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AUSTIN, TX -- (Marketwired) -- 10/28/14 -- SolarWinds® (NYSE: SWI), a leading provider of powerful and affordable IT management software, today reported results for its third quarter ended September 30, 2014.

• Total revenue for the third quarter of $112.9 million, representing 28% year-over-year growth.
  
  
• Combined maintenance and subscription revenue for the third quarter of $70.1 million, representing 31% year-over- year growth in recurring revenue.
  
  
• License revenue for the third quarter of $42.8 million, representing 24% year-over-year growth.
  
  
• GAAP diluted earnings per share of $0.32 and non-GAAP diluted earnings per share of $0.50 for the third quarter.
  
  
• GAAP operating income of $31.7 million, or a GAAP operating margin of 28%, and non-GAAP operating income of $51.0 million, or a non-GAAP operating margin of 45% for the third quarter.
  
  

Financial Results

SolarWinds reported total revenue for the third quarter of 2014 of $112.9 million, a 28% increase over total revenue for the third quarter of 2013. Record total recurring revenue, comprised of subscription revenue of $8.3 million and maintenance revenue of $61.8 million, reached $70.1 million, increasing by 31% over the third quarter of 2013, representing 62% of total revenue. License revenue was $42.8 million for the third quarter of 2014, representing a 24% increase over license revenue for the third quarter of 2013.

On a GAAP basis, diluted earnings per share were $0.32 for the third quarter of 2014 compared to $0.30 for the third quarter of 2013. Non-GAAP diluted earnings per share were $0.50 for the third quarter of 2014, compared to $0.41 for the third quarter of 2013.

Net cash provided by operating activities was $54.3 million for the third quarter of 2014 compared to $42.0 million for the third quarter of 2013, representing a year-over-year increase of 29%.

The financial results included in this press release are preliminary and pending final review by the company and its external auditors. Financial results will not be final until SolarWinds files its quarterly report on Form 10-Q for the period. Information about SolarWinds' use of these non-GAAP financial measures is provided below under "Non-GAAP Financial Measures."

Recent Business Highlights

"We are very pleased to report another quarter of strong license and recurring revenue growth and leverage. Our results in the third quarter reflect broad-based strength across our product portfolio, including the strongest quarter of growth in the last three years in our core Network Management product portfolio. We also had a strong quarter of growth in key areas of our business including North American commercial and in U.S. Federal," said Kevin Thompson, SolarWinds' President and Chief Executive Officer.

"We continue to be excited about the opportunities we see to invest in our business in an effort to drive continued fast growth while leveraging our high volume, product- and user-centric business model and the strong skills and expertise of our team," added Thompson.

Recent SolarWinds business highlights include:

• SolarWinds bolstered its board of directors with the addition of Paul Cormier, Red Hat's President, Products and Technologies. Mr. Cormier's deep expertise and involvement in how modern IT infrastructure is being architected coupled with a proven track record in high-transaction, volume-based software companies will provide SolarWinds with a unique perspective on how companies are evaluating, selecting, and deploying new and emerging technologies.
  
  
• During the quarter, SolarWinds released SolarWinds Network Performance Monitor 11.0, delivering an application-aware approach to network management, enabling companies of all sizes to answer the critical question -- "Is it the network or the application?" In contrast to pricey and cumbersome appliance-based solutions on the market today, NPM v11 is affordably priced and utilizes enterprise-class deep packet inspection technology combined with SolarWinds' easy-to-use, software-only approach that provides IT professionals with deep insights into the impact of network performance on over 1,200 applications.
  
  
• For the third time in a row both Fortune® and Forbes® Magazines recognized SolarWinds in the 100 Fastest-Growing Companies list and Best Small Companies in America, respectively. The inclusions are based on the company's track record of sustained revenue and earnings per share growth. The combination of strong revenue growth coupled with strong profitability continues to reflect SolarWinds' unique ability to serve IT professionals at companies of all sizes. Its pioneering business model consisting of powerful and scalable yet easy-to-use and affordably priced products coupled with an efficient go-to-market and product development model has delivered both top-line growth and strong profitability.
  
