SecureWorks Corp.

Good morning and welcome to the SecureWorks fourth quarter and full year 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 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, recording of the call will be made available on the same site. I will now 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 CEO, and Paul Parrish, our CFO. During this call, unless otherwise indicated, 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. Just two and a half years since initial launch, Tejas reached 165 million in ARR, up 42 million sequentially, accelerating our business model transition. We added a record 400 customers in Q4 to finish the year with 1,200 total Tejas customers, of which over a third are now software only. Our focus remains on transforming the company to higher value security solutions and driving scale and operational efficiencies in the business. As we actively exited non-strategic, lower margin services in fiscal 22, total revenues declined by $26 million, while non-GAAP gross profits increased by half a million dollars. We invested in engineering and marketing talent, with headcount in those areas increasing in the high teens, while our shift away from non-strategic services enabled us to reduce total headcount by 13% versus year-end last year. As a result, Revenue per employee increased 10% and gross profit per employee was up nearly 15%. Our transformation will accelerate in fiscal 23 as we increase investments in TAGIS to capitalize on the market transition to XDR and manage down our non-strategic services. And the shift to XDR is happening because it has to. The existing sprawl of point solutions operating independently and noise generated through legacy SIMs It's too much for overworked security analysts to address, leaving the adversary free to weave between existing controls. And until now, no prior security solution has brought everything together properly. Without that, you end up with billions in ransomware payouts. It's been clear to us that the way to defeat the adversary is a security-first approach with a single big data platform architected for holistic prevention, detection, and response. And while others are catching on, Building a true XDR platform is not easy. We've spent over five years building this vision into Tagus. Creating effective analytics beyond a single control like the endpoint or firewall requires a data lake with substantial volume, diversity, and span of data. Our data lake ingests endpoint, network, email cloud, and other forms of telemetry from thousands of customers every single day. That's the foundation we've built on. Endpoint-only providers, however, don't have the comprehensive visibility into a customer's network, cloud, or email. Architecture is not designed to ingest and correlate all the disparate data across vendors. Without comprehensive data, the detection capabilities are incomplete or unnecessarily noisy. In short, you don't have a scalable XDR solution. Even with the data, it takes a fully operational dedicated threat intelligence team. working with data scientists to research behavioral threat patterns and develop the detection analytics and rules that make XDR so powerful. Tejas is further supplemented with the intelligence gleaned from our incident response and security operations teams, not just by buying intelligence from third parties. As an example, we recently filed a patent for our new hands-on keyboard detector, which uses machine learning to detect threat actors, not using malware, but local tools in malicious ways that would be too noisy for signatures to detect. We started with a single true positive incident and went back through 3.3 trillion process events in our data lake to find more examples. We built a machine learning model, trained it with this data, and developed a detector with a true positive rate of over 99%. This patent-pending approach brings unrivaled capabilities and detection in the market. And as soon as we released the detector, we found multiple intrusions where the existing security point solutions were not raising alerts. This is extended detection. The second key part of XDR is the response. A purpose-built XDR platform pulls together all relevant information and provides an embedded security orchestration layer with automated response capabilities. These capabilities were designed and contagious from day one. It's not a third-party software bolt-on or an after-the-fact acquisition. And we constantly enhance our embedded workflow and response playbooks, driving increasing levels of automation for customers with practices informed by our managed security services and incident response teams. And our customers know we are in the fight with them every day, available when needed most. With one of the top incident response practices in the world that handles over 1,400 engagements annually, our customers know they have access to the right people whenever they need it. The final component of a true XDR platform is active prevention. Vulnerability management has long been akin to exercising to prevent health problems. The solution to most vulnerabilities is patching, yet organizations still don't do it. And the reason is simple. Like exercising, patching can be time-consuming and hard. We've taken the pain away and brought a step change in automation, enabling a more hands-off approach. With comprehensive vulnerability detection and response, Cages delivers a complete security program at a lower total cost of ownership. Bringing this together, a true XDR platform provides the prevention, detection, and response that extends well beyond the endpoint. It marries big data, intelligent security analytics, live threat context, and the best of human engineering and SecOps. Without unifying prevention, detection, and response for the entire ecosystem onto a purpose-built data and automation architecture, you're not doing XDR, no matter how much the marketing says otherwise. When we began building Tejas over five years ago, the XDR market didn't exist, and until more recently, wasn't viewed by industry analysts as a category. Now we're consistently recognized for our clear leadership and the unique solutions we've built. With a leading product and a growth market, excellent NPS scores, and a roster of customers advocating on our behalf, This is our time to capitalize on the market shift to XDR. We are investing further in marketing and product in the year ahead to capture that opportunity and maintain our leadership position. It's a testament to our team and the value of Tagus that we've historically spent significantly less on sales and marketing than public peers, yet delivered one of the highest growth rates in XDR customers and ARR last year. Looking ahead, we see multiple drivers of long-term organic growth, including a continued shift toward XDR and away from standalone point product-based approaches to security, the upsell of additional solutions, increased demand from targeted marketing investments, the shift of sales talent from re-solutioning existing customers as that work winds down this year, to hunting for new logos, and accelerating sales through our partner program. We are at the tipping point year of our transition. We've been building to this moment. We began the resolutioning program just over a year ago, and we expect to exit fiscal 23 with a substantial majority of our ARR on pages. Underneath the noise of our transition, we're building a higher quality business with a strong position in one of the highest growing segments of the cybersecurity industry. And I want to thank all of our customers and partners for their support and our teammates for their hard work and commitment to get us where we are and to fuel the year ahead. With that, I'll turn the call over to Paul Parrish, our CFO.