Stonesoft Corpration Stock Exchange Release, 31 July 2007 9.15 AM
Stonesoft Corporation Interim Report January-June 2007
STONEGATE(TM) SALES INCREASED BY 65% DURING THE SECOND QUARTER
The sales of Stonesoft's main product portfolio, the StoneGate(TM)
product line, increased by 65% during the second quarter. The overall
group net sales increased by 32%. The sales of StoneGate(TM) products
are expected to remain strong during the rest of the year.
April-July 2007 (later "reporting period", previous year's comparable
figures are in brackets and refer to the figures of continuing
operations).
- The net sales for the reporting period totalled EUR 4.8 million
(EUR 3.7 million), which shows comparable increase of 32% compared to
the previous year's corresponding period.
- Stonesoft's core business, sales of the StoneGate(TM) product
family consisting of Firewall, VPN, SSL VPN and IPS (intrusion
prevention and detection system) were EUR 2.7 million (EUR 1.6
million), an increase of 65%.
- The operating result was EUR -1.5 million (EUR -2.0 million).
- Earnings per share were EUR -0.03 (EUR -0,03).
- Shareholder's equity per share was EUR 0.15 (EUR 0.23).
- Liquid assets at the end of the reporting period totalled EUR 11.0
million (EUR 14.8 million).
- The group's cash flow was EUR -2.0 million (EUR -1.1 million).
CEO Ilkka Hiidenheimo
The growth of the company net sales accelerated after the first
quarter of the year. The growth of the StoneGate(TM) product sales
during the second quarter was eightfold compared to the comparable
global market growth estimate by the research company Infonetics, and
by volume the biggest in Stonesoft's history. The share of
StoneGate(TM) products and new support contracts related to them has
already reached 75% of the group sales. Hereby, the growth of
StoneGate(TM) product sales increasingly affects the sales
development of the whole company.
The company continued to decisively implement the strategy and growth
plan established in 2006. During the second quarter, we managed to
gain significant growth in the United States. The sales grew strongly
also on the emerging markets, while in Europe the growth was smaller.
Due to the increase in sales, the company's operating result in the
second quarter improved by EUR 400.000 compared to previous year. Due
to the weak first quarter, cash flow was clearly negative in the
second quarter, but we expect a significant positive development
during the next quarters.
The company's product offering was further strengthened by the
StoneGate(TM) SSL VPN and fast Firewall products that were launched
during the quarter. The previously introduced StoneGate(TM) IPS
product family has opened up some major new sales accounts.
The increase in the company's sales pipeline indicates that the
strong growth of StoneGate(TM) sales will continue favourably during
the rest of the year. Our aim is to continue improving the
profitability of the company through growth, while we will be able to
benefit from the investments made in the previous quarters without
significant expense increases.
January-June 2007
- Net sales for the reporting period totalled EUR 9.2 million (EUR
7.7 million), which shows a comparable increase of 19% compared to
the previous year's corresponding period.
- Stonesoft's core business, sales of the StoneGate(TM) product
family, was EUR 5.0 million (EUR 3.7 million), an increase of 35%.
- The operating result was EUR -3.6 million (EUR -3.4 million).
- Earnings per share were EUR -0.06 (EUR -0.06 million).
- The group's cash flow was EUR -3.4 million (EUR -3.3 million).
NET SALES AND PROFIT
April-June 2007
The group's net sales in the reporting period were EUR 4.8 million
(EUR 3.7 million). The growth to the previous year's corresponding
period was EUR 1.2 million, or 32%. The operating result was EUR -1.5
million (EUR -2.0 million) and the result after taxes was EUR -1.5
million (EUR -1.9 million).
The sales of the main product portfolio StoneGate(TM) were EUR 2.7
million (EUR 1.6 million), an increase of 65% compared to previous
year's corresponding quarter.
The estimation of the final selling price of Embe Systems Oy has not
changed during the reporting period.
