SWI - Earnings call 4 2020 | SolarWinds Corporation

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the SolarWinds Fourth Quarter 2020 Earnings Call. [Operator Instructions] I would now like to hand the call over to your host, Howard Ma, Senior Director of Investor Relations. Please go ahead.

Howard Ma

Thank you, operator. Good morning, everyone, and welcome to SolarWinds' Fourth Quarter 2020 Earnings Call. Sudhakar EVP President and are Bart CEO; today our Kalsu, Chief me Ramakrishna, and our and With Financial Officer.

we'll call. simultaneously deck, intended prepared Investor earnings press remarks, call which website, you On is prepared have and find question-and-answer Relations during brief remarks Following our also session. our is Investor being our website a webcast to Relations our release supplement can on today's at investors.solarwinds.com. a This summary slide

currently this during of call forward-looking remember our that environment made Please financial no required impact impact statements by those on potential this including of on our the business business, the our economic as the business. updates are concerning the opportunities, duty information, certain and statements, on assumptions, global of except our our spin-off outlook, the and market cyberattack we information to available and based update undertake These the on law. MSP statements are

and number potential spin-off These statements the the our and are MSP risks impact business the related cyberattack also the a on of of subject of risks to numerous uncertainties, business. to our including

in highlighted Additional today's and uncertainties on our is the information earnings website. these risks are -- with the them release the considering and associated SEC. with SEC or concerning statements our and Copies from filings in available Investor Relations

summary website. are referring on page our we of and be on today's press otherwise reconciliation our call the available specified. unless between will GAAP Relations measures the When measures. call, deck and will of to earnings measures we non-GAAP on non-GAAP Investor refer financial various in discussed differences release Furthermore, measures, financial discuss non-GAAP today's slide the we financial A to financial

turn that, over the With Sudhakar. now to I'll call

Sudhakar Ramakrishna

you're Howard. Good staying well and doing hope us you you, I joining morning, safe. Thank today. for thank and

and first thanking know, long want of January customers, call our earnings and by joined SolarWinds. I company. to for our is for SolarWinds' with to shareholders I the their company on been earlier year model. velocity their partners X support and you this student high my start As go-to-market the of commitment a I this first employees, ongoing have

Our portfolio the company apply DevOps it to my to support market ITOps, balance opportunity easy to base, made customer strong as address of President when and got I CEO. concentration, opportunity broad solutions, the the and needs strong opportunity me an recurring professionals to background sheet and revenue expanding low lead for say, yes, to the SecOps of

and my could the they're been have with I to understand like In deployed the cyber the spend opportunity X to us have the of had Equally, others a that that partners. address to spoken a I've the we vast lot doing. customers the that see I incident SolarWinds. affected any and are that have company, especially customers vendor weeks The our happened of time majority broadly and and issue share vendor, us which to eager learnings, with

of us their to in opportunity ability a guidance to our input upgraded making on our the have latest our downloaded and products, affected the our customers customers code majority discussions continue and protect our a other version partner. The coming environment provide opposed to keeps focusing renew that with of more version strategic us. of to up entire that The just as to these is contracts

entire of security with customers, us discuss conversations our the priority the safety and our customers continues also of our strength be and first our of and the future opportunity given partners have the plans. portfolio to to While ensure

a plans, both closely in but investigation, on as I'll managing and on employees, have cyberattack and learnings elaborate well XXXX. few time I operational our spent and the of working investigation as highlights partners. touch in customers also QX financial a on significant our future SolarWinds, with amount and first, the I'll on

pandemic. of a did face over job a year executing companies $X in global a of teams the revenues achieving non-GAAP QX. solid by billion significant the for for the hit in aspire milestone and full XXXX each X% of to, We throughout non-GAAP Our that full year-over-year QX. an in We XX% XXXX. delivered EBITDA year-over-year X% We of of and year year many revenues grew margin the adjusted in

continued cyberattack basis. maintenance the completed grew up rate in XXXX, We the rates in we revenue the for native quarter, cloud consistent and the now to quarter. north on hybrid via renewal the which fourth monitor fourth renewal across was and SolarWinds, the our we rates a of despite and monitoring performance trailing supporting the retention by sustained held range VividCortex subscription platforms on and announced acquisition a acquisition performance XX% SentryOne analyzer, and net fourth SentryOne, well database non-GAAP management with a in of approximately recent environment. broad on-premises, database XXXX, strong full products on database XXX% have portfolio, for year trends. XX% XX. We comprehensive grow of Our database our XX-month Between quarter Revenue analysis our December IT

to that SentryOne database hybrid our IT solutions become expect a already sustain growth. We complement monitoring and as as systems strong The well help our monitoring. leader solutions application network, to efforts in

solutions. management by our IT infrastructure our ITSM product ServiceDesk, subscription cloud to and growth management application and fueled core which be continues Our is

