2012-04-27 08:00:01 CEST
2012-04-27 08:00:06 CEST
REGULATED INFORMATION
F-Secure Oyj - Interim report (Q1 and Q3)
F-Secure Corporation - Interim Report January 1 – March 31, 2012
Stock Exchange release
April 27, 2012 at 9.00
F-Secure Corporation - Interim Report January 1 - March 31, 2012
Solid revenue growth continued driven by the operator channel, good internet
security sales, profitability satisfactory
Highlights in Q1
-- Total revenues grew by 12% reaching level of 38.4 million (Q12011: 34.1m)
-- Revenue growth in the operator channel continued; grew 21% reaching
revenues of 22.6 million (18.7m); revenue growth was driven by healthy
internet security sales and content cloud subscriber sales
-- EBIT was 5.4 million representing 14% of revenues (5.5m, 16% of revenues)
-- Earnings per share was EUR 0.02 (EUR 0.02)
-- Cash flow from operations was 7.7 million positive (7.1m)
-- Content Cloud business progressed with a new contract with one major
European operator and launch of Content Anywhere, a solution to save, sync
and share digital content
Outlook for 2012 - the management has revised the annual estimation for the
year.
-- Annual revenue growth is expected to be between 5% and 10% and EBIT
expected to be around 15% of revenues. This is due to possible delays in
the content cloud business. (Previous guidance was the following: Annual
revenue growth is expected to be around 10% and EBIT expected to be around
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 2012 2011 2011
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(Eur Million) 1-3 1-3 12m
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Revenues 38.4 34.1 146.0
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Operating profit 5.4 5.5 23.6
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% of revenues 14% 16% 16 %
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Profit before taxes 5.2 5.3 23.5
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Earnings per share (Eur) 0.02 0.02 0.11
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At the end of period: 38.5 37.5 38.3
Deferred revenues
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Equity ratio, % 73% 60% 68%
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Debt-to-equity ratio, % -49% -80% -47%
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Personnel 975 851 942
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President and CEO Christian Fredrikson:
“Our financial performance in Q1 was satisfactory showing revenue growth of 12%
and profitability of 14% of revenues. The growth was driven by the operator
channel and supported by a slight increase in channel sales. This gives us a
solid base for the whole year.
In Q1, we have signed a new content cloud delivery agreement with one of the
major European operators. This service is expected to be launched to the public
during latter half of 2012. Our content cloud revenue continues its growth.
This was driven by subscriber based revenues while project revenue remained at
same level as a year ago and was lower than anticipated. We see that the
content cloud business offers us a substantial business opportunity longer
term. On the other hand this business is still in its early stage; negotiations
with operators, project deliveries and ramping up the subscriber volumes take
time. This may delay or create fluctuations in our revenue growth.
Our security sales through operators progressed very well, showing a robust
double digit revenue growth. Our entry in Latin America has been successful in
security and content cloud businesses. We have experienced there faster take-up
rate than in any other emerging market. We believe that our upcoming
announcements with new Telefonica subsidiaries will support the continuation of
solid security revenue growth in the coming quarters.
In my view, the Company is in a solid position to execute the strategy and to
deliver profitable growth in the future.”
F-Secure business during January - March 2012
Total revenues for the first quarter of 2012 were 38.4 million representing
growth of 12% (34.1m, 9%). Revenue growth through the operator channel
continued strong with 21% growth from the previous year reaching revenues of
22.6 million (18.7m). Revenues through the other channels developed positively,grew by 2% totaling 15.8 million (15.4m). EBIT was 5.4 million (5.5m),
representing 14% of revenues (16%). Earnings per share were EUR 0.02 (EUR
0.02). Cash flow from operations was 7.7 million positive (7.1m positive).
Deferred revenues were 38.5 million at the end of March (37.5m) due to good
sales in the license business.
Total fixed costs were 31.4 million (27.2m), 16% higher than in the previous
year. In the first quarter, F-Secure also capitalized some of its R&D expenses
according to accounting rules, totaling 1.8 million (1m). The cost increases
were allocated to well progressing geographic expansion in Latin America, R&D
to increase the competitiveness of security and content cloud solutions. The
cost level was also impacted by increased depreciations from the past
capitalized expenses (R&D activations, software, hardware) and decreased
capitalization of development work (compared to Q4 2011).
