2019 analyst and investor day...solarwinds corp. was formed by affiliates of investment firms silver...

© 2019 SolarWinds Worldwide, LLC. All rights reserved.

2019 Analyst and Investor Day

December 11, 2019


2

General Disclaimer

Forward-Looking Statements

This presentation and the accompanying oral presentation contain forward-looking statements. Forward-looking statements convey our current expectations or forecasts of future events. All statements contained in this presentation, other than statements of historical fact, are forward-looking. You can identify forward-looking statements by terminology such as “anticipates,” “believes,” “can,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “seeks,” “should,” “will,” or “would” or the negative of these terms or similar expressions. Forward-looking statements contained in this presentation include, but are not limited to: statements about our expectations regarding our plans and strategies to grow our business and expand our market share, including internationally; our expectations concerning our product offerings and the expansion of these offerings and our market opportunities; our expectations regarding our financial condition and results of operations, including revenue, operating expenses and cash flow; our expectations regarding our non-U.S. earnings in foreign operations; our expectations concerning potential acquisitions and the anticipated benefits of acquisitions; our expectations concerning our ability to compete successfully against current and future competitors; our market opportunities and our ability to take advantage of such market opportunities; the demand for IT management products in various markets, and factors contributing to such demand; trends associated with our industry and potential market; our sales and marketing efforts and our expectations about the results of those efforts; our expectations about our ability to generate and maintain customer loyalty and our ability to manage customer growth; our expectations regarding investment plans and capital expenditures; our research and development plans; our equity compensation plans and practices; our future borrowings and our beliefs regarding the sufficiency of our cash and cash equivalents, cash flows from operating activities and borrowing capacity; our ability to attract and retain qualified employees and key personnel; and our ability to protect and defend our intellectual property and not infringe upon others’ intellectual property.

There are a number of important factors that could cause our actual results to differ materially from the results anticipated by these forward-looking statements, including, but not limited to, our ability to capture significant volumes of high quality sales leads from our digital marketing initiatives and convert such leads into new business at an acceptable conversion rate, our ability to sell products to new customers or to sell additional products or upgrades to our existing customers, our customers renewing their maintenance or subscription agreements, our ability to manage growth effectively and successfully identify, complete and integrate acquisitions, our ability to operate internationally and increase sales of our products to customers outside the United States, our ability to compete in highly competitive markets, potential foreign exchange gains and losses related to expenses and sales denominated in currencies other than the functional currency of an associated entity, and such other risks and uncertainties described more fully in documents filed with or furnished to the Securities and Exchange Commission, including the risk factors discussed in our Annual Report on Form 10-K for the period ended December 31, 2018 filed on February 25, 2019, which is available on our website at https://investors.solarwinds.com. If one or more of these factors materialize, or if any underlying assumptions prove incorrect, our actual results, performance or achievements may vary materially from any future results, performance or achievements expressed or implied by these forward-looking statements. Forward-looking statements represent our management’s beliefs and assumptions only as of the date of this presentation. We undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Accuracy of Data

This presentation contains statistical data based on independent industry publications or other publicly available information, as well as other information based on our internal sources. We have not independently verified the accuracy or completeness of the data contained in these industry publications and other publicly available information. Accordingly, we make no representations as to the accuracy or completeness of that data.


3

Non-GAAP Financial Measures

In addition to financial information prepared in accordance with generally accepted accounting principles in the United States (GAAP), we use certain non-GAAP financial measures to clarify and enhance our understanding, and aid in the period-to-period comparison, of our performance. We believe that these non-GAAP financial measures provide supplemental information that is meaningful when assessing our operating performance because they exclude the impact of certain amounts that our management and board of directors do not consider part of core operating results when assessing our operational performance, allocating resources, preparing annual budgets and determining compensation. The non-GAAP measures have limitations, and should not be considered in isolation, or as a substitute for, the most comparable GAAP financial measures. These non-GAAP financial measures are not prepared in accordance with GAAP, do not reflect a comprehensive system of accounting and may not be completely comparable to similarly titled measures of other companies due to potential differences in the exact method of calculation between companies. See the Appendix to this presentation for a reconciliation of the non-GAAP financial measures presented to their most comparable GAAP equivalents. A reconciliation of forward looking non-GAAP financial measures used in this presentation to their most comparable GAAP measures is not available without unreasonable effort due to the uncertainty regarding, and the potential variability of, certain of the adjustments made to such measures that may be incurred in the future.

UNLESS OTHERWISE STATED, YOU MAY ASSUME ALL FINANCIAL MEASURES DISCUSSED IN THIS PRESENTATION, INCLUDING STATEMENTS REGARDING PROFIT AND PROFITABILITY, ARE PRESENTED ON A NON-GAAP BASIS.

Presentation of 2019 Financial Results Due to Adoption of ASC 606In January 2019, we adopted FASB Accounting Standards Codification (“ASC”) No. 2014-09 “Revenue from Contracts with Customers,” or ASC 606, which replaced all existing revenue guidance under ASC 605 “Revenue Recognition,” including prescriptive industry-specific guidance, or ASC 605, used in prior periods. Unless stated otherwise, year-over-year growth rates are calculated using financial results under ASC 606 for the current period and financial results under ASC 605 for the corresponding period in the prior year.

Impact of Purchase Accounting Related to the Take Private and AcquisitionsSolarWinds Corp. was formed by affiliates of investment firms Silver Lake and Thoma Bravo to acquire SolarWinds, Inc., then a publicly traded company, which acquisition was completed on February 5, 2016 and is referred to throughout this presentation as the “Take Private.” The comparability of our year-to-year operating results has been significantly impacted by the Take Private and to a lesser extent, other acquisitions. We account for acquired businesses, including the Take Private, using the acquisition method of accounting, which requires that the assets acquired and liabilities assumed, including deferred revenue, be recorded at the date of acquisition at their respective fair values which could differ from the historical book values. In most cases, adjusting the acquired deferred revenue balances to fair value on the date of the relevant acquisition had the effect of reducing the historical deferred revenue balance and therefore reducing the revenue recognized in subsequent periods. In addition, we incurred amortization of acquired technology and intangibles in connection with the Take Private and to a lesser extent, other acquisitions.

Note Regarding Results Prior to Take PrivateAll results presented for periods prior to February 5, 2016 represent results of our predecessor entity before the Take Private. All results presented for 2016 represent the combined year 2016 for our predecessor entity before the Take Private and the successor entity after the Take Private. This combination is unaudited and does not comply with GAAP or with the rules for pro forma presentation, but is presented because we believe it provides the most meaningful comparison of our results.

© 2019 SolarWinds Worldwide, LLC. All rights reserved.© 2019 SolarWinds Worldwide, LLC. All rights reserved.

4

Agenda

11:30am

Introduction, 15 minutes

Kevin Thompson, CEO

Market Opportunity, 75 minutes

Kevin Thompson, CEO

ITOM Strategy and Opportunity, 45 Minutes

David Gardiner, GM IT Operations Management

~1:00pm

Lunch Break, 30 minutes

Product Strategy, 45 Minutes

Joe Kim, CTO


5

Agenda

~3:00pm

Short Break, 10 minutes

MSP Strategy and Opportunity, 45 Minutes

John Pagliuca, GM MSP

Long Term Model, 20 Minutes

Kevin Thompson, CEO

Finance Strategy, 45 minutes

Bart Kalsu, CFO

~5:00pm

End of Session


and still the best story in

software.

6


20 Years of Executing On Our Vision

From Point Provider of

Network Management Products

To Broad IT Management

Product Portfolio

To Today’s One-Stop Shop

For “All Things IT”

NETWORK NETWORK

RM

M

NETWORK

AP

M

BACKUP

7


And, 20 Years Of…

Innovation

Pioneering Operating Model

• Digital Marketing

• Easy to Try Products

• Selling from the Inside

• High Velocity, Low Cost

Customer Acquisition

• Efficient R&D

Growth + Profit + Cash

320K+ Customers

15% Non-GAAP Total Revenue

Growth2

Approaching $1B Annual Non-GAAP

Revenue Run-Rate

45%-49%+ Adjusted EBITDA

Margins Since 20173

83%-91% Unlevered Free Cash

Flow Conversion Since 20174

Success

#1 in Network Management5

#3 in ITOM Performance Analysis6

Leading RMM Provider for MSPs

Recognized Cloud Management

Vendor

Highly Rated & Reviewed ITSM

Vendor

Market Disruption

Serve the Entire Market with…

• Powerful & Affordable

Products

• From SMBs to all 500 of

the Fortune 5001

1. Based on the 2018 Fortune 500 list.

2. Represents compounded annual growth rate for non-GAAP total revenue from Q1’17 to Q4’19E based on mid-point of FY’19 outlook provided on October 30, 2019.

