Corero Network Security plc

Transcription

1 Corero Network Security plc Results for the 6 months ended 30 June 2014 Ashley Stephenson, CEO Andrew Miller, CFO and COO

2 1. Introduction 2. Interim Results & Highlights 3. Market Opportunity 4. Corero Value Proposition 5. Near Term Strategy 6. Outlook Appendices

3 Summary Market segment - Cybersecurity Cybersecurity is one of the fastest growing IT sectors Impacts all businesses and governments Major technology suppliers increasing investment in security to address market DDoS mitigation market to increase 66% to over $1.5B by 2018 (Infonetics Research) Corero opportunity - Cybersecurity vendor 2012 announced strategy to deliver First Line of Defense solutions to stop DDoS attacks 2014 SmartWall Threat Defense System (TDS) launched - Successful two year investment plan to develop market leading next-generation cybersecurity platform Target market: Service Providers and large enterprises - Significant increase in addressable market Well positioned for SmartWall led growth in H Finite competition Experienced management team 1

4 Overview 6 months ended 30-Jun-14 Successful launch and commercial introduction of SmartWall TDS SmartWall outlook and opportunities in-line with management expectations First customer sales in June Growing number of customer trials and developing pipeline Successful launch of SecureWatch Analytics (powerful security reporting dashboard) Leverages OEM agreement with Splunk 2014 a year of transition H1 Revenue $3.7m (2013: $4.9m) lower than expected growth from previous generation product H1 EBITDA loss $3.9m* (2013: loss $2.9m) significant investment to support SmartWall launch Key appointments Dave Larson (CTO and VP Product), previously CTO for HP Networking Bipin Mistry (VP Product Management), previously with Juniper Networks and Cisco 2

5 What we do - Stop DDoS attacks & cyber threats Corero goes to market as a First Line of Defense that stops DDoS Attacks and Cyber Threats Patented DDoS defense technology Suite of security products & services Multiple routes to market - security distributor/reseller channel, (OEM and SIs) and direct Previous Generation Next Generation DDS - DDoS Defense System (mid-size Enterprise) Previous generation product 1-10 Gbps performance On premises in-line device Always-on protection appliance Expanding the Addressable Market SmartWall TDS (Service Providers and large Enterprise) Next generation product n x ~30M pps Security services platform Always-on managed service New 3

6 1. Introduction 2. Interim Results & Highlights 3. Market Opportunity 4. Corero Value Proposition 5. Near Term Strategy 6. Outlook Appendices

7 360 CEO Perspective Mid 2014 Products & Services First SmartWall products shipped Positive feedback from customers - Market leading product Management & Team Added several key executives Overall headcount remaining flat (as planned) - Addressing a market need Sales Team in place for the new product SmartWall ready for business Repeatability and efficiency key for scale Partnerships Engage more with our industry now we have a killer story and product Leverage is key 4

8 P&L summary Note: 30-Jun-13 comparatives restated for disposal of Corero Business Systems 0n 1-Aug-13 6 months 6 months 12 months Restated $ 000 $ 000 $ 000 Revenue 3,672 4,869 10,268 Gross profit 2,446 3,361 6,680 Gross profit % 67% 69% 65% Operating expenses (6,338) (6,284) (12,911) EBITDA loss (3,892) (2,923) (6,231) Depreciation and amortisation of intangible assets (1,313) (1,070) (2,309) Loss before financing (5,205) (3,993) (8,540) Net finance costs (6) (238) (344) Loss before taxation (5,211) (4,231) (8,884) Taxation Loss for the year from continuing operations (5,025) (4,045) (8,513) Profit from discontinued operations - 1,218 1,436 Profit from sale of discontinued operations ,244 (Loss)/Profit for the year (5,025) (2,827) 8,167 Adjusted loss before tax * (4,599) (3,635) (7,682) * excluding amortisation of acquired intangibles Revenue impacted by: Higher services mix in H order intake Lower than expected growth in the previous generation product Sales team changes (in readiness for SmartWall) Operating expenses: Net of capitalised development costs of $2.2m (2013: $1.8m) Includes unrealised loss on intercompany loan of $0.2m (2013: gain $0.5m) Finance costs: reduction following early repayment of $5m loan note in Oct-13 Discontinued operations: CBS sold on 1-Aug-13 5

