Artificial Intelligence
Secureworks® Announces Second Quarter Fiscal 2024 Results
ATLANTA, Sept. 7, 2023 /PRNewswire/ — Secureworks® (NASDAQ: SCWX), a global leader in cybersecurity, today announced financial results for its second quarter, which ended on August 4, 2023.
Key Highlights
Secureworks Taegis™ annual recurring revenue (ARR) grew to $276 million, an increase of 37% on a year-over-year basis.Taegis second quarter revenue grew 55% year-over-year to $66.4 million.Taegis GAAP gross margin and non-GAAP gross margin continued to expand in the second quarter, reaching 68.8% and 70.7%, respectively.”We expanded our Partner First ecosystem this quarter with global, market-leading partners, increasing our scale and market reach to further position our business for growth,” said Wendy Thomas, CEO, Secureworks. “As an open XDR platform that combines security analytics, AI, threat intelligence and automation, Taegis is empowering organizations to say goodbye to point solution chaos and embrace a platform-based approach that results in better security outcomes, optimized resources and the highest return on investment for our customers and partners.”
“I’m pleased that we delivered against our financial commitments in the second quarter,” said Alpana Wegner, Chief Financial Officer, Secureworks. “The progress we are making on the acceleration of Other MSS end-of-life, which is allowing us to streamline our operating costs, and our expanded use of automation to drive scale into our growing SaaS business, gives us a clear path to breakeven adjusted EBITDA for fourth quarter this year and cash flow generation next year.”
Second Quarter Fiscal 2024 Financial Highlights
Total revenue for the second quarter was $93.0 million, compared to $116.2 million in the second quarter of fiscal 2023.Taegis revenue for the second quarter was $66.4 million, compared to $42.8 million in the second quarter of fiscal 2023.GAAP gross profit was $52.9 million, compared with $66.6 million in the second quarter of fiscal 2023. Non-GAAP gross profit was $58.0 million, compared with $71.2 million during the same period last year.GAAP gross profit specific to Taegis was $45.7 million, compared with $27.3 million in the second quarter of fiscal 2023. Non-GAAP Taegis gross profit was $47.0 million, compared with $28.0 million during the same period last year.GAAP gross margin for the second quarter was 56.9%, compared with 57.3% in the same period last year. Non-GAAP gross margin was 62.4%, compared with 61.3% in the second quarter of fiscal 2023.GAAP gross margin specific to Taegis was 68.8% for the quarter, compared with 63.7% in the same period last year. Non-GAAP Taegis gross margin was 70.7%, compared with 65.5% in the second quarter of fiscal 2023.GAAP net loss was $32.4 million for the second quarter, or $0.38 per share, compared with net loss of $24.7 million, or $0.29 per share, in the same period last year. Non-GAAP net loss was $8.6 million, or $0.10 per share, compared with non-GAAP net loss of $11.3 million, or $0.13 per share, in the same period last year.Adjusted EBITDA loss for the quarter was $10.3 million, compared with adjusted EBITDA loss of $14.3 million in the second quarter of fiscal 2023.The company ended the second quarter with $64.9 million in cash and cash equivalents.Business and Operational Highlights
Secureworks partnered with EY to launch their Intelligent Extended Detection & Response (IXDR), powered by Taegis XDR, to help organizations combat cyber threats.Announced integrated partnership with Akamai’s Enterprise Application Access module, a leading zero trust network access solution.Continued executing on our Partner First strategy by launching in the Middle East, UK&I and Europe.Delivered Taegis platform capabilities, expanding our automation of investigations and alert triage, directly benefiting our customers by minimizing the time between detection and executing a response.Recognition and awards in the second quarter of fiscal 2024 include:Leader in Frost & Sullivan Frost Radar for XDR, 2023Leader in Frost & Sullivan Frost Radar for VDR, 2023Leader in Cybersecurity – Solutions and Services 2023,” an ISG Provider Lens™ StudyNotable Vendor in the “Forrester Vulnerability Risk Management Landscape, Q2 2023” reportFinancial Outlook
