F-Secure Financial Statement Release 2023: Ending the year on a positive note
Highlights of October–December 2023 (Q4)
- Revenue increased by 30.6% to
EUR 36.9 million (EUR 28.3 million ). Organic growth was 2.9%.- Revenue from Partner Channel increased by 33.6% to
EUR 30.1 million (EUR 22.5 million ), organic growth was 4.2% - Revenue from Direct Channel increased by 19.1% to
EUR 6.8 million (EUR 5.7 million ), organic growth was -2.6%
- Revenue from Partner Channel increased by 33.6% to
- Adjusted EBITA was
EUR 11.7 million (EUR 9.8 million ), 31.7% of revenue (34.6%) - Items affecting comparability (IAC) for Adjusted EBITA were
EUR -1.9 million (EUR 0.0 million ) and almost entirely consisted of costs related to restructuring and change negotiation activities announced inOctober 2023 . - Purchase price allocation (PPA) amortizations were
EUR -2.0 million . - Earnings per share (EPS) was
EUR 0.02 (EUR 0.04 ). Earnings per share excluding PPA amortization wasEUR 0.03 (EUR 0.04 ) 1). - Cash flow from operating activities before financial items and taxes was
EUR 17.4 million (EUR 13.0 million ). - During the quarter
F-Secure conducted group-wide change negotiations to restructure the company’s global operating model and personnel. As a result of the change negotiations and other measures, 56 employments inF-Secure would to be terminated, of which 39 inFinland .
Highlights of January–December 2023
- Revenue increased by 17.4% to
EUR 130.4 million (EUR 111.0 million ). Organic growth was 1.7%.- Revenue from Partner Channel increased by 19.4% to
EUR 105.1 million (EUR 88.1 million ), organic growth was 2.6% - Revenue from Direct Channel increased by 9.9% to
EUR 25.2 million (EUR 23.0 million ), organic growth was -1.7%
- Revenue from Partner Channel increased by 19.4% to
- Adjusted EBITA was
EUR 44.6 million (EUR 43.9 million ), 34.2% of revenue (39.6%). - Items affecting comparability (IAC) for Adjusted EBITA were
EUR -8.0 million (EUR -3.8 million ), following the acquisition of the Lookout consumer security business and one-off costs related to the restructuring and change negotiation activities. - Purchase price allocation (PPA) amortizations were
EUR -4.7 million . - Earnings per share (EPS) was
EUR 0.13 (EUR 0.17 ). Earnings per share excluding PPA amortization wasEUR 0.15 (EUR 0.17 ) 1). - Cash flow from operating activities before financial items and taxes was
EUR 37.6 million (EUR 44.4 million ). - Net debt amounted to
EUR 177.4 million (-19.3) and leverage was 3.6x.2) - The Board of Directors proposes a dividend of
EUR 0.07 per share (55% of the group January–December 2023 net profit), to be paid in two instalments.
1) From the third quarter of 2023,
2) Leverage (Net debt/Adjusted EBITDA) for the last 12 months includes Lookout consumer business unit EBITDA on an illustrative basis as if the acquisition had been made on the first day of the period in question.
As announced on
Outlook for 2024
Growth:
Profitability: The group’s adjusted EBITA is expected to be in the range of EUR 48–54 million.
Background for the outlook:
F-Secure expects the consumer cyber security market to grow mid-single digit CAGR between 2024-2026*. The growth may be moderated due to uncertainties we see around consumer sentiment in certain markets resulting also Service Providers, especially Communication Service Providers being cautious in their investment priorities.- Biggest organic growth driver is Total and Total conversion within the partner channel; within Direct Business focus will be on retention, and marketing investments for paid customer acquisition will be lower than previously.
F-Secure continues investing (both OPEX and CAPEX) in Embedded Security capabilities including Tier 1 capabilities and - relationships, which are expected to boost growth in medium term.- Lookout consumer BU is now included for the full year, compared to June to December (7 months) in 2023.
