Earnings call transcript Q1 2023

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Operator

Hello. My name is Jean-Louis. Welcome to the Solar Winds First Quarter 2023 Earnings Call. [Operator Instructions].

I will now turn the conference over to Tim Karaca, GVP of Finance.

Tim Karaca

you. Thank and SolarWinds everyone, Earnings Quarter to Call. welcome morning, First the XXXX Good are President Ramakrishna, Bart me Sudhakar With today our CFO. Kalsu, and our and CEO;

Following Relations website question-and-answer investors.solarwinds.com. have being we webcast at our call simultaneously Investor This is a our on prepared remarks, session. will

our including deck, remarks statements also can subscription-first statements, during opportunities, outlook, customer and are of Please that of certain slide level our today's our during regarding impact financial geopolitical expectations regarding earnings business retention, our debt. intended this to on global evolution, forward-looking timing and a press evolution call. concerning You is our phases and release supplement to made the our our the a call ecosystem, our the and summary find our of mentality growth which of partner expectations those our the prepared economic remember such market environment

including our based uncertainties no statements assumptions, to on uncertainties Copies our law. and available risks These number currently are information update These SEC. highlighted as SEC with and by except earnings of to website. statements release information a and risks and duty numerous are in filings required the available undertake subject we and from are Investor the the Relations on today's and this

we measures. specified, We financial measures, will be discuss various Unless to on refer to non-GAAP when financial today's non-GAAP otherwise financial measures will referring call. we

and discussed deck. the in today's between available differences summary of call the of non-GAAP release metrics measures earnings well reconciliation and on press slide our definition A financial as other financial GAAP as are

Relations page of Investor On our website. the

we us call review will our financial our quarterly on I Sudhakar. results Finally, preliminary release XX-Q. our to will final auditors in Form report we and and by call external and once over that, be earnings pending only turn note discussed With on now file are the the today's final and that

Sudhakar Ramakrishna

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

As to us, shareholders had our customers commitment broad employees, customers, in momentum year, thank of value and Winds. always, customers resiliency in We strong saw I'd compelling a the to the partners ongoing model the our their we Solar to off in QX, for improvements our start place that our business like which portfolio to to of our the trust we execution. ongoing I attribute solutions deliver building and

First included the in have management, by bolstered growth, balanced quarter Growing we subscription and solutions also service fruits revenue database observability and as of over year product substantial contribution for our subscription-first growth strategy driving highlights known ARR our demonstrating X now. which our been lines. from monitoring ITSM

with customer global progress of to scalable excellence customers in through retention, partners a the continued year-over-year along and our cost-effective adjusted increasing operating manner. margins we expense partners our system solutions. discipline our EBITDA and demonstrating and reflecting value as integrators our proposition growth, to commitment in Continued Double-digit and expand with our reach

provided, financial QX the before high $XXX I'll to outlook of the range quarter year XXXX. of year-over-year million, for touch XXXX, over the In financial highlights. more some representing we delivered Bart our color will XXXX to total revenues I full turn turning these and on above Now end the QX increase. we and a for on X% of QX it

revenue our ARR of growth We growth delivered subscription and XX%. XX% transformation benefits of subscription-first subscription the seeing are and year-over-year of first quarter

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

more and the believe for are XX-month Now value-added renewal foundation that rate transformation, opportunity this a the even report to excited revenue predictable that in-quarter into renewal we converting our now QX, We XX%. in are this maintenance was we see to the to compounding I'm year rates maintenance of our trailing customers. benefits at with lays expand our XX% lifetime value and subscriptions.

since showing rate XXXX, us first the have than with solutions. XXX more XX-month renewal of the quarter is trailing our An in highest ended period the year. continued of QX customers XX the comparable improvement The in XXXX We who the of months. increase previous value $XXX,XXX XX% spent over and of with last reflecting the

[indiscernible] so us business increasingly customers win helping are across transformations, larger to accelerate their fatigue deals. their all our multi-cloud Doing environments, visibility while We tools and has reduce enabled achieve alert eliminate improving comprehensive productivity.

