Quarterly Report • Apr 30, 2020
Quarterly Report
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Highlights CEO Samu Konttinen Financial performance Tables
CONTENTS
in the previous year, unless
otherwise stated.
| • Revenue increased by 3% to EUR 54.8 million (53.4m) |
02 Highlights |
|---|---|
| • Revenue from corporate security increased by 4% to EUR 30.4 million (29.4m) |
03 CEO Samu Konttinen |
| • Revenue from consumer security remained at the previous year's level, and was EUR 24.4 million (24.0m) |
04 Financial performance |
| • Adjusted EBITDA was EUR 7.2 million (5.0m), 13.2% of revenue (9.4%) |
11 F-Secure products and services |
| • Earnings per share (EPS) was EUR 0.01 (EUR –0.01) |
14 Key ratios and other key figures |
| • Cash flow from operating activities before financial items and taxes was EUR 9.6 million (–0.3m) |
15 Tables |
| • After the quarter end F-Secure withdrew its financial outlook for 2020 due to COVID-19 related market uncertainties |
Figures in this report are unaudited. Figures in brackets |
| In 2020 there are no changes to accounting principles impacting | refer to the corresponding period |
In 2020 there are no changes to accounting principles impacting comparability to previous year.
During the first quarter F-Secure's revenue increased by 3% to EUR 54.8 million, with corporate security growing by 4%. Revenue from consumer security remained at the previous year's level. In terms of profitability, the quarter was at the high end of our expectations with adjusted EBITDA margin of 13%.
Despite the COVID-19 pandemic F-Secure has ensured full business continuity to the customers. The transition to remote ways of working has been smooth and all cybersecurity operations protecting our customers have remained unaffected. Until now, we have mainly seen the impact from COVID-19 on our consulting business.
Managed Detection and Response (MDR) solutions had strong revenue growth in Q1. The quarter was characterized by winning some considerable-sized deals in demanding customer verticals. These customers included for instance a media company, an industrial manufacturer, and a critical infrastructure company. These examples are a good representation of the industry verticals where cyber security is critical and which therefore seek the best-in-class solution to counter targeted attacks and to ensure their capability to respond to incidents 24/7.
Endpoint security business continued slight and steady growth. The renewal performance remained good, which is always a great testimony of product quality meeting the mark. We also saw a positive quarter in the new sales of our comprehensive Endpoint Protection Suite across most regions.
Cyber security consulting revenue grew by 3%, and was negatively impacted by a particularly large project in the Nordics coming to the finalization phase with a reduced scope. Apart from this, the revenue of consulting grew strongly in line with the last quarters of 2019. The COVID-19 pandemic has caused some operational disruption, but we have also managed to create new delivery methods to cope with the situation. However, by the end of the quarter we started to see the market uncertainties clearly impacting new sales and we believe that consulting will be negatively affected due to the pandemic.
The revenue from consumer security remained at the previous year's level. The resilient operator channel continued its stable performance. During Q1, F-Secure ID PROTECTION achieved an important business milestone when Nifty (JPN) launched the service as the first of our operator partners. Carrying on from the last quarter of 2019, direct business also performed well.
F-Secure's portfolio is well diversified into different cyber security submarkets, making the company quite resilient against external market shocks. The company has explored different scenarios and will implement potential mitigating actions when necessary. The long-term outlook for F-Secure's business continues to be attractive, as the cyber security market fundaments have not changed.
CEO Samu Konttinen
| EUR m | 1–3/2020 | 1–3/2019 | Change % | 1–12/2019 |
|---|---|---|---|---|
| Revenue | 54.8 | 53.4 | 3 % | 217.3 |
| Consumer security | 24.4 | 24.0 | 1 % | 94.8 |
| Corporate security | 30.4 | 29.4 | 4 % | 122.5 |
| Products | 18.6 | 17.8 | 4 % | 72.5 |
| Consulting | 11.9 | 11.6 | 3 % | 50.0 |
| Cost of revenue | –12.4 | –12.6 | –1 % | –50.5 |
| Gross Margin | 42.4 | 40.8 | 4 % | 166.8 |
| Other operating income 1) | 0.5 | 0.2 | 169 % | 1.5 |
| Operating expenses 1) | –35.7 | –36.0 | –1 % | –145.1 |
| Sales & Marketing | –23.7 | –24.1 | –1 % | –99.4 |
| Research & Development | –8.9 | –8.7 | 2 % | –33.2 |
| Administration | –3.1 | –3.2 | –4 % | –12.4 |
| Adjusted EBITDA 2) | 7.2 | 5.0 | 44 % | 23.2 |
| of revenue, % | 13.2 % | 9.4 % | 10.7 % | |
| Adjustment to operating income | 12.5 | |||
| Restructuring | 0.4 | –4.6 | ||
| EBITDA | 7.6 | 5.0 | 51 % | 31.1 |
| of revenue, % | 13.9 % | 9.4 % | 14.3 % | |
| Depreciation & amortization | –3.2 | –3.3 | –4 % | –13.6 |
| Impairment | –6.3 | |||
| PPA amortization | –0.9 | –1.1 | –21 % | –4.1 |
| EBIT | 3.6 | 0.6 | 7.2 | |
| of revenue, % | 6.5 % | 1.1 % | 3.3 % | |
| Adjusted EBIT 2) | 4.0 | 1.7 | 131 % | 9.6 |
| of revenue, % | 7.4 % | 3.3 % | 4.4 % | |
| Earnings per share, (EUR) 3) | 0.01 | –0.01 | 0.02 | |
| Deferred revenue | 73.7 | 71.4 | 3 % | 73.9 |
| Cash flow from operations before financial items and taxes | 9.6 | –0.3 | 19.0 | |
| Cash and financial assets at fair value through P&L | 26.3 | 23.4 | 12 % | 25.5 |
| ROI, % | 15.9 % | 2.7 % | 7.8 % | |
| Equity ratio, % | 49.2 % | 41.3 % | 19 % | 49.0 % |
| Gearing, % | 19.5 % | 36.5 % | –47 % | 20.8 % |
| Personnel, end of period | 1,688 | 1,680 | 0 % | 1,696 |
1) Excluding Items Affecting Comparability (IAC) and depreciation and amortization
2) Adjustments are material items outside normal course of business associated with acquisitions, integration, restructuring, gains or losses from sales of businesses and other items affecting comparability. Reconciliation and a breakdown of adjusted costs is in note 5 of the Table Section of this report.
