Fingerprint Cards AB (publ)

Good day and thank you for standing by. Welcome to the Q3 2025 earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during the session, you will need to press star one and one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one and one again. Alternatively, you may submit your question via the webcast. Please be advised that today's conference is being recorded. I would now like to turn the conference over to your first speaker today, Stefan Petersen, Head of Investor Relations. Please go ahead.

Thank you, Sharon. And good morning, everyone, and welcome to FPC's earnings call following the release of our Q3 report this morning. We'll start by presentation by the report by our CEO, Adam Philpott, and then by our CFO, Fredrik Hedlund. And if you're following the conference call on the web, you can post questions throughout the call. And with that, let me now hand over to our CEO, Adam Philpott.

Wonderful. Thank you very much, Stefan. Thank you, Sharon. Great to be here with everybody today. Good morning. Let me jump into the agenda straight away. As always, quite a jam-packed agenda for you. So I'll kick off by giving a summary of some of the results from Q3. And then once again, we'll talk about the transformation of the company. And as you all know, playing along for a couple of years now, four key aspects to the transformation plan. Number one, asset monetization. Number two, core growth. Number three, new growth. And number four, business modernization. So we'll dig in to all of those in a little more detail. And then I'll hand to Frederick Hedlund for some key figures. Before I close off, talking a little more about the longer term future and where we see growth ahead of us also. And then, of course, we'll close with some Q&A. So as we look at the executive summary, I want to start by talking about cash burn. I know that's a key item for the company and for our shareholders and has been for some time. So I want to start straight away with that, talking about the continued progress that we've made. You can see. from the table on the right that will come up in just a moment that we've made great progress in EBITDA moving towards a positive EBITDA through the transformation plan that we've put in place. So that continues to be a key focus of ours is reducing the cash burn and get into a place where we have positive EBITDA. So that's the most important thing that drives us on a daily basis. And then if you look at some of the things that we're doing in order to achieve that, that's where the transformation plan comes in. So asset monetization is an ongoing part of our revenue mix. When I joined in 2023, I talked about diversifying our revenue streams, opening up capabilities and assets that we have to offer new types of income as well. And I think we've seen a good track record in asset monetization. These are like big deals. We don't get them every single quarter. But we certainly have a good track record and credibility in bringing different types of monetization opportunities to the table. And that's an important part of our ongoing revenue mix. We obviously did the easiest deal in Q3. And after Q3, early in Q4, we announced the Pixar deal. I won't spend time on that today. We'll talk about that in more detail at a future call. Then we think about core revenue growth, super important, good continued performance for our core revenue as well. You can see up 35% year on year just for Q3, year to date up even higher. Our business is lumpy, and so we get different deals coming in at different times. Like any company, big deals can make a big difference, whether they're core business, whether they're new business or whether they're asset monetization, can make a difference. We're pleased with the growth that we're seeing on our top line as well. And also pleased with the gross margin. Of course, when we bring asset monetization deals in, they bring very, very strong profitability. But even if you back those out and look at the overall business performance, very strong gross margin. So I'm really pleased at how the team is focused on adding value to customers and but getting value in return based on the premium products that we're able to offer. But a really important part, and we're going to spend some time on this on the call today, in our core business is also how we're evolving. We've talked a lot about passwords. We've talked a lot about the identity market, and we'll continue to do that because we see a very, very rich market for us to sell into. But there's also lots of opportunities in our core business as a part of that broader market. And what the team have done a fantastic job on is as we've moved to high value markets, What we've also done is move up the value chain. So moving beyond sensors into integrated systems, which offer much better top line revenue, 3x to the ASP, but also offer our customers the opportunity to simplify their COGS, simplify their products and accelerate their product development. So we're really in between us and our customers. And so Aukey is going to be a really important part of our revenue mix moving forward as well as customers start to adopt that technology, build it into their products, and then take those products to market. So we'll spend a bit of time on all key today as well. As we think about new growth, this is us really moving into some new market segments in software, particularly in cloud. We announced our Anonabit partnership towards the end of last year, and since then been co-developing products with Anonabit 2, manifesting in Q3 in the launch of a Microsoft Entra product. That's Microsoft's capability for orchestrating identity and access management, we can now dovetail into that. There's many, many customers who use that product, so it opens up quite a big new market for us. And so accordingly, what we've also done is invest in some new sales capacity. Two dedicated sellers focused on the identity market in the US, in addition to our existing sales organization, as we now pivot from developing products to then taking that product to market. So a really important step in that new growth also. And then finally, business modernization is about continuing to have the operational discipline that we put in place a couple of years ago to ensure that our cost base is at the right level, the right level to reflect the profit we're making, but also the right level to drive future growth as well. but at the same time have the right operating model in place so that with that headcount, we can grow without constantly adding heads in order to fuel that growth. So essentially driving top line growth ahead of any operational cost