Additionally, fourth business year, again XXXX. million XX% revenue in growth quarter $XXX the double-digit surpassing both and our in full MSP delivered the in

and data partners MSPs remote year management small, the solutions the world. business management, MSP for more provider that as XXX,XXX and reflecting XX,XXX ended enterprise around service We medium over customers, than protection of status leading security, our with monitoring a

potential registration of submission SEC announced we December, spin-off the a the statement Form with In the for of XX MSP our business. confidential

the to to completing quarter. While the is in difficult process second predict, continue target the transaction we

spin-off, the formerly the announced part in business, as the MSP known also brand As a of MSP SolarWinds preparation for new December.

our extending the the of roots MSP and businesses company. need name, clients Moving familiar forward. partners their reflect To to Enable, power partnership, forward, business protection be will a and known the the by performance,

to our let Since to a that with been and patience, ensure support the trust, our understanding remediation, support authorities learned provide tirelessly cooperate we employees turn want moment personally safe Now customers protected. has working time. has and around this to government me are I take for December, our the thank priority customers, to world their our it company to customers, publicly. in And been our cyberattack. share learnings partners the entire of and and dedication, top during

a came also threat backdoor us. create of the The became own about Orion. as to type companies believe attack broader We of versions Orion has of by this IT versions SolarWinds code, other and and select we scope than the to March and did attack SUNBURST of As campaign nation clear an released and this to adding not our became customers. on clear removed board was its emerged since breaches be more, XXXX. of June determined it of hard-pressed in current between state. It a I that into and ongoing was threat SUNBURST, known malicious unrelated to public that environment this platform targeted disclosures any actor is in as withstand and sophisticated on compromises by would learned company news that much dedicated been

trade have statements organizations version code threat agencies customers that to the products. platform. installed nature fewer on investigation, Security and the an Orion we affected that XX substantially with believe for found craft customers that of actually of Emerging is fewer One Orion after through that disclosed critical have actor, is Additionally, we we version the previously and of I advanced were may into share of XX, Technology, not have SUNBURST than about any compromised. believe update the SUNBURST may in our extensive and number Based the and sector X affected that exploited that is private non-Orion malicious number of companies number Advisor of installed was the of software by Neuberger, This discussions the with XXX SUNBURST more than Cyber consistent of the customers an federal platform is as XX,XXX. February investigations our Anne our than of National

is potentially will number While total was currently lower the what than our one one of many, attitude customers significantly be impacted customer is too feared. believe always impacted originally of we that

model work design. And by with our solutions. our this to principles We ensure and from investments our applying being we secure customers event development trust premised a best-in-class of and software affordable of zero learnings Internally, confidence broadly. best-in-class goal secure secure powerful, are solutions. consistent as utmost our provider on more sharing have are it's our see work to a the developing We in and as our these can referring

and security internal our products they of summary, X environment; goes beyond regarding ensuring our through of product review tools, further and efforts, we integrity on level details where automation all development added industry We've securing believe a processes, our our environment; deliver. first, manual to our in and published primary of around security of that norms necessary, have and the second, the checks We third, the well processes are development areas: focused enhancing product integrity ensure products. security but we and

well code. be used Orion without the risk our software products related by the SUNBURST and believe products firmly as of We malicious our as platform of that can other customers all

and who in management Two current with advice our a formed improvement I Board to are response cybersecurity our X responsibility our committee. formed committee the cyber and technology of experience, Board. new also our initiatives. of incident We This and a has overseeing committee oversight our cybersecurity assist of Board, to members and the to CIOs provide member significant sitting

experience, but industry. to unique sharing to we only development, secure our the are with learnings Given to the our with software way not committed respect also leading

to the provide Bart? to details let call our over Now performance. turn financial Bart of me you

J. Kalsu

thanks call. to joining us Thanks, again Sudhakar, everyone on today's and

model fourth the revenue for was of maintenance demonstrating in our versus maintenance year-over-year near execution the over year, million the of acceleration with revenue, the the representing of fourth This the finished and sequential impacted was fourth revenue up reflect growth quarter. since Our the total million end consistent quarter ending in face XX% customer prior high financial the quarter range Non-GAAP by in growth the by as of results reflecting the X% bookings the outlook evidenced non-GAAP We in fourth $XXX.X our was revenue, second X%. approximately the in retention most rates driven cyberattack. quarter the solid solid renewal $XXX.X which resiliency renewal for by of growth while quarter by of pandemic. maintenance driven quarter, maintenance

our $XX.X For from the continued continuing the evolution non-GAAP which impact The the a and compared license of our approximately decline on-premises pandemic, COVID of revenue sales to revenue the quarter XX% subscription of the represents fourth resulted products. of as for to XXXX. million, fourth was license quarter, decline the in impact cyberattack global

continue an sales of in X in the revenue see On-premises the fourth quarter-over-quarter to on-premises resulted products for license headwind growth our approximately to percentage quarter. in our point We sequential sales subscriptions subscription for quarter.

