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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 | |
---|---|---|---|---|---|---|---|---|
0.07 | 0.58% | 12.05 | 12.09 | 11.89 | 12.06 | 66,677 | 15:59:13 |
SolarWinds Corporation (NYSE:SWI), a leading provider of simple, powerful, secure observability and IT management software, today reported results for its third quarter ended September 30, 2023.
Third Quarter Financial Highlights
Please see the tables below for a reconciliation of our GAAP to non-GAAP results.
“We again delivered total revenue and adjusted EBITDA that exceeded the high end of our guidance range, highlighted by 6% year-over-year revenue growth and 21% year-over-year adjusted EBITDA growth,” said Sudhakar Ramakrishna, President and Chief Executive Officer, SolarWinds. “Our subscription-first strategy continues to yield strong results while our product teams continue to deliver multi-cloud solutions on the SolarWinds Platform designed to improve customer productivity and reduce their costs. I’m pleased with the team’s progress and strong execution across our business.”
Recent Business Highlights
Balance Sheet
At September 30, 2023, total cash and cash equivalents and short-term investments were $235.2 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 quarterly report on Form 10-Q for the period. Information about SolarWinds’ use of non-GAAP financial measures is provided below under “Non-GAAP Financial Measures.”
Financial Outlook
As of November 2, 2023, SolarWinds is providing its financial outlook for the fourth quarter and its updated financial outlook for the 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. 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 Fourth Quarter of 2023
SolarWinds’ management currently expects to achieve the following results for the fourth 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:
The conference call will provide additional details on the company's outlook.
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 fourth 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) risks related to the Cyber Incident, including with respect to (1) numerous financial, legal, reputational and other risks to us related to the Cyber Incident, including risks that the incident, SolarWinds’ response thereto or litigation and investigations 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 resulting from the exhaustion of our insurance coverage related to the Cyber Incident, (2) litigation and investigation risks related to the Cyber Incident, including as a result of the civil complaint recently filed by the Securities and Exchange Commission against us and our Chief Information Security Officer relating to the previously disclosed Wells Notices, 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, 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 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 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, (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, inflation, instability in the banking sector and financial services industry, foreign currency exchange rates and the effects of the COVID-19 pandemic or other public health crises 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 existing 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 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) 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 year ended December 31, 2022 filed on February 22, 2023, our Quarterly Report on Form 10-Q for the quarter ended March 31, 2023 filed on May 4, 2023, our Quarterly Report on Form 10-Q for the quarter ended June 30, 2023 filed on August 9, 2023 and our Quarterly Report on Form 10-Q for the quarter ended September 30, 2023 that SolarWinds anticipates filing on or before November 9, 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 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 calculation method 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 intangible 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 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.
#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
Condensed Consolidated Balance Sheets
(In thousands, except share and per share information)
(Unaudited)
September 30,
December 31,
2023
2022
Assets
Current assets:
