AUSTIN, TX — (Marketwired) — 10/28/14 — SolarWinds® (NYSE: SWI), a leading provider of powerful and affordable IT management software, today reported results for its third quarter ended September 30, 2014.
Total revenue for the third quarter of $112.9 million, representing 28% year-over-year growth.
Combined maintenance and subscription revenue for the third quarter of $70.1 million, representing 31% year-over- year growth in recurring revenue.
License revenue for the third quarter of $42.8 million, representing 24% year-over-year growth.
GAAP diluted earnings per share of $0.32 and non-GAAP diluted earnings per share of $0.50 for the third quarter.
GAAP operating income of $31.7 million, or a GAAP operating margin of 28%, and non-GAAP operating income of $51.0 million, or a non-GAAP operating margin of 45% for the third quarter.
SolarWinds reported total revenue for the third quarter of 2014 of $112.9 million, a 28% increase over total revenue for the third quarter of 2013. Record total recurring revenue, comprised of subscription revenue of $8.3 million and maintenance revenue of $61.8 million, reached $70.1 million, increasing by 31% over the third quarter of 2013, representing 62% of total revenue. License revenue was $42.8 million for the third quarter of 2014, representing a 24% increase over license revenue for the third quarter of 2013.
On a GAAP basis, diluted earnings per share were $0.32 for the third quarter of 2014 compared to $0.30 for the third quarter of 2013. Non-GAAP diluted earnings per share were $0.50 for the third quarter of 2014, compared to $0.41 for the third quarter of 2013.
Net cash provided by operating activities was $54.3 million for the third quarter of 2014 compared to $42.0 million for the third quarter of 2013, representing a year-over-year increase of 29%.
The financial results included in this press release are preliminary and pending final review by the company and its external auditors. Financial results will not be final until SolarWinds files its quarterly report on Form 10-Q for the period. Information about SolarWinds– use of these non-GAAP financial measures is provided below under “Non-GAAP Financial Measures.”
“We are very pleased to report another quarter of strong license and recurring revenue growth and leverage. Our results in the third quarter reflect broad-based strength across our product portfolio, including the strongest quarter of growth in the last three years in our core Network Management product portfolio. We also had a strong quarter of growth in key areas of our business including North American commercial and in U.S. Federal,” said Kevin Thompson, SolarWinds– President and Chief Executive Officer.
“We continue to be excited about the opportunities we see to invest in our business in an effort to drive continued fast growth while leveraging our high volume, product- and user-centric business model and the strong skills and expertise of our team,” added Thompson.
Recent SolarWinds business highlights include:
SolarWinds bolstered its board of directors with the addition of Paul Cormier, Red Hat–s President, Products and Technologies. Mr. Cormier–s deep expertise and involvement in how modern IT infrastructure is being architected coupled with a proven track record in high-transaction, volume-based software companies will provide SolarWinds with a unique perspective on how companies are evaluating, selecting, and deploying new and emerging technologies.
During the quarter, SolarWinds released SolarWinds Network Performance Monitor 11.0, delivering an application-aware approach to network management, enabling companies of all sizes to answer the critical question — “Is it the network or the application?” In contrast to pricey and cumbersome appliance-based solutions on the market today, NPM v11 is affordably priced and utilizes enterprise-class deep packet inspection technology combined with SolarWinds– easy-to-use, software-only approach that provides IT professionals with deep insights into the impact of network performance on over 1,200 applications.
For the third time in a row both Fortune® and Forbes® Magazines recognized SolarWinds in the 100 Fastest-Growing Companies list and Best Small Companies in America, respectively. The inclusions are based on the company–s track record of sustained revenue and earnings per share growth. The combination of strong revenue growth coupled with strong profitability continues to reflect SolarWinds– unique ability to serve IT professionals at companies of all sizes. Its pioneering business model consisting of powerful and scalable yet easy-to-use and affordably priced products coupled with an efficient go-to-market and product development model has delivered both top-line growth and strong profitability.
For the eighth consecutive year, Software Magazine included SolarWinds in its Software 500 ranking, listing SolarWinds No. 177 — its highest rank to date. The Software 500 is a revenue-based ranking of the world–s largest software and services suppliers, targeting medium to large enterprises, their IT professionals, software developers, and business managers that are involved in software and services purchasing.