X% revenue Total year. non-GAAP maintenance million license fourth was in versus and the prior the quarter, $XXX.X down

ARR of of business approximately X the impacted $XXX million from and customers, continue XX%, the quarter. to million fourth headwinds the contribution continue expect end as XX%, existing customers was in near-term acquisition. growth to SentryOne Subscription reached of rates. demand approximately for and includes said, new at lower we the SentryOne December That our cyberattack ahead, year-over-year grew renew on our XX, points both existing Looking acquisition $XXX by quarter. reaching at reflecting which not we ARR materially XXXX, Subscription pandemic. the our due growth of percentage from products ARR although and Total to see our

revenue as growth $XXX.X Moving to core IT revenue. was year-over-year, subscription MSP XX% by year-over-year well subscription which as performance up XX% our in business. was our management subscription business quarter solid million, driven non-GAAP Fourth our in

driven and our expand successfully growth in land, Our customer relationships. has sustained retain model

subscription rate year the net Our was retention for XXX%.

the importance for on strength believe the of partners IT and small, depend validated and our pandemic confidence digital our us business Over enterprises of year, has model. management last given we transformation has medium-sized that the in security MSP the the to

in SMEs, promising seen also retention uptake we've stable spending reduction While solutions net our amongst and XXXX. well as seen consistency resulting some of in our as among we've partners, rates larger some in trends MSP

revenue $X.XX major as billion over revenue represents in non-GAAP mark XXXX, million. which broke year total delivering $X of we was Total threshold while X% XX, revenues ended the annual a for milestone the $XXX.X growth XXXX December billion,

our a non-GAAP revenue ITSM in revenue XXXX, ended and which was the full MSP For $XXX million, XX% was respectively. in were of from year year-over-year. growth and and dollars that year from December represents XX, subscription business acquired The of VividCortex by XXXX, our led December April growth products

negatively maintenance full $XXX.X solid year year for was revenue a of at This Non-GAAP million. million. maintenance to License of increased rate a driven over by X% X%, year-over-year growth evidenced grew revenue retention impacted perpetual and more the the a result XXXX. rate $XXX the cyberattack was quarter duration for maintenance Non-GAAP renewal in purchasing XXXX on-premises on reaching as full XX.X% license the by impact customer full of typical in the revenue slowdown of of products license COVID the a offering fourth of pandemic, to lifetime. subscription which basis, the and by combination expect the in previous customer in the a yield we revenue over as

which XXXX. is that have more XX% than with us the $XXX,XXX over months, last improvement in with spent finished year-end XX an We customers XXXX X,XXX

larger our build with to efforts relationships our continuing customers. are enterprise We

as the solid And non-GAAP December for the full XX%, of the million, adjusted EBITDA for quarter EBITDA profitability year outlook in margin fourth an adjusted had ended year the well. quarter. XX% EBITDA of We XX, quarter. the for high $XXX.X adjusted fourth adjusted representing was million, margin the $XXX.X an of EBITDA also XXXX, of was quarter representing a end Fourth exceeding

Unlevered quarter. reflects rate on conversion was improved flow by million, for and December debt free at interest in working totaled of positively despite SentryOne capital. our which EBITDA, The was leverage lower the full the net the our of the impacted acquisition fourth year adjusted XX-month $XXX of trailing rate million adjusted conversion of Net EBITDA cash cash $XXX on payments use XX%. an XX X.Xx

our million complete the to to full future of power course cash now SentryOne you positioned year. size XXXX, continue to net acquisition the standpoint our ratio walk For are from our it an before leverage delever turning the XX, of first at in reduced in year invest X.Xx, final over well some we to outlook of for December through a the will $XXX.X still the over the growth Sudhakar X.Xx quarter and our to financial we reflecting With from model I of in business. significantly thoughts.

full cyberattack impact impact there on global relates continuing the around is of it As the to the uncertainty of top pandemic. the from year, the

growth We customers, of engagements are both existing business we with in XXXX. prospective optimistic encouraged our by recent and and cautiously are about

it the of too of range renewals the still have business, the customer outcomes early our growth to ongoing are pipeline While and predict with of indicators past. precision the level health feel we is we of provided in

first for we to believe and provide such, XXXX share adjusted revenue, of As it per prudent this point. outlook total only at is EBITDA quarter earnings

margin. to quarter to $XXX non-GAAP million the XXXX, million, of of For expected in year-over-year the to an we -- representing total $XXX Adjusted be first to X%. XX% non X% range which is the negative $XX approximately be expect implies quarter revenue positive $XXX million EBITDA EBITDA growth first for to million, of

EBITDA license margin and the and adjusted every expenses, of typically particularly revenue social year payroll lower first quarter increase level due reminder, around in is lowest in As to taxes. our security a an at its

to the spending decline reflects said, acquisition, initiatives. the That business spin of in security-related SentryOne incremental in also our year-over-year advance are incremental expenses in the our we EBITDA making adjusted MSP the investments in related and

approximately be million. share shares our initiatives to per and $X.XX XXXX As to to estimated million XXXX projected adjusted EBITDA, in diluted earnings $XX to an $X.XX assuming XXX diluted expect security-related investments fully Non-GAAP per $XX to be it we outstanding. fully share, relates million is

