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Share Name | Share Symbol | Market | Type |
---|---|---|---|
SecureWorks Corp | NASDAQ:SCWX | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
-0.09 | -1.50% | 5.92 | 5.50 | 8.30 | 6.07 | 5.90 | 5.94 | 30,631 | 21:30:00 |
(Mark One)
|
|
|
|
|
|
x
|
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 |
For the quarterly period ended July 29, 2016
|
||
or
|
||
¨
|
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
|
For the transition period from
to
|
Delaware
|
|
56-2015395
|
(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)
|
Large accelerated filer
¨
|
|
Accelerated filer
¨
|
Non-accelerated filer
þ
(Do not check if a smaller reporting company)
|
|
Smaller reporting company
¨
|
|
July 29,
2016 |
|
January 29,
2016 |
||||
|
|
|
|
||||
ASSETS
|
|||||||
Current assets:
|
|
|
|
|
|||
Cash and cash equivalents
|
$
|
113,284
|
|
|
$
|
33,422
|
|
Accounts receivable, net
|
100,758
|
|
|
116,357
|
|
||
Inventories, net
|
3,524
|
|
|
3,549
|
|
||
Other current assets
|
25,508
|
|
|
26,211
|
|
||
Total current assets
|
243,074
|
|
|
179,539
|
|
||
Property and equipment, net
|
25,142
|
|
|
22,766
|
|
||
Goodwill
|
416,487
|
|
|
416,487
|
|
||
Purchased intangible assets, net
|
275,789
|
|
|
289,657
|
|
||
Other non-current assets
|
26,991
|
|
|
9,336
|
|
||
Total assets
|
$
|
987,483
|
|
|
$
|
917,785
|
|
|
|||||||
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|||||||
Current liabilities:
|
|
|
|
||||
Accounts payable
|
$
|
26,846
|
|
|
$
|
22,126
|
|
Accrued and other
|
31,975
|
|
|
60,407
|
|
||
Short-term deferred revenue
|
114,000
|
|
|
109,467
|
|
||
Short-term debt
|
—
|
|
|
27,993
|
|
||
Total current liabilities
|
172,821
|
|
|
219,993
|
|
||
Long-term deferred revenue
|
16,470
|
|
|
18,352
|
|
||
Other non-current liabilities
|
97,089
|
|
|
90,984
|
|
||
Total liabilities
|
286,380
|
|
|
329,329
|
|
||
Commitments and Contingencies (Footnote 5)
|
|
|
|
|
|
||
Stockholders' equity:
|
|
|
|
||||
Preferred stock - $0.01 par value: 200,000 shares authorized; 0 shares issued
|
—
|
|
|
—
|
|
||
Common stock - Class A of $.01 par value: 2,500,000 shares authorized; 10,671 issued and outstanding
|
107
|
|
|
—
|
|
||
Common stock - Class B of $.01 par value: 500,000 shares authorized; 70,000 shares issued and outstanding
|
700
|
|
|
700
|
|
||
Additional paid in capital
|
849,400
|
|
|
711,923
|
|
||
Accumulated deficit
|
(146,324
|
)
|
|
(122,646
|
)
|
||
Accumulated other comprehensive loss
|
(2,780
|
)
|
|
(1,521
|
)
|
||
Total stockholders' equity
|
701,103
|
|
|
588,456
|
|
||
Total liabilities and stockholders' equity
|
$
|
987,483
|
|
|
$
|
917,785
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
July 29, 2016
|
|
July 31, 2015
|
|
July 29, 2016
|
|
July 31, 2015
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net revenue
|
$
|
103,653
|
|
|
$
|
79,855
|
|
|
$
|
203,446
|
|
|
$
|
157,254
|
|
Cost of revenue
|
52,907
|
|
|
44,717
|
|
|
102,756
|
|
|
88,713
|
|
||||
Gross margin
|
50,746
|
|
|
35,138
|
|
|
100,690
|
|
|
68,541
|
|
||||
Research and development
|
12,848
|
|
|
12,643
|
|
|
26,444
|
|
|
24,473
|
|
||||
Sales and marketing
|
28,639
|
|
|
26,696
|
|
|
56,135
|
|
|
48,815
|
|
||||
General and administrative
|
29,306
|
|
|
28,148
|
|
|
57,158
|
|
|
53,932
|
|
||||
Total operating expenses
|
70,793
|
|
|
67,487
|
|
|
139,737
|
|
|
127,220
|
|
||||
Operating loss
|
(20,047
|
)
|
|
(32,349
|
)
|
|
(39,047
|
)
|
|
(58,679
|
)
|
||||
Interest and other, net
|
851
|
|
|
303
|
|
|
1,216
|
|
|
(515
|
)
|
||||
Loss before income taxes
|
(19,196
|
)
|
|
(32,046
|
)
|
|
(37,831
|
)
|
|
(59,194
|
)
|
||||
Income tax benefit
|
(7,145
|
)
|
|
(10,922
|
)
|
|
(14,153
|
)
|
|
(20,240
|
)
|
||||
Net loss
|
$
|
(12,051
|
)
|
|
$
|
(21,124
|
)
|
|
$
|
(23,678
|
)
|
|
$
|
(38,954
|
)
|
|
|
|
|
|
|
|
|
||||||||
Net loss per common share (basic and diluted)
|
$
|
(0.15
|
)
|
|
$
|
(0.30
|
)
|
|
$
|
(0.31
|
)
|
|
$
|
(0.56
|
)
|
Weighted-average common shares outstanding (basic and diluted)
