2007-07-25 08:03:23 CEST

2007-07-25 08:03:23 CEST


REGULATED INFORMATION

English
SSH Communications Security - Quarterly report

SSH INTERIM REPORT FOR JANUARY 1 - JUNE 30, 2007



SSH COMMUNICATIONS SECURITY CORP STOCK EXCHANGE RELEASE
July 25, 2007, at 9:00 a.m.


- Net sales for January-June totaled EUR 4.1 million, down by 6
percent year on year (EUR 4.4 million in Q1-Q2/2006).
- Second-quarter net sales came to EUR 1.5 million, down by 34
percent on a year earlier (EUR 2.3 million in Q2/2006).
- Operating loss for January-June amounted to EUR -1.1 million (a
loss of -0.9 million in Q1-Q2/2006), loss EUR -0.8 million (-0.5
million). Second-quarter operating loss was EUR -1.1 million and net
loss was EUR -0.9 million.
- After the reporting period, the company signed its largest ever
agreement with one of world's largest corporations headquartered in
the US. The total value of the agreement is about EUR 4.5 million, of
which licenses are about EUR 4 million and annual maintenance is
about EUR 0.5 million. Invoicing has been agreed to the 3rd quarter
of 2007 after the final acceptance of the delivery.



KEY FIGURES
                                                           1-6/ 1-12/
                            4-6/ 2007 4-6/ 2006 1-6/ 2007  2006  2006

Net sales (MEUR)                  1.5       2.3       4.1   4.4   9.5
Net sales, change %             -34.3      89.6      -5.9  54.4   1.7
Operating profit/loss
(MEUR)                           -1.1      -0.3      -1.1  -0.9  -0.9
  % of net sales                -71.5     -12.5     -27.6 -21.5  -9.4
Operating profit/loss,
change %                       -277.1      82.5     -20.4  73.2  66.5
Profit/loss before taxes
(MEUR)                           -0.9      -0.2      -0.8  -0.5  -0.2
  % of net sales                -58.9      -8.0     -18.8 -12.6  -2.0
Number of employees
at period end                      80        85        80    85    80

Earnings per share (EUR)                            -0.03 -0.02 -0.01
Shareholders' equity per
share (EUR)                                          0.60  0.88  0.63


SSH Communications Security is a world-leading provider of enterprise
security solutions and end-to-end communications security, and the
original developer of the Secure Shell protocol. The company's SSH
Tectia solution addresses the most critical needs of large
enterprises, financial institutions and government agencies.

NET SALES

Consolidated net sales for January-June totaled EUR 4.1 million (EUR
4.4 million), down by -5.9% percent, year on year. Net sales for the
second quarter totaled EUR 1.5 million, a decrease of -34.3% compared
to the corresponding quarter for year 2006.

For a system-level IT product, such as SSH Tectia, the sales process
is often long. With major customers, the timing of large orders will
cause fluctuations in sales from quarter to quarter.

The majority of SSH's invoicing is based on the U.S. dollar. During
the report period, the U.S. dollar's average exchange rate was
approximately 8 percent weaker than during the same period a year
ago.

RESULTS AND EXPENSES

Operating loss for January-June amounted to EUR -1.1 million
(Q1-Q2/2006: a loss of EUR -0.9 million), with net loss totaling EUR
-0.8 million (a loss of EUR -0.5 million). Operating loss for the
second quarter totaled EUR -1.1 million (a loss of EUR -0.3 million),
with net loss amounting to EUR -0.9 million (a loss of EUR -0.2
million).

The fixed costs remained at the same level as in January-June, 2006.
Research and development expenses for the report period totaled EUR
1.8 million (EUR 1.7 million), while sales and marketing expenses
came to EUR 2.7 million (EUR 2.9 million) and administrative expenses
EUR 0.9 million (EUR 0.8 million).

BALANCE SHEET AND FINANCIAL POSITION

The financial position of SSH remained at a healthy level during the
report period. The consolidated balance sheet total on June 30, 2007
stood at EUR 19.6 million (EUR 27.6 million), of which liquid assets
accounted for EUR 17.6 million (EUR 23.9 million), or 89.8 percent of
the balance sheet total. The company has no interest bearing
liabilities. On June 30, 2007, gearing, or the ratio of net
liabilities to shareholders' equity, was -102.9 (-96.4) and the
equity ratio stood at 93.5 percent (95.2 percent).

