SolarWinds Corp (SWI)

Interest coverage

		Dec 31, 2024	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020
Earnings before interest and tax (EBIT)	US$ in thousands	208,419	150,373	-819,579	-32,871	52,253
Interest expense	US$ in thousands	8,604	10,718	9,056	9,103	9,200
Interest coverage		24.22	14.03	-90.50	-3.61	5.68

December 31, 2024 calculation

Interest coverage = EBIT ÷ Interest expense
= $208,419K ÷ $8,604K
= 24.22

Interest coverage is a financial ratio that measures a company's ability to cover its interest expenses with its operating income. Looking at the data provided for SolarWinds Corp, the interest coverage ratio has fluctuated over the past five years.

As of December 31, 2020, SolarWinds Corp had an interest coverage ratio of 5.68, indicating that the company's operating income was able to cover its interest expenses approximately 5.68 times over. This suggests a comfortable level of margin of safety for the company.

However, by December 31, 2021, the interest coverage ratio had declined significantly to -3.61. A negative interest coverage ratio indicates that the company's operating income was insufficient to cover its interest expenses, potentially raising concerns about the company's financial health and ability to meet its debt obligations.

The situation worsened by December 31, 2022, with an interest coverage ratio of -90.50, which is a very concerning figure as it indicates severe financial distress and a high risk of default on debt obligations.

Fortunately, by December 31, 2023, the interest coverage ratio had improved to 14.03, indicating that the company's ability to cover its interest expenses had significantly strengthened.

By December 31, 2024, SolarWinds Corp further improved its interest coverage ratio to 24.22, signaling a healthier financial position and increased ability to meet its interest obligations comfortably.

Overall, SolarWinds Corp's interest coverage ratio has shown significant fluctuations over the past five years, reflecting changes in the company's financial performance and ability to manage its debt obligations. It is crucial for investors and stakeholders to monitor this ratio closely to assess the company's financial health and stability.