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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
 
(Mark One) 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 30, 2020
 
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from            to           
Commission File Number: 001-37748
https://cdn.kscope.io/de29791afeb520201cb49b78dd4d3d47-scwx-20201030_g1.jpg
 
SecureWorks Corp.
(Exact name of registrant as specified in its charter)
Delaware
27-0463349
(State or other jurisdiction of
incorporation or organization)
(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, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A Common Stock, SCWXThe Nasdaq Stock Market LLC
par value $0.01 per share(Nasdaq Global Select Market)
    Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes   No 
    Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes    No 
    Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer  Accelerated filer
Non-accelerated filer   Smaller reporting company 
Emerging growth company
     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.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No 
    As of December 1, 2020, there were 82,237,741 shares of the registrant's common stock outstanding, consisting of 12,237,741 outstanding shares of Class A common stock and 70,000,000 outstanding shares of Class B common stock.




TABLE OF CONTENTS
ITEM PAGE
 






Except where the content otherwise requires or where otherwise indicated, all references in this report to "Secureworks," "we," "us," "our" and "our Company" to refer to SecureWorks Corp. and our subsidiaries on a consolidated basis.

Part I. Financial Information
Item 1. Financial Statements
SECUREWORKS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Unaudited)
(in thousands, except for per share data)
 October 30,
2020
January 31,
2020
ASSETS
Current assets: 
Cash and cash equivalents$188,048 $181,838 
Accounts receivable, net of allowances of $5,332 and $5,120, respectively
107,907 111,798 
Inventories, net690 746 
Other current assets25,992 27,449 
Total current assets322,637 321,831 
Property and equipment, net19,669 27,606 
Operating lease right-of-use assets, net22,421 23,463 
Goodwill425,314 416,487 
Intangible assets, net164,928 180,052 
Other non-current assets76,488 78,592 
Total assets$1,031,457 $1,048,031 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable$20,874 $18,690 
Accrued and other current liabilities88,208 98,855 
Short-term deferred revenue173,536 175,847 
Total current liabilities282,618 293,392 
Long-term deferred revenue9,930 12,690 
Operating lease liabilities, non-current22,828 24,669 
Other non-current liabilities48,932 50,400 
Total liabilities364,308 381,151 
Commitments and contingencies (Note 7)
Stockholders' equity:
Preferred stock - $0.01 par value: 200,000 shares authorized; shares issued
  
Common stock - Class A of $0.01 par value: 2,500,000 shares authorized; 12,236 and 11,206 issued and outstanding, respectively.
122 112 
Common stock - Class B of $0.01 par value: 500,000 shares authorized; 70,000 shares issued and outstanding
700 700 
Additional paid in capital909,686 896,983 
Accumulated deficit(220,300)(207,929)
Accumulated other comprehensive loss(3,163)(3,090)
Treasury stock, at cost - 1,257 shares
(19,896)(19,896)
Total stockholders' equity667,149 666,880 
Total liabilities and stockholders' equity$1,031,457 $1,048,031 
 The accompanying notes are an integral part of these condensed consolidated financial statements.
3


SECUREWORKS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(in thousands, except per share data)
Three Months EndedNine Months Ended
 October 30, 2020November 1, 2019October 30, 2020November 1, 2019
  
Net revenue$141,641 $141,332 $421,298 $410,779 
Cost of revenue59,613 61,568 182,422 188,004 
Gross margin82,028 79,764 238,876 222,775 
Research and development27,608 24,095 75,790 71,600 
Sales and marketing34,810 40,726 107,886 116,966 
General and administrative24,508 25,078 73,824 73,862 
Total operating expenses86,926 89,899 257,500 262,428 
Operating loss(4,898)(10,135)(18,624)(39,653)
Interest and other, net(79)(1,257)944 961 
Loss before income taxes(4,977)(11,392)(17,680)(38,692)
Income tax benefit(1,369)(3,484)(5,309)(12,254)
Net loss$(3,608)$(7,908)$(12,371)$(26,438)
Loss per common share (basic and diluted)$(0.04)$(0.10)$(0.15)$(0.33)
Weighted-average common shares outstanding (basic and diluted)81,474 80,518 81,276 80,553 
 The accompanying notes are an integral part of these condensed consolidated financial statements.


4


SECUREWORKS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Unaudited)
(in thousands)
Three Months EndedNine Months Ended
October 30, 2020November 1, 2019October 30, 2020November 1, 2019
Net loss$(3,608)$(7,908)$(12,371)$(26,438)
Foreign currency translation adjustments, net of tax(587)1,602 (73)(340)
Comprehensive loss$(4,195)$(6,306)$(12,444)$(26,778)

The accompanying notes are an integral part of these condensed consolidated financial statements.
5


SECUREWORKS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(in thousands)
Nine Months Ended
 October 30,
2020
November 1,
2019
Cash flows from operating activities:
Net loss$(12,371)$(26,438)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization30,978 32,017 
Stock-based compensation expense17,675 15,617 
Effects of exchange rate changes on monetary assets and liabilities denominated in foreign currencies(1,190)(102)
Income tax benefit(5,309)(12,254)
Other non cash impacts150 1,830 
Provision for doubtful accounts1,871 1,651 
Changes in assets and liabilities, net of effect of business combination:
Accounts receivable2,296 21,689 
Net transactions with parent5,586 (18,571)
Inventories56 (438)
Other assets5,593 10,838 
Accounts payable2,668 9,086 
Deferred revenue(4,820)9,848 
Accrued and other liabilities(14,749)(8,921)
Net cash provided by operating activities28,434 35,852 
Cash flows from investing activities:  
Capital expenditures(2,181)(12,082)
Acquisition of business, net of cash acquired(15,081) 
Net cash used in investing activities(17,262)(12,082)
Cash flows from financing activities:  
Taxes paid on vested restricted shares(4,962)(8,197)
Purchases of stock for treasury (6,377)
Net cash used in financing activities(4,962)(14,574)
Net increase in cash and cash equivalents6,210 9,196 
Cash and cash equivalents at beginning of the period181,838 129,592 
Cash and cash equivalents at end of the period$188,048 $138,788 