  
• For the eighth consecutive year, Software Magazine included SolarWinds in its Software 500 ranking, listing SolarWinds No. 177 -- its highest rank to date. The Software 500 is a revenue-based ranking of the world's largest software and services suppliers, targeting medium to large enterprises, their IT professionals, software developers, and business managers that are involved in software and services purchasing.
  
  
• SolarWinds® Database Performance Analyzer, formerly Confio Ignite®, was named a finalist for "Best Database Performance Solution" by Database Trends and Application Magazine in the 2014 DBTA Readers' Choice Awards. This award highlights products that "help optimize performance by quickly identifying performance problems" with automated capabilities impacting every aspect of a database's performance.
  
  

"In addition to strong revenue results, we are pleased with our ability to aggressively invest in our market opportunity while continuing to deliver high margins," said Jason Ream, SolarWinds' Executive Vice President and Chief Financial Officer. "Looking ahead we plan to continue to invest in the opportunity to provide technology professionals with powerful yet affordable and easy-to-use tools that simplify their jobs amid increasingly complex on-premise, Cloud, and hybrid environments. At the same time, we intend to maintain our high standards for return on these investments," added Ream.

Financial Outlook

As of October 28, 2014, SolarWinds is providing its financial outlook for its fourth quarter and full year of 2014. The financial information below represents forward-looking non-GAAP financial information, including an estimate of non-GAAP operating income as a percentage of revenue, and non-GAAP diluted earnings per share, for the fourth quarter of 2014 and for the full year 2014. These non-GAAP financial measures exclude, among other items mentioned below, stock-based compensation expense and related employer-paid payroll taxes. SolarWinds cannot reasonably estimate the expected stock-based compensation expense and related employer-paid payroll taxes for these future periods as the amounts depend upon such factors as the future price of SolarWinds' stock for purposes of computation. In addition, costs related to non-recurring items and acquisitions are not costs that SolarWinds can estimate because they are a function of what non-recurring items and acquisitions, if any, occur and the kind of costs incurred in connection with any such non-recurring items or acquisitions.

Financial Outlook for the Fourth Quarter of 2014

SolarWinds' management is increasing its previous outlook for the fourth quarter and currently expects to achieve the following results for the fourth quarter of 2014:

• Total revenue in the range of $116.2 to $118.5 million, or 20% to 22% growth over the fourth quarter of 2013.
• Non-GAAP operating income representing 40.5% to 41.5% of revenue.
• Non-GAAP diluted earnings per share of $0.45 to $0.47.
• Weighted average outstanding diluted shares of approximately 77 million.
  
  

Financial Outlook for Full Year 2014

SolarWinds' management currently expects to achieve the following results for the full year 2014:

• Total 2014 revenue in the range of $426.5 to $428.8 million, or 27% to 28% year-over-year growth.
• Non-GAAP operating income for the full year representing approximately 42.5% of revenue.
• Non-GAAP diluted earnings per share of $1.77 to $1.79.
• Weighted average outstanding diluted shares of approximately 76.5 million.
  
  

Conference Call and Webcast

In conjunction with this announcement, SolarWinds will host a conference call today to discuss its financial results, financial outlook and other business at 4:00pm CT (5:00pm ET/2:00pm PT). A live webcast of the event, including any supplemental information, will be available on the SolarWinds Investor Relations website at http://ir.solarwinds.com. A live dial-in will be available domestically at 888-778-9052 and internationally at +1-913-312-1469. To access the live call, please dial in 5-10 minutes before the scheduled start time. A replay of the webcast will be available on a temporary basis shortly after the event on the SolarWinds Investor Relations website.