|
80,009
|
|
|
70,000
|
|
|
75,169
|
|
|
70,000
|
|
||||
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
July 29, 2016
|
|
July 31, 2015
|
|
July 29, 2016
|
|
July 31, 2015
|
||||||||
Net loss
|
$
|
(12,051
|
)
|
|
$
|
(21,124
|
)
|
|
$
|
(23,678
|
)
|
|
$
|
(38,954
|
)
|
Foreign currency translation adjustments, net of zero tax
|
(1,753
|
)
|
|
140
|
|
|
(1,259
|
)
|
|
267
|
|
||||
Comprehensive loss
|
$
|
(13,804
|
)
|
|
$
|
(20,984
|
)
|
|
$
|
(24,937
|
)
|
|
$
|
(38,687
|
)
|
|
Six Months Ended
|
||||||
|
July 29, 2016
|
|
July 31, 2015
|
||||
Cash flows from operating activities:
|
|
|
|
||||
Net loss
|
$
|
(23,678
|
)
|
|
$
|
(38,954
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
||||
Depreciation and amortization
|
19,422
|
|
|
20,722
|
|
||
Change in fair value of convertible notes
|
132
|
|
|
—
|
|
||
Stock-based compensation expense
|
3,365
|
|
|
414
|
|
||
Effects of exchange rate changes on monetary assets and liabilities denominated in foreign currencies
|
(1,129
|
)
|
|
534
|
|
||
Income tax benefit
|
(14,153
|
)
|
|
(20,240
|
)
|
||
Other non cash impacts
|
—
|
|
|
5,539
|
|
||
Provision for doubtful accounts
|
1,340
|
|
|
1,714
|
|
||
Excess tax benefit from share-based payment
|
(221
|
)
|
|
—
|
|
||
Changes in assets and liabilities:
|
|
|
|
||||
Accounts receivable
|
15,388
|
|
|
(11,823
|
)
|
||
Net transactions with parent
|
(21,032
|
)
|
|
—
|
|
||
Inventories
|
25
|
|
|
322
|
|
||
Other assets
|
109
|
|
|
(6,910
|
)
|
||
Accounts payable
|
4,720
|
|
|
(9,593
|
)
|
||
Deferred revenue
|
2,651
|
|
|
13,195
|
|
||
Accrued and other liabilities
|
(8,519
|
)
|
|
41,669
|
|
||
Net cash used in operating activities
|
(21,580
|
)
|
|
(3,411
|
)
|
||
Cash flows from investing activities:
|
|
|
|
|
|
||
Capital expenditures
|
(7,930
|
)
|
|
(6,207
|
)
|
||
Net cash used in investing activities
|
(7,930
|
)
|
|
(6,207
|
)
|
||
Cash flows from financing activities:
|
|
|
|
|
|
||
Proceeds from initial public offering, net
|
99,604
|
|
|
—
|
|
||
Capital contribution from parent, net
|
9,547
|
|
|
—
|
|
||
Excess tax benefit from share-based payment
|
221
|
|
|
—
|
|
||
Transfers from parent, net
|
—
|
|
|
23,206
|
|
||
Net cash provided by financing activities
|
109,372
|
|
|
23,206
|
|
||
|
|
|
|
||||
Net increase in cash and cash equivalents
|
79,862
|
|
|
13,588
|
|
||
Cash and cash equivalents at beginning of the period
|
33,422
|
|
|
6,669
|
|
||
Cash and cash equivalents at end of the period
|
$
|
113,284
|
|
|
$
|
20,257
|
|
|
|
|
|
||||
Supplemental Disclosures of Non-Cash Investing and Financing Activities:
|
|
|
|
||||
Conversion of convertible notes to common stock
|
$
|
28,125
|
|
|
$
|
—
|
|
|
|
Common Stock - Class A
|
|
Common Stock - Class B
|
|
|
|
|
|
|
|
|
||||||||||||||||||
|
|
Outstanding Shares
|
|
Amount
|
|
Outstanding Shares
|
|
Amount
|
|
Additional Paid in Capital
|
|
Accumulated Deficit
|
|
Accumulated Other Comprehensive (Loss) Income
|
|
Total Stockholders' Equity
|
||||||||||||||
Balances, January 29, 2016
|
|
—
|
|
|
—
|
|
|
70,000
|
|
|
700
|
|
|
$
|
711,923
|
|
|
$
|
(122,646
|
)
|
|
$
|
(1,521
|
)
|
|
$
|
588,456
|
|
||
Net loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
(23,678
|
)
|
|
—
|
|
|
(23,678
|
)
|
|||||||
Other comprehensive loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,259
|
)
|
|
(1,259
|
)
|
||||||
Issuance of common stock in connection with initial public offering, net of offering costs
|
|
8,000
|
|
|
80
|
|
|
—
|
|
|
—
|
|
|
96,246
|
|
|
—
|
|
|
—
|
|
|
96,326
|
|
||||||
Conversion of convertible notes to common stock in connection with initial public offering
|
|
2,009
|
|
|
20
|
|
|
—
|
|
|
—
|
|
|
28,105
|
|
|
—
|
|
|
—
|
|
|
28,125
|
|
||||||
Restricted stock awards
|
|
662
|
|
|
7
|
|
|
—
|
|
|
—
|
|
|
(7
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Capital contribution from parent, net
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
9,547
|
|
|
—
|
|
|
—
|
|
|
9,547
|
|
||||||
Stock-based compensation
