STRONG REVENUE GROWTH IN CORPORATE SECURITY
F-Secure Q1 / 2019
Key takeaways from Q1
Key figures
Business updates
Outlook
Financials
AGENDA
Revenue growth improved in both businesses
▪ Consumer security business growing again
▪ Corporate security growth improved from the previous quarter
▪ Endpoint protection business stable, strong renewals
▪ MDR revenue growing, pipeline strong and renewal rates high, new sales lower than during the previous quarter
▪ Consulting revenue in strong growth, large extension deal signed in the Nordics
▪ Adjusted EBITDA as expected
KEY TAKEAWAYS FROM Q1
KEY FIGURESEUR m 1–3/2019 1–3/2018 Change 1–12/2018
Revenue 53.4 43.1 24 % 190.7
Consumer security 24.0 23.8 1 % 94.9
Corporate security 29.4 19.4 52% 95.9
Products 17.8 14.8 21 % 63.8
Consulting 11.6 4.6 158% 32.0
Adjusted EBITDA1) 2) 5.0 3.8 31 % 17.4
% of revenue 9.4 % 8.9 % 9.1 %
M & A expenses -3.6
EBITDA 2) 5.0 3.8 31 % 13.8
Depreciation & amortization 2) -3.3 -1.5 121% -6.8
PPA amortization -1.2 -0.1 916% -2.5
EBIT 0.6 2.3 -74 % 4.6
Earnings per share (EUR) -0.01 0.00 -344 % 0.01
Deferred revenue 71.4 67.2 6% 72.9
Cash and financial assets at fair value
through P&L23.4 88.5 -74% 27.8
Personnel, end of period 1,680 1,145 47% 1,666
1) Adjustments are material items outside
normal course of business associated with
acquisitions, integration, gains or losses from
sales of businesses, and other items affecting
comparability.
2) IFRS 16 had a positive impact of EUR 1.6
million to adjusted EBITDA, while having the
negative impact of EUR -1.5 million on
depreciations & amortizations.
ADJUSTED EBITDA ACCORDING TO EXPECTATIONS
Adjustments are material items outside normal course of business associated with acquisitions, integration, gains or losses from sales of businesses and other items affecting comparability.
M€ % of revenue
▪ Profitability impacted by investments in product development as well as sales and marketing, and cyber security consulting expansion
▪ IFRS 16 had a positive impact of EUR 1.6 million to adjusted EBITDA, while having the same negative impact on depreciations & amortizations
1,52,1
4,23,7
2,3
0,5 0,4
1,40,6
1,3
1,4
1,6
1,6
1,5
1,5 1,8
2,0
1,8
0,1
1,1
1,2
1,2
0,4
2,71,6
7
14
9 9 9
0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
0
1
2
3
4
5
6
7
8
9
10
12
Q218
9
Q117
0.1
Q217
0.3
Q317
0.1
6
12
Q417 Q1/19Q118
2.9
0.1
Q318
0.1
0,6
0.1
4.0
5.8
5.4
3.8
Q418
6.0
4.95.0
0,02.7
IFRS 16 impact
Depreciation & Amortization (excl. IFRS 16)
Adjusted EBITDA
PPA Amortization
M&A costs
Reported EBIT
Adjusted EBITDA, % of revenue
IMPACT OF IFRS 16 IN Q1/2019
▪ F-Secure adopted IFRS 16 Leases standard using modified approach on 1 January 2019. Comparative information has not been restated.
▪ Under IFRS 16 almost all leases are recognized on the balance sheet as the distinction between operating and finance leases was removed. Right-of-use assets (leased item) and corresponding lease liability was recognized according to the standard in opening balance sheet on 1 January 2019.
▪ For the full year 2019, the impact on adjusted EBITDA is estimated to be around EUR +6.0 million
Income statement
Cost of revenue Decreased (EUR +0.1 million)
Operating expenses Decreased (EUR +1.5 million)
EBITDA Increased (EUR +1.5 million)
Depreciation & amortization Increased (EUR -1.5 million)
Financial expenses Increased (EUR -0.1 million)
Balance sheet
Interest-bearing liabilities Increased (EUR +11.6 million)
Tangible assets Increased (+11.6 million)
Cash flow
Cash flow from operating activities Increased (EUR +1.5 million)
Cash flow from financing activities Decreased (-1.5 million)
Key figures
Adjusted EBITDA Increased (EUR +1.6 million)
Adjusted EBIT Increased (0.1 million)
Equity ratio, % Decreased (-3.1 p.p)
Gearing, % Increased (+16.8 p.p.)
