Magnet Forensics acquires assets from Comae Technologies, posts 35 percent revenue growth in Q1 2022

Magnet Forensics founder Jad Saliba and CEO Adam Belsher
Magnet acquired Comae’s memory analysis tech to bolster its cyber incident investigation capabilities.

Magnet Forensics, which develops digital investigation solutions, saw year-over-year (YoY) revenue growth of 35 percent in the first quarter of 2022.

The Kitchener-Waterloo-based company grew its revenue to $19.8 million USD in Q1, a jump compared to the $14.7 million Magnet pulled in during the same period in 2021. However, Magnet also posted a loss of $900,000 in Q1—its second consecutive quarterly drop in net income—after generating net income of $2.8 million in the first quarter of last year.

Magnet grew its revenue to $19.8 million USD in Q1, a jump compared to the same period in 2021.

Magnet attributed this rise in revenue to increased maintenance and support revenue due to growth within the company’s existing customer base, chalking up its loss to investments in research and development (R&D) and sales and marketing, as well as acquisition-related and restricted share unit expenses.

Magnet also announced earlier this morning that during Q1 it acquired strategic intellectual property (IP) assets from cybersecurity software firm Comae Technologies, which is based in the United Arab Emirates and specializes in incident response and memory analysis. The financial terms of the transaction were not disclosed.

Following the release of this earnings and acquisition news, Magnet, which trades on the TSX as ‘MAGT,’ has seen its share price drop just over five percent from $23.41 at market open to $23.18 at time of publication. Although the company’s stock has since dropped below its 52-week high of $65.80 last August, Magnet currently trades above its initial public offering (IPO) target, making it one of the few Canadian tech companies that went public last year to do so. Other firms, like Thinkific, Coveo, and Q4 Inc, continue to trade below their initial issue prices.

Founded in 2010, Magnet develops digital investigation software that acquires, analyzes, reports on, and manages evidence from sources, including computers, mobile devices, IoT devices, and cloud services. The company’s tech is used by over 4,000 public and private sector customers across more than 100 countries to help investigators fight crime, protect assets, and ensure national security. According to Magnet, evidence recovered with its tools has been used to support investigations into cybercrimes, child exploitation, terrorism, human resource disputes, fraud, and IP theft.

RELATED: Magnet Forensics acquires evidence software company DME Forensics in $9 million deal

Led by former Waterloo Region police officer Jad Saliba (CTO) and ex-BlackBerry executive Adam Belsher (CEO), Magnet’s backers include former BlackBerry co-CEO Jim Balsillie, who also serves as the company’s chairman.

According to Magnet, the Comae deal will accelerate its development of memory analysis tech, which it claims plays a “critical role” in recovering evidence from various devices that can be used to piece together what occurred during cyber incidents. Belsher said the move will help Magnet address “a growing need” for its customers.

As part of this acquisition, Comae founder Matt Suiche will be tasked with leading a memory analysis and incident response R&D team at Magnet, which will focus on continuing to develop Comae’s memory analysis platform and incorporating its capabilities into Magnet’s existing solutions. According to Magnet, Suiche’s team at Comae will also work closely with Magnet going forward.

Magnet will continue to develop Comae’s memory analysis platform within the Magnet Idea Lab—a company incubator made up of hundreds of investigators and analysts from companies and police agencies.

RELATED: Magnet Forensics increases TSX IPO target, aiming to raise $100 million

Magnet is no stranger to acquisitions—the Comae deal marks the company’s second since its TSX debut in April 2021. Last September, Magnet purchased Colorado-based DME Forensics, which focuses on video and multimedia forensics, for $9 million USD. Magnet has also previously acquired Virginia-based digital evidence case and lab management solution Sentinel Data.

Magnet’s earnings reflect the company’s push towards increasing its term license revenue relative to its perpetual license revenue—which is part of its strategy to boost the amount of contracts and licenses it sells. Since Q1 2021, the company has grown this amount from 29 percent of total revenue to 50 percent at the end of the first quarter.

The company has grown its annual recurring revenue to $66 million—a 49 percent rise compared to the first quarter of 2021. Magnet said this rise was due to an overall increase in licenses sold and the expanded suite of products it has been selling into its customer base.

Magnet’s 2022 outlook remains unchanged: the company expects to generate revenue of between $91.5 million and $93.5 million, for 30 to 33 percent growth relative to 2021.

Feature image courtesy Magnet Forensics.

Josh Scott

Josh Scott

Josh Scott is a BetaKit reporter focused on telling in-depth Canadian tech stories, tracking Canada’s innovation economy and the people and companies building it, and breaking news. His coverage is more complete than his moustache.

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