Exhibit 99.1
SolarWinds Announces Fourth Quarter and Full Year 2009 Results
| | • | | Record quarterly total revenue of $33.0 million, 32% growth over Q4 2008 |
| | • | | 11th straight quarter of 40% or higher year-over-year maintenance revenue growth |
| | • | | GAAP diluted earnings per share of $0.09, Non-GAAP diluted earnings per share of $0.19 |
AUSTIN, Texas – February 8, 2010 – SolarWinds®, Inc. (NYSE: SWI), a leading provider of powerful and affordable IT management software to more than 90,000 customers worldwide, today reported results for its fourth quarter and fiscal year ended December 31, 2009.
Financial Results
SolarWinds reported record total revenue for the fourth quarter of 2009 of $33.0 million, a 32% increase over total revenue in the fourth quarter of 2008, and reported total revenue for the full year 2009 of $116.4 million, a 25% increase over total revenue for the full year 2008.
License revenue was $17.6 million in the fourth quarter of 2009, representing a 26% increase over license revenue in the fourth quarter of 2008. Maintenance revenue was $15.4 million in the fourth quarter of 2009, representing a 40% increase over maintenance revenue in the fourth quarter of 2008.
Non-GAAP operating income was $17.5 million in the fourth quarter of 2009, or 53% of revenue, compared to $13.3 million and 53% of revenue in the fourth quarter of 2008. Non-GAAP net income was $13.5 million and non-GAAP diluted earnings per share was $0.19 in the fourth quarter of 2009, compared to $7.3 million and $0.12 per share in the fourth quarter of 2008.
On a GAAP basis, operating income was $6.9 million and diluted earnings per share was $0.09 in the fourth quarter of 2009, compared to operating income of $11.3 million and diluted earnings per share of $0.09 in the fourth quarter of 2008. For the full year 2009, operating income was $43.8 million and diluted earnings per share was $0.52, compared to operating income of $42.0 million and diluted earnings per share of $0.35 for the full year 2008
Non-GAAP operating income was $61.7 million for the full year 2009, or 53% of revenue, compared to $48.8 million and 52% of revenue for the full year 2008. Non-GAAP net income was $42.5 million and Non-GAAP diluted earnings per share was $0.63 for the full year 2009 compared to $27.8 million and $0.47 for the full year 2008.
Non-GAAP net income and operating income exclude stock-based compensation expense, amortization of intangible assets, expenses related to the secondary offering of common stock by certain of our stockholders, lawsuit settlement and related legal fees, the write-off of debt issuance costs and the related tax impact of these items. Non-GAAP diluted earnings per share is equal to non-GAAP net income divided by non-GAAP weighted average shares outstanding, which adjusts GAAP weighted average shares outstanding to assume that the conversion of preferred stock in May 2009 occurred at the beginning of the applicable period.
Net cash provided by operating activities was $13.2 million in the fourth quarter of 2009, representing a 71% increase over net cash provided by operating activities in the fourth quarter of 2008. Net cash provided by operating activities was $49.2 million for the full year 2009, representing a 40% increase over net cash provided by operating activities for the full year 2008. Adjusted cash flow, which is defined as net cash provided by operating activities plus cash interest paid, cash taxes paid and lawsuit settlement and related legal fees, was $21.0 million in the fourth quarter of 2009 and $68.4 million for the full year 2009 as compared to $13.9 million and $57.3 million for the fourth quarter and full year of 2008, respectively.
Information about SolarWinds’ use of non-GAAP financial information is provided under “Non-GAAP Financial Measures” below.
Recent Business Highlights
“The fourth quarter of 2009 was a strong quarter for SolarWinds, primarily due to a significant increase in interest and purchasing activity from commercial market customers, globally,” said Kevin Thompson, SolarWinds’ President, Chief Operating Officer and Chief Financial Officer. “The investments we have made over the past year in our product portfolio, coupled with the focus on our international sales and marketing efforts, have resulted in not only increased global demand for SolarWinds’ products, but also improved our ability to satisfy that demand.”
“2009 was an important year for SolarWinds,” added Mike Bennett, SolarWinds’ Chairman and Chief Executive Officer, “and our fourth quarter results and achievements are a reflection of investments and initiatives we made throughout the year in our people, products, operations and market awareness. As we continue to drive further demand for our products, we believe that we are well positioned to capitalize on that demand, and to quickly and seamlessly add capacity to our operations as needed.”