January-June 2007
Stonesoft group's net sales in January-June were EUR 9.2 million (EUR
7.7 million). Compared with the previous year's corresponding period,
there was an increase of EUR 1.5 million, or 19%. The operating
result was EUR -3.6 million (EUR -3.4 million) and the result after
taxes was EUR -3.5 million (-3.4 million). The result after taxes
including the booked selling price of the sales of Embe Systems Oy
mentioned above was EUR -1.3 million.
The sales of the main product portfolio StoneGate(TM) were EUR 5.0
million (EUR 3.7 million), an increase of 35% compared to previous
year's corresponding period.
The geographical distribution of net sales was as follows: EMEA
(Europe, Middle East and Africa) 73% (71%), Americas (North and South
America) 21% (19%) and APAC (Asia-Pacific) 6% (10%).
Finance and investments
At the end of the reporting period, total assets were EUR 18.5
million (EUR 22.9 million). The equity ratio was 68% (73%) and
gearing (the ratio of net debt to shareholder's equity) was -1.28
(-1.19). Consolidated liquid assets of the group at the end of the
reporting period totaled EUR 11.0 million (EUR 14.8 million).
Investments in tangible and intangible assets totaled EUR 0.18
million (EUR 0.12 million).
DEVELOPMENT OF BUSINESS OPERATIONS
Main business events in the quarter
- StoneGate(TM) IPS-6000 and FW-5100, designed for large and
demanding network environments, began shipping to customers in May.
StoneGate(TM) FW-5100 is suited for networks demanding 10 Gbps
performance and IPS-6000 meets 2 Gbps capacity needs.
- StoneGate(TM) SSL VPN solution for mobile users started shipping to
customers in June.
- Stonesoft complemented its StoneGate(TM) secure connectivity
solution by new features. StoneGate(TM) Management Center 4.0 offers
advanced navigation, sophisticated log filters and search tools as
well innovative disaster recovery.
- Stonesoft launched StoneGate(TM) IPS 4.0 for intrusion prevention
and detection.
- StoneGate(TM) FW-300 and IPS-400 providing uncompromised security
for remote offices were introduced in May.
- Stonesoft extended its StoneGate(TM) secure connectivity solution
with a module that unifies IPS and firewall functionalities without
the need to change existing network configurations.
- Stonesoft signed a reseller agreement with Network Defense.
- Stonesoft signed a reseller agreement with Qual.
- Stonesoft was granted two patents related to firewall clustering.
REVIEW OF MAJOR RESEARCH AND DEVELOPMENT ACTIVITIES
The group's R&D investments during the quarter totaled EUR 1.3
million (EUR 1.2 million).
R&D employed 62 (66) persons at the end of the quarter.
SHARE CAPITAL AND STOCK OPTION PROGRAMS
At the end of the reporting period, Stonesoft's share capital
recorded in the Trade Register totaled EUR 1.146.054,64. The number
of shares was 57.302.732. The share capital remained unchanged.
Stock option programs
During the reporting period no subscriptions were made on the basis
of the stock option programs for key personnel of the company.
The company's valid stock option programs and their subscription
prices are as follows:
- Stock Option program 2004-2010, subscription price EUR 0.56
DEVELOPMENT OF SHARE PRICES AND TURNOVER
During the reporting period, the average price of Stonesoft's share
was EUR 0.51. The highest share price was EUR 0.56 and the lowest EUR
0.46. The official closing price was EUR 0.48. During the reporting
period, 7.995.459 shares were traded, which is 13.95% of the total
number of shares.
Based on the share price on 30 June 2007, Stonesoft's market
capitalization was EUR 26.9 million.
CHANGES IN OWNERSHIP
During the reporting period, the Group did not receive any notices of
changes in ownership.
PERSONNEL
At the end of the reporting period, Stonesoft's personnel numbered
180 (189 in continuing operations).
AUTHORIZATIONS TO THE BOARD OF DIRECTORS
Authorization to issue new shares and to grant option and other
special rights.
