SecureWorks Corp. revenue increased on 6.6% and EBITDA Margin showed almost no change
03/27/2020 • About SecureWorks Corp. (
$SCWX) • By InTwits
SecureWorks Corp. reported FY2020 financial results today. Here are the key drivers of the company's long term financial model:
- SecureWorks Corp. is a growth stock: FY2020 revenue growth was 6.6%, 5 year revenue CAGR was 16.1% at FY2020 ROIC -6.8%
- The company operates at negative EBITDA Margin: -1.3%
- SecureWorks Corp. spends a lot for Stock Based Compensation (SBC): average SBC/Revenue for FY2016-FY2020 is 0.0%. Average EBITDA Margin for the same period was -5.8%
- SecureWorks Corp. has low CAPEX intensity: 5 year average CAPEX/Revenue was 2.9%. At the same time it's in pair with industry average of 3.2%
- CAPEX is quite volatile: $80m in 2020, $41m in 2019, $25m in 2018, $13m in 2017, $9m in 2016
- The company has unprofitable business model: ROIC is -6.8%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
The company's Revenue increased on 6.6%. Revenue growth showed acceleration in FY20Q4 - it increased 8.6% YoY. Revenue decline was accelerating on average at -6.2 pp per annum in the last 5 years. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased on 5.3 pp from -3.5% to 1.9% in 2020. EBITDA Margin followed a growing trend at 4.1 pp per annum in the last 5 years.
Gross Margin increased slightly on 1.7 pp from 52.6% to 54.3% in FY2020. Gross Margin grew at 1.9 pp per annum in the last 5 years. SG&A as a % of Revenue increased slightly on 1.5 pp from 45.1% to 46.5% in FY2020.
Net Income margin increased slightly on 1.8 pp from -7.5% to -5.7% in FY2020.
Investments (CAPEX, working capital and M&A)
In FY2020 SecureWorks Corp. had CAPEX/Revenue of 2.3%. CAPEX/Revenue decreased on 2.2 pp from 4.5% in FY2017 to 2.3% in FY2020. For the last three years the average CAPEX/Revenue was 2.4%.
Return on investment
The company operates at negative ROIC (-6.8%) and ROE (-4.7%). ROIC decreased slightly on 0.52 pp from -6.3% to -6.8% in FY2020. ROE increased slightly on 0.83 pp from -5.5% to -4.7% in FY2020. During FY2016-FY2020 ROIC topped in FY2019 at -6.3%.
Leverage (Debt)
Company's Net Debt / EBITDA is -0.1x and Debt / EBITDA is . Debt jumped while cash surged on 40.3%.
The company has no short term refinancing risk: short term debt is zero.
Management team
SecureWorks Corp.'s CEO is Michael R Cote "Mike". Michael R Cote "Mike" has 5 years tenure with the company. SecureWorks Corp.'s CFO Paul M Parrish has spent 1 year with the company.
