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):      September 5, 2019

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)

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

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Class A Common Stock, 
par value $0.01 per share
SCWX
The NASDAQ Stock Market LLC
(NASDAQ Global Select Market)

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 September 5, 2019, SecureWorks Corp. (the “Company”) issued a press release announcing its financial results for its fiscal quarter ended August 2, 2019, which is the Company’s second quarter of fiscal 2020. 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
 

2



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:
September 5, 2019
SecureWorks Corp.
 
 
 
 
 
 
By: 
/s/ R. Wayne Jackson
 
 
 
R. Wayne Jackson
 
 
 
Chief Financial Officer
 
 
 
(Duly Authorized Officer)


3
Exhibit



 
Exhibit 99.1
http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=13096218&doc=3
Secureworks Reports Second Quarter Fiscal 2020 Results

Second Quarter Fiscal 2020 Highlights
Revenue of $136.6 million, increased 6.1 percent from the second quarter of fiscal 2019, including an increase of 26.7 percent, internationally.
Net loss of $0.13 per share and non-GAAP net loss per share of $0.01 exceeded expectations.
GAAP net loss was $10.3 million in the second quarter of fiscal 2020, compared with $9.8 million in the second quarter of fiscal 2019.
Adjusted EBITDA was $1.3 million, compared with $1.0 million in the second quarter of fiscal 2019.
Cash provided by operating activities was $16.3 million in the second quarter, bringing year-to-date cash provided by operating activities to $13.2 million, compared with $10.9 million second quarter year-to-date in fiscal 2019

ATLANTA, Ga, September 5, 2019 - 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 2, 2019.

“The future of security operations requires a more agile, scalable, and effective model to address the challenges of today’s dynamic IT landscape and rapidly evolving threats. The ‘SOC of the future’ demands a leap forward in capabilities made possible through software-driven solutions that leverage the speed and scale of machine learning, crowd-sourced threat intelligence and incident response insights to provide visibility across a customer’s environment, real-time collaboration with experts and smarter automation.” said Michael R. Cote, Chief Executive Officer of Secureworks.

“Our business is undergoing an exciting strategic transition as we bring our vision of the ‘SOC of the future’ to life. Our recently launched SaaS based Red Cloak TDR software application and our MDR solution leverage our security operations expertise and 20 year history of understanding the threat. I am encouraged by the positive response in the marketplace and pleased with the improved results this quarter, as we continue to invest in the advancement of our portfolio of software-driven security solutions to drive growth and long-term value,” continued Mr. Cote.

Business and operational developments include:

The Company recently launched Managed Detection and Response (MDR), powered by Red CloakTM, using its cloud-based security analytics platform to deliver threat detection and response with unprecedented speed and accuracy. The actionable insights generated by Red Cloak Threat Detection and Response (TDR), Secureworks’ SaaS product, are now available to organizations that want software-enabled threat hunting, detection and response capabilities, but prefer the turnkey support of an experienced provider.

Second Quarter Fiscal 2020 Financial Results Highlights
Both GAAP and non-GAAP revenue increased 6.1 percent to $136.6 million from $128.8 million in the second quarter of fiscal 2019.
GAAP gross margin was 53.4 percent in the second quarter of fiscal 2020, compared with 51.4 percent in the same period last year. Non-GAAP gross margin was 56.3 percent compared with 54.3 percent in the second quarter of fiscal 2019.





GAAP net loss was $10.3 million, or $0.13 per share, in the second quarter of fiscal 2020, compared with $9.8 million, or $0.12 per share, in the prior year. Non-GAAP net loss was $0.7 million, or $0.01 per share, in the second quarter of fiscal 2020, compared with $0.9 million, or $0.01 per share, in the same prior year period.
Adjusted EBITDA was $1.3 million, compared with $1.0 million in the second quarter of fiscal 2019.
Cash provided by operating activities for the three months ended August 2, 2019 was $16.3 million.
Secureworks ended the second quarter of fiscal 2020 with $117.7 million in cash and cash equivalents.
Monthly recurring revenue as of August 2, 2019 was $36.5 million. 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 2020 Guidance
For the third quarter of fiscal 2020, the Company expects:
Revenue of $135 to $137 million on both a GAAP and non-GAAP basis.
GAAP net loss per share of $0.15 to $0.16 and non-GAAP net loss per share of $0.03 to $0.04.

