Helsinki, Finland -
October 20, 2004
SSH's interim report for january 1 - september 30, 2004
- Net sales for January-September totaled EUR 6.3 million, down 42.5
percent year on year (EUR 11.0 million in Q1-Q3/2003). 2004 net sales
are not comparable with the 2003 figure, due to the divestment of the
OEM business.
- The SSH Tectia business grew by 4.8 percent on a year earlier.
- The SSH business increased its third-quarter net sales by almost 30
per cent over the previous year.
- Operating loss for January-September amounted to EUR -4.6 million (a
loss of EUR -4.1 million).
- During January-September, the company concluded 9 customer
agreements, each worth over EUR 100,000, 3 of which were signed during
the third quarter.
- During the second quarter, SSH concluded its largest ever agreement
with a US systems integrator.
KEY FIGURES
7-9/ 7-9/ 1-9/ 1-9/ 1-12/
2004 2003 2004 2003 2003
Net sales, EUR million 2.1 3.3 6.3 11.0 13.9
Net sales, change % -37.06 -14.1 -42.5 -11.2 -17.6
Operating profit/loss, -0.9 -0.8 -4.6 -4.1 5.2
EUR million
% of net sales -41.1 -25.0 -73.5 -36.9 37.5
Operating profit/loss, -3.2 61.5 -14.5 -65.9 136.9
change %
Profit/loss before -0.6 -0.9 -4.1 -4.0 5.5
extraordinary items and
taxes, EUR million
% of net sales -30.3 -25.5 -65.6 -36.2 40.0
Number of employees 102 131 102 131 104
at period-end
Earnings per share, EUR -0.15 -0.14 0.20
Equity per share, EUR 1.33 1.16 1.48
NET SALES
Consolidated net sales for January-September totaled EUR 6.3 million
(EUR 11.0 million), down by 42.5 percent, year on year. The 2004 net
sales are not comparable with those reported for the same period a
year ago, due to the divestment of the OEM business in 2003 based on
an agreement signed by SSH and SafeNet Inc, a US company, in October
2003.
Products based on the SSH Tectia solution generated net sales of EUR
6.3 million during the report period, up 4.8 percent over the figure
reported a year ago (EUR 6.0 million).
During Q3, SSH continued the systematic implementation of its strategy
based on the SSH Tectia solution. The companys primary target groups
range from large corporations and financial institutions to government
agencies, with most of SSHs sales for the third quarter stemming from
these customer segments.
The 2004 third-quarter net sales came to EUR 2.1 million, showing a
year-on-year fall of 37.1 percent (EUR 3.3 million). Products based on
the Tectia solution generated net sales of EUR 2.1 million in the
third quarter of 2004, compared to EUR 1.6 million posted a year
earlier, a year-on-year improvement of 28.8 percent.
The US dollars depreciation against the euro had a substantial effect
on consolidated net sales for the report period, i.e. the US dollar
average rate dropped by 10 percent from the previous years
corresponding rate. SSHs invoicing is mostly based on US dollars.
RESULTS AND EXPENSES
Operating loss for January-September amounted to EUR -4.6 million (a
loss of EUR -4.1 million), with net loss coming to EUR -4.1 million (a
loss of EUR -4.0 million). The establishment of new offices in Germany
and the UK coupled with the related recruitment incurred exceptional
non-recurring expenses in the companys cost structure during the
first half of the year.
In July, the company recorded a provision, which in September was EUR
0.1 million, as required by IAS standards regarding its so-called
unprofitable contract. SSHs US subsidiary moved to smaller and more
affordable premises. At the same time, the company subleased its Palo
Alto office, but this rental income does not fully cover rental
expenses. However, as a result of the sublease contract, the
subsidiarys recurring expenses fell considerably, with a favorable
impact on the companys cash flow.
Operating loss for the third quarter amounted to EUR -0.9 million (a
loss of EUR -0.8 million), while net loss totaled EUR -0.6 million (a
loss of EUR -0.9 million).
