TIDMCNS
RNS Number : 8743J
Corero Network Security PLC
05 April 2018
5 April 2018
Corero Network Security plc (AIM: CNS)
("Corero" or the "Company")
Full year results
Corero Network Security plc, the AIM listed network security
company, announces its audited results for the year ended 31
December 2017.
Key financial highlights:
-- Total revenue $8.5 million (2016: $8.8 million) - strong
performance of flagship SmartWall product broadly offsetting the
decline in revenue from the legacy discontinued product
o SmartWall revenue up 43%
o Existing customer add-on orders up 320% over the prior
year
-- Reduced EBITDA loss* $5.1 million (2016: $6.4 million)
-- Loss per share 3.1 cents (2016: 9.0 cents)
-- Net cash $1.4 million at 31 December 2017 (2016: $2.9 million)
Key operating highlights:
-- Signed partnerships with global blue-chip technology companies to accelerate revenue growth
o Juniper Networks, McAfee, Gigamon
-- High customer satisfaction with >95% renewal rates for support and services
-- First two $1.0 million customers
-- Encouraging uptake of DDoS protection as-a-service ("DDPaaS"), launched in late 2016
-- New technology launched following two-year development programme
o Added 100Gbps capacity product
o Launched vNTD virtual software appliance
* before foreign exchange differences on an intercompany loan,
depreciation, amortisation, impairment of goodwill and
financing
Ashley Stephenson, CEO of Corero, commented:
"2017 proved to be a year of progress across our business
highlighted by the strong revenue growth in our SmartWall product,
which secured multiple $1.0 million plus customers, in addition to
several disruptive contract wins against key competitors. We also
introduced an enhanced product portfolio alongside expanding our
ecosystem of world class partners, which we believe will bolster
our sales footprint in the current year.
"Corero enters 2018 with renewed confidence for the prospects of
the business."
The Annual Report and Accounts for the year ended 31 December
2017 are available on the Company's website
www.corero.com/investors.
Enquiries:
Corero Network Security plc
Andrew Miller, CFO Tel: 01895 876
382
Cenkos Securities plc Tel: 020 7397
8900
Mark Connelly / Bobbie Hilliam - NOMAD
Michael Johnson - Sales
Vigo Communications Tel: 020 7830
9703
Jeremy Garcia / Ben Simons
corero@vigocomms.com
About Corero
Corero is the leader in real-time, high-performance DDoS defense
solutions. Service providers, hosting providers and digital
enterprises rely on Corero's award winning technology to eliminate
the DDoS threat to their environment through automatic attack
detection and mitigation, coupled with complete network visibility,
analytics and reporting. This industry leading technology provides
cost effective, scalable protection capabilities against DDoS
attacks in the most complex environments while enabling a more cost
effective economic model than previously available. For more
information, visit www.corero.com
Review of business
Corero revenue for the year ended 31 December 2017 was $8.5
million (2016: $8.8 million) reflecting the expected reduction in
revenue from the legacy discontinued product from $3.2 million in
2016 to $0.6 million in 2017. More pleasing however was the strong
performance from the SmartWall product, with revenues up 43% over
the prior year.
Revenue and the EBITDA loss for the year ending 31 December 2017
were 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. The majority of the revenue from
these two customers is now expected in the first half of 2018.
Operating performance against strategy
Corero's performance against its 2017 strategic objectives is
summarised below:
-- Establish SmartWall as the leading solution for real-time DDoS mitigation:
o Continued progress in growing the customer base.
o Addition of a number of high profile customers including
Corero's first US federal government customer, two $1 million
customers, first Australian customer and first potentially
significant revenue share contract with a Tier 1 service
provider.
-- Improve SmartWall DDoS defence technology:
o SmartWall software releases in 2017 have added new attack
defences and improved forensics and analytics capabilities.
