SSH COMMUNICATIONS SECURITY CORPORATION INTERIM REPORT JULY 1 –
SEPTEMBER 30, 2021
SSH COMMUNICATIONS SECURITY
CORPORATION
STOCK EXCHANGE RELEASE OCTOBER 21, 2021, AT 9:00 A.M
SSH COMMUNICATIONS SECURITY CORPORATION INTERIM REPORT JULY 1 –
SEPTEMBER 30, 2021
NET SALES INCREASED
54%, EBITDA
POSITIVE
July–September
2021: Net sales increased 53.8%
compared to the previous year. EBITDA was positive for the
quarter.
- Net sales totaled EUR 3.9 million (7-9/2020: EUR 2.6
million)
- EBITDA was EUR 0.6 million (EUR 0.2 million)
- Operating loss was EUR -0.3 million (EUR -0.3 million)
- Net loss for the period was EUR -0.3 million (EUR -0.5
million)
- Earnings per share was EUR -0.02 (EUR -0.02)
January–September
2021: Net sales increased 19.7% compared to the
previous year. EBITDA was negative due to growth investments.
- Net sales totaled EUR 9.9 million (1-9/2020: EUR 8.3
million).
- EBITDA was EUR -0.3 million (EUR 0.4
million).
- Operating loss was EUR -2.2 million (EUR -1.2 million).
- Net loss for the period was EUR -2.7 million (EUR -1.5
million).
- Earnings per share was EUR -0.10 (EUR -0.06).
Operating cash flow was EUR -1.5 million (EUR -0.2 million).
Equity ratio was 46.3% (76.2%). Liquid assets were EUR 4.2 million
(EUR 9.4 million).
KEY FIGURES |
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EUR million |
7–9/2021 |
7–9/2020 |
Change % |
1–9/2021 |
1–9/2020 |
Change % |
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1–12/2020 |
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Net
sales |
3.9 |
2.6 |
53.8 |
9.9 |
8.3 |
19.7 |
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11.3 |
EBITDA |
0.6 |
0.2 |
143.8 |
-0.3 |
0.4 |
-177.3 |
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-0.4 |
%
of net sales |
14.0 |
8.8 |
58.5 |
-2.8 |
4.3 |
-164.6 |
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-3.5 |
Operating profit/loss |
-0.3 |
-0.3 |
-30.6 |
-2.2 |
-1.2 |
-85.0 |
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-2.5 |
%
of net sales |
-8.3 |
-9.8 |
-15.1 |
-22.0 |
-14.2 |
54.6 |
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-22.1 |
Profit/loss before taxes |
-0.4 |
-0.5 |
-24.7 |
-2.5 |
-1.5 |
69.7 |
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-3.1 |
Profit/loss |
-0.3 |
-0.5 |
-40.7 |
-2.7 |
-1.5 |
84.6 |
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-3.1 |
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Return on equity, % |
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-27.0 |
-13.3 |
-102.6 |
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-30.0 |
Return on investment, % |
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-18.0 |
-12.2 |
-47.4 |
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-27.3 |
Liquid assets |
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4.2 |
9.4 |
-55.9 |
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8.5 |
Gearing (%) |
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-25.8 |
-82.2 |
68.6 |
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-85.3 |
Equity ratio (%) |
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46.3 |
76.2 |
-39.3 |
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69.7 |
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Earnings per share, EUR |
-0.02 |
-0.02 |
24.5 |
-0.10 |
-0.06 |
-57.0 |
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-0.11 |
Shareholders' equity per share, EUR |
0.30 |
0.25 |
16.5 |
0.30 |
0.25 |
16.5 |
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0.22 |
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Annual Recurring revenue |
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14.5 |
8.6 |
69.7 |
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8.0 |
Subscription revenue, ARR |
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6.3* |
0.8 |
697.4 |
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1.2 |
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*Subscription revenue ARR reported previously for Q2 2021 was
EUR 6.9 million. During Deltagon's integration process in Q3 2021,
it was discovered that June 2021 contained recognized revenue
belonging to previous months. Because ARR is calculated by
multiplying the period end figure, the Q2 2021 Subscription revenue
ARR was previously overstated, and it has grown during Q3 2021
compared to Q2 2021.
SSH Communications Security provides alternative performance
measures, which are not defined by IFRS standards. Alternative
performance measures should not be considered substitutes for
performance measures in accordance with the IFRS. The alternative
performance measures are:
EBITDA: Operating profit/loss + depreciation and
amortizationSubscription ARR (Annual Recurring Revenue):
Subscription revenue in the last month of a reported quarter
multiplied by 12.Annual Recurring Revenue: Subscription +
maintenance revenue at the end of the last month of the reported
quarter multiplied by 12.
CEO REVIEW
Valued shareholders, customers, partners, and colleagues,
In the third quarter we saw a clear pick-up in the cybersecurity
market and increased demand for our solutions. We acquired several
new customers in addition to closing large renewals and generating
new sales with existing customers.
