2010-10-22 08:15:00 CEST
2010-10-22 08:15:28 CEST
REGULATED INFORMATION
Stonesoft - Interim report (Q1 and Q3)
STONESOFT CORPORATION INTERIM REPORT FOR JANUARY-SEPTEMBER 2010
Stonesoft Corporation Stock Exchange Release 22 October 2010 at 9:15 a.m.
Result of the third quarter according to previous announcement
Stonesoft Corporation's operating result for the third quarter declined
according to previous announcement and was MEUR -0.6 or MEUR -1.1 weaker than
during the corresponding period in the previous year. The company's product
sales were MEUR 2.9 while total net sales were MEUR 5.6. Cash flow was MEUR
-1.0, which is MEUR 0.2 better than in the corresponding period in the previous
year.
The comparable figures from the corresponding period in the previous year are in
brackets and refer to the figures of continuing operations.
July-September 2010
- Net sales MEUR 5.6 (6.0), down by -6%
- Product sales MEUR 2.9 (3.2), down by -11%
- Operating result MEUR -0.6 (0.5)
- Operating result as percentage of net sales -10% (9%)
- Earnings per share -0.01 (0.01) EUR
- Operative cash flow MEUR -1.0 (-1.2)
- Liquid cash funds at the end of the reporting period MEUR 10.5 (5.5). The
corporate had no interest-bearing debts.
January-September 2010
- Net sales MEUR 16.8 (17.1), down by -1%
- Product sales MEUR 8.3 (9.0), down by -7%
- Operating result MEUR -2.0 (-1.1)
- Operating result as percentage of net sales -12% (-7%)
- Earnings per share -0.03 (-0.02) EUR
- Operative cash flow MEUR -0.2 (-1.5)
CEO ILKKA HIIDENHEIMO
Stonesoft's product sales developed as announced during the third quarter of the
year 2010. As expected, several customers continued to postpone their large
investment decisions. The company's sales project pipeline is strong and we have
continued our long-standing investments in significant markets and customers
accounts as well as business growth.
Stonesoft's StoneGate products were granted the FSTEK certificate in Russia,
which means they can now be used to protect the critical information systems of
the Russian government, authorities and also commercial organizations. Without
the certificate, this would not be possible for a foreign vendor in the Russian
market.
After the accounting period we announced (Stock Exchange Release 4 October
2010, Stock Exchange Release and Press Release on 18 October 2010) that we have
discovered a significant network security threat category, advanced evasion
techniques (AET), which put the functionality of organizations' data capital and
systems at risk. Evasion techniques indicate, that the security field has
focused too much on the speed and marketability of products while compromising
the most important - real security. The discovery has received global publicity
in IT and financial media.
Unlike most traditional network security solutions, Stonesoft's software-based
solutions offer comprehensive protection also against these previously unknown
and constantly evolving advanced evasion techniques. This will improve our
competitiveness on the market, open new business opportunities and have a
positive effect on the company's net sales and profitability. However, at this
point it is too early to estimate the magnitude nor the schedule of this effect.
NET SALES AND RESULT
July-September 2010 (hereinafter 'reporting period')
The Group's net sales in the reporting period were MEUR 5.6 (6.0). Decrease
compared to the corresponding period in the previous year was MEUR -0.3, or -6%.
The operating result (EBIT) was MEUR -0.6 (0.5) and the result after taxes was
MEUR -0.4 (0.6).
Product sales were MEUR 2.9 (3.2), down by -11% compared to the corresponding
quarter in the previous year.
The geographical distribution of net sales was as follows: Europe 55% (60%),
Emerging Markets (Russia, North Africa and Middle East) 17% (13%), Americas
(North and South America) 20% (24%) and APAC (Asia-Pacific) 8% (3%).
January-September 2010 (hereinafter 'fiscal period')
The Group's net sales in the fiscal period were MEUR 16.8 (17.1). Decrease
compared to the corresponding period in the previous year was MEUR -0.3, or -1%.
The operating result (EBIT) was MEUR -2.0 (-1.1) and the result after taxes was
MEUR -1.8 (-1.0).
Product sales were MEUR 8.3 (9.0), down by -7% compared to the corresponding
period in the previous year.
