SSH COMMUNICATIONS SECURITY CORP Stock Exchange Release February 4, 2004, at 9:00 a.m. FINANCIAL STATEMENTS BULLETIN FOR JANUARY 1 - DECEMBER 31, 2003 - SSH’s operating results turned positive and were EUR 5.3 million (EUR -14.1 million), i.e. 38.2 percent (-83.7 percent) of net sales. - The OEM business divestment to SafeNet, Inc. for approx. EUR 12 million increased the results for 2003 by approx. EUR 10.5 million. - Reported net sales fell by 17.6 percent, to EUR 13.9 million (EUR 16.8 million in 2002), due to the OEM business divestment. - In the fourth quarter the revenue of SSH Tectia(TM) Enterprise Security Products targeted at end-user companies increased about 37 percent compared to the third quarter. - The company’s fixed expenses decreased as planned during 2003, by about EUR 9.8 million, or by 36 percent. Gross margin for the fourth quarter rose to nearly 100 percent as the royalties paid to F-Secure Oyj were terminated. - In October, SSH introduced two significant new products for its SSH Tectia solution. SSH Tectia Manager and SSH Tectia Connector complement the solution and strengthen SSH’s position as the world’s leading supplier of Managed Security Middleware solutions. KEY FIGURES 10-12/ 10-12/ 2003 2002 2003 2002 Net sales, EUR million 2.9* 4.4 13.9* 16.8 Net sales, change % -35.2 -9.3 -17.6 -15.4 Operating profit/loss, 9.3 -2.2 5.3 -14.1 EUR million % of net sales 326.9 -48.8 38.2 -83.7 Operating profit/loss, 524.0 7.7 137.6 -109.3 change % Profit/loss before 9.6 -1.7 5.6 -13.6 extraordinary items and taxes, EUR million % of net sales 336.6 -38.2 40.8 -80.6 Number of employees, 104 147 104 147 period-end Earnings/share, EUR 0.20 -0.49 Equity/share, EUR 1.49 1.30 * = Due to the OEM business divestment, completed on November 18, 2003, net sales for 2003 are not fully comparable with those for 2002. NET SALES SSH’s consolidated net sales decreased by 17.6 percent from the previous year, to EUR 13.9 million (EUR 16.8 million in 2002). Net sales for the last quarter fell by 15 percent from EUR 3.3 million in the third quarter, ending up at EUR 2.9 million (EUR 4.4 million), the underlying reason for the fall being the OEM business divestment to the American company SafeNet, Inc. in the last quarter of 2003. The net sales of the OEM business were transferred at the conclusion of the sale to the new owner. The sold OEM business accounted for approx. 35 percent of SSH’s net sales in 2003. Parent company net sales fell by 22.8 percent, amounting to EUR 8.6 million for the fiscal year (EUR 11.1 million). The SSH Tectia product concept launched in the final quarter was well received by the markets. SSH also achieved the first sale and delivery of SSH Tectia Manager product to a major US financial institution. However, due to the long sales process and the timing of the product launches that are part of the concept, the new products did not have a significant influence on net sales for the last quarter. Consolidated net sales for 2003 were also substantially affected by the weaker US dollar against the euro. The average rate of US dollar during 2003 fell by 19.7 percent compared to its average rate during the previous year. The majority of SSH’s invoicing is based on US dollars. RESULTS AND EXPENSES SSH’s consolidated operating profit for the fiscal year reached EUR 5.3 million (EUR -14.1 million), while net profit for the same period amounted to EUR 5.6 million (EUR -13.6 million). Parent-company operating profit came to EUR 5.6 (EUR -7.7 million) and net profit for totaled EUR 6.6 million (EUR -8.0 million). Fourth quarter consolidated operating profit amounted to EUR 9.3 million (EUR -2.2 million), while net profit for the period was EUR 9.6 million (EUR 1.7 million). Due to the OEM business divestment, the Group’s financial position improved during 2003, with consolidated cashflow at EUR +4.4 million and that of the parent company at EUR +4.9 million. The effects of the company’s adjustment measures initiated in 2002 were reflected in SSH Group’s profitability improvements in 2003. The company was successful in its aim to trim its costs to correspond to the changed market situation. The company’s reported fixed expenses amounted to EUR 17.4 million, compared to EUR 27.2 million in the previous year, showing a year-on-year fall of 36.0 percent. When comparing with the figures from 2002, it is important to note that SSH Group’s results in 2002 were burdened by write-downs and certain non-recurring expenses. These non-recurring expenses entered in 2002 totaled EUR 5.1 million. R&D