9 Cash flow summary 6 months 6 months 12 months $ 000 $ 000 $ 000 (Loss)/profit (5,025) (2,827) 8,167 Adjustments for: Amort'n of acquired intangible assets ,202 Amorti'n of capitalised development costs Depreciation Finance income (11) (11) (48) Finance expense Taxation (186) (186) (371) Profit on disposal of subsidiary - - (15,244) Share based payment charge Changes in working capital 1,798 (1,949) (2,976) Net cash from operating activities (2,094) (3,449) (7,504) Net cash used in investing activities (2,684) (2,965) 11,768 Net cash from financing activities 143 7,512 (424) Effects of exchange rates 246 (638) 1,074 Net (decrease)/increase in cash (4,389) 460 4,914 Opening cash and cash equivalents 9,775 4,861 4,861 6 months 6 months 12 months $ 000 $ 000 $ 000 Cash flows from investing activities Purchase of intangible assets (48) (36) (107) Capitalised development expenditure (2,173) (2,195) (4,202) Purchase of PPE (net of disposals) (463) (734) (1,148) Sale proceeds from disposal of subsidiary ,225 Net cash used in investing activities (2,684) (2,965) 11,768 Cash flows from financing activities Proceeds from issue of share capital - 5,869 5,869 Term loan received ,897 Interest received Interest paid (17) (27) (39) Repayment of term loans - (379) (8,432) Capital element of finance leases - (13) (23) Receipt of credit facility Net cash from financing activities 143 7,512 (424) Closing cash and cash equivalents 5,386 5,321 9,775 Investment in IPR Development costs capitalised $2.2m - primarily related to SmartWall (2013: $1.8m) Represents 62% of total engineering costs (2013: 54%) 6

10 Net assets summary Note: 30-Jun-13 comparatives include Corero Business Systems (sold on 1-Aug-13) 30-Jun Jun Dec-13 $ 000 $ 000 $ 000 Assets Non-current assets Goodwill 17,983 18,758 17,983 Acquired intangible assets 2,071 3,174 2,635 Capitalised development expenditure 8,066 6,336 6,121 Property, plant and equipment 1,333 1,579 1,343 29,453 29,847 28,082 Current assets Inventories Trade and other receivables 2,247 6,554 3,720 Cash and cash equivalents 5,386 5,321 9,775 8,151 12,493 13,824 Liabilities Current liabilities 30-Jun Jun Dec-13 $ 000 $ 000 $ 000 Trade and other payables (2,118) (3,664) (2,171) Borrowings (406) (6,653) (256) Deferred income (3,087) (6,512) (3,195) (5,611) (16,829) (5,622) Net current assets/(liabilities) 2,540 (4,336) 8,202 Non-current liabilities Borrowings - (1,426) - Deferred income (2,110) (1,400) (1,423) Deferred taxation (639) (1,010) (825) (2,749) (3,836) (2,248) Net assets 29,244 21,675 34,036 Net cash $5.0m (2013: net debt $2.8m) Borrowings comprise short term receivables backed facility Deferred revenue like-for-like comparison (short and long term): $5.2m at 30-Jun-14, $4.4m at 30-Jun-13 7

11 1. Introduction 2. Interim Results & Highlights 3. Market Opportunity 4. Corero Value Proposition 5. Near Term Strategy 6. Outlook Appendices

12 Snapshot of DDoS attacks ( ) and impact Attack Bandwidth Gbps Data shown represents the top ~2% of reported attacks AUG DEC MAJOR HOSTING SITES MAR JUN 1 JUL 1 AUG 1 SEP 1 OCT 1 NOV 1 DEC 1 JAN JUNE DEC FEB 1 MAR 1 APR 1 MAY 1 JUN 1 JUL 1 MAR JUNE HONG KONG VOTING SITES 20% of data center downtime is caused by a DDoS attack 86 minutes is an average of data center downtime due to DDoS attacks $700K per incident is the average cost of a DDoS outage $8K per minute is the average cost of unplanned data center downtime 8 Source: Network Computing/Ponemon Institute Source: Digital Attack Map - DDoS attacks around the globe

13 DDoS facts 9

14 Corero - Expanding the addressable market Service Providers: Corero SmartWall, Arbor, Radware Enterprise solutions: Corero SmartWall, Arbor, Radware, F5 Peer point DDoS Mitigation SP New Current Mid-size enterprise New Large enterprise New New New New Current Secure Internet Hosting Data Centre Corero SmartWall Network Threat Defense 10

