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SolarWinds Announces Fourth Quarter and Full Year 2014 Results

AUSTIN, TX — (Marketwired) — 01/29/15 — SolarWinds (NYSE: SWI), a leading provider of powerful and affordable IT management software, today reported results for its fourth quarter and full year ended December 31, 2014.

Total revenue for the fourth quarter reached a record high of $118.4 million, representing 22% year-over-year growth on a reported basis and 24% year-over-year growth on a constant currency basis.

Combined maintenance and subscription revenue for the fourth quarter of $73.4 million, representing 28% year-over-year growth in recurring revenue.

License revenue for the fourth quarter of $45.1 million, representing 14% year-over-year growth.

GAAP diluted earnings per share of $0.30 and non-GAAP diluted earnings per share of $0.51 for the fourth quarter.

GAAP operating income of $30.5 million, or a GAAP operating margin of 26%, and non-GAAP operating income of $52.5 million, or a non-GAAP operating margin of 44% for the fourth quarter.

SolarWinds reported total revenue for the fourth quarter of 2014 of $118.4 million, a 22% increase over total revenue for the fourth quarter of 2013. Total recurring revenue, comprised of subscription revenue of $9.3 million and record maintenance revenue of $64.1 million, reached $73.4 million, increasing by 28% over the fourth quarter of 2013, representing 62% of total revenue. License revenue was $45.1 million for the fourth quarter of 2014, representing a 14% increase over license revenue for the fourth quarter of 2013.

On a GAAP basis, diluted earnings per share were $0.30 for the fourth quarter of 2014, compared to $0.28 for the fourth quarter of 2013. Non-GAAP diluted earnings per share were $0.51 for the fourth quarter of 2014 compared to $0.41 for the fourth quarter of 2013.

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 these non-GAAP financial measures is provided below under “Non-GAAP Financial Measures.”

“I am pleased to report that we delivered another strong performance in the fourth quarter, and closed the year in a very good position. Over the course of the year, we invested heavily in our business and believe that those investments have translated into strong gains across product lines and the regions in which we operate,” said Kevin Thompson, SolarWinds– President and Chief Executive Officer.

“The team is continuously working to enhance our execution and this will remain a focus in 2015 — both as we continue to capitalize on the opportunity in the on-premise IT Management market and as we expand SolarWinds– offerings and model into technology management for the Cloud. We believe that we have created momentum in the business that will allow us to take advantage of new opportunities in 2015,” added Thompson.

Recent SolarWinds business highlights include:

SolarWinds acquired Librato®, a Cloud-based monitoring company headquartered in San Francisco. This latest acquisition, on the heels of SolarWinds– acquisition of Pingdom® in 2014, represents another step in the company–s efforts to extend and connect performance management capabilities from on-premise IT infrastructure to Cloud-based application environments. The company believes that these two acquisitions represent significant progress towards executing an overall vision of helping technology pros manage all things IT in a hybrid world.

The Company–s results in 2014 reflect strength across multiple product lines, including contributions to year-over-year growth for the Network Management and Database Management product portfolios. The SolarWinds MSP team also drove solid performance and delivered record results. Key regions that experienced robust year-over-year growth versus 2013 include North America commercial, Latin America and EMEA.

In the fourth quarter, SolarWinds released an updated version of SolarWinds® Database Performance Analyzer (DPA), giving database administrators valuable insight into the database–s impact on other layers of the application stack. SolarWinds DPA 9.0 adds storage resource visibility and correlation, providing database admins with unique insight into how storage I/O issues contribute to poor response time; and adds metric baselining and alerting, which enables DBAs to pinpoint the root cause of performance issues within minutes.

SolarWinds continues to receive honors for its business and product performance. In the fourth quarter, SolarWinds– GeekSpeak blog, which offers IT Professionals deep, technical discussions on a range of IT management topics, was named one of BizTech–s 50 Must-Read IT blogs of 2014. Fourth quarter product accolades included a number of awards across multiple publications for Server & Application Monitor (SAM), Virtualization Manager (VM), Network Performance Monitor (NPM), Network Configuration Manager (NCM), User Device Tracker (UDT), Network Topology Mapper (NTM), Log & Event Manager (LEM) and SolarWinds N-able–s N-central®.

“Through the hard work of the SolarWinds team and the increased investment we made in our business this year, we exited 2014 well-positioned to capitalize on the opportunity in IT management,” said Jason Ream, SolarWinds– Executive Vice President and Chief Financial Officer. “Despite foreign currency headwinds which negatively impacted our year-over-year revenue growth, our fourth quarter revenue growth remained robust and represents record total revenue for SolarWinds.”

