F-Secure Oyj · OMXHEX:FSECURE
F-Secure Oyj — Q4 2016 Earnings Presentation
28 slides from F-Secure Oyj's earnings presentation, 2017
Slide 1: Interim Results Q4 and full year 2016
Samu Konttinen, CEO Interim Results Q4 and full year 2016 A STRONG FOURTH QUARTER CONCLUDED A SOLID YEAR -ACCELERATING INVESTMENTS IN CORPORATE SECURITY IN 2017
Slide 2: Agenda
AGENDA Highlights from Q4 and full year Business & Market update Outlook Financials 2
Slide 3: Key takeaways from Q4
KEY TAKEAWAYS FROM Q4 Continued double-digit growth in corporate security product sales throughout the year Great traction in cyber security services, particularly strong demand in Q4 Consumer security remained stable, confirming our positive outlook = Strong confidence in our scalable model 3
Slide 4: The opportunity is there, we will invest more to accelerate growth
THE OPPORTUNITY IS THERE WE WILL INVEST MORE TO ACCELERATE GROWTH 2016 2017 Our model works Seize the opportunity Very competitive Boost product portfolio development Fast growing More cross-selling channel Expand channel Security capabilities best-in-class Recruit best people 4
Slide 5: Financial highlights
FINANCIAL HIGHLIGHTS October–December (Q4) Full year 2016 Total revenue increased by 9% to EUR 42.4 Total revenue increased by 7% to EUR 158.3 million (38.9m); million (147.6m); corporate security increased by 19% to corporate security increased by 20% to EUR 17.4 million (14.6m) EUR 62.5 mi
Slide 6: Deferred revenue outpacing revenue growth
DEFERRED REVENUE OUTPACING REVENUE GROWTH nSense acquisition 6
Slide 7: Corporate security driving growth
CORPORATE SECURITY DRIVING GROWTH nSense acquisition EUR m Growth % 7
Slide 8: Consumer security up by 3% in Q4
CONSUMER SECURITY UP BY 3% IN Q4 OPERATOR DIRECT SALES & SALES RETAILERS • Strongest growth in Latin America • Continued solid growth and North America - Europe remains stable • Retail sales of consumer products continued to develop favorably • After a weak Q1, sales continuously increased q-o-q • A
Slide 9: Bundling leads to more comprehensive security for consumer
BUNDLING LEADS TO MORE COMPREHENSIVE SECURITY FOR CONSUMER – AND ADDED REVENUE TOTAL SECURITY AND PRIVACY Coming in Q2: F-SECURE F-SECURE KEY F-SECURE SAFE F-SECURE FREEDOME SENSE Bundling enables cross-selling to leverage the power of portfolio, and increase average revenue per customer. 9
Slide 10: Corporate security up by 19% in Q4
CORPORATE SECURITY UP BY 19% IN Q4 CORPORATE SECURITY MANAGED SECURIT Y CYBER SECURITY PRODUCTS SERVICES CONSULTING • Endpoint security product revenue • Sales of F-Secure Radar and Rapid • Cyber security services revenue in in double-digit growth Detection Service developed as very strong, double-d
Slide 11: Expanded offering allows us to expand into new corporate customer segments
EXPANDED OFFERING ALLOWS US TO EXPAND INTO NEW CORPORATE CUSTOMER SEGMENTS Mid-market & Small businesses local enterprises Global enterprises Protection Service for & Business Suite Business F-Secure traditional Rapid Detection strongholds Service F-Secure Radar New opportunities Cyber security serv
Slide 12: Extended offering enables cross-selling and supports product development
EXTENDED OFFERING ENABLES CROSS-SELLING AND SUPPORTS PRODUCT DEVELOPMENT CYBER SECURITY SECURITY EXPERTS TECHNOLOGY Our world-renowned labs research team, Our Live Security-approach combines Our tens-of-millions of security solutions security consultants and ethical hackers the latest human expertis
Slide 13: Our new offering is targeted to the fastest growing segments
OUR NEW OFFERING IS TARGETED TO THE FASTED GROWING SEGMENTS Estimated growth pace in selected corporate security market (%) Most of the F-Secure’s Opportunity with absolute growth in 2016 expanded offering 13
Slide 14: Increasing focus on detection creates new opportunities in the endpoint market
INCREASING FOCUS ON DETECTION CREATES NEW OPPORTUNITIES IN THE ENDPOINT MARKET Endpoint Protection Protection & Business Platforms (EPP) Service for Suite Business market Endpoint Detection & Rapid Detection Response (EDR) Service market “EDR is an addition, not a replacement for other endpoint secu
