REG - Corero Network Sec. - Final Results
27/03/2024 07:00
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RNS Number : 4183I Corero Network Security PLC 27 March 2024
27 March 2024
This announcement contains inside information for the purposes of Article 7 of
the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law
by virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and is
disclosed in accordance with the Company's obligations under Article 17 of
MAR.
Corero Network Security plc
("Corero" the "Company", or the "Group")
Audited results for the year-ended 31 December 2023
Strong financial performance and operational progress, underpinned by a
renewed focus on geographic expansion and securing new strategic alliances
Corero Network Security (AIM: CNS) (OTCQB: DDOSF), the specialists in
distributed denial of service ("DDoS") protection solutions, announces its
audited results for the year ended 31 December 2023 ("FY 2023" or the
"Period").
Financial Highlights:
· Annualised Recurring Revenues(1) ("ARR") up 17% to $16.9 million (FY
2022: $14.4 million)
· Revenues up 11% to $22.3 million (FY 2022: $20.1 million)
· Gross margins of 90% (FY 2022: 87%)
· Adjusted EBITDA(2) of $2.2 million (FY 2022: $1.7 million)
· All company debt repaid during 2023, with net cash(3) at 31 December
2023 of $5.2 million (FY 2022: $4.4 million)
· Loss before taxation of $0.2 million (FY 2022: profit before taxation
of $0.4 million)
· Earnings and diluted earnings per share of 0.0 cents (FY 2022:
earnings per share of 0.1 cents)
Operational Highlights:
· Secured strategic go-to-market partnership with Akamai Technologies
Inc. ("Akamai")
· CEO Carl Herberger appointed in November 2023
· Launched SmartWall ONE(TM) platform and released a major product
update during H2 2023
· Secured $1 million contract with new channel partner customer,
TechEnabler, in Brazil
· Continued growth in the Company's subscription-based products and
DDoS Protection-as-a-Service ("DDPaaS") offering, underpinning revenue and
earnings predictability
Outlook:
· Strong start to 2024 with robust new business pipeline already
delivering results in H1 2024
· Expansion of strategic partnership with Ingecom Ignition ("Ingecom"),
enabling European footprint expansion
· DDoS solution demand remains strong driven by the relentless growth
in DDOS attacks globally
· Focus on four revenue generating activities:
o Investment in targeted marketing and sales initiatives to accelerate new
business generation
o Expand sales partnerships and global alliances
o Upsell opportunities within current installed base
o Renewals and current customer expansion
Carl Herberger, CEO of Corero, said:
"I am delighted to have joined Corero at such an exciting time, with the
business delivering strong growth across all our key metrics in FY 2023,
alongside the continued expansion of both our customer base and market reach.
Our new Akamai partnership is already yielding positive contract momentum and
the new Brazilian partnership highlights the expansion of Corero's global
footprint.
The global demand for DDoS protection remains robust, driven by the
ever-growing activity from threat-actors, with 2023 being another record year.
Corero expects this trend to continue and is therefore well placed to take
advantage of this ever more complex and evolving market.
During 2024, we will continue to build upon the foundations laid in 2023. Our
focus on profitability and positive cash-flow generation, whilst delivering
both ARR and revenue growth, will allow us to further demonstrate the
scalability of the Corero business model as we continue to realise the
Company's potential."
(1) ARR is defined as the normalised annualised recurring revenues and
includes recurring revenues from contract values of annual support, software
subscriptions including terms greater than one year, and from DDoS
Protection-as-a-Service ("DDPaaS") contracts.
(2) Adjusted EBITDA is defined as earnings before interest, tax, depreciation,
and amortisation excluding unrealized FX gains/(losses) from an intercompany
loan.
(3) Net cash is defined as cash at bank less debt.
Investor Presentation
Corero will be conducting an online investor presentation this morning at
10.00 a.m. GMT covering the Company's year-end results, which will be hosted
by Carl Herberger, Chief Executive Officer, and Phil Richards, Chief Financial
Officer.