expenses totaled EUR 5.2 million in 2003 (EUR 8.2 million), while amounting to EUR 1.2 million (EUR 1.7 million) in the fourth quarter. During the fiscal year as a whole, R&D spending accounted for approximately 37 percent of net sales. Sales and marketing expenses for the period came to EUR 9.6 million (EUR 14.7 million), while administrative expenses amounted to EUR 2.6 million (EUR 4.3 million). Fourth-quarter sales and marketing expenses came to EUR 2.7 million (EUR 3.2 million), while administrative expenses for the same period amounted to EUR 0.4 million (EUR 0.8 million). Return on investment (ROI) was 16.6 percent (-30.6 percent) and return on equity (ROE) came to 14.6 percent (-31.7 percent). Earnings per share (EPS) were EUR 0.20 (EUR -0.49) and equity per share amounted to EUR 1.49 (EUR 1.30). BALANCE SHEET AND FINANCIAL POSITION The consolidated balance sheet total on December 31, 2003 stood at EUR 43.9 million (EUR 42.0 million), of which liquid assets accounted for EUR 36.7 million (EUR 34.7 million), or 83.6 percent of the balance sheet total. The parent-company balance sheet total on December 31, 2003 was EUR 50.1 million (EUR 45.1 million). Except for the subordinated loan of EUR 0.2 million in shareholders’ equity granted by the National Technology Agency (TEKES), the company has no other long-term liabilities. Gearing, or the ratio of net liabilities to shareholders’ equity, remained at the previous year’s level almost throughout the financial year, standing at -88.5 percent (-95.8 percent) at the end of December. The Group has no other interest-bearing liabilities except for the above-mentioned subordinated loan. Equity-to-assets ratio on December 31, 2003 was 94.7 percent (88.7 percent). Reported gross capital expenditure totaled EUR 0.8 million (EUR 0.4 million), comprising mainly parent-company investments in machinery and software. Reported financial income consisted of interest income. Financial income and expenses totaled EUR +0.4 million, compared to EUR +0.5 million in the previous year. Interest income for 2003 amounted to EUR +1.1 million, but the financial income was affected by exchange rate losses. The parent company recorded financial income and expenses of EUR +0.8 million, compared to the previous year’s EUR -0.4 million. A total of EUR 10.5 million of capital gains on the divestment of the OEM business was entered in other income from business operations. A total of EUR 0.8 million of product development funding, granted by the National Technology Agency (TEKES), was entered in other income from business operations. The Group had two TEKES projects under way during the report period. MARKET DEVELOPMENTS SSH’s customers pursued a cautious investment policy throughout 2003. Larger IT investments were often split into smaller orders and implemented stage by stage over the course of several quarters. Customers also tended to postpone their investment decisions. Hardware and software manufactures, too, tended to shy away from the launch of R&D projects. During the first half of 2003, the market situation remained extremely challenging. During the third quarter, markets began to show their first signs of slight recovery, the mildly favorable trend also continuing during the fourth quarter. In North America, the company’s main market area, growing IT budgets of large corporations, financial institutions and the US government sector initiated increasing IT allocations to data security. As customers tend to be very careful with analyzing the costs and benefits of investments, the opportunities provided by the centrally-managed SSH Tectia solution for cutting costs and managing risks more efficiently were well received by the markets. The interest of potential European customers in the SSH Tectia solution increased steadily during the last quarter. SSH succeeded in strengthening its position especially on SSH Tectia product markets based on the Public Key Infrastructure (PKI) in Great Britain and Finland. During 2003, Great Britain, Germany, Switzerland and Austria, as well as the Nordic countries, consolidated their positions as the most interesting individual markets in Europe from the company’s point of view. SSH is confident that the SSH Tectia solution will strengthen its competitive position in the markets for major companies, financial institutions and public-sector organizations. As the world’s leading supplier of Managed Security Middleware solutions, SSH’s market position is unique, and there are no direct competitors on the end- user company markets