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SecureWorks Corp (SCWX)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 FY2024 revenue was $89.2M, above guidance of $86–$88M; non-GAAP EPS was $0.08 vs guided loss of $0.03–$0.05; adjusted EBITDA positive at $3.8M, marking a key profitability milestone .
  • Taegis subscription revenue grew 15% YoY to $68.9M, with non-GAAP Taegis gross margin expanding to 73.1% (up 390 bps YoY); ARR reached $285M (+9% YoY) .
  • FY2025 outlook targets ARR ≥$300M, revenue $325–$335M, non-GAAP EPS $0.00–$0.08, adjusted EBITDA $4–$12M; Q1 FY2025 revenue guided to $83–$85M with EPS -$0.01 to $0.01 .
  • Catalysts: sunset of legacy Other MSS in Q1 FY2025, improving Taegis margins, partner-first motion driving higher win rates and ARPC ($145k in Q4) .

What Went Well and What Went Wrong

What Went Well

  • Beat guidance and turned EBITDA positive: revenue $89.2M vs $86–$88M guide and adjusted EBITDA $3.8M vs breakeven guide; non-GAAP EPS $0.08 vs guided loss ($0.03)–($0.05) .
  • Taegis momentum and margin expansion: Taegis revenue +15% YoY to $68.9M; non-GAAP Taegis gross margin 73.1% (+390 bps YoY), supported by scalable cloud architecture and AI/automation .
  • Strategic execution and market validation: CEO highlighted contribution to LockBit disruption and AI-powered Threat Score; Frost & Sullivan award and CRN Security 100 recognition bolster positioning (“Taegis sees more, detects better and responds faster”) .

What Went Wrong

  • Total revenue down YoY due to wind-down of Other MSS: $89.2M vs $115.3M in Q4 FY2023 (-$26.1M), with Other MSS contraction driving mix headwinds .
  • Continued GAAP losses: Q4 GAAP net loss of $8.3M (-$0.10/share), albeit improving from -$40.0M (-$0.47/share) YoY .
  • Measured outlook on renewals and NRR: management flagged caution given the largest renewal cohort since Taegis launch; guidance reflects macro scrutiny and potential NRR pressure even amid strong CSAT/NPS .

Financial Results

MetricQ4 2023Q2 2024Q3 2024Q4 2024
Total Revenue ($M)$115.3 $93.0 $89.4 $89.2
GAAP EPS ($)-$0.47 -$0.38 -$0.17 -$0.10
Non-GAAP EPS ($)-$0.17 -$0.10 $0.00 $0.08
GAAP Gross Margin (%)59.7% 56.9% 61.3% 65.6%
Non-GAAP Gross Margin (%)63.9% 62.4% 66.3% 68.1%
Adjusted EBITDA ($M)-$19.7 -$10.3 -$1.2 $3.8

Segment revenue breakdown:

Segment Revenue ($M)Q4 2023Q2 2024Q3 2024Q4 2024
Taegis Subscription Solutions$60.2 $66.4 $67.3 $68.9
Managed Security Services (Other MSS)$31.4 (implied from table total subs; see detailed table) $10.4 $7.9 $6.3
Professional Services$23.8 $16.1 $14.2 $13.9
Total Revenue$115.3 $93.0 $89.4 $89.2

Taegis margin KPIs:

KPIQ4 2023Q2 2024Q3 2024Q4 2024
Taegis GAAP Gross Margin (%)67.5% 68.8% 70.4% 70.8%
Taegis Non-GAAP Gross Margin (%)69.2% 70.7% 72.7% 73.1%

Operational KPIs:

KPIQ4 2024
ARR ($M)$285 (+9% YoY)
Taegis Customers2,000
ARPC ($K)$145 (up from $139 sequentially)
Endpoint Count Growth+9% YoY
Partner Share of New Logos~90% of global Taegis new logos via partners

Guidance Changes

MetricPeriodPrevious GuidanceCurrent/ActualChange
Revenue ($M)Q4 FY2024$86–$88 $89.2 Beat
Non-GAAP EPS ($)Q4 FY2024-$0.05 to -$0.03 $0.08 Beat
Adjusted EBITDA ($M)Q4 FY2024Breakeven $3.8 Beat
Total Revenue ($M)FY2024$363–$365 $365.9 Slight beat
Non-GAAP Net Loss ($M)FY2024$(28) to $(30) $(19.1) Better
Adjusted EBITDA ($M)FY2024$(31) to $(33) $(27.8) Better
Cash From Operations ($M)FY2024$(70) to $(80) $(59.2) Better
Revenue ($M)Q1 FY2025—$83–$85 New
Adjusted EBITDA ($M)Q1 FY2025—$0–$2 New
Non-GAAP EPS ($)Q1 FY2025—-$0.01 to $0.01 New
ARR ($M)FY2025—≥$300 New
Total Revenue ($M)FY2025—$325–$335 New
Non-GAAP EPS ($)FY2025—$0.00–$0.08 New
Adjusted EBITDA ($M)FY2025—$4–$12 New
Cash From Operations ($M)FY2025—$(2) to $8 New

