Annual Report • Mar 2, 2018
Annual Report
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AUDITOR'S REPORT
SSH Communications Security helps organizations access, secure and control their digital core – their critical data, applications and services. In the rapidly growing global data economy, secure access that enables digital transformation at business velocity is the new competitive advantage.
We have over 3,000 customers around the world, including 40 % of Fortune 500 companies, the world's largest financial institutions, and major organizations in all verticals. Our solutions guard against the rapidly changing threat landscape that includes both internal and external actors.
We generate value from a combination of our world-leading expertise, proven enterpriseclass solutions, professional services, support offering, and from our strong IP portfolio and well-established licensing operations.
SSH Communications Security sells through offices in North America, Europe and Asia and through a global network of certified partners. The company's shares (SSH1V) are quoted on the NASDAQ Helsinki. For more information, visit www.ssh.com.
| KEY FIGURES | 2017 | 2016 | |
|---|---|---|---|
| Net sales | kEUR | 16,233 | 15,122 |
| Operating profit/loss | kEUR | -1,709 | -10,753 |
| % of net sales | % | -10.5 | -71.1 |
| Profit/loss before taxes | kEUR | -2,220 | -11,017 |
| Earnings per share | EUR | -0.09 | -0.36 |
| Equity ratio | % | 82.9 | 63.1 |
| Gearing | % | -104.5 | -94.8 |
| Number of personnel 31 Dec | 80 | 84 |
The Service + other revenue category (including patent licensing) grew significantly with +253 % growth over 2016.
Recurring revenue from maintenance and support strong; +5 % over 2016.
Net Sales Operating Profit / Loss Operating Profit % of Net Sales Q1 Q2 Q3 Q4 M€ % 6 0 30 -60 1 -45 2 -30 3 -15 4 0 5 15
We achieved 80 % year-on-year growth in software subscription sales which is in line with our focus on subscription sales and helps build a stable base for future growth.
Software license sales were challenging due to long sales cycles, increasing competition, and the trend of customers starting their deployments with smaller orders instead of large one-off purchases. As a result of this, license sales decreased by 34 %. This is a result we are not happy with and we have started several initiatives to boost license sales.
The category of professional services & other sales showed a remarkable 253 % growth. This number, however, must be understood in the right context. The figure includes the EUR 2.1 million royalty payment from the patent cross-licensing deal we announced in December.
Pure professional services sales showed a more reasonable +64 % growth, resulting from continued demand from larger customers to support them in their SSH key remediation projects. While we continue to emphasize license and subscription sales, the growth in demand for our professional services indicates the trust placed in us by some of the largest and most successful companies in the world.
The above-mentioned patent licensing deal was our first licensing win. It validates our patent licensing strategy and gives us renewed energy to further pursue patent licensing negotiations.
The company operates globally with regional headquarters in Helsinki (for EMEA) and Boston (for Americas). In EMEA, we have sales and support offices in the UK and Germany. In the APAC region, the company has an office in Hong Kong. AMER total revenue in 2017 was up +1.4 %. APAC revenue was up +18.9 % in 2017. EMEA revenue decreased by -29.4 % in 2017. The patent licensing revenue was recognized as Global royalty revenue.
We continue to work with a mixed sales model in AMER and EMEA, while APAC is predominantly channel-driven.
The cost reduction and restructuring process started in Q4 of 2016 resulted in a significantly decreased headcount. During 2017, we streamlined both our organization and processes to increase operative efficiency.
The most visible change was the start of the new PrivX Business Program to manage the go-to-market process of the PrivX® On-Demand Access Manager product and ensure there are enough resources and focus on the product line to make it a success and an engine of future growth for the company.
Product Management was also streamlined and unified under clear leadership.
The marketing organization was reshaped, and a new Chief Marketing Officer and Chief Digital Officer were appointed to lead us in our digital transformation process and create the increased online presence and visibility required for future growth.
Despite significantly reduced headcount, R&D produced a brand-new product, PrivX® On-Demand Access Manager, and new versions of our Universal SSH Key Manager® (UKM) and CryptoAuditor® products. Our Tectia® SSH products continue to be the gold standard in encryption technology that leading customers around the world use for their mission-critical operations.
The launch of PrivX On-Demand Access Manager in June of 2017 was the first phase of SSH's ambitious new strategy. PrivX rearchitects access management for the Cloud and DevOps, enabling enterprises to instantly reap the business benefits of faster time-to-market, increased agility, and lower costs. As a "keyless" on-demand solution, PrivX solves one of greatest challenges facing CIO's and CISO's now and in the future: how to manage the virtually unlimited number of privileged access credentials in data-driven organizations.
Our firewall/VPN product entered the final national CAA (Crypto Approval Authority) certification process. The successful completion of this certification process will enable sales to public sector customers in Finland.
While we had mixed results in the patent litigation process early in the year, we were able to conclude and announce our first patent cross-licensing agreement with a global technology player during Q4. This agreement resulted in a EUR 2.1 million one-time payment to SSH Communications Security in Q4.
We entered into a settlement and patent cross-licensing agreement with Sony in February 2018. The agreement ends all litigation between SSH and Sony and provides for a one-time royalty fee payable by Sony to SSH. This royalty fee will have a moderate positive effect on SSH's revenue and EBIT in Q1 of 2018.
We continue other patent licensing negotiations with full force.
In addition to enforcement efforts and licensing negotiations, we filed several international patents on key PrivX innovations to continue growing our IPR portfolio, further differentiate the product in the market, and increase patent licensing potential.
The cybersecurity market is poised to keep growing at a brisk pace for the foreseeable future, fueled by the growing and shifting threat landscape, accelerating cloud transformation, and new regulations (in Europe, primarily GDPR which comes into full force in May 2018).
The growth of the traditional cybersecurity market notwithstanding, there is a fundamental shift happening in the market. By 2020, 50 % of the Global 2000 will see the majority of their business depend on their ability to create digitally-enhanced products, services, and experiences in response to evolving consumer expectations. This evolution requires businesses to invest in technology enablers to ramp up their digital transformation efforts.
IDC calls technologies that enable businesses to fast-track their digital transformation "3rd Platform Technologies": Big Data & Analytics, Cloud, Mobile and Social. These four technologies are important foundational elements that enable enterprises to disrupt the market.
In this new reality, cybersecurity has to be an innovative accelerator. Organizations need security solutions that enable secure access between the critical assets of their digital core and these 3rd Platform Technologies. SSH Communications is positioned to exploit this need with our solutions that offer secure access with zero inertia, zero friction and zero credentials risk.
The new direction addresses the tectonic shift in the IT landscape caused by the parallel emergence of cloud computing and the global data economy, resulting in an ever-accelerating digital transformation of businesses.
The scale of the opportunity created by the cloud is unprecedented. Gartner, Inc. wrote in 2016: "More than \$1 trillion in IT spending will be directly or indirectly affected by the shift to cloud during the next five years. This will make cloud computing one of the most disruptive forces of IT spending since the early days of the digital age. Cloud-first strategies are the foundation for staying relevant in a fast-paced world."
The EU estimates the size of the data economy to exceed EUR 700 billion by the year 2020 in Europe alone. The global number is likely to be in excess of EUR 2 trillion by the year 2020. Craig Mundie of Microsoft succinctly describes this development: "Data is becoming the new raw material of business: an economic input almost on a par with capital and labor."
A key impediment to companies' digital transformation is the cost, effort and risk balance associated with secure access to critical data, applications, and services. According to Forbes, 49 % of businesses are delaying cloud deployment due to cybersecurity.
With the new strategic direction, we are repositioning SSH Communications Security to better respond to changing customer needs and increase shareholder value:
In 2017, we laid the groundwork for our new strategy, but the process is just starting. We will execute the new strategy in four successive stages, the first of which was completed in 2017.
Dear valued customers, partners, co-workers, and shareholders,
The year 2017 was a period of rebuilding for SSH Communications Security – we restructured the organization after the reorganization and cost savings actions in late 2016, announced a new cloud-facing strategy, launched a new product, increased our focus on marketing, and also started changing our sales model. While this process is still ongoing, the results were encouraging.
Supported by our patent licensing activity and a strong fourth quarter (56 % year-on-year revenue growth and very healthy 22 % operating profit), we grew our annual revenue by 7 % and decreased our operating loss by nearly 85 %. Our cash flow from operations for the year was also positive, signifying a nearly EUR 10 million turnaround from 2016.
We successfully controlled costs and improved our operational efficiency throughout the organization. Despite significantly reduced headcount, R&D produced a brand-new product, PrivX® On-Demand Access Manager, and new versions of our our Universal SSH Key Manager® (UKM) and CryptoAuditor® products. Our Tectia® SSH products continue to be the gold standard in encryption technology that leading customers around the world use for their mission-critical operations.
The launch of PrivX On-Demand Access Manager in June of 2017 was the first phase of SSH's ambitious new strategy. PrivX rearchitects access management for the cloud and DevOps, enabling enterprises to instantly reap the business benefits of faster timeto-market, increased agility, and lower costs. As a "keyless" on-demand solution, PrivX® On-Demand Access Manager solves one of future CIO and CISO's biggest concerns: managing the virtually limitless number of privileged access credentials.
While we are encouraged by our progress, there is still a lot of work ahead of us as we are far from finished with our transformation journey. However, the past year clearly shows that we are on the right path.
We did not yet turn our result positive and new license sales were challenging due to long sales cycles,
increasing competition, and the trend of customers starting their deployments with smaller orders instead of large one-off purchases.
On the other hand, our software subscription revenue grew 80 % year-on-year, and the maintenance revenue from old products remained robust. The APAC region performed especially well and the results there exceeded our expectations.
Many of the changes and initiatives we decided on and started executing in 2017 will start showing results in 2018 and beyond. Some of the key initiatives include a strategic shift in our marketing to digital and online, and investment in a new sales model that encompasses both online sales and aggressive inside sales for targeting new customer segments and faster market penetration.
We successfully grew our digital footprint and increased the number of visitors on our web site by more than 500 % compared to 2016. One of the key initiatives in 2018 will be increasingly converting this visitor flow into new customers.
Online and inside sales help us reach a significantly larger number of customers cost-efficiently and also help in the visitor-to-customer conversion. The average deal sizes will be smaller in these channels than in our direct sales channel, but this difference will be more than offset by the expected larger number of transactions and much shorter sales cycles. 2018 will be a very important year for the new sales model: while we do not expect a large revenue impact yet, the work will build a strong foundation for future growth and should start producing significant results in 2019 and beyond.
Our cash position remains very strong. We ensured we have enough resources to execute our new strategy and invest in R&D and marketing with a successful EUR 7 million share issue in June. The share issue was fully subscribed and led to a new major institutional investor joining our list of shareholders. While the success of the funding round was gratifying, we also feel the urgency to successfully execute the new strategy to create growing shareholder value.
We strengthened and streamlined our organization and leadership team during the year. We started a dedicated PrivX Business Program to manage the go-to-market process of the PrivX product and ensure there are enough resources and focus on the product line to make it a success and an engine of future growth. We were successful in hiring new world-class marketing and digital talent to lead us in our digital transformation process and create the increased online presence and visibility required for future growth.
We also saw our first win on the patent licensing front: in December, we announced a EUR 2.1 million cross-licensing agreement with a global technology company. We continue our other patent licensing efforts with full force.
The firewall business continues to progress steadily, and the certification process is proceeding well. However, deliveries still await the completion of the certification process and confirmed customer orders.
I would like to thank my entire team at SSH Communications Security for their efforts and dedication during 2017. This was not an easy year as the pace of change was fast and we were in a heavy rebuilding phase. The team responded superbly to the challenges we faced, and we emerged from this year stronger and in a clearly better position to prosper than we were at the end of the previous year.
I expect the new initiatives and changes we made in 2017 to start bearing fruit in 2018. I am looking forward to continuing the change journey together with our talented and focused team.
Kaisa Olkkonen CEO
The Annual General Meeting held in March 2017 elected Petri Kuivala, Jukka Manner, Timo Syrjälä, Ari Vänttinen, and Tatu Ylönen as members of the Board of Directors.
Jukka Manner was elected as the Chairman of the Board of Directors. The majority of the Board members are considered independent of the company. Board Members Petri Kuivala, Jukka Manner and Timo Syrjälä are deemed to be independent Board members. Board members Ari Vänttinen and Tatu Ylönen are not independent of the company. Ari Vänttinen has signed a multi-year CMO-as-a-Service contract with SSH. Tatu Ylönen is a member of the Executive Management Team and the largest shareholder. Directly and through his holdings he owns approximately 47.7 % of SSH Communications Security shares.
Chairman of the Board
Jukka Manner is Professor of Networking Technology at Aalto University. He has more than 20 years of experience in networking, software engineering and distributed systems. He has contributed to standardization of Internet technologies in the Internet Engineering Task Force (IETF) since 1999. Jukka has been principal investigator and project manager for over 25 national and international research projects and has authored over 100 publications, including eleven IETF standards. Prior to joining the board of SSH Communications Security, he served on the board of Stonesoft. He has received the Cross of Merit, Signals, and the Medal for Military Merits for contributions in national defense and C4. Jukka is also a member of the board of the Nokia Foundation.
Jukka has a Ph.D. degree from the University of Helsinki (Computer Science). Jukka owns 12,000 SSH shares.
He has no option rights.
Petri Kuivala is an experienced international leader who currently works as the Chief Information Security Officer of NXP Semiconductors, which is a world leading provider of security and automotive semiconductor solutions. Prior to NXP, he was member of the Microsoft Global Security management team. Prior to that, he worked for almost 14 years in different security leadership positions at Nokia Corporation, including as CISO and CSO.
Prior to joining Nokia, Petri worked for the Helsinki Police department, and was a founding member of the Helsinki Criminal Police IT investigations department.
Petri neither owns any SSH shares nor has any option rights.
Timo Syrjälä has more than 30 years of experience in capital markets and has spent the last 10 years as a private investor and a non-executive director in several firms. Prior to joining the board of SSH Communications Security, he served on the boards of several leading technology firms including Stonesoft (a security company specializing in firewalls, acquired by Intel/McAfee, now ForcePoint) and Efore.
Earlier in his career, Timo held executive and managerial positions in management consulting, asset management, and investment banking.
Timo holds a Master of Science degree from the Helsinki University of Technology (now Aalto University) in Finland.
Timo owns 3,559,131 SSH shares directly and and through his holdings. He has no option rights.
Ari Vänttinen is an experienced leader in international B2B marketing within the software industry and digital economy.
Since 2010, Ari has been instrumental in changing the marketing of two Finnish publicly listed software companies (Stonesoft and Comptel) that have both, during his time, significantly increased shareholder value and company valuation.
Ari has deep subject matter expertise in cybersecurity matters and understands how to build a global thought leader position in the industry. He has held various marketing management roles and also currently works as a mentor and advisor to several startups and tech/software companies. Ari neither owns any SSH shares
nor has any option rights.
Tatu Ylönen founded SSH Communications Security in 1995, grew the company to \$20 million in sales and 190 employees in five years, and led the company to a public listing on the NASDAQ OMX Nordic in 2000.
Tatu is an experienced entrepreneur and the original inventor of SSH (Secure Shell) and NAT Traversal technologies. He has also co-authored the NIST IR 7966, guide-lines for managing SSH keys.
Prior to his current role as Founder and SSH Fellow, Tatu has held various roles in the company throughout the years, including CEO, CTO, and Chief Innovation Officer. He is also the largest shareholder in the company.
Tatu holds a degree of Licentiate of Technology from the Helsinki University of Technology (now Aalto University) in Finland. He has previously founded and invested in several other companies; one of these companies went public in 2014.
Tatu owns 18,317,123 SSH shares directly and through his company Clausal Computing Ltd. He has no option rights.
