Fingerprint Cards AB: Interim Report January – June 2019

Highlights of the quarter

• Positive net earnings and continued positive EBITDA trend
• Net cash increased to SEK 486 M (440)
• Stronger market position in capacitive sensors
• Fingerprints participated in one additional market test of biometric payment cards. Fingerprints’ technology is used in all publicly announced market trials of contactless biometric payment cards in the world.

Second quarter of 2019

• Revenues amounted to SEK 381.8 M (389.9)
• The gross margin was 22 percent (neg: 63)
• EBITDA totaled SEK 44.0 M (neg: 402.0)
• Operating profit was SEK 6.2 M (neg: 578.2)
• Earnings per share before dilution amounted to SEK 0.01 (neg: 1.49)
• Cash flow from operating activities amounted to SEK 179.6 M (302.0)

January – June 2019

• Revenues amounted to SEK 724.7 M (679.6)
• The gross margin was 22 percent (neg: 30)
• EBITDA totaled SEK 79.8 M (neg: 550.7)
• Operating profit was SEK 4.3 M (neg: 753.1)
• Earnings per share before dilution amounted to SEK 0.00 (neg: 1.96)
• Cash flow from operating activities amounted to SEK 18.5 M (98.2)

CEO’s comments

Fingerprints’ delivery volumes increased during the quarter and I estimate that our market position in capacitive sensors for smartphones has been strengthened, with a market share that is currently somewhat higher than the figure for the full-year 2018. This positive trend is reflected in the fact that we increased our sales by 11 percent (10 percent in constant currency) compared with the first quarter of 2019. However, since the average selling price (ASP) is lower than in the preceding year, sales declined by 2 percent (12 percent in constant currency) compared with the same period last year.

Compared with the second quarter of last year, we increased our gross margin by seven percentage points. Compared with the first quarter of the year, we had a lower share of software revenues, as well as a less favorable customer mix, which led to the gross margin being somewhat lower than in Q1.

At the same time as ASP has continued to decline, the share of new and more cost-effective sensors in Fingerprints’ product mix has increased. We will soon be ready for the next step by launching yet another new generation of sensors, based on FPC1511, which will be even smaller and thus more cost-effective. The development project is proceeding to plan, and I expect the first smartphones to use this new sensor to be launched as early as this year.

As communicated on August 13, 2019, Fingerprints delivers fingerprint sensors within the context of a production project, which likely means that Fingerprints’ technology will be included in a Samsung smartphone model, the Galaxy A10s, which was launched in August. However, there is also a possibility that technology from alternative suppliers will be used. Fingerprints has received orders and delivered sensors within the context of this project. Fingerprints is also working on an additional production project that could potentially lead to Fingerprints’ technology being included in another future model from Samsung.

The introduction of in-display sensors has led to biometric solutions for smartphones once again becoming a growing market. The fact is that, in 2019, in-display will represent the largest share of the market for fingerprint sensors for smartphones in terms of value. Accordingly, achieving a position in this market is a priority for Fingerprints. In February, we launched our first in-display sensor, the FPC1610, with the aim of establishing ourselves in this segment in 2019 to subsequently capture a significant share of the market.

During the quarter, we further strengthened our position as the leading provider of biometric solutions for smart cards. In June 2019, the major French bank Crédit Agricole announced that it was conducting a market test of biometric payment cards with the aim of launching commercially in France in 2020. The cards use Fingerprints’ T-Shape sensor, which means that our technology is being used in all 20 market tests of biometric payment cards announced worldwide to date. We will likely be able to report on more tests in the near future, since these are a key aspect of testing various solutions under real conditions, collecting feedback from consumers and fine-tuning parts of the system ahead of a broader launch.

We recently announced that Fingerprints is partnering with Giesecke + Devrient Mobile Security to launch biometric payment cards that use our T-Shape sensor. The card which was developed under the framework of this partnership is being used in the above-mentioned market test conducted by Crédit Agricole.

In July 2019, our partner NXP announced that the company’s module for biometric payment cards – incorporating Fingerprints’ T-Shape sensor – has been certified by Mastercard. This is a significant milestone and an important step on the way to enabling secure and convenient payments for consumers around the world. This certification by Mastercard is yet another indication that we are now approaching a broader commercial roll-out and we are delighted to collaborate with NXP and other partners along the value chain to create the next mass market for biometrics.

Christian Fredrikson, President and CEO

Today at 09:00 CET Fingerprints’ CEO Christian Fredrikson will present the report together with CFO Per Sundqvist in a combined webcast and telephone conference. The presentation will be held in English.

The report will be available at fingerprints.com

The webcast and the presentation material can be accessed through https://engage.vevent.com/index.jsp?eid=3483&seid=149

For analysts and media: The telephone conference dial-in is +44 (0) 2071 928000 (international participants) or 08-506 921 80 (Swedish participants). Please state conference ID 7344149.

Attachment

• Interim report Q2 2019