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F-Secure Oyj Interim / Quarterly Report 2023
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Interim / Quarterly Report
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F-Secure Corporation
Interim Report
1 January–31 March 2023
2
Strategy execution continues
Highlights of January–March (Q1 2023)
- Revenue increased by 1.6% to EUR 27.8 million (EUR 27.4 million).
- Revenue from Partner Channel increased by 1.7% to EUR 22.0 million (EUR 21.7 million)
- Revenue from Direct Channel increased by 1.2% to EUR 5.8 million (EUR 5.7 million)
- Adjusted EBITA was EUR 10.2 million (EUR 12.7 million), 36.7% of revenue (46.3%)
- Items affecting comparability (IAC) for Adjusted EBITA were EUR -1.3 million (EUR -0.8 million).
- Earnings per share (EPS) was EUR 0.04 (EUR 0.05)
- Cash flow from operating activities before financial items and taxes was EUR 9.3 million (EUR 10.8 million)
- After the review period, On 26 April 2023, F-Secure announced the planned acquisition of Lookout Life, US-based consumer focused mobile security business arm of Lookout Inc. The planned acquisition strengthens F-Secure’s position as a leading consumer security company in the fast-growing US market. More information is provided under Significant events after the review period.
F-Secure Corporation formed a separate legal group as of June 30, 2022. The financial information presented in this interim report is based on actual figures as an independent group after the consummation of the partial demerger and carve-out figures prior to the consummation of the partial demerger. 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. Figures in this interim report are unaudited.
F-Secure Corporation
January–March 2023 Interim Report
3
Outlook for 2023
After the review period, On 26 April 2023, F-Secure announced the planned acquisition of Lookout Life. Subject to the completion of the acquisition, the transaction will have a financial impact on F-Secure. At this point, F-Secure will keep its 2023 outlook unchanged until the schedule for the completion of the transaction is confirmed. Financial outlook for 2023 published in the financial statement release 2022 on 17 February 2023, does not incorporate the impact of the now disclosed acquisition on the company's revenue or adjusted EBITA for 2023. Implications on financial outlook for 2023 will be announced later when a reasoned estimate can be made.
Financial outlook for 2023 published on 17 February 2023 is as follows:
F-Secure expects the global demand for cyber security solutions to grow while our operating environment has turned more challenging and consumer confidence remains unstable in the face of rising inflation, causing higher risk for weaker development on new business sales in the direct channel.
We have made a number of growth-related investments in 2022 and continue to do so in 2023. There is a level of uncertainty when these will have a concrete effect on our financial performance.
F-Secure expects revenue to grow by 4-8% year-on-year.
Adjusted EBITA for the full year 2023 is expected to be within 38-41%.
Financial targets (updated on 26 April 2023)
Subject to the closing of the transaction, the acquisition will significantly accelerate revenue and absolute EBITA growth and will thus have an impact on mid-term targets of F-Secure. In addition, F-Secure introduced a new financial target regarding leverage. New mid-term financial targets by 2026 are:
- Growth (updated): Total revenue of more than EUR 200 million by 2026
- Profitability (unchanged): After initial growth investments, adjusted EBITA margin of above 42%
- Dividend Yield (unchanged): Around or above 50% of net profit on an annual basis.
- Leverage (new): Net debt/adjusted EBITDA ratio below 2.5x, excluding temporary impact from acquisitions.
F-Secure Corporation follows the Rule of 40 metric as internal performance measurement and guiding principle, according to which the combined revenue growth rate and profitability margin should be equal to or greater than 40%.
F-Secure Corporation
January–March 2023 Interim Report
Financial performance
| EUR million | 1-3/2023 | 1-3/2022 | Change % | 1-12/2022 |
|---|---|---|---|---|
| Revenue | 27.8 | 27.4 | 1.6% | 111.0 |
| Partner channel | 22.0 | 21.7 | 1.7% | 88.1 |
| Direct channel | 5.8 | 5.7 | 1.2% | 23.0 |
| Cost of revenue | -2.5 | -2.1 | 18.4% | -9.3 |
| Gross Margin | 25.3 | 25.2 | 0.2% | 101.7 |
| % of revenue | 90.9% | 92.2% | 91.6% | |
| Other operating income | 0.2 | 0.2 | -1.8% | 1.1 |
| Operating expenses^{1)} | -15.0 | -12.8 | 17.9% | -58.3 |
| Sales & Marketing | -7.3 | -7.3 | 0.0% | -29.3 |
| R&D | -4.6 | -3.9 | 16.3% | -15.1 |
| Administration | -3.1 | -1.5 | 109.0% | -13.9 |
| Adjusted EBITDA^{1)} | 10.5 | 12.7 | -17.6% | 44.5 |
| % of revenue | 37.6% | 46.4% | 40.1% | |
| Adjusted EBITA^{1)} | 10.2 | 12.7 | -19.4% | 43.9 |
| % of revenue | 36.7% | 46.3% | 39.6% | |
| Items affecting comparability (IAC)^{2)} | -1.3 | -0.8 | 62.8% | -3.8 |
| Depreciation & amortization | -0.8 | -0.4 | 114.2% | -2.0 |
| EBIT | 8.3 | 11.5 | -27.6% | 38.8 |
| % of revenue | 30.0% | 42.1% | 34.9% | |
| Adjusted EBIT^{1)} | 9.7 | 12.3 | -21.6% | 42.5 |
| % of revenue | 34.7% | 45.0% | 38.3% | |
| Earnings per share (EUR)^{3)} | 0.04 | 0.05 | -26.9% | 0.17 |
| Shareholders' equity per share, EUR | 0.11 | 0.14 | ||
| Operating cash flow | 7.3 | 8.3 | -11.9% | 36.4 |
| Cash conversion % | 78.8% | 86.1% | 96.2% | |
| Deferred revenue | 21.2 | 20.2 | 4.7% | 20.9 |
| Net debt (+) / Net cash (-)^{4)} | -24.2 | 0.2 | -19.3 | |
| Gearing, % | -108.2 % | -63.0% | ||
| Equity ratio, % | 26.5% | 23.7% | 39.6% | |
| Personnel at the end of the period^{5)} | 414 | 255 | 62.4% | 376 |
The key figures and other financial information are presented on an actual basis for the income statement after July 2022 and for financial position after 30 June 2023, and on a carve-out basis for the prior periods. Refer to Note 1, Basis of Preparation.
1) Excluding Items Affecting Comparability (IAC) and depreciation and amortization.
2) A reconciliation of items affecting comparability is presented at the end of this report.
3) Based on the average number of shares after 30 June 2022 and on the number of shares upon formation of F-Secure on 30 June 2022 for other periods.
4) Prior to the demerger on 30 June 2022, no cash or certain lease liabilities, such as lease liabilities related to business premises or machinery and equipment, were allocated to F-Secure. From 30 June 2022 onwards, the figure includes F-Secure's interest-bearing liabilities, less interest-bearing receivables and cash and cash equivalents.
5) Prior to the demerger on 30 June 2022, the figure consisted of personnel directly employed by the consumer security business and did not include the share of personnel in shared group functions. At the end of Q1 2023, the figure comprises all personnel employed by F-Secure.
F-Secure Corporation
January-March 2023 Interim Report
Timo Laaksonen, President and CEO
The first quarter of 2023 was colored by a challenging market environment. Performance in the partner business continued on a solid track with retail partners doing well, while eCommerce experienced strong headwinds in new sales. Consumer sentiment, which continued to be soft, has resulted in a significant decline in device sales globally and it played a central role in the new sales development during the quarter. Overall, the demand for security solutions remained rather good, with the operating environment still impacted by continued high inflation and weaker consumer confidence across the board.