And in a rate finally, first the $XX.X tax rate to first euro to of expect our pay of a for to million exchange first rate and assumes during quarter outlook a taxes X.XX cash we non-GAAP XXXX. the dollar assumes of dollar quarter of approximately exchange outlook quarter and Our U.S. XX%, pound X.XX.

our and providing not that say improve we full all through license we regions. growth in the I particularly are outlook, revenue regions to we year in will APJ While as year and move EMEA expect

we've return expected to with performance rates targeting to in the in And mid-XXs we first Based far historical XXXX. the are to quarter, our in on what XXXX maintenance portfolio. as to ensure low a customers so in renewal and are work we seen our to ours over of is revenue. further percentage we the continue product recurring X past recurring focus of to XX% Increasing as revenue success been revenue now their enhance years, has our the of total our be and

and our a will teams. make offerings new priority products continue subscription our on-premises We sales in to XXXX with expand sales the subscription of

As we continue in of quarter explore that of said we occur having year. the target now previously, business, as known MSP continue the previously transaction this our and spin-off potential to Enable second to announced

will his call the back closing I remarks. turn for that, Sudhakar now over With to

Sudhakar Ramakrishna

Thank assignments, have bias action my humility, executive various principles. you, focused success sought guiding towards Bart. to In a transparency, I my and ownership, be customer let

actively committed do, leveraging to we a analysis and to we time, and by business. and stronger tools, we are our along service expand to with relevance see principles Over our We to customers our at applications and as increase significant will practicing these opportunities monitoring tools desk as database systems, emerge our SolarWinds, portfolio. and IT excellent network, market

needs serve integrate platforms to hybrid the customers. intend We evolving IT of and our our

to further monitoring, across revenues. and of experiences enable greater automation configuration, subscription accelerate will towards and DevOps a moves integrated visibility, SecOps have recurring and We will ITOps, our remediation. alerting and mix professionals progress These

margins. we achieve As our intend the growing market long-term we exceed plans segments, years, even over some several opportunity, organize look strong as to to and, a in next we growth the and to and have EBITDA quarters rates believe that we deliver we market and activities

new the created business and strong additional over to also a with go-to-market international ability enterprise growth in market will investments XXXX. expand. lead to our we of nourish to balance sustained increase and profitability, take system value our sales believe enhance motions, opportunities, velocity and we better operating customer customers, a model capture success result and we key our actions: of growth land and lifetime to in to have the achieve integrated model our customers the expect expanding our leverage expand to between our to continue We customer evolution time, accelerate and, team's satisfaction go-to-market while critical global evolution following the a this further As our high started that

and portfolio integration enterprise on are of is to SaaS on-premises greater the with our IT strategy mix. deployments via additional enhance expand We market packaging inorganic offering that portfolio our both faster. round an comprehensively with associated cloud, address needs to subscription a hybrid accelerate as to embarking as evolution our and customers, out well support efforts capture deployments investments ability to Selectively opportunity that flexible

again trust forward, and customers I'm and solutions, powerful, thanking conclude years, customers their and to commitment affordable of delivering employees, support our the XX-plus of have SolarWinds. partners that affordable I'll confident for we secure for known and be powerful delivering by will we earned our solutions. by Over and going

be will questions. I and Bart happy your to address now

Howard Ma

questions. for ready we're Operator,

Operator

comes [Operator the line your Sterling first from Instructions] of And question JPMorgan. Auty with

Sterling Auty

that through are the you expecting for improvement kind and in, You that baking to then specifically, made of the small picture elements, X one, Number show improvement about touched subscriptions sure demand will kind is the terms But back want I licensing. the the in subscription, upon I on of to improvement of the key through in year? you some comments in wanted in I of which specifically kind a dive you are the of much how make understand to bottom piece, the number the ways. demand year but in around start March more

J. Kalsu

as And being a what about what And subscription we're we I said, relates priority. saw with right? so the license other XXXX. XXXX, the Sterling, in make consistent fourth That's X% expecting talked far going quarter headwind revenue. subscription so it in sales we're sales quarters Yes, that continue to in we in fairly to a to we've done headwind mean, we like

that anything, a move we is little be only as even if So through to XXXX. going stronger headwind bit

Sterling Auty

you I'm not mix, subscriptions, to show expecting the for what the and from guess demand here the is your term of subscriptions near the year? demand I asking bottom demand a for impact improvement But breach, general through hit just then the but Right. in are kind

J. Kalsu

Yes, absolutely.

And XXXX, to we've to Sterling, first year, we move be rest then building As continue the for of we impact the out as we in demand our expect through expect biggest been forecast the to the improve. quarter.

