2013-04-26 08:00:00 CEST
2013-04-26 08:00:09 CEST
REGULATED INFORMATION
F-Secure Oyj - Interim report (Q1 and Q3)
F-Secure Corporation - Interim Report January 1 - March 31, 2013
F-Secure Corporation
Interim Report
April 26, 2013 at 9.00 a.m.
F-Secure Corporation - Interim Report January 1 - March 31, 2013
Improving cashflow and profitability, progress in content cloud
Highlights in Q1
-- Total revenues were flat at 38.4 million (Q12012: 38.4m)
-- EBIT was 5.9 million representing 15% of revenues (5.4m, 14% of revenues);
an increase of 9% YoY
-- Earnings per share was EUR 0.03 (EUR 0.02)
-- Cash flow from operations was 7.4 million positive (7.7m); change in cash
5.6 million positive (3.1m positive)
-- Content Cloud business progressed with a launch of Content Anywhere with
BT, one of Europe's major operators
Outlook for 2013 - management's estimation for the year remains unchanged:
-- Revenue growth is estimated to be over 5% compared to 2012.
-- Profitability is estimated to be over 15% of revenues.
(This report is unaudited. Unless otherwise stated the comparisons refer to
the corresponding period a year ago. The currency is euro. The Content Cloud
business is included in the Operator channel figures.)
Key figures 2013 2012 2012
--------------------------------------------
(Eur Million) 1-3 1-3 12m
--------------------------------------------
Revenues 38.4 38.4 157.2
--------------------------------------------
Operating profit 5.9 5.4 20,3
--------------------------------------------
% of revenues 15 14 17
--------------------------------------------
Profit before taxes 6.0 5.2 19.9
--------------------------------------------
Earnings per share (Eur) 0.03 0.02 0.09
--------------------------------------------
At the end of period: 38.9 38.5 37.7
Deferred revenues
--------------------------------------------
Equity ratio, % 74.8 72.7 72.7
--------------------------------------------
Debt-to-equity ratio, % -55.8 -49 -50.9
--------------------------------------------
Personnel 938 975 931
--------------------------------------------
President and CEO Christian Fredrikson:
“We have a clear goal at F-Secure: revenue growth while gradually improving our
profitability and cost structure. Our operative progress has continued well
though the top line development does not yet reflect it. The financial
performance in Q1 was as anticipated and we ended the quarter with a flat
revenue growth. Obviously this is not satisfactory. However, we improved our
profitability and our cash flow. Our annual guidance remains unchanged and we
expect a stronger second half of the year.
Our progress in the Content Cloud business is promising. In Q1 we launched our
personal cloud services with BT, one of Europe's major operators, and we won
three new operator deals in Europe. Our pipeline is developing strongly with a
clear demand from service providers globally. I'm very pleased to see that due
to our new standardized Content Cloud product we will be able to roll out new
deliveries with a much shorter time to market.
Our security portfolio continues to evolve. I'm excited to work with a
passionate team that actively develops innovative security solutions for new
mobile and PC devices. We are continuously increasing the competitiveness of
our offering and are regularly coming up with smart products such as Safe
Avenue. This solution makes offering converged security quick and easy for
operators and responds to a strong need for flexible security which covers all
consumer's devices. Launched at Mobile World Congress in February, this
solution is generating strong interest. Swisscom is the latest operator to
launch it.
The shift in dominance from PCs to mobile devices is driving changes in the
traditional security industry and is affecting us like every other player. We
have identified short-term challenges. But at the same time we see mega trends,
such as mobility, consumerization and the shift of services to the cloud, from
which we can greatly benefit in the near future. We are ready to address these
trends with a highly competitive product portfolio. We can already be proud of
our OS- and device- independent content cloud and security products that have
won many awards. We continue to evolve our products even further and our aim
is to position us as a leader for security in the cloud.”
F-Secure business January - March 2013
Total revenues for the first quarter of 2013 were flat at 38.4 million (38.4m).
Revenue through the operator channel grew by 2% from the previous year reaching
revenues of 23.1 million (22.6m). Revenues through the other channels developed
as anticipated, a decrease of 3% totaling 15.2 million (15.8m). EBIT was 5.9
million (5.4m), representing 15% of revenues (14%). Earnings per share were EUR
0.03 (EUR 0.02). Cash flow from operations was 7.4 million positive (7.7m
positive). The change of net cash was 5.6 million positive (3.1m positive).