The geographical distribution of net sales was as follows: Europe 60% (63%),
Emerging Markets (Russia, North Africa and Middle East) 17% (15%), Americas
(North and South America) 19% (19%) and APAC (Asia-Pacific) 4% (3%).
FINANCE AND INVESTMENTS
At the end of the fiscal period, the Group's total assets were MEUR 17.9 (14.1).
The equity ratio was 60% (45%) and gearing (the ratio of net debt to
shareholder's equity) -1.96 (-2.08). The Group's liquid cash funds at the end of
the reporting period were MEUR 10.5 (5.5). The corporate had no interest bearing
debts. Investments in tangible and intangible assets were MEUR 0.4 (0.3).
DEVELOPMENT OF BUSINESS OPERATIONS
Main business events in the reporting period
In July, Stonesoft announced it expects the net sales for the second quarter of
2010 to decline by about 15% compared to the corresponding period in the
previous year and expects the operating result to be negative. The company
announced it maintains its full year estimate regarding the net sales and
operating result for now and still expects its net sales to grow from the
previous year's level and the result to be positive.
In August, Stonesoft announced the extended availability of the StoneGate
MobileID authentication software token for five additional platforms: Apple Mac
OS, iPod, iPhone, iPad and Google Android.
In August, Stonesoft announced a selection of new modular network security
appliances. The key benefits offered by the modular appliances are scalability,
connectivity and ease of maintenance. Thanks to the modularity, the capacity of
StoneGate 5.2 firewall and intrusion prevention system appliances can be raised
flexibly to meet network connectivity needs.
In September, Stonesoft announced it estimates its net sales to grow the
previous year's level but the operating result for the full year 2010 to be
negative.
In September, Stonesoft announced it has extended its strategic partnership with
the US-based IT service provider Accuvant.
In September, Stonesoft announced its StoneGate Firewall/VPN and IPS network
security solutions have received FSTEK certifications in Russia. FSTEK is one of
the main government authorities regulating information security in the Russian
Federation. As a result, Stonesoft's StoneGate solutions are now approved to
secure highly critical information systems in state and commercial organizations
as well as government authorities.
Main business events after the reporting period
In October, Stonesoft announced it has discovered a new and significant security
threat category, which enables intruding into organizations' data systems. This
puts the uninterrupted functionality of organizations' data capital and systems
at risk. The new threat category comprises of so-called Advanced Evasion
Techniques (AET), which can bypass current network security devices without
leaving a trace. Advanced Evasion Techniques can also transport already known
malware or phishing programs, worms and viruses, which otherwise would be
detectable and stoppable by network security systems.
RESEARCH AND DEVELOPMENT
Stonesoft continued its strong investments in R&D. Investments during the
reporting period totaled MEUR 4.0 (3.6). This represented 24% (22%) of operating
expenses.
R&D employed 71 (62) persons at the end of the fiscal period.
SHARE CAPITAL AND STOCK OPTION PROGRAMS
At the end of the fiscal period, Stonesoft's share capital recorded in the Trade
Register totaled EUR 1 147 929.64. The number of shares was 63 140 232. The
share capital did not increase by subscriptions through stock option programs.
The company gave no notices in change of ownership during the reporting period.
Stock option programs
The company has two valid stock option programs, Stock Option Program
2004-2010, the subscription price of which is EUR 0.56, and Stock Option Program
2008-2014, the subscription price of which is EUR 0.30.
During the fiscal period 93 750 subscriptions were made on the basis of the
stock option program 2004-2010 and 43 750 subscriptions were made on the basis
of the stock option program 2008-2014. Shares have been registered in the
Finnish Trade Register during the reporting period and admitted to public
trading.
Development of share prices and turnover
In the beginning of the fiscal period the price of Stonesoft share was EUR 0.70
(0.32). At the end of the fiscal period the price was EUR 0.59 (0.46). The
highest price was EUR 1.19 (0.52) and the lowest EUR 0.56 (0.31). During the
fiscal period the total turnover of Stonesoft shares amounted to MEUR 19.5 (2.4)
and 22.0 (6.0) million shares, which is 34.9 (10.5)% of the total amount of the
shares. Based on the share price at the end of the fiscal period, Stonesoft's
market value was MEUR 37.3 (26.4).
ACQUISITIONS AND CHANGES IN GROUP STRUCTURE
No acquisitions were made during the reporting period and there were no other
changes in the group structure.
