FSC1V F-Secure Oyj

F-Secure Interim Report 1 January - 30 September 2018

F-Secure Interim Report 1 January - 30 September 2018

F-Secure Corporation, Interim Report, 2 November 2018 at 09.00 EET

F-Secure Interim Report 1 January - 30 September 2018

ACQUISITION OF MWR INFOSECURITY ACCELERATED REVENUE GROWTH

This is a summary of F-Secure’s Interim Report. The full report is attached to this stock exchange release and it is also available on the company's website at the address: -secure.com/ir.

Highlights of July-September(Q3)

  • Revenue increased by 23% and was EUR 50.5 million (41.2m)
  • Revenue from corporate security increased by 58% to EUR 26.7 million (16.9m)
  • Revenue from consumer security decreased by 2% to EUR 23.8 million (24.3m)
  • Deferred revenue increased by 14% to EUR 69.0 million (60.6m) at the end of the quarter
  • Adjusted EBITDA was EUR 6.0 million (5.8m), 11.9% of revenue (14.2%)
  • Earnings per share (EPS) was EUR 0.01 (EUR 0.02)
  • Cash flow from operations was EUR -2.6 million (1.3m)
  • On 2 July, F-Secure completed the acquisition of MWR InfoSecurity Ltd.

Highlights of  January-September

  • Revenue increased by 9% to EUR 137.0 million (125.4m)
  • Revenue from corporate security increased by 27% to EUR 66.1 million (52.1m)
  • Revenue from consumer security decreased by 3% to EUR 70.9 million (73.2m)
  • Adjusted EBITDA was EUR 12.6 million (12.8m), 9.2% of revenue (10.2%)
  • Earnings per share (EPS) was EUR 0.01 (EUR 0.05)
  • Cash flow from operations was EUR -1.6 million (14.7m)

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

Outlook

Outlook for 2018 (updated 18 October 2018)

The company's outlook for 2018 including the acquisition of MWR InfoSecurity is:

  • Revenue from corporate security is expected to grow by around 30% compared to 2017
  • Revenue from consumer security is expected to decline by 0-4% compared to 2017
  • Adjusted EBITDA is expected to be in the range of EUR 14-18 million (More information under Alternative performance measures)
  • M&A related acquisition and integration costs in 2018 are expected to be 3.5-4.0 million

Outlook for the strategy period 2018-2021

The demand for cyber security products and services is expected to continue in strong growth and F-Secure aims to grow faster than the market. Revenue from corporate security is expected to grow above 15% annually during our strategy period 2018-2021.

Driven by the anticipated revenue growth and scalable business model, profitability is expected to improve significantly in the long-term. The management continuously seeks to balance the growth investments and profitability to optimize long-term growth and value creation for the shareholders.

CEO SAMU KONTTINEN



F-Secure’s revenue increased by 23 % to EUR 50.5 million in the third quarter. Our revenue growth accelerated as a result of the inclusion of the acquired MWR InfoSecurity in our financials, and organic growth in our corporate security business also continued. Following the acquisition, over half of our revenue now comes from corporate security, highlighting the impact of our strategic investments.

Our focus is on detection and response solutions, one of the fastest growing markets within cyber security. We aim to be a key player in this market, and expect this business to be the most significant growth driver for the company in the long-term. Between July and September, we signed an encouraging amount of deals with our managed detection and response (MDR) solutions (RDS, Countercept) in several countries. Also, the pipeline is developing positively across many industry verticals.

At the same time, the endpoint protection (EPP) market continues to be in transition. Corporate customers are increasingly interested in integrating detection and response capabilities into their existing installations. Our EDR solution is therefore a very important addition to our endpoint offering. As customers consider their options, they have become increasingly cautious with new purchase decisions with standalone EPP solutions. Consequently, our EPP new sales – while improving compared to the previous quarter - continued to be weaker than expected. Our EPP renewal rates continued to be very high.

