SolarWinds Announces Fourth Quarter and Full Year 2011 Results
AUSTIN, TX, Feb 07, 2012 (MARKETWIRE via COMTEX) -- SolarWinds(R) (SWI), a
leading provider of powerful and affordable IT management software, today
reported results for its fourth quarter and full year ended December 31, 2011.
--Record total revenue for the fourth quarter of $55.6 million,
representing 34% year-over-year growth.
--Record total revenue for the full year of 2011 of $198.4 million,
representing 30% year-over-year growth.
--Fourth quarter GAAP operating income of $22.3 million and non-GAAP
operating income of $29.3 million, or a non-GAAP operating margin for
the fourth quarter of 53%.
--Fourth quarter GAAP diluted earnings per share of $0.22 and non-GAAP
diluted earnings per share of $0.29.
--Fourth quarter free cash flow of $36.6 million, representing 28%
year-over-year growth.
Financial Results
SolarWinds reported record total revenue for the fourth quarter of 2011 of $55.6
million, a 34% increase over total revenue for the fourth quarter of 2010.
License revenue of $25.3 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 $200,000, which was consistent with SolarWinds'
previously announced expectations. Maintenance revenue was a record $30.3 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 $0.22 for the fourth quarter of
2011 compared to $0.21 for the fourth quarter of 2010. Non-GAAP diluted earnings
per share were $0.29 for the fourth quarter of 2011 compared to $0.24 for the
fourth quarter of 2010.
Net cash provided by operating activities was $36.4 million for the fourth
quarter of 2011 compared to $20.0 million for the fourth quarter of 2010,
representing a year-over-year increase of 82%. Free cash flow was $36.6 million
for the fourth quarter of 2011 compared to $28.6 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 $152.4 million, a
decrease of $13.4 million from the end of the third quarter of 2011. During the
fourth quarter of 2011, SolarWinds paid approximately $51.0 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.
Information about SolarWinds' use of these non-GAAP financial measures is
provided below under "Non-GAAP Financial Measures."
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 honors 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 $55.5-$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 $0.24-$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 $245.0-$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.
Conference Call and Webcast
In conjunction with this announcement, SolarWinds will host a conference call
today to discuss its financial results and other business at 8:00am CST (9:00am
EST/6). A live webcast of the event, including any supplemental information, will
be available on the SolarWinds Investor Relations website at
ir.solarwinds.com. A live dial-in will be available domestically at
800-967-7135 and internationally at +1-719-457-2642. 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.
Forward-Looking Statements
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 and its plan to continue disrupting
the IT management space by reshaping expectations around how enterprise software
is built, purchased, and used. 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 "plans," "expects," 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-K that SolarWinds anticipates filing on or before February
29, 2012. 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.
Non-GAAP Financial Measures
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 and to determine employee incentive
compensation. Accordingly, these measures may provide helpful insight to
investors on the motivation and decision-making of management in operating the
business. SolarWinds considers free cash flow also to be a liquidity measure that
provides important information regarding the cash generated by the business after
the purchase of property and equipment that can then be used for, among other
things, strategic acquisitions and investments in the business, stock repurchases
and funding ongoing operations.
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. In addition, free cash flow does not
represent the total increase or decrease in the cash balance for the period.
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.
About SolarWinds
SolarWinds (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. Learn more today at solarwinds.com.
SolarWinds and the SolarWinds logo are exclusive trademarks of SolarWinds, are
registered with the U.S. patent and trademark office, and may be registered or
pending registration in other countries. All other SolarWinds trademarks, service
marks, and logos, including without limitation, Application Performance Monitor,
Synthetic End-User Monitor, VM Monitor, SolarWinds Network Performance Monitor,
Network Configuration Manager, User Device Tracker, Storage Manager,
Virtualization Manager, Storage Response Time Monitor, and Real-Time Bandwidth
Monitor, may be common law marks or registered or pending registration in the
United States or in other countries. All other trademarks or registered
trademarks mentioned herein are used for identification purposes only and may be
trademarks or registered trademarks of their respective companies.
