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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 | |
---|---|---|---|---|---|---|---|---|
-0.29 | -2.47% | 11.44 | 11.74 | 11.43 | 11.74 | 382,248 | 01:00:00 |
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, 2023.
Fourth Quarter 2023 Financial Highlights
Full Year 2023 Financial Highlights
For a reconciliation of our GAAP to non-GAAP results, please see the tables below.
“We are pleased to finish the year with fourth quarter and full-year revenue and adjusted EBITDA results that exceeded our guidance, while also expanding our margins,” said Sudhakar Ramakrishna, President and Chief Executive Officer of SolarWinds. “Our year-over-year growth in full-year revenue, total ARR, subscription revenue, and adjusted EBITDA represent significant progress towards the priorities we set forth at the beginning of 2023, including our subscription-first strategy, continued focus on customer success and retention, innovation on the SolarWinds Platform, and strong operating discipline. In 2024, we intend to accelerate the execution and progress towards our established priorities.”
Recent Business Highlights
Balance Sheet
At December 31, 2023, total cash and cash equivalents and short-term investments were $289.2 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.”
Financial Outlook
As of February 8, 2024, SolarWinds is providing its financial outlook for the first quarter and full year of 2024. The financial information below represents forward-looking non-GAAP financial information, including an estimate of adjusted EBITDA and non-GAAP diluted earnings per share. 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, 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 2024
SolarWinds’ management currently expects to achieve the following results for the first quarter of 2024:
Financial Outlook for Full Year of 2024
SolarWinds’ management currently expects to achieve the following results for the full year of 2024:
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 +1 (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 2024. 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) risks related to the Cyber Incident, including with respect to (1) litigation and investigation risks related to the Cyber Incident, including as a result of the pending civil complaint filed by the Securities and Exchange Commission against us and our Chief Information Security Officer, including that we may incur significant costs in defending ourselves and may be unsuccessful in doing so, resulting in exposure to potential penalties, judgements, fines, settlement-related costs, and penalties and other costs and liabilities related thereto, (2) numerous financial, legal, reputational and other risks to us related to the Cyber Incident, including risks that the incident, SolarWinds’ response thereto or litigation related to the Cyber Incident may result in the 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 and risks related to the impact of any such costs and liabilities, and (3) 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 cybersecurity, 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, our customers, insider threats, 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 and success of, our ongoing 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) risks related to using artificial intelligence ("AI”) in our business and our solutions, including risks related to evolving regulation of artificial intelligence, machine learning, and the receipt, collection, storage, processing, and transfer of data as well as the threat of cyberattacks created through AI or leveraging AI; (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 global macroeconomic conditions, including the wars in Israel and Ukraine, geopolitical tensions involving China, disruptions in the global supply chain and energy markets, inflation, uncertainty over liquidity concerns in the broader financial services industry, foreign currency exchange rates, and the effects of the global COVID pandemic or other public health crisis 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, or to sell additional products or upgrades to our existing customers, or to convert our maintenance 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 us or our competitors, (6) changes in interest rates, (7) risks associated with our international operations and any international expansion efforts, and (8) ongoing sanctions and export controls; (i) the possibility that our operating income could fluctuate and may decline as percentage of revenue as we make further expenditures to expand our infrastructure, 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) any violation of legal and regulatory requirements or any misconduct by our employees or partners; (m) our inability to successfully identify, complete, and integrate acquisitions and manage our growth effectively; (n) risks associated with our status as a controlled company; and (o) 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 year ended December 31, 2022 filed on February 22, 2023, our Quarterly Reports on Form 10-Q, and our Annual Report on Form 10-K for the year ended December 31, 2023, that we anticipate filing on or before March 15, 2024. 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 investors and security analysts use these non-GAAP financial measures 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.
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 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 excluding such items as 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 cost of revenue and non-GAAP operating income, 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 (loss), excluding 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, net, 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 total 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 restructuring impairment charges related to exited leased facilities which may continue to require future cash rent payments; 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, net, 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.
Other Defined Terms
Subscription Annual Recurring Revenue (Subscription ARR). Subscription ARR represents the annualized recurring value of all active subscription contracts at the end of a reporting period.
