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AUSTIN, TX -- (Marketwired) -- 07/16/15 -- SolarWinds (NYSE: SWI), a leading provider of powerful and affordable IT management software, today reported results for its second quarter ended June 30, 2015.

Financial Results

• Total revenue for the second quarter of $119.1 million on a reported basis and $125.0 million on a constant currency basis, representing 17% year-over-year growth on a reported basis and 23% year-over-year growth on a constant currency basis.
• Record recurring revenue for the second quarter of $80.5 million on a reported basis, comprising maintenance revenue of $67.6 million and subscription revenue of $12.9 million, and $85.3 million on a constant currency basis, representing 26% year-over-year growth on a reported basis and 34% year-over-year growth on a constant currency basis, and representing 68% of total revenue.
• License revenue for the second quarter of $38.6 million on a reported basis and $39.6 million on a constant currency basis, representing 3% year-over-year growth on a reported basis and 5% year-over-year growth on a constant currency basis.
• GAAP operating income of $27.9 million and GAAP operating margin of 24% for the second quarter of 2015 compared to GAAP operating income of $18.2 million and GAAP operating margin of 18% for the second quarter of 2014.
• Non-GAAP operating income of $51.5 million and non-GAAP operating margin of 43% for the second quarter of 2015 compared to non-GAAP operating income of $42.7 million and non-GAAP operating margin of 42% for the second quarter of 2014.
• Record cash flow from operations of $54.7 million in the second quarter of 2015 compared to $51.0 million in the second quarter of 2014.
• GAAP diluted earnings per share of $0.29 for the second quarter of 2015 compared to $0.18 for the second quarter of 2014 and non-GAAP diluted earnings per share of $0.52 for the second quarter of 2015 compared to $0.41 for the second quarter of 2014.

Recent Business Highlights

"During the second quarter of 2015 several areas of our business performed well including our MSP and Cloud businesses, license sales in our US Federal and Asia-Pacific businesses, our installed base teams' sales efforts and our customer retention rates. In addition, we exceeded our margin and profit outlook and generated record cash flow from operations given the strength of our unique business model," said Kevin Thompson, SolarWinds' President and Chief Executive Officer.

"As we look ahead to the second half of 2015, we feel confident in our ability to deliver strong growth given the size of our market opportunity and our strategy to capitalize on it as we seek to become the IT management vendor of choice for managing all things IT for IT professionals in all geographies and in companies of all sizes," added Thompson.

Additional highlights include:

• The company took important steps to strengthen its ability to reach IT pros and provide them with the best products to manage all things IT -- from on-premise to the Cloud -- regardless of where the asset or user sits. SolarWinds added a new strategic European R&D office in Kraków, Poland, expanded a dedicated international sales team to better serve national government IT pros and added Jason Marshall as Senior Vice President, Chief Marketing Officer.
• SolarWinds also delivered important product updates. Among these enhancements, SolarWinds® Virtualization Manager now provides users the ability to perform remediation actions for performance issues in virtualized environments; SolarWinds Storage Resource Monitor added support for five market-leading storage array families; SolarWinds Network Configuration Manager now automates network vulnerability detection and security policy enforcement with remediation actions; and SolarWinds Database Performance Analyzer improved the performance management of business-critical applications whether hosted on premises, in a virtualized environment or on the Amazon Web Services® Cloud as well as introduced new integration with SolarWinds' Orion® technology backbone, providing a single view of performance, uptime, capacity and resource utilization across the stack. Additional product updates were made to SolarWinds Web Help Desk® software and DameWare® Remote Support.
• SolarWinds and its products received recognition from several leading IT and business publications. SolarWinds systems management family of products won for overall "Application Performance Monitoring & Management" in NetworkWorld® Asia's Information Management Awards. SC Magazine® honored SolarWinds Network Configuration Manager with "Best Risk/Policy Management Solution" and "Best SIEM Solution" for SolarWinds Log & Event Manager. In addition, Database Trends and Applications included SolarWinds on their DBTA 100 2015 list based on SolarWinds' database performance management and optimization capabilities. Forbes® also recently ranked SolarWinds No. 19 on its list of the "Most Innovative Growth Companies."

