Secureworks Reports Record Third Quarter Fiscal 2019 Financial Results
Third Quarter Fiscal 2019 Highlights
- Revenue grew 13.6 percent over fiscal 2018 to $133.1 million, including 51 percent growth year
over year internationally.
- Net loss of $0.05 per share and non-GAAP earnings per share of $0.06 were better than our
expectations and Adjusted EBITDA was $8.6 million.
- Cash provided by operating activities was $15.2 million.
Secureworks (NASDAQ: SCWX), a leading global cybersecurity company that protects organizations in the digitally connected world,
today announced financial results for its third quarter ended November 2, 2018.
“We had a strong third quarter, with revenue growth of 13.6 percent and continued improvements in our operating leverage. I am
pleased with our progress and remain excited about the significant opportunities for further growth and productivity enhancements
as we continue executing against our objectives,” said Michael R. Cote, Chief Executive Officer of Secureworks.
“Amidst a constantly evolving threat landscape and increasingly complex technology ecosystems, we continue to bring
intelligence-driven, software-enabled solutions to the market, delivering integrated visibility and effective security for our
customers,” continued Mr. Cote.
Business and operational highlights for the third quarter of fiscal 2019 include:
- International revenue increased 51 percent year over year.
- Revenue in EMEA increased 47 percent over the prior year, with the company recently recognized by
Forrester as a Leader in its Managed Security Services Providers, Europe report.1
- Revenue in Asia/Pacific increased 65 percent year over year.
- The company was recognized as a Leader in the IDC MarketScape: U.S. Incident Readiness, Response and
Resiliency Services 2018 Vendor Assessment.2 The company continues to expand this important offering -- recently
including it within its Managed Detection and Response (MDR) package -- and has performed over 1,000 incident response
engagements over the last twelve months.
- The company has added industry leaders CrowdStrike and Carbon Black to its Red Cloak Partner Program.
The Program expands the scope of Secureworks' endpoint visibility so threats observed across different products and organizations
can be transformed into effective threat intelligence and threat indicators that help detect adversaries across customers.
____________________
|
1
|
|
The Forrester Wave™: Managed Security Services Providers (MSSPs), Europe, Q4 2018, Forrester
Research, Inc., 19 November 2018
|
|
2
|
|
IDC MarketScape: U.S. Incident Readiness, Response, and Resiliency Services 2018 Vendor
Assessment - Beyond the Big 5 Consultancies, by Christina Richmond and Pete Lindstrom, September, 2018, IDC
#US44257117
|
|
|
|
Third Quarter Fiscal 2019 Financial Results Highlights
- GAAP revenue increased 13.6 percent to $133.1 million in the third quarter of fiscal 2019, from
$117.1 million in the same period last year. Non-GAAP revenue increased 13.5 percent to $133.1 million from $117.2
million in the third quarter of fiscal 2018.
- GAAP gross margin was 53.3 percent in the third quarter of fiscal 2019, compared with 52.8 percent in
the same period last year. Non-GAAP gross margin was 56.0 percent compared with 55.9 percent in the third quarter of fiscal
2018.
- GAAP net loss was $3.7 million, or $0.05 per share, in the third quarter of fiscal 2019, compared
with GAAP net loss of $9.4 million, or $0.12 per share, in the prior year. Non-GAAP income was $5.2 million, or $0.06 per
share, in the third quarter of fiscal 2019, compared with a non-GAAP net loss of $3.0 million, or $0.04 per share, in the
same prior year period.
- Adjusted EBITDA was $8.6 million, compared with an adjusted EBITDA loss of $1.0 million in the third
quarter of fiscal 2018.
- Cash provided by operating activities for the three months ended November 2, 2018 was
$15.2 million.
- During the third quarter of fiscal 2019, the Company purchased 71 thousand shares of its Class A
common stock for $1.1 million, under its existing $15 million stock repurchase authorization.
- Secureworks ended the third quarter of fiscal 2019 with $115.8 million in cash and cash
equivalents.
- Monthly recurring revenue as of November 2, 2018 increased 5.1 percent to $35.1 million from
$33.4 million as of November 3, 2017. The Company’s monthly recurring revenue metric represents the monthly value of its
subscription contracts, including operational backlog, as of period end.