Based on second quarter fiscal 2020 performance and current business trends, the Company has updated its guidance for the full fiscal year 2020. The Company now expects:
GAAP and non-GAAP revenue of $540 to $545 million.
GAAP net loss of $42 to $44 million and $0.52 to $0.55 on a per share basis.
Non-GAAP net loss per share of $0.08 to $0.11.
Adjusted EBITDA of $2 to $5 million.
Cash flow from operations of $30 to $35 million.

Conference Call Information
As previously announced, the Company will hold a conference call to discuss its second quarter fiscal 2020 results and outlook for its third quarter and full year fiscal 2020 on September 5, 2019, at 8:00 a.m. ET. A live audio webcast of the conference call and the related supplemental financial information will be accessible on the Company’s website at http://investors.secureworks.com. The webcast and supplemental information will be archived at the same location for one year.

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 2020 and for full year fiscal 2020, and net loss, adjusted EBITDA, and cash flow from operations for full year fiscal 2020, 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 customers, retain existing customers and increase its annual contract values; the Company’s reliance on customers in the financial services industry; the Company’s ability to manage its growth effectively; the Company’s ability to maintain high-quality client service and support functions; the Company’s service level agreements with customers 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 effect of Brexit on the Company’s operations; the Company’s ability to expand its key distribution relationships; the Company’s technology alliance partnerships; real or perceived defects, errors or vulnerabilities in the Company’s solutions or the failure of its solutions to prevent a security breach; the risks associated with cyber attacks or other data security incidents; the ability of the Company’s solutions to interoperate with its customers’ IT infrastructure; the Company’s ability to use third-party technologies; the effect of evolving information security and data privacy laws and regulations on the Company’s business; the Company’s ability to maintain and enhance its brand; risks associated with the Company’s acquisition of other businesses; the Company’s recognition of revenue ratably over the terms of its managed security and threat intelligence contracts; estimates or judgments relating to the Company’s critical accounting policies; the Company’s exposure to fluctuations in currency exchange rates; the effect of governmental export or import controls on the Company’s business; the Company’s compliance with the Foreign Corrupt Practices Act and similar laws; the Company’s ability to maintain effective disclosure controls and procedures; the effect of natural disasters and other catastrophic events on the Company’s ability to serve its customers; 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 1, 2019, 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 technology-driven cybersecurity leader that protects organizations in the digitally connected world. Built on proprietary technologies and world-class threat intelligence, our applications and solutions help prevent, detect, and respond to cyber threats.  Red Cloak™ software brings advanced threat analytics to thousands of customers, and the Secureworks Counter Threat Platform™ processes over 300 billion threat events per day. We understand complex security





environments and are passionate about simplifying security with Defense in Concert™ so that security becomes a business enabler. More than 4,000 customers across over 50 countries are protected by Secureworks, benefit from our network effect and are 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
press@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 2, 2019
 
August 3, 2018
 
August 2, 2019
 
August 3, 2018
Net revenue
 
$
136,605

 
$
128,778

 
$
269,447

 
$
254,939

Cost of revenue
 
63,595

 
62,548

 
126,436

 
123,078

 
Gross margin
 
73,010

 
66,230

 
143,011

 
131,861

 
Research and development
 
24,863

 
22,453

 
47,505

 
44,807

 
Sales and marketing
 
38,047

 
35,521

 
76,240

 
71,191

 
General and administrative
 
25,146

 
22,419

 
48,784

 
47,616

 
 
Total operating expenses
 
88,056

 
80,393

 
172,529

 
163,614

 
Operating loss
 
(15,046
)
 
