(Mark One)
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended
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January 31, 2020
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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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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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Accelerated filer
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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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prevent security breaches by fortifying their cyber defenses,
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detect malicious activity,
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respond rapidly to security breaches, and
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predict emerging threats.
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maintain and extend our technology leadership,
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expand and diversify our customer base,
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deepen our existing customer relationships, and
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attract and retain top talent.
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Managed security, through which we provide our customers global visibility and insight into malicious activity enabling them to detect and effectively remediate threats quickly
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Threat intelligence, through which we deliver early warnings of vulnerabilities and threats, along with actionable information to help prevent any adverse impact
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Security and risk consulting, through which we advise our customers on a variety of security and risk-related matters, such as how to design and build strategic security programs, assess and test security capabilities and meet regulatory requirements
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Incident response, through which we help our customers minimize the impact and duration of security breaches through proactive customer preparation, rapid containment and thorough event analysis followed by effective remediation
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Counter Threat Appliance. Our Counter Threat Appliance performs several of the important functions of the Counter Threat Platform. The Counter Threat Appliance is a server that facilitates secure non-intrusive communications of security information used to provide managed security solutions, while our platform enriches data with our intimate knowledge of threats and customer specific intelligence to detect security incidents. A Counter Threat Appliance may be physical or virtual, which refers to the manner by which our technology is deployed to transmit information: “physical” being through the provisioning of a physical Company-owned server to a customer’s site, and “virtual” being through the use of the existing customer infrastructure and residing and operating in a customer’s virtual environment or platform. This technology supports a wide range of security and network devices, applications and endpoints to collect information on the customer environment, perform analytics and report to our counter threat operations centers.
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Foresee. Foresee, our behavioral and self-learning technology, identifies malicious events through the use of machine learning algorithms to determine the probability and confidence that a particular event or a collection of events is malicious. Foresee learns which events are malicious or non-malicious based on ongoing feedback from our certified security analysts and applies machine-learning analysis techniques for the discovery of previously unknown threats.
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Multi-Purpose Logic Engine. Our Multi-Purpose Logic Engine is an analytics engine that leverages our broad visibility into the global threat environment and applied intelligence from the Counter Threat Unit to identify security incidents of interest. The engine intelligently analyzes billions of events into actionable information, providing
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Very Large Database. Our Very Large Database efficiently and cost-effectively collects, correlates, analyzes and stores billions of structured and unstructured data elements, which help us to identify new security threats, provide valuable context to our security analysts and customers and enable Counter Threat Unit researchers to perform historical threat analysis.
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•
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Threat Intelligence Management System, or TIMS. We manage structured and unstructured data in TIMS. TIMS collects, correlates and analyzes billions of data points to catalogue threat actors and generate threat indicators applied to the Counter Threat Platform and across our solutions. The data points are sourced from our managed security solutions, malware, social media, honeypots (or traps set to detect or counteract attempts at unauthorized use of information systems), open source intelligence, hunting and incident response engagements, strategic relationships and priority research.
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Catalog for Artifact and Signal Extraction, or CASE. CASE is a repository and a set of tools for the dynamic analysis of malware to catalogue its behaviors and generate threat indicators. CASE feeds into TIMS threat indicators identified from the analysis of malware.
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Attacker Database. Our Counter Threat Unit research team maintains a patented process for generating a proprietary Attacker Database that contains machine readable threat intelligence we apply to the Counter Threat Platform, iSensorTM, Red CloakTM Advanced Endpoint Threat Detection and third-party security controls.
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Portal. Powered by integrated intelligence and analytics tools, the portal delivers near real time information to customer executives, managers and security professionals and provides insights that help customers make better security decisions. It also facilitates near real time communication between customers and our security analysts, measures the effectiveness of a customer’s security profile using asset-based and risk-weighted analyses, supports regulatory compliance requirements, links threat intelligence from our Counter Threat Unit and enables a visualization of point-in-time, comparative and historical security trends across multiple security metrics. Our portal is accessible via web and mobile applications as well as via customer applications that leverage our application programming interfaces.
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Threat Analysis Platform. We present threat information to our certified security analysts in a graphical user interface. This interface supports the delivery of high-quality security analysis of threats targeting or occurring within a customer’s environment. Visualization enables our security analysts to detect patterns and to determine in near real time relationships of security incidents within a customer environment and across our entire customer base. Our security analysts have access to all data collected from customer environments and human readable threat intelligence from our Counter Threat Unit to provide them with the context necessary to inform their analysis and to help them determine whether they should communicate information about a security incident to a customer.
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Ticket Management. Our ticket management system is based on Information Technology Infrastructure Library principles and delivers security monitoring and device management solutions to customers. A sophisticated and configurable workflow provides incident, change and problem management in a leveraged-service delivery model to enable our counter threat operations centers t o handle a higher volume of work with consistent quality.
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Management and Monitoring Tools. To effectively manage and monitor our infrastructure at customer sites and our data centers, we rely on a suite of purpose-built software applications to facilitate the full lifecycle management of all software and configuration deployments and updates, efficient management and troubleshooting, and monitoring of the health and availability of devices.
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iSensor. Many of our customers use our proprietary network intrusion detection and prevention appliance, the iSensor. The iSensor eliminates malicious inbound and outbound traffic in near real time by performing in-line deep packet inspection (which is an examination of packet data as the data passes through the device for signs of malware, intrusions or other threats) and by applying countermeasures from the Counter Threat Unit.
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Red Cloak. Advanced Endpoint Threat Detection software, allows us to apply our threat intelligence and advanced analytics to the endpoint to reduce the amount of time required to detect a compromise of security and reduce the
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Third-Party Technologies. Our technology-driven information security solutions are designed to monitor alerts, logs and other messages across multiple stages of the threat lifecycle. In addition to security monitoring, we offer device management for many leading security platforms. In deploying these solutions, we integrate a wide array of proprietary and third-party security products. Our technology supports firewalls from market-leading vendors, including, but not limited to, Cisco Systems, Inc., Palo Alto Networks, Inc., Check Point Software Technologies Ltd., Juniper Networks, Inc., Fortinet, Inc. and SonicWall, Inc. In addition, we also support intrusion prevention systems from vendors such as Intel Corporation (McAfee), and web application firewalls from vendors such as Imperva, Inc., F5 Networks, Inc. and Citrix Systems, Inc.
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Red Cloak TDR analyzes activity from endpoint, network and cloud while reducing the number of false positives security professionals face. It detects advanced threats by correlating information from a variety of sources and threat intelligence feeds, integrating Secureworks’ knowledge of threat actor behaviors, and applying machine learning to provide much-needed context about the threat. Red Cloak TDR builds trust in security alerts and frees security teams to focus on threats that matter.
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Designed around Secureworks’ defense in concert methodology, Red Cloak TDR unifies security environments and analyzes all relevant signals in one place. Users gain additional context so they can quickly and accurately judge the implications of each event.
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By seamlessly working on investigations together, teams can quickly reach conclusions with confidence. The built-in chat feature can be used right from the user interface during an investigation to get expert help based upon years of experience hunting, analyzing and defending against threats.
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The application allows for a quick, accurate, software-driven response that gives users the ability to automate the right action.
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Because Red Cloak TDR is a cloud-based SaaS application, companies would not have the burden of installing on-premises hardware or maintaining software version upgrades. Updates, backups and tuning are provided through the broader solution.
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Red Cloak TDR does not charge by data consumption, so subscribers are free to process the security-relevant data they need to keep their organization safe.
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Onboarding is quick and easy because the application is designed to easily integrate into an organization’s current control framework.
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Cisco (Sourcefire) – network security
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CrowdStrike – endpoint security
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Lastline – malware detection and protection
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Microsoft Defender – spyware and malware protection
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Qualys – vulnerability management
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TIBCO (LogLogic) – log management
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VMware Carbon Black – endpoint security
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Managed Vulnerability Scanning. A vulnerability scan is designed to alert an organization to potential exposures and vulnerabilities in its network. As part of our solution, we perform internal and external scan audits across network devices, servers, databases and other assets in on-premises and cloud environments.
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Managed Web Application Scanning. Applications that deliver services via the web are the lifeblood of business-to-business and business-to-consumer e-commerce. A vulnerability scan can alert an organization to potential exposures and weaknesses in these web-based applications before a threat actor exploits those weaknesses. Our managed web application scanning solution performs deep and accurate scans of web applications that are hosted on customer premises or in cloud environments. These scans search for vulnerabilities specific to the web protocols that are foundational to web applications. Our solution also supports the ability to log into web applications and discover vulnerabilities that may lie behind the login page.
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Press and industry analyst relations to build third-party validation and generate positive coverage for our company and our solutions;
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Events, trade shows and industry events, to create customer and prospect awareness;
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Leveraging our proprietary research through content marketing and engagement on social channels like Twitter, LinkedIn and Facebook and on our own blogs;
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Search engine marketing and advertising to drive traffic to our website;
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Website development to engage and educate prospects and generate interest through product information and demonstrations, case studies, white papers, blog posts and marketing collateral;
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Multi-channel marketing campaigns;
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Customer testimonials and references; and
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Sales tools and field marketing events to enable our sales organization to more effectively convert leads into customers.
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global telecommunications and network services providers such as AT&T Inc., BT Group plc, Verizon Communications Inc. and NTT Communications Corp.;
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providers of specialized or niche IT security products and services such as FireEye, Inc., and Palo Alto Networks, Inc.;
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diversified technology companies such as Cisco Systems, Inc., Hewlett Packard Enterprise Company, International Business Machines Corporation and Intel Corporation; and
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regional information security services providers that compete in the small and medium-sized businesses market with some of the features present in our information security solutions.
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global visibility into the threat landscape;
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ability to generate actionable intelligence based on historical data and emerging threats;
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scalability and overall performance of platform technologies;
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ability to integrate with, monitor and manage a variety of third-party products;
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ability to provide a flexible deployment option to cater to specific customer needs;
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ability to attract and retain high-quality professional staff with information security expertise;
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brand awareness and reputation;
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strength of sales and marketing efforts;
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cost effectiveness;
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customer service and support; and
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breadth and richness of threat intelligence, including history of data collection and diversity and geographic scope of customers.
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Name
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Age
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Position
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Michael R. Cote
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59
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President and Chief Executive Officer
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Paul M. Parrish
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58
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Senior Vice President, Chief Financial Officer and Principal Accounting Officer
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the establishment by organizations of increasingly complex IT networks that often include a combination of on-premise, cloud and hybrid environments;
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the rapid growth of smart phones, tablets and other mobile devices and the “bring your own device” trend in enterprises;
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action by hackers and other threat actors seeking to compromise secure systems;
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evolving computer hardware and software standards and capabilities;
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changing customer requirements for information technology; and
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introductions of new products and services or enhancements to existing products and services by our competitors.
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delays in our introduction of new, enhanced or modified solutions that address and respond to innovations in computer technology and customer requirements;
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defects, errors or failures in any of our solutions or delivery of our solutions;
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any inability by us to integrate our solutions with the security and network technologies used by our current and prospective customers;
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any failure by us to anticipate, address and respond to new and increasingly sophisticated security threats or techniques used by hackers and other threat actors;
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negative publicity about the performance or effectiveness of our solutions; and
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disruptions or delays in the availability and delivery of our solutions.
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our ability to increase sales to existing customers and to renew contracts with our customers;
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delays in deployment of solutions under our customer contracts;
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our ability to attract new customers;
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interruptions or service outages in our data centers, cloud providers and other technical infrastructure, other technical difficulties or security breaches;
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customer budgeting cycles, seasonal buying patterns and purchasing practices;
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changes in our pricing policies or those of our competitors;
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fluctuations in the demand for our information security solutions and in the growth rate of the information security market generally;
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the level of awareness of IT security threats and the market adoption of information security solutions;
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the timing of the recognition of revenue and related expenses;
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our ability to expand our direct sales force and our strategic and distribution relationships;
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our ability to develop in a timely manner new and enhanced information security solutions and technologies that meet customer needs;
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our ability to retain, hire and train key personnel, including sales personnel, security analysts, security consultants and members of our security research team;
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fluctuations in available cash flow from prepayments for our solutions;
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changes in the competitive dynamics of our market, including the launch of new products and services by our competitors;
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the effectiveness and efficiency of in-house information security solutions;
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our ability to control costs, including our operating and capital expenses;
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our ability to keep our proprietary technologies current;
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any failure of or technical issues affecting a significant number of our appliances or software;
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adverse litigation judgments, settlements or other litigation-related costs;
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costs related to the acquisition of businesses, talent, technologies or intellectual property, including potentially significant amortization costs and possible write-downs;
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stock-based compensation expense associated with attracting and retaining personnel; and
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general economic conditions, geopolitical events and natural catastrophes and public health issues, including the novel strain of coronavirus, COVID-19, which began spreading globally in early 2020.
