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Solarwinds Corporation (NYSE:SWI)
Q4 2019 Earnings Call
Feb 04, 2020, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Ladies and gentlemen, thank you for standing by, and welcome to the SolarWinds fourth-quarter 2019 earnings call. [Operator instructions] Please be advised that today's conference is being recorded. [Operator instructions] I would now like to hand the conference over to your speaker today, Ms. Ashley Hook.

Thank you. Please go ahead, ma'am.

Ashley Hook -- Chief Executive Officer

Thank you, Elaine. Good afternoon, everyone and welcome to SolarWinds' fourth-quarter 2019 earnings call. With me today are Kevin Thompson, our president and CEO, and Bart Kalsu, our executive vice president and CFO. Following prepared remarks from Kevin and Bart, we'll have a brief question-and-answer session.

Please note that this call is being simultaneously webcast on our investor relations website at investors.solarwinds.com. Please remember that certain statements made during the call, including those concerning our financial outlook, our expectations regarding growth and profitability and our drivers of growth areas of our focus and investment, expectations regarding collections and cash flow, our market opportunities and market share, and our M&A strategy are forward-looking statements. These statements are subject to a number of risks, uncertainty and assumptions described in our SEC filings, including the risk factors discussed in our Form 10-K that was filed on February 25, 2019 and the Form 10-K we plan to file on March 2, 2020. Should any of these risks or uncertainties materialize or should any of our assumptions prove to be incorrect, actual company results could differ materially and adversely from those anticipated in these forward-looking statements.

These statements are also based on currently available information, and we undertake no duty to update this information, except as required by law. Precautionary statements regarding these forward-looking statements are further described in today's press release. Unless otherwise noted, all 2019 results will be discussed on today's call will include adjustments for the adoption of ASC 606 and all 2018 financial measures discussed today will be presented on a 605 basis. All year-over-year comparisons will be impacted by these adjustments in 2019 unless otherwise noted.

The tables accompanying today's press release include a presentation of the 2019 results on a 606 and a 605 basis. We will also provide our results and outlook for revenue growth rate on a constant-currency basis to provide a framework for adopting our performance and how we expect our business to perform, excluding the effect of foreign currency fluctuations. Our use and calculation of the non-GAAP financial measures are further explained in today's press release and a full reconciliation between each non-GAAP measure and its corresponding GAAP measure is provided in the tables accompanying the press release, including adjustments for the impact of ASC 606. However, each non-GAAP item in our forward-looking financial outlook that we provide today has not been reconciled to the comparable GAAP outlook item because providing projections of changes in individual balance sheet and income statement amount is not possible without unreasonable effort, and release of such reconciliations would imply an inappropriate degree of precision.

Unless otherwise indicated, references to profitability and comparable measures refer to such measures on a non-GAAP basis. With that, I'll now turn the call over to Kevin.

Kevin Thompson -- President and Chief Executive Officer

Thanks, Ashley. First, I would like to say that our forward-looking comments on this fourth-quarter call will be a bit shorter than what you have come to expect from us, given the fact that we had our analyst day back on December 11 in New York City which many of you attended. We shared a tremendous amount of information about the company and our growth strategy in that event. If you did not get a chance to attend the event, a replay of our webcast, as well as the presentation are both available to stream and download from the IR section of our website.

I am pleased to report we had a solid finish to a successful year in 2019, delivering fourth-quarter 2019 non-GAAP total revenue on a constant-currency basis of approximately $251 million, reflecting 13% year-over-year growth. This resulted in full-year 2019 non-GAAP total revenue on a constant-currency basis of $951 million or 14% year-over-year growth. Our fourth-quarter non-GAAP total revenue performance was within the range of the outlook we had previously provided. However, subscription revenue growth which is today and will continue to be in the future the primary driver of our overall growth rate, came in above the high end of our outlook range, with growth accelerating to its highest level in 2019 and 28% year-over-year growth on a reported basis for the quarter.

We also finished the year on a very strong profit note, as fourth-quarter adjusted EBITDA totaled $123 million, or an adjusted EBITDA margin of over 49%, exceeding the high end of the range of our previously provided outlook for the quarter. The strong finish to the year resulted in full-year 2019 adjusted EBITDA of $454 million and 11% growth as compared to 2018 despite the dilutive impact of the midyear 2019 to manage acquisitions. Our operating model has continued to show tremendous resilience as the business has grown and as our revenue profile has evolved to be dominated by recurring revenue. We had a number of operating and strategic highlights for the fourth-quarter and the full year that I would like to make note of.

First, we have quickly driven our business to 82% recurring revenue in 2019 as compared to 80% for 2018 as our recurring revenue on a non-GAAP basis grew by 15% in 2019, outpacing our total revenue growth for the year. Non-GAAP subscription revenue which was a small component of total revenue prior to our take-private in early 2016, ended 2019 on a constant-currency basis at $334 million, reflecting growth of 25% for the full year, and for the fourth quarter totaled $90 million, increasing by 29% as compared to the fourth quarter of 2018. We are pleased with the accelerating growth we saw in revenue from our cloud-based subscription products and expect to see a similar to slightly higher level of growth in the first quarter of 2020. The growth we have driven in subscription bookings, both organically and through products that we have acquired, has also resulted in rapid growth of annual recurring revenue which we defined as the annualized value of our maintenance contracts plus annualized value of our subscription agreements.

Total ARR at the end of 2019 was $845 million as compared to $710 million at the end of 2018, reflecting an increase of 19% and an acceleration in year-over-year growth as compared to what we saw in 2018. Subscription ARR which is a component of total ARR, grew at an even more impressive rate of 31% in 2019, reaching $370 million at December 31, 2019. During 2019, we also increased the number of large customer relationships we have, reaching a total of approximately 900 customers who have spent over $100,000 with us in the last 12 months which reflects 22% year-over-year growth. We have done this while still driving strong new customer additions, adding over 25,000 new customers in 2019.

Given the strength and breadth of our product portfolio and the fact that our products are already deployed in a significant number of large enterprises, we see the opportunity to continue to build the number of large customer relationships we have at a double-digit rate. We believe the ability we have shown to build large customer relationships while still maintaining velocity in our business is a unique characteristic of our go to market model. We believe our customer retention rates have continued to be among the best in software during 2019 as demonstrated by our maintenance renewal rates for the full year, coming in at a robust 94% and the net retention rate on our subscription revenue streams reaching 105%, led by our MSP business which delivered a full-year net retention rate of 108%. We continue to be focused on driving our overall net retention rate on subscription revenues above 110% and maintaining our maintenance renewal rates in the 92% to 94% range for the long-term and believe that these goals are achievable.

