Thread opening for a small Swedish tech company, Zignsec. Are there any investors here who have familiarized themselves with this interesting company before?
This is still a very small (2019 revenue 7M SEK) and unprofitable, but rapidly growing company that offers various electronic services related to identity verification. The company was founded in 2015 and had its IPO exactly a year ago in October 2019. Zignsec has customers from several different industries, e.g., online gaming companies, physical access control, banks, e-commerce… the customer base and industries are constantly expanding.
The company is interesting for the following reasons, among others:
Scalable business model
Revenue still small, but the company is growing rapidly (2020 >100%/a?)
Growth is supported by digitalization, growing identity verification markets/new industries, and regulation
No major global players in the market yet? The competitive landscape is fragmented
Developed impressively since listing, including:
Several new significant customers from existing and new industries
08/2020 Acquisition (BasisID) & directed share issue to prepare for new acquisitions?
Geographic expansion outside Scandinavia has begun (USA, Asia, Central Europe, Africa)
The company’s valuation has grown rapidly in a year, although it has come down by over 25% from the peaks of early September. The industry and its competitive advantages are difficult to assess, but so far, the news flow and results have supported Zignsec’s positive story, and I eagerly await the H2 2020 results.
What thoughts, pro and con, does Zignsec evoke?
A short discussion related to this can be found on the KL side, with some additional information:
Zignsec indeed offers concepts for electronic identification etc. Advanced, simple, and easy-to-deploy identification is required due to, among other things, data security and digitalization. This is ZignSec’s market and opportunity. However, there is certainly competition in that field as well. Time will tell if Zignsec succeeds? I own some of this. For me, it’s a bit of a lottery ticket.
The cash position is good. In 09/2020, there was a directed issue of 40 MSEK (after an acquisition), and my understanding is that the cash balance is now >50 MSEK. In 2019, ZignSec burned approximately 15 MSEK per year.
In its 2019 IPO document, ZignSec commented that its target for 2022 was sales of 100 MSEK and an operating profit of 20%. The track record for growth in previous years is good, and the rest of the year will show how significant the growth curve will be for the current year (>100%? vs. 2019 / sales 15 MSEK?).
Business model: ZignSec has built an umbrella to combine authentication methods from different countries, which can be used for real-time digital user verification anywhere in the world through a single integration, across various industries. A client can integrate only with ZignSec’s platform to verify customers in multiple countries, instead of integrating with local providers in each country.
The earnings logic consists of three parts: a setup fee, a fixed monthly fee, and a transaction-based fee.
I initially invested without a detailed analysis, but as I’ve learned more about the company and followed its progress, I have continuously increased my position, and my expectations for the future are high.
Should we be worried about Zignsec’s recent decline, or is it just “investors taking profits” after a brilliant start to the year? Parabolic rises are often followed by an equally steep decline.
The directed issue in September was executed at a price of 17.5 SEK, so I believe support can be found there at the latest. Q3 results on November 24th - we await them with interest to see how the new large contracts begin to show (the BasisID purchase will only be visible from Q4 onwards, as I understand it) and what the revenue growth % will be?
Now it has already gone below that anti-price. RSI seems relatively low, so one would think it would soon take a small jump upwards. Today could be a pretty okay day to acquire this for your portfolio, if you’ve already been interested. It has already risen a bit from the day’s lows while writing this, and is no longer below the 17 SEK level. My own knowledge of this company is still quite limited, and its stock market journey isn’t very long either, so for this one, we’re more on the “hope for the best” line, hopefully, evidence will come later.
Here’s a Google Translate before the press release is available in English:
"ZignSec expands to the Philippines through agreement with Unicapital
ZignSec has signed a client agreement with the Philippine stockbroker Unicapital Securities Inc, which has access to a market with over one million private investors. The signed agreement applies to a complete solution for online customer identification and onboarding.
ZignSec’s agreement with Unicapital includes customer information forms online, global ID services, PEP and sanction checks, digital signatures and a risk assessment function. With the wide range of services in ZignSec’s digital platform, Unicapital’s digital onboarding process can be automated for improved security and ease of use when opening private investment accounts.
With over one million private investors, and a strategic agenda by PSE (Philippines Stock Exchange) to focus on improved personal finance and financial knowledge, the Philippines is a very important market. 21.5% of account owners in the region are now 18-25 years old, which is why the need for digitization and online security has increased. Unicapital wants to be at the forefront of this development and will, with ZignSec’s digital services, be able to protect its customers against online fraud, counter money laundering and at the same time offer a good user experience.
