Press release
October 26, 2017
Fingerprint Cards AB: Interim report January-September 2017
Leading position in a challenging smartphone market and positive trend for smart cards
- Challenging smartphone market and weakened gross margin, but sequential volume growth
- Positive cash flow, decreased inventory and strong cash position
- Positive trend for smart cards
- Increased investment in strategic R&D projects
Third quarter 2017
- Revenues amounted to SEK 841.4 M (1,862.3), down 55 percent compared with the third quarter of 2016
- The gross margin was 33 percent (49)
- Operating profit amounted to SEK 52.4 M (764.5) and the operating margin was 6 percent (41)
- Earnings per share before dilution totaled SEK 0.16 (1.89)
- Cash flow from operating activities amounted to SEK 174.7 M (134.5)
January-September 2017
- Revenues totaled SEK 2,350.7 M (5,019.6), down 53 percent compared with the year-earlier period
- The gross margin was 37 percent (49)
- Operating profit amounted to SEK 195.2 M (2,058.2) and the operating margin declined to 8 percent (41)
- Earnings per share before dilution totaled SEK 0.44 (5.04)
- Cash flow from operating activities amounted to SEK 378.6 M (944.3)
CEO's comments
Leading position in a challenging smartphone market and positive trend for smart cards
As previously announced, earnings for the third quarter were impacted negatively by the cautious market situation and noticeable price pressure. Yet on a positive note, we continued to reduce our own inventories and maintained a strong cash flow. We are operating in a mature mass market where we will remain a leader in terms of volumes and we are implementing a number of initiatives to enable us to restore our growth and improve our profitability. Firstly, we are pursuing a combination of technology and product development in order to cut production costs and develop new, innovative products. Secondly, we are focusing on business development in order to increase the number of application areas for our technology and broaden our customer base. Finally, we will focus on increasing efficiency and lowering costs throughout the supply chain. We are also aiming to implement a number of efficiency measures in order to reduce our costs.
When it comes to the market, there were a number of concurrent technological trends and uncertainty factors that caused our Chinese OEM customers to adopt a highly cautious approach during the quarter. As a result of this uncertainty, our customers have opted to shorten their planning horizons and component inventories in the value chain have decreased from normal levels. We are also seeing signs of consolidation in the value chain. This impeded market growth and our deliveries during the quarter. For example, we are seeing a trend toward smartphone screens that cover the entire front of the device and many OEM customers are therefore looking to move the fingerprint sensor to the back of the phone. Back-mounted sensors are sold at a lower price which - in combination with the general price pressure - has resulted in a decline in the average selling price (ASP). The rate of decline in ASP amounts to approximately 30 percent annually for 2017. Looking at the fourth quarter, I expect our overall delivery volumes to decline compared with the third quarter due to seasonal effects in the component industry.
Our OEM customers are also evaluating other technologies, such as the possibility of fully integrated in-display fingerprint sensors. As of yet, there are no commercial in-display solutions suitable for mass production, but we are engaged in a number of development projects in the area. Iris and face recognition are also being evaluated as alternative biometric methods.
We are seeing no signs that our OEM customers plan to replace the fingerprint sensor with other solutions. Instead, there is talk of offering complementing biometric methods for authentication, known as multimodality. Our iris solution would work well in such a scenario, and our major OEM customers and customers in other segments have expressed significant interest in this possibility.
Fingerprints' market position remains very strong. During the quarter, 27 mobile devices equipped with our sensors were launched and we announced the first product launch of FPC1028, a high-performance, cost-efficient sensor.
Fingerprints' smart card offering is attracting considerable and growing interest, even though it will take time for market volumes to become comparable with those we are currently seeing in the smartphone market. As the only player in this space with extensive experience in the mass production of sensors, Fingerprints has a very strong starting position in the promising smart card market. During the quarter, we took the next step toward high-volume production of Fingerprints' smart card sensors through the launch of the new module design T-Shape. We also joined the standardization work being carried out by Eurosmart and announced that our sensors will be used in AirPlus's pilot project for contactless payment cards.
To create the conditions for profitable growth, we are pursuing a number of technology and market initiatives and are continuing to invest in new innovations. We will talk more about this at our Technology Update on November 1 in Stockholm.
Christian Fredrikson, CEO
For further information, contact:
Christian Fredrikson
President and CEO, Fingerprint Cards AB (publ),
+46 31 60 78 20
Stefan Pettersson
Investor Relations
+46 10 172 00 10
investrel@fingerprints.com (mailto:investrel@fingerprints.com)
www.fingerprints.com/corporate/ (http://www.fingerprints.com/corporate/)
Welcome to Fingerprint Cards' presentation of the interim report for the third quarter of 2017 on October 26 at 3:00 p.m. CEST. The presentation will be webcasted, and participants can register via the link below.
https://engage.vevent.com/index.jsp?eid=3483&seid=113 (https://engage.vevent.com/index.jsp?eid=3483&seid=113)
For media and analysts: The telephone conference dial-in is +44 (0) 1452 5555 66 (international participants) or 08 5033 6434 (Swedish participants). State conference ID 9902 9857.
This information is information that Fingerprint Cards AB is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact person set out above, at 7:00 a.m. CEST on October 26, 2017.
About Fingerprint Cards (Fingerprints)
Fingerprint Cards AB, Fingerprints, with its Swedish roots, is the leading global biometrics company, whose mission is to spearhead the development of biometric interaction that facilitates the convenience and integrity of the individual. Its value is proven daily by users in millions of devices, through billions of touches, who are their own key - quite simply, with a human touch. Fingerprints develops biometric systems comprising sensors, algorithms, software and packaging technologies. The success is based on product development at the cutting edge of technology, which results in world-leading products in terms of security, convenience and performance. The current product range consists largely of fingerprint sensors and customers are primarily manufacturers of smartphones and tablets, where the company is market leading. As the use of biometric solutions increases, Fingerprints is working to broaden its offering by using different biometric techniques, or modalities, and to identify other market segments where the solutions can be used, such as smart cards, PCs, automotive and online devices (IoT). The Fingerprints share is listed on Nasdaq Stockholm (FING B). The company has shown strong growth and sales totaled SEK 6,638 M in 2016, with an operating margin of 39 percent. Most of the more than 500 employees work in Sweden, but the company has offices worldwide, from Shanghai to Silicon Valley.
Important information
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Source: Fingerprint Cards AB via Globenewswire
