November 2, 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.
Are stock indices ready for a pullback? As markets continue to trade near record highs some suggest there are signs the trend could be at an end. One analyst pointed out the S&P 500 recently posted its second longest streak without a five percent decline in history. The stat was offered along with a warning that these good times can’t last forever. Another analyst pointed out that the amount of cash investment funds are holding in portfolios are at record lows. As one analyst was quoted as saying, “There are a lot of fully-invested bears out there. There is not much sideline cash left to push stocks higher.”
On the other hand market bulls point out that global growth seems solid. Stock markets are actually rising in many countries, not just the U.S. A report in the financial press earlier this week notes share prices have risen even higher than the U.S. in Japan, Germany and France. That is, there is something other than a Trump Bump driving stock prices to record highs.
Markets are also supported, of course, by the continued good story in the tech sector. Analysts have warned that the remarkable growth in the share price of big tech names like Amazon, Google and Facebook can’t continue at the torrid rates of the last year and a half. But the good times continue. Facebook has warned that the remarkable revenue growth that has occurred through the growth phase of the company will end at some point. That point was not this week. Analysts seemed astounded when the company reported its latest financials, which show profit in the latest quarter came in 79 percent higher than a year ago. The company’s stock is trading at record highs as a result, closing Thursday at USD $178.92 per share. One analyst pointed out this is about 50 percent above where it was when Trump was elected in November of last year. Amazing. The current tech boom is not done yet, clearly.
Also enjoying a good week was Apple. It became apparent over last weekend that worries about demand for the new iPhone X were overblown. Apple had been struggling to manufacture the next level security featured in the Face ID function. As a result the launch was delayed by six weeks. When orders for the iPhone8 (a less sophisticated phone that was also recently released) seemed to be lagging, some wondered if the shine was coming off Apple. Not the case. Over this past week the Cupertino-based company has been able to report that demand for the iPhone X is, “off the charts.” Within minutes of its release in the U.S. shipping time had lengthened to weeks. In Hong Kong the phone sold out in less than half an hour. Shares in some of Apple’s biggest suppliers were all trading higher as a result. Hon Hai Precision Industry Co. (Foxconn) climbed almost four percent on the Taipei stock exchange, hitting TWD 112.00 a share (USD $3.71). Shares in Taiwan Semiconductor Mfg. Co. Ltd. (TSMC), a chip supplier, rose to a record high of $42.15 a share on the New York Stock Exchange. Austrian-based optical sensor provider, AMS, was also up, rising five per cent to close earlier this week at 77.65 Swiss francs (USD $100) on the Zurich exchange.
U.S. Senator Al Franken has been all over the new Face ID function on the iPhone X. The former comedian sent a letter to Apple last month asking about Face ID. He wanted to know how the new face-based biometric function will impact, “iPhone users’ privacy and security, and whether the technology will perform equally well on different groups of people”. Some of the other questions he included in the letter: Is the facial recognition system “always on,” that is, does Face ID perpetually search for a face to recognize? And if so: “Will Apple retain, raw photos of faces and faceprints of individuals other than the owner of the device?” Apple responded to the letter recently, saying, “Face ID data, including mathematical representations of your face, is encrypted and only available to the Secure Enclave. This data never leaves the device. It is not sent to Apple, nor is it included in device backups. Face images captured during normal unlock operations aren’t saved, but are instead immediately discarded once the mathematical representation is calculated for comparison to the enrolled Face ID data.” Apple also went on to say that, “We worked with participants from around the world to include a representative group of people accounting for gender, age, ethnicity and other factors… “Investors are clearly loving the new technology. The company was trading just above $168 at the end of the day Thursday, up from $150 a share on September 15th.
