SWI - Earnings call transcript Q1 2024

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Operator

Thank you for standing by. My name is Katelyn, and I will be your conference operator today. At this time, I would like to welcome everyone to the SolarWinds 2024 First Quarter Earnings Call. [Operator Instructions] I would now like to turn the call over to Tim Karaca, Group Vice President of Finance. Please go ahead.

Tim Karaca

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

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

statements, and You number with statements find certain filings call today's to during business, call. press assumptions, the numerous remember our that website. except our today's those release slide this a summary including remarks can which our is forward-looking prepared made also statements are during this deck, of our intended earnings our currently our are retention, opportunities, geopolitical the and gross level based expectations SEC subject to from are earnings our and duty statements release the our and as action, available highlighted to by information concerning of of regarding our supplement continued the These enforcement environment no impact and SEC expectations risks such and the of available Relations financial our uncertainties update on debt. These undertake and mentality our risks on uncertainties, are of on SEC. in law. information market outlook, the regarding required partner we evolution, our evolution customer global and to timing ecosystem, Please Copies phases to the Investor including and a economic subscription-first

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

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

Sudhakar Ramakrishna

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

employees, model. In our stack am provider full across of value increasingly our both to metrics for commitment strongest of guidance provider across from years. service comprehensive EBITDA I'd I'm of impact the quarterly is we pleased shareholders having I demonstrating like and delivered X financial achieve a support teams, their and monitoring growth positive in environments business to ARR hybrid on evolution solutions ongoing sustained objectives. to key our compelling our a their our adjusted monitoring solutions to thank of observability, the strong our and the in again margin business over and execution strong our a and multi-cloud ongoing transformations ability strategic resulting management the customers report particular, always, pleased to year, and with and and the strength of platform in our to database exceeding customers, partners a SolarWinds. start to once As our tools that

range Now saw year-over-year we $XXX high XXXX, of quarter. million, turning from to representing revenue of end of X%. above In highlights growth business total this the the provided QX we and

QX in X% grew ARR of total XXXX. Our

exceed driving cloud maintenance factors, are incremental a healthy that to base significant us. opportunity as conversion the for as our the our continues This believe well factor new ARR a significant ongoing in of Cloud Hybrid $XXX expect total these solutions second We of to continue there experience consolidation, of to milestone result simplicity ahead modernization key solutions with the and conversion be a of customers. We of quarter. in the million Observability is and strong acquisition adoption and tools

With representing the subscription delivered quarter ARR in of of of growth and our adjusted the subscription first high EBITDA percentage provided points range margin represents quarter, XX%. delivered ongoing growth X XX% of and up strategy, the first the as million, earlier, revenue success and XX% X the quarterly We XX%, EBITDA we subscription-first adjusted level growth of year-over-year year-over-year. mentioned end I $XX we above of years. in highest over of this And

subscription-first of the XXth our maintenance continued is remediate the first quarter the to value, quarter. in-quarter XX%, we was And increase means fourth diluted want delivering growth I their X% at that customers maintenance year-over-year, our we a and reflect moment company, X, to in of we it celebrated XX% ARR what rate take for renewal to environments. On end our with anniversary best to quarter XX-month rate issues time what total have as in on renewal to time detect, multi-cloud accomplished execution first a from for April XX%, trailing of and and strategy time future. an our delivered Our as of

believe management to with the of robust secure ones. improve professionals. and of in costs to pace provider platform performance we solutions. We SolarWinds addition tools, the by by was a privilege and comprehensive flexibility customers to in serving over reduce their founding, of at simple, consolidate evolved their around lives building our team's help full offering employees, with the database monitoring a powerful simplify transformations shareholders. This to own the face, We've provide from now goal move tools engineer lower digital solutions have We our and as stack journeys observability, provider of they a set via customers founded a our purpose capabilities and being productivity. our our solutions. business the powerful enables monitoring guide lives their transformation focused partners to of hybrid back Harkening complexities accelerate Through continues their cloud-native IT to over of customers us a people service execution network designed XXXX purpose we our the is we in serve, to XXX,XXX world. enrich the customers, to our customers of years, the including