The following people also served in the executive management team during 2017:
Chris Riley, President, SSH, Inc. and Vice President, US Sales & Global Marketing, 01-12/2017
Kalle Jääskeläinen, Vice President, Platform Management, 01-05/2017
The CFO of SSH Communications Security, Helena Kukkonen resigned in December 2017 to pursue new challenges. Helena will continue in her duties until spring of 2018
Tatu Ylönen will step down from the Executive Management Team starting March 1, 2018.
Niklas Nordström will join the Executive Management Team as CFO starting March 19, 2018.
Chief Executive Officer Born 1964, Master of Laws, Helsinki University
Kaisa is an experienced leader and expert in international business, legal matters, intellectual property, and digitalization. She has previously been, e.g. VP, Legal and VP, Government Relations at Nokia Corporation.
Kaisa has led international and diverse expert teams through changes and transitions. Her international career has taken her on expatriate assignments in Sweden, Singapore, and Belgium.
She also holds Board of Directors positions in Cargotec Oyj, Enfo Oyj, and John Nurminen Foundation, and acts as an investor and advisor to several startup companies.
Kaisa owns 10,000 SSH Communications Security shares and has 300,000 option rights.
SSH Fellow, Founder born 1968, Lic.Sc. (Technology)
After founding SSH Communications Security in 1995, Tatu grew the company to \$20 million in sales and 190 employees in five years and led the company to a public listing on the NASDAQ OMX Nordic in 2000.
He is an experienced entrepreneur with significant technical achievements:
• Developed the SSH (Secure Shell) protocol for secure remote access and SFTP for file transfers. • Implemented the original free SSH client and server, which later became OpenSSH.
• Developed patented NAT Traversal technology, which is now included in most major smartphones, computers, and 3G/4G telecoms equipment.
Tatu has authored several IETF standards and NIST IR 7966 and is the inventor in 30+ US and international patents, including several essential patents on major telecommunications standards. Tatu owns 18,317,123 SSH Communications Security shares directly and through his company, Clausal Computing Ltd. He has no
option rights.
Chief Financial Officer born 1972, M.Sc. (Economics)
Helena brings more than 20 years of experience in financial and management accounting and reporting, finance process, and systems development. She is responsible for financial management, treasury, human resources, corporate development, and corporate governance. She also acts as the secretary to the Board of Directors.
Prior to joining the company in September 2016, Helena held several senior financial management positions at Microsoft Corporation and Nokia Corporation. She headed finance and control functions on group and business unit level for a global large-scale company, as well as global functional finance teams in the manufacturing and supply chain areas, including mobile phone factories worldwide.
Helena has a Master of Science in Economics degree from the University of Vaasa, Finland.
Helena does not own any SSH Communications Security shares but has 115,000 option rights.
Head of PrivX Business Program and Product Management (starting from 07/2017), born 1963, M.Sc. (Engineering)
Jussi has extensive experience in international business management. His career includes a long tenure with Nokia where he led two businesses from the beginning to world #1 positions in their segments.
Jussi combines deep market and customer understanding with knowledge of technology. He also has deep understanding of SSH as a company and its products due to his long career working with the SSH R&D team.
Jussi has a Master of Science in Engineering degree from Aalto University.
Jussi does not own any SSH Communications Security shares but has 35,000 option rights.
...>
Chief Technology Officer born 1970, M.Sc. (Technology)
Markku is responsible for the company's global R&D and directs the company's technology strategy. Markku has extensive knowledge and experience with SSH Communications Security products, having served the company from 1998 through 2005 as a Chief Engineer, making a leading contribution to SSH solutions' software architecture. Prior to re-joining the company in 2015, Markku founded several companies, such as Codento and ShopAdvisor, served as CTO at Navicore, Chief Architect at Nokia, and is currently member of the board at Codento and partner at Prominda Revolution.
Markku holds a Master of Science degree in Computer Science from the Helsinki University of Technology (Aalto University) in Finland. Markku does not own any SSH Communications Security shares but has 140,000 option rights.
Vice President, EMEA and APAC Sales born 1961, M.Sc. (Economics)
Rami is a seasoned sales leader with a background of international leadership positions in sales and business management, marketing, and product management in global companies.
He has been developing and leading regional and global sales teams in multiple companies for successful sales growth, and customer satisfaction and loyalty. He is experienced in go-to-market strategy, implementation and channel partner management. Rami has been working in management positions in Finnish, Asian and Global companies including Nokia, ICL, Fujitsu, Fujitsu-Siemens, and Ahlstrom. Rami holds a Master of Science degree in strategic marketing, business economics and computer science from Helsinki School of Economics (Aalto University). Rami does not own any SSH Communications Security shares but has 35,000 option rights.
VP Americas Operations & Global Customer Services (starting from 12/2017) born 1981 B.Sc. (Computer Science)
Joe has over 15 years of experience in the information security technology and network communications industry. He has held various management roles at SSH Communication Security, including technical sales, technical support and professional services. He has a strong technical and managerial background that allows him to deliver strategic solutions to Fortune 500 customers. He is responsible for all US business operations, including sales in the Americas and global customer services.
Joe holds a Bachelor of Computer Science degree from Wentworth Institute of Technology Joe owns 40,000 SSH Communications Security shares and has 20,000 option rights.
Chief Digital Officer (starting from 12/2017) born 1981
Simo Karkkulainen brings SSH marketing function over 20 years of experience and a strong international point of view. He is responsible for Global Digital marketing, go-to-market strategies and online demand generation. Prior to joining the company in December 2017, Simo held several senior marketing positions at Stonesoft, McAfee, Comptel and several other companies. Simo neither owns any SSH Communications Security shares nor has any option rights.
Vice President, Business Development born 1964 M.Sc. (Engineering)
Jussi is a seasoned growth company executive who has been CEO and founder of several venture-backed companies. He has nearly 30 years of management and consulting experience from international technology-intensive businesses with a sound understanding of strategy, communications, operations, processes, and critical success factors. He also has a strong track record in fundraising and M&A transactions. Jussi holds a Master of Science degree in Industrial Engineering and Management from the Helsinki University of Technology (Aalto University) in Finland. Jussi does not own any SSH Communications Security shares but has 100,000 option rights.
30 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
46 PARENT COMPANY FINANCIAL STATEMENTS
56 SIGNATURES TO THE BOARD OF DIRECTORS REPORT AND FINANCIAL STATEMENTS
57 AUDITOR'S REPORT
| NET SALES EUR million |
10–12/ 2017 |
7–9/ 2017 |
4–6/ 2017 |
1–3/ 2017 |
1–12/ 2017 |
10–12/ 2016 |
1–12/ 2016 |
|---|---|---|---|---|---|---|---|
| BY GEOGRAPHICAL SEGMENT | |||||||
| AMERICAS | 2.6 | 1.6 | 2.2 | 1.9 | 8.3 | 2.2 | 8.2 |
| APAC | 0.7 | 0.6 | 0.6 | 0.4 | 2.3 | 0.6 | 2.0 |
| EMEA | 1.0 | 0.8 | 1.0 | 0.8 | 3.5 | 1.3 | 5.0 |
| Global royalty income | 2.1 | 0.0 | 0.0 | 0.0 | 2.1 | 0.0 | 0.0 |
| Total | 6.4 | 3.0 | 3.7 | 3.1 | 16.2 | 4.1 | 15.1 |
| BY OPERATION | |||||||
| Software fees | 1.8 | 0.6 | 1.0 | 0.6 | 4.0 | 1.3 | 6.1 |
| Professional services and other | 2.5 | 0.4 | 0.6 | 0.4 | 3.9 | 0.6 | 1.1 |
| Recurring revenue | 2.1 | 2.0 | 2.1 | 2.1 | 8.3 | 2.2 | 7.9 |
| Total | 6.4 | 3.0 | 3.7 | 3.1 | 16.2 | 4.1 | 15.1 |
Consolidated net sales for January–December totaled EUR 16.2 million (EUR 15.1 million), up 7.3 %, year on year.
The majority of SSH Communications Security's invoicing is U.S. dollar-based. During the reporting period, the U.S. dollar's average exchange rate to euro weakened 2.0 % compared with the same period in 2016. With comparable exchange rates the net sales growth in 2017 would have been 8.8 % compared to 2016.
Operating loss for January–December amounted to EUR -1.7 million (EUR -10.8 million), with net loss totaling EUR -2.2 million (EUR -11.1 million). Profitability improved considerably from the previous year due to the performance improvement program.
Sales, marketing and customer support expenses amounted EUR -8.8 million (EUR -12.0 million), while research and development expenses totaled EUR -5.6 million (EUR -9.5 million) and administrative expenses EUR -2.1 million (EUR -2.4 million). Operating expenses decreased according to the plan (-31 %) compared to previous year.
The financial position of SSH Communications Security remained strong during the reporting period. The consolidated balance sheet total on December 31, 2017 stood at EUR 23.2 million (EUR 21.8 million; December 31, 2016), of which liquid assets accounted for EUR 13.5 million (EUR 7.8 million), or 58.1 % of the balance sheet total. In June, new shares for EUR 7 million were issued in a directed share issue. On December 31, 2017, gearing, or the ratio of net liabilities to shareholders' equity, was -104.5 % (-94.8 %) and the equity ratio stood at 82.9 % (63.1 %).
The reported gross capital expenditure for the period totaled EUR 1.5 million (EUR 2.5 million). Financial income and expenses totaled EUR -0.5 million (EUR -0.3 million), which consisted mainly of exchange rate gains or losses.
During January–December, SSH Communications Security reported a positive cash flow of EUR 1.3 million (EUR -8.1 million) from business operations, and investments showed a negative cash flow of EUR -1.5 million (EUR -2.5 million). Cash flow from financing totaled EUR 6.1 million (EUR 7.1 million). Increase in cash totaled EUR 5.9 million (EUR -3.5 million).
Research and development expenses totaled EUR -5.6 million (EUR -9.5 million), the equivalent of 34.3 % of net sales (62.5 %). During the reporting period, R&D cost capitalizations totaled EUR 1.2 million (EUR 1.9 million). The overall activation level has decreased due to maturing of the products and overall cost reductions. Depreciation from R&D capitalization assets was EUR -1.7 million (EUR -1.6 million).
Most significant risks that might impact the profitability of the company have remained by and large the same as 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.
The principles and organization of risk management of SSH Communications Security can be read from the company's website: www.ssh.com.
SSH Communications Security Group had 80 (84) employees at the end of December, down by 4 persons or -4.8 % from the previous year. The average age of the employees was 40.8 years (42.4 years). 17.5 % (13.1 %) of the employees were women and 82.5 % (86.9 %) men. At the end of the period under review, 36.3 % (36.9 %) of the employees worked in sales, marketing, and customer services, 43.8 % (45.2 %) in research and development, and 20.0 % (17.9 %) in corporate administration.
At the end of the financial period, the parent company had 53 (56) employees on its payroll. On average, the parent company had 53 (79) employees during the period under review. Parent company salaries, bonuses, and other personnel expenses during the financial period totaled EUR 3.6 million (6.5 million).
At the Annual General Meeting held on March 29, 2017, Petri Kuivala and Ari Vänttinen were elected as new members of the Board of Directors. Tatu Ylönen, Timo Syrjälä and Jukka Manner were re-elected as members of the Board of Directors. In the Board's organizing meeting, Jukka Manner was elected as the Chairman of the Board of Directors.
The Authorized Public Accountant Firm Ernst & Young Oy was elected as the auditor of the company with Erkka Talvinko, authorized public accountant, as principal auditor.
According to the Articles of Association, the highest decisionmaking power in the company is wielded by the shareholders at the shareholders' meeting. The Annual General Meeting (AGM) is held within six months of the completion of the company's financial period, at a time decided by the Board. The AGM decides the number of members of the Board of Directors and elects them. Additionally, under the Finnish Limited Liability Companies Act, the AGM has the authority to amend the company's Articles of Association, adopt the financial statements, approve the amount of dividend, and select the company's auditors. Each SSH Communications Security Corporation share conveys one vote at the shareholder's meeting. Under the Articles of Association, the CEO is appointed by the Board of Directors.
SSH Communications Security complies with the Finnish Limited Liability Companies Act, securities market legislation, including the market abuse regulation, rules of Nasdaq Helsinki, and Finnish Corporate Governance Code 2015 adopted by the Securities Market Association.
More information on corporate governance is available under the Corporate Governance section at: https://www. ssh. com/investors.
SSH Communications Security is committed to systematically maintain and develop the responsibility and sustainability of business through its strategy, operations and actions. Company is committed to operate in socially and ethically responsible way.
The adoption and maintenance of high ethical standards is a core principle of SSH Communications Security and its subsidiaries and affiliates worldwide. Company´s ethical principles emphasize the values important to SSH, including environmental effects, treatment of employees and safety and behavioral culture within workplaces.
SSH Communications Security is responsible employer and treats all employees equally. Company does not approve harassment or discrimination in any form. Company constantly develops the safety and comfort of its workplaces as well as the management of work-related stress ja coping with the workload.
SSH Communications Security regards the diversity of its personnel as essential strength and encourages the appraisal and adoption of diversity throughout the organization including top management.
The company has a separate Anti-Bribery and Anti-Corruption Policy, which prohibits all forms of bribery and corruption as well as annually updated equality plan focusing on equal and fair treatment of its employees.
The company has also established a whistle-blower process which is initiated when someone reports suspected internal or external misconduct or violation of law, regulations, human rights, labour practices, discrimination and harassment, or similar within the operations of SSH Group or by its personnel.
The reported trading volume of SSH Communications Security Corporation totaled 5,565,659 shares (valued at EUR 11,728,799). The highest quotation was EUR 2.59 and the lowest EUR 1.72. The trade-weighted average share price for the period was EUR 2.11 and the share closed at EUR 1.77 (December 29, 2017).
The company's principal owner Tatu Ylönen holds directly and through his company, Clausal Computing Oy, 47.7 % of the company's shares, Timo Syrjälä holds directly and through his company, Acme Investments SPF S.a.r.l., 9.3 % and Juha Mikkonen holds directly 5.5 % of the company's shares. More information about the shareholding can be obtained from the company´s web site www.ssh.com.
The company has the following subsidiaries: SSH Communications Security, Inc. and SSH Government Solutions, Inc. in the USA, SSH Communications Security Ltd. in Hong Kong, SSH Communications Security UK Ltd. (formerly SSH ROkITT Solutions and Services Ltd.) in the UK, and SSH Operations Ltd., Kyberleijona Ltd., and SSH Technology Ltd. in Finland. SSH Operations Ltd. has a branch in Germany.
