Fingerprint Cards AB: Interim Report January – June 2020

Highlights of the quarter

• The demand for Fingerprints’ sensors remained healthy, but sales were negatively impacted by continued insufficient access to production capacity among the major semiconductor manufacturers.
• Fingerprints expanded its product portfolio in physical and logical access control.
• Fingerprints’ iris recognition technology was implemented at a South Korean hospital.
  
  

Second quarter of 2020

• Revenues amounted to SEK 282.3 M (381.8)
• The gross margin was 21 percent (22)
• EBITDA totaled SEK 6.7 M (44.0)
• The operating result was negative SEK 16.7 M (pos: 6.2)
• Earnings per share before dilution were negative SEK 0.07 (pos: 0.01)
• Cash flow from operating activities amounted to SEK 81.3 M (179.6)

January-June 2020

• Revenues amounted to SEK 592.3 M (724.7)
• The gross margin was 23 percent (22)
• EBITDA totaled SEK 18.3 M (79.8)
• The operating result was negative SEK 34.4 M (pos: 4.3)
• Earnings per share before dilution were negative SEK 0.08 (0.00)
• Cash flow from operating activities amounted to SEK 43.5 M (18.5)

CEO’s comments

As expected and communicated earlier, sales in the second quarter were negatively impacted by continued insufficient access to production capacity among the major semiconductor manufacturers. The geopolitical situation has led to increased domestic demand for silicon chips from Chinese smartphone manufacturers, which means that there is a production capacity deficit. At the same time, demand for our sensors remained healthy, despite declining deliveries of smartphones in China during May and June. The proportion of mobile phones with fingerprint sensors has continued to increase. In the mid-price segment, nearly all models sold have a fingerprint sensor and the penetration rate in the low-price segment continues to develop positively.

The gross margin was a percentage point lower than in the corresponding period in 2019, primarily due to higher purchase prices, and the earnings level is not satisfactory. At the same time, it is gratifying that cash flow from operating activities was strong during the quarter. We have continuously improved our inventory management and generally improved working capital.

We expect that the outbreak of the coronavirus will dampen the demand for smartphones for the remainder of the year. Consumers are waiting ever longer to replace their devices and, accordingly, the replacement cycle for mobile phones is expected to be of record-breaking length this year. This means that the global smartphone market could shrink by 10–20 percent in 2020.

At the same time, there has been a clear upswing in contactless payments in the wake of the pandemic because consumers want to avoid touching surfaces in public environments as far as possible. This could lead to an acceleration in the roll-out of biometric payment cards, since the increased security offered by fingerprint authentication makes it possible to eliminate payment caps that currently apply to contactless card payments. Accordingly, the banks can offer their customers a secure and easy way of paying, regardless of the amount. Already prior to the outbreak of the pandemic, we saw increased activity in the market and in June, the French bank BNP Paribas announced its plans to launch a biometric payment card in the autumn of 2020, using technology from Fingerprints. Several other banks are preparing commercial launches. This means that biometrics is now seriously on its way to making its debut in another global mass market and Fingerprints’ complete hard and software solution for biometric authentication in the payment area gives us a very strong starting point. This is illustrated by our technology being used in all 21 of the market tests announced to date of contactless biometric payment cards and in the world’s first commercial launch. We have well-established cooperation with the leading players along the value chain, with card manufacturers and their subcontractors, manufacturers of secure chips, payment systems and card issuers. We are continuing to strengthen our position and develop our strategic partnerships, for example, through the recently announced partnership with STMicroelectronics to develop an advanced system solution for biometric payment cards.

The pandemic has also led to a strong increase in remote working, which can often involve increased IT security risks. By combining security, flexibility and convenience, biometric solutions can facilitate secure access to devices and data, regardless of where an employee is located. The growth opportunities are positive throughout the Access area and we continued to expand our portfolio for biometric access control during the quarter.

Christian Fredrikson, President and CEO

Today at 09:00 CEST 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/rt/fingerprints/index.jsp?seid=166

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 9788598.

Attachment

• Interim report Q2 2020