Sterling Auty

And one then maintenance. the follow-up just on

to us about understand, when would would that You like? Because does maintenance think maintenance I contracts that, what more come the when seasonality towards mix gave renewal imagine look rates, weighted those I of renewal want be you up, that but QX.

actually the expecting biggest might QX? are that So not come maintenance you until hit

J. Kalsu

lot maintenance what there's business. are When consistent our it in really of to bookings quarter look not a Sterling, relates out. quarter standpoint, as at seasonality from and they're I our a

to quarter So although renewal maintenance fourth seen not we customers like a we've that our a of historically. co-term have some to that trend that's just date,

Operator

Your line from comes the with next of question Crédit Suisse. Zelnick Brad

Brad Zelnick;Crédit Suisse;Analyst

But liabilities liability to you potential call may any Sudhakar, which and and see degree be how types SolarWinds it's a for might covered industry good industry. licensing is This comment but a agreements? that and its leadership future to and an question addressing customer the attacks. to to you in ask not SUNBURST, these of a just is on. by are position these the entire I wake-up litigation SolarWinds wanted that difficult claims the a I it's thinking clear think on think I about SolarWinds to related SUNBURST of be issue pretty taking issue, for

Sudhakar Ramakrishna

just agreement. And on disclose Thank software which we you have the vendors, a also SolarWinds' last our relevant vulnerabilities basis. end-user correct The is you most for you is as is mentioned, issue. question. and not covered software made you as most issue, one, broader most go-forward but it's And they the that industry unfortunately much specific a a SUNBURST have through like licensing companies point know,

at practices we SolarWinds well. as so have And similar

Brad Zelnick;Crédit Suisse;Analyst

out, related Bart. I to for sure you just million want maybe which the in the it heard to SUNBURST? the is to time called I security-related $XX maybe heard -- versus business point of cost follow-up I changes and $XX to something put Can security to Okay. finer a correctly, million that process a make And your to remediation initiatives. you ongoing frame incident and related

J. Kalsu

insurance yes, up charges, to we as increases as So all the that incur Sudhakar in of expenses security a expect cost is general cyberattack some of Brad, to well throughout our XXXX. the of XXXX. just go that's million, $XX as the result that some of $XX in a we as And about combination cost to expect up initiatives such talked as our some million our will And other go then there's fees well. of professional both

$XX just but in increase really, $XX be million the you to as of some as we move well. give our to number what forward just not expenses to we So the context 'XX, million for was expected

Sudhakar Ramakrishna

as looking And as at clarify in much investments dev mentioned Bart, and necessarily we my forward. to I'd that aspiration IT, extensions of also SecOps professionals. not that to our like for are as and support is broader the these as needs us And remediation to related I are these going remarks,

Operator

from comes line RBC Hedberg question Markets. with of next Your the Capital Matt

Matthew Hedberg

sort I'm pace can cyberattack. the here. talk think you wondering X renewal could appreciate year. of X thank effectively I QX? transparency we versus talked rates? the what quarter if you I between renewals for mid-XXs on private Maybe kind here. mean and would talk it's the this then question, a I of first I there linearity normal it, Sudhakar. expect fluid believe, situation, a know -- mid, maintenance maintenance secondarily, through public the months details the business a we're to of into the sector about you about Welcome low the your difference but the on you you Is months side QX of And all in And new

J. Kalsu

-- low all, that our of as account to the rates that federal well renewal you, commercial customers. our we renewal mid-XXs, the Matt, both the first takes as into gave

between broken rate X our renewal not of a those that's historically we've pieces out So business. that

well. to we you those So range both reflects the mid-XXs low as that of gave

as license -- So our one XXXX new first our sales. attack that's as and the we said, And far impacted the like expect as in it obviously, most of we're by quarter, the first of impacted trends. but the the the been business positive then pace of to I quarter seeing relates business, it's be pace the heavily to

Sudhakar Ramakrishna

have findings And it spending transparently, to our time comments, sector as CIOs, just a I add especially of spending steps. customers, to with CISOs, with SUNBURST in with lot the in put public highlighting, and remediation been you Bart's customers, on the government their both as as the time from my private federal and the well the

code. A customers, our my in I understanding. of remarks, of mentioned remediated been in has as lot of one our many the customers, our have including reaction And their public sector already to upgraded

Matthew Hedberg

business? growth the this but of that you Enable, how guess adding through think more That's expanding that MSP we expanding there, on services to to sell second year can beyond, number of I When as business. progress about MSPs think think both I great. also And the on I what you then do and part, them.

