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SEC Filings, Earing Reports, Press Releases
Solarwinds Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: May 4, 2012 04:28PM
Solarwinds Inc. (SWI) filed Quarterly Report for the period ended 2012-03-31.
Highlight of Business Operations:Revenue was $59.7 million in the quarter ended March 31, 2012 compared to $43.0 million in the quarter ended March 31, 2011, an increase of $16.7 million, or 38.8%. Maintenance and other revenue increased $9.6 million due to a growing maintenance renewal customer base and an increase in new license sales which drives new maintenance revenue. We have maintained high customer retention and our customer base has continued to grow with acquisitions. In addition, maintenance revenue continues to increase each quarter as we begin to renew, and recognize the revenue associated with such renewals, the maintenance associated with products acquired in 2011. License revenue increased $7.1 million due to continued growth in new license sales of our network management products and sales of our newly-developed and newly-acquired products. We define newly-developed or newly-acquired products as those acquired or developed within the last year.
New license sales in our global commercial business increased 45.0% and new license sales in our U.S. federal government business decreased 32.0% for the first quarter of 2012 as compared to the first quarter of 2011. This growth in our commercial business was driven by core product transactions growth of 36.8% in the first quarter of 2012 as compared to the first quarter of 2011. The decrease in our U.S. federal government new license sales was primarily due to a transaction in the first quarter of 2011 that resulted in license revenue greater than $0.5 million, whereas we did not have any transactions that resulted in license revenue greater than $0.5 million in the first quarter of 2012. Our U.S. federal government core product transaction growth year-over-year was 31.8%. Our revenue from our foreign subsidiaries was 24.8% and 23.9% of total revenue in the first quarter of 2012 and 2011, respectively.
Cost of revenue was $4.3 million in the quarter ended March 31, 2012 compared to $2.5 million in the quarter ended March 31, 2011, an increase of $1.8 million, or 71.9%. Cost of license revenue increased by $1.1 million in the first quarter of 2012 compared to the first quarter of 2011, primarily due to the amortization of acquired product technologies associated with our acquisitions in the second half of 2011 and in the first quarter of 2012. Cost of maintenance revenue also increased $0.7 million primarily due to increased headcount from our acquisitions and organically to support new customers, additional product offerings from acquisitions and internal product development.
Sales and Marketing. Sales and marketing expenses were $16.6 million in the quarter ended March 31, 2012 compared to $11.7 million in the quarter ended March 31, 2011, an increase of $4.8 million, or 41.2%. We continue to invest in the sales and marketing efforts that drive our revenue growth. These efforts include the costs associated with our website redesign and community platform. In addition, we have increased the size of our marketing team, maintenance renewal team and sales management teams. Our sales expense as a percentage of revenue has remained consistent in the first quarter of 2012 as compared to the same period in 2011. As a result of these expansion efforts, our sales and marketing personnel costs, which include stock-based compensation expense, increased by $3.6 million, marketing program costs increased $0.7 million and contract services increased $0.3 million.
Net cash used in investing activities for the three months ended March 31, 2012 was primarily related to $11.9 million of cash used to purchase available-for-sale securities classified as short-term investments, $11.0 million of cash used for the acquisition of EminentWare (refer to Note 2Acquisitions of our Notes to Condensed Consolidated Financial Statements for additional details), and $9.5 million of proceeds from maturities of short-term investments. Also during the three months ended March 31, 2012, we paid approximately $3.5 million of cash upon the achievement of certain sales milestones related to the acquisition of Hyper9 in January 2011. This contingent consideration was recorded at fair value as an accrued acquisition earnout of $3.5 million for the year ended December 31, 2011. In accordance with authoritative guidance, $3.2 million of the earnout payment is reflected in cash flows from investing activities and the $0.3 million change in fair value due to the passage of time is reflected in cash flows from operating activities in the condensed consolidated statement of cash flows for the three months ended March 31, 2012.