3. Represents current and historical adjusted EBITDA margins from FY 2017 to YTD’19 through September 30, 2019.

4. Represents current and historical unlevered free cash flow conversions from FY2017 to YTD’19 through September 30, 2019.

5. IDC defined Network Management Software functional market, IDC’s Worldwide Semiannual Software Tracker, November 2019

6. Gartner. Market Share Analysis: ITOM, Performance Analysis Software, Worldwide, 20188


While Always Delivering on the SolarWinds’ Promise

Powerful ScalableEasy to try Easy to use Affordable

9


We believe this is the RIGHT PLACE

and RIGHT TIME for

SolarWinds to disrupt again…

10


Market OpportunityKevin Thompson, CEO

11


Monitoring, Management & Analytics

for IT Ops, DevOps & MSPs in the

Hybrid IT World

12


We Are a Company With...

• A user-defined product strategy

• Broad coverage of hybrid IT

• Products that simplify the complex job of IT

• The ability to serve companies of all sizes

• A unique and powerful go-to-market model

• Best in class profitability & consistent growth

13


Resulting In Where We Stand Today

14

Note: All trailing 12-month (“TTM”) and year-to-date (“YTD”) amounts are through Q3’19.

1. Constant Currency Non-GAAP revenue for entities reporting in currencies other than U.S. Dollars are converted into U.S. Dollars at the average exchange rates in effect during the corresponding prior period presented.

2. Trailing 12-month net retention is calculated on a constant currency basis as of Q3’19 for all non-USD transactions are converted using the same exchanges rates for all periods. Constant currency calculation not used in previous disclosures.

3. Trailing 12-month maintenance renewal rate is calculated on a constant currency basis as of Q3’19 for all non-USD transactions are converted using the same exchanges rates for all periods. Constant currency calculation method not used in

previous disclosures.

$172.3

$242.7

Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18 Q3'18 Q4'18 Q1'19 Q2'19 Q3'19

15%

CAGR

Total Non-GAAP Revenue, in millions

320K+Customers

14%YTD 2019 YoY CC Non-

GAAP Revenue Growth1

108%TTM CC Avg. Subscription

Net Retention2

26Customers with

500K+ in TTM spend

$387MTTM Unlevered Free

Cash Flow

96%TTM CC Maintenance

Renewal Rate3

850+Customers with

100K+ in TTM spend

82%TTM Non-GAAP

Recurring Revenue


With Multiple Drivers of Long-Term Growth Still In Front of Us

MSP AdoptionNot all companies have the resources needed

to manage IT performance on their own.

SMBs are adopting MSPs

at a rapid pace.

Hybrid ITOn-premises infrastructure continues to

grow, and public cloud adoption continues

at a rapid pace.

Hybrid IT increases

complexity and need for

monitoring and management

tools.

Evolving MarketIncreasing maturity of previously disrupted IT

capabilities is introducing new winners/losers

in IT management.

Opportunity for growth

increases as performance

challenges become better

understood.

Proven Ability to Take Market ShareDeep IT management expertise + product depth and breadth + powerful and scalable + easy to use + affordable.

Disruptive value proposition.

15

Continued On-

Premises Growth…driven by security requirements, cost

considerations and performance needs that

aren’t going away.

On-prem IT infrastructure is

here to stay and needs to be

managed.

Digital

TransformationBusinesses of all sizes are more dependent

on technology than ever before

Managing IT performance

matters more than ever before.


Created by the Challenges of Rapidly Changing IT Technology

Critical to business

Always-On App

Performance

Must solve interconnected

performance challenges

Hybrid IT

Powerful, scalable

products must also be

easy to use and built for

end users

Increasing IT

Complexity

IT management needs to

be built for IT Ops teams

as well as third parties

like MSPs

Limited IT

Management

Resources

16


$40

$45

2019 2023

As is spending for on-prem

IT management software2

While at the Same Time On-Prem IT Infrastructure is Still a Growth Market

17

($ in billions)

1. IDC WW Quarterly Cloud IT Infrastructure Tracker, Q2-2019. Represents total value of on-premises and private cloud spending on servers, storage and network hardware.

2. IDC Semiannual Software Tracker – Forecast 2019H1, November 2019.

3. IDC defined Network Management Software functional market, IDC’s Worldwide Semiannual Software Tracker, November 2019.

4. IDC Research, Worldwide Network Performance and Operations Management 2009-2013 Forecast.

5. Gartner, Market Share Analysis: ITOM, Performance Analysis Software, Worldwide 2018.

6. Gartner, Market Share Analysis: ITOM, Performance Analysis Software, Worldwide 2016.

$88$96

2019 2023

On-prem IT infrastructure

expected to continue to grow1…

$88$96

2019 2023

On-prem IT infrastructure

expected to continue to grow1…

We don’t see on-prem IT

going away…

Until optimizing

performance doesn’t

matter…

Until security is no longer a

concern…

And, until cost isn’t

important

Our approach has allowed

us to gain market share

#1 in Network

Management3

#3 in ITOM Performance

Analysis5

vs #8 in 20084

vs #6 in 20166


Ma

na

ge

me

nt

Ne

ed

s

…And New IT Architectures Create New Issues and Greater Complexity

Time

Physical networks,

infrastructure and

packaged apps sitting

behind the firewall

Same existing needs plus…

- Software-defined networks,

over-the-internet traffic,

dynamic infrastructure, edge

computing and custom apps

Breadth of

Management Needs

Time

Nu

mb

er

of

Lo

cati

on

s

On-Premises

Number of

Deployment Locations

On-premises plus…

- Private cloud, public

cloud and multi-cloud

18


Which Have Added to the Performance Management Challenge

Time

Hybrid IT

On-Premises

Private Cloud

Public Cloud

19


SolarWinds is Built for Today’s IT Infrastructure: On-Prem to Cloud = Hybrid

AppOptics is a

SaaS APM tool for

cloud-native and

hybrid environments

PerfStack delivers

cross-stack IT

data correlation

NetPath provides

hop by hop visual

network path

analysis for hybrid IT

20


And Provides Technology to Monitor & Manage ALL IT Environments

21


Based on an Understanding of Tech Pros’ Needs

22

600+Attendees

1.7MUsers

2.7MVisits in 2018

150K+Members

1.1KAttendees

6Events

700+Attendees


While Remaining Infrastructure-Location Agnostic

On-Premises Private Cloud

23


Today’s Infrastructure is Varied & Complex & You Have to Manage it All

Built for

Hybrid IT?

Full Stack

Visibility?

Network

Visibility?

Easy to

Use?

Built for All

IT Pros?

Purpose-

Built for

Service

Providers?

Legacy IT

Management

Vendors

Some Most Some None None None

Infrastructure

ProvidersNone None Some Some None None

APM & Cloud

Infra-Mgmt

Vendors

Some Some Some Some None None

Low-End Point

ProductsNone None Some Some Some Some

Yes Yes Yes Yes Yes Yes

24


And SolarWinds Does Just That

On-Premises Private Cloud Public Cloud

SolarWinds offers full hybrid IT visibility spanning on-prem to

public cloud

Where Cloud & APM Vendors Focus

Where Legacy Vendors Focus

25


Through a Connected Set of Solutions

Logs

Digital

Experience

Applications

Servers

Security

Storage

Database

Network

26


27

Increasing the SolarWinds Competitive Advantage

Purpose-built solutions that solve specific problems

Connected products that solve today’s problems

Trusted by technology professionals: IT Ops, DevOps & MSPs

IT infrastructure location- and cloud-agnostic

Full coverage of the hybrid IT world


Which Creates a Significant Market Opportunity…

$26B Recurring Annual Maintenance Opportunity

$19B Recurring Annual Subscription Opportunity

$45B Recurring Annual ITOM Subscription Opportunity

$37B Recurring Annual MSP Subscription Opportunity

Note: “TAM” stands for total addressable market.

