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AUSTIN, TX -- (Marketwired) -- 01/29/15 -- SolarWinds (NYSE: SWI), a leading provider of powerful and affordable IT management software, today reported results for its fourth quarter and full year ended December 31, 2014.

• Total revenue for the fourth quarter reached a record high of $118.4 million, representing 22% year-over-year growth on a reported basis and 24% year-over-year growth on a constant currency basis.
• Combined maintenance and subscription revenue for the fourth quarter of $73.4 million, representing 28% year-over-year growth in recurring revenue.
• License revenue for the fourth quarter of $45.1 million, representing 14% year-over-year growth.
• GAAP diluted earnings per share of $0.30 and non-GAAP diluted earnings per share of $0.51 for the fourth quarter.
• GAAP operating income of $30.5 million, or a GAAP operating margin of 26%, and non-GAAP operating income of $52.5 million, or a non-GAAP operating margin of 44% for the fourth quarter.
  
  

Financial Results

SolarWinds reported total revenue for the fourth quarter of 2014 of $118.4 million, a 22% increase over total revenue for the fourth quarter of 2013. Total recurring revenue, comprised of subscription revenue of $9.3 million and record maintenance revenue of $64.1 million, reached $73.4 million, increasing by 28% over the fourth quarter of 2013, representing 62% of total revenue. License revenue was $45.1 million for the fourth quarter of 2014, representing a 14% increase over license revenue for the fourth quarter of 2013.

On a GAAP basis, diluted earnings per share were $0.30 for the fourth quarter of 2014, compared to $0.28 for the fourth quarter of 2013. Non-GAAP diluted earnings per share were $0.51 for the fourth quarter of 2014 compared to $0.41 for the fourth quarter of 2013.

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 annual report on Form 10-K for the period. Information about SolarWinds' use of these non-GAAP financial measures is provided below under "Non-GAAP Financial Measures."

Recent Business Highlights

"I am pleased to report that we delivered another strong performance in the fourth quarter, and closed the year in a very good position. Over the course of the year, we invested heavily in our business and believe that those investments have translated into strong gains across product lines and the regions in which we operate," said Kevin Thompson, SolarWinds' President and Chief Executive Officer.

"The team is continuously working to enhance our execution and this will remain a focus in 2015 -- both as we continue to capitalize on the opportunity in the on-premise IT Management market and as we expand SolarWinds' offerings and model into technology management for the Cloud. We believe that we have created momentum in the business that will allow us to take advantage of new opportunities in 2015," added Thompson.

Recent SolarWinds business highlights include:

• SolarWinds acquired Librato®, a Cloud-based monitoring company headquartered in San Francisco. This latest acquisition, on the heels of SolarWinds' acquisition of Pingdom® in 2014, represents another step in the company's efforts to extend and connect performance management capabilities from on-premise IT infrastructure to Cloud-based application environments. The company believes that these two acquisitions represent significant progress towards executing an overall vision of helping technology pros manage all things IT in a hybrid world.
  
  
• The Company's results in 2014 reflect strength across multiple product lines, including contributions to year-over-year growth for the Network Management and Database Management product portfolios. The SolarWinds MSP team also drove solid performance and delivered record results. Key regions that experienced robust year-over-year growth versus 2013 include North America commercial, Latin America and EMEA.
  
  
• In the fourth quarter, SolarWinds released an updated version of SolarWinds® Database Performance Analyzer (DPA), giving database administrators valuable insight into the database's impact on other layers of the application stack. SolarWinds DPA 9.0 adds storage resource visibility and correlation, providing database admins with unique insight into how storage I/O issues contribute to poor response time; and adds metric baselining and alerting, which enables DBAs to pinpoint the root cause of performance issues within minutes.
  
