SecureWorks Reports $82.7 Million Revenue, Operating Loss of $22.2 Million Amid Transition to Taegis Solutions

SecureWorks Corp. reported a net revenue of $82.7 million for the three months ended November 1, 2024, a decrease of 7.4% compared to $89.4 million in the same period last year. For the nine months ending November 1, 2024, total revenue was $250.6 million, down from $276.7 million in the prior year. The decline in revenue was primarily attributed to the company's exit from non-strategic Managed Security Services and a reduction in professional services revenue, which fell by 20% for the quarter and 24.8% year-to-date. Subscription revenue from the Taegis solutions, however, increased by 6% for the quarter, indicating a shift towards higher-margin offerings.

The company's operating loss for the third quarter was $22.2 million, compared to a loss of $19.3 million in the same quarter of the previous year. The increase in operating loss was largely due to higher general and administrative expenses, which rose by 35.1% to $27.8 million, driven by merger-related costs associated with the pending acquisition by Sophos Inc. Despite the losses, SecureWorks reported a gross profit of $56.1 million, reflecting a gross margin of 67.8%, up from 61.3% a year earlier, largely due to improved margins from Taegis solutions.

In terms of operational metrics, SecureWorks' total customer base decreased to 3,000 from 4,300 year-over-year, with the Taegis subscription customer base also declining to 1,900 from 2,000. The company reported a total annual recurring revenue of $288.8 million, slightly up from $278.7 million, indicating a focus on retaining and expanding existing customer relationships despite the overall decline in customer count. The company also noted that international revenue represented 41% of total revenue for the quarter, up from 37% in the previous year.

Looking ahead, SecureWorks is navigating a significant transition as it prepares for its merger with Sophos, expected to close in early 2025. The company has indicated that it will focus on optimizing its organizational structure and enhancing its higher-margin Taegis solutions to improve profitability. As of November 1, 2024, SecureWorks held $53.1 million in cash and cash equivalents, with no amounts drawn on its $50 million revolving credit facility, providing a buffer for its operational needs in the near term. The company remains cautious about its financial outlook, emphasizing the need for continued investment in technology and talent to adapt to the evolving cybersecurity landscape.