Fourth Quarter and Full Fiscal Year 2019 Guidance
For the fourth quarter of fiscal 2019, the Company expects:
- Revenue of $132 to $133 million on both a GAAP and non-GAAP basis.
- GAAP net loss per share of $0.11 to $0.12 and non-GAAP earnings per share of $0.00 to $0.01.
Based on third quarter fiscal 2019 performance and current business trends, the Company has updated its guidance for the full
fiscal year 2019. The Company now expects:
Full Fiscal Year 2020 Guidance
Based on third quarter year to date fiscal 2019 performance and current business trends, the Company is introducing full year
fiscal 2020 GAAP and non-GAAP revenue estimates of $565 to $575 million.
Conference Call Information
As previously announced, the Company will hold a conference call to discuss its fiscal 2019 third quarter and outlook for its
fourth quarter and fiscal year 2019 on December 6, 2018, at 8:00 a.m. ET. A live audio webcast of the conference call and the
supplemental financial information referred to above 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.
Non-GAAP Financial Measures
The 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 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 concerning its GAAP and non-GAAP revenue for full year fiscal 2020, GAAP and non-GAAP revenue and GAAP and non-GAAP
earnings (loss) per share for the fourth quarter of fiscal 2019 and for full year fiscal 2019, net income (loss) and adjusted
EBITDA (loss) for full year fiscal 2019, capital expenditures and effective tax rate for full year fiscal 2019, weighted average
shares outstanding during the fourth quarter of fiscal 2019 and full year fiscal 2019, monthly recurring revenue at the end of the
fourth quarter of fiscal 2019, and cash flow from operations for full year fiscal 2019, 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: 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 clients, retain existing clients and increase its annual
contract values; the Company’s reliance on its largest client and on clients 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; the
Company’s service level agreements with clients requiring 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 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 ability of the Company’s solutions to interoperate with its clients’ 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; the effect of timing differences between the expensing of sales commissions paid to the Company’s strategic
and distribution partners and the recognition of associated revenues; 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 and other catastrophic events on
the Company’s ability to serve its clients; 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 for the fiscal year ended February 2, 2018, 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 leading global cybersecurity company that protects organizations in the digitally connected
world. We close gaps in security layers with a Defense in Concert that combines visibility from thousands of clients, machine
learning and automation from our industry-leading Secureworks Counter Threat Platform™, and actionable insights from our team of
elite researchers, analysts and consultants to create a powerful network effect of increasingly strong protection for our clients.
By aggregating and analyzing data from any source, anywhere, we prevent security breaches, detect malicious activity in real time,
respond rapidly, and predict emerging threats. We offer our clients a cyber-defense that is Collectively Smarter. Exponentially
Safer.™
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 |
|
|
Nine Months Ended |
|
|
|
|
|
|
November 2,
2018
|
|
|
November 3,
2017*
|
|
|
November 2,
2018
|
|
|
November 3,
2017*
|
| Net revenue |
|
|
$ |
133,060 |
|
|
|
$ |
117,101 |
|
|
|
$ |
387,999 |
|
|
|
$ |
347,019 |
|
| Cost of revenue |
|
|
62,133 |
|
|
|
55,311 |
|
|
|
185,211 |
|
|
|
164,831 |
|
|
Gross margin |
|
|
70,927
|
|
|
|
61,790 |