Cash and cash equivalents
$
232,231
$
121,738
Short-term investments
2,979
27,114
Accounts receivable, net of allowances of $1,210 and $1,173 as of September 30, 2023 and December 31, 2022, respectively
91,399
100,204
Income tax receivable
1,133
987
Prepaid and other current assets
33,354
57,350
Total current assets
361,096
307,393
Property and equipment, net
20,387
26,634
Operating lease assets
45,015
61,418
Deferred taxes
133,072
134,922
Goodwill
2,371,756
2,380,059
Intangible assets, net
196,517
243,980
Other assets, net
49,829
45,600
Total assets
$
3,177,672
$
3,200,006
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable
$
8,996
$
14,045
Accrued liabilities and other
45,260
68,284
Current operating lease liabilities
14,941
15,005
Accrued interest payable
627
579
Income taxes payable
25,173
11,841
Current portion of deferred revenue
328,071
337,541
Current debt obligation
12,450
9,338
Total current liabilities
435,518
456,633
Long-term liabilities:
Deferred revenue, net of current portion
41,583
38,945
Non-current deferred taxes
7,017
8,582
Non-current operating lease liabilities
52,233
59,235
Other long-term liabilities
54,995
74,193
Long-term debt, net of current portion
1,191,378
1,192,765
Total liabilities
1,782,724
1,830,353
Commitments and contingencies
Stockholders’ equity:
Common stock, $0.001 par value: 1,000,000,000 shares authorized and 165,818,155 and 161,928,532 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively
166
162
Preferred stock, $0.001 par value: 50,000,000 shares authorized and no shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively
—
—
Additional paid-in capital
2,672,036
2,627,370
Accumulated other comprehensive loss
(58,956
)
(48,114
)
Accumulated deficit
(1,218,298
)
(1,209,765
)
Total stockholders’ equity
1,394,948
1,369,653
Total liabilities and stockholders’ equity
$
3,177,672
$
3,200,006
SolarWinds Corporation
Condensed Consolidated Statements of Operations
(In thousands, except per share information)
(Unaudited)
Three Months Ended September 30,
Nine Months Ended September 30,
2023
2022
2023
2022
Revenue:
Subscription
$
58,764
$
42,248
$
166,510
$
117,975
Maintenance
116,415
114,381
346,949
343,848
Total recurring revenue
175,179
156,629
513,459
461,823
License
14,412
22,767
47,142
70,475
Total revenue
189,591
179,396
560,601
532,298
Cost of revenue:
Cost of recurring revenue
17,957
16,563
54,884
49,854
Amortization of acquired technologies
3,412
3,628
10,273
24,503
Total cost of revenue
21,369
20,191
65,157
74,357
Gross profit
168,222
159,205
495,444
457,941
Operating expenses:
Sales and marketing
59,675
64,813
185,429
190,472
Research and development
27,308
22,562
75,180
68,092
General and administrative
31,101
42,558
91,120
116,505
Amortization of acquired intangibles
11,613
13,045
36,712
39,387
Goodwill impairment
—
278,706
—
891,101
Total operating expenses
129,697
421,684
388,441
1,305,557
Operating income (loss)
38,525
(262,479
)
107,003
(847,616
)
Other income (expense):
Interest expense, net
(29,314
)
(23,181
)
(87,338
)
(57,669
)
Other expense, net
(121
)
(2,418
)
(197
)
(1,861
)
Total other expense
(29,435
)
(25,599
)
(87,535
)
(59,530
)
Income (loss) before income taxes
9,090
(288,078
)
19,468
(907,146
)
Income tax expense
12,262
4,141
28,001
11,856
Net loss
$
(3,172
)
$
(292,219
)
$
(8,533
)
$
(919,002
)
Net loss available to common stockholders
$
(3,172
)
$
(292,219
)
$
(8,533
)
$
(919,002
)
Net loss available to common stockholders per share:
Basic loss per share
$
(0.02
)
$
(1.81
)
$
(0.05
)
$
(5.72
)
Diluted loss per share
$
(0.02
)
$
(1.81
)
$
(0.05
)
$
(5.72
)
Weighted-average shares used to compute net loss available to common stockholders per share:
Shares used in computation of basic loss per share
165,275
161,111
164,089
160,545
Shares used in computation of diluted loss per share
165,275
161,111
164,089
160,545
SolarWinds Corporation
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Nine Months Ended September 30,
2023
2022
Cash flows from operating activities
Net loss
$
(8,533
)
$
(919,002
)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization
62,810
74,107
Goodwill and indefinite-lived intangible asset impairment
—
906,350
Provision for losses on accounts receivable
300
612
Stock-based compensation expense
55,103
50,599
Amortization of debt issuance costs
8,050
6,794
Loss on extinguishment of debt
—
1,930
