SolarWinds (SWI) 10-Q 8 May 20 2020 Q1 Quarterly report Financial data

Cover Page

Cover Page - shares	3 Months Ended
	Mar. 31, 2020	May 04, 2020
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Mar. 31, 2020
Document Transition Report	false
Entity File Number	001-38711
Entity Registrant Name	SolarWinds Corporation
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	81-0753267
Entity Address, Address Line One	7171 Southwest Parkway
Entity Address, Address Line Two	Building 400
Entity Address, City or Town	Austin
Entity Address, State or Province	TX
Entity Address, Postal Zip Code	78735
City Area Code	512
Local Phone Number	682.9300
Title of 12(b) Security	Common Stock, $0.001 par value
Trading Symbol	SWI
Security Exchange Name	NYSE
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		311,814,278
Entity Central Index Key	0001739942
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q1
Amendment Flag	false

Condensed Consolidated Balance

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Current assets:
Cash and cash equivalents	$ 236,955	$ 173,372
Accounts receivable, net of allowances of $5,358 and $3,171 as of March 31, 2020 and December 31, 2019, respectively	121,709	121,930
Income tax receivable	1,633	1,117
Prepaid and other current assets	25,420	23,480
Total current assets	385,717	319,899
Property and equipment, net	41,554	38,945
Operating lease assets	90,181	89,825
Deferred taxes	4,316	4,533
Goodwill	4,033,807	4,058,198
Intangible assets, net	704,099	771,513
Other assets, net	29,354	27,829
Total assets	5,289,028	5,310,742
Current liabilities:
Accounts payable	10,765	13,796
Accrued liabilities and other	39,687	47,035
Current operating lease liabilities	13,226	14,093
Accrued interest payable	203	248
Income taxes payable	18,375	15,714
Current portion of deferred revenue	323,168	312,227
Current debt obligation	19,900	19,900
Total current liabilities	425,324	423,013
Long-term liabilities:
Deferred revenue, net of current portion	32,384	31,173
Non-current deferred taxes	89,237	97,884
Non-current operating lease liabilities	95,279	93,084
Other long-term liabilities	123,721	122,660
Long-term debt, net of current portion	1,890,719	1,893,406
Total liabilities	2,656,664	2,661,220
Commitments and contingencies (Note 8)
Stockholders’ equity:
Common stock, $0.001 par value: 1,000,000,000 shares authorized and 309,890,505 and 308,290,310 shares issued and outstanding as of March 31, 2020 and December 31, 2019, respectively	310	308
Preferred stock, $0.001 par value: 50,000,000 shares authorized and no shares issued and outstanding as of March 31, 2020 and December 31, 2019, respectively	0	0
Additional paid-in capital	3,054,734	3,041,880
Accumulated other comprehensive income (loss)	(35,676)	(5,247)
Accumulated deficit	(387,004)	(387,419)
Total stockholders’ equity	2,632,364	2,649,522
Total liabilities and stockholders’ equity	$ 5,289,028	$ 5,310,742

Condensed Consolidated Balanc_2

Condensed Consolidated Balance Sheets (Parentheticals) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Current assets:
Allowance for credit loss, accounts receivable	$ 5,358	$ 3,171
Common Stock
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, authorized (in shares)	1,000,000,000	1,000,000,000
Common stock, issued (in shares)	309,890,505	308,290,310
Common stock, outstanding (in shares)	309,890,505	308,290,310
Preferred Stock
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, authorized (in shares)	50,000,000	50,000,000
Preferred stock, issued (in shares)	0	0
Preferred stock, outstanding (in shares)	0	0

Condensed Consolidated Statemen

Condensed Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Revenue:
Total revenue	$ 246,950	$ 215,792
Cost of revenue:
Cost of recurring revenue	22,501	18,159
Amortization of acquired technologies	44,492	43,817
Total cost of revenue	66,993	61,976
Gross profit	179,957	153,816
Operating expenses:
Sales and marketing	72,378	60,595
Research and development	31,845	25,188
General and administrative	29,755	21,736
Amortization of acquired intangibles	18,296	16,502
Total operating expenses	152,274	124,021
Operating income	27,683	29,795
Other income (expense):
Interest expense, net	(24,095)	(27,382)
Other income (expense), net	(758)	1,297
Total other income (expense)	(24,853)	(26,085)
Income before income taxes	2,830	3,710
Income tax expense	2,415	565
Net income	415	3,145
Net income available to common stockholders	$ 412	$ 3,103
Net income available to common stockholders per share:
Basic earnings per share (in dollars per share)	$ 0	$ 0.01
Diluted earnings per share (in dollars per share)	$ 0	$ 0.01
Weighted-average shares used to compute net income available to common stockholders per share:
Shares used in computation of basic earnings per share (in shares)	308,937	305,653
Shares used in computation of diluted earnings per share (in shares)	312,865	309,783
Recurring Revenue
Revenue:
Total revenue	$ 209,984	$ 177,857
Subscription
Revenue:
Total revenue	93,635	71,565
Cost of revenue:
Amortization of acquired technologies	8,920	7,980
Maintenance
Revenue:
Total revenue	116,349	106,292
License
Revenue:
Total revenue	36,966	37,935
Cost of revenue:
Amortization of acquired technologies	$ 35,572	$ 35,837

Condensed Consolidated Statem_2

Condensed Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Statement of Comprehensive Income [Abstract]
Net income	$ 415	$ 3,145
Other comprehensive income (loss):
Foreign currency translation adjustment	(30,429)	(27,708)
Other comprehensive income (loss)	(30,429)	(27,708)
Comprehensive income (loss)	$ (30,014)	$ (24,563)

