ATLANTA, Dec. 7, 2023
/PRNewswire/ -- Secureworks® (NASDAQ: SCWX), a global
leader in cybersecurity, today announced financial results for its
third quarter, which ended on November 3, 2023.
Key Highlights
- Secureworks Taegis™ annual recurring revenue (ARR) grew to
$279 million, an increase of 25% on a
year-over-year basis.
- Taegis third quarter revenue grew 41% year-over-year to
$67.3 million.
- Taegis GAAP gross margin and non-GAAP gross margin continued to
expand in the third quarter, reaching 70.4% and 72.7%,
respectively.
"Our Taegis business is consistently delivering market-leading
growth and Q3 was no exception. We expanded the breadth and depth
of our Partner ecosystem, and recognition within the analyst
community for our leadership in the XDR market accelerated. As we
continue to enrich our partner experience and launch new product
capabilities, we strengthen our ability to scale with partners,
expand their addressable market and most importantly deliver
superior customer outcomes," said Wendy
Thomas, CEO, Secureworks. "These elements lay the foundation
for long-term Taegis growth."
"We've made significant progress on our path to profitability,
increasing our confidence in achieving breakeven adjusted EBITDA
milestone in fourth quarter this year," said Alpana Wegner, Chief Financial Officer,
Secureworks. "The Taegis gross margin expansion we delivered this
quarter demonstrates the scalability of our platform and
longstanding use of AI in driving operational efficiencies."
Third Quarter Fiscal 2024 Financial
Highlights
- Total revenue for the third quarter was $89.4 million, compared to $110.9 million in the third quarter of fiscal
2023, reflecting the strategic wind-down of our Other MSS
business.
- Taegis revenue for the third quarter was $67.3 million, compared to $47.9 million in the third quarter of fiscal
2023.
- GAAP gross profit was $54.7
million, compared with $65.4
million in the third quarter of fiscal 2023. Non-GAAP gross
profit was $59.2 million, compared
with $70.2 million during the same
period last year.
- GAAP gross profit specific to Taegis was $47.4 million, compared with $31.3 million in the third quarter of fiscal
2023. Non-GAAP Taegis gross profit was $48.9
million, compared with $32.4
million during the same period last year.
- GAAP gross margin for the third quarter was 61.3%, compared
with 58.9% in the same period last year. Non-GAAP gross margin was
66.3%, compared with 63.3% in the third quarter of fiscal
2023.
- GAAP gross margin specific to Taegis was 70.4% for the quarter,
compared with 65.4% in the same period last year. Non-GAAP Taegis
gross margin was 72.7%, compared with 67.6% in the third quarter of
fiscal 2023.
- GAAP net loss was $14.4 million
for the third quarter, or $0.17 per
share, compared with GAAP net loss of $28.1
million, or $0.33 per share,
in the same period last year. Non-GAAP net loss was $0.0 million, or $0.00 per share, compared with non-GAAP net loss
of $13.7 million, or $0.16 per share, in the same period last
year.
- Adjusted EBITDA loss for the quarter was $1.2 million, compared with adjusted EBITDA loss
of $17.2 million in the third quarter
of fiscal 2023.
- The company ended the third quarter with $58.1 million in cash and cash equivalents.
Business and Operational Highlights
- Published 2023 State of the Threat Report and completed the
Secureworks 8th annual Global Threat Intelligence Summit, with
keynote by Jen Easterly, Director of
the Cybersecurity and Infrastructure Security Agency (CISA).
- Introduced new features in the Taegis platform to broaden our
market reach, including enhanced cloud security, custom
configurations and advanced tools for threat hunting.
- Recognition and awards received during the third quarter of
fiscal 2024 include:
- Leader in The Forrester Wave™: Managed Detection And Response
Services In Europe, Q4 2023
- #1 Marketshare in IDC Marketshare: Worldwide Cloud-Native XDR
2022 Share Snapshot, published September
2023
- Leader in Innovation in Frost & Sullivan XDR Radar report,
Open XDR category published August
2023
- XDR Platform of the Year in Cybersecurity Breakthrough
Financial Outlook
For the fourth quarter of fiscal 2024, the Company expects:
- Revenue of $86 million to
$88 million.
- GAAP net loss per share of $0.16
to $0.18 and non-GAAP net loss per
share of $0.03 to $0.05.
Secureworks is providing the following updated guidance for full
fiscal year 2024. The Company expects:
Fiscal Year 2024
Guidance
|
|
Taegis ARR
|
$280M or
Greater
|
Other MSS
ARR
|
$15M or Less
|
Total
revenue
|
$363M to
$365M
|
Taegis
revenue
|
$264M to
$266M
|
GAAP net
loss
|
($91M) to
($93M)
|
|
($1.06) to ($1.08) per
share
|
Non-GAAP net
loss
|
($28M) to
($30M)
|
|
($0.33) to ($0.35) per
share
|
Adjusted
EBITDA
|
($31M) to
($33M)
|
Cash from
operations
|
($70M) to
($80M)
|
|
|
Conference Call Information
As previously announced, the Company will hold a conference call
to discuss its third quarter fiscal 2024 results and financial
guidance on December 7, 2023, at 8:00
a.m. U.S. ET. A live audio webcast of the conference call
and the related supplemental financial information will be
accessible on the Company's website at
https://investors.secureworks.com. The webcast and supplemental
information will be archived at the same location.
