• Core Business Growth: 10.5% growth in the core business.
• Total Revenue Reduction: 45% reduction due to winding down the mobile business.
• Cash Burn Reduction: Reduced by SEK42 million.
• Gross Margin: Adjusted gross margin at 25.4% compared to 19.7% in the previous year.
• Headcount Reduction: Decreased by 31% from Q1 2024.
• Adjusted Gross Margin Increase: Increased by 5 percentage points excluding non-cash items.

• Warning! GuruFocus has detected 3 Warning Signs with FGRRF.

Release Date: August 15, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Fingerprint Cards AB (FGRRF) reported a 10.5% growth in its core business, despite undergoing a significant transformation.
• The company successfully reduced its cash burn by SEK42 million, demonstrating improved financial control and operational efficiency.
• Gross margin improved to 25.4% from 19.7% in the previous year, indicating better profitability after exiting the mobile business.
• The company has made significant progress in reducing headcount by 31%, contributing to cost optimization and increased agility.
• Fingerprint Cards AB (FGRRF) is focusing on expanding into new markets, particularly in the payment and access segments, with promising opportunities identified in logical access and electric vehicles.

Negative Points

• The total top-line revenue decreased by 45% due to the planned wind-down of the mobile business, impacting overall financial performance.
• The company anticipates continued volatility as it progresses through its transformation plan, which may affect short-term stability.
• There is pressure in the PC business from companies considering using facial recognition instead of fingerprint sensors, potentially impacting future sales.
• The payment segment experienced a soft quarter with limited business transactions, indicating challenges in achieving market traction.
• The transformation plan involves significant changes, including cost cuts and strategic shifts, which may pose execution risks and require careful management.

Q & A Highlights

Q: What's driving the growth in the access segment, and is there any growth in China in door locks? A: The growth in the access segment is primarily from the rest of the world, not China. A key driver is logical access, where biometric tokens are used for digital applications. This aligns with our strategy to replace passwords with biometric solutions. The access market is broad, offering many opportunities, which we plan to scale through partnerships and channels. - Adam Philpott, CEO

Q: Is the PC market at a standstill, or is there something else affecting stability compared to Q1? A: The PC market is project-driven and can be volatile. Our focus is on winning new projects and maintaining profitability. We are actively engaged with clients on new models, but cycles can create gaps between projects. The market is competitive, and we aim to manage this volatility as a newer player. - Adam Philpott, CEO

Q: Are there competing technologies to capacitive fingerprint sensors in biometric payment cards? A: Currently, capacitive sensors are the primary technology for biometric payment cards due to their durability, ease of use, and cost-effectiveness. While there may be other entrants, capacitive sensors have a head start. We are optimistic about our position in this market, especially in regions where cards are preferred over mobile payments. - Adam Philpott, CEO

Q: How will you manage cost cuts and execute your strategy going forward? A: We are dynamically managing costs to ensure we have the necessary resources for R&D and growth. We are on track to meet our OpEx targets and will continue to adjust as business conditions change. Our focus is on maintaining financial flexibility to support strategic initiatives. - Adam Philpott, CEO

Q: Can you comment on the progress in touchless iris recognition? A: We are making progress in the DMS market, focusing on partnerships for iris authentication. As hardware costs decrease, we expect iris technology to appear in new devices, including PCs. We are engaging with potential customers to explore opportunities in this area. - Adam Philpott, CEO

For the complete transcript of the earnings call, please refer to the full earnings call transcript.