At the end of March, the geographical breakdown of revenues was as follows:
Finland and Scandinavia 31% (33%), Rest of Europe 45% (45%), North America 10%
(10%) and Rest of the World 14% (12%).
Operator channel and its performance in Q1
The Operator channel, which includes Internet service providers, mobile
operators and cable operators, is the main channel through which F-Secure
services are delivered. F-Secure has more than 200 partners in over 40
countries with an addressable market of over 250 million fixed and mobile
broadband customers. The total number of F-Secure's operator partners is
significantly larger than that of any other security service vendor.
F-Secure provides, through Operators, security and content cloud services that
are easy and intuitive to use for mainstream consumers. This channel utilizes
Operators' presence and brand to reach millions of consumers in a cost
efficient and scalable way. F-Secure provides its Operator partners with
services that enable them to compete with other Internet players. By selling
and offering security and content cloud services, the Operator can improve its
ARPU (average revenue per user) and margins and reduce churn.
F-Secure currently generates a majority of its revenues from the Security as a
Service business where Operators sell security service subscriptions to protect
their customers against Internet threats. The revenues are shared by F-Secure
and the Operator. Revenue growth in this area has been driven by increasing
security subscriber numbers within the existing and new operator partner
customer base. This has been supported by the growth of fixed and mobile
broadband connections, natural demand for security services as well as
relatively low take-up rates. Internet security services for smartphones and
tablet devices currently generate a small portion of F-Secure and market wide
volumes. The mobile security landscape has started to change recently due to
smartphone and tablet sales growth.
Content cloud services, for example cloud-based storage, sharing and
synchronization, are expected to become a major business opportunity for the
software industry. The use of social media is increasing and people seek
services for sharing, storing and organizing 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. The overall interest in content cloud services among
Operators is prominent as they have realized the business opportunity. To
compete with other Internet players, Operators are looking for services that
match the demand. Operators' advantage is their ability to manage the
continuously diverging multi-device, multi-OS environment. Also, they are able
to bring services to the masses and provide support for these services.
F-Secure's entry into content cloud services has strengthened the Company's
position as a strategic partner to the Operators. Overall interest in the
content cloud business among Operators is high. Currently, F-Secure has tens of
Operators that are offering content cloud services, mostly standard on-line
backup. In addition, with regard to more advanced cloud services like file
synchronization and sharing, F-Secure has several prospects in the pre-sales
phase. This business model is evolving. Usually the Operator offers limited
capacity for free to the end user and charges for premium services. F-Secure
charges the Operator a per-user fee for subscribers to the services. In
addition to subscriber based revenues, additional revenue streams originate
from optional features and functionalities, capacity usage, project deliveries
and related customizations. F-Secure's revenues from content cloud subscriber
services is at a relatively low level, but the management expects revenues to
gradually increase as a growing number of operators will offer content cloud
services to their customers together with increasing take-up rates.
F-Secure has increased its investments, mostly in the content cloud business
but also in security services. In addition to new mainstream operating systems,
such as Android, iOS and Windows, the Company is investing in platform
development. These investments ensure the scalability and competiveness of
these services and allow Operators to offer F-Secure services, both PC and
mobile, to a wide subscriber base.
During Q1, security sales developed strong in several European countries, APAC
and Latin America showing robust double-digit revenue growth. Additional
operator partner launches in several Latin America countries are expected to
take place in the coming quarters. These long-term regional partnerships enable
F-Secure to reach major wireless and mobile broadband markets with its Internet
protection and content cloud services.
During Q1, the Company signed a new content cloud delivery agreement with one
of the major European operators. This service is expected to be launched to the
public during the latter half of 2012. In Q1, this had only a minor impact on
the project revenues. The Company's co-operation with AT&T works well while
experiencing delays with the launch. The Q1 financials include some revenues
from the AT&T project revenues and the initial commitment of subscriber
revenues. The total revenue growth (YoY) of the content cloud business comes
from the growth of subscriber revenues. The project revenues were at the same
level as a year ago.
