Stonesoft Corporation Stock Exchange Release 12 August 2011 at 9:15 a.m.
StoneGate product sales grew strongly
Stonesoft Corporation's StoneGate product sales grew by 53% and net sales by
29% compared to the corresponding period in the previous year. Operating result
remained negative and was MEUR -0.7, which is MEUR -0.5 better than in the
corresponding period in the previous year.
The comparable figures from the corresponding period in the previous year are in
brackets and refer to the figures of continuing operations.
April-June 2011
- Net sales MEUR 6.5 (5.1), growth 29%
- Product sales MEUR 3.3 (2.2), growth 53%
- Operating result MEUR -0.7 (-1.2)
- Operating result as percentage of net sales -12 (-25)%
- Earnings per share -0.01 (-0.02) EUR
- Operative cash flow MEUR -0.5 (0.0)
- Liquid cash funds at the end of the fiscal period MEUR 9.3 (11.5). The
corporate had no interest-bearing debts.
January-June 2011
- Net sales MEUR 13.0 (11.2), growth 16%
- Product sales MEUR 6.9 (5.4), growth 27%
- Operating result MEUR -1.6 (-1.4)
- Operating result as percentage of net sales -12 (-13)%
- Earnings per share EUR -0.02 (-0.02) EUR
- Operative cash flow MEUR 1.2 (0.7)
CEO ILKKA HIIDENHEIMO
During the second quarter of the year 2011, StoneGate product sales grew by 53%
and net sales by 29%. The growth was strong, even though some expected fairly
large orders were postponed. The company increased its investments in customer
acquisition and sales promotion from the previous level, which is why expenses
grew compared to the previous year. These investments are expected to contribute
positively during the second half of the year.
The series of serious security breaches that came to publicity during the first
quarter of the year continued on an almost daily basis during the second quarter
of the year.
Security breaches against Pentagon, Lockheed Marting and Citibank, among others,
demonstrate that the current method of protecting networks is insufficient.
Until now, network protection has largely been based on previous experience and
knowledge; since some protection methods have worked before and are well-known,
their use has continued.
The challenge posed to network security by Advanded Evasion Techniques that were
discovered by Stonesoft has not decreased since our knowledge has grown. In
practice, 24/7 monitoring is useless, if security devices and alarm systems do
not discover attacks.
The paradigm shift of network security is such a serious issue that every
organization with critical or valuable data assets should review their current
security policy and operations at board level as part of risk management in
order to make sure they are up to date.
Previously, while building security devices, the aim has been to optimize speed
at the expense of security, and low-cost special-purpose processors have been
used to maximize performance. The increased efficiency of standard processors,
together with the change of the threat landscape has proven our vision about
dynamic security correct. This has also become evident in tests requiring
extremely high performance and security, where our security systems have
achieved excellent results.
In several competition situations where potential customers have organized
third-party evaluations the measurement results have proven that the
competitiveness of our appliances in handling real-world traffic is excellent.
The nominal speed rates of some competitors drop to a fraction of what has been
reported, for example when the packet size is smaller or when the actual
security features of the appliances are switched on. Similar to what happened
earlier with the so-called engineering work stations, we have now reached the
point where the capacity of standard PC components is the same or even higher
than that of special circuits. From security point of view, standard components
are superior thanks to their modifiability and programmability, enabling swift
reactions to dynamic challenges.
The above-mentioned factors strengthen our view about the necessity of dynamic
security and we see the possibility of strong organic growth in the future.
NET SALES AND RESULT
April-June 2011 (hereinafter 'reporting period')
The Group's net sales in the fiscal period were MEUR 6.5 (5.1). Increase
compared to the corresponding period in the previous year was MEUR 1.4, or 29%.
The operating result (EBIT) was MEUR -0.7 (-1.2) and the result after taxes was
MEUR -0.8 (1.3).
Product sales were MEUR 3.3 (2.2), growth by 53% compared to the corresponding
quarter in the previous year.
The geographical distribution of net sales was as follows: Europe 63 (62)%,
Emerging Markets (Russia, North Africa and Middle East) 22 (11)%, Americas
(North and South America) 12 (19)% and APAC (Asia-Pacific) 3 (3)%.