- Lookout consumer BU post-acquisition related deferred revenue is fair valued according to IFRS reporting and will be lower compared to revenue recognised by Lookout consumer BU for those advance payments. The negative revenue impact included in the outlook is estimated to be approximately
EUR 1.5 million in 2024, and negative EBITA-level impact in the outlook approximatelyEUR 0.5 million , respectively.
* Industry analyst views such as Gartner and IDC, and
Financial targets
Medium term financial targets of
- Growth: Total revenue of more than
EUR 200 million by 2026 - Profitability: After initial growth investments, adjusted EBITA margin of above 42%
- Dividend Yield: Around or above 50% of net profit on an annual basis.
- Leverage: Net debt/adjusted EBITDA ratio below 2.5x, excluding temporary impact from acquisitions.
Financial performance
EUR million | 10−12/2023 | 10−12/2022 | Change % | 1−12/2023 | 10−12/2022 | Change % |
Revenue | 36.9 | 28.3 | 30.6% | 130.4 | 111.0 | 17.4% |
Partner channel | 30.1 | 22.5 | 33.6% | 105.1 | 88.1 | 19.4% |
Direct channel | 6.8 | 5.7 | 19.1% | 25.2 | 23.0 | 9.9% |
Cost of revenue | -5.1 | -2.4 | 115.1% | -16.0 | -9.3 | 71.5% |
Gross Margin | 31.8 | 25.9 | 22.9% | 114.3 | 101.7 | 12.5% |
% of revenue | 86.2% | 91.6% | 87.7% | 91.6% | ||
Other operating income | 0.1 | 0.3 | -49.6% | 0.8 | 1.1 | -22.9% |
Operating expenses1) | -20.0 | -16.1 | 24.3% | -69.6 | -58.3 | 19.5% |
Sales & Marketing | -9.3 | -6.9 | 36.0% | -33.6 | -29.3 | 14.8% |
R&D | -7.1 | -3.5 | 101.0% | -23.2 | -15.1 | 54.2% |
Administration | -3.6 | -5.7 | -37.2% | -12.8 | -13.9 | -8.2% |
Adjusted EBITDA1) | 12.0 | 10.0 | 19.3% | 45.7 | 44.5 | 2.6% |
% of revenue | 32.4% | 35.5% | 35.0% | 40.1% | ||
Adjusted EBITA1) | 11.7 | 9.8 | 19.7% | 44.6 | 43.9 | 1.5% |
% of revenue | 31.7% | 34.6% | 34.2% | 39.6% | ||
Items affecting comparability (IAC)2) | -1.9 | -8.0 | -3.8 | 111.4% | ||
Depreciation & amortization, excl. PPA amortization | -1.0 | -0.6 | 68.0% | -3.5 | -2.0 | 79.2% |
PPA amortization | -2.0 | -4.7 | ||||
EBIT | 7.1 | 9.4 | -24.9% | 29.5 | 38.8 | -23.9% |
% of revenue | 19.1% | 33.3% | 22.6% | 34.9% | ||
Earnings per share ( | 0.02 | 0.04 | -53.5% | 0.13 | 0.17 | -25.9% |
Earnings per share, excluding PPA amortization ( | 0.03 | 0.04 | -30.2% | 0.15 | 0.17 | -13.6% |
Shareholders’ equity per share, EUR | 0.19 | 0.14 | ||||
Operating cash flow | 13.2 | 10.7 | 23.1% | 30.1 | 36.4 | -17.2% |
Cash conversion % | 141.2% | 108.1% | 81.2% | 96.2% | ||
Deferred revenue | 25.6 | 20.9 | 22.3% | |||
Net debt (+) / Net cash (-) | 177.4 | -19.3 | ||||
Net debt/Adjusted EBITDA4) | 3.6 | -0.4 | ||||
Gearing, % | >100% | -63.0% | ||||
Equity ratio, % | 12.0% | 39.6% | ||||
Personnel at the end of the period | 524 | 376 | 39.4% |
The key figures and other financial information are presented on a carve-out basis for January-
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 average number of shares during the reporting period.