The Board of Directors is authorized to decide one or more share
issues and to grant option and other special rights so that the total
number of shares or rights to the shares issued may be 11.450.000 at
the maximum.
The new shares to be issued in a new issue and/or the option or
special rights may be offered for subscription either according to
the shareholders' pre-emptive subscription rights or in deviation
from the shareholders' pre-emptive subscription right, in case the
deviation is justified by a weighty financial reason for the company,
such as financing of an acquisition, enabling of a joint venture
transaction, providing of additional financial alternatives, and/or
an arrangement for incentive program directed to the company's
personnel.
The Board of Directors is authorized to decide on other terms and
conditions related to the share issues and to the issuance of option
or other special rights. The authorization is in force until the end
of the 2009 AGM.
The Board of Directors is not authorized to purchase the company's
own shares. At the moment there are no shares in the company's
possession.
CORPORATE GOVERNANCE
Stonesoft complies since 2004 with the Corporate Governance
Recommendation for listed companies issued by the Helsinki Stock
Exchange. More information can be found from Stonesoft's Website:
http://www.stonesoft.com/en/investor_relations/corporate_governance.
MAJOR EVENTS AFTER THE REPORTING PERIOD
In July Stonesoft signed an OEM contract with Funkwerk Enterprise
Communications GmbH in Germany to launch a small FW/VPN appliance to
the market. The appliance will have ADSL and WLAN functionalities.
RISKS AND BUSINESS UNCERTAINTIES
Risk management is organized to be part of the Stonesoft management
system. The Board of Directors approves the risk management policy
that includes risk management principles and processes. The CEO is
responsible for organizing risk management, and the CFO, as the
coordinator of risk management, develops risk management tools and
establishes global insurance policies. The directors of the business
units are responsible for identifying and managing risks in their
units. The target of risk management is to ensure conditions for
achieving the strategic targets and the business continuity.
In the near future, the risks and business uncertainties relate to
the realization timetable of the sales projects and possible
production disruption of our subcontractors and suppliers.
Operational risks
Stonesoft constantly develops its sales processes and related control
systems. Product sales and the sales of related services are made
mainly through a global channel. The sales are supported by the legal
department, which seeks to reduce the legal risks related to business
operations through continuously developing, managing and giving
guidance related to Stonesoft agreements, and by making legal risk
assessments for business plans before their implementation. The
company has worldwide insurances to cover operational risks.
Stonesoft manages and safeguards its critical business information by
stringent internal policies and processes. The company constantly
reviews and updates its network infrastructure and guarantees the
safety of its business-critical information. All critical components
are duplicated and, in addition, the company has a continuously
updated back up system placed in another physical location.
Financial risks
The most significant currency in addition to Euro is US dollar. The
company's costs occur mostly in Euros. The company operates actively
to minimize the exchange rate risks.
The main principles of the treasury policy of the company are; (i) to
ensure the short-term liquidity of the company, (ii) to guarantee
efficient circulation and short-term investments of the operational
cash flows and (iii) to follow prudent and transparent investment
policy for the cash reserves, aiming at guaranteeing competitive
return on the selected risk level. The company's reserves are all
invested in interest-bearing low-risk instruments.
The company's operations and related costs are continuously
controlled. The company does not have a separate internal audit
organization or a separate audit committee.
FUTURE OUTLOOK
According to the Research Institute Infonetics, the Firewall/VPN and
IPS Intrusion detection and prevention market will grow globally by
roughly 8% in 2007. The market will continue to be dynamic.
In our view, companies will continue to network with their partners
and subcontractors, and this development will create even higher
requirements for network security and availability. We believe that
combining security and high availability, which is the cornerstone of
StoneGate(TM) product design, will prove its strength even better in
this development.
The convergence of voice, video and data on IP-based networks will
create more demand for capacity and drive the adoption of 10 Gbps
networks. The growing demand for added bandwidth together with new
protocols in the IP networks is expected to increase the general
demand for better reporting, monitoring and analysis tools. This
development will support Stonesoft in achieving its year 2007 growth
plan, since these are the cornerstones in StoneGate(TM) Management
Center's functionality. Stonesoft will further strengthen its
competitiveness by introducing new products to complement its
StoneGate(TM) product line.
