2016 IPO Prospects: SecureWorks is Ready to List

According to a MarketsAndMarkets report, the global cyber security market is estimated to grow 9.8% annually over the next five years to be worth $170.2 billion by 2020. The market was estimated to be worth $106.32 billion in 2015. North America is expected to continue to be the largest market on the basis of spending while Latin American and Asia-Pacific regions will see the highest growth rates.

SecureWorks’ History

Atlanta-based SecureWorks was founded in 1999 by Michael Pearson and Joan Wilbanks to deliver information security offerings to companies worldwide. By 2011, the company was offering Security-as-a-Service solutions which included Managed-Security Services, Security and Risk Consulting Services, and Threat Intelligence. It was an attractive target for Dell, which was expanding its enterprise offerings. Dell agreed to acquire SecureWorks for an estimated $612 million in 2011. At the time of the acquisition, SecureWorks was trending at revenues north of $120 million.

In the years to follow though, Dell itself turned into a private organization. Last year, Dell announced its lofty $67 billion acquisition of EMC. Given the size of the acquisition, Dell has had to rethink its business portfolio. As part of the re-organization, Dell announced plans to list SecureWorks instead of merging it with EMC owned RSA security offering.

SecureWorks’s Offerings

Today SecureWorks is a leading global provider of intelligence-driven information security solutions focused on defending cyber attacks. Its suite of solutions enable organizations to prevent security breaches, detect malicious activity in real-time, prioritize and respond rapidly to security breaches, and predict emerging threats.

SecureWorks’s proprietary Counter Threat Platform is the basis of its intelligence-driven information security solution. It has been built with the ability to provide global visibility into the threat landscape. The platform aggregates as many as 150 billion incidents to represent activity or trends across the client’s network. Its platform then analyzes these events with sophisticated algorithms to discover malicious activity and deliver security countermeasures, dynamic intelligence ,and valuable context regarding the intentions and actions of cyber adversaries. The platform keeps learning from experience and is able to deliver enhanced actionable security information and incident response measures.

SecureWorks’s Financials

SecureWorks operates on a subscription-based service for its managed security and threat intelligence solutions. Additionally, it also generates revenues from security and risk consulting engagements through fixed-price or retainer-based contracts. Its revenues grew 27% in 2015 to $262.1 million and 19% in 2014 to $172.8 million. Last week, it reported its fiscal 2016 revenues which grew 30% to $339.5 million. Despite its size, and age, the company has not turned in profits. Net losses for fiscal 2015 came in at $38.5 million, compared with $44.5 million for 2014 and $41.5 million in fiscal 2013. Recently reported fiscal 2016 losses grew 88% to $72.3 million driven by 47% growth in operating expenses.

SecureWorks has over 4,100 customers spread across 61 countries. Its customer list includes names like Bank of America Merrill Lynch, Morgan Stanley, Goldman Sachs, JPMorgan, Barclays Capital, and Citigroup Global Markets. Bank of America is its biggest customer and it generated 12% of its revenues last year.

Dell plans to float 20% of SecureWorks’s stock in the listing that is expected to hit the stock markets later this month. It is expected to raise $150 million through the listing. Latest valuation estimates are not known, but back in June last year, analysts estimated that SecureWorks was valued at close to $2 billion. Given their current revenue number, the valuation will likely be upwards of $3 billion.

This segment is a part in the series : 2016 IPO Prospects