Attached files
| file | filename |
|---|---|
| 8-K - FORM 8-K - SolarWinds, Inc. | d8k.htm |
Exhibit 99.1
SolarWinds Announces Fourth Quarter and Full Year 2010 Results
AUSTIN, Texas – February 9, 2011 – SolarWinds® (NYSE: SWI), a leading provider of powerful and affordable IT management software, today reported results for its fourth quarter and fiscal year ended December 31, 2010.
| • | Record quarterly total revenue for the fourth quarter of 2010 of $41.4 million, representing 26% year-over-year growth. |
| • | Record total revenue for the full year of 2010 of $152.4 million, representing 31% year-over-year growth. |
| • | GAAP operating income for the fourth quarter of 2010 of $18.2 million and non-GAAP operating income of $21.4 million, or 52% of revenue. |
| • | GAAP diluted earnings per share for the fourth quarter of 2010 of $0.21 and non-GAAP diluted earnings per share of $0.24 (including a benefit of approximately $0.04 due to the extension of the R&D tax credit). |
| • | Free cash flow for the fourth quarter of 2010 of $28.6 million, representing 52% year-over-year growth. |
Financial Results
SolarWinds reported record total revenue for the fourth quarter of 2010 of $41.4 million, a 26% increase over total revenue in the fourth quarter of 2009. License revenue was $19.9 million in the fourth quarter of 2010, representing a 13% increase over license revenue in the fourth quarter of 2009. Maintenance revenue was a record $21.5 million in the fourth quarter of 2010, representing a 40% increase over maintenance revenue in the fourth quarter of 2009.
On a GAAP basis, diluted earnings per share were $0.21 in the fourth quarter of 2010, compared to $0.09 in the fourth quarter of 2009. Non-GAAP diluted earnings per share were $0.24 in the fourth quarter of 2010 compared to $0.19 in the fourth quarter of 2009. The reinstatement of the R&D tax credit during the quarter provided a benefit of approximately $0.04 to non-GAAP diluted earnings per share in the fourth quarter of 2010.
Net cash provided by operating activities was $20.0 million in the fourth quarter of 2010 compared to $13.2 million for the fourth quarter of 2009, representing a year-over-year increase of 51%. Free cash flow, which is equal to net cash provided by operating activities, plus excess tax benefit from stock-based compensation less purchases of property and equipment, was $28.6 million in the fourth quarter of 2010 compared to $18.8 million for the fourth quarter of 2009, representing a year-over-year increase of 52%. For full year 2010, free cash flow was $90.1 million compared to $55.2 million for 2009, representing a year-over-year increase of 63%.
Cash and cash equivalents at the end of the fourth quarter of 2010 were $142.0 million, an increase of $34.2 million from the end of the third quarter of 2010.
Information about SolarWinds’ use of non-GAAP financial information is provided under “Non-GAAP Financial Measures” below.
Recent Business Highlights
“We are very pleased with our performance in the fourth quarter. We generated record total revenue driven by strong execution by our team,” said Kevin Thompson, SolarWinds’ President and Chief Executive Officer.
“2010 was a very important year for SolarWinds, marking the beginning of our transformation from a singular focus on network management to a more expansive portfolio of powerful, easy to use, and affordable products that address the key areas of IT infrastructure management,” continued Thompson. “The acquisition of Tek-Tools earlier in the year was an important first step in this strategic move. The success that we have had in reaching Storage Admins and addressing their problems in much the same way as we have for Network Engineers and IT Generalists leads us to believe we can continue to expand the scope of management challenges we solve for an even broader audience of IT professionals. Already this year, we’re sustaining this momentum with the launch of SolarWinds Application Performance Monitor and the acquisition of Hyper9 for virtualization management. Looking ahead, we expect to continue to expand the markets in which we sell while executing on the vast opportunities we have in network, application, storage, and virtualization management.”
Other business highlights during the fourth quarter of 2010 include:
| • | SolarWinds released the latest version of Orion Network Performance Monitor (NPM) with specific support for data center networks, including support for Cisco UCS, fibre channel switches, improved visibility into virtual infrastructure and the ability to view Orion NPM from mobile devices such as iPhone, Blackberry and Android. |
| • | SolarWinds released new versions of Storage Profiler, Orion IP SLA Monitor (IP SLA), Orion IP Address Manager (IPAM), and Kiwi Syslog and CatTools. |
| • | SolarWinds received four honors in Redmond Magazine’s 2010 Readers Choice Awards, including Best Performance Management Product and Best Virtualization Management and Optimization Product. In addition, Windows IT Pro Magazine named SolarWinds the “2010 Editors’ Best” gold medal winner in the Best Network Management Product Category. |
| • | SolarWinds introduced Permissions Analyzer for Active Directory, a free tool for system administrators to track user and group permissions. |
| • | SolarWinds established its Asia-Pacific headquarters in Brisbane, Australia for sales and customer support to the Australasia and greater Asia-Pacific region. |
“We had solid financial results in the fourth quarter as our non-GAAP operating margin, free cash flow and non-GAAP diluted earnings per share were all above our expectations,” added Mike Berry, SolarWinds’ Chief Financial Officer. “Heading into 2011, SolarWinds is well positioned to capitalize on growth opportunities in both existing and new markets. While targeting these growth opportunities, we intend to continue to leverage our powerful business model to deliver strong margins and cash flow.”
