HIGH DEMAND FOR CORPORATE SECURITY Interim Report Q1/2016 - PowerPoint PPT Presentation

HIGH DEMAND FOR CORPORATE SECURITY Interim Report Q1/2016 Christian Fredrikson, CEO 1

AGENDA  Highlights from Q1  Market review  Business updates  Outlook  Financials 2

All figures for continuing operations, HIGHLIGHTS Q1 Investments in growth continued  Total revenues increased by 5% to EUR 37.8 million;  corporate security increased by 27% to EUR 14.6 million  consumer security decreased by 5% to EUR 23.2 million  Organic revenue growth was flat, but organic order intake showed a healthy increase  Deferred revenues in strong growth (+11%) thanks to increased new sales  EBIT (IFRS) was EUR 3.2 million, 8% of revenues (5,0 m; 14%); . reflects investments in sales growth and product development, and decline in operator revenue  Cash flow from operations was EUR -1.1 million (4.6 m) ; reflects the repayment of foreign tax credits (3.9 m) on withholding taxes from 2009-2011 11

KEY FIGURES Revenues and EBIT Deferred revenues Eur million Eur million 45 50,0 38,9 40 45,0 37,8 37,2 35,9 35,5 40,0 35 35,0 30 38,2 30,0 36,0 30,9 25 33,5 32,5 25,0 20 20,0 15 15,0 10 10,0 6,0 5,0 5,0 4,0 13,9 5 3,2 12,1 11,3 11,6 11,1 5,0 0 0,0 Q115 Q215 Q315 Q415 Q116 Q115 Q215 Q315 Q415 Q116 Deferred revenue, non-current Deferred revenue, current Revenues EBIT (IFRS) 4

Cash position reflects the KEY FIGURES repayment of foreign tax credits on withholding taxes from 2009- 2011 based on debit decisions by the Finnish tax authority Costs Net cash Eur million Eur million 40 120 35 100 3,0 4,3 35,2 30 2,8 2,5 3,2 7,4 80 6,8 25 6,2 7,4 6,5 20 60 110,2 93 15 94,3 80,5 40 76,3 23,5 22,6 22,0 20,8 20,9 10 20 5 0 0 Q115 Q215 Q315 Q415 Q116 Q115 Q215 Q315 Q415 Q116 Cash position Dividend/ Other Sales & Marketing Reseach & Development Administration 5

CORPORATE SECURITY DRIVING THE MARKET Average annual growth USD billion 120 8-15% 100 CORPORATE SECURITY SERVICES AND CONSULTATION 80 7% 60 CORPORATE SECURITY PRODUCTS 40 20 3% 0 CONSUMER SECURITY 2014 2015 2016 2017 2018 2019 Source: Gartner, March 2016 6

ADVANCED ATTACKS AND THE NEED FOR COMPREHENSIVE SOLUTIONS ARE DRIVING THE SECURITY MARKET Enterprises Mid-size Business Consumers 8

CORPORATE SECURITY INCREASES ITS SHARE OF F-SECURE REVENUES 24,4 24,3 25,0 23,6 23,5 23,6 23,3 23,3 23,2 20,0 14,6 14,6 15,0 13,7 12,2 11,6 11,1 11,0 10,9 10,0 5,0 0,0 2014 Q2 2014 Q3 2014 Q4 2015 Q1 2015 Q2 2015 Q3 2015 Q4 2016 Q1 Corporate Total Consumer Total Note: Some minor re-allocation of revenues between consumer and corporate businesses was made in Q1 2016; revenues from past quarters have been restated to reflect this. 8

CORPORATE RESELLER BUSINESS HIGHLIGHTS FROM Q1 GOING FORWARD  Continued investment in sales Revenues from the corporate Investments now cover Europe more reseller channel were the broadly highest ever for the first quarter  First cyber security product introduced to the reseller channel:  Revenues have now grown (y-o-y) Fujitsu Finland to sell F-Secure Radar for 2 years in a row (vulnerability management solution)  Sales in strong growth across the to enterprise customers in all board in Europe and in Japan Nordics  Protection Service for Business the fastest growing solution, one third of sales 9

F-SECURE RADAR OFFICIALLY PART OF THE CORPORATE OFFERING THE PRODUCT WHAT DOES IT DO? THE CHANNEL THE PRODUCT FEATURES Allows companies to easily F-Secure Radar control and manage IT security risks.  A sophisticated vulnerability scanning, management and reporting service  Helps companies to identify and remediate known vulnerabilities in any platform or web application  Easy-to-use, web-based platform  Third party integration capabilities Radar formerly known as Karhu 10

CYBER SECURITY SERVICES HIGHLIGHTS FROM Q1 GOING FORWARD  Continued sales expansion and Revenues in strong double- product development digit growth  Significant new customers, some  New solution to be launched in new markets for enterprises in Q2:  Recruited tens of new cyber Rapid Detection Service (RDS) security experts since nSense  Service center founded to acquisition support RDS 11

RAPID DETECTION SERVICE LAUNCH IN Q2 12

OPERATOR BUSINESS HIGHLIGHTS FROM Q1 GOING FORWARD  Broadening of offering to Decline in operator revenue largely operators: caused by currency fluctuations Freedome and F-Secure Key and one client in Latin America increasingly part of the partner offering  Revenue decline anticipated to be temporary  Initiatives with partners to  Outlook remains unchanged; operator improve take-up rates and usage: business largely flat in 2016 Work together with partners continues  Expanded product offering to operators  Increased cross-selling functionalities 13

