SSH.COM

SSH Communications Security Oyj

Financial Statements and Report of the Board of Directors

2020

SSH Communications Security Group

TABLE OF CONTENTS 2

REPORT OF THE BOARD OF DIRECTORS FOR 1 JAN – 31 DEC 2020 3

CONSOLIDATED FINANCIAL STATEMENTS 15

CONSOLIDATED COMPREHENSIVE INCOME STATEMENT 16
CONSOLIDATED BALANCE SHEET 17
CONSOLIDATED BALANCE SHEET 18
CONSOLIDATED CASH FLOW STATEMENT 19
STATEMENT OF CHANGES IN CONSOLIDATED EQUITY 20
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 22

PARENT COMPANY FINANCIAL STATEMENTS 50

PARENT COMPANY INCOME STATEMENT 51
PARENT COMPANY BALANCE SHEET 52
PARENT COMPANY INCOME STATEMENT 53
PARENT COMPANY CASH FLOW STATEMENT 54
NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS 55

DIVIDEND PROPOSAL AND SIGNATURES 63

SSH Communications Security Group

Report of the Board of Directors for 1 Jan – 31 Dec 2020

NET SALES

EUR million	10-12/2020	7-9/2020	4-6/2020	1-3/2020	1-12/2020	10-12/2019	1-12/2019
BY GEOGRAPHICAL SEGMENT
AMERICAS	1.4	1.4	1.5	1.6	5.9	2.4	7.8
APAC	0.5	0.4	0.3	0.9	2.1	0.5	2.9
EMEA	1.0	0.7	0.9	0.6	3.2	1.2	3.6
Total	3.0	2.6	2.6	3.1	11.3	4.1	14.4

BY OPERATION
Subscription sales	0.2	0.2	0.2	0.2	0.8	0.2	0.7
License sales	0.6	0.4	0.4	0.8	2.2	1.5	4.5
Maintenance sales	1.7	1.9	2.0	2.1	7.8	2.1	8.6
Professional services & others	0.4	0.0	0.0	0.0	0.4	0.3	0.6
Total	3.0	2.6	2.6	3.1	11.3	4.1	14.4

Consolidated net sales for January–December totaled EUR 11.3 million (2019: EUR 14.4 million), down by 21.7 %, year on year.

The majority of SSH Communications Security's invoicing is U.S. dollar based. During the financial year, the average exchange rate of the U.S. dollar against the euro depreciated by 1.9 % compared to 2019. With comparable exchange rates, the software business sales reduction in 2020 would have been 20.8 % compared to 2019.

PROFIT AND PROFITABILITY TRENDS

Operating loss for the financial year amounted to EUR -2.5 million (2019: EUR -1.2 million), with net profit totaling EUR -3.1 million (2019: EUR -1.5 million).

Sales, marketing, and customer support expenses amounted EUR -6.7 million (2019: EUR -7.5 million), while research and development expenses totaled EUR -5.0 million (2019: EUR -4.9 million) and administrative expenses EUR -2.7 million (2019: EUR -2.9 million). Operating expenses decreased by 5.1 % compared to previous year.

BALANCE SHEET AND FINANCIAL POSITION

The financial position of SSH Communications Security was good during the financial year. The consolidated balance sheet total on December 31, 2020 stood at EUR 18.6 million (31 Dec 2019: EUR 23.8 million), of which liquid assets accounted for EUR 8.5 million (31 Dec 2019: EUR 12.0 million), or 45.7 % of the balance sheet total. Interest-bearing debts were EUR 1.3 million at the end of financial year (31 Dec 2019: EUR 0.9 million). Interest-bearing liabilities increased by EUR 0.4 million from December 31, 2019 due to the new leasing contracts. Interest-bearing liabilities

SSH Communications Security Group

include a subordinated loan of EUR 0.6 million (December 31, 2019: 0.6 million) taken out from the non-controlling interest holder State Security Networks Group Finland. On December 31, 2020, gearing, or the ratio of net liabilities to shareholders' equity, was -85.3 % (31 Dec 2019: -92.3 %) and the equity ratio stood at 69.7 % (31 Dec 2019: 78.0 %).

The capital and interest of the subordinated loan which Kyberleijona Oy has taken out from the non-controlling interest holder State Networks Group Finland can only be repaid in circumstances permitted by Chapter 12 of the Finnish Limited Liability Companies Act. The capital of the subordinated loan can only be repaid to the extent the unrestricted shareholders' equity and the total amount of the subordinated loan at the time of the repayment exceeds the loss that is to be confirmed for the company's latest financial year or is included in the balance sheet of more recent financial statements. The annual interest for the loan, three per cent (3 %), has been recognized as expense.

The reported gross capital expenditure for the period totaled EUR 2.1 million (2019: EUR 2.0 million). Financial income and expenses totaled EUR -0.6 million (2019: EUR -0.1 million), which consisted mainly of exchange rate losses and interest expenses from sales and leasing contracts.

The Group had a cash flow of EUR -0.2 million (2019: EUR 0.3 million) from business operations, and investments showed a cash flow of EUR -1.5 million (2019: EUR -1.1 million). Cash flow from investments includes government grants of EUR 0.6 million (2019: EUR 0.9 million). Cash flow from financing totaled EUR -1.3 million (2019: EUR -0.8 million).

RESEARCH AND DEVELOPMENT

Research and development expenses totaled EUR -5.0 million (2019: EUR -4.9 million), the equivalent of 44.9 % of net sales (2019: 34.0 %). During the reporting period, R&D cost capitalizations totaled EUR 1.3 million (2019: EUR 1.6 million). Capitalized product development expenses were reduced by the amount of EUR 0.4 million received as funding from EU (2019: EUR 0.1 million). Depreciation from R&D capitalization assets was EUR -1.3 million (2019: EUR -1.3 million).

RISKS AND UNCERTAINTIES

The ongoing COVID-19 pandemic is a major macro-level risk that, if prolonged, may affect SSH Communications Security through challenges it poses on new license sales. The 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.

Largest risks:

Continuing uncertainty of the macroeconomic environment, such as Covid-19 pandemic
Cybercrime, including e.g. ransomware
Delays in product development and closing new business
Ability to execute our strategy
Ability to retain and recruit key personnel
Maintaining our ability to innovate and develop our product portfolio, including intellectual property rights (IPR)
IPR litigation and the utilization of our patent portfolio

SSH Communications Security Group

A significant proportion of the company revenue is invoiced in U.S. dollars, and possible large fluctuation in the U.S. dollar exchange rates during 2021 could have unpredictable effects for profitability that difficult to estimate at this time. The company decides on hedging of USD based contracts on a case-by-case basis.

The principles and organization of risk management of SSH Communications Security can be read from the company's website www.ssh.com.

HUMAN RESOURCES AND ORGANIZATION

SSH Communications Security Group had 94 (2019: 90) employees at the end of December, up by four persons or 4.4 % from the previous year. The average age of the employees was 43 years (2019: 42.4 years). Approximately 15.8 % (2019: 16.7 %) of the employees were women and 84.2 % (2019: 83.3 %) men. At the end of the period under review, 33.0 % (2019: 35.6 %) of the employees worked in sales, marketing, and customer services, 51.1 % (2019: 51.1 %) in research and development, and 16.0 % (2019: 13.3 %) in corporate administration.

At the end of the financial period, the parent company had 73 (2019: 64) employees on its payroll. On average, the parent company had 66 (2019: 63) employees during the financial period. Parent company salaries, bonuses, and other personnel expenses during the financial period totaled EUR 5.7 million (2019: 5.1 million).

BOARD OF DIRECTORS AND AUDITORS

At the Annual General Meeting held on March 26, 2020 Mr. Tatu Ylönen was re-elected and Ms. Aino-Mari Kiianmies and Mr. Sampo Kellomäki were elected as a new member of the Board of Directors. Mr. Tatu Ylönen was elected as the Chairman of the Board of Directors at the Board's organizing meeting.

Authorized Public Accountants Ernst & Young Oy was re-elected as the auditor of the company with Erkka Talvinko, authorized public accountant, as principal auditor.

The Extraordinary General Meeting of SSH Communications Security Oyj was held on June 26, 2020. The Extraordinary General Meeting approved that the members of the Board of Directors is five (5) and elected Mr. Tatu Ylönen, Ms. Aino-Mari Kiianmies, Mr. Sampo Kellomäki, Mr. Henri Österlund (new member) and Mr. Kai Tavakka (new member) as members of the Board of Directors. Mr. Henri Österlund was elected as the Chairman of the Board of Directors at the Board's organizing meeting.

GROUP MANAGEMENT TEAM

At the end of 2020, the Group Management Team consisted of three members:

Teemu Tunkelo, Chief Executive Officer
Jussi Mononen, Chief Commercial Officer
Niklas Nordström, Chief Financial Officer

SSH Communications Security Group

PRINCIPAL PROVISIONS OF THE ARTICLES OF ASSOCIATION

According to the Articles of Association, the highest decision-making 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.

CORPORATE GOVERNANCE

SSH Communications Security abides by its Articles of Association as well as principles of transparent and responsible corporate governance, and high ethical standards in its governance and decision-making. The company complies with the Finnish company and securities market legislation, including the market abuse regulation, rules of Nasdaq Helsinki and Finnish Corporate Governance Code 2020 adopted by the Securities Market Association.

For more information see our Corporate Governance Statement that is published annually as a separate report and can be found at SSH's website.

RESPONSIBILITY AND BUSINESS ETHICS

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 company's ethical principles emphasize values that are important to SSH, such as antibribery, position and 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 and for that the company has created internal guideline and organized training. Company constantly develops the safety and comfort of its workplaces as well as the management of work-related stress and coping with the workload. The company's headquarters in Helsinki moved to new, modern premises during spring 2020. In addition, the company offers its employees physical, cultural and other benefits.

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 as well as equality plan focusing on equal and fair treatment of its employees.

The company has also a whistleblowing policy in place to ensure that employees and third parties, if they wish, can report anonymously suspected serious deficiencies, abuses and crimes within the SSH Group.

SSH Communications Security Group

SSH has established a Code of Conduct for responsible and transparent activities, employee satisfaction and ethics for all employees worldwide.