The webinar is free and open to all existing and potential shareholders, and
questions can be submitted during the presentation to be addressed at the end.
The registration link can be found here:
https://www.equitydevelopment.co.uk/news-and-events/corero-investor-presentation-27march2024
(https://www.equitydevelopment.co.uk/news-and-events/corero-investor-presentation-27march2024)
Enquiries:
Corero Network Security plc Tel: +44(0)20 7390 0230
Carl Herberger, Chief Executive Officer
Phil Richards, Chief Financial Officer
Canaccord Genuity Limited (Nominated Adviser and Broker) Tel: +44(0)20 7523 8000
Simon Bridges / Andrew Potts / Harry Rees
Vigo Consulting Tel: +44(0)20 7390 0230
Jeremy Garcia / Kendall Hill
corero@vigoconsulting.com (mailto:corero@vigoconsulting.com)
About Corero Network Security
Corero Network Security is a leading provider of DDoS protection solutions,
specializing in automatic detection and protection solutions with network
visibility, analytics, and reporting tools. Corero's technology protects
against external and internal DDoS threats in complex edge and subscriber
environments, ensuring internet service availability. With operational centres
in Marlborough, Massachusetts, USA, and Edinburgh, UK, Corero is headquartered
in London and listed on the London Stock Exchange's AIM market (ticker: CNS)
and the US OTCQB market (OTCQB: DDOSF).
For more information, visit www.corero.com (http://www.corero.com/) , and
follow us on LinkedIn (https://www.linkedin.com/company/corero/)
and Twitter (https://twitter.com/Corero) .
CHIEF EXECUTIVE OFFICER'S STRATEGIC UPDATE, FINANCIAL AND OPERATIONAL REVIEW
Introduction
The Company delivered a strong performance in FY 2023, underpinned by new
business momentum and organic growth. Despite a difficult macro-economic
environment, we were able to deliver double digit growth in both revenue and
ARR whilst repaying our outstanding bank loan facility and finishing the year
cash generative, EBITDA profitable and debt free.
We continued to execute our focused sales strategy during the Period. ARR
increased to $16.9 million as at 1 January 2024, growth of 17% over the prior
year (ARR at 1 January 2023: $14.4 million), driven by continued demand for
Corero's subscription-based and DDPaaS products. This strong performance
continues to improve earnings visibility for the Company going forward, which,
when aligned with the Group's healthy business pipeline built through 2023,
ensures Corero remains well positioned for revenue growth in 2024 and beyond.
Our global partnership with Akamai, announced in September 2023, has already
significantly expanded Corero's routes to market and we anticipate that the
relationship will deliver incremental revenue growth in the medium to long
term. We also secured our first major LATAM partnership in the Period, with
network solutions distributor TechEnabler supporting our growth in Brazil and
the wider region as we aim to broaden our international reach.
Corero has built both a market-leading product and management team to execute
the Company's enhanced sales strategy, driven by the following levers:
· Large and high growth addressable market;
· Market-leading proprietary technology with global customer service
capability;
· Continued investment in sales and channel resources;
· Scalable and recurring revenue model with high gross margins; and
· Strong base of existing customers and strategic partnerships.
Strategic Progress
As the DDoS market and cybersecurity sector continue to evolve at a fast pace,
and with a myriad of new digital threats emerging, the Company continues to
focus on ensuring it is best positioned to remain at the forefront of the
industry.
The following key strategic pillars have been established to underpin
operational and financial progress and drive growth in 2024 and beyond:
· Increasing our customer base and market reach, as demonstrated by the
addition of TechEnabler to our customer base in the Brazilian market.
· Growing strategic alliances by entering into new partnerships, for
example our agreement with Akamai to offer complementary technology to
Akamai's Prolexic Cloud offering.
· Better monetisation of our existing services and introducing new
services: we continue to enhance the protection and network security
visibility for our customers.
· Amplifying our demand generation programmes: increasing on-line
advertising and marketing campaigns including webinars and thought leadership
speaking opportunities.
