Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
May 04, 2018 | Jun. 01, 2018 | |
Document Information [Line Items] | ||
Entity Registrant Name | SECUREWORKS CORP. | |
Entity Central Index Key | 1,468,666 | |
Current Fiscal Year End Date | --02-01 | |
Entity Filer Category | Accelerated Filer | |
Document Type | 10-Q | |
Document Period End Date | May 4, 2018 | |
Document Fiscal Year Focus | 2,019 | |
Document Fiscal Period Focus | Q1 | |
Amendment Flag | false | |
Common Stock, Class A | ||
Document Information [Line Items] | ||
Entity Common Stock, Shares Outstanding (in shares) | 11,703,960 | |
Common Stock, Class B | ||
Document Information [Line Items] | ||
Entity Common Stock, Shares Outstanding (in shares) | 70,000,000 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Financial Position (Unaudited) - USD ($) $ in Thousands | May 04, 2018 | Feb. 02, 2018 | [1] |
Current assets: | |||
Cash and cash equivalents | $ 77,302 | $ 101,539 | |
Accounts receivable, net of allowances of $8,589 and $8,246, respectively | 146,823 | 157,764 | |
Inventories, net | 670 | 1,030 | |
Other current assets | 42,125 | 40,551 | |
Total current assets | 266,920 | 300,884 | |
Property and equipment, net | 32,549 | 33,457 | |
Goodwill | 416,487 | 416,487 | |
Purchased intangible assets, net | 227,250 | 234,184 | |
Other non-current assets | 75,979 | 72,069 | |
Total assets | 1,019,185 | 1,057,081 | |
Current liabilities: | |||
Accounts payable | 19,458 | 23,266 | |
Accrued and other | 53,142 | 81,625 | |
Short-term deferred revenue | 146,700 | 137,697 | |
Total current liabilities | 219,300 | 242,588 | |
Long-term deferred revenue | 14,926 | 14,948 | |
Other non-current liabilities | 66,541 | 68,455 | |
Total liabilities | 300,767 | 325,991 | |
Commitments and contingencies (Note 5) | |||
Stockholders' equity: | |||
Preferred stock - $0.01 par value: 200,000 shares authorized; 0 shares issued | 0 | 0 | |
Additional paid in capital | 870,122 | 867,411 | |
Accumulated deficit | (150,981) | (137,162) | |
Accumulated other comprehensive loss | (1,540) | 30 | |
Total stockholders' equity | 718,418 | 731,090 | [2] |
Total liabilities and stockholders' equity | 1,019,185 | 1,057,081 | |
Common Stock, Class A | |||
Stockholders' equity: | |||
Common stock, Class A and Class B, $.01 par value | 117 | 111 | |
Common Stock, Class B | |||
Stockholders' equity: | |||
Common stock, Class A and Class B, $.01 par value | $ 700 | $ 700 | |
[1] | Certain prior period amounts have been adjusted as a result of the adoption of the accounting standard for revenue recognition set forth in ASC 606. | ||
[2] | Certain prior period amounts have been adjusted as a result of the adoption of the accounting standard for revenue recognition set forth in ASC 606. |
Condensed Consolidated Stateme3
Condensed Consolidated Statements of Financial Position (Unaudited) (Parenthetical) - USD ($) $ in Thousands | May 04, 2018 | Feb. 02, 2018 |
Accounts receivable, allowance for doubtful accounts | $ 8,589 | $ 8,246 |
Preferred stock, par value (usd per share) | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized (in shares) | 200,000,000 | 200,000,000 |
Preferred Stock, shares issued (in shares) | 0 | 0 |
Common Stock, Class A | ||
Common stock, par value (usd per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized (in shares) | 2,500,000,000 | 2,500,000,000 |
Common stock, shares issued (in shares) | 11,704,000 | 11,085,000 |
Common stock, shares outstanding (in shares) | 11,704,000 | 11,085,000 |
Common Stock, Class B | ||
Common stock, par value (usd per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized (in shares) | 500,000,000 | 500,000,000 |
Common stock, shares issued (in shares) | 70,000,000 | 70,000,000 |
Common stock, shares outstanding (in shares) | 70,000,000 | 70,000,000 |
Condensed Consolidated Stateme4
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | ||
May 04, 2018 | May 05, 2017 | [1] | |
Income Statement [Abstract] | |||
Net revenue | $ 126,161 | $ 113,678 | |
Cost of revenue | 60,530 | 53,613 | |
Gross margin | 65,631 | 60,065 | |
Research and development | 22,354 | 19,479 | |
Sales and marketing | 35,670 | 36,178 | |
General and administrative | 25,197 | 23,404 | |
Total operating expenses | 83,221 | 79,061 | |
Operating loss | (17,590) | (18,996) | |
Interest and other, net | 505 | (649) | |
Loss before income taxes | (17,085) | (19,645) | |
Income tax benefit | (3,266) | (6,368) | |
Net loss | $ (13,819) | $ (13,277) | [2],[3] |
Net loss per common share, basic and diluted (usd per share) | $ (0.17) | $ (0.17) | |
Weighted average common shares outstanding, basic and diluted (in shares) | 80,522 | 80,056 | |
[1] | Certain prior period amounts have been adjusted as a result of the adoption of the accounting standard for revenue recognition set forth in ASC 606. | ||
[2] | Certain prior period amounts have been adjusted as a result of the adoption of the accounting standard for revenue recognition set forth in ASC 606. | ||
[3] | Certain prior period amounts have been adjusted as a result of the adoption of the accounting standard for revenue recognition set forth in ASC 606. |
Condensed Consolidated Stateme5
Condensed Consolidated Statements of Comprehensive Loss (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | ||
May 04, 2018 | May 05, 2017 | [2] | |
Statement of Comprehensive Income [Abstract] | |||
Net loss | $ (13,819) | $ (13,277) | [1],[3] |
Foreign currency translation adjustments, net of tax | (1,570) | 735 | |
Comprehensive loss | $ (15,389) | $ (12,542) | |
[1] | Certain prior period amounts have been adjusted as a result of the adoption of the accounting standard for revenue recognition set forth in ASC 606. | ||
[2] | Certain prior period amounts have been adjusted as a result of the adoption of the accounting standard for revenue recognition set forth in ASC 606. | ||
[3] | Certain prior period amounts have been adjusted as a result of the adoption of the accounting standard for revenue recognition set forth in ASC 606. |
Condensed Consolidated Stateme6
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | |||
May 04, 2018 | May 05, 2017 | [3] | ||
Cash flows from operating activities: | ||||
Net loss | $ (13,819) | $ (13,277) | [1],[2] | |
Adjustments to reconcile net loss to net cash used in operating activities: | ||||
Depreciation and amortization | 10,287 | 10,261 | ||
Stock-based compensation expense | 4,730 | 3,628 | ||
Effects of exchange rate changes on monetary assets and liabilities denominated in foreign currencies | (377) | 649 | ||
Income tax benefit | (3,266) | (6,368) | ||
Provision for doubtful accounts | 1,492 | 889 | ||
Changes in assets and liabilities: | ||||
Accounts receivable | 9,176 | (10,494) | ||
Due to / from parent | 1,103 | 7,506 | ||
Inventories | 360 | 475 | ||
Other assets | (2,350) | (1,124) | ||
Accounts payable | (3,343) | 1,027 | ||
Deferred revenue | 8,668 | 8,155 | ||
Accrued and other liabilities | (31,065) | (20,982) | ||
Net cash used in operating activities | (18,404) | (19,655) | ||
Cash flows from investing activities: | ||||
Capital expenditures | (2,216) | (3,350) | ||
Net cash used in investing activities | (2,216) | (3,350) | ||
Cash flows from financing activities: | ||||
Principal payments on financing arrangement with Dell Financial Services | (1,104) | (800) | ||
Taxes paid on vested restricted shares | (2,013) | (1,224) | ||
Payments on financed capital expenditures | (500) | 0 | ||
Net cash (used in) provided by financing activities | (3,617) | (2,024) | ||
Net (decrease) increase in cash and cash equivalents | (24,237) | (25,029) | ||
Cash and cash equivalents at beginning of the period | 101,539 | [4] | 116,595 | |
Cash and cash equivalents at end of the period | $ 77,302 | $ 91,566 | ||
[1] | Certain prior period amounts have been adjusted as a result of the adoption of the accounting standard for revenue recognition set forth in ASC 606. | |||
[2] | Certain prior period amounts have been adjusted as a result of the adoption of the accounting standard for revenue recognition set forth in ASC 606. | |||
[3] | Certain prior period amounts have been adjusted as a result of the adoption of the accounting standard for revenue recognition set forth in ASC 606. | |||
[4] | Certain prior period amounts have been adjusted as a result of the adoption of the accounting standard for revenue recognition set forth in ASC 606. |
Condensed Consolidated Stateme7
Condensed Consolidated Statements of Stockholders' Equity (Unaudited) - 3 months ended May 04, 2018 - USD ($) shares in Thousands, $ in Thousands | Total | Common StockCommon Stock, Class A | Common StockCommon Stock, Class B | Additional Paid in Capital | Accumulated Deficit | Accumulated Other Comprehensive (Loss) Income | ||
Beginning balance (in shares) at Feb. 02, 2018 | [1] | 11,085 | 70,000 | |||||
Balances, February 2, 2018 at Feb. 02, 2018 | [1] | $ 731,090 | [2] | $ 111 | $ 700 | $ 867,411 | $ (137,162) | $ 30 |
Statement of Shareholders' Equity | ||||||||
Net loss | (13,819) | (13,819) | ||||||
Other comprehensive loss | (1,570) | (1,570) | ||||||
Vesting of restricted stock units (in shares) | 448 | |||||||
Vesting of restricted stock units | 0 | $ 4 | (4) | |||||
Grant of restricted stock awards (in shares) | 386 | |||||||
Grant of restricted stock awards | 0 | $ 4 | (4) | |||||
Common stock withheld as payment for withholding taxes upon the vesting of restricted shares (in shares) | (215) | |||||||
Common stock withheld as payment for withholding taxes upon the vesting of restricted shares | (2,013) | $ (2) | (2,011) | |||||
Stock-based compensation | 4,730 | 4,730 | ||||||
Ending balance (in shares) at May. 04, 2018 | 11,704 | 70,000 | ||||||
Balances, May 4, 2018 at May. 04, 2018 | $ 718,418 | $ 117 | $ 700 | $ 870,122 | $ (150,981) | $ (1,540) | ||
[1] | Certain prior period amounts have been adjusted as a result of the adoption of the accounting standard for revenue recognition set forth in ASC 606. | |||||||
[2] | Certain prior period amounts have been adjusted as a result of the adoption of the accounting standard for revenue recognition set forth in ASC 606. |
Description of the Business and
Description of the Business and Basis of Presentation | 3 Months Ended |
May 04, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Description of the Business and Basis of Presentation | DESCRIPTION OF THE BUSINESS AND BASIS OF PRESENTATION Description of the Business SecureWorks Corp. (individually and collectively with its consolidated subsidiaries, "Secureworks" or the "Company") is a leading global provider of intelligence-driven information security solutions singularly focused on protecting the Company's clients from cyber attacks. The Company's solutions enable organizations of varying size and complexity to fortify their cyber defenses to prevent security breaches, detect malicious activity in near real time, prioritize and respond rapidly to security incidents and predict emerging threats. On February 8, 2011, the Company was acquired by Dell Inc. (individually and collectively with its consolidated subsidiaries, "Dell" or "Parent"). On October 29, 2013, Dell was acquired by Dell Technologies Inc., formerly known as Denali Holding Inc. ("Dell Technologies"), a parent holding corporation. For the purposes of the accompanying financial statements, the Company elected to utilize pushdown accounting for the acquisition of Dell by Dell Technologies. On April 27, 2016, the Company completed its initial public offering ("IPO"). Upon the closing of the IPO, Dell Technologies owned, indirectly through Dell Inc. and Dell Inc.'s subsidiaries, no shares of the Company's outstanding Class A common stock and all outstanding shares of the Company's outstanding Class B common stock, which as of May 4, 2018 represented approximately 85.7% of the Company's total outstanding shares of common stock and approximately 98.4% of the combined voting power of both classes of the Company's outstanding common stock. The Company has one primary business activity, which is to provide clients with intelligence-driven information security solutions. The Company's chief operating decision maker, who is the President and Chief Executive Officer, makes operating decisions, assesses performance, and allocates resources on a consolidated basis. Accordingly, Secureworks operates its business as a single reportable segment. Basis of Presentation and Consolidation The Company's condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts reported in the Company's financial statements. The condensed consolidated financial statements include assets, liabilities, revenue and expenses of all majority-owned subsidiaries. Intercompany transactions and balances are eliminated in consolidation. For the periods presented, Dell has provided various corporate services to the Company in the ordinary course of business, including finance, tax, human resources, legal, insurance, IT, procurement and facilities-related services. The costs of these services are charged in accordance with a shared services agreement that went into effect on August 1, 2015. For more information regarding the charges for these services and related party transactions, see " Note 9 —Related Party Transactions." During the periods presented in the financial statements, Secureworks did not file separate federal tax returns, as the Company is generally included in the tax grouping of other Dell entities within the respective entity's tax jurisdiction. The income tax benefit has been calculated using the separate return method, modified to apply the benefits for loss approach. Under the benefits for loss approach, net operating losses or other tax attributes are characterized as realized or as realizable by Secureworks when those attributes are utilized or expected to be utilized by other members of the Dell consolidated group. See " Note 8 —Income and Other Taxes" for more information. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with GAAP for interim financial information and the requirements of the Securities and Exchange Commission ("SEC"). Accordingly, they do not include all of the information and disclosures required by GAAP for complete financial statement presentation. The year-end condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP. In the opinion of management, all adjustments consisting of normal recurring accruals and disclosures considered necessary for a fair statement have been included. All inter-company accounts and transactions have been eliminated in consolidation. The accompanying condensed consolidated financial statements and related financial information should be read in conjunction with the audited financial statements and the related notes thereto for the year ended February 2, 2018 included in Part II, Item 8 of the Company's Annual Report on Form 10-K filed with the SEC on March 28, 2018 (the "Annual Report"). Fiscal Year The Company’s fiscal year is the 52- or 53-week period ending on the Friday closest to January 31. The Company refers to the fiscal year ending February 1, 2019 and the fiscal year ended February 2, 2018 as fiscal 2019 and fiscal 2018, respectively. Both fiscal 2019 and fiscal 2018 have 52 weeks, and each quarter has 13 weeks. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Estimates are revised as additional information becomes available. In the Condensed Consolidated Statements of Operations, estimates are used when accounting for revenue arrangements, determining the cost of revenue, allocating costs and estimating the impact of contingencies. In the Condensed Consolidated Statements of Financial Position, estimates are used in determining the valuation and recoverability of assets, such as accounts receivables, inventories, fixed assets, goodwill and other identifiable intangible assets, and estimates are used in determining the reported amounts of liabilities, such as taxes payable and the impact of contingencies, all of which also impact the Condensed Consolidated Statements of Operations. Actual results could differ from these estimates. Revision of Previously Issued Financial Statements During the fiscal year ended February 2, 2018, the Company revised its balance sheet as of and for the period ended February 3, 2017 as a result of the correction of an error related to prepaid expenses for which the Company had been invoiced, but for which cash had not been remitted. This error resulted in an overstatement of other current assets and accounts payable balances in the Consolidated Statements of Financial Position and had a corresponding impact to the changes in the balances in the Consolidated Statements of Cash Flows, with no impact on the cash used in operating activities, for the period ended February 3, 2017. The error had no impact on the Consolidated Statements of Operations. Management has concluded that the impact of the misstatement was not material to the previously issued financial statements. Additional information concerning the effect of this revision on the previously issued consolidated financial statements is provided in Note 1 to Consolidated Financial Statements included in Part II, Item 8 of the Annual Report. Recently Adopted Accounting Pronouncements Compensation - Stock Compensation —In May 2017, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU") No. 2017-09, "Compensation – Stock Compensation (Topic 718): Scope of Modification Accounting." The amendments in this update provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting under Topic 718. The Company adopted this guidance during the three months ended May 4, 2018 with no material impact on its condensed consolidated financial statements. Statement of Cash Flows —In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments - A consensus of the FASB Emerging Issues Task Force.” The update was issued with the objective of reducing the existing diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows under Topic 230 and other topics. The adoption of this standard had no impact on the Condensed Consolidated Statements of Cash Flows. Revenue from Contracts with Customers —The Company adopted ASU 2014-09, "Revenue From Contracts With Customers" ("ASC 606") effective February 3, 2018 using the full retrospective method. The cumulative effect of the adoption was recognized as a decrease to accumulated deficit of $51.8 million on February 2, 2018 and impacted certain other prior period amounts. Certain amounts and disclosures set forth in this Quarterly Report on Form 10-Q have been updated to comply with the new ASC 606 standard. Summary of Significant Accounting Policies Except for the accounting policies for revenue, deferred revenue, deferred commissions and deferred installation costs updated as a result of adopting ASC 606 (including Subtopic 340-40), there have been no significant changes to the Company's significant accounting policies as of and for the three months ended May 4, 2018, as compared to the significant accounting policies described in the Annual Report. Revenue Recognition —Secureworks derives revenue primarily from two sources: (1) subscription revenue related to managed security and threat intelligence solutions; and (2) professional services, including security and risk consulting and incident response solutions. Subscription-based arrangements typically include security solutions, the associated hardware appliance, up-front installation fees and maintenance agreements, which are all typically recognized over the life of the related agreement. The Company has determined that hardware appliances and the related maintenance agreement included in the subscription-based solutions arrangements are incapable of being distinct within the context of the contract as they are required to access the Company's Counter Threat Platform. Moreover, any related installation fees are non-refundable and also incapable of being distinct within the context of the contract. Therefore, the Company has deemed these arrangements as a single performance obligation within the context of a typical subscription-based arrangement. The revenue and any related costs for these deliverables are recognized ratably over the contract term, beginning on the date on which service is made available to clients. Amounts that have been invoiced, but for which the above revenue recognition criteria have not been met, are included in deferred revenue. Professional services consist primarily of fixed-fee and retainer-based contracts. Revenue from these engagements is recognized using an input method over the contract term. The Company reports revenue net of any revenue-based taxes assessed by governmental authorities that are imposed on, and concurrently with, specific revenue-producing transactions. The Company recognizes revenue when all of the following criteria are met: • Identification of the contract, or contracts, with a customer— A contract with a customer exists when (i) the Company enters into an enforceable contract with a customer that defines each party's rights regarding the goods or services to be transferred and identifies the payment terms related to these goods or services, (ii) the contract has commercial substance and the parties are committed to perform and, (iii) collection of substantially all consideration to which the Company will be entitled in exchange for goods or services that will be transferred is deemed probable based on the customer's intent and ability to pay. Contracts entered into for professional services and subscription-based solutions near or at the same time are generally not combined as a single contract for accounting purposes, since neither the pricing nor the services are interrelated. • Identification of the performance obligations in the contract— Performance obligations promised in a contract are identified based on the goods or services that will be transferred to the customer that are both (i) capable of being distinct, whereby the customer can benefit from the goods or service either on its own or together with other resources that are readily available from third parties or from the Company, and (ii) are distinct in the context of the contract, whereby the transfer of the goods or services is separately identifiable from other promises in the contract. When promised goods or services are incapable of being distinct, the Company accounts for them as a combined performance obligation. With regard to a typical contract for subscription-based solutions, the performance obligation represents a series of distinct services that will be accounted for as a single performance obligation. In a typical professional services contract, the Company has a separate performance obligation associated with each service. The Company is generally acting as a principal in each subscription-based and professional services arrangement and, thus, recognizes revenue on a gross basis. • Determination of the transaction price— The total transaction price is primarily fixed in nature as the consideration is tied to the specific services purchased by the customer, which constitutes a series for delivery of the solutions over the duration of the contract. For professional services contracts, variable consideration exists in the form of rescheduling penalties and expense reimbursements; no estimation is required at contract inception, since variable consideration is allocated to the applicable period. • Allocation of the transaction price to the performance obligations in the contract— The Company allocates the transaction price to each performance obligation based on the performance obligation's standalone selling price. Standalone selling price is determined by considering all information available to the Company, such as historical selling prices of the performance obligation, geographic location, overall strategic pricing objective, market conditions and internally approved pricing guidelines related to the performance obligations. • Recognition of revenue when, or as, the Company satisfies performance obligation— The Company recognizes revenue over time using a time-elapsed output method to measure progress (i.e., ratable recognition) for the subscription-based performance obligation over the contract term. For any upgraded installation services, which the Company has determined represent a performance obligation separate from its subscription-based arrangements, revenue is recognized over time using hours elapsed over the service term as an appropriate method to measure progress. For the performance obligation pertaining to professional services arrangements, the Company recognizes revenue over time using an input method based on time (hours or days) incurred to measure progress over the contract term. As indicated above, the Company has one primary business activity, which is to provide clients with intelligence-driven information security solutions. The Company's chief operating decision maker, who is the President and Chief Executive Officer, makes operating decisions, assesses performance, and allocates resources on a consolidated basis. There are no segment managers who are held accountable for operations and operating results below the consolidated unit level. Accordingly, the Company is considered to be in a single reportable segment and operating unit structure. The following table presents revenue by service type (in thousands): Three Months Ended May 4, 2018 Three Months Ended May 5, 2017 Managed Security Services revenue $ 98,700 $ 88,909 Security and Risk Consulting revenue 27,461 24,769 Total revenue $ 126,161 $ 113,678 Deferred Revenue (Contract Liabilities) —Deferred revenue represents amounts contractually billed to customers or payments received from customers for which revenue has not yet been recognized. Deferred revenue that is expected to be recognized within one year is recorded as short-term deferred revenue and the remaining portion is recorded as long-term deferred revenue. The Company has determined that its contracts generally do not include a significant financing component. The primary purpose of the Company's invoicing terms is to provide customers with simplified and predictable ways of purchasing its solutions, not to receive financing from customers or to provide customers with financing. Examples of such terms include invoicing at the beginning of a subscription term with revenue recognized ratably over the contract period. Deferred Commissions and Deferred Fulfillment Costs —The Company accounts for both costs to obtain a contract for a customer, which are defined as costs that the Company would not have incurred if the contract had not been obtained, and contract costs by capitalizing and systematically amortizing the assets on a basis that is consistent with the transfer to the customer of the goods or services to which the assets relate. These costs generate or enhance resources used in satisfying performance obligations that directly relate to contracts. Applying the practical expedient guidance, the Company recognizes the incremental costs of obtaining contracts as an expense when incurred if the amortization period of the incremental costs of obtaining contracts that the Company otherwise would have recognized is one year or less. The Company's customer acquisition costs are primarily attributable to sales commissions and related fringe benefits earned by the Company's sales force and such costs are considered incremental costs to obtain a contract. Sales commissions for initial contracts are deferred and amortized taking into consideration the pattern of transfer to which assets relate and may include expected renewal periods where renewal commissions are not commensurate with the initial commission period. The Company recognizes the deferred commissions on a straight-line basis over the life of the customer relationship (estimated to be seven years ) in sales and marketing expenses. These assets are classified as non-current, and included in other non-current assets in the Condensed Consolidated Statements of Financial Position. As of May 4, 2018 and February 2, 2018, the amount of deferred commissions included in other non-current assets was $57.8 million and $57.2 million , respectively. Additionally, the Company incurs certain costs to install and activate hardware and software used in its managed security services, primarily related to a portion of the compensation for the personnel who perform the installation activities. The Company makes judgments regarding the fulfillment costs to be capitalized. Specifically, the Company capitalizes direct labor and associated fringe benefits using standards developed from actual costs and applicable operational data. The Company updates the information quarterly for items such as the estimated amount of time required to perform such activity. The Company capitalizes and amortizes these fulfillment costs on a straight-line basis over the economic life of the services, or approximately four years, in cost of revenue. As of May 4, 2018 and February 2, 2018, the amount of deferred fulfillment costs included in other non-current assets was $10.6 million and $10.2 million , respectively. ASC 606 Adoption and Revision Impact to Previously Reported Results The Company adjusted its condensed consolidated financial statements from amounts previously reported due to the retrospective adoption of ASC 606 and the revision discussed above. Select unaudited condensed consolidated statements of financial position line items which reflect the adoption of ASC 606 are as follows (in thousands): February 2, 2018 Adjustments for Adoption of February 2, 2018 (as reported) ASC 606 (as adjusted) Current assets: Other current assets $ 42,163 $ (1,612 ) $ 40,551 Total current assets 302,496 (1,612 ) 300,884 Other non-current assets 4,677 67,392 72,069 Total assets $ 991,301 $ 65,780 $ 1,057,081 Current liabilities: Deferred revenue $ 139,632 $ (1,935 ) $ 137,697 Total current liabilities 244,523 (1,935 ) 242,588 Other non-current liabilities 52,681 15,774 68,455 Total liabilities 312,152 13,839 