Condensed Consolidated Statem_3

Condensed Consolidated Statements Stockholders' Equity - USD ($) $ in Thousands	Total	Common Stock	Additional Paid-in Capital	Accumulated Other Comprehensive Income (Loss)	Accumulated Deficit
Balance at beginning of period (in shares) at Dec. 31, 2018		304,942,000
Balance at beginning of period at Dec. 31, 2018	$ 2,616,100	$ 305	$ 3,011,080	$ 17,043	$ (412,328)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Foreign currency translation adjustment	(27,708)			(27,708)
Net income	3,145				3,145
Comprehensive income (loss)	(24,563)
Exercise of stock options (in shares)		47,000
Exercise of stock options	36		36
Issuance of stock (in shares)		1,416,000
Issuance of stock	749	$ 1	748
Stock-based compensation	7,788		7,788
Balance at end of period (in shares) at Mar. 31, 2019		306,405,000
Balance at end of period at Mar. 31, 2019	$ 2,606,377	$ 306	3,019,652	(10,665)	(402,916)
Balance at beginning of period (in shares) at Dec. 31, 2019	308,290,310	308,290,000
Balance at beginning of period at Dec. 31, 2019	$ 2,649,522	$ 308	3,041,880	(5,247)	(387,419)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Foreign currency translation adjustment	(30,429)			(30,429)
Net income	415				415
Comprehensive income (loss)	(30,014)
Exercise of stock options (in shares)		59,000
Exercise of stock options	51		51
Restricted stock units issued, net of shares withheld for taxes (in shares)		276,000
Restricted stock units issued, net of shares withheld for taxes	(1,548)		(1,548)
Issuance of stock (in shares)		1,105,000
Issuance of stock	629	$ 2	627
Issuance of stock under employee stock purchase plan (in shares)		161,000
Issuance of stock under employee stock purchase plan	2,357		2,357
Stock-based compensation	$ 11,367		11,367
Balance at end of period (in shares) at Mar. 31, 2020	309,890,505	309,891,000
Balance at end of period at Mar. 31, 2020	$ 2,632,364	$ 310	$ 3,054,734	$ (35,676)	$ (387,004)

Condensed Consolidated Statem_4

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Cash flows from operating activities
Net income	$ 415	$ 3,145
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	67,768	64,463
Provision for losses on accounts receivable	3,014	514
Stock-based compensation expense	11,268	7,718
Amortization of debt issuance costs	2,288	2,286
Deferred taxes	(8,744)	(11,283)
(Gain) loss on foreign currency exchange rates	983	(1,308)
Other non-cash expenses (benefits)	(190)	(687)
Changes in operating assets and liabilities, net of assets acquired and liabilities assumed in business combinations:
Accounts receivable	(4,084)	(10,568)
Income taxes receivable	(583)	(250)
Prepaid and other assets	(4,092)	(4,326)
Accounts payable	(3,047)	479
Accrued liabilities and other	(5,800)	(10,798)
Accrued interest payable	(45)	573
Income taxes payable	4,566	2,546
Deferred revenue	14,739	20,054
Other long-term liabilities	(85)	805
Net cash provided by operating activities	78,371	63,363
Cash flows from investing activities
Purchases of property and equipment	(6,536)	(4,570)
Purchases of intangible assets	(1,694)	(1,240)
Other investing activities	0	235
Net cash used in investing activities	(8,230)	(5,575)
Cash flows from financing activities
Proceeds from issuance of common stock under employee stock purchase plan	2,357	0
Repurchase of common stock and incentive restricted stock	(1,571)	(8)
Exercise of stock options	51	36
Repayments of borrowings from credit agreement	(4,975)	(4,975)
Net cash used in financing activities	(4,138)	(4,947)
Effect of exchange rate changes on cash and cash equivalents	(2,420)	(996)
Net increase in cash and cash equivalents	63,583	51,845
Cash and cash equivalents
Beginning of period	173,372	382,620
End of period	236,955	434,465
Supplemental disclosure of cash flow information
Cash paid for interest	21,972	25,423
Cash paid for income taxes	$ 6,035	$ 8,635

Organization and Nature of Oper

Organization and Nature of Operations	3 Months Ended
	Mar. 31, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Organization and Nature of Operations	Organization and Nature of OperationsSolarWinds Corporation, a Delaware corporation, and its subsidiaries (“Company”, “we,” “us” and “our”) is a leading provider of information technology, or IT, infrastructure management software. Our products give organizations worldwide, regardless of type, size or IT infrastructure complexity, the power to monitor and manage the performance of their IT environments, whether on-premise, in the cloud, or in hybrid infrastructure models. Our approach, which we refer to as the SolarWinds Model, combines powerful, scalable, affordable, easy to use products with high-velocity, low-touch sales. We’ve built our business to enable the technology professionals who use our products to manage “all things IT.” Our range of customers has expanded over time to include network and systems engineers, database administrators, storage administrators, DevOps and service desk professionals, as well as managed service providers, or MSPs. Our SolarWinds Model enables us to sell our products for use in organizations ranging in size from very small businesses to large enterprises.

