Document

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

 Date of Report (Date of earliest event reported):      June 6, 2018

SecureWorks Corp.
(Exact name of registrant as specified in its charter)

Delaware
 
001-37748
 
27-0463349
(State or other jurisdiction of
incorporation)
 
(Commission File Number)
 
(I.R.S. Employer
Identification No.)
 
 
 
 
 
One Concourse Parkway NE Suite 500
 
 
 
 
Atlanta, Georgia
 
 
 
30328
(Address of principal executive offices)
 
 
 
(Zip Code)

(404) 327-6339
(Registrant’s telephone number, including area code)

Not Applicable
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o
 
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
 
 
o
 
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
 
 
o
 
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
 
 
o
 
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
 
 
Emerging growth company þ 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. þ




Item 2.02    Results of Operations and Financial Condition.

On June 6, 2018, SecureWorks Corp. (the “Company”) issued a press release announcing its financial results for its fiscal quarter ended May 4, 2018, which is the Company’s first quarter of fiscal 2019. A copy of the press release is furnished as Exhibit 99.1 to this report.

In accordance with General Instruction B.2 to Form 8-K, the information contained in this report, including Exhibit 99.1 hereto, is being “furnished” with the Securities and Exchange Commission and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities under such section. Furthermore, such information shall not be deemed to be incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, unless specifically identified as being incorporated therein by reference.


Item 9.01    Financial Statements and Exhibits.

(d)    Exhibits. The following document is herewith furnished as an exhibit to this report:

Exhibit No.
 
Exhibit Description
 
 
 
99.1
 





SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


Date:
June 6, 2018
SecureWorks Corp.
 
 
 
 
 
 
By: 
/s/ R. Wayne Jackson
 
 
 
R. Wayne Jackson
 
 
 
Chief Financial Officer
 
 
 
(Duly Authorized Officer)


Exhibit



 
Exhibit 99.1
http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12298251&doc=3

Secureworks Reports First Quarter Fiscal 2019 Results



First Quarter Fiscal 2019 Highlights
Revenue grew 11 percent over fiscal 2018 to $126.2 million.
Monthly recurring revenue (MRR) increased 11 percent year-over-year to $35.5 million.
International revenue grew 57 percent over prior year.
Revenue retention rate was 100 percent in the first quarter of fiscal 2019.

ATLANTA, Ga, June 6, 2018 - Secureworks (NASDAQ: SCWX), a leading global cybersecurity company that protects organizations in the digitally connected world, today announced financial results for its first quarter ended May 4, 2018.

“We had a strong start to the year with first quarter revenue and MRR each up 11 percent and with sales continuing its momentum. The global demand for our solutions continues to be large and growing. As a global leader, we are well positioned to succeed in the rapidly evolving cybersecurity space,” said Michael R. Cote, Chief Executive Officer of Secureworks.

“Our business model combines the power of years of historical attack data, our knowledge of the threat actors and technology including our algorithms to create a “network effect” delivering solutions to protect our clients. Our focus is on execution — on development efforts to bring innovative, technology-driven solutions to the market, on increasing velocity and impact for our clients through automation and on productivity initiatives across the organization,” continued Mr. Cote. “I am excited about our progress so far this year delivering results for our clients, as well as the progress we are making in executing against our strategic objectives.”

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

The annual value of closed deals in the first quarter increased 50 percent year over year and the total value of closed deals greater than $1 million increased 94 percent over the first quarter of fiscal 2018.
The Company recently launched a new pricing model for its Managed Detection and Response (MDR) solution. The MDR solution is a comprehensive solution that pinpoints real security threats, speeds investigation and provides context to improve response. The flexible, scalable pricing further improves our MDR offering to ensure that a coordinated defense continues across all key attack surfaces as the client organization grows.

First Quarter Fiscal 2019 Financial Results Highlights
Revenue increased 11.0 percent to $126.2 million in the first quarter of fiscal 2019, from $113.7 million in the same period last year. Non-GAAP revenue increased 10.8 percent to $126.2 million from $113.8 million in the first quarter of fiscal 2018.
Gross margin was 52.0 percent in the first quarter of 2019, compared with 52.8 percent in the same period last year. Non-GAAP gross margin was 54.9 percent compared with 56.1 percent in the first quarter of fiscal 2018.