Copyright Copyright 2012 SolarWinds, Inc.
SolarWinds, Inc.
Condensed Consolidated Balance Sheets
(In thousands, except share and per share information)
(Unaudited)
December 31,December 31,
20112010
--------------------------
Assets
Current assets:
Cash and cash equivalents$122,707$142,003
Short-term investments29,688-
Accounts receivable, net of allowances of
$192 and $201 as of December 31, 2011 and
December 31, 2010, respectively26,96520,255
Income tax receivable11010,350
Deferred taxes668261
Other current assets2,7703,210
--------------------------
Total current assets182,908176,079
Property and equipment, net7,3416,702
Deferred taxes3,3344,099
Goodwill110,74640,424
Intangible assets and other, net58,07920,173
--------------------------
Total assets$362,408$247,477
==========================
Liabilities and stockholders' equity
Current liabilities:
Accounts payable$2,213$2,150
Accrued liabilities9,4428,588
Accrued earnout3,5134,000
Income taxes payable779555
Current portion of deferred revenue73,77452,583
--------------------------
Total current liabilities89,72167,876
Long-term liabilities:
Deferred revenue, net of current portion3,3733,175
Non-current deferred taxes289-
Other long-term liabilities4,078817
--------------------------
Total liabilities97,46171,868
Commitments and contingencies
Stockholders' equity:
Common stock, $0.001 par value: 123,000,000
shares authorized and 73,367,367 and
71,658,808 shares issued and outstanding as
of December 31, 2011 and December 31, 2010,
respectively7372
Additional paid-in capital194,379165,972
Accumulated other comprehensive loss(2,769)(1,256)
Accumulated earnings73,26410,821
--------------------------
Total stockholders' equity264,947175,609
--------------------------
Total liabilities and stockholders' equity $362,408$247,477
==========================
SolarWinds, Inc.
Condensed Consolidated Statements of Income
(In thousands, except per share information)
(Unaudited)
Three Months EndedTwelve Months Ended
December 31,December 31,
----------------------------------------
2011201020112010
------------------------------------
Revenue:
License$25,283$19,868$92,254$75,603
Maintenance and other30,32621,538106,10476,790
------------------------------------
Total revenue55,60941,406198,358152,393
Cost of license revenue1,1866364,0971,943
Cost of maintenance and other
revenue2,2121,6387,8925,987
------------------------------------
Gross profit52,21139,132186,369144,463
Operating expenses:
Sales and marketing15,15211,32253,85043,252
Research and development5,6924,22621,33215,731
General and administrative8,0935,37028,07623,476
Accrued earnout loss (gain)936-(664)-
------------------------------------
Total operating expenses29,87320,918102,59482,459
------------------------------------
Operating income22,33818,21483,77562,004
Other income (expense):
Interest income9442308177
Interest expense--(1,146)
Other income69978720115
------------------------------------
Total other income
(expense)7931201,028(854)
------------------------------------
Income before income taxes23,13118,33484,80361,150
Income tax expense6,8373,02022,36016,404
------------------------------------
Net income$16,294$15,314$62,443$44,746
====================================
Net income per share:
Basic earnings per share$0.22$0.22$0.86$0.65
====================================
Diluted earnings per share$0.22$0.21$0.84$0.61
====================================
Weighted shares used to compute
net income per share:
Shares used in computation of
basic earnings per share73,21570,50372,81268,664
====================================
Shares used in computation of
diluted earnings per share74,88573,04174,41372,862
====================================
SolarWinds, Inc.