PERSONNEL
At the end of the reporting period, the Group's personnel totaled 195 (173).
AUTHORIZATIONS OF THE BOARD OF DIRECTORS
The Annual General Meeting held on April 22, 2010 decided to grant the Board of
Directors an authorization, according to which the Board of Directors may decide
to issue new shares in one or several issues and to grant option and other
special rights. The total number of shares or rights to the shares issued may be
11.450.000 at the maximum.
Based on the authorization, the Board of Directors may decide to issue new
shares for subscription according to the shareholders´ pre-emptive subscription
rights or in deviation from the shareholders´ pre-emptive subscription right, or
in a directed issue of option rights or other special rights in case the
deviation is justified by a weighty financial reason for the company, such as
financing of an acquisition, other arrangement concerning the business of the
company or development of its capital structure, or incentive to the company's
personnel.
The company does not own its shares and the Board of Directors does not have an
authorization to acquire its own shares.
SHORT-TERM RISKS AND BUSINESS UNCERTAINTIES
During the fiscal year 2010, Stonesoft's main risks and business uncertainties
relate to the realization timetable of the sales projects and possible
production disruption of our subcontractors and suppliers.
The company's risk management and risk management principles are discussed more
extensively at the company's website and in the Annual Report 2009.
FUTURE OUTLOOK
According to the research company Gartner, Inc. the enterprise network equipment
market is estimated to grow 5% during 2010.
Stonesoft's products protect large and critical network environments that
require advanced network security. The company has launched security solutions
that meet the capacity needs of 10 Gbps networks. Large enterprises are
currently making a transition to 10 Gbps networks, which will fulfill their
needs today and in the near future. Large network environments are under
constant change pressures, because companies strive for increasingly efficient
operations and at the same time need to adapt to rapidly changing competitive
situations. This sets special demands to the flexibility and manageability of
security solutions. Many traditional security companies and products are too
static to adapt to these changes fast enough. Stonesoft has always stood out as
a company and with its product through its flexibility and ability to quickly
meet dynamic security challenges and its customers' changing needs.
The strong growth of MSSP (Managed Security Service Provider)-, virtualization,
SAAS (Software as a Service) and cloud services as well as the spreading of
social media services have continued to create a need for ensuring network
security and business continuity also in new environments. In addition, illicit
acquisition of confidential data to obtain financial benefits has to a large
extent surpassed non-professional operations. The management features of
StoneGate, the scalability of the appliance based product family and the
excellent suitability of the product for virtual environments offer an optimal
system for these environments.
As security threats in the public sector increase, a growing number of
government organizations have started improving their protection against network
attacks and cyber espionage. The amount of confidential material that is handled
in the net such as patient data and juridical documents is constantly growing.
In addition, various interest groups, political extremist groups and
governmental intelligence agencies are searching for information more and more
from the net. StoneGate products offer a comprehensive, centrally managed
protection and are ideally suited for the needs of the public sector. Currently
Stonesoft's network security solutions are used by more than 50 government
departments at five continents around the world.
The relative importance of the operationality and availability of data networks
to business is continuously increasing. This had led to the growth of the
demands to network security design and to the need to achieve a comprehensive
overview of the state of the network and data communications. This strengthens
Stonesoft's competitive position. We are specialized in delivering comprehensive
network security solutions, which meet also the exceptionally high demands of
critical network environments and enable increased efficiency and flexibility.
Advanced evasion techniques
In the stock exchange release published on 4 October 2010 Stonesoft Corporation
announced it has discovered a new network security threat category. More
detailed information was given in the stock exchange release and press release
published on 18 October, which announced the threat is about the so-called
advanced evasion techniques (AET), which are capable of bypassing current
network security systems without leaving a trace. Advanced Evasion Techniques
can also transport to the IT systems already known malware or phishing programs,
worms and viruses, which otherwise would be detectable and stoppable by network
security systems.
Stonesoft has reported the threat posed by these advanced evasion techniques to
the national computer security incident team of Finland, CERT-FI for
vulnerability coordination, and ICSA Labs, a US-based security product testing
and certification laboratory has confirmed the severity of the discovery. The
subject has received a lot of coverage in global media.
In addition to testing their own network security solutions, Stonesoft has
extended their research to cover also solutions by other leading vendors in the
field. The test results show that most of current network security solutions do
not detect attacks that utilize advanced evasion techniques.
