Ssh Communications Security Corporation Interim Report January 1 -- June 30, 2019

 
TIDMSSH1V 
 
 
   SSH COMMUNICATIONS SECURITY CORPORATION          STOCK EXCHANGE RELEASE 
July 17, 2019 AT 9:00 A.M 
 
   OVER 8 % SALES GROWTH, POSITIVE OPERATING PROFIT IN SECOND QUARTER 
 
   April-June 2019: Net sales increased by 8.5 % compared to the previous 
year. Quarter-end cash position was strong. 
 
 
   -- Net sales totaled EUR 4.0 million (EUR 4--6/2018: 3.7 million) 
 
   -- Operating profit was EUR 0.4 million (EUR -0.1 million) 
 
   -- Profit for the period was EUR 0.2 million (EUR 0.0 million) 
 
   -- Earnings per share was EUR 0.00 (EUR -0.01) 
 
 
   January--June 2019: Net sales decreased by 21.9 % compared to the 
previous year. Operating cash flow was slightly negative and cash 
position remained strong at the end of the period. 
 
 
   -- Net sales totaled EUR 6.6 million (EUR 1--6/2018: 8.5 million) 
 
   -- Operating loss was EUR -0.9 million (EUR 0.0 million) 
 
   -- Loss for the period was EUR -1.0 million (EUR 0.0 million) 
 
   -- Earnings per share was EUR -0.04 (EUR -0.01) 
 
 
   Equity ratio remained good at 81.5 % (June 30, 2018: 89.0 %) and liquid 
assets were EUR 11.2 million (EUR 11.7 million). 
 
 
 
 
KEY FIGURES 
 
EUR million     4--6/2019  4--6/2018  1--6/2019  1--6/2018   Change %  1--12/2018 
--------------  ---------  ---------  ---------  ---------  ---------  ---------- 
 
Net sales             4.0        3.7        6.6        8.5      -21.9        18.3 
Operating 
 profit/loss          0.4       -0.1       -0.9        0.0   -4 536.1         0.5 
 % of net 
  sales               9.3       -2.5      -13.4        0.2   -5 779.0         3.0 
Profit/loss 
 before taxes         0.3        0.0       -1.0        0.0   -2 376.6         0.6 
Profit/loss           0.2        0.0       -1.0        0.0  -13 679.5         0.5 
 
Return on 
 equity, %                                 -7.1        0.1  -12 537.0         3.8 
Return on 
 investment, 
 %                                         -6.8        0.3   -2 153.7         4.1 
Liquid assets                              11.2       11.7       -4.5        13.5 
Gearing (%)                               -81.6      -95.7       14.7       -93.5 
Equity ratio 
 (%)                                       81.5       89.0       -8.5        81.6 
 
Earnings per 
 share, EUR          0.00      -0.01      -0.04      -0.01     -213.7       -0.01 
Shareholders' 
 equity per 
 share, EUR          0.32       0.32       0.32       0.32        1.1        0.37 
 
 
 
 
   CEO'S REVIEW 
 
   Valued shareholders customers, partners, and co-workers, 
 
   We had a positive second quarter with growing sales and a return to 
profitability. 
 
   Financial Performance 
 
   Q2 sales were EUR 4.0 million with 8.5 % year-on-year growth and 48.0 % 
growth over the previous quarter. While the performance was a clear 
improvement, the strong quarterly variation is a reminder of the 
volatility we will keep experiencing during our ongoing transition 
period from perpetual licensing to a subscription-based sales model. 
Continuous cost-control measures help stabilize this volatility and we 
remain well-positioned to go into the second half of the year, which 
typically represents a stronger sales cycle in our business. 
 
   Operating profit for the quarter was EUR 0.4 million, showing a clear 
improvement both year-on-year (EUR -0.1 million) and quarter-on-quarter 
(EUR -1.3 million). We continued the careful management of 
administrative costs during the quarter and also achieved savings in our 
IPR asset management. 
 
   Due to the successful savings in administration and IPR asset management, 
we were able to increase our operational R&D spending while keeping the 
overall costs on a lower level than earlier. 
 
   Our profit for the quarter was EUR 0.2 million, compared to EUR 0.0 
million in Q2/2018 and EUR -1.2 million in Q1/2019. Quarterly cash flow 
from operations was supported by the strong performance of maintenance 
renewals but was slightly negative due to growth in receivables as 
several large deals we closed towards the end of the quarter. Our 
balance sheet and cash position remain strong and allow us to proceed 
with the execution of our strategy. 
 
   Sales performance 
 
   In regional terms, sales in the APAC region grew by over 70 % compared 
to the same quarter in 2018. The EMEA region sales were up by 4 % and 
Americas sales were down by 5 %.  Americas remained the largest region 
with a 49 % share of the total revenue. EMEA accounted for 29 % and APAC 
for 22 % of the total revenue. 
 