-- New products to address the evolving requirements of the target market:
o Corero further enhanced its market leading SmartWall product
portfolio in 2017 through a two-year development program with a new
SmartWall 100Gbps capable product. This along with the SmartWall
virtual appliance software-only product, captures the growth in
customer demand for 100Gbps connectivity and hybrid on-premises /
Cloud DDoS mitigation deployments.
o Corero announced the first sales of the 100Gbps product
(totaling $0.4 million) in early January 2018.
-- Target market focus:
o Customer wins in 2017 have continued to validate the target
market for real-time, automatic DDoS mitigation solutions; namely
service providers, cloud providers and digital enterprises.
-- Expand routes to market - Corero's strategy is to work with
leading IT and network technology vendors to make DDoS mitigation
an integral component of any well-engineered Internet facing
network design thereby increasing its go-to-market
opportunities:
o Signed agreements with major global technology companies
including Juniper Networks, Gigamon, and McAfee.
o The technology alliance partnership with Juniper Networks, a
US based multinational corporation that develops and markets
networking and security products, has provided benefits in 2017
with the opportunity for Corero to expand its market reach by
leveraging Juniper Networks' global footprint.
-- Develop sales models to attract new target customers:
o The DDoS protection as-a-service model launched in late 2016
has gained traction in 2017 with 16 customers by the year end.
o The Service Portal, a turnkey solution for service provider
customers to manage the delivery of DDoS mitigation services to
their customers, has been an important competitive
differentiator.
Market dynamics
Cyber-security risks are growing, both in their prevalence and
in their disruptive potential. Another growing trend is the use of
cyber-attacks to target critical infrastructure and strategic
industrial sectors, raising fears that attackers could trigger a
breakdown in systems that are essential to modern society. The
World Economic Forum Global Risks Landscape for 2018 ranks
cyber-attacks as the third most likely risk in its top 10 risk
analysis, behind extreme weather events and natural disasters.
The head of the National Cyber Security Centre (NCSC), Ciaran
Martin, recently commented that while the UK is fortunate to have
avoided a so-called category one cyber-attack so far, it is only a
matter of time before a catastrophic cyber-attack is launched on
its critical infrastructure or election setup.
A recent report from Neustar revealed that many businesses
viewed unsecured Internet of Things ("IoT") devices as a major
concern. This is hardly surprising, given the recent developments
in IoT botnets and the huge potential for unsecured IoT devices to
be turned into a botnet army and used by hackers to launch DDoS
attacks.
IoT devices still suffer from basic security vulnerabilities and
it is precisely this lack of security that makes them so attractive
to hackers. But it's not just a password problem anymore. Attackers
understand that manufacturers and users are waking up to the
problem of passwords on IoT devices, and so are seeking more
complex ways to access them. As this trend continues, and hackers
become increasingly inventive when searching for new devices and
ways to enlist them, there is really no limit to the size and scale
of future DDoS attacks driven by IoT botnets. Any device that has
an Internet connection and a processor can be exploited. In an
ideal world, all devices should be forced to go through some sort
of network configuration before being used, rather than being
exploitable from a default position.
Businesses and government departments can protect their networks
from DDoS attacks fueled by IoT-driven botnets by deploying a
real-time, automated solution at the network edge, which can
instantaneously detect and mitigate DDoS activity, thereby
eliminate threats from entering a network. As with all DDoS
threats, clear visibility is a crucial step in detecting and
defending against attacks. The Corero SmartWall solution is this
real-time automated solution providing rich actionable
analytics.
As organisations develop their businesses to harness the
benefits and power of technology we are seeing companies reassess
their security architecture, including DDoS protection, as
traditional approaches will not be sufficient to protect
enterprises.
Outlook
Corero enters 2018 with the foundations 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 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's efforts to widen its partner network with global
blue-chip technology companies has gathered momentum, expanding
market reach and underpinning the Group's growth ambitions.
The Board therefore remains confident that Corero will deliver
strong revenue growth in 2018.
Financial review
For the year ended 31 December 2017, the Group reported an
EBITDA loss before unrealised foreign exchange differences on an
intercompany loan, depreciation, amortisation, impairment of
goodwill and financing of $5.1 million (2016: EBITDA loss $6.4
million).
