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MSAB: Need for decentralized solutions on the rise

Regulatory

MSAB: Need for decentralized solutions on the rise

January - September

  • Net sales increased 0.4 percent to SEK 217.7 (216.9) million (-2 percent in local currencies).
  • EBIT for the year amounted to SEK 24.0 (51.9) million.
  • The EBIT margin reached 11.0 (23.9) percent.
  • Profit after tax amounted to SEK 20.4 (38.8) million.
  • Earnings per share were SEK 1.10 (2.12).
  • Cash flow from operating activities amounted to SEK -23.7 (-2.7) million.
  • Cash and cash equivalents and short-term investments amounted to SEK 70.5 (76.3) million at the end of the period.

Third quarter

  • Net sales declined 12.4 percent to SEK 89.4 (102.0) million (-19 percent in local currencies).
  • EBIT amounted to SEK 20.1 (40.0) million.
  • The EBIT margin reached 22.5 (39.2) percent.
  • Profit after tax amounted to SEK 14.7 (30.4) million.
  • Earnings per share were SEK 0.79 (1.65).
  • Cash flow from operating activities amounted to SEK -12.6 (-1.0) million.

Comments from the CEO

Sales amounted to SEK 217.7 (216.9) million for the first nine months of the year. EBIT amounted to SEK 24.0 (51.9) million, corresponding to an EBIT margin of 11.0 (23.9) percent. Sales for the quarter amounted to SEK 89.4 (102.0) million. Only once has the company demonstrated a higher quarterly revenue, which was for the corresponding quarter of 2017 where a single major order from Germany influenced heavily. Lower sales in this year's third quarter and continued investments for future growth affected earnings for the quarter, which amounted to SEK 20.1 (40.0) million.

The market for mobile forensics is evolving and changing rapidly. A major growth area is what we call Frontline, i.e. solutions intended to decentralize the ability of police to assimilate digital evidence - an ability that must be as close to the scene of the crime in time and space as possible. A popular expression within law enforcement is "the critical first 48 hours", i.e., securing relevant evidence within this timeframe increases the likelihood of solving the crime by as much as 50 percent. Today, virtually all suspects have a mobile phone or some other type of digital device. This is also where most of the crucial evidence is found. Thus, a decentralization of expertise to take advantage of digital evidence is a must for police to do their job with good results. We see our customers' awareness of this need increasing. This is also reflected in our sales. The proportion of new sales in the Frontline category is highly significant as compared to just a few years ago. At the same time we are convinced that we have only scratched the surface of our customers' needs for these solutions.

We have surveyed cities the size of Stockholm and larger around the globe, and can state that only a fraction of these have implemented some form of decentralised solution for securing digital evidence. It is our firm belief that we can make the police far more effective in their fight against crime by helping them with Frontline solutions. A good example is the London Metropolitan Police who invested early in our Kiosk solution and have been successfully using it to make London a safer place for years. This development is not news for MSAB. Our product mix in the MSAB Ecosystem family is well-designed to meet market demands.

MSAB's core competence is the capacity to unlock, extract and decrypt information in digital devices. This expertise can be found in our XRY software, which has been well-established in forensic labs over most of the world for several years. Our Frontline solutions consist of the same core products, packaged in a user-friendly platform which can be used by almost any police officer. We call these solutions Kiosk, Tablet and XRY Express. A couple other examples of customers who have ordered these products are the French Gendarmerie Nationale, which we announced in July, and a major order from Germany in the third quarter of 2017.

As mentioned earlier, time is of the essence when it comes to securing critical evidence. To do this efficiently and to be the best globally, we have now launched the fastest and most advanced version of XAMN ever. With XAMN 4.0, our customers can quickly and in a legally secure way work with evidence from mobile phones with a level of efficiency that has never before been achieved. 

MSAB's solutions meet a challenge that no law enforcement agency can resist. Our view is that it is only a matter of time before all police operations around the world will need some form of Frontline solution. This implies that geographic expansion is another important vertical in MSAB's future growth. In addition to EMEA and North America, MSAB has been established for a number of years in Asia with subsidiaries in China, Singapore, Australia and, most recently, Japan. We intend to continue our establishment and expansion country by country.

We are continuing to invest in our organisation. On one hand, we invest continuously in our product offering, while at the same time expanding our sales and marketing activities in existing markets, but mainly in new geographic areas where we see potential. Synonymous for all our investments is that they are completely focused on and intended to maximize the great growth potential we see in the markets where we are active.

Often the investments come first, with results in terms of growth following later, which leads to a temporary weakening of the company's results. It is important to note that what we sell primarily is a license to use our software. This means that our business model is scalable, which proves itself in the third quarter with a level of sales that takes us to an EBIT margin over 20 percent. Furthermore, our customers to a large extent renew their licenses, which ensures a high degree of recurring revenues.

As CEO of MSAB, I am optimistic about the future and our opportunities for growth, but this does not, however, free us from challenges nor the need for investments where the effect is somewhat delayed. I am convinced that what we do is so important and necessary for law enforcement authorities that I cannot be anything but positive, not just about how we contribute to society, but also for our own opportunities for growth in the future.

Stockholm, October 2018

Joel Bollö
Chief Executive Director

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 26 October, 2018.

MSAB in brief

MSAB is a world leader in mobile forensics technology with the aim of extracting and analyzing 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.

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