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,365
|
|
|
—
|
|
|
—
|
|
|
3,365
|
|
||||||
Excess tax benefit from share-based payment
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
221
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
221
|
|
Balances, July 29, 2016
|
|
10,671
|
|
|
$
|
107
|
|
|
70,000
|
|
|
$
|
700
|
|
|
$
|
849,400
|
|
|
$
|
(146,324
|
)
|
|
$
|
(2,780
|
)
|
|
$
|
701,103
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
July 29, 2016
|
|
July 31, 2015
|
|
July 29, 2016
|
|
July 31, 2015
|
||||||||
Numerator:
|
|
|
|
|
|
|
|
||||||||
Net loss
|
$
|
(12,051
|
)
|
|
$
|
(21,124
|
)
|
|
$
|
(23,678
|
)
|
|
$
|
(38,954
|
)
|
Denominator:
|
|
|
|
|
|
|
|
|
|
||||||
Weighted-average number of shares outstanding:
|
|
|
|
|
|
|
|
|
|||||||
Basic and Diluted
|
80,009
|
|
|
70,000
|
|
|
75,169
|
|
|
70,000
|
|
||||
Loss per common share:
|
|
|
|
|
|
|
|
|
|
||||||
Basic and Diluted
|
$
|
(0.15
|
)
|
|
$
|
(0.30
|
)
|
|
$
|
(0.31
|
)
|
|
$
|
(0.56
|
)
|
|
|
|
|
|
|
|
|
||||||||
Weighted-average anti-dilutive stock options, non-vested restricted stock and restricted stock units
|
4,925
|
|
|
—
|
|
|
2,699
|
|
|
—
|
|
|
|
July 29, 2016
|
|
January 29, 2016
|
||||||||||||||||||||
|
|
Gross
|
|
Accumulated
Amortization
|
|
Net
|
|
Gross
|
|
Accumulated
Amortization
|
|
Net
|
||||||||||||
|
|
(in thousands)
|
||||||||||||||||||||||
Customer relationships
|
|
$
|
189,518
|
|
|
$
|
(41,916
|
)
|
|
$
|
147,602
|
|
|
$
|
189,518
|
|
|
$
|
(34,869
|
)
|
|
$
|
154,649
|
|
Technology
|
|
135,584
|
|
|
(37,515
|
)
|
|
98,069
|
|
|
135,584
|
|
|
(30,694
|
)
|
|
104,890
|
|
||||||
Finite-lived intangible assets
|
|
325,102
|
|
|
(79,431
|
)
|
|
245,671
|
|
|
325,102
|
|
|
(65,563
|
)
|
|
259,539
|
|
||||||
Trade name
|
|
30,118
|
|
|
—
|
|
|
30,118
|
|
|
30,118
|
|
|
—
|
|
|
30,118
|
|
||||||
Total intangible assets
|
|
$
|
355,220
|
|
|
$
|
(79,431
|
)
|
|
$
|
275,789
|
|
|
$
|
355,220
|
|
|
$
|
(65,563
|
)
|
|
$
|
289,657
|
|
|
Three Months Ended
|
|
April 29, 2016
|
|
|
Expected life
|
6.3 years
|
Risk-free interest rate
|
1.69%
|
Volatility
|
44.76%
|
Dividend yield
|
—%
|
Expected forfeiture rate
|
6.12%
|
Weighted-average grant-date fair value
|
$6.15
|
|
|||||||||||||||||
|
Number
of
Options
|
|
Weighted-
Average Exercise Price Per Share |
|
Weighted-
Average Contractual Life (years) |
|
Weighted-Average Grant date Fair Value Per Share
|
|
Aggregate Intrinsic Value
|
||||||||
|
|
|
|
|
|
|
|
|
(in thousands)
|
||||||||
Balance, January 29, 2016
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
Granted
|
2,910,503
|
|
|
$
|
14.00
|
|
|
9.73
|
|
|
$
|
6.15
|
|
|
$
|
—
|
|
Exercised
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|||
Canceled, expired or forfeited
|
(98,267
|
)
|
|
$
|
14.00
|
|
|
—
|
|
|
$
|
6.36
|
|
|
—
|
|
|
Balance, July 29, 2016
|
2,812,236
|
|
|
$
|
14.00
|
|
|
9.73
|
|
|
$
|
6.14
|
|
|
$
|
2,278
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Options expected to vest, July 29, 2016
|
2,570,328
|
|
|
$
|
14.00
|
|
|
9.73
|
|
|
$
|
6.13
|
|
|
$
|
2,082
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Options exercisable, July 29, 2016
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Number
of
Shares
|
|
Weighted-
Average
Grant Date
Fair Value Per Share
|
|
Weighted-
Average Contractual Life (years) |
|
Aggregate Intrinsic Value
|
||||||
|
|
|
|
|
|
|
(in thousands)
|
||||||
Balance, January 29, 2016
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
—
|
|
Granted
|
2,116,555
|
|
|
$
|
13.67
|
|
|
2.22
|
|
|
$
|
31,346
|
|
Vested
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||
Forfeited
|
(63,572
|
)
|
|
$
|
14.00
|
|
|
—
|
|
|
—
|
|
|
Converted
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||
Balance, July 29, 2016
|
2,052,983
|
|
|
$
|
13.66
|
|
|
2.28
|
|
|
$
|
30,405
|
|
|
|
|
|
|
|
|
|
||||||
Restricted Stock and Restricted Stock Units expected to vest, July 29, 2016
|
1,846,363
|
|
|
$
|
13.63
|
|
|
2.54
|
|
|
$
|
27,345
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
