SolarWinds Buyout Moving to Financing Stage

SolarWinds, which Silver Lake and Thoma Bravo are buying for $4.5 billion, has created a confidential presentation for potential lenders and investors interested in the deal.

To be clear: Silver Lake and Thoma Bravo are still buying SolarWinds and its N-able business -- which works closely with managed services providers (MSPs). But an SEC filing suggests that "a confidential presentation to potential lenders and investors" is designed to help attract financing for the deal. That presentation apparently started to reach potential lenders and investors on January 12, 2016.

SolarWinds 2015 Revenue Estimates

That confidential presentation includes a range of financial and customer metrics, according to SolarWinds' SEC filing. Among the financial metrics in the filing:

  • Preliminary 2015 Revenues: SolarWinds' preliminary unaudited total revenue for the full year 2015 was $504.1 million, up 17.6% vs 2014.
  • Preliminary Q4 Revenues: SolarWinds' preliminary unaudited total revenue for Q4 2015 was $136.6 million, up 15.4% from Q4 2014.
  • Preliminary Recurring Revenues: Preliminary recurring revenue for 2015 was $332.4 million,including maintenance revenue of $277.6 million and subscription revenue of $54.8 million, and representing 65.9% of total revenue. The N-able buyout of 2013 has played a key role in SolarWinds' recurring revenue growth.
  • Preliminary Adjusted EBITDA: It's expected to be in the range of $67.5 to $69.0 million for Q4 2015 and $231.0 to $232.5 million for the full year 2015.

SolarWinds Customer Metrics

SolarWinds' confidential presentation to investors, according to the SEC filing, also includes some customer adoption KPIs (key performance indicators). For instance:
  • Average Deal Size: SolarWinds' preliminary commercial core average transaction size for new license sales was approximately $9,000 in the fourth quarter of 2015. But that figure excludes SolarWinds' transactional products, MSP products and cloud products.
  • Customer Adoption: SolarWinds has more than 225,000 customers, and the typical customer licenses about 2.76 products from the company -- up from 2.38 products in Q1 2012.

SolarWinds Buyout and Long-Term Goals

The SolarWinds buyout, negotiated in late 2015, involved roughly 66 days of negotiations and nine potential suitors. While SolarWinds' core technologies appeal to IT professionals, the company remains strongly committed to its N-able software for MSPs, sources have indicated.

Longer term, SolarWinds plans to grow revenues to nearly $1 billion by 2020, according to another SEC filing reviewed by ChannelE2E. That's nearly double 2015's preliminary figure of $504.1 million.

No doubt, SolarWinds has a broad product portfolio -- spanning monitoring and performance management for networks, servers, applications, security, and database management. Those areas are ripe for growth as customers extend applications across traditional, hybrid, cloud and mobile environments.

Established and Emerging SolarWinds Rivals

But those opportunities also come with challenges -- including potential rivals like:

Bottom line: SolarWinds remains in growth mode, with an attractive portfolio of tools designed for corporate IT professionals and service providers. But it sounds like Silver Lake and Thoma Bravo will welcome potential investors to the table to help finance the buyout.

At the same time, SolarWinds will need to continue investing heavily -- for organic R&D and potential acquisitions -- to address the next waves of IT management, from big data and Docker containers to the Internet of Things.

Joe Panettieri

Joe Panettieri is co-founder & editorial director of MSSP Alert and ChannelE2E, the two leading news & analysis sites for managed service providers in the cybersecurity market.