  
• SolarWinds continues to receive honors for its business and product performance. In the fourth quarter, SolarWinds' GeekSpeak blog, which offers IT Professionals deep, technical discussions on a range of IT management topics, was named one of BizTech's 50 Must-Read IT blogs of 2014. Fourth quarter product accolades included a number of awards across multiple publications for Server & Application Monitor (SAM), Virtualization Manager (VM), Network Performance Monitor (NPM), Network Configuration Manager (NCM), User Device Tracker (UDT), Network Topology Mapper (NTM), Log & Event Manager (LEM) and SolarWinds N-able's N-central®.
  
  

"Through the hard work of the SolarWinds team and the increased investment we made in our business this year, we exited 2014 well-positioned to capitalize on the opportunity in IT management," said Jason Ream, SolarWinds' Executive Vice President and Chief Financial Officer. "Despite foreign currency headwinds which negatively impacted our year-over-year revenue growth, our fourth quarter revenue growth remained robust and represents record total revenue for SolarWinds."

"In addition, though we continued to aggressively invest in our business, the inherent leverage in our business model was once again reflected in non-GAAP operating margins well above our outlook. For the coming year, we remain confident in our ability to drive strong growth despite continued foreign currency headwinds as we continue to focus on improving our momentum in network and systems management while extending our capabilities beyond on-premise IT management in order to attack the growing opportunity to manage the performance of applications and IT infrastructure both in the Cloud as well as across hybrid on-premise/Cloud environments," added Ream.

Financial Outlook

As of January 29, 2015, SolarWinds is providing its financial outlook for its first quarter of 2015. 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 first quarter of 2015. 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 First Quarter of 2015

SolarWinds' management currently expects to achieve the following results for the first quarter of 2015:

• Total revenue in the range of $116.2 to $118.4 million, or 21% to 23% growth over the first quarter of 2014.
• Non-GAAP operating income representing approximately 40% of revenue.
• Non-GAAP diluted earnings per share of $0.43 to $0.46.
• Weighted average outstanding diluted shares of approximately 77.8 million.
  
  

Conference Call and Webcast

In conjunction with this announcement, SolarWinds will host a conference call to discuss its financial results and its business for the fourth quarter and full year 2014 at 4:00 p.m. CT (5:00 p.m. ET/2:00 p.m. PT) on Thursday, January 29, 2015. A live webcast of the call will be available on the SolarWinds Investor Relations website at http://ir.solarwinds.com. A live dial-in will be available domestically at 1-888-708-5692 and internationally at +1-913-312-1477. 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 our financial outlook for the first quarter of 2015, the focus and trajectory of our business, our future product releases and roadmap, areas of investment and focus, and our market opportunity, including the growing opportunity to manage the performance of applications and IT infrastructure both in the Cloud as well as across hybrid on-premise/Cloud environments. 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, 2014 that SolarWinds anticipates filing on or before March 2, 2015. 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' management and Board of Directors analyzes revenue growth on a constant currency basis in order to provide a comparable framework for assessing how the business performed excluding the effect of foreign currency fluctuations.

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.

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, Librato, Pingdom, 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.

© 2015 SolarWinds Worldwide, LLC. All rights reserved.

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


                                                 December 31,   December 31,
                                                     2014           2013
                                                -------------  -------------
Assets
Current assets:
  Cash and cash equivalents                     $     237,942  $     165,973
  Short-term investments                               12,384         19,327
  Accounts receivable, net of allowances of
   $1,088 and $473 as of December 31, 2014 and
   2013, respectively                                  50,791         45,694
  Income tax receivable                                   128          1,535
  Deferred taxes                                        8,350          5,410
  Prepaid and other current assets                      6,492          4,846
                                                -------------  -------------
    Total current assets                              316,087        242,785
Property and equipment, net                            23,614          9,213
Long-term investments                                  17,423         11,012
Deferred taxes                                            830            478
Goodwill                                              363,585        317,054
Intangible assets and other, net                      103,493        125,800
                                                -------------  -------------
    Total assets                                $     825,032  $     706,342
                                                =============  =============
Liabilities and stockholders' equity
Current liabilities:
  Accounts payable                              $       6,829  $       7,187
  Accrued liabilities and other                        35,276         17,716
  Income taxes payable                                  2,351            563
  Current portion of deferred revenue                 154,799        128,328
  Current debt obligations                                 --         40,000
                                                -------------  -------------
    Total current liabilities                         199,255        193,794
Long-term liabilities:
  Deferred revenue, net of current portion              8,609          6,863
  Non-current deferred taxes                            5,319          4,975
  Other long-term liabilities                          22,990         16,816
                                                -------------  -------------
    Total liabilities                                 236,173        222,448
Stockholders' equity:
  Common stock, $0.001 par value: 123,000,000
   shares authorized and 75,911,349 and
   75,009,620 shares issued and outstanding as
   of December 31, 2014 and 2013, respectively             76             75
  Additional paid-in capital                          279,584        236,481
  Accumulated other comprehensive income (loss)       (13,299)         2,953
  Accumulated earnings                                322,498        244,385
                                                -------------  -------------
    Total stockholders' equity                        588,859        483,894
                                                -------------  -------------
    Total liabilities and stockholders' equity  $     825,032  $     706,342
                                                =============  =============



