SWI - Earnings call transcript Q4 2021

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Dave Hafner

Good morning, everyone. And welcome to SolarWinds Fourth Quarter 2021 Earnings Call. With me today are Sudhakar Ramakrishna, our President and CEO; and Bart Kalsu, our Executive Vice President and CFO.

Following prepared remarks, we'll have a brief question-and-answer session. This call is being simultaneously webcast on our Investor Relations website at investors.solarwinds.com. during website, a also is summary supplement prepared Relations press our intended Investor our and release slide remarks our you find can earnings to On call. today's deck, which including spin-off Incident on certain of that the the the impact the the this forward-looking financial made Please our business, business. the those the our of remember our Cyber statements concerning of impact environment business our N-able call and global during of are economic statements, on impact opportunities, outlook, market statements based and required to information, These are information on and as we update currently assumptions, except by available duty law. undertake no this spinoff These number risks of of business. statements the a Cyber numerous subject related including are to risks to and completed Incident the also N-able uncertainties, the the and

for concerning Investor first of today's available the the we measures N-able presented of non-GAAP today's as revenue and longer there with revenue page the we from this financial accordingly GAAP release Relations our SEC release of website. business because and and Investor accounting. historical equivalent the have and uncertainties turn periods. these reflects on to business on of the available to XXXX, the our GAAP I'll call otherwise note highlighted results today's business. the we information financial included on quarter Beginning accounting with Furthermore, summary earnings on will from completed XXXX, financial include no reconciliation We XXXX refer N-able our website. to for are filings when measures be measures, N-able current July We risks the measure statements SEC. the non-GAAP earnings fourth XX, associated of in between financial the purchase that of results various of on deck the operations referring the Copies and the the in as and slide no measure. over financial and Therefore, non-GAAP also the call. in the was in discuss Relations impact press press the the is are of spin-off for them impact discussed quarter differences total on Additional or SolarWinds do business non-GAAP our a we and the quarter contribution our standalone call that, not on discontinued any specified, now will we to our total With the reported. Sudhakar. call of purchase revenue that historically adjust will revenue is have A Unless

Sudhakar Ramakrishna

and Good revenue subscription their hope partners little I’ll efforts the our priorities on progress SolarWinds. Dave. you over joining a and shareholders joined again, customers, you well by I and would thanking for SolarWinds. safe. since now start on-going our I thank Thanks year today. employees, Thank us commitment to staying you Once to doing are I everyone, competence, like for It’s morning the our and team into we retention, resilience our based attitudes key entire significant resulted go to performance of team commitment, shortly. which solutions. made in have evolution highlights platform customer our growth increasing of SolarWinds relative our in The of to and several great a to focus

XXXX. Annual of we on Analyst you Day our held XX, also aware many As meeting are November

companies small mid-XXs. EBITDA and and We in to scale combination our $X to portfolio plans with strong will market market goal During a expanding SolarWinds annual us virtual And by amount financial in a then ARR XXXX, $XX the period. to a event, time on margins believe of to which we that we and by similar described achieve approximately growth put billion over go for profitability software this public compounded of in XX% of billion north our this growth XXXX profile. believe opportunity will ARR with building topline group subscription

the mentioned to touch as for our the highlights turning outlook earlier year of were I’ll first I it as before we solution, in quarter. fourth the of quarter for well As teams, had several on highlights Bart execution of financial the XXXX. relevance trust quarter us of and abilities more during The in the color the fourth display on over all fourth some full on the quarter our continued our and our of have that customers XXXX.

margin fourth EBITDA to revenues we million provided $XXX.X remained our of $XX.X again above range fourth in million. end the representing this quarter, adjusted delivered retention EBITDA the we million great and high For XXXX the Customer end Adjusted was progress exceeding of our $XXX of $XXX top the of of towards quarter. million goal made for XX% throughout the an QX. high we priority outlook

customer’s noted rates our Our we on levels trailing the and in of XX% renewal best-in-class we to in low improve customer go-to-market XX-month we and QX to execution above Based maintenance rate XX% and in teams, XXXX. the return historical to retention our range. our our rates renewal XXXX was XX% strong loyalty expected expect low-to-mid of approach

the level Our continued believe we to moving on positioned of revenues well subscription an this driving growth fourth accelerate forward. in year-over-year quarter XX% and increase resulted in are focus first in subscription we

