SolarWinds (NYSE: SWI) reported Q3 EPS of $0.28, $0.04 better than the analyst estimate of $0.24. Revenue for the quarter came in at $261.3 million versus the consensus estimate of $256.61 million.

On a non-GAAP basis:

• Non-GAAP total revenue for the third quarter of $261.3 million, representing 7.7% year-over-year growth on a reported basis and 6.5% year-over-year growth on a constant currency basis.
• Non-GAAP total recurring revenue for the third quarter of $222.0 million, representing 11.5% year-over-year growth on a reported basis and 10.2% year-over-year growth on a constant currency basis. Non-GAAP total recurring revenue includes:
  • Non-GAAP maintenance revenue for the third quarter of $121.1 million, representing 6.5% year-over-year growth on a reported basis.
  • Non-GAAP subscription revenue for the third quarter of $100.9 million, representing 18.2% year-over-year growth on a reported basis.
• Adjusted EBITDA for the third quarter of $132.7 million, representing a margin of 50.8% of non-GAAP total revenue.

For a reconciliation of our GAAP to non-GAAP results, please see the tables below.

“We delivered a strong performance in the third quarter of 2020 that included total non-GAAP revenue of $261 million, representing year-over-year growth of 8%, which exceeded the high end of our outlook range,” said Kevin Thompson, president and CEO, SolarWinds. “In the face of what has continued to be a volatile and uncertain economic environment, we continued to execute disciplined expense management, delivering an exceptional quarter of profitability generating $133 million of Adjusted EBITDA representing a margin of 51%. This year has shown us how critical the flexibility and resiliency of IT systems must be to support today’s modern businesses, which makes the work we do every day to support IT professionals as important as ever. We believe that the trend that we saw developing in the third quarter – CIOs and IT organizations aggressively looking for ways to reduce costs while still maintaining a depth of monitoring to ensure peak performance – gives us a strong opportunity to continue to capture share in our key markets.”

“The combination of our uniquely high level of profitability and focus on conversion of Adjusted EBITDA to free cash flow continued to pay dividends in the third quarter as our total cash balance reached $425 million dollars,” added Bart Kalsu, executive vice president and CFO, SolarWinds “ We converted approximately $108 million in unlevered free cash flow in the third quarter which puts our unlevered free cash for the first nine months of 2020 at $312 million and a year to date conversation rate of 86%. Additionally, our total non-GAAP recurring revenue grew 12% reaching $222 million dollars in the third quarter. Our non-GAAP recurring revenue included non-GAAP subscription revenue of $101 million dollars, reflecting year-over-year growth of 18%.”

GUIDANCE:

SolarWinds sees Q4 2020 EPS of $0.25, versus the consensus of $0.25. SolarWinds sees Q4 2020 revenue of $261-266 million, versus the consensus of $262.3 million.

SolarWinds sees FY2020 EPS of $0.98, versus the consensus of $0.94. SolarWinds sees FY2020 revenue of $1.017-1.022 billion, versus the consensus of $1.01 billion.

SolarWinds’ management currently expects to achieve the following results for the fourth quarter of 2020:

• Non-GAAP total revenue in the range of $261.0 to $266.0 million, representing growth over the fourth quarter of 2019 non-GAAP total revenue of 5% to 7%, or 4% to 6% on a constant currency basis assuming the same average foreign currency exchange rates as those in the fourth quarter of 2019.
• Adjusted EBITDA in the range of $123.0 to $126.0 million, representing approximately 47% of non-GAAP total revenue.
• Non-GAAP diluted earnings per share of $0.25.
• Weighted average outstanding diluted shares of approximately 317.5 million.

SolarWinds’ management currently expects to achieve the following results for the full year 2020:

• Non-GAAP total revenue in the range of $1.017 to $1.022 billion, representing growth over 2019 non-GAAP revenue of 8% to 9%, or 8% to 9% on a constant currency basis assuming the same average foreign currency exchange rates as those in 2019.
• Adjusted EBITDA in the range of $486.0 to $489.0 million, representing approximately 48% of non-GAAP total revenue.
• Non-GAAP diluted earnings per share of $0.98.
• Weighted average outstanding diluted shares of approximately 315.5 million.

For earnings history and earnings-related data on SolarWinds (SWI) click here.