Form 10-Q - Quarterly report [Sections 13 or 15(d)]

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

FORM 10-Q

(Mark One)


☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-38711

SolarWinds Corporation

(Exact name of registrant as specified in its charter)


Delaware						81-0753267
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

7171 Southwest Parkway

Building 400

Austin, Texas 78735

(512) 682.9300

(Address and telephone number of principal executive offices)

Securities registered pursuant to Section 12(b) of the Act:


Title of Each Class	Trading Symbol	Name of Each Exchange on Which Registered
Common Stock, $0.001 par value	SWI	New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. þ Yes ¨ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). þ Yes ¨ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☑	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes þ No

On August 4, 2023, 164,738,253 shares of common stock, par value $0.001 per share, were outstanding.

SOLARWINDS CORPORATION

Table of Contents


PART I - FINANCIAL INFORMATION
		Page
Item 1.	Financial Statements	5
	Condensed Consolidated Balance Sheets as of June 30 , 2023 and December 31, 2022	5
	Condensed Consolidated Statements of Operations for the three and six month periods ended June 30 , 2023 and 2022	6
	Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and six month periods ended June 30 , 2023 and 2022	7
	Condensed Consolidated Statements of Stockholders' Equity for the three and six month periods ended June 30 , 2023 and 2022	8
	Condensed Consolidated Statements of Cash Flows for the six month periods ended June 30, 2023 and 2022	10
	Notes to the Condensed Consolidated Financial Statements	11
	1. Organization and Nature of Operations
	2. Summary of Significant Accounting Policies
	3. Investments
	4. Goodwill
	5. Fair Value Measurements
	6. Debt
	7. Income (Loss) Per Share
	8. Income Taxes
	9. Commitment and Contingencies

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures of Market Risk	35
Item 4.	Controls and Procedures	37
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	38
Item 1A.	Risk Factors	38
Item 6.	Exhibits	39
	Signatures	40

Safe Harbor Cautionary Statement

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Private Securities Litigation Reform Act of 1995. Such statements may be signified by terms such as “aim,” “anticipate,” “believe,” “continue,” “expect,” “feel,” “intend,” “estimate,” “seek,” “plan,” “may,” “can,” “could,” “should,” “will,” “would” or similar expressions and the negatives of those terms. In this report, forward-looking statements include statements regarding our financial projections, future financial performance and plans and objectives for future operations including, without limitation, the following:

•expectations regarding our financial condition and results of operations, including revenue, revenue growth, revenue mix, cost of revenue, operating expenses, operating income, non-GAAP operating income, non-GAAP operating margin, adjusted EBITDA and adjusted EBITDA margin, cash flows and effective income tax rate;

•expectations regarding the impact of the cyberattack on our Orion Software Platform and internal systems (the "Cyber Incident") on our business and reputation and the additional costs, liabilities and other adverse consequences that we may incur as a result of the Cyber Incident;

•expectations regarding the impact the government investigations and litigation resulting from the Cyber Incident may have on our business;

•expectations regarding investment in product development and our expectations about the results of those efforts and our ability to convert our customers to subscription products;

•expectations regarding our evolution from monitoring to observability;

•expectations regarding hiring additional personnel globally in the areas of sales and marketing and research and development;

•expectations regarding the impact of macroeconomic conditions, including the war in Ukraine, geopolitical tensions involving China, inflation, instability in the banking sector and financial services industry, foreign currency exchange rates and the global COVID-19 pandemic on our business and financial results;

•intentions regarding our international earnings and investment of those earnings in international operations;

•expectations regarding our capital expenditures;

•expectations concerning acquisitions and opportunities resulting from our acquisitions; and

•our beliefs regarding the sufficiency of our cash and cash equivalents, cash flows from operating activities and borrowing capacity.

Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially and adversely 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:

•numerous risks related to the Cyber Incident, including with respect to (1) numerous financial, legal, reputational and other risks to us related to the Cyber Incident, including risks that the incident or SolarWinds’ response thereto, may result in the loss of business as a result of termination or non-renewal of agreements or reduced purchases or upgrades of our products, reputational damage adversely affecting customer, partner and vendor relationships and investor confidence, increased attrition of personnel and distraction of key and other personnel, indemnity obligations, damages for contractual breach, penalties for violation of applicable laws or regulations and the incurrence of other liabilities, (2) litigation and investigation risks related to the Cyber Incident, including as a result of U.S. regulatory investigations and enforcement actions, including any proceeding that may be commenced against us or our current and former executive officers and employees by the Securities and Exchange Commission, in each case relating to the previously disclosed Wells Notices, and exposure to judgements, fines, settlements and other costs and liabilities related thereto, (3) risks that our insurance coverage may not be available or sufficient to compensate for all liabilities we incur related to these matters and (4) the possibility that our steps to secure our internal environment, improve our product development environment and ensure the security and integrity of the software that we deliver to our customers may not be successful or sufficient to protect against future threat actors or attacks or be perceived by existing and prospective customers as sufficient to address the harm caused by Cyber Incident;

•other risks related to cyber security, including that we may experience other security incidents or have vulnerabilities in our systems and services exploited, whether through the actions or inactions of our employees or otherwise, which may result in compromises or breaches of our and our customers’ systems or, theft or misappropriation of our and our customers’ confidential, proprietary or personal information, as well as exposure to legal and other liabilities, including the related risk of higher customer, employee and partner attrition and the loss of key personnel, as well as negative impacts to our sales, renewals and upgrades;

•risks related to the evolving breadth of our sales motion and challenges, investments and additional costs associated with increased selling efforts toward enterprise customers and adopting a subscription-first approach;

•risks relating to increased investments in, and the timing of, our transformation from monitoring to observability;

•risks related to any shifts in our revenue mix and the timing of how we recognize revenue as we transition to a subscription-first model;

•risks related to using artificial intelligence in our business and our solutions, including risks related to evolving regulation of artificial intelligence, machine learning and the receipt, collection, storage, processing and transfer of data;

•potential foreign exchange gains and losses related to expenses and sales denominated in currencies other than the functional currency of an associated entity;

•any of the following factors either generally or as a result of the impacts of global macroeconomic conditions, including the war in Ukraine, geopolitical tensions involving China, inflation, instability in the banking sector and financial services industry, foreign currency exchange rates and the effects of the COVID-19 pandemic on the global economy or on our business operations and financial condition or on the business operations and financial conditions of our customers, their end-customers and our prospective customers:

◦reductions in information technology spending or delays in purchasing decisions by our customers, their end-customers and our prospective customers;

◦the inability to sell products to new customers or to sell additional products or upgrades to our existing customers or to convert our existing customers to subscription products;

◦any decline in our renewal or net retention rates or any delay or loss of U.S. government sales;

◦the inability to generate significant volumes of high-quality sales leads from our digital marketing initiatives and convert such leads into new business at acceptable conversion rates;

◦the timing and adoption of new products, product upgrades or pricing model changes by us or our competitors;

◦changes in interest rates;

◦risks associated with our international operations and any international expansion efforts; and

◦ongoing sanctions and export controls;

•the possibility that our operating income could fluctuate and may decline as percentage of revenue as we make further expenditures to expand our product offerings and sales motion in order to support additional growth in our business;

•our ability to compete effectively in the markets we serve and the risks of increased competition as we enter new markets;

•our ability to attract, retain and motivate employees;

•risks related to the spin-off of the N-able business into a newly created and separately traded public company, including that we could incur significant liability if the separation is determined to be a taxable transaction or potential indemnification liabilities incurred in connection with the separation could materially affect our business and financial results;

•our inability to successfully identify, complete and integrate acquisitions and manage our growth effectively;

•risks associated with our status as a controlled company; and

•such other risks and uncertainties described more fully in documents filed with or furnished to the Securities and Exchange Commission, including the risk factors discussed in our Annual Report on Form 10-K for the year ended December 31, 2022, our Quarterly Report on Form 10-Q for the quarter ended March 31, 2023 and this Quarterly Report on Form 10-Q.

Given these risks and uncertainties, you should not place undue reliance on these forward-looking statements. Also, forward-looking statements represent our management’s beliefs and assumptions only as of the date of this Quarterly Report on Form 10-Q. Except as required by law, we assume no obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially and adversely from those anticipated in these forward-looking statements, even if new information becomes available in the future.

Investors and others should note that we announce material information to our investors using our investor relations website (https://investors.solarwinds.com), SEC filings, press releases, public conference calls and webcasts. We use these channels as well as social media to communicate with the public about our company, our business and other matters. It is possible that the information we post on social media could be deemed to be material information. Therefore, we encourage investors, the media, and others interested in our company to review the information we post on the social media channels listed on our investor relations website.

In this report “SolarWinds,” “Company,” “we,” “us” and “our” refer to SolarWinds Corporation and its consolidated subsidiaries.

PART I: FINANCIAL INFORMATION

Item 1. Financial Statements

SolarWinds Corporation

Condensed Consolidated Balance Sheets

(In thousands, except share and per share information)

(Unaudited)


	June 30,		December 31,
	2023		2022
Assets
Current assets:
Cash and cash equivalents	$	177,194	$	121,738
Short-term investments	995		27,114
Accounts receivable, net of allowances of $2,425 and $1,173 as of June 30, 2023 and December 31, 2022, respectively	83,446		100,204
Income tax receivable	1,998		987


Prepaid and other current assets	67,046		57,350
Total current assets	330,679		307,393
Property and equipment, net	21,114		26,634
Operating lease assets	43,837		61,418
Deferred taxes	136,509		134,922
Goodwill	2,386,896		2,380,059
Intangible assets, net	212,592		243,980
Other assets, net	48,807		45,600
Total assets	$	3,180,434	$	3,200,006
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	10,928	$	14,045
Accrued liabilities and other	39,982		68,284
Current operating lease liabilities	14,847		15,005

Accrued interest payable	307		579
Income taxes payable	25,656		11,841
Current portion of deferred revenue	332,309		337,541
Current debt obligation	12,450		9,338
Total current liabilities	436,479		456,633
Long-term liabilities:
Deferred revenue, net of current portion	42,018		38,945
Non-current deferred taxes	4,995		8,582
Non-current operating lease liabilities	52,276		59,235
Other long-term liabilities	54,194		74,193
Long-term debt, net of current portion	1,191,816		1,192,765
Total liabilities	1,781,778		1,830,353
Commitments and contingencies (Note 9)

Stockholders’ equity:
Common stock, $0.001 par value: 1,000,000,000 shares authorized and 164,710,793 and 161,928,532 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively	165		162
Preferred stock, $0.001 par value: 50,000,000 shares authorized and no shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively	—		—
Additional paid-in capital	2,654,178		2,627,370
Accumulated other comprehensive loss	(40,561)		(48,114)
Accumulated deficit	(1,215,126)		(1,209,765)
Total stockholders’ equity	1,398,656		1,369,653
Total liabilities and stockholders’ equity	$	3,180,434	$	3,200,006

The accompanying notes are an integral part of these condensed consolidated financial statements.

SolarWinds Corporation

Condensed Consolidated Statements of Operations

(In thousands, except per share information)

(Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Revenue:
Subscription	$	53,389	$	36,980	$	107,746	$	75,727
Maintenance	116,056		113,972		230,534		229,467
Total recurring revenue	169,445		150,952		338,280		305,194
License	15,589		25,082		32,730		47,708
Total revenue	185,034		176,034		371,010		352,902
Cost of revenue:
Cost of recurring revenue	18,533		15,460		36,927		33,291
Amortization of acquired technologies	3,425		3,648		6,861		20,875
Total cost of revenue	21,958		19,108		43,788		54,166
Gross profit	163,076		156,926		327,222		298,736
Operating expenses:
Sales and marketing	59,838		64,615		125,754		125,659
Research and development	24,081		22,108		47,872		45,530
General and administrative	34,418		41,283		60,019		73,947
Amortization of acquired intangibles	12,094		13,103		25,099		26,342
Goodwill impairment	—		612,395		—		612,395
Total operating expenses	130,431		753,504		258,744		883,873
Operating income (loss)	32,645		(596,578)		68,478		(585,137)
Other income (expense):
Interest expense, net	(29,443)		(18,401)		(58,024)		(34,488)
Other income (expense), net	13		726		(76)		557
Total other expense	(29,430)		(17,675)		(58,100)		(33,931)
Income (loss) before income taxes	3,215		(614,253)		10,378		(619,068)
Income tax expense	2,955		7,871		15,739		7,715
Net income (loss)	$	260	$	(622,124)	$	(5,361)	$	(626,783)
Net income (loss) available to common stockholders	$	260	$	(622,124)	$	(5,361)	$	(626,783)
Net income (loss) available to common stockholders per share:
Basic income (loss) per share	$	—	$	(3.87)	$	(0.03)	$	(3.91)
Diluted income (loss) per share	$	—	$	(3.87)	$	(0.03)	$	(3.91)
Weighted-average shares used to compute net income (loss) available to common stockholders per share:
Shares used in computation of basic income (loss) per share	164,193		160,663		163,487		160,257
Shares used in computation of diluted income (loss) per share	165,386		160,663		163,487		160,257

The accompanying notes are an integral part of these condensed consolidated financial statements.

SolarWinds Corporation

Condensed Consolidated Statements of Comprehensive Income (Loss)

(In thousands)

(Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Net income (loss)	$	260	$	(622,124)	$	(5,361)	$	(626,783)
Other comprehensive income (loss):
Foreign currency translation adjustment	(2,950)		(53,670)		7,433		(70,565)
Unrealized gains (losses) on investments, net of income tax expense (benefit) of $10 and $(34) for the three months ended June 30, 2023 and 2022, respectively, and $31 and $(34) for the six months ended June 30, 2023 and 2022, respectively	37		(152)		120		(152)
Other comprehensive income (loss)	(2,913)		(53,822)		7,553		(70,717)
Comprehensive income (loss)	$	(2,653)	$	(675,946)	$	2,192	$	(697,500)

The accompanying notes are an integral part of these condensed consolidated financial statements.

SolarWinds Corporation

Condensed Consolidated Statements of Stockholders' Equity

(In thousands)

(Unaudited)


	Three Months Ended June 30, 2023
	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount









Balance at March 31, 2023	163,667	$	164	$	2,638,670	$	(37,648)	$	(1,215,386)	$	1,385,800
Foreign currency translation adjustment	—	—		—		(2,950)		—		(2,950)
Unrealized gain on investments, net of taxes	—	—		—		37		—		37
Net income	—	—		—		—		260		260
Comprehensive loss										(2,653)
Exercise of stock options	115	—		104		—		—		104
Restricted stock units issued, net of shares withheld for taxes	929	1		(3,177)		—		—		(3,176)



Stock-based compensation	—	—		18,581		—		—		18,581
Balance at June 30, 2023	164,711	$	165	$	2,654,178	$	(40,561)	$	(1,215,126)	$	1,398,656


	Six Months Ended June 30, 2023
	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount
Balance at December 31, 2022	161,929	$	162	$	2,627,370	$	(48,114)	$	(1,209,765)	$	1,369,653
Foreign currency translation adjustment	—	—		—		7,433		—		7,433
Unrealized gain on investments, net of taxes	—	—		—		120		—		120
Net loss	—	—		—		—		(5,361)		(5,361)
Comprehensive income										2,192
Exercise of stock options	121	—		112		—		—		112
Restricted stock units issued, net of shares withheld for taxes	2,460	3		(10,170)		—		—		(10,167)
Issuance of stock	3	—		18		—		—		18
Issuance of stock under employee stock purchase plan	198	—		1,711		—		—		1,711
Stock-based compensation	—	—		35,137		—		—		35,137
Balance at June 30, 2023	164,711	$	165	$	2,654,178	$	(40,561)	$	(1,215,126)	$	1,398,656


	Three Months Ended June 30, 2022
	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount
Balance at March 31, 2022	160,456	$	160	$	2,577,818	$	(15,589)	$	(285,011)	$	2,277,378
Foreign currency translation adjustment	—	—		—		(53,670)		—		(53,670)
Unrealized loss on investments, net of taxes	—	—		—		(152)		—		(152)
Net loss	—	—		—		—		(622,124)		(622,124)
Comprehensive loss										(675,946)
Exercise of stock options	18	—		25		—		—		25
Restricted stock units issued, net of shares withheld for taxes	391	1		(1,476)		—		—		(1,475)
Issuance of stock	6	—		11		—		—		11


Stock-based compensation	—	—		17,814		—		—		17,814
Balance at June 30, 2022	160,871	$	161	$	2,594,192	$	(69,411)	$	(907,135)	$	1,617,807


	Six Months Ended June 30, 2022
	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount
Balance at December 31, 2021	159,176	$	159	$	2,566,783	$	1,306	$	(280,352)	$	2,287,896
Foreign currency translation adjustment	—	—		—		(70,565)		—		(70,565)
Unrealized loss on investments, net of taxes	—	—		—		(152)		—		(152)
Net loss	—	—		—		—		(626,783)		(626,783)
Comprehensive loss										(697,500)
Exercise of stock options	34	—		37		—		—		37
Restricted stock units issued, net of shares withheld for taxes	1,454	2		(7,884)		—		—		(7,882)
Issuance of stock	57	—		227		—		—		227
Issuance of stock under employee stock purchase plan	150	—		1,753		—		—		1,753
Stock-based compensation	—	—		33,276		—		—		33,276
Balance at June 30, 2022	160,871	$	161	$	2,594,192	$	(69,411)	$	(907,135)	$	1,617,807

The accompanying notes are an integral part of these condensed consolidated financial statements.

SolarWinds Corporation

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)


	Six Months Ended June 30,
	2023		2022
Cash flows from operating activities
Net loss	$	(5,361)	$	(626,783)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	43,132		54,059
Goodwill and indefinite-lived intangible asset impairment	—		621,760
Provision for losses on accounts receivable	1,293		366
Stock-based compensation expense	34,494		32,684

Amortization of debt issuance costs	5,361		4,536


Deferred taxes	(3,593)		(9,027)


(Gain) loss on foreign currency exchange rates	116		(440)
Lease impairment charges	11,689		—
Other non-cash expenses	245		142
Changes in operating assets and liabilities, net of assets acquired and liabilities assumed in business combinations:
Accounts receivable	15,873		8,912
Income taxes receivable	(999)		(110)
Prepaid and other assets	(9,522)		6,566
Accounts payable	(3,048)		252
Accrued liabilities and other	(29,736)		(3,976)
Accrued interest payable	(272)		81
Income taxes payable	(6,171)		(4,700)
Deferred revenue	(3,734)		(2,998)
Other long-term liabilities	—		116
Net cash provided by operating activities	49,767		81,440
Cash flows from investing activities
Purchases of investments	(988)		(55,885)
Maturities of investments	26,535		—
Purchases of property and equipment	(1,387)		(3,533)
Purchases of intangible assets	(6,867)		(7,508)
Acquisitions, net of cash acquired	—		(6,500)

Other investing activities	564		—
Net cash provided by (used in) investing activities	17,857		(73,426)
Cash flows from financing activities


Proceeds from issuance of common stock under employee stock purchase plan	1,711		1,753
Repurchase of common stock and incentive restricted stock	(10,167)		(7,921)
Exercise of stock options	112		37




Repayments of borrowings from credit agreement	(3,113)		(9,950)



Net cash used in financing activities	(11,457)		(16,081)
Effect of exchange rate changes on cash and cash equivalents	(711)		(1,609)






Net increase (decrease) in cash and cash equivalents	55,456		(9,676)
Cash and cash equivalents
Beginning of period	121,738		732,116
End of period	$	177,194	$	722,440

Supplemental disclosure of cash flow information
Cash paid for interest	$	54,935	$	30,933
Cash paid for income taxes	$	24,140	$	19,422

The accompanying notes are an integral part of these condensed consolidated financial statements.

SolarWinds Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)

1. Organization and Nature of Operations

SolarWinds Corporation, a Delaware corporation, and its subsidiaries (“Company,” “we,” “us” and “our”) is a leading provider of simple, powerful and secure observability and information technology, or IT, management software. Our solutions are designed to give organizations worldwide, regardless of type, size or complexity, the power to optimize performance of their IT environments, no matter where they are in their digital transformation journeys. Our business is focused on building products designed to enable technology professionals and leaders to securely monitor and manage the performance of their IT environments, whether they be on-premises, in the cloud or in hybrid deployments. Our approach has enabled us to serve the entire IT market and our customers include network and systems engineers, database administrators, storage administrators, DevOps, SecOps and service desk professionals. We sell our products for use in organizations across industries ranging in size from very small businesses to large enterprises.

