(Mark One)
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☑
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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or
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☐
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from to
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Delaware
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27-0463349
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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One Concourse Parkway NE
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Suite 500
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Atlanta,
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Georgia
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30328
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(Address of Principal Executive Offices)
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(Zip Code)
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Title of each class
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Trading Symbol(s)
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Name of each exchange on which registered
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Class A Common Stock,
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SCWX
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The NASDAQ Stock Market LLC
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par value $0.01 per share
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(NASDAQ Global Select Market)
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Large accelerated filer
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☐
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Accelerated filer
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☑
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Non-accelerated filer
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☐
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Smaller reporting company
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☐
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Emerging growth company
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☑
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TABLE OF CONTENTS
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ITEM
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PAGE
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November 1,
2019 |
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February 1,
2019 |
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ASSETS
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|||||||
Current assets:
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|||
Cash and cash equivalents
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$
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138,788
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$
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129,592
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Accounts receivable, net of allowances of $5,734 and $6,160, respectively
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118,396
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141,344
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Inventories, net
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906
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468
|
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Other current assets
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26,177
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|
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27,604
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Total current assets
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284,267
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299,008
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Property and equipment, net
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30,580
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35,978
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Operating lease right-of-use assets, net
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24,035
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—
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Goodwill
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416,487
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416,487
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Intangible assets, net
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187,135
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206,448
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Other non-current assets
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87,502
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78,238
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Total assets
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$
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1,030,006
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$
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1,036,159
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LIABILITIES AND STOCKHOLDERS' EQUITY
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|||||||
Current liabilities:
|
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||||
Accounts payable
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$
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20,407
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$
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16,177
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Accrued and other
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71,166
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|
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86,495
|
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Short-term deferred revenue
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169,576
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|
|
157,865
|
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Total current liabilities
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261,149
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|
260,537
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Long-term deferred revenue
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14,276
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|
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16,064
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Operating lease liabilities, non-current
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27,091
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|
|
—
|
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Other non-current liabilities
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60,518
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|
|
66,851
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Total liabilities
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363,034
|
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343,452
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Commitments and contingencies (Note 6)
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Stockholders' equity:
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Preferred stock - $0.01 par value: 200,000 shares authorized; 0 shares issued
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—
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—
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Common stock - Class A of $0.01 par value: 2,500,000 shares authorized; 11,225 and 11,016 issued and outstanding, respectively.
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112
|
|
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110
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||
Common stock - Class B of $0.01 par value: 500,000 shares authorized; 70,000 shares issued and outstanding
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700
