Fingerprint Cards : FPC) Interim Report Q1 2014

CEO's comments
The success of Fingerprint Cards (FPC) is continuing and, in terms of sales, we can state that the first quarter of 2014 was our strongest ever first quarter, with sales of SEK 18 M. Both the rapidly growing market of smartphones and the traditional banking sector contributed to this relative sales success. The development of our next generation of touch sensors, where the FPC1020 is the first product, is progressing according to plan, and we have now entered an intensive period together with our customers. Interest from major manufacturers of smartphones is very strong, which continues to confirm our previously stated forecasts of the size and growth in the market.

During the first quarter of 2014, we saw clear confirmation of how fingerprint sensor technology is becoming integrated particularly in smartphones. At the Mobile World Congress in February, the world's largest manufacturer of smartphones, Samsung, confirmed that its next flagship model, the Galaxy S5, would contain swipe sensors in the home button. In addition to basic functions, such as unlocking the screen, the capability of making secure mobile payments with PayPal is utilized, a possibility that was created from the work in the FIDO alliance in which Fingerprint Cards is a driving and highly active partner.

Secure mobile transactions are a clear direction in the expanding service range that is now emerging due to the ecosystem surrounding fingerprint sensor technology. FPC has the opportunity to serve as a strong and active partner in the expansion of these services and has the intention of capturing a leading position in this market segment.

The opportunities that will be created with fingerprint sensor technology, primarily within smartphones, are by no means limited to the exclusive upper segments. FPC believes that the market is rapidly approaching segmentation, whereby touch sensors will be the dominant type of sensor in the more expensive premium and high-end segments, while Swipe sensors will comprise a large volume product in the less expensive market segments. As the undisputed, independent market leader in touch sensors, combined with our long tradition of delivering swipe sensors, I am delighted that our customers have shown an interest in both of these types of implementation of fingerprint technology.

The level of activity in our traditionally largest market, China, is intense and interest in our products and fingerprint technology is generally very high. The Chinese smartphone market is the single largest market globally with slightly more than 450 million smartphones sold in 2014* and our long-term and recognized leading market position in the Chinese bank market also provides us with a strong foundation among leading Chinese OEM suppliers of smartphones and tablets. A distinct trend is that Chinese manufacturers, ranging from such global players as Huawei, ZTE and Lenovo to less well-known brands as Xiaomi, Coolpad and Gionee, are all capturing market shares as they gradually build up their technology and design expertise, which they add to their low production costs. Premium smartphones are normally priced in excess of USD 300 and often contain the latest and best functions, such as powerful processors, high screen resolutions, the best cameras and fingerprint readers that are usually touch sensors. Lee Seung-woo, an analyst at IBK Securities, said in a recent comment to Reuters: "The winners in the current market conditions will be those who show the best cost-efficiency, and in that sense Chinese players will be in a better position than others."

We are continuing our organic expansion and are growing mainly in Sweden, where we are recruiting all types of functions that support volume growth expected imminently and the number of customers with high demands for delivery reliability and support is increasing. During the second quarter, we will significantly expand our sales and customer support organization, primarily in Asia. In the first quarter, we also recruited Bill Gallione, VP Americas, thus considerably strengthening our focus on customers, primarily in North America.

Finally, I can conclude that 2014 has begun strongly and interest in our solutions is greater than ever. Our full focus remains directed to generating success for our shareholders, customers and personnel based on FPC's technology and products.

Source: IDC China

Future prospects
FPC stands by its assessment that sales in 2014 will exceed SEK 500 M and that the EBITDA margin will end up at +20% for the full-year. Sales are expected to increase very sharply sequentially during the year. The vast majority of the income is expected to occur during the second half of 2014, particularly during the fourth quarter of 2014, since volume deliveries of the significantly more income-generating touch senor FPC 1020 are scheduled to start at the end of the second quarter. This forecast entails a renewal of the previous forecast.

Sales for the second quarter of 2014 are anticipated to amount to SEK 30-50 M. Volume deliveries of touch sensors for the Tier 1 flagship mobile phones will start at the end of the second quarter and are expected to be launched on the market in July 2014.

Fingerprint Cards AB (publ), Corp. Reg. No. 556154-2381, discloses this information pursuant to the Swedish Securities Market Act (2007:528) and the Swedish Financial Instruments Trading Act (1991:980). The information was issued for publication on February 6, 2014, at 8:00 a.m. (CET)

Key information
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