Shares of Austin software maker SolarWinds took a hit on Wednesday after sales of new licenses slowed and the company missed analysts’ first-quarter revenue estimates.
SolarWinds, which sells network management software, also forecast that second quarter revenue would be below consensus estimates.
The company’s stock closed on Wednesday at $43.45, down $7.40, or 14.55 percent, on the New York Stock Exchange.
SolarWinds’ software is used by information technology professionals to configure, monitor and report on the health and performance of their network, systems and applications.
The company has more than 90,000 customers in more than 170 countries including corporations, the military, government agencies and education institutions. It has 900 employees worldwide, with 300 in Austin.
During the first quarter, SolarWinds posted revenue of $72.9 million, up 22 percent from the same quarter a year ago.
Net income rose 34 percent to $22 million, or 30 cents a share. Excluding items, SolarWinds earned 41 cents per share.
Analysts had expected revenue of $75.6 million and an adjusted profit of 37 cents a share, according to Thomson Reuters.
CEO Kevin Thompson said “solid interest in many of our core products did not translate into the level of new license sales we anticipated and we did not deliver the level of new license sales and total revenue growth we expected.”
Steven Ashley, an industry analyst with Baird Equity Research, said the company’s sales organization struggled to keep up with interest in new products that are selling at lower prices. As a result, they closed fewer large deals, causing the average transaction size to fall by 22 percent, he said.
“When this wave of demand came up, it overwhelmed the sales organization and they ended up focusing on too many small deals,” Ashley said. “They simply need more salesmen, and they also need to do a better job of qualifying and prioritizing what the salesmen should be doing. It’s growing pains, they had a bump and I do believe they will right the ship.”
Thompson said the company was responding by hiring 10 percent more sales representatives and better qualifying new lead generation.
SolarWinds said it expects second-quarter adjusted earnings in the range of 37 cents to 38 cents per share on revenue of $77.8 million t0 $78.8 million.
Analysts were expecting adjusted earnings of 39 cents a share and $80.7 million in revenue, according to Thomson Reuters.