F-Secure Corporation, Half Year Financial Report, 20 July 2022 at 08:00 EEST
F-Secure Corporation Half Year Financial Report 1 January–30 June 2022
Creating strong foundation for growth
Highlights of April–June (Q2)
- Revenue increased by 4.3% to EUR 27.5 million (EUR 26.3 million)
- Revenue from Partner Channel increased by 4.3% to EUR 21.7 million (EUR 20.8 million)
- Revenue from Direct Channel increased by 4.1% to EUR 5.7 million (EUR 5.5 million)
- Adjusted EBITA decreased by 14.6% to EUR 10.1 million (EUR 11.8 million), 36.7% of revenue (44.8%)
- Items affecting comparability (IAC) for Adjusted EBITA were EUR -3.0 million (EUR -2.4 million)
- Earnings per share (EPS) was EUR 0.03 (EUR 0.04)
- Cash flow from operating activities before financial items and taxes was EUR 9.2 million (EUR 10.9 million)
Highlights of January–June (H1)
- Revenue increased by 4.2% to EUR 54.8 million (EUR 52.6 million)
- Revenue from Partner Channel increased by 4.3% to EUR 43.4 million (EUR 41.6 million)
- Revenue from Direct Channel increased by 3.7% to EUR 11.4 million (EUR 11.0 million)
- Adjusted EBITA decreased by 3.8% to EUR 22.7 million (EUR 23.6 million), 41.5% of revenue (44.9%)
- Items affecting comparability (IAC) for Adjusted EBITA were EUR -3.8 million (EUR -2.4 million)
- Earnings per share (EPS) was EUR 0.08 (EUR 0.09)
- Cash flow from operating activities before financial items and taxes was EUR 20.0 million (EUR 19.2 million)
WithSecure Board of Directors announced on 17 February 2022 its decision to pursue towards the separation of its Consumer Security business through a partial demerger. F-Secure Corporation was formed as a result of the partial demerger from WithSecure Corporation (“Demerger”), which was completed on 30 June 2022.
In this half-year report, financial information is presented on an actual basis for the statement of financial position as at 30 June 2022, and on a carve-out basis for all other financial information for the other periods presented. Figures in brackets refer to the corresponding period in the previous year, unless otherwise stated. Percentages and figures presented herein may include rounding differences and therefore may not add up precisely to the totals presented. All figures in the following tables are EUR million unless otherwise stated. This half year report is unaudited.
The trading in F-Secure shares commenced on 1 July 2022. Therefore, it is not possible to calculate key figures that are based on market value for years 2022 and 2021. This applies to the following key figures: price/earnings ratio, share price development, market capitalization of shares, trading volume of shares as number and percentage, weighted average adjusted number of shares during the financial period, adjusted number of shares at the end of the financial period.
Outlook (issued 3 June 2022)
In June 2022, WithSecure Corporation Board of Directors, with F-Secure Corporation Board of Directors, issued the following financial outlook for F-Secure for 2022.
We expect F-Secure revenue to grow by 4-6% year-on-year.
Due to necessary investments into establishing our independence and ensuring future growth, we will see lower profitability during the rest of the year compared to Q1/2022. Thus, we expect the adjusted EBITA to be approximately 40% for the full year 2022.
Financial targets (unchanged)
The following financial targets in the medium term (by 2025) have been adopted for F-Secure by the Board of Directors of WithSecure:
- Growth: High single digit organic revenue growth
- Profitability: After initial growth investments, adjusted EBITA margin of above 42%
- Dividend Yield: F-Secure aims to pay around or above 50% of net profit as dividend on an annual basis.
F-Secure Corporation follows the Rule of 40 metric as internal performance measurement and guiding principle, according to which the combined revenue growth rate and profitability margin should be equal to or greater than 40%.