Financial Outlook
As of February 9, 2011, SolarWinds is providing its financial outlook for its first quarter and full year of 2011. The financial information below represents forward-looking non-GAAP financial information, including an estimate of non-GAAP operating income, and non-GAAP diluted earnings per share, for the first quarter of 2011 and for the full year 2011. These non-GAAP financial measures exclude, among other items mentioned below, stock-based compensation expense and related employer-paid payroll taxes. SolarWinds cannot reasonably estimate the expected stock-based compensation expense and related employer-paid payroll taxes for these future periods as the amounts depend upon such factors as the future price of SolarWinds’ stock for purposes of computation. In addition, costs related to non-recurring items and acquisitions are not something that SolarWinds can estimate because they are a function of what non-recurring items and acquisitions, if any, occur and the kind of costs incurred in connection with any such non-recurring items or acquisitions.
Financial Outlook for the First Quarter of 2011
SolarWinds management currently expects to achieve the following results for the first quarter of 2011:
| • | Total revenue in the range of $41.5–$42.7 million. |
| • | Non-GAAP operating income representing 46%–48% of revenue, which includes 2%-3% of impact related to the acquisition of Hyper9. |
| • | Non-GAAP diluted earnings per share of $0.18–$0.19, which includes approximately $0.01 of impact related to the acquisition of Hyper9. |
| • | Weighted average shares outstanding of approximately 74.0 million. |
Financial Outlook for Full Year 2011
SolarWinds management currently expects to achieve the following results for the full year 2011:
| • | Total revenue in the range of $184.4–$190.5 million. |
| • | Non-GAAP operating income representing approximately 48%-49% of revenue, which includes 1%-2% of impact related to the acquisition of Hyper9. |
| • | Non-GAAP diluted earnings per share of $0.82–$0.88, which includes approximately $0.02 of impact related to the acquisition of Hyper9. |
| • | Weighted average shares outstanding of approximately 76.0 million. |
Conference Call and Webcast
In conjunction with this announcement, SolarWinds will host a conference call today to discuss its financial results and other business at 4:00pm CDT (5:00pm EDT/2:00pm PDT). A live webcast of the event, including any supplemental information, will be available on the SolarWinds Investor Relations website at http://ir.solarwinds.com. A live dial-in will be available domestically at 888-339-3503 and internationally at +1-719-325-2418. To access the live call, please dial in 5-10 minutes before the scheduled start time. A replay of the webcast will be available on a temporary basis shortly after the event on the SolarWinds Investor Relations website.
Forward-Looking Statements
This press release contains “forward-looking” statements, which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including SolarWinds’ financial outlook, its belief in its ability to rapidly expand the scope of the management challenges it solves for an even broader audience of IT professionals, its expectations to expand its market opportunities and capitalize on these new opportunities as well as existing opportunities, and its intention to leverage its business model to deliver best-in-class margins and cash flow. These forward-looking statements are based on management’s beliefs and assumptions and on information currently available to management. Forward-looking statements include all statements that are not historical facts and may be identified by terms such as “continues,” “expects,” “believes,” “intends” or similar expressions and the negatives of those terms. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, the following: (a) the possibility that general economic conditions or uncertainty cause information technology spending to be reduced or purchasing decisions to be delayed; (b) the presence or absence of occasional large customer orders, including in particular those placed by the U.S. federal government; (c) the inability to increase sales to existing customers and to attract new customers; (d) SolarWinds’ failure to integrate acquired businesses and any future acquisitions successfully; (e) the timing and success of new product introductions by SolarWinds or its competitors; (f) changes in SolarWinds’ pricing policies or those of its competitors; (g) potential foreign exchange gains and losses related to expenses and sales denominated in currencies other than the functional currency of an associated entity; and (h) such other risks and uncertainties described more fully in documents filed with or furnished to the Securities and Exchange Commission, including the Form 10-K that SolarWinds anticipates filing on or before March 16, 2011. All information provided in this release is as of the date hereof and SolarWinds undertakes no duty to update this information except as required by law.