year further existing We base. revenue new license revenues anticipate customers year-over-year sales on we adjusted EBITDA revenue XX% to subscription and delivered subscription basis. GAAP grow representing revenues and a performance while margin recording reflecting year, both $XXX over representing $XXX in XXXX of million EBITDA full our flat XXXX a to XX% of a in growing to expanding GAAP our relative million the and and For recovery

our our number resulted enterprise expansion deals. very on Our and secure combined an in efforts build still has and ASP and large powerful delivering increasing simple, solutions with continued focus integrator out go-to-market motions of early to system

in increasing half multiple of search a resulting our well deals to dollar the Specifically, our an customers tremendous absorbability our with second and packaging XXXX. SolarWinds new delivered deals plus customers pricing XXXX. On in product million transition simplified offerings was and combined received platform XXXK of to to integrations and in value number

the accomplish early, While been have while main them SolarWinds to seamlessly looking deployment subscription modernizing a both providing Customers customer helping while XXXX. to their to we deployments transformations. transformation it’s goal very and leverage solution subscription and will in their their to are the adoption become are with bookings accelerate them This very connecting digital cloud their encouraging. stay beginning absorbability on-premises still and

them remediate Our them AIOps to simply on further and platform their manage capabilities the by issues delivered efficiently quickly. being to more bolstering [ph] productivity customer’s same helping to deployments are our isolate

application believe unifying monitoring to consume lead our platform customers solutions support. and to will database give solutions continue easier even integral with to breadth depth platform. deployment We across deploy functionality, are monitoring an our and the market SolarWinds monitoring our of We become and part ways them. Application significant

has AWS XXXK of like to our our volume SolarWinds velocity further to growth. closely to deals plus our intend hyperscalar Our continued Azure alongside partners We motion. working accelerate and grow with continue

our Our desk Microsoft and ideally mid-market service most accelerating are solutions teams. suited integration the we with recently for are

the our to elements of to desk will believe integral will automation standalone SolarWinds support continue service we the platform accelerate, become our remediation While motion and solutions capabilities.

I very more of building initiative customer all to detailed take this commitment aspects to secure and safer on our secure-by-design environment a continue in which our Through are end, seriously. We XXXX. working we

share on in turn generation to the industry contribute financial White result can our over source systems our my and more Bart software set recently standard open efforts, secure It engage to a will will have customer’s on to enable Our entire securely. paper and teams a next and that published software together, supply that, that to development bill efforts provide practices learned With of details chain to what help to practices. and a digital I to these embrace is hope new secure outlook. with is transformations our we performance our it we

Bart Kalsu

Sudhakar, Thanks standalone will basis. results on to joining us our again, SolarWinds on discuss again call. thanks a today's I and Once everyone

you as the know, from in quick impact discontinued the full quarter XXXX. spin that results results. As our fourth N-able operations XX, their effective the our to was year of completed are most quarter. of a spin the include Therefore, been has fourth not reflected reminder prior in did on start for October of the Also, July the fourth financial guidance business as any quarter provided N-able that and I

of the In of addition, Cyber and At operations comparability. business. our as discontinued at uncertainty N-able Incident, COVID-XX start result N-able the determined given impact filings the of not timing will the public we for periods full present the of faced that the as spin-off a we potential guidance, in year better pandemic XXXX, our to on-going the provide of time prior

level renewal with customer in on customer we felt while range to XXXX year, As back XXXX. early of we were in retention above and on the predict outcomes upon are Reflecting by focused our was expect despite our engagements, encouraged discussed usual to it significant improve precision, pleased we of recent we challenges and with the a earnings call, faced, we QX it too the maintaining and XX%. performance rates our

the approximately XX% ended expected Although mid rates rates XXs, we the low at we had to to be for that with maintenance we in indicated year renewal renewal XXXX.

of That reflect better improve new improving commercial outlook the revenue another high total our execution fourth We total of the our moved end million also revenue sales business, million. and $XXX saw to to expected than year of results financial $XXX.X another with in above financial led well we execution. million quarter $XXX ending of through as quarter at our results, quarter

purchase was For no there impact quarter accounting XXXX, of the fourth on of revenue.

is year. which to reported. was and total a So a the the which revenue have GAAP period. our Maintenance was revenue quarter, maintenance we is revenue X% fourth decrease historically in decrease of the non-GAAP $XXX year from prior million the $XXX of license revenue measure the quarter, fourth is prior total from in million Total X% equivalent

impacted about lower in introduction and nine the of of longer well rates reduction license focus As the day, our Incident well. renewal our licensed Cyber of been declines products our with as retention. at XXXX We XXXX term on efforts success second more maintenance the past we quarter our intensified analyst the in for trend revenue and as by as in in customer of has sales combination a of The XXXX. sales our quarters year-over-year a in licensed talked of of subscriptions December