SolarWinds® Database Performance Analyzer, formerly Confio Ignite®, was named a finalist for “Best Database Performance Solution” by Database Trends and Application Magazine in the 2014 DBTA Readers– Choice Awards. This award highlights products that “help optimize performance by quickly identifying performance problems” with automated capabilities impacting every aspect of a database–s performance.
“In addition to strong revenue results, we are pleased with our ability to aggressively invest in our market opportunity while continuing to deliver high margins,” said Jason Ream, SolarWinds– Executive Vice President and Chief Financial Officer. “Looking ahead we plan to continue to invest in the opportunity to provide technology professionals with powerful yet affordable and easy-to-use tools that simplify their jobs amid increasingly complex on-premise, Cloud, and hybrid environments. At the same time, we intend to maintain our high standards for return on these investments,” added Ream.
As of October 28, 2014, SolarWinds is providing its financial outlook for its fourth quarter and full year of 2014. The financial information below represents forward-looking non-GAAP financial information, including an estimate of non-GAAP operating income as a percentage of revenue, and non-GAAP diluted earnings per share, for the fourth quarter of 2014 and for the full year 2014. These non-GAAP financial measures exclude, among other items mentioned below, stock-based compensation expense and related employer-paid payroll taxes. SolarWinds cannot reasonably estimate the expected stock-based compensation expense and related employer-paid payroll taxes for these future periods as the amounts depend upon such factors as the future price of SolarWinds– stock for purposes of computation. In addition, costs related to non-recurring items and acquisitions are not costs that SolarWinds can estimate because they are a function of what non-recurring items and acquisitions, if any, occur and the kind of costs incurred in connection with any such non-recurring items or acquisitions.
SolarWinds– management is increasing its previous outlook for the fourth quarter and currently expects to achieve the following results for the fourth quarter of 2014:
Total revenue in the range of $116.2 to $118.5 million, or 20% to 22% growth over the fourth quarter of 2013.
Non-GAAP operating income representing 40.5% to 41.5% of revenue.
Non-GAAP diluted earnings per share of $0.45 to $0.47.
Weighted average outstanding diluted shares of approximately 77 million.
SolarWinds– management currently expects to achieve the following results for the full year 2014:
Total 2014 revenue in the range of $426.5 to $428.8 million, or 27% to 28% year-over-year growth.
Non-GAAP operating income for the full year representing approximately 42.5% of revenue.
Non-GAAP diluted earnings per share of $1.77 to $1.79.
Weighted average outstanding diluted shares of approximately 76.5 million.
In conjunction with this announcement, SolarWinds will host a conference call today to discuss its financial results, financial outlook and other business at 4:00pm CT (5:00pm ET/2:00pm PT). A live webcast of the event, including any supplemental information, will be available on the SolarWinds Investor Relations website at . A live dial-in will be available domestically at 888-778-9052 and internationally at +1-913-312-1469. To access the live call, please dial in 5-10 minutes before the scheduled start time. A replay of the webcast will be available on a temporary basis shortly after the event on the SolarWinds Investor Relations website.
This press release contains “forward-looking” statements, which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including statements regarding SolarWinds– financial outlook for the fourth quarter and full year 2014, the opportunities we see to invest in our business in an effort to drive continued fast growth while leveraging our high volume, product and user-centric business model and the strong skills and expertise of our team, our plan to continue to invest in the opportunity to provide technology professionals with powerful yet affordable and easy-to-use tools that simplify their jobs amid increasingly complex on-premise, Cloud, and hybrid environments and our intent to maintain our high standards for return on these investments. These forward-looking statements are based on management–s beliefs and assumptions and on information currently available to management. Forward-looking statements include all statements that are not historical facts and may be identified by terms such as “believe,” “plan,” “will,” “expect,” “anticipate,” “continue,” or similar expressions and the negatives of those terms. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, the following: (a) the inability to generate significant volumes of sales leads from Internet search engines, marketing campaigns and traffic to our websites; (b) the inability to expand our sales operations effectively; (c) the inability to increase sales to existing customers and to attract new customers; (d) SolarWinds– ability to successfully identify, complete, and integrate acquisitions; (e) the possibility that general economic conditions or uncertainty cause information technology spending to be reduced or purchasing decisions to be delayed; (f) the timing and success of new product introductions and product upgrades by SolarWinds or its competitors; (g) the presence or absence of occasional large customer orders, including in particular those placed by the U.S. federal government; (h) the possibility that our operating income could fluctuate and may decline as percentage of revenue as we make further expenditures to expand our operations in order to support additional growth in our business; (i) potential foreign exchange gains and losses related to expenses and sales denominated in currencies other than the functional currency of an associated entity; and (j) such other risks and uncertainties described more fully in documents filed with or furnished to the Securities and Exchange Commission, including the risk factors discussed in our Annual Report on Form 10-K for the period ended December 31, 2013 filed on February 14, 2014 and the Form 10-Q that SolarWinds anticipates filing on or before November 10, 2014. All information provided in this release is as of the date hereof and SolarWinds undertakes no duty to update this information except as required by law.