We are pleased with the full-year growth in our non-GAAP license and maintenance revenue which increased $612 million in 2019, reflecting growth of 7% as compared to 2018 which is within the range of the long-term growth rates, we are focused on delivering in this part of our business. Based on the trends in IT infrastructure, the strength of our product portfolio, the loyalty and trust of our customer base and the reach of our go to market model, we believe that a rate of overall growth in sales of our core on-premise deployed IT management portfolio in the range of our 2019 performance is sustainable for the long-term. We currently serve all 500 of the Fortune 500 based on the 2018 Fortune 500 list, and our total direct customer count grew to over 320,000 customers during 2019. The total number of companies whose environments are being managed by a SolarWinds product, either directly or indirectly through one of our MSP partners, has reached almost 850,000 customers.

There are very few companies in enterprise software who have shown the ability to reach a group of users with their products and go to market motions that is this large. We also continue to expand our footprint in IT operations management during 2019 through the acquisition of Samanage in the second quarter which added IT service management to our product portfolio, and through the acquisition of VividCortex late in the fourth quarter which completed our infrastructure and application management picture. We now manage all key components of today's hybrid IT infrastructure, including the applications and all key databases that those applications rely on, in addition to providing technology pros with the tools to manage issues that are identified through to resolution and to improve the efficiency of their technical operations. We believe that we have assembled the broadest coverage of modern IT infrastructure and application environment in the ITOM market.

Overall, I'm pleased with the performance we are seeing across our different product lines and geographic regions. We delivered a strong year of performance in 2019 and believe we have positioned the company from an ITOM market coverage and operating metrics perspective for another strong year in 2020 With that, I will turn the call over to Bart, who will provide additional details and thoughts on our fourth-quarter performance, and we'll provide a detailed view of our outlook for the first-quarter and full-year 2020.

Bart Kalsu -- Executive Vice President and Chief Financial Officer

Thanks, Kevin. And thanks again to everyone joining us on today's call. Our fourth-quarter financial results reflect another solid quarter of execution while demonstrating the significant leverage that we have in our model. As Kevin indicated in his remarks, we were within the range of our previously provided outlook for the fourth quarter for non-GAAP total revenue, finishing the year with $249.4 million in revenue on a reported basis, or $251 million on a constant-currency basis, representing year-over-year growth of approximately 13% on both a reported and constant-currency basis.

Fourth-quarter non-GAAP total revenue growth was led by non-GAAP subscription revenue of 89.2 million which grew 28% year over year on a reported basis and 29% on a constant-currency basis. The growth in subscription revenue in the fourth quarter was driven by strong performance by our MSP business and a solid contribution from SolarWinds service desk or ITSM products. Non-GAAP license and maintenance revenue was $160.2 million in the fourth quarter, increasing by 5% on a reported basis and 6% on a constant-currency basis. Non-GAAP maintenance revenue was $115.6 million in the fourth quarter, reflecting growth of 9% on a reported basis and 10% on a constant-currency basis, driven by continued strong maintenance renewal bookings.

For the fourth quarter, non-GAAP license revenue was $44.6 million which represents a decline of approximately three and a half percent, as compared to the fourth quarter of 2018. As Kevin indicated on our third-quarter earnings call, we are driving the business to deliver license sales growth in the zero to 2% range on an annual basis. So, while our full-year license sales performance was within that range, and we are pleased with that level of full-year performance, the fourth-quarter license sales performance was not as strong as we wanted it to be. However, with that being said, as we look at our fourth-quarter license sales performance, we saw several highlights which include our international new license sales performance was much stronger in the fourth quarter of 2019 than it was in the third quarter of 2019.

This acceleration was driven by a meaningful level of improvement in license sales in EMEA as we saw operational improvement and market stabilization across the region and continued growth from Asia Pacific. We expect to see a similar level of positive performance from our international business in 2020. We also had several strong areas of North American license sales performance and growth in our -- in the fourth quarter that unfortunately were offset by a single weak area of performance. On the positive front, our new customer business and our state, local, federal and education businesses were strong in the fourth quarter, delivering year-over-year growth.

In addition, we meaningfully grew the number of our large customer relationships sequentially, reaching approximately 900 customers at the end of the year, with the majority of this growth being driven by our North American customer sales teams. Among these positive fourth-quarter areas of North American performance, there was one area of weakness that caused our global license sales in the fourth quarter to be lower than where we expected. This area of weakness relates to execution issues in a portion of our North American installed base sales team. We are actively addressing this issue and have already seen a meaningful level of improvement in performance in January.

Total non-GAAP revenue for the year ended December 31, 2019, was $938.5 million which is a 12% increase over the prior-year amount of $836.8 million on a reported basis and 14% on a constant-currency basis. For the year ended December 31, 2019, non-GAAP subscription revenue was $326.7 million which represents growth of 22% year over year and was $333.7 million on a constant-currency basis which represents growth of 25%. The growth was led by our MSP business and from the solid contribution we got from SolarWinds service desk or ITSM products. Our success at landing, expanding and retaining subscription customers has translated into consistent growth of our customer relationships.

Our subscription retention rate for the year was 105%, led by a 108% net retention rate for our MSP business. Non-GAAP license and maintenance revenue increased 7% year over year to $611.8 million for the full year. Non-GAAP maintenance revenue grew at a rate of 10%, reaching over $446 million. This growth was driven by very strong customer retention as evidenced by maintenance renewal rates for 2019 of 94% which was at the high end of the range of performance, we have indicated investors should expect.

License revenue grew at approximately a half percent year over year on a reported basis and approximately 1.5% on a constant-currency basis which is within the range of zero to 2% growth that we consider solid performance. We also had a very strong quarter of non-GAAP profitability in the fourth quarter. Fourth-quarter adjusted EBITDA was $122.9 million, representing an adjusted EBITDA margin of 49.3%. And for the year ended December 31, 2019, adjusted EBITDA was $453.6 million, representing an adjusted EBITDA margin of over 48%.

These results are despite the dilutive impact of the Samanage acquisition which we closed in the second quarter. The combination of our revenue growth and profitability is still well above even the high industry standards as we ended 2019 yet another year that puts us above our rule of 60 on a non-GAAP basis. Unlevered free cash flow for the full-year 2019 totaled $372 million which reflects a conversion rate of 82%. The conversion rate, while very solid in the fourth quarter was slightly lower than we had anticipated as license bookings for the fourth quarter came in a bit later than our historical trend which resulted in a higher accounts receivable balance of approximately $13 million than we had expected at the end of the year which is reflected in our DSO at December 31, 2019, of 45 days, compared to an expectation of 40 days.

