Release Date: June 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Taegis revenue grew 10% year over year to $69 million, with annual recurring revenue (ARR) now at $287 million.
- SecureWorks Corp (SCWX, Financial) delivered Q1 total revenue and adjusted EBITDA above guidance ranges.
- Taegis gross margins improved by 430 basis points year over year, indicating better profitability.
- The company launched new Taegis modules and capabilities, enhancing their product offerings.
- SecureWorks Corp (SCWX) was recognized by Frost & Sullivan as a leader in the 2024 MDR Radar, highlighting their industry innovation.
Negative Points
- Total revenue continues to be impacted by the wind-down of nonstrategic legacy business, contributing to a 9% decline year over year.
- GAAP net loss was $36 million for the first quarter, reflecting a significant noncash tax expense.
- The company used $13 million of cash from operations, although this was an improvement from the prior year.
- Q2 fiscal year '25 guidance indicates a potential decline in total revenue to $80 million to $82 million.
- The macroeconomic environment and buying behaviors remain uncertain, affecting future ARR growth.
Q & A Highlights
Q: Wendy, what are you hearing from customers about how they're thinking about their SIEMs right now given some recent market consolidations? How do you think Taegis could benefit in that backdrop?
A: Wendy Thomas, CEO: Customers are looking for broader consolidation beyond just SIEM replacements. Taegis, with its native controls and capabilities across EDR, NDR, VDR, and orchestration, offers a comprehensive platform that can replace multiple point products. This consolidation provides better security outcomes and cost efficiencies, making SecureWorks a preferred choice for customers and MSSPs.
Q: Alpana, where are we in the arc of subscription revenue, and when do you expect to see sequential growth?
A: Alpana Wegner, CFO: With the completion of the wind-down of our nonstrategic legacy business, we are now fully focused on Taegis ARR. We expect to see sequential growth in subscription revenue in the second half of the year, driven by the strong performance of Taegis.
Q: What can you tell us about your assumptions for the slope of net new ARR in the back half of the year now that the drawdown of other MSS is complete?
A: Alpana Wegner, CFO: We expect similar sequential performance on the ARR line as we saw in Q1. The macroenvironment and buying behaviors remain steady, and we continue to see good demand for cybersecurity solutions.
Q: Was there anything to call out this quarter in terms of deal pull forward or linearity, and what are your expectations for the rest of the year?
A: Wendy Thomas, CEO: Unlike Q4, we did not see any significant deal pull forward or acceleration in Q1. The first quarter tends to be more moderate as customers finalize their budgets. We expect a more typical deal flow for the rest of the year.
Q: How do you feel about the capital position and financial condition of the company?
A: Alpana Wegner, CFO: We have a strong balance sheet with $47 million in cash and no debt. Our current operating leverage allows us to invest in growth areas while maintaining financial stability. We expect sequential growth in revenue and continued operational efficiencies in the second half of the year.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
