Stonesoft Corporation Stock Exchange Release, April 22, 2008
STONESOFT CORPORATION'S INTERIM REPORT FOR JANUARY-MARCH 2008
STONEGATE SALES GREW BY 37%, TOTAL NET SALES BY 22%
Stonesoft's total net sales continued to increase during the first
quarter of 2008. The sales of the StoneGate product family were the
second highest in the company's history. The sales grew by 37%
compared to the corresponding period in the previous year. The
highest sales in StoneGate's history were reached during the previous
quarter.
SUMMARY
The comparable figures from the corresponding period in the previous
year are in brackets and refer to the figures of continuing
operations.
January-March 2008
- Net sales EUR 5,3 (4,3) million, growth 22%
- Stonesoft's core business, the sales of the StoneGate product
family, EUR 3,1 (2,3) million, growth 37%
- Operating result EUR -1,2 (-2,1) million
- Operating result as percentage of net sales -24% (-48%)
- Earnings per share EUR -0,02 (-0,04)
- Equity per share EUR 0,08 (0,17)
- Cash flow EUR -1,1 (-1,4) million. The total cash flow, including
the last part of the selling price of Embe Systems Oy, EUR 0.8
million, was EUR -0.3 million euros
- Liquid assets at the end of the period EUR 7,9 (13,0) million
Changes in the segment reporting
The segment reporting of Stonesoft Group is based on geographical
area division. Earlier this division consisted of three geographical
areas: EMEA, Americas and APAC. Due to a strong growth of net sales
in certain areas, Stonesoft has decided to amend its segment
reporting starting from January 1, 2008 in such a way that EMEA area
will be divided into Europe and Emerging Market. Emerging Markets
mean Russia, Northern Africa and Middle East. The comparable figures
have been adjusted to correspond to the new division. No amendments
in reporting have been made for Americas and APAC areas.
CEO Ilkka Hiidenheimo
Our main target in 2008 is to have a strong growth of net sales
generating improved profitability. Our net sales increased by 22% and
the sales of StoneGate products by 37% during the first quarter,
compared to the corresponding period in the previous year. Also the
cash flow developed positively, operating result improved and we
managed to reduce the previous year's comparable loss close to half.
This development as a whole strengthens our insight that we have
chosen the right strategy to reach our target.
During 2007, the change of Stonesoft's position from a network
security provider to a provider of integrated network security and
business continuity was confirmed. The company aims to further
strengthen this position by launching new StoneGate products, among
others, to MSPs (managed service providers) and MSSPs (managed
security service provider), whose market position is still growing
strongly.
During this year, we will accelerate our business through efficient
use of scalable business models. These include the increased use of
the MSSP channel, opening a digital marketplace for software-based
solutions and expanding our business operations based on OEM deals.
We are among the first to bring new products to the VMware virtual
environment, as an answer to the demand created by the strong growth
of virtualization of IT systems. Virtual firewall products are
already available and the virtual IPS solution for securing internal
networks will be launched later in 2008.
The comparable cash flow and the operating result of the company have
developed positively during the two last quarters. Consequently, the
company does not need additional funding at present. In case the
situation changes, additional funding can be arranged, because the
main shareholders of the company have reconfirmed their readiness to
invest at least three (3) million Euros in the company in form of a
convertible bond, if needed.
NET SALES AND RESULT
January-March 2008 (hereinafter 'reporting period')
The group's net sales totaled EUR 5,3 (4,3) million. The growth
compared to the corresponding period in the previous year was EUR 0,9
million, or 22%. The operating result (EBIT) was EUR -1,2 (-2,1)
million and the result after taxes was EUR -1,1 (0,2) million.
The group's core business, the sales of the main portfolio StoneGate,
which comprises of firewall, VPN, SSL VPN and IPS (intrusion
detection and prevention system), totaled EUR 3,1 (2,3) million, an
increase of 37% compared to previous year's corresponding quarter.
The geographical distribution of net sales was as follows: Europe 59%
(65%), Emerging Markets (Russia, North Africa and Middle East) 17%
(13%) Americas (North and South America) 19% (15%) and APAC
(Asia-Pacific) 5% (7%).