Total Annual Recurring Revenue (Total ARR). Total ARR represents the sum of Subscription ARR and the annualized value of all maintenance contracts related to perpetual licenses active at the end of a reporting period.
We use Subscription ARR and Total ARR to better understand and assess the performance of our business, as our mix of revenue generated from recurring revenue has increased in recent years. Subscription ARR and Total ARR each provides a normalized view of customer retention, renewal and expansion, as well as growth from new customers. Subscription ARR and Total ARR should each be viewed independently of revenue and deferred revenue and are not intended to be combined with or to replace either of those items.
#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.
© 2024 SolarWinds Worldwide, LLC. All rights reserved.
SolarWinds Corporation
Consolidated Balance Sheets
(In thousands, except share and per share information)
(Unaudited)
December 31,
2023
2022
Assets
Current assets:
Cash and cash equivalents
$
284,695
$
121,738
Short-term investments
4,477
27,114
Accounts receivable, net of allowances of $743 and $1,173 as of December 31, 2023 and 2022, respectively
103,455
100,204
Income tax receivable
459
987
Prepaid and other current assets
28,241
57,350
Total current assets
421,327
307,393
Property and equipment, net
19,669
26,634
Operating lease assets
43,776
61,418
Deferred taxes
133,224
134,922
Goodwill
2,397,545
2,380,059
Intangible assets, net
183,688
243,980
Other assets, net
51,686
45,600
Total assets
$
3,250,915
$
3,200,006
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable
$
9,701
$
14,045
Accrued liabilities and other
56,643
68,284
Current operating lease liabilities
14,925
15,005
Accrued interest payable
942
579
Income taxes payable
29,240
11,841
Current portion of deferred revenue
344,907
337,541
Current debt obligation
12,450
9,338
Total current liabilities
468,808
456,633
Long-term liabilities:
Deferred revenue, net of current portion
42,070
38,945
Non-current deferred taxes
1,933
8,582
Non-current operating lease liabilities
49,848
59,235
Other long-term liabilities
55,278
74,193
Long-term debt, net of current portion
1,190,934
1,192,765
Total liabilities
1,808,871
1,830,353
Commitments and contingencies
Stockholders’ equity:
Common stock, $0.001 par value: 1,000,000,000 shares authorized and 166,637,506 and 161,928,532 shares issued and outstanding as of December 31, 2023 and 2022, respectively
167
162
Preferred stock, $0.001 par value: 50,000,000 shares authorized and no shares issued and outstanding as of December 31, 2023 and 2022, respectively
—
—
Additional paid-in capital
2,688,854
2,627,370
Accumulated other comprehensive loss
(28,103
)
(48,114
)
Accumulated deficit
(1,218,874
)
(1,209,765
)
Total stockholders’ equity
1,442,044
1,369,653
Total liabilities and stockholders’ equity
$
3,250,915
$
3,200,006
SolarWinds Corporation
Consolidated Statements of Operations
(In thousands, except per share information)
(Unaudited)
Three Months Ended
December 31,
Twelve Months Ended
December 31,
2023
2022
2023
2022
Revenue:
Subscription
$
67,726
$
49,701
$
234,236
$
167,676
Maintenance
115,123
115,053
462,072
458,901
Total recurring revenue
182,849
164,754
696,308
626,577
License
15,290
22,315
62,432
92,790
Total revenue
198,139
187,069
758,740
719,367
Cost of revenue:
Cost of recurring revenue
18,752
17,994
73,636
67,848
Amortization of acquired technologies
3,096
3,632
13,369
28,135
Total cost of revenue
21,848
21,626
87,005
95,983
Gross profit
176,291
165,443
671,735
623,384
Operating expenses:
Sales and marketing
63,836
67,274
249,265
257,746
