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2011-10-21 08:15:00 CEST 2011-10-21 08:15:30 CEST REGULATED INFORMATION Stonesoft - Interim report (Q1 and Q3)Stonesoft Oyj :STONESOFT CORPORATION INTERIM REPORT FOR JANUARY-SEPTEMBER 2011Stonesoft Corporation Stock Exchange Release 21 October 2011 at 9:15 a.m. Stonesoft net sales grew 43% and product sales grew 63% Stonesoft Corporation's net sales grew by 43% and product sales by 63% compared to the corresponding period in the previous year. Operating result was MEUR 0.2, which is MEUR 0.7 better than in the corresponding period in the previous year. The operating result was impacted by significant additional investments in product development and marketing, which are expected to have a positive influence on the competitiveness and sales of the company's products. The comparable figures from the corresponding period in the previous year are in brackets and refer to the figures of continuing operations. July-September 2011 - Net sales MEUR 8.0 (5.6), growth 43% - Product sales MEUR 4.7 (2.9), growth 63% - Operating result MEUR +0.2 (-0.6) - Operating result as percentage of net sales +2 (-10)% - Earnings per share +0.00 (-0.01) EUR - Operative cash flow MEUR -2.2 (-1.0) - Liquid cash funds at the end of the fiscal period MEUR 7.1 (10.5). The corporate had no interest-bearing debts. January-September 2011 - Net sales MEUR 21.1 (16.8), growth 25% - Product sales MEUR 11.6 (8.3), growth 39% - Operating result MEUR -1.4 (-2.0) - Operating result as percentage of net sales -7 (-12)% - Earnings per share EUR -0.02 (-0.03) EUR - Operative cash flow MEUR -0.9 (-0.2) CEO ILKKA HIIDENHEIMO During the third quarter of the year 2011, StoneGate product sales grew by 63%and net sales by 43%. We are very pleased with this strong growth and with the fact that we have been able to grow our market share in spite of the generally insecure economic situation. We will continue to invest in customer acquisition and sales promotion. The strong interest in the company and its solutions has been seen for example in the continuous growth of the number of meeting requests as well as active participation at Stonesoft's stand at trade shows and customer events. The growth in the third quarter of the year is based on success in several areas. Geographically the most successful areas were Europe, including Southern European countries, and the United States, where in particular the sales to the public sector grew strongly. With regard to the products, the sales of intrusion prevention systems (IPS) grew significantly more than other sales, because customers view the threat posed by advanced evasion techniques as even more significant than before. Also our new flagship products StoneGate FW-5201 and FW-5205 have been received successfully by telecom operators as well as in other sectors. The new customers include internationally significant large enterprises whose purchases are estimated to support Stonesoft's strong growth also in the future. After the reporting period Stonesoft delivered 163 new samples of advanced evasion techniques to CERT-FI. In our tests the new evasion techniques have been able to bypass all generally known security solutions on the market, which means that companies' current network security solutions do not offer protection against security breaches. We are the only company on the market with comprehensive protection against known evasion techniques. Competitors' security solutions based on inspection algorithms embedded in special circuits are not capable of offering protection against new, rapidly evolving threats. Special circuits are a nonfunctional solution in this security paradigm shift, because changes to them can only be made by changing the whole appliance base, which may have a remarkable effect in terms of costs and resources. This provides Stonesoft's software based solution a significant competitive advantage. As a result of the recent security breaches, authorities are preparing new corporate governance requirements and laws. For example, the United States Securities and Exchange Commission (SEC) proposes that public companies must report about occurred security breaches. In addition, there is a law under preparation in the US that requires companies to test their IT solutions annually against security breaches and intrusions under penalty of a fine. Companies must re-evaluate their