For the third quarter of fiscal 2024, the Company expects:
Revenue of $88 million to $90 million.GAAP net loss per share of $0.21 to $0.23 and non-GAAP net loss per share of $0.05 to $0.07.Secureworks is providing the following updated guidance for full fiscal year 2024. The Company expects:
Fiscal Year 2024 Guidance
Taegis ARR
$285M to $300M
Other MSS ARR
$15M or Less
Total revenue
$360M to $368M
Taegis revenue
$264M to $268M
GAAP net loss
($94M) to ($99M)
($1.09) to ($1.15) per share
Non-GAAP net loss
($31M) to ($36M)
($0.36) to ($0.41) per share
Adjusted EBITDA
($31M) to ($37M)
Cash from operations
($70M) to ($80M)
Conference Call Information
As previously announced, the Company will hold a conference call to discuss its second quarter fiscal 2024 results and financial guidance on September 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 gross margin, 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 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 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,” “will” 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 third 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 threat intelligence and research, improving customers’ ability 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
Six Months Ended
August 4,2023
July 29,2022
August 4,2023
July 29,2022
Net revenue:
Subscription
$ 76,825
$ 90,322
$ 154,084
$ 184,735
Professional services
16,141
25,860
33,277
52,462
Total net revenue
92,966
116,182
187,361
237,197
Cost of revenue:
Subscription
30,084
34,060
61,103
66,886
Professional services
9,973
15,519
21,740
32,128
Total cost of revenue
40,057
49,579
82,843
99,014
Gross profit
52,909
66,603
104,518
138,183
Operating expenses:
Research and development
28,236
33,638
59,408
66,969
Sales and marketing
31,237
40,940
65,763
80,185
General and administrative
20,366
24,274
42,629
49,634
Reorganization and other related charges
14,232
—
14,232
—
Total operating expenses
94,071
98,852
182,032
196,788
Operating loss
(41,162)
(32,249)
(77,514)
(58,605)
Interest and other, net
(636)
131
(2,382)
(566)
Loss before income taxes
(41,798)
(32,118)
(79,896)
(59,171)
Income tax benefit
(9,439)
(7,399)
(16,567)
(12,854)
Net loss
$ (32,359)
$ (24,719)
$ (63,329)
$ (46,317)
Loss per common share (basic and diluted)
$ (0.38)
$ (0.29)
$ (0.74)
$ (0.55)
Weighted-average common shares outstanding (basic and diluted)
86,121
84,483
85,776
84,123
Percentage of Total Net Revenue (1)
Subscription gross margin
60.8 %
62.3 %
60.3 %
63.8 %
Professional services gross margin
38.2 %
40.0 %
34.7 %
38.8 %
Total gross margin
56.9 %
57.3 %
55.8 %
58.3 %
Research and development expenses
30.4 %
29.0 %
31.7 %
28.2 %
Sales and marketing expenses
33.6 %
35.2 %
35.1 %
33.8 %
General and administrative expenses
21.9 %
20.9 %
22.8 %
20.9 %
Reorganization and other related charges
15.3 %
— %
7.6 %
— %
Operating expenses
101.2 %
85.1 %
97.2 %
83.0 %
Operating loss
(44.3) %
(27.8) %
(41.4) %
(24.7) %
Loss before income taxes
(45.0) %
(27.6) %
(42.6) %
(24.9) %
Net loss
(34.8) %
(21.3) %
(33.8) %
(19.5) %
Effective tax rate
22.6 %
23.0 %
20.7 %
21.7 %
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)
August 4,2023
February 3,2023
Assets:
Current assets:
Cash and cash equivalents
$ 64,899
$ 143,517
Accounts receivable, net
56,436
72,627
Inventories, net
774
620
Other current assets
17,353
17,526
Total current assets
139,462
234,290
Property and equipment, net
3,151
4,632
Operating lease right-of-use assets, net
5,883
9,256
Goodwill
425,494
425,519
Intangible assets, net
92,559
106,208
Other non-current assets
71,147
60,965
Total assets
$ 737,696
$ 840,870
Liabilities and Stockholders’ Equity:
Current liabilities:
Accounts payable
$ 11,212
$ 18,847
Accrued and other current liabilities
62,290
81,566
Short-term deferred revenue
134,477
145,170
Total current liabilities
207,979
245,583
Long-term deferred revenue
7,893
11,162