-Fingerprint Cards AB released interim financial results for the third quarter and full year this past week. According to the report third quarter 2017 revenues amounted to SEK 841.4 million, or, USD $101.3 million. This is down 55 percent from results posted in the third quarter of 2016. Operating profit was also off at SEK 52.4 million (USD $6.3 million). Earnings per share came in at SEK 0.16. According to management a challenging smartphone market weakened the company’s gross margin, but the company did enjoy sequential volume growth, as well as positive cash flow, however, decreased inventory and a strong cash position. Management also highlighted the positive trend for smart cards and increased investments in a strategic research and development project. “As previously announced, earnings for the third quarter were impacted negatively by the cautious market situation and noticeable price pressure. Yet on a positive note, we continued to reduce our own inventories and maintained a strong cash flow. We are operating in a mature mass market where we will remain a leader in terms of volumes and we are implementing a number of initiatives to enable us to restore our growth and improve our profitability,” said Christian Fredrikson, CEO, FIngerprint Cards. Fredrikson went on to say that “a number of concurrent technological trends and uncertainty factors” caused Chinese original equipment makers (OEMs) to adopt a highly cautious approach during the quarter. “As a result of this uncertainty, our customers have opted to shorten their planning horizons and component inventories in the value chain have decreased from normal levels,” according to Fredrikson. As well, consolidation along the value chain impeded market growth and deliveries during the quarter. In terms of business trends Fredrikson said, “… we are seeing a trend toward smartphone screens that cover the entire front of the device and many OEM customers are therefore looking to move the fingerprint sensor to the back of the phone. Back-mounted sensors are sold at a lower price which – in combination with the general price pressure – has resulted in a decline in the average selling price.” The rate of decline in the average selling price amounts to approximately 30 percent annually for 2017. “Looking at the fourth quarter, I expect our overall delivery volumes to decline compared with the third quarter due to seasonal effects in the component industry,” said the CEO. “Our OEM customers are also evaluating other technologies, such as the possibility of fully integrated in-display fingerprint sensors. As of yet, there are no commercial in-display solutions suitable for mass production, but we are engaged in a number of development projects in the area.” Following on what seems to be the acceptance of Apple’s Face ID Fredrikson also said the company is evaluating iris and face recognition as alternative biometric methods. Interestingly, he said, “We are seeing no signs that our OEM customers plan to replace the fingerprint sensor with other solutions. Instead, there is talk of offering complementing biometric methods for authentication, known as multimodality. Our iris solution would work well in such a scenario, and our major OEM customers and customers in other segments have expressed significant interest in this possibility.” The company’s market position remains very strong according to the report. “During the quarter, 27 mobile devices equipped with our sensors were launched and we announced the first product launch of FPC1028, a high-performance, cost-efficient sensor… Fingerprints’ smart card offering is attracting considerable and growing interest, even though it will take time for market volumes to become comparable with those we are currently seeing in the smartphone market. As the only player in this space with extensive experience in the mass production of sensors, Fingerprints has a very strong starting position in the promising smart card market,” said Fredrikson.
-IDEX ASA also reported financials this past week. Revenue came in at NOK 3.5 million (USD $430,000) in the third quarter of 2017. In the corresponding periods of 2016, the company reported revenue of NOK 8.4 million, so revenue was down. But according to management IDEX has made significant progress on the commercialization of its sensor solution for biometric cards. The company was also able to announce in the quarter that Mastercard, and IDEMIA have selected IDEX’s off-chip technology in the development a new generation of biometric smart cards. Through these partnerships IDEX is equipped for, “… commercial mass deployment,” according to a press release. “The partners have completed several end-user trials with extremely positive feedback on the convenience, security and ease of use of the card. The completion of these real-life trials is a competitive advantage to IDEX’s solution…” The company also noted that it sees significant interest for biometric cards from a range of players, “… particularly in the Far East.” As well, after the end of the quarter, IDEX announced an agreement with a global payment provider to deliver a “patented, low-cost, on-card remote enrolment solution as well as a compact matcher for commercial deployment in 2018… Together, these advanced offerings are expected to provide IDEX’s customers with a complete and fully integrated solution to pursue a number of rapidly emerging opportunities in the biometric card market,” according to the company. Management also expects a biometric card developed in partnership with Mastercard to achieve certification shortly, with commercial roll-out expected in early 2018. The company’s sensor for contactless cards is expected to be ready for volume shipments in first half 2018. According to the report, “The IoT market is still in the early stages of development and adoption. Although highly fragmented, the emerging growth in this market is expected to have a profound impact across a number of different applications and end markets…. The benefits of IDEX’s leading market position and newest off-chip touch sensor for biometric cards transfer well into IoT applications.” In October the company also announced that BIO-key International’s new TouchLock TSA luggage padlock features IDEX’s fingerprint sensor, and is, according to the company, “… only one example of the vast opportunities for IDEX’s fingerprint solutions in the emerging IoT market.” IDEX ASA was trading over-the-counter at USD $0.58 per share at end of day Thursday. Shares in BIO-key ended the trading day on NASDAQ Thursday at USD $2.07.