increases. And so accordingly, we are very much actively using AI to underpin our business in a very real way. We have agenting models in place in marketing and lead generation. We're using AI in our engineering organization and in our corporate services as well. And I'll touch just a little bit on that later in the call. So as we go to the next slide, this is really a reminder of what the transformational plan is. This is the second phase. We had a six point plan in the first phase to get us to a place of stability. Now we're really focused on how we accelerate growth and move to operational excellence. And we have these four pillars that I've already touched on. And so really pleased to see that this phase is continuing well. I see this, by the way, moving us into next year as well. You know, moving to accelerating growth and operational excellence is a multi-year endeavor. And so I don't see us changing this plan significantly, but really continuing to focus on its execution, and we're seeing good results. We saw the Aegis asset deal in Q3. In Q4, we also saw a Pixar asset monetization deal as well, and I'll break those down a little bit for you later. We saw great core growth, 53% year-to-date on our core business, 35% just for Q3, and we're starting to see all keys, so moving from sensors to higher value, higher revenue systems, really seeing that start to expand is a portion of our overall future pipeline. On new business growth, we announced the Microsoft Entra product and we expanded the go-to-market so that not only are we building product, but we're also increasing our capacity, specialist capacity, to be able to take that to market and now move through leads into opportunities. And then finally on business modernization, continued rigor around headcount. Headcount is about 70% of our overall costs. So that remains a primary focus. And you can see year on year significant change there as well. So good ongoing discipline on the headcount side. But also underpinning our headcount because we need our headcount to be productive. So augmenting the people capacity with AI, with agentic models, which I'll touch on later. So what I'm going to do now is go into each of these just in a bit more detail so you can understand how they're pillars that are driving our business. So if we start with asset monetization, we've talked about those deals a couple of times already on the call. But if I break that down, this is why we see asset monetization is an element of our ongoing revenue. It doesn't mean it happens every quarter. you can think of asset monetization really being like large deals. You don't get huge deals every single quarter. They come in when they come in. They can be lumpy, just like we have large deals in our core business. And in future, we will also have them in our new business too, whether that's Iris or Identity Cloud. But this is how we think about it. And so asset monetization isn't just inactive assets it's also active assets things that we're still doing but want to monetize in different ways and the smart ideal that we did back in January I think is a really good example of how we're monetizing our assets in different ways not always discontinued assets but but operating assets as well but there's also through our deals some capabilities that we monetize we have a very in-demand a set of resources, whether it's our ASIC team, whether it's our algorithm team, particularly as they continue to build AI capability, these people are in demand. And so that's how we're kind of using those capabilities also to monetize the team in different ways also. And of course, as we do those deals with our customers, typically we tie it to a royalty, which gives us a longer term revenue. Great for the partnership because it means that we're really invested in a quality product that's going to manifest in volumes, but also great for us because it gives us a long tail, typically a couple of years after the deal because it takes time to productize some of these technologies. But typically a couple of years after, then you start to see those royalties flow as well. So this is a really good example, I think, of how we're evolving the revenue mix on an ongoing basis. core business as we also build out new business too, hence why we see those pillars as key elements of the transformation plan and also how we fund the business on an ongoing basis. And then I also want to talk about the move up the value chain. So in our core business, you know, we've seen good growth. That's great that we're seeing good growth, 53% year to date. But we're also looking ahead at how do we continue to supercharge growth as well. What can we do to evolve our premium solutions? What can we do to ensure that we continue to move up the value chain and avoid, of course, commoditization? In the past, we were a component provider focused on fingerprint sensors. But as we've moved towards higher value markets, We've also wanted to move up the value chain as well. You've seen us do a really good job in moving from a fingerprint sensor to high volume markets to a fingerprint sensor in high value markets whilst driving up the margin. But now what we're also doing is focused on how we move up the revenue stack. And so providing complete integrated systems, integrating with software, integrating with memory, integrating with MCUs, and also integrating with secure elements so that we can open up different use cases. And as we do this, I'll start with the benefit to our clients. So as you look at the right of the chart here, the benefit to our clients is that it reduces costs for them. So they're reducing the number of suppliers by having more integrated systems from fewer providers. So it takes not only cost out in terms of the different components they need to buy, but it also takes total cost out in terms of the workload and the effort necessary to integrate complex systems. And then for us, of course, we benefit from that. So we offer a greater portion of what they need and therefore drive up our wallet share. It's about 3x ASP for a system versus a sensor. So really positive to us on the top line. But at the same time, we're able to maintain our margins from a higher revenue and we increase profitability. It also accelerates velocity. It's easier to integrate. It's more of a turnkey system where they don't need specialist skills or certainly very high-end specialist skills to be able to integrate it. They don't need as much support from us with our limited capacity. They can more self-serve in terms of how they integrate this into their product as well. So it accelerates the development cycle and therefore their time to market. It's also a