F-Secure Corporation, Interim Report, 30 April 2020 at 08.00 EEST

F-Secure Interim Report 1 January - 31 March 2020

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 SAMU KONTTINEN

During the first quarter F-Secure’s revenue increased by 3% to EUR 54.8 million, with corporate security growing by 4%. Revenue from consumer security remained at the previous year’s level. In terms of profitability, the quarter was at the high end of our expectations with adjusted EBITDA margin of 13%.

Despite the COVID-19 pandemic F-Secure has ensured full business continuity to the customers. The transition to remote ways of working has been smooth and all cybersecurity operations protecting our customers have remained unaffected. Until now, we have mainly seen the impact from COVID-19 on our consulting business.

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

 

  1. Excluding Items Affecting Comparability (IAC) and depreciation and amortization
  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 5 of the Table Section of this report.
  3. Based on the weighted average number of outstanding shares during the period 157,855,454 (1-3/2020).

 

Events after period-end

Financing – EUR 10million of Revolving Credit Facility withdrawn 

On 24 April F-Secure withdrew EUR 10 million from the committed Revolving Credit Facility to strengthen its liquidity further.

Outlook for 2020 withdrawn due to COVID-19 related market uncertainties 

F-Secure withdrew its financial outlook for 2020 on 9 April due to COVID-19 related market uncertainties and provides a new outlook as soon as deemed possible. The update of the outlook section in financial reporting is subject to release of new outlook.

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 F-Secure sees possible slowdown in the new sales of software products and Managed Detection and Response (MDR) service. Also more project based Cyber Security Consulting is likely to be negatively affected at the times of economic uncertainty.

The long-term outlook of all F-Secure’s business areas continues to be attractive as the cybersecurity market fundaments have not changed.

F-Secure has secured the health and safety of its employees and ensured full business continuity to the customers. The company continues to successfully deliver services according to service level agreements (SLAs) despite the company working fully remotely.

In order to prepare for the uncertainties in the future, F-Secure has explored different scenarios and will implement potential mitigating actions if necessary.

For reference, in December 2019 F-Secure issued the following outlook for 2020:

  • 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 Samu Konttinen will present the results in a webcast for analysts and investors starting at 14.00 EEST. The webcast will be held in English and can be accessed at https://f-secure.videosync.fi/2020-04-30-q1. Questions are requested in written format in the webcast portal.

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 - 31 March 2020. The full report is attached to this stock exchange release and it is also available on the company's website.

Annual General Meeting

The Annual General Meeting is scheduled for Tuesday, May 12, 2020 at 14:00 EEST. Due to the coronavirus situation, the Company keeps the meeting as short as possible and limits the number of participants as much as possible in order to reduce the risk of infection and to comply with authority regulations.

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

Financial calendar

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

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



Contact information

Eriikka Söderström, CFO, F-Secure
+358 40 6691844

Henri Kiili, Investor Relations and Treasury Director, F-Secure
+358 40 8405450
investor-relations@f-secure.com

Attachment

  • F-Secure_Q1-2020_ENG_Final

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