   Recurring revenue invoicing grew noticeably from the comparison period 
indicating that our recurring revenue is on solid ground. The healthy 
renewal rate and our ability to increase recurring revenue from several 
key customers show the continued faith of our customers and our 
importance to their mission-critical infrastructure. This also maintains 
our source of investment capability to realize our SSH200 growth vision. 
 
   During the quarter, we entered into several new partnerships including a 
global partnership with Tech Mahindra that covers both PrivX(R) and 
Universal SSH Key Manager(R) (UKM). We also made deliveries of both UKM 
and PrivX with partners that we signed in late 2018 and early 2019 and 
continued supporting our new partners in several opportunities active in 
their pipelines. 
 
   We increasingly emphasize partnerships in our go-to-market planning, and 
we have shifted our focus from simply signing up partners to building 
successful and value-creating long-lasting partnerships. Tech Mahindra 
is a perfect example of the direction we want to go in with our 
partnering efforts: a value-added relationship with a trusted partner 
for enterprise customers. 
 
   We received several significant orders for the UKM product from Fortune 
500 companies and continued to see increasing interest in the product, 
especially in the US market. A major technology company also started 
their step-by-step deployment of UKM during the quarter. 
 
   Our Tectia(R) product line continued to perform well in both license 
sales and maintenance renewals. We received a large Tectia enterprise 
license order from a major Asian bank during the quarter. 
 
   PrivX Business 
 
   PrivX customer base grew during the quarter and we started seeing 
increasing traction from large enterprises during the quarter. We signed 
several new deals, including a delivery to Western Union, the global 
leader in cross-border, cross-currency money movement. PrivX was also 
taken into use for example by a large manufacturing company in Europe, 
by several digital growth companies in Europe and the US, and by 
mid-sized financing sector players globally. These customers are 
forward-looking innovators who are starting to embrace SSH.COM's new 
Zero Trust driven Privileged Access Management paradigm and are among 
the first to take advantage of the improved security, faster deployment, 
and increased productivity offered by PrivX. 
 
   We launched a free version of PrivX aimed primarily at start-ups in 
early June. The strong demand for the free version during the first four 
weeks after the launch demonstrates growing interest and demand for a 
modern cloud access management tool such as PrivX. 
 
   Due to our strategic decision to focus on the subscription-based sales 
model, the revenue impact of PrivX was still relatively modest, but 
these sales build a growing base of stable recurring revenue. 
 
   NQX(R) Business 
 
   We produced new versions of the NQX appliance with major new features, 
including certificate support, centralized management, high availability, 
and support for new hardware platforms. We also expanded the product 
selection with a smaller and more affordable appliance meant for less 
demanding use cases. 
 
   The Finnish Transport and Communications Agency (Traficom) certified 
version 1.1.0 of NQX firewall and VPN appliance with several of the new 
features as a cryptographic product for protecting classified 
information according to Finnish national (FI) confidential security 
requirements. 
 
   Operational milestones 
 
   During Q2 we continued the roll-out of the new customer-focused 
organization we announced in December 2018. We increased both 
organizational ability and worked systematically to increase our 
customer intimacy and understanding. 
 
   Operationally, we reached several milestones during the second quarter: 
 
 
   -- Release of the free version of PrivX in early June 
 
   -- Releases of new versions of NQX, UKM, Tectia, and PrivX products 
 
   -- Start of NPS (Net Promoter Score) measurements of our customers with good 
      to excellent scores and no detractors 
 
   -- We continued to refine our lead generation and inside sales models to 
      boost lead generation and speed up sales in future quarters 
 
 
   We continued adopting faster, more agile R&D processes developed at the 
PrivX business program in other areas of R&D. The first results are 
encouraging as we have been able to shorten the development cycles for 
e.g. UKM. 
 
   The SSH200 Growth Vision and Our Mission and Purpose 
 
   As announced on June 4(th) , SSH's Board of Directors has approved a new 
growth vision called SSH200. The vision describes our long-term growth 
ambition to grow to over 200 million euro in annual revenue in the 
identity and access management market during the 2020s. 
 
   The vision is based on deep, research-based insight into technology and 
market developments and consequent customer needs. We believe 
Intelligent Access Control will be a key focus area in enterprise 
security in the coming years. This is the segment where we concentrate 
on and where we aim to grow with new generations of our key products 
such as PrivX. 
 
   During the formulation of the growth vision, we also examined and 
updated our company purpose and company mission statement. These 
statements stem from our corporate DNA, our capabilities, values, and 
where we want to take the company. 
 
   SSH's updated company purpose is "We make digital safer". This purpose 

reflects both our historical roots and future ambition and is a direct 
extension of the original spirit SSH was founded upon in 1995. 
 
   SSH's updated mission statement is "We craft proactive, foundational 
security solutions that power intelligent access". This statement 
reflects our pride in our work, the foundational nature of SSH's 
products past, present, and future, and our belief that intelligent 
access will be a crucially and increasingly important segment of the 
growing cybersecurity market in the cloud era. 
 
