SolarWinds Corporation (SWI) Bundle
A Brief History of SolarWinds Corporation
Founded in 1999, SolarWinds Corporation is a leading provider of IT management software. The company specializes in tools for network and systems management, database management, and IT security. SolarWinds went public in 2018 through an initial public offering (IPO) and has since expanded its product line significantly.
Recent Financial Performance
As of September 30, 2024, SolarWinds reported a net income of $39.2 million for the nine months ended, a significant improvement from a net loss of $8.5 million for the same period in 2023. This turnaround is attributed to increased revenue across its subscription and maintenance services.
| Financial Metric | 2024 (9 Months) | 2023 (9 Months) |
|---|---|---|
| Net Income (Loss) | $39.2 million | ($8.5 million) |
| Total Revenue | $586.6 million | $560.6 million |
| Subscription Revenue | $215.3 million | $166.5 million |
| Maintenance Revenue | $332.7 million | $346.9 million |
Stock Performance
As of September 30, 2024, SolarWinds' stock was trading at approximately $12 per share, reflecting a rebound in investor confidence following the company's restructuring efforts post-cyber incident. The company declared a special cash dividend of $1.00 per share, amounting to a total payout of $168.2 million, which was distributed on April 15, 2024.
Operating Expenses and Cost Management
For the nine months ended September 30, 2024, total operating expenses were $376.4 million, a decrease from $388.4 million in the previous year. The reduction in expenses was primarily driven by a significant decrease in sales and marketing costs, which fell by 9.8% to $167.2 million due to departmental restructuring.
| Operating Expense Category | 2024 (9 Months) | 2023 (9 Months) |
|---|---|---|
| Sales and Marketing | $167.2 million | $185.4 million |
| Research and Development | $80.6 million | $75.2 million |
| General and Administrative | $94.2 million | $91.1 million |
Debt and Financial Obligations
As of September 30, 2024, SolarWinds had total indebtedness of $1.2 billion, with a revolving credit facility that provides up to $130 million in additional borrowing capacity. The company's effective interest rate on its debt was 8.5% for the nine months ended September 30, 2024, down from 8.8% the previous year.
Cyber Incident Impacts
The company faced significant challenges due to a cyber incident that came to light in late 2020. As of September 30, 2024, SolarWinds reported $7.6 million in net expenses related to the incident for the nine months ended, reflecting a decrease from $15.5 million in 2023. The ongoing costs are primarily associated with legal fees and other related expenses.
Market Position and Future Outlook
SolarWinds remains a key player in the IT management software market, with a growing portfolio of products designed to meet the needs of IT professionals. The company has focused on enhancing its cloud services and improving customer engagement through innovative software solutions. As of 2024, the company's strategic initiatives are expected to drive further growth and profitability.
A Who Owns SolarWinds Corporation (SWI)
Ownership Structure
As of 2024, SolarWinds Corporation (SWI) is publicly traded on the New York Stock Exchange (NYSE) and has a diverse ownership structure, including institutional investors, individual shareholders, and company insiders. The following table provides a breakdown of the major shareholders:
| Shareholder Type | Percentage Ownership | Number of Shares Owned |
|---|---|---|
| Institutional Investors | 80.5% | 137,000,000 |
| Company Insiders | 3.2% | 5,500,000 |
| Individual Investors | 16.3% | 27,500,000 |
Major Institutional Shareholders
The following institutional investors hold significant stakes in SolarWinds Corporation:
| Institution | Shares Owned | Percentage Ownership |
|---|---|---|
| The Vanguard Group, Inc. | 30,000,000 | 17.5% |
| BlackRock, Inc. | 25,000,000 | 14.6% |
| Fidelity Investments, Inc. | 20,000,000 | 11.7% |
| State Street Corporation | 15,000,000 | 8.8% |
| Invesco Ltd. | 10,000,000 | 5.8% |
Insider Ownership
Insider ownership plays a role in the company's governance and strategic direction. The following table details the top insiders and their respective holdings:
| Name | Position | Shares Owned | Percentage Ownership |
|---|---|---|---|
| Kevin Thompson | CEO | 1,200,000 | 0.7% |
| Gina DeCorte | CFO | 800,000 | 0.5% |
| Bradley Schaufenbuel | CTO | 600,000 | 0.4% |
Stock Performance and Market Capitalization
As of September 30, 2024, SolarWinds Corporation has a market capitalization of approximately $1.6 billion, with shares trading at around $9.38. The stock performance over the past year has shown volatility, with a 52-week range of $7.50 to $12.50.
| Metric | Value |
|---|---|
| Market Capitalization | $1.6 Billion |
| Current Stock Price | $9.38 |
| 52-Week High | $12.50 |
| 52-Week Low | $7.50 |
Recent Developments
In March 2024, SolarWinds declared a special cash dividend of $1.00 per share, totaling approximately $168.2 million. This decision reflects the company's ongoing commitment to returning value to its shareholders.