1. Compass Intelligence, April 2018. Management estimates. Excludes 31.4 million worldwide businesses with 1-19 employees.

$82B Total Recurring Annual Market Opportunity1

+

+

Bottoms-Up Internal TAM

$62B One-Time Perpetual License Opportunity

$37.1

$27.5

$17.7

$82B total annual

recurring revenue

opportunity1

3.2M Small

businesses

(20-99 FTEs)

775K Mid-sized

businesses

(100-999 FTEs)

46K Enterprises

(1K+ FTEs)

TAM By Company Size1

28

Versus $67B at time of 2018 IPO driven by…

• Market Expansion - IT Service Management added through Samanage acquisition

• New Products in Existing Markets (e.g., End-Point Detection & Response added to set of

MSP offerings, Server Configuration Management added to ITOM offerings)


…Regardless of Who is Adding Up the Market Opportunity

1. IDC Semiannual Software Tracker – Forecast 2019H1, Nov 14 2019

Tops-Down Industry Analyst View, in $ billions1

$53.3

$72.3

$0.0

$10.0

$20.0

$30.0

$40.0

$50.0

$60.0

$70.0

$80.0

2019 2023

7.9%

CAGR

29


IF You Can Successfully Address the Entire Market: Which We Do

3.2M Small Businesses

20–99 Employees

775K Mid-Size Businesses

100–999 Employees

46K Enterprise Businesses

1K+ Employees

Small MSPs

<5 Techs

Mid-Sized MSPs

5–25 Techs

Very Large MSPs

100+ Techs

Large MSPs

26–100 Techs

ITO

M P

rod

ucts

MS

P

Pro

du

cts

ITO

M

30


Through Our Disruptive Approach…

MSPsIT Ops

Selling From

the Inside

Digital Marketing

Efficient R&D

User-Centric

Products

Disruptive Pricing

Engaged User

Community

31


Which Creates Sustainable Competitive Advantage in Old And New Areas of the ITOM & MSP Markets…

New

TechnologyOld Go-to-Market

Old

Economics

Same Results

• Product roadmaps locked

up by traditional enterprise

relationships

• Challenging economics

• Opportunity opens for SWI

to disrupt and displace

32

Competitor Approach…


Delivering Growth Through the Quintessential Land & Expand Model

Sales model focused onvolume and velocity

Buy what you need,when you need it

Customer becomesour best salesperson

Drives repeated landand expand success

Initial Deal (2005)

$150KToolset

Lifetime Spend

$120M15 Products

135+ License Trx’s

Military Branch

Initial Deal (2002)

$4.9KNPM

Lifetime Spend

$13.8M23 Products


Government Agency

Initial Deal (2005)

$5.3KToolset

Lifetime Spend

$7.6M25 Products

176 License Trx’s

Telecom Company

Initial Deal (2002)

$2KToolset

Lifetime Spend

$3.4M25 Products


Document Solutions & Services Co.

Initial Deal (2002)

$1.4KToolset

Lifetime Spend

$4.4M17 Products

75 License Trx’s

Hospital System

Initial Deal (2002)

$1.7KToolset

Lifetime Spend

$3.2M21Products

70+ License Trx’s

Backup & Records Management Co.

Initial ARR (2014)

$79KSolarWinds Service

Desk

Current ARR

$247.6KDriven by add-on expansions and additional users

Debt Collection Company

Initial MRR (2014)

$49Loggly

Current MRR

$40KDriven by greater

consumption / metrics monitored

Streaming Service

Selected Customers Across Verticals:

33


34

Resulting in a 320K+ & Growing List of Customers That Trust SolarWinds1

Selected Customers Across Verticals:

Consumer

& Retail

Business,

Financial Services

& Insurance

Industrial,

Transportation

& Healthcare

Media,

Entertainment

& Telecom

Technology

1. Customers are defined as individuals or entities that have an active subscription for at least one of our subscription products or that have purchased one or more of our perpetual license products since our inception under a

unique customer identification number. We may have multiple purchasers of our products within a single organization, each of which may be assigned a unique customer identification number and deemed a separate customer.


And Also Has Created Many Large Customer Relationships…

Total Customer Count, in Thousands1

289

303

317

FY'16 FY'17 FY'18 Q3'19

Customers with $100K+ in Trailing 12-Month Spend

625

697733

761780

857

Q2'18 Q3'18 Q4'18 Q1'19 Q2'19 Q3'19

351. Customers are defined as individuals or entities that have an active subscription for at least one of our subscription products or that have purchased one or more of our perpetual license products since our inception under a

unique customer identification number. We may have multiple purchasers of our products within a single organization, each of which may be assigned a unique customer identification number and deemed a separate customer.

329


… With Multiple Opportunities For Continued Growth Remaining

International

Expansion

Expand Product

Offerings in

Existing Markets

Expansion into Adjacent

Technology Markets

Accelerate Massive

Installed Base

Penetration

Continue to Drive High

Volume of New

Customer Acquisition

36


37

While Expanding Internationally

35% of

total revenue

International Non-GAAP RevenueGermany

• Established office in October 2018

• 14% of European non-GAAP revenue, goal of

35%+

Japan

• Established office in May 2019

• Small revenue contribution to date

International Growth Drivers

• Building greater brand awareness in key EMEA

and APAC markets

• Selling broader portfolio of products, beyond

Network Management

• Expanding our partnerships (distributors,

resellers and Global SIs)

1. Revenue data are YTD percentages through Q3’19.


And Leveraging our Competitive Advantage to Expand into New and Existing IT Markets Security

Application Network

Monitoring

Runbook

Automation

Alert Management

Dev Ops Automation

Cloud Management

Database

Management

Network

Management

Systems

Management

MSP Cloud & APM New & Existing

Market

Opportunities

38


And That Expansion Continues...

Leading provider of SaaS database performance management

Database Performance Management for

Today’s Modern Applications: Leading Technology Companies Use VividCortex:

Transaction Highlights:

• Acquired on December 10, 2019

• $117.5M purchase price

• All cash deal

39


Led by Experienced Technology Executives

Kevin ThompsonPresident & CEO

13 years with SWI

25+ years experience:

Jason BlissEVP, General Counsel & Secretary

11 years with SWI


Bart KalsuEVP, CFO

12 years with SWI


Darren BeckSVP, CMO

3 years with SWI


David GardinerEVP, GM ITOM

13 years with SWI


Doug HibberdEVP, Business Operations

13 years with SWI


Joe KimEVP, Engineering & CTO

4 years with SWI


John PagliucaEVP, GM MSP

7 years with SWI1


Committed to the long-term growth of SolarWinds

401. Includes tenure with acquired company.


Product StrategyJoe Kim, CTO

41


IT Infrastructure Landscape is Rapidly Changing

Datacenter/

Central Office

User

Branch Offices

MSP

5G

42

Devices

Build a Wall (Protect) →

detect, respond, correct4

Defined, Controlled Systems,

Models and Data →

explosion of devices, variety

and volume of data

3

Build, Centralize, Customize →

as-a-Service, configurable,

composable, software-defined

2

On-Premises → virtualized,

containerized, cloudified & edge

infrastructure (Hybrid)

1


New Challenges:2

Which is Introducing New Challenges, While Existing Challenges Remain

Managing the existing performance

challenges in traditional IT1

• Edge-to-edge network performance

• Explosion of volume and variety of

data and databases/stores

• Lack of visibility

• Operational complexity

• And… this doesn’t go away

• Zero trust

Datacenter/

Central Office

Branch Offices

5G

43

User

Devices


And On-Prem IT Infrastructure Continues to be Critical

1

Datacenter/

Central Office

Branch Offices

User

Devices1 Complexity of applications refactoring

2 New on-prem players (Amazon, Google,

Microsoft)

3Usage of distributed compute and edge

4Hyperconvergence and SD-WAN

5 Security and compliance

6 Cost

44


SolarWinds is Positioned to Address All of These Issues Today

• IT Pros

• Functional Departments

• DevOps / SREs

• MSPs

Who

• On-Prem to On-Prem

• On-Prem to Cloud

• Cloud to Cloud

• Cloud to On-Prem

Where

• Metrics / Traces / Logs

• Applications

• Databases

• Infrastructure

• Network

• Security

What

45


Based on Unique Product Strategy Principles

Easy-to-Use Optional

Professional

Services

Modular

& Scalable

User-Centric Affordable

Transparent

Pricing

$

46


Resulting In a Unique Approach to Delivering Full Stack Visibility…

SolarWinds Legacy IT Vendors Infrastructure Providers Cloud & APM Vendors Low-End Point

