Earnings Call: Fingerprint Cards Shifts Focus to Streamline Operations

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Earnings Call: Fingerprint Cards Shifts Focus to Streamline Operations

Fingerprint Cards AB (FING-B.ST) announced a strategic shift during its third quarter earnings call. The company is focusing on exiting commoditized markets while transitioning to the high-margin Access and Payment segments.

CEO Adam Philpott and CFO Fredrik Hedlund shared details about the company’s transformation plan. This plan includes significant reductions in operational costs and workforce, aiming to lower the operational expenditure structure to below 70 million SEK by June 2025.

Despite a slight year-over-year decline in revenue, the company reported improvements in gross margins and became debt-free following a successful rights issue.

Key Points:

  • Year-over-year revenue slightly decreased due to the strategic exit from the Mobile business.
  • Improved gross margins with the company moving away from commoditized markets.
  • Operational costs are being reduced, with a 40% decrease in workforce compared to last year.
  • The company aims to reduce operational costs to below 70 million SEK by June 2025.
  • Fingerprint Cards became debt-free by redeeming convertible bonds through a rights issue.
  • The focus is shifting to the Access and Payment segments with new product launches like AllKey and an advanced version of IRIS.
  • The Access business recorded strong sequential growth with significant orders in Q3 2023.

Company Outlook: The company is actively seeking partnerships to manage cash consumption while exiting the competitive PC market. A new CTO, David Eastaugh, has been hired to manage expansion into the broader identity market. The company is determined to transition from volume-driven strategies to value-focused business strategies.

Negative Aspects:

  • Exiting the PC business due to unsustainable margins and high operational costs.
  • Growth in the Payments segment is slow due to challenges in ecosystem building.

Positive Aspects:

  • Access revenue increased from 9 million SEK in Q1 to 18 million SEK in Q3.
  • The company is focusing on high-margin areas and innovative partnerships.

Underperformance:

  • Negative adjusted EBITDA of 22.8 million SEK.
  • Negative free cash flow of 27 million SEK, with a cash reserve of 49 million SEK.

Q&A Highlights:

  • The company is largely exiting the Mobile market, concentrating on Access and Payments.
  • Efforts are focused on improving deal progression in the Payments sector.
  • The Access market remains fragmented, providing opportunities for value and innovation.

Fingerprint Cards AB is navigating a challenging financial environment with a clear strategy to optimize operations and focus on profitable segments. As it exits low-margin businesses, the company leverages its expertise in biometrics and identity management to position itself for future growth. The tone of the third quarter earnings call reflected cautious optimism as the company aims to adapt to market dynamics while implementing its transformation plan and enhancing profitability.