0001739942False00017399422023-11-022023-11-02

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
 
FORM 8-K
 CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
November 2, 2023
Date of Report (Date of earliest event reported)
 
SOLARWINDS CORPORATION
(Exact name of registrant as specified in its charter)
   
Delaware001-3871181-0753267
(State or other jurisdiction
of incorporation)		(Commission
File Number)		(IRS Employer
Identification No.)
7171 Southwest Parkway
Building 400
Austin, Texas 78735
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (512) 682-9300

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
 
☐Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading SymbolName of Each Exchange on Which Registered
Common Stock, $0.001 par valueSWINew York Stock Exchange
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
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. ☐ 


Item 2.02Results of Operations and Financial Condition.
On November 2, 2023, SolarWinds Corporation (“SolarWinds” or the “Company”) issued a press release regarding, and will hold a conference call announcing, its financial results for the fiscal quarter ended September 30, 2023. A copy of SolarWinds' press release is attached hereto as Exhibit 99.1.
The information contained in this report shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section. The information in this report shall not be incorporated by reference in any filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
SolarWinds refers to non-GAAP financial information in both the press release and the conference call. A reconciliation of these non-GAAP financial measures to the comparable GAAP financial measures is contained in the attached press release.

Item 9.01Financial Statements and Exhibits.
(d)Exhibits.


Exhibit
Number		  Description
 Press release issued by SolarWinds Corporation dated November 2, 2023.
104Cover Page Interactive Data File (formatted as Inline XBRL)



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 hereunto duly authorized.
SOLARWINDS CORPORATION
Dated:November 2, 2023By:/s/ J. Barton Kalsu
J. Barton Kalsu
Chief Financial Officer


Exhibit 99.1
sw_logoxa.jpg
SolarWinds Announces Third Quarter 2023 Results
AUSTIN, Texas - November 2, 2023 - SolarWinds Corporation (NYSE:SWI), a leading provider of simple, powerful, secure observability and IT management software, today reported results for its third quarter ended September 30, 2023.
Third Quarter Financial Highlights
•Total revenue for the third quarter of $189.6 million, representing 6% year-over-year growth, and total recurring revenue representing 92% of total revenue.
•Net loss for the third quarter of $3.2 million.
•Adjusted EBITDA for the third quarter of $85.1 million, representing a margin of 45% of total revenue and 21% year-over-year growth.
Please see the tables below for a reconciliation of our GAAP to non-GAAP results.
“We again delivered total revenue and adjusted EBITDA that exceeded the high end of our guidance range, highlighted by 6% year-over-year revenue growth and 21% year-over-year adjusted EBITDA growth,” said Sudhakar Ramakrishna, President and Chief Executive Officer, SolarWinds. “Our subscription-first strategy continues to yield strong results while our product teams continue to deliver multi-cloud solutions on the SolarWinds Platform designed to improve customer productivity and reduce their costs. I’m pleased with the team’s progress and strong execution across our business.”

Recent Business Highlights

•SolarWinds announced on July 18 its Next-Generation Build System meets or exceeds NIST Secure Software Development Framework guidance for secure software development as directed by Executive Order 14028.

•In August, SolarWinds unveiled enhancements to its Transform Partner Program, announcing new tier qualifications and improved benefits to accelerate growth and drive revenue for channel partners.

•Ahead of its eighth-annual IT Pro Day celebration on September 19, SolarWinds released its annual survey report, IT Trends Report 2023: Lessons From Observability Leaders, finding that enterprises leveraging observability increase operational efficiency, grow revenue, advance automation, and empower innovation, yet broad adoption remains in early stages.

•In September, the company continued its ongoing business evolution as it launched SolarWinds Enterprise Service Management and upgraded SQL Sentry to accelerate customers’ digital transformations and innovation.