|
|
|
202,788 |
|
|
|
182,188 |
|
|
Research and development |
|
|
21,114 |
|
|
|
19,501 |
|
|
|
65,921 |
|
|
|
58,673 |
|
|
Sales and marketing |
|
|
34,773 |
|
|
|
34,084 |
|
|
|
105,964 |
|
|
|
105,695 |
|
|
General and administrative |
|
|
21,619 |
|
|
|
22,896 |
|
|
|
69,235 |
|
|
|
67,438 |
|
|
|
Total operating expenses |
|
|
77,506 |
|
|
|
76,481 |
|
|
|
241,120 |
|
|
|
231,806 |
|
|
Operating loss |
|
|
(6,579 |
) |
|
|
(14,691 |
) |
|
|
(38,332 |
) |
|
|
(49,618 |
) |
| Interest and other, net |
|
|
1,074 |
|
|
|
116 |
|
|
|
2,582 |
|
|
|
(953 |
) |
|
Loss before income taxes |
|
|
(5,505 |
) |
|
|
(14,575 |
) |
|
|
(35,750 |
) |
|
|
(50,571 |
) |
| Income tax benefit |
|
|
(1,770 |
) |
|
|
(5,189 |
) |
|
|
(8,427 |
) |
|
|
(17,637 |
) |
|
Net loss |
|
|
$ |
(3,735 |
) |
|
|
$ |
(9,386 |
) |
|
|
$ |
(27,323 |
) |
|
|
$ |
(32,934 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Loss per common share (basic and diluted) |
|
|
$ |
(0.05 |
) |
|
|
$ |
(0.12 |
) |
|
|
$ |
(0.34 |
) |
|
|
$ |
(0.41 |
) |
|
Weighted-average common shares outstanding (basic and diluted)
|
|
|
80,892 |
|
|
|
80,355 |
|
|
|
80,751 |
|
|
|
80,254 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of Total Net Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
| Gross margin |
|
|
53.3 |
% |
|
|
52.8 |
% |
|
|
52.3 |
% |
|
|
52.5 |
% |
| Research and development |
|
|
15.9 |
% |
|
|
16.7 |
% |
|
|
17.0 |
% |
|
|
16.9 |
% |
| Sales and marketing |
|
|
26.1 |
% |
|
|
29.1 |
% |
|
|
27.3 |
% |
|
|
30.5 |
% |
| General and administrative |
|
|
16.2 |
% |
|
|
19.6 |
% |
|
|
17.8 |
% |
|
|
19.4 |
% |
| Operating expenses |
|
|
58.2 |
% |
|
|
65.3 |
% |
|
|
62.1 |
% |
|
|
66.8 |
% |
| Operating loss |
|
|
(4.9 |
)% |
|
|
(12.5 |
)% |
|
|
(9.9 |
)% |
|
|
(14.3 |
)% |
| Loss before income taxes |
|
|
(4.1 |
)% |
|
|
(12.4 |
)% |
|
|
(9.2 |
)% |
|
|
(14.6 |
)% |
| Net loss |
|
|
(2.8 |
)% |
|
|
(8.0 |
)% |
|
|
(7.0 |
)% |
|
|
(9.5 |
)% |
| Effective tax rate |
|
|
32.2 |
% |
|
|
35.6 |
% |
|
|
23.6 |
% |
|
|
34.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Note: Percentage growth rates are calculated based on underlying data in
thousands |
| |
|
* Certain prior period amounts have been adjusted as a result of the adoption of the accounting
standard for revenue recognition set forth in ASC 606.
|
| |
| |
| SECUREWORKS CORP. |
| Condensed Consolidated Statements of Financial Position |
| (in thousands) |
| (unaudited) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
November 2,
2018
|
|
|
February 2,
2018*
|
|
Assets:
|
|
|
|
|
|
|
| Current assets: |
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
$ |
115,779 |
|
|
|
$ |
101,539 |
|
Accounts receivable, net |
|
|
134,355 |
|
|
|
157,764 |
|
Inventories, net |
|
|
632 |
|
|
|
1,030 |
|
Other current assets |
|
|
41,084 |
|
|
|
40,551 |
|
|
Total current assets |
|
|
291,850 |
|
|
|
300,884 |
| Property and equipment, net |
|
|
31,112 |
|
|
|
33,457 |
| Goodwill |
|
|
416,487 |
|
|
|
416,487 |
| Purchased intangible assets, net |
|
|
213,382 |
|
|
|
234,184 |
| Other non-current assets |
|
|
79,182 |
|
|
|
72,069 |
|
|
Total assets |
|
|
$ |
1,032,013 |
|
|
|
$ |
1,057,081 |
|
Liabilities and Stockholders' Equity:
|
|
|
|
|
|
|
| Current liabilities: |
|
|
|
|
|
|
|
Accounts payable |
|
|
$ |
23,387 |
|
|
|
$ |
23,266 |
|
Accrued and other |
|
|
71,224 |
|
|
|
81,625 |
|
Short-term deferred revenue |
|
|
148,937 |
|
|
|
137,697 |
|
|
Total current liabilities |
|
|
243,548 |
|
|
|
242,588 |
| Long-term deferred revenue |
|
|
15,295 |
|
|
|
14,948 |
| Other non-current liabilities |
|
|
61,233 |
|
|
|
68,455 |
|
|
Total liabilities |
|
|
320,076 |
|
|
|
325,991 |
| Stockholders' equity |
|
|
711,937 |
|
|
|
731,090 |
| Total liabilities and stockholders' equity |
|
|
$ |
1,032,013 |
|
|
|
$ |
1,057,081 |
|
|
|
|
|
|
|
|
|
|
|
* Certain prior period amounts have been adjusted as a result of the adoption of the accounting
standard for revenue recognition set forth in ASC 606.
