SecureWorks (SCWX) Financial Report Summaries

Risks

• We have a history of losses and may not be able to achieve or maintain profitability.
• Our revenue growth may vary due to global economic conditions, geopolitical uncertainty, and volatile financial markets, which may have an adverse effect on our business and financial condition.
• We rely on personnel with extensive information security expertise, and the loss of, or our inability to attract and retain, qualified personnel in this highly competitive labor market could harm our business.
• Implementation of our plans to strategically realign and optimize our investments with our priorities may not be successful, which could adversely affect our reputation, profitability and financial condition.
• We face intense competition, including from larger companies, and may lack sufficient financial or other resources to maintain or improve our competitive position.
• If we cannot successfully execute our go-to-market strategy by attracting new customers, retaining existing customers or increasing the annual contract values for Taegis subscription solutions, our business, results of operations and financial performance will be adversely affected.
• We generate a significant portion of our revenue from customers in the financial services industry, and changes within that industry, including new or altered compliance obligations or priorities, or an unfavorable review by the federal banking regulatory agencies could reduce demand for our Taegis subscription solutions and other cybersecurity offerings.
• If we fail to manage our growth effectively, we may be unable to execute our business plan and maintain high levels of customer service due to operational disruptions.
• Failure to maintain high-quality customer service and support functions, including the quality of the services and support provided by our channel partners, could adversely affect our reputation and sales growth prospects.
• Our reputation and results of operations may be adversely affected by service level agreements with some of our customers that require us to provide them with credits for service failures or inadequacies.
• Because we recognize revenue ratably over the terms of our Taegis subscription solutions contracts, decreases in sales of these solutions may not immediately be reflected in our results of operations.
• Our sales cycles are long and unpredictable, and our sales efforts require considerable time and expense, which could adversely affect our results of operations.
• As we continue to expand the sale of our Taegis subscription solutions and other cybersecurity offerings to customers located outside the United States, our business increasingly will be susceptible to risks associated with international sales and operations.
• Tax matters may materially affect our financial position and results of operations.
• We are exposed to fluctuations in currency exchange rates, which could negatively affect our financial condition and results of operations.
• Governmental export or import controls or international sanctions could require additional compliance obligations or may limit our ability to compete in foreign markets.
• An inability to expand our key distribution relationships could constrain the growth of our business.
• Our technology alliance partnerships expose us to an array of business risks and uncertainties that could prevent us from realizing the benefits we seek from these partnerships.
• Real or perceived defects, errors, or vulnerabilities in our Taegis subscription solutions or real or perceived failure of our Taegis subscription solutions to prevent or detect threat actor activity could harm our reputation, cause us to lose customers and expose us to costly litigation.
• Our inability to expand our development, use and adoption of artificial intelligence, or issues presented in our development, use and adoption of artificial intelligence, could harm our reputation, expose us to liability and cause us to lose customers.
• Cyber-attacks or other data security incidents that disrupt our operations or result in the breach or compromise of proprietary or confidential information about us, our workforce, customers, or other third parties could harm our business and expose us to costly regulatory enforcement and other liability.
• If our Taegis subscription solutions do not interoperate with our customers’ technology infrastructure, our Taegis subscription solutions may become less competitive, and our results of operations may be harmed.
• Loss of our right or ability to use various third-party technologies could result in short-term disruptions to our business and may cause harm to our brand and reputation.
• New and evolving information security, cybersecurity and data privacy laws and regulations may result in increased compliance costs, impede the development or performance of our Taegis subscription solutions, and cause us to incur monetary or other penalties.
• If we are unable to maintain and enhance our brand, our revenue and profitability could be adversely affected.
• We may expand through acquisitions of other companies, which could divert our management’s attention and company resources from our current business, resulting in unforeseen operating difficulties, increased costs and dilution to the ownership interests of our stockholders.
• Earthquakes, fires, power outages, floods, terrorist attacks, geopolitical and military conflicts, public health issues, and other catastrophic events could disrupt our business and ability to serve our customers and could have a material adverse effect on our business, supply chain, results of operations or financial condition.
• If we are unable to protect, maintain or enforce our non-patented intellectual property rights and proprietary information, our competitive position could be harmed, and we could be forced to incur significant expenses to enforce our rights.
• Claims by others that we infringe their proprietary technology could harm our business and financial condition.
• Our use of open-source technology could require us in some circumstances to make the source code of our modifications to that technology available to the public, which could include source code of our proprietary technologies, restricting our ability to commercialize our cybersecurity offerings.
• Our inability to favorably resolve any potential conflicts or disputes that arise between us and Dell or Dell Technologies relating to our past and ongoing relationships may adversely affect our business and prospects.
• If Dell Technologies, Dell or Dell Technologies’ other affiliates, or Silver Lake or its affiliates, engage in the same or similar type of business we conduct, enter partnerships with our competitors, or take advantage of business opportunities that might be attractive to us, our ability to operate successfully and expand our business may be hampered.
• Upon our deconsolidation from the Dell Technologies affiliated tax group, we may be unable to collect reimbursements or fully utilize related tax assets, and we might be obligated to pay to Dell Technologies certain previously realized or future tax benefits, which may adversely affect our results of operations and financial condition.
• The market price for our Class A common stock has been and is likely to continue to be volatile or may decline regardless of our operating performance.
• As long as Dell Technologies Inc. controls us, the ability of our other stockholders to influence matters requiring stockholder approval will be limited.
• We do not expect to pay any dividends on our Class A common stock for the foreseeable future.
• The dual-class structure of our common stock may adversely affect the trading price of our Class A common stock.
• As a “controlled company” under the marketplace rules of the Nasdaq Stock Market, we may rely on exemptions from certain corporate governance requirements that provide protection to stockholders of companies that are subject to such requirements.
• Future sales, or the perception of future sales, of a substantial number of shares of our Class A common stock could depress the trading price of our Class A common stock.
• Our charter designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or with our directors, our officers or other employees, or our majority stockholder.
• We are obligated to develop and maintain proper and effective internal control over financial reporting and any failure to maintain the adequacy of our internal controls may adversely affect investor confidence in our company, potentially resulting in a negative impact on the value of our Class A common stock.