ATLANTA, June 03, 2021 (GLOBE NEWSWIRE) — Secureworks (NASDAQ: SCWX), a global leader in cybersecurity, today announced financial results for its first quarter, which ended on April 30, 2021.
Key Highlights
Secureworks threat intelligence and security operations expertise remain in high demand as organizations face an increasingly complex and hostile threat environment, said Michael R. Cote, chief executive officer, Secureworks. Our first quarter marked a strong start to the fiscal year. We made clear progress on our transformation with year over year Taegis growth of 191% in ARR, 213% in revenue and 400% in customers.
Financial Summary
Were pleased with our first quarter results and start of the fiscal year, with $17.5 million added to Taegis ARR this quarter, up 35% from the $12.9 million Taegis ARR added in the fourth quarter of fiscal 2021, said Paul Parrish, chief financial officer, Secureworks. Further, were encouraged by the improvements in Adjusted EBITDA and increased outlook for the year.
First Quarter Fiscal 2022 Financial Results Highlights
Business and Operational Highlights
Financial Outlook
For the second quarter of fiscal 2022, the Company expects:
For the full fiscal year 2022, the Company expects:
Conference Call Information
As previously announced, the Company will hold a conference call to discuss its first quarter fiscal 2022 results and financial guidance on Jun. 3, 2021, 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 Companys website at http://investors.secureworks.com. The webcast and supplemental information will be archived at the same location for one year.
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 Companys non-GAAP revenue, non-GAAP gross margin, 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 and adjusted EBITDA, 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 non-GAAP financial measures to the most directly comparable 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 Companys expectations regarding revenue, GAAP net loss per share, and non-GAAP net loss per share for the second quarter of fiscal 2022, and revenue, GAAP net loss, GAAP net loss per share, non-GAAP net loss, non-GAAP net loss per share, Adjusted EBITDA, cash flow from operations, and annual recurring revenue and revenue for its Taegis platform for full year fiscal 2022, all of which reflect the Companys current analysis of existing trends and information. These forward-looking statements represent the Companys 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, including those relating to, among others: the Companys ability to achieve or maintain profitability; the Companys ability to enhance its existing solutions and technologies and to develop or acquire new solutions and technologies; the Companys reliance on personnel with extensive information security expertise; intense competition in the Companys markets; the Companys ability to attract new customers, retain existing customers and increase its annual contract values; the Companys reliance on customers in the financial services industry; the Companys ability to manage its growth effectively; the Companys ability to maintain high-quality client service and support functions; terms of the Companys service level agreements with customers that require credits for service failures or inadequacies; the Companys recognition of revenue ratably over the terms of its Taegis SaaS applications and managed security services contracts; the Companys long and unpredictable sales cycles; risks associated with the Companys international sales and operations; the effect of Brexit on the Companys operations; the Companys exposure to fluctuations in currency exchange rates; the effect of governmental export or import controls on the Companys business; the Companys ability to expand its key distribution relationships; the Companys technology alliance partnerships; real or perceived defects, errors or vulnerabilities in the Companys 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 Companys solutions to interoperate with its customers IT infrastructure; the Companys ability to use third-party technologies; the effect of evolving information security and data privacy laws and regulations on the Companys business; the Companys ability to maintain and enhance its brand; risks associated with the Companys acquisition of other businesses; estimates or judgments relating to the Companys critical accounting policies; the effect of natural disasters, public health issues and other catastrophic events on the Companys ability to serve its customers, including the coronavirus (COVID-19) pandemic; the Companys reliance on patents to protect its intellectual property rights; the Companys 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 Companys use of open source technology; and risks related to the Companys relationship with Dell Technologies Inc. and Dell Inc. and control of the Company by Dell Technologies Inc.