Finance and investments
At the end of reporting period, the group's total assets were EUR
15,7 (20,0) million. The equity ratio was 51% (72%) and gearing (the
ratio of net debt to shareholder's equity) -1,77 (-1,29).
Consolidated liquid assets of the group at the end of reporting
period totaled EUR 7,9 (13,0) million. Investments in tangible and
intangible assets were EUR 0,1 (0,1) million.
The comparable cash flow has developed positively during the past two
quarters. In order to strengthen the company's capital structure with
an additional cash reserve and to ensure the continuance of the
positive development in the future in line with the company's
strategy and growth plan, the main shareholders of the company have
informed the company of their readiness to invest at least three (3)
million Euros in the company in form of convertible bond. According
to the assessment of the Board of Directors, the company does not
need additional funding at present due to the positive development of
the cash flow. Furthermore, the arrangement would, especially in the
current situation of the financial market, cause additional costs to
the company. For these reasons, the Board of Directors decided to
propose to the Annual General Meeting (AGM) to be held in April 23,
2008, that, instead of issuing a directed convertible bond, the AGM
would grant to the Board of Directors an authorization that would
enable the arrangement of additional funding through issuing of a
directed convertible bond, if needed. Accordingly, the main
shareholders have confirmed that their commitment given earlier in
October is in force until the end of the AGM in 2009.
DEVELOPMENT OF BUSINESS OPERATIONS
Main business events in the fiscal period
- Stonesoft introduced a new StoneGate security solution
especially for the needs of high capacity networks. StoneGate
IPS-6100 intrusion detection and prevention system and FW-5100
firewall appliances offer managed service providers (MSPs) and large
organizations flexibility, high performance and cost-efficiency.
- Stonesoft announced that it has become a member of the
Technology Alliance Partner (TAP) program of VMware, the world`s
leading provider of virtualization solutions. The cooperation brings
Stonesoft among the first providers to launch security solutions for
virtual environments and strengthens its position as a leading expert
in network security.
REVIEW OF MAJOR RESEARCH AND DEVELOPMENT ACTIVITIES
Stonesoft continued its strong investments in R&D. Ivestments during
the reporting period totaled EUR 1,4 (1,4) million. This represented
23% (23%) of operating expenses. R&D employed 68 (66) persons at the
end of the reporting period.
SHARE CAPITAL AND STOCK OPTION PROGRAMS
At the end of the fiscal period, Stonesoft's share capital recorded
in the Trade Register totaled EUR 1 146 054.64 euros. The number of
shares was 57 302 732. The share capital remained unchanged.
Stock option programs
The company has one valid stock option program, Stock Option Program
2004-2010, the subscription price of which is EUR 0.56. During the
fiscal period no subscriptions were made on the basis of the stock
option programs for the key personnel of the company.
DEVELOPMENT OF SHARE PRICES AND TURNOVER
In the beginning of the fiscal period the price of Stonesoft share
was EUR 0.29. At the end of the fiscal period the price was EUR 0.27.
The highest price was EUR 0.34 and the lowest EUR 0.24. During the
year the total turnover of Stonesoft shares amounted to EUR 0.9
million. Based on the share price at the end of the fiscal period,
Stonesoft's market value was EUR 15.5 million.
NOTICES IN CHANGE OF OWNERSHIP
The company gave no notices in change of ownership during the fiscal
period.
ACQUISITIONS AND CHANGES IN GROUP STRUCTURE
No acquisitions were made and no other changes in the group structure
were implemented during the fiscal period.
PERSONNEL
At the end of the fiscal period, the group's personnel totaled 185
(183).
AUTHORIZATIONS OF THE BOARD OF DIRECTORS
The Annual General Meeting held on March 21, 2007 authorized the
Board of Directors to issue new shares in one or several issues and
to grant option and other special rights. The total number of shares
or rights to the shares issued may be 11.450.000 at the maximum.