Deferred revenues increased to 38.9 million at the end of March (38.5m) due to
improving sales in the license business.
Total fixed costs were 31.6 million (31.4m), 0.4% higher than in the previous
year. During the quarter, F-Secure capitalized very little of its R&D expenses
according to accounting rules, totaling 0.3 million (1.8m). The cost level was
impacted by increased depreciations from the past capitalized expenses (R&D
activations, software, hardware) 2.1 million (1.9m) in total. The operational
costs decreased from the comparison quarter. F-Secure continues to invest in
geographic expansion in Latin America and in R&D to increase the
competitiveness of both security and content cloud solutions.
At the end of March, the geographical breakdown of revenues was as follows:
Finland and Scandinavia 29% (31%), Rest of Europe 46% (45%), North America 11%
(10%) and Rest of the World 13% (14%).
Operator channel in Q1
In Q1 BT, one of Europe's major operators, launched its Content Cloud service
powered by F-Secure's latest Content Cloud technology. BT's consumer customers
will now get more out of their digital content while safely accessing and
sharing it from virtually anywhere. F-Secure's cooperation with AT&T is
continuing well with steadily growing numbers of users. Service providers are
clearly very interested in the Content Cloud area and the Company expects to
sign several new contracts during the year.
During the quarter, the mobile security business performed especially well.
Telefonica Movistar, F-Secure's flagship partner in Latin America, continued
expanding its security offering footprint by launching security services in
Colombia and Nicaragua. Vodafone India selected F-Secure to provide security
services to its SMB customers. Swisscom launched F-Secure's Safe Avenue
solution, a multi-device converged security service allowing customers flexibly
to combine their PCs and their mobile devices within a simple license package.
In the first quarter of 2013, sales through Operator business partners totaled
23.1 million (22.6m), representing 60% of F-Secure's total revenues (59%).
Revenue growth was 2% compared to the corresponding quarter in 2012 and
negative 6% to the previous quarter due to communicated contractual changes and
lower project revenues as project sizes are smaller.
Corporate and Direct to Consumer channels in Q1
Sales in traditional channels continued as anticipated. Customer satisfaction
in security services remained high, which was visible in healthy license and
renewal sales; deferred revenues increased to 38.9 million (Q412: 37.7m; Q112:
38.5m).
During the first quarter, revenues decreased by 3% reaching 15.2 million (15.8
m). These other channels represented 40% of F-Secure's total revenues (41%).
Product announcements in Q1
F-Secure develops and sells Security and Content Cloud products that support
personal computers, servers and an increasing set of major smartphone, tablet
and other mobile device operating systems. Services include a wide range of
security products like anti-virus, anti-theft, browsing protection and parental
control as well as Content Cloud products like online backup, synchronization
and sharing.
During Q1 2013 the key product announcements were as follows:
In February, the new version of Client Security (version 10) was launched with
a number of new and improved features like Windows 8 support and DeepGuard 4
technology, which protects workstations and servers from zero-day attacks.
In February, F-Secure launched F-Secure Antibot, a new product that fights
botnets by cleaning infected PCs and devices on operators' networks. It guides
the users through a self-cleaning process, cutting out the need to call the
operator helpdesk and resulting in considerable savings for operators. F-Secure
Antibot works across platforms, supporting Windows, Android and later this year
Mac OSX.
In February, F-Secure launched Safe Avenue, which combines award-winning best
protection technologies, allowing consumers to easily manage the security of
all their devices. With Safe Avenue, consumers purchase a certain number of
security licenses from their operator, and then can apply those licenses to any
of their devices, switching to any combination of computers, tablets, and
smartphones. Safe Avenue supports PC, Mac and Android, with support for iOS
coming soon.
Awards
The Forrester Wave™: Endpoint Security, Q1 2013 by Forrester Research Inc.
featured F-Secure as a strong performer. The top strategy rating was based on
evaluation of F-Secure's product roadmap, cost and licensing models, and
go-to-market strategies.
F-Secure Internet Security 2013 won the award “BEST PROTECTION 2012 - Home
User” by AV-Test Org which was announced in January.