The accompanying notes are an integral part of these condensed consolidated financial statements.
6


SECUREWORKS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited)
(in thousands, except per share data)

Three Months Ended October 30, 2020Common Stock - Class ACommon Stock - Class B
 Outstanding SharesAmountOutstanding SharesAmountAdditional Paid in CapitalAccumulated DeficitAccumulated Other Comprehensive Income (Loss)Treasury
Stock
Total Stockholders' Equity
Balances, July 31, 202012,186 $122 70,000 $700 $903,909 $(216,692)$(2,576)$(19,896)$665,567 
Net loss— — — — — (3,608)— — (3,608)
Other comprehensive loss— — — — — — (587)— (587)
Vesting of restricted stock units75 — — — — — — —  
Common stock withheld as payment for withholding taxes upon the vesting of restricted shares(25)— — — (304)— — — (304)
Stock-based compensation— — — — 6,081 — — — 6,081 
Balance, October 30, 202012,236 $122 70,000 $700 $909,686 $(220,300)$(3,163)$(19,896)$667,149 

Nine Months Ended October 30, 2020Common Stock - Class ACommon Stock - Class B
 Outstanding SharesAmountOutstanding SharesAmountAdditional Paid in CapitalAccumulated DeficitAccumulated Other Comprehensive Income (Loss)Treasury
Stock
Total Stockholders' Equity
Balances, January 31, 202011,206 $112 70,000 $700 $896,983 $(207,929)$(3,090)$(19,896)$666,880 
Net loss— — — — — (12,371)— — (12,371)
Other comprehensive loss— — — — — — (73)— (73)
Vesting of restricted stock units993 9 — — (9)— — —  
Grant of restricted stock awards 455 5 — — (5)— — —  
Common stock withheld as payment for withholding taxes upon the vesting of restricted shares(418)(4)— — (4,958)— — — (4,962)
Stock-based compensation— — — — 17,675 — — — 17,675 
Balance, October 30, 202012,236 $122 70,000 $700 $909,686 $(220,300)$(3,163)$(19,896)$667,149 










7


Three Months Ended November 1, 2019Common Stock - Class ACommon Stock - Class B
 Outstanding SharesAmountOutstanding SharesAmountAdditional Paid in CapitalAccumulated DeficitAccumulated Other Comprehensive Income (Loss)Treasury
Stock
Total Stockholders' Equity
Balances, August 2, 201911,203 $112 70,000 $700 $887,014 $(194,793)$(4,826)$(19,896)$668,311 
Net loss— — — — — (7,908)— — (7,908)
Other comprehensive income— — — — — — 1,602 — 1,602 
Vesting of restricted stock units32 — — — — — — —  
Common stock withheld as payment for withholding taxes upon the vesting of restricted shares(10)— — — (125)— — — (125)
Stock-based compensation— — — — 5,092 — — — 5,092 
Shares repurchased— — — — — — — —  
Balances, November 1, 201911,225 $112 70,000 $700 $891,981 $(202,701)$(3,224)$(19,896)$666,972 



Nine Months Ended November 1, 2019Common Stock - Class ACommon Stock - Class B
 Outstanding SharesAmountOutstanding SharesAmountAdditional Paid in CapitalAccumulated DeficitAccumulated Other Comprehensive Income (Loss)Treasury
Stock
Total Stockholders' Equity
Balances, February 1, 201911,016 $110 70,000 $700 $884,567 $(176,263)$(2,884)$(13,523)$692,707 
Net loss— — — — — (26,438)— — (26,438)
Other comprehensive loss— — — — — — (340)— (340)
Vesting of restricted stock units939 9 — — (9)— — —  
Grant of restricted stock awards 122 1 — — (1)— — —  
Common stock withheld as payment for withholding taxes upon the vesting of restricted shares(414)(4)— — (8,193)— — — (8,197)
Stock-based compensation— — — — 15,617 — — — 15,617 
Shares repurchased(438)(4)— — — — — (6,373)(6,377)
Balances, November 1, 201911,225 $112 70,000 $700 $891,981 $(202,701)$(3,224)$(19,896)$666,972 


The accompanying notes are an integral part of these condensed consolidated financial statements.



