Today’s half year results from cyber security supplier Avast (AVST) are very good with adjusted revenue beating analyst forecasts and impressive cash generation.

Shares in the FTSE 250 business jumped 7% by mid-morning to 350.6p, valuing Avast at $3.43bn.

Czech Republic-based Avast is one of the world’s biggest cyber security providers to consumers, with more than 435m people worldwide using its Avast and AVG firewall, anti-hacking, malware and anti-virus toolkits.

The figures show 9.2% growth in adjusted revenues to $421.7m (after stripping out discontinued business lines and FX oscillations), or $426.8m with just FX stripped out. That beat analyst estimates for roughly $423m.

The company also put up adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) of $236.5m, implying a 55.4% margin. That generated $250.5m of operating cash flows, if we exclude $74m of one-offs.


Perhaps the best measure of success in the period comes from Avast’s efforts to turn ‘freemium’ customers into paying subscribers. The so-called freemium model sees basic tolls given away for nothing in exchange for customers accepting third-party ads pitched at them.

Obviously, convincing more consumers to switch from freemium to a regular, monthly subscription is far better for the company in the long run. And efforts have been pretty good, especially among PC and laptop users.

Adjusted revenues here grew 11% to $308m, benefitting from particularly strong user monetisation in the period and reportedly good retention rates, as well as investments made into the ecommerce and monetisation/marketing engine to help make the conversion process smoother (e.g. one-click upgrades).

This led the company to up its full year guidance from this part of the business from previous high single-digit growth to low double-digit expansion. With a few swings and roundabouts elsewhere in the business it means Avast now looks set to put up revenue growth at the top of its’ previously guided high single-digit steer.

Consensus is currently pitched at $473m of EBITDA on $860m revenues, but we would anticipate those estimates being moved higher after today.

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Issue Date: 14 Aug 2019