Comment from Sebastian Zilliacus, Vice President - Asia at ZignSec: “We are pleased to announce our partnership with Unicapital. They are one of a handful of stockbrokers in the Philippines that have been approved by the SEC (Securities and Exchange Commission) and are seen as a leader in the field with their integrated offering of digitized financial services. This means that Zignsec’s solution has also been approved in principle by the SEC to be used for financial services in the Philippines. Unicapital’s commitment matches the deep commitment we have towards our customers. We are both honored and very proud to work with them to create a compatible, simple and user-friendly onboarding process.”
For example, from Tradera’s press release (Swedish-English translator). Tradera is currently owned by PayPal.
"the agreement means that ZignSec will deliver ID and verification services for both buyers and advertisers on Tradera´'s online auction and trading venue. Tradera is Sweden’s largest circular market and the company’s vision is to be a driving force in the transition to a circular economy. With over 5 million visitors a week and 1,000 new ads per hour, things change owners every three seconds on Tradera. "
"Saa’s business model (subscription service in the cloud) with low start-up fees to promote usage and recurring revenue based on monthly fees and transactions
Once the integration with Zignsec’s platform has been established, it is easy for customers to expand and use services
Satisfied could in principle no churn or loss of the customer since the start"
Interesting, thanks @jaska1 for the effort in researching and sharing!
That pricing → e.g. 30,000 scans / 15K€, or 50 cents per scan. Does one scan mean one identity verification? Offhand, that seems like a high price? But business seems to be booming.. of course for large clients with hundreds of thousands/millions of customers, and perhaps just as many scans (?), the transaction cost must surely be on a completely different level?
Really interesting to see where things stand on November 24th…
Now Q2 / 2020 has accumulated 6.1MSEK. If that 2022 target is somehow realistic to reach, this growth trend that has happened from 2018->2019 must continue. It seems extremely challenging, but looking at this year’s news flow, I wouldn’t even be surprised. Q3 will be very interesting.
It’s difficult to assess Alan’s competitive advantages, but here’s a layman’s stream of thought on them:
Niche services built around core identity verification / on the same platform for different industries → there seem to be many of these, and only imagination limits future potential
Platform/library coverage → number of integrations with identity verification service providers in different countries
Technical solutions / ease of implementation
Service certifications / quality trust marks / regulatory compliance
Combining AI/Machine learning as part of identity verification (e.g., Onfido, Socure)
…add to the list?
It’s hard to say how Zignsec positions itself concerning the above, for example, against Signicat, which is currently probably the leading player in this industry in Europe. In the big picture, Zignsec is certainly in a challenger role. Signicat seems to have recently expanded into electronic signatures, an area where Zignsec does not operate, instead focusing on other services built around identity verification (8? different services).
As @Jaska1 noted, this billion-dollar market will double in a few years – the potential is enormous, and megatrends/regulation/data breaches/fraud, etc., support it. Once a contract with a customer is signed, the threshold for switching providers is high, meaning it’s also a race to see who can capture markets fastest. We will surely see more acquisitions by Zignsec in addition to organic growth. How Zignsec will fare in the competition remains to be seen – upcoming quarters will show the growth trajectory and whether growth promises will be fulfilled. Zignsec has recently announced several large (?) contracts in Europe and the first contracts outside Europe, but there’s no factual data yet on how these contracts will reflect in the top line, or if they will at all. The stock’s valuation is, in my opinion, still very attractive if Zignsec can grow according to its plans. For now, I think it’s worth staying on board and following the development…
It’s been around for years, with a turnover of 30m€, which I believe comes mainly from the Nordic countries. They recently changed their CEO “to support internationalization”. This industry, as I understand it, has expanded in recent years and will continue to expand in the coming years into new spheres and new industries, even though the technology was indeed invented a long time ago.
Edit: and indeed, as I understand it, the Nordic countries have been quite a bit ahead of other countries in this regard
“Comment from Timm Schneider, CEO of ZignSec:
“Our newly launched partnership with Suprema is incredibly important to us, partly because our technology in combination with theirs can revolutionize how we interact with doors and locks in the future, but also because it is a huge quality stamp for us. I look forward to working with them for a digital and secure society. ””
When it was listed on the stock exchange, the subscription was oversubscribed by 750%.
E: I also added a couple of older articles from 2019 here
