February 13, 2008
SSH's financial statement bulletin, 1 January - 31 December 2007
SSH COMMUNICATIONS SECURITY CORP STOCK EXCHANGE RELEASE
February 13th, 2008, at 9:00 a.m.
SSH´S FINANCIAL STATEMENT BULLETIN, 1 JANUARY – 31 DECEMBER 2007
STRONG GROWTH, GOOD PROFITABILITY
- Net sales for 2007 totaled EUR 14.1 million, up 49.4 percent year on
year (EUR 9.5 million in 2006).
- Operating profit for 2007 amounted to EUR 2.2 million (EUR –0.9
million in 2006), profit EUR 3.0 million (EUR –0.2 million).
- Fourth-quarter net sales came to EUR 2.2 million, operating loss was
EUR –1.0 million and net loss EUR –0.8 million. The largest deliveries
in 2007 took place in the 1st and 3rd quarters.
- Profit per share EUR 0.11 (-0.01). The Board of Directors requests
authorization to distribute to shareholders max EUR 0.15 per share.
- During 2007, significant new breakthrough orders in new large
customer segments such as retail and manufacturing. The three largest
orders of the year came from three leading US retail chains.
KEY FIGURES
10-12/ 10-12/ 1-12/ 1-12/
2007 2006 2007 2006
Net sales (MEUR) 2.2 3.3 14.1 9.5
Net sales, change % -32.7 -19.2 49.4 1.7
Operating profit/loss -1.0 0.5 2.2 -0.9
(MEUR)
% of net sales -46.6 15.2 15.3 -9.7
Operating profit/loss, -293.1 -51.5 343.4 65.2
change %
Profit/loss before taxes -0.8 0.7 3.0 -0.2
(MEUR)
% of net sales -34.8 20.4 21.5 -2.4
Number of employees 83 80 83 80
at period end
Earnings per share (EUR) 0.11 -0.01
Earnings per share, 0.11 -0.01
diluted(EUR)
Shareholders’ equity per 0.73 0.64
share (EUR)
SSH Communications Security is a world-leading provider of enterprise
security solutions and end-to-end communications security, and the
original developer of the Secure Shell protocol. The company’s SSH
Tectia solution addresses the most critical needs of large
enterprises, financial institutions and government agencies.
NET SALES
Consolidated net sales for 2007 totaled EUR 14.1 million (EUR 9.5
million), up by 49.4 % percent, year on year. Net sales for the fourth
quarter totaled EUR 2.2 million (3.3 million).
For a system-level IT product, such as SSH Tectia, the sales process
is often long. With major customers, the timing of large orders will
cause fluctuations in sales from quarter to quarter.
The majority of SSH’s invoicing is based on the U.S. dollar. During
the report period, the U.S. dollar’s average exchange rate was
approximately 9 percent weaker than during the same period for 2006.
RESULTS AND EXPENSES
Operating profit for 2007 amounted to EUR 2.2 million (in 2006 a loss
of EUR –0.9 million), with net profit totaling EUR 3.0 million (a loss
of EUR –0.2 million). Operating loss for the fourth quarter totaled
EUR -1.0 million (a profit of EUR 0.5 million), with net loss
amounting to EUR -0.8 million (a profit of EUR 0.7 million).
SSH’s fixed costs reported for the period increased EUR 1.4 million.
Research and development expenses for the report period totaled EUR
3.7 million (EUR 3.4 million). The cost increases of R&D were mainly
caused by development of test automation and technical customer
services.
Sales and marketing expenses came to EUR 6.5 million (EUR 5.7
million). The difference was caused by expenses linked to the strong
growth of sales, such as sales commissions, as well as additional
marketing activities.
Administrative expenses were EUR 1.9 million (EUR 1.6 million). The
cost increase was mainly due to a reservation, about 0.2 million, for
the re-structuring of SSH’s Asian sales organization. The purpose of
the arrangements is to sharpen the geographic focus of the sales
operations, emphasize the role of the re-sellers, as well as reduce
running rate expenses.
