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Our expectation to grow our business by focusing on initiatives such as increasing our presence in several key geographic markets including Asia-Pacific, Latin America, Europe, Middle East and Africa by expanding our product portfolio, localizing marketing material, and establishing new relationships with distributors and resellers, expanding our web presence, brand awareness and improving our communication with prospects and our current customer base both domestically and internationally, acquisitions of products that will expand our network management and systems and application management offerings or potential acquisitions of products in new markets and international expansion company-wide at lower cost locations to drive our competitive advantage;

•	Our expectation to continue to pursue acquisitions that will enable us to enter new markets, or new segments of our existing markets, by bringing new product offerings to market more quickly than we can develop them;

•	Our belief that the acquisition of N-able will allow us to leverage the opportunity associated with rapidly growing adoption of the cloud and SaaS-based services among SMBs by enhancing our remote monitoring and management offerings and adding MSP service automation to the broad range of management challenges that we address for the IT industry;

•	Our belief that we can bring the key features of our operating model to the N-able business and help drive revenue growth in the remote monitoring and management market;

•	Our expectation to continue to generate solid growth while delivering strong operating income and to increase our cash flows from operating activities with our disciplined approach to investing in our business combined with our large market opportunity;

•	The premise that we will be able to deliver ongoing value to our customers and maintain a long-term financial relationship with the users of our IT management products;

•	Our expectation that our revenue growth will be approximately 20-22% for the full year of 2013;

•	Our expectation that core product transaction volume growth will be the primary driver of our new license growth;

•	Our expectation that our Non-GAAP operating margin will be approximately 49% for the full year of 2013;

•	Our belief that IT-related trends and the limitations of existing offerings present a significant market opportunity for our products;

•	Our expectation that our revenue will continue to grow as we capitalize on IT-related trends and other market opportunities through acquisitions and development;

•	Our objective of targeting total new sales growth of 20% for our existing license and subscription products and new product offerings over the next three to five years;

•	Our belief that there is a substantial opportunity for additional sales of our software in the Europe, Middle East and Africa, or EMEA, region, the Asian-Pacific region, and the Latin American region, and our intention to increase our sales, marketing and support operations in these regions;

•	Our belief that although difficult economic conditions in certain geographic regions may adversely affect the sales of our products, such conditions also could offer us an opportunity to market and sell our products to mid-size businesses and enterprise customers at compelling prices compared to the prices of some competing products;

•	Our expectation that the U.S. federal government will continue to be a significant market opportunity and our belief that the ease of deployment, power and scalability of our products gives us a competitive advantage to sell to various agencies and departments of the U.S. federal government;

•	Our expectation that we will continue to experience inconsistency in the buying pattern of the U.S. federal government for larger transactions with our products;

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Our belief that many of our larger transactions with the U.S. federal government, both new licenses and maintenance renewals, are dependent on specific projects that may not be continued at the same scale in the future due to budgetary cuts or other reasons, and the reduction or cancellation of specific projects such as these could result in our sales to the U.S. government growing less rapidly than expected or even decreasing;

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•	Our expectation that maintenance revenue will continue to increase in absolute dollars in future periods;

•	Our expectation that our cost of revenue will increase in absolute dollars and fluctuate as a percentage of revenue as we acquire additional companies or technologies and as we increase our headcount to support new customers and product offerings;

•	Our expectation that we will incur approximately $16.0 to $17.0 million of incremental expenses for the remainder of the year as a result of the N-able acquisition;

•	Our expectation that our operating expenses will continue to increase in absolute dollars as we make long-term investments in our business both domestically and internationally;

•	The possibility that our operating expenses in future periods may increase in absolute dollars and fluctuate as a percentage of revenue as we acquire additional companies or technologies and integrate the businesses;

•	Our intention to continue to grant equity awards to our current executives and employees and those who join us in the future through acquisitions or otherwise, which will result in additional stock-based compensation expense;

•	Our expectation that we will continue to hire sales personnel in the United States and in our international sales offices to drive new license sales growth;

•	Our expectation to continue to invest in our websites, online user community site and marketing programs to drive customer downloads and support our new product launches;

•	Our expectation that the continued expansion of our research and development centers in the Czech Republic and India will continue to result in an increase in facilities and personnel costs;

•	Our expectation that we will continue to invest in our research and development activities by hiring engineers in our international locations, which will allow us to continue our research and development growth strategy internationally;

•	Our expectation that we will incur higher administrative costs in future periods as our business continues to grow both organically and through acquisitions;

•	Our expectation that our international income, as a percentage of total income, will increase and that such increase should result in a corresponding decline in our effective income tax rate;

•	Our continued investment in the sales and marketing efforts that drive our revenue growth;

•	Our expectation that our international cash and cash equivalents will continue to increase as a percentage of our consolidated cash and cash equivalents;

•	Our intention that the earnings generated by our international operations will be invested indefinitely in those operations and our expectation that we will not repatriate those earnings to our domestic operations;

•	Our estimation that our capital expenditures for the remaining six months of 2013 will be approximately $3.0 million, primarily related to purchases of equipment and software in our Austin and Czech Republic locations to support their continued growth;

•	Our expectation that repurchases of our common stock under our share repurchase program will occur over the next 12 months although the exact timing of repurchases and number of shares of common stock to be purchased will depend upon market conditions and other factors;

•	Our expectation that our share repurchase program will be funded using our cash on hand and cash generated from operations;

•	Our belief that our existing cash and cash equivalents and our cash flows from operating activities will be sufficient to fund our operations and our commitments for capital expenditures for at least the next 12 months; and

•	Our expectation that the lease for our future corporate headquarters in Austin, Texas will commence in the second quarter of 2014 and our plans with respect to either terminating our existing lease through a settlement with our landlord or subleasing all or part of our existing corporate headquarters to a third party for the remaining lease term through May 2016.