security level and top management must acknowledge the growing importance of security strategy as part of risk management. The responsibility cannot be left with the IT management alone, but the top management and even corporate boards need to familiarize themselves with the subject and review the company's risk profile. The above-mentioned factors strengthen our view about the necessity of dynamic security and we see the possibility of strong organic growth in the future. NET SALES AND RESULT July-September 2011 (hereinafter 'reporting period') The Group's net sales in the fiscal period were MEUR 8.0 (5.6). Increase compared to the corresponding period in the previous year was MEUR 2.4, or 43%. The operating result (EBIT) was MEUR +0.2 (-0.6) and the result after taxes was MEUR +0.2 (-0.4). Product sales were MEUR 4.7 (2.9), growth by 63% compared to the corresponding quarter in the previous year. The geographical distribution of net sales was as follows: Europe 52 (55)%, Emerging Markets (Russia, North Africa and Middle East) 23 (17)%, Americas (North and South America) 22 (20)% and APAC (Asia-Pacific) 3 (8)%. January-September 2011 (hereinafter 'fiscal period') The Group's net sales in the fiscal period were MEUR 21.1 (16.8). Increase compared to the corresponding period in the previous year was MEUR 4.2, or 25%. The operating result (EBIT) was MEUR -1.4 (-2.0) and the result after taxes was MEUR -1.3 (-1.8). Product sales were MEUR 11.6 (8.3), growth by 39% compared to the corresponding quarter in the previous year. The geographical distribution of net sales was as follows: Europe 57 (60)%, Emerging Markets (Russia, North Africa and Middle East) 24 (17)%, Americas (North and South America) 16 (19)% and APAC (Asia-Pacific) 3 (4)%. FINANCE AND INVESTMENTS At the end of the fiscal period, the Group's total assets were MEUR 18.5 (17.9). The equity ratio was 41 (60)% and gearing (the ratio of net debt to shareholders' equity) was -2.08 (-1.96). The comparable cash flow during the fiscal period was MEUR -0.9 (-0.2). The Group has no interest-bearing debt. The consolidated liquid assets at the end of the fiscal period totalled MEUR 7.1 (10.5). Investments in tangible and intangible assets totalled MEUR 0.5 (0.4). DEVELOPMENT OF BUSINESS OPERATIONS Main business events in the fiscal period In August Stonesoft encouraged organizations to re-evaluate their existing risk management and security architecture. Several security breaches and threats that have raised discussion lately have changed the security landscape permanently and acted as wake-up calls also in the strategic aspect. In August Stonesoft announced it has signed a cooperation agreement with ECCT, a leading managed security services provider (MSSP). ECCT will deploy the StoneGate IPS across 50 regional and community banks and credit unions by end of year. In August Stonesoft introduced the StoneGate FW-315 firewall/VPN appliance, which has been designed for small networks and branch offices. In August Stonesoft announced that Perket Technologies will begin to provide the Anti-Evasion Readiness Test service to its customers. In September, Stonesoft announced it has joined Secured by RSA ® Certified Partner Program to allow the integration of StoneGate Firewall/VPN, IPS and SSL VPN with the RSA enVision® platform. In September, Stonesoft announced the new Stonesoft a2Cloud solution for authentication and access management. The solution makes cloud services more secure and easier to use with minimized TCA (Total Cost of Administration) and TCO (Total Cost of Ownership). We estimate the above-mentioned operations and achievements to strengthen the company's competitiveness. Main business events after the fiscal period In October, Stonesoft announced its partnership with the University of Glamorgan in United Kingdom to conduct research into AETs. In October, Stonesoft announced the discovery that Advanced Evasion Techniques are deliverable across the port-80, HTTP protocol, making them a very real and credible threat to the security of organisations worldwide. In October, Stonesoft announced that its StoneGate IPS device has performed well in a network intrusion prevention systems (IPS) test conducted by ICSA Labs. In October, Stonesoft announced it has delivered 163 new advanced evasion technique (AET) samples for global vulnerability coordination. The new samples include AETs over a number of