2011-10-26 08:00:00 CEST
2011-10-26 08:00:14 CEST
REGULATED INFORMATION
F-Secure Oyj - Interim report (Q1 and Q3)
F-Secure Corporation - Interim Report January 1 - September 30, 2011
October 26, 2011 at 9.00
F-Secure Corporation - Interim Report January 1 - September 30, 2011
Revenue growth accelerated driven by strong operator business, healthy
profitability
(This report is unaudited. Unless otherwise stated the comparisons refer to the
corresponding period a year ago. The currency is euro. Storage and Digital
Content business unit is included in the operator channel figures.)
Highlights in Q3
- Total revenues grew by 14% to a record level of 36.6 million (Q32010: 32.0m)
- Revenues from the operator channel continued to be strong and growth
accelerated to 28%, reaching revenues of 21.5 million (16.7m); revenue growth
was driven by good security and cloud storage sales
- EBIT was 6.9 million representing 19% of revenues (5.9m,18%)
- Earnings per share was EUR 0.03 (EUR 0.03)
- Cash flow from operations was 5.8 million positive (3.5m)
- Pirkka Palomäki was nominated as acting CEO as of November 1, as announced on
October 6, 2011
Outlook for 2011 - management estimation for the year is in line with previous
guidance
- Annual revenue is expected to be over 143m (growth of 10-12%) and EBIT is
expected to be 16-18% of revenues
- Previous guidance: Annual revenue growth is expected to accelerate to around
10% and annual profitability to improve from 2010 level at a comparable pace to
revenue growth (compared to 2010 EBIT of 21.8m excl. re-structuring)
Key figures 2011 2010 2011 2010
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(Eur Million) 7-9 7-9 1-9 12m
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Revenues 36.6 32.0 106.1 130.1
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Operating profit 6.9 5.9 17.1 19.8
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% of revenues 19% 18 % 16 % 15 %
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Profit before taxes 7.0 5.5 16.9 19.9
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Earnings per share (Eur) 0.03 0.03 0.08 0.10
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At the end of period: 35.0 35.1 35.0 37.2
Deferred revenues
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Equity ratio, % 70% 71% 70% 69%
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Debt-to-equity ratio, % -48% 58% -48% -63%
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Personnel 907 855 907 812
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President and CEO Kimmo Alkio:
“We are pleased to see strong performance in our business resulting in strong
revenues and healthy profitability. Our Operator business continued to perform
very well and the cost level reflected typical seasonality. The Operator
revenue growth accelerated to 28% YoY demonstrating robust demand for both
security and cloud storage services.
Our entry into storage-related businesses has progressed well. In Q3, we
successfully delivered our storage service platform to AT&T. The overall
interest and pipeline for storage cloud related services within our operator
partners has continued to develop favourably. Our cloud storage services help
operators to augment their core voice and data service offering to take
advantage of the growth of internet services. Our investments in cloud storage
business will continue and are expected to drive future revenue growth together
with solid security sales.
Based on our current performance we are confident that the Company will
continue profitable growth with Operators globally. With these premises, I
leave the CEO role to my successor with a feeling of trust and confidence.”
F-Secure business during January - September 2011
Total revenues for the first nine months were 106.1 million (95.7m),
representing growth of 11%. Revenue growth through the operator channel
continued strong and was 24% from the previous year and revenues totaled 60.5
million (48.7m). Revenues through other channels were, as anticipated, down by
3%, totaling 45.6 million (47m). EBIT was 17.1 million (16.3m), representing
16% of revenues (17%). Earnings per share were EUR 0.08 (EUR 0.08). Cash flow
from operations was 13.7 million positive (16m positive). Deferred revenues
were 35.0 million at the end of September (35.1m) in line with normal seasonal
market fluctuations Renewal sales in the other channels were at a good level.
Total fixed costs for first nine months were 84.3 million (74.1m), 14% higher
than in the previous year. F-Secure capitalized some of its R&D expenses
according to accounting rules, totaling 4.7 million (1.8m) and booked one-time
write-offs of 0.5m related to prior R&D investments. Cost increases were
targeted toward the geographic expansion in Latin America, storage related
project deliveries (e.g. AT&T) and R&D to increase the competitiveness of the
PC and mobile device (e.g. iOS, Android, RIM) solutions and cloud storage
development.
During the first nine months of 2011 the geographical breakdown of revenues was
as follows: Finland and Scandinavia 33% (33%), Rest of Europe 45% (46%), North
America 10% (9%) and Rest of the World 12% (12%).
Operator channel and its performance in Q3
F-Secure provides a broad range of security and cloud storage related services
that are easy and intuitive to use for the mainstream consumers, through the
operators (including ISP's, mobile operators and cable operators). F-Secure is
expanding its investments to extend the products and services to new
mainstream smartphone and tablet operating systems, such as Android, iOS and
RIM. This allows operators to offer F-Secure services, both PC and mobile, to a
wide subscriber base.
