TIDMCNS
RNS Number : 6251L
Corero Network Security PLC
14 September 2021
14 September 2021
Corero Network Security plc (AIM: CNS)
("Corero," the "Company" or the "Group")
Unaudited H1 2021 Interim Results
EBITDA profit achieved
underpinned by sustained growth and margin improvement
Corero Network Security plc (AIM: CNS), a leading provider of
real-time, high performance, automatic Distributed Denial of
Service (DDoS) cyber defense solutions, announces its unaudited
interim results for the six months ended 30 June 2021.
Financial Summary:
-- Group revenue up 34% to $8.3 million (H1 2020: $6.2 million)
o Growth across all key revenue categories: software
subscription and appliance revenue, DDoS Protection as a Service
("DDPaaS") and Maintenance and Support revenues
-- Annualised Recurring Revenues (1) ("ARR") up 27% to $11.2 million (H1 2020: $8.8 million)
-- Gross margin of 84% (H1 2020: 75%)
-- EBITDA(2) profit of $0.1 million (H1 2020: loss of $1.2 million)
-- Loss before taxation of $1.2 million (H1 2020: loss of $2.7 million)
-- Loss per share of 0.3 cents (H1 2020: loss per share of 0.5 cents)
-- Net cash at 30 June 2021 of $5.1 million (30 June 2020: $3.3
million; 31 Dec 2020: $7.6 million)
-- The Company entered into, in April 2021, a new borrowing
facility for up to GBP3.0 million (c. $.4.1 million) with its
existing banking partner, comprising a drawn GBP2.0 million term
loan facility and an undrawn GBP1.0 million revolving credit
facility
(1) Defined as the normalised annualised recurring revenue and
includes recurring revenues from contract values of annual support,
software subscription and from DDoS Protection-as-a-Service
contracts. (2) Defined as Earnings before Interest, Taxation,
Depreciation and Amortisation.
Operational Highlights:
-- The demand for network security and protection against DDoS
attacks continues to be reinforced and accelerate globally
-- Record H1 2021 order intake, increasing by 13% to $8.9 million (H1 2020: $7.9 million)
-- 20 new customer wins secured in the period (H1 2020: 18 new
customer wins), eight of which originated through Corero's
strategic partnership with Juniper Networks Inc. (H1 2020: five new
Juniper customers)
-- High levels of customer satisfaction and expansion of
customer networks continue to result in higher follow-on orders of
$4.2 million for the period (H1 2020: $3.0 million)
-- Significant progress achieved in delivering the Group's growth strategy, including:
o Continued investment in sales and marketing underpins global
direct and channel sales efforts
o Addition of agent, distributor and reseller relationships in
more geographies
o Recent customer wins which broaden the Company's international
footprint and mark the entry into a number of new verticals
o Strong momentum through strategic partnerships and progress
towards securing new relationships
o Targeted content creation for each stage of the buying cycle,
amplifying demand generation programmes
o A broadened software solution offering to address diverse
customer needs
Outlook
-- The Board continues to monitor the Covid-19 situation and
global supply chain uncertainty, though remains confident in Corero
meeting expectations for FY 2021
-- Promising order pipeline for H2 2021 with increasing activity
through Juniper Networks and GTT partnerships
Lionel Chmilewsky, Chief Executive Officer of Corero,
commented:
"I am pleased to report that Corero has successfully delivered a
strong trading performance in the first six months of the year. Our
business continues to go from strength to strength, particularly
the growth of recurring revenue generation and progress towards
profitability."
"Sales momentum continues to build with significant traction now
being generated through our strategic partnerships. To deliver 20
new customers in the first six months of the year is an outstanding
performance and provides a solid foundation for the remainder of
the year."
This announcement contains inside information for the purposes
of article 7 of the Market Abuse Regulation (EU) 596/2014 as
amended by regulation 11 of the Market Abuse (Amendment) (EU Exit)
Regulations 2019/310. With the publication of this announcement,
this information is now considered to be in the public domain.