Our cyber security services continued to see good revenue growth. The on-going integration activities had an impact on the business in the UK, but in the US, South Africa, Singapore and the Nordics we continued grow well. The demand for cyber security advisory services remains strong, driven by the continued expertise gap in the market. Following the acquisition we now have presence on four continents, and are able to serve companies across the globe.

Revenue from consumer security decreased by 2%. Third quarter still saw a partial impact from the operator account lost one year ago. I was very pleased that in October we announced our first operator deal with Elisa integrating our F-Secure SENSE as software into the operator’s routers, and we have many similar negotiations on-going with our operator partners. That said, we expect the short term financial impact of F-Secure SENSE to be limited. In direct consumer sales our order intake continued to grow.

Overall, F-Secure is now in a good position to address the cyber security needs of corporate and consumer customers. While we decreased our outlook for the remaining months of the year, we remain confident in our mid- to long-term opportunities, and have the right strategy to meet the market demands.



Key figures

EUR m7-9/20187-9/20174)Change1-9/20181-9/20174)Change1-12/20174)
Revenue50.541.223 %137.0125.49 %169.8
of which corporate security26.716.958 %66.152.127 %72.2
of which consumer security23.824.3-2 %70.973.2-3 %97.5
Adjusted EBITDA1)6.05.83 %12.612.8-2 %18.1
of revenue, %11.914.2 9.210.2 10.7
EBITDA3.35.8-43 %9.312.4-25 %17.8
of revenue, %6.514.2 6.89.9 10.5
Adjusted EBIT1)4.24.20 %7.88.6-9 %12.3
of revenue, %8.310.3 5.76.8 7.3
EBIT0.44.1-90 %3.17.8-60 %11.5
% of revenue0.8 %10.0 % 2.3 %6.3 % 6.7 %
        
Earnings per share, (EUR) 2) 3)0.010.02-75 %0.010.05-85 %0.07
        
Deferred revenue   69.060.614 %65.7
Cash and financial assets at fair value through P&L   21.581.1-73 %90.2
ROI, % 7,7 %29.6 % 8.1 %18.3 % 20.0 %
Equity ratio, %    43.7 %65.7 % 61.9 %
Gearing, %    23.4 %-119.2 % -127.8 %
Personnel, end of period    1,6361,06054 %1,104

1)Adjustments are material items outside normal course of business associated with acquisitions, integration, gains or losses from sales of businesses and other items affecting comparability.

2) Based on the weighted average number of outstanding shares during the period 157.134.442 (1-9/2018).

3) Earnings per share (EPS) excluding returned withholding taxes was EUR 0.05 for 1-12/2017.

4) As of 1 January 2018 F-Secure has adopted the new guidance on revenue recognition, IFRS 15, and revised the allocation of costs between Cost of Revenue and Operating expenses, and therefore restated 2017 financials.

Press conference and webcast

A news conference for analysts and media will be held (in Finnish) at the Company's headquarters (address: Tammasaarenkatu 7, 00180 Helsinki) today at 11.00–12.00 a.m..  

A webcast for investors and analysts will be held (in English) at 14.00 p.m.

  • To participate in the online meeting, please click on the link: 
  • To participate via phone, please dial in to . The conference ID is 797494.

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



Additional information

This is a summary of F-Secure’s Interim Report. The full report is attached to this stock exchange release and it is also available on the company's website at the address: -secure.com/ir.



Contact information

Tapio Pesola, IR Manager, F-Secure



Financial calendar

F-Secure Corporation will publish its financial calendar for 2018 later this year.

Capital Markets Day

F-Secure will host a Capital Markets Day on 28 November in Helsinki. More information about the Capital Markets Day is available at -secure.com/cmd.

Analysts, bankers and institutional investors are invited to register to the event by sending an e-mail with their contact information and possible dietary requirements to by Wednesday, 14 November 2018. Please also mention whether you will join the physical event or the live webcast.

Retail investors are invited to join the webcast. The link will be available on the company website.

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