Adjusted the outlook an business $XX million million to EBITDA I'll EBITDA highlights. the gave XX% grew turn above million some $XX.X representing year-over-year now and for quarter. we XX% $XX to adjusted margin to of

our Turning ecosystem. from our partner with product business portfolio our progress quarter. highlights to expanding in growing and pleased the some I'm

On front, solutions. for last a a Solar introduction provider Winds SaaS we SolarWinds our vendor evolved year, as with a the product year from transformational solutions the and hybrid cloud comprehensive was observability observability to observability monitoring of

give in during for a uniquely platform solutions the and geographic our to to our the best and in to Pacific. continue continue networks, functional, these users demand the of across believe will products opening quarter across of systems, address our To of our customers needs and the create variety environment databases, appeal the departmental we Solar are centers for of data will Winds Asia geographies. seeing I teams broad applications, Europe our integrating footprint solutions we new We multi-cloud ability and verticals support with solutions things. extended value executive

access APJ Australia announced the AWS observability the for region. to so we also Asia and Japan service launch And first to Asia center enhance data In of we Pacific, customers Australian expand their center SaaS our customers data and in by in ITSM customer The customers. set center throughout data manage SolarWind's region, they offering and ongoing Europe, in our ITSM center SaaS data our of opening new Pacific desk the our IT expanded businesses allow to environments. is availability observability reflecting commitment multi-cloud hybrid and our The Germany. new a can to reach solutions will more

evolve in clouds monitoring plane we private experiences, systems, observability databases, solutions a visibility. Sullivan's public single aim we applications, infrastructure, to As and of across and platform, log the deliver digital gas network, with

have earned its in recent AI AI is solution awards from only on-premise own hybrid their Forrester named and pace. in believe QX, amongst allows true solutions SaaS months that Ops Research to vendors cloud multiple recognitions landscape notable to customers report. and at observility Our Ops us process-centric hybrid industry migrate in our We the solution

we cloud with our our as launched or cloud a cloud, customer service. the our it regardless our partner customers virtual to to of while Partner flexibility Summit to internal partners. excited demonstrating for are they through expanding early the reach sector, also And consume program, it's partner X progress We're teams. days, on transform channel GSI In the held journey in deploy ongoing we ability QX, are public private public of about in our and a all making evolution support where the relationships our of growing summits and major a [indiscernible] geographies on commitment

scalable reach partner Winds, example the continue an to with observed excitement me more GSI progress, key complexity CLI to multiplier and significant who continue and in efforts a As to satisfying joint to believe Solar macro our partners our We fourth fashion. our of throughout partner. costs, a we represents customers in a a cost-effective by partners challenges It ecosystem and our the world. the powered customers palpable see summits. project very development visit attended productivity launched exacerbated conditions. the was budget for I be of our by

my journeys and business transformation the and customers these same in deliver belief addressing value. execution to key view to conversations their reinforce continue Customer abilities All disproportionate solutions strategy as our our challenges.

you Now you I'd like the priorities last quarter. of to laid out remind we for

we cost. to complexity, grow will constrained. remain customers productivity continue further environments and Looking improve believe in value while will lower XXXX, IT budgets solutions that Therefore, into

database the to these can to the customers we I of products service to belief growing services even is that on value challenges. all customer while comprehensive innovations relationships. establishing simplicity and creating believe expand observability, Winds our ideally are our ongoing our deliver my ability lifetime Solar the suited address platform, and our greater also It by management

transformational and a top much deliver our QX. to Following emerging we stronger player XXXX, growth in a are we margins as ability believe expand line by demonstrated

seeing our base customer across us sizes believe the weather to are economic we industries on of success, and focus our the attractive challenging and should allow and conditions. diversity all We markets growth

