# Sophos Group plc Profitability significantly improved increased by 157% - Link: https://www.directorstalkinterviews.com/sophos-group-plc-profitability-significantly-improved-increased-by-157/412764650 - Published: 2019-01-18T07:26:48+00:00 - Author: Charlotte Edwards **Sophos Group plc** (LON: SOPH), a leading provider of cloud enabled enduser and network security solutions, today issues its trading update for the nine-months and third-quarter ended 31 December 2018. **Summary Financial Performance** · Constant currency Billings1 grew 2% for the third-quarter and 2% for the nine- months year-to-date (“YTD”) o Continued subdued performance is set against the context of a challenging prior- year comparable o A further sequential improvement in the renewal rate to existing customers in the third-quarter to 122% o Offset by a modest decline in billings from new customers as well as a decline in hardware billings o Sophos Central billings up by 22% YTD and 29% in the third-quarter at constant currency o Enduser billings rose by 6% in the third-quarter at constant currency, an improvement over the small constant currency decline experienced in the first-half of the fiscal year o Positive initial customer response to Intercept X Advanced with EDR, following a successful launch at the end of the third-quarter o Network saw a small benefit from the launch of XG Firewall v17.5 late in the period, albeit overall Network subscription growth was offset by lower hardware billings o We now expect the trends in the third quarter to generally continue into the fourth quarter, which would result in a modest decline in full-year constant currency billings · Revenue increased by 14% YTD on both a reported and constant currency basis, principally driven by continued growth in subscription revenue o Subscription revenue increased by 18% YTD and 15% in the third-quarter at constant currency, benefiting from prior-period subscription billings and offsetting a reduction in hardware revenue o Deferred revenue increased by 8% year-over-year (“YOY”), as a result of the deferral of billings net of the impact of currency movements from the strengthening of the US dollar in the period **· Profitability significantly improved** o Adjusted operating profit2 increased by 157% YTD, driven by strong growth in revenue o Reported operating profit of $51 million YTD, compared to a prior-period loss of $25 million o Cash EBITDA3 declined 8% YTD reflecting the subdued billings performance · Cash flow performance was strong, in the context of a strong prior-year comparative period o Net cash flow from operations of $100 million and unlevered free cash flow4 broadly unchanged YTD · Over 25,000 net new customers added YTD, including more than 9,000 in the third- quarter, with total customers of 327,000 **Financial highlights** | | Q3 FY19 | Q3 FY18 | Growth | 9-months FY19 | 9-months FY18 | Growth | | GAAP measures | $M | $M | % | $M | $M | % | | Revenue | 178.0 | 165.9 | 7.3 | 527.5 | 462.7 | 14.0 | | Operating profit/(loss) | 23.9 | (1.6) | nm | 50.9 | (24.7) | nm | | Net cash flow from operations | 18.7 | 17.5 | 6.9 | 100.2 | 98.2 | 2.0 | |   Non-GAAP measures | | | | | | | | Billings | 193.7 | 194.8 | (0.6) | 546.4 | 536.3 | 1.9 | | Cash EBITDA | 49.9 | 46.7 | 6.9 | 103.9 | 113.3 | (8.3) | | Adjusted operating profit | 33.1 | 16.5 | 100.6 | 83.0 | 32.3 | 157.0 | | Unlevered free cash flow | > **Kris Hagerman, Chief Executive Officer, commented:** > “Sophos remains strongly positioned from a technology, product, and strategic > perspective. We are confident in our strengthening product platform and how it > positions us for the future.” **IFRS 15** The results for FY18 have been restated for the adoption of IFRS 15 “Revenue from contracts with customers”. The restatement is consistent with the expected impact disclosed in the Annual Report and Accounts for the year-ended 31 March 2018. **About** The Sophos Group is a leading global provider of cloud-enabled enduser and network security solutions, offering organisations end-to-end protection against known and unknown IT security threats through products that are easy to install, configure, update and maintain. For further information please visit: www.sophos.com. The Group has over 30 years of experience in enterprise security and has built a portfolio of products that protects 327,000 organisations and over 100 million endusers in 150 countries, across a variety of industries.   Share on: