Corero Network Security PLC (LON:CNS), the AIM listed network security company, today provided an update on trading for the year ending 31 December 2017.
· Q4 2017 expected to be a record SmartWall order intake
· Strong SmartWall revenue and recurring revenue growth in 2017
· 2017 revenue will be impacted by delays in customer implementation schedules
· Corero enters 2018 with a strengthened market proposition and well positioned for continued growth
Trading update
Corero is expected to end the year strongly, with a record final quarter SmartWall® Threat Defense System (“SmartWall”) order intake.
Notwithstanding this, Group revenue for the year ending 31 December 2017 is now expected to be in the range $8.5 million to $9.0 million. It is expected that SmartWall revenue and recurring revenue will show strong growth over the prior year, with the contribution from legacy product revenue only $0.6 million (2016: SmartWall revenue of $5.5 million versus legacy product revenue of $3.3 million for a total of $8.8 million).
Revenue for the year ending 31 December 2017 will be impacted by delays in world-wide implementation schedules for a large digital enterprise customer win in Q3 2017 and an existing customer’s ongoing deployment (with the majority of the revenue from these two customer’s now expected in H1 2018).
SmartWall order intake for the year ending 31 December 2017 is expected to be between $9.3 million and $9.8 million, with approximately 50% representing recurring revenue in the form of support, services, and DDoS protection as a service (DDPaaS) contracts (2016: SmartWall order intake was $6.7 million including recurring revenue order intake of $2.6 million).
Given the above, the Group EBITDA* loss for the year ending 31 December 2017 is expected to be in the range $4.8 million to $5.3 million (2016: EBITDA* loss $6.4 million). Corero is encouraged that the Q4 2017 Group EBITDA* loss is expected to be in the range $0.1 to $0.5 million, bringing the Group close to its goal of being EBITDA positive.
Corero has continued to manage its cost base in 2017 with overheads* expected to be approximately 10% below the prior year.
Net cash at 31 December 2017 is expected to be approximately $1.0 million (2016: $2.9 million). Corero is planning to fund the Company’s working capital requirements for 2018 via a debt financing which it expects to complete in the first half of 2018.
* before depreciation, amortisation, financing and unrealised foreign exchange differences on an intercompany loan
2018 outlook
Corero enters 2018 with the foundation in place for continued acceleration of SmartWall revenue growth as a result of:
· Strong market demand from the growing awareness of the threat and impact of DDoS attacks, and increased risk associated with the projected growth of IoT deployments;
· Pending regulations in the US, UK and Europe, including the Directive on the Security of Network and Information’s Systems (NIS Directive) which comes into force for all EU member states on the 9th May 2018), are expected to positively impact demand for DDoS mitigation investment in 2018 particularly by Digital Enterprises (including critical national infrastructure providers);
· Corero go-to-market partner recruitment and enablement efforts in 2017 with partners expected to contribute to revenue in H1 2018; and
· Investment in channel sales development in 2017 to grow Corero’s routes to market in 2018.
It is expected that Corero will enter 2018 with a recurring revenue contract base, including support, services and DDPaaS contracts, of approximately $5.0 million.
The DDoS mitigation market fundamentals remain strong with a leading technology analyst forecasting double digit growth and the market to grow to $1.4 billion in 2021 (Source: IHS Markit).
Corero has a market leading SmartWall product portfolio which has been further enhanced for 2018 with the deliverables from a two-year development program to expand the existing product offerings with:
· A new 100Gbps capable product to capture growth in customer demand for 100Gbps connectivity; and
· A virtual appliance software-only product to capture demand for hybrid on-premises / Cloud DDoS mitigation deployments.
Ashley Stephenson, Corero CEO, said:
“Corero enters 2018 with confidence following a year of strong growth in SmartWall order intake with proof points of multiple $1.0 million plus customers, a growing catalog of industry awards and several disruptive contract wins against competitors. The Group has also expanded its ecosystem of world class partners and introduced an enhanced product portfolio. We are excited about the prospects for the future of the business.”