Forward-Looking Statements

This press release contains "forward-looking" statements, which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including statements regarding SolarWinds' financial outlook for the fourth quarter and full year 2014, the opportunities we see to invest in our business in an effort to drive continued fast growth while leveraging our high volume, product and user-centric business model and the strong skills and expertise of our team, our plan to continue to invest in the opportunity to provide technology professionals with powerful yet affordable and easy-to-use tools that simplify their jobs amid increasingly complex on-premise, Cloud, and hybrid environments and our intent to maintain our high standards for return on these investments. These forward-looking statements are based on management's beliefs and assumptions and on information currently available to management. Forward-looking statements include all statements that are not historical facts and may be identified by terms such as "believe," "plan," "will," "expect," "anticipate," "continue," or similar expressions and the negatives of those terms. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, the following: (a) the inability to generate significant volumes of sales leads from Internet search engines, marketing campaigns and traffic to our websites; (b) the inability to expand our sales operations effectively; (c) the inability to increase sales to existing customers and to attract new customers; (d) SolarWinds' ability to successfully identify, complete, and integrate acquisitions; (e) the possibility that general economic conditions or uncertainty cause information technology spending to be reduced or purchasing decisions to be delayed; (f) the timing and success of new product introductions and product upgrades by SolarWinds or its competitors; (g) the presence or absence of occasional large customer orders, including in particular those placed by the U.S. federal government; (h) the possibility that our operating income could fluctuate and may decline as percentage of revenue as we make further expenditures to expand our operations in order to support additional growth in our business; (i) potential foreign exchange gains and losses related to expenses and sales denominated in currencies other than the functional currency of an associated entity; and (j) 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, 2013 filed on February 14, 2014 and the Form 10-Q that SolarWinds anticipates filing on or before November 10, 2014. All information provided in this release is as of the date hereof and SolarWinds undertakes no duty to update this information except as required by law.

Non-GAAP Financial Measures

In addition to disclosing financial measures prepared in accordance with GAAP, this press release and the accompanying tables contain certain non-GAAP financial measures. The tables below set forth a reconciliation of each of these non-GAAP measures to a GAAP financial measure that we consider to be most comparable. SolarWinds believes that each of these non-GAAP financial measures provides meaningful supplemental information regarding its performance by excluding certain items that may not be indicative of its core business operations. SolarWinds' management and Board of Directors use certain of these non-GAAP measures to assess operational performance, allocate resources, prepare annual budgets, and determine employee incentive compensation. Accordingly, these measures may provide helpful insight to investors into the motivation and decision-making of management in operating the business. SolarWinds considers free cash flow also to be a liquidity measure that provides important information regarding the cash generated by the business after the purchase of property and equipment that can then be used for, among other things, strategic acquisitions and investments in the business, stock repurchases and funding ongoing operations.

SolarWinds also believes that these non-GAAP financial measures are used by investors and security analysts to (a) compare and evaluate its performance from period to period and (b) compare its performance to those of its competitors. These non- GAAP measures exclude certain items that can vary substantially from company to company depending upon their financing and accounting methods, the book value of their assets, their capital structures and the method by which their assets were acquired.

There are limitations associated with the use of these non-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. Certain items that are excluded from these non-GAAP financial measures can have a material impact on operating and net income. In addition, free cash flow does not represent the total increase or decrease in the cash balance for the period.

As a result, these non-GAAP financial measures have limitations and should not be considered in isolation from, or as a substitute for, the most comparable GAAP measures. SolarWinds' management and Board of Directors compensate for these limitations by using these non-GAAP financial measures as supplements to GAAP financial measures and by reviewing the reconciliations of the non-GAAP financial measures to their most comparable GAAP financial measure. Investors are encouraged to review the reconciliations of these non-GAAP financial measures to their most comparable GAAP financial measures that are set forth in the tables below.

About SolarWinds

SolarWinds (NYSE: SWI) provides powerful and affordable IT management software to customers worldwide from Fortune 500® enterprises to small businesses. In all of our market areas, our approach is consistent. We focus exclusively on IT Pros and strive to eliminate the complexity that they have been forced to accept from traditional enterprise software vendors. SolarWinds delivers on this commitment with unexpected simplicity through products that are easy to find, buy, use and maintain while providing the power to address any IT management problem on any scale. Our solutions are rooted in our deep connection to our user base, which interacts in our thwack® online community to solve problems, share technology and best practices, and directly participate in our product development process. Learn more today at http://www.solarwinds.com.

SolarWinds, SolarWinds & Design and thwack are registered trademarks of SolarWinds or its affiliates. All other SolarWinds marks are the exclusive property of SolarWinds, may be pending registration with the U.S. Patent and Trademark Office, and may be registered or pending registration in other countries. All other company and product names mentioned are used only for identification purposes and may be trademarks or registered trademarks of their respective companies.

