SolarWinds Corp. (SWI) is a provider of information technology (IT) infrastructure management software. The company’s broad suite of tools is designed to serve the needs of network engineers, systems engineers, database administrators, storage administrators, DevOps, service desk professionals, and managed service providers (MSPs). The the company generates revenue through maintenance services, subscriptions and licenses.

Founded in 1999 and headquartered in Texas, SolarWinds operates in a highly competitive industry. Competitors include large network management and IT companies such as Cisco Systems Inc. (CSCO), British MicroFocus International PLC, CA Technologies, International Business Machines Corp. (IBM) and BMC Software Inc. The company also competes with smaller firms in markets including cloud and application monitoring.

Key things

  • SolarWinds provides IT infrastructure management software.
  • The company has three business segments: Subscriptions, Maintenance Services and Licensing.
  • The company’s biggest source of revenue is maintenance services, but the subscription services segment is growing the fastest.
  • In May 2023, SolarWinds re-branded with a new logo, color palette and digital makeover to showcase its evolving business.
  • The company has also started introducing artificial intelligence into some of its products.

SolarWinds Finance

SolarWinds reported a net loss of $5.6 million for the first quarter of 2023, a 20% year-over-year increase in losses (JOY). The company had $186 million in revenue for the quarter; year-on-year increase of 5.1%.

The company’s revenue grew in only one business segment: subscriptions, while the other segments: maintenance and licenses fell. SolarWinds is shifting its business model to rely more on subscriptions and reduce maintenance, which it says will lead to revenue volatility over time. Subscription revenue grew by 40% year-on-year. Contributions came from SolarWinds’ Observability solution and the growth of ITSM and database monitoring product lines. Companies operating profit is positive but will hit high interest costs.

SolarWinds Business Segments

SolarWinds does not separate its operations into separate business segments; however, it splits its revenue into two main components: recurring revenue, which consists of subscription revenue and maintenance revenue; and license revenue. Recurrent sales make up the majority of the company’s total revenue. We’ll take a closer look at these separate sources of income below.

Subscription Revenue (Recurring)

SolarWinds primarily generates subscription revenue from fees received for subscriptions to its software-as-a-service (SaaS) offerings and certain revenue from time-based subscription arrangements. Subscription revenue includes sales of cloud infrastructure products, application performance management and IT service management, among other tasks.

Subscription revenue grew 40.2% to $54.4 million in Q1 2023. It accounts for approximately 29.2% of the company’s total revenue.

Maintenance revenue (recurring)

The Company generates maintenance revenue from the sale of maintenance services associated with its perpetual license products. Customers pay for these services depending on the products purchased.

Maintenance revenue decreased 0.88% to $114.5 million in 2023Q1. It accounts for about 61.6% of SolarWinds’ total revenue.

License revenue (non-recurring)

License revenue is generated from the sale of perpetual licenses for corporate network, systems, storage and database management products. Customers receive one year of maintenance services when they first purchase a license.

License revenue fell 24.2% to $17 million in Q1 2023. It accounts for about 9.2% of the company’s total revenue.

The latest developments from SolarWinds

In May 2023, SolarWinds relaunched mark in order to demonstrate its transformational efforts to develop its business, expand its product portfolio and improve its market entry strategy. The update includes a new brand logo, a new color palette, as well as a digital redesign to “improve consistency and usability across the company’s web properties and solutions.”

In May 2023, the company announced that it would incorporate transformative AI and machine learning capabilities into its IT service management solutions. Artificial intelligence features will help customers solve everyday IT problems and managed incident resolution to solve complex problems.

Source Link