· Continuing to increase our technological innovation leadership by
investing in product development and ensuring we respond rapidly to market
trends and technological advancements in DDoS protection technology. The
launch of the SmartWall ONE solution during 2023 was a significant milestone
for Corero as we cemented our position at the cutting edge of the
technological landscape. The SmartWall ONE solution delivers a modular
architecture which interfaces with industry-leading routers, increased
protection against DNS-based attacks, and a new 100G software appliance
solution.
DDoS Addressable Market and Market Drivers
The global DDoS protection market was worth c.$3.6 billion in 2023 and is
expected to reach $9.1 billion by 2030 at a CAGR of 14%(4). Corero operates
within a significant segment of this overall market and estimates that the
total addressable market exceeds $2.0 billion for its SmartWall ONE solutions.
Cybercriminals are increasingly opting to launch DDoS attacks on corporations,
favouring the method over more expensive and higher risk forms of
cyberattacks, or even using DDoS as camouflage for ransomware attacks. A
growing number of businesses globally are beginning to recognise DDoS attacks
as their biggest cybersecurity concern largely due to the considerable
reputational damage they can inflict(5).
Companies across all sectors and of all sizes are vulnerable to DDoS attacks,
including those operating in fast-growing markets like satellite
communications and cryptocurrency. Alarmingly, recent market research revealed
that attacks on financial services rose a staggering 154% between 2022 and
2023(6), which, given the increasing digitalisation of banking, puts consumers
in great jeopardy if corporations are not safeguarded by DDoS defence and
mitigation solutions.
Regionally, EMEA has suffered a sharp increase in DDoS attacks. Cybersecurity
commentators believe this spike can be attributed to the geopolitical turmoil
and resultant cyber warfare stemming from Russia's invasion of Ukraine,
including the emerging trend of hactivism(7). Strategic regional expansion is
integral to Corero's growth strategy, and post-period end, we extended our
partnership with cybersecurity solutions specialist and distributor Ingecom to
increase our presence and exposure in EMEA.
DDoS attacks, however, are prevalent across the globe, with North America
estimated to account for 39% of the global DDoS protection and mitigation
market growth until 2027(8). Corero's partnership with Akamai, together with
our investment in US sales and marketing initiatives and strategic North
American recruitment, has ensured the Company remains well positioned to
capitalise on new mandate opportunities within the US market. This is
reflected by the geographic mix of the Group's customer wins across 2023,
where Corero secured contracts with a significant number of US and Canadian
based companies.
(4) MarketsandMarkets - DDoS Protection and Mitigation Security Market Report,
https://shorturl.at/gsCKX (https://shorturl.at/gsCKX) .
(5) T&T - 2023 Cybersecurity Insights Report,
https://www.itprotoday.com/attacks-and-breaches/ddos-not-ransomware-top-business-concern-edge-networks
(https://www.itprotoday.com/attacks-and-breaches/ddos-not-ransomware-top-business-concern-edge-networks)
.
(6) FS-ISAC/Akamai - DDoS: Here to Stay Report, https://shorturl.at/hMY28
(https://shorturl.at/hMY28) .
(7) Europol - Cyber Attacks: The Apex of Crime-as-a-Service,
https://sofiaglobe.com/2023/09/13/europol-russias-war-on-ukraine-led-to-significant-boost-in-ddos-attacks-on-eu-targets/
(https://sofiaglobe.com/2023/09/13/europol-russias-war-on-ukraine-led-to-significant-boost-in-ddos-attacks-on-eu-targets/)
.
(8) Technavio - DdoS Protection Mitigation Market by Component, Application,
and Geography - Forecast and Analysis 2023-2027,
https://www.technavio.com/report/ddos-protection-mitigation-market-analysis
(https://www.technavio.com/report/ddos-protection-mitigation-market-analysis)
.