Other business highlights:
| | • | | In December 2009, the outstanding litigation with a former employee, which has been previously disclosed in SolarWinds’ public filings, was completely and fully resolved. This resulted in settlement costs and related legal fees of $7.5 million in the fourth quarter. |
| | • | | SolarWinds released new versions of key products, including its most popular free tool, SolarWinds TFTP Server, and SolarWinds ipMonitor. SolarWinds also released updates to Orion Network Configuration Manager (NCM), Orion Application Performance Monitor (APM), and Orion IP Address Manager (IPAM). |
| | • | | In November, SolarWinds facilitated the secondary offering of 13.8 million shares of common stock by certain of its stockholders. |
| | • | | For the second year in a row, SolarWinds was chosen by Redmond magazine’s readers as the best Independent Software Vendor (ISV) and preferred performance management product over HP OpenView® in the 2009 Reader’s Choice Awards. SolarWinds Network Management Software was also named the ISV winner and preferred product in the “Best Network Management Product” category. |
| | • | | In January 2010, SolarWinds completed the acquisition of Tek-Tools, Inc., expanding its product offerings to include storage resource and virtualization management. |
“Our commitment to providing the IT community with powerful, easy-to-use and affordable management solutions continues to be rewarded through broad market recognition and the trust our customers place in our products to help them manage mission-critical IT environments,” continued Kevin Thompson. “Over the course of 2010 and as we expand into new areas, we hope to continue to build on our reputation of delivering powerful, easy-to-use and effective products that address the immediate needs of our customers and the market.”
Financial Outlook
As of February 8, 2010, SolarWinds is providing its guidance for its first quarter of 2010 and its full year ending December 31, 2010. The financial information below represents forward-looking non-GAAP financial information, including an estimate of non-GAAP operating income, non-GAAP net income and non-GAAP diluted earnings per share, for the first quarter and full year 2010. These non-GAAP financial measures exclude, among other items mentioned previously, stock-based compensation expense and acquisition-related costs. SolarWinds cannot reasonably estimate the expected stock-based compensation expense for these future periods as the amounts depend upon such factors as the future price of SolarWinds’ stock for purposes of computation. In addition, costs related to acquisitions are not something that SolarWinds can estimate because it is a function of what acquisitions, if any, are completed and what kinds of costs are incurred in connection with any such acquisitions.
Financial Outlook for Full Year 2010
SolarWinds management currently expects to achieve the following results for the full year 2010:
| | • | | Total revenue in the range of $159.0–$164.0 million |
| | • | | Non-GAAP operating income of $77.5–$80.5 million |
| | • | | Non-GAAP net income of $54.0–$56.0 million |
| | • | | Non-GAAP diluted earnings per share of $0.72–$0. 75 |
| | • | | Weighted average shares outstanding of approximately 74.8 million |
Financial Outlook for the First Quarter of 2010
SolarWinds management currently expects to achieve the following results for the first quarter of 2010:
| | • | | Total revenue in the range of $33.7–$34.7 million |
| | • | | Non-GAAP operating income of $16.2–$16.7 million |
| | • | | Non-GAAP net income of $11.3–$11.7 million |
| | • | | Non-GAAP diluted earnings per share of $0.15–$0.16 |
| | • | | Weighted average shares outstanding of approximately 73.8 million |
Conference Call and Webcast
In conjunction with this announcement, SolarWinds will host a conference call today to discuss its financial results and other business at 4:00pm CST (5:00pm EST/2:00pm PST). A live webcast of the event, a copy of this press release and any other financial and statistical information about the periods to be presented in the conference call will be available on the SolarWinds Investor Relations website at http://ir.solarwinds.com. A live dial-in is available domestically at 888-554-1417 and internationally at +1-719-785-9447. It is recommended that participants access the webcast or dial into the call at least 5-10 minutes before the scheduled start time. A replay of the webcast will be available on a temporary basis shortly after the event on the SolarWinds Investor Relations website.
Forward-Looking Statements
This press release contains “forward-looking” statements relating to SolarWinds’ possible or assumed future results of operations, potential growth and market opportunities and SolarWinds’ ability to execute on such opportunities. 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 “expects,” “believes,” “hopes,” “will,” or similar expressions and the negatives of those terms. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, the following: (a) the possibility that general economic conditions or uncertainty cause information technology spending to be reduced or purchasing decisions to be delayed; (b) the presence or absence of occasional large customer orders, including in particular those placed by the U.S. federal government; (c) the inability to increase sales to existing customers and to attract new customers; (d) the failure to integrate Tek-Tools and any future acquisitions successfully; (e) the timing and success of new product introductions by SolarWinds or its competitors; and (f) such other risk and uncertainties described more fully in documents filed with or furnished to the Securities and Exchange Commission, including the Form 10-Q previously filed for the third quarter of 2009 and Form 10-K for the full year 2009 that we anticipate filing on or before February 28, 2010. 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 disclosing financial measures prepared in accordance with GAAP, this press release and the accompanying tables contain the following non-GAAP financial measures: non-GAAP operating income, non-GAAP net income, non-GAAP diluted earnings per share, adjusted EBITDA, adjusted cash flow and non-GAAP weighted average shares outstanding. Each of non-GAAP operating income, non-GAAP net income, non-GAAP diluted earnings per share and adjusted EBITDA exclude the impact of stock-based compensation expense, amortization of intangible assets, lawsuit settlement and related legal fees, secondary offerings expenses and acquisition costs from the comparable GAAP measure. Each of non-GAAP net income, non-GAAP diluted earnings per share and adjusted EBITDA also excludes the write-off of debt issuance costs and the tax benefits related to these items from the comparable GAAP measure. This press release also contains a reconciliation of each of these non-GAAP measures to its most comparable GAAP financial measure.
