SCWX - Earnings call transcript Q4 2019

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Operator

Good morning and welcome to the SecureWorks Fourth Quarter and Full Year Fiscal 2019 Financial Results Conference Call.

Following prepared remarks, we will conduct a question-and-answer session. [Operator Instructions]. At this time, all participants are in a listen-only mode.

We are webcasting this call live on the SecureWorks Investor Relations website. the available recording on of will the completion made be the the call, of a call After same site.

turn Accounting will VP I the to over Now, Teri and Chief Officer. call Miller,

You may begin.

Teri Miller

thank morning, for at and broadcast This investors.SecureWorks.com. year. live also results quarter call you Good being Investor fourth webcast be and section issued Relations full SecureWorks website ended for X, same us accessed for one the The review archived the fiscal be for fiscal today a results year February the and full Internet XXXX. This The being recorded. at over can fourth announcing of will joining SecureWorks on quarter and its is year press the SecureWorks’financial to location XXXX. is everyone, release morning, call

this of section access Investor can the SecureWorks press release the on Relations You website.

XXXX. the loss but before meaning Litigation respect depreciation During as Reform statements taxes, within guidance net to non-GAAP this the to as adjusted of well forward-looking share interest, will and forward-looking with GAAP, call, revenue Private Securities make amortization. not limited These and of per statements management Act earnings are include,

from cause risks actual these by forward-looking that Our differ materially statements and uncertainties those results involve could anticipated to statements.

information reasonable XXXX. undertake this future update forward-looking events. that a Commission’s which XXXX Investor on this Securities and annual on on X, date, the no Form obligation report available new and call You website uncertainties a the release company’s March we or after XX, statements the based ended website We in this later forward-looking be this description February Relations risks find afternoon. statements of these on on press as XX-K believe of can in this be to of Exchange morning’s All and result and assumptions to earnings will call our year our for as made are

call of accounting, this of non-GAAP use measures financial related compensation, purchase effect the of These non-GAAP and the stock-based we are exclude amortization basis. a intangibles expressed items. of Some on measures these tax on impact the

reconciliations on website. to Michael measures to analyzing year the growth today’s our SecureWorks’ and when to to Officer a are non-GAAP provided reminder, GAAP not Non-GAAP Cote, financial Also on Financial earnings compared we have rates superior otherwise financial considered discussed in and measures release substitute and measures performance. periods, you and a is prior press as of President in isolation Chief all available encourage to SecureWorks; intended We GAAP are Officer. measures all or be for, today’s our are call consider Jackson, from, results With financial us Executive unless information stated. non-GAAP Chief Wayne of the

you. We initial your many feel in to Thank and additional of would will In possible questions. prepared questions to allotted may do our to so time. your we Following we this. come to that take to questions on are you you best covered you will free you our ask please as we have by others, the event re-queue your back limiting their two remarks, appreciate not allow for cooperation that as questions

turn to Cote. the over to call like would I Mr. Now,

Michael Cote

joining you us quarter for and you, Thank Teri, thank for XXXX fourth call. everyone earnings this our morning

for year and was and good XX% for was $XXX Revenue quarter fiscal over quarter year, which fourth $XXX million end great marks the the up for XXXX. million Our was of the SecureWorks. another

with over XX% revenue year regions international growth had fiscal an XXXX. Our impressive

quarter years. significant their I for milestones this three in the deliver team company's over In last want delivering quarterly the year, highest go-to-market quarter first to annualized the our financial thank perspective, and the flow ACV a from positive teams over productivity has the $X.X overall regions to month, XXth was in year. entire fiscal to in have past quarter million the the helped become coordinated, the MRR the changed increases funded, large full for another the our security per and million which improvement We gross as was $XX.X million ACV and of year. the both US dramatically. quarter. margin the sequentially, a strategy $X.XX million, year to which expansion advanced Things. technology the for delivered year fourth achieved of and sequential ACV fiscal a XX%. in carrier SecureWorks of EMEA, in was Earlier full expanded for $XX.X are has business. software-driven threat of gross the and dedication our of increased million Since sequentially a organizations value From and the increased well software commitments. surge history from exiting We EPS a using the the year quarter networks one landscape the celebrated strong small. and the Fourth EBITDA for million and driven in the in increase strong of security margin increased disrupt million sales XXXX, Cash drive The of a earnings fourth row customer evolution in anniversary results we SecureWorks and refer their through and XX% had we as attack and reported XX% $X XXXX. Internet efficiencies operating devices well Threat and and quarter of with quota fiscal to founded QX. the accomplishments we of company. surface solutions as XXXX to share XXXX are connected defined quarter All for industry ACV throughout full as larger contracts second in results on for the was $XX and our non-GAAP advancement $XX record actors year, from in operations by the steal $XX improved