Non-GAAP Financial Measures
In addition to disclosing financial measures prepared in accordance with GAAP, this press release and the accompanying tables contain the following non-GAAP financial measures: non-GAAP operating income, non-GAAP net income, non-GAAP diluted earnings per share, revenue on a constant currency basis, non-GAAP weighted average shares outstanding and free cash flow. Each of non-GAAP operating income, non-GAAP net income and non-GAAP diluted earnings per share exclude the impact of amortization of intangible assets, stock-based compensation expense and related employer-paid payroll taxes, lawsuit settlement costs and related legal fees, expenses related to potential and completed follow-on offerings of common stock, certain acquisition-related costs and severance costs related to retirement of our former Executive Chairman from the comparable GAAP measure. Non-GAAP net income and non-GAAP diluted earnings per share also exclude the write-off of debt issuance costs, any change in fair value of contingent consideration potentially payable in our acquisitions and the related tax benefits of the excluded items from the comparable GAAP measures. Non-GAAP diluted earnings per share is equal to non-GAAP net income divided by non-GAAP weighted average shares outstanding, which adjusts GAAP weighted average shares outstanding for the first and second quarters of 2009 to assume that the conversion of our preferred stock in May 2009 occurred at the beginning of the applicable period. SolarWinds defines free cash flow as cash flows from operating activities plus excess tax benefit from stock-based compensation less purchases of property and equipment. This press release contains a reconciliation of each of these non-GAAP measures to its most comparable GAAP financial measure.
SolarWinds believes that each of these non-GAAP financial measures provides meaningful supplemental information regarding its performance by excluding certain items that may not be indicative of its core business operations. SolarWinds’ management and Board of Directors use these non-GAAP measures to
assess operational performance as well as to determine employee incentive compensation. Accordingly, these measures may provide helpful insight to investors on the motivation and decision-making of management in operating the business. SolarWinds considers free cash flow also to be a liquidity measure that provides important information to management, investors and security analysts regarding the cash generated by the business after the purchase of property and equipment that can then be used for, among other things, strategic acquisitions and investments in the business, stock repurchases and funding ongoing operations. SolarWinds also believes that these non-GAAP financial measures are used by investors and security analysts to (a) compare and evaluate its performance from period to period and (b) compare its performance to those of its competitors. These non-GAAP measures exclude certain items that can vary substantially from company to company depending upon their financing and accounting methods, the book value of their assets, their capital structures and the method by which their assets were acquired. These items are typically interest expense, income tax expense, depreciation and amortization and stock-based compensation expense and related employer-paid payroll taxes.
SolarWinds understands that, although these non-GAAP financial measures are frequently used by investors and securities analysts in their evaluations of companies, there are limitations associated with the use of these non-GAAP financial measures. These non-GAAP financial measures are not prepared in accordance with GAAP, do not reflect a comprehensive system of accounting and may not be completely comparable to similarly titled measures of other companies due to potential differences in the exact method of calculation between companies. Certain items that are excluded from these non-GAAP financial measures, such as the amortization of intangible assets, stock-based compensation expense and related employer-paid payroll taxes and acquisition-related costs, can have a material impact on net earnings. In addition, free cash flow does not represent the total increase or decrease in the cash balance for the period.
As a result, these non-GAAP financial measures have limitations and should not be considered in isolation from, or as a substitute for, operating income, net income, cash flows from operating activities, revenue or other measures of performance prepared in accordance with GAAP. SolarWinds’ management and Board of Directors compensate for these limitations by using these non-GAAP financial measures as supplements to GAAP financial measures and by reviewing the reconciliations of the non-GAAP financial measures to their most comparable GAAP financial measure. Investors are encouraged to review the reconciliations of these non-GAAP financial measures to their most comparable GAAP financial measures that are included elsewhere in this press release.
About SolarWinds
SolarWinds (NYSE: SWI) provides powerful and affordable IT management software to customers worldwide – from Fortune 500 enterprises to small businesses. We work to put our users first and remove the obstacles that have become “status quo” in traditional enterprise software. SolarWinds products are downloadable, easy to use and maintain, and provide the power, scale, and flexibility needed to address users’ management priorities. Our online user community, thwack, is a gathering-place where tens of thousands of IT pros solve problems, share technology, and participate in product development for all of SolarWinds’ products. Learn more today at http://www.solarwinds.com.
SolarWinds, SolarWinds.com and Orion are registered trademarks of SolarWinds. All other company and product names mentioned are used only for identification purposes and may be trademarks or registered trademarks of their respective companies.