Stonesoft will continue its decisive and persistent efforts to
increase its net sales and to improve the profitability of the
company. The main target for 2007 is to have a strong growth of net
sales generating also improved profitability. By extension of the
product portfolio and improved competitiveness, we aim to win more
deals of larger size.
Based on the extension of the product portfolio, intensification of
sales efforts and strong growth of the sales pipeline, the company
expects to have an annual overall net sales of roughly 21 million
euros (+/- 10%) while the comparable net sales figure during the
previous financial year was 16,5 million euros. The estimation is
based on existing sales funnel and may change upward, if certain
larger projects, which have some uncertainties arisen in the timing
of the materialization, will materialize during this year. The annual
costs are expected to be 23 million euros (+/- 10 %). The comparable
cost during the previous financial year was 22,6 million euros. The
operating profit and the total result for the whole year is expected
to develop favourably.
With regard to the development of the turnover and the result, we
expect a significant variation 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, the variation
between the quarters in the previous year as well as the growing
weight of the developing markets in larger projects.
This interim report is prepared in accordance with IAS 34 standard.
Stonesoft Corporation has adhered to the same accounting principles
and reporting standards as in the Financial Statements for 2006.
The presented figures are unaudited.
Stonesoft Group
Income Statement 4-6/ 4-6/ 1-6/ 1-6/ 1-12/
(1000 Euro) 2007 2006 2007 2006 2006
Continuing operations
Net sales 4 845 3 666 9 165 7 719 16 479
Other operating income 186 214 364 396 766
Materials and services -737 -398 -1 284 -886 -1 915
Personnel expenses -3 431 -3 271 -6 915 -6 437 -13 135
Depreciation -111 -130 -228 -268 -512
Other operating expenses -2 296 -2 052 -4 734 -3 962 -8 292
Operating result -1 544 -1 971 -3 633 -3 438 -6 608
Financial income and
expenses 106 86 220 181 382
Result before taxes -1 438 -1 885 -3 413 -3 257 -6 226
Taxes -40 -55 -94 -103 -262
Result from continuing
operations -1 479 -1 940 -3 507 -3 361 -6 488
Result from discontinued
operations 0 -4 2 217 176 40
Result for the accounting
period -1 479 -1 944 -1 290 -3 185 -6 448
Basic earnings per share
(EUR), continuing
operations -0.03 -0.03 -0.06 -0.06 -0.11
Diluted earnings per share
(EUR), continuing
operations -0.03 -0.03 -0.06 -0.06 -0.11
Basic earnings per share
(EUR), discontinued
operations 0.00 0.00 0.04 0.00 0.00
Diluted earnings per share
(EUR), discontinued
operations 0.00 0.00 0.04 0.00 0.00
Stonesoft Group
Balance Sheet (1000 Euro) 30.6.2007 30.6.2006 31.12.2006
ASSETS
Non-Current Assets
Tangible assets 592 679 608
Intangible assets 107 167 137
Deferred tax assets 2 2 2
Total 701 847 747
Current assets
Inventories 719 523 912
Trade and other receivables 6 052 3 339 5 522
Prepayments 68 154 98
Marketable securities 10 019 14 791 13 755
Cash and cash equivalents 942 54 616
Total 17 799 18 861 20 902
Asset held for sale 0 3 165 2 859
Total assets 18 500 22 874 24 507
EQUITY AND LIABILITIES
Equity attributable to equity
holders of the parent company
Share capital 1 146 1 146 1 146
Share premium account 76 905 76 866 76 897
Conversion differences -872 -862 -867