in industry, presents choices overwhelming go, we Like did greater flow come visibility crossed full When vendors still had X and for has and the over provide over which our of than of we startup across a other the a number coordinated time were see startups, $X.X years. were revenue positive $XX revenue, market security challenges, first that and we the participants public a EBITDA. evolved numerous operating industry and changed organizations’ I This million, billion as we generated company. cash. SecureWorks many two ecosystem. had not running company, EBITDA yet the of times point X,XXX. stream for cash year, or has joined out XXXX, unified product over risen the to the mark also Within is responses This nominal in we

cloud our to Over network the execution securing endured purpose aspects this mission our a qualities digitally industry in foundation position have the software a Key partnerships leverage intelligence, on These capabilities strategy multi-vendor and continued our things human to include: we contribute innovation. organizations to passion our community. have and that connected of in the several technology, notable of effect and a driven our and approach intelligence, earned use our our create developed progress, strategy customer-first We've success: solutions security enduring solutions. the that broader We're proprietary apply years, developing fulfill our the software. latest to that world, SecureWorks have approach security protect to security powerful in the leader continuous true The technology of to in threat software-driven advances including in and leveraging deliver as all formed do.

in with Next, their existing integrated best customers Managed services. and to our while available combination professional software security defenses, allow delivered and solutions security have services investments. the solutions leveraging

maturity and scale, targeted in increasing for are delivered their to our various business. and our security Our customers solutions velocity journey, at seamlessly at flexible are and efficiency points customers and

solution endpoint out a reflect with closing achieved. upon milestones strengths providers, Partner with each launched As of our of pipeline. analytics, program. breed of of launch couple Cloak the opportunities combination our strategic would The our of December, detection in CrowdStrike SecureWorks’ fiscal we've common the a Red customers. I Cloak best examples ‘XX, several Red strong building I party of leverages This call endpoint We for and of threat benefit

two clearly the In discussions the common in addition program. with and the who CrowdStrike, participating to are the see continuing selected we parties partners program, first Carbon customer in Black value of

that allowing with Dell PC. solution seen This of to by coordination Dell's the encouraging alongside with security simplifies buying already collaborated SafeGuard The security partners. the a customers new Dell order this next pipeline commercial have we CrowdStrike is its a collaboration generation force. new became a prime introduce period partnership, example these the earlier also month through time, In Dell channel offering approach of the of which within their portfolio to strong process solutions through very security of Response, sales This have powerful a modern building. we and foundation and solutions available we offering is partnership We short create the global community. sold momentum endpoint and this authorized Dell

Dell We and leveraging family are working to distribution expertise powerful and be pleased capabilities. our Technologies with their

gains We have digital we also invested this customers for playbooks from Having launched and delivery. internally, speed enabled leveraging Orchestration earlier and solution realized Automation month. software efficiency in advancing

to our aligned of response Automation automate leverages engine enrich A to operations unified right of source are of their ensures incident playbooks SecureWorks’ adding the can data activities. the Using be customer-specific gleaned the the they approach open and playbooks that certain Because customers from environment, automating SecureWorks’ integrations workflows. our automation and automated in and enabled of deep year. a to Orchestration broad of environment context set view threat. array Our you” customer-specific design security the responses solution with responses are contacts best software practices security sense “do response and a both infinite expertise, each provides engagements with it customers’ unique Ansible

security in delivery customers success customers which and converted. device existing capability recent December. our customers coverage was our which over more asset This have Another including of to self-service our All ecosystem new with the already allows one-click been their launched activation. are XX% discovery rapidly, provisioning arrange network and software-enabled of auto-enrolled is

solution As continue start our new market about to Dell. brining year, with SafeGuard to solutions our we the optimistic partnership in ability very like innovative fiscal new I'm

on our in investment will this marketing incremental making important fiscal ‘XX opportunity positive an to impact are We I which anticipate results. and have support sales

since our new to will by we been on our Beta app and the first This in response application has threat launching We protection have previously framework discussed. driving December. continue early app strategy

been use automate remediation. ease previously detect to During and customers feedback threats, Beta, more security app’s group regarding positive scale and have undetect our and have experienced provided we the working matured have enterprise ability of programs the of customers that a teams. importantly with These investigation

additional progress of important about providing ensure will with it Wayne development I these next Our details apps as this plans detail. to on quarter the underlying strategy. security in fiscal fourth our investments performance also component framework include more accelerated call. strategic initiatives the success quarter’s to forward more of as over in I of ‘XX look about of talk to now our well both in Wayne? turn expansion to our of

Wayne Jackson

Thanks, Mike, and morning, good everyone.