various protocols, including IPv4, IPv6, TCP and HTTP. RESEARCH AND DEVELOPMENT Stonesoft continued its strong investments in R&D. Investments during the fiscal period totalled MEUR 4.4 (4.0). This represented 22 (24) % of operating expenses. R&D employed 79 (71) persons at the end of the fiscal period. Stonesoft has booked 0.6 MEUR R&D funding from Tekes, the Finnish Funding Agency for Technology and Innovation during the fiscal period. SHARE CAPITAL AND STOCK OPTION PROGRAMS Stonesoft has one class of shares and all shares have equal rights. At the end of the fiscal period, the share capital recorded in the Trade Register was 1 150 574.64 Euros. The number of shares was 63 312 482. Stonesoft or its daughter companies do not own their shares. There were no changes in the share capital during the fiscal period. Stock Option Programs The company had one valid stock option program, Stock Option Program 2008-2014, under which the subscription price is EUR 0.30 and the total number of stock options to be granted based on this program is 3 000 000 at the maximum. The subscription period of the shares is graded and will end for all stock options on December 31, 2014. During the fiscal period no subscriptions were made on the basis of the Stock Option Program 2008-2014. DEVELOPMENT OF SHARE PRICES AND TURNOVER In the beginning of the fiscal period on January 3, 2011, the price of Stonesoft share was EUR 0.58 (0.70). At the end of the fiscal period on 30 September 2011 the price was EUR 0.52 (0.59). The highest price was EUR 0.65 (1.19) and the lowest EUR 0.41 (0.56). During the fiscal period the total turnover of Stonesoft shares amounted to MEUR 5.2 (19.5) and 9.3 (22.0) million shares, which is 14.6 (34.9)% of the total amount of the shares. Based on the share price at the end of the fiscal period, Stonesoft's market value was MEUR 32.9 (37.3). The company gave no notices in change of ownership during the fiscal period. Stonesoft evaluates possibility to establish an ADR (American Depository Receipt) program to be traded in the OTC-markets in the USA. ACQUISITIONS AND CHANGES IN GROUP STRUCTURE No acquisitions were made during the fiscal period. There were no changes in the Group structure. PERSONNEL At the end of the reporting period, the Group's personnel totalled 212 (195). AUTHORIZATIONS OF THE BOARD OF DIRECTORS The AGM decided on 13.4.2011 to authorize the Board of Directors of the company to decide about one or more share issues as well as the issuance of option and other special rights so that the total number of new shares may be 12 600 000 at the maximum. Based on the authorization the Board of Directors may decide on issuance of shares to the shareholders according to the shareholders' pre-emptive subscription rights as well as in a directed issuance of shares or stock options or other special rights in deviation from the shareholders' pre-emptive subscription rights in case the deviation is justified by a weighty financial reason for the company, such as financing of an acquisition, other arrangement concerning the business of the company or development of its capital structure, or incentive to the company's personnel. The Board of Directors was authorized to decide on other terms and conditions related to the share issues and to the issuance of option or other special rights. The authorization is in force until the end of the 2012 AGM. The Board of Directors is not authorized to purchase the company's own shares. SHORT-TERM RISKS AND BUSINESS UNCERTAINTIES During the fiscal year 2011, Stonesoft's main risks and business uncertainties relate to the realization timetable of the sales projects and possible production disruption of our subcontractors and suppliers. In addition, the recent political restlessness in North Africa and Middle East may have a negative impact on the company's business operations in these markets. Also insecurities related to public economies in the United States as well as in the European Union may have a negative effect on the public sector projects in these areas. A further scenario is that the Southern European crisis will spread to cover the whole of Europe or become a global financing and bank crisis, in which case it can be assumed that it would have a negative impact on Stonesoft's growth and profitability. The company has no risks related to the order book, because it normally can process incoming orders