Our as subscription X priorities drive follows: seeking key are near-term First, continue to businesses. we adoption our aggressively across

the this how margins. is believe key to to our customers with at in $X to adjusted EBITDA and ARR products goal billion our achieve want We mid-XXs consume our consistent

foundation an more We for in also even subscription an believe expansion our base efforts. provides our solid revenue and margin increase

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

expenses managing to and our continue for look to invest expect to operating opportunities while selectively margins. improving We

model team companies said cycles. believe levels I've and deliver allow experienced expand through many have of As resilient healthy we led an times, management business us growth has should economic to many profitability. We that our

Third, as XX we management observability Winds And and efforts cloud database continue our our fourth, expand and on expansion been our past evolution the and solution. very portfolio focused for we observability hybrid industry-leading service have months. customer retention with remain Solar solutions, and along

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

Barton Kalsu

mentality. strategic one that and I throughout growing we outlined, Thanks, just everyone to a areas top subscription-first Sudhakar. is discussed focus of XXXX, with as Sudhakar remind want as our of

will Our subscription multifaceted. be transition

The has for existing cloud entailed first on-premises product. phase selling and our hybrid products subscriptions observability our

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

is I subscription remind perpetual also negatively our We expect our our subscription these new will overall transformation focus that operating impact subscription grow sales. want X exercising models will license in while business, ARR persist to discipline. growth you of and to

of Our results transition another execution. progress our and quarter with this first ongoing reflect quarter solid

numbers. $XXX Turning above is to and revenue X% total year $XXX total million. provided which a revenue compared the to first outlook we the million quarter $XXX the with to million, range We the of of prior of increase finished

our in You our will of subscription shift reflective meaningful notice of which revenue mix transformation. a is

our a We new larger subscription of to have continue as products. sales percentage

first the year-over-year. $XXX ARR total ended with quarter We up of X% a million,

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

Digging into the details. revenue

revenue year-over-year. Our million, XX% was first subscription quarter up $XX

success ongoing the growth Our our reflects of subscription subscription-first revenue efforts.

of also seeing base to the our cloud the of observability product. maintenance portion a hybrid conversion results are the of We

a from of of need the customers is We value first prior environment. decrease continue a to Maintenance was million higher their hybrid convert as IT revenue they $XXX see ratio which the than at X% quarter, the our and manage product X:X maintenance year. in the to

of new of has discussed revenue impacted maintenance a the As by our as maintenance and been percentage products. sales our customers of recently, we subscriptions have portion conversion subscription larger to a

Our maintenance the XXXX. this a expansion focused renewal quarter. is the was rate QX a testament believe XX% to highest and is and efforts. XX-month rate loyalty and XX-month the trailing at basis trailing on our customer retention for of first XX% base customer The our of since We

exclude convert we rate our we arrangements, customers maintenance those subscription as customers that from Note to renewal calculation.

result subscription strong of renewal of we and XX% a revenue as our in total have maintenance the revenue. As now revenue growth rates, recurring

revenue $XX license compared decline expect for quarter, the license our place and subscription will perpetual new has continue of to Remember representing in we first was therefore, to performance the XXXX. negatively now, one approximately year of XX% model over first a impacted. transformation be that sales million, been quarter For

in offsets the sales the in decline subscription revenue license increased quarter. Our

since finished with of improvement the strong increase us pleased year the is report I'm than with and spent in we another also delivered months. an of to of customers more year. profitability. We XXX which the non-GAAP last have the $XXX,XXX another of XX the quarter over of previous customers quarter who first that start XX quarter XXXX

year-over-year, margin First gave outlook representing the million above million, of XX% in we coming EBITDA to adjusted EBITDA was and quarter XX% quarter. $XX million for growing the adjusted $XX $XX.X an

professional fees certain charges. Excluded from insurance and $X.X by as costs, adjusted restructuring reimbursements, EBITDA cyber investigation expected net related litigation in the million related approximately offset well as and to to onetime incident December the proceeds governmental of first quarter, other our