Financial performance
| EUR million | 4−6/2022 | 4−6/2021 | Change % | 1−6/2022 | 1−6/2021 | Change % | 1−12/2021 |
| Revenue | 27.5 | 26.3 | 4.3% | 54.8 | 52.6 | 4.2% | 106.3 |
| Partner channel | 21.7 | 20.8 | 4.3% | 43.4 | 41.6 | 4.3% | 84.2 |
| Direct channel | 5.7 | 5.5 | 4.1% | 11.4 | 11.0 | 3.7% | 22.1 |
| Cost of revenue | -2.6 | -2.0 | 29.2% | -4.7 | -4.1 | 14.5% | -8.8 |
| Gross Margin | 24.9 | 24.3 | 2.2% | 50.1 | 48.5 | 3.3% | 97.4 |
| % of revenue | 90.5% | 92.3% | 91.4% | 92.1% | 91.7% | ||
| Other operating income | 0.2 | 0.1 | 30.1% | 0.4 | 0.3 | 57.5% | 0.5 |
| Operating expenses 1) | -14.9 | -12.6 | 18.3% | -27.7 | -25.0 | 10.6% | -50.6 |
| Sales & Marketing | -8.8 | -7.2 | 21.8% | -16.2 | -13.9 | 15.8% | -28.5 |
| Research & Development | -4.3 | -3.7 | 15.3% | -8.2 | -7.7 | 6.6% | -15.6 |
| Administration | -1.8 | -1.6 | 9.6% | -3.3 | -3.3 | -1.8% | -6.5 |
| Adjusted EBITDA 1) | 10.1 | 11.8 | -14.5% | 22.8 | 23.7 | -3.8% | 47.4 |
| % of revenue | 36.9% | 45.0% | 41.6% | 45.1% | 44.6% | ||
| Adjusted EBITA 1) | 10.1 | 11.8 | -14.6% | 22.7 | 23.6 | -3.8% | 47.2 |
| % of revenue | 36.7% | 44.8% | 41.5% | 44.9% | 44.4% | ||
| Items affecting comparability (IAC) 2) | -3.0 | -2.4 | 24.3% | -3.8 | -2.4 | 58.3% | -2.4 |
| Depreciation & amortization | -0.4 | -0.4 | -0.9% | -0.8 | -0.7 | 6.3% | -1.5 |
| EBIT | 6.8 | 9.1 | -25.3% | 18.3 | 20.6 | -11.3% | 43.5 |
| % of revenue | 24.7% | 34.5% | 33.4% | 39.2% | 40.9% | ||
| Adjusted EBIT 1) | 9.7 | 11.5 | -15.0% | 22.1 | 23.0 | -4.1% | 45.9 |
| % of revenue | 35.5% | 43.5% | 40.2% | 43.7% | 43.2% | ||
| Earnings per share (EUR) 3) | 0.03 | 0.04 | -28.4% | 0.08 | 0.09 | -11.7% | 0.20 |
| Operating cash flow | 7.1 | 9.0 | -21.8% | 15.4 | 15.0 | 2.7% | 36.1 |
| Cash conversion % | 113.1% | 107.3% | 98.0% | 87.7% | 95.6% | ||
| Deferred revenue | 20.6 | 19.7 | 4.7% | 19.7 | |||
| Net debt (+) / Net cash (-) 4) | -1.8 | 0.2 | 0.2 | ||||
| Equity ratio % | 18.8% | 24.9% | 24.5% | ||||
| Personnel at the end of the period 5) | 368 | 245 | 50.2 % | 248 |
The key figures and other financial information are presented on an actual basis for the financial position as at 30 June 2022, and on a carve-out basis for all other financial information for the other periods presented. Refer to Note 1, Basis of Preparation.
1) Excluding Items Affecting Comparability (IAC) and depreciation and amortization.
2) A reconciliation of items affecting comparability is presented at the end of this report.
3) Based on the number of shares upon formation of F-Secure on 30 June 2022.
4) Prior to the Demerger on 30 June 2022, no cash or certain lease liabilities, such as lease liabilities related to business premises or machinery and equipment, were allocated to F-Secure. From 30 June 2022 onwards, the figure includes F-Secure's interest-bearing liabilities, less interest-bearing receivables and cash and cash equivalents.
5) Prior to the Demerger on 30 June 2022, the figure consisted of personnel directly employed by the consumer security business and did not include the share of personnel in shared group functions. At the end of Q2 2022, the figure comprises all personnel employed by F-Secure.
Timo Laaksonen, CEO
This has been a year of change for us, as the Demerger was carried out and completed at the end of June, followed by the listing of F-Secure Corporation on the main market of Nasdaq Helsinki on 1 July 2022. A new, independent F-Secure was created, enabling us to better meet and serve the needs of our customers and partners.
As we embark on a new era for F-Secure, we are happy with this quarter of continued growth and several strategic advances. Revenue for the quarter grew by 4.3%, amounting to EUR 27.5 million, reflecting a solid demand for F-Secure’s products and partially supported by the strong dollar. Revenue for the first half of 2022 increased 4.2%. The adjusted EBITA decreased, being EUR 10.1 million in the second quarter and EUR 22.7 million for the first half of the year.
F-Secure strives for continued profitable growth based on three strategic pillars: increase average revenue per user (ARPU), develop current offering and new products, and expand into new channels. The roll-out of the latest version of F-Secure TOTAL, which combines VPN, password management, and endpoint and identity protection into one unified application experience, got into full swing in the partner channel in the second quarter with six partners launching services. We develop new product categories like connected home security with F-Secure SENSE to provide a complete security experience to consumers. During the quarter, we focused on creating a partner program and standardizing our delivery model for SENSE to enable business scalability. F-Secure has a strong position in the consumer security market through our global partner network, and we see great potential to expand into new channel partnerships and thereby widen our potential customer base. We signed up with several new partners in the quarter.