On the earlier, with a rates our XXs our of basis, on for Also mentioned above our I start and quarters, Working place quarter, but stands year they of that our quarter quarter, rate which in XXXX. priority our by it XX% trust recent at the reflect rate the and our focus renewal XX%. which than has customers at been is want in our currently the the encouraged to this end shared be renewal customers the we solutions approximately of and XX-month the we we As renewal is higher the expectations by that again year. believe rates start at relationships. the fact fourth remained top trailing at expectation maintenance consistent provide will a renewal of low-to-mid first with are our XX%

quarter XXXX. $XX.X compared approximately which the was as For decline fourth license million, to a of X% of fourth the revenue represents quarter

performance the each customers revenue year. quarter. our sales with percentage subscription for point quarter approximately during license On-premises new Our an in the headwind sales sequentially improved to eight resulted commercial licensed

as subscription. $XX.X Moving well total additional shift increased to of $XXX subscription ARR year-over-year. X%, This is of December to million. our revenue was of subscription quarter on-premises of that's revenue ARR our of fourth revenue, efforts increase the XX, as reflecting reached XX% approximately subscriptions up to sales slightly to $XXX from our products of quarter SentryOne due our and from our as million subscription growth Total part as year-over-year balance ending third business early more XXXX million,

sequentially license have our expanding typical on of our our impacts led term. a expect XX% $XXX including The of growth as revenue X% XXXX reaching XXXX acquired XXXX on for offerings December represents $XXX was XX% revenue is us revenue maintenance the full the Total than the decreased of the revenue sales the continued GAAP was negatively $XXX the that year. database million. by Our X% an finished to X% than a quarter subscription year-over-year and grew XX, customers million. and Total impact duration we of through year-over-year growth previous over quarter. on on-premises Total the and subscription that impacted in $XXX products lifetime fourth in in of which for full million $XXX.X in well total ARR to maintenance subscription GAAP from with the improvement more year XX million. year million full more our was total which offerings, ended was increase revenue X% sales, third basis, revenue SentryOne as Cyber combination products for is year-over-year, of offering year negatively Incident license revenue Licensed subscription XXXX. and by Subscription and focus revenue the customer XXX yield of XXXX last of the of a perpetual We full the near over months, the with that license the $XXX,XXX spent a basis. more

These the adjusted in EBITDA And $XX.X non-GAAP the our in profitability. from EBITDA XX%, ended XX% traditional customers, EBITDA exceeding velocity representing end adjusted our continuing XXXX totaled with year will adjusted of the separate cost of which outlet delivered These an not spoke non-recurring. our our and full are related onetime EBITDA and approach initiatives, we low to go-forward IT approximately and We costs build million, targeted our of fourth for invest analyst Security representing high professional quarter distinct business. at which and Secure They the million December at insurance fourth fees efforts We Cyber Cost was of sales Secure adjusted from for insurance net are processes. by adjusted well. in to enterprise of Design adjusted November. recurring supply with are EBITDA Incident and continue million, Excluded and are to was of remediation, despite onetime $XXX solid $XX.X quarter investigation enhancing time year structure high EBITDA touch larger Fourth of chain cost supplement remain Design the basis. a our approximately of as are about day an our margin our quarter relationships one by are margin reimbursements. to proceeds. aimed Cyber part on XX, a $X.X the XXXX quarter, net related initiatives a included of the for related million costs Incident containment

cyber to related predict. expect adjusted to Incident These to We Cyber times in one XX, quarters, however future December onetime costs lower future leverage periods. Net was fluctuate overall in costs time EBITDA. are our approximately but X.X on XX-months difficult trailing

of that to the prior in X.X we term the full N-able. reminder, retained amount a As of had billion debt we the spin-off

the Our billion. $XXX fourth at million net debt balance approximately was end bringing quarter, of cash to the our $X.X

sheet maintain relates Our keep to plan the is to that intend cash on We on foreseeable as it to cash balance for sheet. flexibility our our future. balance

our well in advance And of pay over to maturity of some turning expect gross now possible we that you it will thoughts. date. and debt Our I matures our for re-evaluate debt XXXX. walk Sudhakar downs before in February through outlook level to of final back

and quarter first guidance EBITDA the total margins are per for earnings of for XXXX the adjusted XXXX of revenue, for year full providing We and share.