for the SSH Tectia solution. SALES PERFORMANCE SSH’S NET SALES EUR million 10-12/ 7-9/ 4-6/ 1-3/ 10-12/ 1-12/ 2003 2003 2003 2003 2002 2002 BY SEGMENT AMER 1.6 1.2 1.8 2.0 2.0 7.1 APAC 0.5 0.7 0.7 0.3 0.8 2.2 EROW 0.8 1.4 1.6 1.3 1.6 7.5 SSH Group total 2.9 3.3 4.1 3.6 4.4 16.8 BY PRODUCT* Enterprise Security 2.5 1.8 3.0 2.0 3.2 10.4 Products OEM products 0.4** 1.5 1.1 1.6 1.2 6.4 SSH Group total 2.9 3.3 4.1 3.6 4.4 16.8 * Due to changes in the product portfolio, the figures for 2002 are not completely comparable with those for 2003. ** Due to the OEM business divestment to SafeNet, Inc., the net sales for OEM products were entered in the fourth quarter until November 18, 2003. By focusing on large corporations, financial institutions and public sector organizations, SSH succeeded in increasing the average size of potential customer contracts during the report period. However, due to the changes in size and nature of the contracts, the sales process has become longer. The delay of the product development of some products within the SSH Tectia solution postponed the final investment decision of a few customers until the beginning of 2004. The Americas, Asia Pacific, and Europe and Rest of the World accounted for 47.3 percent (42.2 percent), 15.5 percent (12.9 percent) and 37.2 percent (44.9 percent) of reported net sales, respectively. The USA remained SSH’s main market area during the report period, and its share grew over the previous quarter, mainly due to the fact that some of the deals transferred from the third quarter were implemented during the fourth quarter. The decrease in Asia Pacific’s net sales in comparison with the previous quarter was due to the fact that the divested OEM business had formed the main part of the area’s sales in the previous quarters. The drop in Europe’s share was due to the postponement of some major deals for 2004. In line with its strategy, SSH focused its sales on Enterprise Security Products targeted at end-user companies, their share of the company’s net sales showing a year-on-year growth. Accounting for 66.4 percent (61.7 percent) of reported net sales, Enterprise Security Products incorporate the SSH Tectia solution, consisting of the end- user versions of the former SSH Secure Shell product family, the SSH Certifier product family and IPVia hardware technology license fees. In the fourth quarter the revenue of SSH Tectia Enterprise Security Products targeted at end-user companies increased about 37 percent compared to the third quarter. OEM products for hardware and software manufacturers accounted for 33.6 percent (38.3 percent) of reported net sales. This product group includes Toolkit and SSH Sentinel products. During the report period, SSH concluded 18 customer agreements, each worth more than EUR 100,000, 5 of which during the last quarter. SSH’s ten largest customers accounted for 29.5 percent of reported net sales. However, none of the customers represents over 10 percent of net sales, in other words, the company does not depend on a single customer. During 2003, SSH reinforced considerably its global partner network. During the second and third quarters, the company concluded major distributor agreements of its products with the US companies iGov.com and Lyme Computer Systems, both providing the US government sector in particular with a broad range of SSH’s products. In Europe, SSH intensified cooperation with its partners, above all in the sales of PKI products. SSH was also in close cooperation with both Siemens Oy and Fujitsu Invia concerning the SSH Tectia Certifier product. PRODUCTS AND MARKETING During 2003, SSH continued to develop its product range according to strategy and introduced several significant product innovations onto the market. The company also increasingly focused its R&D resources on projects in line with its strategy, the aim of which is to strengthen SSH’s leading position as a provider of Managed Security Middleware. During the third quarter, SSH launched the SSH Tectia solution, which is based on innovative data security architecture. The development of SSH Tectia, which falls into the new Managed Security Middleware product category, is part of the strategic decision previously announced by SSH to meet the increasing data security needs of large corporations. During the fourth quarter, SSH launched two major new products for its SSH Tectia solution: SSH Tectia Manager and SSH Tectia Connector. SSH Tectia Manager enables centralized implementation and administration of the SSH Tectia data security solution