SSHs reported fixed costs for the report period declined year on
year. The first-half results for 2003 were still burdened by the costs
resulting from the Kuopio office and its closure, as well as those
stemming from the OEM business. Year on year, fixed costs for the
report period decreased by around EUR 2.0 million, divided between
payroll expenses and other operating expenses on a fifty-fifty basis.
Research and development expenses for January-September totaled EUR
3.0 million (EUR 4.0 million), while sales and marketing expenses came
to EUR 6.3 million (EUR 6.9 million). Administrative expenses were EUR
1.8 million (EUR 2.2 million).
Research and development expenses for the third quarter came to EUR
0.8 million, compared with the EUR 1.1 million posted a year ago.
Sales and marketing expenses totaled EUR 1.9 million (EUR 2.0
million). Administrative expenses were EUR 0.5 million (EUR 0.6
million).
BALANCE SHEET AND FINANCIAL POSITION
SSHs financial position remained solid and strong during the report
period. The consolidated balance sheet total on September 30, 2004
stood at EUR 39.6 million (EUR 35.6 million), of which liquid assets
accounted for EUR 37.8 million (EUR 33.5 million), or 95.6 percent of
the balance sheet total. The company has no long-term liabilities
other than the subordinated loan of EUR 0.2 million granted by the
National Technology Agency (Tekes).
Gearing, or the ratio of net liabilities to shareholders equity, was
-88.0 (-89.5) at the end of the third quarter. Equity ratio on
September 30, 2004 stood at 95.5 percent (95.2 percent).
The reported gross capital expenditure for the period totaled EUR 0.4
million (EUR 0.7 million), consisting mainly of software investments.
Reported financial income consisted of interest income and capital
gains on fund units. Financial income and expenses totaled EUR 0.5
million, compared with EUR 0.1 million in the previous year.
Since SSH, under IAS 39, classifies financial assets and other
marketable securities as available-for-sale assets, it recognizes
changes in their value under shareholders equity. Only after the sale
of an asset does the company recognize interest income in the income
statement. During the report period, SSH recognized an increase of EUR
0.04 million in the value of its financial and other marketable
securities.
Business operations and investments showed a negative cash flow of EUR
3.5 million and EUR 0.3 million, respectively. Cash flow from
financing, EUR 0.1 million, was generated by share subscriptions,
based on the employee stock-option scheme. The company showed a
negative total cash flow of EUR 3.7 million during the period.
MARKET DEVELOPMENTS
As in the preceding quarters, the third quarter was characterized by
cautious signs of recovery in IT investments. Similarly, the number of
invitations to tender, and projects pending among SSHs customers -
large corporations, financial institutions and government agencies -
increased, although the conclusion of actual contracts was a slow
process.
Legislative reforms on data confidentiality and secure data
communication are taking place both in the US and Europe. Customers
are facing an ever-greater challenge in terms of information security
management due to the gradual disappearance of boundaries between
companies' internal and external information networks, with recent
surveys suggesting that large corporations are finding it more
difficult to protect their intranets and businesses from sophisticated
worms and back doors. The SSH Tectia solutions features are well in
line with this trend, and SSH is confident that reforms will have
favorable effects in terms of customers planning secure remote
management of their information systems and solutions for protecting
their business applications.
The number of companies actively testing new data security solutions
increased in North America, SSHs main market area, with demand mainly
focusing on solutions for secure remote management of network servers
and various kinds of data communication equipment. Currently, SSH
Tectia Manager is included in practically all major SSH Tectia
installations.
In Europe, the SSH Tectia solution attracted growing interest,
especially among financial institutions and government organizations.
Customers interest in securing their business applications grew
slightly during the third quarter. For SSH, the most interesting
countries in Europe were still Germany, the UK and the Nordic
countries, with SSH taking a huge step forward in the UK during the
third quarter when a major UK bank selected the SSH Tectia solution
for secure remote management.
