Shares of SecureWorks (NASDAQ: SCWX) were down 9.7% as of 1:20 p.m. ET Thursday after reporting weaker-than-expected fourth-quarter results.
Fourth quarter revenue decreased 8.5% compared to the same quarter a year ago. The company also reported a net loss of $8.8 million, or $0.11 per share, which was slightly lower than a loss of $9.5 million, or $0.12 per share, in the quarter. of the previous year.
The highlight of the quarter was the growth of 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 had no significant impact on overall growth.
SecureWorks is shifting from low-margin services to higher-value offerings such as Taegis. “Just 2.5 years after initial launch, Taegis has reached $165 million in [annual recurring revenue]up $42 million sequentially, accelerating the transition of our business model,” CEO Wendy Thomas said during the company’s fourth quarter earnings call.
The business transformation is expected to accelerate in fiscal year 2023 (which ends in January) with expected growth from Taegis. Taegis provides SecureWorks with a growing stream of annual recurring revenue, but it may still take some time before the company shows significant improvement in revenue. Analysts expect revenue to fall another 4.4% this year and 1.8% next year.
Over the long term, SecureWorks has a nice tailwind behind it. A recent 2022 study from PricewaterhouseCoopers (PwC) found that 69% of organizations plan to increase their cybersecurity budgets this year. However, there are plenty of cybersecurity stocks to follow this trend that could offer better growth than SecureWorks.
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