Deferred taxes
(1,532
)
(10,019
)
Gain on foreign currency exchange rates
(614
)
(898
)
Lease impairment charges
11,685
—
Other non-cash expenses (benefit)
359
(220
)
Changes in operating assets and liabilities, net of assets acquired and liabilities assumed in business combinations:
Accounts receivable
7,908
(2,326
)
Income taxes receivable
(171
)
4
Prepaid and other assets
24,057
(20,319
)
Accounts payable
(5,020
)
2,385
Accrued liabilities and other
(25,125
)
18,964
Accrued interest payable
47
108
Income taxes payable
(6,024
)
(6,398
)
Deferred revenue
(5,211
)
4,017
Other long-term liabilities
100
38
Net cash provided by operating activities
118,189
106,726
Cash flows from investing activities
Purchases of investments
(3,948
)
(67,133
)
Maturities of investments
27,535
16,000
Purchases of property and equipment
(3,000
)
(5,570
)
Purchases of intangible assets
(10,404
)
(11,099
)
Acquisitions, net of cash acquired
—
(6,500
)
Other investing activities
564
176
Net cash provided by (used in) investing activities
10,747
(74,126
)
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
(14,696
)
(9,123
)
Exercise of stock options
114
58
Repayments of borrowings from credit agreement
(6,226
)
(314,925
)
Net cash used in financing activities
(17,431
)
(320,839
)
Effect of exchange rate changes on cash and cash equivalents
(1,012
)
(2,216
)
Net increase (decrease) in cash and cash equivalents
110,493
(290,455
)
Cash and cash equivalents
Beginning of period
121,738
732,116
End of period
$
232,231
$
441,661
Supplemental disclosure of cash flow information
Cash paid for interest
$
83,308
$
54,629
Cash paid for income taxes
$
32,477
$
25,177
SolarWinds Corporation
Reconciliation of GAAP to Non-GAAP Financial Measures
(Unaudited)
Three Months Ended September 30,
Nine Months Ended September 30,
2023
2022
2023
2022
(in thousands, except margin data)
GAAP cost of revenue
$
21,369
$
20,191
$
65,157
$
74,357
Stock-based compensation expense and related employer-paid payroll taxes
(519
)
(489
)
(1,589
)
(1,586
)
Amortization of acquired technologies
(3,412
)
(3,628
)
(10,273
)
(24,503
)
Restructuring costs
—
—
(377
)
—
Cyber Incident costs
—
(6
)
—
(169
)
Non-GAAP cost of revenue
$
17,438
$
16,068
$
52,918
$
48,099
GAAP gross profit
$
168,222
$
159,205
$
495,444
$
457,941
Stock-based compensation expense and related employer-paid payroll taxes
519
489
1,589
1,586
Amortization of acquired technologies
3,412
3,628
10,273
24,503
Restructuring costs
—
—
377
—
Cyber Incident costs
—
6
—
169
Non-GAAP gross profit
$
172,153
$
163,328
$
507,683
$
484,199
GAAP gross margin
88.7
%
88.7
%
88.4
%
86.0
%
Non-GAAP gross margin
90.8
%
91.0
%
90.6
%
91.0
%
GAAP sales and marketing expense
$
59,675
$
64,813
$
185,429
$
190,472
Stock-based compensation expense and related employer-paid payroll taxes
(7,236
)
(5,554
)
(18,962
)
(16,787
)
Acquisition and other costs
(213
)
—
(213
)
—
Restructuring costs
(240
)
—
(2,857
)
(163
)
Cyber Incident costs
—
—
—
(130
)
Non-GAAP sales and marketing expense
$
51,986
$
59,259
$
163,397
$
173,392
GAAP research and development expense
$
27,308
$
22,562
$
75,180
$
68,092
Stock-based compensation expense and related employer-paid payroll taxes
(3,347
)
(3,015
)
(9,772
)
(8,370
)
Restructuring costs
(1,703
)
—
(1,945
)
—
Cyber Incident costs
—
—
—
(2
)
Non-GAAP research and development expense
$
22,258
$
19,547
$
63,463
$
59,720
GAAP general and administrative expense
$
31,101
$
42,558
$
91,120
$
116,505
Stock-based compensation expense and related employer-paid payroll taxes
(9,785
)
(8,933
)
(26,264
)
(24,726
)
Acquisition and other costs
(1,591
)
(146
)
(1,715
)
(432
)
Restructuring costs
(77
)
(43
)
(15,035
)
(1,310
)
Cyber Incident costs, net
(2,901
)
(10,823
)
4,289
(19,992
)
Goodwill and indefinite-lived intangible asset impairment
—
(5,884
)
—
(15,249
)
Non-GAAP general and administrative expense
$
16,747
$
16,729
$
52,395
$
54,796
GAAP operating expenses
$
129,697
$
421,684
$
388,441
$
1,305,557
Stock-based compensation expense and related employer-paid payroll taxes
(20,368
)
(17,502
)
(54,998
)
(49,883
)
Amortization of acquired intangibles
(11,613
)
(13,045
)
(36,712
)
(39,387
)
Acquisition and other costs
(1,804
)
(146
)
(1,928
)
(432
)
Restructuring costs
(2,020
)
(43
)
(19,837
)
(1,473
)
Cyber Incident costs, net
(2,901
)
(10,823
)
4,289
(20,124
)