The company closed its subsidiary in Singapore in October 2017 and and its subsidiary in Japan in November 2017. The company focuses its operations in the Asia Pacific region in Hong Kong.
| Type of sector | Number of shares | Percentage of shares and votes, % |
|---|---|---|
| Companies | 7,239,004 | 18.83 % |
| Financial and insurance institutions | 2,993,463 | 7.79 % |
| Households and private individuals | 24,584,281 | 63.95 % |
| Public sector organizations | 3,420,600 | 8.90 % |
| Non-profit organizations | 80,950 | 0.21 % |
| Foreign shareholders | 122,585 | 0.32 % |
| Total | 38,440,883 | 100.00 % |
| Shares | Number of shareholders |
Percentage of shareholders, % |
Number of shares |
Percentage of shares, % |
|---|---|---|---|---|
| 1-100 | 1,617 | 33.52 % | 88,288 | 0.23 % |
| 101-500 | 1,357 | 28.13 % | 409,832 | 1.07 % |
| 501-1,000 | 690 | 14.30 % | 577,838 | 1.50 % |
| 1,001-5,000 | 869 | 18.01 % | 2,091,766 | 5.44 % |
| 5,001-10,000 | 141 | 2.92 % | 1,043,378 | 2.71 % |
| 10,001-50,000 | 119 | 2.47 % | 2,456,785 | 6.39 % |
| 50,001-100,000 | 14 | 0.29 % | 935,607 | 2.43 % |
| 100,001-500,000 | 7 | 0.15 % | 1,559,645 | 4.06 % |
| 500,001-999,999,999 | 10 | 0.21 % | 29,277,744 | 76.16 % |
| Total | 4,824 | 100.00 % | 38,440,883 | 100.00 % |
| of which nominee-registered | 2,905,490 | 7.56 % |
| 31 December 2017, Excluding Nominee Registered |
Percentage of shares, % |
Shares |
|---|---|---|
| Ylönen Tatu | 37.74 % | 14,508,473 |
| Clausal Computing Oy | 9.91 % | 3,808,650 |
| Mikkonen Juha Taneli | 5.48 % | 2,108,000 |
| Elo Mutual Pension Insurance Company |
3.90 % | 1,500,000 |
| Gaselli Capital Oy | 3.08 % | 1,185,070 |
| Ilmarinen Mutual Pension Insurance Company |
3.03 % | 1,165,300 |
| Syrjälä Timo Kalevi | 2.17 % | 835,011 |
| Varma Mutual Pension Insurance Company |
1.96 % | 755,300 |
| Taaleritehdas Mikro Markka Fund |
1.62 % | 623,000 |
| AC Invest Oy | 1.04 % | 400,000 |
| Total | 69.95 % | 26,888,804 |
Tatu Ylönen holds directly and through his company, Clausal Computing Oy, 47.65 % of the company's shares, Timo Syrjälä holds directly and through his nominee-registered company 9.26 % of the company's shares.
The registered share capital of SSH Communications Security Corporation on December 31, 2017 was EUR 1,153,226.49 consisting of 38,440,883 shares.
| SHARE SUBSCRIPTIONS WITH OPTION CERTIFICATES FROM THE COMPANY'S OPTION PLANS |
||||
|---|---|---|---|---|
| Number of shares | 2017 | 2016 | ||
| I/2012 option plan class A option certificates |
14,800 | 32,900 | ||
| I/2012 option plan class B option certificates |
159,150 | 164,750 | ||
| I/2012 option plan class C option certificates |
292,900 | |||
| I/2013 option plan class A option certificates |
6,600 | 37,950 | ||
| I/2013 option plan class B option certificates |
6,600 | |||
| I/2013 option plan class C option certificates |
||||
| I/2013 option plan class D option certificates |
||||
| I/2013 option plan class E option certificates |
||||
| I/2013 option plan class F option certificates |
||||
| I/2014 option plan class A option certificates |
4,950 | |||
| I/2014 option plan class B option certificates |
||||
| I/2014 option plan class C option certificates |
||||
| Total | 480,050 | 240,550 |
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 Limited Liability 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, either new shares can be issued or own shares, which the company possibly has in its possession, can be transferred. Based on the authorization, the Board of Directors has the same right as the Annual General Meeting to decide on the issuing of shares against payment and special rights (including stock options) in accordance with Chapter 10 Section 1 of the Finnish Limited Liability 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 who are entitled to the shares and/ or stock options or special rights in accordance with Chapter 10 Section 1 of the Finnish Limited Liability Companies Act as well as on the related compensation, subscription and payment periods and on the registering of the subscription price into the share capital or invested non-restricted equity fund within the limits of the Finnish Limited Liability Companies Act.
The authorization will be valid until the next Annual General Meeting, but will however expire at the latest on June 30, 2018. As announced on June 15, 2017, a directed share issue of 3,400,000 shares was issued under the authorization.
The Annual General Meeting approved the Board of Directors' proposal to authorize the Board of Directors to decide upon the acquiring of a maximum of 2,000,000 shares of the company with assets belonging to the company's nonrestricted equity. The shares can also be acquired otherwise than in proportion to the holdings of the existing shareholders (directed acquisition). 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, 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.
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 decides on 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 30th, 2018.
The share-based payments of SSH Communications Security are stock options. Stock option programs have been in effect in the reporting period or in the comparison year from the years 2012, 2013, 2014, 2015 and, 2016.
Each option gives the right to subscribe to one new share at a price and at a time specified in the terms of the stock option plan. The option rights will be canceled in case the employee leaves the company before the subscription time has begun. There are no other conditions to the beginning of the option rights.
The shares subscribed with the granted option rights include the rights to any dividend payable for the reporting period during which the shares were subscribed. Other shareholder rights commence as soon as the increase in the share capital has been registered in the Trade Register. More information on stock option plans is given in note 17 in the consolidated financial statements.
In the directed share issue issued by the company on June 15, 2017, Member of the Board Tatu Ylönen subscribed for 243,500 shares and Member of the Board Timo Syrjälä through his controlled company for 728,500 shares.
SSH entered into a patent cross license agreement with a global technology company including a one-time license fee payment. According to the agreement between SSH and Clausal Computing Ltd, SSH paid to Clausal Computing EUR 462,000 of the license revenue as a royalty fee in January 2018.
In January 2018, SSH entered into marketing service agreement with Ari Vänttinen, whereupon Ari Vänttinen is no longer an independent board member.
During the reporting period, there have not been any other significant transactions with related parties.
SSH Communications Security has entered into a patent cross license and settlement agreement with Sony on 5 Feb ruary 2018. The agreement resolves all disputes between the parties. SSH estimates that after taxes, costs and royalty fee paid to Clausal Computing Ltd, this patent license and set tlement agreement will have a moderate positive impact in SSH's net profit for the first quarter of 2018.
The SSH Communications Security's Board of Directors will propose to the Annual General Meeting on March 28th, 2018 that no dividend or return of capital shall be distributed. It is proposed that the loss of the financial year shall be entered to the shareholders' equity in the profit/loss account.
| 2017 | 2016 | 2015 | ||
|---|---|---|---|---|
| Net sales | EUR | 16,232,979 | 15,121,803 | 18,867,166 |
| Operating profit/loss | EUR | -1,708,913 | -10,753,470 | -4,372,562 |
| % of net sales | % | -10.5 | -71.1 | -23.2 |
| Profit/loss before taxes | EUR | -2,219,679 | -11,017,005 | -3,854,905 |
| % of net sales | % | -13.7 | -72.9 | -20.4 |
| Return on equity | % | -21.2 | -112.1 | -40.4 |
| Return on investments | % | -21.0 | -111.8 | -39.9 |
| Net interest-bearing debt | EUR | -13,476,582 | -7,844,754 | -11,302,677 |
| Gearing | % | -104.5 | -94.8 | -98.8 |
| Equity ratio | % | 82.9 | 63.1 | 66.8 |
| Gross investments in tangible and intangible assets | EUR | 1,545,190 | 2,454,542 | 2,589,673 |
| % of net sales | % | 9.5 | 16.2 | 13.7 |
| Research and development costs | EUR | -5,571,580 | -9,456,568 | -5,068,848 |
| % of net sales | % | 34.3 | 62.5 | 26.9 |
| Average number of personnel | 82 | 111 | 102 | |
| Number of personnel 31 Dec | 80 | 84 | 109 | |
| Salaries and fees | EUR | -8,927,260 | -11,402,920 | -9,132,955 |
| 2017 | 2016 | 2015 | ||
|---|---|---|---|---|
| Earnings per share* | EUR | -0.09 | -0.36 | -0.15 |
| Earnings per share, diluted* | EUR | -0.09 | -0.36 | -0.15 |
| Equity per share | EUR | 0.34 | 0.24 | 0.36 |
| Dividends | EUR | 0 | 0 | 0 |
| Dividends per share | EUR | 0.00 | 0.00 | 0.00 |
| Dividend pay-out ratio | % | 0 | 0 | 0 |
| Effective dividend yield | % | 0 | 0 | 0 |
| Return of capital | EUR | 0 | 0 | 0 |
| Return of capital per share | EUR | 0 | 0 | 0 |
| Adjusted average number of shares during the period | 1,000 | 36,570 | 32,983 | 31,068 |
| Adjusted number of shares at the end of the period | 1,000 | 38,441 | 34,561 | 31,370 |
| Adjusted number of shares considering dilution effect | 1,000 | 41,169 | 38,492 | 36,419 |
| Price per earnings ratio (P/E) | neg. | neg. | neg. | |
| Market capitalization 31 Dec | mEUR | 68.0 | 67.0 | 94.7 |
| 2017 | 2016 | 2015 | ||
|---|---|---|---|---|
| Share performance on the Helsinki Stock Exchange | ||||
| Average price | EUR | 2.11 | 2.84 | 4.50 |
| Share price, year end | EUR | 1.77 | 1.94 | 3.02 |
| Lowest quotation | EUR | 1.72 | 1.86 | 2.52 |
| Highest quotation | EUR | 2.59 | 4.39 | 6.32 |
| Volume of shares traded | millions | 5.6 | 6.5 | 8.4 |
| Volume of shares traded, % of total number | % | 15.2 | 19.6 | 27.0 |
| Volume of shares traded | mEUR | 11.7 | 18.3 | 37.7 |
*Earnings per share is impacted by unpaid interest of hybrid capital securities
| = Return on Equity, % (ROE) |
Profit / loss for the financial period | x100 | ||
|---|---|---|---|---|
| Equity (average during the financial period) | ||||
| Profit / loss before taxes + Interest and other financial costs | ||||
| Return on Investment, % (ROI) | = | Balance sheet total - Non-interest bearing debts (average during financial period) |
x100 | |
| Equity | ||||
| Equity Ratio, % | = | Balance sheet total - Advance payments received | x100 | |
| Profit / loss for the financial period − Interest on hybrid capital securities | ||||
| Earnings Per Share (EPS) | = | Average number of outstanding shares during the financial period | ||
| Diluted EPS | = | Profit / loss for the financial period − Interest on hybrid capital securities | ||
| Adjusted average number of shares considering dilution effect | ||||
| Dividend Per Share | = | Dividend | ||
| Number of outstanding shares during the financial period | ||||
| Dividend per share | ||||
| Dividend Pay-out Ratio, % | = | Earnings per share | x100 | |
| Equity Per Share | = | Equity | ||
| Number of outstanding shares on the financial statement date, adjusted for share issue |
||||
| Interest bearing debt - Liquid assets | ||||
| Gearing, % | = | Equity | x100 | |
| EUR | Note | 1 Jan–31 Dec 2017 |
1 Jan–31 Dec 2016 |
|---|---|---|---|
| NET SALES | 3 | 16,232,979 | 15,121,803 |
| Cost of goods sold | -1,532,616 | -1,925,392 | |
| GROSS MARGIN | 14,700,363 | 13,196,411 | |
| Other operating income | 49,049 | 0 | |
| Sales and marketing costs | 4, 5 | -8,822,437 | -12,045,279 |
| R&D costs | 4, 5 | -5,571,580 | -9,456,568 |
| Administrative costs | 4, 5 | -2,064,308 | -2,448,033 |
| OPERATING LOSS | -1,708,913 | -10,753,470 | |
| Financial income | 6 | 54 | 1,285 |
| Financial costs | 7 | -510,820 | -264,821 |
| LOSS BEFORE TAXES | -2,219,679 | -11,017,005 | |
| Income taxes | 8 | -25,907 | -36,860 |
| LOSS FOR THE FINANCIAL PERIOD | -2,245,586 | -11,053,865 |
| OTHER COMPREHENSIVE INCOME | |||
|---|---|---|---|
| Items that may be reclassified subsequently to profit or loss: | |||
| Translation differences | 381,079 | 421,150 | |
| COMPREHENSIVE LOSS FOR THE FINANCIAL PERIOD | -1,864,507 | -10,632,715 | |
| Loss for the financial period attributable to: | |||
| Equity holders of the parent company | -2,245,586 | -11,053,865 | |
| Non-controlling interest | 0 | 0 | |
| Comprehensive loss for the financial period attributable to: | |||
| Equity holders of the parent company | -1,864,507 | -10,632,715 | |
| Non-controlling interest | 0 | 0 | |
| Earnings per share | 9 | -0.09 | -0.36 |
| Earnings per share, diluted | 9 | -0.09 | -0.36 |
| EUR | Note | 31 Dec 2017 | 31 Dec 2016 |
|---|---|---|---|
| ASSETS | |||
| NON-CURRENT ASSETS | |||
| Property, plant and equipment | 10 | 113,250 | 240,304 |
| Intangible assets | 11 | 4,842,426 | 5,216,663 |
| Investments | 11,000 | 11,000 | |
| NON-CURRENT ASSETS, TOTAL | 4,966,676 | 5,467,967 | |
| CURRENT ASSETS | |||
| Current receivables | |||
| Trade receivables | 12, 14 | 3,876,814 | 6,928,563 |
| Other receivables | 13 | 597,158 | 1,107,048 |
| Prepaid expenses and accrued expenses | 279,717 | 494,379 | |
| Current receivables, total | 4,753,689 | 8,529,990 | |
| Cash and cash equivalents | 13,476,582 | 7,844,754 | |
| CURRENT ASSETS, TOTAL | 18,230,270 | 16,374,744 | |
| ASSETS, TOTAL | 23,196,947 | 21,842,711 |
| EUR | Note | 31 Dec 2017 | 31 Dec 2016 |
|---|---|---|---|
| SHAREHOLDERS' EQUITY AND LIABILITIES | |||
| EQUITY ATTRIBUTABLE TO THE PARENT COMPANY SHAREHOLDERS | |||
| Share capital | 1,153,226 | 1,036,825 | |
| Fair value and other reserves | 0 | 0 | |
| Translation differences | -1,307,361 | -1,688,440 | |
| Unrestricted invested equity fund | 22,131,155 | 14,952,192 | |
| Hybrid capital securities | 12,000,000 | 12,000,000 | |
| Retained earnings | -21,083,523 | -18,029,682 | |
| 12,893,498 | 8,270,895 | ||
| NON-CONTROLLING INTEREST | |||
| Non-controlling interest | 0 | 0 | |
| EQUITY, TOTAL | 15 | 12,893,498 | 8,270,895 |
| NON-CURRENT LIABILITIES | |||
| NON-CURRENT LIABILITIES, TOTAL | 0 | 0 | |
| CURRENT LIABILITIES | |||
| Advances received | 7,649,078 | 8,731,532 | |
| Accounts payable | 14 | 830,835 | 1,240,944 |
| Accrued expenses | 18 | 1,380,586 | 3,324,649 |
| Other liabilities | 19 | 442,949 | 274,690 |
| CURRENT LIABILITIES, TOTAL | 10,303,449 | 13,571,816 | |
| LIABILITIES, TOTAL | 10,303,449 | 13,571,816 | |
| EQUITY AND LIABILITIES, TOTAL | 23,196,947 | 21,842,711 |
| EUR | Note | 1 Jan–31 Dec 2017 |
1 Jan–31 Dec 2016 |
|---|---|---|---|
| CASH FLOW FROM BUSINESS OPERATIONS | |||
| Receipts from customers | 3, 12 | 18,465,195 | 16,206,939 |
| Payments to suppliers and employees | 4, 18, 19 | -16,939,884 | -24,270,931 |
| Cash flow from business operations before financial items and taxes | 1,525,312 | -8,063,991 | |
| Interest paid and payments on other financial costs | -261,376 | -13,324 | |
| Interest received and other financial income | 54 | 1,285 | |
| Income taxes paid | 13,240 | -36,860 | |
| Cash flow from business operations | 1,277,229 | -8,112,890 | |
| whereof change in working capital | 850,405 | 408,913 | |
| CASH FLOW FROM INVESTING ACTIVITIES | |||
| Investments in tangible and intangible assets | 10, 11 | -1,545,190 | -2,454,542 |
| Investment in subsidiaries | 0 | -73,090 | |
| Cash flow from investing activities | -1,545,190 | -2,527,632 | |
| CASH FLOW FROM FINANCING ACTIVITIES | |||
| Interest on hybrid capital securities | -900,000 | -900,000 | |
| Proceeds from shares subscribed with option rights | 325,365 | 204,092 | |
| Proceeds from share issue | 6,970,000 | 8,024,000 | |
| Expenses from share issue | -253,059 | -223,650 | |
| Cash flow from financing activities | 6,142,305 | 7,104,442 | |
| Change in cash and cash equivalents | 5,874,345 | -3,536,080 | |
| Cash and cash equivalents in beginning of period | 7,844,754 | 11,302,677 | |
| Exchange rate effect | -242,517 | 78,156 | |
| Change in cash and cash equivalents | 5,874,345 | -3,536,080 | |
| Cash and cash equivalents at end of period | 13,476,582 | 7,844,754 |
| EUR | Note | Share capital | Fair value and other reserves |
Hybrid capital securities |
Translation differences |
Unrestricted invested equity fund |
Retained earnings |
Equity, total |
|---|---|---|---|---|---|---|---|---|
| Equity 1 Jan 2016 | 15 | 941,108 | 0 | 12,000,000 | -2,109,590 | 6,819,816 | -6,205,781 | 11,445,554 |
| Comprehensive profit/loss | ||||||||
| Profit/loss for the period | -11,053,865 | -11,053,865 | ||||||
| Other comprehensive items | ||||||||
| Translation differences | 421,150 | 421,150 | ||||||
| Comprehensive profit/loss for financial period, total |
0 | 0 | 0 | 421,150 | 0 | -11,053,865 | -10,632,715 | |
| Hybrid capital securities | -900,000 | -900,000 | ||||||
| Share issue | 88,500 | 7,935,500 | -223,650 | 7,800,350 | ||||
| Share-based payment plans | 353,615 | 353,615 | ||||||
| Shares subscribed on option rights | 17 | 7,217 | 196,876 | 204,092 | ||||
| Transactions with shareholders | 95,717 | 0 | 0 | 0 | 8,132,376 | -770,035 | 7,458,057 | |
| Equity 31 Dec 2016 | 1,036,825 | 0 | 12,000,000 | -1,688,440 | 14,952,192 | -18,029,682 | 8,270,895 | |
| Equity 1 Jan 2017 | 15 | 1,036,825 | 0 | 12,000,000 | -1,688,440 | 14,952,192 | -18,029,682 | 8,270,895 |
| Comprehensive profit/loss | ||||||||
| Profit/loss for the period | -2,245,586 | -2,245,586 | ||||||
| Other comprehensive items | ||||||||
| Translation differences | 381,079 | 381,079 | ||||||
| Comprehensive profit/loss for financial period, total |
0 | 0 | 0 | 381,079 | 0 | -2,245,586 | -1,864,507 | |
| Hybrid capital securities | -900,000 | -900,000 | ||||||
| Share issue | 102,000 | 6,868,000 | -253,059 | 6,716,941 | ||||
| Share-based payment plans | 344,805 | 344,805 | ||||||
| Shares subscribed on option rights | 17 | 14,402 | 310,964 | 325,365 | ||||
| Transactions with shareholders | 116,402 | 0 | 0 | 0 | 7,178,964 | -808,254 | 6,487,111 | |
| Equity 31 Dec 2017 | 1,153,226 | 0 | 12,000,000 | -1,307,361 | 22,131,155 | -21,083,523 | 12,893,498 |
SSH Communications Security Corporation helps organizations access, secure and control their digital core – their critical data, applications and services. In the rapidly growing global data economy, secure access that enables digital transformation at business velocity is the new competitive advantage.