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


                            Three months ended        Twelve months ended
                               December 31,              December 31,
                         ------------------------  ------------------------
                             2014         2013         2014         2013
                         -----------  -----------  -----------  -----------
Revenue:
  License                $    45,052  $    39,539  $   161,795  $   135,839
  Maintenance and other       64,092       53,650      238,892      191,491
  Subscription                 9,295        3,904       28,027        8,055
                         -----------  -----------  -----------  -----------
    Total revenue            118,439       97,093      428,714      335,385
  Cost of license
   revenue                     4,073        3,370       16,394       11,633
  Cost of maintenance
   and other revenue           4,019        3,034       15,315       11,612
  Cost of subscription
   revenue                     3,770        2,625       12,657        4,671
                         -----------  -----------  -----------  -----------
Gross profit                 106,577       88,064      384,348      307,469
Operating expenses:
  Sales and marketing         41,648       32,751      148,420       99,289
  Research and
   development                14,695       11,892       56,479       37,514
  General and
   administrative             19,706       14,161       77,172       48,919
                         -----------  -----------  -----------  -----------
    Total operating
     expenses                 76,049       58,804      282,071      185,722
                         -----------  -----------  -----------  -----------
Operating income              30,528       29,260      102,277      121,747
Other income (expense):
  Interest income                117           72          363          396
  Interest expense              (107)        (215)        (684)        (215)
  Other income
   (expense), net                194           72          640         (425)
                         -----------  -----------  -----------  -----------
    Total other income
     (expense)                   204          (71)         319         (244)
                         -----------  -----------  -----------  -----------
Income before income
 taxes                        30,732       29,189      102,596      121,503
  Income tax expense           7,765        8,030       24,483       31,725
                         -----------  -----------  -----------  -----------
Net income               $    22,967  $    21,159  $    78,113  $    89,778
                         ===========  ===========  ===========  ===========
Net income per share:
  Basic earnings per
   share                 $      0.30  $      0.28  $      1.03  $      1.19
                         ===========  ===========  ===========  ===========
  Diluted earnings per
   share                 $      0.30  $      0.28  $      1.02  $      1.17
                         ===========  ===========  ===========  ===========
Weighted-average shares
 used to compute net
 income per share:
  Shares used in
   computation of basic
   earnings per share         75,778       75,119       75,476       75,182
                         ===========  ===========  ===========  ===========
  Shares used in
   computation of
   diluted earnings per
   share                      76,925       76,048       76,462       76,475
                         ===========  ===========  ===========  ===========



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

                               Three months ended      Twelve months ended
                                  December 31,            December 31,
                             ----------------------  ----------------------
                                2014        2013        2014        2013
                             ----------  ----------  ----------  ----------
GAAP cost of revenue         $   11,862  $    9,029  $   44,366  $   27,916
  Amortization of intangible
   assets (1)                    (5,137)     (4,517)    (20,233)    (12,285)
  Stock-based compensation
   expense and related
   employer-paid payroll
   taxes (2)                       (496)       (183)     (1,543)       (685)
  Restructuring charges (4)           4         (19)          4         (46)
                             ----------  ----------  ----------  ----------
Non-GAAP cost of revenue     $    6,233  $    4,310  $   22,594  $   14,900
                             ==========  ==========  ==========  ==========