First quarter revenue increased by 1.6% with slightly positive impact from the US dollar. Revenue in the Direct Channel increased by 1.2%, with lower consumer sentiment impacting especially new business sales, following the trend of declining device sales. This was seen even in markets where the underlying market demand was relatively good. Partner Channel revenue increased by 1.7%. All in all, the first quarter's development was not satisfactory, but we expect the situation to improve already in the second quarter. The adjusted EBITA for the first quarter was EUR 10.2 (12.7) million, with an adjusted EBITA margin of 36.7% (46.3%). Ramp-up investments for future growth continued to burden our profitability.
Our journey to become the number one security experience company in the world proceeds. During the first quarter, we signed up with 3 new partners for F-Secure Total, and 8 existing partners signed up for F-Secure Total upgrade. This accelerates ARPU development as we convert existing customers from standalone products to all-in-one security suite. We expect a significant number of Total launches during Q2. The renewal performance continued on a solid level. The launch of the new generation F-Secure Total, enabling users to protect themselves from cyber threats with one simple solution, started in the Direct Channel in mid-February. The brand-new F-Secure Total includes all the security, privacy and identity protection features in one single app. The launch gained positive visibility, but the lower consumer confidence amid inflationary pressures as well as challenges in optimizing direct business performance contributed to lower new sales activity than expected.
During the first quarter, we launched F-Secure Sense with two new operators, one in Denmark and the other one in the Netherlands. At the end of 2022, we launched a new complementary product business cell called 'Embedded Security', and during the first quarter we signed up the second partner for these new solutions; a leading Fintech company in Asia with go-live at the end of Q2/2023. This partnership is not only significant from a business perspective, but it also represents a new vertical partnership, being therefore strategically relevant for F-Secure.
The F-Secure Total launch came alongside the new F-Secure brand identity, which signals who we are today: a globally operating consumer security company, with a vision to become the number one security experience company in the world. The new brand identity is all about Total, Sense and our Embedded Security solutions, and the seamless, simple experiences they deliver.
In March 2023 we joined forces with Allianz Partners, world leader in B2B2C insurance and assistance, to develop a comprehensive cyber security suite, combining cyber security prevention, protection and insurance, delivered through Allianz, F Secure and our partners. Through this partnership, which will roll out in the second half of 2023, Allianz Partners and F-Secure are responding to growing cyber security concerns faced by consumers today. This partnership aims to offer a comprehensive package of cyber security and cyber care insurance.
In line with our strategy, we continue to seek opportunities to grow in consumer cyber security also through M&A. After the review period, on 26 April 2023, we announced the planned acquisition of Lookout Life, the US-based consumer focused mobile security business arm of Lookout Inc. The planned acquisition of Lookout Life strengthens our position as a leading consumer security company in the fast-growing US
F-Secure Corporation
January-March 2023 Interim Report
market, the world's largest consumer cyber security market and a strategic focus country for F-Secure. The planned acquisition of Lookout Life is a significant step in expanding our business with 1st tier Communication Service Providers (CSP) and it further strengthens F-Secure's leadership position in the global CSP segment. Together with our fellows, I warmly welcome our new Lookout Life colleagues to the F-Secure fellowship.
Group performance
Revenue by sales channel
| EUR million | 1-3/2023 | 1-3/2022 | Change % | 1–12/2022 |
|---|---|---|---|---|
| Revenue from external customers | ||||
| Partner channel | 22.0 | 21.7 | 1.7% | 88.1 |
| Direct channel (E-commerce) | 5.8 | 5.7 | 1.2% | 23.0 |
| Total | 27.8 | 27.4 | 1.6% | 111.0 |
Revenue by geography
| EUR million | 1-3/2023 | 1-3/2022 | Change % | Comparable change* % | 1–12/2022 |
|---|---|---|---|---|---|
| Revenue from external customers | |||||
| Nordic countries | 9.9 | 9.6 | 3.4% | 3.5% | 39.4 |
| Rest of Europe | 12.0 | 12.4 | -3.2% | -3.2% | 48.7 |
| North America | 4.3 | 4.0 | 8.6% | 3.2% | 17.1 |
| Rest of the world | 1.5 | 1.4 | 12.2% | 19.8% | 5.9 |
| Total | 27.8 | 27.4 | 1.6% | 1.2% | 111.0 |
*Comparable change excludes the impact of exchange rates.
F-Secure Corporation
January-March 2023 Interim Report
7
January–March 2023
Revenue
F-Secure revenue increased by 1.6% to EUR 27.8 million (EUR 27.4 million) in the first quarter. First quarter revenue growth slowed down from previous quarters as consumers have become more cautious amid inflation, and this was especially evident within new sales. Comparable revenue growth was 1.2%, with slightly positive impact from the US dollar. The demand for our strategic growth products, F-Secure Total, Sense and ID Protection was rather good, but weakened consumer confidence has resulted in a decline in global device spending, the effect of which can be seen in new sales development on the Direct Channel.
Partner Channel
Revenue from the partner channel grew by 1.7% to EUR 22.0 million (EUR 21.7 million) with an increase in revenue especially in the Asia-Pacific (APAC) area. Growth in North America was supported by the strong US dollar. Revenue decreased in the rest of Europe, due to lower retail sales and a regulatory change in Poland in 2021 that had a continued negative impact on adoption rates on the local market. The roll-out of the latest version of F-Secure Total continued and progressed as planned in the partner channel during the quarter with three new partners having signed up for F-Secure Total. Retail sales within the partner channel is performing well.
Direct Channel
Revenue from the direct channel increased by 1.2% to EUR 5.8 million (EUR 5.7 million), with lower growth especially in new sales. Germany remained flat because of exceptionally high sales in March 2022. The renewal performance continued on a solid level. The global decline in device sales is particularly evident in the direct channel performance. Lower consumer sentiment and weaker market demand due to high general inflation resulted in slower growth, and the market's uncertainty is reflected especially in new sales. F-Secure Total was launched in mid-February in the direct channel, but due to challenges in optimizing direct business performance the new sales activity was lower than expected.
Gross margin
Gross margin was 25.3 million (EUR 25.2 million) and 90.9% of revenue (92.2%). The gross margin was on a slightly lower level due to increased costs in hosting and royalties. In connection with the demerger from WithSecure in May 2022, F-Secure and WithSecure entered into transitional services agreements ("TSA") to support the continuous operations of F-Secure. In the first quarter of 2023, the TSA costs were EUR 0.9 million in cost of revenue. These TSAs in cost of revenue are planned to terminate latest by the end of 2023.
Operating expenses
Operating expenses excluding depreciation and amortization were EUR 15.0 million (EUR 12.8 million) in the first quarter of 2023. Sales and marketing costs were EUR 7.3 million (EUR 7.3 million). Research and development (R&D) costs were EUR 4.6 million (EUR 3.9 million) and administration costs were EUR 3.1 million (EUR 1.5 million). Figures for comparison period are not fully comparable as the classification and allocation method used in carve-out vary from actuals, see more in Note 1, Basis of Preparation on page 18. R&D expenses grew as planned due to increased investments in product development and people. In connection with the demerger from WithSecure, F-Secure and WithSecure entered into transitional services agreements ("TSA") to support the continuous operations of F-Secure. TSA costs incurred in the first quarter were EUR 0.8 million in R&D and EUR 0.5 million in administration. Majority of the administration TSAs terminated at the end of 2022, and the rest of administration and all of R&D are planned to terminate by the end of 2023.
