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Strategic shifts to new biometric product mixes drive earnings optimism

Strategic shifts to new biometric product mixes drive earnings optimism

Publicly traded biometrics providers have reported mixed results, but Precise Biometrics, Idex Biometrics, OneSpan, Nuance and Secunet all see growth ahead amid shifts in their strategies and product mixes.

Precise Biometrics optimistic despite revenue decline

Precise Biometrics says it experienced an increase in client activity and promising growth in digital identity during its fiscal first quarter, along with a near 12 percent decline in net sales to SEK 20.3 million (roughly US$2.43 million).

EBITDA during Q1 2021 was flat, after the company booked EBITDA of SEK 3.1 million ($371,000) in the same quarter a year ago, and the company’s operating loss totaled SEK 3.8 million ($455,000) in the recently-ended quarter, compared to SEK 100,000 in Q1 2020.

“We saw increased volatility in our market for mobiles in the first quarter of 2021. The component shortage affected our customers’ volumes, which has decreased our royalty,” states Precise CEO Stefan K. Persson. “We have continued to win projects together with our customers, which resulted in revenues of SEK 20.3 million and a positive result at EBITDA level. Through continued investments in the field of Digital Identity, we are broadening our offering in order to be able to reduce our dependency on revenues from the mobile side in the future, putting us in an even more stable position.”

Persson also said that Precise will continue innovating biometric identification to stay ahead of its competitors, and lauded the selection of its fingerprint technology by Qualcomm during the past quarter. Steps toward commercializing its YOUNiQ biometric access control business and its first installations in the U.S. and Norway are seen as positive signs, and he noted interest in the market in the potential environmental benefits of securing access control without using a physical token, and the possibility of extending YOUNiQ to automate more functions for further benefits.

Idex revenue growth continues on access control and biometric payment cards

Idex Biometrics consolidated revenues ticked up 4 percent to $624,000 its first fiscal quarter of 2021 compared the previous quarter, and a whopping 500 percent from Q1 2020, as revenues from an early adopter implementing a global biometric access control solution began to roll in, along with initial volume shipments of its third-generation TrustedBio product for biometric payment cards.

Total operating expenses for Idex were higher than previous quarters, and it booked a net loss of $7.5 million, increased from $6.3 million a year earlier. Loss per weighted average basic share was $0.01, the same as the previous and year-ago quarter.

A busy quarter for Idex included a $27.5 million fundraise, a launch of shares to the Nasdaq, and progress in various directions on biometric payment cards. Since the quarter ended, Idex has announced a new CFO and the launch of a new generation of Idemia’s FCode card with its TrustedBio sensor.

“Commercial interest in card-based biometric authentication is growing globally at an accelerating pace, and an ecosystem up and down the supply chain is developing,” comments Idex CEO Vince Graziani. “With opportunities in payment cards, access control, and, potentially, digital currencies, I believe IDEX has a promising future. As the COVID-19 pandemic abates, we anticipate a resumption of bank trials on a large scale, followed by increasing production orders for our TrustedBio solutions, which offer superior performance at market-leading price points.”

OneSpan addresses investor concerns

OneSpan has written stockholders to explain an engagement with Legion Partners Holdings, as well as its progress towards transforming its business towards a biometric authentication software focus.

Legion proposed replacing half of OneSpan’s Board of Directors earlier this year, after calling for its former CEO to be replaced on the board last year.

OneSpan has been carrying out the recommendations of the activist investor, “whether by coincidence or engagement with Legion,” including adjusting its disclosure and transparency practices, adding six new directors to its board in the past two years, and conducting a review of its business including an exploration of selling one of its product lines.

The letter notes Legion’s acknowledgement the transformation so far has been impressive, and that transitioning from a hardware-centric company to a software-first model is complex. A research analyst also commended management’s moves and expressed increasing confidence in the company, according to the letter.

In its most recent earnings update, OneSpan reported that its transition to a recurring revenue model is nearly complete. The company drew only 30 percent of its revenue from recurring operations when Legion invested, according to the letter, while 57 percent of Q1 2021 revenue was recurring, due to its ongoing strategic shift.

A suggestion by Legion representatives in 2018 that the company should make financial disclosures typical of cloud-based business would have been premature, the company says, as even the recurring revenue it had at the time was based on server software maintenance, which the representative admitted being unaware of, the letter states.

Further measures supported by Legion to increase the emphasis on cloud in its board of directors, and to divest its remaining hardware business are rejected, on grounds that the board has already been updated with more cloud expertise, and that 19 of OneSpan’s top 20 customers buy its hardware-based authentication solutions, giving the business line more value within OneSpan than it could realize by selling it.

Nuance records positive net income

Nuance Communications reports GAAP earnings of $347 million for its second quarter of fiscal 2021, up from $315.9 million in the same quarter last year, and GAAP earnings per diluted share of $0.04. The revenues and EPS results exceeded the company’s guidance and expectations.

GAAP net income for Nuance during the quarter was $12.7 million, a major swing from a net loss of $26.5 million a year earlier.

The sale of Nuance’s medical transcription and electronic healthcare record implementation business was completed on March 1, and a merger with Microsoft was announced in April.

Nuance’ Enterprise segment was buoyed by particularly strong growth in its security and biometrics technologies, according to the statement.

Secunet records seventh consecutive record quarter

Secunet held its annual general meeting today, approving each item on its agenda, including a dividend of €2.54 ($3.07) per no-par value share, up from €1.56 ($1.89) for its first quarter last year, as its biometrics business raised its overall result.

“We have continued on our growth path: For the seventh time in a row, we achieved record results in terms of both revenue and EBIT,” says Axel Deininger, CEO of secunet Security Networks AG. “This confirms our chosen course and enables us to once again increase the dividend for our shareholders and equally invest in future growth.”

Deininger confirmed secunet’s forecast of €330 million ($399 million) and EBIT of €59 million ($71 million) for fiscal 2021, as the pandemic drives further digitization among businesses.

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