We expect to collect these receivables in the first quarter which should help our cash flow performance in Q1 2020. In addition, cash taxes for the fourth quarter, and as a result, for the year, were higher than originally forecasted by approximately $5 million. Net leverage at December 31 was 3.9 times our trailing 12-month adjusted EBITDA which reflects our ability to continue to de-lever rapidly as our leverage ratio at the end of June 2019 was 4.2 times following the acquisition of Samanage in the second quarter. Another recent highlight is the fact that we were upgraded by both S&P and Moody's in our most recent ratings review cycle.

Both agencies cited our consistent performance and strong cash flows as reasons for the upgrade. I will now walk you through our outlook before turning it over to Kevin for some final thoughts. I will start with first-quarter outlook and subsequently expand on the full-year 2020 outlook that we gave you back in December. For the first quarter of 2020, we expect non-GAAP revenue to be in the range of 243.5 million to $248.5 million, representing year-over-year growth of 13 to 15% which on a constant-currency basis would be 14 to 16%.

Total non-GAAP license and maintenance revenue is projected to be in the range of 152 to $155 million, representing year-over-year growth of approximately 5.5 to 7.5% on a reported basis and 6 to 8% on a constant-currency basis. Non-GAAP subscription revenue for the first quarter is expected to be in the range of 91.5 to $93.5 million, representing growth of 28 to 31% on a reported basis, or 29 to 32% on a constant-currency basis. Adjusted EBITDA for the first quarter is expected to be 108 to $112 million. Consistent with our historical trend, we expect our adjusted EBITDA as a percentage of revenue to trend up over the course of 2020 and will end the year meaningfully higher than the Q1 levels as the dilutive impact of the acquisitions we made in 2019 will become less impactful and as a result of the operational efficiencies which build as we move throughout the year.

Non-GAAP fully diluted earnings per share is projected to be $0.20 to $0.21 per share, assuming an estimated 313.6 million fully diluted shares outstanding. Our outlook for the first quarter assumes a non-GAAP tax rate of 22%, and we expect to pay approximately $10 million in cash taxes during the first quarter of 2020. Last, our first-quarter outlook assumes a euro to dollar exchange rate -- U.S. dollar exchange rate of 1.11 and a pound to U.S.

dollar exchange rate of 1.28. Our outlook as it relates to the full year for 2020 is as follows. We expect total non-GAAP revenue to be in the range of 1.035 billion to 1.055 billion, representing growth of approximately 10 and a half to 12 and a half percent on a reported and constant-currency basis. Total non-GAAP license and maintenance revenue is expected to be in the range of 641 to 653 million, representing growth of approximately 5 to 7% on a reported and constant-currency basis.

This range assumes a maintenance renewal rate of 92 to 93%. Non-GAAP subscription revenue is expected to be in the range of 394 to 402 million, representing growth of approximately 21 to 23% on a reported and constant-currency basis. This assumes a range of net retention rate of 105 to 108% across our different subscription product lines. Adjusted EBITDA is expected to be 475 to 485 million.

As you think about adjusted EBITDA on a quarterly basis, we expect to exit 2020 at a meaningfully higher level of profitability than where we began the year. Our historical trend has been that the first quarter of the year is at a lower level of profitability due to several factors, including payroll taxes on year-end bonuses, higher levels of social taxes, and that we kick off our growth initiatives early in each year with an expectation that those growth initiatives will begin to deliver results by the second half of the year. We did expect our level of profitability to rise in the subsequent quarter, with the third and fourth quarter delivering our highest levels of profitability. Non-GAAP fully diluted earnings per share is expected to be $0.88 to $0.91 per share assuming an estimated 317.2 million shares outstanding for 2020.

Our full-year outlook, like our first-quarter outlook, assumes a euro to U.S. dollar exchange rate of 1.11 and a pound to U.S. dollar exchange rate of 1.28. As we stated at analyst day, our long-term goal is for the conversion rate of EBITDA to unlevered free cash flow to grow slightly faster than revenue growth.

However, our conversion rate in 2020 will be negatively impacted by a few large onetime items which include the major expansion of our Manila office as we believe it will be one of our fastest-growing locations over the next several years, as well as the dilutive impact on cash flows in 2020 from our 2019 acquisition of Samanage and VividCortex. In addition, in 2020, like in 2019, we will have to continue to make additional total tax payments which relate to our historical earnings outside the United States. These items will keep our conversion rate in 2020 in the mid-80% range. Finally, due to our expected earnings and cash flow growth in 2020, net leverage, absent any M&A activity, will continue to decline and will be approximately three times at the end of 2020.

With that, I will now turn the call back over to Kevin for his closing remarks.

Kevin Thompson -- President and Chief Executive Officer

Thanks, Bart. As you can hear from our comments, both on this call and the comments we made at our investor and analyst day in December, we believe that we have positioned SolarWinds to take advantage of both historical trends in deployment models and IT infrastructure in the on-premises and data center market, and for the current and future trends in how hybrid IT infrastructure and application rearchitected, deployed and used. This belief is supported by several facts. First, according to IDC, we have been the market leader in network management for the last three years, and our lead in this market is growing.

Second, 2019, we moved from the No. 4 spot in Gardner's IT operations management performance analysis software market rankings to the No. 3 position which reflects the success we have had taking market share in the systems and application management market, as well as the network management market. We also believe we have positioned SolarWinds to be disruptive in several fast-growing parts of the ITOM market, namely hybrid IT infrastructure and application management and IT service management.

The hybrid IT infrastructure and application market is still early in its maturity cycle. However, the understanding of the problems that need to be addressed in a way that technology pros want the problem to be solved continue to be defined. We have created a portfolio of easy to use and powerful products priced at disruptive levels which we believe will enable us to begin taking meaningful market share from the early entrants into the hybrid IT infrastructure management market who have already pivoted their go to market model and focused on only large customers and only big deals. This leaves a large portion of the market wide open for us to ultimately own.

We are confident that over time, we will not only continue to be a meaningful player in the management of on-premises and hybrid IT infrastructure and applications, but also in the management of stand-alone cloud native infrastructure and applications. In the IT service management market, we believe that the issues that IT teams need to be able to manage successfully are well understood and that companies of all sizes are facing these same challenges. We are currently focused on bringing the power of ITSM in the mid-market and the small business with an intuitive easy-to-use product that we can deliver compelling price points. Consistent with our approach for the last 20 years, however, we plan to improve SolarWinds service desk with each new release, adding capabilities and features that will ultimately allow us to serve the ITSM needs of the entire market.

