Source - RNS
RNS Number : 6473K
Avast Holding B.V.
12 April 2018
 

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO OR WITHIN THE UNITED STATES OF AMERICA, AUSTRALIA, CANADA, JAPAN OR ANY OTHER JURISDICTION WHERE IT IS UNLAWFUL TO DISTRIBUTE THIS ANNOUNCEMENT

This announcement is an advertisement for the purposes of the Prospectus Rules of the UK Financial Conduct Authority ("FCA") and not a prospectus and not an offer to sell, or a solicitation of an offer to subscribe for or to acquire, securities in or into the United States or in any other jurisdiction, including in or into Australia, Canada or Japan. Neither this announcement nor anything contained herein shall form the basis of, or be relied upon in connection with, any offer or commitment whatsoever in any jurisdiction. Investors should not subscribe for or purchase any ordinary shares referred to in this announcement except solely on the basis of information contained in the prospectus (the "Prospectus") in its final form expected to be published by a new English holding company (the "Company") of Avast Holding B.V. ("Avast Holdings") and its subsidiaries (Avast Holdings and its subsidiaries being together the "Group", or "Avast") in due course in connection with the proposed admission of its ordinary shares (the "Shares") to the premium listing segment of the Official List of the FCA and to trading on the main market for listed securities of the London Stock Exchange plc (the "London Stock Exchange"). A copy of the Prospectus will, following its publication, be available for inspection from https://investors.avast.com.

 

FOR IMMEDIATE RELEASE
12 April 2018

 

Avast Holding B.V.

Announcement of Intention to Float

Avast, a leading global cybersecurity provider, today announces that it intends to proceed with an initial public offering (the "IPO" or the "Offer"). It is intended that the Company will apply for admission of its Shares to the Premium segment of the Official List of the FCA and to trading on the Main Market for listed securities on the London Stock Exchange (together, the "Admission"). It is expected that Admission will occur in early May 2018.

Avast - The Number One Consumer Cybersecurity Company

·    Number one provider of security software to the consumer market globally as measured by number of users, offering a range of products that protect users' security, privacy and improve device performance

 

·    More than 435 million users worldwide as of 31 December 2017, including more than 290 million consumer personal computer software users, approximately six times more than the Group's nearest competitor, and more than 145 million mobile users

 

·   Products offered in two segments: consumer products (which generate direct and indirect revenue streams) and products for the small and medium business ("SMB") market which secure not just the devices of users, but also their data, families, networks and homes (collectively, their "digital lives")

 

·    Next-generation consumer PC antivirus security software marketed under the Avast and AVG brands, each in the form of both free offerings as well as paid premium products, as well as value-added solutions for PCs and mobile devices focused on performance and privacy

 

·      A sophisticated, predictive, consumer monetisation platform which uses contextual messaging to convert, up-sell and cross-sell the Group's users. The combination of the Group's large user base and powerful consumer monetisation platform provides the Group with strong monetisation and marketing capabilities for new and existing product offerings

 

·   Advanced security engine stopped approximately two billion attacks per month in the year ended 31 December 2017

 

·     More than 600 employees in research and development ("R&D") focused on continuous development and improvement of these technologies, representing more than 45% of its total permanent employee headcount

 

·   30 years' experience delivering security solutions to the consumer market; successfully growing the business in recent years while maintaining strong levels of profitability

 

·    Billings primarily composed of subscription agreements, which enhance the predictability and visibility of the Group's future revenue streams, with 88% of Adjusted Billings excluding Discontinued Business were attributable to subscription agreements for the year ended 31 December 2017

In 2017, the Group's Adjusted Billings was $811 million, Adjusted Revenue was $780 million, Adjusted Cash EBITDA1 was $451 million. The Group has achieved significant growth, increasing Adjusted Billings, Adjusted Revenue and Adjusted Cash EBITDA at a CAGR of 9%2, 8%2 and 13%3, respectively, over the three years ended 31 December 2017. The Group also benefits from a high cash conversion4 profile, resulting from a combination of low capital expenditure, limited working capital requirements and high margins. The Group had 76% cash conversion for the year ended 31 December 2017, driven by deferred revenue inflows and its low capital expenditure requirements.

The Group is confident that its innovative business strategies will continue to drive growth in a large and robust global market. These include: direct monetisation through up-selling users to premium paid products and by cross-selling across multiple platforms and services; leveraging scale, expertise and big data to find new ways of indirect monetisation; product innovation through the improvement of offerings, including developing products to address the Smart Home market and the internet of things ("IoT"); and continuing the strong track record of successful acquisitions.

Vincent Steckler, CEO of Avast, said:

"Over the past thirty years, Avast has grown from a visionary start-up to the number one consumer cybersecurity company, with 435 million users worldwide. This transformation of our company has happened because of the dramatic increase in the number and types of threats around the world which are a growing concern to people, and Avast's ability to stay ahead of the bad guys with new and evolving technologies and products.

We are proud of our award-winning security products and amazing technical experts in R&D, which have positioned us well to take advantage of this expanding consumer cybersecurity market which is expected to grow 10% annually and reach $21 billion by 2021. Our large user base creates a strong network effect and powers our advanced next-generation security engine which uniquely combines the latest in machine learning and artificial intelligence and big data to keep people around the world safe online. Our winning Freemium business model uses our sophisticated consumer platform to provide highly targeted cross-sell and up-sell opportunities for our premium products. This has resulted in strong revenue growth over the past three years, high margins and an attractive cash conversion rate.

The hard work and commitment of our ~1,700 employees across the globe, over 600 of which work in R&D, has been core to our success. Their talent and dedication has enabled Avast to create leading and trusted products that make people's digital lives safer. As a leading European tech company, a listing on the London Stock Exchange is a strategic and natural fit, providing us with wider access to the capital markets and supporting the future growth of our business in the years ahead."

John Schwarz, Independent Chairman of Avast, said:

"Avast has a pioneering history of innovation in cybersecurity and a clear vision to protect people online, which has resulted in global success. The strength of the management team, with deep experience in security and brand-building, has enabled Avast to build a track record of strong financial performance. I believe that the scale of Avast's operations and the sophistication of its technology platform provide a firm foundation for future growth. A listing on the LSE will allow a new generation of investors to benefit from the next phase of Avast's growth as a public company, and from significant returns through future dividends. The Board is very supportive of the Avast team in executing our plans for protecting people's digital lives."

 

Reasons for the Offer

·     As part of the offer, the Group intends to raise approximately $200 million of primary proceeds

 

·    The Group intends to use the primary proceeds of the offer to reduce its overall indebtedness, which is expected to provide it with greater financial flexibility to drive the future growth of the business

-     assuming approximately $200 million of primary proceeds raised, this would imply a Net Debt / LTM    Adjusted Cash EBITDA of approximately 3x at the time of IPO

 

·     The Group also believes that the Global Offer will:

-   further increase the Group's profile, brand recognition and credibility with its users, suppliers and employees;

-     assist in recruiting, retaining and incentivising key management and employees; and

-     provide the Selling Shareholders with a partial realisation of their investment

 

·   Immediately following Admission, the Company intends to have a free float of at least 25% of the Company's issued share capital

 

·     It is expected that Admission will take place in May 2018 and that, following Admission, the Company will be eligible for inclusion in the FTSE UK indices

Each of the Company, its Directors and members of its senior management, and the Company's ultimate shareholders will agree to customary lock-up arrangements in respect of their remaining holdings of Shares for specified periods of time following Admission. On an estimated fully diluted basis (subject to final dilution), the Group is currently owned by its Founders (46%); CVC (29%); Management, Board and Employees (18%) and Summit Partners (7%).

For more information, see Details of the Offer. 