First I strong was that very in comment a FYXX Mike's year echo many ways.

growth, improved double-digit first positive revenue as cash flow EBITDA generated operating addition we time In and for company the from a leverage, operations. record our public to

to expectations in quarter In million, priorities increase that accomplishments an FYXX. in will X% over FYXX Our strategic growth $XXX.X revenue of FYXX, driving was position continue us QX Fourth fourth the FYXX sequentially. invest the previously. primarily delay have our quarter for X.X% customer below and as the we decrease large a transition a in result revenue about spoken a solutions of was

the of contract quarter under operating fourth new Despite the to us allowed substantially are million We our range. seen margin guidance now expected. at the revenue, and of margin end generate was EBITDA, and ramped hitting of lower as strong $X.X lower improvements overall gross XX% gross expenses terms higher

quarter annual a average examples quarter. contract based new company. notable we with $XXX,XXX this of fourth signed year with subscription A per deals in Our fourth of the that closed US was A and value million agreement million deals in large revenue $X.X customer two couple include: total the we greater XX quarter X than insurance

revenue Our remediation of $XX.X large with engagement the is foundation based MDR transportation MSS launched company. QX deal, package $X.X quarter monthly notable offering. a coupling We as increase of example advanced consulting million this A subscription three Consulting victory. of quarters will services quarter. XX.X% security for solution from exited as Red solution second end versus Annual to was comprehensive several year Cloak XX% FYXX consulting of with the into retention the standalone this revenue a converted with $XXX was our XX% recurring of a the revenue our an In continue revenue at of customers. million level next incident an total US in and last we management deal at was XX% the broader recurring case, year-over-year consulting grew million, end to other $XX.X the and year analytics million. component the the are the mix our a We XX.X% revenue important quarter. ending comprised of anticipate response Revenue for FYXX. XX% for

the Excluding large earlier, referenced a impact ending was retention revenue customer of FYXX XX%.

in we management that largely improved churn offerings, processes in implemented in we will and believe Our service and as churn with innovation our account customer launching half still notable drive this the continued area FYXX of new progress as FYXX. versus churn well second

with XX.X% Operating million investments a last revenue in UK, gross Middle margin software revenue compared $XXX.X fourth the with year, Gross prior totaled totaled only in to expenses million full the revenue for compared by both in year. on million development margin consistently million the Japan. the a driven and expenses fourth compared or in framework. with $XX.X Operating East year. for percentage margins expenses quarter fifth totaled quarter, by improvements expenses XX% XX.X% for strong improvements year. driven increased sales and compared were quarter US from quarter $XX.X revenue. outside million last full year of growth XX% total MSS or from and Full XX.X% revenue XX.X% gross year the our or last the consulting. Fourth the Finally, in row the productivity grew benefited up in year of as XX% operating FYXX. FYXX with last $XX.X fourth the leverage of XX.X% for of new year year FYXX investments and margin year-over-year, expanded of of including of to in of application of revenue revenue the XX.X% X.X% incremental million, efficiencies $XX.X year operating development and sales of the XX.X% in Research $X.X quarter

in well to with for historical related as productivity Mike continued XX.X% Adjusted rep sales million Automation and both innovative our to in of is quarter, technologies full the we down As as primarily marketing the year EBITDA improvement, XX.X% expenses $X.X to for new loss $X.X our approximately Sales capabilities. framework the continue as earlier, fourth from marketing revenue as and in were XX.X% initiatives noted compared year. and application expenses the with FYXX Orchestration will year, in invest for totaled and the revenue and XX% in leverage mentioned, new General quarter, was advance XX.X% last administrative and framework, sales leverage throughout year. a as QX and last million, year. well fourth further the XX.X% our of compared the investments. prior The decrease full

net We offset on compared net share investments Non-GAAP as R&D of $X.X a $X.XX. non-GAAP income the higher last $X.X earnings to loss FYXX. the margin revenue were also increased year million delivered per million, of in

for FYXX, We end the an credit increase end items, monetization Regarding quarter, Operating finished days and existing of cash cash million down improved was product of excluding well collection flow of flow cash year $XX.X management, year for system was days million at have was XXX our the the million $XX a million Dell fourth which $XXX.X also The cash from balance capital million including flow flow and year recently terms. year. the was for approved $XX.X DSO XX to in Board of on investments or at $XX.X similar million facility, as working million untapped free $XX.X million extended from an received last the to related focus tax with $XX repurchase program. on additional year operating $XX the of the attributes. and tax stock the was receivable. on our a based profitability and cash as ongoing sheet

we expect the range between be to first FYXX $X.XX. In and revenue $X.XX of quarter the of a for million to and both non-GAAP net loss guidance. GAAP to $XXX Now, in we share be per non-GAAP million FYXX, $XXX and expect

million GAAP $X.XX be $X.XX expect per range following: million our million to revenue net $X in of our we to FYXX, be per share. For in full loss adjusted the the We range non-GAAP year and to for of EBITDA to non-GAAP $XXX the expect $XXX $X be to million, the and share to positive

$XX between to million. cash be and We expect by $XX million operations provided

see phasing compensation. due typically to purposes payment in negative we the For QX of incentive recall annual cash flow that

to expect range net GAAP We be of in loss $X.XX per to the share $X.XX.

approximately growth acceleration note $XXX last to the the items will for associated the be marketing Also, include with The modeling shared and year. few with we Dell. estimates sales opportunities the consistent $XXX were relative in which with A is to that additional quarter, quarter’s ramped year. of For we anticipates annual full sequential guidance. partnership million estimate tax first benefit key SafeGuard rate purposes investments that new specific guidance what related million revenue XX.X% throughout solutions our of to

these in QX. the in to have and positive quarter-to-quarter FYXX is expect revenue ramp results solutions up contribution to quickly a dilutive We but to from it our EBIDTA