BALANCE SHEET AND FINANCIAL POSITION
The financial position of SSH remained at a healthy level during the
report period. The consolidated balance sheet total on December 31,
2007 stood at EUR 25.5 million (EUR 21.3 million), of which liquid
assets accounted for EUR 22.0 million (EUR 16.7 million), or 86.2
percent of the balance sheet total. The company has no interest
bearing liabilities. On December 31, 2007, gearing, or the ratio of
net liabilities to shareholders’ equity, was –105.8% (-92.9%) and the
equity ratio stood at 91.4 percent (92.5 percent).
The reported gross capital expenditure for the period totaled EUR 0.1
million (EUR 0.1 million). Reported financial income came mainly from
capital gains on fund shares and interests on bank deposits. Financial
income and expenses totaled EUR +0.9 million, compared to EUR +0.7
million a year ago.
During 2007, SSH reported a positive cash flow of EUR 5.1 million from
business operations, whereas investments showed a cash flow of EUR -
5.0 million. Cash flow from financing was EUR 0.0 million. Liquid
assets at period end were at the previous year’s level.
MARKET DEVELOPMENTS
Large enterprise, financial, and public sector organizations have a
growing need for improved data security in several ways. New and
existing data security risks, continuously evolving regulations, and
increasing security standards and models continue to create new needs,
to which we can respond with our versatile product offerings.
Demand for products that secure internal information transfers in
large listed enterprises and public sector organizations has continued
growing in USA. A similar demand growth trend is expected to spread in
the next phase to the largest European and Asian enterprises.
Regulations that currently influence the demand of our company’s
products are, for instance, the U.S. Sarbanes-Oxley Act (SOX), the PCI
DSS standards of the major credit card companies, as well as HIPAA for
the patient data in the health care industry. These regulations set
standards for data security and include audits, which drive now our
customers to implement security upgrade programs for their IT
infrastructure against internal and external threats in a timely
manner.
SSH is confident that legislative reforms, new data security
standards, as well as many industry and company level data security
development programs will continue to drive demand favorably for SSH
Tectia.
SALES PERFORMANCE
SSH’S NET SALES
EUR million 10-12/ 7-9/ 4-6/ 1-3/ 1-12/ 10-12/ 1-12/
2007 2007 2007 2007 2007 2006 2006
BY SEGMENT
AMER 1.4 7.3 1.0 1.8 11.5 2.0 5.7
APAC 0.2 0.2 0.2 0.2 0.8 0.2 0.9
EROW 0.6 0.3 0.3 0.5 1.8 1.2 2.8
SSH Group total 2.2 7.8 1.5 2.6 14.1 3.3 9.5
BY OPERATION
License sales 1.1 6.8 0.6 1.6 10.1 2.4 5.8
Maintenance 1.1 1.0 0.9 0.9 4.0 0.9 3.6
Total 2.2 7.8 1.5 2.6 14.1 3.3 9.5
The Americas, the Asia Pacific region, and the ‘Europe and Rest of the
World’ market area accounted for 82 percent (61 percent), 6 percent 10
percent) and 13 percent (30 percent)of reported net sales,
respectively.
During the report period, SSH concluded eight new license agreements
that were worth more than EUR 100,000. The ten largest customers
accounted for 61 percent of reported net sales, with the largest
single customer accounting for approximately 30 percent.
PRODUCTS AND MARKETING
During the report period, SSH focused its sales and marketing efforts
on large enterprises, financial institutions, and government agencies
in the USA, Europe, and Asia, in line with its long-term strategy. The
company continued also developing its partner network in the same
focus markets.
The marketing focus was on the company’s new Tectia security solutions
for the IBM mainframe environment and SSH Tectia’s enhanced file
transfer security applications for large internal enterprise networks.
The company continued the development of the new third generation
architecture–based products. The company also further developed the
product structure to provide higher value, add new features, expand
application uses, as well as enable easier purchasing for the
customers.
New applications, support of all essential enterprise OS platforms
including IBM mainframes, increased technical support, versatile
integration capabilities, and centralized management have made SSH
Tectia the most extensive and highest performance integrated end-to-
end communications security solution in the market.
RESEARCH AND DEVELOPMENT
Research and development expenses for January-September totaled EUR
3.7 million (EUR 3.4 million), the equivalent of 26.0 percent of net
sales (35.6 percent). During the report period SSH did not capitalize
any research and development expenses.
At the end of December SSH had 13 granted patents and 13 patent
applications.