Avast Investment Highlights
(For more information, see Avast Key Competitive Strengths and Avast Key Business Strategies)

The Group believes that it benefits from the following key competitive strengths:

1) Global leader in security, performance and privacy, specialising in protecting consumers' digital lives

·     More than 435 million users worldwide as of 31 December 2017, a user base of comparable magnitude to other leading global online consumer brands, with more than 290 million consumer PC users as of 31 December 2017 and more than 145 million mobile users

·    Headquartered in the Czech Republic with a global user base, with approximately 35% of users in the Americas, 48% of users in Europe, the Middle East and Africa, and 17% of users in Asia Pacific for the year ended 31 December 2017

 

2) Highly recognisable leading consumer brand

·      Best in class brand awareness results, outranking all the Group's competitors

·     Recognised by the online security community as a leading and trusted provider in consumer security which has helped the Group improve its brands' visibility and promote its reputation and its products

 

3) Advanced next-generation security engine, driven by cloud-based machine-learning capabilities

·   Next-generation security engine which uses a combination of Artificial Intelligence (AI), behavioural detection, machine-learning capabilities and signature-based detection to drive best-in-class protection

·   The Group's threat detection engine is continuously improved through technology that uses a global network of sensors to provide the Group with data gathered anonymously from the online experiences of its users, providing industry leading protection against file and memory attacks as well as network-based attacks

·    The Group's security engine stopped approximately two billion attacks per month in the year ended 31 December 2017 and successfully defended users against specific attacks, including the WannaCry attack which affected millions of PCs worldwide in 2017

·     The Group places a heavy focus on the continuous development and improvement of these technologies, with more than 45% of its permanent employees working in research and development ("R&D")

 

4) Sophisticated consumer platform with strong monetisation opportunities from the Group's existing user base

·    Consumer monetisation platform, which is underpinned by machine-learning algorithms, is used to promote up-sells and cross-sells within the existing user base in an efficient manner

·     Strong execution in converting, up-selling and cross-selling a wide range of products and solutions to the user base: as of 31 December 2017, 25% of customers had purchased more than one Group product, compared to 19% as of 31 December 2015

·   The Group also benefits from indirect monetisation through analytics, advertising, third party product distribution and secure browsing. The Group believes the total Consumer Indirect market will grow at an 11% CAGR from 2017 to 2021, from $6.9 billion in 2017 to $10.4 billion in 2021

 

5) Differentiated and cost-effective user acquisition model

·    Direct sales model, focused on online sales with low user acquisition costs, promotes a low sales and marketing expense that distinguishes the Group from competitors in the traditional retail and OEM channels

·    Free antivirus software is the most effective marketing tool: users have positive experiences with these products, which promotes viral marketing through interactive marketing channels, including through word-of-mouth recommendations and reviews

·     For free PC antivirus products, service cost of approximately $0.02 per free PC antivirus software user per annum for the year ended 31 December 2017

 

6) Highly scalable business model benefitting from significant network effects

·   Large size of the Group's user base promotes strong network effects, fuels further growth and creates barriers to entry

·    The user base also generates large amounts of data with unique insights into their behaviour, which acts as an input to improve the Group's machine-learning-based technology engine, including its virus detection capabilities and its consumer monetisation platform

·      As the Group's technology platform improves and successfully protects users, the Group earns more trust from its users, promoting strong global brand awareness and increased demand for products thereby attracting more users

 

7) Attractive financial profile with robust cash flow generation and high cash conversion

·    The Group operates in a large and robust market, which is estimated to have reached $14.5 billion for the year ended 31 December 2017, and the Group believes the market will reach revenues of $21.3 billion in 2021, representing a CAGR of 10% according to Group estimates

·   Business model provides a high level of billings and revenue visibility, driven by a high proportion of subscription agreements

·   Track record of consistent growth and strong profitability and cash flow generation. The Group's 2017 Adjusted Revenues were $779.5 million with 76% cash conversion for the year ended 31 December 2017; having grown by 8.0%5 over the period 2015-17

 

8) Experienced management team with a strong track record of execution

·    Management team has significant experience in sales, technology, product development and marketing and the security software industry

·     Group Chief Executive Officer, Vincent Steckler, has been with the Group for nine years and has worked in the security software industry for over eighteen years; Ondrej Vlcek, the head of the Group's Consumer business and CTO, has been with the Group for over twenty years

·    Management team has led the Group through its growth into the leading global provider of software to consumers, growing both organically and through the acquisition and integration of AVG, a leading security software company, and Piriform, a leading provider of device performance optimisation software

 Avast's Growth Strategy

·     Continue to drive direct monetisation by up-selling users to paid premium security products and to higher tier premium security products

·      Continue to drive direct monetisation by successful cross-selling across multiple platforms and services

·      Leverage scale, historical expertise and big data to find new ways of indirect monetisation

·   Achieve product innovation through the improvement of its offerings, including developing products to address the Smart Home market and the privacy and security threats posed by the rapid growth of connected devices, collectively known as the internet of things ("IoT")

·      Continue strong track record of successful acquisitions

Current Trading and 2018 Outlook

The Group has performed in line with its expectations in the first three months of 2018. The Group continues to deliver attractive organic growth and outperform the market. As a result, the Group continues to expect high-single digit revenue growth at constant currency in 20186.

Dividend Policy

The Group expects to adopt a dividend policy that focuses on providing significant returns to shareholders, whilst also ensuring that the Group retains the flexibility to continue to deploy capital towards profitable growth. There can be no guarantees that the Company will pay future dividends. The determination of the level of future dividends, if any, will depend upon the Group's results of operations, financial condition, capital requirements, contractual restrictions, business prospects and any other factors the Board may deem relevant. The Group currently expects to maintain dividend payments of approximately 40% of levered free cash flow in the short to medium term.

Dividend payments will be made on an approximate one-third:two-thirds split for interim and final dividends, respectively. The Group intends to commence dividend payments with a final dividend payment in respect of 2018, which will be payable in the first half of 2019.

The Group may revise its dividend policy from time to time.

Summary Details of the Offer

The Global Offer consists of an institutional offer only. In the Global Offer, Shares will be offered (i) to certain institutional investors in the United Kingdom and elsewhere outside the United States and (ii) in the United States only to qualified institutional buyers in reliance on Rule 144A or pursuant to another exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. The Group intends for the Company to use the net proceeds from the issue of the New Shares to reduce the Group's overall indebtedness, which is expected to provide the Group with greater financial flexibility to drive the future growth of the business.

 

Enquiries:

 

Avast
Vincent Steckler (CEO)
Philip Marshall (CFO)

 

Investor Relations

Peter Russell

[email protected]

 

Media Relations

Stephanie Kane

[email protected]

 

 

 

Joint Global Co-ordinators, Joint Bookrunners and Joint Sponsors

 

Morgan Stanley

David Chen

Enrique Perez-Hernandez

Ben Grindley

Martin Thorneycroft

+44 20 7425 8000


UBS Investment Bank

Christian Lesueur

Thomas Koehrer

Christopher Smith

Rahul Luthra

 

 


+44 20 7567 8000

Other Joint Bookrunners

 

Bank of America Merrill Lynch

James Fleming

Tristan Lacroix

+44 20 7628 1000

Barclays Bank PLC

Ben Freeland

Phil Drake

 

+44 20 7623 2323

Credit Suisse

Nick Koemtzopoulos

Vivek Manipadam

 

+44 20 7888 8888

Jefferies International Limited

Nandan Shinkre

Rob Leach

 

 

+44 20 7029 8000

Co-Lead Manager

 

KeyBanc Capital Markets

Rodd Langenhagen

David Spitz

 

+1 (800) 859-1783

 

Financial Adviser to Avast

 

Rothschild
William Marshall

Albrecht Stewen

Anton Black

 

 

+44 20 7280 5000

 

Financial Public Relations

 

 

Finsbury

 

+44 20 7251 3801

Dorothy Burwell                                                 
Andy Parnis

 

Further information on the Group 

Avast Business Overview

The Group offers products in two segments: consumer products (which generate direct and indirect revenue streams) and products for the small and medium business ("SMB") market. These products secure not just the devices of users, but also their data, families, networks and homes. The Group offers next-generation consumer PC antivirus security software under the Avast and AVG brands, each in the form of both free offerings as well as paid premium products. In addition to security products, the Group also offers value-added solutions for PCs and mobile devices focused on performance and privacy, such as optimisation products (including CCleaner, Avast Cleanup and AVG Tune Up), VPN products (including HideMyAss ("HMA") and Avast SecureLine VPN), password manager products (including Avast Passwords) and family safety products (such as Location Labs' mobile parental controls products). The Group is also developing products to address the Smart Home market and the privacy and security threats posed by the rapid growth of connected devices, collectively known as the internet of things ("IoT"). In addition, the Group monetises its users indirectly through advertisements and third party software distribution agreements, as well as through its secure browser, SafeZone, and successor product Avast Secure Browser; its e-commerce offering, SafePrice; and its data analytics business, Jumpshot. Specifically designed for the SMB market, the Group offers cloud and on-premises antivirus protection and IT administrative solutions under both the Avast and AVG brands.