within a couple of work days. Stonesoft's risk management and its principles are discussed more extensively at the company website and in the Annual Report 2010. FUTURE OUTLOOK According to the research company Infonetics, the enterprise network equipment and software market is estimated to grow by 4% during 2011. Stonesoft's products meet the new security challenges brought by cloud services, virtualization and outsourcing of security. Advanced Evasion Techniques In 2010 Stonesoft announced it had discovered a new network security threat category, Advanced Evasion Techniques (AETs). We have continued to deliver additional findings to CERT-FI, who is in charge of international vulnerability coordination. So far we have published hundreds of samples, and we believe the number of advanced evasion techniques is practically unlimited. Due to incorrect technology choices, many competitors seem to have great difficulties in amending their solutions to provide protection against AETs. Leading research institutes such as Gartner have confirmed that the best protection against the threat posed by new, advanced evasion techniques is provided by flexible, software based systems. Compared with the solutions provided by most leading network security vendors such as Cisco, Juniper and Fortinet, Stonesoft's software based systems are capable of detecting advanced evasion techniques. The threat posed by advanced evasion techniques does not concern only intrusion prevention system (IPS) appliances, but also UTM (Unified Threat Management) and next generation firewall appliances. The above mentioned issues have opened new business opportunities for Stonesoft and had a strong impact on the growth of the company's IPS sales. The improved awareness of the threat posed by advanced evasion techniques has brought the company new customers and made contacting target customers significantly easier. Based on Stonesoft's view, these issues will have a positive impact on the company's net sales and profitability and will strengthen its competitiveness and market position as the general understanding and knowledge about advanced evasions techniques grow. In 2011, Stonesoft aims for faster-than-market growth of net sales and improved profitability. With regard to the development of the turnover and the operating result, variation is expected between the quarters in comparison to the corresponding quarter during the previous year as well as to the previous quarter as a consequence of, among others, long sales cycles and the relatively big impact of individual deals on the development of net sales and operating result. SUMMARY OF FINANCIAL STATEMENTS AND NOTES JANUARY 1 - SEPTEMBER 30, 2011 Basis of preparation The Interim Reporthas been prepared in accordance with the IAS 34 Interim Reports standard. The company has adopted certain new or revised IFRS standards and IFRIC interpretations at the beginning of the financial period as described in the Financial Statements for 2010. However, the adoption of these new and amended standards has not yet had an effect on the reported figures in practice. In other respects, the same accounting policies have been followed as in the Financial Statements for 2010. Key indicator calculations remain unchanged. The figures presented in this release are unaudited. Stonesoft Group Income Statement 7-9/2011 7-9/2010 1-9/2011 1-9/2010 1-12/2010 (1000 Euros) Net sales 8 050 5 616 21 065 16 832 24 341 Other operating income 226 160 624 620 847 Materials and services -1 353 -885 -3 294 -2 330 -3 640 Personnel expenses -4 029 -3 306 -12 067 -10 646 -14 744 Depreciation -116 -110 -364 -325 -437 Other operating expenses -2 589 -2 036 -7 352 -6 147 -9 052 Operating result 188 -561 -1 388 -1 997 -2 685 Financial income and expenses 25 151 261 323 217 Result before taxes 213 -410 -1 127 -1 674 -2 468 Taxes -60 -38 -154 -110 -221 Result for the accounting period 152 -448 -1 281 -1 784 -2 689 Other comprehensive income Exchange differences on translating foreign operations 6 -41 -10 -15 -15 Total other comprehensive income 6 -41 -10 -15 -15 Total comprehensive income 158 -489 -1 291 -1 799 -2 704 Basic earnings per share (EUR), continuing operations 0,00 -0,01 -0,02 -0,03 -0,04 Diluted earnings per share (EUR), continuing operations 0,00 -0,01 -0,02 -0,03 -0,04 Stonesoft Group Balance Sheet (1000 Euros) 30.9.2011 30.9.2010 31.12.2010 ASSETS Non-current assets