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SolarWinds Corporation (SWI)
NYSE:SWI
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SolarWinds
(NYSE:SWI)
70Outperform
Positive Factors
Acquisition
SolarWinds to be acquired in an all-cash transaction valued at $4.4 billion, representing a 35% premium over its volume-weighted average closing price for the last 90 trading days.
Revenue and Profitability
SWI reported a strong quarter with nice upside to revenue and profitability.
Negative Factors
Public Sector Challenges
The FBI recently raided the offices of Carahsoft, a leading Public Sector SaaS consultant and SWI's Public Sector distributor/partner, which could slow the Federal market.
SolarWinds (SWI) vs. S&P 500 (SPY)
Market Cap
$3.14B
Dividend YieldN/A
Average Volume (3M)1.55M
Price to Earnings (P/E)28.6
Beta (1Y)0.80
Revenue Growth5.03%
EPS GrowthN/A
CountryUS
Employees2,107
SectorTechnology
Sector Strength54
IndustrySoftware
Share Statistics
EPS (TTM)0.64
Shares Outstanding171,606,890
10 Day Avg. Volume1,492,633
30 Day Avg. Volume1,547,590
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)N/A
Price to Sales (P/S)3.94
Price to Cash Flow (P/CF)10.80
P/FCF Ratio10.80
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$17.10Price Target Upside-6.56% Downside
Rating ConsensusHold
Number of Analyst Covering6
SolarWinds Business Overview & Revenue Model
Company DescriptionSolarWinds (SWI) is a leading provider of IT infrastructure management software, known for delivering powerful and affordable solutions for network management, systems management, database management, and IT security. With a focus on simplifying IT management, SolarWinds offers a range of products that address the needs of IT professionals in various sectors including government, education, healthcare, and technology. The company is headquartered in Austin, Texas, and is renowned for its user-friendly software solutions that are designed to solve the common challenges faced by IT departments.
How the Company Makes MoneySolarWinds generates revenue through the sale of software licenses, subscriptions, and maintenance services. Its primary revenue streams include the licensing of network management software, systems management tools, and security solutions. The company employs a hybrid model, offering both perpetual licenses and subscription-based models for its products, allowing customers flexibility in how they adopt and pay for the software. In addition to direct sales, SolarWinds also benefits from a robust reseller channel, including managed service providers and value-added resellers, which helps extend its reach into various markets. Additionally, the company has strategic partnerships with technology companies that enhance its offerings and expand its market presence. SolarWinds' revenue model is further supported by ongoing maintenance and support contracts, which provide a consistent stream of recurring revenue.
SolarWinds Financial Statement Overview
Summary
SolarWinds is on a strong recovery path with significant improvements in profitability, leverage, and cash flow generation. While revenue growth remains steady, enhancing operational efficiency and increasing returns on equity could further strengthen its financial position.Income Statement
SolarWinds has demonstrated an impressive turnaround in profitability with a gross profit margin of 89.54% and a net profit margin of 14.04% in 2024, up from a negative net margin last year. Revenue growth rate of 5.03% indicates steady performance in a competitive industry. However, the EBIT margin at 26.15% could be improved given the industry's potential for higher operational efficiency.70
Positive
Balance Sheet
The debt-to-equity ratio has improved significantly to 0.04 in 2024, reflecting reduced leverage and a stronger equity base. The equity ratio of 44.21% highlights a healthy proportion of equity financing. However, the return on equity of 7.99% suggests room for enhancing shareholder returns.65
Positive
Cash Flow
SolarWinds shows robust cash flow with a free cash flow of $182.69 million in 2024 and a strong operating cash flow to net income ratio of 1.68, indicating efficient cash conversion. The free cash flow growth rate of 10.57% from the previous year highlights solid cash generation capacity.75
Positive
| Breakdown | ||||
| Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 796.89M | 758.74M | 719.37M | 718.63M | 1.02B | Gross Profit |
| 713.59M | 623.53M | 623.38M | 491.62M | 744.63M | EBIT |
| 208.42M | 150.37M | 66.45M | -32.42M | 107.44M | EBITDA |
| 208.42M | 232.19M | -729.67M | 197.72M | 273.19M | Net Income Common Stockholders |
| 111.90M | -9.11M | -929.41M | -64.47M | 158.47M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 259.32M | 289.17M | 148.85M | 732.12M | 370.50M | Total Assets |
| 3.17B | 3.25B | 3.20B | 4.79B | 5.71B | Total Debt |
| 61.72M | 1.27B | 1.28B | 1.98B | 2.04B | Net Debt |
| -190.13M | 983.46M | 1.15B | 1.25B | 1.66B | Total Liabilities |
| 1.77B | 1.81B | 1.83B | 2.50B | 2.70B | Stockholders Equity |
| 1.40B | 1.44B | 1.37B | 2.29B | 3.01B |
| Cash Flow | Free Cash Flow | |||
| 182.69M | 165.19M | 133.76M | 143.22M | 350.87M | Operating Cash Flow |
| 188.30M | 183.47M | 154.51M | 157.13M | 389.09M | Investing Cash Flow |
| -23.06M | 4.44M | -54.31M | -28.47M | -180.13M | Financing Cash Flow |
| -197.01M | -24.65M | -709.20M | 238.24M | -25.56M |
SolarWinds Technical Analysis
Positive
18.30
Price Trends
16.29
Positive
14.94
Positive
13.58
Positive
Market Momentum
0.53
Positive
77.88
Negative
37.34
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For SWI, the sentiment is Positive. The current price of 18.3 is below the 20-day moving average (MA) of 18.31, above the 50-day MA of 16.29, and above the 200-day MA of 13.58, indicating a neutral trend. The MACD of 0.53 indicates Positive momentum. The RSI at 77.88 is Negative, neither overbought nor oversold. The STOCH value of 37.34 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for SWI.