2. Summary of Significant Accounting Policies

We prepared our interim condensed consolidated financial statements in conformity with United States of America generally accepted accounting principles ("GAAP"), and the reporting regulations of the Securities and Exchange Commission (the "SEC"). They do not include all of the information and footnotes required by GAAP for complete financial statements. The accompanying condensed consolidated financial statements include the accounts of SolarWinds Corporation and the accounts of its wholly owned subsidiaries. We have eliminated all intercompany balances and transactions.

The interim financial information is unaudited, but reflects all normal adjustments that are, in our opinion, necessary to provide a fair statement of results for the interim periods presented. This interim information should be read in conjunction with the audited consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2022.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires our management to make estimates and assumptions that affect the reported amounts and the disclosure of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. The actual results that we experience may differ materially from our estimates. The accounting estimates that require our most significant, difficult and subjective judgments include:

•the valuation of goodwill, intangibles, long-lived assets and contingent consideration;

•revenue recognition;

•stock-based compensation;

•income taxes; and

•loss contingencies.

Recently Issued Accounting Pronouncements

During the six months ended June 30, 2023, there have been no recently issued accounting pronouncements that are expected to have a material impact to our financial position, results of operations or cash flows.

Goodwill

Our goodwill was derived from the take private transaction in early 2016 ("Take Private") and acquisitions where the purchase price exceeded the fair value of the net identifiable assets acquired. Goodwill is tested for impairment at least annually during the fourth quarter or more frequently if events or circumstances indicate it is more likely than not that the fair value of our reporting unit is less than its carrying value.

During the year ended December 31, 2022, we experienced declines in our market capitalization and after considering the impact of current macroeconomic conditions on the assumptions used in determining the fair value of our reporting unit, determined it appropriate to perform interim quantitative assessments of our reporting unit as of June 30, 2022 and September 30, 2022. As a result of the interim goodwill impairment analyses, our reporting unit was determined to have a carrying value that exceeded its fair value and therefore, we recorded non-cash goodwill impairment charges of $612.4 million and $278.7 million for the three months ended June 30, 2022 and September 30, 2022, respectively.

Throughout the period since the quantitative assessment on September 30, 2022, there have been no unanticipated changes or negative indicators in the qualitative factors or valuation assumptions that would negatively impact the fair value of our

SolarWinds Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)

reporting unit. As such, we determined there were no indicators of impairment and that it was more likely than not that the fair value of our reporting unit was greater than its carrying value at June 30, 2023.

Fair value determination of our reporting unit requires considerable judgment and is sensitive to changes in underlying assumptions and factors. As a result, there can be no assurance that the estimates and assumptions made for purposes of the quantitative goodwill impairment tests will prove to be an accurate prediction of future results. Examples of events or circumstances that could reasonably be expected to negatively affect the underlying key assumptions and ultimately impact the estimated fair value of our reporting unit may include such items as: (i) volatility in the equity and debt markets or other macroeconomic factors, (ii) an increase in the weighted-average cost of capital due to further increases in interest rates, (iii) timing and success of new products introduced in our evolution from monitoring to observability, (iv) the ongoing impact of the Cyber Incident including a decrease in future cash flows due to lower than expected license sales or maintenance renewals, higher than expected customer attrition, higher than estimated costs to respond and adverse loss exposure from claims, fines or penalties resulting from government investigations and litigation; and (v) fluctuations in foreign currency exchange rates that may negatively impact our reported results of operations. Accordingly, if our current cash flow assumptions are not realized, we experience further sustained declines in our stock price or market capitalization, or there are further declines in the market multiplies used in our analysis, it is possible that an additional impairment charge may be recorded in the future, which could be material.

Fair Value Measurements

We apply the authoritative guidance on fair value measurements for financial assets and liabilities that are measured at fair value on a recurring basis and non-financial assets and liabilities, such as goodwill, intangible assets and property, plant and equipment that are measured at fair value on a non-recurring basis.

The guidance establishes a three-tiered fair value hierarchy that prioritizes inputs to valuation techniques used in fair value calculations. The three levels of inputs are defined as follows:

Level 1: Unadjusted quoted prices for identical assets or liabilities in active markets accessible by us.

Level 2: Inputs that are observable in the marketplace other than those inputs classified as Level 1.

Level 3: Inputs that are unobservable in the marketplace and significant to the valuation.

We determine the fair value of our available-for-sale securities based on inputs obtained from multiple pricing vendors, who may use quoted prices in active markets for identical assets (Level 1 inputs) or inputs other than quoted prices that are observable either directly or indirectly (Level 2 inputs) in determining fair value. However, we classify all of our available-for-sale securities as being valued using Level 2 inputs. The valuation techniques used to determine the fair value of our financial instruments having Level 2 inputs are derived from unadjusted, non-binding market consensus prices that are corroborated by observable market data, quoted market prices for similar instruments, or pricing models. Our procedures include controls to ensure that appropriate fair values are recorded by a review of the valuation methods and assumptions.

See Note 5. Fair Value Measurements for a summary of our financial instruments accounted for at fair value on a recurring basis. The carrying amounts reported in our consolidated balance sheets for cash, accounts receivable, accounts payable and other accrued expenses approximate fair value due to relatively short periods to maturity.

Accumulated Other Comprehensive Income (Loss)

Changes in accumulated other comprehensive income (loss) by component are summarized below:


	Foreign Currency Translation Adjustments		Unrealized Gain (Loss) on Investments, Net of Tax		Accumulated Other Comprehensive Income (Loss)

	(in thousands)




Balance at December 31, 2022	$	(47,996)	$	(118)	$	(48,114)
Other comprehensive gain before reclassification	7,433		120		7,553
Amount reclassified from accumulated other comprehensive income (loss)	—		—		—
Net current period other comprehensive income	7,433		120		7,553
Balance at June 30, 2023	$	(40,563)	$	2	$	(40,561)

SolarWinds Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)

Deferred Revenue

Details of our total deferred revenue balance are as follows:


	Total Deferred Revenue

	(in thousands)
Balance at December 31, 2022	$	376,486

Deferred revenue recognized	(263,271)
Additional amounts deferred	261,112

Balance at June 30, 2023	$	374,327

We expect to recognize revenue related to these remaining performance obligations as of June 30, 2023 as follows:


	Revenue Recognition Expected by Period
	Total		Less than 1 year		1-3 years		More than 3 years

	(in thousands)
Expected recognition of deferred revenue	$	374,327	$	332,309	$	40,932	$	1,086

Deferred Commissions

Details of our deferred commissions balance are as follows:


			Deferred Commissions
			(in thousands)
Balance at December 31, 2022			$	22,540

Commissions capitalized			4,832
Amortization recognized			(4,065)
Balance at June 30, 2023			$	23,307

	June 30,		December 31,
	2023		2022

	(in thousands)
Classified as:
Current	$	7,557	$	6,936
Non-current	15,750		15,604
Total deferred commissions	$	23,307	$	22,540

Leases

During the six months ended June 30, 2023, as part of our ongoing efforts to align our office lease arrangements with our anticipated operating needs, we exited certain leased facilities and recognized impairment charges for the related operating lease assets of $11.7 million, which are included in general and administrative expense.

Cost of Revenue

Amortization of Acquired Technologies. Amortization of acquired technologies included in cost of revenue relate to our licensed products and subscription offerings as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022

	(in thousands)
Amortization of acquired license technologies	$	924	$	921	$	1,846	$	15,404
Amortization of acquired subscription technologies	2,501		2,727		5,015		5,471
Total amortization of acquired technologies	$	3,425	$	3,648	$	6,861	$	20,875

SolarWinds Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)

The decrease in amortization of acquired license technologies for the six months ended June 30, 2023 in comparison to the same period in 2022 was primarily due to certain intangible assets acquired in connection with the Take Private being fully amortized.

3. Investments

Our short-term investments as of June 30, 2023 and December 31, 2022 consist of available-for-sale securities, such as U.S. Treasury securities and other federal agency bonds, corporate bonds, commercial paper and asset-backed securities.

The following table summarizes our short-term investments:


	June 30, 2023
	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value

	(in thousands)



Short-term investments:
Available-for-sale securities:

U.S. government agency bonds	$	993	$	2	$	—	$	995



Total short-term investments	$	993	$	2	$	—	$	995

	December 31, 2022
	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value

	(in thousands)
Short-term investments:
Available-for-sale securities:
U.S. Treasury securities	$	6,013	$	—	$	(43)	$	5,970
Corporate bonds	19,887		—		(105)		19,782
Commercial paper	798		—		—		798
Asset-backed securities	565		—		(1)		564
Total short-term investments	$	27,263	$	—	$	(149)	$	27,114

The following table summarizes the fair value of our available-for-sale securities with unrealized losses aggregated by type of investment instrument and length of time those securities have been in a continuous unrealized loss position:
















	December 31, 2022
	Less Than 12 Months				12 Months or Greater				Total
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses

	(in thousands)
As of December 31, 2022


U.S. Treasury securities	$	5,970	$	(43)	$	—	$	—	$	5,970	$	(43)
Corporate bonds	19,782		(105)		—		—		19,782		(105)
Asset-backed securities	564		(1)		—		—		564		(1)
	$	26,316	$	(149)	$	—	$	—	$	26,316	$	(149)

The following table summarizes the contractual underlying maturities of our available-for-sale securities:


	June 30, 2023
	Cost		Fair Value

	(in thousands)
Due in one year or less	$	993	$	995

SolarWinds Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)

4. Goodwill

The following table reflects the changes in goodwill for the six months ended June 30, 2023:


	(in thousands)
Balance at December 31, 2022	$	2,380,059


Foreign currency translation	6,837
Balance at June 30, 2023	$	2,386,896

As of June 30, 2023, the accumulated goodwill impairment on our condensed consolidated balance sheet was $894.6 million.

5. Fair Value Measurements

The following table summarizes the fair value of our financial assets that were measured on a recurring basis as of June 30, 2023 and December 31, 2022. There have been no transfers between fair value measurement levels during the six months ended June 30, 2023.


	Fair Value Measurements at June 30, 2023 Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total

	(in thousands)
Cash equivalents:
Money market funds	$	115,930	$	—	$	—	$	115,930
U.S. Treasury securities	—		4,714		—		4,714
U.S. government agency bonds	—		1,994		—		1,994

Commercial paper	—		13,739		—		13,739
Total cash equivalents	115,930		20,447		—		136,377
Short-term investments:
U.S. government agency bonds	—		995		—		995



Total short-term investments	—		995		—		995







Total assets	$	115,930	$	21,442	$	—	$	137,372


	Fair Value Measurements at December 31, 2022 Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total

	(in thousands)
Cash equivalents:
Money market funds	$	48,833	$	—	$	—	$	48,833

Total cash equivalents	48,833		—		—		48,833

Short-term investments:
U.S. Treasury bonds	—		5,970		—		5,970
Corporate bonds	—		19,782		—		19,782
Commercial paper	—		798		—		798
Asset-backed securities	—		564		—		564
Total short-term investments	—		27,114		—		27,114




Total assets	$	48,833	$	27,114	$	—	$	75,947

SolarWinds Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)

The fair value of our non-financial assets and liabilities, which include goodwill, intangible assets and property, plant and equipment, are measured on a non-recurring basis. Fair value adjustments are made in the period an impairment charge is recognized. The fair value of our reporting unit and indefinite-lived intangible asset are classified as Level 3 within the fair value hierarchy due to the significant unobservable inputs developed using company-specific information.

6. Debt

The following table summarizes information relating to our debt:


	June 30,				December 31,
	2023				2022
	Amount		Effective Rate		Amount		Effective Rate

	(in thousands, except interest rates)
Revolving credit facility	$	—	—	%	$	—	—	%
First Lien Term Loan (as amended) due Feb 2027	1,241,888		8.85	%	1,245,000		8.32	%


Total principal amount	1,241,888				1,245,000
Unamortized discount and debt issuance costs	(37,622)				(42,897)
Total debt	1,204,266				1,202,103
Less: Current portion of long-term debt	(12,450)				(9,338)
Total long-term debt	$	1,191,816			$	1,192,765

Senior Secured First Lien Credit Facilities

Our first lien credit agreement, as amended, or First Lien Credit Agreement, provides for senior secured first lien credit facilities, consisting of the following:

•a $1.245 billion U.S. dollar term loan, or First Lien Term Loan, with a final maturity date of February 5, 2027; and

•a $130.0 million revolving credit facility (with a letter of credit sub-facility in the amount of $35.0 million), or the Revolving Credit Facility, consisting of (i) a $112.5 million multicurrency tranche and (ii) a $17.5 million tranche available only in U.S. dollars, with a final maturity of the earlier of: November 23, 2027 or, in the event that there are more than $150.0 million of the First Lien Term Loan outstanding on the 91st day prior to maturity date of the first lien term loans, the 91st day prior to the maturity date of the First Lien Term Loan.

Borrowings under our Revolving Credit Facility bear interest at a floating rate which is, at our option, either (1) a secured overnight financing rate (“SOFR”) rate for a specified interest period plus an applicable margin of 2.25% or (2) a base rate plus an applicable margin of 1.25%, respectively. The SOFR rate applicable to the Revolving Credit Facility is subject to a “floor” of 0.0%.

Borrowings under our First Lien Term Loan bear interest at a floating rate which is, at our option, either (1) a SOFR rate for a specified interest period plus an applicable margin of 3.75% or (2) a base rate plus an applicable margin of 2.75%. The SOFR rate applicable to the First Lien Term Loan is subject to a “floor” of 0.0%.

The base rate for any day is a fluctuating rate per annum equal to the highest of (a) the rate of interest in effect for such day as publicly announced by Credit Suisse as its “prime rate” and (b) the federal funds effective rate in effect on such day plus 0.50% and (c) the one-month SOFR rate plus 1.0% per annum.

The First Lien Term Loan requires equal quarterly repayments equal to 0.25% of the principal amount.

In addition to paying interest on loans outstanding under the Revolving Credit Facility and the First Lien Term Loan, we are required to pay a commitment fee of 0.375% per annum of unused commitments under the Revolving Credit Facility.

The First Lien Credit Agreement contains a number of covenants that, among other things, restrict, subject to certain exceptions, our ability to: incur additional indebtedness; incur liens; engage in mergers, consolidations, liquidations or dissolutions; pay dividends and distributions on, or redeem, repurchase or retire our capital stock; and make certain investments, acquisitions, loans, or advances. In addition, the terms of the First Lien Credit Agreement include a financial covenant which requires that, at the end of each fiscal quarter, if the aggregate amount of borrowings under the Revolving Credit Facility exceeds 35% of the aggregate commitments under the Revolving Credit Facility, our first lien net leverage ratio

SolarWinds Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)

cannot exceed 7.40 to 1.00. The First Lien Credit Agreement also contains certain customary representations and warranties, affirmative covenants and events of default. As of June 30, 2023, we were in compliance with all covenants of the First Lien Credit Agreement.

7. Income (Loss) Per Share

A reconciliation of the number of shares in the calculation of basic and diluted income (loss) per share follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022

	(in thousands)
Basic income (loss) per share
Numerator:
Net income (loss)	$	260	$	(622,124)	$	(5,361)	$	(626,783)


Earnings allocated to unvested restricted stock	—		—		—		—
Net income (loss) available to common stockholders	$	260	$	(622,124)	$	(5,361)	$	(626,783)

Denominator:
Weighted-average shares used in computing basic net income (loss) per share	164,193		160,663		163,487		160,257

Diluted net income (loss) per share
Numerator:
Net income (loss) available to common stockholders	$	260	$	(622,124)	$	(5,361)	$	(626,783)

Denominator:
Weighted-average shares used in computing basic income (loss) per share	164,193		160,663		163,487		160,257
Add dilutive impact of employee equity plans	1,193		—		—		—
Weighted-average shares used in computing diluted net income (loss) per share	165,386		160,663		163,487		160,257

The following weighted-average outstanding shares of common stock equivalents were excluded from the computation of the diluted net income (loss) per share attributable to common stockholders for the periods presented because their effect would have been anti-dilutive or for which the performance condition had not been met at the end of the period:


	Three Months Ended June 30,		Six Months Ended June 30,
	2023	2022	2023	2022

	(in thousands)






Total anti-dilutive shares	7,429	12,954	14,089	11,074

The calculation of diluted income (loss) per share requires us to make certain assumptions related to the use of proceeds that would be received upon the assumed exercise of stock options or proceeds from the employee stock purchase plan.

8. Income Taxes

For the three months ended June 30, 2023 and 2022, we recorded income tax expense of $3.0 million and $7.9 million, respectively, resulting in an effective tax rate of 91.9% and (1.3)%, respectively. For the six months ended June 30, 2023 and 2022, we recorded income tax expense of $15.7 million and $7.7 million, respectively, resulting in an effective tax rate of 151.7% and (1.2)%, respectively. The increase in the effective tax rates for the three and six months ended June 30, 2023 compared to the same period in 2022 was primarily due to the effect of the goodwill impairment recognized in 2022, which is primarily non-deductible for income tax purpose, as well as an increase in the valuation allowance resulting from deduction limitations associated with the U.S. Tax Cuts and Jobs Act of 2017, or U.S. Tax Act.

Our policy is to include interest and penalties related to unrecognized tax benefits as a component of income tax expense. At June 30, 2023, we had accrued interest and penalties related to unrecognized tax benefits of approximately $4.2 million.

We file U.S., state and foreign income tax returns in jurisdictions with varying statutes of limitations. The 2013 through February 2016 and 2019 through 2022 tax years generally remain open and subject to examination by federal tax authorities. The 2015 through 2022 tax years generally remain open and subject to examination by the state tax authorities and foreign tax

SolarWinds Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)

authorities. We are currently under examination by the IRS for the tax years 2013 through the period ending February 2016. We are under audit by the Indian Tax Authority for the 2017 tax year. We are currently under audit by the Texas Comptroller for the 2015 through 2020 tax years. We are not currently under audit in any other taxing jurisdictions.

9. Commitments and Contingencies

Cyber Incident

As previously disclosed, we were the victim of a cyberattack on our Orion Software Platform and internal systems, or the Cyber Incident. We, together with our partners, have undertaken extensive measures to investigate, contain, eradicate, and remediate the Cyber Incident.

Expenses Incurred

We recorded pre-tax expenses (proceeds) related to the Cyber Incident as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022

	(in thousands)
Cost of recurring revenue	$	—	$	7	$	—	$	163
Sales and marketing	—		62		—		130
Research and development	—		—		—		2
General and administrative	5,580		3,679		7,608		9,169
Total gross expenses related to the Cyber Incident	5,580		3,748		7,608		9,464
Less: proceeds received or expected to be received under our insurance coverage	(5,000)		—		(14,798)		—
Total net expenses (proceeds) related to the Cyber Incident	$	580	$	3,748	$	(7,190)	$	9,464

General and administrative expense is presented net of insurance proceeds received and expected insurance proceeds for costs we believe are reimbursable and probable of recovery in our condensed consolidated statements of operations. Expenses include costs to investigate and remediate the Cyber Incident, costs of lawsuits and investigations related thereto, including settlement costs and legal and other professional services, and consulting services provided to customers at no charge, all of which were expensed as incurred.

Litigation, Claims and Government Investigations

As a result of the Cyber Incident, we are subject to multiple lawsuits and investigations. A consolidated putative class action lawsuit alleging violations of the federal securities laws was filed against us and certain of our current and former officers. The complainants sought certification of a class of all persons who purchased or otherwise acquired our securities between October 18, 2018 and December 17, 2020 and sought unspecified monetary damages, costs and attorneys’ fees. On October 28, 2022, the parties entered into a binding settlement term sheet with respect to the securities class action lawsuit and lead plaintiff filed the parties’ Stipulation and Agreement of Settlement with the court on December 8, 2022. On February 8, 2023, the court granted preliminary approval of the settlement, and on March 2, 2023, we paid $26 million to fund claims submitted by class members, the legal fees of plaintiffs’ counsel and the costs of administering the settlement. The settlement resolves all claims asserted against us and the other named defendants in connection with the class action litigation and contains provisions that the settlement does not constitute an admission, concession, or finding of any fault, liability, or wrongdoing of any kind by us or any defendant. On July 28, 2023, the court held a final settlement hearing after which the court entered an order and final judgment approving the settlement. The settlement sum was authorized and approved by our insurers, and we expect that the settlement payment will be reimbursed entirely by applicable directors’ and officers’ liability insurance. In addition, two shareholder derivative actions were filed, purportedly on behalf of the Company, one in the Western District of Texas and one in the Delaware Court of Chancery, in each case asserting breach of duty and other claims against certain of our current and former officers and directors in connection with the Cyber Incident. On October 13, 2022, the Delaware Court of Chancery entered an order dismissing the case in that court with prejudice, and on May 17, 2023, the Supreme Court of the State of Delaware entered an order affirming the Delaware Court of Chancery’s judgment. On July 12, 2023, the United States District Court for the Western District of Texas entered a final judgment dismissing the case in that court without prejudice.