•The company received several industry awards and recognitions in the third quarter, including The Cloud Security Awards 2023 Best Security Infrastructure in Enterprise Cloud Security award for the Next-Generation Build System, The Stevie Awards 2023 International Business Awards Gold Stevie® award for best Service Management Solution, 2023 SaaS Awards Best SaaS Product for IT Management for SolarWinds Observability, 2023 Globee® Awards for Information Technology Most Innovative Company of the Year – Cloud/SaaS for SolarWinds Observability, and was named a finalist in CRN’s 2023 Tech Innovators in the Application Development & DevOps category.
Balance Sheet
At September 30, 2023, total cash and cash equivalents and short-term investments were $235.2 million, and total debt was $1.2 billion.
The financial results included in this press release are preliminary and pending final review by the company and its external auditors. Financial results will not be final until SolarWinds files its quarterly report on Form 10-Q for the period. Information about SolarWinds’ use of non-GAAP financial measures is provided below under “Non-GAAP Financial Measures.”


Financial Outlook
As of November 2, 2023, SolarWinds is providing its financial outlook for the fourth quarter and its updated financial outlook for the full year of 2023. The financial information below represents forward-looking non-GAAP financial information, including an estimate of adjusted EBITDA and non-GAAP diluted earnings per share. These non-GAAP financial measures exclude, among other items mentioned below, stock-based compensation expense and related employer-paid payroll taxes, amortization, certain expenses related to the cyberattack that occurred in December 2020 (the “Cyber Incident”), restructuring costs, and other costs related to non-recurring items. We have not reconciled our estimates of these non-GAAP financial measures to their most directly comparable GAAP measure as a result of uncertainty regarding, and the potential variability of, these excluded items in future periods. Accordingly, reconciliation is not available without unreasonable effort, although it is important to note that these excluded items could be material to our results computed in accordance with GAAP in future periods. Our reported results provide reconciliations of non-GAAP financial measures to their nearest GAAP equivalents.
Financial Outlook for Fourth Quarter of 2023
SolarWinds’ management currently expects to achieve the following results for the fourth quarter of 2023:
•Total revenue in the range of $188.5 to $192.5 million, representing growth of approximately 2% as compared to the fourth quarter of 2022 total revenue at the midpoint of the range.
•Adjusted EBITDA of approximately $80.5 to $82.5 million, representing growth of approximately 9% over the fourth quarter of 2022 adjusted EBITDA at the midpoint of the range.
•Non-GAAP diluted earnings per share of $0.20 to $0.22.
•Weighted average outstanding diluted shares of approximately 167.4 million.
Financial Outlook for Full Year of 2023
SolarWinds’ management currently expects to achieve the following results for the full year of 2023:
•Total revenue in the range of $749 to $753 million, representing growth of approximately 4% over the full year of 2022 total revenue at the midpoint of the range.
•Adjusted EBITDA of approximately $322 to $324 million, representing growth of approximately 15% over the full year of 2022 adjusted EBITDA at the midpoint of the range.
•Non-GAAP diluted earnings per share of $0.83 to $0.85.
•Weighted average outstanding diluted shares of approximately 166.4 million.
The conference call will provide additional details on the company's outlook.
Conference Call and Webcast
In conjunction with this announcement, SolarWinds will host a conference call today to discuss its financial results, business and business outlook at 7:30 a.m. CT (8:30 a.m. ET/5:30 a.m. PT). A live webcast of the call and materials presented during the call will be available on the SolarWinds Investor Relations website at http://investors.solarwinds.com. A live dial-in will be available domestically at (888) 510-2008 and internationally at +1 (646) 960-0306. To access the live call, please dial in 5-10 minutes before the scheduled start time and enter the conference passcode 2975715. A replay of the webcast will be available on a temporary basis shortly after the event on the SolarWinds Investor Relations website.
Forward-Looking Statements
This press release contains “forward-looking” statements, which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including statements regarding our financial outlook for the fourth quarter and the full year 2023. These forward-looking statements are based on management's beliefs and assumptions and on information currently available to management. Forward-looking statements include all statements that are not historical facts and may be identified by terms such as “aim,” “anticipate,” “believe,” “can,” “could,” “seek,” “should,” “feel,” “expect,” “will,” “would,” “plan,” “project,” “intend,” “estimate,” “continue,” “may,” or similar expressions and the negatives of those terms. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, the following: (a) 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, SolarWinds’ response thereto or litigation and investigations related to the Cyber Incident 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, significant costs for remediation and the incurrence of other liabilities and risks related to the impact of any such costs and liabilities resulting from the exhaustion of our insurance coverage related to the Cyber Incident, (2) litigation and investigation risks related to the Cyber Incident, including as a result of the civil complaint recently filed by the Securities and Exchange Commission against us and our Chief Information Security Officer relating to the previously disclosed Wells Notices, including that we may incur significant costs in defending ourselves and may be unsuccessful in doing so, resulting in exposure to potential penalties, judgements, fines, settlement-related costs and penalties and other costs and liabilities related thereto, and (3) 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 the Cyber Incident; (b) other risks related to cybersecurity, 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, our customers 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; (c) 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; (d) risks relating to increased investments in, and the timing and success of, our ongoing transformation from monitoring to observability; (e) risks related to any shifts in our revenue mix and the timing of how we recognize revenue as we transition to subscription; (f) 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, (g) potential foreign exchange gains and losses related to expenses and sales denominated in currencies other than the functional currency of an associated entity; (h) any of the following factors either generally or as a result of the impacts of global macroeconomic conditions, including the wars in Israel and 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 or other public health crises 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: (1) reductions in information technology spending or delays in purchasing decisions by our customers, their end-customers and our prospective customers, (2) 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, (3) any decline in our renewal or net retention rates or any delay or loss of U.S. government sales, (4) 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, (5) the timing and adoption of new products, product upgrades or pricing model changes by us or our competitors, (6) changes in interest rates, (7) risks associated with our international operations and any international expansion efforts and (8) ongoing sanctions and export controls; (i) 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; (j) our ability to compete effectively in the markets we serve and the risks of increased competition as we enter new markets; (k) our ability to attract, retain and motivate employees; (l) any violation of legal and regulatory requirements or any misconduct by our employees or partners; (m) 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 that potential indemnification liabilities incurred in connection with the separation could materially affect our business and financial results; (n) our inability to successfully identify, complete, and integrate acquisitions and manage our growth effectively; (o) risks associated with our status as a controlled company; and (p) 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 filed on February 22, 2023, our Quarterly Report on Form 10-Q for the quarter ended March 31, 2023 filed on May 4, 2023, our Quarterly Report on Form 10-Q for the quarter ended June 30, 2023 filed on August 9, 2023 and our Quarterly Report on Form 10-Q for the quarter ended September 30, 2023 that SolarWinds anticipates filing on or before November 9, 2023. All information provided in this release is as of the date hereof, and SolarWinds undertakes no duty to update this information except as required by law.