Items affecting comparability (IAC) totaled EUR 1.3 million (EUR 0.8 million), related to the preparations for the planned acquisition of Lookout Life (described in Alternative performance measures on page 23). The comparison period included EUR 0.8 million of items affecting comparability attributable to costs incurred due to the listing in the first half of 2022.
Depreciation and amortization totaled EUR 0.8 million (EUR 0.4 million). The increase is related to amortization of R&D as well as subleasing agreements F-Secure entered in for its office premises in connection with the demerger in May 2022.
F-Secure Corporation
January–March 2023 Interim Report
8
Profitability
Adjusted EBITA was EUR 10.2 million and 36.7% of revenue (EUR 12.7 million, 46.3%) for the first quarter of 2023. Items affecting comparability (IAC) were EUR 1.3 million (EUR 0.8 million). EBIT was EUR 8.3 million and 30.0% of revenue (EUR 11.5 million, 42.1%). Strategic investments in growth and R&D investments to strengthen our independence had a negative impact on profitability. The figures for the comparison period do not fully reflect F-Secure's profitability as a standalone entity.
Cash flow, financial position and financing
| EUR million | 1-3/2023 | 1-3/2022 | 1-12/2022 |
|---|---|---|---|
| Cash and cash equivalents | 27.7 | 23.0 | |
| Receivable from WithSecure | 10.3 | ||
| Interest-bearing receivables | 3.7 | 3.7 | |
| Lease liabilities, non-current | 0.7 | 0.1 | 0.9 |
| Lease liabilities, current | 1.0 | 0.1 | 1.0 |
| Other interest-bearing liabilities, non-current | 5.4 | 5.5 | |
| Capital Expenditure | 2.2 | 0.6 | 4.6 |
| % of revenue | 8.1% | 2.0% | 4.2% |
In January–March 2023, cash flow from operating activities before financial items and taxes amounted to EUR 9.3 million (EUR 10.8 million). Cash flow from operations was EUR 7.3 million (EUR 8.3 million) and the cash conversion rate was 78.8% (86.1%). Prior to the Demerger on 30 June 2022, no cash or cash equivalents were allocated to F-Secure in the carve-out financial information, instead it was presented as Receivable from WithSecure. The receivable from WithSecure was transferred as cash to F-Secure in July 2022, and as at 31 March 2023, cash and cash equivalents were EUR 27.7 million in total. Additionally, F-Secure has a committed revolving credit facility of EUR 10 million as at 31 March 2023 (undrawn).
Total assets were EUR 71.7 million (EUR 39.2 million) at the end of March 2023. Equity ratio followed by dividend payment was 26.5% (23.7%), while gearing was -108.2%. F-Secure net cash was EUR 24.2 million (net debt of EUR 0.2 million) at the end of March 2023.
As at 31 March 2023, current lease liabilities were EUR 1.0 million (EUR 0.1 million) and non-current lease liabilities were EUR 0.7 million (EUR 0.1 million). The lease liabilities relate to leases for office premises and cars. In May 2022, in connection with the Demerger from WithSecure, F-Secure entered lease agreements for its office premises.
Prior to completion of the demerger, WithSecure's consumer business conducted by its foreign subsidiaries was separated from the rest of the business into separate companies through business acquisitions or similar transactions in each relevant country. In these transactions, WithSecure or its subsidiary is the buying entity if the transferring business is a corporate security business, and F-Secure or its subsidiary is the buying entity if the transferring business is a consumer security business. The transaction prices vary between approximately EUR 70 thousand and EUR 3.0 million. The payback time for the resulting payables and receivables is primarily three years from the effective date of each local transaction, and prepayment is allowed. The interest rate for the unpaid transaction price varies by country. F-Secure's payables to WithSecure totaled EUR 5.4 million and the receivables from WithSecure totaled EUR 3.7 million, presented in the table above as Other interest-bearing liabilities (non-current) and interest-bearing receivables, respectively.
In January–March 2023, capital expenditure was EUR 2.2 million (EUR 0.6 million). Capital expenditure was mainly related to research and development and IT.
F-Secure Corporation
January–March 2023 Interim Report
9
Organization and leadership
At the end of March 2023, F-Secure had 414 (255) employees. The average number of personnel during January–March 2023 was 407 (250).
At the end of March 2023, the composition of the Leadership Team was the following:
| Timo Laaksonen | President & Chief Executive Officer |
|---|---|
| Sari Somerkallio | Chief Financial Officer |
| Toby White | Chief Technology Officer |
| Kitta Virtavuo | Chief People Officer |
| Paul Palmer | Senior Vice President, Partner Business |
| Perttu Tynkkynen | Senior Vice President, Direct Business |
| Michal Iwan | Vice President, Security Suite Business Team |
| Mikko Kestilä | Vice President, Operations |
| Richard Larcombe | Chief Marketing Officer |
| Antero Norkio | Senior Vice President, Corporate Development |
| Steven Offerein | Vice President, Portfolio Management |
| Dmitri Vellikok | Vice President, Network Security Business Team |
| TL Viswanathan | Vice President, Embedded Security |
- Prior to the demerger on 30 June 2022, the figure consisted of personnel directly employed by the consumer security business and did not include the share of personnel in shared group functions.
Shares and shareholders
On 2 March 2023, F-Secure issued 91,471 new shares to the plan participants of the company's Performance Share Plan and Restricted Share Plan. The new shares issued account for the rewards earned from the performance period 2020-2022 and retention period 2021-2022. On 10 March 2023 F-Secure issued 54,750 new shares to the second payment instalments' participants of the company's Performance Share Plan. The new shares issued account for the rewards earned from the performance period 2020-2022.
At the end of March 2023, the registered share capital of F-Secure was 80,000 and the company had 174,673,165 fully paid shares.
F-Secure has one share class and the company's shares are included in a book-entry system. The closing price of the share at the end of March 2023 was EUR 3.20. In January–March, the highest price paid was EUR 3.44 and the lowest EUR 2.66. In January–March, the share's volume weighted average price was EUR 3.13. The share trading volume in the review period was EUR 19 million and 6.0 million shares. On March 31, 2023, the company's market capitalization was EUR 558 million.
The number of registered shareholders at the end of March 2023 was 31,628, including nominee registers. The company did not hold any treasury shares at the commencement of trading or on the date of this report.
F-Secure Corporation
January–March 2023 Interim Report
10
Governance
Annual General Meeting 2023
The Annual General Meeting of F-Secure Corporation held on 23 March 2023 adopted the annual accounts and the consolidated annual accounts for the financial year ended 31 December 2022, discharged the members of the Company's Board of Directors and the CEO from liability, and approved all proposals made to the Annual General Meeting by the Board of Directors. The Annual General Meeting also approved the 2022 remuneration report for governing bodies. The resolution is of an advisory nature according to the Finnish Companies Act.
Resolution on the use of the profit shown on the balance sheet and the payment of dividend
The Annual General Meeting resolved that a dividend of EUR 0.07 per share will be paid for the financial year 30 June 2022 – 31 December 2022. The amount of the dividend is based on the Company's shorter than normal financial year 30 June 2022 – 31 December 2022. The dividend will be paid to shareholders who are registered in the Company's shareholders' register, maintained by Euroclear Finland Oy, on the record date for dividend payment on 27 March 2023. The dividend will be paid on 4 April 2023.
Composition and remuneration of the Board of Directors
The Annual General Meeting resolved that the number of the members of the Board of Directors shall be six (6). The current board members Pertti Ervi, Thomas Jul, Madeleine Lassoued, Risto Siilasmaa and Petra Teräsaho were re-elected to the Board of Directors. Sami Salonen, who belongs to the personnel of the corporation, was elected as a new member of the Board of Directors.