SHARES, SHAREHOLDING, AND CHANGES IN GROUP STRUCTURE

The reported trading volume of SSH Communications Security Corporation totaled 19,431,318 shares (valued at EUR 24,937,080). The highest quotation was EUR 1.97 and the lowest EUR 0.65. The trade-weighted average share price for the period was EUR 1.28 and the share closed at EUR 1.70 (December 31, 2020).

Tatu Ylönen sold 6.4 million shares in SSH to investment fund Accendo Capital SICAV, SIF on May 22, 2020 and further 4.93 million shares on June 3, 2020. Accendo Capital came the largest shareholder of SSH, with 29.2% of the company. Tatu Ylönen is the second-largest shareholder of SSH after the sale with 18.0% and Juha Mikkonen holds directly 5.2% of the company's shares. More information about the shareholding can be obtained from the company's web site www.ssh.com.

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. in the UK
SSH Operations Ltd., Kyberleijona Ltd., and SSH Technology Ltd. in Finland. SSH Operations Ltd. has a branch in Germany.

State Security Networks Group Finland (Suomen Erillisverkot Oy) became a non-controlling interest holder of Kyberleijona Oy on August 14, 2018 with 35% ownership. SSH Communications Security Oyj owns 65% of the shares in Kyberleijona Oy.

During the review period, no dividend or return of capital have been distributed.

INFORMATION ON SHAREHOLDERS

Distribution of ownership by sector

Type of sector	Number of shares	Percentage of shares and votes, %
Households and private individuals	17 806 698	45.89 %
Financial and insurance institutions	14 817 163	38.19 %
Public sector organizations	3 184 157	8.21 %
Companies	2 705 989	6.97 %
Foreign shareholders	285 555	0.74 %
Non-profit organizations	2 671	0.01 %
Total	38 802 233	100.00 %

SSH Communications Security Group

DISTRIBUTION OF HOLDINGS BY NUMBER OF SHARES
Shares	Number of shareholders	Percentage of shareholders, %	Number of shares	Percentage of shares, %
1–100	1 712	35.73 %	90 848	0.23 %
101–500	1 319	27.53 %	388 524	1.00 %
501–1,000	640	13.36 %	525 552	1.35 %
1,001–5,000	801	16.72 %	1 914 506	4.93 %
5,001–10,000	134	2.80 %	995 601	2.57 %
10,001–50,000	147	3.07 %	3 043 571	7.84 %
50,001–100,000	19	0.40 %	1 221 698	3.15 %
100,001–500,000	11	0.23 %	2 156 629	5.56 %
500,001–999,999,999	9	0.19 %	28 465 304	73.36 %
Total	4 792	100.00 %	38 802 233	100.00 %
of which nominee-registered	9		14 830 115	38.22 %

The ten largest shareholders Dec 31, 2020, excluding nominee-registered

	Percentage of shares, %	Number of shares
Ylönen Tatu	18.01 %	6 987 123
Mikkonen Juha Taneli	5.15 %	2 000 000
Elo Mutual Pension Insurance Company	4.01 %	1 555 258
Gaselli Group Oy	2.70 %	1 047 500
Ilmarinen Mutual Pension Insurance Company	2.25 %	873 599
Varma Mutual Pension Insurance Company	1.95 %	755 300
Syrjälä Timo Kalevi	1.61 %	623 011
Kettunen Risto Juhani	1.09 %	422 000
AC Invest Oy	0.87 %	338 293
Pulli Anita Irmeli	0.79 %	307 610
Total	38.42 %	14 909 694

SHARE CAPITAL AND BOARD AUTHORIZATIONS

The registered share capital of SSH Communications Security Corporation on December 31, 2020 was EUR 1,164,066.99 consisting of 38,802,233 shares.

Share subscriptions have not been made with the warrants of the stock option programs in the financial years 2020 and 2019.

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

SSH Communications Security Group

Chapter 10 Section 1 of the Finnish Companies Act, either according to the shareholders' preemptive right to share subscription or deviating from this right, in one or more tranches. Based on the authorization, it can be either issuing of new shares or transfer of own shares, which the company possibly has in its possession.

Based on the authorization, the Board of Directors shall have the same rights as the Annual General Meeting to decide upon the issuing of shares against payment and special rights (including stock options) in accordance with Chapter 10 Section 1 of the Finnish Companies Act. Thereby, the authorization to be given to the Board of Directors includes, inter alia, the right to deviate from the shareholders' pre-emptive rights with directed issues providing that the company has a weighty financial reason for the deviation in respect of the share issue against payment.

Furthermore, the authorization includes the Board of Directors' right to decide upon who are entitled to the shares and/or stock options or special rights in accordance with Chapter 10 Section 1 of the Finnish Companies Act as well as upon the related compensation, subscription and payment periods and upon the registering of the subscription price into the share capital or invested non-restricted equity fund within the limits of the Finnish Companies Act.

The authorization will be valid until the next Annual General Meeting but will however expire at the latest on June 30, 2021.

The Annual General Meeting approved the Board of Directors' proposal to authorize the Board of Directors to decide upon acquisition of a maximum of 2,000,000 own shares of the company with assets belonging to the company's non-restricted equity, which amounts to approximately 5.2 percent of the company's total shares. The shares can also be acquired otherwise than in proportion to the holdings of the existing shareholders. The maximum compensation to be paid for the acquired shares shall be the market price at the time of purchase, which is determined in the public trading.

The Board of Directors proposes that the authorization for the acquiring of the company's own shares would be used, inter alia, in order to strengthen the company's capital structure, to finance and realize corporate acquisitions and other arrangements, to realize the share-based incentive programs of the company or otherwise to be kept by the company, to be transferred for other purposes or to be cancelled. The acquisition of shares reduces the company's distributable non-restricted equity.

Decision concerning the acquiring of own shares cannot be made so that the combined amount of the own shares, which are in the possession of, or held as pledges by, the company or its subsidiaries exceeds one-tenth of all shares. The Board of Directors shall decide upon all other matters related to the acquisition of shares.

The authorization will be valid until the next Annual General Meeting but will however expire at the latest on June 30, 2021.

SHARE-BASED PAYMENTS

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.

SSH Communications Security Group

The Board of Directors decided on January 20, 2020 on a new stock option program 2020 A. The maximum number of stock options is 980,000. The share subscription period will be from December 1, 2022 to March 31, 2024. The share subscription price for the shares is EUR 0.93.

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 19 in the consolidated financial statements.

RELATED PARTY TRANSACTIONS

During the reporting period, there have not been any significant transactions with related parties.

EVENTS AFTER THE BALANCE SHEET DATE

On January 29, 2021 SSH Communications Security Corporation’s subsidiary Kyberlejona Oy has agreed to acquire all shares of Deltagon Oy from Leijonaverkot Oy, a subsidiary of Suomen Erillisverkot Oy.

Deltagon Oy develops and sells secure messaging and transaction solutions to various industries, including finance and the public sector. The acquisition strengthens SSH’s position as a provider of secure networking and messaging solutions that safeguard key national cybersecurity interests and offer security-critical networking, encryption, and other solutions to the public sector in a coordinated manner. After closing, Deltagon becomes a subsidiary of Kyberlejona and part of the SSH group. The acquisition is expected to close during the first half of 2021, subject to regulatory approvals and fulfillment of customary closing conditions.

The total acquisition price is approximately EUR 15.4 million. The cash flow impact of the acquisition price to SSH is EUR 10 million over the next four years. The parties have also agreed on an earnout payment of no more than EUR 1.3 million, subject to certain conditions being fulfilled in the three-year period after the acquisition.

DIVIDEND AND OTHER DISTRIBUTION OF ASSETS

The parent company’s distributable funds are EUR -2,108,611.53, of which the loss for the financial year is EUR -2,392,977.94. The Board of Directors proposes to the Annual General Meeting on March 25, 2021 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 retained earnings in the shareholders’ equity.

SSH Communications Security Group

FINANCIAL INDICATORS

		2020	2019	2018
Net sales	EUR	11 251 214	14 378 011	18 340 371
Operating profit/loss	EUR	-2 486 221	-1 207 515	544 239
% of net sales	%	-22.1	-8.4	3.0
EBITDA	EUR	-392 982	862 821	2 410 340
% of net sales	%	-3.5	6.0	13.1
Profit/loss before taxes	EUR	-3 090 264	-1 339 130	558 577
% of net sales	%	-27.5	-9.3	3.0
Return on equity	%	-30.0	-11.3	3.8
Return on investments	%	-27.3	-9.8	4.1
Net interest-bearing debt	EUR	-7 220 926	-11 112 723	-13 295 691
Gearing	%	-85.3	-92.3	-93.5
Equity ratio	%	69.7	78.0	81.6
Gross investments in tangible and intangible assets	EUR	2 115 884	2 005 264	2 257 099
% of net sales	%	18.8	13.9	12.3
Research and development costs	EUR	-5 047 946	-4 893 415	-5 108 469
% of net sales	%	44.9	34.0	27.9
Average number of personnel		88	88	82
Number of personnel 31 Dec		94	90	85
Salaries and fees	EUR	-8 125 559	-8 315 829	-8 346 214

SSH Communications Security Group

INDICATORS PER SHARE

		2020	2019	2018
Earnings per share^{1}	EUR	-0.11	-0.06	-0.01
Earnings per share, diluted^{1}	EUR	-0.11	-0.06	-0.01
Equity per share	EUR	0.22	0.31	0.37
Dividends	EUR	0	0	0
Dividends per share	EUR	0.00	0.00	0.00
Dividend payout 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	38 802	38 802	38 578
Adjusted number of shares at the end of the period	1 000	38 802	38 802	38 802
Adjusted average number of shares considering dilution effect	1 000	41 529	41 228	40 298
Price per earnings ratio (P/E)		neg.	neg.	neg.
Market capitalization 31 Dec	mEUR	65.8	40.2	65.2

1 Earnings per share is impacted by unpaid interest of hybrid capital securities.

Share performance at Nasdaq Helsinki		2020	2019	2018
Average price	EUR	1.28	1.34	2.00
Share price, year end	EUR	1.70	1.04	1.68
Lowest quotation	EUR	0.65	0.97	1.60
Highest quotation	EUR	1.97	1.97	2.27
Volume of shares traded	millions	19.4	5.3	7.8
Volume of shares traded, % of total number	%	50.1	10.2	20.2
Volume of shares traded	mEUR	24.9	4.0	15.6

