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Share Name | Share Symbol | Market | Type |
---|---|---|---|
SolarWinds Corporation | NYSE:SWI | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
-0.065 | -0.55% | 11.735 | 11.80 | 11.62 | 11.77 | 150,425 | 19:46:30 |
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
Full Year 2022 Financial Highlights
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
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:
Financial Outlook for Full Year of 2023
SolarWinds’ management currently expects to achieve the following results for the full year of 2023:
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:
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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