Operating Metrics
The Company defines annual recurring revenue (ARR) as the value
of its subscription contracts as of a particular date. Because the
Company uses recurring revenue as a leading indicator of future
annual revenue, it includes operational backlog. Operational
backlog is defined as the recurring revenue associated with pending
contracts, which are contracts that have been sold but for which
the service period has not yet commenced.
Non-GAAP Financial Measures
This press release presents information about the Company's
non-GAAP revenue, non-GAAP subscription cost of revenue, non-GAAP
professional services cost of revenue, non-GAAP Taegis Subscription
Solutions cost of revenue, non-GAAP Managed Security Services cost
of revenue, non-GAAP gross profit, non-GAAP subscription gross
profit, non-GAAP professional services gross profit non-GAAP Taegis
Subscription Solutions gross profit, non-GAAP Managed Security
Services gross profit, non-GAAP operating expenses, non-GAAP
research and development expenses, non-GAAP sales and marketing
expenses, non-GAAP general and administrative expenses, non-GAAP
operating income (loss), non-GAAP net income (loss), non-GAAP
earnings (loss) per share, adjusted EBITDA, weighted average common
shares outstanding - diluted (non-GAAP), non-GAAP gross margin,
non-GAAP Taegis Subscription Solutions gross margin, non-GAAP
Managed Security Services gross margin, non-GAAP subscription gross
margin and non-GAAP professional services gross margin, which are
non-GAAP financial measures provided as a supplement to the results
provided in accordance with accounting principles generally
accepted in the United States of
America ("GAAP"). A reconciliation of each of the foregoing
historical and forward-looking non-GAAP financial measures to the
most directly comparable historical and forward-looking GAAP
financial measure is provided below for each of the fiscal periods
indicated.
Special Note Regarding Forward-Looking Statements
This press release contains "forward-looking statements" within
the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. In some cases,
you can identify these statements by such forward-looking words as
"anticipate," "believe," "confidence," "could," "estimate,"
"expect," "guidance," "intend," "may," "plan," "potential,"
"outlook," "should," and "would," or similar words or expressions
that refer to future events or outcomes. Such forward-looking
statements include, but are not limited to, the statements in this
press release with respect to the Company's expectations regarding
revenue, GAAP net loss per share and non-GAAP net loss per share
for the fourth quarter of fiscal 2024, and Taegis ARR, other MSS
ARR, total revenue, Taegis revenue, GAAP net loss, GAAP net loss
per share, non-GAAP net loss, non-GAAP net loss per share, weighted
average common shares outstanding - diluted (non-GAAP), adjusted
EBITDA, capital expenditures, and cash from operations for full
year fiscal 2024, all of which reflect the Company's current
analysis of existing trends and information. These forward-looking
statements represent the Company's judgment only as of the date of
this press release.
Actual results and events in future periods may differ
materially from those expressed or implied by these forward-looking
statements because of risks, uncertainties and other factors that
include, but are not limited to, the following: the Company's
ability to achieve or maintain profitability; the Company's ability
to enhance its existing solutions and technologies and to develop
or acquire new solutions and technologies; the Company's ability to
navigate economic conditions, geopolitical uncertainty and
financial market volatility; the Company's reliance on personnel
with extensive information security expertise; the Company's
ability to successfully implement its strategic plan to realign and
optimize its investments with its priorities; intense competition
in the Company's markets; the Company's ability to attract new
customers, retain existing customers and increase its annual
contract values; the Company's reliance on customers in the
financial services industry; the Company's ability to manage its
growth effectively; the Company's ability to maintain high-quality
client service and support functions; terms of the Company's
service level agreements with customers that require credits for
service failures or inadequacies; the Company's recognition of
revenue ratably over the terms of its Taegis SaaS applications and
managed security services contracts; the Company's long and
unpredictable sales cycles; risks associated with expansion of the
Company's international sales and operations; the risks associated
with proposed or currently enacted tax statutes, including Internal
Revenue Code Section 174; the Company's exposure to fluctuations in
currency exchange rates or inflation; the effect of new
governmental export or import controls on the Company's business or
any international sanctions compliance program applicable to the
Company; the Company's ability to expand its key distribution
relationships; the Company's technology alliance partnerships; real
or perceived defects, errors or vulnerabilities in the Company's
solutions or the failure of its solutions to prevent a security
breach; the risks associated with cyber-attacks or other data
security incidents; the ability of the Company's solutions to
interoperate with its customers' IT infrastructure; the Company's
ability to use third-party technologies; the effect of evolving
information security and data privacy laws and regulations on the
Company's business; the Company's ability to maintain and enhance
its brand; risks associated with the Company's acquisition of other
businesses; the effect of natural disasters, public health issues,
geopolitical conflict and other catastrophic events on the
Company's ability to serve its customers, including the
Ukrainian/Russian conflict; the Company's reliance on patents to
protect its intellectual property rights; the Company's ability to
protect, maintain or enforce its non-patented intellectual property
rights and proprietary information; claims by third parties of
infringement of their proprietary technology by the Company; the
Company's use of open source technology; risks related to the
Company's relationship with Dell Technologies Inc. and Dell Inc.
and control of the Company by Dell Technologies Inc., which
include, but are not limited to, the effects of a potential
deconsolidation of the Company as a part of the Dell Technologies
Inc. consolidated tax group; and risks related to the volatility of
the price of the Company's Class A common stock.
