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Corero off to fast start in 2017 with contract win

Corero is convinced it has the best product out there; it is simply a matter of getting its foot in the door at enough companies to achieve scale

Corero Network Security
Corero's strategy is to work with network vendors to make DDoS mitigation an integral component of any well-engineered Internet facing network design.

Corero Network Security (LON:CNS) has got off to a fast start in 2017, bagging a US$1mln order from a leading cloud-computing company.

A major chunk of the revenue from the contract, which was won following a proof of concept trial, will be recognised in the current year.

The company also revealed it has entered into a technology alliance partnership with Juniper Networks, a US-based multi-national company that develops and markets networking and security products.

This relationship enables the combination of Corero's SmartWall solution with Juniper Networks MX Series Router and QFX Series switches to create highly scalable defence systems designed to stave off distributed denial of service (DDoS) attacks that can bring down a company’s network and web sites.

This relationship will enable Corero to expand its market reach by leveraging Juniper Networks global footprint.

The cyber-defence specialist said it had a strong finish to 2016, with a record order intake for its flagship SmartWall Threat Defense System in the final quarter.

Corero said 15 new customers were added, including five “as a service” customers. The main difference in revenue terms between the traditional software licensing model and software-as-a-service (SaaS) is that under the former, the software gets the licensing fee up-front, whereas under SaaS it receives subscriptions revenues on a monthly basis.

As a result, the transition to an SaaS model usually involves an initial hit to revenues but the accepted thinking in the industry is that SaaS customers are more “sticky” – i.e. less likely to cancel.

Revenue for the whole of 2016 is expected to be in the region of US$8.8mln when all the numbers are totted up, versus US$8.3mln the year before.

SmartWall revenue was up 62% over the prior year while, as expected, legacy product revenues declined.

The company conceded full-year revenue was lower than it had been expecting at the start of the year, but it had already alerted the market to this in September.

Corero expects to post a loss before interest, depreciation and amortisation of around US$5.1mln for 2016, representing an improvement on 2015’s loss of US$6.4mln, and better than the market had been expecting.

Net cash at the end of 2016 was US$2.9mln, up from US$2.7mln the year before.

In order to get to the position of being cash flow positive, the company will require further growth financing support in the first half of 2017 and said it is exploring both equity and loan financing.

The company's major shareholder is supportive of this, Corero said.

"Corero enters 2017 well-positioned to be the challenger in the fast growing DDoS mitigation market with SmartWall solution validation from over 60 customers and technology validation from NSS Labs. Our goal is to grow faster than the market by taking share from others. Head-to-head trials are proving we are the number one solution for real-time DDoS mitigation,” said Ashley Stephenson, chief executive officer.

"We have strengthened our sales leadership with the recent appointment of Andrew Lloyd as President and Executive Vice President Sales. We have also expanded our addressable market via the recently introduced as-a-service purchase model and are encouraged by the potential for strategic go-to-market partnerships such as the alliance with Juniper. This gives us confidence Corero will deliver strong revenue growth in 2017,” the chief executive said.

"The 2017 financial year is off to a strong start with this major contract win, which demonstrates the significant opportunity for Corero in the Cloud computing market. We expect an increasing number of corporations will see the value of investing in DDoS protection to protect their revenue streams and defend their brand reputations," Stephenson said.

Quick facts: Corero Network Security PLC


Price: 10.61 GBX

Market Cap: £52.5 m

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