Goodwill and indefinite-lived intangible asset impairment
—
(284,590
)
—
(906,350
)
Non-GAAP operating expenses
$
90,991
$
95,535
$
279,255
$
287,908
GAAP operating income (loss)
$
38,525
$
(262,479
)
$
107,003
$
(847,616
)
Stock-based compensation expense and related employer-paid payroll taxes
20,887
17,991
56,587
51,469
Amortization of acquired technologies
3,412
3,628
10,273
24,503
Amortization of acquired intangibles
11,613
13,045
36,712
39,387
Acquisition and other costs
1,804
146
1,928
432
Restructuring costs
2,020
43
20,214
1,473
Cyber Incident costs, net
2,901
10,829
(4,289
)
20,293
Goodwill and indefinite-lived intangible asset impairment
—
284,590
—
906,350
Non-GAAP operating income
$
81,162
$
67,793
$
228,428
$
196,291
GAAP operating margin
20.3
%
(146.3
)%
19.1
%
(159.2
)%
Non-GAAP operating margin
42.8
%
37.8
%
40.7
%
36.9
%
GAAP net loss
$
(3,172
)
$
(292,219
)
$
(8,533
)
$
(919,002
)
Stock-based compensation expense and related employer-paid payroll taxes
20,887
17,991
56,587
51,469
Amortization of acquired technologies
3,412
3,628
10,273
24,503
Amortization of acquired intangibles
11,613
13,045
36,712
39,387
Acquisition and other costs
1,804
146
1,928
432
Restructuring costs
2,020
43
20,214
1,433
Cyber Incident costs, net
2,901
10,829
(4,289
)
20,293
Goodwill and indefinite-lived intangible asset impairment
—
284,590
—
906,350
Loss on extinguishment of debt
—
1,930
—
1,930
Tax benefits associated with above adjustments
(1,452
)
(8,389
)
(7,930
)
(23,148
)
Non-GAAP net income
$
38,013
$
31,594
$
104,962
$
103,647
GAAP diluted loss per share
$
(0.02
)
$
(1.81
)
$
(0.05
)
$
(5.72
)
Non-GAAP diluted earnings per share
$
0.23
$
0.20
$
0.64
$
0.65
Reconciliation of GAAP Net Income (Loss) to Adjusted EBITDA
(Unaudited)
Three Months Ended September 30,
Nine Months Ended September 30,
2023
2022
2023
2022
(in thousands, except margin data)
Net loss
$
(3,172
)
$
(292,219
)
$
(8,533
)
$
(919,002
)
Amortization and depreciation
19,678
20,048
60,636
74,107
Income tax expense
12,262
4,141
28,001
11,856
Interest expense, net
29,314
23,181
87,338
57,669
Unrealized foreign currency gains
(730
)
(458
)
(614
)
(898
)
Acquisition and other costs
1,804
146
1,928
432
Debt-related costs(1)
98
2,025
301
2,222
Stock-based compensation expense and related employer-paid payroll taxes
20,887
17,991
56,587
51,469
Restructuring costs(2)
2,020
43
20,214
1,433
Cyber Incident costs, net
2,901
10,829
(4,289
)
20,293
Goodwill and indefinite-lived intangible asset impairment
—
284,590
—
906,350
Adjusted EBITDA
$
85,062
$
70,317
$
241,569
$
205,931
Adjusted EBITDA margin
44.9
%
39.2
%
43.1
%
38.7
%
_______
(1)Debt-related costs include a non-cash loss on extinguishment of debt of $1.9 million for both the three and nine months ended September 30, 2022.
(2)Restructuring costs for the nine months ended September 30, 2023 includes $13.9 million of non-cash lease impairment and other charges 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 September 30,
Nine Months Ended September 30,
2023
2022
Growth Rate
2023
2022
Growth Rate
(in thousands, except percentages)
Total revenue
$
189,591
$
179,396
5.7
%
$
560,601
$
532,298
5.3
%
Estimated foreign currency impact(1)
(1,827
)
—
(1.0
)
(204
)
—
—
Non-GAAP total revenue on a constant currency basis
$
187,764
$
179,396
4.7
%
$
560,397
$
532,298
5.3
%
_______
(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 nine months ended September 30, 2023.
Reconciliation of Unlevered Free Cash Flow
(Unaudited)
Nine Months Ended September 30,
2023
2022
(in thousands)
Net cash provided by operating activities
$
118,189
$
106,726
Capital expenditures(1)
(13,404
)
(16,669
)
Free cash flow
104,785
90,057
Cash paid for interest and other debt related items
79,542
51,060
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
8,370
26,340
Unlevered free cash flow (excluding forfeited tax shield)
192,697
167,457
Forfeited tax shield related to interest payments(2)
(21,660
)
(13,384
)
Unlevered free cash flow
$
171,037
$
154,073
_______
(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 26.0% for the nine months ended September 30, 2023 and 24.5% for the nine months ended September 30, 2022.
View source version on businesswire.com: https://www.businesswire.com/news/home/20231102584762/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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