Enquiries:
Corero Network Security plc
Lionel Chmilewsky, Chief Executive Officer Tel: +44(0) 1494 590
Neil Pritchard, Chief Financial Officer 404
C anaccord Genuity Limited Tel: +44(0) 20 7523
(Nominated Adviser and Broker) 8000
S imon Bridges / Andrew Potts
Vigo Communications Tel: +44(0) 20 7390
0230
Jeremy Garcia / Antonia Pollock
corero@vigocomms.com
About Corero Network Security
Corero Network Security plc is a global leader in real-time,
high-performance, automatic DDoS cyber defense solutions. Both
Service and Hosting providers, alongside digital enterprises across
the globe rely on Corero's award winning cybersecurity technology
to eliminate the threat of Distributed Denial of Service (DDoS) to
their digital environment through automatic attack detection and
mitigation, coupled with network visibility, analytics and
reporting. Corero's industry leading SmartWall and SecureWatch
technology provides scalable protection capabilities against
external DDoS attackers and internal DDoS botnets in the most
complex edge and subscriber environments, while enabling a more
cost-effective economic model than previously available. Corero's
key operational centers located in Marlborough, Massachusetts, USA
and Edinburgh, UK, with the Company's headquarters in Amersham, UK.
The Company is listed on the London Stock Exchange's AIM market
under the ticker
CNS. For more information, visit www.corero.com
Interim review
Introduction
Building on a record year for Corero in 2020, I am pleased to
report further positive progress in H1 2021, which demonstrates the
Company's strategic focus on its global sales and marketing efforts
and positions us well for sustained future growth.
Corero revenues in the first half of 2021 were $8.3 million (H1
2020: $6.2 million), an increase of 34%. This solid performance was
underpinned by the Group's strong order intake, a record $8.9
million in the period (H1 2020: $7.9 million).
Recurring revenues, comprising revenues from security
maintenance and support services and DDoS Protection-as-a-Service
("DDPaaS") was 59% of total revenue, which was comparable to the
prior half year (H1 2020: 61%), with DDPaaS revenues increasing to
$1.9 million (H1 2020: $1.2 million). Annualised Recurring Revenues
("ARR") as at 1 July 2021 increased to $11.2 million, an increase
of 27% (H1 2020: $8.8 million), driven by growth in DDPaaS and
software subscription orders. ARR is an important measure for the
Group in providing visibility over future earnings.
EBITDA profit for the six months ended 30 June 2021 was $0.1
million (H1 2020: loss of $1.3 million). This positive milestone
was achieved through a combination of increased revenues, higher
gross margins at 84% in the first six months of 2021 (H1 2020: 75%)
due to the effect of mix of business, controlled opex (including
some lower operating costs resulting from Covid-19) and income from
the forgiveness of a US Payment Protection Plan (PPP) loan of $0.6
million (H1 2020: $Nil), offset by exchange losses of $0.2 million
(H1 2020: $0.8m exchange gain). After adjusting for other non-cash
items of share-based payments, depreciation on DDPaaS assets (which
Corero owns) and unrealised foreign exchange differences on an
intercompany loan, the adjusted EBITDA profit was $0.6 million (H1
2020: loss of $1.1 million). The loss before taxation in the period
more than halved to $1.2 million (H1 2020: loss of $2.7
million).
Working remotely due to the Covid-19 pandemic is largely
becoming the new norm globally, with many enterprises adopting
long-term flexible working policies. Alongside this expanded
network usage, the number of opportunistic DDoS attacks is also
increasing. We continue to respond to our customers' ever-evolving
needs with one of the broadest and diverse DDoS defense solution
portfolios in the market.
During the first half of 2021, Corero added 20 new customers (H1
2020: 18), including eight through our global resale partnership
with Juniper Networks (H1 2020: five new customers). We continue to
strengthen relationships with all of our partners, with increased
sales and support training, heightened interaction between
management teams, and ongoing development in our joint marketing
collateral and joint prospecting.
Strategic update
Following the strategic management changes in 2020, we announced
an enhanced strategy for the business focused on delivering
sustainable growth. Set out below are our six core strategic
drivers and the progress which we have achieved against each one
during the first half of 2021.