325,991 Stockholders' equity: Accumulated deficit (188,936 ) 51,774 (137,162 ) Accumulated other comprehensive loss (137 ) 167 30 Total stockholders' equity $ 679,149 $ 51,941 $ 731,090 Select unaudited condensed consolidated statements of operations line items which reflect the retrospective adoption of ASC 606 are as follows (in thousands): May 5, 2017 Adjustments for Adoption of May 5, 2017 (as reported) ASC 606 (as adjusted) Net revenue $ 113,593 $ 85 $ 113,678 Cost of revenue 53,942 (329 ) 53,613 Gross margin 59,651 414 60,065 Total operating expenses 80,052 (991 ) 79,061 Operating loss (20,401 ) 1,405 (18,996 ) Income tax benefit (6,814 ) 446 (6,368 ) Net loss $ (14,236 ) $ 959 $ (13,277 ) Net loss per common share (basic and diluted) $ (0.18 ) $ 0.01 $ (0.17 ) Select unaudited condensed consolidated statement of cash flows line items which reflect the retrospective adoption of ASC 606 and the impact of the revision discussed above are as follows (in thousands): Three Months Ended May 5, 2017 Adjustments for Adoption of Adjustments for Three Months Ended May 5, 2017 (as reported) ASC 606 Revision (as adjusted) Cash flows from operating activities: Net loss $ (14,236 ) $ 959 $ — $ (13,277 ) Adjustments to reconcile net loss to net cash used in operating activities: Effects of exchange rate changes on monetary assets and liabilities denominated in foreign currencies 602 47 — 649 Income tax benefit (6,814 ) 446 — (6,368 ) Changes in assets and liabilities: Other assets (160 ) (1,360 ) 396 (1,124 ) Accounts payable 1,423 — (396 ) 1,027 Deferred revenue 8,247 (92 ) — 8,155 Net cash provided by (used in) operating activities $ (19,655 ) $ — $ — $ (19,655 ) Recently Issued Accounting Pronouncements Intangibles - Goodwill and Other —In January 2017, the FASB issued ASU No. 2017-04, "Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment." ASU 2017-04 eliminates Step 2 of the goodwill impairment test, which required the Company to determine the implied fair value of goodwill by allocating the reporting unit's fair value to each of its assets and liabilities as if the reporting unit was acquired in a business acquisition. Instead, the updated guidance requires an entity to perform its annual or interim goodwill impairment test by comparing the fair value of the reporting unit to its carrying value, and recognizing a non-cash impairment charge for the amount by which the carrying value exceeds the reporting unit's fair value, with the loss not exceeding the total amount of goodwill allocated to that reporting unit. The updated guidance is effective for the Company for annual and interim periods beginning in the Company's 2021 fiscal year, with early adoption permitted, and will be applied on a prospective basis. The Company does not expect that the adoption of this standard will have a material impact on its consolidated financial statements. Financial Instruments — Credit Losses —In June 2016, the FASB issued ASU No. 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments." The amendments in this update replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The update is effective for the Company for fiscal years beginning with the Company's 2021 fiscal year, including interim periods within those fiscal years. The Company is currently evaluating the impact of this guidance on its consolidated financial statements. Leases —In February 2016, the FASB issued ASU No. 2016-02, "Leases (Topic 842)," which requires lessees to recognize most lease liabilities on their balance sheets but recognize the expenses on their income statements in a manner similar to current practice. The update states that a lessee would recognize a lease liability for the obligation to make lease payments and a right-to-use asset for the right to use the underlying asset for the lease term. Companies are required to use a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements. The update is effective for the Company for annual and interim periods beginning with the Company's 2020 fiscal year, and early adoption is permitted. The Company continues to evaluate the impact of this guidance on its consolidated financial statements and related disclosures, but expects that most of its operating lease commitments will be subject to the new standard and recognized as operating lease liabilities and right-to-use assets upon adoption. |
Net Loss Per Share
Net Loss Per Share | 3 Months Ended |
May 04, 2018 | |
Earnings Per Share [Abstract] | |
Net Loss Per Share | NET LOSS PER SHARE Net loss per share is calculated by dividing net loss for the periods presented by the respective weighted-average number of common shares outstanding, and excludes any dilutive effects of share-based awards as they would be anti-dilutive. Diluted net loss per common share is computed by giving effect to all potentially dilutive common shares, including common stock issuable upon the exercise of stock options and unvested restricted common stock and restricted stock units. The Company applies the two-class method to calculate earnings per share. Because the Class A common stock and the Class B common stock share the same rights in dividends and earnings, earnings per share (basic and diluted) are the same for both classes. Since losses were incurred in all periods presented, all potential common shares were determined to be anti-dilutive. The following table sets forth the computation of net loss per common share (in thousands, except per share amounts): Three Months Ended May 4, 2018 May 5, 2017* Numerator: Net loss $ (13,819 ) $ (13,277 ) Denominator: Weighted-average number of shares outstanding: Basic and Diluted 80,522 80,056 Loss per common share: Basic and Diluted $ (0.17 ) $ (0.17 ) Weighted-average anti-dilutive stock options, non-vested restricted stock and restricted stock units 5,531 5,050 * Certain prior period amounts have been adjusted as a result of the adoption of the accounting standard for revenue recognition set forth in ASC 606. |
Contract Balances and Contract
Contract Balances and Contract Costs | 3 Months Ended |
May 04, 2018 | |
Revenue from Contract with Customer [Abstract] | |
Contract Balances and Contract Costs | CONTRACT BALANCES AND CONTRACT COSTS Promises to provide services related to the Company's subscription-based solutions are accounted for as a single performance obligation over an average period of two years . Performance obligations related to the Company's professional service contracts are separate obligations associated with each service. Although the Company has many multi-year customer relationships for its professional service solutions, the contractual period is typically structured as a separate performance obligation and recognized over a duration of less than one year . The Company invoices its clients based on a variety of billing schedules. During the first quarter of fiscal 2019, on average, approximately half of the Company's recurring revenue was billed in advance. In addition, many of the Company's strategic risk consulting engagements are billed in advance of service commencement. Deferred revenue represents the aggregate amount of billing in advance of service delivery. Changes to the Company's deferred revenue during the three months ended May 4, 2018 are as follows (in thousands): As of February 2, 2018* Upfront payments received and billings during the three months ended May 4, 2018 Revenue recognized during the three months ended May 4, 2018 As of May 4, 2018 Deferred revenue $ 152,645 $ 77,262 $ (68,281 ) $ 161,626 * Certain prior period amounts have been adjusted as a result of the adoption of the accounting standard for revenue recognition set forth in ASC 606. Remaining Performance Obligation The remaining performance obligation represents the transaction price allocated to contracted revenue that has not yet been recognized, which includes deferred revenue and non-cancellable contracts that will be invoiced and recognized as revenue in future periods. The remaining performance obligation is comprised of two elements: (i) the value of remaining services to be provided through the contract term for client's whose services have been activated; and (ii) the value of services contracted with clients that have not yet been installed ("backlog"). Backlog is not recorded in revenue, deferred revenue or elsewhere in the condensed consolidated financial statements until the Company establishes a contractual right to invoice at which point it is recorded as revenue or deferred revenue as appropriate. The Company applies the practical expedient in ASC paragraph 606-10-50-14(a) and does not disclose information about remaining performance obligations that are part of a contract that has an original expected duration of one year or less. Additionally, the Company has elected to use the practical expedient to not disclose backlog related to the comparative period under ASC 606-10-65. The Company expects that the amount of backlog relative to the total value of its contracts will change from year to year due to several factors, including the amount invoiced at the beginning of the contract term, the timing and duration of the Company's customer agreements, varying invoicing cycles of agreements and changes in customer financial circumstances. Accordingly, any fluctuations in backlog are not always a reliable indicator of future revenues. As of May 4, 2018 the Company expects to recognize remaining performance obligations as follows (in thousands): Total Expected to be recognized in the next 12 months Expected to be recognized in 12-24 months Expected to be recognized in 24-36 months Expected to be recognized thereafter Performance obligation - active $ 243,247 $ 135,208 $ 72,997 $ 29,538 $ 5,504 Performance obligation - backlog $ 47,899 $ 15,614 $ 15,614 $ 14,394 $ 2,277 Total $ 291,146 $ 150,822 $ 88,611 $ 43,932 $ 7,781 Deferred Commissions and Fulfillment Costs The Company capitalizes a significant portion of its commission expense and related fringe benefits earned by its sales personnel. Additionally, the Company capitalizes certain costs to install and activate hardware and software used in its managed security services, primarily related to a portion of the compensation for the personnel who perform the installation activities. These deferred costs are amortized on a systematic basis that is consistent with the transfer to the customer of the goods or services to which the assets relate. Changes in the balance of total deferred commission and total deferred fulfillment costs during the three months ended May 4, 2018 are as follows (in thousands): As of February 2, 2018 Amount capitalized Amount recognized As of May 4, 2018 Deferred commissions $ 57,229 $ 3,996 $ (3,463 ) $ 57,762 Deferred fulfillment costs 10,163 1,672 (1,200 ) 10,635 The Company did not record any impairment losses on the deferred commissions or deferred fulfillment costs during the three months ended May 4, 2018. |
Goodwill and Intangible Assets
Goodwill and Intangible Assets | 3 Months Ended |
May 04, 2018 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Goodwill and Intangible Assets | GOODWILL AND INTANGIBLE ASSETS Goodwill relates to the acquisition of Dell by Dell Technologies and represents the excess of the purchase price attributable to Secureworks over the fair value of the assets acquired and liabilities assumed. There were no additions, adjustments or impairments to goodwill during the periods presented. Accordingly, goodwill totaled $416.5 million as of May 4, 2018 and February 2, 2018 . Goodwill and indefinite-lived intangible assets are tested for impairment on an annual basis during the third fiscal quarter, or earlier if an indicator of impairment occurs. The Company completed its most recent annual impairment test by performing a qualitative assessment of goodwill at the reporting unit level. In performing this qualitative assessment, the Company evaluated events and circumstances since the date of the last quantitative impairment test including the results of that test, macroeconomic conditions, industry and market conditions, key financial metrics and the overall financial performance of the Company. After assessing the totality of the events and circumstances, the Company determined that it was not more likely than not that the fair value of the Secureworks reporting unit was less than its carrying amount and, therefore, that the first and second steps of the quantitative goodwill impairment test were unnecessary. Further, no triggering events have subsequently transpired that would indicate a potential impairment as of May 4, 2018 . Intangible Assets The Company's intangible assets as of May 4, 2018 and February 2, 2018 were as follows: May 4, 2018 February 2, 2018 Gross Accumulated Amortization Net Gross Accumulated Amortization Net (in thousands) Customer relationships $ 189,518 $ (66,581 ) $ 122,937 $ 189,518 $ (63,058 ) $ 126,460 Technology 135,584 (61,389 ) 74,195 135,584 (57,978 ) 77,606 Finite-lived intangible assets 325,102 (127,970 ) 197,132 325,102 (121,036 ) 204,066 Trade name 30,118 — 30,118 30,118 — 30,118 Total intangible assets $ 355,220 $ (127,970 ) $ 227,250 $ 355,220 $ (121,036 ) $ 234,184 Amortization expense related to finite-lived intangible assets was approximately $6.9 million for each of the three months ended May 4, 2018 and May 5, 2017 . Amortization expense is included within cost of revenue and general and administrative in the Condensed Consolidated Statements of Operations. There were no impairment charges related to intangible assets during the three months ended May 4, 2018 and May 5, 2017 . |
Debt
Debt | 3 Months Ended |
May 04, 2018 | |
Debt Disclosure [Abstract] | |
Debt | DEBT Revolving Credit Facility On November 2, 2015, SecureWorks, Inc., a wholly-owned subsidiary of SecureWorks Corp., entered into a revolving credit agreement with a wholly-owned subsidiary of Dell Inc. under which the Company obtained a $30 million senior unsecured revolving credit facility. This facility was initially available for a one -year term beginning on April 21, 2016. Effective as of March 28, 2017, the term of the facility was extended on the same terms for an additional one -year term ending on April 21, 2018. During the three months ended May 4, 2018, the facility was amended and restated to extend the maturity date to March 27, 2019 and to reduce the annual rate at which interest accrues from the applicable London Interbank Offered Rate plus 1.60% to such rate plus 1.15% . Under the facility, up to $30 million principal amount of borrowings may be outstanding at any time. The maximum amount of borrowings may be increased by up to an additional $30 million by mutual agreement of the lender and borrower. The proceeds from loans made under the facility may be used for general corporate purposes. The facility is not guaranteed by SecureWorks Corp. or its subsidiaries. There was no outstanding balance under the credit facility as of May 4, 2018 or February 2, 2018 . Each loan made under the revolving credit facility will accrue interest at an annual rate equal to the applicable London Interbank Offered Rate plus 1.15% . Amounts under the facility may be borrowed, repaid and reborrowed from time to time during the term of the facility. The borrower will be required to repay in full all of the loans outstanding, including all accrued interest, and the facility will terminate upon a change of control of SecureWorks Corp. or following a transaction in which SecureWorks, Inc. ceases to be a direct or indirect wholly-owned subsidiary of SecureWorks Corp. The credit agreement contains customary representations, warranties, covenants and events of default. The unused portion of the facility is subject to a commitment fee of 0.35% , which is due upon expiration of the facility. |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
