SolarWinds Corporation (NYSE: SWI), a leading provider of
simple, powerful, secure observability and IT management software,
today reported results for its fourth quarter and full year ended
December 31, 2022.
Fourth Quarter 2022 Financial Highlights
- Total revenue for the fourth quarter of $187.1 million,
representing 0.2% year-over-year growth on a reported basis and
2.2% year-over-year growth on a constant currency basis, and total
recurring revenue representing 88% of total revenue.1
- Net loss for the fourth quarter of $10.4 million.
- Adjusted EBITDA for the fourth quarter of $74.5 million,
representing a margin of 40% of total revenue.
Full Year 2022 Financial Highlights
- Total revenue for the full year 2022 of $719.4 million,
representing 0.1% year-over-year growth on a reported basis and
2.0% year-over-year growth on a constant currency basis, and total
recurring revenue representing 87% of total revenue.1
- Net loss for the full year 2022 of $929.4 million, which
includes $906.4 million in impairment charges.
- Adjusted EBITDA for the full year 2022 of $280.4 million,
representing a margin of 39% of total revenue.
For a reconciliation of our GAAP to non-GAAP results, please see
the tables below.
“We are pleased that we delivered constant currency revenue
growth in 2022 and ended the year on a positive note, outperforming
our previously provided outlook for total revenue and adjusted
EBITDA margin for the fourth quarter, and delivering year-over-year
subscription revenue growth of 45%,” said Sudhakar Ramakrishna,
President and Chief Executive Officer, SolarWinds. “Our fourth
quarter demonstrated ongoing progress with the priorities we laid
out at the beginning of 2022, including growing traction with our
observability solutions and partner ecosystem, continued execution
on customer retention, and healthy adjusted EBITDA margins. As we
look to 2023, we remain focused on helping customers accelerate
their digital transformation journeys while we seek to balance
growth with profitability.”
Recent Business Highlights
- SolarWinds earned industry accolades and recognitions from
TrustRadius, GigaOm, Globees, Stevie Awards, and Palmarès de
l’Informaticien for its observability and monitoring solutions and
corporate achievements.
- SolarWinds and DRYiCE™, a division of HCL Software, announced
an intended expansion of their partnership focused on bringing
together the best-in-class advanced AIOps, end-to-end
observability, and service management platform from both
companies.
- TrustRadius® awarded SolarWinds a 2022 Tech Cares Award for its
commitment to significant corporate social responsibility
initiatives and robust diversity, equity, and inclusion
programs.
______________________________ 1
Beginning with the first quarter of 2022,
we no longer adjust our revenue for the impact of purchase
accounting, so GAAP total revenue on a reported basis is equivalent
to our non-GAAP total revenue measure we have historically
reported.
Balance Sheet
During the fourth quarter, we entered into Amendment No. 6 to
First Lien Credit Agreement to, among other things, refinance the
first lien term loans and extend the maturity date to February 5,
2027. In connection with the refinancing, we made a voluntary
prepayment of approximately $349.4 million of our outstanding debt.
At December 31, 2022, following the prepayment, total cash and cash
equivalents and short-term investments were $148.9 million and
total debt was $1.2 billion.
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 annual report on Form 10-K for the period.
Information about SolarWinds' use of non-GAAP financial measures is
provided below under “Non-GAAP Financial Measures.”
SolarWinds completed the previously announced separation and
distribution of its managed service provider (“N-able”) business
into a newly created and separately traded public company, N-able,
Inc. on July 19, 2021. N‑able's historical financial results
through July 19, 2021, are reflected in SolarWinds' consolidated
financial statements as discontinued operations. Effective July 30,
2021, SolarWinds effected a 2:1 reverse stock split of its common
stock. As a result of the reverse stock split, all share and per
share figures contained in the financial statements have been
retroactively restated as if the reverse stock split occurred at
the beginning of the periods presented.
Financial Outlook
As of February 9, 2023, SolarWinds is providing its financial
outlook for the first quarter and full year of 2023. The financial
information below represents forward-looking non-GAAP financial
information, including an estimate of adjusted EBITDA and non-GAAP
diluted earnings per share. Beginning with the first quarter and
full year of 2023, SolarWinds will provide its outlook for adjusted
EBITDA rather than adjusted EBITDA margin as previously provided.
These non-GAAP financial measures exclude, among other items
mentioned below, stock-based compensation expense and related
employer-paid payroll taxes, amortization, certain expenses related
to the cyberattack that occurred in December 2020 (the “Cyber
Incident”), restructuring costs, goodwill and indefinite-lived
intangible asset impairment charges and other costs related to
non-recurring items. We have not reconciled our estimates of these
non-GAAP financial measures to their most directly comparable GAAP
measure as a result of uncertainty regarding, and the potential
variability of, these excluded items in future periods.
Accordingly, reconciliation is not available without unreasonable
effort, although it is important to note that these excluded items
could be material to our results computed in accordance with GAAP
in future periods. Our reported results provide reconciliations of
non-GAAP financial measures to their nearest GAAP equivalents.
Financial Outlook for First Quarter of 2023
SolarWinds’ management currently expects to achieve the
following results for the first quarter of 2023:
- Total revenue in the range of $177 to $182 million,
representing growth at the midpoint of approximately 1% as compared
to the first quarter of 2022 total revenue.
- Adjusted EBITDA of approximately $67 to $70 million.