3) Based on the weighted average number of outstanding shares during the period 157,855,454 (1–3/2020).
Revenue per business, % of revenue
Adjusted EBITDA, MEUR and % of revenue
Total revenue in January–March increased by 3% to EUR 54.8 million (53.4 m). The share of corporate security of total revenue was 56% (55%).
Revenue from corporate security increased by 4% year-on-year to EUR 30.4 million (29.4m).
Revenue from corporate security products increased by 4% to EUR 18.6 million (17.8m).
Revenue from endpoint protection (EPP) solutions increased from the previous year's level. The renewal performance with existing EPP installations was good. New sales of Endpoint Protection Suite was successful in most of the sites. We see an increasing demand for solutions that are sold adjacent to traditional EPP, such as cloud platform security and vulnerability management.
Revenue from Managed Detection and Response (MDR) solutions (F-Secure Countercept) increased significantly compared to the previous year. Renewal performance was good during Q1. New F-Secure Countercept deals were closed in customer verticals such as industrial manufacturing, critical infrastructure and media, in several European countries. The new customer acquisition of advanced solutions such as MDR may show signs of slowdown if the COVID-19 pandemic prolongs due to high touch sales approach and long sales cycles.
Revenue from cyber security consulting increased by 3% to EUR 11.9 million (11.6m).
In the Nordics, a particularly large project came to its finalization phase, which meant a reduction in scope when compared to the previous year. The revenue from the rest of Cyber security consulting continued to grow strongly. The business performance was robust for instance in Singapore and in the Nordics during Q1. However, some negative impact from the COVID-19 pandemic was seen in new sales and consulting will be negatively affected in the coming quarters.
Revenue from consumer security remained at previous year's level and was EUR 24.4 million (24.0m) during the quarter.
Revenue from the operator channel remained at the previous year's level. The business developed as expected continuing its steady course. Importantly, the feedback from operators related to the market environment has been reassuring despite the uncertainties caused by the COVID-19 pandemic.
Revenue from direct sales to consumers remained at the previous year's level. The renewal performance including our bundled solution, F-Secure TOTAL, continued at a good level. The beginning of the year was good especially for ecommerce while the retail sales were impacted slightly by the pandemic, although it forms a considerably smaller share of direct sales to consumers.
Gross margin increased by EUR 1.6 million to 42.4 million (40.8m) and was 77% of revenue (77%). Relative gross margin has remained stable since the acquisition of MWR InfoSecurity.
Operating expenses excluding depreciation and amortization remained at the previous year's level, and was 35.7 million (36.0m).
Depreciation and amortization decreased by EUR 0.3 million to 4.1 million (4.4m), where PPA amortization from acquisitions was EUR 0.9 million (1.1m).
Adjusted EBITDA was EUR 7.2 million and 13.2% of revenue (5.0m, 9.4%) and adjusted EBIT was EUR 4.0 million and 7.4% of revenue (1.7m, 3.3%). Profitability was improved as revenue increased but relative gross margin and operating expenses remained at previous year's level.
EBIT was EUR 3.6 million and 6.5% of revenue (0.6m, 1.1%) including EUR 0.9 million of PPA amortization (1.1m).
Cash flow from operating activities before financial items and taxes improved significantly and was 9.6m (–0.3m). Increase was due to improved result and change in net working capital. Cash flow from operations was EUR 8.4 million (–1.4m).
