SecureWorks Corp (SCWX)·Q2 2025 Earnings Summary

Executive Summary

• Q2 FY25 revenue was $82.2M, at the high end of guidance, with Taegis revenue up 7% YoY to $71.2M; non-GAAP EPS was $0.00 and adjusted EBITDA was $1.0M (1.2% margin), held back by ~$1.3M of transitional costs tied to the legacy MSS wind-down .
• ARR reached $290M (+5% YoY) and Taegis gross margins expanded (GAAP 71.8%, non-GAAP 74.3%), underscoring efficiency gains from automation, AI and scalable cloud architecture .
• Guidance: Q3 FY25 revenue $80–$82M, adj. EBITDA $0–$2M, non-GAAP EPS ($0.01)–$0.01; FY25 revenue range narrowed/raised at the low end to $328–$335M with other FY25 metrics maintained (ARR ≥$300M; non-GAAP EPS $0.03–$0.09; adj. EBITDA $6–$12M; CFFO ($2M)–$8M) .
• Catalyst narrative: completion of legacy MSS wind-down, strengthening channel momentum (80% of Q2 new logos via partners; highest win rate since Partner First launch), and new launches (Taegis IDR, ManagedXDR Plus) support medium-term growth and continued gross margin expansion .

What Went Well and What Went Wrong

• What Went Well

  • Taegis momentum and margin expansion: “Taegis GAAP gross margin and non-GAAP gross margin continued to expand… reaching 71.8% and 74.3%” with ARR at $290M (+5% YoY) .
  • Channel execution: ~80% of global Taegis new-logo sales closed via partners; partner win rate reached the highest level since launch .
  • Product innovation: Launched Taegis IDR to address identity threats and ManagedXDR Plus for tailored MDR; CEO emphasized the “open, AI-powered platform” as a growth cornerstone .

• What Went Wrong

  • Top-line still down YoY: Total revenue declined to $82.2M vs $93.0M in Q2 FY24 amid the strategic wind-down of legacy MSS (MSS revenue effectively de minimis) .
  • Profitability cooled sequentially: Adjusted EBITDA fell to $1.0M from $5.6M in Q1, impacted by >$1.3M transitional costs from the MSS exit; CFO indicated those costs are now behind the company .
  • Mixed KPI optics: ARPC rose to $150k (+14% YoY) and endpoints +9% YoY, but ARR growth (+5% YoY) was modest; management cited normal churn dynamics skewed toward lower-ARPC customers and partner-led fit as drivers .

Financial Results

Segment revenue ($M):

KPIs and Taegis metrics:

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• CEO Wendy Thomas: “Our open, AI-powered platform has proven itself to be the shield that keeps companies safely up and running… The acceleration of security value to our customers through new solutions remains a cornerstone of our growth strategy” .
• CFO Alpana Wegner: “Our [Q2] results demonstrate the sustainability of our Taegis gross margin expansion… giving us confidence in our continued positive adjusted EBITDA trajectory” .
• CFO on Q2 performance drivers: “We delivered total revenue exceeding $82 million… primarily on the strength of subscription deals closing earlier in the quarter… Adjusted EBITDA was $1 million… impacted with more than $1.3 million of redundant or transitional costs” .
• CFO on wind-down: “We’ve got those [legacy MSS] costs behind us… completed the wind down completely at the end of Q2” .

Q&A Highlights

• Demand/macro and Partner First: Sales cycles were “stable, if not slightly better,” with 80% of new-logo sales via partners and highest win rates since Partner First launch .
• Linearity: Larger deals closed earlier in Q2 improved linearity; viewed as a one-off rather than a trend at this stage .
• Legacy MSS exit: Q2 adjusted EBITDA absorbed >$1.3M transitional costs; management said remaining legacy costs are behind them and wind-down is complete .
• SIEM displacement and consolidation: Management sees accelerating opportunities as customers migrate from legacy SIEM to XDR and consolidate vendors; platform breadth and ROI cited as advantages .
• ARR vs ARPC: ARPC up 14% YoY to $150k and endpoints +9% YoY, but ARR +5% YoY; management pointed to churn concentrated in lower-ARPC cohorts and better fit via MSSP partners .

Estimates Context

• Street consensus: S&P Global consensus estimates were not available via our tool for SCWX this quarter; as such, we do not present a vs-consensus comparison. We note management delivered revenue at the high end of its prior guide and non-GAAP EPS within guidance ranges .
• Where estimates may adjust: Given the raised low end of FY25 revenue and affirmation of profitability targets, models may shift modestly higher on full-year revenue with largely unchanged EPS/EBITDA trajectories .

Key Takeaways for Investors

• Taegis-led mix shift is playing out: Taegis revenue +7% YoY with structurally higher margins (GAAP 71.8%, non-GAAP 74.3%), supporting sustainable gross margin expansion .
• Transformation catalyst realized: Legacy MSS wind-down completed; transitional costs removed, enabling clearer operating leverage in 2H and beyond .
• Channel momentum is tangible: ~80% of Q2 new logos via partners and highest partner win rate since launch point to improving pipeline conversion and lower CAC .
• Consolidation/SIEM replacement tailwind: Customer appetite to consolidate and replace SIEM is strengthening; SCWX cites competitive wins and expanding platform (IDR, NDR, VDR) as differentiators .
• Near-term setup: Q3 guide implies flattish revenue and breakeven profitability while investments continue; focus remains on ARR acceleration and retention as large renewal cohorts progress .
• Watch KPIs: ARPC ($150k), endpoints (+9% YoY) and ARR ($290M) trajectory into 2H; stabilization/uptick here is key to reaccelerating subscription revenue growth .
• Cash/Balance sheet: $47.6M cash, no debt; management reiterates FY25 CFFO range of ($2M) to $8M, signaling disciplined opex and improving unit economics .

Other relevant press releases for context: Taegis ManagedXDR Plus launch (mid-market, tailored MDR) and Taegis IDR (identity threat detection/response) bolster product breadth and reinforce the consolidation/ROI message .