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Thursday 16 May 2019

Sophos posts double digit FY19 revenue growth

Sophos posts double digit FY19 revenue growthWhen looked at from the perspective of turnover and operating profit, Sophos’ FY19 performance doesn’t look half bad.

The Abingdon-headquartered cyber security supplier grew its revenue 12% yoy in constant currency to US$711m and adjusted operating profit was up 87% to US$109m. Pre-tax profits too were healthy, reversing a US$41m loss a year ago into a US$54m gain this time around.

What Sophos isn’t too happy about is the flatlining of its billings growth, down 1% yoy to US$760m. The 35k net increase in Sophos’ SME customer numbers (the total client base now counts 382k) saw fewer larger deals signed while weaker network hardware billings were a result of extended refresh cycles. The company has now broken with the tradition of previous years by de-emphasising billings as a metric.

Billings calculates the value of products and services invoiced to customers following a purchase order, for which there is no right to a refund – nominally the guarantee of revenue not yet received. Sophos is gradually moving more of its products into cloud-hosted “as a service” subscriptions and adopting the role of managed security service provider (MSSP) for its customers. That transition - coupled with short term variations in renewal rates and the timing of product releases - renders billings “less indicative of the medium-term growth in our business” said management.

The alternative view of the its financial performance certainly makes for better reading from an investor perspective. Although any impact on the value of its shares was minimal at the time of writing – good news compared to the steep decline following publication of Sophos Q3 results.

We agree with Sophos that demand for cyber security solutions remains robust (read our Cyber Security Market Trends and Forecasts to 2021 here). The healthy FY19 revenue growth already seen from competitive suppliers including Fortinet, FireEye, Check Point and Palo Alto Networks (though not Symantec) appears to confirm that trend.

Competition is strong but with a strong portfolio of subscription security products now established backed by an army of resellers, Sophos has a good chance of gaining even more traction in the SME market in FY20.

Posted by Martin Courtney at '09:22' - Tagged: results   cybersecurity   Sophos  

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