This week in biometrics industry stocks

July 14, 2017 - 

As the biometric industry continues to grow BiometricUpdate is bringing a new focus to the stories around the stocks in the sector. Check in with this space each week for a rundown of the financial news and interesting ideas from the week that was.

This year of 2017 has been a banner one for technology stocks. Nasdaq is still trading near the record high of just a month ago. The so-called FANG stocks (Facebook, Apple, Netflix and Google) have outperformed broader markets. Recent sell-offs injected some volatility into the sector. But it turns out the sell-offs of the past few weeks have been temporary. Tech shares enjoyed another strong week, rising 2.5% for their best performance in seven months.

Within the biometrics sector investors seem to like where NEXT Biometrics is going. The company recently reported first quarter earnings and the news was good. Revenue in the first quarter came in at NOK 24.1 million (about USD $2.9 million). This compares very favorably to revenue of NOK 5.2 million (about USD $633,700) in the first quarter of 2016. The company also reported that the company is just now rolling out some impressive products. As well, a couple of key new contracts have been signed, while several new and important hires have been made. No wonder interest in the firm is building.

One of the company’s most impressive products is a new flexible fingerprint sensor. The company had previously announced that a major goal for the first half of 2017 would be developing the ability to mass produce this sensor. It appears that goal can now be checked off. According to a recent press release the production line is operational and the production partner, Innolux (Taiwan), has produced initial volumes. NEXT and Innolux worked through 2016 and 2017 to get the production process installed and operating correctly. It seems production is ready to go ahead. The company hosted a presentation for shareholders at the Innolux facility in Taiwan where an executive explained that the thermal sensing technology from NEXT has been, “… successfully applied on [a] flexible panel with satisfactory quality.” This is impressive. The G3.5 fabrication plant at the Jhunan facility will be used for the mass production of the panels, which use an active thermal fingerprint sensing technology featuring a large screen area. According to the press release the sensor is highly accurate and compatible with both hard glass and flexible panels. An executive with Innolux suggests the product will become a ‘cash cow’ for the company. The goal now is to take the flexible sensor to creditcard, electronic payment, mobile phone and notebook computer manufacturers. “We are not aware of any other fingerprint supplier able to mass produce flexible sensors. This is not a trivial achievement,” said Ritu Favre, CEO of NEXT. “We have converted a truly innovative idea from the protoype level to the volume mass production level, and this in a field where others have yet to succeed. The smart card market represent endless opportunities and with a mass production line in place, we look forward to extend our discussions and negotiations with potential clients.”

NEXT has also announced that it shipped sensor number two million in April of this year. According to company executives this demonstrates NEXT has the, “… proven ability to consistently mass produce sensors with industry normal yield figures.”

Another recent announcement from NEXT includes a major order from a Tier 1 semiconductor company. The order was for a “large-size secure sensor… [that] works for close to 100 per cent of the user base,” according to the company. The first volumes of the order are already being shipped. According to Favre the order is a result of a twelve-month design and qualification process in the Access Control and Government ID sector. “NEXT’s unique combination of large size and low cost sensor are a perfect fit. We look forward to close cooperation with innovative partners like this,” said Favre.

Ensuring these projects come to fruition will be a couple of new key executives at NEXT. Favre herself is relatively new to the company, having joined NEXT just this year. At 48 years of age Favre has extensive experience in both the semiconductor and the fingerprint sensor industry. She has a masters in electrical engineering. She worked for fifteen years at Motorola as a manufacturing manager and manager of business product operations. She moved on to Freescale Semiconductor where she worked for almost a dozen years, rising to senior vp and general manager of the RF Group. For the past two years she served as senior vp and general manager of the biometric products division at Synaptics. The outgoing CEO and chairman of the board of NEXT, Tore Etholm-Idsoe, described Favre as being, “… the right person to establish NEXT as a leading supplier in the fingerprint industry. There is a strong need for semiconductor experience in the next stages of the company´s development… Ritu has extensive semiconductor experience… and also knows the biometric industry well after heading the biometric division of Synaptics… We need to increase top and middle level management capacity significantly. Having proven ability to build operations serving Tier 1 customers with more than 100 million sensors annually, Ritu is perfectly positioned to take the company to the next level.” An interesting note in the press release suggests that, “Ritu Favre has a background from India and has a deep understanding of the country´s culture and language, which will greatly benefit NEXT as the company seeks to exploit the vast opportunities in the Indian market.” For his part, Etholm-Idsoe, the former CEO, will leave the engineering to Favre and will concentrate on capital markets operations. As NEXT grows it will rely on market financing to more often to carry out its business plans.

