Sophos Group plc Interim results for the period-ended 30 September 2017

OXFORD, United Kingdom, Nov. 08, 2017 -- 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 2017 (“H1”).

Financial and operational highlights

• Strong cash generation, reflecting both a strong operating performance and good cash management
  -  Net cash from operations increased by 28% to $80.7 million, and unlevered free cash flow¹ grew 15% to $71.4 million
• Billings² momentum strengthened further with growth of 22% in H1 and 29% in Q2
  -  Enduser delivered 39% growth in H1, principally driven by Intercept X and Sophos Central
  -  Sophos Central grew more than 220% to $78.5 million in H1
  -  Accelerating momentum in Network with billings up 16% in Q2 driving a 10% increase in H1
  -  Good growth in all regions, with 25% growth in the Americas, 22% in EMEA and 17% in APJ
  -  Steady pace of new customer additions, with over 280,000 customers at the end of September, compared to 240,000 a year ago and 260,000 at the prior year-end
• Subscription business further supporting long-term visibility and sustainable growth
  -  Revenue growth of 16% in H1 with subscription revenue up 21%
  -  Deferred revenue increased by 28% over the prior-year to $654.4 million, with $372.3 million of the balance due for recognition in less than one year (up 27% on prior-year)
• Further progress toward margin expansion over time
  -  Cash EBITDA³ up 31% in H1, with margins up 130 bps
  -  Adjusted operating profit⁴ declined to $15.1 million in H1, reflecting upfront costs associated with the strong subscription billings performance, and a negative foreign exchange charge; on a GAAP basis operating loss improved slightly to $23.8 million
• Raising FY18 outlook
  -  For FY18 we now expect 20-22% billings growth with a 50-100 bps improvement in Cash EBITDA margin and modest growth in unlevered free cash flow

Kris Hagerman, Chief Executive Officer, commented:
“We continued to see strong momentum for our industry-leading cybersecurity solutions, across all regions and product areas, particularly in the Enduser segment where we are establishing a market-leading position in the high-growth new segment of next-generation endpoint.  We continue to offer cutting-edge technology, with robust third-party validation, that is easy to deploy and manage, through a single cloud console.  We also saw solid demand in Network security, with improved growth rates in Q2 versus Q1.  We view the second half with confidence, and we are raising our outlook for billings and unlevered free cash flow for the full year.”

Please see the full results on the Sophos Investor website.

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 280,000 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.

1. 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.
2. Billings represent 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.
3. Cash earnings before interest, taxation, depreciation and amortisation (“Cash EBITDA”) is defined as the Group’s operating (loss)/ profit 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.