Reconciliation of GAAP to Non-GAAP Financial Measures
(In thousands, except per share amounts and percentages)
(Unaudited)
Three MonthsTwelve Months
EndedEnded
December 31,December 31,
----------------- -----------------
2011201020112010
-------- -------- -------- --------
Revenue$ 55,609 $ 41,406 $198,358 $152,393
GAAP cost of revenue$3,398 $2,274 $ 11,989 $7,930
Amortization of intangible assets (1)(1,011)(464)(3,651)(1,730)
Stock-based compensation expense and
related employer-paid payroll taxes
(2)(48)(35)(192)(169)
-------- -------- -------- --------
Non-GAAP cost of revenue$2,339 $1,775 $8,146 $6,031
======== ======== ======== ========
GAAP gross profit$ 52,211 $ 39,132 $186,369 $144,463
Amortization of intangible assets (1)1,0114643,6511,730
Stock-based compensation expense and
related employer-paid payroll taxes
(2)4835192169
-------- -------- -------- --------
Non-GAAP gross profit$ 53,270 $ 39,631 $190,212 $146,362
======== ======== ======== ========
GAAP gross profit as a % of revenue93.9%94.5%94.0%94.8%
Amortization of intangible assets as a
% of revenue (1)1.8%1.1%1.8%1.1%
Stock-based compensation expense and
related employer-paid payroll taxes as
a % of revenue (2)0.1%0.1%0.1%0.1%
-------- -------- -------- --------
Non-GAAP gross profit as a % of revenue95.8%95.7%95.9%96.0%
======== ======== ======== ========
GAAP sales and marketing expense$ 15,152 $ 11,322 $ 53,850 $ 43,252
Stock-based compensation expense and
related employer-paid payroll taxes
(2)(817)(568)(3,363)(2,788)
-------- -------- -------- --------
Non-GAAP sales and marketing expense$ 14,335 $ 10,754 $ 50,487 $ 40,464
======== ======== ======== ========
GAAP research and development expense$5,692 $4,226 $ 21,332 $ 15,731
Stock-based compensation expense and
related employer-paid payroll taxes
(2)(398)(393)(1,673)(1,638)
-------- -------- -------- --------
Non-GAAP research and development
expense$5,294 $3,833 $ 19,659 $ 14,093
======== ======== ======== ========
GAAP general and administrative expense $8,093 $5,370 $ 28,076 $ 23,476
Amortization of intangible assets (1)(1,487)(388)(3,519)(1,440)
Stock-based compensation expense and
related employer-paid payroll taxes
(2)(1,379)(1,273)(5,746)(7,452)
Public offering costs (3)---(170)
Lawsuit settlement costs and related
legal fees, net of reimbursements (3)---217
Severance costs related to retirement
of former Executive Chairman (3)---(208)
Acquisition related adjustments (4)(860)(91)(2,002)(501)
-------- -------- -------- --------
Non-GAAP general and administrative
expense$4,367 $3,618 $ 16,809 $ 13,922
======== ======== ======== ========
GAAP accrued earnout loss (gain)$936 $- $(664)$-
Acquisition related adjustments (4)(936)-664-
-------- -------- -------- --------
Non-GAAP accrued earnout loss (gain)$- $- $- $-
======== ======== ======== ========
GAAP operating expense$ 29,873 $ 20,918 $102,594 $ 82,459
Amortization of intangible assets (1)(1,487)(388)(3,519)(1,440)
Stock-based compensation expense and
related employer-paid payroll taxes
(2)(2,594)(2,234) (10,782) (11,878)
Public offering costs (3)---(170)
Lawsuit settlement costs and related
legal fees, net of reimbursements (3)---217
Severance costs related to retirement
of former Executive Chairman (3)---(208)
Acquisition related adjustments (4)(1,797)(91)(1,339)(501)
-------- -------- -------- --------
Non-GAAP operating expense$ 23,995 $ 18,205 $ 86,954 $ 68,479
======== ======== ======== ========
GAAP operating income$ 22,338 $ 18,214 $ 83,775 $ 62,004
Amortization of intangible assets (1)2,4988527,1703,170
Stock-based compensation expense and
related employer-paid payroll taxes
(2)2,6422,26910,97412,047
Public offering costs (3)---170
Lawsuit settlement costs and related
legal fees, net of reimbursements (3)---(217)
Severance costs related to retirement
of former Executive Chairman (3)---208
Acquisition related adjustments (4)1,797911,339501
-------- -------- -------- --------
Non-GAAP operating income$ 29,275 $ 21,426 $103,258 $ 77,883
