SOLARWINDS CORPORATION The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the condensed consolidated financial statements and related notes thereto included elsewhere in this Quarterly Report on Form 10-Q. In addition to historical condensed consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially and adversely from those anticipated in the forward-looking statements. Please see the section entitled "Safe Harbor Cautionary Statement" above and the risk factors discussed in our Annual Report on Form 10-K for the year endedDecember 31, 2020 , our Quarterly Report on Form 10-Q for the quarter endedMarch 31, 2021 and our Quarter Report on Form 10-Q for the quarter endedJune 30, 2021 for a discussion of the uncertainties, risks and assumptions associated with these statements. The following discussion and analysis also includes a discussion of certain non-GAAP financial measures. For a description and reconciliation of the non-GAAP measures discussed in this section, see "Non-GAAP Financial Measures." OverviewSolarWinds is a leading provider of simple, powerful, and secure information technology, or IT, management software. Our solutions give organizations worldwide, regardless of type, size or complexity, the power to accelerate business transformation in today's hybrid IT environments. We combine powerful, scalable, affordable, easy to use products with an "inside-first" sales model to grow our business while also generating significant cash flow. We offer a broad portfolio of solutions designed to help technology professionals to monitor, manage and optimize networks, systems, desktops, applications, storage, databases, website infrastructures and IT service desks. We intend to continue to innovate and invest in areas of product development that bring new products to market and enhance the functionality, ease of use and integration of our current products. We believe this will strengthen the overall value proposition of our products in any IT environment. OnFebruary 5, 2016 , we were acquired by affiliates ofSilver Lake Group , L.L.C and Thoma Bravo, LLC in a take private transaction, or the Take Private. We applied purchase accounting on the date of the Take Private. InOctober 2018 , we completed our initial public offering, or IPO, and once again become a publicly traded company. Spin-Off of N-able Business OnJuly 19, 2021 , we completed the previously announced separation and distribution of our managed service provider ("MSP" or "N-able") business into a newly created and separately traded public company, N-able, Inc. We refer to this transaction as the "Separation." The Separation was completed by means of a distribution in which each holder of our common stock, par value$0.001 per share, received one share of Nable's common stock, par value$0.001 , for every two shares of our common stock held of record as of the close of business onJuly 12, 2021 . After the distribution, we do not beneficially own any shares of common stock in N-able and no longer consolidate Nable into our financial results for periods ending afterJuly 19, 2021 . As a result, Nable's historical financial results through the Separation are reflected in our consolidated financial statements as discontinued operations. We incurred significant costs in connection with the Separation which we refer to as "spin-off costs." We incurred$7.3 million and$30.4 million of costs in connection with the Separation during the three and nine months endedSeptember 30, 2021 , respectively, and$2.6 million for both the three and nine months endedSeptember 30, 2020 which are primarily reflected in our consolidated statements of operations as discontinued operations for all periods presented. Of these amounts, the spin-off costs included in continuing operations were$2.3 million and$3.1 million for the three and nine months endedSeptember 30, 2021 , respectively. We expect spin-off costs to subside in the fourth quarter of 2021. See Note 3. Discontinued Operations in the Notes to Condensed Consolidated Financial Statements included in Item 1 of Part I of this Quarterly Report on Form 10-Q for additional discussion of the Separation. Cyber Incident As previously disclosed, we were the victim of a cyberattack on our Orion Software Platform and internal systems, or the "Cyber Incident." We, together with our partners, have undertaken extensive measures to investigate, contain, eradicate, and remediate the Cyber Incident. In addition, as part of our "Secure by Design" initiative, we continue to work with industry experts to implement enhanced security practices designed to further strengthen and protect our products and environment against these and other types of attacks in the future. 23 --------------------------------------------------------------------------------
Expenses
For the three months endedSeptember 30, 2021 , we recorded pretax gross expenses related to the Cyber Incident of$5.8 million , partially offset by insurance receipts and expected insurance proceeds for costs we believe are reimbursable and probable of recovery under our cybersecurity insurance coverage of$2.9 million . For the three months endedSeptember 30, 2021 , we have included$0.4 million of these gross expenses in cost of recurring revenue,$0.1 million in sales and marketing expense and$5.3 million in general and administrative expense in the condensed consolidated statements of operations. For the nine months endedSeptember 30, 2021 , we recorded pretax gross expenses related to the Cyber Incident of$39.8 million , partially offset by insurance receipts and expected insurance proceeds for costs we believe are reimbursable and probable of recovery under our cybersecurity insurance coverage of$15.0 million . For the nine months endedSeptember 30, 2021 , we have included$1.8 million of these gross expenses in cost of recurring revenue,$1.6 million in sales and marketing expense,$0.1 million in research and development expense and$36.3 million in general and administrative expense in the condensed consolidated statements of operations. General and administrative expense is presented net of insurance proceeds in the condensed consolidated statements of operations. Expenses include one-time costs to investigate and remediate the Cyber Incident, and legal and other professional services related thereto, and consulting services being provided to customers at no charge, all of which were expensed as incurred. Our "Secure By Design" initiatives which include costs to enhance our security measures across our systems and our software development and build environments, will increase our expenses. We currently estimate that the ongoing costs associated with our "Secure By Design" initiatives will be approximately$20 million on an annual basis. These costs will primarily be included in research and development expense, as well as general and administrative expense. Litigation, Claims and Government Investigations As a result of the Cyber Incident, we are subject to numerous lawsuits and investigations or inquiries as described in Part II, Item 1A. Risk Factors - Risks Related to Cybersecurity and the Cyber Incident in our Quarterly Report on Form 10-Q for the quarter endedMarch 31, 2021 and Note 11. Commitments and Contingencies in the Notes to Condensed Consolidated Financial Statements included in Item 1 of Part I of this Quarterly Report on Form 10-Q. While we will incur costs and other expenses associated with these proceedings and investigations, it is not possible to estimate the amount of any loss or range of possible loss that might result from adverse judgments, settlements, penalties or other resolutions of such proceedings and investigations based on the early stage thereof, the fact that alleged damages have not been specified, the uncertainty as to the certification of a class or classes and the size of any certified class, as applicable, and the lack of resolution on significant factual and legal issues. We will continue to evaluate information as it becomes known and will record an estimate for losses at the time or times when it is both probable that a loss has been incurred and the amount of the loss is reasonably estimable. Future Costs We expect to continue to incur additional legal and other professional services costs and expenses associated with the Cyber Incident in future periods. We expect to recognize these expenses as services are received. Costs related to the Cyber Incident that will be incurred in future periods may include increased expenses associated with ongoing claims, investigations and inquiries, and any new claims, investigations and inquiries, as well as increased customer support activities and other related matters. See Note 11. Commitments and Contingencies in the Notes to Condensed Consolidated Financial Statements in Item 1 of Part I of this Quarterly Report on Form 10-Q for information related to the legal proceedings and governmental investigations related to the Cyber Incident. While we will incur costs and other expenses associated with these proceedings and investigations, it is not possible to estimate the amount of any loss or range of possible loss that might result from adverse judgments, settlements, penalties or other resolutions of such proceedings and investigations based on the early stage thereof, the fact that alleged damages have not been specified, the uncertainty as to the certification of a class or classes and the size of any certified class, as applicable, and the lack of resolution on significant factual and legal issues. In addition, we expect to incur increased expenses for insurance, finance, compliance activities, and to meet increased legal and regulatory requirements. We are also providing, at our cost, free third-party support services to customers related to the Cyber Incident. In addition, in connection with the Separation, we entered into a separation and distribution agreement and related agreements with N-able to govern the Separation and related transactions and the relationship between the respective companies going forward. The separation and distribution agreement provides for certain indemnity and liability obligations, including that we will indemnify N-able for all liabilities based upon, arising out of or related to the Cyber Incident other than certain specified expenses for which N-able will be responsible. Although the ultimate magnitude and timing of expenses or other impacts to our business or reputation related to the Cyber Incident are uncertain, they could be significant. We also expect to continue to incur increased expenses and capital investments related to our "Secure By Design" initiatives. 24 -------------------------------------------------------------------------------- Insurance Coverage We maintain$15 million of cybersecurity insurance coverage to limit our exposure to losses such as those related to the Cyber Incident, which we renewed inJune 2021 . As ofSeptember 30, 2021 , we recorded a loss recovery asset of$5.0 million for insurance proceeds deemed probable of recovery which is included in prepaid and other current assets in our condensed consolidated balance sheet and received payments of$10.0 million for costs incurred. In addition, we maintain$50 million of directors and officers liability insurance coverage to reduce our exposure to our indemnification obligations for certain expenses incurred by our directors and officers, including as a result of the legal proceedings related to the Cyber Incident. Impacts of COVID-19 The impact from