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

earnings aspects and our growth across our operational in and we on expense disciplined focusing focused all on while our in capital transition. are subscription discussed driving we management As February, of broader efficiencies call business, allocation,

locations expense and lease our with Given of in of uncertain of $XX office primarily for certain macro structure we to operating the reductions. on focus associated XXXX million margins. costs optimizations headcount QX, for impairments outlook improving These optimizations resulted our part as in related restructuring $X made ongoing charges, million to

to will a hire selectively to continue disciplined closely we manage cost Looking ahead, to continue plan manner. and we the environment our monitor in and

sheet. Turning trailing XX-month XX March Net to our X.Xx balance adjusted our was at leverage approximately EBITDA.

equivalents investment we the and to extended bringing XXXX. date refinanced net cash cash quarter, in November, was of balance debt Our of short-term maturity our $X.X the of from approximately and to February our that February the at $XXX first and debt million billion. XXXX end Remember

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

by grow will in now through we final product top then although healthy with and over ongoing installed customer guidance, retention. thoughts. for momentum our means it start IT I portfolio will discuss our and potential commitment our in allow the demand year. our this and affecting us well before should the macro in and what mindful spending as XXXX year. formulating our to saw are some see generally quarter it strong continue we headwinds and In second That deterioration walk that all said, optimistic are improvements we for outlook of QX of guidance expanded the areas Sudhakar you turning our the I for line from to as base and full driven to execution we customers,

committed account carefully our can outlook improve We and subscription-first takes macroeconomic we in and into and strategy what to profitability XXXX. continuing remain of our focused our the impact profile control business Accordingly, transition. model conditions our on to are

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

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

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

midpoint. X% $XXX provided guidance full the are million. We be representing adjusted compared million $XXX at growth EBITDA This the between is full of increasing million, year-over-year year to to the a year $XXX to and previously the $XXX million for

control and We on committed remain in to investments selective made as will and investments continue have control meaningful consistent our growth with we top make priorities and very parallel focus to can profitability dividends. per line outstanding. improving portfolio that to what million in product strategy $X.XX per go-to-market Non-GAAP starting we efficiency earnings share and estimated fully is an investments assuming believe to $X.XX projected to these our and pay share, are shares diluted be diluted fully XXX.X

I'll over turn to Sudhakar Our With that, his rate guidance remarks. exchange X.XX:X. year call euro full the closing dollar second for and to assumes quarter of a back

Sudhakar Ramakrishna

very progress about diversified teams and our both strong believe as base. our of the is to monitoring I'm and database observability, our revenue make evidenced on continue customer management growing Bart. QX excited to service portfolio by and offerings performance EBITDA. diversified adjusted broad, you, a appealing Thank We

to solutions in and subscription revenues. best even the deliver that more via compelling best time expanding via We growth customers and are to issues deliver secure environments to to subscription-first our our time their mindset, top and line making best remediate in we progress as deliver value significant value to solutions predictable ongoing to issues simple, multi-cloud and margins initiatives time powerful detect evolve

I'm appealing industry. success will Even portfolio so, customer challenges macro present environment orientation across strategy all to continues that and customers our and be the to broader The confident software to geographies verticals.

growth continue happy questions. Winds. invest address I Bart I'll shareholders exercise selectively revenue employees, Solar customers expanding by again expense strive to will and to discipline to now thanking and your We deliver their for margins. our commitment to are and conclude partners, and

Operator

Instructions]. [Operator

the Singh. of First from question hear can you Sanjit comes us? Sanjit, line

Sanjit Singh

me? Yes. Can you hear

Operator

Yes. We got you.

Sanjit Singh

Yes.

