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

Thank you so much. Kind of you to have me, Roni.

This is your first time on Inderes 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.

You're correct. That's right, I started 28 days ago today as the new CEO. So this is the first quarterly report that we have delivered on behalf of SSH. How did I end up in this role here? My background is that I've worked with software for over 25 years. I come from a technical background and have done lots of different roles. I worked in a number of both large international companies like Google Cloud and Microsoft. I worked also the past seven years in a Danish identity governance organization, Ganymed. I was part of growing that, and that means also that I have background from the cybersecurity and identity market. So I guess the way into this job was the long history of understanding software, being in Microsoft when they switched from being mostly on-premise to a cloud vendor, going into the cybersecurity space, and working with identity management in general. That is probably what gave me the path here, and now sitting here today representing SSH.

You definitely sound 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?

A lot of input. It's always, sometimes, a lot of things to take in, and I've spent the better part of this month talking to people. I've now been meeting as many of the employees as I could, been meeting some partners, been talking to some different prospects, potential new customers, trying to understand and see what it is that really makes SSH capable and 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 to present that and how to 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 year definition of the SSH product 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 is as high as what we see in many of the companies, even if some of them are 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 surrounding access management in the traditional way, using traditional SSH certificates, taking that into a solution with 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, short-lived access, and you can do that both with humans, machines and non-humans. So I see a very, very strong foundation and technology. I also see 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. That's where I see the potential, and this is what gets me excited about being in SSH.

As mentioned, SSH has a strong technological background and expertise, while the commercial success has been quite maybe what some people have hoped for, so maybe if you can share about what 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 this is important to understand, what is success? So there is no doubt we would like to grow faster and bigger and be more profitable looking at SSH. However, we do grow. So what we just released also today is that year on year our annual recurring revenue is growing with 8% plus. We do see that that is turning into a backlog of deferred revenue that will lead to revenues and booked revenue also growing in the coming years. What we see is that the 5% plus growth we have in booked revenue is probably on the low side, so part of that comes from the delay in taking orders and billing it, and then starting to recognize it. The other part comes in our 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 will do my best to help drive that.

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 news.

So nobody wants to go out and give profit warnings. That's when you either miss the market a little of where you've got to, 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 more 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 big, large deals, is what drove the initial outlook on Q3. Then when they saw that that was trailing behind a little, they made that kind of press release with the profit warning, because what has happened is that SSH is also increasing, or has increased, the cost base quarter over quarter, but over the past year.

That's deliberate. That is simply because we're 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 that there is that kind of transition where you take some perpetual licenses and you transform them into subscription-based, which can kind of show give you a little dip while you're doing that. The other side is also that the cost base went up in 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 came out with positive EBITDA for Q3, but when we are looking at full year, that's where they called out that we probably will be just south of break-even.

Regarding the deals that were delayed, is there any issues with deals, for example lost to competitors or other, or are they mostly just delayed basically?

So the deals on the back, ones that had made a difference to this now, 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. There is work being done that we work on with some partners and some of the bigger partners as well. So we have good confidence that they will come back. 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 is still alive and is still in there. If you then ask me, do you lose 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 better something while they are looking for something slightly different than what we deliver, but I think our win rates in general are pretty good compared to market standards.

You announced a major 3 deal, PrivX deal, worth 3 million euros with a bank this quarter as well, so was this basically budgeted to the original guidance and has this started now generating revenues?

We went out early September, I believe it was, and announced that we had signed this contract with one of the largest banks in the world. That is actually a deal that will both take them from using the traditional SSH key management with our key manager and then moved into PrivX, which is the new way of granting access and controlling access. So that is a project that will be an implementation that we roll out 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 have published. However, as we only book one twelfth of that every month, and then they were signed in September, there is only one twelfth of the million that is in the actual recognized revenue. You will see then in October another part of that, and this is the November and so forth, that we will book over the next, and as it is a multi-year deal that will continue for at least three years.

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

I think agentic AI is going to impact all of us in massive ways, and in the software industry also very, very much, and in the cybersecurity space even more. We don't really manage agentic AI. What we manage is access to the critical part of our infrastructure, but agentic AI will multiply many times the amount of access that will start asking for data in your databases, that will go into and 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, they will run into trouble. So for SSH, it is kind of a key driver in why people will accelerate investments in this area. We will probably see that our area is getting prioritized in terms of investment.

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 moving for SSH. We have a 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'll be more than happy to tell you when we are closing deals, but right now we have a pipeline that is out there for us to go work on. But I won't be able to give you all the exact numbers on that, but it is a driver for us going forward for the foreseeable future.

Sounds good. Maybe then about Leonardo partnership. In Q2 report SSH mentioned that you expect the business there 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 you see there.

So yeah, it's actually I think just a couple days ago we had the one-year anniversary for Leonardo investing into SSH. That partnership is still very much alive. Actually, we have Leonardo visiting us these days, so they spent three days here with a 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 cybersecurity 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 with Leonardo also in terms of their presence and pull with them 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 spotting and the opportunities they are getting involved in, then you also have an idea of what they are positioning us for, because SSH is being seen as a part 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 are seeing overall.

Related to technological investments and cost base, 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 growth investments continue rising a lot in the future? How do you see, for example, profitability development? How big of a guess? That's a question, really.

Are you happy with the profitability? The answer is no, we would like to be profitable. We would like to say that we gain into a steady business where we also make good money in this in terms of position. 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 when we recognize the revenues and the investments you have to make. So if you ask me if it's a one-time investment, I would say we lifted the investments approximately 16%, and it was a deliberate thing both in terms of making sure we accelerate development, but also making sure we brought more of our product out into the market in terms of managing that towards actually the speed at which we turn those new orders into revenue.

I think we will all come back to one 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 and the market, and now we can start adjusting and making sure that we grow the cost following the ARR 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 the factors, but maybe summarize that.

I would love to 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 optimal business we close, and with that coming as an ongoing thing, quarter after quarter, we will see ARR growth significantly over the coming period.

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

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