Tangible assets 725 624 649 Intangible assets 184 117 112 Other investments 10 10 10 Total 919 751 771 Current assets Inventories 1 525 1 038 953 Trade and other receivables 8 920 5 475 10 106 Prepayments 74 77 69 Marketable securities 0 9 313 0 Cash and cash equivalents 7 075 1 231 8 016 Total 17 594 17 134 19 144 Total assets 18 513 17 885 19 915 EQUITY AND LIABILITIES Equity attributable to equity holders of the parent company Share capital 1 151 1 148 1 151 Issue of shares 0 2 0 Share premium account 76 602 76 533 76 603 Conversion differences -961 -951 -951 Reserve for invested unrestricted equity fund 4 679 4 739 4 751 Retained earnings -78 066 -76 084 -76 986 Total 3 405 5 386 4 567 Long-term liabilities Prepayments *) 2 979 2 568 2 976 Total 2 979 2 568 2 976 Short-term liabilities Trade and other payables 4 746 3 443 4 571 Prepayments *) 7 195 6 362 7 687 Tax liability 116 68 76 Provisions 74 56 37 Total 12 130 9 930 12 372 Total liabilities 15 109 12 499 15 348 Total equity and liabilities 18 513 17 885 19 915 *) Prepayments contain customers advance payment of support and maintenance contracts 10 173 8 931 10 663 Stonesoft Group Statement of changes in equity (1000 Euros) Reserve Issue for invested Share of Share Conversion unrestricted Retained capital shares premium differences equity fund earnings Total Shareholders' equity at 1.1.2010 1 146 0 76 821 -936 0 -74 346 2 685 Comprehensive -1 income 0 0 0 -15 0 -1 784 799 Reserve for invested unrestricted equity fund reduction 0 0 0 0 0 0 0 Share premium termination 0 0 -338 0 338 0 0 Directed share issue 0 0 0 0 4 560 0 4 560 Transaction costs from equity 0 0 -1 0 -172 0 -173 Stock options exercised 2 2 51 0 13 0 68 Stock option expenses 0 0 0 0 0 46 46 Shareholders' equity at 30.9.2010 1 148 2 76 533 -951 4 739 -76 084 5 386 Reserve Issue for invested Share of Share Conversion unrestricted Retained capital shares premium differences equity fund earnings Total Shareholders' equity at 1.1.2011 1 151 0 76 603 -951 4 751 -76 986 4 567 Comprehensive -1 income 0 0 0 -10 0 -1 281 291 Reserve for invested unrestricted equity fund reduction 0 0 0 0 -71 71 0 Share premium termination 0 0 0 0 0 0 0 Directed share issue 0 0 0 0 0 0 0 Transaction costs from equity 0 0 0 0 0 0 -1 Stock options exercised 0 0 0 0 0 0 0 Stock option expenses 0 0 0 0 0 129 129 Shareholders' equity at 30.9.2011 1 151 0 76 602 -961 4 679 -78 066 3 405 Stonesoft Group Cash flow statement (1000 Euros) 1.1.-30.9.2011 1.1.-30.9.2010 1.1.-31.12.2010 Cash flow from operating activities Operating Result -1 388 -1 997 -2 685 Adjustments Non-cash transactions -6 -116 58 Financial expenses -89 -71 -96 Financial incomes 351 308 464 Change in net working capital 841 2 198 481 Taxes paid -135 -81 -221 Total cash flow from operating activities -427 241 -1 999 Cash flow from investing activities Investments in tangible assets -382 -413 -537 Investments in intangible assets -130 -22 -30 Total cash flow investing activities -512 -434 -566 Cash flow from financing activities Proceeds from issue of share capital 0 4 391 4 391 Stock options exercised -1 64 146 Payments of financial leasing liabilities 0 0 0 Total cash flow from financing activities -1 4 455 4 537 Change in cash and cash equivalents Cash and cash equivalents at beginning of period 8 016 6 210 6 210 Conversion differences -1 29 -17 Changes in the market value of investments 0 43 -148 Total cash and cash equivalents at end of period *) 7 075 10 544 8 016 *) Total cash and cash equivalents at end of the period contains pledged securities 467 498 477 Stonesoft Group Geographical segments 1.1.-30.9.2011 1.1.-30.9.2010 1.1.-31.12.2010 (1000 Euros) Net sales Europe 11 881 10 079 14 599 Emerging Markets 5 140 2 792 4 255 Americas 3 418 3 223 4 525 APAC 626 738 961 Total net sales 21 065 16 832 24 341 Operating profit Europe -137 -542 -661 Emerging Markets -383 -56 -169 Americas -596 -1 152 -1 479 APAC -272 -247 -375 Total operating profit -1 388 -1 997 -2 685 Stonesoft Group Contingent liabilities 1.1.-30.9.2011 1.1.-30.9.2010 1.1.