Earnings call transcript Q4 2022

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Operator

Good morning, and welcome to the SolarWinds Fourth Quarter 2022 Earnings Call. All participants are in a listen-only mode. [Operator Instructions] As a reminder, this conference call is being recorded.

I would now like to turn the call over to Tim Karaca, Group Vice President of Finance. Thank you. sir. ahead, go Please

Tim Karaca

CFO. morning, earnings welcome is call. and Kalsu, our Good fourth Sudhakar the quarter President our Bart and XXXX With CEO; everyone, you. to and SolarWinds Ramakrishna, Thank me today

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

currently the are information from statements our debt. undertake based SEC our certain are statements, are These risks and outlook, impact the Please made risks business of expectations evolution on and These the on remember that global phases a statements the information to opportunities, subject of law. the in update level of with first Relations and Copies we duty SEC. market to those during no regarding and highlighted and financial of Investor this our fashion the subscription geopolitical call retention, gross statements environment earnings our and to forward-looking number evolution, today’s available concerning as customer by and numerous our economic available our including including this website. filings release of on except required uncertainties, are and uncertainties our mentality assumptions, our timing the

in business we in XXXX. between of Relations be call. presented discuss referring stand-alone available business, refer and to measures. financial otherwise our today’s any earnings differences on As will the summary A contribution include the slide on various call a we specified, July financial Unless non-GAAP to measures reconciliation Investor the press page and on deck measures, call as do a and this non-GAAP measures is spun-off the reminder, when on our release today’s we non-GAAP of we financial discussed N-able GAAP reflect financial Furthermore, results financial not website. SolarWinds from will

first no revenue beginning As purchase the of for a accounting. with of adjust reminder, longer XXXX, the our quarter impact we

For of total GAAP revenue our revenue. total equivalent quarter is to the XXXX, non-GAAP fourth

note XX-K. on in earnings be will be release discussed today’s final that once auditors annual and financial pending we us preliminary final by Finally, and results and our our on our we call Form are review report file and external only

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

Sudhakar Ramakrishna

Good Tim. you, everyone, you thank today. morning, Thank joining and us for

and like employees, for to their partners I’d to SolarWinds. ongoing our thank shareholders customers, commitment always, As

back resiliency, model growth that SolarWinds entire Looking challenging at a commitment team top-line the provide testament our the to we value our believe XXXX, macro results to and I’m our proud environment. confidence, and these customers incredibly We delivered attitude. a team’s are in business

cost-effective scalable we continued management, deliver had our Bart as several proposition will solutions in on with increasingly with in partners line fourth we we our our our including to lines, value subscription-first our global traction highlights commitment which generation the execution further; value and revenue in database and sheet, operating ITSM representing quarter, believe in continued progress reach customers and system our adjusted to participating continued balance our flow representing that our superior expense retention, markets; our margins, an cash healthy integrators in a We with delevering reflecting demonstrating through growing the product portfolio diverse our discipline; manner. to partners discuss growth growing and customer the observability strong EBITDA strategy; and extend and innovation solutions; service customers; of subscription

and and our the now a QX range over full Bart basis, on QX XXXX the slight of we to touch year-over-year. delivered provided and revenues it On growth. we for above In XXXX, the a delivered outlook of some increase more turning $XXX million, color XXXX. end high before currency constant we will the on year-over-year total year quarter I for these of financial X%

I’m model that strong of renewal the XX-month to these I’m our But are with team, of our maintenance in rate Both in-quarter currency at happy by of these were relevancy trailing report solutions, that, our our execution. was results trust to report our excited the us. to that and metrics customers the impacted QX, negatively of place our business our XX%. attribute and commitment the resiliency in now rates I XX%, even renewal headwinds.

our fourth of growth We significant with progress continue to and delivered revenue year-over-year. XX% subscription-first strategy make quarter subscription

As I model not change, before, of but greater a just our I’ve business to value way a subscription, to as consider as customers. said delivering evolution

