FPC expands its leading position in touch fingerprint sensors for smartphones and achieves its highest quarterly sales to date.

CEO's comments

The third quarter marked a breakthrough in the market for touch fingerprint sensors for smartphones and FPC achieved its highest quarterly sales to date: SEK 66 M. The successful launch of the FPC1020 touch sensor in Huawei Ascend Mate7 on September 4 marked the greatest accomplishment to date for our industry-leading technology for smartphones. Huawei's flagship product has been praised by industry analysts as a complete product and FPC's touch fingerprint sensors have been the focal point of much of this positive publicity and the feedback received. We are delighted that FPC has thus opened up the market for touch fingerprint sensors in Android smartphones, giving FPC an exceptional position compared with the other players in the market. This success is a clear result of our long-term, focused investments in performance-leading sensor technology and our unique software and algorithms which, when combined, create a stable and future-proof platform for forthcoming products.

As the market realizes the importance of integrating fingerprint sensors, we are seeing a significant increase in interest among smartphone manufacturers, which indicates substantial growth potential - particularly given our success with Huawei, one of the five largest smartphone manufacturers in the world. One example of this is Oppo's launch of N3 on October 29, which means that we can now boast a customer launch including FPC1021, the successor to FPC1020.

To date, we have been able to comfortably meet our objective of a 60% market share in 2014 for touch fingerprint sensors in smartphones and tablet devices, excluding Apple. Unfortunately, we have also noted that the total number of models launched to date is significantly lower than we had anticipated and that delay is affecting our customers' decisions with respect to launches, as well as their product development in other areas. This have had a negative impact on the total size of the market for fingerprint sensors and resulted in a further delay to FPC's expected growth. However, we stand firm in our assessment that the market has entered a breakthrough phase and that FPC is well positioned to capture a substantial share of the available market now being created, particularly in the touch fingerprint sensor segment, thanks to our leading technology, which offers consumers an outstanding user experience. This is a highly important factor for smartphone manufacturers when they determine which touch fingerprint sensor suppliers will be able to guarantee them a successful product launch. As evidence of this, we announced during the quarter that we had secured new design wins for FPC1021 and FPC1150, two state-of-the-art touch fingerprint sensors that, along with FPC1020, give us the most complete and attractive product portfolio on the market. As announced previously, we are convinced that FPC1150 in particular has excellent potential to be integrated into several products in 2015.

Given this combination of factors, the company is confident that its sales for full-year 2015 will exceed SEK 1 billion. This forecast includes expected revenues from all previously announced design wins, and the company will not going forward announce new design wins as long as the total revenues resulting from these do not differ from previously communicated forecast, in which case an updated forecast will be communicated.

In addition to the mobile segment, our success in the banking sector continued during the quarter. This area of operations is a key market in which FPC has been active for many years and we continue to experience favorable demand for these products from our customers, particularly in Asia. Overall, we noted a strong - and actually increasing - interest in our offering from our Chinese bank customers.

An important milestone was achieved when Trustonic, a leading supplier of trusted execution environments (TEE) for smart devices, and FPC announced that we have entered into a partnership to increase access to FIDO ReadyTM  products, enabling secure biometric authentication for connected mobile phones and tablets. This partnership will encompass FPC's product family of fingerprint sensors for mobile devices and associated software adapted for use with Trustonic's TEE, thus enabling OEMs of mobile devices to shorten the integration period and offer the market secure fingerprint authentication in conjunction with the OEM's launch of smartphones and tablets featuring FPC's sensors. As a result of this collaboration, FPC is well positioned to become part of the growing market for secure mobile transactions, which we believe will achieve a broad acceptance among consumers. As previously announced, Huawei's Mate7 also includes an equivalent security solution, which enables integration of Alipay's solution for secure payments using mobile phones.

After the close of the third quarter, it was also announced that Zwipe had entered into a partnership with MasterCard to integrate fingerprint sensors into MasterCard's credit cards and that FPC's touch fingerprint sensor technology had been used for the evaluations conducted by Zwipe and MasterCard. This collaboration has opened up a new market segment in which FPC holds a strong position thanks to its robust and highly energy-efficient technology.

The ongoing preliminary investigation into suspicions of insider trading had no impact on the company's operations and earnings for the third quarter or on its forecasts, and is not expected to affect its performance in the fourth quarter or in 2015.

I have served as Acting CEO of FPC for nearly two months. The organization continues to drive our business towards success with high focus and determination, while we are experiencing growing interest from our customers. Along with the FPC Board, we continue to drive this development while providing the products our customers require. It is with confidence I look forward to the end of 2014 and to FPC's continued role as a driving force in the commercial breakthrough of fingerprint technology. It is happening now!

Key figures Jul-Sep 2014 Jul-Sep 2013
Net sales, SEK M 66.1 31.6
Adjusted gross profit, SEK M* 30.3 19.0
Gross profit, SEK M 21.2 15.5
Adjusted gross margin, % * 46% 60%
Gross margin, % 42% 49%
Operating loss, SEK M -43.9 -1.7
EBITDA, SEK M -21.1 1.3
EBITDA, % -32% 4%
Loss after financial items, SEK M -43.3 -1.3
Earnings per share, SEK -0.76 -0.03
* See page 8 for explanation
Sep 30, 2014 Sep 30, 2013
Cash and cash equivalents, SEK M 192 142
Order backlog, SEK M 50 39

Future prospects
The company is of the opinion that sales for full-year 2014 will be in the range of SEK 230-330 M. It is estimated that sales during the fourth quarter will be in the range of SEK 100-200 M. The reasons for the reduced sales forecast are that the market introduction of a small number of major smartphones equipped with fingerprint sensors has been deferred to the first half of 2015 and that sales of the products launched to date have not reached the volumes we had anticipated.

For 2015, the company foresees sharply rising demand, primarily for touch fingerprint sensors but also for swipe fingerprint sensors in the lower price segments for smartphones. With this strong demand and the increased visibility that we have obtained through the extensive customer activities that we are currently implementing, the company feels confident that sales for full-year 2015 will exceed SEK 1 billion. At the present time, the company does not have sufficient information to be able to forecast the impact of smart cards on the total business volume for 2015. As mentioned in the CEO's comments design wins will not be communicated going forward, instead these are included in the applicable forecast.

For further information, contact: Jörgen Lantto, Acting CEO of Fingerprint Cards AB (publ), +46 031-60 78 20, investrel@fingerprints.com
Website: www.fingerprints.com/corporate/

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 November 6, 2014, at 08.00 a.m.

Key information
Issuing, publishing or distributing this press release may be subject to restrictions in certain jurisdictions. The recipient of this press release is responsible for using this press release and the constituent information in accordance with the rules and regulations prevailing in the particular jurisdiction. This press release does not constitute an offer, or invitation to acquire or subscribe for new securities in Fingerprint Cards in any jurisdiction.

distributed by