business in strategic growth areas performed well
TRANSCRIPT
BUSINESS IN STRATEGIC GROWTH AREAS PERFORMED WELL
CORPORATE SECURITY UP BY 48%
F-Secure Q4 / 2018
Key takeaways from Q4
Key figures
Business updates
Outlook
Financials
AGENDA
2
▪ In corporate security, progress was made with our strategic growth businesses
▪ Very strong progress with MDR solutions with a large amount of deals closed in several countries
▪ Integration of MWR InfoSecurity proceeding well, consulting business is performing well
▪ Successful launch of the new EDR solution with first deals signed in eight countries, well-received by partners and customers alike
▪ Consumer security continued stable progress, as expected
▪ Adjusted EBITDA at the higher end of our expectations
3
KEY TAKEAWAYS FROM Q4
KEY FIGURESEUR m 10–12/2018 10–12/2017 Change 1–12/2018 1–12/2017 Change
Revenue 53.7 44.4 21 % 190.7 169.8 12 %
of which corporate security 29.8 20.1 48 % 95.9 72.2 33 %
of which consumer security 24.0 24.3 -1 % 94.9 97.5 -3 %
Adjusted EBITDA1) 4.9 5.4 -11 % 17.4 18.2 -4 %
% of revenue 9.0 % 12.2 % 9.1 % 10.7 %
M & A expenses -0.3 -3.6 -0.4
EBITDA 4.5 5.4 -16 % 13.8 17.8 -22 %
Depreciation & amortization -2.0 -1.6 -6.8 -5.9
PPA amortization -1.2 -0.1 -2.5 -0.4
EBIT 1.4 3.7 -62 % 4.5 11.5 -61 %
Earnings per share (EUR) 0.00 0.02 -112 % 0.01 0.07 -92 %
Deferred revenue 72.9 65.7 11 %
Cash and financial assets at fair value
through P&L27.9 90.2 -69 %
Personnel, end of period 1,666 1,104 51 %
1)Adjustments are material items outside normal course of business associated with acquisitions,
integration, gains or losses from sales of businesses, and other items affecting comparability.4
CORPORATE SECURITY DRIVING GROWTH
5
0
5
10
15
20
25
30
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
55%
60%
9%
M€
2%
14%
Growth-%
Q117
58%
5%
22%
2%
10%
Q217
11%
Q417Q317 Q318
16%
-3%
6%5%
16%
-1%-2%
Q118
8%
-5%
0%
Q218
-2%
Q418
23%
48%
12%
6%
Revenue from corporate security
Revenue from consumer security
Corporate growth (YoY)
Consumer growth (YoY)
Total growth (YoY)
* MWR InfoSecurity acquired on 2 July 2018
▪ Corporate security revenue is our largest business (55% in Q4/2018), and grew by 48% in Q4/2018
▪ The majority of our corporate security order intake comes from new products and solutions addressing growth markets
▪ The market for detection and response solutions is growing the fastest
ADJUSTED EBITDA AT THE HIGHER END OF EXPECTATIONS
Adjustments are material items outside normal course of business associated with acquisitions, integration, gains or losses from sales of businesses and other items affecting comparability.
6
M€ % of revenue
1,52,1
4,23,7
2,3
0,5 0,4
1,4
1,3
1,4
1,6
1,6
1,5
1,5 1,8
2,0
0,1
1,1
1,20,4
0,6
2,7
7
14
0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
0
1
2
3
4
5
6
7
8
9
10
0,3
0,1
4,9
0,1
Q418
9
Q417Q117
9
0,1
Q317
0,1
Q118
12
0,1
6
Q218
12
Q318
9
2,9
4,0
5,8
5,4
3,8
2,7
6,0
Q217
Adjusted EBITDA
Depreciation & Amortization
M&A costs
PPA Amortization
Reported EBIT
Adjusted EBITDA, % of revenue
▪ F-Secure continues to focus on growth, and is investing in product development as well as sales and marketing, and cyber security consulting expansion
▪ We have managed our operating expenses well
CORPORATE SECURITY REVENUE GREW BY +48% IN Q4
▪ MDR order intake in strong growth, increased significantly from the previous quarter
▪ A large number of deals in several countries, in several industry verticals, including finance and defense
▪ Customer satisfaction and renewal rates very high
▪ Endpoint security at previous year’s level▪ Renewals at a high level, new customer acquisition
slightly improved, but was lower than during previous year
▪ Customers are supplementing their EPP solutions with new EDR functionalities
▪ F-Secure’s new EDR solution launched in November, first sales in eight countries, well-received by partners and customers alike▪ Unique “Elevate to F-Secure” feature appreciated
CORPORATE SECURITY PRODUCTS
7
F-SecurePartner
1. DETECTEDANOMALY
A potential targeted attack was detected but it cannot
be confirmed by the F-Secure Partner
2. ELEVATED TO F-SECURE
The Partner choose “Elevate to F Secure” to
request F-Secure’s assistance
F-Secure’s experts respond 24/7 to the Elevate to F-Secure requests by analyzing the threat and providing
actionable advice on attack containment and remediation
3. RESOLVED WITH EXPERT’S GUIDANCE
Actionable response guidance from cyber
security experts helps to respond fast
F-Secure EDR’s unique “Elevate to F-Secure” functionality
TESTIMONIALS OF OUR COMPETITIVENESS
8
An accounting company supplemented their existing
EPP subscription with our MDR solution.
