VERI

Verisec

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Verisec Q2'18: First comment

Earlier today Verisec presented their report for the second quarter of 2018. Sales came in much higher than expected and EBIT was in line with expectations. Regarding Freja eID nothing new of high importance was communicated. On a preliminary basis we will not make any big estimate changes, and thus our valuation will remain intact. We will return with an updated analysis shortly.

Net sales were stronger than expected and amounted to SEK 19.2 (12.4) million (expected: 14.5), an increase of 54.8 percent compared to the corresponding quarter last year. The growth during the quarter was attributable to all geographic regions (Sweden, Europe and outside Europe). Growth has historically fluctuated, and thus it has been difficult to assess sales on a quarterly basis - the long sales cycle contributes to this. During H1’18 net sales grew with 38.7 percent.

Profitability wise EBIT was in line with expectations (EBIT loss of SEK 8.5 million) despite the higher sales. A weaker gross margin than expectations mainly explains this but also higher other OPEX. Gross margin was 58.2 percent versus our estimate of 66 percent; other OPEX amounted to SEK 19.5 million versus our estimates of SEK 18.0 million. Other OPEX should at least persist at these levels going forward as Verisec will continue to invest in future growth for Freja eID in form of continued development and intensified sales and marketing activities. Activated costs were in line with expectations at around SEK 1.4 million.

On a preliminary basis we will not make any big estimate changes, and thus our valuation will remain intact. We will return with an updated analysis shortly.

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