|
|
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700
|
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Additional paid in capital
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891,981
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884,567
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Accumulated deficit
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(202,701
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)
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(176,263
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)
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Accumulated other comprehensive (loss) income
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(3,224
|
)
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(2,884
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)
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Treasury stock, at cost - 1,257 and 819 shares, respectively
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(19,896
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)
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(13,523
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)
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Total stockholders' equity
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666,972
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692,707
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Total liabilities and stockholders' equity
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$
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1,030,006
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$
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1,036,159
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Three Months Ended
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Nine Months Ended
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||||||||||||
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November 1, 2019
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November 2, 2018
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November 1, 2019
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November 2, 2018
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||||||||
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Net revenue
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$
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141,332
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$
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133,060
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$
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410,779
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$
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387,999
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Cost of revenue
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61,568
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62,133
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188,004
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185,211
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Gross margin
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79,764
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70,927
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222,775
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202,788
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Research and development
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24,095
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21,114
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71,600
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65,921
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Sales and marketing
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40,726
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34,773
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116,966
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105,964
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General and administrative
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25,078
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21,619
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73,862
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69,235
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Total operating expenses
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89,899
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77,506
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262,428
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241,120
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Operating loss
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(10,135
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)
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(6,579
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)
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(39,653
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)
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(38,332
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)
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Interest and other income (expense), net
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(1,257
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)
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1,074
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|
961
|
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2,582
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Loss before income taxes
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(11,392
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)
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(5,505
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)
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(38,692
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)
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(35,750
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)
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Income tax benefit
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(3,484
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)
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(1,770
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)
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(12,254
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)
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(8,427
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)
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Net loss
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$
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(7,908
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)
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$
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(3,735
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)
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$
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(26,438
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)
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$
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(27,323
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)
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||||||||
Loss per common share (basic and diluted)
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$
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(0.10
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)
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$
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(0.05
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)
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$
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(0.33
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)
