Sophos financial results ahead of analyst expectations

June 09, 2008 Sophos Press Release

"Sophos generated 28% year-over-year growth in billings, while also posting impressive deferred revenue and free cashflow results," said Steve Munford, Sophos CEO. "Sophos continues to gain market share because its products explicitly address the growing market demand for a broader, yet simple, integrated solution equipped to manage the increased security complexity of the corporate network."

Key Performance Indicators (in USD)

FY 2008 FY 2007 Percentage change
Billings1 $213.9 $167.3 +28%
Free cashflow2 $41.8 $29.6 +41%
Deferred revenue $226.3 $180.6 +25%

According to IDC, Sophos is the largest privately held vendor in the secure content and threat management market3. Focused on serving the enterprise market exclusively - which it defines to include small and mid-sized businesses, large corporations, educational institutions and government agencies - Sophos protects an estimated 100 million end users and its products are used by more than 72,000 customers worldwide. Within the fiscal year, Sophos garnered 259 new customer wins each worth over $100,000, which were mainly competitive displacements from Symantec or McAfee.

"Sophos enjoyed robust growth across all geographies, with excellent performances in North America and Japan demonstrating Sophos's success in highly strategic and fiercely competitive markets," said Paul Smolinski, Chief Financial Officer for Sophos. "Fiscal 2008 billings for North America topped $77 million while Japan's billings growth grew 45% year-over-year."

In addition to its 20th year of consecutive growth in revenue, Sophos consistently generates strong levels of free cashflow. Cash holdings at the year end were at $139.3 million, a rise of nearly 55% year-over-year.

Over the year, Sophos made a number of enhancements to its overall product line. These included the general availability of Sophos Endpoint Security and Control 8 in addition to upgrade releases of Sophos's Email Security Appliance and Sophos's Web Security and Control offering. It was also a year where Sophos fully integrated last year's acquisition of ENDFORCE, which has led to building NAC functionality into Sophos Endpoint Security and Control 8, as well as delivering-to-market Sophos's standalone endpoint NAC offering - Sophos NAC Advanced.

These product line enhancements enabled Sophos to successfully capitalize on the growing market demand for broader integrated security solutions, a demand driven by the increased complexity of both the corporate network and the desire for corporations to simplify their security solutions. In addition to winning significant new accounts with a broader product line, Sophos has been especially successful with driving revenue growth by selling multiple products into its existing customer base.

Late in 2007, Gartner, Inc. published an updated version of its Magic Quadrant for Endpoint Protection Platforms, 2007, which ranks companies on their 'completeness of vision' and their 'ability to execute,' and categorizes them as either 'niche players,' 'evisionaries,' 'challengers' or 'leaders'. For the first time, Sophos was placed in the 'leaders' quadrant within the Gartner report. More recently, Gartner recognized Sophos in its MarketScope for Network Access Control, 2008 report. Within the report, Sophos received a 'positive' rating, the highest mark given to any vendor by Gartner.

During the year, Sophos continued to strengthen its Board of Directors with both Jonathan Brooks and Nanci Caldwell being appointed as non-executive directors. Jonathan brings with him extensive experience serving on Boards such as Aveva Group Plc, ARM Holdings Plc, and E2V Technologies. Nanci has held senior management positions at PeopleSoft and at Hewlett-Packard Company.

1 Billings represents the value of the Sophos products and services invoiced to customers, following receipt of a purchase order and initial delivery of the solution. Sophos's policy requires that software license revenue is recognized rateably over the license term, and therefore has the effect of deferring a higher proportion of bookings to future periods. This contributes to a future guaranteed revenue stream.

2 Net cash from operations excluding exceptional cash flows plus finance income less capital expenditure.

3 IDC, 'Worldwide Secure Content and Threat Management 2007-2011 Forecast and 2006 Vendor Shares,' Brian E. Burke, Charles J. Kolodgy, Jon Crotty, June 2007.