Our thousands of customers include Fortune 500 companies, the world's largest financial institutions, and major organizations in all verticals. Our solutions guard against the rapidly changing threat landscape that includes both internal and external actors.
We generate shareholder value from a combination of our world-leading expertise, proven enterprise-class solutions, professional services, support offering, and from our strong IP portfolio and well-established licensing operations.
The SSH Communications Security Group consists of SSH Communications Security Corporation and its subsidiaries. SSH Communications Security Corporation (corporate id 1035804-9) is domiciled in Helsinki, Finland and is a publicly traded company, whose share is quoted on NASDAQ Helsinki Oy (SSH1V). SSH Communications Security Corporation has its registered office at address Kornetintie 3, 00380 Helsinki, Finland.
The SSH Communications Security Board of Directors approved this financial statement for publication at its meeting on 6 February 2018. Under the Finnish Limited Liability Companies Act, the shareholders can accept or reject the financial statement at the AGM held after its publication. A copy of the financial statements is published as a part of the company's annual report. The annual report is available on the company website at www.ssh.com, or at the head office of SSH Communications Security Corporation. All stock exchange bulletins are available on the company website www. ssh.com.
The consolidated financial statements have been prepared in compliance with the International Financial Reporting Standards (IFRS) including the International Accounting Standard (IAS) and International Financial Reporting Standards (IFRS) as well as the interpretations by Standing Interpretations Committee (SIC) and International Financial Reporting Interpretations Committee (IFRIC) in force as of 31 December 2017. The aforementioned standards are the standards and interpretations thereof approved for use in the EU pursuant to Regulation (EC) No. 1606/2002 implemented in the Finnish Accounting Act and legislation based thereon. The notes to the consolidated financial statements are also compliant with Finnish accounting and company legislation.
The following new and amended standards have been adopted as of January 1, 2017:
The consolidated financial statements are based on original acquisition costs unless otherwise noted in the accounting principles. The consolidated financial statements are presented in full euros unless otherwise stated.
The consolidated accounts include the parent company SSH Communications Security Corporation and all its subsidiaries. Subsidiaries are companies in which the Group has a controlling interest. A controlling interest is created when the Group has power over the investee, exposure, or rights, to variable returns from its involvement with the investee and the ability to use its power over the investee to affect the amount of the Group's returns. In practice, controlling interest is established when the Group owns more than half of the votes in a company. All subsidiaries a wholly owned by the parent company SSH Communication Security Corporation.
Group-internal share ownership is eliminated using the purchase method. Subsidiaries are consolidated from the date on which control is transferred to the Group and are no longer consolidated from the date on which that control ceases. All Group-internal transactions, receivables and debts, unrealized profit, and profit distribution have been eliminated.
Items of each subsidiary included in the consolidated financial statements are measured using the currency of the operating environment of that subsidiary ('functional currency'). The consolidated financial statements are presented in euros, which is the functional and reporting currency of the parent company.
Foreign currency denominated transactions are recognized at the exchange rate of the functional currency on the transaction date. In practice, the exchange rate used is approximately the rate of the transaction date. Outstanding receivables and liabilities in foreign currencies are measured using the exchange rates on the balance sheet date. Exchange rate gains and losses on financing are included in financing income and costs.
Translation of Financial Statements of Foreign Subsidiaries The comprehensive income statements and cash flow statements of subsidiaries whose functional currency is other than EUR are translated into euros using the exchange rate of the transaction dates. In practice, the translations are done once a month using the monthly average exchange rate. Balance sheet items are translated into euros with the exchange rate of the balance sheet date. The translation of the comprehensive profit/loss for the financial period using different exchange rates in the comprehensive income statement on the one hand and in the balance sheet on the other causes a translation difference recognized under Group equity under other comprehensive profit/loss items.
Translation differences generated through elimination of the acquisition costs of foreign subsidiaries and translation of equity items accrued after acquisition are recognized under other comprehensive profit/loss items. When a subsidiary is sold, accumulated translation differences are recognized in the income statement as part of the gain or loss on the sale.
SSH Communications Security net sales derive mainly from software license sales and subscriptions, related support and maintenance fees, and consulting services. Net sales comprise the invoiced value for the sale of goods and services adjusted with any discounts given, sales taxes, and exchange rate differences.
The revenue from product sales is recognized at the time when significant risks and rewards of the product or the right of use of the product have been transferred to the buyer and there is a binding contract between the parties, the delivery has taken place in accordance with the contract, the amount of revenue can be measured reliably, and it is probable that the economic benefits associated with the transaction will accrue to the Group.
Maintenance fees are recognized evenly on an accrual basis throughout the contract period. Revenues from services are recognized when the service has been delivered and it is probable that the economic benefits associated with the transaction will accrue to the Group.
The revenue of the royalties from licenses is recognized according to the actual content of the contract.
Grants received from the government for a purchase of tangible assets, are entered as a deduction of the book value of the asset when there is reasonable assurance that the company will receive the grant and will comply with the conditions attaching to the grant. Grants are recognized as income over the life of a depreciable asset by way of a reduced depreciation. Government grants that are intended to compensate costs are recognized as income over the same period as the related costs are recognized. These government grants are presented under other operating income.
The property, plant, and equipment of Group companies are measured in the balance sheet at cost less accumulated straight-line depreciation and eventual impairment losses. When a part of a current assets item is treated as a separate asset, expenses related to its replacement are capitalized and any remaining book value is written off. Expenses incurring at a later date are included in the class of property, plant, and equipment only if it is probable that the property will provide future economic benefits to the Group and that the acquisition cost can be reliably determined. Other repair and maintenance expenses are recognized in profit/loss as and when incurred.
Depreciation is calculated on a straight-line basis to reduce the purchase value of each asset item to its residual value over its estimated useful life.
The residual value and useful life of assets are reviewed for each financial statement and, if necessary, adjusted to indicate changes expected in the assets' economic benefits.
The depreciation on property, plant, and equipment is ceased when the asset is classified as held for sale in accordance with standard IFRS 5 Non-current Assets Held for Sale and Discontinued Operations.
Capital gains and losses are determined by comparing proceeds received with the book value of sold assets. Impairment losses incurred through transfer are recognized under other operating costs.
Research costs are recognized as costs in the income statement. Development costs (related to the design and testing of new or improved products) are recognized as intangible assets if capitalization criteria are fulfilled and if it is probable that their economic benefits will flow to the company. The most significant development costs to be capitalized constitute R&D personnel costs and sub-contracting costs. Other development costs are recognized directly as costs. Development costs once recognized as costs are not capitalized in subsequent financial periods.
Incomplete assets are tested annually for impairment. After initial recognition, capitalized development costs are measured at cost less accumulated depreciation and impairment losses. Capitalized development costs are depreciated on a straight- line basis over their economic lifetime, estimated at 3–5 years.
Software includes acquired software licenses. These assets are entered in the balance sheet at cost and depreciated on a straight-line basis over their economic lifetime. The residual value and useful life of assets are reviewed for each financial statement and, if necessary, adjusted to indicate changes expected in the assets' economic benefits. The economic lifetime does not generally exceed 5 years. The depreciation period for software acquired for internal use is 3–5 years.
Immaterial rights include obtained technology patents, trademarks, customer registers, and technology rights. These are entered in the balance sheet at cost and depreciated on a straight-line basis over their economic lifetime. The residual value and useful life of assets are reviewed for each financial statement and, if necessary, adjusted to indicate changes expected in the assets' economic benefits. The economic lifetime does not generally exceed 5 years.
The Group will review on each balance sheet date whether there is any indication of an impaired asset. Whenever indicators of impairment exist, the book value of such an asset is compared with its recoverable amount. The recoverable amount is the fair value of the asset less the costs of its sale, or its value in use, whichever is higher. The value in use is the present value of the future cash flows expected to be derived from an asset or cash-generating unit. The discount rate used to calculate the above is pre-tax rate that reflects the current market assessments of the time value of money and the risks specific to the asset.
Whenever the book value of an asset exceeds its recoverable amount, an impairment loss will be recognized for that asset. The impairment loss is recognized immediately in the income statement. After the recognition of an impairment loss, the economic lifetime of an asset subject to depreciation is re-evaluated. An impairment loss recognized in prior period for an asset other than goodwill will be reversed if there is a change in the estimates that have been used in assessing the recoverable amount of that asset.
The Group has classified its financial assets into the following categories: financial assets at fair value through profit of loss, loans and receivables. The assets are classified at initial recognition. The assets are initially recognized at fair value. Transaction costs are included in the original book value of an asset if the asset is not to be recognized at fair value through profit or loss. Financial assets are written off from the balance sheet when the contractual right to cash flows from an asset included in financial assets ends or when the significant risks and rewards related to the asset are transferred outside the Group. All asset purchases and sales are recognized on the date of the transaction.
Financial assets through profit or loss include derivatives unless they are designated as effective hedging instruments or warrants such as currency derivatives, and fund investments. Changes in fair values of derivative financial instruments and realized and unrealized gains and losses are recognized in the income statement during the period when they incur. The Group did not have any derivatives during 2017 or 2016.
Loans and receivables are assets other than derivative assets and with a fixed or definite series of payments. These assets are unlisted and not held for trading. They are measured at amortized acquisition cost. They are recognized under current or non-current financial assets in the balance sheet depending on their nature: assets expiring in more than 12 months are recognized under non-current assets.
Cash and cash equivalents include cash on hand, short-term deposits at banks, and other short-term liquid investments with a maturity of three months or less at the time of acquisition.
The Group assesses at each balance sheet date whether there is any objective evidence that a financial asset or group of financial assets is impaired. If there is, the impairment will immediately be recognized in the income statement. If an impairment on an interest instrument is later reversed, this will be recognized in profit/loss.
The Group recognizes an impairment loss on trade receivables when there is objective evidence that the receivable is not fully collectible. Significant financial difficulties, likelihood of bankruptcy, neglect of payments or delay of payment by more than 90 days on part of a debtor may be considered to constitute such evidence for an impairment loss on trade receivables. The impairment loss recognized in the income statement is the difference between the book value and current value of estimated future cash flows of a receivable discounted at the effective interest rate. If impairment loss is decreased during any later period and the basis for this can objectively be related to an event occurred after the original impairment, the reversal will be recognized in profit/loss in the income statement.
The Group's financial liabilities are classified into financing liabilities recognized at fair value through profit/loss and other financial liabilities (financing liabilities recognized at amortized acquisition cost). A financial liability is classified as current if the Group does not have the absolute right to postpone repayment to at least 12 months from the end of the period under review. A financial liability (or part thereof) will not be written off the balance sheet until it has ceased to exist, i.e. when the obligation specified in the agreement has been discharged or reversed and its period of validity has expired. In the SSH Communications Security Group, financial liabilities recognized at fair value through profit/ loss include the derivative instruments which do not fulfill the criteria for hedging accounting and which are not warrants (currency derivatives). Unrealized and realized gains/losses due to changes in the fair value of these derivatives are recognized in profit/loss in the financial period during which they are generated. The Group did not have any derivative contracts during 2017 or 2016.
Other financial liabilities (financing liabilities recognized at amortized cost) include, most significantly, trade payables. They are initially recognized at fair value. After the original recognition, other financial liabilities are measured at amortized acquisition cost using the effective interest rate method.
Leases on property, plant and equipment which expose the Group to significant risks and rewards incidental to ownership are classified as finance leases. Finance lease agreements are capitalized at the commencement of the lease at the fair value of the leased asset or the present value of the minimum lease payments, whichever is lower. Finance lease asset is depreciated over its useful life or within the lease term, whichever is shorter. Lease payments are apportioned between the finance charge and repayment on the outstanding liability over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability.
Lease liabilities are included in interest-bearing liabilities. The Group did not have any finance leases at the end of 2017 or 2016.
Leases where a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Operating lease payments are recognized as other operating expenses the income statement on a straight-line basis over the lease term.
The earnings per share is calculated by dividing the net profit/ loss for the financial year by the weighted average number of ordinary shares outstanding during the financial year. Earnings per share is impacted by unpaid interest of hybrid capital securities.