   Outlook for the Year 
 
   The outlook in the cybersecurity segment remains good. We are seeing 
increased awareness of SSH Key Management related risks especially in 
the US which heightens our prospects' and customers' interest in UKM and 
related services. 
 
   The business fundamentals for PrivX also keep improving. Analysts such 
as Gartner and IDC have identified Privileged Access Management as a key 
priority in enterprise cybersecurity and the fast-growing Zero Trust 
security trend supports our PrivX messaging. 
 
   While our ambition level is high and the market situation is positive 
for us, we are still expecting significant quarterly volatility due to 
the timing of large deals and our ongoing transition towards 
subscription-based sales. As we announced in connection with the SSH200 
Growth Vision, the vision does not affect our published guidance, which 
remains unchanged: 
 
   For the year 2019, we expect double-digit percentage growth from our 
software business (software fees, professional services, and recurring 
revenue) at comparable exchange rates, exceeding the projected annual 
cybersecurity market growth of approximately 10 %. In the medium term, 
we expect similar or faster growth and will also explore avenues for 
accelerated growth through inorganic growth opportunities. Possible 
significant quarterly variation in revenue growth is still to be 
expected due to the timing of larger deals over the financial year. 
 
   Kaisa Olkkonen 
 
   CEO 
 
   NET SALES 
 
   Consolidated net sales for April--June totaled EUR 4.0 million (EUR 3.7 
million). 
 
   Consolidated net sales for January--June totaled EUR 6.6 million (EUR 
8.5 million), down by 21.9 %, year on year. 
 
   The Americas accounted for 53.2 % (45.0 %), the Europe, Middle East and 
Africa region (EMEA) 26.3 % (29.8 %), and the Asia Pacific region 20.5 % 
(13.5 %) of reported consolidated net sales. Global royalty income 
accounted for 0.0 % (11.8 %) of reported net sales. 
 
 
 
 
CONSOLIDATED 
NET SALES 
 
EUR million     4--6/2019  4--6/2018  1--6/2019  1--6/2018  Change %  1--12/2018 
--------------  ---------  ---------  ---------  ---------  --------  ---------- 
 
BY 
GEOGRAPHICAL 
AREA 
 AMERICAS             2.0        2.1        3.5        3.8      -7.7         9.0 
 APAC                 0.9        0.5        1.4        1.1      18.7         2.4 
 EMEA                 1.1        1.1        1.7        2.5     -30.8         4.2 
 Global 
  royalty 
  income              0.0        0.0        0.0        1.0    -100.0         2.7 
 Total                4.0        3.7        6.6        8.5     -21.9        18.3 
--------------  ---------  ---------  ---------  ---------  --------  ---------- 
 
BY OPERATION 
 Software fees        1.7        0.7        2.2        2.5     -12.4         5.6 
 Professional 
  services & 
  other               0.1        0.9        0.2        1.9     -89.0         4.3 
 Recurring 
  revenue             2.2        2.1        4.3        4.1       3.3         8.5 
 Total                4.0        3.7        6.6        8.5     -21.9        18.3 
--------------  ---------  ---------  ---------  ---------  --------  ---------- 
 
 
   The majority of the company's invoicing is U.S. dollar based. With 
comparable exchange rates, net sales reduction would have been -25.7 % 
compared with 2018 corresponding period. 
 
   RESULTS AND EXPENSES 
 
   Operating profit for April--June was EUR 0.4 million (EUR -0.1 million), 
with net profit totaling EUR 0.2 million (EUR 0.0 million). 
 
   Operating loss for January-June was EUR -0.9 million (EUR 0.0 million), 
with net profit totaling EUR -1.0 million (EUR 0.0 million). 
 
   Sales, marketing and customer support expenses for April--June amounted 
to EUR -1.7 million (EUR -2.0 million), while research and development 
expenses totaled EUR -1.1 million (EUR -1.1 million) and administrative 
expenses EUR -0.6 million (EUR -0.5 million). Compared to April-June 
2018 operating expenses decreased by 1 %. 
 
   Sales, marketing and customer support expenses for January--June 
amounted to EUR -3.7 million (EUR -4.1 million), while research and 
development expenses totaled EUR -2.3 million (EUR -2.4 million) and 
administrative expenses EUR -1.3 million (EUR -1.4 million).  Operating 
expenses decreased by 8 % compared to the previous year. 
 