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the time, resources and expense required for localization of our solutions, including translation of our Internet-based portal interface into other languages, provision of customer support in other languages and creation of localized agreements;
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the burdens of complying with a wide variety of international laws, regulations and legal standards, including local data privacy laws, local consumer protection laws that could regulate permitted pricing and promotion practices, and restrictions on the use, import or export of encryption technologies;
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longer accounts receivable payment cycles and difficulties in collecting accounts receivable;
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fluctuations in currency exchange rates;
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tariffs and trade barriers and other regulatory or contractual limitations on our ability to sell or develop our solutions in some international markets;
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difficulties in managing and staffing international operations;
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compliance with U.S. laws that apply to operations outside of the United States, including the Foreign Corrupt Practices Act, or FCPA, the Trading with the Enemy Act and regulations of the Office of Foreign Assets Control;
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potentially adverse tax consequences and compliance costs resulting from the complexities of international tax systems and overlap of different tax regimes;
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reduced or varied protection of intellectual property rights in some countries that could expose us to increased risk of infringement of our patents and other intellectual property;
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global disruptions in custom spending patterns or our ability to provide service to our customers as a result of any widespread public health issues, including a pandemic such as COVID-19; and
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political, social and economic instability, terrorist attacks and security concerns in general.
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expenditure of significant financial and development resources in efforts to analyze, correct, eliminate or work around the cause of any related vulnerabilities;
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loss of existing or potential customers or channel partners;
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delayed or lost revenue;
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extension of service credits to affected customers, which would reduce our revenue;
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failure to attain or retain market acceptance of our solutions; and
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litigation, regulatory inquiries or investigations that may be costly and harm our reputation.
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involve our entry into geographic or business markets in which we have little or no experience;
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create difficulties in retaining the customers of any acquired business;
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result in a delay or reduction of customer sales for both us and the company we acquire because of customer uncertainty about the continuity and effectiveness of solutions offered by either company; and
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disrupt our existing business by diverting resources and significant management attention that otherwise would be focused on developing our existing business.
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expose us to unexpected liabilities;
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require us to incur charges and substantial indebtedness or liabilities;
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have adverse tax consequences;
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result in acquired in-process research and development expenses, or in the future require the amortization, write-down or impairment of amounts related to deferred compensation, goodwill and other intangible assets; or
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fail to generate a financial return sufficient to offset acquisition costs.
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the election and removal of our directors;
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amendments to our certificate of incorporation;
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determinations with respect to mergers, business combinations, dispositions of assets or other extraordinary corporate transactions; and
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agreements that may adversely affect us.
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actual or anticipated variations in our quarterly or annual results of operations;
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tax, employee benefit, indemnification and other matters arising from our relationship with Dell;
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employee retention and recruiting;
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business combinations involving us;
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our ability to engage in activities with certain channel, technology or other marketing partners;
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sales or dispositions by Dell Technologies of all or any portion of its beneficial ownership interest in us;
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the nature, quality and pricing of services Dell has agreed to provide us;
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business opportunities that may be attractive to both Dell and us;
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Dell’s ability to use and sublicense patents that we have licensed to Dell under a patent license agreement; and
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product or technology development or marketing activities that may require consent of Dell or Dell Technologies.
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engaging in the same or similar activities or lines of business as those in which we are engaged;
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doing business with any of our customers, customers or vendors; or
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employing, or otherwise engaging or soliciting for such purpose, any of our officers, directors or employees.
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announcements of new products, services or technologies, commercial relationships, acquisitions or other events by us or our competitors;
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changes in how customers perceive the effectiveness of our solutions in protecting against advanced cyber attacks;
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actual or anticipated variations in our quarterly or annual results of operations;
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changes in our financial guidance or estimates by securities analysts;
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price and volume fluctuations in the overall stock market from time to time;
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significant volatility in the market price and trading volume of technology companies in general and of companies in the information security industry in particular;
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actual or anticipated changes in the expectations of investors or securities analysts;
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fluctuations in the trading volume of our shares or the size of the trading market for our shares held by non-affiliates;
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litigation involving us, our industry, or both, including disputes or other developments relating to our ability to patent our processes and technologies and protect our other proprietary rights;
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regulatory developments in the United States and other jurisdictions in which we operate;
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general economic and political factors, including market conditions in our industry or the industries of our customers;
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major catastrophic events;
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sales of large blocks of our Class A common stock; and
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additions or departures of key employees.
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a board of directors having a majority of independent directors;
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a compensation committee composed entirely of independent directors that approves the compensation payable to the company’s chief executive officer and other executive officers; and
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a nominating committee composed entirely of independent directors that nominates candidates for election to the board of directors, or that recommends such candidates for nomination by the board of directors (or obligating the listed company to cause a majority of the board’s independent directors to exercise this oversight of director nominations).
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provide that our Class B common stock is entitled to ten votes per share, while our Class A common stock is entitled to one vote per share, enabling Dell Technologies, as the beneficial owner of all outstanding shares of our Class B common stock, to control the outcome of all matters submitted to a vote of our stockholders, including the election of directors, in which holders of the Class B common stock are entitled to vote;
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provide for the classification of the board of directors into three classes, with approximately one-third of the directors to be elected each year;
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limit the number of directors constituting the entire board of directors to a maximum of 15 directors, subject to the rights of the holders of any outstanding series of preferred stock, and provide that the authorized number of directors at any time will be fixed exclusively by a resolution adopted by the affirmative vote of the authorized number of directors (without regard to vacancies);
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provide that, at such time (if any) as the Dell Technologies Entities beneficially own capital stock representing less than 40% in voting power of the capital stock entitled to vote generally on the election of directors, any newly-created directorship and any vacancy on the board of directors may be filled only by the affirmative vote of a majority of the remaining directors then in office;
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provide that, at such time (if any) as the Dell Technologies Entities beneficially own capital stock representing less than 50% in voting power of the capital stock entitled to vote generally on the election of directors, directors may be removed only for cause and only by the affirmative vote of the holders of at least a majority in voting power of all outstanding shares of capital stock, voting together as a single class;
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provide that a special meeting of stockholders may be called only by our chairman of the board, a majority of the directors then in office or, so long as Dell Technologies Entities beneficially own capital stock representing at least 40% in voting power of the capital stock entitled to vote generally on the election of directors, Dell Technologies;
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provide that, at such time (if any) as the Dell Technologies Entities beneficially own capital stock representing less than 50% in voting power of the capital stock entitled to vote generally on the election of directors, any action required or permitted to be taken by our stockholders at any annual or special meeting may not be effected by a written consent in lieu of a meeting unless such action and the taking of such action by written consent have been approved in advance by our board of directors;
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establish advance notice procedures for stockholders to make nominations of candidates for election as directors or to present any other business for consideration at any annual or special stockholder meeting; and
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provide authority for the board of directors without stockholder approval to authorize the issuance of up to 200,000,000 shares of preferred stock, in one or more series, with terms and conditions, and having rights, privileges and preferences, to be determined by the board of directors.
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any derivative action or proceeding brought on our behalf;
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any action asserting a claim of breach of a fiduciary duty owed by, or other wrongdoing by, any of our directors, officers or other employees, or stockholders to us or our stockholders;
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any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law or as to which the Delaware General Corporation Law confers jurisdiction on the Court of Chancery of the State of Delaware; and
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any action asserting a claim governed by the internal affairs doctrine.
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provide an exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting under the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act;
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permit us to include reduced disclosure regarding executive compensation in our SEC filings; and
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provide an exemption from the requirement to hold a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute arrangements not previously approved.
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Period
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Total Number of Shares Purchased
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Average Price Paid per Share
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Total Number of Shares Purchased as Part of Publicly Announced Programs
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Dollar Value of Shares that May Yet Be Purchased Under Publicly Announced Programs
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||||||
November 2, 2019 through November 29, 2019
|
—
|
|
$
|
—
|
|
—
|
|
10,090,036
|
|
|
November 30, 2019 through December 27, 2019
|
—
|
|
—
|
|
—
|
|
10,090,036
|
|
||
December 28, 2019 through January 31, 2020
|
—
|
|
—
|
|
—
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|
10,090,036
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|
||
Total
|
—
|
|
$
|
—
|
|
—
|
|
$
|
10,090,036
|
|
|
|
April 22, 2016
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|
February 3, 2017
|
|
February 2, 2018
|
|
February 1, 2019
|
|
January 31, 2020
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||||||||||
Secureworks
|
|
$
|
100.00
|
|
|
$
|
75.64
|
|
|
$
|
67.43
|
|
|
$
|
165.07
|
|
|
$
|
112.36
|
|
NASDAQ Composite
|
|
100.00
|
|
|
115.50
|
|
|
147.59
|
|
|
148.05
|
|
|
186.52
|
|
|||||
PureFunds ISE Cyber Security ETF
|
|
100.00
|
|
|
121.21
|
|
|
137.94
|
|
|
161.01
|
|
|
179.55
|
|
|
|
Fiscal Year Ended
|
||||||||||||||||||
|
|
January 31, 2020
|
|
February 1, 2019
|
|
February 2, 2018
|
|
February 3, 2017
|
|
January 29, 2016
|
||||||||||
|
|
(in thousands, except per share data)
|
||||||||||||||||||
Results of Operations:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Net revenue
|
|
$
|
552,765
|
|
|
$
|
518,709
|
|
|
$
|
467,930
|
|
|
$
|
432,751
|
|
|
$
|
339,522
|
|
Gross margin
|
|
$
|
299,969
|
|
|
$
|
272,592
|
|
|
$
|
242,846
|
|
|
$
|
220,262
|
|
|
$
|
155,713
|
|
Operating expenses
|
|
$
|
352,143
|
|
|
$
|
321,324
|
|
|
$
|
312,827
|
|
|
$
|
276,141
|
|
|
$
|
261,721
|
|
Operating loss
|
|
$
|
(52,174
|
)
|
|
$
|
(48,732
|
)
|
|
$
|
(69,981
|
)
|
|
$
|
(55,879
|
)
|
|
$
|
(106,008
|
)
|
Net loss
|
|
$
|
(31,666
|
)
|
|
$
|
(39,101
|
)
|
|
$
|
(10,417
|
)
|
|
$
|
(31,641
|
)
|
|
$
|
(72,381
|
)
|
Share and Per Share Data
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Net loss per share - basic and diluted
|
|
$
|
(0.39
|
)
|
|
$
|
(0.48
|
)
|
|
$
|
(0.13
|
)
|
|
$
|
(0.41
|
)
|
|
$
|
(1.03
|
)
|
Weighted average shares outstanding - basic and diluted
|
|
80,563
|
|
|
80,710
|
|
|
80,280
|
|
|
77,635
|
|
|
70,000
|
|
|
|
January 31, 2020
|
|
February 1, 2019
|
|
February 2, 2018
|
|
February 3, 2017
|
|
January 29, 2016
|
||||||||||
|
|
(in thousands)
|
||||||||||||||||||
Balance Sheet:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash and cash equivalents
|
|
$
|
181,838
|
|
|
$
|
129,592
|
|
|
$
|
101,539
|
|
|
$
|
116,595
|
|
|
$
|
33,422
|
|
Accounts receivable
|
|
$
|
111,798
|
|
|
$
|
141,344
|
|
|
$
|
157,764
|
|
|
$
|
113,546
|
|
|
$
|
116,357
|
|
Total assets(1)
|
|
$
|
1,048,031
|
|
|
$
|
1,036,159
|
|
|
$
|
1,057,081
|
|
|
$
|
1,047,544
|
|
|
$
|
917,785
|
|
Short-term deferred revenue
|
|
$
|
175,847
|
|
|
$
|
157,865
|
|
|
$
|
137,697
|
|
|
$
|
117,999
|
|
|
$
|
109,467
|
|
Short-term convertible notes
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
27,993
|
|
Long-term deferred revenue
|
|
$
|
12,690
|
|
|
$
|
16,064
|
|
|
$
|
14,948
|
|
|
$
|
14,752
|
|
|
$
|
18,352
|
|
Total stockholder's equity
|
|
$
|
666,880
|
|
|
$
|
692,707
|
|
|
$
|
731,090
|
|
|
$
|
725,455
|
|
|
$
|
588,456
|
|
•
|
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.