Operating lease liabilities, non-current
9,865
12,141
Other non-current liabilities
7,489
14,023
Total liabilities
233,226
282,909
Total stockholders’ equity
504,470
557,961
Total liabilities and stockholders’ equity
$ 737,696
$ 840,870
SECUREWORKS CORP.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Six Months Ended
August 4, 2023
July 29, 2022
Cash flows from operating activities:
Net loss
$ (63,329)
$ (46,317)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization
17,961
18,515
Amortization of right of use asset
1,303
1,932
Reorganization and other related charges
3,272
—
Amortization of costs capitalized to obtain revenue contracts
8,820
8,985
Amortization of costs capitalized to fulfill revenue contracts
1,805
2,565
Stock-based compensation expense
14,890
17,938
Effects of exchange rate changes on monetary assets and liabilities denominated in foreign currencies
2,205
516
Income tax benefit
(16,567)
(12,854)
Provision for credit losses
(132)
(102)
Changes in assets and liabilities:
Accounts receivable
16,026
14,329
Net transactions with Dell
(118)
(592)
Inventories
(154)
30
Other assets
(4,699)
(6,933)
Accounts payable
(7,981)
5,685
Deferred revenue
(14,483)
(17,165)
Operating leases, net
(3,024)
(2,801)
Accrued and other liabilities
(25,756)
(25,145)
Net cash used in operating activities
(69,961)
(41,414)
Cash flows from investing activities:
Capital expenditures
(530)
(827)
Software development costs
(2,416)
(2,840)
Net cash used in investing activities
(2,946)
(3,667)
Cash flows from financing activities:
Taxes paid on vested restricted shares
(5,711)
(8,087)
Net cash used in financing activities
(5,711)
(8,087)
Net decrease in cash and cash equivalents
(78,618)
(53,168)
Cash and cash equivalents at beginning of the period
143,517
220,655
Cash and cash equivalents at end of the period
$ 64,899
$ 167,487
Non-GAAP Financial Measures
This press release presents information about the Company’s non-GAAP revenue, non-GAAP gross margin, 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 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 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
Six Months Ended
August 4,2023
July 29,2022
August 4,2023
July 29,2022
GAAP net revenue:
Taegis Subscription Solutions
$ 66,426
$ 42,809
$ 129,022
$ 80,025
Managed Security Services
10,399
47,513
25,062
104,710
Total Subscription revenue
76,825
90,322
154,084
184,735
Professional services
16,141
25,860
33,277
52,462
GAAP net revenue(1)
$ 92,966
$ 116,182
$ 187,361
$ 237,197
GAAP Taegis Subscription Solutions cost of revenue
$ 20,740
$ 15,537
$ 40,648
$ 27,992
Amortization of intangibles
(1,127)
(704)
(2,196)
(1,559)
Stock-based compensation expense
(169)
(67)
(248)
(108)
Non-GAAP Taegis Subscription Solutions cost of revenue
$ 19,444
$ 14,766
$ 38,204
$ 26,325
GAAP Managed Security Services cost of revenue
$ 9,344
$ 18,523
$ 20,455
$ 38,894
Amortization of intangibles
(3,410)
(3,411)
(6,821)
(6,821)
Stock-based compensation expense
(40)
(100)
(107)
(182)
Non-GAAP Managed Security Services cost of revenue
$ 5,894
$ 15,012
$ 13,527
$ 31,891
GAAP subscription cost of revenue
$ 30,084
$ 34,060
$ 61,103
$ 66,886
Amortization of intangibles
(4,537)
(4,115)
(9,017)
(8,380)
Stock-based compensation expense
(209)
(167)
(355)
(290)
Non-GAAP subscription cost of revenue
$ 25,338
$ 29,778
$ 51,731
$ 58,216
GAAP professional services cost of revenue
$ 9,973
$ 15,519
$ 21,740
$ 32,128
Stock-based compensation expense
(322)
(345)
(647)
(732)
Non-GAAP professional services cost of revenue
$ 9,651
$ 15,174
$ 21,093
$ 31,396
GAAP gross profit
$ 52,909
$ 66,603
$ 104,518
$ 138,183
Amortization of intangibles
4,537
4,115
9,017
8,380
Stock-based compensation expense
532
511
1,003
1,021
Non-GAAP gross profit
$ 57,978
$ 71,229
$ 114,538
$ 147,584
GAAP Taegis Subscription Solutions gross profit
$ 45,686
$ 27,272
$ 88,374
$ 52,033
Amortization of intangibles
1,127
704
2,196
1,559
Stock-based compensation expense
169
67
248
108
Non-GAAP Taegis Subscription Solutions gross profit
$ 46,982
$ 28,043
$ 90,818
$ 53,700
GAAP research and development expenses
$ 28,236
$ 33,638
