SERSTECH AB: First Quarter Report 1 January – 31 March 2021
RECORD SALES AND PROFIT
Serstech Group – First Quarter 2021
- Net sales: KSEK 11 459 (6 012) +91%
- Profit for the period: KSEK 3 024 (-3 206)
- Earnings per share SEK 0.04 (-0.05)
Serstech reported the highest revenue so far in a single quarter in Q1 2021 and our reported net sales were 11.5 MSEK, which represents a growth of 91% compared to the same period in 2020. The period resulted in a 3 MSEK profit, which means that we now have reported three profitable quarters in a row. For the first time ever, we are now selling software and invoiced almost 0.5 MSEK in software in Q1, despite having launched the new software on the last day of the quarter. The value of the sales pipeline is still growing, even though the timing uncertainty caused by the effects of the pandemic remains.
Different geographical markets provide different levels of Corona-related challenges. Many markets remain closed, and it is not possible to set up customer meetings. In addition, many of our customer groups in the security market are preoccupied with pandemic-related responsibilities and have paused their planned procurement activities. We do expect however that once the market is starting to get back to normal, the number of closed deals per quarter will increase, due to the currently unfulfilled demand in the market. All in all, this means that in the shortest term, uncertainty remains, but there is a good chance that the second half of 2021 will provide a better market performance than in previous years.
Our local salespeople who started last year have proven to be a good investment. Several new partners have been signed and we can keep a higher pace in especially China and the US than would otherwise had been possible. Both our Asian salespeople are currently working in China and will remain there until travel in South-East Asia will become possible again. Business activity in China is more or less at a normal level and we participate in multiple exhibitions during the spring and have several customer meetings every week. In the US, we signed agreements with two partners during the first quarter and we have several more under negotiation, including some of the largest suppliers of CBRN (Chemical, Biological, Radiological, Nuclear) and Hazmat (Hazardous Materials) solutions to federal authorities. China and the US are two of the largest markets in the world for Raman instruments and our progress during the pandemic has allowed us to achieve several of the objectives we set before the pandemic, despite the circumstances.
On February 22, we launched Serstech Rental, which is the first rental program in our market. Renting instruments instead of buying them provide multiple advantages to the customers and users, one of which being significantly faster access to modern equipment. The normal procurement process can take years, whereas the time from decision to deployment can be a matter of weeks in the case of rental. In addition, rental can meet temporary needs during major events or during focused efforts by police and border control authorities. During the entire rental period, Serstech provides both insurance and perpetual warranty, which means that the product and financial risks are low. The instruments are replaced without additional cost after the rental period ends, given that the customer signs up for a new period.
Serstech Rental provides Serstech with higher revenue per instrument delivered and also recurring revenue, something which will lead to less fluctuations between quarters and more predictable results. We expect many customers to use rental as a tool to test our solutions before they buy, which should help us to increase sales. The customers with financial constraints might select to rent instead of buying, since they can use their operational budget for renting, as opposed to the larger amount needed for an investment. Based on the above and the positive feedback from our partner network and end-customers, we expect that the volumes provided through the rental program will be in addition to our sales, rather than replacing our sales.
During the second quarter we will spend significant resources together with our partner network to market the rental concept and we hope to have the first rental agreement signed already during the summer. Serstech Rental will also be one of the main talking points in the upcoming exhibitions during the summer and fall.
Our investment in marketing, which we increased during the pandemic, has started to pay off and we get an increasing number of requests for interviews and news articles. The number of incoming requests from potential partners is increasing and we have more than doubled the number of visitors to our website and tripled the number of followers on social media. The increasing awareness of the Serstech brand and our well-developed partner channel have also triggered interest from other manufacturers, and we have received several requests for adding third-party products to our portfolio and distribution.
On the last day of the quarter, we launched the first three software products that are built on the new ChemDash platform, which has been developed over the past 18 months. The new platform is using the latest technologies and there are plenty of opportunities to launch more ChemDash products on additional platforms in the near future. The three new products are ChemDash Lite, ChemDash Pro and ChemDash Pro+, whereof the last two are sold and the first is included with any instrument purchase.
Until Q1 2021, Serstech has always included software without cost in any instrument purchase, but starting from March 31, we are now selling our premium software products, both separately and when a customer buys an instrument. The new applications solve multiple customer problems and we have already before the launch managed to sell quite a few licenses at a total value of almost half a million SEK. We expect our software business to increase continuously in the future and we are convinced that software will eventually be important also for our conservative industry, as has happened in most other industries in the past. As with everything else in the security industry, it will be a slow start, but there is no doubt software will play an important role the coming years.
On March 29, we announced a rights issue, which will add approximately 22 MSEK to our cash balance in Q2. The rights issue is underwritten to 100% by mainly the board and management and the money will be used to develop the next generation products at a high pace. Throughout 2020, we spent quite a lot of time in the research lab to try to find solutions for some of the inherent limitations of Raman instruments, and after a lot of work we have found what we were looking for. With our current, small team it would take many years to develop these solutions into finished products and we therefore decided to invest in a larger R&D team to speed up the process. Since the products will have disruptive potential, we will postpone patent applications until we are closer to launch of the products, since competitors will otherwise be alerted to our plans.
With growth at 91%, an all-time-high in invoicing and three profitable quarters in a row, our confidence is growing and we remain optimistic about the future, despite the short-term uncertainty caused by the pandemic. Serstech is increasingly recognized as being the up-and-coming player, who introduced several industry firsts over the last 18 months; the patented and industry-first autofocus, the patented SERS kit, industry-best warranty of five years, industry-first rental program and industry-first “one-click scan”, which makes Raman trivially simple to operate with a single press of a button. We will continue to innovate and we remain convinced that we will surpass our on average 50% per annum growth target.
For further information, please contact:
CEO, Serstech AB
Phone: +46 739 606067
Chairman of the Board, Serstech AB
Phone: +46 702 072643
or visit: 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 10:30 CET on April 30, 2021.
Certified advisor to Serstech is Svensk Kapitalmarknadsgranskning AB (SKMG), phone: +46 11 323 07 32, e-mail: email@example.com.
Serstech delivers solutions for chemical identification and has customers around 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’s head office is in Sweden and all production is done in Sweden.