Magnet Forensics Upcoming IPO (MAGT)

Barkha Rani Apr 27, 2021

Founded in 2010, Magnet Forensics is a developer of digital investigation software that acquires, analyzes, reports on, and manages evidence from digital sources such as computers, mobile devices, IoT devices, and cloud services. Management claims that more than 4000 public and private sector customers in over 90 countries use the software. MAGT’s software helps investigators fight crime, protect assets and guard national security.


Digital forensics is the science of finding evidence from digital sources, in the form of traces of data left behind on digital devices. The investigators use the data to determine what happened, where it happened, who it happened to, when it happened, how it happened, and who did what. With many sources of data such as computer programs, operating systems, and other applications, investigators have to plow through a wide range of data such as the following:

MAGT’s flagship product, Magnet AXIOM, is used by digital forensics investigators to preserve, identify, extract, analyze and document digital forensic artifacts.

Initially designed for use by government law enforcement, MAGT serves two distinct market segments: public sector and private enterprises. For public clients, MAGT tools are used for investigating criminal cases and corroborating the facts of the case, and private enterprise customers use MAGT tools for internal investigations, whether related to fraud, employee misconduct, IP theft, harassment, data breaches, and other cybercrimes. 

MAGT’s customer base is well diversified across industries and regions. The top 20 customers by end-user represented nearly 22% of total revenue as of year-end 2020. In a business like this, recurring revenue provides visibility into MAGT’s ability to generate predictable cash flows. The percentage of recurring revenues has grown from 63% in 2018 to 70% in 2020. 

MAGT offers customers two alternatives for licensing software:

  1. Term License Contract: similar to a conventional software subscription model, provides customers with rights to use the software for a fixed term, typically of one to three years. The contract entails the use of forensic artifact updates, cloud collection access, software platform maintenance, and technical software for the duration of the contract,
  2. Perpetual License: designed to meet the budgeting needs of public sector clients providing customers with rights to use the software in perpetuity. The contract is combined with a separate term subscription to receive software maintenance and support, which are offered in one, two, or three-year terms

Nearly 60% of total software license revenue in fiscal 2020 came from Perpetual Licenses, while there was a ~91% increase in software license revenue recognized from Term Licenses over the year. MAGT’s Annual Recurring Revenue per Account (ARRPA) has grown nearly 86% in the two-year period ended 2020, and Net Dollar Retention Rates were in excess of 120% in fiscal 2019 and fiscal 2020.

Opportunity & Growth

As of Dec 31, 2020, MAGT employed 270 people and operated four offices. Total revenue for Fiscal 2020 was approximately $51.2 million, representing a two-year CAGR of 38%, while adj. EBITDA for the same period was $15.4 million and net income for the same period was $10.6 million, representing a 21% net income margin.


Source: MAGT Sedar Filings

Competition and Takeover Target

Management has recognized the following as key competitors in specialized sub-markets:

Management filed a preliminary prospectus for an initial public offering (IPO) in April 2021. The offering is of nearly six million shares, with an offering price targeted between $14-$16 per share totaling to an issue amount of ~C$90 million. Management intends to use the net proceeds of the offering to strengthen the balance sheet and allow the company to pursue its growth strategies.

With the current numbers, MAGT’s underwriters are valuing the company at just around 15x earnings, and 1.8x sales, considering last twelve months revenues. Cash standing pre-offering stood at $21 million, and debt at $2.2 million. These multiples do look conservative compared to their larger peers but this might be due more to MAGT being a bit more of a niche service provider at this time.


MAGT is an interesting company that will offer a bit of a unique 'flavour' to Canadian markets. Companies initially going public can sometimes have a bit of a rocky start as they find their feet in public markets which is why we typically prefer to allow a company a bit of time to operate publicly traded. Regardless, we think MAGT will be a name to keep on ones radar. 

Happy Investing!

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Disclosure: Authors, directors, partners and/or officers of 5i Research or related companies do not have a financial or other interest in MAGT at the time of publishing

1 comment


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Apr 27, 2021
This offering interests me. I use TD. Will I be able to buy shares through them? They do not have it listed in their new offerings. When does the company think shares will begin to trade?
Thanks guys.