15 Market opportunity for Corero Challenge: DDoS & Cyber Threats Online Enterprises, Hosting Providers, Service Providers and their customers are increasingly being impacted by DDoS attacks and cyber threats Customers are looking to Service Providers and Hosting/Cloud providers for protection against DDoS and cyber threats Double digit growth market (Infonetics Research) DDoS mitigation (products and services) to increase 66% to over $1.5B in 2018 Strong growth in period in DDoS products for data centres (CAGR 13.2%) and mobile providers (CAGR 20.8%) Carrier transport Carrier transport DDoS products market Mobile Mobile 2013 Total $348M Data centre Government 2018 Total $563M Data centre The data centre and mobile DDoS prevention segments are projected to maintain healthy double CAGRs from 2013 to Jeff Wilson, principal analyst for security at Infonetics Research (Jun-14) Government Source: Infonetics Research 11

16 1. Introduction 2. Interim Results & Highlights 3. Market Opportunity 4. Corero Value Proposition 5. Near Term Strategy 6. Outlook Appendices

17 Corero protects the on-line presence against DDoS Advanced DDoS/cyber threat protection removes unwanted traffic FLEXIBLE POLICY CONTROLS PRECISE ENFORCEMENT INFRASTRUCTURE PROTECTION Rate Limiting Protocol Validation Service Integrity Group Based Mitigation of Network/ Application/ Volumetric/ Zero-Day attacks Behavioral Analysis IP Reputation Inspect/Analyze/ Respond/Mitigate Do No Harm Philosophy Protect firewalls, IPSs, routers, switches, servers Bandwidth Optimization Service Availability/ Optimization 12

18 Corero First Line of Defense Product Family DDoS Defense System (DDS) Medium to Large sized Enterprises On Premises deployments < 10 Gbps performance SmartWall Threat Defense System (TDS) Large Enterprise, Service/Hosting Providers On Premises or Cloud deployments Protection in modular increments of 10 Gbps Differentiation ADVANCED DDOS & CYBER THREAT DEFENSE TECHNOLOGY BUILT ON NEXT GENERATION ARCHITECTURE COMPREHENSIVE ATTACK VISIBILITY & NETWORK FORENSICS 13

19 1. Introduction 2. Interim Results & Highlights 3. Market Opportunity 4. Corero Value Proposition 5. Near Term Strategy 6. Outlook Appendices

20 Near Term Strategy Objectives Plan Solution Establish Corero - First Line of Defense - as a leading solution for DDoS protection Raise Corero profile Referenceable customers Independent market testing Establish thought leadership Build out Corero First Line of Defense platform o Incremental software functionality o Cloud enablement o Additional attack protection Software features VM software deployment model Forensics and analysis capability Cyber attacks getting more advanced Growth in Cloud IT Next gen trends e.g. SDN Go To Market Develop existing channels Explore additional indirect channels o SI o OEM Channel enablement with tools & programs High performing teams (matched to market opportunities) Continued strong post sales customer support 14

21 Revenue opportunity SmartWall focus Market opportunity Deal size % revenue H Targeted # deals New business / upgrade deals to deliver 80% of H2 revenue + 20% recurring revenue Enterprise < 10 Gbps > 10 Gbps Tens of thousands of mid to large corporations & public sector entities Medium enterprise: $50-250k Large enterprise: $200k-1M+ 50% 24 deals 1 deal Current New Service Provider > 10 Gbps Internet Service Providers, Multi-Service Operators (MSOs), Cloud based DDoS mitigation providers NAM & Canada: >350 ISPs, cable and mobile operators UK and W Europe: c.100 ISPs Latam: c. 50 ISPs and cable operators Tier 3 ISPs: $ k Tier 2 ISPs: $500-1M Tier 1 ISPs: $1M+ 50% 6 deals New No deals, develop opps for 2015 Web hosting companies offering managed, dedicated, and co-location based hosting 15 > 10 Gbps Hosting & Data Centre NAM & Canada: >17,000 providers UK and W Europe: > 9,000 providers Latam: > 1,000 providers Hosting providers (1-3 locations): $ k Hosting providers (3+ locations): $500-1M+ Deal size variants: # of sites being protected (and therefore # of hardware appliances required), length of the service and support contract (multi-year), additional services e.g. SecureWatch PLUS 16 deals 4 deals New New

22 1. Introduction 2. Interim Results & Highlights 3. Market Opportunity 4. Corero Value Proposition 5. Near Term Strategy 6. Outlook Appendices