8

SECUREWORKS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1 — DESCRIPTION OF THE BUSINESS AND BASIS OF PRESENTATION
Description of the Business
SecureWorks Corp. (individually and collectively with its consolidated subsidiaries, "Secureworks" or the "Company") is a leading global provider of technology-driven information security solutions singularly focused on protecting the Company's customers from cyber attacks.
On April 27, 2016, the Company completed its initial public offering ("IPO"). Upon the closing of the IPO, Dell Technologies Inc. ("Dell Technologies"), owned, indirectly through Dell Inc. ("Dell") and Dell's subsidiaries, no shares of the Company's outstanding Class A common stock and all outstanding shares of the Company's outstanding Class B common stock, which as of October 30, 2020 represented approximately 85.1% of the Company's total outstanding shares of common stock and approximately 98.3% of the combined voting power of both classes of the Company's outstanding common stock.
The Company has one primary business activity, which is to provide customers with information security solutions. The Company's chief operating decision maker, who is the Chief Executive Officer, makes operating decisions, assesses performance, and allocates resources on a consolidated basis. There are no segment managers who are held accountable for operations and operating results below the consolidated unit level. Accordingly, Secureworks operates its business as a single reportable segment.
Basis of Presentation and Consolidation
The Company's condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). The preparation of financial statements in accordance with GAAP requires management to make assumptions and estimations that affect the amounts reported in the Company's financial statements and notes. The inputs into certain of the Company's assumptions and estimations considered the economic implications of the coronavirus disease 2019 ("COVID-19") pandemic on the Company's critical and significant accounting estimates. The condensed consolidated financial statements include assets, liabilities, revenue and expenses of all majority-owned subsidiaries.
For the periods presented, Dell has provided various corporate services to the Company in the ordinary course of business, including finance, tax, human resources, legal, insurance, IT, procurement and facilities-related services. The cost of these services is charged in accordance with a shared services agreement that went into effect on August 1, 2015. For more information regarding the charges for these services and related party transactions, see "Note 12—Related Party Transactions."
During the periods presented in the financial statements, Secureworks did not file separate federal tax returns, as the Company is generally included in the tax grouping of other Dell entities within the respective entity's tax jurisdiction. The income tax benefit has been calculated using the separate return method, modified to apply the benefits for loss approach. Under the benefits for loss approach, net operating losses or other tax attributes are characterized as realized or as realizable by Secureworks when those attributes are utilized or expected to be utilized by other members of the Dell consolidated group. See "Note 11—Income and Other Taxes" for more information.
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with GAAP for interim financial information and the requirements of the Securities and Exchange Commission ("SEC"). Accordingly, they do not include all of the information and disclosures required by GAAP for complete financial statement presentation. The year-end condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP. In the opinion of management, all adjustments consisting of normal recurring accruals and disclosures considered necessary for a fair statement have been included. All intercompany accounts and transactions have been eliminated in consolidation. The accompanying condensed consolidated financial statements and related financial information should be read in conjunction with the audited financial statements and the related notes thereto for the year ended January 31, 2020 included in Part II, Item 8 of the Company's Annual Report on Form 10-K filed with the SEC on March 27, 2020 (the "Annual Report").
Fiscal Year
The Company’s fiscal year is the 52- or 53-week period ending on the Friday closest to January 31. The Company refers to the fiscal year ending January 29, 2021 and the fiscal year ended January 31, 2020 as fiscal 2021 and fiscal 2020, respectively. Both fiscal 2021 and fiscal 2020 have 52 weeks, and each quarter has 13 weeks.
9

SECUREWORKS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Estimates are revised as additional information becomes available. In the Condensed Consolidated Statements of Operations, estimates are used when accounting for revenue arrangements, determining the cost of revenue, allocating cost and estimating the impact of contingencies. In the Condensed Consolidated Statements of Financial Position, estimates are used in determining the valuation and recoverability of assets, such as accounts receivables, inventories, fixed assets, goodwill and other identifiable intangible assets, and purchase price allocation for business combinations. Estimates are also used in determining the reported amounts of liabilities, such as taxes payable and the impact of contingencies. Estimates all of which also impact the Condensed Consolidated Statements of Operations. Actual results could differ from these estimates due to risks and uncertainties, including uncertainty in the current economic environment due to the COVID-19 pandemic. The Company considered the potential impact of the COVID-19 pandemic on its estimates and assumptions and determined there was not a material impact to the Company's condensed consolidated financial statements as of and for the three and nine months ended October 30, 2020. As the COVID-19 pandemic continues to develop, many of the Company's estimates could require increased judgment and be subject to a higher degree of variability and volatility. As events continue to evolve, the Company's estimates may change materially in future periods.
Recently Adopted Accounting Pronouncements
Debt— The Company adopted Accounting Standard Update ("ASU") 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” ASU 2020-04 provides optional expedients and exceptions for applying GAAP to contract modifications, hedging relationships, and other transactions, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. ASU 2020-04 was effective for the Company beginning on March 12, 2020 and will apply the amendments prospectively through December 31, 2022. There was no impact to the Company's unaudited condensed consolidated financial statements as a result of adopting this standard update. Currently, the Company's revolving credit facility references LIBOR and the Company is assessing how this standard update may be applied to any contract modification.
Intangibles - Goodwill and Other - Internal-Use Software—The Company adopted ASU 2018-15, "Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract," effective February 1, 2020. ASU 2018-15 aligns the requirements for capitalizing implementation costs in such cloud computing arrangements with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The adoption of the standard had no material impact on the condensed consolidated financial statements.
Intangibles - Goodwill and Other—The Company adopted ASU No. 2017-04, "Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment," effective February 1, 2020. ASU 2017-04 eliminates Step 2 of the goodwill impairment test, which required the Company to determine the implied fair value of goodwill by allocating the reporting unit's fair value to each of its assets and liabilities as if the reporting unit was acquired in a business acquisition. The updated guidance requires an entity to perform its annual or interim goodwill impairment test by comparing the fair value of the reporting unit to its carrying value, and recognizing a non-cash impairment charge for the amount by which the carrying value exceeds the reporting unit's fair value, with the loss not exceeding the total amount of goodwill allocated to that reporting unit. The adoption of the standard had no impact on the condensed consolidated financial statements.
Financial Instruments - Credit Losses—The Company adopted ASU No. 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments," effective February 1, 2020. The amendments in this update replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The adoption of the standard had no material impact on the condensed consolidated financial statements.
Under the new standard, the Company assesses its allowance for credit losses on trade receivables by taking into consideration forecasts of future economic conditions, information about past events, such as its historical trend of write-offs, and customer-specific circumstances, such as bankruptcies and disputes. The allowance for credit losses on trade receivables is recorded in operating expenses in the Company's Condensed Consolidated Statement of Operations.