May 04, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | COMMITMENTS AND CONTINGENCIES Legal Contingencies — From time to time, the Company is involved in claims and legal proceedings that arise in the ordinary course of business. The Company accrues a liability when it believes that it is both probable that a liability has been incurred and that it can reasonably estimate the amount of the loss. The Company reviews the status of such matters at least quarterly and adjusts its liabilities as necessary to reflect ongoing negotiations, settlements, rulings, advice of legal counsel and other relevant information. Whether the outcome of any claim, suit, assessment, investigation or legal proceeding, individually or collectively, could have a material adverse effect on the Company's business, financial condition, results of operations or cash flows will depend on a number of factors, including the nature, timing and amount of any associated expenses, amounts paid in settlement, damages or other remedies or consequences. To the extent new information is obtained and the Company's views on the probable outcomes of claims, suits, assessments, investigations or legal proceedings change, changes in accrued liabilities would be recorded in the period in which such a determination is made. As of May 4, 2018 , the Company does not believe that there were any such matters that, individually or in the aggregate, could have a material adverse effect on its business, financial condition, results of operations or cash flows. Client-based Taxation Contingencie s — Various government entities ("taxing authorities") require the Company to bill its clients for the taxes they owe based on the services they purchase from the Company. The application of the rules of each taxing authority concerning which services are subject to each tax and how those services should be taxed involves the application of judgment. Taxing authorities periodically perform audits to verify compliance and include all periods that remain open under applicable statutes, which generally range from three to four years. These audits could result in significant assessments of past taxes, fines and interest if the Company were found to be non-compliant. During the course of an audit, a taxing authority may question the Company's application of its rules in a manner that, if the Company were not successful in substantiating its position, could result in a significant financial impact to the Company. In the course of preparing its financial statements and disclosures, the Company considers whether information exists that would warrant disclosure or an accrual with respect to such a contingency. Indemnifications —In the ordinary course of business, the Company enters into contractual arrangements under which it agrees to indemnify its clients from certain losses incurred by the client as to third-party claims relating to the services performed on behalf of the Company or for certain losses incurred by the client as to third-party claims arising from certain events as defined within the particular contract. Such indemnification obligations may not be subject to maximum loss clauses. Historically, payments related to these indemnifications have been immaterial. Concentrations —The Company sells solutions to clients of all sizes primarily through its direct sales organization, supplemented by sales through channel partners. The Company had no client that represented 10% or more of its net revenue for the three months ended May 4, 2018 or May 5, 2017 . |
Stock-Based Compensation And Ot
Stock-Based Compensation And Other Long-Term Performance Incentives | 3 Months Ended |
May 04, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Stock-Based Compensation And Other Long-Term Performance Incentives | STOCK-BASED COMPENSATION AND OTHER LONG-TERM PERFORMANCE INCENTIVES The Company's board of directors adopted the SecureWorks Corp. 2016 Long-Term Incentive Plan (the "2016 Plan") effective April 18, 2016. The 2016 Plan provides for the grant of options, stock appreciation rights, restricted stock, restricted stock units, deferred stock units, unrestricted stock, dividend equivalent rights, other equity-based awards, and cash bonus awards. Awards may be granted under the 2016 Plan to individuals who are employees, officers, or non-employee directors of the Company or any of its affiliates, consultants and advisors who perform services for the Company or any of its affiliates, and any other individual whose participation in the 2016 Plan is determined to be in the best interests of the Company by the compensation committee of the board of directors. In March 2017, the Company began granting long-term performance cash awards to certain employees. The employees who receive these performance cash awards do not receive equity awards as part of the long-term incentive program. The long-term performance cash awards are subject to various performance conditions and vest in equal annual installments over a three -year period. During the three months ended May 4, 2018 and May 5, 2017 , the Company granted $15.7 million and $10.8 million , respectively, of these awards. The Company recognized $1.5 million and $0.5 million of related compensation expense for the three months ended May 4, 2018 and May 5, 2017 , respectively. For the three months ended May 4, 2018 and May 5, 2017 , the Company granted 1,602,953 and 621,164 restricted stock units, respectively, under the 2016 Plan. The Company granted 405,000 and 283,988 restricted stock awards during the three months ended May 4, 2018 and May 5, 2017 , respectively, under the 2016 Plan. The annual restricted stock unit and restricted stock awards granted during fiscal 2019 and 2018 vest over a three -year period and approximately 50% of such awards are subject to performance conditions. |
Income and Other Taxes
Income and Other Taxes | 3 Months Ended |
May 04, 2018 | |
Income Tax Disclosure [Abstract] | |
Income and Other Taxes | INCOME AND OTHER TAXES The Company's effective income tax rate for the three months ended May 4, 2018 and May 5, 2017 was as follows: Three Months Ended May 4, 2018 May 5, 2017 Loss before income taxes $ (17,085 ) $ (19,645 ) Income tax benefit $ (3,266 ) $ (6,368 ) Effective tax rate 19.1 % 32.4 % During the periods presented in the accompanying condensed consolidated financial statements, the Company did not file separate federal tax returns as the Company generally was included in the tax grouping of other Dell entities within the respective entity's tax jurisdiction. The income tax benefit has been calculated using the separate return method, modified to apply the benefits-for-loss approach. Under the benefits-for-loss approach, net operating losses or other tax attributes are characterized as realized by the Company when those attributes are utilized by other members of the Dell consolidated group. The change in the Company's effective income tax rate for the three months ended May 4, 2018 compared to the effective income tax rate for the three months ended May 5, 2017 was primarily driven by lower U.S. corporate income tax rate from 35% to 21% and the impact of the minimum tax on foreign earnings from the enactment of the U.S. Tax Cuts and Jobs Act ("U.S. Tax Reform Act" or the "Act") The Company’s effective tax rate for the three months ended May 4, 2018 also includes the discrete impact of approximately $0.3 million relating to the impact of the vesting of certain equity awards for which the fair value on the vesting date was lower than the fair value on the date the equity awards were originally granted. This change in fair value, which is measured by the price of the Class A common stock as reported on the NASDAQ Global Select Market, resulted in a lower actual tax deduction than was deducted for financial reporting purposes. The U.S. Tax Reform Act was enacted in December 2017. GAAP requires the effect of changes in tax laws to be recognized in the period that includes enactment date. Among other things, the U.S. Tax Reform Act decreases the U.S. corporate income tax, establishes a modified territorial system by requiring a mandatory deemed repatriation tax on undistributed earnings of foreign subsidiaries (the "Transition Tax") and requires a minimum tax on certain future earnings generated by foreign subsidiaries. Due to the complexities involved in accounting for the enactment of the Act, SEC Staff Accounting Bulletin No. 118 ("SAB 118") allows companies to record provisional amounts in earnings for the first year following the Act's enactment, with those provisional amounts required to be finalized by the end of that year. In accordance with GAAP and SAB 118, the Company recognized a provisional tax benefit in the fourth quarter of fiscal 2018 of $27.0 million primarily attributable to the remeasurement of deferred tax assets and liabilities at the lower statutory rate. This tax benefit was net of an expense estimate of approximately $0.6 million for the impact of the Transition Tax. The provisional estimates were made based on the Company's initial analysis using available information and estimates. During the three months ended May 4, 2018, the Company recorded an adjustment to the provisional benefit recognized in fiscal 2018 of approximately $0.4 million due to a change in the remeasurement of a deferred tax liability. No other adjustments have been made to the provisional amounts recorded in the fourth quarter of fiscal 2018. The Company is continuing to gather additional information and refine its analysis to more precisely compute the amount of the Transition Tax and, as a result, the Company's accounting for this item is not yet complete. As the Company refines its provisional estimate calculation, further analyzes provisions of the Act and considers any subsequent guidance in accordance with SAB 118, these provisional estimates could be adjusted during the measurement period, which ends during the fourth quarter of fiscal 2019. As indicated above, the Company is included in the tax groupings of other Dell entities and recognized a tax benefit when its tax attributes are utilized by other members of the Dell consolidated group. Adjustments to these provisional estimates could have an impact on the Company's future financial results. Additionally, further regulatory or GAAP accounting guidance regarding the U.S. Tax Reform Act also could impact the Company's future financial results. As of May 4, 2018 and February 2, 2018 , the Company had $4.5 million and $4.0 million , respectively, of deferred tax assets related to net operating loss carryforwards for state tax returns that are not included with those of other Dell entities. These net operating loss carryforwards began expiring in the fiscal year ended February 2, 2018. Due to the uncertainty surrounding the realization of these net operating loss carryforwards, the Company has provided valuation allowances for the full amount as of May 4, 2018 and February 2, 2018 . Because the Company is included in the tax filings of certain other Dell entities, management has determined that it will be able to realize the remainder of its deferred tax assets. If the Company's tax provision had been prepared using the separate return method, the unaudited pro forma pre-tax loss, tax benefit and net loss for the three months ended May 4, 2018 would have been $17.2 million , $2.8 million and $14.5 million , respectively, as a result of the recognition of a valuation allowance that would have been recorded on certain deferred tax assets as well as certain attributes from the U.S. Tax Reform Act that would be lost if not utilized by the Dell consolidated group. Net deferred tax balances are included in other non-current assets and other non-current liabilities in the Condensed Consolidated Statements of Financial Position. As of May 4, 2018 and February 2, 2018, the Company had $23.2 million and $21.4 million , respectively, of a net operating loss tax receivable from Dell. The Company had $0.9 million and $0.8 million of unrecognized tax benefits as of May 4, 2018 and February 2, 2018 , respectively. |
Related Party Transactions
Related Party Transactions | 3 Months Ended |