Payout of MWR InfoSecurity earnout is presented in cash flow from investments (EUR 3.7m).
| EUR m | 1–3/2020 | 1–3/2019 | Change % | 1–12/2019 |
|---|---|---|---|---|
| Cash and financial assets at fair value through P&L | 26.3 | 23.4 | 12 % | 25.5 |
| Interest bearing liabilities, non-current | 28.8 | 36.8 | –22 % | 29.5 |
| Interest bearing liabilities, current | 11.1 | 11.8 | –6 % | 11.9 |
| Capital expenditure | 2.7 | 1.8 | 49 % | 12.8 |
| Capitalized development expenses | 1.6 | 1.2 | 30 % | 6.2 |
| ROI, % | 15.9 % | 2.7 % | 7.8 % | |
| Equity ratio, % | 49.2 % | 41.3 % | 19 % | 49.0 % |
| Gearing, % | 19.5 % | 36.5 % | –47 % | 20.8 % |
Financial position remained solid. The company has liquid assets of EUR 26.3 million (23.4m) and interest bearing bank debt of EUR 31.0 million (37.0m) out of which repayments in 2020 are due at the end of second quarter (3m) and at the year end (3m). To guarantee liquidity F-Secure has EUR 23 million committed revolving credit facility that was undrawn at the end of the quarter. The interest bearing liabilities in the table contain also IFRS 16 lease liabilities.
At the end of the quarter, F-Secure had 1,688 employees, which shows a net decrease of 8 employees (0%) since the beginning of the year (1,696 on 31 December 2019).
At the end of the quarter, the composition of the Leadership Team was the following:
Samu Konttinen (CEO), Antti Hovila (Strategy, Brand & Communications), Kristian Järnefelt (Consumer Security), Juha Kivikoski (Business Security), Ian Shaw (Cyber Security Consulting), Tim Orchard (Managed Detection & Response) Jari Still (Information & Business Services), Jyrki Tulokas (Security Research & Technologies), Eriikka Söderström (CFO), and Eva Tuominen (People Operations & Culture).
The total number of company shares is currently 158,798,739. The company's registered shareholders' equity is EUR 1,551,311.18. The company held 770,895 of its own shares at the end of the quarter.
The company holds its own shares to be used in the incentive compensation plans, for making acquisitions or implementing other arrangements related to the company's business, to improve the company's financial structure or to be otherwise assigned or cancelled.
The company currently has performance- and market-based long-term share-based incentive programs for key employees and a matching share plan for all employees. In relation to matching share plan F-Secure announced on 6 April 2020 that it had transferred without consideration a total of 93,029 of the company's own shares to its employees who participated in a matching share plan established for the personnel. Following the transfer, F-Secure Corporation holds a total of 677,866 of its own shares.
The following risks and uncertainties can adversely impact F-Secure's sales, profitability, financial condition, market share, reputation, share price or the achievement of the company's short- and long-term objectives. The matters described here should not be construed as exhaustive list. The most significant risks are:
Cyber Security Consulting will be negatively affected by the COVID-19 pandemic. It might also cause a slowdown in the new sales of software products and Managed Detection and Response (MDR) service if the situation prolongs. From the balance sheet perspective the impairment of goodwill can occur if the cyber security market's long term outlook were to change. Additionally, an increase in credit losses and delayed customer payments may occur in shorter term.
Endpoint security market is highly competitive. Operating system manufacturers have increased their focus to built-in security features and at the same time new vendors and technologies have emerged. F-Secure has to succeed in maintaining in-depth understanding of cyber security threat landscape, hacker techniques and technologies used as well as continue to innovate in defense technologies.
The cyber security market is consolidating due to economies of scale. F-Secure has to succeed in finding the right acquisition targets, as well as successfully integrating the target companies.
In a rapidly evolving industry it is vital to keep the products and services relevant to the customers while introducing new technologies to the market on-time. F-Secure is driving technology simplification and R&D effectivization initiatives as well as investments to artificial intelligence to ensure a competitive product portfolio.
Competition for capable personnel is increasing and there is structural undersupply of talent in the cyber security industry. F-Secure is continuously developing and adopting new ways of recruitment, building its own talent and knowledge pools and investing to training and development of personnel.
F-Secure operates globally in different countries, and local regulation is exposing the company to geopolitical risks, including, for instance, unfavorable tax matters or export controls, BREXIT being one example of these risks. Changes in regulations or their application, applicable to current or new technologies or services, may adversely affect F-Secure's business operations.
Increased amount of operations and sites outside the Eurozone in different currencies exposes F-Secure to an increased risk related to currency fluctuations.
The growing number and variety of connected devices as well as digital services continues to create security challenges for both businesses and individuals. Combined with the increasing complexity of IT systems, tightening regulation and increasing significance of geopolitics, these trends are driving demand for security products and services. While advanced cyber-attacks are becoming more common and persistent, criminals are targeting companies of all sizes along with consumers by taking advantage of vulnerabilities in popular software, both traditional and new connected devices as well as online services. Apart from pure criminal activity, governments and hacktivists use vulnerabilities and malware for things including espionage and surveillance.
Attacks against corporations often go undetected for months. As most companies lack relevant capabilities for detection and response, it is estimated that the demand for both Endpoint Detection and Response (EDR) solutions and Managed Detection and Response (MDR) will continue to increase rapidly. The new detection and response capabilities are supplementing existing endpoint protection solutions (EPP), causing the EPP market to be in transition. Overall, as organizations are increasingly adopting cloud services, they seek managed security services and cloud-based delivery to help them maintain control of their security.