The Operator channel has been the main growth driver for F-Secure over several
years. The Company currently has more than 200 partners in over 40 countries
with an addressable market of over 250 million fixed and mobile broadband
consumer customers. The total number of F-Secure's operator partners is
significantly larger than that of any other security service vendor. This
addressable subscriber base is expanding due to the continuous growth of
broadband connections within existing operators and due to new Operator
partnerships. The Operator channel gives a remarkable opportunity for F-Secure
to address millions of consumers worldwide with its service offering. Operators
are locally well known and they are trusted partners for consumers.
Currently, a notable part of revenues in this channel is generated by the
Security as a Service business where Operators sell security service
subscriptions to protect their customers against Internet threats. During the
past quarters revenue growth has been driven by an increase in the take-up
rates of security sales within the existing operator partners' customer base.
This business opportunity is supported by the growth of fixed and mobile
broadband connections as well as the natural demand for security services and
the relatively low level of take-up rates in general. Take-up rates vary by
operator depending on its size, activity level promoting value added services
and time since service launch. Sales of security services improve operators'
ARPU (average revenue per user), which can have a significant impact on
operators' profit marginand reduces churn of broadband connections. Internet
security services for smartphones and tablet devices currently generate a
small proportion of F-Secures and of the market wide volumes. This mobile
security landscape has recently started to change due to smartphone and tablet
volume growth.
The Company's entry to the cloud storage related market has strengthened
F-Secure's attractiveness as a long term strategic partner, as already
experienced with several major operators globally. The use of social media is
increasing and people are looking for services to share, store and control
their personal data. In the future, nearly every device that creates or stores
data, including desktop and laptop computers, tablets, smartphones, and digital
cameras, will be backed up over the internet. Online backup and sharing is
gaining increasing acceptance as the best way to store copies of valuable data
off-premise, where they are safe from equipment failure, theft, loss, viruses,
and accidental deletion. Operators are interested in storage related services
as they see its business potential and an opportunity to deepen their
relationship with their customers. As operators are competing with Internet
players and device manufacturers for consumers' share of mind, the need for
operators' cloud storage services is even more appropriate. Operators'
advantage is their ability to manage the continuously diverging multi-device,
multi-OS environment. Also, they are able to bring services to masses.
Currently, revenues from storage related subscriber services are at a
relatively low level, but management expects revenues gradually to increase as
more operators start to offer this service to their customers. In addition to
subscriber revenues, there is a revenue stream from project deliveries and
customizations for major operators. These project revenues are recognized based
on percentage of completion of the project.
The co-operation with AT&T for storage services has continued very well. During
Q3 the Company successfully delivered the storage service platform. The public
launch date for the service has not yet been communicated. Q3 financials
include revenue recognition from the AT&T delivery project and initial
commitment of subscriber revenues. The user based subscriber revenues is
expected to grow after the public launch of the services.
As informed in the previous interim release, F-Secure has entered into
partnerships with Telefonica and several other operators in Latin America,
which is one of the fastest growing markets of internet users. These long term
regional partnerships enable F-Secure to reach major wireless and mobile
broadband markets with its internet protection and storage related services.
These partnerships are expected to contribute gradually to revenue growth
towards the year end. The first launch with operators took place already in Q2
2011.
During the quarter, the Company has continued to extend its collaboration with
Telefonica in Latin America. Additional service launches in several Latin
America countries are expected to take place during the upcoming quarters.
During the quarter Company's co-operation with mobile operators offering
services for smartphones and other mobile devices has continued as anticipated.
Currently, there are mobile operator partnerships with more than 20 operators
worldwide; such as Telefonica, Vodafone Group, TeliaSonera Group, T-Mobile
International, Swisscom and Elisa. The Company's co-operation with major mobile
device manufactures, like Nokia and SonyEricsson, has continued well, too.
In the third quarter of 2011, revenues through the operator business partners
continued to perform very well and totaled 21.5 million (16.7m), representing
59% of F-Secure's total revenues (52%). Revenue growth was 28% compared to the
corresponding quarter in 2010 and 6% to the previous quarter. The growth was
driven by good security sales, increase in take up rates in current partners'
subscriber base and was supported by project delivery revenues and growing
storage related subscription sales including AT&T initial commitment.
Other channels in Q3
Other channels consist mainly of traditional license sales, i.e., new licenses
and renewals of internet security and online backup for PCs and mobile devices,
to consumers through eStore and retail. These channels include a wide range of
internet security services for corporate customers through the global reseller
network.
