Secureworks (NASDAQ: SCWX), a global leader in cybersecurity, today announced financial results for its fourth quarter and full fiscal year, which ended on February 3, 2023.
Key Highlights
- Secureworks® Taegis™ grew to $261 million in annual recurring revenue (ARR), an increase of 58% on a year-over-year basis, and now represents around 82% of Secureworks total ARR.
- Company added 400 Taegis Customers in the fourth quarter, finishing fiscal 2023 with 2,000 customers on the Taegis XDR platform.
- Taegis fourth quarter revenue grew 106% year-over-year to $60.2 million.
“Taegis enables organizations to secure business assets more cost effectively by automating security operations at a high return on investment,” said Wendy Thomas, CEO, Secureworks. “Our XDR platform powers industry-leading MDR capabilities through our partner ecosystem, and our superior security outcomes are resonating with the market as demonstrated by a 3-year compound annual growth rate of 156%.”
“We reached several important milestones at year end fiscal 2023, as Taegis ARR exceeded $260 million with 2,000 customers now on our XDR platform,” said Paul Parrish, Chief Financial Officer, Secureworks. “With our transformation nearly complete, we expect to be at near break-even in the fourth quarter of FY24, with a path to EBITDA profitability in the following fiscal year.”
Fourth Quarter Fiscal 2023 Financial Highlights
- Total revenue for the fourth quarter was $115.3 million, compared to $127.9 million in the fourth quarter of fiscal 2022. The revenue decrease reflects our continued focus on reducing non-strategic service offerings, while delivering triple digit year-over-year growth in Taegis revenue.
- GAAP gross profit was $68.3 million, compared with $77.3 million in the fourth quarter of fiscal 2022. Non-GAAP gross profit was $73.7 million, compared with $81.9 million during the same period last year. Gross profits declined this quarter due to a decrease in non-strategic revenues.
- Gross margin remained stable as Taegis continued to scale, offset by non-strategic Other MSS revenue declines. Q4 GAAP gross margin was 59.2%, compared with 60.5% in the same period last year. Non-GAAP gross margin was 63.9% compared with 64.1% in the fourth quarter of fiscal 2022.
- GAAP net loss was $40.0 million, or $0.47 per share, compared with a net loss of $8.8 million, or $0.11 per share, in the prior year. Non-GAAP net loss was $14.3 million, or $0.17 per share, compared with non-GAAP net income of $2.6 million, or $0.03 per share, in the same period last year.
- Adjusted EBITDA loss for the quarter was $19.7 million, compared with adjusted EBITDA income of $2.1 million in the fourth quarter of fiscal 2022.
- The company ended the fourth quarter with $143.5 million in cash and cash equivalents.
Full Year Fiscal 2023
- Fiscal 2023 revenue was $463.5 million, a decrease from fiscal 2022 revenue of $535.2 million, reflecting our continued reduction in non-strategic service offerings, which offset triple digit year-over-year growth in Taegis revenue.
- Taegis revenue in fiscal 2023 grew 120% to $188.1 million, up from $85.6 million in fiscal 2022.
- Fiscal 2023 GAAP gross profit was $271.8 million, compared to $318.1 million in fiscal 2022. Fiscal 2023 non-GAAP gross profit decreased to $291.6 million from $335.3 million for fiscal 2022.
- Fiscal 2023 GAAP gross margin was 58.7%, compared with 59.4% for fiscal 2022. Non-GAAP gross margin was 62.9% for fiscal 2023, compared with 62.6% for the prior fiscal year.
- GAAP net loss was $114.5 million, or $1.36 per share, compared with $39.8 million, or $0.48 per share, for the prior fiscal year. Non-GAAP net loss was $46.9 million, or $0.56 per share, compared with net income of $8.7 million, or $0.11 per share, for the prior fiscal year.
- Adjusted EBITDA loss for fiscal 2023 was $59.0 million, compared with Adjusted EBITDA of $18.6 million for fiscal 2022.
Business and Operational Highlights
- Business and Operational Announcements
- Secureworks expanded security coverage for Taegis XDR through enhanced integrations with Cisco ISE, Forcepoint Web Security, VMware vCenter, TrendMicro Deep Security, and CyberArk.
- Secureworks also announced enhanced security for Google Cloud Platform (GCP) and Google Workspace. Extended support for Google environments enhances alert visibility and traceability, delivering a simplified workflow for SOC analysts, reducing the time to investigate alerts flagged by Taegis.
- Secureworks launched a Security Posture Dashboard in Taegis, enabling customers to monitor, maintain, and improve their readiness in the face of ongoing security events, especially those impacting others in their industry. The new Security Posture Dashboard provides customers with key metrics and industry comparisons to continuously evaluate and take actions to strengthen their security posture.
- Secureworks doubled the number of Proactive Response Actions available in Taegis ManagedXDR to equip customers with even more automation capabilities and shortened response time.
- Secureworks launched Unlimited Response for Taegis ManagedXDR. This provides unlimited response to incidents detected by Taegis.
- Secureworks expanded our options for data retention, including the option to store data for up to five years.
- Paul M. Parrish, Chief Financial Officer of Secureworks, made the decision to retire as Chief Financial Officer, effective as of May 5, 2023, and is committed to assisting in a smooth transition.
- In conjunction with the transition out of the vast majority of our non-strategic business, we announced, on February 7, 2023, a workforce reduction of approximately 9%, as we align our go forward cost structure with our go forward business.
- Research and Intelligence Leadership
- Amnesty International Canada cited Secureworks’ support in detecting and responding to a sophisticated digital security breach from state sponsored attackers.
- Secureworks Counter Threat Unit™ (CTU) published innovative, proprietary research on a pro-Iranian hacking group targeting Saudi Arabia which was covered by several prominent security media outlets.
- Secureworks shared details of the CTU Threat Graph, our proprietary data warehouse encompassing more than 40 billion threat and knowledge nodes, which continues to power automated detections across Secureworks’ solutions.
- Recognition and awards in the fourth quarter of fiscal year 2023 include:
- Recognized as a “Large Managed Detection and Response Provider” within the Forrester MDR Landscape, Q1 2023 Report
- Earned Frost & Sullivan 2022 European Managed and Professional Security Services Customer Value Leadership Award
- Named by CRN as one of the 10 Hot XDR Security Companies You Should Watch In 2023
- Named by CRN as one of the 10 Hot Cybersecurity Companies You Should Watch In 2023
Financial Outlook
For the first quarter of fiscal 2024, the Company expects:
- Revenue of $96 million to $98 million.
- GAAP net loss per share of $0.16 to $0.14 and non-GAAP net loss per share of $0.33 to $0.31.
Secureworks is providing the following guidance for full fiscal year 2024. The Company expects:
| Fiscal Year 2024 Guidance | |
| Taegis ARR | At least $300M |
| Other MSS ARR | Below $20M |
| Total revenue | $380M to $400M |
| Taegis revenue | $270M to $280M |
| GAAP net loss | ($86M) to ($78M) |
| ($1.01) to ($0.92) per share | |
| Non-GAAP net loss | ($32M) to ($24M) |
| ($0.35) to ($0.26) per share | |
| Adjusted EBITDA | ($39M) to ($29M) |
| Cash from operations | ($55M) to ($45M) |
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