higher competitive moat for us. more complex systems, higher skills required to be able to do this, and therefore higher barrier to entry for others to come in and be able to compete with us in that way. And then finally, it opens up a bigger addressable market. As you then have secure element, there's different use cases that you can serve there, higher level of security, again, different use cases too. So this is really going to be an important part of our core revenue mix Moving forward is a way to drive incremental growth as we move up that value chain. So all key super important set of products. And as we look at that product family on the next slide, you can see it is truly a portfolio. It's not one thing. We announced Aukey and Aukey Pro. They were launched last year. That was when we first started providing test kits. We've now shipped a lot of test kits out to our distributors and to our end customers. And so we have new customers already testing and building new products with Aukey. Of course, at the same time, we have our existing customers who want to simplify their cost of goods, want to simplify the complexity in their systems. And so they're also looking at moving across to all key two. And that's something we're really focused on as an organization, helping our customers reduce complexity and at the same time then benefiting from that value we create with a higher ASP. And at the same time, it's not just those products we've already announced. We've got new products that are coming to market where we're shipping engineering samples out to those customers to begin testing some additional products in this lineup. Now we've got Aukey Ultra, which includes a FIDO certified product, includes a secure element, so it opens up different markets. And then Ultra Edge, which is a thin, slim form factor product, also out to customers for different use cases. So it really gives us a lot of flexibility in the support we can offer our customers in a more complete system that we can offer to them too. So really important, this is something that we'll continue to talk about in our core business. Then of course we have new growth areas and a couple of areas that are key to us are of course IRIS and the Identity Cloud which is the partnership with Anonavit. We've got some really strong partnerships in this space so if we talk about IRIS for a second, we announced the next generation of our products with CMI Tech Very long-standing relationship with CMI Tech. Some great products that those guys are able to produce. Very, very easy to use for the user. A good distance for IRIS authentication. You don't have to be stood in a really specific position. So really easy for the user to interact with. but also very, very high efficacy. So very strong for things like border control use cases, mass transit use cases, all sorts of different things. And with CMI Tech's new product, I think, is one example of where we can really continue to grow our IRIS products. And of course, we announced the SmartEye partnership early this year. We're now starting to see that manifest in some new products. Really strong potential for a hardware partnership with SmartEye 2, particularly on a small form factor product, which covers face, eye tracking, and iris modalities. So some really interesting areas that we're exploring with SmartEye and where we can take that product to market and both sell to existing customers, but also open up new markets too. And then on the Identity Cloud side, Identity, and I'll talk about this towards the end of the call, is a really hot area right now in the market. We've just announced a product that integrates with Microsoft Entra. Microsoft have about 700,000 customers using that product. So that's a very broad market that we can now tap into to help those customers. And when I talk about helping those customers, that means with some of the key use cases that they're trying to address. they're trying to address things like account recovery. They're trying to address things like help desk is a threat vector. They're trying to address things like insider threat where people are either losing or actually sharing their credentials for financial gain with bad actors who can start reorganization and things like account takeover. So some really hot topics that we've seen some very high profile breaches on because of password sharing, these are things that we can also address through biometrics, unifying the identity lifecycle. And so the announcements, I think, in our identity clouds really open up new markets for us. Now it's a case of focusing on our go-to-market capacity and ensuring that we turn that into leads and into opportunities. And then the final area of our transformation plan is around business modernization. And so, of course, Core to this is about taking cost out and keeping that cost out. So that as we grow, we're not adding cost in at a commensurate rate. And to do that, obviously we've done the hard work in taking cost out and all of our team have participated in that. But now it's about ensuring that we underpin that team so that they can scale. And we are actively using agentic models in our business today. We're using AI agents to do deep research in the themes that we want to focus on with our marketing. We're using AI agents to create content for both LinkedIn and for Twitter or X. We're using AI agents to create visuals for that content. We're using AI agents to create animations for that content. Of course, we do this with a human in the loop so that we review that. But as a team, that's what we have. We have a marketing leader with AI agents underneath them helping create that content. And there's an example of a post on the right here. I think this post was out last Thursday. AI generated with human in the loop to ensure that it's high quality content. We're doing the same on our leads generation process as well. AI response, but also AI augmented for our sales team. We're doing the same in engineering, using AI to do rapid prototyping and demonstrating new features, accelerating our time to market. We're using it to accelerate how we do our testing and showcasing our innovations. So lots of things going on on the engineering side in terms of how we become more efficient using AI. Again, we do the same on our corporate services team to stop people having to input data manually and accelerate some of those repetitive tasks using AI and get smarter outcomes from it too. So this is all about scaling our top line without increasing headcount and using this in a very real way. So with that, let me hand over to Frederick to talk a little bit more about some of the key data points from Q3.

