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SolarWinds: SolarWinds Announces 2009 Second Quarter Results

^{Published on 2009-07-23 13:11:31, Last Modified on 2009-07-23 13:11:39 - Market Wire}
 

AUSTIN, TX--(Marketwire - July 23, 2009) - SolarWinds®, Inc. (NYSE: [ SWI ]), a leading provider of powerful, simple and affordable network management software to customers worldwide, today reported results for its second quarter ended June 30, 2009.

Financial Results

SolarWinds reported record total revenue for the second quarter of 2009 of $27.0 million, a 24.8% increase over total revenue in the second quarter of 2008 and a 12.3% sequential increase over total revenue in the first quarter of 2009. License revenue was $14.6 million in the second quarter of 2009, representing a 12.1% increase over license revenue in the second quarter of 2008 and a 16.4% sequential increase over license revenue in the first quarter of 2009. Maintenance revenue was $12.4 million in the second quarter of 2009, representing a 43.8% increase over maintenance revenue in the second quarter of 2008.

On a GAAP basis, operating income was $11.8 million and net income was $6.8 million, or $0.13 per diluted share, in the second quarter of 2009, compared to operating income of $9.9 million and net income of $5.2 million, or $0.08 per diluted share, in the second quarter of 2008.

Non-GAAP operating income was $13.8 million in the second quarter of 2009 compared to $11.4 million in the second quarter of 2008. Non-GAAP net income was $8.8 million, or $0.13 per diluted share, in the second quarter of 2009, compared to $6.5 million, or $0.11 per diluted share, in the second quarter of 2008. Non-GAAP net income and operating income exclude stock-based compensation expense, amortization of intangible assets and the related tax impact of these items. Non-GAAP net income also excludes the write-off of debt issuance costs. Non-GAAP diluted earnings per share is equal to non-GAAP net income divided by non-GAAP weighted average shares outstanding, which adjusts GAAP weighted average shares outstanding to assume that the conversion of preferred stock in May 2009 occurred at the beginning of the period.

Adjusted EBITDA was $14.2 million, or 52.4% of total revenue, in the second quarter of 2009, representing a 21.2% increase over adjusted EBITDA in the second quarter of 2008. Adjusted EBITDA is defined as net income plus net interest expense, income tax expense (benefit), depreciation and amortization and stock-based compensation expense. Adjusted cash flow, which is defined as net cash provided by operating activities plus cash interest paid plus cash taxes paid, was $14.3 million in the second quarter of 2009, representing a 11.9% increase over adjusted cash flow in the second quarter of 2008.

Information about SolarWinds' use of non-GAAP financial information is provided under "Non-GAAP Financial Measures" below.

"Our growth in revenue, profit and profitability in the second quarter clearly demonstrates the power of our model," said Kevin Thompson, SolarWinds' President, Chief Operating Officer and Chief Financial Officer. "Our powerful, easy-to-use and affordable network software management software allows us to serve all customers in our target market, from the very smallest to the very largest, and our low-touch, high-volume and high-velocity marketing and sales model allows us to do so profitably."

Recent Business Highlights

"We continue to pursue our strategy of providing software that meets the real-world needs of IT professionals," said Mike Bennett, SolarWinds' Chairman and Chief Executive Officer. "While the current economic environment continues to offer challenges, many new and existing customers made the decision to buy from SolarWinds this quarter. We believe that our market position and reputation enables us to take advantage of the opportunities created when IT teams look to do more with less."

 -- SolarWinds increased its total number of customers during the second quarter to over 85,000. -- In June 2009, SolarWinds was added to the Russell 2000® Index. -- In May 2009, SolarWinds released new versions of two key products within the flagship Orion family of network management solutions -- Orion Network Performance Monitor (NPM) and Orion Network Configuration Manager (NCM). These new versions give users both visibility into and control over wireless network performance and network energy consumption, through integration with Cisco® EnergyWise technology. -- In May 2009, SolarWinds completed its initial public offering and listed its shares on the New York Stock Exchange under the ticker symbol "SWI." -- In April 2009, SolarWinds released an addition to the Orion product family called Orion IP Address Manager (IPAM), an enterprise-class, easy-to- use, IP address management solution. 

"One of the key elements of our success is our connection to the network management community. Using various channels, including thwack®, our community of more than 25,000 network professionals, we work to understand the challenges they face and the support we can offer," continued Bennett. "In the second quarter, we were able to use this connection to deliver an updated portfolio of products that clearly resonates with customers."