======== ======== ======== ========
GAAP operating margin40.2%44.0%42.2%40.7%
Amortization of intangible assets as a
% of revenue (1)4.5%2.1%3.6%2.1%
Stock-based compensation expense and
related employer-paid payroll taxes as
a % of revenue (2)4.8%5.5%5.5%7.9%
Public offering costs as a % of revenue
(3)0.0%0.0%0.0%0.1%
Lawsuit settlement costs and related
legal fees, net of reimbursements, as
a % of revenue (3)0.0%0.0%0.0%-0.1%
Severance costs related to retirement
of former Executive Chairman as a % of
revenue (3)0.0%0.0%0.0%0.1%
Acquisition related adjustments as a %
of revenue (4)3.2%0.2%0.7%0.3%
-------- -------- -------- --------
Non-GAAP operating margin52.6%51.7%52.1%51.1%
======== ======== ======== ========
GAAP other income (expense), net$793 $120 $1,028 $(854)
Debt issuance costs write-off (3)---334
Acquisition related adjustments (4)3495239257
-------- -------- -------- --------
Non-GAAP other income (expense), net$827 $215 $1,267 $(263)
======== ======== ======== ========
GAAP income tax expense$6,837 $3,020 $ 22,360 $ 16,404
Income tax effect on non-GAAP
exclusions (3)1,4459074,9704,494
-------- -------- -------- --------
Non-GAAP income tax expense$8,282 $3,927 $ 27,330 $ 20,898
======== ======== ======== ========
GAAP net income$ 16,294 $ 15,314 $ 62,443 $ 44,746
Amortization of intangible assets (1)2,4988527,1703,170
Stock-based compensation expense and
related employer-paid payroll taxes
(2)2,6422,26910,97412,047
Debt issuance costs write-off (3)---334
Public offering costs (3)---170
Lawsuit settlement costs and related
legal fees, net of reimbursements (3)---(217)
Severance costs related to retirement
of former Executive Chairman (3)---208
Acquisition related adjustments (4)1,8311861,578758
Tax benefits associated with above
adjustments (3)(1,445)(907)(4,970)(4,494)
-------- -------- -------- --------
Non-GAAP net income$ 21,820 $ 17,714 $ 77,195 $ 56,722
======== ======== ======== ========
Non-GAAP diluted earnings per share (5) $0.29 $0.24 $1.04 $0.78
======== ======== ======== ========
Weighted average shares used in
computing diluted earnings per share74,88573,04174,41372,862
======== ======== ======== ========
GAAP net income as a % of revenue29.3%37.0%31.5%29.4%
Amortization of intangible assets as a
% of revenue (1)4.5%2.1%3.6%2.1%
Stock-based compensation expense and
related employer-paid payroll taxes as
a % of revenue (2)4.8%5.5%5.5%7.9%
Debt issuance costs write-off as a % of
revenue (3)0.0%0.0%0.0%0.2%
Public offering costs as a % of revenue
(3)0.0%0.0%0.0%0.1%
Lawsuit settlement costs and related
legal fees, net of reimbursements, as
a % of revenue (3)0.0%0.0%0.0%-0.1%
Severance costs related to retirement
of former Executive Chairman as a % of
revenue (3)0.0%0.0%0.0%0.1%
Acquisition related adjustments as a %
of revenue (4)3.3%0.4%0.8%0.5%
Tax benefits associated with above
adjustments as a % of revenue (3)-2.6%-2.2%-2.5%-2.9%
-------- -------- -------- --------
Non-GAAP net income as a % of revenue39.2%42.8%38.9%37.2%
======== ======== ======== ========
(1) Amortization of Intangible Assets. We provide non-GAAP information
which excludes expenses for the amortization of intangible assets which
primarily relate to purchased intangible assets associated with our
acquisitions. Because of varying fair value amounts of intangible assets,
subjective impairment assumptions and the variety of useful lives, which
affect the recognition of amortization expense, we believe that the
exclusion of amortization expense allows for more accurate comparisons of
our operating results to our peer companies. The amortization of purchased
intangible assets associated with our acquisitions results in our
recording expenses in our GAAP financial statements that were already
expensed by the acquired company before the acquisition and for which we
have not expended cash. Accordingly, we analyze the performance of our
operations in each period without regard to such expenses.
