- Record quarterly total revenue of $53.9 million, representing 31per cent year-over-year growth.
- GAAP operating income of $25.3 million and non-GAAP operating income of $28.6 million, or a non-GAAP operating margin of 53 per cent.
- GAAP diluted earnings per share of $0.28 and non-GAAP diluted earnings per share of $0.31.
- Free cash flow of $32.4 million, representing 41.6per cent year-over-year growth.
SolarWinds reported record total revenue for the third quarter of 2011 of $53.9 million, a 31 per cent increase over total revenue in the third quarter of 2010. Licence revenue was a record $25.5 million in the third quarter of 2011, representing a 22per cent increase over license revenue in the third quarter of 2010. Maintenance revenue was a record $28.4 million in the third quarter of 2011, representing a 40 per cent increase over maintenance revenue in the third quarter of 2010.
On a GAAP basis, diluted earnings per share were $0.28 in the third quarter of 2011 compared to $0.17 in the third quarter of 2010. Non-GAAP diluted earnings per share were $0.31 in the third quarter of 2011 compared to $0.21 in the third quarter of 2010.
Net cash provided by operating activities was $32.5 million in the third quarter of 2011 compared to $13.2 million for the third quarter of 2010, representing a year-over-year increase of 145.5per cent. Free cash flow was $32.4 million in the third quarter of 2011 compared to $22.9 million for the third quarter of 2010, representing a year-over-year increase of 41.6 per cent. Cash equivalents and investments at the end of the third quarter of 2011 were $165.8 million, a decrease of $3.7 million from the end of the second quarter of 2011. During the third quarter of 2011, SolarWinds paid approximately $35 million in cash to acquire TriGeo.
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 these non-GAAP financial measures is provided below under "Non-GAAP Financial Measures."
All figures are in US dollars.
Recent business highlights
"The third quarter of 2011 adds another page to the compelling story of SolarWinds' model, and users' need for our approach to solving IT Management challenges. Once again, we delivered strong results and generated record licence and maintenance revenue based on solid performance across our business," said Kevin Thompson, SolarWinds' President and Chief Executive Officer. "The strong demand for our products, including the new SolarWinds Log and Event Manager, continued to drive our results in the North American commercial business. And, outside North America, our commercial business also benefited from growing awareness of the SolarWinds' brand of powerful, affordable and easy to use IT management products.
"Finally, our U.S. federal business had its strongest quarter of sales in the company's history, driven by healthy deal activity and a building appreciation for the value of our product in the space."
SolarWinds' business highlights during the third quarter of 2011 include:
# SolarWinds completed the acquisition of TriGeo and released Log and Event Manager (LEM), a virtual software appliance based on technology acquired from TriGeo. SolarWinds Log and Event Manager is a powerful, easy to use, and affordable solution that combines log management, event correlation and ad hoc search to give IT professionals the ability to collect large volumes of data from virtually any device on the network and correlate that data in real-time to improve system performance and satisfy compliance and security requirements.
# SolarWinds introduced SolarWinds Synthetic End User Monitor (SEUM), a new application management offering that allows systems administrators and application support professionals to monitor multi-step, web-based transactions in mission-critical applications.
# The company continued to receive industry recognition for its product portfolio, with SolarWinds Virtualization Manager winning "Best of VMworld® - Virtualization Management" at VMworld 2011 in Las Vegas.
# SolarWinds introduced VM-to-Cloud Calculator, a free tool for estimating the cost to move virtual machines to the Cloud and comparing the costs of Amazon EC2®, Windows® Azure, and Rackspace® Cloud Servers.
# SolarWinds also introduced Web Transaction Watcher, a companion free tool to SolarWinds Synthetic End User Monitor that allows users to easily record the results of a web transaction and be notified of problems.
"Throughout the year, we have made a number of significant investments in our business in an effort to drive continued strong growth in the future. Despite those many investments, which include the acquisitions of TriGeo and Hyper9 earlier this year, we have continued to produce solid levels of profitability and cash flow," added Mike Berry, SolarWinds' Chief Financial Officer. "For the third quarter of 2011 in particular, we generated record operating income, net income, and cash flow from operations in addition to record revenue. We believe our ability to deliver this combination of strong growth, profitability, and cash flow truly highlights the efforts of the entire SolarWinds' team and the strength of our unique business model."
As of October 27, 2011, SolarWinds is providing its financial outlook for its fourth quarter and full year of 2011. The financial information below represents forward-looking non-GAAP financial information, including an estimate of non-GAAP operating income, and non-GAAP diluted earnings per share, for the fourth quarter of 2011 and for the full year 2011. 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 fourth quarter of 2011
SolarWinds management currently expects to achieve the following results for the fourth quarter of 2011:
- Total revenue in the range of $52.8-$54.2 million.
- Non-GAAP operating income representing approximately 49per cent of revenue.
- Non-GAAP diluted earnings per share of $0.23-$0.25.
- Weighted average shares outstanding of approximately 75.0 million.
Financial Outlook for Full Year 2011
SolarWinds management currently expects to achieve the following results for the full year 2011:
- Total revenue in the range of $195.55-$196.95 million.
- Non-GAAP operating income representing approximately 51per cent of revenue.
- Non-GAAP diluted earnings per share of $0.98-$1.00.
- Weighted average shares outstanding of approximately 74.5 million.
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 SolarWinds' financial outlook. 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 "continues," "believes," 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 possibility that general economic conditions or uncertainty cause information technology spending to be reduced or purchasing decisions to be delayed; (b) the presence or absence of occasional large customer orders, including in particular those placed by the U.S. federal government; (c) the inability to increase sales to existing customers and to attract new customers; (d) SolarWinds' failure to integrate acquired businesses and any future acquisitions successfully; (e) the timing and success of new product introductions by SolarWinds or its competitors; (f) changes in SolarWinds' pricing policies or those of its competitors; (g) potential foreign exchange gains and losses related to expenses and sales denominated in currencies other than the functional currency of an associated entity; and (h) such other risks and uncertainties described more fully in documents filed with or furnished to the Securities and Exchange Commission, including the Form 10-Q that SolarWinds anticipates filing on or before November 9, 2011. 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.
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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