Outlook
Corero expects demand for the Company's market-leading DDoS protection and
mitigation solutions to continue to increase as more and more companies
proactively seek trusted providers to help combat the fast-growing rise in
these highly disruptive attacks.
In 2024, Corero will build upon the robust foundations established in 2023. We
are highly focused on continuing our new business and partnership momentum and
are actively pursuing prudent regional expansion objectives.
Our focus on profitability and positive cash-flow generation, whilst
delivering both ARR and revenue growth, will enable us to further demonstrate
the scalability of our business model. This will be supported, in part, by
continued investment in R&D as we aim to roll-out new product features and
innovative service enhancements.
With the strong performance in FY 2023 and positive start to 2024, the Board
is confident the Company can deliver on its growth prospects by growing
Corero's market share and reinforcing its reputation as the go-to DDoS
protection solutions provider.
Carl Herberger
Chief Executive Officer
26 March 2024
Consolidated Income Statement
For the year ended 31 December 2023
Year ended 31 December Year ended 31 December
2023 2022
$'000 $'000
Continuing operations
Revenue 22,349 20,121
Cost of sales (2,164) (2,576)
Gross profit 20,185 17,545
Operating expenses (20,201) (16,869)
Consisting of:
Operating expenses before depreciation and amortisation (18,428) (14,926)
Depreciation and amortisation of intangible assets (1,773) (1,943)
Operating (loss)/profit (16) 676
Finance income 44 7
Finance costs (181) (279)
(loss)/Profit before taxation (153) 404
taxation (charge)/credit (17) 150
(loss)/profit after taxation (170) 554
(loss)/profit after taxation attributable to equity owners of the parent (170) 554
Basic and diluted earnings/(loss) per share Cents Cents
Basic earnings per share 0.0 0.1
Diluted earnings per share 0.0 0.1
EBITDA 1,757 2,619
Adjusted EBITDA - for unrealised foreign exchange differences on intercompany
loan
2,186 1,658
Consolidated Statement of Comprehensive Income Year ended Year ended
For the year ended 31 December 2023
31 December 31 December
2023 2022
$'000 $'000
(loss)/Profit for the year (170) 554
Other comprehensive income/(expense):
items reclassified subsequently to profit or loss upon derecognition:
Foreign exchange differences 628 (1,087)
Other comprehensive income/(expense) for the year net of taxation attributable
to the equity owners of the parent
458 (1,087)
total comprehensive income/(expense) for the year attributable to the equity
owners of the parent
458 (533)
Consolidated Statement Of Financial Position
As at 31 December 2023
As at 31 December As at 31 December
2023 2022
$'000 $'000
Assets
Non-current assets
Goodwill 8,991 8,991
intangible assets 4,820 4,502
Property, plant and equipment - owned assets 633 604
leased right of use assets 309 62
14,753 14,159
Current assets
inventories 96 164
trade and other receivables 8,427 6,865
Cash and cash equivalents 5,160 5,646
13,683 12,675
total assets 28,436 26,834
liabilities
Current liabilities
trade and other payables (3,902) (3,956)
lease liabilities (164) (78)
Deferred income (4,992) (3,323)
Borrowings - (971)
(9,058) (8,328)
Net current assets 4,625 2,776
Non-current liabilities
trade and other payables - (100)
lease liabilities (151) -
Deferred income (2,491) (2,285)
Borrowings - (237)
(2,642) (2,622)
Net assets 16,737 15,884
Capital and reserves attributable to the equity owners of the parent
Share capital 6,999 6,980
Share premium 82,430 82,284
Capital redemption reserve 7,051 7,051
Share options reserve 2,007 1,777
Foreign exchange translation reserve (1,965) (2,593)
Accumulated profit and loss reserve (79,785) (79,615)
total shareholders' equity 16,737 15,884
