F-Secure Financial Statement Release

F-Secure Corporation, Financial Statement release, 13 February 2019 at 12.00 EET F-Secure Financial Statement Release 1 January - 31 December 2018

BUSINESS IN STRATEGIC GROWTH AREAS PERFORMED WELL - Corporate security up by 48% in Q4

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

Highlights of October-December (Q4)

Revenue increased by 21% to EUR 53.7 million (44.4m)
Revenue from corporate security increased by 48% to EUR 29.8 million (20.1m)
Revenue from consumer security was at previous year’s level and was EUR 24.0 million (24.3m)
Deferred revenue increased by 11% to EUR 72.9 million (65.7m)
Adjusted EBITDA was EUR 4.9 million (5.4m), 9.0% of revenue (12.2%)
Earnings per share (EPS) was EUR 0.00 (EUR 0.02)
Cash flow from operating activities before financials items and taxes was EUR 10.5 million (13.1m)

Highlights of the full year 2018

On 2 July, F-Secure completed the significant acquisition of MWR InfoSecurity Ltd.
Revenue increased by 12% to EUR 190.7 million (169.8m)
Revenue from corporate security increased by 33% to EUR 95.9 million (72.2m)
Revenue from consumer security decreased by -3% to EUR 94.9. million (97.5m)
Adjusted EBITDA was EUR 17.4 million (18.2m), 9.1% of revenue (10.7%)
Earnings per share (EPS) was EUR 0.01 (EUR 0.07)
Cash flow from operating activities before financial items and taxes was EUR 13.8 million (29.5m)
The Board of Directors is exceptionally proposing to the AGM that the company will not pay a dividend for 2018

Figures in this report are unaudited. Figures in brackets refer to the corresponding period in the previous year, unless otherwise stated.

Outlook

Outlook for 2019

The company's outlook for 2019 is:

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

Outlook for the strategy period 2018-2021 is unchanged

The demand for cyber security products and services is expected to continue in strong growth and F-Secure aims to grow faster than the market. Revenue from corporate security is expected to grow above 15% annually during our strategy period 2018-2021.

Driven by the anticipated revenue growth and scalable business model, profitability is expected to improve significantly in the long-term. The management continuously seeks to balance the growth investments and profitability to optimize long-term growth and value creation for the shareholders.

CEO SAMU KONTTINEN F-Secure’s revenue increased by 21% to EUR 53.7 million in the fourth quarter, and progress was made with our strategic growth businesses. Revenue from corporate security grew by 48%, and consumer security was at previous year’s level. Profitability was at the higher end of our expectations.

I was particularly pleased with the number of deals we signed in several countries with our managed detection and response (MDR) solutions. Our customers choose us because of F-Secure’s AI-powered Broad Context Detection technology, unique threat hunting capabilities, and our ability to respond to attacks in real-time. This enables our customers to react to attacks faster and enables swifter recovery from them. As a result, customer satisfaction and renewal rates with existing installations have been very high. We continue to win new customers in demanding verticals such as finance and defense.

Our consulting business in the UK recovered swiftly to an all-time high level from the temporary slowdown experienced during the third quarter caused by integration activities. Overall, I was happy with our consulting business’ performance, and our global presence in cyber security consulting is a real strength when serving international customers.

In endpoint security, our new sales improved slightly from the previous quarter, and renewal rates remained high. Additionally, following the November launch, F-Secure’s first EDR deals were signed in eight countries, and the solution was well-received by the market. The new EDR solution supplements our endpoint protection (EPP) solution with detection and response capabilities. Our partners appreciate our partner-centric solution design and the unique “elevate to F-Secure” functionality, which allows them to directly work with F-Secure’s cyber security response teams in more demanding incidents.

F-Secure’s consumer security business developed as expected. Our unique operator channel is the back bone of our consumer business, and as consumers are increasingly aware of new security and privacy challenges, our global network of partners provides us with a platform to protect their not just their PCs and smart phones, but their whole digital homes. We continue to focus on pushing the sales of the company’s broad consumer portfolio to provide more comprehensive protection and to increase average revenue per customer.

Overall, F-Secure made good progress during 2018 in the implementation of our growth strategy. The acquisition of MWR InfoSecurity in July bolstered our detection and response capabilities further and expanded the reach and expertise of our consulting business. The integration is progressing well. Overall, the high demand for cyber security products and services continues to provide us with tailwind.

Key figures

EUR m	10-12/2018	10-12/2017⁴⁾	Change	1-12/2018	1-12/2017⁴⁾	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
EBITDA	4.5	5.4	-16%	13.8	17.8	-22%
of revenue, %	8.5	12.2		7.2	10.5
Adjusted EBIT¹⁾	2.8	3.8	-25%	10.6	12.3	-14%
of revenue, %	5.3	8.5		5.6	7.3
EBIT	1.4	3.7	-62%	4.5	11.5	-61%
% of revenue	2.6	8.3		2.4	6.8

Earnings per share, (EUR)²⁾ ³⁾	0.00	0.02	-112%	0.01	0.07	-92%

Deferred revenue				72.9	65.7	11%
Cash flow from operations	8.3	11.4	-27%	6.8	26.0	-74%
Cash and financial assets at fair value through P&L				27.9	90.2	-69%
ROI, %	6.2	27.7		7.9	20.0
Equity ratio, %				42.7	61.9
Gearing, %				13.9	-127.8
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. ²⁾ Based on the weighted average number of outstanding shares during the period 157,224,137 (1-12/2018). ³⁾ Earnings per share (EPS) excluding returned withholding taxes was EUR 0.05 for 1-12/2017. ⁴⁾ As of 1 January 2018 F-Secure has adopted the new guidance on revenue recognition, IFRS 15, and revised the allocation of costs between Cost of Revenue and Operating expenses, and therefore restated 2017 financials.

Events after period-end

Dividend and proposals to the Annual General Meeting

The company's dividend policy is to pay approximately half of its profits as dividends. Subject to circumstances, the company may deviate from this policy.

During the year 2018, the company completed the acquisition of MWR InfoSecurity, which was financed partially with an external loan. In addition to the costs related to the acquisition and integration, the company’s profitability was impacted by the continued growth investments in corporate security. Considering these aspects, the Board of Directors has exceptionally decided to propose no dividend to be paid for year 2018.

Court decision related to claim in France

In February 2019, F-Secure received a French appeal court decision related to the claim which was related to a contract regarding the purchasing of services, and which was originally disclosed in the Annual Report for 2017. F-Secure is assessing whether grounds for an appeal to supreme court exists. However, the decision will be implemented and F-Secure’s subsidiary is required to pay approximately EUR 1.3 million, for which a similar provision has been booked earlier.

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) today at 14.30–15.30 a.m. (EET).

A webcast will be held (in English) at 16.00 p.m. (EET).

To participate in the online meeting, please click on the link: https://meet.f-secure.com/tapio.pesola/H39MF49Z
To participate via phone, please dial in to +358975110100. The conference ID is 434694.

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

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

Financial calendar

F-Secure Corporation will publish its interim reports during 2018 as follows:

Q1/2019: 8 May 2019
Q2/2019: 19 July 2019
Q3/2019: 30 October2019

Annual General Meeting

The Annual General Meeting (AGM) is scheduled to be held on 19 March 2019
The Annual Report for 2018 will be published on the Company's website latest on 26 February 2019

More information is available at www.f-secure.com/agm.

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