Avast delivers strong top line organic growth with high levels of profitability

AVAST

Avast plc (LON:AVST), a leading global cybersecurity provider, has announced its results for the year ended 31 December 2020.

Ondrej Vlcek, Chief Executive of Avast, said:

‘The Group delivered another strong year of top line organic growth, high levels of profitability and cash flow generation. Group Adjusted Revenue was $892.9m, with organic growth1 of 7.9%, driven by double-digit growth in our Consumer Direct Desktop business.

‘In a year when more people and businesses turned to technology to keep their lives and their work enabled, Avast has played a vital role in safeguarding our customers’ digital data and privacy. I am proud of the way the Company has met the challenge of the pandemic head on, putting our duty to act as a responsible business at the heart of our approach.

‘The core of the Avast business and our fundamental strengths remain unchanged as we continue to effectively leverage the scale and sophistication of our platform in consumer and SMB markets. We are confident in our ability to unlock new growth opportunities, with a commitment to continued product and technological innovation, and a stronger-than-ever customer experience.

‘Underpinned by a strong prior year billings performance, we expect to deliver FY 2021 organic revenue growth in the range of 6 percent to 8 percent.’

FINANCIAL HIGHLIGHTS

●     Adjusted Billings at $922.0m up 1.2% at actual rates, with organic growth of 7.1%

●     Adjusted Revenue at $892.9m up 2.3% at actual rates, with organic growth of 7.9%

●     Consumer Direct Desktop Adjusted Revenue at $699.7m, up 10.6% at actual rates, with organic growth of 11.3%

●     Adjusted EBITDA up 2.6% to $495.5m; Adjusted EBITDA margin2 at 55.5%, up 17bps

●     Adjusted fully diluted earnings per share (‘EPS’) up 9.8% to $0.35 (versus $0.32 at YE 2019)

●     Proposed final dividend payable in June 2021 of 11.2 US cents per share; total dividend for the year of 16.0 US cents per share, up 8.8%

●     Continued strong cash generation with Unlevered Free Cash Flow up 6.2% to $451.1m and Levered Free Cash Flow up 11.9% to $414.3m

●     Resilient balance sheet with $215.4m of cash and available liquidity3. Net debt / LTM (‘last twelve months’) Adjusted EBITDA at 1.5x at year end

●     On a statutory basis, Revenue up from $871.1m to $892.9m, Operating profit including $25m COVID-19 donations paid decreased from $344.6m to $335.4m, cash flows from operating activities increased from $399.1m to $456.5m, fully diluted EPS decreased from $0.24 to $0.16 mainly due to significant unrealised FX loss arising from Euro denominated loan

OPERATIONAL AND STRATEGIC HIGHLIGHTS

●     End of Period desktop customers4 increased strongly by 7.9% to 13.6m. Average Products per Customer5 up 2.8% and Average Revenue Per Customer6 was up 4.5%, in line with growth guidance of low single-digit and mid-single-digit respectively

●     Continued successful execution on the global growth strategy, with increases in customer numbers in both established markets and target underpenetrated countries: US up 6%, Italy up 13%, Mexico up 33%, Brazil up 19%, and Russia up 6%

●     Renewed focus on consolidation of the user base around higher quality organically installed users; accelerated momentum in move away from lower value return Pay-Per-Install (PPI)

●     Sustained expansion of multi-device solutions and more desktop-transacted subscriptions for mobile-enabled products 

●     Good execution on the roadmap for personalised privacy and identity protection, with the release of BreachGuard in the US in H1, and rollout into Europe and expansion onto the Mac platform in H2

●     Avast Smart Life for 5G launched as the next iteration of Avast’s smart home proposition

●     User engagement with Avast Secure Browser remained robust, however the weak advertising environment, caused by the pandemic, acted as a drag on monetisation. The Browser offering was expanded with the release of an iOS version and real-time synchronisation between platforms (PC, Android and iOS)

($’m)FY 2020FY 2019Change %Change % (excluding FX) 7
Adjusted Billings922.0911.11.21.8
Acquisitions0.10.0n/an/a
Disposal Managed Workplace (SMB) 80.01.0n/an/a
Discontinued Business94.248.9(91.4)(91.4)
Adjusted Billings excl. Acquisitions, Disposals and Discontinued business917.7861.16.67.1
($’m)FY 2020FY 2019Change %Change % (excluding FX)
Adjusted Revenue892.9873.12.32.8
Acquisitions0.20.0n/an/a
Disposal Managed Workplace (SMB)0.01.0n/an/a
Discontinued Business5.145.0(88.6)(88.6)
Adjusted Revenue excl. Acquisitions, Disposals and Discontinued business887.6827.27.37.9
($’m)FY 2020FY 2019Change %
Adjusted EBITDA495.5483.02.6
Adjusted EBITDA Margin %55.555.30.2 ppts
Adjusted Net Income360.2322.311.8
Net Debt725.6884.5(18.0)

Statutory Results:

($’m)FY 2020FY 2019Change %11
Revenue892.9871.12.5
Operating profit335.4344.6(2.7)
Net Income169.6248.9(31.8)
Net Cash Flows from operating activities456.5399.114.4

OUTLOOK

We remain confident that the fundamental strengths of the business model and culture of driving performance will sustain our track record of delivering good growth and profitability.

Underpinned by a strong prior year billings performance that will be supportive of revenue in the first half of the current year, we expect to deliver FY 2021 organic revenue growth in the range of 6 percent to 8 percent. Organic billings growth for the year is expected to be at the lower end of this range and heavily weighted toward the second half, due in part to the strong baseline comparison in the second quarter of last year. The Group’s transition to 1-year subscriptions to increase customer lifetime value will also exert downward pressure on billings particularly in the first half.

Adjusted Group EBITDA margin is expected to remain broadly flat versus FY 2020, despite an increase to operating costs from the Company’s planned on-premises to cloud migration and higher wage inflation. The Group will sustain strong organic cash generation, with benefits to cash flow anticipated from reduced capex requirements on data centres, and lower interest costs following additional loan repayment last year.

PRESENTATION OF RESULTS

A live webcast presentation and conference call for analysts and investors will be held at 9:00 AM GMT today (3 March 2021). Please register for the call or webcast on the Company website at https://investors.avast.com. A Q&A facility will be available for conference call participants.

PUBLICATION OF ANNUAL REPORT

The Company today published its Annual Report and Accounts 2020. The document will be available to view on the Company website at https://investors.avast.com and is also being submitted to the National Storage Mechanism for inspection at www.morningstar.co.uk/uk/nsm.

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