GAAP gross profit            $  106,577  $   88,064  $  384,348  $  307,469
  Amortization of intangible
   assets (1)                     5,137       4,517      20,233      12,285
  Stock-based compensation
   expense and related
   employer-paid payroll
   taxes (2)                        496         183       1,543         685
  Restructuring charges (4)          (4)         19          (4)         46
                             ----------  ----------  ----------  ----------
Non-GAAP gross profit        $  112,206  $   92,783  $  406,120  $  320,485
                             ==========  ==========  ==========  ==========

GAAP sales and marketing
 expense                     $   41,648  $   32,751  $  148,420  $   99,289
  Stock-based compensation
   expense and related
   employer-paid payroll
   taxes (2)                     (4,305)     (2,084)    (14,496)     (8,469)
  Restructuring charges (4)          (2)         (5)        (15)       (228)
                             ----------  ----------  ----------  ----------
Non-GAAP sales and marketing
 expense                     $   37,341  $   30,662  $  133,909  $   90,592
                             ==========  ==========  ==========  ==========

GAAP research and
 development expense         $   14,695  $   11,892  $   56,479  $   37,514
  Stock-based compensation
   expense and related
   employer-paid payroll
   taxes (2)                     (2,285)       (970)     (7,692)     (4,377)
  Restructuring charges (4)         (29)        (24)       (106)       (123)
                             ----------  ----------  ----------  ----------
Non-GAAP research and
 development expense         $   12,381  $   10,898  $   48,681  $   33,014
                             ==========  ==========  ==========  ==========

GAAP general and
 administrative expense      $   19,706  $   14,161  $   77,172  $   48,919
  Amortization of intangible
   assets (1)                    (2,936)     (3,207)    (10,967)     (9,527)
  Stock-based compensation
   expense and related
   employer-paid payroll
   taxes (2)                     (4,579)     (2,335)    (16,105)     (9,919)
  Acquisition related
   adjustments (3)               (2,329)       (102)     (6,234)     (1,108)
  Restructuring charges (4)         120        (878)     (7,296)     (1,839)
                             ----------  ----------  ----------  ----------
Non-GAAP general and
 administrative expense      $    9,982  $    7,639  $   36,570  $   26,526
                             ==========  ==========  ==========  ==========

GAAP operating expenses      $   76,049  $   58,804  $  282,071  $  185,722
  Amortization of intangible
   assets (1)                    (2,936)     (3,207)    (10,967)     (9,527)
  Stock-based compensation
   expense and related
   employer-paid payroll
   taxes (2)                    (11,169)     (5,389)    (38,293)    (22,765)
  Acquisition related
   adjustments (3)               (2,329)       (102)     (6,234)     (1,108)
  Restructuring charges (4)          89        (907)     (7,417)     (2,190)
                             ----------  ----------  ----------  ----------
Non-GAAP operating expenses  $   59,704  $   49,199  $  219,160  $  150,132
                             ==========  ==========  ==========  ==========

GAAP operating income        $   30,528  $   29,260  $  102,277  $  121,747
  Amortization of intangible
   assets (1)                     8,073       7,724      31,200      21,812
  Stock-based compensation
   expense and related
   employer-paid payroll
   taxes (2)                     11,665       5,572      39,836      23,450
  Acquisition related
   adjustments (3)                2,329         102       6,234       1,108
  Restructuring charges (4)         (93)        926       7,413       2,236
                             ----------  ----------  ----------  ----------
Non-GAAP operating income    $   52,502  $   43,584  $  186,960  $  170,353
                             ==========  ==========  ==========  ==========

GAAP other income (expense)  $      204  $      (71) $      319  $     (244)
  Acquisition related
   adjustments (3)                   --          --          --           4
                             ----------  ----------  ----------  ----------
Non-GAAP other income
 (expense)                   $      204  $      (71) $      319  $     (240)
                             ==========  ==========  ==========  ==========