(14,163
)
 
(29,518
)
 
(31,753
)
Interest and other, net
 
1,950

 
1,003

 
2,218

 
1,508

 
Loss before income taxes
 
(13,096
)
 
(13,160
)
 
(27,300
)
 
(30,245
)
Income tax benefit
 
(2,836
)
 
(3,391
)
 
(8,770
)
 
(6,657
)
 
Net loss
 
$
(10,260
)
 
$
(9,769
)
 
$
(18,530
)
 
$
(23,588
)
 
 
 
 
 
 
 
 
 
Loss per common share (basic and diluted)
 
$
(0.13
)
 
$
(0.12
)
 
$
(0.23
)
 
$
(0.29
)
 
 
 
 
 
 
 
 
 
Weighted-average common shares outstanding (basic and diluted)
 
80,674

 
80,839

 
80,571

 
80,680

 
 
 
 
 
 
 
 
 
 
 
 
Percentage of Total Net Revenue
 
 
 
 
 
 
 
 
Gross margin
 
53.4
 %
 
51.4
 %
 
53.1
 %
 
51.7
 %
Research and development
 
18.2
 %
 
17.4
 %
 
17.6
 %
 
17.6
 %
Sales and marketing
 
27.9
 %
 
27.6
 %
 
28.3
 %
 
27.9
 %
General and administrative
 
18.4
 %
 
17.4
 %
 
18.1
 %
 
18.7
 %
Operating expenses
 
64.5
 %
 
62.4
 %
 
64.0
 %
 
64.2
 %
Operating loss
 
(11.0
)%
 
(11.0
)%
 
(11.0
)%
 
(12.5
)%
Loss before income taxes
 
(9.6
)%
 
(10.2
)%
 
(10.1
)%
 
(11.9
)%
Net loss
 
(7.5
)%
 
(7.6
)%
 
(6.9
)%
 
(9.3
)%
Effective tax rate
 
21.7
 %
 
25.8
 %
 
32.1
 %
 
22.0
 %
 
 
 
 
 
 
 
 
 
 
 
 
Note: Percentage growth rates are calculated based on underlying data in thousands








SECUREWORKS CORP.
Condensed Consolidated Statements of Financial Position
(in thousands)
(unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
August 2,
2019
 
February 1, 2019
Assets:
 
 
 
 
 
Current assets:
 
 
 
 
 
 
Cash and cash equivalents
 
 
$
117,716

 
$
129,592

 
Accounts receivable, net
 
 
120,104

 
141,344

 
Inventories, net
 
 
1,090

 
468

 
Other current assets
 
 
24,591

 
27,604

 
 
Total current assets
 
 
263,501

 
299,008

Property and equipment, net
 
 
33,210

 
35,978

Operating lease right-of-use assets, net
 
 
25,034

 

Goodwill
 
 
416,487

 
416,487

Purchased intangible assets, net
 
 
192,580

 
206,448

Other non-current assets
 
 
90,463

 
78,238

 
 
Total assets
 
 
$
1,021,275

 
$
1,036,159

Liabilities and Stockholders' Equity:
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
Accounts payable
 
 
$
19,224

 
$
16,177

 
Accrued and other
 
 
61,757

 
86,495

 
Short-term deferred revenue
 
 
165,206

 
157,865

 
 
Total current liabilities
 
 
246,187

 
260,537

Long-term deferred revenue
 
 
15,997

 
16,064

Operating lease liabilities, non-current
 
 
27,800

 

Other non-current liabilities
 
 
62,980

 
66,851

 
 
Total liabilities
 
 
352,964

 
343,452

Stockholders' equity
 
 
668,311

 
692,707

Total liabilities and stockholders' equity
 
 
$
1,021,275

 
$
1,036,159







SECUREWORKS CORP.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
 
 
 
 
 
 
 
Six Months Ended
 
 
August 2, 2019
 
August 3, 2018
Cash flows from operating activities:
 
