Press Release

Printer Friendly Version View printer-friendly version
<< Back
SolarWinds Announces Second Quarter 2010 Results
Record Quarterly Total Revenue of $35.5 Million Representing 31% Year-Over-Year Growth; GAAP Operating Income of $12.9 Million, Non-GAAP Operating Income of $17.7 Million, or 50% of Revenue; GAAP Diluted Earnings per Share of $0.12, Non-GAAP Diluted Earnings per Share of $0.17

AUSTIN, TX, Jul 21, 2010 (MARKETWIRE via COMTEX) --

SolarWinds(R) (NYSE: SWI), a leading provider of powerful and affordable IT management software to more than 95,000 customers worldwide, today reported results for its second quarter ended June 30, 2010.

Financial Results

SolarWinds reported record total revenue for the second quarter of 2010 of $35.5 million, a 31% increase over total revenue in the second quarter of 2009. License revenue was $17.3 million in the second quarter of 2010, representing an 18% increase over license revenue in the second quarter of 2009. Maintenance revenue was $18.2 million in the second quarter of 2010, representing a 47% increase over maintenance revenue in the second quarter of 2009, the 13th consecutive quarter of year-over-year growth greater than 40%.

On a GAAP basis, operating income was $12.9 million, net income was $8.8 million and diluted earnings per share was $0.12 in the second quarter of 2010, compared to operating income of $11.8 million, net income of $6.8 million and diluted earnings per share of $0.13 in the second quarter of 2009.

Non-GAAP operating income was $17.7 million, or 50% of revenue, in the second quarter of 2010 compared to $14.0 million in the second quarter of 2009. Non-GAAP net income in the second quarter of 2010 was $12.5 million, a 40% increase over non-GAAP net income of $8.9 million in the second quarter of 2009. Non-GAAP diluted earnings per share was $0.17 in the second quarter of 2010 compared to $0.14 in the second quarter of 2009.

Net cash provided by operating activities was $16.9 million in the second quarter of 2010 and $32.8 million for the first six months of 2010 compared to $7.1 million for the second quarter of 2009 and $22.0 million for the first six months of 2009, which is a year-to-date increase of 49%. Cash and cash equivalents at the end of the second quarter of 2010 were $99.8 million, a decrease of only $4.3 million from the end of the first quarter of 2010 despite the repayment of $25.0 million of outstanding debt obligations.

Information about SolarWinds' use of non-GAAP financial information is provided under "Non-GAAP Financial Measures" below.

Recent Business Highlights

"This quarter, we continued to see strong demand for our products in the commercial markets," said Kevin Thompson, SolarWinds' President and Chief Executive Officer. "IT trends such as virtualization, data center consolidation and SaaS have increased the importance of monitoring and management technologies for companies of all sizes, including the Global 2000. We believe that SolarWinds is uniquely positioned with the right products and the right model to meet the significant market demand for better visibility into the entire IT infrastructure."

Other business highlights:

--  SolarWinds increased its total number of customers during the second
    quarter to over 95,000. Larger companies continued to come to
    SolarWinds for cost-effective, easier-to-use solutions, with five new
    customers during the quarter spending, on average, over $60,000 in
    their first SolarWinds purchase.
--  SolarWinds released new major versions of several important products,
    including Orion Network Performance Monitor (NPM) and Orion Network
    Configuration Manager (NCM), providing new features and functionality
    to both new and existing SolarWinds customers.
--  SolarWinds released two new versions of its Storage Profiler product,
    acquired from Tek-Tools, Inc. in January 2010, designed to improve the
    download and evaluation experience and to simplify licensing for
    customers. SolarWinds also released the industry's only free
    multi-vendor storage monitoring tool as part of its strategy to drive
    awareness and loyalty among potential customers.

"While we experienced lower close rates in sales to the U.S. federal government and a softening of the European market that we first began to see in June, our core business with customers in the global commercial market showed strong growth over the second quarter of 2009," continued Thompson.

Financial Outlook

As of July 21, 2010, SolarWinds is providing its financial outlook for its third quarter of 2010 and updating its outlook for the full year ending December 31, 2010. The financial information below represents forward-looking non-GAAP financial information, including an estimate of non-GAAP operating income, non-GAAP net income and non-GAAP diluted earnings per share, for the third quarter of 2010 and for the full year 2010. These non-GAAP financial measures exclude, among other items mentioned below, stock-based compensation expense. SolarWinds cannot reasonably estimate the expected stock-based compensation expense 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 something 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 2010

SolarWinds management currently expects to achieve the following results for the third quarter of 2010:

--  Total revenue in the range of $37.0-$39.0 million
--  Non-GAAP operating income representing 48%-50% of revenue
--  Non-GAAP net income of $12.5-$13.5 million
--  Non-GAAP diluted earnings per share of $0.165-$0.180
--  Weighted average shares outstanding of approximately 74.5 million

Financial Outlook for Full Year 2010

SolarWinds is revising its outlook, previously announced on April 26, 2010, for the full year 2010 based on several factors, including:

--  unfavorable trends in the exchange rate of Euros to US dollars;
--  lengthening sales cycles to the U.S. federal government, resulting in
    decreased predictability of future results and an expected decline in
    sales to the U.S. federal government; and
--  lower expectations for the growth in European sales due to economic
    issues impacting both the public sector and commercial business
    customers in the region.

SolarWinds management currently expects to achieve the following results for the full year 2010:

--  Total revenue in the range of $146.0-$151.0 million, or year-over-year
    growth of 25%-30%
--  Non-GAAP operating income representing 48%-50% of revenue
--  Non-GAAP net income of $49.3-$52.2 million
--  Non-GAAP diluted earnings per share of $0.67-$0.70
--  Weighted average shares outstanding of approximately 74.0 million

Conference Call and Webcast

In conjunction with this announcement, SolarWinds will host a conference call today to discuss its financial results and other business at 4:00pm CDT (5:00pm EDT/2:00pm PDT). A live webcast of the event will be available on the SolarWinds Investor Relations website at http://ir.solarwinds.com. A live dial-in will be available domestically at 800-390-5311 and internationally at +1-719-325-2163. To access the live call, please dial in 5-10 minutes before the scheduled start time. 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 relating to SolarWinds' possible or assumed future results of operations and potential growth and market opportunities. 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 "expects," "believes" 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) the possibility that general economic conditions or uncertainty cause information technology spending to be reduced or purchasing decisions to be delayed; (b) the presence or absence of occasional large customer orders, including in particular those placed by the U.S. federal government; (c) the inability to increase sales to existing customers and to attract new customers; (d) SolarWinds' failure to integrate acquired businesses and any future acquisitions successfully; (e) the timing and success of new product introductions by SolarWinds or its competitors; (f) changes in SolarWinds' pricing policies or those of its competitors; (g) the loss of the relationship with a distributor that helps fulfill most of SolarWinds' sales orders from the U.S. federal government; (h) potential foreign exchange gains and losses related to expenses and sales denominated in currencies other than the functional currency of an associated entity; and (i) such other risks and uncertainties described more fully in documents filed with or furnished to the Securities and Exchange Commission, including the Form 10-K previously filed for the full year of 2009 and a Form 10-Q for the second quarter of 2010 that SolarWinds anticipates filing on or before August 15, 2010. 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 disclosing financial measures prepared in accordance with GAAP, this press release and the accompanying tables contain the following non-GAAP financial measures: non-GAAP operating income, non-GAAP net income, non-GAAP diluted earnings per share, revenue on a constant currency basis and non-GAAP weighted average shares outstanding. Each of non-GAAP operating income, non-GAAP net income and non-GAAP diluted earnings per share exclude the impact of stock-based compensation expense, amortization of intangible assets, expenses related to potential and completed follow-on offering of common stock, lawsuit settlement and related legal fees and certain acquisition-related costs from the comparable GAAP measure. Non-GAAP net income and non-GAAP diluted earnings per share also exclude the write-off of debt issuance costs and the related tax benefits of the excluded items from the comparable GAAP measure. Non-GAAP diluted earnings per share is equal to non-GAAP net income divided by non-GAAP weighted average shares outstanding, which adjusts GAAP weighted average shares outstanding for the first and second quarters of 2009 to assume that the conversion of our preferred stock in May 2009 occurred at the beginning of the applicable period. This press release contains a reconciliation of each of these non-GAAP measures to its most comparable GAAP financial measure.