Retained earnings -68 700 -64 146 -67 410
Total 8 480 13 003 9 767
Long-term liabilities
Provisions 92 108 112
Interest bearing liabilities 27 108 62
Other long-term liabilities 1 447 1 052 1 296
Total 1 565 1 267 1 470
Short-term liabilities
Trade and other payables 8 229 7 450 12 041
Tax liability 90 134 116
Provisions 40 37 84
Short-term interest bearing
liabilities 96 147 107
Total 8 455 7 768 12 348
Liabilities held for sales 0 836 922
Total liabilities 10 020 9 870 14 740
Total equity and
liabilities 18 500 22 874 24 507
Stonesoft Group
Statement of changes in equity
(1000 Euro) Share Share Conversion Retained Total
capital premium difference earnings
account
Shareholders' equity
at 01.01.2006 1 146 76 845 -849 -60 961 16 181
Conversion differences -14 -14
Result for the period -3 185 -3 185
Total recognized
income and expense
for the period -14 -3 185 -3 199
Stock options exercised 21 21
Shareholders' equity
at 30.6.2006 1 146 76 866 -862 -64 146 13 003
Share Share Conversion Retained Total
capital premium difference earnings
account
Shareholders' equity
at 01.01.2007 1 146 76 897 -867 -67 410 9 767
Conversion differences -5 -5
Result for the period -1 290 -1 290
Total recognized
income and expense
for the period -5 -1 290 -1 295
Stock options exercised 8 8
Shareholders' equity
at 30.6.2007 1 146 76 905 -872 -68 700 8 480
Stonesoft Group
Cash flow statement 1.1-30.6.2007 1.1-30.6.2006 1.1-31.12.2006
(1000 Euro)
Cash flow from operating
activities
Operating Result -3 633 -3 438 -6 608
Adjustments 274 337 984
Change in net working capital 53 39 -1 240
Taxes paid -94 -104 -261
Net cash flow from operating
activities continuing
operations -3 400 -3 166 -7 125
Net cash flow from operating
activities discontinued
operations 0 137 114
Total cash flow from operating
activities -3 400 -3 029 -7 011
Cash flow from investing
activities
Investments in tangible
assets -156 -105 -216
Investments in intangible
assets -26 -19 -50
Investments in affiliated
company 0 0 3 631
Net cash flow investing
activities continuing
operations -182 -124 3 365
Net cash flow investing
activities discontinued
operations -448 -78 -131
Total cash flow investing
activities -630 -202 3 233
Cash flow from financing
activities
Payments of financial
leasing liabilities -47 -81 -166
Total cash flow from financing
activities
Change in cash and cash
equivalents
Cash and cash equivalents
at beginning of period 14 370 18 097 18 097
Conversion differences -5 -14 -18
Changes in the market
value of investments 182 133 -39
Discontinued operations 492 -59 274
Total cash and cash
equivalents at end of
period *) 10 961 14 846 14 370
*) Total cash and cash
equivalents at end of the
period contains pledged
securities 303 3 3
Stonesoft Group
Geographical segments 1.1-30.6.2007 1.1-30.6.2006 1.1-31.12.2006
(1000 Euro)
Net sales
EMEA 6 661 8 345 16 938
AMER 1 940 1 471 3 571
APAC 9 165 10 551 21 879
Total net sales 4 320 5 508 21 879
Operating profit
EMEA -2 615 -1 997 -4 131
AMER -932 -936 -2 040
APAC -85 -326 -366
Total operating profit -3 633 -3 259 -6 536
Stonesoft Group
Contingent liabilities 30.6.2007 30.6.2006 31.12.2006
(1000 Euro)
Contingent off-balance sheet
Non-cancelable other leases 4 862 6 528 6 103
Contingent liabilities
for the Company 20 100 323
Pledged shares 0 0 585
Stonesoft Group
Related party information 30.6.2007 30.6.2006 31.12.2006
(1000 Euro)Consultation fees paid to
the Board of Directors 30 9 9
Stonesoft Group