We have continued our investments in growth and R&D to
capitalize on the increased interest in our products from potential
customers.
During the past two years, we have seen customers moving
increasingly toward a “land and expand” purchasing pattern where
customers start small and expand the use of the solutions in a
stepwise manner. There is also a trend towards subscription-based
software purchasing, especially in the US and Europe.
Our installed base continues to grow, and we have accelerated
our growth rate compared to the comparison period as well as
compared to the previous two quarters.
Third quarter highlights:
- Revenue growth of +54%
- Annual Recurring Revenue (ARR)
reached EUR 14.5 million at the end of Q3
- We continued our investments in
growth and R&D, with 35% of revenue invested in R&D during
the period
- We broadened our market reach by
expanding our portfolio of solutions with PrivX technology
- PrivX OT (Operational Technology)
Edition for factories, harbors, and marine vessel operators
- PrivX MSP (Managed Service Provider)
Edition for Outsourcers and SaaS software companies
- UKM Zero Trust Edition makes digital
key management more flexible and cost-effective, especially in
large and dynamic customer environments
- Tectia Zero Trust Edition provides
JIT (Just-In-Time) and JEA (Just-Enough-Access) connections to
servers in hybrid, cloud and multi-cloud environments
- NQX PQC Edition, our
first Post Quantum Cryptography product was introduced
- We introduced the
SSH Secure e-communication Suite of products, which comprises of
the products acquired through the Deltagon acquisition
A subscription-based business model generates slower initial
revenue growth compared to a perpetual license model. However,
increasing customer demand and an increasing share of subscription
revenues resulted in a good third quarter overall. The postponement
of cybersecurity investments, common during the pandemic so far,
appears to be diminishing. Our customers are starting to invest in
a more cybersecure future due to the increased digitalization of
their businesses, increased remote work and growing cybercrime and
ransomware risks. We are executing on our growth strategy and enter
the fourth quarter with enthusiasm and momentum.
Financial Performance
- Net sales for the third quarter were
EUR 3.9 million (EUR 2.6 million), an increase of 54% compared to
Q3 2020.
- EBITDA for Q3 2021 was EUR 0.6
million (EUR 0.2 million), a second consecutive positive
quarter.
- Operating loss was EUR -0.3 million
(EUR -0.3 million), and the net loss for the period was EUR -0.3
million (EUR -0.5 million).
- The operating cash flow for the
quarter was EUR 0.4 million (-0.2 million).
Sales Performance
Sales in the EMEA region increased 172% compared to Q3 2020.
APAC region sales decreased by 30% compared to Q3 2020, and AMER
region sales increased by 22%.
Subscription revenue grew 765% compared to Q3 2020. PrivX
subscription revenue grew by 170%. The majority of the subscription
revenue growth was driven by the acquisition of Deltagon’s Secure
e-communication Suite.
During the quarter, both license revenue and recurring revenue
(subscriptions and maintenance) increased.
PrivX gives
customers Just
In Time Zero Trust access
control
During the quarter, we reached several important milestones with
our Privileged Access Management solution PrivX and its industry
focused PrivX OT and PrivX MSP Editions. We won several new PrivX
enterprise customers. We have secured PrivX OT Edition and PrivX
MSP Edition projects expanding our addressable market outside the
traditional enterprise IT market.
We announced PrivX, UKM and Tectia Zero Trust Editions, which
help customers remove static credentials by enabling PrivX with JIT
(Just In Time) and JEA (Just Enough Access) Zero Trust
technologies. Access is granted only when needed in real time and
the use of the access is monitored and logged to enable auditing of
system level access activities. Our JIT Zero Trust technology is
especially important in the US market and differentiates our
products from the competition. We have accomplished this through
our leading-edge microservices architecture, which is based on
technology superior to that of our competitors.
According to Allied Market Research (7/2021) the global
container and Kubernetes security market was USD 714 million in
2020, and is expected to grow to USD 8 billion by 2030, growing at
a CAGR of 27% over the period. PrivX now supports container
deployment model. PrivX supports wide range of cloud, hybrid and
SaaS deployment models. First customer installations of container
enabled PrivX version have been successful.
At CAGR of 8%, the Managed Security Services market hits USD 51
billion by 2027 says Brandessence Market Research (9/2021). PrivX
MSP Edition has been well received by our existing and new
customers and offers us a market expansion opportunity to medium
size managed services provides especially in Europe and US.
According to Kenneth Research (8/2021) the Global Operational
Technology (OT) Security market was at USD 200 million in 2018 and
is expected to grow at CAGR of 42% during the forecast period and
reach USD 3.5 billion by 2025.New PrivX OT Edition contracts are
being finalized with several major European customers and we
estimate new projects to start during the last quarter of the
year.
NQX, Quantum
Safe security,
cryptographic products and
services
NQX is gaining traction with security-critical customers. At the
end of the third quarter, we had secured in excess of EUR 0.3
million in customer subscription orders. We have a good visibility
towards larger expected orders as customers’ test environments
progress into deployments.