Financial Outlook

As of July 23, 2009, SolarWinds is initiating guidance for its third quarter of 2009 and for its full year ending December 31, 2009. The financial information below represents forward-looking non-GAAP financial information, including an estimate of non-GAAP operating income, non-GAAP net income and non-GAAP diluted earnings per share, for the third quarter of 2009 and for the full year 2009. These non-GAAP financial measures exclude, among other items mentioned previously, stock-based compensation expense. SolarWinds cannot reasonably estimate the expected stock-based compensation expense for these future periods as the amounts depend upon such factors as the future price of SolarWinds' stock for purposes of computation.

Financial Outlook for the Third Quarter of 2009

SolarWinds management currently expects to achieve the following results for the third quarter of 2009:

 -- Total revenue in the range of $30.3-$31.5 million -- Non-GAAP operating income of $15.3-$16.2 million -- Non-GAAP net income of $10.6-$11.2 million -- Non-GAAP diluted earnings per share of $0.15-$0.16 -- Weighted average shares outstanding of approximately 72 million 

Financial Outlook for Full Year 2009

SolarWinds management currently expects to achieve the following results for the full year 2009:

 -- Total revenue in the range of $114.0-$116.7 million -- Non-GAAP operating income of $57.3-$59.2 million -- Non-GAAP net income of $38.0-$39.4 million -- Non-GAAP diluted earnings per share of $0.56-$0.58 -- Non-GAAP weighted average shares outstanding of approximately 68 million 

Conference Call and Webcast

In conjunction with this announcement, SolarWinds will host a conference call today to discuss its financial results and other business at 4:00pm CDT (5:00pm EDT/2:00pm PDT). A live webcast of the event will be available on the SolarWinds Investor Relations website at [ http://ir.solarwinds.com ]. A live dial-in is available domestically at 877-419-6596 and internationally at +1-719-325-4873. It is recommended that participants access the webcast or dial into the call at least 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 relating to SolarWinds' possible or assumed future results of operations and potential growth and market opportunities. 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 "expects," "believes," "may," 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 possibility that general economic conditions or uncertainty cause information technology spending to be reduced or purchasing decisions to be delayed; (b) the presence or absence of occasional large customer orders, including in particular those placed by the U.S. federal government; (c) the inability to increase sales to existing customers and to attract new customers; (d) the timing and success of new product introductions by SolarWinds or its competitors; (e) changes in SolarWinds' pricing policies or those of its competitors; (f) the loss of relationships with the distributor and reseller that help fulfill most sales orders from the U.S. government; (g) potential foreign exchange gains and losses related to expenses and sales denominated in currencies other than the functional currency of an associated entity; and (h) such other risk and uncertainties described more fully in documents filed with or furnished to the Securities and Exchange Commission, including the prospectus filed on May 20, 2009. 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 the following non-GAAP financial measures: non-GAAP operating income, non-GAAP net income, non-GAAP diluted earnings per share, adjusted EBITDA, adjusted cash flow and non-GAAP weighted average shares outstanding. Each of non-GAAP operating income, non-GAAP net income, non-GAAP diluted earnings per share and adjusted EBITDA exclude the impact of stock-based compensation expense, amortization of intangible assets and the related tax benefits from the comparable GAAP measure. Non-GAAP net income also excludes the write-off of debt issuance costs. This press release also contains a reconciliation of each of these non-GAAP measures to its most comparable GAAP financial measure.

SolarWinds believes that each of these non-GAAP financial measures provide meaningful supplemental information regarding its liquidity and performance by excluding certain expenses and expenditures that may not be indicative of its core business operations. SolarWinds' management and Board of Directors use these non-GAAP measures to assess liquidity and operational performance as well as to determine employee incentive compensation. Accordingly, these measures may provide helpful insight to investors on the motivation and decision-making of management in operating the business.

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 and liquidity 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. These items are typically interest expense, income tax expense, depreciation and amortization and stock-based compensation expense.

SolarWinds also believes that adjusted EBITDA and adjusted cash flow are useful liquidity measures for investors and security analysts. Adjusted EBITDA is the performance measure for two of the key operational covenants used to assess SolarWinds' ability to service the debt in its credit agreements. SolarWinds believes that adjusted EBITDA and adjusted cash flow provide useful information to management and investors about the amount of cash generated by the business that, after the acquisition of property and equipment, can be used for strategic opportunities, including investing in the business, making strategic acquisitions and increasing cash balances.

