Sophos' first quarter revenue rises

Cloud security provider Sophos’ first quarter revenues grew due to an increase in subscription revenues.

In a trading statement for the three months ended 30 June, the company reported a 12.2% rise in revenue year-on-year to $127.4m, a 11.9% increase at a constant currency basis.

The subscription component of revenue increased by 14.5% at reported exchange rates.

The FTSE 250 company had unlevered free cash flow of $28.8m.

Cash earnings before interest, tax, depreciation and amortisation (EBITDA) grew 55.2% year-on-year, driven by an improvement in billings, a 48.6% increase at a constant currency basis.

Billings increased by 25.2% year-over-year to $141.9m with growth across all regions and products.

European billings grew 35.3% due to a material contract with an existing customer. Network billings grew 22.3% driven by acceleration of the company’s unified threat management product.

Over the last 12 months the average contract length was 29.2 months, a slight increase from last year’s 28.6 months due to the impact of the material contract.

For the financial year ending 31 March 2017, the company said it expects to deliver billings growth on a like-for-like basis while also delivering a modest cash EBITDA margin expansion. Unlevered free cash flow is expected to double in the 2017 financial year as working capital normalises and the level of its anticipated profit improves.

Chief executive Kris Hagerman said: "We are encouraged by our strong start to the year which underpins our confidence in the outlook for the full financial year. Our compelling strategy of targeting the underserved mid-market with a complete security offering through the channel that serves them continues to drive positive performance."

Shares in Sophos were up 6.08% to 242.50p at 1154 BST.