Summary of Significant Accounti

Summary of Significant Accounting Policies	3 Months Ended
	Mar. 31, 2020
Accounting Policies [Abstract]
Summary of Significant Accounting Policies	2. Summary of Significant Accounting Policies We prepared our interim condensed consolidated financial statements in conformity with United States of America generally accepted accounting principles, or GAAP, and the reporting regulations of the Securities and Exchange Commission, or the SEC. They do not include all of the information and footnotes required by GAAP for complete financial statements. The accompanying condensed consolidated financial statements include the accounts of SolarWinds Corporation and the accounts of its wholly owned subsidiaries. We have eliminated all intercompany balances and transactions. The interim financial information is unaudited, but reflects all normal adjustments that are, in our opinion, necessary to provide a fair statement of results for the interim periods presented. This interim information should be read in conjunction with the audited consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2019 . Use of Estimates The preparation of financial statements in conformity with GAAP requires our management to make estimates and assumptions that affect the reported amounts and the disclosure of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. The impact from the rapidly changing market and economic conditions due to the coronavirus disease 2019, or COVID-19, pandemic on our business, results of operations and financial condition is uncertain. We have made estimates of the impact of the COVID-19 pandemic within our financial statements as of and for the three months ended March 31, 2020 which did not result in material adjustments. The estimates assessed included, but were not limited to, allowances for credit losses, the carrying values of goodwill and intangible assets and other long-lived assets, valuation allowances for tax assets and revenue recognition and may change in future periods. The actual results that we experience may differ materially from our estimates. The accounting estimates that require our most significant, difficult and subjective judgments include: • the valuation of goodwill, intangibles, long-lived assets and contingent consideration; • revenue recognition; • stock-based compensation; and • income taxes. Recently Adopted Accounting Pronouncements On January 1, 2020 we adopted the Financial Accounting Standards Board, or FASB, Accounting Standards Codification ("ASC") No. 2017-04 "Intangibles-Goodwill and Other," or ASC 350, which simplifies the accounting for goodwill impairment. The new guidance removes step two of the two-step quantitative goodwill impairment test, which requires a hypothetical purchase price allocation. The standard did not have a material impact on our condensed consolidated financial statements for the three months ended March 31, 2020 . Fair Value Measurements We apply the authoritative guidance on fair value measurements for financial assets and liabilities that are measured at fair value on a recurring basis and non-financial assets and liabilities, such as goodwill, intangible assets and property, plant and equipment that are measured at fair value on a non-recurring basis. The guidance establishes a three-tiered fair value hierarchy that prioritizes inputs to valuation techniques used in fair value calculations. The three levels of inputs are defined as follows: Level 1: Unadjusted quoted prices for identical assets or liabilities in active markets accessible by us. Level 2: Inputs that are observable in the marketplace other than those inputs classified as Level 1. Level 3: Inputs that are unobservable in the marketplace and significant to the valuation. See Note 4. Fair Value Measurements for a summary of our financial instruments accounted for at fair value on a recurring basis. The carrying amounts reported in our consolidated balance sheets for cash, accounts receivable, accounts payable and other accrued expenses approximate fair value due to relatively short periods to maturity. Accumulated Other Comprehensive Income (Loss) Changes in accumulated other comprehensive income (loss) by component are summarized below: Foreign Currency Translation Adjustments Accumulated Other Comprehensive Income (Loss) (in thousands) Balance at December 31, 2019 $ (5,247 ) $ (5,247 ) Other comprehensive gain (loss) before reclassification (30,429 ) (30,429 ) Amount reclassified from accumulated other comprehensive income (loss) — — Net current period other comprehensive income (loss) (30,429 ) (30,429 ) Balance at March 31, 2020 $ (35,676 ) $ (35,676 ) Deferred Revenue Details of our total deferred revenue balance was as follow s: Total Deferred Revenue (in thousands) Balance at December 31, 2019 $ 343,400 Deferred revenue recognized (120,363 ) Additional amounts deferred 132,515 Balance at March 31, 2020 $ 355,552 We expect to recognize revenue related to remaining performance obligations as follows: Revenue Recognition Expected by Period Total Less than 1 year 1-3 years More than 3 years (in thousands) Expected recognition of deferred revenue $ 355,552 $ 323,168 $ 31,669 $ 715 Deferred Commissions Details of our deferred commissions balance was as follow s: (in thousands) Balance at December 31, 2019 $ 10,624 Commissions capitalized 1,957 Amortization recognized (821 ) Balance at March 31, 2020 $ 11,760 March 31, December 31, 2020 2019 Classified as: (in thousands) Current $ 2,883 $ 2,543 Non-current 8,877 8,081 Total deferred commissions $ 11,760 $ 10,624 Cost of Revenue Amortization of Acquired Technologies. Amortization of acquired technologies included in cost of revenue relate to our licensed products and subscription products as follows: Three Months Ended March 31, 2020 2019 (in thousands) Amortization of acquired license technologies $ 35,572 $ 35,837 Amortization of acquired subscription technologies 8,920 7,980 Total amortization of acquired technologies $ 44,492 $ 43,817

Goodwill

Goodwill	3 Months Ended
	Mar. 31, 2020
Goodwill and Intangible Assets Disclosure [Abstract]
Goodwill	Goodwill The following table reflects the changes in goodwill for the three months ended March 31, 2020 : (in thousands) Balance at December 31, 2019 $ 4,058,198 Foreign currency translation and other adjustments (24,391 ) Balance at March 31, 2020 $ 4,033,807