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 Companys business, financial condition, results of operations and prospects, under the caption Risk Factors in the Companys annual report on Form 10-K, as well as in the Companys 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 as a result of 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 protects customer progress with Secureworks® Taegis, a cloud-native security analytics 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
Contact Information
Investor Inquiries:
Richie Downum
Investor Relations Director
404-235-1021
rdownum@secureworks.com
Media Inquiries:
Derek Delano
Corporate Communications
617-335-9516
press@secureworks.com
SECUREWORKS CORP. | |||||||||||||
Condensed Consolidated Statements of Operations and Related Financial Highlights | |||||||||||||
(in thousands, except per share data and percentages) | |||||||||||||
(unaudited) | |||||||||||||
Three Months Ended | |||||||||||||
April 30, 2021 | May 1, 2020 | ||||||||||||
Net revenue | $ | 139,463 | $ | 141,181 | |||||||||
Cost of revenue | 57,207 | 62,909 | |||||||||||
Gross margin | 82,256 | 78,272 | |||||||||||
Research and development | 28,152 | 24,073 | |||||||||||
Sales and marketing | 36,405 | 37,452 | |||||||||||
General and administrative | 25,555 | 27,516 | |||||||||||
Total operating expenses | 90,112 | 89,041 | |||||||||||
Operating loss | (7,856 | ) | (10,769 | ) | |||||||||
Interest and other, net | (907 | ) | 993 | ||||||||||
Loss before income taxes | (8,763 | ) | (9,776 | ) | |||||||||
Income tax benefit | (2,373 | ) | (2,240 | ) | |||||||||
Net loss | $ | (6,390 | ) | $ | (7,536 | ) | |||||||
Loss per common share (basic and diluted) | $ | (0.08 | ) | $ | (0.09 | ) | |||||||
Weighted-average common shares outstanding (basic and diluted) | 81,985 | 80,938 | |||||||||||
Percentage of Total Net Revenue | |||||||||||||
Gross margin | 59.0 | % | 55.4 | % | |||||||||
Research and development | 20.2 | % | 17.1 | % | |||||||||
Sales and marketing | 26.1 | % | 26.5 | % | |||||||||
General and administrative | 18.3 | % | 19.5 | % | |||||||||
Operating expenses | 64.6 | % | 63.1 | % | |||||||||
Operating loss | (5.6 | ) | % | (7.6 | ) | % | |||||||
Loss before income taxes | (6.3 | ) | % | (6.9 | ) | % | |||||||
Net loss | (4.6 | ) | % | (5.3 | ) | % | |||||||
Effective tax rate | 27.1 | % | 22.9 | % | |||||||||
Note: Percentage growth rates are calculated based on underlying data in thousands |
SECUREWORKS CORP. | |||||||||||
Condensed Consolidated Statements of Financial Position | |||||||||||
(in thousands) | |||||||||||
(unaudited) | |||||||||||
April 30, 2021 | January 29, 2021 | ||||||||||
Assets: | |||||||||||
Current assets: | |||||||||||
Cash and cash equivalents | $ | 180,607 | $ | 220,300 | |||||||
Accounts receivable, net | 94,901 | 108,005 | |||||||||
Inventories, net | 687 | 560 | |||||||||
Other current assets | 16,920 | 17,349 | |||||||||
Total current assets | 293,115 | 346,214 | |||||||||
Property and equipment, net | 15,243 | 17,143 | |||||||||
Operating lease right-of-use assets, net | 21,207 | 22,330 | |||||||||
Goodwill | 426,278 | 425,861 | |||||||||
Intangible assets, net | 152,247 | 157,820 | |||||||||
Other non-current assets | 76,721 | 75,993 | |||||||||
Total assets | $ | 984,811 | $ | 1,045,361 | |||||||
Liabilities and Stockholders’ Equity: | |||||||||||
Current liabilities: | |||||||||||
Accounts payable | $ | 17,473 | $ | 16,769 | |||||||
Accrued and other | 60,194 | 109,134 | |||||||||
Short-term deferred revenue | 166,211 | 168,437 | |||||||||
Total current liabilities | 243,878 | 294,340 | |||||||||
Long-term deferred revenue | 8,193 | 9,590 | |||||||||
Operating lease liabilities, non-current | 21,082 | 22,461 | |||||||||
Other non-current liabilities | 50,609 | 51,189 | |||||||||
Total liabilities | 323,762 | 377,580 | |||||||||
Stockholders’ equity | 661,049 | 667,781 | |||||||||
Total liabilities and stockholders’ equity | $ | 984,811 | $ | 1,045,361 |
SECUREWORKS CORP. | ||||||||
Condensed Consolidated Statements of Cash Flows | ||||||||
(in thousands) | ||||||||
(unaudited) | ||||||||
Three Months Ended | ||||||||
April 30, 2021 | May 1, 2020 | |||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (6,390 | ) | $ | (7,536 | ) | ||
Adjustments to reconcile net loss to net cash provided by operating activities | ||||||||
Depreciation and amortization | 9,918 | 10,486 | ||||||
Stock-based compensation expense | 6,035 | 5,887 | ||||||
Effects of exchange rate changes on monetary assets and liabilities denominated in foreign currencies | 798 | (856 | ) | |||||
Income tax benefit | (2,373 | ) | (2,240 | ) | ||||
Provision for doubtful accounts | 434 | 909 | ||||||
Changes in assets and liabilities: | ||||||||
Accounts receivable | 12,573 | (5,987 | ) | |||||
Net transactions with parent | (9,859 | ) | 2,494 | |||||
Inventories | (127 | ) | (66 | ) | ||||
Other assets | 3,320 | 5,267 | ||||||
Accounts payable | 526 | 8,495 | ||||||
Deferred revenue | (3,773 | ) | 1,291 | |||||
Accrued and other liabilities | (41,640 | ) | (38,481 | ) | ||||
Net cash used in operating activities | (30,558 | ) | (20,337 | ) | ||||
Cash flows from investing activities: | ||||||||
Capital expenditures | (2,294 | ) | (1,020 | ) | ||||
Net cash used in investing activities | (2,294 | ) | (1,020 | ) | ||||
Cash flows from financing activities: | ||||||||
Taxes paid on vested restricted shares | (6,841 | ) | (4,491 | ) | ||||
Net cash used in financing activities | (6,841 | ) | (4,491 | ) | ||||
Net decrease in cash and cash equivalents | (39,693 | ) | (25,848 | ) | ||||
Cash and cash equivalents at beginning of the period | 220,300 | 181,838 | ||||||
Cash and cash equivalents at end of the period | $ | 180,607 | $ | 155,990 |
Non-GAAP Financial Measures
This press release presents information about the Companys non-GAAP revenue, non-GAAP gross margin, 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 and adjusted EBITDA, which are non-GAAP financial measures provided as a supplement to the results provided in accordance with GAAP. A detailed discussion of the Companys 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 below. The Company encourages investors to review its GAAP results in conjunction with the presentation of non-GAAP financial measures.