The major contract for the delivery of cryptographic products
and services announced in 12/2020 is now moving into production
deployment. The progress into deployment phase has been slower than
anticipated and that has reflected negatively on revenue generation
this year. We see development being positive for next year.
However, delays have been encountered in supply of hardware
components due to the global shortage in semiconductors, which may
affect our lead times in delivering devices for customer
orders.
During the quarter, we released the Quantum Safe solution for
Data-in-Transit by bringing NQX PQC Edition to the market. NQX PQC
is our first commercially available Post Quantum safe solution.
Next steps are to expand the use of PQC technologies in the rest
of our portfolio.Secure e-communication
Suite
The Secure e-communication Suite gives customers secure digital
communication. The suite consists of Secured Email, Secure
Workspace, Secure Signature and Secure Forms. The Secure
e-communication Suite contributes to SSH’s subscription revenue
growth, and we signed over thirty new customers during the quarter.
JIT (Just in Time)
Zero Trust
SSH is a leading company in providing JIT Zero Trust privileged
access, digital key management, secure data-in-transit and
communication solutions. We have expanded our portfolio with two
new Zero Trust Editions. UKM Zero Trust and Tectia Zero Trust based
on PrivX technology enable our customers with controlled key
management and secure server connections in dynamic cloud and
hybrid infrastructures and help customers to make a smooth and safe
transition to the cloud era with increased amount of remote work
and 3rd party suppliers.
Continuing with the recurring revenue
transition
Recurring revenue accounted for 87% of total revenue, increasing
its share from the previous quarter and giving SSH a solid base for
further growth.
To complement the Subscription ARR metric, we publish a broader
metric, Annual Recurring Revenue. This metric is a snapshot of the
last month of the reporting period multiplied by 12, presenting an
annualized revenue figure for SSH’s recurring revenue base. Our
Annual Recurring Revenue at the end of Q3 reached EUR 14.5
million.
Outlook
Our 2021 guidance remains unchanged:
We expect net sales to increase significantly during 2021. We
are accelerating our transition from license and support service
sales to a recurring revenue business model, which we expect will
provide more stable revenue in the long term.
Even though the growth strategy will require operational
investments, we estimate EBITDA and cash flow from operations to be
positive for 2021.
CONSOLIDATED NET SALES
Consolidated net sales for July – September totaled EUR 3.9
million (EUR 2.6 million).
Consolidated net sales for January – September totaled EUR 9.9
million (EUR 8.3 million).
The Americas region accounted for 48.1% (54.1%); the Europe,
Middle East, and Africa region 42.0% (26.1%); and the Asia Pacific
region 9.9% (19.8%) of reported net sales.
CONSOLIDATED NET SALES |
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EUR million |
7–9/2021 |
7–9/2020 |
Change % |
1–9/2021 |
1–9/2020 |
Change % |
1–12/2020 |
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BY SEGMENT |
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AMERICAS |
1.7 |
1.4 |
21.9 |
4.8 |
4.5 |
6.1 |
5.9 |
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APAC |
0.3 |
0.4 |
-30.3 |
1.0 |
1.6 |
-40.3 |
2.1 |
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EMEA |
1.9 |
0.7 |
172.1 |
4.2 |
2.2 |
92.3 |
3.2 |
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Total |
3.9 |
2.6 |
53.8 |
9.9 |
8.3 |
19.7 |
11.3 |
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BY OPERATION |
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Subscription sales |
1.6 |
0.2 |
765.4 |
3.0 |
0.5 |
463.8 |
0.8 |
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License sales |
0.4 |
0.4 |
1.3 |
1.4 |
1.7 |
-18.7 |
2.2 |
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Maintenance sales |
1.8 |
1.9 |
-7.1 |
5.4 |
6.1 |
-11.4 |
7.8 |
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Professional services & others |
0.1 |
0.0 |
349.8 |
0.2 |
0.1 |
209.6 |
0.4 |
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Total |
3.9 |
2.6 |
53.8 |
9.9 |
8.3 |
19.7 |
11.3 |
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The majority of SSH Communications Security’s invoicing is US
dollar-denominated. During the financial year to-date, the average
exchange rate of the US dollar against the euro declined by 6.5%
compared to the January-September 2020 period. With comparable
exchange rates, the net sales increase in 2021 YTD would have been
24.2% compared to 2020 YTD, instead of reported 19.3%.
RESULT AND EXPENSES
Operating loss for July – September was EUR -0.3 million (EUR
-0.3 million), with net profit totaling EUR -0.3 million (EUR -0.5
million).
Operating loss for January – September was EUR -2.2 million (EUR
-1.2 million), with net loss totaling EUR -2.7 million (EUR -1.5
million).
Selling, marketing, and customer support expenses for July –
September amounted to EUR -2.0 million (EUR -1.2 million), while
research and development expenses totaled EUR -1.4 million (EUR
-1.1 million) and administrative expenses EUR -1.1 million (EUR
-0.6 million).