-31.12.2010 (1000 Euros) Contingent off-balance sheet Non-cancellable other leases 1 795 2 234 2 327 Contingent liabilities for the Company 183 70 94 Stonesoft Group Quarterly development Q3 / Q2 / Q1 / Q4 / Q3 / Q2 / Q1 / (Euro Millions) 2011 2011 2011 2010 2010 2010 2010 2010 Software 0,4 0,4 0,4 0,5 0,4 0,3 0,3 1,5 Security appliances 4,2 2,9 3,2 3,9 2,5 1,9 2,9 11,2 Services 3,3 3,2 3,0 3,1 2,8 2,8 2,8 11,6 Other products 0,1 0,0 -0,1 0,0 -0,1 0,1 0,1 0,0 Net sales continuing operations 8,0 6,5 6,5 7,5 5,6 5,1 6,2 24,3 Change-% from previous year 43 29 6 15 -6 -16 21 3 Sales margin 6,7 5,6 5,4 6,2 4,7 4,4 5,3 20,7 Sales margin % 83 87 83 83 84 88 86 85 Operative expenses 6,7 6,7 6,4 7,1 5,4 5,9 5,7 24,2 Operating profit (EBITA) 0,2 -0,7 -0,8 -0,7 -0,6 -1,2 -0,2 -2,7 % of net sales 2 -12 -13 -9 -10 -25 -3 -11 Result before taxes 0,2 -0,7 -0,6 -0,8 -0,4 -1,2 0,0 -2,5 % of net sales 3 -11 -10 -11 -7 -24 -1 -10 Stonesoft Group Key ratios 1.1.-30.9.2011 1.1.-30.9.2010 1.1.-31.12.2010 (1000 Euros) Net sales 21 065 16 832 24 341 Net sales change-% 25 -1 3 Operating result -1 388 -1 997 -2 685 % of net sales -7 -12 -11 Operating result before taxes -1 127 -1 674 -2 468 % of net sales -5 -10 -10 ROE - %, annualized -43 -59 -74 ROI - %, annualized -34 -52 -65 Equity ratio-% 41 60 49 Net gearing -2,08 -1,96 -1,75 Total Assets 18 513 17 885 19 915 Capital expenditure 512 434 566 Capital disposals 0 0 0 R&D costs 4 405 4 041 5 639 % of net sales 21 24 23 Number of employees (weighted average) 202 188 191 Number of employees (end of the period) 212 195 201 Share Specific Ratios Earnings per share -0,02 -0,03 -0,04 Equity per share 0,05 0,08 0,07 Dividend 0,00 0,00 0,00 Dividend per share (EUR) 0,00 0,00 0,00 Dividend / Profit-% 0 0 0 Calculation of indicators (Profit before taxes - income Return on equity (ROE) % = taxes) x 100 / Shareholders' equity + minority interest (average) (Profit before extraordinary Return on invested capital items+interest and other financial (ROI)% = expenses) x100 / Balance sheet total - non-interest bearing debt (average) (Equity + minority interest) x Equity ratio % = 100 / Balance sheet total - advances received Interest bearing net debt - cash in hand and on deposit - Net gearing = marketable securities / Equity + minority interest Profit before taxes - minority Earning per share (EPS) = interest - income taxes / Average number of shares adjusted for dilutive effect of options Equity per share = Equity / Number of shares at end of period FORWARD-LOOKING STATEMENTS This report contains statements concerning, among other things, Stonesoft's financial condition and the results of operations that are forward-looking in nature. Such statements are not historical facts, but rather represent Stonesoft's future expectations. The company believes that the expectations reflected in these forward-looking statements are based on reasonable assumptions. However, these forward-looking statements involve inherent risks and uncertainties, which could cause actual results or outcomes to differ materially from those anticipated in the statements. These risks and uncertainties may include, among other things, (1) changes in our market position or in the Firewall/VPN and Intrusion detection and protection market in general; (2) the effects of competition; (3) the success, financial condition, and performance of our collaboration partners, suppliers and customers;(4) our ability to source quality components without interruption and at acceptable prices;(5) our ability to recruit, retain and develop appropriately skilled employees;(6) exchange rate fluctuations, including, in particular, fluctuations between the Euro, which is our reporting currency, and the US dollar;(7) other factors related to sale of products, economic situation, business, competition or legislation affecting the business of Stonesoft or the industry in general and (8) our ability to control the variety of factors affecting our ability to reach our targets and give accurate forecasts. PRESS CONFERENCE A press conference for analysts and the media will be held on 21 October, 2011 at 10.30 am at the Stonesoft headquarters, street address Itälahdenkatu 22 A, 00210 Helsinki. For additional information, please contact: Ilkka Hiidenheimo, CEO, Stonesoft Corporation Tel. +358 9 476 711 E-mail: ilkka.hiidenheimo@stonesoft.com Mikael Nyberg, CFO, Stonesoft Corporation Tel. +358 9 476 711 E-mail: mikael.nyberg@stonesoft.com Stonesoft Corporation Ilkka Hiidenheimo CEO This stock exchange release and the presentation material related to this report are also available at the Stonesoft web site www.stonesoft.com. Distribution: NASDAQ OMX Helsinki Ltd www.stonesoft.com [HUG#1556698] |
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