-- Increasing our international presence : recent customer wins
across Australia, Germany, France, Japan, China, Brazil, Canada and
the United States have broadened our international footprint. In
addition, new business partners have been signed in international
markets and our current pipeline includes further expansion in ten
new countries
-- Leveraging existing strategic partnerships and adding new
ones: a good proportion of our recent deals have been through our
channel partnerships and strategic alliances with Juniper Networks
and GTT; and we continue to make progress in securing new
partners
-- Intensifying our Global, Tier One and major accounts
relationships: customer wins have included significant global
enterprises across a number of verticals such as utilities and
research and educational networks. In 2021, existing large
customers have also continued to expand their network using
Corero's DDoS solutions to protect their infrastructure
-- Augmenting our services portfolio: we continue to explore and
provide service initiatives that enhance the protection and network
security visibility for our customers
-- Amplifying our demand generation programmes: we have been
creating targeted content at each stage of the buying cycle, and
within the key segments we serve. This includes increasing
advertising, targeted, sector-specific email campaigns and virtual
speaking engagements with Partners, amongst many other
initiatives
-- Continuing to increase our technological innovation
leadership: further strengthened our portfolio of SmartWall
products with major software releases including a new ETD (Edge
Threat Defense) capability. The new ETD capability for SmartWall
enables integrated scrubbing center deployments to protect against
attacks accurately and automatically leading to a lower total cost
of ownership for customers who prefer to use scrubbing center
configurations
Total addressable market and market drivers
Corero's key target market, cybersecurity and networking, is
high-growth and the market for DDoS protection and mitigation was
forecast in June last year by MarketsandMarkets to grow from $2.4
billion in 2019 to $4.7 billion in 2024 (a compound annual growth
rate (CAGR) of 14.0% over the forecast period). Market drivers
growth include a rise in multi-vector attacks, availability of
DDoS-for-hire services, the impact of growth in IoT devices, the
roll-out of 5G services, and growing demand for hybrid DDoS
protection and mitigations services and solutions.
Increasing competitive advantage
As DDoS attacks continue to grow in size, frequency and
sophistication, they reinforce the need for scalable, accurate and
automated DDoS mitigation solutions. Our mission to protect the
increasing importance of our customers' internet facing networks
and services drives our product roadmap. New network topologies
including Cloud and Edge offer greenfield opportunities for
innovative DDoS protection techniques. Corero has established
itself as a pioneer in bringing real-time DDoS detection and
mitigation into the Terabit era. Insights gained from observing
millions of DDoS attacks via our SecureWatch service not only
inform our customers but also serve to provide unique insights into
what Corero should build next to stay at the forefront of our
industry.
Supporting multiple deployment topologies, SmartWall utilises an
always-on DDoS mitigation architecture to automatically, and
surgically, remove just the DDoS attack traffic. Corero continues
to invest in its market leading solutions through its research and
development efforts, and its engineering and customer service
teams.
Financial summary
The Group reported revenues of $8.3 million in the six months
ended 30 June 2021 (H1 2020: $6.2 million).
Total operating expenses were $8.4 million (H1 2020: $7.1
million), with the following components:
-- Adjusted operating expenses, being those excluding
depreciation and amortisation of intangible assets, increased to
$7.2 million (H1 2020: $5.9 million), as a result of our increased
investment in sales and marketing and engineering activity, and
higher central overheads;
-- Depreciation and amortisation of intangible assets of $1.1
million (H1 2020: $1.2 million) ; and,
-- Capitalised R&D costs of $0.9 million (H1 2020: $0.7 million).
Other significant income statement movements included:
-- Increased share-based payment costs of $0.3 million (H1 2020: $0.1 million); and
-- $0.6 million credit from the forgiveness of the PPP loan
previously received by the Company's trading subsidiary under the
US CARES Act (H1 2020: $Nil); offset by a realised (trading) and
unrealised (intercompany loan) total exchange loss of $0.2 million
(H1 2020: total exchange gain of $0.8 million), an adverse variance
of $1.0 million between the two halves.
Loss before taxation was $1.2 million (H1 2020: loss of $2.7
million). Loss after taxation was $1.2 million (H1 2020: $2.6
million). The reported loss per share was 0.3 cents (H1 2020: loss
per share 0.5 cents).
Gross cash at bank as at 30 June 2021 was $8.8 million (30 June
2020: $6.2 million; 31 Dec 2020: $10.1 million) and borrowings were
$3.7 million (30 June 2020: $2.9 million; 31 Dec 2020: $2.5
million). Net cash as at 30 June 2021 was $5.1 million (30 June
2020: $3.3 million; 31 Dec 2020: $7.6 million).