CORPORATE SECURITY REVENUE GREW BY +52% IN Q1
Revenue from products increased by 21%
▪ Revenue from endpoint security increased from previous year▪ Renewals at a high level▪ New customer acquisition lower than during
previous year, but with good progress in several countries
▪ Customers are supplementing their EPP solutions with new EDR functionalities, revenue impact small but customer and partner reactions positive
▪ Revenue from MDR increased significantly from previous year
▪ Customer satisfaction and renewal rates very high, Sales pipeline continued to develop positively
▪ Significant quarterly variance in new customer acquisition, Q1/19 was lower than Q4/18 also due to seasonality
CORPORATE SECURITY PRODUCTS
Revenue from consulting increased by 158%
▪ F-Secure continued to win new deals and expand existing accounts in many demanding verticals
▪ Revenue increased in all regions with growth being especially strong in Singapore, South Africa and the Nordics
▪ In the Nordics extension to a large project deal was also signed during the quarter
CYBER SECURITY CONSULTING
88
We have beaten the following brands in the AV-TEST Best Protection category for business products in 2018:
Bitdefender Sophos
Kaspersky Lab Avast
Trend Micro G Data
Microsoft Seqrite
McAfee Palo Alto Networks
We continuously get awarded for best protection
F-Secure whitepaper on continuous response: https://img.en25.com/Web/FSecure/%7B59c4c3cc-69ac-4330-9344-bfbb8ce793d5%7D_Rethinking_Response_Whitepaper_-_F-Secure.pdf
COMPANIES ARE STRUGGLING TO DETECT AND RESPOND
Most breaches took only minutes to execute…
… but months to detect!
Gartner’s sample vendors:▪ Alert Logic, Arctic Wolf, CrowdStrike,
eSentire, mnemonic, F-Secure, Paladion, Rapid7, Red Canary
F-SECURE COUNTERCEPT IS THE ONLY MDR SOLUTION DESIGNED TO SKILL-UP YOUR TEAM
“Demand for MDR has been particularly strong in the midmarket. It provides a turnkey service that fills gaps in security expertise and 24/7 operations for incident response and threat containment. Organizations that have not yet invested in, or are underinvested in, detection and response technologies and internal capabilities should consider MDR services.”
- Gartner
CONSUMER SECURITY REVENUE GROWING AGAIN IN Q1
Revenue increased slightly from the previous year
▪ Business developed as expected, and the company continued to work closely with its broad global network of partners to increase product activation
▪ Negotiations with operators and router manufacturers to include F-Secure SENSE’s capabilities in their router offering progressed well with several partners
OPERATOR CHANNEL
Revenue increased slightly from the previous year
▪ Renewals remained at a good level
▪ F-Secure continued to focus on pushing the sales of the company’s broad consumer portfolio to increase average revenue per customer
DIRECT SALES
Endpointprotection (EPP)
(Consumer & Corporate security)
Endpoint Detection &
Response (EDR)
Managed Detection &
Response (MDR)
Cyber Security Consulting
SCALABLE SOFTWARE BUSINESS COMPLEMENTED BY EXPERT SERVICES
20152018 2016
Software business
Software business
Service center
Service business
SCALABILITY
78% of total revenue 22% of total revenue
OUTLOOK FOR 2019 UNCHANGED
▪ Revenue from corporate security is expected to
grow by over 30% compared to 2018
▪ Revenue from consumer security is expected to
stay approximately at the same level as in 2018
▪ Adjusted EBITDA is expected to be above EUR 15
million excluding the impact of IFRS 16
OUTLOOK FOR 2018-2021 UNCHANGED
▪ The demand for corporate cyber security products and services is expected to grow strongly. F-Secure aims to grow faster than the market, with revenue from corporate security expected to grow above 15% annually during our strategy period 2018-2021.
▪ Driven by the anticipated revenue growth and scalable business model, the company’s profitability is expected to improve significantly in the long-term. The board and the management continuously seek to balance growth investments and profitability to optimize long-term value creation for the shareholders.
FINANCIALSQ1 2019
All income statement figures refer to continuing operations, and figures in brackets refer to the corresponding period in the previous year, unless otherwise stated.
REVENUE
January-March
▪ Revenue increased by 24% y-o-y
▪ Total quarterly revenue 53.4m (Q118: 43.1m)
45
5
0
10
35
20
15
25
30
55
40
50
53.7
40.9
Q318Q417 Q4/18Q117 Q317 Q218Q118
50.5
Q1/19
44.4
41.243.3 43.1 43.4
53.4
Q217
+24%
Revenue
EUR m
REVENUE SPLIT January-March
▪ Revenue from corporate security increased by 52% totalling EUR 29.4 million (19.4m)
▪ Revenue from consumer security increased by 1% totalling EUR 24.0 million (23.8m)
▪ Corporate security represented 55% (45%) and consumer security 45% (55%) of total revenue
30
0
10
5
20
15
25
Q117 Q217 Q317 Q417 Q118
23.4
Q4/18 Q1/19
24.2
Q218
24.0
Q318
16.6
23.8
18.6
24.7
29.4
24.3
26.7
20.1
24.3
16.9
29.8
23.8
20.0
24.0
19.4
+52%
Corporate Total Consumer Total
EURm
PROFITABILITY
January-March
▪ Adjusted EBITDA 5.0m, 9.4% of revenue (3.8m, 8.9%)
▪ Earnings per share (EPS) EUR -0.01 (EUR 0.00)
▪ IFRS 16 had a positive impact of EUR 1.6 million to adjusted EBITDA
▪ Depreciation and amortization increased by EUR 2.8 million to 4.4 million (1.6m).
