Idex restructures and Megvii denies IPO delay as biometrics industry grapples with broad market shifts

Idex restructures and Megvii denies IPO delay as biometrics industry grapples with broad market shifts

A major shift in the fingerprint sensor market has motivated Idex Biometrics to restructure its business, while a major shift in global trade relations is not delaying Megvii’s initial public offering, the company insists.

Idex has begun a restructuring program to match its size to its current operational environment, planning to reduce its annual operating expenses by 30 percent, largely through actions in the fourth quarter of 2019.

The company has been transitioning from primarily serving the smartphone market to supplying technology for biometric cards and embedded products. The smart card market is expected to take off soon, but is yet to generate major revenues.

Cuts will be made to staff and cash compensation, and other operating expenses unrelated to near-term revenue generation or main development activities will be reduced, the company says.

The reduction in expenses should lower the break-even point in shipments of Idex products by half, according to the announcement. Idex expects to realize the full impact of the restructuring in the first quarter of 2020.

Idex will monitor its cash flow closely, and actively pursue opportunities to supplement it with strategic partnerships, joint development projects, monetizing IP, debt financing, and tax credits and support initiatives for research and development.

“We continue to make steady progress on our strategic initiatives, and, we’re seeing the beginning of shipments and design-in wins in the access control market,” comments Idex CEO Stan Swearingen. “However, the biometric payment card market is still a developing market and, as is common with most emerging growth markets, it is difficult to predict revenue streams with precision. As a result, we have decided to take certain expense reductions. These reductions are prudent and will provide extended cash runway while not impacting our strategic initiatives. We will maintain the capacity to support our customers and continue key roadmap development activities. Streamlining our cost structure was a difficult but necessary measure to achieve our strategic plan.”

The impact of the recent addition of Megvii to the U.S. Government’s Entity List remains somewhat uncertain, but the company is denying a report earlier in the week that it is considering delaying its IPO plans while it attempts to be removed, the South China Morning Post reports.

A Megvii spokesperson texted SCMP that the Bloomberg report that it was meeting with advisors to consider a delay is untrue, but the company declined further comment.

A source told SCMP that Megvii is still answering questions from the Hong Kong exchange under the application process, and is yet to have a listing hearing.

An internal company letter from Megvii co-founder and CEO Yin Qi, which was obtained by the SCMP, says the Face++ facial recognition-maker plans to continue with its IPO plans, and says that until now, the industry has “enjoyed the innovative fruits yielded by the U.S. for four decades and had never really had a sense of crisis.”

Even if the company is removed from the Entity List, Yin says the long term outlook on Chinese-American tech relations means that changes to Megvii’s supply chain are unavoidable.

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