|
|
January 31, 2020
|
|
February 1, 2019
|
|
February 2, 2018
|
||||||
Subscription customer base
|
4,100
|
|
|
4,200
|
|
|
4,400
|
|
|||
Total customer base
|
5,200
|
|
|
4,700
|
|
|
5,000
|
|
|||
Monthly recurring revenue (in millions)
|
$
|
36.5
|
|
|
$
|
36.2
|
|
|
$
|
35.3
|
|
Annual recurring revenue (in millions)
|
$
|
437.5
|
|
|
$
|
434.1
|
|
|
$
|
423.0
|
|
Average subscription revenue per customer (in thousands)
|
$
|
107.8
|
|
|
$
|
103.3
|
|
|
$
|
95.6
|
|
Revenue retention rate
|
95
|
%
|
|
89
|
%
|
|
96
|
%
|
•
|
Impact of Purchase Accounting. The impact of purchase accounting consists primarily of purchase accounting adjustments related to a change in the basis of deferred revenue related to the acquisition of Dell by Dell Technologies in fiscal 2014.
|
•
|
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.
|
•
|
Stock-based Compensation Expense. Non-cash stock-based compensation expense relates to both the Dell Technologies and Secureworks equity plans. We exclude such expense when assessing the effectiveness of our operating performance since stock-based compensation does not necessarily correlate with the underlying operating performance of the business.
|
•
|
Impact of Tax Cuts and Jobs Act. The impact of the Tax Cuts and Jobs Act relates to final tax provision impacts of complying with the U.S. tax reform that was enacted in December 2017, as recorded in fiscal 2020 and fiscal 2019, as well as the provisional tax benefit of $27.0 million that was recorded in the fourth quarter of fiscal 2018. For additional information, see “Notes to Consolidated Financial Statements—Note 11—Income and Other Taxes” in our consolidated financial statements included in this report.
|
•
|
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.
|
|
Fiscal Year Ended
|
||||||||||
|
January 31, 2020
|
|
February 1, 2019
|
|
February 2, 2018
|
||||||
GAAP revenue
|
$
|
552,765
|
|
|
$
|
518,709
|
|
|
$
|
467,930
|
|
Impact of purchase accounting
|
—
|
|
|
—
|
|
|
584
|
|
|||
Non-GAAP revenue
|
$
|
552,765
|
|
|
$
|
518,709
|
|
|
$
|
468,514
|
|
|
|
|
|
|
|
||||||
GAAP gross margin
|
$
|
299,969
|
|
|
$
|
272,592
|
|
|
$
|
242,846
|
|
Amortization of intangibles
|
14,089
|
|
|
13,642
|
|
|
13,642
|
|
|||
Impact of purchase accounting
|
—
|
|
|
—
|
|
|
624
|
|
|||
Stock-based compensation expense
|
1,206
|
|
|
780
|
|
|
891
|
|
|||
Non-GAAP gross margin
|
$
|
315,264
|
|
|
$
|
287,014
|
|
|
$
|
258,003
|
|
|
|
|
|
|
|
||||||
GAAP research and development expenses
|
$
|
94,964
|
|
|
$
|
87,608
|
|
|
$
|
80,164
|
|
Stock-based compensation expense
|
(4,280
|
)
|
|
(4,133
|
)
|
|
(3,261
|
)
|
|||
Non-GAAP research and development expenses
|
$
|
90,684
|
|
|
$
|
83,475
|
|
|
$
|
76,903
|
|
|
|
|
|
|
|
||||||
GAAP sales and marketing expenses
|
$
|
157,674
|
|
|
$
|
141,818
|
|
|
$
|
139,937
|
|
Stock-based compensation expense
|
(1,694
|
)
|
|
(2,652
|
)
|
|
(735
|
)
|
|||
Non-GAAP sales and marketing expenses
|
$
|
155,980
|
|
|
$
|
139,166
|
|
|
$
|
139,202
|
|
|
|
|
|
|
|
||||||
GAAP general and administrative expenses
|
$
|
99,505
|
|
|
$
|
91,898
|
|
|
$
|
92,726
|
|
Amortization of intangibles
|
(14,094
|
)
|
|
(14,094
|
)
|
|
(14,095
|
)
|
|||
Impact of purchase accounting
|
—
|
|
|
—
|
|
|
(1,025
|
)
|
|||
Stock-based compensation expense
|
(12,368
|
)
|
|
(11,805
|
)
|
|
(8,903
|
)
|
|||
Non-GAAP general and administrative expenses
|
$
|
73,043
|
|
|
$
|
65,999
|
|
|
$
|
68,703
|
|
|
|
|
|
|
|
||||||
GAAP operating income (loss)
|
$
|
(52,174
|
)
|
|
$
|
(48,732
|
)
|
|
$
|
(69,981
|
)
|
Amortization of intangibles
|
28,183
|
|
|
27,736
|
|
|
27,737
|
|
|||
Impact of purchase accounting
|
—
|
|
|
—
|
|
|
1,649
|
|
|||
Stock-based compensation expense
|
19,548
|
|
|
19,370
|
|
|
13,790
|
|
|||
Non-GAAP operating income (loss)
|
$
|
(4,443
|
)
|
|
$
|
(1,626
|
)
|
|
$
|
(26,805
|
)
|
|
|
|
|
|
|
GAAP net income (loss)
|
$
|
(31,666
|
)
|
|
$
|
(39,101
|
)
|
|
$
|
(10,417
|
)
|
Amortization of intangibles
|
28,183
|
|
|
27,736
|
|
|
27,737
|
|
|||
Impact of purchase accounting
|
—
|
|
|
—
|
|
|
1,649
|
|
|||
Stock-based compensation expense
|
19,548
|
|
|
19,370
|
|
|
13,790
|
|
|||
Impact of Tax Cuts and Jobs Act
|
(1,191
|
)
|
|
4,325
|
|
|
(34,993
|
)
|
|||
Aggregate adjustment for income taxes
|
(14,688
|
)
|
|
(10,978
|
)
|
|
(15,129
|
)
|
|||
Non-GAAP net income (loss)
|
$
|
186
|
|
|
$
|
1,352
|
|
|
$
|
(17,363
|
)
|
|
|
|
|
|
|
||||||
GAAP earnings (loss) per share
|
$
|
(0.39
|
)
|
|
$
|
(0.48
|
)
|
|
$
|
(0.13
|
)
|
Amortization of intangibles
|
0.35
|
|
|
0.34
|
|
|
0.35
|
|
|||
Impact of purchase accounting
|
—
|
|
|
—
|
|
|
0.02
|
|
|||
Stock-based compensation expense
|
0.24
|
|
|
0.24
|
|
|
0.17
|
|
|||
Impact of Tax Cuts and Jobs Act
|
(0.01
|
)
|
|
0.05
|
|
|
(0.44
|
)
|
|||
Aggregate adjustment for income taxes
|
(0.18
|
)
|
|
(0.13
|
)
|
|
(0.19
|
)
|
|||
Non-GAAP earnings (loss) per share *
|
$
|
—
|
|
|
$
|
0.02
|
|
|
$
|
(0.22
|
)
|
* Sum of reconciling items may differ from total due to rounding of individual components
|
|||||||||||
|
|
|
|
|
|
||||||
GAAP net income (loss)
|
$
|
(31,666
|
)
|
|
$
|
(39,101
|
)
|
|
$
|
(10,417
|
)
|
Interest and other, net
|
(850
|
)
|
|
(2,778
|
)
|
|
2,735
|
|
|||
Income tax benefit
|
(19,658
|
)
|
|
(6,853
|
)
|
|
(62,299
|
)
|
|||
Depreciation and amortization
|
42,932
|
|
|
41,207
|
|
|
42,171
|
|
|||
Stock-based compensation expense
|
19,548
|
|
|
19,370
|
|
|
13,790
|
|
|||
Impact of purchase accounting
|
—
|
|
|
—
|
|
|
584
|
|
|||
Adjusted EBITDA
|
$
|
10,306
|
|
|
$
|
11,845
|
|
|
$
|
(13,436
|
)
|
•
|
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.
|
|
|
Fiscal Year Ended
|
|||||||||||||||
|
|
January 31, 2020
|
|
|
|
February 1, 2019
|
|||||||||||
|
|
$
|
|
% of
Revenue |
|
%
Change |
|
$
|
|
% of
Revenue |
|||||||
|
|
(in thousands, except percentages)
|
|||||||||||||||
Net revenue
|
|
$
|
552,765
|
|
|
100.0
|
%
|
|
6.6
|
%
|
|
$
|
518,709
|
|
|
100.0
|
%
|
Cost of revenue
|
|
$
|
252,796
|
|
|
45.7
|
%
|
|
2.7
|
%
|
|
$
|
246,117
|
|
|
47.4
|
%
|
Total gross margin
|
|
$
|
299,969
|
|
|
54.3
|
%
|
|
10.0
|
%
|
|
$
|
272,592
|
|
|
52.6
|
%
|
Operating expenses
|
|
$
|
352,143
|
|
|
63.7
|
%
|
|
9.6
|
%
|
|
$
|
321,324
|
|
|
61.9
|
%
|
Operating loss
|
|
$
|
(52,174
|
)
|
|
(9.4
|
)%
|
|
7.1
|
%
|
|
$
|
(48,732
|
)
|
|
(9.4
|
)%
|
Net loss
|
|
$
|
(31,666
|
)
|
|
(5.7
|
)%
|
|
(19.0
|
)%
|
|
$
|
(39,101
|
)
|
|
(7.5
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other Financial Information (1)
|
|
|
|
|
|
|
|
|
|
|
|||||||
Non-GAAP revenue
|
|
$
|
552,765
|
|
|
100.0
|
%
|
|
6.6
|
%
|
|
$
|
518,709
|
|
|
100.0
|
%
|
Non-GAAP gross margin
|
|
$
|
315,264
|
|
|
57.0
|
%
|
|
9.8
|
%
|
|
$
|
287,014
|
|
|
55.3
|
%
|
Non-GAAP operating expenses
|
|
$
|
319,707
|
|
|
57.8
|
%
|
|
10.8
|
%
|
|
$
|
288,640
|
|
|
55.6
|
%
|
Non-GAAP operating loss
|
|
$
|
(4,443
|
)
|
|
(0.8
|
)%
|
|
173.2
|
%
|
|
$
|
(1,626
|
)
|
|
(0.3
|
)%
|
Non-GAAP net income
|
|
$
|
186
|
|
|
—
|
%
|
|
(86.2
|
)%
|
|
$
|
1,352
|
|
|
0.3
|
%
|
Adjusted EBITDA
|
|
$
|
10,306
|
|
|
1.9
|
%
|
|
(13.0
|
)%
|
|
$
|
11,845
|
|
|
2.3
|
%
|
(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.
|
|
Fiscal Year Ended
|
|||||||||||||||
|
January 31, 2020
|
|
|
|
February 1, 2019
|
|||||||||||
|
Dollars
|
|
% of
Revenue
|
|
%
Change
|
|
Dollars
|
|
% of
Revenue
|
|||||||
|
(in thousands, except percentages)
|
|||||||||||||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Research and development
|
$
|
94,964
|
|
|
17.2
|
%
|
|
8.4
|
%
|
|
$
|
87,608
|
|
|
16.9
|
%
|
Sales and marketing
|
157,674
|
|
|
28.5
|
%
|
|
11.2
|
%
|
|
141,818
|
|
|
27.3
|
%
|
||
General and administrative
|
99,505
|
|
|
18.0
|
%
|
|
8.3
|
%
|
|
91,898
|
|
|
17.7
|
%
|
||
Total operating expenses
|
$
|
352,143
|
|
|
63.7
|
%
|
|
9.6
|
%
|
|
$
|
321,324
|
|
|
61.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|||||||
Other Financial Information
|
|
|
|
|
|
|
|
|
|
|||||||
Non-GAAP research and development
|
$
|
90,684
|
|
|
16.4
|
%
|
|
8.6
|
%
|
|
$
|
83,475
|
|
|
16.1
|
%
|
Non-GAAP sales and marketing
|
155,980
|
|
|
28.2
|
%
|
|
12.1
|
%
|
|
139,166
|
|
|
26.8
|
%
|
||
Non-GAAP general and administrative
|
73,043
|
|
|
13.2
|
%
|
|
10.7
|
%
|
|
65,999
|
|
|
12.7
|
%
|
||
Non-GAAP operating expenses (1)
|
$
|
319,707
|
|
|
57.8
|
%
|
|
10.8
|
%
|
|
$
|
288,640
|
|
|
55.6
|
%
|
(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.
