Fingerprint Cards AB (publ) publishes interim report for January –
September 2023, and announces cost optimization program
Highlights, third quarter
- Healthy revenue growth across
Mobile, PC, Payment, and Access outside of Asia
- On October 19, 2023, Fingerprints
announced the initiation of a cost optimization program – expected
to yield cost savings of approximately SEK 204 M on an annual basis
– to respond to challenging market conditions that the company
faces in the short term (see below under “Cost optimization” for
more details)
- Repayment of bond loan, following
the convertible bond issue and rights issue, will lower interest
expense by approximately 75 percent, while increasing financial
flexibility with no restrictive financial commitments
- Cash flow impacted by approximately
SEK 20 M in one-time expenses associated with refinancing
Third quarter of 2023
- Revenues amounted to SEK 184.8 M
(143.2)
- The gross margin was 12.8 percent
(12.2)
- EBITDA amounted to negative SEK 40.4
M (neg: 38.1)
- The operating result was a negative
SEK 63.8 M (neg: 59.8)
- Earnings per share before and after
dilution amounted to a negative SEK 0.17 (neg: 0.17)
- Cash flow from operating activities
was negative SEK 38.0 M (neg: 111.6)
January-September 2023
- Revenues amounted to SEK 505.1 M
(671.5)
- The gross margin was 13.9 percent
(22.3)
- EBITDA amounted to negative SEK
158.4 M (neg: 41.7)
- The operating result was a negative
SEK 215.2 (neg: 103.7)
- Earnings per share before and after
dilution amounted to a negative SEK 0.52 (neg: 0.29)
- Cash flow from operating activities
was negative SEK 27.9 M (neg: 230.2)
CEO’s comments
Let me begin my first interim report as CEO by giving you a
summary of our performance in the third quarter including headline
revenue growth, along with the completion of our refinancing to
significantly improve our financial flexibility. I’ll then discuss
the Transformation Plan I’ve set in motion including a large cost
optimization program to ensure our growth brings strong future
profitability with it, organizational changes that bring fresh
energy, agility and new DNA to our company, and a new strategic
direction for Fingerprints to thrive in this incredible Biometrics
market, all of which we are announcing today.
Q3 results and financingI am pleased that we
are reporting 29-percent year-on-year revenue growth. We saw growth
in our Mobile, PC and Payment product groups, as well as in our
Access business outside of Asia. In Asia, Access sales decreased,
driven mainly by lower demand for door locks because of weak
development in the construction sector. Whilst the top-line growth
is encouraging, we continue to face intense price pressure in
Mobile – our largest product group in terms of revenue – as the
industry still struggles with excessive inventory. Aggressive
destocking measures have had a significant negative effect on the
average selling price and thus on our gross margin. Since the end
of the second quarter 2023, we have decreased our inventory by 23
percent and we expect to reach an acceptable level before the end
of this year as previously communicated. On an industry level,
however, we expect that it will take longer for competitors’
inventories to normalize. Once this happens, we expect selling
prices and margins to improve. At the same time, we are continuing
to increase our share of the market for biometric solutions for PCs
– a segment offering higher margins and attractive growth
potential. We also expect to continue growing revenue in the Access
and Payment areas, even though revenue development in individual
quarters remains volatile as these industries are less mature when
it comes to the use of biometric solutions.
Following the completion of the convertible bond issue and the
rights issue, we repaid our SEK 300 M bond loan at the end of
September. This will lower our interest expense by approximately 75
percent, or around SEK 30 M on an annual basis, while increasing
financial flexibility with no restrictive financial commitments. As
a result of this, our ability to execute on our growth and
diversification plans has significantly improved. That said, our
cash flow from operating activities in the third quarter was
impacted by approximately SEK 20 M in one-time expenses associated
with the early redemption of the bond loan, the convertible bond
issue and the rights issue.
Cost optimizationIn response to the challenging
market conditions that are impacting gross margin, we are
initiating a plan to implement a number of restructuring measures
which are expected to yield cost savings of approximately SEK 204 M
on an annual basis with full effect from the second half of 2024,
resulting in an OPEX run rate of approximately SEK 180 M on an
annual basis. This effectively halves our OPEX run rate.
Restructuring costs are currently estimated at SEK 62 M, half of
which will be recorded in the fourth quarter of 2023, and the rest
in 2024.
Let me outline why we are doing this now, what it will mean for
Fingerprints and our key stakeholders, and how we will move forward
as a premium solution provider.
First of all, current market conditions in our largest operating
segment mean that our gross margin is at a level that is
economically unsustainable given our existing cost base. As already
mentioned, we expect the situation in Mobile to improve once
inventory levels normalize. However, we view these cost reduction
measures as necessary in order to safeguard the financial health
and future of the company. Our top priority is to arrest losses,
while continuing to diversify our revenue streams to new,
higher-margin areas, including and beyond PC, Access and Payments.