Copyright © 2014 SolarWinds Worldwide, LLC. All rights reserved.

                    Condensed Consolidated Balance Sheets
           (In thousands, except share and per share information)
                                 (Unaudited)

                                               September 30,   December 31,
                                                   2014            2013
Assets
Current assets:
  Cash and cash equivalents                   $      195,203  $      165,973
  Short-term investments                              14,394          19,327
  Accounts receivable, net of allowances of
   $717 and $473 as of September 30, 2014 and
   December 31, 2013, respectively                    47,698          45,694
  Income tax receivable                                  195           1,535
  Deferred taxes                                       8,860           5,410
  Prepaid and other current assets                     6,490           4,846
    Total current assets                             272,840         242,785
Property and equipment, net                           22,735           9,213
Long-term investments                                  5,189          11,012
Deferred taxes                                           514             478
Goodwill                                             366,700         317,054
Intangible assets and other, net                     112,238         125,800
    Total assets                              $      780,216  $      706,342
                                              --------------  --------------
Liabilities and stockholders' equity
Current liabilities:
  Accounts payable                            $        7,451  $        7,187
  Accrued liabilities and other                       31,784          17,716
  Income taxes payable                                 4,953             563
  Current portion of deferred revenue                146,830         128,328
  Current debt obligations                                 -          40,000
    Total current liabilities                        191,018         193,794
Long-term liabilities:
  Deferred revenue, net of current portion             8,550           6,863
  Non-current deferred taxes                           4,348           4,975
  Other long-term liabilities                         22,625          16,816
                                                              --------------
    Total liabilities                                226,541         222,448
Commitments and Contingencies
Stockholders' equity:
  Common stock, $0.001 par value: 123,000,000
   shares authorized and 75,628,926 and
   75,009,620 shares issued and outstanding
   as of September 30, 2014 and December 31,
   2013, respectively                                     76              75
  Additional paid-in capital                         261,617         236,481
  Accumulated other comprehensive income
   (loss)                                             (7,549)          2,953
  Accumulated earnings                               299,531         244,385
                                              --------------  --------------
    Total stockholders' equity                       553,675         483,894
                                              --------------  --------------
    Total liabilities and stockholders'
     equity                                   $      780,216  $      706,342
                                              ==============  ==============



                Condensed Consolidated Statements of Income
                (In thousands, except per share information)
                                (Unaudited)

                                  Three months ended     Nine months ended
                                     September 30,         September 30,
                                 --------------------  --------------------
                                    2014       2013       2014       2013
                                 ---------  ---------  ---------  ---------
Revenue:
  License                        $  42,756  $  34,358  $ 116,743  $  96,300
  Maintenance and other             61,844     50,283    174,800    137,841
  Subscription                       8,262      3,222     18,732      4,151
    Total revenue                  112,862     87,863    310,275    238,292
  Cost of license revenue            4,100      2,646     12,321      8,263
  Cost of maintenance and other
   revenue                           3,965      2,942     11,296      8,578
  Cost of subscription revenue       3,513      1,511      8,887      2,046
Gross profit                       101,284     80,764    277,771    219,405
Operating expenses:
  Sales and marketing               37,538     25,962    106,772     66,538
  Research and development          13,761      9,558     41,784     25,622
  General and administrative        18,274     13,383     57,466     34,758
                                 ---------  ---------  ---------  ---------
    Total operating expenses        69,573     48,903    206,022    126,918
Operating income                    31,711     31,861     71,749     92,487
Other income (expense):
  Interest income                       85         91        246        324
  Interest expense                    (142)        --       (577)        --
  Other income (expense), net          238         (6)       446       (497)
                                 ---------  ---------  ---------  ---------
    Total other income (expense)       181         85        115       (173)
Income before income taxes          31,892     31,946     71,864     92,314
  Income tax expense                 7,771      9,123     16,718     23,695
Net income                       $  24,121  $  22,823  $  55,146  $  68,619
                                 ---------  ---------  ---------  ---------
Net income per share:
  Basic earnings per share       $    0.32  $    0.30  $    0.73  $    0.91
                                 ---------  ---------  ---------  ---------
  Diluted earnings per share     $    0.32  $    0.30  $    0.72  $    0.90
                                 ---------  ---------  ---------  ---------
Weighted-average shares used to
 compute net income per share:
  Shares used in computation of
   basic earnings per share         75,508     75,371     75,375     75,202
                                 ---------  ---------  ---------  ---------
  Shares used in computation of
   diluted earnings per share       76,463     76,466     76,321     76,580
                                 ---------  ---------  ---------  ---------



