SolarWinds, a developer of IT management and observability technologies, is counting on an increase in subscription revenue for the company to reach $1 billion in annual recurring revenue by 2025.
In a prepared speech, SolarWinds Chairman, CEO and Director Sudhakar Ramakrishna expressed his optimism for the Texas-based company in the first quarter of 2022 at the financial analyst conference.
“Our expanded portfolio of offerings and expanding market opportunity, which we expect to grow to approximately $60 billion by 2025, further reinforces our goal of reaching at least $1 billion in ARR d ‘by 2025 with compound annual growth in subscription ARR north of 30% from that. period of time, and while building EBITDA margins in the mid-40s,” Ramakrishna said.
Ramakrishna also noted that while total Q1 revenue was nearly flat at 2% compared to the same period in 2021, subscription revenue was up 37%.
Yet Bart Kalsu, the company’s chief financial officer, also said the company’s impressive growth in subscription revenue led to lower license sales and maintenance contract sales, noting that total license revenue and maintenance fell by 5%.
Despite this apparent compromise, Ramakrishna said the company sees subscriptions less as a change in business model and more as an extension of the value proposition, adding that SolarWinds is building a pipeline of subscriptions.
“We’re looking at … 90 days or 180 days from when customers come in for their maintenance renewals and actively discuss with them whether to upgrade the subscription,” he said. “So it’s a pipeline source. The second source of pipeline is our new sales teams who themselves deliver these solutions to clients through a number of sales strategies, tool crawl consolidation being one, embedded visibility being another, and so on.
In the first quarter of 2022, SolarWinds generated total revenues of $176.9 million, a slight increase from $173.9 million in the same period of 2021.
First quarter revenue included subscription revenue of $38.7 million, a significant increase from $28.3 million a year ago; maintenance revenue of $115.5 million, down significantly from $120.7 million in 2021; and licensing revenue of $22.6 million, also down from $24.9 million a year earlier.
SolarWinds expects second-quarter revenue growth of 2% year-over-year to range of $174-177 million, and full-year 2022 revenue growth of 2%-4% year-on-year between 730 and 750 million dollars. million.