This list of risks, uncertainties and other factors is not
complete. The Company discusses these matters more fully, as well
as certain risk factors that could affect the Company's business,
financial condition, results of operations and prospects, under the
caption "Risk Factors" in the Company's annual report on Form 10-K
or in the Company's first quarter fiscal 2024 Form 10-Q filing, as
well as in the Company's other SEC filings.
Any or all forward-looking statements the Company makes may turn
out to be wrong and can be affected by inaccurate assumptions the
Company might make or by known or unknown risks, uncertainties and
other factors, including those identified in this press release.
Accordingly, you should not place undue reliance on the
forward-looking statements made in this press release, which speak
only as of its date. The Company does not undertake to update, and
expressly disclaims any obligation to update, any of its
forward-looking statements, whether resulting from circumstances or
events that arise after the date the statements are made, new
information or otherwise.
About Secureworks
Secureworks (NASDAQ: SCWX) is a global cybersecurity leader that
secures human progress with Secureworks® Taegis™, a SaaS-based,
open XDR platform built on 20+ years of real-world detection data,
security operations expertise, and threat intelligence and
research. Taegis is embedded in the security operations of over
4,000 organizations around the world who use its advanced,
AI-driven capabilities to detect advanced threats, streamline and
collaborate on investigations, and automate the right actions.
www.secureworks.com
(Tables Follow)
SECUREWORKS
CORP.
|
Condensed Consolidated
Statements of Operations and Related Financial
Highlights
|
(in thousands, except
per share data and percentages)
|
(unaudited)
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
November 3,
2023
|
|
October 28,
2022
|
|
November 3,
2023
|
|
October 28,
2022
|
Net revenue:
|
|
|
|
|
|
|
|
Subscription
|
$ 75,212
|
|
$
87,191
|
|
$
229,296
|
|
$
271,926
|
Professional
services
|
14,152
|
|
23,751
|
|
47,429
|
|
76,213
|
Total net
revenue
|
89,364
|
|
110,942
|
|
276,725
|
|
348,139
|
Cost of
revenue:
|
|
|
|
|
|
|
|
Subscription
|
25,986
|
|
32,136
|
|
87,089
|
|
99,022
|
Professional
services
|
8,629
|
|
13,444
|
|
30,369
|
|
45,572
|
Total cost of
revenue
|
34,615
|
|
45,580
|
|
117,458
|
|
144,594
|
Gross profit
|
54,749
|
|
65,362
|
|
159,267
|
|
203,545
|
Operating
expenses:
|
|
|
|
|
|
|
|
Research and
development
|
26,358
|
|
35,263
|
|
85,766
|
|
102,232
|
Sales and
marketing
|
27,079
|
|
41,380
|
|
92,842
|
|
121,565
|
General and
administrative
|
20,565
|
|
24,725
|
|
63,194
|
|
74,359
|
Reorganization and
other related charges
|
—
|
|
—
|
|
14,232
|
|
—
|
Total operating
expenses
|
74,002
|
|
101,368
|
|
256,034
|
|
298,156
|
Operating
loss
|
(19,253)
|
|
(36,006)
|
|
(96,767)
|
|
(94,611)
|
Interest and other,
net
|
684
|
|
(661)
|
|
(1,698)
|
|
(1,227)
|
Loss before income
taxes
|
(18,569)
|
|
(36,667)
|
|
(98,465)
|
|
(95,838)
|
Income tax
benefit
|
(4,148)
|
|
(8,521)
|
|
(20,715)
|
|
(21,375)
|
Net loss
|
$
(14,421)
|
|
$ (28,146)
|
|
$
(77,750)
|
|
$
(74,463)
|
|
|
|
|
|
|
|
|
Loss per common share
(basic and diluted)
|
$
(0.17)
|
|
$
(0.33)
|
|
$
(0.90)
|
|
$
(0.88)
|
Weighted-average common
shares outstanding (basic and diluted)
|
86,278
|
|
84,584
|
|
85,943
|
|
84,277
|
|
|
|
|
|
|
|
|
Percentage of
Total Net
Revenue (1)
|
|
|
|
|
|
|
|
Subscription gross
margin
|
65.4 %
|
|
63.1 %
|
|
62.0 %
|
|
63.6 %
|
Professional services
gross margin
|
39.0 %
|
|
43.4 %
|
|
36.0 %
|
|
40.2 %
|
Total gross
margin
|
61.3 %
|
|
58.9 %
|
|
57.6 %
|
|
58.5 %
|
Research and
development expenses
|
29.5 %
|
|
31.8 %
|
|
31.0 %
|
|
29.4 %
|
Sales and marketing
expenses
|
30.3 %
|
|
37.3 %
|
|
33.6 %
|
|
34.9 %
|
General and
administrative expenses
|
23.0 %
|
|
22.3 %
|
|
22.8 %
|
|
21.4 %
|
Reorganization and
other related charges
|
— %
|
|
— %
|
|
5.1 %
|
|
— %
|
Operating
expenses
|
82.8 %
|
|
91.4 %
|
|
92.5 %
|
|
85.6 %
|
Operating
loss
|
(21.5) %
|
|
(32.5) %
|
|
(35.0) %
|
|
(27.2) %
|
Loss before income
taxes
|
(20.8) %
|
|
(33.1) %
|
|
(35.6) %
|
|
(27.5) %
|
Net loss
|
(16.1) %
|
|
(25.4) %
|
|
(28.1) %
|
|
(21.4) %
|
Effective tax
rate
|
22.3 %
|
|
23.2 %
|
|
21.0 %
|
|
22.3 %
|
Note: Percentage
growth rates are calculated based on underlying data in
thousands
|
|
(1)
|
Financial measures as a
percentage of revenue are calculated based on total GAAP net
revenue, except for GAAP subscription gross margin and GAAP
professional services gross margin measures, which are calculated
based on each of their respective GAAP net revenue
measures.
