21 January 2020

Corero Network Security plc

("Corero" or the "Company")

Trading update

Record order intake in H2 2019

Strong recurring revenue growth and order book pipeline underpins outlook for 2020

Corero (AIM: CNS), the network security company, provides an update on trading for the year ended 31 December 2019.

Corero had a record H2 2019 order intake of $8.0 million, an increase of 62% over H1 2019 and 36% over H2 2018, with a total order intake for the year of $13.0 million, up 17% versus 2018 (2018: $11.1 million). Revenue for the year ended 31 December 2019 is expected to be approximately $10.0 million (2018: $10.0 million) due to the increase in deferred revenue resulting from the higher mix of DDoS protection as a service ("DDPaaS") long term contract orders in 2019. These revenues are recognised over the term (typically 3 years). 

H2 2019 revenue is expected to have increased over 30% versus H1 2019 and 10% versus H2 2018. Recurring revenue for the year ended 31 December 2019 is expected to be approximately $6.0 million (2018: $5.1 million), up 17%.

Corero enters 2020 with a growing recurring revenue base and an annualised recurring revenue value of over $7.0 million (2018: $5.4 million), of which $2.0 million represents multi-year DDPaaS contracts.

Highlights from orders received in 2019 include:

·      Significant increase in the mix of DDPaaS recurring revenue orders - 32% of new business in 2019;

·      12 new customers added in H2 2019, with a total of 18 in 2019; and

·      Six new Juniper customer orders in 2019, with 5 in the second half of 2019.

The Company is also developing an impressive pipeline of new business prospects for 2020 in both direct customer sales and through Corero's Juniper partnership.

Corero has enjoyed continued high levels of customer satisfaction resulting in strong service and support contract renewals 98.8% (2018: 98.5%) and existing customer follow-on orders of $5.7 million (2018: $4.4 million). In addition, gross margins remain robust at approximately 80% (2018: 78%).

Operating costs* for the year ended 31 December 2019 are expected to be approximately $10.5 million (2018: $9.9 million), the increase in the year was due to an increased share options charge, lower capitalised development costs and higher headcount related costs. 

The EBITDA* loss for the year ended 31 December 2019 is expected to be approximately $3.0 million (2018: EBITDA* loss $2.1 million).

Cash at bank as at 31 December 2019 was $8.3 million (2018: $8.0 million) and debt was $2.9 million (2018: $3.6 million) resulting in net cash of $5.4 million (2018: $4.4 million). Corero successfully closed an over-subscribed equity fund raise on 13 December 2019, raising $4.1 million before costs, providing the funding required to execute on the Company's growth plans.

Corero has delivered further operational progress in the second half of the year, including:

·      Sales team headcount doubling since the start of 2019;

·      Revenue from the Company's partnership with GTT Communications increased 300%; and

·      A new partnership secured with a leading cloud DDoS service provider to deliver hybrid DDoS protection, which facilitated Corero's largest DDPaaS order to date.

* before depreciation, amortisation, financing and unrealised foreign exchange differences on an intercompany loan

Ashley Stephenson, CEO of Corero, commented: 

"Our strong order momentum in the second half of 2019, combined with our higher levels of recurring revenue and strong new business pipeline, provide Corero with solid foundations for 2020.

"Following the fundraising in December 2019, we have already commenced our investment programme, which includes expanding our routes to market and broadening our sales coverage.

"This improvement in our operational platform underpins our confidence in the growth potential of our business and reinforces our drive to deliver on our plans for 2020 and beyond."

The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulation (EU) No. 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain. 

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About Corero Network Security

Corero Network Security is a 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