Biometrics companies report solid but inconsistent growth in Q2: FPC, IDEX, Imageware, BIO-key, SuperCom
Biometrics sensor, software, and hardware companies have issued earnings reports, showing shifts in some parts of the market, including growth in under-display sensors for smartphones and payment cards. Problematic international relations and changes in business focus and technology delivery methods meanwhile contribute to inconsistency and uncertainty for some businesses.
A positive net earnings and EBITDA trend continued for Fingerprint Cards in the second quarter of 2019, as the company recorded positive totals in a number of measures that had been negative in the same period in 2018.
While revenues were SEK 381.8 million (roughly US$39.6 million), slightly down from SEK 389.9 million ($40.5 million) in the same quarter last year, FPC’s gross margin was 22 percent, up from negative 63 percent in Q2 2018, EBITDA totalled SEK 44 million ($4.6 million), up from negative SEK 402 million ($41.7 million), and operating profit jumped from negative SEK 578.2 million ($60 million) to SEK 6.2 million ($640,000). Earnings per share before dilution also climbed to SEK 0.01 from negative SEK 1.49 a year earlier, and cash flow from operating activities was SEK 179.6 million ($18.6 million), compared to a loss of SEK 302 million ($31.3 million).
A similar turnaround can be seen in first half results for 2019 compared to 2018.
“Fingerprints’ delivery volumes increased during the quarter and I estimate that our market position in capacitive sensors for smartphones has been strengthened, with a market share that is currently somewhat higher than the figure for the full-year 2018. This positive trend is reflected in the fact that we increased our sales by 11 percent (10 percent in constant currency) compared with the first quarter of 2019. However, since the average selling price (ASP) is lower than in the preceding year, sales declined by 2 percent (12 percent in constant currency) compared with the same period last year,” comments Fingerprint Cards CEO Christian Fredrikson.
“Compared with the second quarter of last year, we increased our gross margin by seven percentage points. Compared with the first quarter of the year, we had a lower share of software revenues, as well as a less favorable customer mix, which led to the gross margin being somewhat lower than in Q1.
“At the same time as ASP has continued to decline, the share of new and more cost-effective sensors in Fingerprints’ product mix has increased. We will soon be ready for the next step by launching yet another new generation of sensors, based on FPC1511, which will be even smaller and thus more cost-effective. The development project is proceeding to plan, and I expect the first smartphones to use this new sensor to be launched as early as this year.”
Fredrikson also notes that the company’s technology may be integrated into the Samsung Galaxy A10 smartphone, and that in-display sensors have made smartphone biometrics a growing market again. The company also strengthened its position for biometric smart cards, including with the June launch of a test by Crédit Agricole which could lead to a commercial launch in 2020. A partnership with G+D and a certificate received by partner NXP from Mastercard are also cited as reasons for optimism about the company’s prospects.
IDEX Biometrics recorded revenues of NOK 0.4 million ($44,000) in Q2 2019, up from NOK 0.3 million ($33,000) in the same period a year ago, with gross margin rising from 39 to 55 percent over the same period, operating expenses lowered from NOK 63.3 million ($7 million) in Q2 last year to NOK 60.1 million ($6.7 million). First half revenues were slightly down from 2018 levels.
Recent company highlights include the first high-volume order of IDEX’s dual-interface sensors, as well as manufacturing milestones for biometric smart cards, certification progress, and patents granted by the USPTO and IP Australia for its on-card enrollment technology.
“The evolution of the biometric smart card market is undoubtedly gathering pace and IDEX made great progress in the quarter,” says IDEX CEO Stan Swearingen. “Our pipeline of commercial opportunities continues to grow, and we expect sensor shipments to increase significantly. We have developed important relationships with new customers in the ecosystem and our biometric technology is proven, and ready for mass deployment. I am highly confident that our strategy and technology leadership will deliver considerable success for all our stakeholders.”
IDEX board of directors has also decided to issue 12,766,500 incentive subscription rights to employees and contractors, most of them related to the company’s practice to providing long-term incentive for employees. The exercise price is NOK 1.65 ($0.18) per share, and rights vest by 25 percent per year before expiring in 2024.
BIO-key has reported second quarter revenue of $728,383, down 2.7 percent from the same period a year earlier, with delays in the timing of large orders causing lower license fees and service revenues.