   BALANCE SHEET AND FINANCIAL POSITION 
 
   The financial position of SSH Communications Security was good during 
the reporting period. The consolidated balance sheet total on June 30, 
2019 stood at EUR 20.6 million (June 30, 2018 EUR 19.4 million; December 
31, 2018 EUR 24.2 million), of which liquid assets accounted for EUR 
11.2 million (June 30, 2018 EUR 11.7 million; December 31, 2018 EUR 13.5 
million), or 54.3 % of the balance sheet total. Interest-bearing 
liabilities were EUR 1.0 million (June 30, 2018 EUR 0.0 million, 
December 31, 2018 EUR 0.2 million). Interest-bearing liabilities 
increased by EUR 0.4 million from December 31, 2018 due to the 
application of IFRS 16 Leases -standard and increase in lease liability. 
In June 2019 subordinated loan which Kyberleijona Oy has taken out from 
the non-controlling interest holder, State Security Networks Group 
Finland was increased by EUR 0.4 million from EUR 0.2 million to EUR 0.6 
million. On June 30, 2019, gearing, or the ratio of net liabilities to 
shareholders' equity, was -81.6 % (June 30, 2018 -95.7 %; December 31, 
2018 -93.5 %) and the equity ratio stood at 81.5 % (June 30, 2018 89.0 
%; December 31, 2018 81.6 %). 
 
   The reported gross capital expenditure for January-June totaled EUR 1.0 
million (EUR 0.9 million). The reported financial income and expenses 
amounting in total to EUR -0.1 million (EUR 0.0 million) consisted of 
exchange rate gains and losses, interest expenses on advances from 
customers with a significant financing component and interest expenses 
on lease liability. 
 
   During January--June, SSH Communications Security reported a cash flow 
of EUR -0.7 million (EUR -0.2 million) from business operations, and 
investments showed a cash flow of EUR -1.0 million (EUR -0.9 million). 
Cash flow from financing totaled EUR -0.6 million (EUR -0.7 million). 
Total cash flow from operations, investments and financing was negative 
EUR -2.3 million (EUR -1.9 million). 
 
   There were no short-term investments at the end of the reporting period. 
 
   RESEARCH AND DEVELOPMENT 
 
   Research and development expenses for April--June totaled EUR -1.1 
million (EUR -1.1 million), the equivalent of 28.8 % of net sales (31.4 
%). During April--June, the company has capitalized R&D costs EUR 0.5 
million (EUR 0.4 million). 
 
   Research and development expenses for January--June totaled EUR -2.3 
million (EUR -2.4 million), the equivalent of 34.5 % of net sales (28.5 
%). During January--June, the company has capitalized new product R&D 
costs EUR 1.0 million (EUR 0.9 million). Depreciation from R&D 
capitalization assets was EUR -0.7 million (EUR -0.9 million). 
 
   HUMAN RESOURCES AND ORGANIZATION 
 
   At the end of June, the Group had 86 employees on its payroll (June 30, 
2018: 85; December 31, 2018: 85). The number of employees increased by 
one person from the previous year and from the year-end (1.2 %). 
 
   At the end of the period, 36.0 % (40.0 %) of the employees worked in 
sales, marketing and customer services, 50.0 % (43.5 %) in R&D, and 14.0 
% (16.5 %) in corporate administration. 
 
   BOARD AND AUDITORS 
 
   The Annual General Meeting of SSH Communications Oyj was held on March 
26, 2019. The Annual General Meeting unanimously adopted the financial 
statement and consolidated financial statement and granted discharge 
from liability to the Board members and CEO who have been active during 
the accounting period between January 1, 2018 and December 31, 2018. In 
the meeting, it was decided that the Board of Directors would consist of 
six members. Petri Kuivala, Tatu Ylönen, Timo Syrjälä, 
Anne Marie Zettlemoyer and Sam Curry were re-elected and Sauli Kiuru was 
elected as a new member of the Board of Directors. Petri Kuivala was 
elected as the Chairman of the Board of Directors at the Board's 
organizing meeting and Sauli Kiuru was elected as the Vice Chairman of 
the Board of Directors. 
 
   The Authorized Public Accountants Ernst & Young Oy was re-elected as the 
auditor of the company. Ernst & Young Oy has informed that Erkka 
Talvinko, Authorized Public Accountant, will continue to act as the 
principle auditor. 
 
   SHARES, SHAREHOLDING, AND CHANGES IN GROUP STRUCTURE 
 
   The reported trading volume of SSH Communications Security shares 
totaled 2,220,063 shares (valued at EUR 3,289,064). The highest 
quotation was EUR 1.97 and the lowest EUR 1.11. The trade-weighted 
average share price for the period was EUR 1.48 and the share closed at 
EUR 1.46 (June 28, 2019). 
 
   The company's principal owner Tatu Ylönen holds directly 47.2 %, 
Timo Syrjälä holds directly and through his company Acme 
Investments SPF S.a.r.l. 9.2 % and Juha Mikkonen holds directly 5.2 % of 
the company's shares. More information about the shareholding can be 
obtained from the company's web site www.ssh.com. 
 
   No dividend or return of capital has been distributed during the 
reporting period. 
 
   SHARE CAPITAL AND BOARD AUTHORIZATIONS 
 
   The company's registered share capital on June 30, 2019 was EUR 
1,164,066.99 consisting of 38,802,233 shares. 
 
