Questions & Answers
Question: You grew revenue by 25 percent in constant currency in Q3 2021. What are the drivers of the growth and what is the outlook?
Answer: The demand for Fingerprints’ products remained healthy in the Mobile business line in Q3 2021. Mobile is our largest business, currently accounting for approximately 90 percent of revenue. At the same time, our revenue streams are now beginning to diversify at a higher pace than previously, into new areas with attractive margins. Our activities within the Access area – primarily smart door locks – are developing favorably, while PC is now emerging as an important new area for Fingerprints. We anticipate favorable growth in the short and long term, partly due to considerably more computers being sold now compared with pre-pandemic volumes, but primarily because the share of computers with fingerprint sensors is expected to grow considerably from today’s relatively low levels. Our sales to the PC industry have all the prerequisites to outgrow the Access area in the next 12-18 months and thereby develop into the second largest application area for our products. External analysts estimate that the global market for PCs will establish itself at around 350 million units per year from 2021. We believe that up to 80 percent of PCs will have a fingerprint sensor, and that the addressable market for us in this segment will consequently amount to around 280 million units in 3-5 years.
In the Payments area, yet another commercial launch of biometric payment cards was announced in the third quarter, by Jordan Kuwait Bank. They will use Thales’ cards, with Fingerprints’ technology, in the launch of biometric cards to the bank’s customers in Jordan. Thus far, we have seen five banks launching biometric cards, including BNP Paribas, Europe’s largest bank, and Crédit Agricole, number three in Europe. This means that another global mass market for our products is now significantly on the way to being opened up. We expect an increasing number of biometric card launches in 2022 and beyond. There is considerable interest in adopting this technology, and Europe, Asia and South America have taken the lead.
Question: Your gross margin improved in Q3 2021. What are the key drivers?
Answer: A more favorable product mix in the Mobile area, with a higher share of new products, contributed to improving the gross margin during the quarter. We are also growing in new areas, such as PC and Access, which is having a positive impact as well. As we continue to diversify our business into new verticals, outside of smartphones, we expect a positive effect on our profitability, as well as lower risk and greater stability.
Question: What are your comments on the strategic review initiated by the Board of Directors?
Answer: The Board has decided to conduct a review of strategic alternatives for Fingerprints with the purpose of evaluating and creating the best route to crystalize value for shareholders. We are conducting this review from a position of strength, but it is still too early to comment on potential outcomes. Should the review result in a material event, information will be disclosed in due course. Different alternatives are being reviewed, which could range from acquisitions, to spin-offs, sales and new listings. There has been considerable interest for Fingerprints from a number of different players, which has triggered this review process.
Question: You have commissioned Carnegie Investment Bank to evaluate the conditions for supplementing Fingerprints’ financing with debt capital. Why?
Answer: Fingerprints is planning for significant growth in the years ahead, which would require capital. The company carries no debt at the moment, and we believe that current conditions on the credit market are favorable. Thus, the company believes that this is a good time to look into taking on some debt on good terms. If we do decide to take on debt, it will be a smaller corporate bond of a few hundred million SEK, which will be used to accelerate our growth in 2022 and beyond.
Link to Fingerprints’ Q3 2021 results presentation, including Q&A: https://edge.media-server.com/mmc/p/xbb5vbpp