Products

Applications

Infrastructure

Database

Network

Security

Deep Service Desk Integration

Easy to Use and Deploy

Affordable, Transparent Pricing

Built for Ease of Use

Focused on IT Professionals

TE

CH

NO

LO

GIE

SP

RO

DU

CT

AT

TR

IBU

TE

S

US

ER

FO

CU

S

47


…That Provides the Hybrid Management Capabilities Tech Pros Need

NETWORK

AP

M

BACKUP

48


Delivering Faster Time to Value…

• Deploy quickly on

prem or in the cloud

• Get faster time-to-

insight for complex

performance issues

• Get faster time to

resolution of incidents

SYSTEM

INTERRUPTION

Define the

Problem

Where is the

Problem

How to

Repair

Action to

Resolution

Future Interruption

Prediction

Who is

Impacted

49


50

And, Addressing the Critical Security Areas of IT Performance

Protect

Advanced Endpoint

Detection &

Response

Password Control

& Identity Access

Management

Phishing &

Email Attack

Spread Across

Hybrid Clouds

Detect

Zero-Day

Attacks

Advanced

Threat Hunting

Correct

Patching

Remediation of

Threats

Backup &

Restore


With Roadmaps Defined by Technology Pros’ Needs…

THWACK®

Large user community of

150K+ members

7,000+ daily unique visitors

interacting with each other

Geekbuilt™

Product roadmap driven by

IT Professionals

Ensures customers will use

the product / feature

SWI Product

Products that solve clearly

identified problems

Easy to try, buy & get value

Ready to use – No PS

required

51


Based on Products Developed Through a Platform Engineering Approach:Build Once, Run Everywhere

Key Tenets

Common technology components

across monitoring, management, and

security products – user

management, dashboards, reports,

discovery, data collection, automation,

AI/ML, etc.

Many assets are monitored and

managed by different

personas/markets – users, business

services, applications, servers,

network, databases, logs, etc.

Platform engineering allows us to

create and transfer new capabilities

quickly for all our end users – NetPath

and Network Topology Map for MSP,

APM for SAM, Azure Monitoring for

AO, etc.

IT Ops MSP

APM Network RMM Backup ITSM

Log Analytics Systems Database Security UEX

Platform Services

Integrations DiscoveryAlertingIntelligent

Reporting

Access

ControlAutomation

Data

Collection

52


IT Ops Strategic Focus Areas

Orion Integration

SolarWinds

Service Desk

End-User Network

Performance

Troubleshooting

Application

Network

Monitoring

APM Suite

Cloud

Infrastructure

Management

Orion-Based Suite

Deployment

Azure

53


54

Delivering What IT Ops Pros Need

Hybrid IT Digital Transformation Consumerization

Market

Changes

SWI

Opportunity

On-premises & private growing at

2% CAGR to $96B in 20231

Public cloud growing at 9% CAGR

on $60B in 20231

11% of enterprise IT workloads in

public cloud by 20212

41% of CEO’s are facing substantial

industry transformation3

90% of all new applications will

feature microservices architecture4

Employees now taking consumption

mindset from home to work

Tighter integration between our

SaaS and on-premises products

Network monitoring and

management for the hybrid world

Tighter integration between ITSM

and our other SWI products

Better methods to discover and

manage configuration items

Advanced end user monitoring

Support product deployments on

cloud infrastructure (Azure,

AWS, etc.)

Utilize cloud marketplaces

Reimagining Orion capabilities

on SaaS

1. IDC WW Quarterly Cloud IT Infrastructure Tracker, Q2-2019. Represents total value of spending on servers, storage and network hardware.

2. Uptime Institute (division of 451 Group), 2019 Data Center Survey Results, May 2019.

3. Gartner, Digital Transformation Strategy Needs a Change of Perspective, January 2019.

4. IDC FutureScape: Worldwide IT Industry 2019 Predictions, October 2018.


MSP Strategic Focus Areas

On-Premises & SaaS

Remote

Monitoring and

Management

Automation Platform

& Content

Automation &

Orchestration

Advanced EDR, Threat

Monitoring, DRaaS &

Cloud Backup

Security & Data

Protection

Network Topology &

Configuration Management

Network

Monitoring

55


56

Addressing the Needs of Our MSP Partners

Increased MSP

AdoptionScrutiny on MSP

SecurityMarket Consolidation

Market

Changes

SWI

Opportunity

IT landscape is getting more and

more complex

More SMBs are outsourcing their

IT needs to MSPs

Worldwide MSP market revenue

growing at 12% CAGR to $302B

in 20231

Security is critical for MSPs, as they

hold the keys to their customers’2

environments

Global campaigns/attacks now

specifically target MSPs3

Many MSP software vendors are

consolidating to compete

Introduced additional products and

capabilities (IP) from Core IT into

MSP Platform

Introduce additional automation &

reporting capabilities to make MSPs’

lives easier

Ability to position SWI MSP as a

leader in security within the MSP

market – from data & end-point

protection to password &

document management

Competitive consolidation which

introduces confusion for their

customers

MSPs can grow with our MSP

product & capabilities – they will

never outgrow us

Products that are aligned to

customer maturity

1. Analysys Mason, “The MSP landscape: the importance of MSPs is increasing as IT systems get more complex,” April 2019.

2. US Department of Homeland Security CISA Cyberinfrastructure, “Advanced Persistent Threat Activity Exploiting Managed Service Providers”, October 2018.

3. ZD Net, “At least nine global MSPs hit in APT10 attacks: ACSC”, December 2018.


Our ITOM Strategy & Opportunity

57

David Gardiner, GM IT Operations Management


2010–2013

Systems:

Broad expansion

into systems

management with

the addition of

server, virtual

server, storage

and database

performance

management

2019

Named #1 in

Network

Management by

IDC / Ranked

#3 in ITOM

Performance

Analysis by

Gartner

Our 20 Year Journey to IT Operations Management

58

1999

The Start:

Began offering a

set of affordable,

purpose-built

software tools

directly to Network

Engineers

2006

The Model:

Expansion of the

NetMan portfolio

and the birth of

the “SolarWinds’

Model”

2014

Cloud:

Pingdom

acquisition marks

entry into cloud

monitoring market

2017

Cloud

Expansion:

Released

AppOptics, our

APM Product

2016 & 2017

Named #1 in

Network

Management

by IDC

2019

ITSM:

Samanage

acquisition adds

ITSM capabilities

to SolarWinds’

hybrid IT

management

portfolio

2018

Named #1 in

Network

Management

by IDC /

Ranked #4 in

Systems

Management

by Gartner

2018–2019

Security:

Launched Asset

Rights Manager

and reintroduced

Security Event

Manager


We Have Assembled a Comprehensive IT Operations Management Portfolio

IT Ops

On-premises Public Cloud

Service Management

IT

Security

Digital Experience Monitoring

Application Performance Management

Network Management

Infrastructure Management

IT Security

DevOps

Private Cloud

Wherever IT

sits

All Things IT Whoever is

managing IT

performance

59


Creating Competitive Advantages and Taking Share in the On-Prem IT Infrastructure Market

60

Wide Breadth and Depth

Connection to Public Cloud

Serves the Entire Market

Powerful Products

Designed for IT Professionals

Large, Active Customer Base

Connection to the IT

Professional

SolarWinds Brand

Go-to-Market Approach

Pricing Advantage

Expanding Investment Levels

Playing to Our Strengths

Selected On-Prem Competitors:


Becoming A Meaningful Disruptor in Expanding Markets

61

Powerful ProductsConnection to the

CommunityPlaying to Our Strengths

Wide Breadth of Product

Offerings

Connection with On-Prem

SolarWinds Reputation

Large, Active Customer Base


Selected ITSM, Cloud Infrastructure & APM Competitors:


How We Win: We Are a One-Stop Shop for IT Management

62

Digital Experience Monitoring

Security Management

Server Monitoring

Application Performance Monitoring

Infrastructure Monitoring

Network Monitoring

Storage Monitoring

Virtualization Management

Database Monitoring

Log Management


63

How We Win: We Are a One-Stop Shop for IT Management

Customer Case Study: Hospital System

180Locations

14Divisions

150K+Nodes Managed

100sof Point Solutions

Today Tomorrow Our Opportunity


How We Win: We Can Be the Whole Picture or a Piece of the Puzzle

Department-

Level Adoption

Enterprise

Adoption

End-User

Adoption

64


65

How We Win: We Can Be A “Piece of the Puzzle”

Too plain.