During the third quarter, revenues through other channels were 15.2 million
(15.3m), showing a decline of 1% from the corresponding quarter in 2010. These
other channels represented 41% of F-Secure's total revenues (48%). The impact
of earthquake in Japan in March is expected to continue to impact negatively on
sales for the whole year. Japan is a major market for F-Secure in these
channels.
In other countries, sales in traditional channels continued as anticipated.
Customer satisfaction in security services continued at a high level as
evidenced by healthy license renewal sales.
Products, Services and Technologies
F-Secure develops and sells security and storage related services that support
personal computers, servers and an increasing set of major smartphone and
tablet operating systems. Services include broad security suites (anti-virus,
browsing protection and parental control) and storage-related services like
on-line back-up. Nearly 10 years ago F-Secure innovated and launched to the
market a new business model by offering security as a service (SaaS).
F-Secure's main solutions are world leaders for SaaS via operators.
F-Secure is increasing the investment to extend the products and services to
new mainstream smartphone and tablet operating systems, such as Android, iOS
and RIM. This allows operators to offer F-Secure services, both PC and mobile,
to a wide subscriber base.
Cloud computing has been at the center of the Company's technology strategy and
choices for the past few years. F-Secure uses cloud for two purposes: for
Real-time Protection Network and for on-line storage. Real-time Protection
Network moves certain processing and memory intensive functions from the
end-user device to the cloud making the client software one of the fastest in
the industry. Furthermore, by harnessing the collective intelligence of client
systems, the real-time protection network is able to detect and react to new
emerging threats a magnitude faster, and to provide protection to different
device categories, such as smartphones. This technology provides reputations of
files, sites and URLs and is utilized broadly in F-Secure solutions.
F-Secure continues to invest in cloud storage services. The Company has
preannounced investments into a standardized syncronization service to be
available in 2012. This service offering enables sync and sharing of internet
connected devices (smartphones, tablets, PC's). Additionally, the carrier-grade
cloud storage platform enables F-Secure to offer scalable and customizable
services for the largest operators in the world.
The combination of security and storage cloud-based technologies will in the
future allow F-Secure to create new and innovative solutions for personal
computers, smartphones and other devices.
F-Secure has continued to invest in user experience design when developing
solutions and service offerings. User experience designers, marketers, and
developers engage in consumer research, focus groups, and usability tests, to
explore consumer needs and validate new product and service prototypes with
consumers to ensure that they are appealing and usable when introduced to the
public. User experience in addition to technical performance is crucial for
commercial success of solutions and services.
During the first nine months of 2011 the key product announcements were as
follows:
In October, after the reporting period, F-Secure announced a new version of its
flagship internet security service, F-Secure Internet Security™ 2012. F-Secure
Internet Security™ 2012 provides complete protection for computers and online
life, delivered with a smooth user experience. The solution combines
industry-leading technologies for a sophisticated and multilayered defense
against the whole range of modern malware threats.
In June, F-Secure introduced a new version of its mobile security product,
F-Secure Mobile Security 7. F-Secure Mobile Security 7 is a complete security
solution for smartphones and tablet computers. It provides safe web browsing
with parental control, protects confidential content, and makes it possible to
locate your device if it is lost or stolen. Mobile Security identifies which
websites are safe to enter and which you should avoid.
In May, F-Secure launched F-Secure Anti-Virus for Mac for home users and
businesses. The product has been designed with performance in mind, making it
easy and fast to use. It gives real-time protection against all Mac-based
threats, automatically detecting and removing any malware. F-Secure's automatic
updates ensure protection for Macs in today's rapidly changing threat
landscape.
In May, F-Secure launched F-Secure Protection Service for Email, which is an
effective and hassle-free email security service for small and medium
enterprises. F-Secure Protection Service for Email is a cloud-based offering
powerful real-time protection for email against unwanted content, viruses and
spyware, as well as spam control. F-Secure Protection Service for Email has a
99% spam detection accuracy.
In March, F-Secure introduced a new Partner Portal for its resellers. The
portal provides advanced online tools for resellers that help them to react
quickly and efficiently to end-customers' needs, boosting sales and customer
service. The new Partner Portal makes life easier for resellers by bringing all
their end customer information to a single location where they can conveniently
manage accounts, calculate offers and find the full range of sales support
materials from F-Secure.
In March, F-Secure Policy Manager 10 was introduced to the corporate segment.
F-Secure Policy Manager 10 delivers a new level of effectiveness by automating
daily security operations. IT security management now requires less manual
work. F-Secure Policy Manager 10 automates daily operations like protecting new
computers and the removal of disconnected hosts. With the Policy Manager
centralized security management solution, security administrators can remotely
install, configure and monitor workstations, servers or even remote offices
from one location. The new version of Policy Manager also introduces several
features to boost productivity and performance.
