SecureWorks Corp.

Good morning and welcome to the SecureWorks Third Quarter Fiscal 2022 Financial Results Conference Call. Following prepared remarks, we will conduct a question and answer session. If you have a question, simply press star then 1 on your telephone keypad at any time during the presentation. At this time, all participants are in listen-only mode. We are webcasting this call live on the SecureWorks Investor Relations website at After the completion of the call, a recording of the call will be made available on the same site. Now, I will turn the call over to Andrew Storm, Vice President of Investor Relations. You may begin.

Thanks, everyone, for joining us. I'm Andrew Storm, VP of Investor Relations at SecureWorks. And with me are Wendy Thomas, our CEM, and Paul Parrish, our CFO. During this call, we will reference non-GAAP financial measures. You will find the reconciliations between these GAAP and non-GAAP measures in the press release and presentation posted on our website earlier today. Please also note that all growth percentages refer to year-over-year changes 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 our press release, web deck, and SEC filings. We assume no obligation to update our forward-looking statements. Now, I'll turn it over to Wendy.

Thank you, Andrew, and welcome, everyone. Our focus at SecureWorks is to ensure our customers achieve their best security outcomes, and we help to secure their mission, their progress, by enabling them to outpace and outmaneuver the adversary. Buying individual security products that react independently won't make an organization safe because they fail to provide timely visibility into their entire technology infrastructure. For effective security, organizations require a holistic, integrated detection and response platform that measurably reduces their business risk from cyber exposure, optimizes their investment in security solutions, and addresses the shortage of expert security talent. Our Tagus solutions were purpose-built to solve these challenges. First, Tagus brings a comprehensive big data answer to security challenges, applying our analytics and wide breadth and depth of detections across the endpoint, network, cloud, email, and beyond, driving superior threat detection and enabling automated response. With over 98% coverage against most categories of the MITRE ATT&CK framework, Cages excels at detecting and halting sophisticated attacks early in the kill chain. Second, Cages was architected from day one to be extensible, unifying an organization's existing security infrastructure, empowering customers to maximize return on investment quickly. Industry analysts evaluating Cages regularly call out our breadth of integrations as a key differentiator in shortening customer time to value. And third, with our 20 years of experience running scaled, effective security operations built into the design of Tagus, our platform enables significant improvements in our customers' operating efficiency. A recent Forrester study concluded Tagus can reduce risk by 85%, with average savings of $1 million over three years, a solid return given our average Tagus spend per customer of $149,000. The market opportunity for us and our partners is large and growing, with an estimated addressable market approaching 100 billion by 2025, growing in the double digits annually. Reflecting the significant opportunity, we're proud to announce that in the third quarter, Tagus ARR nearly tripled from last year, reaching 123 million, and Tagus customers increased 170% year-over-year to 800. Our growth has been driven by the strength of our solutions, and our work to constantly innovate and improve our portfolio continues. In the third quarter, we announced the addition of a machine learning-based endpoint prevention solution to Tagus. The incorporation of superior prevention helps further reduce customer security risk and allows customers to both consolidate and reduce overall security spend. We recently launched a global technology alliance partner program with several initial partners, including AWS, Zscaler, Corelight, and others. Because Tagus was architected from the outside to be extensible, we're able to provide customer value quickly as we expand our technology alliance partner relationships. We also continue to improve our security orchestration and automation capabilities with best practice playbooks, additional connectors, and a growing set of automated response capabilities. These enhancements, along with custom reporting and extended log retention options, fuel our ability to display SIMs across security use cases. In fact, SIM displacement is a big opportunity for us. The SIM market for security is several billion dollars a year, despite the high cost to implement and maintain and low security efficacy. Our Tagus XDR use cases go beyond what SIMs promise. but never delivered on, especially on the response side. Increasingly, we're seeing companies put out RFPs to upgrade their SIMs, but switch to buying Tejas instead. As an example, we recently signed a UK logistics company to a multi-year deal. This customer had an existing SIM that they'd implemented, but there were significant gaps in visibility and coverage, and maintaining the system was requiring too much from their four-member team. In short, they were falling behind. So they put out an RFP to either supplement the support for their SIEM or transition to another solution, and 11 companies competed for the contract. The company chose SecureWorks Tagus for the following reasons. First, their security coverage went from 60% to 100%, reducing their financial risk of a breach. Second, our detectors and integrated SOAR capabilities, which are continuously updated and tuned by our data science and security experts, reduced