F-Secure Corporation, Financial Statements Release 2021, 17 February 2022 at 08.00 EET

Financial Statements Release 1 January - 31 December 2021

Solid growth in cloud-based technologies

Highlights of October–December (Q4)

  • Revenue increased by 6% to EUR 61.6 million (57.9m)
  • Revenue from corporate security products increased by 18% to EUR 22.1 million (18.7m)
  • Revenue from cyber security consulting decreased by 6% to EUR 12.4 million (13.3m)
  • Revenue from consumer security increased by 5% to EUR 27.1 million (25.9m)
  • Adjusted EBITDA was EUR 7.7 million (7.3m), 12.5% of revenue (12.6%)
  • Earnings per share (EPS) were EUR 0.01 (EUR 0.02)
  • Cash flow from operating activities before financial items and taxes was EUR 15.6 million (19.4m)
  • Annual recurring revenue (ARR)1) of corporate security’s cloud-based Solutions2) grew by 34% to EUR 60.9 million (45.5m)
  • After the review period on 17 February 2022, F-Secure announced its plan to pursue towards the separation of the company’s consumer security business through a partial demerger. The planned completion date is June 30, 2022. The trading in the new consumer security company’s shares on Nasdaq Helsinki is expected to commence on July 1, 2022 or as soon as possible thereafter.

Highlights of January–December

  • Revenue increased by 7% to EUR 236.3 million (220.2m)
  • Revenue from corporate security products increased by 11% to EUR 82.8 million (74.3m)
  • Revenue from cyber security consulting increased by 3% to EUR 47.2 million (45.8m)
  • Revenue from consumer security increased by 6% to EUR 106.3 million (100.1m)
  • Adjusted EBITDA was EUR 36.5 million (35.7m), 15.4% of revenue (16.2%)
  • Items affecting comparability (IAC) for EBITDA were EUR -3.7 million
  • Earnings per share (EPS) were EUR 0.08 (EUR 0.08)
  • Cash flow from operating activities before financial items and taxes was EUR 38.7 million (48.3m)
  • F-Secure’s Board of Directors proposes no dividend will be paid for the financial year 2021 due to the planned demerger.


1)Annual recurring revenue (ARR) of corporate security products is calculated by multiplying monthly recurring revenue by twelve.  Monthly recurring revenue includes recognized revenue within the month excluding non-recurring revenues such as setup and start-up fees and proof of value.

2)Corporate security products excluding on-premise (Business Suite). Cloud Portfolio includes Elements Cloud, Cloud Protection for Salesforce and Countercept.

Figures in this report are unaudited. Figures in brackets refer to the corresponding period in the previous year, unless otherwise stated. Percentages and figures presented herein may include rounding differences and therefore may not add up precisely to the totals presented.

Outlook

F-Secure will share outlook for 2022 later when the demerger process has progressed further.

Medium term financial targets

Medium term financial targets for the consumer security business:

  • Growth Target: High single digit organic revenue growth
  • Profitability Target: After initial growth investments, adjusted EBITA margin of above 42%

Medium term financial targets for the corporate security business:

  • Growth Target: To double revenue organically by the end of 2025
  • Profitability Target: Adjusted EBITDA break-even by the end of 2023 and adjusted EBITDA margin of some 20% by 2025


CEO Juhani Hintikka


We finished the year with a relatively strong performance. In the fourth quarter, F-Secure’s revenue grew by 6% to EUR 61.6 million (57.9m), driven by the 18% growth in corporate security products. Our adjusted EBITDA grew by 6% to EUR 7.7 million (7.3m).

I’m quite satisfied with the development of our annual recurring revenue (ARR) during 2021. ARR of corporate security’s cloud-based Solutions grew by 34% year-on-year to EUR 60.9 million, which shows we are making good progress in transitioning towards a SaaS (Security as a Service) company.

The fourth quarter was especially strong for our corporate security products, their revenue growing by 18%. The revenue growth of Managed Detection and Response (MDR) solutions has accelerated throughout the year. In business security software, the demand for our Cloud Protection for Salesforce software and cloud-native Elements platform translated into good sales growth. To accelerate growth further, we continue to invest significantly into MDR and Cloud Protection for Salesforce products.

The revenue of our cyber security consulting decreased by 6% in the last quarter. The impact of COVID-19 related restrictions was smaller than in the previous quarters, but the attrition of consultants in some regions negatively impacted the consulting business. However, during the fourth quarter our attrition rate has improved within our consulting business. Thanks to our flexible delivery models, we can also utilize our global pool of highly skilled experts to deliver cyber security consulting services more remotely and globally, independent of customer’s physical location.

Consumer security continued its good performance also in the fourth quarter and grew by 5%, the whole portfolio contributing to the growth. During the quarter, we strengthened our position in Service Provider channel within important new verticals, for example in insurance. Importantly, we also signed new partners for F-Secure TOTAL in Asia and Europe which support our growth strategy striving to convert the existing customer base from solo products to an all-in-one security suite.

For F-Secure, year 2021 was a year of strategy clarification. In August, we announced a new strategy that is based on having three growing business areas brought together by technology. In corporate security, we seek growth in mid-market segment via highly scalable software offering, whereas our enterprise customers are served directly with the outcome-based solution portfolio. In consumer security, we are aiming for profitable growth especially by partnering with service providers.

Announced demerger plan for the company. In 2021, we also started a strategic review and evaluation of different strategic options for our consumer security business. Today, we announced the outcome of that review. I believe this is the right time to pursue this change in our business and create two great companies, benefiting from their current strong momentum. The demerger would enable us to serve our end customers even better from two separate companies, which would be more focused on the differing customer needs. These companies would have different financial profiles, which would support shareholder value creation in the long term. I believe the demerger would create two even more successful companies and offer new, exciting opportunities also for our employees.

