SolarWinds Corporation, a leading provider of powerful and affordable IT management software, today reported results for its fourth quarter ended December 31, 2019.

On a GAAP basis, reflecting our adoption of the new standard ASC 606 effective January 1, 2019:

• Total revenue for the fourth quarter of $247.5 million, representing 11.9% growth on a reported basis.
• Total recurring revenue for the fourth quarter of $202.9 million, representing 16.0% growth on a reported basis. Total recurring revenue includes:
  • Maintenance revenue for the fourth quarter of $115.6 million, representing 9.7% growth on a reported basis.
  • Subscription revenue for the fourth quarter of $87.3 million, representing 25.4% growth on a reported basis.
• Net income for the fourth quarter of $13.2 million.

On a non-GAAP basis:

• Non-GAAP total revenue for the fourth quarter of $249.4 million, representing 12.5% year-over-year growth on a reported basis and 13.3% year-over-year growth on a constant currency basis.
• Non-GAAP total recurring revenue for the fourth quarter of $204.8 million, representing 16.8% year-over-year growth on a reported basis and 17.6% year-over-year growth on a constant currency basis. Non-GAAP total recurring revenue includes:
  
  • Non-GAAP maintenance revenue for the fourth quarter of $115.6 million, representing 9.3% growth on a reported basis.
  • Non-GAAP subscription revenue for the fourth quarter of $89.2 million, representing 28.1% growth on a reported basis.

• Adjusted EBITDA for the fourth quarter of $122.9 million, representing a margin of 49.3% of non-GAAP total revenue.

For a reconciliation of our GAAP to non-GAAP results including adjustments for the impact of ASC 606, please see the tables below.

"We had a solid finish to a successful 2019 delivering fourth quarter non-GAAP revenue of $249.4 million reflecting 13% year-over-year growth, which resulted in full year 2019 non-GAAP total revenue of $938.5 million," said Kevin Thompson, SolarWinds' President & Chief Executive Officer. "Our fourth quarter revenue performance was within the range of our outlook, led primarily by non-GAAP subscription revenue exceeding the high end of our outlook representing 28% growth year-over-year for the quarter. In 2019, we also made significant progress towards our goal of solving the full complement of IT management challenges for our customers. We expanded our footprint in IT Operations Management through the acquisition of Samanage in the second quarter and the acquisition of VividCortex late in the fourth quarter which completed our infrastructure and application management picture. We can now help technology professionals monitor and manage all the key components of hybrid IT infrastructure through what we believe is the broadest coverage of the modern IT infrastructure and application environments."

"In addition to solid 2019 non-GAAP total revenue growth, non-GAAP recurring revenue has grown 17% on a constant currency basis and non-GAAP recurring revenue accounted for 82% of total non-GAAP revenue for 2019. We also finished the year with strong profit margins exceeding the high end of our outlook for the year with full year 2019 Adjusted EBITDA of $453.6 million or an Adjusted EBITDA margin of 48% for 2019, despite the dilutive impact of the Samanage acquisition," added Bart Kalsu, SolarWinds' Executive Vice President and Chief Financial Officer.

Additional highlights for the fourth quarter of 2019 include:

• SolarWinds expanded its Database Performance offering through the acquisition of VividCortex, a leading database performance management product with an emphasis on monitoring and managing databases commonly used in cloud-native applications. This SaaS-based offering will complement SolarWinds' award-winning Database Performance Analyzer (DPA) the on-premises and cloud-deployed product SolarWinds offers today to serve the needs of businesses of all sizes. With this addition, the company can now offer IT teams the ability to go deep on app traces, infrastructure monitoring, metrics, both traditional and cloud-native database performance, digital experience monitoring, logs and network monitoring.

• SolarWinds also launched Identity Monitor, an easy-to-use solution designed to help IT and security professionals strengthen their security posture and combat instances of account fraud, loss of revenue, brand damage and spam by automating account takeover prevention. This latest release deepens SolarWinds' commitment to making security solutions accessible to organizations of all sizes.

