Fingerprint Cards AB (publ) publishes interim report for January – September 2024

Highlights

• Continued focus on high-margin, high-growth segments, with decision to wind down PC product group.
• Wind-down of Mobile operations continue according to plan. Please see page 5 for a summary.
• Gross margin excluding R&D depreciation reached 38.7% (21.2% in Q3 2023).
• Debt-free: Following the completion of the rights issue, the convertible bonds, amounting to SEK 108.3 M (including accrued interest) was repaid.
• Operating profit is impacted by two non-cash items: a SEK 34.3 write-down of capitalized R&D projects and a SEK 183.6 M goodwill write-down related to the acquisition of Delta ID that was finalized in 2017. For more information, refer to pages 6-7.
  
  

Third quarter of 2024

• Revenues amounted to SEK 102.8 M (184.8*)
• The gross margin was 18.3 percent (12.8)
• EBITDA amounted to negative SEK 50.0 M (neg: 40.4)
• Adjusted EBITDA amounted to negative SEK 22.8 M (neg: 40.4)
• The operating result was negative SEK 291.0 M (neg: 63.8)
• Earnings per share before and after dilution amounted to a negative SEK 0.10 (neg: 0.07) **
• Cash flow from operating activities was negative SEK 25.0 M (neg: 38.0)
  
  

January-September 2024

• Revenues amounted to SEK 361.6 M (505.1)
• The gross margin was 10.8 percent (13.9)
• EBITDA amounted to negative SEK 102.9 neg: 158.4)
• Adjusted EBITDA amounted to negative SEK 120.9 M (neg: 158.4)
• The operating result was negative SEK 456.7 M (neg: 215.2)¬¬¬
• Earnings per share before and after dilution amounted to a negative SEK 0.30 (neg: 0.22) **
• Cash flow from operating activities was negative SEK 162.0 M (neg: 27.9)
  
  

* Numbers in brackets refer to the year-earlier period
** As the subscription price was below the market price, a fund element has been identified, which means that the comparison figures have been recalculated.

CEO’s comments

Performance and Transformation Overview
Our Transformation Plan, initiated in Q4 2023, aims to return Fingerprints to profitability. A critical component of this plan is Portfolio Refresh, where we exit commoditized, low-margin markets to focus on profitable growth segments. Key achievements include the complete exit of the Mobile product group, which has already contributed to gross margin improvement and significantly reduced our operational costs. Headcount reduction (42% since the end of 2023) demonstrates our commitment to cost optimization and improved cash flow.

While our Access product group shows sequential growth, the PC market is rapidly commoditizing like Mobile. We will wind down this product group, achieving further cost reductions and entirely exiting China.

In parallel, we are advancing strategic discussions with potential investment partners for our product lines – Access, Payment, and PC – to unlock additional growth capital and enhance value creation.

Revenue performance: navigating strategic transition
Our Q3 results reflect our ongoing transformation. While Mobile revenues continue to decline as we wind down operations, the segment still contributed significant revenue this quarter – albeit at a low margin – marking the final stages of its lifecycle.

For our product groups outside Mobile, revenue performance was mixed. In the PC product line, slower sales partly stemmed from some models incorporating our technology that are now reaching later lifecycle stages. Customer shifts to other suppliers as part of risk diversification strategies have also impacted our market share, given our status as a smaller-cap company. Securing new PC projects is capital-intensive and generally takes longer compared to the Mobile industry, reinforcing our dicision to wind this business down while we seek partners to benefit from our assets and support our customers.

In contrast, our Access product line demonstrated robust sequential growth this quarter, maintaining the positive momentum from earlier in the year. Market demand for biometric authentication—particularly for FIDO-certified products—remains strong. To capture these opportunities, we introduced FPC AllKey, a versatile, high-security biometric solution for various devices, from smart door locks to cryptocurrency wallets. This launch strengthens our position in the access control market and broadens our addressable market in secure authentication.

Cost Optimization and enhanced operational efficiency
Cost reduction remains pivotal in our transformation efforts. By the end of September, we had lowered our headcount, including consultants, to 107 from 119 in June 2024, primarily driven by our ongoing transition out of Mobile, our outsourced manufacturing model, and increased operational efficiency.

As a result of the PC wind-down, we will continue to implement cost reduction measures in the fourth quarter in order to significantly improve our OPEX run rate by the end of this year. In addition, our objective is to reach an annualized OPEX run-rate of less than SEK 70 million by the end of Q2 2025, underscoring our commitment to operational efficiency and disciplined resource allocation.

Strengthened gross margin from strategic refocus
Adjusted for R&D depreciation, our gross margin improved to 38.7%, compared to 25.4% in Q2 2024. While continued intense price pressure within our remaining Mobile operations impacted gross margin, the segment benefitted from a marketing incentive adjustment as part of the wind-down. As we entirely phase out Mobile operations, we expect further gross margin improvements by reallocating resources to growth segments aligned with our profitability goals, fully supporting our transformation plan.

Debt-free
We completed the rights issue in September, with HCM subscribing to the remaining shares under their guarantee commitments. Following this, we fully repaid SEK 108 million in convertible bonds, including accrued interest, leaving Fingerprints debt-free and ensuring a level playing field for all shareholders.

Digital Identity: innovation and strategic Positioning
Fingerprints continues to expand its digital identity footprint, most recently with the launch of our 4th generation iris recognition software. This "just glance" technology offers secure, touchless authentication with exceptional versatility, performing reliably even with accessories like glasses and masks. It supports privacy-sensitive sectors, including automotive and access control, and is well-suited for Zero Trust security frameworks, where it mitigates deepfake risks and enhances system-level security. System integration with select customers will begin in Q1 2025, marking a critical step in broadening our digital identity offerings.

Looking ahead, we are committed to building a robust digital identity platform to help our customers address the myriad cyber-risks and poor user experience arising from passwords. As we complete the phase-out of our Mobile segment, we are strategically reallocating capital toward high-margin, high-growth segments in digital identity. Our investment plans include partnerships and technological advancements that strengthen our identity solutions, with a particular focus on sectors requiring advanced authentication, such as enterprise security, both in edge modalities and in the cloud. These partnerships will enable us to deliver scalable, innovative solutions tailored to evolving market needs.

Our transformation is designed to ensure sustained profitable growth. Ongoing cost optimization will keep Fingerprints lean and agile, while targeted investments in digital identity reinforce our leadership in secure authentication. As we carve out our digital identity and secure authentication specialty, Fingerprints is well-positioned for sustainable growth and long-term value creation through these initiatives.

Adam Philpott, President and CEO

Today at 09:00 CET, Fingerprints’ CEO Adam Philpott will present the report together with CFO Fredrik Hedlund 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/ro7agrms

For media and analysts: Registration for the teleconference is carried out via this link: https://register.vevent.com/register/BIf1f6056df56b4c3780ac7cdcddadad5a

Attachment

• Interim report Q3 2024