January-June 2011 (hereinafter 'fiscal period')
The Group's net sales in the fiscal period were MEUR 13.0 (11.2). Increase
compared to the corresponding period in the previous year was MEUR 1.8, or 16%.
The operating result (EBIT) was MEUR -1.6 (-1.4) and the result after taxes was
MEUR -1.4 (-1.3).
Product sales were MEUR 6.9 (5.4), growth by 27% compared to the corresponding
quarter in the previous year.
The geographical distribution of net sales was as follows: Europe 59 (62)%,
Emerging Markets (Russia, North Africa and Middle East) 25 (17)%, Americas
(North and South America) 13 (19)% and APAC (Asia-Pacific) 3 (2)%.
FINANCE AND INVESTMENTS
At the end of the fiscal period, the Group's total assets were MEUR 18.8 (19.0).
The equity ratio was 40 (60)% and gearing (the ratio of net debt to
shareholders' equity) was -2.89 (-1.96).
The comparable cash flow during the fiscal period was MEUR 1.2 (0.7). The Group
has no interest-bearing debt. The consolidated liquid assets at the end of the
fiscal period totalled MEUR 9.3 (11.5).
Investments in tangible and intangible assets totalled MEUR 0.4 (0.2).
DEVELOPMENT OF BUSINESS OPERATIONS
Main business events in the fiscal period
In April, Stonesoft announced it had expanded its partnered offering with
Optimesys, a Finnish specialist company focused on producing information
security services.
In May, Stonesoft introduced two new firewall appliances specifically designed
to meet the security needs of today's most demanding high-capacity environments.
The new StoneGate(TM) FW-5201 and FW-5205 appliances are Stonesoft's latest
addition to its family of modular network security appliances.
In June, Stonesoft introduced the world's first Anti-Evasion Readiness Test(TM)
service. This service tests how well an organization's critical digital assets
are protected against advanced evasion techniques (AETs). The service will be
provided by selected, independent IT service organizations around the world.
In June, Stonesoft made its public website www.stonesoft.com and corporate blog
StoneBlog http://stoneblog.stonesoft.com available over IPv6 to demonstrate
their readiness to help their customers migrate securely into IPv6. Both web
services are IPv6 enabled and protected by StoneGate Firewall/VPN.
In June, Stonesoft introduced a new solution for the mass deployment, tuning and
upkeep of network security. The StoneGate Mass Security solution has been
designed to meet the security needs of small branch and remote offices such as
retail and hotel chains as well as unattended locations, for example ATMs.
In June, Stonesoft announced its StoneGate network security solutions had
received Common Event Format (CEF) Certification from ArcSight, Inc., an HP
company and a leading global provider of security and compliance management
solutions that protect enterprises and government agencies. Stonesoft is one of
the first security vendors worldwide to offer full support for CEF.
In June, Stonesoft encouraged organizations to re-evaluate their existing risk
management and security architecture. Recent phenomena such as Wikileaks,
Stuxnet, Advanced Evasion Techniques and the latest security breaches have
changed the security landscape permanently and acted as wake-up calls also in
the strategic aspect.
In June, Stonesoft introduced the StoneGate Firewall/VPN 5.3 and StoneGate
Management Center 5.3. The new version offers enhanced access control,
authentication and mass security as well as a broad range of additional features
and improvements.
We estimate the above-mentioned operations and achievements to strengthen the
company's competitiveness.
Main business events after the fiscal period
In August ECCT, a leading US-based managed security services provider (MSSP),
will deploy the StoneGate IPS across 50 regional and community banks and credit
unions by end of year. The MSSP has already successfully deployed or is in the
process of deploying the StoneGate IPS solution in 33 financial institutions.
RESEARCH AND DEVELOPMENT
Stonesoft continued its strong investments in R&D. Investments during the fiscal
period totalled MEUR 3.0 (2.9). This represented 23 (25)% of operating expenses.
R&D employed 76 (70) persons at the end of the fiscal period. Stonesoft has
booked 0.3 MEUR R&D funding from Tekes, the Finnish Funding Agency for
Technology and Innovation during the fiscal period.
SHARE CAPITAL AND STOCK OPTION PROGRAMS
Stonesoft has one class of shares and all shares have equal rights. At the end
of the fiscal period, the share capital recorded in the Trade Register was
1 150 574.64 Euros. The number of shares was 63 312 482. Stonesoft or its
daughter companies do not own its shares. There were no changes in the share
capital during the fiscal period.