SSH Communications Security Group

ALTERNATIVE PERFORMANCE MEASURE

SSH Communications Security presents an alternative performance measure, which is not defined by IFRS standards. Alternative performance measure should not be considered as substitute for performance measures in accordance with the IFRS. From the first quarter of 2020 onwards, SSH Communications Security has introduced the following new alternative performance measure:

EBITDA = Operating profit/loss + depreciation, amortization, and impairment

The following table presents the reconciliation of EBITDA to the operating profit/loss.

kEUR	2020	2019
EBITDA	-393	863
Depreciation, amortization, and impairment	-2 093	-2 070
Operating profit/loss	-2 486	-1 208

SSH Communications Security Group

CALCULATION OF FINANCIAL RATIOS

| Return on Equity, % (ROE) | = | Profit/loss for the financial year
Equity (average during the financial year) | x 100 |
| --- | --- | --- | --- |
| Return on Investment, % (ROI) | = | Profit/loss before taxes + Interest and other financial costs
Balance sheet total - Non-interest-bearing debts (average during the financial period) | x 100 |
| Equity Ratio, % | = | Equity
Balance sheet total - Advance payments received | x 100 |
| Earnings Per Share (EPS) | = | Profit/loss for the financial period - Interest on hybrid capital securities
Average number of outstanding shares during the financial period | |
| Diluted Earnings Per Share (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 Pay-out Ratio, % | = | Dividend per share
Earnings per share | x 100 |
| Equity Per Share | = | Equity
Number of outstanding shares on the financial statement date, adjusted for share issue | x 100 |
| Gearing, % | = | Interest-bearing debt - Liquid assets
Equity | x 100 |

SSH Communications Security Group
15

CONSOLIDATED FINANCIAL STATEMENTS

SSH Communications Security Group

CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED COMPREHENSIVE INCOME STATEMENT

EUR	Note	1 Jan-31 Dec 2020	1 Jan-31 Dec 2019
NET SALES	3	11 251 214	14 378 011
Cost of goods sold		-283 797	-451 282
GROSS MARGIN		10 967 417	13 926 729
Other operating income	4	987 464	80 143
Sales and marketing costs	5, 6	-6 698 629	-7 469 757
R&D costs	5, 6	-5 047 946	-4 893 415
Administrative costs	5, 6	-2 694 526	-2 851 216
OPERATING PROFIT/LOSS		-2 486 220	-1 207 515
Finance income	7	631	798
Finance costs	8	-604 675	-132 413
PROFIT/LOSS BEFORE TAXES		-3 090 264	-1 339 130
Income tax expense	9	12 162	-146 600
PROFIT/LOSS FOR THE YEAR		-3 078 102	-1 485 730
Profit/loss attributable to:
Owners of the parent company		-2 834 021	-1 264 498
Non-controlling interests		-244 081	-221 232
TOTAL		-3 078 102	-1 485 730
OTHER COMPREHENSIVE INCOME
Items that may be reclassified subsequently to profit or loss:
Translation differences		266 038	-31 084
TOTAL COMPREHENSIVE INCOME FOR THE YEAR		-2 812 064	-1 516 814
Total comprehensive income attributable to:
Owners of the parent company		-2 567 983	-1 295 581
Non-controlling interests		-244 081	-221 232
TOTAL		-2 812 064	-1 516 814
Earnings per share
Basic earnings per share (EUR)	10	-0,11	-0,06
Diluted earnings per share (EUR)	10	-0,11	-0,06

SSH Communications Security Group

CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEET

ASSETS
EUR	Note	31 Dec 2020	31 Dec 2019
NON-CURRENT ASSETS
Property, plant and equipment	11	142 859	135 048
Right-of-use assets	12, 22	686 405	262 138
Intangible assets	13	5 447 999	5 478 458
Investments		11 000	11 000
Total non-current assets		6 288 263	5 886 644
CURRENT ASSETS
Inventories		33 405	31 964
Trade receivables	14, 16	2 961 250	5 190 952
Other receivables	15	492 525	422 345
Prepaid expenses and accrued expenses		341 785	269 885
Total current assets		3 828 965	5 915 145
Cash and cash equivalents		8 517 698	11 968 885
TOTAL CURRENT ASSETS		12 346 663	17 884 030
TOTAL ASSETS		18 634 926	23 770 674

SSH Communications Security Group

CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEET

EQUITY AND LIABILITIES
EUR	NOTE	31 Dec 2020	31 Dec 2019
EQUITY ATTRIBUTABLE TO PARENT COMPANY SHAREHOLDERS
Share capital	17	1 164 067	1 164 067
Translation differences		-1 171 419	-1 437 458
Unrestricted invested equity fund		22 720 156	22 720 156
Hybrid capital securities		12 000 000	12 000 000
Retained earnings		-26 603 569	-23 000 578
Equity attributable to parent company shareholders		8 109 235	11 446 187
Non-controlling interests		355 791	599 872
Total equity		8 465 026	12 046 059
NON-CURRENT LIABILITIES
Borrowings	18	582 000	582 000
Lease liabilities	18, 22	385 355	73 237
Advances received and deferred revenue	14	756 043	2 369 020
Total non-current liabilities		1 723 398	3 024 257
CURRENT LIABILITIES
Trade and other payables	14	2 377 051	2 532 325
Lease liabilities	18, 22	329 417	200 925
Advances received and deferred revenue	14	5 740 034	5 967 108
Total current liabilities		8 446 502	8 700 357
TOTAL LIABILITIES		10 169 900	11 724 614
TOTAL EQUITY AND LIABILITIES		18 634 926	23 770 674

SSH Communications Security Group

CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED CASH FLOW STATEMENT

EUR	Note	1 Jan-31 Dec 2020	1 Jan-31 Dec 2019
Cash flows from operating activities
Receipts from customers	3, 14	12 235 754	14 763 043
Payments to suppliers and employees	5, 20	-12 400 181	-14 373 570
Cash flows from operating activities before financial items and taxes		-164 427	389 473
Interest paid and payments on other financial costs		-73 456	-65 074
Interest received and other financial income		631	798
Income taxes paid		9 373	-45 376
Net cash flows from operating activities		-227 878	279 821
whereof change in working capital		1 143 491	-581 604
Cash flows from investing activities
Investments in tangible and intangible assets	11, 13	-2 115 884	-2 005 264
Receipt of government grants	4	612 255	922 340
Net cash flows from investing activities		-1 503 628	-1 082 923
Cash flows from financing activities
Proceeds from subordinated debt	18	-	420 000
Interest paid on hybrid capital securities		-900 000	-900 000
Principal portion of finance lease payments	21	-374 466	-304 277
Net cash flows from financing activities		-1 274 466	-784 277
Change in cash and cash equivalents		-3 005 973	-1 587 379
Cash and cash equivalents in beginning of period		11 968 885	13 457 691
Exchange rate effect		-445 214	98 573
Change in cash and cash equivalents		-3 005 973	-1 587 379
Cash and cash equivalents at end of period		8 517 698	11 968 885

SSH Communications Security Group

CONSOLIDATED FINANCIAL STATEMENTS

STATEMENT OF CHANGES IN CONSOLIDATED EQUITY

EUR	Note	Attributable to the owners of the Company						Non-controlling interests	Total equity
		Share capital	Hybrid capital securities	Translation differences	Unrestricted invested equity fund	Retained earnings	Total
Equity 1 Jan 2019	17	1 164 067	12 000 000	-1 406 374	22 720 156	-21 077 384	13 400 465	821 104	14 221 570
Comprehensive profit/loss
Profit/loss for the year						-1 264 498	-1 264 498	-221 232	-1 485 730
Other comprehensive items
Translation differences				-31 084			-31 084		-31 084
Comprehensive profit/loss
for financial period, total		0	0	-31 084	0	-1 264 498	-1 295 581	-221 232	-1 516 814
Hybrid capital securities						-900 000	-900 000		-900 000
Share-based payment plans						241 304	241 304		241 304
Transactions with shareholders		0	0	0	0	-658 696	-658 696	0	-658 696
Equity 31 Dec 2019		1 164 067	12 000 000	-1 437 458	22 720 156	-23 000 578	11 446 187	599 872	12 046 059

SSH Communications Security Group

Attributable to the owners of the Company

EUR	Note	Share capital	Hybrid capital securities	Translation differences	Unrestricted invested equity fund	Retained earnings	Total	Non-controlling interests	Total equity
Equity 1 Jan 2020	17	1 164 067	12 000 000	-1 437 458	22 720 156	-23 000 578	11 446 187	599 872	12 046 059
Comprehensive profit/loss
Loss for the period						-2 834 022	-2 834 022	-244 081	-3 078 102
Other comprehensive items
Translation differences				266 038			266 038		266 038
Comprehensive profit/loss
for financial period, total		0	0	266 038	0	-2 834 022	-2 567 983	-244 081	-2 812 064
Hybrid capital securities						-900 000	-900 000		-900 000
Share-based payment plans						131 031	131 031		131 031
Transactions with shareholders		0	0	0	0	-768 969	-768 969	0	-768 969
Equity 31 Dec 2020		1 164 067	12 000 000	-1 171 419	22 720 156	-26 603 569	8 109 235	355 791	8 465 026

SSH Communications Security Group

CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. GENERAL INFORMATION

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 Karvaamokuja 2B, 00380 Helsinki, Finland.

The SSH Communications Security Board of Directors approved this financial statement for publication at its meeting on 17 February 2021. 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.

SSH Communications Security UK Ltd (registration number 09346221) is exempt from the requirements of the UK Companies Act relating to the audit of accounts under section 479A of the Companies Act 2006.

SSH Communications Security Corporation has one reportable segment, the software business.

2. ACCOUNTING PRINCIPLES

Basis of Preparation

The consolidated financial statements have been prepared in compliance with the International Financial Reporting Standards (IFRS). 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.

SSH Communications Security Group

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.