DIRECT CONSUMER BUSINESS HIGHLIGHTS FROM Q1 GOING FORWARD  Partnerships with global device Revenue continues to grow and manufacturers: outpace market growth Now in execution phase; 2016 will show how pre-installations convert to  Increasing contribution from Freedome customers  Partnerships with global device  Sense product development manufacturers into execution phase continues: First deliveries now expected by end of year 14

OUTLOOK FOR 2016 IS UNCHANGED  F-Secure anticipates its overall  EBIT for continuing operations is security revenues to grow in 2016 estimated to be EUR 17-21 million compared to the year before (2015: EUR 20 million). (2015: EUR 148 million). 15

FINANCIALS Q1 / 2016

This interim report is unaudited and prepared in accordance with IAS 34 standard Interim Financial Reporting and with accounting principles stated in the annual report 2015. As of the first quarter of 2015, the personal cloud business is reported as discontinued operations. Consequently, comparison figures related to the statement of comprehensive income have been restated. All figures in the following tables are EUR million unless otherwise stated. 17

REVENUES EURm 45 Q1 Revenues increased by 5% y-o-y  Total quarterly revenues 37.8m 38,9 40 37,8 37,2 (Q115: 35.9m) 35,9 35,5 35 Organic revenues were flat year-on-year, 30 but organic order intake showed healthy growth. 25 20 15 10 6,0 5,0 5,0 4,0 5 3,2 0 Q115 Q215 Q315 Q415 Q116 Revenues EBIT (IFRS) 18

REVENUE SPLIT EURm Revenues from corporate security 24,4 24,3 25,0 23,6 23,6 23,5 23,3 23,3 23,2 increased by 27% totaling EUR 14.6 million (11.6m)  Corporate security represented 39 % 20,0 EURm (Q115: 32%) of F- Secure’s total revenues 14,6 14,6 15,0 Revenues from consumer security 13,7 12,2 decreased by 5% and were EUR 23.2 11,6 11,1 11,0 10,9 million (24.4m) 10,0  Consumer security represented 61% (Q115: 68%) of F- Secure’s total revenues 5,0 0,0 2014 Q2 2014 Q3 2014 Q4 2015 Q1 2015 Q2 2015 Q3 2015 Q4 2016 Q1 Corporate Total Consumer Total 19

PROFITABILITY EURm 18% 7,0 Q1 Operating Profit 6,0 16%  EBIT (IFRS) 3.2m, 8% of revenues (Q115: 5.0m, 6,0 14%) 14% 5,0 5,0  Earnings per share for continuing operations 5,0 EUR 0.01 (EUR 0.04) 12%  4,0 Earnings per share EUR 0.02 (EUR 0.11) 4,0 10% 3,2 8% 3,0 6% 2,0 4% 1,0 2% 0% 0,0 Q115 Q215 Q315 Q415 Q116 EBIT (IFRS) EBIT (IFRS) % 20

COSTS EURm 40 Q1 costs Costs 33.9m (Q115: 30.7m), +10% y-o-y 35  The increase is mainly related to personnel 3,0 4,3 related expenses, external services and costs 30 2,8 2,5 3,2 incurred by the acquired nSense business 7,4  6,8 Depreciations from past capitalized expenses 25 6,2 7,4 6,5 decreased to 1.3m (Q115: 1.6m)  Capitalized R&D expenses were 0.4m (Q115: 20 0.5m) 15 23,5 22,6 22,0 20,8 20,9 10 5 0 Q115 Q215 Q315 Q415 Q116 Sales & Marketing Reseach & Development Administration 21

DEFERRED REVENUES Q1 Deferred revenues increased by 11% to 49.7m (44.9m) EURm 60,0 50,0 40,0 38,2 36,0 30,0 30,9 33,5 32,5 32,0 33,4 31,0 35,2 20,0 10,0 13,9 12,1 11,3 11,6 11,0 11,1 7,3 6,5 4,7 0,0 Q114 Q214 Q314 Q414 Q115 Q215 Q315 Q415 Q116 Deferred revenue, non-current Deferred revenue, current 22

SOLID CASH POSITION EURm Q1 Cash flow from operations -1.1m* (Q115: 4.6m) 120  Cash flow reflected the repayment of foreign tax credits on withholding taxes from 2009-2011 100 based on debit decisions by the Finnish tax 35,2 authority 80  Market value of liquid assets on 31 March 93.0m (31 Dec 2015: 94.3m) 60 110,2 * Including discontinued business 94,3 93 40 80,5 76,3 20 0 Q115 Q215 Q315 Q415 Q116 Cash position Dividend/ Other 23

NUMBER OF PERSONNEL  Number of personnel 950 (Q415: 926; Q115: 841) at the end of the quarter 1000 900 137 147 144 135 800 133 700 303 279 273 279 600 274 500 400 300 510 500 493 490 434 200 100 0 Q115 Q215 Q315 Q415 Q116 Sales and Marketing Research and Development Administration 24

REGIONAL REVENUE EUR million 40,0 37,8 35,9 35,0 30,0 25,0 20,0 16,2 15,4 13,9 15,0 11,5 10,0 5,2 4,9 3,6 5,0 3,1 0,0 Nordic Rest of Europe North America Rest Total Q115 Q116 25