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SolarWinds Corp (SWI)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 revenue $210.3M (+6% y/y) and adjusted EBITDA $104.1M (49.5% margin) both exceeded the high end of guidance; GAAP net income was $72.7M and non‑GAAP EPS $0.51 .
  • Subscription ARR grew 34% y/y to $311.7M and Total ARR grew 7% y/y to $729.0M, with 94% of revenue now recurring, underscoring a successful subscription‑first transition .
  • Management will not provide 2025 outlook and did not hold a Q4 call due to the pending sale to Turn/River Capital for $18.50/share (~$4.4B), expected to close in 2Q25—key near‑term stock catalyst pending approvals .
  • Mix shift remains a double‑edged sword: subscription strength and cost discipline are lifting margins, while maintenance and license continue to decline y/y as the model transitions .

What Went Well and What Went Wrong

What Went Well

  • Outperformed guidance with strong profitability: “We ended 2024 on a high note… fourth quarter and full‑year total revenue and adjusted EBITDA results exceeded the high end of our guidance ranges.” — CEO Sudhakar Ramakrishna .
  • Recurring model momentum: 94% recurring revenue in Q4; Subscription ARR +34% y/y to $311.7M, Total ARR +7% y/y to $729.0M, evidencing durable mix improvement .
  • Platform and product expansion: During Q4 period, the company unveiled Observability SaaS and Self‑Hosted offerings and launched a Universal Database License across SQL Sentry and DPA—supporting broader platform adoption .

What Went Wrong

  • Legacy revenue headwinds: Maintenance revenue declined y/y to $107.9M (from $115.1M) and license declined to $13.1M (from $15.3M) as subscription transition advances .
  • High interest burden and leverage: Q4 interest expense was $23.0M; total debt remains ~$1.2B, partially offset by $259.3M cash and ST investments at year‑end .
  • Limited forward visibility: No Q4 earnings call and no 2025 outlook given pending acquisition; legal and cyber‑incident related risks remain cited in risk disclosure .

Financial Results

P&L and Profitability (oldest → newest)

MetricQ2 2024Q3 2024Q4 2024
Total Revenue ($M)$193.3 $200.0 $210.3
Total Revenue y/y Growth4.4% 5.5% 6.1%
GAAP Gross Margin %89.5% 89.5% 89.9%
Non‑GAAP Gross Margin %90.8% 90.5% 90.8%
GAAP Operating Income ($M)$49.5 $51.7 $60.4
Non‑GAAP Operating Income ($M)$87.2 $88.7 $98.9
Adjusted EBITDA ($M)$92.5 $96.0 $104.1
Adjusted EBITDA Margin %47.9% 48.0% 49.5%
GAAP Net Income ($M)$11.1 $12.6 $72.7
GAAP Diluted EPS$0.06 $0.07 $0.41
Non‑GAAP Diluted EPS$0.26 $0.27 $0.51

Revenue Mix and Recurrence

MetricQ2 2024Q3 2024Q4 2024
Subscription Revenue ($M)$70.0 $76.5 $89.3
Maintenance Revenue ($M)$110.3 $110.6 $107.9
License Revenue ($M)$12.9 $12.9 $13.1
Recurring Revenue ($M)$180.3 $187.1 $197.2
Recurring % of Total93% 94% 94%

KPIs and Balance Sheet

KPIQ2 2024Q3 2024Q4 2024
Subscription ARR ($M)$269.9 $289.5 $311.7
Total ARR ($M)$704.7 $724.1 $729.0
Cash + ST Investments ($M)$169.6 $199.2 $259.3
Total Debt ($B)~$1.2 ~$1.2 ~$1.2

Guidance Changes

MetricPeriodPrevious Guidance (as of 10/31/24)Actual/CurrentChange
Total RevenueQ4 2024$201–$204M $210.3M Beat (above high end)
Adjusted EBITDAQ4 2024$95–$98M $104.1M Beat (above high end)
Non‑GAAP Diluted EPSQ4 2024$0.27–$0.28 $0.51 Beat (above high end)
Total RevenueFY 2024$788–$791M $796.9M Beat (above high end)
Adjusted EBITDAFY 2024$376–$379M $384.7M Beat (above high end)
Non‑GAAP Diluted EPSFY 2024$1.08–$1.09 $1.32 Beat (above high end)
  • Company will not provide 2025 outlook and did not host a Q4 call due to the pending acquisition .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024)Previous Mentions (Q3 2024)Current Period (Q4 2024)Trend
Subscription‑first and ARREmphasized subscription‑first; Subscription ARR +36% y/y; Total ARR $705M; high retention Subscription revenue +30% y/y; Subscription ARR +36% y/y; 94% recurring Subscription ARR +34% y/y to $311.7M; 94% recurring Sustained strength
Observability platformGrowing adoption; HCO and cloud support enhancements Rebranding, expanded hybrid/SaaS offerings; AI/AIOps progress Unveiled Observability SaaS & Self‑Hosted; DB Universal License Broader platform reach
AI/GenAIAI by Design; ITSM AI extensions (premium tier) GenAI in Service Desk driving higher ASP; no shift to consumption pricing near‑term Published 2024 State of ITSM report (data‑driven guidance) Monetization via premium continues
Go‑to‑marketStable macro; partner program expansion New CRO; expand with GSIs/partners; prudent guidance philosophy No call; pending acquisition Execution continuity, limited updates
Legal/CyberCourt order largely agreeing with motion to dismiss in SEC case noted Risk disclosures reiterate cyber/SEC matters Risk factors reiterated re SEC complaint & cyber costs Ongoing
M&A——Sale to Turn/River Capital at $18.50/share; ~$4.4B; expected 2Q25 close New catalyst