In February, a new version of F-Secure's Protection Service for Mobile (PSM 7)
was introduced at the Mobile World Congress in Barcelona, Spain. Protection
Service for Mobile enables operators to offer comprehensive protection and
parental control for their customers' mobile devices. PSM enables operators to
offer an end user service that makes Internet browsing, social networking and
mobile financial transactions safer by automatically identifying harmful web
sites, as well as keeping children safe from inappropriate and dangerous web
content. PSM also helps operators' customers to lock, locate and erase missing
devices and gives protection against harmful applications and viruses. PSM
supports multiple mobile platforms, and includes several customizable
alternatives for operators to offer mobile security as a service to their
customers.
In January 2011, F-Secure received the “Product of the Year” award issued by
AV-Comparatives, one of the major independent testing organizations in the
industry. The testing organization described Internet Security 2011 as a
well-designed product with a clear and easy-to-use interface.
Market situation
There were no significant changes in the competitive landscape or in the
pricing levels in the security space during the quarter. Consolidation in the
storage and digital content market continued, with many of F-Secure's
traditional competitors entering the space. Usual signs of price competition
are evident in some countries in the security market. In general, the storage
and digital content space is beginning to become more sustainable business with
market driven pricing as new cloud services were introduced in the storage and
synchronization related services market. F-Secure's competitive position in the
operator channel has remained strong. At the same time the broadband market is
experiencing a shift from fixed to mobile broadband access. The combined
broadband business is anticipated to continue as a healthy growth driver for
Security as a Service in the operator channel.
Personnel and organization
F-Secure's personnel totaled 907 at the end of Q3 (855). The number of
personnel has continued to increase especially in the storage related business
and in R&D.
As of September the current Executive Team consists of the following persons:
Kimmo Alkio (President and CEO), Ari Alakiuttu (Vice President, Human
Resources), Tuomas Hyyryläinen (Vice President, Strategy and M&A), Samu
Konttinen (Vice President, Sales and Marketing), Maria Nordgren (Vice
President, Channels), Pirkka Palomäki (Chief Technology Officer), Kari Penttilä
(Vice President, R&D), Patrik Sallner (Vice President, Professional Services ),
Antti Reijonen (Vice President, Solution and Portfolio Management) and Taneli
Virtanen (Chief Financial Officer).
As informed in Stock Exchange release on October 6, 2011 Pirkka Palomäki has
been nominated as acting CEO as of November 1, 2011. Kimmo Alkio leads F-Secure
until 31 October, 2011. The search for the new CEO has been initiated and is
planned to be completed during the second half of 2011.
Financing and capital structure
F-Secure's financial position continued to be strong. F-Secure's equity ratio
at the end of Q3 was 70% (71%) and gearing ratio was 48% negative (58%
negative).
Cash flow from operations for the first nine months was 13,7 million positive
(16m positive); lower than in previous year mainly due to increased capex and
activations. The net financial income was slightly negative of 0.2m impacted by
low interest income and changes of exchange rates losses (0.2m negative).
The Company's cash position has developed according to the longer term
efficient capital management objectives. The market value of the liquid assets
of F-Secure on September 30, 2011 was 25,9 million (28.8m).
Changes in exchange rates did not have material impact on sales and costs.
Capital expenditure
F-Secure's capital expenditure for the first nine months was 12.7 million (9m),
consisting mainly of capitalization of development expenses for Operator
platforms and applications for both security and storage services.
Capital management and repurchase of own shares
The objective of F-Secure's capital management is to achieve an efficient
capital structure that ensures the functioning of business operations and
promotes the increase of shareholder value. During the third quarter, the
Company continued its share buy back program, announced to start on May 31,
2011. The repurchase of own shares commenced on June 8 and by the end of
September F-Secure has bought in total 547.045 shares.
The share buy-back program is based on the authorization of the Annual General
Meeting of March 30, 2011. The maximum number of shares to be repurchased is
2.000.000 shares, representing maximum of approximately 1.3% of all shares
issued by the Company. The shares are purchased through public trading on the
NASDAQ OMX Helsinki Ltd. in accordance with its rules and at market price.
These own shares will be purchased in order to improve the Company's financial
structure, to be used as part of the incentive compensation plan, or to be used
for the purpose for making acquisitions or implementing other arrangements
related to the Company's business, or otherwise assigning or cancelling the
shares.
Including all shares bought, the total number of own shares held at the end of
September 2011 was 3.854.358 shares, corresponding to approximately 2.4% of the
Company's shares and voting rights.
Shares, shareholders' equity and option programs
In September, a total of 510,522 F-Secure shares were subscribed for with the C
warrants attached to the F-Secure 2005 Warrant Plan. The issue of the 2005
Warrant Plan was approved by the Annual General Meeting on March 23, 2005. In
aggregate the number of shares was increased by 510,522, which was registered
in the Finnish Trade Register on Sep 6, 2011. F-Secure received as subscription
price a total amount of EUR 755,572.56, which was recorded in the fund for
Company's distributable equity. As a result of the registering the total number
of shares is 158,380,658. Trading in the new shares commenced on Sep 7, 2011.