July 29,
2016 |
|
July 31,
2015 |
|
July 29,
2016 |
|
July 31,
2015 |
||||||||
|
(in thousands)
|
|
(in thousands)
|
||||||||||||
Cost of revenue
|
$
|
156
|
|
|
$
|
—
|
|
|
$
|
175
|
|
|
$
|
—
|
|
Research and development
|
688
|
|
|
70
|
|
|
770
|
|
|
136
|
|
||||
Sales and marketing
|
362
|
|
|
—
|
|
|
405
|
|
|
—
|
|
||||
General and administrative
|
1,799
|
|
|
144
|
|
|
2,015
|
|
|
278
|
|
||||
Total stock-based compensation expense
|
$
|
3,005
|
|
|
$
|
214
|
|
|
$
|
3,365
|
|
|
$
|
414
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
July 29, 2016
|
|
July 31, 2015
|
|
July 29, 2016
|
|
July 31, 2015
|
||||||||
|
|
|
|
|
|
|
|
||||||||
Loss before income taxes
|
$
|
(19,196
|
)
|
|
$
|
(32,046
|
)
|
|
$
|
(37,831
|
)
|
|
$
|
(59,194
|
)
|
Income tax benefit
|
$
|
(7,145
|
)
|
|
$
|
(10,922
|
)
|
|
$
|
(14,153
|
)
|
|
$
|
(20,240
|
)
|
Effective tax rate
|
37.2
|
%
|
|
34.1
|
%
|
|
37.4
|
%
|
|
34.2
|
%
|
|
|
July 29, 2016
|
January 29, 2016
|
||||
|
|
(in thousands)
|
|||||
Intercompany receivable
|
|
$
|
55,337
|
|
$
|
19,496
|
|
Intercompany payable
|
|
(55,996
|
)
|
(41,187
|
)
|
||
Net intercompany payable (in accrued and other)
|
|
$
|
(659
|
)
|
$
|
(21,691
|
)
|
|
|
|
|
||||
Accounts receivable from clients under reseller agreements with Dell (in accounts receivable, net)
|
|
$
|
13,838
|
|
$
|
15,552
|
|
|
|
|
|
||||
Net operating loss tax sharing receivable under agreement with Dell (in other non-current assets at July 29, 2016 and other non-current liabilities at January 29, 2016)
|
|
$
|
20,678
|
|
$
|
18,509
|
|
|
July 29, 2016
|
|
January 29, 2016
|
|
July 31, 2015
|
||||||
Client base
|
4,300
|
|
|
4,200
|
|
|
4,000
|
|
|||
Monthly recurring revenue (in millions)
|
$
|
29.8
|
|
|
$
|
28.6
|
|
|
$
|
26.6
|
|
Retention rate
|
99
|
%
|
|
102
|
%
|
|
105
|
%
|
•
|
Impact of Purchase Accounting.
The impact of purchase accounting consists primarily of purchase accounting adjustments related to a change in the basis of deferred revenue related to the acquisition of Dell by Dell Technologies as well as the acquisition of our company by Dell in fiscal 2012.
|
•
|
Amortization of Intangible Assets.
Amortization of intangible assets consists of amortization of customer relationships and acquired technology. In connection with the acquisition of Dell by Dell Technologies and the acquisition of us by Dell in fiscal 2012, all of our tangible and intangible assets and liabilities were accounted for and recognized at fair value on the transaction date. Accordingly, for the successor periods, amortization of intangible assets consists of amortization associated with intangible assets recognized in connection with this transaction. In comparison, for the predecessor periods, amortization of intangible assets consists of amortization associated with purchased intangible assets recognized in connection with the acquisition of us by Dell.
|
•
|
Stock-based Compensation.
Non-cash stock-based compensation relates to both the Dell Technologies and SecureWorks equity plans. We exclude such expenses when assessing the effectiveness of our operating performance since stock-based compensation does not necessarily correlate with the underlying operating performance of the business.
|
•
|
Other Expenses.
Other expenses include professional fees incurred by us in connection with our IPO and amounts expensed in the settlement of a legal matter. We are excluding these expenses for the purpose of calculating the non-GAAP financial measures presented below because we believe these items are outside our ordinary course of business and do not contribute to a meaningful evaluation of our current operating performance or comparisons to our past operating performance.
|
•
|
Aggregate Adjustment for Income Taxes.
The aggregate adjustment for income taxes is the estimated combined income tax effect for the adjustments mentioned above. The tax effects are determined based on the tax jurisdictions where the above items were incurred.