SolarWinds believes that each of these non-GAAP financial measures provides meaningful supplemental information regarding its liquidity and performance by excluding certain expenses and expenditures that may not be indicative of its core business operations. SolarWinds’ management and Board of Directors use these non-GAAP measures to assess liquidity and operational performance as well as to determine employee incentive compensation. Accordingly, these measures may provide helpful insight to investors on 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 and liquidity 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. These items are typically interest expense, income tax expense, depreciation and amortization and stock-based compensation expense.
SolarWinds also believes that adjusted EBITDA and adjusted cash flow are useful liquidity measures for investors and security analysts. Adjusted EBITDA is also the performance measure for two of the key operational covenants used to assess SolarWinds’ ability to service the debt in its credit agreements. SolarWinds believes that adjusted EBITDA and adjusted cash flow provide useful information to management and investors about the amount of cash generated by the business that, after the acquisition of property and equipment, can be used for strategic opportunities, including investing in the business, making strategic acquisitions and increasing cash balances.
SolarWinds understands that, although these non-GAAP financial measures are frequently used by investors and securities analysts in their evaluations of companies, 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. Items such as the amortization of intangible assets, stock-based compensation expense, acquisition costs, interest expense and income tax expense that are excluded from these non-GAAP financial measures can have a material impact on net earnings. Furthermore, Adjusted EBITDA and adjusted cash flow does not reflect (a) interest expense, interest income or cash requirements for income taxes; (b) cash requirements for potential replacements of assets being depreciated or amortized in the future; (c) cash expenditures or future requirements for capital expenditures or other contractual commitments; (d) changes in, or cash requirements for, working capital needs; (e) cash payment for the one-time settlement of an outstanding lawsuit and related legal fees; or (f) the total increase or decrease in the cash balance for the period.
As a result, these non-GAAP financial measures have limitations and should not be considered in isolation from, or as a substitute for, operating income, net income, cash flow from operations or other measures of performance prepared in accordance with GAAP. SolarWinds’ management and Board of Directors compensate for these limitations by using these non-GAAP financial measures as supplements to GAAP financial measures and by reviewing the reconciliations of the non-GAAP financial measures to their most comparable GAAP financial measure. Investors are encouraged to review the reconciliations of these non-GAAP financial measures to their most comparable GAAP financial measures that are included elsewhere in this press release.
About SolarWinds
SolarWinds provides powerful and affordable network management software to more than 90,000 customers worldwide – from Fortune 500 enterprises to small businesses. Focused on the real-world needs of network professionals, SolarWinds products are downloadable, easy to use and maintain, and provide the power, scale, and flexibility needed to manage today’s complex network environments. SolarWinds’ growing online community, thwack, offers users problem-solving and technology-sharing for all of SolarWinds’ products.
SolarWinds, thwack and Orion are registered trademarks of SolarWinds. All other company and product names mentioned are used only for identification purposes and may be trademarks or registered trademarks of their respective companies.
CONTACTS:
| | |
Investors: Jason Ream Phone: 512.682.9680 ir@solarwinds.com | | Media: Tiffany Nels Phone: 512.682.9545 pr@solarwinds.com |
SolarWinds, Inc.
Consolidated Balance Sheets
(In thousands, except for per share information)
(unaudited)
| | | | | | | | |
| | | December 31,
2009 | | | December 31,
2008 | |
Assets | | | | | | | | |
Current assets: | | | | | | | | |
Cash and cash equivalents | | $ | 129,788 | | | $ | 40,566 | |
Accounts receivable, net of allowances of $ 149 and $ 117 as of December 31, 2009 and December 31, 2008, respectively | | | 15,786 | | | | 13,722 | |
Income tax receivable | | | 109 | | | | 728 | |
Deferred taxes | | | 252 | | | | 40 | |
Prepaid income taxes | | | 4,675 | | | | — | |
Other current assets | | | 2,116 | | | | 1,420 | |
| | | | | | | | |
Total current assets | | | 152,726 | | | | 56,476 | |
Property and equipment, net | | | 6,406 | | | | 5,178 | |
Debt issuance costs, net | | | 399 | | | | 1,101 | |
Deferred taxes | | | 2,078 | | | | 1,847 | |
Goodwill | | | 15,444 | | | | 15,745 | |
Intangible assets and other, net | | | 4,417 | | | | 6,560 | |
| | | | | | | | |
Total assets | | $ | 181,470 | | | $ | 86,907 | |
| | | | | | | | |
| | |
Liabilities, convertible preferred stock and stockholders’ equity (deficit) | | | | | | | | |
Current liabilities: | | | | | | | | |