First Quarter Fiscal 2019 Financial Results Highlights, continued

Operating loss was $17.6 million compared with $19.0 million in the first quarter of fiscal 2018; non-GAAP operating loss was $5.9 million compared with $8.0 million in the first quarter of last year.
Net loss was $13.8 million, or $0.17 per share, in the first quarter of fiscal 2019, compared with net loss of $13.3 million, or $0.17 per share, in the prior year. Non-GAAP net loss was $4.5 million, or $0.06 per share, in the first quarter of fiscal 2019, compared with a non-GAAP net loss of $5.5 million, or $0.07 per share, in the same prior year period.
Adjusted EBITDA loss was $2.6 million, compared to adjusted EBITDA loss of $5.0 million in the first quarter of fiscal 2018.
Cash used in operating activities for the first quarter of fiscal 2019 was $18.4 million.
Secureworks ended the first quarter of fiscal 2019 with $77.3 million in cash and cash equivalents.
Monthly recurring revenue as of May 4, 2018 increased 11.4 percent to $35.5 million from $31.9 million as of May 5, 2017. The Company’s monthly recurring revenue metric represents the monthly value of its subscription contracts, including operational backlog, as of period end.

Second Quarter and Full Fiscal Year 2019 Guidance

Secureworks provides guidance based on current market conditions and expectations. The guidance ranges provided below reflect adoption of ASC 606 and ASC 340-40, effective in the first quarter of fiscal 2019. The Company has posted historical, unaudited information related to the impact of adopting these standards on the investor section of its website.

For the second quarter of fiscal 2019 the Company expects:
Revenue of $127 to $128 million on both a GAAP and non-GAAP basis.
Net loss per share of $0.16 to $0.17 and non-GAAP net loss per share of $0.05 to $0.06.

Based on first 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 $515 to $518 million.
Net loss of $48 to $51 million and $0.59 to $0.63 on a per share basis. The increased net loss and net loss per share are primarily attributable to a lower tax benefit rate now anticipated for fiscal 2019 of approximately 22 percent.
Non-GAAP net loss per share of $0.15 to $0.19.
Adjusted EBITDA loss of $3 to $7 million.
Monthly recurring revenue of $38 to $39 million, at the end of the fourth quarter of fiscal 2019.
Cash flow from operations of $15 to 20 million.






Conference Call Information
As previously announced, the Company will hold a conference call to discuss its fiscal 2019 first quarter and outlook for its second quarter and fiscal year 2019 on June 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 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 second 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 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 capital structure and 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

Contact Information
Investor Inquiries:
Teri Miller
VP, Chief Accounting Officer
678-268-4389
temiller@secureworks.com

Media Inquiries:
Doreen Kelly Ruyak
Corporate Communications
202-744-9767
dkellyruyak@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
 
 
 
 
 
May 4, 2018
 
May 5, 2017*
Net revenue
 
$
126,161

 
$
113,678

Cost of revenue
 
60,530

 
53,613

 
Gross margin
 
65,631

 
60,065

 
Research and development
 
22,354

 
19,479

 
Sales and marketing
 
35,670

 
36,178

 
General and administrative
 
25,197

 
23,404

 
 
Total operating expenses
 
83,221

 
79,061

 
Operating loss
 
(17,590
)
 
(18,996
)
Interest and other, net
 
505

 
(649
)
 
Loss before income taxes
 
(17,085
)
 
(19,645
)
Income tax benefit
 
(3,266
)
 
(6,368
)
 
Net loss
 
$
(13,819
)
 
$
(13,277
)
 
 
 
 
 
Net loss per common share (basic and diluted)
 
$
(0.17
)
 
$
(0.17
)
Weighted-average common shares
 
 
 
 
 
outstanding (basic and diluted)
 
80,522

 
80,056

 
 
 
 
 
 
 
 
Percentage of Total Net Revenue
 
 
 
 
Gross margin
 
52.0
 %
 
52.8
 %
Research and development
 
17.7
 %
 
17.1
 %
Sales and marketing
 
28.3
 %
 
31.8
 %
General and administrative
 
20.0
 %
 
20.6
 %
Operating expenses
 
66.0
 %
 
69.5
 %
Operating loss
 
(13.9
)%
 
(16.7
)%
Loss before income taxes
 
(13.5
)%
 
(17.3
)%
Net loss
 
(11.0
)%
 
(11.7
)%
Effective tax rate
 
19.1
 %
 
32.4
 %
 
 
 
 
 
 
 
 
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)
 
 
 
 
 
 
 
 
 
 
 
 
 
May 4,
2018
 
February 2, 2018*
Assets:
 
 
 
 
 
Current assets:
 
 
 
 
 
 
Cash and cash equivalents
 
 
$
77,302

 
$
101,539

 
Accounts receivable, net
 
 
146,823

 
157,764

 
Inventories, net
 
 
670

 
1,030

 
Other current assets
 
 
42,125

 
40,551

 
 
Total current assets
 
 
266,920

 
300,884

Property and equipment, net
 
 
32,549

 
33,457

Goodwill
 
 
416,487

 
416,487

Purchased intangible assets, net
 
 
227,250

 
234,184

Other non-current assets
 
 
75,979

 
72,069

 
 
Total assets
 
 
$
1,019,185

 
$
1,057,081

Liabilities and Stockholders' Equity:
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
Accounts payable
 