We believe that SolarWinds service desk will be a long-term growth driver for our business. We also plan to continue to invest in the MSP market, where we have been a recognized leader since 2013. We believe in the large opportunity in this market well before any other company of size really understood it. With a new round of investment in the MSP market over the last three years, it is becoming one of those hot new markets that is not really new at all.

We believe that we are well positioned with the broadest and most compelling set of products in the MSP market to continue to be a leader and to take share in this market. As we stated at our investor and analyst day, we are focused on building a business in the MSP market that can grow subscription revenue at a sustained level of 20% or greater for the foreseeable future. Next, I thought I would share a few additional comments on our M&A strategy as we move into a new decade, and in fact, what is the third decade of SolarWinds' history. We believe that we have made M&A a core competency of our business and have demonstrated the ability to acquire companies or, in some cases, to acquire products and quickly adapt them to the SolarWinds model, driving revenue growth and a high level of profitability.

We will continue to aggressively look for opportunities to add capabilities through our product portfolios that our customers are telling us that they need from us to allow them to manage their IT environment the way they want to manage them. We will, of course, focus on being a disciplined acquirer of companies and technologies to ensure that we deliver a high rate return on these investments. Last, turning specifically to our thoughts on 2020. We believe that we'll deliver a solid year of non-GAAP total revenue and adjusted EBITDA growth in 2020, while at the same time investing in some of the fast-growing parts of our business to position SolarWinds to grow at a CAGR of at least 15% over the next five years.

We have entered 2020 from a position of strength, with $845 million in ARR which is 19% higher than where we entered 2019, strong maintenance renewal and subscription net retention rates which are historically high level, a solid level of international momentum across all of our product lines, and meaningfully increase the number of large customer relationships we have while maintaining a high velocity of new customer additions which has been the hallmark of the SolarWinds model. As you can tell from the outlook which Bart provided, we expect to drive accelerated growth in our subscription revenue stream in 2020, driven by strong growth from our RMS business, SolarWinds service desk and our cloud infrastructure management products. With that, we'll now open the call for questions.

Questions & Answers:


Operator

[Operator instructions] And your first question comes from the line of Sterling Auty from JP Morgan.

Sterling Auty -- J.P. Morgan -- Analyst

Thanks. Hi, guys. So maybe just focusing in on the license sales into the installed base in North America. You mentioned that you've already made some changes.

Can you just peel back the onion, give us a little bit better clarity on what changes you actually have made? And how long do you think it will take for that to kind of get back to optimal productivity?

Kevin Thompson -- President and Chief Executive Officer

Sure. So what Bart indicated, Sterling, is we had a really strong performance across most of North America in the quarter. We had good performance in EMEA, with EMEA delivering growth again in the fourth quarter which is great, and Asia Pacific continuing to deliver growth. Federal, our new customer business, state, local and educational, very strong in North America, and our customer sales team has been really great across most of that team.

We have one of our geographic regions that just did not perform very well in the fourth quarter. We've made changes in approach. We've made changes in kind of the way we're managing that team to make sure that they're performing consistent with the rest of the business, and I expect the performance to be -- we had a very strong January in customer-based sales. So we feel like we've already addressed the problem and we've corrected the issues we saw in the fourth quarter.

We're already seeing improvement in performance in the first 30 days of this year.

Sterling Auty -- J.P. Morgan -- Analyst

Got it. And then one follow-up. In relation to the first quarter guidance, how do you think about the organic versus the inorganic acquisition contribution for the quarter?

Kevin Thompson -- President and Chief Executive Officer

Yeah. So, if you look at kind of the third and fourth quarter, I think, as examples, really, the inorganic impact at any material level is really driven by the Samanage acquisition which we made in the second quarter of last year. So, what you've seen in Q3, Q4 is really what's continuing into Q1. And so Samanage, as Bart indicated in his comments and maybe I did also, performed well, and it really contributed positively to our growth in the fourth quarter.

So that acquisition is performing very consistent with our expectations. Great product, great team, great market opportunity, continue to grow at the rate that we said that it would back when we made that acquisition with Loggly, 30%-plus range. So that's really the only inorganic material contribution in 2020 that is built into our outlook.

Sterling Auty -- J.P. Morgan -- Analyst

Got it. Thank you.

Kevin Thompson -- President and Chief Executive Officer

Thanks, Sterling.

Operator

And your next question comes from the line of Brad Zelnick from Credit Suisse.

Brad Zelnick -- Credit Suisse -- Analyst

Great. Thanks so much guys. It's great to see the momentum, especially in the subscription side of the business. On that note, we were impressed recently to see that Pingdom showed up as a top 10 most popular developer tool in a recent report out from Okta.

I don't know if you guys had seen it. But how are other products within the cloud suite ramping, Kevin? And can you give us a sense of how big Pingdom is versus the other solutions?

Kevin Thompson -- President and Chief Executive Officer

Yeah. So, we talked about a few things. We said we have 40,000 paying customers across our cloud infrastructure and application management products, but then most of those customers are relatively small in terms of their annual financial relationship with us, but those relationships are growing. Pingdom has, by far, the most users out of that total 40,000 of the other product lines as a brand.

It is incredibly well known. It's a brand that is widely used by both web developers, as well as product development teams. But the -- if you look at the website and see the pricing on Pingdom, the pricing ranges from about $7.99 a month to $349 a month. So, you can see that the ASP is not very large.

So decent-sized revenue stream in the double digits, growing nicely, but it's not going to be the driver of growth of that portfolio. The driver of growth will ultimately be AppOptics which is our application infrastructure management product. It's going to be Loggly which is our infrastructure log management product, and then, Papertrail which is our log management product for developers. That's where you're going to see more of the dollar growth.

But user growth, Pingdom does have and will always have a very, very large number of users. So great product, great brand awareness for us across the DevOps market, in the cloud market, bringing and has brought a lot of users to look at the other products that we have. So, it's really great, high-volume, profitable marketing is a great way to think about it.

Brad Zelnick -- Credit Suisse -- Analyst

Excellent. And if I could just follow up with a question on net retention. Not to completely rehash analyst day, but to make sure I've got my facts straight, and again, ask a question that follows. 105% net retention on the subscription business for 2019 which, if I'm not mistaken, is at the bottom end of the 105 to 108% assumption embedded in your 2020 guidance, but yet you also talked about being able to get to over 110%.

A, can you just confirm that I've got it right? And b, the confidence in the motions that get you to 110% and the optimism and things that you're already seeing that should give us confidence that you're going to be able to get there.

Kevin Thompson -- President and Chief Executive Officer

Yeah. So you're right, we're 105% for the full-year '19. And for that matter, we've been 105% pretty much on a trailing 12-month basis all year along across all of our subscription products, and we're 108% right now in our MSP business, and then the net retention of our ITSM product is already above 110. And we also -- you have recently added a database management product which is very tiny revenue today.

