2008-07-29 08:03:33 CEST
2008-07-29 08:04:34 CEST
REGULATED INFORMATION
F-Secure Oyj - Interim report (Q1 and Q3)
F-SECURE GROUP JANUARY 1 - JUNE 30, 2008 FINANCIAL RESULTS
F-SECURE CORPORATION INTERIM REPORT
Translation from Finnish July 29, 2008 at 9.00am
F-SECURE GROUP JANUARY 1 - JUNE 30, 2008 FINANCIAL RESULTS
Solid overall growth, good profitability
(Unaudited figures. Unless otherwise stated comparisons are made to the same
period one year ago. The currency is euro.)
Highlights in Q2
- Total revenue growth was 16% and resulted in an all-time high quarterlyrevenue of 27.2m
- ISP business growth was 6% quarter over quarter, and 35% year over year,
reaching revenues of 11.6m
- EBIT was 4.7m, 17% of revenues (3.7m)
- Cash flow 7.1m negative after a dividend of 10.9m in April (5.6m)
- Portfolio expansion launched to ISPs with online back-up service
Business at the Group level during the first half of 2008
For the first six months of 2008 total revenues were 53.8m (46.5m),
representing 16% growth. EBIT was 10.0m (7.8m) and 19% of revenues,
representing 28% growth. Cash flow was 1m negative after a dividend of 10.9m in
April(10.9m positive). Deferred revenues were 33.9m at the end of the period
(33.7m at the end of 1Q2008).
The total costs were 40.2m (35.3m), representing 14% growth. The Group
capitalizes some of its development expenses according to the accounting rules.
This had no material impact on the cost level.
The first six months' results were in line with the guidance given in April
(revenues 53.1m-55.1m, costs not exceeding 40.5m).
The geographical breakdown of the business was as follows: Nordic Countries 39%
(39%), Rest of Europe 43% (43%), North America 9% (9%) and Rest of the World 9%
(9%). Anti-virus and intrusion prevention represented close to 100% of the
total revenues.
ISP channel during Q2
Strong development in the Service Provider business continued and a total of 4
new ISP partnerships were signed in Q2. The total number of ISP partners was
173 operating in 39 countries at the end of the quarter.
New service provider partnerships announced in Q2 include KabelBW (Germany) and
Tele2 (Germany).
In the second quarter of 2008, revenues through the Internet Service Provider
(ISP) partners were 11.6m (8.6m), representing 43% of the total revenues (37%)
and a growth of 35% from the previous year. The quarter-over-quarter revenue
growth was 6% (8% in 1Q2008). The growth during first six months was 38%
compared to the previous year.
The traditional Security as a Service business has developed at slightly slower
pace in Q2 than anticipated.
The total number of the Group's ISP partners is significantly larger than with
any other security service vendor. At the end of 2007 the Group's ISP partners
held approximately 37% (34%) market share of total consumer broadband
connections in Europe, approximately 10% (10%) in North America and
approximately 9% (n/a%) in APAC (Source: Dataxis and F-Secure).
Wider broadband adoption is a key driver of this business. Broadband
subscribers represented on an average 22.0% of the population in European OECD
countries and 24.9% in North America at the end of 2007, with Denmark and the
Netherlands at the lead with approximately 35% uptake. OECD countries' average
penetration increased by 3.0 percentage points year-over-year. Germany showed a
particularly high growth rate of 6.7 percentage points (Source: www.oecd.org).
Other channels in Q2
The traditional sales channels, including Value Added Resellers, IT Service
Providers, Managed Security Service Providers, e-Store and Retail channels
performed stronger than in Q1. The Group has implemented a channel revitalising
programme to deliver solid growth in the traditional channels.
Revenues were 15.6m (14.8m). This represented 57% of the total revenues (63%)
and a growth of 5% from the previous year. The growth during first six months
was 4% compared to the previous year.
