Q3 2024 SolarWinds Corp Earnings Call

During this time simply press star followed by the number one on your telephone keypad and if you'd like to withdraw that question again press star one.

Speaker Change: I will now like to turn the conference over to Kim Karanja, Vice President of Finance you may begin.

Kim Karanja: Thank you good morning to everyone and welcome to the solar with third quarter 2024 earnings call.

Kim Karanja: Tobacco Ramakrishna, our president and CEO Lewis Black our CFO are with me today.

Kim Karanja: Following our prepared remarks, we will have a question and answer session.

Kim Karanja: This call is being simultaneously webcast on our Investor relations website at investors that solar winds dot com.

You can also find our earnings press release, and the summary, slide deck, which is intended to supplement our prepared remarks during today's call.

Kim Karanja: Please remember that certain statements made during this call are forward looking statements, including those concerning our financial outlook.

Kim Karanja: Market opportunities our expectations regarding customer retention, our continued evolution to a subscription first mentality our expectations regarding our partner ecosystem.

Kim Karanja: The enforcement action the impact of the global economic and geopolitical environment on our business and our gross level of debt.

Kim Karanja: These statements are based on currently available information and assumptions and we undertake no duty to update this information except as required by law.

Kim Karanja: These statements are subject to a number of risks and uncertainties, including the numerous risks and uncertainties highlighted in today's earnings release, and our filings with the SEC.

Kim Karanja: Copies are available from the SEC on our Investor Relations website.

It was 97% flat from 97% last quarter and up from 95% in Q3 of last year.

Kim Karanja: Our customer retention metrics remained robust highlighting the compelling value proposition of our solutions.

Kim Karanja: Total <unk> in the third quarter was $724 million, an increase of 8% year over year.

Kim Karanja: We delivered adjusted EBITDA of $96 million.

Kim Karanja: Representing 13% year over year growth with 48% margins.

Kim Karanja: We continue to be a rule of 50 companies.

Turning to our product portfolio as I've previously discussed.

Kim Karanja: Purpose of enriching the lives of our customers is central to all we do.

Kim Karanja: Reducing complexity lowering costs and increasing our customers' productivity remain key motivating factors, but our portfolio evolution.

Kim Karanja: I believe our diverse array of solutions across Absorbability database performance monitoring and service management deliver unmatched time to value time to detect and time to remediate issues.

Kim Karanja: With our enterprise service management platform, enabling our customers to provide help desk solutions across any department in the organization.

Kim Karanja: Solar wind <unk> customers, who have enabled our gen AI features.

Kim Karanja: We achieved meaningful year over year improvement in the meantime to resolve issues. We are seeing greater adoption of these gen AI capabilities, which are part of our service desk solutions premium package and result in higher average sales prices.

Kim Karanja: Now turning to our database performance management solution.

Kim Karanja: Continue to simplify the packaging and pricing of our database solutions.

Kim Karanja: Now customers have the freedom and flexibility to choose the right solution for their environment.

Kim Karanja: And now let us to the changes to be implemented for our observe ability solutions over the last two plus years.

Kim Karanja: We believe this will further simplify the customer experience, resulting in greater adoption and higher ASP.

Kim Karanja: As always we remain dedicated to helping customers reduce cost, while enabling them to accelerate their business transformation.

Kim Karanja: We believe this will give us.

Kim Karanja: Further opportunity to expand our footprint in customers' environments and help them consolidate their tools.

Kim Karanja: In closing I am proud of the progress we have made against the priorities. We provided at the start of the year.

Kim Karanja: $3 9 million.

Diluted shares outstanding.

Kim Karanja: Our full year and fourth quarter guidance assumes a euro to dollar exchange rate of $1 <unk> to one euro.

Speaker Change: With that I'll return the call to suit anchor for his closing remarks.

Speaker Change: Thank you Louis I'm pleased with our progress in the third quarter evidenced by our strong financial performance and the platform updates that address our customers' evolving and critical needs.

Speaker Change: We delivered a strong Q3 and I am confident about closing Q4 and 2024 on a high note as we continue to execute our strategy, which we set more than three years ago.

Speaker Change: As I look to the future.

Speaker Change: And optimistic for several reasons.

Speaker Change: We continue to serve a large growing and diversified customer base with our broad array of solutions, allowing us to increase our share of wallets, while growing our relevant.

Speaker Change: We believe the growth in our IRR and strong customer retention close this out.

Speaker Change: Your next question comes from the line of Matt Hedberg with RBC capital markets. Please go ahead.

Matt Hedberg: Thanks for taking my questions gentlemen, and congrats on the.

Matt Hedberg: The results, it's really good to see the momentum I guess the doctor.

Matt Hedberg: Your growth rate continues to kind of tick up here this year and the beats are getting larger and relative to what we saw earlier. This year I was just curious.

Matt Hedberg: Could you put a finer point on the demand environment I know you said it was sort of stable but.

Matt Hedberg: The results are certainly feel better than stable. So I'm just kind of curious if you could help us understand some of the demand trends that you're seeing.

Speaker Change: Definitely Matt first of all thanks again for your ongoing support of Sullivan's.

Speaker Change: I am very pleased with the results that we deliver that and it is simply an indication of ongoing progress and validation of our strategy and execution abilities.

Speaker Change: In regards to the demand environment as you know we have a very large and diversified customer base, both by deal as well as market segment.

Speaker Change: A lot of our.

Speaker Change: Expansion or growth definitely comes from our installed base as.

Speaker Change: As we support them with broader solutions.

Speaker Change: I would highlight is the ongoing conversion to subscription as we have converted our maintenance base to subscription there's always a opportunity to discuss the value with the customer and as you remember.

Speaker Change: I have noted that our subscription transition is not simply a business model transition as much as it is a value model transition. So in many of those kind of conversations we consolidate customers tools. So that in essence means that we are getting a larger share of wallet and that is definitely one aspect of it the second incur.

Speaker Change: <unk> is the fact that we have a more unified absorbability solution that spans on premises and cloud and closes the hybrid visibility gaps is enabling us to win larger deals. That's an early trend, but thats definitely a contributing trend and the third piece is what you mentioned.

Which is some of the upstream customer requirements, especially as we selectively go upstream into the enterprise through GSI partners. That's also a contributing factor.

Speaker Change: Understood. Thank you.

Speaker Change: Your next question comes from the line of Miller with <unk> Securities. Please go ahead.