Secureworks Reports Record Second Quarter Fiscal 2019 Results

September 5, 2018

Second Quarter Fiscal 2019 Highlights

  • Revenue grew 10.8 percent over fiscal 2018 to $128.8 million, including 50 percent growth year-over-year internationally.
  • Monthly recurring revenue increased 12 percent year-over-year to $36.2 million.
  • Net loss of $0.12 per share and non-GAAP net loss per share of $0.01 were better than expectations and Adjusted EBITDA was $1.0 million.
  • Cash flow provided by operating activities was $29.3 million.

ATLANTA--(BUSINESS WIRE)--Sep. 5, 2018-- Secureworks (NASDAQ: SCWX), a leading global cybersecurity company that protects organizations in the digitally connected world, today announced financial results for its second quarter ended August 3, 2018.

“The global demand for cybersecurity solutions has never been greater and as a recognized industry leader, we continue to bring technology-led solutions that leverage our unique threat intelligence to provide measureable outcomes to help protect our clients,” said Michael R. Cote, Chief Executive Officer of Secureworks.

“We had a strong second quarter, finishing with MRR growth of 12% and improving operating leverage, as we continue to gain sales momentum. I am pleased with our progress and remain excited about the significant opportunity for further growth and productivity gains as we continue to execute against our objectives,” continued Mr. Cote.

Business and operational developments for the second quarter of fiscal 2019 include:

  • Total value of closed deals in the second quarter increased 37 percent year over year and the total value of closed deals greater than $1 million increased 30 percent over the second quarter of fiscal 2018.
  • The Company was recently recognized by the respected industry analyst firm Forrester.
    • The Forrester Wave™: Global Managed Security Services (MSSPs), Q3 20181 report recognized Secureworks as a leader, based on a comprehensive set of evaluation criteria, including current offerings, strategy and market presence.
    • Forrester’s Now Tech: Managed Detection and Response (MDR) Services, Q2 20182 report recognized Secureworks as one of only two large providers with full forensics capabilities.
  • International revenue increased 50 percent year over year, including 53 percent in Japan. The Company was recently recognized as a leader in the IDC MarketScape: Asia/Pacific Threat Lifecycle Services 2018 Vendor Assessment3.
  • The Company recently launched its Red CloakTM Partner Program, working with industry leading solution providers, making the Company’s proprietary brand of behavioral analytics and high-fidelity visibility more broadly available in the marketplace. This collaboration will generate the necessary level of telemetry to apply Red Cloak analytics effectively, regardless of which endpoint detection and response solution exists within the client environment.

____________________
1 The Forrester Wave™: Global Managed Security Services Providers (MSSPs), Q3 2018, Forrester Research, Inc., August 20, 2018
2 Now Tech: Managed Detection And Response (MDR) Services, Q2 2018, Forrester Research, Inc., April 26, 2018
3 IDC MarketScape: Asia/Pacific Threat Lifecycle Services 2018 Vendor Assessment, July 2018, IDC #AP43699718

Second Quarter Fiscal 2019 Financial Results Highlights

  • GAAP revenue increased 10.8 percent to $128.8 million in the second quarter of fiscal 2019, from $116.2 million in the same period last year. Non-GAAP revenue increased 10.6 percent to $128.8 million from $116.4 million in the second quarter of fiscal 2018.
  • GAAP gross margin was 51.4 percent in the second quarter of 2019, compared with 51.9 percent in the same period last year. Non-GAAP gross margin was 54.3 percent compared with 55.1 percent in the second quarter of fiscal 2018.
  • GAAP net loss was $9.8 million, or $0.12 per share, in the second quarter of fiscal 2019, compared with a GAAP net loss of $10.3 million, or $0.13 per share, in the prior year. Non-GAAP net loss was $0.9 million, or $0.01 per share, in the second quarter of fiscal 2019, compared with a non-GAAP net loss of $3.5 million, or $0.04 per share, in the same prior year period.
  • Adjusted EBITDA was $1.0 million, compared with an adjusted EBITDA loss of $1.8 million in the second quarter of fiscal 2018.
  • Cash provided by operating activities for the three months ended August 3, 2018 was $29.3 million.
  • Secureworks ended the second quarter of fiscal 2019 with $103.3 million in cash and cash equivalents.
  • Monthly recurring revenue as of August 3, 2018 increased 12.0 percent to $36.2 million from $32.3 million as of August 4, 2017. The Company’s monthly recurring revenue metric represents the monthly value of its subscription contracts, including operational backlog, as of period end.