Mobile security in Q2
Mobile security revenues were at the level of approximately 3% of the Group's
total revenues in Q2. These revenues are included in the above-mentioned
channel revenues and the percentage figure is shown as an indicator only.
During Q2, the Group has signed a Global Frame Agreement (GFA) with Vodafone
Global enabling co-operation with Vodafone operating companies globally. The
scope consists of delivering mobile security for major handset platforms to
Vodafone customers.
Close co-operation with Nokia and Sony Ericsson together with operator
partnerships, such as Orange UK, Orange Switzerland, T-Mobile Germany, T-Mobile
UK, Swisscom, TeliaSonera and Elisa, is the prime vehicle to make mobile
security applications available to a large number of end users. Co-operation
initiatives with other major mobile operators and handset manufacturers are
also progressing well.
Products & Services in Q2
During Q2 the Group announced F-Secure Mobile Security for Windows Mobile,
combining real time anti-virus and anti-spyware with a firewall for this mobile
platform.
The Group has extended its offering beyond traditional security services by
launching online back-up service for its ISP partners. The service offering is
targeted for consumers and small businesses.
Competitive situation
There were no significant changes in the competitive landscape during the
quarter. However, compared to the situation one year ago, competition in the
traditional corporate channel has become tougher resulting in negative price
development in some countries. The Group's competitive position in the ISP
channel has remained strong.
Customer satisfaction
F-Secure updated its annual customer satisfaction survey at the end of 2007.
The overall satisfaction was at a healthy level of 4.1 on a scale from 1 to 5.
Personnel and Organization
The Group's personnel numbered 668 at the end of the Q2 (540).
The Group has been successful in pursuing its strategy to reinforce above all
its global sales and marketing organization.
The current Executive Team consists of the following persons: Mr. Ari Alakiuttu
(Vice President, Human Resources), Mr. Kimmo Alkio (President and CEO), Mr.
Trond Neergaard (Vice President, ISP Operations), Mr. Pirkka Palomäki, (Chief
Technology Officer), Mr. Antti Reijonen, (Vice President, Strategy), Mr. Taneli
Virtanen (Chief Financial Officer) and Mr. Travis Witteveen (Senior Vice
President, Sales and Geography Operations).
Financing
The Group's financial position remained strong. The Group's equity ratio on
June 30, 2008, was 82% (79%). Financial income for the first half of 2008 was
0.9m (0.5m).
A dividend of EUR 0.07 per share was paid on April 8, 2008, representing a
total of 10.9m for all outstanding shares.
During the first half of the year cash flow was 9.9m before dividend (14m
positive)and 1.0m negative after the dividend of 10.9m (10.9m positive).
The market value of the liquid assets of the Group on June 30, 2008 was 83.3m
(78.1m).
The change in the USD-EUR exchange has had some negative effect on revenues and
results.
Capital Expenditures
The Group's capital expenditures during the first half of the year were 1.7m
(1.2m). These consisted mainly of IT hardware, software and capitalization of
development expenses.
Shares, Shareholders' Equity, and Option Programs
During Q2, a total of 26,384 F-Secure shares were subscribed for with the A1/A2
warrants and a total of 45,336 F-Secure shares were subscribed for with the
B1/B2/B3 warrants attached to the F-Secure 2002 Warrant Plan.
In aggregate, the number of shares was increased by 71,720. The corresponding
increase was registered in the Finnish Trade Register on May 20, 2008. F-Secure
received as subscription price a total amount of EUR 56,632.80, which will be
recorded in the fund for company's distributable equity.
As a result of the registering the total number of shares is 155,202,838. The
corresponding number of shares fully diluted would be 161,464,443 including all
stock option programs.
Corporate Governance
F-Secure complies with the Corporate Governance recommendations for public
listed companies published in December 2003 by OMX Nordic Exchange Helsinki,
the Central Chamber of Commerce of Finland and the Confederation of Finnish
Industry and Employers as explained on the Group's web pages.