|
|
January 31,
2020 |
|
February 1,
2019 |
||||
|
(in thousands)
|
||||||
|
|
|
|
|
|||
Cash and cash equivalents
|
$
|
181,838
|
|
|
$
|
129,592
|
|
Accounts receivable, net
|
$
|
111,798
|
|
|
$
|
141,344
|
|
|
|
Fiscal Year Ended
|
||||||
|
|
January 31,
2020 |
|
February 1,
2019 |
||||
|
|
(in thousands)
|
||||||
Net change in cash from:
|
|
|
|
|
|
|
||
Operating activities
|
|
$
|
78,839
|
|
|
$
|
57,199
|
|
Investing activities
|
|
(12,590
|
)
|
|
(10,200
|
)
|
||
Financing activities
|
|
(14,003
|
)
|
|
(18,946
|
)
|
||
Change in cash and cash equivalents
|
|
$
|
52,246
|
|
|
$
|
28,053
|
|
•
|
Operating Activities — Cash provided by operating activities was $78.8 million and $57.2 million in fiscal 2020 and fiscal 2019, respectively. The improvement in our operating cash flows was primarily driven by the decrease in our net accounts receivable due to improved collection rates, partially offset by our net transactions with Dell. We expect that our future transactions with Dell will be a source of cash over time as we anticipate that our charges to Dell will continue to exceed Dell’s charges to us, although the timing of charges and settlements may vary period to period.
|
•
|
Investing Activities — Cash used in investing activities totaled $12.6 million and $10.2 million in fiscal 2020 and fiscal 2019, respectively. For the periods presented, investing activities consisted primarily of capital expenditures for property and equipment to support our data center and facility infrastructure, as well as certain capitalized costs related to the development of our new security software application.
|
•
|
Financing Activities — Cash used in financing activities was $14.0 million and $18.9 million in fiscal 2020 and fiscal 2019, respectively. The usage in fiscal 2020 reflected employee tax withholding payments of $8.5 million associated with the vesting of stock compensation grants and our repurchase of $6.4 million of our Class A common stock pursuant to our stock repurchase program re-authorized during fiscal 2020 and payment of a long-term financing arrangement of $0.5 million, which was partially offset by proceeds of $1.3 million from stock options exercised during fiscal 2020. The usage in fiscal 2019 reflected our repurchase of $13.5 million of our Class A common stock pursuant to our stock repurchase program authorized during fiscal 2019, payments of long-term financing arrangements of $3.2 million, including related
|
|
|
Payments Due by Fiscal Year
|
||||||||||||||
(in thousands)
|
|
Less than 1 year
|
1-3 years
|
3-5 years
|
Thereafter
|
Total
|
||||||||||
Operating leases
|
|
$
|
5,017
|
|
$
|
12,285
|
|
$
|
9,918
|
|
$
|
7,648
|
|
$
|
34,868
|
|
Purchase obligations
|
|
3,645
|
|
2,048
|
|
—
|
|
—
|
|
5,693
|
|
|||||
Credit facilities and other(1)
|
|
—
|
|
500
|
|
—
|
|
—
|
|
500
|
|
|||||
Total
|
|
$
|
8,662
|
|
$
|
14,833
|
|
$
|
9,918
|
|
$
|
7,648
|
|
$
|
41,061
|
|
(1)
|
Other reflects purchase obligations of annual maintenance services for hardware systems for internal use financed from a related party. See also “Notes to Consolidated Financial Statements—Note 13—Related Party Transactions” in our consolidated financial statements included in this report.
|
•
|
Identification of the contract, or contracts, with a customer—A contract with a customer exists when (i) we enter into an enforceable contract with a customer, (ii) the contract has commercial substance and the parties are committed to perform, and (iii) payment terms can be identified and collection of substantially all consideration to which we will be entitled in exchange for goods or services that will be transferred is deemed probable based on the customer's intent and ability to pay. Contracts entered into for professional services and subscription-based solutions near or at the same time are generally not combined as a single contract for accounting purposes, since neither the pricing nor the services are interrelated.
|
•
|
Identification of the performance obligations in the contract—Performance obligations promised in a contract are identified based on the goods or services that will be transferred to the customer that are both (i) capable of being distinct, whereby the customer can benefit from the goods or service either on its own or together with other resources that are readily available from third parties or from us, and (ii) distinct in the context of the contract, whereby the transfer of the goods or services is separately identifiable from other promises in the contract. When promised goods or services are incapable of being distinct, we account for them as a combined performance obligation. With regard to a typical contract for subscription-based solutions, the performance obligation represents a series of distinct services that will be accounted for as a single performance obligation. In a typical professional services contract, Secureworks has a separate performance obligation associated with each service. We are generally acting as a principal in each subscription-based and professional services arrangement and, thus, recognize revenue on a gross basis.
|
•
|
Determination of the transaction price—The total transaction price is primarily fixed in nature as the consideration is tied to the specific services purchased by the customer, which constitutes a series for delivery of the solutions over the duration of the contract. For professional services contracts, variable consideration exists in the form of rescheduling penalties and expense reimbursements; no estimation is required at contract inception, since variable consideration is allocated to the applicable period.
|
•
|
Allocation of the transaction price to the performance obligations in the contract—We allocate the transaction price to each performance obligation based on the performance obligation's standalone selling price. Standalone selling price is determined by considering all information available to us, such as historical selling prices of the performance obligation, geographic location, overall strategic pricing objective, market conditions and internally approved pricing guidelines related to the performance obligations.
|
•
|
Recognition of revenue when, or as, the Company satisfies performance obligation—We recognize revenue over time using a time-elapsed output method to measure progress (i.e., ratable recognition) for the subscription-based performance obligation over the contract term. For any upgraded installation services, which we have determined represent a performance obligation separate from its subscription-based arrangements, revenue is recognized over time using hours elapsed over the service term as an appropriate method to measure progress. For the performance obligation pertaining to professional services arrangements, we recognize revenue over time using an input method based on time (hours or days) incurred to measure progress over the contract term.
|
Audited Consolidated Financial Statements of SecureWorks Corp.
|
|
Page
|
|
|
Report of Independent Registered Public Accounting Firm
|
|
|
|
Consolidated Statements of Financial Position as of January 31, 2020 and February 1, 2019
|
|
|
|
Consolidated Statements of Operations for the fiscal years ended January 31, 2020, February 1, 2019, and February 2, 2018
|
|
|
|
Consolidated Statements of Comprehensive Loss for the fiscal years ended January 31, 2020, February 1, 2019, and February 2, 2018
|
|
|
|
Consolidated Statements of Cash Flows for the fiscal years ended January 31, 2020, February 1, 2019, and February 2, 2018
|
|
|
|
Consolidated Statements of Stockholders' Equity for the fiscal years ended January 31, 2020, February 1, 2019, and February 2, 2018
|
|
|
|
Notes to Consolidated Financial Statements
|
|
|
|
Schedule II - Valuation and Qualifying Accounts for the fiscal years ended January 31, 2020, February 1, 2019, and February 2, 2018
|
|
|
January 31,
2020 |
|
February 1,
2019 |
||||
|
|
|
|
||||
ASSETS
|
|||||||
Current assets:
|
|
|
|
|
|||
Cash and cash equivalents
|
$
|
181,838
|
|
|
$
|
129,592
|
|
Accounts receivable, net
|
111,798
|
|
|
141,344
|
|
||
Inventories
|
746
|
|
|
468
|
|
||
Other current assets
|
27,449
|
|
|
27,604
|
|
||
Total current assets
|
321,831
|
|
|
299,008
|
|
||
Property and equipment, net
|
27,606
|
|
|
35,978
|
|
||
Goodwill
|
416,487
|
|
|
416,487
|
|
||
Operating lease right-of-use assets, net
|
23,463
|
|
|
—
|
|
||
Intangible assets, net
|
180,052
|
|
|
206,448
|
|
||
Other non-current assets
|
78,592
|
|
|
78,238
|
|
||
Total assets
|
$
|
1,048,031
|
|
|
$
|
1,036,159
|
|
|
|||||||
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|||||||
Current liabilities:
|
|
|
|
||||
Accounts payable
|
$
|
18,690
|
|
|
$
|
16,177
|
|
Accrued and other current liabilities
|
98,855
|
|
|
86,495
|
|
||
Deferred revenue
|
175,847
|
|
|
157,865
|
|
||
Total current liabilities
|
293,392
|
|
|
260,537
|
|
||
Long-term deferred revenue
|
12,690
|
|
|
16,064
|
|
||
Operating lease liabilities, non-current
|
24,669
|
|
|
—
|
|
||
Other non-current liabilities
|
50,400
|
|
|
66,851
|
|
||
Total liabilities
|
381,151
|
|
|
343,452
|
|
||
Commitments and contingencies (Note 7)
|
|
|
|
|
|
||
Stockholders' equity:
|
|
|
|
||||
Preferred stock - $0.01 par value: 200,000 shares authorized; 0 shares issued
|
—
|
|
|
—
|
|
||
Common stock - Class A of $0.01 par value: 2,500,000 shares authorized; 11,206 and 11,016 issued and outstanding, respectively
|
112
|
|
|
110
|
|
||
Common stock - Class B of $0.01 par value: 500,000 shares authorized; 70,000 shares issued and outstanding
|
700
|
|
|
700
|
|
||
Additional paid in capital
|
896,983
|
|
|
884,567
|
|
||
Accumulated deficit
|
(207,929
|
)
|
|
(176,263
|
)
|
||
Accumulated other comprehensive income (loss)
|
(3,090
|
)
|
|
(2,884
|
)
|
||
Treasury stock, at cost - 1,257 and 819 shares, respectively
|
(19,896
|
)
|
|
(13,523
|
)
|
||
Total stockholders' equity
|
666,880
|
|
|
692,707
|
|
||
Total liabilities and stockholders' equity
|
$
|
1,048,031
|
|
|
$
|
1,036,159
|
|
|
Fiscal Year Ended
|
||||||||||
|
January 31, 2020
|
|
February 1, 2019
|
|
February 2, 2018
|
||||||
|
|
|
|
|
|
|
|
||||
Net revenue
|
$
|
552,765
|
|
|
$
|
518,709
|
|
|
$
|
467,930
|
|
Cost of revenue
|
252,796
|
|
|
246,117
|
|
|
225,084
|
|
|||
Gross margin
|
299,969
|
|
|
272,592
|
|
|
242,846
|
|
|||
Research and development
|
94,964
|
|
|
87,608
|
|
|
80,164
|
|
|||
Sales and marketing
|
157,674
|
|
|
141,818
|
|
|
139,937
|
|
|||
General and administrative
|
99,505
|
|
|
91,898
|
|
|
92,726
|
|
|||
Total operating expenses
|
352,143
|
|
|
321,324
|
|
|
312,827
|
|
|||
Operating loss
|
(52,174
|
)
|
|
(48,732
|
)
|
|
(69,981
|
)
|
|||
Interest and other, net
|
850
|
|
|
2,778
|
|
|
(2,735
|
)
|
|||
Loss before income taxes
|
(51,324
|
)
|
|
(45,954
|
)
|
|
(72,716
|
)
|
|||
Income tax benefit
|
(19,658
|
)
|
|
(6,853
|
)
|
|
(62,299
|
)
|
|||
Net loss
|
(31,666
|
)
|
|
(39,101
|
)
|
|
(10,417
|
)
|
|||
|
|
|
|
|
|
||||||
Loss per common share (basic and diluted)
|
$
|
(0.39
|
)
|
|
$
|
(0.48
|
)
|
|
$
|
(0.13
|
)
|
Weighted-average common shares outstanding (basic and diluted)
|
80,563
|
|
|
80,710
|
|
|
80,280
|
|
|||
|
|
|
|
|
|
|
Fiscal Year Ended
|
||||||||||
|
January 31, 2020
|
|
February 1, 2019
|
|
February 2, 2018
|
||||||
Net loss
|
$
|
(31,666
|
)
|
|
$
|
(39,101
|
)
|
|
$
|
(10,417
|
)
|
Foreign currency translation adjustments, net of tax
|
(206
|
)
|
|
(2,914
|
)
|
|
3,544
|
|
|||
Comprehensive loss
|
$
|
(31,872
|
)
|
|
$
|
(42,015
|
)
|
|
$
|
(6,873
|
)
|
|
Fiscal Year Ended
|
||||||||||
|
January 31, 2020
|
|
February 1, 2019
|
|
February 2, 2018
|
||||||
Cash flows from operating activities:
|
|
|
|
|
|
||||||
Net loss
|
$
|
(31,666
|
)
|
|
$
|
(39,101
|
)
|
|
(10,417
|
)
|
|
Adjustments to reconcile net loss to net cash provided by operating activities:
|
|
|
|
|
|
||||||
Depreciation and amortization
|
42,932
|
|
|
41,207
|
|
|
42,171
|
|
|||
Stock-based compensation expense
|
19,548
|
|
|
19,370
|
|
|
13,790
|
|
|||
Effects of exchange rate changes on monetary assets and liabilities denominated in foreign currencies
|
270
|
|
|
(1,818
|
)
|
|
3,256
|
|
|||
Income tax benefit
|
(19,658
|
)
|
|
(6,853
|
)
|
|
(62,299
|
)
|
|||
Other non cash impacts
|
1,830
|
|
|
—
|
|
|
—
|
|
|||
Provision for doubtful accounts
|
3,099
|
|
|
2,356
|
|
|
3,947
|
|
|||
Changes in assets and liabilities:
|
|
|
|
|
|
||||||
Accounts receivable
|
26,789
|
|
|
13,750
|
|
|
(48,540
|
)
|
|||
Net transactions with parent
|
(12,483
|
)
|
|
(1,797
|
)
|
|
11,024
|
|
|||
Inventories
|
(278
|
)
|
|
562
|
|
|
917
|
|
|||
Other assets
|
13,293
|
|
|
(7,277
|
)
|
|
14,610
|
|
|||
Accounts payable
|
7,008
|
|
|
(6,117
|
)
|
|
3,302
|
|
|||
Deferred revenue
|
14,463
|
|
|
20,942
|
|
|
19,560
|
|
|||
Accrued and other current liabilities
|
13,692
|
|
|
21,975
|
|
|
9,466
|
|
|||
Net cash provided by operating activities
|
78,839
|
|
|
57,199
|
|
|
787
|
|
|||
Cash flows from investing activities:
|
|
|
|
|
|
|
|
||||