|
| |
| |
| SECUREWORKS CORP. |
| Condensed Consolidated Statements of Cash Flows |
| (in thousands) |
| (unaudited) |
|
|
|
|
|
|
|
|
|
|
Nine Months Ended |
|
|
|
November 2,
2018
|
|
|
November 3,
2017*
|
| Cash flows from operating activities: |
|
|
|
|
|
|
| Net loss |
|
|
$ |
(27,323 |
) |
|
|
$ |
(32,934 |
) |
| Adjustments to reconcile net loss to net cash provided by (used in) operating
activities |
|
|
|
|
|
|
| Depreciation and amortization |
|
|
30,872 |
|
|
|
31,320 |
|
| Stock-based compensation expense |
|
|
14,475 |
|
|
|
10,092 |
|
| Effects of exchange rate changes on monetary assets and liabilities denominated in
foreign currencies |
|
|
(1,924 |
) |
|
|
1,368 |
|
| Income tax benefit |
|
|
(8,427 |
) |
|
|
(17,637 |
) |
| Provision for doubtful accounts |
|
|
2,371 |
|
|
|
3,525 |
|
| Changes in assets and liabilities: |
|
|
|
|
|
|
| Accounts receivable |
|
|
20,756 |
|
|
|
(27,557 |
) |
| Net transactions with parent |
|
|
2,272 |
|
|
|
9,415 |
|
| Inventories |
|
|
398 |
|
|
|
984 |
|
| Other assets |
|
|
(4,472 |
) |
|
|
18,546 |
|
| Accounts payable |
|
|
573 |
|
|
|
(1,997 |
) |
| Deferred revenue |
|
|
11,252 |
|
|
|
5,480 |
|
| Accrued and other liabilities |
|
|
(14,784 |
) |
|
|
(3,810 |
) |
| Net cash provided by (used in) operating activities |
|
|
26,039 |
|
|
|
(3,205 |
) |
| Cash flows from investing activities: |
|
|
|
|
|
|
| Capital expenditures |
|
|
(6,974 |
) |
|
|
(11,676 |
) |
| Net cash provided by (used in) investing activities |
|
|
(6,974 |
) |
|
|
(11,676 |
) |
| Cash flows from financing activities: |
|
|
|
|
|
|
| Principal payments on financing arrangement with Dell Financial Services |
|
|
(1,104 |
) |
|
|
(800 |
) |
| Taxes paid on vested restricted shares |
|
|
(2,153 |
) |
|
|
(1,224 |
) |
| Purchases of stock for treasury |
|
|
(1,068 |
) |
|
|
— |
|
| Payments on financed capital expenditures |
|
|
(500 |
) |
|
|
— |
|
| Net cash provided by (used in) financing activities |
|
|
(4,825 |
) |
|
|
(2,024 |
) |
| Net increase (decrease) in cash and cash equivalents |
|
|
14,240 |
|
|
|
(16,905 |
) |
| Cash and cash equivalents at beginning of the period |
|
|
101,539 |
|
|
|
116,595 |
|
| Cash and cash equivalents at end of the period |
|
|
$ |
115,779 |
|
|
|
$ |
99,690 |
|
|
|
|
|
|
|
|
|
|
|
|
|
* Certain prior period amounts have been adjusted as a result of the adoption of the accounting
standard for revenue recognition set forth in ASC 606.
|
| |
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. The Company believes these non-GAAP financial
measures provide useful information to help evaluate its operating results by facilitating an enhanced understanding of its
operating performance and enabling more meaningful period-to-period comparisons. There are limitations to the use of the non-GAAP
financial measures presented in the press release. These non-GAAP financial measures may not be comparable to similarly titled
measures of other companies. Other companies, including companies in Secureworks’ industry, may calculate non-GAAP financial
measures differently than the Company does, limiting the usefulness of those measures for comparative purposes.
