SolarWinds also believes that these non-GAAP financial measures are used by investors and security analysts 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 method of calculation between companies. Certain items that are excluded from these non-GAAP financial measures can have a material impact on operating and net income. In addition, free cash flow does not represent the total increase or decrease in the cash balance for the period.
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. 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.
About SolarWinds
SolarWinds (NYSE: SWI) provides powerful and affordable IT management software to customers worldwide from Fortune 500 enterprises to small businesses. In all of our market areas, our approach is consistent. We focus exclusively on IT Pros and strive to eliminate the complexity that they have been forced to accept from traditional enterprise software vendors. SolarWinds delivers on this commitment with unexpected simplicity through products that are easy to find, buy, use and maintain while providing the power to address any IT management problem on any scale. Our solutions are rooted in our deep connection to our user base, which interacts in our thwack® online community to solve problems, share technology and best practices, and directly participate in our product development process. Learn more today at http://www.solarwinds.com.
SolarWinds, SolarWinds & Design, Alert Central, DameWare and thwack are registered trademarks of SolarWinds. All other SolarWinds marks are the exclusive property of SolarWinds, may be pending registration with the U.S. Patent and Trademark Office, and may be registered or pending registration in other countries. Any other company and product names mentioned are used only for identification purposes and may be trademarks or registered trademarks of their respective companies.
Copyright © 2013 SolarWinds Worldwide, LLC. All rights reserved.
SolarWinds, Inc. Condensed Consolidated Balance Sheets (In thousands, except share and per share information) (Unaudited) March 31, December 31, 2013 2012 ----------- -----------AssetsCurrent assets: Cash and cash equivalents $ 221,325 $ 179,702 Short-term investments 44,438 49,276 Accounts receivable, net of allowances of $308 and $271 as of March 31, 2013 and December 31, 2012, respectively 34,315 32,506 Income tax receivable 1,776 142 Deferred taxes 3,036 1,712 Prepaid and other current assets 2,723 3,322 ----------- ----------- Total current assets 307,613 266,660Property and equipment, net 8,267 8,342Long-term investments 8,232 12,823Deferred taxes 1,207 338Goodwill 157,882 158,601Intangible assets and other, net 65,790 70,631 ----------- ----------- Total assets $ 548,991 $ 517,395 =========== ===========Liabilities and stockholders' equityCurrent liabilities: Accounts payable $ 3,764 $ 4,050 Accrued liabilities 8,052 14,226 Accrued earnout 123 121 Income taxes payable 1,910 4,037 Current portion of deferred revenue 103,251 97,672 ----------- ----------- Total current liabilities 117,100 120,106Long-term liabilities: Deferred revenue, net of current portion 6,028 5,084 Non-current deferred taxes 858 483 Other long-term liabilities 10,997 8,908 ----------- ----------- Total liabilities 134,983 134,581Commitments and contingenciesStockholders' equity: Common stock, $0.001 par value: 123,000,000 shares authorized and 75,121,383 and 74,633,412 shares issued and outstanding as of March 31, 2013 and December 31, 2012, respectively 75 75 Additional paid-in capital 239,739 229,277 Accumulated other comprehensive loss (3,412) (1,145) Accumulated earnings 177,606 154,607 ----------- ----------- Total stockholders' equity 414,008 382,814 ----------- ----------- Total liabilities and stockholders' equity $ 548,991 $ 517,395 =========== =========== SolarWinds, Inc. Condensed Consolidated Statements of Income (In thousands, except per share information) (Unaudited) Three months ended March 31, ------------------------ 2013 2012 ----------- -----------Revenue: License $ 30,725 $ 27,457 Maintenance and other 42,185 32,214 ----------- ----------- Total revenue 72,910 59,671 Cost of license revenue 2,761 1,880 Cost of maintenance and other revenue 2,870 2,393 ----------- -----------Gross profit 67,279 55,398Operating expenses: Sales and marketing 20,300 16,560 Research and development 7,846 6,671 General and administrative 9,821 8,449 ----------- ----------- Total operating expenses 37,967 31,680 ----------- -----------Operating income 29,312 23,718Other income (expense): Interest income 123 88 Other expense, net (151) (16) ----------- ----------- Total other income (expense) (28) 72 ----------- -----------Income before income taxes 29,284 23,790 Income tax expense 6,285 6,659 ----------- -----------Net income $ 22,999 $ 17,131 =========== ===========Net income per share: Basic earnings per share $ 0.31 $ 0.23 =========== =========== Diluted earnings per share $ 0.30 $ 0.23 =========== ===========Weighted-average shares used to compute net income per share: Shares used in computation of basic earnings per share 74,987 73,743 =========== =========== Shares used in computation of diluted earnings per share 76,672 75,440 =========== =========== SolarWinds, Inc. Reconciliation of GAAP to Non-GAAP Financial Measures (In thousands, except per share amounts and percentages) (Unaudited) Three months ended March 31, ------------------------ 2013 2012 ----------- -----------GAAP cost of revenue $ 5,631 $ 4,273 Amortization of intangible assets (1) (2,553) (1,682) Stock-based compensation expense and related employer-paid payroll taxes (2) (175) (92) ----------- -----------Non-GAAP cost of revenue $ 2,903 $ 2,499 =========== ===========GAAP gross profit $ 67,279 $ 55,398 Amortization of intangible assets (1) 2,553 1,682 Stock-based compensation expense and related employer-paid payroll taxes (2) 175 92 ----------- -----------Non-GAAP gross profit $ 70,007 $ 57,172 =========== ===========GAAP sales and marketing expense $ 20,300 $ 16,560 Stock-based compensation expense and related employer-paid payroll taxes (2) (2,870) (1,393) ----------- -----------Non-GAAP sales and marketing expense $ 17,430 $ 15,167 =========== ===========GAAP research and development expense $ 7,846 $ 6,671 Stock-based compensation expense and related employer-paid payroll taxes (2) (1,288) (801) ----------- -----------Non-GAAP research and development expense $ 6,558 $ 5,870 =========== ===========GAAP general and administrative expense $ 9,821 $ 8,449 Amortization of intangible assets (1) (1,885) (1,825) Stock-based compensation expense and related employer-paid payroll taxes (2) (2,613) (1,848) Acquisition related adjustments (3) (50) (222) ----------- -----------Non-GAAP general and administrative expense $ 5,273 $ 4,554 =========== ===========GAAP operating expenses $ 37,967 $ 31,680 Amortization of intangible assets (1) (1,885) (1,825) Stock-based compensation expense and related employer-paid payroll taxes (2) (6,771) (4,042) Acquisition related adjustments (3) (50) (222) ----------- -----------Non-GAAP operating expenses $ 29,261 $ 25,591 =========== ===========GAAP operating income $ 29,312 $ 23,718 Amortization of intangible assets (1) 4,438 3,507 Stock-based compensation expense and related employer-paid payroll taxes (2) 6,946 4,134 Acquisition related adjustments (3) 50 222 ----------- -----------Non-GAAP operating income $ 40,746 $ 31,581 =========== ===========GAAP other income (expense) $ (28) $ 72 Acquisition related adjustments (3) 2 9 ----------- -----------Non-GAAP other income (expense) $ (26) $ 81 =========== ===========GAAP income tax expense $ 6,285 $ 6,659 Income tax effect on non-GAAP exclusions (4) 3,228 2,191 ----------- -----------Non-GAAP income tax expense $ 9,513 $ 8,850 =========== ===========GAAP net income $ 22,999 $ 17,131 Amortization of intangible assets (1) 4,438 3,507 Stock-based compensation expense and related employer-paid payroll taxes (2) 6,946 4,134 Acquisition related adjustments (3) 52 231 Tax benefits associated with above adjustments (4) (3,228) (2,191) ----------- -----------Non-GAAP net income $ 31,207 $ 22,812 =========== ===========Non-GAAP diluted earnings per share (5) $ 0.41 $ 0.30 =========== ===========Weighted-average shares used in computing diluted earnings per share 76,672 75,440 =========== ===========Percentage of Revenue:GAAP gross profit 92.3% 92.8% Non-GAAP adjustments (1)(2) 3.7 3.0 ----------- -----------Non-GAAP gross profit 96.0% 95.8% =========== ===========GAAP operating margin 40.2% 39.7% Non-GAAP adjustments (1)(2)(3) 15.7 13.2 ----------- -----------Non-GAAP operating margin 55.9% 52.9% =========== ===========GAAP net income 31.5% 28.7% Non-GAAP adjustments (1)(2)(3)(4) 11.3 9.5 ----------- -----------Non-GAAP net income 42.8% 38.2% =========== ===========