Financial and operational results
FY ended 01/31/2020
SecureWorks Corp. ($SCWX) key annual financial indicators| mln. $ | 2016 | 2017 | 2018 | 2019 | 2020 | 2020/2019 |
|---|
P&L
|
|---|
| Revenue | 339.5 | 429.5 | 467.9 | 518.7 | 552.8 | 6.6% |
| Gross Profit | 155.7 | 216.9 | 242.8 | 272.6 | 300.0 | 10.0% |
| SG&A | 212.0 | 211.8 | 232.7 | 233.7 | 257.2 | 10.0% |
| EBITDA | -65.4 | -26.5 | -27.8 | -7.5 | -6.9 | |
| Net Income | -72.4 | -38.2 | -10.4 | -39.1 | -31.7 | |
Balance Sheet
|
|---|
| Cash | 33.4 | 116.6 | 101.5 | 129.6 | 181.8 | 40.3% |
| Short Term Debt | 28.0 | 0.0 | 0.0 | 0.0 | 0.0 | |
| Long Term Debt | 0.0 | 0.0 | 0.0 | 0.0 | 24.7 | |
Cash flow
|
|---|
| Capex | 9.0 | 19.4 | 13.8 | 10.2 | 12.6 | 23.4% |
Ratios
|
|---|
| Revenue growth | 29.5% | 26.5% | 8.9% | 10.9% | 6.6% | |
| EBITDA growth | 232.4% | -59.4% | 4.8% | -72.9% | -7.7% | |
|
|---|
| Gross Margin | 45.9% | 50.5% | 51.9% | 52.6% | 54.3% | 1.7% |
| EBITDA Margin | -19.3% | -6.2% | -5.9% | -1.5% | -1.3% | 0.2% |
| SG&A, % of revenue | 62.4% | 49.3% | 49.7% | 45.1% | 46.5% | 1.5% |
| Net Income Margin | -21.3% | -8.9% | -2.2% | -7.5% | -5.7% | 1.8% |
| CAPEX, % of revenue | 2.7% | 4.5% | 3.0% | 2.0% | 2.3% | 0.3% |
|
|---|
| ROIC | -20.6% | -10.0% | -8.8% | -6.3% | -6.8% | -0.5% |
| ROE | -12.1% | -6.0% | -1.5% | -5.5% | -4.7% | 0.8% |
SecureWorks Corp. ($SCWX) key quoterly financial indicators
| mln. $ | FY20Q1 | FY20Q2 | FY20Q3 | FY20Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 133 | 137 | 141 | 142 | | 5.3% | 6.1% | 6.2% | 8.6% |
| EBITDA | -3 | -1 | 2 | -0 | | - | - | -35.6% | - |
| Net Income | -8 | -10 | -8 | -5 | | - | - | - | - |
Balance Sheet
|
|---|
| Cash | 111 | 118 | 139 | 182 | | 43.8% | 13.9% | 19.9% | 40.3% |
| Short Term Debt | 3 | 3 | 3 | 0 | | - | - | - | - |
| Long Term Debt | 28 | 28 | 27 | 25 | | - | - | - | - |
Ratios
|
|---|
| Gross Margin | 52.7% | 53.4% | 56.4% | 54.4% | | 0.7% | 2.0% | 3.1% | 1.0% |
| EBITDA Margin | -2.0% | -1.1% | 1.7% | -0.1% | | 3.8% | 2.0% | -1.1% | -0.1% |
| Net Income Margin | -6.2% | -7.5% | -5.6% | -3.7% | | 4.7% | 0.1% | -2.8% | 5.3% |
Peers in Systems Software
Below we provide SecureWorks Corp. benchmarking against other companies in Systems Software industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Zscaler, Inc. ($ZS) | - | 56.5% | 51.3% | 59.2% | 42.4% |
| ServiceNow, Inc. ($NOW) | - | 38.0% | 36.0% | 32.6% | 30.6% |
| SailPoint Technologies Holdings, Inc. ($SAIL) | - | 40.5% | 33.8% | 15.9% | 26.6% |
| Rapid7, Inc. ($RPD) | - | 27.6% | 21.5% | 33.9% | 25.9% |
| Tenable Holdings, Inc. ($TENB) | - | 50.9% | 42.4% | 32.6% | 24.2% |
| |
|---|
| Median (23 companies) | 12.9% | 14.0% | 20.4% | 19.4% | 15.1% |
|---|
| SecureWorks Corp. ($SCWX) | - | 26.5% | 8.9% | 10.9% | 6.6% |