A reconciliation of each non-GAAP financial measure to the most directly comparable GAAP financial measure is provided below for
each of the periods indicated. Investors are encouraged to review the reconciliations in conjunction with the presentation of the
non-GAAP financial measures for each of the periods presented. In future fiscal periods, the Company may exclude such items and may
incur income and expenses similar to these excluded items. Accordingly, the exclusion of these items and other similar items in
this non-GAAP presentation should not be interpreted as implying that these items are non-recurring, infrequent or unusual.
The Company excludes the following items from one or more of its non-GAAP financial measures:
Impact of purchase accounting. The impact of purchase accounting consists primarily of purchase accounting adjustments
related to a change in the basis of deferred revenue for the acquisition of Dell Inc. (“Dell”) by Dell Technologies Inc. in fiscal
2014.
Amortization of intangible assets. Amortization of intangible assets consists of amortization of customer relationships
and acquired technology. In connection with the acquisition of Dell by Dell Technologies Inc. in fiscal 2014, all of the Company’s
tangible and intangible assets and liabilities were accounted for and recognized at fair value on the transaction date.
Accordingly, amortization of intangible assets consists of amortization associated with intangible assets recognized in connection
with this transaction.
Stock-based compensation. Non-cash stock-based compensation relates to awards under both the Dell Technologies Inc. and
Secureworks equity plans. We exclude such expenses when assessing the effectiveness of our operating performance since they do not
necessarily correlate with the underlying operating performance of the business.
Aggregate adjustment for income taxes. The aggregate adjustment for income taxes is the estimated combined income tax
effect for the adjustments mentioned above. The tax effects are determined based on the tax jurisdictions where the above items
were incurred.
As the excluded items can have a material impact on earnings, management compensates for this limitation by relying primarily on
GAAP results and using non-GAAP financial measures supplementally. The non-GAAP financial measures are not meant to be considered
as indicators of performance in isolation from or as a substitute for revenue, gross margin, research and development expenses,
sales and marketing expenses, general and administrative expenses, operating loss or net loss prepared in accordance with GAAP, and
should be read only in conjunction with financial information presented on a GAAP basis.
(Tables Follow)
| |
| SECUREWORKS CORP. |
| Reconciliation of GAAP to Non-GAAP Financial Measures |
| (in thousands, except per share data) |
| (unaudited) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
|
|
November 2,
2018
|
|
|
November 3,
2017*
|
|
|
November 2,
2018
|
|
|
November 3,
2017*
|
| GAAP revenue |
|
|
$ |
133,060 |
|
|
|
$ |
117,101 |
|
|
|
$ |
387,999 |
|
|
|
$ |
347,019 |
|
|
Impact of purchase accounting |
|
|
— |
|
|
|
146 |
|
|
|
— |
|
|
|
438 |
|
|
|
Non-GAAP revenue |
|
|
$ |
133,060 |
|
|
|
$ |
117,247 |
|
|
|
$ |
387,999 |
|
|
|
$ |
347,457 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| GAAP gross margin |
|
|
$ |
70,927 |
|
|
|
$ |
61,790 |
|
|
|
$ |
202,788 |
|
|
|
$ |
182,188 |
|
|
Amortization of intangibles |
|
|
3,410 |
|
|
|