10

SECUREWORKS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Recently Issued Accounting Pronouncements
Income Taxes—In December 2019, the Financial Accounting Standards Board (the "FASB") issued ASU No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” ASU No. 2019-12 simplifies the accounting for income taxes by eliminating certain exceptions to the guidance in Topic 740 related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The new guidance also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill and allocation of consolidated income taxes to separate financial statements of entities not subject to income tax. ASU No. 2019-12 is effective for fiscal years beginning after December 15, 2020, with early adoption permitted. Upon adoption, the Company must apply certain aspects of this standard retrospectively for all periods presented while other aspects are applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. The Company is currently evaluating the impact of this new standard on its condensed consolidated financial statements
Summary of Significant Accounting Policies
There have been no significant changes to the Company’s significant accounting policies as of and for the nine months ended October 30, 2020, as compared to the significant accounting policies described in the Annual Report, except for the following:
Business Combinations—The Company accounts for business combinations under the acquisition method of accounting. This method requires the recording of acquired assets and assumed liabilities at their acquisition date fair values. The allocation of the purchase price in a business combination requires us to make significant estimates in determining the fair value of acquired assets and assumed liabilities, especially with respect to intangible assets. The excess of the purchase price over the fair value of assets acquired and liabilities assumed is recorded as goodwill. These estimates are based upon a number of factors, including historical experience, market conditions and information obtained from the management of the acquired company. Critical estimates in valuing certain intangible assets included, but are not limited to, cash flows that an asset is expected to generate in the future, discount rates, the time and expense that would be necessary to recreate the assets and the profit margin a market participant would receive Results of operations related to business combinations are included prospectively beginning with the date of acquisition and transaction costs related to business combinations are recorded within selling, general and administrative expenses in the Condensed Consolidated Statements of Operations. For more information, see Note 2 —Business Combinations.
NOTE 2 — BUSINESS COMBINATIONS
On September 21, 2020, the Company acquired all of the outstanding shares (representing 100% of the voting interest) of Delve Laboratories, Inc. ("Delve") for approximately $15.4 million. Delve provides comprehensive vulnerability assessment solutions through its automated vulnerability platform. Delve's software-as-a-service solution is powered by artificial intelligence and machine learning to provide customers with more accurate and actionable data about the highest risk vulnerabilities across their network, endpoints and cloud. Secureworks plans to integrate the vulnerability discovery and prioritization technology into new offerings within its cloud-based portfolio, including its Red Cloak Platform and TDR application, expanding visibility and insights for users. The financial results of Delve have been included in the Company's condensed consolidated financial statements prospectively from the date of acquisition within the Company's single reporting unit. The goodwill recognized below in connection with the transaction is primarily attributable to the software intellectual property acquired and the anticipated synergies from future growth of the product and the Company’s Red Cloak Platform. The acquisition was treated as an asset transaction for tax purposes and $8.8 million of goodwill acquired is expected to be deductible for tax purposes. Transaction costs were approximately $0.6 million and were expensed as incurred by the Company. The acquired business did not have a material impact on our condensed consolidated financial statements, and therefore historical and pro forma disclosures have not been presented.

The following table summarizes the allocation of the aggregate purchase price to the fair values of the assets acquired and liabilities assumed at the date of acquisition (in thousands of USD):

11

SECUREWORKS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Amount
Assets acquired:
Cash and cash equivalents$343 
Accounts and notes receivable101 
Other current assets607 
Intangibles6,200 
Total identifiable assets7,251 
Goodwill8,831 
Total assets acquired
16,082 
Liabilities assumed:
    Accounts payable25 
    Accrued and other liabilities413 
    Non-current liabilities220 
Total liabilities assumed
658 
Purchase consideration$15,424 

The intangibles identified in the transaction represent Technology-based assets with a preliminary useful life of 6 years. The value of the acquired assets was estimated using the relief-from-royalty method, an income approach (Level 3), which provides an estimate of cost savings that accrue to the owner of the asset which would otherwise be payable as royalties or license fees on revenue earned through the use of the asset.

The purchase accounting allocations above were determined based upon estimates of fair value. Based on the timing of the acquisition, the preliminary estimates associated with the respective purchase accounting is expected to be finalized in fiscal 2021. The assumptions used in these preliminary allocations are pending completion and subject to change. The effect of any changes could be significant.
NOTE 3 — LOSS PER SHARE
Loss per share is calculated by dividing net loss for the periods presented by the respective weighted-average number of common shares outstanding, and excludes any share-based awards that may be anti-dilutive. Diluted net loss per common share is computed by giving effect to all potentially dilutive common shares, including common stock issuable upon the exercise of stock options and unvested restricted common stock and restricted stock units. The Company applies the two-class method to calculate earnings per share. Because the Class A common stock and the Class B common stock share the same rights in dividends and earnings, earnings per share (basic and diluted) are the same for both classes. Since losses were incurred in all periods presented, all potential common shares were determined to be anti-dilutive.
The following table sets forth the computation of loss per common share (in thousands, except per share amounts):
Three Months Ended Nine Months Ended
October 30, 2020November 1, 2019October 30, 2020November 1, 2019
Numerator:
Net loss$(3,608)$(7,908)$(12,371)$(26,438)
Denominator:  
Weighted-average number of shares outstanding: 
Basic and Diluted81,474 80,518 81,276 80,553 
Loss per common share:  
Basic and Diluted$(0.04)$(0.10)$(0.15)$(0.33)
Weighted-average anti-dilutive stock options, non-vested restricted stock and restricted stock units6,436 5,122 6,151 5,275 

12

SECUREWORKS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 4 — CONTRACT BALANCES AND CONTRACT COSTS
Promises to provide services related to the Company's subscription-based solutions are accounted for as a single performance obligation over an average period of two years. Performance obligations related to the Company's security and risk consulting professional service contracts are separate obligations associated with each service. Although the Company has many multi-year customer relationships for its various professional service solutions, each arrangement is typically structured as a separate performance obligation over the contract period and recognized over a duration of less than one year.
The following table presents revenue by service type (in thousands):
Three Months EndedNine Months Ended
October 30, 2020November 1, 2019October 30, 2020November 1, 2019
Managed Security Solutions revenue$108,265 $109,344 $320,881 $311,210 
Security and Risk Consulting revenue33,376 31,988 100,417 99,569 
Total revenue$141,641 $141,332 $421,298 $410,779 


The deferred revenue balance does not represent the total contract value of annual or multi-year, non-cancelable subscription agreements. Rather, it represents the aggregate amount of billing in advance of service delivery. The Company invoices its customers based on a variety of billing schedules. During the nine months ended October 30, 2020, on average, 57% of the Company's recurring revenue was billed in advance and approximately 43% was billed on either a monthly or a quarterly basis in advance. In addition, many of the Company's professional services engagements are billed in advance of service commencement. The deferred revenue balance is influenced by several factors, including seasonality, the compounding effects of renewals, invoice duration and invoice timing.

