Secureworks Reports Third Quarter Fiscal 2021 Results
News Summary
- Achieved third quarter revenue of $141.6 million. GAAP gross margin increased to a record 57.9 percent during the quarter and non-GAAP gross margin increased to a record 60.7 percent.
- Nearly 300 customers on our cloud-native Threat Detection and Response (TDR) security application.
- Significant sequential ARR growth of 25 percent from TDR and Managed Detection and Response (MDR) security analytics offerings.
- Offering customers a compelling alternative to legacy SIEMs through the addition of log retention and flexible reporting to our TDR application.
- Expanded software portfolio with Vulnerability, Detection and Prioritization (VDP) application.
ATLANTA, Dec. 03, 2020 (GLOBE NEWSWIRE) -- Secureworks (NASDAQ: SCWX), a leader in software-driven security solutions, today announced financial results for its third fiscal quarter, which ended on October 30, 2020. For the quarter, the company increased both GAAP and non-GAAP revenue 0.2 percent to $141.6 million from $141.3 million in the same period in the prior year. GAAP gross margin increased to 57.9 percent during the quarter, from 56.4 percent in the same period in the prior year. Non-GAAP gross margin increased to 60.7 percent from 59.2 percent in the third quarter of fiscal 2020. GAAP net loss of $3.6 million, or $0.04 per share, in the third quarter of fiscal 2021, improved from $7.9 million, or $0.10 per share, in the same period in the prior year. Non-GAAP net income was $6.7 million, or $0.08 per share, in the third quarter of fiscal 2021, compared with a non-GAAP net income of $0.8 million, or $0.01 per share, in the same period in the prior year. Adjusted EBITDA for the quarter increased to $11.3 million from $5.8 million in the third quarter of fiscal 2020.
"Our ability to outpace and outmaneuver adversaries at scale requires an integrated software platform accelerated by the power of the community," said Michael R. Cote, Chief Executive Officer of Secureworks. "Nearly 300 customers have now chosen our cloud-native security analytics platform to transform the way they secure their environments.
Were pleased with our record GAAP and non-GAAP gross margin performance in the third quarter, as well as the continued significant growth and investment in our cloud-based SaaS security analytics platform, said Paul Parrish, Chief Financial Officer of Secureworks.
Conference Call Information
As previously announced, the Company will hold a conference call to discuss its third quarter fiscal 2021 results on Dec. 3, 2020, 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, 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 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 rapidly evolving market in which the Company operates; the Companys reliance on personnel with extensive information security expertise; fluctuations in the Companys quarterly results and other operating measures; 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 ability to continue expansion of its sales force; 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 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 effect of adverse legislative or regulatory tax changes or unfavorable outcomes in tax audits and other tax compliance matters; 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; the Companys recognition of revenue ratably over the terms of its managed security and threat intelligence contracts; estimates or judgments relating to the Companys critical accounting policies; the Companys exposure to fluctuations in currency exchange rates; the effect of governmental export or import controls on the Companys business; the Companys compliance with the Foreign Corrupt Practices Act and similar laws; the Companys ability to maintain effective disclosure controls and procedures; 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), a global cybersecurity leader, enables our customers and partners to outpace and outmaneuver adversaries with more precision, so they can rapidly adapt and respond to market forces to meet their business needs. With a unique combination of cloud-native, SaaS security platform and intelligence-driven security solutions, informed by 20+ years of threat intelligence and research, no other security platform is grounded and informed with this much real-world experience.