Accounts payable | | $ | 3,293 | | | $ | 1,471 | |
Accrued liabilities | | | 4,928 | | | | 3,284 | |
Accrued interest payable | | | 539 | | | | 2,011 | |
Income taxes payable | | | 284 | | | | 201 | |
Current portion of deferred revenue | | | 37,103 | | | | 25,930 | |
Current portion of capital lease obligations | | | 9 | | | | 25 | |
Current portion of long-term debt | | | 16,871 | | | | 7,161 | |
| | | | | | | | |
Total current liabilities | | | 63,027 | | | | 40,083 | |
Long-term liabilities: | | | | | | | | |
Deferred revenue, net of current portion | | | 1,544 | | | | 1,232 | |
Capital lease obligations, net of current portion | | | — | | | | 10 | |
Other long-term liabilities | | | 607 | | | | 188 | |
Long-term debt, net of current portion | | | 27,226 | | | | 93,922 | |
| | | | | | | | |
Total long-term liabilities | | | 29,377 | | | | 95,352 | |
| | | | | | | | |
Total liabilities | | | 92,404 | | | | 135,435 | |
| | |
Commitments and contingencies | | | | | | | | |
Convertible preferred stock, $0.001 par value: no shares authorized and no shares issued and outstanding as of December 31, 2009 and 46,551,618 shares authorized and 27,000,003 shares issued and outstanding as of December 31, 2008 | | | — | | | | 27 | |
Stockholders’ equity (deficit): | | | | | | | | |
Common stock, $0.001 par value: 123,000,000 shares authorized and 66,502,098 and 28,166,656 shares issued and outstanding as of December 31, 2009 and December 31, 2008, respectively | | | 67 | | | | 28 | |
Additional paid-in capital | | | 123,083 | | | | 15,166 | |
Accumulated other comprehensive loss | | | (159 | ) | | | (315 | ) |
Accumulated deficit | | | (33,925 | ) | | | (63,434 | ) |
| | | | | | | | |
Total stockholders’ equity (deficit) | | | 89,066 | | | | (48,555 | ) |
| | | | | | | | |
| | |
Total liabilities, convertible preferred stock and stockholders’ equity (deficit) | | $ | 181,470 | | | $ | 86,907 | |
| | | | | | | | |
SolarWinds, Inc.
Consolidated Statements of Income
(In thousands, except for per share information)
(unaudited)
| | | | | | | | | | | | | | | | |
| | | Three Months Ended December 31, | | | Year Ended December 31, | |
| | | 2009 | | | 2008 | | | 2009 | | | 2008 | |
| | | | |
Revenue: | | | | | | | | | | | | | | | | |
License | | $ | 17,601 | | | $ | 13,916 | | | $ | 62,378 | | | $ | 55,461 | |
Maintenance and other | | | 15,378 | | | | 10,981 | | | | 54,068 | | | | 37,674 | |
| | | | | | | | | | | | | | | | |
Total revenue | | | 32,979 | | | | 24,897 | | | | 116,446 | | | | 93,135 | |
| | | | |
Cost of license revenue | | | 36 | | | | 81 | | | | 494 | | | | 272 | |
Cost of maintenance and other revenue | | | 1,239 | | | | 901 | | | | 4,366 | | | | 3,316 | |
| | | | | | | | | | | | | | | | |
Gross profit | | | 31,704 | | | | 23,915 | | | | 111,586 | | | | 89,547 | |
| | | | |
Operating expenses: | | | | | | | | | | | | | | | | |
Sales and marketing | | | 8,858 | | | | 6,466 | | | | 30,548 | | | | 22,664 | |
Research and development | | | 3,032 | | | | 2,203 | | | | 11,199 | | | | 8,452 | |
General and administrative | | | 12,911 | | | | 3,978 | | | | 26,038 | | | | 16,464 | |
| | | | | | | | | | | | | | | | |
Total operating expenses | | | 24,801 | | | | 12,647 | | | | 67,785 | | | | 47,580 | |
| | | | | | | | | | | | | | | | |
Operating income | | | 6,903 | | | | 11,268 | | | | 43,801 | | | | 41,967 | |
| | | | |
Other income (expense): | | | | | | | | | | | | | | | | |
Interest income | | | 42 | | | | 128 | | | | 267 | | | | 528 | |
Interest expense | | | (594 | ) | | | (2,104 | ) | | | (4,253 | ) | | | (8,539 | ) |
Other income (expense) | | | 178 | | | | (891 | ) | | | 90 | | | | (934 | ) |
| | | | | | | | | | | | | | | | |
Total other expense | | | (374 | ) | | | (2,867 | ) | | | (3,896 | ) | | | (8,945 | ) |
| | | | | | | | | | | | | | | | |
Income before income taxes | | | 6,529 | | | | 8,401 | | | | 39,905 | | | | 33,022 | |
Income tax expense (benefit) | | | (19 | ) | | | 2,761 | | | | 10,396 | | | | 10,717 | |
| | | | | | | | | | | | | | | | |
Net income | | | 6,548 | | | | 5,640 | | | | 29,509 | | | | 22,305 | |
Amount allocated to participating preferred stockholders | | | — | | | | (2,761 | ) | | | — | | | | (10,922 | ) |
| | | | | | | | | | | | | | | | |
Net income available to common stockholders | | $ | 6,548 | | | $ | 2,879 | | | $ | 29,509 | | | $ | 11,383 | |
| | | | | | | | | | | | | | | | |
| | | | |
Net income available to common stockholders per share: | | | | | | | | | | | | | | | | |
Basic earnings per share available to common stockholders | | $ | 0.10 | | | $ | 0.10 | | | $ | 0.58 | | | $ | 0.40 | |
| | | | | | | | | | | | | | | | |
Diluted earnings per share available to common stockholders | | $ | 0.09 | | | $ | 0.09 | | | $ | 0.52 | | | $ | 0.35 | |
| | | | | | | | | | | | | | | | |
Weighted shares used to compute net income available to common stockholders per share: | | | | | | | | | | | | | | | | |
Shares used in computation of basic earnings per share available to common stockholders | | | 65,661 | | | | 28,157 | | | | 51,042 | | | | 28,137 | |
| | | | | | | | | | | | | | | | |
Shares used in computation of diluted earnings per share available to common stockholders | | | 71,935 | | | | 33,380 | | | | 56,824 | | | | 32,652 | |
| | | | | | | | | | | | | | | | |
SolarWinds, Inc.
