Corero Network Security : Annual Report and Accounts for the year ended 31 December 2019

Contents

Overview

1. Highlights
2. At a Glance

1. The Need for DDoS Protection

Strategic Report

1. Market Overview

1. Business Model

1. Our Strategy

1. Chief Executive's Strategic Update

1. Key Performance Indicators

1. Financial Review

1. Principal Risks and Uncertainties

1. Risk Management
2. Section 172 Statement

1. Responsible Business

Governance

28 Board of Directors

1. Chairman's Governance Introduction

1. QCA Code Compliance

1. Corporate Governance Report

1. Board Performance and Remuneration Policy
2. Committee Reports

1. Directors' Report

1. Statement of Directors' Responsibilities

Financial Statements

44 Independent Auditor's Report

1. Consolidated Statement of Comprehensive Income
2. Consolidated Statement of Financial Position
3. Company Statement of Financial Position
4. Consolidated Statement of Cash Flows
5. Consolidated Statement of Changes in Equity
6. Company Statement of Changes in Equity
7. Notes to the Financial Statements

Corporate Directory

85 Corporate Directory

2019 HIGHLIGHTS

increase over the prior yearincrease over the prior year

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1. comprises maintenance, support services and as-a-service recognised revenue
2. comprises the operating loss less unrealised foreign exchange differences on an intercompany loan, depreciation excluding DDPaaS assets depreciation which is charged to cost of sales, amortisation and impairment of goodwill. The Directors consider EBITDA to be a better measure of profitability as it excludes non-cash items

• Significant increase in DDoS protection as-a-service ('DDPaaS') recurring revenue orders.
• • 32% of new business orders in 2019 (2018: 7%).
• 18 new Corero customers added in 2019 (12 in H2 2019).
• Six new Juniper Networks, Inc. ('Juniper', NYSE: JNPR) customer orders in 2019 (5 in H2 2019).
• Follow-onorders from existing customers $5.7 million (2018: $4.3 million).
• Revenue from partnership with GTT Communications increased by more than 100%.

• Continued high levels of customer satisfaction.
• • Services renewal rate remained strong at 98.8% (2018: 98.5%).
• Sales team headcount doubled since the start of 2019 under leadership of new VP Worldwide Sales recruited in June 2019.
• New partnership secured with Neustar, Inc. ('Neustar'), a leading cloud DDoS service provider, to deliver hybrid DDoS protection.
• • Facilitated Corero's largest DDPaaS order to date in Q4 2019.

Our culture and values

Successful companies have a strong culture and deeply rooted shared values. In common

with most intellectual property businesses, at Corero, we know that the skills, experiences and passion of our employees are genuinely what make our products and services market leading.

With a growing business, the level of team diversity and multi-site operations, we have recognised the importance of our culture and values. Corero's agreed values, which have been defined in conjunction with our employees, are:

Integrity

Customer delight

Innovation

Open and honest communications

Empowerment

Corero has invested in an online tool, called Kudos, which is used to acknowledge, reinforce and measure the values-supporting behaviours and actions taken by Corero team members.

Proud of our service

Corero's Security Operation Centre ('SOC') comprises a team of highly experienced security analysts whose role it is to assist our customers IT and security teams mitigate the growing number of increasingly sophisticated DDoS attacks. Our service and customer support offering is an important competitive differentiator. Customers value the service levels and our team regularly receives glowing feedback from our customers. This customer satisfaction is validated by our market leading service and support contract renewals rate

of 98.8% for the year ended 31 December 2019.

Over the past few years Corero's SOC has proven to be a trustworthy partner, always willing to go the extra mile to provide excellent service and inspire confidence in our internal teams with their outstanding technical know-how.

Corero SaaS customer

03

Who we are

Corero has a market leading SmartWall® Threat Defense System solution portfolio endorsed by over 120 customers, many of whom are providers using it to protect hundreds, or thousands, of their customers. The SmartWall family of products utilises innovative, patented, technology to automatically and surgically remove DDoS attack traffic, while allowing good traffic to flow uninterrupted.

Corero solutions are amongst the highest performing in the industry, while providing the most automated DDoS protection, at unprecedented scale, with the lowest total cost of ownership to the customer. We protect against DDoS attacks in seconds, or less, rather than the minutes or tens of minutes taken by legacy solutions.

Our products are recommended by NSS Labs (a leading independent product testing laboratory) and selected by Juniper as their DDoS protection solution.

The goal of the Corero SmartWall real- time DDoS protection solution is to protect business continuity, service availability, revenues and brand reputations from harmful DDoS attacks. We do this for enterprises, service providers, cloud hosting providers, co-location providers and edge providers.

OVERVIEW

The cost of global cyber losses is predicted to reach $6 trillion annually by 2021. Cyber security spending will exceed $1 trillion from 2017 to 2021.

Safeguarding Value in the Era of Cyber Risk, Aon, October 2019

Strategic Report

Where we are

Corero's key operational centres are in Marlborough, Massachusetts in the USA and Edinburgh in the UK, with the Company's registered office in Uxbridge in the UK.

Who do we partner with

Neustar - in September 2019, Corero launched a hybrid DDoS protection solution combining on-premises SmartWall Threat Defense System ('TDS') with the SmartWall Threat Defense Cloud ('TDC') service, powered by Neustar, which provides protection against the largest attacks which can saturate an organisation's internet connections and overwhelm legitimate traffic.

Juniper - Corero has a global partnership agreementwithJuniper, enabling

them to sell Corero's SmartWall Threat Defense Director ('TDD') software

product in conjunction with Juniper's MX Series routers. Juniper and Corero have developed this integrated solution for large-scalenetwork-edge DDoS defence that leverages powerful filtering capabilities in the latest generation of Juniper's MX Series routers.

GTT Communications, Inc. ('GTT') - as one of the top five Tier 1 providers in the world with over 600 points of presence ('POP's'). GTT customers can purchase IP transit with DDoS protection provided by Corero's SmartWall TDS's which are deployed within the GTT network.

Governance

Financial Statements

Juniper Networks MX Series

Corporate Directory