SmartWall order intake for the year ended 31 December 2017 was
$9.3 million, with 50% representing recurring revenue in the form
of support, services, and DDoS protection as-a-service contracts
(2016: SmartWall order intake was $6.7 million including recurring
revenue order intake of $2.6 million).
Corero continued to manage its cost base in 2017 with overheads
more than 10% below the prior year.
The loss for the year after taxation amounted to $8.6 million
(2016: $17.2 million including an impairment to goodwill acquired
of $9.0 million) and includes:
-- Unrealised exchange loss of $0.6 million (2016: gain $1.2
million) arising on an intercompany loan;
-- Finance costs of $0.004 million (2016: $0.006 million).
The loss per share was 3.1 cents (2016: loss per share 9.0
cents).
The Group's net assets at 31 December 2017 were $17.5 million
(2016: $18.2 million).
The key financial metrics for the business are as follows:
-- Order intake: $9.3 million for the year ended 31 December 2017 (2016: $7.1 million);
-- Gross margin: 75% for the year ended 31 December 2017 (2016: 76%);
-- Operating expenses (gross of research and development costs
capitalised and before unrealised foreign exchange differences on
an intercompany loan, depreciation and amortisation of
intangibles): $13.7 million for the year ended 31 December 2017
(2016: $15.7 million); and
-- Net cash: $1.4 million at 31 December 2017 (2016: $2.9 million)
The order intake in 2017 comprised $9.3 million of SmartWall
orders, an increase of 38%. (2016: $6.7 million).
The average perpetual license order value in 2017 was $0.25
million (2016: $0.2 million), and the average as-a-service year one
contract value was $0.04 million (2016: $0.04 million).
Cash and treasury
The closing cash balance was $1.4 million (2016: $2.9 million).
Corero had no debt at 31 December 2017 (2016: $nil).
In the year ended 31 December 2017, the net reduction in cash
from operating activities was $6.7 million (2016: $5.5 million).
The Company raised $7.0 million (before expenses), of which the
Chairman contributed $4.4 million, to fund the further development
of the SmartWall product sales and marketing activities.
Corero is in advanced discussions with a UK bank to provide a
term loan of GBP3.0 million ($4.2 million) ("Bank Loan"). The Bank
Loan is contingent on the proposed equity fund raise of GBP3.0
million ($5.6 million) to be announced by the Company on 5 April
2018 ("Equity Fund Raise"), and is expected to be finalised and
drawn down following the completion of the Equity Fund Raise.
The proposed Equity Fund Raise and Bank Loan will provide Corero
with the funding required to execute the Company's strategy and
become cash generating.
The Directors believe that on the basis of a successful Equity
Fund Raise and draw down of the Bank Loan, the Company and the
Group will have, or have access to, the necessary financial
resources to continue operating for the foreseeable future.
Equity Fund Raise
A circular containing a notice of a General Meeting will be sent
to shareholders on 5 April 2018 to be convened on 26 April 2018.
Corero shareholders will be asked to approve the Equity Fund Raise.
Since the participants in the Equity Fund Raise include
shareholders which at 4 April 2018 held more than 75% of the
Company's issued shares, it is anticipated that the resolutions to
approve the Equity Fund Raise will be duly passed.
Should the Equity Fund Raise and Bank Loan not proceed, the
Company will be required to seek further working capital funding in
short order.