Management Commentary

  • “We ended 2024 on a high note with fourth quarter and full‑year total revenue and adjusted EBITDA results that exceeded the high end of our guidance ranges… I’m pleased with the progress of our subscription‑first strategy, our strong customer retention, and the continued innovation on the SolarWinds Platform.” — CEO Sudhakar Ramakrishna .
  • On the announced sale: “Partnering with Turn/River Capital, we believe we can invest to fast‑track a broader set of SolarWinds Platform innovations and an even greater focus on customer success…” — CEO .
  • Prior quarter on demand and mix: “We continue to experience a good balance of deal sizes across our regions and market segments… 94% of our total revenue is now recurring revenue.” — CEO/CFO (Q3) .
  • Prior quarter on profitability and guidance discipline: “Adjusted EBITDA…$96M…above the high end… Guidance is tempered with a level of prudence to make sure that what we state, we have confidence that we will be able to deliver.” — CFO (Q3) .

Q&A Highlights (from Q3 call; no Q4 call was held)

  • Consolidation deals and sales motion: Renewals trigger broader platform consolidation; shift from transactional to continuous‑touch with strong customer success engagement .
  • Guidance philosophy: Build forecasts based on current performance, market signals, and prudence; maintain record of delivering guidance .
  • GenAI monetization and pricing: GenAI included in premium Service Desk package driving ASP uplift; no shift to consumption‑based pricing near‑term .
  • Large customer growth drivers: Maintenance‑to‑subscription conversions, unified hybrid observability, and selective upstream enterprise expansion via partners/GSIs .
  • Margin vs growth balance: Continue to invest selectively for growth while protecting strong profitability .

Estimates Context

  • Wall Street consensus (S&P Global) for Q4 2024 EPS/Revenue/EBITDA was unavailable through our S&P Global feed mapping at the time of analysis; as a result, vs‑consensus comparisons are not shown. The company indicated that Q4 revenue and adjusted EBITDA exceeded the high end of management’s guidance ranges .

Key Takeaways for Investors

  • The quarter capped a year of consistent execution: Q4 revenue $210.3M and adjusted EBITDA $104.1M each beat the high end of guidance; profitability trajectory improved with a 49.5% adjusted EBITDA margin .
  • Recurring engine strengthening: 94% recurring revenue and robust ARR growth (Subscription ARR +34% y/y) position the model for durable cash generation through the transition .
  • Mix headwinds persist in legacy streams (maintenance/license declines), but are strategically aligned with subscription‑first objectives .
  • Balance sheet supports flexibility: $259.3M cash/ST investments vs ~$1.2B debt; interest costs remain material and should be monitored .
  • No 2025 outlook and no Q4 call due to pending sale; deal spread and approval timeline likely dominate near‑term stock behavior (Turn/River at $18.50/share; target close 2Q25) .
  • Post‑transaction scenario (if closed) could accelerate platform investments per management; if not, the company reverts to a mid‑single‑digit revenue growth profile with high‑40s EBITDA margins and continued ARR mix upgrades .

Additional Context (Q4‑period product updates and data points)

  • Observability portfolio re‑introduced as SolarWinds Observability (Self‑Hosted and SaaS), with scalability, expanded Azure/AWS coverage, and AIOps‑driven capabilities communicated during the period .
  • October/November initiatives highlighted in the Q4 release include Observability SaaS & Self‑Hosted, and a Universal Database License for SQL Sentry and DPA; plus the 2024 State of ITSM Report .

Notes:

  • No Q4 2024 earnings call was held; the company will not provide 2025 guidance, citing the pending acquisition .
  • Non‑GAAP adjustments materially impact reported profitability; see reconciliations for details on stock‑based comp, amortization, restructuring, cyber‑incident costs, and other items .