$X to deliver in it revenues revenue shifting value has some this believe the While way to customer we headwinds, billion strategy coming the focus right in over to total resulted years. is on growing recurring continue to annual and

ended over in maintenance to lay foundation spent even to more with the last have previous of revenue value We from XX lifetime conversion the years. subscription; increase quarter fourth with more than $XXX,XXX with believe an XXXX the We the who the the customers our customers. predictable comparable opportunity and for months, of the period us expand X% in XXX

gave all outlook adjusted larger so alert tools environments, fatigue win eliminate increasingly million, across the digital accelerate $XX.X strong, the to their an representing is helping quarter. enabled improving customers margin deals. XX%, has of achieve transformation, Adjusted EBITDA reduce their comprehensive us was productivity. multi-cloud while EBITDA to above We’re our for which and we visibility XX% Doing XX%

Now, and milestones and reached Partner we and critical what database platform for of Program, observability, how management progress XXXX. and evolution our our a was monitoring. sets us teams. internal and I’d our the SolarWinds’ the via XXXX we reflect this back SolarWinds reach GSI transformational a up Simultaneously, expanded service significant XXXX to on customer in Transform relationships ongoing accelerated we year in for our step accomplished as take like on

help deliver to time time help the choice an be these value, of to AI-powered to in time to vendor remediate believe to accelerate best vital world us customers with issues them digital detect and the their I and simple solutions. transformations multi-cloud increasingly foundations to

We eliminate fatigue, costs. reduce trawl, improve tools and alert significantly helping reduce are customers productivity increasingly

monitoring to evolved In solutions We solutions an a observability XXXX, launched vendor we year. provider. from key new last

machine detection solution Hybrid migrate observability that their own customers and intelligence Hybrid the We We Observability solutions. Our allows Observability cloud-native from powered artificial Cloud have Cloud our at SaaS since is April SolarWinds Hybrid Observability pace. by launched capabilities hybrid introduced Cloud to and and believe solution our to solution learning. in true only enhanced on-premises

healthy We Hybrid Observability with Cloud a and runway for seeing traction a growth. are long

We that followed customers believe launch packaging with Hybrid We richness the AWS Cloud cloud-native along Azure of and appreciate our with and the SolarWinds Hybrid Observability on solutions clouds. Cloud of our observability in pricing available simplicity future October, Observability.

deliver one clouds the aim we solutions platform infrastructure, visibility. to and applications, of SolarWinds’ across evolve private network, we platform, systems, with experiences single As pane public monitoring digital glass observability databases, across log in and

with to While or is on of public it are private they deploy early about every cloud ability excited cloud their are in where SolarWinds’ our cloud, service. flexibility journey to the support days, as a regardless customer we observability’s

recognitions recent industry awards Our multiple and already months. earned observability in solutions have

and XXXX, that costs. and will in suited improve SolarWinds’ the products with database value the while will these budgets we our offerings look services to expand their to constrained. we platform, creating the observability, are environment ideally will solutions. belief our even I lower solutions ongoing all relationships. deliver to to innovations As by our ability remain on our service establishing IT lifetime greater continue simplicity customers management productivity of customer their believe compelling we and value Customers my to It’s and complexity address believe grow also can challenges our

invite February virtual more Day at to we our about you that, our solutions XX. With Wednesday, SolarWinds on hear upcoming

IT will industry share During advice practical problems. today’s the event, on solving customers experts and

also AI-powered showcasing capabilities observability using new a use are cases. real-world customer We

on partners. channel and our launch with accelerate distribution, customers growth our service solutions. vital integrators, helping in system across are cloud our providers October, enhanced focus Recall our Program, that channel Lastly, announced partners Transform we digital development their SolarWinds managed and the representing of in global transformation

expanded an HCL powers over at a the Software DRYiCE, bringing together announced and our including As organizations, on will Fortune Global quarter, with XX,XXX from best-in-class of the an the both apps XXXX over the example of Software. expanded of XXXX progress, focus HCL we end-to-end AI of millions half partnership companies. observability companies. ops, We management division advanced believe platforms during service and partnership

to I to moment environment. a take address the Now, want macro

the we a know, was challenging technology industry the As XXXX year community. all broader for and

value proposition, renewal ability environment. and diversified our consistently on we and challenging QX successfully – highly generally and customer continue while strong immune, retention sizes to This through the customers, in our across not macro and the headwinds is we And IT industry in focusing including demonstrated spending rates and while demand operate growth as high-velocity our we transaction compelling reflected to results, model to customer from our to XXXX. control. see we we of what enable base cognizant are revenue our across industries time healthy our commitments believe by strong across us experienced being Although can solution, are cost-effective deliver our year-over-year strategy

model testament focused many deliver to and while a resiliency generate is healthy As our revenue on our business cash to growth during particularly and stickiness our solutions challenging of remaining I’ve said ability solid flow of the times, profitability periods.