The reported gross capital expenditure for the period totaled EUR 0.1
million (EUR 0.1 million). Reported financial income came mainly from
capital gains on fund shares. Financial income and expenses totaled
EUR +0.4 million, compared with EUR +0.4 million a year ago.

During January-June, SSH reported a positive cash flow of EUR 0.7
million from business operations, whereas investments showed a
negative cash flow of EUR -0.1 million. Cash flow from financing
totaled EUR 0.0 million. Cash flow from operations, investments and
financing resulted in the company showing a positive total cash flow
of EUR 0.6 million during the period.

MARKET DEVELOPMENTS

Large enterprise, financial, and public sector organizations have a
growing need for improved data security in several ways. New and
existing data security risks, continuously evolving regulations, and
increasing security standards and models continue to create new
needs, to which we can respond with our versatile product offerings.

The demand for products and services for securing corporate-internal
information security has continued growing in the large North
American corporations, especially in recent months for securing file
transfers to IBM mainframes. A similar demand growth trend is
expected to spread in the next phase to the largest European and
Asian enterprises.

Regulations that currently influence the demand of our products are,
for instance, the Sarbanes-Oxley Act (SOX), HIPAA, as well as the PCI
standards of the major credit card companies. These regulations cause
data security audits, which drive our customers to implement security
upgrade programs for their IT infrastructure against internal and
external threats.

The new tighter data security regulations are now causing customers
to re-assess the risks and hidden costs of deploying non-commercial
software for security, driving many customers to start and/or
increase phase-by-phase migration programs to deploy fully
commercially supported products, such as SSH Tectia.

SSH is confident that legislative reforms, new data security
standards, as well as many industry and company level data security
development programs will continue to drive demand favorably for SSH
Tectia.

SALES PERFORMANCE

SSH'S NET SALES
EUR million          4-6/     1-3/    10-12/    7-9/    4-6/    1-12/
                     2007     2007      2006    2006    2006     2006

BY SEGMENT
  AMER                1.0      1.8       2.0     1.1     1.4      5.7
  APAC                0.2      0.2       0.2     0.3     0.3      0.9
  EROW                0.3      0.5       1.2     0.4     0.6      2.8
  SSH Group
total                 1.5      2.6       3.3     1.8     2.3      9.5

BY OPERATION
  License sales       0.6      1.6       2.4     0.8     1.4      5.8
  Maintenance         0.9      0.9       0.9     0.9     0.9      3.6
  Total               1.5      2.6       3.3     1.8     2.3      9.5


The Americas, the Asia Pacific region, and the 'Europe and Rest of
the World' market area accounted for 68 percent (60 percent), 11
percent (11 percent) and 21 percent (29 percent) of reported net
sales, respectively.

During the report period, SSH concluded one new license agreement
that was worth more than EUR 100,000. The ten largest customers
accounted for 41 percent of reported net sales, with the largest
single customer accounting for approximately 21 percent.


PRODUCTS AND MARKETING

During the report period, SSH focused its sales and marketing efforts
on large enterprises, financial institutions, and government agencies
in the USA, Europe, and Asia, in line with its long-term strategy.
The company continued also developing its partner network in the same
focus markets.

The marketing focus was on the company's new Tectia security
solutions of IBM mainframe environment and SSH Tectia's enhanced file
transfer applications for large internal enterprise networks. The
company continued the development of the new third generation
architecture-based products. The company also made further
development of the productisation to provide higher value, new
features and expanded uses, as well as enabling easier purchasing for
the customers.

New applications, support of all essential enterprise OS platforms
including IBM mainframes, versatile integration capabilities, and
centralized management have made SSH Tectia the most extensive
integrated end-to-end communications security solution in the market.

RESEARCH AND DEVELOPMENT

Research and development expenses for January-June totaled EUR 1.8
million (EUR 1.7 million), the equivalent of 43.8 percent of net
sales (38.8 percent). During the report period SSH didn't capitalize
any research and development expenses.

HUMAN RESOURCES AND ORGANIZATION

At the end of June, the Group had 80 employees on its payroll, down
by 5 from the previous year, a decrease of -5.9 percent.

At the end of the period, 48.8 percent of the employees worked in
R&D, 38.8 percent in sales and marketing, and 12.5 percent in
corporate administration.

