ARR driven cyber growth
Corero is a cyber software business that is overlooked by the market, in our view. Huge progress has been made over the last three years bringing the business to operational maturity. The company is predominantly now a recurring revenue business, but this does not seem to be recognised in the current valuation. Corero's technology has been validated with major market leading customers and go-to-market partners.Group revenues have grown c20% compound between 2018-22A, enabling the business to fully recover its total cost base and report positive EBITDA since FY21A. Corero has repaid all outstanding debt and is now unleveraged. The recent trading update for H1E has confirmed strong trading with revenues growing 20% YoY to $10.6m and net cash on the balance sheet of $6.2m.
Back in 2019 the stock was trading around 5x EV/sales. On just 2x FY22A EV/sales the shares now, the shares look materially undervalued. We will be initiating coverage with forecasts in due course.
Corero Network Security is a provider of Distributed Denial of Service (DDoS) defense solutions for Service Providers, Hosting Providers and the On-line Enterprise. Co. develops, markets and sells network security products and services to provide protection from DDoS attacks. Co. sells the SmartWall technology in the form of either an appliance sale and perpetual software license plus annual SecureWatch services, or as-a-service which enables the customer to utilize the technology on a subscription or revenue share basis. Co.'s SecureWatch services include: updates delivered to its appliances in customer networks; and monitoring and support services such as DDoS attack mitigation services.
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