$ 59,408
$ 66,969
Stock-based compensation expense
(2,681)
(2,640)
(5,283)
(5,383)
Non-GAAP research and development expenses
$ 25,555
$ 30,998
$ 54,125
$ 61,586
GAAP sales and marketing expenses
$ 31,237
$ 40,940
$ 65,763
$ 80,185
Stock-based compensation expense
(1,097)
(1,627)
(1,938)
(3,265)
Non-GAAP sales and marketing expenses
$ 30,140
$ 39,313
$ 63,825
$ 76,920
GAAP general and administrative expenses
$ 20,366
$ 24,274
$ 42,629
$ 49,634
Amortization of intangibles
(3,523)
(3,523)
(7,047)
(7,047)
Stock-based compensation expense
(3,310)
(4,034)
(6,666)
(8,269)
Non-GAAP general and administrative expenses
$ 13,533
$ 16,717
$ 28,916
$ 34,318
GAAP operating loss
$ (41,162)
$ (32,249)
$ (77,514)
$ (58,605)
Amortization of intangibles
8,060
7,638
16,064
15,427
Stock-based compensation expense
7,620
8,812
14,890
17,938
Reorganization and other related charges
14,232
—
14,232
—
Non-GAAP operating (loss) income
$ (11,250)
$ (15,799)
$ (32,328)
$ (25,240)
GAAP net loss
$ (32,359)
$ (24,719)
$ (63,329)
$ (46,317)
Amortization of intangibles
8,060
7,638
16,064
15,427
Stock-based compensation expense
7,620
8,812
14,890
17,938
Reorganization and other related charges
14,232
—
14,232
—
Aggregate adjustment for income taxes
(6,173)
(3,024)
(7,613)
(5,944)
Non-GAAP net (loss) income
$ (8,620)
$ (11,293)
$ (25,756)
$ (18,896)
GAAP loss per share
$ (0.38)
$ (0.29)
$ (0.74)
$ (0.55)
Amortization of intangibles
0.10
0.09
0.19
0.18
Stock-based compensation expense
0.08
0.10
0.17
0.21
Reorganization and other related charges
0.17
—
0.17
—
Aggregate adjustment for income taxes
(0.07)
(0.04)
(0.09)
(0.07)
Non-GAAP (loss) earnings per share *
$ (0.10)
$ (0.13)
$ (0.30)
$ (0.22)
* Sum of reconciling items may differ from total due to rounding of individual components
GAAP net loss
$ (32,359)
$ (24,719)
$ (63,329)
$ (46,317)
Interest and other, net
636
(131)
2,382
566
Income tax benefit
(9,439)
(7,399)
(16,567)
(12,854)
Depreciation and amortization
8,981
9,132
17,961
18,515
Stock-based compensation expense
7,620
8,812
14,890
17,938
Reorganization and other related charges
14,232
—
14,232
—
Adjusted EBITDA
$ (10,329)
$ (14,305)
$ (30,431)
$ (22,152)
(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
Six Months Ended
Percentage of Total Net Revenue
August 4,2023
July 29,2022
August 4,2023
July 29,2022
GAAP Taegis Subscription Solutions gross margin
68.8 %
63.7 %
68.5 %
65.0 %
Non-GAAP adjustment
1.9 %
1.8 %
1.9 %
2.1 %
Non-GAAP Taegis Subscription Solutions gross margin
70.7 %
65.5 %
70.4 %
67.1 %
GAAP Managed Security Services gross margin
10.1 %
61.0 %
18.4 %
62.9 %
Non-GAAP adjustment
33.2 %
7.4 %
27.6 %
6.6 %
Non-GAAP Managed Security Services gross margin
43.3 %
68.4 %
46.0 %
69.5 %
GAAP subscription gross margin
60.8 %
62.3 %
60.3 %
63.8 %
Non-GAAP adjustment
6.2 %
4.7 %
6.1 %
4.7 %
Non-GAAP subscription gross margin
67.0 %
67.0 %
66.4 %
68.5 %
GAAP professional services gross margin
38.2 %
40.0 %
34.7 %
38.8 %
Non-GAAP adjustment
2.0 %
1.3 %
1.9 %
1.4 %
Non-GAAP professional services gross margin
40.2 %
41.3 %
36.6 %
40.2 %
GAAP gross margin
56.9 %
57.3 %
55.8 %
58.3 %
Non-GAAP adjustment
5.5 %
4.0 %
5.3 %
3.9 %
Non-GAAP gross margin
62.4 %
61.3 %
61.1 %
62.2 %
GAAP research and development expenses
30.4 %
29.0 %
31.7 %
28.2 %
Non-GAAP adjustment
(2.9) %
(2.3) %
(2.8) %
(2.2) %
Non-GAAP research and development expenses
27.5 %
26.7 %
28.9 %
26.0 %
GAAP sales and marketing expenses
33.6 %
35.2 %
35.1 %
33.8 %
Non-GAAP adjustment
(1.2) %
(1.4) %
(1.0) %
(1.4) %
Non-GAAP sales and marketing expenses
32.4 %
33.8 %
34.1 %
32.4 %
GAAP general and administrative expenses
21.9 %
20.9 %
22.8 %
20.9 %
Non-GAAP adjustment
(7.3) %
(6.5) %
(7.4) %
(6.4) %
Non-GAAP general and administrative expenses
14.6 %
14.4 %
15.4 %
14.5 %
GAAP operating loss
(44.3) %
(27.8) %
(41.4) %
(24.7) %
Non-GAAP adjustment
32.2 %
14.2 %
24.1 %
14.1 %
Non-GAAP operating (loss) income
(12.1) %
(13.6) %
(17.3) %
(10.6) %
GAAP net loss
(34.8) %
(21.3) %
(33.8) %
(19.5) %
Non-GAAP adjustment
25.5 %
11.6 %
20.1 %
11.5 %
Non-GAAP net (loss) income
(9.3) %
(9.7) %
(13.7) %
(8.0) %
SECUREWORKS CORP.
