SecureWorks Corp. (NASDAQ:SCWX) Q1 2024 Earnings Call Transcript

Christian Grant: Yes. Good morning, Saket. Thank you for your question. Yes. So as we talked about — like when it comes to the remaining 14%, right, with the acceleration in Q1 to the non-Japan other MSS, we got more than half is left in Japan and which we’re actively managing down with the expected end of life in Q1 of next year. Well, when it comes to those costs, right, as I mentioned in my remarks, there’s about $25 million that is directly tied to the wind down of the other MSS which is split $15 million in cost of service and $10 million of OpEx that we’re actively — we’re aligning that and managing as the rundown called the — that 14% occurs. There’s a little bit of timing that will happen as some costs will comes off after the revenue. But the expectation of the — all those duplicative and transition costs will exit the business by mid-FY ’25.

Wendy Thomas: Right. I think that’s the thing I’d emphasize, Saket is – two world. Thank you.

Saket Kalia: Very helpful. Thanks guys.

Operator: Our next question comes from Mike Cikos from Needham. Mike, your line is now open. Please go ahead.

Michael Cikos: Hi, guys. Thanks for taking the questions here. I appreciate you provided the guidance and metrics, but I just wanted to piece out a little bit more around the revenues. With Q1 coming in obviously, below where you guys have expected based on that more active management of other MSS. Is it fair to think that you guys probably tracking towards the lower end of that revenue guidance range we have today? And maybe in conjunction with that response, can you help us think about what needs to go right or what are the vectors that would help you guys come in towards the higher end of that revenue guidance for the reiterated full year guide that we have today?

Wendy Thomas: Good morning, Mike, thanks for that. There are a couple of factors in first quarter. There certainly was and as you recall, the other MSS has two pieces, a handful of larger contracts that were originally extended beyond the non-Japan end-of-life state that we are just working through with those customers for a smooth transition and we were able to accelerate some of that, which is a good thing, and we can align our cost structure accordingly. The second piece was really the transactional consulting revenue, which was more — those revenues were sold, but the revenue is dependent on customer resourcing to implement those. So think of that more as a timing issue than a sort of permanent issue. And then within the existing Taegis guidance range, we can see the offset of the other MSS piece, which, as I said, the sooner we kind of get to one go-forward business, the more that’s good for the overall company.

Michael Cikos: Got it. Got it. And I know that you guys have spoken about the go-to-market earlier in your prepared remarks as well. And I think Chris had pointed to some of the success you guys continue to see with Taegis ARR coming from, whether it’s new customers or upsell or cross-sell. So a two quarter here. But first, maybe for Chris, can you help explain how many of — I guess, how many customers were added for Taegis in Q1 versus Q4 of last year? And then to Wendy, this is more of a product view here, but can you help us think about the marriage of the IT and OT with respect to the — I guess, tie up of those environments and where SecureWorks envisions itself playing in that field? Thank you.