Improved profitability with adjusted EBITDA margin of 13%
Highlights of January-March (Q1)
- Revenue increased by 3% to
EUR 54.8 million (53.4m) - Revenue from corporate security increased by 4% to
EUR 30.4 million (29.4m) - Revenue from consumer security remained at the previous year’s level, and was
EUR 24.4 million (24.0m) - Adjusted EBITDA was
EUR 7.2 million (5.0m), 13.2% of revenue (9.4%) - Earnings per share (EPS) was
EUR 0.01 (EUR -0.01 ) - Cash flow from operating activities before financial items and taxes was
EUR 9.6 million (-0.3m) - After the quarter end
F-Secure withdrew its financial outlook for 2020 due to COVID-19 related market uncertainties
In 2020 there are no changes to accounting principles impacting comparability to previous year.
Figures in this report are unaudited. Figures in brackets refer to the corresponding period in the previous year, unless otherwise stated.
CEO
During the first quarter F-Secure’s revenue increased by 3% to
Despite the COVID-19 pandemic
Managed Detection and Response (MDR) solutions had strong revenue growth in Q1. The quarter was characterized by winning some considerable-sized deals in demanding customer verticals. These customers included for instance a media company, an industrial manufacturer, and a critical infrastructure company. These examples are a good representation of the industry verticals where cyber security is critical and which therefore seek the best-in-class solution to counter targeted attacks and to ensure their capability to respond to incidents 24/7.
Endpoint security business continued slight and steady growth. The renewal performance remained good, which is always a great testimony of product quality meeting the mark. We also saw a positive quarter in the new sales of our comprehensive Endpoint Protection Suite across most regions.
Cyber security consulting revenue grew by 3%, and was negatively impacted by a particularly large project in the Nordics coming to the finalization phase with a reduced scope. Apart from this, the revenue of consulting grew strongly in line with the last quarters of 2019. The COVID-19 pandemic has caused some operational disruption, but we have also managed to create new delivery methods to cope with the situation. However, by the end of the quarter we started to see the market uncertainties clearly impacting new sales and we believe that consulting will be negatively affected due to the pandemic.
The revenue from consumer security remained at the previous year’s level. The resilient operator channel continued its stable performance. During Q1, F-Secure ID PROTECTION achieved an important business milestone when Nifty (JPN) launched the service as the first of our operator partners. Carrying on from the last quarter of 2019, direct business also performed well.
F-Secure’s portfolio is well diversified into different cyber security submarkets, making the company quite resilient against external market shocks. The company has explored different scenarios and will implement potential mitigating actions when necessary. The long-term outlook for F-Secure’s business continues to be attractive, as the cyber security market fundaments have not changed.
Financial performance
EUR m | 1-3/2020 | 1-3/2019 | Change % | 1-12/2019 |
Revenue | 54.8 | 53.4 | 3 % | 217.3 |
Consumer security | 24.4 | 24.0 | 1 % | 94.8 |
Corporate security | 30.4 | 29.4 | 4 % | 122.5 |
Products | 18.6 | 17.8 | 4 % | 72.5 |
Consulting | 11.9 | 11.6 | 3 % | 50.0 |
Cost of revenue | -12.4 | -12.6 | -1 % | -50.5 |
Gross Margin | 42.4 | 40.8 | 4 % | 166.8 |
Other operating income 1) | 0.5 | 0.2 | 169 % | 1.5 |
Operating expenses 1) | -35.7 | -36.0 | -1 % | -145.1 |
Sales & Marketing | -23.7 | -24.1 | -1 % | -99.4 |
Research & Development | -8.9 | -8.7 | 2 % | -33.2 |
Administration | -3.1 | -3.2 | -4 % | -12.4 |
Adjusted EBITDA 2) | 7.2 | 5.0 | 44 % | 23.2 |
of revenue, % | 13.2 % | 9.4 % | 10.7 % | |
Adjustment to operating income | 12.5 | |||
Restructuring | 0.4 | -4.6 | ||
EBITDA | 7.6 | 5.0 | 51 % | 31.1 |
of revenue, % | 13.9 % | 9.4 % | 14.3 % | |
Depreciation & amortization | -3.2 | -3.3 | -4 % | -13.6 |
Impairment | -6.3 | |||
PPA amortization | -0.9 | -1.1 | -21 % | -4.1 |
EBIT | 3.6 | 0.6 | 7.2 | |
of revenue, % | 6.5 % | 1.1 % | 3.3 % | |
Adjusted EBIT 2) | 4.0 | 1.7 | 131 % | 9.6 |
of revenue, % | 7.4 % | 3.3 % | 4.4 % | |
Earnings per share, (EUR) 3) | 0.01 | -0.01 | 0.02 | |
Deferred revenue | 73.7 | 71.4 | 3 % | 73.9 |
Cash flow from operations before financial items and taxes | 9.6 | -0.3 | 19.0 | |
Cash and financial assets at fair value through P&L | 26.3 | 23.4 | 12 % | 25.5 |
ROI, % | 15.9 % | 2.7 % | 7.8 % | |
Equity ratio, % | 49.2 % | 41.3 % | 19 % | 49.0 % |
Gearing, % | 19.5 % | 36.5 % | -47 % | 20.8 % |
Personnel, end of period | 1,688 | 1,680 | 0 % | 1,696 |
- Excluding Items Affecting Comparability (IAC) and depreciation and amortization
- Adjustments are material items outside normal course of business associated with acquisitions, integration, restructuring, gains or losses from sales of businesses and other items affecting comparability. Reconciliation and a breakdown of adjusted costs is in note 5 of the Table Section of this report.
- Based on the weighted average number of outstanding shares during the period 157,855,454 (1-3/2020).
Events after period-end
Financing –
On 24 April F-Secure withdrew
Outlook for 2020 withdrawn due to COVID-19 related market uncertainties
F-Secure’s portfolio is well diversified into different cybersecurity sub-markets making the company’s vulnerability to external market shocks limited. Until now F-Secure’s software product businesses to both corporates and consumers have not been adversely impacted by the pandemic. The market uncertainty is not expected to have a significant effect on contract renewals. However, during the rest of the year
The long-term outlook of all F-Secure’s business areas continues to be attractive as the cybersecurity market fundaments have not changed.
In order to prepare for the uncertainties in the future,
For reference, in
- Organic revenue growth in corporate security is expected to continue in 2020 although slower than in 2019. The negative impact of terminated non-strategic products in growth rate is estimated to be a few percentage points in 2020.
- Revenue from consumer security is expected to be approximately at the same level as in 2019.
- Adjusted EBITDA is expected to clearly increase compared to 2019.
Webcast
F-Secure’s CEO
The presentation material and the webcast recording will be available on the company’s website
Additional information
This is a summary of F-Secure’s Interim Report 1 January -
Annual General Meeting
The Annual General Meeting is scheduled for
More information is available at https://www.f-secure.com/en/investors/governance.
Financial calendar
During the year 2020,
- Half year financial report January-
June 2020 ,July 16, 2020 - Interim report January-
September 2020 ,October 29, 2020
Contact information
Eriikka Söderström, CFO,
+358 40 6691844
+358 40 8405450
investor-relations@f-secure.com
Attachment
- F-Secure_Q1-2020_ENG_Final
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