But based on the characteristics of that buyer, we believe that product will have very, very strong net retention. It already does today, above our 105% average. And so, when you look at the fact that our MSP net retention has been increasing over the last 12 months, it was less than 108% 12 months ago, it's at 108 now. When you look at the fact that it is one of the faster-growing parts of our subscription revenue stream, that ITSM is already above 110%, it is the fastest-growing part of our subscription revenue product line right now.

Those are the things that give us a lot of confidence that we can get above 110%. I've said I'd really like us to get into the 112, 115 range. We have a path to 110, and we know what that path is, and we're on it and making really good progress to get to 110. Once we get to 110, we're not done.

Then we're going to try to drive to between 112 and 115, and we absolutely do believe that's possible. I just don't have as much visibility to that as I do to 110%. The other thing to know is the 105 was negatively impacted by -- in 2019, so it's more like 106% on a constant-currency basis. So, it's a little better than the 105.

So, we have a good path that we're on, and we've got visibility through to 110, and then we believe we know how to get from 110 to 115. But we'll get to 110 first, and then we'll get to 110 -- 115. As one of my favorite sales leaders used to say, I got to sell a dollar to get to $2, like I got to get to 110 to get to 115. But ultimately, we think we can get beyond 110.

We just don't have much visibility yet in terms of how we get all the way there.

Brad Zelnick -- Credit Suisse -- Analyst

Awesome Color. Thank you, and thanks for all the other disclosure. Really appreciate the transparency.

Kevin Thompson -- President and Chief Executive Officer

Thanks, Brad.

Operator

And your next question comes from the line of Walter Pritchard from Citi.

Walter Pritchard -- Citi -- Analyst

Hi, thanks. Two questions. One, just on the incremental marketing spend, you've been talking about over the last few months before the analyst day, and then a little bit of an update at the analyst day. Can you just update us on what sort of returns you're seeing there? And then I had a follow-up product question.

Kevin Thompson -- President and Chief Executive Officer

Yeah. So we are seeing positive returns on that investment through the end of the year, and you indicated we'd have a decent view by the end of December, we have a better view kind of by the end of February. Given our average cycle time, we're seeing a positive return on that investment. It's not at the level I'd like it to be yet, so we're going to have to tweak it a little bit.

We are tweaking it a little bit in January in terms of how we're executing on some of those marketing campaigns. So what I'd say is we're not at the point where Bart and I have said, OK, we're going to increase our marketing spend through 2018, through all of 2020 -- so why I said 2018, I've sit back in the past, through all of 2020 because we're not just seeing the level of return we want to see. It is positive, but it's not positive at the ROI that we generally expect. So, we're going to keep tweaking it in terms of some of the activities and campaigns we're running in the first quarter.

We're going to try to drive that ROI up. But what we got built in our outlook is not an assumption. We'll continue to spend at the level we did in the fourth quarter, and this is really specifically around our cloud infrastructure and application management products. So, we're not going to spend in 2020 right now at the level we spent in the fourth quarter of '19 until we see a higher ROI than what we saw in the fourth quarter.

So, it was positive. If we were probably any other software company you know, we put a bucket of money in and dump it out and spend like crazy people. But because we run our business at a higher level of discipline than that, positive is not good enough. It's got to have an ROI level that's better than just I'm making a little bit of profit on the dollar that I spend.

So, we're going to have to tweak it a little bit. It works. It delivers more dollars of revenue than it costs, but it's not where I want it to be yet.

Walter Pritchard -- Citi -- Analyst

And then on the product side, Kevin, how -- any update as to how you're thinking about the security area? And you've done some M&A work there and so forth. But curious, any update?

Kevin Thompson -- President and Chief Executive Officer

Yeah. So, we continue to do a decent amount of work in security. We added, if you remember, on advanced importation products, our MSP product offering in 2019. That's been incredibly well accepted by our MSPs as one of the fastest-growing products on a percentage basis we have right now in our MSP product portfolio in 2019, and we expect it to continue to be a driver of growth in 2020, and so, we've added capabilities there.

We have expanded our -- what I'd like to call our infrastructure -- security infrastructure management capabilities in 2019 with a couple of different products. We have, one, Loggly which is used in some security use cases. And we have a product called security event manager which is both a compliance product in a lightweight SIM for companies who don't have the sophistication of a full SIM, and those products are performing well in the back half of 2019. As I think about security, I really like security that's tightly attached to infrastructure into the network.

So, what you should expect from us is that we will either build and/or look for opportunities to acquire infrastructure, security product, either at the network level or at the server level, because that's where the connection to the rest of our product portfolio creates the most value for our customers, and so definitely a space we're going to continue to expand in. We're going to do it a little bit at a time like we did in 2019, make sure we really understand the market. We understand the dynamics of the buyer, how they behave, the amount of budget they control and how they want to engage with the product, and then hopefully making healthy decisions about what we build and buy so that we have the same kind of result we have with this end point protection product we brought in the MSP market in 2019.

Walter Pritchard -- Citi -- Analyst

Great. Thank you.

Operator

And your next question comes from the line of Sanjit Singh from Morgan Stanley.

Keith Weiss -- Morgan Stanley -- Analyst

Hey, guys. This is actually Keith Weiss sitting in for Sanjit. A very nice quarter, particularly on that subscription side. It's really great to see the acceleration you're seeing there and the good traction in a lot of the incremental investments that you guys have been making through 2019.

Two questions kind of around that. One, just in terms of understanding kind of the weaker license revenues. How do you sort of parse out like license weakness coming from sort of more demand going toward subscriptions versus kind of license weakness overall? Why shouldn't this be kind of a more durable kind of trend going forward, if you will, as more and more of the business shifts toward the areas that are more cloud subscription focus, No. 1? And then No.

2, you talked a little bit about within the MSP business starting to see some incremental or some increased competition in that space. You guys had a good idea upfront and have been -- you've gotten some competitors building up over time. Can you talk to us just what that -- the environment looks like today and sort of how you're competing to get sort of more MSPs on your platform?

Kevin Thompson -- President and Chief Executive Officer

Yeah. OK. In regard to the first question is it kind of relates to the opportunity for us to continue to grow our on-premise kind of line of products today, we sell the license. And we talked about at analyst day that we are going to, at some point in 2020, and we don't have that date nailed down yet, we're still working on it, begin to offer those on-premise products, also add a subscription because we are beginning to see some level of demand to buy our on-premise products that way.