growth are disciplined capital focusing our management on all transition. operational expense aspects and and business focused have driving allocation, always We broader our subscription of and across on been while efficiencies

for margins. structure month focus optimizations outlook of further macro operating as XXXX, part on we made expense our to uncertain the Given ongoing our last improving

while ahead, strategy, hard profitability to belief and execute. in and improve unwavering seeking model to build We’ve we worked will a in to sturdy the hire selectively continue our our closely monitor to business Looking plan to environment and in XXXX. ability are market we

provide it that, on Bart our to outlook. performance expand to will and over With a Bart? turn I and QX full year financial

Bart Kalsu

I joining Thanks, essential again it our subscription want With Sudhakar emphasize strategic today. remind transition multifaceted. that will be of to focus our a for XXXX is to on subscription-first with mentality. everyone and thanks this, us growing

product. first on-premises Hybrid Cloud the entails subscriptions evolution existing selling phase of The for and products Observability our our

with The of Observability, second SaaS began SolarWinds recent launch the transition solution. the our phase of

business our fourth ARR, subscription overall ongoing We grow is These believe a have our our another products and focus exercising to business subscription quarter in subscription solid with this will with transition in models while operating million and our two of combined of execution. efforts, ARR, $XXX of when our that discipline. other close subscription and quarter these reflect with results to persist resulted growth progress

a range revenue revenue fourth the provided total total Turning prior a total $XXX XXXX, well the full release. million On of year million, we year at was compared finished $XXX and in provided slightly above the the of we increase quarter basis QX million our million. for to which outlook range to of numbers. to revenue $XXX finished is $XXX with above revenue and year to the of We million the million, slight outlook the higher than $XXX of prior earnings which $XXX

million, Like would in also with year. we the approximately year companies basis XXXX, the a $XXX impact the a currency value On of full of basis, felt compared U.S. increase currency X% is which decrease exposure, approximately X% revenue $XXX currency which the million, been constant growth a foreign fourth other revenue would constant is to of the year-over-year. quarter an been to the prior have total for have dollar. compared our On euro

the the would We upon with the ARR ARR total X% quarter of to Beginning year-over-year. also impact have constant maintenance total during increased on impact year. increases $XXX million, the of increase in total versus QX, only now calculate price renewal basis, prior methodology currency and up over maintenance ARR fourth we a revised We X% our the ended the recognize the renewal contract the of contract. used price ARR. enacted exclude to And

more definition change others rates, total growth ARR – change impact methodology, the to that recalculated we line was bring in our conform high which does to given year-over-year renewal year felt not this revised prior this material rates. have in would a We with the to is reflected industry. the ARR While our a in

mainly as the growth year-over-year. subscription-first ARR XX Observability and December strategy $XXX of XX% execution a is the million, Cloud maintenance our to the conversion subscription of solution. is our to base an portion of was Our of This of increase due which Hybrid

Digging quarter full $XX our into year-over-year. revenue was revenue subscription the $XXX year-over-year, million, fourth revenue up year million, details, with up subscription XX% of XX%

subscription-first of transition creates current success strategy to subscription-first reflects quarter’s ongoing our a revenue. Our the subscription efforts. revenue total The headwinds growth in the

made result percentage However, future. deals a we higher the believe that basis revenue an subscription in new recurring in will on increasing of

$XXX which of year X% was fourth decrease Maintenance the million prior which quarter, $XXX is from revenue the decrease and million of a prior the year. is a X% in from in XXXX,

conversion As XXXX customers discussed our maintenance in compared we the revenue euro portion the to subscription conversion dollar of recently, and maintenance by prior the U.S. a year. have been of impacted our to rate lower has to

headwinds XX% rate historical and XX% renewal consistent with rate maintenance trailing quarter. for both. performance Our is a impact the These XX-month basis and are in-quarter fourth on currency renewal our rates

arrangements, renewal exclude XXXX the calculation. our Note customer historical testament a renewal we as return convert our The of rate subscription customers and customer to efforts. that to base customers expansion and is from in our those loyalty rates we to the maintenance focused retention