CONTACTS:
| Investors: | Media: | |
| Dave Hafner | Tiffany Nels | |
| Phone: 512.682.9867 | Phone: 512.682.9545 | |
| ir@solarwinds.com | pr@solarwinds.com |
SolarWinds, Inc.
Consolidated Balance Sheets
(In thousands, except share and per share information)
(Unaudited)
| December 31, 2010 |
December 31, 2009 |
|||||||
| Assets |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 142,003 | $ | 129,788 | ||||
| Accounts receivable, net of allowances of $201 and $149 as of December 31, 2010 and 2009, respectively |
20,255 | 15,786 | ||||||
| Income tax receivable |
10,350 | 109 | ||||||
| Deferred taxes |
261 | 252 | ||||||
| Prepaid income taxes |
— | 4,675 | ||||||
| Other current assets |
3,210 | 2,116 | ||||||
| Total current assets |
176,079 | 152,726 | ||||||
| Property and equipment, net |
6,702 | 6,406 | ||||||
| Debt issuance costs, net |
— | 399 | ||||||
| Deferred taxes |
4,099 | 2,078 | ||||||
| Goodwill |
40,424 | 15,444 | ||||||
| Intangible assets and other, net |
20,173 | 4,417 | ||||||
| Total assets |
$ | 247,477 | $ | 181,470 | ||||
| Liabilities and stockholders’ equity |
||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 2,150 | $ | 3,293 | ||||
| Accrued liabilities |
8,588 | 4,937 | ||||||
| Accrued interest payable |
— | 539 | ||||||
| Accrued earnout |
4,000 | — | ||||||
| Income taxes payable |
555 | 284 | ||||||
| Current portion of deferred revenue |
52,583 | 37,103 | ||||||
| Current portion of long-term debt |
— | 16,871 | ||||||
| Total current liabilities |
67,876 | 63,027 | ||||||
| Long-term liabilities: |
||||||||
| Deferred revenue, net of current portion |
3,175 | 1,544 | ||||||
| Other long-term liabilities |
817 | 607 | ||||||
| Long-term debt, net of current portion |
— | 27,226 | ||||||
| Total long-term liabilities |
3,992 | 29,377 | ||||||
| Total liabilities |
71,868 | 92,404 | ||||||
| Commitments and contingencies |
||||||||
| Stockholders’ equity: |
||||||||
| Common stock, $0.001 par value: 123,000,000 shares authorized and 71,658,808 and 66,502,098 shares issued as of December 31, 2010 and 2009, respectively |
72 | 67 | ||||||
| Additional paid-in capital |
165,972 | 123,083 | ||||||
| Accumulated other comprehensive loss |
(1,256 | ) | (159 | ) | ||||
| Retained earnings (deficit) |
10,821 | (33,925 | ) | |||||
| Total stockholders’ equity |
175,609 | 89,066 | ||||||
| Total liabilities and stockholders’ equity |
$ | 247,477 | $ | 181,470 | ||||
SolarWinds, Inc.
Consolidated Statements of Income
(In thousands, except per share information)
(Unaudited)
| Three Months Ended December 31, | Year Ended December 31, | |||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
| Revenue: |
||||||||||||||||
| License |
$ | 19,868 | $ | 17,601 | $ | 75,603 | $ | 62,378 | ||||||||
| Maintenance and other |
21,538 | 15,378 | 76,790 | 54,068 | ||||||||||||
| Total revenue |
41,406 | 32,979 | 152,393 | 116,446 | ||||||||||||
| Cost of license revenue |
636 | 36 | 1,943 | 494 | ||||||||||||
| Cost of maintenance and other revenue |
1,638 | 1,239 | 5,987 | 4,366 | ||||||||||||
| Gross profit |
39,132 | 31,704 | 144,463 | 111,586 | ||||||||||||
| Operating expenses: |
||||||||||||||||
| Sales and marketing |
11,322 | 8,858 | 43,252 | 30,548 | ||||||||||||
| Research and development |
4,226 | 3,032 | 15,731 | 11,199 | ||||||||||||
| General and administrative |
5,370 | 12,911 | 23,476 | 26,038 | ||||||||||||
| Total operating expenses |
20,918 | 24,801 | 82,459 | 67,785 | ||||||||||||
| Operating income |
18,214 | 6,903 | 62,004 | 43,801 | ||||||||||||
| Other income (expense): |
||||||||||||||||
| Interest income |
42 | 42 | 177 | 267 | ||||||||||||
| Interest expense |
— | (594 | ) | (1,146 | ) | (4,253 | ) | |||||||||
| Other income |
78 | 178 | 115 | 90 | ||||||||||||
| Total other income (expense) |
120 | (374 | ) | (854 | ) | (3,896 | ) | |||||||||
| Income before income taxes |
18,334 | 6,529 | 61,150 | 39,905 | ||||||||||||
| Income tax expense (benefit) |
3,020 | (19 | ) | 16,404 | 10,396 | |||||||||||
| Net income |
$ | 15,314 | $ | 6,548 | $ | 44,746 | $ | 29,509 | ||||||||
| Net income per share: |
||||||||||||||||
| Basic earnings per share |
$ | 0.22 | $ | 0.10 | $ | 0.65 | $ | 0.58 | ||||||||
| Diluted earnings per share |
$ | 0.21 | $ | 0.09 | $ | 0.61 | $ | 0.52 | ||||||||
| Weighted shares used to compute net income per share: |
||||||||||||||||
| Shares used in computation of basic earnings per share |
70,503 | 65,661 | 68,664 | 51,042 | ||||||||||||
| Shares used in computation of diluted earnings per share |
73,041 | 71,935 | 72,862 | 56,824 | ||||||||||||
SolarWinds, Inc.