It was resolved that the remuneration of the members of the Board shall remain unchanged. The remuneration is as follows: EUR 80,000 annually for the Chair of the Board of Directors, EUR 48,000 annually for the Committee Chairs, EUR 38,000 annually for the members of the Board of Directors and EUR 12,667 for members employed by F-Secure. Furthermore, the travel expenses and other costs of the members of the Board of Directors directly related to board work are paid in accordance with the Company's policy in force from time to time and that each member of the Board of Directors of F-Secure is paid a predetermined travel fee in addition to travel expenses for meetings held outside their country of residence as follows: A separate meeting fee of EUR 1,000 is paid to the Board members travelling from another country to an on-site meeting within the European continent. If inter-continental travel is required, the fee is EUR 2,000. No separate meeting fee will be paid to members of the Board of Directors employed by the Company.
Election and remuneration of the Auditor
The Annual General Meeting re-elected the audit firm PricewaterhouseCoopers Oy as Auditor of the Company. Mr Janne Rajalahti, APA, was nominated as the Company's Responsible Auditor*. The Auditor will be remunerated in accordance with the invoice approved by the Company.
Authorising the Board of Directors to decide on the repurchase of the Company's own shares
The Annual General Meeting authorised the Board of Directors to resolve on the repurchase of a maximum of 10,000,000 of the Company's own shares in one or more instalments with funds belonging to the Company's unrestricted equity. The authorisation entitles the Board of Directors to decide on the repurchase also in deviation from the proportional holdings of the shareholders (directed repurchase). The authorisation comprises the repurchase of shares either in the public trading or otherwise in the market on the trading price determined for the shares in public trading on the date of purchase, or with a purchase offer to the shareholders in which case the repurchase price must be the same for all shareholders. The authorisation includes the right of the Board of Directors to decide on all other terms related to the repurchase of the Company's own shares.
*As announced on 21 April 2023, PricewaterhouseCoopers Oy has appointed APA Samuli Perälä as the responsible auditor of F-Secure Corporation. The change concerns the financial year 2023.
F-Secure Corporation
January–March 2023 Interim Report
The authorisation will remain valid until the conclusion of the next Annual General Meeting, in any case until no later than 30 June 2024. The authorisation cancels the Company's prior authorisations concerning the repurchase of the Company's own shares.
Authorising the Board of Directors to decide on the issuance of shares and special rights entitling to shares
The Annual General Meeting authorised the Board of Directors to decide on issuance, in one or more instalments, of new shares or shares possibly held by the Company through share issue and/or issuance of option rights or other special rights entitling to shares, referred to in Chapter 10, Section 1 of the Finnish Companies Act, so that by virtue of the authorisation altogether 15,000,000 shares may be issued and/or conveyed at the maximum.
The authorisation be used for the financing or execution of potential acquisitions or other arrangements or investments relating to the Company's business, for the implementation of the Company's incentive scheme or for other purposes subject to the Board of Directors' decision.
The authorisation entitles the Board of Directors to decide on all terms and conditions of the share issue and the issuance of special rights referred to in Chapter 10, Section 1 of the Finnish Companies Act. The authorisation thus includes the right to issue shares also in a proportion other than that of the shareholders' current shareholdings in the Company under the conditions provided in law, the right to issue shares against payment or without charge as well as the right to decide on a share issue without payment to the Company itself, subject to the provisions of the Finnish Companies Act on the maximum amount of treasury shares.
The authorisation will remain valid until the conclusion of the following Annual General Meeting, however, at the latest until 30 June 2024. The authorisation cancels the Company's prior authorisations concerning the issuance of shares and special rights entitling to shares.
Amendment of the Articles of Association
The Annual General Meeting resolved that § 10 of the Company's Articles of Association was amended to enable holding a general meeting entirely without a physical meeting venue as a so-called remote meeting. In its amended form, said provision of the Articles of Association will read as follows:
"Article 10 Place of a General Meeting
In addition to the company's domicile, a general meeting may be held in Espoo or Vantaa.
The Board of Directors may resolve on organising the General Meeting without a meeting venue whereby the shareholders exercise their decision-making power in full in real time during the meeting using telecommunication connection and technical means."
In other respects, no amendments were made to the Articles of Association.
Organisational meeting of the Board of Directors
In its organisational meeting the Board of Directors of F-Secure re-elected Pertti Ervi as Chairman of the Board of Directors. From among its members, the Board elected Pertti Ervi, Petra Teräsaho and Risto Siilasmaa as members of the Audit Committee.
All members are independent of the Company's major shareholders with the exception of Risto Siilasmaa, who is himself a significant shareholder of the Company. All members are independent of the Company with the exception of Sami Salonen, who is himself an employee of the Company.
F-Secure Corporation
January-March 2023 Interim Report
12
Risks and uncertainties
Risks related to the Demerger and the planned integration of Lookout Life
F-Secure's business organizations are dependent to a certain extent on certain functions provided by WithSecure and Lookout Life under transitional services agreements (TSA), and WithSecure's and Lookout Life's inability to provide these functions would have a material adverse effect on F-Secure's business operations.
The Demerger may have undesirable effects on the uninterrupted continuity of certain functions and processes central to F-Secure's operations, such as IT systems, which may result in interruptions and disturbances in F-Secure's business operations and its financial reporting.
F-Secure may not be able to implement its business organization and its independent strategy in the manner and timeframe currently anticipated, and it may not be able to realize any or all of the anticipated benefits.
F-Secure may be liable for certain obligations of WithSecure following the effective date of the Demerger and such obligations could have an adverse effect on F-Secure's financial position and results of operations.
Due to having transitional services agreements simultaneously with WithSecure and Lookout Life, F-Secure may not have the capabilities to end TSAs as currently planned. This may lead to a longer TSA period and an increase in F-Secure costs, or delays or otherwise negatively impacts planned future product releases and thereby reduces portfolio competitiveness.
F-Secure together with Lookout Life may not be able to successfully carve-out Lookout Life assets as planned, which increases TSA related costs. F-Secure may not be successful in migrating existing Lookout Life customers and partners to its technology platforms, which may increase operational costs or expose F-Secure to claims related to Service Level Agreements ("support penalties").
Risks related to F-Secure's operating environment
Intensifying competition in the consumer security market could lead to a general decline of the price level and affect F-Secure's ability to maintain or increase its market share, and the intensifying competition could thus have an adverse effect on F-Secure's revenue, profitability and market share.
F-Secure may not be able to keep up with rapid changes in customer demand, distribution channels, technologies and the evolution of malware and cyber security threats, which could have an adverse effect on F-Secure's reputation, competitiveness, results of operations and financial position.
Inflation has increased the risk of negative development of the cost structure. Rising energy prices could have an impact mainly on cost of revenue through cloud production cost. Inflation may have a negative impact due to lower consumer sentiment mostly indirectly due to decreasing sales of devices for which F-Secure products are typically purchased, but as well directly due to lower new service sales and services renewals.
Uncertainty on F-Secure's key markets, financial markets and general economic situation could have an adverse effect on F-Secure's business and growth opportunities and reduce the demand for the products and services offered by F-Secure. The Ukraine war has increased the uncertainty in the world and the risk of unexpected disruptions of the world economy. The war in Ukraine has caused some exceptional consequences to the cyber security landscape, such as highly visible governmental activities, as well as organized civilian response to the war efforts.