Aruba increasing create opportunities for them. node I for believe value offerings We the consolidate expanded look our support with capabilities us with relevance Palo devices, customers in These As and and prioritize our customer identify achieve of types their of will visibility our lifetime results. I a emerging investments, Alto, support better serve to others. financial confident delivering to needs our containers, aid hybrid to will serving now and to new product and tools enhancements enhanced our updates already-rich us. solution ability customers further and few I'm cloud continue SD-WAN opportunities improve we execute to and share Azure, our future, ServiceNow, in discipline, expansion observability key strong team's our and

framework complexity observability environments. have We believe are and to across continue service script of performance manage platform designed and These monitoring. committed reduce for very We fatigue alert customers significant services SQL common enhance solutions. we services enhancements the management remain their database to our our the and technologies. to in added support our open-source AI full broadest help We database

with new that announced that a Software month Secure fostering. consistent software Agency and are Secure last initiatives self-attestation we have commitment, the believe to Cybersecurity have are proud framework. Development to with public-private in we Finally, partnerships publish initiatives we the first that We been alignment Infrastructure provider these our and further Design Security by the

made our we strategy, to and motions our have front, the our investing partner significant including subscription-first reach cost progress increase in On aligning efficiently effectively. with our program go-to-market

Transform our Partner can Our partners. create opportunity the recent and with Summit amplify through further we by working

continue cloud motions integrators service system Our world-class and distributors, These build success. to to powerful our sales solutions. providers secure go-to-market resellers, by and partners, efforts global other complemented including our to contribute our inside simple, on continue and

over that will that call reiterate are of continue to my I across I past the years. all X direct our optimism aspects over transformation As a we gains accelerate Bart, the the turn of efforts result will to the business

uptake our EBITDA will believe and XXXX we in we judiciously in quarter and financial to outlook. ARR solutions, growth performance adjusted our year solutions, the service with management future, ask observability now while continued and expand ongoing sustain invest second growth to continue along our and expansion. I our margin support database Specifically, Bart provide resulting will and on Bart? full of the

J. Kalsu

a to XXXX. strong good revenue while recurring thanks positive had we quarter call. on as to double-digit the a first to in our we We everyone the sustained we start ARR joined has growth are a drive year, and growth. And EBITDA predictable Sudhakar. of trajectory off Thanks, us demonstrating increase on continue strong who and adjusted believe mix the We're to

We ended for Turning to X% ARR high up a above of million, X% first the revenue with of year-over-year. the end we quarter with and total compared prior $XXX finished total that the numbers. the the million of outlook first quarter. year increase last $XXX.X provided revenue to $XXX quarter total of the We million,

an of XX% the growth Our our the subscription end the year-over-year. increase at of by million, first be subscription-first This continues execution driven ARR was to strategy. of quarter $XXX

now the our customers we our quality revenue from year. Digging who of customers the As the revenue growth portion total quarter provides these of increase compared our last the ARR, our We mentioned in provide products. subscription-first that which was business. subscription $XX reflects year-over-year. annual total X,XXX into converting than roughly greater revenue a in quarter, over base with over Maintenance first first into the subscription strategy, of had the customers we a $XXX,XXX as million of customers of conversion to prior $XXX,XXX of our have number quarter, was the $XXX despite of recurring to details, and maintenance portion XX% ARR of the XX% year The revenue includes the believe representing insight prior repeatability million, our to products. up subscription success revenue flat subscription

customers we is those calculation. basis To XX% renewal we as and our from renewal subscriptions, rate maintenance first was customers on XX-month the Our a convert trailing rate to for remind maintenance quarter. at you, XX% exclude

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

revenue down was the year. $XX $XX in XX% the from million, million For quarter, first prior license

will As affect has our a sales affected reminder, license focus our and to subscription-first performance. continue

operating quarter of focus delivered profitability. on strong another non-GAAP Our discipline