"Our focus on delighting our customers resulted in strong customer retention rates for maintenance and subscription in the quarter," said Jason Ream, SolarWinds Executive Vice President and Chief Financial Officer. "In addition, our highly efficient business model allowed us to deliver a very strong quarter of earnings and cash flow in the second quarter," added Ream.

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."

Financial Outlook

As of July 16, 2015, SolarWinds is providing its financial outlook for its third quarter of 2015 and full year 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 third quarter of 2015 and for the full year 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. To determine projected revenue growth rates on a constant currency basis for the third quarter and full year 2015, expected revenue from entities reporting in foreign currencies was translated into U.S. dollars using the comparable prior year period's average foreign currency exchange rates.

Financial Outlook for the Third Quarter of 2015

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

• Total revenue on a reported basis in the range of $130 to $134 million, or 15% to 19% growth over the third quarter of 2014. Total revenue on a constant currency basis in the range of $135 to $138 million, or 19% to 23% growth over the third quarter of 2014.
• Non-GAAP operating income representing 41% to 42% of revenue.
• Non-GAAP diluted earnings per share of $0.49 to $0.53.
• Weighted average outstanding diluted shares of approximately 77.8 million.

Financial Outlook for Full Year 2015

SolarWinds' management currently expects to achieve the following results for the full year 2015:

• Total 2015 revenue on a reported basis in the range of $502 to $512 million, or 17% to 19% year-over-year growth. Total revenue on a constant currency basis in the range of $521 to $530 million, or 22% to 24% year-over-year growth.
• Non-GAAP operating income for the full year representing 41.5% to 42.0% of revenue.
• Non-GAAP diluted earnings per share of $2.00 to $2.08.
• Weighted average outstanding diluted shares of approximately 77.6 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 888-211-9951 and internationally at +1-913-312-0398. 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 third quarter and full year 2015, our growth expectations and our market opportunity, including our ability to deliver faster growth given the size of our market opportunity and our strategy to capitalize on it as we seek to become the IT management vendor of choice for managing all things IT for IT professionals in all geographies and in companies of all sizes. 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," "feel," "expect," "will," "plan," "intend," "estimate," "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 filed on February 23, 2015 and the Form 10-Q that SolarWinds anticipates filing on or before August 10, 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, Web Help Desk, DameWare, Orion, 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. Amazon Web Services is a trademark of Amazon.com, Inc. or its affiliates in the United States and/or other countries. Also referenced at http://aws.amazon.com. 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)

                                                  June 30,     December 31,
                                                    2015           2014
                                               -------------  -------------
Assets
Current assets:
  Cash and cash equivalents                    $     226,076  $     237,942
  Short-term investments                              20,327         12,384
  Accounts receivable, net of allowances of
   $637 and $1,088 as of June 30, 2015 and
   December 31, 2014, respectively                    47,613         50,791
  Income tax receivable                                2,031            128
  Deferred taxes                                       7,308          8,350
  Prepaid and other current assets                     6,517          6,492
                                               -------------  -------------
    Total current assets                             309,872        316,087
Property and equipment, net                           28,602         23,614
Long-term investments                                  9,387         17,423
Deferred taxes                                         3,449            830
Goodwill                                             431,853        363,585
Intangible assets, net                                85,534         93,046
Other assets, net                                     10,234         10,447
                                               -------------  -------------
    Total assets                               $     878,931  $     825,032
                                               =============  =============
Liabilities and stockholders' equity
Current liabilities:
  Accounts payable                             $       8,275  $       6,829
  Accrued liabilities and other                       19,103         35,276
  Income taxes payable                                 2,012          2,351
  Current portion of deferred revenue                168,906        154,799
                                               -------------  -------------
    Total current liabilities                        198,296        199,255
Long-term liabilities:
  Deferred revenue, net of current portion            10,316          8,609
  Non-current deferred taxes                           3,621          5,319
  Other long-term liabilities                         24,364         22,990
                                               -------------  -------------
    Total liabilities                                236,597        236,173
Commitments and Contingencies
Stockholders' equity:
  Common stock, $0.001 par value: 123,000,000
   shares authorized and 76,575,254 and
   75,911,349 shares issued and outstanding as
   of June 30, 2015 and December 31, 2014,
   respectively                                           77             76
  Additional paid-in capital                         304,457        279,584
  Accumulated other comprehensive loss               (25,009)       (13,299)
  Accumulated earnings                               362,809        322,498
                                               -------------  -------------
    Total stockholders' equity                       642,334        588,859
                                               -------------  -------------
    Total liabilities and stockholders' equity $     878,931  $     825,032
                                               =============  =============