The new shares to be issued in a new issue and/or the stock option or
special rights may be offered for subscription either according to
the shareholders' pre-emptive subscription rights or in deviation
from the shareholders' pre-emptive subscription right, in case the
deviation is justified by a weighty financial reason for the company,
such as financing of an acquisition, enabling of a joint venture
transaction, providing of additional financial alternatives, and/or
an arrangement for incentive program directed to the company's
personnel.
The Board of Directors was authorized to decide other terms and
conditions related to the share issues and to the issuance of option
or other special rights. The authorization is in force until the end
of the 2009 Annual General Meeting.
The granted authorization was not used.
The company does not own its shares and the Board of Directors does
not have an authorization to acquire its own shares.
CORPORATE GOVERNANCE
Stonesoft complies with the Corporate Governance Recommendation for
listed companies issued by the OMX Nordic Stock Exchange Helsinki, as
described on the web pages of the company.
SHORT-TERM RISKS AND BUSINESS UNCERTAINTIES
In the current fiscal period, Stonesoft's main risks and business
uncertainties relate to the realization timetable of the sales
projects and possible production disruption of our subcontractors and
suppliers as well as to the fact that the general economic
uncertainty has increased. There have been no significant changes in
these risks and business uncertainties in comparison to what has been
announced earlier.
FUTURE OUTLOOK
According to the Research Institute Infonetics, the Firewall/VPN and
IPS Intrusion detection and prevention market will grow globally
roughly by 8% in 2008. The market will continue to be dynamic.
Companies will continue to network with their partners and
subcontractors, and this development will create even higher
requirements for network security and availability. At the same time,
the demand for outsourcing solutions and services will grow. Managed
service providers (MSPs) have a growing need to provide their
customers with the possibility to track the status of their network
security while maintaining an overview of their own data network.
According to the company's view combining security and high
availability, which is the cornerstone of StoneGate product design,
will prove its strength even better in this development.
The convergence of voice, video and data on IP-based networks will
create more demand for capacity and drive the adoption of 10 Gbps
networks. The growing demand for added bandwidth together with new
protocols in the IP networks is expected to increase the general
demand for better reporting, monitoring and analysis tools. This
development will support Stonesoft in achieving its year 2008 growth
plan, since these are the cornerstones in StoneGate Management
Center's functionality.
The strong growth of virtualization has created a demand for ensuring
network security and business continuity also in virtual
environments. StoneGate products are better suited for virtual
environments than the competitors' products because they are based on
software solutions.
Stonesoft will continue its decisive and persistent efforts to
increase its net sales and to improve the profitability of the
company. The company's main target in 2008 is to have a strong growth
of net sales generating improved profitability. By extension of the
product portfolio and improved competitiveness, we aim to win even
larger individual deals.
Based on the extension of the product portfolio, intensification of
sales efforts and the present sales pipeline, the company expects to
have an annual total net sales of roughly EUR 24 million (+/- 10%)
while the comparable net sales figure during the previous financial
year was EUR 19.0 million. Through increased sales and cost control,
the annual operating result (EBIT) is expected to improve by EUR 2.5
- 4.5 million compared to the previous year. Also the cash flow is
expected to develop positively.
With regard to the development of the turnover and the operating
result, we expect a significant variation between the quarters in
comparison to the corresponding quarter during the previous year as
well as to the previous quarter as a consequence of, among others,
long sales cycles, a relatively big impact of individual deals, and
the variation between the quarters in the previous year.
