Strong first half performance; full year revenue outlook at the upper end of guidance
LONDON, Aug. 12, 2020 Avast plc, together with its subsidiaries ('Avast', 'the Group' or 'the Company'), a leading global cybersecurity provider, announces its results for the six-months ended 30 June 2020.
Ondrej Vlcek, Chief Executive of Avast, said:
"Avast has demonstrated its business resilience during the Covid-19 outbreak. Our overall operational and financial performance has been strong, aided by the work-from-home trend that has driven an increase in online consumer activity and product engagement.
"We have prioritised the health and wellbeing of our employees while continuing to provide high levels of user and customer support. The Group donated $25m to science and technology initiatives to help combat Covid19, including $12m to the Covid-19 Therapeutics Accelerator, an initiative of the Bill & Melinda Gates Foundation, and $8m to the Coalition for Epidemic Preparedness Innovations. I am also immensely proud of our people who have worked tirelessly to play valuable roles in local community aid projects worldwide.
"Avast's mission to provide online safety and privacy for all is more relevant than ever. In the half, Avast passed the milestone of 13 million paying customers, up by 640,000. We continue to expand into new markets and extend our reach through new product offerings, such as our innovative privacy solution, BreachGuard. Despite the economic uncertainty, Avast remains well positioned. The business is resilient, strongly cash-generative, and has significant capacity to harness new growth opportunities as they emerge.
"The Group's first half performance underpins a strong full year outlook. We expect FY 2020 organic1 revenue growth to be at the upper end of the previously stated mid-single digit percentage range."
Strong overall performance in line with expectations
Adjusted Billings at $469.1m up 2.1% at actual rates, with organic growth of 9.2%
Adjusted Revenue at $433.1m up 1.5% at actual rates, with organic growth of 6.6%
Consumer Direct Desktop Adjusted Revenue at $334.4m, up 8.7% at actual rates, with organic growth of
Adjusted EBITDA up 2.1% to $241.4m; Adjusted EBITDA margin2 at 55.7%, up 31bps
Adjusted fully diluted earnings per share ('EPS') up 11.8% to $0.16 (versus $0.15 at HY 2019)
Final dividend in respect of 2019 paid in June 2020 of 10.3 cents per share; total dividend for the year of 14.7 cents per share, up 8.1%3. Declared interim dividend payable in October 2020 of 4.8 cents per share, up 9.1%
Continued strong cash generation with Unlevered Free Cash Flow up 4.7% to $241.2m and Levered Free Cash Flow up 10.3% to $220.9m
Resilient balance sheet with $191.0m of cash and available liquidity4. Net debt / LTM ('last twelve months') Adjusted EBITDA at 1.7x at half year
On a statutory basis, Revenue up from $425.4m to $433.1m, Operating profit including $22.7m of Covid-19 donations paid (out of total committed $25.0m) decreased from $161.9m to $134.5m, fully diluted EPS at $0.08.
OPERATIONAL AND STRATEGIC HIGHLIGHTS
The work-from-home trend presented a strong tailwind to the core Consumer Desktop business, with an upswing in demand across the product portfolio, including premium AV. Desktop operating KPI's reflected the strong growth in customer numbers5, up 5.1% in the six months to 13.26m. APPC6 increased by 1.7% to 1.48 and ARPC7, impacted by the timing of customer growth (Q2) versus revenue materialising in H2, was up 0.7% to $51.40.
Avast's localisation program, which customises the product and customer experience to suit local preferences, helped drive growth in customer numbers and penetration. There was marked strength in target countries worldwide, including Brazil, Mexico and Argentina in LatAm, and Japan in Asia. This was accompanied by continued gains in traditional markets such as the US and the UK.
The Group's innovative new product, BreachGuard was soft launched in the US, presenting another building block to the company's privacy offering.
Avast expanded the device compatibility of its current and new products. This resulted in continued growth in multi-device licenses that enable a seamless journey for customers between desktop and mobile.
While impacted by lower digital advertising, Avast Secure Browser's user activity and search volumes remained strong. Revenues in the Indirect segment were underpinned by the successful extension in March of the Chrome distribution contract.
The wind down of the Jumpshot business is on schedule, to budget and has not had a discernible impact on the core business.
Avast Free Antivirus was named a Top-Rated Product for 2019 by test-lab AV Comparatives.
Avast plc became a member of the FTSE 100 index on 19 June 2020.
Disposal Managed Workplace (SMB) 9
Adjusted Billings excl. Acquisitions, Disposals and Discontinued
Disposal Managed Workplace (SMB)
Adjusted Revenue excl. Acquisitions, Disposals and Discontinued
Adjusted EBITDA Margin %
Adjusted Net Income
Net Cash Flows from operating activities
COVID-19 IMPACT AND BUSINESS RESILIENCE
The health and wellbeing of the Group's employees is our priority. Avast offices worldwide were closed as a preventative measure on 16 March. While some offices reopened in June in line with local risk levels, the Executive Team took the decision in early August to close all offices until January 2021, at which date the situation will be reassessed. Keeping offices closed and embracing remote work for a longer period means less risk for employees. Avast recognises the strain the pandemic has had, and continues to have, on its employees and is working hard to ensure that they the support they need wherever they are. This includes a program of remote work training with self-care help, private GP services and performance management coaching.