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$
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(0.34
|
)
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Weighted-average common shares outstanding (basic and diluted)
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80,518
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80,892
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80,553
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|
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80,751
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|
||||
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Three Months Ended
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Nine Months Ended
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||||||||||||
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November 1, 2019
|
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November 2, 2018
|
|
November 1, 2019
|
|
November 2, 2018
|
||||||||
Net loss
|
$
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(7,908
|
)
|
|
$
|
(3,735
|
)
|
|
$
|
(26,438
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)
|
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$
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(27,323
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)
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Foreign currency translation adjustments, net of tax
|
1,602
|
|
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(349
|
)
|
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(340
|
)
|
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(3,084
|
)
|
||||
Comprehensive loss
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$
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(6,306
|
)
|
|
$
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(4,084
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)
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|
$
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(26,778
|
)
|
|
$
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(30,407
|
)
|
|
Nine Months Ended
|
||||||
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November 1, 2019
|
|
November 2, 2018
|
||||
Cash flows from operating activities:
|
|
|
|
||||
Net loss
|
$
|
(26,438
|
)
|
|
$
|
(27,323
|
)
|
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
|
|
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|
||||
Depreciation and amortization
|
32,017
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|
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30,872
|
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Stock-based compensation expense
|
15,617
|
|
|
14,475
|
|
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Effects of exchange rate changes on monetary assets and liabilities denominated in foreign currencies
|
(102
|
)
|
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(1,924
|
)
|
||
Income tax benefit
|
(12,254
|
)
|
|
(8,427
|
)
|
||
Other non cash impacts
|
1,830
|
|
|
—
|
|
||
Provision for doubtful accounts
|
1,651
|
|
|
2,371
|
|
||
Changes in assets and liabilities:
|
|
|
|
||||
Accounts receivable
|
21,689
|
|
|
20,756
|
|
||
Net transactions with parent
|
(18,571
|
)
|
|
2,272
|
|
||
Inventories
|
(438
|
)
|
|
398
|
|
||
Other assets
|
10,838
|
|
|
(4,472
|
)
|
||
Accounts payable
|
9,086
|
|
|
573
|
|
||
Deferred revenue
|
9,848
|
|
|
11,252
|
|
||
Accrued and other liabilities
|
(8,921
|
)
|
|
(14,784
|
)
|
||
Net cash provided by operating activities
|
35,852
|
|
|
26,039
|
|
||
Cash flows from investing activities:
|
|
|
|
|
|
||
Capital expenditures
|
(12,082
|
)
|
|
(6,974
|
)
|
||
Net cash used in investing activities
|
(12,082
|
)
|
|
(6,974
|
)
|
||
Cash flows from financing activities:
|
|
|
|
|
|
||
Principal payments on financing arrangement with Dell Financial Services
|
—
|
|
|
(1,104
|
)
|
||
Taxes paid on vested restricted shares
|
(8,197
|
)
|
|
(2,153
|
)
|
||
Purchases of stock for treasury
|
(6,377
|
)
|
|
(1,068
|
)
|
||
Payments on financed capital expenditures
|
—
|
|
|
(500
|
)
|
||
Net cash used in financing activities
|
(14,574
|
)
|
|
(4,825
|
)
|
||
|
|
|
|
||||
Net increase in cash and cash equivalents
|
9,196
|
|
|
14,240
|
|
||
Cash and cash equivalents at beginning of the period
|
129,592
|
|
|
101,539
|
|
||
Cash and cash equivalents at end of the period
|
$
|
138,788
|
|
|
$
|
115,779
|
|
Three Months Ended November 1, 2019
|
|
Common Stock - Class A
|
|
Common Stock - Class B
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
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Outstanding Shares
|
|
Amount
|
|
Outstanding Shares
|
|
Amount
|
|
Additional Paid in Capital
|
|
Accumulated Deficit
|
|
Accumulated Other Comprehensive (Loss) Income
|
|
Treasury
Stock |
|
Total Stockholders' Equity
|
||||||||||||||||
Balances, August 2, 2019
|
|
11,203
|
|
|
$
|
112
|
|
|
70,000
|
|
|
$
|
700
|
|
|
$
|
887,014
|
|
|
$
|
(194,793
|
)
|
|
$
|
(4,826
|
)
|
|
$
|
(19,896
|
)
|
|
$
|
668,311
|
|
Net loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(7,908
|
)
|
|
—
|
|
|
—
|
|
|
(7,908
|
)
|
|||||||
Other comprehensive loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,602
|
|
|
—
|
|
|
1,602
|
|
|||||||
Vesting of restricted stock units
|
|
32
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Grant of restricted stock awards
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Common stock withheld as payment for withholding taxes upon the vesting of restricted shares
|
|
(10
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(125
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(125
|
)
|
|||||||
Stock-based compensation
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,092
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,092
|
|
|||||||
Shares repurchased
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Balances, November 1, 2019
|
|
11,225
|
|
|
$
|
112
|
|
|
70,000
|
|
|
$
|
700
|
|
|
$
|
891,981
|
|
|
$
|
(202,701
|
)
|
|
$
|
(3,224
|
)
|
|
$
|
(19,896
|
)
|
|
$
|
666,972
|
|
Nine Months Ended November 1, 2019
|
|
Common Stock - Class A
|
|
Common Stock - Class B
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
|
Outstanding Shares
|
|
Amount
|
|
Outstanding Shares
|
|
Amount
|
|
Additional Paid in Capital
|
|
Accumulated Deficit
|
|
Accumulated Other Comprehensive (Loss) Income
|
|
Treasury
Stock |
|
Total Stockholders' Equity
|
||||||||||||||||
Balances, February 1, 2019
|
|
11,016
|
|
|
$
|
110
|
|
|
70,000
|
|
|
$
|
700
|
|
|
$
|
884,567
|
|
|
$
|
(176,263
|
)
|
|
$
|
(2,884
|
)
|
|
$
|
(13,523
|
)
|
|
$
|
692,707
|
|
Net loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(26,438
|
)
|
|
—
|
|
|
—
|
|
|
(26,438
|
)
|
|||||||
Other comprehensive loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(340
|
)
|
|
—
|
|
|
(340
|
)
|
|||||||
Vesting of restricted stock units
|
|
939
|
|
|
9
|
|
|
—
|
|
|
—
|
|
|
(9
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Grant of restricted stock awards
|
|
122
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Common stock withheld as payment for withholding taxes upon the vesting of restricted shares
|
|
(414
|
)
|
|
(4
|
)
|
|
—
|
|
|
—
|
|
|
(8,193
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(8,197
|
)
|
|||||||
Stock-based compensation
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
15,617
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
15,617
|
|
|||||||
Shares repurchased
|
|
(438
|
)
|
|
(4
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(6,373
|
)
|
|
(6,377
|
)
|
|||||||
Balances, November 1, 2019
|
|
11,225
|
|
|
$
|
112
|
|
|
70,000
|
|
|
$
|
700
|
|
|
$
|
891,981
|
|
|
$
|
(202,701
|
)
|
|
$
|
(3,224
|
)
|
|
$
|
(19,896
|
)
|
|
$
|
666,972
|
|
Three Months Ended November 2, 2018
|
|
Common Stock - Class A
|
|
Common Stock - Class B
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
|
Outstanding Shares
|
|
Amount
|
|
Outstanding Shares
|
|
Amount
|
|
Additional Paid in Capital
|
|
Accumulated Deficit
|
|
Accumulated Other Comprehensive (Loss) Income
|
|
Treasury
Stock |
|