Reconciliation of GAAP to Non-GAAP Financial Measures
(in millions, except per share data)
(unaudited)
Three Months Ending
Fiscal Year Ending
November 3, 2023
February 2, 2024
Low End of Guidance
High End of Guidance
Low End of Guidance
High End of Guidance
GAAP net revenue
$ 88
$ 90
$ 360
$ 368
GAAP net loss
$ (20)
$ (18)
$ (99)
$ (94)
Amortization of intangibles
7
7
28
28
Stock-based compensation expense
12
12
38
38
Aggregate adjustment for income taxes
(4)
(4)
(16)
(16)
Non-GAAP net loss*
$ (6)
$ (5)
$ (36)
$ (31)
GAAP net loss per share
$ (0.23)
$ (0.21)
$ (1.15)
$ (1.09)
Amortization of intangibles
0.08
0.08
0.32
0.32
Stock-based compensation expense
0.13
0.13
0.44
0.44
Aggregate adjustment for income taxes
(0.05)
(0.05)
(0.18)
(0.18)
Non-GAAP net loss per share*
$ (0.07)
$ (0.05)
$ (0.41)
$ (0.36)
GAAP net loss
$ (99)
$ (94)
Interest and other, net
5
5
Income tax benefit
(27)
(26)
Depreciation and amortization
32
32
Reorganization and other related charges
14
14
Stock-based compensation expense
38
38
Adjusted EBITDA*
$ (37)
$ (31)
Other Items
Effective tax rate
22 %
Weighted average shares outstanding (in millions) – diluted (non-GAAP)
86.3
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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Artificial Intelligence
XA NETWORK EXPANDS TO AFRICA WITH LAUNCH OF XA AFRICA, BACKED BY TECH VETERANS
An exclusive investment network founded by tech alumni in Southeast Asia expands to support and fuel the vibrant African startup ecosystem.
SINGAPORE, Oct. 11, 2024 /PRNewswire/ — XA Network, a leading investment network founded by tech alumni in Southeast Asia, today announced its expansion into Africa with the launch of XA Africa. The move underscores the network’s vision and commitment to fostering innovation and supporting promising startups globally.
XA Africa is founded by a trio of experienced tech professionals:
Nitin Gajria, former MD of Google Sub-Saharan AfricaJason Scott, venture capitalist and an architect of the Black Founders Fund at GoogleMarek Dawidowicz, current Marketing Director at YouTube and South African native”Founders of technology startups in Africa are uniquely placed to solve some of Africa’s most profound challenges and unlock its greatest opportunities. We see the foray of XA Network into Africa as a natural progression, allowing us to connect amazing founders to experienced and expert operators from the tech industry”, says Nitin Gajria, Co-Founder of XA Africa.
XA Africa aims to connect exceptional African tech founders with seasoned investors and industry experts, primarily from global and regional technology companies, to provide not just capital but also the guidance and support needed to scale their ventures. The newly established XA Africa has already made notable investments in promising African startups, including:
Crop2Cash (Nigeria)BuuPass (Kenya)Kaya (South Africa)Talamus Health (Ghana)”We are excited to have XA network on board because of their strong network of experts who are open to listening and helping. They’ve introduced us to advisors from Expedia and truly understand the dynamics of emerging markets, making them a valuable investor.” – Sonia Kabra & Wyclife Omondi – Founders of BuuPass
“Partnering with XA Network has been a game-changer for our company. Their strategic guidance and network have opened doors to new opportunities, and we’re excited to see the impact of our collaboration continue to unfold. We’re grateful for their trust in our vision.” – Michael Ogundare – CEO of Crop2Cash
Since its inception six years ago, XA Network has established itself as a significant player in the Southeast Asian startup ecosystem, making nearly 100 investments in the region, and consistent ranked as #1 investment network in the region. XA Network comprises senior leaders from prominent global and regional technology companies and notable company founders. This approach distinguishes XA Network, enabling it to offer portfolio companies unparalleled guidance and support from experienced industry operators.
We also see an opportunity to build a stronger bridge between ecosystems in Africa and Southeast Asia along the way. In fact, this investment hypothesis has already been proven across some of the African founders we are currently supporting.”, Mr Gajria added.
The XA Africa team will be hosting their first public Demo Day webinar on Thursday November 7, 1-2pm GMT+1, where Africa focused investors can meet and invest in four founding companies and learn more about XA Africa. Click here to register for the event.