During Covid-19, Avast's services have remained unaffected, with minimal disruption to operations. The Group has not furloughed any employees or made use of any government support programs, and there are no plans to do so. Continued investment in people resulted in a rise in headcount in the first half of the year, with a digital on-boarding experience created for new joiners.
Avast has set up a Future of Work task force, comprised of 60 employees, to consider the company's future work structures and facilities use.
The Board's assessment of the principal risks affecting the business has been extended to cover the risks associated with the impact of Covid-19. These risks have been developed in light of Covid-19 Scenario Planning undertaken by the Board. Avast's recurring and subscription-based revenues, and strong liquidity position gives the business a resilient operational and financial position. However, the impact of the pandemic remains uncertain, and the Board continues to closely monitor developments in order to adapt and respond accordingly. • In recognition of the responsibility Avast has to the communities in which it operates, Avast's drive to keep people safe and its belief in the role of technology in achieving this, Avast is donating $25 million to science and technology initiatives to help combat Covid-19, offering critical financial and practical support to the global scientific and technology community. This includes $12m to the Covid-19 Therapeutics Accelerator, an initiative of the Bill & Melinda Gates Foundation, and $8m to the Coalition for Epidemic Preparedness Innovations. An additional $5 million has been earmarked for further science programs such as Folding@home's supercomputing program that seeks to find a cure for the virus. The $25m donation is treated as an exceptional item in the P&L.
PRESENTATION OF RESULTS
Management will hold a live webcast presentation and conference call for analysts and investors at 9:00 AM BST today (12 August 2020). Please register to participate on the Company website at https://investors.avast.com. A Q&A facility will be available for conference call participants.
Investors and analysts:
Peter Russell, Director of IR
Stephanie Kane, VP PR and Corporate Communications
+44 20 7920 3150
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This announcement contains certain forward-looking statements that are subject to the usual risk factors and uncertainties associated with the Company's business. Whilst the Company believes the expectations reflected herein to be reasonable in the light of the information available to them at this time, the actual outcome may be materially different owing to factors beyond the Company's control or within the Company's control where, for example, the Company decides on a change of plan or strategy. Accordingly, no reliance may be placed on the figures contained in such forward-looking statements.
Throughout the Half Year Report a number of alternative performance measures are used to provide users with a clearer picture of the performance of the business. This is in line with how management monitor and manage the business day-to-day. Definitions and details are provided below. Further definitions (see 'PRESENTATION OF RESULTS AND DEFINITIONS') and reconciliations (see 'FINANCIAL REVIEW') of non-GAAP measures are included in the notes to the financial statements.
All dollar figures throughout the report are at actual currency rates unless otherwise indicated.
1 Organic growth rate excludes the impact of FX, acquisitions, business disposals and discontinued business. It excludes current period billings and revenue of acquisitions until the first anniversary of their consolidation.
2 Adjusted EBITDA margin percentage is defined as Adjusted EBITDA divided by Adjusted Revenue.
3 Growth rate calculated on an annualized basis. In June 2019 the Group paid dividend of 8.6 cents per share in respect of the period 15 May 2018 to 31 December 2018 (13.6 cents per share on an annualized basis). 4 Total available liquidity includes cash and cash equivalents balance as at 30 June 2020 of $151m and revolving credit facility of $40m (not drawn at 30 June 2020).
5 Users who have at least one valid paid Consumer Direct Desktop subscription (or licence) at the end of the period.
6 APPC defined as the Consumer Direct Desktop simple average valid licences or subscriptions for the financial period presented divided by the simple average number of Customers during the same period.
7 ARPC defined as the Consumer Direct Desktop revenue for the financial period divided by the simple average number of Customers during the same period.
8 Growth rate excluding currency impact calculated by restating 2020 actual to 2019 FX rates (see "Principal exchange rates applied "). Deferred revenue is translated to USD at date of invoice and is therefore excluded when calculating the impact of FX on revenue.
9 On 1 February 2019 Avast plc sold the non-core asset of Managed Workplace, its remote monitoring and management product, to Barracuda Networks, Inc. ('Barracuda'). Managed Workplace was Avast's solution in the Remote Monitoring and Management ('RMM') space, which is sold to Managed Service Providers ('MSPs'). This business was not core to our SMB strategy, which focuses on securing the workplace. Barracuda, which has a large existing MSP base but did not offer an RMM solution, provides a better long-term solution for this business. In addition, Barracuda has signed a reseller agreement with Avast under which it now resells Avast's business security solutions to MSPs. In the year ended 31 December 2018 the asset generated low teen revenue (USD million) with a materially lower margin profile than the Group.
10 In January 2020 Avast decided to terminate the provision of anonymized data to its data analytics business, Jumpshot, having concluded that the business was not consistent long term with the Group's privacy priorities as a global cybersecurity company. As the company is also exiting its toolbar-related search distribution business (which had previously been an important contributor to AVG's revenues) and the browser clean-up business, the growth figures exclude all of these (referred to above and throughout the report as "Discontinued Business"), which the Group expects to be negligible by the end of 2020. The Discontinued Business does not represent a discontinued operation as defined by IFRS 5 since it either has not been disposed of but rather it is being continuously scaled down or it is considered to be neither a separate major line of business, nor geographical area of operations.
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