Top companies by Gross margin, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Check Point Software Technologies Ltd. ($CHKP) | 88.5% | 88.6% | 89.6% | 89.5% | 89.4% |
| Progress Software Corporation ($PRGS) | 83.8% | 82.6% | 83.1% | 81.8% | 86.0% |
| Varonis Systems, Inc. ($VRNS) | 90.5% | 90.4% | 89.8% | 86.2% | 84.9% |
| Vmware, Inc. ($VMW) | 85.2% | - | 85.5% | 83.9% | 83.4% |
| Tenable Holdings, Inc. ($TENB) | 88.6% | 86.4% | 83.9% | 82.8% | 82.4% |
| |
|---|
| Median (23 companies) | 73.6% | 74.1% | 75.0% | 76.6% | 77.8% |
|---|
| SecureWorks Corp. ($SCWX) | 45.9% | 50.5% | 51.9% | 52.6% | 54.3% |
Top companies by EBITDA margin, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Check Point Software Technologies Ltd. ($CHKP) | 49.8% | 50.7% | 48.8% | 46.0% | 45.1% |
| Qualys, Inc. ($QLYS) | 23.8% | 25.1% | 28.4% | 36.5% | 40.3% |
| SolarWinds Corporation ($SWI) | -8.0% | 44.0% | 44.8% | 44.7% | 39.8% |
| Progress Software Corporation ($PRGS) | 2.4% | 28.6% | 32.9% | 23.4% | 34.4% |
| Fortinet, Inc. ($FTNT) | 7.2% | 11.1% | 15.9% | 19.8% | 23.9% |
| |
|---|
| Median (23 companies) | -8.0% | -3.6% | -3.9% | 0.2% | 3.0% |
|---|
| SecureWorks Corp. ($SCWX) | -19.3% | -6.2% | -5.9% | -1.5% | -1.3% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Zscaler, Inc. ($ZS) | 7.8% | 6.5% | 8.0% | 9.5% | 12.0% |
| ServiceNow, Inc. ($NOW) | 7.6% | 7.8% | 8.6% | 7.7% | 9.3% |
| Qualys, Inc. ($QLYS) | 11.7% | 16.4% | 8.2% | 8.6% | 8.3% |
| Zuora, Inc. ($ZUO) | 3.4% | 3.3% | 2.8% | 5.7% | 7.8% |
| Proofpoint, Inc. ($PFPT) | 9.2% | 9.0% | 4.1% | 4.0% | 6.9% |
| |
|---|
| Median (23 companies) | 2.0% | 2.2% | 2.5% | 3.8% | 3.4% |
|---|
| SecureWorks Corp. ($SCWX) | 2.7% | 4.5% | 3.0% | 2.0% | 2.3% |
Top companies by ROIC, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Fortinet, Inc. ($FTNT) | 5.3% | 15.0% | 28.0% | 29.0% | 46.3% |
| Check Point Software Technologies Ltd. ($CHKP) | 24.7% | 26.8% | 25.5% | 24.2% | 25.6% |
| Qualys, Inc. ($QLYS) | 13.7% | 12.3% | 14.3% | 18.7% | 22.0% |
| Vmware, Inc. ($VMW) | 15.9% | - | - | 18.1% | 19.6% |
| Progress Software Corporation ($PRGS) | -4.9% | 13.5% | 18.5% | 7.6% | 16.0% |
| |
|---|
| Median (23 companies) | 0.0% | -2.7% | -0.9% | -6.4% | -6.4% |
|---|
| SecureWorks Corp. ($SCWX) | -20.6% | -10.0% | -8.8% | -6.3% | -6.8% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| SolarWinds Corporation ($SWI) | - | 6.2x | 4.1x | 4.4x | 4.1x |
| Proofpoint, Inc. ($PFPT) | - | - | - | -27.4x | 2.5x |
| Progress Software Corporation ($PRGS) | -7.5x | -0.1x | 0.1x | 1.5x | 2.1x |
| Vmware, Inc. ($VMW) | -0.7x | - | -0.8x | 0.3x | 1.5x |
| CyberArk Software Ltd. ($CYBR) | -4.1x | -5.7x | -4.5x | -3.6x | 0.9x |
| |
|---|
| Median (12 companies) | -1.2x | -0.6x | -0.4x | -0.3x | 0.4x |
|---|
