SecureWorks Corp.

Good morning. My name is Emily and I'll be your conference operator today. At this time, I would like to welcome everyone to the SecureWorks first quarter fiscal 2025 earnings conference call. All lines have been placed on mute to prevent any background noise. A supplemental slide presentation to accompany the prepared remarks can be found on the company's website. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, please press star followed by two. Thank you. At this time, I would like to turn over the call to Kevin Toomey, SecureWorks Vice President of Investor Relations. Mr. Toomey, you may begin your conference.

Thank you, Operator. Good morning and welcome to SecureWorks first quarter fiscal 2025 earnings call. Joining me today are Wendy Thomas, our Chief Executive Officer, and Alpana Wegner, our Chief Financial Officer. 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. 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, which you can also find at the investor relations website at investors.secureworks.com. We assume no obligation to update our forward-looking statements. With that, I'll turn the call over to SecureWorks CEO, Wendy Thomas.

Thank you, Kevin, and welcome, everyone. We reached a significant positive milestone with the close of first quarter. This moment was several years in the making as we executed against our strategy to transform our business from a pure play services company into a product-led SaaS business as the foundation for long-term growth and success. We delivered on this transformation in our committed timeframe while delivering even better security outcomes to our customers as a result. we are pleased to move past the financial headwinds from the sunsetting of our non-strategic lines of business going forward. Our TAGES business continued its strong momentum in first quarter, as TAGES revenue grew 10% year over year to $69 million. TAGES annual recurring revenue, or ARR, now stands at $287 million. And we delivered Q1 total revenue and adjusted EBITDA above our guidance ranges. It's important for me to also recognize our progress on profitability. We continue to see further opportunities to benefit from the scale our business model offers, and we remain committed to delivering positive adjusted EBITDA for the full fiscal year. This quarter, we launched new TAGIS modules and capabilities and announced major global partners. Importantly, our unique OpenXDR-based approach is increasingly receiving accolades by the market. This quarter, we were recognized by Frost and Sullivan as a leader in the 2024 MDR radar for our understanding of the industry, customer demands, and for taking a collaborative approach, positioning us as one of the most innovative companies in the space. Our efforts have set us up to drive sustained growth with a business model that has a proven ability to scale, underpinned by our unique cloud architecture, and advanced automation and AI capabilities. Specifically, for first quarter, I'll highlight several important results. We delivered expanding gross margins, with Tagus gross margins improving 430 basis points year over year. We added marquee global partners who recognize the strength of Tagus in our security expertise and who further broaden our reach and expand our addressable market. We launched to TAGIS modules. New products propel expansion and retention with our customers and allow us to further increase our industry-leading TAGIS average revenue per customer of $145,000. With our other MSS business reaching end of life, we can be singularly focused. All of our go-to-market and product development resources are focused on our go-forward business. with the opportunity to accelerate innovation even further through both add-on and native security products within the R&D envelope. To that end, we made two significant product advancements for our customers in first quarter. First, NDR, network detection and response. For context, the dominance of cloud applications and hybrid workforces with the growing return to office have created a surge in network traffic. up over 20% in the last year. Adversaries are taking advantage of these increased volumes to lurk unseen and slip past cyber defenses. With threat actors obfuscating their behavior, legacy network controls, such as IDPs and firewalls, are no longer able to keep pace, nor offer sufficient protection against evolving adversarial tactics. This quarter, we launched TAGIS network detection and response to help organizations protect against these threats. SecureWorks NDR closes the gap to detect network-based attacks and anomalous insider threats and comply with the ever-growing audit and compliance requirements. TAGIS NDR furthers TAGIS's defense-in-depth approach with a full prevent, detect, and respond set of capabilities. The key differentiation of TAGIS NDR lies in its design to add context to the detection of adversarial behavior and stop threat actors from traversing the network with no interruption to business traffic. NDR provides a complete picture of all internal traffic, not only moving between endpoints, but also traffic entering and exiting the network at the edge with added visibility into hypervisor attacks, all managed centrally within the Tagus UI. Endpoint solutions alone are not sufficient. Organizations often have operational control gaps or technology gaps where they cannot apply or deploy an EDR, leaving them vulnerable if they do not have an NDR in place. Tagus NDR simplifies security management by eliminating the burden of device management through a fully managed cloud offering with on-premise protection, saving customers time and resources that can be deployed elsewhere. And Tagus's AI engine uncovers hidden threats with AI-powered behavior detection, and NDR goes beyond detection to prevention, automatically blocking threats in real time, blocking nearly 1 million threats per month, and preventing 99% of malicious activity identified across all network traffic. The second product advancement that I'll highlight from first quarter is squarely aimed at solving one of the most entrenched pain points in cybersecurity, protecting against software vulnerabilities. As our Counter Threat Unit's recent State of the Threat Report documented, software vulnerabilities remain one of the largest risk factors for organizations, representing a third of initial access by threat actors in successful breaches. Organizations are faced with an overwhelming and growing number of software vulnerabilities to be mitigated, taxing both security and IT resources in the process. With Tagus VDR and prioritization, We offer the first security platform that integrates and unifies two worlds. Vulnerabilities with threat detection, investigation, and response within Tagus XDR. Ingesting vulnerabilities from both our native vulnerability scanner and third-party vulnerability products, we streamline investigation and remediation workloads. The platform offers tailored vulnerability prioritization. based on each organization's unique threat landscape and operational context. This personalized approach ensures that security efforts are focused on the most pressing threats, improving overall risk management and resource allocation. Furthermore, with C-suite and board attention more focused on cyber risk than ever, Tagus VDR provides an overall health score that helps executives understand their organization's security posture, and prioritize the best way to