In the first quarter of 2012, sales through Operator business partners
continued buoyant and totaled 22.6 million (18.7m), representing 59% of
F-Secure's total revenues (55%). Revenue growth was 21% compared to the
corresponding quarter in 2011 and negative 7% to the previous quarter as
project revenues were substantially lower than in Q4.
Other channels in Q1
Other channels consist mainly of traditional license sales to consumers through
eStore and retail, i.e. new licenses and renewals of Internet security and
online backup for PCs and mobile devices. The other channels business also
includes a wide range of Internet security services to corporate customers
through the global reseller network. Sales in traditional channels continued
slightly better than anticipated; especially eStore business grew well.
Customer satisfaction in security services continued at a high level, which was
visible in healthy license renewal sales.
During the first quarter, revenues grew by 2% reaching 15.8 million (15.4m).
These other channels represented 41% of F-Secure's total revenues (45%).
Products, services and technologies
F-Secure develops and sells Internet security and content cloud services that
support personal computers, servers and an increasing set of major smartphone
and tablet operating systems. Services include broad security suites like
anti-virus, anti-theft, browsing protection and parental control as well as
content cloud services like on-line back-up, synching and sharing.
F-Secure is investing further in the content cloud business and in security
services. In addition to mainstream operating systems, such as Android, iOS and
Windows, the Company is investing in platform development. These investments
ensure the scalability and competiveness of services and allow Operators to
offer F-Secure services, both PC and mobile, to a wide subscriber base.
Cloud computing has for the past few years been at the center of the company's
technology strategy and choices. F-Secure uses cloud for two purposes: for
Real-time Protection Network and for content cloud. 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 has made significant investments in content cloud technology.
F-Secure's carrier-grade cloud storage platform gives F-Secure the scalability
and flexibility to tackle even the most complex requirements of the largest
operators in the world, while at the same time making small deployments
feasible to enable new solutions to be trialed in a fast and incremental
manner.
The combination of security and content 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 puts emphasis on user experience design when developing services. User
experience designers, marketers and developers utilize consumer research, focus
groups and usability tests to explore consumer needs and validate new product
and service prototypes with consumers, thereby ensuring that they are appealing
and usable when introduced to the public. User experience along with technical
performance are crucial for the commercial success of solutions and services.
During the first quarter of 2012 the key product announcements were as follows:
In March, F-Secure introduced Safe Infinity, which is offered through operator
partners. F-Secure Safe Infinity safeguards irreplaceable content while
enabling a secure online life. Safe Infinity covers all the functionalities
available from F-Secure's Internet security service such as anti-virus,
firewall, spam protection and parental control as well as backup and restore
functionality via the cloud.
In March, F-Secure launched Safe Anywhere, a unique offering which allows
consumers to obtain full protection of their computers, smart phones and
tablets in one single service through their local operators. Safe Anywhere is
embedded with F-Secure's protection from viruses, spam, phishing and other
kinds of malware and cyber attacks. F-Secure Safe Anywhere combines F-Secure
Protection Service for Consumers and F-Secure Mobile Security. Safe Anywhere
supports PCs, Macs and mobile devices running Android, Blackberry, iOS and
Symbian.
In February, F-Secure introduced its entry into the content cloud space with
its F-Secure Content Anywhere. F-Secure Content Anywhere synchronizes a user's
content in the cloud, making it accessible on any device including PC's, smart
phones, tablets and connected digital TV's, anywhere and anytime of the day.
Consumers' ease of use is paramount when accessing their content from more than
one device and therefore the user interface will be uniform across all
connected devices. Operators will be able to offer a safe personal cloud to
their customers to save, sync and share their digital content.
Awards
F-Secure's products and services succeeded well in tests run by various test
reviewers. F-Secure Client Security received the AV-TEST Best Protection 2011
award in the corporate product category in January 2012. F-Secure Internet
Security 2012 received the AV-Comparatives Top Rated award in January 2012.
F-Secure also got excellent results in AV-TEST's Malware Protection for Android
-test run in March 2012.
Market situation
During the quarter the internet security space experienced no significant
changes in the competitive landscape or in pricing levels. Usual signs of price
competition are evident in some countries in the security market, especially in
traditional license business. Commercial interest in the content cloud business
is picking up with the introduction of new cloud services to the market. Many
of F-Secure's traditional competitors are also entering the content cloud
business.