Great. Thank you, Adam. So let's look at the key figures for the third quarter. So revenue grew 53%, 35% year-over-year, and 53% year-to-date. And gross margin was a pretty impressive 68.6% for the quarter. And when we look at gross margins year-to-date, it was 58.7%. And from an EBITDA perspective, EBITDA was negative 9.8% for the quarter, but that compares to negative 40.8% last year and a negative 18.4 last quarter. So we are getting significantly better year over year and quarter over quarter. And that is also reflected in free cash flow or what we call our cash burn. And free cash flow was negative 2.3 for the quarter. It was negative 27.6 last year and 18.4 as you might remember from the last quarter. And we had cash of 28.3 million. And if you look at headcount, we were at 49, which is 54% less year over year, but it's flat quarter over quarter. But in the quarter, in the third quarter, we added two new sellers and we reduced support. So although the headcount is flat, We were pivoting more aggressively towards supporting the growth that Adam is talking about. So with that, Adam, back to you.

Awesome. Thank you, Frederick. And so just to close, I want to talk just quickly about even the medium to longer term future as well. We've been very vocal in talking about passwords. We've been very vocal about talking about identity issues. as the primary threat vectors today. This is how bad actors are exploiting companies and breaching them. And so this market is a place where continued help and focus is required. I talked earlier about account recovery and help desk. These are such a primary threat vector today. We saw the Jaguar Land Rover. I don't know if you guys saw that breach recently. That was the most expensive cyber attack in UK history. history, £2 billion that cost John Land Rover. And that occurred through the help desk. It's a huge threat vector. We saw similar ones, and forgive me for using a couple of UK ones, but Harrods was also breached in this way. Going beyond the UK, MGM was breached in this way. Uber was breached in in this way. And so these things are very top of mind for our customers. They are threat vectors. They are attack services. They are looking to reduce and close. And so as we look at the threat landscape, it's very much about identity being the new perimeter. And so for us, though, as you look at this market, and that's why we put this graphic in front of you today, very fragmented, very siloed, and very complex. And that does not help organizations seeking to secure themselves. Where there is complexity for an organization, there are gaps and vulnerabilities that can be exploited. So there are opportunities here to simplify this as we present it to customers. And so as you look at a lot of customers' identity strategies about having identity-centric security, putting identity as the new perimeter and unifying the life cycle from when you first onboard a person to when you continue to authenticate that person to when they need to recover their account. Unifying that whole process so that it stops bad actors coming in masquerading as individuals and having access to your network. Whether or not that's through stolen credentials or what we're also seeing is shared credentials where insiders are selling, if you like, their credentials to allow people in. So it protects against all of this where we're able to use biometrics instead of passwords. And for us, it's about having multi-factor biometrics, ease of use biometrics by unifying this cycle. And so a big opportunity for rolling up organizations in this space, vendors in this space into single solutions that work across the lifecycle. And that's something we've very much got our eye on, unifying that cycle, offering defense in depth for those use cases that I talked about and use cases beyond those like continuous security, shared devices, etc. And so we as FPC find ourselves very well placed for that. We offer the highest efficacy biometrics today, and we believe that that can be applied in ever more meaningful ways, both for digital security, but of course also for physical security as well. We have the skills, the efficacy in our products to be able to do that. So this is something we've very much got our eye on is a medium term opportunity as an organization. We think about solving the most critical problems in the industry today. And so with that, I'm going to just go to one final slide just to summarize the Q3 report. Great progress on the strategic turnaround. We saw good core revenue growth of 35% for the quarter, even stronger as we look at it year to date, well ahead of the market growth. We've seen continued discipline around our gross margin. So great to see that and shows that switch or that improvement in mix in terms of going up the value chain into higher value products. but also having blended revenues from both our core operations, but also asset monetization as well. And continued operational discipline on the cost line, of course, then augmenting that so that the cost stays out and we leverage tools in order to drive growth. A number of milestones achieved, good asset monetization deals in the quarter with Aegis, but also after the quarter with PixArt2. progress on our core business, moving up the value chain to systems from sensors with stronger ASP, more looking ahead on that one in terms of how that's going to improve our mix and our overall growth. and then for new business, great product launch for the identity cloud, and then driving up the go-to-market capacity, as Frederick spoke about earlier, whilst managing that cost control. So the focus here is to continue that transformation plan to accelerate growth, continue those four pillars, but with a real focus on driving positive EBITDA. That's the North Star that we're focused on, driving positive EBITDA, but also driving long-term growth to continue to get strong profitability as a company and leveraging our strength to expand into the broader identity markets. So with that, I'm going to pause. We'll come back for questions now.