Sorry about that.

new I quarter product a to across little start year. on more great growth the congrats get sources portfolio. the the wanted So on a color to of fiscal and solid a

will, you drove the could management across sort you which X and scorecard, the if if in subscription, those So these database came of strength of maintenance in give of or across sort service than which of sort also us expected? areas across the and quarter observability of weaker line

Sudhakar Ramakrishna

is question. This Sanjit, thanks the for Sudhakar.

see the of on script, As we our board. focus the to continue subscription I across in transition benefits the noted

is in keep major and portions. lines, the I of terms that we observability, highlighting, service product of the X all which businesses saw growth management database ones In specific

mentioned market to platform for they're also value are we because highlighting opportunities As Solar interrelated the that of are customers. our Winds especially for us, as we while broad have X evolve previously, those I integrated as delivering we us,

Sanjit Singh

a That guess makes look question. results, the ads customer I similar the sense. When quite And then I strong. were XXX,XXX at

in revenue When did prudently customer what lines the full segments, you yet commercial, trend base different mid-market, terms of in SMB You enterprise, guidance. your versus the and base? of growth you're cautious your at sort are seeing the you're X% year enterprise being there look

Sudhakar Ramakrishna

line did segment segment, and you increase more of QX across increasing. a At from can scrutiny for segments same a and the bit that the be pipeline is you imagine, standpoint. budget little all as budget mentioned a or enterprise larger there'll of the as based the Bart, Sanjit, our for discipline. us time, you strength allocation address year the on The your way on question Absolutely. our would the performance the growth focus guidance continued EBITDA I and full both from top is operating heard we

we of in comes really, in to the segment customer mid-market years really is established have over timing a variable the the us that say, That bit upon. deals let's diversified that the more a handy. foundation velocity where plus the build motion so have those gives base better we And than,

Barton Kalsu

did improvement XX,XXX. or a deals that in we have a mentioned, -- number noticeable have are than that of -- the as you $XXX,XXX more But we have customers deals first our just We've than Sanjit, starting with that we've greater upmarket number of noticeably to the quarter, moving who spent to number are that Not we're that -- pay efforts it's of every off. going the increase us but the going increase on kind say in did some done to of the have the quarter. of

Operator

comes Matthew Your the of Hedberg. from line next question

Unidentified Analyst

on Hedberg. Matt This for is [indiscernible]

So just next talk start a can as year? observability, progress adoption focus the and of bit off, to to if you incremental the step this for about you you continue any have just more on solutions? your And hybrid little

Sudhakar Ramakrishna

Absolutely.

seeing our is that a with adoption are say year What in and we capabilities last see April We create a it and earnest APJ as solutions becomes progresses. a of of primary still highlighted, effect and the year. of continuing of we the part flywheel observability motion EMEA in Americas, last I of we October can strong lot solution cloud in that as year being in hybrid July launched our to in added opportunity

the as we of believe we lot are we So as And early there of transition. have a in still made, ahead as opportunity much it, us. we is see stages of progress

Operator

line Oliver. Your of next from question comes Robert the

Robert Oliver

of And follow-up last and name My Obviously, of apologize and and very Where And you strong a few service relative rebuilding a to you traditionally year-end? from had position very then voice. at to September here I in of really I positioning you relative spend the years, now now. Fed be Rob Baird question and tailwinds relationships. on are to renewal for kind you've fiscal you. guys the [indiscernible] right for Fed you a Fed guys for Great. big my think, terms Oliver over rates where want those Fed. lot done, and Bart, Sudhakar,

Sudhakar Ramakrishna

Sure. feel again hope Rob, thanks you for question. the I better.

subscription that which of maintenance our year. as And last highlighted reinforcing a their in largest business, First you is this ours subscription became customer imagine, that again they set. have generally federal year, we not can things just solution can a renewal. space, first, belief What in the customer highlight I renewed our

Additionally, of cases. we quarter as a had our continue customers in well number strong of many as with several to QX, Fed both terms deals relationships deals in of size and well expand as the a in

for to a as As team the highlighted, in you as well future. resonate our get area our solutions we sector be buying The XXXX will service there human federal for both the is into in it. broader season into do and continue us as focus done us and has the sector, public federal strong to continue and we a