Financial performance

EUR m 10-12/2021 10-12/2020 Change % 1-12/2021 1-12/2020 Change %
Revenue                    61.6                      57.9   6%                236.3                    220.2   7%
     Consumer security                         27.1   25.9 5% 106.3 100.1 6%
     Corporate security                         34.5   32.0 8% 130.0 120.1 8%
Products 22.1 18.7 18% 82.8 74.3 11%
Consulting 12.4 13.3 -6% 47.2 45.8 3%
Cost of revenue -13.7 -12.2 13% -50.6 -48.0 5%
Gross Margin 47.9 45.7 5% 185.7 172.2 8%
of revenue, % 77.7% 79.0%   78.6% 78.2%  
Other operating income 1) 0.9 0.4 105% 2.3 2.1 7%
Operating expenses 1) -41.1 -38.9 6% -151.5 -138.5 9%
     Sales & Marketing -25.1 -24.7 2% -93.9 -89.4 5%
     Research & Development -11.8 -10.4 13% -41.4 -35.9 15%
     Administration -4.2 -3.8 12% -16.2 -13.2 23%
Adjusted EBITDA 2) 7.7 7.3 6% 36.5 35.7 2%
of revenue, % 12.5% 12.6%   15.4% 16.2%  
Items affecting comparability (IAC)            
     Divestments 0.5     0.5    
     Restructuring   -0.4     0.0  
     Strategy -1.5     -4.3    
EBITDA 6.7 6.9 -3% 32.8 35.7 -8%
of revenue, % 10.9% 11.8%   13.9% 16.2%  
Depreciation  & amortization, excluding PPA 3) -3.0 -3.0 0% -11.2 -12.6 -11%
Impairment -1.0     -1.0 -0.3  
PPA amortization -0.7 -0.7 -8% -2.8 -3.2 -11%
EBIT 2.0 3.1 -34% 17.7 19.7 -10%
of revenue, % 3.3% 5.4%   7.5% 8.9%  
             
Adjusted EBIT 2) 4.7 4.3 9% 25.3 22.9 10%
of revenue, % 7.6% 7.4%   10.7% 10.4%  
             
Earnings per share, (EUR) 4) 0.01 0.02 -69% 0.08 0.08 -2%
Dividend, EUR per share       0.00 (5 0.04  
Deferred revenue       86.1 81.0 6%
Cash flow from operations before financial items and taxes 15.6 19.4 -20% 38.7 48.3 -20%
Cash and financial assets at fair value through P&L       53.0 51.4 3%
ROI, % 8.5% 11.6% -27% 15.6% 18.5% -16%
Equity ratio, %       59.5% 52.5% 13%
Gearing, %       -25.8% -14.1% 83%
Personnel, end of period       1,656 1,678 -1%

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) Amortization of intangible assets from business combinations (PPA, purchase price allocation, related amortizations).

4) Based on the weighted average number of outstanding shares during the period 158,354,073 (1-12/2021).

5) Board of Directors’ proposal


Board of Directors’ proposal for the distribution of profit

The company's dividend policy is to pay approximately half of its profits as dividends. On December 31, 2021, F-Secure Oyj’s distributable funds totaled EUR 81.4 million of which net profit for the period was EUR 15.7 million. No material changes have taken place in the company’s financial position after the balance sheet date.

F-Secure’s Board of Directors proposes that no dividend will be paid for 2021 due to the planned demerger of consumer security business.

More information about the planned demerger can be found from the demerger plan, published on February 17, 2022, that is available from company’s website at www.f-secure.com.

Events after period-end

After the reporting period, in February 2022, F-Secure sold its shares in its F-Secure Cyber Security (PTY) Limited in South Africa through a local management buy-out (MBO). Impacts of the divestment to financial reporting will be disclosed in the first quarter of 2022 Interim Report.

On February 17, 2022, F-Secure announced the outcome of the strategic review and evaluation of different strategic options for company’s consumer security business. The Board of Directors of F-Secure Corporation has decided to pursue towards the separation of the company’s consumer security business through a partial demerger. It is planned that the consumer security business would be transferred into a new independent company to be named F-Secure Corporation to be established in connection with the demerger. The current F-Secure Corporation will carry on its corporate security business and it is planned to be renamed as WithSecure Corporation. The planned completion date is June 30, 2022. The trading in the new consumer security company’s shares on Nasdaq Helsinki is expected to commence on July 1, 2022 or as soon as possible thereafter.

Webcast

Risto Siilasmaa (Chairman of the Board), Juhani Hintikka (CEO), Tom Jansson (CFO) and Timo Laaksonen (EVP Consumer Security) will present the Company’s 2021 results and the plan for the contemplated demerger in webcast that is held today, February 17, 2022 at 14:00 EET. The webcast will be held in English and can be accessed at https://f-secure.videosync.fi/2022-02-17-fsirq4/. Questions are to be submitted in written format in the webcast portal.

Analysts following F-Secure are invited to the presentation at the company headquarters, Tammasaarenkatu 7, Helsinki, Finland.

The presentation materials and the webcast recording will be available later on the Company’s website at www.f-secure.com.

Additional information

This is a summary of F-Secure’s Financial Statement Release. 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 2022, F-Secure Corporation will publish financial information as follows:

  • Interim Report for January-March 2022, April 21, 2022
  • Half-Year Financial Report for January-June 2022, July 14, 2022
  • Interim Report for January-September 2022, October 27, 2022

The Annual General Meeting is scheduled for Wednesday, March 16, 2022. The Board of Directors will convene the meeting.


Contact information

Tom Jansson, CFO, F-Secure Corporation
+358 40 700 1849
investor-relations@f-secure.com

Attachment

  • F-Secure_Q4_2021_eng