SolarWinds (SWI) Reports Prelim. Q1 Results

April 13, 2021 4:50 PM EDT

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SolarWinds Corporation (NYSE: SWI), a leading provider of powerful and affordable IT management software, today announced certain preliminary financial results for its first quarter ended March 31, 2021. The Company plans to report its full first quarter 2021 financial results on Thursday, April 29, 2021.

Recent Financial Results (Preliminary and Unaudited)

Set forth below are preliminary estimates of selected unaudited financial information for the three months ended March 31, 2021 and actual selected unaudited financial results for the three months ended March 31, 2020. The following information reflects the company's preliminary estimates based on currently available information and is subject to change.

After an initial review of its first quarter 2021 financial performance, SolarWinds expects to report:

On a GAAP basis:

  • Total revenue in the range of $255.8 million to $256.8 million, representing approximately 4% year-over-year growth, and consisting of:
    • Core IT Management revenue in the range of $173.1 million to $173.9 million, representing a consistent year-over-year performance.
    • N-able revenue in the range of $82.7 million to $82.9 million, representing 13% year-over-year growth.
  • Net loss for the first quarter in the range of $16.6 million to $16.9 million.

On a non-GAAP basis:

  • Total non-GAAP revenue in the range of $255.9 million to $256.9 million, representing approximately 3% year-over-year growth, and consisting of:
    • Core IT Management non-GAAP revenue in the range of $173.2 million to $174.0 million, representing a decline of 1% year-over-year.
    • N-able revenue in the range of $82.7 million to $82.9 million, representing 13% year-over-year growth.
  • Adjusted EBITDA in the range of $103.0 million to $106.0 million, representing an adjusted EBITDA margin of approximately 40% to 41%.

(*Consensus sees Q1 revenue of $249.9 million)

“We are pleased with our preliminary first quarter financial results, which exceeded the high end of our previously provided outlook with respect to both non-GAAP total revenue and adjusted EBITDA,” said Sudhakar Ramakrishna, president and Chief Executive Officer, SolarWinds. “I am extremely proud of the poise and collaboration that our team has exhibited to deliver value to our customers, contributing to our better than anticipated first quarter results. I continue to be encouraged by the resiliency of our business, and the positive customer and partner feedback to our ‘Secure by Design’ initiatives. Our entire team remains focused on our mission to deliver powerful, affordable, and secure solutions.”

Ramakrishna continued, “In addition, we remain committed to completing the previously announced potential spin-off of our N-able (formerly SolarWinds MSP) business in the second quarter of 2021. I want to thank our customers and partners for their ongoing support and thank our employees for their commitment.”

The Company's unaudited interim consolidated financial statements for the three months ended March 31, 2021 are not yet available. SolarWinds has provided ranges, rather than specific amounts, for the preliminary estimates of the financial information described above primarily because its financial closing procedures for the three months ended March 31, 2021 are not yet complete and, as a result, the final results upon completion of the closing procedures may vary from the preliminary estimates. See “Forward-Looking Statements” for additional information regarding factors that could result in differences between the preliminary estimated ranges of certain of the Company's financial results and operating data presented above and the actual financial results and other information SolarWinds will report for the three months ended March 31, 2021.

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

The following table reconciles expected GAAP total revenue to expected non-GAAP total revenue for the three months ended March 31, 2021, and reconciles actual GAAP total revenue to non-GAAP total revenue for the three months ended March 31, 2020:

Three Months Ended March 31,

2021

2020

Low

High

Actual

(in thousands)

Total GAAP revenue

$

255,830

$

256,810

$

246,950

Impact of purchase accounting

70

90

1,513

Total non-GAAP revenue

$

255,900

$

256,900

$

248,463

Total GAAP revenue - Core IT Management

$

173,130

$

173,910

$

173,737

Impact of purchase accounting

70

90

1,513

Non-GAAP total revenue - Core IT Management

$

173,200

$

174,000

$

175,250

Total GAAP revenue - N-able

$

82,700

$

82,900

$

73,213

Impact of purchase accounting

Non-GAAP total revenue - N-able

$

82,700

$

82,900

$

73,213

The following table reconciles expected net loss to expected adjusted EBITDA for the three months ended March 31, 2021, and reconciles actual net income to adjusted EBITDA for the three months ended March 31, 2020:

Three Months Ended March 31,

2021

2020

Low

High

Actual

(in thousands)

Net income (loss)

$

(16,620

)

$

(16,870

)

$

415

Amortization and depreciation

69,600

69,700

67,768

Income tax (benefit) expense

(12,130

)

(11,130

)

2,415

Interest expense, net

16,000

16,300

24,095

Impact of purchase accounting on total revenue

70

90

1,513

Unrealized foreign currency (gains) losses

(900

)

(1,200

)

983

Acquisition and other costs

800

1,000

1,943

Spin-off exploration costs

9,700

10,200

Debt related costs

80

110

93

Stock-based compensation expense and related employer-paid payroll taxes

18,000

18,300

11,483

Restructuring costs

400

500

222

Cyber Incident costs

18,000

19,000

Adjusted EBITDA

$

103,000

$

106,000

$

110,930

Adjusted EBITDA margin

40.3

%

41.3

%

44.6

%

In addition, in connection with the potential spin-off of the N-able business, SolarWinds is providing its financial outlook, as of April 13, 2021, for the N-able business for the second quarter of 2021 and full year 2021. This financial outlook for the N-able business is based on the assumption that the potential separation of the N-able business is completed in the second quarter of 2021. SolarWinds will provide an update to its financial outlook for the second quarter of 2021 on its earnings release call, currently scheduled for April 29, 2021.

The financial information below represents forward-looking non-GAAP financial information, including an estimate of adjusted EBITDA. Adjusted EBITDA excludes, among other items mentioned below, stock-based compensation expense and related employer-paid payroll taxes, amortization, costs related to the exploration of a potential spin-off of SolarWinds’ MSP business and other costs related to non-recurring items. The Company has not reconciled the estimates of these non-GAAP financial measures to their most directly comparable GAAP measure as a result of uncertainty regarding, and the potential variability of, these excluded items in future periods. Accordingly, reconciliation is not available without unreasonable effort, although it is important to note that these excluded items could be material to the Company's results computed in accordance with GAAP in future periods. The reported results provide reconciliations of non-GAAP financial measures to their nearest GAAP equivalents.

N-able Financial Outlook for Second Quarter of 2021

SolarWinds’ management currently expects the N-able business to achieve the following results for the second quarter of 2021:

  • Total GAAP revenue in the range of $83.5 to $84.0 million, representing growth over the second quarter of 2020 total revenue of the N-able business of approximately 14%.

N-able Financial Outlook for Full Year 2021

SolarWinds’ management currently expects the N-able business to achieve the following results for the full year 2021:

  • Total GAAP revenue in the range of $340 to $344 million, representing growth over 2020 total revenue of the N-able business of 12% to 14%.
  • Adjusted EBITDA in the range of $105 to $110 million, representing approximately 31% to 32% of total revenue of the N-able business.



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