Fair Value Measurements

Fair Value Measurements	3 Months Ended
	Mar. 31, 2020
Fair Value Disclosures [Abstract]
Fair Value Measurements	4. Fair Value Measurements The following table summarizes the fair value of our financial assets that were measured on a recurring basis as of March 31, 2020 and December 31, 2019 . There have been no transfers between fair value measurement levels during the three months ended March 31, 2020 . Fair Value Measurements at March 31, 2020 Using Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total (in thousands) Money market funds $ 110,000 $ — $ — $ 110,000 Trading security — — 5,087 5,087 Total assets $ 110,000 $ — $ 5,087 $ 115,087 Fair Value Measurements at December 31, 2019 Using Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total (in thousands) Money market funds $ 4,559 $ — $ — $ 4,559 Trading security — — 5,000 5,000 Total assets $ 4,559 $ — $ 5,000 $ 9,559 As of March 31, 2020 and December 31, 2019 , the carrying value of our long-term debt approximates its estimated fair value as the interest rate on the debt agreements is adjusted for changes in the market rates. See Note 5. Debt

Debt

Debt	3 Months Ended
	Mar. 31, 2020
Debt Disclosure [Abstract]
Debt	5. Debt The following table summarizes information relating to our debt: March 31, December 31, 2020 2019 Amount Effective Rate Amount Effective Rate (in thousands, except interest rates) Revolving credit facility $ — — % $ — — % First Lien Term Loan (as amended) due Feb 2024 1,945,225 3.74 % 1,950,200 4.55 % Total principal amount 1,945,225 1,950,200 Unamortized discount and debt issuance costs (34,606 ) (36,894 ) Total debt 1,910,619 1,913,306 Less: Current portion of long-term debt (19,900 ) (19,900 ) Total long-term debt $ 1,890,719 $ 1,893,406 Senior Secured First Lien Credit Facilities Our first lien credit agreement, as amended, or First Lien Credit Agreement, provides for senior secured first lien credit facilities, consisting of the following as of March 31, 2020 : • a $1.99 billion U.S. dollar term loan, or First Lien Term Loan, with a final maturity date of February 5, 2024; and • a $125.0 million revolving credit facility (with a letter of credit sub-facility in the amount of $35.0 million ), or the Revolving Credit Facility, consisting of (i) a $100.0 million multicurrency tranche and (ii) a $25.0 million tranche available only in U.S. dollars, of which $7.5 million has a final maturity date of February 5, 2021 and $17.5 million has a final maturity date of February 5, 2022. Borrowings under our Revolving Credit Facility bear interest at a floating rate which is, at our option, either (1) a Eurodollar rate for a specified interest period plus an applicable margin of 2.50% or (2) a base rate plus an applicable margin of 1.50% , respectively. The Eurodollar rate applicable to the Revolving Credit Facility is subject to a “floor” of 0.0% . Borrowings under our First Lien Term Loan bear interest at a floating rate which is, at our option, either (1) a Eurodollar rate for a specified interest period plus an applicable margin of 2.75% or (2) a base rate plus an applicable margin of 1.75% , respectively. The Eurodollar rate applicable to the First Lien Term Loan is subject to a “floor” of 0.0% . The Eurodollar rate is equal to an adjusted London Interbank Offered Rate, or LIBOR, for a one -, two -, three - or six -month interest period with a LIBOR floor of 0% . The base rate for any day is a fluctuating rate per annum equal to the highest of (a) the rate of interest in effect for such day as publicly announced by Credit Suisse as its “prime rate” and (b) the federal funds effective rate in effect on such day plus 0.50% and (c) the one-month adjusted LIBOR plus 1.0% per annum. The First Lien Term Loan requires equal quarterly repayments equal to 0.25% of the original principal amount. In addition to paying interest on loans outstanding under the Revolving Credit Facility and the First Lien Term Loan, we are required to pay a commitment fee of 0.50% per annum of unused commitments under the Revolving Credit Facility. The commitment fee is subject to a reduction to 0.375% per annum based on our first lien net leverage ratio. The First Lien Credit Agreement contains a number of covenants that, among other things, restrict, subject to certain exceptions, our ability to: incur additional indebtedness; incur liens; engage in mergers, consolidations, liquidations or dissolutions; pay dividends and distributions on, or redeem, repurchase or retire our capital stock; and make certain investments, acquisitions, loans, or advances. In addition, the terms of the First Lien Credit Agreement include a financial covenant which requires that, at the end of each fiscal quarter, if the aggregate amount of borrowings under the Revolving Credit Facility exceeds 35% of the aggregate commitments under the Revolving Credit Facility, our first lien net leverage ratio cannot exceed 7.40 to 1.00 . The First Lien Credit Agreement also contains certain customary representations and warranties, affirmative covenants and events of default. As of March 31, 2020 , we were in compliance with all covenants of the First Lien Credit Agreement.

Earnings Per Share

Earnings Per Share	3 Months Ended
	Mar. 31, 2020
Earnings Per Share [Abstract]
Earnings Per Share	6. Earnings Per Share A reconciliation of the number of shares in the calculation of basic and diluted earnings per share follows: Three Months Ended March 31, 2020 2019 (in thousands) Basic earnings per share Numerator: Net income $ 415 $ 3,145 Earnings allocated to unvested restricted stock (3 ) (42 ) Net income available to common stockholders $ 412 $ 3,103 Denominator: Weighted-average common shares outstanding used in computing basic earnings per share 308,937 305,653 Diluted earnings per share Numerator: Net income available to common stockholders $ 412 $ 3,103 Denominator: Weighted-average shares used in computing basic earnings per share 308,937 305,653 Add dilutive impact of employee equity plans 3,928 4,130 Weighted-average shares used in computing diluted earnings per share 312,865 309,783 The following weighted-average outstanding shares of common stock equivalents were excluded from the computation of the diluted net income per share attributable to common stockholders for the periods presented because their effect would have been anti-dilutive or for which the performance condition had not been met at the end of the period: Three Months Ended March 31, 2020 2019 (in thousands) Stock options to purchase common stock 247 369 Performance-based stock options to purchase common stock 84 130 Non-vested restricted stock incentive awards 1,669 2,908 Performance-based non-vested restricted stock incentive awards 845 1,282 Restricted stock units 5,650 4,675 Performance stock units 677 957 Employee stock purchase plan 177 — Total anti-dilutive shares 9,349 10,321