4) Net debt/Adjusted EBITDA for the last 12 months includes Lookout consumer business unit EBITDA on an illustrative basis as if the acquisition had been made on the first day of the period in question.
The year 2023 was the second consecutive year of big changes for
Under the hood, the year 2023 has been about developing and assuming full control of our core technology platforms and business infrastructure following the demerger. These projects were completed on schedule as a result of almost two years of consistent work. We also dedicated significant effort to upgrading
It is fair to say that we entered 2023 with higher expectations and ambitions for growth and profitability. Our consumer cyber security business had experienced consistent revenue growth in previous years, a record number of new partner acquisitions in 2022, renewed offering and brand launches scheduled for early 2023, along with increased marketing investments. However, these were not enough to counter weak consumer sentiment and service provider reticence to expand into new security services amidst consumer challenges and higher interest rates.
Fourth quarter revenue increased by 30.6% amounting to
Partner Business continued on a steady path during the fourth quarter, with three new partner signings and nine agreements with existing partners. Among others, two Nordic Communications Service Providers (CSP) signed up for Total conversion, as well as two Central European CSPs. Two CSPs were signed up for Network Security (DNS) and new partner, Celcom Digi, which is the largest CSP in Malaysa agreed to adopt Total as their consumer security offering. Focus in the Partner Business has been on the conversion of existing partners and their customers from separate
In the second half of 2023 we dedicated significant bandwidth to upgrade our partners' services to run on our latest technology platforms, operating systems and app versions. During the fourth quarter we implemented an agile product creation process that will drive faster value creation in the form of, for instance, novel scam protection capabilities and advances in customer experience. Finally, we strengthened our capabilities across the line to win and serve Tier 1 partners - investments that continue in the new year, especially during the first half of the year, and are expected to bear fruit starting during the latter part of 2024.
Already towards the end of the third quarter we saw some early signs of demand recovery and increased market activity in Direct Business, and I am happy to confirm that this positive trend continued during the remainder of the year, powered by strong renewals. In the third quarter of 2023 we decreased paid customer acquisition investments in Direct Business as those were not generating expected returns. Subsequently, in the fourth quarter we took several steps to boost sales, such as price adjustments, launch of free tools, and content driven activities across non-paid channels. While new sales continues to face a headwind in Direct Business, we will apply the same principle in 2024 – i.e. limited paid acquisition while boosting organic demand creation.
In October we initiated change negotiations to enable continued growth investments while securing a solid financial position. The change negotiations were completed in mid-December with 56 roles terminated globally. Alongside change negotiations we reorganized our global operating model and made some group Leadership Team appointments. Mikko Kestilä was appointed Senior Vice President, Services and member of the F-Secure Leadership Team.
The market sentiment remains volatile, with some variation across geographies. The market demand in
Significant events during the review period
Change negotiations
On
The estimated annual cost savings of around
Changes in the leadership team
On
Significant events after the review period
On
Board of Directors’ proposal for the distribution of profit
According to the company’s dividend policy
No material changes have occurred in the company's financial position since the end of the financial year.
Additional information
This is a summary of F-Secure Corporation’s Financial Statement Release January 1–December 31, 2023. The full report is a PDF file attached to this stock exchange release. Full report is also available on the company website at www.investors.f-secure.com.
Webcast
Analysts following
Financial calendar in 2024
In 2024,
- Interim Report for January–March 2024 on Friday
26 April 2024 - Half-year Financial Report for January–June 2024 on Thursday
18 July 2024 - Interim Report for January–September 2024 on Thursday
24 October 2024
The Annual General Meeting planned to be held on
For further information, please contact:
Sari Somerkallio, Chief Financial Officer
tel. +358 40 3569251
investor.relations@f-secure.com
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