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 | Nine Months Ended | ||||||||||||||||||
| October 30, 2020 | November 1, 2019 | October 30, 2020 | November 1, 2019 | ||||||||||||||||
| Net revenue | $ | 141,641 | $ | 141,332 | $ | 421,298 | $ | 410,779 | |||||||||||
| Cost of revenue | 59,613 | 61,568 | 182,422 | 188,004 | |||||||||||||||
| Gross margin | 82,028 | 79,764 | 238,876 | 222,775 | |||||||||||||||
| Research and development | 27,608 | 24,095 | 75,790 | 71,600 | |||||||||||||||
| Sales and marketing | 34,810 | 40,726 | 107,886 | 116,966 | |||||||||||||||
| General and administrative | 24,508 | 25,078 | 73,824 | 73,862 | |||||||||||||||
| Total operating expenses | 86,926 | 89,899 | 257,500 | 262,428 | |||||||||||||||
| Operating loss | (4,898 | ) | (10,135 | ) | (18,624 | ) | (39,653 | ) | |||||||||||
| Interest and other, net | (79 | ) | (1,257 | ) | 944 | 961 | |||||||||||||
| Loss before income taxes | (4,977 | ) | (11,392 | ) | (17,680 | ) | (38,692 | ) | |||||||||||
| Income tax benefit | (1,369 | ) | (3,484 | ) | (5,309 | ) | (12,254 | ) | |||||||||||
| Net loss | $ | (3,608 | ) | $ | (7,908 | ) | $ | (12,371 | ) | $ | (26,438 | ) | |||||||
| Loss per common share (basic and diluted) | $ | (0.04 | ) | $ | (0.10 | ) | $ | (0.15 | ) | $ | (0.33 | ) | |||||||
| Weighted-average common shares outstanding (basic and diluted) | 81,474 | 80,518 | 81,276 | 80,553 | |||||||||||||||
| Percentage of Total Net Revenue | |||||||||||||||||||
| Gross margin | 57.9 | % | 56.4 | % | 56.7 | % | 54.2 | % | |||||||||||
| Research and development | 19.5 | % | 17.0 | % | 18.0 | % | 17.4 | % | |||||||||||
| Sales and marketing | 24.6 | % | 28.8 | % | 25.6 | % | 28.5 | % | |||||||||||
| General and administrative | 17.3 | % | 17.7 | % | 17.5 | % | 18.0 | % | |||||||||||
| Operating expenses | 61.4 | % | 63.6 | % | 61.1 | % | 63.9 | % | |||||||||||
| Operating loss | (3.5 | )% | (7.2 | )% | (4.4 | )% | (9.7 | )% | |||||||||||
| Loss before income taxes | (3.5 | )% | (8.1 | )% | (4.2 | )% | (9.4 | )% | |||||||||||
| Net loss | (2.5 | )% | (5.6 | )% | (2.9 | )% | (6.4 | )% | |||||||||||
| Effective tax rate | 27.5 | % | 30.6 | % | 30.0 | % | 31.7 | % | |||||||||||
| Note: Percentage growth rates are calculated based on underlying data in thousands | |||||||||||||||||||
| SECUREWORKS CORP. | |||||||||||
| Condensed Consolidated Statements of Financial Position | |||||||||||
| (in thousands) | |||||||||||
| (unaudited) | |||||||||||
| October 30, 2020 | January 31, 2020 | ||||||||||
| Assets: | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 188,048 | $ | 181,838 | |||||||
| Accounts receivable, net | 107,907 | 111,798 | |||||||||
| Inventories, net | 690 | 746 | |||||||||
| Other current assets | 25,992 | 27,449 | |||||||||
| Total current assets | 322,637 | 321,831 | |||||||||
| Property and equipment, net | 19,669 | 27,606 | |||||||||
| Operating lease right-of-use assets, net | 22,421 | 23,463 | |||||||||
| Goodwill | 425,314 | 416,487 | |||||||||
| Intangible assets, net | 164,928 | 180,052 | |||||||||
| Other non-current assets | 76,488 | 78,592 | |||||||||
| Total assets | $ | 1,031,457 | $ | 1,048,031 | |||||||
| Liabilities and Stockholders' Equity: | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | 20,874 | $ | 18,690 | |||||||
| Accrued and other | 88,208 | 98,855 | |||||||||
| Short-term deferred revenue | 173,536 | 175,847 | |||||||||
| Total current liabilities | 282,618 | 293,392 | |||||||||
| Long-term deferred revenue | 9,930 | 12,690 | |||||||||
| Operating lease liabilities, non-current | 22,828 | 24,669 | |||||||||
| Other non-current liabilities | 48,932 | 50,400 | |||||||||
| Total liabilities | 364,308 | 381,151 | |||||||||
| Stockholders' equity | 667,149 | 666,880 | |||||||||
| Total liabilities and stockholders' equity | $ | 1,031,457 | $ | 1,048,031 | |||||||
| SECUREWORKS CORP. | ||||||||||
| Condensed Consolidated Statements of Cash Flows | ||||||||||
| (in thousands) | ||||||||||
| (unaudited) | ||||||||||
| Nine Months Ended | ||||||||||
| October 30, 2020 | November 1, 2019 | |||||||||
| Cash flows from operating activities: | ||||||||||
| Net loss | $ | (12,371 | ) | $ |
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