Risks and Uncertainties in the Near Future
The Group has not seen any material changes to the risks and uncertainties
during the reporting period.
The Group's risks and uncertainties are related to, among other things, the
competitiveness of the Group's product portfolio, competitive dynamics in the
industry, the 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 the Group'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, service quality level requirements and
the overall development of value added security solutions in the Service
Provider and mobile operator market.
Future Outlook
The Group's first priority is to drive strong growth. The core growth driver is
the ISP channel.
The Group continues to invest in new sales and marketing activities to build
scalability for future growth especially for the service providers and in the
mobile segment. The Group continues to pursue innovations in security related
technologies as well as in new services related to the online wellbeing of
Internet users.
The annual growth rate in the ISP business is expected to be between 35% and
40%, with accelerated growth at the end of the year. The growth is driven by a
combination of security services and new value added services (such as online
back up). The estimate in the previous interim report was approximately 40%
annual growth.
In the mobile security business revenues are expected to grow steadily.
However, it is expected to remain a small part of the Group's revenues during
2008.
Management expects full year 2008 revenues to be between 110 and 120 million
and full year EBIT between 19 and 23% of revenues.
In the 2-4-year horizon the Group aims to continue to exceed the average market
growth rates in revenues and seeks an EBIT level around 25%.
The third quarter 2008 revenues are estimated to be between 27.5m and 29.5m.
Fixed costs are estimated to be below 20m in Q3 reflecting usual third quarter
seasonality.
The revenue estimates are based on the sales pipeline at the time of
publishing, existing subscriptions and support contracts and a EUR/USD exchange
rate of 1.55.
Financial Reporting
A press and analyst conference will be arranged today, July 29th, at 11 am
Finnish time at the Group's Headquarters, Tammasaarenkatu 7, Helsinki. A
conference call for international investors and analysts will be arranged at
1530 Finnish time (1430 CET, 1.30 pm UK time). Instructions can be found on the
investor pages of the Group's web site.
The quarterly report for Q3 will be published on October 21. A Stock Exchange
bulletin will be sent at 9 am Finnish time to the Helsinki Exchanges, 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. Full
details will be provided later on the Group's web site.
F-Secure Corporation
This interim report is prepared in accordance with IAS 34 standard and with
accounting principles stated in the annual report 2007.
Key figures (unaudited):
Euro million
INCOME STATEMENT 2008 2007 2008 2007 Chge 2007
4-6 4-6 1-6 1-6 % 1-12
Revenues 27.2 23.3 53.8 46.5 16 96.8
Cost of revenues 2.4 1.8 4.5 3.6 24 7.5
Gross margin 24.7 21.6 49.3 42.8 15 89.2
Other operating income 0.6 0.1 0.9 0.2 275 0.8
Sales and marketing 12.4 11.1 23.9 21.7 10 43.2
Research and development 6.5 5.3 12.8 10.6 20 21.2
Administration 1.7 1.6 3.5 3.0 17 6.2
Operating result 4.7 3.7 10.0 7.8 28 19.5
Financial net 0.6 0.3 0.9 0.5 1.9
Result before taxes 5.3 4.0 10.9 8.2 21.4
Income taxes -1.4 -1.0 -2.8 -2.1 -5.9
Result for the period 4.0 3.0 8.1 6.4 15.4
Earnings per share, e 0.05 0.04 0.10
EPS, diluted, e 0.05 0.04 0.10
BALANCE SHEET
ASSETS 30/6/2008 30/6/2007 31/12/2007
Intangible assets 3.8 4.2 3.8
Tangible assets 3.5 3.3 3.3
Other financial assets 0.7 0.8 0.9
Non-current assets total 8.0 8.4 8.0
Inventories 0.1 0.4 0.3
Other receivables 22.1 17.0 22.1
Available-for-sale
financial assets 73.1 62.4 71.6
Cash and bank accounts 10.3 15.8 12.7
Current asset total 105.6 95.6 106.6
Total 113.6 104.0 114.7
SHAREHOLDERS' EQUITY
AND LIABILITIES 30/6/2008 30/6/2007 31/12/2007
Equity 65.2 58.0 67.5
Other non-current 0.1 0.2 0.1
Provisions 1) 0.0 1.2 1.3
Deferred revenues 6.4 3.4 4.8
Non-current liabilities total 6.5 4.9 6.2
Other current 14.3 14.3 13.8
Deferred revenues 27.5 26.8 27.1
Current liabilities total 41.9 41.1 40.9
Total 113.6 104.0 114.7
Note 1) By decision of Helsinki Court of Appeal a payment was made concerning
dispute between F-Secure Corporation and SRV Viitoset Oy. F-Secure has applied
for leave to appeal for Supreme Court.
