Sophos Group plc (LON: SOPH), a leading provider of next-generation cloud-enabled enduser and network cybersecurity solutions, has today issued its trading update for the quarter-ended 30 June 2019.
Financial highlights
· Revenue of $180.2M increased by 3% year-over-year (“YOY”), or by 7% at constant currency
- Strong subscription revenue growth of 10% at constant currency, offsetting a reduction in hardware revenue of -11%
- MSP(3) ARR(4) now at $31.8 million, an increase of 78% YOY at constant currency
· Billings of $183.1M increased by 5% in the period, or by 9% at constant currency
- Next generation (“next-gen”) business, including Sophos Central and XG Firewall, grew 43% at constant currency to $100.2 million, and represented 54% of billings in the quarter
- Within next-gen business, Sophos Central billings grew 49% to $64.3 million
- Renewal rate(5) was 118% in the period, compared to 115% in the prior-year period
- Enduser billings rose by 17% in the quarter at constant currency, whilst Network billings grew 1% reflecting as anticipated the phasing of new product releases, with subscription growth offset by lower hardware billings
· Profitability improved
- Adjusted operating profit(6) increased by 10% YOY, reflecting revenue growth and phasing of expenses
- Reported operating profit at breakeven, compared to a profit of $6.2 million in the prior-year; primarily impacted by a one-off exceptional restructuring charge
- Cash EBITDA(7) of $26.6 million increased by 31% YOY reflecting in equal proportions the strength of billings and the impact of IFRS 16 in the quarter
· Cash flow continued to be strong in the quarter
- Net cash flow from operating activities of $54.4 million, compared to $40.4 million in the prior-year period, the improvement principally reflecting timing differences on working capital; with unlevered free cash flow(8) at $55.6 million, compared to $39.6 million in the prior-year period
· Total customers now exceed 397,000 when including MSP customers (Q1 FY19: 341,000)
Sophos Group Group Chief Executive Officer, Kris Hagerman, commented:
“This has been an encouraging start to the year which underpins our confidence in our prospects for the full year. The demand environment continues to be strong, and as we noted at the full-year, we believe we have a highly effective and differentiated next-generation security product portfolio that positions Sophos very well. Along with encouraging overall company growth, we saw significant continued growth in our next-generation products, including Sophos Central, Intercept X endpoint, XG Firewall, and our MSP business. Consequently, we believe we are well positioned for continued future growth.”