We delivered about 1.5% growth year over year on a constant-currency basis in license revenue. What we've consistently said is anywhere between zero and 2% license growth on an annual basis is where we believe we can -- at the level which we believe we can perform, and we think we can do that on a sustainable basis for the longer term. We had really good growth across most of our sales team and most of our core on-premise products in the year-end or fourth quarter, for that matter. We've had a little bit of weakness on the customer, on part of the customer base side, in the fourth quarter.

What I'd tell you, when I look at what's happening in the infrastructure, a couple of things are happening. Without a doubt, we've seen some small businesses stop buying technology to manage environments themselves and begin to ask him if he needs to manage those environments for them, and that's something that we've built into our business model as we look forward, and it's one of the reasons why we don't expect 5 to 8% license growth is because we know a portion of that small business market and an increasing portion of that small business market has thrown up their hands and said, I can't do it myself anymore. Somebody needs to do it for me. Which is why we've invested in the MSP market as heavily as we have and why we've got the really strong growth that we're seeing in that part of the market.

However, at the same time, what we have seen is that there's a tremendous amount of technology, still a point on-premise, and there is still new technology being deployed on-premise. We think we're really well positioned from a product portfolio perspective to take share in that market because almost every other vendor that has any real focus on that market has reduced their level of focus, reduced their level of investment either because they got acquired by companies who just harvest those technology for profit, or because they simply don't have a level of profitability. They need to be able to invest in those areas, and they're looking for areas that have higher, easier growth which is where a lot of big companies tend to turn when things get a little bit difficult. So that market is still growing.

The number of competitors in that market is actually shrinking, not growing. The strength of those competitors has actually been declining. And we're seeing a lot of our customers who are large companies, in some cases, are also large customers of ours, expanding the footprint of their SolarWinds product portfolio in pretty dramatic ways which is why we built as many large relationships as we have, and we're still adding a lot of new customers. So, a couple of things I think is going to happen as we look at 2020 through kind of 2024.

You're going to see us continue to build an increasing number of large relationships with large customers that will start at the ground level with an initial very small transaction, but we're going to grow more rapidly in those accounts than we have historically. There are many accounts we've got large footprints already, and there's still an opportunity to increase those footprints in meaningful ways. And we talked about analyst day, we've added a new sales motion to our bag of sales motions, I guess, if you want to put it that way, to allow us to more rapidly expand those relationships because we're having a lot of success, and we really had -- intentionally trying to do that over the last five years. It's happening because our products are strong, they're deep, they're broad, and no one else really is anymore, and so those are the things that give us confidence that -- we're not saying that license revenue is going to grow at 10%.

What we're saying is that zero to 2% range which allows us to grow total license and maintenance on a combined basis in that 6 to 8% range, maybe 9% range is absolutely a level we're comfortable and sustained. We were there in 2019. We expect to be there in 2020 because the competition is just not very strong. On your MSP question, that market is an interesting market.

Yes, there are a number of competitors in that market. There's really no one new in that market of any size over the last five years. There's just been a lot of investment into the company that are in that market, either by VCs who have funded some of the smaller players or by PE firms who bought some of the larger players. So, there's not a lot of new, strong competitors in that market.

But there are a number of competitors in that market. Where we've had an advantage, where I think we're going to continue to have an advantage, is the overall strength, depth and breadth of the SolarWinds technology portfolio. None of the competitors in that space have the product we've had for the last 20 years and the IP we have. We have the knowledge and know-how we have managing infrastructure environments wherever those infrastructure environments have to sit, and nobody has the breadth of capabilities on their MSP platform that we have today.

So as long as we continue to improve the products we have, as long as we continue to bring the IP we've had for the last 20 years to bear on the MSP market problem, and we've accelerated the rate at which we're doing that, we believe we're going to continue to be one of the leaders in that market, and we'll be able to deliver 20% plus growth to really as far out as we can see.

Keith Weiss -- Morgan Stanley -- Analyst

Thank you, guys. Thank you, guys.

Kevin Thompson -- President and Chief Executive Officer

Thank you.

Operator

Your next question comes from the line of Brent Thill from Jefferies.

Luv Sodha -- Jefferies -- Analyst

Hi. This is Luv Sodha on for Brent Thill. Yes. I just wanted to ask, maybe peel the onion back a little bit on the sales and marketing investments that you made this quarter.

Maybe could you talk about, like the competitive environment, what was it about those investments that didn't sort of live up to the expectations that you had in terms of returns?

Kevin Thompson -- President and Chief Executive Officer

Yeah. So, look, it's a couple of things. So, one, I mentioned this in the last quarter's call, is because we're still relatively early in the maturity of that market. There's a level of demand that exists on the web, while at a decent level, is not so high.

So, as people start to spend more money, trying to market to that demand, you're seeing the rate -- the cost per click, if you will, go up at a pretty rapid pace. So, one of the things we were trying to test is, as we deploy dollars, what rate does that cost per click go up? What's the rate of conversion we get at that rate per dollar goes up? Because the reality of web-based marketing is, as you push the volume limit, as you push the dollar cost per click, you will see some level of decline in conversion. That's just math. And so, what we were trying to test is, as the cost goes up, what's the conversion rate look like to opportunity, and then what's the conversion rate look like for opportunity to close the deal? So, while we can spend those dollars profitably, they don't meet my hurdle rate, the board I have established in terms of what -- how many dollars of revenue do we want to get for every dollar of marketing spend.

And you look at our -- historically, we spend about 25 to 27% of revenue on sales and marketing combined. So, we've got a pretty high hurdle rate, much higher hurdle rate than other companies have. I absolutely do believe, however, that we can drive demand, even in that client restructuring application management market, at a level of profitability that meets our hurdle rate, and we can increase the level of demand that we're driving, increase the rate which we're adding new customers in that part of our business, and increase our growth rate. So, we haven't lost any of our confidence in that.

We just haven't gotten to the math equation that -- where Bart said, "OK. Now I'm going to open up the vault and give you more money." You still got the vault locked at this point, waiting for them to prove to him that it was a good investment from taking money out of that vault and give it to them. So, we'll get there. I'm not worried about our ability to solve that math equation.

We just didn't solve it completely in the fourth quarter.

Luv Sodha -- Jefferies -- Analyst

Got it. And a quick follow-up for me. In terms of your progress on international markets, I know you're mentioning that next year, you're planning to open an office in Manila. Is that -- so how do you think about international growth? And how should we think about it going forward in 2020?

Kevin Thompson -- President and Chief Executive Officer

Yeah. So maybe to clarify, we had a big operation in Manila already. What Bart indicated, we're really going to double down and meaningfully increase the size of that operation because the employees we have in Manila are truly phenomenal, great attitude, incredibly committed to the company, do an incredibly high level of work, and so, it's really been a home run for us in terms of that operation. So, we're planning to double down, really double the size of that operation over the next 12 months.

