ATLANTA, March 11, 2021 (GLOBE NEWSWIRE) -- Secureworks (NASDAQ: SCWX), a global leader in cybersecurity, today announced financial results for its fourth quarter and full fiscal year which ended on January 29, 2021.

Key Highlights

“The ability to outpace the adversary at scale requires an integrated, open analytics platform that empowers the community to collectively defend against threats,” said Michael R. Cote, chief executive officer, Secureworks. “Nearly 400 customers around the world are now realizing the transformative power of that community through our cloud-native Taegis security analytics platform.”

Financial Summary
“We are pleased with the momentum in our Taegis platform, with over 266% annual growth in ARR for the product of $55 million, up from $15 million since the start of the fiscal year,” said Paul Parrish, chief financial officer, Secureworks. “Further, we’re excited about the future opportunity and see Taegis ARR growth continuing to accelerate.”

Fourth Quarter Fiscal 2021

Full Year Fiscal 2021

Business and Operational Highlights

Financial Outlook
For the first 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 fourth quarter and full year 2021 results and financial guidance on Mar. 11, 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 Company’s 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 Company’s 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 Company’s expectations regarding revenue, GAAP net loss per share, and non-GAAP net loss per share for the first 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 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, including those relating to, among others: 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 rapidly evolving market in which the Company operates; the Company’s reliance on personnel with extensive information security expertise; fluctuations in the Company’s quarterly results and other operating measures; 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 ability to continue expansion of its sales force; the Company’s long and unpredictable sales cycles; risks associated with the Company’s international sales and operations; the effect of Brexit on the Company’s operations; 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 effect of adverse legislative or regulatory tax changes or unfavorable outcomes in tax audits and other tax compliance matters; 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 Company’s recognition of revenue ratably over the terms of its managed security and threat intelligence contracts; estimates or judgments relating to the Company’s critical accounting policies; the Company’s exposure to fluctuations in currency exchange rates; the effect of governmental export or import controls on the Company’s business; the Company’s compliance with the Foreign Corrupt Practices Act and similar laws; the Company’s ability to maintain effective disclosure controls and procedures; the effect of natural disasters, public health issues and other catastrophic events on the Company’s ability to serve its customers, including the coronavirus (COVID-19) pandemic; 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; and risks related to the Company’s 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 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, 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 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.
Consolidated Statements of Operations and Related Financial Highlights
(in thousands, except per share data and percentages)
(unaudited)
            
     Three Months Ended Twelve Months Ended
     January 29,
2021		 January 31,
2020		 January 29,
2021		 January 31,
2020
Net revenue $139,736   $141,986   $561,034   $552,765  
Cost of revenue 59,745   64,792   242,167   252,796  
 Gross margin 79,991   77,194   318,867   299,969  
 Research and development 29,218   23,364   105,008   94,964  
 Sales and marketing 37,048   40,708   144,934   157,674  
 General and administrative 27,936   25,643   101,760   99,505  
  Total operating expenses 94,202   89,715   351,702   352,143  
 Operating loss (14,211)  (12,521)  (32,835)  (52,174) 
Interest and other, net 90   (111)  1,034   850  
 Loss before income taxes (14,121)  (12,632)  (31,801)  (51,324) 
Income tax expense (benefit) (4,590)  (7,404)  (9,899)  (19,658) 
 Net income (loss) $(9,531)  $(5,228)  $(21,902)  $(31,666) 
         
Net income (loss) per common share (basic)$(0.12)  $(0.06)  $(0.27)  $(0.39) 
         
Net income (loss) per common share (diluted)$(0.12)  $(0.06)  $(0.27)  $(0.39) 
         
Weighted-average common shares        
 outstanding (basic) 81,602   80,591   81,358   80,563  
Weighted-average common shares        
 outstanding (diluted) 81,602   80,591   81,358   80,563  
            
Percentage of Total Net Revenue        
Gross margin 57.2 % 54.4 % 56.8 % 54.3 %
Research and development 20.9 % 16.5 % 18.7 % 17.2 %
Sales and marketing 26.5 % 28.7 % 25.8 % 28.5 %
General and administrative 20.0 % 18.1 % 18.1 % 18.0 %
Operating expenses 67.4 % 63.2 % 62.7 % 63.7 %
Operating loss (10.2)% (8.8)% (5.9)% (9.4)%
Loss before income taxes (10.1)% (8.9)% (5.7)% (9.3)%
Net income (loss) (6.8)% (3.7)% (3.9)% (5.7)%
Effective tax rate 32.5 % 58.6 % 31.1 % 38.3 %
            
Note: Percentage growth rates are calculated based on underlying data in thousands



SECUREWORKS CORP.
Consolidated Statements of Financial Position
(in thousands)
(unaudited)
        