|
SECUREWORKS
CORP.
|
Condensed Consolidated
Statements of Financial Position
|
(in
thousands)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
November 3,
2023
|
|
February 3,
2023
|
Assets:
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
|
$
58,105
|
|
$
143,517
|
|
Accounts receivable,
net
|
|
|
55,914
|
|
72,627
|
|
Inventories,
net
|
|
|
759
|
|
620
|
|
Other current
assets
|
|
|
12,865
|
|
17,526
|
|
|
Total current
assets
|
|
|
127,643
|
|
234,290
|
Property and equipment,
net
|
|
|
2,626
|
|
4,632
|
Operating lease
right-of-use assets, net
|
|
|
5,262
|
|
9,256
|
Goodwill
|
|
|
425,241
|
|
425,519
|
Intangible assets,
net
|
|
|
86,942
|
|
106,208
|
Other non-current
assets
|
|
|
72,236
|
|
60,965
|
|
|
Total assets
|
|
|
$
719,950
|
|
$
840,870
|
Liabilities and
Stockholders' Equity:
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
Accounts
payable
|
|
|
$
11,675
|
|
$
18,847
|
|
Accrued and other
current liabilities
|
|
|
60,890
|
|
81,566
|
|
Short-term deferred
revenue
|
|
|
126,198
|
|
145,170
|
|
|
Total current
liabilities
|
|
|
198,763
|
|
245,583
|
Long-term deferred
revenue
|
|
|
6,988
|
|
11,162
|
Operating lease
liabilities, non-current
|
|
|
8,800
|
|
12,141
|
Other non-current
liabilities
|
|
|
7,662
|
|
14,023
|
|
|
Total
liabilities
|
|
|
222,213
|
|
282,909
|
Total stockholders'
equity
|
|
|
497,737
|
|
557,961
|
Total liabilities and
stockholders' equity
|
|
|
$
719,950
|
|
$
840,870
|
SECUREWORKS
CORP.
|
Condensed Consolidated
Statements of Cash Flows
|
(in
thousands)
|
(unaudited)
|
|
|
|
|
|
|
|
Nine Months
Ended
|
|
|
November 3,
2023
|
|
October 28,
2022
|
Cash flows from
operating activities:
|
|
|
|
|
Net loss
|
|
$
(77,750)
|
|
$
(74,463)
|
Adjustments to
reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
Depreciation and
amortization
|
|
26,028
|
|
27,728
|
Amortization of right
of use asset
|
|
1,686
|
|
2,853
|
Reorganization and
other related charges
|
|
3,272
|
|
—
|
Amortization of costs
capitalized to obtain revenue contracts
|
|
12,964
|
|
13,319
|
Amortization of costs
capitalized to fulfill revenue contracts
|
|
2,562
|
|
3,635
|
Stock-based
compensation expense
|
|
24,852
|
|
27,504
|
Effects of exchange
rate changes on monetary assets and liabilities denominated in
foreign currencies
|
|
1,575
|
|
1,386
|
Income tax
benefit
|
|
(20,715)
|
|
(21,375)
|
Provision for credit
losses
|
|
232
|
|
(552)
|
Changes in assets and
liabilities:
|
|
|
|
|
Accounts
receivable
|
|
15,951
|
|
21,584
|
Net transactions with
Dell
|
|
2,028
|
|
(3,741)
|
Inventories
|
|
(139)
|
|
(178)
|
Other
assets
|
|
(1,237)
|
|
(9,709)
|
Accounts
payable
|
|
(7,462)
|
|
4,550
|
Deferred
revenue
|
|
(24,011)
|
|
(33,171)
|
Operating leases,
net
|
|
(4,031)
|
|
(4,086)
|
Accrued and other
liabilities
|
|
(30,299)
|
|
(23,462)
|
Net cash used in
operating activities
|
|
(74,494)
|
|
(68,178)
|
Cash flows from
investing activities:
|
|
|
|
|
Capital
expenditures
|
|
(865)
|
|
(1,609)
|
Software development
costs
|
|
(4,106)
|
|
(3,352)
|
Net cash used in
investing activities
|
|
(4,971)
|
|
(4,961)
|
Cash flows from
financing activities:
|
|
|
|
|
Taxes paid on vested
restricted shares
|
|
(5,947)
|
|
(8,484)
|
Net cash used in
financing activities
|
|
(5,947)
|
|
(8,484)
|
Net decrease in cash
and cash equivalents
|
|
(85,412)
|
|
(81,623)
|
Cash and cash
equivalents at beginning of the period
|
|
143,517
|
|
220,655
|
Cash and cash
equivalents at end of the period
|
|
$
58,105
|
|
$
139,032
|
|
Non-GAAP Financial Measures
This press release presents information about the Company's
non-GAAP revenue, non-GAAP subscription cost of revenue, non-GAAP