Reconciliation of GAAP to Non-GAAP Financial Measures
(In thousands)
(Unaudited)
| Three Months Ended December 31, 2010 |
Three Months Ended December 31, 2009 |
|||||||||||||||||||||||
| GAAP | Adjustments | Non-GAAP | GAAP | Adjustments | Non-GAAP | |||||||||||||||||||
| Total revenue |
$ | 41,406 | $ | — | $ | 41,406 | $ | 32,979 | $ | — | $ | 32,979 | ||||||||||||
| Gross profit |
39,132 | 499 | 39,631 | 31,704 | 57 | 31,761 | ||||||||||||||||||
| Operating expenses |
20,918 | (2,713 | ) | 18,205 | 24,801 | (10,755 | ) | 14,046 | ||||||||||||||||
| Operating income |
18,214 | 3,212 | (a) | 21,426 | 6,903 | 10,812 | (a) | 17,715 | ||||||||||||||||
| Total other expense (income) |
120 | 95 | (b) | 215 | (374 | ) | — | (374 | ) | |||||||||||||||
| Income before income taxes |
18,334 | 3,307 | 21,641 | 6,529 | 10,812 | 17,341 | ||||||||||||||||||
| Income tax expense (benefit) |
3,020 | 907 | (c) | 3,927 | (19 | ) | 3,741 | (c) | 3,722 | |||||||||||||||
| Net income |
$ | 15,314 | $ | 2,400 | $ | 17,714 | $ | 6,548 | $ | 7,071 | $ | 13,619 | ||||||||||||
| (a) | Reflects the reversal of amortization of intangible assets, stock-based compensation expense and related employer-paid payroll taxes and other excluded expenses as follows: |
| Amortization of intangible assets:
|
||||||||
| Three Months
Ended December 31, |
||||||||
| 2010 | 2009 | |||||||
| Cost of license revenue |
$ | 464 | $ | 30 | ||||
| Sales and marketing |
— | — | ||||||
| Research and development |
— | — | ||||||
| General and administrative |
388 | 81 | ||||||
|
Stock-based compensation expense and related employer-paid payroll taxes:
|
||||||||
| Three Months
Ended December 31, |
||||||||
| 2010 | 2009 | |||||||
| Cost of maintenance revenue |
$ | 35 | $ | 27 | ||||
| Sales and marketing |
568 | 575 | ||||||
| Research and development |
393 | 356 | ||||||
| General and administrative |
1,273 | 1,483 | ||||||
|
Other excluded expenses:
|
||||||||
| Three Months
Ended December 31, |
||||||||
| 2010 | 2009 | |||||||
| Lawsuit settlement costs and related legal fees |
$ | — | $ | 7,480 | ||||
| Public offering costs (d) |
— | 720 | ||||||
| Acquisition related costs |
91 | 60 | ||||||
| (b) | Represents the change in fair value of the contingent consideration potentially payable under the asset purchase agreement with Tek-Tools, Inc. |
| (c) | Reflects the removal of the tax benefits associated with amortization of intangible assets, stock-based compensation expense and related employer-paid payroll taxes and other excluded expenses. |
| (d) | Represents expenses related to a public offering completed in the fourth quarter of 2009. |
SolarWinds, Inc.
