Stock Exchange Release
STONESOFT CORP.'S INTERIM REPORT FOR JANUARY-MARCH 2006
The sales of StoneGate™ products increased by 12 % during the first quarter.
SUMMARY
January-March (“reporting period”)
- Net sales for the reporting period totalled EUR 5.5 million, which was 1% less than in the previous year's corresponding period.
- Stonesoft´s core business, sales of StoneGate™ product family that includes firewall, VPN and Intrusion Protection and Detection System products, increased to EUR 2.1 million, an increase of 12% compared to corresponding period of the previous year.
- The operating loss was EUR 1.3 million. The comparable loss in the previous year's corresponding period was EUR 1.3 million.
- Earnings per share were EUR –0.02, compared with EUR –0.02 for the last year's corresponding period.
- Equity per share was EUR 0.26 (EUR 0.36).
- Liquid assets totalled EUR 16.5 million at the end of the period (EUR 21.6).
- The group’s cash flow was EUR –1.6 million. Cash flow in the previous year's corresponding period was EUR –0.6 million.
“Sales of Stonesoft´s main product StoneGate™ were favourable compared to the equivalent period last year, in spite of the sales decline in the US. “In order to reach our goals in the US we have hired a new Regional Manager for Americas during the first months of the year with a task to get the US sales into new growth”, says Ilkka Hiidenheimo, CEO of the company.
“The sales decline in the US and EMBE´s turnover, that was lower than the previous year, left the turnover and result on the same level as last year. We have invested in activities consistent with EMBE´s competitiveness and condition of activity in line with its strategy in order to develop EMBE´s result in the long run”, Hiidenheimo continues.
“The sales strategy based on long term sales work and the customer-focused sales model we have chosen generates significant breakthroughs such as the deals with Finnish Defence Forces and RWTH Aachen, both achieved during the reporting period. Our partner network has developed positively in different countries and we both continue and boost sales work with the partners onwards.”
“Long term marketing efforts that support sales have gradually gained results, that are shown, among other things, as acknowledgements in the international media. The recognition of StoneGate™ in the market has increased”, Hiidenheimo mentions.
NET SALES AND RESULT
January-March 2006
Stonesoft group's net sales in January-March were EUR 5.5 million (EUR 5.6 million). Compared with the previous year's corresponding period, there was a decrease of EUR 0.1 million, or -1%. The operating loss for the review period was EUR 1.3 million (EUR 1.3 million).
The net sales were distributed by the geographical segments as follows: EMEA (Europe, Middle East and Africa) 79% (71%), North and South America 13% (22%), and Asia-Pacific 8% (7%).
The group’s operating result was on the same level compared to the corresponding period in the previous year. The loss for the reporting period after taxes was EUR 1.2 million. The previous year's loss was EUR 1.3 million.
Finance and investments
At the end of the quarter, the group's total assets were EUR 24.7 million (EUR 29.7 million). The equity ratio was 77% (83%) and gearing (the ratio of net debt to shareholders' equity) was –1 .08 (-1.02). The group’s liquid assets at the end of the quarter totalled EUR 16.5 million (EUR 21.6 million). Investments in tangible and intangible assets totalled EUR 0.12 million (EUR 0.06 million).
DEVELOPMENT OF BUSINESS OPERATIONS
Markets
Network security markets are expected to grow steadily. The growth of both the firewall/VPN markets and the IDS/IPS markets is expected to continue at an annual rate of about 10% during 2006. (Source: Infonetics)
Main events during the quarter
- Finnish Defence Forces selected Stonesoft’s firewalls to protect its transition network
- StoneGate™ SG-4000 was named "Hot Pick of the month" in February by Information Security Magazine, the leading international network security magazine
- The renowned technical university RWTH Aachen chose Stonesoft’s network security products to protect its IT network with the StoneGate security solution
- SC Magazine voted Stonesoft’s products as finalists in categories Best Enterprise Solution and Best Enterprise Firewall for the SC Magazine European Excellence Awards 2006
- New Country Manager were nominated for UK and Ireland
- New Regional Manager was hired for Americas
- The company introduced the first internal FW/VPN Solution for IBM Mainframes with fully clustered load-balancing capabilities
- The company introduced a remarkable innovation concerning screening of data packets in a network node
- The Annual General Meeting for Stonesoft Corp. elected a new Board, Pertti Ervi was elected the Chairman of the Board
- The District Prosecutor pressed charges against Stonesoft in a suspected securities market information offence related to the ongoing disclosure requirements for public companies and regarding the alleged delay of Stonesoft’s profit warning issued in February 2001. Stonesoft denies all charges and claims made against it.