The most efficient protection against the threat posed by advanced evasions
techniques is provided by flexible software-based systems, which can detect
advanced evasion techniques and are remotely updated and centrally managed.
Stonesoft's network security solutions fulfill these criteria.
More information about advanced evasion techniques and how to protect against
them is available at www.antievasion.com.
Based on Stonesoft's view, the above mentioned issues will open new business
opportunities for the company, have a positive effect on its net sales and
profitability and strengthen its competitiveness and market position as general
understanding and knowledge about advanced evasion techniques grow. However, at
this point the company cannot estimate the magnitude nor the scale of this
effect.
The company has previously announced it expects its net sales to grow from the
previous year's level. Now the company estimates its net sales will be at the
same level as in the previous year. The company has previously estimated to make
a negative result for the full fiscal year 2010 and at this point does not see
any reason to change its estimate.
With regard to the development of the turnover and the operating result,
variation is expected between the quarters in comparison to the corresponding
quarter during the previous year as well as to the previous quarter as a
consequence of, among others, long sales cycles, a relatively big impact of
individual deals, and the variation between the quarters in the previous year.
Stonesoft Group
Income Statement 7-9/2010 7-9/2009 1-9/2010 1-9/2009 1-12/2009
(1000 Euros)
Continuing operations
Net sales 5 616 5 965 16 832 17 087 23 597
Other operating income 160 188 620 694 969
Materials and services -885 -872 -2 330 -2 686 -3 539
Personnel expenses -3 306 -3 055 -10 646 -10 344 -14 004
Depreciation -110 -113 -325 -341 -454
Other operating expenses -2 036 -1 568 -6 147 -5 548 -7 616
Operating result -561 546 -1 997 -1 137 -1 048
Financial income and expenses 151 131 323 280 316
Result before taxes -410 677 -1 674 -857 -731
Taxes -38 -36 -110 -116 -240
Result for the accounting period -448 640 -1 784 -973 -971
Other comprehensive income
Exchange differences on
translating foreign operations -41 -3 -15 7 15
Total other comprehensive income -41 -3 -15 7 15
Total comprehensive income -489 637 -1 799 -966 -956
Basic earnings per share (EUR),
continuing operations -0,01 0,01 -0,03 -0,02 -0,02
Diluted earnings per share (EUR),
continuing operations -0,01 0,01 -0,03 -0,02 -0,02
Stonesoft Group
Balance Sheet (1000 Euros) 30.9.2010 30.9.2009 31.12.2009
ASSETS
Non-Current Assets
Tangible assets 624 552 494
Intangible assets 117 162 176
Other investments 10 10 10
Total 751 725 680
Current assets
Inventories 1 038 541 673
Trade and other receivables 5 475 7 249 8 383
Prepayments 77 64 67
Marketable securities 9 313 4 742 5 240
Cash and cash equivalents 1 231 779 970
Total 17 134 13 376 15 333
Total assets 17 885 14 100 16 013
EQUITY AND LIABILITIES
Equity attributable to equity holders of the
parent company
Share capital 1 148 1 146 1 146
Issue of shares 2 0 0
Share premium account 76 533 76 821 76 821
Conversion differences -951 -945 -936
Reserve for invested unrestricted equity fund 4 739 0 0
Retained earnings -76 084 -74 372 -74 346
Total 5 386 2 650 2 685
Long-term liabilities
Prepayments *) 2 568 2 626 2 606
Total 2 568 2 626 2 606
Short-term liabilities
Trade and other payables 3 443 3 073 3 943
Prepayments *) 6 362 5 561 6 660
Tax liability 68 80 81
Provisions 56 110 37
Short-term interest bearing liabilities 0 0 0
Total 9 930 8 824 10 722
Total liabilities 12 499 11 450 13 328
Total equity and liabilities 17 885 14 100 16 013
*) Prepayments contain customers advance
payment of support and maintenance contracts 8 931 8 187 9 267
Stonesoft
Group