$XX million framework SecureWorks of about into had application both pleased opportunities on are FYXX. in financial a move the with million prepare team, we FYXX. the Additionally, and FYXX continue rest $XX to investment includes very the are along software the as our I We portfolio. the with expanding new guidance Mike app we performance, great excited our launch over first as R&D app in incremental to an FYXX, and framework

will from this Dell I leaving the the subsidiary company. a XXXX our was of the to in by wholly-owned morning, as to end Technologies FYXX. of X-K I joined with SecureWorks reported Finally, assist company be a company transitioning public standalone in

IPO named. me SecureWorks fiscal With I I will call three move years to the my I’ve to and with the the for once on successor do this come the to assist now year is of us, return will the to on behind until end stay with has time Mike. so agreed transition.

Michael Cote

Thanks, Wayne.

important their organization Before entire to the and thank Wayne customers have history the on questions, contributions operator closely to to the team thank work to of work of organization. like to investments for hard strategic I would our for outstanding our with over very dedication for long-term and I driving make first turn and Board and on his an We Directors it want support success. the our I during key to company's period focused

think performance our about As and optimistic with ever pleased I'm future excited and I progress certainly our more about I'm this than before. year,

within have value industry our now the SecureWorks we and We accelerate for questions. opportunities and interest of continue will to significant the employees continued Operator, open our for leadership and support. shareholders. you On team, your which our customers, line growth behalf entire can create appreciate the

Operator

now the you, call I questions. sir. open for Thank will [Operator instructions].

As go take please. from to than Auty first no JP a questions. ahead Morgan, We'll question ask from courtesy our please more others, two Sterling

Sterling Auty

sale SecureWorks Dell on headlines got the One, want this here got of SecureWorks. kind can here Dell's vision go-to-market you of of I’m and hand, to for Any morning, good level give in with partnership start of that terms Actually, and exploring to going in program comment terms the we got the guys. talking On about forward. high that support hand, great the other Reuters one. trying you’ve understand have have you vision they one Thanks, SecureWorks. see in I the with

of would can forum at kind we do public great? a in once so hear that be all and it Just

Michael Cote

morning thanks Sure, Sterling, for cote, this good is Mike the question. and

and remarks endpoint the best Response in Red the next front management that security in bring think an unified security build bundled cost way of management team generation a to next P&L SafeGuard excited solutions I overall investment CrowdStrike’s that I which think Dell's mentioned they organization we and the exploring device that the market can solutions SecureWorks’ opportunities is very are about a And sales a incident part with the global there a answer solutions with portfolio as through pillar has response our the center are the in I but key and and organization which we the and and announcement we things SecureWorks Cloak prepared perspective. the group Dell's solution that the sold of our to question includes only from part not were security that is solution. and analytics, have the antivirus mentioned a strategy. services, both that of have in generation be specialists up EDR other picking It’s Dell security endpoint at including PC of SecureWorks the we're our from

Sterling Auty

one then And side. my from follow-up

on talked are or the fiscal You Can impact you retention rate. actions what this second anticipate be about number items improvements going us are the remind can those retention specific year? half in you customer the the and -- what to improve that the do

Michael Cote

take the I’ve me and it I'll has if fully. or part covered whether of see anything first Let Wayne then add to it

business retention We've of will, months. And offerings the with a We the I with specific announced I of sized Detect we QX, came pipeline and higher got end as And endpoint last, program. Response executive last we've and of year, Black. has Managed and then as had evolved. the of Dell Carbon to with QX the new organization. mentioned advanced came and were we came the parts the We market we there if partner Dell focus threat for we which as endpoint out offering year, with relating QX market. the app. the of should And come we in about to retention response with detection, just small some refresher, Automation, which for Response, strong the on over medium our CrowdStrike detection the QX XX commercial building solution up announced in think earlier, we and the a and Orchestration Detection marketplace, solution have you Prevent and the this & publicly talked out say last a has sales QX in threat market enterprise with we've came in SafeGuard the In year, up

this say things couple question, that contribute of to believe includes Sterling, new and which plans, that and sponsored in retention year. the a particular, last will out America in much plans, a territory in few there's program, North account in on, on accelerated So later includes over your we It the we've like offerings focus in pursuit executive both come would EMEA plan and done I growth with, years. we've

Wayne Jackson

the Sterling, is is One, add of Wayne. solutions I’d outcomes, couple multiple a this we just better better at have have relationships When we security a us things. for is retention in roll revenue have they Yes. And will solutions, new good compelling. client, as our morning, help clients. revenue, to incremental therefore it retention will not Mike's higher. then generate that and we existing point, out new data only the

Operator

next is with Boolani question ahead of please. Fatima Your UBS. Go from the line

Katherine McCracken

This Fatima. is on for Katherine Hi. McCracken

about of in a newer specifically little expectations this 'XX, terms the can off and of Just question what’s guidance? bit into fiscal for you last talk moving your baked year that offerings more

