SolarWinds Holdings Inc.

Overview Key strengths Key risks Trailing-12-month (TTM) maintenance renewal rates of 95% with subscription revenue growth of 39% year over year. SEC lawsuit on SolarWinds will result in increased litigation costs over the near term. Good profitability with S&P Global Ratings'-adjusted EBITDA margins of about 40%. Operates in a competitive end market for its network monitoring products. Ample liquidity with cash and short-term investments of about $235 million and full access to a $130 million revolving credit facility. Acquisitive past with majority sponsor ownership (about 67% owned by Silverlake and Thoma Bravo). SolarWinds continues to execute well during fiscal 2023 and announced a solid third quarter 2023 that beat our base-case expectations, with revenue growth of 6% year over year

...SolarWinds Holdings Inc.'s 2023 performance is ahead of expectations, but challenges remain. SolarWinds continues to execute well during fiscal 2023 and announced a solid third quarter 2023 that beat our base-case expectations, with revenue growth of 6% year over year (vs 5% year over year revenue growth in the second quarter of 2023). The strength in revenues is driven by ongoing transition subscription revenues, with subscription revenue growth of 39% year over year and subscription annual recurring revenue (ARR) growth of 34% in the third quarter 2023. The company also continues to improve maintenance renewal rates which are now at 95% for the trailing twelve months ending in third quarter of fiscal 2023, showcasing the critical nature of its products. SolarWinds did note some slipped deals in its US federal segment due to continuing resolution issues, but the company expects to close them in the fourth quarter of 2023. Despite the generally uncertain spending environment, we expect...

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