Inside information, profit warning: F-Secure updates its financial outlook for 2023 following the completion of the acquisition of the mobile consumer security business of Lookout Inc.

• F-Secure and Lookout Inc. have completed the mobile consumer security business unit transaction and F-Secure updates its financial outlook to incorporate the effect of the acquisition.
• The combined operations of F-Secure and the mobile consumer security business unit of Lookout start on June 1, 2023.
• Post-completion, F-Secure has significantly increased scale, strengthened footprint in the US and in the communication service provider channel as well as a complementary mobile optimized software product portfolio reaching tens of millions of subscribers worldwide.
• Transaction expected to deliver at least EUR 12 million of revenue synergies and incremental EBITA level synergies of EUR 10 million per annum in 2027.
• Transaction is projected to be significantly accretive to EPS (adjusted for items affecting comparability and purchase price allocation related amortization) from inception, by more than 15% in 2024 and increasingly thereafter.

F-Secure Corporation (“F-Secure”) has completed the acquisition of the mobile consumer security business unit (“Lookout consumer BU") from Lookout Inc (“Lookout”) for an enterprise value of USD 223 million (approx. EUR 203 million [1]) on a cash and debt-free basis. The acquisition was announced on April 26, 2023. Customary closing approvals have been received for the transaction. Lookout consumer BU will be consolidated as part of F-Secure from June 1, 2023 onwards. Due to the completion, F-Secure updates its outlook for 2023.

New outlook for 2023 including the acquisition of Lookout consumer BU:

Growth: In 2023, F-Secure expects revenue to exceed EUR 134 million.

Profitability: The group’s adjusted EBITA is expected to exceed EUR 45 million. The adjusted EBITA margin is estimated to temporarily decrease in 2023 due to acquisition related additional OPEX investments of more than EUR 3 million to ensure successful integration and drive revenue synergies.

Background for the outlook:

• F-Secure expects the cyber security market to grow in 2023 and the global demand to remain stable, in the face of a challenging operating environment.
• Lookout consumer BU included from June to December (7 months).
• Pro forma revenue growth of Lookout consumer BU expected to be above 10% on a standalone basis and therefore contributing to F-Secure growth positively (FY 1 February 2023–31 January 2024).
• Lookout consumer BU has received payments in advance related to part of its revenue. Such payments are recognised as deferred revenue. As part of the acquisition, F-Secure fair values the deferred revenue according to IFRS reporting for the purposes of acquisition balance sheet, thus the revenues recognised post-acquisition related to deferred revenue balances will be lower compared to revenue recognised by Lookout consumer BU for those advance payments. The preliminary negative revenue impact included in the outlook is estimated to be approximately EUR 3.2 million in 2023, and negative EBITA-level impact in the outlook approximately EUR 2.6 million, respectively.

Previous outlook for 2023:

F-Secure expects the global demand for cyber security solutions to grow while our operating environment has turned more challenging and consumer confidence remains unstable in the face of rising inflation, causing higher risk for weaker development on new business sales in the direct channel.

We have made a number of growth-related investments in 2022 and continue to do so in 2023. There is a level of uncertainty when these will have a concrete effect on our financial performance.

F-Secure expects revenue to grow by 4-8% year-on-year.

Adjusted EBITA for the full year 2023 is expected to be within 38-41%

Impact on medium-term financial targets (published April 26, 2023)

As announced on April 26, 2023, medium term financial targets of F-Secure by 2026 are:

• Growth: Total revenue of more than EUR 200 million by 2026
• Profitability: After initial growth investments, adjusted EBITA margin of above 42%
• Dividend Yield: Around or above 50% of net profit on an annual basis.
• Leverage: Net debt / adjusted EBITDA ratio below 2.5x, excluding temporary impact from acquisitions.

F-Secure Corporation follows the Rule of 40 metric as internal performance measurement and guiding principle, according to which the combined revenue growth rate and profitability margin should be equal to or greater than 40%.

Financing of the transaction

The acquisition was financed with debt for which a new facilities agreement was entered into with Danske Bank A/S and OP Corporate Bank plc. The new financing package consists of two facilities, (i) a EUR 202 million amortising term loan to finance the acquisition, and (ii) a EUR 20 million revolving loan facility to be used for general corporate purposes of the combined group. Both facilities hold a maturity of 3 years with two 1-year extension options.

The previous undrawn revolving credit facility, procured in conjunction with the demerger from WithSecure, was cancelled concurrently with closing of the transaction.

For further information, please contact:

Timo Laaksonen, President and CEO
tel. +358 40 7157411

Sari Somerkallio, Chief Financial Officer
tel. +358 40 3569251
investor.relations@f-secure.com

About F-Secure

F-Secure is Finland headquartered and globally operating consumer cyber security company. F-Secure offers award-winning security and privacy products and services that make every digital moment more secure, for everyone. F-Secure operates in over 100 countries, has ~200 Service Provider partners and is the global leader providing security through Communication Service Providers. F-Secure Corporation is listed on Nasdaq Helsinki Ltd. Read more: www.f-secure.com.

[1] The Company entered into a EUR/USD hedge position on 26 April 2023 at an exchange rate of 1.10 EUR/USD.