of of we $XXX million to representing range year-over-year X% $XXX expect total year X%. For to guidance growth to be in the revenue the of full million, XXXX,

We revenue, to of subscription revenue to well impacted by an expect total as increase increases in as a in licensed new in be result as positively sales revenue XXXX growth as XXXX. compared our our

our to sales. available. We especially on subscription subscriptions, focus will second more a half functionality as we will migrating of that our are the sold And when maintenance it as which with observability first relates new sold to we'll the the expect of customers as also be year lead focus in products,

lower assuming margin a the revenue for due expect years. to Non-GAAP maintenance projected by growth to in XXX.X year fully fully expected earnings $X.XX to $X.XX diluted past XX%. million be share decline over approximately be diluted EBITDA shares two partially share, sales per license total Adjusted be the is revenue that will We our an estimated to offset is outstanding. per

the from of November. for at the year exchange XXXX in previously. guidance provided analyst X.XX, quarter we initial guidance rate outlook Even assumed we day XXXX assumes so down our comfortable when our are full Our and the gave dollar euro reaffirming to we X.XX we first

a in be revenue X% approximately partially revenue, of expect the down to first X% million a growth range license quarter we for be to first million, the we For $XXX year-over-year Adjusted be and to rate to the offset in of X%. subscription year-over-year. again, Once representing decline expect expected XX%. maintenance by which revenue be $XXX is flat expect we of total to quarter to growth EBITDA approximately XXXX, to margin

payroll at including historical Our of bonuses, profitability of several the on of Security has due lower Social year-end is first level the trend factors, taxes. higher taxes been that levels quarter year to a

the we in ago are our Secure of discussed addition, now a place. that impact full initiatives by In Design year

expect investments has historically, year, as of increases We our as level we scale. improve as to the been move the to revenue case profitability our in

As for stated share, XX%. estimated projected earnings diluted an fully diluted be Non-GAAP of non-GAAP and year XXX.X shares per the for our during per full is first fully cash the XX%, assuming million to to pay taxes tax the outlook earlier, our outstanding. expect outlets $X.XX And margins assumes adjusted approximately share of for approximately $X.X finally, quarter. quarter million a rate we first in EBITDA

expect levels get to improve closer historical and rates also continue in that maintenance to We will XXXX. renewal

costs excited we term, think in with you to shared mix We we accelerating day our But in in in subscription our margins a again and while factored to and transitioning about we return in expect our marketing are margins that by product As the analyst investments Design our investments with year November. we and the consistent initiatives investments the our sales our future. are for the our into greater be margins with to business associated at committed portfolio EBITDA margins believe near will about and XXXX, we initiatives, XXXX. and to continued for the the Secure

flow in over With the to to Finally, now turn I remarks. will we free Sudhakar believe with XXXX. will cash that, fourth quarter over our And XXXX in our back his line we levels. unlevered XXXX improve call conversion to be closing expect for

Sudhakar Ramakrishna

with Thank EBITDA and ended outlook performance you, in and revenue Bart. how with our both strong adjusted I'm XXXX. our we QX exceeding total pleased

to and business our executing and are or help solutions, accelerate environments. business. about mission our via serve to customers We secure powerful excited ability their simple, our customers multi cloud our I'm transformations to grow accelerating

deliver of our foundation XXXX growth journey expect XXXX for of In our license execution experiences, strategy. in will growth applications the motions, via as We subscription strong superior and unified go-to-market continued of customer growing subscription expanding growth. list to and a we this continue platforms, with

We deliver represents to in combination and again how customers compelling and and a to invest profitability I’ll growth our address I business exercise Bart a their to questions. SolarWind. to partners continue commitment will we your be discipline of order we in for our will that conclude investment now in believe by opportunity. employees, thanking unique happy

Operator

Instructions]. [Operator

in Your line with Auty of JPMorgan. first today comes Sterling the question

line is Your open. now

Sterling Auty

Hi guys. thanks. Yes,

of new you of if And is So curious the can of the sense you're what leading give most that what seeing those I'm a us are in wins? the customers new terms success kind subscription. improvement, customer those new customer into of choosing product percentage