In addition to disclosing financial measures prepared in accordance with GAAP, this press release and the accompanying tables contain certain non-GAAP financial measures. The tables below set forth a reconciliation of each of these non-GAAP measures to a GAAP financial measure that we consider to be most comparable. SolarWinds believes that each of these non-GAAP financial measures provides meaningful supplemental information regarding its performance by excluding certain items that may not be indicative of its core business operations. SolarWinds– management and Board of Directors use certain of these non-GAAP measures to assess operational performance, allocate resources, prepare annual budgets, and determine employee incentive compensation. Accordingly, these measures may provide helpful insight to investors into the motivation and decision-making of management in operating the business. SolarWinds considers free cash flow also to be a liquidity measure that provides important information regarding the cash generated by the business after the purchase of property and equipment that can then be used for, among other things, strategic acquisitions and investments in the business, stock repurchases and funding ongoing operations.
SolarWinds also believes that these non-GAAP financial measures are used by investors and security analysts to (a) compare and evaluate its performance from period to period and (b) compare its performance to those of its competitors. These non- GAAP measures exclude certain items that can vary substantially from company to company depending upon their financing and accounting methods, the book value of their assets, their capital structures and the method by which their assets were acquired.
There are limitations associated with the use of these non-GAAP financial measures. These non-GAAP financial measures are not prepared in accordance with GAAP, do not reflect a comprehensive system of accounting and may not be completely comparable to similarly titled measures of other companies due to potential differences in the exact method of calculation between companies. Certain items that are excluded from these non-GAAP financial measures can have a material impact on operating and net income. In addition, free cash flow does not represent the total increase or decrease in the cash balance for the period.
As a result, these non-GAAP financial measures have limitations and should not be considered in isolation from, or as a substitute for, the most comparable GAAP measures. SolarWinds– management and Board of Directors compensate for these limitations by using these non-GAAP financial measures as supplements to GAAP financial measures and by reviewing the reconciliations of the non-GAAP financial measures to their most comparable GAAP financial measure. Investors are encouraged to review the reconciliations of these non-GAAP financial measures to their most comparable GAAP financial measures that are set forth in the tables below.
SolarWinds (NYSE: SWI) provides powerful and affordable IT management software to customers worldwide from Fortune 500® enterprises to small businesses. In all of our market areas, our approach is consistent. We focus exclusively on IT Pros and strive to eliminate the complexity that they have been forced to accept from traditional enterprise software vendors. SolarWinds delivers on this commitment with unexpected simplicity through products that are easy to find, buy, use and maintain while providing the power to address any IT management problem on any scale. Our solutions are rooted in our deep connection to our user base, which interacts in our thwack® online community to solve problems, share technology and best practices, and directly participate in our product development process. Learn more today at .
SolarWinds, SolarWinds & Design and thwack are registered trademarks of SolarWinds or its affiliates. All other SolarWinds marks are the exclusive property of SolarWinds, may be pending registration with the U.S. Patent and Trademark Office, and may be registered or pending registration in other countries. All other company and product names mentioned are used only for identification purposes and may be trademarks or registered trademarks of their respective companies.
Copyright © 2014 SolarWinds Worldwide, LLC. All rights reserved.
Dave Hafner
Phone: 512.682.9867
Tiffany Nels
Phone: 512.682.9545
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