Research and development
24,993
24,238
100,173
92,330
General and administrative
32,596
32,956
123,716
149,461
Amortization of acquired intangibles
11,496
12,938
48,208
52,325
Goodwill impairment
—
—
—
891,101
Total operating expenses
132,921
137,406
521,362
1,442,963
Operating income (loss)
43,370
28,037
150,373
(819,579
)
Other income (expense):
Interest expense, net
(28,510
)
(25,705
)
(115,848
)
(83,374
)
Other expense, net
(189
)
(3,213
)
(386
)
(5,074
)
Total other expense
(28,699
)
(28,918
)
(116,234
)
(88,448
)
Income (loss) before income taxes
14,671
(881
)
34,139
(908,027
)
Income tax expense
15,247
9,530
43,248
21,386
Net loss
$
(576
)
$
(10,411
)
$
(9,109
)
$
(929,413
)
Net loss available to common stockholders
$
(576
)
$
(10,411
)
$
(9,109
)
$
(929,413
)
Net loss available to common stockholders per share:
Basic loss per share
$
—
$
(0.06
)
$
(0.06
)
$
(5.78
)
Diluted loss per share
$
—
$
(0.06
)
$
(0.06
)
$
(5.78
)
Weighted-average shares used to compute net loss available to common stockholders per share:
Shares used in computation of basic loss per share
166,239
161,721
164,631
160,841
Shares used in computation of diluted loss per share
166,239
161,721
164,631
160,841
SolarWinds Corporation
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Twelve Months Ended December 31,
2023
2022
Cash flows from operating activities
Net loss
$
(9,109
)
$
(929,413
)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization
82,198
94,981
Goodwill and indefinite-lived intangible asset impairment
—
906,350
Provision for losses on accounts receivable
(389
)
951
Stock-based compensation expense
75,727
67,050
Amortization of debt issuance costs
10,718
9,056
Loss on extinguishment of debt
—
3,822
Deferred taxes
(1,140
)
(6,741
)
(Gain) loss on foreign currency exchange rates
(14
)
1,525
Lease impairment charges
11,392
—
Other non-cash (benefits) expenses
192
(30
)
Changes in operating assets and liabilities, net of assets acquired and liabilities assumed in business combinations:
Accounts receivable
(1,568
)
(6,846
)
Income taxes receivable
539
99
Prepaid and other assets
29,391
(28,898
)
Accounts payable
(4,357
)
6,751
Accrued liabilities and other
(15,339
)
25,759
Accrued interest payable
362
426
Income taxes payable
(1,616
)
(9,290
)
Deferred revenue
6,389
19,689
Other long-term liabilities
89
(735
)
Net cash provided by operating activities
183,465
154,506
Cash flows from investing activities
Purchases of investments
(8,388
)
(67,133
)
Maturities of investments
30,535
39,633
Purchases of property and equipment
(4,353
)
(7,463
)
Capitalized software development costs
(13,674
)
(13,037
)
Purchases of intangible assets
(244
)
(250
)
Acquisitions, net of cash acquired
—
(6,500
)
Other investing activities
564
437
Net cash provided by (used in) investing activities
4,440
(54,313
)
Cash flows from financing activities
Proceeds from issuance of common stock under employee stock purchase plan
3,377
3,151
Repurchase of common stock and incentive restricted stock
(18,830
)
(11,130
)
Exercise of stock options
143
59
Repayments of borrowings from credit agreement
(9,338
)
(664,350
)
Payment of debt issuance costs
—
(36,925
)
Net cash used in financing activities
(24,648
)
(709,195
)
Effect of exchange rate changes on cash and cash equivalents
(300
)
(1,376
)
Net increase (decrease) in cash and cash equivalents
162,957
(610,378
)
Cash and cash equivalents
Beginning of period
121,738
732,116
End of period
$
284,695
$
121,738
Supplemental disclosure of cash flow information
Cash paid for interest
$
111,861
$
79,614
Cash paid for income taxes
$
40,964
$
33,117
Non-cash investing and financing transactions