BOARD AND AUDITORS

The Annual General Meeting (AGM) on March 29, 2007 re-elected Tapio
Kallioja, Tomi Laamanen, Timo Ritakallio and Tatu Ylönen to SSH
Communications Security Corp.'s Board of Directors, with Laamanen
re-elected as chairman.

The AGM again elected to have PricewaterhouseCoopers Oy, authorized
public accountants, as the company's auditor, with Henrik Sormunen,
authorized public accountant, acting as the principal auditor.

SHARES, SHAREHOLDING AND CHANGES IN GROUP STRUCTURE

The reported trading volume of SSH Communications Security Corp.
shares totaled 8,118,462 (valued at EUR 12,129,155.60). The highest
quotation was EUR 1.75 and the lowest EUR 1.15. The trade-weighted
average share price for the period was EUR 1.49, and the share closed
at EUR 1.19 (June 29, 2007).

In February SSH Communications Security Corp received a notification
in accordance with the Securities Market Act 2:9, according to which
the total of Assetman Oy's shares in SSH Communications Security Corp
has on February 13, 2007 risen above one tenth part (1/10) of the
total of all shares and related voting rights. Assetman OY held 10.6
percent of the company's shares at the end of the period. There were
no other substantial changes in SSH Communications Security Corp.'s
shareholding during the report period. Tatu Ylönen holds, directly
and through his company, Tatu Ylönen Oy, 53.1 percent of the
company's shares, and Tero Kivinen holds 5.7 percent. More
information about the shareholding can be obtained from the company's
Web site.

There were no changes in the group structure during the period.

SHARE CAPITAL AND BOARD AUTHORIZATIONS


The company's registered share capital on June 30, 2007 was EUR
853,331.85,

consisting of 28,444,395 shares. During the report period,

SSH increased its share capital once, based on subscription to

the new shares under SSH's stock-option plan. In total, 20,500 new

SSH shares were subscribed to under the I/2003 stock-option plan.
With these

subscriptions the company's share capital was increased by EUR

615.00.


On March 29, 2007, the Annual General Meeting decided, in accordance
with the proposal made by the Board of Directors to authorize the
Board of Directors to decide on issuing the maximum of 5.500.000
shares in one or more new share issues or on issuing special rights
to share subscription as defined in the Finnish Companies Act Chapter
10,
section 1, with or without subscription rights to shareholders.
This authorization is effective until the next Annual General
Meeting, but will expire June 30, 2008, at the latest. The Board has
not exercised this authorization.

CORPORATE GOVERNANCE

The company complies with the corporate governance recommendations
for listed companies issued by the Helsinki Stock Exchange, the
Central Chamber of Commerce of Finland, and the Confederation of
Finnish Industry and Employers. More information on corporate
governance is available on the company's Web site (www.ssh.com).

EVENTS AFTER THE REPORTING PERIOD

In July, the company signed its largest ever agreement with one of
world's largest corporations headquartered in the US. The total value
of the agreement is about EUR 4.5 million, of which licenses are
about EUR 4 million and annual maintenance is about EUR 0.5 million.
Invoicing has been agreed to the 3rd quarter of 2007 after the final
acceptance of the delivery.

PROSPECTS

The large EUR 4.5 million licensing and support agreement signed in
July significantly increases our confidence in our near-term growth
prospects. The company's strong backlog of agreements and tenders
provides a solid basis for substantial growth of the full year
revenue. In 2007, SSH aims to be a profitable company.

Our target markets are in different network security adoption phases
according to geography and industry, enabling a good long-term growth
base for our company. We are set both technically and in timing to a
good position to utilize the trends and regulations of internal
enterprise data security, spreading from the USA and creating growing
demand for our products also in Europe and Asia. In the same way, we
can leverage the experience we have gained in the finance and
government sectors, when the new practices and requirements spread to
other industries.

We believe in a phased diversification of our customer base so that
parallel to strong finance sector customers, for instance, we will
see new major customers in the retail, pharmaceutical, and high
technology sectors. Continuously expanding use of the products will
also generate growing software maintenance revenue for us.

Due to the large size of individual orders and depending on timing of
customer projects, variation of the quarterly revenue may occur.


