Secureworks Corp. (Exact Name of Registrant As Specified in Its Charter)
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES þ EXCHANGE ACT OF 1934 For the fiscal year ended February 3, 2017 or TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES o EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 001-37748 SecureWorks Corp. (Exact name of registrant as specified in its charter) Delaware 56-2015395 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) One Concourse Parkway NE Suite 500, Atlanta, Georgia 30328 (Address of principal executive offices) (Zip Code) Registrant’s telephone number, including area code: (404)327-6339 Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered Class A Common Stock, par value $0.01 per share The NASDAQ Stock Market LLC (NASDAQ Global Select Market) Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No R Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No R Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes R No o Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes R No o Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. R Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. Large accelerated filer ¨ Accelerated filer ¨ Non-accelerated filer þ (Do not check if a smaller reporting company) Smaller reporting company ¨ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No þ The aggregate market value of the registrant's common stock held by non-affiliates as of July 29, 2016, the last day of the registrant's most recently completed second fiscal quarter, was $144.3 million. As of March 27, 2017, there were 80,566,149 shares of the registrant's common stock outstanding, consisting of 10,566,149 outstanding shares of Class A common stock and 70,000,000 outstanding shares of Class B common stock. DOCUMENTS INCORPORATED BY REFERENCE The information required by Part III of this report, to the extent not set forth herein, is incorporated by reference from the registrant’s proxy statement relating to the annual meeting of stockholders in 2017. Such proxy statement will be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year to which this report relates. TABLE OF CONTENTS PAGE PART I Item 1 Business 5 Item 1A Risk Factors 19 Item 1B Unresolved Staff Comments 40 Item 2 Properties 40 Item 3 Legal Proceedings 40 Item 4 Mine Safety Disclosures 40 PART II Item 5 Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 41 Item 6 Selected Financial Data 43 Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations 44 Item 7A Quantitative and Qualitative Disclosure About Market Risk 62 Item 8 Financial Statements and Supplementary Data 63 Item 9 Changes in and Disagreements With Accountants on Accounting and Financial Disclosure 94 Item 9A Controls and Procedures 94 Item 9B Other Information 94 PART III Item 10 Directors, Executive Officers and Corporate Governance 95 Item 11 Executive Compensation 95 Item 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 95 Item 13 Certain Relationships and Related Transactions, and Director Independence 95 Item 14 Principal Accounting Fees and Services 95 PART IV Item 15 Exhibits, Financial Statement Schedules 96 Item 16 Form 10-K Summary 96 SIGNATURES 97 EXHIBITS 98 Table of Contents CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS This report contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The words “may,” “will,” “anticipate,” “estimate,” “expect,” “intend,” “plan,” “aim,” “seek” and similar expressions as they relate to us or our management are intended to identify these forward-looking statements. All statements by us regarding our expected financial position, revenues, cash flows and other operating results, business strategy, legal proceedings, and similar matters are forward-looking statements. Our expectations expressed or implied in these forward-looking statements may not turn out to be correct. Our results could be materially different from our expectations because of various risks, including the risks discussed in this report under “Part I – Item 1A – Risk Factors” and in our other periodic and current reports filed with the Securities and Exchange Commission. Any forward-looking statement speaks only as of the date as of which such statement is made, and, except as required by law, we undertake no obligation to update any forward-looking statement after the date as of which such statement was made, whether to reflect changes in circumstances or our expectations, the occurrence of unanticipated events, or otherwise. 4 Table of Contents Except where the context otherwise requires or where otherwise indicated, all references in this report to “SecureWorks,” “we.” “us,” “our” and “our company” refer to SecureWorks Corp. and our subsidiaries on a consolidated basis, and all references to “Dell” refer to Dell Inc. and its subsidiaries on a consolidated basis. Our fiscal year is the 52- or 53-week period ending on the Friday nearest January 31. Our 2017 fiscal year ended on February 3, 2017, our 2016 fiscal year ended on January 29, 2016 and our 2015 fiscal year ended on January 30, 2015. Part I Item 1. Business Our Mission Our mission is to secure our clients by providing exceptional intelligence-driven information security solutions. Overview We are a leading global provider of intelligence-driven information security solutions singularly focused on helping to protect our clients from cyber attacks. Through our vendor-neutral approach, we create integrated and comprehensive solutions by proactively managing the collection of “point” products deployed by our clients to address specific security issues and by providing supplemental solutions where gaps exist in our clients' defenses. We have pioneered an integrated approach that delivers a broad portfolio of information security solutions to organizations of varying size and complexity. Our flexible and scalable solutions support the evolving needs of the largest, most sophisticated enterprises staffed with in-house security experts, as well as small and medium-sized businesses and government agencies with limited in-house capabilities and resources. Our solutions enable organizations to: • fortify their cyber defenses to prevent security breaches, • detect malicious activity, • prioritize and respond rapidly to security breaches, and • predict emerging threats. The solutions leverage our proprietary technologies, processes and extensive expertise in the information security industry which we have developed over more than 17 years of operations. As of February 3, 2017, we served approximately 4,400 clients across 61 countries. Our success in serving our clients has resulted in consistent recognition of our company as a market leader in managed security services by leading industry research firms. We generate approximately 80% of our revenue from our managed security and threat intelligence solutions through subscription-based arrangements, which provide us with a predictable and recurring revenue stream, and approximately 20% of our revenue from our security and risk consulting engagements primarily through fixed-price and retainer-based contracts. Corporate Information We are a holding company that conducts operations through our wholly-owned subsidiaries. The mailing address of our principal executive offices is One Concourse Parkway NE, Suite 500, Atlanta, Georgia 30328. Our telephone number at that address is (404) 327-6339. The predecessor company of SecureWorks was originally formed as a limited liability company in Georgia in March 1999, and SecureWorks was incorporated in Georgia in May 2009. In February 2011, SecureWorks was acquired by Dell Inc. In November 2015, our company reincorporated from Georgia to Delaware and, in connection with the reincorporation, changed its name from SecureWorks Holding Corporation to SecureWorks Corp. On April 27, 2016, SecureWorks completed its initial 5 Table of Contents public offering, or IPO. Upon the closing of the IPO, Dell Technologies Inc., the ultimate parent company of Dell, Inc., owned indirectly through Dell Inc. and Dell Inc.’s subsidiaries no shares of our outstanding Class A common stock and all shares of our outstanding Class B common stock, which as of February 3, 2017 represented approximately 86.9% of our total outstanding shares of common stock and approximately 98.5% of the combined voting power of both classes of our outstanding common stock.