$XX revenue of $XX focus. XX% fourth XXXX a which be license decline million, For that continue the decrease quarter, XXXX, XX% Remember impacted to subscription-first fourth quarter million representing year. prior and our is of our to performance will of from license approximately the the perpetual by sales was new a in compared

revenue subscription the previously, in who sales quarter which in than previous $XXX,XXX with XXXX finished decline fourth quarter months, last the quarter. our increased We year. XX us with noted the of the customers another more over in As XXX offset spent is of improvement the have license

which outlook million, EBITDA On the I’m margin our investigation of fees that is million, of adjusted governmental another quarter the year. year million was professional gave $X.X strong other related from representing December quarter XX% of XX%, outlook costs the we adjusted cyber an adjusted and representing which the above cost full we adjusted Fourth EBITDA basis, XX%, quarter, gave quarter. $XXX EBITDA onetime in fourth with margin Excluded an to EBITDA non-GAAP a pleased for EBITDA the in is to adjusted delivered of line we XX% to report $XX.X of litigation for profitability. was approximately and the incident.

costs fluctuate quarters, to We in and to expect related costs cyber cyber incident- difficult onetime future onetime are predict. these

X.X balance December was adjusted Turning sheet. XX at leverage Net EBITDA. XX our months our trailing times to approximately

at and short-term the the equivalents of approximately balance our bringing cash and billion. cash Our debt million end net fourth investment to was $XXX $X.X quarter,

prepayment to $XXX in made we maturity February In In in date from November, September. addition to of we voluntary the of extended refinanced connection $XXX approximately and million, was prepayment February the our with the debt XXXX. refinancing, XXXX million which a made voluntary of that we

our B are Global We upgraded credit rating B+. S&P also pleased from to Ratings that corporate

bring continue seek quarters. EBITDA plan the payments further expansion further We debt adjusted opportunities to to evaluate coming in for to and down leverage with the

In our our I turning now to guidance and year. in customer strategy, before and some walk will our our full with top-line will and Sudhakar in QX then formulating addition guidance, I it allow that over year. us outlook thoughts. final our are you to our for will start first through we quarter full installed go-to-market strong for discuss retention, the optimistic expanded momentum and portfolio grow product to the the behind enhanced outlook base

mindful providing That our affects said, we and the IT model, have taken of the into subscription-first areas headwinds, account and all macro are of our transitioning of carefully FX spending impact and outlook. business which

committed are already to profitability our focus efforts in strong XXXX. profile on improving increased our optimization and we’ve expense Importantly, our

the share an total of EBITDA fully in is per $XX to diluted expected the first XXX.X be million, a million. $X.XX to Adjusted fully growth quarter, year-over-year first million outstanding. shares approximately expect the be we midpoint. X% to $X.XX For representing at quarter the million revenue be million $XXX $XXX projected share assuming range diluted to to are $XX estimated to per $XX million earnings – Non-GAAP for

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

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

at EBITDA representing midpoint. expected is year-over-year million, to million the growth a approximately Adjusted $XXX $XXX X% the year be for to

notice, on adjusted basis aligned guidance a to XXXX. in now adjusted will are deliver of our with commitment margin provided dollar you we in EBITDA growth the previously lieu providing As EBITDA EBITDA

continue product on we core focused While manage remain map, prudently, subscription-first we execution our expenses robust our to strategy. road and

meaningful product investments believe have our in starting dividends. made We strategy and portfolio are and go-to-market these investments to that pay

investments commitment profitability. our will We efficiency improving and continue to selective support prioritizing innovation product while our make to to

earnings million per shares projected outstanding. is be to per XXX.X share, estimated diluted $X.XX Non-GAAP diluted an fully assuming to fully share $X.XX

of to quarter X.XX euro full to dollar rate and a Our year exchange assumes first guidance X.