Thank you. To ask a question, you will need to press star one and one on your telephone and wait for your name to be announced. To withdraw your question, please press star one and one again. If you wish to ask a question via the webcast, please type it into the box and click submit. We will now go to our first phone question. And your question comes from the line from Marcus Almarud from D&B Carnegie. Please go ahead.

Yeah, hi. Hi, Marcus here. Can you hear me? We can, Marcus, yes. Yeah, so a number of questions. Maybe starting with the growth, 50% growth, and we know that the market should be growing by some 20%. So can we dig into a little bit on that growth? Because I would guess at all key, which I've come back to, but that's not the driver yet. So what is the drive? If you dig into the growth and you just try to kind of elaborate a little bit on it and give some color.

Yeah. No, I'm happy to take that and Frederick, feel free to jump in as well. So yeah, 53% growth. Marcus, not 50. And that's here today, of course, 35% for Q3. Those are hard-won points of growth, so I'll correct that. But no, it's a great question. I think what we're trying to have, Marcus, is balance across the business. So as you think about the transformation plan, those first three pillars are are growth enablers or pillars of growth. The last one, which is business modernization, is about then the foundation as to how we ensure we get that growth with the capacity that we have. And so as I think about the growth in Q3, there were some good elements of growth from asset monetization, and there was, of course, growth from core business. No growth yet from new business, or at least no growth in Q3 from new business. Of course, we have seen growth from new business earlier in the year from Iris. It's a little early yet on some of the product development work we've been doing in our identity cloud with Anonabit. So we're not seeing that yet. So I expect to see that later on. And so therefore, you know, core business and asset monetization is really a key part of the mix. The way we also think about it is I think about big deals. Where can I get big deals from? Sometimes we get big deals in our core business. We saw some really strong performance, for example, in Q1 in our core business. But I also don't just want to rely on that. Hence, asset monetization is an alternate source. of big deals and as long as we're getting one of those uh happening on a given quarter then we look like we're in pretty good shape it does mean there's some lumpiness in the business but having multiple means of bringing big deals in gives us more optionality and balance across the business uh frederick anything you want to add there yeah i um i would just add that you know marcus this is year two uh of the transformation and and year one was really