Capital expenditures
|
(12,590
|
)
|
|
(10,200
|
)
|
|
(13,819
|
)
|
|||
Net cash used in investing activities
|
(12,590
|
)
|
|
(10,200
|
)
|
|
(13,819
|
)
|
|||
Cash flows from financing activities:
|
|
|
|
|
|
|
|
||||
Proceeds from stock option exercises
|
1,327
|
|
|
—
|
|
|
—
|
|
|||
Principal payments on financing arrangement with Dell Financial Services
|
—
|
|
|
(2,208
|
)
|
|
(800
|
)
|
|||
Taxes paid on vested restricted shares
|
(8,453
|
)
|
|
(2,207
|
)
|
|
(1,224
|
)
|
|||
Purchases of stock for treasury
|
(6,377
|
)
|
|
(13,531
|
)
|
|
—
|
|
|||
Payments on financed capital expenditures
|
(500
|
)
|
|
(1,000
|
)
|
|
—
|
|
|||
Net cash used in financing activities
|
(14,003
|
)
|
|
(18,946
|
)
|
|
(2,024
|
)
|
|||
Net (decrease) increase in cash and cash equivalents
|
52,246
|
|
|
28,053
|
|
|
(15,056
|
)
|
|||
Cash and cash equivalents at beginning of the period
|
129,592
|
|
|
101,539
|
|
|
116,595
|
|
|||
Cash and cash equivalents at end of the period
|
$
|
181,838
|
|
|
$
|
129,592
|
|
|
$
|
101,539
|
|
|
|
|
|
|
|
||||||
Supplemental Disclosures of Non-Cash Investing and Financing Activities:
|
|
|
|
|
|
||||||
Financed capital expenditures
|
$
|
724
|
|
|
$
|
373
|
|
|
$
|
1,390
|
|
Income taxes paid
|
$
|
1,746
|
|
|
$
|
1,961
|
|
|
$
|
1,152
|
|
|
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 3, 2017
|
10,566
|
|
|
$
|
107
|
|
|
70,000
|
|
|
$
|
700
|
|
|
$
|
854,907
|
|
|
$
|
(126,745
|
)
|
|
$
|
(3,514
|
)
|
|
$
|
—
|
|
|
$
|
725,455
|
|
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(10,417
|
)
|
|
—
|
|
|
—
|
|
|
(10,417
|
)
|
|||||||
Other comprehensive (loss) income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,544
|
|
|
—
|
|
|
3,544
|
|
|||||||
Vesting of restricted stock units
|
384
|
|
|
4
|
|
|
—
|
|
|
—
|
|
|
(4
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Grants of restricted stock awards, net
|
284
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Common stock withheld as payment for withholding taxes upon the vesting of restricted shares
|
(149
|
)
|
|
(2
|
)
|
|
—
|
|
|
—
|
|
|
(1,280
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,282
|
)
|
|||||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
13,790
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
13,790
|
|
|||||||
Balances, February 2, 2018
|
11,085
|
|
|
$
|
111
|
|
|
70,000
|
|
|
$
|
700
|
|
|
$
|
867,411
|
|
|
$
|
(137,162
|
)
|
|
$
|
30
|
|
|
$
|
—
|
|
|
$
|
731,090
|
|
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(39,101
|
)
|
|
—
|
|
|
—
|
|
|
(39,101
|
)
|
|||||||
Other comprehensive (loss) income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,914
|
)
|
|
—
|
|
|
(2,914
|
)
|
|||||||
Vesting of restricted stock units
|
598
|
|
|
5
|
|
|
—
|
|
|
—
|
|
|
(5
|
)
|
|
$
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Grants of restricted stock awards, net
|
386
|
|
|
4
|
|
|
—
|
|
|
—
|
|
|
(4
|
)
|
|
$
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Common stock withheld as payment for withholding taxes upon the vesting of restricted shares
|
(234
|
)
|
|
(2
|
)
|
|
—
|
|
|
—
|
|
|
(2,205
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,207
|
)
|
|||||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
19,370
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
19,370
|
|
|||||||
Shares repurchased
|
(819
|
)
|
|
(8
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(13,523
|
)
|
|
(13,531
|
)
|
|||||||
Balances, February 1, 2019
|
11,016
|
|
|
$
|
110
|
|
|
70,000
|
|
|
$
|
700
|
|
|
$
|
884,567
|
|
|
$
|
(176,263
|
)
|
|
$
|
(2,884
|
)
|
|
$
|
(13,523
|
)
|
|
$
|
692,707
|
|
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(31,666
|
)
|
|
—
|
|
|
—
|
|
|
(31,666
|
)
|
|||||||
Other comprehensive (loss) income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(206
|
)
|
|
—
|
|
|
(206
|
)
|
|||||||
Vesting of restricted stock units
|
957
|
|
|
9
|
|
|
—
|
|
|
—
|
|
|
(9
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Exercise of stock options
|
95
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
1,326
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,327
|
|
|||||||
Grants of restricted stock awards, net
|
122
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Cancellation of unvested restricted stock awards
|
(124
|
)
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Common stock withheld as payment for withholding taxes upon the vesting of restricted shares
|
(422
|
)
|
|
(4
|
)
|
|
—
|
|
|
—
|
|
|
(8,449
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(8,453
|
)
|
|||||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
19,548
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
19,548
|
|
|||||||
Shares repurchased
|
(438
|
)
|
|
(4
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(6,373
|
)
|
|
(6,377
|
)
|
|||||||
Balances, January 31, 2020
|
11,206
|
|
|
$
|
112
|
|
|
70,000
|
|
|
$
|
700
|
|
|
$
|
896,983
|
|
|
$
|
(207,929
|
)
|
|
$
|
(3,090
|
)
|
|
$
|
(19,896
|
)
|
|
$
|
666,880
|
|
•
|
Identification of the contract, or contracts, with a customer—A contract with a customer exists when (i) the Company enters into an enforceable contract with a customer, (ii) the contract has commercial substance and the parties are committed to perform, and (iii) payment terms can be identified and collection of substantially all consideration to which the Company will be entitled in exchange for goods or services that will be transferred is deemed probable based on the customer's intent and ability to pay. Contracts entered into for professional services and subscription-based solutions near or at the same time are generally not combined as a single contract for accounting purposes, since neither the pricing nor the services are interrelated.
|
•
|
Identification of the performance obligations in the contract—Performance obligations promised in a contract are identified based on the goods or services that will be transferred to the customer that are both (i) capable of being distinct, whereby the customer can benefit from the goods or service either on its own or together with other resources that are readily available from third parties or from the Company, and (ii) distinct in the context of the contract, whereby the transfer of the goods or services is separately identifiable from other promises in the contract. When promised goods or services are incapable of being distinct, the Company accounts for them as a combined performance obligation. With regard to a typical contract for subscription-based solutions, the performance obligation represents a series of distinct services that will be accounted for as a single performance obligation. In a typical professional services contract, the Company has a separate performance obligation associated with each service. The Company is generally acting as a principal in each subscription-based and professional services arrangement and, thus, recognizes revenue on a gross basis.
|
•
|
Determination of the transaction price—The total transaction price is primarily fixed in nature as the consideration is tied to the specific services purchased by the customer, which constitutes a series for delivery of the solutions over the duration of the contract. For professional services contracts, variable consideration exists in the form of rescheduling penalties and expense reimbursements; no estimation is required at contract inception, since variable consideration is allocated to the applicable period.
|
•
|
Allocation of the transaction price to the performance obligations in the contract—The Company allocates the transaction price to each performance obligation based on the performance obligation's standalone selling price. Standalone selling price is determined by considering all information available to the Company, such as historical selling prices of the performance obligation, geographic location, overall strategic pricing objective, market conditions and internally approved pricing guidelines related to the performance obligations.
|
•
|
Recognition of revenue when, or as, the Company satisfies performance obligation—The Company recognizes revenue over time using a time-elapsed output method to measure progress (i.e., ratable recognition) for the subscription-based performance obligation over the contract term. For any upgraded installation services, which the Company has determined represent a performance obligation separate from its subscription-based arrangements, revenue is recognized over time using hours elapsed over the service term as an appropriate method to measure progress. For the performance obligation pertaining to professional services arrangements, the Company recognizes revenue over time using an input method based on time (hours or days) incurred to measure progress over the contract term.
|
|
|
January 31, 2020
|
|
February 1, 2019
|
|
February 2, 2018
|
||||||
Managed Security Solutions revenue
|
|
$
|
419,489
|
|
|
$
|
396,130
|
|
|
$
|
365,768
|
|
Security and Risk Consulting revenue
|
|
133,276
|
|
|
122,579
|
|
|
102,162
|
|
|||
Total revenue
|
|
$
|
552,765
|
|
|
$
|
518,709
|
|
|
$
|
467,930
|
|
|
|
Fiscal Year Ended
|
||||||||||
|
|
January 31, 2020
|
|
February 1, 2019
|
|
February 2, 2018
|
||||||
Numerator:
|
|
|
|
|
|
|
||||||
Net loss
|
|
$
|
(31,666
|
)
|
|
$
|
(39,101
|
)
|
|
$
|
(10,417
|
)
|
Denominator:
|
|
|
|
|
|
|
||||||
Weighted-average number of shares outstanding:
|
|
|
|
|
|
|
||||||
Basic and Diluted
|
|
80,563
|
|
|
80,710
|
|
|
80,280
|
|
|||
Loss per common share:
|
|
|
|
|
|
|
||||||
Basic and Diluted
|
|
$
|
(0.39
|
)
|
|
$
|
(0.48
|
)
|
|
$
|
(0.13
|
)
|
|
|
|
|
|
|
|
||||||
Weighted-average anti-dilutive stock options, non-vested restricted stock and restricted stock units
|
|
5,826
|
|
|
5,966
|
|
|
5,096
|
|
|
|
As of February 1, 2019
|
|
Upfront payments received and billings during the fiscal year ended January 31, 2020
|
|
Revenue recognized during the fiscal year ended January 31, 2020
|
|
As of January 31, 2020
|
||||||||
Deferred revenue
|
|
$
|
173,929
|
|
|
$
|
249,215
|
|
|
$
|
(234,607
|
)
|
|
$
|
188,537
|
|
|
|
As of February 2, 2018
|
|
Upfront payments received and billings during the fiscal year ended February 1, 2019
|
|
Revenue recognized during the fiscal year ended February 1, 2019
|
|
As of February 1, 2019
|
||||||||
Deferred revenue
|
|
$
|
152,645
|
|
|
$
|
206,960
|
|
|
$
|
(185,676
|
)
|
|
$
|
173,929
|
|
|
|
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
|
|
$
|
285,833
|
|
|
$
|
160,195
|
|
|
$
|
85,660
|
|
|
$
|
28,497
|
|
|
$
|
11,481
|
|
Performance obligation - backlog
|
|
25,391
|
|
|
10,067
|
|
|
9,707
|
|
|
5,494
|
|
|
123
|
|
|||||
Total
|
|
$
|
311,224
|
|
|
$
|
170,262
|
|
|
$
|
95,367
|
|
|
$
|
33,991
|
|
|
$
|
11,604
|
|
|
|
As of February 1, 2019
|
|
Amount capitalized
|
|
Amount expensed
|
|
As of January 31, 2020
|
||||||||
Deferred commissions
|
|
$
|
62,895
|
|
|
$
|
19,053
|
|
|
$
|
(19,163
|
)
|
|
$
|
62,785
|
|
Deferred fulfillment costs
|
|
10,973
|
|
|
5,921
|
|
|
(5,528
|
)
|
|
11,366
|
|
|
|
As of February 2, 2018
|
|
Amount capitalized
|
|
Amount expensed
|
|
As of February 1, 2019
|
||||||||
Deferred commissions
|
|
$
|
57,229
|
|
|
$
|
19,915
|
|
|
$
|
(14,249
|
)
|
|
$
|
62,895
|
|
Deferred fulfillment costs
|
|
10,163
|
|
|
5,920
|
|
|
(5,110
|
)
|
|
10,973
|
|
|
|
January 31, 2020
|
|
February 1, 2019
|
||||||||||||||||||||
|
|
Gross
|
|
Accumulated
Amortization
|
|
Net
|
|
Gross
|
|
Accumulated
Amortization
|
|
Net
|
||||||||||||
|
|
(in thousands)
|
||||||||||||||||||||||
Customer relationships
|
|
$
|
189,518
|
|
|
$
|
(91,246
|
)
|
|
$
|
98,272
|
|
|
$
|
189,518
|
|
|
$
|
(77,152
|
)
|
|
$
|
112,366
|
|
Technology
|
|
137,371
|
|
|
(85,709
|
)
|
|
51,662
|
|
|
135,584
|
|
|
(71,620
|
)
|
|
63,964
|
|
||||||
Finite-lived intangible assets
|
|
326,889
|
|
|
(176,955
|
)
|
|
149,934
|
|
|
325,102
|
|
|
(148,772
|
)
|
|
176,330
|
|
||||||
Trade name
|
|
30,118
|
|
|
—
|
|
|
30,118
|
|
|
30,118
|
|
|
—
|
|
|
30,118
|
|
||||||
Total intangible assets
|
|
$
|
357,007
|
|
|
$
|
(176,955
|
)
|
|
$
|
180,052
|
|
|
$
|
355,220
|
|
|
$
|
(148,772
|
)
|
|
$
|
206,448
|
|
Fiscal Years
|
(in thousands)
|
||
2021
|
$
|
28,332
|
|
2022
|
28,332
|
|
|
2023
|
27,885
|
|
|
2024
|
23,491
|
|
|
2025
|
14,094
|
|
|
Thereafter
|
27,800
|
|
|
Total
|
$
|
149,934
|
|
|
|
Payments Due For
|
||||||||||
|
|
Purchase
|
|
Credit Facilities
|
|
|
||||||
Fiscal Years Ending
|
|
Obligations
|
|
and Other (1)
|
|
Total
|
||||||
2021
|
|
$
|
3,645
|
|
|
$
|
—
|
|
|
$
|
3,645
|
|
2022
|
|
1,788
|
|
|
500
|
|
|
2,288
|
|
|||
2023
|
|
260
|
|
|
—
|
|
|
260
|
|
|||
2024
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
2025
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
2026 and beyond
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Total
|
|
$
|
5,693
|
|
|
$
|
500
|
|
|
$
|
6,193
|
|
(1)
|
Reflects purchase obligations of annual maintenance services for hardware systems for internal use from a related party. See also “Note 13—Related Party Transactions.”
