Biometrics stocks this week: Mitek, BIO-key, NXT-ID, ImageWare, FPC
San Diego tech firm Mitek Systems this week announced that it acquired an artificial intelligence and image analysis firm, A2iA. The deal rounds out at €42.5 million in cash and shares of Mitek common stock. A2iA uses AI and machine learning to create proprietary algorithms that process millions of checks, IDs and documents each day for banks, retailers, insurance companies, mobile operators, healthcare providers and governments. “With the addition of A2iA’s technology and team, Mitek’s digital identity verification platform will extend its lead in the industry. Mitek’s Mobile Verify product will be able to read government-issued identity documents even more accurately and quickly than today, and authenticate them using A2iA’s advanced AI algorithms, thereby increasing companies’ trust that their customers are who they say they are,” said James DeBello, CEO and chairman of Mitek. By acquiring A2iA’s Research Labs, Mitek doubles the size of the existing Mitek Labs team, forming the largest private research group of PhD scientists in computer vision, machine learning and artificial intelligence in this industry (according to the press release). Mitek software is deployed in 6,100 U.S. banks, including the 10 largest U.S. financial institutions. A2iA’s software is also used by top U.S. banks, as well as 100% of U.K. banks, 90% of French banks, 90% of Brazilian banks and more than 75,000 ATMs worldwide. “The acquisition of A2iA combines two market leaders in image recognition and processing, creating a powerful force with a deep expertise in image analytics,” according to Bob Meara, analyst, Celent. Shares in Mitek, trading around USD $6.08, are up about $1 since late April.
Rounding out earnings news from first quarter is New Jersey-based biometrics firm BIO-key, which reported a string of new business in the most recent reporting period. The company has an agreement with a regional bank to provide biometrics-based employee access through shared workstations. A mold and tool maker needs to secure its factory floor and administrative network. An industrial engineering and manufacturing firm installed a password-sharing security breach. A government defense ministry implemented a biometric system to strengthen network access and reporting. These are the kinds of deals representative of the current momentum in the biometrics sector. Small, medium and large-sized business are updating their security. They’re moving beyond passcards and installing biometric tech around their office or manufacturing facility. The economy is going through a one-time evolution. BIO-key is picking up some of this business.
Even so, the company ended up reporting another decline in revenue in the first quarter. Total revenue declined by $577,000, falling to $841,000 from $1,418,000 reported in the first quarter of 2017. According to the press release, lower fees from software licensing and hardware reader fees was primarily to blame. Commenting on the decline in revenue Michael DePasquale, CEO, BIO-key, was careful to note that volatility has to be expected when analyzing numbers on a quarterly basis. He was careful to reaffirm previously stated estimates for the full year 2018. “[As] we have indicated and expected, BIO-key’s quarterly performance will continue to fluctuate based on the timing of larger software and hardware agreements, creating variability in our year over year and sequential quarterly comparisons… For this reason, we continue to focus investors on full year results and provide financial guidance for full year revenue as we believe this longer-term measure presents a more relevant performance metric for our business,” DePasquale was quoted as saying.
On a positive note, one of the company’s new products–a line of Bluetooth and biometric-enabled locks–have finally come to market and are now beginning to contribute real cash to the bottom line. The locks sent $151,000 to the bottom line as they filtered into the market. Discussing the pick-up in sales, DePasquale said, “These products which were introduced late 2017, contributed 19% of our total Q1 revenues. Consumers and retailers are embracing these convenient, stylish and secured padlocks; and we are working to expand their distribution via partnerships, new distribution and marketing initiatives.” These products are available through online distribution outlets including Amazon and the company’s e-commerce website. “Just this week two of our TouchLock models became available for purchase at Best Buy and will be in stock in 200 to 300 stores across the U.S. in the next week or two. You will hear more about this shortly,” said DePasquale.