Risks related to F-Secure's business operations and strategy
The loss of key persons and skilled employees, the possible delay of new hires or the increase in personnel expenses could and weaken F-Secure's profitability and the standard of its services or solutions, hinder operations and prevent F-Secure from successfully developing and growing its business. F-Secure may not be able to retain key Lookout Life employees, which can negatively impact F-Secure business, carve-out and integration plans.
Actual, possible or perceived defects, disruptions or vulnerabilities in F-Secure products or services, including risks from cyber security attacks and errors or abuses by F-Secure employees and business partners, could harm F-Secure or its customers reputation, decrease sales, hinder operations, tie up personnel resources and give rise to claims for damages and increase other costs.
F-Secure Corporation
January–March 2023 Interim Report
Integration of F-Secure and Lookout Life product portfolios over time may prove to be more costly than estimated, take longer than planned, or may need to be kept separate to continue to serve different customer segments and their needs. This may increase F-Secure costs or negatively impact planned future product releases, their scope, availability and/or competitiveness.
If F-Secure's or Lookout Life's agreement with a significant business partner or Channel Partner ends or is terminated, or if F-Secure is unable to continue cooperating with a business partner or Channel Partner under acceptable terms, or if there is a failure by a Channel Partner to fulfil its duties, this could significantly decrease F-Secure revenue, increase its costs, hinder its operative business and weaken its ability to offer services or solutions to its customers.
Risks related to the technology used by F-Secure, intellectual property rights and other regulations
Any malfunctions in technologies, IT systems or network connections used by F-Secure or any security breaches could engender disruptions to F-Secure's service offering. F-Secure may not succeed in registering, protecting, managing, maintaining and enforcing its intellectual property rights, and F-Secure may be targeted by intellectual property right infringement claims which can cause significant costs. Leakage of personal data collected by F-Secure may have a material adverse effect on F-Secure's business and reputation and result in claims for damages as well as fines and orders imposed by the authorities.
Risks related to F-Secure's financial position and financing
The number of operations and sites outside the Eurozone in different currencies exposes F-Secure to a risk related to currency fluctuations. Changes in the exchange rates between currencies could have an adverse effect on F-Secure's revenue, results and financial position. F-Secure is exposed to transaction risks caused by purchasing and selling products and goods in currencies that are not F-Secure's home currencies especially USD after Lookout Life acquisition, investment risks in units abroad and translation risks that arise when investments in subsidiaries in different currencies are converted into F-Secure's operational currency, i.e., the euro.
Significant events after the review period
Acquisition of Lookout Life
On 26 April 2023, F-Secure announced the planned acquisition of Lookout Life, US-based consumer focused mobile security business arm of Lookout Inc. The acquisition will nearly triple F-Secure market presence in the United States and expand its diverse range of consumer security products. The acquisition is also a significant step in expanding F-Secure business with 1st tier Communication Service Providers and will further strengthen F-Secure leadership position in the global CSP segment.
The enterprise value is USD 223 million (approx. EUR 202 million). The acquisition will be financed with debt for which a new facilities agreement has been entered into with Danske Bank A/S and OP Corporate Bank plc. The new financing package consists of two facilities, (i) a EUR 202 million amortising term loan to finance the acquisition, and (ii) a EUR 20 million revolving loan facility to be used for general corporate purposes of the combined group. Both facilities hold a maturity of 3 years with two 1-year extension options. The existing undrawn revolving credit facility, procured in conjunction with the demerger from WithSecure, will be cancelled concurrently with closing of the transaction.
The transaction is subject to customary closing conditions and is expected to be completed in the second quarter of 2023. The closing of the transaction does not require approval from the competition or other authorities and is not subject to any financing conditions. Read more about the transaction from the Stock Exchange Release published on 26 April 2023.
Updated mid-term financial targets
At this point, F-Secure will keep its 2023 outlook unchanged until the schedule for the completion of the transaction is confirmed. Implications on financial outlook for 2023 will be announced later when a reasoned estimate can be made.
Subject to the closing of the transaction, the acquisition will significantly accelerate revenue and absolute EBITA growth and will thus have an impact on mid-term targets of F-Secure. In addition, F-Secure introduced a new financial target regarding leverage. New mid-term financial targets by 2026 are:
F-Secure Corporation
January-March 2023 Interim Report
14
- Growth (updated): Total revenue of more than EUR 200 million by 2026
- Profitability (unchanged): After initial growth investments, adjusted EBITA margin of above 42%
- Dividend Yield (unchanged): Around or above 50% of net profit on an annual basis.
- Leverage (new): Net debt/adjusted EBITDA ratio below 2.5x, excluding temporary impact from acquisitions.
F-Secure Corporation follows the Rule of 40 metric as internal performance measurement and guiding principle, according to which the combined revenue growth rate and profitability margin should be equal to or greater than 40%.
Change of responsible auditor
On April 21 2023, F-Secure announced that PricewaterhouseCoopers Oy, the firm of authorised public accountants acting as the auditor of F-Secure Corporation, has informed F-Secure Corporation that it has appointed APA Samuli Perälä as the responsible auditor of F-Secure Corporation to replace the previously appointed responsible auditor APA Janne Rajalahti. The change concerns the financial year 2023.
Financial calendar in 2023
In 2023, F-Secure Corporation will publish financial information as follows:
- Half-Year Financial Report for January-June 2023, Thursday, July 20, 2023
- Interim Report for January-September 2023, Wednesday, October 25, 2023
Helsinki, April 26, 2023
F-Secure Corporation
Board of Directors
F-Secure Corporation
January–March 2023 Interim Report
Financial information
Income Statement
| EUR thousand | 1-3/2023 | 1-3/2022 | Change % | 1-12/2022 |
|---|---|---|---|---|
| Revenue | 27,806 | 27,366 | 1.6% | 111,017 |
| Cost of revenue | -2,529 | -2,135 | 18.4% | -9,342 |
| Gross margin | 25,277 | 25,230 | 0.2% | 101,675 |
| Other operating income | 231 | 236 | -1.8% | 1,076 |
| Sales and marketing | -7,616 | -7,380 | 3.2% | -29,857 |
| Research and development | -5,094 | -4,258 | 19.6% | -16,434 |
| Administration 1) | -4,457 | -2,310 | 93.0% | -17,690 |
| EBIT | 8,342 | 11,518 | -27.6% | 38,770 |
| Financial income | 534 | 365 | 46.2% | 1,476 |
| Financial expenses | -451 | -157 | 187.7% | -1,691 |
| Profit before taxes | 8,425 | 11,726 | -28.2% | 38,556 |
| Income tax | -1,657 | -2,470 | -32.9% | -8,403 |
| Result for the period | 6,768 | 9,256 | -26.9% | 30,153 |
| Other comprehensive income | ||||
| Exchange difference on translation of foreign operations | -31 | -272 | -88.7% | 79 |
| Comprehensive income for the period | 6,737 | 8,984 | -25.0% | 30,233 |
| Earnings per share | 1-3/2022 | 1-3/2022 | Change % | 1-12/2022 |
| Earnings per share, basic and diluted, EUR | 0.04 | 0.05 | -26.9% | 0.17 |
Income statement information has been prepared on a carve-out basis for 1-6/2022 - refer to Note 1, Basis of Preparation.
1) Costs related to preparations for the acquisition increase administration expenses by EUR 1.3 million in Q1/2023 and costs related to listing increase administration expenses by EUR 0.8 million in Q1/2022 and EUR 3.8 million in 2022.