the rapidly changing market and economic conditions due to the COVID-19 pandemic on our business is uncertain. We initially responded to the COVID-19 pandemic by executing our business continuity plan and transitioning nearly all of our workforce to a remote working environment to prioritize the safety of our personnel. Substantially all of our workforce is currently working remotely. Due to the nature of our business, at this time, we have seen an impact on our financial results, including a decline in license revenue, but do not expect to experience a significant long-term impact on our financial results due to the COVID-19 pandemic. However, we are unable to predict with a level of precision the longer term impact it may have on our business, results of operations and financial condition due to numerous uncertainties, including the duration of the pandemic, actions that may be taken by governmental authorities in response to the pandemic, its impact to the business of our customers and their end-customers and other factors identified in Part I, Item 1A "Risk Factors" in our Annual Report on Form 10-K for the fiscal year endedDecember 31, 2020 . We will continue to evaluate the nature and extent of the impact of the COVID-19 pandemic to our business, consolidated results of operations and financial condition. Third Quarter Highlights Below are our key financial highlights from continuing operations for the three months endedSeptember 30, 2021 as compared to the three months endedSeptember 30, 2020 . Customers Our approach, which we call the "The SolarWinds Model," allows us to both sell to a broad group of potential customers and close large transactions with significant customers. As ofSeptember 30, 2021 , we had over 300,000 customers. While some customers may spend as little as$100 with us over a twelve-month period, we had 786 customers who spent more than$100,000 with us for the trailing twelve-month period endedSeptember 30, 2021 as compared to 754 for the twelve-month period endedSeptember 30, 2020 . We define customers as individuals or entities that have purchased one or more of our products under a unique customer identification number since our inception for our perpetual license products and individuals or entities that have an active subscription for at least one of our subscription products. Each unique customer identification number constitutes a separate customer regardless of the amount purchased. We may have multiple purchasers of our products within a single organization, each of which may be assigned a unique customer identification number and deemed a separate customer. Annual Recurring Revenue (ARR) We use Subscription Annual Recurring Revenue, or Subscription ARR, and Total Annual Recurring Revenue, or Total ARR, to evaluate the results of our recurring revenue model. As of September 30, 2021 Year-over-Year 2021 2020 Growth (in thousands, except percentages) Subscription ARR(1)$ 130,176 $ 105,869 23.0 % Total ARR(2) 623,761 572,078 9.0 % _______ (1)Subscription ARR represents the annualized recurring value of all active subscription contracts at the end of a reporting period. (2)Total ARR represents the sum of Subscription ARR and the annualized value of all maintenance contracts related to perpetual licenses active at the end of a reporting period. ARR Correction for the Quarter EndedJune 30, 2021 After filing our Quarterly Report on Form 10-Q for the quarter endedJune 30, 2021 onAugust 6, 2021 (the "Prior Form 10-Q"), we determined that we made an error in reporting our Total ARR and Core IT Management Total ARR as ofJune 30 , 25 -------------------------------------------------------------------------------- 2021. The corrected Total ARR was$973.9 million , reflecting an increase of 11.6% from the$872.5 million as ofJune 30, 2020 . In the Prior Form 10-Q, we reported Total ARR of$992.5 million , reflecting an increase of 13.8%. The corrected Core IT Management Total ARR was$621.1 million , reflecting an increase of 8.8% from the$570.6 million as ofJune 30, 2020 . In the Prior Form 10-Q, we reported Core IT Management Total ARR of$639.7 million , reflecting an increase of 12.1%. Components of Our Results of Operations Revenue Our revenue consists of recurring revenue and perpetual license revenue. •Recurring Revenue. The significant majority of our revenue is recurring and consists of subscription and maintenance revenue. •Subscription Revenue. We primarily derive subscription revenue from fees received for subscriptions to our SaaS offerings, and to a lesser extent, our time-based license arrangements. Subscription revenue includes sales of our cloud infrastructure, database, network management, application performance management and IT service management, or ITSM products. We generally invoice subscription agreements in advance over the subscription period on either a monthly or annual basis and to a lesser extent, monthly based on usage. Our subscription revenue grows as customers add new subscription products, upgrade the capacity level of their existing subscription products or increase the usage of their subscription products. InApril 2020 , we launched subscription pricing options for certain of our network, systems and database management products that have historically been sold as perpetual licenses. The on-premise subscription option gives customers additional flexibility when purchasing our products. We recognize revenue for SaaS offerings ratably over the subscription term once the service is made available to the customer or when we have the right to invoice for services performed. The on-premise subscription offerings are time-based revenue arrangements recognized at a point in time upon delivery of the software and support is recognized ratably over