SolarWinds Corporation, a leading provider of simple, powerful, and secure IT management software, today reported results for its second quarter ended June 30, 2022.

Second Quarter Financial Highlights from Continuing Operations

• Total revenue for the second quarter of $176.0 million, representing a slight decline year-over-year on a reported basis and 2% year-over-year growth on a constant currency basis, and total recurring revenue representing 86% of total revenue.

• Net loss for the second quarter of $622.1 million, which includes $621.8 million in impairment charges.

• Adjusted EBITDA for the second quarter of $66.8 million, representing a margin of 38% of total revenue.

For a reconciliation of our GAAP to non-GAAP results, please see the tables below.

"I am proud of our team's commitment to customer success, backed by their solid execution in the second quarter. We delivered year-over-year growth in subscription revenue for the second quarter of 25%, improved customer retention to historical levels, and are evolving to platform-based solutions that we believe offer the best time to value, time to detect issues, and time to resolve issues for our customers," said Sudhakar Ramakrishna, President and Chief Executive Officer, SolarWinds. "We are pleased with our results despite challenging foreign exchange and macro headwinds, and we believe that our announcement of SolarWinds Hybrid Cloud Observability last quarter, together with an early version of our integrated SaaS offerings, provide a very unique value proposition for customers to automate, observe, visualize, and remediate in their ongoing digital transformation journeys, thereby significantly improving customer productivity and reducing their costs."

Balance Sheet

At June 30, 2022, total cash and cash equivalents and short-term investments were $778.2 million and total debt was $1.9 billion.

As of June 30, 2022, in light of the sustained decline in the total market value of SolarWinds' outstanding shares of common stock and the impact of current macroeconomic conditions on our projected operating results, we determined it appropriate to perform an interim quantitative assessment of our reporting unit. As a result of the interim goodwill impairment analysis, a $612.4 million non-cash goodwill impairment charge was recognized for the quarter ended June 30, 2022. In addition, we determined the estimated fair value of the SolarWinds trade name, recorded in connection with the take private transaction in early 2016 ("Take Private"), was less than its carrying value and recorded a $9.4 million non-cash impairment charge which is included in general and administrative expense in our consolidated statements of operations for the quarter ended June 30, 2022.

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 non-GAAP financial measures is provided below under "Non-GAAP Financial Measures."

SolarWinds completed the previously announced separation and distribution of its managed service provider ("N-able") business into a newly created and separately traded public company, N-able, Inc. on July 19, 2021. N‑able's historical financial results through July 19, 2021, are reflected in SolarWinds' consolidated financial statements as discontinued operations. Effective July 30, 2021, SolarWinds effected a 2:1 reverse stock split of its common stock. As a result of the reverse stock split, all share and per share figures contained in the financial statements have been retroactively restated as if the reverse stock split occurred at the beginning of the periods presented.

Financial Outlook

As of August 2, 2022, SolarWinds is providing its financial outlook for the third quarter and its updated financial outlook for the full year of 2022. The financial information below represents forward-looking non-GAAP financial information, including an estimate of adjusted EBITDA margin and non-GAAP diluted earnings per share. These non-GAAP financial measures exclude, among other items mentioned below, stock-based compensation expense and related employer-paid payroll taxes, amortization, certain expenses related to the cyberattack that occurred in December 2020 (the "Cyber Incident"), restructuring costs, goodwill and indefinite-lived intangible asset impairment charges and other 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 Third Quarter of 2022

SolarWinds' management currently expects to achieve the following results for the third quarter of 2022:

• Total revenue in the range of $180 to $185 million, representing a slight decline to 2% growth as compared to the third quarter of 2021 total revenue from continuing operations, or growth of 2% to 5% on a constant currency basis assuming the same average foreign currency exchange rates as those in the third quarter of 2021.

• Adjusted EBITDA margin of approximately 39% to 40% of total revenue.

• Non-GAAP diluted earnings per share of $0.19 to $0.21.

• Weighted average outstanding diluted shares of approximately 161.8 million.

Financial Outlook for Full Year of 2022

SolarWinds' management currently expects to achieve the following results for the full year of 2022:

• Total revenue in the range of $715 to $725 million, representing a slight decline to 1% growth over the full year of 2021 total revenue from continuing operations, or 2% to 3% on a constant currency basis assuming the same average foreign currency exchange rates as those in 2021.

• Adjusted EBITDA margin of approximately 39% to 40% of total revenue.

• Non-GAAP diluted earnings per share of $0.81 to $0.86.

• Weighted average outstanding diluted shares of approximately 162.6 million.
  

Second Quarter Business Highlights

• SolarWinds announced key findings from its ninth annual 2022 IT Trends Report examining the acceleration of digital transformation, including that 75% of tech pro respondents say their organizations have prioritized adopting a hybrid IT strategy for their technology environment within the next three years.

• SolarWinds unveiled its Next-Generation Build System, a transformational model for software development that is a key component of the company's Secure by Design initiative.

• The 2022 GigaOm^® Network Observability Radar Report rated SolarWinds^® Hybrid Cloud Observability as an Outperforming Leader for network observability, delivering comprehensive, integrated, and full-stack observability, as well as integrating data from across the IT ecosystem, encompassing network, servers, applications and databases.

• TrustRadius^®, a customer review platform for B2B technology, recognized nine SolarWinds solutions as 2022 Top Rated Products based on verified user reviews across 21 categories.