Solarwinds Inc. (SWI, Financial) filed Quarterly Report for the period ended 2010-06-30.
Solarwinds Inc. has a market cap of $940.1 million; its shares were traded at around $13.83 with a P/E ratio of 24.3 and P/S ratio of 8.1. SWI is in the portfolios of Lee Ainslie of Maverick Capital, Pioneer Investments, Steven Cohen of SAC Capital Advisors.
Revenue was $35.5 million in the three months ended June 30, 2010 compared to $27.0 million in the three months ended June 30, 2009, an increase of $8.5 million, or 31.3%. This increase was comprised of a $5.8 million increase in maintenance and other revenue, which resulted from a growing maintenance base due to new sales, new customers through acquisitions and high customer retention, and a $2.7 million increase in license revenue due to an increase in sales transaction volumes of our core enterprise -class network and IT management products and a 22.2% increase in our average transaction size for new sales. Our average transaction size for new sales was approximately $7,700 and $6,300 for the three months ended June 30, 2010 and 2009, respectively. Through the second quarter of 2010, the trailing 12- month average transaction size was approximately $7,600 as compared to approximately $6,100 for the 12- month period ending in the second quarter of 2009. We believe that the increase in new sales and our average transaction size for new sales resulted from better awareness of our products, an increase in the number of products that we sell primarily as a result of our product development and, to a significantly lesser extent, our acquisitions.
New sales in our commercial business increased 31.6% globally while new sales in our U.S. federal government business decreased 43.6% for the second quarter of 2010 compared to the second quarter of 2009. The decline in U.S. federal sales was primarily driven by a reduction in the value of orders received from agencies and groups associated with the Department of Defense. While we had no single transaction with license revenue over $0.5 million in the three months ended June 30, 2010, we received a single purchase order from one of our federal resellers in the three months ended June 30, 2009 that resulted in the recognition of $1.1 million in license revenue during the second quarter of 2009. Our revenue results also had a negative impact from foreign currency rates during the second quarter of 2010 compared to the rates during the second quarter of 2009. Our international revenue was 21.5% and 19.4% of total revenue in the second quarter of 2010 and 2009, respectively. The net impact of revenue in the second quarter of 2010 assuming we applied the same exchange rates used in the second quarter of 2009 was $0.6 million, comprised of an unfavorable impact on license revenue of $0.4 million and on maintenance revenue of $0.2 million.
Cost of revenue was $1.9 million in the three months ended June 30, 2010 compared to $1.2 million in the three months ended June 30, 2009, an increase of $0.7 million, or 60.9%. This increase was primarily due to a $0.4 million increase in cost of maintenance revenue related to increased headcount in our North American, European and Asia Pacific support organizations to support the new customers we added during 2009 and the first half of 2010. Cost of license revenue also increased by $0.3 million in the three months ended June 30, 2010 compared to the same period in 2009 due to the amortization of acquired product technologies associated with the Tek-Tools acquisition in January 2010.
Sales and Marketing. Sales and marketing expenses were $10.7 million in the three months ended June 30, 2010 compared to $7.2 million in the three months ended June 30, 2009, an increase of $3.5 million, or 47.9%. Sales and marketing expenses increased in the three months ended June 30, 2010 due to the expansion of our direct inside sales force in the United States, EMEA and the Asia Pacific region, an increase in marketing operations and program costs in the United States and EMEA and an increase in business development costs as we began to expand our partner relationships. As a result of these efforts, our sales and marketing personnel costs, which include stock-based compensation expense, increased by $2.1 million. Marketing program costs to drive higher levels of web traffic such as paid search, search engine optimization, search engine management, web operating costs and trade shows increased by $1.0 million.
General and Administrative . General and administrative expenses were $6.9 million in the three months ended June 30, 2010 compared to $4.1 million in the three months ended June 30, 2009, an increase of $2.8 million, or 68.4%. This increase was due primarily to an increase of $2.1 million in personnel costs, which include stock-based compensation expense, $0.1 in accounting, legal and severance costs associated with the acquisition of Tek-Tools, $0.3 million in amortization related to certain intangible assets from Tek-Tools, $0.2 million in cash severance costs related to the retirement of our former Executive Chairman and $0.2 million associated with preliminary work on a potential public offering that was cancelled during the second quarter of 2010 offset by a $0.3 million decrease in accounting and legal expenses related to our IPO in the second quarter of 2009. In June 2010, our former Executive Chairman retired and entered into a Severance Agreement and Release which provided for, among other things, an acceleration of the vesting of certain options, resulting in an additional one-time stock-based compensation expense of $1.4 million.
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Solarwinds Inc. has a market cap of $940.1 million; its shares were traded at around $13.83 with a P/E ratio of 24.3 and P/S ratio of 8.1. SWI is in the portfolios of Lee Ainslie of Maverick Capital, Pioneer Investments, Steven Cohen of SAC Capital Advisors.