In addition, there are several pending investigations and inquiries by U.S. regulatory authorities related to the Cyber Incident, including from the Department of Justice and the SEC. We are cooperating and providing information in connection with these investigations and inquiries and are incurring, and in future periods expect to incur, costs and other expenses in connection with these investigations and inquiries. On October 28, 2022, the enforcement staff of the SEC provided us with a

SolarWinds Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)

“Wells Notice” relating to its investigation, or the Investigation, into the Cyber Incident. Subsequently, certain of our current and former executive officers and employees, including our Chief Financial Officer and Chief Information Security Officer, also received “Wells Notices” from the SEC staff, each in connection with the Investigation. The Wells Notices state that the SEC staff has made a preliminary determination to recommend that the SEC file an enforcement action against us and each such individual, respectively, alleging violations of certain provisions of the U.S. federal securities laws with respect to our cybersecurity disclosures and public statements, as well as our internal controls and disclosure controls and procedures. A Wells Notice is neither a formal charge of wrongdoing nor a final determination that the recipient has violated any law. We maintain that our disclosures, public statements, controls and procedures were appropriate, and we currently intend to continue to vigorously defend ourselves, including against any enforcement action or other charges. If the SEC were to authorize an action against us or such individuals, it could seek an order enjoining us or the individuals from engaging in future violations of provisions of the federal securities laws subject to the action and, in the case of the individuals, imposing a bar from serving as an officer or director of a public company, imposing civil monetary penalties and/or providing for other equitable relief within the SEC’s authority. The results of the Wells Notice process and any corresponding enforcement action and the costs, timing and other potential consequences of responding and complying therewith are unknown at this time.

While we believe it is reasonably possible that we could incur losses associated with these proceedings and investigations, other than with respect to the securities class action settlement and the two shareholder derivative actions, it is not possible to estimate the amount of any loss or range of possible loss that might result from adverse judgments, settlements, penalties or other resolutions of such proceedings and investigations based on the fact that alleged damages have not been specified and the lack of resolution on significant factual and legal issues. The Company will continue to evaluate information as it becomes known and will record an estimate for losses at the time or times when it is both probable that a loss has been incurred and the amount of the loss is reasonably estimable. Losses associated with any adverse judgments, settlements, penalties or other resolutions of such proceedings and investigations could be material to our business, results of operations, financial condition or cash flows in future periods.

Additional lawsuits and claims related to the Cyber Incident may be asserted by or on behalf of customers, stockholders or others seeking damages or other related relief and additional inquiries from governmental agencies may be received or investigations by governmental agencies commenced.

Insurance Coverage

We maintain $15 million of cybersecurity insurance coverage to limit our exposure to losses such as those related to the Cyber Incident, which renews annually. In addition, we maintain $50 million of directors and officers liability insurance coverage to reduce our exposure to our indemnification obligations for certain expenses incurred by our directors and officers, including as a result of the legal proceedings related to the Cyber Incident such as the securities class action settlement, which renews annually. As of June 30, 2023, we have a loss recovery asset of $45 million recorded for insurance proceeds deemed probable of recovery which is included in prepaid and other current assets in our condensed consolidated balance sheet.

Indemnification

In connection with the separation and distribution of our managed service provider (“N-able”) business into a newly created and separately traded public company, N-able, Inc. (“Separation”), we entered into a separation and distribution agreement and related agreements with N‑able to govern the Separation and related transactions and the relationship between the respective companies going forward. The separation and distribution agreement provides for certain indemnity and liability obligations, including that we will indemnify N-able for all liabilities based upon, arising out of or related to the Cyber Incident other than certain specified expenses for which N-able will be responsible. The amount of the indemnification liability, if any, cannot be determined and has not been recorded in our condensed consolidated financial statements as of June 30, 2023.

Other Matters

In addition to the Cyber Incident described above, from time to time we are involved in litigation arising from the normal course of business. In management's opinion, this litigation is not expected to have a material adverse effect on our consolidated financial condition, results of operations or cash flows.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the condensed consolidated financial statements and related notes thereto included elsewhere in this Quarterly Report on Form 10-Q. In addition to historical condensed consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially and adversely from those anticipated in the forward-looking statements. Please see the section entitled “Safe Harbor Cautionary Statement” above and the risk factors discussed in our Annual Report on Form 10-K for the year ended December 31, 2022, our Quarterly Report on Form 10-Q for the quarter ended March 31, 2023 and this Quarterly Report on Form 10-Q for a discussion of the uncertainties, risks and assumptions associated with these statements. The following discussion and analysis also includes a discussion of certain non-GAAP financial measures. For a description and reconciliation of the non-GAAP measures discussed in this section, see “Non-GAAP Financial Measures.”

Overview

SolarWinds is a leading provider of simple, powerful, and secure information technology, or IT, management and observability software. Our solutions are designed to give organizations worldwide, regardless of type, size, or complexity, the power to optimize performance of their hybrid IT environments, no matter where they are in their digital transformation journeys.

We offer a broad portfolio of solutions designed to help technology professionals and leaders to monitor, manage, and optimize networks, systems, databases and applications across on-premises, multi-cloud and hybrid IT infrastructures. Most of our offerings are built on a platform-based approach, that we call the SolarWinds Platform, to enable our customers to easily purchase and deploy our products individually or as an integrated offering as their needs evolve. We utilize a cost-efficient, integrated global product development model and have expanded our offerings over time through both organic development and strategic acquisitions. We intend to continue to innovate and invest in areas of product development to bring new products to market and enhance the functionality, ease of use, and integration of our current products. Over time, we intend to grow our subscription revenue by focusing more on selling subscriptions over perpetual licenses, which we call our subscription-first approach.

On February 5, 2016, we were acquired by affiliates of Silver Lake Group, L.L.C. and Thoma Bravo, LLC in a take private transaction, or the Take Private. In October 2018, we completed our initial public offering, or IPO, and once again become a publicly traded company.

Cyber Incident

As previously disclosed, we were the victim of a cyberattack on our Orion Software Platform and internal systems, or the “Cyber Incident.” We, together with our partners, have undertaken extensive measures to investigate, contain, eradicate, and remediate the Cyber Incident. In addition, as part of our “Secure by Design” initiative, we continue to work with industry experts to implement enhanced security practices designed to further strengthen and protect our products and environment against these and other types of attacks in the future.

Expenses

Expenses incurred related to the Cyber Incident include costs to investigate and remediate the Cyber Incident, costs of lawsuits and investigations related thereto, including settlement costs and legal and other professional services, and consulting services provided to customers at no charge, all of which were expensed as incurred. See Note 9. Commitments and Contingencies in the Notes to Condensed Consolidated Financial Statements included in Item 1 of Part I of this Quarterly Report on Form 10-Q for additional information regarding expenses incurred related to the Cyber Incident.

Our “Secure by Design” initiatives, which include costs to enhance our security measures across our systems and our software development and build environments, continue to be included in our ongoing research and development expense, as well as general and administrative expense.

Litigation, Claims and Government Investigations

As a result of the Cyber Incident, we are subject to several lawsuits and investigations or inquiries as described in Note 9. Commitments and Contingencies in the Notes to Condensed Consolidated Financial Statements included in Item 1 of Part I of this Quarterly Report on Form 10-Q.

Future Costs

We expect to continue to incur additional legal and other professional services costs and expenses associated with the Cyber Incident in future periods. We expect to recognize these expenses as services are received. Costs related to the Cyber

Incident that will be incurred in future periods may include increased expenses associated with ongoing claims, investigations and inquiries, and any new claims, investigations and inquiries. See Note 9. Commitments and Contingencies in the Notes to Condensed Consolidated Financial Statements in Item 1 of Part I of this Quarterly Report on Form 10-Q for information related to the legal proceedings and governmental investigations related to the Cyber Incident. While we will incur costs and other expenses associated with these proceedings and investigations, other than with respect to the settlement of the consolidated putative class action lawsuit and dismissal of the two derivative cases, it is currently not possible to estimate the amount of any loss or range of possible loss that might result from adverse judgments, settlements, penalties or other resolutions of such proceedings and investigations based on the fact that alleged damages have not been specified and the lack of resolution on significant factual and legal issues. We also expect to incur increased expenses for insurance, finance, compliance activities, and to meet increased legal and regulatory requirements.

Insurance Coverage

Impacts of Macroeconomic Conditions

As a global company, we are subject to negative impacts and risks related to prevailing macroeconomic conditions and significant events with macroeconomic impacts, including, but not limited to, the ongoing conflict between Russia and Ukraine and resulting sanctions and other actions against Russia and Belarus, geopolitical tensions involving China, market conditions related to inflation and action taken by central banks to counter inflation, fluctuating foreign currency exchange rates, changes in interest rates, instability in the banking sector and financial services industry, supply chain disruption issues and the effects of the COVID-19 pandemic. We have suspended all of our business activities in Russia and Belarus, but such suspension has not had, and we do not expect it to have, a material impact on our financial results. Foreign currency exchange rate fluctuations during the past year negatively impacted our revenues and may continue to impact our revenues in 2023. In addition, rising interest rates have increased our borrowing expense under our credit agreement, and if rates continue to rise, our borrowing costs may continue to increase. We continuously monitor the direct and indirect impacts of these events on our business and financial results, as well as the overall global economy, and we anticipate that these macroeconomic events may continue to negatively impact our results of operation. See Part I, Item 1A “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 and Part II, Item 1A “Risk Factors” in our Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2023 for further discussion of the possible impacts of these macroeconomic conditions on our business and financial results.

Second Quarter Highlights

Below are our key financial highlights for the three months ended June 30, 2023 as compared to the three months ended June 30, 2022.

Customers

Our approach allows us to both sell to a broad group of potential customers and close large transactions with significant customers. As of June 30, 2023, we had over 300,000 customers. While some customers may spend as little as $100 with us over a twelve-month period, we had 933 customers who spent more than $100,000 with us for the trailing twelve-month period ended June 30, 2023 as compared to 879 for the trailing twelve-month period ended June 30, 2022.

We define customers as individuals or entities that have purchased one or more of our products under a unique customer identification number since our inception for our perpetual license products and individuals or entities that have an active subscription for at least one of our subscription products. Each unique customer identification number constitutes a separate customer regardless of the amount purchased. We may have multiple purchasers of our products within a single organization, each of which may be assigned a unique customer identification number and deemed a separate customer.

Annual Recurring Revenue (ARR)

We use Subscription Annual Recurring Revenue, or Subscription ARR, and Total Annual Recurring Revenue, or Total ARR, to better understand and assess the performance of our business, as our mix of revenue generated from recurring revenue has increased in recent years. Subscription ARR and Total ARR each provides a normalized view of customer retention, renewal and expansion, as well as growth from new customers. Subscription ARR and Total ARR should each be viewed independently of revenue and deferred revenue and are not intended to be combined with or to replace either of those items.

Beginning in the quarter ended December 31, 2022, we revised the methodology used to calculate Total ARR. In calculating Total ARR, we now only recognize the impact of any price increases upon renewal of the expiring maintenance contracts rather than upon enactment of such price increases. We believe this change in methodology better represents the current value of our maintenance contracts and better aligns our definition with comparable companies.

Total ARR for the prior period ended June 30, 2022 presented below has been recalculated to conform to the current calculation method. The change in calculation method reduced our previously reported Total ARR as of June 30, 2022 by $4.0 million. There have been no changes in the calculation method for Subscription ARR.


	As of June 30,				Year-over-Year Growth
	2023		2022

	(in thousands, except percentages)
Subscription ARR(1)	$	197,725	$	148,277	33.3	%
Total ARR(2)	657,104		621,449		5.7

_______

(1)Subscription ARR represents the annualized recurring value of all active subscription contracts at the end of a reporting period.

(2)Total ARR represents the sum of Subscription ARR and the annualized value of all maintenance contracts related to perpetual licenses active at the end of a reporting period.

The year-over-year growth in Subscription ARR was primarily driven by sales of our time-based subscription offerings as a result of customers transitioning to our subscription products and pricing models including our SolarWinds Hybrid Cloud Observability. Total ARR increased primarily due to the growth in Subscription ARR, partially offset by the decline in the annualized value of maintenance contracts as a result of lower new perpetual license sales and the impact of customers transitioning to our subscription offerings.

Components of Our Results of Operations

Revenue

Our revenue consists of recurring revenue and perpetual license revenue.

•Recurring Revenue. The significant majority of our revenue is recurring and consists of subscription and maintenance revenue.

•Subscription Revenue. We primarily derive subscription revenue from fees received for subscriptions to our SaaS offerings and our time-based subscription offerings. We recognize revenue for SaaS offerings, including our SolarWinds Observability solution, ratably over the subscription term once the service is made available to the customer or when we have the right to invoice services performed. We also offer time-based subscription offerings for our SolarWinds Hybrid Cloud Observability solution along with many of our products historically sold as perpetual licenses, such as our network, systems and database management products, to give customers additional flexibility when purchasing our products. Revenue for our time-based subscription offerings, including multi-year arrangements, is recognized upfront upon delivery of the on-premise software license and ratably over the contract period for the related support. We generally invoice our time-based subscription agreements in advance at the beginning of the subscription period and invoice our SaaS offerings over the subscription period on either a monthly or annual basis and to a lesser extent, monthly based on usage. Our subscription revenue grows as customers transition to our subscription model, add new subscription products, upgrade the capacity level of their existing subscription products or increase the usage of their subscription products. In addition, while the majority of our contracts include annual subscription periods, subscription revenue is impacted by the timing, duration and volume of multi-year time-based subscription arrangements sold during a period, which impacts the amount of revenue recognized upfront and may cause subscription revenue to fluctuate.

•Maintenance Revenue. We derive maintenance revenue from the sale of maintenance services associated with our perpetual license products. Perpetual license customers pay for maintenance services based on the products they have purchased. We recognize maintenance revenue ratably on a daily basis over the contract period. Our maintenance revenue grows when we renew existing maintenance contracts and add new perpetual license customers, and as existing customers add new products. In addition, we typically implement annual price increases for our maintenance services. We also include professional services and other revenue in maintenance revenue, which is generally recognized ratably or as delivered.

•License Revenue. We derive license revenue from sales of perpetual licenses of our on-premise network, systems, storage and database management products to new and existing customers. We include one year of maintenance services as part of our customers’ initial license purchase. License revenue is recognized upfront upon delivery of the electronic license key. We allocate revenue to the license component based upon our estimated standalone selling prices, which is derived by evaluating our historical pricing and discounting practices in observable bundled transactions.

Our continued efforts to increase sales of our subscription offerings as part of our subscription-first approach has impacted the mix of license and recurring revenue. As we introduce new subscription offerings and incentivize our sales teams to focus on more subscription sales, we expect a continued shift in our revenue mix each quarter as existing customers transition to, and new customers purchase, our subscription offerings. However, due to uncertainty regarding the level of customer adoption of our subscription offerings, the timing and impact of this transition are difficult to predict at this time. While we encourage customers to transition to our subscription offerings, we do not require them to transition and we plan to continue to sell perpetual licenses and renew maintenance services for our network, systems and database management products. Our license sales and maintenance renewals may decline or fluctuate in future periods as customers transition to our subscription offerings.

Cost of Revenue

•Cost of Recurring Revenue. Cost of recurring revenue primarily consists of technical support personnel costs, public cloud infrastructure and hosting fees, amortization of capitalized development costs related to our hosted solutions and an allocation of overhead costs for our subscription revenue and maintenance services. Allocated costs consist of certain facilities, depreciation, benefits and IT costs allocated based on headcount. We expect our public cloud infrastructure and hosting fees and amortization of capitalized development costs to increase as we expand our subscription-based offerings.

•Amortization of Acquired Technologies. Amortization of acquired technologies consists of amortization related to capitalized costs of technologies acquired, including those acquired in connection with the Take Private.

Operating Expenses

Operating expenses consists of sales and marketing, research and development and general and administrative expenses as well as amortization of acquired intangibles. Generally, personnel costs are the most significant component of operating expenses and consist of salaries, benefits, bonuses, sales commissions, stock-based compensation and an allocation of overhead costs based on headcount. The total number of employees as of June 30, 2023 was 2,129, as compared to 2,215 as of June 30, 2022. During 2023, as part of our ongoing efforts to improve our operating margins, we completed certain restructuring activities, resulting in lease impairment charges, other costs incurred in connection with the exiting of certain leased facilities and other contracts as well as costs related to headcount reductions.

While we are focused on disciplined expense management, we expect our operating expenses to continue to increase in absolute dollars as we make long-term investments in our business, including continued product development and increasing our selling efforts toward enterprise customers. Our operating expenses in future periods also may increase in absolute dollars and fluctuate as a percentage of revenue as a result of any future acquisitions and any further decisions to increase our investment in our business. Our stock-based compensation expense has increased due to equity awards granted to our employees and directors, and we intend to continue to grant equity awards which will result in additional stock-based compensation expense in future periods.

•Sales and Marketing. Sales and marketing expenses primarily consist of related personnel costs, including our sales, marketing and maintenance renewal and subscription retention teams. Sales and marketing expenses also includes the cost of digital marketing programs such as paid search, search engine optimization and management, website maintenance and design. As part of our ongoing efforts to improve our operating margins, we have and expect to continue to invest selectively in our marketing programs as we look to optimize our sales and marketing productivity and expand our routes to market.

•Research and Development. Research and development expenses primarily consist of related personnel costs for our product development employees and executives and, to a lesser extent, contractor fees. We capitalize certain research and development costs related to developing new functionality for our solutions that are hosted and accessed by our customers on a subscription basis, which may cause our research and development expense to fluctuate from period to period.

•General and Administrative. General and administrative expenses primarily consist of personnel costs for our executive, finance, legal, human resources and other administrative personnel, general restructuring costs, acquisition costs, certain Cyber Incident costs, professional fees, certain non-cash impairment charges and other general corporate expenses. The Cyber Incident has resulted in increased general and administrative expenses which we expect to

continue in 2023 and beyond, although expenses may fluctuate from period to period depending on the timing of related activities.

•Amortization of Acquired Intangibles. We amortize to operating expenses the capitalized costs of intangible assets acquired in connection with the Take Private and our other acquisitions.

Other Income (Expense)

Other income (expense) primarily consists of interest expense, interest income and gains (losses) resulting from changes in exchange rates on foreign currency denominated accounts. The interest expense on our debt has increased due to increases in interest rates and as a result of the increase in applicable margins resulting from the refinancing of our debt in November 2022. We expect our interest expense may continue to increase as a result of anticipated interest rate increases since the borrowings outstanding under our credit agreement currently bear interest at variable rates.

Foreign Currency

As a global company, we face exposure to adverse movements in foreign currency exchange rates. Fluctuations in foreign currencies impact the amount of total assets, liabilities, revenue, operating expenses and cash flows that we report for our foreign subsidiaries upon the translation of these amounts into U.S. dollars. See “Item 3. Quantitative and Qualitative Disclosures About Market Risk” for additional information on how foreign currency impacts our financial results.

Income Tax Expense (Benefit)

Income tax expense (benefit) consists of domestic and foreign corporate income taxes related to the sale of products. The tax rate on income earned by our North American entities is generally higher than the tax rate on income earned by our international entities. We expect the income earned by our international entities to grow over time as a percentage of total income, which could result in a decline in our effective income tax rate. However, our effective tax rate will be affected by many other factors including changes in tax laws, regulations or rates, new interpretations of existing laws or regulations, shifts in the allocation of income earned throughout the world and changes in overall levels of income before tax.

Comparison of the Three Months Ended June 30, 2023 and 2022

Revenue


	Three Months Ended June 30,
	2023				2022
	Amount		Percentage of Revenue		Amount		Percentage of Revenue		Change

	(in thousands, except percentages)
Subscription	$	53,389	28.9	%	$	36,980	21.0	%	$	16,409
Maintenance	116,056		62.7		113,972		64.7		2,084
Total recurring revenue	169,445		91.6		150,952		85.8		18,493
License	15,589		8.4		25,082		14.2		(9,493)
Total revenue	$	185,034	100.0	%	$	176,034	100.0	%	$	9,000

Total revenue increased $9.0 million, or 5.1%, for the three months ended June 30, 2023 compared to the three months ended June 30, 2022, primarily due to an increase in recurring revenue partially offset by a decrease in license revenue as we continue to transition to a subscription model. Revenue from North America was approximately 69% of total revenue for both the three months ended June 30, 2023 and 2022. Other than the United States, no single country accounted for 10% or more of our total revenue during these periods. We expect our international total revenue to increase slightly as a percentage of total revenue as we expand our international sales and marketing efforts across our product lines.