SolarWinds understands that, although these non-GAAP financial measures are frequently used by investors and securities analysts in their evaluations of companies, 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. Items such as the amortization of intangible assets, stock-based compensation expense, interest expense and income tax expense that are excluded from these non-GAAP financial measures can have a material impact on net earnings. Furthermore, neither Adjusted EBITDA nor adjusted cash flow reflects (a) interest expense, interest income or cash requirements for income taxes; (b) cash requirements for potential replacements of assets being depreciated or amortized in the future; (c) cash expenditures or future requirements for capital expenditures or other contractual commitments; (d) changes in, or cash requirements for, working capital needs; or (e) the total increase or decrease in the cash balance for the period.

As a result, these non-GAAP financial measures have limitations and should not be considered in isolation from, or as a substitute for, operating income, net income, cash flow from operations or other measures of performance prepared in accordance with GAAP. 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 included elsewhere in this press release.

About SolarWinds

SolarWinds provides powerful, simple and affordable network management software to more than 85,000 customers worldwide -- from Fortune 500 enterprises to small businesses. Focused on the real-world needs of network professionals, SolarWinds products are downloadable, easy to use and maintain, and provide the power, scale, and flexibility needed to manage today's complex network environments. SolarWinds' growing online community, thwack, offers users problem-solving and technology-sharing for all of SolarWinds' products.

SolarWinds, SolarWinds.com, thwack, and Orion are registered trademarks of SolarWinds. All other company and product names mentioned are used only for identification purposes and may be trademarks or registered trademarks of their respective companies.