Reconciliation of GAAP to Non-GAAP Financial Measures
(In thousands)
(Unaudited)
| Year Ended December 31, 2010 |
Year Ended December 31, 2009 |
|||||||||||||||||||||||
| GAAP | Adjustments | Non-GAAP | GAAP | Adjustments | Non-GAAP | |||||||||||||||||||
| Total revenue |
$ | 152,393 | $ | — | $ | 152,393 | $ | 116,446 | $ | — | $ | 116,446 | ||||||||||||
| Gross profit |
144,463 | 1,899 | 146,362 | 111,586 | 562 | 112,148 | ||||||||||||||||||
| Operating expenses |
82,459 | (13,980 | ) | 68,479 | 67,785 | (17,667 | ) | 50,118 | ||||||||||||||||
| Operating income |
62,004 | 15,879 | (a) | 77,883 | 43,801 | 18,229 | (a) | 62,030 | ||||||||||||||||
| Total other expense |
(854 | ) | 591 | (b) | (263 | ) | (3,896 | ) | 428 | (b) | (3,468 | ) | ||||||||||||
| Income before income taxes |
61,150 | 16,470 | 77,620 | 39,905 | 18,657 | 58,562 | ||||||||||||||||||
| Income tax expense |
16,404 | 4,494 | (c) | 20,898 | 10,396 | 5,434 | (c) | 15,830 | ||||||||||||||||
| Net income |
$ | 44,746 | $ | 11,976 | $ | 56,722 | $ | 29,509 | $ | 13,223 | $ | 42,732 | ||||||||||||
| Recalculated | ||||||||||||||||||||||||
| (a) | Reflects the reversal of amortization of intangible assets, stock-based compensation expense and related employer-paid payroll taxes and other excluded expenses as follows: |
| Amortization of intangible assets:
|
||||||||
| Year Ended December 31, |
||||||||
| 2010 | 2009 | |||||||
| Cost of license revenue |
$ | 1,730 | $ | 480 | ||||
| Sales and marketing |
— | — | ||||||
| Research and development |
— | — | ||||||
| General and administrative |
1,440 | 209 | ||||||
|
Stock-based compensation expense and related employer-paid payroll taxes:
|
||||||||
| Year Ended December 31, |
||||||||
| 2010 | 2009 | |||||||
| Cost of maintenance revenue |
$ | 169 | $ | 82 | ||||
| Sales and marketing |
2,788 | 2,056 | ||||||
| Research and development |
1,638 | 1,189 | ||||||
| General and administrative |
7,452 | 4,882 | ||||||
|
Other excluded expenses:
|
||||||||
| Year Ended December 31, |
||||||||
| 2010 | 2009 | |||||||
| Lawsuit settlement costs and related legal fees |
$ | (217 | ) | $ | 8,551 | |||
| Public offering costs (d) |
170 | 720 | ||||||
| Acquisition related costs |
501 | 60 | ||||||
| Severance costs related to retirement of former Executive Chairman |
208 | — | ||||||
| (b) | Represents a decrease of $334 and $428 in the amortization of debt issuance costs due to the repayment of all or a portion of the long-term debt during the year ended December 31, 2010 and 2009, respectively. The remaining expenses of $257 for the year ended December 31, 2010 represent a change in fair value of the contingent consideration potentially payable under the asset purchase agreement with Tek-Tools, Inc. |
| (c) | Reflects the removal of the tax benefits associated with amortization of intangible assets, stock-based compensation expense and related employer-paid payroll taxes and other excluded expenses. |
| (d) | Represents expenses of $19 and $720 for the year ended December 31, 2010 and 2009, respectively, related to a public offering completed in the fourth quarter of 2009. The remaining third-party expenses of $151 for the year ended December 31, 2010 related to a potential public offering that was cancelled during the second quarter of 2010. |
SolarWinds, Inc.