Reconciliation of GAAP to Non-GAAP Results of Operations
(In thousands, except for per share information)
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended
December 31, 2009 | | | Three Months Ended
December 31, 2008 | |
| | | GAAP | | | Adjustments | | | Non-GAAP | | | GAAP | | | Adjustments | | | Non-GAAP | |
Total revenue | | $ | 32,979 | | | $ | — | | | $ | 32,979 | | | $ | 24,897 | | | $ | — | | | $ | 24,897 | |
Gross profit | | | 31,704 | | | | 57 | | | | 31,761 | | | | 23,915 | | | | 75 | | | | 23,990 | |
Operating expenses | | | 24,801 | | | | (10,577 | ) | | | 14,224 | | | | 12,647 | | | | (1,932 | ) | | | 10,715 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Operating income | | | 6,903 | | | | 10,634 | (a) | | | 17,537 | | | | 11,268 | | | | 2,007 | (a) | | | 13,275 | |
Total other expense | | | (374 | ) | | | — | | | | (374 | ) | | | (2,867 | ) | | | — | | | | (2,867 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
Income before income taxes | | | 6,529 | | | | 10,634 | | | | 17,163 | | | | 8,401 | | | | 2,007 | | | | 10,408 | |
Income tax expense (benefit) | | | (19 | ) | | | 3,679 | (b) | | | 3,660 | | | | 2,761 | | | | 393 | (b) | | | 3,154 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Net income | | $ | 6,548 | | | $ | 6,955 | | | $ | 13,503 | | | $ | 5,640 | | | $ | 1,614 | | | $ | 7,254 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| (a) | Reflects the reversal of amortization of intangible assets, stock-based compensation expense and other excluded expenses as follows: |
Amortization of intangible assets:
| | | | | | |
| | | Three Months Ended
December 31, |
| | | 2009 | | 2008 |
Cost of license revenue | | $ | 30 | | $ | 58 |
Sales and marketing | | | — | | | — |
Research and development | | | — | | | — |
General and administrative | | | 81 | | | 26 |
Stock-based compensation expense:
| | | | | | |
| | | Three Months Ended
December 31, |
| | | 2009 | | 2008 |
Cost of maintenance revenue | | $ | 27 | | $ | 17 |
Sales and marketing | | | 515 | | | 414 |
Research and development | | | 333 | | | 192 |
General and administrative | | | 1,388 | | | 994 |
Other excluded expenses:
| | | | | | |
| | | Three Months Ended
December 31, |
| | | 2009 | | 2008 |
Lawsuit settlement and related legal fees | | $ | 7,480 | | $ | 306 |
Secondary offering costs | | | 720 | | | — |
Acquisition costs | | | 60 | | | — |
| (b) | Reflects the removal of the tax benefits associated with amortization of intangible assets, stock-based compensation expense and other excluded expenses. |
SolarWinds, Inc.
