TIDMSOPH
RNS Number : 7930V
Sophos Group Plc
26 July 2018
Sophos Group plc
26 July 2018
Trading statement for the quarter-ended 30 June 2018
Billings growth at 6%, with strong revenue and cash flow
Oxford, 26 July 2018. Sophos Group plc (the "Group" / LSE:
SOPH), a leading provider of cloud enabled enduser and network
security solutions, today issues its trading update for the first
quarter-ended 30 June 2018.
Financial and operational highlights
-- As previously announced, Q1 FY19 group billings(1) growth of
6%, (or 2% constant currency), was lower than anticipated
-- Overall the Group continued to see a strong demand
environment, with a double-digit increase in billings from new
customers(2) , and Sophos Central and Intercept X both continued to
show good momentum in the quarter
-- Enduser security billings declined by -1% (or -5% constant
currency) versus the prior-year period, after a particularly
challenging prior-year comparable, where billings growth was over
50% constant currency in Q1 FY18 after adjusting for the previously
disclosed material contract in FY17
-- Network security billings grew by 12% (or 7% constant
currency) versus the prior-year period, and within this UTM growth
was 19% (or 14% constant currency)
-- The net renewal rate was 114% in Q1 compared to 141% a year
ago. This level was below what we believe are sustainable norms,
and was principally caused by two factors:
- In Enduser security, we saw relatively lower levels of
cross-selling activity than expected, in part due to accelerated
demand in FY18 that resulted from the global Wannacry ransomware
outbreak
- In Network security, the renewal rate was affected by a legacy
product transition, as the migration from Cyberoam to Sophos XG
Firewall nears its conclusion
-- Revenue increased by 24% (or 19% constant currency),
principally driven by a 27% increase in subscription revenue
-- Cash EBITDA(3) decreased from $27.3 million in Q1 FY18 to
$20.3 million in Q1 FY19, reflecting both lower than expected
billings growth and a planned increase in annualised Research and
Development and Sales and Marketing expenses
-- Adjusted operating profit(4) increased almost six-fold from
$3.7 million in Q1 FY18 to $21.9 million in Q1 FY19, driven by
strong revenue growth, demonstrating the operating leverage of the
Sophos business model
-- Cash generation in the period continued to be strong, with a
33% increase in net operating cash flow and a 31% increase in
unlevered free cash flow(5) compared to the prior-year period
Financial highlights
Q1 FY19 Q1 FY18 Growth
GAAP measures $M $M %
Revenue 175.5 141.4 24.1
Operating profit/(loss) 6.2 (15.3) nm
Net cash flow from
operations 40.4 30.3 33.3
Non-GAAP measures
Billings 174.9 164.3 6.5
Cash EBITDA 20.3 27.3 (25.6)
Adjusted operating
profit 21.9 3.7 491.9
Unlevered free cash
flow 39.6 30.3 30.7
Kris Hagerman, Chief Executive Officer, commented:
"Sophos continues to execute against our core mission: to
deliver innovative, simple, and highly-effective cybersecurity
solutions to IT professionals and the channel that serves them. Our
solutions are managed in a single integrated cloud platform where
the products actively communicate and work together to deliver
better security. This remains a highly differentiated approach and
continues to resonate well with customers and partners.
As we look forward, we expect a return to mid-teens constant
currency billings growth in the second-half of the year. In H2,
prior-year comparisons become more favourable, the temporary
effects of legacy product transitions diminish, and the renewal
rate is expected to return to a more normal range. This, combined
with the expected strong growth in our future renewal book into
FY20, continues to give us confidence in our long-term
outlook."
IFRS 15
The results for Q1 FY18 have been restated for the adoption of
IFRS 15 "Revenue from contracts with customers". The restatement is
consistent with the expected impact disclosed in the Annual Report
and Accounts for the year-ended 31 March 2018; though the Directors
will continue to monitor industry practice and experience of
implementation through the coming months and update their
assessment of the impact on the Group if required. Excluding the
impact of IFRS 15, revenue growth has been estimated at 24.0 per
cent.
About
The Sophos Group is a leading global provider of cloud-enabled
enduser and network security solutions, offering organisations
end-to-end protection against known and unknown IT security threats
through products that are easy to install, configure, update and
maintain. For further information please visit: www.sophos.com. The
Group has over 30 years of experience in enterprise security and
has built a portfolio of products that protects over 300,000
organisations and over 100 million endusers in 150 countries,
across a variety of industries.
Forward-looking statements
Certain statements in this announcement constitute
"forward-looking statements". These forward-looking statements
involve risks, uncertainties and other factors that may cause the
Group's actual results, performance or achievements, or industry
results, to be materially different from those projected in the
forward-looking statements. These factors include: general economic
and business conditions; changes in technology; timing or delay in
signing, commencement, implementation and performance or
programmes, or the delivery of products or services under them;
structural change in the security industry; relationships with
customers; competition; and ability to attract personnel. You are
cautioned not to rely on these forward-looking statements, which
speak only as of the date of this announcement. The Group
undertakes no obligation to update or revise any forward-looking
statement to reflect any change in expectations or any change in
events, conditions or circumstances.
Contact
Sophos Group plc Financial Public Relations
Tel: +44 (0) 1235 559 933 Tulchan Communications
Kris Hagerman, Chief Executive Officer Tel: +44 (0) 20 7353 4200
Nick Bray, Chief Financial Officer
Derek Brown, Vice President Investor
Relations
Conference call and webcast
Sophos management will host a conference call and audio-webcast,
for registered participants, at 09:30 (BST) today. A replay of the
audio-webcast will be also accessible via the Sophos investor
website following the presentation.
To register for the webcast and access the presentation
materials please visit:
https://investors.sophos.com/events-and-presentations
Please dial into the conference call 5-10 minutes prior to the
start time using the number/conference ID below:
Telephone:
+44 (0) 330 336 9411 (UK) / 0800 279 7204 (toll free)
+1 323 994 2131 (US) / 800 288 0540 (toll free)
Conference call confirmation code: 6864762
Participants are advised to visit the website at least 15
minutes prior to the commencement of the call-in order to register
and, for those accessing the webcast, in order to download and
install any audio software that may be required.
NB: Conference call participants will be able to ask questions
during the Q&A session, but those on the webcast will be in a
listen-only mode.
1. Billings represents the value of products and services
invoiced to customers after receiving a purchase order from the
customer and delivering products and services to them, or for which
there is no right to a refund. Billings does not equate to
statutory revenue.
2. New customer billings includes MSP billings and excludes OEM and Consumer billings.
3. Cash earnings before interest, taxation, depreciation and
amortisation ("Cash EBITDA") is defined as the Group's operating
profit/ (loss) adjusted for depreciation and amortisation charges,
any gain or loss on the sale of tangible and intangible assets,
share option charges, unrealised foreign exchange differences and
exceptional items, with billings replacing recognised revenue.
4. Adjusted operating profit represents the Group's operating
profit / (loss) adjusted for amortisation charges, share option
charges and exceptional items.
5. Unlevered free cash flow represents Cash EBITDA less
purchases of property, plant and equipment and intangibles, plus
cash flows in relation to changes in working capital and
taxation.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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