Third Quarter and Full Fiscal Year 2019 Guidance

For the third quarter of fiscal 2019, the Company expects:

  • Revenue of $130 to $131 million on both a GAAP and non-GAAP basis.
  • GAAP net loss per share of $0.16 to $0.17 and non-GAAP net loss per share of $0.05 to $0.06, including approximately $0.02 per share of reorganization costs.

Based on second quarter fiscal 2019 performance and current business trends, the Company has updated its guidance for the full fiscal year 2019. The Company now expects:

  • GAAP and non-GAAP revenue of $518 to $520 million.
  • GAAP net loss of $48 to $50 million and $0.59 to $0.61 on a per share basis.
  • Non-GAAP net loss per share of $0.15 to $0.17.
  • Adjusted EBITDA loss of $3 to $5 million.
  • Monthly recurring revenue of $37.0 to $39.0 million, at the end of the fourth quarter of fiscal 2019.
  • Cash flow from operations of $35 to $40 million.

Conference Call Information

As previously announced, the Company will hold a conference call to discuss its fiscal 2019 second quarter and outlook for its third quarter and fiscal year 2019 on September 5, 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 loss, non-GAAP net loss, non-GAAP net 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 and GAAP and non-GAAP net loss per share for the third quarter of fiscal 2019 and for full year fiscal 2019, net 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 third 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 combine 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 that provides 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   Six Months Ended
             

August 3,

2018

 

August 4,

2017*

 

August 3,

2018

 

August 4,

2017*

Net revenue       $ 128,778     $ 116,240     $ 254,939     $ 229,918  
Cost of revenue       62,548     55,907     123,078     109,520  
  Gross margin       66,230     60,333     131,861     120,398  
  Research and development       22,453     19,693     44,807     39,172  
  Sales and marketing       35,521     35,433     71,191     71,611  
  General and administrative       22,419     21,138     47,616     44,542  
    Total operating expenses       80,393     76,264     163,614     155,325  
  Operating loss       (14,163 )   (15,931 )   (31,753 )   (34,927 )
Interest and other, net       1,003     (420 )   1,508     (1,069 )
  Loss before income taxes       (13,160 )   (16,351 )   (30,245 )   (35,996 )
Income tax benefit       (3,391 )   (6,080 )   (6,657 )   (12,448 )
  Net loss       $ (9,769 )   $ (10,271 )   $ (23,588 )   $ (23,548 )
                     
Net loss per common share (basic and diluted)       $ (0.12 )   $ (0.13 )   $ (0.29 )   $ (0.29 )

Weighted-average common shares outstanding (basic and diluted)

      80,839     80,353     80,680     80,205  
                           

Percentage of Total Net Revenue

                   
Gross margin       51.4 %   51.9 %   51.7 %   52.4 %
Research and development       17.4 %   16.9 %   17.6 %   17.0 %
Sales and marketing       27.6 %   30.5 %   27.9 %   31.1 %
General and administrative       17.4 %   18.2 %   18.7 %   19.4 %
Operating expenses       62.4 %   65.6 %   64.2 %   67.6 %
Operating loss       (11.0 )%   (13.7 )%   (12.5 )%   (15.2 )%
Loss before income taxes       (10.2 )%   (14.1 )%   (11.9 )%   (15.7 )%
Net loss       (7.6 )%   (8.8 )%   (9.3 )%   (10.2 )%
Effective tax rate       25.8 %   37.2 %   22.0 %   34.6 %
                           
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)
                 
           

August 3,

2018

 

February 2,

2018*

Assets:

           
Current assets:            
  Cash and cash equivalents       $ 103,316     $ 101,539
  Accounts receivable, net       133,344     157,764
  Inventories, net       623     1,030
  Other current assets       40,814     40,551
    Total current assets       278,097     300,884
Property and equipment, net       32,611     33,457
Goodwill       416,487     416,487
Purchased intangible assets, net       220,316     234,184
Other non-current assets       79,638     72,069
    Total assets       $ 1,027,149     $ 1,057,081

Liabilities and Stockholders' Equity:

           
Current liabilities:            
  Accounts payable       $ 21,417     $ 23,266
  Accrued and other       65,321     81,625
  Short-term deferred revenue       151,828     137,697
    Total current liabilities       238,566     242,588
Long-term deferred revenue       13,435     14,948
Other non-current liabilities       62,878     68,455
    Total liabilities       314,879     325,991
Stockholders' equity       712,270     731,090
Total liabilities and stockholders' equity       $ 1,027,149     $ 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)
             