Reconciliation of GAAP to Non-GAAP Results of Operations
(In thousands, except for per share information)
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | Year Ended
December 31, 2009 | | | Year Ended
December 31, 2008 | |
| | | GAAP | | | Adjustments | | | Non-GAAP | | | GAAP | | | Adjustments | | | Non-GAAP | |
Total revenue | | $ | 116,446 | | | $ | — | | | $ | 116,446 | | | $ | 93,135 | | | $ | — | | | $ | 93,135 | |
Gross profit | | | 111,586 | | | | 559 | | | | 112,145 | | | | 89,547 | | | | 295 | | | | 89,842 | |
Operating expenses | | | 67,785 | | | | (17,352 | ) | | | 50,433 | | | | 47,580 | | | | (6,548 | ) | | | 41,032 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Operating income | | | 43,801 | | | | 17,911 | (a) | | | 61,712 | | | | 41,967 | | | | 6,843 | (a) | | | 48,810 | |
Total other expense | | | (3,896 | ) | | | 428 | (c) | | | (3,468 | ) | | | (8,945 | ) | | | — | | | | (8,945 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
Income before income taxes | | | 39,905 | | | | 18,339 | | | | 58,244 | | | | 33,022 | | | | 6,843 | | | | 39,865 | |
Income tax expense | | | 10,396 | | | | 5,323 | (b) | | | 15,719 | | | | 10,717 | | | | 1,342 | (b) | | | 12,059 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Net income | | $ | 29,509 | | | $ | 13,016 | | | $ | 42,525 | | | $ | 22,305 | | | $ | 5,501 | | | $ | 27,806 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| (a) | Reflects the reversal of amortization of intangible assets, stock-based compensation expense and other excluded expenses as follows: |
Amortization of intangible assets:
| | | | | | |
| | | Year Ended
December 31, |
| | | 2009 | | 2008 |
Cost of license revenue | | $ | 480 | | $ | 232 |
Sales and marketing | | | — | | | — |
Research and development | | | — | | | — |
General and administrative | | | 209 | | | 98 |
Stock-based compensation expense:
| | | | | | |
| | | Year Ended
December 31, |
| | | 2009 | | 2008 |
Cost of maintenance revenue | | $ | 79 | | $ | 63 |
Sales and marketing | | | 1,950 | | | 1,593 |
Research and development | | | 1,151 | | | 755 |
General and administrative | | | 4,711 | | | 3,509 |
Other excluded expenses:
| | | | | | |
| | | Year Ended
December 31, |
| | | 2009 | | 2008 |
Lawsuit settlement and related legal fees | | $ | 8,551 | | $ | 593 |
Secondary offering costs | | | 720 | | | — |
Acquisition costs | | | 60 | | | — |
| (b) | Reflects the removal of the tax benefits associated with amortization of intangible assets, stock-based compensation expense, write-off of debt issuance costs and other excluded expenses. |
| (c) | The amortization of debt issuance cost was decreased as a result of the lower outstanding principal balance due to the repayment of the long-term debt. |
SolarWinds, Inc.
Reconciliation of Diluted Earnings Per Share to Non-GAAP Diluted Earnings Per Share
(In thousands, except for per share information)
(unaudited)
| | | | | | | | | | | | | | | | |
| | | Three Months Ended
December 31, | | | Year Ended
December 31, | |
| | | 2009 | | | 2008 | | | 2009 | | | 2008 | |
Numerator: | | | | | | | | | | | | | | | | |
Reconciliation between GAAP and non-GAAP net income: | | | | | | | | | | | | | | | | |
Net income | | $ | 6,548 | | | $ | 5,640 | | | $ | 29,509 | | | $ | 22,305 | |
Reversal of intangible assets amortization | | | 111 | | | | 84 | | | | 689 | | | | 330 | |
Reversal of stock-based compensation expense | | | 2,263 | | | | 1,617 | | | | 7,891 | | | | 5,920 | |
Reversal of debt issuance costs write-off | | | — | | | | — | | | | 428 | | | | — | |
Reversal of secondary offering costs | | | 720 | | | | — | | | | 720 | | | | — | |
Reversal of lawsuit settlement costs and related legal fees | | | 7,480 | | | | 306 | | | | 8,551 | | | | 593 | |
Reversal of acquisition related costs | | | 60 | | | | — | | | | 60 | | | | — | |
Reversal of tax benefits associated with above adjustments | | | (3,679 | ) | | | (393 | ) | | | (5,323 | ) | | | (1,342 | ) |
| | | | | | | | | | | | | | | | |
Non-GAAP net income | | $ | 13,503 | | | $ | 7,254 | | | $ | 42,525 | | | $ | 27,806 | |
| | | | | | | | | | | | | | | | |
| | | | |
Denominator: | | | | | | | | | | | | | | | | |
Reconciliation between GAAP and non-GAAP weighted average shares used in computing diluted earnings per share: | | | | | | | | | | | | | | | | |
Weighted average number of shares used in computing diluted earnings per share | | | 71,935 | | | | 33,380 | | | | 56,824 | | | | 32,652 | |
Pro forma adjustments to reflect assumed weighted average effect of conversion of preferred stock (a) | | | — | | | | 27,000 | | | | 10,356 | | | | 27,000 | |
| | | | | | | | | | | | | | | | |
Non-GAAP weighted average shares used in computing non-GAAP diluted earnings per share (b) | | | 71,935 | | | | 60,380 | | | | 67,180 | | | | 59,652 | |
| | | | | | | | | | | | | | | | |
| | | | |
Diluted earnings per share | | $ | 0.09 | | | $ | 0.09 | | | $ | 0.52 | | | $ | 0.35 | |
| | | | | | | | | | | | | | | | |
| | | | |
Non-GAAP diluted earnings per share | | $ | 0.19 | | | $ | 0.12 | | | $ | 0.63 | | | $ | 0.47 | |
| | | | | | | | | | | | | | | | |
| (a) | Represents common shares from the conversion of convertible preferred shares as if the shares were converted as of the beginning of the indicated period. |
| (b) | If the company assumed the common shares issued in the IPO were issued as of the beginning of the comparable periods, or January 1, 2008, then the weighted average shares used in computing non-GAAP diluted earnings per share and the non-GAAP diluted earnings per share would have been 71,935 shares and $0.19 per share, respectively, and 70,104 shares and $0.10 per share, respectively, for the three months ended December 31, 2009 and 2008 and 70,924 shares and $0.60 per share, respectively, and 69,376 shares and $0.40 per share, respectively, for the year ended December 31, 2009 and 2008. |
SolarWinds, Inc.