Sudhakar Ramakrishna

the for A both is continuing to as deal my opportunity velocity the ways couple call database size. plus expand side, of remarks, on deal, XXXK XXXK I the as different think in us it. about One is, to Definitely as it mentioned Sterling. well

the that we in can to and deals that to to a for And tools focus ability great first, products, with customers were levels subscription well. different some also scenario, packaging that mix the same we have seeing move, as them the that increasingly I say we subscription that type pricing of and too, embarked is we are won subscription larger of sell the deals. we our attraction So and opportunity word, consolidation the and and on midmarket, use And we and been of maintenance as lead able Platform customers are a lot those let's see integrations subscription of to if either good core have customers. from have there. as a

put we to midmarket So simply, trend or seeing across enterprise. it board, that are large it in the be

the is subscription. only it customer, not subscription still although on we sell model; preference give a However, the acquiring value proposition we to of the

Sterling Auty

you they manage into And used maybe that database the give follow-up a for terms using production? storage of databases, are sense. putting to also in in Makes one repositories it on sense that cloud? that customers the us data private are Can on-premise some, case Is side. it center,

Sudhakar Ramakrishna

capabilities those, our as there well. specific database monitoring Sterling are well as All some as that solutions DevOps provide of

to focused that DevOps as we other been a and So Increasingly, whereas are of historically, ITOps. as have for represents the needs expanding database on SRE us, well opportunity community serving products. it we and relates

Sterling Auty

Got it. Thank you.

Operator

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

line is now open. Your

Matt Hedberg

my guys, Great, taking thanks for questions.

guys about maybe kind sort good taken new XXXX? You've spending the, talk of XXXX. how mean, basis, constraints, into side, maybe how of XXXX? kind the a business global in first trends some you of of hear on expect really or maintenance, just I Geo, to kind about that on by SME you improve trend to guess a do new to expectations in business step I and it's of back, following renewal rates feel question, the

Sudhakar Ramakrishna

thanks first questions. all, for of So, Matt,

from As with And say where I the the that into been expanding midmarket, into SME. enterprise albeit the you know of the that's an SolarWind’s the SME growth business foundation early has motion we fee enterprise. to in motion But see expect comes encouraging. been has majority will the XXXX.

be a macro about as at their organizations of have in terms say accelerating. for multi trends, they look as stabilizing, that they sector their to evidence they you don't tell future have could the general capabilities. at I would look been spend But most that the statement is I in of that although that needs cloud terms In

their we standpoint. affordable from value environments; to multi at we that One provide proposition cost things them they for cloud deploy the a them these do them a as of doing declutter environments are for how simplicity is

what have than a a it's cases, us it value of And share into net a we is have we many one expansion. much based in rather new is as very noticed, deal, sell. shift So wallet

Matt Hedberg

Got it. expect you Thank as maintenance, up follow and improvements maybe in the XXXX. that you, renewal a then just to

couple had So years. maintenance been running at the I XXXX lower of obviously, federal as what How rates around the, beyond? of guess maintenance last are of federal they much and into rates renewal side the the for on approval expectations move sort

Bart Kalsu

renewal Actually, our consistent commercial Matt. with XXXX our fairly renewal rates were in federal rates

working And so as we quarter move forward, we're business in results. But our efforts a as All a and projecting that making federal understand, them. as same customers, breach, that positive seeing our saw far there. into, trend maintaining result impacted renewing of to have third be our was sure the the trend honest with they customers, we may how you you. as Obviously, XXXX, put in breach the we're that impacted with

as most we're As case. customers traction well. good with we've seeing And our that wasn't done the there. federal you know, And of the customers, that

Matt Hedberg

That's a great. Thanks lot Bart.

Operator

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

line now is Your open.

Erik Suppiger

Yes, a service. or who you little how little out said relic you going also, competitive an part new thanks of the for rollout largely a Talk taking plans see there? the bit about that's see XX. data application timing? it integral there? When monitoring dog about then Is the bit to going dynamics do you talk you'd be How, to can the be for question. And playing

Sudhakar Ramakrishna

parts me let question. that two provide Eric, to Definitely.

today. that monitoring fairly we rich a application portfolio is First have

basis, on meaning specific individual there's a those logging monitoring is However, a products, on. product, sold are most products so and a there application of

So simply them what way we is allows a in done consume unified them. more to have that more recently customers

as both improves e-commerce cross better integration products sell product our existing as the well consequently, So itself. of through integration, the

kind as when service integral innovations. basis a a cloud be call And was of of to becomes these of becomes capabilities that part hybrid the platform. that's ported future it referring platform, to will a on motion. I that all our What directly said platform, So APM standard I an

system is simply mentioned, infrastructure and the previous that be our that forms increased landscape, be and us and customers. all network this it from capabilities, competitive more SolarWinds the the database, the is monitoring, securely the solutions, is unique whether think application for in obviously, integration ability of will a terms of competitors our the except relevant will about you of unique across desk what platform way But gives In the space, to and be breadth our all to service automation monitoring derived integrate solutions, a combination, pieces. which remediation them with it