As a result of macroeconomic conditions, certain of our customers have, and others may, defer renewals or cancel subscriptions which has had, and could in the future have, a negative impact on our revenue. However, despite the impact of macroeconomic conditions, our maintenance renewal rate for the trailing twelve month period was 94%.

Recurring Revenue

Subscription Revenue. Subscription revenue increased $16.4 million, or 44.4%, for the three months ended June 30, 2023 compared to the three months ended June 30, 2022, primarily due to increased sales of our time-based subscription offerings resulting from customers transitioning to our subscription pricing model, including our SolarWinds Hybrid Cloud Observability solution, and includes a $3.0 million increase resulting from sales of multi-year time-based arrangements during the period. Our

subscription revenue increased as a percentage of our total revenue for the three months ended June 30, 2023 as compared to the three months ended June 30, 2022.

Our net retention rate for our subscription products was as follows:


	Trailing Twelve Months Ended June 30,
	2023		2022

Net retention rate(1)	93	%	97	%

_______

(1)Net retention rate for subscription products represents the implied monthly subscription revenue at the end of a period for the base set of customers from which we generated subscription revenue in the year prior to the calculation, divided by the implied monthly subscription revenue one year prior to the date of the calculation for that same customer base.

The decrease in net retention rate for the period is primarily attributable to the impacts of customer attrition in certain of our established subscription products, partially offset by stronger net retention rates of our Observability solutions.

Maintenance Revenue. Maintenance revenue increased $2.1 million, or 1.8%, for the three months ended June 30, 2023 compared to the three months ended June 30, 2022, primarily due to increased sales of professional services and other revenue as well as the impact of price increases on our maintenance services, partially offset by the impact on maintenance revenue from conversions of customers to subscription-based products.

Our maintenance renewal rate for our perpetual license products was as follows:


	Trailing Twelve Months Ended June 30,
	2023		2022

Maintenance renewal rate(1)	94	%	91	%

_______

(1)Maintenance renewal rate represents the sales of maintenance services for all existing maintenance contracts expiring in a period, divided by the sum of previous sales of maintenance services corresponding to those services expiring in the current period. The calculation of maintenance renewal rate only includes customers renewing maintenance contracts and excludes all customers that transition from maintenance contracts to subscription offerings. Sales of maintenance services includes sales of maintenance renewals for a previously purchased product and the amount allocated to maintenance revenue from a license purchase.

License Revenue

License revenue decreased $9.5 million, or 37.8%, primarily due to the impact of customers transitioning to our subscription offerings including an increase in the subscription sales of our SolarWinds Hybrid Cloud Observability solution and other products that have historically been sold only as perpetual licenses. We expect license revenue to continue to decline as customers transition to our subscription offerings.

Cost of Revenue


	Three Months Ended June 30,
	2023				2022
	Amount		Percentage of Revenue		Amount		Percentage of Revenue		Change

	(in thousands, except percentages)
Cost of recurring revenue	$	18,533	10.0	%	$	15,460	8.8	%	$	3,073
Amortization of acquired technologies	3,425		1.9		3,648		2.1		(223)
Total cost of revenue	$	21,958	11.9	%	$	19,108	10.9	%	$	2,850

Total cost of revenue increased in the three months ended June 30, 2023 compared to the three months ended June 30, 2022, primarily due to increases in public cloud infrastructure and hosting fees related to our subscription products of $2.2 million and amortization of capitalized development costs of $1.4 million, partially offset by a decrease in personnel costs of $0.7 million.

Operating Expenses


	Three Months Ended June 30,
	2023				2022
	Amount		Percentage of Revenue		Amount		Percentage of Revenue		Change

	(in thousands, except percentages)
Sales and marketing	$	59,838	32.3	%	$	64,615	36.7	%	$	(4,777)
Research and development	24,081		13.0		22,108		12.6		1,973
General and administrative	34,418		18.6		41,283		23.5		(6,865)
Amortization of acquired intangibles	12,094		6.5		13,103		7.4		(1,009)
Goodwill impairment	—		—		612,395		347.9		(612,395)
Total operating expenses	$	130,431	70.5	%	$	753,504	428.0	%	$	(623,073)

Sales and Marketing. Sales and marketing expenses decreased $4.8 million, or 7.4%, primarily due to a decrease in marketing program costs of $4.4 million and personnel costs of $0.8 million, partially offset by an increase in travel costs of $0.4 million.

Research and Development. Research and development expenses increased $2.0 million, or 8.9%, primarily due to an increase in personnel costs of $2.2 million and cost for subscriptions used in the development of our offerings of $0.5 million, partially offset by a decrease in professional fees of $0.5 million.

General and Administrative. General and administrative expenses decreased $6.9 million, or 16.6%, primarily due to a $9.4 million decrease in non-cash impairment charges related to the impairment of the SolarWinds trade name recognized in the three months ended June 30, 2022. In addition, Cyber Incident costs, net decreased $3.1 million, primarily due to a $5.0 million increase in expected insurance recoveries, as well as a $1.3 million decrease in directors and officers liability and cybersecurity insurance costs and professional fees. These decreases were partially offset by an increase in restructuring charges of $7.2 million primarily related to lease impairment charges and accelerated depreciation expense in connection with the exiting of certain leased facilities.

Amortization of Acquired Intangibles. Amortization of acquired intangibles decreased $1.0 million, or 7.7%, primarily due to certain acquired intangibles being fully amortized.

Goodwill Impairment. As a result of the interim goodwill impairment analysis as of June 30, 2022, we recognized a $612.4 million non-cash goodwill impairment charge. See Note 2. Summary of Significant Accounting Policies in the Notes to Condensed Consolidated Financial Statements in Item 1 of Part I of this Quarterly Report on Form 10-Q for additional information.

Interest Expense, Net


	Three Months Ended June 30,
	2023				2022
	Amount		Percentage of Revenue		Amount		Percentage of Revenue		Change

	(in thousands, except percentages)
Interest expense, net	$	(29,443)	(15.9)	%	$	(18,401)	(10.5)	%	$	(11,042)

Interest expense, net increased by $11.0 million, or 60.0%, in the three months ended June 30, 2023 compared to the three months ended June 30, 2022. The increase in interest expense is primarily due to the increase in interest rates on our debt, including an increase in applicable margins resulting from the refinancing of our debt in November 2022. The weighted-average effective interest rate on our debt was 8.9% for the three months ended June 30, 2023 compared to 3.5% for the three months ended June 30, 2022. See Note 6. Debt in the Notes to Condensed Consolidated Financial Statements included in Item 1 of Part I of this Quarterly Report on Form 10-Q for additional information regarding our debt.

Other Income (Expense), Net


	Three Months Ended June 30,
	2023				2022
	Amount		Percentage of Revenue		Amount		Percentage of Revenue		Change

	(in thousands, except percentages)

Other income (expense), net	$	13	0.0	%	$	726	0.4	%	$	(713)

Other income (expense), net decreased by $0.7 million in the three months ended June 30, 2023 compared to the three months ended June 30, 2022, primarily due to the impact of changes in exchange rates on foreign currency denominated accounts.

Income Tax Expense


	Three Months Ended June 30,
	2023					2022
	Amount			Percentage of Revenue		Amount			Percentage of Revenue		Change

	(in thousands, except percentages)
Income (loss) before income taxes	$	3,215		1.7	%	$	(614,253)		(348.9)	%	$	617,468
Income tax expense	2,955			1.6		7,871			4.5		(4,916)
Effective tax rate	91.9		%			(1.3)		%			93.2		%

Our income tax expense for the three months ended June 30, 2023 was $3.0 million as compared to $7.9 million for the three months ended June 30, 2022. The effective tax rate increased to 91.9% for the period, primarily due to an increase in the valuation allowance resulting from deduction limitations associated with the U.S. Tax Act. Additionally, the effective tax rate for the three months ended June 30, 2022 included the effect of the goodwill impairment, which is primarily non-deductible for income tax purposes. For additional discussion about our income taxes, see Note 8. Income Taxes in the Notes to Condensed Consolidated Financial Statements included in Item 1 of Part I of this Form 10-Q.

Comparison of the Six Months Ended June 30, 2023 and 2022

Revenue


	Six Months Ended June 30,
	2023				2022
	Amount		Percentage of Revenue		Amount		Percentage of Revenue		Change

	(in thousands, except percentages)
Subscription	$	107,746	29.0	%	$	75,727	21.5	%	$	32,019
Maintenance	230,534		62.1		229,467		65.0		1,067
Total recurring revenue	338,280		91.2		305,194		86.5		33,086
License	32,730		8.8		47,708		13.5		(14,978)
Total revenue	$	371,010	100.0	%	$	352,902	100.0	%	$	18,108

Total revenue increased $18.1 million, or 5.1%, for the six months ended June 30, 2023 compared to the six months ended June 30, 2022 primarily due to an increase in recurring revenue, partially offset by a decrease in license revenue. Revenue from North America was approximately 69% of total revenue for both the six months ended June 30, 2023 and 2022. Other than the United States, no single country accounted for 10% or more of our total revenue during these periods. We expect our international total revenue to increase slightly as a percentage of total revenue as we expand our international sales and marketing efforts across our product lines.

Recurring Revenue

Subscription Revenue. Subscription revenue increased $32.0 million, or 42.3%, for the six months ended June 30, 2023 compared to the six months ended June 30, 2022, primarily due to increased sales of our time-based subscription offerings resulting from customers transitioning to our subscription pricing model, including our SolarWinds Hybrid Cloud Observability solution, and includes a $6.0 million increase resulting from sales of multi-year time-based arrangements during the period.

Our net retention rate for our subscription products was as follows:


	Trailing Twelve Months Ended June 30,
	2023		2022

Net retention rate(1)	93	%	97	%

_______

Maintenance Revenue. Maintenance revenue increased $1.1 million, or 0.5%, for the six months ended June 30, 2023 compared to the six months ended June 30, 2022, primarily due to increased sales of professional services and other revenue as well as the impact of price increases on our maintenance services, partially offset by the impact on maintenance revenue from conversions of customers to subscription-based products and the effect of the weakening of most foreign currencies relative to the U.S. dollar.

Our maintenance renewal rate for our perpetual license products was as follows:


	Trailing Twelve Months Ended June 30,
	2023		2022

Maintenance renewal rate(1)	94	%	91	%

_______

License Revenue

License revenue decreased $15.0 million, or 31.4%, primarily due to the impact of customers transitioning to our subscription offerings including an increase in the subscription sales of our SolarWinds Hybrid Cloud Observability solution and other products that have historically been sold only as perpetual licenses.

Cost of Revenue


	Six Months Ended June 30,
	2023				2022
	Amount		Percentage of Revenue		Amount		Percentage of Revenue		Change

	(in thousands, except percentages)
Cost of recurring revenue	$	36,927	10.0	%	$	33,291	9.4	%	$	3,636
Amortization of acquired technologies	6,861		1.8		20,875		5.9		(14,014)
Total cost of revenue	$	43,788	11.8	%	$	54,166	15.3	%	$	(10,378)

Total cost of revenue decreased in the six months ended June 30, 2023 compared to the six months ended June 30, 2022 primarily due to a decrease in amortization of acquired technologies due to certain intangible assets, acquired in connection with the Take Private, being fully amortized. Cost of recurring revenue increased primarily due to increases in amortization of capitalized development costs of $2.5 million, public cloud infrastructure and hosting fees related to our subscription products of $2.2 million and contract services of $0.7 million. These increases were partially offset by a decrease in personnel costs of $1.8 million.

Operating Expenses


	Six Months Ended June 30,
	2023				2022
	Amount		Percentage of Revenue		Amount		Percentage of Revenue		Change

	(in thousands, except percentages)
Sales and marketing	$	125,754	33.9	%	$	125,659	35.6	%	$	95
Research and development	47,872		12.9		45,530		12.9		2,342
General and administrative	60,019		16.2		73,947		21.0		(13,928)
Amortization of acquired intangibles	25,099		6.8		26,342		7.5		(1,243)
Goodwill impairment	—		—		612,395		173.5		(612,395)
Total operating expenses	$	258,744	69.7	%	$	883,873	250.5	%	$	(625,129)

Sales and Marketing. Sales and marketing expenses increased $0.1 million, or 0.1%, primarily due to an increase in restructuring charges primarily related to severance expense of $2.5 million, personnel costs of $2.4 million and consulting, contract services and subscription costs of $1.6 million. These increases were partially offset by a decrease in marketing program costs of $6.4 million.

Research and Development. Research and development expenses increased $2.3 million, or 5.1%, primarily due to an increase in costs for subscriptions used in the development of our offerings of $1.2 million and personnel costs of $1.1 million primarily related to an increase in stock-based compensation expense.

General and Administrative. General and administrative expenses decreased $13.9 million, or 18.8%, primarily due to a decrease in Cyber Incident costs, net of $16.4 million, primarily related to an increase in expected insurance recoveries of $14.8 million. In addition, non-cash impairment charges decreased $9.4 million related to the impairment of the SolarWinds trade name recognized in the six months ended June 30, 2022 and directors and officers liability and cybersecurity insurance costs and professional fees decreased $2.4 million. These decreases were partially offset by an increase in restructuring charges of $13.9 million primarily related to lease impairment charges and accelerated depreciation expense in connection with the exiting of certain leased facilities.

Amortization of Acquired Intangibles. Amortization of acquired intangibles decreased $1.2 million, or 4.7%, primarily due to certain acquired intangibles being fully amortized during the period and the impact of changes in foreign currency exchange rates.

Goodwill Impairment. As a result of the interim goodwill impairment analysis performed at June 30, 2022, we recognized $612.4 million in non-cash goodwill impairment charges. See Note 2. Summary of Significant Accounting Policies in the Notes to Condensed Consolidated Financial Statements in Item 1 of Part I of this Quarterly Report on Form 10-Q for additional information.

Interest Expense, Net


	Six Months Ended June 30,
	2023				2022
	Amount		Percentage of Revenue		Amount		Percentage of Revenue		Change

	(in thousands, except percentages)
Interest expense, net	$	(58,024)	(15.6)	%	$	(34,488)	(9.8)	%	$	(23,536)

Interest expense, net increased by $23.5 million, or 68.2%, in the six months ended June 30, 2023 compared to the six months ended June 30, 2022. The increase in interest expense is primarily due to increases in interest rates on our debt, including an increase in applicable margins resulting from the refinancing of our debt in November 2022. The weighted-average effective interest rate on our debt for the six months ended June 30, 2023 was 8.7% compared to 3.2% for the six months ended June 30, 2022. See Note 6. Debt in the Notes to Condensed Consolidated Financial Statements included in Item 1 of Part I of this Quarterly Report on Form 10-Q for additional information regarding our debt.

Other Income (Expense), Net


	Six Months Ended June 30,
	2023				2022
	Amount		Percentage of Revenue		Amount		Percentage of Revenue		Change

	(in thousands, except percentages)


Other income (expense), net	$	(76)	—	%	$	557	0.2	%	$	(633)

Other income (expense), net decreased by $0.6 million in the six months ended June 30, 2023 compared to the six months ended June 30, 2022 primarily due to the impact of changes in exchange rates on foreign currency denominated accounts.

Income Tax Expense


	Six Months Ended June 30,
	2023					2022
	Amount			Percentage of Revenue		Amount			Percentage of Revenue		Change

	(in thousands, except percentages)
Income (loss) before income taxes	$	10,378		2.8	%	$	(619,068)		(175.4)	%	$	629,446
Income tax expense	15,739			4.2		7,715			2.2		8,024
Effective tax rate	151.7		%			(1.2)		%			152.9		%

Our income tax expense for the six months ended June 30, 2023 was $15.7 million as compared to $7.7 million for the six months ended June 30, 2022. The effective tax rate increased to 151.7% for the period primarily due to an increase in the valuation allowance resulting from deduction limitations associated with the U.S. Tax Act. Additionally, the effective tax rate for the six months ended June 30, 2022 included the effect of the goodwill impairment, which is primarily non-deductible for income tax purposes. For additional discussion about our income taxes, see Note 8. Income Taxes in the Notes to Condensed Consolidated Financial Statements included in Item 1 of Part I of this Quarterly Report on Form 10-Q.

Non-GAAP Financial Measures

In addition to financial measures prepared in accordance with GAAP, we use certain non-GAAP financial measures to clarify and enhance our understanding, and aid in the period-to-period comparison, of our performance. We believe that these non-GAAP financial measures provide supplemental information that is meaningful when assessing our operating performance because they exclude the impact of certain amounts that our management and board of directors do not consider part of core operating results when assessing our operational performance, allocating resources, preparing annual budgets and determining compensation. Accordingly, these non-GAAP financial measures may provide insight to investors into the motivation and decision-making of management in operating the business. Investors are encouraged to review the reconciliation of each of these non-GAAP financial measures to its most comparable GAAP financial measure included below.

While we believe that these non-GAAP financial measures provide useful supplemental information, non-GAAP financial measures have limitations and should not be considered in isolation from, or as a substitute for, their most comparable GAAP 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 comparable to similarly titled measures of other companies due to potential differences in their financing and accounting methods, the book value of their assets, their capital structures, the method by which their assets were acquired and the manner in which they define non-GAAP measures. Items such as the amortization of intangible assets, stock-based compensation expense and related employer-paid payroll taxes, acquisition related adjustments, the Cyber Incident, restructuring costs and goodwill and indefinite-lived intangible asset impairment, as well as the related tax impacts of these items can have a material impact on our GAAP financial results.

Non-GAAP Operating Income and Non-GAAP Operating Margin

We provide non-GAAP operating income and related non-GAAP margin excluding such items as amortization of acquired intangible assets, stock-based compensation expense and related employer-paid payroll taxes, acquisition and other costs, restructuring costs, Cyber Incident costs and goodwill and indefinite-lived asset impairment. Management believes these measures are useful for the following reasons:

•Amortization of Acquired Intangible Assets. We provide non-GAAP information that excludes expenses related to purchased intangible assets associated with our acquisitions including our acquired technologies. We believe that eliminating this expense from our non-GAAP measures is useful to investors because the amortization of acquired

intangible assets can be inconsistent in amount and frequency and is significantly impacted by the timing and magnitude of our acquisition transactions, which also vary in frequency from period to period. Accordingly, we analyze the performance of our operations in each period without regard to such expenses.

•Stock-Based Compensation Expense and Related Employer-Paid Payroll Taxes. We provide non-GAAP information that excludes expenses related to stock-based compensation and related employer-paid payroll taxes. 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 related employer-paid payroll taxes, management excludes these expenses when analyzing the organization’s business performance.

•Acquisition and Other Costs. We exclude certain expense items resulting from acquisitions, such as legal, accounting and advisory fees, changes in fair value of contingent consideration, costs related to integrating the acquired businesses, deferred compensation, severance and retention expense. In addition, we exclude certain other costs including expenses related to our offerings. 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 operating expenses that we would not have otherwise incurred in the normal course of our organic business operations. We believe that providing these non-GAAP measures that exclude acquisition and other costs, allows users of our financial statements to better review and understand the historical 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.

•Restructuring Costs. We provide non-GAAP information that excludes restructuring costs such as severance, lease impairments and other costs incurred in connection with the exiting of certain leased facilities and other contracts as they relate to our corporate restructuring and exit activities and costs related to the separation of employment with executives of the Company. In addition, we exclude certain costs resulting from the spin-off of N-able, Inc. These costs are inconsistent in amount and are significantly impacted by the timing and nature of these events. Therefore, although we may incur these types of expenses in the future, we believe that eliminating these costs for purposes of calculating the non-GAAP financial measures facilitates a more meaningful evaluation of our operating performance and comparisons to our past operating performance.

•Cyber Incident Costs. We exclude certain expenses resulting from the Cyber Incident. Expenses include costs to investigate and remediate the Cyber Incident, costs of lawsuits and investigations related thereto, including settlement costs and legal and other professional services, and consulting services being provided to customers at no charge. Cyber Incident costs are provided net of expected and received insurance reimbursements, although the timing of recognizing insurance reimbursements may differ from the timing of recognizing the associated expenses. We expect to incur significant legal and other professional services expenses associated with the Cyber Incident in future periods. The Cyber Incident results in operating expenses we would not have otherwise incurred in the normal course of our organic business operations. We believe that providing non-GAAP measures that exclude these costs facilitates a more meaningful evaluation of our operating performance and comparisons to our past operating performance. We continue to invest significantly in cybersecurity and expect to make additional investments. These estimated investments are in addition to the Cyber Incident costs and not included in the net Cyber Incident costs reported.

