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Corero increases fund-raising target to meet demand

Published: 15:18 06 Apr 2017 BST

Cyber security
The SmartWall user base is increasing rapidly

Corero Network Security PLC (LON:CNS) has started 2017 well, with its recently introduced “as-a-service” sales model opening up new revenue opportunities for the cyber-security specialist.

Traditionally the company has operated on “perpetual licence model”, where customers pay an up-front fee to renew the licence (and maybe upgrade the associated network kit).

As in the software world, where “software-as-a-service” is becoming the norm, Corero is finding that a number of customers (and potential customers) would prefer to use a pay as you go model, so it has introduced an “as-a-service” option.

Switching to this model usually leads to an initial dip in revenues, because the company forgoes the up-front licence fee and instead receives the revenue over a longer period.

Experience indicates, however, that the contract value and recurring revenues increase over the life of the customer relationship.

In its full-year results for 2016, which largely rubber-stamped the numbers in the trading update released in February, the group revealed the average perpetual licence order in 2016 was in line with the previous year, and was in excess of US$200,000, whereas the average as-a-service year-one contract value was US$40,000.

Group revenue in 2016 was up 5% to US$8.8mln from US$8.3mln in 2015, with the flagship product SmartWall seeing a 62% increase in revenue on the back of a sharp rise in customers from 39 at the end of 2015 to 64 at the end of 2016.

The underlying loss (EBITDA) narrowed to US$5.1mln from US$6.4mln.

The group ended the year with net cash of US$2.9mln, up from US$2.7mln the year before.

Last week the company announced plans to raise £5mln. Today it was announced that the amount to be raised had been increased to £5.6mln, due to the level of demand from existing shareholders.

Chairman Jens Montanana, who had indicated a willingness to subscribe for £4.2mln of new shares, has pared back the amount he will be pumping into the company to £3.4mln or thereabouts, lifting his stake in the company to around 44%.

As previously indicated, the shares will be placed at 5p.

"With the DDoS [distributed denial of service] threat landscape continuing to move in our favour, independent third party validation from one of the world's leading product test laboratories, and a growing SmartWall instal base, the board is increasingly confident in Corero's ability to become the leading player in the real-time DDoS mitigation market,” said Ashley Stephenson, the chief executive officer of Corero.

"Corero has continued to invest in its technology in the period, and with the new as-a-service sales model and focus on go-to-market partnerships such as the alliance with Juniper that expand our addressable market, is now focused on delivering revenue growth,” he added.

Shares in Corero fell 0.25p to 5p on confirmation of the share placing at 5p.

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