In order to do that, we had to more than double the size of the footprint we have in terms of facilities in Manila. So that's been a great, great location for us, one that I'm incredibly, incredibly enthusiastic about, and one that just delivers a tremendous amount of value to the company. In terms of international growth, you indicated we saw -- it was a good performance in the fourth quarter from EMEA. We saw continued good performance from Asia Pacific.

We're still focused on really cracking the code in the German market. We started to invest in that in the kind of middle of 2019. We will continue to invest in the German market. We're seeing some improvement in performance in Germany, particularly in the fourth quarter.

We're going to continue to push on that because we believe that's a market where we should be much larger. We should be able to grow much faster than even we're growing in the fourth quarter, even though we saw a performance, so we're going to push on that. We're going to push hard this year to get our ITSM product and to get to continue to get our cloud infrastructure and application management product really deployed into the international market, Europe first, Asia second, because those products are mainly North American in terms of revenue streams. And then we talked about it last year, we opened a Japanese office in late 2019.

We've got a small handful, so I guess, it's less than five employees in Japan today, and we're beginning to see some positive traction from their efforts. And so that was going to be, as I've said, slower, but ultimately, will be a really good market for us. So that's how we're thinking about international right now.

Luv Sodha -- Jefferies -- Analyst

Good. Thank you, guys.

Kevin Thompson -- President and Chief Executive Officer

Thank you.

Operator

And your next question comes from the line of Matt Hedberg from RBC Capital Markets.

Matt Hedberg -- RBC Capital Markets -- Analyst

Thank you for taking my questions. I wanted to circle back on analyst day, you talked about introducing core IT subscriptions at some point in 2020. I know, Kevin, you said there's really not a date yet. But, I guess, I'm wondering, Bart, how do you think about that when you offered the 2020 outlook from a revenue perspective? I mean, is this something that as you are selling more, you'll sort of call it out? And if it does have any cannibalistic effect, we'd note that.

I'm just sort of curious on your thoughts on the guide.

Bart Kalsu -- Executive Vice President and Chief Financial Officer

Yeah. So, the guidance I gave for the first quarter, as well as for the full-year 2020 doesn't include any of the subscription story that we talked about at analyst day. Once again, it's not a subscription transition for us. We're just going to offer our core IT products under a subscription pricing model.

We're going through the process of putting together the systems and all the other work behind the scenes in order to offer subscription. So, in the quarter that we rolled that out, we will obviously adjust our guidance and talk about how that's going to impact our income statement.

Kevin Thompson -- President and Chief Executive Officer

And in terms of from a kind of business momentum perspective, based on the work we've done, the research we've done, the hundreds if not thousands of conversations we've had with both prospects and customers, I do believe we're going to see some level of volume pickup, particularly at the lower end of our product line where our price points are not as competitive when you have to buy a license and if you can buy a subscription from some of our smaller competitors that small companies might look at. Small companies worry about 5,000 upfront or can I pay $1,800 a year, and they'll make decisions at that level. So, we do believe that's a smaller version of our product. We will see some level of volume pickup once we get a subscription offering in the market so you can choose, do I want to buy a license or do I want to buy a subscription.

So, once we get the date nailed down, we've got all the work done, we'll obviously do a launch, we'll announce that we're doing it, and then we'll update our outlook.

Matt Hedberg -- RBC Capital Markets -- Analyst

Got it. That's helpful. And then in your prepared remarks, Kevin, you talked a lot about ITOM, a lot of investments last year, and I know you're pleased with the success there. Now that you've had, certainly, the ITSM product under your watch for a couple of quarters now.

Can you talk about maybe the competitive landscape? Are you surprised by who you're running up against, maybe win rates? Just a little bit more detail there.

Kevin Thompson -- President and Chief Executive Officer

Yeah. So, we're running up against the kind of group of companies we thought we would. So, we're running up against people who have kind of legacy ITSM products deployed. So remedy products like that from BMC and CA and HP and others.

So, there's a bunch of old service desk products out there that really are not modern ITSM that we run up against, and so, it's really a customer design. Those products don't meet their needs anymore. They need something much more modern, much more easier to use. They want something that is cloud deployed so they don't have to deploy it on their infrastructure.

We're also seeing some of the competitors that -- some of the larger private players in the space, so companies like Cherwell and fresh head, or fresh – whatever, they got a lot of different fresh names, and we'll probably get them a little bit. And then there's a bunch of cheap and cheerful service desk companies out there, really, they are help desks, literally hundreds of them. Because when we started our research of the space, we were actually shocked at the number of very small kind of 1 to 3 million in revenue, maybe 5 million revenue companies that are out there that provide help desk. So, there's a bunch of those out there were customer, prospects and potential customers are trying to decide, do I just need a help desk or do I want to move to something that actually gives me much more functionality than that? So that's who we run up against competitively.

I think the mid-market and even the small enterprise is pretty wide open from a competitive perspective. I don't think any of the competitors are particularly strong, and they definitely don't have the go to market reach that we have, they don't have the customer base that we have. We're seeing a lot of interest by the SolarWinds customer rate in our ITSM product which we thought we'd see. Because now, you connect the operational -- the infrastructure management product that we provide you with operational management of your IT team, and we can connect that more tightly than anyone else can.

So there, somebody -- they've got them deployed in almost every day. But in all cases, we believe we can win that business relatively easily. We don't -- we're not running up against ServiceNow very often. Why? Because I'm not going that high in the market today.

As I indicated in my comments, we're really focused on the mid-market, small enterprise, small business. Our product is really good for that level of company. If you're a large business who doesn't have a really complex IT, we scale to very large. But if you're really complex, we're not the right solution for you yet.

But we will be. So whether that's 24 months from now or 30 months from now, with every release we make, we are going to be -- the product will be stronger and stronger, and we will get to the point over a relatively short period of time where we can compete against the ServiceNow and some of those really large opportunities, but that's not what we're doing today.

Matt Hedberg -- RBC Capital Markets -- Analyst

Got it. Thanks a lot, guys.

Operator

And your next question comes from the line of Erik Suppiger from JMP.

Erik Suppiger -- JMP Securities -- Analyst

Yeah, thank you for taking my questions. Just a quick question. On your larger customers, can you talk a little bit about what kind of success you had with $100,000 customers, the volume that you generated at the end of the year?

Kevin Thompson -- President and Chief Executive Officer

Sure. So, I think one of the trends we're seeing, Erik, is that we have a footprint in a lot of companies around the world. We've got a footprint in most of the large companies around the world with some volume and SolarWinds technology deployed. Some footprints are small, maybe about 15 or $20,000 of licenses.