Non-GAAP Financial Measures
In addition to 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.
SolarWinds also believes that investors and security analysts use these non-GAAP financial measures to (a) compare and evaluate its performance from period to period and (b) compare its performance to those of its competitors. These non-GAAP measures exclude certain items that can vary substantially from company to company depending upon their financing and accounting methods, the book value of their assets, their capital structures, and the method by which their assets were acquired.
There are limitations associated with the use of these non-GAAP financial measures. These non-GAAP financial measures are not prepared in accordance with GAAP, do not reflect a comprehensive system of accounting and may not be completely comparable to similarly titled measures of other companies due to potential differences in the exact calculation method between companies. Certain items that are excluded from these non-GAAP financial measures can have a material impact on operating and net income (loss).
As a result, these non-GAAP financial measures have limitations and should not be considered in isolation from, or as a substitute for, the most comparable GAAP measures. SolarWinds' management and board of directors compensate for these limitations by using these non-GAAP financial measures as supplements to GAAP financial measures and by reviewing the reconciliations of the non-GAAP financial measures to their most comparable GAAP financial measure. Set forth in the tables below are the corresponding GAAP financial measures for each non-GAAP financial measure presented. Investors are encouraged to review the reconciliations of these non-GAAP financial measures to their most comparable GAAP financial measures that are set forth in the tables below.

