Fingerprint Cards AB (publ)

Good day and thank you for standing by. Welcome to the Fingerprint Cards Q2 Results 2025 conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 1 again. Alternatively, you may submit your questions via the webcast. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Stefan Petersson, Head of Investor Relations. Please go ahead.

Thank you, Sandra. And good morning, everyone. And welcome to FPC's earnings call following the release of our Q2 report this morning. So we'll start by a presentation of the report by our CEO, Adam Philpott. and then by our CFO, Fredrik Hedlund. And if you're following the call on the web, you can post questions throughout the call. And with that, let me now hand over to our CEO, Adam Philpott.

Thank you, Stefan, and good morning, everybody. Thanks for joining us for our Q2 earnings presentation. Just by way of agenda. I'll be walking us through an executive summary of the results We will also then talk about the new board members that we announced recently at the AGM We'll talk about the transformation plan We've been very clear on every single earnings call for the last eight quarters this is the transformation plan that we have in place for this company and And what we'll show today is continued progress and successful execution of that transformation plan. And as we think about that, we're in the accelerating growth phase of that transformation plan. We'll talk about the things that are helping us build that growth as well. Finally, I'll hand to Frederick Hedlund. Frederick will talk about the Q2 financials in a little more detail before we go to some Q&A. So let's move on to the executive summary. So first of all, core growth is one of those pillars of our transformation plan. And I'm really pleased to see strong growth again this quarter in our core revenue. So our ongoing operations increased by 40% year on year, really strong growth, particularly as you compare that to the market growth of around 20%, really good execution from the team. And if you look at the first half, 66% growth for the first half entirely. So really good performance in our core business. Very pleased to see that and appreciate all the efforts from the whole team, from our partners, and of course, the faith that our customers put in us as well. But at the same time, it's not just good growth. It's also good growth with continued strong margins. 48.1% for the quarter, 53% on average for the first half. We talked about stability being the first phase of the transformation plan, and this shows that we've really improved gross margins compared to where they were a couple of years ago. So great performance, again, from the team to maintain a very strong gross margin. Slight delta between last quarter, simply just because of some of the mix. It's a relatively small revenue base, and the mix skewed that slightly, but really, really strong margin nonetheless. The other piece, a key piece, I think, of the transformation plan is around asset monetization. We have some great assets as a company. We have a great brand in our markets as a company. So we were really pleased just after quarter end to announce another deal monetizing our pc assets meaningful cash onto the balance sheet is really important for us to continue to fund the business and be able to fund our our future investments as well and drive future growth so great uh upfront cash in that deal as well really pleased for us to be able to uh announce that um recently Also, we focus on then new growth as well. We've invested in a joint partnership with Anonabit on our Identity Cloud. We launched the initial product a few months ago during Q2, so really pleased to get that initial product out to market. We've got more products coming, and we're now really starting to invest behind that so that we can start to see new opportunity and in turn new revenue coming out of that partnership. I'll talk a little bit more about that. And then the final pillar is around business modernization. Of course, we continue to be focused on managing our operational efficiency. In this case, you can see continued execution on managing OPEX, particularly headcount, a big part of our overall OPEX. You can see the change year on year in terms of headcount. And that's something we'll continue to do, is make sure that we keep a firm eye on OPEX, but at the same time, get the right balance. between having the right optics for our business, but also investing in growth. Growth doesn't come for free, it's something we need to invest in, and then thinking about how we manage those investments. And again, I'll touch on that in a little more detail shortly. But of course, this is all about building towards a positive EBITDA and free cash flow. We feel good about the track that we're on. We feel good about the progress we're making towards that. Double-digit profitable growth is helping us. And in addition, monetizing those assets then brings additional cash in to make sure we've got a well-funded business. Really pleased about the way we're executing the transformation program. We've been very open and transparent about what it is, and we like to hold ourselves to account to demonstrate we're executing extremely well against that plan. If we go to the next slide, we've also got a new board that's going to help us continue to drive this transformation and grow the business. John Lord has joined us. John's got incredible experience in identity specifically and with biometrics too. He's a successful founder, been able to monetize and sell his company, True Narrative, to Lexus Nexus in 2021. He's got incredible experience in driving growth Both organically and through acquisition as well. So great to have John on the board. We also have Carl Johan based in Sweden in Stockholm. Great track record in building and scaling Nordic and European tech ventures too. So Carl Yohan is also a board member in other high-growth tech companies, a specialist in go-to-market, and a specialist in creating operational scale. And we actually streamlined the board by having John and Carl Yohan with us. Now we're down to four board members, including myself, John and Carl Yohan, and, of course, Christian as the chairman. So a smaller board, agile-focused, really reflecting where we now need to go as a company. we go to the next slide i want to keep the transformation plan top of mind for all of you as investors this is something that we've been talking about as i said for the last couple of years it's an important transformation for us as a company but