Attached files
| file | filename |
|---|---|
| 8-K - FORM 8-K - SolarWinds, Inc. | d8k.htm |
Exhibit 99.1
SolarWinds Announces First Quarter 2011 Results
AUSTIN, Texas – May 4, 2011 – SolarWinds® (NYSE: SWI), a leading provider of powerful and affordable IT management software, today reported results for its first quarter ended March 31, 2011.
| • | Record quarterly total revenue of $43.0 million, representing 25% year-over-year growth. |
| • | GAAP operating income of $17.1 million and non-GAAP operating income of $22.1 million, or a non-GAAP operating margin of 51%. |
| • | GAAP diluted earnings per share of $0.16 and non-GAAP diluted earnings per share of $0.21. |
| • | Free cash flow of $21.8 million, representing 14% year-over-year growth. |
Financial Results
SolarWinds reported record total revenue for the first quarter of 2011 of $43.0 million, a 25% increase over total revenue in the first quarter of 2010. License revenue was $20.4 million in the first quarter of 2011, representing a 16% increase over license revenue in the first quarter of 2010. Maintenance revenue was a record $22.6 million in the first quarter of 2011, representing a 35% increase over maintenance revenue in the first quarter of 2010.
On a GAAP basis, diluted earnings per share were $0.16 in the first quarter of 2011 compared to $0.12 in the first quarter of 2010. Non-GAAP diluted earnings per share were $0.21 in the first quarter of 2011 compared to $0.16 in the first quarter of 2010.
Net cash provided by operating activities was $18.9 million in the first quarter of 2011 compared to $15.9 million for the first quarter of 2010, representing a year-over-year increase of 18%. Free cash flow was $21.8 million in the first quarter of 2011 compared to $19.2 million for the first quarter of 2010, representing a year-over-year increase of 14%.
Cash and cash equivalents at the end of the first quarter of 2011 were $143.3 million, an increase of $1.3 million from the end of the fourth quarter of 2010 despite cash payments during the first quarter of $23.0 million for the acquisition of Hyper9 and $4.0 million for the earnout payment associated with the acquisition of Tek-Tools in 2010.
The financial results included in this press release are preliminary and pending final review by the company and its external auditors. Financial results will not be final until SolarWinds files its quarterly report on Form 10-Q for the period. Information about SolarWinds’ use of these non-GAAP financial measures is provided below under “Non-GAAP Financial Measures.”
Recent Business Highlights
“We believe that 2011 is off to a solid start — the company generated another quarter of record revenue and made good progress on one of our key objectives for the year: extending our product portfolio beyond our traditional network management focus,” said Kevin Thompson, SolarWinds’ President and CEO.
“During the first quarter, we acquired Hyper9, a provider of virtualization management software and released a number of new products, including SolarWinds Application Performance Monitor. We’re very encouraged by the traction these products have gained so far. Throughout the remainder of the year, we plan to build on this positive momentum, expanding our product portfolio to serve a wider audience of IT professionals across a growing global footprint.”
SolarWinds’ business highlights during the first quarter of 2011 include:
| • | In the first ten weeks following the acquisition, SolarWinds increased the number of Hyper9 customers by nearly 250%, showing the advantage of our high volume inside sales model. Hyper9 adds optimization, capacity planning, configuration, and chargeback reporting for virtualized server environments to SolarWinds’ portfolio. |
| • | SolarWinds released Application Performance Monitor (APM), a comprehensive application and systems management solution that provides visibility into the performance of critical IT services, the underlying application components, the operating system, and the Windows, Unix and Linux server resources on which they run. |
| • | SolarWinds released Orion IP Address Manager (IPAM) as a standalone solution. Orion IPAM delivers powerful and affordable IP address management to companies of all sizes and IT budgets looking to more effectively manage IP address usage across their organization and prepare for an IPv6 migration. |
| • | SolarWinds introduced SNMP Enabler for Windows, a free tool for system administrators to install, configure, and enable SNMP on remote Windows servers and workstations. SolarWinds also introduced Switch Port Mapper, an affordable tool for discovering the devices connected to each port on a switch or hub. |
“Our results for the first quarter underscore the strength of our financial model,” added Mike Berry, SolarWinds’ Chief Financial Officer. “We generated higher than expected margins and cash flow and even grew our cash balance despite the acquisition of Hyper9 during the quarter. As we look ahead, we are encouraged by our continued ability to invest meaningfully for growth while delivering robust profitability and cash flow.”