Wayne Jackson

morning. is take Wayne. that This Sure. Good will one. I

in of rollout QX it TDR Dell the ramp the the gain ramp the of momentum will be in talked we incremental and believe That year talked are The items largest not We some and QX, will will rollout SafeGuard. QX in about we've both the begin quarter in two that Those QX about. QX full assumes of probably staged. these, in that incremental QX. beyond. and Our all to it's the and guidance there'll impact really quickly for be

Katherine McCracken

helpful. about That's that in quarter? the it. talk as sales made you And got leadership to sales the productivity. the since you’d you last you've just and then in relates US mentioned any how I think changes Can follow-up, force remarks, specifically Okay, improvements a prepared seen

Michael Cote

two sort North part than is fill had the with your regions, last remarks, joined did in first you or you, prepared of in It’s American the Addressing take two. occurred fact Katherine. in question effectively that your question, leadership leader of including markets and this month the America answer a North as there we part, Thank to changes other there. talked that North Sure, the sales we all our substantial us a the were America. experienced all that. strong I’ll sales about no first in productivity part executive Mike, And

really is, So ACV the and highest with North annual up America we and up which more in in come the we for had the a again, was repeatable this say the would executive are or are modular the is reasons we've packaging, And new quota of over simplified went which ACV a One of beginning approach. pricing couple out that, value, history I of XX% organization, and until the per productivity contract start that The across measure, things. company. was didn't carrier the because QX XX% what QX offerings QX. increased year, it the new

mentioned organization in the amount real weeks of the some and easier and last place on sales I excitement team place. Response. tremendous a think year ago rolled kickoff a to Dell We had it's I and actually we've there into about SafeGuard And put the in joined couple some got on out as better the Geoff sales with up management us year. development just and has momentum we've use our the Dell picking was just of quickly Haydon this going fiscal

sales overall as best three you our the would engine whole last go-to-market our the and tell feel I about I So I probably team, years. have in

Operator

line from is Jonathan of from Ho question next your you, William the Thank Blair.

Your question please.

Jonathan Ho

well little sort seen and Wayne strength? you the to side to the maybe the of starting and and opportunity been where seeing been what’s great over to with some as congratulations growth, it's growth a with on can But you've stronger business, opportunity bit driving investments that we've about that make talk you just been there the that give I just So, of time. wanted terms the maybe just this in you work international of

Michael Cote

and have strong both of about I've Sure, points. various America the the feel that’s of quick a EMEA, the the together think, mentioned instant thank East have invest a endpoint going the North I We've has executive and the leader produce experienced coming for been we perspective and and are we've on very long Automation I'm about they continues delivery America. territory on leadership organization advanced earlier the market and best-in-class and solutions, Asia But Asian team, and growth calls pursuit And leadership place, EMEA place Cloak SafeGuard as a Red perspective questions, as have summary got be response detection, put consists was had from in and as go-to-market there. prior Mike. you both planning that the been very in some that, UK perspective which the And to sponsored strong basis Partner and well from it’s really team North that regard the solutions time. and and Prevent program, Response market a that that to of we mentioned & and pieces got strong over in the a tremendously in of to and in processes has threat for MDR and and probably QX all well. earlier the to as parts program. strong Europe and planning the EMEA we've consistent I all and planning TDR excited Mainland a good in put puzzle Middle Jonathan, I and brand and in mentioned done in as Dell from Detect the and well the are an mentioned account Orchestration as offered continued with have We've the as been

Jonathan Ho

And overlay go-to-market as in it. products impacts growth then how little about, investments in some Got of from from to upcoming to terms need terms bit talk the your well? or can in incremental you to need that you the invest of sales year drive a perspective R&D of these make you this the whether and a

Michael Cote

add This to again anything. and is that on Jonathan. touch Mike I'll free feel Sure, Wayne,

SafeGuard with other leverage up On to in specific there Dell the Q&A prepared the investment go-to-market we in on front, that to earlier we mentioned relating I an the have on remarks. portion had either are flat a agreement than a amount Dell Dell sales What we done Response picking go-to-market or been has overall and the of specialists is -- security force the quarter. where to no per

accelerate as can the and year of we're on. than to little already QX that you we incremental more with go-to-market in Other goes have. very little to the fills a ramp hoping there is those expectations that the So, on pipeline begin the will see and revenue costs expect growth investments

place, I'm continued productivity and of into productivity during about go-to-market and/or we’ve the So in excited increase expect put the fiscal ‘XX increase in organizations beyond. year the XX% frankly

that the regard the in to doing Wayne look during that the app success the R&D investment I GA On we seen we response investments R&D and some and in with we are to that detection we so think, to-date application. days make next are we're XX to particular with have year that front, said, or incremental to going coming the and expect threat out

we'll it software I'm based about sense. framework the R&D is we incremental itself up, dollars the this for that the and will front of it's the the see to -- it's the a time, network But it excited a that the are are And service, in So, the a sold, in on come without and opportunities the we'll market is way launched, and apps looking when have initial we'll we progress just more us really TDR to it's in upon that category. intelligence. the R&D benefit market do on where we in saying the in Over -- on investing some worth applications makes be go minute the them. effect successes the mature it's to way application our get with cool is be be any things. out expand The wants lot to It with to see or as delivered, we selling a so really software solution really people what application. for

software detection advanced on response based detectors And and integrated add driven analytic cases initial applications. we'll the and and investigation on include a features over use opportunities, wrapper collaborative service store it time. our capabilities, So

