Sudhakar Ramakrishna: So, we’re not splitting out customer accounts and revenues at this point, but a large part of that is definitely implied in a continued healthy subscription growth rate. As I mentioned on the call, they grew about 45% in Q4 relative to last year. That will continue to be a trend for us in terms of focus. And my expectation is that we demonstrate progress across both sides. And as I was mentioning to Matt’s question earlier, the fact that we have Hybrid Cloud Observability comes in really, really handy at times when customers may either be hesitant about cloud spend or, let’s call it, a little bit more cautious than they were even in 2021 and 2022. So providing the optionality helps them a lot. And the way to think about our solution is that it’s actually a continuum while we may have introduced in two parts of the year, we’ll be merging them such that customers have a seamless migration.
Let’s say, they choose to have 100% SaaS at some point down the road, they will have the optionality to do it. What I will say is that customers absolutely love how we have packaged the solution for them, obviously priced it on a per node basis and the feature richness of it because they don’t really have to buy a lot of tools or in fact, are able to consolidate a lot of tools, including third-party vendor tools to deliver €“ to take leverage of our solutions.
Patrick Schulz: Appreciate the color there. And then just on the international market, it seems like the macro environment in Europe is still impacting sales cycles and causing some increased deal scrutiny. But from an overall pipeline perspective, can you comment on any trends you were seeing throughout the quarter?
Sudhakar Ramakrishna: Yes, absolutely. The pipeline for us, including in Europe has actually been quite robust and increasing. But the way we are modeling it in light of, call it, the broader macro conditions and the extra scrutiny that you mentioned is that we are assuming a lower pipeline conversion in our numbers than, let’s say, would be the norm. But on the flip side, we continue to see significant demand represented by our pipeline increases.
Patrick Schulz: Excellent. Thanks for taking my questions guys.
Sudhakar Ramakrishna: Thank you.
Operator: Our next question comes from Sanjit Singh from Morgan Stanley. Please go ahead. Your line is open.
Sanjit Singh: Thank you for taking the questions. I had some more kind of higher level questions kind of beyond the current macro environment. We’ve been talking a lot about the observability opportunity and it’s really nice to you guys execute on the road map both this year on the hybrid cloud as well as the cloud-native solutions. But you sort of laid out in your investor presentation and in your script database performance monitoring as well as our service management. And I wanted to talk about those two opportunities, in particular, to Sudhakar. How should we think about the contributions of those opportunities to your revenue growth profile over the next couple of years? Do you sort of see that sort of incremental to the core observability opportunity? Or do you think they could be really meaningful contributors in and of themselves?
Sudhakar Ramakrishna: First, the latter , Sanjit. Thanks for the question. We look at them as meaningful individual contributors to the business. That’s the reason why I do not €“ while observability is a very strong pillar of ours, including our erstwhile monitoring solutions, I’d like to think of it as we are participating in three growth markets with service management and database. And as of now, they are increasing, meaning the service management and database monitoring parts of our business are robust growth. And because of the size that they have currently, you will not see the full impact of their growth rates. That being said, the way to think about this as we move forward, is that as a SolarWinds’ platform itself matures, a lot of the functionality will ride on the same platform.
So for instance, when we think about observability and we talk about database observability as an element that comes out from the innovation of our database team. Similarly, we’ll integrate automation and remediation with observability, and that’s contributed by the service management team. So there is a stand-alone motion, as you know in the market, as well as a more integrated motion, which is why I’m excited about how our observability solutions be very differentiated than, let’s say, simply observing and reporting.
Sanjit Singh: Understood. That’s very interesting. Also in your investor deck, you have sort of some preliminary initiatives and goals for the team in 2024. And one of them was around product-led growth, which, in some ways, I kind of thought of SolarWinds as sort of the €“ an early pioneer of product-led growth, I guess, has been executed an online digital sales model for well over a decade now. Can you talk to a little bit about what you sort of mean in 2024 about moving into product-led growth? What are the aspects €“ capability standpoint, you’re looking to build that you don’t necessarily have today?
Sudhakar Ramakrishna: Absolutely. So that’s a good call out, Sanjit. It’s more of a evolution/extension. You’re right about saying in SolarWinds’ historically has been, in many ways, a product-led growth company in the broad connotation of product-led growth. And broadly speaking, we used to call the motion, download try and quote. So that is how the whole velocity motion was nurtured. The way to think about this in this evolution is the download try and quote motion essentially become a try and buy with greater embedded technologies to both create demand and prompt demand with customers. So think of our velocity motion accelerating, leveraging newer technology paradigm as opposed to a completely new paradigm being created.
Sanjit Singh: Understood. I take pause on. Thank you very much Sudhakar.
Sudhakar Ramakrishna: Thank you, Sanjit.
Operator: Our next question comes from Connor Passarella from Truist Securities. Please go ahead. Your line is open.
Connor Passarella: Perfect. Thank you. Good morning guys. This is Connor on for Terry Tillman. I just maybe wanted to start also with a more high-level question. So just as we think about the long-term targets of achieving $1 billion in ARR and mid-40% EBITDA margins. Just if we grow ARR 10%, it takes about five years to get there, about 5% takes around 10 years. As you think about these long-term targets, where do we think in reality, this will kind of shake out maybe closer to the five-year, 10-year mark? Just any color around this is really helpful.
Bart Kalsu: Yes. Good question, Connor. I mean, when we’re thinking about it, we originally talked about having a target of those numbers in 2025. We need to see some acceleration in revenue, which we saw in the back half of the year. So if that trend continues, then we think these are targets that we think we can hit in the next five or six years, definitely not thinking about it on a 10-year horizon. We need to see more acceleration on the top-line. And then you’ll see us deliver the targets that we’re talking about.
Sudhakar Ramakrishna: And Connor, we have taken absorbed the impact of subscription transition in both 2021, I should say, 2022 and 2023, and we’ll continue to do that. But as you can imagine, that also has a compounding effect as we get into the out years. And so I don’t believe that is fully internalized absorbed our model yet. And that’s the reason why I think the time horizon is nearer rather than farther.
Connor Passarella: Got it. Okay. Yes, that makes a lot of sense. Maybe just as a quick follow-up. We saw the announcement that once ago Chad Reese being appointed as the President of Americas Sales and Global Channel. Maybe just any progress support on getting them ramped up on the SolarWinds platform? Thank you guys.
Sudhakar Ramakrishna: Yes. So Chad has been here now for almost six months, Connor. And he’s, I would say, fully up to speed and in fact, on the road to meet our global channel partners in EMEA and APJ very sharply. So he and his team, not only have been driving, call it, the cadence around our partner program, but also scaling our Americas business and really supplementing our high-velocity motion with what I would call selective high-touch motion, because we see increasing opportunities as I noted in the script, as well as getting our partners more excited about our future and the possibilities that we offer them because there’s a lot of opportunities for partners to engage with SolarWinds solutions and become even more profitable than they previously were.
Connor Passarella: Great. Thank you.
