Fingerprint Cards : FPC) interim report for the second quarter of 2014.

CEO's comments

During the second quarter, we experienced further successes with our area and touch sensors. We have confirmed our strong position in the banking sector in China, where we are unchallenged as the market leader and this resulted in additional orders of slightly more than SEK 30 M. Furthermore, our volume deliveries of the 1020 touch sensor have commenced and during the quarter, we received a first order for production volumes for a Tier 1 manufacturer's flagship mobile, which was launched in the summer. Interest in our various touch sensors included in our product portfolio continued to increase and is now very significant. A clear result of our successes is the close relationships we have with leading smartphone manufacturers and the clearest is the Design Win and order we already announced for FPC1020. As we previously communicated, we expect to see high volume deliveries of our touch sensors already during the third, but mainly during the fourth quarter of 2014.

Following the successes with the FPC1020, we also announced two touch sensors, the FPC1021 and the FPC1150. These new pioneering products will set the standard for integration of touch sensors in considerably smaller mobile units than was previously possible. Our focus remains on the best possible performance combined with low power consumption, which is very important in the mobile industry. I am convinced that our strong and expanding product portfolio will continue to generate very favorable opportunities to maintain and strengthen our position as leader in our industry. 

A key event for FPC was the acquisition of Anacatum Design AB during the quarter. This will provide FPC with access to leading technology which will further strengthen our already strong holding of intellectual property rights. Further, FPC will gain access to leading analog IP and ASIC development competence, and by integrating Anacatum's development team into FPC, we will further accelerate the development rate of the industry's most ambitious portfolio of touch and swipe fingerprint sensors. We are happy to welcome Anacatum's employees to the FPC team.

In early June, Apple disclosed that in its most recent operative system iOS8, the company will open up the so-called APIs to App developers. This means that a very large group of developers will come into direct contact with the benefits of fingerprint technology and will be able to build applications that will utilize the functionality provided by fingerprint technology. For FPC, this is important and means an additional step toward the mass market for fingerprint applications, which we know will be much more than just a change of password and PIN code. There are actually no limits beyond your fantasy for the new apps and solutions that can and will be developed for biometric technology in the forthcoming years.

FPC is growing strongly and with the acquisition of Anacatum, we have now additionally increased our Research and Development operation and significantly strengthened our ability and capacity to develop fingerprint sensors, which is critical to meet the strong demand for new products that we now anticipate.

It is with great confidence that I look forward to the second half of 2014. Interest from our customers remains very strong. We can confirm that it is happening now and we look forward to seeing all our efforts be converted into commercial successes.

Future prospects

FPC continues to stand by its assessment that sales in 2014 will exceed SEK 500 M and that the EBITDA margin will surpass 20% for the full-year. Sales are expected to increase sharply sequentially during the year. The majority of the income is expected to occur during the fourth quarter of 2014, when volume deliveries of the significantly more income-generating sensors FPC 1020 and 1021 are expected to increase concurrently and deliveries of the 1150 sensor, which will likely be the major volume product going forward, are expected to be initiated. This forecast means a renewal of the previous forecasts.

Sales for the third quarter of 2014 are anticipated to amount to SEK 50-80 M. During the third quarter, volume deliveries of the first secured project with 1021 commenced according to plan. The clear breakthrough for fingerprint sensors, particularly touch sensors, which we are now witnessing in the market has resulted in the decision and implementation of accelerated recruitment of additional resources within product development, sales and customer support. As a result of the company's objectives to become the global leading supplier in the market for fingerprint sensors in smartphones and tablet devices, we are now increasing personnel expenses, which means that break-even and profit results are not expected to be achieved until the fourth quarter of 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). This information was issued for publication on August 21, 2014 at 8:00 a.m.

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