Avanza: Exciting times await Irisity

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Article by Ludvig Löngårdh in Placera 29 September 2021

Exciting times await Irisity

The Gothenburg-based security company Irisity has had a fantastic journey on the stock exchange and the share is up about 80 percent this year. The question is whether the company can continue to offer shareholders a good return?


The security industry has previously been a staff-intensive industry and operating margins have been around a low 5 percent. Throughout history, the solution has been everything from patrolling guards to complicated sensors. Now, however, the industry is facing a new era.

One of the fastest growing niches in the security industry is video surveillance. Industry analysts forecast that this niche will have an average annual growth rate of around 10 percent in the coming years, this is mainly driven by the implementation of AI in today’s surveillance cameras. Today, there are approximately 500 million IP cameras (surveillance cameras) globally excluding China. AI penetration in cameras is low and is expected to grow sharply in the coming years. Irisity is one of the players that streamlines the video surveillance niche.

The software company Irisity previously went by the name Mindmancer and was founded by two students from Chalmers University of Technology. The First North listed company today has a market capitalization of approximately SEK 2 billion.

The company is active in the development of algorithms for IP cameras. The algorithms that Irisity develops have the ability to alarm automatically in the event of an intrusion on a protected object. Using self-learning algorithms (AI), Irisity’s algorithms can identify human behavior over long distances under all possible types of light conditions. According to the company itself, the number of false alarms can be reduced by as much as 99.9 percent when using Irisity’s software IRIS™.

IRIS intrusion detection

By implementing Irisity’s software algorithm, security companies can save both time and resources. The company’s software enables cost savings of around 50 percent for the customers who use their product.

The company has different cutting-edge algorithms that are adapted to different types of situations. Examples of areas where Irisity offers cutting-edge algorithms are the rail and transportation industry, elderly care and school monitoring. In addition, Irisity’s software has the ability to have anonymization in real-time. It often takes several months to get permission to set up cameras in public places, but with the help of Irisity’s anonymization technology, this process can be streamlined.

Irisity uses a Saas revenue model where the company licenses its software for a monthly fee. The company receives a monthly income per camera (with Irisity’s software). This monthly income is expected to average $15 per camera. The gross margins at full rollout are expected to be 90 percent per camera, states Irisity.

About a month ago, Irisity acquired competitor Agent Vi, which has come a little further in the commercialization phase. Agent We had sales of $6.1 million last year and reported a profit of $0.3 million. The acquisition is expected to create synergy effects in areas such as product development, marketing, and sales. In addition, Agent Vi has agreements with security giants such as Securitas. The acquisition of the company is expected to contribute revenues in excess of $ 12 million over the next twelve months. Irisity thus expects the company to reach a positive cash flow for the full year 2021.

One aspect that is particularly interesting is that Irisity’s software can be implemented in both existing and new cameras. This means that Irisity is hardware independent. One could argue that this is one of Irisity’s competitive advantages. The greatest competitive advantage could be considered to be the amount of data Irisity receives. The more cameras Irisity has exposure to, the more data they get. More data provides the conditions for making Irisity’s algorithms better and thus more competitive.

Irisity                                 2021e          2022e          2023e
Ev/S                                   12                 3,8               1,7
P/E                                     *                    21                8
Ebit marg.                          -1,76             30                40

Analysts believe that the risk of commercialization decreases due to the acquisition of Agent Vi. Of course, this risk still remains in the company. Irisity has agreements with some of the world’s largest camera manufacturers as well as security companies and the company is facing a major global expansion.

The company has high expectations and it is important that now in 2021/2022 it really gets started with the rollout. The company’s business model is very scalable and we can expect marginal expansion once Irisity has scaled up properly.


Written by:

Ludvig Löngårdh, Placera