     January 29,
2021		 January 31,
2020
Assets:     
Current assets:     
 Cash and cash equivalents  $220,300  $181,838 
 Accounts receivable, net  108,005  111,798 
 Inventories  560  746 
 Other current assets  17,349  27,449 
  Total current assets  346,214  321,831 
Property and equipment, net  17,143  27,606 
Goodwill  425,861  416,487 
Operating lease right-of-use assets, net  22,330  23,463 
Intangible assets, net  157,820  180,052 
Other non-current assets  75,993  78,592 
  Total assets  $1,045,361  $1,048,031 
Liabilities and Stockholders' Equity:     
Current liabilities:     
 Accounts payable  $16,769  $18,690 
 Accrued and other  109,134  98,855 
 Deferred revenue  168,437  175,847 
  Total current liabilities  294,340  293,392 
Long-term deferred revenue  9,590  12,690 
Operating lease liabilities, non-current  22,461  24,669 
Other non-current liabilities  51,189  50,400 
  Total liabilities  377,580  381,151 
Stockholders' equity  667,781  666,880 
Total liabilities and stockholders' equity  $1,045,361  $1,048,031 
          



SECUREWORKS CORP.
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
      
   Twelve Months Ended
   January 29,
2021		 January 31,
2020
Cash flows from operating activities:     
Net loss  $(21,902) $(31,666)
Adjustments to reconcile net loss to net cash provided by operating activities:     
Depreciation and amortization  41,614  42,932 
Stock-based compensation expense  24,414  19,548 
Effects of exchange rate changes on monetary assets and liabilities denominated in foreign currencies  (1,485) 270 
Income tax benefit  (9,899) (19,658)
Other non cash impacts  392  1,830 
Provision for doubtful accounts  1,810  3,099 
Changes in assets and liabilities:     
Accounts receivable  2,557  26,789 
Net transactions with parent  11,788  (12,483)
Inventories  186  (278)
Other assets  18,659  13,293 
Accounts payable  (1,527) 7,008 
Deferred revenue  (9,759) 14,463 
Accrued and other current liabilities  3,741  13,692 
Net cash provided by operating activities  60,589  78,839 
Cash flows from investing activities:     
Capital expenditures  (3,005) (12,590)
Acquisition of Subsidiary, net of cash  (15,081) — 
Net cash used in investing activities  (18,086) (12,590)
Cash flows from financing activities:     
Proceeds from stock option exercises  1,469  1,327 
Taxes paid on vested restricted shares  (5,510) (8,453)
Purchases of stock for treasury  —  (6,377)
Payments on financed capital expenditures  —  (500)
Net cash used in financing activities  (4,041) (14,003)
Net increase in cash and cash equivalents  38,462  52,246 
Cash and cash equivalents at beginning of the period  181,838  129,592 
Cash and cash equivalents at end of the period  220,300  181,838 
      
Supplemental Disclosures of Cash Flow Information:     
Financed capital expenditures  $—  $724 
Income taxes paid  1,933  1,746 

Non-GAAP Financial Measures

This press release presents information about the Company’s 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 Company’s 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 Twelve Months Ended
    January 29,
2021		 January 31,
2020		 January 29,
2021		 January 31,
2020
GAAP revenue $139,736   $141,986   $561,034   $552,765  
  Non-GAAP revenue $139,736   $141,986   $561,034   $552,765  
GAAP gross margin $79,991   $77,194   $318,867   $299,969  
 Amortization of intangibles 3,833   3,560   14,587   14,089  
 Stock-based compensation expense 338   197   1,346   1,206  
  Non-GAAP gross margin $84,162   $80,951   $334,800   $315,264  
GAAP research and development expenses $29,218   $23,364   $105,008   $94,964  
 Stock-based compensation expense (1,229)  (1,123)  (4,410)  (4,280) 
  Non-GAAP research and development expenses$27,989   $22,241   $100,598   $90,684  
GAAP sales and marketing expenses $37,048   $40,708   $144,934   $157,674  
 Stock-based compensation expense (981)  695   (3,676)  (1,694) 
  Non-GAAP sales and marketing expenses $36,067   $41,403   $141,258   $155,980  
GAAP general and administrative expenses $27,936   $25,643   $101,760   $99,505  
 Amortization of intangibles (3,524)  (3,524)  (14,094)  (14,094) 
 Stock-based compensation expense (4,190)  (3,305)  (14,982)  (12,368) 
  Non-GAAP general and administrative expenses$20,222   $18,814   $72,684   $73,043  
GAAP operating income (loss) $(14,211)  $(12,521)  $(32,835)  $(52,174) 
 Amortization of intangibles 7,357   7,083   28,682   28,183  
 Stock-based compensation expense 6,739   3,931   24,414   19,548  
  Non-GAAP operating income (loss) $(115)  $(1,507)  $20,261   $(4,443) 
GAAP net income (loss) $(9,531)  $(5,228)  $(21,902)  $(31,666) 
 Amortization of intangibles 7,357   7,083   28,682   28,183  
 Stock-based compensation expense 6,739   3,931   24,414   19,548  
 Impact of Tax Cuts and Jobs Act —   (1,191)  —   (1,191) 
 Aggregate adjustment for income taxes (4,269)  (2,691)  (13,267)  (14,688) 
  Non-GAAP net income $296   $1,904   $17,927   $186  
GAAP earnings (loss) per share $(0.12)  $(0.06)  $(0.27)  $(0.39) 
 Amortization of intangibles 0.09   0.09   0.35   0.35  
 Stock-based compensation expense 0.08   0.05   0.30   0.24  
 Impact of Tax Cuts and Jobs Act —   (0.01)  —   (0.01) 
 Aggregate adjustment for income taxes (0.05)  (0.03)  (0.16)  (0.18) 
  Non-GAAP earnings per share * $—   $0.02   $0.22   $—  
* Sum of reconciling items may differ from total due to rounding of individual components  
GAAP net income (loss) $(9,531)  $(5,228)  $(21,902)  $(31,666) 
 Interest and other, net (90)  111   (1,034)  (850) 
 Income tax expense (benefit) (4,590)  (7,404)  (9,899)  (19,658) 
 Depreciation and amortization 10,636   10,915   41,614   42,932  
 Stock-based compensation expense 6,739   3,931   24,414   19,548  
  Adjusted EBITDA $3,164   $2,325   $33,193   $10,306  
                       



