SOURCE: Sophos


May 17, 2017 09:00 ET

Sophos Group plc: Results for the year-ended 31 March 2017

FY17 results ahead of expectations, unlevered free cash flow of $133 million

Strong momentum across all regions and products

Company issues medium-term guidance

OXFORD, UNITED KINGDOM--(Marketwired - May 17, 2017) - Sophos Group plc (the "Group") (LSE: SOPH), a leading provider of cloud enabled enduser and network security solutions, today issues its audited results for the year-ended 31 March 2017 ("FY17").

Business highlights

  • FY17 reported billings grew 18.2% to $632.1 million, or by 19.9% at constant currency, with strong momentum across all regions and products, in new business and renewals
  • Cash flow growth exceptionally strong, with unlevered free cash flow almost tripling to $133.4 million
  • Very strong performance from Sophos Central, growing 220% to $87.7 million from $27.4 million in the prior year; now representing 17.1% of subscription billings (FY16: 6.5%)
  • Enduser security increased by 24.4% to $298.5 million and network security grew by 17.8% to $319.1 million at constant currency, reflecting continued market share gains
  • Operating loss increased over prior-year, primarily as a consequence of cost increases associated with the strong growth in billings, whilst the majority of revenue is deferred and recognised over time
  • Deferred revenue grew 16.5%, growing $82.3 million to $581.0 million, increasing visibility of future revenue growth
  • Cash EBITDA margin increased by 110 basis points to 23.7%
  • Net renewal rate (including cross-sell and upsell) increased to 106% (FY16: 102%) with UTM/endpoint cross-sell at 9.6% (FY16: 7.4%)
  • Launch in September of Intercept X, a next-generation endpoint protection application, featuring signature-less anti-exploit and anti-ransomware capabilities, already with more than 8,000 customers
  • Integration of Invincea's machine learning technology progressing well, with new endpoint protection solution expected to be available in Sophos Central in 2017
  • Final dividend of 3.3 US Cents per share, an increase of 200%; total dividend for the year of 4.6 US Cents, an increase of 156% over the prior year

Financial highlights

    FY17     FY16     Increase/
GAAP measures   $M     $M     %  
Revenue   529.7     478.2     10.8  
Operating loss   (44.3 )   (32.7 )   35.5  
Net cash flow from operating activities   118.5     21.3     456.3  
Non GAAP measures                  
Billings1   632.1     534.9     18.2  
Cash EBITDA2   150.1     120.9     24.2  
Adjusted operating profit3   38.3     53.4     (28.3 )
Unlevered free cash flow4   133.4     46.4     187.5  

FY18 and medium term guidance
For FY18, we expect mid to high-teens billings growth, a 50-100 basis point improvement in the cash EBITDA margin and unlevered free cash flow coming from a high base in FY17, broadly unchanged. For the medium-term, we anticipate achieving billings of c.$1 billion, unlevered free cash flow in the range of $220 million to $240 million and around a 100-150 basis point cash EBITDA margin improvement per annum giving adjusted operating profit of $100+ million by FY20.

Kris Hagerman, Chief Executive Officer, commented:
"FY17 was another strong year for Sophos, in which we made significant progress against our strategic goals, and delivered operational and financial performance above our expectations. We have a differentiated strategy of delivering innovative, simple, and highly effective cybersecurity solutions for mid-market enterprises, synchronizing across enduser and network security - all in partnership with our channel. Encouragingly, the strong momentum at the heart of this performance was manifest across all major regions and products, and in both new business and renewals. We have issued a medium term outlook as a sign of our confidence in delivering sustainable growth in billings and profitability over the longer-term."

Please see the full results on the Sophos Investor website here:

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: The Group has over 30 years' experience in enterprise security and has built a portfolio of products that protects over 260,000 organisations and more than 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.