The consumer security software market continues to be impacted by the changing device landscape, app stores and online sales overall. On the whole, the number of connected smart home devices is growing very rapidly, and as a result telecommunication operators are investing heavily in upgrading connectivity and introducing new security related services into their offerings. As consumers become increasingly aware of the threats to their privacy and security, they seek to buy more comprehensive solutions to secure their digital lives. This creates opportunities for innovative new security products.
In corporate security F-Secure provides a broad range of cyber security products, managed detection and response solutions and cyber security consulting to companies globally with a focus on the mid-market and local enterprises. The majority of revenue comes from product sales through a large network of solution and service provider partners.
MDR: F-Secure Countercept – Advanced threat hunting and continuous response capabilities against targeted attacks delivered as a managed service. Provides 24/7 monitoring, alerts within minutes, and gives clear guidance on how to respond
Response – Customer- or partnermanaged solution for detecting and responding to targeted attacks
– Cloud-hosted endpoint security
F-Secure Business Suite – On-site deployed endpoint security
– Content level security for Salesforce's customers
Prediction solutions
management platform
and management platform
phishd – Anti-phishing behavior
F-Secure Radar – Vulnerability scanning
F-Secure provides premium consultancy services for all areas of cyber security on four continents, including services such as:
In consumer security the company provides a comprehensive range of endpoint protection, privacy and password management solutions, and security for all the connected devices at home, both separately and as a bundled premium offering (F-Secure TOTAL). The majority of consumer sales comes from the sale of endpoint protection products through the operator channel, but the company also sells consumer products through various online and retail partners, as well as the company's own web shop.
F-Secure SAFE – Easy to use antivirus and internet security, including Family rules to let you set healthy boundaries for your children's device use
F-Secure FREEDOME – VPN that hides your online activity to ensure anonymous and secure internet browsing
F-Secure KEY – A light and easy password manager, allowing you to store your passwords securely and access them from any device
F-Secure SENSE – Protects every device in your connected home while serving as a fast, technologically advanced wireless router. The required router is sold separately or provided by the operator
Combines personal information monitoring against data breaches with password manager to create strong passwords
On 24 April F-Secure withdrew EUR 10 million from the committed Revolving Credit Facility to strengthen its liquidity further.
F-Secure withdrew its financial outlook for 2020 on 9 April due to COVID-19 related market uncertainties and provides a new outlook as soon as deemed possible. The update of the outlook section in financial reporting is subject to release of new outlook.
F-Secure's portfolio is well diversified into different cybersecurity sub-markets making the company's vulnerability to external market shocks limited. Until now F-Secure's software product businesses to both corporates and consumers have not been adversely impacted by the pandemic. The market uncertainty is not expected to have a significant effect on contract renewals. However, during the rest of the year F-Secure sees possible slowdown in the new sales of software products and Managed Detection and Response (MDR) service. Also more project based Cyber Security Consulting is likely to be negatively affected at the times of economic uncertainty.
The long-term outlook of all F-Secure's business areas continues to be attractive as the cybersecurity market fundaments have not changed.
F-Secure has secured the health and safety of its employees and ensured full business continuity to the customers. The company continues to successfully deliver services according to service level agreements (SLAs) despite the company working fully remotely.
In order to prepare for the uncertainties in the future, F-Secure has explored different scenarios and will implement potential mitigating actions if necessary.
For reference, in December 2019 F-Secure issued the following outlook for 2020:
The Annual General Meeting is scheduled for Tuesday, May 12, 2020 at 14:00 EEST. Due to the coronavirus situation, the Company keeps the meeting as short as possible and limits the number of participants as much as possible in order to reduce the risk of infection and to comply with authority regulations.
More information is available at https://www.f-secure.com/en/investors/governance.
