Sophos Group plc Interim results for the six-month period-ended 30 September 2018

Billings in line with expectations; strong revenue, profit, and cash performance

OXFORD, United Kingdom, Nov. 07, 2018 (GLOBE NEWSWIRE) -- Sophos Group plc (the “Group” / LSE: SOPH), a leading provider of cloud enabled enduser and network security solutions, today issues its interim results for the six-months to 30 September 2018 (“H1 FY19”).

Financial and operational highlights

• In line with the expectations outlined at the time of the Q1 update in July, H1 FY19 billings¹ increased by 3% to $353 million, a rise of 2% at constant currency to $361 million
  - The renewal rate at 118% in the H1 FY19 period (or 121% in Q2 FY19), compared to 142% a year ago, as cross-sell activity in our Enduser business returned to more sustainable levels following elevated growth in the comparative period
  - Continued robust growth in Sophos Central; now accounting for around one third of subscription billings with 77,000 customers on the integrated cloud management platform
  - Further expansion in the partner channel and customer base, with over 43,000 channel partners and 317,000 customers
• Revenue² for H1 FY19 grew by 18%, or 16% at constant currency, to $350 million, with 20% growth in subscription revenue at constant currency, reflecting the strength of our subscription model and billings growth in prior years
• Profit before tax of $26 million, reflecting strong revenue contribution, a foreign exchange benefit, and fair value adjustments, compared to a loss before tax of $36 million in the comparative period
• Modest improvement in operating cash flow and unlevered free cash flow³ against the comparative period
• Strong product and innovation pipeline during FY19: successful H1 release of Intercept X for Server, already gaining good traction with customers; in H2 the Group plans to release significant new versions of its flagship endpoint and firewall products: Intercept X Advanced with Endpoint Detection and Response (“EDR”), and XG Firewall v17.5 with Sophos Central cloud management and significant new synchronized security features

Outlook
We are confident that we are well positioned to deliver future growth.  We have a strong innovation pipeline and are making a significant investment in our strategic Sophos Central cloud platform.  We now expect a modest improvement in constant currency billings growth in H2 FY19 compared to the first half, as we continue to work through challenging year-on-year comparatives.  For FY20, we enter the year with strong growth in our subscription renewals base, and hence, assuming a stable renewal rate, we would anticipate a significant improvement in the rate of overall constant currency year-on-year billings growth.

Financial highlights

Kris Hagerman, Chief Executive Officer, commented:
“Sophos continues to make solid progress in advancing our strategy of delivering advanced and highly effective cybersecurity solutions to IT professionals at organizations of all sizes.  We saw continued growth and momentum in Sophos Central, our strategic cloud management platform, with now over 77,000 customers.  And we are well on track to deliver two significant new releases in our flagship products – Intercept X with EDR, and XG Firewall v17.5 – which we believe will further deliver on the promise of synchronized security, and position us well in the market for next-generation security solutions, for H2 and beyond.” 

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 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 317,000 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.

Please see the full results on the Sophos Investor website.

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. Restated for the adoption of IFRS 15 “Revenue from Contracts with Customers”; see note 2 of the Financial Statements for further details
3. 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.
4. 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, the net deferral of sales related costs, unrealised foreign exchange differences and exceptional items, with billings replacing recognised revenue.