Sophos rallies on improved revenues and profitability in Q2

Provider of next-generation cloud-enabled enduser and network cybersecurity solutions, Sophos Group plc (LON: SOPH) saw its share price rally in Friday morning trading, following a quarterly performance update which saw consistent financial improvement.

Sophos Group said subscription revenue was up 10% on a constant currency basis while ‘MSP’ and ‘ARR’ were up 78% on a constant currency basis, to $31.8 million. This pushed overall revenues up 3% despite an 11% reduction in hardware revenue.

Enduser billings were also up 17% on constant currency, Network billings grew 1%, Sophos Central billings grew 49% to $64.3 million and the Company’s ‘next gen’ business grew 43% to $100.2 million on a constant currency basis. Overall, billings grew 5% to $183.1 million.

Adjusted operating profit was up 10% year in year and Cash Ebidta rose 31%, though reported operating profit was said to be down to ‘breakeven’ due to a one-off restructuring charge.

Sophos Comments

Company Chief Executive Officer, Kris Hagerman, commented on the update,

“This has been an encouraging start to the year which underpins our confidence in our prospects for the full year.  The demand environment continues to be strong, and as we noted at the full-year, we believe we have a highly effective and differentiated next-generation security product portfolio that positions Sophos very well.  Along with encouraging overall company growth, we saw significant continued growth in our next-generation products, including Sophos Central, Intercept X endpoint, XG Firewall, and our MSP business.  Consequently, we believe we are well positioned for continued future growth.”

 The Company spoke on the impact of IFRS 16 leasing,

“The results for Q1 FY19 reflect the adoption of IFRS 16 “Leasing”.  The impact is consistent with the expected impact disclosed in the Annual Report and Accounts for the year-ended 31 March 2019; though the Directors will continue to monitor industry practice and experience of implementation through the coming months and update their assessment of the impact on the Group if required.”

Investor notes

The Company’s shares have rallied 4.19% or 17.3p to 430p per share 12/07/19 11:26 GMT. Liberum Capital and Deutsche Bank retain their ‘Hold’ stances on Sophos Group stock, while JP Morgan Cazenove upgraded its stance from ‘Neutral’ to ‘Overweight’.

Elsewhere in the tech sector; MiriAd Advertising plc (LON: MIRI), Zoo Digital Group plc (LON: ZOO), Vela Technologies Plc (LON: VELA),  Remote Monitored Systems PLC (LON: RMS), Tekmar Group Plc (LON: TGP), Redcentric PLC (LON: RDN) and Codemasters Group Holdings Limited (LON: CDM) provided trading updates.