Selling, marketing, and customer support expenses for January –
September amounted to EUR -6.1 million (EUR -4.5 million), while
research and development expenses totaled EUR -4.1 million (EUR
-3.7 million) and administrative expenses EUR -2.8 million (EUR
-1.9 million). Operating expenses increased by 28% compared to the
previous year.
BALANCE SHEET AND FINANCIAL POSITION
The financial position of SSH Communications Security was
satisfactory during the reporting period. The consolidated balance
sheet total on September 30, 2021, was EUR 32.0 million (September
30, 2020: EUR 18.1 million; December 31, 2020: EUR 18.6 million),
of which liquid assets accounted for EUR 4.2 million (September 30,
2020: EUR 9.4 million; December 31, 2020: EUR 8.5 million), or 13.0
% of the balance sheet total. Interest-bearing liabilities were EUR
1.2 million (September 30, 2020: 1.3 million; December 31, 2020:
EUR 1.3 million). Interest-bearing liabilities include a
subordinated loan of EUR 0.6 million (September 30, 2020: 0.6
million; December 31, 2020: 0.6 million) granted by the
non-controlling interest holder State Security Networks Group
Finland. On September 30, 2021 gearing, or the ratio of net
liabilities to shareholders’ equity, was -25.8%
(September 30, 2020: ‑82.2%; December 31, 2020: -85.3%) and the
equity ratio stood at 46.3% (September 30, 2020: 76.2%; December
31, 2020: 69.7%).
The reported gross capital expenditure for January – September
totaled EUR 1.8 million (EUR 1.5 million). The reported financial
income and expenses of EUR -0.3 million (EUR -0.3 million)
consisted mainly of exchange rate gains or losses, interest
expenses, sales and leasing expenses.
During January – September, SSH Communications Security
generated cash flow of EUR -1.5 million (EUR -0.2 million) from
business operations, and investments generated cash flow of EUR
-4.7 million (EUR -1.0 million). Cash flow from investments
includes the acquisition of Deltagon Oy for EUR -4.6 million and
received government grants of EUR 1.8 million (EUR 0.6 million).
Cash flow from financing totaled EUR 1.7 million (EUR -1.2
million). Cash flow from financing includes the payment of hybrid
instrument interest of EUR -1.4 million (EUR -0.9 million), and a
received loan 2.5 million. Total cash flow from operations,
investments, and financing was EUR -4.5 million (EUR -2.4
million).
There were no short-term investments at the end of the reporting
period.
RESEARCH AND DEVELOPMENT
Research and development expenses for July – September totaled
EUR -1.4 million (EUR -1.1 million), the equivalent of 34.9 % of
net sales (43.2 %). During July – September, the company has
capitalized new product R&D costs in the amount of EUR 0.4
million (EUR 0.3 million). Capitalized product development expenses
were reduced by EUR 0.1 million received as funding from the EU in
2020 (EUR 0.1 million).
Research and development expenses for January – September
totaled EUR -4.1 million (EUR -3.7 million), the equivalent of
40.8% of net sales (45.1%). During January – September, the company
has capitalized new product R&D costs in the amount of EUR 0.9
million (EUR 1.0 million). Capitalized product development expenses
were reduced by EUR 0.3 million received as funding from the EU in
2020 (EUR 0.4 million). Depreciation expense from capitalized
R&D assets was EUR -0.9 million (EUR -0.9 million).
HUMAN RESOURCES AND ORGANIZATION
At the end of September, the Group had 123 employees (September
30, 2020: 82; December 31, 2020: 94). The number of employees
increased by 41 persons from the comparison period and by 29
persons from the year-end 2020 (3 %). The change was mainly driven
by the Deltagon acquisition.
At the end of the period, 39.0% (29.3%) of the employees worked
in sales, marketing and customer service, 51.2% (53.7%) in R&D,
and 9.8% (17.1%) in corporate administration.
BOARD AND AUDITORS
The Annual General Meeting of SSH Communications Security Oyj
was held on March 25, 2021. The Annual General Meeting unanimously
adopted the consolidated financial statements and discharged from
liability the Board members and CEO who have been active during the
accounting period between January 1, 2020, and December 31, 2020.
Henri Österlund, Kai Tavakka, Sampo Kellomäki, and Christian
Fredrikson (new member) were elected as directors of the company's
Board of Directors. At the inaugural meeting of the Board of
Directors, Henri Österlund was elected Chairman.
The Authorized Public Accountants Ernst & Young Oy were
re-elected as the auditor of the company. Ernst & Young Oy
informed the company that Erkka Talvinko, Authorized Public
Accountant, will continue as the principal auditor.