F-Secure's competitive position in the Operator channel has remained strong.
The growth of fixed and mobile broadband access supports the position of
Operators in providing internet security and content cloud services.
Personnel and organization
F-Secure's personnel totaled 975 at the end of Q1 (851). The number of
personnel has continued to increase especially in sales and marketing, project
delivery and R&D in respect to content cloud business.
Currently, the Executive Team consists of the following persons: Christian
Fredrikson (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)
and Taneli Virtanen (Chief Financial Officer).
Financing and capital structure
F-Secure's financial position remained solid. F-Secure's equity ratio at the
end of year was 72% (60% and 69% if dividend was paid in March) and gearing
ratio was 49% negative (80% negative).
Cash flow from operations for the quarter was 7.7 million positive (7.1m
positive). Net financial income was slightly negative at 0.2m, impacted by low
interest income and exchange rates losses (negative 0.2m).
The Company's cash position has developed according to the longer term
efficient capital management objectives. The market value on March 31, 2012 of
the liquid assets of F-Secure was 31.2 million (37.1m). Changes in exchange
rates did not have material impact on sales and costs.
Capital expenditure
F-Secure's capital expenditure for the quarter was 3 million (2.5m), consisting
mainly of capitalization of development expenses for Operator platforms and
applications for both security and content cloud services. The capitalized
development expenses were 1.8m (1m in Q1) and have decreased from Q4 (3.1m) as
anticipated.
Capital management and 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.
Currently, the total number of own shares held at the end of March 2012 was
3,732,390 shares, corresponding to approximately 2.4% of the Company's shares
and voting rights. The shares were purchased through public trading on the
NASDAQ OMX Helsinki Ltd. in accordance with its rules and at market price.
These own shares were 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 of making acquisitions or implementing other arrangements
related to the Company's business, or otherwise assigning or cancelling the
shares.
In January 2012, the company assigned a total of 274,923 shares to the 21
participants of the
F-Secure share-based incentive program as a reward payment based on the
achievements in the earning criteria for the 2008 earning period. The criteria
set for the earnings period were Revenues and EBIT. The handover date for the
shares was January 13, 2012. After the transfer, F-Secure Corporation holds a
total of 3,732,390 of its own shares.
Shares, shareholders' equity and option programs
During the first quarter, there were no shares subscribed with options.
The total number of Company shares is currently 158,798,739. The corresponding
number of shares diluted is 160,940,348 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 web pages.
Share-based incentive program
In January 2012, F-Secure announced that the Board of Directors established a
new share-based incentive program with earning period 2011-2013 for key
employees. The purpose of these programs is to support company´s strategy by
aligning the interests of shareholders and key employees in order to increase
the value of the company and to commit key employees to the company. The Board
determines the metrics of the share-based program and may change them according
to the terms and conditions of the program. Metrics for the earning period are
based on results in growth of new businesses, stock performance against peer
group and earnings per share against predefined objectives.
Participants in the share-based incentive program have the possibility to
receive a reward of F-Secure shares and cash to cover taxes. There shall be a
maximum total of 2,500,000 shares and a cash payment corresponding to the
registration date value of the shares. The participants in the share-based
incentive program are recommended not to sell more than 50% of the received
shares and to cumulate the shares from the incentive programs until the value
of the shares received from the share programs equals the annual gross base
salary of the employee.
F-Secure Board of Directors established a share-based incentive program, with
earning periods 2008-2010, for the company's key employees in 2008. Based on
this program, reward payment from 2008 period was executed on January 13, 2012
as explained above.
Corporate Governance
F-Secure complies with the Corporate Governance recommendations for public
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 a corporate governance statement for 2011 in the annual
report and on the Company website in March 2012.
Annual General Meeting
The Annual General Meeting of F-Secure Corporation was held on April 3, 2012.
The Meeting confirmed the financial statements for the financial year 2011. 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, which was paid to those shareholders that on the record date of April
10, 2012 were registered in the Register of Shareholders held by Euroclear
Finland Ltd. The dividend was paid on April 17, 2012.