 
 
 
Net loss
 
$
(18,530
)
 
$
(23,588
)
Adjustments to reconcile net loss to net cash provided by operating activities
 
 
 
 
Depreciation and amortization
 
21,148

 
20,512

Stock-based compensation expense
 
10,525

 
9,642

Effects of exchange rate changes on monetary assets and liabilities denominated in foreign currencies
 
(1,650
)
 
(1,275
)
Income tax benefit
 
(8,770
)
 
(6,657
)
Other non cash impacts
 
1,830

 

Provision for doubtful accounts
 
1,026

 
1,571

Changes in assets and liabilities:
 
 
 
 
Accounts receivable
 
20,147

 
22,542

Net transactions with parent
 
(12,902
)
 
(1,334
)
Inventories
 
(622
)
 
407

Other assets
 
5,514

 
(5,162
)
Accounts payable
 
7,423

 
(1,392
)
Deferred revenue
 
7,175

 
12,240

Accrued and other liabilities
 
(19,082
)
 
(16,620
)
Net cash provided by operating activities
 
13,232

 
10,886

Cash flows from investing activities:
 
 
 
 
Capital expenditures
 
(10,659
)
 
(5,366
)
Net cash used in investing activities
 
(10,659
)
 
(5,366
)
Cash flows from financing activities:
 
 
 
 
Principal payments on financing arrangement with Dell Financial Services
 

 
(1,104
)
Taxes paid on vested restricted shares
 
(8,072
)
 
(2,139
)
Purchases of stock for treasury
 
(6,377
)
 

Payments on financed capital expenditures
 

 
(500
)
Net cash used in financing activities
 
(14,449
)
 
(3,743
)
Net (decrease)/increase in cash and cash equivalents
 
(11,876
)
 
1,777

Cash and cash equivalents at beginning of the period
 
129,592

 
101,539

Cash and cash equivalents at end of the period
 
$
117,716

 
$
103,316








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. A detailed discussion of the Company’s reasons for including these non-GAAP financial measures, the limitations associated with these measures, the items excluded from these measures, and our reason for excluding those items are presented in “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Non-GAAP Financial Measures” in our periodic reports filed with the SEC. The Company encourages investors to review the non-GAAP discussion in conjunction with the presentation of non-GAAP financial measures.

(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 2, 2019
 
August 3, 2018
 
August 2, 2019
 
August 3, 2018
GAAP and non-GAAP revenue
 
$
136,605

 
$
128,778

 
$
269,447

 
$
254,939

 
 
 
 
 
 
 
 
 
 
 
GAAP gross margin
 
$
73,010

 
$
66,230

 
$
143,011

 
$
131,861

 
Amortization of intangibles
 
3,560

 
3,411

 
6,970

 
6,821

 
Stock-based compensation expense
 
396

 
275

 
656

 
544

 
 
Non-GAAP gross margin
 
$
76,966

 
$
69,916

 
$
150,637

 
$
139,226

 
 
 
 
 
 
 
 
 
 
 
GAAP research and development expenses
 
$
24,863

 
$
22,453

 
$
47,505

 
$
44,807

 
Stock-based compensation expense
 
(985
)
 
(1,006
)
 
(2,161
)
 
(2,037
)
 
 
Non-GAAP research and development expenses
$
23,878

 
$
21,447

 
$
45,344

 
$
42,770

 
 
 
 
 
 
 
 
 
 
 
GAAP sales and marketing expenses
 
$
38,047

 
$
35,521

 
$
76,240

 
$
71,191

 
Stock-based compensation expense
 
(917
)
 
(720
)
 
(1,698
)
 
(1,341
)
 
 
Non-GAAP sales and marketing expenses
 
$
37,130

 
$
34,801

 
$
74,542

 
$
69,850

 
 
 
 
 
 
 
 
 
 
 
GAAP general and administrative expenses
 
$
25,146

 
$
22,419

 
$
48,784

 
$
47,616

 
Amortization of intangibles
 
(3,524
)
 