In Asia, financial institutions were the most important customer
segment for SSH during the third quarter. Asian customers were
primarily interested in the secure remote management of traditional
network servers and various data communication equipment, as evidenced
by an international bank, based in China (Hong Kong), selecting SSH
Tectia for secure remote management.
Competition in the market for secure remote management solutions took
a new form in the third quarter when F-Secure, a Finnish company,
entered into a strategic partnership with WRQ, a US firm, which became
the global, exclusive distributor of F-Secures SSH products. This is
expected to maintain fierce price competition in both the US, Europe
and Asia.
SALES PERFORMANCE
SSHS NET SALES
EUR million 7-9/ 4-6/ 1-3/ 10-12/ 7-9/ 1-12/
2004 2004 2004 2003 2003 2003
BY SEGMENT *
AMER 1.4 2.0 1.0 1.6 1.2 6.5
APAC 0.1 0.1 0.2 0.5 0.7 2.2
EROW 0.6 0.5 0.5 0.8 1.4 5.1
SSH Group total 2.1 2.6 1.7 2.9 3.3 13.9
SSH TECTIA BUSINESS
Net Sales** 2.1 2.6 1.7 2.3 1.6 8.3
* The figures for 2003 by segment are not fully comparable with those
for 2004 because they include the OEM business divested in Q4/2003.
** The SSH Tectia solution was launched during the last quarter of
2003. Net sales for previous quarters include net sales of the
products integrated as part of the SSH Tectia solution.
In line with its long-term strategy, SSH continued its strong sales
and marketing efforts during the third quarter. Compared with the
corresponding period in the previous year, net sales of products
belonging to the SSH Tectia solution rose by 28.8 percent. However,
the third-quarter sales performance is traditionally weaker than that
of the second quarter, as evidenced by the third quarters 17.5
percent decline in net sales over the previous quarter.
Although the sales process for system-level products for major
customers is still protracted, the average size of contract grew
during the third quarter, in line with SSHs long-term strategy.
The Americas, Asia Pacific, Europe and Rest of the World accounted for
67.9 percent (45.4 percent), 6.1 percent (15.3 percent) and 26.0
percent (39.3 percent) of reported net sales, respectively.
Asia Pacific and Europe and Rest of the World saw a decrease in their
year-on-year share of net sales, as a result of the divestment of the
OEM business. SSHs measures to reinforce and train its sales
organization to sell the SSH Tectia solution in these market areas
have made good progress.
During the report period, SSH concluded 9 customer agreements each
worth more than EUR 100,000 and 3 of which were signed during the
third quarter. SSHs ten largest customers accounted for 43.0 percent
of reported net sales, with the largest single customer accounting for
around 19 percent. As the average size of contract is still on the
increase, individual contracts may also come to represent a
considerable share of future net sales.
PRODUCTS AND MARKETING
In line with its long-term strategy, SSH continued to focus its sales
and marketing efforts during the first half of 2004 on large
corporations, financial institutions and government agencies in the
US, Europe and Asia.
The company strengthened its sales organization by reinforcing its
partner network complementing the SSH Tectia solution. In addition, it
was involved in major trade fairs and customer workshops in the US,
Europe and Asia, while embarking on the launch of active, targeted
marketing campaigns promoting secure remote management solutions.
In August, SSH joined HPs partnership program and entered into a
distributor partnership with SiegeWorks, a US company.
In September, SSH announced that it had concluded an OEM licensing
agreement with Cryptico A/S, enabling SSH to incorporate Crypticos
encryption and data authentication software into its SSH Tectia
solution. High-performance cryptographic algorithms pave the way for
new uses for SSH Tectias managed security middleware solution.
During the second quarter, SSH also launched a new version of the SSH
Tectia data security solution. SSH Tectia is based on award-winning
SSH Secure Shell technology, and the new version is much easier to
integrate with various user data management systems. The SSH Tectia
solution enables companies to replace conventional, insufficient
authentication methods easily and cost-effectively with electronic
certificates and strong two-factor authentication. The third quarter
saw several smaller software update projects for SSH Tectia and the
extension of operating system support into HP Itanium. At the same
time, SSH sharpened its product strategy in such a way that the
management of certificates will be integrated seamlessly with SSH
Tectia.