SECUREWORKS CORP.
Reconciliation of GAAP to Non-GAAP Financial Measures
(unaudited)
           
           
    Three Months Ended Twelve Months Ended
Percentage of Total Net Revenue January 29,
2021		 January 31,
2020		 January 29,
2021		 January 31,
2020
GAAP gross margin 57.2 % 54.4 % 56.8 % 54.3 %
 Non-GAAP adjustment 3.0 % 2.6 % 2.9 % 2.7 %
Non-GAAP gross margin 60.2 % 57.0 % 59.7 % 57.0 %
           
GAAP research and development expenses 20.9 % 16.5 % 18.7 % 17.2 %
 Non-GAAP adjustment (0.9)% (0.8)% (0.8)% (0.8)%
Non-GAAP research and development expenses20.0 % 15.7 % 17.9 % 16.4 %
           
GAAP sales and marketing expenses 26.5 % 28.7 % 25.8 % 28.5 %
 Non-GAAP adjustment (0.7)% 0.5 % (0.6)% (0.3)%
Non-GAAP sales and marketing expenses 25.8 % 29.2 % 25.2 % 28.2 %
           
GAAP general and administrative expenses 20.0 % 18.1 % 18.1 % 18.0 %
 Non-GAAP adjustment (5.5)% (4.8)% (5.1)% (4.8)%
Non-GAAP general and administrative expenses14.5 % 13.3 % 13.0 % 13.2 %
           
GAAP operating income (loss) (10.2)% (8.8)% (5.9)% (9.4)%
 Non-GAAP adjustment 10.1 % 7.7 % 9.5 % 8.6 %
Non-GAAP operating income (loss) (0.1)% (1.1)% 3.6 % (0.8)%
           
GAAP net income (loss) (6.8)% (3.7)% (3.9)% (5.7)%
 Non-GAAP adjustment 7.0 % 5.0 % 7.1 % 5.7 %
Non-GAAP net income (loss) 0.2 % 1.3 % 3.2 % — %
                 



SECUREWORKS CORP.
Reconciliation of GAAP to Non-GAAP Financial Measures
(in millions, except per share data)
(unaudited)
         
  Three Months Ending Fiscal Year Ending
  April 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   $535   $545  
         
GAAP net loss $(14)  $(13)  $(71)  $(63) 
Amortization of intangibles 7   7   29   29  
Stock-based compensation expense 7   7   30   30  
Aggregate adjustment for income taxes (3)  (3)  (14)  (14) 
Non-GAAP net (loss)* $(3)  $(2)  $(26)  $(18) 
         
GAAP net loss per share $(0.17)  $(0.16)  $(0.86)  $(0.76) 
Amortization of intangibles 0.09   0.09   0.35   0.35  
Stock-based compensation expense 0.08   0.08   0.37   0.37  
Aggregate adjustment for income taxes (0.03)  (0.03)  (0.17)  (0.17) 
Non-GAAP net (loss) per share* $(0.04)  $(0.02)  $(0.31)  $(0.22) 
         
GAAP net loss     $(71)  $(63) 
Interest and other, net     (1)  (1) 
Income tax benefit     (20)  (18) 
Depreciation and amortization     38   38  
Stock-based compensation expense     30   30  
Adjusted EBITDA*     $(23)  $(13) 
         
Other Items        
Effective tax rate       22 %
Weighted average shares outstanding (in millions)       82.1
Cash flow from operations     Breakeven to $(10)
Capital expenditures       $3 - $4

* 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