INCOME STATEMENT
EUR million                    4-6/    4-6/             1-6/    1-12/
                               2007    2006 1-6/ 2007   2006     2006

  Net sales                     1.5     2.3    4.1       4.4      9.5
  Purchasing and production
  costs                         0.0     0.0    0.0       0.0     -0.1
  Gross profit                  1.5     2.3    4.1       4.3      9.4
  Other operating income        0.0     0.1    0.1       0.1      0.4
  Expenses
    Product development        -0.9    -0.8   -1.8      -1.7     -3.4
    Sales and
    marketing                  -1.3    -1.5   -2.7      -2.9     -5.7
    Administration             -0.4    -0.4   -0.9      -0.8     -1.6

  Operating profit/loss        -1.1    -0.3   -1.1      -0.9     -0.9

  Financial income and
  expenses                      0.2     0.1    0.4       0.4      0.7

  Profit/loss before taxes     -0.9    -0.2   -0.8      -0.5     -0.2
  Taxes                         0.0     0.0    0.0       0.0      0.0

  Net profit/loss for the
  period                       -0.9    -0.2   -0.8      -0.5     -0.2





EARNINGS PER SHARE                    1-6/   1-6/  1-12/
                                      2007   2006   2006

Earnings per share (EUR)                -0.03   -0.02 -0.01
Earnings per share, diluted (EUR)       -0.03   -0.02 -0.01



BALANCE SHEET
EUR million                                  6/30/ 6/30/ 12/31/
                                              2007  2006   2006

  ASSETS

  Fixed and other non-current assets
    Tangible assets                            0.1   0.1    0.1
    Intangible assets                          0.2   0.4    0.3
    Deferred tax assets                        0.2   0.2    0.2
  Total fixed and other
  non-current assets                           0.6   0.8    0.7

  Inventories and current assets
    Short-term receivables                     1.4   2.9    3.9
    Short-term investments                    15.3  22.5   15.0
    Cash and cash equivalents                  2.3   1.4    1.7
  Total inventories and current assets        19.1  26.8   20.7

  Total assets                                19.6  27.6   21.3

  LIABILITIES AND SHAREHOLDERS' EQUITY

  Shareholders' equity                        17.1  24.7   18.0
  Long-term liabilities
    Provisions                                 0.0   0.1    0.0
    Long-term financial
    liabilities                                0.0   0.0    0.0
  Total long-term liabilities                  0.0   0.1    0.1

  Short-term liabilities                       2.5   2.8    3.3

  Total liabilities and shareholders' equity  19.6  27.6   21.3



CASH FLOW STATEMENT
EUR million                            1-6/ 2007 1-6/ 2006 1-12/ 2006

  Cash flow from business operations         0.7       1.2        0.9
  Cash flow from investments                -0.1      -1.3        6.5
  Cash flow from financing                   0.0       0.0       -7.0

  Increase(+) / decrease (-) in liquid
  assets                                     0.6      -0.1        0.4

  Liquid assets at period start              1.7       1.4        1.4
  Adjustment for translation
  difference                                 0.0      -0.1       -0.1
  Liquid assets at period end                2.3       1.4        1.7



STATEMENT ON CHANGES IN
SHAREHOLDERS' EQUITY
EUR million          Share  Share   Fair Trans- Unrest- Retain- Total
                     Capi- Premi-  value lation  ricted      ed
                       tal     um reser-  diff.  equity    Ear-
                                     ves          funds   nings


Shareholders' equity
Jan. 1, 2006           0.8   24.4    0.2   -0.7     0.0     0.6  25.4
Change                 0.0    0.0   -0.1   -0.1            -0.5

Shareholders' equity
Jun. 30, 2006          0.8   24.5    0.2   -0.8     0.0     0.1  24.7
Change                 0.0  -13.0    0.0    0.0     5.9     0.3

Shareholders' equity
Dec. 31, 2006          0.9   11.5    0.1   -0.8     5.9     0.4  18.0
Change                 0.0    0.0    0.0   -0.1     0.0
Net profit                                                 -0.8

Shareholders' equity
Jun. 30, 2007          0.9   11.5    0.1   -0.9     5.9    -0.4  17.1



NET SALES BY SEGMENT
EUR million          4-6/ 4-6/ 1-6/ 1-6/ 1-12/
                     2007 2006 2007 2006  2006

AMER                  1.0  1.4  2.8  2.7   5.7
APAC                  0.2  0.3  0.4  0.5   0.9
EROW                  0.3  0.6  0.9  1.2   2.8
SSH Group total       1.5  2.3  4.1  4.4   9.5