Statement of
changes in
equity
(1000 Euros)
Reserve
Issue for invested
Share of Share Conversion unrestricted Retained
capital shares premium differences equity fund earnings Total
Shareholders'
equity at
1.1.2009 1 146 0 76 821 -951 0 -73 473 3 543
Comprehensive
income 7 -973 -966
Share premium
termination 0 0 0
Directed share
issue 0 0
Transaction
costs from
equity 0 0 0
Stock options
exercised 0 0 0 0 0
Stock option
expenses 73 73
Shareholders'
equity at
30.9.2009 1 146 0 76 821 -945 0 -74 372 2 650
Reserve
Issue for invested
Share of Share Conversion unrestricted Retained
capital shares premium differences equity fund earnings Total
Shareholders'
equity at
1.1.2010 1 146 0 76 821 -936 0 -74 346 2 685
Comprehensive -1
income -15 -1 784 799
Share premium
termination -338 338 0
Directed share
issue 4 560 4 560
Transaction
costs from
equity -1 -172 -173
Stock options
exercised 2 2 51 13 68
Stock option
expenses 46 46
Shareholders'
equity at
30.9.2010 1 148 2 76 533 -951 4 739 -76 084 5 386
Stonesoft Group
Cash flow statement (1000 Euros) 1.1.-30.9.2010 1.1.-30.9.2009 1.1.-31.12.2009
Cash flow from operating
activities
Operating Result -1 997 -1 137 -1 048
Adjustments
Non-cash transactions -116 -7 644
Financial expenses -71 -94 -129
Financial incomes 308 248 336
Change in net working capital 2 198 -307 -226
Taxes paid -81 -101 -210
Total cash flow from operating
activities 241 -1 398 -632
Cash flow from investing
activities
Investments in tangible assets -413 -163 -202
Investments in intangible
assets -22 -97 -126
Investments in other shares 0 0 0
Total cash flow investing
activities -434 -259 -328
Cash flow from financing
activities
Proceeds from issue
of share capital 4 391 0 0
Stock options
exercised 64 0 0
Payments of
financial leasing
liabilities 0 -2 -2
Total cash flow from financing
activities 4 455 -2 -2
Change in cash and cash
equivalents
Cash and cash equivalents at
beginning of period 6 210 7 048 7 048
Conversion differences 29 7 15
Changes in the market value of
investments 43 126 109
Total cash and cash equivalents at
end of period *) 10 544 5 521 6 210
*) Total cash and cash equivalents
at end of the period
contains pledged securities 498 316 452
Stonesoft Group
Geographical segments 1.1.-30.9.2010 1.1.-30.9.2009 1.1.-31.12.2009
(1000 Euros)
Net sales
Europe 10 079 10 737 15 182
Emerging Markets 2 792 2 589 3 162
Americas 3 223 3 275 4 605
APAC 738 487 648
Total net sales 16 832 17 087 23 597
Operating profit
Europe -542 40 546
Emerging Markets -56 -10 -327
Americas -1 152 -1 074 -1 180
APAC -247 -93 -87
Total operating profit -1 997 -1 137 -1 048
Stonesoft Group
Contingent liabilities 1.1.-30.9.2010 1.1.-30.9.2009 1.1.-31.12.2009
(1000 Euros)
Contingent off-balance sheet
Non-cancellable other leases 2 234 2 683 2 541
Contingent liabilities for the
Company 70 27 117
Stonesoft Group
Quarterly development Q3 / Q2 / Q1 / Q4 / Q3 / Q2 / Q1 /
(Euro Millions) 2010 2010 2010 2009 2009 2009 2009 2009
Software 0,4 0,3 0,3 0,6 0,4 0,3 0,4 1,6
Security appliances 2,5 1,9 2,9 3,1 2,9 3,1 2,0 11,0
Services 2,9 2,8 2,9 2,8 2,7 2,7 2,6 10,9
Other products -0,1 0,1 0,1 0,0 0,0 0,0 0,1 0,1
Net sales continuing operations 5,6 5,1 6,2 6,5 6,0 6,0 5,1 23,6
Change-% from previous year -6 -16 21 -6 2 -5 -3 -3
Sales margin 4,7 4,4 5,3 5,7 5,1 4,9 4,4 20,1
Sales margin % 84 88 86 87 85 81 86 85
Operative expenses 5,4 5,9 5,7 5,8 4,7 5,8 5,7 22,0
Operating profit (EBITA) -0,6 -1,2 -0,2 0,1 0,5 -0,6 -1,1 -1,0
% of net sales -10 -25 -3 1 9 -9 -22 -4
Result before taxes -0,4 -1,2 0,0 0,1 0,7 -0,5 -1,0 -0,7
% of net sales -7 -24 -1 2 11 -8 -20 -3
Stonesoft Group
Key ratios 1.1.-30.9.2010 1.1.-30.9.2009 1.1.-31.12.2009
(1000 Euros)
Net sales, continuing
operations 16 832 17 087 23 597
Net sales change-% -1 -2 -3
Operating result,
continuing operations -1 997 -1 137 -1 048
% of net sales -12 -7 -4
