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@SolarWinds Announces Second Quarter 2014 Results #Financials
SolarWinds, a leading provider of powerful and affordable IT management software, today reported results for its second quarter ended June 30, 2014.
  • Total revenue for the second quarter of $101.5 million, representing 31% year-over-year growth.

  • Combined maintenance and subscription revenue for the second quarter of $63.9 million, representing 38% year-over-year growth in recurring revenue.

  • License revenue for the second quarter of $37.6 million, representing 21% year-over-year growth.

  • GAAP diluted earnings per share of $0.18 and non-GAAP diluted earnings per share of $0.41 for the second quarter.

  • GAAP operating income of $18.2 million, or a GAAP operating margin of 18%, and non-GAAP operating income of $42.7 million, or a non-GAAP operating margin of 42% for the second quarter.

Financial Results

SolarWinds reported total revenue for the second quarter of 2014 of $101.5 million, a 31% increase over total revenue for the second quarter of 2013. Record total recurring revenue, comprised of subscription revenue of $5.8 million and maintenance revenue of $58.0 million, reached $63.9 million, increasing by 38% over the second quarter of 2013, representing 63% of total revenue. License revenue was $37.6 million for the second quarter of 2014, representing a 21% increase over license revenue for the second quarter of 2013. 

On a GAAP basis, diluted earnings per share were $0.18 for the second quarter of 2014 compared to $0.30 for the second quarter of 2013. Non-GAAP diluted earnings per share were $0.41 for the second quarter of 2014, compared to $0.40 for the second quarter of 2013.

Net cash provided by operating activities was $51.0 million for the second quarter of 2014 compared to $40.7 million for the second quarter of 2013, representing a year-over-year increase of 25%.

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

"I am pleased to report that we delivered strong results in the second quarter. Total revenue for the second quarter exceeded $100 million for the first time in SolarWinds' history and we believe the progress we have made across many facets of our business has led to the improvement in the level and consistency of growth we achieved in the first half of the year," said Kevin Thompson, SolarWinds' President and Chief Executive Officer.

"We are focused on the opportunity to drive improving growth across our portfolio of network and systems management products. We are excited about the emerging opportunity to deliver SolarWinds' value proposition of powerful, easy-to-use, and affordable products to IT professionals in need of solutions to manage the performance of Cloud-based applications and their underlying, supporting infrastructure. Most importantly, we believe our ability to tie the on-premise world together with the nascent world of Cloud-based IT management for our users puts us in a good position to drive solid, long-term growth," added Thompson.

Recent SolarWinds business highlights include:

  • SolarWinds continued to build toward its holistic, application-centric vision of IT management, by continuing to focus on tighter technology integration of the company's products such as SolarWinds Server & Application Monitor and Virtualization Manager. As application performance becomes increasingly critical to business productivity, SolarWinds believes the new mantra for IT is moving from ensuring the basic availability of IT infrastructure to delivering critical application capabilities to end users. Delivering visibility into the performance of the entire application stack, regardless of where that application lives -- on-premise or in the Cloud -- will continue to be a priority for SolarWinds while still offering IT professionals the ability to solve their individual pain points with only the products they need, when they need them.

  • In June, SolarWinds acquired Pingdom, adding website and web application performance monitoring to the list of problems the company can solve for IT professionals. Given the ever-growing importance of websites to businesses of all sizes around the world, SolarWinds believes the acquisition represents an important step towards its vision for the future of IT management while also aligning well with the company's high volume, low touch go-to-market model. Given the timing of the acquisition late during the second quarter, Pingdom contributed only approximately $100,000 in subscription revenue during the second quarter.

  • Once again, SolarWinds was recognized by users and influencers in the IT management market through a number of honors for its product portfolio. These awards reflect the company's vision and focus on delivering exceptional products across the application stack. This quarter's awards included recognition as the Market Leader and overall winner for Ethernet Network Monitoring in the IT Brand Pulse Awards. SolarWinds Network Performance Monitor also won Networking Solution of the Year in the IT Europa European IT & Software Excellence Awards, the only pan-European awards that recognizes real-world solutions. Within systems management, SolarWinds Storage Manager was voted most preferred Storage Virtualization Solution by VirtualizationAdmin.com in their Readers' Choice Awards while SolarWinds Server & Application Monitor was named a finalist in the Windows IT Pro Best of TechEd 2014 Awards for Systems Management and Operations. Within security management, SolarWinds Log & Event Manager received a five-star rating from SC Magazine. Lastly, SolarWinds Database Performance Analyzer was included in Database Trends and Application Magazine's second annual DBTA 100 list for companies that matter most in data.

"We believe that this third consecutive quarter of better-than-expected results is evidence that the accelerated level of investment we have made in our business since the third quarter of last year has contributed to the underlying strength of the business," said Jason Ream, SolarWinds' Executive Vice President and Chief Financial Officer. "As we enter the second half of the year, we plan to continue to thoughtfully fund initiatives to improve our rate of growth while also delivering best-in-class profitability for our shareholders," added Ream.

Financial Outlook

As of July 24, 2014, SolarWinds is providing its financial outlook for its third quarter and full year of 2014. The financial information below represents forward-looking non-GAAP financial information, including an estimate of non-GAAP operating income as a percentage of revenue, and non-GAAP diluted earnings per share, for the third quarter of 2014 and for the full year 2014. 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 costs 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 Third Quarter of 2014

SolarWinds' management currently expects to achieve the following results for the third quarter of 2014:

  • Total revenue in the range of $109.0 to $111.5 million, or 24% to 27% growth over the third quarter of 2013.

  • Non-GAAP operating income representing 41% to 42% of revenue.

  • Non-GAAP diluted earnings per share of $0.42 to $0.44.

  • Weighted average outstanding diluted shares of approximately 77.0 million.

Financial Outlook for Full Year 2014

SolarWinds' management is raising the mid-point of its previous total revenue outlook by $8.5 million and raising its view of non-GAAP operating margins. Management currently expects to achieve the following results for the full year 2014:

  • Total 2014 revenue in the range of $420.5 to $426.5 million, or 25% to 27% year-over-year growth, which includes $2.1 to $2.6 million in expected subscription revenue contribution from the Pingdom acquisition.

  • Non-GAAP operating income for the full year representing approximately 42% of revenue.

  • Non-GAAP diluted earnings per share of $1.68 to $1.72.

  • Weighted average outstanding diluted shares of approximately 77.0 million.
Published Thursday, July 24, 2014 6:35 PM by David Marshall
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