In May, a total of 45,000 F-Secure shares were subscribed for with the C
warrants attached to the F-Secure 2005 Warrant Plan. The issue of the 2005
Warrant Plan was approved by the Annual General Meeting on March 23, 2005. In
aggregate the number of shares was increased by 45,000, which was registered in
the Finnish Trade Register on May 24, 2011. F-Secure received as subscription
price a total amount of EUR 66,600.00, which was recorded in the fund for
Company's distributable equity. As a result of this registration the total
number of shares is 157,870,136. Trading in the new shares commenced on May 25,
2011.
In April, a total of 285,893 F-Secure shares were subscribed for with the C
warrants attached to the F-Secure 2005 Warrant Plan. The issue of the 2005
Warrant Plan was approved by the Annual General Meeting on March 23, 2005. In
aggregate the number of shares was increased by 285,893, which was registered
in the Finnish Trade Register on Apr 12, 2011. F-Secure received as
subscription price a total amount of EUR 423,121.64, which was recorded in the
fund for Company's distributable equity. As a result of the registering the
total number of shares is 157,825,136. The trading in the new shares commenced
on Apr 13, 2011. The subscription period for the 2005 C warrants began on March
1, 2010.
2005 D-warrants of F-Secure Corporation were listed on the Nasdaq OMX Helsinki
Ltd. and trading commenced on March 1, 2011. In connection with the 2005 Option
Plan, the maximum of 4.5 million warrants will be issued which are divided into
categories A, B, C and D. Each 2005 D-warrant entitles holders to subscribe for
one F-Secure share at a price of EUR 2,09. The subscription price of the stock
options shall, as per the dividend record date, be reduced by the amount of
dividend per share. The subscription time for 2005 D-warrants began on March 1,
2011 and will end on November 30, 2012. In aggregate the 2005 D-warrants
entitle holders to subscribe for 410,000 shares. The terms and conditions of
stock options were published as a stock exchange release on February 17, 2011.
The total number of Company's shares is currently 158,380,658. The
corresponding number of shares diluted is 160,990,852 including all stock
option programs. The Company's registered shareholders' equity is EUR
1.551.311,18. More information on the stock option programs is available on the
Company's Investors website.
Corporate Governance
F-Secure complies with the Corporate Governance recommendations for public
listed companies published in January 2010 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 a corporate governance statement for
2009 in the annual report and on the Company website in March.
Risks and uncertainties
F-Secure has not seen material changes in the risks and uncertainties during
the reporting period. The slower growth in sales of fixed broadband connections
by operators may also have an impact on security service sales. As uncertainty
in the economic environment continues, this may have an impact on operators'
willingness to invest in new services. F-Secure continues to monitor closely
the development in the economic and financial markets.
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), impact of changes in technology, timely and
successful commercialization of complex technologies as new products and
solutions, the ability to protect own 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.
Due to the longevity and complexity of project deliveries in the storage and
digital content business, the 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.
F-Secure Corporation is a party to a dispute in Brazil regarding a distributor
relationship and will defend itself accordingly, including through an
arbitration process in Finland. The Company does not expect a material impact
on its financials from this dispute.
Market view and long-term objectives
The long term market opportunities are attractive for F-Secure. Demand for
Value Added Services, like Internet security and cloud storage services, is
driven by the expansion of Internet users and Internet connected devices.
The global Internet penetration is globally still at a low level around 30%; in
Asia below 25%, in Europe close to 60%, and in North America close to 80%
(Source: Internet World Stats, U.S. Census Bureau, estimated in March 2011).
The accelerating growth of smartphones and other Internet connected devices is
expected to lead to tens of billions during next 10 years (source; gigaom/
Ericson). The number of Internet users is still growing rapidly in coming
years.
The Internet security and threat landscape continues to evolve and attacks are
getting more frequent and are increasingly conducted for criminal purposes.
While device security will be improved over time by more secure operating
systems, there is a need for specialized security services. For example,
phishing is an increasing problem as email and Internet services are often
accessed with mobile devices. Privacy-related threats have become more visible
with the booming social media usage. Such developments provide business
opportunities for new solutions such as reputation services.
The global Security software market as a whole is attractive. The global
security software revenue worldwide estimate for 2010 is $16.5bn, reflecting a
10% annual growth rate for 2010. Consumer security software growth is expected
to show CAGR of 6.5% 2007-2014 (source: Source: Gartner Jul. 2010).
The use of social media is increasing and people are looking for services to
share, store and control their personal data. In the future, nearly every
device that creates or stores data, including desktop and laptop computers,
tablets, smartphones, and digital cameras, will be backed up over the internet.
