"Driven by the leverage built into our business model and a strong revenue contribution from N-able, we delivered non-GAAP operating margins and non-GAAP EPS that exceeded our outlook during the second quarter, despite a shortfall in our license revenue results. That profitability helped translate into $41.3 million of free cash flow, representing 53% of revenue," said Mike Berry, SolarWinds' Executive Vice President and Chief Financial Officer.
"In an effort to improve our level of new business growth, we plan to make significant investments across our business for the second half of 2013. In spite of these investments, we have increased our outlook for non-GAAP operating margins and non-GAAP EPS for the year," added Berry.
As of July 25, 2013, SolarWinds is providing its financial outlook for its third quarter and full year of 2013. The financial information below represents forward-looking non-GAAP financial information, including an estimate of non-GAAP operating income as a percentage of revenue, and non-GAAP diluted earnings per share, for the third quarter of 2013 and for the full year 2013. These non-GAAP financial measures exclude, among other items mentioned below, stock-based compensation expense and related employer-paid payroll taxes. SolarWinds cannot reasonably estimate the expected stock-based compensation expense and related employer-paid payroll taxes for these future periods as the amounts depend upon such factors as the future price of SolarWinds' stock for purposes of computation. In addition, costs related to non-recurring items and acquisitions are not costs that SolarWinds can estimate because they are a function of what non-recurring items and acquisitions, if any, occur and the kind of costs incurred in connection with any such non-recurring items or acquisitions.
Financial Outlook for the Third Quarter of 2013
SolarWinds' management currently expects to achieve the following results for the third quarter of 2013, which includes the impact of the N-able Technologies acquisition completed on May 28, 2013:
•Total revenue in the range of $84.7 to $87.2 million, or 18% to 22% growth over the third quarter of 2012. •Non-GAAP operating income representing 44% to 45% of revenue. •Non-GAAP diluted earnings per share of $0.35 to $0.36. •Weighted average outstanding diluted shares of approximately 77.1 million.
Financial Outlook for Full Year 2013
SolarWinds' management is revising its outlook, previously announced on May 21, 2013, and currently expects to achieve the following results for the full year 2013, which includes the impact of the N-able Technologies acquisition completed on May 28, 2013:
•Total 2013 revenue in the range of $322.7 to $327.7 million, or 20% to 22% year-over-year growth. •Non-GAAP operating income for the full year representing approximately 49% of revenue. •Non-GAAP diluted earnings per share of $1.51 to $1.54. •Weighted average outstanding diluted shares of approximately 77.0 million.