For SSHs business, the relevant data security markets can be roughly
divided into two application areas: data communications encryption and
secure remote management. SSH estimates that the size of its target
market in 2004 is worth around EUR 180 million, this figure excluding
the traditional PKI infrastructure market, which is no longer high on
SSHs agenda, This estimate is based on reports by international
market research firms and SSHs own estimates.
RESEARCH AND DEVELOPMENT
January-September R&D expenses totaled EUR 3.0 million (EUR 4.0
million), accounting for 46.7 percent of net sales (36.4 percent),
with this fall due mainly to the divestment of the OEM business in
October 2003. In addition, the closure of the Kuopio office in the
first quarter of 2003, and the resulting relocation of R&D resources
to Helsinki, also lowered expenses.
In accordance with IAS, SSH capitalizes only product development
expenses caused by the commercialization of new products at the end of
R&D processes. Such R&D expenses incurred during the report period
totaled EUR 0.3 million, with these expenses to be capitalized as part
of the commercialization of the new SSH Tectia Manager solution.
During the third quarter there were no capitalized R&D expenses. SSH
will continue to expense the majority of its R&D expenses directly.
At the end of September, the company held nine patents with 18
pending.
HUMAN RESOURCES AND ORGANIZATION
During the report period, SSH reinforced its sales organization, with
the UK and German sales teams in Europe recruiting more staff, in
addition to a few salespeople hired in the US.
In June, Mr Juha Saksi, M.Sc. (Eng.) and eMBA, was appointed Vice
President of Sales, Europe and Asia, and SSH Management Team Member.
Prior to joining SSH, Juha Saksi held positions at F-Secure as
Director of Wireless Security Business and at Okmetic as VP of Sales
and Marketing. He was also a member of the management team in both
companies. In his new position, Saksi is in charge of SSH Tectia sales
in the European and Asian markets, and of sales development in
cooperation with SSHs local partners.
At the end of June, the Group had 102 employees on its payroll, down
by 29 over the previous year (-22.1 percent).
At the end of the period, 39.2 percent of personnel worked in R&D,
44.1 percent in sales and marketing, and 16.7 percent in
administration.
The company will follow a moderate policy in terms of any increase in
its sales and R&D staff.
BOARD AND AUDITORS
Until the Annual General Meeting on April 27, 2004, SSH Communications
Security Corps Board of Directors consisted of Tapio Kallioja, Tomi
Laamanen, Timo Ritakallio and Tatu Ylönen, who were all re-elected as
Board members, with Tomi Laamanen re-elected as Chairman.
The AGM re-elected PricewaterhouseCoopers Oy, an authorized public
accountants firm, as the companys auditor, with Henrik Sormunen, an
authorized public accountant, acting as the principal auditor.
SHARES, SHAREHOLDING AND CHANGES IN THE GROUP STRUCTURE
The reported trading volume of SSH Communications Security Corp shares
for the period totaled 7,439,262 (valued at EUR 13,403,556.61), i.e.
26.5 percent of shares changed hands. The highest quotation for the
period was EUR 2.69 and the lowest EUR 1.18. The trade-weighted
average price for the period amounted to EUR 1.80, and the share
closed at EUR 1.33 (Sept.30, 2004).
There were no substantial changes in SSH Communications Security
Corps shareholding during the report period. Applied Computing
Research (ACR) Oy holds 60.4 percent of the companys shares.
In March, the company announced that the Board of Directors of SSH and
Applied Computing Research (ACR) had signed a merger agreement whereby
ACR would merge with SSH. Through the implementation of the merger,
SSH would issue 16,942,487 new shares for ACRs shareholders, Mr.