A dilutive effect caused by stock options exists when the subscription price of a share is lower than the fair value of the share. In the calculation of diluted earnings per share, stock options are only considered dilutive when their conversion to ordinary shares would decrease earnings per share or increase the loss per share from continuing operations. In other words, when the Group declares a loss, no dilutive effect will be calculated. Diluted earnings per share is impacted by unpaid interest of hybrid capital securities.
Ordinary shares of the parent company are presented as share capital. Dividends paid on ordinary shares are deducted from equity in the period during which the decision to distribute dividends is made in the Annual General Meeting.
Costs directly related to an issue of new shares, other than costs attributable to a business combination, are deducted, net of tax, from the proceeds recognized under equity.
If SSH Communications Security Corporation or its subsidiaries purchase parent company SSH Communications Security Corporation's shares, the compensation paid, including any related incremental external costs, net of tax, is deducted from total equity as own shares until the shares are canceled or transferred. If own shares are subsequently sold, any compen- sation received will be recognized under equity. The Group companies held no shares in the parent company at December 31, 2017 or December 31, 2016.
Hybrid capital securities is an instrument that is subordinated to the Company's other debt obligations and is treated as equity in the Group balance sheet. Unpaid interest is cumulated but presented in the financial statements only after Board of Directors' interest payment decision.
Gross margin is equal to net sales less the acquisition costs of materials and services.
IAS 1 Presentation of Financial Statements does not define operating profit/loss. The Group uses the following definition: operating profit/loss is equal to earnings before interest and taxes.
Tax expenses in the income statement comprise tax based on taxable income for the period and deferred tax. Income tax is recognized in the income statement except for taxes related to items recognized under comprehensive profit/loss or directly under equity, in which case the tax impact will be incorporated in the aforementioned items. Tax based on taxable income for the period is calculated using the corporate income tax rate (and tax laws) effective in each country, adjusted for any tax from previous periods.
Deferred taxes are calculated on all temporary differences between the book value and taxable value. The largest temporary differences arise from unused tax losses which are deductible at a later date.
Deferred taxes are calculated using the statutory tax bases or the tax bases whose confirmed content has been announced by the closing date. Deferred tax assets are recognized to the extent that it is probable that taxable income against which the temporary difference can be applied will materialize in the future. Deferred tax liabilities are recognized at full value in the balance sheet.
The Group's pension schemes comply with the relevant regulations and practices in each relevant country. Pension security for the Group personnel is handled through external pension insurance companies. The Group applies defined contribution pension plans, in which the Group pays fixed contributions to an outside unit. The Group has no obligation to make additional payments in case the recipient of the aforementioned contributions cannot discharge its pension payment obligations. Contributions under the defined contribution plan are recognized in the income statement for the financial period during which the contributions were made.
Option rights have been issued to the Group management and personnel. Option rights are issued with a fixed subscription price determined in the terms and conditions of the option plan.
Option rights are measured at fair value on their date of issue and recognized as a cost in the income statement on a straight-line basis over the vesting period. The expense determined at the time of issuing the stock options is based on the Group's estimate of the number of stock options to which it is assumed that rights will vest by the end of the vesting period. The fair value is determined using the Black-Scholes pricing model. The non-market criteria are not included in the fair value of the option but taken into account in the number of stock options that are assumed to vest at the end of the vesting period. On the date of each financial statement, the Group updates its estimate of the final amount of the stock options that will vest, and changes in this estimate are recognized in the income statement. When the option rights are exercised, the proceeds received, net of any transaction costs, are recognized under share capital and unrestricted invested equity fund.
Provisions are recognized when the Group has a present legal or constructive obligation as a result of past events, when it is probable that expenditure will be required to settle the obligation, and when a reliable estimate of the amount can be made. If the Group expects an obligation to be partly reimbursed by a third party, the reimbursement is recognized as a separate asset but only when the reimbursement is certain in practical terms. The Group recognizes a provision on loss-making agreements when the expected benefits of an agreement are less than the unavoidable costs of meeting the obligations under the agreement.
Provisions are measured at the current value of the costs required to discharge the obligation. The discount rate is determined to reflect current market assessments of the time value of money and the risks specific to the obligation.
Preparation of the consolidated financial statements in accordance with IFRS requires management to make estimates and assumptions affecting the reported amounts of assets, liabilities, income and expenses, as well as the disclosure of contingent assets and liabilities. The estimates and assumptions are based on historical experience and other factors that are believed to be reasonable under the circumstances, which form the basis of making the judgments about carrying values. These estimates and assumptions are reviewed on an ongoing basis and possible effect of the changes in estimates and assumptions are recognized during the period they are changed.
The estimates and assumptions that have a significant risk of causing adjustment to the carrying value of assets within next financial year relate to restructuring plans, impairment testing, claims, onerous contracts, pending patent litigations, and the probability of deferred tax assets being recovered against future taxable profits.
The Group adopts the following new and amended standards and interpretations already issued by the IASB. The Group will adopt them as of the effective date or, if the date is other than the first day of the financial year, from the beginning of the subsequent financial year.
The Group has assessed the impacts of IFRS 15 on its revenue recognition. The performance obligations in the new standard are principally similar to the transfer of risks and rewards in the current practice. In this respect there will not be any changes in revenue recognition. Consideration of the time value of money incorporated in the new standard will slightly change the revenue recognition. In case of major advance payment received, the Group will increase revenue with the amount of the interest component and recognize corresponding interest expense over the duration of the advance payment. It is estimated that deferred reveue will increase and retained earnings will decrease by approximately 87 thousand euros on 1 January 2018.
The group intends to adopt the standard using the modified retrospective approach which means that the cumulative impact of the adoption will be recognized in retained earnings on 1 January 2018 and that comparatives will not be restated.
• IFRS 16 Leases (effective for 2019 annual period with early adoption permitted at the same time with IFRS 15). New standard replaces IAS 17 standard and related interpretations. The new standard requires a lessee to recognize leasing contract in the balance sheet as a lease liability and related asset. There are optional exemptions for short-term leases with a lease term of 12 months or less and leases of low-value assets. The company has not yet assessed the impact of the standard to the financial statements. At the end of the financial period the Group has non-cancellable lease agreements for office facilities with 602 thousand euros (note 21. Operating lease agreements) which forms the basis for the asset and financial liability to be recognized. Possible new lease agreements or extensions of the contracts may change the amount that is recognized.
At this stage, the Group does not intend to adopt the standard before its effective date.
• Amendments to IFRS 2 Share-based Payment Transactions – Clarification and Measurement of share-based Payment Transactions (effective for 2018 annual period). The amendments clarify the measurement for certain arrangements. The following three areas are affected: cash-settled share-based payments, share-base payments settled net of tax withholdings and modifications of share-based payment transactions from cash-settled to equity-settled. The standard has not yet been endorsed by the EU.
| EUR | 2017 | 2016 |
|---|---|---|
| BY OPERATION | ||
| Software fees | 4,047,914 | 6,123,352 |
| Professional services and other |
3,924,684 | 1,111,011 |
| Recurring revenue | 8,260,381 | 7,887,439 |
| Total | 16,232,979 | 15,121,803 |
| EUR | 2017 | 2016 | |
|---|---|---|---|
| BY GEOGRAPHICAL SEGMENT | |||
| AMERICAS | 8,269,950 | 8,152,221 | |
| APAC | 2,323,968 | 1,955,359 | |
| EMEA | 3,539,062 | 5,014,223 | |
| Global royalty income | 2,100,000 | 0 | |
| Total | 16,232,979 | 15,121,803 |
In the financial year 2017, revenue share from one customer was EUR 2.1 million, which was 13 % of the net sales of the Group.
| EUR | ||
|---|---|---|
| Employee benefit expenses |
2017 | 2016 |
| Wages and salaries | -8,314,707 | -10,872 448 |
| Pensions, defined contribution plan |
-824,637 | -1,051,029 |
| Other social security costs | -484,134 | -622,704 |
| Stock options issued | -344,805 | -353,615 |
| Total | -9,968,283 | -12,899,796 |
Information on the employee benefits of the management is presented in the note 23. Related party transactions and information on the options granted is presented in the note 17. Share-based payments.
| Number of personnel | 2017 | 2016 |
|---|---|---|
| Average during the financial period |
82 | 111 |
| At the end of the financial period |
80 | 84 |
| Personnel distribution by function on 31 Dec |
2017 | 2016 |
|---|---|---|
| Sales, marketing, and customer support |
29 | 31 |
| Research and development | 35 | 38 |
| Administration | 16 | 15 |
| Total | 80 | 84 |
| Research and development costs, EUR |
2017 | 2016 |
|---|---|---|
| Total | -5,571,580 | -9,456,568 |
| Other operating costs, EUR |
2017 | 2016 |
|---|---|---|
| External services | -3,890,688 | -8,690,575 |
| Depreciation | -2,037,801 | -1,915,896 |
| Other costs | -1,602,575 | -1,940,489 |
| Total | -7,531,064 | -12,546,960 |
| EUR | 2017 | 2016 |
|---|---|---|
| Principal auditor (Ernst & Young Oy) | ||
| Statutory auditing | -36,000 | -35,000 |
| Other auditing | -12,900 | - |
| Tax guidance | -800 | - |
| Other services | -5,131 | - |
| Other auditing firms: | ||
| Statutory auditing | -17,779 | -10,000 |
| Other auditing | -4,109 | -5,833 |
| Tax guidance | -19,113 | -17,740 |
| Other services | -685 | -4,413 |
| Total | -96,518 | -72,986 |
| EUR | 2017 | 2016 |
|---|---|---|
| By asset category | ||
| Machinery and equipment | 141,653 | 155,043 |
| Software & other intangible assets |
232,039 | 199,795 |
| Capitalized development costs |
1,664,109 | 1,561,057 |
| Total | 2,037,801 | 1,915,896 |
| By function | 2017 | 2016 |
| Sales and marketing | 135,463 | 135,176 |
| Research and development | 1,827,599 | 1,730,028 |
| Administration | 74,738 | 50,691 |
| Total | 2,037,801 | 1,915,896 |
| EUR | 2017 | 2016 |
|---|---|---|
| Interest revenue | 54 | 1,285 |
| Exchange rate gains, loans and other receivables |
0 | 0 |
| Total | 54 | 1,285 |
| EUR | 2017 | 2016 |
|---|---|---|
| Exchange rate losses, loans and other receivables |
-510,155 | -264,821 |
| Other interest costs | -665 | 0 |
| Total | -510,820 | -264,821 |
| EUR | 2017 | 2016 |
|---|---|---|
| Income tax | -25,907 | -36,860 |
| Total | -25,907 | -36,860 |
The Group's unrecognized tax losses on deferred tax assets, which have not been booked based on the principle of prudence, are EUR 15.2 million (EUR 10.2 million). EUR 8.3 million (EUR 2.3 million) of the tax losses are in Finland, and EUR 6.9 million (EUR 7.9 million) in the USA. The tax losses expire in Finland between the years 2018–2027, and in the USA between the years 2021–2035. The amount of unrecognized deferred tax assets from the tax losses is EUR 4.0 million (EUR 3.2 million). Year 2017 losses, which have not yet been confirmed in taxation, are included in the figures.
In addition, the parent company has EUR 24.6 million (EUR 20.5 million) research and development expenses and depreciations not deducted in taxation and the amount of unrecognized deferred tax assets resulting from those is EUR 4.9 million (EUR 4.1 million).
The Group's subsidiaries do not have earnings that would cause tax consequences when repatriated.
Reconciliation of income taxes and taxes calculated at Finnish tax rate (20 %):
| 2016 | |
|---|---|
| -2,219,679 | -11,017,005 |
| 443,936 | 2,203,401 |
| -27,862 | 6,796 |
| -48,222 | 71,961 |
| 3,545 | -80,757 |
| 477,973 | 0 |
| -29,149 | -2,238,262 |
| -830,455 | |
| -13,466 | |
| -2,206 | |
| -25,907 | -36,860 |
| 2017 |
| EUR | 2017 | 2016 |
|---|---|---|
| Loss attributable to shareholders of the parent company |
-2,245,586 | -11,053,865 |
| Hybrid loan interest expense | -900,000 | -900,000 |
| Weighted average number of shares in issue, 1,000 |
36,570 | 32,983 |
| Earnings per share | -0.09 | -0.36 |
| Adjusted average number of shares considering dilution effect, 1,000 |
41,169 | 38,492 |
| Earnings per share, diluted | -0.09 | -0.36 |
| EUR | 2016 | |
|---|---|---|
| Machinery and equipment | ||
| Acquisition cost 1 Jan | 1,891,296 | 1,789,365 |
| Exchange rate effect | -30,094 | 7,620 |
| Increase | 17,860 | 94,311 |
| Decrease | -1,748 | 0 |
| Acquisition cost 31 Dec | 1,877,315 | 1,891,296 |
| Accumulated depreciation 1 Jan | 1,655,387 | 1,495,579 |
| Exchange rate effect | -28,432 | 7,027 |
| Depreciation for the financial period |
138,896 | 152,781 |
| Accumulated depreciation on decrease |
-519 | 0 |
| Accumulated depreciation 31 Dec |
1,765,331 | 1,655,387 |
| Book value 31 Dec | 111,984 | 235,909 |
| EUR | 2017 | 2016 |
| Other tangible assets | ||
| Acquisition cost 1 Jan | 19,538 | 18,917 |
| Exchange rate effect | -2,366 | 621 |
| Increase | 0 | 0 |
| Decrease | 0 | 0 |
| Acquisition cost 31 Dec | 17,173 | 19,538 |
| Accumulated depreciation 1 Jan | 15,143 | 11,934 |
| Exchange rate effect | -1,994 | 392 |
| Depreciation for the financial period |
2,758 | 2,817 |
| Accumulated depreciation on decrease |
0 | 0 |
| Accumulated depreciation 31 Dec | 15,906 | 15,143 |
| Book value 31 Dec | 1,267 | 4,395 |
| Balance sheet value of property, plant and equipment 31 Dec |
113,250 | 240,304 |
| EUR | 2017 | 2016 |
|---|---|---|
| Software | ||
| Acquisition cost 1 Jan | 2,078,841 | 2,040,082 |
| Exchange rate effect | -25,925 | 5,756 |
| Increase | 0 | 33,002 |
| Decrease | 0 | 0 |
| Acquisition cost 31 Dec | 2,052,916 | 2,078,841 |
| Accumulated depreciation 1 Jan |
2,024,100 | 1,956,156 |
| Exchange rate effect | -20,506 | 3,041 |
| Depreciation for the financial period |
20,714 | 64,903 |
| Accumulated depreciation on decrease |
0 | 0 |
| Accumulated depreciation 31 Dec |
2,024,308 | 2,024,100 |
| Book value 31 Dec | 28,608 | 54,740 |
| EUR Immaterial rights |
2017 | 2016 |
| Acquisition cost 1 Jan | 9,615,897 | 8,364,859 |
| Increase | 1,527,329 | 2,312,283 |
| Decrease | 0 | -1,061,244 |
| Acquisition cost 31 Dec | 11,143,227 | 9,615,897 |
| Accumulated depreciation 1 Jan |
4,453,975 | 3,820,178 |
| Depreciation for the financial period |
1,875,434 | 1,683,986 |
| Accumulated depreciation on decrease |
0 | -1,050,190 |
| Accumulated depreciation 31 Dec |
6,329,408 | 4,453,975 |
| Book value 31 Dec | 4,813,818 | 5,161,922 |
| Book value of intangible assets 31 Dec |
4,842,426 | 5,216,663 |
At the end of the year, the company has tested the value of Intangible assets using a moderate growth rate compared to year 2017 net sales and year 2017 cost structure. The cash flow forecasts of the new products to be launched in the market are based on year 2018 budget. The discount rate used in the testing was 15 %. As a result of the testing, no impairment risk was detected. According to the made sensitivity analyses, any other reasonably possible change in key variables (net sales, profitability and discount rate) would not create a situation where the carrying value of an asset would exceed its recoverable amount.
| EUR | 2017 | 2016 |
|---|---|---|
| Total | 3,876,814 | 6,928,563 |
| Trade receivable by currency, EUR |
2017 | 2016 |
| EUR | 367,023 | 1,221,429 |
| USD | 2,995,568 | 5,432,189 |
| JPY | 0 | 12,133 |
| GBP | 253,598 | 262,811 |
| CHF | 260,625 | 0 |
| Total (EUR) | 3,876,814 | 6,928,563 |
| EUR | 2017 | 2016 |
|---|---|---|
| VAT receivable | 200,202 | 104,952 |
| Other current receivables | 396,956 | 1,002,097 |
| Total | 597,158 | 1,107,048 |
The book value of trade receivables and trade payables equals their fair value because the impact of discounting is not significant considering the maturity of these items.
