THIRD QUARTER REPORT 1 January – 30 September 2019

Brake-even at EBITDA Level and Cash-flow Neutral

Third quarter 2019

• EDITDA: KSEK -72 (-4943)
• Net sales: KSEK 6 578 ( 2 727 + 141%)
• Profit for the period: KSEK -2 542 (-6 550)

• Earnings per share SEK -0,04 (-0,10)

Period 1 January – 30 September 2019

• EBITDA: KSEK -2184 (-8973)
• Net sales: KSEK 14 918 (5 495, +171%)
• Profit for the period KSEK -9 550 (-12 150)

• Earnings per share: SEK -0,15 (-0,19)

The three-digit sales growth continued in the third quarter and the net sales closed at 6.6 MSEK compared to 2.6 MSEK in 2018. At EBITDA level we improved the result by almost 4.9 MSEK and essentially reached break-even, ending with -72 KSEK, compared to -4943 KSEK in 2018. The cashflow from operating activities, before changes to working capital, also improved dramatically, to -76 KSEK from -5431 KSEK in 2018. Compared to the third quarter in 2018, the team was on average 10 people stronger in 2019 in Sweden and Romania combined.

Our sales partner network is becoming ever more active and during the third quarter, we had the highest number of end-customer meetings in the history of the company. I feel confident that we have been able to attract the best possible partners in all prioritized markets and I now consider our partner network to be one of our most valuable assets. We do not expect the network to show net expansion the coming quarters and we will continue to review and, if needed, cancel agreements with those partners not performing.

To accelerate the development of our partners, most of which have been with the company for less than one year, we launched both the Serstech Partner Program and the Serstech Certified Professional training and certification program during the quarter. The partner program provides incentives for partners to behave, perform and report to us as we want them to. The idea is to reward the good partners and give them Gold and Platinum status and a number of extra benefits, whereas the less well-performing ones are to be identified and removed from the network. The training and certification program recognizes and aims to reduce the technical challenges inherent in Raman spectroscopy and the everyday sales challenges our partners are faced with. To achieve and retain the Gold level, a partner needs to have Serstech Certified staff, provide excellent technical service and repair service, reach the sales targets and a number of other predefined goals.

As previously communicated, the sales cycles are long and so far in 2019, our ten most active partners contributed with 86% of our total sales. The successful partners are the ones that have been with us the longest and we expect to see the remaining 75 partners making their initial or more significant contributions to our numbers in Q4 and onwards. Quartely forecasting remains highly uncertain and most partners are still unable or unwilling to provide forecasts for their local market. The main reason for this is that our partners are providing an, until recently, unknown product to a market with sales cycles of several years. With limited statistical data, it is hard to predict the outcome of public tenders.

The opportunities in the market are large and the industry is currently dominated by large US instrument manufacturers. These companies are moving at a much slower pace than Serstech is, and we expect to be able to take a relatively large market share over the coming years. One of our main advantages today is that we are more agile and have shorter development cycles than the competitors. Another is our increasing solution and software focus, which still seems to be unique for Serstech. To leverage these two advantages and accelerate both hardware and software development even further, we will in Q4 issue a little more than seven million new shares, to strengthen our balance sheet with approximately 25 MSEK before emission costs.

In September, we launched three new products, whereof two were versions of our Raman instrument and ChemDash software for the pharmaceutical production industry. These two products comply with the US FDA (Food and Drug Administration) regulations, which set the standard for pharmaceutical producers around the world. By launching these products, we opened up the 20-30 MEUR pharma market for our products and we expect to see significant sales contributions from them already in 2020.

The third product we launched in September was our first SERS kit. SERS stands for Surface Enhanced Raman Spectroscopy and the acronym is also part of our company name. The technology is based on resonance in nano-coated silicon surfaces and the resulting Raman signal is greatly amplified, which allows our instrument to identify substances with a weak Raman effect, such as heroin. In July, we applied for a patent of the solution.

Serstech continues to grow in both Romania and Lund, adding five team members during the third quarter. The feedback we receive from both the security and pharma markets is very positive and we remain confident that we have the right products, an excellent channel to market and a team that can continue to deliver a high growth and an imminent profitability.

Stefan Sandor, CEO

For further information, please contact:

Stefan Sandor,
CEO, Serstech AB
tel: +46 739 606067
email: ss@serstech.com

Thomas Pileby,
Chairman of the Board, Serstech AB
tel: +46 702 072643
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 and the Securities Markets Act. The information was submitted for publication, through the agency of the contact person set out above at 08.45 CET on November 13, 2019.

Certified advisor to Serstech is Västra Hamnen Corporate Finance AB, phone: 040-20 02 50, e-mail: ca@vhcorp.se.

About Serstech
Serstech delivers solutions for chemical identifications 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 and more information about the company can be found at www.serstech.com

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