The Group's antivirus solutions use artificial intelligence ("AI") and employ machine-learning capabilities to conduct behavioural analysis and improve detection abilities. With both local and cloud-based deep learning capabilities, the Group's security engine is powered by a continuous data loop of inputs from the Group's users, who act as a geographically dispersed global threat detection system. The Group's security engine stopped approximately two billion attacks per month in the year ended 31 December 2017. The Group places a heavy focus on the continuous development and improvement of these technologies, with more than 45% of its permanent employees working in research and development ("R&D"). The Group believes this focus on R&D strongly contributes to the fact that the Group's products are consistently ranked among the highest-rated antivirus solutions by both users and editors on leading download websites, as well as in popular media globally.

The Group offers versions of its high-performance consumer PC antivirus security software to consumers free of charge. The Group focuses on promoting these free products as a part of its user acquisition strategy. The Group monetises its user base by converting users of its free antivirus software to paid antivirus customers and selling existing customers of its paid antivirus products a higher tier of paid antivirus software (collectively, "up-selling") or selling adjacent (non-antivirus) paid products, such as VPN products or PC optimisation tools, to existing users or customers ("cross-selling"). The large user base not only drives direct revenues by growing the market to which the Group can target its up-selling and cross-selling campaigns, but it also improves the accuracy and effectiveness of the Group's machine-learning-powered consumer monetisation platform. The platform becomes more effective with increased inputs, improving the Group's ability to market and advertise its products to its existing user base by learning the most effective time and manner to message and prompt users to purchase premium paid antivirus software or value-added solutions. The Group's free products provide comprehensive malware protection to users, while imposing low user support and servicing costs on the Group, amounting to, on average, $0.02 per free PC antivirus software user per annum for the year ended 31 December 2017.

The Group has successfully grown its business in recent years while maintaining strong levels of profitability. Further, the Group's billings are primarily composed of subscription agreements, which enhance the predictability and visibility of the Group's future revenue streams. Subscription agreements are typically paid in full up front with revenue being recognised on a deferred basis over the life of the agreements, which typically vary from one to three years.

Avast Key Competitive Strengths

The Group believes that it benefits from the following key competitive strengths:

Global leader in security, performance and privacy, specialised in protecting consumers' digital lives

The Group is the number one provider of security software to the consumer market by number of users. With more than 435 million users worldwide as of 31 December 2017, the Group had a user base of comparable magnitude to other leading global online consumer brands. The Group has a global user base, with approximately 35% of its users in the Americas, 48% of its users in Europe, the Middle East and Africa, and 17% of its users in Asia Pacific for the year ended 31 December 2017.

The Group had more than 290 million consumer PC users as of 31 December 2017, which was approximately six times the number of consumer PC users as its nearest competitor and more than 145 million mobile users.

Highly recognisable leading consumer brand

The Group has high brand awareness among consumers. According to data from Google Trends, which tracked trends in Google searches for antivirus vendors (and their name variations) for the year ended 31 December 2017, the Group's two major brands, Avast and AVG, together generated 21.4% of named searches worldwide. These brand awareness results were best-in-class in the industry, outranking all the Group's competitors.

Further, the Group has also been recognised by the online security community as a leading and trusted provider in consumer security. For example, the Group's free antivirus products under both the Avast and AVG brands have been recognised by PC Mag as an Editors' Choice in 2018 and have been given the title of "best free antivirus". AV Test rated the Group's Mobile Security product as the best antivirus software for Android in November 2017, giving it a perfect score for its antivirus capabilities. These and other such recognitions have helped the Group improve its brand's visibility and promote its reputation and its products.

Advanced next-generation security engine, driven by cloud-based machine-learning capabilities

The Group has developed a next-generation security engine which uses a combination of behavioural detection, machine-learning capabilities and signature-based detection to drive best-in-class protection. Unlike signature-based antivirus products that can only detect known viruses, the Group's proprietary scanning engine proactively searches for previously unknown viruses and malware, as well as new variants of known viruses and malware undetectable with normal definitions and virus signatures. The security engine adds additional layers of defence to protect against more sophisticated and advanced threats and will flag anomalous behaviours (e.g., the creation of new binary files, the execution of files or the modification of certain registry entries), even if such behaviours have not previously been identified as known viruses. The Group's threat detection engine is continuously refined through technology that uses a global network of sensors to provide the Group with data gathered anonymously from the online experiences of its users. This threat detection engine uses advanced techniques, such as these behavioural insights as well as machine-learning capabilities, to leverage the data collected in order to provide effective protection for users. The Group has a highly specialised team of researchers, including a core team of individuals with advanced degrees, who have a specific focus in developing the Group's next-generation technology and machine-learning capabilities, with the task of continuing to improve the Group's security engine and core technologies.

The Group's security engine is supported by more than 10,000 servers handling more than 60 million simultaneous connections, enabling a high level of automation and scalability to process extensive data sets from users to drive industry leading protection against file and memory attacks as well as network-based attacks. The multi-layered security protection integrated into the Group's products successfully defended users against specific attacks, including the WannaCry attack which affected millions of PCs worldwide in 2017 (in which the devices of many well-known organisations were infected with ransomware, which encrypted these organisations' files and threatened to delete them unless the hackers were paid a ransom).

Sophisticated consumer platform with strong monetisation opportunities from the Group's existing user base

The Group believes that its consumer monetisation platform is a key driver of its success, allowing the Group to leverage data from, and monitor the behaviour of, its base of more than 435 million users. The Group uses this consumer monetisation platform to promote up-sells and cross-sells within its existing user base in an efficient manner. The Group believes that the most powerful features of its consumer monetisation platform are those underpinned by machine-learning algorithms. Through this predictive modelling method (which statistically analyses potential outcomes of various campaigns), the Group optimises its marketing campaigns to better identify monetisation opportunities through price optimisation (which provides customised prices for different users), campaign muting (which minimises the number of messages in order to optimise effectiveness), and churn prediction (which predicts when and how likely a user is to leave the Group so the Group can take proactive measures).

The Group's consumer monetisation platform is a sophisticated predictive platform which uses contextual messaging to convert, up-sell and cross-sell the Group's users, targeting users at the most appropriate moment. The Group believes these messages are minimally intrusive and provide offers for quality products that add value for the user in the appropriate context. For example, the consumer monetisation platform will push a message to users who have connected to an unsecure Wi-Fi network to suggest downloading the Group's paid VPN products, or warn antivirus users of device performance issues that could be resolved by downloading the Group's paid optimisation products. These messages are applied to the Group's indirect consumer offerings as well. For example, if a user were to go to a banking website, a tailored message would appear prompting the user to download the Group's secure browser, Avast Secure Browser. The Group continuously tracks and tests this consumer monetisation system, applying machine-learning to optimise yield.

The combination of the Group's large user base and powerful consumer monetisation platform provides the Group with strong monetisation and marketing capabilities for new and existing product offerings. The Group has been successful in converting, up-selling and cross-selling its wide range of products and solutions to its user base: as of 31 December 2017, 25% of customers had purchased more than one Group product, compared to 19% as of 31 December 2015. The Group believes that up-sells and cross-sells will continue to drive the Group's growth in the future.