Some footprints are large, and maybe they bought half a million or $1 million of licenses. But there are very few organizations of any size anyway, where we are managing their entire environment. There are some, but that's the distinct minority of our customer base. And definitely, what we've seen over the last 24 months, because the trend has really been building in 2018 and 2019, we really dramatically increased the number of large customer relationships we have over the last 24 months.

And the trend we're seeing is those companies coming to us who are using our products already in a certain area or infrastructure, coming to us and say, OK, we've got all these other legacy products deployed. They're not meeting the need we have any more in order to give us the level of visibility we need in our infrastructure. They're not dealing with the modern IT architecture that these companies are creating and deploying. We need you to be able to help us manage that, and we want to go from a small or medium-sized relationship to very large relationships.

So we've built a really large number of significant relationships over the last 24 months. And the level of activity there, the level of interest is building which is why when David talked about at analyst day, he has created a new sales motion which we put in place in January. So brand-new teams in place now handling the rest on that team. And that team's job is to go into those large customers who have meaningful relationships with us, where we know there's a much larger opportunity and try to accelerate the rate at which we're capturing that large opportunity.

So, we'll be able to -- you give us six months. So, by the end of the second quarter, I think we're going to be able to talk about what kind of success we're having with that new sales approach. It's still a typical SolarWinds approach, selling from the inside still, but it's much more proactive touch, going in and telling a bigger story, making sure these organizations know the breadth of our capabilities which, in many cases, they don't, and then showing how rapidly that they can actually deliver value as an organization, and the ROI we can give them which is incredibly rapid because we're going to be generally less than the maintenance they're paying for some of the older products that they've got deployed to buy our licenses, and then our maintenance also will be much cheaper than the maintenance relationships we have -- they have today. So, it's a big opportunity, one we're really excited about because we're already seeing a very significant level of success, and we really haven't intentionally focused on driving that success until now.

Erik Suppiger -- JMP Securities -- Analyst

I think you had 238 customers at the end of Q3. Can you update us what it was at the end of Q4?

Kevin Thompson -- President and Chief Executive Officer

So, we had 900 at the end of Q4, and we had a little over 800 at the end of Q3. We've been adding anywhere between, kind of on a trailing 12-month basis, we've been adding anywhere between kind of 50 to 70 a quarter that reached that level of spend with us.

Erik Suppiger -- JMP Securities -- Analyst

All right. Very good. Thank you.

Kevin Thompson -- President and Chief Executive Officer

We're going take one more question.

Operator

OK. Your next question comes from the line of Heather Bellini from Goldman Sachs.

Heather Bellini -- Goldman Sachs -- Analyst

Thank you. Thanks, Kevin. I'll make it quick. Just wanted to follow up on the comments about the back-end loaded quarter.

Just wondering, in any particular market if you're seeing it, was that mostly focused in the U.S. where you mentioned you had a couple of pockets of weakness? Or is it related to the U.K., where I know you cited weakness in your Q3 quarter? And then the second topic I just wanted to get your comment on is just the maintenance renewal rates, obviously, have been running very high. You had 97% in Q1, and it's fully been ticking down. I'm just wondering what caused the spike to 97% in Q1? And what makes you feel like it's going to give you -- I guess, what gives you the sense to guide to it being 90 to 93%?

Kevin Thompson -- President and Chief Executive Officer

Yes. Yes. In terms of the linearity of the fourth quarter, we definitely saw more business in the last 30 days of the quarter than we typically have seen even in the fourth quarter. Fourth quarter is always more shifted toward the back end.

Our DSO typically runs kind of 35, 36 days every other quarter. They typically bounce up to 40 days in the fourth quarter. So consistently, we've seen more of the fourth-quarter business come in, in the last 30 days than other quarters in the year. However, this year, in the fourth quarter, we definitely saw a little heavier loading in the fourth quarter.

That was a little bit on the federal side. So federal, we had indicated a federal plan. We had a strong fourth quarter, and that business tends to be a little bit less predictable in terms of timing. We saw more of that business come in late in the quarter.

And then on the North American side, from a commercial perspective, we saw a little bit more coming. Europe was not significantly less later than it historically has been in the fourth quarter, really, nor is Asia Pac. It's really more federal in North America. As I indicated, we saw a reversal of that trend already this quarter.

We had a strong January which is much better than our October in terms of performance and expectation in what we'd expect for linearity. So it feels a little bit like a fourth-quarter blip which is we're still more linear than most companies in software. I'm not getting 70% of our year in the fourth quarter and 90% of my fourth quarter in December, but less linear than what we've historically seen by about 13 million of bookings, and that's what Bart said, the ARR went up by. So that's kind of the shift in linearity.

On maintenance renewals, kind of two -- a couple of things. One, what we've consistently said all year long is don't bank on 95, 96, 97%. 92 to 94 is where we believe it will be. That's where we've trended historically over long periods of time.

And then we were -- we had really, really strong maintenance renewal performance in the first part of this year. In the first quarter, we talked about the fact we had a very, very large federal renewal which came in, in the first quarter which boosted our maintenance renewal rates in the first quarter. And because we disclosed making sure renewal rate on a trailing 12-month basis, that had some mathematical impact all the way through the year. We do believe that 92% to 94% is the right range to expect.

We've got 92 to 93% baked into our view for 2020. We hopefully can do better than that and deliver that 94%, maybe a little bit higher than that. But anywhere between 92 and 94%, we felt we did a really good job. And if we get 94% or higher, we're doing a great job, and we've got -- we feel like we've got the process of methodologies and the track record to be able to deliver that 92 to 94%, and hopefully we're at the higher end of that range.

But that's really what happened in 2019.

Heather Bellini -- Goldman Sachs -- Analyst

Thank you so much.

Kevin Thompson -- President and Chief Executive Officer

So, with that, operator, we're going to end the call for today. We appreciate everyone's attendance on the call and for the questions we got. Thanks.

Operator

[Operator signoff]

Duration: 66 minutes

Call participants:

Ashley Hook -- Chief Executive Officer

Kevin Thompson -- President and Chief Executive Officer

Bart Kalsu -- Executive Vice President and Chief Financial Officer

Sterling Auty -- J.P. Morgan -- Analyst

Brad Zelnick -- Credit Suisse -- Analyst

Walter Pritchard -- Citi -- Analyst

Keith Weiss -- Morgan Stanley -- Analyst

Luv Sodha -- Jefferies -- Analyst

Matt Hedberg -- RBC Capital Markets -- Analyst

Erik Suppiger -- JMP Securities -- Analyst

Heather Bellini -- Goldman Sachs -- Analyst

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