Consolidated Statement of Cash Flows Year ended 31 December Year ended 31 December
For the Year ended 31 December 2023 2023 2022
$'000 $'000
Operating activities
(loss)/Profit before taxation for the year (153) 404
Adjustments for movements:
Amortisation of acquired intangible assets 2 2
Amortisation of capitalised development expenditure 1,504 1,732
Depreciation - owned assets 423 497
Depreciation - leased assets 116 82
Assets redesignated from PPE to Cost of Sales 30 -
Finance income (44) (7)
Finance expense 164 268
Finance lease interest costs 17 11
Share based payments expense 233 386
Cash generated from operating activities before movement in working capital 2,292 3,375
movement in working capital:
(increase)/decrease in inventories and sales evaluation assets 68 (26)
(increase)/decrease in trade and other receivables (1,248) (3,867)
Increase/(decrease) in trade and other payables 2,035 (1,361)
Net movement in working capital 855 (5,254)
Cash generated from/(used in) operating activities 3,147 (1,879)
Taxation (paid) / received (17) 150
Net cash (used in)/generated from operating activities 3,130 (1,729)
Cash flows from investing activities
investment in development expenditure (1,823) (1,704)
Purchase of property, plant and equipment (813) (420)
Finance income 44 7
Net cash used in investing activities (2,592) (2,117)
Cash flows from financing activities
Net proceeds from issue of ordinary share capital 166 228
lease liability payments (126) (104)
Finance expense (78) (158)
Repayments of borrowings (1,317) (1,364)
Net cash (used in)/generated from financing activities (1,355) (1,398)
(Decrease)/increase in cash and cash equivalents (835) (5,244)
effects of exchange rates on cash and cash equivalents 349 (311)
Cash and cash equivalents at 1 January 5,646 11,201
Cash and cash equivalents at 31 December 5,160 5,646
Consolidated Statement Of Changes In Equity
For the Year ended 31 December 2023
total
Foreign attributable
Capital exchange Accumulated to equity
Share Share premium redemption Share translation profit and loss owners of
capital account reserve options reserve reserve reserve the parent
$'000 $'000 $'000 $'000 $'000 $'000 $'000
1 January 2022 6,914 82,122 7,051 1,490 (1,506) (80,268) 15,803
Profit for the year - - - - - 554 554
Other comprehensive income - - - - (1,087) - (1,087)
total comprehensive expense for the year - - - - (1,087) 554 (533)
Contributions by and distributions to owners
issue of share capital - exercise of options 66 162 - - - - 228
Fully exercised share options - - - (99) - 99 -
Share based payments - - - 386 - - 386
total contributions by and distributions to owners 66 162 - 287 - 99 614
31 December 2022 and 1 January 2023 6,980 82,284 7,051 1,777 (2,593) (79,615) 15,884
(loss)/Profit for the year - - - - - (170) (170)
Other comprehensive income - - - - 628 - 628
total comprehensive income for the year - - - - 628 (170) 458
Contributions by and distributions to owners
issue of share capital - exercise of options 19 146 - - - - 165
Fully exercised share options - - - (3) - - (3)
Share based payments - - - 233 - - 233
total contributions by and distributions to owners 19 146 - 230 - - 395
31 December 2023 6,999 82,430 7,051 2,007 (1,965) (79,785) 16,737
The share capital comprises the nominal values of all shares issued.
The share premium account comprises the amounts subscribed for share capital
in excess of the nominal value, net of issuance costs.
The capital redemption reserve comprises the amount transferred from deferred
shares on redemption of the deferred shares.
The share options reserve represents the cost to the Group of share options.
The foreign exchange translation reserve arises on retranslating the net
assets of UK operations into US dollars.
The retained earnings are all other net gains and losses and transactions with
owners not recognised elsewhere.