Stock-based compensation included in capitalized software development costs
$
1,246
$
1,171
SolarWinds Corporation
Reconciliation of GAAP to Non-GAAP Financial Measures
(Unaudited)
Three Months Ended
December 31,
Twelve Months Ended
December 31,
2023
2022
2023
2022
(in thousands, except margin and per share data)
GAAP cost of revenue
$
21,848
$
21,626
$
87,005
$
95,983
Stock-based compensation expense and related employer-paid payroll taxes
(496
)
(491
)
(2,085
)
(2,077
)
Amortization of acquired technologies
(3,096
)
(3,632
)
(13,369
)
(28,135
)
Restructuring costs
—
—
(377
)
—
Cyber Incident costs
—
(9
)
—
(178
)
Non-GAAP cost of revenue
$
18,256
$
17,494
$
71,174
$
65,593
GAAP gross profit
$
176,291
$
165,443
$
671,735
$
623,384
Stock-based compensation expense and related employer-paid payroll taxes
496
491
2,085
2,077
Amortization of acquired technologies
3,096
3,632
13,369
28,135
Restructuring costs
—
—
377
—
Cyber Incident costs
—
9
—
178
Non-GAAP gross profit
$
179,883
$
169,575
$
687,566
$
653,774
GAAP gross margin
89.0
%
88.4
%
88.5
%
86.7
%
Non-GAAP gross margin
90.8
%
90.6
%
90.6
%
90.9
%
GAAP sales and marketing expense
$
63,836
$
67,274
$
249,265
$
257,746
Stock-based compensation expense and related employer-paid payroll taxes
(7,482
)
(5,810
)
(26,444
)
(22,597
)
Acquisition and other costs
(12
)
—
(225
)
—
Restructuring costs
—
—
(2,857
)
(163
)
Cyber Incident costs
—
—
—
(130
)
Non-GAAP sales and marketing expense
$
56,342
$
61,464
$
219,739
$
234,856
GAAP research and development expense
$
24,993
$
24,238
$
100,173
$
92,330
Stock-based compensation expense and related employer-paid payroll taxes
(1,887
)
(2,860
)
(11,659
)
(11,230
)
Restructuring costs
(148
)
—
(2,093
)
—
Cyber Incident costs
—
—
—
(2
)
Non-GAAP research and development expense
$
22,958
$
21,378
$
86,421
$
81,098
GAAP general and administrative expense
$
32,596
$
32,956
$
123,716
$
149,461
Stock-based compensation expense and related employer-paid payroll taxes
(10,951
)
(7,391
)
(37,215
)
(32,117
)
Acquisition and other costs
(672
)
(108
)
(2,387
)
(540
)
Restructuring costs
114
(90
)
(14,921
)
(1,400
)
Cyber Incident costs, net
(2,205
)
(5,931
)
2,084
(25,923
)
Goodwill and indefinite-lived intangible asset impairment
—
—
—
(15,249
)
Non-GAAP general and administrative expense
$
18,882
$
19,436
$
71,277
$
74,232
GAAP operating expenses
$
132,921
$
137,406
$
521,362
$
1,442,963
Stock-based compensation expense and related employer-paid payroll taxes
(20,320
)
(16,061
)
(75,318
)
(65,944
)
Amortization of acquired intangibles
(11,496
)
(12,938
)
(48,208
)
(52,325
)
Acquisition and other costs
(684
)
(108
)
(2,612
)
(540
)
Restructuring costs
(34
)
(90
)
(19,871
)
(1,563
)
Cyber Incident costs, net
(2,205
)
(5,931
)
2,084
(26,055
)
Goodwill and indefinite-lived intangible asset impairment
—
—
—
(906,350
)
Non-GAAP operating expenses
$
98,182
$
102,278
$
377,437
$
390,186
GAAP operating income (loss)
$
43,370
$
28,037
$
150,373
$
(819,579
)
Stock-based compensation expense and related employer-paid payroll taxes
20,816
16,552
77,403
68,021
Amortization of acquired technologies
3,096
3,632
13,369
28,135
Amortization of acquired intangibles
11,496
12,938
48,208
52,325
Acquisition and other costs
684
108
2,612
540
Restructuring costs
34
90
20,248
1,563
Cyber Incident costs, net
2,205
5,940
(2,084
)
26,233
Goodwill and indefinite-lived intangible asset impairment
—
—
—
906,350
Non-GAAP operating income
$
81,701
$
67,297
$
310,129
$
263,588
GAAP operating margin
21.9
%
15.0
%
19.8
%
(113.9
)%
Non-GAAP operating margin
41.2
%
36.0
%
40.9
%
36.6
%
GAAP net loss
$
(576
)
$
(10,411