Risks and uncertainties
Uncertainty in the economic environment may impact the growth of broadband
connections, operators' willingness to invest in new services and may create
pricing pressure. These may have a negative impact on F-Secure's security and
Content Cloud sales.
F-Secure's risks and uncertainties are related to, among other things, the
competitiveness of F-Secure's product portfolio, competitive dynamics in the
industry, pricing models (e.g. free services, cost of Content Cloud services),
impact of changes in technology, timely and successful commercialization of
complex technologies and new products and solutions, the ability to protect
intellectual property (IPR) in F-Secure's solutions as well as the use of third
party technologies on reasonable commercial terms, subcontracting
relationships, regional development in new growth markets, sustainability of
partner relationships, compromising stored personal data, service quality
related penalties, and risk exposure from increasing contractual liability
requirements and forming of the new business areas.
The Content Cloud project completion timelines and related revenues are more
unpredictable by nature than in the traditional security services business.
This may cause risks for delivery delay penalties and may cause more
variability in revenue forecasts.
Events after period-end
No material changes regarding the Company's business or financial position have
materialized after the end of March 2013.
Personnel and organization
F-Secure's personnel totaled 938 at the end of Q1 (975). The number of
personnel decreased in Q4 due to R&D re-organization.
Currently, the Leadership Team consists of the following persons: Christian
Fredrikson (President and CEO), Ari Alakiuttu (Human Resources & Facilities),
Samu Konttinen (Customer and Market Operations), Timo Laaksonen (Content Cloud
Business), Maria Nordgren (Consumer Security Business), Pirkka Palomäki (Chief
Strategy Officer), Jari Still (R&D Operations), Pekka Usva (Corporate Security
Business) and Taneli Virtanen (Chief Financial Officer).
Financing and capital structure
Cash flow from operations for the quarter was 7.4 million positive (7.7m
positive). Net financial income was slightly positive at 0.1 million (negative
0.2m).
The market value of the liquid assets of F-Secure on March 31, 2012 increased
to 38.7 million (Q412: 33.1m, Q112: 31.2m). Changes in exchange rates impacted
slightly negatively on sales and positively on costs; especially changes in
Japanese yen.
The Company's capital expenditure for the quarter was 1.5 million (3m),
consisting mainly of capitalization of development expenses. The capitalized
development expenses were 0.3 m (1.8m in Q1) and have substantially decreased
from Q4 (4.9m) as anticipated.
F-Secure's financial position remained solid. F-Secure's equity ratio at the
end of the quarter was 75% (73%) and gearing ratio was 56% negative (49%
negative).
Shares, shareholders' equity, own shares and option programs
The total number of Company shares is currently 158,798,739. The Company's
registered shareholders' equity is EUR 1,551,311.18.
In January 2013, the Company assigned a total of 316,555 shares to 19
participants of the F-Secure share-based incentive program as a reward payment
based on the 2009 earning period (share-based incentive program 2011-13). After
the transfer, F-Secure Corporation holds a total of 3,415,835 of its own
shares.
Currently, the Company does not have any warrant program.
Corporate Governance
F-Secure complies with the Corporate Governance recommendations for publicly
listed companies published by the Securities Market Association, a body
established by the Confederation of Finnish Industries EK, the Central Chamber
of Commerce and NASDAQ OMX Helsinki Ltd., as explained on F-Secure's web pages.
F-Secure published its corporate governance statement for 2012 in the Annual
Report and on the Company website in March 2013.
Annual General Meeting
The Annual General Meeting of F-Secure Corporation was held on April 3, 2013.
The Meeting confirmed the financial statements for the financial year 2012. The
members of the Board and the President and CEO were granted a discharge from
liability.
The Annual General Meeting decided to distribute a dividend of EUR 0.06 per
share. It was decided that the number of Board members would be seven (7). The
current six members were re-elected: Mr. Jussi Arovaara, Ms. Sari Baldauf, Mr.
Pertti Ervi, Mr. Juho Malmberg, Ms. Anu Nissinen, Mr. Risto Siilasmaa and Mr.
Matti Heikkonen as a new member. The Board elected in the first meeting Mr.