3,410 |
|
|
|
10,231 |
|
|
|
10,231 |
|
|
Impact of purchase accounting |
|
|
— |
|
|
|
156 |
|
|
|
— |
|
|
|
468 |
|
|
Stock-based compensation expense |
|
|
224 |
|
|
|
205 |
|
|
|
768 |
|
|
|
646 |
|
|
|
Non-GAAP gross margin |
|
|
$ |
74,561 |
|
|
|
$ |
65,561 |
|
|
|
$ |
213,787 |
|
|
|
$ |
193,533 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| GAAP research and development expenses |
|
|
$ |
21,114 |
|
|
|
$ |
19,501 |
|
|
|
$ |
65,921 |
|
|
|
$ |
58,673 |
|
|
Stock-based compensation expense |
|
|
(933 |
) |
|
|
(809 |
) |
|
|
(2,970 |
) |
|
|
(2,382 |
) |
|
|
Non-GAAP research and development expenses |
|
$ |
20,181 |
|
|
|
$ |
18,692 |
|
|
|
$ |
62,951 |
|
|
|
$ |
56,291 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| GAAP sales and marketing expenses |
|
|
$ |
34,773 |
|
|
|
$ |
34,084 |
|
|
|
$ |
105,964 |
|
|
|
$ |
105,695 |
|
|
Stock-based compensation expense |
|
|
(800 |
) |
|
|
135 |
|
|
|
(2,141 |
) |
|
|
(490 |
) |
|
|
Non-GAAP sales and marketing expenses |
|
|
$ |
33,973 |
|
|
|
$ |
34,219 |
|
|
|
$ |
103,823 |
|
|
|
$ |
105,205 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| GAAP general and administrative expenses |
|
|
$ |
21,619 |
|
|
|
$ |
22,896 |
|
|
|
$ |
69,235 |
|
|
|
$ |
67,438 |
|
|
Amortization of intangibles |
|
|
(3,524 |
) |
|
|
(3,525 |
) |
|
|
(10,571 |
) |
|
|
(10,572 |
) |
|
Impact of purchase accounting |
|
|
— |
|
|
|
(257 |
) |
|
|
— |
|
|
|
(769 |
) |
|
Stock-based compensation expense |
|
|
(2,876 |
) |
|
|
(2,055 |
) |
|
|
(8,596 |
) |
|
|
(6,574 |
) |
|
|
Non-GAAP general and administrative expenses |
|
$ |
15,219 |
|
|
|
$ |
17,059 |
|
|
|
$ |
50,068 |
|
|
|
$ |
49,523 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| GAAP operating income (loss) |
|
|
$ |
(6,579 |
) |
|
|
$ |
(14,691 |
) |
|
|
$ |
(38,332 |
) |
|
|
$ |
(49,618 |
) |
|
Amortization of intangibles |
|
|
6,934 |
|
|
|
6,935 |
|
|
|
20,802 |
|
|
|
20,803 |
|
|
Impact of purchase accounting |
|
|
— |
|
|
|
413 |
|
|
|
— |
|
|
|
1,237 |
|
|
Stock-based compensation expense |
|
|
4,833 |
|
|
|
2,934 |
|
|
|
14,475 |
|
|
|
10,092 |
|
|
|
Non-GAAP operating income (loss) |
|
|
$ |
5,188 |
|
|
|
$ |
(4,409 |
) |
|
|
$ |
(3,055 |
) |
|
|
$ |
(17,486 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| GAAP net income (loss) |
|
|
$ |
(3,735 |
) |
|
|
$ |
(9,386 |
) |
|
|
$ |
(27,323 |
) |
|
|
$ |
(32,934 |
) |
|
Amortization of intangibles |
|
|
6,934 |
|
|
|
6,935 |
|
|
|
20,802 |
|
|
|
20,803 |
|
|
Impact of purchase accounting |
|
|
— |
|
|
|
413 |
|
|
|
— |
|
|
|
1,237 |
|
|
Stock-based compensation expense |
|
|
4,833 |
|
|
|
2,934 |
|
|
|
14,475 |
|
|
|
10,092 |
|
|
Aggregate adjustment for income taxes |
|
|
(2,801 |
) |
|
|
(3,897 |
) |
|
|
(8,130 |
) |
|
|
(11,253 |
) |
|
|
Non-GAAP net income (loss) |
|
|
$ |
5,231 |
|
|
|
$ |
(3,001 |
) |
|
|
$ |
(176 |
) |
|
|
$ |
(12,055 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| GAAP earnings (loss) per share |
|
|
$ |
(0.05 |
) |
|
|
$ |
(0.12 |
) |
|
|
$ |
(0.34 |
) |
|
|
$ |
(0.41 |
) |
|
Amortization of intangibles |
|
|
0.09 |
|
|
|
0.09 |
|
|
|
0.26 |
|
|
|
0.26 |
|
|
Impact of purchase accounting |
|
|
— |
|
|
|
0.01 |
|
|
|
— |
|
|
|
0.02 |
|
|
Stock-based compensation expense |
|
|
0.06 |
|
|
|
0.04 |
|
|
|
0.18 |
|
|
|
0.13 |
|
|
Aggregate adjustment for income taxes |
|
|
(0.03 |
) |
|
|
(0.05 |
) |
|
|
(0.10 |
) |
|
|
(0.14 |
) |
|
|
Non-GAAP earnings (loss) per share * |
|
|
$ |
0.06 |
|
|
|
$ |
(0.04 |
) |
|
|
$ |
— |
|
|
|
$ |