-NEXT Biometrics Group ASA demonstrated two of its biometric smart cards at the Asia Pacific SmartCard Association (APSCA) Powered and Next-Generation Cards Conference & Exhibition. NEXT Biometrics has scheduled a business review meeting along with the release of its interim financial report for the third quarter 2017, on Tuesday 14 November 2017 in Oslo. The presentation will be held in English.
-Diebold Nixdorf posted a third quarter loss as sales suffered. The company continues to integrate operations following the acquisition of Wincor Nixdorf in 2016. Andy Mattes, president and CEO, said the ATM manufacturer is making “tangible progress in transforming to a services-led, software-enabled company.” However, the company reported a loss of $35.4 million, or 47 cents per share, for the third quarter ended September 30th. As large as that loss was, it was an improvement on the $102.3 million loss ($1.38 per share) reported in the same period last year.
Over the past two weeks several companies in the biometric sector made patent-related announcements. Among the news bits:
-SmartMetric announced the issuance of new patents that protect the company’s investments in its biometric card technology. The company also issued a press release noting that management is now in direct talks with seven banks after taking part in the 20/20 Money show in Los Angeles. The company showed off its Biometric Credit Card and its Cyber and Access Security Card at the show. According to the President and CEO of SmartMetric, Chaya Hendrick, “A constant stream of Bank executives have been coming to our stand at the Money 20/20 exhibition to see our working biometric fingerprint activated and user validated credit card… At this point in time we are able to manufacture 1 million cards a month and are able to rapidly increase this production capacity to over 10 million cards a month as demand from card issuers increases.”
-Nuance Communications Inc. this week announced it has filed a patent infringement lawsuit in the U.S. Federal District Court of Delaware against M*Modal. The lawsuit alleges that M*Modal products violate six Nuance patents related to, among other things, speech recognition in the healthcare IT market. “Nuance has invested significant human and financial resources in developing innovations and building an intellectual property portfolio that are important components of our strategy and integral to the success of our business,” said David Greenbaum, vp of litigation and intellectual property, Nuance. “Our IP and technology assets favorably differentiate our voice- and AI-powered offerings in the healthcare industry. We take great pride in, and place significant value on, our patents and will protect our rights.”
-Another patent-related announcement comes from EyeLock LLC, an iris-based identity authentication company majority-owned by VOXX International Corporation. If VOXX isn’t a familiar name that’s because it is mostly known for its car audio brands. It also owns Eyelock. The company announced three new patents this week covering crucial technology innovations for the validation of iris and facial images, including the, “…ease and speed of biometric matching; and visual guidance for gaze alignment.” Jeff Carter, CTO EyeLock, was quoted as saying, “We couldn’t be more excited about these latest patent awards… [They] show continued technical expertise and leadership in developing unique capabilities for the efficient deployment of multi-modal biometrics. We continue to achieve significant technological breakthroughs that have served as significant barriers to market-wide adoption of iris authentication… “The EyeLock product looks at more than 240 unique iris characteristics and is one of the only companies in the world to utilize dual-eye authentication. “The world of biometrics is evolving rapidly, and these new patents allow EyeLock to capitalize on its strategy to deliver multiple form factor and industry-agnostic authentication platforms. We remain committed to investing in our R&D capabilities and technical expertise to provide even more advanced support to the marketplace in the years to come,” said Carter. Voxx reported net sales for second quarter of fiscal 2018 as USD $113.5 million, a decrease of $4.9 million, compared to $118.3 million reported in the comparable year-ago period. Shares in Voxx were trading around USD $6.65 at the end of the day Thursday, up a bit more than two percent on the day.