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2017
Total Total
2017 2016
$'000 $'000
------------------------------------------------------------------ ------------- -------------
Revenue 8,531 8,772
------------------------------------------------------------------ ------------- -------------
Cost of sales (2,126) (2,071)
------------------------------------------------------------------ ------------- -------------
Gross profit 6,405 6,701
------------------------------------------------------------------ ------------- -------------
Operating expenses before highlighted items (12,157) (11,847)
------------------------------------------------------------------ ------------- -------------
Depreciation and amortisation of intangible assets (2,938) (3,128)
------------------------------------------------------------------ ------------- -------------
Impairment of goodwill - (8,992)
------------------------------------------------------------------ ------------- -------------
Operating expenses (15,095) (23,967)
------------------------------------------------------------------ ------------- -------------
Operating loss (8,690) (17,266)
------------------------------------------------------------------ ------------- -------------
Finance income 5 9
------------------------------------------------------------------ ------------- -------------
Finance costs (4) (6)
------------------------------------------------------------------ ------------- -------------
Loss before taxation (8,689) (17,263)
------------------------------------------------------------------ ------------- -------------
Taxation 116 85
------------------------------------------------------------------ ------------- -------------
Loss for the year (8,573) (17,178)
------------------------------------------------------------------ ------------- -------------
Other comprehensive expense
------------------------------------------------------------------ ------------- -------------
Difference on translation of UK functional currency entities 805 (2,355)
------------------------------------------------------------------ ------------- -------------
Total comprehensive expense for the year (7,768) (19,533)
------------------------------------------------------------------ ------------- -------------
Total loss for the year attributable to:
------------------------------------------------------------------ ------------- -------------
Equity holders of the parent (8,573) (17,178)
------------------------------------------------------------------ ------------- -------------
Total (8,573) (17,178)
------------------------------------------------------------------ ------------- -------------
Total comprehensive expense for the year attributable to:
------------------------------------------------------------------ ------------- -------------
Equity holders of the parent (7,768) (19,533)
------------------------------------------------------------------ ------------- -------------
Total (7,768) (19,533)
------------------------------------------------------------------ ------------- -------------
Consolidated Statement of Financial Position
as at 31 December 2017
2017 2016
$'000 $'000
------------------------------------------------------- ------------- -------------
Assets
------------------------------------------------------- ------------- -------------
Non-current assets
------------------------------------------------------- ------------- -------------
Goodwill 8,991 8,991
------------------------------------------------------- ------------- -------------
Acquired intangible assets 37 82
------------------------------------------------------- ------------- -------------
Capitalised development expenditure 7,664 7,901
------------------------------------------------------- ------------- -------------
Property, plant and equipment 770 970
------------------------------------------------------- ------------- -------------
Trade and other receivables 76 80
------------------------------------------------------- ------------- -------------
17,538 18,024
------------------------------------------------------- ------------- -------------
Current assets
------------------------------------------------------- ------------- -------------
Inventories 94 65
------------------------------------------------------- ------------- -------------
Trade and other receivables 2,955 2,227
------------------------------------------------------- ------------- -------------
Cash and cash equivalents 1,365 2,940
------------------------------------------------------- ------------- -------------
4,414 5,232
------------------------------------------------------- ------------- -------------
Liabilities
------------------------------------------------------- ------------- -------------
Current Liabilities
------------------------------------------------------- ------------- -------------
Trade and other payables (1,305) (1,728)
------------------------------------------------------- ------------- -------------
Deferred income (2,896) (2,457)
------------------------------------------------------- ------------- -------------
(4,201) (4,185)
------------------------------------------------------- ------------- -------------
Net current assets 213 1,047
------------------------------------------------------- ------------- -------------
Non-current liabilities
------------------------------------------------------- ------------- -------------
Deferred income (287) (855)
------------------------------------------------------- ------------- -------------
(287) (855)