you know, taking out a ton of costs, winding down mobile. And then at the beginning of this year, we still continue to wind down PC. Really what's happened, you know, year to date, the first three quarters, just we've been able to breathe and we've been able to focus our sellers. You know, our strategy is pretty clear. So this notion of focus, I think, is a big driver for the 53% versus, you know, having the hair on fire and you're just really digging into the cost structure and legal entity structure and trying to phase out, which depending how you calculate was 90% of our revenue, right? And that's just being phased out. So now we have clarity and we have focus. People know what they need to do and they have clear targets.

And if I just continue on that to follow up, because I also noticed that Asia is a big part of sales. And is that also because there is a lumpiness and a lot of it is coming from gas monetization, et cetera, the thing that you were mentioning. Is that the reason as well why Asia is such a big part of it?

Yeah, no, you're right. So I think it's a good expression there, you know, or data point of the lumpiness. So it's fairly big this quarter, you know, with a lot smaller other quarters, you know. Europe's going to be big when one of our big European customer comes in, and that customer tends to order once per year. It's really big. You know, the same we have in the U.S., you know, with a few of our bigger customers. When they come in, then, you know, North America is going to be really big. So You know, you're going to see this revenue mixed by geography shifting around, you know, you know, a fair amount.

Yeah. And I would also say that, you know, those are the hallmarks of a balanced business, I think, as well as we talked about the, you know, the pillars in the transformation plan of assets, new business and core business. But you can also look at it horizontally or geographically to say, well, we've got a strong business cylinder in the United States. We've got a strong cylinder in EMEA and we got a strong cylinder in Asia, including India as well. And so, again, as long as one or more of those cylinders is firing, we tend to have a good quarter. Yeah.

Yeah. And Mark, if I can just jump in. The whole notion around asset monetization, I know you have access to the report and you read the entire 3Q report, but on page 29 is the P&L's discontinued operations. And revenue for discontinued operations was $16.9 million. And that is not part of the continued P&L or any of the numbers that we've been talking about. So there's a very small portion of asset monetization that's continued business that we expect to do going forward. But you have 16.9 million that's not part of this report. You only see it in the discontinued P&L. And this discontinued P&L is not going to continue in 2026. Accounting-wise, we only allow the discontinued operations for one year. So, you know, it might be a little bit here in the fourth quarter as well. And then, you know, the whole legacy piece in mobile is gone forever.

Moving down the P&L, look at the gross margins. You had 58% or something like that if you exclude the EGIS income. Is that kind of the, this was just hardware. So it's kind of around 60% sustainable level, you think?

And I'll follow up on that when I come into Aukey. I mean, yeah, I think we've been very clear on, you know, those sorts of levels of what we're looking for from the business. And so we're pretty pleased that, you know, again, with lumpiness, you're going to get ebbs and flows on that, but they get smoothed out over longer periods. So we feel pretty good about sustaining the margin. We also think about all key as a key component for future growth. We feel good about getting strong margin from that product as well. Very beneficial to the customer, their manufacturing cycle, and then beneficial for us to win a greater portion of the wallet share there too. So we feel pretty good about the overall margin and sustaining it at around that level.

And on Allkey, moving on to that, because you're moving towards system sales. So this is what Allkey is doing. First of all, before we come into profitability and ASPs, do you expect to convert old customers into using these systems in Aukey?

Or is it all about finding new customers or a mix of the two? That's a great question. That's a really good question. I think if we look at it, there are some customers who are higher volume and they're probably going to continue to be sensor customers. because they just operate at that level of scale. That's what their business model is built around. And so we'll have a few high volume customers that focus on sensors. I think the bulk of our customers by number, so the number of customers, I think have got the potential to shift to systems. So that's really what we're focused on is week by week, line by line, looking at our customers. Have they got a test kit? Are they developing the product? What do we need to do to support them? How are we ensuring that we are flipping our revenue from sensors to systems with those customers? And so that's really where the focus is. As I look at the pipeline, it suggests that that's taking place very well. There's really a few ways of looking at it, Marcus. You can look at it by customers, which customers are flipping to systems. The second way you can look at it is what volume is switching to systems. And then the final one you can look at is what revenue mix is flipping to systems as well. So they give slightly different results, but I think that's really the way we look at it. But the primary one for me is our customers. Are they moving to systems? And are we bringing new customers on with this technology? And both are really a focus for us.