It was decided that the annual compensation remain on a previous years' level;
for the chairman is EUR 55,000, for the chairmen of Executive and Audit
Committee EUR 40,000 and for members EUR 30,000. Approximately 40% of the
annual remuneration will be paid as company shares.
It was decided that the number of Board members would be six. The following
members were re-elected: Jussi Arovaara, Sari Baldauf, Pertti Ervi, Juho
Malmberg, Anu Nissinen and Risto Siilasmaa. The Board elected in the first
meeting Mr. Siilasmaa as the Chairman of the Board. The Board nominated Ms.
Baldauf as the Chairman of the Executive Committee and Mr. Siilasmaa and Ms.
Nissinen as members of the Executive Committee. Mr. Ervi was nominated as the
Chairman of the Audit Committee and Mr. Arovaara and Mr. Malmberg were
nominated as members of the Audit Committee.
It was decided that auditors fee will be paid against approved invoice. Ernst &
Young Oy was elected the Groups auditors. APA, Mr. Erkka Talvinko is acting as
responsible partner.
It was decided that the Board of Directors may pass a resolution to purchase a
maximum of 10.000.000 shares of the Company. The amount represents
approximately 6.3% of all the shares issued by the Company. The authorization
would be valid for one year. The Board of Directors shall have the right to
decide on other matters related to the purchase of the Company's own shares.
The Annual General Meeting authorized the Board of Directors to decide on a
transfer of a maximum of 13.732.390 own shares of the Company either against
consideration or without payment. The authorization would be valid for one
year. The Board of Directors is authorized to transfer the shares in deviation
from the shareholders pre-emptive rights (directed transfer) subject to the
provisions of the applicable law. The Board of Directors shall have the right
to decide on other matters related to a transfer of own shares.
It was decided by the Annual General Meeting that the Board of Directors is
authorized to decide on the issuance of shares. The amount of shares to be
issued based on this authorization shall not exceed 40.000.000 shares. Board of
Directors decides on all the conditions of the issuance of shares. The
authorization is valid for 18 months. In connection with registering this
authorization, the authorization by the AGM 2011 for a directed share issue
shall be reversed.
Risks and uncertainties
F-Secure has not seen material changes in risks and uncertainties during the
reporting period. Uncertainty in the economic environment may impact on the
growth of broadband connections and on Operators' willingness to invest in new
services and may also create pricing pressure. These may have negative impact
on F-Secure's security and content cloud sales. The Company 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, cost of content cloud 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, risk exposure from increasing contractual liability
requirements and forming of the new business areas.
Due to the longevity and complexity of project deliveries in the content cloud
business, 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 2012.
Market view
The long term market opportunities are attractive for F-Secure. The growth of
Internet users and Internet connected devices will drive demand for security
and content cloud services.
The number of Internet users is growing and has passed 2 billion. The global
Internet penetration has kept growing and is now over 30%; in Asia 24%, in
Europe close to 60%, and in North America close to 80% (source: Internet World
Stats, U.S. Census Bureau, estimated in Mar. and Dec.2011). The growth of
smartphones and other Internet connected devices is expected to accelerate to
tens of billions during next 10 years (source: gigaom/ Ericson)
The global security software revenues were estimated to be $18.8 billion in
2011 (Gartner 2011). Forecasted growth 2010-1015 for the industry is estimated
to be close to 10% (CAGR). However, growth across the security segments varies
greatly. The security market is undergoing rapid evolution in terms of both new
delivery models with Security as a Service showing increasing popularity and
new technologies being introduced (Gartner July 2011).
The volume of user generated digital content is expected to continue to
increase rapidly during coming years, driven by digital photos and music. The
use of social media is increasing and people look for services to share, store
and control of their personal data. Parks Associates forecasts that operators
providing security, storage and sharing value-added services have a revenue
opportunity of $1.03b 2012, increasing to $4.82b during 2015.
Based on several industry analyst estimates, the Software as a Service 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. F-Secure is
a pioneer in Security as a Service (SaaS) business with Operators. This channel
has been driving the Company's revenue growth over 10 years. Based on the
company's strong technology assets in security, cloud computing and content
cloud, F-Secure continues to create new innovative offerings to augment
traditional security services, especially in the content cloud space.