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
July 29, 2016
|
|
July 31, 2015
|
|
July 29, 2016
|
|
July 31, 2015
|
||||||||
|
(in thousands)
|
|
|
||||||||||||
GAAP revenue
|
$
|
103,653
|
|
|
$
|
79,855
|
|
|
$
|
203,446
|
|
|
$
|
157,254
|
|
Impact of purchase accounting
|
221
|
|
|
693
|
|
|
442
|
|
|
1,385
|
|
||||
Non-GAAP revenue
|
$
|
103,874
|
|
|
$
|
80,548
|
|
|
$
|
203,888
|
|
|
$
|
158,639
|
|
|
|
|
|
|
|
|
|
||||||||
GAAP gross margin
|
$
|
50,746
|
|
|
$
|
35,138
|
|
|
$
|
100,690
|
|
|
$
|
68,541
|
|
Amortization of intangibles
|
3,411
|
|
|
3,410
|
|
|
6,821
|
|
|
6,820
|
|
||||
Impact of purchase accounting
|
356
|
|
|
733
|
|
|
617
|
|
|
1,466
|
|
||||
Stock-based compensation expense
|
156
|
|
|
—
|
|
|
175
|
|
|
—
|
|
||||
Other
|
—
|
|
|
1,868
|
|
|
—
|
|
|
4,868
|
|
||||
Non-GAAP gross margin
|
$
|
54,669
|
|
|
$
|
41,149
|
|
|
$
|
108,303
|
|
|
$
|
81,695
|
|
|
|
|
|
|
|
|
|
||||||||
GAAP research and development expenses
|
$
|
12,848
|
|
|
$
|
12,643
|
|
|
$
|
26,444
|
|
|
$
|
24,473
|
|
Stock-based compensation expense
|
(688
|
)
|
|
(70
|
)
|
|
(770
|
)
|
|
(136
|
)
|
||||
Non-GAAP research and development expenses
|
$
|
12,160
|
|
|
$
|
12,573
|
|
|
$
|
25,674
|
|
|
$
|
24,337
|
|
|
|
|
|
|
|
|
|
||||||||
GAAP sales and marketing expenses
|
$
|
28,639
|
|
|
$
|
26,696
|
|
|
$
|
56,135
|
|
|
$
|
48,815
|
|
Stock-based compensation expense
|
(362
|
)
|
|
—
|
|
|
(405
|
)
|
|
—
|
|
||||
Non-GAAP sales and marketing expenses
|
$
|
28,277
|
|
|
$
|
26,696
|
|
|
$
|
55,730
|
|
|
$
|
48,815
|
|
|
|
|
|
|
|
|
|
||||||||
GAAP general and administrative expenses
|
$
|
29,306
|
|
|
$
|
28,148
|
|
|
$
|
57,158
|
|
|
$
|
53,932
|
|
Amortization of intangibles
|
(3,523
|
)
|
|
(3,570
|
)
|
|
(7,047
|
)
|
|
(7,612
|
)
|
||||
Impact of purchase accounting
|
(177
|
)
|
|
(229
|
)
|
|
(406
|
)
|
|
(458
|
)
|
||||
Stock-based compensation expense
|
(1,799
|
)
|
|
(144
|
)
|
|
(2,015
|
)
|
|
(278
|
)
|
||||
Other
|
—
|
|
|
(3,446
|
)
|
|
(1,164
|
)
|
|
(6,535
|
)
|
||||
Non-GAAP general and administrative expenses
|
$
|
23,807
|
|
|
$
|
20,759
|
|
|
$
|
46,526
|
|
|
$
|
39,049
|
|
|
|
|
|
|
|
|
|
||||||||
GAAP operating loss
|
$
|
(20,047
|
)
|
|
$
|
(32,349
|
)
|
|
$
|
(39,047
|
)
|
|
$
|
(58,679
|
)
|
Amortization of intangibles
|
6,934
|
|
|
6,980
|
|
|
13,868
|
|
|
14,432
|
|
||||
Impact of purchase accounting
|
533
|
|
|
962
|
|
|
1,023
|
|
|
1,924
|
|
||||
Stock-based compensation expense
|
3,005
|
|
|
214
|
|
|
3,365
|
|
|
414
|
|
||||
Other
|
—
|
|
|
5,314
|
|
|
1,164
|
|
|
11,403
|
|
||||
Non-GAAP operating loss
|
$
|
(9,575
|
)
|
|
$
|
(18,879
|
)
|
|
$
|
(19,627
|
)
|
|
$
|
(30,506
|
)
|
|
|
|
|
|
|
|
|
||||||||
GAAP net loss
|
$
|
(12,051
|
)
|
|
$
|
(21,124
|
)
|
|
$
|
(23,678
|
)
|
|
$
|
(38,954
|
)
|
Amortization of intangibles
|
6,934
|
|
|
6,980
|
|
|
13,868
|
|
|
14,432
|
|
||||
Impact of purchase accounting
|
533
|
|
|
962
|
|
|
1,023
|
|
|
1,924
|
|
||||
Stock-based compensation expense
|
3,005
|
|
|
214
|
|
|
3,365
|
|
|
414
|
|
||||
Other
|
—
|
|
|
5,314
|
|
|
1,164
|
|
|
11,403
|
|
||||
Aggregate adjustment for income taxes
|
(3,997
|
)
|
|
(5,151
|
)
|
|
(7,419
|
)
|
|
(10,773
|
)
|
||||
Non-GAAP net loss
|
$
|
(5,576
|
)
|
|
$
|
(12,805
|
)
|
|
$
|
(11,677
|
)
|
|
$
|
(21,554
|
)
|
|
|
|
|
|
|
|
|
||||||||
GAAP net loss per share
|
$
|
(0.15
|
)
|
|
$
|
(0.30
|
)
|
|
$
|
(0.31
|
)
|
|
$
|
(0.56
|
)
|
Amortization of intangibles
|
0.09
|
|
|
0.10
|
|
|
0.18
|
|
|
0.21
|
|
||||
Impact of purchase accounting
|
0.01
|
|
|
0.01
|
|
|
0.01
|
|
|
0.02
|
|
||||
Stock-based compensation expense
|
0.04
|
|
|
—
|
|
|
0.04
|
|
|
—
|
|
||||
Other
|
—
|
|
|
0.08
|
|
|
0.02
|
|
|
0.17
|
|
||||
Aggregate adjustment for income taxes
|
(0.06
|
)
|
|
(0.07
|
)
|
|
(0.10
|
)
|
|
(0.15
|
)
|
||||
Non-GAAP net loss per share
|
$
|
(0.07
|
)
|
|
$
|
(0.18
|
)
|
|
$
|
(0.16
|
)
|
|
$
|
(0.31
|
)
|
|
|
|
|
|
|
|
|
||||||||
GAAP net loss
|
$
|
(12,051
|
)
|
|
$
|
(21,124
|
)
|
|
$
|
(23,678
|
)
|
|
$
|
(38,954
|
)
|
Interest and other, net
|
(851
|
)
|
|
(303
|
)
|
|
(1,216
|
)
|
|
515
|
|
||||
Income tax benefit
|
(7,145
|
)
|
|
(10,922
|
)
|
|
(14,153
|
)
|
|
(20,240
|
)
|
||||
Depreciation and amortization
|
9,796
|
|
|
10,145
|
|
|
19,422
|
|
|
20,722
|
|
||||
Stock-based compensation expense
|
3,005
|
|
|
214
|
|
|
3,365
|
|
|
414
|
|
||||
Impact of purchase accounting
|
221
|
|
|
693
|
|
|
442
|
|
|
1,385
|
|
||||
Other
|
—
|
|
|
5,314
|
|
|
1,164
|
|
|
11,403
|
|
||||
Adjusted EBITDA
|
$
|
(7,025
|
)
|
|
$
|
(15,983
|
)
|
|
$
|
(14,654
|
)
|
|
$
|
(24,755
|
)
|
▪
|
Research and Development, or R&D, Expenses.