GROUP MANAGEMENT TEAM
On September 30, 2021, the Group Management Team comprised:Teemu
Tunkelo, Chief Executive OfficerNiklas Nordström, Chief Financial
OfficerRami Raulas, Head of EMEA Region
SHARES, SHAREHOLDING, AND CHANGES IN GROUP
STRUCTURE
The reported trading volume of SSH Communications Security
shares totaled 7,076,597 shares (valued at EUR 18,022,658) during
the reporting period. The highest quotation was EUR 3.26 and the
lowest EUR 1.60. The trade-weighted average share price for the
period was EUR 2.51, and the share closed at EUR 2.35 (September
30, 2021).
Accendo Capital is the largest shareholder of SSH, with 29.2% of
the company shares and votes. Tatu Ylönen is the second-largest
shareholder of SSH with 18.0%, 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.
On January 29, 2021, SSH announced the acquisition of Deltagon
Oy through its subsidiary Kyberleijona Oy. The transaction was
closed on April 26, 2021.
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 September 30, 2021,
was EUR 1,176,206.99, consisting of 38,826,233 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 may have 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 compelling financial reason for
the deviation with respect to the share issue against payment.
Furthermore, the authorization includes the Board of Directors'
right to decide upon who is 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 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 expire at the latest on June 30, 2022.
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 other 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 by 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 acquisition of own shares must be made
so that the combined amount of the own shares, which are in
possession of, or held as pledges by, the company or its
subsidiaries does not exceed 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 expire at the latest on June 30, 2022.
RISKS AND
UNCERTAINTIES
The ongoing COVID-19 pandemic remains a macro-level risk which,
if prolonged, may affect SSH Communications Security through
challenges it poses on new license sales. The most substantial
risks that might otherwise affect the profitability of the company
have remained the same as in the previous reporting period and are
listed below.
Largest risks:
- Uncertainty of the macroeconomic environment, such as the
impact of COVID-19 pandemic
- Refinancing risk/liquidity risk such as being unable to pay
obligations due to insufficient liquidity or difficulties in
raising financing.
- 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
- Due to the global shortage in semiconductors hinder supply of
hardware components and indirectly initiation of customer IT
project
- 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, and possible significant fluctuation in USD currency
rates during 2021 could have unpredictable effects on
profitability. The company decides on hedging of USD-based
contracts case by case.
Principles and organization of risk management of SSH
Communications Security are available on the company's web page:
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 events.
CONDENSED CONSOLIDATED COMPREHENSIVE INCOME
STATEMENT |
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EUR million |
7–9/2021 |
7–9/2020 |
1–9/2021 |
1–9/2020 |
1–12/2020 |
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Net sales |
3.9 |
2.6 |
9.9 |
8.3 |
11.3 |
Cost of
sales |
0.0 |
-0.1 |
0.1 |
-0.2 |
-0.3 |
Gross margin |
4.0 |
2.5 |
10.0 |
8.1 |
11.0 |
Other operating
income |
0.2 |
0.2 |
0.8 |
0.8 |
1.0 |
|
|
|
|
|
|
Selling,
marketing and customer support expenses |
-2.0 |
-1.2 |
-6.1 |
-4.5 |
-6.7 |
Research and
development expenses |
-1.4 |
-1.1 |
-4.1 |
-3.7 |
-5.0 |
Administrative expenses |
-1.1 |
-0.6 |
-2.8 |
-1.9 |
-2.7 |
Operating
profit/loss |
-0.3 |
-0.3 |
-2.2 |
-1.2 |
-2.5 |
|
|
|
|
|
|
Financial income and expenses |
-0.1 |
-0.3 |
-0.3 |
-0.3 |
-0.6 |
Profit/loss before taxes |
-0.4 |
-0.5 |
-2.5 |
-1.5 |
-3.1 |
Taxes |
0.1 |
0.0 |
-0.2 |
0.0 |
0.0 |
Profit/loss for the period |
-0.3 |
-0.5 |
-2.7 |
-1.5 |
-3.1 |
|