Sudhakar Ramakrishna

that, I'll Bart. take

the to continue branding example. it We recently So to going be going made some expand strategic as to business, our as as an announcements forward, we'll Sentinel we're portfolio. Enable partnership it its with relates

and for monitoring in was insights analytics So well. that additional already and evolved into to past, data continues And the in into it as focused evolve avenues explore the security. largely I'm on has we'll sure business like protection, a future, remote

Matthew Hedberg

is us just Can here. Federal, total quick last the a remind -- just of your percentage the... side? you state, that exposure Bart, maybe, local one again to federal kind about Actually, segment? revenue what of Roughly,

J. Kalsu

-- we've had historically we've number obviously not not to that number our that's federal piece our big is been that's we've of -- a -- revenue, Matt. a that it mean a I separately. Yes. broken but it's out, It's disclose big enough is that business

Operator

next the comes Singh line with question from Your Sanjit of Morgan Stanley.

Sanjit Singh

I on business like Congrats just wanted a -- given of anyone. resilient. December. have But sort even for headlines on One does into this accepting the bigger comment And it role, just and in the is Sudhakar kudos of role the dive around couple seem the to to could topics. the proving happened

as would less I of things think of us -- sort agree. vulnerable sort more to my whether SolarWinds, or do most potential anything like, having to perspective going there the the is comes sort distributed operations your side? that was engineering better first on any or from the we operations up of But of an certainly from product That's relative to made peers, company there question. shore company is from look -- any teams any vulnerabilities the it that, at

Sudhakar Ramakrishna

thanks Sanjit, welcome. for the

to As what reason malware deconstructed anyone own found That's the supply have happened and why themselves so be actors chain. both it attacks. that can injected supply current the chains future believe their we did, as from other protect any at publicly we companies look it and we disclosed can could essentially relates threat why it that we potentially into to

security specific consistent environment. there the both is it posture, idiosyncratic could the the to with anything, anything security As to tools we was relates find our SolarWinds' industry. that what are hygiene, SolarWinds' in environment, if security anything to And was not practiced

Sanjit Singh

and will perspective? should fundamentally see we you sort on your are relative the focused sort of And guess through strategy, sort question what things company And change the of compromise from what extending your is, you the I the at What's this? the of strategic been balance look of and tenure thinking? to how out that versus your as Or customers. has how SolarStorm growth be with your past? forward for looking then to manage they initial of the comes managed run margins, the thoughts SolarWinds on, line vision company it. work Got is going as business sort you larger of of as sort a

Sudhakar Ramakrishna

extend Definitely. believe My with personally following focus our monitoring application will broadest systems, term the in if database desk use may tools as way. as be that service IT in to essentially our strategy network, well and I have the portfolio. portfolio, combined I we the

be will in is one platform. our doing provide and cloud, we of needs them intend we to into on-premises deploy what capabilities with forward, can way able support so that integrating hybrid consistent customers or them integrated can Going that we they the the a

there first aspects things, to feel on IT automation to monitoring and significant configuration and with alerting remediation for we our us then is expand our a the to into to Additionally, service opportunity our what life such the for of That see market desk opportunity support customers. we portfolio going of as are forward. as entire is a cycle that we an integrated able growth

will And have our the continue profitability created we balance between to that and we and continue operating in business. as demonstrate do we to leverage that, growth

Sanjit Singh

of is I one of in hesitation look there to Bart. quarter. your cadence. I guiding the accelerated into year? cohorts back Understood. segments, overview. That's lingering some sort annual is, this other My question sort sneak on sell at full similar a gotten could they why for great ARR If for that of If guidance

more consensus. is or QX line less Your guidance with in

in so there's the relative So providing having least far. what doesn't is the looks but ] business full the question is at tons volatility fear around the year, seem of given sort [ like of guidance numbers, that it some impact,

J. Kalsu

just pretty be are just to confident guidance. a at We enough there's outcomes we a weren't year enough confident revenue. Yes. like the Sanjit, just component point. to to revenue. give relates talk to sales full what of comes that do give and going there's to variability enough license enough full there's question. license weren't or when total is we give a year that the new in to a as that fact around there's this still thanks broad We our -- precise XX% just revenue guide. But like XXXX guide the And of recurring to it of have our full XX% enough a license to range piece, it -- we -- And for about our enough uncertainty be

Operator

Your next question from comes with Erik the line Securities. Suppiger of JMP

Erik Suppiger

impact Sudhakar. this the having the and us on federal sector is Welcome you the was some sector? primarily for Clearly, -- targeted customers, what to can this in nonfederal helpful context in to it One, around versus the be attack your understand sector the nonfederal particular? provide churn federal would

Sudhakar Ramakrishna

as our remediate helping say X customers since little about whole way I would I look one a early occurred. to The forward. this quantify and engagement Sure. churn activities one of over describe it's it's and would are at point, of too months event been this

have taken many customers So at through would I both as in on this have point conversations our replacement and had not conversations necessarily personally sector I a focus say customers. a mentioned, or private wait-and-see but some I -- and with attitude, public churn time.