(3,523
)
 
(7,047
)
 
(7,047
)
 
Stock-based compensation expense
 
(3,311
)
 
(2,911
)
 
(6,010
)
 
(5,720
)
 
 
Non-GAAP general and administrative expenses
$
18,311

 
$
15,985

 
$
35,727

 
$
34,849

 
 
 
 
 
 
 
 
 
 
 
GAAP operating income (loss)
 
$
(15,046
)
 
$
(14,163
)
 
$
(29,518
)
 
$
(31,753
)
 
Amortization of intangibles
 
7,083

 
6,934

 
14,017

 
13,868

 
Stock-based compensation expense
 
5,609

 
4,912

 
10,525

 
9,642

 
 
Non-GAAP operating income (loss)
 
$
(2,354
)
 
$
(2,317
)
 
$
(4,976
)
 
$
(8,243
)
 
 
 
 
 
 
 
 
 
 
 
GAAP net income (loss)
 
$
(10,260
)
 
$
(9,769
)
 
$
(18,530
)
 
$
(23,588
)
 
Amortization of intangibles
 
7,083

 
6,934

 
14,017

 
13,868

 
Stock-based compensation expense
 
5,609

 
4,912

 
10,525

 
9,642

 
Aggregate adjustment for income taxes
 
(3,092
)
 
(2,938
)
 
(8,559
)
 
(5,329
)
 
 
Non-GAAP net income (loss)
 
$
(660
)
 
$
(861
)
 
$
(2,547
)
 
$
(5,407
)
 
 
 
 
 
 
 
 
 
 
 
GAAP earnings (loss) per share
 
$
(0.13
)
 
$
(0.12
)
 
$
(0.23
)
 
$
(0.29
)
 
Amortization of intangibles
 
0.08

 
0.09

 
0.17

 
0.17

 
Stock-based compensation expense
 
0.07

 
0.06

 
0.13

 
0.12

 
Aggregate adjustment for income taxes
 
(0.04
)
 
(0.04
)
 
(0.11
)
 
(0.07
)
 
 
Non-GAAP earnings (loss) per share *
 
$
(0.01
)
 
$
(0.01
)
 
$
(0.03
)
 
$
(0.07
)
 
 
 
 
 
 
 
 
 
 
 
* Sum of reconciling items may differ from total due to rounding of individual components
 
 
 
 
 
 
 
 
 
 
 
GAAP net income (loss)
 
$
(10,260
)
 
$
(9,769
)
 
$
(18,530
)
 
$
(23,588
)
 
Interest and other, net
 
(1,950
)
 
(1,003
)
 
(2,218
)
 
(1,508
)
 
Income tax benefit
 
(2,836
)
 
(3,391
)
 
(8,770
)
 
(6,657
)
 
Depreciation and amortization
 
10,783

 
10,225

 
21,148

 
20,512

 
Stock-based compensation expense
 
5,609

 
4,912

 
10,525

 
9,642

 
 
Adjusted EBITDA
 
$
1,346

 
$
974

 
$
2,155

 
$
(1,599
)






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 2, 2019
 
August 3, 2018
 
August 2, 2019
 
August 3, 2018
 
 
 
 
 
 
 
 
 
GAAP gross margin
 
53.4
 %
 
51.4
 %
 
53.1
 %
 
51.7
 %
 
Non-GAAP adjustment
 
2.9
 %
 
2.9
 %
 
2.8
 %
 
2.9
 %
Non-GAAP gross margin
 
56.3
 %
 
54.3
 %
 
55.9
 %
 
54.6
 %
 
 
 
 
 
 
 
 
 
 
 
GAAP research and development expenses
 
18.2
 %
 
17.4
 %
 
17.6
 %
 
17.6
 %
 
Non-GAAP adjustment
 
(0.7
)%
 
(0.7
)%
 
(0.8
)%
 
(0.8
)%
Non-GAAP research and development expenses
 
17.5
 %
 
16.7
 %
 
16.8
 %
 
16.8
 %
 
 
 
