SecureWorks Corp.

Good morning and welcome to the SecureWorks third quarter fiscal 2021 financial results conference call. Following prepared remarks, we will conduct a question and answer session. If you have a question, simply press star then one on your telephone keypad at any time during the presentation. At this time, all participants are in a listen-only mode. We are webcasting this call live on the SecureWorks Investor Relations website after the Completion of the call, a recording of this call will be made available on the same site. Now, I'll turn the call over to Paul Parrish, Chief Financial Officer. You may begin.

Thanks, everyone, for joining us. With me today is Mike Cody, our CEO, and Wendy Thomas, President of Customer Success, will join us for questions at the end of our prepared remarks. During this call, we'll reference non-GAAP financial measures, including non-GAAP revenue, gross margin, operating expenses, operating income, net income, EPS, EBITDA, adjusted EBITDA, and cash flow from operations. A reconciliation of these measures to their most directly comparable gap measures can be found in our web deck and press release. Please also note that all growth percentages refer to year-over-year change unless otherwise specified. Finally, I'd like to remind you that all statements made during this call that relate to future results and events are forward-looking statements based on current expectations. Actual results and events could differ materially from those projected due to a number of risks and uncertainties, which are discussed in this morning's press release and our SEC reports. Now, I'll turn it over to Mike.