Reconciliation of Net Income to Adjusted EBITDA
(In thousands)
(unaudited)
| | | | | | | | | | | | | |
| | | Three Months Ended
December 31, | | Year Ended
December 31, |
| | | 2009 | | | 2008 | | 2009 | | 2008 |
Reconciliation of Net Income to Adjusted EBITDA: | | | | | | | | | | | | | |
| | | | |
Net income | | $ | 6,548 | | | $ | 5,640 | | $ | 29,509 | | $ | 22,305 |
Interest expense, net | | | 552 | | | | 1,976 | | | 3,986 | | | 8,011 |
Income tax expense (benefit) | | | (19 | ) | | | 2,761 | | | 10,396 | | | 10,717 |
Depreciation and amortization | | | 539 | | | | 374 | | | 2,166 | | | 1,436 |
Lawsuit settlement and related legal fees | | | 7,480 | | | | 306 | | | 8,551 | | | 593 |
Stock-based compensation expense | | | 2,263 | | | | 1,617 | | | 7,891 | | | 5,920 |
| | | | | | | | | | | | | |
Adjusted EBITDA | | $ | 17,363 | | | $ | 12,674 | | $ | 62,499 | | $ | 48,982 |
| | | | | | | | | | | | | |
SolarWinds, Inc.
Reconciliation of Net Cash Provided by Operating Activities to
Adjusted Cash Flow
(In thousands)
(unaudited)
| | | | | | | | | | | | | |
| | | Three Months Ended
December 31, | | Year Ended
December 31, |
| | | 2009 | | | 2008 | | 2009 | | 2008 |
Reconciliation of Net Cash Provided by Operating Activities to Adjusted Cash Flow: | | | | | | | | | | | | | |
| | | | |
Net cash provided by operating activities | | $ | 13,204 | | | $ | 7,727 | | $ | 49,225 | | $ | 35,217 |
Cash paid for interest | | | 574 | | | | 1,804 | | | 4,976 | | | 8,619 |
Cash (received) paid for income taxes | | | (238 | ) | | | 4,090 | | | 5,665 | | | 12,879 |
Lawsuit settlement and related legal fees | | | 7,480 | | | | 306 | | | 8,551 | | | 593 |
| | | | | | | | | | | | | |
Adjusted Cash Flow | | $ | 21,020 | | | $ | 13,927 | | $ | 68,417 | | $ | 57,308 |
| | | | | | | | | | | | | |
SolarWinds, Inc.
Consolidated Statements of Cash Flows
(In thousands)
(unaudited)
| | | | | | | | | | | | | | | | |
| | | Three Months Ended
December 31, | | | Year Ended
December 31, | |
| | | 2009 | | | 2008 | | | 2009 | | | 2008 | |
Cash flows from operating activities | | | | | | | | | | | | | | | | |
Net income | | $ | 6,548 | | | $ | 5,640 | | | $ | 29,509 | | | $ | 22,305 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | | | | | | | | | | | |
Depreciation and amortization | | | 539 | | | | 374 | | | | 2,166 | | | | 1,436 | |
Provision for doubtful accounts | | | 43 | | | | 190 | | | | 175 | | | | 505 | |
Stock-based compensation expense | | | 2,263 | | | | 1,617 | | | | 7,891 | | | | 5,920 | |
Expenses paid by stockholder | | | 2,100 | | | | — | | | | 2,100 | | | | — | |
Deferred taxes | | | (100 | ) | | | (127 | ) | | | (281 | ) | | | (1,005 | ) |
Excess tax benefit from stock-based compensation | | | (6,522 | ) | | | 2 | | | | (8,734 | ) | | | (83 | ) |
Other non-cash expenses | | | 19 | | | | 154 | | | | 915 | | | | 663 | |
Changes in operating assets and liabilities, net of assets acquired and liabilities assumed in business combinations: | | | | | | | | | | | | | | | | |
Accounts receivable | | | 5,125 | | | | 497 | | | | (2,099 | ) | | | (3,553 | ) |
Income taxes receivable | | | (6 | ) | | | (693 | ) | | | 613 | | | | (693 | ) |
Prepaid income taxes | | | (4,675 | ) | | | — | | | | (4,675 | ) | | | — | |
Prepaid & other current assets | | | (30 | ) | | | (349 | ) | | | (673 | ) | | | (846 | ) |
Accounts payable | | | 1,091 | | | | (311 | ) | | | 1,791 | | | | (32 | ) |
Accrued liabilities | | | (291 | ) | | | (1,168 | ) | | | 1,581 | | | | 956 | |
