SolarWinds Announces Fourth Quarter and Full Year 2022 Results

SolarWinds Corporation, a leading provider of simple, powerful, secure observability and IT management software, reported results for its fourth quarter and full year ended December 31, 2022.

Fourth Quarter 2022 Financial Highlights

• Total revenue for the fourth quarter of $187.1 million, representing 0.2% year-over-year growth on a reported basis and 2.2% year-over-year growth on a constant currency basis, and total recurring revenue representing 88% of total revenue.¹
• Net loss for the fourth quarter of $10.4 million.
• Adjusted EBITDA for the fourth quarter of $74.5 million, representing a margin of 40% of total revenue.

Full Year 2022 Financial Highlights

• Total revenue for the full year 2022 of $719.4 million, representing 0.1% year-over-year growth on a reported basis and 2.0% year-over-year growth on a constant currency basis, and total recurring revenue representing 87% of total revenue.¹
• Net loss for the full year 2022 of $929.4 million, which includes $906.4 million in impairment charges.
• Adjusted EBITDA for the full year 2022 of $280.4 million, representing a margin of 39% of total revenue.

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

“We are pleased that we delivered constant currency revenue growth in 2022 and ended the year on a positive note, outperforming our previously provided outlook for total revenue and adjusted EBITDA margin for the fourth quarter, and delivering year-over-year subscription revenue growth of 45%,” said Sudhakar Ramakrishna, President and Chief Executive Officer, SolarWinds. “Our fourth quarter demonstrated ongoing progress with the priorities we laid out at the beginning of 2022, including growing traction with our observability solutions and partner ecosystem, continued execution on customer retention, and healthy adjusted EBITDA margins. As we look to 2023, we remain focused on helping customers accelerate their digital transformation journeys while we seek to balance growth with profitability.”

Recent Business Highlights

• SolarWinds earned industry accolades and recognitions from TrustRadius, GigaOm, Globees, Stevie Awards, and Palmarès de l’Informaticien for its observability and monitoring solutions and corporate achievements.
• SolarWinds and DRYiCE^TM, a division of HCL Software, announced an intended expansion of their partnership focused on bringing together the best-in-class advanced AIOps, end-to-end observability, and service management platform from both companies.
• TrustRadius® awarded SolarWinds a 2022 Tech Cares Award for its commitment to significant corporate social responsibility initiatives and robust diversity, equity, and inclusion programs.

Balance Sheet

During the fourth quarter, we entered into Amendment No. 6 to First Lien Credit Agreement to, among other things, refinance the first lien term loans and extend the maturity date to February 5, 2027. In connection with the refinancing, we made a voluntary prepayment of approximately $349.4 million of our outstanding debt. At December 31, 2022, following the prepayment, total cash and cash equivalents and short-term investments were $148.9 million and total debt was $1.2 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.”

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 February 9, 2023, SolarWinds is providing its financial outlook for the first quarter and full year of 2023. The financial information below represents forward-looking non-GAAP financial information, including an estimate of adjusted EBITDA and non-GAAP diluted earnings per share. Beginning with the first quarter and full year of 2023, SolarWinds will provide its outlook for adjusted EBITDA rather than adjusted EBITDA margin as previously provided. 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 First Quarter of 2023

SolarWinds’ management currently expects to achieve the following results for the first quarter of 2023:

• Total revenue in the range of $177 to $182 million, representing growth at the midpoint of approximately 1% as compared to the first quarter of 2022 total revenue.
• Adjusted EBITDA of approximately $67 to $70 million.
• Non-GAAP diluted earnings per share of $0.15 to $0.17.
• Weighted average outstanding diluted shares of approximately 163.9 million.

Financial Outlook for Full Year of 2023

SolarWinds’ management currently expects to achieve the following results for the full year of 2023:

• Total revenue in the range of $725 to $740 million, representing growth at the midpoint of approximately 2% over the full year of 2022 total revenue.
• Adjusted EBITDA of approximately $290 to $300 million, representing growth at the midpoint of approximately 5% over the full year of 2022 adjusted EBITDA.
• Non-GAAP diluted earnings per share of $0.69 to $0.74.
• Weighted average outstanding diluted shares of approximately 165.9 million.