SecureWorks(US:SCWX)2024-09-05 14:06Financial Data and Key Metrics Changes - Total revenue for Q2 2025 exceeded $82 million, at the high end of expectations, primarily due to earlier closing of subscription deals [19] - Taegis revenue grew 7% year-over-year to $71 million, with annual recurring revenue (ARR) now at $290 million, reflecting a 5% year-over-year increase [4][19] - Average revenue per customer (ARPC) increased to $150,000, up 14% year-over-year, indicating strong customer value [4][19] - Non-GAAP Taegis gross margin improved by 360 basis points year-over-year to 74.3%, while total non-GAAP gross margin expanded by 680 basis points to approximately 69% [20][21] - Adjusted EBITDA was $1 million, an improvement from a loss of $10 million in the same period last year [21] Business Line Data and Key Metrics Changes - Taegis subscription revenue was $71 million, up 7% year-over-year, with a total of 1,900 Taegis customers at the end of the quarter [19][20] - Endpoint count grew more than 9% year-over-year, indicating platform expansion [20] Market Data and Key Metrics Changes - The company noted a stable sales cycle and good demand for cybersecurity, particularly for Taegis, amidst macroeconomic uncertainties [26] - The partner ecosystem showed strong momentum, with 80% of new logo sales being partner deals, reflecting the value of Taegis-based solutions [15][26] Company Strategy and Development Direction - The company launched Taegis IDR, an identity threat detection and response solution, addressing significant security gaps in identity management [6][7] - The focus on a partner-first strategy has led to improved sales productivity and higher win rates in the partner ecosystem [15][26] - The company is committed to investing in sales and marketing to accelerate partner momentum and product development [24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the demand for cybersecurity solutions and the company's ability to navigate macroeconomic challenges [26] - The transition from legacy business has been completed, allowing the company to focus on growth and profitability [32][33] - The company expects total ARR to exceed $300 million and total revenue between $328 million and $335 million for the full fiscal year 2025 [23] Other Important Information - The company ended Q2 with $48 million in cash, no debt, and an undrawn $50 million credit facility, indicating a strong balance sheet [22] - Cash flow from operations was $4 million in the quarter, a significant improvement from $27 million used in the prior year period [22] Q&A Session Summary Question: How is the company feeling about the overall macro and spending environment? - Management noted continued good demand for cybersecurity and stable sales cycles, with strong performance in partner relationships [26] Question: What is the company's position from an investment and sales capacity standpoint? - The company has restructured its go-to-market organization and feels confident in its sales capacity to drive top-line growth [27] Question: Can you clarify the dynamics of subscription revenue and any macro-related impacts? - Management clarified that earlier deal closures positively impacted subscription revenue, and this was not indicative of a negative trend [30][31] Question: What are the remaining transitional costs from the legacy business? - Management confirmed that all transitional costs from the legacy business have been resolved, allowing focus on growth [32] Question: How is the company positioned regarding SIEM displacements and technology consolidation? - Management highlighted that customers are increasingly moving away from traditional SIEMs to the Taegis platform, benefiting from the trend of technology consolidation [36][37] Question: Can you explain the dynamics of ARR growth and customer retention? - Management indicated that while there is some variability in customer retention, the focus remains on building strong relationships and providing value through product expansion [41][43]