SolarWinds believes that each of these non-GAAP financial measures provides meaningful supplemental information regarding its performance by excluding certain expenses, expenditures that may not be indicative of its core business operations. SolarWinds' management and Board of Directors use these non-GAAP measures to assess operational performance as well as to determine employee incentive compensation. Accordingly, these measures may provide helpful insight to investors on the motivation and decision-making of management in operating the business.

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. These items are typically interest expense, income tax expense, depreciation and amortization and stock-based compensation expense.

SolarWinds understands that, although these non-GAAP financial measures are frequently used by investors and securities analysts in their evaluations of companies, 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. Items such as the amortization of intangible assets, stock-based compensation expense, interest expense and income tax expense that are excluded from these non-GAAP financial measures can have a material impact on net earnings.

As a result, these non-GAAP financial measures have limitations and should not be considered in isolation from, or as a substitute for, operating income, net income, revenue or other measures of performance prepared in accordance with GAAP. 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 included elsewhere in this press release.

About SolarWinds

SolarWinds (NYSE: SWI) provides powerful and affordable IT management software to more than 95,000 customers worldwide -- from Fortune 500 enterprises to small businesses. We work to put our users first and remove the obstacles that have become "status quo" in traditional enterprise software. SolarWinds products are downloadable, easy to use and maintain, and provide the power, scale, and flexibility needed to address users' management priorities. Our online user community, thwack, is a gathering-place where tens of thousands of IT pros solve problems, share technology, and participate in product development for all of SolarWinds' products. Learn more today at http://www.solarwinds.com.

SolarWinds, SolarWinds.com and Orion are registered trademarks of SolarWinds. All other company and product names mentioned are used only for identification purposes and may be trademarks or registered trademarks of their respective companies.