The following is a summary of the items excluded from the most comparable GAAP financial measures to calculate our non-GAAP financial measures:
SECUREWORKS CORP. | ||||||||||
Reconciliation of GAAP to Non-GAAP Financial Measures | ||||||||||
(in thousands, except per share data) | ||||||||||
(unaudited) | ||||||||||
Three Months Ended | ||||||||||
April 30, 2021 | May 1, 2020 | |||||||||
GAAP and non-GAAP revenue | $ | 139,463 | $ | 141,181 | ||||||
GAAP gross margin | $ | 82,256 | $ | 78,272 | ||||||
Amortization of intangibles | 3,819 | 3,460 | ||||||||
Stock-based compensation expense | 299 | 355 | ||||||||
Non-GAAP gross margin | $ | 86,374 | $ | 82,087 | ||||||
GAAP research and development expenses | $ | 28,152 | $ | 24,073 | ||||||
Stock-based compensation expense | (1,098 | ) | (1,291 | ) | ||||||
Non-GAAP research and development expenses | $ | 27,054 | $ | 22,782 | ||||||
GAAP sales and marketing expenses | $ | 36,405 | $ | 37,452 | ||||||
Stock-based compensation expense | (732 | ) | (741 | ) | ||||||
Non-GAAP sales and marketing expenses | $ | 35,673 | $ | 36,711 | ||||||
GAAP general and administrative expenses | $ | 25,555 | $ | 27,516 | ||||||
Amortization of intangibles | (3,524 | ) | (3,524 | ) | ||||||
Stock-based compensation expense | (3,906 | ) | (3,500 | ) | ||||||
Non-GAAP general and administrative expenses | $ | 18,125 | $ | 20,492 | ||||||
GAAP operating loss | $ | (7,856 | ) | $ | (10,769 | ) | ||||
Amortization of intangibles | 7,343 | 6,984 | ||||||||
Stock-based compensation expense | 6,035 | 5,887 | ||||||||
Non-GAAP operating income (loss) | $ | 5,522 | $ | 2,102 | ||||||
GAAP net loss | $ | (6,390 | ) | $ | (7,536 | ) | ||||
Amortization of intangibles | 7,343 | 6,984 | ||||||||
Stock-based compensation expense | 6,035 | 5,887 | ||||||||
Aggregate adjustment for income taxes | (2,997 | ) | (2,803 | ) | ||||||
Non-GAAP net income (loss) | $ | 3,991 | $ | 2,532 | ||||||
GAAP loss per share | $ | (0.08 | ) | $ | (0.09 | ) | ||||
Amortization of intangibles | 0.09 | 0.09 | ||||||||
Stock-based compensation expense | 0.07 | 0.07 | ||||||||
Aggregate adjustment for income taxes | (0.04 | ) | (0.03 | ) | ||||||
Non-GAAP earnings (loss) per share * | $ | 0.05 | $ | 0.03 | ||||||
* Sum of reconciling items may differ from total due to rounding of individual components | ||||||||||
GAAP net loss | $ | (6,390 | ) | $ | (7,536 | ) | ||||
Interest and other, net | 907 | (993 | ) | |||||||
Income tax benefit | (2,373 | ) | (2,240 | ) | ||||||
Depreciation and amortization | 9,918 | 10,486 | ||||||||
Stock-based compensation expense | 6,035 | 5,887 | ||||||||
Adjusted EBITDA | $ | 8,097 | $ | 5,604 |
SECUREWORKS CORP. | ||||||||||
Reconciliation of GAAP to Non-GAAP Financial Measures | ||||||||||
(in thousands) | ||||||||||
(unaudited) | ||||||||||
Three Months Ended | ||||||||||
Percentage of Total Net Revenue | April 30, 2021 | May 1, 2020 | ||||||||
GAAP gross margin | 59.0 | % | 55.4 | % | ||||||
Non-GAAP adjustment | 2.9 | % | 2.7 | % | ||||||