Income Taxes

Income Taxes	3 Months Ended
	Mar. 31, 2020
Income Tax Disclosure [Abstract]
Income Taxes	7. Income Taxes For the three months ended March 31, 2020 and 2019 , we recorded income tax expense of $2.4 million and $0.6 million , respectively, resulting in an effective tax rate of 85.3% and 15.2% , respectively. The increase in the effective tax rate for the three months ended March 31, 2020 compared to the same period in 2019 was primarily due to the impact of having a full valuation allowance against the deferred tax assets related to the current period losses related to the entities acquired in the SAManage Ltd., or Samanage, acquisition completed in April 2019. Our policy is to include interest and penalties related to unrecognized tax benefits as a component of income tax expense. At March 31, 2020 , we had accrued interest and penalties related to unrecognized tax benefits of approximately $5.8 million . We file U.S., state and foreign income tax returns in jurisdictions with varying statutes of limitations. The 2011 through 2018 tax years generally remain open and subject to examination by federal tax authorities. The 2011 through 2019 tax years generally remain open and subject to examination by the state tax authorities and foreign tax authorities. We are currently under examination by the IRS for the tax years 2011 through the period ending February 2016. We are under audit by the Indian Tax Authority for the 2014 and 2017 tax years. We are currently under audit by the California Franchise Tax Board for the 2012 through 2014 tax years and the Massachusetts Department of Revenue for the 2015 through February 2016 tax years. We were notified in February 2020 that the Texas Comptroller would audit the 2015 through 2018 tax years. We are not currently under audit in any other taxing jurisdictions. On July 27, 2015, the U.S. Tax Court issued an opinion in Altera Corp. v. Commissioner related to the treatment of stock-based compensation expense in an intercompany cost-sharing arrangement. In February 2016, the U.S. Internal Revenue Service appealed the decision to the U.S. Court of Appeals for the Ninth Circuit. On June 7, 2019, the Ninth Circuit reversed the 2015 decision of the U.S. Tax Court. Due to the uncertainty surrounding the status of the current regulations, questions related to the scope of potential benefits or obligations, and the risk of the Tax Court's decision being overturned upon appeal, we have not recorded any benefit or expense as of March 31, 2020 . We will continue to monitor ongoing developments and potential impacts to our consolidated financial statements. Governments in certain countries where we do business have enacted legislation in response to the COVID-19 pandemic, including the Coronavirus Aid, Relief, and Economic Security Act, or “CARES Act," enacted by the United States on March 27, 2020. We are continuing to analyze these legislative developments and believe they have not had a material impact on our provision for income taxes for the three months ended March 31, 2020.

Commitments and Contingencies

Commitments and Contingencies	3 Months Ended
	Mar. 31, 2020
Commitments and Contingencies Disclosure [Abstract]
Commitments and Contingencies	8. Commitments and Contingencies Legal Proceedings From time to time, we have been and may be involved in various legal proceedings arising in our ordinary course of business. In the opinion of management, resolution of any pending claims (either individually or in the aggregate) is not expected to have a material adverse impact on our consolidated financial statements, cash flows or financial position and it is not possible to provide an estimated amount of any such loss. However, the outcome of disputes is inherently uncertain. Therefore, although management considers the likelihood of such an outcome to be remote, an unfavorable resolution of one or more matters could materially affect our future results of operations or cash flows, or both, in a particular period.

Summary of Significant Accoun_2

Summary of Significant Accounting Policies (Policies)	3 Months Ended
	Mar. 31, 2020
Accounting Policies [Abstract]
Basis of Accounting	We prepared our interim condensed consolidated financial statements in conformity with United States of America generally accepted accounting principles, or GAAP, and the reporting regulations of the Securities and Exchange Commission, or the SEC. They do not include all of the information and footnotes required by GAAP for complete financial statements. The accompanying condensed consolidated financial statements include the accounts of SolarWinds Corporation and the accounts of its wholly owned subsidiaries. We have eliminated all intercompany balances and transactions. The interim financial information is unaudited, but reflects all normal adjustments that are, in our opinion, necessary to provide a fair statement of results for the interim periods presented. This interim information should be read in conjunction with the audited consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2019 .
Use of Estimates	The preparation of financial statements in conformity with GAAP requires our management to make estimates and assumptions that affect the reported amounts and the disclosure of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. The impact from the rapidly changing market and economic conditions due to the coronavirus disease 2019, or COVID-19, pandemic on our business, results of operations and financial condition is uncertain. We have made estimates of the impact of the COVID-19 pandemic within our financial statements as of and for the three months ended March 31, 2020 which did not result in material adjustments. The estimates assessed included, but were not limited to, allowances for credit losses, the carrying values of goodwill and intangible assets and other long-lived assets, valuation allowances for tax assets and revenue recognition and may change in future periods. The actual results that we experience may differ materially from our estimates. The accounting estimates that require our most significant, difficult and subjective judgments include: • the valuation of goodwill, intangibles, long-lived assets and contingent consideration; • revenue recognition; • stock-based compensation; and • income taxes.
Recently Adopted Accounting Pronouncements and Not Yet Adopted	On January 1, 2020 we adopted the Financial Accounting Standards Board, or FASB, Accounting Standards Codification ("ASC") No. 2017-04 "Intangibles-Goodwill and Other," or ASC 350, which simplifies the accounting for goodwill impairment. The new guidance removes step two of the two-step quantitative goodwill impairment test, which requires a hypothetical purchase price allocation. The standard did not have a material impact on our condensed consolidated financial statements for the three months ended March 31, 2020 .
Fair Value Measurements	We apply the authoritative guidance on fair value measurements for financial assets and liabilities that are measured at fair value on a recurring basis and non-financial assets and liabilities, such as goodwill, intangible assets and property, plant and equipment that are measured at fair value on a non-recurring basis. The guidance establishes a three-tiered fair value hierarchy that prioritizes inputs to valuation techniques used in fair value calculations. The three levels of inputs are defined as follows: Level 1: Unadjusted quoted prices for identical assets or liabilities in active markets accessible by us. Level 2: Inputs that are observable in the marketplace other than those inputs classified as Level 1. Level 3: Inputs that are unobservable in the marketplace and significant to the valuation. See Note 4. Fair Value Measurements for a summary of our financial instruments accounted for at fair value on a recurring basis. The carrying amounts reported in our consolidated balance sheets for cash, accounts receivable, accounts payable and other accrued expenses approximate fair value due to relatively short periods to maturity.