Changes to the Company's deferred revenue during the nine months ended October 30, 2020 and November 1, 2019 are as follows (in thousands):
As of January 31, 2020
Upfront payments received and billings during the nine months ended October 30, 2020
Revenue recognized during the nine months ended October 30, 2020
As of October 30, 2020
Deferred revenue$188,537 $217,903 $(222,974)$183,466 

As of February 1, 2019
Upfront payments received and billings during the nine months ended November 1, 2019
Revenue recognized during the nine months ended November 1, 2019
As of November 1, 2019
Deferred revenue$173,929 $209,596 $(199,673)$183,852 

Remaining Performance Obligation
The remaining performance obligation represents the transaction price allocated to contracted revenue that has not yet been recognized, which includes deferred revenue and non-cancellable contracts that will be invoiced and recognized as revenue in future periods. The remaining performance obligation consists of two elements: (i) the value of remaining services to be provided through the contract term for customers whose services have been activated (“active”); and (ii) the value of services contracted with customers that have not yet been installed (“backlog”). Backlog is not recorded in revenue, deferred revenue or elsewhere in the consolidated financial statements until the Company establishes a contractual right to invoice, at which point it is recorded as revenue or deferred revenue, as appropriate. The Company applies the practical expedient in Accounting Standards Codification (“ASC”) paragraph 606-10-50-14(a) and does not disclose information about remaining performance obligations that are part of a contract that has an original expected duration of one year or less.
The Company expects that the amount of backlog relative to the total value of its contracts will change from year to year due to several factors, including the amount invoiced at the beginning of the contract term, the timing and duration of the Company's customer agreements, varying invoicing cycles of agreements and changes in customer financial circumstances. Accordingly, fluctuations in backlog are not always a reliable indicator of future revenue.    
13

SECUREWORKS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
As of October 30, 2020, the Company expects to recognize remaining performance obligations as follows (in thousands):
TotalExpected to be recognized in the next 12 monthsExpected to be recognized in 12-24 monthsExpected to be recognized in 24-36 monthsExpected to be recognized thereafter
Performance obligation - active$281,346 $159,004 $82,343 $30,638 $9,361 
Performance obligation - backlog13,789 4,783 4,693 3,364 949 
Total$295,135 $163,787 $87,036 $34,002 $10,310 

Deferred Commissions and Fulfillment Costs
The Company capitalizes a significant portion of its commission expense and related fringe benefits earned by its sales personnel. Additionally, the Company capitalizes certain costs to install and activate hardware and software used in its managed security solutions, primarily related to a portion of the compensation for the personnel who perform the installation activities. These deferred costs are amortized on a systematic basis that is consistent with the transfer to the customer of the goods or services to which the assets relate.
Changes in the balance of total deferred commission and total deferred fulfillment costs during the nine months ended October 30, 2020 and November 1, 2019 are as follows (in thousands):
As of January 31, 2020Amount capitalizedAmount recognized
As of October 30, 2020
Deferred commissions$62,785 $11,369 $(16,040)$58,114 
Deferred fulfillment costs11,366 4,163 (4,312)11,217 
As of February 1, 2019Amount capitalizedAmount recognized
As of November 1, 2019
Deferred commissions$62,895 $11,113 $(13,823)$60,185 
Deferred fulfillment costs10,973 4,520 (4,115)11,378 

As referenced in the Annual Report, deferred commissions are recognized on a straight-line basis over the life of the customer relationship, which historically had been estimated to be seven years. During the third quarter of fiscal 2020, the Company determined a change in the estimated life of the customer relationship to be six years. The net impact of this change was an increase in operating loss for the nine months ended October 30, 2020 of $3.0 million on a pre-tax basis, or $0.03 on a per share basis. The Company did not record any impairment losses on the deferred commissions or deferred fulfillment costs during the three and nine months ended October 30, 2020 or November 1, 2019.
NOTE 5 — GOODWILL AND INTANGIBLE ASSETS
Goodwill relates to the acquisition of Dell by Dell Technologies and represents the excess of the purchase price attributable to Secureworks over the fair value of the assets acquired and liabilities assumed, as well as subsequent business combinations completed by the Company. Goodwill increased $8.8 million for the nine months ended October 30, 2020, as compared to January 31, 2020, as a result of the acquisition of Delve. Accordingly, goodwill totaled $425.3 million as of October 30, 2020 and $416.5 million as of January 31, 2020.
Goodwill and indefinite-lived intangible assets are tested for impairment on an annual basis during the third fiscal quarter of each fiscal year, or earlier if an indicator of impairment occurs. The Company completed the most recent annual impairment test in the third quarter of fiscal 2021 by performing a quantitative assessment of goodwill at the reporting unit level, as well as related to the Company's indefinite-lived intangible asset. In performing this quantitative assessment of goodwill, the Company used a market approach (comparable market prices) to determine the fair value of the reporting unit and compared the fair value to its carrying value. The assumptions used in the valuation are consistent with those which the Company believes hypothetical market participants would use.
In performing the quantitative assessment of the indefinite-lived intangible asset, the Company determined the fair value using the relief from royalty method, which is a risk-adjusted discounted cash flow approach. The relief from royalty method values an intangible asset by estimating the royalties saved through ownership of the asset. The relief from royalty method requires identifying the future revenue that would be generated by the indefinite-lived intangible asset, multiplying it by a royalty rate deemed to be avoided through ownership of the asset and discounting the projected royalty savings amounts back to the
14