REVIEW OF THE SCOPE OF R&D ACTIVITIES
The group's R&D investments in the quarter totalled EUR 1.26 million (EUR 1.14 million).
R&D employed 66 (62) persons at the end of the quarter.
SHARE CAPITAL AND STOCK OPTION PROGRAMS
Stock Option Programs
During the quarter no subscriptions were made on the basis of the Stock Option Programs for key personnel of the company.
At the end of the quarter Stonesoft's share capital entered in the Trade Register was EUR 1,146,054.64. The number of shares was 57,302,732 and the counter book value per share was EUR 0.02. No changes took place in the share capital.
The company's valid stock option programs and their subscription prices were at the end of the quarter as follows:
- Stock Option program 2000-2006, subscription price EUR 14.16
- Stock Option program 2001-2006, subscription price EUR 2.43
- Stock Option program 2004-2010, subscription price EUR 0.56
PERSONNEL
At the end of the quarter, Stonesoft's personnel numbered 248 (236).
MAJOR EVENTS AFTER THE QUARTER
- Stonesoft launched the new StoneGate™ Platform that provides secured, optimized, and resilient connectivity for converged services, while preventing damage from attacks.
- StoneGate™ Firewall won two awards at SC Magazine Awards 2006 in England. StoneGate™ Firewall was the winner Best Network Security Solution category and it was also elected the best Enterprise Firewall.
FUTURE OUTLOOK
According to an estimate given by Infonetics, the Firewall/VPN and Intrusion detection and protection market is estimated to achieve an average growth of roughly 10% during 2006.
Stonesoft continues decisive work to increase turnover and to improve financial result. The structural changes, restructuring measures and added sales resources, the new products and the strategic partnerships concluded during the years 2004 and 2005, will create a lasting foundation for a positive development. With these changes turnover, operating result and market position of the company is aimed, on the long run, to be raised to a level equal to the competitiveness of the product offering.
The main goal for 2006 is to achieve faster growth than the market growth in the sales of StoneGate products, by utilizing the past investments. The company believes that as a result of this growth the right balance between the expenses and the sales will be achieved over time. The company will enforce the focus to the selected key markets, develop further the partner community to support sales efforts and to further sharpen the marketing and communications actions to the key interest groups.
Stonesoft anticipates the growth in the sales of StoneGate™ products to continue to be faster than the market growth on an annual level. However, the development of the sales may fluctuate during the fiscal quarters.
FORWARD-LOOKING STATEMENTS
This report contains statements concerning among others Stonesoft’s financial condition and 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 others (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. Forward-looking statements describe the present understanding of the company and Stonesoft does not undertake to update any of the statements or estimates given other than as strictly required by applicable laws.
For additional information, please contact:
Ilkka Hiidenheimo, CEO, Stonesoft Corp.
Tel. +358 9 476 711
E-mail: ilkka.hiidenheimo@stonesoft.com
Mikael Nyberg, CFO, Stonesoft Corp.
Tel. +358 9 476 711
E-mail: mikael.nyberg@stonesoft.com
Stonesoft Corp.
Board of Directors
Ilkka Hiidenheimo
CEO
Financial figures are included in the full quarterly report available here as a PDF.
This release and the presentation material related to the Interim Report are also available on Stonesoft's web site at http://www.stonesoft.com.
Friday, April 28, 2006
