F-Secure Corporation, Interim Report, 29 October 2020 at 08.00 EET
F-Secure Interim Report 1 January - 30 September 2020
Profitability improved further, revenue at the previous year’s level
Highlights of July-September (Q3)
- Revenue remained at previous year’s level, and was EUR 54.5 million (53.8m)
- Revenue from corporate security decreased by 3% to EUR 29.5 million (30.3m)
- Revenue from consumer security increased by 7% to EUR 25.0 million (23.4m)
- Adjusted EBITDA was EUR 11.0 million (6.8m), 20.2% of revenue (12.7%)
- EBIT was EUR 6.9 million (2.5m), 12.7% of revenue (4.7%)
- Earnings per share (EPS) was EUR 0.03 (EUR 0.01)
- Cash flow from operating activities before financial items and taxes was EUR 7.9 million (3.7m)
- F-Secure issued a new financial outlook for 2020 on 15 October 2020
Highlights of January- September
- Revenue remained at previous year’s level, and was EUR 162.3 million (161.2m)
- Revenue from corporate security remained at previous year’s level, and was EUR 88.1 million (89.8m)
- Revenue from consumer security increased by 4% to EUR 74.2 million (71.4m)
- Adjusted EBITDA was EUR 28.4 million (16.6m), 17.5% of revenue (10.3%)
- EBIT was 16.5 million (6.4m), 10.2% of revenue (4.0%)
- Earnings per share (EPS) was EUR 0.06 (EUR 0.02)
- Cash flow from operating activities before financial items and taxes was EUR 28.9 million (10.3m)
- F-Secure issued a new financial outlook for 2020 on 15 October 2020
In 2020 there are no changes to accounting principles impacting comparability to the previous year.
Figures in this report are unaudited. Figures in brackets refer to the corresponding period in the previous year, unless otherwise stated.
Outlook
F-Secure issued financial outlook for 2020 on 15 October 2020
F-Secure’s outlook for 2020
- Revenue from corporate security products is expected to grow compared to 2019
- Revenue from cyber security consulting is expected to decrease compared to 2019
- Revenue from consumer security is expected to grow compared to 2019
- Adjusted EBITDA is expected to be above EUR 33 million
CEO SAMU KONTTINEN
During the third quarter F-Secure’s revenue remained at the previous year’s level and reached EUR 54.5 million as our scalable product businesses grew, whereas revenue from cyber security consulting decreased compared to the last year. Our EBITDA margin of 20% was supported by lower activity levels impacted by the COVID-19-pandemic.
In Q3, the growth with the Managed Detection and Response (MDR) solutions continued as we won several new deals in Europe within healthcare, media and defense industries. The strong renewal performance amongst the MDR customers is a testimony of our high quality detection and response service in addition to the “peace time value” delivered. This concept helps our clients improve their cyber resilience and IT security practices. In Q3, we still witnessed COVID-19 negatively impacting the growth in MDR as sales cycles were prolonged.
The endpoint security business continued to grow slightly excluding the impact from discontinued products. I am delighted that the positive new sales performance stems from all of our main markets in Europe and Japan. The strong new sales growth arises from the sales of the whole endpoint suite alongside the adjacent Cloud Protection products winning new contracts such as the published deal with Yahoo! JAPAN. Overall, I am pleased with the momentum among our channel partners, and as a result the growth of new orders has clearly outpaced revenue growth for the past three quarters.
Cyber security consulting was still impacted by the COVID-19 pandemic, which led to a reduction in revenue from the previous year’s level. Significant regional variations in revenue continued, while the overall sentiment has improved from the spring as clients are increasingly getting accustomed to the new remote ways of working. The pandemic still casts a shadow on the short term predictability of the business, however in the long term we find the market attractive for profitable growth.
Consumer security grew from the previous year, which was driven by both the operator channel and direct business. The growth in consumer security derives from our core solutions F-Secure SAFE and TOTAL and also from the new deals signed in US and Asia. These operator deals include contracts for F-Secure SENSE and F-Secure ID PROTECTION on top of the traditional endpoint protection, planting the seed for growth potential in the longer term. The reported revenue growth of 7% contains a slight positive impact related to one-off items.
On a personal level, the third quarter closes a chapter in my life as I will pass on the torch to F-Secure’s next CEO. I am proud to leave behind a great company that has transformed from an endpoint protection vendor to a cyber security specialist with a broad set of products and services. As a result, the company of today stands tall and protects our consumer and business customers better than ever before. Lastly, I want to thank all the Fellows from the past 15 years that I have been a part of F-Secure.