professional services cost of revenue, non-GAAP Taegis Subscription
Solutions cost of revenue, non-GAAP Managed Security Services cost
of revenue, non-GAAP gross profit, non-GAAP subscription gross
profit, non-GAAP professional services gross profit, non-GAAP
Taegis Subscription Solutions gross profit, non-GAAP Managed
Security Services gross profit, non-GAAP operating expenses,
non-GAAP research and development expenses, non-GAAP sales and
marketing expenses, non-GAAP general and administrative expenses,
non-GAAP operating income (loss), non-GAAP net income (loss),
non-GAAP earnings (loss) per share, adjusted EBITDA, weighted
average common shares outstanding - diluted (non-GAAP), non-GAAP
gross margin, non-GAAP Taegis Subscription Solutions gross margin,
non-GAAP Managed Security Services gross margin, non-GAAP
subscription gross margin and non-GAAP professional services gross
margin, which are non-GAAP financial measures provided as a
supplement to the results provided in accordance with GAAP. A
detailed discussion of our reasons for including these non-GAAP
financial measures, the limitations associated with these measures,
the items excluded from these measures, and our reason for
excluding those items are presented in "Management's Discussion and
Analysis of Financial Condition and Results of Operations —
Non-GAAP Financial Measures" in our periodic reports filed with the
SEC. The Company encourages investors to review the non-GAAP
discussion in these reports in conjunction with the presentation of
non-GAAP financial measures.
(Tables Follow)
SECUREWORKS
CORP.
|
Reconciliation of GAAP
to Non-GAAP Financial Measures
|
(in thousands, except
per share data)
|
(unaudited)
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
November 3,
2023
|
|
October 28,
2022
|
|
November 3,
2023
|
|
October 28,
2022
|
GAAP net
revenue:
|
|
|
|
|
|
|
|
Taegis Subscription
Solutions
|
$
67,346
|
|
$
47,888
|
|
$
196,368
|
|
$
127,913
|
Managed Security
Services
|
7,866
|
|
39,303
|
|
32,928
|
|
144,013
|
Total Subscription
revenue
|
75,212
|
|
87,191
|
|
229,296
|
|
271,926
|
Professional
services
|
14,152
|
|
23,751
|
|
47,429
|
|
76,213
|
GAAP net
revenue(1)
|
$
89,364
|
|
$
110,942
|
|
$
276,725
|
|
$
348,139
|
|
|
|
|
|
|
|
|
GAAP Taegis
Subscription Solutions cost of revenue
|
$
19,927
|
|
$
16,558
|
|
$
60,575
|
|
$
44,550
|
Amortization of
intangibles
|
(1,208)
|
|
(960)
|
|
(3,404)
|
|
(2,519)
|
Stock-based
compensation expense
|
(313)
|
|
(80)
|
|
(561)
|
|
(188)
|
Non-GAAP Taegis
Subscription Solutions cost of revenue
|
$
18,406
|
|
$
15,518
|
|
$
56,610
|
|
$
41,843
|
|
|
|
|
|
|
|
|
GAAP Managed Security
Services cost of revenue
|
$
6,059
|
|
$
15,578
|
|
$
26,514
|
|
$
54,472
|
Amortization of
intangibles
|
(2,576)
|
|
(3,411)
|
|
(9,397)
|
|
(10,232)
|
Stock-based
compensation expense
|
(53)
|
|
(87)
|
|
(160)
|
|
(269)
|
Non-GAAP Managed
Security Services cost of revenue
|
$
3,430
|
|
$
12,080
|
|
$
16,957
|
|
$
43,971
|
|
|
|
|
|
|
|
|
GAAP subscription cost
of revenue
|
$
25,986
|
|
$
32,136
|
|
$
87,089
|
|
$
99,022
|
Amortization of
intangibles
|
(3,784)
|
|
(4,371)
|
|
(12,801)
|
|
(12,751)
|
Stock-based
compensation expense
|
(366)
|
|
(167)
|
|
(721)
|
|
(457)
|
Non-GAAP subscription
cost of revenue
|
$
21,836
|
|
$
27,598
|
|
$
73,567
|
|
$
85,814
|
|
|
|
|
|
|
|
|
GAAP professional
services cost of revenue
|
$
8,629
|
|
$
13,444
|
|
$
30,369
|
|
$
45,572
|
Stock-based
compensation expense
|
(344)
|
|
(323)
|
|
(991)
|
|
(1,055)
|
Non-GAAP professional
services cost of revenue
|
$
8,285
|
|
$
13,121
|
|
$
29,378
|
|