------------------------------------------------------- ------------- -------------
Net assets 17,464 18,216
------------------------------------------------------- ------------- -------------
Total equity attributable to owners of the parent
------------------------------------------------------- ------------- -------------
Ordinary share capital 4,556 3,119
------------------------------------------------------- ------------- -------------
Capital redemption reserve 7,051 7,051
------------------------------------------------------- ------------- -------------
Share premium 73,239 67,681
------------------------------------------------------- ------------- -------------
Share options reserve 322 301
------------------------------------------------------- ------------- -------------
Translation reserve (1,318) (2,123)
------------------------------------------------------- ------------- -------------
Retained earnings (66,386) (57,813)
------------------------------------------------------- ------------- -------------
Total equity 17,464 18,216
------------------------------------------------------- ------------- -------------
Consolidated Statement of Cash Flow
for the year ended 31 December 2017
2017 2016
$'000 $'000
------------------------------------------------------------------------ ------------ -------------
Loss for the year (8,573) (17,178)
------------------------------------------------------------------------ ------------ -------------
Adjustments for non-cash movements:
------------------------------------------------------------------------ ------------ -------------
Amortisation of acquired intangible assets 55 325
------------------------------------------------------------------------ ------------ -------------
Impairment loss on intangible assets - 8,992
------------------------------------------------------------------------ ------------ -------------
Amortisation and impairment of capitalised development expenditure 2,408 2,252
------------------------------------------------------------------------ ------------ -------------
Depreciation 548 551
------------------------------------------------------------------------ ------------ -------------
Loss on sale of property, plant and equipment - 9
------------------------------------------------------------------------ ------------ -------------
Finance income (5) (9)
------------------------------------------------------------------------ ------------ -------------
Finance expense 4 6
------------------------------------------------------------------------ ------------ -------------
Taxation (116) (85)
------------------------------------------------------------------------ ------------ -------------
Qualifying research and development expenditure tax credit 116 -
------------------------------------------------------------------------ ------------ -------------
Share-based payment charge 21 19
------------------------------------------------------------------------ ------------ -------------
Decrease in inventories and as-a-service-assets 127 596
------------------------------------------------------------------------ ------------ -------------
(Increase)/decrease in trade and other receivables (33) 1,605
------------------------------------------------------------------------ ------------ -------------
Decrease in payables (596) (2,623)
------------------------------------------------------------------------ ------------ -------------
Net cash used in operating activities (6,044) (5,540)
------------------------------------------------------------------------ ------------ -------------
Cash flows from investing activities
------------------------------------------------------------------------ ------------ -------------
Purchase of intangible assets (10) (32)
------------------------------------------------------------------------ ------------ -------------
Capitalised development expenditure (2,171) (2,533)
------------------------------------------------------------------------ ------------ -------------
Purchase of property, plant and equipment (497) (644)
------------------------------------------------------------------------ ------------ -------------
Net cash used in investing activities (2,678) (3,209)
------------------------------------------------------------------------ ------------ -------------
Cash flows from financing activities
------------------------------------------------------------------------ ------------ -------------
Net proceeds from issue of ordinary share capital 6,995 11,392
------------------------------------------------------------------------ ------------ -------------
Finance income 5 9
------------------------------------------------------------------------ ------------ -------------
Finance expense (4) (6)
------------------------------------------------------------------------ ------------ -------------
Net cash from financing activities 6,996 11,395
------------------------------------------------------------------------ ------------ -------------
Effects of exchange rates on cash and cash equivalents 151 (2,412)
------------------------------------------------------------------------ ------------ -------------
Net increase/(decrease) in cash and cash equivalents (1,575) 234
------------------------------------------------------------------------ ------------ -------------
Cash and cash equivalents at 1 January 2,940 2,706
------------------------------------------------------------------------ ------------ -------------
Cash and cash equivalents at 31 December 1,365 2,940