Add arrow w/

notes to

diagram

maybe?

Customer Case Study: Sports

Retail Company

• Initial purchase in 2006 for 18k

• Renewal footprint of $125k+

• Lifetime spend of $629k

• 13 products owned

• 30+ license transactions

• Customer is running AppOptics

alongside AppDynamics

Customer Journey


$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

$1,800

$2,000

$0

$100

$200

$300

$400

$500

$600

2013 2014 2015 2016 2017 2018 2019

Cumulative Spend Annual Renewal Spend Annual License Spend

1

66

How We Win: Or, We Can Be The “Whole Picture”

Early End-User Adoption

Continued Penetration Driving Wider

Adoption & Increasing Renewal FootprintReplaced Full Network

Environment for All US

Locations($ in thousands)

Cu

mu

lativ

e S

pe

nd

1 2019 renewal and cumulative spend illustrates actual spend through Q3’19 and excludes any potential bookings amounts that may be recognized in Q4’19.

YTD

Bo

ok

ing

s

Customer Case Study: Big 4

Accounting Firm


How We Win: Ability to Solve Interconnected Performance Problems

Network

Management

System

ManagementDatabase

Management

Service

Management

Application

ManagementIT Security

67

Application

ManagementDatabase

Management

SolarWinds provides the ability to find and

correct when database issues are causing

application performance problems

Network

Management IT Security

SolarWinds gives tech pros the power

to manage network performance while

securing their IT environments

System

Management

Service

Management

SolarWinds delivers broad systems

management while streamlining the

process to resolve issues

Our products are powerful on their own…

Or, they can be combined to solve interconnected problems…


68

How We Win: Ability to Solve Interconnected Performance Problems

Customer Case Study: Major Metropolitan Local Government

• Engagement started in response

to improving infrastructure

security following ransomware

attack

• Began with Log Analyzer, Server

Configuration Monitor, High

Availability, etc.

• But, needed Asset

Management. Enter ITSM

• Use case extended to Service

Management for tickets related

to those assets

Cross-Team Effort Got the Job Done


As We Have Grown Our Customer Relationships and Our Product Capabilities, the Buyers We Need to Reach Have Evolved

Network Engineers

Engineer's Toolset

CIOs, VPs, CSOs

IT Operations

Management

Network Engineers,

Admins, VoIP Specialists

Network Monitoring and

Management

69

Network, Systems, ITSM, Security, Cloud

Infrastructure and Applications

Network Engineers, Network Admins,

Sys Admins, IT Admins, DBAs, Virtualization

Admins, HelpDesk Admins, DevOps, SecOps

Network and Systems Management

Network Engineers, Network Admins,

Sys Admins, IT Admins, DBAs,

Virtualization Admins


...And the Ways We Reach Them Have Also Evolved

MarketingWebsite & Word of Mouth

Digital Marketing

Events (Live and Virtual)

Solutions-Based

Awareness...

Sales Inside Sales Channel Installed-BaseAccount

Reviews...

Customer Support & Engagement

Peer to Peer Forums

THWACKOnline

SupportTiered

SupportAcademy and Certifications

Smart Start ...

70


…Allowing Us to Uncover New Opportunities to Solve Their Challenges

$253K+Total License

Spend

6Products

$32KInitial Purchase

$77KRenewal Footprint

71

Customer Case Study: Major Beverage Company


21.6KNew ITOM Customers Added

in Trailing 12-Months1

5K+Average Number of New ITOM

Customers Per Quarter in

Trailing 12-Months1

72

While We Have Maintained Our Velocity…

1. IT Operations Management customer data is trailing-12 months through Q3’19..


And Built a Growing Number of Large Customer Relationships

Number of $50K+ ITOM

Deals1

Number of $100K+ ITOM

Deals1

858

1019

1181

1496

1683

2015 2016 2017 2018 Q3'19

193

249278

411

478

2015 2016 2017 2018 Q3'19

2879

743

132

$250K+ $500K+ $1M+

731. Data for 2015, 2016, 2017 and 2018 are for the corresponding the calendar year. Data for Q3’19 represent trailing 12-month amounts.

2. Represents count of customer lifetime spend through Q3’19.

Lifetime Spend2

(# of ITOM Customers)


As Our Customers Adopt “More and More” of Our Products

3.84.0

4.4

4.84.9

2015 2016 2017 2018 Q3'19

Avg. # On-Prem Products /

Customer1,2

4.3

4.8

5.3

5.86.1

2015 2016 2017 2018 Q3'19

Avg. for Customer Base

at Dec 31, 20133

But new customers tend to

dilute the average given initial

purchase of ~1-2 products…

741. Chart shows the average number of Core IT license products per active Core IT customers. “Active Core IT customers” are defined as customers with a maintenance contract expiring on or after October 1st for the year shown.

2. For Q3’19 “Active Core IT customers” is defined as customers with a maintenance contract expiring on or after July 1.

3. Chart shows the average number of Core IT license products owned by Active Core IT customers. Excludes new Core IT customers from January 1, 2014 and forward.


And Once We Win a Customer, We Keep Them...

94% 93%96% 95%

2016 2017 2018 Q3'19

Trailing 12-Month Maintenance

Renewal Rates

95% 94%97% 97%

2016 2017 2018 Q3'19

Trailing 12-Month Maintenance

Renewal Rates for Customers

with 4+ Products



After 20 Years, We Believe We Still Have Multiple Avenues of Growth in IT Operations Management

Ability to Serve

Organizations

of All Sizes

Massive

Underpenetrated

Installed Base

New Product

Introductions

in Current Markets

New Products

in New ITOM MarketsVendor Consolidation

76


John Pagliuca, GM MSP

77

Our MSP Strategy & Opportunity


Serving MSPs the SolarWinds Way…

MSPs

Selling From

the Inside

Digital Marketing

Efficient R&D

User-Centric

Products

Disruptive Pricing

Engaged User

Community

78


…Leads To a Strong Business and Differentiated Results

79

CC MSP Net Retention2

109%Avg. Products per MSP

(out of 14 products)

3.5 FY’19E CC

MSP Subscription

Growth1

19%

Networks Managed

500K+Endpoints Monitored

6.3M+MSPs serving SMBs

27K+ > 450K+

1. Subscription billings growth FY19 based on the constant currency midpoint of our outlook given on October 30, 2019

2. Trailing 12-month net retention is calculated on a constant currency basis as of Q3’19 for all non-USD transactions are converted using the same exchanges rates for all periods. Constant currency calculation not used in

previous disclosures.


80

OUR MISSION is to fuel the success of

MSPs by empowering them with

monitoring, security, and business tools

that are simple, integrated, and powerful.


SMB Pain Points Asset management, LAN management, data management

MSP Solution Profits in projects and hardware margin

MSP Tools Vendor management, PSA, Remote Control

81

2000 2020Reactive Wave Managed Wave Security Wave Next Wave

IT Reliance: Low

Security Reliance: Low

The Evolution of the SMB and Service Provider: Reactive Wave


82

IT Reliance: High

Security Reliance: Rising

The Evolution of the SMB and Service Provider: Managed Wave

SMB Pain Points Lost productivity, connectivity, wants to be secure, application

management

MSP Solution Managed services are born, layered security begins

MSP Tools RMM & Automation, Patch Management, AntiVirus, Backup, Mail Security,

Web Protection

Reactive Wave Managed Wave Security Wave Next Wave2000 2020


83

SMB Pain Points Avoid an extinction event, detection and protection, compliance

MSP Solution Vulnerability Assessments, Incident Response, Layered Security PLUS

MSP Tools Endpoint Detection and Response, Threat Hunting and Monitoring,

Penetration testing, Scanning Solutions, Rollback Functionality

IT Reliance: High

Security Reliance: High

The Evolution of the SMB and Service Provider: Security Wave



84

SMB Pain Points Mobility, interoperability, shadow IT, hybrid infrastructures, big data &

privacy

MSP Solution Mobile Device Management, Application Management,

End-User Experience Monitoring, IoT integrations and Management,

Cloud Migration and Management

MSP Tools APM, Network Management, MDM

IT Reliance: Crucial

Security Reliance: Crucial

The Evolution of the SMB and Service Provider: Next Wave



85

The Number of Tools MSPs Need to Provide the Solutions They Sell Increases…

Remote AccessAutomated Monitoring &

MaintenancePrescriptive Analytics

Network Management Automation & Scripting Reporting

Asset & Inventory

Tracking

Password Management

DocumentationSecurity Risk

Assessment

Tools for the MSP Provided by SolarWinds Solutions They Sell to SMBs

Advanced Firewall

Email Security & Filtering

Web Filtering & Protection

Security Risk Assessment

Security Management

End-Point Detection & Response

Business Continuity & Disaster

Recovery Planning

Patch Management

Networking

(WiFi, Switching, Routing)