the contract period. •Maintenance Revenue. We derive maintenance revenue from the sale of maintenance services associated with our perpetual license products. Perpetual license customers pay for maintenance services based on the products they have purchased. We recognize maintenance revenue ratably on a daily basis over the contract period. Our maintenance revenue grows when we renew existing maintenance contracts and add new perpetual license customers, and as existing customers add new products. In addition, we typically implement annual price increases for our maintenance services. Customers typically renew their maintenance contracts at our standard list maintenance renewal pricing for their applicable products. We generally invoice maintenance contracts annually in advance. •License Revenue. We derive license revenue from sales of perpetual licenses of our on-premise network, systems, storage and database management products to new and existing customers. We include one year of maintenance services as part of our customers' initial license purchase. License revenue is recognized at a point in time upon delivery of the electronic license key. We allocate revenue to the license component based upon our estimated standalone selling prices, which is derived by evaluating our historical pricing and discounting practices in observable bundled transactions. We plan to continue to sell perpetual licenses for our network, systems and database management products and not require customers to transition to a subscription pricing model discussed above. The subscription pricing option, and our continued efforts to increase subscription revenue, may impact the mix of license and recurring revenue, but this impact is difficult to predict at this time due to uncertainty regarding the level of customer adoption of the new subscription pricing options. We expect a continued shift in the mix between license and recurring revenue in each quarter as new customers purchase these on-premise subscription offerings. Our license sales and maintenance renewal rates may decline or fluctuate in future periods as customers transition to our subscription offerings and as a result of the Cyber Incident. Cost of Revenue •Cost of Recurring Revenue. Cost of recurring revenue consists of technical support personnel costs, public cloud infrastructure and hosting fees and an allocation of overhead costs for our subscription revenue and maintenance services. Allocated costs consist of certain facilities, depreciation, benefits and IT costs allocated based on headcount. •Amortization of Acquired Technologies. Amortization of acquired technologies primarily consists of amortization related to capitalized costs of technologies acquired in connection with the Take Private, and to a lesser extent, acquired technologies from our other acquisitions. 26 -------------------------------------------------------------------------------- Operating Expenses Operating expenses consists of sales and marketing, research and development and general and administrative expenses as well as amortization of acquired intangibles. Personnel costs are the most significant component of operating expenses and consist of salaries, benefits, bonuses, sales commissions, stock-based compensation and an allocation of overhead costs based on headcount. The total number of employees as ofSeptember 30, 2021 was 2,155, as compared to 2,088 as ofSeptember 30, 2020 , as adjusted to exclude employees of the N-able business. We expect our operating expenses to continue to increase in absolute dollars as we make long-term investments in our business. Our operating expenses in future periods also may increase in absolute dollars and fluctuate as a percentage of revenue as a result of any future acquisitions and any further decisions to increase our investment in our business. In addition, the separation of the N-able business will result in dis-synergies associated with increased overhead costs and duplicate hiring for the remainder of 2021. We intend to continue to grant equity awards to employees and directors, which will result in additional stock-based compensation expense in future periods. •Sales and Marketing. Sales and marketing expenses primarily consist of related personnel costs, including our sales, marketing and maintenance renewal and subscription retention teams. Sales and marketing expenses also includes the cost of digital marketing programs such as paid search, search engine optimization and management, website maintenance and design. We expect to continue to hire personnel globally to drive new sales and maintenance renewals. •Research and Development. Research and development expenses primarily consist of related personnel costs. We expect to continue to grow our research and development organization, particularly internationally. •General and Administrative. General and administrative expenses primarily consist of personnel costs for our executive, finance, legal, human resources and other administrative personnel, general restructuring costs, acquisition costs, certain Cyber Incident costs, professional fees and other general corporate expenses. The Cyber Incident has resulted in increased general and administrative expenses which we expect to continue in the near term. •Amortization of Acquired Intangibles. We amortize to operating expenses the capitalized costs of intangible assets acquired in connection with the Take Private and our other acquisitions. Other Income (Expense) Other income (expense) primarily consists of interest expense and gains (losses) resulting from changes in exchange rates on foreign currency denominated accounts. We expect interest expense to decrease as we repay indebtedness. Foreign Currency As a global company, we