(0.15 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| * Sum of reconciling items may differ from total due to rounding of
individual components |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| GAAP net income (loss) |
|
|
$ |
(3,735 |
) |
|
|
$ |
(9,386 |
) |
|
|
$ |
(27,323 |
) |
|
|
$ |
(32,934 |
) |
|
Interest and other, net |
|
|
(1,074 |
) |
|
|
(116 |
) |
|
|
(2,582 |
) |
|
|
953 |
|
|
Income tax benefit |
|
|
(1,770 |
) |
|
|
(5,189 |
) |
|
|
(8,427 |
) |
|
|
(17,637 |
) |
|
Depreciation and amortization |
|
|
10,360 |
|
|
|
10,654 |
|
|
|
30,872 |
|
|
|
31,320 |
|
|
Stock-based compensation expense |
|
|
4,833 |
|
|
|
2,934 |
|
|
|
14,475 |
|
|
|
10,092 |
|
|
Impact of purchase accounting |
|
|
— |
|
|
|
146 |
|
|
|
— |
|
|
|
438 |
|
|
|
Adjusted EBITDA |
|
|
$ |
8,614 |
|
|
|
$ |
(957 |
) |
|
|
$ |
7,015 |
|
|
|
$ |
(7,768 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* Certain prior period amounts have been adjusted as a result of the adoption of the accounting
standard for revenue recognition set forth in ASC 606.
|
| |
| |
| SECUREWORKS CORP. |
| Reconciliation of GAAP to Non-GAAP Financial Measures |
| (in thousands) |
| (unaudited) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
Percentage of Total Net Revenue
|
|
|
November 2,
2018
|
|
|
November 3,
2017*
|
|
|
November 2,
2018
|
|
|
November 3,
2017*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| GAAP gross margin |
|
|
53.3 |
% |
|
|
52.8 |
% |
|
|
52.3 |
% |
|
|
52.5 |
% |
|
Non-GAAP adjustment |
|
|
2.7 |
% |
|
|
3.1 |
% |
|
|
2.8 |
% |
|
|
3.2 |
% |
| Non-GAAP gross margin |
|
|
56.0 |
% |
|
|
55.9 |
% |
|
|
55.1 |
% |
|
|
55.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| GAAP research and development expenses |
|
|
15.9 |
% |
|
|
16.7 |
% |
|
|
17.0 |
% |
|
|
16.9 |
% |
|
Non-GAAP adjustment |
|
|
(0.7 |
)% |
|
|
(0.8 |
)% |
|
|
(0.8 |
)% |
|
|
(0.7 |
)% |
| Non-GAAP research and development expenses |
|
|
15.2 |
% |
|
|
15.9 |
% |
|
|
16.2 |
% |
|
|
16.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| GAAP sales and marketing expenses |
|
|
26.1 |
% |
|
|
29.1 |
% |
|
|
27.3 |
% |
|
|
30.5 |
% |
|
Non-GAAP adjustment |
|
|
(0.6 |
)% |
|
|
0.1 |
% |
|
|
(0.5 |
)% |
|
|
(0.2 |
)% |
| Non-GAAP sales and marketing expenses |
|
|
25.5 |
% |
|
|
29.2 |
% |
|
|
26.8 |
% |
|
|
30.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| GAAP general and administrative expenses |
|
|
16.2 |
% |
|
|
19.6 |
% |
|
|
17.8 |
% |
|
|
19.4 |
% |
|
Non-GAAP adjustment |
|
|
(4.8 |
)% |
|
|
(5.1 |
)% |
|
|
(4.9 |
)% |
|
|
(5.1 |
)% |
| Non-GAAP general and administrative expenses |
|
|
11.4 |
% |
|
|
14.5 |
% |
|
|
12.9 |
% |
|
|
14.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| GAAP operating income (loss) |
|
|
(4.9 |
)% |
|
|
(12.5 |
)% |
|
|
(9.9 |
)% |
|
|
(14.3 |
)% |
|
Non-GAAP adjustment |
|
|
8.8 |
% |
|
|
8.7 |
% |
|
|
9.1 |
% |
|
|
9.3 |
% |
| Non-GAAP operating income (loss) |
|
|
3.9 |
% |
|
|
(3.8 |
)% |
|
|
(0.8 |
)% |
|
|
(5.0 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| GAAP net income (loss) |
|
|
(2.8 |
)% |
|
|
(8.0 |
)% |
|
|
(7.0 |
)% |
|
|
(9.5 |
)% |
|
Non-GAAP adjustment |
|
|
6.7 |
% |
|
|
5.4 |
% |
|
|
7.0 |
% |
|
|
6.0 |
% |
| Non-GAAP net income (loss) |
|
|
3.9 |
% |
|
|
(2.6 |
)% |
|
|
0.0 |
% |
|
|
(3.5 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* Certain prior period amounts have been adjusted as a result of the adoption of the accounting
standard for revenue recognition set forth in ASC 606.