$
44,517
|
|
|
|
|
|
|
|
|
GAAP gross
profit
|
$
54,749
|
|
$
65,362
|
|
$
159,267
|
|
$
203,545
|
Amortization of
intangibles
|
3,784
|
|
4,371
|
|
12,801
|
|
12,751
|
Stock-based
compensation expense
|
711
|
|
491
|
|
1,713
|
|
1,512
|
Non-GAAP gross
profit
|
$
59,244
|
|
$
70,224
|
|
$
173,781
|
|
$
217,808
|
|
|
|
|
|
|
|
|
GAAP Taegis
Subscription Solutions gross profit
|
$
47,419
|
|
$
31,330
|
|
$
135,793
|
|
$
83,363
|
Amortization of
intangibles
|
1,208
|
|
960
|
|
3,404
|
|
2,519
|
Stock-based
compensation expense
|
313
|
|
80
|
|
561
|
|
188
|
Non-GAAP Taegis
Subscription Solutions gross profit
|
$
48,940
|
|
$
32,370
|
|
$
139,758
|
|
$
86,070
|
|
|
|
|
|
|
|
|
GAAP research and
development expenses
|
$
26,358
|
|
$
35,263
|
|
$
85,766
|
|
$
102,232
|
Stock-based
compensation expense
|
(3,794)
|
|
(3,077)
|
|
(9,077)
|
|
(8,460)
|
Non-GAAP research and
development expenses
|
$
22,564
|
|
$
32,186
|
|
$
76,689
|
|
$
93,772
|
|
|
|
|
|
|
|
|
GAAP sales and
marketing expenses
|
$
27,079
|
|
$
41,380
|
|
$
92,842
|
|
$
121,565
|
Stock-based
compensation expense
|
(836)
|
|
(1,631)
|
|
(2,774)
|
|
(4,896)
|
Non-GAAP sales and
marketing expenses
|
$
26,243
|
|
$
39,749
|
|
$
90,068
|
|
$
116,669
|
|
|
|
|
|
|
|
|
GAAP general and
administrative expenses
|
$
20,565
|
|
$
24,725
|
|
$
63,194
|
|
$
74,359
|
Amortization of
intangibles
|
(3,524)
|
|
(3,524)
|
|
(10,571)
|
|
(10,571)
|
Stock-based
compensation expense
|
(4,621)
|
|
(4,367)
|
|
(11,288)
|
|
(12,636)
|
Non-GAAP general and
administrative expenses
|
$
12,420
|
|
$
16,834
|
|
$
41,335
|
|
$
51,152
|
|
|
|
|
|
|
|
|
GAAP operating
loss
|
$
(19,253)
|
|
$
(36,006)
|
|
$
(96,767)
|
|
$
(94,611)
|
Amortization of
intangibles
|
7,308
|
|
7,895
|
|
23,372
|
|
23,322
|
Stock-based
compensation expense
|
9,962
|
|
9,566
|
|
24,852
|
|
27,504
|
Reorganization and
other related charges
|
—
|
|
—
|
|
14,232
|
|
—
|
Non-GAAP operating
(loss) income
|
$
(1,983)
|
|
$
(18,545)
|
|
$
(34,311)
|
|
$
(43,785)
|
|
|
|
|
|
|
|
|
GAAP net
loss
|
$
(14,421)
|
|
$
(28,146)
|
|
$
(77,750)
|
|
$
(74,463)
|
Amortization of
intangibles
|
7,308
|
|
7,895
|
|
23,372
|
|
23,322
|
Stock-based
compensation expense
|
9,962
|
|
9,566
|
|
24,852
|
|
27,504
|
Reorganization and
other related charges
|
—
|
|
—
|
|
14,232
|
|
—
|
Aggregate adjustment
for income taxes
|
(2,856)
|
|
(3,030)
|
|
(10,469)
|
|
(8,974)
|
Non-GAAP net (loss)
income
|
$
(7)
|
|
$
(13,715)
|
|
$
(25,763)
|
|
$
(32,611)
|
|
|
|
|
|
|
|
|
GAAP loss per
share
|
$
(0.17)
|
|
$
(0.33)
|
|
$
(0.90)
|
|
$
(0.88)
|
Amortization of
intangibles
|
0.08
|
|
0.10
|
|
0.27
|
|
0.28
|
Stock-based
compensation expense
|
0.12
|
|
0.12
|
|
0.29
|
|
0.33
|
Reorganization and
other related charges
|
—
|
|
—
|
|
0.17
|
|
—
|
Aggregate adjustment
for income taxes
|
(0.03)
|
|
(0.04)
|
|
(0.12)
|
|
(0.11)
|
Non-GAAP (loss)
earnings per share *
|
$
—
|
|
$
(0.16)
|
|
$
(0.30)
|
|
$
(0.39)
|
* Sum of reconciling
items may differ from total due to rounding of individual
components
|
|
|
|
|
|
|
|
|
GAAP net
loss
|
$
(14,421)
|
|
$
(28,146)
|
|
$
(77,750)
|
|
$
(74,463)
|
Interest and other,
net
|
(684)
|
|
661
|
|
1,698
|
|
1,227
|
Income tax
benefit
|
(4,148)
|
|
(8,521)
|
|
(20,715)
|
|
(21,375)
|
Depreciation and
amortization
|
8,067
|
|
9,213
|
|
26,028
|
|
27,728
|
Stock-based
compensation expense
|
9,962
|
|
9,566
|
|
24,852
|
|
27,504
|
Reorganization and
other related charges
|
—
|
|
—
|
|
14,232
|
|
—
|
Adjusted
EBITDA
|
$
(1,224)
|
|
$
(17,227)
|
|
$
(31,655)
|
|
$
(39,379)
|
|
(1)
|
Historically the
Company has presented non-GAAP net revenue as a financial measure.