                             SolarWinds, Inc.
                  Condensed Consolidated Balance Sheets
        (In thousands, except for share and per share information)
                                (unaudited)
                                                  June 30,    December 31,
                                                    2010          2009
                                                ------------  ------------
Assets
Current assets:
  Cash and cash equivalents                     $     99,767  $    129,788
  Accounts receivable, net of allowances of
   $101 and $149 as of June 30, 2010 and
    December 31, 2009, respectively                   17,013        15,786
  Income tax receivable                                  572           109
  Deferred taxes                                         289           252
  Prepaid income taxes                                     -         4,675
  Other current assets                                 2,877         2,116
                                                ------------  ------------
    Total current assets                             120,518       152,726
Property and equipment, net                            6,623         6,406
Debt issuance costs, net                                   -           399
Deferred taxes                                         2,960         2,078
Goodwill                                              40,372        15,444
Intangible assets and other, net                      21,100         4,417
                                                ------------  ------------
    Total assets                                $    191,573  $    181,470
                                                ============  ============
Liabilities and stockholders' equity
Current liabilities:
  Accounts payable                              $      2,131  $      3,293
  Accrued liabilities                                  4,449         4,937
  Accrued interest payable                                 -           539
  Accrued earnout                                      3,743             -
  Income taxes payable                                   336           284
  Current portion of deferred revenue                 43,099        37,103
  Current portion of long-term debt                        -        16,871
                                                ------------  ------------
    Total current liabilities                         53,758        63,027
Long-term liabilities:
  Deferred revenue, net of current portion             3,144         1,544
  Deferred taxes                                         778           153
  Other long-term liabilities                            621           454
  Long-term debt, net of current portion                   -        27,226
                                                ------------  ------------
    Total long-term liabilities                        4,543        29,377
                                                ------------  ------------
    Total liabilities                                 58,301        92,404
Commitments and contingencies
Stockholders' equity:
Common stock, $0.001 par value: 123,000,000
 shares authorized and 68,504,017 and
 66,502,098 shares issued as of June 30, 2010
 and December 31, 2009, respectively                      69            67
Additional paid-in capital                           151,215       123,083
Accumulated other comprehensive loss                  (1,851)         (159)
Accumulated deficit                                  (16,161)      (33,925)
                                                ------------  ------------
    Total stockholders' equity                       133,272        89,066
                                                ------------  ------------
    Total liabilities and stockholders' equity  $    191,573  $    181,470
                                                ============  ============
                              SolarWinds, Inc.
                Condensed Consolidated Statements of Income
               (In thousands, except per share information)
                                (unaudited)
                                    Three Months Ended   Six Months Ended
                                         June 30,            June 30,
                                    ------------------  ------------------
                                      2010      2009      2010      2009
                                    --------  --------  --------  --------
Revenue:
   License                          $ 17,264  $ 14,598  $ 34,885  $ 27,139
   Maintenance and other              18,244    12,444    34,948    23,978
                                    --------  --------  --------  --------
     Total revenue                    35,508    27,042    69,833    51,117
 Cost of  license revenue                462       154       817       305
 Cost of maintenance and other
  revenue                              1,458     1,039     2,802     2,017
                                    --------  --------  --------  --------
Gross profit                          33,588    25,849    66,214    48,795
Operating expenses:
   Sales and marketing                10,688     7,225    20,937    13,925
   Research and development            3,824     2,755     7,451     5,181
   General and administrative          6,200     4,112    11,521     7,977
                                    --------  --------  --------  --------
     Total operating expenses         20,712    14,092    39,909    27,083
                                    --------  --------  --------  --------
Operating income                      12,876    11,757    26,305    21,712
Other income (expense):
   Interest income                        67        53       100       132
   Interest expense                     (363)   (1,540)   (1,146)   (2,991)
   Other income (expense)                163        (9)      211        (6)
                                    --------  --------  --------  --------
     Total other expense                (133)   (1,496)     (835)   (2,865)
                                    --------  --------  --------  --------
Income before income taxes            12,743    10,261    25,470    18,847
   Income tax expense                  3,916     3,443     7,706     6,041
                                    --------  --------  --------  --------
Net income                          $  8,827  $  6,818  $ 17,764  $ 12,806