face exposure to adverse movements in foreign currency exchange rates. Fluctuations in foreign currencies impact the amount of total assets, liabilities, revenue, operating expenses and cash flows that we report for our foreign subsidiaries upon the translation of these amounts intoU.S. dollars. See "Item 3. Quantitative and Qualitative Disclosures About Market Risk" for additional information on how foreign currency impacts our financial results. Income Tax Expense (Benefit) Income tax expense (benefit) consists of domestic and foreign corporate income taxes related to the sale of products. The tax rate on income earned by our North American entities is higher than the tax rate on income earned by our international entities. We expect the income earned by our international entities to grow over time as a percentage of total income, which may result in a decline in our effective income tax rate. However, our effective tax rate will be affected by many other factors including changes in tax laws, regulations or rates, new interpretations of existing laws or regulations, shifts in the allocation of income earned throughout the world and changes in overall levels of income before tax. 27 --------------------------------------------------------------------------------
Comparison of the Three Months Ended
Three Months Ended
2021 2020
Percentage of Percentage of
Amount Revenue Amount Revenue Change
(in thousands, except percentages)
Subscription $ 32,293 17.8 % $ 26,871 14.5 % $ 5,422
Maintenance 119,742 66.1 118,663 64.2 1,079
Total recurring revenue 152,035 83.9 145,534 78.7 6,501
License 29,236 16.1 39,284 21.3 (10,048)
Total revenue $ 181,271 100.0 % $ 184,818 100.0 % $ (3,547)
Total revenue decreased $3.5 million , or 1.9%, for the three months ended
September 30, 2021 compared to the three months ended September 30,
2020 . Revenue from North America was approximately 69% and 71% of total revenue
for the three months ended September 30, 2021 and 2020, respectively. Other than
the United States , no single country accounted for 10% or more of our total
revenue during these periods. We expect our international total revenue to
increase slightly as a percentage of total revenue as we expand our
international sales and marketing efforts across our product lines.
The Cyber Incident is expected to negatively impact revenue, profitability and
cash flows in 2021 and beyond. Certain of our customers have, and others may,
defer renewals or cancel subscriptions which could have a negative impact on our
revenue. However, despite the Cyber Incident, our maintenance renewal rate for
the trailing twelve month period was 89%.
Recurring Revenue
Subscription Revenue. Subscription revenue increased $5.4 million , or 20.2%, for
the three months ended September 30, 2021 compared to the three months ended
September 30, 2020 , primarily due to sales of our database monitoring and
onpremise subscription offerings.
Our net retention rate for our subscription products was as follows:
Trailing Twelve-Months Ended September 30,
2021 2020
Net retention rate(1) 96 % 99 %
_______
(1)Net retention rate for subscription products represents the implied monthly
subscription revenue at the end of a period for the base set of customers from
which we generated subscription revenue in the year prior to the calculation,
divided by the implied monthly subscription revenue one year prior to the date
of the calculation for that same customer base.
Maintenance Revenue. Maintenance revenue increased $1.1 million , or 0.9%, for
the three months ended September 30, 2021 compared to the three months ended
September 30, 2020 , primarily due to the effect of price increases for our
licensed products, partially offset by the impact on maintenance revenue from
decreased sales of our licensed products, customers transitioning to our
on-premise subscription offerings and a decline in our maintenance renewal rate
primarily due to the Cyber Incident.
Our maintenance renewal rate for our perpetual license products was as follows:
Trailing Twelve-Months Ended September 30,
2021 2020
Maintenance renewal rate(1) 89 % 92 %
_______
(1)Maintenance renewal rate represents the sales of maintenance services for all
existing maintenance contracts expiring in a period, divided by the sum of
previous sales of maintenance services corresponding to those services expiring
in the current period. Sales of maintenance services includes sales of
maintenance renewals for a previously purchased product and the amount allocated
to maintenance revenue from a license purchase.
28
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License Revenue
License revenue decreased $10.0 million , or 25.6%, primarily due to decreased
sales of our licensed products as a result of the Cyber Incident, the continuing
impact of the difficult economic environment caused by COVID-19 and an increase
in the subscription sales of our network, systems and database management
products that have historically been sold only as perpetual licenses.
Cost of Revenue
Three Months Ended September 30,
2021 2020
Percentage of Percentage of
Amount Revenue Amount Revenue Change
(in thousands, except percentages)
Cost of recurring revenue $ 17,949 9.9 % $ 13,645 7.4 % $ 4,304
Amortization of acquired technologies 39,882 22.0 39,282 21.3 600
Total cost of revenue $ 57,831 31.9 % $ 52,927 28.6 % $ 4,904
Total cost of revenue increased in the three months ended September 30, 2021
compared to the three months ended September 30, 2020 primarily due to increases
in public cloud infrastructure and hosting fees related to our subscription
products of $2.1 million , personnel costs to support our customers and
additional product offerings of $1.2 million and costs related to the Cyber
Incident of $0.4 million .