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

Sudhakar Ramakrishna

Thank and most provided outlook our in I’m the The the building trajectory momentum customers relevance reflects ability us. represents our year-over-year critically, the innovations, for and solutions, belief business. the long-term very trust, you, and our Bart of as our ever our of new teams partners midpoint Bart. of continued execution in our confident place which the I’m in pleased of growth, the with

continue conditions make and across several growth manner We economic maintain vectors. in the disciplined a to progress

we like As to key look reiterate near-term us. XXXX, for I’d priorities to three

focused rates. with months. a customer expansion on for XX% have XX efforts been retention business remain First, very as the we have past robust we renewal renewal and over We

our businesses. continue seek we drive adoption to Second, aggressively to subscription across

for foundation our margin long-term at margins subscription the in more adjusted our this to an also strategy the products efforts. increasing and to accelerated our in in in coming the revenue and customers consistent mid-XXs continue to believe our has want We our While is revenue, resulted base subscription years. solid to expansion EBITDA billion how likely $X key a to reported ARR will even shift consume variability achieve provides result some with and

macro to in a exercise discipline challenging continue third, And environment. expense we

expect XXXX, opportunities managed excesses improve selectively, continue we margins. and a disciplined our in look to to begin we to for operating manner As invest

has through have cycles, We efficiencies in while and markets. demonstrated we led have an economic consistent many that appropriately experienced management team with attractive targeting our operational growth companies discipline investments

growth levels business focused for to $XXX margin guiding should us and our of million are We adjusted deliver healthy as $XXX heard allow of million XXXX. and believe on you continued expansion to model we Bart, EBITDA resilient And to from profitability.

to their by be again conclude shareholders I partners, I’ll customers your and address for questions. SolarWinds. our Bart happy will to thanking and employees, now commitment

Operator

comes question Markets. first Our Instructions] RBC [Operator Matt go Capital ahead. from Please from Hedberg

is open. Your line

Matt Hedberg

for for Thanks the Sudhakar, questions. you. Great. guys

things a are users that are you investors of thinking that about of color your optimization. of that the whole a little observability, of on us One of your on about and impacting SME customers are lot maybe optimization. how about spend? a talk be increased end Or cloud cloud talking idea lot bit With this would maybe focus just could Is helpful.

Sudhakar Ramakrishna

Absolutely.

in we the sure in wholesale choose handy you can give have solutions on it. cloud somewhat And force a solutions public to hybrid is there spend they a cloud, I’m deploy cloud approach our designed more As deceleration particular instead in of customer. the not where and come because extend broadly, across way deployment seen have them the a was clouds. way the here’s definitely where the really And premises salmon

ability them pace allowed to their has is evolve us that what So essentially cloud. do for alongside to the investments to their

So is in truly a really hybrid that’s because come solution. handy as

that they really of as Observability, are infrastructure an spending get able spend of we immediate customers has and of platform, environment. how eye Hybrid in traction thing. such more the of context Cloud it this our optimization. some of terms infrastructure itself, in future can cloud good going overall The leveraging more seen evolve Now part a is benefit which also is the keep that on observability that’s But the in observability and SolarWinds’ to

Matt Hedberg

and you and about XQ then you And Thanks. had expansive back-end you it’s you Can it. end – you progressed? view guys large Obviously, expectations. good just of through a seen – think guide what of on Can you’ve commented relative to January? talk talk I customer but guys results the such linearity spending an Got patterns don’t the December results Bart, maybe though. necessarily your and base. have mean How loaded, through I quarter

Bart Kalsu

is mean on I our commercial hockey perspective, this us is that From year. biggest Matt, you, side yes, doesn’t stick. quarter that happened is So And I’d have our the the that what typical business tell a business. the again linearity always quarter that model obviously, the good for fourth of thing

as the We have has progression this held well. like past just year and throughout quarter, bookings that it up in the

So is for and strong a all from standpoint, the a to in us that definitely it we the revenue a gave what was third from in all, compared guide back quarter standpoint booking quarter.

improvement we’re what you us, across tell So, I would continuing to board. the that for see is

– every seasonality You And was for throughout in standpoint, results performance our improved from XXXX from the year. we trended saw that we as other as throughout a just year, move they the us, year. saw like

Matt Hedberg

Got it. you. Thank

Operator

from from comes question Erik Please JMP next Our Securities. Suppiger go ahead.