- Non-GAAP diluted earnings per share of $0.15 to $0.17.
- Weighted average outstanding diluted shares of approximately
163.9 million.
Financial Outlook for Full Year of 2023
SolarWinds’ management currently expects to achieve the
following results for the full year of 2023:
- Total revenue in the range of $725 to $740 million,
representing growth at the midpoint of approximately 2% over the
full year of 2022 total revenue.
- Adjusted EBITDA of approximately $290 to $300 million,
representing growth at the midpoint of approximately 5% over the
full year of 2022 adjusted EBITDA.
- Non-GAAP diluted earnings per share of $0.69 to $0.74.
- Weighted average outstanding diluted shares of approximately
165.9 million.
Additional details on the company's outlook will be provided on
the conference call.
Conference Call and Webcast
In conjunction with this announcement, SolarWinds will host a
conference call today to discuss its financial results, business,
and business outlook at 7:30 a.m. CT (8:30 a.m. ET/5:30 a.m. PT). A
live webcast of the call and materials presented during the call
will be available on the SolarWinds Investor Relations website at
http://investors.solarwinds.com. A live dial-in will be available
domestically at (888) 510-2008 and internationally at +1 (646)
960-0306. To access the live call, please dial in 5-10 minutes
before the scheduled start time and enter the conference passcode
2975715. A replay of the webcast will be available on a temporary
basis shortly after the event on the SolarWinds Investor Relations
website.
Forward-Looking Statements
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 our
financial outlook for the first quarter and the full year 2023.
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
“aim,” “anticipate,” “believe,” “can,” “could,” “seek,” “should,”
“feel,” “expect,” “will,” “would,” “plan,” “project,” “intend,”
“estimate,” “continue,” “may,” 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) numerous risks related to the
Cyber Incident, including with respect to (1) the discovery of new
or different information regarding the Cyber Incident, (2) the
possibility that our mitigation and remediation efforts with
respect to the Cyber Incident may not be successful, (3) the
possibility that additional confidential, proprietary, or personal
information, including information of SolarWinds’ current or former
employees and customers, was accessed and exfiltrated as a result
of the Cyber Incident, (4) numerous financial, legal, reputational
and other risks to us related to the Cyber Incident, including
risks that the incident or SolarWinds’ response thereto, may result
in the loss, compromise or corruption of data and proprietary
information, loss of business as a result of termination or
non-renewal of agreements or reduced purchases or upgrades of our
products, reputational damage adversely affecting customer, partner
and vendor relationships and investor confidence, increased
attrition of personnel and distraction of key and other personnel,
indemnity obligations, damages for contractual breach, penalties
for violation of applicable laws or regulations, significant costs
for remediation and the incurrence of other liabilities, (5)
litigation and investigation risks related to the Cyber Incident,
including as a result of U.S. or foreign regulatory investigations
and enforcement actions, including any proceeding that may be
commenced by the Securities and Exchange Commission relating to the
previously disclosed Wells Notice, and exposure to judgements,
settlements and other costs and liabilities related thereto, (6)
risks that our insurance coverage may not be available or
sufficient to compensate for all liabilities we incur related to
these matters and (7) the possibility that our steps to secure our
internal environment, improve our product development environment
and ensure the security and integrity of the software that we
deliver to our customers may not be successful or sufficient to
protect against future threat actors or attacks or be perceived by
existing and prospective customers as sufficient to address the
harm caused by the Cyber Incident; (b) other risks related to cyber
security, including that we may experience other security incidents
or have vulnerabilities in our systems and services exploited,
whether through the actions or inactions of our employees or
otherwise, which may result in compromises or breaches of our and
our customers’ systems or, theft or misappropriation of our and our
customers’ confidential, proprietary or personal information, as
well as exposure to legal and other liabilities, including the
related risk of higher customer, employee and partner attrition and
the loss of key personnel, as well as negative impacts to our
sales, renewals and upgrades; (c) risks related to the evolving
breadth of our sales motion and challenges, investments and
additional costs associated with increased selling efforts toward
enterprise customers and adopting a subscription first approach;
(d) risks relating to increased investments in, and the timing of,
our transformation from monitoring to observability; (e) risks
related to any shifts in our revenue mix and the timing of how we
recognize revenue as we transition to subscription; (f) regulatory
risks, including risks related to evolving regulation of artificial
intelligence, machine learning and the receipt, collection,
storage, processing and transfer of data, (g) potential foreign
exchange gains and losses related to expenses and sales denominated
in currencies other than the functional currency of an associated
entity; (h) any of the following factors either generally or as a
result of the impacts of the Cyber Incident, the war in Ukraine,
inflation or the global COVID-19 pandemic on the global economy or
on our business operations and financial condition or on the
business operations and financial conditions of our customers,
their end-customers and our prospective customers: (1) reductions
in information technology spending or delays in purchasing
decisions by our customers, their end-customers and our prospective
customers, (2) the inability to sell products to new customers, to
sell additional products or upgrades to our existing customers or
to convert our customers to subscription products, (3) any decline
in our renewal or net retention rates or any delay or loss of U.S.