•Goodwill and Indefinite-lived Intangible Asset Impairment. We provide non-GAAP information that excludes non-cash goodwill and indefinite-lived intangible asset impairment charges. We believe that providing these non-GAAP measures that exclude these non-cash impairment charges allows users of our financial statements to better review and understand our historical and current operating results. In addition, as a significant portion of our goodwill and indefinite-lived intangible assets were derived from the Take Private transaction, providing these non-GAAP measures that exclude these impairment charges facilitates comparisons to our peers who may not have undertaken a transformational acquisition resulting in significant goodwill and indefinite-lived intangible assets.


	Three Months Ended June 30,						Six Months Ended June 30,
	2023			2022			2023			2022

	(in thousands, except percentages)
GAAP operating income (loss)	$	32,645		$	(596,578)		$	68,478		$	(585,137)

Stock-based compensation expense and related employer-paid payroll taxes	18,543			17,541			35,700			33,478
Amortization of acquired technologies	3,425			3,648			6,861			20,875
Amortization of acquired intangibles	12,094			13,103			25,099			26,342
Acquisition and other costs	69			118			124			286

Restructuring costs(1)	7,235			7			18,194			1,430
Cyber Incident costs, net	580			3,748			(7,190)			9,464
Goodwill and indefinite-lived intangible asset impairment	—			621,760			—			621,760
Non-GAAP operating income	$	74,591		$	63,347		$	147,266		$	128,498
GAAP operating margin	17.6		%	(338.9)		%	18.5		%	(165.8)		%
Non-GAAP operating margin	40.3		%	36.0		%	39.7		%	36.4		%

_______

(1)Restructuring costs for the three and six months ended June 30, 2023 includes $7.1 million and $13.9 million, respectively, of non-cash lease impairment and other charges incurred in connection with the exiting of certain leased facilities.

Adjusted EBITDA and Adjusted EBITDA Margin

We regularly monitor adjusted EBITDA and adjusted EBITDA margin, as it is a measure we use to assess our operating performance. We define adjusted EBITDA as net income (loss), excluding amortization of acquired intangible assets and developed technology, depreciation expense, stock-based compensation expense and related employer-paid payroll taxes, restructuring costs, acquisition and other costs, Cyber Incident costs, net, goodwill and indefinite-lived intangible asset impairment charges, interest expense, net, debt-related costs including fees related to our credit agreements, debt extinguishment and refinancing costs, unrealized foreign currency (gains) losses, and income tax expense (benefit). We define adjusted EBITDA margin as adjusted EBITDA divided by total revenue. Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are: although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements; adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs; adjusted EBITDA does not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on our debt; adjusted EBITDA does not reflect tax payments that may represent a reduction in cash available to us; and other companies, including companies in our industry, may calculate adjusted EBITDA differently, which reduces its usefulness as a comparative measure.

Because of these limitations, you should consider adjusted EBITDA alongside other financial performance measures, including net income (loss) and our other GAAP results. In evaluating adjusted EBITDA, you should be aware that in the future we may incur expenses that are the same as or similar to some of the adjustments in this presentation. Our presentation of adjusted EBITDA should not be construed as an inference that our future results will be unaffected by the types of items excluded from the calculation of adjusted EBITDA. Adjusted EBITDA is not a presentation made in accordance with GAAP and the use of the term varies from others in our industry.


	Three Months Ended June 30,						Six Months Ended June 30,
	2023			2022			2023			2022

	(in thousands, except margin data)
Net income (loss)	$	260		$	(622,124)		$	(5,361)		$	(626,783)
Amortization and depreciation	20,027			20,131			40,958			54,059
Income tax expense	2,955			7,871			15,739			7,715
Interest expense, net	29,443			18,401			58,024			34,488

Unrealized foreign currency (gains) losses	(68)			(720)			116			(440)
Acquisition and other costs	69			118			124			286

Debt-related costs	98			95			203			197
Stock-based compensation expense and related employer-paid payroll taxes	18,543			17,541			35,700			33,478
Restructuring costs	7,235			3			18,194			1,390
Cyber Incident costs, net	580			3,748			(7,190)			9,464
Goodwill and indefinite-lived intangible asset impairment	—			621,760			—			621,760
Adjusted EBITDA	$	79,142		$	66,824		$	156,507		$	135,614
Adjusted EBITDA margin	42.8		%	38.0		%	42.2		%	38.4		%

Liquidity and Capital Resources

Cash and cash equivalents and short-term investments were $178.2 million as of June 30, 2023. Our international subsidiaries held approximately $28.8 million of cash and cash equivalents, of which 49.2% were held in Euros. We intend either to invest our foreign earnings permanently in foreign operations or to remit these earnings to our U.S. entities in a tax-free manner with the exception for immaterial state income taxes. The U.S. Tax Act imposed a mandatory transition tax on accumulated foreign earnings and eliminates U.S. federal income taxes on foreign subsidiary distribution.

Our primary source of cash for funding operations and growth has been through cash provided by operating activities. We continue to evaluate the nature and extent of the impact of the Cyber Incident to our business and financial position. Other than with respect to the settlement of the consolidated putative class action lawsuit and the dismissal of the two shareholder derivative actions, currently it is not possible to estimate the amount of loss or range of possible loss that might result from adverse judgments, settlements, penalties, or other resolution of any other proceedings and the investigations resulting from the Cyber Incident. Such potential payments, if great enough, could have an adverse effect on our liquidity. In addition, there continues to be uncertainty in the rapidly changing market and macroeconomic conditions related in part to the war in Ukraine, market conditions related to inflation, fluctuating foreign currency exchange rates, changes in interest rates, geopolitical tensions involving China and instability in the banking sector and financial services industry. However, despite these uncertainties, we believe that our existing cash and cash equivalents, our cash flows from operating activities and our borrowing capacity under our credit facilities will be sufficient to fund our operations, fund required debt repayments and meet our commitments for capital expenditures for at least the next 12 months.

Although we are not currently a party to any material definitive agreement regarding potential investments in, or acquisitions of, complementary businesses, applications or technologies, we may enter into these types of arrangements, which could reduce our cash and cash equivalents, require us to seek additional equity or debt financing or repatriate cash generated by our international operations that could cause us to incur withholding taxes on any distributions. Additional funds from financing arrangements may not be available on terms favorable to us or at all.

Indebtedness

As of June 30, 2023, our total indebtedness was $1.2 billion, with up to $130.0 million of available borrowings under our revolving credit facility. See Note 6. Debt in the Notes to Condensed Consolidated Financial Statements included in Item 1 of Part I of this Quarterly Report on Form 10-Q for additional information regarding our debt.

First Lien Credit Agreement

The First Lien Credit Agreement, as amended, provides for a senior secured revolving credit facility in an aggregate principal amount of $130.0 million, or the Revolving Credit Facility, consisting of a $17.5 million U.S. dollar revolving credit facility, or the U.S. Dollar Revolver, and a $112.5 million multicurrency revolving credit facility, or the Multicurrency Revolver. The Revolving Credit Facility includes a $35.0 million sublimit for the issuance of letters of credit. The First Lien Credit Agreement also contains a term loan facility (which we refer to as the First Lien Term Loan, and together with the Revolving Credit Facility, as the First Lien Credit Facilities) in an amended aggregate principal amount of $1,245.0 million.

The First Lien Credit Agreement provides us the right to request additional commitments for new incremental term loans and revolving loans, in an aggregate principal amount not to exceed (a) the greater of (i) $400.0 million and (ii) 100% of our consolidated EBITDA, as defined in the First Lien Credit Agreement (calculated on a pro forma basis), for the most recent four fiscal quarter period, or the First Lien Fixed Basket, plus (b) the amount of certain voluntary prepayments of the First Lien Credit Facilities, plus (c) an unlimited amount subject to pro forma compliance with a first lien net leverage ratio not to exceed 4.75 to 1.00.

The First Lien Term Loan requires equal quarterly repayments equal to 0.25% of the principal amount and has a final maturity date of February 5, 2027. We have made voluntary debt prepayments in prior periods and expect to continue to evaluate opportunities for additional debt prepayments in order to reduce our levels of gross debt.

Summary of Cash Flows

Summarized cash flow information is as follows:


	Six Months Ended June 30,
	2023		2022

	(in thousands)
Net cash provided by operating activities	$	49,767	$	81,440
Net cash provided by (used in) investing activities	17,857		(73,426)
Net cash used in financing activities	(11,457)		(16,081)
Effect of exchange rate changes on cash and cash equivalents	(711)		(1,609)

Net increase (decrease) in cash and cash equivalents	$	55,456	$	(9,676)

Operating Activities

Our primary source of cash from operating activities is cash collections from our customers. We expect cash inflows from operating activities to be affected by the timing of our sales. Our primary uses of cash from operating activities are for personnel-related expenditures, and other general operating expenses, as well as payments related to taxes, interest and facilities.

For the six months ended June 30, 2023 as compared to the six months ended June 30, 2022, the decrease in cash provided by operating activities was primarily due to increased cash outflows resulting from the changes in our operating assets and liabilities related to the timing of sales and cash payments and receipts. The net cash outflow resulting from the changes in our operating assets and liabilities was $37.6 million for the six months ended June 30, 2023 as compared to net cash inflows of $4.1 million for the six months ended June 30, 2022.

Cash flow from operating activities during the six months ended June 30, 2023 includes the $26.0 million consolidated putative class action lawsuit settlement payment made during the period. We expect that this settlement payment will be reimbursed entirely by the applicable directors’ and officers’ liability insurance in a future period. In addition, cash flow from operating activities was impacted by an increase in cash paid for interest due to increases in interest rates and as a result of the increase in applicable margins resulting from the refinancing of our debt in November 2022. Cash flow from operations for the six months ended June 30, 2022 included a cash inflow of $5.0 million of cybersecurity insurance proceeds received for costs incurred related to the Cyber Incident.

Investing Activities

Investing cash flows consist primarily of cash used for acquisitions, purchases and maturities of investments, capital expenditures and purchases of intangible assets. Our capital expenditures primarily relate to purchases of computers, servers and equipment and leasehold improvements to support our domestic and international office locations. Purchases of intangible assets consist primarily of capitalized research and development costs.

Net cash provided by investing activities increased in the six months ended June 30, 2023, as compared to the six months ended June 30, 2022, primarily due to $26.5 million of maturities of short-term investments during the current period compared to $55.9 million of purchases of short-term investments and the acquisition of Monalytic, Inc., a monitoring, analytics and professional services company, during the prior period.

Financing Activities

Financing cash flows consist primarily of issuance and repayments associated with our long-term debt, the proceeds from the issuance of shares of common stock through equity incentive plans and the repurchase of unvested incentive restricted stock and common stock to satisfy withholding tax requirements related to the settlement of restricted stock units.

Net cash used in financing activities decreased in the six months ended June 30, 2023 as compared to the six months ended June 30, 2022, primarily due to a $6.8 million decrease in repayments of debt under our First Lien Term Loan. In connection with our debt refinancing in November 2022, our quarterly principal repayments were reduced and no quarterly debt repayment was required in the three months ended March 31, 2023.

In the six months ended June 30, 2023 and 2022, we withheld and retired shares of common stock to satisfy $10.2 million and $7.9 million, respectively, of statutory withholding tax requirements that we pay in cash to the appropriate taxing authorities on behalf of our employees related to the settlement of restricted stock units during the period. These shares are treated as common stock repurchases in our condensed consolidated financial statements.

Contractual Obligations and Commitments

As of June 30, 2023, there have been no material changes in our contractual obligations and commitments as of December 31, 2022 that were disclosed in our Annual Report on Form 10-K.

During the six months ended June 30, 2023, we did not have any relationships with unconsolidated organizations or financial partnerships, such as structured finance or special purpose entities that would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

Critical Accounting Policies and Estimates

Our condensed consolidated financial statements are prepared in conformity with GAAP and require our management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from these estimates, and such estimates may change if the underlying conditions or assumptions change. To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected, perhaps materially.

In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP and does not require management’s judgment in its application, while in other cases, management’s judgment is required in selecting among available alternative accounting standards that allow different accounting treatment for similar transactions. We believe that these accounting policies requiring significant management judgment and estimates are critical to understanding our historical and future performance, as these policies relate to the more significant areas of our financial results. These critical accounting policies are:

•the valuation of goodwill, intangibles, long-lived assets and contingent consideration;

•revenue recognition;

•stock-based compensation;

•income taxes; and

•loss contingencies.

A full description of our critical accounting policies that involve significant management judgment appears in our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on February 22, 2023. There have been no material changes to our critical accounting policies and estimates since that time.

Recent Accounting Pronouncements

See Note 2. Summary of Significant Accounting Policies in the Notes to Condensed Consolidated Financial Statements in Item 1 of Part I of this Quarterly Report on Form 10-Q, for a full description of recent accounting pronouncements, if any, which is incorporated herein by reference.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

We had cash and cash equivalents of $177.2 million and $121.7 million at June 30, 2023 and December 31, 2022, respectively. We also had short-term investments classified as available-for-sale securities of $1.0 million and $27.1 million at June 30, 2023 and December 31, 2022, respectively. Our cash and cash equivalents consist of bank demand deposits, money market funds and investments with original maturities of three months or less. Our short-term investments consist primarily of corporate bonds and U.S. Treasury securities and other federal agency bonds. We hold cash and cash equivalents and short-term investments for working capital purposes. Our investments are made for capital preservation purposes, and we do not enter into investments for trading or speculative purposes.

We do not have material exposure to market risk with respect to our cash and cash equivalents, as these consist primarily of highly liquid investments purchased with original maturities of three months or less at June 30, 2023. We strive to maintain our cash deposits and invest in money market funds with multiple financial institutions of reputable credit and perform periodic evaluations of the relative credit standing of the financial institutions. We believe the financial institutions that hold our cash and cash equivalents are financially sound and minimal credit risk exists with respect to cash.

Our portfolio of available-for-sale securities classified as investments is subject to market risk due to changes in interest rates. Changes in interest rates could impact our future investment income, or we may suffer losses in principal if we are forced to sell securities that decline in market value due to changes in interest rates. However, because we classify our investment securities as “available for sale,” no gains or losses are recognized due to changes in interest rates unless such securities are sold prior to maturity or declines in fair value are determined to be other-than-temporary.

We had total indebtedness with an outstanding principal balance of $1.24 billion and $1.25 billion as of June 30, 2023 and December 31, 2022, respectively. Borrowings outstanding under our credit agreement bear interest at variable rates equal to applicable margins plus specified base rates or a secured overnight financing rate (“SOFR”) with a 0% floor. As of June 30, 2023 and December 31, 2022, the annual rate on borrowings was 8.85% and 8.32%, respectively. If there was a hypothetical 100 basis point increase in interest rates, the annual impact to interest expense would be approximately $12.5 million. This hypothetical change in interest expense has been calculated based on the borrowings outstanding at December 31, 2022 and a 100 basis point per annum change in interest rate applied over a one-year period.

We do not have material exposure to fair value market risk with respect to our total long-term outstanding indebtedness which consists of $1.24 billion U.S. dollar term loans as of June 30, 2023, not subject to market pricing. See Note 6. Debt in the Notes to Condensed Consolidated Financial Statements in Item 1 of Part I of this Quarterly Report on Form 10-Q for additional information regarding our debt.

Foreign Currency Exchange Risk

As a global company, we face exposure to adverse movements in foreign currency exchange rates. We primarily conduct business in the following locations: the United States, Europe, Canada, South America and Australia. This exposure is the result of selling in multiple currencies, growth in our international investments, additional headcount in foreign countries and operating in countries where the functional currency is the local currency. Specifically, our results of operations and cash flows are subject to fluctuations in the following currencies: the Euro, British Pound Sterling and Australian Dollar against the United States Dollar, or USD. These exposures may change over time as business practices evolve and economic conditions change, including as a result of the impact of the war in Ukraine, geopolitical tensions involving China, instability in the banking sector and financial services industry, inflation, or changes in interest rates on the global economy. Changes in foreign currency exchange rates have had and could continue to have an adverse impact on our financial results and cash flows.

Our condensed consolidated statements of operations are translated into USD at the average exchange rates in each applicable period. Our international revenue, operating expenses and significant balance sheet accounts denominated in currencies other than the USD primarily flow through our European subsidiaries, which have Euro functional currency. This results in a two-step currency exchange process wherein the currencies other than the Euro are first converted into the functional currency and then translated into USD for our consolidated financial statements. As an example, revenue for sales in Australia is translated from the Australian Dollar to the Euro and then into the USD.

Our statement of operations and balance sheet accounts are also impacted by the re-measurement of non-functional currency transactions such as intercompany loans, cash accounts held by our overseas subsidiaries, accounts receivable denominated in foreign currencies, deferred revenue and accounts payable denominated in foreign currencies.

Foreign Currency Transaction Risk

Our foreign currency exposures typically arise from selling annual and multi-year maintenance contracts and subscriptions in multiple currencies, accounts receivable, intercompany transfer pricing arrangements and other intercompany transactions. Our foreign currency management objective is to minimize the effect of fluctuations in foreign exchange rates on selected assets or liabilities without exposing us to additional risk associated with transactions that could be regarded as speculative.

We utilize purchased foreign currency forward contracts to minimize our foreign exchange exposure on certain foreign balance sheet positions denominated in currencies other than the Euro. We do not enter into any derivative financial instruments for trading or speculative purposes. Our objective in managing our exposure to foreign currency exchange rate fluctuations is to reduce the impact of adverse fluctuations in such exchange rates on our earnings and cash flow. The notional amounts and currencies underlying our foreign currency forward contracts will fluctuate period to period as they are principally dependent on the balances of the balance sheet positions that are denominated in currencies other than the Euro held by our global entities. There can be no assurance that our foreign currency hedging activities will substantially offset the impact of fluctuation in currency exchange rates on our results of operations and functional positions. As of June 30, 2023 and December 31, 2022, we

did not have any forward contracts outstanding and while we do not have a formal policy to settle all derivatives prior to the end of each quarter, our current practice is to do so. The effect of derivative instruments on our condensed consolidated statements of operations was insignificant for the three and six months ended June 30, 2023 and 2022.

We are exposed to credit-related losses in the event of non-performance by counterparties to derivative financial instruments, but we do not expect any counterparties to fail to meet their obligations given their high credit ratings. In addition, we diversify this risk across several counterparties and actively monitor their ratings.

Foreign Currency Translation Risk

Fluctuations in foreign currencies impact the amount of total assets, liabilities, revenue, operating expenses and cash flows that we report for our foreign subsidiaries upon the translation of these amounts into U.S. dollars. If there is a change in foreign currency exchange rates, the amounts of assets, liabilities, revenue, operating expenses and cash flows that we report in U.S. dollars for foreign subsidiaries that transact in international currencies may be higher or lower to what we would have reported using a constant currency rate. To the extent the U.S. dollar strengthens against foreign currencies, the translation of these foreign currency denominated transactions results in reduced assets, liabilities, revenue, operating expenses and cash flows for our international operations. Similarly, our assets, liabilities, revenue, operating expenses and cash flows will increase for our international operations if the U.S. dollar weakens against foreign currencies. The conversion of the foreign subsidiaries’ financial statements into U.S. dollars will also lead to remeasurement gains and losses recorded in income, or translation gains or losses that are recorded as a component of accumulated other comprehensive income (loss).

Item 4: Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2023. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms.

Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of June 30, 2023, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at a reasonable assurance level.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the quarter ended June 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II: OTHER INFORMATION

Item 1. Legal Proceedings

For a description of the lawsuits and government investigations or inquiries related to the Cyber Incident, see Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Note 9. Commitments and Contingencies in the Notes to Condensed Consolidated Financial Statements in Item 1 of Part I of this Quarterly Report on Form 10-Q, which description is incorporated herein by reference.

In addition, from time to time, we have been and may be involved in various legal proceedings and claims arising in our ordinary course of business. Other than with respect to the Cyber Incident, neither we nor any of our subsidiaries is a party to, and none of our respective property is the subject of, any material legal proceeding. However, the outcome of legal proceedings and claims brought against us are subject to significant uncertainty. Therefore, if one or more of these legal matters were resolved against us in the same reporting period for amounts in excess of management’s expectations, our consolidated financial statements for a particular period could be materially adversely affected.

Item 1A. Risk Factors

With the exception of the following updated risk factor and the updated risk factor disclosed in Part II, Item 1A, under the heading “Risk Factors” in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2023, there have been no other material changes in our risk factors from those disclosed in Part I, Item 1A, under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022.

Risks Related to Our Technology, Cybersecurity and the Cyber Incident

As a result of the Cyber Incident, we are party to several lawsuits and we and certain of our current and former executive officers and employees are the subject of an ongoing investigation by the SEC, any of which could result in significant costs and expenses, the diversion of management’s attention, a negative impact on employee morale and an adverse effect on our business, reputation, financial condition, results of operations or stock price.