Reconciliation of Diluted Earnings Per Share to Non-GAAP Diluted Earnings Per Share
(In thousands, except per share information)
(Unaudited)
| Three Months Ended December 31, |
Year Ended December 31, |
|||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
| Numerator: |
||||||||||||||||
| Reconciliation between GAAP and non-GAAP net income: |
||||||||||||||||
| Net income |
$ | 15,314 | $ | 6,548 | $ | 44,746 | $ | 29,509 | ||||||||
| Reversal of intangible assets amortization |
852 | 111 | 3,170 | 689 | ||||||||||||
| Reversal of stock-based compensation expense and related employer-paid payroll taxes |
2,269 | 2,441 | 12,047 | 8,209 | ||||||||||||
| Reversal of debt issuance costs write-off |
— | — | 334 | 428 | ||||||||||||
| Reversal of public offering costs |
— | 720 | 170 | 720 | ||||||||||||
| Reversal of lawsuit settlement costs and related legal fees |
— | 7,480 | (217 | ) | 8,551 | |||||||||||
| Reversal of acquisition related costs |
186 | 60 | 758 | 60 | ||||||||||||
| Reversal of severance costs related to retirement of former Executive Chairman |
— | — | 208 | — | ||||||||||||
| Reversal of tax benefits associated with above adjustments |
(907 | ) | (3,741 | ) | (4,494 | ) | (5,434 | ) | ||||||||
| Non-GAAP net income |
$ | 17,714 | $ | 13,619 | $ | 56,722 | $ | 42,732 | ||||||||
| Denominator: |
||||||||||||||||
| Reconciliation between GAAP and non-GAAP weighted average shares used in computing diluted earnings per share: |
||||||||||||||||
| Weighted average number of shares used in computing diluted earnings per share |
73,041 | 71,935 | 72,862 | 56,824 | ||||||||||||
| Pro forma adjustments to reflect assumed weighted average effect of conversion of preferred stock (a) |
— | — | — | 10,356 | ||||||||||||
| Non-GAAP weighted average shares used in computing non-GAAP diluted earnings per share (b) |
73,041 | 71,935 | 72,862 | 67,180 | ||||||||||||
| Diluted earnings per share |
$ | 0.21 | $ | 0.09 | $ | 0.61 | $ | 0.52 | ||||||||
| Non-GAAP diluted earnings per share |
$ | 0.24 | $ | 0.19 | $ | 0.78 | $ | 0.64 | ||||||||
| (a) | Represents common shares from the conversion of convertible preferred shares as if the shares were converted as of the beginning of the indicated period. |
| (b) | If the company assumed the common shares issued in its initial public offering in May 2009 were issued as of the beginning of the comparable period, or January 1, 2009, then the weighted average shares used in computing non-GAAP diluted earnings per share and the non-GAAP diluted earnings per share would have been 70,924 shares and $0.60 per share, respectively, for the year ended December 31, 2009. |
SolarWinds, Inc.
Reconciliation of GAAP Revenue to Non-GAAP Revenue on a Constant Currency Basis
(In thousands)
(Unaudited)
Revenue on a constant currency basis is calculated using the average foreign exchange rates in the monthly periods during a previous quarter or year and applying these rates to foreign-denominated revenue in the corresponding monthly periods in the fourth quarter of 2010 or in the year ended 2010. The difference between revenue calculated based on these foreign exchange rates and revenue calculated in accordance with GAAP is listed as foreign exchange impact in the table below.
| Fourth Quarter 2010 Revenue Using Foreign Exchange Rates in Third Quarter of 2010 |
Fourth Quarter 2010 Revenue Using Foreign Exchange Rates in Fourth Quarter of 2009 |
Year Ended 2010 Revenue Using Foreign Exchange Rates in Year Ended 2009 |
||||||||||
| License revenue |
$ | 19,868 | $ | 19,868 | $ | 75,603 | ||||||
| Foreign exchange impact on license revenue |
(246 | ) | 521 | 1,080 | ||||||||
| License revenue on a constant currency basis |
$ | 19,622 | $ | 20,389 | $ | 76,683 | ||||||
| Maintenance and other revenue |
$ | 21,538 | $ | 21,538 | $ | 76,790 | ||||||
| Foreign exchange impact on maintenance and other revenue |
(230 | ) | 394 | 927 | ||||||||
| Maintenance and other revenue on a constant currency basis |
$ | 21,308 | $ | 21,932 | $ | 77,717 | ||||||
| Total revenue |
$ | 41,406 | $ | 41,406 | $ | 152,393 | ||||||
| Foreign exchange impact on total revenue |
(476 | ) | 915 | 2,007 | ||||||||
| Total revenue on a constant currency basis |
$ | 40,930 | $ | 42,321 | $ | 154,400 | ||||||
SolarWinds, Inc.
Reconciliation of GAAP Cash Flows From Operating Activities to Free Cash Flow
(In thousands)
(Unaudited)
| Three Months Ended December 30, |
Year Ended December 30, |
|||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
| Reconciliation between GAAP cash flows from operating activities and free cash flow: |
||||||||||||||||
| GAAP cash flows from operating activities |
$ | 19,994 | $ | 13,204 | $ | 66,043 | $ | 49,225 | ||||||||
| Excess tax benefit from stock-based compensation |
9,381 | 6,522 | 26,748 | 8,734 | ||||||||||||
| Purchases of property and equipment |
(773 | ) | (923 | ) | (2,740 | ) | (2,729 | ) | ||||||||
| Free cash flow |
$ | 28,602 | $ | 18,803 | $ | 90,051 | $ | 55,230 | ||||||||
SolarWinds, Inc.