Net cash from operating activities before working capital in the
first six months was a net reduction of $0.1 million (H1 2020: net
reduction of $1.1 million), reflecting the reduced loss for the
period and the forgiveness of the PPP loan of $0.6 million; before
the forgiveness, cash from operating activities would have
registered an inflow of $0.5 million. There was a decrease in
working capital in the half of $1.8 million (H1 2020: working
capital increase of $0.4 million), following an unwind of a
supplier commitment position associated with a large customer
contract at the year end. Net cash used in investing activities
included sustained investment in R&D of $0.9 million (H1 2020:
$0.7 million spend), and capex investment lower at $0.2 million (H1
2020: $0.6 million). Net proceeds from borrowings less repayments
were $1.9 million, reflecting the new drawn borrowing facility
negotiated in April 2021. Overall, the decrease in cash and cash
equivalents for the half was $1.3 million (H1 2020: decrease of
$2.1 million).
Outlook
The long-term market dynamics for DDoS mitigation reinforces the
technological superiority, cost-effectiveness and efficacy of
Corero's solutions more than ever. The ongoing impact of Covid-19
continues to drive working from home and network traffic flows. The
superior total cost of ownership (TCO) performance of our SmartWall
platform and our continued investment in R&D (of 21% of our
revenue in the first half) positions our solution well with our
current and prospective customers.
Our increased investment in sales and marketing as well as the
development of our partner and channel strategy enables us to have
a greater coverage of the market, with our solutions now deployed
in more than 40 countries. We have recently announced that we are
strengthening our sales organisation and introducing a new
go-to-market configuration with the plan to hire three senior sales
executives in North America, in Rest of the World and for Channel
Sales to drive further growth.
We continue to be vigilant of the economic ramifications of the
on-going global pandemic and semiconductor supply chain shortages.
Nevertheless, based on our first half performance and solid
pipeline, we expect trading for the full year 2021 to be in-line
with expectations and remain of the view that Corero is well-placed
for further growth in the medium and long term.
Lionel Chmilewsky
Chief Executive Officer
13 September 2021
Condensed Consolidated Income Statement
for the six months ended 30 June 2021
Unaudited six months ended Unaudited six months ended Audited year ended 31
30 June 30 June December
2021 2020 2020
Continuing operations $'000 $'000 $'000
Revenue 8,298 6,238 16,877
Cost of sales (1,364) (1,559) (3,832)
---------------------------- ---------------------------- ----------------------------
Gross profit 6,934 4,679 13,045
Operating expenses (8,356) (7,098) (16,431)
---------------------------- ---------------------------- ---------------------------- ----------------------------
Consisting of:
Operating expenses before
depreciation and
amortisation (7,234) (5,895) (14,114)
Depreciation and
amortisation of
intangible assets (1,122) (1,203) (2,317)
---------------------------- ---------------------------- ---------------------------- ----------------------------
Loss from operations (1,422) (2,419) (3,386)
Share-based payments (265) (128) (359)
---------------------------- ---------------------------- ----------------------------
Operating loss (1,687) (2,547) (3,745)
Other income 637 - -
Finance income 1 14 16
Finance costs (182) (164) (301)
---------------------------- ---------------------------- ----------------------------
Loss before taxation (1,231) (2,697) (4,030)
Taxation credit - 122 246
---------------------------- ---------------------------- ----------------------------
Loss after taxation (1,231) (2,575) (3,784)
---------------------------- ---------------------------- ----------------------------
Loss after taxation
attributable to equity
owners of the parent (1,231) (2,575) (3,784)
---------------------------- ---------------------------- ----------------------------
Basic and diluted loss per share
Cents Cents Cents
Basic and diluted loss per share (0.3) (0.5) (0.8)
------ ------ ------
EBITDA(1) 72 (1,345) (1,428)
Adjusted EBITDA - for DDPaaS depreciation 254 (1,242) (1,173)
Adjusted EBITDA - for DDPaaS depreciation and share based payments(1) 519 (1,114) (814)
Adjusted EBITDA - for DDPaaS depreciation, share based payments and unrealised foreign
exchange
differences on intercompany loan - Fully adjusted basis(1) 609 (1,657) (551)
--------------------------------------------------------------------------------------- ----- ---------- ----------
(1) See note 6 for definition and reconciliation.