So be for value community add, DevOps be the segments like specific it for mentioned earlier. customer, I customers that that albeit will our of the midmarket the

Erik Suppiger

compare your pricing competition? how And do you expect to with the

Sudhakar Ramakrishna

done, based well the as Yes, so competitive. early forward, very historically, the value going as as focused on as except that we both pricing more that continue well going pricing been you received will know much been will we And on forward. on well, have And tendency has have front. front packaging very we price that be in the tests that

Erik Suppiger

Very good. Thank you.

Operator

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

now is line open. Your

Sanjit Singh

question on wanted the questions. I sales. you the first taking to topic Thank of for start, my

little you're going? going Typically, far? and and to strategy you phase thus that has year. leaning of of of kick-off assess at in how sort looking XXXX, one How What the initiatives. against strategy can the is at of think tell progress there's the what the out already in laid early that the more beginning meeting terms analyst a no in how account the would evolve hiring of sales those sort you bit How's sales. based of that traction us sort about I is base into like

Sudhakar Ramakrishna

their about that unified offerings a products ago, which the but coming share of with. teams at Sanjit, our sales which couple events the in completed the weeks on global spoke also we kick-off about and strategy we so the the and to out that excitement just motions fact our around plans obviously team and they're

we’ll and As is I'll relates the motion, as they're of think are just three expectation APJ, broad midmarket as the very of better already already velocity those we have it already XXXX, us similarly, the those in of And we SolarWinds year, which enter motion. half still is progress, as work in traditional enterprise we expanded the productivity. are getting to benefit that sales of the the are EMEA, call making teams those then place, with specifically start and the it it and two, in into more getting place, from Americas, the a motions, in the those the motions, investments in we And we last added in in them traction. it but resources fuller second well. teams. for yields everybody good the remind of of In making have motion. started latter Many The to

So Marketing standardized with motion team. in has across marketing teams Based driven conjunction by a the sales today, Account been our company

So QX what you million and that, dollar very expect spending indicators in some noted gave XXXK that I the us. BART to multiple of earnings number of of deals, deals early also should customer increasing see you report plus a with as

why nourishing time, going motion. a I the in have. the say So same see what trends going up, intention transactions up, which keeping we At is ASP is not the only ASPs increase our need our also velocity to the continue that we clear is we continue but

Sanjit Singh

year. any full level Bart, be expect from the to QX do begin you encouraging. on we of of connect go trajectory and we as year dots we could the that very year? go, sense, and total with is why that a of want how throughout sort lower throughout question, fault And as about the you starts progress to the the comments, I to do larger traction QX. guide would to helpful. The as year growth trend growth in and the customers hear curious just definitely Makes my talk

Bart Kalsu

year. main prior half the is revenue One that particularly trend was lower talked year, the relates be, thing in Okay, analyst licensed to This is, consistent Sanjit, this quarter, in headwind slightly But facing yes. had to -- We’ve We maintenance day to revenue revenue with a in the back the always back down maintenance to as it revenue. revenue historically. going re-accelerates however, a relates about XXXX. flat the it thing our years. that is little of we're maintenance first as in how

in So that most first quarter. is felt impact heavily the

its you as starts to you're models, to when revenue, then back quarter, year. at through putting we think together about point in maintenance the move pick the and your So being up want lowest it might first

is way So the of in two things lowest quarter combination it to on it's the our is perspective those out. a we And based lay from really the going is why year. be QX growth

with projected what in what again, once way we consistent So done we've the the very past. and

Sanjit Singh

you, Thank helpful. Super Bart.