                                    ========  ========  ========  ========
Net income per share:
  Basic earnings per share          $   0.13  $   0.15  $   0.26  $   0.35
                                    ========  ========  ========  ========
  Diluted earnings per share        $   0.12  $   0.13  $   0.24  $   0.30
                                    ========  ========  ========  ========
Weighted shares used to compute net
 income per share:
  Shares used in computation of
   basic earnings per share           68,202    44,907    67,738    36,544
                                    ========  ========  ========  ========
  Shares used in computation of
   diluted earnings per share         73,287    50,952    73,061    42,236
                                    ========  ========  ========  ========
                             SolarWinds, Inc.
          Reconciliation of GAAP to Non-GAAP Financial Measures
                              (In thousands)
                                (unaudited)
                     Three Months Ended            Three Months Ended
                        June 30, 2010                 June 30, 2009
                ----------------------------  ----------------------------
                         Adjus-        Non-            Adjus-       Non-
                  GAAP   tments        GAAP    GAAP    tments       GAAP
                -------  ------      -------  -------  ------      -------
Total revenue   $35,508  $    -      $35,508  $27,042  $    -      $27,042
Gross profit     33,588     502       34,090   25,849     171       26,020
  Operating
   expenses      20,712  (4,340)      16,372   14,092  (2,108)      11,984
                -------  ------      -------  -------  ------      -------
Operating
 income          12,876   4,842  (a)  17,718   11,757   2,279  (a)  14,036
  Total other
   expense         (133)    131  (b)      (2)  (1,496)    428  (b)  (1,068)
                -------  ------      -------  -------  ------      -------
Income before
 income taxes    12,743   4,973       17,716   10,261   2,707       12,968
   Income tax
    expense       3,916   1,347  (c)   5,263    3,443     609  (c)   4,052
                -------  ------      -------  -------  ------      -------
Net income      $ 8,827  $3,626      $12,453  $ 6,818  $2,098      $ 8,916
                =======  ======      =======  =======  ======      =======
(a) Reflects the reversal of amortization of intangible assets, stock-based
    compensation expense and other excluded expenses as follows:
   Amortization of intangible
    assets:
              Three Months Ended
                   June 30,
                ---------------
                  2010    2009
                -------  ------
    Cost of
     license
     revenue    $   458  $  154
    Sales and
     marketing        -       -
    Research and
     development      -       -
    General and
     administra-
      tive          387      39
   Stock-based compensation
    expense:
               Three Months Ended
                    June 30,
                ---------------
                  2010    2009
                -------  ------
   Cost of
    maintenance
    revenue     $    44  $   17
   Sales and
    marketing       817     467
   Research and
    development     453     290
   General and
    administra-
    tive          2,249   1,111
  Other excluded
   expenses:
              Three Months Ended
                    June 30,
                ---------------
                  2010    2009
                -------  ------
   Lawsuit
    settlement
    and related
    legal fees  $   (69) $  201
   Follow-on
    offering
    costs (d)       151       -
   Acquisition
    related
    costs           144       -
   Severance
    costs
    related to
    retirement of
    Executive
    Chairman        208       -
(b) Represents a decrease in the amortization of debt issuance costs due to
    the repayment of all or a portion of the long-term debt.
(c) Reflects the removal of the tax benefits associated with amortization
    of intangible assets, stock-based compensation expense and other
    excluded expenses.
(d) Represents expenses of $151 associated with preliminary work on a
    potential public offering that was cancelled during the second quarter
    of 2010.
                             SolarWinds, Inc.
          Reconciliation of GAAP to Non-GAAP Financial Measures
                              (In thousands)
                                (unaudited)
                      Six Months Ended              Six Months Ended
                        June 30, 2010                 June 30, 2009
                ----------------------------  ----------------------------
                         Adjus-        Non-            Adjus-        Non-
                  GAAP   tments       GAAP     GAAP    tments        GAAP
                -------  ------      -------  -------  ------      -------
Total revenue   $69,833  $    -      $69,833  $51,117  $    -      $51,117
Gross profit     66,214     888       67,102   48,795     339       49,134
  Operating
   expenses      39,909  (7,043)      32,866   27,083  (3,862)      23,221
                -------  ------      -------  -------  ------      -------
Operating
 income          26,305   7,931  (a)  34,236   21,712   4,201  (a)  25,913
  Total other
   expense         (835)    334  (b)    (501)  (2,865)    428  (b)  (2,437)
                -------  ------      -------  -------  ------      -------
Income before
 income taxes    25,470   8,265       33,735   18,847   4,629       23,476
   Income tax
    expense       7,706   2,160  (c)   9,866    6,041     968  (c)   7,009
                -------  ------      -------  -------  ------      -------
Net income      $17,764  $6,105      $23,869  $12,806  $3,661      $16,467
                =======  ======      =======  =======  ======      =======
(a) Reflects the reversal of amortization of intangible assets, stock-based
    compensation expense and other excluded expenses as follows:
   Amortization of intangible
    assets:
               Six Months Ended
                    June 30,
                ---------------
                  2010    2009
                -------  ------
    Cost of
     license
     revenue    $   807  $  305
    Sales and
     marketing        -       -
    Research and
     development      -       -
    General and
     administra-