|
|
|
|
|
Attributable to: |
|
|
|
|
|
Owners of the parent company |
-0.4 |
-0.5 |
-2.7 |
-1.3 |
-2.8 |
Non-controlling interests |
0.1 |
-0.1 |
0.0 |
-0.2 |
-0.2 |
|
-0.3 |
-0.5 |
-2.7 |
-1.5 |
-3.1 |
|
|
|
|
|
|
Other
comprehensive income |
|
|
|
|
|
Items which might be later transferred to profit or loss: |
|
|
|
|
|
Foreign subsidiary translation differences |
-0.1 |
0.1 |
0.0 |
0.1 |
0.3 |
Total comprehensive income |
-0.4 |
-0.4 |
-2.7 |
-1.4 |
-2.8 |
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to: |
|
|
|
|
|
Owners of the parent company |
-0.5 |
-0.3 |
-2.6 |
-1.2 |
-2.6 |
Non-controlling interest |
0.1 |
-0.1 |
0.0 |
-0.2 |
-0.2 |
|
-0.4 |
-0.4 |
-2.7 |
-1.4 |
-2.8 |
|
|
|
|
|
|
Earnings
per share |
|
|
|
|
|
Earnings per
share (EUR) |
-0.02 |
-0.02 |
-0.10 |
-0.06 |
-0.11 |
Diluted earnings
per share (EUR) |
-0.02 |
-0.02 |
-0.10 |
-0.06 |
-0.11 |
CONDENSED CONSOLIDATED BALANCE SHEET |
|
|
|
|
|
|
|
EUR million |
Sep 30. 2021 |
Sep 30. 2020 |
Dec 31. 2020 |
ASSETS |
|
|
|
Non-current assets |
|
|
|
Property, plant and equipment |
0.1 |
0.1 |
0.1 |
Right-of-use assets |
0.6 |
0.7 |
0.7 |
Goodwill and intangible assets |
21.7 |
5.3 |
5.4 |
Investments |
0.0 |
0.0 |
0.0 |
Total
non-current assets |
22.4 |
6.2 |
6.3 |
|
|
|
|
Current assets |
|
|
|
Inventories |
0.0 |
0.0 |
0.0 |
Trade and other receivables |
5.3 |
2.4 |
3.8 |
Financial assets |
0.0 |
0.0 |
0.0 |
Cash and cash equivalents |
4.2 |
9.4 |
8.5 |
Total
current assets |
9.5 |
11.9 |
12.3 |
|
|
|
|
Total assets |
32.0 |
18.1 |
18.6 |
|
|
|
|
EQUITY
AND LIABILITIES |
|
|
|
|
|
|
|
Equity |
|
|
|
Attributable to parent company's shareholders |
5.2 |
9.4 |
8.1 |
Non-controlling interest |
6.2 |
0.4 |
0.4 |
Total
equity |
11.5 |
9.9 |
8.5 |
|
|
|
|
Non-current liabilities |
|
|
|
Borrowings |
0.6 |
0.6 |
0.6 |
Lease liabilities |
0.3 |
0.4 |
0.4 |
Other non-current liabilities |
3.6 |
|
|
Advances received and deferred revenue |
1.0 |
0.7 |
0.8 |
Deferred tax liabilities |
1.6 |
|
|
Total
non-current liabilities |
7.1 |
1.7 |
1.7 |
|
|
|
|
Current liabilities |
|
|
|
Trade and other payables |
6.9 |
1.8 |
2.4 |
Lease liabilities |
0.3 |
0.3 |
0.3 |
Advances received and deferred revenue |
6.1 |
4.4 |
5.7 |
Total
current liabilities |
13.3 |
6.5 |
8.4 |
|
|
|
|
Total equity and liabilities |
32.0 |
18.1 |
18.6 |
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN
EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to the owners of the Company |
|
|
EUR million |
Share capital |
Hybrid capital securities |
Translation difference |
Unrestricted invested equity fund |
Retained earnings |
Total |
Non-controlling interests |
Total equity |
Equity Jan 1,
2020 |
1.2 |
12.0 |
-1.4 |
22.7 |
-23.0 |
11.4 |
0.6 |
12.0 |
|
|
|
|
|
|
|
|
|
Change |
|
|
0.1 |
|
-0.8 |
-0.7 |
|
-0.7 |
Net profit |
|
|
|
|
-1.3 |
-1.3 |
-0.2 |
-1.5 |
Equity Sep 30,
2020 |
1.2 |
12.0 |
-1.3 |
22.7 |
-25.1 |
9.4 |
0.4 |
9.9 |
|
|
|
|
|
|
|
|
|
Change |
0.0 |
0.0 |
0.2 |
0.0 |
-1.5 |
-1.3 |
|
-1.3 |
Net profit |
|
|
|
|
0.0 |
0.0 |
-0.1 |
0.0 |
Equity Dec 31,
2020 |
1.2 |
12.0 |
-1.2 |
22.7 |
-26.6 |
8.1 |
0.4 |
8.5 |
|
|
|
|
|
|
|
|
|
Change |
0.0 |
|
0.0 |
0.8 |
-1.1 |
-0.2 |
|
-0.2 |
Net profit |
|
|
|
|
-2.7 |
-2.7 |
0.0 |
-2.7 |
Acquisition of subsidiary |
|
|
|
|
|
|
5.9 |
5.9 |
Equity
September 30, 2021 |
1.2 |
12.0 |
-1.1 |
23.6 |
-30.3 |
5.2 |
6.2 |
11.5 |
CONDENSED CONSOLIDATED STATEMENT OF CASH
FLOWS |
|
|
|
EUR million |
1–9/2021 |
1–9/2020 |
1–12/2020 |
|
|
|
|
Cash flow from
operations |
-1.5 |
-0.2 |
-0.2 |
whereof change
in working capital |
2.5 |
0.3 |
1.1 |
Cash flow from
investing activities |
-4.7 |
-1.0 |
-1.5 |
Cash flow from
financing activities |
1.7 |
-1.2 |
-1.3 |
|
|
|
|
Increase (+) /
decrease (-) in cash |
-4.5 |
-2.4 |
-3.0 |
|
|
|
|
Cash at period
start |
8.5 |
12.0 |
12.0 |
Effect of
exchange rate |
0.1 |
-0.2 |
-0.4 |
Cash at period
end |
4.2 |
9.4 |
8.5 |
NOTES TO THE FINANCIAL STATEMENT
RELEASE
The interim report for the nine months reporting period ended
September 30, 2021 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,
2020. The information presented in this interim report is
unaudited.