According to the Articles of Association, SSH Communications Security Corporation has a minimum share capital of EUR 600,000 and a maximum share capital of EUR 2,400,000, within which limits the share capital may be raised or lowered without amending the Articles of Association. The nominal value of one share is EUR 0.03; hence, the minimum number of shares is 20 million and maximum number is 80 million. The company has one series of shares; each share entitles its holder to one vote at the shareholders' meeting. The share capital of the company, registered in the Trade Register and fully paid up as of 31 December 2017 was EUR 1,153,226.49 (EUR 1,036,824.99), and the number of shares was 38,440,883 (34,560,833).
| Changes in the share cap ital: |
Number of shares |
Share capital, EUR |
|---|---|---|
| 31 Dec 2016 | 34,560,833 | 1,036,825 |
| Subscriptions under stock option plans |
480,050 | 14,402 |
| Subscriptions under share issue |
3,400,000 | 102,000 |
| 31 Dec 2017 | 38,440,883 | 1,153,226 |
| Trade receivable by age, EUR | 2017 | Impairment losses |
Net value 2017 |
2016 | Impairment losses |
Net value 2016 |
|---|---|---|---|---|---|---|
| Non-matured | 2,792,449 | 2,792,449 | 4,284,997 | 4,284,997 | ||
| Matured | ||||||
| < 30 days | 369,131 | 369,131 | 1,717,334 | 1,717,334 | ||
| 30-60 days | 627,194 | 627,194 | 272,301 | 272,301 | ||
| > 60 days | 88,040 | 88,040 | 653,930 | 653,930 | ||
| Total | 3,876,814 | 0 | 3,876,814 | 6,928,563 | 0 | 6,928,563 |
The share capital includes the share subscription prices unless conditions of share issues. Expenses related to share issue are deducted from retained earnings.
The translation differences fund comprises the exchange rate differences arising from the translation of the financial statements of the foreign subsidiaries.
The item 'Fair value and other reserves' consists of two different funds: a fair value reserve for available-for-sale investments and a hedging reserve for changes in the fair value of cash flow hedging instruments. In the 2017 and 2016 financial periods, SSH Communications Security had no available-for-sale financial assets and did not apply hedge accounting.
The unrestricted equity fund consists of the dissolved share premium fund formed by share subscriptions under option rights and includes share subscription prices insofar as not registered as share capital.
Hybrid capital securities is an instrument that is subordinated to the Company's other debt obligations and does not have maturity date (i.e. it is perpetual). It is treated as equity in the IFRS financial statements. Hybrid capital securities do not confer to their holders the right to vote at shareholders' meetings and do not dilute the holdings of the current shareholders.
The other equity fund consists of hybrid capital securities of EUR 12 million issued in March 2015, subscribed by institutional investors. The principal owner and the Chief Executive Officer of the parent company, Tatu Ylönen, subscribed EUR 500,000 of the hybrid capital securities. The capital securities bear a fixed interest rate of 7.5 per cent until 30 March 2020, after which the interest rate will increase by four percentage points. The capital securities have no maturity date, but the issuer has the right to redeem them after 3 but before 5 years from the issue date, upon certain conditions, or after 5 years from the issue date. The investors have the right to convert the capital loan into the Company's shares at EUR 4.76 per share until 30 March 2020.
The objective in managing Group capital is to secure the ability to continue operating. The structure of the capital can be managed, for instance, through decisions concerning dividends and other distribution of assets, purchase of the company's own shares, and share issues.Capital management concerns equity recognized in the balance sheet. There are no requirements imposed by outside parties on the Group's capital management. Balance sheet was strengthened by hybrid capital securities in March 2015 and a directed share issue in June 2016 and in June 2017.
The indicators depicting the capital structure are the equity ratio and gearing.
| 2017 | 2016 |
|---|---|
| 0 | 0 |
| 0 | 0 |
| 13,476,582 | 7,844,754 |
| -13,476,582 | -7,844,754 |
| 12,893,498 | 8,270,895 |
| 63.1 % | |
| -104.5 % | -94.8 % |
| 82.9 % |
In the company's industry, it is common practice internationally that incentives are provided to employees in the form of equity-settled share-based instruments, like options. Personnel of the company belong to options plans. If no longer working for the company, one loses one's options.
On the balance sheet date, SSH Communications Security had 4,599,050 stock options outstanding (5,509,800), representing 10.7 % of shares and 10.7 % of votes. The weighted average exercise price of outstanding stock options was EUR 2.79 (EUR 2.44). The weighted average of the remaining subscription period was 1.6 years (2.3 years). The exercise price varies from EUR 1.66 to EUR 3.45, and the remaining subscription period from 0.7 years to 2.4 years.
The cost of option plan I/2016 has been calculated with an exercise price of 3.45 €, an interest rate of 0.39 % and a volatility of 30 %. The recognized cost of options issued in the 2017 income statement was EUR 344,805 (EUR 353,615). A person holding option rights is entitled to subscribe shares if employed by SSH at the beginning of the subscription period.
| Option plan | Option certificate |
Release date |
Subscription period | Subscription price, EUR |
Options not excercised |
|
|---|---|---|---|---|---|---|
| Begin | End | |||||
| I/2013 | I/2013 A | 4 Jun 2013 | 1 Jun 2015 | 1 Sep 2018 | 1.66 | 192,550 |
| I/2013 B | 4 Jun 2013 | 1 Jun 2017 | 1 Sep 2018 | 1.66 | 460,350 | |
| I/2013 C | 4 Jun 2013 | 1 Jun 2018 | 1 Sep 2018 | 1.66 | 481,100 | |
| I/2013 D | 4 Jun 2013 | 15 Feb 2015 | 1 Sep 2018 | 1.66 | 35,000 | |
| I/2013 E | 4 Jun 2013 | 15 Feb 2016 | 1 Sep 2018 | 1.66 | 21,000 | |
| I/2013 F | 4 Jun 2013 | 15 Feb 2017 | 1 Sep 2018 | 1.66 | 14,000 | |
| 1,204,000 | ||||||
| I/2014 | I/2014 A | 17 Sep 2014 | 17 Sep 2016 | 1 Dec 2018 | 2.55 | 311,850 |
| I/2014 B | 17 Sep 2014 | 17 Sep 2017 | 1 Dec 2018 | 2.55 | 316,800 | |
| I/2014 C | 17 Sep 2014 | 17 Sep 2018 | 1 Dec 2018 | 2.55 | 326,400 | |
| I/2014 D | 17 Sep 2014 | 1 Jan 2016 | 1 Dec 2018 | 2.55 | 40,000 | |
| 995,050 | ||||||
| I/2015 | I/2015 A | 4 Feb 2015 | 15 Mar 2018 | 30 May 2020 | 3.45 | 660,000 |
| I/2015 B | 4 Feb 2015 | 15 Mar 2019 | 30 May 2020 | 3.45 | 660,000 | |
| I/2015 C | 4 Feb 2015 | 15 Mar 2020 | 30 May 2020 | 3.45 | 680,000 | |
| 2,000,000 | ||||||
| I/2016 | I/2016 A | 26 May 2016 | 15 Mar 2017 | 30 May 2020 | 3.45 | 400,000 |
| 400,000 |
| 2017 | 2016 | |||
|---|---|---|---|---|
| Weighted average exercise price EUR |
Number of stock options |
Weighted average exercise price EUR |
Number of stock options |
|
| At the beginning of the financial period |
2.44 | 5,509,800 | 2.29 | 5,350,350 |
| Stock options granted | 0.00 | 0 | 3.45 | 400,000 |
| Stock option forfeited | 0.65 | 430,700 | 0.00 | 0 |
| Stock options canceled | 0.00 | 0 | 0.00 | 0 |
| Stock options exercised | 0.68 | 480,050 | 0.85 | 240,550 |
| At the end of the financial period | 2.79 | 4,599,050 | 2.44 | 5,509,800 |
| Exercisable option rights at the end of the financial period |
2.79 | 4,599,050 | 2.44 | 5,509,800 |
The trade-weighted average share price of SSH Communications Security for the period was EUR 2.11 (EUR 2.84).
| EUR | 2017 | 2016 |
|---|---|---|
| Personnel related | 1,240,185 | 2,688,511 |
| Accruals | 140,402 | 108,085 |
| Other accrued expenses and deferred income |
0 | 528,053 |
| Total | 1,380,586 | 3,324,649 |
| EUR | 2017 | 2016 |
|---|---|---|
| Personnel related | 148,286 | 149,621 |
| VAT liabilities | 17,290 | 17,750 |
| Other current liabilities | 277,373 | 107,320 |
| Total | 442,949 | 274,690 |
The Group is exposed to financial risks in its normal business. The purpose of the Group's risk management is to minimize negative impacts of changes on financial markets to Group income.
The Group operates internationally and is exposed to foreign exchange risk, the most significant currency being the U.S. dollar. The company reduces risk by using net position when feasible. Currently the U.S. dollar position is not hedged, and the company decides on the hedging of the U.S. dollarbased contracts case by case. At the moment, the Group is not using hedging accounting. Any gains or losses realized through hedging actions are thus recognized in profit/loss. Impact of the U.S. dollar change on profits as per December 31, 2017: +-10 % = +40/ -40 EUR in thousands.
The Group has no interest-bearing debt from financial institutions and therefore no need for debt protection. The Group's money market investments expose its cash flow to interest-rate risks, but the exposure is not significant as a whole.
The Group's cash reserves have been invested in accordance with the policy approved by the Board of Directors. At the end of the financial reporting period, all the assets are invested in cash in financial institutions with high credit ratings.
The Group has no significant concentrations of credit risk. The Group has policies in place to ensure that sales of products and services are made to customers with an appropriate credit history. The Group has not recognized significant impairment losses on 2017 or 2016. The aging distribution of trade receivables is presented in note 12. Trade receivables.
The Group has no liquidity risks, since invested funds which are substantial compared to the Group's cash flows are available on a one-day notice.
The Group has trade payables and other short-term liabilities on 31 December 2017 totaling to EUR 1,273,784 with following maturity structure:
| 955,338 |
|---|
| 191,068 |
| 127,378 |
| 1,273,784 |
The item 'Operating lease agreements' includes lease agreements not classified as finance leasing agreements. SSH Communications Security Group acts as lessee.
| EUR | 2017 | 2016 |
|---|---|---|
| Non-cancellable lease agreements for office facili ties – minimum rents |
||
| Within one year | 316,788 | 485,201 |
| Within more than one year but no more than 5 years |
285,603 | 378,728 |
| Total | 602,391 | 863,930 |
The Group rents the office facilities it uses. The duration of the rental agreements is usually 3 to 5 years, and normally the agreements include options to renew past the original termination date. The index, renewal, and other terms and conditions differ from agreement to agreement. The income statement for 2017 includes rents based on rental agreements totaling EUR 515,225 (EUR 536,544).
The income statement for 2017 includes vehicle leasing costs totaling EUR 4,271 (EUR 9,979). At the end of the financial period, the Group did not have any vehicles rented.
| EUR | 2017 | 2016 |
|---|---|---|
| Rental guarantees (pledged) |
80,846 | 110,535 |
| Hybrid Loan, Interest | 675,000 | 675,000 |
SSH Communications Security Corporation, its subsidiaries, the Board and CEO belong to related party of the Group. The Group management team is not considered as part of related party as they do not have direct decision making authority.
| Group companies | Domicile | Group holding, % | Votes, % |
|---|---|---|---|
| SSH Communications Security Corporation, Helsinki | Finland | ||
| SSH Communications Security Inc., Waltham | USA | 100 | 100 |
| SSH Operations Oy, Helsinki | Finland | 100 | 100 |
| SSH Communications Security Ltd., Hong Kong | Hong Kong | 100 | 100 |
| Kyberleijona Oy, Helsinki | Finland | 100 | 100 |
| SSH Government Solutions Inc., Waltham | USA | 100 | 100 |
| SSH Technology Oy, Helsinki | Finland | 100 | 100 |
| SSH Communications Security UK Ltd, London | United Kingdom | 100 | 100 |
The key management personnel of the Group is defined consisting of the CEO of the parent company. The employee benefits of the CEO are presented in the table below. The sums of employee benefits are shown in accrual basis. The CEO of SSH Communications Security Corporation has been Kaisa Olkkonen as of 1 January 2017.
| Remuneration and fees – CEO | ||
|---|---|---|
| EUR | 2017 | 2016 |
| Salary and other short-term employee benefits | 259,866 | 348,706 |
| Share-based payment | 0 | 0 |
| Total | 259,866 | 348,706 |
| Fees Paid to Members of the Board of Directors | ||
|---|---|---|
| EUR | 2017 | 2016 |
| Manner Jukka (Chairman of the Board as of 29 Dec 2016) | 28,500 | 18,000 |
| Olkkonen Kaisa (until 29 Mar 2017, Chairman of the Board as of 20 Apr 2016, until 29 Dec 2016, CEO as of 1 Jan 2017) |
4,500 | 16,571 |
| Kuivala Petri (as of 29 March 2017) | 15,000 | - |
| Syrjälä Timo (Chairman of the Board as of 25 March 2015, until 20 Apr 2016) | 19,500 | 17,857 |
| Vänttinen Ari (as of 29 Mar 2017) | 15,000 | - |
| Ylönen Tatu (CEO as of 17 Feb 2016, until 31 Dec 2016) | 19,500 | 18,000 |
| Koponen Harri (as of 20 Apr 2016, until 29 Mar 2017, CEO until 17 Feb 2016) | 4,500 | 12,429 |
| Hautamäki Päivi (until 20 Apr 2016) | - | 5,571 |
| Total | 106,500 | 88,428 |
| Share and stock option holdings of Board members |
31 Dec 2017 Shares |
31 Dec 2017 Options |
31 Dec 2016 Shares |
31 Dec 2016 Options |
|---|---|---|---|---|
| Manner Jukka | 12,000 | 0 | 12,000 | 0 |
| Kuivala Petri | 0 | 0 | - | - |
| Syrjälä Timo | 3,559,131 | 0 | 2,830,631 | 0 |
| Vänttinen Ari | 0 | 0 | - | - |
| Ylönen Tatu | 18,317,123 | 0 | 18,073,623 | 0 |
| Total | 21,888,254 | 0 | 20,916,254 | 0 |
| Share and stock option holdings of the key management |
31 Dec 2017 Shares |
31 Dec 2017 Options |
31 Dec 2016 Shares |
31 Dec 2016 Options |
|---|---|---|---|---|
| Olkkonen Kaisa (CEO as of 1 Jan 2017) | 10,000 | 300,000 | - | - |
| Ylönen Tatu (CEO as of 17 Feb 2016, until 31 Dec 2016) |
18,317,123 | 0 | 18,073,623 | 0 |
| Karkkulainen Simo | 0 | 0 | - | - |
| Kukkonen Helena | 0 | 115,000 | 0 | 100,000 |
| Löppönen Jussi | 0 | 35,000 | - | - |
| Mononen Jussi | 0 | 100,000 | 0 | 100,000 |
| Raulas Rami | 0 | 35,000 | - | - |
| Rossi Markku | 0 | 140,000 | 0 | 100,000 |
| Scaff Joe | 40,000 | 20,000 | - | - |
| Total | 18,367,123 | 745,000 | 18,073,623 | 300,000 |
| Compensation of the key management personnel | ||
|---|---|---|
| EUR | 2017 | 2016 |
| Wages and other short-term employee benefits | 1,479,812 | 1,420,184 |
| Share-based payments | 0 | 0 |
On 31 December 2017, the CEO and members of the Board of Directors of SSH Communications Security owned 56.9 % (60.5 %) of the shares and votes in the company, either directly or indirectly through companies they own. Management group members including the CEO directly or indirectly held about 47.8 % (52.3 %) of company shares and have a total of 745,000 (300,000) option rights. The general conditions of the option right arrangements are described in note 17. Share-based payments.