Siilasmaa as the Chairman of the Board. The Board nominated Mr. Siilasmaa as
the Chairman of the Executive Committee and Ms. Baldauf and Ms. Nissinen as
members of the Executive Committee. Mr. Ervi was nominated as the chairman of
the Audit Committee and Mr. Arovaara, Mr. Heikkonen and Mr. Malmberg were
nominated as members of the Audit Committee. It was decided that auditor's fee
will be paid against approved invoice. Ernst & Young Oy was elected the Group's
auditors. APA, Mr. Erkka Talvinko is acting as responsible partner.
The Company has released a stock exchange release about the decisions of the
AGM on April 3, 2013.
Market view
The long term market opportunities are attractive for F-Secure. Malware threats
and targeted attacks to private users and businesses in both PC and mobile
operating environments are still evolving.
Security is a growing market. According to Gartner (Jan 2013) the consumer
security software market is growing to be about a $6 billion market by 2016
($4.3 billion in 2012) and the mobile security software market is growing
almost at 40% per year in the next four years. Tablet computers and smartphones
are becoming the most dominant form of devices on the market, according to IDC
(March 2013). Tablets grew 78.4 % in units shipped from 2011-2012, while
smartphone units grew 46.1 %.
However, the market landscape for security technology will change. By 2015, 10
percent of overall IT security enterprise product capabilities will be
delivered in the cloud, according to Gartner (April 2013). The analyst firm
expects the cloud-based security services market to reach $4.2 billion by 2016.
Based on several industry analyst estimates, the Software as a Service (SaaS)
business model is expected to continue to grow strongly and to gain more market
share over traditional license sales. For Operators the Software as a Service
model is a natural expansion to their other service offerings. The SaaS
business offers operators the opportunity to replace revenues lost from the
provision of commoditized services and to increase loyalty in the face of
competitive threats from over-the-top providers and third parties.
Long-term objectives and strategy summary for 2012 -14
F-Secure's first priority is to drive growth and market expansion. Based on the
company's strong technology assets in security products, cloud computing and
Content Cloud services, F-Secure continues to create new innovative offerings
to augment traditional security services, especially in the Content Cloud
space.
The Company sells its products globally through three channels; the Direct to
Consumer channel (eStore, App Stores, retail), the Corporate channel (reseller
network) and the Operator channel (SaaS).
Operators, including Internet service providers, mobile operators and cable
operators, are the largest channel for F-Secure services. F-Secure provides,
through operators, awarded security and Content Cloud services and utilizes the
local presence and brand of operators to reach millions of consumers in a
cost-efficient and scalable way.
F-Secure's competitive advantage derives from existing operator network and
relationships built over the years. Key assets include security research,
scalable products optimized for the mass-market, experience in service
provisioning in the operator network environment and the ever growing user base
of operators. F-Secure stands out in its ability to combine security with safe
Content Cloud services for both computers and mobile devices and its
understanding of the Operator channel as a whole.
During the strategy period, the Company is aiming for double-digit revenue
growth, driven by the Operator channel and supported by the Corporate and
Direct to Consumer channels. The growth is expected to come from the western
hemisphere and some emerging markets like Latin America and the APAC.
The Company will continue its investments in new services around the Content
Cloud and security products with emphasis on end-customer focus. Profitability
is targeted to develop towards the 25% level at the end of the strategy period.
F-Secure's longer-term profitability level continues to be driven by revenue
growth and scalable operations.
Outlook for 2013
The Operator channel is expected to continue to drive the revenue growth
powered by security sales and supported by a productized, highly-scalable
Content Cloud service. The Company also estimates steady progress from the
Corporate and Direct to Consumer channels. However, the revenue growth in the
coming quarter remains at a low level, similar to Q1, due to contractual
changes and decreased Content Cloud project revenues as the project sizes are
smaller.
The actual operational cost increase is fairly limited, and is targeted at
driving product portfolio competitiveness and supporting geographical
expansion.
Management's estimation for the year remains unchanged; the annual revenue
growth is estimated to be over 5% compared to 2012. The annual profitability is
estimated to be over 15% of revenues.
The revenue estimate is based on the sales pipeline at the time of publishing,
existing subscriptions and support contracts as well as current exchange rates.
The Company continues to prioritize growth over short-term profitability and
plans to invest the majority of the improved earnings in growth opportunities
in its core business while aiming at improving profitability.
