Invoicing Grows 43 Percent in Fourth Quarter; Annual Revenue Grows 35 Percent Rotterdam (September 15, 2003) - SurfControl plc (London:SRF, Nasdaq Europe:SRFC), the world's number one Web and e-mail filtering company, reported record results for the year ending June 30, 2003, and fourth quarter invoicing that beat the same quarter last year by 43 percent.
Highlights of the announcement included:
- Record fourth quarter invoicing of $30 million, or 43 percent year on year growth
- $73.2 million annual revenues in line with 35 percent year on year growth expectations
- EBITDA up from $1.7 million to $11 million
- Record levels of operating cash flow at $8.2 million in the fourth quarter and closing cash of $61.7 million
- Continued growth in new customers with more than 1,700 signed in the final quarter.
"Our record-breaking year-end results are a testament to the continued strong demand for filtering tools that enable companies to stop unwanted content," said SurfControl CEO Steve Purdham. "These results are an outstanding achievement and reflect the strength of the company, its brand, its customers and its people, as well as the investment we've made in SurfControl's early years to lay a solid foundation for future growth."
Purdham said the record levels of turnover, profit and cash will help fund expansion, corporate investment and acquisitions.
Revenues for the quarter increased 30 percent to $20.4 million compared to $15.6 million for the fourth quarter last year. Revenues for the year ended June 30, 2003, increased 35 percent to $73.2 million from $54.2 million in the prior year. License revenue represented 27 percent of total revenue in the quarter and for the year as a whole.
U.S. revenues represented 70 percent of overall revenues in the fourth quarter and 72 percent for the year ended June 30, 2003. The U.S. revenues were down four percentage points from the fourth quarter of last year as a result of higher growth rates in the UK and globally.
EBITDA for the quarter increased 121 percent to $3.2 million compared to $1.4 million for the fourth quarter last year. EBITDA for the year ended June 30, 2003, increased 547 percent to $11 million from $1.7 million in the prior year. This significant increase in profitability, as measured by EBITDA, is a direct consequence of the achievement of cost efficiencies, as revenues continue to grow at a higher rate than costs. Profit before tax for the quarter was $2.7 million compared to a fourth quarter 2002 loss of $15.1 million and $8.9 million for the year ended June 30, 2003, compared to a loss of $69.4 million in 2002.
Overall invoicing in the quarter was $30 million, representing a 43 percent annual increase over the same period last year. Invoicing for the year ended June 30, 2003, was $92.1 million representing a 41 percent annual increase. A portion of these increases in invoicing is due to a higher proportion of longer-term contracts. The average U.S. Corporate invoice value increased to $7,200 in the quarter and the average U.S. Education invoice value increased to $5,900, reflecting both the increase in average contract length as well as increased sales of bundled products.
The record fourth quarter in invoicing drove a significant increase in deferred revenue to $54.3 million, representing a 60 percent year on year increase over the fourth quarter 2002 deferred revenue of $33.9 million. Also reflective of the record invoicing, the Company continued to maintain the trend of generating significant cash from operations with $8.2 million generated during the quarter compared to $4.7 million in the fourth quarter of 2002, and $24.1 million for the year ended compared to $11.7 million in 2002. Total cash balances as of June 30, 2003, were $61.7 million.
During the quarter, the Company added 1,753 new customers including two new OEM contracts. SurfControl continued to build its customer base globally. New additions in the latest quarter were Zippo, Reebok, CSC, Dyson, Barnes & Noble, Motorola, Sodexho, John Fairfax and the Australian Taxation Department. Additional customers were won through resellers, including the U.S. Marine Corp, Legg Mason, Arizona Department of Transport, Check Point Software, Hertz Rental Car and the Indianapolis Motor Speedway.
The indirect channel contribution in the quarter increased to 53 percent, compared to 36 percent for the same quarter of last year. For the first time, channel sales exceeded management's target of 50 percent. Customer renewal rates vary across sales channels, customer segments, product life cycles, and geographic regions. During the quarter renewal rates across these various areas, calculated on a customer count basis, ranged from 70 to 75 percent.
In line with MSN's increasing use of in-house services, MSN decided to terminate the agreement with SurfControl for providing a categorization service. The amicable termination will take effect at the end of October. Although disappointing, due to the company's very conservative recognition of the contract and its strategy of not relying on any single large contract, the loss of this business is not expected to have a material negative effect on the financial performance of the company.
SurfControl also announced that Greg Lock has accepted an invitation to take over as Non Executive Chairman of the Company. Rob Barrow, after six years as Chief Executive and three years as Chairman of SurfControl, is retiring. Lock has served on SurfControl's Board since 2000 and is a former Global General Manager, Industrial Sector, for IBM. At IBM, he was responsible for IBM's business with some of the world's largest industrial enterprises. This experience and his knowledge of SurfControl make him an ideal person to help guide the company through the next phase of growth.
In looking toward the future, Purdham noted that people traditionally have looked at Web filtering or e-mail filtering as separate markets. However, this approach is evolving, with organizations realizing that the management issue is stopping unwanted content in a variety of electronic forms.
There will continue to be increasing focus on the overall Content Security market, which is set to grow at a CAGR of 31 percent and estimates say may be worth almost $2 billion by 2007. Due to the significant investment in filtering research and development, SurfControl is well positioned to meet the demand for filtering solutions rather than simple point products.
Caution concerning forward-looking statements Any statements contained in this announcement that are not historical facts are forward-looking statements. Although the Company believes that its plans, intentions and expectations reflected in such forward-looking statements are reasonable, a number of important factors could cause SurfControl's actual future results to differ materially from those expressed in any such forward-looking statements. The forward-looking statements herein speak only as of today. SurfControl expressly disclaims any obligation or undertaking to update or revise such informat
Contact
For futher information:
Irene Management Consultancy b.v.
Carroll Florentinus
Burgemeester Stramanweg 63
1191 CX Ouderkerk aan de Amstel
Tel. +31 (0) 20-4961500 of +31 (0) 6-53225853
E-mail: carrollf@worldonline.nl
Henriette Oeschger
Marketing Manager Benelux & France, SurfControl
Tel: +31 (0) 10 402 00 70
henriette.oeschger@surfcontrol.com