Operating Expenses
Three Months Ended September 30,
2021 2020
Percentage of Percentage of
Amount Revenue Amount Revenue Change
(in thousands, except percentages)
Sales and marketing $ 58,642 32.4 % $ 52,940 28.6 % $ 5,702
Research and development 26,285 14.5 21,485 11.6 4,800
General and administrative 28,551 15.8 23,875 12.9 4,676
Amortization of acquired intangibles 13,784 7.6 12,596 6.8 1,188
Total operating expenses $ 127,262 70.2 % $ 110,896 60.0 % $ 16,366
Sales and Marketing. Sales and marketing expenses increased $5.7 million , or
10.8%, primarily due to increases in personnel costs of $3.2 million and
marketing program costs and public relation costs increased $0.9 million . We
have increased our sales and marketing employee headcount through acquisitions,
and we expect to incur additional costs in future periods as we expand our
international sales teams and focus on enterprise customers.
Research and Development. Research and development expenses increased $4.8
million , or 22.3%, primarily due to an increase in personnel costs of $3.0
million and a $1.1 million increase in contract services. Our research and
development expenses have increased as we work to deliver new product offerings
to our customers as well as through acquisitions.
General and Administrative. General and administrative expenses increased $4.7
million , or 19.6%, primarily due to $2.4 million of costs related to the Cyber
Incident, net of insurance proceeds, and $1.4 million of costs related to the
spin-off of our Nable business. Personnel costs increased $0.2 million , which
includes a $1.7 million decrease in stock-based compensation expense resulting
from modifications to certain stock awards during the third quarter of 2020. The
Cyber Incident has resulted in increased general and administrative expenses
which we expect to continue for the remainder of 2021.
Amortization of Acquired Intangibles. Amortization of acquired intangibles
increased $1.2 million , or 9.4% primarily due to amortization related to
intangibles acquired in the fourth quarter of 2020.
29
--------------------------------------------------------------------------------Interest Expense, Net
Three Months Ended
2021 2020
Percentage of Percentage of
Amount Revenue Amount Revenue Change
(in thousands, except percentages)
Interest expense, net $ (15,897) (8.8) % $ (16,792) (9.1) % $ 895
Interest expense, net decreased by $0.9 million , or 5.3%, in the three months
ended September 30, 2021 compared to the three months ended September 30, 2020 .
The decrease in interest expense is primarily due to decreases in interest rates
on our debt and the reduction in our outstanding debt balance related to
quarterly principal repayments. The weighted-average effective interest rate on
our debt for the three months ended September 30, 2021 was 2.84% compared to
2.91% for the three months ended September 30, 2020 . See Note 6. Debt in the
Notes to Condensed Consolidated Financial Statements included in Item 1 of Part
I of this Quarterly Report on Form 10-Q for additional information regarding our
debt.
Other Income (Expense), Net
Three Months Ended
2021 2020
Percentage of Percentage of
Amount Revenue Amount Revenue Change
(inthousands, except percentages)
Other income (expense), net$ 1,478 0.8 %$ (255) (0.1) %$ 1,733 Other income (expense), net increased by$1.7 million in the three months endedSeptember 30, 2021 compared to the three months endedSeptember 30, 2020 primarily due to the impact of changes in foreign currency exchange rates related to various accounts for the period and amounts recorded in connection with the transition services agreement with N-able. Income Tax Expense (Benefit) Three
Months Ended
2021 2020
Percentage of Percentage of
Amount Revenue Amount Revenue Change
(in thousands, except percentages)
Income (loss) before income taxes $ (18,241) (10.1) % $ 3,948 2.1 % $ (22,189)
Income tax expense (benefit) (19,321) (10.7) 1,505 0.8 (20,826)
Effective tax rate 105.9 % 38.1 % 67.8 %
Our income tax benefit for the three months ended September 30, 2021 was $19.3
million as compared to income tax expense of $1.5 million for the three months
ended September 30, 2020 . The effective tax rate increased to 105.9% for the
period primarily due to adjustments made in connection with the Separation
during the quarter. For additional discussion about our income taxes, see Note
9. Income Taxes in the Notes to Condensed Consolidated Financial Statements
included in Item 1 of Part I of this Form 10-Q.
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