A large financial institution who had been our consulting customer in
the past, added our MDR solution.
A very demanding defense contractor expanded their
protection with sophisticated detection and response
capabilities (MDR)
WINNING MDR DEALS THROUGH CONSULTING
EXPANDING CROSS-SELL OPPORTUNITIES
WINNING MOST DEMANDING CUSTOMERS
INDUSTRY-LEADING RESEARCH AND THREAT VISIBILITY
AUTONOMOUS SELF-LEARNING BIG DATA PLATFORM
BROAD CONTEXT DETECTION ®F-Secure Labs Forensics
Incident responseThreat Hunting
Targeted Attack Simulation
Endpoint data is essential
Big Data and AI platform Actionable insights and
continuous response
Corrective actions
9
CORPORATE SECURITY REVENUE GREW BY +48% IN Q4
▪ Order intake in strong growth driven by the increased contribution from MWR InfoSecurity
▪ Continued strong demand in the market, and successful recruitment, F-Secure particularly strong in the finance industry serving several of the largest banks in the world
▪ Consultancy business in the UK bounced back to an all-time high level, the impact of integration activities started to wear off
▪ In the US, Singapore and South Africa consultancy business in good growth
▪ In the Nordics, order intake lower than during the previous year, tough comparison period including large deal
CYBER SECURITY CONSULTING
10
CAPABILITY
250+Technical consultants
CLIENTS
250+Clients
Our global presence in cyber security consulting is a real strength when serving international customers
ADDRESSING SEVERAL GROWTH MARKETS
11
PREDICT PREVENT DETECT & RESPOND
Cyber security consulting
Vulnerabilitymanagement
Anti-phishingbehavioral
management
Endpointprotection
Endpoint detection and response
Managed Detection & Response
Managed ThreatHunting
Radar PhishdProtection Service
for BusinessRapid Detection
& Response (EDR)Countercept (MDR)*
2016 2018 2018 2016 2018
* Including RDS
CONSUMER SECURITY REVENUE AT THE PREVIOUS YEAR’S LEVEL IN Q4
▪ Order intake at previous year’s level
▪ Signed first F-Secure SENSE SDK deals, and negotiations on-going with several operators and leading router manufacturers
▪ Signed new or extended operator contracts in Europe, United States and Latin America
▪ Continued to successfully work with partners globally to increase product activation rates
OPERATOR CHANNEL
12
In 2018 we continued to win new accounts
CONSUMER SECURITY REVENUE AT THE PREVIOUS YEAR’S LEVEL IN Q4
▪ Order intake at previous year’s level
▪ Renewals at a good level
▪ Continued focus on selling broad consumer portfolio to increase average revenue per customer (ARPU)
DIRECT SALES
13
AARPU* uplift with F-Secure TOTAL
AARPU = Annualized Average Revenue per User
OUTLOOK FOR 2019
▪ Revenue from corporate security is expected to
grow by over 30% compared to 2018
▪ Revenue from consumer security is expected to
stay approximately at the same level as in 2018
▪ Adjusted EBITDA is expected to be above EUR 15
million excluding the impact of IFRS 16
14
OUTLOOK FOR 2018-2021 UNCHANGED
▪ The demand for corporate cyber security products and services is expected to grow strongly. F-Secure aims to grow faster than the market, with revenue from corporate security expected to grow above 15% annually during our strategy period 2018-2021.
▪ Driven by the anticipated revenue growth and scalable business model, the company’s profitability is expected to improve significantly in the long-term. The board and the management continuously seek to balance growth investments and profitability to optimize long-term value creation for the shareholders.
15
16
WE ARE ON RIGHT TRACK
FINANCIALSQ4 2018
All income statement figures refer to continuing operations, and figures in brackets refer to the corresponding period in the previous year, unless otherwise stated.