New and amended standards and interpretations

From the beginning of year 2020, the Group has applied the following amended standards:

Amendments to IFRS 3 Business combinations. The amendments help companies to determine whether an acquisition made is of a business or a group of assets. The amended definition emphasizes that the output of a business is to provide goods and services to customers, whereas the previous definition focused on returns in the form of dividends, lower costs or other economic benefits to investors and others.
Amendments to IFRS 9, IAS 39 and IFRS 7. The amendments are related to Interest Rate Benchmark Reform and require qualitative and quantitative disclosures to enable users of financial statements to understand how an entity's hedging relationships are affected by the uncertainty arising from interest rate benchmark reform.
Amendments to IAS 1 and IAS 8: Definition of Material. The amendment clarifies the definition of "material" and aligns the definition used in the Conceptual Framework and the standard themselves.
Amendments to References to the Conceptual Framework in IFRS standards. The revised Conceptual Framework includes a new chapter on measurement; guidance on reporting financial performance; improved definitions and guidance - particular the definition of a liability; and clarifications in important areas, such as the roles of stewardship, prudence and measurement uncertainty in financial reporting.

The IFRS standards and the amendments that entered into force in 2020 had no impact on the Group's result, the financial position, or the presentation of the financial statements.

Changes that become effective later

The Group will adopt new and amended standards and interpretations 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 not yet adopted the following new and amended standards and interpretations already issued by the IASB.

The following amendments have been endorsed for use by the European Union:

Amendment to IFRS 16 Leases, Covid-19 - pandemic related rent concessions (effective for financial years beginning on or after June 1, 2020). The amendment provides optional, temporary Covid-19 related operational relief for lessees who benefit from lease payment holidays without compromising the relevance and usefulness of financial information provided by companies.

The changes are not expected to have a material impact on SSH Communications Security's consolidated financial statements.

Subsidiaries

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

SSH Communications Security Group

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.

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.

The share of the non-controlling interests of the subsidiaries' profits and equity is presented as a separate item in the consolidated income statement, comprehensive income statement, statement of changes in equity, and in the balance sheet.

Converting Foreign Currency Transactions

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.

Transactions in Foreign Currency

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 differences are recorded in the income statement. 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.

Revenue Recognition

SSH Communications Security net sales derive mainly from software license sales and subscriptions, related support and maintenance fees, and consulting fees. Net sales comprise the invoiced

SSH Communications Security Group

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. Control is transferred to the buyer at the point of time.

Maintenance sales, or revenue from support and maintenance contracts, 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 royalties from licenses is recognized according to the actual content of the contract at the point of time.

The Group customarily receives short-term advance payments from customers, but also from time to time substantial long-term advance payments for subscription or support and maintenance fees. In these cases, the financing component is accounted for and interest expenses are recorded for the duration of the advance payment.

Government Grants

Grants received from the government for 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 for costs are recognized as income over the same period as the related costs are recognized. These government grants are presented under other operating income.

Property, Plant, and Equipment

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 later 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.

Machinery and equipment: 5 years from month of acquisition.
Computer hardware: 3-5 years from month of acquisition.
Leasehold improvements of rental premises: According to the lease term, though no more than 7 years from year of acquisition.

SSH Communications Security Group

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.

Intangible Assets

Research and Development Costs

Research costs are recognized as costs in the income statement. Development costs (related to the design and testing of new or improved products) from incomplete projects are recognized as intangible assets if capitalization criteria are fulfilled, to the extent of their probable economic benefits 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.

Capitalized 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 5 years.

Software

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 3–6 years.

Other Immaterial Rights

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 is generally 5 to 10 years.

Impairment of Tangible and Intangible Assets

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.

SSH Communications Security Group

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.

Inventories

Inventories are valued at cost or at a net realizable value, whichever is lower. Inventories comprise finished goods for sale or for use in producing a service.

Financial Assets and Liabilities

Financial assets

The Group has classified its financial assets into the following categories: financial assets at fair value through profit of loss, financial assets at fair value through comprehensive income statement, and financial assets at amortized value.

The assets are classified at initial recognition; the classification is based on the business model used in managing the financial assets and contractual terms of the cash flows. 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 2020 or 2019.

Loans and receivables are valued at cost at the time of acquisition and they are measured at amortized acquisition cost using the effective interest rate method.

Cash and cash equivalents

Cash and cash equivalents include cash on hand, short-term deposits at banks, and other short-term liquid investments. Assets classified as cash and cash equivalents have a maturity of three months or less at the time of acquisition.

Impairment of financial assets

The Group applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all trade receivables and contract assets. Credit losses are recognized in the income statement in other operating expenses.

SSH Communications Security Group

The Group assesses at each balance sheet date whether an individual financial asset or group of financial assets is impaired. The Group recognizes an impairment loss on trade receivables when it is expected that the receivable will not be recovered in full. 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.

Financial liabilities

The Group's financial liabilities are classified into financing liabilities recognized at fair value through profit/loss or 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 2020 or 2019.

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

The Group leases mainly offices. Rental contracts are typically made for fixed periods from two to three years but may have extension options. Extension options have not been included in the lease liability, because the Group could replace the asset without significant cost or business disruption. The lease term is reassessed if the option is exercised.

Leases are recognized in the balance sheet as a right-of-use asset and a corresponding financial liability at the date at which the lease asset is available for the use by the Group. Each lease payment is allocated between the liability and finance cost. The finance cost is recognized in the income statement over the lease period. The right-of-use asset is depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis. The right-of-use assets are also subject to impairment.

In calculating the present value of lease payments, the Group uses its incremental borrowing rate at the lease commencement date because the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. The carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the lease payments or a change in the assessment of an option to purchase the underlying asset.

Lease liabilities are included in interest-bearing loans and borrowings.

SSH Communications Security Group

The Group applies the short-term lease recognition exemption to the leases of 12 months or less and the lease of low-value assets recognition exemption. Lease payments on short-term leases and leases of low-value assets are recognized as expense on a straight-line basis over the lease term.

Earnings per share

Earnings per share is calculated by dividing the net profit/ loss for the financial year attributable to the owners 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.

Diluted earnings per share

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.

Share capital

Share capital consists of ordinary shares of the parent company classified as equity. 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.

Share issue costs

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.

Own shares

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 compensation received will be recognized under equity. The Group companies held no shares in the parent company on December 31, 2020 or December 31, 2019.

SSH Communications Security Group

Hybrid capital securities

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

Gross margin is equal to net sales less the acquisition costs of directly related materials and services.

Operating Profit/Loss

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.

Income tax

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 temporary differences between the book value and taxable value. The largest temporary differences arise from unused tax losses which are deductible later.

Deferred taxes are calculated using the statutory tax bases with confirmed content announced by the closing date or with generally accepted tax bases. 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.

Employee Benefits

Pensions

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 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.

Share-based payments

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

SSH Communications Security Group

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 considered 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

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.

Use of estimates

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 effects of 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 determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised.

SSH Communications Security Group

3. NET SALES

EUR	2020	2019
BY OPERATION
Subscription sales	768 755	711 123
License sales	2 245 939	4 463 337
Maintenance sales	7 800 367	8 627 826
Professional services and other	436 153	575 725
Total	11 251 214	14 378 011
BY GEOGRAPHICAL SEGMENT
AMERICAS	5 943 849	7 808 912
APAC	2 124 979	2 928 543
EMEA	3 182 386	3 640 556
Total	11 251 214	14 378 011

Information about major customers

In 2020, no customer's revenue accounted for more than ten percent of the Group's net sales. In 2019, revenue share from one customer was EUR 2.0 million, which was 14% of the Group's net sales.

4. OTHER OPERATING INCOME

Other operating income includes EUR 1.0 million received government grants (2019: EUR 0.1 million).

5. OTHER OPERATING COSTS

EUR	2020	2019
Employee benefit expenses
Wages and salaries	-8 387 096	-8 393 843
Pensions, defined contribution plan	-796 193	-912 456
Other social security costs	-449 328	-351 755
Stock options issued	-131 031	-241 304
Total	-9 763 649	-9 899 357

Information about remuneration of the key management personnel is presented in note 24. Related party transactions and information on the options granted is presented in the note 19. Share-based payments.

SSH Communications Security Group

Number of personnel	2020	2019
Average during the financial period	88	88
At the end of the financial period	94	90

Personnel distribution by function on 31 Dec

Sales, marketing, and customer support	31	32
Research and development	48	46
Administration	15	12
Total	94	90

Research and development costs recognized as costs

EUR	2020	2019
Total	-5 047 946	-4 893 415

Other operating costs

EUR	2020	2019
External services	-3 016 512	-3 767 236
Depreciation	-2 093 238	-2 070 336
Other costs	-1 205 792	-1 060 986
Total	-6 315 542	-6 898 559

Auditor's fees

Auditor's fees categorized into service groups were:

EUR	2020	2019
Principal auditor (Ernst & Young Oy)
Statutory auditing	-65 720	-44 000
Other auditing	-5 625	-19 100
Other services	-2 009	-1 812
Other auditing firms:
Statutory auditing	-7 050	-8 091
Tax guidance	-15 158	-14 881
Total	-95 562	-87 884

SSH Communications Security Group

6. DEPRECIATIONS AND IMPAIRMENTS

EUR	2020	2019
BY ASSET CATEGORY
Machinery and equipment	76 136	67 629
Right-of-use assets	393 566	318 951
Software & other tech assets	336 704	395 328
Capitalized development costs	1 286 832	1 288 429
Total	2 093 238	2 070 336
BY FUNCTION
Sales and marketing	12 063	13 782
Research and development	1 501 520	1 543 740
Administration	579 655	512 815
Total	2 093 238	2 070 336

7. FINANCIAL INCOME

EUR	2020	2019
Interest revenue	631	798
Total	631	798

8. FINANCIAL COSTS

EUR	2020	2019
Exchange rate losses, loans, and other receivables	-458 289	-33 547
Interest arising from sales contracts	-72 222	-52 904
Interest from leasing contracts	-48 314	-33 232
Other interest costs	-25 850	-12 730
Total	-604 675	-132 413

SSH Communications Security Group

9. INCOME TAXES

EUR	2020	2019
Income taxes	12 162	-146 600
Total	12 162	-146 600

Reconciliation of income taxes and profit/loss before taxes

EUR	2020	2019
Profit/loss before taxes	-3 090 264	-1 339 130
Tax at parent company tax rate (20 %)	618 053	267 826
Effect of foreign subsidiaries' differing tax rates	-7 877	-2 702
Non-deductible expenses	-19 351	-4 322
Tax exempt revenue	72 299	2 041
Tax deductible hybrid loan interest expenses	180 000	180 000
Use of previously unrecognized tax losses	297 264	347 979
Tax assets not recognized for reported losses	-28 247	-125 776
Tax assets not recognized for unused tax depreciations	-1 124 324	-679 566
Income taxes from previous years	25 938	-30 471
Other direct taxes	-1 593	-101 609
Income taxes	12 162	-146 600

The amount of Group's unused tax losses, for which no deferred tax asset has been recognized based on the prudence principle, is EUR 8.1 million (2019: EUR 10.1 million). EUR 2.8 million (2019: EUR 4.4 million) of the tax losses are in Finland, and EUR 5.2 million (2019: EUR 5.7 million) in the USA. The tax losses expire in Finland between the years 2022-2030, and in the USA between the years 2022-2035. The amount of unrecognized deferred tax assets from the tax losses is EUR 1.7 million (2019: EUR 2.1 million). The figures include use of losses in 2020 which have not yet been confirmed in taxation.