Total Stockholders' Equity
|
||||||||||||||||
Balances, August 3, 2018
|
|
11,797
|
|
|
$
|
118
|
|
|
70,000
|
|
|
$
|
700
|
|
|
$
|
874,907
|
|
|
$
|
(160,750
|
)
|
|
$
|
(2,705
|
)
|
|
$
|
—
|
|
|
$
|
712,270
|
|
Net loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,735
|
)
|
|
—
|
|
|
—
|
|
|
(3,735
|
)
|
|||||||
Other comprehensive loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(349
|
)
|
|
—
|
|
|
(349
|
)
|
|||||||
Vesting of restricted stock units
|
|
6
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Grant of restricted stock awards
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Common stock withheld as payment for withholding taxes upon the vesting of restricted shares
|
|
(3
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(14
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(14
|
)
|
|||||||
Stock-based compensation
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,833
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,833
|
|
|||||||
Shares repurchased
|
|
(71
|
)
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,067
|
)
|
|
(1,068
|
)
|
|||||||
Balances, November 2, 2018
|
|
11,729
|
|
|
$
|
117
|
|
|
70,000
|
|
|
$
|
700
|
|
|
$
|
879,726
|
|
|
$
|
(164,485
|
)
|
|
$
|
(3,054
|
)
|
|
$
|
(1,067
|
)
|
|
$
|
711,937
|
|
Nine Months Ended November 2, 2018
|
|
Common Stock - Class A
|
|
Common Stock - Class B
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
|
Outstanding Shares
|
|
Amount
|
|
Outstanding Shares
|
|
Amount
|
|
Additional Paid in Capital
|
|
Accumulated Deficit
|
|
Accumulated Other Comprehensive (Loss) Income
|
|
Treasury
Stock |
|
Total Stockholders' Equity
|
||||||||||||||||
Balances, February 2, 2018*
|
|
11,085
|
|
|
$
|
111
|
|
|
70,000
|
|
|
$
|
700
|
|
|
$
|
867,411
|
|
|
$
|
(137,162
|
)
|
|
$
|
30
|
|
|
$
|
—
|
|
|
$
|
731,090
|
|
Net loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(27,323
|
)
|
|
—
|
|
|
—
|
|
|
(27,323
|
)
|
|||||||
Other comprehensive loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,084
|
)
|
|
—
|
|
|
(3,084
|
)
|
|||||||
Vesting of restricted stock units
|
|
551
|
|
|
5
|
|
|
—
|
|
|
—
|
|
|
(5
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Grant of restricted stock awards
|
|
386
|
|
|
4
|
|
|
—
|
|
|
—
|
|
|
(4
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Common stock withheld as payment for withholding taxes upon the vesting of restricted shares
|
|
(222
|
)
|
|
(2
|
)
|
|
—
|
|
|
—
|
|
|
(2,151
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,153
|
)
|
|||||||
Stock-based compensation
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
14,475
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
14,475
|
|
|||||||
Shares repurchased
|
|
(71
|
)
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,067
|
)
|
|
(1,068
|
)
|
|||||||
Balances, November 2, 2018
|
|
11,729
|
|
|
$
|
117
|
|
|
70,000
|
|
|
$
|
700
|
|
|
$
|
879,726
|
|
|
$
|
(164,485
|
)
|
|
$
|
(3,054
|
)
|
|
$
|
(1,067
|
)
|
|
$
|
711,937
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
November 1, 2019
|
|
November 2, 2018
|
|
November 1, 2019
|
|
November 2, 2018
|
||||||||
Numerator:
|
|
|
|
|
|
|
|
||||||||
Net loss
|
$
|
(7,908
|
)
|
|
$
|
(3,735
|
)
|
|
$
|
(26,438
|
)
|
|
$
|
(27,323
|
)
|
Denominator:
|
|
|
|
|
|
|
|
|
|
||||||
Weighted-average number of shares outstanding:
|
|
|
|
|
|
|
|
|
|||||||
Basic and Diluted
|
80,518
|
|
|
80,892
|
|
|
80,553
|
|
|
80,751
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Loss per common share:
|
|
|
|
|
|
|
|
|
|
||||||
Basic and Diluted
|
$
|
(0.10
|
)
|
|
$
|
(0.05
|
)
|
|
$
|
(0.33
|
)
|
|
$
|
(0.34
|
)
|
|
|
|
|
|
|
|
|
||||||||
Weighted-average anti-dilutive stock options, non-vested restricted stock and restricted stock units
|
5,122
|
|
|
5,287
|
|
|
5,275
|
|
|
5,355
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
|
November 1, 2019
|
|
November 2, 2018
|
|
November 1, 2019
|
|
November 2, 2018
|
||||||||
Managed Security Solutions revenue
|
|
$
|
109,344
|
|
|
$
|
100,521
|
|
|
$
|
311,210
|
|
|
$
|
297,656
|
|
Security and Risk Consulting revenue
|
|
31,988
|
|
|
32,539
|
|
|
99,569
|
|
|
90,343
|
|
||||
Total revenue
|
|
$
|
141,332
|
|
|
$
|
133,060
|
|
|
$
|
410,779
|
|
|
$
|
387,999
|
|
|
|
As of February 1, 2019
|
|
Upfront payments received and billings during the nine months ended November 1, 2019
|
|
Revenue recognized during the nine months ended November 1, 2019
|
|
As of November 1, 2019
|
||||||||
Deferred revenue
|
|
$
|
173,929
|
|
|
$
|
209,596
|
|
|
$
|
(199,673
|
)
|
|
$
|
183,852
|
|
|
|
As of February 2, 2018*
|
|
Upfront payments received and billings during the nine months ended November 2, 2018
|
|
Revenue recognized during the nine months ended November 2, 2018
|
|
As of November 2, 2018
|
||||||||
Deferred revenue
|
|
$
|
152,645
|
|
|
$
|
171,946
|
|
|
$
|
(160,359
|
)
|
|
$
|
164,232
|
|
|
|
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
|
|
$
|
274,332
|
|
|
$
|
157,836
|
|
|
$
|
85,636
|
|
|
$
|
27,731
|
|
|
$
|
3,129
|
|
Performance obligation - backlog
|
|
19,004
|
|
|
7,251
|
|
|
6,948
|
|
|
4,685
|
|
|
120
|
|
|||||
Total
|
|
$
|
293,336
|
|
|
$
|
165,087
|
|
|
$
|
92,584
|
|
|
$
|
32,416
|
|
|
$
|
3,249
|
|
|
|
As of February 1, 2019
|
|
Amount capitalized
|
|
Amount recognized
|
|
As of November 1, 2019
|
||||||||
Deferred commissions
|
|
$
|
62,895
|
|
|
$
|
11,113
|
|
|
$
|
(13,823
|
)
|
|
$
|
60,185
|
|
Deferred fulfillment costs
|
|
10,973
|
|
|
4,520
|
|
|
(4,115
|
)
|
|
11,378
|
|
|
|
As of February 2, 2018*
|
|
Amount capitalized
|
|
Amount recognized
|
|
As of November 2, 2018
|
||||||||
Deferred commissions
|
|
$
|
57,229
|
|
|
$
|
13,938
|
|
|
$
|
(10,643
|
)
|
|
$
|
60,524
|
|
Deferred fulfillment costs
|
|
10,163
|
|
|
4,426
|
|
|
(3,779
|
)
|
|
10,810
|
|
|
|
November 1, 2019
|
|
February 1, 2019
|
||||||||||||||||||||
|
|
Gross
|
|
Accumulated
Amortization
|
|
Net
|
|
Gross
|
|
Accumulated
Amortization
|
|
Net
|
||||||||||||
|
|
(in thousands)
|
||||||||||||||||||||||
Customer relationships
|
|
$
|
189,518
|
|
|
$
|
(87,723
|
)
|
|
$
|
101,795
|
|
|
$
|
189,518
|
|
|
$
|
(77,152
|
)
|
|
$
|
112,366
|
|
Technology
|
|
137,371
|
|
|
(82,149
|
)
|
|
55,222
|
|
|
135,584
|
|
|
(71,620
|
)
|
|
63,964
|
|
||||||
Finite-lived intangible assets
|
|
326,889
|
|
|
(169,872
|
)
|
|
157,017
|
|
|
325,102
|
|
|
(148,772
|
)
|
|
176,330
|
|
||||||
Trade name
|
|
30,118
|
|
|
—
|
|
|
30,118
|
|
|
30,118
|
|
|
—
|
|
|
30,118
|
|
||||||
Total intangible assets
|
|
$
|
357,007
|
|
|
$
|
(169,872
|
)
|
|
$
|
187,135
|
|
|
$
|
355,220
|
|
|
$
|
(148,772
|
)
|
|
$
|
206,448
|
|
|
|
November 1, 2019
|
|
Weighted-average remaining lease term
|
|
5.9 years
|
|
Weighted-average discount rate
|
|
5.32
|
%
|
Fiscal Years Ending
|
|
|
||
2020
|
|
$
|
1,362
|
|
2021
|
|
4,979
|
|
|
2022
|
|
6,705
|
|
|
2023
|
|
5,893
|
|
|
2024
|
|
5,347
|
|
|
Thereafter
|
|
12,216
|
|
|
Total operating lease payments
|
|
$
|
36,502
|
|
Less imputed interest
|
|
(6,436
|
)
|
|
Total operating lease liabilities
|
|
$
|
30,066
|
|
Fiscal Years Ending
|
|
February 1, 2019
|
|
|
2020
|
|
$
|
5,237
|
|
2021
|
|
4,446
|
|
|
2022
|
|
6,190
|
|
|
2023
|
|
5,440
|
|
|
2024
|
|
4,936
|
|
|
Thereafter
|
|
11,825
|
|
|
Total operating lease payments
|
|
$
|
38,074
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
November 1, 2019
|
|
November 2, 2018
|
|
November 1, 2019
|
|
November 2, 2018
|
||||||||
|
|
|
|
|
|
|
|
||||||||
Loss before income taxes
|
$
|
(11,392
|
)
|
|
$
|
(5,505
|
)
|
|
$
|
(38,692
|
)
|
|
$
|
(35,750
|
)
|
Income tax benefit
|
$
|
(3,484
|
)
|
|
$
|
(1,770
|
)
|
|
$
|
(12,254
|
)
|
|
$
|
(8,427
|
)
|
Effective tax rate
|
30.6
|
%
|
|
32.2
|
%
|
|
31.7
|
%
|
|
23.6
|
%
|
|
|
November 1, 2019
|
|
February 1, 2019
|
||||
|
|
(in thousands)
|
||||||
Net intercompany receivable (included in "Other current assets") / (payable) (included in "Accrued and other")
|
|
$
|
2,920
|
|
|
$
|
(15,634
|
)
|
|
|
|
|
|
||||
Accounts receivable from customers under reseller agreements with Dell (included in "Accounts receivable, net")
|
|
$
|
17,205
|
|
|
$
|
