Release Date: September 05, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Taegis revenue grew 7% year over year to $71 million.
- Annual recurring revenue (ARR) stands at $290 million, driven by new customer acquisition and expansion.
- Non-GAAP Taegis gross margin of 74% grew by 360 basis points year over year.
- SecureWorks was recognized as the gold winner in the Golden Bridge Awards for AI and cybersecurity innovation.
- Positive adjusted EBITDA was delivered once again this quarter.
Negative Points
- Total revenue growth was impacted by a $13 million decline from the wind-down of non-strategic legacy business.
- GAAP net loss was $15 million for the second quarter.
- ARR growth was only 5% year over year, showing further degradation from the previous quarter.
- Some deals closed earlier in the quarter, which may not indicate a sustainable trend.
- The company faced $1.3 million in redundant or transitional costs associated with the end-of-life of its other MSS business.
Q & A Highlights
Q: How are you feeling about the overall macro and spending environment going into the new fiscal year?
A: Wendy Thomas, CEO: We see continued good demand for cybersecurity in general and specifically for Taegis. Our sales cycles were stable if not slightly better. We saw strong performance in our partner first strategy, with the highest win rates and 80% of new sales coming from partners.
Q: How are you positioned from an investment and sales capacity standpoint to drive sustainable top-line growth?
A: Alpana Wegner, CFO: We have restructured our go-to-market organization and have the right seller profile and capacity. Our partner ecosystem is generating greater sales productivity. We will continue to invest in go-to-market and product development to ensure top-line growth.
Q: Can you clarify the dynamic of deals closing earlier in the quarter and its impact on subscription revenues?
A: Alpana Wegner, CFO: It was a positive dynamic with larger deals closing earlier in the quarter, which is unusual. It did not pull away from what we saw towards the end of the quarter.
Q: What are the remaining transitional costs from the end of life of other MSS?
A: Alpana Wegner, CFO: We have no remaining costs from the legacy business. The transition is complete, allowing us to focus on growth and profitability.
Q: How are you thinking about the velocity of SIEM displacements and the consolidation of spend in the industry?
A: Wendy Thomas, CEO: We see an acceleration in customers moving away from SIEMs to XDR. Our platform is designed to address niche security products becoming features over time, providing complete protection at a compelling ROI.
Q: Can you help us understand the dynamics between positive indicators like endpoint growth and ARPC growth versus ARR growth?
A: Wendy Thomas, CEO: We see leading and lagging indicators. Endpoint growth is important given our managed services partner business model. We are confident in our partner first model and expect continued growth in ARR, endpoints, and ARPC.
Q: Have the dynamics in churn changed with the end of sunsetting your legacy business?
A: Alpana Wegner, CFO: Most of the transition from the legacy customer base is behind us. We see some attrition, but new customers have a higher ARPC. Our focus is on deep relationships, ROI, and continuous improvement in our platform.
Q: Can you provide qualitative discussions around product adoption and the number of products customers are adopting?
A: Alpana Wegner, CFO: We are in the early stages of launching new products this year. We plan to share more information on product adoption as it becomes meaningful for analysts and investors.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