F-Secure works together with Operators by providing security and content cloud
services with which Operators can compete with Internet players. The Company's
large operator network covers over 200 operator partners in over 40 countries
with an addressable market of over 250 million fixed and mobile broadband
customers. In addition, 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.
F-Secure focuses on increasing the penetration within the current operator base
and continues to selectively seek partner expansion globally, especially in
emerging markets. The penetration rates vary by operator; overall penetration
levels are relatively low leaving substantial opportunity for growth.
The Company has revised its strategy for the next three years as, announced in
February 1, 2012. The strategy forms solid ground for continuous growth and
improving profitability.
Operators, including Internet service providers, mobile operators and cable
operators, are the main channel for F-Secure services. F-Secure provides,
through Operators, security and content cloud services that are easy and
intuitive to use for mainstream consumers. This channel utilizes the presence
and brand of Operators to reach millions of consumers in a cost efficient and
scalable way.
Operators are competing with other Internet players and device manufacturers
for consumers' share of mind. Operators' advantage is their ability to manage
the continuously diverging multi-device, multi-OS environment. Also, they are
able to bring services to masses and are able to support them.
The sources of F-Secure's competitive advantage include the existing operator
and service provider network and relationships built over the years. Key assets
include security research, experience in service provisioning in the Operator
network environment and Operators' growing user base. Differentiation builds on
top of the ability to combine security into storage and the Operator channel at
large. By helping operators to establish local, secure and trustworthy Internet
services the Company enhances its position as Operators' long-term partner.
During the strategy period the Company is aiming for double digit revenue
growth (CAGR), driven by the Operator channel. The growth is expected to come
from the western world and some emerging markets like Latin America.
The Company will continue its investments in the content cloud business and
also in security services. In addition to mainstream operating systems, such as
Android, iOS and Windows, the Company is investing in platform development.
These investments ensure the scalability and competiveness of the services and
allow Operators to offer F-Secure services, both PC and mobile, to a wide
subscriber base. Profitability is targeted to develop towards the 25% level at
the end of strategy period due to improving scalability in content cloud
business. F-Secure's longer term profitability level continues to be driven by
revenue growth and scalable operations.
Outlook for 2012
F-Secure's Operator channel business (SaaS) is expected to continue with
healthy growth rates driven by good security sales and content cloud projects
with subscriber-based revenues. The traditional license business is expected to
continue to decline slightly as in 2011.
As overall uncertainty in the global economy and financial markets is expected
to continue, this may have impact on Operators' interest to invest in new
services, especially in new content cloud projects.
F-Secure has several content cloud prospects in the pre-sales phase. However,
there are increased risks of delays in content cloud contract negotiations and
in ramping up the subscriber volumes. This is likely to have an impact on the
annual revenue growth.
The management has revised the guidance; the annual revenue growth is estimated
to be between 5% and 10% compared to 2011.The annual profitability is estimated
to remain around 15% of revenues.
The financial performance will follow the usual seasonality although Q4 is
expected to show lower revenue growth and profitability than traditionally. The
Company has changed its vacation accrual accounting due to operational reasons,
which balances costs between Q2 and Q3 by decreasing Q2 costs and increasing Q3
costs by approximately 400k.
The guidance given at the beginning of the year was the following: The annual
revenue growth is estimated to be around 10% and the annual profitability is
expected to be around 15% of revenues and is expected to follow the usual
seasonality with a better second half.
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 back to growth
opportunities in its core business.
The actual operational cost increases are fairly limited, and they are targeted
to drive product portfolio competitiveness, build the scalability of the
content cloud services and support geographical expansion. A notable part of
the annual cost increase is arising from the end of development activations of
new platforms and increased depreciations.
News conference today at 11 am
A news conference for analysts and press is arranged today, on April 27, at 11
am Finnish time at F-Secure's Headquarters, address: Tammasaarenkatu 7,
Ruoholahti, Helsinki. In the news conference, President & CEO Christian
Fredrikson will present the Q1 financial results. A conference call for
international investors and analysts is arranged at 14.00 Finnish time (EEST)
(13.00 CEST, 12.00 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
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 2012
F-Secure will publish the interim report for the second quarter of 2012 on July
25, 2012. The quarterly interim report for the third quarter of 2012 will be
published on October 25. On the publication date a stock exchange release will
be published at approximately 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
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
2011.