located at the middleware level, while reducing the large companies’ total data security expenses. SSH Tectia Connector is an invisible workstation application for the end-user, responsible for the protection of the connection between the workstation and the server without separate configuration of individual business applications. During 2003, SSH also launched new versions of most of its products already on the market. The company continued to revise its product range by discontinuing the manufacture, sale and marketing of the SSH Secure Shell for Handhelds, designed for wireless terminals, as well as integrating the SSH Accession(TM) product as part of the SSH Tectia solution. Furthermore, SSH signed a licensing agreement with a major Japanese hardware manufacturer for licensing its VPN hardware technology. SSH was also successful in international product reviews. During the first quarter of 2003, it received the "NSS Approved" certification for its SSH Certifier™ product, awarded by an independent international testing organization. The SSH Secure Shell product (currently the SSH Tectia Client/Server), designed for secure remote connections, received the data security award from the international Information Security magazine and, for the third time in a row, it won the highly recognized "Best Communications Security Solution" award from SC Magazine. At the end of the last quarter, SSH received the FIPS 140-2 certification from NIST (National Institute of Standards Technology) for the crypto module used in many of its products, which is expected to support SSH’s marketing and sales efforts in its selected customer segments. RESEARCH AND DEVELOPMENT SSH continued its research and development spending in 2003, reported R&D expenses totaling EUR 5.2 million (EUR 8.2 million), which accounts for 37.4 percent of net sales (49.0). During the third and fourth quarters, the company put dedicated efforts into the development of products within the SSH Tectia solution. Since the beginning of 2003, SSH has adopted an accounting principle complying with the IAS standard for its R&D expenditure, according to which it will capitalize only product development expenses caused by the commercialization of new products at the end of R&D processes. Such R&D expenses incurred during 2003 totaled EUR 0.2 million, resulting from the commercialization of the new SSH Tectia Manager solution. SSH will continue to expense the majority of its R&D expenses. In connection with the divestment of the OEM business, SSH sold some of the patents belonging to the OEM business to SafeNet, Inc. SSH still holds several major patents related to data security as well as easy product installation and manageability. At the end of December, SSH held 7 patents while 19 were pending. At the end of 2003, SSH appointed Jorma Kemppinen, M.Sc. (Engineering), 38, Vice President of R&D and Technical Services, and member of the Executive Management Team. He is responsible for SSH’s R&D resources, operations and technical services. During 2004, R&D at SSH will pay particular attention to the easy installation and manageability of its products. HUMAN RESOURCES AND ORGANIZATION At the end of the report period, SSH Group had 104 employees on its payroll. The number of employees decreased by 43 over the previous year, or by 41.3 percent. At the end of the period, 39.4 percent of the personnel worked in R&D, 42.3 percent in sales and marketing, and 18.3 percent in administration. During the first quarter of 2003, SSH deployed all of its R&D operations to its office in Helsinki. As a result of the Information and Consultation Procedures relating to the closure of the Kuopio office, the number of employees decreased by 11. During 2004, the company will moderately increase the number of employees in R&D, customer support and sales. BOARD AND AUDITORS Until the Annual General Meeting (AGM) on April 29, 2003, SSH Communications Security Corp’s Board of Directors consisted of Bo Harald, Tapio Kallioja, Tomi Laamanen and Tatu Ylönen. The AGM elected the following Board members: Tapio Kallioja, Tomi Laamanen, Timo Ritakallio and Tatu Ylönen. Tomi Laamanen was re-elected as Chairman. PricewaterhouseCoopers Oy, Authorized Public Accountant, was re- elected as the company’s auditors, with Henrik Sormunen, Authorized Public Accountant, acting as the principal auditor. SHARES AND SHAREHOLDING The reported trading volume of SSH Communications Security Corp shares for the financial year totaled 7,625,766 shares (valued at EUR 9,986,848.57), i.e. 27.5 percent