SolarWinds Corporation

Good morning, everyone. My name is Chris and I will be your conference operator today. At this time, I'd like to welcome everyone to the SolarWinds third quarter 2021 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. And if you would like to withdraw your question, please press star one again. Thank you. Dave Hafner, Head of Investor Relations. You may begin.

Thank you, Chris. Good morning, everyone, and welcome to SolarWinds' third quarter 2021 earnings call. With me today are Sataka Ramakrishna, our President and CEO, and Bart Kalzu, our Executive Vice President and CFO. As Chris mentioned, following our prepared remarks, we'll have a brief question and answer session. This call is also being simultaneously webcast on our Investor Relations website at investors.solarwinds.com. On our Investor Relations website, you can also find our earnings press release, and a summary slide deck, which is intended to supplement our prepared remarks during today's call. Please remember that certain statements made during this call are forward-looking statements, including those concerning our financial outlook, the impact of the cyber incident on our business, our market opportunities, the impact of the global economic environment on our business, and the spinoff for the enabled business. These statements are based on currently available information and assumptions, and we undertake no duty to update this information except as required by law. These statements are also subject to a number of risks and uncertainties, including the numerous risks related to the cyber incident and the recently completed spinoff of the Enable business. Additional information concerning these statements and the risks and uncertainties associated with them is highlighted in today's earnings release and in our filings with the SEC. Copies are available from the SEC or on our investor relations website. We completed a spinoff of the Enable business on July 19th 2021, and accordingly have included the results of the Enable business as discontinued operations for the current and historical periods. Therefore, the financial results presented on this call reflect SolarWinds as a standalone business and do not include any contribution from the Enable business. Furthermore, we will discuss various non-GAAP financial measures on today's call. Unless otherwise specified, when we refer to the financial measures, we will be referring to the non-GAAP financial measures. A reconciliation of the differences between GAAP and non-GAAP financial measures discussed on today's call are available in our earnings press release and summary slide deck on the investor relations page of our website. We note also that because there was no impact of purchase accounting on revenue in the third quarter, our non-GAAP total revenue is equivalent to our GAAP total revenue in this period. Going forward, we will begin to present certain financial measures on a GAAP basis only. With that, I'll now turn the call over to the docker. Thank you, Dave.

Good morning, everyone, and thank you for joining us today. I hope you're doing well and staying safe. I want to start by first thanking our employees, customers, partners, and our shareholders for their ongoing commitment to SolarWinds. As many of you know, we will hold our annual Analyst Day meeting on November 10, 2021. During this virtual event, we look forward to sharing our vision for SolarWinds and how we plan to retain, evolve, and grow to build an even more successful business. Given the proximity of this call to the Analyst Day event, our comments today will be a bit shorter than normal. As we move our discussion of financial and operational highlights for Q3, I'd describe our performance as continued progress. I attribute the progress to the dedication of our salarians For the third quarter, we delivered revenue above the high end of the range of the outlook we provided, with total revenue ending the quarter at $181.3 million. Third quarter adjusted EBITDA was $75.3 million, representing an adjusted EBITDA margin of 42%, exceeding the high end of our outlook. As I outlined in the Q4 2020 earnings call, customer retention is a top priority in 2021, and we continue to make great progress towards this goal in Q3. Our Q3 maintenance renewal rate of 88% was above the low to mid-80% renewal rate we noted we expected in 2021. Customer retention remains a key priority and with our growing portfolio of offerings, we believe we have a great opportunity to continue to grow our LTV and net retention rates with our large customer base. While we continue to offer flexible pricing purchasing options to our customers, we're increasing our focus on subscription bookings, and we expect to continue to increase the mix of subscriptions in the upcoming quarters and years. In Q3, Our subscription revenue grew at a 20% year-over-year rate, with subscription ARR growing 23% year-over-year. Bart will provide more color on how this part of our business will trend in Q4 and beyond, given the skew that the Century One acquisition timing creates. We completed the successful spin-off of the Enable business in July, and that has enabled us to plan and execute our standalone strategy, the details of which we look forward to sharing with you at Analyst Day. Our global system integrator and enterprise motions are resulting in larger subscription rates. Noteworthy here is that customers are investing in our entire solutions offering and taking advantage of our simplified packaging and pricing. These solutions are the underpinnings of our upcoming solo which we look forward to sharing more details about at our analyst-based presentation. We will also highlight our views on our observability solutions' potential to be a growth driver in the coming years through a comprehensive and differentiated approach to observability compared to the alternatives. Our product teams made significant progress in Q3, delivering new elements within our solutions that are designed to drive additional value to our customers based on their evolving needs, including updates to our database and ITSM solutions, as well as Secure by Design initiatives that impact our entire product portfolio. We extended the breadth of our database monitoring portfolio's platform support, which now includes Google Cloud extensions and added enhanced integrations, including with Microsoft Teams, to our ITSM solutions. Increasingly, our application, database, and ITSM offerings will become integral elements of SolarWinds' observability as we support customers of all sizes with their IT, Dev, and SecOps requirements. We believe that this will help differentiate our offerings from those of the other vendors. we are expanding our global partner engagements with events in various geographies. Our global partners, including GSIs, cloud service providers, and MSPs, are critical to expanding our GTM reach and to jointly deliver customer success. Differentiated offerings with rich enablement, incentives, and a spirit of mutual accountability are the underpinnings of our partner strategy. In September, we celebrated the seventh annual IT Professionals Day holiday, which was originally established by SolarWinds in 2015. IT Pro Day recognizes and celebrates all IT professionals and the contributions they make to their business every day. As part of the celebration, we released findings from our IT Pro Day 2021 survey, Bring It On, which revealed ITPRO's confidence and pride in their role. We were also able to recognize four IT professionals nominated by their peers in our second annual ITPRO Day Awards. We believe that IT professionals showed true grit under challenging conditions this past year and deserve recognition and appreciation for their effort, commitment, and resilience We continue to attract excellent talent across all functions of our organization, and we are selectively adding footprint in international regions, including most recently in South Korea and parts of our EMEA region. With that, I'll turn it over to Bhatt to provide more color on our financial performance and outlook.