Other recent hires at NEXT include Dan Cronin, who joins as executive vp of engineering and brings more than thirty years of experience in the semiconductor industry in a career spanning IBM, Motorola, Freescale and NXP. Zehira Dadon-Sitbon also recently accepted a position at NEXT. She’ll serve as vp of product and program management. With over thirty years in the semiconductor industry she has run complex multi-discipline programs at large companies like Motorola, Philips, Freescale and Synaptics. “The recent hires prove our ability to attract top semiconductor industry talent. We are now taking a number of steps towards becoming a leading supplier of high quality large fingerprint sensors. Production is running at high yields, and coupled with our new ASIC we are able to ramp up volumes to meet the increasing demand for our cost efficient large-size sensors,” according to the company.

– Biometrics firm NXT-ID announced this week it struck a deal to sell $3,432,000 of shares and warrants to a group of institutional investors. The private placement will see a group of large firms already invested in NXT-ID buy up the stock. The deal will leave the investors owning about 9.99% of NXT-ID in return for the cash. The stock was priced at $1.43. The warrants are exercisable six months after issue and will remain so for five years. Aegis Capital and Maxim Group LLC worked the deal. It’s no surprise that institutional investors would be interested in upping their share of NXT-ID now (the warrants give them investors the right to up their stake in the years to come). Just two weeks ago the company’s subsidiary Fit Pay was cleared to operate on the Visa platform. Stock in NXT-ID spiked on the news. Now this week the company has announced another deal with the other major credit card firm. Fit Pay will offer prepaid funds on its contactless payment-enabled devices through MasterCard. That is, users will be able to store funds directly on their wearable and other devices connected to the Fit Pay Payment Platform while enjoying the ease and security of contactless payments. “Adding reloadable prepaid capabilities is a new feature for devices on our platform and makes our payment… services available on a wider range of [products],” said Michael Orlando, president of Fit Pay and COO of NXT-ID. The Fit Pay prepaid MasterCard option will be available to original equipment manufacturers who build products based on the Fit Pay platform. A digital wallet allows the user to re-load the account, set top-off thresholds and manage the account settings according to a press release. “This is particularly appealing to millennials who are more likely to use a prepaid account, more likely to own a wearable and more likely to make a contactless payment,” Orlando was quoted as saying. This is a good point. No other generation is more attached to their digital devices than the millennials who are said to be foregoing acquiring cars and auto insurance in lieu of buying the latest smartphones and big data plans. Fit Pay uses Near Field Communication (NFC) technology to interact point-of-sale (POS) terminals. In recognition of the recent advances at Fit Pay, NXT-ID announced that Orlando will be named to the board of directors of the parent company. Orlando brings 20 years of experience in payment services technology to his new role. Previously he worked for Cybersource where he oversaw enterprise sales. He played a primary role in the $2 billion acquisition of Cybersource by Visa. He stuck around to help out with post-acquisition integration after that deal and remained at Visa in an executive role until 2012. In 2014 Orlando co-founded Fit Pay. His vision at that time was, “… to build a comprehensive payment and secure authentication platform for the IoT and wearable devices.” NXT-ID completed a business combination with Fit Pay in May of this year. Now he’s on the board of directors. Impressive work. “Michael brings a wealth of experience not only within the payment and technology space but also building successful companies and growing large organizations,” said Gino Pereira, CEO and president of NXT-ID. “His technical knowledge and deep network within the industry will add an important perspective to the Board and increase the depth of our operational expertise.”

As for the rest of the biometrics sector, here are some of the more interesting stock moves of late:

-BIO-key International announced this week that it has been selected by a government agency in Australia to deliver its SideSwipe fingerprint readers for a country-wide rollout. This is BIO-key’s first notable contract in the country, and according to a company press release the agreement, “… supports further business development opportunities within government, healthcare, financial, retail, and enterprise markets throughout Australia.” The contract is sure to bolster the optimism among investors in the stock, which has done quite well through the spring and early summer. Shares in BIO-key were trading at just $2.09 in late May, but are now trading just above $3.00 a share.

-Shares in IDEX ASA continue to do well. The stock was trading at NOK 8.72 earlier this spring. It’s down to NOK 7.69 this week. But that’s still a gain on the low of NOK 6.10 shares hit in December last year.

-Another biometrics industry stock that is having a good year is Korea-based Suprema Inc. The shares are traded on the Kosdaq and have risen from a price of KRW 18850 (about USD $16.75) in early March to about KRW 26900 (USD $23.50) in June. The price has come off a bit since then, but the stock is hanging in around KRW 23800 (USD $20.79). Most recently the company showcased its BioMini Slim 2 this past June at a trade show in London, England. Suprema bills the BioMini Slim2 the world’s “slimmest fingerprint authentication scanner”.