In addition, the parent company has EUR 36.8 million (2019: EUR 31.6 million) research and development expenses and depreciations not deducted in taxation and the amount of unrecognized deferred tax assets resulting from those is EUR 7.3 million (2019: EUR 6.3 million).

The Group's subsidiaries do not have earnings that would cause tax consequences when repatriated.

SSH Communications Security Group

10. EARNINGS PER SHARE

EUR	2020	2019
Profit/loss for the year attributable to shareholders of the parent company	-2 834 022	-1 264 498
Hybrid loan interest expense	-1 260 000	-900 000
Weighted average number of shares in issue, 1,000	38 802	38 802
Earnings per share	-0.11	-0.06
Adjusted average number of shares considering dilution effect, 1,000	41 529	41 228
Earnings per share, diluted	-0.11	-0.06

11. PROPERTY, PLANT AND EQUIPMENT

EUR	2020	2019
Machinery and equipment
Acquisition cost 1 Jan	2 054 825	2 002 996
Exchange rate effect	-22 420	5 157
Increase	61 777	46 672
Decrease	-	-
Acquisition cost 31 Dec	2 094 182	2 054 825
Accumulated depreciation 1 Jan	1 936 735	1 874 456
Exchange rate effect	-21 367	-4 026
Depreciation for the financial period	64 486	66 305
Accumulated depreciation on decrease	-	-
Accumulated depreciation 31 Dec	1 979 855	1 936 735
Book value 31 Dec	114 327	118 090
EUR	2020	2019
---	---	---
Other tangible assets
Acquisition cost 1 Jan	52 876	51 878
Exchange rate effect	-4 468	997
Increase	23 982	-
Decrease	-	-
Acquisition cost 31 Dec	72 389	52 876
Accumulated depreciation 1 Jan	35 918	25 620
Exchange rate effect	-3 710	459
Depreciation for the financial period	11 650	9 839
Accumulated depreciation on decrease	-	-
Accumulated depreciation 31 Dec	43 857	35 918
Book value 31 Dec	28 532	16 958
Book value of tangible assets 31 Dec	142 859	135 048
---	---	---

SSH Communications Security Group

12. RIGHT-OF-USE ASSETS

EUR	2020	2019
Buildings
Acquisition cost 1 Jan	581 008	-
Adoption of IFRS 16 standard	-	510 004
Exchange rate effect	-34 943	5 600
Increase	829 623	69 233
Decrease	-	-3 829
Acquisition cost 31 Dec	1 375 688	581 008
Accumulated depreciation 1 Jan	318 870	-
Exchange rate effect	-23 153	-81
Depreciation for the financial period	364 343	318 951
Impairment	29 223	-
Accumulated depreciation on decrease	-	-
Accumulated depreciation 31 Dec	689 283	318 870
Book value 31 Dec	686 405	262 138

Right-of-use assets include leased offices and software. The lease for the Helsinki office expired at the end of April 2020 and the company moved to new premises from the beginning of April. The new lease contract is for the period of three years and added right-of-use assets and lease liabilities with EUR 0.6 million in 2020. Subsidiary in the United States moved at the end of 2020 to New York City. Right-of-use assets and lease liabilities of EUR 0.1 million have been recognized for the new office. Lease agreement for the old office expires in September 2021 and an impairment loss of EUR 29.2 thousand was recognized in the financial statements.

More information on leases is presented in the note 22. Leases.

SSH Communications Security Group

13. INTANGIBLE ASSETS

EUR	2020	2019
Software
Acquisition cost 1 Jan	2 065 632	2 061 841
Exchange rate effect	1 401	3 790
Increase	58 255	-
Decrease	-	-
Acquisition cost 31 Dec	2 125 288	2 065 632
Accumulated depreciation 1 Jan	2 057 842	2 052 938
Exchange rate effect	1 523	3 615
Depreciation for the financial period	7 667	1 290
Accumulated depreciation on decrease	-	-
Accumulated depreciation 31 Dec	2 067 033	2 057 842
Book value 31 Dec	58 255	7 789
EUR	2020	2019
---	---	---
Immaterial rights
Acquisition cost 1 Jan	15 235 306	13 267 829
Increase	1 537 826	1 967 477
Decrease	-	-
Acquisition cost 31 Dec	16 773 132	15 235 306
Accumulated depreciation and impairment 1 Jan	9 764 636	8 082 170
Depreciation for the financial period	1 618 751	1 632 655
Impairment	-	49 811
Accumulated depreciation on decrease	-	-
Accumulated depreciation and impairment 31 Dec	11 383 387	9 764 636
Book value 31 Dec	5 389 744	5 470 669
Book value of intangible assets 31 Dec	5 447 999	5 478 458

Impairment testing

At the end of the year, the company has tested the value of Intangible assets using a moderate growth rate compared to year 2020 net sales and year 2020 cost structure. The cash flow forecasts of new products in the market are based on year 2021 budget. The discount rate used in the testing was $12.4\%$ . As a result of the testing, no impairment risk was detected. According to the sensitivity analyses carried out, even a significant 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.

SSH Communications Security Group

14. TRADE RECEIVABLES AND CONTRACT LIABILITIES

EUR	2020	2019
Total trade receivables	2 961 250	5 190 952
EUR	2020	2019
---	---	---
Deferred revenue	6 361 348	7 606 049
Government grants received	134 729	730 079
Total advances received and deferred revenue	6 496 077	8 336 128

By currency

EUR	2020	2019
EUR	417 572	1 136 999
USD	2 293 408	3 767 489
GBP	250 270	-
CHF	-	286 464
Total	2 961 250	5 190 952

By age

EUR	2020	2019
Non-matured	1 431 762	3 744 424
Matured
< 30 days	1 042 358	214 119
31–90 days	428 128	872 780
91-180 days	105 865	417 685
> 181 days	377 501	35 960
Impairment losses	-424 364	-94 017
Total	2 961 250	5 190 952

During the financial year, the Group has changed the calculation parameters of the bad debt provision calculated based on the age distribution of trade receivables and recorded a single larger impairment loss, taking into account the increased credit risk due to the COVID-19 -pandemic. The Group does not fully record impairment losses on receivables older than 90 days, as historically credit losses have been very small.

15. OTHER RECEIVABLES

€	2020	2019
VAT receivables	150 020	332 396
Deposits	157 669	84 807
Other short-term receivables	184 836	5 142
Total	492 525	422 345

SSH Communications Security Group

16. FAIR VALUES OF FINANCIAL ASSETS AND LIABILITIES

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.

17. NOTES TO EQUITY

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 2020 was EUR 1,164,066.99 (2019: EUR 1,164,066.99), and the number of shares was 38,802,233 (2019: 38,802,233).

Changes in the share capital	Number of shares	Share capital, EUR
31 Dec 2019	38 802 233	1 164 067
Subscriptions under stock option plan	-	-
Subscriptions under share issue	-	-
31 Dec 2020	38 802 233	1 164 067

DESCRIPTION OF THE EQUITY RESERVES:

Share capital

The share capital includes the share subscription prices from share issues and share subscriptions through options unless the conditions of the share issue stipulate that the subscription price shall be registered in the unrestricted invested equity fund. Expenses related to share issue are deducted from retained earnings.

Translation differences

The translation differences fund comprises the exchange rate differences arising from the translation of the financial statements of the foreign subsidiaries.

Fair value and other reserves

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 2020 and 2019 financial periods, SSH Communications Security had no available-for-sale financial assets and did not apply hedge accounting.

Unrestricted invested equity fund

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 based on a specific decision.

SSH Communications Security Group

Hybrid capital securities

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 any rights of shareholders 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 of the parent company, Mr. 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 to 11.5 per cent. 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 had the right to convert the capital loan into the Company's shares at EUR 4.76 per share until 30 March 2020.

18. CAPITAL MANAGEMENT

The objective in managing Group capital is to secure the ability to continue operating. The structure of the capital can be managed through decisions concerning, for instance, 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. In March 2015 the Group issued hybrid capital securities which are included in the Group's equity.

The indicators depicting the capital structure are the equity ratio and gearing.

Net liabilities

EUR	2020	2019
Borrowings	582 000	582 000
Lease liabilities	714 772	274 162
Cash and cash equivalents	8 517 698	11 968 885
Net liabilities	-7 220 926	-11 112 723
Equity total	8 492 206	12 046 059
Equity ratio	69,7 %	78,0 %
Gearing	-85,3 %	-92,3 %

The interest-bearing liabilities consist of the subordinated loan which Kyberleijona Oy has taken out from the non-controlling interest holder State Security Networks Group Finland. The capital and interest of the subordinated loan can only be repaid in circumstances permitted by Chapter 12 of the Finnish Limited Liability Companies Act. The capital of the subordinated loan can only be repaid to the extent the unrestricted shareholders' equity and the total amount of the subordinated loan at the time of the repayment exceeds the loss that is to be confirmed for the company's latest financial year or is included in the balance sheet of more recent financial statements. The annual interest for the loan, three per cent (3%), has been recognized as expense.

SSH Communications Security Group

19. SHARE-BASED PAYMENTS

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, such as options. Personnel of the company belong to options plans. An employee leaving the company before the vesting of the options forfeits their options.