Non-GAAP Revenue on a Constant Currency Basis. We provide non-GAAP revenue on a constant currency basis to provide a framework for assessing our performance, excluding the effect of foreign currency rate fluctuations. To present this information, current period results for entities reporting in currencies other than U.S. Dollars are converted into U.S. Dollars at the average exchange rates in effect during the corresponding prior period presented. We believe that providing non-GAAP revenue on a constant currency basis facilitates the comparison of revenue to prior periods.
Non-GAAP Cost of Revenue and Non-GAAP Operating Income. We provide non-GAAP cost of revenue and non-GAAP operating income and related non-GAAP margins 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 intangible 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 non-recurring costs, including internal investigation costs. 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 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. 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, consulting services being provided to customers at no charge, and estimated loss contingencies. 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 that 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 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 February 2016 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.
Non-GAAP Net Income (Loss) and Non-GAAP Net Income (Loss) Per Diluted Share. We believe that the use of non-GAAP net income (loss) and non-GAAP net income (loss) per diluted share is helpful to our investors to clarify and enhance their understanding of past performance and future prospects. Non-GAAP net income (loss) is calculated as net income (loss) excluding the adjustments to non-GAAP cost of revenue and non-GAAP operating income, certain other non-operating gains and losses and the income tax effect of the non-GAAP exclusions. We define non-GAAP net income (loss) per diluted share as non-GAAP net income (loss) divided by the weighted average outstanding diluted common shares.
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, 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.
Unlevered Free Cash Flow. Unlevered free cash flow is a measure of our liquidity used by management to evaluate cash flow from operations after the deduction of capital expenditures and prior to the impact of our capital structure, acquisition and other costs, restructuring costs, Cyber Incident costs, net, employer-paid payroll taxes on stock awards and other one-time items, that can be used by us for strategic opportunities and strengthening our balance sheet. However, given our debt obligations, unlevered free cash flow does not represent residual cash flow available for discretionary expenses.
#SWIfinancials
About SolarWinds
SolarWinds (NYSE:SWI) is a leading provider of simple, powerful, secure observability and IT management software built to enable customers to accelerate their digital transformation. Our solutions provide organizations worldwide—regardless of type, size, or complexity—with a comprehensive and unified view of today’s modern, distributed, and hybrid network environments. We continuously engage IT service and operations professionals, DevOps and SecOps professionals, and Database Administrators (DBAs) to understand the challenges they face in maintaining high-performing and highly available IT infrastructures, applications, and environments. The insights we gain from them, in places like our THWACK® community, allow us to address customers’ needs now, and in the future. Our focus on the user and our commitment to excellence in end-to-end hybrid IT management have established SolarWinds as a worldwide leader in solutions for observability, IT service management, application performance, and database management. Learn more today at www.solarwinds.com.
The SolarWinds, SolarWinds & Design, Orion, and THWACK trademarks are the exclusive property of SolarWinds Worldwide, LLC or its affiliates, are registered with the U.S. Patent and Trademark Office, and may be registered or pending registration in other countries. All other SolarWinds trademarks, service marks, and logos may be common law marks or are registered or pending registration. All other trademarks mentioned herein are used for identification purposes only and are trademarks of (and may be registered trademarks of) their respective companies.
© 2023 SolarWinds Worldwide, LLC. All rights reserved.
CONTACTS:
Media:Investors:
Jenne Barbour
Phone: 512.498.6804
Media: pr@solarwinds.com		Tim Karaca
Phone: 512.498.6739
Investors: ir@solarwinds.com