BIO-key executives maintain full year revenue guidance somewhere between $8 million and $12 million. Considering revenue fell to $840,000, the company is going to have to hustle to make up the revenue in the back end of the year. Even so, the CEO is confident. On a conference call DePasquale fielded a question from an analyst questioning the company’s claims about year-end results. “… [We are] feeling very good about our annual guidance… As I mentioned before just this week, our locks made it into Best Buy. You can see that continue to grow and blossom; however… we are feeling very good across the board, that we have a business that is diverse enough that we can absolutely achieve our objectives at year.” A decrease in operating expenses, down 12%, helped. The company boosted the amount of cash and cash equivalents on hand. At the end of this quarter the company had $1.3 million in the bank, up from $300,000 at the end of last quarter. DePasquale also discussed possible new business trends, including a new standard, WebAuthn, released by the World Wide Web Consortium and FIDO Alliance. The standard will allow browsers to integrate with hardware authentication devices such as USB dongles or biometric readers. This will make logging onto a browser and online accounts easier and safer according to DePasquale. The technology makes it possible for hardware devices to enable users to prove identity on websites without relying on usernames or passwords. “With WebAuthn enabled browsers and sites, users can utilize BIO-key fingerprint readers and software solutions to securely sign into online accounts. Microsoft, Google and Mozilla have already committed to using WebAuthn and we view the standards as being very favorable in helping to bring biometrics more broadly into mainstream use. We are tracking the standards development closely and working to ensure BIO-key is well-positioned to participate,” said DePasquale.
The overall net loss on the quarter was $2,348,000, or $0.30 per basic share, larger than the $1,557,000 loss recorded in the same period last year. Shares in BIO-key are trading around USD $2.26.
NXT-ID recently hosted a conference call. Vin Miceli, CFO, summarized results. Revenues were slightly below $5 million, as compared to about $6.7 million in the comparable quarter in 2017. According to Miceli, “The primary reason for the reduction there was, we had a shortfall in Flye card, shipments to WorldVentures, which we anticipated and as you all know, we disclosed in our annual report for 2017… So that shortfall was partially offset by increased revenues at the LogicMark level, the revenues were up slightly on a quarter-over-quarter basis and also was partially offset by the contribution of revenues from FitPay.”
FitPay is a biometrics-based wearable that allows contactless payments. NXT-ID acquired the company last year. Gino Periera, CEO, NXT-ID, discussed FitPay. “The payment division continued to build on the success we had coming out of 2017. In terms of accomplishments, we announced our network services agreement with Discover to innovate the FitPay Payment Platform to the tokenization service, which is called Discover Digital Exchange… This agreement will now allow the Discover cardholders and their alliance partner cardholders to easily make contactless payments [at] retail locations that accept NFC or contactless transactions. Under this agreement, we’ve completed the integration and we expect to launch the service later this quarter with our major partner, Garmin.” This is exciting. Garmin, the GPS maker, is now venturing into the world of mobile payments. It has launched Garmin Pay, a contactless payment product that works on the company’s Vivoactive 3 Smartwatch device. The Garmin Pay service is powered by FitPay. “This agreement is the milestone for us, because it represents an expansion of our platform that we now include the three major networks around the globe: Visa, Mastercard, and Discover. In addition to that, the service for Garmin Pay continues to grow. We’ve added up to 15 new countries worldwide and over 150 banks that are supporting our service and that – those banks continue onboard to our platform essentially on a weekly basis,” according to Periera.
Michael Orland is the CFO of NXT-ID and former CEO of FitPay. He was also on the call and said he was, “very pleased with the activations” of new devices coming in from Garmin. He went on to detail recent business. “As Gino mentioned in his opening remarks, in February, Garmin announced its second Smartwatch, the Forerunner 465, which now includes Garmin Pay. The service is now available on two of their newest smartwatch lines, which are the Vivoactive 3 and the Forerunner 465. I think what’s significant about the addition of the Forerunner 465 is that it is a very runner specific watch. It brings, not only our paid capabilities, but onboard music, so that athletes, and even casual owners that are dedicated to their sport, now have a single device that they can take with them. They can take music and payments and all the tracking capabilities with them without having to bring their smartphone on the run with them,” said Orlando.
The company is already expanding the capabilities of the FitPay Platform overall. According to Orlando, “… we’re in the process of integrating to cryptocurrency exchanges, the new banking partners to allow those capabilities on to the platform… We announced late last year and continue to develop the Flip product, which is a new contactless payment device that will allow Bitcoin holders to use the value of their currency to make purchases in USD at unions of retail locations around the world. The new device, as I mentioned, leverages our platform. And as we develop those innovations with the new exchange and the issuing partner, we expect those products to ship later this quarter.”