Research and development expenses include compensation and related expenses for the continued development of our solutions, including a portion of expenses related to our threat research team, which focuses on the identification of system vulnerabilities, data forensics and malware analysis. R&D expenses also encompass expenses related to the development of prototypes of new solutions and allocated overhead. We operate in a competitive and highly technical industry. Therefore, to maintain and extend our technology leadership, we intend to continue to invest in our research and development efforts by hiring more research and development personnel to enhance our existing security solutions and to add complementary solutions.
|
•
|
Sales and Marketing, or S&M, Expenses.
Sales and marketing expenses include wages and benefits, sales commissions and related expenses for our sales and marketing personnel, travel and entertainment, marketing programs (including lead generation), client advocacy events, and other brand-building expenses, as well as allocated overhead.
|
▪
|
General and Administrative, or G&A, Expenses.
General and administrative expenses include primarily the costs of human resources and recruiting, finance and accounting, legal support, information technology, product management, facilities management, corporate development and other administrative functions.
|
|
|
Three Months Ended
|
|||||||||||||||
|
|
July 29, 2016
|
|
|
|
July 31, 2015
|
|||||||||||
|
|
$
|
|
% of
Revenue
|
|
%
Change
|
|
$
|
|
% of
Revenue
|
|||||||
|
|
(in thousands, except percentages)
|
|||||||||||||||
Net revenue
|
|
$
|
103,653
|
|
|
100.0
|
%
|
|
29.8
|
%
|
|
$
|
79,855
|
|
|
100.0
|
%
|
Cost of revenue
|
|
$
|
52,907
|
|
|
51.0
|
%
|
|
18.3
|
%
|
|
$
|
44,717
|
|
|
56.0
|
%
|
Total gross margin
|
|
$
|
50,746
|
|
|
49.0
|
%
|
|
44.4
|
%
|
|
$
|
35,138
|
|
|
44.0
|
%
|
Operating expenses
|
|
$
|
70,793
|
|
|
68.3
|
%
|
|
4.9
|
%
|
|
$
|
67,487
|
|
|
84.5
|
%
|
Operating loss
|
|
$
|
(20,047
|
)
|
|
(19.3
|
)%
|
|
(38.0
|
)%
|
|
$
|
(32,349
|
)
|
|
(40.5
|
)%
|
Net loss
|
|
$
|
(12,051
|
)
|
|
(11.6
|
)%
|
|
(43.0
|
)%
|
|
$
|
(21,124
|
)
|
|
(26.5
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Other Financial Information
(1)
|
|
|
|
|
|
|
|
|
|
|
|||||||
Non-GAAP net revenue
|
|
$
|
103,874
|
|
|
100.0
|
%
|
|
29.0
|
%
|
|
$
|
80,548
|
|
|
100.0
|
%
|
Non-GAAP cost of revenue
|
|
$
|
49,205
|
|
|
47.4
|
%
|
|
24.9
|
%
|
|
$
|
39,399
|
|
|
48.9
|
%
|
Non-GAAP gross margin
|
|
$
|
54,669
|
|
|
52.6
|
%
|
|
32.9
|
%
|
|
$
|
41,149
|
|
|
51.1
|
%
|
Non-GAAP operating expenses
|
|
$
|
64,244
|
|
|
61.8
|
%
|
|
7.0
|
%
|
|
$
|
60,028
|
|
|
74.5
|
%
|
Non-GAAP operating loss
|
|
$
|
(9,575
|
)
|
|
(9.2
|
)%
|
|
(49.3
|
)%
|
|
$
|
(18,879
|
)
|
|
(23.4
|
)%
|
Non-GAAP net loss
|
|
$
|
(5,576
|
)
|
|
(5.4
|
)%
|
|
(56.5
|
)%
|
|
$
|
(12,805
|
)
|
|
(15.9
|
)%
|
Adjusted EBITDA
|
|
$
|
(7,025
|
)
|
|
(6.8
|
)%
|
|
(56.0
|
)%
|
|
$
|
(15,983
|
)
|
|
(38.8
|
)%
|
|
|
Six Months Ended
|
|||||||||||||||
|
|
July 29, 2016
|
|
|
|
July 31, 2015
|
|||||||||||
|
|
$
|
|
% of
Revenue |
|
%
Change |
|
$
|
|
% of
Revenue |
|||||||
|
|
(in thousands, except percentages)
|
|||||||||||||||
Net revenue
|
|
$
|
203,446
|
|
|
100.0
|
%
|
|
29.4
|
%
|
|
$
|
157,254
|
|
|
100.0
|
%
|
Cost of revenue
|
|
$
|
102,756
|
|
|
50.5
|
%
|
|
15.8
|
%
|
|
$
|
88,713
|
|
|
56.4
|
%
|
Total gross margin
|
|
$
|
100,690
|
|
|
49.5
|
%
|
|
46.9
|
%
|
|
$
|
68,541
|
|
|
43.6
|
%
|
Operating expenses
|
|
$
|
139,737
|
|
|
68.7
|
%
|
|
9.8
|
%
|
|
$
|
127,220
|
|
|
80.9
|
%
|
Operating loss
|
|
$
|
(39,047
|
)
|
|
(19.2
|
)%
|
|
(33.5
|
)%
|
|
$
|
(58,679
|
)
|
|
(37.3
|
)%
|
Net loss
|
|
$
|
(23,678
|
)
|
|
(11.6
|
)%
|
|
(39.2
|
)%
|
|
$
|
(38,954
|
)
|
|
(24.8