            Reconciliation of GAAP to Non-GAAP Financial Measures
          (In thousands, except per share amounts and percentages)
                                 (Unaudited)


                               Three months ended       Nine months ended
                                  September 30,           September 30,
                             ----------------------  ----------------------
                                2014        2013        2014        2013
                             ----------  ----------  ----------  ----------
GAAP cost of revenue         $   11,578  $    7,099  $   32,504  $   18,887
  Amortization of intangible
   assets (1)                    (5,185)     (2,633)    (15,096)     (7,768)
  Stock-based compensation
   expense and related
   employer-paidpayroll
   taxes (2)                       (367)       (189)     (1,047)       (502)
  Restructuring charges (4)           -         (17)          -         (27)
                             ----------  ----------  ----------  ----------
Non-GAAP cost of revenue     $    6,026  $    4,260  $   16,361  $   10,590
                             ==========  ==========  ==========  ==========

GAAP gross profit            $  101,284  $   80,764  $  277,771  $  219,405
  Amortization of intangible
   assets (1)                     5,185       2,633      15,096       7,768
  Stock-based compensation
   expense and related
   employer-paid payroll
   taxes (2)                        367         189       1,047         502
  Restructuring charges (4)           -          17           -          27
                             ----------  ----------  ----------  ----------
Non-GAAP gross profit        $  106,836  $   83,603  $  293,914  $  227,702
                             ==========  ==========  ==========  ==========

GAAP sales and marketing
 expense                     $   37,538  $   25,962  $  106,772  $   66,538
  Stock-based compensation
   expense and related
   employer-paid payroll
   taxes (2)                     (3,088)     (1,945)    (10,191)     (6,385)
  Restructuring charges (4)         (13)       (190)        (13)       (223)
                             ----------  ----------  ----------  ----------
Non-GAAP sales and marketing
 expense                     $   34,437  $   23,827  $   96,568  $   59,930
                             ==========  ==========  ==========  ==========

GAAP research and
 development expense           $ 13,761  $    9,558  $   41,784  $   25,622
  Stock-based compensation
   expense and related
   employer-paid payroll
   taxes (2)                     (1,423)     (1,071)     (5,407)     (3,407)
  Restructuring charges (4)         (39)        (91)        (77)        (99)
                             ----------  ----------  ----------  ----------
Non-GAAP research and
 development expense         $   12,299  $    8,396  $   36,300  $   22,116
                             ==========  ==========  ==========  ==========

GAAP general and
 administrative expense      $   18,274  $   13,383  $   57,466  $   34,758
  Amortization of intangible
   assets (1)                    (2,796)     (2,482)     (8,031)     (6,320)
  Stock-based compensation
   expense and related
   employer-paid payroll
   taxes (2)                     (3,892)     (2,470)    (11,526)     (7,584)
  Acquisition related
   adjustments (3)               (2,510)       (402)     (3,905)     (1,006)
  Restructuring charges (4)          27        (529)     (7,416)       (961)
                             ----------  ----------  ----------  ----------
Non-GAAP general and
 administrative expense      $    9,103  $    7,500  $   26,588  $   18,887
                             ==========  ==========  ==========  ==========

GAAP operating expenses      $   69,573  $   48,903  $  206,022  $  126,918
  Amortization of intangible
   assets (1)                    (2,796)     (2,482)     (8,031)     (6,320)
  Stock-based compensation
   expense and related
   employer-paid payroll
   taxes (2)                     (8,403)     (5,486)    (27,124)    (17,376)
  Acquisition related
   adjustments (3)               (2,510)       (402)     (3,905)     (1,006)
  Restructuring charges (4)         (25)       (810)     (7,506)     (1,283)
                             ----------  ----------  ----------  ----------
Non-GAAP operating expenses  $   55,839  $   39,723  $  159,456  $  100,933
                             ==========  ==========  ==========  ==========