For more information, please visit https://xanetwork.co/
For media queries, please contact: Carmelita Lumempouw-Didoné[email protected]
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Artificial Intelligence
Arta Finance partners with Abu Dhabi’s Wio Invest to launch Wealth-as-a-Service for banks globally, unveils Arta AI Copilot
MAS-licensed Arta Finance launches in Singapore and internationallyArta announces partnerships with Wio Invest for its Wealth-as-a-service offering for banks and financial institutions globallyArta unveils Arta AI Copilot – a number of AI-enhanced experiences on its wealth platformArta welcomes Ralph Hamers as external advisorSINGAPORE, Oct. 11, 2024 /PRNewswire/ — Fast-growing digital wealth management platform Arta Finance today launched globally. Arta’s platform is now open to accredited investors in Singapore and to international investors open to managing their wealth in Singapore – a global wealth hub where an expected 1.6 million offshore investors are expected to manage $4.8 trillion in assets by 2028. The international launch follows Arta’s successful debut in the US in October 2023.
Arta today also took a major step on its B2B journey with the announcement that Abu Dhabi’s Wio Invest would be the first of many to integrate the Arta wealth-as-a-service platform into their digital platform, to create a new wealth management offering for its clients in the Middle East, pending regulatory approval. Wio Invest, a forward-thinking Middle Eastern fintech, is regulated by the Securities and Commodities Authority (SCA) and backed by Abu Dhabi Development Company (ADQ), a prominent institution.
Arta’s wealth platform offers a curated deal flow that includes private investments from exclusive fund managers, intelligent public market strategies, and innovative structured products, without the sales pressure, opaque pricing and manual processes found in many other financial institutions.
Commenting on the international launch, Arta CEO Caesar Sengupta said: “Arta is at the intersection of some powerful trends, including the personalisation and democratisation of wealth management, the huge growth and opportunity in private market investing, and the use of AI to create capabilities that have previously only been the preserve of the ultra-wealthy. We are now taking a major leap forward with our international launch and can’t wait to bring the Arta wealth platform and AI Copilot to the global community in the months and years ahead.”
The ‘wealth-as-a-service’ platform for banks and financial institutions is a new B2B offering by Arta. It was done with support from the venture building team of the Singapore Economic Development Board (EDB), which worked closely with Arta to incubate this offering during the early stages of the concept. This cloud-based platform empowers partner banks to serve their clients better and meet evolving demands with faster time-to-market for innovative wealth management products, services, and technology. Banks can choose from integrating Arta AI Copilot capabilities, to embedding Arta’s investment solutions into their platforms, to fully white-labelling the Arta platform — enhancing their digital capabilities and unlocking growth in new wealth segments.
To help integrate a cloud and AI-native wealth platform into legacy systems at partner banks, Arta is also announcing partnerships with leading cloud provider Google Cloud and global management and technology consultancy Capco to provide solutions for banks looking to adopt Arta’s technology.
Amanda Ong, Head of International Expansion commented: “The launch of the B2B business is an extension of Arta’s mission, enabling us to partner with banks and financial institutions in a way that is wholly complementary to their current offering. We are proud to welcome Wio as our launch partner and look forward to growing together.”
AI drives leap in wealth tech
Arta also launched the first-of-its-kind AI Copilot, purpose-built for wealth management and finance. This patent-pending technology empowers Arta’s members to make smarter investment decisions – ideate, analyse, and monitor their portfolios with the tools and insights that usually require large teams of relationship managers, private bankers, and investment analysts.
Unlike commonly available AI chatbots or apps, Arta’s AI systems are purpose-built for applications in wealth and finance and exploit the reasoning capabilities of the latest large language models. Arta’s AI stack employs several models that work in conjunction with each other – including commercially available closed source models, fine-tuned open source LLMs and several custom built AI/ML models created by Arta’s researchers. These models have access to high-quality public and proprietary data including large financial and risk data sets for training and inference. This enables Arta to combine the fluency of LLMs with the time sensitivity, hard mathematical rigour and explainability necessary for investment and financial applications. Its AI stack, like the rest of Arta’s infrastructure, is highly privacy-preserving and uses encryption at rest and in transit for all user data.
Singapore Minister of State for Trade and Industry and MAS board member, Alvin Tan was on hand to help launch Arta in the City State, alongside investors, fund managers, partners, and clients. The company has established key functions in Singapore including engineering, marketing, product, design and operations and a number of its global leads including its CEO are based in Singapore.