We have several pending investigations and inquiries by U.S. regulatory authorities related to the Cyber Incident, including the Department of Justice and the SEC. On October 28, 2022, we received a “Wells Notice” from the SEC relating to its investigation (the “Investigation”) into the Cyber Incident and the SEC’s preliminary determination to recommend an enforcement action against us in connection with our cybersecurity disclosures and public statements, as well as our internal controls and disclosure controls and procedures. Subsequently, certain current and former executive officers and employees of the Company, including the Company’s Chief Financial Officer and Chief Information Security Officer, received “Wells Notices” from the SEC staff, each in connection with the Investigation. A Wells Notice is neither a formal charge of wrongdoing nor a final determination that the recipient has violated any law, and we maintain that our disclosures, public statements, controls and procedures were appropriate and have responded to the SEC staff’s position. If the SEC were to authorize an action against us or any of these individuals, it could seek an order enjoining us or such individuals from engaging in future violations of provisions of the federal securities laws subject to the action and, in the case of the individuals, imposing a bar from serving as an officer or director of a public company, imposing civil monetary penalties and providing for other equitable relief within the SEC’s authority. The results of the Wells Notice process and any corresponding enforcement action and the costs, timing and other potential consequences of responding and complying therewith are unknown at this time, and any fines, penalties or other remedies could impact our stock price, ability to obtain financing or the ability to attract or retain key employees.

Furthermore, regardless of the outcome of the Investigation, the Investigation itself has resulted, and may continue to result, in substantial costs, use of resources and diversion of the attention of management and other employees, which could adversely affect our business. Furthermore, publicity surrounding any civil action that may be brought by the SEC, even if ultimately resolved favorably for us, could have an adverse impact on our reputation, business, financial condition, results of operations or cash flows. We are currently incurring legal expenses in connection with this matter and anticipate that we will be required to indemnify certain current and former officers with respect thereto, some of which may not be covered by insurance. We cannot predict what impact, if any, these matters may have on our business, financial condition, results of operations and cash flow, though they may be material.

We are also party to lawsuits in the U.S. and additional claims may be asserted by or on behalf of customers, stockholders or others seeking monetary damages or other relief. On October 28, 2022, we entered into a binding term sheet to settle the consolidated putative class action lawsuit and on February 8, 2023, the court granted preliminary approval of the settlement, which is subject to final court approval. On July 28, 2023, the court held a final settlement hearing. On October 13, 2022, the Delaware Court of Chancery entered an order dismissing the Delaware derivative case with prejudice, and on May 17, 2023, the

Supreme Court of the State of Delaware entered an order affirming the Delaware Court of Chancery’s judgment. On July 12, 2023, the United States District Court for the Western District of Texas entered a final judgment dismissing the Texas derivative case without prejudice. The lawsuits, investigations, claims and regulatory compliance efforts have resulted, and are expected to result in the future, in the incurrence of significant costs and expenses (which may not be covered by insurance), the diversion of management’s attention from the operation of our business and a negative impact on employee morale. The resolution or an unfavorable outcome of these lawsuits, investigations, claims and regulatory compliance efforts, including providing indemnity to our officers and directors, may result in additional costs and other liabilities, which may not be covered by insurance, and may have an adverse impact on our business, financial condition and results of operations.

Item 6. Exhibits

EXHIBIT INDEX


Exhibit Number						Exhibit Title
3.1						Third Amended and Restated Certificate of Incorporation as currently in effect (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 10-Q (File No. 001-38711), filed with the Securities and Exchange Commission on November 27, 2018)
3.2						Certificate of Amendment to the Third Amended and Restated Certificate of Incorporation of SolarWinds Corporation (incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K (File No. 001-38711), filed with the Securities and Exchange Commission on July 26, 2021)
3.3						Amended and Restated Bylaws as currently in effect (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 10-Q (File No. 001-38711), filed with the Securities and Exchange Commission on November 27, 2018)
31.1*						Certification of Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*						Certification of Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1**						Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101*						Interactive Data Files (formatted as Inline XBRL)
104*						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)


*			Filed herewith
**			The certifications attached as Exhibit 32.1 accompanying this Quarterly Report on Form 10-Q, are deemed furnished and not filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of the Registrant under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Quarterly Report on Form 10-Q, irrespective of any general incorporation language contained in such filing

SOLARWINDS CORPORATION

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		SOLARWINDS CORPORATION

Dated:	August 9, 2023	By:	/s/ J. Barton Kalsu

			J. Barton Kalsu
			Chief Financial Officer
			(Principal Financial and Accounting Officer)

Exhibit 31.1

CERTIFICATION PURSUANT TO RULE 13a-14(a) OR 15d-14(a) OF

THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, Sudhakar Ramakrishna, certify that:

1.I have reviewed this quarterly report on Form 10-Q of SolarWinds Corporation;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;

d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date:	August 9, 2023	By:	/s/ Sudhakar Ramakrishna
			Sudhakar Ramakrishna
			President and Chief Executive Officer (Principal Executive Officer)

Exhibit 31.2

CERTIFICATION PURSUANT TO RULE 13a-14(a) OR 15d-14(a) OF

THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, J. Barton Kalsu, certify that:

1.I have reviewed this quarterly report on Form 10-Q of SolarWinds Corporation;

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date:	August 9, 2023	By:	/s/ J. Barton Kalsu
			J. Barton Kalsu
			Chief Financial Officer (Principal Financial Officer)

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of SolarWinds Corporation for the quarterly period ended June 30, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Sudhakar Ramakrishna, as Principal Executive Officer of SolarWinds Corporation, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of SolarWinds Corporation.


Date:	August 9, 2023	By:	/s/ Sudhakar Ramakrishna
			Sudhakar Ramakrishna
			President and Chief Executive Officer (Principal Executive Officer)

The foregoing certification is being furnished pursuant to 18 U.S.C. Section 1350. It is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and it is not to be incorporated by reference into any filing of the Company, regardless of any general incorporation language in such filing.

In connection with the Quarterly Report on Form 10-Q of SolarWinds Corporation for the quarterly period ended June 30, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, J. Barton Kalsu, as Principal Financial Officer of SolarWinds Corporation, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of SolarWinds Corporation.


Date:	August 9, 2023	By:	/s/ J. Barton Kalsu
			J. Barton Kalsu
			Chief Financial Officer (Principal Financial Officer)

Cover - shares	6 Months Ended
Cover - shares	Jun. 30, 2023	Aug. 04, 2023
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Jun. 30, 2023
Document Transition Report	false
Entity File Number	001-38711
Entity Registrant Name	SolarWinds Corp
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	81-0753267
Entity Address, Address Line One	7171 Southwest Parkway
Entity Address, Address Line Two	Building 400
Entity Address, City or Town	Austin
Entity Address, State or Province	TX
Entity Address, Postal Zip Code	78735
City Area Code	512
Local Phone Number	682.9300
Title of 12(b) Security	Common Stock, $0.001 par value
Trading Symbol	SWI
Security Exchange Name	NYSE
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		164,738,253
Entity Central Index Key	0001739942
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2023
Document Fiscal Period Focus	Q2
Amendment Flag	false

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
Current assets:
Cash and cash equivalents	$ 177,194	$ 121,738
Short-term investments	995	27,114
Accounts receivable, net of allowances of $2,425 and $1,173 as of June 30, 2023 and December 31, 2022, respectively	83,446	100,204
Income tax receivable	1,998	987
Prepaid and other current assets	67,046	57,350
Total current assets	330,679	307,393
Property and equipment, net	21,114	26,634
Operating lease assets	43,837	61,418
Deferred taxes	136,509	134,922
Goodwill	2,386,896	2,380,059
Intangible assets, net	212,592	243,980
Other assets, net	48,807	45,600
Total assets	3,180,434	3,200,006
Current liabilities:
Accounts payable	10,928	14,045
Accrued liabilities and other	39,982	68,284
Current operating lease liabilities	14,847	15,005
Accrued interest payable	307	579
Income taxes payable	25,656	11,841
Current portion of deferred revenue	332,309	337,541
Current debt obligation	12,450	9,338
Total current liabilities	436,479	456,633
Long-term liabilities:
Deferred revenue, net of current portion	42,018	38,945
Non-current deferred taxes	4,995	8,582
Non-current operating lease liabilities	52,276	59,235
Other long-term liabilities	54,194	74,193
Long-term debt, net of current portion	1,191,816	1,192,765
Total liabilities	1,781,778	1,830,353
Commitments and contingencies (Note 9)
Stockholders’ equity:
Common stock, $0.001 par value: 1,000,000,000 shares authorized and 164,710,793 and 161,928,532 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively	165	162
Preferred stock, $0.001 par value: 50,000,000 shares authorized and no shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively	0	0
Additional paid-in capital	2,654,178	2,627,370
Accumulated other comprehensive loss	(40,561)	(48,114)
Accumulated deficit	(1,215,126)	(1,209,765)
Total stockholders’ equity	1,398,656	1,369,653
Total liabilities and stockholders’ equity	$ 3,180,434	$ 3,200,006

Condensed Consolidated Balance Sheets (Parentheticals) - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
Assets
Allowance for credit loss, accounts receivable	$ 2,425	$ 1,173
Common Stock
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, authorized (in shares)	1,000,000,000	1,000,000,000
Common stock, issued (in shares)	164,710,793	161,928,532
Common stock, outstanding (in shares)	164,710,793	161,928,532
Preferred Stock
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, authorized (in shares)	50,000,000	50,000,000
Preferred stock, issued (in shares)	0	0
Preferred stock, outstanding (in shares)	0	0

Condensed Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Revenue:
Total revenue	$ 185,034	$ 176,034	$ 371,010	$ 352,902
Cost of revenue:
Cost of recurring revenue	18,533	15,460	36,927	33,291
Amortization of acquired technologies	3,425	3,648	6,861	20,875
Total cost of revenue	21,958	19,108	43,788	54,166
Gross profit	163,076	156,926	327,222	298,736
Operating expenses:
Sales and marketing	59,838	64,615	125,754	125,659
Research and development	24,081	22,108	47,872	45,530
General and administrative	34,418	41,283	60,019	73,947
Amortization of acquired intangibles	12,094	13,103	25,099	26,342
Goodwill impairment	0	612,395	0	612,395
Total operating expenses	130,431	753,504	258,744	883,873
Operating income (loss)	32,645	(596,578)	68,478	(585,137)
Other income (expense):
Interest expense, net	(29,443)	(18,401)	(58,024)	(34,488)
Other income (expense), net	13	726	(76)	557
Total other expense	(29,430)	(17,675)	(58,100)	(33,931)
Income (loss) before income taxes	3,215	(614,253)	10,378	(619,068)
Income tax expense	2,955	7,871	15,739	7,715
Net income (loss)	260	(622,124)	(5,361)	(626,783)
Net income (loss) available to common stockholders	260	(622,124)	(5,361)	(626,783)
Net income (loss) available to common stockholders	$ 260	$ (622,124)	$ (5,361)	$ (626,783)
Net income (loss) available to common stockholders per share:
Basic income (loss) per share (in dollars per share)	$ 0	$ (3.87)	$ (0.03)	$ (3.91)
Diluted income (loss) per share (in dollars per share)	$ 0	$ (3.87)	$ (0.03)	$ (3.91)
Weighted-average shares used to compute net income (loss) available to common stockholders per share:
Shares used in computation of basic income (loss) per share (in shares)	164,193	160,663	163,487	160,257
Shares used in computation of diluted income (loss) per share (in shares)	165,386	160,663	163,487	160,257
Recurring Revenue
Revenue:
Total revenue	$ 169,445	$ 150,952	$ 338,280	$ 305,194
Subscription
Revenue:
Total revenue	53,389	36,980	107,746	75,727
Cost of revenue:
Amortization of acquired technologies	2,501	2,727	5,015	5,471
Maintenance
Revenue:
Total revenue	116,056	113,972	230,534	229,467
License
Revenue:
Total revenue	15,589	25,082	32,730	47,708
Cost of revenue:
Amortization of acquired technologies	$ 924	$ 921	$ 1,846	$ 15,404

Condensed Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Statement of Comprehensive Income [Abstract]
Net income (loss)	$ 260	$ (622,124)	$ (5,361)	$ (626,783)
Other comprehensive income (loss):
Foreign currency translation adjustment	(2,950)	(53,670)	7,433	(70,565)
Unrealized gains (losses) on investments, net of income tax expense (benefit) of $10 and $(34) for the three months ended June 30, 2023 and 2022, respectively, and $31 and $(34) for the six months ended June 30, 2023 and 2022, respectively	37	(152)	120	(152)
Other comprehensive income (loss)	(2,913)	(53,822)	7,553	(70,717)
Comprehensive income (loss)	$ (2,653)	$ (675,946)	$ 2,192	$ (697,500)

Condensed Consolidated Statements of Comprehensive Income (Loss) (Parenthetical) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Statement of Comprehensive Income [Abstract]
Tax expense (benefit) on unrealized gains (losses) on investments	$ 10	$ (34)	$ 31	$ (34)

Condensed Consolidated Statements of Stockholders' Equity - USD ($) $ in Thousands	Total	Common Stock	Additional Paid-in Capital	Accumulated Other Comprehensive Income (Loss)	Accumulated Deficit
Balance at beginning of period (in shares) at Dec. 31, 2021		159,176,000
Balance at beginning of period at Dec. 31, 2021	$ 2,287,896	$ 159	$ 2,566,783	$ 1,306	$ (280,352)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Foreign currency translation adjustment	(70,565)
Unrealized gain (loss) on investments, net of taxes	(152)			(152)
Net loss	(626,783)				(626,783)
Comprehensive income (loss)	(697,500)
Exercise of stock options (in shares)		34,000
Exercise of stock options	37		37
Restricted stock units issued, net of shares withheld for taxes (in shares)		1,454,000
Restricted stock units issued, net of shares withheld for taxes	(7,882)	$ 2	(7,884)
Issuance of stock (in shares)		57,000
Issuance of stock	227		227
Issuance of stock under employee stock purchase plan (in shares)		150,000
Issuance of stock under employee stock purchase plan	1,753		1,753
Stock-based compensation	33,276		33,276
Balance at end of period (in shares) at Jun. 30, 2022		160,871,000
Balance at end of period at Jun. 30, 2022	1,617,807	$ 161	2,594,192	(69,411)	(907,135)
Balance at beginning of period (in shares) at Mar. 31, 2022		160,456,000
Balance at beginning of period at Mar. 31, 2022	2,277,378	$ 160	2,577,818	(15,589)	(285,011)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Foreign currency translation adjustment	(53,670)			(53,670)
Unrealized gain (loss) on investments, net of taxes	(152)			(152)
Net loss	(622,124)				(622,124)
Comprehensive income (loss)	(675,946)
Exercise of stock options (in shares)		18,000
Exercise of stock options	25		25
Restricted stock units issued, net of shares withheld for taxes (in shares)		391,000
Restricted stock units issued, net of shares withheld for taxes	(1,475)	$ 1	(1,476)
Issuance of stock (in shares)		6,000
Issuance of stock	11		11
Stock-based compensation	17,814		17,814
Balance at end of period (in shares) at Jun. 30, 2022		160,871,000
Balance at end of period at Jun. 30, 2022	$ 1,617,807	$ 161	2,594,192	(69,411)	(907,135)
Balance at beginning of period (in shares) at Dec. 31, 2022	161,928,532	161,929,000
Balance at beginning of period at Dec. 31, 2022	$ 1,369,653	$ 162	2,627,370	(48,114)	(1,209,765)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Foreign currency translation adjustment	7,433			7,433
Unrealized gain (loss) on investments, net of taxes	120			120
Net loss	(5,361)				(5,361)
Comprehensive income (loss)	2,192
Exercise of stock options (in shares)		121,000
Exercise of stock options	112		112
Restricted stock units issued, net of shares withheld for taxes (in shares)		2,460,000
Restricted stock units issued, net of shares withheld for taxes	(10,167)	$ 3	(10,170)
Issuance of stock (in shares)		3,000
Issuance of stock	18		18
Issuance of stock under employee stock purchase plan (in shares)		198,000
Issuance of stock under employee stock purchase plan	1,711		1,711
Stock-based compensation	$ 35,137		35,137
Balance at end of period (in shares) at Jun. 30, 2023	164,710,793	164,711,000
Balance at end of period at Jun. 30, 2023	$ 1,398,656	$ 165	2,654,178	(40,561)	(1,215,126)
Balance at beginning of period (in shares) at Mar. 31, 2023		163,667,000
Balance at beginning of period at Mar. 31, 2023	1,385,800	$ 164	2,638,670	(37,648)	(1,215,386)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Foreign currency translation adjustment	(2,950)			(2,950)
Unrealized gain (loss) on investments, net of taxes	37			37
Net loss	260				260
Comprehensive income (loss)	(2,653)
Exercise of stock options (in shares)		115,000
Exercise of stock options	104		104
Restricted stock units issued, net of shares withheld for taxes (in shares)		929,000
Restricted stock units issued, net of shares withheld for taxes	(3,176)	$ 1	(3,177)
Stock-based compensation	$ 18,581		18,581
Balance at end of period (in shares) at Jun. 30, 2023	164,710,793	164,711,000
Balance at end of period at Jun. 30, 2023	$ 1,398,656	$ 165	$ 2,654,178	$ (40,561)	$ (1,215,126)

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022
Cash flows from operating activities
Net loss	$ (5,361)	$ (626,783)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	43,132	54,059
Goodwill and indefinite-lived intangible asset impairment	0	621,760
Provision for losses on accounts receivable	1,293	366
Stock-based compensation expense	34,494	32,684
Amortization of debt issuance costs	5,361	4,536
Deferred taxes	(3,593)	(9,027)
(Gain) loss on foreign currency exchange rates	116	(440)
Lease impairment charges	11,689	0
Other non-cash expenses	245	142
Changes in operating assets and liabilities, net of assets acquired and liabilities assumed in business combinations:
Accounts receivable	15,873	8,912
Income taxes receivable	(999)	(110)
Prepaid and other assets	(9,522)	6,566
Accounts payable	(3,048)	252
Accrued liabilities and other	(29,736)	(3,976)
Accrued interest payable	(272)	81
Income taxes payable	(6,171)	(4,700)
Deferred revenue	(3,734)	(2,998)
Other long-term liabilities	0	116
Net cash provided by operating activities	49,767	81,440
Cash flows from investing activities
Purchases of investments	(988)	(55,885)
Maturities of investments	26,535	0
Purchases of property and equipment	(1,387)	(3,533)
Purchases of intangible assets	(6,867)	(7,508)
Acquisitions, net of cash acquired	0	(6,500)
Other investing activities	564	0
Net cash provided by (used in) investing activities	17,857	(73,426)
Cash flows from financing activities
Proceeds from issuance of common stock under employee stock purchase plan	1,711	1,753
Repurchase of common stock and incentive restricted stock	(10,167)	(7,921)
Exercise of stock options	112	37
Repayments of borrowings from credit agreement	(3,113)	(9,950)
Net cash used in financing activities	(11,457)	(16,081)
Effect of exchange rate changes on cash and cash equivalents	(711)	(1,609)
Net increase (decrease) in cash and cash equivalents	55,456	(9,676)
Cash and cash equivalents
Beginning of period	121,738	732,116
End of period	177,194	722,440
Supplemental disclosure of cash flow information
Cash paid for interest	54,935	30,933
Cash paid for income taxes	$ 24,140	$ 19,422

Organization and Nature of Operations	6 Months Ended
Organization and Nature of Operations	Jun. 30, 2023
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Organization and Nature of Operations	Organization and Nature of OperationsSolarWinds Corporation, a Delaware corporation, and its subsidiaries (“Company,” “we,” “us” and “our”) is a leading provider of simple, powerful and secure observability and information technology, or IT, management software. Our solutions are designed to give organizations worldwide, regardless of type, size or complexity, the power to optimize performance of their IT environments, no matter where they are in their digital transformation journeys. Our business is focused on building products designed to enable technology professionals and leaders to securely monitor and manage the performance of their IT environments, whether they be on-premises, in the cloud or in hybrid deployments. Our approach has enabled us to serve the entire IT market and our customers include network and systems engineers, database administrators, storage administrators, DevOps, SecOps and service desk professionals. We sell our products for use in organizations across industries ranging in size from very small businesses to large enterprises.

Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2023

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Use of Estimates

•the valuation of goodwill, intangibles, long-lived assets and contingent consideration;

•revenue recognition;

•stock-based compensation;

•income taxes; and

•loss contingencies.

Recently Issued Accounting Pronouncements

Goodwill

Fair Value Measurements

The guidance establishes a three-tiered fair value hierarchy that prioritizes inputs to valuation techniques used in fair value calculations. The three levels of inputs are defined as follows:

Level 1: Unadjusted quoted prices for identical assets or liabilities in active markets accessible by us.