                               Three months ended       Nine months ended
                                  September 30,           September 30,
                             ----------------------  ----------------------
                                2014        2013        2014        2014
GAAP operating income        $   31,711  $   31,861  $   71,749  $   92,487
  Amortization of intangible
   assets (1)                     7,981       5,115      23,127      14,088
Stock-based compensation
 expense and related
 employer-paid payroll taxes
 (2)                              8,770       5,675      28,171      17,878
Acquisition related
 adjustments (3)                  2,510         402       3,905       1,006
  Restructuring charges (4)          25         827       7,506       1,310
                             ----------  ----------  ----------  ----------
Non-GAAP operating income    $   50,997  $   43,880  $  134,458  $  126,769
                             ==========  ==========  ==========  ==========

GAAP other income (expense)  $      181  $       85  $      115  $     (173)
  Acquisition related
   adjustments (3)                    -           -           -           4
                             ----------  ----------  ----------  ----------
Non-GAAP other income
 (expense)                   $      181  $       85  $      115  $     (169)
                             ==========  ==========  ==========  ==========

GAAP income tax expense      $    7,771  $    9,123  $   16,718  $   23,695
  Income tax effect on non-
   GAAP exclusions (5)            4,843       3,183      16,674       9,308
                             ----------  ----------  ----------  ----------
Non-GAAP income tax expense  $   12,614  $   12,306  $   33,392  $   33,003
                             ==========  ==========  ==========  ==========

GAAP net income              $   24,121  $   22,823  $   55,146  $   68,619
  Amortization of intangible
   assets (1)                     7,981       5,115      23,127      14,088
  Stock-based compensation
   expense and related
   employer-paid payroll
   taxes (2)                      8,770       5,675      28,171      17,878
  Acquisition related
   adjustments (3)                2,510         402       3,905       1,010
  Restructuring charges (4)          25         827       7,506       1,310
  Tax benefits associated
   with above adjustments
   (5)                           (4,843)     (3,183)    (16,674)     (9,308)
                             ----------  ----------  ----------  ----------
Non-GAAP net income          $   38,564  $   31,659  $  101,181  $   93,597
                             ==========  ==========  ==========  ==========

Non-GAAP diluted earnings
 per share (6)               $     0.50  $     0.41  $     1.33  $     1.22
                             ==========  ==========  ==========  ==========
Weighted-average shares used
 in computing diluted
 earnings per share              76,463      76,466      76,321      76,580
                             ==========  ==========  ==========  ==========
Percentage of Revenue:

GAAP gross profit                  89.7%       91.9%       89.5%       92.1%
  Non-GAAP adjustments
   (1)(2)(4)                        4.9         3.2         5.2         3.5
                             ----------  ----------  ----------  ----------
Non-GAAP gross profit              94.7%       95.2%       94.7%       95.6%
                             ==========  ==========  ==========  ==========

GAAP operating margin              28.1%       36.3%       23.1%       38.8%
  Non-GAAP adjustments
   (1)(2)(3)(4)                    17.1        13.7        20.2        14.4
                             ----------  ----------  ----------  ----------
Non-GAAP operating margin          45.2%       49.9%       43.3%       53.2%
                             ==========  ==========  ==========  ==========

GAAP net income                    21.4%       26.0%       17.8%       28.8%
  Non-GAAP adjustments
   (1)(2)(3)(4)(5)                 12.8        10.1        14.8        10.5
                             ----------  ----------  ----------  ----------
Non-GAAP net income                34.2%       36.0%       32.6%       39.3%
                             ==========  ==========  ==========  ==========


(1)  Amortization of Intangible Assets. We provide non-GAAP information
     which excludes expenses for the amortization of intangible assets which
     primarily relate to purchased intangible assets associated with our
     acquisitions. We believe that eliminating this expense from our non-
     GAAP measures is useful to investors, because the amortization of
     intangible assets can be inconsistent in amount and frequency and is
     significantly impacted by the timing and magnitude of our acquisition
     transactions, which also vary in frequency from period to period.
     Accordingly, we analyze the performance of our operations in each
     period without regard to such expenses.