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

                                  Three months ended     Six months ended
                                       June 30,              June 30,
                                 --------------------  --------------------
                                    2015       2014       2015       2014
                                 ---------  ---------  ---------  ---------
Revenue:
  License                        $  38,591  $  37,636  $  80,953  $  73,987
  Maintenance and other             67,556     58,035    131,285    112,956
  Subscription                      12,929      5,833     23,630     10,470
                                 ---------  ---------  ---------  ---------
    Total revenue                  119,076    101,504    235,868    197,413
  Cost of license revenue            4,371      4,112      8,586      8,221
  Cost of maintenance and other
   revenue                           4,130      3,875      8,267      7,331
  Cost of subscription revenue       4,920      2,911      9,147      5,374
                                 ---------  ---------  ---------  ---------
Gross profit                       105,655     90,606    209,868    176,487
Operating expenses:
  Sales and marketing               43,193     35,254     86,585     69,234
  Research and development          15,133     13,883     31,503     28,023
  General and administrative        19,399     23,263     39,737     39,192
                                 ---------  ---------  ---------  ---------
    Total operating expenses        77,725     72,400    157,825    136,449
                                 ---------  ---------  ---------  ---------
Operating income                    27,930     18,206     52,043     40,038
Other income (expense):
  Interest income                      108         83        217        161
  Interest expense                     (88)      (216)      (191)      (435)
  Other income, net                  2,356         13      2,453        208
                                 ---------  ---------  ---------  ---------
    Total other income (expense)     2,376       (120)     2,479        (66)
                                 ---------  ---------  ---------  ---------
Income before income taxes          30,306     18,086     54,522     39,972
    Income tax expense               8,161      4,707     14,211      8,947
                                 ---------  ---------  ---------  ---------
Net income                       $  22,145  $  13,379  $  40,311  $  31,025
                                 =========  =========  =========  =========
Net income per share:
  Basic earnings per share       $    0.29  $    0.18  $    0.53  $    0.41
                                 =========  =========  =========  =========
  Diluted earnings per share     $    0.29  $    0.18  $    0.52  $    0.41
                                 =========  =========  =========  =========
Weighted-average shares used to
 compute net income per share:
  Shares used in computation of
   basic earnings per share         76,476     75,411     76,339     75,308
                                 =========  =========  =========  =========
  Shares used in computation of
   diluted earnings per share       77,400     76,296     77,306     76,245
                                 =========  =========  =========  =========

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

                                  Three months ended     Six months ended
                                       June 30,              June 30,
                                 --------------------  --------------------
                                    2015       2014       2015       2014
                                 ---------  ---------  ---------  ---------
GAAP cost of revenue             $  13,421  $  10,898  $  26,000  $  20,926
  Amortization of intangible
   assets (1)                       (5,996)    (4,978)   (11,701)    (9,911)
  Stock-based compensation
   expense and related employer-
   paid payroll taxes (2)             (498)      (330)    (1,026)      (680)
                                 ---------  ---------  ---------  ---------
Non-GAAP cost of revenue         $   6,927  $   5,590  $  13,273  $  10,335
                                 =========  =========  =========  =========

GAAP gross profit                $ 105,655  $  90,606  $ 209,868  $ 176,487
  Amortization of intangible
   assets (1)                        5,996      4,978     11,701      9,911
  Stock-based compensation
   expense and related employer-
   paid payroll taxes (2)              498        330      1,026        680
                                 ---------  ---------  ---------  ---------
Non-GAAP gross profit            $ 112,149  $  95,914  $ 222,595  $ 187,078
                                 =========  =========  =========  =========

GAAP sales and marketing expense $  43,193  $  35,254  $  86,585  $  69,234
  Stock-based compensation
   expense and related employer-
   paid payroll taxes (2)           (4,229)    (3,144)    (8,997)    (7,103)
                                 ---------  ---------  ---------  ---------
Non-GAAP sales and marketing
 expense                         $  38,964  $  32,110  $  77,588  $  62,131
                                 =========  =========  =========  =========