Level 2: Inputs that are observable in the marketplace other than those inputs classified as Level 1.

Level 3: Inputs that are unobservable in the marketplace and significant to the valuation.

Accumulated Other Comprehensive Income (Loss)

Changes in accumulated other comprehensive income (loss) by component are summarized below:


	Foreign Currency Translation Adjustments		Unrealized Gain (Loss) on Investments, Net of Tax		Accumulated Other Comprehensive Income (Loss)

	(in thousands)




Balance at December 31, 2022	$	(47,996)	$	(118)	$	(48,114)
Other comprehensive gain before reclassification	7,433		120		7,553
Amount reclassified from accumulated other comprehensive income (loss)	—		—		—
Net current period other comprehensive income	7,433		120		7,553
Balance at June 30, 2023	$	(40,563)	$	2	$	(40,561)

Deferred Revenue

Details of our total deferred revenue balance are as follows:


	Total Deferred Revenue

	(in thousands)
Balance at December 31, 2022	$	376,486

Deferred revenue recognized	(263,271)
Additional amounts deferred	261,112

Balance at June 30, 2023	$	374,327

We expect to recognize revenue related to these remaining performance obligations as of June 30, 2023 as follows:


	Revenue Recognition Expected by Period
	Total		Less than 1 year		1-3 years		More than 3 years

	(in thousands)
Expected recognition of deferred revenue	$	374,327	$	332,309	$	40,932	$	1,086

Deferred Commissions

Details of our deferred commissions balance are as follows:


			Deferred Commissions
			(in thousands)
Balance at December 31, 2022			$	22,540

Commissions capitalized			4,832
Amortization recognized			(4,065)
Balance at June 30, 2023			$	23,307

	June 30,		December 31,
	2023		2022

	(in thousands)
Classified as:
Current	$	7,557	$	6,936
Non-current	15,750		15,604
Total deferred commissions	$	23,307	$	22,540

Leases

Cost of Revenue

Amortization of Acquired Technologies. Amortization of acquired technologies included in cost of revenue relate to our licensed products and subscription offerings as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022

	(in thousands)
Amortization of acquired license technologies	$	924	$	921	$	1,846	$	15,404
Amortization of acquired subscription technologies	2,501		2,727		5,015		5,471
Total amortization of acquired technologies	$	3,425	$	3,648	$	6,861	$	20,875

Investments

6 Months Ended

Jun. 30, 2023

Investments, Debt and Equity Securities [Abstract]

Investments

The following table summarizes our short-term investments:


	June 30, 2023
	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value

	(in thousands)



Short-term investments:
Available-for-sale securities:

U.S. government agency bonds	$	993	$	2	$	—	$	995



Total short-term investments	$	993	$	2	$	—	$	995

	December 31, 2022
	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value

	(in thousands)
Short-term investments:
Available-for-sale securities:
U.S. Treasury securities	$	6,013	$	—	$	(43)	$	5,970
Corporate bonds	19,887		—		(105)		19,782
Commercial paper	798		—		—		798
Asset-backed securities	565		—		(1)		564
Total short-term investments	$	27,263	$	—	$	(149)	$	27,114
















	December 31, 2022
	Less Than 12 Months				12 Months or Greater				Total
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses

	(in thousands)
As of December 31, 2022


U.S. Treasury securities	$	5,970	$	(43)	$	—	$	—	$	5,970	$	(43)
Corporate bonds	19,782		(105)		—		—		19,782		(105)
Asset-backed securities	564		(1)		—		—		564		(1)
	$	26,316	$	(149)	$	—	$	—	$	26,316	$	(149)

The following table summarizes the contractual underlying maturities of our available-for-sale securities:


	June 30, 2023
	Cost		Fair Value

	(in thousands)
Due in one year or less	$	993	$	995

Goodwill

6 Months Ended

Jun. 30, 2023

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill

The following table reflects the changes in goodwill for the six months ended June 30, 2023:


	(in thousands)
Balance at December 31, 2022	$	2,380,059


Foreign currency translation	6,837
Balance at June 30, 2023	$	2,386,896

As of June 30, 2023, the accumulated goodwill impairment on our condensed consolidated balance sheet was $894.6 million.

Fair Value Measurements

6 Months Ended

Jun. 30, 2023

Fair Value Disclosures [Abstract]

Fair Value Measurements


	Fair Value Measurements at June 30, 2023 Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total

	(in thousands)
Cash equivalents:
Money market funds	$	115,930	$	—	$	—	$	115,930
U.S. Treasury securities	—		4,714		—		4,714
U.S. government agency bonds	—		1,994		—		1,994

Commercial paper	—		13,739		—		13,739
Total cash equivalents	115,930		20,447		—		136,377
Short-term investments:
U.S. government agency bonds	—		995		—		995



Total short-term investments	—		995		—		995







Total assets	$	115,930	$	21,442	$	—	$	137,372


	Fair Value Measurements at December 31, 2022 Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total

	(in thousands)
Cash equivalents:
Money market funds	$	48,833	$	—	$	—	$	48,833

Total cash equivalents	48,833		—		—		48,833

Short-term investments:
U.S. Treasury bonds	—		5,970		—		5,970
Corporate bonds	—		19,782		—		19,782
Commercial paper	—		798		—		798
Asset-backed securities	—		564		—		564
Total short-term investments	—		27,114		—		27,114




Total assets	$	48,833	$	27,114	$	—	$	75,947

As of June 30, 2023 and December 31, 2022, the carrying value of our long-term debt approximates its estimated fair value as the interest rate on the debt agreements is adjusted for changes in the market rates. See Note 6. Debt for additional information regarding our debt. The fair value of our non-financial assets and liabilities, which include goodwill, intangible assets and property, plant and equipment, are measured on a non-recurring basis. Fair value adjustments are made in the period an impairment charge is recognized. The fair value of our reporting unit and indefinite-lived intangible asset are classified as Level 3 within the fair value hierarchy due to the significant unobservable inputs developed using company-specific information.

Debt

6 Months Ended

Jun. 30, 2023

Debt Disclosure [Abstract]

Debt

The following table summarizes information relating to our debt:


	June 30,				December 31,
	2023				2022
	Amount		Effective Rate		Amount		Effective Rate

	(in thousands, except interest rates)
Revolving credit facility	$	—	—	%	$	—	—	%
First Lien Term Loan (as amended) due Feb 2027	1,241,888		8.85	%	1,245,000		8.32	%


Total principal amount	1,241,888				1,245,000
Unamortized discount and debt issuance costs	(37,622)				(42,897)
Total debt	1,204,266				1,202,103
Less: Current portion of long-term debt	(12,450)				(9,338)
Total long-term debt	$	1,191,816			$	1,192,765

Senior Secured First Lien Credit Facilities

Our first lien credit agreement, as amended, or First Lien Credit Agreement, provides for senior secured first lien credit facilities, consisting of the following:

•a $1.245 billion U.S. dollar term loan, or First Lien Term Loan, with a final maturity date of February 5, 2027; and

The First Lien Term Loan requires equal quarterly repayments equal to 0.25% of the principal amount.

Income (Loss) Per Share

6 Months Ended

Jun. 30, 2023

Earnings Per Share [Abstract]

Income (Loss) Per Share

Loss) Per Share

A reconciliation of the number of shares in the calculation of basic and diluted income (loss) per share follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022

	(in thousands)
Basic income (loss) per share
Numerator:
Net income (loss)	$	260	$	(622,124)	$	(5,361)	$	(626,783)


Earnings allocated to unvested restricted stock	—		—		—		—
Net income (loss) available to common stockholders	$	260	$	(622,124)	$	(5,361)	$	(626,783)

Denominator:
Weighted-average shares used in computing basic net income (loss) per share	164,193		160,663		163,487		160,257

Diluted net income (loss) per share
Numerator:
Net income (loss) available to common stockholders	$	260	$	(622,124)	$	(5,361)	$	(626,783)

Denominator:
Weighted-average shares used in computing basic income (loss) per share	164,193		160,663		163,487		160,257
Add dilutive impact of employee equity plans	1,193		—		—		—
Weighted-average shares used in computing diluted net income (loss) per share	165,386		160,663		163,487		160,257


	Three Months Ended June 30,		Six Months Ended June 30,
	2023	2022	2023	2022

	(in thousands)






Total anti-dilutive shares	7,429	12,954	14,089	11,074

Income Taxes	6 Months Ended
Income Taxes	Jun. 30, 2023
Income Tax Disclosure [Abstract]
Income Taxes	Income Taxes For the three months ended June 30, 2023 and 2022, we recorded income tax expense of $3.0 million and $7.9 million, respectively, resulting in an effective tax rate of 91.9% and (1.3)%, respectively. For the six months ended June 30, 2023 and 2022, we recorded income tax expense of $15.7 million and $7.7 million, respectively, resulting in an effective tax rate of 151.7% and (1.2)%, respectively. The increase in the effective tax rates for the three and six months ended June 30, 2023 compared to the same period in 2022 was primarily due to the effect of the goodwill impairment recognized in 2022, which is primarily non-deductible for income tax purpose, as well as an increase in the valuation allowance resulting from deduction limitations associated with the U.S. Tax Cuts and Jobs Act of 2017, or U.S. Tax Act. Our policy is to include interest and penalties related to unrecognized tax benefits as a component of income tax expense. At June 30, 2023, we had accrued interest and penalties related to unrecognized tax benefits of approximately $4.2 million. We file U.S., state and foreign income tax returns in jurisdictions with varying statutes of limitations. The 2013 through February 2016 and 2019 through 2022 tax years generally remain open and subject to examination by federal tax authorities. The 2015 through 2022 tax years generally remain open and subject to examination by the state tax authorities and foreign tax authorities. We are currently under examination by the IRS for the tax years 2013 through the period ending February 2016. We are under audit by the Indian Tax Authority for the 2017 tax year. We are currently under audit by the Texas Comptroller for the 2015 through 2020 tax years. We are not currently under audit in any other taxing jurisdictions.

Commitments and Contingencies

6 Months Ended

Jun. 30, 2023

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Cyber Incident

Expenses Incurred

We recorded pre-tax expenses (proceeds) related to the Cyber Incident as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022

	(in thousands)
Cost of recurring revenue	$	—	$	7	$	—	$	163
Sales and marketing	—		62		—		130
Research and development	—		—		—		2
General and administrative	5,580		3,679		7,608		9,169
Total gross expenses related to the Cyber Incident	5,580		3,748		7,608		9,464
Less: proceeds received or expected to be received under our insurance coverage	(5,000)		—		(14,798)		—
Total net expenses (proceeds) related to the Cyber Incident	$	580	$	3,748	$	(7,190)	$	9,464

Litigation, Claims and Government Investigations

Insurance Coverage

Indemnification

Other Matters

Summary of Significant Accounting Policies (Policies)	6 Months Ended
Summary of Significant Accounting Policies (Policies)	Jun. 30, 2023
Accounting Policies [Abstract]
Basis of Accounting	We prepared our interim condensed consolidated financial statements in conformity with United States of America generally accepted accounting principles ("GAAP"), and the reporting regulations of the Securities and Exchange Commission (the "SEC"). They do not include all of the information and footnotes required by GAAP for complete financial statements. The accompanying condensed consolidated financial statements include the accounts of SolarWinds Corporation and the accounts of its wholly owned subsidiaries. We have eliminated all intercompany balances and transactions.The interim financial information is unaudited, but reflects all normal adjustments that are, in our opinion, necessary to provide a fair statement of results for the interim periods presented. This interim information should be read in conjunction with the audited consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2022.
Use of Estimates	The preparation of financial statements in conformity with GAAP requires our management to make estimates and assumptions that affect the reported amounts and the disclosure of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. The actual results that we experience may differ materially from our estimates. The accounting estimates that require our most significant, difficult and subjective judgments include: •the valuation of goodwill, intangibles, long-lived assets and contingent consideration; •revenue recognition; •stock-based compensation; •income taxes; and •loss contingencies.
Recently Issued Accounting Pronouncements	During the six months ended June 30, 2023, there have been no recently issued accounting pronouncements that are expected to have a material impact to our financial position, results of operations or cash flows.
Goodwill	Our goodwill was derived from the take private transaction in early 2016 ("Take Private") and acquisitions where the purchase price exceeded the fair value of the net identifiable assets acquired. Goodwill is tested for impairment at least annually during the fourth quarter or more frequently if events or circumstances indicate it is more likely than not that the fair value of our reporting unit is less than its carrying value. During the year ended December 31, 2022, we experienced declines in our market capitalization and after considering the impact of current macroeconomic conditions on the assumptions used in determining the fair value of our reporting unit, determined it appropriate to perform interim quantitative assessments of our reporting unit as of June 30, 2022 and September 30, 2022. As a result of the interim goodwill impairment analyses, our reporting unit was determined to have a carrying value that exceeded its fair value and therefore, we recorded non-cash goodwill impairment charges of $612.4 million and $278.7 million for the three months ended June 30, 2022 and September 30, 2022, respectively. Throughout the period since the quantitative assessment on September 30, 2022, there have been no unanticipated changes or negative indicators in the qualitative factors or valuation assumptions that would negatively impact the fair value of our reporting unit. As such, we determined there were no indicators of impairment and that it was more likely than not that the fair value of our reporting unit was greater than its carrying value at June 30, 2023. Fair value determination of our reporting unit requires considerable judgment and is sensitive to changes in underlying assumptions and factors. As a result, there can be no assurance that the estimates and assumptions made for purposes of the quantitative goodwill impairment tests will prove to be an accurate prediction of future results. Examples of events or circumstances that could reasonably be expected to negatively affect the underlying key assumptions and ultimately impact the estimated fair value of our reporting unit may include such items as: (i) volatility in the equity and debt markets or other macroeconomic factors, (ii) an increase in the weighted-average cost of capital due to further increases in interest rates, (iii) timing and success of new products introduced in our evolution from monitoring to observability, (iv) the ongoing impact of the Cyber Incident including a decrease in future cash flows due to lower than expected license sales or maintenance renewals, higher than expected customer attrition, higher than estimated costs to respond and adverse loss exposure from claims, fines or penalties resulting from government investigations and litigation; and (v) fluctuations in foreign currency exchange rates that may negatively impact our reported results of operations. Accordingly, if our current cash flow assumptions are not realized, we experience further sustained declines in our stock price or market capitalization, or there are further declines in the market multiplies used in our analysis, it is possible that an additional impairment charge may be recorded in the future, which could be material.
Fair Value Measurements	We apply the authoritative guidance on fair value measurements for financial assets and liabilities that are measured at fair value on a recurring basis and non-financial assets and liabilities, such as goodwill, intangible assets and property, plant and equipment that are measured at fair value on a non-recurring basis. The guidance establishes a three-tiered fair value hierarchy that prioritizes inputs to valuation techniques used in fair value calculations. The three levels of inputs are defined as follows: Level 1: Unadjusted quoted prices for identical assets or liabilities in active markets accessible by us. Level 2: Inputs that are observable in the marketplace other than those inputs classified as Level 1. Level 3: Inputs that are unobservable in the marketplace and significant to the valuation. We determine the fair value of our available-for-sale securities based on inputs obtained from multiple pricing vendors, who may use quoted prices in active markets for identical assets (Level 1 inputs) or inputs other than quoted prices that are observable either directly or indirectly (Level 2 inputs) in determining fair value. However, we classify all of our available-for-sale securities as being valued using Level 2 inputs. The valuation techniques used to determine the fair value of our financial instruments having Level 2 inputs are derived from unadjusted, non-binding market consensus prices that are corroborated by observable market data, quoted market prices for similar instruments, or pricing models. Our procedures include controls to ensure that appropriate fair values are recorded by a review of the valuation methods and assumptions. See Note 5. Fair Value Measurements for a summary of our financial instruments accounted for at fair value on a recurring basis. The carrying amounts reported in our consolidated balance sheets for cash, accounts receivable, accounts payable and other accrued expenses approximate fair value due to relatively short periods to maturity.

Summary of Significant Accounting Policies (Tables)

6 Months Ended

Jun. 30, 2023

Accounting Policies [Abstract]

Changes in Accumulated Other Comprehensive Income (Loss) by Component

Changes in accumulated other comprehensive income (loss) by component are summarized below:


	Foreign Currency Translation Adjustments		Unrealized Gain (Loss) on Investments, Net of Tax		Accumulated Other Comprehensive Income (Loss)

	(in thousands)




Balance at December 31, 2022	$	(47,996)	$	(118)	$	(48,114)
Other comprehensive gain before reclassification	7,433		120		7,553
Amount reclassified from accumulated other comprehensive income (loss)	—		—		—
Net current period other comprehensive income	7,433		120		7,553
Balance at June 30, 2023	$	(40,563)	$	2	$	(40,561)

Details of Total Deferred Revenue Balance

Details of our total deferred revenue balance are as follows:


	Total Deferred Revenue

	(in thousands)
Balance at December 31, 2022	$	376,486

Deferred revenue recognized	(263,271)
Additional amounts deferred	261,112

Balance at June 30, 2023	$	374,327

Remaining Performance Obligations For Revenue Recognition

We expect to recognize revenue related to these remaining performance obligations as of June 30, 2023 as follows:


	Revenue Recognition Expected by Period
	Total		Less than 1 year		1-3 years		More than 3 years

	(in thousands)
Expected recognition of deferred revenue	$	374,327	$	332,309	$	40,932	$	1,086

Details of Contract Acquisition Cost

Details of our deferred commissions balance are as follows:


			Deferred Commissions
			(in thousands)
Balance at December 31, 2022			$	22,540

Commissions capitalized			4,832
Amortization recognized			(4,065)
Balance at June 30, 2023			$	23,307

	June 30,		December 31,
	2023		2022

	(in thousands)
Classified as:
Current	$	7,557	$	6,936
Non-current	15,750		15,604
Total deferred commissions	$	23,307	$	22,540

Amortization of Acquired Technologies

Amortization of Acquired Technologies. Amortization of acquired technologies included in cost of revenue relate to our licensed products and subscription offerings as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022

	(in thousands)
Amortization of acquired license technologies	$	924	$	921	$	1,846	$	15,404
Amortization of acquired subscription technologies	2,501		2,727		5,015		5,471
Total amortization of acquired technologies	$	3,425	$	3,648	$	6,861	$	20,875

Investments (Tables)

6 Months Ended

Jun. 30, 2023

Investments, Debt and Equity Securities [Abstract]

Schedule of Available-for-Sale Securities Reconciliation

The following table summarizes our short-term investments:


	June 30, 2023
	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value

	(in thousands)



Short-term investments:
Available-for-sale securities:

U.S. government agency bonds	$	993	$	2	$	—	$	995



Total short-term investments	$	993	$	2	$	—	$	995

	December 31, 2022
	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value

	(in thousands)
Short-term investments:
Available-for-sale securities:
U.S. Treasury securities	$	6,013	$	—	$	(43)	$	5,970
Corporate bonds	19,887		—		(105)		19,782
Commercial paper	798		—		—		798
Asset-backed securities	565		—		(1)		564
Total short-term investments	$	27,263	$	—	$	(149)	$	27,114

Schedule of Available-for-Sale Securities in Continuous Unrealized Loss Position and Fair Value
















	December 31, 2022
	Less Than 12 Months				12 Months or Greater				Total
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses

	(in thousands)
As of December 31, 2022


U.S. Treasury securities	$	5,970	$	(43)	$	—	$	—	$	5,970	$	(43)
Corporate bonds	19,782		(105)		—		—		19,782		(105)
Asset-backed securities	564		(1)		—		—		564		(1)
	$	26,316	$	(149)	$	—	$	—	$	26,316	$	(149)

Schedule of Investments Classified by Contractual Maturity Date

The following table summarizes the contractual underlying maturities of our available-for-sale securities:


	June 30, 2023
	Cost		Fair Value

	(in thousands)
Due in one year or less	$	993	$	995

Goodwill (Tables)

6 Months Ended

Jun. 30, 2023

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Goodwill

The following table reflects the changes in goodwill for the six months ended June 30, 2023:


	(in thousands)
Balance at December 31, 2022	$	2,380,059


Foreign currency translation	6,837
Balance at June 30, 2023	$	2,386,896

Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2023

Fair Value Disclosures [Abstract]

Fair Value of Financial Assets Measured on a Recurring Basis


	Fair Value Measurements at June 30, 2023 Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total

	(in thousands)
Cash equivalents:
Money market funds	$	115,930	$	—	$	—	$	115,930
U.S. Treasury securities	—		4,714		—		4,714
U.S. government agency bonds	—		1,994		—		1,994

Commercial paper	—		13,739		—		13,739
Total cash equivalents	115,930		20,447		—		136,377
Short-term investments:
U.S. government agency bonds	—		995		—		995