Differentiated and cost-effective user acquisition model

The Group believes its direct sales model promotes a low sales and marketing expense that distinguishes the Group from competitors in the traditional retail channel or OEM channel. In the traditional retail channel, antivirus software is promoted through material marketing spend, requiring fees in the form of slotting, promotions and stocking, in addition to the revenues shared with the retailer (which can be up to 100%). In the OEM partnership channel, software companies will pay large fees to OEMs to pre-install their software on equipment. There is generally a large loss of users who will stop using the pre-installed product upon the expiry of a free trial, and there are fees (often more than 50%) that are shared with the OEM for revenues from users who opt to continue to use the product.

By contrast, the Group's differentiated and cost-effective business model primarily focuses on online sales with low user acquisition costs. The Group believes that its most effective marketing tool is the quality of the Group's free antivirus software: users have positive experiences with these products, which promotes viral marketing through interactive marketing channels, including through word-of-mouth recommendations and reviews. At the same time, the Group also maintains low user support and servicing costs even after successfully acquiring new users, due to its community forum user support platform. For the Group's free PC antivirus products, there is a service cost of approximately $0.02 per free PC antivirus software user per annum for the year ended 31 December 2017. Further, the Group still generates revenues from these free PC users through indirect monetisation methods.

For the Group's customers, the Group retains the majority of the revenues it generates. Certain revenue share agreements with mobile network operators for certain mobile offerings result in a revenue share of up to 50%. The Group believes that its direct sales model provides strong benefits as compared to the traditional retail or OEM partnership channels and allows the Group to cost-effectively scale its business globally.

Highly scalable business model benefitting from significant network effects

The large size of the Group's user base promotes strong network effects and a continuing cycle of growth. The Group's large user base generates large amounts of data with unique insights into their behaviour, which acts as an input to improve the Group's machine-learning-based technology platform, including its virus detection capabilities and its consumer monetisation platform. As the Group's technology platform improves and successfully protects users, the Group earns more trust from its users, promoting strong global brand awareness. As the Group's global brands strengthen, there is an increase in demand for its products. This increased demand leads, in turn, to more users, perpetuating the cycle. The Group believes this cycle of growth and the related network effects create high barriers for new market entrants.

Attractive financial profile with robust cash flow generation and high cash conversion

The Group operates in a large and robust market, which is estimated to have reached $14.5 billion for the year ended 31 December 2017, and the Group believes the market will reach revenues of $21.3 billion in 2021, according to Group estimates. Within this market, the Group believes it is well-positioned to grow, given the Group's history of growth and of increasing its market share. Furthermore, as the Group continues to expand its product offerings, its total addressable market is expected to continue to expand to include the markets of such product offerings.

The Group's business model provides a high level of billings and revenue visibility, driven by a high proportion of subscription agreements, which are typically paid up front, enhancing the predictability and visibility of the Group's future revenue streams. For the year ended 31 December 2017, 88% of Adjusted Billings excluding Discontinued Business were attributable to subscription agreements, compared to 83% for the year ended 31 December 2016 and 79% for the year ended 31 December 2015. Revenues are predictable as a result of primarily being driven by prior period billings that were recorded as deferred revenue to be recognised in future periods, as the revenue from subscription agreements is recognised on a deferred basis over the life of the agreement, which are typically from one to three years. Further, 88% of the Group's consumer direct desktop renewal revenues are from existing customers auto-renewing their subscriptions.

The Group has established a track record of consistent growth and strong profitability and cash flow generation. The Group's Adjusted Revenues increased by $43.0 million on a like-for-like basis from $736.5 million for the year ended 31 December 2016 to $779.5 million for the year ended 31 December 2017 and increased $16.0 million on a like-for-like basis from $720.5 million for the year ended 31 December 2015 to $736.5 million for the year ended 31 December 2016. As a technology company, the Group benefits from low overhead costs, and its primary cost is personnel costs, which remain low compared to its peers given the location of many of its employees in the Czech Republic, a relatively low-cost jurisdiction. The Group also maintains a cost efficient distribution model with low user acquisition costs and low sales and marketing costs compared to competitors.

For the year ended 31 December 2017 Adjusted Cash EBITDA was $451 million which has grown at a CAGR of 13% over the three years ended 31 December 2017.

The Group also benefits from a high cash conversion profile, resulting from a combination of low capital expenditure, limited working capital requirements and high margins. The Group had 76% cash conversion for the year ended 31 December 2017, driven by deferred revenue inflows and its low capital expenditure requirements.

On a like-for-like basis, the Group had capital expenditures of $15.9 million for the year ended 31 December 2017, $23.7 million for the year ended 31 December 2016 and $26.8 million for the year ended 31 December 2015.

Experienced management team with a strong track record of execution

The Group's management team has significant experience in sales, technology, technology product development and marketing and each member has years of experience in the security software industry. The Group's Chief Executive Officer, Vincent Steckler, has been with the Group for nine years and has worked in the security software industry for over eighteen years. Ondrej Vlcek, the head of the Group's Consumer business, has been with the Group for over twenty years. Mr. Steckler, Mr. Vlcek and the other members of the management team have led the Group through its growth into the leading global provider of software to consumers, growing both organically and through the acquisition and integration of AVG, a leading security software company with $418.6 million in revenue for the year ended 31 December 2016, and Piriform, a leading provider of device performance optimisation software, in 2017, among other key strategic acquisitions. The Group's management team has experience working at blue-chip companies such as Google, Apple, Symantec, General Electric and Netgear, and has been key in attracting and retaining talent from similar companies. The Group believes that the experience of the Group's management team has driven the Group's strong performance, increasing total users from approximately 100 million in 2009 to more than 435 million in 2017.

Avast Key Business Strategies

Continue to drive direct monetisation by up-selling users to paid premium security products and to higher tier premium security products

The Group generates revenues from users who upgrade to paid antivirus security products with advanced functionalities. The Group plans to further differentiate its premium antivirus products from its free antivirus products in order to continue to drive users toward its paid premium security products by adding better add-on products to its premium antivirus offerings and by improving its bundling options for paid antivirus products. Four percent of the Group's desktop antivirus users were premium security software customers in the year ended 31 December 2017 (and 96% were free desktop antivirus users). The Group therefore continues to have a large percentage of its user base which it can convert to its premium paid security products.

The Group also seeks to directly monetise its user base by continuing to sell existing antivirus customers higher tier premium security products. The Group has been successful in recent years with its up-sell campaigns, with average revenue per customer for the Group's antivirus products increasing from $43.09 in 2015 to $45.35 in 2017. As only a small portion of the Group's customers subscribed to its top-tier products within the Avast and AVG brand offerings as of 31 December 2017, the Group continues to have a significant opportunity to up-sell the majority of its customers to higher-tier security offerings.

Continue to drive direct monetisation by successful cross-selling across multiple platforms and services

As the Group's user base grows, the Group utilises its consumer monetisation engine, powered by machine-learning, to effectively push cross-selling campaigns to its users to promote its paid value-added products. The Group has a proven model of driving success with cross-selling its value-added non-antivirus solutions in past years, with the portion of the Group's revenues driven by non-antivirus solutions increasing from 2015 to 2017. In addition to achieving success in cross-selling to the Group's free antivirus users, the Group has also been successful at increasing the average spend of customers on value-added products. The Group plans to continue to improve the breadth and quality of its value-added solutions through product innovation and acquisitions, which the Group believes will further increase its direct monetisation from cross-sales. As the markets grow, the Group believes it is well-positioned to continue to increase its billings and revenues from such products.

Leverage scale, historical expertise and user data to find new ways of indirect monetisation

The Group has powerful methods by which to indirectly monetise its large user community. The Group earns revenues through its distribution agreements with Google, one of which was recently renewed for two years; to promote Chrome downloads, advertising on its free mobile applications, distribution of promotion codes to drive traffic and user acquisition for online retailers in exchange for e-commerce affiliate payments, its analytics business and its secure desktop web browser product. Through these channels, the Group is able to monetise its user base, including its free users, at different points throughout their relationship with the Group.