Online backup and sharing is gaining increasing acceptance as the best way to
store copies of valuable data off-premise, where they are safe from equipment
failure, theft, loss, viruses, and accidental deletion.
Ubiquitous connectivity combined with falling storage prices encourages further
migration of more data into the cloud. This will shift even more data and
applications from the desktops to servers elsewhere, making the data accessible
from anywhere and enabling collaboration and sharing within networks. This will
create a market opportunity for Internet companies and operators to provide
cloud services to consumers to store, sync and share their digital content.
The volume of user generated digital content is expected to continue to
increase rapidly during the coming years, driven primarily by digital photos
and music. The use of social media is increasing and people are looking for
services to share, store and control of their personal data. IDC forecasts this
storage as a service -market to pass $3bn by 2012, with a compound annual
growth rate of more than 29% from 2007 to 2012.
The Security as a Service (SaaS) business has been a strong growth driver for
F-Secure since 2000. Based on the Company's strong technology assets in
security, cloud computing and in storage area and based on its pioneering role
in offering Software as a Service, F-Secure continues to create new innovative
offerings to augment its traditional security services.
Based on experience of the Software as a Service business model, F-Secure
anticipates that both customer benefits (e.g. lower total cost of ownership)
and attractive partner business benefits (e.g. lifetime revenue share) will
accelerate the adoption of the Software as a Service business model compared to
traditional software acquisition as a product.
F-Secure's first priority is to drive growth and market expansion. The Company
sells its Value Added Services to consumers through its large operator network
of over 200 operator partners in over 40 countries with an addressable market
of over 250 million fixed and mobile broadband customers.
F-Secure focuses on increasing the penetration within the current operator base
with security and storage related cloud services and continues to selectively
seek partner expansion globally; especially in emerging markets. Penetration
rates vary by operator; overall penetration levels are relatively low and leave
substantial opportunity for growth. The combination of security and storage
services attracts a larger customer base and has proven to drive penetration
rates.
F-Secure's close co-operation with major mobile phone vendors and mobile phone
operators provides good opportunities to benefit from the growth of the mobile
Internet. Over time, F-Secure anticipates synergies across the Value Added
Services being developed and offered both for PCs and smart phones.
F-Secure's target is to be the best partner for operators in providing value
added services to consumers. F-Secure pursues investments in new value added
services for both PC and mobile users to augment its existing security and
storage services.
F-Secure aims to exceed the average market growth rates in revenues and seeks
to improve its profitability sustainably towards an EBIT level of 25% over
time. F-Secure's longer term profitability level continues to be driven
extensively by revenue growth and scalable operations. F-Secure targets its
investments in strategic growth businesses, specifically the operator channel.
Outlook for 2011
The combination of the latest operator wins together with a competitive service
portfolio and successful project deliveries support the Company's previous
growth projections for 2011. Revenue growth is driven by the combination of
security and storage services through Operators. Traditional security license
business related revenues are not expected to contribute to revenue growth.
Management estimation for the year is in line with previous guidance. The
annual revenue is expected to be over 143m (growth of 10-12%YoY) and EBIT is
expected to be 16-18% of revenues.
Previous guidance: Annual revenue growth is expected to accelerate to around
10% and annual profitability to improve from 2010 level at a comparable pace to
revenue growth (compared to 2010 EBIT of 21.8m excl. re-structuring).
The Company is investing in geographical expansion, competiveness of its value
added service (VAS) portfolio in PC security and storage related services, in
new mainstream mobile operating systems, like Android, RIM, iOS and in new
innovations. In addition, the Company's investments in cloud storage business
will continue to further accelerate revenue growth in the operator channel.
This revenue estimate is based on the sales pipeline at the time of publishing,
existing subscriptions and support contracts as well as current exchange rates.
News conference today at 11 am
A news conference for analysts and press is arranged today, on October 26, at
11 am Finnish time at F-Secure's Headquarters, address: Tammasaarenkatu 7,
Ruoholahti, Helsinki. In the news conference, CEO Kimmo Alkio will present the
Q3 financial results. Acting CEO as of November 1, Pirkka Palomäki, will join
the news conference for possible questions. A conference call for international
investors and analysts is arranged at 14.00 Finnish time (13.00 CET, 12.00 pm
UK time). To participate in the call, please dial in and register 5-10 minutes
prior to the event in the following number: +44 20 7162 0077, password:
F-Secure. The Q3 financial results presentation material will be available on
our Investors web pages at
http://www.f-secure.com/en_EMEA-Corp/investor-relations/financial-publications/
before the call begins.
F-Secure Corporation
Additional information
F-Secure Corporation
Kimmo Alkio, President and CEO
tel. +358 9 2520 0700
Taneli Virtanen, CFO
tel. +358 9 2520 5655
Mervi Pohjoisaho, IR
tel. +358 40 535 8989
This interim report is prepared in accordance with IAS 34 standard Interim
Financial Reporting and with accounting principles stated in the annual report
2010.
