Micro Systemation : MSAB - Report Q2 2021 (eng)

Interim Report

Q2

2021

Net sales		EBIT	Cash and Cash equivalents
SEK 64.6 (83.9) million		SEK -1.9 (12.1) million	SEK 70.8 (64.8) million

• EarningsThe EBITpermarginsharewasbefore/after-2.9 (14.4)dilutionpercentamounted to SEK -0.16 (0.56)

•

• Profit after tax amounted to SEK -2.9 (10.4) million

Key figures	Q2 2021	Q2 2020	Jan 21-Jun 21 Jan 20-Jun 20 Apr 20-Mar 21	Full Year
						2020
Net sales growth %	-23.0	30.9	-10.1	15.1	2.1	0.8
EBIT margin %	-2.9	14.4	3.1	2.2	5.0	9.2
Equity/ %	38.5	41.2	44.9	39.7	46.1	46.8
Cash flow from operating activities / share (SEK)	0.1	-0.1	0.6	0.3	2.8	3.3
Return on equity %	-4.3	15.7	26.6	2.9	37.3	17.5
Return on capital employed %	-2.1	21.7	50.6	10.9	59.5	32.2
Equity per share	3.1	4.2	3.1	4.2	4.5	4.4
Average no. of shares before/after dilution (millions)	18.5	18.5	18.5	18.5	18.5	18.5

Comments from the CEO

Increased profit for the first half of the year but sales decreased slightly. The result of a couple of unfortunate, coinciding factors.

The decline in sales is foremost attributable to North America. The major reorganisation that we implemented in the USA in the end of last year is starting to yield results and we have high hopes for the important US market going forward. We are doing the right things and winning the confidence of additional customers, although this is not yet reflected in our reported figures.

We are continuing to increase new sales in several important countries, and we have a very high degree of license renewals.

MSAB is a global company that helps improve the efficiency of

law enforcement agencies. Simultaneously, conditions worldwide are in a constant state of flux. Our products are extremely powerful, which means we must be selective about who we sell to.

We follow an ethical policy which means that we continually evaluate which countries and organisations we can deliver our solutions to. As a result, we are delivering to fewer regions than previously. This carries a negative impact on our sales in the short-term.

At the same time, we are entirely convinced that this is the correct decision and that it will benefit the Company long-term since this is something we know that the absolute majority of our customer base, law enforcement agencies globally, is putting an increased emphasis on. As we have always done.

The pandemic continues to affect MSAB.

Our experience of working under pandemic conditions has been both good and bad. One positive effect has been that the pandemic has taught us and our customers to work more efficiently in the digital environment, and we have become quite accomplished at working via webinars, and on-line conferences and meetings using Teams and other tools.

Our experience from the pandemic has been less positive when it comes to major system solutions. Our customers experience no problems buying or renewing licenses, complementing with new systems, etc. However, decisions for major integration solutions take time. We still have several customers who cannot execute their plans because of the pandemic. This is especially true for rollout of kiosk solutions.

Two years ago, we decided to improve our success in Japan. We hired a sales representative to start working the market.

Japan is probably the most detail-oriented culture we have worked in thus far. The Japanese have a reputation for not making hasty decisions and their review has been thorough. The police have gone through everything down to the tiniest detail. It is therefore especially gratifying that they have now placed a larger, initial order, one which gives the police throughout Japan access to XRY.

With XRY, they will be able to work smarter and more effectively, and above all they gain access to our unique features.

Japan exemplifies well that what we are doing on this market is right and unique. We know that customers that use our solutions become more efficient. We also know that it can take time for our customers to make decisions and cross the start line, but once the decision is made, it is highly likely that they will be customers for a long time. We have many customers today who made their original investments in XRY more than 15 years ago, and who remain loyal and steadfast customers.

A powerful motivating factor for the whole Company is the fantastic feedback we receive from customers who see us as a partner they can trust. Over time, we deliver pivotal value to

Interim-Report

Q2

2021

our customers, and we are world leaders at much of what we do.

I am convinced that MSAB will continue to grow, and that our solutions will be a critical component in ensuring our customers' success in their work, and for making our societies safer around the world.

We will continue to work hard, and focus on the future, and we know we are on the right path - not because we think so ourselves - but because our customers tell us we're good at what we do, that we are easy to work with, and that our products relative to our competitors are constantly improving. Our customers are, like us, looking forward to the pandemic ending soon so that together we can accelerate the pace on several new and exciting, major projects.

I am incredibly proud of the outstanding work MSAB does to contribute to a safer and more secure world, and our ambition will always be to continue to be world leaders at what we do.

