F-Secure Interim Report 1 January - 31 March 2019: Strong growth in corporate security
F-Secure Corporation, Interim Report, 8 May 2019 at 09.00 EEST
F-Secure Interim Report 1 January - 31 March 2019
Strong growth in corporate security
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: www.f-secure.com/ir.
Highlights of January-March (Q1)
- Revenue increased by 24% to EUR 53.4 million (43.1m)
- Revenue from corporate security increased by 52% to EUR 29.4 million (19.4m)
- Revenue from consumer security increased by 1% to EUR 24.0 million (23.8m)
- Deferred revenue increased by 6% to EUR 71.4 million (67.2m)
- Adjusted EBITDA was EUR 5.0 million (3.8m), 9.4% of revenue (8.9%)1)
- Earnings per share (EPS) was EUR -0.01 (EUR 0.00)
- Cash flow from operating activities before financials items and taxes was EUR -0.3 million (1.2m)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. For the first quarter, the impact of IFRS 16 on adjusted EBITDA is EUR +1.6 million and on operative cash flow EUR +1.5 million. For the full year 2019, the impact on adjusted EBITDA is estimated to be around EUR +6.0 million.
Figures in this report are unaudited. Figures in brackets refer to the corresponding period in the previous year, unless otherwise stated.
Outlook
Outlook for 2019 unchanged
The company's outlook for 2019 is unchanged:
- Revenue from corporate security is expected to grow by over 30% compared to 2018
- Revenue from consumer security is expected to stay approximately at the same level as in 2018
- Adjusted EBITDA is expected to be above EUR 15 million excluding the impact of IFRS 16
Outlook for the strategy period 2018-2021 is unchanged
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 growth improved in both of our businesses during the first quarter. Our total revenue increased by 24% to EUR 53.4 million, with revenue from corporate security increasing by 52%. In terms of profitability, the quarter was in line with our expectations.
I was particularly pleased to see our consumer security revenue growing again. F-Secure’s operator channel continues to show steady performance, supported by our very competitive and comprehensive portfolio.
In corporate security, our core endpoint protection (EPP) business performed well. Reliable endpoint protection is the backbone of cyber security, and F-Secure continues to win recognition for its industry leading capabilities to stop cyber threats. In February, we won our seventh Best Protection Award from AV-TEST Institute. The new Endpoint Detection and Response (EDR) solution has improved our protection capabilities further, and forms an increasing part of the discussions with our partners and corporate customers, even if we are still at an early phase in this market.
We continued to put our efforts into integrating our two Managed Detection and Response (MDR) solutions (Countercept & RDS) into a single very competitive modular solution. A combination of MDR solutions and adjacent consultancy services – such as incident response – allows us to help our customers react to cyber attacks effectively. This is reflected in the very high MDR renewal rates, which offers an important validation of the value we deliver and the trust our customers place on us. We expect to see significant variation in new customer acquisition between different quarters depending of the timing of the deals. In January-March, new sales were low, but revenue was in strong growth compared to the previous year. At the same time, our MDR sales pipeline continued to develop positively
It was another good quarter for cyber security consulting with revenue growing across all regions. Our global ability to provide cyber advisory services is being recognized among corporate customers, and we closed a number of important new deals in many demanding verticals and expanded our services with existing customers. In the Nordics, revenue growth was driven by a large project, to which we also signed an extension during the quarter.
The first three months were a good start for the year overall, and we continued to focus on the successful integration of MWR InfoSecurity. F-Secure has three strong businesses to build on: our cyber security product business for consumers and corporate customers, as well as our cyber security consulting business. With each business growing and having their unique strengths, we have a solid foundation for delivering on our strategy.