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•	the valuation of goodwill, intangibles, long-lived assets and contingent consideration, including accrued earnouts;

•	revenue recognition;

•	stock-based compensation;

•	income taxes; and

•	loss contingencies.

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•	Total revenue was $150.4 million in the first half of 2013 compared to $123.7 million in the first half of 2012, or an increase of 21.6%;

•	Net income was $45.8 million in the first half of 2013 compared to $36.6 million in the first half of 2012, or an increase of 25.3%;

•	Net income was $0.60 per share on a fully diluted basis for the first half of 2013 compared to $0.48 per share on a fully diluted basis for the first half of 2012, or an increase of 25.0%; and

•	Cash flow from operating activities was $71.6 million in the first half of 2013 compared to $61.4 million in the first half of 2012, or an increase of 16.7%.

•	We released new versions of SolarWinds Network Performance Monitor, SolarWinds IP Address Manager, DameWare

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•	We focused on finding new ways to communicate and sell to our customer base. Our customer base continues to grow and evolve with our business and we have to find new ways to deliver value to these customers;

•	We continued to expand our international research and development locations allowing us to respond to user demand and support new product releases and enhancements for our acquired and internally developed technologies; and

•	We continued to add targeted sales teams for products and regions that utilize our low touch, high-volume sales model.

•	Increasing our presence in several key geographic markets including Asia-Pacific, Latin America, Europe, Middle East and Africa by expanding our product portfolio, localizing marketing material, and establishing new relationships with distributors and resellers;

•	Expanding our web presence, brand awareness and improving our communication with prospects and our current customer base both domestically and internationally;

•	Acquisitions of products that will expand our network management and systems and application management offerings or potential acquisitions of products in new markets; and

•	International expansion company-wide at lower cost locations to drive our competitive advantage.

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(1)

Amortization of Intangible Assets. We provide non-GAAP information that excludes expenses for the amortization of intangible assets that primarily relate to purchased intangible assets associated with our acquisitions. We believe that eliminating this expense from our non-GAAP measures is useful to investors, because the amortization of intangible assets can be inconsistent in amount and frequency and is significantly impacted by the timing and magnitude of our acquisition transactions, which also vary in frequency from period to period. Accordingly, we analyze the performance of our operations in each period without regard to such expenses.

(2)

Stock-Based Compensation Expense and Related Employer-Paid Payroll Taxes. We provide non-GAAP information that excludes expenses for stock-based compensation and related employer-paid payroll taxes. We believe the exclusion of these items allows for financial results that are more indicative of our continuing operations. We believe that the exclusion of stock-based compensation expense provides for a better comparison of our operating results to prior periods and to our peer companies as the calculations of stock-based compensation vary from period to period and company to company due to different valuation methodologies, subjective assumptions and the variety of award types. Employer-paid payroll taxes on stock-based compensation is dependent on our stock price and the timing of the taxable events related to the equity awards, over which our management has little control, and does not correlate to the core operation of our business. Because of these unique characteristics of stock-based compensation and the related employer-paid payroll taxes, management excludes these expenses when analyzing the organization's business performance.

(3)

Acquisition Related Adjustments. We exclude certain expense items resulting from acquisitions including the following, when applicable: (i) amortization of purchased intangible assets associated with our acquisitions (see Note 1 for further discussion); (ii) legal, accounting and advisory fees to the extent associated with acquisitions; (iii) changes in fair value of contingent consideration; (iv) costs related to integrating the acquired businesses; and (v) restructuring costs, including adjustments related to changes in estimates, related to acquisitions. We consider these adjustments, to some extent, to be unpredictable and dependent on a significant number of factors that are outside of our control. Furthermore, acquisitions result in non-continuing operating expenses, which would not otherwise have been incurred by us in the normal course of our organic business operations, with respect to each acquisition. We believe that providing non-GAAP information for acquisition related expense items in addition to the corresponding GAAP information allows the users of our financial statements to better review and understand the historical and current results of our continuing operations, and also facilitates comparisons to our historical results and results of less acquisitive peer companies, both with and without such adjustments.

(4)

Restructuring Charges. We provide non-GAAP information that excludes restructuring charges such as severance, relocation and benefits and the estimated costs of exiting and terminating facility lease commitments, including accelerated depreciation on leasehold improvements and fixed assets, as they relate to our corporate restructuring and exit activities. These restructuring charges are inconsistent in amount and are significantly impacted by the timing and nature of these events. Therefore, although we may incur these types of expenses in the future, we believe that eliminating these charges for purposes of calculating the non-GAAP financial measures facilitates a more meaningful evaluation of our current operating performance and comparisons to our past operating performance.