Ylönen and Mr. Kivinen, as a consideration of the merger. The number
of these shares equals that of SSH shares currently held by ACR. The
shares held by ACR will be transferred to SSHs ownership.
The Annual General Meeting on April 27, 2004 approved ACRs and SSHs
merger plan, the increase of share capital related to the merger
consideration, and the merger of ACR with SSH, as proposed by the
Board of Directors. The AGM also decided on the conditional
invalidation of the SSH shares held by ACR to be transferred to SSH as
a result of the merger, and on the reduction of shareholders equity.
In addition, the AGM decided to reduce the companys share premium
fund by transferring a total of EUR 15,000,000 to unrestricted equity.
The key objective of this merger is to streamline the corporate
structure and enhance the transparency of SSHs shareholding. The plan
is to implement the merger on October 31, 2004.
SHARE CAPITAL AND BOARD AUTHORIZATIONS
The companys registered share capital on September 30, 2004 came to
EUR 842,691.78, consisting of 28,089,726 shares. During the report
period, SSH increased its share capital twice, based on the
subscription of the new shares under SSHs stock-option scheme. A
total of 334,750 and 19,166 new SSH shares were subscribed under the
1999 and 2003 stock-option schemes, respectively, with the result that
the companys share capital increased by EUR 10,617.48.
SSHs Annual General Meeting of April 27, 2004 authorized the Board to
decide by April 27, 2004 to increase share capital through a rights
issue and/or grant stock options or issue bonds with warrants, or
convertible bonds, in such a way that the resultant share capital may
increase by a maximum of EUR 165,000. The authorization has not been
exercised.
On August 27, 2004, the Trade Register gave the green light for the
reduction of the share premium fund by EUR 15,000,000.
EVENTS AFTER THE REPORT PERIOD
In September, SSH implemented a Tectia solution in the US, worth EUR
0.4 million, for one of the worlds largest financial services
companies. However, contrary to the related income recognition
predicted for September, SSH recognized the deal for October since the
customer had dated the order for then. This deal is a part of a large
frame agreement, and the management expects to see more purchase
orders based on this frame agreement in the future.
After the report period, SSH and Instasec Oy signed a letter of intent
regarding the transfer of the further development of the SSH Certifier
PKI platform to Instasec Oy. This OEM licensing includes the transfer
of existing SSH Certifier customer relationships to Instasec Oy.
SSH introduced two new modules for its SSH Tectia solution, with the
new versions of the SSH Tectia Server software enabling powerful,
visible encryption for business applications, while protecting
application server remote management. In addition, the company has
adopted a new pricing model for its SSH Tectia, designed to make
powerful enterprise security more cost-effective for entry-level
customers.
In early October, SSH appointed Timo Rinne, M.Sc. (CS), Chief
Technology Officer responsible for the companys technology strategy
and its application to product development and the SSH Tectia
products. His predecessor, Tatu Ylönen, will continue as a member of
SSHs product development team and Board of Directors, while
concentrating on his doctoral dissertation at the Helsinki University
of Technology.
PROSPECTS
During the fourth quarter, SSH will continue to place particular
emphasis on expanding its SSH Tectia business and catering for the
needs of its selected customer segments - large corporations,
financial institutions and public-sector organizations.
A number of legislative programs are underway both in the United
States and Europe, which will have an impact on their data security
and data systems. In the development of its SSH Tectia product
concept, SSH has remained proactive in relation to the effects of
these legislative initiatives so as to allow customers to adapt to the
new requirements as easily as possible. SSHs management is confident
that these legislative reforms will have a favorable effect on demand
for the SSH Tectia solution.
SSH sharpens its net sales forecast for 2004 to EUR 9-11 million. The
companys management expects the SSH Tectia solution, including the
SSH Tectia Manager and SSH Tectia Connector product, which met with a
favorable reception in the market, to provide greater scope for
increasing the average size of contracts while contributing to the
achievement of the companys net sales target. The management
estimates that SSH will show an operating loss for 2004 as a whole.