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January-March 2023 Interim Report
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Statement of financial position
| Assets | 31 Mar 2023 | 31 Mar 2022 | 31 Dec 2022 |
|---|---|---|---|
| Tangible assets | 182 | 26 | 154 |
| Right-of-use assets | 1,716 | 213 | 1,834 |
| Intangible assets | 10,732 | 6,126 | 9,064 |
| Deferred tax assets | 136 | 223 | 93 |
| Interest-bearing receivables | 3,665 | - | 3,693 |
| Total non-current assets | 16,431 | 6,587 | 14,838 |
| Inventories | 39 | 41 | 41 |
| Accrued income | 3,786 | 1,045 | 1,651 |
| Trade and other receivables | 23,645 | 21,258 | 23,040 |
| Receivable from WithSecure | - | 10,311 | - |
| Income tax receivables | 136 | - | 143 |
| Cash and cash equivalents 1) | 27,675 | - | 22,953 |
| Total current assets | 55,280 | 32,655 | 47,828 |
| Total assets | 71,711 | 39,242 | 62,667 |
| Shareholders' equity and liabilities | 31 Mar 2023 | 31 Mar 2022 | 31 Dec 2022 |
| --- | --- | --- | --- |
| Total Equity | 18,972 | 9,282 | 24,804 |
| Interest bearing liabilities, non-current | 6,141 | 88 | 6,381 |
| Deferred tax liabilities | 593 | 320 | 528 |
| Deferred revenue, non-current | 3,763 | 3,228 | 3,621 |
| Other non-current liabilities | 86 | 54 | 81 |
| Total non-current liabilities | 10,583 | 3,690 | 10,612 |
| Interest-bearing liabilities, current | 1,012 | 117 | 957 |
| Trade and other payables | 22,905 | 9,169 | 7,818 |
| Income tax liabilities | 831 | - | 1,152 |
| Deferred revenue, current | 17,408 | 16,984 | 17,324 |
| Total current liabilities | 42,156 | 26,270 | 27,251 |
| Total equity and liabilities | 71,711 | 39,242 | 62,667 |
Statement of financial position information has been prepared on a carve-out basis for 31 March 2022. Refer to Note 1, Basis of Preparation.
1) Prior to the Demerger on 30 June 2022, no cash was allocated to F-Secure in the carve-out financial information.
F-Secure Corporation
January–March 2023 Interim Report
Cash flow statement
| EUR thousand | 1-3/2023 | 1-3/2022 | 1-12/2022 |
|---|---|---|---|
| Cash flow from operations | |||
| Result for the period | 6,768 | 9,256 | 30,153 |
| Adjustments | 2,529 | 2,750 | 11,269 |
| Cash flow from operations before change in working capital | 9,297 | 12,006 | 41,423 |
| Change in net working capital | 28 | -1,213 | 2,960 |
| Cash flow from operations before financial items and taxes | 9,325 | 10,793 | 44,383 |
| Net financial items and taxes | -2,004 | -2,485 | -8,002 |
| Cash flow from operations | 7,321 | 8,308 | 36,381 |
| Cash flow from investments | |||
| Net Investments in tangible and intangible assets | -2,250 | -557 | -4,634 |
| Proceeds from sale of intangible and tangible assets | 0 | - | -4 |
| Cash flow from investments | -2,250 | -557 | -4,638 |
| Cash flow from financing activities | |||
| Repayments of lease liabilities | -257 | -39 | -612 |
| Increase in interest-bearing liabilities with WithSecure | - | - | 5,663 |
| Increase in interest-bearing receivables with WithSecure | - | - | -3,789 |
| Equity financing with WithSecure, net | - | -7,712 | -10,068 |
| Cash flow from financing activities | -257 | -7,751 | -8,806 |
| Change in cash | 4,814 | 22,937 | |
| Cash and cash equivalents at the beginning of the period | 22,953 | ||
| Effect of exchange rate changes on cash | -92 | 16 | |
| Cash and cash equivalents at period end 1) | 27,675 | 22,953 |
Cash flow statement information has been prepared on a carve-out basis for 1-6/2022 - refer to Note 1, Basis of Preparation.
1) Prior to the Demerger on 30 June 2022, no cash was allocated to F-Secure in the carve-out financial information.
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January-March 2023 Interim Report
18
Statement of changes in shareholder's equity
| EUR thousand | Invested equity and retained earnings | Share capital | Unrestricted equity reserve | Retained earnings | Translation difference | Total |
|---|---|---|---|---|---|---|
| Invested equity December 31, 2021 | 9,546 | 9,546 | ||||
| Result of the period | 9,256 | 9,256 | ||||
| Translation difference | -272 | -272 | ||||
| Total comprehensive income for the year | 8,984 | 8,984 | ||||
| Cost of share-based payments | 28 | 28 | ||||
| Equity transactions with WithSecure | -9,277 | -9,277 | ||||
| Invested equity March 31, 2022 | 9,282 | 9,282 | ||||
| Equity December 31, 2022 | 80 | 9,590 | 15,213 | -79 | 24,804 | |
| Result of the period | 6,768 | -31 | 6,737 | |||
| Total comprehensive income for the period | 6,768 | -31 | 6,737 | |||
| Cost of share-based payments | -342 | -342 | ||||
| Dividend 1) | -12,227 | -12,227 | ||||
| Equity March 31, 2023 | 80 | 9,590 | 9,411 | -110 | 18,972 |
Statement of changes in shareholder's equity has been prepared on a carve-out basis for 1-6/2022 - refer to Note 1, Basis of Preparation.
1) Dividend payable recorded following the approval on 23 March 2023
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January–March 2023 Interim Report
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1. Basis of preparation
F-Secure formed a separate legal group as of June 30, 2022. The financial information presented in this report is based on actual figures as an independent group after the consummation of the partial demerger and carve-out figures prior to the consummation of the partial demerger.
This interim report has been prepared in accordance with IAS 34, Interim Financial Reporting. For comparison period, the financial information is presented on an actual basis for the income statement Jul-Dec 2022 and the statement of financial position as at 31 December 2022, 30 September 2022 and 30 June 2022, and on a carve-out basis for income statement Jan-Jun 2022 and the statement of financial position as at 31 March 2022. The accounting principles and carve-out principles applied are consistent with those followed in the annual report 2022, note 1 Basis of preparation, accounting principles and carve-out principles.
The information of interim periods is unaudited. Percentages and figures presented herein may include rounding differences and therefore may not add up precisely to the totals presented. All figures are presented as EUR thousand unless otherwise stated.
Segment information
F-Secure has only one segment (consumer security). Revenue per sales channel and geographical information about revenue are presented in Note 2 Revenue.