Financial Outlook
As of May 4, 2011, SolarWinds is providing its financial outlook for its second 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 second 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 Second Quarter of 2011
SolarWinds management currently expects to achieve the following results for the second quarter of 2011:
| • | Total revenue in the range of $43.2–$44.7 million. |
| • | Non-GAAP operating income representing 47%–48% of revenue. |
| • | Non-GAAP diluted earnings per share of $0.19–$0.20. |
| • | Weighted average shares outstanding of approximately 75.0 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 $185.5–$191.5 million. |
| • | Non-GAAP operating income representing approximately 49% of revenue. |
| • | Non-GAAP diluted earnings per share of $0.83–$0.89. |
| • | 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 888-352-6803 and internationally at +1-719-785-9448. 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 extend its product portfolio to serve a wider audience of IT professionals across a growing global footprint and its belief in its continued ability to invest meaningfully for growth while delivering robust profitability 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,” “plans,” “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-Q that SolarWinds anticipates filing on or before May 10, 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 certain non-GAAP financial measures. The tables below set forth 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 certain of these non-GAAP measures to assess operational performance and 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 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.
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 can have a material impact on operating and net income. 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 the most comparable GAAP measures. 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 set forth in the tables below.
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.
Condensed Consolidated Balance Sheets
(In thousands, except share and per share information)
(Unaudited)
| March 31, 2011 |
December 31, 2010 |
|||||||
| Assets |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 143,317 | $ | 142,003 | ||||
| Accounts receivable, net of allowances of $196 and $201 as of March 31, 2011 and December 31, 2010, respectively |
20,830 | 20,255 | ||||||
| Income tax receivable |
9,068 | 10,350 | ||||||
| Deferred taxes |
318 | 261 | ||||||
| Other current assets |
1,996 | 3,210 | ||||||
| Total current assets |
175,529 | 176,079 | ||||||
| Property and equipment, net |
6,833 | 6,702 | ||||||
| Deferred taxes |
7,805 | 4,099 | ||||||
| Goodwill |
55,399 | 40,424 | ||||||
| Intangible assets and other, net |
28,415 | 20,173 | ||||||
| Total assets |
$ | 273,981 | $ | 247,477 | ||||
| Liabilities and stockholders’ equity |
||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 1,893 | $ | 2,150 | ||||
| Accrued liabilities |
6,188 | 8,588 | ||||||
| Accrued earnout |
3,938 | 4,000 | ||||||
| Income taxes payable |
897 | 555 | ||||||
| Current portion of deferred revenue |
56,807 | 52,583 | ||||||
| Total current liabilities |
69,723 | 67,876 | ||||||
| Long-term liabilities: |
||||||||
| Deferred revenue, net of current portion |
3,237 | 3,175 | ||||||
| Other long-term liabilities |
1,087 | 817 | ||||||
| Total liabilities |
74,047 | 71,868 | ||||||
| Commitments and contingencies |
||||||||
| Stockholders’ equity: |
||||||||
| Common stock, $0.001 par value: 123,000,000 shares authorized and 72,591,764 and 71,658,808 shares issued and outstanding as of March 31, 2011 and December 31, 2010, respectively |
73 | 72 | ||||||
| Additional paid-in capital |
177,398 | 165,972 | ||||||
| Accumulated other comprehensive income (loss) |
237 | (1,256 | ) | |||||
| Accumulated earnings |
22,226 | 10,821 | ||||||
| Total stockholders’ equity |
199,934 | 175,609 | ||||||
| Total liabilities and stockholders’ equity |
$ | 273,981 | $ | 247,477 | ||||
SolarWinds, Inc.
