Msab: Growth and new orders

January - June

• Net sales increased 12 percent to SEK 128.3 (114.9) million (13 percent in local currencies).
• EBIT amounted to SEK 3.8 (12.0) million.
• The EBIT margin was 3.0 (10.4) percent (3.1 percent in local currencies).
• Profit after tax was SEK 5.7 (8.7) million.
• Earnings per share amounted to SEK 0.31 (0.46).
• Cash flow from operating activities was SEK -11.1 (-1.7) million.
• Cash and cash equivalents and short-term investments at the end of the period were SEK 80.4 (77.8) million.

Second quarter

• Net sales increased 6 percent to SEK 63.0 (59.5) million (6 percent in local currencies).
• EBIT amounted to SEK 0.1 (6.0) million.
• The EBIT margin was 0.2 (10.2) percent (0.2 percent in local currencies).
• Profit after tax was SEK 1.3 (4.5) million.
• Earnings per share amounted to SEK 0.07 (0.24).
• Cash flow from operating activities was SEK –11.4 (-4.4) million.

Comments from the CEO

Sales for the first half-year amounted to SEK 128.3 (114.9) million. EBIT for the year was SEK 3.8 (12.0) million, corresponding to an EBIT margin of 3.0 (10.4) percent. The EBIT margin decrease resulted from our continued investment in product development and marketing. Second quarter sales amounted to SEK 63.0 (59.5) million. 

Our market is changing rapidly. In addition to being able to unlock and read the contents of seized mobile phones, several other additional features and solutions are desirable:

• placing scanned content into a larger context
• decentralising scanning of seized phones so it can take place further out in organisations
• facilitating the use of artificial intelligence.

Through MSAB Ecosystem, we have acquired a leading market position in these and other areas. We will continue to invest in and develop our system solutions in order to remain a relevant supplier and ensure continued growth.

The term mobile forensics is becoming obsolete. The term was coined when the technology was used by just a few experts in qualified laboratories. Today, it is about so much more. Almost everyone in law enforcement agencies are, to a greater or lesser extent, involved with digital technology. MSAB is capable of scanning and securing evidence in a variety of different types of digital devices. Today, we secure evidence from apps, smart watches, tablets, drones, cars, USB memory sticks, etc. It is within this area of digital evidence that the future ability of the police to solve all kinds of crimes will be determined. With our latest release of XRY in Q2, we support some 25,000 different devices (profiles).

The change taking place among our customers – and one which we are happy to help drive – is the capacity to take digital evidence to the next level, where customers should be able to decentralise scanning of digital devices; but also to increase the ability of investigators to quickly analyse and draw conclusions from scanned information.

France has suffered several terrorist attacks and the threat for more of the same remains. In many cases, it is digital evidence that enables the police to succeed in tracking down criminals and in several cases prevent crimes from taking place. Awareness of the importance of digital evidence has led to France now investing more resources in this area, implementing a number of measures, including strengthening legislation. In the spring, a law came into force regarding the withholding of encrypted information. In essence, this law means that a person who withholds encrypted data from the police can be sentenced to heavy fines and imprisonment for three years and if the crime is considered aggravated, imprisonment for up to five years. In 2017, Germany also changed its legislation, expanding the possibility to read digital devices under certain conditions. These are just a few examples of what happens when law enforcement authorities and responsible politicians realise how important digital evidence is.

Against this background, it is especially gratifying that we won a large and strategically important order from the French Gendarmerie Nationale worth over SEK 12 million. MSAB’s new solutions enable the police to work more decentralised, and this is what led to us winning the Gendarmerie’s trust. The order was won in July, and the revenue will be recognised in the upcoming third quarter.

In the region that includes southeast Asia and Australia, all countries except China demonstrated favourable growth. During the period, we further strengthened the organisation, employing more personnel in our Singapore office and starting a subsidiary in Japan. North America continues to grow. This was mainly due to business from state and local police organisations which contributed to the favourable growth for the first half-year. We have strengthened our resources in the region with more sales representatives and local marketing. Federal authorities close their books for the year at the end of September, which means that many investment decisions are taken during our third quarter. EMEA is growing and continues to show strength. There remains much to be done in Europe and growth is healthy. As regards decentralisation of digital evidence, Europe is about to take the lead.

Business decision to purchase our products are increasingly made at higher levels within our customers’ organisations, which has led to greater unpredictability surrounding lead times. Decision-making processes are becoming more complex and while business deals are more comprehensive, time spent on procurement and the lead up to decisions is increasing. Hence, the Company's performance should continue to be assessed over a longer period, and not based on single quarters.

Along with our strong offering of products and solutions, our business model is a major strength for the Company. In essence, we sell licenses to use our software. This means our business is scalable and that a high degree of recurring revenue is generated when our customers renew their licenses.

The importance of digital evidence is increasing at an undiminished pace. This poses a major challenge for all law enforcement authorities, and MSAB is well-positioned to assist societies in efforts to meet this challenge.   We will continue to invest long-term in both our products and organisation in order to consolidate our position as a leading actor in a growing market.

Stockholm, July 2018

Joel Bollö, Chief Executive Officer

Media Contacts:
Joel Bollö, CEO MSAB
+46 (0)70 930 07 20
joel.bollo@msab.com

This information is information that Micro Systemation AB is obliged to make public pursuant to the EU Market Abuse Regulation. This information was submitted for publication, through the agency of the contact person set out below, at 08:00 CEST on July 20 2018.

MSAB in brief

MSAB is a world leader in mobile forensics technology with the aim of extracting and analysing data from confiscated mobile devices, mainly mobile phones. The company has its own sales offices and sales representatives in Europe, North America, South America, China, Australia, Singapore, Japan and Russia, and together with a number of distributors covers most of the world. The company's proprietary products have become a de facto standard in the field and are used for securing evidence in over 100 countries. The products are complemented by a wide range of training courses, with the opportunity to become certified in a forensically sound method of extracting data from mobile devices. Customers are primarily authorities involved in performing criminal investigations, and include police, military and customs. MSAB is listed on Nasdaq Stockholm under the ticker symbol: MSAB B.

Attachment

• Interim report January - June_2018