HUMAN RESOURCES AND ORGANIZATION
At the end of December, the Group had 83 employees on its payroll, up
by 3 from the previous year, an increase of 3.8 percent.
At the end of the period, 51.8 percent of the employees worked in R&D,
37.4 percent in sales and marketing, and 10.8 percent in corporate
administration.
BOARD AND AUDITORS
The Annual General Meeting (AGM) on March 29, 2007 re-elected Tapio
Kallioja, Tomi Laamanen, Timo Ritakallio and Tatu Ylönen to SSH
Communications Security Corp.’s Board of Directors, with Laamanen re-
elected as chairman.
The AGM again elected to have PricewaterhouseCoopers Oy, authorized
public accountants, as the company’s auditor, with Henrik Sormunen,
authorized public accountant, acting as the principal auditor.
SHARES, SHAREHOLDING AND CHANGES IN GROUP STRUCTURE
The reported trading volume of SSH Communications Security Corp.
shares totaled 15,020,468 (valued at EUR 24,462,255). The highest
quotation was EUR 2.39 and the lowest EUR 1.12. The trade-weighted
average share price for the period was EUR 1.63, and the share closed
at EUR 1.61 (December 28, 2007).
In February, SSH Communications Security Corp received a notification
in accordance with the Securities Market Act 2:9, according to which
the total of Assetman Oy’s shares in SSH Communications Security Corp
has on February 13, 2007 risen above one tenth part (1/10) of the
total of all shares and related voting rights. Assetman OY held 14.0
percent of the company´s shares at the end of the financial year.
There were no other substantial changes in SSH Communications Security
Corp.’s shareholding during the report period. Tatu Ylönen holds,
directly and through his company, Tatu Ylönen Oy, 52.9 percent of the
company’s shares, and Tero Kivinen holds 5.5 percent. More information
about the shareholding can be obtained from the company´s Web site.
There were no changes in the group structure during the period.
SHARE CAPITAL AND BOARD AUTHORIZATIONS
The company’s registered share capital on December 31, 2007 was EUR
856,083.36, consisting of 28,536,112 shares. During 2007, SSH
increased its share capital three times, based on subscription to
the new shares under SSH’s stock-option plan. In total, 3,550 new
SSH shares were subscribed to under the I/1999 stock-option plan and
100,667 shares under the I/2003 stock-option plan, and 8,000 shares
under the II/2003 stock-option plan, respectively. With these
subscriptions the company’s share capital was increased by EUR
3,366.51.
On March 29, 2007, the Annual General Meeting decided, in accordance
with the proposal made by the Board of Directors to authorize the
Board of Directors to decide on issuing the maximum of 5.500.000
shares in one or more new share issues or on issuing special rights to
share subscription as defined in the Finnish Companies Act Chapter 10,
section 1, with or without subscription rights to shareholders.
This authorization is effective until the next Annual General
Meeting, but will expire June 30, 2008, at the latest. The Board has
not exercised this authorization.
CORPORATE GOVERNANCE
The company complies with the corporate governance recommendations for
listed companies issued by the OMX Nordic Exchange Helsinki, the
Central Chamber of Commerce of Finland, and the Confederation of
Finnish Industry and Employers. More information on corporate
governance is available on the company’s Web site (www.ssh.com).
PROSPECTS
New data security regulations and risks continue driving our customers
in all target markets to long-term development programs for the
security of the IT infrastructure.
During 2007 SSH received significant new orders that diversified its
customer base, as well as expanded the ways of use and applications of
the company’s products. Large, successful deliveries of our software
products have reinforced our major customer reference base both
technically and commercially. These and many other positive factors
make us expect good sales results also in the near term.
The US dollar exchange rate and speculations about the US economy
contain some factors of uncertainty that are hard to estimate.
However, our active sales prospect base is at a historically high
level, especially in the US markets. We expect to be in a good
position to leverage the trends of enterprise data security, spreading
from the USA and creating growing demand for our products also in
Europe and Asia.
SSH will pursue clearly profitable results also in 2008.
Due to the large size of individual orders and depending on the timing
of customer projects, significant variation of the quarterly revenue
may occur.