Stock Option Programs
The company had one valid stock option program, Stock Option Program 2008-2014,
under which the subscription price is EUR 0.30 and the total number of stock
options to be granted based on this program is 3 000 000 at the maximum. The
subscription period of the shares is graded and will end for all stock options
on December 31, 2014.
During the fiscal period no subscriptions were made on the basis of the Stock
Option Program 2008-2014.
DEVELOPMENT OF SHARE PRICES AND TURNOVER
In the beginning of the fiscal period on January 3, 2011, the price of Stonesoft
share was EUR 0.58 (0.70). At the end of the fiscal period on 30 June 2011 the
price was EUR 0.60 (0.72). The highest price was EUR 0.65 (1.19) and the lowest
EUR 0.51 (0.69). During the fiscal period the total turnover of Stonesoft shares
amounted to MEUR 3.8 (17.0) and 6.5 (11.1) million shares, which is 10.3 (19.4)%
of the total amount of the shares. Based on the share price at the end of the
fiscal period, Stonesoft's market value was MEUR 38.0 (45.5).
The company gave no notices in change of ownership during the fiscal period.
ACQUISITIONS AND CHANGES IN GROUP STRUCTURE
No acquisitions were made during the fiscal period and there were no changes in
the Group structure.
PERSONNEL
At the end of the reporting period, the Group's personnel totalled 203 (192).
AUTHORIZATIONS OF THE BOARD OF DIRECTORS
The AGM decided on 13.4.2011 to authorize the Board of Directors of the company
to decide about one or more share issues as well as the issuance of option and
other special rights so that the total number of new shares may be 12 600 000 at
the maximum.
Based on the authorization the Board of Directors may decide on issuance of
shares to the shareholders according to the shareholders' pre-emptive
subscription rights as well as in a directed issuance of shares or stock options
or other special rights in deviation from the shareholders' pre-emptive
subscription rights in case the deviation is justified by a weighty financial
reason for the company, such as financing of an acquisition, other arrangement
concerning the business of the company or development of its capital structure,
or incentive to the company's personnel.
The Board of Directors was authorized to decide on other terms and conditions
related to the share issues and to the issuance of option or other special
rights.
The authorization is in force until the end of the 2012 AGM.
The Board of Directors is not authorized to purchase the company's own shares.
SHORT-TERM RISKS AND BUSINESS UNCERTAINTIES
During the fiscal year 2011, Stonesoft's main risks and business uncertainties
relate to the realization timetable of the sales projects and possible
production disruption of our subcontractors and suppliers. In addition, the
recent political restlessness in North Africa and Middle East may have a
negative impact on the company's business operations in these markets. Also
insecurities related to public economies in the United States as well as in the
European Union may have a negative effect on the public sector projects in these
areas. The company has no risks related to the order book, because it normally
can process incoming orders within a couple of work days.
Stonesoft's risk management and its principles are discussed more extensively at
the company website and in the Annual Report 2010.
FUTURE OUTLOOK
According to the research company Infonetics, the enterprise network equipment
and software market is estimated to grow by 4% during 2011.
Stonesoft's products meet the new security challenges brought by cloud services,
virtualization and outsourcing of security.
Advanced Evasion Techniques
In 2010 Stonesoft announced it had discovered anew network security threat
category, Advanced Evasion Techniques (AETs).
As we have continued our research, this area has become an even more challenging
problem than initially estimated. We have reported additional findings to CERT-
FI, who is in charge of international vulnerability coordination. Due to wrong
technology choices, many competitors seem to have great difficulties in amending
their solutions to provide protection against AETs. Stonesoft estimates that
there will be additional findings for years to come. In June 2011, the company
introduced a tool which security experts can use to help their customers
evaluate their own situation.
The most efficient protection against the threat posed by advanced evasions
techniques is provided by flexible software-based systems, which can detect
advanced evasion techniques and are remotely updated and centrally managed.
Stonesoft's network security solutions fulfill these criteria.
The latest security breaches around the world have made many parties understand
the importance of security and demand organizations to take additional measures
to strengthen their security. Instead of speed or performance, the ability of
security systems to protect organizations' critical data capital and systems has
become increasingly important.