Operator

comes Suppiger. question next line from of the Your Eric

Erik Suppiger

expense you bit X:X. as has it off, maintenance from to Do expectations talk that there? moving or at can conversion ratio about you to looking convert actions reduce can said tell was to it a looking you -- seeing -- that range kind costs? further First is us greater customers are faster conversion little how you And of if I'd be that is a at you're subscription, expansion relative further have your taking you from projected subscriptions had What subscription, in what of is then interested lastly, what than than you you to cuts. you're been you said

Barton Kalsu

from X.X the quarter, the the maintenance conversion conversion to Eric, yes, closer first from to rate for was standpoint, a So subscription -- in us.

million, at well So our above maintenance above most expectations. X.X convert X.X that still well their base folks and the

We are still early fairly on.

to we to that level. expect at convert So don't X.X continue

So that modeled. is better than we've what expect what and we

and tell slightly I customers rate, ahead. generally far but adoption the maybe of as the it's in As number you line, will

to future We hard. from We converted get sacrifice customer a have just to to maintenance We time the customers to want don't to We meaning convert revenue that subscription. want it, don't their decision. we push customers an own expectation. for on We're lines. want not want pushing

getting move maintenance and far subscription as over to slow revenue. our space board we're to So the steady as across

that. Anything talked honest we'll prudent that it's to as cuts, we to first expense quarter. after with about management, just very that, made pay be from And meaning selective Rob, hiring the we it that quota-carrying 'XX things expense in continue of far But as to the investments going starting the standpoint, we but actions you, think hire, like be replacement in and we are took investment 'XX will off. reps the an be to and

to we and couple dividends, the the that reap Now the over investments of it's years way last back -- from made us is step watch it. we time dividends we're the for that watch the view seeing

Operator

Your of comes line from next question Terry the Tillman.

Connor Passarella

is Conor for on This Casanello Terry.

partners. Just wanted touch to on

So it you're terms with far. sounds from seen the on adoption traction of updated like around them reaching well double good wanted co-selling momentum strategy and from place you've have the to you're there's just motions more so I partner with AWS Azure? maybe you in stemming where what as advantages click on seeing hearing customers, as maybe in any partners

Sudhakar Ramakrishna

to the Sure, and traditional I call focused program partners is as help system way street. geographic as think our with in company, customer such. more And focused are the the enterprise, lot our more more well partners Con. the lot but in recent footprint both, regards transform it, predominantly as GSI The which us feet on global on about highlighted a traditional a more partners continue and With the know, require, it to a you expand the larger traditional to mid-market. that some of partners, integrators we've through partner additions made

cost given more But of sales. model, and GSIs, with was a it appropriate we lower the continue to manage work enable our felt to them

so how well. do as we but expense that's standpoint efficiently an scale, from So

AWS continue. Those relationships Azure. to coming and Now

partnership established than portfolio. co-sell larger strong for that some life life the being them much cycle very cycle, go-forward a mature are But cycle, We still of in would on entire with motions a across in I life earlier the us terms representing said, pretty opportunity more in say basis. have the they

Operator

[Operator Instructions].

next line the comes Staff. of Jacob from Our question

Unidentified Analyst

that are? deals believe that This customers maybe in quantify couple rates is the by that, I would it wanted Jacob Overall, the And on on larger a evidenced some these against remarks on touch Are seeing good year. looks you increase be very Any things much so of A of really, that's was to win it congrats on appreciated. to maybe really cloud how been XXX,XXX prepared that. able in for color on in able you've I landing on win mentioned that quarter, Kash. and more deals touch like top last the larger then that to you're native competition? you're is,