Total short-term investments	—		995		—		995







Total assets	$	115,930	$	21,442	$	—	$	137,372


	Fair Value Measurements at December 31, 2022 Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total

	(in thousands)
Cash equivalents:
Money market funds	$	48,833	$	—	$	—	$	48,833

Total cash equivalents	48,833		—		—		48,833

Short-term investments:
U.S. Treasury bonds	—		5,970		—		5,970
Corporate bonds	—		19,782		—		19,782
Commercial paper	—		798		—		798
Asset-backed securities	—		564		—		564
Total short-term investments	—		27,114		—		27,114




Total assets	$	48,833	$	27,114	$	—	$	75,947

Debt (Tables)

6 Months Ended

Jun. 30, 2023

Debt Disclosure [Abstract]

Summary of Debt

The following table summarizes information relating to our debt:


	June 30,				December 31,
	2023				2022
	Amount		Effective Rate		Amount		Effective Rate

	(in thousands, except interest rates)
Revolving credit facility	$	—	—	%	$	—	—	%
First Lien Term Loan (as amended) due Feb 2027	1,241,888		8.85	%	1,245,000		8.32	%


Total principal amount	1,241,888				1,245,000
Unamortized discount and debt issuance costs	(37,622)				(42,897)
Total debt	1,204,266				1,202,103
Less: Current portion of long-term debt	(12,450)				(9,338)
Total long-term debt	$	1,191,816			$	1,192,765

Income (Loss) Per Share (Tables)

6 Months Ended

Jun. 30, 2023

Earnings Per Share [Abstract]

Schedule of Reconciliation of Shares in Calculation of Basic and Diluted Loss Per Share Income (Loss)

A reconciliation of the number of shares in the calculation of basic and diluted income (loss) per share follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022

	(in thousands)
Basic income (loss) per share
Numerator:
Net income (loss)	$	260	$	(622,124)	$	(5,361)	$	(626,783)


Earnings allocated to unvested restricted stock	—		—		—		—
Net income (loss) available to common stockholders	$	260	$	(622,124)	$	(5,361)	$	(626,783)

Denominator:
Weighted-average shares used in computing basic net income (loss) per share	164,193		160,663		163,487		160,257

Diluted net income (loss) per share
Numerator:
Net income (loss) available to common stockholders	$	260	$	(622,124)	$	(5,361)	$	(626,783)

Denominator:
Weighted-average shares used in computing basic income (loss) per share	164,193		160,663		163,487		160,257
Add dilutive impact of employee equity plans	1,193		—		—		—
Weighted-average shares used in computing diluted net income (loss) per share	165,386		160,663		163,487		160,257

Weighted Average Shares Excluded From Computation of the Diluted Net Income (Loss)


	Three Months Ended June 30,		Six Months Ended June 30,
	2023	2022	2023	2022

	(in thousands)






Total anti-dilutive shares	7,429	12,954	14,089	11,074

Commitment and Contingencies (Tables)

6 Months Ended

Jun. 30, 2023

Commitments and Contingencies Disclosure [Abstract]

Schedule of Loss Contingencies Pre-Tax Expenses (Proceeds)

We recorded pre-tax expenses (proceeds) related to the Cyber Incident as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022

	(in thousands)
Cost of recurring revenue	$	—	$	7	$	—	$	163
Sales and marketing	—		62		—		130
Research and development	—		—		—		2
General and administrative	5,580		3,679		7,608		9,169
Total gross expenses related to the Cyber Incident	5,580		3,748		7,608		9,464
Less: proceeds received or expected to be received under our insurance coverage	(5,000)		—		(14,798)		—
Total net expenses (proceeds) related to the Cyber Incident	$	580	$	3,748	$	(7,190)	$	9,464

Summary of Significant Accounting Policies - Narrative (Details) - USD ($) $ in Thousands	3 Months Ended			6 Months Ended
	Jun. 30, 2023	Sep. 30, 2022	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Accounting Policies [Abstract]
Goodwill impairment	$ 0	$ 278,700	$ 612,395	$ 0	$ 612,395
Lease impairment charges				$ 11,689	$ 0

Summary of Significant Accounting Policies - Changes in Accumulated Other Comprehensive Income (Loss) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Balance at beginning of period	$ 1,385,800	$ 2,277,378	$ 1,369,653	$ 2,287,896
Other comprehensive gain before reclassification			7,553
Amount reclassified from accumulated other comprehensive income (loss)			0
Other comprehensive income (loss)	(2,913)	(53,822)	7,553	(70,717)
Balance at end of period	1,398,656	1,617,807	1,398,656	1,617,807
Accumulated Other Comprehensive Income (Loss)
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Balance at beginning of period	(37,648)	(15,589)	(48,114)	1,306
Balance at end of period	(40,561)	$ (69,411)	(40,561)	$ (69,411)
Foreign Currency Translation Adjustments
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Balance at beginning of period			(47,996)
Other comprehensive gain before reclassification			7,433
Amount reclassified from accumulated other comprehensive income (loss)			0
Other comprehensive income (loss)			7,433
Balance at end of period	(40,563)		(40,563)
Unrealized Gain (Loss) on Investments, Net of Tax
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Balance at beginning of period			(118)
Other comprehensive gain before reclassification			120
Amount reclassified from accumulated other comprehensive income (loss)			0
Other comprehensive income (loss)			120
Balance at end of period	$ 2		$ 2

Summary of Significant Accounting Policies - Changes in Deferred Revenue (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2023 USD ($)
Movement in Deferred Revenue [Roll Forward]
Balance at December 31, 2022	$ 376,486
Deferred revenue recognized	(263,271)
Additional amounts deferred	261,112
Balance at June 30, 2023	$ 374,327

Summary of Significant Accounting Policies - Expected Recognition of Deferred Revenue (Details) $ in Thousands	Jun. 30, 2023 USD ($)
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Expected recognition of deferred revenue	$ 374,327
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-07-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Expected recognition of deferred revenue	$ 332,309
Remaining revenue performance obligation, expected timing of satisfaction, period	12 months
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2024-07-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Expected recognition of deferred revenue	$ 40,932
Remaining revenue performance obligation, expected timing of satisfaction, period	2 years
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2026-07-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Expected recognition of deferred revenue	$ 1,086
Remaining revenue performance obligation, expected timing of satisfaction, period

Summary of Significant Accounting Policies - Change in Contract Acquisition Costs (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2023	Dec. 31, 2022
Deferred Commissions, Roll Forward [Roll Forward]
Balance at December 31, 2022	$ 22,540
Commissions capitalized	4,832
Amortization recognized	(4,065)
Balance at June 30, 2023	23,307
Current	7,557	$ 6,936
Non-current	15,750	15,604
Total deferred commissions	$ 23,307	$ 22,540

Summary of Significant Accounting Policies - Cost of Revenue (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Product Information [Line Items]
Total amortization of acquired technologies	$ 3,425	$ 3,648	$ 6,861	$ 20,875
License
Product Information [Line Items]
Total amortization of acquired technologies	924	921	1,846	15,404
Subscription
Product Information [Line Items]
Total amortization of acquired technologies	$ 2,501	$ 2,727	$ 5,015	$ 5,471

Investments - Available-For-Sale Securities (Details) - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
Short-term investments:
Cost	$ 993	$ 27,263
Gross Unrealized Gains	2	0
Gross Unrealized Losses	0	(149)
Fair Value	995	27,114
U.S. government agency bonds
Short-term investments:
Cost	993
Gross Unrealized Gains	2
Gross Unrealized Losses	0
Fair Value	$ 995
U.S. Treasury securities
Short-term investments:
Cost		6,013
Gross Unrealized Gains		0
Gross Unrealized Losses		(43)
Fair Value		5,970
Corporate bonds
Short-term investments:
Cost		19,887
Gross Unrealized Gains		0
Gross Unrealized Losses		(105)
Fair Value		19,782
Commercial paper
Short-term investments:
Cost		798
Gross Unrealized Gains		0
Gross Unrealized Losses		0
Fair Value		798
Asset-backed securities
Short-term investments:
Cost		565
Gross Unrealized Gains		0
Gross Unrealized Losses		(1)
Fair Value		$ 564

Investments - Summary of Fair Value Of Available-For-Sale Securities With Unrealized Losses (Details) $ in Thousands	Dec. 31, 2022 USD ($)
Debt Securities, Available-for-Sale [Line Items]
Available-for-sale securities less than 12 months, Fair Value	$ 26,316
Available-for-sale securities less than 12 months, Gross Unrealized Losses	(149)
Available-for-sale securities, 12 Months or Greater, Fair Value	0
Available-for-sale securities, 12 Months or Longer, Gross Unrealized Losses	0
Available-for-sale securities, Total Fair Value	26,316
Available-for-sale securities Total Gross Unrealized Loss	(149)
U.S. Treasury securities
Debt Securities, Available-for-Sale [Line Items]
Available-for-sale securities less than 12 months, Fair Value	5,970
Available-for-sale securities less than 12 months, Gross Unrealized Losses	(43)
Available-for-sale securities, 12 Months or Greater, Fair Value	0
Available-for-sale securities, 12 Months or Longer, Gross Unrealized Losses	0
Available-for-sale securities, Total Fair Value	5,970
Available-for-sale securities Total Gross Unrealized Loss	(43)
Corporate bonds
Debt Securities, Available-for-Sale [Line Items]
Available-for-sale securities less than 12 months, Fair Value	19,782
Available-for-sale securities less than 12 months, Gross Unrealized Losses	(105)
Available-for-sale securities, 12 Months or Greater, Fair Value	0
Available-for-sale securities, 12 Months or Longer, Gross Unrealized Losses	0
Available-for-sale securities, Total Fair Value	19,782
Available-for-sale securities Total Gross Unrealized Loss	(105)
Asset-backed securities
Debt Securities, Available-for-Sale [Line Items]
Available-for-sale securities less than 12 months, Fair Value	564
Available-for-sale securities less than 12 months, Gross Unrealized Losses	(1)
Available-for-sale securities, 12 Months or Greater, Fair Value	0
Available-for-sale securities, 12 Months or Longer, Gross Unrealized Losses	0
Available-for-sale securities, Total Fair Value	564
Available-for-sale securities Total Gross Unrealized Loss	$ (1)

Investments - Maturity Dates Of Available-For-Sale Securities (Details) $ in Thousands	Jun. 30, 2023 USD ($)
Cost
Due in one year or less	$ 993
Fair Value
Due in one year or less	$ 995

Goodwill - Schedule of Goodwill (Details) $ in Thousands	6 Months Ended
Goodwill - Schedule of Goodwill (Details) $ in Thousands	Jun. 30, 2023 USD ($)
Goodwill [Roll Forward]
Balance at beginning of period	$ 2,380,059
Foreign currency translation	6,837
Balance at end of period	$ 2,386,896

Goodwill - Narrative (Details) $ in Millions	Jun. 30, 2023 USD ($)
Goodwill and Intangible Assets Disclosure [Abstract]
Accumulated goodwill impairment	$ 894.6

Fair Value Measurements - Schedule of Fair Value of Financial Assets Measured on a Recurring Basis (Details) - Recurring - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents:	$ 136,377	$ 48,833
Short-term investments:	995	27,114
Total assets	137,372	75,947
U.S. Treasury securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short-term investments:		5,970
U.S. government agency bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short-term investments:	995
Corporate bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short-term investments:		19,782
Commercial paper
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short-term investments:		798
Asset-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short-term investments:		564
Quoted Prices in Active Markets for Identical Assets (Level 1)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents:	115,930	48,833
Short-term investments:	0	0
Total assets	115,930	48,833
Quoted Prices in Active Markets for Identical Assets (Level 1) \| U.S. Treasury securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short-term investments:		0
Quoted Prices in Active Markets for Identical Assets (Level 1) \| U.S. government agency bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short-term investments:	0
Quoted Prices in Active Markets for Identical Assets (Level 1) \| Corporate bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short-term investments:		0
Quoted Prices in Active Markets for Identical Assets (Level 1) \| Commercial paper
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short-term investments:		0
Quoted Prices in Active Markets for Identical Assets (Level 1) \| Asset-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short-term investments:		0
Significant Other Observable Inputs (Level 2)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents:	20,447	0
Short-term investments:	995	27,114
Total assets	21,442	27,114
Significant Other Observable Inputs (Level 2) \| U.S. Treasury securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short-term investments:		5,970
Significant Other Observable Inputs (Level 2) \| U.S. government agency bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short-term investments:	995
Significant Other Observable Inputs (Level 2) \| Corporate bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short-term investments:		19,782
Significant Other Observable Inputs (Level 2) \| Commercial paper
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short-term investments:		798
Significant Other Observable Inputs (Level 2) \| Asset-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short-term investments:		564
Significant Unobservable Inputs (Level 3)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents:	0	0
Short-term investments:	0	0
Total assets	0	0
Significant Unobservable Inputs (Level 3) \| U.S. Treasury securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short-term investments:		0
Significant Unobservable Inputs (Level 3) \| U.S. government agency bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short-term investments:	0
Significant Unobservable Inputs (Level 3) \| Corporate bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short-term investments:		0
Significant Unobservable Inputs (Level 3) \| Commercial paper
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short-term investments:		0
Significant Unobservable Inputs (Level 3) \| Asset-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short-term investments:		0
Money market funds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents:	115,930	48,833
Money market funds \| Quoted Prices in Active Markets for Identical Assets (Level 1)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents:	115,930	48,833
Money market funds \| Significant Other Observable Inputs (Level 2)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents:	0	0
Money market funds \| Significant Unobservable Inputs (Level 3)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents:	0	$ 0
U.S. Treasury securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents:	4,714
U.S. Treasury securities \| Quoted Prices in Active Markets for Identical Assets (Level 1)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents:	0
U.S. Treasury securities \| Significant Other Observable Inputs (Level 2)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents:	4,714
U.S. Treasury securities \| Significant Unobservable Inputs (Level 3)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents:	0
U.S. government agency bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents:	1,994
U.S. government agency bonds \| Quoted Prices in Active Markets for Identical Assets (Level 1)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents:	0
U.S. government agency bonds \| Significant Other Observable Inputs (Level 2)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents:	1,994
U.S. government agency bonds \| Significant Unobservable Inputs (Level 3)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents:	0
Commercial paper
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents:	13,739
Commercial paper \| Quoted Prices in Active Markets for Identical Assets (Level 1)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents:	0
Commercial paper \| Significant Other Observable Inputs (Level 2)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents:	13,739
Commercial paper \| Significant Unobservable Inputs (Level 3)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents:	$ 0

Debt - Summary of Debt (Details) - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
Amount
Total principal amount	$ 1,241,888	$ 1,245,000
Unamortized discount and debt issuance costs	(37,622)	(42,897)
Total debt	1,204,266	1,202,103
Less: Current portion of long-term debt	(12,450)	(9,338)
Total long-term debt	1,191,816	1,192,765
Secured Debt \| First Lien Term Loan (as amended) due Feb 2027
Amount
Total principal amount	$ 1,241,888	$ 1,245,000
Effective Rate	8.85%	8.32%
Revolving credit facility \| Line of Credit
Amount
Total principal amount	$ 0	$ 0
Effective Rate	0.00%	0.00%

Debt - Narrative (Details) - Credit Suisse	6 Months Ended
Debt - Narrative (Details) - Credit Suisse	Jun. 30, 2023 USD ($)
Secured Overnight Financing Rate (SOFR) Overnight Index Swap Rate
Debt Instrument [Line Items]
Basis spread on variable rate	1.00%
Federal Funds Effective Rate
Debt Instrument [Line Items]
Basis spread on variable rate	0.50%
Line of Credit \| Revolving credit facility
Debt Instrument [Line Items]
Maximum borrowing capacity	$ 130,000,000
Commitment fee percentage	0.375%
Covenant, borrowing percentage of commitments, maximum	35.00%
Line of Credit \| Revolving credit facility \| Secured Overnight Financing Rate (SOFR) Overnight Index Swap Rate
Debt Instrument [Line Items]
Basis spread on variable rate	2.25%
Covenant, floor interest rate	0.00%
Line of Credit \| Revolving credit facility \| Base Rate
Debt Instrument [Line Items]
Basis spread on variable rate	1.25%
Line of Credit \| Letter of Credit
Debt Instrument [Line Items]
Maximum borrowing capacity	$ 35,000,000
First Lien Term Loan (as amended) due Feb 2027 \| Secured Debt
Debt Instrument [Line Items]
Face amount of debt	$ 1,245,000,000
Quarterly periodic payment, as a percentage of original principal	0.25%
Covenant, leverage ratio, maximum	7.40
First Lien Term Loan (as amended) due Feb 2027 \| Secured Debt \| Secured Overnight Financing Rate (SOFR) Overnight Index Swap Rate
Debt Instrument [Line Items]
Basis spread on variable rate	3.75%
Covenant, floor interest rate	0.00%
First Lien Term Loan (as amended) due Feb 2027 \| Secured Debt \| Base Rate
Debt Instrument [Line Items]
Basis spread on variable rate	2.75%
Multi-Currency Tranche \| Line of Credit \| Revolving credit facility
Debt Instrument [Line Items]
Maximum borrowing capacity	$ 112,500,000
Single Currency Tranche \| Line of Credit \| Revolving credit facility \| US Dollars
Debt Instrument [Line Items]
Maximum borrowing capacity	17,500,000
First Lien Term Loan Mature 91 Days Prior to Maturity Date \| Secured Debt
Debt Instrument [Line Items]
Maturity date covenant, amount outstanding threshold	$ 150,000,000

Income (Loss) Per Share - Reconciliation of Shares in the Calculation of Basic and Diluted Loss Per Share (Details) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Numerator:
Net income (loss)	$ 260	$ (622,124)	$ (5,361)	$ (626,783)
Earnings allocated to unvested restricted stock	0	0	0	0
Net income (loss) available to common stockholders	$ 260	$ (622,124)	$ (5,361)	$ (626,783)
Denominator:
Weighted-average shares used in computing basic net income (loss) per share (in shares)	164,193	160,663	163,487	160,257
Net income (loss) available to common stockholders	$ 260	$ (622,124)	$ (5,361)	$ (626,783)
Add dilutive impact of employee equity plans (in shares)	1,193	0	0	0
Weighted-average shares used in computing diluted net income (loss) per share (in shares)	165,386	160,663	163,487	160,257

Income (Loss) Per Share - Weighted Average Outstanding Shares of Common Stock Equivalents Excluded (Details) - shares shares in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Earnings Per Share [Abstract]
Total anti-dilutive shares (in shares)	7,429	12,954	14,089	11,074

Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
Income Taxes (Details) - USD ($) $ in Thousands	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Income Tax Disclosure [Abstract]
Income tax expense	$ 2,955	$ 7,871	$ 15,739	$ 7,715
Effective income tax rate	91.90%	(1.30%)	151.70%	(1.20%)
Unrecognized tax benefits, income tax penalties and interest accrued	$ 4,200		$ 4,200

Commitments and Contingencies - Loss Contingencies Pre-Tax Expenses (Proceeds) (Details) - Cyber Incident - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Loss Contingencies [Line Items]
Total gross expenses related to the Cyber Incident	$ 5,580	$ 3,748	$ 7,608	$ 9,464
Less: proceeds received or expected to be received under our insurance coverage	(5,000)	0	(14,798)	0
Total net expenses (proceeds) related to the Cyber Incident	580	3,748	(7,190)	9,464
Cost of recurring revenue
Loss Contingencies [Line Items]
Total gross expenses related to the Cyber Incident	0	7	0	163
Sales and marketing
Loss Contingencies [Line Items]
Total gross expenses related to the Cyber Incident	0	62	0	130
Research and development
Loss Contingencies [Line Items]
Total gross expenses related to the Cyber Incident	0	0	0	2
General and administrative
Loss Contingencies [Line Items]
Total gross expenses related to the Cyber Incident	$ 5,580	$ 3,679	$ 7,608	$ 9,169

Commitments and Contingencies - Narrative (Details) - Cyber Incident $ in Millions		6 Months Ended
	Mar. 02, 2023 USD ($)	Jun. 30, 2023 USD ($)	Oct. 28, 2022 shareholderDerivativeAction
Loss Contingencies [Line Items]
Loss contingency, damages paid, value	$ 26
Shareholder derivative actions filed \| shareholderDerivativeAction			2
Cybersecurity insurance coverage amount		$ 15
Loss contingency, receivable, proceeds		15
Director and Officer liability insurance		50
Loss contingency, receivable		$ 45
TEXAS
Loss Contingencies [Line Items]
Shareholder derivative actions filed \| shareholderDerivativeAction			1
DELAWARE
Loss Contingencies [Line Items]
Shareholder derivative actions filed \| shareholderDerivativeAction			1

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