(2)  Stock-Based Compensation Expense and Related Employer-Paid Payroll
     Taxes. We provide non-GAAP information which excludes expenses for
     stock-based compensation and related employer-paid payroll taxes. We
     believe the exclusion of these items allows for financial results that
     are more indicative of our continuing operations. We believe that the
     exclusion of stock-based compensation expense provides for a better
     comparison of our operating results to prior periods and to our peer
     companies as the calculations of stock-based compensation vary from
     period to period and company to company due to different valuation
     methodologies, subjective assumptions and the variety of award types.
     Employer-paid payroll taxes on stock-based compensation is dependent on
     our stock price and the timing of the taxable events related to the
     equity awards, over which our management has little control, and does
     not correlate to the core operation of our business. Because of these
     unique characteristics of stock-based compensation and the related
     employer-paid payroll taxes, management excludes these expenses when
     analyzing the organization's business performance.

(3)  Acquisition Related Adjustments. We exclude certain expense items
     resulting from acquisitions including the following, when applicable:
     (i) amortization of purchased intangible assets associated with our
     acquisitions (see Note 1 for further discussion); (ii) legal,
     accounting and advisory fees to the extent associated with
     acquisitions; (iii) changes in fair value of contingent consideration;
     (iv) costs related to due diligence and integrating the acquired
     businesses; (v) deferred compensation expense related to acquisitions;
     and (vi) restructuring costs, including adjustments related to changes
     in estimates, related to acquisitions. We consider these adjustments,
     to some extent, to be unpredictable and dependent on a significant
     number of factors that are outside of our control. Furthermore,
     acquisitions result in non-continuing operating expenses, which would
     not otherwise have been incurred by us in the normal course of our
     organic business operations, with respect to each acquisition. We
     believe that providing non-GAAP information for acquisition related
     expense items in addition to the corresponding GAAP information allows
     the users of our financial statements to better review and understand
     the historic and current results of our continuing operations, and also
     facilitates comparisons to our historical results and results of less
     acquisitive peer companies, both with and without such adjustments.

(4)  Restructuring Charges. We provide non-GAAP information that excludes
     restructuring charges such as severance, relocation and benefits and
     the estimated costs of exiting and terminating facility lease
     commitments, including accelerated depreciation on leasehold
     improvements and fixed assets, as they relate to our corporate
     restructuring and exit activities. These restructuring charges are
     inconsistent in amount and are significantly impacted by the timing and
     nature of these events. Therefore, although we may incur these types of
     expenses in the future, we believe that eliminating these charges for
     purposes of calculating the non-GAAP financial measures facilitates a
     more meaningful evaluation of our current operating performance and
     comparisons to our past operating performance.

(5)  Income Tax Effect of Non-GAAP Exclusions. We believe providing
     financial information with and without the income tax effect of
     excluding items related to our non-GAAP financial measures provide our
     management and users of the financial statements with better clarity
     regarding the ongoing performance and future liquidity of our business.

(6)  Non-GAAP Diluted Earnings Per Share Item. We provide non-GAAP diluted
     earnings per share. The non-GAAP diluted earnings per share amount was
     calculated based on our non-GAAP net income and the shares used in the
     computation of GAAP diluted earnings per share.



     Reconciliation of Free Cash Flow to GAAP Cash Flows From Operating
                                 Activities
                               (In thousands)
                                (Unaudited)

                                  Three months ended    Nine months ended
                                     September 30,         September 30,
                                 --------------------  --------------------
                                    2014       2013       2014       2013
                                 ---------  ---------  ---------  ---------
Reconciliation of free cash flow
 to GAAP cash flows from
 operating activities:
GAAP cash flows from operating
 activities                      $  54,300  $  42,004  $ 147,844  $ 113,603
Excess tax benefit from stock-
 based compensation                  1,908      1,500      5,309      7,746
Purchases of property and
 equipment                          (2,524)    (1,217)   (16,840)    (2,963)
                                 ---------  ---------  ---------  ---------
Free cash flow (1)               $  53,684  $  42,287  $ 136,313  $ 118,386
                                 =========  =========  =========  =========
Free cash flow margin (1)             47.6%      48.1%      43.9%      49.7%
                                 =========  =========  =========  =========

(1)  Free Cash Flow. We define free cash flow as cash flows from operating
     activities plus the excess tax benefit from stock-based compensation
     and less the purchases of property and equipment. We believe free cash
     flow is an important liquidity measure that reflects the cash generated
     by the business after the purchase of property and equipment that can
     then be used for, among other things, strategic acquisitions and
     investments in the business, stock repurchases and funding ongoing
     operations. Free cash flow margin is defined as free cash flow divided
     by total revenue.



