Oxford, 17 May 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

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.”