SolarWinds Corporation
Condensed Consolidated Balance Sheets
(In thousands, except share and per share information)
(Unaudited)
September 30,December 31,
20232022
Assets
Current assets:
Cash and cash equivalents$232,231 $121,738 
Short-term investments2,979 27,114 
Accounts receivable, net of allowances of $1,210 and $1,173 as of September 30, 2023 and December 31, 2022, respectively
91,399 100,204 
Income tax receivable1,133 987 
Prepaid and other current assets33,354 57,350 
Total current assets361,096 307,393 
Property and equipment, net20,387 26,634 
Operating lease assets45,015 61,418 
Deferred taxes133,072 134,922 
Goodwill2,371,756 2,380,059 
Intangible assets, net196,517 243,980 
Other assets, net49,829 45,600 
Total assets$3,177,672 $3,200,006 
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable$8,996 $14,045 
Accrued liabilities and other45,260 68,284 
Current operating lease liabilities14,941 15,005 
Accrued interest payable627 579 
Income taxes payable25,173 11,841 
Current portion of deferred revenue328,071 337,541 
Current debt obligation12,450 9,338 
Total current liabilities435,518 456,633 
Long-term liabilities:
Deferred revenue, net of current portion41,583 38,945 
Non-current deferred taxes7,017 8,582 
Non-current operating lease liabilities52,233 59,235 
Other long-term liabilities54,995 74,193 
Long-term debt, net of current portion1,191,378 1,192,765 
Total liabilities1,782,724 1,830,353 
Commitments and contingencies
Stockholders’ equity:
Common stock, $0.001 par value: 1,000,000,000 shares authorized and 165,818,155 and 161,928,532 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively
166 162 
Preferred stock, $0.001 par value: 50,000,000 shares authorized and no shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively— — 
Additional paid-in capital2,672,036 2,627,370 
Accumulated other comprehensive loss(58,956)(48,114)
Accumulated deficit(1,218,298)(1,209,765)
Total stockholders’ equity1,394,948 1,369,653 
Total liabilities and stockholders’ equity$3,177,672 $3,200,006 


SolarWinds Corporation
Condensed Consolidated Statements of Operations
(In thousands, except per share information)
(Unaudited)
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Revenue:
Subscription$58,764 $42,248 $166,510 $117,975 
Maintenance116,415 114,381 346,949 343,848 
Total recurring revenue175,179 156,629 513,459 461,823 
License14,412 22,767 47,142 70,475 
Total revenue189,591 179,396 560,601 532,298 
Cost of revenue:
Cost of recurring revenue17,957 16,563 54,884 49,854 
Amortization of acquired technologies3,412 3,628 10,273 24,503 
Total cost of revenue21,369 20,191 65,157 74,357 
Gross profit168,222 159,205 495,444 457,941 
Operating expenses:
Sales and marketing59,675 64,813 185,429 190,472 
Research and development27,308 22,562 75,180 68,092 
General and administrative 31,101 42,558 91,120 116,505 
Amortization of acquired intangibles11,613 13,045 36,712 39,387 
Goodwill impairment— 278,706 — 891,101 
Total operating expenses129,697 421,684 388,441 1,305,557 
Operating income (loss)38,525 (262,479)107,003 (847,616)
Other income (expense):
Interest expense, net(29,314)(23,181)(87,338)(57,669)
Other expense, net
(121)(2,418)(197)(1,861)
Total other expense(29,435)(25,599)(87,535)(59,530)
Income (loss) before income taxes9,090 (288,078)19,468 (907,146)
Income tax expense12,262 4,141 28,001 11,856 
Net loss$(3,172)$(292,219)$(8,533)$(919,002)
Net loss available to common stockholders$(3,172)$(292,219)$(8,533)$(919,002)
Net loss available to common stockholders per share:
Basic loss per share$(0.02)$(1.81)$(0.05)$(5.72)
Diluted loss per share$(0.02)$(1.81)$(0.05)$(5.72)
Weighted-average shares used to compute net loss available to common stockholders per share:
Shares used in computation of basic loss per share165,275 161,111 164,089 160,545 
Shares used in computation of diluted loss per share165,275 161,111 164,089 160,545 