First quarter. In deliver dividend our paid million, we We're aggregate. the above year-over-year, an proud or $X.X $XX.X growing adjusted to million our of back the of the representing end outlook adjusted to special of value coming share quarter per in a of was high in $XXX million million for EBITDA shareholders. XX% $XX.X we April, work $X gave margin XX% and EBITDA

our with opportunities return to shareholders to to our financial We capital and investments. will allocation opportunities flexibility evaluate strategic while plans, making selective evaluating capital continue balancing debt repayment

our sheet. to balance Turning

pro our X.Xx XX, for Our XX-month adjusted our of at X.Xx in the X.Xx to the at taking EBITDA. In forma compares the last the refinanced ratio trailing leverage by interest This XXXX, at is finally, plus leverage March net dividend of was payment EBITDA. environment ratio April, adjusted rate end decreasing from at And approximately basis adjusted term we plus time. the X.XX% interest rate to SOFR loan, XX our X.XX%, January of points quarter. SOFR advantage

interest look variable go We our opportunities will rate reduce continue as for we to to forward.

flow, flow to generate continue in We quarter. first operations the cash with from cash $XX.X in million strong

and and Our balance end. quarter cash short-term equivalents at cash investment was million $XXX.X

and diluted improved onetime with now our per was by to the as profitability Sudhakar year. the through is per range final his Most our outlook a discuss before second turning it of tax our non-GAAP start per over outlook $X.XX guidance guidance I Our over earnings walk thoughts. $X.XX for benefit. I to well our this of share, updated quarter for share full beat share. you as $X.XX will income well driven then will

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

million expect outlook the to rate assumes non-GAAP we of approximately million our XX%, $XX toll tax quarter related second in which for the pay quarter cash the of taxes during Finally, is tax. second a $XX and to

of range year-over-year For the from $XXX prior it guide. in million representing at million, we X% full our expect midpoint, revenue to unchanged leaving the year, total to be growth the $XXX

diluted growth is We which are be the million, EBITDA to share, midpoint. $XXX now per Non-GAAP adjusted share $XXX raising year-over-year year, per approximately to assuming are be XX% fully to expected outstanding. our projected $X diluted earnings estimated million million full shares to the an for $X.XX XXX.X representing at fully

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

Sudhakar Ramakrishna

Thank you, Bart.

continue adjusted ability of to of EBITDA relevance continuation efforts solution which growth our execute. of our indicative of top of growth, the line to transformation be the result both increasing a proud broad our are innovate We area of very with to offerings, and direct of are and combined and

are requirements. suited tools customer you've continued all of macro hybrid address productivity. continue seeking their discipline, in adjusted to cloud As as our ideally execution businesses. is With the from heard customers challenges unsolved can respective their Customer enhance while we address are Bart, year and stages solutions complex evolution, visibility EBITDA environments consolidate to in their We remain cloud-ready, budgets outlook. security, they and these raised we especially looking with cost-effective their opportunities become more improve to Equally, to an this of believe various constrained, environment. Customers are challenge. full that and

that and environments. Observability Finally, operating solutions just ago to and effectively our the a strong platform ability testament to Hybrid we our adoption we help The our abilities. execution hybrid on significant SolarWinds innovate strategy of that is their cost believe focus us years X our gives and launched customers multi-cloud and Cloud enhances manage efficiency

continued Our up self-hosted allowing capabilities their execution our to centers extend cloud to them the data growth. public represent distinct We us a business believe with continuum sets and solutions dictate. for these pace combined needs their SaaS our discipline for at profitable customers,

shareholders direction prouder focused SolarWinds. Bart the persist, to address I macroeconomic questions. as I'm on not I customer their we and could be of the success. thank partners, commitment our team's our can confident unknowns now things commitment the to we that happy Again, and remain environment for customers our are in your and employees, around business. control of many I to ever Although

Operator

your comes from first And Matt RBC of the of question Instructions] [Operator Hedberg line Markets. Capital

