OneSpan face activist investor, Next Biometrics and Nxt-ID solidly positioned after challenging quarters

An activist investor says OneSpan is severely undervalued, and has written a letter to the Board with four proposals to overhaul the company. Next Biometrics says its sales pipeline is stronger and Nxt-ID believes it is through the worst of the pandemic’s impact, as publicly traded biometrics companies continue to report their results midway through the strangest year in recent memory. Idex Biometrics has reported an insider share purchase, an FPC sensor has been implemented in another smartphone, and Ipsidy has joined the push for device-based authentication.

Activist investor calls for major OneSpan shakeup

OneSpan’s valuation is heavily discounted, and the company needs to improve its financial disclosure, divest its hardware segment and eSignature SaaS business, and upgrade the Board by replacing Founder and former Chairman and CEO T. Kendall Hunt, according to activist investor Legion Partners Asset Management, LLC.

Legion Partners holds approximately 5.6 percent of OneSpan’s stock, and sent a letter to OneSpan Board of Directors members explaining its criticisms and demands. The investor wants OneSpan’s guidance to be formatted like its competitors and peers in the software sector, and strategic reviews of the company’s hardware segment and OneSpan Sign to be performed.

The investor compares OneSpan to “cybersecurity peers,” including Okta, Ping Identity, and Mitek, but also Cloudflare and Palo Alto Networks, according to the revenue multiple they are trading at, and finds OneSpans 2.4 times multiple lacking compared to the others, which mostly range from 3.5 times to multiples in the twenties.

The company has done a poor job of communicating with investors, according to the letter, a problem exacerbated by “lumpiness” from its hardware business and similar factors, which have resulted in revenue “misses” despite strong results. Legion Partners also suggests that Hunt has overseen long periods of underperformance and shown poor judgement in decisions like selling shares the day before the Q2 earnings release earlier this month, which the investor says has contributed to a lack of trust between the Board and investors.

The comparisons to similar companies and some assumptions Legion Partners characterize as conservative lead it to the conclusion that OneSpan stock should be priced at around $42 per share, 120 percent higher than it currently is.

Next Biometrics reports improved costs and cash position

Next Biometrics has reported improvements in its sales pipeline and revenues of NOK 13.6 million (US$1.5 million) in the second quarter of its fiscal 2020 year.

Gross margin during the quarter was 13 percent, and EBITDA excluding options was negative NOK 23 million ($2.6 million), with non-recurring costs of NOK 8.3 million ($0.9 million) mainly related to non-cash impairment losses, according to the announcement.

As of June 30, Next had a cash position of NOK 97.8 million ($11.1 million).

Next Biometrics CEO Peter Heuman said that the successful completion of a NOK 50 million private placement was one of the most important recent events for the company, and that Next is “leaner and fitter than ever before.”

“Even though NEXT was also affected during the quarter by the ramifications related to Covid-19, mostly through delays and slower sales cycles as customers work through their own issues, we still managed to deliver an increased revenue of 48 percent compared to our low-point in Q4 2019, when the reset and ongoing transformation of the Group was initiated,” Heuman states in the announcement. “We see that earlier communicated cost savings and optimization of the Group clearly yields effect and now clearly runs towards our Q4 OPEX target of NOK 5 million per month.

“We have completed the steps needed to reach our target cost levels, reorganized and established a more customer focused sales force and engineering team, improved internal process and simplified our product portfolio. We now have a platform that allows us to deliver revenue growth at better margins. As cost reductions and other changes flow through to the income statement, we intend to push on to achieve growth and improved margins.”

Nxt-ID nearly breaks even in tough first half

Nxt-ID reports revenues of $2.5 million in the last quarter and $6.2 million for the first half of fiscal 2020, both down significantly from a year earlier due to the effects of the COVID-19 pandemic.

The company still turned a gross profit, of $1.8 million for Q2 and $4.6 million for the first half, but those were down from $3.4 million and $6.6 million respectively last year. Operating expenses were similarly affected, and operating income was a loss of $103,000 in the last quarter and positive $936,000 for the first six months of the year.

Adjusted non-GAAP operating income was $0.1 million for the quarter and $1.4 million for the half, compared to $1 million and $1.9 million in the same periods of 2019.

“We continue to make significant progress with regards to our new product development efforts and we remain very optimistic about our future prospects in a post COVID-19 environment,” states Nxt-ID CEO Vin Miceli in the press release. The company also repaid roughly $1.2 million in term debt during the first six months of 2020.

Idex Biometrics CEO purchases shares

A mandatory notice of an insider share purchase has been issued by Idex Biometrics, with CEO Vince Graziani purchasing 350,000 shares at NOK 1.65 ($0.19) each. Graziani now holds 535,000 shares in the company, with 5 million incentive subscription rights.

Many employees of Idex have been taking a portion of their salaries in shares instead of cash, and the company said in a recent earnings announcement it is beginning its commercial ramp-up.

Fingerprint Cards sensor implemented in durable smartphone

A new durable smartphone from UK-based Cat has been released with the FPC1035 sensor from Fingerprint Cards. The S62 Pro is a smartphone built for professionals and featuring thermal imaging capabilities.

Ipsidy joins FIDO Alliance

The FIDO Alliance has welcomed Ipsidy as its newest member in a Tweet. Ipsidy will promote the use of second factors in the form of on-device biometrics or hardware tokens to perform fast identity authentication online.

Article Topics

biometrics  |  financial results  |  Fingerprint Cards  |  Idex Biometrics  |  Ipsidy  |  Next Biometrics  |  NXT-ID  |  OneSpan  |  stocks