Key figures (unaudited):
--------------------------------------------------------------------------------
Euro million
--------------------------------------------------------------------------------
INCOME STATEMENT 2011 2010 2011 2010 Chge 2010
--------------------------------------------------------------------------------
7-9 7-9 1-9 1-9 % 1-12
--------------------------------------------------------------------------------
Revenues 36.6 32.0 106.1 95.7 11 130.1
--------------------------------------------------------------------------------
Cost of revenues 2.0 2.2 5.7 6.1 -6 8.1
--------------------------------------------------------------------------------
Gross margin 34.6 29.9 100.3 89.7 12 122.0
--------------------------------------------------------------------------------
Other operating income 0.2 0.2 1.0 0.7 46 1.0
--------------------------------------------------------------------------------
Sales and marketing 15.8 13.9 46.7 43.7 7 59.6
--------------------------------------------------------------------------------
Research and development 9.4 8.2 28.8 24.3 19 34.5
--------------------------------------------------------------------------------
Administration 2.8 2.1 8.8 6.1 44 9.1
--------------------------------------------------------------------------------
Operating result 6.9 5.9 17.1 16.3 5 19.8
--------------------------------------------------------------------------------
Financial net 0.0 -0.4 -0.2 -0.2 0.0
--------------------------------------------------------------------------------
Result before taxes 7.0 5.5 16.9 16.1 19.9
--------------------------------------------------------------------------------
Income taxes -2.0 -1.4 -5.1 -4.2 -4.6
--------------------------------------------------------------------------------
Result for the period 4.9 4.2 11.7 12.0 15.2
--------------------------------------------------------------------------------
Other comprehensive income:
--------------------------------------------------------------------------------
Exchange diff. on translating 0.0 -0.1 -0.1 0.1 0.1
foreign operations
--------------------------------------------------------------------------------
Available-for-sale fin.assets 0.0 0.2 0.0 0.2 0.0
--------------------------------------------------------------------------------
Income tax rel. to components of other 0.0 -0.1 0.0 -0.1 0.0
comprehensive income
--------------------------------------------------------------------------------
Total compr.income (owners) 5.0 4.2 11.7 12.2 15.4
--------------------------------------------------------------------------------
Earnings per share, e 0.03 0.03 0.08 0.08 0.10
--------------------------------------------------------------------------------
EPS diluted. e 0.03 0.03 0.07 0.07 0.10
--------------------------------------------------------------------------------
BALANCE SHEET 30/09/2011 30/09/2010 31/12/2010
ASSETS
-----------------------------------------------------------------------
Intangible assets 22.1 15.4 16.0
-----------------------------------------------------------------------
Tangible assets 8.6 7.1 7.5
-----------------------------------------------------------------------
Goodwill 19.4 19.4 19.4
-----------------------------------------------------------------------
Other financial assets 5.9 4.9 6.0
-----------------------------------------------------------------------
Non-current assets total 56.0 46.8 48.8
-----------------------------------------------------------------------
Inventories 0.1 0.4 0.4
-----------------------------------------------------------------------
Other receivables 31.0 28.1 29.7
-----------------------------------------------------------------------
Available-for-sale financial assets 15.9 16.8 16.8
-----------------------------------------------------------------------
Cash and bank accounts 10.1 12.1 16.2
-----------------------------------------------------------------------
Current asset total 57.2 57.5 63.1
-----------------------------------------------------------------------
Total 113.2 104.3 111.9
-----------------------------------------------------------------------
SHAREHOLDERS' EQUITY 30/09/2011 30/09/2010 31/12/2010
AND LIABILITIES
-----------------------------------------------------------------
Equity 54.4 49.0 51.4
-----------------------------------------------------------------
Other non-current 1.8 2.3 2.2
-----------------------------------------------------------------
Deferred revenues 7.7 7.3 7.8
-----------------------------------------------------------------
Non-current liabilities total 9.5 9.6 10.0
-----------------------------------------------------------------
Other current 22.0 17.8 21.1
-----------------------------------------------------------------
Deferred revenues 27.3 27.9 29.4
-----------------------------------------------------------------
Current liabilities total 49.3 45.6 50.4
-----------------------------------------------------------------
Total 113.2 104.3 111.9
-----------------------------------------------------------------
CASH FLOW STATEMENT 30/09/2011 30/09/2010 31/12/2010
--------------------------------------------------------------------------------
Cash flow from operations 13.7 16.0 23.2
--------------------------------------------------------------------------------
Cash flow from investments -11.4 -9.3 -11.5
--------------------------------------------------------------------------------
Cash flow from financing -9.4 -12.3 -13.2
activities 1)
--------------------------------------------------------------------------------
Change in cash -7.1 -5.6 -1.5
--------------------------------------------------------------------------------
Cash and bank at 1 Jan 32.9 34.1 34.3
--------------------------------------------------------------------------------
Change in net fair value of 0.1 0.2 0.0
Available-for-sale
--------------------------------------------------------------------------------
Cash and bank at end of period 25.9 28.8 32.8
--------------------------------------------------------------------------------
Statement of changes in shareholders' equity
Share Share Unrestrict Treasur Retaine Assets Transl Total
capita premium ed equity y d avail. .
