F-Secure Corporation, Financial Statement Release 2019, 12 February 2020 at 08.00 EET

F-Secure Financial Statement Release 1 January - 31 December 2019

Corporate security revenue grew 10% organically in fourth quarter


Highlights of October-December (Q4)

  • Revenue increased by 4% to EUR 56.1 million (53.7m)  
  • Revenue from corporate security increased by 10% to EUR 32.7 million (29.8m)
  • Revenue from consumer security decreased by 2% to EUR 23.4 million (24.0m)
  • Deferred revenue increased by 1% to EUR 73.9 million (72.9m)
  • Adjusted EBITDA was EUR 6.6 million (4.9m), 11.8% of revenue (9.0%)1)
  • EBIT was EUR 0.8 million (1.4m), 1,3% of revenue (2.6%)
  • EBIT includes EUR 3.4 million positive impact related to revaluation of MWR InfoSecurity contingent consideration, and EUR 4.6 million costs from restructuring. Final contingent consideration to be paid in the first quarter of 2020 is EUR 3.7 million.
  • Earnings per share (EPS) was EUR 0.00 (EUR 0.00)
  • Cash flow from operating activities before financial items and taxes was EUR 8.7 million (10.5m)1)   

Highlights of January-December

  • Revenue increased by 14% to EUR 217.3 million (190.7m)
  • Revenue from corporate security increased by 28% to EUR 122.5 million (95.9m)
  • Revenue from consumer security remained at previous year’s level and was EUR 94.8 million (94.9m)
  • Deferred revenue increased by 1% to EUR 73.9 million (72.9m)
  • Adjusted EBITDA was EUR 23.2 million (17.4m), 10.7% of revenue (9.1%)1)
  • EBIT was EUR 7.2 million (4.5m), 3.3% of revenue (2.4%)
  • EBIT includes EUR 6.5 million positive net impact from revaluation of MWR InfoSecurity acquisition related items, and EUR 4.6 million costs from restructuring. Final contingent consideration to be paid in the first quarter of 2020 is EUR 3.7 million.
  • Earnings per share (EPS) was EUR 0.02 (EUR 0.01)
  • Cash flow from operating activities before financial items and taxes was EUR 19.0 million (13.8m)1)

1)F-Secure has adopted the new Leases standard (IFRS 16) on 1 January 2019 using the modified approach. Comparative information has not been restated. The impact of IFRS 16 on adjusted EBITDA is EUR +1.7 million for the fourth quarter and EUR +6.6 million for January-December. Impact on operative cash flow is EUR +1.5 million for the fourth quarter and EUR 6.0 million for January-December.

Figures in this report are unaudited. Figures in brackets refer to the corresponding period in the previous year, unless otherwise stated.

 

Outlook

The company's outlook for 2020 is:

  • 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.

This outlook disclosed on the 12 December 2019 replaced previously disclosed forecasts and forward looking statements.

 

CEO SAMU KONTTINEN

In the final quarter of 2019 F-Secure’s revenue increased by 4% to EUR 56.1 million, with corporate security growing by 10%. Revenue from consumer security remained at the previous year’s level. In terms of profitability, the quarter was in line with our expectations with adjusted EBITDA margin of 12%.

In Managed Detection and Response (MDR) solutions we continued to win new deals. Examples of these customers include a leading European logistics company, a large Nordic financial institution and a Nordic critical infrastructure company. In October F-Secure achieved the highest score among vendors in the MITRE ATT&CK evaluation based on a scoring code created by Forrester1). This demonstrates F-Secure’s exceptional capability to detect advanced threats. Overall, Managed Detection and Response is one of our top focus areas, while long sales cycles and varying deal sizes can cause significant quarterly variations in new sales.

F-Secure’s endpoint security business continued slight and steady growth driven by good performance in renewals. Our cloud-native EDR and EPP combination is a good fit for SME-sized customers and for our partners offering them services. In October, F-Secure’s industry-leading ability to cooperate with the partner network was awarded as the Channel Sales Program of the Year by SiriusDecisions of Forrester Research. Competitive rivalry in this market has intensified as several non-traditional endpoint security companies also now offer endpoint solutions.

Cyber security consulting grew strongly, while we continued to see variation in country performances. As an example of growing locations, Singapore had yet another exceptional quarter as customers were successfully served by cross-country resourcing. This demonstrates our increasing global reach that enables execution of large projects worldwide and, thus, we can tap into full potential of the market growth.

Revenue from consumer security remained at the previous year’s level. In Q4, the positive sentiment around ID PROTECTION started to materialize as we closed first deals with operator partners in Asia, Europe and US. Overall the operator channel delivered according to our expectations. Direct business had the strongest quarter of the year which is a good starting point for 2020.

After completion of restructuring and MWR InfoSecurity integration in December, F-Secure can now focus on better serving different customer segments in versatile business areas. This sets us well for successful 2020.

