WithSecure Corporation, Financial statement release 1 January - 31 December 2023, 13 February 2024 at 8.00 EET
WithSecure financial statement release 2023: First break-even and cash-flow positive quarter since the demerger
Highlights of October - December 2023 ("fourth quarter")
- Annual Recurring Revenue (ARR)1 for cloud products2 increased by 8% to EUR 86.8 million (EUR 80.2 million)
- Cloud ARR increased from previous quarter by 7%
- Net Revenue Retention for cloud products was 99%
- Revenue from cloud products increased by 13% to EUR 21.2 million (EUR 18.7 million)
- Revenue from on-premise products decreased by 10% to EUR 5.9 million (EUR 6.6 million)
- Revenue from cyber security consulting decreased by 2% to EUR 10.8 million (EUR 11.1 million)
- Adjusted EBITDA was EUR 0.2 million (EUR -6.0 million)
- Items affecting comparability (IAC) of EBITDA were EUR -5.6 million (EUR +0.9 million). Of this, approximately EUR -4.5 million relates to the restructuring announced in the fourth quarter of 2023 and EUR -1.0 to strategic projects.
Highlights of January - December 2023
- Revenue from cloud products increased by 19% to EUR 81.9 million (EUR 68.7 million)
- Revenue from on-premise products decreased by 10% to EUR 24.4 million (EUR 27.2 million)
- Revenue from cyber security consulting decreased by 6% to EUR 36.6 million (EUR 38.8 million)
- Adjusted EBITDA was EUR -16.1 million (EUR -23.2 million - Estimated comparable EBITDA3)
- Items affecting comparability (IAC) of EBITDA were EUR -9.0 million (EUR -3.3 million). Of this, EUR -8.9 million related to restructuring activities of the first and last quarter, EUR +1.4 million to valuation of earn-out from previously divested businesses and EUR -1.4 million to strategic projects.
(1) Annual recurring revenue (ARR) of cloud products is calculated by multiplying monthly recurring revenue of last month of quarter by twelve. Monthly recurring revenue includes recognized revenue within the month excluding non-recurring revenue
(2) Cloud products are Elements, Cloud Protection for Salesforce and Managed Services
(3) Estimated comparable EBITDA is used for previous periods to ensure comparability. For explanation, see Note 6 (Reconciliation of alternative performance measures)
Outlook for 2024
Annual recurring revenue (ARR) for Elements Cloud products and services will grow by 10-20 % from the end of 2023. At the end of 2023, Elements Cloud ARR was EUR 78.4 million.
Revenue from Elements Cloud products and services will grow by 10-16 % from previous year. Previous year revenue from Elements Cloud was EUR 73.7 million.
Total revenue of the group will grow by 6-12 % from previous year. Previous year revenue of the group was EUR 142.8 million.
Adjusted EBITDA of full year 2024 will be positive.
Bridge to 2023 Cloud revenue
Cloud revenue, as published in financial year 2023, includes Elements Cloud products and services and Cloud Protection for Salesforce (CPSF) product. The split of 2023 revenue is the following:
| Q1 23 | Q2 23 | Q3 23 | Q4 23 | 2023 total | |
| Elements Cloud products and services | 17.9 | 18.1 | 18.5 | 19.2 | 73.7 |
| CPSF | 2.0 | 2.2 | 2.0 | 2.0 | 8.2 |
| Cloud revenue (published) | 19.9 | 20.3 | 20.5 | 21.2 | 81.9 |
CEO Juhani Hintikka
In the last quarter of 2023, WithSecure reached its first ever profitable and cash-flow positive quarter: fourth quarter adjusted EBITDA was EUR 0.2 million (EUR -6.0 million) and operating cash flow EUR 2.7 million (EUR -3.5 million). Improving profitability further will be a focus area for us also in 2024. We are pleased to see the transformation journey starting to deliver results.
WithSecure met its financial outlook, with the exception of our Annual Recurring Revenue (ARR) growth target. Total revenue of the fourth quarter grew by 4 % from previous year and was EUR 38 million (EUR 36.4 million). Cloud revenue grew by 13 % and was EUR 21.2 million (EUR 18.7 million). In cloud ARR, we did not reach a similar stretch as in the end of 2022, and the ARR growth remained at 8 % year-on-year.
Cloud revenue grew in all major products year-on-year. Of our main markets, revenue grew in most geographic regions. We continued a strong development in France and DACH (Germany, Austria, Switzerland) area. In UK and some countries in Nordics, the growth development did not meet our expectations.
The Cloud Protection for Salesforce revenue grew from previous year, and several international enterprise customers have selected the product to protect their Salesforce content. As part of the strategy update in the fourth quarter, we announced that a strategic review will be initiated, to explore alternatives for accelerating the CPSF business.
Cyber security consulting revenue decreased by 2% to EUR 10.8 million (EUR 11.1 million). The revenue and profitability improvement from previous quarters of 2023 are partly resulting from the systematic efforts taken by the team during 2023, to improve coordination between customer demand and resourcing of the work. As part of the updated strategy, we announced that the cyber security consulting will be established as an independent unit serving large enterprise customers in US, Europe, and Asia. It will continue to build a world-leading offensive security consultancy. A process has been initiated to explore strategic options for the cyber security consulting business.
In October, we announced an updated company strategy. Going forward, WithSecure will focus on serving mid-market customers with the Elements Cloud portfolio and scalable co-security services through the partner channel. Value adding partners are key to reaching the mid-market customers, and the updated strategy enables WithSecure to focus on and further develop its core differentiators: Elements Cloud technology platform, co-security services and the comprehensive partner approach the company is known for. In 2024, we plan to introduce new Exposure management capabilities in the Elements portfolio and leverage AI to a larger extent than before. I believe that the combination of our own in-house software, complemented by world-class supporting services that will become available to all our partners and customers according to their needs, will be a strong differentiating factor for WithSecure in the cyber security market.
