Fingerprint Cards AB: Interim report January — June 2018

Short of the quarter

  • The sales trend stabilized somewhat, with a sequential revenue growth of 35%

  • Positive cash flow from operations, driven by a sequential improvement in operating profit excluding non-recurring items, as well as a tax refund

  • As communicated on June 4, implemented, additional cost savings, which is estimated to result in savings of at least 350 M on an annual basis

  • The operating result is charged with restructuring charges of 43.2 Million, and two non-cash items: an inventory impairment of 305,0 Million and a write-down of capitalized R & d projects on 146,6 M

  • Excluding restructuring and impairment charges, the operating margin amounted to -21 % (15 %). Gross margin excluding lagernedskrivningen amounted to 15 % (42)

The second quarter of 2018

  • Total revenue amounted to 389,9 Million (823,4), a decrease of 53 % compared with the second quarter of 2017

  • The gross margin amounted to -63 % (36)

  • Operating profit amounted to -578,2 M (72,0)

  • Earnings per share before dilution decreased to -1,49 Kr (0,10)

  • Cash flow from operating activities amounted to 302,0 M (528,0)

January-June 2018

  • Total revenue amounted to 679,6 M (1 509,3), a decrease of 55 % compared with the same period in 2017

  • The gross margin amounted to -30 % (39)

  • Operating profit amounted to -753,1 M (142,8)

  • Earnings per share before dilution decreased to -1,96 Kr (0,28)

  • Cash flow from operating activities amounted to 98,2 Million (eur 203,9)

Comment from the ceo

While sales stabilised somewhat during the second quarter, with a sequential revenue growth of 35%, market conditions remain challenging. Compared with the same quarter of the previous year, Fingerprints its turnover by 53%, primarily driven by the average selling price of our products decreases. Fingerprints have continued to be a leading position in the field of capacitive fingeravtryckssensorer for smartphones, but during the year we have seen a clear shift in demand in favour of smaller and cheaper sensors. At the moment, approximately 80% of the sensors we supply of lågkostnadsprodukter. This is a marked change compared with last year, when the demand scenario has allowed for a more varied product range with sensors in several different designs and price ranges.

The domestic chinese smartphonemarknaden recovered somewhat during the quarter, but volumes are still lower than in the corresponding period last year. We assess that the market for capacitive fingeravtryckssensorer for smartphones will continue to decline in value. This is a consequence of the continuing price pressure, but also to alternative biometric technologies, not the least in-displaysensorer, is introduced. For Fingerprints, this means that we must lower our costs while we focus on the diversification for increased growth, reduced risk and more stable revenue streams.

Strong cost management and new organization

In the beginning of this year we initiated a programme, which means savings of approximately sek 360 Million in 2018, with the full effect on cash flow beginning in the third quarter. As communicated on 4 June, we are implementing further cost-saving initiatives, which we expect to complete during the third quarter of 2018. These estimated mean cost savings of at least another 350 Million on an annual basis with full impact at the end of the fourth quarter of 2018, which will result in a rörelsekostnadsnivå of less than 400 M on an annual basis, and prior to the capitalization of R & d expenditure. This means that we reduce the rörelsekostnadsnivån with approximately two-thirds compared with 2017. I am well aware that this means difficult changes for many of our employees, but the alignment is necessary in order to safeguard our competitiveness.

We simplify and streamline our organization by coordinating the Business Line Smartcards and Business Line Automotive & Embedded in a device. At the same time, we reduce the number of people in the executive team from ten to six. For more information about the management structure as of July 1, 2018 are on page 8.

In order to face the negative price movements, it is absolutely essential that we can ensure a competitive cost of production. As communicated on 18 June 2018, has launched a fingerprint sensor with lower production costs relative to current generation of sensors, but with continued high biometric performance. We expect the first commercial phones using this new sensor will be launched in late 2018 or early 2019.

Diversification

Diversifying the business is our most important strategic priority. It is about both broadening our teknologiportfölj, not least in order to defend our strong position in mobilsegmentet, and to expand in other industries through new applications of our biometric solutions. Our goal is to have approximately 10 percent of sales in 2018 to be generated outside of the capacitive sensors for mobile phones. We were able during the quarter to tell you if the majority of shops in the field of Embedded, inter alia, that the Fingerprints solutions are used in a smart suitcase from Xiaomi 90FUN, in the secure USB devices from the Ensurity and Feitian, as well as in a debit card kryptovalutor from MeReal Biometrics and Unikeys.

In mobilsegmentet we see that the alternative to the capacitive fingerprint sensor is starting to gain ground. During the year, commercial-displays, which integrates the fingerprint sensor into the screen, introduced to the market. Check-display technology is a priority development area for the Fingerprints, then the interest among our customers is significant. Work to further develop our unique ultrasound-based check-display technology continues, with the goal to enable mobile phone users to authenticate themselves by placing their fingers anywhere on the screen. Within the touchless-the area we focus on to further develop our solution for iris recognition, with the specific objective to further increase the user-friendliness of smartphones.

When it comes to expansion in new application areas, it is gratifying that we in the second quarter, secured initial orders for our T-Shape module for biometric smart cards from two global manufacturer. It is indeed even on the small volumes, but orders is an important milestone and represents a further step towards a new mass market created for our solutions. In June, we could also tell you that Fingerprints ActiveIRIS®-system is used in an indian pay terminal from ApnaPay that enables payments through iris recognition, and that can authenticate digital payments via the biometric identitetssystemet Aadhaar.

Christian Fredrikson, president and ceo

Today at 09:00 CET presents Fingerprints ceo Christian Fredrikson report together with the Acting CFO Ylva Blomén in a combined webcast and conference call. The presentation is in English.

The report will be available on the

fingerprints.com

.

The webcast and supporting slides will be available on the

https://engage.vevent.com/rt/fingerprints/index.jsp?seid=131

For analysts and the media: the Teleconference can be reached via +44 (0) 1452 560 304 (international participants) or

08-506 921 86 (Swedish participants). V. g. provide the conference ID 3390799.

Delårsrapport_Q218_SVE

This announcement is distributed by Nasdaq Corporate Solutions on behalf of Nasdaq Corporate Solutions clients.

The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein.

Source: Fingerprint Cards AB via Globenewswire

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