Summary of Significant Accoun_3

Summary of Significant Accounting Policies (Tables)	3 Months Ended
	Mar. 31, 2020
Accounting Policies [Abstract]
Changes in accumulated other comprehensive income (loss) by component	Changes in accumulated other comprehensive income (loss) by component are summarized below: Foreign Currency Translation Adjustments Accumulated Other Comprehensive Income (Loss) (in thousands) Balance at December 31, 2019 $ (5,247 ) $ (5,247 ) Other comprehensive gain (loss) before reclassification (30,429 ) (30,429 ) Amount reclassified from accumulated other comprehensive income (loss) — — Net current period other comprehensive income (loss) (30,429 ) (30,429 ) Balance at March 31, 2020 $ (35,676 ) $ (35,676 )
Details of total deferred revenue balance	Details of our total deferred revenue balance was as follow s: Total Deferred Revenue (in thousands) Balance at December 31, 2019 $ 343,400 Deferred revenue recognized (120,363 ) Additional amounts deferred 132,515 Balance at March 31, 2020 $ 355,552
Remaining performance obligations for revenue recognition	We expect to recognize revenue related to remaining performance obligations as follows: Revenue Recognition Expected by Period Total Less than 1 year 1-3 years More than 3 years (in thousands) Expected recognition of deferred revenue $ 355,552 $ 323,168 $ 31,669 $ 715
Details of contract acquisition cost	Details of our deferred commissions balance was as follow s: (in thousands) Balance at December 31, 2019 $ 10,624 Commissions capitalized 1,957 Amortization recognized (821 ) Balance at March 31, 2020 $ 11,760 March 31, December 31, 2020 2019 Classified as: (in thousands) Current $ 2,883 $ 2,543 Non-current 8,877 8,081 Total deferred commissions $ 11,760 $ 10,624
Amortization of acquired technologies	Amortization of Acquired Technologies. Amortization of acquired technologies included in cost of revenue relate to our licensed products and subscription products as follows: Three Months Ended March 31, 2020 2019 (in thousands) Amortization of acquired license technologies $ 35,572 $ 35,837 Amortization of acquired subscription technologies 8,920 7,980 Total amortization of acquired technologies $ 44,492 $ 43,817

Goodwill (Tables)

Goodwill (Tables)	3 Months Ended
	Mar. 31, 2020
Goodwill and Intangible Assets Disclosure [Abstract]
Schedule of Goodwill	The following table reflects the changes in goodwill for the three months ended March 31, 2020 : (in thousands) Balance at December 31, 2019 $ 4,058,198 Foreign currency translation and other adjustments (24,391 ) Balance at March 31, 2020 $ 4,033,807

Fair Value Measurements (Tables

Fair Value Measurements (Tables)	3 Months Ended
	Mar. 31, 2020
Fair Value Disclosures [Abstract]
Fair value of financial assets measured on a recurring basis	The following table summarizes the fair value of our financial assets that were measured on a recurring basis as of March 31, 2020 and December 31, 2019 . There have been no transfers between fair value measurement levels during the three months ended March 31, 2020 . Fair Value Measurements at March 31, 2020 Using Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total (in thousands) Money market funds $ 110,000 $ — $ — $ 110,000 Trading security — — 5,087 5,087 Total assets $ 110,000 $ — $ 5,087 $ 115,087 Fair Value Measurements at December 31, 2019 Using Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total (in thousands) Money market funds $ 4,559 $ — $ — $ 4,559 Trading security — — 5,000 5,000 Total assets $ 4,559 $ — $ 5,000 $ 9,559

Debt (Tables)

Debt (Tables)	3 Months Ended
	Mar. 31, 2020
Debt Disclosure [Abstract]
Summary of debt	The following table summarizes information relating to our debt: March 31, December 31, 2020 2019 Amount Effective Rate Amount Effective Rate (in thousands, except interest rates) Revolving credit facility $ — — % $ — — % First Lien Term Loan (as amended) due Feb 2024 1,945,225 3.74 % 1,950,200 4.55 % Total principal amount 1,945,225 1,950,200 Unamortized discount and debt issuance costs (34,606 ) (36,894 ) Total debt 1,910,619 1,913,306 Less: Current portion of long-term debt (19,900 ) (19,900 ) Total long-term debt $ 1,890,719 $ 1,893,406