        Six Months Ended
        August 3, 2018   August 4, 2017*
Cash flows from operating activities:            
Net loss       $ (23,588 )   $ (23,548 )
Adjustments to reconcile net loss to net cash provided by (used in) operating activities            
Depreciation and amortization       20,512     20,666  
Stock-based compensation expense       9,642     7,158  
Effects of exchange rate changes on monetary assets and liabilities denominated in foreign currencies       (1,275 )   1,449  
Income tax benefit       (6,657 )   (12,448 )
Provision for doubtful accounts       1,571     2,591  
Changes in assets and liabilities:            
Accounts receivable       22,542     (12,491 )
Due to/from parent       (1,334 )   7,653  
Inventories       407     778  
Other assets       (5,162 )   (4,014 )
Accounts payable       (1,392 )   428  
Deferred revenue       12,240     13,617  
Accrued and other liabilities       (16,620 )   (10,254 )
Net cash provided by (used in) operating activities       10,886     (8,415 )
Cash flows from investing activities:            
Capital expenditures       (5,366 )   (8,376 )
Net cash provided by (used in) investing activities       (5,366 )   (8,376 )
Cash flows from financing activities:            
Principal payments on financing arrangement with Dell Financial Services       (1,104 )   (800 )
Taxes paid on vested restricted shares       (2,139 )   (1,224 )
Other financing activities       (500 )    
Net cash provided by (used in) financing activities       (3,743 )   (2,024 )
Net increase (decrease) in cash and cash equivalents       1,777     (18,815 )
Cash and cash equivalents at beginning of the period       101,539     116,595  
Cash and cash equivalents at end of the period       $ 103,316     $ 97,780  
 

* 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 loss, non-GAAP net loss, non-GAAP net 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   Six Months Ended
       

August 3,

2018

 

August 4,

2017*

 

August 3,

2018

 

August 4,

2017*

GAAP revenue   $ 128,778     $ 116,240     $ 254,939     $ 229,918  
  Impact of purchase accounting       146         292  
    Non-GAAP revenue   $ 128,778     $ 116,386     $ 254,939     $ 230,210  
                     
GAAP gross margin   $ 66,230     $ 60,333     $ 131,861     $ 120,398  
  Amortization of intangibles   3,411     3,411     6,821     6,821  
  Impact of purchase accounting       156         312  
  Stock-based compensation expense   275     217     544     441  
    Non-GAAP gross margin   $ 69,916     $ 64,117     $ 139,226     $ 127,972  
                     
GAAP research and development expenses   $ 22,453     $ 19,693     $ 44,807     $ 39,172  
  Stock-based compensation expense   (1,006 )   (759 )   (2,037 )   (1,573 )
    Non-GAAP research and development expenses $ 21,447     $ 18,934     $ 42,770     $ 37,599  
                     
GAAP sales and marketing expenses   $ 35,521     $ 35,433     $ 71,191     $ 71,611  
  Stock-based compensation expense   (720 )   (411 )   (1,341 )   (625 )
    Non-GAAP sales and marketing expenses   $ 34,801     $ 35,022     $ 69,850     $ 70,986  
                     
GAAP general and administrative expenses   $ 22,419     $ 21,138     $ 47,616     $ 44,542  
  Amortization of intangibles   (3,523 )   (3,523 )   (7,047 )   (7,047 )
  Impact of purchase accounting       (256 )       (512 )
  Stock-based compensation expense   (2,911 )   (2,143 )   (5,720 )   (4,519 )
    Non-GAAP general and administrative expenses $ 15,985     $ 15,216     $ 34,849     $ 32,464  
                     
GAAP operating loss   $ (14,163 )   $ (15,931 )   $ (31,753 )   $ (34,927 )
  Amortization of intangibles   6,934     6,934     13,868     13,868  
  Impact of purchase accounting       412         824  
  Stock-based compensation expense   4,912     3,530     9,642     7,158  
    Non-GAAP operating loss   $ (2,317 )   $ (5,055 )   $ (8,243 )   $ (13,077 )
                     
GAAP net loss   $ (9,769 )   $ (10,271 )   $ (23,588 )   $ (23,548 )
  Amortization of intangibles   6,934     6,934     13,868     13,868  
  Impact of purchase accounting       412         824  
  Stock-based compensation expense   4,912     3,530     9,642     7,158  
  Aggregate adjustment for income taxes   (2,938 )   (4,122 )   (5,329 )   (7,356 )
    Non-GAAP net loss   $ (861 )   $ (3,517 )   $ (5,407 )   $ (9,054 )
                     
GAAP net loss per share   $ (0.12 )   $ (0.13 )   $ (0.29 )   $ (0.29 )
  Amortization of intangibles   0.09     0.09     0.17     0.17  
  Impact of purchase accounting       0.01         0.01  
  Stock-based compensation expense   0.06     0.04     0.12     0.09  
  Aggregate adjustment for income taxes   (0.04 )   (0.05 )   (0.07 )   (0.09 )
    Non-GAAP net loss per share *   $ (0.01 )   $ (0.04 )   $ (0.07 )   $ (0.11 )
                     
