Oxford, 9 November 2016.  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 2016 (“H1, FY17”).

Financial and operational highlights

• H1, FY17 like-for-like5 billings up 15.1 percent year-on-year to $282.3 million (“YOY”) (15.6 percent reported)
  • New customer billings⁶ up 19.9 percent YOY, driven by Unified Threat Management and Sophos Central platform (c. +150 percent YOY)
  • Like-for-like subscription billings increased by 19.4 percent YOY (19.7 percent reported)
  • Cross sell of UTM and Endpoint improved to 8.4 percent  (H1, FY16: 6.4 percent)
  • Renewal rate, including upsell, improved to 104.1 percent (H1, FY16: 100.5 percent)
• Reported revenue grew 9.7 percent YOY and 10.4 percent on a constant currency basis, driven by subscription revenue which increased 12.7 percent YOY
• Deferred revenue balance increased to $511.3 million (FY16: $498.7 million) driven by strong billings growth
• Cash EBITDA margin 18.2 percent (H1, FY16: 18.8 percent), reflecting further investment in R&D; the company continues to expect modest YOY margin improvement for FY17
• Operating loss increased as a consequence of increased R&D investment, a higher share-based payment expense and for the period a higher deferral of revenue from a shift in the mix of billings to recurring subscription contracts
• Unlevered free cash flow of $62.2 million, a significant increase YOY due to improvements in operating performance and cash management and in part aided by first/second half phasing
• Significant innovation during the period, with release of new next-generation endpoint protection product, Sophos Intercept X, further extension of Sophos Central cloud-based management platform, and the industry’s first synchronized encryption product, Sophos SafeGuard
• Proposed interim dividend of 1.3 US Cents per share(+86 percent YOY)

Kris Hagerman, Chief Executive Officer, commented:

“We are pleased with our first half results which were in-line with our outlook, and especially pleased with our cash flow performance which was ahead of our outlook.  We continued to outgrow the IT security market, supported by a strong demand environment in our target market, industry-leading technology, the quality and reach of our extensive partner channel, the consistency of our operational execution, and the strength of our financial model, where we benefit from high levels of recurring subscription business.

As we enter the second half of the fiscal year we expect continued strong growth, in particular as we benefit from key new product releases in next-generation endpoint and next-generation firewall, and the continued momentum of our Sophos Central cloud management platform.”

Outlook

For the year-ending 31 March 2017, the Board continues to expect to deliver mid-teens percentage billings growth on a like-for-like basis whilst also delivering modest cash EBITDA margin expansion, reflecting the operational leverage in the business.  Revenue growth is expected to be mid-teens.  Unlevered free cash flow is expected to approximately double in FY17.

To read the full report, please go to https://otp.tools.investis.com/clients/uk/sophos/rns/regulatory-story.aspx?cid=107&newsid=815967