As stated in connection with the Demerger, F-Secure and WithSecure entered into transitional services agreements (TSAs) covering certain areas such as general services (HR, IT and finance), and the technology stack. The term of each service is defined separately, the period varies from three to eighteen months. The fees are determined on an arm´s length basis. Many of the support function TSAs are planned to terminate at the end of 2022, and the rest during 2023.
F-Secure’s vision is to become the number one security experience company in the world. To remain a leading force in the market, we have formed cross-functional teams, so called product business cells to ensure a high degree of customer focus and agility. The first two cells were set up for Security Suite and Network Security*. Alongside the Demerger, we have developed our internal processes, business support systems and operational excellence, and this work continues actively during the second half of the year. We remain focused on the three strategic growth priorities as the year progresses, while keeping our 2022 outlook unchanged: revenue growth of 4-6% year-on-year and adjusted EBITA at approximately 40%.
The first half of 2022 provides a solid foundation for the future. An important milestone has been passed and F-Secure´s employees have done a great job and demonstrated dedication and flexibility during the Demerger process. I want to thank all our colleagues for a fantastic job up to this point. I would also like to take this opportunity to welcome all shareholders to F-Secure. As an independent company, we are able to execute fully our growth strategy and focus capital allocation in the best interest of F-Secure and our shareholders.
*Security Suite refers to VPN, terminal and identity security products F-Secure TOTAL and Network Security refers to F-Secure SENSE.
Demerger from WithSecure Corporation
WithSecure Corporation announced on 17 February 2022 that the Board of Directors of WithSecure had decided to pursue the separation of WithSecure’s consumer security business and had approved a demerger plan according to which all assets and liabilities of WithSecure’s consumer security business would be transferred without a liquidation procedure to a company to be incorporated in connection with the Demerger and to be named F-Secure Corporation. The Demerger is expected to strengthen the preconditions for shareholder value creation in both companies.
The Extraordinary General Meeting of WithSecure Corporation, held on 31 May 2022 resolved to approve the demerger plan. The General Meeting also resolved that the shareholders of WithSecure will receive as demerger consideration one (1) new share in F-Secure for each share they hold in WithSecure on the effective date on 30 June 2022. The Demerger was registered with the Trade Register maintained by the Finnish Patent and Registration Office on the effective date on 30 June 2022. After the Demerger was completed, the total number of shares in F-Secure was 174,526,944 and its share capital was EUR 80,000. Trading in the shares of F-Secure, admitted to trading on the official list of Nasdaq Helsinki under the trading code FSECURE (ISIN code: FI4000519236), commenced on 1 July 2022.
Significant events after the review period
Trading in F-Secure’s shares commenced on the Helsinki Stock Exchange on 1 July 2022. The trading code of the shares in F-Secure is FSECURE. At the beginning of trading, the number of shares in F-Secure subject to trading was 174,526,944.
As on 1 July 2022, F-Secure’s share capital was 80,000 and the company has one share class. Each share carries one vote and entitles to the same dividend. At the beginning of trading on 1 July 2022, the company had 30,805 shareholders. The company did not hold any treasury shares at the end of the period or on the date of this report. A list of the largest shareholders is available on the company's website at www.f-secure.com.
Additional information
This is a summary of F-Secure Corporation’s Half Year Financial Report 1 January–30 June 2022. The full report is a PDF file attached to this stock exchange release. Full report is also available on the company website.
Webcast
F-Secure will organize a webcast today at 14:00. In the webcast, F-Secure’s CEO Timo Laaksonen and CFO Sari Somerkallio will present the results and after the presentation there will be time for questions. The presentation can be followed live as a webcast at: https://fsecure.videosync.fi/q2-2022.
Analysts following F-Secure are invited to the presentation at the company headquarters, Tammasaarenkatu 7, Helsinki, Finland.
Financial calendar
In 2022, F-Secure Corporation will publish financial information as follows:
- Interim Report for January-September 2022, 31 October 2022
For further information, please contact:
Sari Somerkallio, Chief Financial Officer
tel. +358 40 3569251
investor.relations@f-secure.com
F-Secure in brief
F-Secure is Finland headquartered and globally operating consumer cyber security company. F-Secure offers award-winning security and privacy products and services that make every digital moment more secure, for everyone. F-Secure operates in over 100 countries, has ~170 Service Provider partners and is the global leader providing security through Communication Service Providers. F-Secure Corporation is listed on Nasdaq Helsinki Ltd. Read more: www.f-secure.com.