Korea's security industry saw slight overall sales growth in the third quarter this year, but profitability deteriorated. Rising demand for solutions based on new technologies drove topline expansion, but operating profit fell as expense increased due to expanded research and development (R&D) and hiring. The industry plans to improve results in the fourth quarter, traditionally a peak season.
According to the security industry on the 17th, AhnLab's third-quarter sales were 64.5 billion won and operating profit was 7.9 billion won, down 5.8% and 7.6%, respectively, from a year earlier. The company said the result reflected efforts to improve its sales structure with a focus on profitability. An AhnLab official said, "This is the result of reducing the proportion of low-profit businesses that have large short-term sales but low operating margins," and added, "While total sales temporarily decreased, overall profitability, including operating margin, improved."
During the same period, Genians recorded sales of 10.4 billion won, up 0.3% from a year earlier, but operating profit was 1.1 billion won, down 52% year over year. The company said external factors such as budget reallocation and execution delays partly affected results, and expense increased due to research and development and staffing to strengthen competitiveness in new businesses such as vaccines and zero trust.
PIOLINK also grew sales 8.0% year over year to 14.7 billion won, but operating profit fell 22.2% to 521 million won. The company said operating profit declined as proactive investment expense related to headcount additions for hyper-converged infrastructure (HCI) and zero trust, and expanded research and development (R&D), were reflected during the first half.
ATON reported third-quarter sales of 14.6 billion won and operating profit of 3.3 billion won, down 2.7% and 12.9%, respectively, from a year earlier. The company said that third-quarter investments in new business R&D, marketing expense, and talent acquisition expense concentrated in the period affected profitability. It especially projected that several high-margin contracts signed in the third quarter would begin to be recognized as sales starting in the fourth quarter.
IGLOO Corp. posted third-quarter sales of 26.8 billion won and operating profit of 1.4 billion won, up 14.2% and 0.8%, respectively, from a year earlier. The company said sales grew slightly through sales of key security solutions, including an extended detection and response (XDR)-based next-generation security operations platform (SIEM).
Thus, the security industry's profitability generally slowed in the third quarter. The common view in the industry is that expense burdens grew as corporations sharply increased research and development investments for artificial intelligence (AI) and cloud transitions. In addition, companies with a high proportion of on-premises projects saw relatively weak third-quarter results as seasonal factors and the timing of recognizing sales from large projects were pushed to the fourth quarter. Intensifying competition to secure talent across the industry and rapidly rising labor costs are also cited as major factors in the deterioration of profitability.
Still, the security industry said it plans to accelerate sales expansion in the fourth quarter, traditionally the peak season. This year as well, large security projects in the public and financial sectors are concentrated in the fourth quarter, creating an environment in which most corporations expect additional sales growth. In particular, after the government released the "pan-ministry comprehensive information protection plan" in Oct., signs of increased security investment have emerged, and expectations for improved results are growing in the industry. The plan includes measures such as introducing a penalty surcharge for concealing or delaying reports of security breaches and strengthening investigative authority.
A security industry official said, "Security-related investment budgets of public institutions account for a high proportion of security companies' sales, and execution mostly takes place in the fourth quarter," and added, "In particular, as demand for information protection-related investment increases among both the pan-government and corporations, expectations for improved results are high."