SecureWorks : 2024 Annual Report CEO Letter to Stockholders

May 15, 2024

Dear Secureworks® stakeholder:

Fiscal 2024 highlighted how critical cybersecurity is in a world of accelerating technological change. While the pace of advancement creates compelling opportunities for organizations to grow, it also makes it challenging for governments, businesses, and individuals to outpace the relentless, sophisticated adversary on their own. Attack surfaces are expanding, and threat actor dwell times are falling precipitously, now under 24 hours.

A New Paradigm Around Trust and Security

Secureworks Taegis™ XDR is the platform of choice for organizations who want to secure their data, workloads and business operations and stay ahead of the evolving threat. Taegis has been powered by advanced-AI since inception. The platform was designed to seamlessly secure the diversity and complexity of evolving customer technology environments, and to leverage our threat intelligence and automation capabilities.

Security has never been more mission critical, as we witness the early impacts of AI on threat vectors, with increasingly convincing deep fakes and savvy phishing attacks. This, and the pace of technological advancement, is creating a new paradigm around trust and security. Digitization and most aspects of our lives are now touched by technological involvement and enablement, which makes us highly vulnerable to cyber disruptions, attacks, misrepresentation, extorsion, and activism, both personally and corporately. Against this threat backdrop, companies look to Secureworks to not only secure their work, but also help them navigate growing privacy and cybersecurity compliance regulations, and scale their spend on both security technology and talent at a time when fiscal prudence is top of mind and cybersecurity talent remains scarce.

Our Open without Compromise Approach to Security

The market is realizing that an open and collaborative approach to security is a must, and Secureworks is uniquely positioned to meet this market need. Our open Taegis platform future-proofs our customers, with security innovation that parallels the change in technology, pivoting and expanding with customer technology choices over time. Our open approach also provides customers with choice in how they can secure holistically across endpoint, cloud, identity and network. We designed Taegis to excel in detections across mixed environments, with the proven ability to automate sophisticated response actions. This means better, faster protection - with less noise and effort.

Taegis enables organizations to bolster their security posture with the power of Secureworks technology and security expertise. With thousands of security investigations and incident response activities each year, our platform leverages these insights to create machine-readable threat intelligence that updates our detectors every hour of every day. We continued to make significant advancements in the Taegis platform, leveraging the integration of Machine Learning and Large Language Models alongside our unique cloud architecture, to enhance the platform's security analytics and SecOps efficiency.

Our customers and partners continue to benefit from our expanding partner ecosystem. In alignment with our Partner First motion, Taegis is transparent and collaborative with critical managed service and solution providers, as well as technology alliance partners, providing flexibility and optionality around who manages detection and response activities leveraging Taegis XDR. Our unique, open without compromise approach to XDR has opened multiple go-to-market channels for Secureworks, and greater addressable market and revenue growth opportunities for our partners to deliver high margin and effective MDR.

Completing our Business Model Transformation

In Fiscal 2024, our Secureworks Taegis business continued its strong momentum. We delivered annual Taegis revenue growth of 41% and ended the year with the vast majority of our annual recurring revenue (ARR) from Taegis solutions, signaling the near completion of our transformation from a pure-play services company into a SaaS-led business. To put this growth into context, we were recognized as having the largest XDR market share by both Gartner and IDC this year. We made significant progress on profitability, achieving positive EBITDA in fourth quarter, and we accomplished this while accelerating toward the finish line of our business model transformation.

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This is a testament to the hard work of our teammates as we actively streamlined our cost structure while sunsetting certain non-strategic business lines. We are delivering - and remain committed to driving - sustained growth, while improving the scale, productivity, and operational efficiencies of our business.

Innovating for Our Customers and Partners

We are fulfilling the promise that is the foundation for Taegis - bringing the T (Technology) and Aegis (Shield) together - by providing organizations with holistic coverage and a multilayered cybersecurity strategy. That is the only way organizations can outpace and outmaneuver an ever-evolving adversary. We're advancing our mission with continued integrations, new features and expanded capabilities, and scaled services powered by our Taegis platform to meet organizations where they are on their security journey. Our innovation will ensure we continue to raise the bar to prevent more, detect better, and respond faster to threats, protecting our customers from ransomware and other cyberattacks.

On behalf of the entire Secureworks team, we thank you for investing in our mission to Secure Human Progress, with Taegis defining the future of threat detection and response, driving superior long-term and sustainable growth and value creation for investors. Thank you to our customers and partners for the trust that they place in us, and I deeply appreciate our Board and teammates around the globe for their diligence, integrity and commitment to securing our customers. We look forward to our continued partnership in Fiscal 2025 and beyond.

Sincerely,

Wendy K. Thomas,

Chief Executive Officer

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