 
 
 
 
 
 
 
 
GAAP sales and marketing expenses
 
27.9
 %
 
27.6
 %
 
28.3
 %
 
27.9
 %
 
Non-GAAP adjustment
 
(0.7
)%
 
(0.6
)%
 
(0.6
)%
 
(0.5
)%
Non-GAAP sales and marketing expenses
 
27.2
 %
 
27.0
 %
 
27.7
 %
 
27.4
 %
 
 
 
 
 
 
 
 
 
 
 
GAAP general and administrative expenses
 
18.4
 %
 
17.4
 %
 
18.1
 %
 
18.7
 %
 
Non-GAAP adjustment
 
(5.0
)%
 
(5.0
)%
 
(4.8
)%
 
(5.0
)%
Non-GAAP general and administrative expenses
 
13.4
 %
 
12.4
 %
 
13.3
 %
 
13.7
 %
 
 
 
 
 
 
 
 
 
 
 
GAAP operating (loss)
 
(11.0
)%
 
(11.0
)%
 
(11.0
)%
 
(12.5
)%
 
Non-GAAP adjustment
 
9.3
 %
 
9.2
 %
 
9.2
 %
 
9.3
 %
Non-GAAP operating (loss)
 
(1.7
)%
 
(1.8
)%
 
(1.8
)%
 
(3.2
)%
 
 
 
 
 
 
 
 
 
 
 
GAAP net (loss)
 
(7.5
)%
 
(7.6
)%
 
(6.9
)%
 
(9.3
)%
 
Non-GAAP adjustment
 
7.0
 %
 
6.9
 %
 
6.0
 %
 
7.2
 %
Non-GAAP net (loss)
 
(0.5
)%
 
(0.7
)%
 
(0.9
)%
 
(2.1
)%






SECUREWORKS CORP.
Reconciliation of GAAP to Non-GAAP Financial Measures
(in millions, except per share data)
(unaudited)
 
 
 
 
 
 
 
 
 
 
 
Three Months Ending
 
Fiscal Year Ending
 
 
November 1, 2019
 
January 31, 2020
 
 
Low End of Guidance
 
High End of Guidance
 
Low End of Guidance
 
High End of Guidance
 
 
 
 
 
 
 
 
 
GAAP and non-GAAP revenue
 
$
135

 
$
137

 
$
540

 
$
545

 
 
 
 
 
 
 
 
 
GAAP (loss) per share
 
$
(0.16
)
 
$
(0.15
)
 
$
(0.55
)
 
$
(0.52
)
Amortization of intangibles
 
0.09

 
0.09

 
0.35

 
0.35

Stock-based compensation expense
 
0.07

 
0.07

 
0.28

 
0.28

Aggregate adjustment for income taxes
 
(0.04
)
 
(0.04
)
 
(0.19
)
 
(0.19
)
Non-GAAP (loss) per share*
 
$
(0.04
)
 
$
(0.03
)
 
$
(0.11
)
 
$
(0.08
)
 
 
 
 
 
 
 
 
 
GAAP net loss
 
 
 
 
 
$
(44
)
 
$
(42
)
Interest and other, net
 
 
 
 
 
(2
)
 
(2
)
Income tax benefit
 
 
 
 
 
(17
)
 
(16
)
Depreciation and amortization
 
 
 
 
 
43

 
43

Stock-based compensation expense
 
 
 
 
 
22

 
22

Adjusted EBITDA*
 
 
 
 
 
$
2

 
$
5

 
 
 
 
 
 
 
 
 
Other Items
 
 
 
 
 
 
 
 
Effective tax rate
 
 
 
 
 
 
 
24
%
Weighted average shares outstanding (in millions)
 
 
 
 
 
 
 
80.5

Cash flow from operations
 
 
 
 
 
 
 
$30-$35

Capital expenditures
 
 
 
 
 
 
 
$14-$16


* 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