There are no such adjustments that give rise to non-GAAP net
revenue for any of the periods presented.
|
SECUREWORKS
CORP.
|
Reconciliation of GAAP
to Non-GAAP Financial Measures
|
(unaudited)
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
Percentage of Total
Net Revenue
|
|
November 3,
2023
|
|
October 28,
2022
|
|
November 3,
2023
|
|
October 28,
2022
|
|
|
|
|
|
|
|
|
|
GAAP Taegis
Subscription Solutions gross margin
|
|
70.4 %
|
|
65.4 %
|
|
69.2 %
|
|
65.2 %
|
Non-GAAP
adjustment
|
|
2.3 %
|
|
2.2 %
|
|
2.0 %
|
|
2.1 %
|
Non-GAAP Taegis
Subscription Solutions gross margin
|
|
72.7 %
|
|
67.6 %
|
|
71.2 %
|
|
67.3 %
|
|
|
|
|
|
|
|
|
|
GAAP Managed Security
Services gross margin
|
|
23.0 %
|
|
60.4 %
|
|
19.5 %
|
|
62.2 %
|
Non-GAAP
adjustment
|
|
33.4 %
|
|
8.9 %
|
|
29.0 %
|
|
7.3 %
|
Non-GAAP Managed
Security Services gross margin
|
|
56.4 %
|
|
69.3 %
|
|
48.5 %
|
|
69.5 %
|
|
|
|
|
|
|
|
|
|
GAAP subscription gross
margin
|
|
65.4 %
|
|
63.1 %
|
|
62.0 %
|
|
63.6 %
|
Non-GAAP
adjustment
|
|
5.6 %
|
|
5.2 %
|
|
5.9 %
|
|
4.8 %
|
Non-GAAP subscription
gross margin
|
|
71.0 %
|
|
68.3 %
|
|
67.9 %
|
|
68.4 %
|
|
|
|
|
|
|
|
|
|
GAAP professional
services gross margin
|
|
39.0 %
|
|
43.4 %
|
|
36.0 %
|
|
40.2 %
|
Non-GAAP
adjustment
|
|
2.5 %
|
|
1.4 %
|
|
2.1 %
|
|
1.4 %
|
Non-GAAP professional
services gross margin
|
|
41.5 %
|
|
44.8 %
|
|
38.1 %
|
|
41.6 %
|
|
|
|
|
|
|
|
|
|
GAAP gross
margin
|
|
61.3 %
|
|
58.9 %
|
|
57.6 %
|
|
58.5 %
|
Non-GAAP
adjustment
|
|
5.0 %
|
|
4.4 %
|
|
5.2 %
|
|
4.1 %
|
Non-GAAP gross
margin
|
|
66.3 %
|
|
63.3 %
|
|
62.8 %
|
|
62.6 %
|
|
|
|
|
|
|
|
|
|
GAAP research and
development expenses
|
|
29.5 %
|
|
31.8 %
|
|
31.0 %
|
|
29.4 %
|
Non-GAAP
adjustment
|
|
(4.3) %
|
|
(2.8) %
|
|
(3.3) %
|
|
(2.5) %
|
Non-GAAP research and
development expenses
|
|
25.2 %
|
|
29.0 %
|
|
27.7 %
|
|
26.9 %
|
|
|
|
|
|
|
|
|
|
GAAP sales and
marketing expenses
|
|
30.3 %
|
|
37.3 %
|
|
33.6 %
|
|
34.9 %
|
Non-GAAP
adjustment
|
|
(0.9) %
|
|
(1.5) %
|
|
(1.1) %
|
|
(1.4) %
|
Non-GAAP sales and
marketing expenses
|
|
29.4 %
|
|
35.8 %
|
|
32.5 %
|
|
33.5 %
|
|
|
|
|
|
|
|
|
|
GAAP general and
administrative expenses
|
|
23.0 %
|
|
22.3 %
|
|
22.8 %
|
|
21.4 %
|
Non-GAAP
adjustment
|
|
(9.1) %
|
|
(7.1) %
|
|
(7.9) %
|
|
(6.7) %
|
Non-GAAP general and
administrative expenses
|
|
13.9 %
|
|
15.2 %
|
|
14.9 %
|
|
14.7 %
|
|
|
|
|
|
|
|
|
|
GAAP operating
loss
|
|
(21.5) %
|
|
(32.5) %
|
|
(35.0) %
|
|
(27.2) %
|
Non-GAAP
adjustment
|
|
19.3 %
|
|
15.8 %
|
|
