Good day to all Inderes listeners and viewers. SSH published their Q3 results today and we will discuss that with the new CEO, Lars Bell. So Lars, welcome to InderesTV.

Thank you so much, and kind of you to have us here, Roni.

This is your first time on TV, so we could start the interview. If you could introduce yourself and talk a little bit about how you ended up working at SSH?

Yeah. So yeah, you're correct. That's right. I started 28 days ago today. I did, our new CFO. So this is the first quarterly report that we will be delivering on, or we have delivered on behalf of SSH. So how did I end up in this role here? My background is that I've worked with software for a little more than 25 years. I come from a technical background and I've done lots of different roles. I've worked in a number of both large international companies like HP, IBM, Microsoft. I worked there, also the past seven years in a Danish identity governance organization called Omada, that was part of growing that. And that means also that I have background from the cybersecurity and the identity market.

So I guess the way into this job was that the long history of understanding software, being in Microsoft when they switched from being mostly an on-premise to a cloud vendor, going into the cybersecurity space, and then working with identity management in general is probably what gave me a foot in the door here, and now I'm sitting here today representing SSH.

Yeah, definitely. It sounds like a good background. It's been only a few weeks that you have been in the company, but what is your first impression about the company and the organization? Maybe.

So, lots of input. You know, it's always, sometimes, there's a lot of things to take in. And I spent the better part of this month talking to people, I've been out meeting as many of the employees as I could. I've been meeting some partners. I've been talking to some different prospects, potential new customers, trying to understand and see what is it that really makes us capable, and being in the position to deliver on what the market is looking for right now in terms of identity management. And the other side is how do we present that and how do we best take that to market?

So my observation is a little that SSH. I expected it to be a technically well-founded company, given its history. Coming back to the definition of the SSH protocol and servicing customers in that space for a long time. But I'm very, very impressed, actually, with the level of detail and knowledge and skills we have in this company here. It surpasses what I've seen in many of the companies, even if some of them are quite significantly larger. I also see that the ability to take what is happening in the market and turn it into products is actually very, very strong in the company.

And I do see that today. We have a portfolio that supports both customers running access management in the traditional ways using traditional SSH keys. Taking that into a solution with our key management solution, where you can manage that, you can control it and you can optimize on it. And taking that into the new world where you have ephemeral access rights with short-lived accesses. And you can do that both with humans, machines, and non-humans, Agentic AI. So I see a very, very strong foundation in technology. I see us having a product that is well suited for where the market is going. I think we should be much more known for it.

I think we need to get better at going out there, talking about the things we can do, presenting ways we can actually help customers to adopt AI and Agentic AI in a safe and secure way. And that's where I see the potential in this. And this is what gets me excited about being in SSH.

Yeah. As you mentioned, SSH has a strong technological background and expertise, but the commercial success hasn't been quite maybe what some people have hoped for. So maybe if you can talk about what do you see are the biggest gaps in terms of reaching commercial success, and what are your main focus areas in the short term?

So I think also it's important to understand what success is. So there's no doubt we would like to grow faster and be bigger and be more profitable. Looking at SSH, however, we do grow. So we just released also today that year on year, our annual recurring revenue is growing with 20% plus. We do see that that is turning into a backlog of deferred revenue that will lead to revenues and booked revenues also growing in the coming years. What we see is that the five-plus percent growth we have in booked revenue is probably on the low side. So part of that comes from the delay in us taking orders, building it, and then starting to recognize on it. The other part comes in us making sure that we get even more and more consistent business into SSH. So that commercial step of actually continuously adding to that is probably where we will see the acceleration and where I would do my best to help drive that.

Yeah. Let's go more into the Q3 development. SSH gave a profit warning in September. Of course, this was before you started, so you have nothing to do with that. But maybe if you could go through the reasons behind this. Yeah. So, nobody.

Wants to go out and give profit warnings. That's when you kind of either misread the market a little or where you're going to land, or it's because there are some bad things happening, in this case here. I think the previous outlook that was given by the company was based on some assumptions on deals in the pipeline. And one of the learnings I think the company has come to is that some of the deals, especially when we moved into some of the more restricted government industries, just take longer than they had expected. So maybe a little too much optimism, maybe a little too much hope that the usual sales cycles would apply to these new, larger deals is what drove the initial outlook on Q3.

And then when they saw that that was trailing behind a little, they made that kind of press release with a profit warning, because what has happened is that SSH is also increasing and has increased the cost base quite a bit over the past year. And that's deliberate. That is simply because we are moving from one market where the old traditional technology was serving a lot of good customers. Now we see the need to go into a new world with short-lived access rights, and there is that kind of transition where you take some perpetual licenses and you transform them into subscription-based, which kind of gives you a little dip while you're doing that. And the other side is also that the cost base, we're hiring people to accelerate our technology development. And when you then see the top line falling a bit because the deals take longer, that's when you see the EBITDA being affected, we still come out with a positive EBITDA for Q3. But when we're looking at it full year, that's where they called out that we probably will be just south of break-even.

Yeah. Regarding the deals that were delayed, are there any issues with deals, for example, lost to competitors, or are they mostly just delayed? Basically.

So on the deals, on the big ones that had made the difference to this. No, they are still in the pipeline. And now you're probably going to ask me, are they closing in Q4? I will not go into giving a commitment on that, as we've already kind of seen that it takes a little longer and there are some things to be done. They are being worked on, they're being worked on with some partners and some of the bigger partners as well. So we have good confidence that they will come. But customer priorities are a little out of our control in that way. So I don't want to make some promises on exactly when it's going to come. But it's still alive and it's still in there.