Condensed Consolidated Statements of Income
(In thousands, except per share information)
(Unaudited)
| Three Months Ended March 31, | ||||||||
| 2011 | 2010 | |||||||
| Revenue: |
||||||||
| License |
$ | 20,380 | $ | 17,621 | ||||
| Maintenance and other |
22,598 | 16,704 | ||||||
| Total revenue |
42,978 | 34,325 | ||||||
| Cost of license revenue |
765 | 355 | ||||||
| Cost of maintenance and other revenue |
1,721 | 1,344 | ||||||
| Gross profit |
40,492 | 32,626 | ||||||
| Operating expenses: |
||||||||
| Sales and marketing |
11,727 | 10,249 | ||||||
| Research and development |
5,038 | 3,627 | ||||||
| General and administrative |
6,670 | 5,321 | ||||||
| Total operating expenses |
23,435 | 19,197 | ||||||
| Operating income |
17,057 | 13,429 | ||||||
| Other income (expense): |
||||||||
| Interest income |
55 | 33 | ||||||
| Interest expense |
— | (783 | ) | |||||
| Other income (expense) |
(306 | ) | 48 | |||||
| Total other income (expense) |
(251 | ) | (702 | ) | ||||
| Income before income taxes |
16,806 | 12,727 | ||||||
| Income tax expense |
5,096 | 3,790 | ||||||
| Net income |
$ | 11,710 | $ | 8,937 | ||||
| Net income per share: |
||||||||
| Basic earnings per share |
$ | 0.16 | $ | 0.13 | ||||
| Diluted earnings per share |
$ | 0.16 | $ | 0.12 | ||||
| Weighted shares used to compute net income per share: |
||||||||
| Shares used in computation of basic earnings per share |
72,368 | 67,268 | ||||||
| Shares used in computation of diluted earnings per share |
74,003 | 72,851 | ||||||
SolarWinds, Inc.
Reconciliation of GAAP to Non-GAAP Financial Measures
(In thousands, except per share amounts and percentages)
(Unaudited)
| Three Months Ended March 31, | ||||||||
| 2011 | 2010 | |||||||
| GAAP cost of revenue |
2,486 | 1,699 | ||||||
| Stock-based compensation expense and related employer-paid payroll taxes (1) |
(53 | ) | (44 | ) | ||||
| Amortization of intangible assets (2) |
(701 | ) | (349 | ) | ||||
| Non-GAAP cost of revenue |
1,732 | 1,306 | ||||||
| GAAP gross profit |
40,492 | 32,626 | ||||||
| Stock-based compensation expense and related employer-paid payroll taxes (1) |
53 | 44 | ||||||
| Amortization of intangible assets (2) |
701 | 349 | ||||||
| Non-GAAP gross profit |
41,246 | 33,019 | ||||||
| GAAP gross profit as a % of revenue |
94.2 | % | 95.1 | % | ||||
| Stock-based compensation expense and related employer-paid payroll taxes as a % of revenue (1) |
0.1 | % | 0.1 | % | ||||
| Amortization of intangible assets as a % of revenue (2) |
1.6 | % | 1.0 | % | ||||
| Non-GAAP gross profit as a % of revenue |
96.0 | % | 96.2 | % | ||||
| GAAP sales and marketing expense |
11,727 | 10,249 | ||||||
| Stock-based compensation expense and related employer-paid payroll taxes (1) |
(909 | ) | (659 | ) | ||||
| Non-GAAP sales and marketing expense |
10,818 | 9,590 | ||||||
| GAAP research and development expense |
5,038 | 3,627 | ||||||
| Stock-based compensation expense and related employer-paid payroll taxes (1) |
(470 | ) | (377 | ) | ||||
| Non-GAAP research and development expense |
4,568 | 3,250 | ||||||
| GAAP general and administrative expense |
6,670 | 5,321 | ||||||
| Stock-based compensation expense and related employer-paid payroll taxes (1) |
(1,428 | ) | (1,442 | ) | ||||
| Amortization of intangible assets (2) |
(471 | ) | (282 | ) | ||||
| Acquisition related costs (3) |
(1,004 | ) | (266 | ) | ||||
| Public offering costs (4) |
— | (19 | ) | |||||
| Lawsuit settlement costs and related legal fees reimbursements (4) |
— | 148 | ||||||
| Non-GAAP general and administrative expense |
3,767 | 3,460 | ||||||
| GAAP operating expense |
23,435 | 19,197 | ||||||
| Stock-based compensation expense and related employer-paid payroll taxes (1) |
(2,807 | ) | (2,478 | ) | ||||
| Amortization of intangible assets (2) |
(471 | ) | (282 | ) | ||||
| Acquisition related costs (3) |
(1,004 | ) | (266 | ) | ||||
| Public offering costs (4) |
— | (19 | ) | |||||
| Lawsuit settlement costs and related legal fees reimbursements (4) |
— | 148 | ||||||