Key figures (unaudited):
---------------------------------------------------
Euro million
---------------------------------------------------
INCOME STATEMENT 2012 2011 Change 2011
---------------------------------------------------
1-3 1-3 % 1-12
---------------------------------------------------
Revenues 38.4 34.1 12 146.0
---------------------------------------------------
Cost of revenues 1.9 1.8 2 8.0
---------------------------------------------------
Gross margin 36.5 32.3 13 138.1
---------------------------------------------------
Other operating income 0.3 0.4 -18 1.4
---------------------------------------------------
Sales and marketing 16.9 14.8 15 64.7
---------------------------------------------------
Research and development 11.5 9.4 22 39.3
---------------------------------------------------
Administration 3.0 3.0 2 11.9
---------------------------------------------------
Operating result 5.4 5.5 -2 23.6
---------------------------------------------------
Financial net -0.2 -0.2 -0.1
---------------------------------------------------
Result before taxes 5.2 5.3 23.5
---------------------------------------------------
Income taxes -1.4 -1.5 -7.1
---------------------------------------------------
Result for the period 3.8 3.8 16.4
---------------------------------------------------
Other comprehensive income:
-----------------------------------------------------------------------------
Exchange diff. on translating 0.0 -0.1 0.0
foreign operations
-----------------------------------------------------------------------------
Available-for-sale fin. assets 0.2 0.0 0.1
-----------------------------------------------------------------------------
Income tax rel. to components of other comprehensive income -0.1 0.0 0.0
-----------------------------------------------------------------------------
Total compr. income (owners) 3.9 3.7 16.4
-----------------------------------------------------------------------------
Earnings per share. e 0.02 0.02 0.11
-----------------------------------------------------------------------------
EPS diluted. e 0.02 0.02 0.10
-----------------------------------------------------------------------------
BALANCE SHEET 31/3/2012 31/3/2011 31/12/2011
ASSETS
---------------------------------------------------------------------
Intangible assets 26.4 16.5 25.3
---------------------------------------------------------------------
Tangible assets 9.0 7.7 9.1
---------------------------------------------------------------------
Goodwill 19.4 19.4 19.4
---------------------------------------------------------------------
Other financial assets 5.2 5.9 5.5
---------------------------------------------------------------------
Non-current assets total 60.0 49.6 59.2
---------------------------------------------------------------------
Inventories 0.3 0.3 0.4
---------------------------------------------------------------------
Other receivables 34.5 26.9 37.9
---------------------------------------------------------------------
Available-for-sale financial assets 16.2 18.2 16.0
---------------------------------------------------------------------
Cash and bank accounts 15.1 19.0 12.2
---------------------------------------------------------------------
Current asset total 66.1 64.4 66.4
---------------------------------------------------------------------
Total 126.1 114.1 125.7
---------------------------------------------------------------------
SHAREHOLDERS' EQUITY 31/3/2012 31/3/2011 31/12/2011
AND LIABILITIES
---------------------------------------------------------------
Equity 63.6 46.1 59.6
---------------------------------------------------------------
Other non-current 1.6 2.2 1.6
---------------------------------------------------------------
Deferred revenues 7.8 7.9 8.4
---------------------------------------------------------------
Non-current liabilities total 9.4 10.1 10.1
---------------------------------------------------------------
Other current 22.3 28.4 26.2
---------------------------------------------------------------
Deferred revenues 30.7 29.6 29.8
---------------------------------------------------------------
Current liabilities total 53.1 57.9 56.1
---------------------------------------------------------------
Total 126.1 114.1 125.7
---------------------------------------------------------------
CASH FLOW STATEMENT 31/3/2012 31/3/2011 31/12/2011
--------------------------------------------------------------------------------
Cash flow from operations 7.7 7.1 20.8
--------------------------------------------------------------------------------
Cash flow from investments -4.6 -2.6 -16.7
--------------------------------------------------------------------------------
Cash flow from financing 0.0 0.0 -9.1
activities 1)
--------------------------------------------------------------------------------
Change in cash 3.1 4.5 -5.0
--------------------------------------------------------------------------------
Cash and bank at 1 Jan 27.9 32.5 32.9
--------------------------------------------------------------------------------
Change in net fair value of Available-for-sale 0.2 0.0 0.1
--------------------------------------------------------------------------------
Cash and bank at end of period 31.2 37.1 28.1
--------------------------------------------------------------------------------
Statement of changes in shareholders' equity
Share Share Un- Trea- Retained Assets Transl. Total
capi-t prem- restrict sury earning avail. diff.