Infrastructure Management

VoIP Technology

Outsourced IT Help Desk

Identity & Privilege Access

ManagementThreat Monitoring

End User Training Cloud Management


Which Creates Unique Leveraged Growth in the MSP Model

86

27K+ MSPs

250K+Technicians

450K+SMBs vs 3.2M SMBs

worldwide

6M+Devices

Our MSP Business Today Provides

Multiple Levers for Growth…

• Digital Transformation

• Hybrid IT Management

• Performance Management

• Security & Compliance

• IT Resource Scarcity

Market Drivers:


…As SMBs Increasingly Turn to MSPs

Serving the broader universe of millions of SMBs using MSPs globally

creates an explosive multi-faceted market opportunity.

SMBs using MSP Services in 20181100k+ MSPs Worldwide

51%and growing1

871. IDC Research, 2018 US SMB Survey Jan 2018


88

Resulting In a Growing Market Opportunity

Source: Altman Vilandrie & Company, April 2019

1.2

2.1

0.8

1.2

0.6

1.0

$2.6

$4.3

2019 2023

Security

BDR

RMM

Total Addressable Market for RMM, Backup & Recovery

and Security Software for MSPs, $ in billionsTotal Market for RMM, Backup & Recovery and

Security for MSPs Growing at 14% CAGR

Security for MSPs Growing at 17% CAGR

Backup & Recovery for MSPs Growing at 11%

CAGR

Remote Monitoring & Management (“RMM”) for

MSPs Growing at 14% CAGR


5 Ways MSPs Win

Increase profitability

through automation

and efficiency

Deliver proactive

value with in-depth

monitoring

capabilities

Add new services

quickly through a

broad ecosystem

Grow the business

through continuous

business support

89

Develop security

services that work for

the way business is

done today

with SolarWinds MSP


90

How We Are Leveraging Our Competitive Advantage

Selected MSP Competitors:

Platform-Based

Wide Breadth of Offerings

Deep Monitoring & Integrated

Security Capabilities

Serve the Full Spectrum of

MSPs

Customer Success Focus

Business & Technical Tools


Pricing Advantage

Leverage SolarWinds’ Brand

Leverage SolarWinds’ Global

Reach

Powerful ProductsEmpowering Our

Partners

Playing to Our

Strengths


How We Win: Ability to Serve the Full Spectrum of MSPs

À La Carte

Services

Proactive Managed Services

& Security

Reactive (Break/Fix)

91


How We Win: Ability to Serve the Full Spectrum of MSPs

$0

$5

$10

$15

$20

$25

$30

$35

$40

$45

2016 2017 2018 Q3'19

Monitoring & Management Backup Security

Break/Fix

Shop

Full

Monitoring

Capability

92

MSP’s expansion from a break/fix

shop to full-service provider:$000s

Initial ARR

2016

$1.2K

Devices

Managed

0

Current

ARR

$41K

Devices

Managed

700

Exit A

RR


How We Win: Broader, Deeper, Integrated Products

Monitor

Support

Protect

93


94

How We Win: Broader, Deeper, Integrated Products

$0

$10

$20

$30

$40

$50

$60

$70

2015 2016 2017 2018 Q3'19

Monitoring & Management Backup Security

Initial ARR

2015

$1.5K

Devices

Managed

0.8K

Current

ARR

$63K

Devices

Managed

1.4K

Backup

Adoption

EDR

Adoption$000s

MSP’s IT requirements leads to

product expansion:

Exit A

RR


How We Win: Expansion of New Services to MSPs

Threat Monitor

Service Program

Antivirus for Mac

Backup for

Microsoft Office 365

Network Device

Management

SolarWinds Endpoint Detection

and Response

95


How We Win: Expansion of Services for MSPs

SolarWinds Endpoint Detection

and Response

Threats mitigated to date1

1,319,778

MSPs Deployed

718

Current ARR Contribution2

$3.8M961. Represents number of threats mitigated from May 7, 2019 to December 4, 2019.

2. Represents ARR as of November 2019.


Resulting in LANDING a Large Number of New Customers

97Note: Trailing 12-month (“TTM”) amounts are through Q3’19.

1. Estimated using the average number of SMBs serviced by our existing MSP customers multiplied by the new customers added in the last 12 months.

6KNew MSPs Added in

Trailing 12-Months

~144KSMBs Served By

Newly-Added MSPs1


And, Our Customers EXPAND With Us

Number of

$50K+ MSP Customers1

Number of

$100K+ MSP Customers1

Lifetime Spend2

(# of MSP Customers)

229

363

543

783

1026

2015 2016 2017 2018 Q3'19

31

54

90

158

238

2015 2016 2017 2018 Q3'19

180

20

3

$250K+ $500K+ $1M+


2. Represents count of customer lifetime spend through Q3’19.


Also Once We Land a Customer, We RETAIN Them

109%CC Net Retention1

87%CC Gross Retention1

991. Trailing 12-month net and gross retention are calculated on a constant currency basis through Q3’19 for all non-USD transactions are converted using the same exchanges rates for all periods. Constant currency calculation

not used in previous disclosures.


With Multiple Paths to Achieve Sustainable 110%+ Net Retention and 20% Revenue Growth

Price

Increases

Empowering

More MSPs

Additional

Product

Offerings

CSM

Motion

Increased

Adoption by

SMBs and MSPs

100


Finance StrategyBart Kalsu, CFO

101


Financial Highlights

1

2

3

4

Large & Growing Market Opportunity

Durable Total Non-GAAP Revenue Growth

Increasing Mix of Recurring Revenue

Best in Class Profitability & Cash Flow

5 Proven Ability to Efficiently Expand TAM

102


We Have a Large User Base

320K+ Total Customers

2K+

40K+

255K+ Network & Systems

Management Customers

Cloud Infrastructure &

APM Customers

ITSM Customers

SMBsMSPs serving

27K+ 450K+

103Note: Customers are defined as individuals or entities that have an active subscription for at least one of our subscription products or that have purchased one or more of our perpetual license products since our inception under a unique

customer identification number. We may have multiple purchasers of our products within a single organization, each of which may be assigned a unique customer identification number and deemed a separate customer.


And Our Go-to-Market Approach Allows Us to Drive Large Transaction Volumes AND Large Customer Relationships

55KAvg. Transactions per Month

$79MAvg. Cash Collections per Month

857Customers $100K+ in Spend

Note: All figures shown are for the trailing 12-months through Q3’19.104


Resulting in Strong and Differentiated Operating Metrics...

$8 Billion

TAM expansion through

Samanage acquisition4

108%

TTM Q3’19 CC Subscription

Net Retention1

96%

TTM Q3’19 CC Maintenance

Renewal Rates1

$331M

YTD Adjusted EBITDA2

$276M

YTD Unlevered Free Cash

Flow2 (Mid-80%s FY’19E

uFCF Conversion Rate3)Approaching $1B+

Annual Revenue

5K+ IT Ops

TTM Avg ITOM Customers

Added / Quarter

1.4K+ MSPs

TTM Avg MSPs Added /

Quarter

Continued

Growth

Solid

Renewal &

Retention

Strong Profit

& Cash

Generation

Market

Expansion

91% of Revenue

YTD from Existing

Customers

$2 Billion

TAM expansion through

VividCortex acquisition4

Note: Trailing 12-month and year-to-date figures are through Q3’19.

1. Figures shown on a constant currency basis using the foreign currency exchange rates from the corresponding prior year period.