Condensed Consolidated Statement of Total Comprehensive
Income
for the six months ended 30 June 2021
Unaudited six months ended Unaudited six months ended Audited year ended 31
30 June 30 June December
2021 2020 2020
$'000 $'000 $'000
---------------------------- ---------------------------- ---------------------------- ----------------------------
Loss for the period (1,231) (2,575) (3,784)
Other comprehensive
income/(expense):
---------------------------- ---------------------------- ---------------------------- ----------------------------
Items reclassified
subsequently to profit or
loss upon derecognition:
Foreign exchange
differences 91 (689) 216
---------------------------- ---------------------------- ---------------------------- ----------------------------
Other comprehensive
income/(expense) for the
period net of taxation
attributable to the equity
owners of the parent 91 (689) 216
---------------------------- ---------------------------- ---------------------------- ----------------------------
Total comprehensive expense
for the period
attributable to the equity
owners of the parent (1,140) (3,264) (3,568)
---------------------------- ---------------------------- ---------------------------- ----------------------------
Condensed Consolidated Statement of Financial Position
as at 30 June 2021
Unaudited Unaudited
as at 30 as at 30 Audited
June June as at 31 December
2021 2020 2020
$'000 $'000 $'000
Assets
Non-current assets
Goodwill 8,991 8,991 8,991
Acquired intangible assets 7 5 9
Capitalised development expenditure 4,640 4,870 4,646
Property, plant and equipment - owned assets 1,015 1,000 1,099
Leased right of use assets 186 295 237
Long term trade and other receivables 833 518 694
15,672 15,679 15,676
Current assets
Inventories 79 145 98
Trade and other receivables 3,193 2,386 3,714
Cash and cash equivalents 8,830 6,220 10,140
----------- --------- ------------------
12,102 8,751 13,952
----------- --------- ------------------
Total assets 27,774 24,430 29,628
----------- --------- ------------------
Liabilities
Current Liabilities
Trade and other payables (3,428) (2,665) (6,461)
Lease liabilities (88) (99) (86)
Deferred income (4,163) (3,214) (3,444)
Borrowings (1,839) (1,468) (2,073)
(9,518) (7,446) (12,064)
Net current assets 2,584 1,305 1,888
Non-current liabilities
Trade and other payables (326) (130) (402)
Lease liabilities (126) (214) (171)
Deferred income (2,869) (1,277) (2,705)
Borrowings (1,929) (1,409) (405)
----------- --------- ------------------
(5,250) (3,030) (3,683)
----------- --------- ------------------
Net assets 13,006 13,954 13,881
----------- --------- ------------------
Capital and reserves attributable to the equity owners of the parent
Share capital 6,914 6,914 6,914
Share premium 82,122 82,122 82,122
Capital redemption reserve 7,051 7,051 7,051
Share options reserve 1,233 737 968
Foreign exchange translation reserve (1,293) (2,289) (1,384)
Accumulated profit and loss reserve (83,021) (80,581) (81,790)
----------- --------- ------------------
Total shareholders' equity 13,006 13,954 13,881
----------- --------- ------------------
Consolidated Interim Statement of Cash Flows
for the six month period ended 30 June 2021
Unaudited six months ended Unaudited six months ended Audited year ended 31
30 June 30 June December
2021 2020 2020
Operating activities $'000 $'000 $'000
Loss before taxation for the
period (1,231) (2,697) (4,030)
Adjustments for movements:
Amortisation of acquired
intangible assets 2 2 6
Amortisation of capitalised
development expenditure 944 1,013 1,933
Depreciation - owned assets 307 231 514
Depreciation - leased assets 51 59 119
Finance income (1) (14) (16)
Finance expense 172 149 274
Finance lease interest costs 10 15 27
Share based payments expense 265 128 359
Forgiveness of PPP loan (637) - -
Cash used in operating
activities before movement
in working capital (118) (1,114) (814)
Movement in working capital:
Decrease in inventories and
sales evaluation assets 32 25 45
Decrease/(increase) in trade
and other receivables 533 (1,118) (1,187)
(Decrease)/increase in trade
and other payables (2,332) 1,454 6,852
---------------------------- ---------------------------- ----------------------------
Net movement in working
capital (1,767) 361 5,710
Cash (used in)/generated
from operating activities (1,885) (753) 4,896
Taxation received - 122 246