News conference today at 11 am
A news conference for analysts and press is arranged today, on April 26, at 11
am Finnish time at F-Secure's Headquarters, address: Tammasaarenkatu 7,
Ruoholahti, Helsinki. At the news conference, President & CEO Christian
Fredrikson will present the Q1 financial results. A conference call for
international investors and analysts is arranged at 13.00 Finnish time (EEST)
(12.00 CEST, 11.00 UK time). To participate in the call, please dial in and
register 5-10 minutes prior to the event through the following number: +44 20
7162 0077, password: F-Secure.
The Q1 financial results presentation material, including a video where
Christian Fredrikson will present Q1 results, will be available on our
Investors web pages at www.f-secure.com under About F-Secure, Investors before
the call begins.
Financial calendar for 2013
F-Secure will publish the interim report for the second quarter of 2013 on July
26, 2013. The quarterly interim report for the third quarter of 2013 will be
published on October 25. On the publication date a stock exchange release will
be published at 9 am Finnish time on the NASDAQ OMX Helsinki Ltd., a press and
analyst conference will be arranged at 11 am Finnish time in Helsinki, and an
international conference call will be arranged in the afternoon.
F-Secure Corporation
Additional information
F-Secure Corporation
Christian Fredrikson, President and CEO
tel. +358 9 2520 0700
Taneli Virtanen, CFO
tel. +358 9 2520 5655
Katariina Kataja, IR
tel. +358 40 661 6884
This interim report is prepared in accordance with IAS 34 standard Interim
Financial Reporting and with accounting principles stated in the annual report
2012.
---------------------------------------------------
Key figures (unaudited):
Euro million
---------------------------------------------------
INCOME STATEMENT 2013 2012 Change 2012 1-3 1-3 % 1-12
---------------------------------------------------
Revenues 38.4 38.4 157.2
Cost of revenues 1.7 1.9 -11 7.4
---------------------------------------------------
Gross margin 36.7 36.5 1 149.7
Other operating income 0.8 0.3 125 1.8
---------------------------------------------------
Sales and marketing 18.4 16.9 9 70.9
Research and development 10.7 11.5 -7 49.3
---------------------------------------------------
Administration 2.5 3.0 -19 11.0
Operating result 5.9 5.4 9 20.3
---------------------------------------------------
Financial net 0.1 -0.2 -0.3
Result before taxes 6.0 5.2 19.9
---------------------------------------------------
Income taxes -1.9 -1.4 -5.8
Result for the period 4.1 3.8 14.1
---------------------------------------------------
-----------------------------------------------------------------------------
Other comprehensive income:
Exchange diff. on translating 0.1 0.0 0.2
foreign operations
-----------------------------------------------------------------------------
Available-for-sale fin. assets 0.0 0.2 0.1
Income tax rel. to components of other comprehensive income 0.0 -0.1 0.0
-----------------------------------------------------------------------------
Total compr. income (owners) 4.2 3.9 14.3
Earnings per share. e 0.03 0.02 0.09
-----------------------------------------------------------------------------
EPS diluted. e 0.03 0.02 0.09
-----------------------------------------------------------------------------
---------------------------------------------------------------------
BALANCE SHEET 31/3/2013 31/3/2012 31/12/2012
ASSETS
Intangible assets 20.4 26.4 20.8
---------------------------------------------------------------------
Tangible assets 9.7 9.0 9.8
Goodwill 19.4 19.4 19.4
---------------------------------------------------------------------
Other financial assets 5.1 5.2 5.4
Non-current assets total 54.5 60.0 55.4
---------------------------------------------------------------------
Inventories 0.2 0.3 0.2
Other receivables 38.2 34.5 38.4
---------------------------------------------------------------------
Available-for-sale financial assets 23.0 16.2 16.8
Cash and bank accounts 15.9 15.1 16.5
---------------------------------------------------------------------
Current asset total 77.3 66.1 71.9
Total 131.8 126.1 127.3
---------------------------------------------------------------------
---------------------------------------------------------------
SHAREHOLDERS' EQUITY 31/3/2013 31/3/2012 31/12/2012
AND LIABILITIES
Equity 69.5 63.6 65.1
---------------------------------------------------------------
Other non-current 0.4 1.6 0.4
Provisions 0.1 0.0 0.1
---------------------------------------------------------------
Deferred revenues 8.8 7.8 8.5
Non-current liabilities total 9.3 9.4 9.1
---------------------------------------------------------------
Other current 22.8 22.3 23.9
Deferred revenues 30.1 30.7 29.3
---------------------------------------------------------------
Current liabilities total 53.0 53.1 53.2
Total 131.8 126.1 127.3
---------------------------------------------------------------
--------------------------------------------------------------------------------
CASH FLOW STATEMENT 31/3/2013 31/3/2012 31/12/2012
Cash flow from operations 7.4 7.7 25.6
--------------------------------------------------------------------------------
Cash flow from investments -1.8 -4.6 -11.1
Cash flow from financing 0.0 0.0 -9.3
activities 1)
--------------------------------------------------------------------------------
Change in cash 5.6 3.1 5.2
Cash and bank at 1 Jan 33.1 27.9 27.8
--------------------------------------------------------------------------------
Change in net fair value of Available-for-sale 0.0 0.2 0.1
Cash and bank at end of period 38.7 31.2 33.1
--------------------------------------------------------------------------------
Statement of changes in shareholders' equity
--------------------------------------------------------------------------------
Share Share Unres-trict Trea- Retaine Assets Transl Total
capita premiu ed equity- sury d avail. .