During the year 2020, F-Secure Corporation will publish financial information as follows:
Eriikka Söderström, CFO, F-Secure
+358 40 6691844
Henri Kiili, Investor Relations and Treasury Director, F-Secure
+358 40 8405450
| PROFITABILITY | 1–3/2020 | 1–3/2019 | 1–12/2019 |
|---|---|---|---|
| Revenue | 54.8 | 53.4 | 217.3 |
| Consumer security | 24.4 | 24.0 | 94.8 |
| Corporate security | 30.4 | 29.4 | 122.5 |
| Products | 18.6 | 17.8 | 72.5 |
| Consulting | 11.9 | 11.6 | 50.0 |
| Gross margin | 42.4 | 40.8 | 166.8 |
| Gross margin, % of revenue | 77.3% | 76.5% | 76.7% |
| Operating expenses | –39.3 | –40.4 | –173.7 |
| Operating expenses for adjusted EBITDA | –35.7 | –36.0 | –145.1 |
| Adjustment to other income | 12.5 | ||
| Adjusted EBITDA | 7.2 | 5.0 | 23.2 |
| Adjusted EBITDA, % of revenue | 13.2% | 9.4% | 10.7% |
| EBITDA | 7.6 | 5.0 | 31.1 |
| EBITDA, % of revenue | 13.9% | 9.4% | 14.3% |
| Adjusted EBIT | 4.0 | 1.7 | 9.6 |
| Adjusted EBIT, % of revenue | 7.4% | 3.3% | 4.4% |
| EBIT | 3.6 | 0.6 | 7.2 |
| EBIT, % of revenue | 6.5% | 1.1% | 3.3% |
| ROI, % | 15.9% | 2.7% | 7.8% |
| ROE, % | 11.4% | –8.3% | 4.7% |
| CAPITAL STRUCTURE | |||
| Equity ratio, % | 49.2% | 41.3% | 49.0% |
| Gearing, % | 19.5% | 36.5% | 20.8% |
| Interest bearing liabilities | 39.9 | 48.6 | 41.3 |
| Cash and financial assets at FVTPL | 26.3 | 23.4 | 25.5 |
| SHARE RELATED | |||
| Earnings per share, basic and diluted | 0.01 | –0.01 | 0.02 |
| Shareholders' equity per share, EUR | 0.44 | 0.44 | 0.48 |
| OTHER | |||
| Capitalized expenditure, MEUR excl. acquisition | 2.7 | 1.8 | 12.8 |
| Capitalized development expenses, MEUR | 1.6 | 1.2 | 6.2 |
| Depreciation and amortization excl. PPA amortization, MEUR | –3.2 | –3.3 | –13.6 |
| Depreciation and amortization | –4.1 | –4.4 | –24.0 |
| Personnel, average | 1,682 | 1,667 | 1,701 |
| Personnel, period end | 1,688 | 1,680 | 1,696 |
The Interim Report has been prepared in accordance with IAS 34 standard Interim Financial Reporting. The accounting principles applied in the interim report are the same as in the annual report 2019.
All figures in the following tables are EUR million unless otherwise stated. This interim report is unaudited.
| 1–3/2020 | 1–3/2019 | Change % | 1–12/2019 | |
|---|---|---|---|---|
| Revenue | 54.8 | 53.4 | 3% | 217.3 |
| Cost of revenue | –12.4 | –12.6 | –1% | –50.5 |
| Gross margin | 42.4 | 40.8 | 4% | 166.8 |
| Other operating income 1) | 0.5 | 0.2 | 169% | 14.0 |
| Sales and marketing | –25.3 | –25.7 | –2% | –106.0 |
| Research and development | –10.3 | –10.2 | 1% | –39.5 |
| Administration 2) | –3.7 | –4.6 | –18% | –28.1 |
| EBIT | 3.6 | 0.6 | 7.2 | |
| Financial net | –1.3 | –1.5 | –16% | –2.9 |
| Result before taxes | 2.3 | –1.0 | 4.2 | |
| Income taxes | –0.2 | –0.4 | –52% | –0.9 |
| Result for the period total | 2.1 | –1.4 | 3.4 | |
| Other comprehensive income | ||||
| Exchange differences on translating foreign operations | –8.9 | 3.5 | 5.1 | |
| Total comprehensive income (parent company owners) | –6.8 | 2.1 | 8.5 | |
| Earnings per share | 1–3/2020 | 1–3/2019 | Change % | 1–12/2019 |
| Earnings per share, basic and diluted, EUR | 0.01 | –0.01 | 0.02 |
1) Contingent consideration liability from MWR InfoSecurity acquisition was decreased by EUR 12.5m during 2019 and EUR 6m impairment of goodwill was booked during 2019. 2) Restructuring during 2019 increases administration costs by EUR 4.6m. Impairment of goodwill (EUR 6.0m) during 2019 additionally increases full year administration costs.
| Assets | 31 Mar 2020 | 31 Mar 2019 | 31 Dec 2019 |
|---|---|---|---|
| Tangible assets | 14.0 | 16.7 | 15.6 |
| Intangible assets | 35.1 | 38.2 | 36.5 |
| Goodwill | 80.4 | 93.2 | 88.4 |
| Deferred tax assets | 3.1 | 3.9 | 3.1 |
| Other receivables | 0.6 | 0.6 | 0.6 |
| Total non-current assets | 133.2 | 152.6 | 144.2 |
