Executive Summary

Q1 FY25 revenue of $85.7M came in above company guidance ($83–$85M), driven by stronger professional services; CFO noted revenue of “$86 million” vs the range (rounding vs the 8‑K table) . Taegis revenue grew 10% YoY to $69.1M as Taegis ARR reached $287M (+7% YoY) .
Profitability inflected on a non-GAAP basis: EPS $0.05 (vs $(0.20) LY) and adjusted EBITDA $5.6M (6.6% margin), with 1,000 bps YoY expansion in total gross margin to ~70% on automation/AI and cloud architecture leverage .
GAAP net loss widened to $(36.1)M (or $(0.41) per share), largely due to a $26.2M non-cash valuation allowance from tax deconsolidation with Dell; balance sheet ended with $47.0M cash and no debt .
FY25 outlook was raised at the low end for EBITDA and EPS; Q2 guide embeds the temporary drag from remaining redundant costs and lower non-strategic professional services before sequential growth resumption in 2H FY25 (catalyst: margin/ARR trajectory + partner momentum) .

What Went Well and What Went Wrong

What Went Well

Double-digit Taegis growth and margin expansion: “Taegis revenue grew 10% year-over-year to $69 million... Taegis gross margins improving 430 basis points year-over-year” .
Product innovation and partner traction: Launch of Taegis NDR (AI-powered network defense) and deeper VDR-XDR integration; new marquee partners in Japan (SoftBank; Tokio Marine & Nichido) broadened reach .
Operational leverage from AI and cloud: “The continued expansion of our Taegis gross margin reflects... investments in AI and unique cloud architecture” . CFO: total gross margin up ~1,000 bps YoY; adjusted EBITDA beat guidance .

What Went Wrong

Top-line still declined YoY (-9%) given the wind-down of legacy Other MSS; subscription MSS revenue diminished as the exit completed .
GAAP net loss impacted by tax deconsolidation: “$26.2 million valuation allowance recorded as a result of our tax deconsolidation from Dell Technologies Inc.” .
Q2 to be the near-term trough: guide reflects remaining redundant costs and softer non-strategic services; sequential revenue growth expected to resume in 2H FY25 as the transition overhang clears .

Financial Results

Key P&L and cash metrics

Metric	Q3 FY2024	Q4 FY2024	Q1 FY2025
Total Revenue ($M)	$89.364	$89.154	$85.652
GAAP EPS	$(0.17)	$(0.10)	$(0.41)
Non-GAAP EPS	$0.00	$0.08	$0.05
Total Gross Margin % (GAAP)	61.3%	65.6%	67.5%
Adjusted EBITDA ($M)	$(1.224)	$3.831	$5.645
Adjusted EBITDA Margin %	—	4.3%	6.6%
Cash & Equivalents ($M)	$58.105	$68.655	$47.024

Segment and revenue mix

Revenue Component ($M)	Q3 FY2024	Q4 FY2024	Q1 FY2025
Subscription – Total	$75.212	$75.260	$72.221
• Taegis Subscription	$67.346	$68.9	$69.075
• Managed Security Services	$7.866	—	$3.146
Professional Services	$14.152	$13.894	$13.431

KPIs and operating metrics

KPI	Q3 FY2024	Q4 FY2024	Q1 FY2025
Taegis ARR ($M)	$279	$285	$287
Taegis Gross Margin % (GAAP)	70.4%	70.8%	71.9%
Taegis Gross Margin % (Non-GAAP)	72.7%	73.1%	74.3%
Taegis ARPC ($)	$139,000	$145,000	$145,000
Taegis Customers (#)	N/A	2,000	2,000
Endpoint Count YoY	N/A	+9%	+11%

Estimate comparisons

S&P Global consensus estimates were unavailable in our system for SCWX this quarter; as a result, vs-consensus comparisons are not shown. We attempted to retrieve S&P Global consensus but no CIQ mapping was available for SCWX at query time.

Guidance Changes

Metric	Period	Previous Guidance (Mar 14, 2024)	Current Guidance (Jun 6, 2024)	Change
Total ARR	FY2025	≥$300M	≥$300M	Maintained
Total Revenue	FY2025	$325M–$335M	$325M–$335M	Maintained
Non-GAAP Net Income	FY2025	$0M–$7M	$3M–$8M	Raised
Non-GAAP EPS	FY2025	$0.00–$0.08	$0.03–$0.09	Raised
Adjusted EBITDA	FY2025	$4M–$12M	$6M–$12M	Raised (low end)
Cash from Operations	FY2025	($2M) to $8M	($2M) to $8M	Maintained
Revenue	Q2 FY2025	N/A	$80M–$82M	—
Adjusted EBITDA	Q2 FY2025	N/A	$1M–$3M	—
Non-GAAP EPS	Q2 FY2025	N/A	$0.00–$0.02	—