On the balance sheet date, SSH Communications Security had 2,727,000 stock options outstanding (2019: 2,425,575), representing 6.6% of shares and 6.6% of votes. The weighted average exercise price of outstanding stock options was EUR 1.9 (2019: EUR 2.29). The weighted average of the remaining subscription period was 2.2 years (2019: 1.0 years). The exercise price varies from EUR 0.93 to EUR 2.09, and the remaining subscription period from 1.2 years to 3.3 years.

A person holding option rights is entitled to subscribe shares if employed by SSH at the beginning of the subscription period.

Information about option plans:

Option plan	Option certificate	Release date	Subscription period		Subscription price, EUR	Options not exercised
			Begin	End
I/2015	I/2015 A	4 Feb 2015	15 Mar 2018	30 May 2020	3.45	0
	I/2015 B	4 Feb 2015	15 Mar 2019	30 May 2020	3.45	0
	I/2015 C	4 Feb 2015	15 Mar 2020	30 May 2020	3.45	0
I/2016	I/2016 A	26 May 2016	15 Mar 2017	30 May 2020	3.45	0
2018	2018	22 Feb 2018	1 Dec 2020	31 Mar 2022	2.09	980 000
2019 A	2019 A	18 Dec 2018	1 Dec 2021	31 Mar 2023	1.56	980 000
2020 A	2020 A	13 Feb 2020	1 Dec 2022	31 Mar 2024	0.93	980 000
Total						2 940 000

Changes in outstanding stock options:

	2020	2019
At the beginning of the financial period	2 425 575	1 496 000
Stock options granted	1 688 000	1 034 000
Stock option forfeited	710 100	104 425
Stock options canceled	676 475	-
Stock options exercised	-	-
At the end of the financial period	2 727 000	2 425 575
Exercisable option rights at the end of the financial period	2 727 000	2 425 575

SSH Communications Security Group

The fair value is of option programs is determined at the time the options are granted and is recorded as an expense in the profit/loss during the period of inception. The fair value is determined using the Black-Scholes pricing model. The parameters for options granted in 2020 are:

	2020
Share price at grant, EUR	1.25
Share price at financial period end, EUR	1.70
Exercise price, EUR	1.32
Expected volatility¹	62.0 %
Maturity, years	2.9
Risk-free rate	-0.69 %
Expected dividends, EUR	0.00
Valuation model	Black & Scholes
Fair value 31 Dec 2020, EUR	767 763

¹ The expected volatility has been determined by calculating the historical volatility of the company's shares using monthly observations over corresponding maturity.

Share-based payments recognized as an expense, EUR	2020	2019
Share-based payments	131 031	241 304
Liability from share-based payments 31 Dec	-	-

20. TRADE AND OTHER PAYABLES

EUR	2020	2019
Trade payables	398 156	430 047
Personnel related	1 559 165	1 499 585
Accruals	95 733	93 583
VAT liabilities	75 967	246 796
Other liabilities	248 029	262 314
Total	2 377 051	2 532 325

21. FINANCIAL RISK MANAGEMENT

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.

Foreign Exchange Risk

The Group operates internationally and is exposed to foreign exchange risk, the most significant currency being the U.S. dollar. The company reduces risk based on net position, using foreign exchange forwards or options. Currently the net position is not hedged. The company decides on

SSH Communications Security Group

the hedging on case by case basis. Currently the Group is not using hedging accounting. Any gains or losses realized through hedging actions are thus recognized in profit/loss.

A 10 % strengthening of the U.S. dollar against the Euro using with net position on 31 Dec 2020 would increase the pre-tax profit of the Group by 68,000 euros. Similarly, a 10 % weakening of the U.S. dollar against the Euro would decrease the pre-tax profit of the Group by 55,000 euros.

Interest Rate Risk

The interest-bearing debt of the Group at the end of the review period was 582,000 euro and it consisted of a subordinated loan taken by a subsidiary company from a non-controlling interest holder. The annual interest of the loan is three per cent (3 %).

The money market investments of the Group expose the cash flow to interest rate risk, but their impact is not material.

Market Risk Related to Investments

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.

Credit Risk

The Group has no significant concentrations of credit risk. At the end of the financial year, the Group recorded impairment losses of EUR 0.4 million to cover doubtful receivables (2019: EUR 0.1 million). The aging distribution of trade receivables is presented in note 14. Trade receivables.

Liquidity Risk

The Group's cash and cash equivalents on 31 Dec 2020 were 8,517,698 euros (2019: 11,968,885 euros). 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 had trade payables and other short-term debts amounting 2,377,051 euros (2019: 2,532,325 euros).

The tables below present the Group's maturity of the financial liabilities:

31 Dec 2020

EUR	Less than 1 year	1 to 5 years	Over 5 years	Total
Borrowings	-	-	582 000	582 000
Lease liabilities	329 417	385 355	-	714 772
Trade and other payables	2 377 051	-	-	2 377 051
Total	2 706 468	385 355	582 000	3 673 823

SSH Communications Security Group

31 Dec 2019

EUR	Less than 1 year	1 to 5 years	Over 5 years	Total
Borrowings	-	-	582 000	582 000
Lease liabilities	200 925	73 237	-	274 162
Trade and other payables	2 532 325	-	-	2 532 325
Total	2 733 250	73 237	582 000	3 388 486

The tables below present changes in liabilities arising from financing activities:

EUR	1 Jan 2020	Cash flows	Foreign exchange movement	New leases	Other	31 Dec 2020
Current lease liabilities	200 925	-374 466	-9 977	297 180	215 756	329 417
Non-current interest-bearing borrowings	582 000	-	-	-	-	582 000
Non-current lease liabilities	73 237	-	-4 569	532 443	-215 756	385 355
Total liabilities from financing activities	856 162	-374 466	-14 546	829 623	0	1 296 772
EUR	1 Jan 2019	Cash flows	Foreign exchange movement	New leases	Other	31 Dec 2019
---	---	---	---	---	---	---
Current lease liabilities	310 508	-304 277	5 667	-	189 027	200 925
Non-current interest-bearing borrowings	162 000	420 000	-	-	-	582 000
Non-current lease liabilities	199 496	-	-	74 255	-200 515	73 237
Total liabilities from financing activities	672 004	115 723	5 667	74 255	-11 488	856 162

Lease liabilities have been recognized on adoption of IFRS 16 on January 1, 2019. The column "Other" includes non-cash movements, such as reclassification from non-current to current.

22. LEASES

Leases in the balance sheet

The Group has recognized the following amounts related to the leases in the balance sheet:

Right-of-use assets

EUR	2020	2019
Offices	554 973	262 138
Software	131 432	0
Total	686 405	262 138

SSH Communications Security Group

Lease liabilities

EUR	2020	2019
Current	329 417	200 925
Non-current	385 355	73 237
Total	714 772	274 162

Additions to the right-of-use assets during 2020 were in total EUR 0.8 million (2019: EUR 0.1 million). Changes in right-of-use assets have been presented in note 12. Right-of-use assets.

Leases in the income statement

The Group has recognized the following amounts related to the leases in the income statement:

EUR	2020	2019
Depreciation charge of right-of-use assets	-393 566	-318 951
Interest expenses (included in financial costs)	-48 314	-33 232
Expense relating to short-term leases (included in other operating costs)	-59 131	-52 533
Expense relating to leases of low-value assets (included in other operating costs)	-1 791	-1 738

The cash outflow for leases in 2020 was in total EUR 0.4 million (2019: EUR 0.3 million).

23. GUARANTEES GIVEN AND OTHER COMMITMENTS

EUR	2020	2019
Rental guarantees (pledged)	157 669	84 807
Hybrid Loan, Interest	1 035 000	675 000

SSH Communications Security Group

24. GROUP COMPANIES AND RELATED PARTY TRANSACTIONS

SSH Communications Security Corporation, its subsidiaries, its CEO, and its Board members and companies controlled by them 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 Dec 31 2020

Group company	Domicile	Group holding, %	Votes, %
SSH Communications Security Oyj, Helsinki	Finland
SSH Communications Security Inc., New York City	USA	100	100
SSH Operations Oy, Helsinki	Finland	100	100
SSH Communications Security Ltd., Hong Kong	Hong Kong	100	100
Kyberleijona Oy, Helsinki	Finland	65	65
SSH Government Solutions Inc., New York City	USA	100	100
SSH Technology Oy, Helsinki	Finland	100	100
SSH Communications Security UK Ltd, London	United Kingdom	100	100

Employee benefits of the management

The key management personnel of the Group are 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 on an accrual basis. The CEO of SSH Communications Security Corporation has been Mr. Teemu Tunkelo as of 24 March 2020.

Remuneration and fees - CEO

EUR	2020	2019
Salary and other short-term employee benefits	284 978	221 762
Termination benefits	111 451	-
Share-based payments	-	-
Total	396 428	221 762

Fees to Members of the Board of Directors

EUR	2020	2019
Curry Sam (until 26 March 2020)	7 500	32 500
Kellomäki Sampo (as of 26 March 2020)	18 000	-
Kiianmies Aino-Mari (as of 26 March 2020)	18 000	-
Kiuru Sauli (until 26 March 2020)	7 500	22 500
Kuivala Petri (until 26 March 2020)	8 750	35 000
Tavakka Kai (as of 26 June 2020)	12 286	-
Syrjälä Timo (until 26 March 2020)	7 500	30 000
Ylönen Tatu	7 500	30 000
Zettlemoyer Anne Marie (until 26 March 2020)	7 500	32 500
Österlund Henri (as of 26 June 2020, Chairman of the Board)	14 743	-
Total	109 279	182 500

SSH Communications Security Group

Share and stock option holdings of Board members	31 Dec 2020		31 Dec 2019
	Shares	Options	Shares	Options
Kellomäki Sampo	-	-	-	-
Kiianmies Aino-Mari	-	-	-	-
Tavakka Kai	-	-	-	-
Ylönen Tatu	6 987 123	-	18 317 123	-
Österlund Henri	61 060	-	-	-
Total	7 048 183	-	18 317 123	-
Share and stock option holdings of the management	31 Dec 2020		31 Dec 2019
---	---	---	---	---
	Shares	Options	Shares	Options
Tunkelo Teemu (CEO as of 24 March 2020)	20 300	475 000	-	-
Mononen Jussi	-	305 000	-	130 000
Nordström Niklas	-	370 000	-	95 000
Total	20 300	1 150 000	-	225 000

Compensation of the key management personnel of the group

EUR	2020	2019
Wages and other short-term employee benefits	1 179 520	1 446 330
Share-based payments	-	-

On 31 December 2020, the CEO and members of the Board of Directors of SSH Communications Security owned 18.2 % (2019: 47.2 %) 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 0.1 % (2019: 0 %) of company shares and have a total of 1,150,000 (2019: 225,000) option rights.

