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FPC expects short-term challenges to continue

Fingerprint Cards (FPC) revealed that it expects an even weaker Q1 as well as its short-term challenges to prevail in Q2, which means the company cannot confirm its communicated guidance for revenues and profitability for 2017.

The previously communicated guidance for 2017 revenues was estimated to amount to SEK 7,500 – 9,500 million (US$8.54 million – US$1.08 billion) while the 2017 operating margin was expected to surpass 35 percent.

As a consequence of the current short term uncertainty, the Company has decided to refrain from further guidance for 2017 and the board of Fingerprint Cards has decided to withdraw its proposal of dividend for 2016, which was communicated in the year-end report.

Based on the weakened demand from OEM customers in Q1 and the channel inventory build up previously communicated, FPC now estimates a revenue decline of more than 50 percent for Q1 2017 compared to Q1 2016.

“There is clearly a sluggishness in the first quarter from the OEMs, because they had higher ambitions going into the year,” Fredrikson said in a conference call reported by Bloomberg. “This is the mobile-phone industry. It’s one of the most competitive industries in the world.”

The slow start to the year has weakened further by high inventory levels throughout the supply chain, with the demand for FPC’s fingerprint sensors being weaker than expected due to the OEM customers’ inventory build up.

Inventory levels in FPC’s channel have decreased slower than expected. This will continue to impact shipment volumes and revenues in the current quarter and most likely in the second quarter.

Based on the current short term uncertainty, FPC has decided to refrain from further guidance in 2017.

Despite this, FPC “continues to actively execute on the strategy as a leading biometric company to defend and strengthen its position further in smartphones, while enabling the roll out of the new segments, and continuing to innovate and strengthen the IP portfolio,” the company said.

These short-term issues are expected to continue until Q2, but the company has a strong customer base to build on. This is signalled by an active dialogue with its customers regarding iris recognition through the acquisition of Delta ID, as well as the company being selected as vendor for a number of devices.

FPC’s management is also taking the necessary actions to amend investments and to secure efficiency of resources in the current situation.

The board of directors has reviewed its previous dividend proposal for 2016 where it had proposed a dividend of 2 SEK (US$0.23) per share.

Considering that market conditions have weakened since the proposal was communicated, the board has now decided to withdraw what would have been its first-ever payout to shareholders

FPC will no longer pay dividend for 2016, but will instead proceed with the cancellation of treasure shares.

The move is consistent with the previously communicated ambition around capital structure for FPC which is focused on long term growth opportunities.

Finally, the company announced it will host an annual general meeting (AGM) on April 20 at Hotel Gothia Towers in Gothenburg, Sweden.

At the meeting, FPC will discuss individual proposals by the nomination committee and shareholder, as well as the board of directors’ motion to adopt a long-term incentive program (performance-based share program) for employees, the buyback and transfer of Class B treasury shares, lowering the share capital through the cancellation of the bought back shares and a bonus issue, amending the articles of association, and issuing new shares with preferential rights for the shareholders.

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