   The Annual General Meeting approved the Board of Directors' proposal to 

authorize the Board of Directors to decide upon the issuing of a maximum 
of 6,000,000 shares as a share issue against payment or by giving stock 
options or other special rights entitling to shares, in accordance with 
Chapter 10 Section 1 of the Finnish Companies Act, either according to 
the shareholders' pre-emptive right to share subscription or deviating 
from this right, in one or more tranches. Based on the authorization, it 
can be either issuing of new shares or transfer of own shares, which the 
company possibly has in its possession. 
 
   Based on the authorization, the Board of Directors shall have the same 
rights as the Annual General Meeting to decide upon the issuing of 
shares against payment and special rights (including stock options) in 
accordance with Chapter 10 Section 1 of the Finnish Companies Act. 
Thereby, the authorization to be given to the Board of Directors 
includes, inter alia, the right to deviate from the shareholders' 
pre-emptive rights with directed issues providing that the company has a 
weighty financial reason for the deviation in respect of the share issue 
against payment. 
 
 
 
   Furthermore, the authorization includes the Board of Directors' right to 
decide upon who are entitled to the shares and/or stock options or 
special rights in accordance with Chapter 10 Section 1 of the Finnish 
Companies Act as well as upon the related compensation, subscription and 
payment periods and upon the registering of the subscription price into 
the share capital or invested non-restricted equity fund within the 
limits of the Finnish Companies Act. 
 
 
 
   The authorization will be valid until the next Annual General Meeting, 
but will however expire at the latest on June 30, 2020. 
 
 
 
   The Annual General Meeting approved the Board of Directors' proposal to 
authorize the Board of Directors to decide upon acquisition of a maximum 
of 2,000,000 own shares of the company with assets belonging to the 
company's non-restricted equity, which amounts to approximately 5.2 
percent of the company's total shares. The shares can also be acquired 
otherwise than in proportion to the holdings of the existing 
shareholders. The maximum compensation to be paid for the acquired 
shares shall be the market price at the time of purchase, which is 
determined in the public trading. 
 
 
 
   The Board of Directors proposes that the authorization for the acquiring 
of the company's own shares would be used, inter alia, in order to 
strengthen the company's capital structure, to finance and realize 
corporate acquisitions and other arrangements, to realize the 
share-based incentive programs of the company or otherwise to be kept by 
the company, to be transferred for other purposes or to be cancelled. 
The acquisition of shares reduces the company's distributable 
non-restricted equity. 
 
 
 
   A decision concerning the acquiring of own shares cannot be made so that 
the combined amount of the own shares, which are in the possession of or 
held as pledges by, the company or its subsidiaries exceeds one-tenth of 
all shares. The Board of Directors shall decide upon all other matters 
related to the acquisition of shares. 
 
 
 
   The authorization will be valid until the next Annual General Meeting 
but will however expire at the latest on June 30, 2020. 
 
   RISKS AND UNCERTAINTIES 
 
   Largest risks that might impact the profitability of the company have 
remained by and large the same than in the previous reporting period and 
are listed below. Other risks, which are currently either unknown or 
considered immaterial to SSH Communications Security may, however, 
become material in the future. 
 
   Largest risks: 
 
   - uncertainty of the macroeconomic environment 
 
   - cybercrime, including e.g. ransomware 
 
   - delays in product development and closing new business as well as 
phasing of new business cases 
 
   - ability to execute the strategy 
 
   - ability to retain and recruit key personnel 
 
   - maintaining the ability to innovate and develop the product portfolio 
including intellectual property rights (IPR) 
 
   - IPR litigation and utilization of the patent portfolio 
 
   - a large portion of the company revenue is invoiced in USD currency so 
possible large fluctuation in USD currency rates during 2019 could have 
unpredictable effects for profitability that are at the time difficult 
to estimate. The company decides on hedging of USD based contracts case 
by case. 
 
 
 
 
 
   Principles and organization of risk management of SSH Communications 
Security can be read from the company's webpage: www.ssh.com. 
 
   RELATED PARTY TRANSACTIONS 
 
   During the reporting period, there have not been any significant 
transactions with related parties. 
 
 
 
   EVENTS AFTER THE BALANCE SHEET DATE 
 
   After the balance sheet date, there have not been any significant 
transactions. 
 
 
 
   REPORTING 
 
   The interim report for the six months reporting period ended June 30, 
2019 has been prepared in accordance with IAS 34 Interim Financial 
Reporting. This interim report does not include all the information and 
disclosures required in the annual financial statements and should be 
read in conjunction with the consolidated financial statements for the 
year ended December 31, 2018.  The information presented in this interim 
report is unaudited. 
 
   The accounting policies adopted for this interim report are consistent 
with those applied in 2018 consolidated financial statements except for 
the adoption of new standards effective as of January 1, 2019. The Group 
has not early adopted any other standard, interpretation or amendment 
that has been issued but is not yet effective. 
 
   New and amended standards adopted 
 
   A few new standards and amendments to standards are effective for the 
annual period beginning on January 1, 2019 and the Group had to change 
its accounting policies and make retrospective adjustments as a result 
of adopting IFRS 16 Leases. 
 