| Non-GAAP operating expense |
19,153 | 16,300 | ||||||
| GAAP operating income |
17,057 | 13,429 | ||||||
| Stock-based compensation expense and related employer-paid payroll taxes (1) |
2,860 | 2,522 | ||||||
| Amortization of intangible assets (2) |
1,172 | 631 | ||||||
| Acquisition related costs (3) |
1,004 | 266 | ||||||
| Public offering costs (4) |
— | 19 | ||||||
| Lawsuit settlement costs and related legal fees (reimbursements) (4) |
— | (148 | ) | |||||
| Non-GAAP operating income |
22,093 | 16,719 | ||||||
| GAAP operating margin |
39.7 | % | 39.1 | % | ||||
| Stock-based compensation expense and related employer-paid payroll taxes as a % of revenue (1) |
6.7 | % | 7.3 | % | ||||
| Amortization of intangible assets as a % of revenue (2) |
2.7 | % | 1.8 | % | ||||
| Acquisition related costs as a % of revenue (3) |
2.3 | % | 0.8 | % | ||||
| Public offering costs as a % of revenue (4) |
— | 0.1 | % | |||||
| Lawsuit settlement costs and related legal fees (reimbursements) as a % of revenue (4) |
— | (0.4 | )% | |||||
| Non-GAAP operating margin |
51.4 | % | 48.7 | % | ||||
| GAAP other income (expense), net |
(251 | ) | (702 | ) | ||||
| Debt issuance costs write-off (4) |
— | 203 | ||||||
| Non-GAAP other income (expense), net |
(251 | ) | (499 | ) | ||||
| GAAP income tax expense |
5,096 | 3,790 | ||||||
| Income tax effect on non-GAAP exclusions (4) |
1,047 | 884 | ||||||
| Non-GAAP income tax expense |
6,143 | 4,674 | ||||||
| GAAP net income |
11,710 | 8,937 | ||||||
| Stock-based compensation expense and related employer-paid payroll taxes (1) |
2,860 | 2,522 | ||||||
| Amortization of intangible assets (2) |
1,172 | 631 | ||||||
| Acquisition related costs (3) |
1,004 | 266 | ||||||
| Debt issuance costs write-off (4) |
— | 203 | ||||||
| Public offering costs (4) |
— | 19 | ||||||
| Lawsuit settlement costs and related legal fees (reimbursements) (4) |
— | (148 | ) | |||||
| Tax benefits associated with above adjustments (4) |
(1,047 | ) | (884 | ) | ||||
| Non-GAAP net income |
15,699 | 11,546 | ||||||
| Non-GAAP diluted earnings per share (5) |
0.21 | 0.16 | ||||||
| Weighted average shares used in computing diluted earnings per share |
74,003 | 72,851 | ||||||
| GAAP net income as a % of revenue |
27.2 | % | 26.0 | % | ||||
| Stock-based compensation expense and related employer-paid payroll taxes as a % of revenue (1) |
6.7 | % | 7.3 | % | ||||
| Amortization of intangible assets as a % of revenue (2) |
2.7 | % | 1.8 | % | ||||
| Acquisition related costs as a % of revenue (3) |
2.3 | % | 0.8 | % | ||||
| Debt issuance costs write-offas a % of revenue (4) |
— | 0.6 | % | |||||
| Public offering costs as a % of revenue (4) |
— | 0.1 | % | |||||
| Lawsuit settlement costs and related legal fees (reimbursements) as a % of revenue (4) |
— | (0.4 | )% | |||||
| Tax benefits associated with above adjustments as a % of revenue (4) |
(2.4 | )% | (2.6 | )% | ||||
| Non-GAAP net income as a % of revenue |
36.5 | % | 33.6 | % | ||||
| (1) | Stock-Based Compensation Expense and Related Employer-Paid Payroll Taxes. We provide non-GAAP information which excludes expenses for stock-based compensation and related employer-paid payroll taxes. We believe the exclusion of these items allows for financial results that are more indicative of our continuing operations. We believe that the exclusion of stock-based compensation expense provides for a better comparison of our operating results to prior periods and to our peer companies as the calculations of stock-based compensation vary from period to period and company to company due to different valuation methodologies, subjective assumptions and the variety of award types. Employer-paid payroll taxes on stock based compensation is dependent on our stock price and the timing of the taxable events related to the equity awards, over which our management has little control, does not correlate to the core operation of our business. Because of these unique characteristics of stock-based compensation and the related employer-paid payroll taxes, management excludes these expenses when analyzing the organization’s business performance. |