Operator

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

Your line open. now is

Rob Oliver

had Great, one you up start a good Sudhakar, Bart, morning, to then follow guys. you. and I for for

post done So lot really Sudhakar on variables, of a Obviously, federal the job the outstanding commentary, through maintaining for your business. have portion guys a the renewal you hack. earlier of the rates

on drive able newer of to the into core, the As know, federal here consistent for some is you federal to to you as of the a initiatives, we rates get get mean, be guys you've the of, lot vertical? the is renewal XXXX. year What platform I product look better success UI, there where just or initiatives idea at in constitutes federal unified the out of into got that product an opportunity or end here. you the

Sudhakar Ramakrishna

Great question.

federal which capabilities. to XXXX, what establish as this success complement of our customers So heard, able footprints reaching were to in but we will be with of you maintaining constitutes also expanding year, their renewal not out full and our the in only the rates,

main not was it while and started XXXX, into very introducing received. of we well as was customers federal monitoring even focus, database that So our

the So conjunction, customers this that in are teams how to sell can cross federal year. into sales working teams government we and see the specialist federal database

to that myself, not it to I'm deliver capabilities, talking in can restricting example, due we relative the that have environments. Equally, other just necessarily that. breadth very not strong synergy products in customers depth federal deployed in but to many have the And and they environments. that simplicity of portfolio, they those our the to we an their application monitoring the have to As a interest if use the I that word

will motions accelerating. those start So

I'd speaking speaking XXXX, activities thing that stabilizing reaching demand for more selling and customers in our in team, been versus has other XXXX. to is largely Another government activities gen note much out broadly

in business. those So on-going the also factors three the growth minimum contribute to at should

Rob Oliver

year, analyst day, of a costs, a bunch to Great, of laid of a think I And a you earlier employment then that. up even question you Sanjit’s And Sudhakar, at new turf here, around color. there's like Bart, the lot guys lot for you some the bit guys here. then hiring, that efforts out things companies of variables have thanks, that’s a for experience great this that follow just have, account of for based

some things, maybe those just you you as the help at if this Thank looked for you. of guidance contemplated understand So could us year? others, or how you

Bart Kalsu

before we've When into we've enterprise it's going talking lot in not factors even us together and we efforts to for is is of guidance, just go that. in we XXXX, volume still business always put the motion that. of motion had. been some those you, our would Clearly, about something of be for But that the still tell that majority you, Rob, started I a velocity

We start bigger relationships are going we've the continue that had. to build upon to to

actually one I in in and who and was that'll the relationships, about than I over that XXX SME amount. than you less my those number exactly still with think the revenue case. customers, on math is. we're spent most $XX,XXX the that XXX,XXX of still us, have the the have that do and our XXXX, is figure be customers customers get, in grew talked we're on dominant of script out XXX of percentage we our still can what It’s, have that things But the more fact we

Sudhakar Ramakrishna

be continue case. will the that to And

enterprise well The XXX there large Fortune other presents we is, on almost over fact, XXX. mean, point is. of I'd every I highlight have in in the that

most So will historically. like But purchases, that's seem midmarket been many of the not issue which a purchase. were the those environments in of purchasers departmental

touch department cross And well IT/CIO both expand as as the added, resources, global relationships, go our motion basically it of is the that and to with direct and integrator so system, we've director levels. to the

Bart Kalsu

more thing at the we in fact is day our integrated one of our product the we'll of an the is so a opportunities that And talked product the lot to the become platform shift other too will analyst things a that platform observability, about that, point of products products. have that hopefully, been past, mainly offering you'll be within have the better it'll more itself. just upsell In

is new, a focus sales complete new So almost a a for us. new opportunity

Rob Oliver

helpful. very again, Thanks guys. Great,

Operator

line Your with next Berenberg. comes Crane question from of the Kingsley

open. is line now Your

Kingsley Crane

have that and What growth. base the do in I'd growth converting maintenance about between balance to subscription like expectations you subscription more XX? to think for maintenance fiscal

Bart Kalsu

have because expectations products So -- fairly, aggressively reason shifting is are the they're of don't And are that base. in XXXX biggest the of still available. is, maintenance full functionality that we we're not the

we out Kingsley. have, to We as numbers are expectations, in relates be to the low. migration that fair, into building as customers to very still our reach it interested a those that would starting will very, XXXX far think are But

Kingsley Crane

We'll talk that. more about

Okay.

any so be what conversion for really and potentially the then thinking subscription that growth about just means then And in could year? level X And that XXXX. also revenue

Sudhakar Ramakrishna

second the part repeat you of can question? Kingsley, your

Kingsley Crane

and subscription conversion. revenue about or acts the maintenance Thinking growth to their gross organic