The key conditions of the option right arrangements are described in note 19. Share-based payments.

Related party transactions

During the reporting period, there have not been any significant transactions with related parties.

SSH Communications Security Group

25. EVENTS AFTER THE BALANCE SHEET DATE

On January 29, 2021 SSH Communications Security Corporation’s subsidiary Kyberleijona Oy has agreed to acquire all shares of Deltagon Oy from Leijonaverkot Oy, a subsidiary of Suomen Erillisverkot Oy.

Deltagon Oy develops and sells secure messaging and transaction solutions to various industries, including finance and the public sector. The acquisition strengthens SSH’s position as a provider of secure networking and messaging solutions that safeguard key national cybersecurity interests and offer security-critical networking, encryption, and other solutions to the public sector in a coordinated manner. After closing, Deltagon becomes a subsidiary of Kyberleijona and part of the SSH group. The acquisition is expected to close during the first half of 2021, subject to regulatory approvals and fulfillment of customary closing conditions.

SSH Communications Security Group
50

PARENT COMPANY FINANCIAL STATEMENTS

SSH Communications Security Group

PARENT COMPANY FINANCIAL STATEMENTS
PARENT COMPANY INCOME STATEMENT

EUR	Note	1 Jan-31 Dec 2020	1 Jan-31 Dec 2019
NET SALES	1	7 006 767,78	9 365 109,50
Purchasing and production costs		-451,33	-32 404,91
GROSS MARGIN		7 006 316,45	9 332 704,59
Other operating income		645 229,02	77 268,32
Research and development costs	2, 3, 6	-5 159 333,65	-5 136 015,12
Sales and marketing costs	2, 3, 6	-2 615 628,82	-2 968 791,29
Administrative costs	2, 3, 6	-2 369 383,91	-2 375 260,97
OPERATING PROFIT/LOSS		-2 492 800,91	-1 070 094,47
Financial income	7
Interest revenue and other financing income		548 857,58	529 494,18
Interest costs and other financing costs		-465 899,39	-14 432,45
PROFIT/LOSS BEFORE APPROPRIATIONS AND TAXES		-2 409 842,72	-555 032,74
Appropriations	8
Group contribution received		16 864,78	8 154,97
PROFIT/LOSS BEFORE TAXES		-2 392 977,94	-546 877,77
Taxes		0,00	-100 397,38
PROFIT/LOSS FOR THE FINANCIAL PERIOD		-2 392 977,94	-647 275,15

SSH Communications Security Group

PARENT COMPANY FINANCIAL STATEMENTS

PARENT COMPANY BALANCE SHEET

ASSETS

EUR	Note	31 Dec 2020	31 Dec 2019
NON-CURRENT ASSETS
Intangible assets	9
Immaterial rights		3 162 965,59	3 299 080,81
Intangible assets, total		3 162 965,59	3 299 080,81
Tangible assets	9
Machinery & equipment		116 918,81	84 049,23
Tangible assets, total		116 918,81	84 049,23
Investments
Shares in Group companies	9,17	3 889 689,01	3 889 689,01
Other shares		11 000,00	11 000,00
Investments, total		3 900 689,01	3 900 689,01
NON-CURRENT ASSETS, TOTAL		7 180 573,41	7 283 819,05
CURRENT ASSETS
Current receivables
Trade receivables		488 393,59	269 725,43
Receivables from Group companies	10	5 328 229,56	8 124 686,12
Prepaid expenses and accrued income	11	216 048,95	157 808,59
Other receivables	12	317 283,49	56 156,56
Current receivables, total		6 349 955,59	8 608 376,70
Cash and cash equivalents		2 744 865,26	3 979 808,06
CURRENT ASSETS, TOTAL		9 094 820,85	12 588 184,76
ASSETS, TOTAL		16 275 394,26	19 872 003,81

SSH Communications Security Group

PARENT COMPANY FINANCIAL STATEMENTS

PARENT COMPANY INCOME STATEMENT

EQUITY AND LIABILITIES

EUR	Note	31 Dec 2020	31 Dec 2019
EQUITY	13
Share capital		1 164 066,99	1 164 066,99
Unrestricted invested equity fund		22 720 155,85	22 720 155,85
Hybrid capital securities	14	12 000 000,00	12 000 000,00
Retained profit/loss		-20 410 104,85	-18 862 829,70
Profit/loss for financial period		-2 392 977,94	-647 275,15
EQUITY, TOTAL		13 081 140,05	16 374 117,99

LIABILITIES

CURRENT LIABILITIES

Advances received		1 080 577,73	1 266 366,60
Trade payables		326 744,86	278 721,43
Payables to Group Companies		398 369,66	589 223,21
Accrued expenses and deferred income	15	1 219 070,76	1 009 770,73
Other liabilities		169 491,20	353 803,85
CURRENT LIABILITIES, TOTAL		3 194 254,21	3 497 885,82
LIABILITIES, TOTAL		3 194 254,21	3 497 885,82
EQUITY AND LIABILITIES, TOTAL	16 275 394,26	19 872 003,81
---	---	---

SSH Communications Security Group

PARENT COMPANY FINANCIAL STATEMENTS
PARENT COMPANY CASH FLOW STATEMENT

EUR	1 Jan-31 Dec 2020	1 Jan-31 Dec 2019
Cash flow from business operations
Receipts from customers	9 461 880,39	7 582 734,85
Payments to suppliers and employees	-9 001 780,48	-8 960 731,37
Cash flow from business operations before financial items and taxes	460 099,91	-1 377 996,52
Interest and other financial costs	-26 641,36	-71 789,74
Interest and other financial revenue	507 457,58	506 856,44
Income tax paid	0,00	-397,38
Cash flow from business operations	940 916,13	-943 327,20
Cash flow from investing activities
Investments in tangible and intangible assets	-1 555 202,07	-1 206 587,10
Receipt of government grants	271 188,17	922 340,47
Cash flow from investing activities	-1 284 013,90	-284 246,63
Cash flow from financing activities
Interest on hybrid capital securities	-900 000,00	-900 000,00
Subordinated loan to related parties	-	-780 000,00
Group contribution received	8 154,97	11 658,14
Cash flow from financing activities	-891 845,03	-1 668 341,86
Change in liquid assets	-1 234 942,80	-2 895 915,69
Liquid assets in the beginning of period	3 979 808,06	6 875 723,75
Change in liquid assets	-1 234 942,80	-2 895 915,69
Liquid assets at the end of period	2 744 865,26	3 979 808,06

SSH Communications Security Group

PARENT COMPANY FINANCIAL STATEMENTS

NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS

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 21. Financial Risk Management).

Principles of revenue recognition

Revenue from services rendered under maintenance agreements are amortized across the agreement 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 royalties from licenses is recognized according to the actual content of the contract at the point of time.

Apportioning of costs to functions

Costs are apportioned to functions according to the matching principle.

Leases

The parent company has rental agreement for office premises at Karvaamokuja 2B, Helsinki and minor other assets. Leasing payments paid pursuant to these agreements are recognized as costs over the rental or leasing period under agreements.

Income tax

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 2.7 million (2019: EUR 4.2 million). In addition, the parent company has EUR 36.8 million (2019: EUR 31.6 million) research and development expenses and depreciations not deducted in taxation, whereof no deferred tax asset has been recognized.

Fixed assets

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.

SSH Communications Security Group

The asset categories and their depreciation periods are:

Machinery and equipment	5 years from month of acquisition
Computer hardware	3 years from month of acquisition
Immaterial rights	5 years from month of acquisition
Development costs	5 years from month of capitalization
Other capitalized expenditure	5 years from year of capitalization
Leasehold approvements of rental premises	Length of the rental agreement, though no more than 7 years, from year of capitalization

Research and Development Costs

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.

Foreign currency transactions

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.

Option rights

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

Hybrid capital securities is an equity-related instrument that is presented as a separate item in equity. Interest payments on hybrid capital securities are decided by the Board. Unpaid interest accumulated at the balance sheet date is presented in note 16. Other commitments.

SSH Communications Security Group

NOTES TO THE INCOME STATEMENT

1. NET SALES BY MARKET AREA

EUR	2020	2019
Finland	2 432 052,63	2 742 375,86
Rest of Europe	1 214 151,04	1 596 088,03
Other	3 360 564,11	5 026 645,61
Total	7 006 767,78	9 365 109,50

2. OPERATING COSTS

EUR	2020	2019
Other operating costs
External services	-1 832 280,68	-2 153 629,70
Depreciation	-1 221 521,35	-1 424 148,88
Other	-1 766 820,27	-1 801 478,13
Total	-4 820 622,30	-5 379 256,71

Auditor's fees

EUR	2020	2019
Principal auditor (Ernst & Young Oy)
Statutory auditing	-65 720,00	-44 000,00
Other auditing	-7 305,00	-20 719,00
Other services	-329,00	-192,60
Total	-73 354,00	-64 911,60

3. PERSONNEL COSTS AND AVERAGE NUMBER OF EMPLOYEES

EUR	2020	2019
Wages and salaries	-5 507 723,65	-4 865 593,85
Pension costs	-765 499,67	-886 875,37
Other ancillary personnel costs	-184 601,46	-220 415,32
Total	-6 457 824,78	-5 972 884,54
	2020	2019
---	---	---
Average number of employees	66	63

SSH Communications Security Group

PERSONNEL DISTRIBUTION BY BUSINESS AREA AT THE END OF THE FINANCIAL PERIOD

	2020	2019
Research and development	47	43
Sales and marketing	13	11
Administration	13	10
Total	73	64

SALARIES AND FEES PAID TO MANAGEMENT AND MEMBERS OF THE BOARD OF DIRECTORS

See note 24 in the consolidated financial statements.