Earnings Call Themes & Trends

TopicQ2 FY2024 (Prev-2)Q3 FY2024 (Prev-1)Q4 FY2024 (Current)Trend
AI/Automation in TaegisExpanded automation of investigations and alert triage; platform enhancements Continued margin expansion; recognition in XDR leadership AI-powered Threat Score launched; ~50% of investigations automated; LLMs for SecOps; 6,000+ playbooks Strengthening
Partner EcosystemPartner First strategy launched across regions; alliance integrations (EY, Akamai) Expanded breadth/depth; accelerated recognition 400+ partners; ~90% new logos via partners; partner opportunities +20% QoQ; higher win rates Strengthening
SIEM Replacement TailwindsZero trust and platform approach highlighted Market leadership validations CEO: SIEM displacement a tailwind; vendor consolidation; MSSPs shifting to Taegis Positive
Pricing/ROIFixed per-endpoint pricing; no variable data charges —Transparent pricing; 12 months data standard; improved ROI narratives to C-suite/Board Consistent
Margin ExpansionTaegis GAAP 68.8%/non-GAAP 70.7% Taegis GAAP 70.4%/non-GAAP 72.7% Taegis GAAP 70.8%/non-GAAP 73.1%; cloud cost per endpoint down ~20% over 2 years Improving
Renewals/MacroCohort growth from FY22–23 adds renewal pool —Largest renewal cohort; measured approach; NRR more at risk than GRR amid caution Watchful

Management Commentary

  • CEO: “Taegis sees more, detects better and responds faster… continuous innovations in AI… powerful capabilities in cyber defense to drive better security outcomes and greater efficiencies.”
  • CEO on industry: “With ransomware proliferating and dwell times below 24 hours… never has our mission been more critical.”
  • CFO: “We exceeded our commitment for breakeven adjusted EBITDA in the fourth quarter… gives us confidence in our EBITDA guidance for the full year fiscal 2025.”
  • CFO on ARPC and customers: ARPC rose to $145k; 2,000 Taegis customers; endpoint count +9% YoY; deals pulled forward aided ARR .
  • CEO on SIEM: “SIEMs… time is here… replacement… where we win a lot of deals… vendor consolidation is a tailwind.”

Q&A Highlights

  • SIEM disruption and consolidation: Management sees SIEM displacement as a tailwind, with MSSPs and solution providers shifting to Taegis for better outcomes and scale .
  • Margin path post-legacy sunset: After Other MSS exit, continued Taegis margin gains from AI/automation and cloud architecture efficiencies; services mix will hold lower margins than Taegis .
  • ARR outperformance drivers: Mix of pull-forward deals and larger-sized wins; ARPC increased sequentially to $145k .
  • Renewals guidance philosophy: Balanced approach given macro scrutiny; risk more to NRR than GRR; strong CSAT/NPS underpin confidence .
  • Pricing discipline and ROI: Fixed per-endpoint pricing, 12 months data standard, no variable data charges; focus on demonstrating security efficacy and benchmarks vs peers .

Estimates Context

  • Wall Street consensus via S&P Global was unavailable for SCWX Q4 FY2024 due to missing CIQ mapping; as a result, comparisons vs analyst estimates cannot be provided at this time. Values from S&P Global were not retrievable.*

Key Takeaways for Investors

  • Execution inflection: Q4 beat with positive adjusted EBITDA and non-GAAP profitability signals operating leverage as Taegis scales .
  • Structural margin drivers: Taegis non-GAAP gross margin rose to 73.1%; AI/automation and cloud architecture underpin sustained margin expansion .
  • Mix normalization ahead: Legacy Other MSS sunsets in Q1 FY2025; management guides sequential total revenue growth returning in 2H FY2025 .
  • Go-to-market leverage: Partner-first motion is working (~90% new logos via partners, higher win rates), likely supporting ARPC and pipeline efficiency .
  • Renewal cohort watch: Largest renewal pool since Taegis launch; management flagged measured stance and potential NRR pressure in a cautious macro .
  • Cash discipline: FY2024 CFFO of -$59.2M, better than prior guidance; FY2025 CFFO guided to -$2M to +$8M, implying improving cash trajectory .
  • Trading implications: Near-term sentiment supported by beats and EBITDA positive; monitor renewal dynamics and confirmation of 2H FY2025 sequential growth as key narrative drivers .