              Condensed Consolidated Statements of Cash Flows
                               (In thousands)
                                (Unaudited)

                                  Three months ended     Nine months ended
                                     September 30,         September 30,
                                 --------------------  --------------------
                                    2014       2013       2014       2013
                                 ---------  ---------  ---------  ---------
Cash flows from operating
 activities
  Net income                     $  24,121  $  22,823  $  55,146  $  68,619
  Adjustments to reconcile net
   income to net cash provided
   by operating activities:
    Depreciation and
     amortization                    9,418      6,851     27,140     17,727
    Provision for doubtful
     accounts                          (34)       134        439        261
    Stock-based compensation
     expense                         8,630      5,601     27,429     17,143
    Deferred taxes                  (1,895)    (1,519)    (6,387)    (4,393)
    Excess tax benefit from
     stock-based compensation       (1,908)    (1,500)    (5,309)    (7,746)
    (Premium) discount on
     investments                       (90)         6        (90)      (607)
    Other non-cash expenses
     (benefits)                       (108)        84      1,025        822
  Changes in operating assets
   and liabilities, net of
   assets acquired and
   liabilities assumed in
   business combinations:
    Accounts receivable             (6,583)    (9,605)    (3,059)    (9,706)
    Income taxes receivable            806        169      3,884        133
    Prepaid and other assets           668       (641)    (1,906)      (236)
    Accounts payable                 1,905      1,654         48        968
    Accrued liabilities and
     other                           2,155      1,453     14,271     (3,596)
    Income taxes payable             5,235      4,916      6,252     11,989
    Deferred revenue                12,301     11,582     22,939     21,991
    Other long-term liabilities       (321)        (4)     6,022        234
                                 ---------  ---------  ---------  ---------
      Net cash provided by
       operating activities         54,300     42,004    147,844    113,603
Cash flows from investing
 activities
  Purchases of investments          (3,001)        --     (3,001)   (17,288)
  Maturities of investments          3,473      7,179     13,488     38,674
  Purchases of property and
   equipment                        (2,524)    (1,217)   (16,840)    (2,963)
  Purchases of intangible assets
   and other long-term
   investments                         (14)    (8,078)      (199)    (8,249)
  Acquisition of businesses, net
   of cash acquired                    296         --    (63,700)  (120,868)
  Other investing activities            --        579         --        579
                                 ---------  ---------  ---------  ---------
      Net cash used in investing
       activities                   (1,770)    (1,537)   (70,252)  (110,115)
Cash flows from financing
 activities
  Repurchase of common stock        (3,379)   (13,852)   (13,223)   (18,351)
  Exercise of stock options          1,921      2,734      6,049      8,124
  Excess tax benefit from stock-
   based compensation                1,908      1,500      5,309      7,746
  Repayments of borrowings from
   credit agreement                (40,000)        --    (40,000)        --
                                 ---------  ---------  ---------  ---------
      Net cash used in financing
       activities                  (39,550)    (9,618)   (41,865)    (2,481)
Effect of exchange rate changes
 on cash and cash equivalents       (4,994)     3,088     (6,497)     2,122
                                 ---------  ---------  ---------  ---------
  Net increase in cash and cash
   equivalents                       7,986     33,937     29,230      3,129
Cash and cash equivalents
  Beginning of period              187,217    148,894    165,973    179,702
  End of period                  $ 195,203  $ 182,831  $ 195,203  $ 182,831
                                 ---------  ---------  ---------  ---------
Supplemental disclosure of cash
 flow information
  Cash paid for interest         $     191  $      --  $     521  $      --
                                 ---------  ---------  ---------  ---------
  Cash paid for income taxes     $   3,823  $   5,514  $  12,763  $  15,737
                                 ---------  ---------  ---------  ---------