Non-GAAP gross margin | 61.9 | % | 58.1 | % | ||||||
GAAP research and development expenses | 20.2 | % | 17.1 | % | ||||||
Non-GAAP adjustment | (0.8 | ) | % | (1.0 | ) | % | ||||
Non-GAAP research and development expenses | 19.4 | % | 16.1 | % | ||||||
GAAP sales and marketing expenses | 26.1 | % | 26.5 | % | ||||||
Non-GAAP adjustment | (0.5 | ) | % | (0.5 | ) | % | ||||
Non-GAAP sales and marketing expenses | 25.6 | % | 26.0 | % | ||||||
GAAP general and administrative expenses | 18.3 | % | 19.5 | % | ||||||
Non-GAAP adjustment | (5.3 | ) | % | (5.0 | ) | % | ||||
Non-GAAP general and administrative expenses | 13.0 | % | 14.5 | % | ||||||
GAAP operating loss | (5.6 | ) | % | (7.6 | ) | % | ||||
Non-GAAP adjustment | 9.6 | % | 9.1 | % | ||||||
Non-GAAP operating income (loss) | 4.0 | % | 1.5 | % | ||||||
GAAP net loss | (4.6 | ) | % | (5.3 | ) | % | ||||
Non-GAAP adjustment | 7.5 | % | 7.1 | % | ||||||
Non-GAAP net income (loss) | 2.9 | % | 1.8 | % |
SECUREWORKS CORP. | ||||||||||||||||||||
Reconciliation of GAAP to Non-GAAP Financial Measures | ||||||||||||||||||||
(in millions, except per share data) | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||
Three Months Ending | Fiscal Year Ending | |||||||||||||||||||
July 30, 2021 | January 28, 2022 | |||||||||||||||||||
Low End of Guidance | High End of Guidance | Low End of Guidance | High End of Guidance | |||||||||||||||||
GAAP and non-GAAP revenue | $ | 134 | $ | 136 | $ | 540 | $ | 550 | ||||||||||||
GAAP net loss | $ | (12 | ) | $ | (11 | ) | $ | (57 | ) | $ | (48 | ) | ||||||||
Amortization of intangibles | 7 | 7 | 29 | 29 | ||||||||||||||||
Stock-based compensation expense | 7 | 7 | 30 | 30 | ||||||||||||||||
Aggregate adjustment for income taxes | (4 | ) | (3 | ) | (13 | ) | (14 | ) | ||||||||||||
Non-GAAP net (loss)* | $ | (2 | ) | $ | 0 | $ | (10 | ) | $ | (3 | ) | |||||||||
GAAP net loss per share | $ | (0.15 | ) | $ | (0.13 | ) | $ | (0.70 | ) | $ | (0.59 | ) | ||||||||
Amortization of intangibles | 0.09 | 0.09 | 0.36 | 0.36 | ||||||||||||||||
Stock-based compensation expense | 0.08 | 0.08 | 0.36 | 0.36 | ||||||||||||||||
Aggregate adjustment for income taxes | (0.05 | ) | (0.04 | ) | (0.15 | ) | (0.17 | ) | ||||||||||||
Non-GAAP net (loss) per share* | $ | (0.03 | ) | $ | 0.00 | $ | (0.13 | ) | $ | (0.04 | ) | |||||||||
GAAP net loss | $ | (57 | ) | $ | (48 | ) | ||||||||||||||
Interest and other, net | 1 | 1 | ||||||||||||||||||
Income tax benefit | (18 | ) | (16 | ) | ||||||||||||||||
Depreciation and amortization | 39 | 39 | ||||||||||||||||||
Stock-based compensation expense | 30 | 30 | ||||||||||||||||||
Adjusted EBITDA* | $ | (5 | ) | $ | 5 | |||||||||||||||
Other Items | ||||||||||||||||||||
Effective tax rate | 24 | % | ||||||||||||||||||
Weighted average shares outstanding (in millions) | 82.1 | |||||||||||||||||||
Cash flow from operations | Breakeven to $10 | |||||||||||||||||||
Capital expenditures | $7 – $10 |
* 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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