 
$
19,458

 
$
23,266

 
Accrued and other
 
 
53,142

 
81,625

 
Short-term deferred revenue
 
 
146,700

 
137,697

 
 
Total current liabilities
 
 
219,300

 
242,588

Long-term deferred revenue
 
 
14,926

 
14,948

Other non-current liabilities
 
 
66,541

 
68,455

 
 
Total liabilities
 
 
300,767

 
325,991

Stockholders' equity
 
 
718,418

 
731,090

Total liabilities and stockholders' equity
 
 
$
1,019,185

 
$
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)
 
 
 
 
 
 
 
Three Months Ended
 
 
May 4, 2018
 
May 5, 2017*
Cash flows from operating activities:
 
 
 
 
Net loss
 
$
(13,819
)
 
$
(13,277
)
Adjustments to reconcile net loss to net cash used in operating activities
 
 
 
 
Depreciation and amortization
 
10,287

 
10,261

Stock-based compensation expense
 
4,730

 
3,628

Effects of exchange rate changes on monetary assets and liabilities denominated in foreign currencies
 
(377
)
 
649

Income tax benefit
 
(3,266
)
 
(6,368
)
Provision for doubtful accounts
 
1,492

 
889

Changes in assets and liabilities:
 
 
 
 
Accounts receivable
 
9,176

 
(10,494
)
Due to/from parent
 
1,103

 
7,506

Inventories
 
360

 
475

Other assets
 
(2,350
)
 
(1,124
)
Accounts payable
 
(3,343
)
 
1,027

Deferred revenue
 
8,668

 
8,155

Accrued and other liabilities
 
(31,065
)
 
(20,982
)
Net cash used in operating activities
 
(18,404
)
 
(19,655
)
Cash flows from investing activities:
 
 
 
 
Capital expenditures
 
(2,216
)
 
(3,350
)
Net cash used in investing activities
 
(2,216
)
 
(3,350
)
Cash flows from financing activities:
 
 
 
 
Principal payments on financing arrangement with Dell Financial Services
 
(1,104
)
 
(800
)
Taxes paid on vested restricted shares
 
(2,013
)
 
(1,224
)
Payments on financed capital expenditures
 
(500
)
 

Net cash (used in) provided by financing activities
 
(3,617
)
 
(2,024
)
Net (decrease) increase in cash and cash equivalents
 
(24,237
)
 
(25,029
)
Cash and cash equivalents at beginning of the period
 
101,539

 
116,595

Cash and cash equivalents at end of the period
 
$
77,302

 
$
91,566

* 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
 
 
 
 
May 4, 2018
 
May 5, 2017*
GAAP revenue
 
$
126,161

 
$
113,678

 
Impact of purchase accounting
 

 
146

 
 
Non-GAAP revenue
 
$
126,161

 
$
113,824

 
 
 
 
 
 
 
GAAP gross margin
 
$
65,631

 
$
60,065

 
Amortization of intangibles
 
3,410

 
3,410

 
Impact of purchase accounting
 

 
156

 
Stock-based compensation expense
 
269

 
224

 
 
Non-GAAP gross margin
 
$
69,310

 
$
63,855

 
 
 
 
 
 
 
GAAP research and development expenses
 
$
22,354

 
$
19,479

 
Stock-based compensation expense
 
(1,031
)
 
(814
)
 
 
Non-GAAP research and development expenses
$
21,323

 
$
18,665

 
 
 
 
 
 
 
GAAP sales and marketing expenses
 
$
35,670

 
$
36,178

 
Stock-based compensation expense
 
(621
)
 
(214
)
 
 
Non-GAAP sales and marketing expenses
 
$
35,049

 
$
35,964

 
 
 
 
 
 
 
GAAP general and administrative expenses
 
$
25,197

 
$
23,404

 
Amortization of intangibles
 
(3,524
)
 
(3,524
)
 
Impact of purchase accounting
 

 
(256
)
 
Stock-based compensation expense
 
(2,809
)
 
(2,376
)
 
 
Non-GAAP general and administrative expenses
$
18,864

 
$
17,248

 
 
 
 
 
 
 
GAAP operating loss
 
$
(17,590
)
 
$
(18,996
)
 
Amortization of intangibles
 
6,934

 
6,934

 
Impact of purchase accounting
 

 
412

 
Stock-based compensation expense
 
4,730

 
3,628

 
 
Non-GAAP operating loss
 
$
(5,926
)
 
$
(8,022
)
 
 
 
 
 
 
 
GAAP net loss
 
$
(13,819
)
 
$
(13,277
)
 
Amortization of intangibles
 
6,934

 
6,934

 
Impact of purchase accounting
 

 
412

 
Stock-based compensation expense
 
4,730

 
3,628

 
Aggregate adjustment for income taxes
 
(2,391
)
 