Based on Stonesoft's view, the above mentioned issues will open new business
opportunities for the company, have a positive effect on its net sales and
profitability and strengthen its competitiveness and market position as general
understanding and knowledge about advanced evasion techniques grow. In 2011,
Stonesoft aims for faster-than-market growth of net sales and improved
profitability.
With regard to the development of the turnover and the operating result,
variation is expected between the quarters in comparison to the corresponding
quarter during the previous year as well as to the previous quarter as a
consequence of, among others, long sales cycles and the relatively big impact of
individual deals on the development of net sales and operating result.
SUMMARY OF FINANCIAL STATEMENTS AND NOTES JANUARY 1 - JUNE 30, 2011
Basis of preparation
The Interim Report has been prepared in accordance with the IAS 34 Interim
Reports standard.
The company has adopted certain new or revised IFRS standards and IFRIC
interpretations at the beginning of the financial period as described in the
Financial Statements for 2010. However, the adoption of these new and amended
standards has not yet had an effect on the reported figures in practice. In
other respects, the same accounting policies have been followed as in the
Financial Statements for 2010. Key indicator calculations remain unchanged.
The figures presented in this release are unaudited.
Stonesoft Group
Income Statement 4-6/2011 4-6/2010 1-6/2011 1-6/2010 1-12/2010
(1000 Euros)
Net sales 6 506 5 060 13 015 11 216 24 341
Other operating income 279 219 398 460 847
Materials and services -862 -610 -1 941 -1 445 -3 640
Personnel expenses -4 007 -3 538 -8 038 -7 340 -14 744
Depreciation -124 -108 -248 -215 -437
Other operating expenses -2 540 -2 264 -4 762 -4 112 -9 052
Operating result -748 -1 240 -1 576 -1 436 -2 685
Financial income and expenses 53 21 236 172 217
Result before taxes -695 -1 219 -1 340 -1 264 -2 468
Taxes -62 -44 -93 -73 -221
Result for the accounting period -757 -1 263 -1 433 -1 336 -2 689
Other comprehensive income
Exchange differences on
translating foreign operations -3 37 -16 27 -15
Total other comprehensive income -3 37 -16 27 -15
Total comprehensive income -760 -1 226 -1 449 -1 310 -2 704
Basic earnings per share (EUR),
continuing operations -0,01 -0,02 -0,02 -0,02 -0,04
Diluted earnings per share (EUR),
continuing operations -0,01 -0,02 -0,02 -0,02 -0,04
Stonesoft Group
Balance Sheet (1000 Euros) 30.6.2011 30.6.2010 31.12.2010
ASSETS
Non-Current Assets
Tangible assets 762 506 649
Intangible assets 186 116 112
Other investments 10 10 10
Total 958 632 771
Current assets
Inventories 1 361 1 106 953
Trade and other receivables 7 169 5 699 10 106
Prepayments 64 101 69
Marketable securities 0 21 0
Cash and cash equivalents 9 260 11 487 8 016
Total 17 853 18 415 19 144
Total assets 18 811 19 047 19 915
EQUITY AND LIABILITIES
Equity attributable to equity holders of the
parent company
Share capital 1 151 1 148 1 151
Issue of shares 0 0 0
Share premium account 76 602 76 871 76 603
Conversion differences -967 -910 -951
Reserve for invested unrestricted equity fund 4 751 4 404 4 751
Retained earnings -78 334 -75 654 -76 986
Total 3 202 5 859 4 567
Long-term liabilities
Prepayments *) 3 022 2 589 2 976
Total 3 022 2 589 2 976
Short-term liabilities
Trade and other payables 4 729 3 692 4 571
Prepayments *) 7 685 6 758 7 687
Tax liability 122 91 76
Provisions 52 59 37
Total 12 587 10 599 12 372
Total liabilities 15 609 13 188 15 348
Total equity and liabilities 18 811 19 047 19 915
*) Prepayments contain customers advance
payment of support and maintenance contracts 10 707 9 346 10 663
Stonesoft
Group
Statement of
changes in
equity