Highlight of Business Operations:
Other income (expense) primarily consists of interest income, interest expense and foreign exchange gains (losses). Interest income represents interest received on our cash and cash equivalents. Interest expense is associated with our outstanding long-term debt, the outstanding principal of which was $44.1 million on December 31, 2009 and was paid in full on May 28, 2010. Interest expense includes the amortization and write-off of debt issuance costs, which was $0.1 million and $0.5 million for the three months ended June 30, 2010 and 2009, respectively, and $0.4 million and $0.6 million in the six months ended June 30, 2010 and 2009, respectively. Foreign exchange gains (losses) relate to expenses and transactions denominated in currencies other than the functional currency of the associated company.Revenue was $35.5 million in the three months ended June 30, 2010 compared to $27.0 million in the three months ended June 30, 2009, an increase of $8.5 million, or 31.3%. This increase was comprised of a $5.8 million increase in maintenance and other revenue, which resulted from a growing maintenance base due to new sales, new customers through acquisitions and high customer retention, and a $2.7 million increase in license revenue due to an increase in sales transaction volumes of our core enterprise -class network and IT management products and a 22.2% increase in our average transaction size for new sales. Our average transaction size for new sales was approximately $7,700 and $6,300 for the three months ended June 30, 2010 and 2009, respectively. Through the second quarter of 2010, the trailing 12- month average transaction size was approximately $7,600 as compared to approximately $6,100 for the 12- month period ending in the second quarter of 2009. We believe that the increase in new sales and our average transaction size for new sales resulted from better awareness of our products, an increase in the number of products that we sell primarily as a result of our product development and, to a significantly lesser extent, our acquisitions.
New sales in our commercial business increased 31.6% globally while new sales in our U.S. federal government business decreased 43.6% for the second quarter of 2010 compared to the second quarter of 2009. The decline in U.S. federal sales was primarily driven by a reduction in the value of orders received from agencies and groups associated with the Department of Defense. While we had no single transaction with license revenue over $0.5 million in the three months ended June 30, 2010, we received a single purchase order from one of our federal resellers in the three months ended June 30, 2009 that resulted in the recognition of $1.1 million in license revenue during the second quarter of 2009. Our revenue results also had a negative impact from foreign currency rates during the second quarter of 2010 compared to the rates during the second quarter of 2009. Our international revenue was 21.5% and 19.4% of total revenue in the second quarter of 2010 and 2009, respectively. The net impact of revenue in the second quarter of 2010 assuming we applied the same exchange rates used in the second quarter of 2009 was $0.6 million, comprised of an unfavorable impact on license revenue of $0.4 million and on maintenance revenue of $0.2 million.
Cost of revenue was $1.9 million in the three months ended June 30, 2010 compared to $1.2 million in the three months ended June 30, 2009, an increase of $0.7 million, or 60.9%. This increase was primarily due to a $0.4 million increase in cost of maintenance revenue related to increased headcount in our North American, European and Asia Pacific support organizations to support the new customers we added during 2009 and the first half of 2010. Cost of license revenue also increased by $0.3 million in the three months ended June 30, 2010 compared to the same period in 2009 due to the amortization of acquired product technologies associated with the Tek-Tools acquisition in January 2010.
Sales and Marketing. Sales and marketing expenses were $10.7 million in the three months ended June 30, 2010 compared to $7.2 million in the three months ended June 30, 2009, an increase of $3.5 million, or 47.9%. Sales and marketing expenses increased in the three months ended June 30, 2010 due to the expansion of our direct inside sales force in the United States, EMEA and the Asia Pacific region, an increase in marketing operations and program costs in the United States and EMEA and an increase in business development costs as we began to expand our partner relationships. As a result of these efforts, our sales and marketing personnel costs, which include stock-based compensation expense, increased by $2.1 million. Marketing program costs to drive higher levels of web traffic such as paid search, search engine optimization, search engine management, web operating costs and trade shows increased by $1.0 million.
General and Administrative . General and administrative expenses were $6.9 million in the three months ended June 30, 2010 compared to $4.1 million in the three months ended June 30, 2009, an increase of $2.8 million, or 68.4%. This increase was due primarily to an increase of $2.1 million in personnel costs, which include stock-based compensation expense, $0.1 in accounting, legal and severance costs associated with the acquisition of Tek-Tools, $0.3 million in amortization related to certain intangible assets from Tek-Tools, $0.2 million in cash severance costs related to the retirement of our former Executive Chairman and $0.2 million associated with preliminary work on a potential public offering that was cancelled during the second quarter of 2010 offset by a $0.3 million decrease in accounting and legal expenses related to our IPO in the second quarter of 2009. In June 2010, our former Executive Chairman retired and entered into a Severance Agreement and Release which provided for, among other things, an acceleration of the vesting of certain options, resulting in an additional one-time stock-based compensation expense of $1.4 million.
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