What happened
Shares of SecureWorks (NASDAQ: SCWX) were down 9.7% as of 1:20 p.m. ET on Thursday after delivering lower-than-expected results for the fourth quarter.
So what
Fourth-quarter revenue declined 8.5% over the same quarter a year ago. The company also reported a net loss of $8.8 million, or $0.11 per share, which is slightly down from a loss of $9.5 million, or $0.12 per share, in the year-ago quarter.
The highlight of the quarter was the growth in the company's Taegis cloud-based security platform. Taegis revenue grew 156% year over year in the quarter and more than doubled for the full year. But it contributed less than 10% of total revenue for the year, so it didn't make a significant impact on overall growth.
Image source: Getty Images.
Now what
SecureWorks is transitioning from lower-margin services to higher-value offerings like Taegis. "Just 2.5 years since initial launch, Taegis reached $165 million in [annual recurring revenue], up $42 million sequentially, accelerating our business model transition," CEO Wendy Thomas said on the company's fourth-quarter earnings call.
The company's transformation should accelerate in fiscal 2023 (which ends in January) with expected growth from Taegis. Taegis provides SecureWorks a growing stream of annual recurring revenue, but it still might take a while before the company shows significant improvement on the top line. Analysts expect revenue to decline another 4.4% this year and fall 1.8% next year.
Over the long term, SecureWorks has a nice tailwind at its back. A recent 2022 study from PricewaterhouseCoopers (PwC) found that 69% of organizations expect to increase their cybersecurity budgets this year. However, there are many cybersecurity stocks to ride this trend that might offer better growth than SecureWorks.
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