-Synaptics shares are having a good week. The stock started the week at about $43.91 but have since climbed to about $47.00 a share. The company announced this week it will release financial results for the fourth quarter of fiscal 2017 Thursday, August 3, 2017. With analysts projecting an average one-year price target of $59.61 it seems investors have a favourable view of the stock.

– Rumors about the expected fall debut of Apple’s new iPhones are running wild, as might be expected. Some of the juiciest rumours revolve around the biometric devices to be worked into the latest model. Early speculation is that the new version will forgo the finger scanner for a 3D sensor that will scan the users face to gain entry to the device. Some suggest that Apple will ditch the home button to make way for an edge-to-edge screen, eliminating the fingerprint reader. As a result, according to reports Apple is, “… testing advanced facial recognition as an authentication method.” A report from major financial publisher Bloomberg cited unnamed sources who were said to be ‘familiar with the product.’ According to the source, “… facial recognition could be used to unlock phones, purchase goods and open secure apps.” Popular tech-industry website TechCrunch apparently uncovered a patent that points to facial recognition technology on the new phone. Facial recognition would make sense. It’s the next step up. The notion fits with another rumour floating around, which is that Apple is “buying up a ton of 3D cameras for devices.” It has also been noted in the tech press that the company acquired a 3D sensor company called PrimeSense in 2013. This week an analyst with KeyBanc Capital Markets released a report stating he doesn’t think Apple, “… will have fingerprint sensors in the higher end, OLED screened iPhone model expected this fall.” According to the analyst the OLED-fingerprint tech won’t be ready. This gives Apple two options: “Delay the model until the sensor is ready or turn to facial recognition for unlocking,” according to a report.

– A U.S. government agency known as the Intelligence Advanced Research Projects Agency (IARPA) is holding a Face Recognition Prize Challenge. Whoever submits the algorithm that most accurately improves recognition of unconstrained face images captured in the “wild” will win a solid $25,000. Whoever submits the algorithm that can do this the fastest wins $5,000. IARPA is based in Maryland. The agency is a consolidation of the National Security Agency’s Disruptive Technology Office, the National Geospatial-Intelligence Agency’s National Technology Alliance, and the Central Intelligence Agency’s Intelligence Technology Innovation Center. According to Wikipedia, the first Advanced Research Projects Agency, or ‘ARPA,’ was created in the late 1950s in response to the Soviet Union’s successful launch of the Sputnik satellite. A U.S. defense official at the time wanted an agency that would fund projects involving wildly speculative technologies. The idea was that the U.S. wouldn’t be surprised again by the sudden appearance of a technology as it was by the launch of Sputnik. Out of that initiative came the ARPA model, designed to “anticipate and preempt technological surprise.” DARPA, of course, is the government defense sector agency that created the internet. IARPA focus on intelligence needs rather than defense subjects. The organization searches for and funds technologies that, “… will be important to the intelligence community in the future.” It funds projects in math, computer science, physics, chemistry, biology, neuroscience, linguistics, political science, and cognitive psychology. IARPA programs are meant to, “… enable researchers to pursue ideas that are potentially disruptive to the status quo.” The organization then transfers, “… successful research results and technologies to other government agencies.” Dr. Chris Boehnen, IARPA program manager, is quoted as saying about the facial recognition challenge, “Whether focused on preventing the next random act of violence or catching a child predator, face recognition has become an essential tool for professionals who strive to ensure public safety. The state-of-the-art is improving rapidly, due in large part to the availability of unconstrained training data, as well as the careful curation of evaluation data that’s balanced across many real-world scenarios.” The organization is also running something called the Janus program, which aims to, “… dramatically improve face recognition performance in massive video collections.” IARPA’s Odin project funds companies that are developing technology that can, “… detect when people are trying to disguise their fingerprints or iris scans.” Contest winners will be announced in October of this year.

Disclaimer: Stock recommendations and comments presented on BiometricUpdate.com are solely those of the analysts and experts quoted. They do not represent the opinions of BiometricUpdate.com on whether to buy, sell or hold shares of a particular stock. All investors are advised to conduct their own independent research into individual stocks before making a purchase decision.

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About Jeff Sanford

Jeff Sanford has worked as a business journalist for more than fifteen years. He has held staff jobs at major commercial publications such as Canadian Business and National Post Business magazine. He has contributed to various Canadian, U.S. and UK-based publications. He has written about markets, economy, finance, energy, infrastructure, government policy and technology. He currently lives and works in the west-end Toronto neighbourhood of Parkdale.