DIVIDEND AND OTHER DISTRIBUTION OF ASSETS
The Board of Directors will propose to the Annual General Meeting that
the Board of Directors would be authorized to decide on the dividend
distribution and/or distribution of assets from the invested
unrestricted equity fund to shareholders so that by virtue of the
authorization assets can be distributed in total a maximum of 0.15
euros per share. The Board of Directors proposes that the maximum
amount of the distribution according to the authorization would be in
total 4,350,000.00 euros and that the authorization would be valid
until December 31st, 2008.
INCOME STATEMENT
EUR million 10-12/ 10-12/ 1-12/ 1-12/
2007 2006 2007 2006
Net sales 2.2 3.3 14.1 9.5
Purchasing and production 0.0 0.0 0.0 -0.1
costs
Gross profit 2.2 3.3 14.1 9.4
Other operating income 0.0 0.1 0.1 0.4
Expenses
Product development -1.1 -0.9 -3.7 -3.4
Sales and -1.5 -1.6 -6.5 -5.7
marketing
Administration -0.7 -0.4 -1.9 -1.6
Operating profit/loss -1.0 0.5 2.2 -0.9
Financial income and expenses 0.3 0.2 0.9 0.7
Profit/loss before taxes -0.8 0.7 3.0 -0.2
Taxes 0.0 0.0 0.0 0.0
Net profit/loss for the -0.8 0.7 3.0 -0.2
period
EARNINGS PER SHARE 1-12/ 1-12/
2007 2006
Earnings per share (EUR) 0.11 -0.01
Earnings per share, diluted 0.11 -0.01
(EUR)
BALANCE SHEET
EUR million 12/31/ 12/31/
2007 2006
ASSETS
Fixed and other non-current
assets
Tangible assets 0.1 0.1
Intangible assets 0.1 0.3
Deferred tax assets 0.2 0.3
Total fixed and other 0.5 0.7
non-current assets
Inventories and current
assets
Short-term receivables 3.0 3.9
Short-term investments 20.3 15.0
Cash and cash equivalents 1.7 1.7
Total inventories and current 25.1 20.7
assets
Total assets 25.5 21.3
LIABILITIES AND SHAREHOLDERS’
EQUITY
Shareholders’ equity 20.8 18.0
Long-term liabilities
Provisions 0.2 0.0
Long-term financial 0.0 0.0
liabilities
Total long-term liabilities 0.2 0.1
Short-term liabilities 4.5 3.3
Total liabilities and 25.5 21.3
shareholders’ equity
CASH FLOW STATEMENT
EUR million 1-12/ 1-12/
2007 2006
Cash flow from business operations 5.1 0.9
Cash flow from investments -5.0 6.5
Cash flow from financing 0.0 -7.0
Change in liquid assets 0.1 0.4
Liquid assets at period start 1.7 1.4
Adjustment for translation -0.1 -0.1
difference
Liquid assets at period end 1.7 1.7
STATEMENT ON CHANGES IN
SHAREHOLDERS’ EQUITY
EUR million Share Issue Fair Trans- Retained Total
Capi- Premium value lation Earnings
tal fund reser- diff. and free
ves reserves
Shareholders’ 0.8 24.4 0.2 -0.7 0.6 25.4
equity
Jan. 1, 2006
Change 0.0 -13.0 -0.1 -0.1 5.7
Shareholders’ 0.9 11.5 0.1 -0.8 6.3 18.0
equity
Dec. 31, 2006
Shareholders´ 0.9 11.5 0.1 -0.8 6.3 18.0
equity
Jan. 1, 2007
Change 0.0 0.0 0.0 -0.2 0.0
Net profit 3.0
Shareholders’ 0.9 11.5 0.1 -1.1 9.4 20.8
equity
Dec. 31, 2007
NET SALES BY SEGMENT
EUR million 10-12/ 10-12/ 1-12/ 1-12/
2007 2006 2007 2006
AMER 1.4 2.0 11.5 5.7
APAC 0.2 0.2 0.8 0.9
EROW 0.6 1.2 1.8 2.8
SSH Group total 2.2 3.3 14.1 9.5
OPERATING PROFIT/LOSS
BY SEGMENT
EUR million 10-12/ 10-12/ 1-12/ 1-12/
2007 2006 2007 2006
AMER 0.6 1.2 7.6 2.9
APAC 0.0 0.0 0.3 0.4
EROW 0.0 0.6 -0.1 0.6
Common Group expenses* -1.6 -1.3 -5.6 -4.8
SSH Group total -0.9 0.5 2.3 -0.9
* Common Group expenses include Group administration expenses (e.g.,
management and finance) and product management and R&D expenses for
corporate headquarters.