)
$
(9,109
)
$
(929,413
)
Stock-based compensation expense and related employer-paid payroll taxes
20,816
16,552
77,403
68,021
Amortization of acquired technologies
3,096
3,632
13,369
28,135
Amortization of acquired intangibles
11,496
12,938
48,208
52,325
Acquisition and other costs
684
108
2,612
540
Restructuring costs
34
90
20,248
1,523
Cyber Incident costs, net
2,205
5,940
(2,084
)
26,233
Goodwill and indefinite-lived intangible asset impairment
—
—
—
906,350
Loss on extinguishment of debt
—
1,892
—
3,822
Tax (benefits) expense associated with above adjustments
1,729
(560
)
(6,201
)
(23,708
)
Non-GAAP net income
$
39,484
$
30,181
$
144,446
$
133,828
GAAP diluted loss per share
$
—
$
(0.06
)
$
(0.06
)
$
(5.78
)
Non-GAAP diluted earnings per share
$
0.24
$
0.19
$
0.88
$
0.83
Reconciliation of GAAP Net Income (Loss) to Adjusted EBITDA
(Unaudited)
Three Months Ended
December 31,
Twelve Months Ended
December 31,
2023
2022
2023
2022
(in thousands, except margin data)
Net loss
$
(576
)
$
(10,411
)
$
(9,109
)
$
(929,413
)
Amortization and depreciation
19,387
20,874
80,023
94,981
Income tax expense
15,247
9,530
43,248
21,386
Interest expense, net
28,510
25,705
115,848
83,374
Unrealized foreign currency (gains) losses
600
2,423
(14
)
1,525
Acquisition and other costs
684
108
2,612
540
Debt-related costs(1)
99
3,687
400
5,909
Stock-based compensation expense and related employer-paid payroll taxes
20,816
16,552
77,403
68,021
Restructuring costs(2)
34
90
20,248
1,523
Cyber Incident costs, net
2,205
5,940
(2,084
)
26,233
Goodwill and indefinite-lived intangible asset impairment
—
—
—
906,350
Adjusted EBITDA
$
87,006
$
74,498
$
328,575
$
280,429
Adjusted EBITDA margin
43.9
%
39.8
%
43.3
%
39.0
%
________
(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 twelve months ended December 31, 2023 includes $13.6 million of non-cash lease impairment and other accelerated depreciation expense incurred in connection with the exiting of certain leased facilities.
Reconciliation of Revenue to Non-GAAP Revenue
on a Constant Currency Basis
(Unaudited)
Three Months Ended December 31,
Twelve Months Ended December 31,
2023
2022
Growth Rate
2023
2022
Growth Rate
(in thousands, except percentages)
Total GAAP revenue
$
198,139
$
187,069
5.9
%
$
758,740
$
719,367
5.5
%
Estimated foreign currency impact(1)
(1,499
)
—
(0.8
)
(1,703
)
—
(0.2
)
Non-GAAP total revenue on a constant currency basis
$
196,640
$
187,069
5.1
%
$
757,037
$
719,367
5.2
%
________(1)
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, 2023.
Reconciliation of Unlevered Free Cash Flow
(Unaudited)
Twelve Months Ended December 31,
2023
2022
(in thousands)
Net cash provided by operating activities
$
183,465
$
154,506
Capital expenditures(1)
(18,271
)
(20,750
)
Free cash flow
165,194
133,756
Cash paid for interest and other debt related items
105,168
75,978
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
13,194
33,498
Unlevered free cash flow (excluding forfeited tax shield)
283,556
243,232
Forfeited tax shield related to interest payments(2)
(29,084
)
(19,505
)
Unlevered free cash flow
$
254,472
$
223,727
_______________
(1)
Includes purchases of property and equipment, capitalized software development costs and purchases of intangible assets.
(2)
Forfeited tax shield related to interest payments assumes a statutory rate of 26.0% for the twelve months ended December 31, 2023 and 24.5% for the twelve months ended December 31, 2022.
View source version on businesswire.com: https://www.businesswire.com/news/home/20240208359158/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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