Sudhakar Ramakrishna

Jacob. Sounds good,

representing the Bart and XXX,XXX script That's in to that basis. are that deals of you highlighted a his an continue of we on will above size types go-forward We indication the with customers winning. customers, These large trailing necessarily well. a growing. customers of XX why winning about lot are not think our you But large we are as when although months many is deals

to we That's because we happens that manage because the their are industry focus and another them as productivity. solutions. in That's in most a helping environments, complex from their lot as set improve have of and we trend There's evolves look their that and I are tools simplify that helping them consolidate keep customers consolidate their environments, would suggest comprehensive environments. customer the we of cost

our broadly we you speaking, cloud competition, feel of about or terms of segments. take one each competitive In native position good if our very

this almost But regards in with the and sizes database competitors. we help we of are Let in our larger time that especially products, order an have it's a enterprises well. monitoring on believe me of reverse set seeing different that everything the all incredibly in will market, we to customers compelling start solution based as

coming well. on competitive ideally enabling of to to for as we the wins had them. questioning as The suited business that this service total have particular of solutions solutions cost model efficiency it indicate a customers cloud-native customers than from mid-market, and cloud on or where imposing to their solutions environment is And there relates needs we as expand and premises-based in And scrutinizing and are particularly rather and management their that share we in handy SaaS their dictate observability, uniqueness ecosystem. that costs we've our are evolve continue And is to furnishing. are

Operator

of comes next question from John Dessauer. the Your line

John Dessauer

pickup maintenance SaaS convert recognition, point, you're Dessauer selling an PARP regarding for to and customer sequentially assuming you you licenses, continue John attrition if question say, to see same the A inflection you here, okay, in you revenue sort across as of increases from meaning just longer will here. QX rates trends your no revenue, -- start moving observed assuming in you set, see no -- forward?

Barton Kalsu

there's answer we to we subscription to a on-prem regards talked will that, that's hybrid the then product, question, yes, the rata. to subscription transition that fully offering, about convert about observability So pro And in be our revenue. talk an upfront when we -- cloud being customer still product an And to have SaaS multifaceted. maintenance we subscription [indiscernible] revenue that the component when offering,

a our of bit we revenue is those in our because we subscription there's ARR get what to what So that because from subscription trend subscription is between an why a both on-prem we be going do revenue when models. indicative why the It's the think we is it's standpoint that's mix subscription X just component some little disclose a overall more of subscription. upfront to

Operator

comes next line Your Suppiger the Erik question of from

Erik Suppiger

on wanted year? what interest expense expecting rates moved the are you around much the to -- I Yes, and debt -- interest just but what this check for

Tim Karaca

is this Tim. Eric,

the moved QX even in much slightly, terms expecting We we vicinity. we're models, of in in same though discussed change to still aren't freights compared what

Operator

Next the line again Dessauer. John question comes of from

John Dessauer

you efficiencies this spend? the customers, budgeting of from year, -- more you would QX about in their deciding when on I terms from or customers XXXX your Dessauer was XXXX offerings result made XXXX decisions demand your decisions that you the in you commentary you understand their of part again. XXXX that guess customers those customers processes, think you again, a are was John about but your of the -- conversion by if think how about budget or driver where think buying signed of give your that

Sudhakar Ramakrishna

combination, a It's say. I would

look within foundations that the you is, If our in we we at and we close how boundary. of pipeline the pipeline business, how generate the velocity cases, many quarter have we with closed

And standpoint. can so a cycle a XXXX of budgeting attribute you that lot from

well. pipe approach. some have And mentioned, we Equally, as cases, generate in previous a customers taken I wait-and-see in quarters like

QX. to spillover will some a to going always there's spillover QX to like so there one another, And quarter be just be from from

we one those every And keep out. count close so and of of those

spillover to speak, So it's XXXX in terms to budgets. be so bag, XXXX mixed going to of a

give keep may macro to conditions I'll Another growing approach. in grow. the especially some And we that wait-and-see pipe when they take indication predictable that do, in there is continues even focus. a important where And is to given overall it's do the business customers it our you overall the growth direction, how deliver

Operator

are questions Karaca, There at further me, team. I -- the to back of over turn Finance management excuse call Tim you. the will and no now GVP this time. Thank

Tim Karaca

is everyone's soon. appreciate again. Thanks bot. Tim Thank Winds. Solar and focus to I here support all. you Talk attention, as with me of you is

Operator

This call. concludes today's conference

SolarWinds (SWI) 27 Apr 232023 Q1 Earnings call transcript