Operating result before
taxes -1 674 -857 -731
% of net sales -10 -5 -3,10
ROE - %, annualized,
continuing operations -59 -42 -31
ROI - %, annualized -52 -31 -19
Equity ratio-% 60 45 40
Net gearing -1,96 -2,08 -2,31
Total Assets 17 885 14 100 16 013
Capital expenditure 434 259 328
Capital disposals 0 20 19
R&D costs 4 041 3 614 4 918
% of net sales 24 21 21
Number of employees
(weighted average) 188 180 178
Number of employees
(end of the period) 195 173 174
Share Specific Ratios
Earnings per share,
continuing operations -0,03 -0,02 -0,02
Equity per share 0,08 0,05 0,05
Dividend 0,00 0,00 0,00
Dividend per share
(EUR) 0,00 0,00 0,00
Dividend / Profit-% 0 0 0
Calculation of indicators
Return on equity (ROE) % = (Profit before taxes - income taxes) x 100 / Shareholders' equity + minority interest
(average)
(Profit before extraordinary items+interest
Return on invested capital (ROI)% = and other financial expenses) x100 /
Balance sheet total - non-interest bearing
debt (average)
Equity ratio % = (Equity + minority interest) x 100 /
Balance sheet total - advances received
Interest bearing net debt - cash in hand and
Net gearing = on deposit - marketable securities /
Equity + minority interest
Profit before taxes - minority interest -
Earning per share (EPS) = income taxes /
Average number of shares adjusted for
dilutive effect of options
Equity per share = Equity /
Number of shares at end of period
ACCOUNTING PRINCIPLES
This Interim Report Release has been prepared in accordance with IAS 34
standard. The presented figures are unaudited.
FORWARD-LOOKING STATEMENTS
This report contains statements concerning, among other things, Stonesoft's
financial condition and the results of operations that are forward-looking in
nature. Such statements are not historical facts, but rather represent
Stonesoft's future expectations. The company believes that the expectations
reflected in these forward-looking statements are based on reasonable
assumptions. However, these forward-looking statements involve inherent risks
and uncertainties, which could cause actual results or outcomes to differ
materially from those anticipated in the statements. These risks and
uncertainties may include, among other things, (1) changes in our market
position or in the Firewall/VPN and Intrusion detection and protection market in
general; (2) the effects of competition; (3) the success, financial condition,
and performance of our collaboration partners, suppliers and customers;(4) our
ability to source quality components without interruption and at acceptable
prices;(5) our ability to recruit, retain and develop appropriately skilled
employees;(6) exchange rate fluctuations, including, in particular, fluctuations
between the Euro, which is our reporting currency, and the US dollar;(7) other
factors related to sale of products, economic situation, business, competition
or legislation affecting the business of Stonesoft or the industry in general
and (8) our ability to control the variety of factors affecting our ability to
reach our targets and give accurate forecasts.
PRESS CONFERENCE
A press conference for analysts and investors will be held on 22 October, 2010
at 10.30 am at the Stonesoft headquarters, street address Itälahdenkatu 22 A,
00210 Helsinki.
For additional information, please contact:
Ilkka Hiidenheimo, CEO, Stonesoft Corporation
Tel. +358 9 476 711
E-mail: ilkka.hiidenheimo@stonesoft.com
Mikael Nyberg, CFO, Stonesoft Corporation
Tel. +358 9 476 711
E-mail: mikael.nyberg@stonesoft.com
Stonesoft Corporation
Ilkka Hiidenheimo
CEO
This stock exchange release and the presentation material related to this report
are also available at the Stonesoft web site www.stonesoft.com.
Distribution:
NASDAQ OMX Helsinki Ltd
www.stonesoft.com
[HUG#1454289]
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