------------------------------------------------------------------------ ------------ -------------
Consolidated Statement of Changes in Equity
for the year ended 31 December 2017
Total
attributable
Capital Share Share to equity
Share redemption premium options Translation Retained holders of
capital reserve account reserve reserve earnings the parent
$'000 $'000 $'000 $'000 $'000 $'000 $'000
------------------- ------------ --------------- ------------ ------------ ---------------- ------------- -----------------
1 January 2016 2,573 7,051 56,835 282 232 (40,635) 26,338
------------------- ------------ --------------- ------------ ------------ ---------------- ------------- -----------------
Loss for the
year - - - - - (17,178) (17,178)
------------------- ------------ --------------- ------------ ------------ ---------------- ------------- -----------------
Other
comprehensive
income - - - - (2,355) - (2,355)
------------------- ------------ --------------- ------------ ------------ ---------------- ------------- -----------------
Total
comprehensive
expense for
the year - - - - (2,355) (17,178) (19,533)
------------------- ------------ --------------- ------------ ------------ ---------------- ------------- -----------------
Contributions
by and
distributions
to owners
------------------- ------------ --------------- ------------ ------------ ---------------- ------------- -----------------
Share-based
payments - - - 19 - - 19
------------------- ------------ --------------- ------------ ------------ ---------------- ------------- -----------------
Issue of share
capital 546 - 10,846 - - - 11,392
------------------- ------------ --------------- ------------ ------------ ---------------- ------------- -----------------
Total
contributions
by and
distributions
to owners 546 - 10,846 19 - - 11,411
------------------- ------------ --------------- ------------ ------------ ---------------- ------------- -----------------
31 December
2016 and 1
January
2017 3,119 7,051 67,681 301 (2,123) (57,813) 18,216
------------------- ------------ --------------- ------------ ------------ ---------------- ------------- -----------------
Loss for the
year - - - - - (8,573) (8,573)
------------------- ------------ --------------- ------------ ------------ ---------------- ------------- -----------------
Other
comprehensive
income - - - - 805 - 805
------------------- ------------ --------------- ------------ ------------ ---------------- ------------- -----------------
Total
comprehensive
expense for
the year - - - - 805 (8,573) (7,768)
------------------- ------------ --------------- ------------ ------------ ---------------- ------------- -----------------
Contributions
by and
distributions
to owners
------------------- ------------ --------------- ------------ ------------ ---------------- ------------- -----------------
Share-based
payments - - - 21 - - 21
------------------- ------------ --------------- ------------ ------------ ---------------- ------------- -----------------
Issue of share
capital 1,437 - 5,558 - - - 6,995
------------------- ------------ --------------- ------------ ------------ ---------------- ------------- -----------------
Total
contributions
by and
distributions
to owners 1,437 - 5,558 21 - - 7,016
------------------- ------------ --------------- ------------ ------------ ---------------- ------------- -----------------
31 December
2017 4,556 7,051 73,239 322 (1,318) (66,386) 17,464
------------------- ------------ --------------- ------------ ------------ ---------------- ------------- -----------------
1. General information
These consolidated financial statements are presented in US
Dollars ("$") which represents the presentation currency of the
Group. The average $-GBP sterling ("GBP") exchange rate, used for
the conversion of the statement of comprehensive income, for the 12
months ended 31 December 2017 was 1.29 (2016: 1.36). The closing
$-GBP exchange rate, used for the conversion of the Group's assets
and liabilities, at 31 December 2017 was 1.35 (2016: 1.23).
The principal accounting policies adopted in the preparation of
the financial information in this preliminary announcement are
unchanged from those used in the company's financial statements for
the year ended 31 December 2016 and are consistent with those that
the company has applied in its financial statements for the year
ended 31 December 2017. The financial information set out above
does not constitute the Company's Annual Report and Accounts for
the year ended 31 December 2017. The Annual Report and Accounts for
2016 have been delivered to the Registrar of Companies and those
for 2017 will be delivered shortly. The auditor's report for the
Company's 2017 Annual Report and Accounts was unqualified but did
draw attention to the material uncertainty relating to going
concern in the light of the proposed future Equity Fund Raise and
Bank Loan. The auditor's report did not contain statements under
s498(2) or (3) of the Companies Act 2006.
Whilst the financial information included in this preliminary
announcement has been computed in accordance with International
Financial Reporting Standards (IFRSs) this announcement does not
itself contain sufficient information to comply with IFRSs.
The Annual Report and Accounts for the year ended 31 December
2017 are available on the Company's website
www.corero.com/investors.
The information in this preliminary announcement was approved by
the board on 4 April 2018.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR BRGDSIUGBGIS
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