SolarWinds Corporation
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Nine Months Ended September 30,
20232022
Cash flows from operating activities
Net loss$(8,533)$(919,002)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization62,810 74,107 
Goodwill and indefinite-lived intangible asset impairment— 906,350 
Provision for losses on accounts receivable300 612 
Stock-based compensation expense55,103 50,599 
Amortization of debt issuance costs8,050 6,794 
Loss on extinguishment of debt— 1,930 
Deferred taxes(1,532)(10,019)
Gain on foreign currency exchange rates
(614)(898)
Lease impairment charges11,685 — 
Other non-cash expenses (benefit)
359 (220)
Changes in operating assets and liabilities, net of assets acquired and liabilities assumed in business combinations:
Accounts receivable7,908 (2,326)
Income taxes receivable(171)4 
Prepaid and other assets24,057 (20,319)
Accounts payable(5,020)2,385 
Accrued liabilities and other(25,125)18,964 
Accrued interest payable47 108 
Income taxes payable(6,024)(6,398)
Deferred revenue(5,211)4,017 
Other long-term liabilities100 38 
Net cash provided by operating activities118,189 106,726 
Cash flows from investing activities
Purchases of investments(3,948)(67,133)
Maturities of investments27,535 16,000 
Purchases of property and equipment(3,000)(5,570)
Purchases of intangible assets(10,404)(11,099)
Acquisitions, net of cash acquired— (6,500)
Other investing activities564 176 
Net cash provided by (used in) investing activities10,747 (74,126)
Cash flows from financing activities
Proceeds from issuance of common stock under employee stock purchase plan3,377 3,151 
Repurchase of common stock and incentive restricted stock(14,696)(9,123)
Exercise of stock options114 58 
Repayments of borrowings from credit agreement(6,226)(314,925)
Net cash used in financing activities(17,431)(320,839)
Effect of exchange rate changes on cash and cash equivalents(1,012)(2,216)
Net increase (decrease) in cash and cash equivalents110,493 (290,455)
Cash and cash equivalents
Beginning of period121,738 732,116 
End of period$232,231 $441,661 


Nine Months Ended September 30,
20232022
Supplemental disclosure of cash flow information
Cash paid for interest$83,308 $54,629 
Cash paid for income taxes$32,477 $25,177 


SolarWinds Corporation
Reconciliation of GAAP to Non-GAAP Financial Measures
(Unaudited)
 Three Months Ended September 30,Nine Months Ended September 30,
 2023202220232022
(in thousands, except margin data)
GAAP cost of revenue$21,369 $20,191 $65,157 $74,357 
Stock-based compensation expense and related employer-paid payroll taxes(519)(489)(1,589)(1,586)
Amortization of acquired technologies(3,412)(3,628)(10,273)(24,503)
Restructuring costs — — (377)— 
Cyber Incident costs— (6)— (169)
Non-GAAP cost of revenue$17,438 $16,068 $52,918 $48,099 
GAAP gross profit$168,222 $159,205 $495,444 $457,941 
Stock-based compensation expense and related employer-paid payroll taxes519 489 1,589 1,586 
Amortization of acquired technologies3,412 3,628 10,273 24,503 
Restructuring costs— — 377 — 
Cyber Incident costs— 6 — 169 
Non-GAAP gross profit$172,153 $163,328 $507,683 $484,199 
GAAP gross margin88.7 %88.7 %88.4 %86.0 %
Non-GAAP gross margin90.8 %91.0 %90.6 %91.0 %
GAAP sales and marketing expense$59,675 $64,813 $185,429 $190,472 
Stock-based compensation expense and related employer-paid payroll taxes(7,236)(5,554)(18,962)(16,787)
Acquisition and other costs(213)— (213)— 
Restructuring costs (240)— (2,857)(163)
Cyber Incident costs— — — (130)
Non-GAAP sales and marketing expense$51,986 $59,259 $163,397 $173,392 
GAAP research and development expense$27,308 $22,562 $75,180 $68,092 
Stock-based compensation expense and related employer-paid payroll taxes(3,347)(3,015)(9,772)(8,370)
Restructuring costs (1,703)— (1,945)— 
Cyber Incident costs— — — (2)
Non-GAAP research and development expense$22,258 $19,547 $63,463 $59,720 
GAAP general and administrative expense$31,101 $42,558 $91,120 $116,505 
Stock-based compensation expense and related employer-paid payroll taxes(9,785)(8,933)(26,264)(24,726)
Acquisition and other costs(1,591)(146)(1,715)(432)
Restructuring costs (77)(43)(15,035)(1,310)
Cyber Incident costs, net(2,901)(10,823)4,289 (19,992)
Goodwill and indefinite-lived intangible asset impairment— (5,884)— (15,249)
Non-GAAP general and administrative expense$16,747 $16,729 $52,395 $54,796 


 Three Months Ended September 30,Nine Months Ended September 30,
 2023202220232022
(in thousands, except margin data)
GAAP operating expenses$129,697 $421,684 $388,441 $1,305,557 
Stock-based compensation expense and related employer-paid payroll taxes(20,368)(17,502)(54,998)(49,883)
Amortization of acquired intangibles(11,613)(13,045)(36,712)(39,387)
Acquisition and other costs(1,804)(146)(1,928)(432)
Restructuring costs(2,020)(43)(19,837)(1,473)
Cyber Incident costs, net(2,901)(10,823)4,289 (20,124)
Goodwill and indefinite-lived intangible asset impairment— (284,590)— (906,350)
Non-GAAP operating expenses$90,991 $95,535 $279,255 $287,908 
GAAP operating income (loss) $38,525 $(262,479)$107,003 $(847,616)
Stock-based compensation expense and related employer-paid payroll taxes20,887 17,991 56,587 51,469 
Amortization of acquired technologies3,412 3,628 10,273 24,503 
Amortization of acquired intangibles11,613 13,045 36,712 39,387 
Acquisition and other costs1,804 146 1,928 432 
Restructuring costs2,020 43 20,214 1,473 
Cyber Incident costs, net2,901 10,829 (4,289)20,293 
Goodwill and indefinite-lived intangible asset impairment— 284,590 — 906,350 
Non-GAAP operating income$81,162 $67,793 $228,428 $196,291 
GAAP operating margin20.3 %(146.3)%19.1 %(159.2)%
Non-GAAP operating margin42.8 %37.8 %40.7 %36.9 %
GAAP net loss$(3,172)$(292,219)$(8,533)$(919,002)
Stock-based compensation expense and related employer-paid payroll taxes20,887 17,991 56,587 51,469 
Amortization of acquired technologies3,412 3,628 10,273 24,503 
Amortization of acquired intangibles11,613 13,045 36,712 39,387 
Acquisition and other costs1,804 146 1,928 432 
Restructuring costs2,020 43 20,214 1,433 
Cyber Incident costs, net2,901 10,829 (4,289)20,293 
Goodwill and indefinite-lived intangible asset impairment— 284,590 — 906,350 
Loss on extinguishment of debt— 1,930 — 1,930 
Tax benefits associated with above adjustments(1,452)(8,389)(7,930)(23,148)
Non-GAAP net income$38,013 $31,594 $104,962 $103,647 
GAAP diluted loss per share$(0.02)$(1.81)$(0.05)$(5.72)
Non-GAAP diluted earnings per share$0.23 $0.20 $0.64 $0.65 