Quarterly development Q2 / Q1 / Q4 / Q3 / Q2 / Q1 /
(Euro Millions) 2007 2007 2006 2006 2006 2006 2006
Security software
and appliances 2.7 2.3 2.3 2.3 1.7 2.1 8.5
Services 2.1 2.0 2.1 2.0 2.0 2.0 8.1
Other products 0.0 0.0 -0.1 0.1 0.0 0.0 -0.1
Net sales continuing operations 4.8 4.3 4.3 4.4 3.7 4.1 16.5
Change-% from previous year 32 7 -2 24 -20 4 0
Net sales discontinuing
operations - - 1.5 1.1 1.4 1.5 5.4
Change-% from previous year - - 4 -3 -13 -12 -7
Net sales total 4.8 4.3 5.8 5.5 5.0 5.5 21.9
Change-% from previous year -4 -22 1 17 -18 -1 -2
Sales margin 4.1 3.8 5.3 5.0 4.6 5.0 20.0
Sales margin % 85 87 91 90 92 91 91
Operative expenses 5.8 6.0 7.5 6.4 6.8 6.5 27 2
Operating profit (EBITA) -1.5 -2.1 -2.0 -1.3 -2.0 -1.3 -6.5
% of net sales -32 -48 -34 -23 -39 -23 -30
Result before taxes -1.4 -2.0 -1.9 -1.2 -1.9 -1.2 -6.2
% of net sales -30 -46 -33 -22 -37 -22 -28
Stonesoft Group
Key ratios 30.6.2007 30.6.2006 31.12.2006
(1000 Euro)
Net sales total 9 165 10 551 21 879
Net sales change-% -13 -10 -2
Net sales continuing
Operations 9 165 7 719 16 479
Net sales change-% 19 -9 0
Net sales continued operations - 2 832 5 400
Net sales change-% - -13 -7
Operating result total -3 633 -3 259 -6 536
% of Net sales -40 -31 -30
Operating result continuing
operations -3 633 -3 438 -6 608
% of net sales -40 -45 -40
Operating result discontinued
operations - 179 72
% of net sales - 6 1
Operating result before
taxes -3 413 -3 077 -6 170
% of net sales -37 -29 -28
ROE - %, annualized,
continuing operations -77 -44 -50
ROI - %, annualized -72 -41 -46
Equity ratio-% % 68 73 66
Net gearing -1.28 -1.19 -1.50
Total Assets 18 500 22 874 24 507
Capital expenditure 189 218 416
Capital disposals -7 -16 -165
R&D costs 2 611 2 461 4 804
% of net sales 28 23 22
Number of employees
(weighted average) 181 249 251
Number of employees
(end of the period) 180 257 254
Share Specific Ratios
Earnings per share,
continuing operations -0.06 -0.06 -0.11
Earnings per share,
discontinued operations 0.00 0.04 0.00
Equity per share (EUR) 0.15 0.23 0.17
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 extraordinary items
- income taxes) * 100
/ Shareholders' equity + minority interest (average)
Return on invested capital (ROI) % = (Profit before extraordinary
items + interest and other financial expenses) * 100
/ Balance sheet total
- non-interest bearing debt(average)
Equity ratio % = (Equity + minority interest) * 100
/ Balance sheet total - advances received
Net gearing = Interest bearing net debt
- cash in hand and on deposit - marketable securities
/ Equity + minority interest
Earning per share (EPS) = Profit before taxes
- minority interest - income taxes
/ Average number of shares
adjusted for dilutive effect of options
Equity per share = Equity
/ Number of shares at end of period
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.
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 Corp.
Ilkka Hiidenheimo
CEO
PRESS CONFERENCE
A press conference for analysts and investors will be held today, 31
July 2007 at 10:30 AM at the Stonesoft headquarters, street address
Itälahdenkatu 22 A, 00210 Helsinki.
This release and the presentation material related to this report are
also available on Stonesoft's web site at http://www.stonesoft.com
Distribution:
The Helsinki Stock Exchange
Main media
Stonesoft Corporation Interim Report January-June 2007
| Source: Stonesoft
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