 SolarWinds, Inc. Condensed Consolidated Balance Sheets (In thousands, except for per share information) (unaudited) December 31, June 30, 2008 2009 ------------ ------------ Assets Current assets: Cash and cash equivalents $ 40,566 $ 112,150 Accounts receivable, net of allowances of $117 and $175 as of December 31, 2008 and June 30, 2009 (unaudited), respectively 13,722 12,767 Income tax receivable 728 310 Deferred taxes 40 44 Prepaid income taxes - 2,129 Other current assets 1,420 1,932 ------------ ------------ Total current assets 56,476 129,332 Property and equipment, net 5,178 5,472 Debt issuance costs, net 1,101 501 Deferred taxes 1,847 1,862 Goodwill 15,745 15,791 Intangible assets and other, net 6,560 4,177 ------------ ------------ Total assets $ 86,907 $ 157,135 ============ ============ Liabilities, convertible preferred stock and stockholders' equity (deficit) Current liabilities: Accounts payable $ 1,471 $ 1,770 Accrued liabilities 3,284 5,077 Accrued interest payable 2,011 1,033 Dividends payable - 20,000 Income taxes payable 201 271 Current portion of deferred revenue 25,930 30,290 Current portion of capital lease obligations 25 22 Current portion of long-term debt 7,161 - ------------ ------------ Total current liabilities 40,083 58,463 Long-term liabilities: Deferred revenue, net of current portion 1,232 1,651 Capital lease obligations, net of current portion 10 - Other long-term liabilities 188 300 Long-term debt, net of current portion 93,922 44,097 ------------ ------------ Total long-term liabilities 95,352 46,048 ------------ ------------ Total liabilities 135,435 104,511 ------------ ------------ Commitments and contingencies Convertible preferred stock, $0.001 par value: 46,551,618 shares authorized and 27,000,003 shares issued and outstanding as of December 31, 2008 and no shares authorized and no shares issued and outstanding as of June 30, 2009 (unaudited) 27 - Stockholders' equity (deficit): Common stock, $0.001 par value: 123,000,000 shares authorized and 28,166,656 and 64,979,173 shares issued and outstanding as of December 31, 2008 and June 30, 2009 (unaudited), respectively 28 65 Additional paid-in capital 15,166 123,389 Accumulated other comprehensive loss (315) (202) Accumulated deficit (63,434) (70,628) ------------ ------------ Total stockholders' equity (deficit) (48,555) 52,624 ------------ ------------ Total liabilities, convertible preferred stock and stockholders' equity $ 86,907 $ 157,135 ============ ============ SolarWinds, Inc. Condensed Consolidated Statements of Income (In thousands, except for per share information) (unaudited) Three Months Ended Six Months Ended June 30, June 30, ------------------ ------------------ 2008 2009 2008 2009 -------- -------- -------- -------- Revenue: License $ 13,025 $ 14,598 $ 25,475 $ 27,139 Maintenance and other 8,652 12,444 16,598 23,978 -------- -------- -------- -------- Total revenue 21,677 27,042 42,073 51,117 Cost of license revenue 60 154 130 305 Cost of maintenance and other revenue 787 1,039 1,536 2,017 -------- -------- -------- -------- Gross profit 20,830 25,849 40,407 48,795 -------- -------- -------- -------- Operating expenses: Sales and marketing 5,138 7,225 9,676 13,925 Research and development 1,990 2,755 3,910 5,181 General and administrative 3,787 4,112 7,959 7,977 -------- -------- -------- -------- Total operating expenses 10,915 14,092 21,545 27,083 -------- -------- -------- -------- Operating income 9,915 11,757 18,862 21,712 -------- -------- -------- -------- Other income (expense): Interest income 110 53 260 132 Interest expense (1,858) (1,540) (4,539) (2,991) Other income (expense) 6 (9) (127) (6) -------- -------- -------- -------- Total other expense (1,742) (1,496) (4,406) (2,865) -------- -------- -------- -------- Income before income taxes 8,173 10,261 14,456 18,847 Income tax expense 2,945 3,443 5,078 6,041 -------- -------- -------- -------- Net income 5,228 6,818 9,378 12,806 Amount allocated to participating preferred stockholders (2,560) - (4,594) - -------- -------- -------- -------- Net income available to common stockholders $ 2,668 $ 6,818 $ 4,784 $ 12,806 ======== ======== ======== ======== Net income available to common stockholders per share: Basic earnings per share available to common stockholders $ 0.09 $ 0.15 $ 0.17 $ 0.35 ======== ======== ======== ======== Diluted earnings per share available to common stockholders $ 0.08 $ 0.13 $ 0.15 $ 0.30 ======== ======== ======== ======== Weighted shares used to compute net income available to common stockholders per share: Shares used in computation of basic earnings per share available to common stockholders 28,141 44,907 28,119 36,544 ======== ======== ======== ======== Shares used in computation of diluted earnings per share available to common stockholders 33,035 50,952 31,912 42,236 ======== ======== ======== ======== SolarWinds, Inc. Reconciliation of GAAP to Non-GAAP Results of Operations (In thousands, except for per share information) (unaudited) Three Months Ended Three Months Ended June 30, 2008 June 30, 2009 ---------------------------- ---------------------------- Non- Non- GAAP Adjustments GAAP GAAP Adjustments GAAP ------- ------- ------- ------- ------- ------- Total revenue $21,677 $ - $21,677 $27,042 $ - $27,042 Gross profit 20,830 73 20,903 25,849 171 26,020 Operating expenses 10,915 (1,431) 9,484 14,092 (1,907) 12,185 ------- ------- ------- ------- ------- ------- Operating income 9,915 1,504(a) 11,419 11,757 2,078(a) 13,835 Total other expense (1,742) - (1,742) (1,496) 428(c) (1,068) ------- ------- ------- ------- ------- ------- Income before income taxes 8,173 1,504 9,677 10,261 2,506 12,767 Income tax expense 2,945 271(b) 3,216 3,443 539(b) 3,982 ------- ------- ------- ------- ------- ------- Net income $ 5,228 $ 1,233 $ 6,461 $ 6,818 $ 1,967 $ 8,785 ======= ======= ======= ======= ======= ======= (a) Reflects the reversal of amortization of intangible assets and stock-based compensation expense as follows: Amortization of intangible assets: Three Months Ended June 30, ---------------- 2008 2009 ------- ------- Cost of license revenue $ 58 $ 154 Sales and marketing - - Research and development - - General and administrative 24 39 Stock-based compensation expense: Three Months Ended June 30, ---------------- 2008 2009 ------- ------- Cost of maintenance revenue $ 15 $ 17 Sales and marketing 390 467 Research and development 188 290 General and administrative 829 1,111 (b) Reflects the removal of the tax benefits associated with amortization of intangible assets, stock-based compensation expense and write-off of debt issuance costs. (c) The amortization of debt issuance cost was decreased as a result of the lower outstanding principal balance due to the repayment of the long-term debt. SolarWinds, Inc. Reconciliation of GAAP to Non-GAAP Results of Operations (In thousands, except for per share information) (unaudited) Six Months Ended Six Months Ended June 30, 2008 June 30, 2009 ---------------------------- ---------------------------- Non- Non- GAAP Adjustments GAAP GAAP Adjustments GAAP ------- ------- ------- ------- ------- ------- Total revenue $42,073 $ - $42,073 $51,117 $ - $51,117 Gross profit 40,407 145 40,552 48,795 339 49,134 Operating expenses 21,545 (2,674) 18,871 27,083 (3,596) 23,487 ------- ------- ------- ------- ------- ------- Operating income 18,862 2,819(a) 21,681 21,712 3,935(a) 25,647 Total other expense (4,406) - (4,406) (2,865) 428(c) (2,437) ------- ------- ------- ------- ------- ------- Income before income taxes 14,456 2,819 17,275 18,847 4,363 23,210 Income tax expense 5,078 546(b) 5,624 6,041 852(b) 6,893 ------- ------- ------- ------- ------- ------- Net income $ 9,378 $ 2,273 $11,651 $12,806 $ 3,511 $16,317 ======= ======= ======= ======= ======= ======= (a) Reflects the reversal of amortization of intangible assets and stock-based compensation expense as follows: Amortization of intangible assets: Six Months Ended June 30, ---------------- 2008 2009 ------- ------- Cost of license revenue $ 116 $ 305 Sales and marketing - - Research and development - - General and administrative 47 77 Stock-based compensation expense: Six Months Ended June 30, ---------------- 2008 2009 ------- ------- Cost of maintenance revenue $ 29 $ 34 Sales and marketing 763 894 Research and development 370 515 General and administrative 1,494 2,110 (b) Reflects the removal of the tax benefits associated with amortization of intangible assets, stock-based compensation expense and write-off of debt issuance costs. (c) The amortization of debt issuance cost was decreased as a result of the lower outstanding principal balance due to the repayment of the long-term debt. SolarWinds, Inc. Reconciliation of Diluted Earnings Per Share to Non-GAAP Diluted Earnings Per Share (In thousands, except for per share information) (unaudited) Three Months Ended Six Months Ended June 30, June 30, ------------------ ------------------ 2008 2009 2008 2009 -------- -------- -------- -------- Numerator: Reconciliation between GAAP and non-GAAP net income: Net income $ 5,228 $ 6,818 $ 9,378 $ 12,806 Reversal of intangible assets amortization 82 193 163 382 Reversal of stock-based compensation expense 1,422 1,885 2,656 3,553 Reversal of debt issuance costs write-off - 428 - 428 Reversal of tax benefit for amortization of intangible assets (29) (51) (58) (100) Reversal of tax benefit of stock-based compensation expense (242) (337) (488) (601) Reversal of tax benefit of debt issuance costs write-off - (151) - (151) -------- -------- -------- -------- Non-GAAP net income $ 6,461 $ 8,785 $ 11,651 $ 16,317 -------- -------- -------- -------- Denominator: Reconciliation between GAAP and non-GAAP weighted average shares used in computing diluted earnings per share: Weighted average number of shares used in computing diluted earnings per share 33,035 50,952 31,912 42,236 Pro forma adjustments to reflect assumed weighted average effect of conversion of preferred stock on January 1, 2008 (a) 27,000 14,700 27,000 20,850 -------- -------- -------- -------- Non-GAAP weighted average shares used in computing non-GAAP diluted earnings per share (b) 60,035 65,652 58,912 63,086 ======== ======== ======== ======== Diluted earnings per share $ 0.08 $ 0.13 $ 0.15 $ 0.30 ======== ======== ======== ======== Non-GAAP diluted earnings per share $ 0.11 $ 0.13 $ 0.20 $ 0.26 ======== ======== ======== ======== (a) Represents common shares from the conversion of convertible preferred shares