The Group plans to specifically focus on continued distribution of third party products as well as improving its secure web browsing product, e-commerce rewards business and analytics business to continue to strengthen its success with, and variety of, indirect monetisation methods. On 5 March 2018 the Group began a process by which existing installations of the Group's SafeZone browser product are being updated globally to the newly launched Avast Secure Browser, the Group's updated and renamed successor product, which the Group markets together with, and as an extension of, its online security offerings. The browser is expected to earn the Group a share of advertising revenue generated by user search activity. The Group also plans to launch an upgrade and successor to its existing SafePrice e-commerce affiliate product, offering improved discounts or rebates to users during their online shopping activities through a browser plugin or mobile application. The Group earns revenues reflecting the value that retailers receive in the form of increased traffic, user acquisition and sales. Further, the Group intends to continue to grow its analytics business, Jumpshot, to enhance its brand recognition to be able to target business partners on a larger scale. As the business receives greater volumes of anonymised data and inputs which it can aggregate and analyse, the Group believes it will continue to become more valuable and attractive to market research firms, advertising agencies and consumer brands.

Achieve product innovation to continually improve its product offerings

The Group has a strong portfolio of existing products to improve PC and mobile security, privacy and performance. The Group seeks to more deeply penetrate this market by continuing to innovate and improve upon its offerings, leveraging the Group's large global footprint and customer understanding to feed its product innovation pipeline. The Group believes that its strong focus on R&D, which accounts for over 45% of its permanent employees, will help the Group implement this strategy and continue to improve its offerings. Further, the Group's employees are based in the Czech Republic, which the Group believes is a benefit not only for its cost efficient model but also for its welcoming environment for innovation: the Czech Republic was identified as one of the top ten most innovative countries in the Consumer Technology Association's 2018 International Innovation Scorecard.

The Group's near-term product pipeline includes new and updated products such as anti-tracking products, parental controls, identity theft monitoring and Smart Home security, among others. The Group also plans to continue to improve its SMB offerings to expand its market share in that sector and drive growth.

The Group plans to release its first Smart Home security product in 2018. The Group believes that this market will continue to come into increasing user focus as IoT growth increases. Smart Home devices are complex with high threats to privacy, potentially worse than those threats to PCs, as once a hacker breaks into the network through its weakest link (i.e., a Smart Home product), that hacker could gain access to all devices on that network, resulting in a greater potential for harm. To enter the Smart Home security market, the Group plans to market to its existing users using its consumer monetisation platform. It will also focus on a partnership model with internet service providers, with the potential to also partner with OEMs to offer its products direct to consumers pre-installed on Smart Home equipment.

In addition, the Group plans to release a new anti-tracking product which, similarly to its VPN products, will protect users' privacy online. The anti-tracking product will shield users' internet browsing by masking a user's location, detecting threats, scheduling browser cleanings and allowing private searching and browsing. The Group will also offer a new free service to monitor whether users have been hacked or had their personal details stolen online, providing regular alerts and reports. This hack checking service will allow the Group to establish regular communications with users, which will include product promotions for the purpose of up-selling and cross-selling. Further, the Group also plans to finalise a new parental control innovation which will increase the variety of functionalities as compared to its existing offering, such as location tracking and smart alerts. The Group intends to market this parental control offering both on a direct-to-consumer basis and to consumers through mobile carriers and internet service providers as intermediaries.

Continue strong track record of successful acquisitions

The Group strategically seeks out acquisitions that will consolidate the market and grow the Group's scale and market share, such as the acquisition of AVG in 2016. The Directors recognised that AVG was very similar to the Group in terms of its product offerings, culture and strategy: it offered a free consumer PC antivirus product, with a business model focused on converting free users to paid products, and had its main office in the Czech Republic. The Group believed the two businesses would integrate well, increasing the scale of the Group, expanding its product offerings and creating significant synergies and cost savings compared to running the two as separate entities. The acquisition of AVG brought approximately 141 million new users to the Group's user base, and, by combining the two businesses, the Group expects to over-deliver by approximately $10 million on the Group's original cost synergy projections of $118 million, in particular related to payroll cost reductions in the Czech Republic and the U.S. The Group continues to monitor the market for any other similar security companies which it could acquire to increase its scale.

The Group also believes that there is value in acquiring well-recognised companies and brands that will increase its distribution network and user base. The addition of new product lines and offerings increases the Group's functionalities and ability to sell adjacent products to its users, while also increasing its total addressable market. For example, the Group acquired Piriform (including its main brand, CCleaner) in 2017. The Group sought out this acquisition because it added a compatible optimisation product through CCleaner and brought with it a significant number of users who did not already use Avast or AVG products to whom the Group could cross-sell. As of the date of the acquisition, of CCleaner's approximately 90 million users, approximately 79% (or 71 million users) did not yet use any Group products as of 31 December 2017. In addition, CCleaner was seen as a well-regarded product with strong brand recognition which the Group could cross-sell to its existing users. The Group continues to monitor the market for other complementary businesses focused on adjacent products which it could acquire to increase its distribution.

The Group has a strong track record in diversifying its business and expanding its product breadth in recent years through acquisitions. The Group acquired a small PC optimisation company in 2013 and launched its first organic PC optimisation product, Avast Cleanup, in 2014. Also in 2014, AVG acquired Location Labs to enter the parental controls market. These acquisitions, among others, allowed the Group to broaden its offerings and focus more on cross-selling its value added products, such as its VPN and PC Cleaner, to its users. The Group plans to continue to seek out opportunities for acquisitions that will diversify its product offerings, and in turn, grow the size of its total addressable market.

 

Avast's Financial Track Record

The Group - Consolidated Income Statement Data

 

Group

 

Year ended 31 December

 

2015

2016

2017

 

(in $ millions)

Revenues.......................................................................................

251.0

340.7

652.9

Cost of revenues..............................................................................

(72.8)

(112.1)

(232.8)

Gross profit...................................................................................

178.2

228.6

420.1

Operating costs:

 

 

 

Sales and marketing.....................................................................

(29.0)

(59.6)

(121.4)

Research and development..........................................................

(23.7)

(46.8)

(75.5)

General and administrative..........................................................

(25.9)

(90.3)

(98.9)

Total operating costs......................................................................

(78.6)

(196.7)

(295.8)

Operating profit (loss)................................................................

99.6

31.9

124.3

Analysed as:

 

 

 

Underlying Operating Profit

165.7

183.8

299.7

Share-based payment.......................................................................

(6.1)

(2.7)

(7.7)

Exceptional items...........................................................................

(0.8)

(69.8)

(34.8)

Amortisation of acquisition intangible items....................................

(59.2)

(79.4)

(132.9)

Finance income and expenses, net...................................................

(27.9)

(12.4)

(153.2)

Profit (loss) before income tax...................................................

71.7

19.5

(28.9)

(0.2)

5.1

(4.9)

Profit (loss) for the financial year.............................................

71.5

24.6

(33.8)

 

The Group - Consolidated Cash Flow Data

 

Year ended 31 December

 

2015

2016

2017

 

(in $ millions)

Net cash flows from operating activities.....................................

202.3

224.6

306.5

Net cash used in investing activities............................................

(30.5)

(1,250.0)

(173.8)

Net cash used in financing activities............................................

(154.3)

1,124.9

(193.7)

Cash and cash equivalents at end of period.........................

141.2

240.7

176.3

 

 

 

 

There has been no significant change in the financial or trading position of the Group since 31 December 2017.

 

Board of Directors

John Schwarz, Independent Chairman

Mr. Schwarz has served as one of the Group's Directors since December 2011 and as Chairman of the Group since January 2014. Mr. Schwarz will be the Independent Chairman of the Company at Admission. Since May 2010, Mr. Schwarz has served as co-founder and Chief Executive Officer of Visier Inc., a business analytics software firm. Mr. Schwarz joined SAP AG through its acquisition of Business Objects S.A. in January 2008 and served on the executive board of SAP from March 2008 to February 2010, where he led the successful integration of the two companies. From September 2005 until 2010, Mr. Schwarz was the Chief Executive Officer of Business Objects S.A., later SAP Business Objects, a provider of business intelligence software and services that was acquired by SAP in January 2008. Before joining Business Objects, Mr. Schwarz served as President and Chief Operating Officer of Symantec Corporation from December 2001 to September 2005. Prior to joining Symantec, from January 2000 to November 2001, Mr. Schwarz served as President and Chief Executive Officer of Reciprocal Inc., which provided business-to-business secure e-commerce services to the media industry. Before joining Reciprocal, Mr. Schwarz spent 25 years at IBM Corporation, working in various development, manufacturing, sales and marketing roles. His last position was general manager of IBM's Industry Solutions unit, a worldwide organisation focused on building business applications and related services for IBM's large industry customers. Mr. Schwarz currently serves as a director of Synopsys, Inc. and Teradata, Inc. in addition to his role as an advisor to Dalhousie University in Halifax, Nova Scotia. Mr. Schwarz holds a B.S. in Computer Science from the University of Manitoba, a Diploma in Business Administration from the University of Toronto, and an honorary Ph.D. from Dalhousie University.