     tive           669      77
   Stock-based compensation
    expense:
               Six Months Ended
                    June 30,
                ---------------
                  2010    2009
                -------  ------
    Cost of
     maintenance
     revenue    $    81  $   34
    Sales and
     marketing    1,395     894
    Research and
     development    812     515
    General and
     administra-
     tive         3,596   2,110
   Other excluded
    expenses:
                Six Months Ended
                    June 30,
                ---------------
                  2010    2009
                -------  ------
    Lawsuit
     settlement
     and related
     legal fees $  (217) $  266
    Follow-on
     offering
     costs (d)      170       -
    Acquisition
     related costs  410       -
    Severance
     costs
     related to
     retirement of
     Executive
     Chairman       208       -
(b) Represents a decrease in the amortization of debt issuance costs due to
    the repayment of all or a portion of the long-term debt.
(c) Reflects the removal of the tax benefits associated with amortization
    of intangible assets, stock-based compensation expense and other
    excluded expenses.
(d) Represents expenses of $151 associated with preliminary work on a
    potential public offering that was cancelled during the second quarter
    of 2010. The remaining expenses of $19 related to a public offering
    completed in the fourth quarter of 2009.
                             SolarWinds, Inc.
Reconciliation of Diluted Earnings Per Share to Non-GAAP Diluted Earnings
                                Per Share
               (In thousands, except per share information)
                                (unaudited)
                                        Three Months
                                            Ended         Six Months Ended
                                          June 30,            June 30,
                                      ----------------    ----------------
                                        2010     2009       2010     2009
                                      -------  -------    -------  -------
Numerator:
Reconciliation between GAAP and
 non-GAAP net income:
   Net income                         $ 8,827  $ 6,818    $17,764  $12,806
   Reversal of intangible assets
    amortization                          845      193      1,476      382
   Reversal of stock-based
    compensation expense                3,563    1,885      5,884    3,553
   Reversal of debt issuance costs
    write-off                             131      428        334      428
   Reversal of follow-on offering
    costs                                 151        -        170        -
   Reversal of lawsuit settlement
    costs and related legal fees          (69)     201       (217)     266
   Reversal of acquisition related
    costs                                 144        -        410        -
   Reversal of severance costs
    related to retirement of
    Executive Chairman                    208        -        208        -
   Reversal of tax benefits
    associated with above adjustments  (1,347)    (609)    (2,160)    (968)
                                      -------  -------    -------  -------
   Non-GAAP net income                $12,453  $ 8,916    $23,869  $16,467
                                      =======  =======    =======  =======
Denominator:
Reconciliation between GAAP and
 non-GAAP weighted average shares
 used in computing diluted earnings
 per share:
   Weighted average number of shares
    used in computing diluted
    earnings per share                 73,287   50,952     73,061   42,236
   Pro forma adjustments to reflect
    assumed weighted average effect
    of conversion of preferred
    stock (a)                               -   14,700          -   20,850
                                      -------  -------    -------  -------
   Non-GAAP weighted average shares
    used in computing non-GAAP
    diluted earnings per share (b)     73,287   65,652     73,061   63,086
                                      =======  =======    =======  =======
   Diluted earnings per share         $  0.12  $  0.13    $  0.24  $  0.30
                                      =======  =======    =======  =======
   Non-GAAP diluted earnings per
    share                             $  0.17  $  0.14    $  0.33  $  0.26
                                      =======  =======    =======  =======
(a) Represents common shares from the conversion of convertible preferred
    shares as if the shares were converted as of the beginning of the
    indicated period.
(b) If the company assumed the common shares issued in its initial
    public offering in May 2009 were issued as of the beginning of the
    comparable period, or January 1, 2009, then the weighted average shares
    used in computing non-GAAP diluted earnings per share and the non-GAAP
    diluted earnings per share would have been 71,004 shares and $0.13 per
    share, respectively, for the three months ended June 30, 2009 and
    70,624 shares and $0.23 per share, respectively, for the six months
    ended June 30, 2009.
                             SolarWinds, Inc.
Reconciliation of Second Quarter of 2010 GAAP Revenue to Non-GAAP Revenue
                       on a Constant Currency Basis
                              (In thousands)
                                (unaudited)
Revenue on a constant currency basis is calculated using the average
foreign exchange rates in the monthly periods during a previous quarter and
applying these rates to foreign-denominated revenue in the corresponding
monthly periods in the second quarter of 2010. The difference between
revenue calculated based on these foreign exchange rates and revenue
calculated in accordance with GAAP is listed as foreign exchange impact in
the table below.
                                                     Using        Using
                                                    Foreign      Foreign
                                                    Exchange     Exchange
                                                     Rates        Rates
                                                    in First    in Second
                                                  Quarter of   Quarter of
                                                      2010         2009