(3,234
)
 
 
Non-GAAP net loss
 
$
(4,546
)
 
$
(5,537
)
 
 
 
 
 
 
 
GAAP net loss per share
 
$
(0.17
)
 
$
(0.17
)
 
Amortization of intangibles
 
0.09

 
0.09

 
Impact of purchase accounting
 

 
0.01

 
Stock-based compensation expense
 
0.06

 
0.05

 
Aggregate adjustment for income taxes
 
(0.03
)
 
(0.04
)
 
 
Non-GAAP net loss per share *
 
$
(0.06
)
 
$
(0.07
)
 
 
 
 
 
 
 
* Sum of reconciling items may differ from total due to rounding of individual components





 
 
 
 
 
 
 
GAAP net loss
 
$
(13,819
)
 
$
(13,277
)
 
Interest and other, net
 
(505
)
 
649

 
Income tax benefit
 
(3,266
)
 
(6,368
)
 
Depreciation and amortization
 
10,287

 
10,261

 
Stock-based compensation expense
 
4,730

 
3,628

 
Impact of purchase accounting
 

 
146

 
 
Adjusted EBITDA
 
$
(2,573
)
 
$
(4,961
)
* 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
Percentage of Total Net Revenue
 
May 4, 2018
 
May 5, 2017*
 
 
 
 
 
GAAP gross margin
 
52.0
 %
 
52.8
 %
 
Non-GAAP adjustment
 
2.9
 %
 
3.3
 %
Non-GAAP gross margin
 
54.9
 %
 
56.1
 %
 
 
 
 
 
 
 
GAAP research and development expenses
 
17.7
 %
 
17.1
 %
 
Non-GAAP adjustment
 
(0.8
)%
 
(0.7
)%
Non-GAAP research and development expenses
 
16.9
 %
 
16.4
 %
 
 
 
 
 
 
 
GAAP sales and marketing expenses
 
28.3
 %
 
31.8
 %
 
Non-GAAP adjustment
 
(0.5
)%
 
(0.2
)%
Non-GAAP sales and marketing expenses
 
27.8
 %
 
31.6
 %
 
 
 
 
 
 
 
GAAP general and administrative expenses
 
20.0
 %
 
20.6
 %
 
Non-GAAP adjustment
 
(5.0
)%
 
(5.4
)%
Non-GAAP general and administrative expenses
 
15.0
 %
 
15.2
 %
 
 
 
 
 
 
 
GAAP operating loss
 
(13.9
)%
 
(16.7
)%
 
Non-GAAP adjustment
 
9.2
 %
 
9.7
 %
Non-GAAP operating loss
 
(4.7
)%
 
(7.0
)%
 
 
 
 
 
 
 
GAAP net loss
 
(11.0
)%
 
(11.7
)%
 
Non-GAAP adjustment
 
7.4
 %
 
6.8
 %
Non-GAAP net loss
 
(3.6
)%
 
(4.9
)%
* 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 August 3, 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
 
$
127

 
$
128

 
$
515

 
$
518

Impact of purchase accounting
 

 

 

 

Non-GAAP revenue
 
$
127

 
$
128

 
$
515

 
$
518

 
 
 
 
 
 
 
 
 
GAAP net loss per share
 
$
(0.17
)
 
$
(0.16
)
 
$
(0.63
)
 
$
(0.59
)
Amortization of intangibles
 
0.09

 
0.09

 
0.34

 
0.34

Stock-based compensation expense
 
0.06

 
0.06

 
0.23

 
0.23

Aggregate adjustment for income taxes
 
(0.03
)
 
(0.03
)
 
(0.13
)
 
(0.13
)
Non-GAAP net loss per share*
 
$
(0.06
)
 
$
(0.05
)
 
$
(0.19
)
 
$
(0.15
)
 
 
 
 
 
 
 
 
 
GAAP net loss
 
 
 
 
 
$
(51
)
 
$
(48
)
Interest and other, net
 
 
 
 
 

 

Income tax benefit
 
 
 
 
 
(14
)
 
(14
)
Depreciation and amortization
 
 
 
 
 
40

 
40

Stock-based compensation expense
 
 
 
 
 
18

 
18

Adjusted EBITDA*
 
 
 
 
 
$
(7
)
 
$
(3
)
 
 
 
 
 
 
 
 
 
Other Items
 
 
 
 
 
 
 
 
Effective tax rate
 
 
 
 
 
 
 
22
%
Weighted average shares outstanding (in millions)
 
 
 
 
 
 
 
80.8

Cash flow from operations
 
 
 
 
 
 
 
$15-$20

Capital expenditures
 
 
 
 
 
 
 
$16-$17

Monthly recurring revenue (MRR)
 
 
 
 
 
 
 
$38-$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