as if the shares were converted as of the beginning of the indicated period. (b) If the company assumed the common shares issued in the IPO were issued as of the beginning of the comparable periods, or January 1, 2008, then the weighted average shares used in computing non-GAAP diluted earnings per share and the non-GAAP diluted earnings per share would have been 69,759 shares and $0.09 per share and 71,004 shares, respectively, and $0.12 per share, respectively, for the three months ended June 30, 2008 and 2009 and 68,636 shares and $0.17 per share, respectively, and 70,624 shares and $0.23 per share, respectively, for the six months ended June 30, 2008 and 2009. SolarWinds, Inc. Reconciliation of Net Income to Adjusted EBITDA (In thousands) (unaudited) Three Months Ended Six Months Ended June 30, June 30, ----------------- ----------------- 2008 2009 2008 2009 -------- -------- -------- -------- Reconciliation of Net Income to Adjusted EBITDA: Net income $ 5,228 $ 6,818 $ 9,378 $ 12,806 Interest expense, net 1,748 1,487 4,279 2,859 Income tax expense 2,945 3,443 5,078 6,041 Depreciation 267 345 534 649 Amortization 82 193 163 382 Stock-based compensation expense 1,422 1,885 2,656 3,553 -------- -------- -------- -------- Adjusted EBITDA $ 11,692 $ 14,171 $ 22,088 $ 26,290 ======== ======== ======== ======== SolarWinds, Inc. Reconciliation of Net Cash Provided by Operating Activities to Adjusted Cash Flow (In thousands) (unaudited) Three Months Ended Six Months Ended June 30, June 30, ----------------- ----------------- 2008 2009 2008 2009 -------- -------- -------- -------- Reconciliation of Net Cash Provided by Operating Activities to Adjusted Cash Flow: Net cash provided by operating activities $ 5,244 $ 7,055 $ 15,912 $ 21,986 Cash paid for interest 2,588 1,358 5,051 3,369 Cash paid for income taxes 4,933 5,865 6,141 5,865 -------- -------- -------- -------- Adjusted Cash Flow $ 12,765 $ 14,278 $ 27,104 $ 31,220 ======== ======== ======== ======== SolarWinds, Inc. Condensed Consolidated Statements of Cash Flows (In thousands) (unaudited) Three Months Ended Six Months Ended June 30, June 30, -------------------- -------------------- 2008 2009 2008 2009 --------- --------- --------- --------- Cash flows from operating activities Net income $ 5,228 $ 6,818 $ 9,378 $ 12,806 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 349 538 697 1,031 Provision for doubtful accounts 64 (8) 101 115 Stock-based compensation expense 1,422 1,885 2,656 3,553 Deferred taxes 297 405 (545) (28) Excess tax benefit from stock-based compensation (85) (1,721) (85) (1,721) Other non-cash expenses 105 491 360 864 Changes in operating assets and liabilities, net of assets acquired and liabilities assumed in business combinations: Accounts receivable (651) (1,481) (1,679) 875 Income taxes receivable - 161 - 406 Prepaid income taxes - (2,129) - (2,129) Prepaid & other current assets 270 (180) 55 (499) Accounts payable (1,514) 226 380 294 Accrued liabilities (40) 691 312 767 Accrued interest payable (568) (325) (699) (978) Income taxes payable (2,280) (883) (513) 1,900 Deferred revenue and other liabilities 2,647 2,567 5,494 4,730 --------- --------- --------- --------- Net cash provided by operating activities 5,244 7,055 15,912 21,986 --------- --------- --------- --------- Cash flows from investing activities Purchases of property and equipment (1,632) (561) (2,258) (975) Purchases of intangible assets (109) (50) (238) (200) Acquisition of businesses, net of cash acquired (750) (26) (1,074) (46) --------- --------- --------- --------- Net cash used in investing activities (2,491) (637) (3,570) (1,221) --------- --------- --------- --------- Cash flows from financing activities Repayment of long-term debt (1,417) (49,825) (1,417) (56,986) Exercise of stock options 170 2,311 170 2,391 Net cash proceeds from initial public offering - 104,625 - 104,625 Interest on options exercised with note - - 15 - Excess tax benefit from stock-based compensation 85 1,721 85 1,721 Repayments of capital lease obligations (6) (7) (13) (13) Payments for offering costs (216) (856) (1,568) (878) Proceeds from note receivable from stockholder - - 1,738 - Proceeds from issuance of stock - - 13,640 - Purchase of stock - - (13,640) - --------- --------- --------- --------- Net cash (used in) provided by financing activities (1,384) 57,969 (990) 50,860 Effect of exchange rate changes on cash and cash equivalents (43) 557 (214) (41) --------- --------- --------- --------- Net increase in cash and cash equivalents 1,326 64,944 11,138 71,584 Cash and cash equivalents Beginning of period 29,115 47,206 19,303 40,566 --------- --------- --------- --------- End of period $ 30,441 $ 112,150 $ 30,441 $ 112,150 ========= ========= ========= ========= Supplemental disclosure of cash flow information Cash paid for interest $ 2,588 $ 1,358 $ 5,051 $ 3,369 ========= ========= ========= ========= Cash paid for income taxes $ 4,933 $ 5,865 $ 6,141 $ 5,865 ========= ========= ========= ========= Noncash investing and financing transactions Capital lease termination and related asset write-off $ - $ - $ 412 $ - ========= ========= ========= ========= Debt issuance costs write-off $ - $ 428 $ - $ 428 ========= ========= ========= =========