INCOME STATEMENT
EUR million 7-9/ 7-9/ 1-9/ 1-9/ 1-12/
2004 2003 2004 2003 2003
Net sales 2.1 3.3 6.3 11.0 13.9
Purchasing and production 0.0 -0.5 -0.1 -2.5 -2.5
costs
Gross profit 2.1 2.8 6.2 8.5 11.3
Other operating income 0.2 0.2 0.2 0.5 11.3
Expenses
Product development -0.8 -1.1 -3.0 -4.0 -5.2
Sales and marketing -1.9 -2.0 -6.3 -6.9 -9.6
Administration -0.5 -0.6 -1.8 -2.2 -2.6
Operating profit/loss -0.9 -0.8 -4.6 -4.1 5.2
Financial income and expenses 0.2 0.0 0.5 0.1 0.4
Profit/loss before taxes -0.6 -0.9 -4.1 -4.0 5.5
a Taxes* 0.0 0.0 0.0 0.0 0.0
Net profit/loss for the -0.6 -0.9 -4.1 -4.0 5.5
period
a)* Taxes are proportionate to the net profit for the period, and no
deferred tax assets are recorded for the periods accrued loss.
1-9/ 1-9/ 1-12/
2004 2003 2003
Earnings per share, EUR -0.15 -0.14 0.20
Earnings per share (diluted), -0.15 -0.14 0.19
EUR
BALANCE SHEET
EUR million Sept. Sept. Dec.
30, 30, 31,
2004 2003 2003
ASSETS
Fixed and non-current assets
Tangible assets 0.5 0.7 0.5
Intangible assets 1.0 1.1 1.2
Deferred tax assets 0.2 0.2 0.2
Fixed and non-current assets 1.7 2.1 2.0
total
Inventories and current
assets
Inventories 0.0 0.5 0.0
Short-term receivables 4.8 4.0 5.2
Short-term investments 31.4 23.0 33.8
Cash and cash equivalents 1.6 6.0 2.9
Total inventories and current 37.8 33.5 41.9
assets
Total assets 39.6 35.6 43.8
LIABILITIES AND SHAREHOLDERS
EQUITY
Shareholders equity 37.1 32.2 41.1
Long-term liabilities
Provisions 0.1 0.0 0.0
Long-term financial 0.4 0.2 0.2
liabilities
Total long-term liabilities 0.5 0.2 0.2
Short-term liabilities 1.9 3.2 2.4
Total liabilities and 39.6 35.6 43.8
shareholders equity
STATEMENT ON CHANGES IN
SHAREHOLDERS EQUITY
Share Issue Revaluat Transl Retained Total
capital premium ion and ation earnings
fund other differ
funds ence
EUR million
Shareholders 0,8 53,0 0,0 -0,3 -17,5 36,0
equity
January 1,
2003
Change 0,0 -13,6 0,4 -0,2 9,7
Shareholders 0,8 39,3 0,4 -0,5 -7,8 32,2
equity Sept.
30, 2003
Change 0,0 0,0 -0,4 0,2 9,1
Shareholders 0,8 39,3 0,0 -0,4 1,3 41,1
equity
December 31,
2003
Change 0,0 -14,9 15,0 0,0
Net loss -4,1
Shareholders 0,8 24,4 15,0 -0,3 -2,8 37,1
equity Sept.
30, 2004
* Transfer to the retained loss account has resulted in a reduction in
the issue premium fund.
CASH FLOW STATEMENT
EUR million 1-9/ 1-9/ 1-12/
2004 2003 2003
Cash flow from business operations -3.5 -5.1 5.5
Cash flow from investments -0.3 -0.8 -1.0
Cash flow from financing 0.1 0.4 0.0
Change/increase(+), decrease (-) -3.7 -5.5 4.5
in liquid assets
Liquid assets at period-start 36.7 34.7 34.7
Adjustment for translation 0.0 -0.2 -0.2
difference
b Liquid assets at period-end 33.0 29.0 39.0
b) Liquid assets consist of cash and cash equivalents, as well as
other marketable securities.