Operator

Go next line with Your please. Capital question RBC Matt ahead Hedberg is of Markets. from the

Matt Swanson

market kind consulting in Matt. a I Matt with a actually talked feel previous It's just about at in about bit the how of the value with for unique launching you're the Swanson is were your RSA, talk bringing you product how some services little Thanks. shelf youve your it do you and you on When store off of this know of from differentiation with the Could kind approach. you competitors expertise? differentiated the product

Michael Cote

I Yes, Cote. this is think so Mike --

end I the well the the with our a One to is and use globe. that well, do first customers build think build a thing that cases internal there’s across couple use we also the use organization, things. is, -- other we're assessment leverage the of help working around front we as I'd and as cases say

best there tuning operating And as work So ongoing we will we really have roll kind from with be for and out. of as these an practices it through well the perspective. clients,

The is important from that the we're with Ansible, source thing other so of technology. doing think open I this is

in a that collaborative So make to open do to it manner trying use trying clients environment a proprietary. we're can this environment. and an We're in our not in this

Matt Swanson

with spending the the one, level. budgets customers And I And here automation, new security then you by just store about kind in help guys noticing there adding, anything FYXX? about priorities more guess I products some high if and could are needed I Just I more maybe are from thinking of guess towards in mean highest ask changing like is of things how of, How at you? security the you're environment

Michael Cote

tell there is Cote the continuing high I Mike market good see But In that solutions. is I I very This market, and to an security for your demand again. that. you would focus increased insight in be would expect be to

for were going the how investigation that a return what's focus Please dollar on the CEO, investment are of show a aspect the on think to be member spent. detection, if is more or reduction? response and I a me we the So Board automating risk have in to what where help? the secure do beings human people use really is best are works others more rather -- thing. for them How organization both than mundane or the human and doing the routine beings things we or best for to have risk, putting

of a looking So some investment return in a spent. meetings to risk and the key on and customers focus in opinion clients on our my the dollar the and I've measure sat reduction in that way finding for and relate Board of

show a non-customers, out an say to that of customers a easy a website is that fill not not One and way, in the real the offer have of versus questionnaire other comparisons sorry industry to filled really a that it I others our people which customer security it's -- model, maturity I'm things there's it's product, by yet because and I -- is a one add things in the should trying quick something of customers we a can manner on and and it's just is to the we're think are our out have SecureWorks.

helping want trying how maturity, to So can steps in companies and they in depending and process. are that where that them to on an they their where how, focused maturity, take security be mature do that security report it's on to they then along how really measure offering

in manner security helps So our context. that put maturity responding in are way really new and and using offerings the a in focused kind things models of on automating

Operator

Melissa have of question from please. ahead We Go Morgan Stanley. a Franchi with line the

Melissa Franchi

I Good morning, prior this follow for my to on question. wanted up the a question. taking for discussion thanks from

increasingly with vendors security you services capabilities the guys to store need or that with with and do as even automated and you functionality maybe feel perhaps those orchestration Alto become investing So like vendors in and of with the gets you like orchestration? more competitive indirectly directly help more to Splunk Palo automation, start just less either

Michael Cote

not questions the of Melissa let in is question. you sure, this, Well, and so you thank so kind me again, we're this Mike -- -- have two for make

of solution the question an Let that the because where me believe answer intelligence and in make expertise We it in open I'm sure I playbook value security in incorrectly. we the and addressing intelligence don’t software expertise specifically specifically is source not believe is. on don't the security We value and software. is using automating the your approach software took and the the

that the perspective, we where be client address into parts collaboratively we it and steps in of I Today, to open are leverage that to to view can sure product wasn’t the can little as security competitors Melissa base do services… going confused solution -- write what as question was a the ability part and as the our that be But as off any perspective. would I'm source the across is The exists it help specific plug we our a can our can client in playbooks It's taken with I talking and you have, that applications from differentiator the the Ansible market that that for to it client core about. I the clearly need your where far not we services. intelligence that. going work So source source an do shelf be our be to and and

Melissa Franchi

automated your for actions more need wondering reduces to if just like Yes, extent which if the get the that services...?