Cash flow statement 30/6/2008 30/6/2007 31/12/2007
Cash flow from operations 12.4 15.1 22.7
Cash flow from investments -2.5 -1.2 -2.1
Cash flow from financing
Activities 2) -10.8 -3.1 -3.0
Change in cash -1.0 10.9 17.6
Cash and bank at 1 Jan 84.0 66.6 66.4
Change in net fair value of
Available-for-sale 0.2 0.5 0.1
Cash and bank at 30 Jun 83.3 78.1 84.1
Note 2) dividends paid/increase in equity
Final dividend for year 2007 0.07 euro per share totaling 10,859,178.26 euro
was paid on 8th April 2008.
Statement of changes in shareholders' equity
share unres-
share premium transl. reval. tricted retained
capital fund diff. reserve reserve earnings total
Equity on
31.12.2007 1.5 0.2 0.0 0.0 33.6 32.2 67.5
Available-for-sale
financial asset, net 0.2 0.2
Translation diff. -0.1 -0.1
Cost of share
based payments 0.3 0.3
Profit 8.1 8.1
Dividend -10.9 -10.9
Exercise of
options 0.0 0.0 0,1 0.1
30.6.2008 1.5 0.2 -0.1 0.2 33.7 29.7 65.2
Key ratios 2008 2007 2007
6 m 6 m 12 m
Operating result,
% of revenues 18.6 16.7 20.1
ROI, % 34.2 30.2 36.3
ROE, % 24.3 21.6 25.4
Equity ratio, % 81.8 78.7 81.6
Debt-to-equity ratio, % -127.7 -134.5 -124.6
Earnings per share (EUR) 0.05 0.04 0.10
Earnings per share diluted 0.05 0.04 0.10
Shareholders' equity
per share, e 0.42 0.37 0.44
P/E ratio 26.0 32.9 24.6
Capitalized expenditures (Me) 1.7 1.2 2.2
Contingent liabilities (Me) 7.9 10.0 9.2
Personnel, average 612 511 528
Personnel, Jun 30 668 540 566
Segment information
The Group has only one primary segment; data security.
Quarterly development
1/07 2/07 3/07 4/07 1/08 2/08
Revenues 23.1 23.3 24.3 26.0 26.6 27.2
Cost of revenues 1.9 1.8 2.0 2.0 2.1 2.4
Gross margin 21.3 21.6 22.3 24.0 24.5 24.7
Other operating income 0.1 0.1 0.1 0.4 0.3 0.6
Sales and marketing 10.6 11.1 10.0 11.5 11.5 12.4
Research and
development 5.3 5.3 5.0 5.7 6.3 6.5
Administration 1.4 1.6 1.3 1.8 1.8 1.7
Operating result 4.1 3.7 6.2 5.5 5.3 4.7
Financial net 0.2 0.3 0.1 1.4 0.3 0.6
Result before taxes 4.2 4.0 6.3 6.9 5.6 5.3
Additional information:
F-Secure Corporation
Kimmo Alkio, President and CEO tel. +358 9 2520 0700
Taneli Virtanen, CFO tel. +358 9 2520 5655
Jukka Kotovirta, IR tel. +358 40 5883 933
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