(1000 Euros)
Reserve
Issue for invested
Share of Share Conversion unrestricted Retained
capital shares premium differences equity fund earnings Total
Shareholders'
equity at
1.1.2010 1 146 0 76 821 -936 0 -74 346 2 685
Comprehensive -1
income 0 0 0 27 0 -1 336 310
Share premium
termination 0 0 0 0 0 0 0
Directed share
issue 0 0 0 0 4 560 0 4 560
Transaction
costs from
equity 0 0 0 0 -170 0 -170
Stock options
exercised 2 0 51 0 13 0 66
Stock option
expenses 0 0 0 0 0 28 28
Shareholders'
equity at
30.6.2010 1 148 0 76 871 -910 4 404 -75 654 5 859
Reserve
Issue for invested
Share of Share Conversion unrestricted Retained
capital shares premium differences equity fund earnings Total
Shareholders'
equity at
1.1.2011 1 151 0 76 603 -951 4 751 -76 986 4 567
Comprehensive -1
income 0 0 0 -16 0 -1 433 449
Share premium
termination 0 0 0 0 0 0 0
Directed share
issue 0 0 0 0 0 0 0
Transaction
costs from
equity 0 0 0 0 0 0 -1
Stock options
exercised 0 0 0 0 0 0 0
Stock option
expenses 0 0 0 0 0 85 85
Shareholders'
equity at
30.6.2011 1 151 0 76 602 -967 4 751 -78 334 3 202
Stonesoft Group
Cash flow statement (1000 Euros) 1.1.-30.6.2011 1.1.-30.6.2010 1.1-31.12.2010
Cash flow from operating activities
Operating Result -1 576 -1 436 -2 685
Adjustments
Non-cash transactions 57 -65 58
Financial expenses -76 -5 -96
Financial incomes 313 282 464
Change in net working capital 3 079 2 423 481
Taxes paid -102 -73 -221
Total cash flow from operating
activities 1 696 1 126 -1 999
Cash flow from investing activities
Investments in tangible assets -323 -199 -537
Investments in intangible assets -111 -6 -30
Total cash flow investing
activities -435 -205 -566
Cash flow from financing activities
Proceeds from issue of share
capital 0 4 391 4 391
Stock options exercised -1 65 146
Payments of financial leasing
liabilities 0 0 0
Total cash flow from financing
activities -1 4 456 4 537
Change in cash and cash equivalents
Cash and cash equivalents at
beginning of period 8 016 6 210 6 210
Conversion differences -17 70 -17
Changes in the market value of
investments 0 -148 -148
Total cash and cash equivalents at
end of period *) 9 260 11 509 8 016
*) Total cash and cash equivalents
at end of the period
contains pledged securities 467 498 477
Stonesoft Group
Geographical segments 1.1.-30.6.2011 1.1.-30.6.2010 1.1.-31.12.2010
(1000 Euros)
Net sales
Europe 7 726 6 996 14 599
Emerging Markets 3 290 1 849 4 255
Americas 1 641 2 103 4 525
APAC 359 268 961
Total net sales 13 015 11 216 24 341
Operating profit
Europe -818 -535 -661
Emerging Markets -106 35 -169
Americas -472 -799 -1 479
APAC -179 -137 -375
Total operating profit -1 576 -1 436 -2 685
Stonesoft Group
Contingent liabilities 1.1.-30.6.2011 1.1.-30.6.2010 1.1.-31.12.2010
(1000 Euros)
Contingent off-balance sheet
Non-cancellable other leases 2 024 2 245 2 327
Contingent liabilities for the
Company 171 66 94
Stonesoft Group
Quarterly development Q2 / Q1 / Q4 / Q3 / Q2 / Q1 /
(Euro Millions) 2011 2011 2010 2010 2010 2010 2010
Software 0,4 0,4 0,5 0,4 0,3 0,3 1,5
Security appliances 2,9 3,2 3,9 2,5 1,9 2,9 11,2
Services 3,2 3,0 3,1 2,8 2,8 2,8 11,6
Other products 0,0 -0,1 0,0 -0,1 0,1 0,1 0,0
Net sales continuing operations 6,5 6,5 7,5 5,6 5,1 6,2 24,3
Change-% from previous year 29 6 15 -6 -16 21 3
Sales margin 5,6 5,4 6,2 4,7 4,4 5,3 20,7
Sales margin % 87 83 83 84 88 86 85
Operative expenses 6,7 6,4 7,1 5,4 5,9 5,7 24,2
Operating profit (EBITA) -0,7 -0,8 -0,7 -0,6 -1,2 -0,2 -2,7
% of net sales -12 -13 -9 -10 -25 -3 -11
Result before taxes -0,7 -0,6 -0,8 -0,4 -1,2 0,0 -2,5
% of net sales -11 -10 -11 -7 -24 -1 -10
Stonesoft Group
Key ratios 1.1.-30.6.2011 1.1.-30.6.2010 1.1.-31.12.2010
(1000 Euros)
Net sales 13 015 11 216 24 341
Net sales
change-% 16 1 3
Operating result -1 576 -1 436 -2 685