22.6 %
|
|
14.6 %
|
Non-GAAP operating
(loss) income
|
|
(2.2) %
|
|
(16.7) %
|
|
(12.4) %
|
|
(12.6) %
|
|
|
|
|
|
|
|
|
|
GAAP net
loss
|
|
(16.1) %
|
|
(25.4) %
|
|
(28.1) %
|
|
(21.4) %
|
Non-GAAP
adjustment
|
|
16.1 %
|
|
13.0 %
|
|
18.8 %
|
|
12.0 %
|
Non-GAAP net (loss)
income
|
|
— %
|
|
(12.4) %
|
|
(9.3) %
|
|
(9.4) %
|
SECUREWORKS
CORP.
|
Reconciliation of GAAP
to Non-GAAP Financial Measures
|
(in millions, except
per share data)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ending
|
|
Fiscal Year
Ending
|
|
|
February 2,
2024
|
|
February 2,
2024
|
|
|
Low End of
Guidance
|
|
High End of
Guidance
|
|
Low End of
Guidance
|
|
High End of
Guidance
|
GAAP net
revenue
|
|
$
86
|
|
$
88
|
|
$
363
|
|
$
365
|
|
|
|
|
|
|
|
|
|
GAAP net
loss
|
|
$
(16)
|
|
$
(14)
|
|
$
(93)
|
|
$
(91)
|
Amortization of
intangibles
|
|
5
|
|
5
|
|
28
|
|
28
|
Stock-based
compensation expense
|
|
10
|
|
10
|
|
35
|
|
35
|
Aggregate adjustment
for income taxes
|
|
(4)
|
|
(4)
|
|
(14)
|
|
(14)
|
Reorganization and
other related charges
|
|
—
|
|
—
|
|
14
|
|
14
|
Non-GAAP net
loss*
|
|
$
(4)
|
|
$
(2)
|
|
$
(30)
|
|
$
(28)
|
|
|
|
|
|
|
|
|
|
GAAP net loss per
share
|
|
$
(0.18)
|
|
$
(0.16)
|
|
$
(1.08)
|
|
$
(1.06)
|
Amortization of
intangibles
|
|
0.05
|
|
0.05
|
|
0.33
|
|
0.33
|
Stock-based
compensation expense
|
|
0.12
|
|
0.12
|
|
0.41
|
|
0.41
|
Aggregate adjustment
for income taxes
|
|
(0.04)
|
|
(0.04)
|
|
(0.16)
|
|
(0.16)
|
Reorganization and
other related charges
|
|
—
|
|
—
|
|
0.17
|
|
0.17
|
Non-GAAP net loss per
share*
|
|
$
(0.05)
|
|
$
(0.03)
|
|
$
(0.35)
|
|
$
(0.33)
|
|
|
|
|
|
|
|
|
|
GAAP net
loss
|
|
|
|
|
|
$
(93)
|
|
$
(91)
|
Interest and other,
net
|
|
|
|
|
|
4
|
|
4
|
Income tax
benefit
|
|
|
|
|
|
(25)
|
|
(25)
|
Depreciation and
amortization
|
|
|
|
|
|
31
|
|
31
|
Reorganization and
other related charges
|
|
|
|
|
|
14
|
|
14
|
Stock-based
compensation expense
|
|
|
|
|
|
35
|
|
35
|
Adjusted
EBITDA*
|
|
|
|
|
|
$
(33)
|
|
$
(31)
|
|
|
|
|
|
|
|
|
|
Other Items
|
|
|
|
|
|
|
|
|
Effective tax
rate
|
|
|
|
|
|
|
|
21 %
|
Weighted average
shares outstanding (in millions) –
diluted (non-GAAP)
|
|
|
|
|
|
|
|
86.2
|
Cash flow from
operations
|
|
|
|
|
|
$(80) to
$(70)
|
Capital
expenditures
|
|
|
|
|
|
|
|
$6 to $8
|
|
|
*
|
Sum of reconciling
items may differ from total due to rounding of individual
components
|
|
Sum of quarterly
guidance may differ from full year guidance due to
rounding
|
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SOURCE Secureworks, Inc.