Arta welcomes Ralph Hamers as external advisor
Arta also today welcomes Ralph Hamers as an external senior advisor, providing strategic guidance as the company grows internationally. Ralph Hamers is an advisor to established and new players in the global financial sector. He developed a special knowledge in digitalisation of processes and client offerings. Hamers previously was CEO with UBS and ING
Commenting on his role as senior advisor to Arta, Mr Hamers said:
“A central focus of my leadership has been to take legacy businesses and digitalise, integrating front-to-back technology to drive efficiencies and make the lives of clients and colleagues easier. This often needs major and multi-year transformations in well-established organisations. With Arta, I see the enormous opportunity of having incredibly smart people from the worlds of technology and finance coming together to build a platform that is more than ready to take its place amongst the world’s leading wealth managers.”
Mr. Hamers becomes part of a distinguished group of early investors in Arta, which includes more than 140 technology and finance leaders, such as ex-Google CEO Eric Schmidt and Mastercard CEO Michael Miebach.
The Arta wealth platform is now available globally to all accredited investors on desktop and mobile. Early members will get their first investment up to $100K managed free for life by Arta (terms and conditions apply). To learn more about Arta, please visit artafinance.com.
Important DisclosuresArta Wealth Management Pte. Ltd. (“Arta Finance”) is licensed by the Monetary Authority of Singapore (“MAS”) whose products and services are only available to Accredited Investors.
Investing in securities involves risk, and there is always the potential of losing money. Certain investments are not suitable for all investors. The content provided herein is for informational purposes only and is not investment or financial advice, tax or legal advice, an offer, solicitation of an offer, or advice to buy or sell or hold securities or investment products. This material has not been reviewed by the Monetary Authority of Singapore. For additional disclosures related to Arta Finance, please visit https://artafinance.com/sg/disclosures.
About Arta Finance:Founded by ex-Google executives, Arta Finance is a digital wealth platform for the savvy that enables more people to access the “financial superpowers” of the ultra-wealthy. The platform provides access to private market investments from elite fund managers, intelligent public market strategies and structured products, and sophisticated financial services such as insurance and estate planning. Headquartered in the US and Singapore, Arta serves its members directly as well as empowering partner financial institutions to expand wealth management to new clients. Arta is backed by Peak XV, Ribbit Capital, Coatue, EDBI, and over 140 luminaries in tech and finance.
Learn more at artafinance.com
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Artificial Intelligence
Supermicro Introduces New Servers and GPU Accelerated Systems with AMD EPYC™ 9005 Series CPUs and AMD Instinct™ MI325X GPUs for AI Ready Data Centers
New Supermicro Systems Enable Customers to Upgrade and Consolidate Data Centers for AI Workloads
SAN JOSE, Calif., Oct. 10, 2024 /PRNewswire/ — Supermicro, Inc. (NASDAQ: SMCI), a Total IT Solution Provider for AI, Cloud, Storage, and 5G/Edge, announces the launch of a new series of servers, GPU-accelerated systems, and storage servers featuring the AMD EPYC™ 9005 Series processors and AMD Instinct™ MI325X GPUs. The new H14 product line represents one of the most extensive server families in the industry, including Supermicro’s Hyper systems, the Twin multi-node servers, and AI inferencing GPU systems, all available with air or liquid cooling options. The new “Zen5” processor core architecture implements full data path AVX-512 vector instructions for CPU-based AI inference and provides 17% better instructions per cycle (IPC) than the previous 4th generation EPYC processor, enabling more performance per core.
Supermicro’s new H14 family uses the latest 5th Gen AMD EPYC processors which enable up to 192 cores per CPU with up to 500W TDP (thermal design power). Supermicro has designed new H14 systems including the Hyper and FlexTwin™ systems which can accommodate the higher thermal requirements. The H14 family also includes three systems for AI training and inference workloads supporting up to 10 GPUs which feature the AMD EPYC 9005 Series CPU as the host processor and two which support the AMD Instinct MI325X GPU.
“Supermicro’s H14 servers have 2.44X faster SPECrate®2017_fp_base performance1 using the EPYC 9005 64 core CPU as compared with Supermicro’s H11 systems using the second generation EPYC 7002 Series CPUs,” said Charles Liang, president and CEO, Supermicro. “This significant performance improvement allows customers to make their data centers more power efficient by reducing the total data center footprint by at least two-thirds2 while also adding new AI processing capabilities. The H14 server family provides the highest performance, density, and power efficiency available through Supermicro’s liquid and air-cooling options, wide selection of system designs, and proven Building Block Solutions.”
For more information about the Supermicro H14 family of products, please visit: www.supermicro.com/aplus
“Supermicro’s ‘Building Block Solutions’ has enabled it to consistently deliver time-to-market solutions powered by AMD across a variety of compelling system designs,” said Forrest Norrod, executive vice president and general manager, Data Center Solutions Group, AMD. “Our collaboration with Supermicro, along with their in-house engineering design and manufacturing capabilities worldwide combined with their rack-scale integration capability for both air and liquid-cooled systems enables customers of any scale to generate time-to-value from AMD EPYC CPUs and Instinct GPUs.”
