Fingerprint Cards AB

Interim report, January-March 2017

Fingerprint Cards AB (Publ.)
Interim report, January-March 2017

First quarter of 2017

• Revenues amounted to SEK 685.9 M (1,491.2), down 54 % compared to the first quarter of 2016
• The gross margin was 41% (49)
• Operating profit amounted to SEK 70.8 M (618.7) and the operating margin to 10 % (41)
• Earnings per share before dilution declined to SEK 0.17 (1.44)
• Cash flow from operating activities was a negative SEK 324.1 M (pos: 279.5)

CEO's comments

A weak but profitable first quarter

We currently face a challenge with excess inventories in the value chain in combination with increased competition which have affected our deliveries and revenues negatively. This has resulted in a weak, but profitable first quarter.  Revenues declined to SEK 686 M and operating profit was SEK 71 M, corresponding to an operating margin of 10 percent. Our gross margin of 41 percent was impacted by an obsolescence charge linked to our own inventories, and to the lower revenues, however, the underlying product margin still reflects the fact that we have a competitive offering despite operating in an increasingly competitive market. Our cash flow, primarily impacted by the lower earnings and increased inventories, was negative at SEK 324 M.

The inventory build-up in the value chain that is currently affecting our revenues is largely a consequence of our major OEM customers having set high sales targets that they have not achieved, resulting in excess production and inventory build-up.

I have recently received many questions about our visibility. I can state that our visibility is very good when it comes to the forthcoming smartphone launches that our sensors will be features of. However, we have limited knowledge of the sales volumes that these smartphones will achieve and that is what drives our revenues.

In terms of the issue of the excess inventories at our partners and customers, we view this as a short-term problem and expect these inventory levels to normalize during the second quarter. To safeguard our profitability, we are reviewing our costs and the business at large, to ensure that we invest our resources in the right areas. Recruitment of cutting-edge competencies will continue, but will be done more selectively. After a couple of years of extremely sharp growth, it makes sense to consolidate the business and take the opportunity to fine-tune processes and work methods.