GAAP research and development
 expense                         $  15,133  $  13,883  $  31,503  $  28,023
  Stock-based compensation
   expense and related employer-
   paid payroll taxes (2)           (3,054)    (1,658)    (5,941)    (3,984)
  Restructuring charges (4)             --         (8)        --        (38)
                                 ---------  ---------  ---------  ---------
Non-GAAP research and
 development expense             $  12,079  $  12,217  $  25,562  $  24,001
                                 =========  =========  =========  =========

GAAP general and administrative
 expense                         $  19,399  $  23,263  $  39,737  $  39,192
  Amortization of intangible
   assets (1)                       (2,490)    (2,609)    (4,919)    (5,235)
  Stock-based compensation
   expense and related employer-
   paid payroll taxes (2)           (4,928)    (3,475)   (10,060)    (7,634)
  Acquisition related
   adjustments (3)                  (2,361)    (1,398)    (5,156)    (1,395)
  Restructuring charges (4)             --     (6,899)       327     (7,443)
Non-GAAP general and
 administrative expense          $   9,620  $   8,882  $  19,929  $  17,485
                                 =========  =========  =========  =========

GAAP operating expenses          $  77,725  $  72,400  $ 157,825  $ 136,449
  Amortization of intangible
   assets (1)                       (2,490)    (2,609)    (4,919)    (5,235)
  Stock-based compensation
   expense and related employer-
   paid payroll taxes (2)          (12,211)    (8,277)   (24,998)   (18,721)
  Acquisition related
   adjustments (3)                  (2,361)    (1,398)    (5,156)    (1,395)
  Restructuring charges (4)             --     (6,907)       327     (7,481)
                                 ---------  ---------  ---------  ---------
Non-GAAP operating expenses      $  60,663  $  53,209  $ 123,079  $ 103,617
                                 =========  =========  =========  =========

GAAP operating income            $  27,930  $  18,206  $  52,043  $  40,038
  Amortization of intangible
   assets (1)                        8,486      7,587     16,620     15,146
  Stock-based compensation
   expense and related employer-
   paid payroll taxes (2)           12,709      8,607     26,024     19,401
  Acquisition related
   adjustments (3)                   2,361      1,398      5,156      1,395
  Restructuring charges (4)             --      6,907       (327)     7,481
                                 ---------  ---------  ---------  ---------
Non-GAAP operating income        $  51,486  $  42,705  $  99,516  $  83,461
                                 =========  =========  =========  =========

GAAP income tax expense          $   8,161  $   4,707  $  14,211  $   8,947
  Income tax effect on non-GAAP
   exclusions (5)                    5,216      6,409     11,524     11,831
                                 ---------  ---------  ---------  ---------
Non-GAAP income tax expense      $  13,377  $  11,116  $  25,735  $  20,778
                                 =========  =========  =========  =========

GAAP net income                  $  22,145  $  13,379  $  40,311  $  31,025
  Amortization of intangible
   assets (1)                        8,486      7,587     16,620     15,146
  Stock-based compensation
   expense and related employer-
   paid payroll taxes (2)           12,709      8,607     26,024     19,401
  Acquisition related
   adjustments (3)                   2,361      1,398      5,156      1,395
  Restructuring charges (4)             --      6,907       (327)     7,481
  Tax benefits associated with
   above adjustments (5)            (5,216)    (6,409)   (11,524)   (11,831)
                                 ---------  ---------  ---------  ---------
Non-GAAP net income              $  40,485  $  31,469  $  76,260  $  62,617
                                 =========  =========  =========  =========

Non-GAAP diluted earnings per
 share (6)                       $    0.52  $    0.41  $    0.99  $    0.82
                                 =========  =========  =========  =========
Weighted-average shares used in
 computing diluted earnings per
 share                              77,400     76,296     77,306     76,245
                                 =========  =========  =========  =========

Percentage of Revenue:

GAAP gross profit                     88.7%      89.3%      89.0%      89.4%
  Non-GAAP adjustments (1)(2)          5.5        5.2        5.4        5.4
                                 ---------  ---------  ---------  ---------
Non-GAAP gross profit                 94.2%      94.5%      94.4%      94.8%
                                 =========  =========  =========  =========

GAAP operating margin                 23.5%      17.9%      22.1%      20.3%
  Non-GAAP adjustments
   (1)(2)(3)(4)                       19.8       24.1       20.1       22.0
                                 ---------  ---------  ---------  ---------
Non-GAAP operating margin             43.2%      42.1%      42.2%      42.3%
                                 =========  =========  =========  =========

GAAP net income                       18.6%      13.2%      17.1%      15.7%
  Non-GAAP adjustments
   (1)(2)(3)(4)(5)                    15.4       17.8       15.2       16.0
                                 ---------  ---------  ---------  ---------
Non-GAAP net income                   34.0%      31.0%      32.3%      31.7%
                                 =========  =========  =========  =========

(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, except percentages)
                                (Unaudited)

                               Three months ended       Six months ended
                                  June 30, 2015           June 30, 2015
                             ----------------------  ----------------------
                                Using
                               Foreign                  Using
                               Exchange   Growth %     Foreign    Growth %
                               Rates in   Compared     Exchange   Compared
Reconciliation of GAAP          Second    to Second    Rates in   to First
 revenue to Non-GAAP          Quarter of Quarter of   First Half   Half of
 revenue:                        2014       2014       of 2014      2014
                             ----------- ----------  ----------- ----------
GAAP license revenue         $    38,591          3% $    80,953          9%
  Estimated foreign currency
   impact                          1,037          2        1,973          3
                             ----------- ----------  ----------- ----------
Non-GAAP license revenue on
 a constant currency basis
 (1)                         $    39,628          5% $    82,926         12%
                             =========== ==========  =========== ==========

GAAP maintenance and other
 revenue                     $    67,556         16% $   131,285         16%
  Estimated foreign currency
   impact                          3,906          7        7,032          6
                             ----------- ----------  ----------- ----------
Non-GAAP maintenance and
 other revenue on a constant
 currency basis (1)          $    71,462         23% $   138,317         22%
                             =========== ==========  =========== ==========

GAAP subscription revenue    $    12,929        122% $    23,630        126%
  Estimated foreign currency
   impact                            957         16        1,471         14
                             ----------- ----------  ----------- ----------
Non-GAAP subscription
 revenue on a constant
 currency basis (1)          $    13,886        138% $    25,101        140%
                             =========== ==========  =========== ==========

GAAP total revenue           $   119,076         17% $   235,868         19%
  Estimated foreign currency
   impact                          5,900          6       10,476          6
                             ----------- ----------  ----------- ----------
Non-GAAP total revenue on a
 constant currency basis (1) $   124,976         23% $   246,344         25%
                             =========== ==========  =========== ==========

                               Three months ended       Six months ended
                                  June 30, 2015           June 30, 2015
                             ----------------------  ----------------------
                                Using
                               Foreign                  Using
                               Exchange   Growth %     Foreign    Growth %
                               Rates in   Compared     Exchange   Compared
Reconciliation of GAAP          Second    to Second    Rates in   to First
revenue to Non-GAAP revenue   Quarter of Quarter of   First Half   Half of
by product group:                2014       2014       of 2014      2014
                             ----------- ----------  ----------- ----------
GAAP network management
 revenue                     $    66,779         11% $   133,472         13%
  Estimated foreign currency
   impact                          3,233          5        5,826          5
                             ----------- ----------  ----------- ----------
Non-GAAP network management
 revenue on a constant
 currency basis (1)          $    70,012         16% $   139,298         18%
                             =========== ==========  =========== ==========

GAAP systems and application
 management revenue          $    35,989         14% $    72,100         17%
  Estimated foreign currency
   impact                          1,567          4        2,928          5
                             ----------- ----------  ----------- ----------
Non-GAAP systems and
 application management
 revenue on a constant
 currency basis (1)          $    37,556         18% $    75,028         22%
                             =========== ==========  =========== ==========

GAAP MSP and cloud revenue   $    16,308         72% $    30,296         73%
  Estimated foreign currency
   impact                          1,100         12        1,722         10
                             ----------- ----------  ----------- ----------
Non-GAAP MSP and cloud
 revenue on a constant
 currency basis (1)          $    17,408         84% $    32,018         83%
                             =========== ==========  =========== ==========

(1) Revenue on a constant currency basis is calculated using the average
    foreign exchange rates in the comparable prior year monthly periods and
    applying these rates to foreign-denominated revenue in the corresponding
    monthly periods in the second quarter and the first half of 2015. The
    difference between revenue calculated based on these foreign exchange
    rates and revenue calculated in accordance with GAAP is listed as
    estimated foreign currency impact in the table above.



