) reported fourth-quarter 2012 non-GAAP earnings of 36 cents per
share, which increased 24.1% from the year-ago quarter. Including
stock-based compensation, earnings came in at 32 cents per share,
ahead of the Zacks Consensus Estimate of 29 cents per share. The
upside in the earnings was driven by robust top-line growth and
Revenues for quarter increased 32.2% year over year to $73.5
million and exceeded management's revenue guidance of $69.3
million-$70.8 million. Reported revenues also surpassed the Zacks
Consensus Estimate of $71 million. On a sequential basis, the
company's revenues were up 2.5%.
The encouraging top-line expansion was aided by higher license
and maintenance revenue. License revenues, which accounted for
45% of the total revenue, increased 30.8% year on year to $33.1
million, primarily attributable to the robust performance of the
commercial business and the U.S. Federal business. SolarWinds
recorded 29% growth in the commercial new license sales.
Maintenance revenues, which accounted for the remaining 55% of
revenues, increased 33.3% from the year-ago quarter to $40.5
million on strong customer retention.
Gross profit (including stock-based compensation) increased
32.3% from the year-ago quarter to $70.4 million. Gross margin
for the quarter expanded approximately 10 basis points ("bps")
from the year-ago quarter to 95.8% due to higher revenue
Operating income (including stock-based compensation)
increased 33% from the year-ago quarter to $35.4 million while
operating margin increased 30 bps to 48.2%.
Non-GAAP net income increased from $21.8 million or 29 cents
per share to $27.7 million or 36 cents. However, including
stock-based compensation, net income came in at $24.5 million or
SolarWinds exited the quarter with cash, cash equivalents and
short-term investments of $229 million versus $195.7 million in
the previous quarter. Cash from operations increased sequentially
from $35 million to $47.2 million. Free cash flow for the quarter
was $48 million, which improved from $37.2 million in the
For the first quarter of 2013, SolarWinds expects revenues in
the range of $74.9-$75.7 million, reflecting a 26%-27% upside on
a year-over-year basis. Management expects non-GAAP earnings per
share to be 37 cents for the forthcoming quarter. The Zacks
Consensus Estimate expects SolarWinds to report 31 cents per
share in the first quarter.
SolarWinds also provided its fiscal 2013 guidance. Management
expects revenues in the range of $330 million - $338 million and
non-GAAP earnings per share between $1.57 and $1.62.
We believe that SolarWinds is well positioned to grow on its
recurring maintenance revenue stream. Moreover, strategic
acquisitions are expected to be incrementally beneficial over the
long run. Moreover, the company's expanding product portfolio and
expansions in the Asia-Pacific and the Latin American countries,
particularly in Brazil, should act as a positive catalyst going
However, increased investments in products and expansionary
initiatives will likely impact margins in the near term.
Moreover, volatile macroeconomic environment and competition from
bellwethers such as
Hewlett Packard Company
) are the major headwinds going forward.
Currently, SolarWinds has a Zacks Rank #3 (Hold).
BMC SOFTWARE (BMC): Free Stock Analysis
HEWLETT PACKARD (HPQ): Free Stock Analysis
INTL BUS MACH (IBM): Free Stock Analysis
SOLARWINDS INC (SWI): Free Stock Analysis
To read this article on Zacks.com click here.