Matthew Hedberg

for Maybe Sudhakar. the first question

talk uneven. certainly a expectations, a of feels of kind just the little versus your of results execution level, really, just quarter good of versus bit know kind environment the about macro of to guess wondering remains bit Is guide, your you to the can is and I'm I relative and reported environment high from guys more due really selling [indiscernible]? company? your you You given the how similar, guide said kind just estimates the I kind a upside it to a and

Sudhakar Ramakrishna

Matt. morning, Good

thanks for continuing support all, of question. and us your for to First

difference, In or value last really resonate QX, we terms customers of in to and continues let's the to selling The environment, few environment. in that with very say, don't have relative speaking, especially our the see much we this of quarters. broadly a QX well proposition

or as for buying behaviors control macroeconomic future, we're So continuing But factors no are the as [indiscernible] selling execute guided largely the taking account on we into to have there's and we and factors can. patterns. can one level focus we numerous hard possibly what and as at

Matthew Hedberg

Just good execution.

customers, are [ your you ] GenAI influence any the solutions observability within -- your really kind and had increased tell sort to of success hear seeing to adoption million observability, too you guys And sort GenAI observability as your here. Okay. target to maybe interest your difficult it customer then to curious, if in base? the resonate it's a I'm lot solutions? That's have of that's Or of within positively of $XXX helpful. is good vis-a-vis continues within success

Sudhakar Ramakrishna

it fatigue of on to management that say. digital better because customers Most have still the but efficiency times. critically of early investing response years improving do the in or analytics early and is And are call I should or AI strong of call we should more been have for or I derive we started now, most benefits or predictive to stacking, investing, work it's success with, the we of and say alert reductions, in of terms platform, alert service X there say. Matt, too a the part the assistance more enjoying, that it, then traction pattern,

and broader So issue these improvements. time value value with are time detect improvements consistent all improvements, our to remediation to of proposition

relates and like observability et questions things to optimization, As for. asking, it, immediate platform on cetera, as English have language platform the of but the progresses, capabilities to the or SolarWinds performance, an in it an GenAI capability that's those implement the ability on terms looking we that call is need not industry

Operator

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

Sanjit Singh

XX%. way sort [indiscernible] the between is sort I from at wondering expansion talk Is little want I subscription any the about there what customer to was migrations? to versus quarter growth of that of the contribute bit a existing extent which to decompose [indiscernible] base growth? ARR,

J. Kalsu

question. Thanks the for

continue Our on Cloud we And our we have what growth uplift. in the converting doing is ARR, X.Xx ARR at effort the it's still strategy subscription to do around customers driven and subscription-first healthy converting like And still really their primarily customers from the big our to about. growth at subscription is -- that existing We're that efforts a talked is. we to that over the a that. That Observability product. we're relationship continues lead current over Hybrid

we of we're $X to maintenance, revenue. that close of to converting $X.XX when So subscription over convert

driving growth what's So subscription that's in ARR. really the

Sanjit Singh

helpful. the customers you're company total the your a kind licenses ARR a total year at there cloud a sunsets when X% growth single the to digits. growth, time? [indiscernible] or like transitions sort to perpetual and where a over subscription Is has scenario or company high fully hybrid been which new guiding I of more to more That's ] I look on And of then versus of Understood. think broadly, [ revenue a X% full just next basis, ultimately

Sudhakar Ramakrishna

both how packaged and product answer focus of be on Sanjit. have, I'll side, the by will time, we have that the we -- largely things to yes, driven deliver give this be kind the on are the a how At our based elaborate, we quick a time, and Over we positioning customers. forced we then a and transition believe this that should same to customers. should value that be not proposition answer we value

is ability in customers, You've on for us do platform, the are it, heard we much forcing our eventually, just me to cross-sell a about as transition functions and value trends customers model you that shouldn't around as our transition so given I the business up as subscription see the talk as is it subscription be existing it transition, a do. that it point but And well is the increased both increased expansion growth? made. consolidation I driving to both model SolarWinds'

we So direction that in anyway are tending this at point.