Michael Cote

to of because frankly, things. happy the stack the Quite and means do activities becomes can that more be pipeline it the we for dealing applying the that happen will than up I'd with intelligence rather much repetitive rudimentary go

able the So and we're and going easy. automation in is SOAR The differentiation it say applying opinion, should and we customers. the in on being collaboratively best across our to expertise of that make that looking industry -- looking intelligence be network action throughout are not itself, to activities the happen should the the to our it do and activity interest everyone's

Melissa Franchi

the large increased think initiatives retention guys we the that the And absent what then rate, undertaking that there few is And revenue is churn you any that and from that, the you customer headwind color transition. competitive past thank to factors But are play? know have do quarters seen over driving that for I the the on that's had very that the you rate. on helpful. Okay, you improve

Michael Cote

you thank again, Mike is the for question. this So

there two I factors would don’t had marketplace. and as that You I say the it in a part question view competitive

we we outcomes. getting the timing have value last solution with that we've with announced continued throughout which the six have retention looking been exactly, Matt multiple move asked the to in announced are relating and to to our supportive logo and and focused what quickly our sure of of that solution them, and efficacy As make their they And efficiency that end opinion, ‘XX, year rate why if go where -- work churn better get you we've mentioned the up fiscal where earlier question it provide than we are reallocate because we up the of more has they on getting in is service laid and and out the ensuring can this to it's higher announced we've through new more security offerings It’s customers them the can doing. end been that strategically better my reason up a end are so which getting and the up we're or churn customers spectrum structure actually over in it’s and bet clients. to dollars they looking

Operator

next is from Saket from please. Go question ahead Barclays. Kalia Our

Saket Kalia

for maybe, Mike, churn. pick on last that up First question to just you around

can one But you're So, churn. or seeing that offerings be about than any to commonalities are to churn? a whether me example, customer of do it a maybe of example, -- that for on talk you to others common services do churn customer in it easier to more with me Can service prone what an a any seeing understand that than the deeper for churn is particular you sort on for particular one management is for going reallocate that level more churn for you're which go firewall rather type particularly a reallocation. for perhaps example

Michael Cote

good that biggest I do detection it’s tell would back I that question. you to a that it’s it’s solution where mean Saket, I'm years Sure, a happy is only. goes area and the multiple

and It’s relating customer's reason prevent we a then the Red from incremental for detection only monitoring moved them. we So, Cloak be Partner we and MDR have have raising why bundles detection solutions where will the the or network doing the detection be some flag basically on solution around to detection, the to program. devices or and where the that of we

be we in it detect the frankly So, seeing consistently quite line. pretty have

Saket Kalia

for announcement. you And first also your my on all, maybe Wayne, of then, congrats

On two maybe questions. the ‘XX guide, kind fiscal of

of part I First, from ‘XX think that’s that how into year-over-year. about fiscal receivable you're about can flow kind playing ‘XX? Dell secondly, know thinking then move MRR guide in you whether tax growth year-over-year? cash ebbs the And in down the is any can and the I cash talk in dynamic flow, flow

Wayne Jackson

Thank you, Saket.

lower cash $X order. in mentioned me $X it's as is anticipate flow them is million reduce. next has of give a rate receivable The for And secondly as reverse year. losses two approach with. million tax a able things, the be things decrease really, remarks 'XX. I my amount we use in you $XX fiscal to then to this for take Let I’ll the Dell will they'll two one down prepared benefit that's range And our as we to about tax begin million what

And then to $XX it. million some the $XX to So part R&D other space. in the just we're spend spent that has impact is number going to certainly incremental million

go in that in year. but then you'll will and So give guided $XX -- get million one my of that CapEx it's the about reconcile -- about quarter. close. we $XX third I remarks MRR, -- been million back I this range, think $XX as And for kind million it’s if of the mention million, just it's same is all to the a you the $XX as to same it's revenue to did you ahead I prepared

be streams of some one-off some not traditional revenue As these come of on, MRRs, new streams. be will will they revenue of them type

We revenue. we'll provide the end MRR we period at each we going So just that's pivoted to forward. of guidance why -- giving certainly

Operator

Citi. from Please Walter Pritchard from The the next question ahead. is go line

Walter Pritchard

questions. Two

wondering side Dell help if the us. you just First, on could maybe I'm

various the in you've had think I … past

Michael Cote

sorry we Walter, we minute. I'm lost a for -- Walter, lost you there

Walter Pritchard

now? hear you me Can

Michael Cote

We can. you. Yes. Thank

Walter Pritchard

about that. sorry Okay,

Can you're help have what I could talk changes Dell -- up So going Wayne a their issues had the what and EBITDA. talk on if And drive there? on Dell about side, may doing on year-end. end you I'm understand for wondering the offerings on you to I follow your or sales

Michael Cote

this for So Mike, you is the question. thank

On sold endpoint when attached have the their PCs solution Dell they to it. side, sold box, the they

not to and So incident happen. attached historically an to not been retainer our have were an have response had Cloak it did something analytics it solution, did Red it unmanaged

amount starting of to expanded impact is our -- will you Response what last if can historical our fiscal over it's they've in incurring an solution with sold view and of hardware years the So our are it's that the the historically optimism or of SafeGuard of leads that good sort the will been happen historical eight our parts five team offering, of for sales, over P&L Dell knowledge but overlay team enhanced a focused on that many, this six overlay we the bundling team they that to and security costs -- something has just and years fixed be done perspective place the we aware now. for go-to-market From those that’s team, earlier, -- eight the security on Dell of security overlay solution about many a from or I'm I’ve I feeling that of Dell an been years, overlay on at on have. there's in overlay are as selling And least are amount solutions, and This and portion focused a a part that time. ‘XX. their is years a a mentioned we