23 Outlook Market Drivers - Significant increase in malicious traffic (DDoS attacks) Impacts all businesses and governments DDoS mitigation (products and services) to increase 66% to over $1.5B in 2018 SmartWall Will drive step change in revenue by opening up new markets Increases addressable market to include Service Providers and large enterprises Addresses market need: - Solves hosting providers and SP pain caused by DDoS attacks scalable, advanced protection, and visibility - Solution for SPs to deliver incremental services / revenue Cutting edge / purpose built platform SmartWall outlook and opportunities in-line with management expectations Continued investment in SmartWall - YoY Well positioned for growth H important to deliver referenceable customers and build pipeline / visibility for

24 1. Introduction 2. Interim Results & Highlights 3. Market Opportunity 4. Corero Value Proposition 5. Near Term Strategy Focus 6. Outlook Appendices

25 A1. H customer order analysis A2. Customer case studies

26 H order intake H order intake H order intake $4.5m (2013: $4.2m) Up 9% 16% New contracts 41% of order intake (H1 2013: 24%) Support and services 43% of order intake (H1 2013: 28%) Corero revenue model New customer sale: - Hardware / perpetual license sale - Support and update services (annual, discount for multi-year) - Additional services e.g. SecureWatch PLUS Existing customer sale: - Support and service renewal (annual) 43% - Upgrade opportunity: additional equipment / more bandwidth (as required) * - Technology refresh (3-5 years from first sale) * 41% New contracts Support and services Upgrades * same as new customer sale A1.1

27 H customer momentum New customer material orders: SmartWall orders: - hosting provider - UK government network provider DDS orders - leading Wall street financial services firm - provider of business analytics and data to the financial services and real estate industries - Spanish bank - on-line ticketing operator - US airport and port operator - international insurance provider Sector analysis 32% 28% 16.% 13% Geographic analysis Financial Services ecommerce Telecom and hosting Utilities & Energy Public sector Other Existing customer material orders (upgrades and support contract renewals): North America leading industrial group one of the world s largest on-line gaming companies UK financial service provider and asset management specialist 41% 53% EMEA Asia Pacific a medical information provider US metropolitan city ROW two US district school groups leading price comparison web site A1.2

28 Customer Testimonial: Hosting Provider PROBLEM: SOLUTION: Proactively planning for security needs is one thing, but this Hosting Company felt the pain of being unprepared for a DDoS attack. Experiencing 24 hours of downtime at one point, impacting their customers and SLA agreements. Initially, they tried to work with their providers to block IPs to fend off the attack, but that was totally ineffective. The company was only able to get out from under the attack by temporarily redirecting its DNS to an outside filtering company. Once the attack ended, the Company vowed to never lose control like that again. The Company wanted an on premises solution to control and manage themselves. The Corero First Line of Defense solution was quickly identified as the best overall solution. Other products and services were not or purpose-built for the DDoS challenge. Multiple solutions were evaluated and none compared to the advanced DDoS protection and comprehensive visibility into the network traffic. In addition to the advanced protection they receive, the Company plans to offer value-added services around security based on the Corero reporting capabilities. Hosting Hosting The most important thing is that Corero protects our customers networks and their data. That is critical to our clients, which makes it critical to us. The second thing is that it helps our security department run more smoothly. We now have we have less unwanted traffic coming in, allowing us cut our bandwidth costs, and we have a faster network with reduced latency. And not only do we save money, but the added security that Corero provides helps us generate revenue through new solution offerings. A2.1

29 Customer Testimonial: Banking Institution PROBLEM: SOLUTION: This High Profile Wall Street firm experienced relentless DDoS attacks. The firewall was taking the brunt of the attack traffic causing overload at 95% utilization, shutting down all network traffic. It would re-boot, and traffic would flow for a few minutes, then grind to a halt again. The attempt at a resolution was to perform reverse lookups to attempt to manually block the attacking source IPs. That was time-consuming, labor intensive and, worst of all, ineffective, as the firm was hit by 10,000 attackers from almost every country in the world. The First Line of Defense solution was deployed, and almost instantly removed the attack traffic from the equation. The power of the Corero device is in its design, ease of use and single purpose to provide the First Line of Defense to proactively stop attacks while moving legitimate traffic without delay. With the firewall and other downstream IT security devices back to functioning as intended, this Wall Street Financial Institution was quickly back to delivering online banking services to their customers. Large enterprise Large enterprise The Corero First Line of Defense solution was installed in 45 minutes, and it was like shutting off a water faucet. Hackers stopped, traffic delays were gone, and the firewall was back down to single digits. System downtime frequently results in lost productivity, lost revenue, lost customers and lost opportunities. If a system is down, the staff cannot work and goals cannot be accomplished. Since we now know and understand this, we know we can call on Corero to prevent downtime. A2.2

30 Thank you