NET SALES BY SEGMENT
EUR million 7-9/ 7-9/ 1-9/ 1-9/ 1-12/
2004 2003 2004 2003 2003
AMER 1.4 1.2 4.3 5.0 6.5
APAC 0.1 0.7 0.4 1.7 2.2
EROW 0.6 1.4 1.6 4.3 5.1
SSH Group total 2.1 3.3 6.3 11.0 13.9
OPERATING PROFIT/LOSS
BY SEGMENT
EUR million 7-9/ 7-9/ 1-9/ 1-9/ 1-12/
2004 2003 2004 2003 2003
AMER 0.4 -0.1 1.4 0.0 1.0
APAC 0.0 0.3 0.1 0.4 0.7
EROW 0.6 0.6 -0.1 1.5 11.3
Common Group expenses* -1.8 -1.7 -6.1 -6.0 -7.8
SSH Group total -0.9 -0.8 -4.6 -4.1 5.2
* Common Group expenses include the Groups administration expenses
(e.g. Management, Finance) and headquarters Product Management and
R&D expenses. The capital gains on the divestment of the OEM business
have been divided among these segments.
KEY FIGURES AND RATIOS
1-9/ 1-9/ 1-12/
2004 2003 2003
Net sales, MEUR 6.3 11.0 13.9
Operating profit/loss, MEUR -4.6 -4.1 5.2
Operating profit/loss, % of net -73.5 -36.9
sales 37.5
Profit before extraordinary -4.1 -4.0 5.5
items and taxes, EUR million
Profit/loss before extraordinary -65.6 -36.2 40.0
items and taxes, % of net sales
Profit/loss before taxes, MEUR -4.1 -4.0 5.5
Profit/loss before taxes,% of -65.6 -36.2 40.0
net sales
Return on investment, % 16.6
Return on equity, % 14.6
Interest-bearing net -32.7 -28.8
liabilities, MEUR -36.5
Equity ratio, % 95.5 95.2 94.7
Gearing, % -88.0 -89.5 -88.7
Gross capital expenditure, MEUR 0.4 0.7 0.8
% of net sales 6.3 6.3 6.2
R&D expenses, MEUR 3.0 4.0 5.2
% of net sales 46.7 36.4 37.4
Personnel, on average 106 136 131
Personnel, period-end 102 131 104
For the companys line of business, the value of outstanding orders is
not a significant reference stated in the notes to the accounts.
PER-SHARE DATA
1-9/ 1-9/ 1-12/
2004 2003 2003
Earnings per share -0.15 -0.14 0.20
EUR (undiluted)
Earnings per share, EUR -0.15 -0.14 0.19
(diluted)
Equity/share, EUR 1.33 1.16 1.48
No. of shares at period-end, 28,090 27,730 27,736
1,000
Share performance, in EUR
Average price 1.80 1.13 1.31
Low 1.18 0.61 0.61
High 2.69 2.36 2.36
Share price, period-end 1.33 1.91 1.70
Market capitalization, period- 37.4 53.0 47.2
end, MEUR
Volume of shares traded, 7.4 5.3
million 7.6
Volume of shares traded, 26.5 19.1
% of total 27.5
Value of shares traded, MEUR 13.4 5.9 10.0
Price-earnings ratio (P/E) 8.4
CONTINGENT LIABILITIES
EUR million Sept. 30, Sept. Dec.
2004 30, 31,
2003 2003
Rental liabilities 0.2 1.2 0.2
Leasing liabilities 0.2 0.2 0.2
Other contingent liabilities 2.4 0.0 2.4
Currency derivatives (not 1.6 0.0 2.0
included in the hedging
calculations)
These data are based on unaudited figures.
NOTES TO THE CONSOLIDATED ACCOUNTS
1. ACCOUNTING PRINCIPLES
This interim report has been prepared in accordance with the IAS 34
standard (Interim Reports).