In the directed share issue issued by the company in June, Member of the Board Tatu Ylönen subscribed for 243,500 shares and Member of the Board Timo Syrjälä through his controlled company for 728,500 shares.
SSH entered into a patent cross license agreement with a global technology company including a one-time license fee payment. According to the agreement between SSH and Clausal Computing Ltd, SSH will pay to Clausal Computing EUR 462,000 of the license revenue as a royalty fee in January 2018.
In January 2018, SSH entered into marketing service agreement with Ari Vänttinen, whereupon Ari Vänttinen is no longer an independent board member.
During the reporting period, there have not been any other significant transactions with related parties.
The SSH Communications Security's Board of Directors will propose to the Annual General Meeting on March 28th, 2018 that no dividend or return of capital shall be distributed. It is proposed that the loss of the financial year shall be entered to the shareholders' equity in the profit/loss account.
SSH Communications Security has entered into a patent cross license and settlement agreement with Sony on 5 February 2018. The agreement resolves all disputes between the parties. SSH estimates that after taxes, costs and royalty fee paid to Clausal Computing Ltd, this patent license and settlement agreement will have a moderate positive impact in SSH's net profit for the first quarter of 2018.
| EUR | Note | 1 Jan–31 Dec 2017 |
1 Jan–31 Dec 2016 |
|---|---|---|---|
| NET SALES | 1 | 8,147,301.26 | 6,775,505.70 |
| Purchasing and production costs | -580,939.46 | -1,098,899.35 | |
| GROSS MARGIN | 7,566,361.80 | 5,676,606.35 | |
| Research and development costs | 2, 3, 6 | -5,575,287.13 | -10,004,929.98 |
| Sales and marketing costs | 2, 3, 6 | -2,507,056.52 | -4,179,558.77 |
| Administrative costs | 2, 3, 6 | -1,129,907.15 | -2,125,042.10 |
| OPERATING LOSS | -1,645,889.00 | -10,632,924.51 | |
| Financial income and costs | 7 | ||
| Interest income and other financing income | 434,710.09 | 517,651.11 | |
| Interest costs and other financing costs | -942,075.04 | -475,076.93 | |
| LOSS BEFORE APPROPRIATIONS AND TAXES | -2,153,253.95 | -10,590,350.33 | |
| Appropriations | 8 | ||
| Group contribution received | 9,143.64 | 135,000.00 | |
| LOSS BEFORE TAXES | -2,144,110.31 | -10,455,350.33 | |
| Taxes | - | - | |
| LOSS FOR THE FINANCIAL PERIOD | -2,144,110.31 | -10,455,350.33 |
| ASSETS | |||
|---|---|---|---|
| EUR | Note | 31 Dec 2017 | 31 Dec 2016 |
| NON-CURRENT ASSETS | |||
| Intangible assets | 9 | ||
| Immaterial rights | 4,813,818.26 | 5,161,922.36 | |
| Intangible assets, total | 4,813,818.26 | 5,161,922.36 | |
| Tangible assets | 9 | ||
| Machinery & equipment | 99,142.67 | 222,303.93 | |
| Tangible assets, total | 99,142.67 | 222,303.93 | |
| Investments | |||
| Shares in Group companies | 9, 17 | 577,666.15 | 499,126.88 |
| Other shares | 11,000.00 | 11,000.00 | |
| Investments, total | 588,666.15 | 510,126.88 | |
| NON-CURRENT ASSETS, TOTAL | 5,501,627.08 | 5,894,353.17 | |
| CURRENT ASSETS | |||
| Current receivables | |||
| Trade receivables | 361,729.44 | 1,313,571.27 | |
| Receivables from Group companies | 10 | 1,938,870.51 | 4,554,822.69 |
| Prepaid expenses and accrued income | 11 | 176,319.95 | 281,322.17 |
| Other receivables | 12 | 306,045.07 | 1,022,844.84 |
| Current receivables, total | 2,782,964.97 | 7,172,560.97 | |
| Cash and cash equivalents | 11,209,229.09 | 4,631,223.60 | |
| CURRENT ASSETS, TOTAL | 13,992,194.06 | 11,803,784.57 | |
| ASSETS, TOTAL | 19,493,821.14 | 17,698,137.74 |
EQUITY AND LIABILITIES
| EUR | Note | 31 Dec 2017 | 31 Dec 2016 |
|---|---|---|---|
| EQUITY | 13 | ||
| Share capital | 1,153,226.49 | 1,036,824.99 | |
| Unrestricted invested equity fund | 22,131,155.35 | 14,952,192.35 | |
| Hybrid capital securities | 14 | 12,000,000.00 | 12,000,000.00 |
| Retained earnings | -16,460,788.44 | -5,105,438.11 | |
| Loss for the financial period | -2,144,110.31 | -10,455,350.33 | |
| EQUITY, TOTAL | 16,679,483.09 | 12,428,228.90 | |
| LIABILITIES | |||
| CURRENT LIABILITIES | |||
| Advances received | 970,301.67 | 1,718,223.09 | |
| Trade payables | 758,100.85 | 912,165.81 | |
| Payables to Group Companies | 103,543.13 | 207,412.24 | |
| Accrued expenses and deferred income | 15 | 856,802.69 | 2,432,107.70 |
| Other liabilities | 125,589.71 | 0.00 | |
| CURRENT LIABILITIES, TOTAL | 2,814,338.05 | 5,269,908.84 | |
| LIABILITIES, TOTAL | 2,814,338.05 | 5,269,908.84 | |
| EQUITY AND LIABILITIES, TOTAL | 19,493,821.14 | 17,698,137.74 |
| EUR | 1 Jan–31 Dec 2017 |
1 Jan–31 Dec 2016 |
|---|---|---|
| Cash flow from business operations | ||
| Receipts from customers | 10,495,889.97 | 7,340,910.21 |
| Payments to suppliers and employees | -8,670,442.83 | -15,419,005.55 |
| Cash flow from business operations before financial items and taxes | 1,825,447.14 | -8,078,095.34 |
| Interest paid and other financial costs | -257,108.74 | -251,426.93 |
| Interest received and other financial revenue | 504,691.44 | 517,651.11 |
| Cash flow from business operations | 2,073,029.84 | -7,811,871.16 |
| Cash flow from investing activities | ||
| Investments in tangible and intangible assets | -1,537,329.45 | -2,417,350.51 |
| Other investments | -100,000.00 | -308,800.66 |
| Cash flow from investing activities | -1,637,329.45 | -2,726,151.17 |
| Cash flow from financing activities | ||
| Interest on hybrid capital securities | -900,000.00 | -900,000.00 |
| Proceeds from shares subscribed with option rights | 325,364.50 | 204,092.00 |
| Proceeds from share issue | 6,970,000.00 | 8,024,000.00 |
| Expenses from share issue | -253,059.40 | -223,650.00 |
| Group contribution received | 0.00 | 50,000.00 |
| Cash flow from financing activities | 6,142,305.10 | 7,154,442.00 |
| Change in cash and cash equivalents | 6,578,005.49 | -3,383,580.33 |
| Cash and cash equivalents at beginning of period | 4,631,223.60 | 8,014,803.93 |
| Change in cash and cash equivalents | 6,578,005.49 | -3,383,580.33 |
| Cash and cash equivalents at end of period | 11,209,229.09 | 4,631,223.60 |
The financial statement of the parent company, SSH Communications Security Corporation, is drawn up in accordance with the Finnish Accounting Standards. Figures are given to an accuracy of one cent (EUR 0.01). All items in the balance sheet are recognized at original acquisition cost. Information on financial risk management is presented in the consolidated financial statements (Note 20. Financial Risk Management).
Revenue is principally recognized in net sales once delivery has occurred or services have been rendered, an agreement has been signed with the customer or the customer has submitted a written order, and it has been assured that the customer is solvent.
Revenue from services rendered under maintenance agreements are amortized across the agreement period.
The revenue of the royalties from licenses is recognized according to the actual content of the contract.
Costs are apportioned to functions according to the matching principle.
The parent company has rental agreement for office premises at Kornetintie 3, Helsinki and minor other assets. Leasing payments paid pursuant to these agreements are recognized as costs over the rental or leasing period under agreements.
The income tax in the income statement comprises direct taxes based on the taxable profit for the financial period and adjustments to taxes on previous financial periods. The parent company does not recognize deferred tax receivables or liabilities in its financial statement. The parent company has confirmed tax losses of EUR 8.9 million (3.0 million). In addition, the parent company has EUR 24.6 million (EUR 20.5 million) research and development expenses and depreciations not deducted in taxation, whereof no deferred tax asset has been recognized.
Fixed assets are recognized in the balance sheet at acquisition cost less planned depreciation and any impairment. Planned depreciations are calculated on a straight-line basis according to the economic life of each asset category. The asset categories and their depreciation periods are:
| Machinery and equipment | 5 years from month of acquistion |
|---|---|
| Computer hardware | 3 years from month of acquisition |
| Immaterial rights | 5 years from year of acquistion |
| Development costs | 5 years from month of capitalization |
| Other capitalized expenditure |
5 years from year of capitalization |
| Leasehold improvements of rental premises |
Length of the rental agree ment, though no more than 7 years, from year of capitalization |
Research and development costs are recognized as costs in the financial period in which they occurred except for those product development costs which are capitalized once certain criteria have been met. Capitalized development expenses are depreciated systematically over their useful lives.
Transactions denominated in foreign currencies are recognized at the exchange rate on the transaction date. Outstanding receivables and liabilities in foreign currencies are recognized using the exchange rates on the balance sheet date. Exchange rate gains and losses on actual business operations are considered sales adjustment items or adjustment items to materials and services. Exchange rate gains and losses on financing activities are recognized under financing income and costs.
Employees of the parent company and its subsidiaries have been granted option rights. The option rights entitle their holders to subscribe shares in the parent company at a fixed subscription price specified in the terms of the option plan. No costs are recognized in the income statement or balance sheet regarding the granting of option rights.
Hybrid capital securities is an equity-related instrument that is presented as a separate item in equity. Unpaid interest accumulated at the balance sheet date is presented in note 16. Other commitments.
| EUR | 2017 | 2016 |
|---|---|---|
| Finland | 166,256.23 | 702,698.41 |
| Rest of Europe | 5,842,036.51 | 6,045,145.53 |
| Other | 2,139,008.52 | 27,661.76 |
| Total | 8,147,301.26 | 6,775,505.70 |
| EUR | 2017 | 2016 |
|---|---|---|
| Other operating costs | ||
| External services | -2,279,847.16 | -7,200,336.95 |
| Depreciation | -2,008,594.81 | -1,843,588.26 |
| Other | -1,284,737.54 | -747,528.98 |
| Total | -5,573,179.51 | -9,791,454.19 |
| EUR | 2017 | 2016 |
|---|---|---|
| Principal auditor (Ernst & Young Oy) | ||
| Statutory auditing | -36,000 | -35,000 |
| Other auditing | -12,900 | - |
| Tax guidance | -800 | - |
| Other services | -5,131 | - |
| Other auditing firms: | ||
| Statutory auditing | - | -10,000 |
| Other auditing | - | -5,833 |
| Tax guidance | - | -1,000 |
| Other services | - | -4,000 |
| Total | -54,831 | -55,833 |
| Personnel costs | ||
|---|---|---|
| EUR | 2017 | 2016 |
| Wages and salaries | -3,671,374.61 | -6,327,071.02 |
| Pension costs | -794,332.24 | -1,051,029.07 |
| Other ancillary personnel costs |
-214,387.34 | -346,176.03 |
| Total | -4,680,094.19 | -7,724,276.12 |
| Average number of employees |
2017 | 2016 |
|---|---|---|
| 53 | 79 |
| 2017 | 2016 | |
|---|---|---|
| Research and development | 34 | 37 |
| Sales and marketing | 6 | 6 |
| Administration | 13 | 13 |
| Total | 53 | 56 |
See note 23 in the consolidated financial statements.
| EUR | 2017 | 2016 |
|---|---|---|
| Immaterial rights | 211,324.53 | 138,969.67 |
| Capitalized develop ment costs |
1,664,109.02 | 1,561,057.30 |
| Machinery and equipment |
133,161.26 | 143,561.29 |
| Total | 2,008,594.81 | 1,843,588.26 |
In the financial year 2016, SSH Communications Security has recognized a write-off of EUR 11,054.56 from capitalized development costs.