| (2) | Amortization of Intangible Assets. We provide non-GAAP information which excludes expenses for the amortization of intangible assets. Because of varying fair value amounts of intangible assets, subjective impairment assumptions and the variety of useful lives, which affect the recognition of amortization expense, we believe that the exclusion of amortization expense allows for more accurate comparisons of our operating results to our peer companies. We also exclude amortization of purchased intangible assets associated with our acquisitions. The amortization of purchased intangible assets associated with our acquisitions results in our recording expenses in our GAAP financial statements that were already expensed by the acquired company before the acquisition and for which we have not expended cash. Moreover, had we internally developed the products acquired, the amortization of intangible assets, and the expenses of uncompleted research and development would have been expensed in prior periods. Accordingly, we analyze the performance of our operations in each period without regard to such expenses. |
| (3) | Acquisition Related Charges. We exclude certain expense items resulting from acquisitions including the following, when applicable: (i) amortization of purchased intangible assets associated with our acquisitions (see Note 2 for further discussion); (ii) acquisition related charges such as legal, accounting and advisory fees; (iii) changes in fair value of contingent consideration; and (iv) restructuring costs related to acquisitions. Acquisitions result in non-continuing operating expenses, which would not otherwise have been incurred by us in the normal course of our business operations. We believe that providing non-GAAP information for acquisition related expense items in addition to the corresponding GAAP information allows the users of our financial statements to better review and understand the historic and current results of our continuing operations, and also facilitates comparisons to less acquisitive peer companies. |
| (4) | Other Items. We exclude certain other unplanned items which we believe are not indicative of our continuing operations and which amounts and timing are difficult to estimate in advance, including the following, when applicable: (i) write-off of debt issuance costs; (ii) public offering costs; (iii) lawsuit settlement costs and related legal fees, net of related reimbursements from insurance proceeds; (iv) severance costs related to retirement of certain executive officers; and (v) the income tax effect on our financial statements of excluding items related to our non-GAAP financial measures. Although these events are reflected in our GAAP financials, these transactions which are not indicative of our continuing operations may limit the comparability of our ongoing operations with prior and future periods. We also believe providing financial information with and without the income tax effect of excluding items related to our non-GAAP financial measures provide our management and users of the financial statements with better clarity regarding the on-going performance and future liquidity of our business. Because of these factors, we assess our operating performance both with these amounts included and excluded, and by providing this information, we believe the users of our financial statements are better able to understand the financial results of what we consider our continuing operations. |
| (5) | Non-GAAP Net Income Per Share Item. We provide diluted non-GAAP net income per share. The diluted non-GAAP net income per share amount was calculated based on our non-GAAP net income and the weighted-average number of shares outstanding during the reporting period. The diluted non-GAAP income per share included additional dilution from potential issuance of common stock, except when such issuances would be anti-dilutive. |
SolarWinds, Inc.