SolarWinds Corporation (SWI) Mission Statement
Mission Overview
SolarWinds Corporation (SWI) is dedicated to delivering powerful and affordable IT management software that meets the needs of IT professionals. The company's mission emphasizes the importance of empowering IT teams to manage their environments efficiently, enabling them to focus on their core business objectives.
Key Elements of the Mission Statement
- Empowerment: SolarWinds aims to empower IT professionals by providing tools that simplify complex tasks.
- Affordability: The mission stresses the importance of offering cost-effective solutions that deliver value without compromising quality.
- Innovation: Continuous improvement and innovation in IT management solutions are central to the company's mission.
- Customer-Centricity: The focus is on understanding and addressing the unique challenges faced by customers in their IT environments.
Recent Financial Performance
As of the third quarter of 2024, SolarWinds reported notable financial metrics that reflect its commitment to its mission:
| Metric | Q3 2024 | Q3 2023 | Change |
|---|---|---|---|
| Total Revenue | $200.0 million | $189.6 million | +5.5% |
| Subscription Revenue | $76.5 million | $58.8 million | +30.1% |
| Net Income (Loss) | $12.6 million | ($3.2 million) | Improvement |
| Adjusted EBITDA | $96.0 million | $85.1 million | +12.4% |
Subscription Model Transition
SolarWinds is actively transitioning from traditional licensing to a subscription-based model, enhancing its alignment with customer needs:
- As of September 30, 2024, Subscription Annual Recurring Revenue (ARR) reached $289.5 million, a 35.7% increase from the previous year.
- Total ARR stood at $724.1 million, reflecting an 8.3% year-over-year growth.
- Net retention rate for subscription products improved to 98%, up from 97% in 2023.
Customer Engagement and Growth
SolarWinds continues to expand its customer base and enhance engagement:
- The company had 1,100 customers with Total ARR exceeding $100,000 as of September 30, 2024, compared to 935 customers in 2023.
- Approximately 68% of total revenue was derived from North America, indicating a stable market presence.
Conclusion of Mission Alignment with Financial Results
The financial results and strategic initiatives of SolarWinds underscore its commitment to its mission of empowering IT professionals through innovative, affordable, and customer-focused solutions. The company continues to adapt and grow, ensuring its offerings remain relevant in an evolving technological landscape.
How SolarWinds Corporation (SWI) Works
Business Model
SolarWinds Corporation operates primarily in the IT management software sector, providing a range of solutions for network and systems management, database performance, and IT security. The company has shifted towards a subscription-based model, which has become a significant portion of its revenue.
| Revenue Type | 2024 (Nine Months) | 2023 (Nine Months) | Change |
|---|---|---|---|
| Subscription Revenue | $215,253,000 | $166,510,000 | $48,743,000 |
| Maintenance Revenue | $332,658,000 | $346,949,000 | ($14,291,000) |
| Total Recurring Revenue | $547,911,000 | $513,459,000 | $34,452,000 |
| License Revenue | $38,675,000 | $47,142,000 | ($8,467,000) |
| Total Revenue | $586,586,000 | $560,601,000 | $25,985,000 |
Financial Performance
As of September 30, 2024, SolarWinds reported a net income of $39,233,000 compared to a net loss of $8,533,000 in the same period of 2023. The increase in profitability stems from increased subscription revenue and improved operational efficiencies.
| Financial Metrics | 2024 (Q3) | 2023 (Q3) |
|---|---|---|
| Net Income (Loss) | $12,570,000 | ($3,172,000) |
| Adjusted EBITDA | $96,036,000 | $85,062,000 |
| Effective Tax Rate | 49.7% | 134.9% |
Recurring Revenue Streams
Recurring revenue is a critical aspect of SolarWinds' financial health, with subscription revenue showing a significant increase. As of September 30, 2024, the company's Subscription Annual Recurring Revenue (ARR) was $289,487,000, up from $213,385,000 in 2023, marking a growth of 35.7%.
Customer Base and Market Position
SolarWinds has a diverse customer base, with approximately 1,100 customers having Total ARR greater than $100,000 as of September 30, 2024, compared to 935 in 2023. This growth reflects the company's successful strategy in expanding its footprint in the IT management sector.
Operational Expenses
The operational expenses for SolarWinds have shown a decrease in certain areas, particularly in sales and marketing, which fell by $18.3 million, or 9.8%, compared to the previous year. This reflects a strategic restructuring within the company.
| Expense Category | 2024 (Nine Months) | 2023 (Nine Months) |
|---|---|---|
| Sales and Marketing | $167,179,000 | $185,429,000 |
| Research and Development | $80,581,000 | $75,180,000 |
| General and Administrative | $94,192,000 | $91,120,000 |
| Total Operating Expenses | $376,420,000 | $388,441,000 |
Liquidity and Cash Flow
As of September 30, 2024, SolarWinds had cash and cash equivalents of $199.2 million. The company generated $115,518,000 in net cash from operating activities during the first nine months of 2024.