---------------------------- ---------------------------- ----------------------------
Net cash (used in)/generated
from operating activities (1,885) (631) 5,142
Cash flows from investing
activities
Purchase of intangible
assets - - (8)
Investment in development
expenditure (938) (714) (1,410)
Purchase of property, plant
and equipment (234) (647) (1,015)
Net cash used in investing
activities (1,172) (1,361) (2,413)
Cash flows from financing
activities
Net proceeds from borrowings
(after costs) 2,683 637 637
Finance income 1 14 16
Lease liability payments (48) (68) (136)
Finance expense (109) (115) (206)
Repayments of borrowings (759) (534) (1,187)
---------------------------- ---------------------------- ----------------------------
Net cash generated
from/(used in) financing
activities 1,768 (66) (876)
(Decrease)/increase in cash
and cash equivalents (1,289) (2,058) 1,833
---------------------------- ---------------------------- ----------------------------
Effects of exchange rates on
cash and cash equivalents (21) (43) (14)
Cash and cash equivalents at
1 January 10,140 8,321 8,321
---------------------------- ---------------------------- ----------------------------
Cash and cash equivalents at
balance sheet dates 8,830 6,220 10,140
---------------------------- ---------------------------- ----------------------------
Consolidated Interim Statement of Changes in Equity
for the six month period ended 30 June 2021
Total
Foreign Accumulated attributable
Capital Share exchange profit and to equity
Share Share redemption options translation loss owners of
capital premium reserve reserve reserve reserve the parent
$'000 $'000 $'000 $'000 $'000 $'000 $'000
1 January 2020 6,914 82,122 7,051 609 (1,600) (78,006) 17,090
Loss for the period - - - - - (2,575) (2,575)
Other comprehensive expense - - - - (689) - (689)
-------- -------- ----------- -------- ------------ ------------ -------------
Total comprehensive expense for the period - - - - (689) (2,575) (3,264)
Contributions by and distributions to owners
Share based payments - - - 128 - - 128
Total contributions by and distributions to owners - - - 128 - - 128
-------- -------- ----------- -------- ------------ ------------ -------------
30 June 2020 6,914 82,122 7,051 737 (2,289) (80,581) 13,954
Loss for the period - - - - - (1,209) (1,209)
Other comprehensive expense - - - - 905 - 905
-------- -------- ----------- -------- ------------ ------------ -------------
Total comprehensive expense for the period - - - - 905 (1,209) (304)
Contributions by and distributions to owners
Share based payments - - - 231 - - 231
Total contributions by and distributions to owners - - - 231 - - 231
31 December 2020 and 1 January 2021 6,914 82,122 7,051 968 (1,384) (81,790) 13,881
Loss for the period - - - - - (1,231) (1,231)
Other comprehensive expense - - - - 91 - 91
-------- -------- ----------- -------- ------------ ------------ -------------
Total comprehensive expense for the period - - - - 91 (1,231) (1,140)
-------- -------- ----------- -------- ------------ ------------ -------------
Contributions by and distributions to owners
Share based payments - - - 265 - - 265
Total contributions by and distributions to owners - - - 265 - - 265
30 June 2021 6,914 82,122 7,051 1,233 (1,293) (83,021) 13,006
-------- -------- ----------- -------- ------------ ------------ -------------
Notes to the interim financial statements
1. General information and basis of preparation
Corero Network Security plc (the "Company") is a company
domiciled in England. The condensed consolidated interim financial
statements of the Company for the six months ended 30 June 2021
comprise the Company and its subsidiaries (together referred to as
the "Group").
These condensed interim consolidated financial statements have
been prepared in accordance with UK-adopted IAS 34,"Interim
Financial Reporting". They do not include all disclosures that
would otherwise be required in a complete set of financial
statements and should be read in conjunction with the Annual Report
and Accounts for the year ending 31 December 2020 ("2020 Annual
Report and Accounts"). The financial information for the half years
ended 30 June 2021 and 30 June 2020 do not constitute statutory
accounts within the meaning of Section 434(3) of the Companies Act
2006 and have neither been audited nor reviewed by the Group
Auditor.