Slide 15: Several factors continue to drive growth in demand for security
SEVERAL FACTORS CONTINUE TO DRIVE GROWTH IN DEMAND FOR SECURITY Targeted attacks - almost anything € Ransomware for the seems possible cloud era and IoT? The cloud industry grows – vulnerable Emerging attacks with simple encryption for IoT Email continues to be a Governmental popular attack vector c
Slide 16: The opportunity is there, we will invest more to accelerate growth
THE OPPORTUNITY IS THERE WE WILL INVEST MORE TO ACCELERATE GROWTH 2016 2017 Our model works Seize the opportunity Very competitive Boost product portfolio development Fast growing channel More cross-selling 2018-2020 Expand channel Security capabilities best-in-class Recruit best peopl
Slide 17: Outlook
OUTLOOK 2017 Encouraged by the results from Revenue is anticipated to grow from the previous year’s level (2016: EUR our growth investments in 158.3 million) corporate security in 2016, we have decided to make a Operating profit is anticipated to be EUR 8-12 million (2016: EUR 19.2 meaningful ad
Slide 18: Outlook: strategy period 2017-2020
OUTLOOK 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.
Slide 19: Financials Q4 & full year 2016
FINANCIALS Q4 & FULL YEAR 2016 19
Slide 20: Financial statement release basis of preparation
This financial statement release is prepared in accordance with IAS 34 standard Interim Financial Reporting and with accounting principles stated in the annual report 2015. Full year figures have been audited. As of the first quarter of 2015, the personal cloud business is reported as discontinued o
Slide 21: Revenue
REVENUE October–December Revenue increased by 9% y-o-y EURm Total quarterly revenue 42.4m (Q415: 38.9m) January–December Revenue increased by 7% compared to 2015 For the year overall revenue totalled EUR 158.3 million (147.6m) 21
Slide 22: Revenue split
REVENUE SPLIT October–December EURm Revenue from corporate security increased by 19% totalling EUR 17.4 million (14.6m) Revenue from consumer security increased by 3% and was EUR 25.0 million (24.3m) Corporate and consumer security represented 41% (38%) and 59% (62%) of total revenue respectiv
Slide 23: Profitability
PROFITABILITY October–December EURm Operating profit EBIT 6.9m, 16% of revenues (Q415: 5.0m, 13%) Earnings per share (EPS) for continuing operations EUR 0.04 (EUR 0.00) EPS EUR 0.04 (EUR 0.00) for the Group including discontinued operations January–December Operating profit EBIT including th
Slide 24: Fixed costs
FIXED COSTS October–December fixed costs 35.7m (Q415: EURm 33.8m), +6% y-o-y The increase was driven by costs incurred as a result of significant recruitment in corporate security Depreciation and amortization decreased to 1.3m (Q415: 1.4m) Capitalized R&D expenses were 1.2m (Q415: 0.8m) Janua
Slide 25: Deferred revenue
DEFERRED REVENUE October–December Deferred revenue increased by 13% to EUR 54.3m (EUR 48.1m), continuing positive development* EURm 25 *figure shows 4-qtr rolling average deferred revenue
Slide 26: Solid cash position
SOLID CASH POSITION October–December EURm Q4 Cash flow from operations was EUR 9.6m (Q415: 14.3m) F-Secure’s financial position remained solid. Gearing ratio was 122.1% negative (122.4% negative) January–December Cash flow from operations was EUR 21.9m (28.9m) 94,3 26
Slide 27: Number of personnel
2 7 NUMBER OF PERSONNEL F-Secure stated as its target to recruit over a hundred new employees in 2016 to support the Company growth. The company’s headcount at the end of Q416 was 1,026 (+100 from Q415) 1016 1026 950 982 1000 913 926 136 131 137 139 144 147 800 318 325 303 308 600 279 279 400 50
Slide 28: Regional revenue
2 8 REGIONAL REVENUE Growth in most regions in Q4 EURm Nordic region, rest of Europe and North America 20 all grew in Q4 18 Revenue in other regions decreased slightly 16 17.2 15.8 January–December saw growth in all regions 15.6 14 14.0 Revenue in all regions grew compared to year 12 2015 10