The accounting policies adopted for this interim report are
consistent with those applied in 2020 consolidated financial
statements except for the adoption of new standards effective as of
January 1, 2021. The Group has not early adopted any standard,
interpretation, or amendment that has been issued but is not yet
effective. The new standards and amendments had no impact on the
interim condensed consolidated financial statements of the SSH
Group.
BUSINESS COMBINATIONSAcquisition
of Deltagon Oy
On April 26, 2021, the Group’s subsidiary Kyberleijona Oy
acquired 100% of the voting shares of Deltagon Oy, an unlisted
company based in Finland that develops and sells secure messaging
and transaction solutions to various industries, including finance
and the public sector. A majority of Deltagon’s revenue is
generated from the secure email messaging solution Sec@GW that has
been certified by the National Cyber Security Authority at the
Finnish Transport and Communications Agency (NCSA-FI) for
protecting classified information according to the Finnish national
(FI) ST III and ST IV security requirements. The Group has acquired
Deltagon because it complements SSH’s product and services
portfolio and creates synergies in product development, developing
future quantum resistance, and leveraging international sales and
marketing channels. The acquisition has been accounted for using
the acquisition method. The interim condensed consolidated
financial statements include the results of Deltagon from the
acquisition date April 26 until September 30, 2021.
Details of purchase consideration, the net assets acquired, and
goodwill are as follows:
Purchase consideration |
EUR million |
Cash paid |
5.0 |
Deferred
purchase price |
4.9 |
Considerations
shares |
5.4 |
Closing
adjustments |
1.5 |
Earnout
consideration |
0.4 |
Total
purchase consideration |
17.1 |
Assets |
Fair value recognised on
acquisition |
Intangible
assets |
|
Customer related intangible assets |
8.1 |
Technology related intangible assets |
0.4 |
Trade and
other receivables |
2.0 |
Cash |
1.4 |
|
11.9 |
|
|
Liabilities |
|
Trade and
other payables |
-1.3 |
Deferred tax
liability |
-1.7 |
|
-3.0 |
Total
identifiable net assets at fair value |
8.8 |
|
|
Goodwill
arising on acquisition |
8.3 |
Purchase consideration transferred |
17.1 |
|
|
Analysis of
cash flows on acquisition: |
|
Net cash
acquired with the subsidiary (included in cash flows from investing
activities) |
1.4 |
Cash paid |
-6.0 |
Net
cash flow on acquisition |
-4.6 |
The total purchase price was EUR 17.1 million. Cash component of
EUR 5.0 million was paid at closing, EUR 1.0 million in July and
EUR 5.4 million of consideration shares were recognized in equity.
Deferred purchase price EUR 4.9 million consists out of the present
value of three additional installments of EUR 1.67 million paid in
years 2022, 2023 and 2024. The installments have been discounted at
the estimated cost of debt (2.1%). A closing adjustment of EUR 1.5
million was based on the net cash position and net working capital
adjustment on the closing date.
The goodwill recognized is attributed to Deltagon’s profitably
growing business with a strong position in the domestic messaging
security market, new international business, and a wide customer
base.
Transaction costs were not significant and have been expensed
and included in the administrative expenses in profit or loss.
CHANGES
IN PROPERTY, PLANT AND EQUIPMENT |
|
|
|
|
|
|
|
EUR million |
September 30, 2021 |
September 30, 2020 |
December 31, 2020 |
Carrying amount
in the beginning of the period |
0.1 |
0.1 |
0.1 |
Increase |
0.1 |
0.1 |
0.1 |
Depreciation and
impairment |
-0.1 |
-0.1 |
-0.1 |
Foreign exchange
rate differences |
0.0 |
0.0 |
0.0 |
Carrying amount at the end of the period |
0.1 |
0.1 |
0.1 |
CHANGES
IN RIGHT-OF-USE ASSETS |
|
|
|
|
|
|
|
EUR million |
September 30, 2021 |
September 30, 2020 |
December 31, 2020 |
Carrying amount
in the beginning of the period |
0.7 |
0.3 |
0.3 |
Increase |
0.2 |
0.7 |
0.8 |
Decrease |
-0.0 |
|
|
Depreciation and
impairment |
-0.3 |
-0.3 |
-0.4 |
Foreign exchange
rate differences |
0.0 |
0.0 |
0.0 |
Carrying amount at the end of the period |
0.6 |
0.7 |
0.7 |
Right-of-use assets include leased offices and software.
