Fingerprint Cards AB: Interim report, first quarter 2016

28 april 2016

First quarter 2016:

• Revenues amounted to SEK 1,491.2 M (139.9), up 966% compared with the first quarter of 2015
• The gross margin was 49% (27)
• Operating profit totaled SEK 589.1 M (loss: 18.8) and the operating margin was 40% (-13)
• Earnings per share rose to SEK 7.12 (loss: 0.32)
• Cash flow from operations was SEK 249.9 M (21.2)

Outlook

• The 2016 revenue guidance is unchanged, SEK 7,000-8,500 M.
• The operating margin for 2016 is estimated to exceed the operating margin for the second half of 2015. The operating margin for the second half of 2015 was 37%.

CEO's comments

Growing market share and continued strong growth
I am delighted to report that Fingerprint Cards showed continued strong growth and a further increase in market share in the first quarter. Revenues amounted to SEK 1,491 M, representing growth of 966% compared with the first quarter of 2015 and sequential growth of 10%, despite a sequential decline in the total volume of smartphones in the first quarter. The operating margin continued to show a positive trend and amounted to 40%, primarily due to an increase in gross profit and gross margin.

Well positioned for accelerating market
According to our assessment, we have continued to gain market share, which is in line with previous estimates. Our market position can be measured by the number of smartphones embedding our sensors that were launched during the quarter. In the first quarter, 26 mobile devices were launched with our sensors, compared with no devices in the first quarter of 2015. These launched devices, combined with a large number of customer projects pertaining to launches of new smartphones embedding our sensors in the months ahead, makes us confident in our ability to continue capturing market share in coming quarters, and thus further strengthening our position for the next few years.

Our major customers in China have accelerated the penetration of fingerprint sensors in their smartphones, driven by strong consumer demand. We have been entrusted with providing fingerprint sensors for an absolute majority of our customers' product launches. Huawei, Xiaomi, Oppo, Vivo and Lenovo, for example, launched 13 mobile devices integrating our sensors in the first quarter. To date in April, 13 smartphones with our sensors have been launched, including the P9 and P9+ flagship models from Huawei, our largest customer.

New level of security - innovations strengthens industry leading product portfolio
Our strategy for maintaining our leading market position despite growing competition is to continue developing and improving our technology leadership. One example of this is the launch of our improved and totally in-house developed algorithm, which was delivered to customers in the first quarter and was already included in the first commercial smartphone launches early in the second quarter. The improved algorithm, combined with our anti-spoof solution that was also launched in the first quarter, means that we have taken the security of fingerprint verification to an entirely new level. Due to our enhanced product offering, we believe our competitive position has been further strengthened, particularly in relation to the leading smartphone manufacturers that strive to offer consumers the best possible user experience for simple and secure user verification.

In view of the growing market and increasing demand from our customers, we are planning for strong growth in the supply of sensors going forward. In partnership with our suppliers, we are therefore investing in expanded manufacturing capacity. Our strong financial position is enabling these investments, and thanks to this, we have the ability to satisfy demand from a rapidly growing market.

An important product launch in the first quarter was the introduction of FPC1268, a touch fingerprint sensor that makes it possible to mount the sensor under a sheet of glass. Together with the first customers and our module partners, work is underway to integrate the new sensor in smartphones for launch during the second half of 2016. Our assessment is that we can establish the same technology leadership for sensors mounted under glass as for sensors mounted traditionally. Our first generation of sensors mounted under a sheet of ceramics, FPC1245, has been highly successful in the first quarter and is now integrated into major flagship smartphones such as Xiaomi Mi5 and Oppo R9 and R9+.

Expanded offering and partnerships - foundation for growth
In the first quarter, we accelerated efforts to adapt our sensors to new market segments, such as smartcards, the automotive industry and the Internet of Things. Development activities with our partners and customers continued, with an ambition of commercial launch of smartcards during 2016. In the first quarter, we also announced that we are working to integrate fingerprint sensors into the automotive industry in collaboration with leading global car manufacturers and other partners.

We also announced a partnership with Gemalto, ST Microelectronics and Precise Biometrics in wearable biometric sensor technology. The results of these efforts has strong potential to lead to a strong position in the Internet of Things.

The strong trend we experienced in 2015 has continued in early 2016, and for the remainder of 2016 we are very much looking forward to setting the foundation to continue being the leading provider of fingerprint sensors in 2017 as well as the following years.

Jörgen Lantto, CEO

For further information, contact:
Jörgen Lantto, CEO, Fingerprint Cards AB (publ),
+46 (0)31-60 78 20, investrel@fingerprints.com

Internet: www.fingerprints.com/corporate/

Welcome to Fingerprint Cards' Q1 2016 Financial Report Webcast on Thursday, April 28, at 3 p.m. CET.
Participants can enter using this link and register:
https://engage.vevent.com/rt/fingerprints~20160428

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 April 28, 2016, at 7:00 a.m.

Important information
Issuance, publication or distribution of this press release in certain jurisdictions could be subject to restrictions. Recipients of this press release are responsible for using this press release and the information herein in accordance with applicable rules in each jurisdiction. This press release does not constitute an offer, or invitation to acquire or subscribe for new securities in Fingerprint Cards in any jurisdiction.

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