F-Secure (FSC1V) Q3 2024 earnings summary

Executive summary

• Revenue grew 3.5% year-over-year in Q3 2024 to EUR 36.3 million, with direct business up 5.2% and partner business up 3.0%.

• Profitability exceeded expectations, with adjusted EBITA up 14.4% to EUR 14.6 million (40.3% margin), driven by lower costs and higher efficiency.

• Transformation process initiated to focus on growth, cost savings, and customer-centricity, including leadership changes and new roles.

• Product innovation included the launch of Scam Protection and a new Total version, both receiving positive market feedback.

• Direct channel outperformed partner channel in Q3 growth, supported by strong eCommerce billings and higher ARPU.

Financial highlights

• Q3 2024 revenue: EUR 36.3 million (+3.5% YoY); YTD revenue: EUR 109.2 million (+16.9% YoY).

• Adjusted EBITA margin reached 40.3% in Q3; YTD adjusted EBITA: EUR 40.5 million (37.1% margin).

• Gross margin for Q3: 85.9%–86.4%, slightly up sequentially but below historical highs due to embedded business mix.

• Cash conversion YTD improved to 75% (up from 59.9%); cash at end of September: EUR 13.5 million.

• Net debt at EUR 165.4 million; leverage ratio at 3.1x, trending toward 2.5x target.

Outlook and guidance

• 2024 revenue guidance narrowed to EUR 144–147 million; adjusted EBITA forecast at EUR 50–53 million.

• Medium-term targets: revenue above EUR 200 million by 2026, adjusted EBITA margin above 42%, leverage below 2.5x.

• Lookout consumer BU deferred revenue to reduce 2024 revenue by EUR 1.5 million and EBITA by EUR 0.5 million.

• Lower R&D capitalization in Q4 expected to negatively impact profitability; limited Q4 growth expected.

• Tier 1 partnership benefits anticipated in 2025 and beyond, not impacting Q4.