1. General Information
This results announcement is presented in US Dollars ("$") rounded to the
nearest $'000 unless otherwise stated which represents the presentation
currency of the Group. The average $-GBP sterling ("GBP") exchange rates used
for the conversion of the Consolidated Income Statement for the year ended 31
December 2023 were between 1.21-1.29 (2022: 1.20-1.36). The closing $-GBP
exchange rate used for the conversion of the Group's assets and liabilities at
31 December 2023 was 1.27 (2022: 1.21).
This results announcement has been prepared in accordance with UK adopted
international accounting standards in conformity with the requirements of the
Companies Act 2006. The "requirements of the Companies Act 2006" here means
accounts being prepared in accordance with "international accounting
standards" as defined in section 474(1) of that Act, as it applied immediately
before Implementation Period (IP) completion day (end of transition period),
including where the Company also makes use of standards which have been
adopted for use within the United Kingdom in accordance with regulation 1(5)
of the International Accounting Standards and European Public Limited
Liability Company (Amendment etc.) (EU Exit) Regulations 2019. The
consolidated financial statements have been prepared under the historical cost
convention.
The financial statements have been prepared on a going concern basis.
The Directors have prepared detailed income statement, balance sheet and cash
flow projections for the period to 30 June 2025 ("going concern assessment
period"). The cash flow projections have been subjected to sensitivity
analysis of the revenue, cost and combined revenue and cost levels which
demonstrate that the Group and Company will maintain a positive cash balance
through the going concern assessment period. As part of the sensitivity
analysis, the Directors have noted that should the forecasted revenues not be
achieved, mitigating actions can be taken to address any cash flow concerns.
These actions include the deferral of capital expenditure, reduction in
marketing and other variable expenditure alongside a hiring freeze.
The Directors are also not aware of any significant matters in the remainder
of calendar 2025 that occur outside the going concern period that could
reasonably possibly impact the going concern conclusion.
The Directors have also considered the geo-political environment, including
rising inflation in some of our key markets and the conflict in Ukraine, and
whilst the impact on the Group is currently deemed minimal, the Directors
remain vigilant and ready to implement mitigation action in the event of a
downturn in demand or an impact on operations.
On this basis, the Directors have therefore concluded that it is appropriate
to prepare the financial statements on a going concern basis.
The financial information set out above does not constitute the Company's
Annual Report and Accounts for the year ended 31 December 2023. The Annual
Report and Accounts for 2022 have been delivered to the Registrar of Companies
and those for 2023 will be delivered shortly. The auditor's report for the
Company's 2023 Annual Report and Accounts was unqualified and did not contain
an emphasis of matter paragraph nor any statement under Section 498 of the
Companies Act 2006.
Whilst the financial information included in this results announcement has
been prepared in accordance with UK adopted international accounting standards
in conformity with the requirements of the Companies Act 2006, this
announcement does not itself contain sufficient information to comply with UK
adopted international accounting standards.
The Annual Report and Accounts for the year ended 31 December 2023 are
available on the Company's
website https://www.corero.com/about/investor-relations
(https://www.corero.com/about/investor-relations) .
The information in this results announcement was approved by the Board on 26
March 2024.
2. Segment reporting and revenue
The Group is managed according to one business unit, Corero Network Security,
which makes up the Group's reportable operating segment. This business unit
forms the basis on which the Group reports its primary segment information to
the Board, which management consider to be the Chief Operating Decision maker
for the purposes of IFRS 8 Operating Segments.
The Group's revenues from external customers for the country of the Group's
domiciles and each individually material country (those over 10% of Group
revenues) are as follows:
2023 2022
$'000 $'000
United States 15,855 13,527
United Kingdom 2,122 2,307
Others 4,372 4,286
Total 22,349 20,121
Revenues from external customers are identified on the basis of invoicing
systems and adjusted to take into account the difference between invoiced
amounts and deferred revenue adjustments as required by IFRS.
The revenue is analysed for each revenue category as:
2023 2022
$'000 $'000
Software licence and appliance revenue 8,186 8,107
DDoS Protection-as-a-Service revenue 5,599 4,854
Maintenance and support services revenue 8,564 7,160
Total 22,349 20,121
The revenue is analysed by timing of delivery of goods or services as:
2023 2022
$'000 $'000
Point-in-time delivery 8,186 8,107
Over time 14,163 12,014
Total 22,349 20,121
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