May 04, 2018 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | RELATED PARTY TRANSACTIONS Allocated Expenses For the periods presented, Dell has provided various corporate services to Secureworks in the ordinary course of business. The costs of services provided to Secureworks by Dell are governed by a shared services agreement between Secureworks and Dell Inc. or its wholly-owned subsidiaries. The total amounts of the charges under the shared services agreement with Dell were $1.1 million and $1.4 million for the three months ended May 4, 2018 and May 5, 2017 , respectively. Management believes that the basis on which the expenses have been allocated is a reasonable reflection of the utilization of services provided to or the benefit received by the Company during the periods presented. Related Party Arrangements For the periods presented, related party transactions and activities involving Dell Inc. and its wholly-owned subsidiaries were not always consummated on terms equivalent to those that would prevail in an arm's-length transaction where conditions of competitive, free-market dealing may exist. The Company purchases computer equipment for internal use from Dell that is capitalized within property and equipment in the Condensed Consolidated Statements of Financial Position. These purchases were made at pricing that is intended to approximate arm's-length pricing. Purchases of computer equipment from Dell and EMC Corporation, a wholly-owned subsidiary of Dell ("EMC"), totaled $0.7 million for the three months ended May 4, 2018 , and $0.6 million for the three months ended May 5, 2017 . EMC, a company that provides enterprise software and storage, maintains a majority ownership interest in a subsidiary, VMware, Inc. ("VMware"), that provides cloud and virtualization software and services. The Company's purchases of annual maintenance services, software licenses and hardware systems for internal use from EMC and VMware totaled $0.3 million and $0.2 million for the three months ended May 4, 2018 and May 5, 2017 , respectively. Approximately $3.0 million of the purchases from VMware prior to the three months ended May 4, 2018 were financed through Dell Financial Services, of which approximately $1.1 million of such purchases were included in intercompany liabilities as of May 4, 2018 . The Company recognized revenue related to solutions provided to other subsidiaries of Dell, consisting of RSA Security LLC, Pivotal Software, Inc., and Boomi, Inc. The revenue recognized by the Company for security solutions provided to these entities totaled $0.1 million and $16.0 thousand for the three months ended May 4, 2018 and May 5, 2017 , respectively. Purchases by the Company from these subsidiaries totaled $28.0 thousand for the three months ended May 4, 2018 . The Company did not make any purchases from these subsidiaries for the three months ended May 5, 2017 . The Company recognized revenue related to solutions provided to principal stockholders of Dell Technologies consisting of Michael S. Dell, Chairman and Chief Executive Officer of Dell Technologies and Dell Inc., the Susan Lieberman Dell Separate Property Trust (a separate property trust for the benefit of Mr. Dell's wife) and MSD Capital, L.P. (a firm founded for the purposes of managing investments of Mr. Dell and his family). The revenues recognized by the Company from solutions provided to Mr. Dell, the Susan Lieberman Dell Separate Property Trust and MSD Capital, L.P. totaled $19 thousand and $23 thousand for the three months ended May 4, 2018 and May 5, 2017 , respectively. The Company provides solutions to certain clients whose contractual relationship has historically been with Dell rather than Secureworks, although the Company is the primary obligor and carries credit and inventory risk in these arrangements. Effective August 1, 2015, upon the creation of new subsidiaries to segregate some of the Company's operations from Dell's operations, as described in " Note 1 —Description of the Business and Basis of Presentation," many of such client contracts were transferred from Dell to the Company, forming a direct contractual relationship between the Company and the end client. For clients whose contracts have not yet been transferred and for contracts subsequently originated through Dell under a reseller agreement, the Company recognized revenues of approximately $12.7 million for the three months ended May 4, 2018 , and approximately $10.2 million for the three months ended May 5, 2017 . As the Company's client and on behalf of certain of its own clients, Dell also purchases solutions from the Company at pricing that is intended to approximate arm's-length pricing. Such revenues totaled approximately $5.0 million for the three months ended May 4, 2018 and $5.9 million for the three months ended May 5, 2017 . As a result of the foregoing related party arrangements, the Company has recorded the following related party balances in the Condensed Consolidated Statements of Financial Position as of May 4, 2018 and February 2, 2018 . During the third quarter of fiscal 2017, the Company began settling in cash its related party balances with Dell on a quarterly basis. May 4, 2018 February 2, 2018 (in thousands) Intercompany receivable $ — $ — Intercompany payable (19,808 ) (19,580 ) Net intercompany payable (in accrued and other) $ (19,808 ) $ (19,580 ) Accounts receivable from clients under reseller agreements with Dell (included in accounts receivable, net) $ 22,451 $ 25,229 Net operating loss tax sharing receivable under agreement with Dell (included in "Other current assets" and "Other non-current assets" at May 4, 2018 and in "Other current assets" at February 2, 2018) $ 23,211 $ 21,380 |
Fair Value Measurements
Fair Value Measurements | 3 Months Ended |
May 04, 2018 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements | FAIR VALUE MEASUREMENTS The Company measures fair value within the guidance of the three-level valuation hierarchy. This hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The categorization of a measurement within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The three levels are defined as follows: • Level 1 - Quoted market prices in active markets for identical assets or liabilities • Level 2 - Other observable market-based inputs or unobservable inputs that are corroborated by market data • Level 3 - Significant unobservable inputs Assets and Liabilities Measured at Fair Value on a Recurring Basis The assets and liabilities of the Company that are measured at fair value on a recurring basis using the respective input levels as of May 4, 2018 and February 2, 2018 were as follows: May 4, February 2, 2018 Level 1 Level 1 (in thousands) Cash equivalents - Money Market Funds $ 34,125 $ 58,967 Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis The carrying amounts of the Company's accounts receivable, accounts payable and accrued expenses approximate their respective fair value due to their short-term nature. |
Description of the Business a18
Description of the Business and Basis of Presentation (Policies) | 3 Months Ended |
May 04, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation and Consolidation | Basis of Presentation and Consolidation The Company's condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts reported in the Company's financial statements. The condensed consolidated financial statements include assets, liabilities, revenue and expenses of all majority-owned subsidiaries. Intercompany transactions and balances are eliminated in consolidation. For the periods presented, Dell has provided various corporate services to the Company in the ordinary course of business, including finance, tax, human resources, legal, insurance, IT, procurement and facilities-related services. The costs of these services are charged in accordance with a shared services agreement that went into effect on August 1, 2015. For more information regarding the charges for these services and related party transactions, see " Note 9 —Related Party Transactions." During the periods presented in the financial statements, Secureworks did not file separate federal tax returns, as the Company is generally included in the tax grouping of other Dell entities within the respective entity's tax jurisdiction. The income tax benefit has been calculated using the separate return method, modified to apply the benefits for loss approach. Under the benefits for loss approach, net operating losses or other tax attributes are characterized as realized or as realizable by Secureworks when those attributes are utilized or expected to be utilized by other members of the Dell consolidated group. See " Note 8 —Income and Other Taxes" for more information. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with GAAP for interim financial information and the requirements of the Securities and Exchange Commission ("SEC"). Accordingly, they do not include all of the information and disclosures required by GAAP for complete financial statement presentation. The year-end condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP. In the opinion of management, all adjustments consisting of normal recurring accruals and disclosures considered necessary for a fair statement have been included. All inter-company accounts and transactions have been eliminated in consolidation. The accompanying condensed consolidated financial statements and related financial information should be read in conjunction with the audited financial statements and the related notes thereto for the year ended February 2, 2018 included in Part II, Item 8 of the Company's Annual Report on Form 10-K filed with the SEC on March 28, 2018 (the "Annual Report"). |
Fiscal Year | Fiscal Year The Company’s fiscal year is the 52- or 53-week period ending on the Friday closest to January 31. The Company refers to the fiscal year ending February 1, 2019 and the fiscal year ended February 2, 2018 as fiscal 2019 and fiscal 2018, respectively. Both fiscal 2019 and fiscal 2018 have 52 weeks, and each quarter has 13 weeks. |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Estimates are revised as additional information becomes available. In the Condensed Consolidated Statements of Operations, estimates are used when accounting for revenue arrangements, determining the cost of revenue, allocating costs and estimating the impact of contingencies. In the Condensed Consolidated Statements of Financial Position, estimates are used in determining the valuation and recoverability of assets, such as accounts receivables, inventories, fixed assets, goodwill and other identifiable intangible assets, and estimates are used in determining the reported amounts of liabilities, such as taxes payable and the impact of contingencies, all of which also impact the Condensed Consolidated Statements of Operations. Actual results could differ from these estimates. |
Reclassification | Revision of Previously Issued Financial Statements During the fiscal year ended February 2, 2018, the Company revised its balance sheet as of and for the period ended February 3, 2017 as a result of the correction of an error related to prepaid expenses for which the Company had been invoiced, but for which cash had not been remitted. This error resulted in an overstatement of other current assets and accounts payable balances in the Consolidated Statements of Financial Position and had a corresponding impact to the changes in the balances in the Consolidated Statements of Cash Flows, with no impact on the cash used in operating activities, for the period ended February 3, 2017. The error had no impact on the Consolidated Statements of Operations. Management has concluded that the impact of the misstatement was not material to the previously issued financial statements. Additional information concerning the effect of this revision on the previously issued consolidated financial statements is provided in Note 1 to Consolidated Financial Statements included in Part II, Item 8 of the Annual Report. |
Revenue Recognition | Revenue Recognition —Secureworks derives revenue primarily from two sources: (1) subscription revenue related to managed security and threat intelligence solutions; and (2) professional services, including security and risk consulting and incident response solutions. Subscription-based arrangements typically include security solutions, the associated hardware appliance, up-front installation fees and maintenance agreements, which are all typically recognized over the life of the related agreement. The Company has determined that hardware appliances and the related maintenance agreement included in the subscription-based solutions arrangements are incapable of being distinct within the context of the contract as they are required to access the Company's Counter Threat Platform. Moreover, any related installation fees are non-refundable and also incapable of being distinct within the context of the contract. Therefore, the Company has deemed these arrangements as a single performance obligation within the context of a typical subscription-based arrangement. The revenue and any related costs for these deliverables are recognized ratably over the contract term, beginning on the date on which service is made available to clients. Amounts that have been invoiced, but for which the above revenue recognition criteria have not been met, are included in deferred revenue. Professional services consist primarily of fixed-fee and retainer-based contracts. Revenue from these engagements is recognized using an input method over the contract term. The Company reports revenue net of any revenue-based taxes assessed by governmental authorities that are imposed on, and concurrently with, specific revenue-producing transactions. The Company recognizes revenue when all of the following criteria are met: • Identification of the contract, or contracts, with a customer— A contract with a customer exists when (i) the Company enters into an enforceable contract with a customer that defines each party's rights regarding the goods or services to be transferred and identifies the payment terms related to these goods or services, (ii) the contract has commercial substance and the parties are committed to perform and, (iii) collection of substantially all consideration to which the Company will be entitled in exchange for goods or services that will be transferred is deemed probable based on the customer's intent and ability to pay. Contracts entered into for professional services and subscription-based solutions near or at the same time are generally not combined as a single contract for accounting purposes, since neither the pricing nor the services are interrelated. • Identification of the performance obligations in the contract— Performance obligations promised in a contract are identified based on the goods or services that will be transferred to the customer that are both (i) capable of being distinct, whereby the customer can benefit from the goods or service either on its own or together with other resources that are readily available from third parties or from the Company, and (ii) are distinct in the context of the contract, whereby the transfer of the goods or services is separately identifiable from other promises in the contract. When promised goods or services are incapable of being distinct, the Company accounts for them as a combined performance obligation. With regard to a typical contract for subscription-based solutions, the performance obligation represents a series of distinct services that will be accounted for as a single performance obligation. In a typical professional services contract, the Company has a separate performance obligation associated with each service. The Company is generally acting as a principal in each subscription-based and professional services arrangement and, thus, recognizes revenue on a gross basis. • Determination of the transaction price— The total transaction price is primarily fixed in nature as the consideration is tied to the specific services purchased by the customer, which constitutes a series for delivery of the solutions over the duration of the contract. For professional services contracts, variable consideration exists in the form of rescheduling penalties and expense reimbursements; no estimation is required at contract inception, since variable consideration is allocated to the applicable period. • Allocation of the transaction price to the performance obligations in the contract— The Company allocates the transaction price to each performance obligation based on the performance obligation's standalone selling price. Standalone selling price is determined by considering all information available to the Company, such as historical selling prices of the performance obligation, geographic location, overall strategic pricing objective, market conditions and internally approved pricing guidelines related to the performance obligations. • Recognition of revenue when, or as, the Company satisfies