SecureWorks(SCWX) - 2025 Q3 - Quarterly Results

Financial Highlights Secureworks achieved strong Taegis revenue and ARR growth, improved profitability with positive Adjusted EBITDA, and maintained a solid cash position Q3 FY2025 Key Financial Metrics vs. Q3 FY2024 | Metric | Q3 FY2025 (USD) | Q3 FY2024 (USD) | Change | | :--- | :--- | :--- | :--- | | Taegis Revenue | $71.4M | $67.3M | +6% YoY | | Total Revenue | $82.7M | $89.4M | -7.5% YoY | | GAAP Net Loss | ($27.5M) | ($14.4M) | Increased Loss | | Non-GAAP Net Income | $0.2M | $0.0M | Improved | | Adjusted EBITDA | $1.4M | ($1.2M) | Improved | - Total Annual Recurring Revenue (ARR) grew by 4% year-over-year, reaching $288.8 million[4] - The Taegis platform's profitability improved, with GAAP gross margin reaching 72.2% (up from 70.4% YoY) and non-GAAP gross margin reaching 74.9% (up from 72.7% YoY)[4][8] - The company maintained a healthy liquidity position, ending the quarter with $53.1 million in cash and cash equivalents and no debt on its credit facility[10] Business and Operational Highlights Secureworks expanded its global footprint, hosted its annual summit, and received industry recognition for its Taegis platform - Key operational activities included hosting the 9th annual Global Threat Intelligence Summit, expanding Taegis ManagedXDR services to Japan, and receiving multiple industry accolades for its security solutions[11] Corporate Developments and Business Outlook Secureworks announced its acquisition by Sophos, leading to the suspension of financial guidance for Q4 and full fiscal year 2025 - On October 21, 2024, Secureworks entered into a definitive agreement to be acquired by Sophos Inc., with the merger anticipated to be completed in early 2025[5][12] - Due to the proposed acquisition by Sophos, the company has suspended its financial guidance for Q4 and the full fiscal year 2025[13] Detailed Financial Statements This section provides a comprehensive overview of Secureworks' financial performance and position through its consolidated statements Consolidated Statements of Operations Total revenue declined, but gross profit increased, though higher operating expenses led to a wider GAAP net loss for the quarter Q3 FY2025 Income Statement Summary (in thousands USD) | Metric | Three Months Ended Nov 1, 2024 | Three Months Ended Nov 3, 2023 | | :--- | :--- | :--- | | Total Revenue | $82,733 | $89,364 | | Gross Profit | $56,066 | $54,749 | | Operating Loss | ($22,158) | ($19,253) | | Net Loss | ($27,501) | ($14,421) | | Loss Per Share | ($0.31) | ($0.17) | Consolidated Statements of Financial Position Total assets and stockholders' equity decreased, primarily due to reduced cash, while total liabilities remained relatively stable Balance Sheet Summary (in thousands USD) | Metric | November 1, 2024 | February 2, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $53,088 | $68,655 | | Total Assets | $664,976 | $724,779 | | Total Liabilities | $220,623 | $223,454 | | Total Stockholders' Equity | $444,353 | $501,325 | Consolidated Statements of Cash Flows The company significantly improved operational cash flow, reducing cash used in operations for the nine-month period Cash Flow Summary - Nine Months Ended (in thousands USD) | Metric | November 1, 2024 | November 3, 2023 | | :--- | :--- | :--- | | Net cash used in operating activities | ($453) | ($69,907) | | Net cash used in investing activities | ($6,451) | ($4,981) | | Net cash used in financing activities | ($7,305) | ($5,947) | | Net decrease in cash | ($15,567) | ($85,412) | | Cash at end of period | $53,088 | $58,105 | Non-GAAP Financial Measures and Reconciliation Secureworks demonstrated significant non-GAAP financial improvement, achieving positive operating income and Adjusted EBITDA, driven by strategic shifts and expense management Q3 GAAP to Non-GAAP Reconciliation Summary (in thousands USD) | Metric | Q3 FY2025 | Q3 FY2024 | | :--- | :--- | :--- | | GAAP Net Loss | ($27,501) | ($14,421) | | Key Adjustments* | $27,766 | $17,270 | | Non-GAAP Net Income (Loss) | $203 | ($7) | Adjusted EBITDA Reconciliation (in thousands USD) | Metric | Q3 FY2025 | Q3 FY2024 | | :--- | :--- | :--- | | GAAP Net Loss | ($27,501) | ($14,421) | | Adjustments | $28,932 | $13,197 | | Adjusted EBITDA | $1,431 | ($1,224) | - Major non-GAAP adjustments for the quarter included $11.5 million for stock-based compensation, $6.5 million in merger-related costs, and $5.0 million for amortization of intangibles[33]