The annual financial statements of Corero Network Security plc
are prepared in accordance with international accounting standards
in conformity with the requirements of the Companies Act 2006. The
comparative financial information for the year ended 31 December
2020 included within this report does not constitute the full
statutory accounts for that period. The statutory Annual Report and
Financial Statements for 2020 have been filed with the Registrar of
Companies. The Independent Auditors' Report on the Annual Report
and Accounts for 2020 was unqualified, drew attention to a material
uncertainty relating to going concern and did not contain a
statement under 498(2) or 498(3) of the Companies Act 2006.
Subsequent to the United Kingdom's exit from the European on 31
December 2020, the Group has transitioned from International
Financial Reporting Standards (IFRS) as adopted by the European
Union (EU) to UK-adopted international accounting standards. The
transition has had no material impact on previously reported
numbers.
The consolidated financial statements have been prepared on a
going concern basis as the Directors believe, based on internal
forecasts and cash flow projections, that the current sales
prospects, combined with the Group's existing cash resources should
ensure that the Group has adequate working capital to service its
existing business and meet debt repayments for the foreseeable
future. However, the ability of the Company and Group to achieve
the future profit and cash flow projections cannot be predicted
with certainty. Failure of the Company and the Group to meet these
projections may adversely impact the achievability of the bank loan
covenants which may result in the bank loan being required to be
repaid before the maturity date if the covenants are not met and
cannot be renegotiated.
There have been no related party transactions or changes in
related party transactions described in the latest Annual Report
and Accounts that could have a material effect on the financial
position or performance of the Group in the first six months of the
financial year.
These consolidated interim financial statements were approved by
the Board on 13 September 2021 and approved for issue on 14
September 2021.
A copy of this Interim Report can be viewed on the company's
website: www.corero.com .
2. Significant accounting policies
The basis of preparation and accounting policies used in
preparation of these interim financial statements have been
prepared in accordance with the same accounting policies set out in
the 2020 Annual Report and Accounts.
3. 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. Consequently, there are
no separable 'other segmental information' not otherwise showed in
these Condensed Consolidated Financial statements.
The Group's revenues from external customers are divided into
the following geographies:
Unaudited Unaudited Audited
six months six months year ended
ended 30 ended 30 31 December
June 2021 June 2020 2020
$'000 $'000 $'000
The Americas 5,858 4,687 10,988
EMEA 1,158 1,485 4,501
APAC 1,282 66 1,388
Total 8,298 6,238 16,877
------------ ------------ -------------
Revenues from external customers are identified by invoicing
systems and adjusted to take into account the difference between
invoiced amounts and deferred revenue adjustments as required by
IFRS accounting standards.
The revenue is analysed for each revenue category as:
Unaudited Unaudited Audited
six months six months year ended
ended 30 ended 30 31 December
June 2021 June 2020 2020
$'000 $'000 $'000
Software licence and appliance
revenue 3,373 2,405 8,446
DDoS Protection-as-a-Service
revenue 1,904 1,189 2,876
Maintenance and support services
revenue 3,021 2,644 5,555
Total 8,298 6,238 16,877
------------ ------------ -------------
The revenue is analysed by timing of delivery of goods or
services as:
Unaudited Unaudited Audited
six months six months year ended
ended 30 ended 30 31 December
June 2021 June 2020 2020
$'000 $'000 $'000
Point-in-time delivery 3,373 2,405 8,446
Over time 4,925 3,833 8,431
Total 8,298 6,238 16,877
------------ ------------ -------------
4. Taxation
The Group is currently loss making and consequently does not
recognise a material taxation income tax expense or credit. The tax
receipt(s) in the prior periods relates to research and development
expenditure tax credit(s).
5. Earnings per share
Loss per share is calculated by dividing the earnings
attributable to ordinary shareholders by the weighted average
number of ordinary shares in issue during the period. The effects
of anti-dilutive ordinary shares resulting from the exercise of
share options are excluded from the calculation of the loss per
share. Therefore, the diluted loss per share is equal to the loss
per share.