Software license fees dropped by 61 percent as BIO-key transitions to a Software-as-a-Service (SaaS) model, but services revenues decreased 7 percent, due to a decline in non-recurring service revenue and also in recurring revenue, pending customer renewals. Hardware sales increased by 26 percent with a large order from an existing customer and several new customer deployments, according to the announcement.
BIO-key’s gross margin was 7 percent, up from negative 38 percent in Q2 2018, which was impacted by software license amortization expenses. Excluding that factor, gross margin would have been 45 percent in Q2 2019, down from 51 percent in Q2 2018. Net loss was cut to just over $1.4 million, or $0.10 per basic share, from nearly $1.7 million, or $0.15 per basic share, and likewise first half net loss was $3.2 million, or $0.23 per basic share, an improvement from a loss of just over $4 million and $0.42 per basic share in the first half of 2018.
“Our new sales and marketing initiatives are generating an increasing level of requests for demonstrations and proofs of concept from customers looking to incorporate the security and convenience of biometrics into their existing workflow. These initiatives include a range of enhancements to our website and sales & marketing collateral intended to better target and illustrate BIO-key’s value-add for key verticals. During the second quarter, we advanced several new customer dialogues which provide promise for revenue in the second half of 2019,” notes BIO-key CEO Michael DePasquale.
“Unfortunately, our results continue to be negatively impacted by ongoing delays in anticipated cash payments from a large contract we closed with a Chinese customer in Q4 2018. To support BIO-key through this period, we have taken steps to provide sufficient working capital for our operations, including completing a convertible debt financing early in Q3’19.”
BIO-key raised $2.55 million recently to weather unforeseen circumstances.
Timing uncertainty for payments from a $5 million order with a Chinese customer continue to be reflected in the company’s guidance, and BIO-key has revised its 2019 revenue guidance to a range between $6 million and $12 million, with significant top and bottom line improvements. Revenues of $8 million or above would push BIO-key into positive cash flow and net income, the company says.
Revenue fell drastically for ImageWare Systems in Q2 2019 to $812,000 from nearly $1.9 million in the same period of 2018, though one-time orders from government agencies made up almost the entire difference, according to an earnings announcement.
Gross profit in the quarter was $672,000, or 83 percent, compared to $1,579,000, or 84 percent, in Q2 2018. Net loss grew from $2.3 million a year ago to $2.5 million.
Recent highlights for the company include the launch of its Biointellic Intelligent Anti-Spoofing System, and a revitalized marketing and sales effort with Fujitsu in Latin America.
“Although results for the quarter are less than we expected, we remain optimistic on key deals and partnership opportunities,” says ImageWare Systems CEO Jim Miller. “Working largely through our partners and with Federal and State agencies, we are beholden to their delays and integration schedules. We continue to see very positive changes in the biometric authentication adoption landscape and our confidence that ImageWare is positioned strategically to capitalize remains steadfast.”
SuperCom has announced an increase in net profit from $30,000 to $110,000 in Q2, even amid a decline in revenue from $6.8 million to $5.7 million.
The company’s operating expenses dropped 34 percent to $2.7 million from $4.1 million, EBITDA improved 34 percent from $1.4 million to $1.9 million, and EBITDA margin grew from 21 percent in Q2 last year to 33 percent, a 57 percent improvement. First half results reflected a similar improvement from the first half of 2018.
“We expect more cost optimizations in the following quarters brining us closer to the lean operating structure that we have not seen since 2015, before the strategic acquisitions took place. Yet today, I believe our business prospects are multiples greater, with 2 additional business segments, a major presence in developed markets, over 60 percent growth in our steady-state recurring revenue, and significant enhancements to our technology portfolio backed by 119 patents,” comments SuperCom President and CEO Arie Trabelsi.
“We continue to execute on our business plan across our business segments. In the recent past we have been expanding organically into new countries and governments faster than ever, including 10 new multi-year project wins in the last 12 months alone, which are expected to generate long term recurring revenues for years to come as well as additional business from customer references.”
A shift towards offender monitoring with biometric IoT devices boosted SuperCom’s Q1 revenue.
BIO-key | biometrics | financial results | Fingerprint Cards | Idex Biometrics | ImageWare | stocks | SuperCom