Your line is open.

Erik Suppiger

a taking be should what comment question. expense XXXX? thinking modeling we restructured of you for cost changes for of about your of first growth Can Thanks then bit expand kind made? can should interest And further we into OpEx be from bit little XXXX how off, reductions? little we you’ve Yes. what a terms you And how for be the given in debt? should secondly, Hey the modeling

Tim Karaca

I’ll for question. this take the Erik, sure. Thanks one.

as As million we in our this of line assumption. $XX with debt and expense, around to But it cash base that’s high-level how expect, post $X $XXX the around of that noncash million. call and model debt the it, have interest expense, may expense interest comes as expect to to expense, refinance you to and interest And interest is we be, we also, par, all the financing. million

Bart’s be selective. it be to our and investments prudent points, and as to optimizations we comes will comes Sudhakar’s very to continue it As to expense very

the we places sure highest we right return. right make expecting investments are we’ll the making at where And the are

EBITDA make and of expenses expense go same our through we making we sure well right margin management the as as So will we focusing, closely that and just expanding And you may trend trade-offs very XXXX, are with observe see dollar. as expect prudence. to

Erik Suppiger

Okay, thank you.

Operator

Our next Please Patrick from comes question from ahead. Baird. go Schulz

is open. Your line

Patrick Schulz

for questions. Hey guys. taking Yes. my Thanks

the with any initial And success? during color Just sounds embedded you XXXX? it what’s ride on expectations of like Then customer to able you you’re stats provide two Are the launched having what observability success with pretty in been for can has just any types customer XXXX, around conversations positive. maybe solutions customers?

Sudhakar Ramakrishna

So, at accounts splitting that and but in definitely out of large rate. we’re subscription revenues not this customer part healthy growth a is continued a point, implied

on call, I fact have That call may they As that to expectation Matt’s about comes really, in XXXX. more hesitant they relative the both it, And times little a to were as for cautious earlier, either progress really customers XXXX spend bit a I year. be mentioned in cloud the was when question grew focus. about demonstrate And Observability trend handy XX% in mentioning to even Hybrid in and let’s at or, Cloud we last we of than is continue us be terms across QX sides. my will that

optionality them a the providing lot. So helps

And in the seamless way of that merging such year, that migration. to continuum we have introduced a actually it’s think the customers about solution them two is parts have we’ll a may be while our

on tools, a that XXX% will What they have how the choose road, the some I will priced it we absolutely solution down them, obviously leverage do is buy say in to deliver at the packaged to the say, SaaS tools love it. they able have have Let’s or have they to point customers vendor for optionality of including of lot and of to richness are fact, a don’t third-party feature our it consolidate because a take – really to tools solutions. basis node lot per to of

Patrick Schulz

like on in And increased still overall But were the some on international color causing Appreciate market, the deal and comment sales Europe pipeline trends perspective, is there. from the you can environment seeing impacting cycles just any throughout you it the quarter? macro seems then an scrutiny.

Sudhakar Ramakrishna

it, broader pipeline including are you let’s and in on represented for of, in pipeline has mentioned are scrutiny the extra But Europe quite demand say, But we our we be us, light side, than, modeling lower macro it the our conditions Yes, significant pipeline to by actually continue and call way that norm. we in increasing. robust is been assuming the conversion flip absolutely. that The the would a increases. see the numbers

Patrick Schulz

Excellent. Thanks taking for my guys. questions

Sudhakar Ramakrishna

Thank you.

Operator

Our Singh go from Stanley. from Sanjit next Morgan question comes Please ahead.

Your open. line is

Sanjit Singh

to monitoring And think talk as I our do incremental level could of observability of that we environment. the the contributors Sudhakar. questions taking over about the macro questions. kind We’ve to Or current of as the in for some contributions opportunities, a more wanted higher observability been should you you about to it’s nice of talking think and service had well beyond be particular, of I to core opportunity of lot about you Thank guys kind really the you management. both out really the laid profile your see they road year performance well sort sort as to opportunity? couple execute But the and in the investor script and of presentation on How two your this growth map years? sort in in meaningful those next those solutions. you opportunities the your on revenue hybrid of cloud-native as cloud database Do themselves?