Stockholm, July 2021

Joel Bollö, Chief Executive Officer

Interim-Report

Q2

2021

Improved earnings for first half-year despite lower sales

Comparative figures for profit/loss items refer to the previous year's corresponding period.

Consolidated income statement in summary

Apr-Jun

Jan-Jun

12 months

MSEK

2021

2020

2021

2020

Jul-Jun

2020

Net sales	64.6		83.9	134.9		150.1	290.7	310.1
Cost of goods sold	-6.2		-8.3	-11.0		-13.4	-26.0	-28.1
Other external costs	-11.6		-11.4	-22.3		-28.5	-49.8	-49.7
Personnel costs	-45.8		-49.1	-91.5		-98.9	-188.0	-191.3
Depreciation of fixed assets	-2.9		-3.0	-6.0		-6.0	-12.2	-12.3
Total operating cost	-66.4		-71.8	-130.8		-146.8	-276.0	-281.4
Operating profit - EBIT	-1.9		12.1	4.2		3.3	14.7	28.6
Financial income	0.5		0.7	3.5		2.3	3.2	3.5
Financial expenses	-2.5		-1.6	-3.3		-2.4	-10.7	-9.8
Profit/loss before tax	-3.9		11.2	4.3		3.2	7.2	22.3
Tax	1.0		-0.8	-0.7		-1.3	-4.3	-6.1
Net profit/loss after tax	-2.9		10.4	3.6		1.9	2.9	16.3
Earnings per share before dilution SEK	-0.16		0.56	0.19		0.10	0.97	0.88
Earnings per share after dilution SEK	-0.16		0.56	0.19		0.10	0.97	0.88
Statement of comprehensive income
	Apr-jun		Jan-Jun		12 months
MSEK	2021		2020	2021		2020	Jul-Jun	2020
Net profit/loss after tax	-2.9		10.4	3.6		1.9	2.9	16.3
Currency translation differences	-0.5		2.5	2.5		-0.5	-7.1	-4.1
Total com prehensive incom e	-3.4		12.9	6.1		1.4	-4.2	12.2
Comprehensive income for the period attributable to	-3.4		12.9	6.1		1.4	-4.2	12.2
the shareholders of the parent company

				Interim-Report
				Q2
Segment reporting				2021
MSEK Jan-Jun 2021	Asia & CIS	EMEA & Latin America	North America	Total
Product sales	21.3	63.9	34.9	120.1
Training & other services	0.7	12.0	2.1	14.8
Total	22.0	75.9	37.0	134.9
Recognized at a certain point in	19.2	62.5	30.2	111.8
Recognized over time	2.9	13.5	6.8	23.1
Total	22.0	75.9	37.0	134.9
MSEK Jan-Jun 2020	Asia & CIS	EMEA & Latin America	North America	Total
Product sales	23.8	64.9	43.2	132.0
Training & other services	3.2	9.9	5.3	18.3
Total	27.0	74.8	48.6	150.3
Recognized at a certain point in
time	24.3	63.1	39.5	126.9
Recognized over time	2.7	11.7	9.1	23.4
Total	27.0	74.8	48.6	150.3

Net Sales

Consolidated net sales declined 23.0 percent during the quarter to SEK 64.6 (83.9) million. In local currencies, sales declined 18.1 percent. For information on revenue development, see section Market Comments, pages 12- 14, and the associated graphs.

Expenses

Expenses for goods for resale for the quarter amounted to SEK 6.2 (8.3) million. Expenses for goods for resale depend on the product mix sold, and the lower cost is directly proportional to the lower revenues compared with last year. Historically, the gross margin averages approximately 90 percent. Since early 2020, the company has succeeded in raising its gross margin thanks to a combination of lower purchase prices for certain hardware, and a general rise in sale prices, which has meant an overall improvement in gross margin. The gross margin for the first half-year was 92 (91) percent.

Other external expenses for the quarter including depreciation amounted to SEK 14.4 (14.4) million. MSAB has been actively working with its cost base since last year, and this has improved efficiency throughout the entire company.

This has been accomplished without sacrificing quality or any other aspect of operations. As most branch-specific conferences and exhibitions have not taken place since early 2020 due to the ongoing pandemic, significantly fewer resources have been allocated for such activities. The level of external expenses that the company is reporting for the quarter, and which are in line with the previous year, are expected to increase during the second half of 2021 - if the world at large begins opening again, and travel becomes possible to a greater extent than was the case over the last 18 months. For the period January - June, other external costs, including depreciation, amounted to SEK 28.3 (34.5) million. Even if the expectation and hope is that external expenses will increase somewhat during the second half-year, the cost base is expected to remain lower moving forward than has been the case historically, both as it relates to revenues and to the total cost base for all operations.