of the shares changed hands. The highest quotation for the year was EUR 2.36 and the lowest was EUR 0.61. The trade-weighted average price for the year was EUR 1.31, and the company’s share closed at EUR 1.70 on the final trading day of the year (December 31, 2003). Fourth-quarter trading volume totaled 2,339,100 shares (valued at EUR 3,992,135.50), i.e. 8.4 percent of the shares changed hands at a low of EUR 1.55 and a high of EUR 2.05. There were no substantial changes in SSH Communications Security Corp’s shareholding during the financial year. The period-end number of shareholders totaled 7,174 (7,571). On December 31, 2003, the ten largest shareholders accounted for 76.2 percent (74.7 percent) of the company’s shares and voting rights. Applied Computing Research Ltd (ACR) still holds 61.1 percent of the company’s shares. Foreign shareholding accounted for 0.9 percent. SHARE CAPITAL AND BOARD AUTHORIZATIONS The company’s registered share capital on December 31, 2003 came to EUR 832,074.30, consisting of 27,735,810 shares. SSH increased its share capital three times during 2003, based on share subscriptions according to SSH’s stock options. The number of shares subscribed on the basis of the 1999 stock options totaled 21,875, increasing the company’s share capital by EUR 656.25. The company’s AGM authorized the Board to decide by 29 April 2004 to increase the company’s share capital through a rights issue and/or granting stock options or issuing bonds with warrants, or convertible bonds, in such a way that the resultant share capital may increase by a maximum of EUR 120,000. The Board did not exercise this authorization by the end of the report period. The AGM approved SSH’s new stock-option schemes. On the basis of the stock-option scheme I/2003, the company may offer its personnel a maximum of 625,000 stock options. Each stock option entitles the holder to subscribe for one SSH Communications Security Corp share, at a nominal value of 3 cents. Depending on the type of warrant, the subscription period will begin in several tranches, on May 1, 2004, May 1, 2005 or May 1, 2006, and end on May 1, 2009, for all stock options. The share subscription price is the closing price of SSH shares, as quoted in continuous trading on the Helsinki Exchanges on May 6, 2003, plus 10 percent, and rounded upwards to the nearest ten cents (EUR 0.87). As a result of the subscriptions, the company’s share capital may rise by a maximum of EUR 18,750. On the basis of the II/2003 stock-option scheme, SSH may offer its personnel in the USA a maximum total of 75,000 stock options. Each stock option entitles the holder to subscribe for one SSH Communications Security Corp share, at a nominal value of 3 cents. Depending on the type of warrant, the subscription period will begin in several tranches, on May 1, 2004, May 1, 2005, May 1, 2006 or May 1, 2007, and end on April 29, 2013, for all stock options. The share subscription price is the closing price of SSH shares, as quoted in continuous trading on the Helsinki Exchanges on May 6, 2003, plus 10 percent, and rounded upwards to the nearest cent (EUR 0.87). As a result of these subscriptions, the company’s share capital may rise by a maximum of EUR 2,250. ADOPTION OF IAS-BASED ACCOUNTING PRINCIPLES SSH has progressed as planned in the adoption of the IFRS accounting principles. Since the beginning of 2002, the Group has adopted revenue recognition principles complying with the IFRS standards. During the project the company has prepared itself for adopting the existing IFRS standards and the related financial reporting procedures. The company has also made preparations for the adoption of those IFRS standards that will be published in 2004. The company is preparing the balancing calculations related to shareholders’ equity and profit, and their announcements, as specified by IFRS1 governing the transitional period. The differences in these balancing calculations governing the transfer period are not significant for the SSH Group, i.e. the transitional period will not have a great impact on the Group’s shareholders’ equity. SSH will publish its first IFRS-based Interim Report for Q1/2004 and the first IFRS-based Annual Report the financial year 2004. PROSPECTS FOR 2004 In 2003, in line with its strategy, SSH completed its transformation from a technology supplier to a supplier of complete data security solutions for end-user companies. A crucial step in this process was the divestment of the OEM business in the fall of 2003, related to the company’s hardware and