Sudhakar Ramakrishna

for question. We erstwhile I not while First, the why is ours, latter them contributors our a That’s including to do Sanjit. of individual [ph], look the the at pillar as very strong – Thanks the meaningful observability business. reason meaning service now, as robust of like are increasing, parts and management they and solutions, monitoring database. of service we growth. And of our are business markets it the are to in participating management database with I’d as growth three monitoring think

this way same on the see you the the of that functionality rates. full And impact that will itself they platform to a not being That forward, have said, SolarWinds’ is their because of move currently, ride a we of as lot as the matures, size think will growth the about platform.

about instance, contributed we the and and and integrate for we element with observability team. our Similarly, team. of talk about service observability as we’ll out think remediation an when comes by automation database So management that database observability, the that’s innovation from

know you excited as in and the about motion, solutions observing than, integrated be as how as more let’s observability I’m motion, stand-alone a simply a is well is our there So why very differentiated reporting. say, which market,

Sanjit Singh

mean sort in Understood. That’s I deck, moving guess, an some are XXXX. XXXX SolarWinds about sort of that little as which, to has have over you looking product-led you sales a kind Can initiatives into And necessarily – you in pioneer don’t of in growth, What model an the very your standpoint, bit I around product-led been preliminary digital of now. growth? decade one investor executed ways, of was today? you’re goals for – the to well some build for of talk product-led in thought sort about them growth, you have of of interesting. online early Also aspects capability a the and what team

Sudhakar Ramakrishna

Absolutely.

good that’s It’s Sanjit. So call a evolution/extension. more a of out,

historically company in You’re motion, right has in quote. ways, SolarWinds’ been, to the used speaking, about broadly we growth product-led connotation broad in call saying product-led of try growth. many and And a the download

both customers. velocity greater this create motion the buy demand about this nurtured. way how become is a evolution with technologies embedded quote in think the download to that to try essentially whole prompt motion and demand with was is So The and and try

created. newer motion So leveraging think opposed of technology as accelerating, a paradigm being paradigm completely to new our velocity

Sanjit Singh

take I you Thank much Understood. very pause on. Sudhakar.

Sudhakar Ramakrishna

you, Sanjit. Thank

Operator

comes from question ahead. Securities. from Truist Please go next Our Connor Passarella

line open. is Your

Connor Passarella

also on wanted with just I This Thank more a is Good start Tillman. high-level Terry to for Perfect. guys. Connor you. question. maybe morning

targets and just achieving $X the think long-term in EBITDA as mid-XX% billion margins. of we ARR So about

takes Just years there, about if around about we ARR takes it XX five years. X% to grow XX%, get

XX-year the in targets, of out any closer long-term is mark? this you around maybe five-year, Just think kind helpful. As to these color where really think we will this about reality, shake do

Bart Kalsu

having we Connor. when those we acceleration it, in to Good Yes. thinking XXXX. originally We the some half which mean, of about target back numbers we’re I saw of year. question, the revenue, talked about see in a in need

us see the then hit And or then targets think horizon. XX-year can thinking need continues, targets trend in the that the not we these top-line. if about deliver We see that to a think So we’re on five it years, that six more acceleration we you’ll we about. next are on talking definitely

Sudhakar Ramakrishna

I absorbed of do get as And subscription years. XXXX, as also that has impact to compounding in can XXXX and XXXX, into the taken and Connor, But a we say, we imagine, continue both transition we’ll out you should that. effect have the

believe that model internalized time so the horizon And is farther. don’t fully rather nearer I that’s reason our yet. absorbed than why And I think the is

Connor Passarella

Got it.

lot announcement support Americas Reese you Maybe getting and as Yes, sense. being just Chad Maybe of the platform? saw ago any SolarWinds Channel. ramped that progress of a quick a appointed that the on Sales guys. makes follow-up. Okay. just up Thank them the once President We on Global as

Sudhakar Ramakrishna

Yes.