TABLES
Stonesoft Group
Cash flow statement
(1000 Euro) 1.1.-31.3.2008 1.1.-31.3.2007 1.1.-31.12.2007
Cash flow from
operating activities
Operating Result -1 237 -2 089 -6 514
Adjustments 123 127 417
Change in net
working capital 265 625 687
Taxes paid -50 -54 -212
Net cash flow from
operating activities
continuing operations -899 -1 390 -5 622
Net cash flow from
operating activities
discontinued operations 0 0 0
Total cash flow from
operating activities -899 -1 390 -5 622
Cash flow from
investing activities
Investments in
tangible assets -99 -94 -463
Investments in
intangible assets -6 -5 -32
Investments in
affiliated company 0 0 -1
Investments in in
other shares -10 0 0
Net cash flow investing
activities continuing
operations -115 -99 -496
Net cash flow
investing activities
discontinued operations 761 -448 -448
Total cash flow
investing activities 646 -547 -944
Cash flow from
financing activities
Payments of
financial leasing
liabilities -20 -21 -95
Total cash flow from
financing activities -20 -21 -95
Change in cash and cash
equivalents
Cash and cash
equivalents at
beginning of period 8 210 14 370 14 370
Conversion
differences -74 -4 -60
Changes in the
market value of
investments 9 107 69
Discontinued
operations 0 492 492
Total cash and cash
equivalents at end of
period *) 7 871 13 007 8 210
*) Total cash and cash
equivalents at end of
the period
contains pledged
securities 263 281 281
Stonesoft Group
Geographical segments 1.1.-31.3.2008 1.1.-31.3.2007 1.1.-31.12.2007
(1000 Euro)
Net sales
Europe 3 096 2 807 12 075
Emerging Market 909 554 2 004
Americas 973 663 3 906
APAC 280 295 1 036
Total net sales 5 259 4 320 19 020
Operating profit
Europe -665 -1 442 -4 119
Emerging Market -158 -46 -231
Americas -375 -553 -2 038
APAC -39 -48 -126
Total operating profit -1 237 -2 089 -6 514
Stonesoft Group
Contingent liabilities 1.1.-31.3.2008 1.1.-31.3.2007 1.1.-31.12.2007
(1000 Euro)
Contingent off-balance
sheet
Non-cancelable other
leases 4 323 5 257 4 624
Contingent
liabilities for the
Company 20 20 20
Contingent
liabilities for
inventories 0 0 0
Stonesoft Group
Related party
information 1.1.-31.12.2007 1.1.-31.3.2007 1.1.-31.12.2007
(1000 Euro)
Consultation fees paid
to the Board of
Directors 0 0 73
Stonesoft Group
Quarterly development Q1 / Q4 / Q3 / Q2 / Q1 /
(Euro Millions) 2008 2007 2007 2007 2007 2007
Security software and appliances 3,2 3,7 2,0 2,7 2,3 10,7
Services 2,2 2,2 2,1 2,1 2,0 8,4
Other products -0,1 -0,1 0,0 0,0 0,0 -0,1
Net sales continuing operations 5,3 5,8 4,0 4,8 4,3 19,0
Change-% from previous year 22 35 -9 32 7 15
Net sales discontinuing operations 0,0 0,0 0,0 0,0 0,0 0,0
Change-% from previous year - - - - - -
Net sales total 5,3 5,8 4,0 4,8 4,3 19,0
Change-% from previous year 22 0 -27 -4 -22 -13
Sales margin 4,3 4,7 3,4 4,1 3,8 16,0
Sales margin % 82 80 84 85 87 84
Operative expenses 5,8 6,2 5,4 5,8 6,0 23,4
Operating profit (EBITA) -1,2 -1,2 -1,6 -1,5 -2,1 -6,5
% of net sales -24 -21 -41 -32 -48 -34
Result before taxes -1,2 -1,2 -1,7 -1,4 -2,0 -6,3
% of net sales -23 -20 -43 -30 -46 -33
Stonesoft Group
Key ratios 1.1.-31.3.2008 1.1.-31.3.2007 1.1.-31.12.2007
(1000 Euro)
Net sales total 5 259 4 320 19 020
Net sales
change-% 22 -22 -13
Net sales,
continuing
operations 5 259 4 320 19 020
Net sales
change-% 22 7 15
Net sales,
discontinued
operations 0 0 0
Net sales
change-% - - -
Operating
result total -1 237 -2 089 -6 514
% of net
sales -24 -48 -34
Operating
result,
continuing
operations -1 237 -2 089 -6 514
% of net
sales -24 -48 -34
Operating
result,
discontinued
operations 0 0 0
% of net
sales - - -
Operating
result before
taxes -1 214 -1 975 -6 312
% of net
sales -23 -46 -33
ROE - %,
annualized,
continuing
operations -101 -82 -85
ROI - %,
annualized -90 -77 -78
Equity ratio-% 51 72 52
Net gearing -1,77 -1,29 -1,46
Total Assets 15 748 20 049 17 666
Capital
expenditure 105 99 500
Capital
disposals 0 0 -5
R&D costs 1 372 1 387 5 285
% of net
sales 26 32 28
Number of
employees
(weighted
average) 181 184 181
Number of
employees (end
of the period 185 183 181
Share Specific