Accrued interest payable | | | (35 | ) | | | 208 | | | | (1,472 | ) | | | (452 | ) |
Income taxes payable | | | 5,087 | | | | (446 | ) | | | 9,078 | | | | (397 | ) |
Deferred revenue and other liabilities | | | 2,048 | | | | 2,139 | | | | 11,340 | | | | 10,493 | |
| | | | | | | | | | | | | | | | |
| | | | |
Net cash provided by operating activities | | | 13,204 | | | | 7,727 | | | | 49,225 | | | | 35,217 | |
| | | | |
Cash flows from investing activities | | | | | | | | | | | | | | | | |
Purchases of property and equipment | | | (923 | ) | | | (371 | ) | | | (2,729 | ) | | | (3,395 | ) |
Purchases of intangible assets | | | (96 | ) | | | (58 | ) | | | (401 | ) | | | (349 | ) |
Decrease in restricted cash | | | | | | | 1,000 | | | | | | | | 1,000 | |
Acquisition of businesses, net of cash acquired | | | — | | | | (6,707 | ) | | | (46 | ) | | | (8,281 | ) |
| | | | | | | | | | | | | | | | |
| | | | |
Net cash used in investing activities | | | (1,019 | ) | | | (6,136 | ) | | | (3,176 | ) | | | (11,025 | ) |
| | | | |
Cash flows from financing activities | | | | | | | | | | | | | | | | |
Repayment of long-term debt | | | — | | | | — | | | | (56,986 | ) | | | (1,417 | ) |
Exercise of stock options | | | 5,833 | | | | 57 | | | | 8,518 | | | | 227 | |
Net cash proceeds from initial public offering | | | — | | | | — | | | | 104,625 | | | | — | |
Interest on options exercised with note | | | — | | | | — | | | | — | | | | 15 | |
Excess tax benefit from stock-based compensation | | | 6,522 | | | | (2 | ) | | | 8,734 | | | | 83 | |
Repayments of capital lease obligations | | | (7 | ) | | | (7 | ) | | | (26 | ) | | | (27 | ) |
Payments for offering costs | | | (249 | ) | | | (160 | ) | | | (1,745 | ) | | | (2,092 | ) |
Earnout dividend paid | | | (20,000 | ) | | | — | | | | (20,000 | ) | | | — | |
Proceeds from note receivable from stockholder | | | — | | | | — | | | | — | | | | 1,738 | |
Proceeds from issuance of stock | | | — | | | | — | | | | — | | | | 13,640 | |
Purchase of stock | | | — | | | | — | | | | — | | | | (13,640 | ) |
| | | | | | | | | | | | | | | | |
| | | | |
Net cash provided by (used in) financing activities | | | (7,901 | ) | | | (112 | ) | | | 43,120 | | | | (1,473 | ) |
Effect of exchange rate changes on cash and cash equivalents | | | (301 | ) | | | (720 | ) | | | 53 | | | | (1,456 | ) |
| | | | | | | | | | | | | | | | |
| | | | |
Net increase in cash and cash equivalents | | | 3,983 | | | | 759 | | | | 89,222 | | | | 21,263 | |
Cash and cash equivalents | | | | | | | | | | | | | | | | |
Beginning of period | | | 125,805 | | | | 39,807 | | | | 40,566 | | | | 19,303 | |
| | | | | | | | | | | | | | | | |
| | | | |
End of period | | $ | 129,788 | | | $ | 40,566 | | | $ | 129,788 | | | $ | 40,566 | |
| | | | | | | | | | | | | | | | |
| | | | |
Supplemental disclosure of cash flow information | | | | | | | | | | | | | | | | |
Cash paid for interest | | $ | 574 | | | $ | 1,804 | | | $ | 4,976 | | | $ | 8,619 | |
| | | | | | | | | | | | | | | | |
| | | | |
Cash (received) paid for income taxes | | $ | (238 | ) | | $ | 4,090 | | | $ | 5,665 | | | $ | 12,879 | |
| | | | | | | | | | | | | | | | |
| | | | |
Noncash investing and financing transactions | | | | | | | | | | | | | | | | |
Capital lease termination and related asset write-off | | $ | — | | | $ | — | | | $ | — | | | $ | 412 | |
| | | | | | | | | | | | | | | | |
Debt issuance costs write-off | | $ | — | | | $ | — | | | $ | 428 | | | $ | — | |
| | | | | | | | | | | | | | | | |
