solid quarter: good progress in corporate business
TRANSCRIPT
SOLID QUARTER:GOOD PROGRESS IN
CORPORATE BUSINESS
F-SECURE CORPORATION INTERIM REPORT Q3 / 2015
October 22, 2015Christian Fredrikson, CEO
2
CONTENTS• Highlights• Market review• Business updates• Outlook• Financials
© F-Secure Interim Results 22 October 2015
3
HIGHLIGHTS IN Q3 Overall security revenue increased by 8 %
y-o-y totaling EUR 37.2 million (34.5 m)
EBIT (non-IFRS) 7.3 million, 20% of revenues (EUR 7.4 m, 22%)
Operator revenues on the same level as last year, totaling EUR 18.7 million (18.7 m)
Corporate and direct-to-consumer sales increased by 17% totaling 18.6 million (15.8 m), partly due to the nSense acquisition
Good, positive cash flow: 5.7 million (5.3m)
As of the beginning of 2015 the personal cloud storage business (younited), which was sold to Synchronoss Technologies in February, is reported as discontinued operations. Consequently, comparison figures related to the statement of income have been restated. Comparison figures in the text refer to continuing
operations only and the corresponding period of the previous year, unless otherwise stated.
As of 2 June 2015 the acquired cyber security services business (nSense) has been consolidated into the F-Secure Group accounts.
EBIT (non-IFRS) calculated for continuing operations excluding costs associated with the deferred payment and earn-out of the nSense acquisition and non-recurring items
KEY FIGURES
4
RevenuesEur million Eur million
Deferred revenues
EBIT (non-IFRS) calculated for continuing operations excluding costs associated with the deferred payment and earn-out of the nSense acquisition and non-recurring items
© F-Secure Interim Results 22 October 2015
KEY FIGURESCosts
5
Eur million Net cash
Personal cloud storage business (younited) sold Dividend of EUR 24.9 million paid in AprilThe EUR 11 million cash payment for nSense
1
1
2
3
2
3
Eur million
© F-Secure Interim Results 22 October 2015
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SECURITY MARKET CONTINUES TO GROW
2015 2016 2017 2018
Consumer Security 5518 5799 6063 6316
0
5 000
10 000
15 000
20 000
25 000
Consumer security
$ million
2015 2016 2017 2018
Corporate Security 17311 18463 19612 20820
0
5 000
10 000
15 000
20 000
25 000
Corporate security
$ million
Consumer Security Software market is expected to grow
4-5% annually
Corporate Security Software market is expected to grow
faster, 6-7% annually
Source:Gartner
© F-Secure Interim Results 22 October 2015
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ENTERPRISE SECURITYGROWING FASTEST
45
15
30
75
90
60
0
4
2017
75
17
17
14
19
13
369
16
15
13
18
12
3
2016
64
15
13
12
18
12
3
2015
818.5%
Consulting
IT Outsourcing
Implementation
Hardware Support
Network Security Equipment
19
IAM1
2019
88
2018
21
22
16
2
InfrastructureProtection215
4
19
15
1
9
14
€ bn
10
Global Enterprise Security market expected to grow 8.5% annually
...European market expected to grow slightly slower, but still healthy pace
ProductsCAGR 6%
ServicesCAGR 10%
25
15
10
20
5
0
Infrastructure
Protection2
7.6%
€ bn
IT Outsourcing
Implementation
Hardware Support
Network Security
Equipment1
Consulting
2
1
2
66
17
5
4
3
02
3
3
3
02
3
1
2015
0
2
3
1
2016
18
5
4
6
1
2017
20
6
5
4
0
2019
21
2018
5
4
04
3
IAM123
ProductsCAGR 4%
ServicesCAGR 9%
© F-Secure Interim Results 22 October 2015
Source: Gartner Source: Gartner
CONSUMER SECURITY CORPORATE SECURITY
OPERATORS DIRECT SALES RESELLERS ENTERPRISES200+ operators 4000+ resellers
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Flat(-0,1%)
Strong growth(+17%)
GROWTH IN Q3
50% 50%SHARE OF REVENUE
IN Q3
NON-OPERATOR SALES DRIVING GROWTH
© F-Secure Interim Results 22 October 2015
ORIGIN OF REVENUE SHIFTING
9
% of restated revenue
56% 55%
54% 54% 54%
52%
50%
44%45%
46% 46% 46%
48%
50%
40%
42%
44%
46%
48%
50%
52%
54%
56%
58%
Q1/2014 Q2/2014 Q3/2014 Q4/2014 Q1/2015 Q2/2015 Q3/2015
Operator Direct-to-consumer & CorporateNon-operator
Disposal of personal cloud
storagebusiness
Acquisition of cyber security
servicesbusiness
© F-Secure Interim Results 22 October 2015
INVESTMENTS IN RESELLER CHANNEL PAY OFF
• Improvements in sales & marketing in key regions
• Continued expansion of the reseller partner network
• Brand recognition and NPS scores confirmed to be on a high level
GOOD GROWTH IN FOCUS COUNTRIES
• France nearly tripled new customer acquisitions, Germany in good growth
• Japan soon to become most significant reseller market
• Revenue grew in almost all of our reseller security markets
SUCCESSFUL INTEGRATION OF NSENSE
• Perfect strategic fit for F-Secure• Cooperation on R&D on-going• New product launch planned for
H1/2016, for incident detection and response
CORPORATE HIGHLIGHTS
10
HUNTING FOR TOP TALENT
• Recruitment of top cyber security talents continues
© F-Secure Interim Results 22 October 2015
MAKING SECURITY INTUITIVE