Ratios
Earnings per
share,
continuing
operations -0,02 -0,04 -0,11
Earnings per
share,
discontinued
operations 0,00 0,04 0,04
Equity per
share 0,08 0,17 0,10
Dividend 0,00 0,00 0,00
Dividend per
share (EUR) 0,00 0,00 0,00
Dividend /
Profit-% 0 0 0
Calculation of
indicators
Return on
equity (ROE) %
= (Profit before taxes - income taxes) x 100 /
Shareholders' equity + minority interest (average)
Return on
invested
capital (ROI)% (Profit before extraordinary items+interest and other
= financial expenses)
x100 /
Balance sheet total - non-interest bearing debt
(average)
Equity ratio %
= (Equity + minority interest) x 100 /
Balance sheet total - advances received
Interest bearing net debt-cash in hand and on
Net gearing = deposit-marketable
securities /
Equity + minority interest
Earning per Profit before taxes - minority interest - income
share (EPS) = taxes /
Average number of shares adjusted for dilutive effect
of options
Equity per
share = Equity /
Number of shares at end of period
ACCOUNTING PRINCIPLES
This interim report is prepared in accordance with IAS 34 standard.
Stonesoft Group has changed its bookkeeping practice regarding
consulting fees for consults working full time for Stonesoft sales
and presales functions starting from January 1, 2008. According to
the new practice these fees are counted to the personnel expenses. In
the financial year 2007 these consulting fees were included in the
other operating expenses. The figures of the previous year have been
adjusted to be comparable with the new bookkeeping practice. In all
other aspects the Group has adapted the same accounting principles
and reporting standards as in the Financial Statements for 2007.
FORWARD-LOOKING STATEMENTS
This report contains statements concerning, among other things,
Stonesoft's financial condition and the results of operations that
are forward-looking in nature. Such statements are not historical
facts, but rather represent Stonesoft's future expectations. The
company believes that the expectations reflected in these
forward-looking statements are based on reasonable assumptions.
However, these forward-looking statements involve inherent risks and
uncertainties, which could cause actual results or outcomes to differ
materially from those anticipated in the statements. These risks and
uncertainties may include, among other things, (1) changes in our
market position or in the Firewall/VPN and Intrusion detection and
protection market in general; (2) the effects of competition; (3) the
success, financial condition, and performance of our collaboration
partners, suppliers and customers;(4) our ability to source quality
components without interruption and at acceptable prices;(5) our
ability to recruit, retain and develop appropriately skilled
employees;(6) exchange rate fluctuations, including, in particular,
fluctuations between the Euro, which is our reporting currency, and
the US dollar;(7) other factors related to sale of products, economic
situation, business, competition or legislation affecting the
business of Stonesoft or the industry in general and (8) our ability
to control the variety of factors affecting our ability to reach our
targets and give accurate forecasts.
The presented figures are unaudited.
PRESS CONFERENCE
A press conference for analysts and investors will be held on April
22, 2008 at 10.30 am at the Stonesoft headquarters, street address
Itälahdenkatu 22 A, 00210 Helsinki.
For additional information, please contact:
Ilkka Hiidenheimo, CEO, Stonesoft Corporation
Tel. +358 9 476 711
E-mail: ilkka.hiidenheimo@stonesoft.com
Mikael Nyberg, CFO, Stonesoft Corporation
Tel. +358 9 476 711
E-mail: mikael.nyberg@stonesoft.com
Stonesoft Corporation
Ilkka Hiidenheimo
CEO
This release and the presentation material related to this report are
also available on Stonesoft's web site at www.stonesoft.com.
Distribution:
OMX Nordic Exchange Helsinki
www.stonesoft.com
STONESOFT CORPORATION'S INTERIM REPORT FOR JANUARY-MARCH 2008
| Source: Stonesoft
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