   The impact of the adoption of the leasing standard and the new 
accounting policies are disclosed below. The other changes in standards 
did not have any impact on the group's accounting policies and did not 
require retrospective adjustments. 
 
   Changes in accounting policies 
 
   The Group has adopted the new IFRS 16 standard using the modified 
retrospective approach and the comparative information has not been 
restated. The reclassifications and adjustments arising from the new 
accounting rules have been recognized in the opening balance sheet on 
January 1, 2019. 
 
   The Group leases mainly offices. Rental contracts are typically made for 
fixed periods from two to three years but may have extension options. 
The Group continues to treat leases of 12 months or less and leases of 
low-value assets as other leases. 
 
   Until the year 2018 leases of property, plant, and equipment were 
classified as operating leases. Payments made under operating leases 
were recognized in the income statement on a straight-line basis over 
the period of the lease. 
 
   From January 1, 2019, according to the new IFRS 16 Leases standard, 
leases are recognized in the balance sheet as a right-of-use asset and a 
corresponding financial liability at the date at which the leased asset 
is available for the use by the Group. Each lease payment is allocated 
between the liability and finance cost. The finance cost is recognized 
in the income statement over the lease period. The right-of-use asset is 
depreciated over the shorter of the asset's useful life and the lease 
term on a straight-line basis. The lease liabilities were discounted at 
the borrowing rate as of January 1, 2019. The weighted average discount 
rate was 7.5 %. 
 
   The change in accounting policy affected the following items in the 
balance sheet on January 1, 2019: 
 
 
   -- right-of-use asset -- increase by EUR 0.5 million 
 
   -- non-current liabilities -- increase by EUR 0.2 million 
 
   -- current liabilities  - increase by EUR 0.3 million 
 
 
   The recognized leases in the balance sheet as of June 30, 2019 and in 
the income statement for the first two quarters of the year are as 
follows: 
 
 
 
 
LEASES IN THE BALANCE SHEET 
 
EUR million                          30 June 2019 
-----------------------------------  ------------ 
ASSETS 
Non-current assets 
    Right-of-use assets - property            0.4 
-----------------------------------  ------------ 
Total                                         0.4 
 
EQUITY AND LIABILITIES 
Lease liabilities, non-current                0.1 
Lease liabilities, current                    0.3 
-----------------------------------  ------------ 
Total                                         0.4 
 
 
 
 
 
 
LEASES IN THE INCOME STATEMENT 
 
EUR million                                        4-6/2019  1-6/2019 
-------------------------------------------------  --------  -------- 
Other lease expenses                                   -0.0      -0.0 
Depreciation of right-of-use assets                    -0.1      -0.2 
Interest expense on lease liabilities                  -0.0      -0.0 
-------------------------------------------------  --------  -------- 
Total amounts recognized in the income statement       -0.1      -0.2 
 
 
 
 
   TABLES 
 
 
 
 
CONDENSED CONSOLIDATED COMPREHENSIVE INCOME STATEMENT 
 
EUR million                                           4--6/2019  4--6/2018  1--6/2019  1--6/2018  1--12/2018 
----------------------------------------------------  ---------  ---------  ---------  ---------  ---------- 
 
Net sales                                                   4.0        3.7        6.6        8.5        18.3 
Cost of sales                                              -0.1       -0.2       -0.3       -0.6        -1.4 
Gross margin                                                3.9        3.5        6.4        7.9        16.9 
Other operating income                                      0.0        0.0        0.0        0.0         0.0 
 
Selling, marketing, and customer support expenses          -1.7       -2.0       -3.7       -4.1        -8.5 

Research and development expenses                          -1.1       -1.1       -2.3       -2.4        -5.1 
Administrative expenses                                    -0.6       -0.5       -1.3       -1.4        -2.7 
----------------------------------------------------  ---------  ---------  ---------  ---------  ---------- 
Operating profit/loss                                       0.4       -0.1       -0.9        0.0         0.5 
 
Financial income and expenses                              -0.1        0.1       -0.1        0.0         0.0 
----------------------------------------------------  ---------  ---------  ---------  ---------  ---------- 
Profit/loss before taxes                                    0.3        0,0       -1.0        0.0         0.6 
Taxes                                                      -0.0       -0.0       -0.0       -0.0        -0.0 
Profit/loss for the period                                  0.2        0.0       -1.0        0.0         0.5 
----------------------------------------------------  ---------  ---------  ---------  ---------  ---------- 
 
Attributable to: 
    Owners of the parent company                            0.3        0.0       -0.9        0.0         0.8 
    Non-controlling interests                              -0.1        0.0       -0.1        0.0        -0.3 
                                                            0.2        0.0       -1.0        0.0         0.5 
                                                      ---------  ---------  ---------  ---------  ---------- 
 
