Stonesoft Oyj :STONESOFT CORPORATION INTERIM REPORT FOR JANUARY-MARCH 2013

Stonesoft Corporation Stock Exchange Release 26 April 2013 at 9:15 a.m. STONESOFT CORPORATION INTERIM REPORT FOR JANUARY-MARCH 2013 NET SALES GREW BY 12 PER CENT Stonesoft Corporation's product sales grew by 9% and net sales by 12% compared to the corresponding period in the previous year. Operating result was MEUR -2.2. The comparable figures from the corresponding period in the previous year are in brackets. January-March 2013 - Net sales MEUR 9.2 (8...

Stonesoft Corporation Stock Exchange Release 26 April 2013 at 9:15 a.m.

 

STONESOFT CORPORATION INTERIM REPORT FOR JANUARY-MARCH 2013

 

NET SALES GREW BY 12 PER CENT

 

Stonesoft Corporation's product sales grew by 9% and net sales by 12% compared to the corresponding period in the previous year. Operating result was MEUR -2.2.

 

The comparable figures from the corresponding period in the previous year are in brackets.

 

January-March 2013

- Net sales MEUR 9.2 (8.3), growth 12%

- Product sales MEUR 5.4 (4.9), growth 9%

- Operating result MEUR -2.2 (-0.6)

- Operating result as percentage of net sales -23 (-7)%

- Earnings per share EUR -0.03 (-0.01)

- Operative cash flow MEUR 1.1 (1.4)

- Liquid cash funds at the end of the fiscal period MEUR 8.3 (9.1). The corporate had no interest-bearing debts.

 

 

CEO ILKKA HIIDENHEIMO

The first quarter of the year 2013 was a time of investing in strong growth. As planned and according to our strategy we increased investments in the beginning of the year in sales, marketing and product development. This, together with some postponed deals, resulted in a weaker result.

During the first quarter of the year 2013 Stonesoft's product sales grew by approximately 9% and net sales by approximately 12%.

 

We expanded our operations to new markets, among others to Sweden, Portugal and Belgium. We will continue to invest in making the growth continue by adding resources in our sales and marketing organization as well as in product development. We will raise the competitiveness of our products in vertical sectors important to us, such as in the public sector, teleoperator, military and defense industries. In addition, Stonesoft is actively seeking distribution and OEM partnerships with internet solution providers. Due to this, we will strengthen the suitability of our products to channel partnership business, managed security service providers (MSSPs) and securing cloud services. Our ability to manage hybrid environments provides significant benefits for the development of cloud services. This way various organizations can flexibly build their solutions in the cloud for example with external partners, but still continue to save their business critical information to their own servers and utilize their own environments securely.

 

The research company Gartner, Inc. positioned Stonesoft as a visionary in its latest Magic Quadrant Enterprise Network Firewalls reports. In the IPS Magic Quadrant report, Stonesoft was the only company positioned in the Visionaries quadrant. In its comparison report, Gartner has recognized this aim. The only way to stay ahead of continuously evolving security threats is to invest in research and product development- that is, to be visionary. Stonesoft develops solutions which are able to secure lives and businesses in cyber space.

 

We introduced an updated version of the Evader testing tool at the RSA event in the United States at the end of February. Evader is still able to bypass all next generation firewall, UTM and intrusion prevention solution on the market, except Stonesoft's own security solutions.

 

The Winning Cyber Strategy 2013 top forum we arranged in January brought together leading cyber security experts from Finland and abroad, such as Toomas Hendrik Ilves, the President of Estonia, and the British journalist Misha Glenny, and provided up-to-date information about cyber risk and threats. We can already refer to arms race in cyber security. Cyber security has still been strongly visible in global media and Stonesoft has obtained the status of an internationally recognized expert.

 

 

NET SALES AND RESULT

 

January-March 2013

 

The Group's net sales in the fiscal period were MEUR 9.2 (8.3). Increase compared to the corresponding period in the previous year was MEUR 1.0, or 12%. The operating result (EBIT) was MEUR -2.2 (-0.6) and the result after taxes was MEUR -2.2 (-0.5).

 

Product sales were MEUR 5.4 (4.9), growth 9% compared to the corresponding quarter in the previous year.

 

The geographical distribution of net sales was as follows: Europe 69 (67)%, Emerging Markets (North Africa, Middle East and Latin America) 18 (18)%, North America 12 (14)% and APAC (Asia-Pacific) 1 (1)%.

 

 

FINANCE AND INVESTMENTS

 

At the end of the fiscal period, Stonesoft's total assets were MEUR 25.9 (21.9). The equity ratio was 29 (39)% and gearing (the ratio of net debt to shareholders' equity) was -3.00 (-2.70).

 

The comparable cash flow during the fiscal period was MEUR 1.1 (1.4). The Group has no interest-bearing debt. The consolidated liquid assets at the end of the fiscal period totalled MEUR 8.3 (9.1).

 

Investments in tangible and intangible assets totalled MEUR 0.2 (0.4).

 

 

DEVELOPMENT OF BUSINESS OPERATIONS

 

Main business events in the fiscal period

 

In January Stonesoft published an updated version of the world's first advanced evasion testing tool Evader.

 

In February Stonesoft introduced two new appliance models Stonesoft 1035 and 1065, offering flexibility and increased throughput with an excellent price-performance-ratio.

 

In February Stonesoft FW-1301 obtained the "Recommend" status in the Network Firewall Group Test of the world's leading independent network security research and analyst organization NSS Labs.

 

In February the research company Garner, Inc. positioned Stonesoft as a visionary in its Magic Quadrant for Enterprise Network Firewalls.