Financial performance
| EUR m | 7-9/2020 | 7-9/2019 | Change % | 1-9/2020 | 1-9/2019 | Change % | 1-12/2019 |
| Revenue | 54.5 | 53.8 | 1 % | 162.3 | 161.2 | 1 % | 217.3 |
| Consumer security | 25.0 | 23.4 | 7 % | 74.2 | 71.4 | 4 % | 94.8 |
| Corporate security | 29.5 | 30.3 | -3 % | 88.1 | 89.8 | -2 % | 122.5 |
| Products | 18.5 | 18.4 | 1 % | 55.5 | 54.2 | 2 % | 72.5 |
| Consulting | 10.9 | 11.9 | -8 % | 32.6 | 35.6 | -9 % | 50.0 |
| Cost of revenue | -11.8 | -12.6 | -6 % | -35.8 | -37.7 | -5 % | -50.5 |
| Gross Margin | 42.7 | 41.2 | 4 % | 126.5 | 123.6 | 2 % | 166.8 |
| Other operating income 1) | 0.4 | 0.4 | -12 % | 1.7 | 1.1 | 50 % | 1.5 |
| Operating expenses 1) | -32.0 | -34.8 | -8 % | -99.6 | -108.0 | -8 % | -145.1 |
| Sales & Marketing | -20.9 | -23.3 | -10 % | -64.7 | -73.9 | -12 % | -99.4 |
| Research & Development | -8.0 | -8.1 | -2 % | -25.5 | -24.6 | 4 % | -33.2 |
| Administration | -3.1 | -3.3 | -5 % | -9.3 | -9.5 | -2 % | -12.4 |
| Adjusted EBITDA 2) | 11.0 | 6.8 | 62 % | 28.4 | 16.6 | 71 % | 23.2 |
| of revenue, % | 20.2 % | 12.7 % | 17.5 % | 10.3 % | 10.7 % | ||
| Adjustment to operating income | 9.1 | 12.5 | |||||
| Restructuring | 0.4 | -4.6 | |||||
| EBITDA | 11.0 | 6.8 | 62 % | 28.8 | 25.7 | 12 % | 31.1 |
| of revenue, % | 20.2 % | 12.7 % | 17.8 % | 16.0 % | 14.3 % | ||
| Depreciation & amortization | -3.1 | -3.5 | -11 % | -9.6 | -11.0 | -13 % | -13.6 |
| Impairment | -0.3 | -0.3 | -6.0 | -95% | -6.3 | ||
| PPA amortization | -0.7 | -0.9 | -15 % | -2.4 | -2.3 | 5 % | -4.1 |
| EBIT | 6.9 | 2.5 | 177 % | 16.5 | 6.4 | 160 % | 7.2 |
| of revenue, % | 12.7 % | 4.7 % | 10.2 % | 4.0 % | 3.3 % | ||
| Adjusted EBIT 2) | 7.7 | 3.4 | 126 % | 18.6 | 6.5 | 186 % | 9.6 |
| of revenue, % | 14.0 % | 6.3 % | 11.4 % | 4.0 % | 4.4 % | ||
| Earnings per share, (EUR) 3) | 0.03 | 0.01 | 494 % | 0.06 | 0.02 | 255 % | 0.02 |
| Deferred revenue | 72.0 | 70.2 | 3 % | 73.9 | |||
| Cash flow from operations before financial items and taxes | 7.9 | 3.7 | 112 % | 28.9 | 10.3 | 180 % | 19.0 |
| Cash and financial assets at fair value through P&L | 42.8 | 24.9 | 72 % | 25.5 | |||
| ROI, % | 24.2 % | 10.6 % | 128 % | 20.3 % | 8.9 % | 128 % | 7.8 % |
| Equity ratio, % | 49.2 % | 45.9 % | 7 % | 49.0 % | |||
| Gearing, % | 8.4 % | 28.3 % | -70 % | 20.8 % | |||
| Personnel, end of period | 1,693 | 1,727 | -2 % | 1,696 |
- Excluding Items Affecting Comparability (IAC) and depreciation and amortization
- 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.
- Based on the weighted average number of outstanding shares during the period 158,051,995 (1-9/2020).
Events after period-end
Samu Konttinen resigned to pursue a leadership opportunity outside the company. Juhani Hintikka was appointed President and CEO of F-Secure Corporation, effective 1 November, 2020. Further information on the appointment can be found in F-Secure’s stock exchange release from 8 October 2020.
F-Secure issued financial outlook for 2020 on 15 October 2020. Further information can be found from the interim report in the Outlook section.
Webcast
F-Secure’s CEO Samu Konttinen will present the results in a webcast for analysts and investors starting at 12.00 EET. The webcast will be held in English and can be accessed at https://f-secure.videosync.fi/2020-q3-results. 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 January - September 2020. The full report is attached to this stock exchange release and it is also available on the company's website.
Financial calendar
During the year 2021, F-Secure Corporation will publish financial information as follows:
- Financial Statement Release 2020 and Annual Report 2020, February 10, 2021
- Interim report January-March 2021, April 29, 2021
- Half year financial report January-June 2021, July 15, 2021
- Interim report January-September 2021, October 21, 2021
The Annual General Meeting is scheduled for Wednesday, March 24, 2021 at 14:00 EET. The Board of Directors will convene the meeting.
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
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