The global market for biometric solutions is large and growing, and
I see abundant opportunities to innovate by leveraging our premium
capabilities and technology assets in new areas. At the same time,
we are fully committed to supporting our existing customers
including those in Mobile. Profitability will be the overriding
consideration in our evaluation of new projects, focusing on those
projects where our premium capabilities are valued.
A new organization and governance model Whilst
changes affecting our people are never easy, it’s important that we
look forward as a company. I believe that we can significantly
reduce organizational and operational complexity, with a
streamlined and engaging model that injects more speed and
efficiency into our company.
We must deploy our talent efficiently, aligning our people with
strategic projects quickly as market opportunities evolve. To
achieve this goal and create an empowered, efficient organization,
our plan is to transition to a functional organizational model,
enhancing accountability and enabling agility. The two primary
pillars of such a structure will be Product and Sales, with support
from Finance, HR and other operational functions. Both the new
organization and our new strategy will be underpinned by enhanced
governance, accelerating throughput and conversion from innovation
through to sales.
A new strategyFingerprints is a highly
innovative biometric hardware and software company that, based on
our skills and IP, provides premium value to our clients. Today,
the bulk of our revenue is generated from sales of fingerprint
sensor modules to customers in the consumer electronics space -
mainly mobile phone manufacturers. These are high-volume, highly
competitive and mature global markets, but are still only a small
part of the vast, double-digit growth biometrics market. Around
three-quarters of the revenue in biometrics – including software
applications – is currently generated in the government &
security, enterprise & industrial, healthcare, and financial
sectors. In addition to these massive opportunities, there are
other attractive growth vectors available to us, including new
technologies, new channels and partnerships and new business models
such as software licensing.
To capitalize on these myriad opportunities, I am pleased to
announce Fingerprints’ Biometrics Platform. I believe we can better
leverage the value of our talent and portfolio by developing and
expanding them as part of a cohesive, extensible platform which can
then be applied to address a greater array of customer challenges
and opportunities. Instead of disparate technologies, the
Fingerprints Biometrics Platform is a common, integrated set of
tools and capabilities that combine in multiple ways to maximize
our addressable market and customer value creation.
The Fingerprints Biometrics Platform has four layers: devices
which capture and transmit a signal; software modalities such as
fingerprints, iris, face or gait that extract key indicators from
the signal; software analytics engines such as algorithms and AI
that match the signal to a given outcome like identity or behavior,
and the software data layer where the information is managed and
securely stored. Fingerprints are best-in-class at doing this with
the highest efficacy within our current portfolio. Expansion across
the Fingerprints Platform will be delivered through building,
partnering or buying new capabilities to unlock new markets.
There are a multitude of development and expansion
opportunities. With thoughtful allocation of our capital, we’ll
explore a set of potential focus areas including new software
modalities, such as face and health; analytics engine expansion for
outcomes beyond identity with AI; new verticals including retail
and government; new use cases including FIDO and KYC (know your
customer). To accelerate monetization, we’ll explore new licensing
models and partnerships.
Fingerprints continues to be a leader in premium biometrics
solutions as shown by our Q3 growth. By addressing our underlying
costs and evolving to a new dynamic organization, we’re well
positioned to drive profitability performance. Launching the new
Fingerprints Platform we can realize our rich set of capabilities
in new, impactful ways.
Adam Philpott, President and CEO
Today at 09:00 CEST, Fingerprints’ CEO Adam Philpott 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 presentation will be webcast, and participants can register
via this link:
https://edge.media-server.com/mmc/p/fh4xhi3a
For media and analysts: Registration for the teleconference is
carried out via this link:
https://register.vevent.com/register/BI0e4ebb1c8919498382f40810e7346087
For
information, please contact:Adam Philpott, CEOPer
Sundqvist, CFOStefan Pettersson, Head of Investor Relations:
+46(0)10-172 00 10investrel@fingerprints.comPress: +46(0)10-172 00
20 press@fingerprints.comThis is the type of information that
Fingerprint Cards AB is obligated to disclose pursuant to the EU’s
Market Abuse Regulation. The information was submitted for
publication, through the agency of the contact person set out
above, on October 19, 2023 at 07:00 a.m. CEST. |
About
Fingerprints Fingerprint Cards AB (Fingerprints) – the
world’s leading biometrics company, with its roots in Sweden. We
believe in a secure and seamless universe, where you are the key to
everything. Our solutions are found in hundreds of millions of
devices and applications, and are used billions of times every day,
providing safe and convenient identification and authentication
with a human touch. For more information visit our website, read
our blog, and follow us on Twitter. Fingerprints is listed on
Nasdaq Stockholm (FING B). |
|
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