software manufacturers. The basis for this divestment was strategic, especially the need to invest in the growing SSH Tectia business. Withdrawing from the OEM products releases SSH’s management, sales, marketing and R&D capacities to the business focusing on system-level products for end- users, providing the company with significantly greater opportunities for long-term growth and profitability. The company will focus on serving selected end-user segments, i.e. large corporations, banks, other financial institutions and public-sector organizations. In 2004, SSH will place particular emphasis on the development of its sales organization, R&D and technical services. The re-focused technology range offers excellent possibilities in this respect, and the company can focus more efficaciously on the increase of its SSH Tectia solution business. SSH will also continue to develop new forms of cooperation with its current customers. Ready to strengthen its position across all markets, SSH is geared up for sharp competition. Despite the cautiously positive signs during the last two quarters of 2003, the market situation will remain challenging in 2004. Customers remaining very careful with their investment decisions, they will tend to split their larger IT investments into smaller wholes. However, as the market revival continues and customer companies put their investments into action, SSH will retain a sound basis for increasing its net sales. In light of current developments, it is estimated that SSH Group's net sales for 2004 will be between EUR 14 million and EUR 16 million. The company’s management expects that the SSH Tectia solution, including the new products SSH Tectia Manager and SSH Tectia Connector, which were launched and well received during the last quarter in 2003, will increase the average size of contracts while contributing to net sales. The company’s management estimates that the SSH Group will show an operating profit for the fiscal year 2004. The predicted net sales and operating profit depend on how well the SSH Tectia solution will sell and how SSH will succeed in expanding its sales organization. The aim of the company is to be the leading supplier of Managed Security Middleware used in internal data security for large corporations, financial institutions and public-sector organizations. BOARD PROPOSAL TO THE ANNUAL GENERAL MEETING The Board proposes that no dividend be paid for the fiscal year 2003 and that the net profit of EUR 6,487,849.73 reported for the period be entered in the shareholders’ equity. FINANCIAL STATEMENTS CONSOLIDATED INCOME STATEMENT EUR million 10-12/ 10-12/ 1-12/ 1-12/ 2003 2002 2003 2002 Net sales 2.9 4.4 13.9 16.8 Materials and services 0.0 -1.1 -2.5 -4.6 Gross margin 2.8 3.3 11.3 12.2 Expenses R&D -1.2 -1.6 -5.2 -8.2 Sales and marketing -2.7 -3.3 -9.6 -14.7 Administration -0.4 -0.8 -2.6 -4.3 Other operating income 10.8 0.2 11.3 0.9 Operating profit/loss 9.3 -2.2 5.3 -14.1 Financial income and 0.3 0.4 0.4 0.5 expenses Profit/loss before 9.6 -1.7 5.6 -13.6 extraordinary items and taxes Profit/loss before taxes 9.6 -1.7 5.6 -13.6 Taxes* 0.0 0.0 0.0 0.0 Net profit/loss for the 9.6 -1.7 5.6 -13.6 period * Taxes are proportionate to the net profit for the period. 1-12/ 1-12/ 2003 2002 Earnings per share, EUR 0.20 -0.49 Earnings per share 0.20 -0.48 (diluted), EUR CONSOLIDATED BALANCE SHEET EUR million Dec. 31, Dec. 31, 2003 2002 ASSETS Fixed and other non- current assets Intangible assets 1.6 1.0 Tangible assets 0.3 0.6 Inventories and current assets Inventories 0.0 0.8 Short-term receivables 5.4 4.9 Short-term investments 29.2 20.4 Cash in hand and at bank 7.6 14.3 Total assets 43.9 42.0 LIABILITIES AND SHAREHOLDERS’ EQUITY Shareholders’ equity 41.5 36.2 Obligatory provisions 0.0 1.5 Liabilities 2.4 4.3 Total liabilities and 43.9 42.0 shareholders’ equity CONSOLIDATED CASHFLOW STATEMENT EUR million 1-12/ 1-12/ 2003 2002 Cashflow from business 5.5 -9.5 operations Cashflow from investments -1.1 -0.4 Cashflow from financing 0.0 0.0 Change in liquid assets/increase 4.4 -9.9 (+), decrease (-) Liquid assets at period-start 34.7 44.6 Liquid assets at period-end* 39.1 34.7 * Liquid assets consist of cash in company's bank accounts, as well as other securities. SSH Communications Security Corp has neither long-term receivables nor liabilities. The subordinated loan of EUR 245,218, at the base rate determined by the Bank of Finland plus one percentage point, and with a maturity of eight years, was granted by the National Technology Agency. SHARE- HOLDERS’ EQUITY EUR million Share Issue Retained Net Subord Total capital premium profit profit inated fund /loss /loss loan for the period Shareholders’ 0.8 54.6 -5.5 0.0 0.2 50.1 equity January 1, 2002 Shareholders’ 0.8 54.6 -5.9 -13.6 0.2 36.2 equity December 31, 2002 Shareholders’ 0.8 41.0* -6.2* 5.6 0.2 41.5 equity December 31, 2003 * According to the decision made by the Annual General Meeting on April 29, 2003, the parent company’s loss shown in the balance sheet has been covered by reducing the issue premium fund. NET SALES BY SEGMENT EUR million 10-12/ 10-12/ 1-12/ 1-12/ 2003 2002 2003 2002 AMER 1.6 2.0 6.5 7.1 APAC 0.5 0.8 2.2 2.2 EROW 0.8 1.6 5.1 7.5 SSH Group total 2.9 4.4 13.8 16.8 OPERATING PROFIT/LOSS BY SEGMENT EUR million 10-12/ 10-12/ 1-12/ 1-12/ 2003 2002 2003 2002 AMER 0.9 -0.3 12.5 -6.6 APAC 0.1 0.4 0.1 -0.9 EROW 8.8 -0.3 -0.2 2.8 Common Group Expenses* -0.6 -2.0 -7.2 -9.4 SSH Group total 9.3 -2.2 5.3 -14.1 * Common Group Expenses include Group’s administration expenses (e.g. Management, Finance) and headquarters’ Product Management and R&D expenses. KEY FIGURES 1-12/ 1-12/ 2003 2002 Net sales, EUR million 13.9 16.8 Operating profit/loss, EUR 5.3 -14.1 million Operating profit/loss, % of net 38.2 -83.7 sales Profit/loss before extraordinary 5.6 -13.6 items and taxes, EUR million Profit/loss before extraordinary 40.8 -81.0 items and taxes, % of net sales Profit/loss before taxes, EUR 5.6 -13.6 million Profit/loss before taxes, 40.8 -81.0 % of net sales Return on investment, % 16.6 -30.0 Return on equity, % 14.6 -31.7 Interest-bearing net -36.5 -34.5 liabilities, EUR million Equity ratio, % 94.7 88.7 Net gearing, % -88.5 -95.8 Gross capital expenditure, 0.8 0.4 EUR million % of net sales 6.2 2.6 R&D expenses, EUR million 5.2 8.2 % of net sales 37.4 49.0 Personnel, on average 131 166 Personnel, period-end 104 147 From the industry’s point of view, the orderbook is not a significant Note to the Accounts. PER-SHARE DATA 1-12/ 1-12/ 2003 2002 Earnings/share, EUR (undiluted) 0.20 -0.49 Earnings per share, EUR (diluted) 0.20 -0.48 Equity/share, EUR 1.50 1.30 Volume of shares, period-end, 1000 27 736 27 714 Share performance, in EUR Average price 1.31 1.66 Low 0.61 0.60 High 2.36 3.70 Share price, period-end 1.70 0.75 Market capitalization, period-end, 47.2 20.8 EUR million Volume of shares traded, 7.6 4.3 million Volume of shares traded, 27.5 15.5 % of total Value of shares traded, EUR 10.0 7.1 million Price-earnings ratio (P/E) 8.3 -1.6 CONTINGENT LIABILITIES EUR million Dec. 31, Dec. 31, 2003 2002 Assets pledged Rental liabilities 0.2 0.8 Leasing liabilities 0.2 0.3 Other liabilities 2.3 0.0 Derivatives The company has hedged its US dollar based receivables. The hedged amount is USD 2.0 million. The social overheads based on stock options exercised during the financial period have been entered as expenses in the profit and loss account. The social overhead expenses based on stock options exercisable in the future would be EUR 17,430, calculated using the closing price of the company’s share (EUR 1.70) on the last day of the financial period. Any social overhead expenses based on stock options exercisable in the next few years have not been presented in the income statement or the consolidated balance sheet. The figures are unaudited. SHAREHOLDERS The company’s 10 largest shareholders, including nominee-registered shares, were as follows on December 31, 2003: Applied Computing Research (ACR) Oy 61.1% Ylönen Tatu 3.7% Assetman Oy 1.8% Promotion Capital I Ky 1.7% Nixu Oy 1.7% Ilmarinen Mutual Pension Insurance Company 1.6% Grahn Juha 1.5% Kaukonen Kalle 1.3% Markula Jussi 0.9% Kaleva Mutual Pension Insurance Company 0.8% Total 76.2% Nominee-registered shares 0.5% FINANCIAL REPORTING A briefing on the financial statements for analysts and the media will be held in the auditorium on the 1st floor of SSH’s head office at Fredrikinkatu 42, Helsinki, Wednesday, on February 4, 2004, starting at 11:00 a.m. Entrance from the corner of Fredrikinkatu and Malminkatu. SSH Communications Security Corp will release its interim reports for 2004 as follows: Interim Report for Q1/2004 April 20, 2004 Interim Report for H1/2004 July 21, 2004 Interim Report for Q1-Q3/2004 October 20, 2004 Helsinki, February 4, 2004 SSH COMMUNICATIONS SECURITY CORP Board of Directors Arto Vainio CEO For further information, please contact: Arto Vainio, CEO tel. +358 (0)20 500 7400 Johanna Lamminen, CFO tel. +358 (0)20 500 7419 Kare Laukkanen, Director, IR tel. +358 (0)20 500 7433 Distribution: Helsinki Exchanges Major media