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

                                  Three months ended     Six months ended
                                       June 30,              June 30,
                                 --------------------  --------------------
                                    2015       2014       2015       2014
                                 ---------  ---------  ---------  ---------
Cash flows from operating
 activities
  Net income                     $  22,145  $  13,379  $  40,311  $  31,025
  Adjustments to reconcile net
   income to net cash provided
   by operating activities:
    Depreciation and
     amortization                   10,223      8,827     19,952     17,722
    Provision for doubtful
     accounts                          301        125        689        473
    Stock-based compensation
     expense                        12,402      8,592     24,727     18,799
    Deferred taxes                     551     (3,294)     1,876     (4,492)
    Excess tax benefit from
     stock-based compensation         (978)      (415)    (3,565)    (3,401)
    Premium on investments            (121)        --       (156)        --
    Other non-cash expenses            491        748      1,039      1,133
  Changes in operating assets
   and liabilities, net of
   assets acquired and
   liabilities assumed in
   business combinations:
    Accounts receivable              5,082      1,808        764      3,524
    Income taxes receivable            858      4,543     (1,921)     3,078
    Prepaid and other assets           (26)      (820)        37     (2,574)
    Accounts payable                    64     (1,104)     1,322     (1,857)
    Accrued liabilities and
     other                          (8,628)    13,485    (16,766)    12,116
    Income taxes payable             1,713       (105)     3,260      1,017
    Deferred revenue                 9,272      2,030     19,634     10,638
    Other long-term liabilities      1,358      3,154      1,177      6,343
                                 ---------  ---------  ---------  ---------
      Net cash provided by
       operating activities         54,707     50,953     92,380     93,544
Cash flows from investing
 activities
  Purchases of investments          (4,044)        --     (5,745)        --
  Maturities of investments          4,000      3,515      5,650     10,015
  Purchases of property and
   equipment                        (3,773)    (8,139)    (7,051)   (14,316)
  Purchases of intangible assets       (83)       (68)      (131)      (185)
  Acquisition of businesses, net
   of cash acquired                (50,125)   (63,996)   (90,067)   (63,996)
                                 ---------  ---------  ---------  ---------
      Net cash used in investing
       activities                  (54,025)   (68,688)   (97,344)   (68,482)
Cash flows from financing
 activities
  Repurchase of common stock        (1,636)    (3,256)    (8,651)    (9,844)
  Exercise of stock options          2,695        914      5,411      4,128
  Excess tax benefit from stock-
   based compensation                  978        415      3,565      3,401
                                 ---------  ---------  ---------  ---------
      Net cash provided by (used
       in) financing activities      2,037     (1,927)       325     (2,315)
Effect of exchange rate changes
 on cash and cash equivalents        1,784     (1,456)    (7,227)    (1,503)
                                 ---------  ---------  ---------  ---------
  Net increase (decrease) in
   cash and cash equivalents         4,503    (21,118)   (11,866)    21,244
Cash and cash equivalents
  Beginning of period              221,573    208,335    237,942    165,973
                                 ---------  ---------  ---------  ---------
  End of period                  $ 226,076  $ 187,217  $ 226,076  $ 187,217
                                 =========  =========  =========  =========
Supplemental disclosure of cash
 flow information
  Cash paid for interest         $      63  $     148  $     125  $     330
                                 =========  =========  =========  =========
  Cash paid for income taxes     $   4,957  $   3,379  $  10,684  $   8,940
                                 =========  =========  =========  =========
Non-cash investing transactions
  Purchases of property and
   equipment included in accrued
   liabilities                   $   1,393  $     486  $   1,393  $     486
                                 =========  =========  =========  =========