Sophos Group Regulatory News (SOPH)

8 February 2017

This announcement contains inside information within the purposes of article 7 of the EU Market Abuse Regulation 596/2014

Sophos Group plc

("Sophos", or the "Company")

Acquisition of Invincea

Sophos (LSE: SOPH), a leading provider of cloud-enabled enduser and network security solutions, today announces that is has entered into a definitive agreement to acquire the commercial software products business of Invincea, Inc., ("Invincea") a leading developer of patented advanced next-generation malware protection, from its existing shareholders for $100 million plus a $20 million earn-out (the "Acquisition").

Headquartered in Fairfax, Virginia, with approximately 100 employees, Invincea has been consistently ranked as among the best performing machine learning, signatureless next-generation endpoint technologies in third-party testing, rated highly both for high detection and low false-positive rates. Invincea has a strong presence in the US, particularly in the government, healthcare and financial services sectors. The Invincea endpoint security portfolio prevents, detects and remediates zero-day and sophisticated attacks, and combines neural-network based machine learning and behavioral monitoring to enhance detection through artificial intelligence and stop evasive malware before damage occurs.

The Acquisition of Invincea extends and consolidates Sophos' lead in the rapidly growing next-generation endpoint market, which many industry analysts expect to materially enhance both the size and growth rate of the overall endpoint market. Sophos has already seen significant success with Intercept X, an industry-leading next-generation endpoint solution, built on a combination of existing Sophos technology and technology integrated through the acquisition of SurfRight in December 2015. Using the same approach, Sophos expects to rapidly integrate Invincea into the Sophos Central endpoint product line, with the first Sophos products incorporating Invincea's machine learning technology expected to be available and sold via our global channel of over 26,000 partners in 2017, bringing immediate value to customers. Invincea, which recorded billings of $13.4 million in the twelve months to 31 March 2016, represents a significant growth opportunity for Sophos.

Under the terms of the agreement Sophos will pay $100 million in cash immediately on closing (subject to adjustment for net working capital and other customary adjustments) plus up to $20 million in contingent consideration pursuant to a billings-based earn-out linked to growth achieved during the first year of ownership. Invincea Labs, a division of Invincea that has been separately managed and operated since 2010, will be demerged prior to the Acquisition and does not form part of this transaction. The Acquisition will be funded through cash resources and an extension of existing credit facilities.

Subject to regulatory approval, Sophos expects to complete the Acquisition around the end of the current fiscal year. Sophos will retain the company's office in Fairfax. Invincea CEO Anup Ghosh will join Sophos as an executive member of the senior management team.

Sophos Chief Executive Officer, Kris Hagerman, commented:

"By adding Invincea to our portfolio, Sophos is executing on its vision to assemble the most powerful technologies to provide the very best, cutting-edge defenses for our customers. Invincea is leading the market in machine learning-based threat detection with the combination of superior detection rates and minimal false positives. Invincea will strengthen Sophos' leading next-gen endpoint protection with complementary predictive defenses that we believe will become increasingly important to the future of endpoint protection and allow us to take full advantage of this significant new growth opportunity. We are proud to welcome the Invincea team to Sophos and look forward to introducing the benefits of this advanced technology to our customers and partners worldwide." 

Additional information

The value of the gross assets of Invincea as at 31 March 2016 was $15.7 million. In the twelve months to 31 March 2016, Invincea recorded billings of $13.4 million, revenue of $9.8 million and a loss before tax of $11.8 million. The acquisition is expected to be broadly neutral to Cash EBITDA in its first full year of ownership and additive thereafter.

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No.596/2014 ("MAR"). Upon the publication of this announcement via a Regulatory Information Service, this inside information is now considered to be in the public domain.

Forward-looking statements:

This announcement includes statements that are, or may be deemed to be, "forward-looking statements". By their nature, forward-looking statements involve risk and uncertainty since they relate to future events and circumstances. Actual results may, and often do, differ materially from any forward-looking statements. Any forward-looking statements in this announcement reflect management's view with respect to future events as at the date of this announcement. Save as required by law or by the Listing Rules of the UK Listing Authority, the Company undertakes no obligation to publicly revise any forward-looking statements in this announcement following any change in its expectations or to reflect events or circumstances after the date of this announcement.

About Sophos:

More than 100 million users in 150 countries rely on Sophos' complete security solutions as the best protection against complex threats and data loss. Simple to deploy, manage and use, Sophos' award-winning encryption, endpoint security, Web, email, mobile and network security solutions are backed by SophosLabs - a global network of threat intelligence centers. Sophos is headquartered in Oxford, UK, and is publicly traded on the London Stock Exchange under the symbol "SOPH." More information is available at www.sophos.com.

About Invincea:

Founded in 2009, Invincea has built one of the strongest and most effective next-generation endpoint technologies on the market, with advanced neural network based machine learning algorithms that protect endpoints without affecting performance. The existing stockholders of Invincea include: Grotech Ventures, NAV, Harbert Management Corporation, Aeris Capital AG, ORIX Growth Capital, as well as other individuals. www.invincea.com.

Enquiries:

Sophos Group plc

+44 (0) 1235 559 933

Kris Hagerman, Chief Executive Officer

Nick Bray, Chief Financial Officer

Derek Brown, VP Investor Relations

Brunswick Group

+44 (0) 20 7404 5959

Conference call and webcast

Sophos management will host a conference call and audio-webcast, for registered participants, at 09:30 (GMT) today. A replay of the audio-webcast will be also accessible via the Sophos investor website following the presentation.

To register for the webcast and access the presentation materials please visit:

https://investors.sophos.com/events-and-presentations

Conference calls dial in details:

Telephone:

+44 (0) 20 3427 1919 (UK)

+1 646 254 3366 (US)

Conference call confirmation code: 3757905

Participants are advised to visit the website at least 15 minutes prior to the commencement of the call in order to register and, for those accessing the webcast, in order to download and install any audio software that may be required.

NB: Conference call participants will be able to ask questions during the Q&A session, but those on the webcast will be in a listen-only mode.