• SolarWinds released a wave of updates to its Orion Platform and Application Performance Management suite, bringing new and expanded Microsoft Azure support to SolarWinds customers. These updates extend SolarWinds' support for organizations investing in Microsoft Azure as their strategic digital transformation partner and offers technology professionals the comprehensive ability to monitor, manage and secure hybrid IT operations.

• In keeping with its long tradition of offering valuable free tools to technology professionals, SolarWinds introduced SolarWinds AppOptics Dev Edition, a free version of its SaaS infrastructure and application performance management solution. AppOptics Dev Edition offers the same rich features of the full AppOptics solution in a scaled-back version well-suited for development environments, enabling technology professionals at any stage in the APM journey to test, optimize and troubleshoot business applications before they go live in production operations.

SolarWinds also announced today that it increased its board of directors to 11 members and appointed Easwaran "Eash" Sundaram to serve on its Board of Directors, each effective February 25, 2020. Mr. Sundaram will also serve as a member of the board's audit committee effective upon his appointment. Mr. Sundaram currently serves as the Executive Vice President, Chief Digital & Technology Officer of JetBlue Airways Corporation.

Kevin Thompson stated, "We are excited to welcome Eash to SolarWinds' Board of Directors. Eash is a well-rounded business executive, in addition to being an experienced CIO. He has a deep understanding of today's hybrid IT architectures and the challenges that digital transformation initiatives introduce for IT teams. His first-hand knowledge of the criticality of delivering the level of application and IT performance that a business demands will be incredibly valuable to us as we strive to deliver technology that meets our customers' needs."

Balance Sheet

At December 31, 2019, total cash and cash equivalents were $173.4 million and total debt was $1.9 billion.

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 annual report on Form 10-K for the period. Information about SolarWinds' use of non-GAAP financial measures is provided below under "Non-GAAP Financial Measures."

Financial Outlook

As of February 4, 2020, SolarWinds is providing its financial outlook for the first quarter of 2020 and full year 2020. The financial information below represents forward-looking non-GAAP financial information, including an estimate of non-GAAP revenue and revenue growth on a constant currency basis, adjusted EBITDA and non-GAAP diluted earnings per share, for the first quarter of 2020 and for the full year 2020. These non-GAAP financial measures exclude, among other items mentioned below, stock-based compensation expense and related employer-paid payroll taxes, amortization and costs related to non-recurring items. We have not reconciled our estimates of these non-GAAP financial measures to their most directly comparable GAAP measure as a result of uncertainty regarding, and the potential variability of, these excluded items in future periods. Accordingly, reconciliation is not available without unreasonable effort, although it is important to note that these excluded items could be material to our results computed in accordance with GAAP in future periods. Our reported results provide reconciliations of non-GAAP financial measures to their nearest GAAP equivalents.

Financial Outlook for First Quarter of 2020

SolarWinds' management currently expects to achieve the following results for the first quarter of 2020:

• Non-GAAP total revenue in the range of $243.5 to $248.5 million, representing growth over the first quarter of 2019 non-GAAP total revenue of 12.8% to 15.2%, or 13.5% to 15.9% on a constant currency basis assuming the same average foreign currency exchange rates as those in the first quarter of 2019.
• Adjusted EBITDA in the range of $108.0 to $112.0 million, representing 44.4% to 45.1% of non-GAAP total revenue.
• Non-GAAP diluted earnings per share of $0.20 to $0.21.
• Weighted average outstanding diluted shares of approximately 313.6 million.

Financial Outlook for Full Year 2020

SolarWinds' management currently expects to achieve the following results for the full year 2020:

• Non-GAAP total revenue in the range of $1.035 to $1.055 billion, representing growth over 2019 non-GAAP revenue of 10.3% to 12.4%, or 10.5% to 12.6% on a constant currency basis assuming the same average foreign currency exchange rates as those in 2019.
• Adjusted EBITDA in the range of $475.0 to $485.0 million, representing approximately 46.0% of non-GAAP total revenue.
• Non-GAAP diluted earnings per share of $0.88 to $0.91.
• Weighted average outstanding diluted shares of approximately 317.2 million.