SERSTECH AB: Third Quarter Report 1 January - 30 September 2020

Positive cashflow and 2 MSEK profit

Serstech Group
Third quarter 2020

• Net sales: KSEK 8 213 (6578, +25%)
• Profit for the period: KSEK 2 076 (-2 542)
• Earnings per share SEK 0.03 (-0.04)
• Cashflow: KSEK 128 (-1 346)

Serstech Group
Period 1 January – 30 September 2020

• Net sales: KSEK 14 534 (14 918)
• Profit for the period: KSEK -7 948 (-9 550)
• Earnings per share SEK -0.11 (-0.15)
• Cashflow: KSEK -4 760 (-2 133)

During the second quarter Serstech’s sales was heavily affected by the shutdown of many  countries during the pandemic, but in Q3 parts of the world opened up again and previously paused tenders were resumed. The third quarter generated a healthy 25% growth compared to the same period last year, positive cashflow and a 2 MSEK profit. In addition to the positive cashflow, we had issued customer invoices of 5 MSEK with due dates after the end of the quarter.

Those who are familiar with our industry know that the sales cycles can be up to three years long and that the buyers are generally more conservative than in almost any other industry. In the security industry, many consider new or previously unknown products as "too new to buy” and that has been a limiting factor for Serstech for the last two years – without credible and local references any sales are hard to achieve. Over the last two years, we have been considered a new, unknown brand, but this is gradually changing, as we have seen in the increased number of orders in the third quarter. In many countries in Asia, we have now achieved the first sale, which will help open many doors in the years to come. With one received order, our partners have become more confident and spend more time promoting our products.

In Europe and the US, the halt in procurement processes has been longer than in Asia and our sales numbers are still relatively low in these important regions. Our Swedish sales staff has been and is still unable to travel to many countries, including the US and China. End-customer and partner meetings are still hard to set up, and we hope this will change in the first half of 2021. Since April this year, Serstech has a local salesperson in China and starting in October, we will also have a salesperson located in the US. The local salespeople will strengthen our presence, increase the frequency of partner and customer meetings and help keep our sales costs low. Our intention is to add at least one more local salesperson the coming months, to make sure we can continue growing our partner network and strengthen our current partners.

The Corona pandemic has had an effect on our R&D output and the volume availability of our new Arx products has been delayed until Q1 2021 and we currently have an order backlog of approximately 2 MSEK for these. We have been able to do limited demos since the first batch became available earlier this year and the feedback has been very encouraging. The Serstech 100 Indicator has been greatly improved over the last two years and we expect it to remain attractive for several years to come due to the improved performance, larger libraries and expanded feature set. The Serstech 100 Indicator will remain our best-selling product also next year, due to its attractive price/performance ratio and the fact that it has been introduced in multiple tender processes. Going into Q4 and 2021 we have a great product portfolio that is, relative to the competition, the strongest we have ever had.

In early 2020, our sales pipeline of known tenders was at the highest level it had ever been, but this changed rapidly in March and April, when a large number of tenders were cancelled. At the beginning of Q4, our sales pipeline has set a new record and several of the previously cancelled tenders have been reactivated, even though we still see many countries being locked down and not open for business.

In March, when the effects of the pandemic became clear, we quickly and dramatically reduced our fixed cost, from more than 3.5 MSEK to less than 2 MSEK per month. This in combination with a returning market and a positive cashflow, has put us in a good financial position. Significant uncertainty about shorter term sales remains of course, but we are convinced that the improving market conditions in combination with our updated portfolio and strong sales channel should place the 50% growth target for 2021 within reach.

Stefan Sandor,
CEO, Serstech AB
phone: +46 739 606 067
email: ss@serstech.com

Thomas Pileby,
Chairman of the Board, Serstech AB
phone: +46 702 072 643
email: tp@serstech.com

Company website: www.serstech.com

This is information that Serstech AB (publ.) is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact person set out above at 08.45 CET on November 11, 2020.

Certified advisor to Serstech is Svensk Kapitalmarknadsgranskning AB (SKMG),
phone: +46 11 323 07 32
e-mail: ca@skmg.se.

ABOUT SERSTECH

Serstech delivers solutions for chemical identification and has customers across the world, mainly in the safety and security industry. Typical customers are customs, police authorities, security organizations and first responders. The solutions and technology are however not limited to security applications and potentially any industry using chemicals of some kind could be addressed by Serstech’s solution. Serstech is traded at Nasdaq First North Growth Market and more information about the company can be found at www.serstech.com

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• Serstech_Third_Quarter_Report_2020