Fingerprint Cards reports on progress toward turnaround
Fingerprint Cards says its sales trend has stabilized somewhat, as sequential revenue growth of 35 percent in the second quarter resulted in positive cash flow from operating activities.
In a mid-year update, the company reported that its revenues from January to June declined 55 percent from the first half of 2017 to SEK 679.6 million (US$76 million), with a gross margin of negative 30 percent for an operating result of negative SEK 753.1 million ($84.2 million). Earnings per share before dilution fell to negative SEK 1.96 ($0.22) from SEK 0.28 ($0.03) in the first half of 2017, and the company’s cash flow from operating activities was SEK 98.2 million ($11 million).
For Q2, revenues totaled SEK 389.9 million ($43.6 million), with a gross margin of negative 63 percent, for an operating result of negative SEK 578.2 million ($64.6 million). Q2 EPS before dilution were down from SEK 0.10 ($0.01) a year earlier to negative SEK 1.49 ($0.17), and cash flow from operations was SEK 302 million ($33.8 million).
The sales declines were attributed to lower average selling prices for Fingerprint Cards products.
The results were significantly impacted by write-downs and restructuring costs, and Fingerprint Cards announced continuing restructuring efforts in June.
“Fingerprints continues to hold a leading position in capacitive fingerprint sensors for smartphones, but during the year we have noted a clear shift in demand toward smaller and cheaper sensors. Currently, around 80 percent of the sensors we deliver are low-cost products. This is a significant change compared with last year, when the market could accommodate a variety of different sensor types in different price ranges,” said Fingerprint Cards CEO Christian Fredrikson.
“The domestic smartphone market in China recovered somewhat during the quarter, but volumes remain lower than in the corresponding period last year. We expect the value of the market for capacitive fingerprint sensors for smartphones to continue to decline. This is a consequence of continued price pressure, but also of the introduction of alternative biometric technologies, not least in-display sensors. For Fingerprints, this means we have to lower our costs in parallel with focusing on diversification to increase growth, lower risk and stabilize revenue streams.”
Fredrikson acknowledged the difficulty of the company’s adaptation for employees, but said it is necessary to defend its competitiveness. He said that the measures would result in a reduction of operating expenses by about two-thirds, compared with 2017. Further restructuring measures include combining the Smartcards and Automotive & Embedded Business Lines into a single unit, and reducing Group management from 10 to 6 people.
FPC is optimistic about the potential of a new POS terminal with its technology integrated for Aadhaar verification, and says it plans to work on developing its ultrasonic in-display fingerprint sensors and iris recognition technology for smartphones.
The company’s sensors have recently been integrated into six new smartphones, and it also launched a new fingerprint sensor with lower production cost in June, which it expects will appear in commercial mobile phones starting in late 2018 or early 2019.