APJ So Chad fact, months, and EMEA has say, been in would the here now for meet on And road to in partners speed and almost I channel to Connor. very fully up sharply. our six he’s, global

high-touch I motion, the his previously So not we cadence a lot would because call and our team, with increasing also opportunities profitable they of well I engage business he and and them script, but selective that we our and supplementing offer our to scaling motion driving, only SolarWinds as getting future call program, Americas excited the more more high-velocity noted as because what been it, our than there’s opportunities become with for solutions really our see were. about even the partners have in partner possibilities partners around as

Connor Passarella

Thank Great. you.

Operator

next from go Sachs. Rangan Kash comes from Our Instructions] question Please Goldman [Operator ahead.

line open. Your is

Kash Rangan

to Hello, talk Sudhakar guys. Nice and Bart. to you

product perspective go-to-market that there the side incentive. subscription licenses. offering the that comment of incremental or away on are from If And incentivize are base installed your you move big up share sweeten the you’re doing subscription also your on tweets can transition? customer there the things that should offer And a to to

that from So side, the could from the accelerate this you product what are things go-to-market the side, to transition. do

they And can to on folks with once a the board Good that are jump have also you or they connect view are just with they Thank to sitting for so out if again. doing? the anything, proficiency on much so other subscription certain you the not you converting of Are subscription, offer any maintenance what guys. dynamics? a fallout, to wait level

Sudhakar Ramakrishna

Observability one Thank Cloud where relevant been working Kash, your Number have something then a mentioned, good Hybrid on. that, actively I and of voice. that Both is you, always are questions set we product and the as hear to very was have that say, focus value the introduced another Kash, as that What can is as and and feature April with ensure in October. in well both extension richness saw first packaging. further to in our I customers pricing was July of and simplicity

we pricing pricing, to for flexibility gives based note great So, thing evolve our the whole which customers.

significant why customers a evolving. so that have been And been reason has

though reposition we’ve pitch seen was stopping took very the the to opportunity customers, is even Absorbability line, a we that you accelerating renewals instead it would transition. for of XXXX, that conversion for year all model through a product less come there, high. have And since starting that as And introduced steady expectation approach than the And and Cloud expiry and is decided to in one we continue new and a XXXX. when is motivation we is and I progress say this an as So Hybrid my our if have up one, been with we rate used maintenance and us.

are As you a be the installed large installed can as way thinking. very opportunity a we us have know, multiyear for is a growing But and this we base well. growth base

or beyond. side, both know, and multiples what also, a XXXX you We as have subscription, and into and effect position the converted as I’ll experiencing will have that have of which, as on also are about the to incentivize revenue given finally, And well XXXX, we harder proposition. better is on meaningful say that, to our salespeople we we maintenance your our because as other XXXX partners as to compounding point get go-to-market, value that

Kash Rangan

observing follow-up product Sudhakar, between? you this for the seeing That’s early in somewhere coupling a could I are on more trends if severity there’s still observability of of phase also consumption? that it a declining do or think are growth Or secular the public in side. it’s And tighter the particular for story vis-à-vis markets, you in cloud you. the me. Thank

Sudhakar Ramakrishna

absolutely. Yes,

cloud in we which that it, our, from approach we consolidation, as environment, the is described, absorbability, I tools and it, of them it especially standpoint. to observability just to SaaS premises the well what this hybrid have supplementary both are And the So our as solutions complementary Kash is call we are cloud. call the macro compelling lot becomes even able do taken because bridge, to more a as

is level. In terms of cost and another optimize solutions, our productivity at how increasing customers it of are at a them helping one combination level viewing

back of a offering. have deployment then must-have So we’re one the to as a give product standpoint. same previous by nice-to integrating to even platform, going overall from And of questions onto it’s more an to management opposed service them able efficiencies the more

a a as is secular three as my of long-term both in this trend the in markets well. unified distinct as market served opinion, So well context served growth more

Operator

questions over to We the call for no have turn remarks. further back I in queue. to closing Dr. like would Ramakrishna

Sudhakar Ramakrishna

Thank Thanks joined who you for support. very your again everyone our ongoing much. and call for

excited are SolarWinds, on very report We continue a out to and to at and about the basis. continue prospects we’ll execute regular

Operator

you participation. Thank conference your concludes This call. for today’s

disconnect. now may You

SolarWinds (SWI) 9 Feb 232022 Q4 Earnings call transcript