Wednesday, 08 February 2012 10:21

SolarWinds announces fourth quarter and full year 2011 results

By David Frost

BRISBANE, Feb 08, 2012. SolarWinds® (NYSE: SWI), a leading provider of powerful and affordable IT management software, has reported results for its fourth quarter and full year ended December 31, 2011.

· Record total revenue for the fourth quarter of $US55.6 million, representing 34% year-over-year growth.

· Record total revenue for the full year of 2011 of $US198.4 million, representing 30% year-over-year growth.

· Fourth quarter GAAP operating income of $22.3 million and non-GAAP operating income of $US29.3 million, or a non-GAAP operating margin for the fourth quarter of 53%.

· Fourth quarter GAAP diluted earnings per share of $US0.22 and non-GAAP diluted earnings per share of $US0.29.

· Fourth quarter free cash flow of $US36.6 million, representing 28% year-over-year growth.

Financial Results

SolarWinds reported record total revenue for the fourth quarter of 2011 of $US55.6 million, a 34% increase over total revenue for the fourth quarter of 2010. License revenue of $US25.3 million for the fourth quarter of 2011 represented a 27% increase over license revenue for the fourth quarter of 2010. During the fourth quarter of 2011, the assets acquired from DameWare Development contributed license revenue of approximately $US200,000, which was consistent with SolarWinds' previously announced expectations. Maintenance revenue was a record $US30.3 million for the fourth quarter of 2011, representing a 41% increase over maintenance revenue for the fourth quarter of 2010.

On a GAAP basis, diluted earnings per share were $US0.22 for the fourth quarter of 2011 compared to $US0.21 for the fourth quarter of 2010. Non-GAAP diluted earnings per share were $US0.29 for the fourth quarter of 2011 compared to $US0.24 for the fourth quarter of 2010.

Net cash provided by operating activities was $US36.4 million for the fourth quarter of 2011 compared to $US20.0 million for the fourth quarter of 2010, representing a year-over-year increase of 82%. Free cash flow was $US36.6 million for the fourth quarter of 2011 compared to $US28.6 million for the fourth quarter of 2010, representing a year-over-year increase of 28%. Cash, cash equivalents, and investments at the end of the fourth quarter of 2011 were $US152.4 million, a decrease of $US13.4 million from the end of the third quarter of 2011. During the fourth quarter of 2011, SolarWinds paid approximately $US51.0 million in cash to acquire DNSstuff.com and DameWare Development.

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.

Recent Business Highlights

"The SolarWinds team had a very strong performance in the fourth quarter, driving solid results across the board and a great finish to an important year for our company," said Kevin Thompson, SolarWinds' President and Chief Executive Officer.

"In 2011, we successfully executed against an aggressive plan to extend our unique brand of powerful, affordable, and easy to use IT management software far beyond our traditional network management roots. We entered into the systems and application management space with the release of two new products -- SolarWinds Application Performance Monitor and Synthetic End-User Monitor -- and entered the virtualization management and log & event management markets through two complementary acquisitions," continued Thompson.

"In the process, we estimate that we more than doubled our total addressable market opportunity, by dramatically increasing the range of IT management problems our products can solve and our relevancy to IT professionals in any size of business. In 2012, we plan to continue disrupting the IT management space, by reshaping expectations around how enterprise software is built, purchased, and used, in order to drive another year of success at SolarWinds."

SolarWinds' business highlights during the fourth quarter of 2011 include:

· SolarWinds completed the acquisition of DameWare Development, deepening SolarWinds' capabilities in the system and application management markets with powerful, yet affordable and easy-to-use tools for SysAdmins to remotely manage the computers on their networks.

· The company also expanded its international sights, entering the Japanese market through key partnerships with leading Japanese companies, including Marubeni Information Systems, Mitsuiwa Corporation, and Daikin, in order to promote and sell its unique IT management portfolio to Japanese customers.

· SolarWinds received honours in Redmond Magazine's 2011 Readers Choice Awards, including Best Virtualization Management and Optimization Product (VM Monitor) and ISV Winner and Grand Slam Winner for Best Network Performance Management Product (SolarWinds Network Performance Monitor). In addition, Windows IT Pro Magazine awarded SolarWinds Network Performance Monitor (NPM) with the 2011 Editors' Best and Community Choice gold medal in the Network Management Product Category.

· SolarWinds released new versions of several products including SolarWinds Network Configuration Manager (NCM), User Device Tracker (UDT), NPM, Storage Manager, and Virtualization Manager.

· SolarWinds introduced Storage Response Time Monitor, a free tool for monitoring total storage response time in VMWare vSphere deployments and identifying storage IO problems caused by server virtualization.

· SolarWinds also introduced Real-Time Bandwidth Monitor, a free tool for monitoring bandwidth usage of many interfaces concurrently.

"In 2011, we successfully demonstrated that periods of significant investment in new products and acquisitions can coincide with periods of strong growth and strong profitability and cash flow generation," added Mike Berry, SolarWinds' Chief Financial Officer. "By leveraging our unique financial model and maintaining a sharp focus on ROI, we expect to continue to deliver this combination of solid revenue growth, profit, and cash flow as we move into 2012."

Financial Outlook

As of February 7, 2012, SolarWinds is providing its financial outlook for its first quarter and full year of 2012. 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 2012 and for the full year 2012. 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 something 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 First Quarter of 2012

SolarWinds management currently expects to achieve the following results for the first quarter of 2012:

· Total revenue in the range of $US55.5-$56.7 million, or 29% to 32% growth over the first quarter of 2011.

· Non-GAAP operating income representing approximately 49% of revenue, including the dilutive impact of recent acquisitions.

· Non-GAAP diluted earnings per share of $US0.24-$0.25.

· Weighted average shares outstanding of approximately 76.0 million.

Financial Outlook for Full Year 2012

SolarWinds' management currently expects to achieve the following results for the full year 2012:

· Total revenue in the range of $US245.0-$255.0 million, or 24% to 29%

year-over-year growth.

· Non-GAAP operating income representing approximately 50% of revenue.

· Non-GAAP diluted earnings per share of $1.10-$1.15.

· Weighted average shares outstanding of approximately 77.5 million.

About SolarWinds

SolarWinds (NYSE: SWI) provides powerful and affordable IT management software to customers worldwide -- from Fortune 500 enterprises to small businesses. We work to put our users first and remove the obstacles that have become "status quo" in traditional enterprise software. SolarWinds products are downloadable, easy to use and maintain, and provide the power, scale, and flexibility needed to address users' management priorities. Our online user community, thwack, is a gathering-place where tens of thousands of IT pros solve problems, share technology, and participate in product development for all of SolarWinds' products.

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