 

In March Stonesoft's Intrusion Prevention System (IPS) obtained the highest level security certification CSPN (Certification de Sécurité de Premier Niveau) delivered by the French security agency ANSSI (French Network and Information Security Agency).

 

In March Stonesoft began cooperation with Red River, a national leader in providing IT products and services to federal agencies in the United States. Based on the partnership agreement the companies deliver advanced and cost-effective cyber security solutions to federal and commercial agencies in the United States.

 

 

Main business events after the fiscal period

 

In April, the Annual General Meeting of Shareholders re-elected Ilkka Hiidenheimo, Harri Koponen, Jukka Manner, Timo Syrjälä, Hannu Turunen and Satu Yrjänen as Board members.

 

In April Stonesoft announced it has received the fourth consecutive "Recommend" status from the product tests of the world's leading independent network security research and analyst organization NSS Labs.

RESEARCH AND DEVELOPMENT

 

Stonesoft continued its strong investments in R&D. Investments during the fiscal period totalled MEUR 2.3 (1.8). This represented 22 (24)% of operating expenses.

 

R&D employed 105 (96) persons at the end of 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 63 841 732. Stonesoft or its daughter companies do not own its shares. There were no changes in the share capital.

 

Stock Option Programs

 

The company had two valid stock option programs, Stock Option Program 2008, 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 and Stock Option Program 2012, under which the subscription price is EUR 1.42 for A-series and the total number of stock options to be granted based on this program is 4 500 000 at the maximum. The subscription period of the shares is graded and will end for all 2008 stock options on December 31, 2014 and for 2012 stock options in 2017-2019.

 

Additional information about both option programs is provided by the company's stock exchange releases and web pages.

 

During the fiscal period 40 000 company shares were registered on the basis of the stock option programs.

 

 

DEVELOPMENT OF SHARE PRICES AND TURNOVER

 

In the beginning of the fiscal period on January 1, 2013, the price of Stonesoft share was EUR 1.39 (0.86). At the end of the fiscal period on 31 March 2013 the price was EUR 2.20 (1.42). The highest price was EUR 2.77 (1.78) and the lowest EUR 1.41 (0.87). During the fiscal period the total turnover of Stonesoft shares amounted to MEUR 21.6 (14.7) and 9.4 (11.2) million shares, which is 14.7 (17.6)% of the total amount of the shares. Based on the share price at the end of the fiscal period on March 31, 2013, Stonesoft's market value was MEUR 140.5 (90.2).

 

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 fiscal period, the Group's personnel totalled 265 (232).

 

 

ANNUAL GENERAL MEETING AND AUTHORIZATIONS OF THE BOARD OF DIRECTORS

 

The Annual General Meeting (AGM) of Stonesoft Corporation held after the fiscal period on April 10, 2013 confirmed the financial statements of the fiscal year 1.1.2012-31.12.2012 and granted release from liability for the members of the Board of Directors and the Chief Executive Officer (CEO). AGM decided that no dividends are paid for the fiscal year 2012.

The AGM re-elected Ilkka Hiidenheimo, Harri Koponen, Jukka Manner, Timo Syrjälä, Hannu Turunen and Satu Yrjänen as Board members.

The Board of Directors did not use the authorization granted by the previous AGM that expired at the end of the AGM 2013. The AGM decided on 10.4.2013 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 2014 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 2013, 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. Insecurities related to public economies may have a negative effect on the public sector projects. Stonesoft has no risks related to the order book, because it normally can process incoming orders within a couple of work days.

 

Risks and uncertainties as well as the principles of Stonesoft's risk management are discussed more extensively at the company website and in the Annual Report 2012.

 

 

FUTURE OUTLOOK

 

In 2012, the network security market grew by approximately 10%, and based on estimates by various sources the growth level of the total market will remain at 5-15% during the year 2013. For example, Gartner has estimated that the network security market, without any support or other services, will reach USD 9 Billion in 2013.

 

Stonesoft's comprehensive product offering meets the rapidly developing and changing  security challenges, including the demands brought by cloud services, virtualization  and outsourcing of security.

 

Advanced evasion techniques

 

Stonesoft's freely downloadable Evader testing tool provides organizations with the possibility to see in their own environment that advanced evasion techniques are able to bypass all except Stonesoft's security systems.

 

Due to incorrect technology choices, many competitors have great difficulties in amending their solutions to provide protection against AETs now and in the future.

 

Stonesoft has received the highest possible status in the product tests of the independent research company NSS Labs already for four consecutive times in the product categories most significant to Stonesoft and its customers. In addition, the research company Gartner has positioned Stonesoft as a visionary in both its IPS and Firewall Magic Quadrants. In the IPS Magic Quadrant Stonesoft is the only company who has received the visionary status.

 

Cyber security

 

The discussion about cyber security continues actively around the world and Stonesoft has established its thought leadership position.

 

Estimate

 

Based on Stonesoft's view, these issues will continue to have a positive impact on the company's net sales and profitability and will strengthen its competitiveness and

market position.

 

The company's net sales target for 2013 is MEUR 60 and the net sales target set in the strategy for the year 2014 is approximately MEUR 90. To support this, the company will enter several new markets during 2013 and actively develop partner business.

 

The company expects the operating profit for the full year to improve compared to the previous year.

 

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 - MARCH 31, 2013

 

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 2012. 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 2012. Key indicator calculations remain unchanged.

 

The figures presented in this release are unaudited.

 

 

 

 

 

 

 

 

 

 

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 26 April, 2013 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: [email protected]

 

Mikael Nyberg, CFO, Stonesoft Corporation

Tel. +358 9 476 711

E-mail: [email protected]

 

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

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