OPERATING PROFIT/LOSS BY SEGMENT
EUR million                      4-6/ 4-6/ 1-6/ 1-6/ 1-12/
                                 2007 2006 2007 2006  2006

AMER                              0.3  0.7  1.4  1.3   2.9
APAC                              0.1  0.1  0.2  0.2   0.4
EROW                             -0.1  0.0  0.0  0.1   0.6
Common Group expenses*           -1.4 -1.2 -2.7 -2.6  -4.8
SSH Group total                  -1.1 -0.3 -1.1 -0.9  -0.9


* Common Group expenses include Group administration expenses (e.g.,
management and finance) and product management and R&D expenses for
corporate headquarters.


KEY FIGURES AND RATIOS
                                                 1-6/ 1-6/ 2006 1-12/
                                                 2007           2006

Net sales (MEUR)                                  4.1       4.4   9.5
Operating profit/loss (MEUR)                     -1.1      -0.9  -0.9
Operating profit/loss, as % of net sales        -27.6     -21.5  -9.4
Profit/loss before extraordinary items and
taxes (MEUR)                                     -0.8      -0.5  -0.2
Profit/loss before extraordinary items and
taxes, as % of net sales                        -18.8     -12.6  -2.0
Profit/loss before taxes (MEUR)                  -0.8      -0.5  -0.2
Profit/loss before taxes, as
% of net sales                                  -18.8     -12.6  -2.0
Return on investment (%)                         -8.5      -4.2  -0.8
Return on equity (%)                             -8.8      -4.4  -1.0
Interest-bearing net liabilities (MEUR)         -17.6     -23.9 -16.7
Equity ratio (%)                                 93.5      95.2  92.4
Gearing (%)                                    -102.9     -96.4 -93.0
Gross capital expenditure (MEUR)                  0.1       0.1   0.1
  % of net sales                                  1.2       2.1   1.2
R&D expenses (MEUR)                               1.8       1.7   3.4
  % of net sales                                 43.8      38.8  35.5
Personnel, period average                          80        81    81
Personnel, period end                              80        85    80



PER-SHARE DATA
                                               1-6/   1-6/  1-12/
                                               2007   2006   2006

Earnings per share, undiluted
(EUR)                                         -0.03  -0.02  -0.01
Earnings per share, diluted (EUR)             -0.03  -0.02  -0.01
Equity per share (EUR)                         0.60   0.88   0.63
No. of shares at period end
(thousands)                                  28 444 28 293 28 424
Share performance (EUR)
  Average price                                1.49   1.71   1.43
  Low                                          1.15   1.24   0.88
  High                                         1.75   2.40   2.40
Share price, period end                        1.19   1.70   1.15
Market capitalization, period end (MEUR)       33.8   48.1   32.7
Volume of shares traded
(in millions)                                   8.1    7.6   13.9
Volume of shares traded, as
% of total                                     28.5   26.8   48.8
Value of shares traded, in millions of euros   12.1   13.0   19.9
Price-to-earnings ratio (P/E)                     -      -      -



CONTINGENT LIABILITIES
EUR million                     6/30 6/30 12/31
                                2007 2006  2006
  Rental liabilities             0.2  0.2   0.2
  Leasing commitments outside
  the balance sheet
     Maturing within 1 year      0.7  0.9   0.8
     Maturing between 1 and 5
     years                       0.9  1.6   1.3
  Currency derivatives (not
  included in hedge accounting)
  Fair value                     0.0  0.0  -0.0
  Nominal value                  0.4  0.0   0.7


FINANCIAL REPORTING

The company will hold a briefing on its interim report for equity
analysts and the media in Hotel Scandic Simonkenttä's Lönkka-cabinet,
1st floor, address Simonkatu 9, 00100 Helsinki on Wednesday, July 25,
2007, starting at 11:00 a.m.

SSH Communications Security Corp will release its next interim report
and financial statements for January 1-September 30, 2007 on 24
October 2007. Further information will be available on the company's
website in due course.

Helsinki, on July 25, 2007

SSH COMMUNICATIONS SECURITY CORP
Board of Directors


Arto Vainio
CEO


For further information, please contact:
Arto Vainio, CEO                  tel. +358 (0)20 500 7400
Mika Peuranen, CFO                tel. +358 (0)20 500 7419


Distribution:
OMX Nordic Exchange Helsinki
Major media