Precise Biometrics – Reduced Sales Due To Fewer Customer Projects

By | November 14, 2017

Sales dropped during the third quarter due to the company’s having won fewer customer projects because of tough competition in the market for capacitive sensors. The lower level of sales resulted in an operating loss. The technology shift from capacitive sensors to new sensor technologies is opening up new opportunities. Precise Biometrics is involved in several projects involving ultrasound and optical sensors, as well as biometric payment cards.

THIRD QUARTER  

  • Net sales for the remaining operation totaled SEK 10.1 (23.0) million.
  • The operating profit/loss for the remaining operation for the quarter totaled SEK -6.5 (8.6) million.
  • The profit/loss for the period for the remaining operation totaled SEK -7.5 (21.8) million.
  • Earnings per share for the remaining operation totaled SEK -0.02 (0.06).
  • Earnings per share for the total operation totaled SEK -0.02 (0.05).
  • Cash flow from total operating activities totaled SEK 3.9 (8.4) million.

INTERIM PERIOD  

  • Net sales for the remaining operation during the interim period totaled SEK 46.9 (62.5) million.
  • The operating profit/loss for the remaining operation for the interim period totaled SEK -8.7 (21.0) million.
  • The profit/loss for the period for the remaining operation totaled SEK -10.7 (34.2) million.
  • Earnings per share for the remaining operation totaled SEK -0.03 (0.10).
  • Earnings per share for the total operation totaled SEK -0.02 (0.08).
  • Cash flow from the total remaining operation totaled SEK 19.7 (25.9) million. Cash and cash equivalents for the total operation totaled SEK 116.7 (75.0) million at the end of the interim period. 

SIGNIFICANT EVENTS  

  • Precise BioMatch™ Embedded was integrated into the world’s first biometric contactless payment card from AirPlus.
  • Licensing agreements were signed with the Chinese module house O-Film and an Asian display manufacturer.
  • After the end of the quarter, an upgrade of Precise BioMatch Embedded was announced that supports small fingerprint sensors and constrained microprocessors.

FINANCIAL DATA AND KEY INDICATORS    

As a consequence of the fact that the Mobile Smart Card Solutions business area has been classified as a business held for sale, previously reported figures have been converted in order to improve comparability. In order to obtain comparable historical data, previously reported figures have only been adjusted for the expenses relating directly to the discontinued business area, which will no longer affect the company’s remaining operation. The resources that were previously allocated to the Mobile Smart Card Solutions business will be transferred to the Fingerprint Technology business area at the latest in connection with the disposal and have therefore not been included in the business held for sale. This reinforcement of resources is taking place in order to meet the market’s demand for increasingly advanced solutions in the field of Fingerprint Technology.

The discontinued operation’s impact on the financial position has not been reported separately, as the company does not consider it possible to report the discontinued operation’s impact on cash flow. Cash flow is instead reported for the total operation.

Unless otherwise specified, reported figures in the interim report relate to the remaining operation. 

KEY INDICATORS

Amount in SEK thousand unless 2017   2016   2017   2016   2016   Rolling
otherwise stated Q3  Q3   Q1-Q3   Q1-Q3   Full-year 12 mon.
Net sales 10 081 22 559  46 858 62 519 83 299 67 638 
Net sales growth, % -56.1% 70.6% -25.0% 162.8% 95.7% -16,8%
Gross margin, % 90.5% 98.2% 93.8% 98.0% 98.0% 95.1%
Operating profit/loss -6 480 8 576 -8 659 20 979 25 407 -4 230
Operating margin, % -64.3% 37.4% -18.5% 33.6% 30.5% -6.3%
Cash flow from operating activities  3 887 8 411 19 695 25 908 37 658 31 447
Cash and cash equivalents 116 722 75 047 116 722 75 047 135 753 116 722

PRESENTATION OF THE INTERIM REPORT    
In connection with today’s interim report, we issue an invitation to an information event today at 10:00. Please see the last page of the interim report for further information about participation. 

CEO COMMENTS 
As communicated previously, the company’s sales during the second half of the year will not reach our earlier estimate. In the increasingly tough competition in the market for capacitive sensors, neither we nor our sensor customers have managed to win projects to the extent we had expected. 

The market for fingerprint sensors for mobile phones is dominated by a small number of players who have been early to market and gained competitive advantages. There have been few other sensor manufacturers who have been able to match the constantly increasing demands of mobile phone manufacturers for smaller sensors, increased performance, lower price and delivery time. This has led to that we, together with our customers, have won fewer projects and been awarded lower volumes.

We are, however, seeing a technology shift from capacitive sensors to new sensor technologies based on, among other things, demands from mobile manufacturers for full-screen displays. This means that interest in ultrasound and optical sensors has increased, which opens up new opportunities for us and our customers who have these new sensor technologies. At the moment we are involved in a number of such projects, and I believe that the first product launches will be starting in the first half of 2018.

During the third quarter we signed a licensing agreement with O-Film, one of the leading module houses, which integrates fingerprint modules with sensors from several well-known sensor manufacturers. A licensing agreement was also signed with an Asian display manufacturer that is developing a new generation of displays for mobile phones in which fingerprint recognition is integrated into the display. We have also announced that AirPlus, a world-leading player in the field of corporate travel management, implemented the world’s first successful use of a contactless biometric payment card using our software. The intention is that this card will make it easy for AirPlus travelers to verify transactions by means of contactless payment. 

We now have licensing agreements with 30 customers, which represents an effective global distribution channel for the company’s algorithm solutions. Just under half of these customers have licensing agreements that cover both mobile devices (Precise BioMatch Mobile) and new product areas (Precise BioMatch Embedded).

The company’s cash position is strong, which gives us the opportunities we feel are necessary to make use of the opportunities for growth in the market. We have invested in development resources in order to meet our customers’ demands for both existing and new sensor technologies, and have made investments in our technology for new areas of application and, not least of all, in local support resources for our customers. We have good cost control and are careful not to increase expenses any more than we consider necessary.

All in all, I am positive about the company’s outlook, despite the weak revenue trend this quarter. New sensor technologies are in an interesting phase and will be opening up new opportunities for us as early as next year. Interest in biometric payment cards is becoming tangible, and we are well positioned in this area. Biometrics will increasingly be replacing passwords and other forms of authentication, and we intend to drive and be part of this trend in the future.

OUTLOOK

Because of tough competition for Precise Biometrics and the company’s customers, sales have not developed in accordance with the company’s earlier estimate. As previously announced, Precise Biometrics has therefore revised its estimate of revenues for the full year 2017, from the previously announced level of approximately SEK 83 million to an interval of SEK 60-70 million. As a consequence of this weaker sales trend, the company will report an operating loss, which differs from the earlier estimate that the full year 2017 would produce an operating profit. 

This information is information that Precise Biometrics AB is obligated to disclose pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact person set out below, at 08:00 CET on November 14, 2017.

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