performance obligation— The Company recognizes revenue over time using a time-elapsed output method to measure progress (i.e., ratable recognition) for the subscription-based performance obligation over the contract term. For any upgraded installation services, which the Company has determined represent a performance obligation separate from its subscription-based arrangements, revenue is recognized over time using hours elapsed over the service term as an appropriate method to measure progress. For the performance obligation pertaining to professional services arrangements, the Company recognizes revenue over time using an input method based on time (hours or days) incurred to measure progress over the contract term. As indicated above, the Company has one primary business activity, which is to provide clients with intelligence-driven information security solutions. The Company's chief operating decision maker, who is the President and Chief Executive Officer, makes operating decisions, assesses performance, and allocates resources on a consolidated basis. There are no segment managers who are held accountable for operations and operating results below the consolidated unit level. Accordingly, the Company is considered to be in a single reportable segment and operating unit structure. The following table presents revenue by service type (in thousands): Three Months Ended May 4, 2018 Three Months Ended May 5, 2017 Managed Security Services revenue $ 98,700 $ 88,909 Security and Risk Consulting revenue 27,461 24,769 Total revenue $ 126,161 $ 113,678 Deferred Revenue (Contract Liabilities) —Deferred revenue represents amounts contractually billed to customers or payments received from customers for which revenue has not yet been recognized. Deferred revenue that is expected to be recognized within one year is recorded as short-term deferred revenue and the remaining portion is recorded as long-term deferred revenue. The Company has determined that its contracts generally do not include a significant financing component. The primary purpose of the Company's invoicing terms is to provide customers with simplified and predictable ways of purchasing its solutions, not to receive financing from customers or to provide customers with financing. Examples of such terms include invoicing at the beginning of a subscription term with revenue recognized ratably over the contract period. Deferred Commissions and Deferred Fulfillment Costs —The Company accounts for both costs to obtain a contract for a customer, which are defined as costs that the Company would not have incurred if the contract had not been obtained, and contract costs by capitalizing and systematically amortizing the assets on a basis that is consistent with the transfer to the customer of the goods or services to which the assets relate. These costs generate or enhance resources used in satisfying performance obligations that directly relate to contracts. Applying the practical expedient guidance, the Company recognizes the incremental costs of obtaining contracts as an expense when incurred if the amortization period of the incremental costs of obtaining contracts that the Company otherwise would have recognized is one year or less. The Company's customer acquisition costs are primarily attributable to sales commissions and related fringe benefits earned by the Company's sales force and such costs are considered incremental costs to obtain a contract. Sales commissions for initial contracts are deferred and amortized taking into consideration the pattern of transfer to which assets relate and may include expected renewal periods where renewal commissions are not commensurate with the initial commission period. The Company recognizes the deferred commissions on a straight-line basis over the life of the customer relationship (estimated to be seven years ) in sales and marketing expenses. These assets are classified as non-current, and included in other non-current assets in the Condensed Consolidated Statements of Financial Position. As of May 4, 2018 and February 2, 2018, the amount of deferred commissions included in other non-current assets was $57.8 million and $57.2 million , respectively. Additionally, the Company incurs certain costs to install and activate hardware and software used in its managed security services, primarily related to a portion of the compensation for the personnel who perform the installation activities. The Company makes judgments regarding the fulfillment costs to be capitalized. Specifically, the Company capitalizes direct labor and associated fringe benefits using standards developed from actual costs and applicable operational data. The Company updates the information quarterly for items such as the estimated amount of time required to perform such activity. The Company capitalizes and amortizes these fulfillment costs on a straight-line basis over the economic life of the services, or approximately four years, in cost of revenue. As of May 4, 2018 and February 2, 2018, the amount of deferred fulfillment costs included in other non-current assets was $10.6 million and $10.2 million , respectively. |
Recently Adopted/Issued Accounting Pronouncements | Recently Issued Accounting Pronouncements Intangibles - Goodwill and Other —In January 2017, the FASB issued ASU No. 2017-04, "Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment." ASU 2017-04 eliminates Step 2 of the goodwill impairment test, which required the Company to determine the implied fair value of goodwill by allocating the reporting unit's fair value to each of its assets and liabilities as if the reporting unit was acquired in a business acquisition. Instead, the updated guidance requires an entity to perform its annual or interim goodwill impairment test by comparing the fair value of the reporting unit to its carrying value, and recognizing a non-cash impairment charge for the amount by which the carrying value exceeds the reporting unit's fair value, with the loss not exceeding the total amount of goodwill allocated to that reporting unit. The updated guidance is effective for the Company for annual and interim periods beginning in the Company's 2021 fiscal year, with early adoption permitted, and will be applied on a prospective basis. The Company does not expect that the adoption of this standard will have a material impact on its consolidated financial statements. Financial Instruments — Credit Losses —In June 2016, the FASB issued ASU No. 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments." The amendments in this update replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The update is effective for the Company for fiscal years beginning with the Company's 2021 fiscal year, including interim periods within those fiscal years. The Company is currently evaluating the impact of this guidance on its consolidated financial statements. Leases —In February 2016, the FASB issued ASU No. 2016-02, "Leases (Topic 842)," which requires lessees to recognize most lease liabilities on their balance sheets but recognize the expenses on their income statements in a manner similar to current practice. The update states that a lessee would recognize a lease liability for the obligation to make lease payments and a right-to-use asset for the right to use the underlying asset for the lease term. Companies are required to use a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements. The update is effective for the Company for annual and interim periods beginning with the Company's 2020 fiscal year, and early adoption is permitted. The Company continues to evaluate the impact of this guidance on its consolidated financial statements and related disclosures, but expects that most of its operating lease commitments will be subject to the new standard and recognized as operating lease liabilities and right-to-use assets upon adoption. Recently Adopted Accounting Pronouncements Compensation - Stock Compensation —In May 2017, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU") No. 2017-09, "Compensation – Stock Compensation (Topic 718): Scope of Modification Accounting." The amendments in this update provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting under Topic 718. The Company adopted this guidance during the three months ended May 4, 2018 with no material impact on its condensed consolidated financial statements. Statement of Cash Flows —In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments - A consensus of the FASB Emerging Issues Task Force.” The update was issued with the objective of reducing the existing diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows under Topic 230 and other topics. The adoption of this standard had no impact on the Condensed Consolidated Statements of Cash Flows. Revenue from Contracts with Customers —The Company adopted ASU 2014-09, "Revenue From Contracts With Customers" ("ASC 606") effective February 3, 2018 using the full retrospective method. The cumulative effect of the adoption was recognized as a decrease to accumulated deficit of $51.8 million on February 2, 2018 and impacted certain other prior period amounts. Certain amounts and disclosures set forth in this Quarterly Report on Form 10-Q have been updated to comply with the new ASC 606 standard. |
Fair Value Measurements | The Company measures fair value within the guidance of the three-level valuation hierarchy. This hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The categorization of a measurement within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The three levels are defined as follows: • Level 1 - Quoted market prices in active markets for identical assets or liabilities • Level 2 - Other observable market-based inputs or unobservable inputs that are corroborated by market data • Level 3 - Significant unobservable inputs |
Description of the Business a19
Description of the Business and Basis of Presentation (Tables) | 3 Months Ended |
May 04, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Revenue by Service Type | The following table presents revenue by service type (in thousands): Three Months Ended May 4, 2018 Three Months Ended May 5, 2017 Managed Security Services revenue $ 98,700 $ 88,909 Security and Risk Consulting revenue 27,461 24,769 Total revenue $ 126,161 $ 113,678 |
Schedule of ASC 606 Adoption and Revision Impact to Previously Reported Results | Select unaudited condensed consolidated statements of financial position line items which reflect the adoption of ASC 606 are as follows (in thousands): February 2, 2018 Adjustments for Adoption of February 2, 2018 (as reported) ASC 606 (as adjusted) Current assets: Other current assets $ 42,163 $ (1,612 ) $ 40,551 Total current assets 302,496 (1,612 ) 300,884 Other non-current assets 4,677 67,392 72,069 Total assets $ 991,301 $ 65,780 $ 1,057,081 Current liabilities: Deferred revenue $ 139,632 $ (1,935 ) $ 137,697 Total current liabilities 244,523 (1,935 ) 242,588 Other non-current liabilities 52,681 15,774 68,455 Total liabilities 312,152 13,839 325,991 Stockholders' equity: Accumulated deficit (188,936 ) 51,774 (137,162 ) Accumulated other comprehensive loss (137 ) 167 30 Total stockholders' equity $ 679,149 $ 51,941 $ 731,090 Select unaudited condensed consolidated statements of operations line items which reflect the retrospective adoption of ASC 606 are as follows (in thousands): May 5, 2017 Adjustments for Adoption of May 5, 2017 (as reported) ASC 606 (as adjusted) Net revenue $ 113,593 $ 85 $ 113,678 Cost of revenue 53,942 (329 ) 53,613 Gross margin 59,651 414 60,065 Total operating expenses 80,052 (991 ) 79,061 Operating loss (20,401 ) 1,405 (18,996 ) Income tax benefit (6,814 ) 446 (6,368 ) Net loss $ (14,236 ) $ 959 $ (13,277 ) Net loss per common share (basic and diluted) $ (0.18 ) $ 0.01 $ (0.17 ) Select unaudited condensed consolidated statement of cash flows line items which reflect the retrospective adoption of ASC 606 and the impact of the revision discussed above are as follows (in thousands): Three Months Ended May 5, 2017 Adjustments for Adoption of Adjustments for Three Months Ended May 5, 2017 (as reported) ASC 606 Revision (as adjusted) Cash flows from operating activities: Net loss $ (14,236 ) $ 959 $ — $ (13,277 ) Adjustments to reconcile net loss to net cash used in operating activities: Effects of exchange rate changes on monetary assets and liabilities denominated in foreign currencies 602 47 — 649 Income tax benefit (6,814 ) 446 — (6,368 ) Changes in assets and liabilities: Other assets (160 ) (1,360 ) 396 (1,124 ) Accounts payable 1,423 — (396 ) 1,027 Deferred revenue 8,247 (92 ) — 8,155 Net cash provided by (used in) operating activities $ (19,655 ) $ — $ — $ (19,655 ) |
Schedule of Revised Statements of Cash Flows | Select unaudited condensed consolidated statement of cash flows line items which reflect the retrospective adoption of ASC 606 and the impact of the revision discussed above are as follows (in thousands): Three Months Ended May 5, 2017 Adjustments for Adoption of Adjustments for Three Months Ended May 5, 2017 (as reported) ASC 606 Revision (as adjusted) Cash flows from operating activities: Net loss $ (14,236 ) $ 959 $ — $ (13,277 ) Adjustments to reconcile net loss to net cash used in operating activities: Effects of exchange rate changes on monetary assets and liabilities denominated in foreign currencies 602 47 — 649 Income tax benefit (6,814 ) 446 — (6,368 ) Changes in assets and liabilities: Other assets (160 ) (1,360 ) 396 (1,124 ) Accounts payable 1,423 — (396 ) 1,027 Deferred revenue 8,247 (92 ) — 8,155 Net cash provided by (used in) operating activities $ (19,655 ) $ — $ — $ (19,655 ) |
Net Loss Per Share (Tables)
Net Loss Per Share (Tables) | 3 Months Ended |
May 04, 2018 | |
Earnings Per Share [Abstract] | |
Schedule of Net Loss Per Common Share, Basic and Diluted | The following table sets forth the computation of net loss per common share (in thousands, except per share amounts): Three Months Ended May 4, 2018 May 5, 2017* Numerator: Net loss $ (13,819 ) $ (13,277 ) Denominator: Weighted-average number of shares outstanding: Basic and Diluted 80,522 80,056 Loss per common share: Basic and Diluted $ (0.17 ) $ (0.17 ) Weighted-average anti-dilutive stock options, non-vested restricted stock and restricted stock units 5,531 5,050 * Certain prior period amounts have been adjusted as a result of the adoption of the accounting standard for revenue recognition set forth in ASC 606. |
Contract Balances and Contrac21
Contract Balances and Contract Costs (Tables) | 3 Months Ended |
May 04, 2018 | |
Revenue from Contract with Customer [Abstract] | |
Schedule of Deferred Revenue | Changes to the Company's deferred revenue during the three months ended May 4, 2018 are as follows (in thousands): As of February 2, 2018* Upfront payments received and billings during the three months ended May 4, 2018 Revenue recognized during the three months ended May 4, 2018 As of May 4, 2018 Deferred revenue $ 152,645 $ 77,262 $ (68,281 ) $ 161,626 * Certain prior period amounts have been adjusted as a result of the adoption of the accounting standard for revenue recognition set forth in ASC 606. |