Earnings Per Share (Tables)

Earnings Per Share (Tables)	3 Months Ended
	Mar. 31, 2020
Earnings Per Share [Abstract]
Reconciliation of shares in basic and diluted loss per share calculation	A reconciliation of the number of shares in the calculation of basic and diluted earnings per share follows: Three Months Ended March 31, 2020 2019 (in thousands) Basic earnings per share Numerator: Net income $ 415 $ 3,145 Earnings allocated to unvested restricted stock (3 ) (42 ) Net income available to common stockholders $ 412 $ 3,103 Denominator: Weighted-average common shares outstanding used in computing basic earnings per share 308,937 305,653 Diluted earnings per share Numerator: Net income available to common stockholders $ 412 $ 3,103 Denominator: Weighted-average shares used in computing basic earnings per share 308,937 305,653 Add dilutive impact of employee equity plans 3,928 4,130 Weighted-average shares used in computing diluted earnings per share 312,865 309,783
Weighted average shares excluded from loss per share computation	The following weighted-average outstanding shares of common stock equivalents were excluded from the computation of the diluted net income per share attributable to common stockholders for the periods presented because their effect would have been anti-dilutive or for which the performance condition had not been met at the end of the period: Three Months Ended March 31, 2020 2019 (in thousands) Stock options to purchase common stock 247 369 Performance-based stock options to purchase common stock 84 130 Non-vested restricted stock incentive awards 1,669 2,908 Performance-based non-vested restricted stock incentive awards 845 1,282 Restricted stock units 5,650 4,675 Performance stock units 677 957 Employee stock purchase plan 177 — Total anti-dilutive shares 9,349 10,321

Summary of Significant Accoun_4

Summary of Significant Accounting Policies - Changes in Accumulated Other Comprehensive Income (Loss) (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Balance at beginning of period	$ 2,649,522	$ 2,616,100
Other comprehensive gain (loss) before reclassification	(30,429)
Amount reclassified from accumulated other comprehensive income (loss)	0
Other comprehensive income (loss)	(30,429)	(27,708)
Balance at end of period	2,632,364	2,606,377
Foreign Currency Translation Adjustments
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Balance at beginning of period	(5,247)
Other comprehensive gain (loss) before reclassification	(30,429)
Amount reclassified from accumulated other comprehensive income (loss)	0
Other comprehensive income (loss)	(30,429)
Balance at end of period	(35,676)
Accumulated Other Comprehensive Income (Loss)
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Balance at beginning of period	(5,247)	17,043
Balance at end of period	$ (35,676)	$ (10,665)

Summary of Significant Accoun_5

Summary of Significant Accounting Policies - Changes in Deferred Revenue (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2020USD ($)
Movement in Deferred Revenue [Roll Forward]
Balance at December 31, 2019	$ 343,400
Deferred revenue recognized	(120,363)
Additional amounts deferred	132,515
Balance at March 31, 2020	$ 355,552

Summary of Significant Accoun_6

Summary of Significant Accounting Policies - Expected Recognition of Deferred Revenue (Details) $ in Thousands	Mar. 31, 2020USD ($)
Accounting Policies [Abstract]
Expected recognition of deferred revenue	$ 355,552
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2020-04-01
Accounting Policies [Abstract]
Expected recognition of deferred revenue	$ 323,168
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue Recognition Expected by Period	9 months
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-04-01
Accounting Policies [Abstract]
Expected recognition of deferred revenue	$ 31,669
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue Recognition Expected by Period	2 years
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-04-01
Accounting Policies [Abstract]
Expected recognition of deferred revenue	$ 715
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue Recognition Expected by Period

Summary of Significant Accoun_7

Summary of Significant Accounting Policies - Change in Contract Acquisition Costs (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2020	Dec. 31, 2019
Deferred Commissions, Roll Forward [Roll Forward]
Balance at December 31, 2019	$ 10,624
Commissions capitalized	1,957
Amortization recognized	(821)
Balance at March 31, 2020	11,760
Current		$ 2,883	$ 2,543
Non-current		8,877	8,081
Total deferred commissions	$ 10,624	$ 11,760	$ 10,624

Summary of Significant Accoun_8

Summary of Significant Accounting Policies - Cost of Revenue (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Product Information [Line Items]
Total amortization of acquired technologies	$ 44,492	$ 43,817
License
Product Information [Line Items]
Total amortization of acquired technologies	35,572	35,837
Subscription
Product Information [Line Items]
Total amortization of acquired technologies	$ 8,920	$ 7,980

Goodwill (Details)

Goodwill (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2020USD ($)
Goodwill [Roll Forward]
Balance at beginning of period	$ 4,058,198
Foreign currency translation and other adjustments	(24,391)
Balance at end of period	$ 4,033,807

Fair Value Measurements (Detail

Fair Value Measurements (Details) - Recurring - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading security	$ 5,087	$ 5,000
Total assets	115,087	9,559
Quoted Prices in Active Markets for Identical Assets (Level 1)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading security	0	0
Total assets	110,000	4,559
Significant Other Observable Inputs (Level 2)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading security	0	0
Total assets	0	0
Significant Unobservable Inputs (Level 3)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading security	5,087	5,000
Total assets	5,087	5,000
Money market funds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and cash equivalents, fair value disclosure	110,000	4,559
Money market funds | Quoted Prices in Active Markets for Identical Assets (Level 1)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and cash equivalents, fair value disclosure	110,000	4,559
Money market funds | Significant Other Observable Inputs (Level 2)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and cash equivalents, fair value disclosure	0	0
Money market funds | Significant Unobservable Inputs (Level 3)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and cash equivalents, fair value disclosure	$ 0	$ 0

