F-Secure Financial Statement Release 1 January –

F-Secure Corporation, Financial Statement Release, 16 February 2017 at 09.00 EET 

A strong fourth quarter concluded a solid year 

- Accelerating investments in corporate security in 2017

This is a summary of F-Secure’s Financial Statement Release for 2016. The full financial Statement Release for 2016 is a PDF file attachment to this stock exchange release and is available on the company's website at the address: www.f-secure.com/ir.

Highlights of  October–December (Q4)

• Revenue from continuing operations increased by 9% year-on-year to EUR 42.4 million (38.9m)  
• Revenue from corporate security increased by 19% to EUR 17.4 million (14.6m), representing 41% (38%) of all revenue
• Revenue from consumer security increased by 3% to EUR 25.0 million (24.3m)
• EBIT for continuing operations was EUR 6.9 million, representing 16% of revenue (5.0m, 13%)
• Earnings per share (EPS) for continuing operations was EUR 0.04 (0.00) and EUR 0.04 (0.00) for the Group including discontinued operations
• Deferred revenue increased by 13% to EUR 54.3 million (48.1m) at the end of the quarter, reflecting strong order intake in corporate security  
• Cash flow from operations was EUR 9.6 million (14.3m)   

Highlights of 2016

• Revenue from continuing operations increased by 7% year-on-year to EUR 158.3 million (147.6m)
• Revenue from corporate security increased by 20% to EUR 62.5 million (52.1m), representing 39% (35%) of all revenue
• Revenue from consumer security remained largely at previous year’s level and amounted to EUR 95.8 million (95.5m)
• EBIT for continuing operations was EUR 19.2 million, representing 12% of revenue (20.0m, 14%)
• Earnings per share (EPS) for continuing operations was EUR 0.10 (0.08) and EUR 0.10 (0.14) for the Group including discontinued operations
• Cash flow from operations was EUR 21.9 million (28.9m)
• Encouraging results from investments in corporate security; expansion of scalable business model to continue in 2017 

Dividend proposal  

• The Board of Directors is proposing a dividend of EUR 0.06 per share and an extraordinary dividend of EUR 0.06 per share for 2016   

Outlook for 2017

Encouraged by the results from our growth investments in corporate security in 2016, we have decided to make a meaningful additional investment in both product development and go-to-market in 2017. Consequently, the Company’s outlook for 2017 is the following:      

• Revenue is anticipated to grow from the previous year’s level (2016: EUR 158.3 million )
• Operating profit is anticipated to be EUR 8-12 million (2016: EUR 19.2 million); profitability in the first quarter of 2017 is foreseen to be lowest during the year following typical seasonality, and clearly better towards the year-end

Revenue growth is expected to be driven by F-Secure’s cyber security services and corporate security products (in particular endpoint protection products, RDS and F-Secure Radar) sold through the reseller channel.   

The decision to continue increasing investment in corporate security is based on the already proven revenue growth seen during the last two years. F-Secure believes that additional investment to expedite market penetration of Rapid Detection Service and F-Secure Radar, in addition to endpoint protection products, and to improve portfolio competitiveness for better cross sell opportunities to existing customers will further enhance growth opportunities. The profitability impact of these growth investments will be clearly negative in 2017.  

In cyber security services, F-Secure’s consultants are widely recognized as leading experts in the field, and demand for their services is high across several industry verticals internationally. Expansion of the consultancy business therefore continues.  

Revenue from consumer security is anticipated to remain at approximately previous year’s level.   

Outlook for strategy period 2017–2020

Driven by the anticipated revenue growth and scalability of the high gross margin product based business model, profitability is expected to improve clearly above the level achieved last year (2016: 12% of revenue) towards the end of the 2017–2020 strategy period.  

CEO SAMU KONTTINEN  

A strong fourth quarter concluded a solid year for F-Secure. Our corporate security revenue continued to grow in double digit figures throughout the year, and in the fourth quarter the demand for cyber security services was even stronger than we had anticipated. In consumer security we saw a slight revenue increase in the fourth quarter compared to the previous year. I was particularly happy to see our operator business perform steadily, with growing confidence in its stability going forward.   

F-Secure’s revenue or the full year 2016 increased by 7% to EUR 158.3 million, with revenue from corporate security growing by 20% and consumer security remaining at previous year’s level. Operating profit was EUR 19.2 million and 12% of revenue, reflecting increased expenditure in sales and marketing as well as product development.  

The cyber security market continues to offer good structural growth, and we believe the market environment and our proven competitiveness will continue to support our anticipated growth. 

Encouraged by the traction for our solutions for the corporate security market during 2016, we have decided to make a meaningful additional investment in both product development and go-to-market in 2017. We will particularly focus our investments on the go-to-market of our managed detection service (RDS) and vulnerability management (F-Secure Radar), and also increase our investments to enhance our portfolio competitiveness and to improve cross sell to existing customers.   

Due to these growth investments, our 2017 profitability will be clearly lower than in 2016. Towards the year-end we expect to see clearly improving profitability. The full positive impact of our investments will be visible only towards the end of the strategy period.  

In cyber security services, demand for our penetration testing, forensics and regulatory and compliance  services is looking very strong. We continue winning customers from the most demanding industry verticals, to whom cyber defense is no place for compromise. This showcases our world class expertise in this domain. We have a very positive outlook for this business and also how it complements our higher margin product sales.   

Looking at new product launches, the focus is at F-Secure Cloud Protection for Salesforce and F-Secure Sense, the connected home security suite. Both are addressing totally new markets for F-Secure and we have been very moderate with their forecasted revenue impact for 2017.  

In general, defending businesses against targeted attacks will increasingly require combining human expertise with technology. With our cyber security consultants working closely with product development, we can ensure that learnings from forensics and penetration testing feed directly into the creation of new artificial intelligence, heuristics and machine learning capabilities. This combination of best-in-class products and cyber security services gives F-Secure a unique competitive advantage.  

I am pleased to conclude by noting that we are building our future growth on a very strong foundation as a confirmed front runner in the industry. This was highlighted again earlier this month, when we received the Best Protection Award by AV-TEST for the fifth time, the first company in the AV-test test history to do so.  

Key figures 

Key figures are for continuing operations unless otherwise stated.    

1) Based on the weighted average number of outstanding shares during the period 156,022,774 (1–12/2016) and 156,258,200 (10–12/2016)

2) Includes both continuing and discontinued operations  

News conference and webcast

A news conference for analysts and media will be held (in Finnish) at the Company's headquarters (address: Tammasaarenkatu 7, 00180 Helsinki) on Thursday 16 January 2017 at 11.00–12.00 a.m. (EET).    

A webcast for international investors and analysts will be held (in English) on the same day at 14.00 p.m. (EET ).      

• To participate and ask questions in the online meeting via web, please click on the link: https://meet.f-secure.com/tapio.pesola/C0G31CV8
• To participate via phone, please dial in to +358975110100. The conference ID is 170372.  

The material will be available at the company's website before the call begins: www.f-secure.com/investors.       

F-Secure Corporation  

Additional information  

Contact information

Samu Konttinen, CEO, F-Secure Corporation +358 9 2520 0700  

Eriikka Söderström, CFO, F-Secure Corporation +358 9 2520 0700 

Tapio Pesola, IR Manager, F-Secure Corporation +358 44 3734693  

Financial calendar

F-Secure Corporation will publish its interim reports during 2017 as follows:

• Q1/2017: 4 May 2017
• Q2/2017: 10 August 2017
• Q3/2017: 9 November 2017