Additionally, them as and renewed of majority have also the I their have many the of mentioned, we continue but engage with only not vast have contracts. customers that I to to upgraded, spoken

I specific point much at not time, indicators a the are indicator. this you so to present those can in churn So

J. Kalsu

provided low And the that for our we full Erik, includes the you, I've that That renewal the rates both customers. as well mid-XXs to as federal year. our commercial expected --

seeing lot Sudhakar are renewal. questions, immediately their turning like right approach. off wait-and-see taking for they've contracts. they're they're said, It's But So more are a not that not when yes, of that renewing we customers maintenance or now, of us up a --

Sudhakar Ramakrishna

any that I customers to One happen because is Number a success. factors. and believe is have That's is speak confidence ability portfolio our X of that their -- it understand of two, software to reflection vulnerabilities and used customers their we our in and customers who recognize their can breadth issues one. software vendors And and also of multiple number vendor. the that important deliver to that

Erik Suppiger

'XX. in Enable 'XX? Then obviously, fiscal Okay. what the -- XX% that it Can how spin-out. growth And fiscal the on was you tell real us was in quick can

is So just curious what the trajectory there?

J. Kalsu

the COVID of just yes, in like the pandemic was MSP lot by a other XXXX. businesses, business, Erik, So impacted

from of in the So would bit slowdown to quarter, we XXXX XXXX was growth we in to have that than positive due in XXXX. our QX. of XX% pandemic growth in really it business that as the impact the MSP saw and we saw relates the higher But trends XXXX second saw any little and been really a that slightly to QX and

Erik Suppiger

type So that's can growth high normalized basis? assume a that, teens on a we

J. Kalsu

the Yes, goal. Yes. that's

Operator

comes Jefferies. the from line with of Thill Brent next Your question

Luv Sodha

the welcome a offering ask normal focus for been these one you has conversations Sodha and you Luv is And would sort Or one the any otherwise Brent of bit on that quick renewing? that on customers renewals. Thill, -- are on This of are to Sudhakar concessions are to to SolarWinds. there I have? wanted

Sudhakar Ramakrishna

that, the been on to are explain should have feel have other the we why renewal to what fact in some doing, front customers conversations et Our had cases, where normal they we secure, than cetera. headed, we are

is has what If say, related per or been I promotion, to your always has been. our question it would behavior pricing

Luv Sodha

you longer-term if one more are nature? investments, these the you're mentioned follow-up, of it on in margins wanted on Got -- the some trying may, longer some I Or this longer-term assess making to of year the to be they quick are I on -- go-to-market -- maybe product investments it. term the And on side. the product I'm margins. or side, impact ask,

J. Kalsu

we that we've Yes, about talked on incident. -- the expenses what Luv. the was talked about What related to primarily security

in be secure be talked Sudhakar we a are I $XX design there XXXX. said, million like in But costs So about the range with by to associated some lot expect that. initiatives and our going to costs those

we and and profitability. throughout we're improve level are -- and tell to to both So to that long as margins at as I be at investment when XXXX move and QX, you're will be look going we always think to try then we're we margins decisions their year. And going what are thinking is lowest between about weigh growth going the would you to margins in going what term, that always beyond, decide

Sudhakar Ramakrishna

returns And yield these in XXXX. investments to are of half of longer year year that of on versus outlined and investments will this some yield term, back this the question your returns expected some about likely I the to this most year, into whether

Operator

Crane. Your from line Kingsley next of the question comes

William Kingsley Crane

we can could attack, the think about Welcome of happen the appreciate. manual anyone. And Sudhakar. completely this the we better nature I This agree learn highly to more with you,

that researchers effective So zero adopting also found that of from and more these the one protect to it's trust vendors customers customers of is attacks. encouraging for But types are agreeing. themselves ways

trust you while your experience today? given with leverage in experience Secure, do So see SolarWinds opportunities to that zero Pulse at

Sudhakar Ramakrishna

Absolutely.

to outlined, as set as mentioned, and for an ability I of part our by the a leadership several as initiative remediation at So this stage much that don't effort years. as I secure I effort look quarters a as over design

I products So to key premised how of of is infrastructure one secure And trust forward. I that say, on or key a our plan say it going both principles. by the as well aspects, when would couple that, build aspects that zero of we is as to design applies

well the I've do products conversations how instance, safety access with the been of of establish security both we our as is our models as enable other some So and vendors' least products within that for privileged having customers. that customers,

them trust I environments to the customers our our was products, So opportunity access one least point describing, related or making, in that and I as through is privileged this that is constructs. but we is guidance principles not up zero on comes was other their only conversations with that how them also across protect provide rooted

William Kingsley Crane

perfect very That That's Great. sense. helpful. makes

the decision how been adopt bit more name brand productivity some hear a more so to change on to strong So to on name I time of have been love encouraged receptive the just customers color a the what's December. just far? little see one for side. to MSP was and Enable Would in

Sudhakar Ramakrishna

strong has brand. to, enable reception, very partners our the MSPs turn, customers. partner That’s the community the you And been but know, for from to Enable primary of small, as business objective in enable enterprise our medium terms in is

the recommitted So the are is a that this partners to nod and business. the to and expanding find redoubling model