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other Financial Information
(1)
|
|
|
|
|
|
|
|
|
|
|
|||||||
Non-GAAP revenue
|
|
$
|
203,888
|
|
|
100.0
|
%
|
|
28.5
|
%
|
|
$
|
158,639
|
|
|
100.0
|
%
|
Non-GAAP gross margin
|
|
$
|
108,303
|
|
|
53.1
|
%
|
|
32.6
|
%
|
|
$
|
81,695
|
|
|
51.5
|
%
|
Non-GAAP operating expenses
|
|
$
|
127,930
|
|
|
62.7
|
%
|
|
14.0
|
%
|
|
$
|
112,201
|
|
|
70.7
|
%
|
Non-GAAP operating loss
|
|
$
|
(19,627
|
)
|
|
(9.6
|
)%
|
|
(35.7
|
)%
|
|
$
|
(30,506
|
)
|
|
(19.2
|
)%
|
Non-GAAP net loss
|
|
$
|
(11,677
|
)
|
|
(5.7
|
)%
|
|
(45.8
|
)%
|
|
$
|
(21,554
|
)
|
|
(13.6
|
)%
|
Adjusted EBITDA
|
|
$
|
(14,654
|
)
|
|
(7.2
|
)%
|
|
(40.8
|
)%
|
|
$
|
(24,755
|
)
|
|
(30.3
|
)%
|
(1)
|
See "Non-GAAP Financial Measures" and "Reconciliation of Non-GAAP Financial Measures" for more information about these non-GAAP financial measures, including our reasons for including the measures, material limitations with respect to the usefulness of the measures, and a reconciliation of each non-GAAP financial measure to the most directly comparable GAAP financial measure. Non-GAAP financial measures as a percentage of revenue are calculated based on non-GAAP revenue.
|
|
Three Months Ended
|
|||||||||||||||
|
July 29, 2016
|
|
|
|
July 31, 2015
|
|||||||||||
|
Dollars
|
|
% of
Revenue
|
|
%
Change
|
|
Dollars
|
|
% of
Revenue
|
|||||||
|
(in thousands, except percentages)
|
|||||||||||||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Research and development
|
$
|
12,848
|
|
|
12.4
|
%
|
|
1.6
|
%
|
|
$
|
12,643
|
|
|
15.8
|
%
|
Sales and marketing
|
28,639
|
|
|
27.6
|
%
|
|
7.3
|
%
|
|
26,696
|
|
|
33.4
|
%
|
||
General and administrative
|
29,306
|
|
|
28.3
|
%
|
|
4.1
|
%
|
|
28,148
|
|
|
35.2
|
%
|
||
Total operating expenses
|
$
|
70,793
|
|
|
68.3
|
%
|
|
4.9
|
%
|
|
$
|
67,487
|
|
|
84.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|||||||
Other Financial Information
|
|
|
|
|
|
|
|
|
|
|||||||
Non-GAAP research and development
|
$
|
12,160
|
|
|
11.7
|
%
|
|
(3.3
|
)%
|
|
$
|
12,573
|
|
|
15.6
|
%
|
Non-GAAP sales and marketing
|
28,277
|
|
|
27.2
|
%
|
|
5.9
|
%
|
|
26,696
|
|
|
33.1
|
%
|
||
Non-GAAP general and administrative
|
23,807
|
|
|
22.9
|
%
|
|
14.7
|
%
|
|
20,759
|
|
|
25.8
|
%
|
||
Non-GAAP operating expenses
(1)
|
$
|
64,244
|
|
|
61.8
|
%
|
|
7.0
|
%
|
|
$
|
60,028
|
|
|
74.5
|
%
|
|
Six Months Ended
|
|||||||||||||||
|
July 29, 2016
|
|
|
|
July 31, 2015
|
|||||||||||
|
Dollars
|
|
% of
Revenue
|
|
%
Change
|
|
Dollars
|
|
% of
Revenue
|
|||||||
|
(in thousands, except percentages)
|
|||||||||||||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Research and development
|
$
|
26,444
|
|
|
13.0
|
%
|
|
8.1
|
%
|
|
$
|
24,473
|
|
|
15.6
|
%
|
Sales and marketing
|
56,135
|
|
|
27.6
|
%
|
|
15.0
|
%
|
|
48,815
|
|
|
31.0
|
%
|
||
General and administrative
|
57,158
|
|
|
28.1
|
%
|
|
6.0
|
%
|
|
53,932
|
|
|
34.3
|
%
|
||
Total operating expenses
|
$
|
139,737
|
|
|
68.7
|
%
|
|
9.8
|
%
|
|
$
|
127,220
|
|
|
80.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|||||||
Other Financial Information
|
|
|
|
|
|
|
|
|
|
|||||||
Non-GAAP research and development
|
$
|
25,674
|
|
|
12.6
|
%
|
|
5.5
|
%
|
|
$
|
24,337
|
|
|
15.3
|
%
|
Non-GAAP sales and marketing
|
55,730
|
|
|
27.3
|
%
|
|
14.2
|
%
|
|
48,815
|
|
|
30.8
|
%
|
||
Non-GAAP general and administrative
|
46,526
|
|
|
22.8
|
%
|
|
19.1
|
%
|
|
39,049
|
|
|
24.6
|
%
|
||
Non-GAAP operating expenses
(1)
|
$
|
127,930
|
|
|
62.7
|
%
|
|
14.0
|
%
|
|
$
|
112,201
|
|
|
70.7
|
%
|
(1)
|
See “"Non-GAAP Financial Measures" and "Reconciliation of Non-GAAP Financial Measures” for a reconciliation of each non-GAAP financial measure to the most directly comparable GAAP financial measure.
|
|
July 29,
2016 |
|
January 29,
2016 |
||||
|
(in thousands)
|
||||||
|
|
|
|
|
|||
