Exclusive Networks reports growth in H1 despite slowing cybersecurity market

Sales hit a record high at €2.3bn, up 20 per cent year-on-year

Cybersecurity VAD Exclusive Networks has recorded a positive first half of 2023 with growth in most areas of the business and a "record high" gross sales clocked at €2.3bn (£1.99bn).

Year-on-year, gross sales grew by 20 per cent on a reported basis and 22 per cent at constant currency.

Most of this growth (17 per cent) was driven by business with existing vendors in their current geographies.

The remainder of the growth was due to vendor expansion (3 per cent). Vendor expansion is a combination of vendors entering into new geographies (1 per cent) and new vendor relationships (2 per cent).

The distributor reported improvements in vendor retention rates in H1 2023, supported by increasing demand for vendors' solutions and the continued engagement of channel partners.

Net vendor retention rate on a rolling 12-month basis at H1 2023 was up 131 per cent (vs 122 per cent in H1 2022) with net reseller retention rate on a rolling 12-month basis at H1 2023 at 130 per cent (vs 122 per cent in H1 2022).

Net margin was €222m (£191.63m) in the first half of 2023, an increase of 18 per cent year-on-year, reflecting a mix of geography and deal size.

Operating expenses increased 14 per cent to €138m (£119.12m), aligned with tight control on new hires and overhead cost structure.

The company said costs are evolving at a slower pace than the top line, improving its operating leverage.

Adjusted EBIT rose to €84m (£72.51m), up 26 per cent year-over-year. Adjusted EBIT margin over Net margin was up 240bps year-on-year to 37.8 per cent as the group benefits from operating leverage, driven at regional level.

In Q2 alone, gross sales were €1.15bn (£0.99bn), an increase of 12 per cent year-over-year on a reported basis, 15 per cent at constant currency.

But compared to Q1 2023, when gross sales clocked at €1.18bn (£1.02bn), Exclusive Networks saw a slight dip in sales this quarter.

"I am pleased to announce an excellent performance in the first half of 2023, with strong margin progression and sales growth ahead of the cybersecurity market," explained Jesper Trolle, CEO at Exclusive Networks.

"Our momentum reflects the differentiation, resilience, and operational gearing of our model, combined with a laser focus on efficiency and cost control.

"As a result, we have moved closer to our long-term target of adjusted EBIT margins of c.40% with high cash generation. In addition, we continue to grow strongly in the US, a significant market with exciting long-term growth potential."

Trolle acknowledged how after a surge in demand for cyber technology in 2022 - reflecting the shift to hybrid working, increasing use of cloud technology and threats linked to the war in Ukraine - the company is now seeing sales activity return to a "normalised" long-term trend of double-digit growth.

"Notwithstanding a lengthening in sales cycles and continued macro uncertainty, our market-leading portfolio of security vendors, proven ability to grow our addressable market and strong balance sheet support our confidence in achieving our 2023 guidance.

He concluded: "On the back of the solid H1 2023 performance, we now expect our Adj. EBIT to reach the upper end of the range."