21,760
|
|
|
|
|
|
|
||||
Net operating loss tax sharing receivable under agreement with Dell (included in "Other current assets" and "Other non-current assets" at November 1, 2019 and in "Other current assets" at February 1, 2019)
|
|
$
|
17,769
|
|
|
$
|
6,853
|
|
•
|
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
|
|
|
|
November 1,
2019 |
|
February 1, 2019
|
||||
|
|
|
Level 1
|
|
Level 1
|
||||
|
|
|
(in thousands)
|
||||||
Cash equivalents - Money Market Funds
|
|
$
|
75,268
|
|
|
$
|
90,673
|
|
•
|
prevent security breaches by fortifying their cyber defenses,
|
•
|
detect malicious activity,
|
•
|
respond rapidly to security breaches, and
|
•
|
predict emerging threats.
|
•
|
maintain and extend our technology leadership,
|
•
|
expand and diversify our customer base,
|
•
|
deepen our existing customer relationships, and
|
•
|
attract and retain top talent.
|
|
November 1, 2019
|
|
November 2, 2018
|
||||
Subscription customer base
|
4,100
|
|
|
4,300
|
|
||
Total customer base
|
4,988
|
|
|
4,840
|
|
||
Monthly recurring revenue (in millions)
|
$
|
36.9
|
|
|
$
|
35.1
|
|
Annual recurring revenue (in millions)
|
$
|
442.8
|
|
|
$
|
421.7
|
|
Average subscription revenue per customer (in thousands)
|
$
|
107.8
|
|
|
$
|
99.3
|
|
Revenue retention rate
|
99
|
%
|
|
91
|
%
|
•
|
Amortization of Intangible Assets. Amortization of intangible assets consists of amortization of customer relationships and acquired technology. In connection with the acquisition of Dell by Dell Technologies in fiscal 2014, all of our tangible and intangible assets and liabilities were accounted for and recognized at fair value on the transaction date. Accordingly, amortization of intangible assets consists of amortization associated with intangible assets recognized in connection with this transaction.
|
•
|
Stock-based Compensation Expense. Non-cash stock-based compensation relates to both the Dell Technologies and Secureworks equity plans. We exclude such expenses when assessing the effectiveness of our operating performance since stock-based compensation does not necessarily correlate with the underlying operating performance of the business.
|
•
|
Aggregate Adjustment for Income Taxes. The aggregate adjustment for income taxes is the estimated combined income tax effect for the adjustments mentioned above. The tax effects are determined based on the tax jurisdictions where the above items were incurred.
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
November 1, 2019
|
|
November 2, 2018
|
|
November 1, 2019
|
|
November 2, 2018
|
||||||||
|
(in thousands)
|
|
(in thousands)
|
||||||||||||
GAAP and non-GAAP revenue
|
$
|
141,332
|
|
|
$
|
133,060
|
|
|
$
|
410,779
|
|
|
$
|
387,999
|
|
|
|
|
|
|
|
|
|
||||||||
GAAP gross margin
|
$
|
79,764
|
|
|
$
|
70,927
|
|
|
$
|
222,775
|
|
|
$
|
202,788
|
|
Amortization of intangibles
|
3,559
|
|
|
3,410
|
|
|
10,529
|
|
|
10,231
|
|
||||
Stock-based compensation expense
|
353
|
|
|
224
|
|
|
1,009
|
|
|
768
|
|
||||
Non-GAAP gross margin
|
$
|
83,676
|
|
|
$
|
74,561
|
|
|
$
|
234,313
|
|
|
$
|
213,787
|
|
|
|
|
|
|
|
|
|
||||||||
GAAP research and development expenses
|
$
|
24,095
|
|
|
$
|
21,114
|
|
|
$
|
71,600
|
|
|
$
|
65,921
|
|
Stock-based compensation expense
|
(996
|
)
|
|
(933
|
)
|
|
(3,157
|
)
|
|
(2,970
|
)
|
||||
Non-GAAP research and development expenses
|
$
|
23,099
|
|
|
$
|
20,181
|
|
|
$
|
68,443
|
|
|
$
|
62,951
|
|
|
|
|
|
|
|
|
|
||||||||
GAAP sales and marketing expenses
|
$
|
40,726
|
|
|
$
|
34,773
|
|
|
$
|
116,966
|
|
|
$
|
105,964
|
|
Stock-based compensation expense
|
(691
|
)
|
|
(800
|
)
|
|
(2,389
|
)
|
|
(2,141
|
)
|
||||
Non-GAAP sales and marketing expenses
|
$
|
40,035
|
|
|
$
|
33,973
|
|
|
$
|
114,577
|
|
|
$
|
103,823
|
|
|
|
|
|
|
|
|
|
||||||||
GAAP general and administrative expenses
|
$
|
25,078
|
|
|
$
|
21,619
|
|
|
$
|
73,862
|
|
|
$
|
69,235
|
|
Amortization of intangibles
|
(3,524
|
)
|
|
(3,524
|
)
|
|
(10,571
|
)
|
|
(10,571
|
)
|
||||
Stock-based compensation expense
|
(3,052
|
)
|
|
(2,876
|
)
|
|
(9,062
|
)
|
|
(8,596
|
)
|
||||
Non-GAAP general and administrative expenses
|
$
|
18,502
|
|
|
$
|
15,219
|
|
|
$
|
54,229
|
|
|
$
|
50,068
|
|
|
|
|
|
|
|
|
|
||||||||
GAAP operating income (loss)
|
$
|
(10,135
|
)
|
|
$
|
(6,579
|
)
|
|
$
|
(39,653
|
)
|
|
$
|
(38,332
|
)
|
Amortization of intangibles
|
7,083
|
|
|
6,934
|
|
|
21,100
|
|
|
20,802
|
|
||||
Stock-based compensation expense
|
5,092
|
|
|
4,833
|
|
|
15,617
|
|
|
14,475
|
|
||||
Non-GAAP operating income (loss)
|
$
|
2,040
|
|
|
$
|
5,188
|
|
|
$
|
(2,936
|
)
|
|
$
|
(3,055
|
)
|
|
|
|
|
|
|
|
|
||||||||
GAAP net income (loss)
|
$
|
(7,908
|
)
|
|
$
|
(3,735
|
)
|
|
$
|
(26,438
|
)
|
|
$
|
(27,323
|
)
|
Amortization of intangibles
|
7,083
|
|
|
6,934
|
|
|
21,100
|
|
|
20,802
|
|
||||
Stock-based compensation expense
|
5,092
|
|
|
4,833
|
|
|
15,617
|
|
|
14,475
|
|
||||
Aggregate adjustment for income taxes
|
(3,438
|
)
|
|
(2,801
|
)
|
|
(11,997
|
)
|
|
(8,130
|
)
|
||||
Non-GAAP net income (loss)
|
$
|
829
|
|
|
$
|
5,231
|
|
|
$
|
(1,718
|
)
|
|
$
|
(176
|
)
|
|
|
|
|
|
|
|
|
||||||||
GAAP earnings (loss) per share
|
$
|
(0.10
|
)
|
|
$
|
(0.05
|
)
|
|
$
|
(0.33
|
)
|
|
$
|
(0.34
|
)
|
Amortization of intangibles
|
0.09
|
|
|
0.09
|
|
|
0.26
|
|
|
0.26
|
|
||||
Stock-based compensation expense
|
0.06
|
|
|
0.06
|
|
|
0.19
|
|
|
0.18
|
|
||||
Aggregate adjustment for income taxes
|
(0.04
|
)
|
|
(0.03
|
)
|
|
(0.15
|
)
|
|
(0.10
|
)
|
||||
Non-GAAP earnings (loss) per share *
|
$
|
0.01
|
|
|
$
|
0.06
|
|
|
$
|
(0.02
|
)
|
|
$
|
—
|
|
* Sum of reconciling items may differ from total due to rounding of individual components
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
||||||||
GAAP net income (loss)
|
$
|
(7,908
|
)
|
|
$
|
(3,735
|
)
|
|
$
|
(26,438
|
)
|
|
$
|
(27,323
|
)
|
Interest and other, net
|
1,257
|
|
|
(1,074
|
)
|
|
(961
|
)
|
|
(2,582
|
)
|
||||
Income tax benefit
|
(3,484
|
)
|
|
(1,770
|
)
|
|
(12,254
|
)
|
|
(8,427
|
)
|
||||
Depreciation and amortization
|
10,869
|
|
|
10,360
|
|
|
32,017
|
|
|
30,872
|
|
||||
Stock-based compensation expense
|
5,092
|
|
|
4,833
|
|
|
15,617
|
|
|
14,475
|
|
||||
Adjusted EBITDA
|
$
|
5,826
|
|
|
$
|
8,614
|
|
|
$
|
7,981
|
|
|
$
|
7,015
|
|
▪
|
Research and Development, or R&D, Expenses. Research and development expenses include compensation and related expenses for the continued development of our solutions offerings, including a portion of expenses related to our threat research team, which focuses on the identification of system vulnerabilities, data forensics and malware analysis. R&D expenses also encompass expenses related to the development of prototypes of new solutions offerings and allocated overhead. Our customer solutions have generally been developed internally. We operate in a competitive and highly technical industry. Therefore, to maintain and extend our technology leadership, we intend to continue to invest in our R&D efforts by hiring more personnel to enhance our existing security solutions and to add complementary solutions.
|
•
|
Sales and Marketing, or S&M, Expenses. Sales and marketing expenses include salaries, sales commissions and performance-based compensation, benefits and related expenses for our S&M personnel, travel and entertainment, marketing and advertising programs (including lead generation), customer advocacy events, and other brand-building expenses, as well as allocated overhead. As we continue to grow our business, both domestically and internationally, we will invest in our sales capability, which will increase our sales and marketing expenses in absolute dollars.
|
▪
|
General and Administrative, or G&A, Expenses. General and administrative expenses include primarily the costs of human resources and recruiting, finance and accounting, legal support, information management and information security systems, facilities management, corporate development and other administrative functions, and are partially offset by allocations of information technology and facilities costs to other functions.