(2) Stock-Based Compensation Expense and Related Employer-Paid Payroll
Taxes. We provide non-GAAP information which excludes expenses for stock-
based compensation and related employer-paid payroll taxes. We believe the
exclusion of these items allows for financial results that are more
indicative of our continuing operations. We believe that the exclusion of
stock-based compensation expense provides for a better comparison of our
operating results to prior periods and to our peer companies as the
calculations of stock-based compensation vary from period to period and
company to company due to different valuation methodologies, subjective
assumptions and the variety of award types. Employer-paid payroll taxes on
stock- based compensation is dependent on our stock price and the timing
of the taxable events related to the equity awards, over which our
management has little control, and does not correlate to the core
operation of our business. Because of these unique characteristics of
stock-based compensation and the related employer-paid payroll taxes,
management excludes these expenses when analyzing the organization's
business performance.
(3) Other Items. We exclude certain other unplanned items which we believe
are not indicative of our continuing operations and which amounts and
timing are difficult to estimate in advance, including the following, when
applicable: (i) write-off of debt issuance costs; (ii) public offering
costs; (iii) lawsuit settlement costs and related legal fees, net of
related reimbursements from insurance proceeds; (iv) severance costs
related to retirement of certain executive officers; and (v) the income
tax effect on our financial statements of excluding items related to our
non-GAAP financial measures. Although these events are reflected in our
GAAP financials, these transactions which are not indicative of our
continuing operations may limit the comparability of our ongoing
operations with prior and future periods. We also believe providing
financial information with and without the income tax effect of excluding
items related to our non-GAAP financial measures provide our management
and users of the financial statements with better clarity regarding the
on-going performance and future liquidity of our business. Because of
these factors, we assess our operating performance both with these amounts
included and excluded, and by providing this information, we believe the
users of our financial statements are better able to understand the
financial results of what we consider our continuing operations.
(4) Acquisition Related Adjustments. We exclude certain expense items
resulting from acquisitions including the following, when applicable: (i)
amortization of purchased intangible assets associated with our
acquisitions (see Note 1 for further discussion); (ii) legal, accounting
and advisory fees to the extent associated with acquisitions; (iii)
changes in fair value of contingent consideration; (iv) costs related to
integrating the acquired businesses; and (v) restructuring costs,
including adjustments related to changes in estimates, related to
acquisitions. We consider these adjustments, to some extent, to be
unpredictable and dependent on a significant number of factors that are
outside of our control. Furthermore, acquisitions result in non-continuing
operating expenses, which would not otherwise have been incurred by us in
the normal course of our organic business operations, with respect to each
acquisition. We believe that providing non-GAAP information for
acquisition related expense items in addition to the corresponding GAAP
information allows the users of our financial statements to better review
and understand the historic and current results of our continuing
operations, and also facilitates comparisons to our historical results and
results of less acquisitive peer companies, both with and without such
adjustments.
(5) Non-GAAP Diluted Earnings Per Share Item. We provide non-GAAP diluted
earnings per share. The non-GAAP diluted earnings per share amount was
calculated based on our non-GAAP net income and the weighted-average
number of shares outstanding during the reporting period. The non-GAAP
diluted earnings per share included additional dilution from potential
issuance of common stock, except when such issuances would be anti-
dilutive.
SolarWinds, Inc.