2. Represents non-GAAP financial figure. Please refer to non-GAAP reconciliation provided in the appendix for equivalent GAAP values.

3. Unlevered free cash flow conversion rate is measured as unlevered free cash flow divided by Adjusted EBITDA.

4. Based on company estimates.105


18%

48%

34%

38%

56%

7%

With an Increasing Mix of Recurring Revenue

License % of Total Non-GAAP Revenue Maintenance % of Total Non-GAAP Revenue Subscription % of Total Non-GAAP Revenue

YTD’19FY’14

62% Non-GAAP

Recurring Revenue1

82% Non-GAAP

Recurring Revenue

Note: Percentages shown may not add to 100% due to rounding.

1. Represents $428.7 million total revenue. Fiscal year 2014 total revenue as presented on non-GAAP and GAAP basis were consistent as there were no purchase accounting adjustments

during this period.

106


Q3'19

Delivering Consistent Growth in ARR

• Subscription ARR of $342 million

up 27% cc year-over-year at end of

Q3’191

o Led by MSP ARR growth

o Contribution of ITSM ARR through

Samanage acquisition

• Maintenance ARR of $454 million

up 9% cc year-over-year at end of

Q3’191

o Reflects combination of strong

maintenance renewal rates, power of

unique maintenance pricing model

and impact of prior price increases197.3

239.3283.5

339.0

387.0

426.1

$536.2

$626.3

$709.7

FY'16 FY'17 FY'18

Subscription ARR

Maintenance ARR

15%

CAGR

12%

CAGR

20%

CAGR

16%

CC YoY

9%

CC YoY

27%

CC YoY

Note: Ending period annual recurring revenue (“ARR”) amounts shown for each time period presented. ARR is annual run-rate revenue of maintenance and subscription agreements from all customers at a point in time. ARR for a given point in

time excludes the impact of future price increases from that point in time and forward.

1. Q3’19 constant currency growth is calculated by converting the local currency ARR amounts for September 30, 2019 using the foreign currency exchanges rates on September 30, 2018. The constant currency ARR values are compared

to ARR as of September 30, 2018 using September 30, 2018 foreign currency exchange rates.

$ in millions

107

454.3

342.0

$796.4


Based on our Current Pricing and Packaging Model...

Cloud & APM

MSP

Product Line

Core IT

Perpetual License Subscription

ITSM

Licensing / Revenue Model

Total ITOM

Product Line

108


However, It Is the Right Time to Offer Core IT Subscriptions…

• Hybrid IT driving increased

usage of our on-premises

products in cloud-based

environments

• Integration of our on-premises

and cloud-based products

• One pricing model to reduce

friction

• Initial roll-out by mid-2020

• Targeting a 2.75 year “break-

even period” for subscription vs.

current license/maintenance

pricing

Market Evolution Pricing/Packaging Evolution Additional Details

109


And Make It Easy for Our Customers to Buy Our Products the Way They Want to Buy Them

Product Line

Core IT

Perpetual License Subscription

Licensing / Revenue Model

What we are planning to do: What we are NOT planning to do:

• We will continue to allow customers to buy the way

they want to buy

o By mid-2020, we plan to begin offering customers

the choice of buying selected on-premises Core IT

(network and systems management) products on a

subscription basis

• Create opportunity for increased transaction volumes

through added customer choice and lower upfront /

year 1 price

• Beyond 2020, we plan to introduce cloud-enabled

SaaS versions of certain Core IT management

products

• We will not create sales friction

o We will not force new or existing customers to buy

subscriptions

o We will not force existing customers to switch their

licenses to a subscription

• We will continue to invest in our perpetual products

• We expect to always offer perpetual license pricing

options

110


7,487

3,209$6,223

$10,695

-

5,000

10,000

15,000

20,000

25,000

30,000

35,000

Perpetual On-PremSubscription

7,487

6,417

$12,445$13,904

-

5,000

10,000

15,000

20,000

25,000

30,000

35,000


7,487

9,626

$18,668$17,112

-

5,000

10,000

15,000

20,000

25,000

30,000

35,000


7,487

12,834

$24,890

$20,321

-

5,000

10,000

15,000

20,000

25,000

30,000

35,000


7,487

$31,113

$23,529

-

5,000

10,000

15,000

20,000

25,000

30,000

35,000


Illustrative Example - How Subscription Pricing May Impact Billings

Perpetual MaintenancePerpetual License Subscription

NPM SL500 List Price1 Example: Cumulative billings

comparison of perpetual vs. subscription pricing of on-premises

products

Year 1

Year 2

Year 3

Year 4

Year 5

1111. NPM SL500 U.S license list price is $10,695. Split of revenue between perpetual license revenue and perpetual maintenance revenue reflects a 70% / 30% split for license and maintenance, respectively based on historical averages.

2. Calculated as follows: $10,695 year 1 revenue + years 2 & 3 maintenance renewal revenue of $3,209 per year (assuming 100% renewal rate and no annual renewal price increases) = $17,112, which is then divided by a 2.75 “break-

even years” assumption to arrive at an annual subscription billing amount of $6,223.

1

2

16,043


7,487

12,834

17,423

7,467$20,321

$24,890

-

5,000

10,000

15,000

20,000

25,000

30,000

35,000


7,487

6,417

8,712

3,734

$13,904$12,445

-

5,000

10,000

15,000

20,000

25,000

30,000

35,000


7,487

3,209

4,356

1,867

$10,695

$6,223

-

5,000

10,000

15,000

20,000

25,000

30,000

35,000


7,487

9,626

13,067

5,600

$17,112

$18,668

-

5,000

10,000

15,000

20,000

25,000

30,000

35,000


7,487

16,043

21,779

9,334

$23,529

$31,113

-

5,000

10,000

15,000

20,000

25,000

30,000

35,000


Illustrative Example - How Subscription Pricing May Impact Recognized Revenue

NPM SL500 List Price1 Example: Cumulative recognized revenue

comparison of perpetual vs. subscription pricing of on-premises products

Perpetual Ratable

Maintenance

Perpetual / Upfront

License

Ratable Subscription Upfront Subscription

Under ASC 606, on-premises subscription

products would still require ~70% of

revenue upfront revenue recognition and

~30% ratable recognition similar to revenue

recognition on perpetual license sales

Year 1

Year 2

Year 3

Year 4

Year 5

1121. NPM SL500 U.S license list price is $10,695


Illustrative Example - How Subscription Adoption Would Have Impacted 2019 Results

Illustrative Example: Impact on 2019E1 Non-GAAP Revenue Results

Assuming a 10% Mix Shift of New License Volume to Subscription2

1. Q4’19E results reflect the mid-point of outlook provided on Oct 30, 2019.

2. Illustrative results reflect 2019E non-GAAP revenue results per the mid-point of outlook provided on Oct 30, 2019, but assume that 10% of license transaction volume is alternatively purchased as a subscription. This 10% assumption

applies only to perspective “subscription eligible” products and excludes certain network & systems management tools deemed by the Company to be “non-subscription eligible”.

3. Illustrative first year and cumulative 3 year impact of each 10% mix shift to subscription using 2019E figures based on the mid-point of outlook provided on Oct 30, 2019. Assumes no additional new license or subscription sales beyond

2019. Assumes 92.5% maintenance & subscription dollar-based renewal rates.

144.2 150.0 157.4 163.3

71.680.6

85.3 88.5

$215.8$230.6

$242.7$251.8

Q1'19 Q2'19 Q3'19 Q4'19E

License & Maintenance Subscription

140.6 145.9 152.5 157.6

73.582.8

87.9 91.5

$214.1$228.7

$240.5$249.2

Q1'19 Q2'19 Q3'19 Q4'19E

License & Maintenance Subscription

614.8596.7

326.0 335.8

$940.8 $932.5

FY'19E FY'19E 10% SubMix

2019E Non-GAAP Revenue1

2019E Non-GAAP Revenue w/ 10%

Subscription Mix2

Annual Comparison

Revenue

Line

1st Year $

Impact

Cum. 3 Yr.