|
|
|
January 31, 2020
|
|
Weighted-average remaining lease term
|
|
5.8 years
|
|
Weighted-average discount rate
|
|
5.33
|
%
|
Fiscal Years Ending
|
|
January 31, 2020
|
||
2021
|
|
$
|
5,017
|
|
2022
|
|
6,498
|
|
|
2023
|
|
5,787
|
|
|
2024
|
|
5,346
|
|
|
2025
|
|
4,572
|
|
|
Thereafter
|
|
7,648
|
|
|
Total operating lease payments
|
|
$
|
34,868
|
|
Less imputed interest
|
|
(5,314
|
)
|
|
Total operating lease liabilities
|
|
$
|
29,554
|
|
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
|
|
|
Number
of Options |
|
Weighted-
Average Exercise Price Per Share |
|
Weighted-
Average Contractual Life (years) |
|
Weighted-Average Grant date Fair Value Per Share
|
|
Aggregate Intrinsic Value1
|
|||||||
|
|
|
|
|
|
|
|
|
(in thousands)
|
|||||||
Balance, February 3, 2017
|
2,578,167
|
|
|
$
|
14.00
|
|
|
|
|
|
|
|
||||
Granted
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|||||
Exercised
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|||||
Canceled, expired or forfeited
|
(53,065
|
)
|
|
14.00
|
|
|
|
|
|
|
|
|||||
Balance, February 2, 2018
|
2,525,102
|
|
|
$
|
14.00
|
|
|
|
|
|
|
|
||||
Granted
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|||||
Exercised
|
(9,826
|
)
|
|
14.00
|
|
|
|
|
|
|
|
|||||
Canceled, expired or forfeited
|
(27,514
|
)
|
|
14.00
|
|
|
|
|
|
|
|
|||||
Balance, February 1, 2019
|
2,487,762
|
|
|
$
|
14.00
|
|
|
|
|
|
|
|
||||
Granted
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|||||
Exercised
|
(94,826
|
)
|
|
14.00
|
|
|
|
|
|
|
|
|||||
Canceled, expired or forfeited
|
(144,939
|
)
|
|
14.00
|
|
|
|
|
|
|
|
|||||
Balance, January 31, 2020
|
2,247,997
|
|
|
$
|
14.00
|
|
|
6.10
|
|
$
|
6.08
|
|
|
$
|
3,890
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Options vested and expected to vest, January 31, 2020
|
2,244,835
|
|
|
$
|
14.00
|
|
|
6.10
|
|
$
|
6.08
|
|
|
$
|
3,884
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Options exercisable, January 31, 2020
|
1,646,650
|
|
|
$
|
14.00
|
|
|
6.06
|
|
$
|
6.11
|
|
|
$
|
2,849
|
|
(1)
|
The aggregate intrinsic values represent the total pre-tax intrinsic values based on the Company's closing share price of $15.73 as reported on the Nasdaq Global Select Market on January 31, 2020, that would have been received by the option holders had all in-the-money options been exercised as of that date.
|
|
Number
of
Shares
|
|
Weighted-
Average
Grant Date
Fair Value Per Share
|
|
Weighted-
Average Contractual Life (years) |
|
Aggregate Intrinsic Value1
|
|||||
|
|
|
|
|
|
|
(in thousands)
|
|||||
Balance, February 3, 2017
|
2,242,486
|
|
|
$
|
13.21
|
|
|
|
|
|
||
Granted
|
1,134,966
|
|
|
10.40
|
|
|
|
|
|
|||
Vested
|
(507,196
|
)
|
|
13.62
|
|
|
|
|
|
|||
Forfeited
|
(550,697
|
)
|
|
11.46
|
|
|
|
|
|
|||
Balance, February 2, 2018
|
2,319,559
|
|
|
$
|
12.16
|
|
|
|
|
|
||
Granted
|
2,274,508
|
|
|
9.78
|
|
|
|
|
|
|||
Vested
|
(793,723
|
)
|
|
11.99
|
|
|
|
|
|
|||
Forfeited
|
(453,866
|
)
|
|
10.69
|
|
|
|
|
|
|||
Balance, February 1, 2019
|
3,346,478
|
|
|
$
|
10.84
|
|
|
|
|
|
||
Granted
|
2,087,872
|
|
|
16.93
|
|
|
|
|
|
|
||
Vested
|
(1,282,743
|
)
|
|
11.10
|
|
|
|
|
|
|||
Forfeited
|
(1,088,990
|
)
|
|
12.44
|
|
|
|
|
|
|||
Balance, January 31, 2020
|
3,062,617
|
|
|
$
|
14.32
|
|
|
1.25
|
|
$
|
48,175
|
|
|
|
|
|
|
|
|
|
|||||
Restricted stock and restricted stock units expected to vest, January 31, 2020
|
2,909,217
|
|
|
$
|
14.27
|
|
|
1.31
|
|
$
|
45,762
|
|
|
|
Fiscal Year Ended
|
||||||||||
|
|
January 31,
2020 |
|
February 1,
2019 |
|
February 2,
2018 |
||||||
|
|
(in thousands)
|
||||||||||
Cost of revenue
|
|
$
|
1,206
|
|
|
$
|
780
|
|
|
$
|
891
|
|
Research and development
|
|
4,280
|
|
|
4,133
|
|
|
3,261
|
|
|||
Sales and marketing
|
|
1,694
|
|
|
2,652
|
|
|
735
|
|
|||
General and administrative
|
|
12,368
|
|
|
11,805
|
|
|
8,903
|
|
|||
Total stock-based compensation expense
|
|
$
|
19,548
|
|
|
$
|
19,370
|
|
|
$
|
13,790
|
|
|
|
Fiscal Year Ended
|
||||||||||
|
|
January 31, 2020
|
|
February 1, 2019
|
|
February 2, 2018
|
||||||
|
|
|
|
|
|
|
||||||
Loss before income taxes
|
|
$
|
(51,324
|
)
|
|
$
|
(45,954
|
)
|
|
$
|
(72,716
|
)
|
Income tax benefit
|
|
$
|
(19,658
|
)
|
|
$
|
(6,853
|
)
|
|
$
|
(62,299
|
)
|
Effective tax rate
|
|
38.3
|
%
|
|
14.9
|
%
|
|
85.7
|
%
|
|
Fiscal Year Ended
|
|||||||
|
January 31, 2020
|
|
February 1, 2019
|
|
February 2, 2018
|
|||
|
|
|||||||
U.S. federal statutory rate
|
21.0
|
%
|
|
21.0
|
%
|
|
33.7
|
%
|
Impact of foreign operations
|
0.5
|
|
|
0.2
|
|
|
0.5
|
|
State income taxes, net of federal tax benefit
|
3.2
|
|
|
3.2
|
|
|
2.6
|
|
Research and development credits
|
6.5
|
|
|
4.4
|
|
|
2.1
|
|
Nondeductible/nontaxable items
|
(0.6
|
)
|
|
(4.0
|
)
|
|
(2.1
|
)
|
U.S. Tax Reform
|
2.3
|
|
|
(9.4
|
)
|
|
49.5
|
|
Stock-based compensation
|
5.4
|
|
|
(0.5
|
)
|
|
(0.6
|
)
|
Total
|
38.3
|
%
|
|
14.9
|
%
|
|
85.7
|
%
|
|
Fiscal Year Ended
|
||||||||||
|
January 31, 2020
|
|
February 1, 2019
|
|
February 2, 2018
|
||||||
|
(in thousands)
|
||||||||||
Current:
|
|
|
|
|
|
|
|
||||
Federal
|
$
|
(8,135
|
)
|
|
$
|
(527
|
)
|
|
$
|
(20,288
|
)
|
State/Local
|
(895
|
)
|
|
(421
|
)
|
|
(886
|
)
|
|||
Foreign
|
1,918
|
|
|
1,274
|
|
|
80
|
|
|||
Current
|
(7,112
|
)
|
|
326
|
|
|
(21,094
|
)
|
|||
Deferred:
|
|
|
|
|
|
|
|||||
Federal
|
(10,367
|
)
|
|
(5,930
|
)
|
|
(41,825
|
)
|
|||
State/Local
|
(931
|
)
|
|
(1,132
|
)
|
|
(444
|
)
|
|||
Foreign
|
(1,248
|
)
|
|
(117
|
)
|
|
1,064
|
|
|||
Deferred
|
(12,546
|
)
|
|
(7,179
|
)
|
|
(41,205
|
)
|
|||
Income tax benefit
|
$
|
(19,658
|
)
|
|
$
|
(6,853
|
)
|
|
$
|
(62,299
|
)
|
|
Fiscal Year Ended
|
||||||||||
|
January 31, 2020
|
|
February 1, 2019
|
|
February 2, 2018
|
||||||
|
(in thousands)
|
||||||||||
Domestic
|
$
|
(55,800
|
)
|
|
$
|
(47,523
|
)
|
|
$
|
(77,390
|
)
|
Foreign
|
4,476
|
|
|
1,569
|
|
|
4,674
|
|
|||
Loss before income taxes
|
$
|
(51,324
|
)
|
|
$
|
(45,954
|
)
|
|
$
|
(72,716
|
)
|
|
January 31, 2020
|
|
February 1, 2019
|
||||
|
(in thousands)
|
||||||
Deferred tax assets:
|
|
|
|
|
|||
Deferred revenue
|
$
|
2,743
|
|
|
$
|
2,163
|
|
Provision for doubtful accounts
|
1,056
|
|
|
1,245
|
|
||
Credit carryforwards
|
5,796
|
|
|
—
|
|
||
Loss carryforwards
|
6,673
|
|
|
7,531
|
|
||
Stock-based and deferred compensation
|
9,249
|
|
|
8,468
|
|
||
Lease right-of-use asset
|
5,829
|
|
|
—
|
|
||
Other
|
2,135
|
|
|
2,948
|
|
||
Deferred tax assets
|
33,481
|
|
|
22,355
|
|
||
Valuation allowance
|
(4,613
|
)
|
|
(4,742
|
)
|
||
Deferred tax assets, net of valuation allowance
|
28,868
|
|
|
17,613
|
|
||
Deferred tax liabilities:
|
|
|
|
||||
Property and equipment
|
(3,733
|
)
|
|
(1,842
|
)
|
||
Purchased intangible assets
|
(44,444
|
)
|
|
(50,509
|
)
|
||
Operating and compensation related accruals
|
(16,723
|
)
|
|
(18,614
|
)
|
||
Lease liability
|
(4,589
|
)
|
|
—
|
|
||
Other
|
(1,067
|
)
|
|
(347
|
)
|
||
Deferred tax liabilities
|
(70,556
|
)
|
|
(71,312
|
)
|
||
Net deferred tax liabilities
|
$
|
(41,688
|
)
|
|
$
|
(53,699
|
)
|
|
Fiscal Year Ended
|
||||||||||
|
January 31, 2020
|
|
February 1, 2019
|
|
February 2, 2018
|
||||||
|
(in thousands)
|
||||||||||
Beginning unrecognized tax benefits
|
$
|
7,285
|
|
|
$
|
763
|
|
|
$
|
579
|
|
Increases related to tax positions of the current year
|
27
|
|
|
1,204
|
|
|
285
|
|
|||
Increases related to tax position of prior years
|
13
|
|
|
5,589
|
|
|
—
|
|
|||
