Withsecure Oyj

Very good afternoon from Helsinki, Finland. We are VidSecure, and this is our Q4 2024 results release. My name is Laura Viita. I am responsible for the investor relations of VidSecure. We've had a very eventful quarter four as well as the month after the quarter end, and we are happy to be here today sharing all our news and figures with our investors and analysts. So welcome to everybody, also those of you who are following us online today. Today's speakers will be our President and CEO Antti Koskela, who will go through the business, what happened and how that looks like going forward. After Antti, Tom Jansson, the CFO, will present our numbers and results and also share some insights regarding the consulting divestment and what to expect going forward. We will have questions and answers at the end. If you are watching us over the live webcast, you can put in questions at any time. I will take them up with the presenters at the end. So now with that, I'm handing over to the president and CEO of WitSecure, Antti Koskela.

So thank you, Laura, so much. And so truly been busy quarter. And maybe I'll just maybe say to Laura that in addition to all this, we did a sustainability report as one of the first ones, as the first one in the Helsinki Stock Exchange. So that they're really proud on that one. So looking at the highlights of the 2024, So I'll first go through the elements company segment and I'll talk about the underlying strategic drivers and then touch base on the cloud protection for Salesforce and then move over to Tom, like Laura said. So the key metric that we measure is the ARR growth. So we grew six percent year in year and that was impacted by the timing of the discounts and we indicated in our report that Without those timing matters, it would have been 3% points higher. And cloud NRR was 99%, and obviously the same discount topic affected here as well. Following this same logic, Elements Cloud revenue growth was 9%. So the growth in Elements Cloud software continued. And it's very much driven by the full portfolio. So we have launched many things this year in Sphere. They are now all in general availability. The growth is not driven by the old products. It's driven by the full portfolio. So I think it's important to be noticed. And... Managed services, like we reported in the investor day. So we are in the transition towards the mid market. The managed service is slightly below previous year level and due to turn of larger customers. But we have notable progress here also in the mid market, like the recently launched with Secure MDR is picking up here underneath quite nicely. So when we look at the whole segment then together with the on-premise, so we grew 4% year on year, and we are really proud that we clocked in 1.5 million, adjusted a bit down for the quarter, and we're on 4 million full year and delivered on the promise that we have given to the market on the profitability. So that's very important. But when I look at the strategy, with Secure Strategy going forward, it's about focus. It's about focus to the mid-market. It's about understanding that the mid-market needs a different playbook than the large enterprises. So that's number one. Number two is that we work with our partners to increase our addressable market and we reach these mid-market customers in all the segments. And thirdly, it's about proudly becoming a European cybersecurity leader and leading the way there. It calls for a good cybersecurity research and the progress there, adherence to our values in Europe, and also making sure that we cover the regulatory aspects that we have in the society over here. So all these points that are here, so all the offerings we launched in Sphere are now in general availability. Identity security is the last one. It's a main attack vector. It's through identities in the mid-market. We have now solutions for that one. And we have been working with the partners quite a lot during the quarter. And we are quite proud to say also that the full elements is available in AWS Marketplace currently to be purchased digitally. And we also launched our intent to launch with the AWS Sovereign Cloud together with AWS Launch. What is the mid-market focus and what's the security specific to them? So if you look at the recent Gartner Magic Quadrant that came in the quarter, we have an improved position. We improved significantly the position there and we get recommendations. The MITRE is an important evaluation body that evaluates the effectiveness of certain cybersecurity products. And this time they also reported the signal-to-noise ratio, that how laboursome it is to work with the tooling. So we really set records in this one. So our products are known to be easy to use. They are very effective, like we have said. all the time what the mid-market needs. And that's exactly the proof point we got from Mitre. We are way more effective than the large companies that we compete with. And we are a lot more effective than companies like, for instance, like Sophos. I'll take one example. Logbit attack. In our system, when we detect that, it's 17 alerts. In one of these competitors, it's 8,052. So it's a question whether you work minutes and hours or whether you work weeks or months. Nobody can go through those lists. So there's a lot of noise here. And this large company playbook has been historically about getting visibility in everything. They have tons of people, mid-market doesn't have, and that's the problem we are solving. So that's the highlight on the element company. So looking quite positive for the next year because of the growth being driven by the full portfolio. So then hard work pays off. So when you look at our journey with the cloud protection, we were hit by JIRN earlier, as you remember in some of the reports. We have been getting our customer success in place here. So London Expand strategy is successful. So we are able to expand on the installed base quite significantly. We have won also significant new customer logos. Due to the nature of security, we don't disclose them, but they are really good. And the addressable market in Salesforce ecosystem is not limiting our growth. And we brought in 52% year on year growth here in ARR terms. And this is a quite meaningful part now of WeedSecure with 12.8 million. And, you know, we have been having strategic review on this business as well. So we are developing this as an independent business inside WeedSecure. We are really patient with it. And the question for us is that how can we accelerate further? So that's the question when we think about strategy options. So how can we scale it still faster? And that's why we keep it open. But otherwise there's no rush and We enjoy the moment and very good learnings also for the element strategy. Many of the things we have done here in this business are exactly the ones that we talked with you in the investor day that we put a focus on the partners, put a focus on the portfolio, and then we put focus on customer success. Those are the things we are doing now as we speak in the elements and here we have done them and are really happy on the result. So maybe with this one, Tom,