 

1)The Forrester MITRE ATT&CK Evaluation Guide, An Objective Analysis Of Round 1 And How To Interpret The Results by Josh Zelonis, with Stephanie Balaouras, Joseph Blankenship, Benjamin Corey, Peggy Dostie, and Diane Lynch, November 20, 2019


 

Financial performance

EUR m 10-12/2019 10-12/2018 Change % 1-12/2019 1-12/2018 Change %
Revenue 56.1 53.7 4 % 217.3 190.7 14 %
  Consumer security 23.4 24.0 -2 % 94.8 94.9 0 %
  Corporate security 32.7 29.8 10 % 122.5 95.9 28 %
Products 18.3 17.4 5 % 72.5 63.8 14 %
Consulting 14.4 12.4 16 % 50.0 32.0 56 %
Cost of revenue -12.9 -12.5 3 % -50.5 -39.4 28 %
Gross Margin 43.2 41.3 5 % 166.8 151.4 10 %
Other operating income 1) 0.4 0.6 -22 % 1.5 2.3 -31 %
Operating expenses 1) -37.0 -37.0 0 % -145.1 -136.2 7 %
  Sales & Marketing -25.5 -24.9 2 % -99.4 -90.7 10 %
  Research & Development -8.7 -9.0 -4 % -33.2 -33.6 -1 %
  Administration -2.9 -3.0 -4 % -12.4 -11.9 4 %
Adjusted EBITDA 2) 6.64) 4.9 36 % 23.24) 17.4 34 %
of revenue, % 11.8 % 9.0 %   10.7 % 9.1 %  
Adjustment to operating income 3.4     12.5    
Restructuring -4.6     -4.6    
M&A expenses   -0.3     -3.6  
EBITDA 5.44) 4.5 19 % 31.14) 13.8 126 %
of revenue, % 9.7 % 8.5 %   14.3 % 7.2 %  
Depreciation & amortization -3.54) -2.0 74 % -13.64) -6.8 96 %
Impairment -0.3     -6.3    
PPA amortization -0.9 -1.2 -22 % -4.1 -2.5 63 %
EBIT 0.84) 1.4 -46 % 7.24) 4.5 58 %
of revenue, % 1.3 % 2.6 %   3.3 % 2.4 %  
             
Adjusted EBIT 2) 3.14) 2.8 10 % 9.64) 10.6 -10 %
of revenue, % 5.6 % 5.3 %   4.4 % 5.6 %  
             
Earnings per share, (EUR) 3) 0.00 0.00 -235 % 0.02 0.01 298 %
Deferred revenue       73.9 72.9 1 %
Cash flow from operations before financial items and taxes   8.7 4)  10.5 -18 % 19.0 4) 13.8 38 %
Cash and financial assets at fair value through P&L       25.5 27.9 -9 %
ROI, % 2.7% 6.2% -56 % 4.5% 7.9% -43 %
Equity ratio, %       49.0 % 42.7% 15%
Gearing, %       20.8 %4) 13.9 % 50%
Personnel, end of period     1,696 1,666 2%
  1. Excluding items affecting comparability (IAC) as defined in note 7 of the Table Section of this report.
  2. 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 7 of the Table Section of this report.
  3. Based on the weighted average number of outstanding shares during the period 157,719,368 (1-12/2019).
  4. IFRS 16 increased Adjusted EBITDA and EBITDA by EUR 1.7 million during Q4 and EUR 6.6 million during January-December. Impact on adjusted EBIT and EBIT was EUR 0.1 million during Q4 and EUR 0.3 million during January-December. Depreciation and amortization increased by EUR 1.6 million during Q4 and by EUR 6.3 million during January-December. Positive impact on cash flow from operations before financial items and taxes was EUR 1.5 million during fourth quarter and EUR 6.0 million during January-December. Gearing excluding IFRS 16 impact is 6.3%.

 

Events after period-end

Dividend proposal 

The company's dividend policy is to pay approximately half of its profits as dividends. Subject to circumstances, the company may deviate from this policy.

The Board of Directors has decided to propose to the Annual General Meeting that no dividend will be paid  for 2019. Based on F-Secure’s dividend policy the resulting dividend would have remained minimal. Taking into account the transaction costs related to the distribution, the Board of Directors considers it not in the shareholders’ interests to pay dividends for fiscal year 2019.

 

Webcast

A webcast for investors and analysts will be held in English at 14.30 EET.

  • To participate in the online meeting, please click on the link: https://meet.f-secure.com/henri.kiili/S2RJF91H
  • To participate via phone, please dial in to +358975110100 (FI). The conference ID is 6385683

The material will be available at the company's website before the call begins.

Additional information

This is a summary of F-Secure’s Financial Statements. The full report is a PDF file attached to this stock exchange release and is also available on the company's website.

Financial calendar

During the year 2020, F-Secure Corporation will publish financial information as follows:

  • Interim report January-March 2020, April 30, 2020
  • Half year financial report January-June 2020, July 16, 2020
  • Interim report January-September 2020, October 29, 2020

Annual General Meeting

  • The Annual General Meeting is scheduled for Tuesday, March 24, 2020 at 14:00 EET.
  • The Annual Report for 2019 will be published on the Company's website on 12 February 2020.

More information is available at https://www.f-secure.com/en/investors/governance.


 

Contact information:

Eriikka Söderström, CFO, F-Secure
+358 40 669 1844

Henri Kiili,  Investor Relations and Treasury Director, F-Secure
+358 40 840 5450
investor-relations@f-secure.com


 


 

Attachment

  • F-Secure_Q4_2019_eng_FINAL

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