Supermicro’s H14 server lineup consists of the following product families:
Hyper – Supermicro’s flagship enterprise server supports maximum performance from two EPYC 9005 CPUs with up to the maximum 192 cores per CPU at 500W and up to 9TB memory in 24 DIMM slots. With either a 1U chassis with up to 12 2.5″ NVMe/SATA bays or a 2U chassis with up to 24 2.5″ NVMe/SATA bays, the Hyper’s advanced cooling design accommodates the highest performance CPUs for use in demanding AI inference, enterprise or cloud workloads.
CloudDC – This versatile system is optimized for use in Cloud Data Centers and features a single EPYC 9005 CPU with up to 12 2.5″ NVMe/SATA drive bays in a 1U chassis. It’s designed using the OCP (Open Compute Platform) DC-MHS specification (Data Center Modular Hardware System) which ensures compatibility with OCP standards.
GrandTwin™ – The GrandTwin is a 4-node compute platform using single EPYC 9005 CPU in a very dense 2U form-factor. This system is often used in multi-server cluster applications such as object storage, virtualization, and HPC applications.
FlexTwin™ – The FlexTwin is a 2U 4-node high-performance high-density compute system with dual EPYC 9005 CPUs per node. The advanced liquid-cooling provides high power efficiency and allows the operation of the highest performance EPYC 9005 CPUs for use in HPC, EDA and other demanding workloads.
5U GPU System – Supermicro’s EPYC CPU-based 5U PCIe GPU system supports up to 10 double-width accelerators for design and visualization applications.
4U GPU System (Liquid Cooled) – This highly dense EPYC CPU-based 8-way accelerators platform supports OAM accelerators in the most compact 4U form-factor using advanced liquid-cooling. It is designed for high-performance AI and HPC applications.
8U GPU System – This 8-way accelerator system uses the AMD Instinct MI325X GPU along with the EPYC 9005 CPU for large-scale LLM AI training. The 8U chassis allows deployment in any air-cooled data center.
Supermicro H14 products with AMD EPYC CPUs are available for customer testing today through Supermicro’s JumpStart program.
Supermicro will present the new H14 solutions at the AMD Advancing AI Day on October 10, 2024, at the San Francisco Moscone Center.
1SPECrate®2017_fp_base of 485 using the Supermicro A+ Server 2023US-TR4 and two AMD EPYC 7702 64 core CPUs (https://www.spec.org/cpu2017/results/res2020q1/cpu2017-20200204-20866.html retrieved October 2, 2024) compared with SPECrate®2017_fp_base of 1670 using the Supermicro AS-2126HS-TN and two AMD EPYC 9555 64 core CPUs. Results of the AS-2126HS-TN with the 9555 CPU to be published on www.spec.org/cpu2017/results on October 10, 2024.
2Based on the SPECrate®2017_fp_base comparison in footnote (1), reduction in number of systems using the AS-2126HS-TN with the 9555 CPU vs. 2023US-TR4 with the 7702 CPU is 70.9%.
About Super Micro Computer, Inc. Supermicro (NASDAQ: SMCI) is a global leader in Application-Optimized Total IT Solutions. Founded and operating in San Jose, California, Supermicro is committed to delivering first-to-market innovation for Enterprise, Cloud, AI, and 5G Telco/Edge IT Infrastructure. We are a Total IT Solutions provider with server, AI, storage, IoT, switch systems, software, and support services. Supermicro’s motherboard, power, and chassis design expertise further enables our development and production, enabling next-generation innovation from cloud to edge for our global customers. Our products are designed and manufactured in-house (in the US, Taiwan, and the Netherlands), leveraging global operations for scale and efficiency and optimized to improve TCO and reduce environmental impact (Green Computing). The award-winning portfolio of Server Building Block Solutions® allows customers to optimize for their exact workload and application by selecting from a broad family of systems built from our flexible and reusable building blocks that support a comprehensive set of form factors, processors, memory, GPUs, storage, networking, power, and cooling solutions (air-conditioned, free air cooling or liquid cooling).
Supermicro, Server Building Block Solutions, and We Keep IT Green are trademarks and/or registered trademarks of Super Micro Computer, Inc.
All other brands, names, and trademarks are the property of their respective owners.
AMD, the AMD Arrow logo, AMD Instinct, EPYC, and combinations thereof are trademarks of Advanced Micro Devices, Inc. Other names are for informational purposes only and may be trademarks of their respective owners.
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