                                                  ------------ ------------
License revenue                                   $     17,264 $     17,264
Foreign exchange impact on license revenue                 392          373
                                                  ------------ ------------
License revenue on a constant currency basis      $     17,656 $     17,637
                                                  ============ ============
Maintenance and other revenue                     $     18,244 $     18,244
Foreign exchange impact on maintenance and other
 revenue                                                   288          234
                                                  ------------ ------------
Maintenance and other revenue on a constant
 currency basis                                   $     18,532 $     18,478
                                                  ============ ============
Total revenue                                     $     35,508 $     35,508
Foreign exchange impact on total revenue                   680          607
                                                  ------------ ------------
Total revenue on a constant currency basis        $     36,188 $     36,115
                                                  ============ ============
                             SolarWinds, Inc.
              Condensed Consolidated Statements of Cash Flows
                              (In thousands)
                                (unaudited)
                                    Three Months Ended   Six Months Ended
                                         June 30,            June 30,
                                    ------------------  ------------------
                                      2010      2009      2010      2009
                                    --------  --------  --------  --------
Cash flows from operating
 activities
  Net income                        $  8,827  $  6,818  $ 17,764  $ 12,806
  Adjustments to reconcile net
   income to net cash provided by
   operating activities:
    Depreciation and amortization      1,388       538     2,492     1,031
    Provision for doubtful accounts       (9)       (8)       15       115
    Stock-based compensation
     expense                           3,563     1,885     5,884     3,553
    Deferred taxes                       403       405      (277)      (28)
    Excess tax benefit from
     stock-based compensation         (3,310)   (1,721)   (7,193)   (1,721)
    Other non-cash expenses              197       491       501       864
  Changes in operating assets and
   liabilities, net of assets
    acquired and liabilities
    assumed in business
    combinations:
     Accounts receivable               1,469    (1,481)   (1,991)      875
     Income taxes receivable            (593)      161      (493)      406
     Prepaid income taxes                807    (2,129)    4,675    (2,129)
     Prepaid & other current assets      (99)     (180)     (622)     (499)
     Accounts payable                   (381)      226    (1,141)      294
     Accrued liabilities                (699)      691      (308)      767
     Accrued interest payable           (525)     (325)     (539)     (978)
     Income taxes payable              3,011      (883)    7,460     1,900
     Deferred revenue and other
      liabilities                      2,849     2,567     6,594     4,730
                                    --------  --------  --------  --------
       Net cash provided by
        operating activities          16,898     7,055    32,821    21,986
Cash flows from investing
 activities
  Purchases of property and
   equipment                            (852)     (561)   (1,434)     (975)
  Purchases of intangible assets        (108)      (50)     (209)     (200)
  Acquisition of businesses                -       (26)  (28,039)      (46)
                                    --------  --------  --------  --------
      Net cash used in investing
       activities                       (960)     (637)  (29,682)   (1,221)
Cash flows from financing
 activities
  Repayment of long-term debt        (25,000)  (49,825)  (44,097)  (56,986)
  Exercise of stock options            2,567     2,311     5,836     2,391
  Net cash proceeds from initial
   public offering                         -   104,625         -   104,625
  Excess tax benefit from
   stock-based compensation            3,310     1,721     7,193     1,721
  Repayments of capital lease
   obligations                            (2)       (7)       (9)      (13)
  Payments for initial public
   offering costs                          -      (856)        -      (878)
                                    --------  --------  --------  --------
      Net cash (used in) provided
       by financing activities       (19,125)   57,969   (31,077)   50,860
Effect of exchange rate changes on
 cash and cash equivalents            (1,134)      557    (2,083)      (41)
                                    --------  --------  --------  --------
  Net (decrease) increase in cash
   and cash equivalents               (4,321)   64,944   (30,021)   71,584
Cash and cash equivalents
  Beginning of period                104,088    47,206   129,788    40,566
                                    --------  --------  --------  --------
  End of period                     $ 99,767  $112,150  $ 99,767  $112,150
                                    ========  ========  ========  ========
Supplemental disclosure of cash
 flow information
  Cash paid for interest            $    742  $  1,358  $  1,280  $  3,369
                                    ========  ========  ========  ========
  Cash paid (received) for income
   taxes                            $    289  $  5,865  $ (3,658) $  5,865
                                    ========  ========  ========  ========
Noncash investing and financing
 transactions
  Accrued earnout                   $      -  $      -  $  3,743  $      -
                                    ========  ========  ========  ========
  Stock issued for acquisition      $      -  $      -  $  9,221  $      -
                                    ========  ========  ========  ========

CONTACTS:
Investors:
Jason Ream
Phone: 512.682.9680
Email Contact

Media:
Tiffany Nels
Phone: 512.682.9545
Email Contact


SOURCE: SolarWinds

http://www2.marketwire.com/mw/emailprcntct?id=641258AFBE202548
http://www2.marketwire.com/mw/emailprcntct?id=804671851AFA6C17