| Inventories | 0.1 | 0.4 | 0.1 |
| Accrued income | 4.3 | 2.5 | 3.5 |
| Trade and other receivables | 47.2 | 53.7 | 53.9 |
| Income tax receivables | 4.6 | 5.3 | 2.3 |
| Financial asset at fair value through profit and loss | 0.1 | 0.1 | 0.1 |
| Cash and bank accounts | 26.2 | 23.4 | 25.4 |
| Total current assets | 82.5 | 85.4 | 85.2 |
| Total assets | 215.7 | 238.0 | 229.4 |
| Shareholders' equity and liabilities | 31 Mar 2020 | 31 Mar 2019 | 31 Dec 2019 |
|---|---|---|---|
| Equity | 69.9 | 68.8 | 76.2 |
| Interest bearing liabilities, non-current | 28.8 | 36.8 | 29.5 |
| Deferred tax liability | 2.7 | 4.4 | 2.5 |
| Deferred revenue, non-current | 19.2 | 17.5 | 17.6 |
| Other non-current liabilities | 1.0 | 1.1 | 1.9 |
| Obligatory provisions | 0.5 | 3.0 | |
| Total non-current liabilities | 52.3 | 59.8 | 54.4 |
| Interest bearing liabilities, current | 11.1 | 11.8 | 11.9 |
| Trade and other payables | 25.0 | 42.4 | 29.0 |
| Income tax liabilities | 3.1 | 1.3 | 1.5 |
| Deferred revenue, current | 54.4 | 53.9 | 56.4 |
| Total current liabilities | 93.5 | 109.4 | 98.8 |
| Total liabilities and equity | 215.7 | 238.0 | 229.4 |
| 1–3/2020 | 1–3/2019 | 1–12/2019 | |
|---|---|---|---|
| Cash flow from operations | |||
| Result for the financial year | 2.1 | –1.4 | 3.4 |
| Adjustments | 6.2 | 6.9 | 22.2 |
| Cash flow from operations before change in working capital | 8.3 | 5.5 | 25.6 |
| Change in net working capital | 1.3 | –5.8 | –6.6 |
| Cash flow from operating activities before financial items and taxes | 9.6 | –0.3 | 19.0 |
| Net financial items and taxes | –1.2 | –1.0 | –0.5 |
| Cash flows from operating activities | 8.4 | –1.4 | 18.5 |
| Cash flow from investments | |||
| Net investments in tangible and intangible assets | –2.6 | –1.7 | –8.5 |
| Acquisition of subsidiaries, net of cash acquired 1) | –3.7 | ||
| Cash flow from investments | –6.3 | –1.7 | –8.5 |
| Cash flow from financing activities | |||
| Repayments of interest bearing liabilities | –1.5 | –1.5 | –12.5 |
| Cash flow from financing activities | –1.5 | –1.5 | –12.5 |
| Change in cash | 0.7 | –4.6 | –2.5 |
| Cash and bank at the beginning of the period | 25.4 | 27.8 | 27.8 |
| Effect of exchange rate changes on cash | 0.1 | 0.2 | 0.1 |
| Cash and bank at period end | 26.2 | 23.4 | 25.4 |
1) Payout of MWR InfoSecurity earnout is presented in cash flow from investments.
| Share capital | Share premium fund |
Unrestricted equity reserve |
Treasury shares | Retained earnings |
Translation difference |
Total | |
|---|---|---|---|---|---|---|---|
| Equity 31 Dec 2018 | 1.6 | 0.2 | 6.1 | –2.8 | 63.1 | –1.8 | 66.3 |
| Total comprehensive income for the year | –1.4 | 3.5 | 2.1 | ||||
| Cost of share based payments | 0.1 | 0.5 | –0.2 | 0.4 | |||
| Equity 31 Mar 2019 | 1.6 | 0.2 | 6.2 | –2.2 | 61.5 | 1.9 | 68.8 |
| Share capital | Share premium fund |
Unrestricted equity reserve |
Treasury shares | Retained earnings |
Translation difference |
Total | |
|---|---|---|---|---|---|---|---|
| Equity 31 Dec 2019 | 1.6 | 0.2 | 6.2 | –2.1 | 67.1 | 3.2 | 76.1 |
| Total comprehensive income for the year | 2.1 | –8.9 | –6.8 | ||||
| Cost of share based payments | 0.2 | 0.5 | –0.1 | 0.6 | |||
| Equity 31 Mar 2020 | 1.6 | 0.2 | 6.4 | –1.7 | 69.1 | –5.7 | 69.9 |
| Average rates | End rates | |||||
|---|---|---|---|---|---|---|
| One Euro is | 1–3/2020 | 1–3/2019 | 1–12/2019 | 31 Mar 2020 | 31 Mar 2019 | 31 Dec 2019 |
| USD | 1.1088 | 1.1451 | 1.1195 | 1.0956 | 1.1235 | 1.1234 |
| GBP | 0.8486 | 0.8762 | 0.8759 | 0.8864 | 0.8583 | 0.8945 |
| JPY | 120.55 | 125.70 | 121.96 | 118.90 | 124.45 | 121.59 |
Changes in exchange rates on profit before taxes
| +/–10% FX rate change | 1–3/2020 | 1–12/2019 |
|---|---|---|
| USD | +/–0.2 | +/–0.3 |
| GBP | +/–0.3 | +/–0.1 |
| JPY | +/–0.3 | +/–0.1 |
The Group has one segment (security).