Vincent Steckler, Chief Executive Officer

Mr. Steckler has served as Chief Executive Officer and Director of the Group since January 2009. Prior to joining the Group, Mr. Steckler was the Senior Vice President of Worldwide Consumer Sales at Symantec Corporation, where he was in charge of multi-channel international consumer sales valued at $2.0 billion. Mr. Steckler joined Symantec in 2000 as Vice President of Public Sector Business and started Symantec's business of serving U.S. local, state and federal governments. Mr. Steckler also served over two years as Symantec's Vice President for Asia Pacific and Japan and was responsible for all enterprise and consumer business in that region. Prior to joining Symantec, Mr. Steckler had 20 years of experience in software development, systems analysis and engineering, project management, and business development. Mr. Steckler holds two B.S.'s from the University of California, Irvine, one in Mathematics and the other in Information and Computer Science.

Philip Marshall, Chief Financial Officer

Mr. Marshall has served as the Chief Financial Officer since February 2018. Prior to joining the Group, Mr. Marshall was the Chief Financial Officer and Board Member at Exova Group plc from 2015 to 2017. Mr. Marshall was a Non-Executive Director and Audit Committee Member at PhotonStar LED plc from 2013 to 2016 and Chief Financial Officer and Board Member at Wood Mackenzie from 2014 to 2015. Prior to this, Mr. Marshall worked at General Electric from 1996 to 2013. He also currently serves as a Supervisory Board and Audit Committee Member at Waberer's International. Mr. Marshall holds a BA in Accounting Studies from University of West London.

Ondrej Vlcek, Executive Vice President and General Manager, Consumer, & Chief Technology Officer

Mr. Vlcek serves as the Group's EVP and GM for the Consumer business and CTO, leading the largest business at Avast. Through his strategies and vision, Mr. Vlcek has architected the Group's cloud based security network for the newly announced IoT security solutions and has led his team to significant growth. Serving as the Group's CTO since 2009, Mr. Vlcek has pioneered Avast's transformation from a traditional PC antivirus vendor into the leading provider of next-gen security solutions it is today. In 2003, Mr. Vlcek became a chief developer at Avast and led the team that developed one of the first antivirus programs for Windows. Mr Vlcek holds an MS in Mathematics from Czech Technical University in Prague.

Pavel Baudiš, Non-Executive Director

Mr. Baudiš is one of the Group's co-founders and has served as a Director of the Group since the incorporation of Avast Software a.s. in December 2006. Mr. Baudiš will be a Non-Executive Director of the Company at Admission. In 1988, Mr. Baudiš wrote the original program from which the Group's portfolio of products is generated. Since 1991, Mr. Baudiš has played a leading role in the development of the Group's business with its predecessor entity, ALWIL Software partnership. Prior to co-founding Avast, Mr. Baudiš was a graphics specialist at the Czech Computer Research Institute (VUMS). Mr. Baudiš holds an M.S. in Information Technology from the Prague School of Chemical Engineering.

Eduard Kučera, Non-Executive Director

Dr. Kučera is one of the Group's co-founders and has served as a Director of the Group from the incorporation of Avast Software a.s. in December 2006, including as Chairman from January 2007 to February 2014. Dr. Kučera will be a Non-Executive Director of the Company at Admission. Since 1991, Dr. Kučera was responsible for the activities of the Group's predecessor entity, ALWIL Software partnership. From 1991 to 2009, Dr. Kučera served as Chief Executive Officer of the Group, directing day-to-day operations that included the transition to a free software distribution model in 2002. Prior to co-founding the Group, Dr. Kučera was a computer hardware specialist at the Czech Computer Research Institute (VUMS). Dr. Kučera holds a doctorate in experimental physics from the Charles University in Prague.

Lorne Somerville, Non-Executive Director

Mr. Somerville has been one of the Group's Directors since 2014. Mr. Somerville will be a Non-Executive Director of the Company at Admission. Mr. Somerville is Co-Head of the Strategic Opportunities Fund and Head of the CVC Telecommunications Media and Technology team. He is based in London. Prior to joining CVC, he worked for UBS where he was Joint Global Head of Telecommunications and Head of the European Communications Group, and Swisscom AG as Head of Swisscom International. Mr. Somerville holds an MA in Computer Sciences from the University of Cambridge and an MBA from IMD, Lausanne.

Warren Finegold, Senior Independent Non-Executive Director

Mr. Finegold has been one of the Group's Directors since February 2015. Mr. Finegold will be the Senior Independent Director of the Company at Admission. Mr. Finegold retired from the Vodafone Group Executive Committee in June 2016 having served for 10 years, most recently as Group Business Development Director. He had previously served as Group Strategy and Business Development Director and CEO Global Business Development. While a member of the Executive Committee, Mr. Finegold was responsible for strategy, business development, mergers and acquisitions and partner networks. From 1985 to 1995, he was an Executive Director at Goldman Sachs International in New York and London. From 1996 to 2006, he served as a Managing Director of UBS Investment Bank and head of its technology team in Europe. He has been a Member of Supervisory Board at VodafoneZiggo Group B.V. since 31 December 2016. He has been an Independent Non-Executive Director at Inmarsat plc since August 2017. He has been a Non-Executive Director at UBM plc since 19 May 2017 and its Senior Independent Director since February 2018. Mr. Finegold holds a M.A. in Philosophy, Politics and Economics from Oxford University and a Masters degree in Business Administration from London Business School.

Ulf Claesson, Independent Non-Executive Director

Mr. Claesson has been one of the Group's Directors since October 2012. Mr. Claesson will be an Independent Non-Executive Director of the Company at Admission. Since 2009, Mr. Claesson has served as a Partner at BLR & Partners AG, a private equity firm in Zurich, Switzerland where he advises technology companies and investors. In addition, since 1997, Mr. Claesson has served as founder and Managing Director of Whitecap GmbH and Whitecap LLP. From 2006 to 2009, Mr. Claesson served as General Manager and Vice President at Hewlett-Packard Corporation. Prior to founding Whitecap in 1997, Mr. Claesson worked for 20 years at IBM Corporation serving in various engineering, sales, management and director positions. Mr. Claesson currently serves as a member of the Board of Directors of AO InvestAG, the President of Board and Director at BlankPage AG and a member of the board of the Swiss Federal Commission for Innovation and Technology. He is also a lecturer at the Swiss Federal Institute of Technology in Zurich. Mr. Claesson holds a M.Sc. from Chalmers University of Technology.

Erwin Gunst, Independent Non-Executive Director

Mr. Gunst has been one of the Group's Directors since October 2012. Mr. Gunst will be an Independent Non-Executive Director of the Company at Admission. From July 2008 to March 2010, Erwin served as Chief Operating Officer and a Member of the Executive Board of SAP AG where he was responsible for global operations, information technology, human resources and the management of all SAP Labs worldwide. From October 2004 to July 2008, Erwin served as a Corporate Officer of SAP AG and President of Customer and Solutions Operations for Europe, the Middle East and Africa. From 1988 to 2004, Erwin served in a variety of positions with SAP, including Managing Director of SAP AG subsidiaries in Belgium, Switzerland and the United Kingdom. Erwin holds a M.S. degree in Commercial Engineering from the Free University (Solvay) in Brussels, Belgium.

The Group does not expect the Company to comply with the full provisions of the UK Corporate Governance Code (the " Governance Code") in respect of composition of the Board by the date of Admission. However, the Group believes this will not have an impact on the Group's governance in practice and intends to achieve full compliance with the Governance Code over time and will update the market in due course.