government sales, (4) the inability to generate significant volumes
of high-quality sales leads from our digital marketing initiatives
and convert such leads into new business at acceptable conversion
rates, (5) the timing and adoption of new products, product
upgrades or pricing model changes by SolarWinds or its competitors,
(6) changes in interest rates, (7) risks associated with our
international operations and (8) ongoing sanctions and disruptions
resulting from the war in Ukraine; (i) the possibility that our
operating income could fluctuate and may decline as percentage of
revenue as we make further expenditures to expand our product
offerings and sales motion in order to support additional growth in
our business; (j) our ability to compete effectively in the markets
we serve and the risks of increased competition as we enter new
markets; (k) our ability to attract, retain and motivate employees;
(l) risks associated with the estimates and assumptions used in our
impairment testing; (m) risks related to the spin-off of the N-able
business into a newly created and separately traded public company,
including that we could incur significant liability if the
separation is determined to be a taxable transaction, or that
potential indemnification liabilities incurred in connection with
the separation could materially affect our business and financial
results; (n) our inability to successfully identify, complete, and
integrate acquisitions and manage our growth effectively; (o) risks
associated with our status as a controlled company; and (p) 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, 2021 filed on February 25,
2022, our Quarterly Reports on Form 10-Q and our Annual Report on
Form 10-K for the period ended December 31, 2022 that we anticipate
filing on or before March 1, 2023. 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.
Non-GAAP Financial Measures
In addition to financial measures prepared in accordance with
GAAP, we use certain non-GAAP financial measures to clarify and
enhance our understanding, and aid in the period-to-period
comparison, of our performance. We believe that these non-GAAP
financial measures provide supplemental information that is
meaningful when assessing our operating performance because they
exclude the impact of certain amounts that our management and board
of directors do not consider part of core operating results when
assessing our operational performance, allocating resources,
preparing annual budgets and determining compensation. Accordingly,
these non-GAAP financial measures may provide insight to investors
into the motivation and decision-making of management in operating
the business.
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
(loss).
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.
Set forth in the tables below are the corresponding GAAP financial
measures for each non-GAAP financial measure presented. 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. Unless noted otherwise, all
non-GAAP financial measures are derived from our GAAP financial
measures from continuing operations.
Non-GAAP Revenue. We define non-GAAP total revenue as
total revenue excluding the impact of purchase accounting from
acquisitions. The non-GAAP revenue growth rate we provide is
calculated using non-GAAP total revenue from the comparable prior
period. We historically monitored this measure to assess our
performance because we believed our revenue growth rate would be
overstated without this adjustment. We believed presenting non-GAAP
total revenue aided in the comparability between periods and in
assessing our overall operating performance. Beginning in the first
quarter of 2022, we no longer adjust our GAAP revenue for the
impact of purchase accounting.
Non-GAAP Revenue on a Constant Currency Basis. We provide
non-GAAP revenue on a constant currency basis to provide a
framework for assessing our performance excluding the effect of
foreign currency rate fluctuations. To present this information,
current period results for entities reporting in currencies other
than U.S. Dollars are converted into U.S. Dollars at the average
exchange rates in effect during the corresponding prior period
presented. We believe that providing non-GAAP revenue on a constant
currency basis facilitates the comparison of non-GAAP revenue to
prior periods.
Non-GAAP Cost of Revenue and Non-GAAP Operating Income.
We provide non-GAAP cost of revenue and non-GAAP operating income
and related non-GAAP margins using non-GAAP revenue and excluding
such items as the write-down of deferred revenue related to
purchase accounting, amortization of acquired intangible assets,
stock-based compensation expense and related employer-paid payroll
taxes, acquisition and other costs, restructuring costs, Cyber
Incident costs and goodwill and indefinite-lived asset impairment.
Management believes these measures are useful for the following
reasons:
- Amortization of Acquired Intangible Assets. We provide non-GAAP
information that excludes expenses related to purchased intangible
assets associated with our acquisitions. We believe that
eliminating this expense from our non-GAAP measures is useful to
investors, because the amortization of acquired intangible assets
can be inconsistent in amount and frequency and is significantly
impacted by the timing and magnitude of our acquisition
transactions, which also vary in frequency from period to period.
Accordingly, we analyze the performance of our operations in each
period without regard to such expenses.
- Stock-Based Compensation Expense and Related Employer-Paid
Payroll Taxes. We provide non-GAAP information that excludes
expenses related to stock-based compensation and related
employer-paid payroll taxes. We believe that the exclusion of
stock-based compensation expense provides for a better comparison
of our operating results to prior periods and to our peer companies
as the calculations of stock-based compensation vary from period to
period and company to company due to different valuation
methodologies, subjective assumptions, and the variety of award
types. Employer-paid payroll taxes on stock-based compensation is
dependent on our stock price and the timing of the taxable events
related to the equity awards, over which our management has little
control, and does not correlate to the core operation of our
business. Because of these unique characteristics of stock-based
compensation and related employer-paid payroll taxes, management
excludes these expenses when analyzing the organization’s business
performance.
- Acquisition and Other Costs. We exclude certain expense items
resulting from acquisitions, such as legal, accounting and advisory
fees, changes in fair value of contingent consideration, costs
related to integrating the acquired businesses, deferred
compensation, severance and retention expense. In addition, we
exclude certain other costs including expense related to our
offerings. We consider these adjustments, to some extent, to be
unpredictable and dependent on a significant number of factors that
are outside of our control. Furthermore, acquisitions result in
operating expenses that would not otherwise have been incurred by
us in the normal course of our organic business operations. We
believe that providing these non-GAAP measures that exclude
acquisition and other costs, allows users of our financial
statements to better review and understand the historical and
current results of our continuing operations, and also facilitates
comparisons to our historical results and results of less
acquisitive peer companies, both with and without such
adjustments.
