FINGERPRINT CARDS Q3 2017 INTERIM REPORT OCTOBER 26, 2017
Q3 2017 Summary Revenues Revenues: SEK 841 (1,862) M, a 55% decrease year over year Margins & profitability Gross profit: SEK 277 (904) M Gross Margin*: 33% (49) Operating profit**: SEK 52 (764) M Operating margin: 6% (41) Operating Cash Flow: SEK 175 (134) M Highlights 27 mobile devices with Fingerprints sensors launched First FPC1028 launch, Huawei Maimang 6 T-Shape launched AirPlus smartcard trial Joined Eurosmart and EMVCo 2 *Gross profit was negatively impacted by SEK 29 M due to a raw materials write-off and sales of older products at a negative margin. **Including a 48 MSEK cost relating to currency translation.
BUSINESS UPDATE
Maturing smartphone market Our total addressable market is growing but is impacted by OEM customer cautiousness, and slower-than-expected growth in fingerprint sensor penetration, as previously communicated Rate of decline in Average Selling Price currently amounts to approximately 30 percent annually, as previously communicated The price level has dropped as a result of commoditization The product mix for smartphones has shifted towards cheaper sensors, mounted on the back of the device 4
OEM customer overview 25% Global Smartphone Vendor Market Share %, Q3 2017 20% 15% 10% 5% 0% Launched phones with competitor or inhouse Has not launched phone with fingerprint sensor Launched phone with FPC sensor Source: Strategy Analytics forecast & provisional data, FPC estimates
Leading position in the smartphone segment and growing in new areas Continued investments in innovation and driving efficiency Continue to innovate to drive lower product cost, addressing ASP decline Driving efficiency throughout our supply chain and internally Biometrics innovation leadership to drive growth in new areas We will keep investing in innovation with a particular focus on iris recognition applications, smart cards and IoT Development of non-capacitive fingerprint sensing technologies 6
Market launches Q3 2017 27 mobile devices by 14 OEM customers Launches by Huawei, Xiaomi, Vivo and Oppo First device launched with FPC1028 - Huawei Maimang 6 New OEM-customers: E-Ben, Bkav Computer mouse and doorlocks 7
Good progress in smart cards T-Shape launched New, power-efficient module design facilitating high-volume production of smart card fingerprint sensors. Optimized for integration in smart cards adhering to the existing fully automated industry process. Available for supply in commercial volumes at the end of 2017. Executive member of Eurosmart Develops smart security standards Fingerprints leads the Biometrics Committee Trials with AirPlus and selected by CardLab The world s first dual interface payment card launched by AirPlus with FPC1300-series sensor from Fingerprints T-Shape has been chosen by CardLab to be integrated into their biometric card reference design. More at : https://www.youtube.com/watch?v=jw_4uarnsba&feature=youtu.be 8
Summary Leadership position in a challenging smartphone market Positive cash flow, decreased inventory and strong cash position Good progress in the smart card segment Increased investments in R&D: iris, non-capacitive fingerprint sensors, smart cards, IoT and cloud 9
10 This is only the beginning!
Q3 2017 FINANCIAL RESULTS
12 Q3 2017 Financial performance
13 Operating expenses development
Weaker profitability in Q3 2017 Jul-Sep Jul-Sep Jan-Sep Jan-Sep Jan-Dec 2017 2016 (*) 2017 2016 (*) 2016 (*) Operating profit, SEK M 52.4 764.5 195.2 2,058.2 2,578.5 Operating margin (%) 6% 41% 8% 41% 39% EPS, SEK 0.16 1.89 0.44 5.04 6.40 Exchange rate effects on bank balances are reported under Financial income and expenses as of 2017 and therefore the 2016 operating profit was reclassified accordingly. 14
Working capital development *Average working capital excluding net cash over 5 quarters/rolling 12 months sales 15
16 Q3 2017 Cash flow and Net cash trend
17 Q&A
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