 

Important Notice

The contents of this announcement, which has been prepared by and is the sole responsibility of Avast Holdings, have been approved by Morgan Stanley & Co. International plc ("Morgan Stanley") and UBS Limited ("UBS Investment Bank") solely for the purposes of section 21(2)(b) of the Financial Services and Markets Act 2000 as amended ("FSMA").

 

The information contained in this announcement is for background purposes only and does not purport to be full or complete. No reliance may be placed by any person for any purpose on the information contained in this announcement or its accuracy, fairness or completeness.

 

Avast Holdings has included non-GAAP and non-IFRS financial measures in this announcement (including Adjusted Billings, Adjusted Revenue and Adjusted Cash EBITDA, among others) which have not been and will not be audited. These non-GAAP and non-IFRS financial measures are not recognised measures of financial performance or liquidity under UK GAAP or IFRS, but are measures used by the Group's management to monitor the underlying performance of the Group's business and operations. These non-GAAP and non-IFRS measures may not be indicative of the Group's historical operating results nor are such measures meant to be predicative of future results. These measurements may not be comparable to those of other companies under the same or similar names. Reference to these non-GAAP and non-IFRS financial measures should be considered in addition to GAAP and IFRS financial measures, but should not be considered а substitute for results that are presented in accordance with GAAP or IFRS.

 

Neither this announcement, nor the information contained herein is for publication, distribution or release, in whole or in part, directly or indirectly, in or into the United States (including its territories and possessions, any State of the United States and the District of Columbia), Australia, Canada or Japan, including to any branch or agency of a non-US person located in the United States, or in any other jurisdiction where to do so could constitute a violation of the relevant laws of such jurisdiction. Any failure to comply with this restriction may constitute a violation of United States, Australian, Canadian, Japanese or other securities laws. The Offer and the distribution of this announcement and other information in connection with Admission and the Offer in other jurisdictions may be restricted by law and persons into whose possession any document or other information referred to herein comes should inform themselves about and observe any such restriction. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction.

 

This announcement does not contain or constitute an offer of, or the solicitation of an offer to buy, or subscribe for, Shares to any person in the United States (including its territories and possessions, any State of the United States and the District of Columbia), Australia, Canada or Japan or in any jurisdiction to whom or in which such offer or solicitation is unlawful. The Shares referred to herein may not be offered or sold, directly or indirectly, in the United States unless registered under the US Securities Act or offered in a transaction exempt from, or not subject to, the registration requirements of the Securities Act. The Offer and sale of Shares referred to herein has not been and will not be registered under the Securities Act or with any regulating authority or under any applicable securities laws of any state or other jurisdiction of the United States or under the applicable securities laws of Australia, Canada or Japan. Subject to certain exceptions, the Shares referred to herein may not be offered or sold in Australia, Canada or Japan or to, or for the account or benefit of, any national, resident or citizen of Australia, Canada or Japan. There will be no public offer of the Shares in the United States, Australia, Canada or Japan or in any other jurisdiction where to do so could be unlawful.

 

In member states of the European Economic Area ("EEA") (each, a "Relevant Member State"), this announcement and any offer if made subsequently is only addressed to and directed at persons who are "qualified investors" within the meaning of Article 2(1)(e) of the Prospectus Directive ("Qualified Investors"). For these purposes, the expression "Prospectus Directive" means Directive 2003/71/EC (and amendments thereto, including the 2010 PD Amending Directive, to the extent implemented in a Relevant Member State), and includes any relevant implementing measure in the Relevant Member State and the expression "2010 PD Amending Directive" means Directive 2010/73/EU. In the United Kingdom this announcement is exclusively addressed to and directed at Qualified Investors who are (i) persons who have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "Order"); (ii) high net worth entities falling within Article 49(2)(a) to (d) of the Order; or (iii) other persons to whom it can otherwise lawfully be distributed (each a "Relevant Person"). This announcement must not be acted or relied upon by persons other than Qualified Investors in any member state of the EEA other than the United Kingdom and Relevant Persons in the United Kingdom and any investment or investment activity or controlled investment or controlled activity to which this presentation relates will only be available to such persons and will be engaged in only with such persons.

 

This announcement contains historical market data that has been obtained or derived from industry publications, market research and other publicly available information. Certain information regarding market size, market share, market position, growth rate and other industry data pertaining to the Group and its business contained in this announcement consist of Directors' estimates and conclusions based on their review of internal Group data, external third-party data, reports compiled by professional organisations and other sources.

 

This announcement includes statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements may be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "plans", "projects", "anticipates", "expects", "intends", "may", "will" or "should" or, in each case, their negative or other variations or comparable terminology, or by discussions of strategy, plans, objectives, goals, future events or intentions. Forward-looking statements may and often do differ materially from actual results. Forward-looking statements include all matters that are not historical facts and involve predictions, and include statements regarding: objectives, goals, strategies, outlook and growth prospects; future plans, events or performance and potential for future growth; contracted revenues, committed revenues, liquidity, capital resources and capital expenditures; economic outlook and industry trends; developments of the Group's markets; and the strength of the Group's competitors. In particular, statements in this announcement regarding expectations in respect of the Group's Adjusted Billings, Adjusted Revenue, Adjusted Cash EBITDA, revenue or capital expenditure, as well as other expressions of the Group's targets and expectations, should be considered forward-looking statements. Such statements may differ materially from the Group's actual results. These expectations and estimates are based on a number of assumptions, which are inherently subject to significant business, operational, economic and other risks, many of which are outside of the Group's control. Accordingly, such assumptions may not materialise at all. Any forward-looking statements, including the Group's medium term objectives, reflect the Group's current view with respect to future events and are subject to risks relating to future events and other risks, uncertainties and assumptions relating to the Group's business, results of operations, financial position, liquidity, prospects, growth or strategies and the industry in which the Group operates. In particular, such factors include, but are not limited to, changes in economic conditions, the Group's competitive environment, the Group's relationship with customers, the Group's ability to execute its strategy, the legislative or regulatory regimes under which the Group operates, or the taxation regime applicable to the Group, as well as other factors within and beyond the Group's control that may affect its operations or planned strategies and operational initiatives. As a result, the Group's actual results may vary from the medium term objectives established herein and those variations may be material. Forward-looking statements speak only as of the date they are made and cannot be relied upon as a guide to future performance.

 

Each member of the Group, the Banks and their respective affiliates expressly disclaims any obligation or undertaking to update, review or revise any forward looking statement contained in this announcement whether as a result of new information, future developments or otherwise, subject, in the case of the Group and its affiliates, as required by law or regulation.

 

Each of Morgan Stanley, UBS Investment Bank, Barclays Bank Plc, Credit Suisse Securities (Europe) Limited, Jefferies International Limited, Merrill Lynch International, and Keybanc Capital Markets Inc. (together, the "Underwriters") and N M Rothschild & Sons Limited ("Rothschild" or the "Financial Adviser" and together with the Underwriters, the "Banks"), are acting exclusively for the Group and no-one else in connection with the Offer. They will not regard any other person as their respective clients in relation to the Offer and will not be responsible to anyone other than the Group for providing the protections afforded to their respective clients, nor for providing advice in relation to the Offer, the contents of this announcement or any transaction, arrangement or other matter referred to herein. Morgan Stanley and UBS Investment Bank are authorised by the Prudential Regulation Authority ("PRA") and regulated by the FCA and the PRA in the United Kingdom. Rothschild is authorised and regulated by the FCA in the United Kingdom.

 

This announcement is an advertisement for the purposes of the UK Prospectus Rules of the FCA and not a prospectus. Investors should not subscribe for or purchase any transferable securities referred to in this announcement except on the basis of information in the Prospectus intended to be published by the Company in due course in connection with the proposed admission of its Shares to the premium listing segment of the Official List of the FCA and to trading on the main market of the London Stock Exchange. Copies of the Prospectus will, following its publication, be available from the Group's website at www.avast.com. Any purchase of Shares in the proposed Offer should be made solely on the basis of the information contained in the final Prospectus to be issued by the Company in connection with the Offer and Admission. Before investing in the Shares, persons viewing this announcement should ensure that they fully understand and accept the risks which will be set out in the Prospectus when published. The information in this announcement is for background purposes only and does not purport to be full or complete. No reliance may be placed by any person for any purpose on the information contained in this announcement or its accuracy or completeness. This announcement does not constitute or form part of any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for any Shares or any other securities nor shall it (or any part of it) or the fact of its distribution, form the basis of, or be relied on in connection with, any contract therefor. The information in this announcement is subject to change.