- Restructuring Costs. We provide non-GAAP information that
excludes restructuring costs such as severance and the estimated
costs of exiting and terminating facility lease commitments, as
they relate to our corporate restructuring and exit activities and
costs related to the separation of employment with executives of
the Company. In addition, we exclude certain costs resulting from
the spin-off of N-able reported in continuing operations. These
costs are inconsistent in amount and are significantly impacted by
the timing and nature of these events. Therefore, although we may
incur these types of expenses in the future, we believe that
eliminating these costs for purposes of calculating the non-GAAP
financial measures facilitates a more meaningful evaluation of our
operating performance and comparisons to our past operating
performance.
- Cyber Incident Costs. We exclude certain expenses resulting
from the Cyber Incident. Expenses include costs to investigate and
remediate the Cyber Incident, costs of lawsuits and investigations
related thereto, including settlement costs and legal and other
professional services, and consulting services being provided to
customers at no charge. Cyber Incident costs are provided net of
expected and received insurance reimbursements, although the timing
of recognizing insurance reimbursements may differ from the timing
of recognizing the associated expenses. We expect to incur
significant legal and other professional services expenses
associated with the Cyber Incident in future periods. The Cyber
Incident results in operating expenses that would not have
otherwise been incurred by us in the normal course of our organic
business operations. We believe that providing non-GAAP measures
that exclude these costs facilitates a more meaningful evaluation
of our operating performance and comparisons to our past operating
performance. We continue to invest significantly in cybersecurity
and expect to make additional investments. These investments are in
addition to the Cyber Incident costs and not included in the net
Cyber Incident costs reported.
- Goodwill and Indefinite-Lived Intangible Asset Impairment. We
provide non-GAAP information that excludes non-cash goodwill and
indefinite-lived intangible asset impairment charges. We believe
that providing these non-GAAP measures that exclude these non-cash
impairment charges allows users of our financial statements to
better review and understand our historical and current operating
results. In addition, as a significant portion of our goodwill and
indefinite-lived intangible assets were derived from the February
2016 take-private transaction, providing these non-GAAP measures
that exclude these impairment charges facilitates comparisons to
our peers who may not have undertaken a transformational
acquisition resulting in significant goodwill and indefinite-lived
intangible assets.
Non-GAAP Net Income (Loss) and Non-GAAP Net Income (Loss) Per
Diluted Share. We believe that the use of non-GAAP net income
(loss) and non-GAAP net income (loss) per diluted share is helpful
to our investors to clarify and enhance their understanding of past
performance and future prospects. Non-GAAP net income (loss) is
calculated as net income (loss) excluding the adjustments to
non-GAAP revenue, non-GAAP cost of revenue and non-GAAP operating
income, losses on extinguishment of debt, certain other
non-operating gains and losses and the income tax effect of the
non-GAAP exclusions. We define non-GAAP net income (loss) per
diluted share as non-GAAP net income (loss) divided by the weighted
average outstanding diluted common shares.
Adjusted EBITDA and Adjusted EBITDA Margin. We regularly
monitor adjusted EBITDA and adjusted EBITDA margin, as it is a
measure we use to assess our operating performance. We define
adjusted EBITDA as net income or loss, excluding the impact of
purchase accounting on total revenue, amortization of acquired
intangible assets and developed technology, depreciation expense,
stock-based compensation expense and related employer-paid payroll
taxes, restructuring costs, acquisition and other costs, Cyber
Incident costs, goodwill and indefinite-lived intangible asset
impairment, interest expense, net, debt-related costs including
fees related to our credit agreements, debt extinguishment and
refinancing costs, unrealized foreign currency (gains) losses, and
income tax expense (benefit). We define adjusted EBITDA margin as
adjusted EBITDA divided by non-GAAP revenue. Adjusted EBITDA has
limitations as an analytical tool, and you should not consider it
in isolation or as a substitute for analysis of our results as
reported under GAAP. Some of these limitations are: although
depreciation and amortization are non-cash charges, the assets
being depreciated and amortized may have to be replaced in the
future, and adjusted EBITDA does not reflect cash capital
expenditure requirements for such replacements or for new capital
expenditure requirements; adjusted EBITDA excludes the impact of
the write-down of deferred revenue due to purchase accounting in
connection with acquisitions, and therefore includes revenue that
will never be recognized under GAAP; adjusted EBITDA does not
reflect changes in, or cash requirements for, our working capital
needs; adjusted EBITDA does not reflect the significant interest
expense, or the cash requirements necessary to service interest or
principal payments, on our debt; adjusted EBITDA does not reflect
tax payments that may represent a reduction in cash available to
us; and other companies, including companies in our industry, may
calculate adjusted EBITDA differently, which reduces its usefulness
as a comparative measure.
Unlevered Free Cash Flow. Unlevered free cash flow is a
measure of our liquidity used by management to evaluate cash flow
from operations, after the deduction of capital expenditures and
prior to the impact of our capital structure, acquisition and other
costs, restructuring costs, Cyber Incident costs, employer-paid
payroll taxes on stock awards and other one-time items, that can be
used by us for strategic opportunities and strengthening our
balance sheet. However, given our debt obligations, unlevered free
cash flow does not represent residual cash flow available for
discretionary expenses.