Financial performance
| EUR m | 1-3/2019 | 1-3/2018 | Change % | 1-12/2018 |
| Revenue | 53.4 | 43.1 | 24 % | 190.7 |
| Consumer security products | 24.0 | 23.8 | 1 % | 94.9 |
| Corporate security | 29.4 | 19.4 | 52% | 95.9 |
| Products | 17.8 | 14.8 | 21 % | 63.8 |
| Consulting | 11.6 | 4.6 | 158% | 32.0 |
| Cost of revenue | -12.6 | -7.3 | 72 % | -39.4 |
| Gross Margin | 40.8 | 35.8 | 14 % | 151.4 |
| Other operating income | 0.2 | 0.8 | -77 % | 2.3 |
| Operating expenses 1) | -36.0 | -32.8 | 10 % | -136.2 |
| Sales & Marketing | -23.5 | -20.0 | 18 % | -90.7 |
| Research & Development | -9.3 | -9.1 | 2 % | -33.6 |
| Administration | -3.2 | -3.6 | -12 % | -11.9 |
| Adjusted EBITDA 2) | 5.04) | 3.8 | -31 % | 17.4 |
| of revenue, % | 9.4 % | 8.9 % | 9.1 % | |
| M&A expenses | -3.6 | |||
| EBITDA | 5.04) | 3.8 | 31 % | 13.8 |
| of revenue, % | 9.4 % | 8.9 % | 7.2 % | |
| Depreciation & amortization | -3.34) | -1.5 | 121 % | -6.8 |
| PPA amortization | -1.2 | -0.1 | 916 % | -2.5 |
| EBIT | 0.64) | 2.3 | -74 % | 4.6 |
| of revenue, % | 1.1 % | 5.2 % | 2.4 % | |
| Adjusted EBIT 2) | 1.7 | 2.4 | -26 % | 10.6 |
| of revenue, % | 3.3 % | 5.5 % | 5.6 % | |
| Earnings per share, (EUR) 3) | -0.01 | 0.00 | -344 % | 0.01 |
| Deferred revenue | 71.4 | 67.2 | 6 % | 72.9 |
| Cash flow from operations before financial items and taxes | -0.34) | 1.2 | -130 % | 13.8 |
| Cash and financial assets at fair value through P&L | 23.4 | 88.5 | -74 % | 27.8 |
| ROI, % | 1.6 % | 19.9 % | -92 % | 7.9 % |
| Equity ratio, % | 41.3 % | 70.4 % | -41 % | 42.7 % |
| Gearing, % | 36.5 % | -123.1 % | -130 % | 13.9 % |
| Personnel, end of period | 1680 | 1145 | 47 % | 1666 |
- Excluding M&A related expenses, depreciation and amortization
- 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. Reconciliation and a breakdown of adjusted costs is in note 7 of the Table Section of this report.
- Based on the weighted average number of outstanding shares during the period 157,630,535 (1-3/2019).
- IFRS 16 increased Adjusted EBITDA and EBITDA by EUR 1.6 million and Adjusted EBIT and EBIT by EUR 0.1 million. Depreciation and amortization increased by EUR 1.5 million. Positive impact on cash flow from operations before financial items and taxes was EUR 1.5 million.
Events after period-end
No material changes regarding the company’s business or financial position have materialized after the end of the quarter.
Press Conference and Webcast
CEO Samu Konttinen will present the results in Finnish at an analyst and press conference at the company's headquarters (address: Tammasaarenkatu 7, 00180 Helsinki) on the same day at 12.30–13.30 pm.
A webcast for investors and analysts will be held (in English) on the same day at 14.00 p.m.
- To participate in the online meeting, please click on the link: https://meet.f-secure.com/tapio.pesola/LKQG28Y0
- To participate via phone, please dial in to +358975110100 (FI). The conference ID is 7098927.
The material will be available at the company's website before the call begins: www.f-secure.com/investors.
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: www.f-secure.com/ir.
Contact information
Eriikka Söderström, CFO, F-Secure
+358 40 6691844
Henri Kiili, IR Manager, F-Secure
+358 40 8405450
Financial calendar
F-Secure Corporation will publish its interim reports during 2019 as follows:
- Q2/2019: 19 July 2019
- Q3/2019: 30 October 2019
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