Sudhakar Ramakrishna

is, customers on functionality go-forward different way we We're conversion what looking can a our that see at and of deliver percentages of not in we're differentiated stating do subscription maintenance to how specific basis. to

event let of cloud ideal evolve an would customer to deployment, an connectedness to but them that it deployments. A if the preserve to So same their based premises call candidate have give their they and me any us, modernization deployment, want cloud model. for at you time be

be So price uptick selling we least would subscription. average to how the is that we evolve many cases, of that a from maintenance date customer also to what a experienced But we customers. prime at would in also experience, to in significant those

on subscription more a conversion. like for need, like false much is maintenance, to opposed as it based So to

Bart Kalsu

observability as XXXX. revenue it for growth We, growth the you XXXX, and our one think subscription offerings relates revenue we to as all about today, would in it's second the as subscription emphasize year. be in sales the what on-premise organic, subscription And said we of the of half to in the than well be of had is that like in I XXXX. as And as that things us far Sudhakar subscription Yes. expect higher

Kingsley Crane

Okay, was very helpful. Thank you.

Operator

line Connor of with question Passarella next comes Your Securities. from the Truist

Your is open. now line

Connor Passarella

good on for Hey, start thanks It’s I customer want questions. Terry, morning just taking to strategy. on my teams. for Connor

So in your to as management motion. a investment supplement customer you've mentioned selling success

expand a rates engagements. might on view backups of as Just curious has maybe what point of as and to what effect successful CSM kinds you've adoption of an seen CSM from result there be

Sudhakar Ramakrishna

Absolutely.

What will so bringing following. I'll, in the due motion for We incidents Initially, our I'll with question. we it online, XXXX. an thanks on. the the expanding and maintaining customers, CSM XXXX, so year, Connor that. the on back partners to far observed started motion were So last that them supporting and focused December take into have them, be in is conjunction

As evolved the of generation as well you we involved refer more became much to. pipeline expand activities, we involved, to in as as XXXX, they much the or half you second more as became motion

into pipelines customers direct the of have customers, noticed forward generate you imagine, we XXXX, higher what motion. the going continue is, in the to happen. have would much the that expect converts through with because the normally at you touch a We as to that especially pipe enterprise lead what that to we And than the midmarket in marketing the we trust a conversion that that expect our rate can CSMs,

So and into significant that's the we get both impact conversion as and see in that expansion we beyond. XX

Connor Passarella

[Indiscernible] Thank you.

Dave Hafner

about Sorry that.

one for time have more We question.

Operator

Your from line Materne today comes question of last the with Kirk Evercore.

now Your line is open.

Unidentified Analyst

is Kirk. on of taking questions. guys [Indiscernible] Hey, my this thanks behalf for asking But

I growth? what in give like in ASPs, more in on up. top some confidence have or maybe follow that the gives a funnel as then more terms stability First, activity? is And you you of mentioned, just rebound business positive of XX color And revenue the licensed more so that you can Sudhakar, can us both? Or

Sudhakar Ramakrishna

Yes definitely.

go-to-market not remind our the beginning I'll get is stable. XXXX, activities, activities, for conversion it in their activities to of us or if demand more and and of I a lot XXXX year, expect can which first call at in that of part terms activities much serve demands the So customers XXXX. We of so of engage be did what I on. environment and did didn't to normal a we

factor. one that's So

is it in be XXXX, go-to-market sales people more adding half engaged second in throughout factor in of XXXX, marketing specifically second the that or and world. efforts, The we to the our across in

So investments into of thing and activities, uptick to we those pricing in an is better The our of last XXXX. I ASP. yield get expect packaging are seeing out because also

those remains our -- can as to customers. will that you So the growth solutions happen. our create our foundation yourself three, Obviously, of the of our multiplicative the effect to you convince licensed basically solutions relevance

Unidentified Analyst

Got Japan on initiatives, specifically wanted to makes international Germany? update a then, just and quick in And the sense. you, ask

Sudhakar Ramakrishna

They have dark of more our were most call a ground the underpenetrated acquisition inside I’ll speaking, served or us. I on region end strong is resources positive so was always of recently, That we sales in the market QX, and QX Germany And of there. beginning partner while have activities been large say partner Japan by enablement. broadly it would region. both, of to dark But on very overall for the have motion. date the the early In part specifically, signs we

but tend a they bit slower they Japan sustain. to be start flowing, little to tend as know, the you As motions in

So say business development region. are we in in revenue in Japan and phase I phase acceleration the would dark

Unidentified Analyst

Yes, thank you so much.

Dave Hafner

quarter fourth much our earnings great Have Thanks concludes everyone who very day. tuned today. That in a call.

SolarWinds (SWI) 17 Feb 222021 Q4 Earnings call transcript