#SWIfinancials
About SolarWinds
SolarWinds (NYSE:SWI) is a leading provider of simple, powerful,
secure observability and IT management software built to enable
customers to accelerate their digital transformation. Our solutions
provide organizations worldwide—regardless of type, size, or
complexity—with a comprehensive and unified view of today’s modern,
distributed, and hybrid network environments. We continuously
engage IT service and operations professionals, DevOps and SecOps
professionals, and Database Administrators (DBAs) to understand the
challenges they face in maintaining high-performing and highly
available IT infrastructures, applications, and environments. The
insights we gain from them, in places like our THWACK® community,
allow us to address customers’ needs now, and in the future. Our
focus on the user and our commitment to excellence in end-to-end
hybrid IT management have established SolarWinds as a worldwide
leader in solutions for observability, IT service management,
application performance, and database management. Learn more today
at www.solarwinds.com.
The SolarWinds, SolarWinds & Design, Orion, and THWACK
trademarks are the exclusive property of SolarWinds Worldwide, LLC
or its affiliates, are registered with the U.S. Patent and
Trademark Office, and may be registered or pending registration in
other countries. All other SolarWinds trademarks, service marks,
and logos may be common law marks or are registered or pending
registration. All other trademarks mentioned herein are used for
identification purposes only and are trademarks of (and may be
registered trademarks of) their respective companies.
© 2023 SolarWinds Worldwide, LLC. All rights reserved.
SolarWinds Corporation
Consolidated Balance
Sheets
(In thousands, except share
and per share information)
(Unaudited)
December 31,
2022
2021
Assets
Current assets:
Cash and cash equivalents
$
121,738
$
732,116
Short-term investments
27,114
—
Accounts receivable, net of allowances of
$1,173 and $476 as of December 31, 2022 and 2021, respectively
100,204
95,095
Income tax receivable
987
1,114
Prepaid and other current assets
57,350
30,515
Total current assets
307,393
858,840
Property and equipment, net
26,634
29,722
Operating lease assets
61,418
74,318
Deferred taxes
134,922
144,162
Goodwill
2,380,059
3,308,405
Intangible assets, net
243,980
342,563
Other assets, net
45,600
34,117
Total assets
$
3,200,006
$
4,792,127
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable
$
14,045
$
7,327
Accrued liabilities and other
68,284
41,328
Current operating lease liabilities
15,005
14,382
Accrued interest payable
579
153
Income taxes payable
11,841
3,086
Current portion of deferred revenue
337,541
327,701
Current debt obligation
9,338
19,900
Total current liabilities
456,633
413,877
Long-term liabilities:
Deferred revenue, net of current
portion
38,945
34,968
Non-current deferred taxes
8,582
16,918
Non-current operating lease
liabilities
59,235
74,543
Other long-term liabilities
74,193
93,156
Long-term debt, net of current portion
1,192,765
1,870,769
Total liabilities
1,830,353
2,504,231
Commitments and contingencies
Stockholders’ equity:
Common stock, $0.001 par value:
1,000,000,000 shares authorized and 161,928,532 and 159,176,042
shares issued and outstanding as of December 31, 2022 and 2021,
respectively
162
159
Preferred stock, $0.001 par value:
50,000,000 shares authorized and no shares issued and outstanding
as of December 31, 2022 and 2021, respectively
—
—
Additional paid-in capital
2,627,370
2,566,783
Accumulated other comprehensive income
(loss)
(48,114
)
1,306
Accumulated deficit
(1,209,765
)
(280,352
)
Total stockholders’ equity
1,369,653
2,287,896
Total liabilities and stockholders’
equity
$
3,200,006
$
4,792,127
SolarWinds Corporation
Consolidated Statements of
Operations
(In thousands, except per
share information)
(Unaudited)
Three Months Ended December
31,
Twelve Months Ended December
31,
2022
2021
2022
2021
Revenue:
Subscription
$
49,701
$
34,383
$
167,676
$
124,601
Maintenance
115,053
118,506
458,901
479,415
Total recurring revenue
164,754
152,889
626,577
604,016
License
22,315
33,828
92,790
114,616
Total revenue
187,069
186,717
719,367
718,632
Cost of revenue:
Cost of recurring revenue
17,994
17,712
67,848
67,043
Amortization of acquired technologies
3,632
39,576
28,135
159,973
Total cost of revenue
21,626
57,288
95,983
227,016
Gross profit
165,443
129,429
623,384
491,616
Operating expenses:
Sales and marketing
67,274
61,999
257,746
236,383
Research and development
24,238
23,339
92,330
101,813
General and administrative
32,956
40,842
149,461
130,977
Amortization of acquired intangibles
12,938
13,610
52,325
55,314
Goodwill impairment
—
—
891,101
—
Total operating expenses
137,406
139,790
1,442,963
524,487
Operating income (loss)
28,037
