Sophos Group plc Interim results for the six-month period-ended 30 September 2019

Sophos Group plc (the "Group" / LSE: SOPH), a leading provider of next-generation cloud-enabled enduser and network cybersecurity solutions, today issues its interim results for the six-months to 30 September 2019 ("H1 FY20").

Financial highlights

• Reported Group revenue of $365.8 million grew 5% YOY (+8% CC)
  • Subscription revenue remained the principal driver of YOY growth, increasing by 8% (+11% CC), and offsetting an 8% reduction in revenue from hardware (-5% CC)
• Reported Group billings(1) of $372.0 million increased by 5% YOY (+9% CC)
  • Next-gen(2) billings grew 40% CC to $208.6 million (H1 FY19: $148.6 million); Sophos Central grew 47% CC to $134.8 million (H1 FY19: $92.0 million)
  • Group net renewal rate improved to 121% (H1 FY19: 118%)
  • Enduser billings (+14% CC) benefited from cross-sell and recent product launches
  • Growth in Network subscription billings (+8% CC) was partially offset by a decline in hardware (-5% CC)
  • Annual-recurring revenue ("ARR"(3)) from MSP(4) grew by 79% at CC to $32.5 million (H1 FY19: $18.1 million)
  • New customer billings (+6% CC) benefited from MSP, closing with 409K total customers (FY19: 382K)
• Loss before tax of $1.5 million (H1 FY19: profit before tax of $26.0 million)
  • Reflects combination of the negative impact from exceptional restructuring and legal costs in the current period versus an exceptional credit which benefited the prior-year comparator
  • Adjusted operating profit(5) was broadly flat at $49.4 million, reflecting further planned investment
  • Cash EBITDA(6) increased by 24%, from $54.0 million to $66.8 million, with the rate of growth benefiting from the introduction of IFRS 16 - Leases ("IFRS 16") (+10% pre IFRS 16)
• Net cash flow from operating activities increased by 15% YOY to $93.8 million
  • Helped by the expected phasing of some costs toward the second-half of the year and the introduction of IFRS 16 (+6% pre IFRS 16)

Financial summary

Note: On 14 October 2019, the Group announced a recommended cash offer of US$7.40 per Sophos Share from Surf Buyer Limited, a company owned by funds managed and/or advised by Thoma Bravo LLC. The details of the offer are set out in the announcement, which is available at investors.sophos.com. Consequently, as indicated at the time of the announcement, no interim dividend is proposed.

Chief Executive Officer, Kris Hagerman, commented:

"Our performance in H1 FY20 shows the continued progress we are making towards fully transitioning our business to next-generation cybersecurity. As we pursue this strategy, we are benefiting from our advanced capabilities and investments in the cloud, machine-learning, APIs, synchronized security, automation, managed threat response and more, to deliver enterprise-grade protection to organisations of any size."

For the full report, please go to Sophos’ Investor page on Sophos.com.

End Notes

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. The next-gen product portfolio consists of the Group's most advanced products, managed in Sophos Central, notably including Sophos Intercept X for endpoint protection and the Sophos XG Firewall.
3. Annual Recurring Revenue is defined as the annualised equivalent of term licenses, subscription agreements and maintenance contracts including OEM and MSP but excluding perpetual licenses.
4. MSP Billings exclude Reflexion.
5. Adjusted Operating Profit represents the Group's operating profit / (loss) adjusted for amortisation charges, share option charges and exceptional items.
6. 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.
7. Growth adjusted to eliminate the impact of IFRS 16 - Leases in the current period; see note 2 of the Financial Statements for further details.
8. 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.