Sanjit Singh

Early the observability milestone. congrats $XXX see. on the great million That's on to

Sudhakar Ramakrishna

was to Sanjit. It's for run testament focus to achieve the a since is and only and introduced our a rate That team. significant teams. value proposition those you, Thank our really solutions, X years achievement been we of that the

Operator

Bora next of from Your the question JPMorgan. Pinjalim of comes line

Pinjalim Bora

decline have you on that more on a I quarter. around in if put is asking want focus that maintenance that drive in that it it's Congrats maintenance the It different was this wondering seems -- I anything place the much this the on the stay ARR, look Sanjit year bigger migration. what the side I'm line at sequentially. QX seems migration. sequential to go-to-market on to going of like when

Sudhakar Ramakrishna

me experiencing part an in observability And what's and is base more and EMEA migration now to What observability maintenance meaningful that we motion. What always EMEA talk combined effect the maintenance our we increased that evolve of through to we flywheel the solution driving set are motion in strategy is of heard of that experienced, to conversions. the XXXX, been subscription, and so to is North APJ. you've America solutions, and about start in have up had our a in specifically On our that has sales. traction QX

in So if you that's maintenance experiencing given healthy conversion in that the decline thing bad gains. base, a see not factor the we observability a are

Pinjalim Bora

is to you're saying a -- is rate. total fantastic, clear. But about also ARR X.Xx ARR Yes. understand basically your flat. That's conversion but kind you're obviously I'm your But sequential is trying additions getting subscription of

just $X subscription including maintenance -- would a $X the that entire ARR, is maintenance if that apart million, in mean right? migration, that you from to fair? uplift your I logo, assume new thinking would is am bit. Or decline million that Is the not the down I it that -- So have, going mean

J. Kalsu

if subscription on down, maintenance that's license I and about would new space, efforts think to our adds our products. yes, be thinking the you're focus logo because that one adopt of new customers but on to getting of

Pinjalim, the side, so as focus the we're what maintenance now, relates that's so... And license on doing and it to

Sudhakar Ramakrishna

as Pinjalim. up can during our We with one-on-one -- well, follow

Operator

question of comes Jump the of from next Truist Securities. Your Miller line

William Miller Jump

Congrats on the solid results.

are the think more of right reporting one I maybe just demand backdrop. acceleration cloud in an revenue on kind Hyperscalers question now.

guess projects, for is leading from So hyperscaler for you indicator should about increased a with lower -- reacceleration that GenAI if all? is growth? cloud I potential that your as like call just the and they Like correlation think a for we transition? growth other contributions Or given tailwind the subscription a a

Sudhakar Ramakrishna

build-out I'd a at tailwind Right side on say short that succeed? the of business answer be yes, infrastructure that reporting to now, us? this is would say no. and but depend then house to our of time? is we significant I do the And in tailwind infrastructure. consumption a is most Will point for the their of part that of on have that

William Miller Jump

then for does of That's from other but on question the something the Or maybe helpful. the getting outlook performance quick of that guide from pulled the some outperformance more quarter, year? and there guide. that reiterating the Strong a cautious the is And remainder -- indicate Okay. the to in year, deals was revenue just maybe quarters? for

Sudhakar Ramakrishna

it. a about by factors, guide this revenue on to continued the year is top we outside and execution model entire for at the guidance specifically, being teams. the you a guide macro quarter QX. Not more all really. the our EBITDA The at conservative how including We've to increased had as in balanced know, very point line, of And factor due looking

on So provide progresses, too. to continue guidance you year the better as that, we'll

Operator

the are back no turn will at There conference ahead. Sudhakar Ramakrishna. I Please now further Instructions] this to questions over go time. [Operator

Sudhakar Ramakrishna

again you and to of call, SolarWinds. attending thank you Talk continued our Thank soon. support you for for your

Operator

Ladies that you call. joining. concludes and gentlemen, today's for all Thank

may disconnect. now You

SolarWinds (SWI) 2 May 242024 Q1 Earnings call transcript