(10,361
)
(819,579
)
(32,871
)
Other income (expense):
Interest expense, net
(25,705
)
(16,260
)
(83,374
)
(64,522
)
Other income (expense), net
(3,213
)
(1,411
)
(5,074
)
454
Total other expense
(28,918
)
(17,671
)
(88,448
)
(64,068
)
Loss before income taxes
(881
)
(28,032
)
(908,027
)
(96,939
)
Income tax expense (benefit)
9,530
(6,147
)
21,386
(32,469
)
Net loss from continuing operations
(10,411
)
(21,885
)
(929,413
)
(64,470
)
Net income (loss) from discontinued
operations, net of tax
—
(1,760
)
—
13,062
Net loss
$
(10,411
)
$
(23,645
)
$
(929,413
)
$
(51,408
)
Net loss from continuing operations
available to common stockholders
$
(10,411
)
$
(21,885
)
$
(929,413
)
$
(64,630
)
Net income (loss) from discontinued
operations available to common stockholders
$
—
$
(1,760
)
$
—
$
13,062
Net income (loss) available to common
stockholders per share:
Basic loss from continuing operations per
share
$
(0.06
)
$
(0.14
)
$
(5.78
)
$
(0.41
)
Basic earnings (loss) from discontinued
operations per share
—
(0.01
)
—
0.08
Basic loss per share
$
(0.06
)
$
(0.15
)
$
(5.78
)
$
(0.33
)
Diluted loss from continuing operations
per share
$
(0.06
)
$
(0.14
)
$
(5.78
)
$
(0.41
)
Diluted earnings (loss) from discontinued
operations per share
—
(0.01
)
—
0.08
Diluted loss per share
$
(0.06
)
$
(0.15
)
$
(5.78
)
$
(0.33
)
Weighted-average shares used to compute
net income (loss) available to common stockholders per share:
Shares used in computation of basic
earnings (loss) per share
161,721
158,960
160,841
158,040
Shares used in computation of diluted
earnings (loss) per share
161,721
158,960
160,841
158,040
SolarWinds Corporation
Consolidated Statements of
Cash Flows
(In thousands)
(Unaudited)
Twelve Months Ended December
31,
2022
2021
Cash flows from operating activities
Net loss from continuing operations
$
(929,413
)
$
(64,470
)
Adjustments to reconcile net income (loss)
from continuing operations to net cash provided by operating
activities:
Depreciation and amortization
94,981
230,135
Goodwill and indefinite-lived intangible
asset impairment
906,350
—
Provision for losses on accounts
receivable
951
23
Stock-based compensation expense
67,050
58,763
Amortization of debt issuance costs
9,056
9,103
Loss on extinguishment of debt
3,822
—
Deferred taxes
(6,741
)
(40,567
)
(Gain) loss on foreign currency exchange
rates
1,525
(1,479
)
Other non-cash (benefits) expenses
(30
)
378
Changes in operating assets and
liabilities, net of assets acquired and liabilities assumed in
business combinations:
Accounts receivable
(6,846
)
(9,926
)
Income taxes receivable
99
(281
)
Prepaid and other assets
(28,898
)
(13,965
)
Accounts payable
6,751
(4,915
)
Accrued liabilities and other
25,759
(11,047
)
Accrued interest payable
426
(4
)
Income taxes payable
(9,290
)
(32,587
)
Deferred revenue
19,689
(852
)
Other long-term liabilities
(735
)
(217
)
Net cash provided by operating activities
from continuing operations
154,506
118,092
Cash flows from investing activities
Purchases of investments
(67,133
)
—
Maturities of investments
39,633
—
Purchases of property and equipment
(7,463
)
(9,252
)
Purchases of intangible assets
(13,287
)
(4,664
)
Acquisitions, net of cash acquired
(6,500
)
447
Other investing activities
437
—
Net cash used in investing activities from
continuing operations
(54,313
)
(13,469
)
Cash flows from financing activities
Proceeds from issuance of common stock
under employee stock purchase plan
3,151
5,658
Repurchase of common stock and incentive
restricted stock
(11,130
)
(14,228
)
Exercise of stock options
59
616
Distributions from spin-off of
discontinued operations, net
—
505,580
Dividends paid
—
(237,214
)
Repayments of borrowings from credit
agreement
(664,350
)
(20,950
)
Payment of debt issuance costs
(36,925
)
(324
)
Net cash provided by (used in) financing
activities from continuing operations
(709,195
)
239,138
Effect of exchange rate changes on cash
and cash equivalents from continuing operations
(1,376
)
(4,355
)
Cash flows of discontinued operations
Operating activities of discontinued
operations
—
39,040
Investing activities of discontinued
operations
—
(15,003
)
Financing activities of discontinued
operations
—
(903
)
Effect of exchange rate changes on cash
and cash equivalents from discontinued operations
—
(922
)
Net cash provided by discontinued
activities
—
22,212
Net increase (decrease) in cash and cash
equivalents
(610,378
)
361,618
Cash and cash equivalents
Beginning of period
732,116
370,498
End of period
$
121,738
$
732,116
Supplemental disclosure of cash flow
information
Cash paid for interest
$
79,614
$
56,053
Cash paid for income taxes
$
33,117
$
43,864
SolarWinds Corporation
Reconciliation of GAAP to
Non-GAAP Financial Measures from Continuing Operations
(Unaudited)
Three Months Ended December
31,
Twelve Months Ended December