SolarWinds Risk Analysis
SolarWinds disclosed 62 risk factors in its most recent earnings report. SolarWinds reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
SolarWinds Peers Comparison
Overall Rating
UnderperformOutperform
Sector (58)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
81 Outperform | $14.73B | 29.71 | 21.59% | ― | 19.81% | 139.58% | |
74 Outperform | $85.95B | 721.64 | -0.69% | ― | 29.39% | -119.62% | |
73 Outperform | $30.60B | ― | -1.21% | ― | 27.77% | 89.39% | |
70 Outperform | $3.14B | 28.55 | 7.87% | ― | 5.03% | ― | |
67 Neutral | $41.43B | ― | -8.71% | ― | 28.76% | 58.13% | |
63 Neutral | $4.35B | ― | -9.73% | ― | 12.68% | 54.80% | |
58 Neutral | $21.67B | 10.04 | -18.58% | 2.39% | 5.01% | -23.17% |
* Technology Sector Average
Performance Comparison
SWI
SolarWinds
18.30
6.88
60.25%
ZS
Zscaler
189.58
-4.45
-2.29%
TENB
Tenable Holdings
35.25
-10.70
-23.29%
CRWD
CrowdStrike Holdings
332.53
16.88
5.35%
DT
Dynatrace
47.32
1.71
3.75%
NET
Cloudflare
113.70
22.10
24.13%
SolarWinds Earnings Call Summary
Earnings Call Date: Feb 11, 2025 | % Change Since: -0.05% | Next Earnings Date: May 1, 2025
Earnings Call Sentiment Positive
The earnings call highlighted strong subscription revenue growth, robust customer retention, and significant achievements in expanding SolarWinds' observability solutions. Despite a challenging IT spending environment and declines in maintenance and license revenue, the company delivered strong financial results and raised its revenue guidance, indicating a positive outlook.Highlights
Strong Subscription Revenue Growth
SolarWinds reported a 30% year-over-year increase in subscription revenue and a 36% growth in subscription ARR for Q3 2024, driven by their subscription-first strategy.
Robust Customer Retention Metrics
The company maintained a trailing 12-month maintenance renewal rate of 97%, indicating strong customer loyalty and satisfaction.
Record Adjusted EBITDA
SolarWinds achieved an adjusted EBITDA of $96 million, representing a 13% year-over-year growth with 48% margins.
Expansion of Observability Solutions
Key updates to the SolarWinds Observability offerings were announced, improving system scalability and supporting Azure and AWS workloads, leading to a significant reduction in total cost of ownership for customers.
Positive Financial Guidance
The company raised its full-year revenue guidance to $788 million to $791 million, representing 4% year-over-year growth.
Lowlights
Decline in Maintenance and License Revenue
Maintenance revenue was down 5% compared to the prior year, and license revenue decreased by 10% year-over-year. This decline was anticipated due to the transition to subscription products.
Challenging IT Spending Environment
The IT spending environment remains challenging, though SolarWinds continues to see growth in predictable recurring revenue.
Company Guidance
During the SolarWinds Q3 2024 earnings call, the company reported exceeding their guidance across key metrics, showcasing a robust financial performance. Total revenue reached $200 million, representing a 6% year-over-year growth, with subscription revenue seeing a significant 30% increase. The company highlighted strong customer retention, with a maintenance renewal rate of 96% for the quarter and 97% on a trailing 12-month basis. SolarWinds also noted an 8% year-over-year increase in total ARR, totaling $724 million, and achieved an adjusted EBITDA of $96 million, reflecting a 13% growth with a margin of 48%. The company continues to focus on its subscription-first strategy, as evidenced by the 36% growth in subscription ARR. Additionally, SolarWinds is optimistic about their future prospects, expecting Q4 revenue to be between $201 million and $204 million, with full-year revenue projected to grow by 4% year-over-year at the midpoint.SolarWinds Corporate Events
Delistings and Listing ChangesM&A TransactionsBusiness Operations and Strategy
SolarWinds Acquired by Turn/River Capital for $4.4 Billion
Positive
Feb 7, 2025
On February 7, 2025, SolarWinds Corporation announced its acquisition by Turn/River Capital in an all-cash transaction valued at approximately $4.4 billion, offering $18.50 per share to shareholders. This transaction, approved by SolarWinds’ Board and majority shareholders, will result in the company going private, with its stock delisted from the New York Stock Exchange. The acquisition signifies a strategic move for SolarWinds to enhance operational resilience and customer value, leveraging Turn/River’s expertise to drive further growth and innovation, while maintaining its headquarters in Austin, Texas.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.