l m fund reserve share earnin f.sale diff.
s gs
Equity 1.6 0.2 5.1 -8.4 66.5 0.2 65.1
on:
31.12.20
12
--------------------------------------------------------------------------------
Total 4.1 0.1 4.2
comprehe
nsive
income
for the
year
Dividend
--------------------------------------------------------------------------------
Other
change
Exercise
of
options
--------------------------------------------------------------------------------
Cost of 0,6 -0.4 0.2
share
based
payment
s
Equity 1.6 0.2 5.1 -7.9 70.2 0.2 0.1 69.5
on
31.3.201
3
--------------------------------------------------------------------------------
NOTES
1. Cash flow from financing
Dividend for year 2012 0.06 euro per share totaling 9.322.974,24 euro was paid
on 16th April 2013. In 2012 paid dividend totaled 9.303.980.94 euro.
----------------------------------------------------
Key ratios 2013 2012 2012
3m 3m 12m
----------------------------------------------------
Operating result. % of revenues 15.4 14.1 12.9
ROI. % 38.0 37.5 34.9
----------------------------------------------------
ROE. % 25.5 24.6 22.6
Equity ratio. % 74.8 72.7 72.7
----------------------------------------------------
Debt-to-equity ratio. % -55.8 -49.0 -50.9
Earnings per share (EUR) 0.03 0.02 0.09
----------------------------------------------------
Earnings per share diluted 0.03 0.02 0.09
Shareholders' equity 0.44 0.40 0.41
per share. e
----------------------------------------------------
P/E ratio 16.1 20.47 17.09
Capitalized expenditures (Me) 1.5 3.0 10.3
----------------------------------------------------
Contingent liabilities 15.9 18.6 15.6
Personnel. average 940 970 970
----------------------------------------------------
Personnel. end of period 938 975 931
----------------------------------------------------
Segment information
The Group has only one segment; data security.
----------------------------------------------------
Quarterly development 1/12 2/12 3/12 4/12 1/13
Revenues 38.4 39.6 39.1 40.1 38.4
----------------------------------------------------
Cost of revenues 1.9 2.1 1.7 1.8 1.7
Gross margin 36.5 37.5 37.4 38.3 36.7
----------------------------------------------------
Other operating income 0.3 0.5 0.6 0.3 0.8
Sales and marketing 16.9 17.9 16.4 19.6 18.4
----------------------------------------------------
Research and 11.5 11.4 10.6 15.8 10.7
development
Administration 3.0 2.9 2.3 2.7 2.5
----------------------------------------------------
Operating result 5.4 5.8 8.6 0.4 5.9
Financial net -0.2 -0.1 -0.1 0.1 0.1
----------------------------------------------------
Result before taxes 5.2 5.7 8.5 0.5 6.0
----------------------------------------------------
Geographical information
-------------------------------------
Revenue 1-3/2013 1-3/2012
Nordic countries 11.3 12.0
-------------------------------------
Rest of Europe 17.8 17.4
North America 4.4 3.6
-------------------------------------
Rest of the world 4.9 5.3
Total 38.4 38.4
-------------------------------------
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