Endace, the network security/packet capture/analysis company, has faced a rapid downturn over recent months, having impressed with strong growth of 37% just as recently as H111 (see Endace’s enviable growth).
Endace issued a surprise year-end profits warning in March (see here). And the year end results for the period to 31 March show operating profits down 11.4% to $2.2m, pushing the group margin down to 5.3% vs. 6.4%. Revenue meanwhile, was up 7.3% to $41.2m.
Reduced spending in the second half from UK Government was blamed as the main reason for the slower growth, causing FY revenues in EMEA to decline 6% to $11.9m. Endace’s other two regions North America and Asia Pacific grew 13.9% and 12% respectively. However APAC has been growing at the expense of profitability – this region made a $572k loss vs. a $1.5m profit last year.
This unexpected downturn forced Endace to appoint Deutsche Bank in March to help with a strategic review. This has so far validated its decision to expand in North America. This seems sensible as North America was by far the best performing region in terms of both revenue and profit. Endace NA now has a margin of 8.7% vs. 2% last year.
While things are now far less settled for Endace than they had been, there are still some positives. The company remains in a hot technology space, with cyber security and real-time network monitoring high on the priority list for many enterprises. But to return to stability Endace needs to execute profitable growth, in NA and APAC where near term opportunities are most likely.