Thank you, Antti, and good afternoon from my part as well. So if we share a little bit more further detail on the different numbers. And we start with the Elements company. As you can see, and Antti mentioned, the key metric cloud ARR grew 6%. We had some timing issues that we will correct in 25, and that would have probably been about 3% higher at the end of Q4. As said, we have had during the year, and we discussed it many times also in the previous quarters, some churn with our existing managed services offering specifically related to large customers who then have chosen a different direction than what we offer. At the same time, new offerings like the VidSecure MDR has been quite nicely starting and we're also winning new customers with our Countercept traditional solution so but that has not didn't fully yet compensate the churn that we had experienced during the year. This is mainly in terms of geographical impact is mainly in the UK and US. As I said, 99% NRR, we were hit a little bit there also by the discount timings, but that of course then will be corrected going forward. And our on-premise revenue declined as was expected and has been the trend and so on that we've been seeing many quarters already. And as I said, we are quite pleased with our EBITDA performance at the end of the year and full year for the Elements company, reaching 1.5 in Q4 and then 4 million on a full year basis. Then I said cloud protection for Salesforce. A lot of work has been done there. Great turnaround from back to growth. And we have seen during the year a great, a lot of work, but then also a good focus and results. And therefore we ended up with over 50% growth. We also, our NRR here has been, is back over 120%, which is also what we are expecting. And as I said, this is a business where the typical land and expand strategy really has demonstrated its strength. So in many cases, as these are large customers, we go in with a smaller part of the customer and offer there and then it expands throughout the organization. And we've seen many, many good examples of this during 24 and are, of course, very, very pleased about that. And we can see that the chosen strategy works. Then for the last time, we're still going to go through the cybersecurity consulting as a segment, as it has been. And from a revenue perspective, you know, of course, was a bit disappointing by reaching only 8.6 in Q4 24. Mainly if you look at the comparison to the previous year, In Q4 23, US was going very strong for us then. A significant customer there had a lot of work, less this year though. So there's some seasonality also in that. And also in Denmark, we have experienced some lower revenue during 24. However, we have also done a lot of of transformative initiatives also in our consulting during 24 and made sure for instance that our sales transformation and as well as looking at our cost structure and trying to manage our cost closer to the business levels and therefore really happy also to see that despite the low revenue in Q4 our EBITDA was about 900k positive so clearly you can see that the trend is right and And I believe we built a good foundation for the future for consulting also for the next owner and so on. And as you all hopefully know, and if you don't, we signed an agreement to divest it with a new owner called Next from Sweden. And therefore also, of course, we have now in this annual report, thank you for treating this segment as discontinued operations, which makes the numbers a bit more challenging than normal to follow, but hopefully we have been able to present them so that you can make sense out of them. But if I just very quickly go through the divestment. So we signed the agreement on the 23rd of January with a Swedish investment company called Next. The enterprise value was 22 and a half, and that's the basis for how we made a decision. Then within that, there was a segregation within a fixed fee that became payable at closing, which we expect to happen in Q2. And then 40% will be paid on different metrics than during the first two years, where we will, of course, we have a mutual interest to make sure that the business continues on a favorable trend, at least in that the end of 24 showed. And we are confident that we built a good foundation for that as well. So at this point then, of course, then looking at the EV, then we also valued our balance sheet based on that. And we did a further 30 million impairment of the goodwill at the end of Q4. And here we also in the table below try to demonstrate how this kind of impacts our P&L also for Elements Company. And one of the things, of course, to note here is that there is a 1.5 million of costs that are group functions that will be allocated back to Elements Company. We don't see this as a big issue and we will review and make decisions to and being prepared for this already. So among many things, we will look at our and already have decided today also some actions around, for instance, our facilities globally that will help and reduce this cost going forward. And we further review on what we can do. And we have pretty good plans already ready for that. So we don't expect this to have a major impact on the Elements company this year either. Then if you look at the overall profitability and now this is the continued operations P&L. So that means that this is the elements company plus the cloud protection for Salesforce and The revenue of that was about 116% for the full year, so 6% growth. Then if you look at it from that perspective, gross margin pretty much on the same level. Then, as you can see on the cost side, of course, quite a bit of reductions as we have restructured the company in 2023 and found a new reset our cost structure levels, I would say, in 2023. And therefore, maybe to point out on the last line, combined operations adjusted EBITDA. So we did almost a 20 million improvement year over year in EBITDA, which, of course, for a this sizeable company is quite a significant change. But this is the kind of the overall situation with our finances for 2024. Then if we look at our new outlook for this year, so one of the things that of course has changed now, we are with consulting going out from the company. We are a subscription company and therefore also moving our outlook to more that direction as well as we are doing now a separate guidance for our CPSF and Elements company. For the Elements company, we expect our ARR to grow 10 to 20% from the end of this year, 24. which was 83.3 million as a starting point. And then on the EBITDA, we expect to be between 3% and 7% of revenue during 2025. Then for the ARR, for cloud protection ARR, we are guiding that we will grow by 20% to 35%. from end of 2024, and that is what we expect for CPSF at this point. And as mentioned, cybersecurity consulting will be divested during 2025. Then as a last reminder for those who may not have seen our investors day for the next two years, we set our medium term financial targets to be a rule of 30 plus companies. So we expect us to be over 30 in that respect in 27. And then to remind what the components of this is, is the percentage revenue growth combined with the adjusted EBITDA percentage of revenue. And that combination we expect to be over 30 in a couple of years time. And that's what we are determined driving the company forward in the next two years or so. So this was a brief overview of the numbers and I will call back Laura to talk a little bit about our reporting and then we go to Q&A.