While SolarWinds’ IPO brought them less cash than planned, the company says that this was a minor part of going public again, and that SolarWinds is on track to execute its planned strategy going forward.
The SolarWinds team at the NYSE opening bell last Friday, led by CEO Kevin B. Thompson (white shirt).
SolarWinds relaunched as a public company on Friday, coming in at the low end of its expected price range, at $15 per share – and closing up three cents, at $15.03. The ramp-up to the IPO was a rough one, as the expected opening price dropped and the number of shares was reduced, resulting in a significant drop in the amount of capital raised. The company is emphasizing that this is of little importance, however, as the raising of capital was not a primary objective of the IPO, and their strategic objectives aren’t impacted at all.
“Some companies would have reverted back and delayed the IPO,” said David Gardiner, SolarWinds Chief Revenue Officer, who has been went the company for the last twelve years. “This is not the first time we have faced market adversity. We first went public in 2008 – as the market was falling then.”
Market factors relating to the broader technology sector, rather than SolarWinds’ own metrics, have been blamed by analysts for the lower price. SolarWinds posted 17 per cent year over year non-GAAP revenue growth in 2017, with nearly $800 million in non-GAAP total revenue in the trailing 12 months ended June 30, 2018. They also have high cash flow.
“The IPO is a temporal event for us – not a crowning success,” Gardiner said. “It is just a flagpost along the way. When we went private in 2016, we were seen as a networking software vendor, who were primarily SMB and midmarket, and as an on-premises play. Since then we have fundamentally transformed the company. We are number one in network management. We are number four in systems management. We are a growing player in cloud management, and in the MSP business.”
Gardiner said that the IPO wasn’t about the private equity companies wanting to cash out, or SolarWinds needing cash to fuel its expanding business.
“Neither of the private equities have moved any shares,” he said. “This is about the next step in the company. Being public gives you access to capital in different ways, beyond the original public offering. We wanted to transform the company into a long term public company, because we think that’s important in continuing our story.”
Gardiner said SolarWinds’ ability to discount the turmoil surrounding the IPO indicated the company’s core strength.
“Many other companies would have had to pull the IPO,” he said. “The fact that we did not speaks to the strength of our model, that we could get through this. The reduction in the size of the offering has also created an opportunity to bring in a set of public investors. For companies looking to raise funds to permit future growth, this would have been more of an issue. That’s not been the case for us. 80 per cent of our business is recurring. The IPO is an important milestone in making us a public company and putting us in the path of being a much larger public company, although it would let us fund future growth initiatives if we choose to do that.”
Gardiner then addressed the plan going forward.
“We just moved into the security market, and we want to push that out,” he said, referring to the company’s acquisition of Trusted Metrics earlier this year, for its solution that SolarWinds will offer for automated threat monitoring and threat hunting. “The plan is to do what we did in networking, systems, MSP and cloud.”
Acquisitions are not the primary purpose of the cash infusion.
“We will use the funds to retire more expensive debt,” Gardiner said. “What is left will be used to expand operations.
Customers and partners shouldn’t expect to see anything different from SolarWinds once again being public.
“They can expect more of the same, to deliver on our long term vision, to leverage our brand, and to provide technology based on the specific IT practitioner,” Gardiner said. “Some of our partners have seen us go from $30 million in revenue to $800 million. We have a very regimented focus in how we go to market.”