| 1–3/2020 | 1–3/2019 | 1–12/2019 | |
|---|---|---|---|
| Revenue | 54.8 | 53.4 | 217.3 |
| Cost of revenue | –12.4 | –12.6 | –50.5 |
| Gross margin | 42.4 | 40.8 | 166.8 |
| Other operating income | 0.5 | 0.2 | 14.0 |
| Sales and marketing | –25.3 | –25.7 | –106.0 |
| Research and development | –10.3 | –10.2 | –39.5 |
| Administration | –3.7 | –4.6 | –28.1 |
| EBIT | 3.6 | 0.6 | 7.2 |
| Financial net | –1.3 | –1.5 | –2.9 |
| Result before taxes | 2.3 | –1.0 | 4.2 |
| By sales channels | 1–3/2020 | 1–3/2019 | 1–12/2019 |
|---|---|---|---|
| Consumer security | 24.4 | 24.0 | 94.8 |
| Corporate security | 30.4 | 29.4 | 122.5 |
| Products | 18.6 | 17.8 | 72.5 |
| Consulting | 11.9 | 11.6 | 50.0 |
| Total revenue | 54.8 | 53.4 | 217.3 |
| By geographical area | 1–3/2020 | 1–3/2019 | 1–12/2019 |
| Nordic countries | 17.3 | 18.5 | 72.5 |
| Europe excl. Nordics | 24.9 | 23.5 | 96.2 |
| North America | 5.6 | 4.5 | 19.7 |
| Rest of the world | 7.0 | 6.9 | 28.9 |
Total revenue 54.8 53.4 217.3
| 31 Mar 2020 | 31 Mar 2019 | 31 Dec 2019 | |
|---|---|---|---|
| Book value at the beginning of the period | 140.6 | 134.2 | 134.2 |
| Right-of-use assets at the beginning of the period | 12.8 | 12.8 | |
| Additions | 2.7 | 2.0 | 12.8 |
| Disposals | –0.1 | 0.0 | –0.2 |
| Depreciation and amortization | –4.0 | –4.4 | –18.0 |
| Impairment | –6.6 | ||
| Translation differences | –9.5 | 3.5 | 5.4 |
| Book value at the end of the period | 129.5 | 148.1 | 140.6 |
Goodwill from MWR InfoSecurity acquisition was tested for impairment during 2019. As a result an impairment of EUR 6.0 million was booked.
Fair value hierarchy levels 1 to 3 are based on the degree to which the fair value is observable:
Level 1: Fair values of financial instruments are based on quoted prices in active markets for identical assets and liabilities.
Level 2: Financial instruments are not subject to trading in active and liquid markets. The fair values of financial instruments can be determined based on quoted market prices and deduced valuation.
Level 3: Measurement of financial instruments is not based on verifiable market information, and information on other circumstances affecting the value of the instruments is not available or verifiable.
| Carrying value | Fair value | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Financial assets | Financial liabilities |
Hierarchy level | |||||||
| FVTPL | Amortised cost |
Amortised cost |
Total | 1 | 2 | 3 | Total | ||
| Cash and bank | 26.2 | 26.2 | 26.2 | 26.2 | |||||
| Trade and other receivables | 47.2 | 47.2 | 47.2 | 47.2 | |||||
| Financial assets at FVTPL | 0.1 | 0.1 | 0.1 | 0.1 | |||||
| Bank loans | 31.0 | 31.0 | 31.0 | 31.0 | |||||
| Lease liabilities | 8.9 | 8.9 | 8.9 | 8.9 | |||||
| Trade payables | 3.5 | 3.5 | 3.5 | 3.5 | |||||
| Contractual maturities of financial liabilities | Less than 1 year |
1 to 2 years | 2 to 3 years | 3 to 4 years | Over 5 years | Total contractual cash flows |
Carrying amount |
||
| Bank loans | 6.0 | 6.0 | 6.0 | 13.0 | 31.0 | 31.0 | |||
| Lease liabilities | 5.1 | 2.4 | 0.8 | 0.5 | 0.1 | 8.9 | 8.9 | ||
| Total financial liabilities | 11.1 | 8.4 | 6.8 | 13.5 | 0.1 | 39.9 | 39.9 |
The financing agreement is subject to conventional loan covenants which the Group complied with throughout the reporting period.
F-Secure has included certain non-IFRS based alternative performance measures (APM) as of the second quarter of 2018. Alternative performance measures are provided to reflect the underlying business performance, and to exclude certain non-operational or non-cash valuation items affecting comparability (IAC). The aim is to improve comparability, and alternative performance measures should not be regarded as substitutes for IFRS based measures. Alternative performance measures include EBITDA, adjusted EBITDA and adjusted EBIT. Depreciations, amortization and impairments are excluded from EBITDA. Also, the adjusted EBITDA and adjusted EBIT exclude IACs which are material items outside normal course of business. These items are associated with acquisitions, integration costs, gains and losses from sales of businesses and other items affecting comparability.
