Fingerprint Cards : FPC) Interim Report for the first quarter of 2015

21 May, 2015

FPC increases its revenue and initiates broader market launch of touch fingerprint sensors

CEO's comments
Revenue for the first quarter of 2015 totaled SEK 140 M, up 660% year-on-year and a rise of 33% compared with the fourth quarter of 2014. We view the rise in revenue as a sign that the market we address is now being properly established. One notable point is that the major smartphone manufacturers clearly prefer touch fingerprint sensors to swipe fingerprint sensors, which is further accelerating the market growth in value thanks to the higher prices per unit for touch fingerprint sensors compared with swipe fingerprint sensors, and favors us because of our broad and competitive touch sensor portfolio.

A positive operating cash flow was generated during the first quarter. This comes from fast growing revenues combined with pre-payments from customers regarding deliveries to be made during the second quarter 2015, as well as from reduced increase in operating expenditure. This positive development has continued further during the second quarter to date. The company does not today foresee any further need of capital injection despite the strong growth of volumes that is expected during the remainder of the year.

To date during 2015, we have continued the integration of our touch fingerprint sensors into a large number of smartphones. This applies particularly to the FPC1025, which is integrated into the backside of the phone, and has proved to be highly competitive. As previously communicated, we have received a number of major orders for touch fingerprint sensors scheduled for delivery during the second and third quarters of 2015.

Up until today HTC, Huawei, Oppo, Newman, LeTV and Yulong have launched smartphones with FPC's touch fingerprint sensor.

During the first quarter, we launched two new touch fingerprint sensors, FPC1140 and FPC1145. The latter is the first touch sensor designed for integration as a side button in phones, meaning it can be integrated into the volume button or the power button. Recently, we also launched two new touch fingerprint sensors, FPC1022 and FPC1035, which are our smallest touch fingerprint sensors to date and are planned as successors to FPC1021 and FPC1025, which have recently met with considerable success. Our algorithm development has reached a breakthrough in the capability to retain highly competitive performance in terms security, speed and reliable verification, despite a substantial reduction in the size of the sensor. These qualities make the touch fingerprint sensors launched in 2015 very strong products for the future.

All touch fingerprint sensors in our product family - with the exception of FPC1022 and FPC1035 - are now being delivered to our module partners for mass production, and projects are ongoing to integrate these into smartphones together with a number of leading smartphone OEMs in Asia. Mass production of FPC1022 and FPC1035 is scheduled for the second quarter of 2015 and orders have already been received for volume supply. Our broad portfolio, which makes us capable of supporting different ways of integrating touch fingerprint sensors into smartphones, makes us prepared to manage the OEMs different requirements and this means we have a very strong competitive position.

In cooperation with our suppliers and module partners, the company's focus at present is to ensure the capacity to deliver substantially growing volumes of touch fingerprint sensors. Our sales organization and sourcing and supply organizations are focusing intently on securing capacity for the volume delivery phase that we have now entered. Together with our suppliers, major efforts have been put into strengthening our organization and supply capability, and our assessment is that we are well prepared to meet the fast growing demand from the market.

In recent months, our development resources have devoted a great deal of time helping mobile phone manufacturers to integrate touch fingerprint sensors into smartphones for ongoing launches. This means that an increasing share of our development cost is associated with efforts with short time to revenue. We are also continuing to invest in further enhancing our sensor technology in all respects. Our wide-ranging involvement with customers gives us invaluable input from OEMs regarding what is required for future products. This makes us secure in the knowledge that we are investing in solutions that add value for our customers and strengthen our competitiveness in the years ahead.

Apart from the rapidly growing touch fingerprint sensor business for smartphones, we continue to develop our offering for smartcards. This is paving the way for new, complementary business potential together with Zwipe and other business partners.

We are with high confidence looking forward to the coming period, which is expected to be associated with successively growing volume deliveries and several product launches of smartphones that incorporate our touch fingerprint sensors.

Future prospects
Revenues for the second quarter 2015 are foreseen to amount to at least SEK 340 M, which corresponds to a growth compared to the second quarter 2014 of +670%. The second quarter and onwards is expected to yield a positive operating result.

Communicated order values for 2015 hereby amount to 740 MSEK to date. In addition to revenues for Q1 2015 of 140 MSEK and a number of smaller orders not separately communicated amounting to 120 MSEK, current order value and revenues amount to more than 1,000 MSEK for 2015. Since FPC foresees sequential significantly increased revenues during the full year 2015, the revenue guidance for 2015 is increased from the previously communicated guidance that revenues for 2015 will exceed 1,000 MSEK to an updated guidance that revenues for 2015 will exceed 1,500 MSEK. The reason for this is the growing interest from the market in integrating touch fingerprint sensors and the company's strong product portfolio.

The company does not today foresee any further need of capital injection despite the strong growth of volumes that is expected during the remainder of the year.

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 May 21, 2015 at 8 a.m. CET.

Key information
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