This week in biometrics industry stocks
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 at the end of each week for a rundown of the financial news and interesting ideas from the week that was.
Biometrics companies continue to report second quarter earnings this week. Some impressive results were trotted out as the sector continues to grow and evolve.
-Melbourne, Florida-based technology firm NXT-ID hosted a conference call last week in conjunction with the release of its second quarter financial results. The firm recently launched its FitPay wearable device, one of the first biometric-based devices to be certified on a major payment platform. As the company continues to launch products (NXT-ID is also shipping a smartcard) executives had good news to report to shareholders. Gino Pereira, CEO, was able to report that revenue for the first six months of 2017 hit $14.3 million, an impressive number considering the company generated just $80,795 in the same period a year ago. For the full six months of the second quarter revenue was approximately $7.6 million, an improvement over the $38,493 generated in the same period of 2016. Overall the gross profit for the first six months of 2017 was approximately $7.3 million. This is far better than the loss of $58,374 recorded in the second quarter of 2016. Pereira noted that operating expenses were slightly higher this year ($5.5 million in 2017 compared to $4.6 million in 2016) but that is to be expected as the company grows. The higher expenses in the period were partly the result of the acquisition of FitPay. But the company expects revenues from that product to ramp up over the last quarter of 2017 and into 2018. According to Pereira revenue from FitPay was minimal in the second quarter, but the company anticipates “consistent revenues” from FitPay to commence in the fourth quarter of 2017. “After a successful first half of 2017 we are looking forward to the rest of the year with continued growth from our existing business and new capabilities from FitPay coming to market,” said Pereira. “We are tremendously pleased with FitPay. We have had good progress on the technical side and the business side. We have 15 customers in total… three new customers in June alone.” The CFO of NXT-ID also commented on FitPay, saying, “It’s a huge technical accomplishment that the team has working on for six months… We have had a lot of momentum and pick-up in terms of adoption of the platform.” In response to a question from an analyst Pereira noted during the call the company currently has an outstanding float of about 15 million shares. He said the company managed to reduce debt and has gotten rid of any floating-rate debt instruments (a good call in an era many expect interest rates to begin to rise). The CEO also said the company will continue to tweak the capital structure over the year to come. “We are looking to continue lowering debt. Having something like $15 million in revenue is quite a different bankable proposition [than last year when the company posted a loss]. “We don’t desire to dilute shares outstanding. We’re trying to clean up the capital structure and free up cash flow and get interest payments down. Hopefully somewhere after that we will see the share price move,” said Pereira. Commenting on the overall result the CEO said, “We’re very pleased. The company performed well across all sectors. We had record results and that shows we have continued the strong performance from the first quarter.” In response to an analyst’s question about the smart card Pereira discussed sales but wouldn’t reveal overall financial results. “I will tell you since November 2016 to the end of June we have shipped approximately 80,000 to 90,000 cards,” said Pereira. Shares in NXT-ID were trading as high as $1.75 on Monday but were down later in the week to about $1.60 a share.
-Another company reporting strong earnings this week is Leidos Innovation Corp. The company is a FORTUNE 500 firm that works in the defence, intelligence, homeland security, civil and health markets. The company has 32,000 employees and serves government and commercial customers. It’s headquartered in Reston, Virginia. On Thursday the company reported annual revenues of approximately $7.04 billion for the year ended December 30, 2016. “Our second quarter performance exceeded expectations…,” Roger Krone, chairman and chief executive officer, was quoted as saying. Revenues for the latest quarter increased primarily due to $1.37 billion of revenue attributable to the Information Systems & Global Solutions business (IS&GS) acquired from Lockheed Martin during the third quarter of fiscal year 2016. The company also reported that “net business bookings” totalled $2.7 billion in the quarter. One of those contracts is with the U.S. Army, which awarded a task order to Leidos to provide program management solutions for a biometric program run by the Department of Defense, known as the DoD Automated Biometrics Identification System. The single-award, cost-plus contract has a one-year base period, four one-year options, and a total contract value of approximately $132 million (if all of the options are exercised). Leidos also reported that it was awarded contracts valued at $225 million by U.S. national security and intelligence clients that went unnamed. According to the press release, “Though the specific nature of these contracts is classified, they all encompass mission-critical services that help to counter global threats and strengthen national security.” The company’s backlog of signed business orders at the end of the quarter was an impressive $17.1 billion.