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
| Three Months Ended December 31, |
Year Ended December 31, |
|||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
| Cash flows from operating activities |
||||||||||||||||
| Net income |
$ | 15,314 | $ | 6,548 | $ | 44,746 | $ | 29,509 | ||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||||||||||
| Depreciation and amortization |
1,602 | 539 | 5,498 | 2,166 | ||||||||||||
| Provision for doubtful accounts |
60 | 43 | 194 | 175 | ||||||||||||
| Stock-based compensation expense |
1,926 | 2,263 | 10,880 | 7,891 | ||||||||||||
| Expenses paid by stockholder |
— | 2,100 | — | 2,100 | ||||||||||||
| Deferred taxes |
(2,629 | ) | (100 | ) | (2,220 | ) | (281 | ) | ||||||||
| Excess tax benefit from stock-based compensation |
(9,381 | ) | (6,522 | ) | (26,748 | ) | (8,734 | ) | ||||||||
| Other non-cash expenses |
(209 | ) | 19 | 470 | 915 | |||||||||||
| Changes in operating assets and liabilities, net of assets acquired and liabilities assumed in business combinations: |
||||||||||||||||
| Accounts receivable |
3,766 | 5,125 | (5,078 | ) | (2,099 | ) | ||||||||||
| Income taxes receivable |
— | (6 | ) | 31 | 613 | |||||||||||
| Prepaid income taxes |
— | (4,675 | ) | 4,675 | (4,675 | ) | ||||||||||
| Prepaid and other current assets |
(769 | ) | (30 | ) | (1,199 | ) | (673 | ) | ||||||||
| Accounts payable |
235 | 1,091 | (1,127 | ) | 1,791 | |||||||||||
| Accrued liabilities |
2,487 | (291 | ) | 3,958 | 1,581 | |||||||||||
| Accrued interest payable |
— | (35 | ) | (539 | ) | (1,472 | ) | |||||||||
| Income taxes payable |
5,447 | 5,087 | 17,160 | 9,078 | ||||||||||||
| Deferred revenue and other liabilities |
2,145 | 2,048 | 15,342 | 11,340 | ||||||||||||
| Net cash provided by operating activities |
19,994 | 13,204 | 66,043 | 49,225 | ||||||||||||
| Cash flows from investing activities |
||||||||||||||||
| Purchases of property and equipment |
(773 | ) | (923 | ) | (2,740 | ) | (2,729 | ) | ||||||||
| Purchases of intangible assets and other |
(144 | ) | (96 | ) | (795 | ) | (401 | ) | ||||||||
| Acquisition of businesses |
— | — | (28,039 | ) | (46 | ) | ||||||||||
| Net cash used in investing activities |
(917 | ) | (1,019 | ) | (31,574 | ) | (3,176 | ) | ||||||||
| Cash flows from financing activities |
||||||||||||||||
| Repurchase of common stock |
— | — | (24,987 | ) | — | |||||||||||
| Net cash proceeds from initial public offering |
— | — | — | 104,625 | ||||||||||||
| Exercise of stock options |
6,261 | 5,833 | 21,032 | 8,518 | ||||||||||||
| Excess tax benefit from stock-based compensation |
9,381 | 6,522 | 26,748 | 8,734 | ||||||||||||
| Repayment of long-term debt |
— | — | (44,097 | ) | (56,986 | ) | ||||||||||
| Repayments of capital lease obligations |
— | (7 | ) | (9 | ) | (26 | ) | |||||||||
| Payments for offering costs |
— | (249 | ) | — | (1,745 | ) | ||||||||||
| Earnout dividend paid |
— | (20,000 | ) | — | (20,000 | ) | ||||||||||
| Net cash provided by (used in) financing activities |
15,642 | (7,901 | ) | (21,313 | ) | 43,120 | ||||||||||
| Effect of exchange rate changes on cash and cash equivalents |
(553 | ) | (301 | ) | (941 | ) | 53 | |||||||||
| Net increase in cash and cash equivalents |
34,166 | 3,983 | 12,215 | 89,222 | ||||||||||||
| Cash and cash equivalents |
||||||||||||||||
| Beginning of period |
107,837 | 125,805 | 129,788 | 40,566 | ||||||||||||
| End of period |
$ | 142,003 | $ | 129,788 | $ | 142,003 | $ | 129,788 | ||||||||
| Supplemental disclosure of cash flow information |
||||||||||||||||
| Cash paid for interest |
$ | — | $ | 574 | $ | 1,280 | $ | 4,976 | ||||||||
| Cash paid (received) for income taxes |
$ | 175 | $ | (238 | ) | $ | (3,282 | ) | $ | 5,665 | ||||||
| Noncash investing and financing transactions |
||||||||||||||||
| Accrued earnout |
$ | 257 | $ | — | $ | 4,000 | $ | — | ||||||||
| Stock issued for acquisition |
$ | — | $ | — | $ | 9,221 | $ | — | ||||||||
| Conversion of preferred stock to common stock |
$ | — | $ | — | $ | — | $ | 27 | ||||||||