Reductions for tax positions of prior years
|
(1,191
|
)
|
|
(271
|
)
|
|
(101
|
)
|
|||
Ending unrecognized tax benefits
|
$
|
6,134
|
|
|
$
|
7,285
|
|
|
$
|
763
|
|
|
|
|
|
Consolidated
|
||||||
|
|
|
|
January 31, 2020
|
|
February 1, 2019
|
||||
|
|
|
|
(in thousands)
|
||||||
Accounts receivable, net:
|
|
|
|
|
||||||
|
Gross accounts receivable
|
|
$
|
116,919
|
|
|
$
|
147,504
|
|
|
|
Allowance for doubtful accounts
|
|
(5,121
|
)
|
|
(6,160
|
)
|
|||
|
|
Total
|
|
$
|
111,798
|
|
|
$
|
141,344
|
|
Other current assets:
|
|
|
|
|
||||||
|
Income tax receivable
|
|
10,040
|
|
|
6,853
|
|
|||
|
Prepaid maintenance and support agreements
|
|
8,425
|
|
|
10,602
|
|
|||
|
Prepaid other
|
|
8,984
|
|
|
10,149
|
|
|||
|
|
Total
|
|
$
|
27,449
|
|
|
$
|
27,604
|
|
Property and equipment, net
|
|
|
|
|
||||||
|
Computer equipment
|
|
$
|
53,012
|
|
|
$
|
67,468
|
|
|
|
Leasehold improvements
|
|
25,087
|
|
|
26,151
|
|
|||
|
Other equipment
|
|
2,956
|
|
|
2,978
|
|
|||
|
|
Total property and equipment
|
|
81,055
|
|
|
96,597
|
|
||
|
Accumulated depreciation and amortization
|
|
$
|
(53,449
|
)
|
|
$
|
(60,619
|
)
|
|
|
|
Total
|
|
$
|
27,606
|
|
|
$
|
35,978
|
|
Other noncurrent assets
|
|
|
|
|
||||||
|
Prepaid maintenance agreements
|
|
1,260
|
|
|
1,351
|
|
|||
|
Deferred tax asset
|
|
1,633
|
|
|
648
|
|
|||
|
Deferred commission and fulfillment costs
|
|
74,151
|
|
|
73,868
|
|
|||
|
Other
|
|
1,548
|
|
|
2,371
|
|
|||
|
|
Total
|
|
$
|
78,592
|
|
|
$
|
78,238
|
|
Accrued and other current liabilities
|
|
|
|
|
||||||
|
Compensation
|
|
$
|
52,450
|
|
|
$
|
48,242
|
|
|
|
Related party payable, net
|
|
3,209
|
|
|
15,634
|
|
|||
|
Other
|
|
43,196
|
|
|
22,619
|
|
|||
|
|
Total
|
|
$
|
98,855
|
|
|
$
|
86,495
|
|
Other non-current liabilities
|
|
|
|
|
||||||
|
Deferred tax liabilities
|
|
$
|
43,321
|
|
|
$
|
54,347
|
|
|
|
Other
|
|
7,079
|
|
|
12,504
|
|
|||
|
|
Total
|
|
$
|
50,400
|
|
|
$
|
66,851
|
|
|
|
|
|
Fiscal Year Ended
|
||||||||||
|
|
|
|
January 31, 2020
|
|
|
February 1, 2019
|
|
|
February 2, 2018
|
|
|||
Net revenue
|
|
|
|
|
|
|
||||||||
|
United States
|
|
$
|
412,511
|
|
|
$
|
403,614
|
|
|
$
|
391,159
|
|
|
|
International
|
|
140,254
|
|
|
115,095
|
|
|
76,771
|
|
||||
|
|
Total
|
|
$
|
552,765
|
|
|
$
|
518,709
|
|
|
$
|
467,930
|
|
|
|
|
|
January 31, 2020
|
|
|
February 1, 2019
|
|
||
Property and equipment, net
|
|
|
|
|
||||||
|
United States
|
|
$
|
22,772
|
|
|
$
|
29,684
|
|
|
|
International
|
|
4,834
|
|
|
6,294
|
|
|||
|
|
Total
|
|
$
|
27,606
|
|
|
$
|
35,978
|
|
|
|
January 31, 2020
|
|
February 1, 2019
|
||||
|
|
(in thousands)
|
||||||
Related party payable (in accrued and other current liabilities)
|
|
$
|
3,209
|
|
|
$
|
15,634
|
|
|
|
|
|
|
||||
Accounts receivable from customers under reseller agreements with Dell (in accounts receivable, net)
|
|
$
|
13,674
|
|
|
$
|
21,760
|
|
|
|
|
|
|
||||
Net operating loss tax sharing receivable under agreement with Dell (in other current assets)
|
|
$
|
10,040
|
|
|
$
|
6,853
|
|
|
|
|
Fiscal Year 2020
|
||||||||||||||
|
|
|
First
|
|
Second
|
|
Third
|
|
Fourth
|
||||||||
|
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
||||||||
|
|
|
|
|
|
|
|
|
|
||||||||
Net revenue
|
|
$
|
132,842
|
|
|
$
|
136,605
|
|
|
$
|
141,332
|
|
|
$
|
141,986
|
|
|
Gross margin
|
|
$
|
70,001
|
|
|
$
|
73,010
|
|
|
$
|
79,764
|
|
|
$
|
77,194
|
|
|
Net loss
|
|
$
|
(8,270
|
)
|
|
$
|
(10,260
|
)
|
|
$
|
(7,908
|
)
|
|
$
|
(5,228
|
)
|
|
Net loss per common share (basic and diluted) (1)
|
|
$
|
(0.10
|
)
|
|
$
|
(0.13
|
)
|
|
$
|
(0.10
|
)
|
|
$
|
(0.06
|
)
|
|
Weighted-average common shares outstanding (basic and diluted)
|
|
80,467
|
|
|
80,674
|
|
|
80,518
|
|
|
80,591
|
|
|
|
|
Fiscal Year 2019
|
||||||||||||||
|
|
|
First
|
|
Second
|
|
Third
|
|
Fourth
|
||||||||
|
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
||||||||
|
|
|
|
|
|
|
|
|
|
||||||||
Net revenue
|
|
$
|
126,161
|
|
|
$
|
128,778
|
|
|
$
|
133,060
|
|
|
$
|
130,710
|
|
|
Gross margin
|
|
$
|
65,631
|
|
|
$
|
66,230
|
|
|
$
|
70,927
|
|
|
$
|
69,804
|
|
|
Net (loss) income
|
|
$
|
(13,819
|
)
|
|
$
|
(9,769
|
)
|
|
$
|
(3,735
|
)
|
|
$
|
(11,778
|
)
|
|
Net (loss) income per common share (basic and diluted) (1)
|
|
$
|
(0.17
|
)
|
|
$
|
(0.12
|
)
|
|
$
|
(0.05
|
)
|
|
$
|
(0.15
|
)
|
|
Weighted-average common shares outstanding (basic and diluted)
|
|
80,522
|
|
|
80,839
|
|
|
80,892
|
|
|
80,587
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
Balance at
|
|
Charged to
|
|
|
|
Balance at
|
||||||||
|
|
|
|
Beginning
|
|
Income
|
|
Charged to
|
|
End of
|
||||||||
Fiscal Year
|
|
Description
|
|
of Period
|
|
Statement
|
|
Allowance
|
|
Period
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||
Trade Receivables:
|
|
|
|
|
|
|
|
|
|
|
||||||||
2020
|
|
Allowance for doubtful accounts
|
|
$
|
6,160
|
|
|
$
|
3,099
|
|
|
$
|
(4,138
|
)
|
|
$
|
5,121
|
|
2019
|
|
Allowance for doubtful accounts
|
|
$
|
8,246
|
|
|
$
|
2,356
|
|
|
$
|
(4,442
|
)
|
|
$
|
6,160
|
|
2018
|
|
Allowance for doubtful accounts
|
|
$
|
6,132
|
|
|
$
|
3,947
|
|
|
$
|
(1,833
|
)
|
|
$
|
8,246
|
|
Michael R. Cote
President and Chief Executive Officer
SecureWorks Corp.
|
Pamela Daley
Retired Senior Vice President and
Senior Advisor to the Chairman
of General Electric Company
|
Michael S. Dell
Chairman and Chief Executive Officer
Dell Technologies Inc.
|
Mark J. Hawkins
President and Chief Financial Officer
Salesforce.com, Inc.
(software)
|
Egon Durban
Managing Partner
Silver Lake Partners
(private equity)
|
Yagyensh C. (Buno) Pati
Partner
Centerview Capital Technology
(investments)
|
(1)
|
Financial Statements: The following financial statements are filed as a part of this report under “Part II — Item 8 Financial Statements and Supplementary Data”:
|
Report of Independent Registered Public Accounting Firm
|
|
Consolidated Statements of Financial Position as of January 31, 2020 and February 1, 2019
|
|
Consolidated Statements of Operations for the fiscal years ended January 31, 2020, February 1, 2019 and February 2, 2018
|
|
Consolidated Statements of Comprehensive Loss for the fiscal years ended January 31, 2020, February 1, 2019 and February 2, 2018
|
|
Consolidated Statements of Cash Flows for the fiscal years ended January 31, 2020, February 1, 2019 and February 2, 2018
|
|
Consolidated Statements of Stockholder's Equity for the fiscal years ended January 31, 2020, February 1, 2019 and February 2, 2018
|
|
Notes to Consolidated Financial Statements
|
|
Schedule II - Valuation and Qualifying Accounts
|
|
(2)
|
Financial Statement Schedules: The following financial statement schedule is included following the Notes to the Consolidated Financial Statements under “Part II — Item 8 — Financial Statements and Supplementary Data”:
|
(3)
|
Exhibits:
|
EXHIBIT INDEX - Continued
|
||
Exhibit No.
|
|
Description
|
10.9+
|
|
|
10.9.1+
|
|
|
10.9.2
|
|
|
10.10+
|
|
|
10.10.1+
|
|
|
10.10.2+
|
|
|
10.10.3+
|
|
|
10.10.4+
|
|
|
10.10.5+
|
|
|
10.10.6
|
|
|
10.10.7+
|
|
|
10.11
|
|
|
10.12
|
|
|
10.13
|
|
|
10.14
|
|
|
10.15
|
|
EXHIBIT INDEX - Continued
|
||
Exhibit No.
|
|
Description
|
10.16
|
|
|
10.17
|
|
|
10.18
|
|
|
10.19*
|
|
|
10.20*
|
|
|
10.21*
|
|
|
10.22*
|
|
|
10.23*
|
|
|
10.24*
|
|
|
10.25*
|
|
|
10.26*
|
|
|
10.27*
|
|
|
10.28*
|
|
|
10.29*
|
|
|
10.30*
|
|
|
10.31*
|
|
|
10.32*
|
|
|
10.33*
|
|
|
10.34*
|
|
|
21.1††
|
|
|
SecureWorks Corp.