-Another company reporting financials this week was Synaptics Incorporated, which announced fourth quarter and financial year-end numbers to June 30, 2017. According to the company net revenue for fiscal 2017 came in at $1.72 billion. That’s an increase of three percent over the fiscal 2016. Net income for the year declined, however, falling 32 percent from the prior year to come in at $48.8 million. That still works out to $1.37 per share. Looking at just the fourth quarter net revenue increased 32 percent from the same quarter last year to $426.5 million. Rick Bergman, CEO, was quoted as saying that, “Synaptics was able to achieve modest top-line growth for fiscal 2017 on the strength of our TDDI and fingerprint solutions despite the headwinds in our discrete display driver business. While growth in the smartphone market has tempered, Synaptics continues to lead in critical areas such as TDDI and next generation fingerprint solutions, and we are well positioned as the broader market shifts to OLED displays.” The CFO of the company, Wajid Ali, offered up some guidance for the financial year ahead: “Considering our backlog of $222 million… we anticipate revenue for the first quarter of fiscal 2018 to be in the range of $380 to $420 million… For fiscal 2018, we expect to generate low single-digit top-line growth… coinciding with the ramp of new products and the growth of our IoT business.” The company is making a shift from phone and PCs markets to the IoT sector. To that end the company also just announced it has acquired Conexant Systems, LLC. Conexant produces voice and audio processing solutions for smart home applications. The Synaptics execs hope the acquisition will “jumpstart” the company’s presence in IoT and Smart Home markets. According to Bergman, “We are very excited to have quickly closed on this important acquisition and be able to immediately leverage the added voice and audio solutions to pursue the growing opportunities in consumer IoT.” Synaptics shares were trading as high as $54 early in the week, but had sold off to about $50 a share by the end of the week.
-South Korean tech giant Samsung posted record-breaking earnings for the latest quarter of 2016. The chip, TV and phone maker is enjoying a so-called “super-cycle” in terms of demand for chips as new cloud-based applications drive demand for more computing power. Some are betting the Korean phone maker can even beat smartphone arch-rival Apple in terms of quarterly profits. Samsung sure does seem to be on a roll. The company reported a quarter-on-quarter increase in earnings of 42%. In North America Samsung is traded as what is called an American Depository Receipts, or ADR, a stock-like security that replicate the original Korean stock. Samsung ADRs were trading as high as $2300 in New York this week before falling back to about $2100 per unit. The company credited massive sales of its new Galaxy S8 smartphone and demand for memory chips as the drivers of the huge quarterly jump. That said, an analyst with HMC Investment Securities warned in a media report that, “Samsung has surpassed its rivals for now but Apple usually sees little fluctuation in its profits whereas Samsung’s profits fluctuate largely on memory chip prices.” According to the analyst even if Samsung beats Apple this quarter Apple will likely win in terms of full-year earnings.
-Rumors of course are still flying around about whether or not Apple will bring its fingerprint scanner “in-display” in its next phone or move to an iris scanner in the race to beat Samsung. Whatever the case, it does seem as if Apple has a way to go to catch up to Samsung. A media report from across the pond this week notes that TSB Bank has became the first European financial institution to offer iris-based biometric access to bank accounts. The service is offered through Galaxy S8 or Galaxy S8+ smartphones. According to a news report the offering will go a long way toward, “… fulfilling predictions that the eye-based modality will go mainstream this year.” The story goes on to say the arrival of the service, “… will test customers’ trust in biometric technology.”
-Fans of the Detroit Tigers can now join a program that allows them to get into the ballpark by using fingerprints to verify identity. The stadium has just installed a scanning system from CLEAR. The device made its debut this week at Comerica Park in downtown Detroit. Visitors enrol in the program using a Michigan state-issued driver’s license. Program members still have to go through security and display their tickets, but those, “…willing to have their fingers scanned for fingerprints will have access to shorter lines,” according to a media report. In the future game tickets could be linked to fingerprints according to the report. The stadium joins several others that are now using fingerprint scanning systems.
-A U.S. supermarket chain in the Chicago area faces a possible class action lawsuit that could cost it up to $10 million in damages because it did not keep up with the paperwork required under Illinois’ biometric data law. Mariano’s is currently facing, “…multiple lawsuits that accuse the company of violating the Illinois Biometric Information Privacy Act (BIPA).” The class action suit alleges that a, “written explanation to employees that outlined the specific purpose for the collection, a transparent retention schedule, a policy for destroying the data or a timetable for how long providing prints would be necessary,” was never provided to employees. In addition the plaintiffs in the suit argue that the company, “didn’t obtain written permission from them to use their biometrics before collection was initiated,” which is required under BIPA.”
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