GAAP income tax expense      $    7,765  $    8,030  $   24,483  $   31,725
  Income tax effect on non-
   GAAP exclusions (5)            5,858       4,067      22,532      13,375
                             ----------  ----------  ----------  ----------
Non-GAAP income tax expense  $   13,623  $   12,097  $   47,015  $   45,100
                             ==========  ==========  ==========  ==========

GAAP net income              $   22,967  $   21,159  $   78,113  $   89,778
  Amortization of intangible
   assets (1)                     8,073       7,724      31,200      21,812
  Stock-based compensation
   expense and related
   employer-paid payroll
   taxes (2)                     11,665       5,572      39,836      23,450
  Acquisition related
   adjustments (3)                2,329         102       6,234       1,112
  Restructuring charges (4)         (93)        926       7,413       2,236
  Tax benefits associated
   with above adjustments
   (5)                           (5,858)     (4,067)    (22,532)    (13,375)
                             ----------  ----------  ----------  ----------
Non-GAAP net income          $   39,083  $   31,416  $  140,264  $  125,013
                             ==========  ==========  ==========  ==========

Non-GAAP diluted earnings
 per share (6)               $     0.51  $     0.41  $     1.83  $     1.63
                             ==========  ==========  ==========  ==========
Weighted-average shares used
 in computing diluted
 earnings per share              76,925      76,048      76,462      76,475
                             ==========  ==========  ==========  ==========

Percentage of Revenue:
----------------------------

GAAP gross profit                  90.0%       90.7%       89.7%       91.7%
  Non-GAAP adjustments
   (1)(2)(4)                        4.8         4.9         5.1         3.9
                             ----------  ----------  ----------  ----------
Non-GAAP gross profit              94.7%       95.6%       94.7%       95.6%
                             ==========  ==========  ==========  ==========

GAAP operating margin              25.8%       30.1%       23.9%       36.3%
  Non-GAAP adjustments
   (1)(2)(3)(4)                    18.6        14.8        19.8        14.5
                             ----------  ----------  ----------  ----------
Non-GAAP operating margin          44.3%       44.9%       43.6%       50.8%
                             ==========  ==========  ==========  ==========

GAAP net income                    19.4%       21.8%       18.2%       26.8%
  Non-GAAP adjustments
   (1)(2)(3)(4)(5)                 13.6        10.6        14.5        10.5
                             ----------  ----------  ----------  ----------
Non-GAAP net income                33.0%       32.4%       32.7%       37.3%
                             ==========  ==========  ==========  ==========

  (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.

                              SolarWinds, Inc.
  Reconciliation of GAAP Revenue to Non-GAAP Revenue on a Constant Currency
                                    Basis
                               (In thousands)
                                 (Unaudited)

                             Using      Increase       Using      Increase
                            Foreign    (Decrease)     Foreign    (Decrease)
                           Exchange   in Growth %    Exchange   in Growth %
Reconciliation of fourth   Rates in   Compared to    Rates in   Compared to
 quarter 2014 GAAP           Third       Third        Fourth       Fourth
 revenue to Non-GAAP      Quarter of   Quarter of   Quarter of   Quarter of
 revenue:                    2014         2014         2013         2013
                         ------------ -----------  ------------ -----------
GAAP total revenue       $    118,439           5% $    118,439          22%
Foreign exchange impact
 on total revenue               1,222           1         1,631           2
                         ------------ -----------  ------------ -----------
Non-GAAP total revenue
 on a constant currency
 basis (1)               $    119,661           6% $    120,070          24%
                         ============ ===========  ============ ===========


  (1) Revenue on a constant currency basis is calculated using the average
      foreign exchange rates in the monthly periods during a previous
      quarter or year and applying these rates to foreign-denominated
      revenue in the corresponding monthly periods in the fourth quarter of
      2014. The difference between revenue calculated based on these foreign
      exchange rates and revenue calculated in accordance with GAAP is
      listed as foreign exchange impact in the table above.