$ Impact

License &

Maintenance-$18.1m -$28.9m

Subscription +$9.8M +$30.4m

Total

Revenue-$8.4M +$1.5m

Estimated 1st yr. and cumulative 3 yr.

revenue impact of a 10% shift of license

sales volume to subscription, based on

2019 figures3:

(+22% yoy)

(+8% yoy)

(+12% yoy)

(+26% yoy)

(+5% yoy)

(+11% yoy)

113


2020 Outlook

114


Q2’19 increase

reflects $329mm

purchase price for

Samanage7.3x 6.9x

6.6x 6.2x5.7x 5.5x 5.2x 5.1x

3.9x 3.7x4.2x 3.9x

0.0x

2.0x

4.0x

6.0x

8.0x

Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18 Q3'18 Q4'18 Q1'19 Q2'19 Q3'19

Durable Revenue Growth + Consistent Profitability + Proven Ability to De-lever Quickly

1. Represents non-GAAP financial figure. Please refer to non-GAAP reconciliation provided in the appendix for equivalent GAAP values

$485.9

$630.8

$741.0

$836.8

$910.7

TTM Q3'15 FY'16 FY'17 FY'18 TTM Q3'19

17%

CAGR

Trailing 12-month total non-GAAP

revenue through Q3’19 has nearly

doubled in the past 4 years reflecting…

• Organic Growth

• Strategic M&A

• Technology Tuck-ins

IPO proceeds used to

pay down $315mm of

second lien debt

Adjusted EBITDA Margin1Total Non-GAAP Revenue1, $ in millions

49%46% 46%

52% 50% 48% 46%50% 50% 49% 48% 47%

0%

10%

20%

30%

40%

50%

60%

Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18 Q3'18 Q4'18 Q1'19 Q2'19 Q3'19

Trailing 12-month Net Leverage Ratio

115


$50 - $55 Million

Cash Taxes

2020 Financial Outlook

Revenue

Profit

Additional

Items

$1.035 - $1.055 Billion

Total Non-GAAP RevenueYear-over-Year Growth of 10% - 12%1

$475 - $485 Million

Adjusted EBITDA

22%

Non-GAAP Tax Rate

316 - 318 million

Weighted Average Shares

Outstanding

1161. Calculated based on the range of 2019 total non-GAAP revenue and Adjusted EBITDA outlook provided on October 30, 2019.

Year-over-Year Growth of 5% - 7%1


2020 Revenue Outlook Assumptions

2020 Total Non-GAAP Revenue Outlook Assumptions:

• Assumes no 2020 M&A

• Does not currently assume any Core IT subscription sales

• Assumes 92-93% maintenance renewal rates

• Assumes range of 105-108% net retention across subscription

product lines

117

Revenue

$1.035 - $1.055 Billion

Total Non-GAAP RevenueYear-over-Year Growth of 10% - 12%1

1. Calculated based on the range of 2019 total non-GAAP revenue and Adjusted EBITDA outlook provided on October 30, 2019.


4% 5%

10% 11% 11%

15%17% 18%

23%

28%

Check Point LogMeIn Intuit GoDaddy SolarWinds Fortinet New Relic Adobe Splunk ServiceNow

A Differentiated Financial Profile

15%18%

24%28% 28% 30%

36%

45% 46%52%

New Relic Splunk GoDaddy ServiceNow Fortinet LogMeIn Intuit Adobe SolarWinds Check Point

2020E EBITDA Margin1,2

2020E Revenue Growth1,2

1. Source: FactSet consensus estimates as of December 3, 2019. Data shown for all companies represents consensus estimates for calendar year ended December 31 except Adobe (based on November fiscal year-end) and Splunk

(based on January fiscal year-end).

2. SolarWinds Adjusted EBITDA margin based on the mid-point of 2020 outlook. SolarWinds 2020 revenue growth based on the mid-point of 2020 outlook and the mid-point of outlook for 2019 provided on October 30, 2019.

118


Long-Term ModelKevin Thompson, CEO

119


What We Believe SolarWinds Will Look Like Over the Next 5 Years

1-3 Pts Above

Revenue Growth

Unlevered Free

Cash Flow Growth

< 3x

Net Leverage

120

Non-GAAP

Recurring Revenue

90%+ of total non-

GAAP revenue$2B+ revenue run-rate by Q4’24

15% Total Non-GAAP Revenue

Growth CAGR 2019 - 2024


With Multiple Revenue Drivers

Organic Growth M&A New Subscription Option

• Low- to mid-teens growth

• Led by MSP, Cloud

Infrastructure & APM and

ITSM

• Small to mid-sized

acquisitions consistent with

prior M&A activity

• Addition of subscription

billings option for Core IT

(network & systems

management) products

Multiple levers provide path to $2B+ total non-GAAP revenue run-rate by Q4’24

121


122

Including a Proven M&A Framework…

Historical Deal

Count

Strategic Rationale

Financial Profile

Examples

New Markets

2

Entry into new markets where we

can leverage our brand and

operating model

• Revenue growth accretive

• Initially margin dilutive / margin neutral

post-integration

Adjacent Markets

5

Complementary products that can

be sold to existing buyers and/or

closely connected tech pros


• Typically margin neutral or dilutive

initially / margin neutral-to-accretive post-

integration

Tuck-ins

25

Features/functionality that fill gaps

in existing market offerings


• Typically margin neutral initially / margin

neutral-to-accretive post-integration

Type of Acquisition


Target at / below

break-even pre-

acquisition

Post-integration

profit profile

123

With a Target of Delivering Increased ProfitabilityM

arg

ins

0%

Acquisition-

specific

Target

Margin

5-10 pts

Shift to more efficient

primarily digital

marketing approach

Marketing

Synergies

Sales

Synergies

10-15

pts

Implement SolarWinds’

sales motion / shift to

100% inside sales

R&D

Synergies

10-15

pts

Transition engineering

to low-cost, high quality

locations over time

Transition support to

low-cost, high quality

locations over time /

optimize royalties /

optimize SaaS delivery

architecture

2-5 pts

COGs

Synergies

G&A Synergies

5-10 pts

Integrate back-office

functions / eliminate

redundant functions,

systems and processes


124

Additional Long-Term Model Details

Metric FY’19E Long-Term Target Model

Cash Taxes $45M / 14% Non-GAAP EBT1 15% - 16% of Non-GAAP EBT1

Non-GAAP Tax Rate 21% ~22%

1. “Non-GAAP EBT” refers to Non-GAAP Earnings Before Tax.


Appendix A:Additional Quarterly Core IT Subscription Revenue Recognition Information

125


7,487

4,011

8,712

2,333

$7,778

$11,497 $11,045

-

5,000

10,000

15,000

20,000

25,000

30,000


SaaS

7,487

802

4,356

467

$1,556

$8,289

$4,822

-

5,000

10,000

15,000

20,000

25,000

30,000


SaaS

7,487

1,604

4,356

933 $3,111

$9,091

$5,289

-

5,000

10,000

15,000

20,000

25,000

30,000


SaaS

7,487

2,406

4,356

1,400 $4,667

$9,893

$5,756

-

5,000

10,000

15,000

20,000

25,000

30,000


SaaS

7,487

3,209

4,356

1,867

$6,223

$10,695

$6,223

-

5,000

10,000

15,000

20,000

25,000

30,000


SaaS

Illustrative Example - How Subscription Pricing May Impact Recognized Revenue (Additional Quarterly Detail)

Qtr 1

Qtr 2

Qtr 3

Qtr 4

NPM SL500 Example: Cumulative recognized revenue

comparison of perpetual vs. on-premises subscription & SaaS

Perpetual MaintenancePerpetual License Ratable Subscription Upfront Subscription SaaS

Qtr 5

Qtr 8

Revenue recognition of on-

premises subscription

renewal also split ~70%

upfront / 30% ratable

7,487

6,417

8,712

3,734

$12,445

$13,904$12,445

-

5,000

10,000

15,000

20,000

25,000

30,000


SaaS

Under ASC 606, on-premises subscription

products would still require ~70% of

revenue upfront revenue recognition and

~30% ratable recognition similar to revenue

recognition on perpetual license sales; this

mutes short-term negative impact to

recognized revenue of subscription pricing

126


Appendix B: Reconciliation of Non-GAAP Financial Measures

127


128

Quarterly Non-GAAP Revenue Reconciliation


129

Non-GAAP Revenue Reconciliation


130

Quarterly Adjusted EBITDA Reconciliation


131

Adjusted EBITDA Reconciliation


132

Unlevered Free Cash Flow Reconciliation


133

Reconciliation of Non-GAAP Revenue on a Constant Currency Basis

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