|
| |
| SECUREWORKS CORP. |
| Reconciliation of GAAP to Non-GAAP Financial Measures |
| (in millions, except per share data) |
| (unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ending February 1, 2019 |
|
|
Fiscal Year Ending February 1, 2019 |
|
|
|
Low End of Guidance |
|
|
High End of Guidance |
|
|
Low End of Guidance |
|
|
High End of Guidance |
|
|
|
|
|
|
|
|
|
|
|
|
|
| GAAP revenue |
|
|
$ |
132 |
|
|
|
$ |
133 |
|
|
|
$ |
520 |
|
|
|
$ |
521 |
|
| Impact of purchase accounting |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
| Non-GAAP revenue |
|
|
$ |
132 |
|
|
|
$ |
133 |
|
|
|
$ |
520 |
|
|
|
$ |
521 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| GAAP earnings (loss) per share |
|
|
$ |
(0.12 |
) |
|
|
$ |
(0.11 |
) |
|
|
$ |
(0.46 |
) |
|
|
$ |
(0.45 |
) |
| Amortization of intangibles |
|
|
0.09 |
|
|
|
0.09 |
|
|
|
0.34 |
|
|
|
0.34 |
|
| Stock-based compensation expense |
|
|
0.07 |
|
|
|
0.07 |
|
|
|
0.25 |
|
|
|
0.25 |
|
| Aggregate adjustment for income taxes |
|
|
(0.04 |
) |
|
|
(0.04 |
) |
|
|
(0.14 |
) |
|
|
(0.14 |
) |
| Non-GAAP earnings (loss) per share* |
|
|
$ |
— |
|
|
|
$ |
0.01 |
|
|
|
$ |
(0.01 |
) |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| GAAP net loss |
|
|
|
|
|
|
|
|
$ |
(37 |
) |
|
|
$ |
(36 |
) |
| Interest and other, net |
|
|
|
|
|
|
|
|
(2 |
) |
|
|
(2 |
) |
| Income tax benefit |
|
|
|
|
|
|
|
|
(11 |
) |
|
|
(11 |
) |
| Depreciation and amortization |
|
|
|
|
|
|
|
|
41 |
|
|
|
41 |
|
| Stock-based compensation expense |
|
|
|
|
|
|
|
|
20 |
|
|
|
20 |
|
| Adjusted EBITDA* |
|
|
|
|
|
|
|
|
$ |
11 |
|
|
|
$ |
12 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other Items |
|
|
|
|
|
|
|
|
|
|
|
|
| Effective tax rate |
|
|
|
|
|
|
|
|
|
|
|
23 |
% |
| Weighted average shares outstanding (in millions) |
|
|
|
|
|
|
|
|
|
|
|
80.8 |
|
| Cash flow from operations |
|
|
|
|
|
|
|
|
|
|
|
$45-$50 |
|
| Capital expenditures |
|
|
|
|
|
|
|
|
|
|
|
$13-$14 |
|
| Monthly recurring revenue (MRR) |
|
|
|
|
|
|
|
|
|
|
|
$35.0 - $36.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* 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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| |
Investor Inquiries:
Teri Miller
VP, Chief Accounting Officer
678-268-4389
temiller@secureworks.com
Media Inquiries:
Doreen Kelly Ruyak
Corporate Communications
202-744-9767
press@secureworks.com
View source version on businesswire.com: https://www.businesswire.com/news/home/20181206005211/en/