SECUREWORKS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
impairment assessment date. The royalty rate used in the valuation was based on a consideration of market rates for similar categories of assets. The discount rate used in the valuation was based on the Company’s weighted average cost of capital and the growth of the earnings associated with the indefinite-lived intangible asset.
Based on the results of the annual impairment test, the Company determined that the derived fair values of the Secureworks' reporting unit and indefinite-lived intangible asset exceeded their respective carrying values, which indicates no impairment as of October 30, 2020.
Intangible Assets
The Company's intangible assets as of October 30, 2020 and January 31, 2020 were as follows (in thousands):
 October 30, 2020January 31, 2020
 GrossAccumulated
Amortization
NetGrossAccumulated
Amortization
Net
Customer relationships$189,518 $(101,817)$87,701 $189,518 $(91,246)$98,272 
Technology143,572 (96,463)47,109 137,371 (85,709)51,662 
Finite-lived intangible assets333,090 (198,280)134,810 326,889 (176,955)149,934 
Trade name30,118 — 30,118 30,118 — 30,118 
Total intangible assets$363,208 $(198,280)$164,928 $357,007 $(176,955)$180,052 

Amortization expense related to finite-lived intangible assets was approximately $7.2 million and $21.3 million for the three and nine months ended October 30, 2020, respectively, and $7.1 million and $21.1 million for the three and nine months ended November 1, 2019, respectively. Amortization expenses are included within cost of revenue and general and administrative expense in the Condensed Consolidated Statements of Operations. There were no impairment charges related to intangible assets during the three and nine months ended October 30, 2020 or November 1, 2019.
NOTE 6 — DEBT
Revolving Credit Facility
On November 2, 2015, SecureWorks, Inc., a wholly-owned subsidiary of SecureWorks Corp., entered into a revolving credit agreement with a wholly-owned subsidiary of Dell Inc. under which the Company obtained a $30 million senior unsecured revolving credit facility. This facility was initially available for a one-year term beginning on April 21, 2016 and was subsequently extended on the same terms for additional one-year terms. During the three months ended May 1, 2020, the facility was amended and restated to extend the maturity date from March 26, 2020 to March 26, 2021 and to decrease the annual rate at which interest accrues to the applicable London Interbank Offered Rate plus 1.30%. All other terms remained substantially the same.
Under the facility, up to $30 million principal amount of borrowings may be outstanding at any time. Amounts under the facility may be borrowed, repaid, and reborrowed from time to time during the term of the facility. The proceeds from loans made under the facility may be used for general corporate purposes. The credit agreement contains customary representations, warranties, covenants and events of default. The unused portion of the facility is subject to a commitment fee of 0.35%, which is due upon expiration of the facility. There was no outstanding balance under the credit facility as of October 30, 2020 or January 31, 2020.
The maximum amount of borrowings may be increased by up to an additional $30 million by mutual agreement of the lender and borrower. The borrower will be required to repay, in full, all of the loans outstanding, including all accrued interest, and the facility will terminate upon a change of control of SecureWorks Corp. or following a transaction in which SecureWorks, Inc. ceases to be a direct or indirect wholly-owned subsidiary of SecureWorks Corp. The facility is not guaranteed by SecureWorks Corp. or its subsidiaries.
NOTE 7 — COMMITMENTS AND CONTINGENCIES
Legal ContingenciesFrom time to time, the Company is involved in claims and legal proceedings that arise in the ordinary course of business. The Company accrues a liability when it believes that it is both probable that a liability has been incurred and that it can reasonably estimate the amount of the loss. The Company reviews the status of such matters at least quarterly and adjusts its liabilities as necessary to reflect ongoing negotiations, settlements, rulings, advice of legal counsel and other relevant information. Whether the outcome of any claim, suit, assessment, investigation or legal proceeding, individually or collectively, could have a material adverse effect on the Company's business, financial condition, results of operations or cash flows will depend on a number of factors, including the nature, timing and amount of any associated expenses, amounts paid in
15

SECUREWORKS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
settlement, damages or other remedies or consequences. To the extent new information is obtained and the Company's views on the probable outcomes of claims, suits, assessments, investigations or legal proceedings change, changes in accrued liabilities would be recorded in the period in which such a determination is made. As of October 30, 2020, the Company does not believe that there were any such matters that, individually or in the aggregate, would have a material adverse effect on its business, financial condition, results of operations or cash flows.
Customer-based Taxation ContingenciesVarious government entities ("taxing authorities") require the Company to bill its customers for the taxes they owe based on the services they purchase from the Company. The application of the rules of each taxing authority concerning which services are subject to each tax and how those services should be taxed involves the application of judgment. Taxing authorities periodically perform audits to verify compliance and include all periods that remain open under applicable statutes, which generally range from three to four years. These audits could result in significant assessments of past taxes, fines and interest if the Company were found to be non-compliant. During the course of an audit, a taxing authority may question the Company's application of its rules in a manner that, if the Company were not successful in substantiating its position, could result in a significant financial impact to the Company. In the course of preparing its financial statements and disclosures, the Company considers whether information exists that would warrant disclosure or an accrual with respect to such a contingency.
Indemnifications—In the ordinary course of business, the Company enters into contractual arrangements under which it agrees to indemnify its customers from certain losses incurred by the customer as to third-party claims relating to the services performed on behalf of the Company or for certain losses incurred by the customer as to third-party claims arising from certain events as defined within the particular contract. Such indemnification obligations may not be subject to maximum loss clauses. Historically, payments related to these indemnifications have been immaterial.
Concentrations—The Company sells solutions to customers of all sizes primarily through its direct sales organization, supplemented by sales through channel partners. During the three and nine months ended October 30, 2020 and November 1, 2019, the Company had no customer that represented 10% or more of its net revenue.
NOTE 8 LEASES
The Company recorded operating lease costs for facilities of approximately $1.5 million and $4.6 million for the three and nine months ended October 30, 2020, respectively, and $1.5 million and $5.5 million for the three and nine months ended November 1, 2019, respectively. Operating lease costs include expenses in connection with variable lease costs of $0.2 million and $0.5 million for the three and nine months ended October 30, 2020, respectively, and $0.5 million and $1.2 million for the three and nine months ended November 1, 2019, respectively, which primarily consisted of utilities and common area charges.