31,
2022
2021
2022
2021
(in thousands, except margin
and per share data)
Total GAAP revenue
$
187,069
$
186,717
$
719,367
$
718,632
Impact of purchase accounting(1)
—
—
—
134
Total non-GAAP revenue
$
187,069
$
186,717
$
719,367
$
718,766
GAAP cost of revenue
$
21,626
$
57,288
$
95,983
$
227,016
Stock-based compensation expense and
related employer-paid payroll taxes
(491
)
(575
)
(2,077
)
(2,202
)
Amortization of acquired technologies
(3,632
)
(39,576
)
(28,135
)
(159,973
)
Acquisition and other costs
—
—
—
(5
)
Restructuring costs
—
514
—
(3
)
Cyber Incident costs
(9
)
(317
)
(178
)
(2,153
)
Non-GAAP cost of revenue
$
17,494
$
17,334
$
65,593
$
62,680
GAAP gross profit
$
165,443
$
129,429
$
623,384
$
491,616
Impact of purchase accounting(1)
—
—
—
134
Stock-based compensation expense and
related employer-paid payroll taxes
491
575
2,077
2,202
Amortization of acquired technologies
3,632
39,576
28,135
159,973
Acquisition and other costs
—
—
—
5
Restructuring costs
—
(514
)
—
3
Cyber Incident costs
9
317
178
2,153
Non-GAAP gross profit
$
169,575
$
169,383
$
653,774
$
656,086
GAAP gross margin
88.4
%
69.3
%
86.7
%
68.4
%
Non-GAAP gross margin
90.6
%
90.7
%
90.9
%
91.3
%
GAAP sales and marketing expense
$
67,274
$
61,999
$
257,746
$
236,383
Stock-based compensation expense and
related employer-paid payroll taxes
(5,810
)
(5,530
)
(22,597
)
(21,801
)
Acquisition and other costs
—
—
—
(1
)
Restructuring costs
—
(78
)
(163
)
(1,042
)
Cyber Incident costs
—
(31
)
(130
)
(1,638
)
Non-GAAP sales and marketing expense
$
61,464
$
56,360
$
234,856
$
211,901
GAAP research and development expense
$
24,238
$
23,339
$
92,330
$
101,813
Stock-based compensation expense and
related employer-paid payroll taxes
(2,860
)
(2,773
)
(11,230
)
(12,597
)
Acquisition and other costs
—
—
—
(355
)
Restructuring costs
—
42
—
(551
)
Cyber Incident costs
—
—
(2
)
(52
)
Non-GAAP research and development
expense
$
21,378
$
20,608
$
81,098
$
88,258
GAAP general and administrative
expense
$
32,956
$
40,842
$
149,461
$
130,977
Stock-based compensation expense and
related employer-paid payroll taxes
(7,391
)
(6,653
)
(32,117
)
(23,343
)
Acquisition and other costs
(108
)
(293
)
(540
)
(1,335
)
Restructuring costs
(90
)
(6,997
)
(1,400
)
(9,819
)
Cyber Incident costs, net
(5,931
)
(8,944
)
(25,923
)
(29,271
)
Goodwill and indefinite-lived intangible
asset impairment
—
—
(15,249
)
—
Non-GAAP general and administrative
expense
$
19,436
$
17,955
$
74,232
$
67,209
GAAP operating expenses
$
137,406
$
139,790
$
1,442,963
$
524,487
Stock-based compensation expense and
related employer-paid payroll taxes
(16,061
)
(14,956
)
(65,944
)
(57,741
)
Amortization of acquired intangibles
(12,938
)
(13,610
)
(52,325
)
(55,314
)
Acquisition and other costs
(108
)
(293
)
(540
)
(1,691
)
Restructuring costs
(90
)
(7,033
)
(1,563
)
(11,412
)
Cyber Incident costs, net
(5,931
)
(8,975
)
(26,055
)
(30,961
)
Goodwill and indefinite-lived intangible
asset impairment
—
—
(906,350
)
—
Non-GAAP operating expenses
$
102,278
$
94,923
$
390,186
$
367,368
GAAP operating income (loss)
$
28,037
$
(10,361
)
$
(819,579
)
$
(32,871
)
Impact of purchase accounting(1)
—
—
—
134
Stock-based compensation expense and
related employer-paid payroll taxes
16,552
15,531
68,021
59,943
Amortization of acquired technologies
3,632
39,576
28,135
159,973
Amortization of acquired intangibles
12,938
13,610
52,325
55,314
Acquisition and other costs
108
293
540
1,696
Restructuring costs
90
6,519
1,563
11,415
Cyber Incident costs, net
5,940
9,292
26,233
33,114
Goodwill and indefinite-lived intangible
asset impairment
—
—
906,350
—
Non-GAAP operating income
$
67,297
$
74,460
$
263,588
$
288,718
GAAP operating margin
15.0
%
(5.5
) %
(113.9
) %
(4.6
) %
Non-GAAP operating margin
36.0
%
39.9
%
36.6
%
40.2
%
GAAP net loss from continuing
operations
$
(10,411
)
$
(21,885
)
$
(929,413
)
$
(64,470
)
Impact of purchase accounting(1)
—
—
—
134
Stock-based compensation expense and
related employer-paid payroll taxes
16,552
15,531
68,021
59,943
Amortization of acquired technologies
3,632
39,576
28,135
159,973
Amortization of acquired intangibles
12,938
13,610
52,325
55,314
Acquisition and other costs
108
293
540
1,696
Restructuring costs
90
8,118
1,523
11,794
Cyber Incident costs, net
5,940
9,292
26,233
33,114
Goodwill and indefinite-lived intangible
asset impairment
—
—
906,350
—
Loss on extinguishment of debt
1,892
—
3,822
—
Tax benefits associated with above
adjustments
(560
)
(17,219
)
(23,708
)
(67,464
)
Non-GAAP net income
$
30,181
$
47,316
$
133,828
$
190,034
GAAP diluted loss from continuing
operations per share
$
(0.06
)
$
(0.14
)
$
(5.78
)
$
(0.41
)
Non-GAAP diluted earnings per share
$
0.19
$
0.30
$
0.83
$
1.20
______________ (1)
Adjustment represents the impact of
purchase accounting to the subscription revenue line item.