what's also important is that we're very clear on how we're executing against this plan too and you can see of this second phase of the transformation there are four pillars i've talked about those in the executive summary. One thing I will say is we feel really good about the stability we've now created in this company. Good stable growth, good stable margins. We're bringing cash into the balance sheet, not only through ongoing operations, but also through asset monetization. We feel like we've got a really nice stable venture here that we can build upon as we move to the accelerate growth phase of this transformation plan. And improve points around these four pillars. For asset monetization, I mentioned the Aegis deal, really important deal for us, not just in terms of bringing cash onto the balance sheet, but also in terms of an ongoing partnership there too with ongoing income through royalty, which I'll touch on in just a moment. The core business continues to perform as well. So great year on year growth, both for the quarter and for the first half as well. So really pleased to see that we're getting good growth out of that core business as we continue to focus on those higher value, higher margin segments as well. In the new business, It's much newer venture for us, some joint partnerships that we have in place starting to manifest in joint product. We launched that first product and now we're doubling down on how we drive go to market around that new business to start to put revenue and opportunities on the table. And then finally, in terms of business modernization, a whole lot of things that we're doing there to ensure that as we grow the business, We're not growing our OPEX base at the same level. We're maintaining a good OPEX level, but getting growth off it through productivity using tools like AI as a modern business, but still managing headcount, still managing OPEX in a really smart way so that we run a good financial operation. And I'll just spend a bit more time on each of these things. I talked about the asset monetization deal for Aegis, really important deal for us. But there are other things that we're doing in asset monetization too. There are other licensing opportunities that we're pursuing, and of course there are the patent partnerships. They take a bit of time to manifest, but we're heavily engaged in our patent partnerships, looking at where there's opportunity to monetize our IP through that process also. As we look at core revenue growth I mentioned, 40% year-on-year growth in core revenue. Really pleased to see that. But there are other things that we're doing to drive core revenue growth as well. If you can go to the next slide for me, please, Stefan. We're working in our marketing engine, so completely revitalizing our website, which is no longer reflective of who we are and where we're going. Changing the website, but not only is our storefront, using that is a much better way to capture leads. Incoming leads are an extremely important part of a company like ourselves to look at making sure we're taking those leads on distributing them and effectively acting upon them as well so a lot of change in terms of our marketing engine to drive top of funnel by turning marketing into a leads engine and of course the other thing that we've spoken about is moving up the value stack we used to be a sensor company just selling sensors we've moved up the value stack to be a systems company including MCU software and other components and we can really see in our pipeline how well we're moving up that value chain driving an improvement in gross margin and getting a greater wallet share with our customers at the same time whilst also helping those customers reduce the number of components they need because we have a greater set of componentry in our systems offers. So pleased to see progress on all of those items for core revenue. On new revenue streams, again, I mentioned first product was launched. We've got more products to come in terms of our identity cloud. but also we've started to increase capacity in the identity space too. A new rep on board in the United States, a new business development person on board in the United States as well, just to focus on those new revenue streams on that software in the identity space as well. So really pleased to now start to put some wood behind the arrow as it relates to new revenue streams. And then finally on business modernization, I mentioned What this is about is ensuring that we're operating as a modern business using modern tools, not just throwing headcount at every problem, which creates obviously OPEX increase. So we're going to manage our OPEX in a really smart way. We are making smart bets as well, though. We are investing in growth, such as additional capacity for identity, but at the same time, we're being smart about how we modernize, for example, our revenue operations using best practice tools, including AI, to be smart around how we maximize our sales capacity, how we minimize the amount of people we need to get things done, how we offload administrative tasks and automate them, etc. And the same is true across the business, augmenting our team with AI-driven support. So a lot going on in that space, but at the same time, continuing to manage the overall OPEX. And then the final thing I'll talk about before I hand to Frederick to do a slightly deeper dive into the numbers is, of course, the Aegis deal. We announced this, I think, last week. So just after quarter end. Really important deal for us. We're monetizing unused assets. We exited the PC market. Those assets are still of value and still in demand. And so great that we've been able to monetize those assets in line with our strategy. it also strengthens our balance sheet. It brings cash onto the balance sheet and gives us improved capital flexibility around how we run ongoing operations, but also how we invest for future growth as well. So extremely important deal as part of that overall strategy. The majority of the cash will come in in Q3 and there will be some in Q4 because it's much more than just a one-off transaction. There's some joint work we're doing on ASIC design, but it's also royalty associated with it. So there's this additional revenue stream that comes as a result of that deal, as well as that upfront that we've spoken about. So good strategic deal for us, great strategic partnership, and good for the overall strategy. With that, Frederick, let me hand to you, and maybe you can talk a little bit more about some of the numbers in Q2.