KEY FIGURES AND RATIOS
1-12/ 1-12/
2007 2006
Net sales (MEUR) 14.1 9.5
Operating profit/loss (MEUR) 2.2 -0.9
Operating profit/loss, as % of 15.3 -9.7
net sales
Profit/loss before extraordinary 3.0 -0.2
items and taxes (MEUR)
Profit/loss before extraordinary 21.5 -2.4
items and taxes, as % of net
sales
Profit/loss before taxes (MEUR) 3.0 -0.2
Profit/loss before taxes, as 21.5 -2.4
% of net sales
Return on investment (%) 16.4 -1.0
Return on equity (%) 15.7 -1.0
Interest-bearing net liabilities -22.0 -16.7
(MEUR)
Equity ratio (%) 91.4 92.5
Gearing (%) -105.8 -92.9
Gross capital expenditure (MEUR) 0.1 0.1
% of net sales 0.8 1.2
R&D expenses (MEUR) 3.7 3.4
% of net sales 26.0 35.6
Personnel, period average 81 81
Personnel, period end 83 80
PER-SHARE DATA
1-12/ 1-12/
2007 2006
Earnings per share, undiluted 0.11 -0.01
(EUR)
Earnings per share, diluted 0.11 -0.01
(EUR)
Equity per share (EUR) 0.73 0.64
No. of shares at period end 28 536 28 424
(thousands)
Share performance (EUR)
Average price 1.63 1.43
Low 1.12 0.88
High 2.39 2.40
Share price, period end 1.61 1.15
Market capitalization, period 45.9 32.7
end (MEUR)
Volume of shares traded 15.0 13.9
(in millions)
Volume of shares traded, as 52.6 48.8
% of total
Value of shares traded, in 24.5 19.9
millions of euros
Price-to-earnings ratio (P/E) 15.2 -
Price-to-earnings ratio (P/E), 15.3 -
diluted
CONTINGENT LIABILITIES
EUR million 12/31 12/31
2007 2006
Rental liabilities 0.1 0.2
Leasing commitments outside
the balance sheet
Maturing within 1 year 0.7 0.8
Maturing between 1 and 5 1.1 1.3
years
This interim report has been compiled observing IAS 34 (Interim
Financial Reporting) accounting standard. The same accounting
principles have been used in the interim report as in the financial
statement for 2006. These data are based on unaudited figures.
DISCLAIMER
The content in this report is provided by SSH Communications Security
Corp (“SSH”) and its third party content providers for your personal
information only, and does not constitute an offer or invitation to
purchase any securities. Nor does it provide any form of advice
(investment, tax, legal) amounting to investment advice, or make any
recommendations regarding particular investments or products. SSH does
not provide investment advice or recommendations to buy or sell its
shares or the shares of others. If you are interested in investing in
SSH, please contact your financial adviser for further details and
information. Past performance of SSH shares is not indicative of
future results. EXCEPT AS PROVIDED BY APPLICABLE COMPULSORY LAW SSH
EXPRESSLY DISCLAIMS ALL WARRANTIES, EXPRESSED OR IMPLIED, AS TO THE
ACCURACY OF ANY OF THE CONTENT PROVIDED, OR AS TO THE FITNESS OF THE
INFORMATION FOR ANY PURPOSE.
FINANCIAL REPORTING
The company will hold a briefing on its interim report for equity
analysts and the media in Hotel Scandic Simonkenttä, 1st floor,
Cabinet Lönkka, address Simonkatu 9, 00100 Helsinki on Wednesday,
February 13, 2008, starting at 11:00 a.m.
SSH Communications Security Corp will release its next interim report
and financial statements for January 1–March 31, 2008 on April 23,
2008. Further information will be available on the company’s website
in due course.
Helsinki, on February 13, 2008
SSH COMMUNICATIONS SECURITY CORP
Board of Directors
Arto Vainio
CEO
Investor Relations/CFO
Mika Peuranen
Tel: +358 20 500 7419
E-mail: 