Solarwinds, Inc. (SWI)

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SolarWinds, Inc. (SWI)

Morgan Stanley Technology, Media & Telecom Conference

February 26, 2013 16:55 ET

Executives

Mike Berry - Chief Financial Officer

Dave Hafner - Investor Relations

Analysts

Adam Holt - Morgan Stanley

Presentation

Adam Holt - Morgan Stanley

Alright, I will go ahead and get started. My name is Adam Holt. For those of you that I don’t know, I run the enterprise software practice at Morgan Stanley in Equity Research. And I am thrilled to have SolarWinds with us for our next presentation, Mike Berry and Dave Hafner. As you have heard in some of the presentations that we have done, I’ll lead the Q&A to start with, but want to make sure you all get all of your questions answered and just raise your hand, I’ll get you a microphone to the webcast. So, with that, guys thanks so much for braving the weather and the travel to get here to see us.

Mike Berry - Chief Financial Officer

Thank you, Adam. Happy to be here.

Adam Holt - Morgan Stanley

So, why don’t I start with a recap question, you are off another strong year, a lot of good metrics in the fourth quarter. The strategy really seems to be coming together. If you look at the recent results, what are you most pleased by and what do you think has really driven the strength in your license revenue?

Mike Berry - Chief Financial Officer

So, I think we are most pleased by really, a couple of years ago when we decoupled our NPM products, where we could sell them standalone. And then we also moved into the system and application space. It really took our addressable market and increased it by multiple times. So, I think we are most, we are happiest with our ability to continue to penetrate network management, but also just a strong growth that we have seen in system as well and to be able to build that awareness. So, we are happiest with that. We have also continued to focus hard on our cross-sell opportunity. And the international markets I mean our EMEA group really had a great year last year, and so we are very happy with that even in the phase of all the economic issues. So, we are very happy with that as well. So, you have bundled all those together. We think we had a very strong year main as renewals continued to do well. Earnings and cash did very well. So, it’s a very strong year financially.

Adam Holt - Morgan Stanley

Why don’t we drill down into each of those areas? So, EMEA was up 56% year-on-year in calendar ‘12, the environment might have stabilized for most people, but it certainly didn’t get a whole lot better. What are you doing differently in that GO to drive those kind of results?

Mike Berry - Chief Financial Officer

So, our team there has done a really great job of diversifying out of just Western Europe into the Africa, Middle East and Eastern Europe region as well plus they have just executed so much better in those home markets. We talk about a lot our average transaction size excluding a couple of smaller price, we average about $8500. And so we are really able to get in there. Again, we are talking to the end user not to the CIO, so even when there are budget issues, we like to think that kind of fly under the radar in those areas. So, even in the parts of Western Europe that have really struggled we did well, but a lot of the growth was in again in Africa and Middle East and Eastern Europe, where we have really seen a nice uptick in that business.

Adam Holt - Morgan Stanley

And if you were to sort of bring your lens up a little bit on the international business in general, you’ve got some localization efforts that are starting to take hold, can you talk about what those are? What kind of impact you have seen?

Mike Berry - Chief Financial Officer

Sure. So, to take a step back for a second, if you look at our products and we view products as not only what the user uses, but certainly our website which is our marketing engine. Virtually, everywhere across the world, the websites that we use to support our international business are all English-based as well as our products are largely English-based as well. So, to Adam’s question, we have embarked now for the last couple of years on localizing not only our products, which the end user uses, but more importantly our websites, because our biggest issue internationally is to continue to build that awareness in those markets that we have just gotten started it. And the localized presence is a huge piece of that.

So, the markets that we have already started in the Japanese market, we have NPM which is our core network performance management product and NTA, which was our net flow product. Those are actually localized in Japanese as well as localized in German. We will continue to localize products within network and system as we see that needs. And then the next countries we are looking hard at is the Brazilian market and China as well. So, we think that, that’s really important to build that awareness. We do, we can pretty much round it to zero. We do basically no business in the Japanese markets and it’s the second largest IT market in the world. We do pretty well in the German market, but we think we can do a lot better. And then China is actually a pretty good market for us and as well as the Brazilian market. So, we see a lot of upside in that, but it’s really incumbent upon us Adam to build that awareness first to get those wesbites up to make sure that those IT users know who we are and get comfortable with our products, because a lot of folks will use an English-based products, but we do think that, that’s really one of the next drivers for growth.

Read the rest of this transcript for free on seekingalpha.com