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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