Since the demerger of F-Secure in June 2022, WithSecure has gone through a large transformation of its strategy, structure, and financials. We will work hard in 2024 to return the company on the strong growth path, while improving the profitability towards the targeted level.
Financial performance
| (mEUR) | 10-12/2023 | 10-12/2022 | Change % | 1-12/2023 | 1-12/2022 | Change % |
| Revenue | 38.0 | 36.4 | 4 % | 142.8 | 134.7 | 6 % |
| Cloud-based security products | 21.2 | 18.7 | 13 % | 81.9 | 68.7 | 19 % |
| On-premise security products | 5.9 | 6.6 | -10 % | 24.4 | 27.2 | -10 % |
| Cyber security consulting | 10.8 | 11.1 | -2 % | 36.6 | 38.8 | -6 % |
| Cost of revenue | -10.4 | -12.6 | 17 % | -42.6 | -47.0 | 9 % |
| Gross Margin | 27.6 | 23.8 | 16 % | 100.2 | 87.7 | 14 % |
| of revenue, % | 72.7 % | 65.4 % | 70.2 % | 65.1 % | ||
| Other operating income | 0.4 | 0.7 | -42 % | 1.4 | 2.3 | -39 % |
| Operating expenses | -27.8 | -30.5 | 9 % | -117.7 | -116.7 | -1 % |
| Sales & Marketing | -15.7 | -21.1 | 26 % | -68.1 | -79.1 | 14 % |
| Research & Development | -8.8 | -6.7 | -31 % | -36.3 | -28.4 | -28 % |
| Administration | -3.3 | -2.6 | -24 % | -13.3 | -9.2 | -44 % |
| Adjusted EBITDA | 0.2 | -6.0 | 103 % | -16.1 | -26.7 | 40 % |
| of revenue, % | 0.5 % | -16.5 % | -11.3 % | -19.8 % | ||
| Items affecting comparability (IAC) | ||||||
| Other items | -1.0 | -1.4 | ||||
| Restructuring | -4.5 | -8.9 | ||||
| Divestments | 1.2 | 100 % | 1.4 | -1.5 | 193 % | |
| Demerger | -0.3 | 100 % | -1.8 | 100 % | ||
| EBITDA | -5.4 | -5.1 | -5 % | -25.1 | -29.9 | 16 % |
| of revenue, % | -14.1 % | -14.0 % | -17.6 % | -22.2 % | ||
| Depreciation & amortization, excluding PPA | -2.6 | -2.7 | -1 % | -10.2 | -10.1 | -1 % |
| Impairment | 0.0 | -6.2 | ||||
| PPA amortization | -0.6 | -0.6 | 0 % | -2.4 | -2.5 | 4 % |
| EBIT | -8.6 | -8.4 | -3 % | -43.9 | -42.6 | -3 % |
| of revenue, % | -22.7 % | -23.0 % | -30.7 % | -31.6 % | ||
| Estimated comparable EBITDA | 0.2 | -6.0 | 103 % | -16.1 | -23.2 | 31 % |
| of revenue, % | 0.5 % | -16.5 % | -11.3 % | -17.3 % | ||
| Adjusted EBIT | -2.4 | -8.7 | 72 % | -26.3 | -36.8 | 28 % |
| of revenue, % | -6.4 % | -23.8 % | -18.4 % | -27.3 % | ||
| Result for the period (Discontinued operations) | 468.5 | 100 % |
| (mEUR) | 10-12/2023 | 10-12/2022 | Change % | 1-12/2023 | 1-12/2022 | Change % |
| Earnings per share, (EUR) (continuing operations) | -0.07 | -0.04 | -49 % | -0.23 | -0.22 | -5 % |
| Deferred revenue | 66.9 | 68.6 | -2 % | |||
| Cash flow from operations before financial items and taxes | 2.7 | -3.5 | 177 % | -19.9 | -14.1 | -40 % |
| Cash and cash equivalents | 36.6 | 55.1 | -34 % | |||
| ROI, % | -27.5 % | -22.5 % | -22 % | -30.5 % | -30.5 % | 0 % |
| Equity ratio, % | 73.3 % | 79.0 % | -7 % | |||
| Gearing, % | -22.2 % | -39.9 % | 44 % | |||
| Personnel, end of period | 1,087 | 1,295 | -16 % |
Events after period-end
No material changes regarding the company's business or financial position have taken place after the end of the quarter.
Additional information
This is a summary of WithSecure's interim report 1 January - 31 December 2023. The full report is a PDF file attached to this stock exchange release. Full report is also available on the company website.
Webcast
WithSecure's CEO Juhani Hintikka and CFO Tom Jansson will present the results in a webcast starting at 14.00 EET. The webcast will be held in English and can be accessed at
https://withsecure.videosync.fi/2024-q4
Questions in written format are requested in the webcast portal. Presentation material and the webcast recording will be available on the company website
Materials | Investor Relations | WithSecure
Financial calendar
WithSecure will publish its financial information in 2024 as follows:
- 24 April 2024: Interim Report for January-March 2024
- 16 July 2024: Half-Year Report for January-June 2024
- 23 October 2024: Interim Report for January-September 2024
WithSecure observes at least a three-week (21 days) silent period prior to publication of financial reports, during which it refrains from engaging in discussions with capital market representatives or the media regarding WithSecure's financial position or the factors affecting it.
The Annual General Meeting is scheduled for Wednesday, 20 March 2024. The Board of Directors will convene the meeting.
Contact information
Tom Jansson, CFO
Laura Viita, VP, Controlling, investor relations and sustainability
+358 50 487 1044
investor-relations@withsecure.com