Notes: CFO reiterated Q2 trough dynamics from redundant costs and lower non-strategic services, with H2 sequential growth expected as the transition overhang clears .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q3 FY24)	Previous Mentions (Q4 FY24)	Current Period (Q1 FY25)	Trend
AI/automation & margins	AI reduces alert noise; adj. EBITDA nearing breakeven; Taegis non-GAAP GM +510 bps YoY	“Positive EBITDA” in Q4; GM expansion via AI/cloud; 12 months data stored at predictable cost	1,000 bps YoY total GM expansion; Taegis GM +430 bps YoY; continued AI leverage	Positive, sustained margin lift
SIEM consolidation tailwind	Customers replacing legacy SIEM; partner-led wins	SIEM displacement a tailwind; vendor consolidation up	More “in earnest”; XDR platform replaces SIEM/point products; reference playbook from MSSP conversion	Strengthening
Product roadmap (NDR, VDR)	Cloud security, partner configurability; ML/LLM advances	AI Threat Score; platform scale; partner ecosystem building	Taegis NDR launch; VDR-XDR integration for risk-centric prioritization	Expanding portfolio
Go-to-market & partners	90% new logos via partners; MSSP scaling	90% new logos via partners; partner win rates rising	SoftBank MSSP; Tokio Marine IR partnership; 50+ MSSPs; federated multi-tenant scaling	Deeper channel leverage
Macro/renewals	Elongated cycles; lower Q4 budget flush expected	Measured FY25 renewal assumptions; big cohort renewals; cycletimes stable	“Steady state” demand; H2 sequential growth expected; Q2 bottom	Stabilizing, cautious

Management Commentary

“We delivered on this transformation… while delivering even better security outcomes… We are pleased to move past the financial headwinds from the sunsetting of our non-strategic lines of business going forward.” — CEO Wendy Thomas .
“Q1 non-GAAP Taegis subscription gross margin expanded 120 bps sequentially to 74.3%… Total gross margin expanded by 1,000 basis points… Adjusted EBITDA was $6 million, exceeding our guidance” — CFO Alpana Wegner .
“GAAP net loss reflects $26 million in non-cash tax expense for valuation allowance recorded as a result of our tax deconsolidation from Dell Technologies” — CFO Alpana Wegner .
“Taegis NDR… closes the gap to detect network-based attacks… AI-powered behavior detection… automatically blocking threats in real time” — CEO Wendy Thomas (prepared remarks) .

Q&A Highlights

SIEM consolidation as a multi-pronged opportunity: Taegis’ open XDR replaces SIEM and point products; Secureworks has a proven playbook and partner references from MSSP migrations .
ARR slope/back-half setup: Management expects sequential subscription growth to show in 2H FY25 now that Other MSS ARR is de minimis; steady-state demand assumptions maintained .
Linearity: No Q4 pull-forward in Q1 (typical moderation post-year-end); nothing cautionary for Q2 from linearity .
Balance sheet and trough dynamics: $47M cash, no debt; Q2 seen as bottom for revenue and profit with redundant costs rolling off in 2H; operating leverage improving .

Estimates Context

We attempted to pull Wall Street consensus from S&P Global for Q1 FY25 and forward quarters; however, consensus was unavailable in our system for SCWX at query time, so vs-consensus comparisons are not shown.

Key Takeaways for Investors

The pivot to a product-led SaaS model is working: Taegis revenue/ARR growth, expanding gross margins, and positive non-GAAP earnings/EBITDA reinforce a structurally improving P&L .
Near-term noise from legacy wind-down is largely past; Q2 embeds the final cost drag before sequential growth resumes in 2H FY25, a potential catalyst as investors refocus on core Taegis KPIs .
AI-first architecture is driving durable margin tailwinds (data architecture + automation), supporting continued non-GAAP profitability even as the company invests in growth .
Product velocity (NDR; VDR-XDR integration) and partner ecosystem scale (SoftBank, Tokio Marine, >50 MSSPs) broaden TAM and support multi-vector consolidation wins vs SIEM and point tools .
Mix shift continues: MSS revenue tailing off as planned; subscription is now essentially all Taegis, simplifying the story and improving visibility on subscription growth and margins .
Watch renewal cohort execution and NRR through FY25 amid measured macro assumptions; ARPC is premium and stable, but management is prioritizing retention over price expansion where needed .

Sources: Q1 FY25 8‑K and press release ; Q1 FY25 earnings call ; Q4 FY24 8‑K and call ; Q3 FY24 8‑K and call ; product/partner PRs .

SecureWorks Corp (SCWX)·Q1 2025 Earnings Summary