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(5)	Income Tax Effect of Non-GAAP Exclusions. We believe providing financial information with and without the income tax effect of excluding items related to our non-GAAP financial measures provide our management and users of the financial statements with better clarity regarding the ongoing performance and future liquidity of our business.

(6)	Non-GAAP Diluted Earnings Per Share Item. We provide non-GAAP diluted earnings per share. The non-GAAP diluted earnings per share amount was calculated based on our non-GAAP net income and the shares used in the computation of GAAP diluted earnings per share.

(7)

Free Cash Flow. We define free cash flow as cash flows from operating activities plus the excess tax benefit from stock-based compensation and less the purchases of property and equipment. We believe free cash flow is an important liquidity measure that reflects the cash generated by the business after the purchase of property and equipment that can then be used for, among other things, strategic acquisitions and investments in the business, stock repurchases and funding ongoing operations. Free cash flow does not represent the total increase or decrease in the cash balance for the period. The changes in free cash flow result from fluctuations in cash flows from operating activities offset by excess tax benefits associated with the exercises of options. For further discussion regarding cash flows from operating activities, see the discussion under the caption “Liquidity and Capital Resources” included in this Item 2.

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Deferred revenue increased to $114.5 million at June 30, 2013 as compared to $102.8 million at December 31, 2012, resulting in an increase in operating liabilities and reflecting a cash inflow of $10.6 million for the six months ended June 30, 2013. For the six months ended June 30, 2012, net cash provided by operating activities increased $9.5 million due to an increase in deferred revenue during the period. Deferred revenue primarily consists of billings or payments received in advance of revenue recognition from maintenance fees.

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Accrued liabilities decreased to $11.5 million at June 30, 2013 as compared to $14.2 million at December 31, 2012, resulting in a decrease in operating liabilities and reflecting a cash outflow of $5.0 million for the six months ended June 30, 2013. This cash outflow was primarily a result of annual company-wide bonus payments for the 2012 fiscal year accrued at December 31, 2012 and paid during the first quarter of 2013.

•	Changes in our income tax receivable and payable balances are also significant components of our cash flows from operating activities. The decrease in our income tax payable was primarily due to tax payments made during the first half of 2013. Net cash provided by operating activities was reduced by income tax payments of $10.2 million in the first half of 2013.

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Accounts receivable increased to $35.8 million at June 30, 2013 as compared to $32.5 million at December 31, 2012 resulting in an increase in operating assets and reflecting a cash outflow of $0.1 million for the six months ended June 30, 2013. The increase in accounts receivable for the six months ended June 30, 2012 as compared to December 31, 2011 resulted in cash outflows of $2.1 million for the six months ended June 30, 2012. Our accounts receivable balance fluctuates from period to period depending on the timing of our sales, cash collections and changes to our allowance for doubtful accounts, which affects our cash flow from operating activities. Our accounts receivable balance represents trade receivables from customers, including resellers and distributors, when we have provided software licenses and/or software maintenance agreements and we have not yet received payment. We have historically had insignificant write-offs related to bad debts. The allowance for doubtful accounts was $0.3 million and $0.2 million at June 30, 2013 and 2012, respectively. We use days sales outstanding, or DSO, calculated on a quarterly basis, as a measurement of the quality and status of our receivables. We define DSO as (a) accounts receivable divided by (b) total revenue for the most recent quarter, multiplied by (c) the number of days in the quarter. Our DSO was 42.0 days and 40.9 days at June 30, 2013 and 2012, respectively.

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(1)

At the inception of our new lease agreement in the second quarter of 2014, we plan to either terminate our existing lease through a settlement with our landlord or sublease all or part of our existing corporate headquarters to a third party for the remaining lease term through May 2016. If we are unable to terminate our lease or sublease the building, we would be required to recognize a loss for our remaining contractual obligation of $8.0 million.

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•	Valuation of goodwill, intangibles, long-lived assets and contingent consideration, including accrued earnouts;

•	Revenue recognition;

•	Stock-based compensation;

•	Income taxes; and

•	Loss contingencies.

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(1)	Represents shares of our common stock withheld by us to satisfy employee withholding obligations due from equity awards issued pursuant to our 2008 Equity Incentive Plan.

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(1)	Incorporated by reference to the same numbered exhibit to the Registrant’s Current Report on Form 8-K (File No. 001-34358) filed on May 28, 2013.

(2)	Incorporated by reference to the same numbered exhibit to the Registrant’s Registration Statement on Form S-1 (SEC File No. 333-162661) filed on November 5, 2009.

(3)	Incorporated by reference to exhibit number 3.4 to the Registrant’s Registration Statement on Form S-1 (SEC File No. 333-149851) filed on June 10, 2008.

(4)	Incorporated by reference to the same numbered exhibit to the Registrant’s Registration Statement on Form S-1 (SEC File No. 333-149851) filed on July 18, 2008.