the workload on their team, and significantly lowered the operating costs they initially budgeted for. Third, the simplicity of our pricing model resonated. They were weary of data overage charges and preferred our simple, predictable pricing model. And finally, our standard offering met their requirement for a minimum year of log retention. Big picture, switching to Tagus XDR met all their needs, cut their operating costs in half, significantly reduced their risk, and the deployment was far easier than the SIM had been. I'm hearing this story more and more from sales. Our biggest hurdle and our biggest opportunity is market awareness that these returns, in fact, can be achieved. It's early, but the math around total cost of ownership for customers is compelling, and the security outcomes are clearly better. To wrap up on product, I want to congratulate the team and call out some recent recognition Tejas XDR won the 2021 CISO Choice Awards for Best Security Analytics. IDC named us as a leader in their 2021 Worldwide Incident Readiness Report, covering both proactive and emergency incident response, powered by the Tejas platform. And our vulnerability management product, Tejas VDR, was reviewed by SC Media, with the conclusion stating, a novel and unique approach to removing much of the manual and mindless work associated with vulnerability management. The bold approach pays off and leaves us wondering, why doesn't everyone do it this way? The vulnerability management market is more mature than XDR, but we see a shift underway from compliance driven to risk and security driven solutions, making the market ripe for disruption with our solution well placed for this shift. This recognition was earned on the strength of our technology and the favorable references of our customers. In fact, a key to our success is the continuous and rapid innovation on Tagus fueled by the voice of our customers. And our customers regularly express their appreciation for how quickly we address their feedback. Our customer-centric approach is paying off. Turning to go-to-market, there is a large number of security service providers that could improve their security efficacy and operational efficiency with Tagus. As an example, this quarter, we displaced a major competitor at an existing MSSP in the Asia-Pac region. The aha moment came during a demo when they realized our solution is so intuitive it could make their junior analysts far more effective. Cages has everything needed delivered to their fingertips, all the counter-threat info, research, telemetry, all in one. They had also worried the competitor's solution was missing threats, but with our coverage fully transparent, and in the public via our software adversary tool, they were confident Tagus provides superior coverage. There are also thousands of technology services providers globally that want to extend their services into security. To succeed in this market, they need an expert security partner to help them ramp quickly and effectively. As the long-term leader in managed security services, we take everything we've learned and accomplished in our 20-plus year history and provide it to our partners, enabling them to deliver the same capabilities via our Tagus platform. While we launched our MSSP program in February, we're excited by the results to date, with 30 MSSP signed and 19 fully certified, with more in the pipeline. We'll continue to provide you updates on this front. Finally, we announced to our customers and partners the end of sale and end of life dates for the majority of our other managed security services. We will stop selling these services at the end of this fiscal year and will not renew contracts with end dates that extend beyond the close of our next fiscal year. This announcement, made early in the fourth quarter, has already driven an uptick in customer engagement to initiate the transition process onto Tagus. While the majority of our other MSS services are a natural transition, really an upgrade to Tagus, there are a handful of non-strategic services which we are transitioning to our MSSP partners or that our customers are taking in-house. To give you a sense of what I mean, let me share a customer story with you. We proactively reached out to an international media customer and asked if we could set up a demo of Tagus to show them how much incremental value it offers. Our team walked them through the capabilities and pricing, And after just a few conversations, they were sold on the depth and breadth of our detection capabilities, as well as expanded coverage of their entire network endpoint and cloud telemetry. And they were confident with the incident response support that reflects the real R in managed XDR. The end result was re-solutioning to Tagus for 20% higher ARR with higher margins. Part of the deal, however, was that they insourced the firewall management we had been providing. Because of this, the 20% lift in ARR was net of the loss of the firewall management revenue. Normalizing for that, we'd have been receiving 50% more ARR. Paul will give you more details of the financial profile of our transition, but this is a good example of the transition we're driving, increasing the security value delivered to our customers while executing a fundamental shift to a higher value business model. To bring this home, SecureWorks today is a very different company than it was just a few years ago when we first set our vision to turn the tide in the security fight. Our teams have delivered on this vision and are focused on supporting this transformation on behalf of our customers and partners. And I would be remiss if I did not thank them for all that we've accomplished so far and will continue to accomplish moving forward. With that, I'll turn the call over to Paul Parrish.