Reconciliation of GAAP Net
Income (Loss) to Adjusted EBITDA from Continuing Operations
(Unaudited)
Three Months Ended December
31,
Twelve Months Ended December
31,
2022
2021
2022
2021
(in thousands, except margin
data)
Net loss
$
(10,411
)
$
(23,645
)
$
(929,413
)
$
(51,408
)
Less: Net income (loss) from discontinued
operations
—
(1,760
)
—
13,062
Net loss from continuing operations
(10,411
)
(21,885
)
(929,413
)
(64,470
)
Amortization and depreciation
20,874
56,773
94,981
230,135
Income tax expense (benefit)
9,530
(6,147
)
21,386
(32,469
)
Interest expense, net
25,705
16,260
83,374
64,522
Impact of purchase accounting on total
revenue
—
—
—
134
Unrealized foreign currency (gains)
losses
2,423
25
1,525
(1,479
)
Acquisition and other costs
108
293
540
1,696
Debt-related costs(1)
3,687
94
5,909
378
Stock-based compensation expense and
related employer-paid payroll taxes
16,552
15,531
68,021
59,943
Restructuring costs(2)
90
8,118
1,523
11,794
Cyber Incident costs, net
5,940
9,292
26,233
33,114
Goodwill and indefinite-lived intangible
asset impairment
—
—
906,350
—
Adjusted EBITDA
$
74,498
$
78,354
$
280,429
$
303,298
Adjusted EBITDA margin
39.8
%
42.0
%
39.0
%
42.2
%
__________ (1)
Debt-related costs for the three and
twelve months ended December 31, 2022 include losses on
extinguishments of debt of $1.9 million and $3.8 million,
respectively.
(2)
Restructuring costs for the three and
twelve months ended December 31, 2021 are primarily related to
costs of exiting and terminating facility lease commitments and
certain costs resulting from the spin-off of N-able reported in
continuing operations.
Reconciliation of Non-GAAP
Revenue to Non-GAAP Revenue
on a Constant Currency Basis
from Continuing Operations
(Unaudited)
Three Months Ended December
31,
Twelve Months Ended December
31,
2022
2021
Growth Rate
2022
2021
Growth Rate
(in thousands, except
percentages)
Total GAAP revenue
$
187,069
$
186,717
0.2
%
$
719,367
$
718,632
0.1
%
Impact of purchase accounting(1)
—
—
—
—
134
—
Non-GAAP total revenue
187,069
186,717
0.2
719,367
718,766
0.1
Estimated foreign currency impact(2)
3,766
—
2.0
13,749
—
1.9
Non-GAAP total revenue on a constant
currency basis
$
190,835
$
186,717
2.2
%
$
733,116
$
718,766
2.0
%
_______ (1)
Adjustment represents the impact of
purchase accounting to the subscription revenue line item.
(2)
The estimated foreign currency impact is
calculated using the average foreign currency exchange rates in the
comparable prior year monthly periods and applying those rates to
foreign-denominated revenue in the corresponding monthly periods in
the three and twelve months ended December 31, 2022.
Reconciliation of Revenue to
Adjusted Non-GAAP Revenue
Assuming Rates in Previously
Issued Outlook
(Unaudited)
Three Months Ended
December 31, 2022
(in thousands)
Total revenue
$
187,069
Estimated foreign currency impact(1)
(1,579
)
Total adjusted non-GAAP revenue assuming
foreign currency exchange rates used in previously issued
outlook
$
185,490
______ (1)
Estimated foreign currency impact
represents the impact of the difference between the actual foreign
currency exchange rates in the period used to calculate our three
months ended December 31, 2022 actual non-GAAP results and the
rates assumed in our previously issued outlook dated November 3,
2022.
Reconciliation of Unlevered
Free Cash Flow from Continuing Operations
Twelve Months Ended December
31,
2022
2021
(in thousands)
Net cash provided by operating activities
from continuing operations
$
154,506
$
118,092
Capital expenditures(1)
(20,750
)
(13,916
)
Free cash flow
133,756
104,176
Cash paid for interest and other debt
related items
75,978
55,895
Cash paid for acquisition and other costs,
restructuring costs, Cyber Incident costs, net, employer-paid
payroll taxes on stock awards and other one-time items
33,498
54,230
Unlevered free cash flow (excluding
forfeited tax shield)
243,232
214,301
Forfeited tax shield related to interest
payments(2)
(19,505
)
(13,172
)
Unlevered free cash flow
$
223,727
$
201,129
_____________ (1)
Includes purchases of property and
equipment and purchases of intangible assets.
(2)
Forfeited tax shield related to interest
payments assumes a statutory rate of 24.5% for the twelve months
ended December 31, 2022 and 23.5% for the twelve months ended
December 31, 2021.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230209005170/en/
Media: Jenne Barbour Phone: 512.498.6804 Media:
pr@solarwinds.com
Investors: Tim Karaca Phone: 512.498.6739 Investors:
ir@solarwinds.com
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