For the three and nine months ended October 30, 2020, the Company recorded operating lease costs for equipment leases of approximately $0.1 million and $1.2 million, respectively, and $0.2 million and $0.9 million for the three and nine months ended November 1, 2019, respectively. For the three and nine months ended October 30, 2020, equipment lease costs included short-term lease costs of $0.1 million and $1.0 million, respectively, and $0.3 million and $0.9 million for the three and nine months ended November 1, 2019, respectively. Lease expense for equipment was included in cost of revenues.
Cash paid for amounts included in the measurement of operating lease liabilities was $1.5 million and $3.3 million for the three and nine months ended October 30, 2020, respectively, and $1.8 million and $5.2 million for the three and nine months ended November 1, 2019, respectively.
Weighted-average information associated with the measurement of the Company’s remaining operating lease obligations is as follows:
 October 30, 2020
Weighted-average remaining lease term5.2 years
Weighted-average discount rate5.32 %
The following table summarizes the maturity of the Company's operating lease liabilities as of October 30, 2020 (in thousands):
16

SECUREWORKS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Fiscal Years EndingOctober 30, 2020
2021$1,863 
20226,890 
20236,360 
20246,019 
20255,213 
Thereafter8,722 
Total operating lease payments$35,067 
Less imputed interest(4,580)
Total operating lease liabilities$30,487 
The Company's leases have remaining lease terms of 1 month to 6.2 years, inclusive of renewal or termination options that the Company is reasonably certain to exercise.
NOTE 9 — STOCKHOLDERS' EQUITY
On September 26, 2018, the Company's board of directors authorized a stock repurchase program, under which the Company was authorized to repurchase up to $15 million of the Company's Class A common stock through September 30, 2019. On March 26, 2019, the board of directors expanded the repurchase program to authorize the repurchase up to an additional $15 million of the Company's Class A common stock through May 1, 2020, on which date the program terminated.
NOTE 10 — STOCK-BASED COMPENSATION AND OTHER LONG-TERM PERFORMANCE INCENTIVES
The SecureWorks Corp. 2016 Long-Term Incentive Plan (the "2016 Plan") was adopted effective April 18, 2016. The 2016 Plan provides for the grant of options, stock appreciation rights, restricted stock, restricted stock units, deferred stock units, unrestricted stock, dividend equivalent rights, other equity-based awards, and cash bonus awards. Awards may be granted under the 2016 Plan to individuals who are employees, officers, or non-employee directors of the Company or any of its affiliates, consultants and advisors who perform services for the Company or any of its affiliates, and any other individual whose participation in the 2016 Plan is determined to be in the best interests of the Company by the compensation committee of the board of directors.
Under the 2016 Plan, the Company granted 345,694 and 2,819,351 restricted stock units during the three and nine months ended October 30, 2020, respectively, and 171,100 and 1,444,104 restricted stock units during the three and nine months ended November 1, 2019, respectively. The Company granted no restricted stock awards during the three months ended October 30, 2020 and November 1, 2019, and 454,546 and 175,000 restricted stock awards during the nine months ended October 30, 2020 and November 1, 2019, respectively. The annual restricted stock unit and restricted stock awards granted during both such periods vest over a three-year period. Approximately 15% and 50% of such awards granted during the nine months ended October 30, 2020 and November 1, 2019, respectively, are subject to performance conditions. As of October 30, 2020, all performance awards granted during fiscal 2021 have been valued and are considered outstanding for accounting purposes.
The Company grants long-term cash awards to certain employees under the 2016 Plan. The employees who receive these cash awards do not receive equity awards as part of the long-term incentive program. The majority of the cash awards issued prior to fiscal 2021 are subject to various performance conditions and vest in equal annual installments over a three-year period. The cash awards issued during the three and nine months ended October 30, 2020 are not subject to any performance conditions and vest in equal installments over a three-year period. The Company granted cash awards of $0.5 million and $8.6 million during the three and nine months ended October 30, 2020, respectively, and $0.3 million and $7.2 million during the three and nine months ended November 1, 2019, respectively. The Company recognized $1.9 million and $5.1 million of related compensation expense for the three and nine months ended October 30, 2020, respectively, and $2.0 million and $5.8 million for the three and nine months ended November 1, 2019, respectively.
17

SECUREWORKS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 11 — INCOME AND OTHER TAXES
The Company's effective income tax rate for the three and nine months ended October 30, 2020 and November 1, 2019 was as follows (in thousands, except percentages):    
Three Months EndedNine Months Ended
October 30, 2020November 1, 2019October 30, 2020November 1, 2019
Loss before income taxes$(4,977)$(11,392)$(17,680)$(38,692)
Income tax benefit$(1,369)$(3,484)$(5,309)$(12,254)
Effective tax rate27.5 %30.6 %30.0 %31.7 %

