Fingerprint Cards AB: Year-End Report January – December 2021

Highlights

• Gross margin improved by 8 percentage points compared with the fourth quarter of the preceding year.
• Order for the most recent generation of the T-Shape sensor module (T2) from one of the world’s three largest card manufacturers.
• A separation of the business operations into two wholly owned subsidiaries was implemented to sharpen focus in each area and thereby drive profitable growth.
• Fingerprints issued SEK 300 M in senior secured bonds with the aim of accelerating growth.

Fourth quarter of 2021

• Revenues amounted to SEK 356.6 M (369.4)
• The gross margin was 31.7 percent (23.7)
• EBITDA totaled SEK 26.7 M (32.4)
• The operating result was SEK 3.9 M (neg: 326.8)
• Earnings per share before and after dilution amounted to SEK 0.02 (neg: 1.02)
• Cash flow from operating activities was a negative SEK 16.8 M (pos: 46.9)

January-December 2021

• Revenues amounted to SEK 1,355.8 M (1,255.7).
• The gross margin was 29.3 percent (21.9)
• EBITDA totaled SEK 85.6 M (59.4)
• The operating result was negative SEK 7.6 M (neg: 365.8)
• Earnings per share before and after dilution amounted to SEK 0.00 (neg: 1.1)
• Cash flow from operating activities amounted to SEK 24.3 M (158.1)

CEO’s comments

Sales in the fourth quarter of 2021 amounted to SEK 357 M, while we continued to improve the gross margin, which increased by 8 percentage points, to 32 percent, compared with the corresponding period of 2020 and by 3 percentage points compared with the preceding quarter. Although sales for the quarter in constant currency terms decreased by 4 percent compared with the corresponding period in 2020, the trend is positive. This is reflected in a sales increase in constant currency terms of 16 percent for the full-year 2021 compared with 2020. We were able to deliver this growth despite an insufficient access to production capacity throughout the year due to the prevailing semiconductor shortage in the world. I believe that this demonstrates the strength and stability of our business, which also began to expand into new areas during the year at a significantly higher pace than previously. Growth in the PC and Access areas contributed to the gross margin improvement, both in the quarter and on a full-year basis. At the same time, the product mix within Mobile has continued to shift to newer products, with a positive effect on the gross margin.

Our Mobile operations continued to perform strongly during the fourth quarter and although the first quarter is usually seasonally weak, we also expect a positive trend during 2022. This is reflected in our previously disclosed revenue forecast of SEK 1,600-2,000 M for the full-year 2022. Following a weak 2020, when many consumers postponed upgrading their smartphones due to the coronavirus pandemic, we saw higher demand in 2021, which also drove the market for fingerprint sensors. The capacitive sensor remains the most common biometric modality by far in the mobile industry. The most recent generation of ultrathin sensors, designed for side-mounting, continued to increase its share of the market during the year. Fingerprints leads the development in this area and the growing share of new products contributed to the positive gross margin trend in the fourth quarter.

During 2021, we received the first volume orders for our new biometric PC solution, and in the fourth quarter, we announced that another PC model has been launched with our technology: HONOR MagicBook V14. We already dominate the market for fingerprint sensors in Chromebooks, while three of the world’s five largest manufacturers of Windows PCs are already working on integrating our technology in their products. To date, we have been able to announce Windows PC launches with our sensors in products by Dell, HONOR, Huawei and Xiaomi. I expect that we will be able to unveil more names of customers that use our technology in the near future. As announced earlier, 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.

During the fourth quarter, yet another commercial launch of biometric payment cards was made using our technology, this time by Bank Pocztowy in Poland. We expect to see an increasing number of launches in 2022 and we continue to drive development in collaboration with our partners. All of the world’s three largest providers of secure elements for payment cards have chosen Fingerprint Cards’ technology for their reference designs and, at the beginning of January, one of them, STMicroelectronics, received a CES 2022 Innovation Award for STPayBio, an advanced platform for biometric payment cards that was developed in collaboration with Fingerprint Cards and Linxens. During the quarter, we also received an initial order for the most recent generation of our T-Shape sensor module (T2) from one of the world’s three largest card manufacturers, to be used for the commercialization of the next generation of biometric payment cards. In January 2022, we announced that the most recent generation’s T-Shape sensor module (T2) achieved compliance with Mastercard’s updated security requirements for fingerprint sensors.

The negative cash flow from operating activities in the fourth quarter is due to an increase in receivables and inventory, a consequence of our growth initiatives. We are seeing a continued positive trend in the underlying market for our products and Fingerprints has ambitious growth plans. This increases the need for working capital and R&D investments, and I am therefore very pleased that, in December 2021, we were able to successfully issue SEK 300 M in senior secured bonds to further accelerate the company’s growth.

To further expand our opportunities for driving profitable growth in our various focus areas, we also implemented a separation of our business operations into two wholly owned subsidiaries at the end of the year. The change came into force on January 1, 2022, and entails that our Payments & Access operations are led by the Fingerprint Cards Switzerland AG subsidiary, based in Zug, Switzerland, and our Mobile and PC operations will be led by our Fingerprint Technology Company (FPC) subsidiary in Shanghai, China. This change enables an even sharper focus on our two individual business operations, which have industry conditions that differ in terms of structure, geography, customers, partners and regulations. Our new organization also gives us better possibilities to explore distinct and separate financing options and avenues of development for the different subsidiaries in our Group.

Christian Fredrikson, President and CEO

Today at 09:00 CEST Fingerprints’ CEO Christian Fredrikson will present the report together with CFO Per Sundqvist in a combined webcast and telephone conference. The presentation will be held in English.

The report will be available at fingerprints.com

The webcast and the presentation material can be accessed through https://edge.media-server.com/mmc/p/ae2ki69u

For analysts and media: The telephone conference dial-in is +44 (0) 2071 928000 (international participants) or 08-506 921 80 (Swedish participants). Please state conference ID 6498218.

Attachment

• Interim report Q4 2021