 

The IPO timetable, including the date of Admission, may be influenced by a range of circumstances such as market conditions. There is no guarantee the Offer and/or that Admission will occur and you should not base your financial decisions on the Group's intentions in relation to the Offer and Admission at this stage. Acquiring investments to which this announcement relates may expose an investor to a significant risk of losing all of the amount invested. Persons considering making such investments should consult an authorised person specialising in advising on such investments. This announcement does not constitute a recommendation concerning the Offer. The value of the Shares can decrease as well as increase. Potential investors should consult a professional advisor as to the suitability of the Offer for the person concerned. Past performance cannot be relied upon as a guide to future performance.

 

In connection with the Offer of the Shares, each of the Underwriters and any of their affiliates, acting as investors for their own accounts, may take up a portion of the Shares in the Offer as a principal position and in that capacity may retain, purchase, sell, offer to sell or otherwise deal for their own accounts in such Shares and other securities of the Company or related investments in connection with the Offer or otherwise. Accordingly, references in the Prospectus, once published, to the Shares being issued, offered, subscribed, acquired, placed or otherwise dealt in should be read as including any issue or offer to, or subscription, acquisition, placing or dealing by, the Underwriters and any of their affiliates acting in such capacity. In addition, the Underwriters and any of their affiliates may enter into financing arrangements (including swaps or contracts for differences) with investors in connection with which the Underwriters and any of their affiliates may from time to time acquire, hold or dispose of Shares. None of the Underwriters nor any of their respective affiliates intend to disclose the extent of any such investment or transactions otherwise than in accordance with any legal or regulatory obligations to do so.

 

None of the Banks nor any of their respective affiliates or any of their respective directors, officers, employees, advisers or agents accepts any responsibility or liability whatsoever for or makes any representation or warranty, express or implied, as to the truth, accuracy or completeness of the information in this announcement (or whether any information has been omitted from the announcement) or any other statement made or purported to be made by it, or on its behalf, in connection with the Company, Avast Holdings, the Shares or the Offer or any other information relating to the Company, Avast Holdings, its subsidiaries or associated companies, whether written, oral or in a visual or electronic form, and howsoever transmitted or made available or for any loss howsoever arising from any use of this announcement or its contents or otherwise arising in connection therewith. Each of the Banks and each of their respective affiliates accordingly disclaim, to the fullest extent permitted by applicable law, all and any liability whether arising in tort, contract or otherwise which they might otherwise be found to have in respect of this announcement or any such statement or information. No representation or warranty express or implied, is made by any of the Banks or any of their respective affiliates as to the accuracy, completeness, verification or sufficiency of the information set out in this announcement, and nothing in this announcement will be relied upon as a promise or representation in this respect, whether or not to the past or future.

 

In connection with the Offer, Morgan Stanley, as stabilisation manager, or any of its agents, may (but will be under no obligation to), to the extent permitted by applicable law, over-allot Shares or effect other transactions with a view to supporting the market price of the Shares at a higher level than that which might otherwise prevail in the open market. Morgan Stanley is not required to enter into such transactions and such transactions may be effected on any stock market, over-the-counter market, stock exchange or otherwise and may be undertaken at any time during the period commencing on the date of the commencement of conditional dealings of the Shares on the London Stock Exchange and ending no later than 30 calendar days thereafter. However, there will be no obligation on Morgan Stanley  or any of its agents to effect stabilising transactions and there is no assurance that stabilising transactions will be undertaken. Such stabilising measures, if commenced, may be discontinued at any time without prior notice. In no event will measures be taken to stabilise the market price of the Shares above the offer price. Save as required by law or regulation, neither Morgan Stanley  nor any of its agents intends to disclose the extent of any over-allotments made and/or stabilisation transactions conducted in relation to the Offer.

 

In connection with the Offer, Morgan Stanley as stabilisation manager, may, for stabilisation purposes, over-allot Shares up to a maximum of 15% of the total number of Shares comprised in the Offer. For the purposes of allowing it to cover short positions resulting from any such over-allotments and/or from sales of Shares effected by it during the stabilisation period, Morgan Stanley will enter into over-allotment arrangements pursuant to which Morgan Stanley may purchase or procure purchasers for additional Shares up to a maximum of 15% of the total number of Shares comprised in the Offer (the "Over Allotment Shares") at the offer price. The over-allotment arrangements will be exercisable in whole or in part, upon notice by Morgan Stanley, at any time on or before the 30th calendar day after the commencement of conditional trading of the Shares on the London Stock Exchange. Any Over-allotment Shares made available pursuant to the over-allotment arrangements, including for all dividends and other distributions declared, made or paid on the Shares, will be purchased on the same terms and conditions as the Shares being issued or sold in the Offer and will form a single class for all purposes with the other Shares.

 

Certain figures contained in this announcement, including financial information, have been subject to rounding adjustments. Accordingly, in certain instances, the sum or percentage change of the numbers contained in this announcement may not conform exactly with the total figure given.

 

Information to Distributors

 

Solely for the purposes of the product governance requirements contained within: (a) EU Directive 2014/65/EU on markets in financial instruments, as amended ("MiFID II"); (b) Articles 9 and 10 of Commission Delegated Directive (EU) 2017/593 supplementing MiFID II; and (c) local implementing measures (together, the "MiFID II Product Governance Requirements"), and disclaiming all and any liability, whether arising in tort, contract or otherwise, which any "manufacturer" (for the purposes of the MiFID II Product Governance Requirements) may otherwise have with respect thereto, the Shares have been subject to a product approval process, which has determined that such Shares are: (i) compatible with an end target market of retail investors and investors who meet the criteria of professional clients and eligible counterparties, each as defined in MiFID II; and (ii) eligible for distribution through all distribution channels as are permitted by MiFID II (the "Target Market Assessment"). Notwithstanding the Target Market Assessment, distributors should note that: the price of the Shares may decline and investors could lose all or part of their investment; the Shares offer no guaranteed income and no capital protection; and an investment in the Shares is compatible only with investors who do not need a guaranteed income or capital protection, who (either alone or in conjunction with an appropriate financial or other adviser) are capable of evaluating the merits and risks of such an investment and who have sufficient resources to be able to bear any losses that may result therefrom. The Target Market Assessment is without prejudice to the requirements of any contractual, legal or regulatory selling restrictions in relation to the Offer. Furthermore, it is noted that, notwithstanding the Target Market Assessment, the Underwriters will only procure investors who meet the criteria of professional clients and eligible counterparties.

 

For the avoidance of doubt, the Target Market Assessment does not constitute: (a) an assessment of suitability or appropriateness for the purposes of MiFID II; or (b) a recommendation to any investor or group of investors to invest in, or purchase, or take any other action whatsoever with respect to the Shares.

 

Each distributor is responsible for undertaking its own target market assessment in respect of the Shares and determining appropriate distribution channels.

 

 

1 All adjusted figures include Piriform pre-acquisition results

2 CAGRs for 2015-2017 excluding Discontinued Business and Piriform

3 CAGR for 2015-2017 excludes Piriform, Discontinued Business (assuming 100% drop-through) and realized cost synergies from AVG

4 Cash Conversion is calculated as Unlevered Free Cash Flow (uFCF) as a % of Adjusted Cash EBITDA. uFCF represents Adjusted Cash EBITDA less capital expenditures, plus cash flows in relation to changes in working capital (excluding change in deferred revenue and change in deferred cost of goods sold) and taxation

5 Excluding Discontinued Business and Piriform

6 Excluding Discontinued Business


This information is provided by RNS
The company news service from the London Stock Exchange
 
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