Expected Timing to Recognize Remaining Performance Obligation | As of May 4, 2018 the Company expects to recognize remaining performance obligations as follows (in thousands): Total Expected to be recognized in the next 12 months Expected to be recognized in 12-24 months Expected to be recognized in 24-36 months Expected to be recognized thereafter Performance obligation - active $ 243,247 $ 135,208 $ 72,997 $ 29,538 $ 5,504 Performance obligation - backlog $ 47,899 $ 15,614 $ 15,614 $ 14,394 $ 2,277 Total $ 291,146 $ 150,822 $ 88,611 $ 43,932 $ 7,781 |
Schedule of Deferred Commissions and Fulfillment Costs | Changes in the balance of total deferred commission and total deferred fulfillment costs during the three months ended May 4, 2018 are as follows (in thousands): As of February 2, 2018 Amount capitalized Amount recognized As of May 4, 2018 Deferred commissions $ 57,229 $ 3,996 $ (3,463 ) $ 57,762 Deferred fulfillment costs 10,163 1,672 (1,200 ) 10,635 |
Goodwill and Intangible Assets
Goodwill and Intangible Assets (Tables) | 3 Months Ended |
May 04, 2018 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of Indefinite-Lived Intangible Assets | The Company's intangible assets as of May 4, 2018 and February 2, 2018 were as follows: May 4, 2018 February 2, 2018 Gross Accumulated Amortization Net Gross Accumulated Amortization Net (in thousands) Customer relationships $ 189,518 $ (66,581 ) $ 122,937 $ 189,518 $ (63,058 ) $ 126,460 Technology 135,584 (61,389 ) 74,195 135,584 (57,978 ) 77,606 Finite-lived intangible assets 325,102 (127,970 ) 197,132 325,102 (121,036 ) 204,066 Trade name 30,118 — 30,118 30,118 — 30,118 Total intangible assets $ 355,220 $ (127,970 ) $ 227,250 $ 355,220 $ (121,036 ) $ 234,184 |
Schedule of Finite-Lived Intangible Assets | The Company's intangible assets as of May 4, 2018 and February 2, 2018 were as follows: May 4, 2018 February 2, 2018 Gross Accumulated Amortization Net Gross Accumulated Amortization Net (in thousands) Customer relationships $ 189,518 $ (66,581 ) $ 122,937 $ 189,518 $ (63,058 ) $ 126,460 Technology 135,584 (61,389 ) 74,195 135,584 (57,978 ) 77,606 Finite-lived intangible assets 325,102 (127,970 ) 197,132 325,102 (121,036 ) 204,066 Trade name 30,118 — 30,118 30,118 — 30,118 Total intangible assets $ 355,220 $ (127,970 ) $ 227,250 $ 355,220 $ (121,036 ) $ 234,184 |
Income and Other Taxes (Tables)
Income and Other Taxes (Tables) | 3 Months Ended |
May 04, 2018 | |
Income Tax Disclosure [Abstract] | |
Schedule of Effective Income Tax Rate Reconciliation | The Company's effective income tax rate for the three months ended May 4, 2018 and May 5, 2017 was as follows: Three Months Ended May 4, 2018 May 5, 2017 Loss before income taxes $ (17,085 ) $ (19,645 ) Income tax benefit $ (3,266 ) $ (6,368 ) Effective tax rate 19.1 % 32.4 % |
Related Party Transactions (Tab
Related Party Transactions (Tables) | 3 Months Ended |
May 04, 2018 | |
Related Party Transactions [Abstract] | |
Schedule of Related Party Transactions | As a result of the foregoing related party arrangements, the Company has recorded the following related party balances in the Condensed Consolidated Statements of Financial Position as of May 4, 2018 and February 2, 2018 . During the third quarter of fiscal 2017, the Company began settling in cash its related party balances with Dell on a quarterly basis. May 4, 2018 February 2, 2018 (in thousands) Intercompany receivable $ — $ — Intercompany payable (19,808 ) (19,580 ) Net intercompany payable (in accrued and other) $ (19,808 ) $ (19,580 ) Accounts receivable from clients under reseller agreements with Dell (included in accounts receivable, net) $ 22,451 $ 25,229 Net operating loss tax sharing receivable under agreement with Dell (included in "Other current assets" and "Other non-current assets" at May 4, 2018 and in "Other current assets" at February 2, 2018) $ 23,211 $ 21,380 |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 3 Months Ended |
May 04, 2018 | |
Fair Value Disclosures [Abstract] | |
Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis | The assets and liabilities of the Company that are measured at fair value on a recurring basis using the respective input levels as of May 4, 2018 and February 2, 2018 were as follows: May 4, February 2, 2018 Level 1 Level 1 (in thousands) Cash equivalents - Money Market Funds $ 34,125 $ 58,967 |
Description of the Business a26
Description of the Business and Basis of Presentation - Narrative (Details) $ in Thousands | 3 Months Ended | ||
May 04, 2018USD ($)segment | Feb. 02, 2018USD ($) | ||
Class of Stock [Line Items] | |||
Number of reportable segments | segment | 1 | ||
Accumulated deficit | $ (150,981) | $ (137,162) | [1] |
IPO | Denali | |||
Class of Stock [Line Items] | |||
Percent of outstanding shares owned | 85.70% | ||
Percent of voting interests owned | 98.40% | ||
Revision | ASC 606 | |||
Class of Stock [Line Items] | |||
Accumulated deficit | 51,774 | ||
Deferred commissions | |||
Class of Stock [Line Items] | |||
Amortization period | 7 years | ||
Capitalized contract costs | $ 57,762 | 57,229 | |
Deferred fulfillment costs | |||
Class of Stock [Line Items] | |||
Amortization period | 4 years | ||
Capitalized contract costs | $ 10,635 | $ 10,163 | |
[1] | Certain prior period amounts have been adjusted as a result of the adoption of the accounting standard for revenue recognition set forth in ASC 606. |
Description of the Business a27
Description of the Business and Basis of Presentation - Disaggregation of Revenue by Product Line (Details) - USD ($) $ in Thousands | 3 Months Ended | |
May 04, 2018 | May 05, 2017 | |
Disaggregation of Revenue [Line Items] | ||
Total revenue | $ 126,161 | $ 113,678 |
Managed Security Services revenue | ||
Disaggregation of Revenue [Line Items] | ||
Total revenue | 98,700 | 88,909 |
Security and Risk Consulting revenue | ||
Disaggregation of Revenue [Line Items] | ||
Total revenue | $ 27,461 | $ 24,769 |
Description of the Business a28
Description of the Business and Basis of Presentation - Condensed Consolidated Statements of Financial Position (Details) - USD ($) $ in Thousands | May 04, 2018 | Feb. 02, 2018 | |
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |||
Other current assets | $ 42,125 | $ 40,551 | [1] |
Total current assets | 266,920 | 300,884 | [1] |
Other non-current assets | 75,979 | 72,069 | [1] |
Total assets | 1,019,185 | 1,057,081 | [1] |
Short-term deferred revenue | 146,700 | 137,697 | [1] |
Total current liabilities | 219,300 | 242,588 | [1] |
Other non-current liabilities | 66,541 | 68,455 | [1] |
Total liabilities | 300,767 | 325,991 | [1] |
Accumulated deficit | (150,981) | (137,162) | [1] |
Accumulated other comprehensive loss | (1,540) | 30 | [1] |
Total stockholders' equity | $ 718,418 | 731,090 | [1],[2] |
As Reported | |||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |||
Other current assets | 42,163 | ||
Total current assets | 302,496 | ||
Other non-current assets | 4,677 | ||
Total assets | 991,301 | ||
Short-term deferred revenue | 139,632 | ||
Total current liabilities | 244,523 | ||
Other non-current liabilities | 52,681 | ||
Total liabilities | 312,152 | ||
Accumulated deficit | (188,936) | ||
Accumulated other comprehensive loss | (137) | ||
Total stockholders' equity | 679,149 | ||
ASC 606 | Revision | |||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |||
Other current assets | (1,612) | ||
Total current assets | (1,612) | ||
Other non-current assets | 67,392 | ||
Total assets | 65,780 | ||
Short-term deferred revenue | (1,935) | ||
Total current liabilities | (1,935) | ||
Other non-current liabilities | 15,774 | ||
Total liabilities | 13,839 | ||
Accumulated deficit | 51,774 | ||
Accumulated other comprehensive loss | 167 | ||
Total stockholders' equity | $ 51,941 | ||
[1] | Certain prior period amounts have been adjusted as a result of the adoption of the accounting standard for revenue recognition set forth in ASC 606. | ||
[2] | Certain prior period amounts have been adjusted as a result of the adoption of the accounting standard for revenue recognition set forth in ASC 606. |
Description of the Business a29
Description of the Business and Basis of Presentation - Condensed Consolidated Statements of Operations (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | ||
May 04, 2018 | May 05, 2017 | ||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |||
Net revenue | $ 126,161 | $ 113,678 | [1] |
Cost of revenue | 60,530 | 53,613 | [1] |
Gross margin | 65,631 | 60,065 | [1] |
Total operating expenses | 83,221 | 79,061 | [1] |
Operating loss | (17,590) | (18,996) | [1] |
Income tax benefit | (3,266) | (6,368) | [1] |
Net loss | $ (13,819) | $ (13,277) | [1],[2],[3] |
Net loss per common share, basic and diluted (usd per share) | $ (0.17) | $ (0.17) | [1] |
As Reported | |||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |||
Net revenue | $ 113,593 | ||
Cost of revenue | 53,942 | ||
Gross margin | 59,651 | ||
Total operating expenses | 80,052 | ||
Operating loss | (20,401) | ||
Income tax benefit | (6,814) | ||
Net loss | $ (14,236) | ||
Net loss per common share, basic and diluted (usd per share) | $ (0.18) | ||
ASC 606 | Revision | |||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |||
Net revenue | $ 85 | ||
Cost of revenue | (329) | ||
Gross margin | 414 | ||
Total operating expenses | (991) | ||
Operating loss | 1,405 | ||
Income tax benefit | 446 | ||
Net loss | $ 959 | ||
Net loss per common share, basic and diluted (usd per share) | $ 0.01 | ||
[1] | Certain prior period amounts have been adjusted as a result of the adoption of the accounting standard for revenue recognition set forth in ASC 606. | ||
[2] | Certain prior period amounts have been adjusted as a result of the adoption of the accounting standard for revenue recognition set forth in ASC 606. | ||
[3] | Certain prior period amounts have been adjusted as a result of the adoption of the accounting standard for revenue recognition set forth in ASC 606. |
Description of the Business a30
Description of the Business and Basis of Presentation - Condensed Consolidated Statement of Cash Flows (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
May 04, 2018 | May 05, 2017 | ||
Error Corrections and Prior Period Adjustments Restatement [Line Items] | |||
Net loss | $ (13,819) | $ (13,277) | [1],[2],[3] |
Adjustments to reconcile net loss to net cash used in operating activities: | |||
Effects of exchange rate changes on monetary assets and liabilities denominated in foreign currencies | (377) | 649 | [3] |
Income tax benefit | (3,266) | (6,368) | [3] |
Changes in assets and liabilities: | |||
Other assets | (2,350) | (1,124) | [3] |
Accounts payable | (3,343) | 1,027 | [3] |
Deferred revenue | 8,668 | 8,155 | [3] |
Net cash provided by (used in) operating activities | $ (18,404) | (19,655) | [3] |
As Reported | |||
Error Corrections and Prior Period Adjustments Restatement [Line Items] | |||
Net loss | (14,236) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | |||
Effects of exchange rate changes on monetary assets and liabilities denominated in foreign currencies | 602 | ||
Income tax benefit | (6,814) | ||
Changes in assets and liabilities: | |||
Other assets | (160) | ||
Accounts payable | 1,423 | ||
Deferred revenue | 8,247 | ||
Net cash provided by (used in) operating activities | (19,655) | ||
ASC 606 | Revision | |||
Error Corrections and Prior Period Adjustments Restatement [Line Items] | |||
Net loss | 959 | ||
Adjustments to reconcile net loss to net cash used in operating activities: | |||
Effects of exchange rate changes on monetary assets and liabilities denominated in foreign currencies | 47 | ||
Income tax benefit | 446 | ||
Changes in assets and liabilities: | |||
Other assets | (1,360) | ||
Accounts payable | 0 | ||
Deferred revenue | (92) | ||
Net cash provided by (used in) operating activities | 0 | ||
Overstatement of other current assets and accounts payable | Revision | |||
Error Corrections and Prior Period Adjustments Restatement [Line Items] | |||
Net loss | 0 | ||
Adjustments to reconcile net loss to net cash used in operating activities: | |||
Effects of exchange rate changes on monetary assets and liabilities denominated in foreign currencies | 0 | ||
Income tax benefit | 0 | ||
Changes in assets and liabilities: | |||
Other assets | 396 | ||
Accounts payable | (396) | ||
Deferred revenue | 0 | ||
Net cash provided by (used in) operating activities | $ 0 | ||
[1] | Certain prior period amounts have been adjusted as a result of the adoption of the accounting standard for revenue recognition set forth in ASC 606. | ||
[2] | Certain prior period amounts have been adjusted as a result of the adoption of the accounting standard for revenue recognition set forth in ASC 606. | ||
[3] | Certain prior period amounts have been adjusted as a result of the adoption of the accounting standard for revenue recognition set forth in ASC 606. |
Net Loss Per Share (Details)
Net Loss Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | ||
May 04, 2018 | May 05, 2017 | ||
Numerator: | |||
Net loss | $ (13,819) | $ (13,277) | [1],[2],[3] |
Denominator: | |||
Weighted average number of shares outstanding, basic and diluted (in shares) | 80,522 | 80,056 | [1] |
Loss per common share: | |||
Loss per common share, basic and diluted (usd per share) | $ (0.17) | $ (0.17) | [1] |
Weighted-average anti-dilutive stock options, non-vested restricted stock and restricted stock units (in shares) | 5,531 | 5,050 | |
[1] | Certain prior period amounts have been adjusted as a result of the adoption of the accounting standard for revenue recognition set forth in ASC 606. | ||
[2] | Certain prior period amounts have been adjusted as a result of the adoption of the accounting standard for revenue recognition set forth in ASC 606. | ||
[3] | Certain prior period amounts have been adjusted as a result of the adoption of the accounting standard for revenue recognition set forth in ASC 606. |
Contract Balances and Contrac32
Contract Balances and Contract Costs - Narrative (Details) | 3 Months Ended |
May 04, 2018 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2018-05-05 | |
Disaggregation of Revenue [Line Items] | |
Performance obligation period | 1 year |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2018-05-05 | Managed Security Services revenue | |
Disaggregation of Revenue [Line Items] | |
Performance obligation period | 2 years |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2018-05-05 | Security and Risk Consulting revenue | |
Disaggregation of Revenue [Line Items] | |
Performance obligation period | 1 year |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2019-05-04 | |
Disaggregation of Revenue [Line Items] | |
Performance obligation period | 1 year |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2020-05-02 | |
Disaggregation of Revenue [Line Items] | |