|
|
|
Three Months Ended
|
|||||||||||||||
|
|
November 1, 2019
|
|
|
|
November 2, 2018
|
|||||||||||
|
|
$
|
|
% of
Revenue |
|
%
Change |
|
$
|
|
% of
Revenue |
|||||||
|
|
(in thousands, except percentages)
|
|||||||||||||||
Net revenue
|
|
$
|
141,332
|
|
|
100.0
|
%
|
|
6.2
|
%
|
|
$
|
133,060
|
|
|
100.0
|
%
|
Cost of revenue
|
|
$
|
61,568
|
|
|
43.6
|
%
|
|
(0.9
|
)%
|
|
$
|
62,133
|
|
|
46.7
|
%
|
Total gross margin
|
|
$
|
79,764
|
|
|
56.4
|
%
|
|
12.5
|
%
|
|
$
|
70,927
|
|
|
53.3
|
%
|
Operating expenses
|
|
$
|
89,899
|
|
|
63.6
|
%
|
|
16.0
|
%
|
|
$
|
77,506
|
|
|
58.2
|
%
|
Operating income (loss)
|
|
$
|
(10,135
|
)
|
|
(7.2
|
)%
|
|
54.1
|
%
|
|
$
|
(6,579
|
)
|
|
(4.9
|
)%
|
Net income (loss)
|
|
$
|
(7,908
|
)
|
|
(5.6
|
)%
|
|
111.7
|
%
|
|
$
|
(3,735
|
)
|
|
(2.8
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Other Financial Information (1)
|
|
|
|
|
|
|
|
|
|
|
|||||||
Non-GAAP net revenue
|
|
$
|
141,332
|
|
|
100.0
|
%
|
|
6.2
|
%
|
|
$
|
133,060
|
|
|
100.0
|
%
|
Non-GAAP cost of revenue
|
|
$
|
57,656
|
|
|
40.8
|
%
|
|
(1.4
|
)%
|
|
$
|
58,499
|
|
|
44.0
|
%
|
Non-GAAP gross margin
|
|
$
|
83,676
|
|
|
59.2
|
%
|
|
12.2
|
%
|
|
$
|
74,561
|
|
|
56.0
|
%
|
Non-GAAP operating expenses
|
|
$
|
81,636
|
|
|
57.8
|
%
|
|
17.7
|
%
|
|
$
|
69,373
|
|
|
52.1
|
%
|
Non-GAAP operating income (loss)
|
|
$
|
2,040
|
|
|
1.4
|
%
|
|
(60.7
|
)%
|
|
$
|
5,188
|
|
|
3.9
|
%
|
Non-GAAP net income (loss)
|
|
$
|
829
|
|
|
0.6
|
%
|
|
(84.2
|
)%
|
|
$
|
5,231
|
|
|
3.9
|
%
|
Adjusted EBITDA
|
|
$
|
5,826
|
|
|
4.1
|
%
|
|
(32.4
|
)%
|
|
$
|
8,614
|
|
|
6.5
|
%
|
|
|
Nine Months Ended
|
|||||||||||||||
|
|
November 1, 2019
|
|
|
|
November 2, 2018
|
|||||||||||
|
|
$
|
|
% of
Revenue
|
|
%
Change
|
|
$
|
|
% of
Revenue
|
|||||||
|
|
(in thousands, except percentages)
|
|||||||||||||||
Net revenue
|
|
$
|
410,779
|
|
|
100.0
|
%
|
|
5.9
|
%
|
|
$
|
387,999
|
|
|
100.0
|
%
|
Cost of revenue
|
|
$
|
188,004
|
|
|
45.8
|
%
|
|
1.5
|
%
|
|
$
|
185,211
|
|
|
47.7
|
%
|
Total gross margin
|
|
$
|
222,775
|
|
|
54.2
|
%
|
|
9.9
|
%
|
|
$
|
202,788
|
|
|
52.3
|
%
|
Operating expenses
|
|
$
|
262,428
|
|
|
63.9
|
%
|
|
8.8
|
%
|
|
$
|
241,120
|
|
|
62.1
|
%
|
Operating income (loss)
|
|
$
|
(39,653
|
)
|
|
(9.7
|
)%
|
|
3.4
|
%
|
|
$
|
(38,332
|
)
|
|
(9.9
|
)%
|
Net income (loss)
|
|
$
|
(26,438
|
)
|
|
(6.4
|
)%
|
|
(3.2
|
)%
|
|
$
|
(27,323
|
)
|
|
(7.0
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Other Financial Information (1)
|
|
|
|
|
|
|
|
|
|
|
|||||||
Non-GAAP net revenue
|
|
$
|
410,779
|
|
|
100.0
|
%
|
|
5.9
|
%
|
|
$
|
387,999
|
|
|
100.0
|
%
|
Non-GAAP cost of revenue
|
|
$
|
176,466
|
|
|
43.0
|
%
|
|
1.3
|
%
|
|
$
|
174,212
|
|
|
44.9
|
%
|
Non-GAAP gross margin
|
|
$
|
234,313
|
|
|
57.0
|
%
|
|
9.6
|
%
|
|
$
|
213,787
|
|
|
55.1
|
%
|
Non-GAAP operating expenses
|
|
$
|
237,249
|
|
|
57.8
|
%
|
|
9.4
|
%
|
|
$
|
216,842
|
|
|
55.9
|
%
|
Non-GAAP operating loss
|
|
$
|
(2,936
|
)
|
|
(0.7
|
)%
|
|
(3.9
|
)%
|
|
$
|
(3,055
|
)
|
|
(0.8
|
)%
|
Non-GAAP net loss
|
|
$
|
(1,718
|
)
|
|
(0.4
|
)%
|
|
876.1
|
%
|
|
$
|
(176
|
)
|
|
—
|
%
|
Adjusted EBITDA
|
|
$
|
7,981
|
|
|
1.9
|
%
|
|
13.8
|
%
|
|
$
|
7,015
|
|
|
1.8
|
%
|
(1)
|
See "Non-GAAP Financial Measures" and "Reconciliation of Non-GAAP Financial Measures" for more information about these non-GAAP financial measures, including our reasons for including the measures, material limitations with respect to the usefulness of the measures, and a reconciliation of each non-GAAP financial measure to the most directly comparable GAAP financial measure. Non-GAAP financial measures as a percentage of revenue are calculated based on non-GAAP revenue.
|
|
Three Months Ended
|
|||||||||||||||
|
November 1, 2019
|
|
|
|
November 2, 2018
|
|||||||||||
|
Dollars
|
|
% of
Revenue |
|
%
Change |
|
Dollars
|
|
% of
Revenue |
|||||||
|
(in thousands, except percentages)
|
|||||||||||||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Research and development
|
$
|
24,095
|
|
|
17.0
|
%
|
|
14.1
|
%
|
|
$
|
21,114
|
|
|
15.9
|
%
|
Sales and marketing
|
40,726
|
|
|
28.8
|
%
|
|
17.1
|
%
|
|
34,773
|
|
|
26.1
|
%
|
||
General and administrative
|
25,078
|
|
|
17.7
|
%
|
|
16.0
|
%
|
|
21,619
|
|
|
16.2
|
%
|
||
Total operating expenses
|
$
|
89,899
|
|
|
63.6
|
%
|
|
16.0
|
%
|
|
$
|
77,506
|
|
|
58.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|||||||
Other Financial Information
|
|
|
|
|
|
|
|
|
|
|||||||
Non-GAAP research and development
|
$
|
23,099
|
|
|
16.3
|
%
|
|
14.5
|
%
|
|
$
|
20,181
|
|
|
15.2
|
%
|
Non-GAAP sales and marketing
|
40,035
|
|
|
28.3
|
%
|
|
17.8
|
%
|
|
33,973
|
|
|
25.5
|
%
|
||
Non-GAAP general and administrative
|
18,502
|
|
|
13.1
|
%
|
|
21.6
|
%
|
|
15,219
|
|
|
11.4
|
%
|
||
Non-GAAP operating expenses (1)
|
$
|
81,636
|
|
|
57.8
|
%
|
|
17.7
|
%
|
|
$
|
69,373
|
|
|
52.1
|
%
|
|
Nine Months Ended
|
|||||||||||||||
|
November 1, 2019
|
|
|
|
November 2, 2018
|
|||||||||||
|
Dollars
|
|
% of
Revenue
|
|
%
Change
|
|
Dollars
|
|
% of
Revenue
|
|||||||
|
(in thousands, except percentages)
|
|||||||||||||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Research and development
|
$
|
71,600
|
|
|
17.4
|
%
|
|
8.6
|
%
|
|
$
|
65,921
|
|
|
17.0
|
%
|
Sales and marketing
|
116,966
|
|
|
28.5
|
%
|
|
10.4
|
%
|
|
105,964
|
|
|
27.3
|
%
|
||
General and administrative
|
73,862
|
|
|
18.0
|
%
|
|
6.7
|
%
|
|
69,235
|
|
|
17.8
|
%
|
||
Total operating expenses
|
$
|
262,428
|
|
|
63.9
|
%
|
|
8.8
|
%
|
|
$
|
241,120
|
|
|
62.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|||||||
Other Financial Information
|
|
|
|
|
|
|
|
|
|
|||||||
Non-GAAP research and development
|
$
|
68,443
|
|
|
16.7
|
%
|
|
8.7
|
%
|
|
$
|
62,951
|
|
|
16.2
|
%
|
Non-GAAP sales and marketing
|
114,577
|
|
|
27.9
|
%
|
|
10.4
|
%
|
|
103,823
|
|
|
26.8
|
%
|
||
Non-GAAP general and administrative
|
54,229
|
|
|
13.2
|
%
|
|
8.3
|
%
|
|
50,068
|
|
|
12.9
|
%
|
||
Non-GAAP operating expenses (1)
|
$
|
237,249
|
|
|
57.8
|
%
|
|
9.4
|
%
|
|
$
|
216,842
|
|
|
55.9
|
%
|
(1)
|
See "Non-GAAP Financial Measures" and "Reconciliation of Non-GAAP Financial Measures" for a reconciliation of each non-GAAP financial measure to the most directly comparable GAAP financial measure.