improve it. This contextual information supports informed decision-making and strategic planning, empowering leaders to drive and demonstrate continuous improvement in their security programs. A great example of customer success with VDR this quarter was a utility company dealing with ongoing resource constraints in prioritizing and remediating the high-risk vulnerabilities in their environment. Cages VDR's risk-centric prioritization engine has drastically improved their timely remediation of high-risk IT vulnerability backlogs. Our dashboard also solved their need to provide meaningful visibility into their risk posture to their senior leadership and stakeholders. Bringing together the combination of our vulnerability and alert prioritization engines, each differentiated in their respective markets, integrated with the real-time threat observability of our XDR platform, We are redefining integrated vulnerability management programs to provide for unmatched security operations. Moving to an update on our go-to market, this quarter we continue to expand our partner ecosystem across tech alliances, solution providers, managed services providers, and cyber insurance partners with leading providers in each category. For example, we recently announced a managed security services provider partnership with SoftBank. one of the largest multinationals in Asia Pacific. SoftBank joins more than 50 MSSPs in our partner ecosystem, providing further validation of Tagus's ability to drive scale for large MSSPs with global footprints. Building on our decade-plus market presence and leadership position in Japan, we've seen early traction with this partnership, with the onboarding of new customers well into the double digits since deploying Tagus. We also launched new capabilities for our partners to customize and further scale their MDR offerings. Partners can write and port their own custom detectors supported with their proprietary threat intelligence additions, enabling them to show unique differentiation for their customers. We also delivered capabilities to support their operating efficiency with enhancements to securing diverse technology stacks with a federated multi-tenant approach. enabling our partners to manage thousands of customers at scale while segmenting access seamlessly. As a growing number of end customers look to consolidate vendors, our platform approach to supporting a wide remit of third-party controls makes us the vendor of choice for MDR providers to expand their addressable market. Our investments to offer native security controls and capabilities in CAGIS from SOAR and EDR And NDR and VDR means partners have a path to meet customer desires for consolidation, while enabling our partners to grow more profitably. A good example of vendor consolidation comes from a partner deal to replace a legacy SIM at a large property developer in EMEA, looking to consolidate Endpoint and other vendors feeding and managing their SIM. This customer was looking to address alert fatigue from a stream of false positives. consolidate prevention capabilities, and automate investigation and response actions holistically across their diverse and multi-cloud technology stack. Our ability to go live quickly with their existing stack while providing the path to consolidation as various contracts came up for renewal met the desire from their executives for a fast path to risk reduction while also reducing vendor sprawl. On the cyber insurance partnership front, We also entered into an incident response partnership with Tokyo Marine and Ishido Fire Insurance Company, a market-leading insurance company in Japan. Cyber risk partners come to SecureWorks to not only respond to incidents, but also to reduce breach exposure for their customers by leveraging our portfolio of solutions. The power and peril of AI continues to be top of mind for customers. AI has always been core to the design of Cages and our security solutions as fundamental to outpacing the adversary and, combined with automation, underpins the expanding scalability of our business. Some examples of Cages' leverage of AI in its various forms apply to several areas. First, security analysis efficiency and efficacy. Through continuous iteration and feedback from our expert analysts, we achieved significant reductions in false positives, leading to a more efficient and effective security operation. Game-changing capabilities, like automated investigations, provide near instantaneous summaries of complex threat actor behavior, enhancing analyst accuracy and productivity by seamlessly integrating AI and automation into their investigation and response workflow. Second, superior detection. Our security flywheel starts with cutting edge threat and detection research and thousands of IR engagements each year, which are fed into TAGIS via threat intelligence, watch lists, and tactic graphs. When coupled with expertise from our data scientists and engineers to build our proprietary advanced detectors, TAGIS operates at a high signal to noise ratio to find things that the competition cannot. Our alerts are fed into our SecOps pipeline and constantly curated enabling our machine learning algorithms to predict and scale what our analysts are focusing on. With machine-readable threat intelligence updating our detectors every hour, TAGES powers superior detection with unmatched speed. Lastly, faster response time. We leverage large language models to explain detection logic, complex command lines, and esoteric third-party alerts, as well as draft key findings for investigations and automate response actions. accelerating investigation time, and reducing time to respond. From detection and triage to investigation and response, AI empowers us to enhance detection capabilities, streamline operations, and ultimately better protect our customers. This quarter, our innovations in AI to deliver meaningful return on investment for our customers and partners was recognized by receiving the CIO 100 Award for Integrated AI for Better Security Operations In conclusion, demand for our Tagus platform and offerings remain strong. We are fulfilling the promise that is the foundation for Tagus by adding features and capabilities to protect against the initial access vectors, including vulnerability, identity, and email compromise. Providing organizations with holistic coverage and a multilayered cybersecurity strategy to outpace and outmaneuver the adversary. using AI and machine learning to drive automation and efficiency through every aspect of the platform. We have and will continue to deliver innovations to meet the security needs most valued by our customers and partners. We remain confident that our unique, open-without-compromise approach has opened the door to continue expanding our successful partnership ecosystem. Cages is the platform of choice for organizations in an environment where vendor consolidation and scaling spend on both security technology and talent is key, simultaneously helping organizations deliver an improved security risk posture and outcomes. This underpins our growth strategy now and in the future. Thank you for investing in our mission to secure human progress. With TAGUS defining the future of threat detection and response, driving long-term sustainable growth and value creation. And thank you to our customers and partners for joining forces with us. With that, I'd like to hand the call over to Alpana to cover our financial results and guidance.