Other comprehensive income 
Items which might be later transferred to profit or 
 loss: 
 Foreign subsidiary translation differences                 0.0       -0.1       -0.0       -0.1        -0.1 
Total comprehensive income                                  0.3       -0.1       -1.0       -0.1         0.4 
----------------------------------------------------  ---------  ---------  ---------  ---------  ---------- 
 
 
Attributable to: 
    Owners of the parent company                            0.3       -0.1       -0.9       -0.1         0.7 
    Non-controlling interest                               -0.1        0.0       -0.1        0.0        -0.3 
                                                            0.3       -0.1       -1.0       -0.1         0.4 
                                                      ---------  ---------  ---------  ---------  ---------- 
 
Earnings per share 
Earnings per share (EUR)                                   0.00      -0.01      -0.04      -0.01       -0.01 
Diluted earnings per share (EUR)                           0.00      -0.01      -0.04      -0.01       -0.01 
 
 
 
 
 
 
CONDENSED CONSOLIDATED BALANCE 
SHEET 
 
EUR million                         June 30, 2019  June 30, 2018  Dec 31, 2018 
----------------------------------  -------------  -------------  ------------ 
ASSETS 
Non-current assets 
 Property, plant, and equipment               0.1            0.1           0.2 
    Right-of-use assets                       0.4              -             - 
 Intangible assets                            5.4            4.8           5.2 
 Investments                                  0.0            0.0           0.0 
----------------------------------  -------------  -------------  ------------ 
Total non-current assets                      6.0            4.9           5.4 
 
Current assets 
    Inventories                               0.0            0.0           0.0 
 Trade and other receivables                  3.4            2.8           5.4 
    Financial assets                          0.0            0.0           0.0 
 Cash and cash equivalents                   11.2           11.7          13.5 
----------------------------------  -------------  -------------  ------------ 
Total current assets                         14.6           14.5          18.9 
 
Total assets                                 20.6           19.4          24.2 
----------------------------------  -------------  -------------  ------------ 
 
EQUITY AND LIABILITIES 
 
Equity 
 Attributable to parent company's 
  shareholders                               11.7           12.2          13.4 
 Non-controlling interest                     0.7            0.0           0.8 
----------------------------------  -------------  -------------  ------------ 
Total equity                                 12.4           12.2          14.2 
 
Non-current liabilities 
    Borrowings                                0.6            0.0           0.2 
    Other non-current liabilities             0.1              -             - 
----------------------------------  -------------  -------------  ------------ 
Total non-current liabilities                 0.7            0.0           0.2 
 
Current liabilities 
    Current liabilities                       7.4            7.2           9.8 
----------------------------------  -------------  -------------  ------------ 
Total current liabilities                     7.4            7.2           9.8 
 
Total equity and liabilities                 20.6           19.4          24.2 
----------------------------------  -------------  -------------  ------------ 
 
 
 
 
 
 
 
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 
 
                     Attributable to the owners of the Company 
                     Hybrid                 Unrestricted 
EUR        Share    capital    Translation    invested    Retained         Non-controlling  Total 
million   capital  securities  difference   equity fund   earnings  Total     interests     equity 
--------  -------  ----------  -----------  ------------  --------  -----  ---------------  ------ 
Equity 
 Jan 1, 
 2018         1.2        12.0         -1.3          22.1     -21.2   12.8                -    12.8 
 
Change        0.0                     -0.1           0.2      -0.8   -0.6                -    -0.6 
Net 
 profit                                                        0.0    0.0                -     0.0 
--------  -------  ----------  -----------  ------------  --------  ----- 
Equity 
 June 
 30, 
 2018         1.2        12.0         -1.4          22.3     -21.9   12.2              0.0    12.2 
 
Change        0.0         0.0          0.0           0.4       0.2    0.5                      0.5 
Change in Group 
 structure(1)                                                 -0.1   -0.1              1.1     1.0 
Net 
 profit                                                        0.8    0.8             -0.3     0.5 
--------  -------  ----------  -----------  ------------  --------  ----- 
Equity 
 Dec 31, 
 2018         1.2        12.0         -1.4          22.7     -21.1   13.4              0.8    14.2 
 
Change                                 0.0                    -0.8   -0.8                     -0.8 
Net 
 profit                                                       -0.9   -0.9             -0.1    -1.0 
--------  -------  ----------  -----------  ------------  --------  ----- 
Equity 
 June 
 30, 
 2019         1.2        12.0         -1.4          22.7     -22.7   11.7              0.7    12.4 
(1) State Security Networks Group Finland became a 
 non-controlling interest holder of Kyberleijona Oy 
 with 35 % ownership. The amount of investment 
 was EUR 1.0 million and additionally, State Security 
  Networks Group Finland has issued a subordinated loan 
  of EUR 0.2 million to Kyberleijona Oy. 
 