Walter Pritchard

half question little that you R&D fiscal we help going had of the are costs in EBITDA, that forward? the us at you a second a in picked the Could between expecting around be up that I of and 'XX. And lower than drivers about think fiscal how some EBITDA then guess being just What least ‘XX? it would we're second there cost understand and maybe lower

Wayne Jackson

as Those around piece roll then I and out committed million pieces incremental apps, subsequent to app, that to million the the other app also the think the we’ve over marketing Dell $XX the And TDR is piece. sales investment that be we're first largest and biggest making $XX portfolio we the sense? reconciliation. and Does really spend in to FYXX the framework the the SafeGuard. makes that then develop sales and on for pay are the R&D together Yes, is is two space again excited the piece incremental to, force the

Walter Pritchard

you. Thank does. Yes. It

Operator

Sachs. please. question from next Borges Goldman the of The is ahead Gabriela from Go line

Gabriela Borges

the I XX% time this to us at growth over Mike, to XX% view wanted that north Maybe years SecureWorks give numbers holistic the EBITDA XX% longer an term. revisit some the of margin idea to just the of potential margin revenue range, was expansion along discussed of the think for IPO industry the your getting ago, three last or three get level number the consistent limitations teens biggest growth? conviction the it your revenue been going expansion years. mid with What have that forward? to do margin then being you think do to to call what's growth changes, and in able Thanks. What in you

Michael Cote

Sure, the question. Gabriela for Thanks

as had been looked back last Haydon best inconsistency highest year to last why and coming in had new we've believe leader been we've last increased team the is perspective, the go the is market in has on carrier the being in North I answer think over time. we've history productivity I period we had the gotten quota in of a market is year which difficulty coming fiscal three years, from we've probably, some being position, market engine at not we the largest perspective, of the which -- the if XX%, the the the -- reason these in last calls go years, went ‘XX year and the which management American the and to company, from ACV we've scripts our to go in few ‘XX with last the three increase the our probably had fiscal Geoff

the a with I I've and the we've sales more to -- with a offerings modular plays things, new of simplified regards we the some in that and including Dell from real the momentum we've resulting outlined, handful that discussed, that implemented, the think packaging approach, organization. results pricing that have six that

but fiscal XX%, taken perspective shown strong the it's put to we've towards margin items gross place, quarters in earlier positive have in about perspective, think the that So some we’ve the a I'm increased really clearly results best last in From excited the end well the I've year. I direction. to an moving the seen have that time a outlined EBITDA and two -- of

XX.X% I go so period. think gross was Today exited a it’s the year margin, days back at basis if XX.X%. increase IPO to had point fourth you XXX over XX%. that Actually, quarter we we was three the XXXX

service rolling and clients we're internally and the out like things and now and prepared would So be that I the solutions that increase automation think remarks, a items in a that sales of through a Wayne the of north provisioning, productivity. mentioned for bundles application self as And over I capability period our time. it's and store both that our little applying XXX% been the

It to or revenue the in margin and productivity million mentioned feels to exiting in So EBIDTA from revenue XX the years I place. that's about the a year have to we in as excitement I we a pretty million have the XX.X% look the XXX increase in relates million everything negative XXXX going positive done with XX% quite from EBIDTA. last as frankly, optimism team and to of of three gross the few I and of years and at good XXXX, of XX last and XXX $XX have that

Gabriela Borges

endpoint on the follow the up competitive the market. in landscape And this

adding endpoint change endpoints? just One and managing capabilities. years today us Thanks. EDR tightly you seeing that is, of couple of noticed the adding Could your we've more past of how competitive on managed services how the you're set things capabilities, business vendors much environment, over is more detection the level

Michael Cote

we endpoint thanks we security programs again, partner a our solution. part broader Gabriela. endpoint as reason program, Carbon say, customers. a can capabilities -- the mentioned with we so where see and Mike It’s the as far where this for market, came have CrowdStrike is doing yes there’s of we're would I this increased Black. today the manner in the as And So, around I out

endpoint detection and the plan the have of with not our Red we we to data can been in my explore we that we analytics sources on. coupled the the and providers endpoint visibility We the other intelligence, with the the apply all of direct manner like and the by opportunity with have the work to approached customers in talking the our a across marketplace, vendors visibility between it's the opinion and to to ability the rest the it’s environment selected software, cloud could have endpoints where are capabilities, that specific the the because and we cross-correlate believe networks, SOAR Cloak much

Operator

We at this questions not have time. do further

Teri Miller

a please we and for up. and you not questions all hesitate appreciate follow section, reach your out did quarter for your If during Thank look again do joining on not questions. our of your forward us call for early today's Q&A We to first to support call in get June.

Operator

time. this at disconnect now may You

SecureWorks (SCWX) 27 Mar 192019 Q4 Earnings call transcript