October 19, 2017 -
As the biometrics industry continues to grow, Biometric Update 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.
Thursday was the 30th anniversary of the Great Market Crash of 1987 when the Dow registered its largest single-day decline ever. Markets sold off sharply the day before the anniversary, as well as Thursday morning. Some fund managers worried the sharp two-day plunge in share prices meant that stock markets were finally going to retreat from recent record highs. Many have been expecting such a sell off. But markets ended the day Thursday mixed. The sell off was muted.
Some have noted that tech shares in particular have sold off from record highs recorded in August and early September. AT least one analyst blamed this week’s sell off on news that Apple is ordering fewer parts for new iPhones as sales come in lower than expected. Shares in the Cupertino-based computer maker traded as high as $164 a share in just early September, but are now trading around $155. Also down are shares in Samsung, which produces some of the chips Apple uses in its phones. The vice chairman and CEO of the main holding company announced this past week he is stepping down after thirty years to make way for younger leaders.
-Within the biometrics sector, this past week a popular investor-based website Seekingalpha.com published a long piece on biometric player NXT-ID. It was interesting that NXT-ID was covered by the site. Analysts at Seekingalpha.com typically cover larger organizations, companies with market caps greater than $100 million. But one analyst at the site took time this week to explain that NXT-ID has a “path to profitability.” As has been mentioned before in this space two recent acquisitions, LogicMark and Fit Pay, are providing new sources of earnings. According to the analyst, NXT-ID, “… is quickly ramping up revenues from almost zero last year to $15 million in the first six months of this year…” A key product of LogicMark is its PERS Mark medical alert system. Now that LogicMark is a part of NXT-ID that product will benefit from, “…the encryption, miniaturization, and sensor development” taking place within the parent company. The analyst also notes that LogicMark enjoyed considerable profitability prior to its acquisition. In 2015 audited revenue was $11.1 million while net profit was $3.1 million. “We see little reason why this could not continue under NXT-ID’s ownership,” according to the analyst.
The report went on to discuss the acquisition of Fit Pay, which is providing contactless payment in wearables and IoT devices. The report notes Fit Pay had fifteen customers at the end of the second quarter. Earnings from those clients should begin to show up in the financials in the year to come. The wearables sector is hot right now. According to the analyst, “The company started to take pre-orders at the end of June and activity has been brisk… Shipments will begin in December… Management argues revenues will start to come in from the fourth quarter onwards when the first of those 15 customers goes live, and then next year the others will follow so this will open up a second important revenue stream, and this is just from existing customers.” Also doing well is NXT-ID’s smartcard segment. Between November of last year and June of this year between 80,000 and 90,000 FlyeCards have been delivered to the travel company, WorldVentures. “The full general release to customers will be somewhere late in 2017 and then these numbers will increase materially,” according to the analyst. That is, there are multiple revenue streams beginning to come together at NXT-ID. As the analyst puts it, “… it seems certain that the two businesses are also going to contribute [to earnings] next year. If they manage to achieve that, the shares are actually fairly cheap.” As it is, existing debt is quite high (15%), but the company has announced that it is carrying out a refinancing plan that could half debt payments. Another interesting detail from the report: A dividend that is currently being paid only to preferred shareholders will end after the third quarter. This will free up more cash internally. And while the amount of outstanding shares has increased in the wake of these two acquisitions resulting in the dilution of the relative stake of earlier shareholders, the report notes that management has indicated, “…it’s not our intention to raise equity in the process of refinancing,” and so dilution of existing stakes should not be an issue. The SeekingAlpha.com analyst expects those to exceed $30 million on the year. Already, “The company isn’t actually that far from profitability…” It is going to be an interesting year for NXT-ID, that’s clear. Shares are currently trading around USD $1.67.
-NASDAQ noted in its news feed this week that Nuance Communications is a top pick for analysts looking for companies that demonstrate strong stock buyback activity. Companies traditionally return profits to shareholders through the payment of a dividend. But a major trend today is return profits to shareholders through stock buybacks. Companies use profits to buy back outstanding shares in the market. By reducing the total share count the earnings per share increases and that translates into capital gains for shareholders (or so goes the theory). According to the story on NASDAQ, Nuance is number nineteen on a list of stocks that have, “… repurchased at least 5% of its outstanding shares over the trailing twelve month period.” Shares in Nuance are currently trading at about $15.34.