The Company's effective tax benefit rate was 27.5% and 30.0% for the three and nine months ended October 30, 2020, respectively, and 30.6% and 31.7% for the three and nine months ended November 1, 2019, respectively. The changes in the Company's effective income tax rate between the periods were primarily attributable to both the improvement in loss before income taxes for the three months ended October 30, 2020 and the impact of certain discrete adjustments related to stock-based compensation expense of approximately $0.3 million and $0.8 million for the three and nine months ended October 30, 2020, respectively, and $0.5 million and $2.6 million for the three and nine months ended November 1, 2019, respectively. The changes related specifically to the impact of the vesting of certain equity awards for which the fair value on the vesting date was higher than the fair value on the grant date for the three and nine months ended October 30, 2020 and higher than the fair value on the grant date for the three and nine months ended November 1, 2019. The change in fair value, which is measured by the price of the Class A common stock as reported on the Nasdaq Global Select Market, resulted in a higher actual tax deduction for the three and nine months ended October 30, 2020 and a higher actual tax deduction for the three and nine months ended November 1, 2019 than the amounts deducted for financial reporting purposes.
As of each of October 30, 2020 and January 31, 2020, the Company had $4.6 million of deferred tax assets related to net operating loss carryforwards for state tax returns that are not included with those of other Dell entities. These net operating loss carryforwards began expiring in the fiscal year ended February 1, 2019. Due to the uncertainty surrounding the realization of these net operating loss carryforwards, the Company has provided valuation allowances for the full amount as of October 30, 2020 and January 31, 2020. Because the Company is included in the tax filings of other Dell entities, management has determined that it will be able to realize the remainder of its deferred tax assets. If the Company's tax provision had been prepared using the separate return method, the unaudited pro forma pre-tax loss, tax benefit and net loss for the nine months ended October 30, 2020 would have been $17.7 million, $3.7 million and $14.0 million, respectively, as a result of the recognition of a valuation allowance that would have been recorded on a significant amount of deferred tax assets as well as certain attributes from the Tax Cuts and Jobs Act of 2017 that would be lost if not utilized by the Dell consolidated group.
Net deferred tax balances are included in other non-current assets and other non-current liabilities in the Condensed Consolidated Statements of Financial Position.
As of October 30, 2020 and January 31, 2020, the Company had $8.8 million and $10.0 million, respectively, of a net operating loss tax receivable from Dell. The Company had $6.4 million and $6.6 million of unrecognized tax benefits as of October 30, 2020 and January 31, 2020, respectively.
During the nine months ended October 30, 2020, the Internal Revenue Service started an examination of the Company's federal income tax returns for fiscal years 2015 through 2019. While it is difficult to predict the final outcome or the timing of resolution of any particular tax matter, the Company believes that it has valid positions supporting its tax returns and that it has provided adequate reserves related to matters contained in tax periods open to examination.
NOTE 12 — RELATED PARTY TRANSACTIONS
Allocated Expenses
For the periods presented, Dell has provided various corporate services to Secureworks in the ordinary course of business. The costs of services provided to Secureworks by Dell are governed by a shared services agreement between Secureworks and Dell Inc. The total amounts of the charges under the shared services agreement with Dell were $1.0 million and $3.0 million for the three and nine months ended October 30, 2020, respectively, and $3.5 million and $7.6 million for the three and nine months ended November 1, 2019, respectively. Management believes that the basis on which the expenses have been allocated is a reasonable reflection of the utilization of services provided to or the benefit received by the Company during the periods presented.
18

SECUREWORKS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Related Party Arrangements
For the periods presented, related party transactions and activities involving Dell Inc. and its wholly-owned subsidiaries were not always consummated on terms equivalent to those that would prevail in an arm's-length transaction where conditions of competitive, free-market dealing may exist.
The Company purchases computer equipment for internal use from Dell that is capitalized within property and equipment in the Condensed Consolidated Statements of Financial Position. These purchases were made at pricing that is intended to approximate arm's-length pricing. Purchases of computer equipment from Dell and EMC Corporation, a wholly-owned subsidiary of Dell ("EMC"), totaled $0.1 million and $0.6 million for the three and nine months ended October 30, 2020, respectively, and $0.2 million and $2.8 million for the three and nine months ended November 1, 2019, respectively.
EMC, a company that provides enterprise software and storage, maintains a majority ownership interest in a subsidiary, VMware, Inc. ("VMware"), that provides cloud and virtualization software and services. The Company's purchases of annual maintenance services, software licenses and hardware systems for internal use from Dell, EMC and VMware totaled $0.4 million and $1.8 million for the three and nine months ended October 30, 2020, respectively, and $0.9 million and $2.7 million for the three and nine months ended November 1, 2019, respectively. The Company recognized revenue related to solutions provided to VMware that totaled $0.1 million and $0.3 million for the three and nine months ended October 30, 2020, respectively. In October 2019, VMware acquired Carbon Black Inc., a security business with which the Company had an existing commercial relationship. Purchases by the Company of solutions from Carbon Black totaled $1.3 million and $4.4 million for the three and nine months ended October 30, 2020, respectively, and $0.5 million for the three and nine months ended November 1, 2019
The Company recognizes revenue related to solutions provided to subsidiaries of Dell, consisting of RSA Security LLC, Pivotal Software, Inc. and Boomi, Inc. The Company recognized no revenue related to agreements with the stated related parties for the three and nine months ended October 30, 2020, respectively, and $11 thousand and $49 thousand for the three and nine months ended November 1, 2019, respectively. The Company made no purchases for the three months ended October 30, 2020 and $0.1 million for the nine months ended October 30, 2020, and $30 thousand and $0.1 million for the three and nine months ended November 1, 2019, respectively, from the stated related parties.
The Company also recognized revenue related to solutions provided to significant beneficial owners of Secureworks, which include Michael S. Dell, Chairman and Chief Executive Officer of Dell Technologies and Dell Inc. and Silver Lake Partners III, L.P. The revenues recognized by the Company from solutions provided to Mr. Dell, MSD Capital, L.P. (a firm founded for the purposes of managing investments of Mr. Dell and his family), DFI Resources LLC, an entity affiliated with Mr. Dell, and the Michael and Susan Dell Foundation, as well as Silver Lake Partners III, L.P., totaled $23 thousand and $0.2 million for the three and nine months ended October 30, 2020, respectively, and $