17
REVENUE
October-December
▪ Revenue increased by 21% y-o-y
▪ Total quarterly revenue 53.7m (Q417: 44.4m)
18
15
0
10
5
50
20
25
30
35
40
45
55
Q118Q117 Q217
53.7
Q317 Q218Q417 Q318 Q4/18
40.943.143.3
41.243.4
44.4
50.5
+21%
Revenue
EURm
REVENUE SPLIT October-December
▪ Revenue from corporate security increased by 48% totalling EUR 29.8 million (20.1m)
▪ Revenue from consumer security was at the previous year’s level at EUR 24.0 million (24.3m)
▪ Corporate security represented 55% (45%) and consumer security 45% (55%) of total revenue
19
0
5
10
25
15
20
30
Q117 Q318Q118
29.8
24.724.2
Q417 Q218Q217 Q317
16.6
18.6
16.9
24.3
20.1
24.3
26.7
19.4
23.423.8
20.0
23.8
Q4/18
24.0
+48%
Corporate Total Consumer Total
EURm
PROFITABILITY
October-December
▪ Adjusted EBITDA 4.9m, 9.0% of revenue (5.4m, 12.2%), excluding EUR 0.3 million of costs related to the acquisition of MWR InfoSecurity
▪ Earnings per share (EPS) EUR 0.00 (EUR 0.02)
20
EURm
1,52,1
4,23,7
2,3
0,5 0,4
1,4
1,3
1,4
1,6
1,6
1,5
1,5 1,8
2,0
0,1
1,1
1,20,4
0,6
2,7 0,3
7
14
9 9
0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
2,0
3,0
6,0
7,0
4,0
8,0
10,0
0,0
5,0
9,0
1,0
12
0,1
0,1
5,4
0,1
Q218 Q418Q318Q317
3.8
0,1
Q217
9
Q117
0,1
6,0
2,9
12
Q417 Q118
6
5.8
4,0
2,7
4,9
Adjusted EBITDA
Reported EBIT
M&A costs
PPA Amortization
Depreciation & Amortization
Adjusted EBITDA, % of revenue
OPERATING EXPENSESEURm
October-December
▪ Operating expenses 40.4m (33.6m), +20% y-o-y, due to the acquisition of MWR InfoSecurity
▪ Expenses for the period include EUR 1.5 million of acquisition and integration related costs
21
0
2
4
6
8
10
12
14
16
18
20
22
24
26
28
30
32
34
36
38
40
42
8.5
19.4
Q317
3.3
40,4
8.4
21.9
9.7
Q417
34.4
9.6
8.2
21.0
35.9 3.8
Q118
3.4
23.9
33.63.1
23.6
Q318 Q418
1.5
34.4
31.2
8.2
3.2
3.83.8
22.0
8.6
Q117
3.9
Q218
8.7
23.3
Q217
26.1
3.3
35.5
38.7
+20%
Sales & MarketingAcquisition related
Administration
Research & Development
DEFERRED REVENUE
31 December 2018
▪ Deferred revenue increased by 11% y-o-y to EUR 72.9m (EUR 65.7m), driven by the increased contribution from the acquired MWR InfoSecurity, and increasing order intake from corporate security products and services with long-term contracts
22
60
0
40
10
75
20
70
30
50
Q218
50.5
18.6
48.3
Q417
20.013.8
Q117
41.7
18.7
Q217
41.9
18.7
Q317
17.412.4
Q118
46.7
Q318
54.8
Q418
47.4
17.6
55.3
+11%
Deferred revenue, current Deferred revenue, non-current
EURm
October-December
▪ Revenue increased in all regions
▪ In Rest of Europe, North America and in Other regions increases were driven by the increased contribution from MWR InfoSecurity
REGIONAL REVENUE
23
0
5
10
15
20
25
4.4
18.4
24.1
17.4
Nordic
18.0
6.8
Rest of Europe
4.8
North America
4.2
Other Regions
+3%
+31%
+9%
+62%
Q4/17 Q4/18
EURm
BALANCE SHEET CHANGE DUE TO THE ACQUISITION
October-December
▪ The main driver behind the change in cash position was the acquisition of MWR InfoSecurity
▪ Cash flow from operating activities before financial items and taxes was 10.5m (13.1m).
▪ Cash flow decreased due to decline in EBIT and a change in net working capital. Acquisition and integration related costs impacted cash flow negatively in third quarter.
▪ Cash flow from operations was EUR 8.3 million (11.4m).
▪ Gearing ratio was 13.9% (127.8% negative)
▪ F-Secure’s financial position remained solid. Short term investments were sold in June 2018 as F-Secure prepared to finance the acquisition of MWR InfoSecurity in the beginning of third quarter.
94,3
24
32,326,1 27,3
36,3 34,6
64,0
54,6 53,8
53,9 53,9
100
60
0
70
50
10
20
30
40
80
90
Q117
79,8
Q317
27,8
Q217 Q218Q417 Q118 Q418Q318
96,3
80,7 81,1
90,2 88,5
21,5
EURm
Short term investments
Cash and bank
* MWR InfoSecurityacquired on 2 July 2018
NUMBER OF PERSONNELOctober-December
▪ At the end of the quarter, F-Secure had 1,666 employees (1,104)
▪ In Q3/18, the increase in personnel from the acquisition of MWR InfoSecurity was 391
25
1 055 1 091 1 060
1 201
1 636 1 666
400
800
0
200
600
1 000
1 200
1 400
1 600
1 800
Q117 Q417 Q118 Q318Q217 Q317 Q218
1 104 1 145
Q418
+51%
Headcount