IT management and observability technology developer SolarWinds is counting on a surge in subscription revenue for the company to hit $1 billion in annual recurring revenue by 2025.
In a prepared speech, SolarWinds President, CEO and Director Sudhakar Ramakrishna expressed optimism for the Texas company in the first quarter of 2022 during the financial analyst conference.
“Our expanded offerings portfolio and our expanding market opportunity, which we believe will amount to approximately $60 billion by 2025, further reinforce our goal of achieving at least $1 billion in ARR by 2025 with a compounded annual subscription ARR growth north of 30 percent over that time period, and while building EBITDA margins in the mid-40s,” Ramakrishna said.
Ramakrishna also noted that while total revenue in the first quarter was nearly flat at 2 percent compared with the same period in 2021, revenue from subscriptions rose 37 percent.
Still, Bart Kalsu, the company’s chief financial officer, also said that the impressive growth in the company’s subscription revenue had led to a decline in license sales and maintenance contract sales, noting that total license and maintenance revenues had fallen 5 percent.
Despite this apparent trade-off, Ramakrishna said the company sees subscriptions less as a change in business model than as an extension of the value proposition, adding that SolarWinds is building a subscription pipeline.
“We are … looking ahead 90 days or 180 days from when customers are coming up for their maintenance renewals and actively discussing with them the opportunity to evolve the subscription,” he said. “So that‘s one source of the pipeline. The second source of pipeline is our new sales teams themselves proposing these solutions to customers along a number of sales plays, tools crawl consolidation being one, integrated 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 in 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, a significant decrease from $120.7 million in 2021; and licensing revenue of $22.6 million, also a decrease from $24.9 million a year earlier.
SolarWinds forecasts second quarter revenue growth of 2 percent year-on-year to a range of $174 million to $177 million, and full year 2022 revenue growth of between 2 percent and 4 percent year-on-year to be somewhere between $730 million and $750 million.