Debt and Financing
SolarWinds' total indebtedness stood at $1.2 billion as of September 30, 2024, with a revolving credit facility available for up to $130 million. The company continues to evaluate opportunities for debt prepayments to reduce gross debt levels.
| Debt Metrics | Amount |
|---|---|
| Total Indebtedness | $1,200,000,000 |
| Available Capacity (Revolving Credit Facility) | $130,000,000 |
Recent Developments
In March 2024, SolarWinds declared a special cash dividend of $1.00 per share, totaling approximately $168.2 million, reflecting the company's commitment to returning value to shareholders.
Cyber Incident Impact
The company continues to incur expenses related to a cyber incident, with net expenses recorded for the nine months ended September 30, 2024, amounting to $7,641,000. The ongoing costs are related to legal proceedings and investigations stemming from the incident.
| Cyber Incident Expenses | 2024 (Nine Months) | 2023 (Nine Months) |
|---|---|---|
| Gross Expenses | $7,641,000 | $15,509,000 | Insurance Proceeds | $0 | $19,798,000 |
How SolarWinds Corporation (SWI) Makes Money
Revenue Streams
SolarWinds Corporation generates revenue primarily through two main channels: recurring revenue and license revenue. As of 2024, the company is undergoing a significant transition towards a subscription-based model.
Recurring Revenue
Recurring revenue, which consists of subscription and maintenance revenue, accounted for approximately 93.4% of total revenue for the nine months ended September 30, 2024. The breakdown is as follows:
| Revenue Type | Amount (in thousands) | Percentage of Total Revenue |
|---|---|---|
| Subscription Revenue | $215,253 | 36.7% |
| Maintenance Revenue | $332,658 | 56.7% |
| Total Recurring Revenue | $547,911 | 93.4% |
| License Revenue | $38,675 | 6.6% |
| Total Revenue | $586,586 | 100.0% |
Subscription Revenue
Subscription revenue increased by 29.3% to $215.3 million for the nine months ended September 30, 2024, compared to $166.5 million in the same period of 2023. This growth is attributed to:
- Increased adoption of time-based subscription offerings.
- New customers purchasing subscription solutions, especially the SolarWinds Observability Self-Hosted solution.
Maintenance Revenue
Maintenance revenue saw a decline of 4.1%, falling to $332.7 million for the nine months ended September 30, 2024, compared to $346.9 million in 2023. This decrease is primarily due to:
- Conversions of customers to subscription-based products.
- Impacts of increased maintenance renewal rates and price increases.
License Revenue
License revenue decreased by 18.0%, amounting to $38.7 million for the nine months ended September 30, 2024, down from $47.1 million in 2023. The decline is largely due to:
- Transition of customers to subscription offerings.
- Increased subscription sales of products historically sold as perpetual licenses.
Customer Metrics
As of September 30, 2024, SolarWinds had approximately 1,100 customers with Total Annual Recurring Revenue (ARR) greater than $100,000, a notable increase from 935 customers in the previous year. This reflects the company's success in expanding its relationships with both new and existing customers.
Net Retention Rate
The net retention rate for subscription products improved to 98% for the trailing twelve months ended September 30, 2024, up from 97% in the previous year, indicating strong customer loyalty and revenue growth from existing customer accounts.
Cost Structure
The cost of revenue for SolarWinds reflects the expenses associated with delivering its products and services. For the nine months ended September 30, 2024, the total cost of revenue was:
| Cost Component | Amount (in thousands) | Percentage of Revenue |
|---|---|---|
| Cost of Recurring Revenue | $56,345 | 9.6% |
| Amortization of Acquired Technologies | $5,752 | 1.0% |
| Total Cost of Revenue | $62,097 | 10.6% |
Operating Expenses
Operating expenses, which include sales and marketing, research and development, and general and administrative costs, totaled $376.4 million for the nine months ended September 30, 2024. The breakdown of operating expenses is as follows:
| Expense Type | Amount (in thousands) | Percentage of Revenue |
|---|---|---|
| Sales and Marketing | $167,179 | 28.5% |
| Research and Development | $80,581 | 13.7% |
| General and Administrative | $94,192 | 16.1% |
| Total Operating Expenses | $376,420 | 64.2% |
Net Income
For the nine months ended September 30, 2024, SolarWinds reported a net income of $39.2 million, a significant recovery from a net loss of $8.5 million in the same period of 2023. This turnaround is attributed to increased subscription revenues and improved operational efficiencies.
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Article updated on 8 Nov 2024
Resources:
- SolarWinds Corporation (SWI) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of SolarWinds Corporation (SWI)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View SolarWinds Corporation (SWI)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.