                              SolarWinds, Inc.
               Condensed Consolidated Statements of Cash Flows
                               (In thousands)
                                 (Unaudited)

                               Three months ended      Twelve months ended
                                  December 31,            December 31,
                             ----------------------  ----------------------
                                2014        2013        2014        2013
                             ----------  ----------  ----------  ----------
Cash flows from operating
 activities
  Net income                 $   22,967  $   21,159  $   78,113  $   89,778
  Adjustments to reconcile
   net income to net cash
   provided by operating
   activities:
    Depreciation and
     amortization                 9,517       9,162      36,657      26,889
    Provision for doubtful
     accounts                       440         195         879         456
    Stock-based compensation
     expense                     11,551       5,506      38,980      22,649
    Accrued earnout gain             --          --          --        (125)
    Deferred taxes                1,182         781      (5,205)     (3,612)
    Excess tax benefit from
     stock-based
     compensation                (2,492)     (1,311)     (7,801)     (9,057)
    Discount (premium) on
     investments                   (461)         11        (551)       (596)
    Other non-cash expenses          66         234       1,091       1,181
  Changes in operating
   assets and liabilities,
   net of assets acquired
   and liabilities assumed
   in business combinations:
    Accounts receivable          (4,187)      3,383      (7,246)     (6,323)
    Income taxes receivable          80        (158)      3,964         (25)
    Prepaid and other assets       (216)        149      (2,122)        (87)
    Accounts payable               (584)        507        (536)      1,475
    Accrued liabilities and
     other                        3,988       2,897      18,259        (699)
    Income taxes payable            752        (235)      7,004      11,754
    Deferred revenue              9,872       6,625      32,811      28,616
    Other long-term
     liabilities                   (507)        812       5,515       1,046
                             ----------  ----------  ----------  ----------
      Net cash provided by
       operating activities      51,968      49,717     199,812     163,320
Cash flows from investing
 activities
  Purchases of investments      (15,478)         --     (18,479)    (17,288)
  Maturities of investments       5,500       9,489      18,988      48,163
  Purchases of property and
   equipment                     (2,388)     (1,790)    (19,228)     (4,753)
  Purchases of intangible
   assets and other long-
   term investments                 (30)       (112)       (229)     (8,361)
  Acquisition of businesses,
   net of cash acquired              --    (102,596)    (63,700)   (223,464)
  Other investing activities         --          --          --         579
                             ----------  ----------  ----------  ----------
      Net cash used in
       investing activities     (12,396)    (95,009)    (82,648)   (205,124)
Cash flows from financing
 activities
  Repurchase of common stock       (668)    (18,929)    (13,891)    (37,280)
  Exercise of stock options       4,654       4,986      10,703      13,110
  Excess tax benefit from
   stock-based compensation       2,492       1,311       7,801       9,057
  Proceeds from credit
   agreement                         --      40,000          --      40,000
  Repayment of borrowings
   from credit agreement             --          --     (40,000)         --
  Payments for debt issuance
   costs                             --        (642)         --        (642)
                             ----------  ----------  ----------  ----------
      Net cash provided by
       (used in) financing
       activities                 6,478      26,726     (35,387)     24,245
Effect of exchange rate
 changes on cash and cash
 equivalents                     (3,311)      1,708      (9,808)      3,830
                             ----------  ----------  ----------  ----------
  Net increase (decrease) in
   cash and cash equivalents     42,739     (16,858)     71,969     (13,729)
Cash and cash equivalents
  Beginning of period           195,203     182,831     165,973     179,702
                             ----------  ----------  ----------  ----------
  End of period              $  237,942  $  165,973  $  237,942  $  165,973
                             ==========  ==========  ==========  ==========

Supplemental disclosure of
 cash flow information
  Cash paid for interest     $       74  $      139  $      595  $      139
                             ==========  ==========  ==========  ==========
  Cash paid for income taxes $    5,583  $    7,525  $   18,346  $   23,262
                             ==========  ==========  ==========  ==========