30 June 2021 30 June 2020
weighted weighted
average average
30 June 2021 number of 1p 30 June 2021 30 June 2020 number of 1p 30 June 2020
loss shares loss per share loss shares loss per share
$'000 Thousand Cents $'000 Thousand Cents
Basic and
diluted loss
per share (1,231) 494,852 (0.3) (2,583) 494,852 (0.5)
--------------- -------------- --------------- --------------- -------------- ---------------
31 Dec 2020 weighted
31 Dec 2020 loss average number of 1p shares 31 Dec 2020 loss per share
$'000 Thousand Cents
Basic and diluted loss per
share (3,784) 494,852 (0.8)
----------------- ---------------------------- -----------------------------
6. Key performance measures
EBITDA and Fully Adjusted EBITDA
Earnings before interest, tax, depreciation, and amortisation
("EBITDA") is defined as earnings from operations before all
interest, tax, depreciation, and amortisation charges. The
following is a reconciliation of EBITDA and further adjustments for
all three periods presented:
Unaudited Unaudited Audited
six months six months year ended
ended 30 ended 30 31 December
June 2021 June 2020 2020
$'000 $'000 $'000
Loss before taxation (1,231) (2,697) (4,030)
Adjustments for:
Finance income (1) (14) (16)
Finance expense 172 149 274
Finance lease interest costs 10 15 27
Depreciation - owned assets 125 128 259
Depreciation - lease liabilities 51 59 119
Amortisation of acquired intangible
assets 2 2 6
Amortisation of capitalised
development expenditure 944 1,013 1,933
------------ ------------ -------------
EBITDA 72 (1,345) (1,428)
Depreciation of DDoS Protection-as-a-Service
assets charged to cost of sales 182 103 255
------------ ------------ -------------
Adjusted EBITDA - for DDPaaS
depreciation 254 (1,242) (1,173)
------------ ------------ -------------
Share based payments 265 128 359
------------ ------------ -------------
Adjusted EBITDA - for DDPaaS
depreciation and share based
payments 519 (1,114) (814)
Unrealised foreign exchange
differences on intercompany
loan 90 (543) 263
------------ ------------ -------------
Adjusted EBITDA - for DDPaaS
depreciation, share based payments
and unrealised foreign exchange
differences on intercompany
loan - Fully adjusted basis 609 (1,657) (551)
------------ ------------ -------------
The EBITDA and Adjusted EBITDA measures above include the credit
from the forgiveness of the Paycheck Protection Program Loan (see
note 7) in respect of H1 2021 (H1 2020: $Nil).
7. Analysis of changes in net cash (cash and cash equivalents,
and borrowings)
As at Movement As at Movement As at Movement As at
1 Jan in 30 June in 1 Jan in 30 June
2020 period 2020 period 2021 period 2021
$'000 $'000 $'000 $'000 $'000 $'000 $'000
Cash and cash equivalents 8,321 (2,101) 6,220 3,920 10,140 (1,310) 8,830
Bank borrowings (2,937) 697 (2,240) 399 (1,841) (1,927) (3,768)
Paycheck Protection Program Loan (see below) - (637) (637) - (637) 637 -
-------- --------- -------- --------- -------- --------- --------
Total net cash 5,384 (2,041) 3,343 4,319 7,662 (2,600) 5,062
-------- --------- -------- --------- -------- --------- --------
The movement in the period is a combination of the actual flow
(from operating, financing and investing activities) and the
exchange rate movement.
Paycheck Protection Program Loan (PPP Loan)
Notification of the PPP loan forgiveness in full was received
from Pacific Western Bank on 28th January 2021. The forgiveness of
the PPP loan is a non-cash movement.
New borrowing facility
The Company announced in April 2021 it had entered into a new
borrowing facility for up to GBP3.0 million (c$4.2 million) with
its existing banking partner, the net proceeds of which will be
used for working capital purposes and its on-going investment
programme to support its growth strategy.
The new borrowings facility comprises a drawn GBP2.0 million
term loan facility and an undrawn GBP1.0 million Revolving Credit
Facility ('RCF') for a three-year term. The facility terms include:
no early repayment penalties or redemption premium; a reduced
interest rate (payable quarterly) at 6.5% per annum over the Bank
of England base rate (before any potential downward EBITDA margin
ratchet adjustment); 2.6% interest per annum on the RCF;
arrangement fee of 3.75%; and standard security and loan covenants
in line with the existing lending arrangement (which will continue
to be repaid in the period to March 2022).
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END
IR SFFFMDEFSELU
(END) Dow Jones Newswires
September 14, 2021 02:00 ET (06:00 GMT)
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