Operator

Your next of comes Oliver Rob Baird. from question the line with

Robert Oliver

and a had Sudhakar, as one for Bart, well. you, for then you I follow-up

that that VividCortex. products ITSM It about like SaaS portfolio? nicely are bit how with little And coalescing kind you Sudhakar, a other on expanding products. and sound Samanage around right? is Or demand about? subscription to the product, opportunity could are of database talk products the of subscription optimistic around view old portfolio take in you the that you perhaps Is does there that Just

Sudhakar Ramakrishna

the Absolutely. both database correct. The are you on observations made and service that absolutely desk

based to additional network including addition integration to traditional platform, and executing that, packaging to are the alluded and management. call that this system broadly In applies That I it, products throughout considerations year. Orion on we our,

continue business I as expect subscription well. that, mix of the of result a as grow to So that to

platforms Now platform. that become then motion, into if subscription as few we quarters increasingly, perspective our motion more you will much of singular take on a particular of a primary a out, our integrate

goal improve the it higher is going mix the and XX% time, forward. current expand to the to over something So from

Robert Oliver

how think color. you That's is into Great. customers bought. helpful which have my I And as follow-up Bart, question is your guys been with that to to be, what traditionally ties you agnostic Okay. directly, going

relative kind Are prioritizing model clearly, consistent And so I built there do the go-to-market? to and force? call. keep to with of sales you're assume SolarWinds you And any to in your And would going what on comment subscription there of incentives sort that said. the this has guess hand-in-hand would And the changes pioneered. for with I lean, this relative other like Sudhakar go-to-market change here go always

J. Kalsu

to end -- Yes, change under mean, like And the you either we're end purchase to Rob, license to subscription offerings, we maintenance the have traditional relates a going to the that. I user said, been of our agreements, not it in as right? under the our either agnostic. subscription in want ability day, At or arrangement we've

investment going we're make more going to put our of on-premises that we priority as However, from forward. are we to products, some to a and standpoint, behind try dollars an move

Operator

with Materne next Evercore question Kirk of Your comes line the from ISI.

Peter Burkly

update I is Kirk. but if for is, My wondering if spin-out actually have MSP on of just missed the on your you This Burkly timing of just this any guys prepared and apologies one first Peter the remarks, the business? in

J. Kalsu

still that quarter. So yes, sometime expecting in we're second to the happen spin-out

Peter Burkly

one Okay. Great. Awesome. quick And then follow-up. just

just MSP sounds had the well? an of it piece if makes any impact of business on the licensing sense. which had Just like it mean, as wondering wondering, impact on business, cyberattack the all But I the at more

J. Kalsu

customers of MSP slight able them the MSP Once partners see the started to potential assessed we to impact. the a some just form. was some our January, were get impact back end MSP There none were cyberattack, its to in our of -- of some our products we've that their of of as business assure part and

Operator

question Gogia line next from comes Mohit of with the Your Barclays.

Mohit Gogia

also post I had -- spin-off last I if can you and growth you and somewhat. the the the will initially for MSP business, you have investments, spin-off mean discussing when wondering the you're just security the incremental like, announced right? and obviously, right? what framework I And a product-related profitability mean was changed framework in things SolarWinds look year, investments profile and stand-alone discussed and some

goalposts So if if you maybe sort just moved. touch wondering, can have of any upon like

discussed in SolarWinds mid spin-off think us update mid you're I business, terms had long-term I a businesses to had I the how stand-alone, of teens. versus mid-single-digit to then a And the MSP have you curious, discussed thinking about can profitability? So if post low to store. as think you In the you But high follow-up separate to just growth X question.

J. Kalsu

MSP be as to relate spend we term obviously to XXXX, in But cyberattack about uncertainty business, is IT in core provide a we -- we guidance they'll side will to have the it a revenue be Yes, is to high there's split think it Mohit. of we X continue companies, relates because reasons different look being of have somewhat separate those goal into IT impacted when as our short certain continue X the business, business the core profiles. I grower. will think like mid the we nature. talked didn't And MSP The year. move XXXX. The we when That mean why we about still the talked financial announced the year we company single-digit full business. amount one to last of and to that impacts we will as the

Operator

a Sterling You Auty with JPMorgan. do with follow-up have

Sterling Auty

on -- the words, thinking through number for change update of I've gotten along a be would And or of questions go? just financing spin, there's So debt any need would companies other any from in capitalized. how actions that process? the in be X the around there actually if In would investors actually any terms where

J. Kalsu

post the capital still spin. both of looking term and businesses the structures we're of long Sterling, at potential

we'll move second we the that. when around discussion into So have more quarter,

Operator

time. no questions at There this are other

Sudhakar Ramakrishna

again, in touch. we'll you, Okay. Thank everyone, for joining be and us,

Operator

conference today's concludes This call.

now disconnect. may You

SolarWinds (SWI) 25 Feb 212020 Q4 Earnings call transcript