-Gemalto N.V. issued its quarterly notice on transactions carried out under a liquidity contract signed with European investment fund Exane BNP Paribas. The bank ensures that buyers and sellers can easily be found so that anyone looking to buy in or out of the stock can do so without trouble. According to the latest report during the third quarter of 2017, 534,975 Gemalto shares were purchased while 486,995 Gemalto shares were sold. Shares currently trade around €31.90, up 2.39% on the day.
-Diebold Nixdorf is a company that has traditionally been known for the ATMs it makes. The company announced this week it will release 2017 third quarter financial results Tuesday, Oct. 31 (before the trading day starts). The call will be interesting. Diebold understands that the culture is moving away from cash and so has to come up with new products that often revolve around security and biometrics. One new product is a smart locker that will receives goods bought online. The item is locked up in the locker until the person receiving the item uses a smartphone app, biometrics, cash or a card to open the box. Diebold will be at the Money20/20 event in Las Vegas this month where it will show off its latest facial recognition authentication method for ATMs (developed in conjunction with Samsung SDS America). Andy Mattes, president and CEO is quoted in a press release as saying, “Our latest innovations are perfect examples of how Diebold Nixdorf continues to help banks and retailers reshape the consumer experience.” Shares in Diebold are doing well. Trading at just $18.50 in early August shares in Diebold are now trading a bit above $22.00. Not bad a bad return in a month.
-SmartMetric will be at the Las Vegas show as well. The company will be showing off its new multi-function biometric-based security and access card. The company has spent years developing a thing biometric fingerprint reader. The miniaturized electronics have been used to build a multi-function cyber and access biometric card that is the size and thickness of a credit card. Because it is so thin it can be carried in a wallet. The card also has a bright green and red indicator light that activates when a biometric scan is made, which allows it to be used for access and identity. “By combining cyber security with doorway access control along with on the spot biometric identity into a single card, we have created the perfect solution for across corporate or government campus portable biometric security. It is easy to use, easy to carry and easy to deploy,” SmartMetric’s president and CEO, Chaya Hendrick, was quoted as saying in a press release. “We have now created the next-generation ultimate portable multifunction biometric security solution that is easily interoperable with current backend security network and physical access systems.” The company’s shares are trading at USD $0.05, down from USD $0.07 over the last month. However a recent report claims the access management market is estimated to grow from USD $8.09 billion in 2016 to USD $14.82 billion by 2021. That’s a compound annual growth rate of 12.9% for that period. That’s good for the prospects of the new card.
-NEXT Biometrics Group ASA this week announced the company shipped sensor number three million. According to the company this demonstrates the company has a proven ability to “consistently mass produce fingerprint sensors with industry normal yield figures.” The new CEO of NEXT, Ritu Favre, was quoted in a press release as saying, “Passing three million NEXT fingerprint sensors shipped, we have now over several quarters consistently demonstrated NEXT’s ability to mass produce high quality, mass market robust sensors at what has become very high yield rates.” The news was welcomed by investors, clearly. Shares trade in Europe on the Norwegian stock market. On Thursday shares were trading at NOK 43.00, up 4.30 on the day or more than eleven percent. That’s a very solid jump.
-It seems new biometric products emerge daily. An interesting and unique use of biometric tech popped up in a local paper in the Canadian province of Alberta. The newspaper reports on a bank that has deployed biometrics to help homeless people. The popular Alberta-based financial institution ATB Financial has created a company, Four Directions, tasked with delivering basic banking services to the homeless. Often homeless people don’t carry ID. Living on the street results in traditional IDs being lost or stolen. The homeless can then end up going to payday loan companies (and paying huge fees) or getting ‘street’ loans, which can be dangerous. Relying on biometric technology, “… provides a real advance in terms of quality of life for this population,” according to the story. By relying on biometric ID the homeless can open a bank account with a mainstream financial institution and can, “… cash cheques and save money in a safe and secure place.” The story notes that, ”About one-third of those people now have money left at the end of the month, compared to virtually none of them before Four Directions started.” Dave Mowat, president and CEO of ATB Financial, has been quoted as saying that by using innovative technology like biometric identification Four Directions Financial makes banking more accessible than ever, “… it was a perfect solution because it did away with the need for identification.”