Reconciliation of Free Cash Flow to GAAP Cash Flows From Operating
Activities
(In thousands)
(Unaudited)
Three Months EndedTwelve Months Ended
December 31,December 31,
----------------------------------------
2011201020112010
------------------------------------
Reconciliation of free cash flow
to GAAP cash flows from
operating activities:
GAAP cash flows from
operating activities$36,445$19,994$ 111,418$66,043
Excess tax benefit from
stock-based compensation1,2279,3816,35926,748
Purchases of property and
equipment(1,102)(773)(2,945)(2,740)
------------------------------------
Free cash flow (1)$36,570$28,602$ 114,832$90,051
====================================
(1) Free Cash Flow: We define free cash flow as cash flows from operating
activities plus the excess tax benefit from stock-based compensation and
less the purchase of property and equipment. We believe free cash flow is
an important liquidity measure that reflects the cash generated by the
business after the purchase of property and equipment that can then be
used for, among other things, strategic acquisitions and investments in
the business, stock repurchases and funding ongoing operations.
SolarWinds, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Three Months EndedTwelve Months Ended
December 31,December 31,
----------------------------------------
2011201020112010
------------------------------------
Cash flows from operating
activities
Net income$16,294$15,314$62,443$44,746
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and
amortization3,2341,6029,9575,498
Provision for doubtful
accounts116097194
Stock-based compensation
expense2,6061,92610,69010,880
Accrued earnout loss (gain)936-(664)-
Deferred taxes2,087(2,629)2,123(2,220)
Excess tax benefit from
stock-based compensation(1,227)(9,381)(6,359)(26,748)
Other non-cash expenses
(benefits)263(209)622470
Changes in operating assets
and liabilities, net of
assets acquired and
liabilities assumed in
business combinations:
Accounts receivable1,2243,766(7,038)(5,078)
Income taxes receivable(8)-(33)31
Prepaid income taxes---4,675
Prepaid and other current
assets(578)(769)(189)(1,199)
Accounts payable(282)23556(1,127)
Accrued liabilities1,2352,4877473,958
Accrued interest payable---(539)
Income taxes payable5,6375,44719,88617,160
Deferred revenue and other
liabilities5,0132,14519,08015,342
------------------------------------
Net cash provided by
operating activities36,44519,994111,41866,043
Cash flows from investing
activities
Purchases of short-term, long-
term investments(3,950)-(34,129)-
Maturities of investments4,000-4,000-
Purchases of property and
equipment(1,102)(773)(2,945)(2,740)
Purchases of intangible assets
and other(191)(144)(745)(795)
Acquisition of businesses, net
of cash acquired(51,000)-(109,483)(28,039)
Earnout payments for
acquisitions--(3,743)-
------------------------------------
Net cash used in investing
activities(52,243)(917)(147,045)(31,574)
Cash flows from financing
activities
Repurchase of common stock(35)-(342)(24,987)
Exercise of stock options3,1486,26111,91921,032
Excess tax benefit from stock-
based compensation1,2279,3816,35926,748
Repayment of long-term debt---(44,097)
Repayments of capital lease
obligations---(9)
------------------------------------
Net cash provided by (used
in) financing activities4,34015,64217,936(21,313)
Effect of exchange rate changes
on cash and cash equivalents(1,658)(553)(1,605)(941)
------------------------------------
Net increase (decrease) in
cash and cash equivalents(13,116)34,166(19,296)12,215
Cash and cash equivalents
Beginning of period135,823107,837142,003129,788
------------------------------------
End of period$ 122,707$ 142,003$ 122,707$ 142,003
====================================
Supplemental disclosure of cash
flow information
Cash paid for interest$-$-$-$1,280
====================================
Cash paid (received) for
income taxes$(97) $175$1,013$(3,282)
====================================
Noncash investing and financing
transactions
Accrued earnout$-$-$3,938$3,743
====================================
Stock issued for acquisition $-$-$-$9,221
====================================
CONTACTS:
Investors:
Dave Hafner
Phone: 512.682.9867
ir@solarwinds.com
Media:
Tiffany Nels
Phone: 512.682.9545
pr@solarwinds.com |