al ium - shares s f.sale
fund ed
equity-
reserve
--------------------------------------------------------------------------------
Equity 1.6 0.2 5.1 -9.0 61.8 0.1 -0.2 59.6
on:
31.12.201
1
--------------------------------------------------------------------------------
Total 3.8 0.2 4.0
comprehen
sive
income
for the
year
--------------------------------------------------------------------------------
Dividend
--------------------------------------------------------------------------------
Other
change
--------------------------------------------------------------------------------
Exercise
of
options
--------------------------------------------------------------------------------
Treasury
shares
--------------------------------------------------------------------------------
Cost of 0.1 0.1
share
based
payments
--------------------------------------------------------------------------------
Equity on 1.6 0.2 5.1 -9.0 65.8 0.3 -0.2 63.6
31.3.2012
--------------------------------------------------------------------------------
NOTES
1. Cash flow from financing
Dividend for year 2011 0.06 euro per share totaling 9.303.980.94 euro was paid
on 17th April 2012. In 2011 paid dividend totaled 9.253.915,80 euro.
Key ratios 2012 2011 2011
----------------------------------------------------
3 m 3 m 12 m
----------------------------------------------------
Operating result. % of revenues 14.1 16.2 16.2
----------------------------------------------------
ROI. % 37.5 47.6 44.3
----------------------------------------------------
ROE. % 24.6 31.1 29.5
----------------------------------------------------
Equity ratio. % 72.7 60.4 68.1
----------------------------------------------------
Debt-to-equity ratio. % -49.0 -79.7 -47.1
----------------------------------------------------
Earnings per share (EUR) 0.02 0.02 0.11
----------------------------------------------------
Earnings per share diluted 0.02 0.02 0.10
----------------------------------------------------
Shareholders' equity 0.40 0.29 0.38
per share. e
----------------------------------------------------
P/E ratio 20.5 23.6 19.0
----------------------------------------------------
Capitalized expenditures (Me) 3.0 2.5 18.7
----------------------------------------------------
Contingent liabilities 18.6 16.5 18.7
----------------------------------------------------
Personnel. average 970 830 878
----------------------------------------------------
Personnel. end of period 975 851 942
----------------------------------------------------
Segment information
The Group has only one segment; data security.
Quarterly development 1/11 2/11 3/11 4/11 1/12
----------------------------------------------------
Revenues 34.1 35.3 36.6 40.0 38.4
----------------------------------------------------
Cost of revenues 1.8 1.9 2.0 2.2 1.9
----------------------------------------------------
Gross margin 32.3 33.4 34.6 37.8 36.5
----------------------------------------------------
Other operating income 0.4 0.4 0.2 0.4 0.3
----------------------------------------------------
Sales and marketing 14.8 16.2 15.8 18.0 16.9
----------------------------------------------------
Research and 9.4 9.9 9.4 10.5 11.5
development
----------------------------------------------------
Administration 3.0 3.0 2.8 3.1 3.0
----------------------------------------------------
Operating result 5.5 4.6 6.9 6.5 5.4
----------------------------------------------------
Financial net -0.2 0.0 0.0 0.1 -0.2
----------------------------------------------------
Result before taxes 5.3 4.6 7.0 6.6 5.2
----------------------------------------------------
Geographical information
Revenue 1-3/2012 1-3/2011
-------------------------------------
Nordic countries 12.0 11.4
-------------------------------------
Rest of Europe 17.4 15.3
-------------------------------------
North America 3.6 3.4
-------------------------------------
Rest of the world 5.3 4.0
-------------------------------------
Total 38.4 34.1
-------------------------------------
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