| 1–3/2020 | 1–3/2019 | 1–12/2019 | |
|---|---|---|---|
| Adjusted EBITDA | 7.2 | 5.0 | 23.2 |
| Adjustments to EBITDA | |||
| Change in fair value of contingent consideration | 12.5 | ||
| Costs related to restructuring | 0.4 | –4.6 | |
| EBITDA | 7.6 | 5.0 | 31.1 |
| Depreciation, amortization and impairment losses | –4.1 | –4.4 | –24.0 |
| EBIT | 3.6 | 0.6 | 7.2 |
| 1–3/2020 | 1–3/2019 | 1–12/2019 | |
| Adjusted EBIT | 4.0 | 1.7 | 9.6 |
| Adjustments to EBIT | |||
| Change in fair value of contingent consideration | 12.5 | ||
| PPA amortization | –0.9 | –1.2 | –4.1 |
| Impairment of goodwill | –6.3 | ||
| Costs related to restructuring | 0.4 | –4.6 | |
| EBIT | 3.6 | 0.6 | 7.2 |
| Operating Expenses 1–3/2020 |
Costs relating to restructuring |
Expenses for adjusted EBIT |
Depreciation | PPA amortization | Operating Expenses for Adjusted EBITDA 1–3/2020 |
|
|---|---|---|---|---|---|---|
| Sales and marketing | –25.3 | –25.3 | 1.5 | –23.7 | ||
| Research and development | –10.3 | –10.3 | 1.5 | –8.9 | ||
| Administration | –3.7 | –0.4 | –4.1 | 0.2 | 0.9 | –3.1 |
| Operating expenses | –39.3 | –0.4 | –39.7 | 3.2 | 0.9 | –35.7 |
| INCOME STATEMENT QUARTERLY | 1–3/2020 | 10–12/2019 | 7–9/2019 | 4–6/2019 | 1–3/2019 |
|---|---|---|---|---|---|
| Revenue | 54.8 | 56.1 | 53.8 | 54.1 | 53.4 |
| Cost of revenue | –12.4 | –12.9 | –12.6 | –12.5 | –12.6 |
| Gross margin | 42.4 | 43.2 | 41.2 | 41.6 | 40.8 |
| Other operating income | 0.5 | 3.9 | 0.4 | 9.6 | 0.2 |
| Sales and marketing | –25.3 | –27.2 | –25.0 | –28.1 | –25.7 |
| Research and development | –10.3 | –10.3 | –9.7 | –9.4 | –10.2 |
| Administration | –3.7 | –8.9 | –4.4 | –10.3 | –4.6 |
| EBIT | 3.6 | 0.8 | 2.5 | 3.3 | 0.6 |
| Financial net | –1.3 | –0.3 | –1.1 | 0.1 | –1.5 |
| Result before taxes | 2.3 | 0.4 | 1.4 | 3.4 | –1.0 |
| Income taxes | –0.2 | 0.1 | –0.5 | 0.0 | –0.4 |
| Result for the period total | 2.1 | 0.5 | 0.8 | 3.4 | –1.4 |
| EARNINGS PER SHARE QUARTERLY | |||||
| Earnings per share, basic and diluted, EUR | 0.01 | 0.00 | 0.01 | 0.02 | –0.01 |
| KEY FIGURES | |||||
| Gross margin, % of revenue | 77.3% | 77.0% | 76.6% | 76.9% | 76.5% |
| Adjusted EBITDA | 7.2 | 6.6 | 6.8 | 4.8 | 5.0 |
| Adjusted EBITDA, % of revenue | 13.2% | 11.8% | 12.7% | 8.9% | 9.4% |
| Adjusted EBIT | 4.0 | 3.1 | 3.4 | 1.4 | 1.7 |
| Adjusted EBIT, % of revenue | 7.4% | 5.6% | 6.3% | 2.5% | 3.3% |
| ROI, % | 15.9% | 4.3% | 10.6% | 11.9% | 2.7% |
| ROE, % | 11.4% | 2.7% | 4.8% | 19.8% | –8.3% |
| Equity ratio, % (YTD) | 49.2% | 49.0% | 45.9% | 44.3% | 41.3% |
| Gearing, % (YTD) | 19.5% | 20.8% | 28.3% | 30.0% | 36.5% |
| Interest bearing liabilities | 39.9 | 41.3 | 45.0 | 46.5 | 48.6 |
| Cash and financial assets at FVTPL | 26.3 | 25.5 | 24.9 | 25.5 | 23.4 |
| Capitalized expenditure, MEUR excl. acquisition | 2.7 | 3.3 | 2.0 | 5.6 | 1.8 |
| Capitalized development expenses, MEUR | 1.6 | 1.5 | 1.4 | 2.2 | 1.2 |
| Depreciation and amortization excl. PPA amortization, MEUR | –3.2 | –3.2 | –3.5 | –3.4 | –3.3 |
| Depreciation and amortization, MEUR | –4.1 | –4.7 | –4.3 | –10.6 | –4.4 |
| Personnel, period end | 1,688 | 1,696 | 1,727 | 1,710 | 1,680 |
| Total equity | |||||
|---|---|---|---|---|---|
| Equity ratio, % | Total assets – deferred revenue | � 100 | |||
| Result before taxes + financial expenses (annualized) | |||||
| ROI, % | � 100 Total assets – non-interest bearing liabilities (average) |
||||
| Result for the period (annualized) | � 100 | ||||
| ROE, % | Total equity (average) | ||||
| Gearing, % | Interest bearing liabilities – cash and bank and financial assets through profit and loss | � 100 | |||
| Total equity | |||||
| Profit attributable to equity holders of the company | |||||
| Earnings per share, EUR | Weighted average number of outstanding shares | ||||
| Equity attributable to equity holders of the company | |||||
| Shareholders' equity per share, EUR | Number of outstanding shares at the end of period | ||||
| Operating expenses | Sales and marketing, research and development, and administration costs | ||||
| EBITDA | EBIT + Depreciation, amortization and impairment |
F-Secure Corporation Tammasaarenkatu 7 P.O. Box 24, 00181 Helsinki Tel. +358 9 2520 0700 [email protected] www.f-secure.com/investors
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