During question period Orlando was quizzed on the nature of revenues from Garmin. Said Orlando, “… we can’t talk quantitatively about the numbers of activation to disclose what… Garmin itself doesn’t disclose the number of devices that they sell… What’s important is that, when they announced their first quarter earnings, their variable position was up 24% in terms of sales year-over-year… So that sector – of the Garmin business continues to grow and we’re seeing the fruits of that… the outcomes of that are that activations growth has largely been driven by the new devices that are in the marketplace. And so as they continue to add new devices like the Forerunner… that’s going to come on later in the year.”
This week NXT-ID announced it has been issued a patent that, “… describes a method of utilizing common data or algorithms across multiple devices to recognize and authenticate a user to perform a variety of actions.” According to the press release, “The technology could be used to enable devices without specific authentication hardware or software to leverage the capabilities of nearby devices, or send data to an authentication service.” Which is neat. “This technology improves the security and operation of the IoT by enabling multiple devices to work together to improve accuracy and convenience,” David Tunnell, CTO of NXT-ID, was quoted as saying. “… instead of simply authenticating with a single device, multiple devices may work together to identify and authenticate users. This introduces numerous possibilities for collaborative services in the future as the IoT grows. Beyond authentication, these collaborative services can include jointly performing tasks or jointly providing services to the user.”
Shares in NXT-ID are trading around USD $1.92.
A couple of other interesting stories this week: ImageWare Systems will present at the 8th annual LD Micro Invitational Conference in Los Angeles, June 5th. Jim Miller, chairman and CEO, will discuss the company’s technology, direct sales and partner sales efforts. In January, the company brought David Somerville on board as senior vp sales and marketing. He is expected to help the company navigate an expected increase in worldwide sales activity. Mr. Somerville brings more than twenty years of experience in the sales and support of security software.
Swedish firm Fingerprint Cards AB (FPC) has generated some interesting news of late. A couple of weeks back the Swedish biometrics company proposed its main shareholder and former CEO Johan Carlstrom replace the current chairman. Some were surprised by the move. Carlstrom has an insider trading case coming to trial in November. In 2014 police launched a probe into suspected insider trading in FPC. He denies the allegations. Whatever the case, another Swedish CEO was recently facing insider trading charges and was acquitted at trial. And so perhaps Carlstrom is feeling a bit more confident about his case. Even so, there has been a fairly strong flow of news around the company of late. Last month, Hassan Tabrizi, CFO, and Jan Johannesson, vice president strategy and corporate development, announced they would be leaving the company. After that, current chairman Jan Wareby and board members Asa Hedin, Carl-Johan von Plomgren and Ann-Sofie Nordh, all declined re-election to the board. More recently the company’s auditor, KPMG, declared that it is “not available for re-election at the 2018 Annual General Meeting.” Interesting. According to the press release, “It should be noted that KPMG has issued a clean auditor’s opinion for the 2017 financial year, and that KPMG’s decision is therefore neither related to Fingerprints’ accounting nor to its internal control.”
Since then, in the company’s favor, Nasdaq Stockholm has announced that it finds no reason to contest the proposed board of directors. “Fingerprint Cards AB informs that Nasdaq Stockholm has examined the composition of the Board of Directors as proposed by the Nomination Committee, and its compatibility with the Exchange’s regulations,” according to the press release. The latest disappointment has been an announcement last week that the company will be removed from Sweden’s large-cap index, the OMX Stockholm 30 Index. The index includes the thirty most traded Swedish stocks in terms of turnover. Membership is reviewed twice a year, in January and July. And stock ranked outside the top forty five on the entire exchange is cut. The turnover in FPC stock has plummeted as the company suffers a slump in business. As a result the company recently ranked only 47 in turnover. FPC found itself just the other side of the cut and was dropped from the index. Even so, the company continues to announce new business. FPC recently released notice that it will team up with China-based CV Microelectronic to develop a contactless payment card aimed at the Chinese market. Shares in FPC this week are trading around SEK 6.08.