Significant exchange rates and sensitivity to exchange rate changes
| One euro is | Closing rate | Average rate | ||||
|---|---|---|---|---|---|---|
| 31 Mar 2023 | 31 Mar 2022 | 31 Dec 2022 | 1-3/2023 | 1-3/2022 | 1-12/2022 | |
| USD | 1.0875 | 1.1101 | 1.0666 | 1.0706 | 1.1227 | 1.0555 |
| GBP | 0.8792 | 0.8460 | 0.8869 | 0.8816 | 0.8358 | 0.8509 |
| JPY | 144.83 | 135.17 | 140.66 | 142.39 | 129.49 | 137.28 |
FX sensitivity
The sensitivity of F-Secure's profit before taxes to foreign exchange rate fluctuations when all other variables are held constant is as follows:
| +/- 10% FX rate change (EUR million) | 31 Mar 2023 | 31 Mar 2022 | 31 Dec 2022 |
|---|---|---|---|
| USD | -0.7/+0.9 | +/-0.2 | -0.7/+0.8 |
F-Secure Corporation
January–March 2023 Interim Report
20
2. Revenue
Disaggregation of revenue
| Sales channels | 1-3/2023 | 1-3/2022 | 1-12/2022 |
|---|---|---|---|
| Revenue from external customers | |||
| Partner channel | 22,040 | 21,666 | 88,052 |
| Direct channel (E-commerce) | 5,766 | 5,700 | 22,965 |
| Total | 27,806 | 27,366 | 111,017 |
| Geographical information | 1-3/2023 | 1-3/2022 | 1-12/2022 |
| --- | --- | --- | --- |
| Revenue from external customers | |||
| Nordic countries | 9,920 | 9,594 | 39,426 |
| Rest of Europe | 12,009 | 12,406 | 48,653 |
| North America | 4,329 | 3,985 | 17,082 |
| Rest of world | 1,548 | 1,380 | 5,856 |
| Total | 27,806 | 27,366 | 111,017 |
3. Right-of-use, intangible and tangible assets
| 31 Mar 2023 | 31 Mar 2022 | 31 Dec 2022 | |
|---|---|---|---|
| Book value at the beginning of the period | 11,052 | 6,186 | 6,186 |
| Additions | 2,390 | 555 | 6,948 |
| Disposals | -0 | - | -112 |
| Depreciation and amortization | -810 | -378 | -1,969 |
| Translation differences | -2 | 2 | -2 |
| Book value at the end of the period | 12,630 | 6,365 | 11,052 |
| 1-3/2023 | 1-3/2022 | 1-12/2022 | |
| --- | --- | --- | --- |
| Depreciation and amortization by function | |||
| Sales and marketing | 273 | 39 | 601 |
| Research and development | 534 | 339 | 1,357 |
| Administration | 3 | - | 18 |
| Total depreciation and amortization | 810 | 378 | 1,976 |
F-Secure Corporation
January–March 2023 Interim Report
4. Financial assets and liabilities
The carrying amounts of F-Secure's financial assets and financial liabilities are considered to approximate their fair values based on their nature and short maturity. F-Secure's financial assets and liabilities are presented in the following tables.
| 31 Mar 2023 | Carrying value | Total | |
|---|---|---|---|
| Financial assets | Financial liabilities | ||
| Amortized cost | Amortized cost | ||
| Cash and cash equivalents | 27,675 | 27,675 | |
| Interest-bearing receivables | 3,665 | 3,665 | |
| Trade receivables | 17,643 | 17,643 | |
| Trade payables | 2,040 | 2,040 | |
| Lease liabilities | 1,722 | 1,722 | |
| Other interest-bearing liabilities | 5,431 | 5,431 | |
| 31 Mar 2022 | |||
| Receivable from WithSecure | 10,311 | 10,311 | |
| Trade receivables | 15,918 | 15,918 | |
| Trade payables | 1,605 | 1,605 | |
| Lease liabilities | 206 | 206 | |
| 31 Dec 2022 | |||
| Cash and cash equivalents | 22,953 | 22,953 | |
| Interest-bearing receivables | 3,693 | 3,693 | |
| Trade receivables | 18,243 | 18,243 | |
| Trade payables | 1,398 | 1,398 | |
| Lease liabilities | 1,840 | 1,840 | |
| Other interest-bearing liabilities | 5,498 | 5,498 |
In connection with the demerger process, WithSecure negotiated on behalf of F-Secure, a revolving credit facility with Nordea Bank Abp amounting to EUR 10.0 million with a maturity of three years and with an equity ratio-based margin grid. Financial covenants include Net Debt to EBITDA and an equity ratio and other standard covenants to similar unsecured transactions. The revolving credit facility transferred to F-Secure on the effective date on 30 June 2022 (undrawn).
Prior to completion of the demerger, WithSecure's consumer business conducted by its foreign subsidiaries was separated from the rest of the business into separate companies through business acquisitions or similar transactions in each relevant country. The transaction prices vary between approximately EUR 70 thousand and EUR 3.0 million. The payback time for the resulting payables and receivables is primarily three years from the effective date of each local transaction, and prepayment is allowed. The interest rate for the unpaid transaction price varies by country. F-Secure's payables totaled EUR 5.4 million and the receivables totaled EUR 3.7 million, presented in the table above as Other interest-bearing liabilities (non-current) and interest-bearing receivables, respectively.
As at 31 March 2023, F-Secure's lease liabilities relate to leases for office premises and cars.
F-Secure Corporation
January-March 2023 Interim Report
22
Financial liabilities
Contractual maturities of financial liabilities:
| 31 Mar 2023 | 31 Mar 2022 | 31 Dec 2022 | |
|---|---|---|---|
| Amount due for settlement within 12 months | 3,052 | 1,722 | 2,355 |
| Amount due for settlement after 12 months | 6,141 | 88 | 6,381 |
| Total | 9,193 | 1,810 | 8,737 |
Quarterly figures and alternative performance measures
Income statement quarterly
| 1-3/2023 | 10-12/2022 | 7-9/2022 | 4-6/2022 | 1-3/2022 | |
|---|---|---|---|---|---|
| Revenue | 27,806 | 28,254 | 27,935 | 27,463 | 27,366 |
| Cost of revenue | -2,529 | -2,376 | -2,225 | -2,606 | -2,135 |
| Gross margin | 25,277 | 25,878 | 25,710 | 24,856 | 25,230 |
| Other operating income | 231 | 260 | 407 | 173 | 236 |
| Sales and marketing | -7,616 | -7,121 | -6,501 | -8,855 | -7,380 |
| Research and development | -5,094 | -3,884 | -3,645 | -4,646 | -4,258 |
| Administration | -4,457 | -5,728 | -4,910 | -4,743 | -2,310 |
| EBIT | 8,342 | 9,405 | 11,061 | 6,786 | 11,518 |
| Financial net | 83 | -507 | 92 | -7 | 208 |
| Profit before taxes | 8,425 | 8,898 | 11,153 | 6,779 | 11,726 |
| Income tax | -1,657 | -2,010 | -2,409 | -1,514 | -2,470 |
| Profit for the period | 6,768 | 6,888 | 8,744 | 5,265 | 9,256 |
Income statement information has been prepared on a carve-out basis for 1-6/2022 - refer to Note 1, Basis of Preparation.