Reconciliation of GAAP Net Income (Loss) to Adjusted EBITDA
(Unaudited)
 Three Months Ended September 30,Nine Months Ended September 30,
 2023202220232022
(in thousands, except margin data)
Net loss$(3,172)$(292,219)$(8,533)$(919,002)
Amortization and depreciation19,678 20,048 60,636 74,107 
Income tax expense12,262 4,141 28,001 11,856 
Interest expense, net29,314 23,181 87,338 57,669 
Unrealized foreign currency gains
(730)(458)(614)(898)
Acquisition and other costs1,804 146 1,928 432 
Debt-related costs(1)
98 2,025 301 2,222 
Stock-based compensation expense and related employer-paid payroll taxes20,887 17,991 56,587 51,469 
Restructuring costs(2)
2,020 43 20,214 1,433 
Cyber Incident costs, net2,901 10,829 (4,289)20,293 
Goodwill and indefinite-lived intangible asset impairment— 284,590 — 906,350 
Adjusted EBITDA$85,062 $70,317 $241,569 $205,931 
Adjusted EBITDA margin44.9 %39.2 %43.1 %38.7 %
_______
(1)Debt-related costs include a non-cash loss on extinguishment of debt of $1.9 million for both the three and nine months ended September 30, 2022.
(2)Restructuring costs for the nine months ended September 30, 2023 includes $13.9 million of non-cash lease impairment and other charges incurred in connection with the exiting of certain leased facilities.



Reconciliation of Revenue to Non-GAAP Revenue
on a Constant Currency Basis
(Unaudited)
Three Months Ended September 30,Nine Months Ended September 30,
 20232022Growth Rate20232022Growth Rate
(in thousands, except percentages)
Total revenue$189,591 $179,396 5.7 %$560,601 $532,298 5.3 %
Estimated foreign currency impact(1)
(1,827)— (1.0)(204)— — 
Non-GAAP total revenue on a constant currency basis$187,764 $179,396 4.7 %$560,397 $532,298 5.3 %
_______
(1)The estimated foreign currency impact is calculated using the average foreign currency exchange rates in the comparable prior year monthly periods and applying those rates to foreign-denominated revenue in the corresponding monthly periods in the three and nine months ended September 30, 2023.










Reconciliation of Unlevered Free Cash Flow
(Unaudited)
 Nine Months Ended September 30,
 20232022
(in thousands)
Net cash provided by operating activities$118,189 $106,726 
Capital expenditures(1)
(13,404)(16,669)
Free cash flow104,785 90,057 
Cash paid for interest and other debt related items79,542 51,060 
Cash paid for acquisition and other costs, restructuring costs, Cyber Incident costs, net, employer-paid payroll taxes on stock awards and other one-time items
8,370 26,340 
Unlevered free cash flow (excluding forfeited tax shield)192,697 167,457 
Forfeited tax shield related to interest payments(2)
(21,660)(13,384)
Unlevered free cash flow $171,037 $154,073 
_______________
(1)Includes purchases of property and equipment and purchases of intangible assets.
(2)Forfeited tax shield related to interest payments assumes a statutory rate of 26.0% for the nine months ended September 30, 2023 and 24.5% for the nine months ended September 30, 2022.


v3.23.3
COVER PAGE COVER PAGE
Nov. 02, 2023
Cover [Abstract]  
Document Type 8-K
Document Period End Date Nov. 02, 2023
Entity Registrant Name SOLARWINDS CORP
Entity Incorporation, State or Country Code DE
Entity File Number 001-38711
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
Written Communications false
Soliciting Material false
Pre-commencement Tender Offer false
Pre-commencement Issuer Tender Offer false
Title of 12(b) Security Common Stock, $0.001 par value
Trading Symbol SWI
Security Exchange Name NYSE
Entity Emerging Growth Company false
Entity Central Index Key 0001739942
Amendment Flag false
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