Performance obligation period | 1 year |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-05-01 | |
Disaggregation of Revenue [Line Items] | |
Performance obligation period |
Contract Balances and Contrac33
Contract Balances and Contract Costs - Deferred Revenue (Details) $ in Thousands | 3 Months Ended |
May 04, 2018USD ($) | |
Change in Contract with Customer, Liability [Roll Forward] | |
Deferred Revenue, Beginning of period | $ 152,645 |
Deferred revenue, Upfront payments received and billings | 77,262 |
Deferred revenue, Revenue recognized | (68,281) |
Deferred Revenue, End of period | $ 161,626 |
Contract Balances and Contrac34
Contract Balances and Contract Costs - Remaining Performance Obligation (Details) $ in Thousands | May 04, 2018USD ($) |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2018-05-05 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Remaining performance obligation | $ 150,822 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2019-05-04 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Remaining performance obligation | 88,611 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2020-05-02 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Remaining performance obligation | 43,932 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-05-01 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Remaining performance obligation | 7,781 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: (nil) | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Remaining performance obligation | 291,146 |
Performance obligation - active | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2018-05-05 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Remaining performance obligation | 135,208 |
Performance obligation - active | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2019-05-04 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Remaining performance obligation | 72,997 |
Performance obligation - active | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2020-05-02 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Remaining performance obligation | 29,538 |
Performance obligation - active | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-05-01 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Remaining performance obligation | 5,504 |
Performance obligation - active | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: (nil) | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Remaining performance obligation | 243,247 |
Performance obligation - backlog | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2018-05-05 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Remaining performance obligation | 15,614 |
Performance obligation - backlog | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2019-05-04 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Remaining performance obligation | 15,614 |
Performance obligation - backlog | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2020-05-02 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Remaining performance obligation | 14,394 |
Performance obligation - backlog | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-05-01 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Remaining performance obligation | 2,277 |
Performance obligation - backlog | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: (nil) | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Remaining performance obligation | $ 47,899 |
Contract Balances and Contrac35
Contract Balances and Contract Costs - Remaining Performance Obligation Time Period (Details) | 3 Months Ended |
May 04, 2018 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2018-05-05 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Performance obligation period | 1 year |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2019-05-04 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Performance obligation period | 1 year |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2020-05-02 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Performance obligation period | 1 year |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-05-01 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Performance obligation period | |
Performance obligation - active | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2018-05-05 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Performance obligation period | 1 year |
Performance obligation - active | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2019-05-04 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Performance obligation period | 1 year |
Performance obligation - active | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2020-05-02 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Performance obligation period | 1 year |
Performance obligation - active | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-05-01 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Performance obligation period | |
Performance obligation - backlog | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2018-05-05 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Performance obligation period | 1 year |
Performance obligation - backlog | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2019-05-04 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Performance obligation period | 1 year |
Performance obligation - backlog | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2020-05-02 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Performance obligation period | 1 year |
Performance obligation - backlog | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-05-01 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Performance obligation period |
Contract Balances and Contrac36
Contract Balances and Contract Costs - Deferred Commissions and Fulfillment Costs (Details) | 3 Months Ended |
May 04, 2018USD ($) | |
Capitalized Contract Cost [Line Items] | |
Impairment losses on deferred commissions and deferred fulfillment costs | $ 0 |
Deferred commissions | |
Capitalized Contract Cost [Roll Forward] | |
Beginning balance | 57,229,000 |
Amount capitalized | 3,996,000 |
Amount recognized | (3,463,000) |
Ending balance | 57,762,000 |
Deferred fulfillment costs | |
Capitalized Contract Cost [Roll Forward] | |
Beginning balance | 10,163,000 |
Amount capitalized | 1,672,000 |
Amount recognized | (1,200,000) |
Ending balance | $ 10,635,000 |
Goodwill and Intangible Asset37
Goodwill and Intangible Assets - Goodwill (Details) - USD ($) $ in Thousands | May 04, 2018 | Feb. 02, 2018 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |||
Goodwill | $ 416,487 | $ 416,487 | [1] |
[1] | Certain prior period amounts have been adjusted as a result of the adoption of the accounting standard for revenue recognition set forth in ASC 606. |
Goodwill and Intangible Asset38
Goodwill and Intangible Assets - Intangible Assets (Details) - USD ($) | 3 Months Ended | |||
May 04, 2018 | May 05, 2017 | Feb. 02, 2018 | ||
Finite-Lived Intangible Assets [Line Items] | ||||
Gross | $ 325,102,000 | $ 325,102,000 | ||
Accumulated Amortization | (127,970,000) | (121,036,000) | ||
Net | 197,132,000 | 204,066,000 | ||
Intangible Assets, Net (Excluding Goodwill) [Abstract] | ||||
Gross | 355,220,000 | 355,220,000 | ||
Accumulated Amortization | (127,970,000) | (121,036,000) | ||
Net | 227,250,000 | 234,184,000 | [1] | |
Amortization expense | 6,900,000 | $ 6,900,000 | ||
Impairment charges | 0 | $ 0 | ||
Trade name | ||||
Indefinite-lived Intangible Assets [Line Items] | ||||
Indefinite-Lived Intangible Assets | 30,118,000 | 30,118,000 | ||
Customer relationships | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Gross | 189,518,000 | 189,518,000 | ||
Accumulated Amortization | (66,581,000) | (63,058,000) | ||
Net | 122,937,000 | 126,460,000 | ||
Intangible Assets, Net (Excluding Goodwill) [Abstract] | ||||
Accumulated Amortization | (66,581,000) | (63,058,000) | ||
Technology | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Gross | 135,584,000 | 135,584,000 | ||
Accumulated Amortization | (61,389,000) | (57,978,000) | ||
Net | 74,195,000 | 77,606,000 | ||
Intangible Assets, Net (Excluding Goodwill) [Abstract] | ||||
Accumulated Amortization | $ (61,389,000) | $ (57,978,000) | ||
[1] | Certain prior period amounts have been adjusted as a result of the adoption of the accounting standard for revenue recognition set forth in ASC 606. |
Debt (Details)
Debt (Details) - Line of Credit - Revolving Credit Facility - USD ($) | Mar. 28, 2017 | Nov. 02, 2015 | May 04, 2018 | Feb. 02, 2018 |
Debt Instrument [Line Items] | ||||
Maximum borrowing capacity | $ 30,000,000 | |||
Debt instrument, term | 1 year | |||
Debt instrument, term, extension | 1 year | |||
Maximum amount outstanding during period | $ 30,000,000 | |||
Additional borrowing capacity | $ 30,000,000 | |||
Line of credit, outstanding balance | $ 0 | $ 0 | ||
Unused capacity, commitment fee percentage | 0.35% | |||
London Interbank Offered Rate (LIBOR) | ||||
Debt Instrument [Line Items] | ||||
Basis spread on variable rate | 1.15% | 1.60% |
Stock-Based Compensation And 40
Stock-Based Compensation And Other Long-Term Performance Incentives (Details) - USD ($) $ in Millions | 3 Months Ended | 12 Months Ended | |
May 04, 2018 | May 05, 2017 | Feb. 02, 2018 | |
Performance Cash Awards | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Award vesting period | 3 years | ||
Awards granted | $ 15.7 | $ 10.8 | |
Compensation expense | $ 1.5 | $ 0.5 | |
Restricted Stock Units (RSUs) | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Award vesting period | 3 years | ||
Awards issued (in shares) | 1,602,953 | 621,164 | |
Restricted Stock | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Award vesting period | 3 years | ||
Awards issued (in shares) | 405,000 | 283,988 | |
Restricted Stock and Restricted Stock Units | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Percentage of grants issued subject to performance conditions | 50.00% |
Income and Other Taxes (Details
Income and Other Taxes (Details) - USD ($) $ in Thousands | 3 Months Ended | ||||
May 04, 2018 | Feb. 02, 2018 | May 05, 2017 | |||
Valuation Allowance [Line Items] | |||||
Loss before income taxes | $ (17,085) | $ (19,645) | [1] | ||
Income tax benefit | (3,266) | (6,368) | [1] | ||
Net loss | $ 13,819 | $ 13,277 | [1],[2],[3] | ||
Effective tax rate | 19.10% | 32.40% | |||
Expense relating to vesting of equity awards | $ 300 | ||||
Provisional net tax benefit | 400 | $ 27,000 | |||
Tax expense due to impact of Transition Tax | 600 | ||||
Loss carryforwards | 4,500 | 4,000 | |||
Net operating loss tax sharing receivable under agreement with Dell | 42,125 | 40,551 | [4] | ||
Unrecognized tax benefits | 900 | 800 | |||
Prepared using separate return method | |||||
Valuation Allowance [Line Items] | |||||
Loss before income taxes | (17,200) | ||||
Income tax benefit | (2,800) | ||||
Net loss | 14,500 | ||||
Principal Owner | Dell Inc. | |||||
Valuation Allowance [Line Items] | |||||
Net operating loss tax sharing receivable under agreement with Dell | $ 23,211 | $ 21,380 | |||
[1] | Certain prior period amounts have been adjusted as a result of the adoption of the accounting standard for revenue recognition set forth in ASC 606. | ||||
[2] | Certain prior period amounts have been adjusted as a result of the adoption of the accounting standard for revenue recognition set forth in ASC 606. | ||||
[3] | Certain prior period amounts have been adjusted as a result of the adoption of the accounting standard for revenue recognition set forth in ASC 606. | ||||
[4] | Certain prior period amounts have been adjusted as a result of the adoption of the accounting standard for revenue recognition set forth in ASC 606. |
Related Party Transactions (Det
Related Party Transactions (Details) - USD ($) | 3 Months Ended | ||
May 04, 2018 | May 05, 2017 | ||
Related Party Transaction [Line Items] | |||
Charged under shared services agreement | $ 25,197,000 | $ 23,404,000 | [1] |
Purchases of computer equipment from Dell | 2,216,000 | 3,350,000 | [2] |
Revenues | 126,161,000 | 113,678,000 | [1] |
Dell Inc. | Principal Owner | |||
Related Party Transaction [Line Items] | |||
Charged under shared services agreement | 1,100,000 | 1,400,000 | |
Dell Inc. | Principal Owner | Contracts Not Yet Transferred | |||
Related Party Transaction [Line Items] | |||
Revenues | 12,700,000 | 10,200,000 | |
Dell Inc. | Principal Owner | Solutions Purchases | |||
Related Party Transaction [Line Items] | |||
Revenues | 5,000,000 | 5,900,000 | |
Dell Inc. | Chief Executive Officer | |||
Related Party Transaction [Line Items] | |||
Revenues | 19,000 | 23,000 | |
EMC and VMware | Subsidiary of Common Parent | |||
Related Party Transaction [Line Items] | |||
Purchase of annual maintenance services | 300,000 | 200,000 | |
VMware | Subsidiary of Common Parent | |||
Related Party Transaction [Line Items] | |||
Purchase of annual maintenance services | 3,000,000 | ||
VMware | Subsidiary of Common Parent | Intercompany Liabilities | |||
Related Party Transaction [Line Items] | |||
Purchase of annual maintenance services | 1,100,000 | ||
RSA Security LLC, Pivotal Software, Inc., and Dell Boomi | Subsidiary of Common Parent | |||
Related Party Transaction [Line Items] | |||
Purchase of annual maintenance services | 28,000 | 0 | |
Revenues | 100,000 | 16,000 | |
Dell and EMC | Principal Owner | |||
Related Party Transaction [Line Items] | |||
Purchases of computer equipment from Dell | $ 700,000 | $ 600,000 | |
[1] | Certain prior period amounts have been adjusted as a result of the adoption of the accounting standard for revenue recognition set forth in ASC 606. | ||
[2] | Certain prior period amounts have been adjusted as a result of the adoption of the accounting standard for revenue recognition set forth in ASC 606. |
Related Party Transactions - Ro
Related Party Transactions - Rollforward (Details) - USD ($) $ in Thousands | May 04, 2018 | Feb. 02, 2018 | |
Related Party Transaction [Line Items] | |||
Intercompany receivable | $ 0 | $ 0 | |
Intercompany payable | (19,808) | (19,580) | |
Net intercompany payable (in accrued and other) | (19,808) | (19,580) | |
Net operating loss tax sharing receivable under agreement with Dell | 42,125 | 40,551 | [1] |
Dell Inc. | Principal Owner | |||
Related Party Transaction [Line Items] | |||
Accounts receivable from clients under reseller agreements with Dell (included in accounts receivable, net) | 22,451 | 25,229 | |
Net operating loss tax sharing receivable under agreement with Dell | $ 23,211 | $ 21,380 | |
[1] | Certain prior period amounts have been adjusted as a result of the adoption of the accounting standard for revenue recognition set forth in ASC 606. |
Fair Value Measurements (Detail
Fair Value Measurements (Details) - USD ($) $ in Thousands | May 04, 2018 | Feb. 02, 2018 |
Money Market Funds | Fair Value, Measurements, Recurring | Level 1 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Cash equivalents - Money Market Funds | $ 34,125 | $ 58,967 |