F-Secure Corporation
January–March 2023 Interim Report
23
Key figures
| EUR thousand | 1-3/2023 | 10-12/2022 | 7-9/2022 | 4-6/2022 | 1-3/2022 |
|---|---|---|---|---|---|
| Revenue | 27,806 | 28,254 | 27,935 | 27,463 | 27,366 |
| Revenue growth % | 1.6% | 4.3% | 5.3% | 4.3% | |
| Adjusted EBITDA | 10,467 | 10,024 | 11,658 | 10,124 | 12,704 |
| % of revenue | 37.6% | 35.5% | 41.7% | 36.9% | 46.4% |
| EBITA | 8,888 | 9,769 | 11,410 | 7,123 | 11,855 |
| % of revenue | 32.0% | 34.6% | 40.8% | 25.9% | 43.3% |
| Adjusted EBITA | 10,204 | 9,769 | 11,410 | 10,079 | 12,663 |
| % of revenue | 36.7% | 34.6% | 40.8% | 36.7% | 46.3% |
| EBIT | 8,342 | 9,405 | 11,061 | 6,786 | 11,518 |
| % of revenue | 30.0% | 33.3% | 39.6% | 24.7% | 42.1% |
| Adjusted EBIT | 9,657 | 9,405 | 11,061 | 9,742 | 12,325 |
| % of revenue | 34.7% | 33.3% | 39.6% | 35.5% | 45.0% |
| Profit for the period | 6,768 | 6,888 | 8,744 | 5,265 | 9,256 |
| % of revenue | 24.3% | 24.4% | 31.3% | 19.2% | 33.8% |
| Earnings per share, basic and diluted, EUR¹⁾ | 0.04 | 0.04 | 0.05 | 0.03 | 0.05 |
| R&D costs | 5,094 | 3,884 | 3,645 | 4,646 | 4,258 |
| % of revenue | 18.3% | 13.7% | 13.0% | 16.9% | 15.6% |
| Capital expenditure | 2,250 | 1,885 | 1,609 | 583 | 557 |
| % of revenue | 8.1% | 6.7% | 5.8% | 2.1% | 2.0% |
| Deferred revenue | 21,171 | 20,945 | 19,775 | 20,613 | 20,212 |
| Operating cash flow | 7,321 | 10,692 | 10,306 | 7,075 | 8,308 |
| Net debt (+) / Net cash (-)²⁾ | -24,187 | -19,308 | -10,763 | -1,823 | 206 |
| Equity ratio % | 26.5% | 39.6% | 32.4% | 18.8% | 23.7% |
| Shareholder's equity per share, EUR | 0.11 | 0.14 | 0.10 | ||
| P/E ratio | 20.6 | 17.9 | 12.2 | ||
| Gearing, % | -108.2% | -63.0% | -37.8% | ||
| Cash conversion | 78.8% | 108.1% | 82.5% | 113.1% | 86.1% |
| Personnel at the end of the period³⁾ | 414 | 376 | 361 | 368 | 255 |
The Key Figures are presented on an actual basis on and after Jul 2022 and for financial position on an actual basis after 30 June 2022, and on a carve-out basis prior to that. Refer to Note 1, Basis of Preparation.
¹⁾ Based on the average number of shares on and after Q3/2022, and on the number of shares upon formation of F-Secure on 30 June 2022 for prior periods.
²⁾ Prior to the demerger on 30 June 2022, no cash or certain lease liabilities, such as lease liabilities related to business premises or machinery and equipment, were allocated to F-Secure. From 30 June 2022 onwards, the figure includes F-Secure's interest-bearing liabilities, less interest-bearing receivables and cash and cash equivalents.
³⁾ Prior to the demerger on 30 June 2022, the figure consisted of personnel directly employed by the consumer security business and did not include the share of personnel in shared group functions. After the end of Q2 2022, the figure comprises all personnel employed by F-Secure.
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January–March 2023 Interim Report
24
Alternative Performance Measures
In addition to EBIT, F-Secure uses Adjusted EBIT, Adjusted EBITA and Adjusted EBITDA as key performance indicators when measuring performance between periods. Adjusted EBIT, Adjusted EBITA and Adjusted EBITDA exclude items that affect comparability. Items affecting comparability are associated with strategic reviews and listing costs. Adjusted EBIT, Adjusted EBITA and Adjusted EBITDA are presented in addition to EBIT to reflect the underlying business performance and to enhance comparability between periods. F-Secure believes that these comparable alternative performance measures provide meaningful supplemental information by excluding items outside normal business operations, which reduce comparability between the periods.
Reconciliation between adjusted EBITDA, EBITDA, adjusted EBITA, EBITA, Adjusted EBIT and EBIT
| 1-3/2023 | 1-3/2022 | 1-12/2022 | |
|---|---|---|---|
| Adjusted EBITDA | 10,467 | 12,704 | 44,510 |
| Adjustments to EBITDA | |||
| Costs related to planned acquisition | -1,315 | ||
| Costs related to listing | -808 | -3,764 | |
| EBITDA | 9,152 | 11,896 | 40,746 |
| Depreciation and amortization | -810 | -378 | -1,976 |
| EBIT | 8,342 | 11,518 | 38,770 |
| 1-3/2023 | 1-3/2022 | 1-12/2022 | |
| Adjusted EBITA | 10,204 | 12,663 | 43,921 |
| Adjustments to EBITA | |||
| Costs related to planned acquisition | -1,315 | ||
| Costs related to listing | -808 | -3,764 | |
| EBITA | 8,888 | 11,855 | 40,157 |
| Amortization | -547 | -337 | -1,387 |
| EBIT | 8,342 | 11,518 | 38,770 |
| 1-3/2023 | 1-3/2022 | 1-12/2022 | |
| Adjusted EBIT | 9,657 | 12,325 | 42,534 |
| Adjustments to EBIT | |||
| Costs related to planned acquisition | -1,315 | ||
| Costs related to listing | -808 | -3,764 | |
| EBIT | 8,342 | 11,518 | 38,770 |
F-Secure Corporation
January–March 2023 Interim Report
Classification of adjusted costs in operating expenses
| 1-3/2023 | 1-3/2022 | 1-12/2022 | |
|---|---|---|---|
| Operating expenses | |||
| Sales and marketing | -7,616 | -7,380 | -29,857 |
| Research and development | -5,094 | -4,258 | -16,434 |
| Administration | -4,457 | -2,310 | -17,690 |
| Total | -17,167 | -13,948 | -63,981 |
| Depreciation and amortization by function | |||
| Sales and marketing | -273 | -39 | -601 |
| Research and development | -534 | -339 | -1,357 |
| Administration | -3 | - | -18 |
| Total | -810 | -378 | -1,976 |
| Items affecting Comparability (IAC) by function | |||
| Administration | -4,457 | -2,310 | -17,690 |
| Less: Costs related to planned acquisition | -1,315 | ||
| Less: Costs related to listing | -808 | -3,764 | |
| Administration excluding IAC | -3,142 | -1,502 | -13,927 |
| Operating expenses less depreciation, amortization and IAC | |||
| Sales and marketing | -7,342 | -7,341 | -29,257 |
| Research and development | -4,560 | -3,919 | -15,076 |
| Administration | -3,139 | -1,502 | -13,927 |
| Total | -15,041 | -12,762 | -58,260 |
F-Secure Corporation
January-March 2023 Interim Report
Calculation of key figures
| Key figure | Definition |
|---|---|
| EBITDA | EBIT + Depreciation, amortization and impairment |
| EBITA | EBIT + Amortization and impairment |
| EBIT | Result before taxes and net financial items |
| Adjusted EBITDA | EBITDA before items affecting comparability |
| Adjusted EBITA | EBITA before items affecting comparability |
| Adjusted EBIT | EBIT before items affecting comparability |
| Items affecting comparability | Items affecting comparability are associated with planned acquisition, strategic reviews and cost related to listing |
| Operating expenses | Sales and marketing, research and development, and administration expenses |
| Capital expenditure | Corresponds to the Statement of Cash Flows line item Investments in intangible and tangible assets |
| Operating cash flow | Corresponds to the Statement of Cash Flows line item Cash flow from operations |
| Net debt (+) / Net cash (-) | Interest-bearing liabilities – Interest-bearing receivables - Cash and cash equivalents |
| Equity ratio, % | Total equity/Total assets |
| Gearing, % | (Interest bearing liabilities – cash and bank) / Total equity |
| Cash conversion, % | (Adjusted EBITDA –Capital expenditure –/+ Change in net working capital) / Adjusted EBITDA |
| Earnings per share, EUR | Profit attributable to equity holders of the company / Weighted average number of outstanding shares |
| Shareholders' equity per share, EUR | Equity attributable to equity holders of the company / Number of outstanding shares at the end of period |
| P/E ratio | Closing price of the share (at period end) / Earnings per share (annualized) |
F-Secure Corporation
January-March 2023 Interim Report
F-Secure.
Tammasaarenkatu 7, 00180, Helsinki
www.f-secure.com