| EUR | 2017 | 2016 |
|---|---|---|
| Interest income | 80,300.36 | 114,274.14 |
| Received payment of impaired internal loan |
424,391.08 | 403,784.33 |
| Impairment on investments and internal receivables |
-239,343.87 | 0.00 |
| Exchange rate gains and losses (net) |
-518,968.98 | -251,904.39 |
| Interest, expenses and other financial costs |
-253,743.54 | -223,579.90 |
| Total | -507,364.95 | 42,574.18 |
| EUR | 2017 | 2016 |
|---|---|---|
| Group contribution from SSH Operations Oy |
0.00 | 135,000.00 |
| Group contribution from SSH Technology Oy |
9,143.64 | 0.00 |
| Total | 9,143.64 | 135,000.00 |
| EUR | 2017 | 2016 |
|---|---|---|
| Intangible assets | ||
| Immaterial rights | ||
| Acquisition cost 1 Jan | 11,539,449.16 | 10,288,410.64 |
| Increase | 1,527,329.45 | 2,312,282.91 |
| Decrease | 0.00 | -1,061,244.39 |
| Acquisition cost 31 Dec | 13,066,778.61 | 11,539,449.16 |
| Book value 31 Dec | 4,813,818.26 | 5,161,922.36 |
|---|---|---|
| Accumulated deprecia- tion 31 Dec |
8,252,960.35 | 6,377,526.80 |
| Accumulated deprecia tion on decrease |
0.00 | -1,050,189.83 |
| Depreciation for the financial period |
1,875,433.55 | 1,685,175.23 |
| Accumulated deprecia tion 1 Jan |
6,377,526.80 | 5,742,541.40 |
| Tangible assets | ||
|---|---|---|
| Machinery and equipment | ||
| Acquisition cost 1 Jan | 1,648,011.36 | 1,557,795.46 |
| Increase | 10,000.00 | 90,215.90 |
| Decrease | 0.00 | 0.00 |
| Acquisition cost 31 Dec | 1,658,011.36 | 1,648,011.36 |
| Accumulated deprecia- tion 1 Jan |
1,425,707.43 | 1,282,146.14 |
| Depreciation for the financial period |
133,161.26 | 143,561.29 |
|---|---|---|
| Accumulated deprecia- tion on decrease |
0.00 | 0.00 |
| Accumulated deprecia tion 31 Dec |
1,558,868.69 | 1,425,707.43 |
|---|---|---|
| Book value 31 Dec | 99,142.67 | 222,303.93 |
| Investments | ||
| Book value 1 Jan | 510,126.88 | 201,326.22 |
| Increase | 100,000.00 | 308,800.66 |
| Decrease | -21,460.73 | 0.00 |
| Book value 31 Dec | 588,666.15 | 510,126.88 |
| EUR | 2017 | 2016 |
|---|---|---|
| Trade receivables | 1,929,726.87 | 4,419,822.69 |
| Group contribution receivable |
9,143.64 | 135,000.00 |
| Total | 1,938,870.51 | 4,554,822.69 |
| EUR | 2017 | 2016 |
|---|---|---|
| Prepaid expenses | 176,319.95 | 281,322.17 |
| Other | - | - |
| Total | 176,319.95 | 281,322.17 |
| EUR | 2017 | 2016 |
|---|---|---|
| Advances paid | - | - |
| VAT receivable | 9,812.91 | 27,265.14 |
| Other receivables | 296,232.16 | 995,579.70 |
| Total | 306,045.07 | 1,022,844.84 |
| EUR | 2017 | 2016 |
|---|---|---|
| Share capital 1 Jan | 1,036,824.99 | 941,108.49 |
| Increase in share capital |
116,401.50 | 95,716.50 |
| Share capital 31 Dec | 1,153,226.49 | 1,036,824.99 |
| Unrestricted invested equity fund |
22,131,155.35 | 14,952,192.35 |
| Hybrid capital securities | 12,000,000.00 | 12,000,000.00 |
| Retained earnings | -16,460,788.44 | -5,105,438.11 |
| Profit/loss for the financial period |
-2,144,110.31 | -10,455,350.33 |
| Total | 16,679,483.09 | 12,428,228.90 |
| Statement on Distributable Funds |
2017 | 2016 |
|---|---|---|
| Retained earnings | -16,460,788.44 | -5,105,438.11 |
| Loss for the financial period |
-2,144,110.31 | -10,455,350.33 |
| Unrestricted invested equity fund |
22,131,155.35 | 14,952,192.35 |
| Capitalised develop- ment costs |
-4,084,206.92 | -4,557,692.61 |
| Total | -557,950.32 | -5,166,288.70 |
Hybrid capital securities is an instrument that is subordinated to the Company's other debt obligations and It does not have maturity date (i.e. it is perpetual). It is treated as equity in the financial statements. Hybrid capital securities do not confer to their holders the right to vote at shareholders' meetings and do not dilute the holdings of the current shareholders.
Hybrid capital securities of EUR 12 million issued in March 2015 were subscribed by institutional investors. The capital securities bear a fixed interest rate of 7.5 per cent until 30 March 2020, after which the interest rate will increase by four percentage points. The capital securities have no maturity date, but the issuer has the right to redeem them after 3 but before 5 years from the issue date, upon certain conditions, or after 5 years from the issue date. The investors have the right to convert the capital loan into the Company's shares at EUR 4.76 per share until 30 March 2020.
Paid interest from hybrid capital securities reduce the amount of retained earnings. Unpaid interest from hybrid capital securities is presented in note 16. Other commitments. Paid interest in the financial year 2017 was EUR 900,000 (EUR 900,000).
| EUR | 2017 | 2016 |
|---|---|---|
| Personnel related | 804,617.69 | 2,197,222.28 |
| Accruals | 52,185.00 | 76,000.00 |
| Other accrued liabilities and deferred income |
0.00 | 158,885.42 |
| Total | 856,802.69 | 2,432,107.70 |
| EUR | 2017 | 2016 | |
|---|---|---|---|
| Non-cancellable lease agreements for office facilities – future rent payments |
|||
| Within one year | 168,939.96 | 281,430.12 | |
| Within more than one year but no more than 5 years |
225,253.28 | 281,430.12 | |
| Total | 394,193.24 | 562,860.24 | |
| EUR | 2017 | 2016 | |
| Guarantees given and other commitments | |||
| Rental guarantees (pledged) |
52,281.40 | 75,010.08 | |
| Hybrid Loan, Interest | 675,000.00 | 675,000.00 |
| Group companies 31 Dec 2017 | Domicile | Holding, % | Votes, % |
|---|---|---|---|
| SSH Communications Security Oyj, Helsinki | Finland | ||
| SSH Communications Security Inc., Waltham | USA | 100 | 100 |
| SSH Operations Oy, Helsinki | Finland | 100 | 100 |
| SSH Communications Security Ltd., Hong Kong | Hong Kong | 100 | 100 |
| Kyberleijona Oy, Helsinki | Finland | 100 | 100 |
| SSH Government Solutions Inc., Waltham | USA | 100 | 100 |
| SSH Technology Oy, Helsinki | Finland | 100 | 100 |
| SSH Communications Security UK Ltd, London | United Kingdom | 100 | 100 |
We have today issued an auditors' report based on our audit.
Helsinki, 6 February 2018
JUKKA MANNER TIMO SYRJÄLÄ Chairman of the Board of Directors Member of the Board of Directors
TATU YLÖNEN ARI VÄNTTINEN Member of the Board of Directors Member of the Board of Directors
PETRI KUIVALA Member of the Board of Directors
KAISA OLKKONEN CEO
Ernst & Young Oy Authorized Public Accountant Firm
ERKKA TALVINKO Authorized Public Accountant
To the Annual General Meeting of SSH Communications Security Oyj
We have audited the financial statements of SSH Communications Security Oyj (business identity code 1035804-9) for the year ended 31 December, 2017. The financial statements comprise the consolidated balance sheet, statement of comprehensive income, statement of changes in equity, statement of cash flows and notes, including a summary of significant accounting policies, as well as the parent company's balance sheet, income statement, statement of cash flows and notes.
Our opinion is consistent with the additional report submitted to the Board of Directors.
We conducted our audit in accordance with good auditing practice in Finland. Our responsibilities under good auditing practice are further described in the Auditor's Responsibilities for the Audit of Financial Statements section of our report. We are independent of the parent company and of the group companies in accordance with the ethical requirements that are applicable in Finland and are relevant to our audit, and we have fulfilled our other ethical responsibilities in accordance with these requirements.
In our best knowledge and understanding, the non-audit services that we have provided to the parent company and group companies are in compliance with laws and regulations applicable in Finland regarding these services, and we have not provided any prohibited non-audit services referred to in Article 5(1) of regulation (EU) 537/2014. The non-audit services that we have provided have been disclosed in note 4 to the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
We have fulfilled the responsibilities described in the Auditor's responsibilities for the audit of the financial statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial statements. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying financial statements.
We have also addressed the risk of management override of internal controls. This includes consideration of whether there was evidence of management bias that represented a risk of material misstatement due to fraud.
| Key Audit Matter | How our audit addressed the Key Audit Matter | |
|---|---|---|
| Revenue Recognition We refer to the Group's accounting policies and the notes 2 and 3 The Group has multiple revenue sources including licenses, maintenance contracts, and consulting services. Since sales contracts include many different terms, there is a risk of incorrect timing of revenue recognition due to fraud or misstatements. Due to this the revenue recognition was determined to be a key audit matter and a significant risk of material misstatement referred to in EU Regulation No 537/241, point (c) of Article 10(2). |
Our audit procedures included, among others: • We evaluated the revenue recognition principles applied by the Group towards applicable accounting standards • We evaluated the revenue recognition of different sources of revenue in the relation to the terms of the sales agreements • We tested the timing of the revenue recognition • We evaluated the appropriateness of the notes related to Group's revenue |
|
| Valuation of Intangible Assets We refer to the Group's accounting policies and the notes 2 and 11 Capitalized R&D expenses aggregated to 4,842 k€ rep resenting a material amount of the consolidated assets (21 %) and equity (38 %). As the impairment test con tains estimates, the audit procedures related to the test prepared by the management were material in respects of the audit. The Group Management exercises judgment determining the assumptions related to future market conditions and economic trends as the general economic growth and sales and margin trends. Due to this the val uation of intangible assets was determined to be a key audit matter and a significant risk of material misstate ment referred to in EU Regulation No 537/241, point (c) of Article 10(2). |
Our audit procedures included, among others: • Use of valuation experts in assisting our evaluation of the methods and assumptions, particularly the discount rate used, applied by the Group • Evaluation of the relevant assumptions used in the impairment testing of the intangible assets, focusing on the reasonableness of the forecasted economic information and the estimation and allocation of the revenue and costs related to each R&D asset • Estimating the accuracy of the management's earlier estimates • Evaluation of the notes representing the impairment test of the intangible assets |
The Board of Directors and the Managing Director are responsible for the preparation of consolidated financial statements that give a true and fair view in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU, and of financial statements that give a true and fair view in accordance with the laws and regulations governing the preparation of financial statements in Finland and comply with statutory requirements. The Board of Directors and the Managing Director are also responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Board of Directors and the Managing Director are responsible for assessing the parent company's and the group's ability to continue as going concern, disclosing, as applicable, matters relating to going concern and using the going concern basis of accounting. The financial statements are prepared using the going concern basis of accounting unless there is an intention to liquidate the parent company or the group or cease operations, or there is no realistic alternative but to do so.
Our objectives are to obtain reasonable assurance on whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with good auditing practice will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.
As part of an audit in accordance with good auditing practice, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the parent company or the group to cease to continue as a going concern.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
We were first appointed as auditors by the Annual General Meeting on 20.4.2016, and our appointment represents a total period of uninterrupted engagement of 2 years.
The Board of Directors and the Managing Director are responsible for the other information. The other information comprises the report of the Board of Directors and the information included in the Annual Report, but does not include the financial statements and our auditor's report thereon. We have obtained the report of the Board of Directors prior to the date of this auditor's report, and the Annual Report is expected to be made available to us after that date.
Our opinion on the financial statements does not cover the other information.
In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. With respect to report of the Board of Directors, our responsibility also includes considering whether the report of the Board of Directors has been prepared in accordance with the applicable laws and regulations.
In our opinion, the information in the report of the Board of Directors is consistent with the information in the financial statements and the report of the Board of Directors has been prepared in accordance with the applicable laws and regulations.
If, based on the work we have performed on the other information that we obtained prior to the date of this auditor's report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
Helsinki 6.2.2018
Ernst & Young Oy Authorized Public Accountant Firm
Erkka Talvinko Authorized Public Accountant
SSH Communications Security aims for transparent and responsible corporate governance through compliance with laws, regulations, and best practices as well as high ethical standards applied in its governance and decision-making. SSH Communications Security's corporate governance practices are subject to its articles of association, Finnish Limited Liability Companies Act, securities market legislation, including the market abuse regulation, rules of Nasdaq Helsinki, and Finnish Corporate Governance Code 2015 adopted by the Securities Market Association. The Corporate Governance Code is available at www.cgfinland.fi.
More information on the governance practices of the company is available under the Corporate Governance section of the company web site at www.ssh.com/investors. Corporate Governance Statements, prepared in accordance with the Finnish Corporate Governance Code and published as separate statements, can also be found on the same page.
SSH implements a one-tier governance model, in which the management of the SSH Group is a responsibility of the General Meeting of shareholders, the Board of Directors, and the CEO. Duties are defined by the Finnish Limited Liability Companies Act and the company's articles of association.
SSH Communications Security's highest decision-making body is the General Meeting, which is composed of the company's shareholders. The General Meeting takes decisions on matters falling within its competence as stipulated by the Finnish Limited Liability Companies Act and the company's articles of association. The Annual General Meeting elects the Board of Directors and auditors. The Board of Directors is responsible for strategic management and decides on the SSH Group's administrative systems and ensures compliance with good governance principles. The Board appoints the CEO, who is in charge of the operative, day-to-day management of the company. CEO is assisted in his/her work by the Executive Management Team.
More information can be found from the annual Corporate Governance Statement and from the company website.
SSH Communications Security operates in a socially and ethically responsible manner, respects the environment and society, promotes internationally proclaimed human rights, and ensures ethical business practices at all times.
SSH has set out a clear Anti-Bribery & Anti-Corruption Policy which prohibits all forms of bribery and corruption. The policy is communicated to all employees during new employee training. Any allegations of bribery or corruption will be investigated thoroughly. The Anti-Bribery & Anti-Corruption Policy is available on our web site at www.ssh.com/investors/anti-bribery-policy. SSH has also established a whistle-blower process which is initiated when someone reports suspected internal or external misconduct or violation of law, regulations, human rights, labor practices or similar within the operations of SSH Group or by its personnel.
SSH respects the surrounding environment and aims to ensure that all of its offices are energy-efficient, and environmental impact is as low as possible. Most of the company's environmental impact comes from the energy consumption of its offices, which is minimized by reusing supplies and recycling. Travel emissions from employee commuting and business travelling are minimized by supporting remote working and online conferencing options.
All SSH employees have the right to a safe and healthy working environment where personal well-being is promoted, and any form of discrimination or harassment is prohibited. Every employee is treated with equal consideration and fairness. All decisions concerning employment are determined by the employee's performance, not on any discriminatory grounds, such as gender, age, nationality, ethnicity, religion, political affiliation, disability, or sexual orientation. In 2017, all full-time employees had individual development discussions and were part of the performance management program.
SSH considers diversity as a strength and actively encourages diversity throughout the organization, including top management and the Board of Directors. The principles of diversity are always taken into account when considering nominations to the Board of Directors. SSH aims to have board members representing both genders, as well as different professional and educational backgrounds.
At the end of 2017, SSH Communications Security personnel consisted of 80 employees in total. 17.5 % of the personnel were women and 82.5 % were men. The average age of the company's employees was 40.8 years. 13.8 % of employees were under 30-years-old, 31.2 % between 30-40, 32.5 % between 40-50, and 22.5 % over 50. 47.5 % of employees had been working at SSH for less than 2 years, 28.8 % for 2-5 years, 11.2 % for 5-10 years, and 12.5% for over 10 years.
All published investor information, including annual reports, interim reports and stock exchange releases are available on the company's website at www.ssh.com/investors. All investor information is published in English. Stock exchange releases are also published in Finnish.
Subscriptions to the emailing list for stock exchange releases can be made by sending your contact details to [email protected]. SSH follows a silent period starting 30 days before the publication of its financial reports, during which company refrains from contact with representatives of the capital markets and financial media.
The company's Annual General Meeting 2018 will be held at Taitotalon Kongressikeskus, Valimotie 8, Helsinki, Finland on Wednesday 28th of March 2018 at 10:00 a.m.
The company will publish the following financial reports during 2018:
| Financial Statements Bulletin | February 7, 2018 |
|---|---|
| Annual Report | Week 9 |
| Interim Report, First quarter | April 19, 2018 |
| Interim Report, First two quarters | July 17, 2018 |
| Interim Report, First three quarters | October 23, 2018 |
| Listing since 2000 | Nasdaq Helsinki Ltd. |
|---|---|
| Trading symbol | SSH1V |
| Number of shares | 38,440,883 |
For any inquiries, please contact: [email protected]
SSH Communications Security Corporation Kornetintie 3 00380 Helsinki, Finland Tel: +358 20 500 7000 Email: [email protected]
460 Totten Pond Road, Suite 460 Waltham, MA 02451, USA Tel: +1 781 247 2100 Email: [email protected]
SSH Communications Security Ltd.
51/F Hopewell Centre 183 Queen's Road East Wan Chai, Hong Kong Tel: +852 3602 3072 Email: [email protected]
SSH Operations Ltd. Max-Planck-Str. 4 85609 Aschheim Tel. +49 89 24414124-0 Email: [email protected]
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