Cash and cash equivalents
|
$
|
113,284
|
|
|
$
|
33,422
|
|
Accounts receivable, net
|
$
|
100,758
|
|
|
$
|
116,357
|
|
|
|
Six Months Ended
|
||||||
|
|
July 29,
2016 |
|
July 31,
2015 |
||||
|
|
(in thousands)
|
||||||
Net change in cash from:
|
|
|
|
|
|
|
||
Operating activities
|
|
$
|
(21,580
|
)
|
|
$
|
(3,411
|
)
|
Investing activities
|
|
(7,930
|
)
|
|
(6,207
|
)
|
||
Financing activities
|
|
109,372
|
|
|
23,206
|
|
||
Change in cash and cash equivalents
|
|
$
|
79,862
|
|
|
$
|
13,588
|
|
•
|
Operating Activities
—
Cash used by operating activities totaled
$21.6 million
and
$3.4 million
for the
six months ended
July 29, 2016
and
July 31, 2015
, respectively. The decline in operating cash flows was mainly due to net transactions with parent and payouts under the annual corporate bonus plan. Our net transactions with parent is a use of cash for the six months ended July 29, 2016, because during this time our receivable from Dell has increased by $21.0 million more than the increase in our payable to Dell.
|
•
|
Investing Activities
—
Cash used in investing activities totaled
$7.9 million
and
$6.2 million
for the
six months ended
July 29, 2016
and
July 31, 2015
, respectively. For the periods presented, investing activities consisted of capital expenditures for property and equipment to support our data center and facility infrastructure.
|
•
|
Financing Activities
— Cash flows from financing activities totaled
$109.4 million
and
$23.2 million
for the
six months ended
July 29, 2016
and
July 31, 2015
, respectively. Financing activities for the
six months ended
July 29, 2016
included
$99.6 million
in net cash proceeds from our IPO and a $10.0 million capital contribution by Dell in March 2016. Financing activities for the
six months ended
July 31, 2015
consisted entirely of cash transfers from Dell.
|
Exhibit No.
|
|
Description
|
31.1
|
|
Certification of Chief Executive Officer of the Company pursuant to Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.
|
31.2
|
|
Certification of Chief Financial Officer of the Company pursuant to Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.
|
32.1
|
|
Certifications of Chief Executive Officer and Chief Financial Officer of the Company pursuant to Rule 13a-14(b) or Rule 15d-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Furnished herewith.
|
101.INS
|
|
XBRL Instance Document.
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document.
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document.
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document.
|
101.LAB
|
|
XBRL Taxonomy Extension Labels Linkbase Document
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document.
|
|
SecureWorks Corp.
|
|
|
|
|
|
By:
|
/s/ R. Wayne Jackson
|
|
|
R. Wayne Jackson
|
|
|
Chief Financial Officer
|
|
|
(Duly Authorized Officer)
|
Exhibit No.
|
|
Description
|
|
|
|
31.1
|
|
Certification of Chief Executive Officer of the Company pursuant to Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.
|
31.2
|
|
Certification of Chief Financial Officer of the Company pursuant to Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.
|
32.1
|
|
Certifications of Chief Executive Officer and Chief Financial Officer of the Company pursuant to Rule 13a-14(b) or Rule 15d-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Furnished herewith.
|
101.INS
|
|
XBRL Instance Document.
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document.
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document.
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document.
|
101.LAB
|
|
XBRL Taxonomy Extension Labels Linkbase Document
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document.
|
1 Year SecureWorks Chart |
1 Month SecureWorks Chart |
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