2. RECONCILIATION OF NET
PROFIT/LOSS
EUR million FAS CHANGE IFRS FAS CHANGE IFRS
7-9/ 7-9/ 1-9/ 1-9/
2003 2003 2003 2003
Net sales 3.3 3.3 11.0 11.0
Purchasing and -0.5 -0.5 -2.5 -2.5
production costs
Gross profit 2.8 2.8 8.5 8.5
Other operating income 0.2 0.2 0.5 0.5
Operating expenses -3.8 -3.8 -13.1 -13.1
Operating profit/loss -0.8 -0.8 -4.0 -4.1
Total financial income 0.0 0.0 0.1 0.1
and expenses
Net profit/loss for -0.8 -0.9 -4.0 -4.0
the period
Earnings per share, -0.14 -0.14
EUR
Earnings per share -0.14 -0.14
(diluted), EUR
The reconciliation of net profit/loss for the entire fiscal year,
2003, is presented in the interim report for the first quarter of
2004, dated April 20, 2004.
3. RECONCILIATION OF BALANCE SHEET
EUR million FAS CHANGE IFRS
Sept.30, Sept. 30,
2003 2003
Long-term assets
Tangible assets 1.5 -0.8 0.7
Intangible assets 0.3 0.8 1.1
Deferred tax assets 0.0 0.2 0.2
Total long-term assets 1.8 0.2 2.1
Short-term assets
Deferred tax assets 0.2 -0.2 0.0
Inventories 0.5 0.5
Short-term receivables 4.0 4.0
Available-for-sale 22.6 0.4 23.0
assets
Liquid assets 6.0 6.0
Total short-term assets 33.4 33.5
Total assets 35.2 35.6
LIABILITIES AND
SHAREHOLDERS EQUITY
Shareholders equity
Share capital 0.8 0.8
Issue premium fund 41.0 -1.6 39.3
Revaluation reserve 0.0 0.4 0.4
Retained profit/loss -10.0 1.6 -8.4
Subordinated loan 0.2 -0.2 0.0
Shareholders equity 32.1 32.2
total
Long-term liabilities
Long-term 0.0 0.2 0.2
financial liabilities
Total long-term 0.0 0.2
liabilities
Short-term liabilities 3.2 3.2
Total liabilities 35.2 35.6
More detailed information on the transition can be found in a press
release dated March 18, 2004.
SHAREHOLDERS
On September 30, 2004, the companys ten largest shareholders,
excluding nominee-registered shares, were as follows:
Applied Computing Research (ACR) Oy 60.3%
Assetman Oy 5.0%
Ilmarinen Mutual Pension Insurance Company 1.7%
Promotion Capital I Ky 1.7%
Jaakonsaari Markus 1.6%
Ylönen Tatu 1.4%
Tatu Ylönen Oy 1.3%
Pohjola Finland 1.3%
Kaukonen Kalle 1.2%
Adams George 1.2%
Total 76.7%
FINANCIAL REPORTING
A briefing on this interim report for analysts and the media will be
presented in the auditorium of SSHs head office on the 1st floor at
Fredrikinkatu 42, Helsinki, Wednesday, on October 20, 2004, starting
at 11:00 a.m.
Entrance can be gained from the corner of Fredrikinkatu and
Malminkatu.
SSH Communications Security Corp will release its next interim report
and financial statements for January 1-December 31, 2004 in February
2005. Further information will be available on the companys website
in due course.
Helsinki, October 19, 2004
SSH COMMUNICATIONS SECURITY CORP
Board of Directors
Arto Vainio
CEO
CEO
Arto Vainio
Tel: +358 20 500 7400
Investor Relations/CFO
Mika Peuranen
Tel: +358 20 500 7419
E-mail: 
© 2004 SSH Communications Security Corp. All rights reserved. ssh® is a registered trademark of SSH Communications Security Corp in the United States and in certain other jurisdictions. All other names and marks are property of their respective owners.