% of net sales -12 -13 -11
Operating result
before taxes -1 340 -1 264 -2 468
% of net sales -10 -11 -10
ROE - %, annualized -74 -63 -74
ROI - %, annualized -64 -58 -65
Equity ratio-% 40 60 49
Net gearing -2,89 -1,96 -1,75
Total Assets 18 811 19 047 19 915
Capital expenditure 435 205 566
Capital disposals 0 0 0
R&D costs 3 006 2 879 5 639
% of net sales 23 26 23
Number of employees
(weighted average) 199 185 191
Number of employees
(end of the period) 203 192 201
Share Specific
Ratios
Earnings per share -0,02 -0,02 -0,04
Equity per share 0,05 0,09 0,07
Dividend 0,00 0,00 0,00
Dividend per share
(EUR) 0,00 0,00 0,00
Dividend / Profit-% 0 0 0
Calculation of indicators
(Profit before taxes - income
Return on equity (ROE) % = taxes) x 100 /
Shareholders' equity + minority
interest (average)
(Profit before extraordinary
Return on invested capital items+interest and other financial
(ROI)% = expenses) x100 /
Balance sheet total - non-interest
bearing debt (average)
(Equity + minority interest) x
Equity ratio % = 100 /
Balance sheet total - advances
received
Interest bearing net debt - cash
in hand and on deposit -
Net gearing = marketable securities /
Equity + minority interest
Profit before taxes - minority
Earning per share (EPS) = interest - income taxes /
Average number of shares adjusted
for dilutive effect of options
Equity per share = Equity /
Number of shares at end of period
FORWARD-LOOKING STATEMENTS
This report contains statements concerning, among other things, Stonesoft's
financial condition and the results of operations that are forward-looking in
nature. Such statements are not historical facts, but rather represent
Stonesoft's future expectations. The company believes that the expectations
reflected in these forward-looking statements are based on reasonable
assumptions. However, these forward-looking statements involve inherent risks
and uncertainties, which could cause actual results or outcomes to differ
materially from those anticipated in the statements. These risks and
uncertainties may include, among other things, (1) changes in our market
position or in the Firewall/VPN and Intrusion detection and protection market in
general; (2) the effects of competition; (3) the success, financial condition,
and performance of our collaboration partners, suppliers and customers;(4) our
ability to source quality components without interruption and at acceptable
prices;(5) our ability to recruit, retain and develop appropriately skilled
employees;(6) exchange rate fluctuations, including, in particular, fluctuations
between the Euro, which is our reporting currency, and the US dollar;(7) other
factors related to sale of products, economic situation, business, competition
or legislation affecting the business of Stonesoft or the industry in general
and (8) our ability to control the variety of factors affecting our ability to
reach our targets and give accurate forecasts.
PRESS CONFERENCE
A press conference for analysts and investors will be held on 12 August, 2011 at
10.30 am at the Stonesoft headquarters, street address Itälahdenkatu 22 A,
00210 Helsinki.
For additional information, please contact:
Ilkka Hiidenheimo, CEO, Stonesoft Corporation
Tel. +358 9 476 711
E-mail: ilkka.hiidenheimo@stonesoft.com
Mikael Nyberg, CFO, Stonesoft Corporation
Tel. +358 9 476 711
E-mail: mikael.nyberg@stonesoft.com
Stonesoft Corporation
Ilkka Hiidenheimo
CEO
This stock exchange release and the presentation material related to this report
are also available at the Stonesoft web site www.stonesoft.com.
Distribution:
NASDAQ OMX Helsinki Ltd
www.stonesoft.com
[HUG#1538052]
STONESOFT CORPORATION INTERIM REPORT FOR JANUARY-JUNE 2011
| Source: Stonesoft
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