 
 
 
 
 
CONDENSED CONSOLIDATED STATEMENT OF CASH 
FLOWS 
EUR million                                   1--6/2019  1--6/2018  1--12/2018 
--------------------------------------------  ---------  ---------  ---------- 
 
Cash flow from operations                          -0.7       -0.2         1.2 
 whereof change in working capital                 -0.8       -1.2        -1.2 
Cash flow from investing activities                -1.0       -0.9        -2.3 
Cash flow from financing activities                -0.6       -0.7         0.9 
 
Increase(+) / decrease(-) in cash                  -2.3       -1.9        -0.2 
 
Cash at period start                               13.5       13.5        13.5 
Effect of exchange rate                             0.0        0.1         0.2 
Cash at period end                                 11.2       11.7        13.5 
 
 
 
 
 
 
CONTINGENT LIABILITIES 
 
EUR million                            30 June 2019  30 June 2018  31 Dec 2018 
-------------------------------------  ------------  ------------  ----------- 
Interest on hybrid capital securities           0.2           0.2          0.7 
Rent security deposits                          0.1           0.1          0.1 
 
Leasing commitments outside the 
balance sheet 
 Maturing within 1 year                         0.0           0.3          0.3 
 Maturing between 1 and 5 years                 0.0           0.4          0.2 
 
 
 
 
 
 
 
 
 
KEY FIGURES AND RATIOS 
 
EUR million                        1--6/2019  1--6/2018  1--12/2018 
---------------------------------  ---------  ---------  ---------- 
Net sales                                6.6        8.5        18.3 
Operating profit/loss                   -0.9        0.0         0.5 
 % of net sales                        -13.4        0.2         3.0 
Profit/loss before taxes                -1.0        0.0         0.6 
 % of net sales                        -14.3        0.5         3.0 
Return on equity (%)                    -7.1        0.1         3.8 
Return on investment (%)                -6.6        0.3         4.1 
Interest-bearing net liabilities       -10.2      -11.7       -13.3 
Equity ratio (%)                        81.5       89.0        81.6 
Gearing (%)                            -81.6      -95.7       -93.5 
Gross capital expenditure                1.0        0.9         2.3 
 % of net sales                         15.7       11.1        12.3 
R&D expenses                            -2.3       -2.4        -5.1 
 % of net sales                         34.5       28.5        27.9 
Personnel, period average                 87         83          82 
Personnel, period end                     86         85          85 
 
 
 
 

 
 
PER SHARE DATA 
 
EUR                                           1--6/2019  1--6/2018  1--12/2018 
--------------------------------------------  ---------  ---------  ---------- 
Earnings per share undiluted(2)                   -0.04      -0.01       -0.01 
Earnings per share diluted(2)                     -0.04      -0.01       -0.01 
Equity per share                                   0.32       0.32        0.37 
No. of shares at period average (thousand)       38 802     38 467      38 578 
No. of shares at period end (thousand)           38 802     38 510      38 802 
Share performance 
 Average price                                     1.48       2.04        2.00 
 Low                                               1.11       1.72        1.60 
 High                                              1.97       2.27        2.27 
Share price period end                             1.46       2.15        1.68 
Market capitalization period end (EUR 
 million)                                          56.5       82.8        65.2 
Volume of shares traded (million)                   2.2        6.2         7.8 
Volume of shares traded as % of total               5.7       16.2        20.2 
Value of shares traded (EUR million)                3.3       12.7        15.6 
Price per earnings ratio (P/E)                     neg.       neg.        neg. 
Dividend per share                                 0.00       0.00        0.00 
Dividend per earnings, %                           0.00       0.00        0.00 
Effective return on dividend, %                    0.00       0.00        0.00 
(2) Earnings per share is impacted by the unpaid interest 
 of hybrid capital securities 
 
 
 
 
   DISCLAIMER 
 
   The content in this report is provided by SSH Communications Security 
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 Communications 
Security 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 Communications Security, please contact your financial 
advisor for further details and information. Past performance of SSH 
Communications Security shares is not indicative of future results. 
EXCEPT AS PROVIDED BY APPLICABLE COMPULSORY LAW SSH COMMUNICATIONS 
SECURITY EXPRESSLY DISCLAIMS ALL WARRANTIES, EXPRESSED OR IMPLIED. AS TO 
THE AVAILABILITY, ACCURACY OR RELIABILITY OF ANY OF THE CONTENT PROVIDED, 
OR AS TO THE FITNESS OF THE INFORMATION FOR ANY PURPOSE. 
 
   SSH Communications Security will release its next interim report for the 
period January 1 -- September 30, 2019 on October 23, 2019. 
 
   Helsinki, July 17, 2019 
 
   SSH COMMUNICATIONS SECURITY 
 
   Board of Directors 
 
   Kaisa Olkkonen 
 
   CEO 
 
   For further information, please contact: 
 
   Kaisa Olkkonen, CEO tel. [phone] 
 
   Niklas Nordström, CFO tel. [phone] 
 
   Distribution: 
 
   NASDAQ Helsinki Ltd. 
 
   Major media 
 
   www.SSH.com 
 
 
 
 
 
 

(END) Dow Jones Newswires

July 17, 2019 02:00 ET (06:00 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.