Reconciliation of Free Cash Flow to GAAP Cash Flows From Operating Activities
(In thousands)
(Unaudited)
| Three Months Ended March 31, | ||||||||
| 2011 | 2010 | |||||||
| Reconciliation of free cash flow to GAAP cash flows from operating activities: |
||||||||
| GAAP cash flows from operating activities |
$ | 18,866 | $ | 15,923 | ||||
| Excess tax benefit from stock-based compensation |
3,565 | 3,883 | ||||||
| Purchases of property and equipment |
(598 | ) | (582 | ) | ||||
| Free cash flow |
$ | 21,833 | $ | 19,224 | ||||
SolarWinds, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
| Three Months Ended March 31, | ||||||||
| 2011 | 2010 | |||||||
| Cash flows from operating activities |
||||||||
| Net income |
$ | 11,710 | $ | 8,937 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
| Depreciation and amortization |
1,832 | 1,104 | ||||||
| Provision for doubtful accounts |
(11 | ) | 24 | |||||
| Stock-based compensation expense |
2,669 | 2,321 | ||||||
| Deferred taxes |
(472 | ) | (680 | ) | ||||
| Excess tax benefit from stock-based compensation |
(3,565 | ) | (3,883 | ) | ||||
| Other non-cash expenses |
110 | 304 | ||||||
| Changes in operating assets and liabilities, net of assets acquired and liabilities assumed in business combinations: |
||||||||
| Accounts receivable |
(288 | ) | (3,460 | ) | ||||
| Income taxes receivable |
10 | 100 | ||||||
| Prepaid income taxes |
— | 3,868 | ||||||
| Prepaid and other current assets |
1,420 | (523 | ) | |||||
| Accounts payable |
(278 | ) | (760 | ) | ||||
| Accrued liabilities |
(2,885 | ) | 391 | |||||
| Accrued interest payable |
— | (14 | ) | |||||
| Income taxes payable |
5,421 | 4,449 | ||||||
| Deferred revenue and other liabilities |
3,193 | 3,745 | ||||||
| Net cash provided by operating activities |
18,866 | 15,923 | ||||||
| Cash flows from investing activities |
||||||||
| Purchases of property and equipment |
(598 | ) | (582 | ) | ||||
| Purchases of intangible assets and other |
(108 | ) | (101 | ) | ||||
| Acquisition of businesses |
(23,000 | ) | (28,039 | ) | ||||
| Earnout payments for acquisitions |
(3,743 | ) | — | |||||
| Net cash used in investing activities |
(27,449 | ) | (28,722 | ) | ||||
| Cash flows from financing activities |
||||||||
| Repurchase of common stock |
(305 | ) | — | |||||
| Exercise of stock options |
5,193 | 3,269 | ||||||
| Excess tax benefit from stock-based compensation |
3,565 | 3,883 | ||||||
| Repayment of long-term debt |
— | (19,097 | ) | |||||
| Repayments of capital lease obligations |
— | (7 | ) | |||||
| Net cash provided by (used in) financing activities |
8,453 | (11,952 | ) | |||||
| Effect of exchange rate changes on cash and cash equivalents |
1,444 | (949 | ) | |||||
| Net increase (decrease) in cash and cash equivalents |
1,314 | (25,700 | ) | |||||
| Cash and cash equivalents |
||||||||
| Beginning of period |
142,003 | 129,788 | ||||||
| End of period |
$ | 143,317 | $ | 104,088 | ||||
| Supplemental disclosure of cash flow information |
||||||||
| Cash paid for interest |
$ | — | $ | 538 | ||||
| Cash paid (received) for income taxes |
$ | 88 | $ | (3,947 | ) | |||
| Noncash investing and financing transactions |
||||||||
| Accrued earnout |
$ | 3,938 | $ | 3,743 | ||||
| Stock issued for acquisition |
$ | — | $ | 9,221 | ||||