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Sophos H1 sees increased revenue but losses widen

The tech unicorn continues to increase sales, but there are signs that the pace may be beginning to slow

UK security heavyweight Sophos today reported its interim results for the six months to 30 September, and while revenues continued to rise at a decent rate, losses also widened.

Revenue increased to $256.96m in the six-months, up from $234.2m in the same period last year. Sophos said its like-for-like billings were up 15% while new customer billings were up 20%.

But the channel-first company reported an operating loss of $24.6m, up from from $13.4m the year before. 

Sophos blamed the increased losses on investment into R&D, as well as a continued shift towards subscription-based billing.

When Sophos went public in July of last year, the demand for mid-sized security solutions was through the roof and investors jumped at the chance to get in on the action. The Abingdon-based company commanded a £1bn valuation, despite being a loss-making company. Growth has remained strong, but Martin Courtney, analyst at TechMarketView believes there are signs of saturation ahead, given current economic circumstances.

“The security market has seen strong growth over the last couple of years and following its IPO last summer Sophos has capitalised on soaring enterprise demand for related products and services,” he said. “We think there are warning signs that previous rates of growth will be harder to sustain in the new macro-economic climate as both Europe and America come to terms with new political realities.”

Investors appeared largely satisfied with the H1 results. The share price crept up by about 1% today to 235 pence per share at the time of writing. 

"We are pleased with our first-half results which were in-line with our outlook, and especially pleased with our cash flow performance which was ahead of our outlook," said Kris Hagerman, chief executive officer.

"As we enter the second half of the fiscal year we expect continued strong growth, in particular as we benefit from key new product releases in next-generation endpoint and next-generation firewall, and the continued momentum of our Sophos Central cloud management platform," added Hagerman.

For the year-ending 31 March 2017, the firm said that it expects to deliver mid-teens revenue growth whilst delivering ‘modest’ cash EBITDA margin expansion.

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