EURm
1,52,1
4,23,7
2,3
0,5 0,4
1,40,6
1,3
1,4
1,6
1,6
1,5
1,5 1,8
2,0
1,8
0,1
1,1
1,2
1,2
0,4
2,71,6
7
14
9 9 9
0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
0
1
2
3
4
5
6
7
8
9
10
0.1
6.0
Q218
0,6
0,0
Q117
4.0
9
0.1
Q317 Q318
0.1
12
6
Q417
0.1
Q118
0.1
2.9
Q217
0.3
Q418 Q1/19
5.8
12
3.8
2.7
4.95.0
5.4
Adjusted EBITDA
IFRS 16 impact
M&A costs
PPA Amortization
Depreciation & Amortization (excl. IFRS 16)
Reported EBIT
Adjusted EBITDA, % of revenue
OPERATING EXPENSESEURm
January-March
▪ Operating expenses excluding depreciation and amortization increased by EUR 3.2 million to 36.0 million (32.8m) due to the inclusion of MWR InfoSecurity in the company’s financials.
0
2
4
6
8
10
12
14
16
18
20
22
24
26
28
30
32
34
36
38
40
42
1.5
23.9
8.2
10.2
8.2
23.3
8.4
Q117
3.8
8.6
Q418
3.9
22.0
3.3
8.7
19.4
Q217
3.3
Q317
21.9
Q417
21.0
Q118
3.4
25.7
Q218
3.8
9.6
26.1
3.13.8
3.4
Q318
3.2
Q1/19
8.5
9.7
34.4
23.6
31.2
33.634.4
35.6
38.7
40.4 40.41.2
35.9
+20%
Sales & Marketing
Acquisition related
Administration
Research & Development
DEFERRED REVENUE
31 March 2019
▪ Deferred revenue increased by 6% (year-on-year) to EUR 71.4 million (67.2m), driven by the inclusion of MWR InfoSecurity.
0
30
10
40
20
75
70
50
60
Q1/19
41.747.4
13.817.6
Q117
18.7
Q217
53.9
18.7
55.3
Q317
48.346.8
17.4
54.8
12.4
Q118 Q218
20.0
Q417
18.6
Q318 Q418
17.5
41.9
50.5
+6%
Deferred revenue, current Deferred revenue, non-current
EURm
January-March
▪ Revenue increased in all regions
▪ In Rest of Europe, North America and in Other regions increases were driven by the increased contribution from MWR InfoSecurity
REGIONAL REVENUE
0
2
4
6
8
10
12
14
16
18
20
22
24
23.5
16.418.5
Nordic
18.6
Rest of Europe
4.0 4.5
North America
4.1
6.9
Other Regions
+13%
+26%
+13%
+68%
Q1/18 Q1/19
EURm
NET DEBT
January-March
▪ F-Secure’s financial position remained solid
▪ The main driver behind the y-o-y change in net debt was the acquisition of MWR InfoSecurity in Q3/2018
▪ Excluding the impact of IFRS 16 net debt was EUR 13.6 million
▪ Increase in interest bearing liabilities compared to previous year-end is due to adoption of IFRS 16 Leases -standard.
▪ Cash flow from operating activities before financial items and taxes was -0.3m (1.2m)
▪ Cash flow decreased due to slower growth in deferred revenue
▪ Cash flow from operations was EUR -1.4 million (-0.3m)
▪ IFRS 16 had a positive impact of EUR 1.5 million to operative cash flow
▪ Gearing ratio was 36.5% (123.1% negative)▪ Excluding the impact of IFRS 16 gearing ratio was 19.7%
94,3-96
-81 -81-90 -88
-78
169 14
12
-100
-90
-80
-70
-60
-50
-40
-30
-20
-10
0
10
20
30
Q3/17Q1/17 Q2/18Q2/17 Q4/17 Q1/18 Q3/18 Q4/18 Q1/19
EURm
IFRS 16 impact Net debt*, MEUR
Acquisition of MWR InfoSecurity
NUMBER OF PERSONNEL
January-March
▪ At the end of the quarter, F-Secure had 1,680 employees (1,145)
▪ In Q3/18, the increase in personnel from the acquisition of MWR InfoSecurity was 391
1 0551 091 1 060
1 104
1 201
1 636 1 666 1 680
100
900
500
0
200
600
300
400
700
800
1 000
1 100
1 200
1 300
1 400
1 500
1 600
1 700
Q118 Q418Q218Q117 Q1/19Q217 Q317 Q417 Q318
1 145
Employees