|
|
|
|
|
|
By:
|
/s/ Michael R. Cote
|
|
|
Michael R. Cote
|
|
|
President and Chief Executive Officer
|
|
|
(Duly Authorized Officer)
|
|
|
|
|
|
SIGNATURE
|
|
TITLE
|
|
DATE
|
|
|
|
|
|
/s/ Michael R. Cote
|
|
President, Chief Executive Officer and Director
|
|
March 27, 2020
|
Michael R. Cote
|
|
(Principal Executive Officer)
|
|
|
|
|
|
|
|
/s/ Paul M. Parrish
|
|
SVP, Chief Financial Officer
|
|
March 27, 2020
|
Paul M. Parrish
|
|
(Principal Financial Officer and
Principal Accounting Officer)
|
|
|
|
|
|
|
|
/s/ Michael S. Dell
|
|
Chairman of the Board of Directors
|
|
March 27, 2020
|
Michael S. Dell
|
|
|
|
|
|
|
|
|
|
/s/ Egon Durban
|
|
Director
|
|
March 27, 2020
|
Egon Durban
|
|
|
|
|
|
|
|
|
|
/s/ Pamela Daley
|
|
Director
|
|
March 27, 2020
|
Pamela Daley
|
|
|
|
|
|
|
|
|
|
/s/ Yagyensh C. Pati
|
|
Director
|
|
March 27, 2020
|
Yagyensh C. Pati
|
|
|
|
|
|
|
|
|
|
/s/ Mark J. Hawkins
|
|
Director
|
|
March 27, 2020
|
Mark J. Hawkins
|
|
|
|
|
|
|
|
|
|
•
|
the election and removal of the Company’s directors;
|
•
|
amendments to the Company certificate; and
|
•
|
determinations with respect to mergers, business combinations, dispositions of substantially all of the Company’s assets or certain other extraordinary corporate transactions.
|
|
•
|
|
upon a transfer of such share of Class B Common Stock if, after the transfer, such share is not beneficially owned by an entity defined as a “Denali Entity” in the Company certificate (a “Dell Technologies Entity”); and
|
|
•
|
|
on the date (if any) on which the aggregate number of outstanding shares of Class B Common Stock beneficially owned by the Dell Technologies Entities represents less than 10% of the aggregate number of shares of the common stock outstanding on that date, so long as a distribution, as discussed below under “Termination of Voluntary and Automatic Conversion Rights,” has not occurred.
|
|
(1)
|
Dell Technologies Inc., any of its successors by way of merger, consolidation or share exchange, any acquiror of all or substantially all of its assets, and any person of which Dell Technologies Inc. becomes a subsidiary; and
|
|
(2)
|
any subsidiary of any of the entities referred to in clause (1).
|
|
•
|
|
a “subsidiary” of any person is a corporation, partnership, limited liability company, joint venture, association or other legal entity (a) in which the person beneficially owns voting interests representing 50% or more in voting power of the outstanding voting interests or (b) if no governing body exists at that legal entity, in which the person beneficially owns capital stock, partnership interests, limited liability company interests or other ownership interests representing 50% or more in voting power of such ownership interests, with the person being deemed to have beneficial ownership of 50% or more in voting power of such voting interests or ownership interests of a partnership or limited liability company if the person or a subsidiary of the person (or a combination thereof) is, or controls (directly or indirectly), the sole general partner or the managing general partner of that partnership or the managing member of that limited liability company;
|
|
•
|
|
“voting interests” of any legal entity consist of the capital stock, partnership interests, limited liability company interests or other ownership interests entitled generally to vote on the election of directors, managers or other voting members of the governing body of that legal entity; and
|
|
•
|
|
“control” means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a legal entity, whether through the ownership of voting interests, by contract or otherwise.
|
|
(1)
|
Dell Technologies Inc., any of its successors by way of merger, consolidation or share exchange, any acquiror of all or substantially all of its assets, and any person of which Dell Technologies Inc. becomes a subsidiary;
|
|
(2)
|
any legal entity of which any of the entities referred to in clause (1) is the beneficial owner of voting interests representing 20% or more in voting power of the outstanding voting interests;
|
|
(3)
|
any other legal entity that, directly or indirectly, is controlled by, controls or is under common control with any of the entities referred to in clause (1); and
|
|
(4)
|
(a) Michael S. Dell, (b) any legal entity of which Mr. Dell is the beneficial owner of voting interests representing 20% or more in voting power of the outstanding voting interests, (c) any other legal entity that, directly or indirectly, is controlled by Mr. Dell, (d) Susan Lieberman Dell Separate Property Trust (the “Dell Trust”), (e) MSDC Denali Investors, L.P. and MSDC Denali EIV, LLC (the “MSD Funds”) and (f) specified permitted transferees of Mr. Dell, the Dell Trust and the MSD Funds, as described below.
|
|
•
|
|
Mr. Dell, the Dell Trust or any immediate family member, as defined in the Company certificate, of Mr. Dell;
|
|
•
|
|
the Michael & Susan Dell Foundation and any other private foundation or supporting organization (as defined in Section 509(a) of the Internal Revenue Code) established and principally funded directly or indirectly by Mr. Dell and/or his spouse;
|
|
•
|
|
one or more trusts whose current beneficiaries are, and will remain for so long as that trust holds the Company’s securities, any of (or any combination of) Mr. Dell, one or more of his immediate family members or any charitable entities referred to in the preceding bullet point;
|
|
•
|
|
any corporation, limited liability company, partnership or other legal entity wholly owned by any one or more persons or legal entities described in any one of the three preceding bullet points; and
|
|
•
|
|
from and after Mr. Dell’s death, any recipient under his will, any revocable trust established by him that becomes irrevocable upon his death, or by the laws of descent and distribution.
|
|
•
|
|
any of its controlled affiliates (other than portfolio companies); and
|
|
•
|
|
an affiliated private equity fund of such MSD Fund that remains such an affiliate or affiliated private equity fund of such MSD Fund.
|
|
•
|
|
engaging in the same or similar activities or lines of business as those in which we are engaged;
|
|
•
|
|
doing business with any of our clients, customers or vendors; or
|
|
•
|
|
employing, or otherwise engaging or soliciting for such purpose, any of our officers, directors or employees.
|
|
•
|
|
we, to the fullest extent permitted by law, renounce any interest or expectancy in the potential transaction or business opportunity or being offered an opportunity to participate in it, and waive any claim that the potential transaction or business opportunity constituted a corporate opportunity that should have been presented to us; and
|
|
•
|
|
the officer or director will have no duty to communicate or present the potential transaction or business opportunity to us and will, to the fullest extent permitted by law, not be liable to us or the Company’s stockholders for breach of any fiduciary duty as the Company’s officer or director, including, without limitation, by reason of the fact that any one or more of the Dell Technologies Entities or the Silver Lake Entities pursues or acquires the potential transaction or business opportunity for itself, directs the potential transaction or business opportunity to another person, or otherwise does not communicate information regarding the potential transaction or business opportunity to us.
|
•
|
any derivative action or proceeding brought on behalf of the Company;
|
•
|
any action asserting a claim of breach of a fiduciary duty owed by, or other wrongdoing by, any of the Company’s directors, officers or other employees, or stockholders to the Company or the Company’s stockholders;
|
•
|
any action asserting a claim arising pursuant to any provision of the DGCL or as to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware; and
|
•
|
any action asserting a claim governed by the internal affairs doctrine.
|
|
•
|
|
provide that the Class B Common Stock is entitled to ten votes per share, while the Class A Common Stock is entitled to one vote per share, enabling Dell Technologies, as the beneficial owner of all outstanding shares of the Class B Common Stock, to control the outcome of all matters submitted to a vote of the Company’s stockholders, including the election of directors, on which the holders of the Class B Common Stock are entitled to vote;
|
|
•
|
|
provide for the classification of the Board of Directors into three classes, with approximately one-third of the directors to be elected each year;
|
|
•
|
|
limit the number of directors constituting the entire Board of Directors to a maximum of 15 directors, subject to the rights of the holders of any outstanding series of preferred stock, and provide that the authorized number of directors at any time will be fixed exclusively by a resolution adopted by the affirmative vote of the authorized number of directors (without regard to vacancies);
|
|
•
|
|
provide that, at such time (if any) as the Dell Technologies Entities beneficially own capital stock representing less than 40% in voting power of the Company’s capital stock entitled to vote generally on the election of directors, any newly-created directorship and any vacancy on the Board of Directors may be filled only by the affirmative vote of a majority of the remaining directors then in office;
|
|
•
|
|
provide that, at such time (if any) as the Dell Technologies Entities beneficially own capital stock representing less than 50% in voting power of the capital stock entitled to vote generally on the election of directors, directors may be removed only for cause and only by the affirmative vote of the holders of at least a majority in voting power of all outstanding shares of the Company’s capital stock, voting together as a single class;
|
|
•
|
|
provide that a special meeting of stockholders may be called only by the chairman of the Board of Directors, a majority of the directors then in office or, so long as Dell Technologies Entities beneficially own capital stock representing at least 40% in voting power of the Company’s capital stock entitled to vote generally on the election of directors, Dell Technologies;
|
|
•
|
|
provide that, at such time (if any) as the Dell Technologies Entities beneficially own capital stock representing less than 50% in voting power of the Company’s capital stock entitled to vote generally on the election of directors, any action required or permitted to be taken by the Company’s stockholders at any annual or special meeting may not be effected by a written consent in lieu of a meeting unless that action and the taking of that action by written consent have been approved in advance by the Board of Directors;
|
|
•
|
|
establish advance notice procedures for stockholders to make nominations of candidates for election as directors or to present any other business for consideration at any annual or special meeting of the Company’s stockholders; and
|
|
•
|
|
as described above, provide authority for the Board of Directors without stockholder approval to provide for the issuance of up to 200,000,000 shares of preferred stock, in one or more series, with terms and conditions, and having rights, privileges and preferences, to be determined by the Board of Directors.
|
|
•
|
|
before that time, the board of directors of the corporation approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder;
|
|
•
|
|
upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the voting stock outstanding (but not the outstanding voting stock owned by the interested stockholder) those shares owned by persons who are directors and also officers and by employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or
|
|
•
|
|
at or after that time, the business combination is approved by the board of directors and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least 66 2⁄3% of the outstanding voting stock that is not owned by the interested stockholder.
|
|
•
|
|
any merger or consolidation of the corporation or any majority-owned subsidiary of the corporation with the interested stockholder or, in specified circumstances, any other entity if the merger or consolidation is caused by the interested stockholder;
|
|
•
|
|
any sale, lease, exchange, mortgage, pledge, transfer or other disposition involving the interested stockholder of assets of the corporation or of any majority-owned subsidiary of the corporation which have an aggregate market value equal to 10% or more of either (1) the aggregate market value of the consolidated assets of the corporation or (2) the aggregate market value of all outstanding stock of the corporation;
|
|
•
|
|
subject to certain limited exceptions, any transaction that results in the issuance or transfer by the corporation or any majority-owned subsidiary of the corporation of any stock of the corporation to the interested stockholder;
|
|
•
|
|
any transaction involving the corporation or any majority-owned subsidiary of the corporation that has the effect of increasing the proportionate share of the stock of any class or series of the corporation or any such subsidiary owned by the interested stockholder; or
|
|
•
|
|
any receipt by the interested stockholder of any direct or indirect benefit of any loans, advances, guarantees, pledges or other financial benefits provided by or through the corporation or any majority-owned subsidiary of the corporation.
|
|
|
|
|
Exhibit 21.1
|
|
|
Jurisdiction of Incorporation
|
Name of Subsidiary
|
|
or Organization
|
SecureWorks, Inc.
|
|
Georgia
|
SecureWorks Australia Pty. Ltd.
|
|
Australia
|
SecureWorks Europe Limited
|
|
United Kingdom
|
SecureWorks Europe S.R.L.
|
|
Romania
|
SecureWorks India Private Limited
|
|
India
|
SecureWorks Japan K.K.
|
|
Japan
|
SecureWorks SAS
|
|
France
|
|
|
|
|
Exhibit 23.1
|
1.
|
I have reviewed this Annual Report on Form 10-K 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.
|
March 27, 2020
|
|
/s/ Michael R. Cote
|
|
|
Michael R. Cote
|
|
|
President and Chief Executive Officer
|
1.
|
I have reviewed this Annual Report on Form 10-K 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):
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(a)
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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
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(b)
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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.
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March 27, 2020
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/s/ Paul M. Parrish
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Paul M. Parrish
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Chief Financial Officer
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1.
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The annual report on Form 10-K of the Company for the fiscal year ended January 31, 2020 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
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2.
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The information contained in such annual report on Form 10-K fairly presents, in all material respects, the financial condition and results of operations of the Company.
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Date:
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March 27, 2020
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/s/ Michael R. Cote
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Michael R. Cote
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President and Chief Executive Officer
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Date:
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March 27, 2020
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/s/ Paul M. Parrish
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Paul M. Parrish
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Chief Financial Officer
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