|
|
November 1,
2019 |
|
February 1, 2019
|
||||
|
(in thousands)
|
||||||
|
|
|
|
|
|||
Cash and cash equivalents
|
$
|
138,788
|
|
|
$
|
129,592
|
|
Accounts receivable, net
|
$
|
118,396
|
|
|
$
|
141,344
|
|
|
|
Nine Months Ended
|
||||||
|
|
November 1, 2019
|
|
November 2, 2018
|
||||
|
|
(in thousands)
|
||||||
Net change in cash from:
|
|
|
|
|
|
|
||
Operating activities
|
|
$
|
35,852
|
|
|
$
|
26,039
|
|
Investing activities
|
|
(12,082
|
)
|
|
(6,974
|
)
|
||
Financing activities
|
|
(14,574
|
)
|
|
(4,825
|
)
|
||
Change in cash and cash equivalents
|
|
$
|
9,196
|
|
|
$
|
14,240
|
|
Exhibit No.
|
|
Description
|
10.1
|
|
|
10.2*
|
|
|
10.3**
|
|
|
31.1
|
|
|
31.2
|
|
|
32.1
|
|
|
101.INS
|
|
XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document.
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document.
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document.
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document.
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document.
|
|
|
|
|
SecureWorks Corp.
|
|
|
|
|
|
By:
|
/s/ R. Wayne Jackson
|
|
|
R. Wayne Jackson
|
|
|
Chief Financial Officer
|
|
|
(Duly Authorized Officer)
|
1.
|
INCORPORATED DEFINITIONS. Unless specifically stated otherwise in this Amendment, all terms defined in the Reseller Agreement shall have the same meaning when used in this Amendment.
|
2.
|
CHANGES TO AMENDMENT NO. 1: The parties agree to add the following provision as Section 2.l. of Amendment No. 1:
|
Dell, Inc.(“Reseller”)
|
SecureWorks, Inc. (“Spyglass”)
|
By: /s/ Kyle Beam
|
By: /s/ R. Wayne Jackson
|
Name: Kyle Beam
|
Name: R. Wayne Jackson
|
Title: Sr. Manager
|
Title: CFO
|
Date: October 1, 2019
|
Date: October 1, 2019
|
1)
|
INCORPORATED DEFINITIONS. Unless specifically stated otherwise in this Amendment, all terms defined in the Reseller Agreement shall have the same meaning when used in this Amendment.
|
2)
|
CHANGES TO RESELLER AGREEMENT. The parties agree to make the following changes to the Reseller Agreement in respect of sales of Cloud Services only to Clients:
|
a)
|
Services. The Cloud Services set forth in Schedule A hereto shall be deemed “Services” for purposes of the Reseller Agreement. Schedule A may be amended by mutual agreement of the Parties.
|
b)
|
Provisioning API. The parties shall work together in good faith to complete a provisioning API process within six (6) months of the Amendment Effective Date.
|
c)
|
Pricing for Cloud Services. Section 1.1.1 of the Reseller Agreement is modified by deleting the following provision: “Spyglass will invoice Reseller an amount equal to Reseller’s Services-related invoiced revenue, net of credit memos and write-offs of uncollectible accounts receivable, less [***] percent.”
|
d)
|
Order Submission. The first two sentences of Section 1.4 of the Reseller Agreement are amended and restated as follows: “Reseller shall provide Spyglass with a service order. Specifically, each service order will set forth the name of each Client, Client’s address and the applicable Products (as defined below) purchased, email address, and unique order identifier that is made available to Client.”
|
e)
|
Provisioning. Reseller shall make the Cloud Service available to Clients at the time the Reseller hardware is invoiced to Client; where “make available” means providing the Client with the ability to: (i) activate the Cloud Service or (ii) contact Reseller in order to activate the Cloud Service. For the avoidance of doubt the term of the Client’s license to the Cloud Service shall begin on the date of Reseller’s invoice to Client regardless of the Client’s Cloud Service activation date. If Reseller fails to make the Cloud Service available within 2 business days of hardware invoice and a Client requests a credit for the gap in service between invoice and provisioning resulting from the delay, Spyglass shall not be liable to repay Reseller for the aforementioned credit.
|
f)
|
Client Agreements. Section 3.1 of the Reseller Agreement is modified by deleting the first two sentences of Section 3.1 and replacing them with the following: “All sales of the Services by Reseller to Clients will be subject to the terms and conditions set forth at https://www.secureworks.com/eula/eula-us, as updated by Spyglass from time to time, are collectively referred to as the “Flow Through Terms”). It is Reseller’s responsibility to ensure that the Flow Through Terms are incorporated into Reseller’s purchase agreement or other purchase documentation, whether or not signed, with the Client (the “Client Agreement” or “Customer Agreement”) in a way that is legally binding. Only the terms of the applicable Flow Through Terms will govern a Client’s use of the Services, and, unless otherwise mutually agreed by the Parties, any additional or conflicting terms in an agreement between Reseller and Client are Reseller’s responsibility.”