“In addition, though we continued to aggressively invest in our business, the inherent leverage in our business model was once again reflected in non-GAAP operating margins well above our outlook. For the coming year, we remain confident in our ability to drive strong growth despite continued foreign currency headwinds as we continue to focus on improving our momentum in network and systems management while extending our capabilities beyond on-premise IT management in order to attack the growing opportunity to manage the performance of applications and IT infrastructure both in the Cloud as well as across hybrid on-premise/Cloud environments,” added Ream.

As of January 29, 2015, SolarWinds is providing its financial outlook for its first quarter of 2015. 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 first quarter of 2015. 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.

SolarWinds– management currently expects to achieve the following results for the first quarter of 2015:

Total revenue in the range of $116.2 to $118.4 million, or 21% to 23% growth over the first quarter of 2014.

Non-GAAP operating income representing approximately 40% of revenue.

Non-GAAP diluted earnings per share of $0.43 to $0.46.

Weighted average outstanding diluted shares of approximately 77.8 million.

In conjunction with this announcement, SolarWinds will host a conference call to discuss its financial results and its business for the fourth quarter and full year 2014 at 4:00 p.m. CT (5:00 p.m. ET/2:00 p.m. PT) on Thursday, January 29, 2015. A live webcast of the call will be available on the SolarWinds Investor Relations website at . A live dial-in will be available domestically at 1-888-708-5692 and internationally at +1-913-312-1477. 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.

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 statements regarding our financial outlook for the first quarter of 2015, the focus and trajectory of our business, our future product releases and roadmap, areas of investment and focus, and our market opportunity, including the growing opportunity to manage the performance of applications and IT infrastructure both in the Cloud as well as across hybrid on-premise/Cloud environments. 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 “believe,” “plan,” “will,” “expect,” “anticipate,” “continue,” 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 inability to generate significant volumes of sales leads from Internet search engines, marketing campaigns and traffic to our websites; (b) the inability to expand our sales operations effectively; (c) the inability to increase sales to existing customers and to attract new customers; (d) SolarWinds– ability to successfully identify, complete, and integrate acquisitions; (e) the possibility that general economic conditions or uncertainty cause information technology spending to be reduced or purchasing decisions to be delayed; (f) the timing and success of new product introductions and product upgrades by SolarWinds or its competitors; (g) the presence or absence of occasional large customer orders, including in particular those placed by the U.S. federal government; (h) the possibility that our operating income could fluctuate and may decline as percentage of revenue as we make further expenditures to expand our operations in order to support additional growth in our business; (i) potential foreign exchange gains and losses related to expenses and sales denominated in currencies other than the functional currency of an associated entity; and (j) such other risks and uncertainties described more fully in documents filed with or furnished to the Securities and Exchange Commission, including the risk factors discussed in our Annual Report on Form 10-K for the period ended December 31, 2014 that SolarWinds anticipates filing on or before March 2, 2015. 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.

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 a GAAP financial measure that we consider to be most comparable. 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, allocate resources, prepare annual budgets, and determine employee incentive compensation. Accordingly, these measures may provide helpful insight to investors into the motivation and decision-making of management in operating the business. SolarWinds– management and Board of Directors analyzes revenue growth on a constant currency basis in order to provide a comparable framework for assessing how the business performed excluding the effect of foreign currency fluctuations.

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.

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.

SolarWinds (NYSE: SWI) provides powerful and affordable IT management software to customers worldwide from Fortune 500® enterprises to small businesses. In all of our market areas, our approach is consistent. We focus exclusively on IT Pros and strive to eliminate the complexity that they have been forced to accept from traditional enterprise software vendors. SolarWinds delivers on this commitment with unexpected simplicity through products that are easy to find, buy, use and maintain while providing the power to address any IT management problem on any scale. Our solutions are rooted in our deep connection to our user base, which interacts in our thwack® online community to solve problems, share technology and best practices, and directly participate in our product development process. Learn more today at .

SolarWinds, SolarWinds & Design, Librato, Pingdom, and thwack are registered trademarks of SolarWinds or its affiliates. All other SolarWinds marks are the exclusive property of SolarWinds, may be pending registration with the U.S. Patent and Trademark Office, and may be registered or pending registration in other countries. All other company and product names mentioned are used only for identification purposes and may be trademarks or registered trademarks of their respective companies.

© 2015 SolarWinds Worldwide, LLC. All rights reserved.

Dave Hafner
Phone: 512.682.9867

Tiffany Nels
Phone: 512.682.9545

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