If you then ask me, Lars, do you win all your deals? No. Like any other software company, there are deals from time to time where a customer chooses a competitor or where we potentially have bid on something where they were looking for something slightly different than what we deliver. But I think our win rates in general are pretty good compared to market standards.

Yeah. You announced a major PrivX deal worth €3 million with a bank this quarter as well. So was this basically budgeted to the original guidance? And has this started now generating revenues?

So yeah, we went out early September, I believe it was announced that we had signed this contract with one of the largest banks in the world. And that is actually a deal that will both take them from using the traditional SSH keys, manage that with our key manager, and then move it into PrivX, which is the new way of granting access and controlling access. So that is a project or an implementation that will run over some time. It's a three-year deal. Approximately 3 million. So 1 million per year in annual contract value. That 1 million is showing up in the ARR that we published. However, as we only book 1/12 of that every month, and then they were signed in September, there is only 1/12 of the million that's in the actual recognized revenue. You will see then in October, there's another part, and then in November and so forth, and we will book it over the next. And as it's a multi-year deal that will continue for at least three years.

Yes, exactly. As I understood that the growing non-human entities was one driver behind the deal. So in general, how big of a demand driver do you see this Agentic AI threat to your products?

I think the Agentic AI thing is going to impact all of us in massive ways, and us in the software industry also very, very much, and also in the cybersecurity space even more. We don't really manage Agentic AI. What we manage is access to the critical parts of our infrastructure. But Agentic AI will multiply many times the amount of actors that will start asking for data in your databases, that will go and try to make changes in your key systems and so forth. That is driving efficiency and growth in most companies. So companies will be looking to adopt those technologies. But if they do that without securing the way they actually manage the access rights, they will run into troubles. So for our sake, that is kind of a key driver in why people will accelerate investments in this. And we will probably see that our area is getting up-prioritized in terms of investments.

The other side of that is also the whole sovereignty play and the geopolitical situation where we see that the world is potentially not as safe as we have all gone around and hoped and expected. So there is a trend of that moving for SSH. We have the portfolio for that, and the bank we just talked about is an example of why somebody chooses to make a major investment and go into that. We are looking at similar cases like that with partners, and that is a thing that definitely will drive business. How much and when we will be more than happy to share when we are closing deals. But right now we have pipeline that is out there for us to go work on. But yeah, I won't be able to give you all the exact numbers on that. But it is a driver for us going forward. But definitely.

Yeah. Sounds good. Maybe then about the Leonardo partnership, in the Q2 report SSH mentioned that you expect the business return to accelerate in H2. So maybe can you give an update on this situation and maybe, as a new CEO, of course, your comments about the partnership in general and what kind of opportunities do you see there?

So yeah, it's actually, I think it was just a couple of days ago, we had the one-year anniversary for Leonardo's investment into SSH. That partnership is still very much alive. Actually we have Leonardo visiting us these days. So they spend three days here with part of the technical team, planning for further integrations, planning for specific opportunities, planning for further certifications to go to higher restricted levels within the security space. So a lot of work going on in making sure that we are aligned as two companies and that the product fits into the type of opportunities they have.

Asking if we have seen a growth in the second half here, we have closed deals here in Q3. Yes. With Leonardo, also in terms of the PSN platform there. So we are seeing it, but we still have some of the big ones sitting there that will run for some time yet. But if you look at what Leonardo is posting and see some of the deals that they're getting involved in. You will also have an idea of where they're positioning us, because SSH is being seen as a part, a component in their go-to-market. And that's why we focus so much on the technology and our opportunities will be related to the opportunities they're seeing overall.

Related to technological investments and cost base. So SSH has been ramping up the cost base quite a bit this year, as you mentioned earlier. So has this, in a way, been more like a one-time ramp-up? Or do you see the cost of the growth investments continue rising a lot in the future? How do you see, for example, profitability development, how big of a.

So yeah, I guess that's the question really.

Are you happy with the profitability, and the answer is no. The answer is no. We would like to be profitable. We would like to see that we get into a steady business where we also make good money on this. In terms of transition. However, it takes some investment, and especially if you're going after highly regulated sectors where there will be high demand, there is a delay between the time where you can recognize the revenues and that and the investments you have to make. So when you ask me if it's a one-time investment, I would say we lifted the investments approximately 16%. And that was a deliberate thing, both in terms of making sure we accelerate development, but also making sure we brought our products out into the market.

In terms of managing that towards actually the speed with which we turn those new orders into revenue, I think you will see us come back to a more normal situation now where we lifted the base to a level where we can actually deliver on what is expected both by our partners in the market. And now we can start adjusting and making sure that we grow the costs following the revenue. And that means when you're asking me, is the goal to be profitable? Yes. The goal is to make us profitable as well as growing.

That sounds like a good goal. So maybe we could end the interview with a general question about the sales outlook going forward. You, of course, talked a little bit about those factors, but maybe summarize that.

So I would love to sit and give you insight into our pipeline. I believe we are out there. We are talking to a lot of interesting customers. We have, fortunately, a good base of customers that use some of our products, some of our more traditional products. And the better we get at actually showing them that there is a way to move into the modern world, the faster we will grow. On the other hand, we also have partners like Leonardo that are out there building a pipeline for us. So we are seeing pipeline building. We are seeing slow increases also in the amount of business we close. And with that coming as an ongoing thing, quarter after quarter, we will see the ARR grow significantly, I'm sure, over the coming period.

That sounds like a good scenario. So thank you, Lars, for the interview and we will return later.

Thank you so much. And thank you for having me here.