Thanks, Paul. The events of 2020 have underscored how transformative technology can be to help adapt, innovate, and increase productivity. Cybercrime continues to accelerate as the explosion of data and devices have expanded the attack surface. And the shift to work from home has required additional cybersecurity controls and operational changes. These same events have created an opportunity for cybercriminals to exploit and capitalize on the expanding number of vulnerabilities. Our recently published incident response report highlighted increased risk areas in direct response to the pandemic. These included an increased risk with more people accessing SAS applications, delays in vulnerability patching, circumvention of VPN connections, and increased phishing attacks. This is the first time we've seen cybercriminals globally focus on one issue, with threat actors using COVID-19 themed tactics to exploit vulnerabilities. Against this backdrop, I continue to be incredibly proud of the resiliency, determination, and adaptability of my teammates in serving our customers and partners every day. For many years, the security industry has been overrun with thousands of point products that do not enable organizations to mount a holistic defense against adversaries whose unrelated attacks only have to succeed once. Through a variety of means, the adversary has consistently been able to navigate between security controls, going undetected and undeterred in organizations that lack integrated detection and response capabilities across their environments. We believe that the ability to outpace the adversary at scale requires an integrated security platform that closes the gaps between point products, puts security detections in context of risk to an organization, and automates the remediation process with agility. Our superior threat detection and remediation capabilities are accelerated with deep learning, machine learning, and workflow automation to detect security risks to an organization quickly, with high fidelity, and to reduce both adversarial dwell time and mean time to remediate. Our cloud-native platform takes a different approach, building on our expertise as a global leader in managed security over the last 20 years, because we fundamentally believe that the only way to win this fight is through the combined power of the community working together. Why? because the adversaries work together, albeit in a mercenary way, increasingly leveraging the same data science and technology capabilities that the security industry does. Our integrated, inclusive, holistic approach continues to gain momentum by allowing customers to, one, detect and respond to threats across the complete environment, including endpoints, network, business systems, and cloud infrastructures, regardless of the underlying point product technologies. Two, provide accurate and prioritized insights through automated asset discovery and classification, vulnerability assessment, and risk prioritization. Three, leverage our deep security operations expertise to automate and simplify investigations, orchestrate and automate responses and workflows, and enable collaboration across security and IT functions in a single platform that sits at the heart of their security operations. Our holistic approach means customers benefit from the capabilities of our platform without having to rip and replace existing point products, nor shift to a single vendor ecosystem. We also see a near-term future where what are now individual security product markets, such as SOAR, SIM, vulnerability management, and more, increasingly become integrated features or capabilities of a holistic security analytics platform. We have built to this vision. And as this trend continues, I believe we are well positioned to be successful in the emerging XDR market that anticipates convergence across historically standalone technology segments. In Q3, we continued to focus on our software products and our transformations. Gross margin grew 150 basis points over Q3 fiscal year 20 to 61%. Paul will share more details on our financial progress in a moment, but I'd first like to update you on the progress we've made across three transformational pillars, expanding our go-to-market, ensuring customer success, and accelerating our software roadmap. In Q3, we continue to make great progress in expanding our go-to-market efforts, focusing on customer success, and attracting new logos to our cloud-native platform. I'm pleased to report that we reached nearly 300 customers on our new security analytics platform. New customers on the platform grew 36% sequentially in the third quarter and represented 45% of our new subscription customers during the quarter. One such new customer example, a global European chemicals company with operations in more than 100 countries, was seeking a security partner to focus on threat detection and response. They were concerned about ransomware attacks. They purchased our TDR software to give them a unified approach to managing their security program with holistic detection and automated investigation capabilities across endpoints, networks, and cloud activity in a single dashboard. Another new customer is a privately held video streaming company in North America that focuses on live, customizable e-commerce applications. The company desired a security solution to help minimize risk and establish confidence and trust. They chose our new VDP product because of the simplicity to get up and running quickly and automation of the vulnerability management and prioritization processes which provides substantial time and resource savings. Last quarter, I updated you on our progress in launching and building our channel efforts with our global partner program. We're investing in training and enablement, marketing, and demand generation to ensure our growing partner community is equipped to sell, market, and support our software solutions. Our new software portfolio represents a fantastic opportunity for the channel to take our superior detection and response capabilities and surround it with their own service and value added offerings. In addition, as a historical leader in the MSSP market, we believe there is new and compelling opportunity for us to scale our cloud native software platform that enables a broader community of managed security service providers. Allowing the growing community access to our software analytics and expertise accelerating the adoption of our cloud-native platform, and, as a community, to combat the adversary at scale. Last month, we hosted our Industry Analyst Summit with Tier 1 analysts from around the world to continue to tell our software transformation story. And on December the 8th, we'll be hosting an Investor Day conference as we continue that discussion with each of you. Core to all we do is customer success. I talked a moment ago about the progress we are making in attracting new customers to our platform. We are also deeply focused on ensuring that existing customers see the value of our latest capabilities and leverage more of our portfolio. For example, in North America, a $2 billion manufacturing company was looking for a security partner that could provide visibility and controls to reduce their cybersecurity risk. They chose TDR to find unknown and advanced threats and to make informed decisions. They also used our built-in real-time chat to collaborate with our threat experts during live investigations. A second existing customer example, a $50 million North American company that works with state and local government agencies to provide document management, payment processing, customer services, financial systems, and case management was looking for a cloud-native turnkey software solution to provide full visibility on endpoint, cloud, and network systems. They appreciated how TDR provides their leadership with the latest threat intelligence insights and research from our counter-threat unit to meet the dynamic changes in cybersecurity and inform their overall security strategies. In each of these examples, customers benefited from having full visibility of their security environment with technology solutions that work together to protect their business. We've made great progress in extending our portfolio, adding another application and more capabilities to increase differentiated value for our customers. We recently announced significant feature enhancements to TDR with the addition of log management, and search reporting capabilities for users to have an integrated contemporary alternative to traditional SIMs. We also extended our platform with the addition of a vulnerability detection and prioritization application as a result of our acquisition of DELV. Our VDP product provides contextual awareness to vulnerabilities with an ML-driven prioritization engine to focus on the highest risks to an organization and VDP automates most of the historically manual vulnerability management processes to free up security resources and reduce human error. You'll have the opportunity to hear more about these capabilities at our upcoming Investor Day. We are transforming our business to strengthen the security community and beat the adversary at scale. We have taken over 20 years of security operations experience threat intelligence, and technological advancements to reimagine how security should be done. This is a multi-year journey, and we will continue to focus our transformation on expanding our go-to-market, advancing the delivery of our cloud-native platform, and ensuring the success of our community, customers, and partners to be a force for good. Thank you. I will now turn it back to Paul.