|
g)
|
Sections 3.1 and 7.3 of the Reseller Agreement are modified by adding the following as the last sentences to each section: “Notwithstanding anything to the contrary in the Reseller Agreement, (a) Spyglass acknowledges and agrees that Reseller has no obligation to flow-through Spyglass terms and conditions to Clients who are public and/or educational institutions (including but not limited to federal customers) located within the United States (such clients referred to in this Amendment as "Public Clients"), and (b) Spyglass agrees that the terms and conditions of the applicable agreement between Reseller and a Public Client (such agreements referred to in this Amendment as “Public Client Contracts”) shall govern the Spyglass Services resold or delivered to a Public Client, so long as Spyglass has agreed to abide by the terms of the applicable Public Client Contract(s), and except to the extent that the Public Client Contract is modified by the written agreement of Spyglass and the applicable Public Client. In the event of a conflict between the terms and conditions of the Reseller Agreement and the Public Client Contract, the terms and conditions of the Public Client Contract shall govern with regard to Spyglass Services resold or delivered to a Public Client, so long as Spyglass has agreed to abide by the terms of the applicable Public Client Contract(s).”
|
h)
|
Section 4.0 of the Reseller Agreement is modified by adding the following new provision as Section 4.3: “4.3 Spyglass Obligations for Public Client Contracts. So long as Spyglass has agreed to abide by the terms of the applicable Public Client Contract(s), Spyglass agrees that it is solely responsible to provide all of Spyglass Services and other obligations specified in any proposal, service order, statement of work or other similar documentation in connection with a Public Client Contract, in each case pursuant to the terms and conditions of the applicable Public Client Contract, notwithstanding anything to the contrary in the Reseller Agreement, and Reseller is solely responsible for invoicing the Public Client. Additionally and notwithstanding anything to the contrary in the Reseller Agreement, each party agrees that it shall: (a) provide the other party with all proposals service orders, statements of work or other similar documentation which it negotiates or provides to/with a Public Client, and (b) work cooperatively with the other party to address any reporting, administrative fees and other obligations required under the Public Client Contract in connection with Spyglass' Services.
|
i)
|
Payment Terms. The first sentence of Section 7.1 of the Reseller Agreement is modified by the addition of the following underlined wording: “Spyglass will invoice Reseller on a monthly basis for fees related to the Services as set forth on Schedule B and one-time fees for installation, shipping and activation of Services and/or Equipment (on the first monthly invoice only) provided under this Agreement.”
|
j)
|
Reporting. Section 1 of the Reseller Agreement is modified for sales of Cloud Services only by adding the following new provision as Section 1.5:
|
i.
|
“Reporting. Reseller shall provide the following reports to Spyglass for sales associated with Solutions listed in Schedule A to this Amendment (as the same may be amended):
|
•
|
For all orders, Reseller shall provide regular reports for reporting and invoicing purposes. Reports will include order-level detail including order number or unique order identifier, order date, order status, invoice number, customer ID, SKU, SKU quantity, product attribute and contact information in addition to term length information.
|
k)
|
Reseller Indemnification Obligations. Section 13.2 of the Reseller Agreement is modified for sales of Cloud Services only by replacing Section 13.2 in its entirety with the following:
|
l)
|
Spyglass Indemnification Obligation. Section 13.3 of the Reseller Agreement is modified for sales of Cloud Services only by adding the following new provision as the last sentence:
|
m)
|
Limitation of Liability. Section 14 of the Reseller Agreement is modified for sales of Cloud Services only by replacing Section 14 in its entirety with the following:
|
1.
|
Cash Severance Benefits - Severance Pay. If an Eligible Executive signs and does not revoke a Separation Agreement and Release, he or she will be eligible to receive Severance Pay in the amount equal to twelve (12) months of Base Salary. This payment will not include 401(k) or any other benefits-related deductions. However, all applicable taxes will be withheld.
|
2.
|
Additional Severance Benefits - COBRA Benefits Payment Coverage. If an Eligible Executive signs and does not revoke a Separation Agreement and Release and he or she enrolls in COBRA coverage, the Company will pay the first twelve (12) months of the Eligible Executive’s COBRA premiums.
|
3.
|
Additional Severance Benefits - Short-Term Incentive Plan Payments. If an Eligible Executive signs and does not revoke a Separation Agreement and Release and such Eligible Executive is participating in the SecureWorks Corp. Incentive Bonus Plan (or any other predecessor or successor plan of the Company or any of its affiliates under which the Eligible Executive is entitled to receive a short-term incentive payment) on his or her Separation Date, the Eligible Executive will receive an additional Severance Benefit equal to a prorated award payout. This payout amount will be calculated using:
|
•
|
A payout modifier of 75%.
|
•
|
A proration factor based on the number of days in the fiscal year that the Eligible Executive was employed by the Company, Dell, and their subsidiaries or affiliates through his or her Separation Date.
|
•
|
The Eligible Executive’s Base Salary on his or her Separation Date.
|
•
|
The plan target for the Eligible Executive’s grade.
|
•
|
Assumed corporate performance and individual modifiers of 100%.
|
4.
|
Additional Severance Benefits - Long-Term Incentive Plan Payments. If an Eligible Executive signs and does not revoke a Separation Agreement and Release and such Eligible Executive holds unvested long-term incentive grants which are due to vest within ninety (90) days following his or her Separation Date, such Eligible Executive will receive an additional Severance Benefit equal to a prorated portion of the value of such grants. This payout amount will be calculated using the following calculation formula as applicable:
|
•
|
Stock Options: 75% TIMES number of options due to vest within ninety (90) days after the Eligible Executive’s Separation Date TIMES (the Company’s average closing price for the week prior to the week of the Eligible Executive’s Separation Date MINUS the option exercise price). If this value is negative, it will be excluded from the payment calculation.
|
•
|
Restricted (and Performance Based) Stock Units: 75% TIMES number of units due to vest within ninety (90) days after the Eligible Executive’s Separation Date TIMES the Company’s average closing price for the week prior to the week of the Eligible Executive’s Separation Date.
|
•
|
Long-Term Cash: 75% TIMES value of cash due to vest within ninety (90) days after the Eligible Executive’s Separation Date.
|
5.
|
Additional Severance Benefits - Outplacement Benefits. If an Eligible Executive signs and does not revoke a Separation Agreement and Release, such Eligible Executive will receive six (6) months of executive outplacement services, provided the Eligible Executive commences use of such benefits within sixty (60) days following his or her Separation Date.
|
1.
|
I have reviewed this quarterly report on Form 10-Q of SecureWorks Corp.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
December 5, 2019
|
|
/s/ Michael R. Cote
|
|
|
Michael R. Cote
|
|
|
President and Chief Executive Officer
|
1.
|
I have reviewed this quarterly report on Form 10-Q of SecureWorks Corp.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
December 5, 2019
|
|
/s/ R. Wayne Jackson
|
|
|
R. Wayne Jackson
|
|
|
Chief Financial Officer
|
1.
|
The quarterly report on Form 10-Q of the Company for the quarter ended November 1, 2019 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
2.
|
The information contained in such quarterly report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
Date:
|
December 5, 2019
|
|
/s/ Michael R. Cote
|
|
|
|
Michael R. Cote
|
|
|
|
President and Chief Executive Officer
|
Date:
|
December 5, 2019
|
|
/s/ R. Wayne Jackson
|
|
|
|
R. Wayne Jackson
|
|
|
|
Chief Financial Officer
|