DEPRECIATION AND IMPAIRMENT

EUR	2020	2019
Immaterial rights	195 229,45	260 229,51
Capitalized development costs	977 883,03	1 119 307,90
Machinery and equipment	48 408,87	44 611,47
Total	1 221 521,35	1 424 148,88

In 2019, impairment of immaterial rights related to patents totaled EUR 49,811.32. In 2020, the company did not record any impairments.

FINANCIAL INCOME AND COSTS

EUR	2020	2019
Interest revenue	56 284,71	68 791,00
Received payments of impaired internal loan	492 572,87	468 695,03
Exchange rate gains and losses (net)	-460 208,29	-21 681,83
Interest and other financial costs	-5 691,10	-742,47
Total	82 958,19	515 061,73

APPROPRIATIONS

EUR	2020	2019
Group contribution from SSH Technology Oy	16 864,78	8 154,97
Total	16 864,78	8 154,97

SSH Communications Security Group

NOTES TO THE BALANCE SHEET

9. INTANGIBLE AND TANGIBLE ASSETS AND LONG-TERM INVESTMENTS

EUR	2020	2019
Immaterial rights
Acquisition cost 1 Jan	13 806 553,00	12 631 531,34
Increase	1 039 879,33	1 175 021,66
Decrease	-	-
Acquisition cost 31 Dec	14 846 432,33	13 806 553,00
Accumulated depreciation 1 Jan	10 507 472,19	9 127 934,94
Depreciation for the financial period	1 175 994,55	1 379 537,25
Accumulated depreciation on decreases	-	-
Accumulated depreciation 31 Dec	11 683 466,74	10 507 472,19
Book value 31 Dec	3 162 965,59	3 299 080,81
Machinery and equipment
Acquisition cost 1 Jan	1 769 775,43	1 738 210,15
Increase	81 278,45	31 565,28
Decrease	-	-
Acquisition cost 31 Dec	1 851 053,88	1 769 775,43
Accumulated depreciation 1 Jan	1 685 726,20	1 641 114,73
Depreciation for the financial period	48 408,87	44 611,47
Accumulated depreciation on decreases	-	-
Accumulated depreciation 31 Dec	1 734 135,07	1 685 726,20
Book value 31 Dec	116 918,81	84 049,23
Investments
Book value 1 Jan	3 900 689,01	3 120 689,01
Increase	-	780 000,00
Decrease	-	-
Book value 31 Dec	3 900 689,01	3 900 689,01

The parent company has granted a subordinated loan in total of EUR 1,080,000 (2019: EUR 1,080,000) to Kyberleijona Oy. The capital and interest of the subordinated loan can only be repaid in circumstances permitted by Chapter 12 of the Finnish Limited Liability Companies Act. The capital of the subordinated loan can only be repaid to the extent the unrestricted shareholders' equity and the total amount of the subordinated loan at the time of the repayment exceeds the loss that is to be confirmed for the company's latest financial year or is included in the balance sheet of more recent financial statements. The annual interest for the loan is three per cent (3%). As part of the cooperation agreement between SSH and State Security Networks Group Finland, SSH has strengthened the equity of Kyberleijona in 2018 by EUR 2,532,022.86.

SSH Communications Security Group

10. RECEIVABLES FROM GROUP COMPANIES

EUR	2020	2019
Trade receivables	5 311 364,78	8 116 531,15
Group contribution receivable	16 864,78	8 154,97
Total	5 328 229,56	8 124 686,12

11. PREPAID EXPENSES AND ACCRUED INCOME

EUR	2020	2019
Prepaid expenses	216 048,95	157 808,59
Total	216 048,95	157 808,59

12. OTHER RECEIVABLES

EUR	2020	2019
VAT receivables	-	-
Other receivables	317 283,49	56 156,56
Total	317 283,49	56 156,56

13. EQUITY

EUR	2020	2019
Share capital 1 Jan	1 164 066,99	1 164 066,99
Increase in share capital	-	-
Share capital 31 Dec	1 164 066,99	1 164 066,99
Unrestricted invested equity fund	22 720 155,85	22 720 155,85
Hybrid capital securities	12 000 000,00	12 000 000,00
Retained earnings	-20 410 104,85	-18 862 829,70
Profit/loss for the financial period	-2 392 977,94	-647 275,15
Total	13 081 140,05	16 374 117,99
Statement on Distributable Funds, EUR	2020	2019
---	---	---
Retained earnings	-20 410 104,85	-18 862 829,70
Profit/loss for the financial period	-2 392 977,94	-647 275,15
Unrestricted invested equity fund	22 720 155,85	22 720 155,85
Capitalized development costs	-2 025 684,59	-2 288 661,49
Total	-2 108 611,53	921 389,51

SSH Communications Security Group

14. HYBRID CAPITAL SECURITIES/SHAREHOLDERS' EQUITY

A hybrid capital security 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 any shareholder rights and do not dilute the holdings of the current shareholders.

Hybrid capital securities in the amount of EUR 12 million were issued in March 2015 and 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 had 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 2020 was EUR 900,000 (2019: EUR 900,000).

15. ACCRUED LIABILITIES AND DEFERRED INCOME

EUR	2020	2019
Personnel related	1 159 848,13	980 770,73
Accruals	59 222,63	29 000,00
Total	1 219 070,76	1 009 770,73

16. OTHER COMMITMENTS

EUR	2020	2019
Non-cancellable lease agreements for office facilities - future rent payments
Within one year	262 020,78	243 907,27
Within more than one year but no more than 5 years	362 049,24	543 125,25
Total	624 070,02	787 032,52
Guarantees given and other commitments
---	---	---
EUR	2020	2019
Rental guarantees (pledged)	130 696,90	55 390,40
Hybrid Loan, Interest	1 035 000,00	675 000,00

SSH Communications Security Group

17. GROUP COMPANIES

Parent and subsidiary relationships of the Group 31 December 2020

Group companies	Domicile	Group holding, %	Votes, %
SSH Communications Security Oyj, Helsinki	Finland
SSH Communications Security Inc., New York City	USA	100	100
SSH Operations Oy, Helsinki	Finland	100	100
SSH Communications Security Ltd., Hong Kong	Hong Kong	100	100
Kyberleijona Oy, Helsinki	Finland	65	65
SSH Government Solutions Inc., New York City	USA	100	100
SSH Technology Oy, Helsinki	Finland	100	100
SSH Communications Security UK Ltd, London	United Kingdom	100	100

SSH Communications Security Group

DIVIDEND PROPOSAL AND SIGNATURES

DIVIDEND PROPOSAL

The parent company's distributable funds are EUR -2,108,611.53, of which the loss for the financial year is EUR -2,392,977.94. The Board of Directors proposes to the Annual General Meeting on 25 March 2021 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 retained earnings in the shareholders' equity.

SIGNATURES FOR THE FINANCIAL STATEMENTS AND REPORT OF THE BOARD OF DIRECTORS

Helsinki, 17 February 2021

Henri Österlund
Chairman of the Board of Directors

Sampo Kellomäki
Member of the Board of Directors

Aino-Mari Kiianmies
Member of the Board of Directors

Kai Tavakka
Member of the Board of Directors

Tatu Ylönen
Member of the Board of Directors

Teemu Tunkelo
Chief Executive Officer

AUDITOR'S NOTE

Our auditors' report has been issued today.

Helsinki, 17 February 2021

Ernst & Young Oy
Authorized Public Accountants

Erkka Talvinko
Authorized Public Accountant

AI assistant

SSH Communications Security — Annual Report 2020

3344_rns_2021-03-03_0becd35a-e7c5-43c0-b576-7c439ab40f49.pdf

SSH Communications Security Oyj

TABLE OF CONTENTS

Report of the Board of Directors for 1 Jan – 31 Dec 2020

NET SALES

PROFIT AND PROFITABILITY TRENDS

BALANCE SHEET AND FINANCIAL POSITION

RESEARCH AND DEVELOPMENT

RISKS AND UNCERTAINTIES

Largest risks:

HUMAN RESOURCES AND ORGANIZATION

BOARD OF DIRECTORS AND AUDITORS

GROUP MANAGEMENT TEAM

PRINCIPAL PROVISIONS OF THE ARTICLES OF ASSOCIATION

CORPORATE GOVERNANCE

RESPONSIBILITY AND BUSINESS ETHICS

SHARES, SHAREHOLDING, AND CHANGES IN GROUP STRUCTURE

INFORMATION ON SHAREHOLDERS

SHARE CAPITAL AND BOARD AUTHORIZATIONS

SHARE-BASED PAYMENTS

RELATED PARTY TRANSACTIONS

EVENTS AFTER THE BALANCE SHEET DATE

DIVIDEND AND OTHER DISTRIBUTION OF ASSETS

ALTERNATIVE PERFORMANCE MEASURE

CALCULATION OF FINANCIAL RATIOS

CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED FINANCIAL STATEMENTS

STATEMENT OF CHANGES IN CONSOLIDATED EQUITY

CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. GENERAL INFORMATION

2. ACCOUNTING PRINCIPLES

Basis of Preparation

New and amended standards and interpretations

Changes that become effective later

Subsidiaries

Converting Foreign Currency Transactions

Transactions in Foreign Currency

Translation of Financial Statements of Foreign Subsidiaries

Revenue Recognition

Government Grants

Property, Plant, and Equipment

Intangible Assets

Research and Development Costs

Software

Other Immaterial Rights

Impairment of Tangible and Intangible Assets

Inventories

Financial Assets and Liabilities

Financial assets

Cash and cash equivalents

Impairment of financial assets

Financial liabilities

Leases

Earnings per share

Earnings per share

Diluted earnings per share

Share capital

Share issue costs

Own shares

Hybrid capital securities

Gross Margin

Operating Profit/Loss

Income tax

Employee Benefits

Pensions

Share-based payments

Provisions

Use of estimates

3. NET SALES

4. OTHER OPERATING INCOME

5. OTHER OPERATING COSTS

Personnel distribution by function on 31 Dec

Research and development costs recognized as costs

Other operating costs

Auditor's fees

6. DEPRECIATIONS AND IMPAIRMENTS

7. FINANCIAL INCOME

SSH Communications Security Annual Report 2020