l fund reserve shares earnin f.sale diff.
gs
--------------------------------------------------------------------------------
Equity 1.6 0.2 3.2 -7.5 54.1 0.0 -0.2 51.4
on:
31.12.20
10
--------------------------------------------------------------------------------Total 11.7 0,1 -0.1 11.7
comprehe
nsive
income
for the
year
--------------------------------------------------------------------------------
Dividend -9.3 -9.3
--------------------------------------------------------------------------------
Other
change
--------------------------------------------------------------------------------
Exercise 1.3 1.3
of
options
--------------------------------------------------------------------------------
Treasury -1.2 -1.2
shares
--------------------------------------------------------------------------------
Cost of 0.4 0.4
share
based
payment
s
--------------------------------------------------------------------------------
Equity 1.6 0.2 4.4 -8.7 57.1 0.1 -0.2 54.4
on
30.9.201
1
--------------------------------------------------------------------------------
NOTES
1) Cash flow from financing
Dividend for year 2010 0.06 euro per share totaling 9.253.915.80 euro was paid
on 12th April 2011. In 2010. Paid dividend totaled 9.310.086.12 euro. The
company has bought own shares by 1.182.640 euro.
Key ratios 2011 2010 2010
----------------------------------------------------
9 m 9 m 12 m
----------------------------------------------------
Operating result. % of revenues 16.1 17.0 15.2
----------------------------------------------------
ROI, % 44.5 47.3 42.5
----------------------------------------------------
ROE, % 29.6 32.5 30.3
----------------------------------------------------
Equity ratio, % 69.5 71.2 69.1
----------------------------------------------------
Debt-to-equity ratio, % -47.5 -58.0 -63.2
----------------------------------------------------
Earnings per share (EUR) 0.08 0.08 0.10
----------------------------------------------------
Earnings per share diluted 0.07 0.07 0.10
----------------------------------------------------
Shareholders' equity 0.34 0.31 0.33
per share. e
----------------------------------------------------
P/E ratio 19.2 22.1 23.1
----------------------------------------------------
Capitalized expenditures (Me) 12.7 9.0 10.4
----------------------------------------------------
Contingent liabilities 15.8 19.1 17.6
----------------------------------------------------
Personnel, average 860 841 835
----------------------------------------------------
Personnel, end of period 907 855 812
----------------------------------------------------
Segment information
The Group has only one segment; data security.
Quarterly development 1/10 2/10 3/10 4/10 1/11 2/11 3/11
----------------------------------------------------------------
Revenues 31.4 32.3 32.0 34.4 34.1 35.3 36.6
----------------------------------------------------------------
Cost of revenues 2.0 1.9 2.2 2.0 1.8 1.9 2.0
----------------------------------------------------------------
Gross margin 29.4 30.4 29.9 32.4 32.3 33.4 34.6
----------------------------------------------------------------
Other operating income 0.3 0.2 0.2 0.3 0.4 0.4 0.2
----------------------------------------------------------------
Sales and marketing 14.4 15.4 13.9 15.9 14.8 16.2 15.8
----------------------------------------------------------------
Research and 7.8 8.3 8.2 10.2 9.4 9.9 9.4
development
----------------------------------------------------------------
Administration 1.9 2.1 2.1 3.0 3.0 3.0 2.8
----------------------------------------------------------------
Operating result 5.5 4.9 5.9 3.6 5.5 4.6 6.9
----------------------------------------------------------------
Financial net -0.1 0.2 -0.4 0.2 -0.2 0.0 0.0
----------------------------------------------------------------
Result before taxes 5.5 5.2 5.5 3.7 5.3 4.6 7.0
----------------------------------------------------------------
Geographical information
Revenue 7-9/2011 7-9/2010 1-9/2011 1-9/2010
---------------------------------------------------------
Nordic countries 11.6 10.5 34.7 31.7
---------------------------------------------------------
Rest of Europe 16.4 14.6 47.9 44.2
---------------------------------------------------------
North America 4.2 2.8 11.2 8.3
---------------------------------------------------------
Rest of the world 4.4 4.1 12.3 11.5
---------------------------------------------------------
Total 36.6 32.0 106.1 95.7
---------------------------------------------------------
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