* Sum of reconciling items may differ from total due to rounding of individual components
GAAP net loss   $ (9,769 )   $ (10,271 )   $ (23,588 )   $ (23,548 )
  Interest and other, net   (1,003 )   420     (1,508 )   1,069  
  Income tax benefit   (3,391 )   (6,080 )   (6,657 )   (12,448 )
  Depreciation and amortization   10,225     10,405     20,512     20,666  
  Stock-based compensation expense   4,912     3,530     9,642     7,158  
  Impact of purchase accounting       146         292  
    Adjusted EBITDA   $ 974     $ (1,850 )   $ (1,599 )   $ (6,811 )
 

* 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   Six Months Ended

Percentage of Total Net Revenue

     

August 3,

2018

 

August 4,

2017*

 

August 3,

2018

 

August 4,

2017*

                     
GAAP gross margin       51.4 %   51.9 %   51.7 %   52.4 %
  Non-GAAP adjustment       2.9 %   3.2 %   2.9 %   3.2 %
Non-GAAP gross margin       54.3 %   55.1 %   54.6 %   55.6 %
                         
GAAP research and development expenses       17.4 %   16.9 %   17.6 %   17.0 %
  Non-GAAP adjustment       (0.7 )%   (0.6 )%   (0.8 )%   (0.7 )%
Non-GAAP research and development expenses       16.7 %   16.3 %   16.8 %   16.3 %
                         
GAAP sales and marketing expenses       27.6 %   30.5 %   27.9 %   31.1 %
  Non-GAAP adjustment       (0.6 )%   (0.4 )%   (0.5 )%   (0.3 )%
Non-GAAP sales and marketing expenses       27.0 %   30.1 %   27.4 %   30.8 %
                         
GAAP general and administrative expenses       17.4 %   18.2 %   18.7 %   19.4 %
  Non-GAAP adjustment       (5.0 )%   (5.1 )%   (5.0 )%   (5.3 )%
Non-GAAP general and administrative expenses       12.4 %   13.1 %   13.7 %   14.1 %
                         
GAAP operating loss       (11.0 )%   (13.7 )%   (12.5 )%   (15.2 )%
  Non-GAAP adjustment       9.2 %   9.4 %   9.3 %   9.5 %
Non-GAAP operating loss       (1.8 )%   (4.3 )%   (3.2 )%   (5.7 )%
                         
GAAP net loss       (7.6 )%   (8.8 )%   (9.3 )%   (10.2 )%
  Non-GAAP adjustment       6.9 %   5.8 %   7.2 %   6.3 %
Non-GAAP net loss       (0.7 )%   (3.0 )%   (2.1 )%   (3.9 )%
 

* 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

November 2, 2018

   

Fiscal Year Ending

February 1, 2019

       

Low End of

Guidance

   

High End of

Guidance

   

Low End of

Guidance

   

High End of

Guidance

                           
GAAP revenue       $ 130       $ 131       $ 518       $ 520  
Impact of purchase accounting                          
Non-GAAP revenue       $ 130       $ 131       $ 518       $ 520  
                           
GAAP net loss per share       $ (0.17 )     $ (0.16 )     $ (0.61 )     $ (0.59 )
Amortization of intangibles       0.09       0.09       0.34       0.34  
Stock-based compensation expense       0.06       0.06       0.24       0.24  
Aggregate adjustment for income taxes       (0.03 )     (0.03 )     (0.14 )     (0.14 )
Non-GAAP net loss per share*       $ (0.06 )     $ (0.05 )     $ (0.17 )     $ (0.15 )
                           
GAAP net loss                   $ (50 )     $ (48 )
Interest and other, net                   (1 )     (1 )
Income tax benefit                   (15 )     (14 )
Depreciation and amortization                   41       41  
Stock-based compensation expense                   19       19  
Adjusted EBITDA*                   $ (5 )     $ (3 )
                           
Other Items                          
Effective tax rate                         22 %
Weighted average shares outstanding (in millions)                         80.9  
Cash flow from operations                         $35-$40
Capital expenditures                         $16-$17
Monthly recurring revenue (MRR)                         $37-$39
 

*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

 
 

 

Source: Secureworks

Secureworks
Investor Inquiries:
Teri Miller, 678-268-4389
VP, Chief Accounting Officer
temiller@secureworks.com
or
Media Inquiries:
Doreen Kelly Ruyak, 202-744-9767
Corporate Communications
press@secureworks.com


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