Three corners of innovation: Technology –User experience –Business models
© F-Secure Interim Results 22 October 201511
CONSUMER HIGHLIGHTS
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NEW F-SECURE ADBLOCKER• Free app launched in September for iOS9• Filters traffic coming from advertisers• Helps consume less data, makes mobile
browsing faster and cleaner
SAFE• Roll-out with operators
continues• New versions of F-Secure SAFE
and Internet Security 2016 launched for consumers in September
FREEDOME• New significant partnerships won in
Q3, several negotiations on-going• Added support for Apple Watch and
iOS9.• Steadily increasing share of direct-
to-consumer sales
© F-Secure Interim Results 22 October 2015
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PRODUCT UPDATES
FREEDOME WINS NEW PARTNERS
• iPad optimized user experience
• Apple Watch support
• New service nodes; currently more than 20 virtual locations available
NEW FEATURE
• Tracker Mapper – visualisation of tracking attempts. Beta program for desktops ongoing
• Promising feedback from press and beta users
• Commercial launch later in the autumn, mobile version by the end of this year
JULY AUGUST SEPTEMBER
One of the world’s largest network
operators
Best Buy (Canada)
[Several negotiations ongoing]
Mad Croc, global energy
drink brand
AWARDED FOR TRUST (OCTOBER)• Freedome won the Meffy Award
in the Consumer Trust category by Mobile Ecosystem Forum (MEF)© F-Secure Interim Results 22 October 2015
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PRODUCT DEVELOPMENT CONTINUES TO MEET MARKET DEMAND
SECURITY FOR SMART HOMES
INCIDENT DETECTION AND RESPONSE FOR COMPANIES
SOLUTIONS UNDER CONSTRUCTION:
14 © F-Secure Interim Results 22 October 2015
OUTLOOK The outlook for 2015 is:
Overall security revenue growth for continuing operations is anticipated to be at or above 5 % in 2015 (2014: EUR 137.4 million)
Operating profit (non-IFRS) for continuing operations is estimated to be around 15% of revenues. The guidance excludes the profit from the sale of the personal cloud storage business, the cost impact of the acquisition of nSense and non-recurring items
Approximately EUR 6 million in revenues from services sold to Synchronoss is anticipated to be recognized in discontinued operations.
The guidance on operating profit (non-IFRS) has been amended to exclude non-recurring items.
15 © F-Secure Interim Results 22 October 2015
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As of the beginning of 2015 the personal cloud storage business (younited), which was sold to Synchronoss Technologies in February, is reported as discontinued operations. Consequently, comparison figures related to the statement of income have been restated. Comparison figures in the text refer to continuing operations only and the corresponding period of the previous year, unless otherwise stated.
As of 2 June 2015 the acquired cyber security services business (nSense) has been consolidated into the F-Secure Group accounts.
© F-Secure Interim Results 22 October 2015
REVENUES Q3 Revenues increased by 8% y-o-y
Total quarterly revenues 37.2m (Q314: 34.5 m)
Operator revenues at last year level, 18.7m (Q314: 18.7 m)
Corporate and direct-to-consumer sales increased by 17% totaling 18.6 million (15.8 m) including the acquired cyber security
services (nSense)
19
EURm
© F-Secure Interim Results 22 October 2015
PROFITABILITYQ3 Operating Profit
EBIT (non-IFRS) 7.3m, 20% of revenues (Q314: 7.4m, 22%)
for continuing operations excluding costs associated with the deferred payment and earn-out of the nSense acquisition and non-recurring items
EBIT (IFRS) 6.0m, 16% (Q314: 7.4m, 22%)
Earnings per share for continuing operations EUR 0.03(EUR 0.04)
Earnings per share EUR 0.02(EUR 0.04)
20
EURm
© F-Secure Interim Results 22 October 2015
COSTSQ3 costs
Costs 30.6m (Q314: 25.6m), +19% y-o-y
The increase is mainly related to personnel related expenses, costs incurred by the acquired nSensebusiness and investments in sales and marketing activities
Depreciations from past capitalized expenses decreased to 1.5m(Q314: 2.0m)
Capitalized R&D expenses were 0.5m (Q314: 0.5m)
21
EURm
© F-Secure Interim Results 22 October 2015
DEFERRED REVENUESQ3 Deferred revenues increased to 43.5m (38.3m)
22
EURm
© F-Secure Interim Results 22 October 2015
SOLID CASH POSITION Solid operational cash flow in Q3
Cash flow from operations 5.7m* (Q314: 5.3m)
Market value of liquid assets on 30 September 80.5m (Q314 : 51.6m)
Notes on the graph1. Personal cloud storage business (younited)
sold
2. Dividend of EUR 24.9 million paid in April
3. The EUR 11 million cash payment for nSense
23
EURm
* Including discontinued business
1
2
3
© F-Secure Interim Results 22 October 2015
NUMBER OF PERSONNEL Number of personnel
913 (Q314: 933) at the end of the quarter
24 © F-Secure Interim Results 22 October 2015