CHANGES
IN GOODWILL AND INTANGIBLE ASSETS |
|
|
|
|
|
|
|
EUR million |
September 30, 2021 |
September 30, 2020 |
December 31, 2020 |
Carrying amount
in the beginning of the period |
5.4 |
5.5 |
5.5 |
Increase |
1.1 |
1.0 |
1.6 |
Acquisition of
subsidiary |
16.8 |
|
|
Amortization and
impairment |
-1.6 |
-1.2 |
-1.6 |
Foreign exchange
rate differences |
0.0 |
0.0 |
0.0 |
Carrying amount at the end of the period |
21.7 |
5.3 |
5.4 |
CONTINGENT LIABILITIES |
|
|
|
|
|
|
|
EUR million |
September 30, 2021 |
September 30, 2020 |
December 31, 2020 |
Interest on
hybrid capital securities |
0.7 |
0.9 |
1.0 |
Rent security
deposits |
0.1 |
0.2 |
0.2 |
KEY FIGURES AND RATIOS
SSH Communications Security provides an alternative performance
measure EBITDA, which is not defined by IFRS standards. Alternative
performance measures should not be considered as substitutes for
performance measures in accordance with IFRS.
EBITDA = Operating profit/loss + depreciation and impairment
KEY
FIGURES AND RATIOS |
|
|
|
|
|
|
|
EUR million |
1–9/2021 |
1–9/2020 |
1–12/2020 |
Net sales |
9.9 |
8.3 |
11.3 |
EBITDA |
-0.3 |
0.4 |
-0.4 |
% of net
sales |
-2.8 |
4.3 |
-3.5 |
Operating
profit/loss |
-2.2 |
-1.2 |
-2.5 |
% of net
sales |
-22.0 |
-14.2 |
-22.1 |
Profit/loss
before taxes |
-2.5 |
-1.5 |
-3.1 |
% of net
sales |
-25.1 |
-17.7 |
-27.5 |
Return on
equity (%) |
-27.0 |
-13.3 |
-30.0 |
Return on
investment (%) |
-18.0 |
-12.2 |
-27.3 |
Interest-bearing net liabilities |
-3.0 |
-8.1 |
-7.2 |
Equity ratio
(%) |
46.3 |
76.2 |
69.7 |
Gearing
(%) |
-25.8 |
-82.2 |
-85.3 |
Gross capital
expenditure |
1.8 |
1.5 |
2.1 |
% of net
sales |
17.7 |
18.6 |
18.8 |
R&D
expenses |
-4.1 |
-3.7 |
-5.0 |
% of net
sales |
40.8 |
45.1 |
44.9 |
Personnel,
period average |
111 |
88 |
88 |
Personnel,
period end |
123 |
82 |
94 |
PER
SHARE DATA |
|
|
|
|
|
|
|
EUR |
1–9/2021 |
1–9/2020 |
1–12/2020 |
Earnings per
share undiluted1 |
-0.10 |
-0.06 |
-0.11 |
Earnings per
share diluted1 |
-0.10 |
-0.06 |
-0.11 |
Equity per
share |
0.30 |
0.25 |
0.22 |
No. of shares
at period average (thousand) |
38,810 |
38,802 |
38,802 |
No. of shares
at period end (thousand) |
38,826 |
38,802 |
38,802 |
Share
performance |
|
|
|
Average
price |
2.51 |
1.26 |
1.28 |
Low |
1.60 |
0.65 |
0.65 |
High |
3.26 |
1.90 |
1.97 |
Share price
period end |
2.35 |
1.45 |
1.70 |
Market
capitalization period end (EUR million) |
91.2 |
56.1 |
65.8 |
Volume of
shares traded (million) |
7.2 |
17.7 |
19.4 |
Volume of
shares traded as % of total |
18.5 |
45.6 |
50.1 |
Value of
shares traded (EUR million) |
18.0 |
22.4 |
24.9 |
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 |
1
Earnings per share is impacted by unpaid interest of hybrid capital
securities |
|
RECONCILIATION OF ALTERNATIVE PERFORMANCE
MEASURES
The following table presents the reconciliation of EBITDA to the
operating profit/loss.
EUR million |
1–9/2021 |
1–9/2020 |
1–12/2020 |
EBITDA |
-0.3 |
0.4 |
-0.4 |
Depreciations
and amortizations |
-1.9 |
-1.5 |
-2.1 |
Operating profit/loss |
-2.2 |
-1.2 |
-2.5 |
DISCLAIMER
The contents of this report are provided by SSH Communications
Security and its third-party content providers for your personal
information only and do not constitute an offer or invitation to
purchase any securities nor does this report provide any form of
advice (investment, tax, legal) amounting to investment advice nor
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 adviser 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 financial reporting
calendar for 2022 later during the year.
Helsinki, October 21, 2021
SSH COMMUNICATIONS SECURITY
Board of Directors
Teemu TunkeloCEO
For further information, please contact:Teemu Tunkelo, CEO tel.
+41 79 227 8362Niklas Nordström, CFO tel. +358 50 541
0543
Distribution:NASDAQ Helsinki Ltd.Major mediawww.SSH.com
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