SSH COMMUNICATIONS SECURITY CORPORATION'S INTERIM REPORT, JANUARY 1 – JUNE 30, 2024
SSH Communications Security Corporation | Stock Exchange Release | July 18, 2024 at 09:00:00 EEST
Net sales increased by 4.1%, EBITDA 0.5 million
April–June 2024:
· Net sales totaled EUR 5.1 million (EUR 4.9 million)
· EBITDA was EUR 0.5 million (EUR 0.1 million)
· Operating loss was EUR -0.5 million (EUR –0.7 million)
· Loss for the period was EUR -0.6 million (-0.9 million)
· Earnings per share was EUR -0.06 (EUR -0.03)
January–June 2024:
· Net sales totaled EUR 10.1 million (EUR 9.6 million)
· EBITDA was EUR 0.7 million (EUR 0.3 million)
· Operating loss was EUR -1.2 million (-1.4 million)
· Loss for the period was EUR -1.4 million (-1.8 million)
· Earnings per share was EUR -0.08 (EUR -0.06)
Operating cash flow was EUR 0.2 million (EUR 0.5 million). The equity ratio was 49.1% (51.6%). Liquid assets were EUR 2.1 million (EUR 2.6 million).
Key Figures
| EUR million | 4–6/2024 | 4–6/2023 | Change % | 1–6/2024 | 1–6/2023 | Change % | 1–12/2023 |
| Net sales | 5.1 | 4.9 | 4.1 | 10.1 | 9.6 | 5.0 | 20.3 |
| EBITDA | 0.5 | 0.1 | 240.3 | 0.7 | 0.3 | 138.8 | 1.8 |
| % of net sales | 9.1 | 2.8 | 226.8 | 6.9 | 3.0 | 127.5 | 8.9 |
| Operating profit/loss | -0.5 | -0.7 | 34.4 | -1.2 | -1.4 | 16.6 | -1.6 |
| % of net sales | -9.3 | -14.6 | 36.8 | -11.5 | -14.4 | 20.5 | -8.1 |
| Profit/loss before taxes | -0.6 | -0.9 | 31.8 | -1.5 | -1.9 | 23.1 | -2.4 |
| Profit/loss | -0.6 | -0.9 | 33.5 | -1.4 | -1.8 | 24.6 | -2.3 |
| Return on equity, % | -15.9 | -18.1 | 12.0 | -22.8 | |||
| Return on investment, % | -13.1 | -15.1 | -13.3 | -19.1 | |||
| Liquid assets | 2.1 | 2.6 | -21.8 | 2.2 | |||
| Short-term liquid investments | 1.5 | ||||||
| Gearing (%) | 7.1 | -2.4 | 398.4 | 3.0 | |||
| Equity ratio (%) | 49.1 | 51.6 | -4.7 | 49.2 | |||
| Earnings per share, EUR | -0.06 | -0.03 | -85.4 | -0.08 | -0.06 | -35.0 | -0.10 |
| Shareholders' equity per share, EUR | 0.21 | 0.25 | -15.3 | 0.25 | |||
| Recurring revenue, ARR | 19.0 | 18.3 | 3.7 | 19.3 | |||
| Subscription revenue, ARR | 11.7 | 10.8 | 8.2 | 11.5 | |||
| Invoicing1 | 3.7 | 4.8 | -23.7 | 8.4 | 8.0 | 5.1 | 18.3 |
| Deferred revenue | 11.3 | 12.6 | -10.5 | 12.6 | |||
| Current | 9.4 | 9.0 | 4.6 | 10.2 | |||
| Non-current | 1.9 | 3.6 | -47.7 | 2.4 |
1) Invoicing numbers for comparison periods 4-6/2023 and 1-6/2023 have been corrected
SSH Communications Security provides alternative performance measures which are not defined by IFRS standards. Alternative performance measures should not be considered substitutes for performance measures in accordance with the IFRS. The alternative performance measures are:
EBITDA = Operating profit/loss + depreciation and amortization.
Recurring Revenue, ARR: Subscription + maintenance revenue at the end of the last month of the reported period multiplied by 12.
Subscription ARR: Subscription revenue in the last month of a reported period multiplied by 12.
Invoicing: Invoices sent during the reported period without VAT.
Deferred Revenue: Non-recognized revenue from invoiced maintenance and subscription sales.
The complete interim report is attached to this release (pdf) and is also available on our website.
Business outlook for 2024
We expect net sales to grow during 2024 compared to 2023. We estimate EBITDA and cash flow from operating activities to be positive for 2024. At the end of 2023, our Annual Recurring Revenue was EUR 19.3 million (EUR 18.4 million in 2022). Our net sales grew by 5.4% to EUR 20.3 million in 2023, and EBITDA was 1.8 million in 2023.
CEO review
Q2 represented solid progress on several fronts. Despite moderate overall revenue growth, we were able to win new deals and partners for future growth, yielding a subscription sales increase of 10.9%, with PrivX subscription sales growing by 21.2%
In the second quarter, our revenue grew by 4.1% year-on-year, reaching EUR 5.1 million. EBITDA increased to EUR 0.5 million from the previous year (0.1 million). Cash flow from operations totaled EUR -0.8 million (-1.4 million). Invoicing from new orders increased compared to the previous year.
License sales decreased by 16.4%. Maintenance sales, mainly consisting of support contracts for sold licenses, declined slightly.
Professional services revenue decreased by 15.2% in Q2 due to the timing of service deliveries, and for the full year we expect revenues to grow.
Subscription ARR grew 8.3% totaling EUR 11.7 million (10.8) and total annual recurring revenue (ARR) grew 3.7% to EUR 19.0 million (18.3). The recurring revenue accounted for 95.1% (93.9%) of revenue in Q2.
The first installment of the 1.8 million agreement for cryptographic solution, announced in the first quarter of 2024 has been invoiced, with approximately half of the agreement value expected to be recognized as revenue in the second half of 2024.
We won new customers through partners during Q2, particularly for healthcare and heavy manufacturing. We strengthened our partnership network, achieving major new partnerships with CANCOM Austria and Deloitte Finland.
During Q2, we successfully achieved the ISO/IEC 27001:2022 certification, the leading global standard for information security management systems. The certification covers SSH's global operations.
Secure Collaboration 2024 was re-branded SalaX™ and first trials and customer wins were accomplished. We see a growing need for secure messaging under customers’ own control, complementing existing secure mail solutions.
New version of PrivX™, 35, was introduced with significant new functionalities, helping customers to migrate to a modern efficient solution. The new incremental functionalities include: Discovery and onboarding of Domain Accounts (AD, Entra ID), Secrets Vault (Secrets Management) and Password Rotation enhancements (legacy support) and Ephemeral Access performance gains and Zero Downtime update (future passwordless & keyless deployments).
The NQX encryption solution for network traffic received new orders and attracted new customers during the second quarter, including in communications and defense industries.
We have completed the organizational changes announced at the beginning of the quarter. These changes streamline the organization and enhance efficiency and profitability.
Whilst Q2 growth was modest, due to certain delayed key customer deals, the market opportunity for our strengthened solution portfolio looks promising. With a more aligned and efficient organization we are better positioned to compete and grow on the main markets. Our recent strategic investments enable us to grow at an accelerated pace in the high demand areas of Zero Trust Ephemeral Access, OT Security, and Quantum Safe Protection.
SSH Communications Security will release its Business Review for the third quarter of the year on October 24, 2024.
Helsinki, July 18, 2024
SSH COMMUNICATIONS SECURITY
Board of Directors
Rami Raulas
Interim CEO