Debt - Summary of Debt (Details

Debt - Summary of Debt (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Amount
Total principal amount	$ 1,945,225	$ 1,950,200
Unamortized discount and debt issuance costs	(34,606)	(36,894)
Total debt	1,910,619	1,913,306
Less: Current portion of long-term debt	(19,900)	(19,900)
Total long-term debt	1,890,719	1,893,406
Line of Credit | Revolving Credit Facility
Amount
Total principal amount	$ 0	$ 0
Effective Rate	0.00%	0.00%
Secured Debt | First Lien Term Loan (as amended) due Feb 2024
Amount
Total principal amount	$ 1,945,225	$ 1,950,200
Effective Rate	3.74%	4.55%

Debt - Additional Information (

Debt - Additional Information (Details) - Credit Suisse	3 Months Ended
	Mar. 31, 2020USD ($)
Eurodollar
Debt Instrument [Line Items]
LIBOR floor	0.00%
Federal Funds Effective Rate
Debt Instrument [Line Items]
Basis spread on variable rate	0.50%
LIBOR
Debt Instrument [Line Items]
Basis spread on variable rate	1.00%
Secured Debt | First Lien Term Loan
Debt Instrument [Line Items]
Face amount of debt	$ 1,990,000,000
Quarterly periodic payment, as a percentage of original principal	0.25%
Covenant, leverage ratio, maximum	7.40
Secured Debt | First Lien Term Loan | Eurodollar
Debt Instrument [Line Items]
Basis spread on variable rate	2.75%
Covenant, floor interest rate	0.00%
Secured Debt | First Lien Term Loan | Base Rate
Debt Instrument [Line Items]
Basis spread on variable rate	1.75%
Line of Credit | Revolving Credit Facility
Debt Instrument [Line Items]
Maximum borrowing capacity	$ 125,000,000
Commitment fee percentage	0.50%
Covenant, commitment fee percentage, net leverage ratio, reduction per annum	0.375%
Covenant, borrowing percentage of commitments, maximum	35.00%
Line of Credit | Revolving Credit Facility | Eurodollar
Debt Instrument [Line Items]
Covenant, floor interest rate	0.00%
Line of Credit | Revolving Credit Facility | Eurodollar | Minimum
Debt Instrument [Line Items]
Basis spread on variable rate	2.50%
Line of Credit | Revolving Credit Facility | Base Rate | Minimum
Debt Instrument [Line Items]
Basis spread on variable rate	1.50%
Line of Credit | Revolving Credit Facility | Multi-Currency Tranche
Debt Instrument [Line Items]
Maximum borrowing capacity	$ 100,000,000
Line of Credit | Revolving Credit Facility | Single Currency Tranche | US Dollars
Debt Instrument [Line Items]
Maximum borrowing capacity	25,000,000
Line of Credit | Revolving Credit Facility | Single Currency Tranche, February 5, 2021 Maturity Date | US Dollars
Debt Instrument [Line Items]
Maximum borrowing capacity	7,500,000
Line of Credit | Revolving Credit Facility | Single Currency Tranche, February 5, 2022 Maturity Date | US Dollars
Debt Instrument [Line Items]
Maximum borrowing capacity	17,500,000
Line of Credit | Letter of Credit
Debt Instrument [Line Items]
Maximum borrowing capacity	$ 35,000,000

Earnings Per Share - Reconcilia

Earnings Per Share - Reconciliation of Shares in the Calculation of Basic and Diluted Loss Per Share (Details) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Numerator:
Net income	$ 415	$ 3,145
Earnings allocated to unvested restricted stock	(3)	(42)
Net income available to common stockholders	$ 412	$ 3,103
Weighted-average common shares outstanding used in computing basic earnings per share (in shares)	308,937	305,653
Net income available to common stockholders	$ 412	$ 3,103
Denominator:
Weighted-average shares used in computing basic earnings per share (in shares)	308,937	305,653
Add dilutive impact of employee equity plans (in shares)	3,928	4,130
Weighted-average shares used in computing diluted earnings per share (in shares)	312,865	309,783

Earnings Per Share - Weighted A

Earnings Per Share - Weighted Average Outstanding Shares of Common Stock Equivalents Excluded (Details) - shares shares in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Total anti-dilutive shares (in shares)	9,349	10,321
Stock options to purchase common stock
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Total anti-dilutive shares (in shares)	247	369
Performance-based stock options to purchase common stock
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Total anti-dilutive shares (in shares)	84	130
Non-vested restricted stock incentive awards
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Total anti-dilutive shares (in shares)	1,669	2,908
Performance-based non-vested restricted stock incentive awards
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Total anti-dilutive shares (in shares)	845	1,282
Restricted stock units
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Total anti-dilutive shares (in shares)	5,650	4,675
Performance stock units
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Total anti-dilutive shares (in shares)	677	957
Employee stock purchase plan
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Total anti-dilutive shares (in shares)	177	0

Income Taxes (Details)

Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Income Tax Disclosure [Abstract]
Income tax expense	$ 2,415	$ 565
Effective income tax rate	85.30%	15.20%
Unrecognized tax benefits, income tax penalties and interest accrued	$ 5,800

Uncategorized Items - swi-20203

Label	Element	Value
Cumulative Effect of New Accounting Principle in Period of Adoption	us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption	$ 6,267,000
Retained Earnings [Member]
Cumulative Effect of New Accounting Principle in Period of Adoption	us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption	$ 6,267,000