Mm-hmm.

Because obviously the ASP set in presentation was three times what it is for just a sensor. And what, I mean, if you can just dream or hope, what do you think could be looking some years in, what kind of mix could we be talking about? What kind of part of cells could be systems and what part of cells could be just sensors?

Yeah, I mean, you know, we don't offer guidance. I want to be a little careful on that. But I certainly think that we can, you know, get, you know, a good percentage of our customers, you know, certainly half or greater of our customers across to systems over time. What we're focused on, though, is ensuring that those customers are moving over. We're focused on maintaining margins as we go ahead and do that. The only thing I would add is, of course, it takes time to shift those over. So we're not going to see a massive swing over to all key next quarter. But what we are focused on is looking at over the next two years to ensure that each year, starting next year, we see an increase in mix. from Aukey, the following year we see an even greater mix, and then three years out, I think we really optimize that mix as well. So that's kind of how we're thinking about it, monitoring our pipeline on a weekly, on a monthly deep dive basis, and then of course, just keeping a firm eye on that.

And looking at gross margins, I mean, ASPs are three times, but you also have higher costs because you're also buying the components and et cetera. Is gross margins kind of roughly the same, so around 60%. And then we should see this as a way of growing revenues and hence bottom line profit. But But margin wise, it's kind of kind of similar.

Yeah, I mean, I think that the kind of range we gave in margin was around 50 to 60. I would certainly see that being the case for all key as well. So we think we can work within those realms. So we feel pretty good about that range. And then, of course, you know, that drives higher profitability because it's off a higher revenue line. Yeah, we certainly don't see like a massive drop in margin in order to deliver that because think about it. The value we're creating for our customers is that they're making savings elsewhere. So their net costs aren't going up. In fact, they're going down because they can consolidate their supply chain with fewer providers. They can reduce complexity. They can reduce the time and skills necessary to be able to integrate this into their products. So there's actually a really nice value exchange for our customers as well. They can probably net take cost out of their production cycle.

That's great. And looking at maybe new growth a little bit and the anonymous partnership in the software sales. First of all, how does it work? I mean, I know that it's a partnership, but is it? Is it sort of, do you have a revenue sharing agreement? Because you also take, of course, you have two salespeople. So how does it practically work here? And how should we expect the streams once they come in?

Yeah, so we have a revenue share model with Anonabit. As I've said, it's been very much focused on product development over the last 12 months. But as we come into next year, we're flipping now towards go to market. We have two dedicated sellers in the United States. We think that's a good market to start with. That's where Anonabit are also largely based. We do, of course, have our core sales team as well, who we're working with as additional capacity to create leads to. So there's some opportunities arising through our core sales team supported by the specialist organization. So I think, you know, the focus now moves to, first of all, leads, because this is a new business. It's not a market. It's already established. So it's about developing understanding, awareness. There's a huge need in the market and we have a number of different use cases we can solve. So looking at where the real demand is from a customer perspective is we take this thing to market in anger and then from leads moving towards opportunities elsewhere. that are closeable. So, you know, in terms of our outlook, again, I'm not going to give guidance, but I will say I would expect to start seeing this bear fruit second half of next year, something like that.

And that was actually my next question, when we should expect to see this kind of taking off. And also, when you sell this, is it kind of one-time cost or is it a soft model or... Yeah, it's recurring revenues.

Yeah, it's recurring revenues. So it's an ARR model, a SaaS model, exactly as you say.

Uh-huh. And then on your last one, you talk about capabilities and using your IP and your engineering team to kind of get further revenues in or to get further income or cash in. And you mentioned Aegis there. Is it... Is this something which is done? And is this part of the whole deal that you've done with Aegis? Does it come on top or how does it work?

No, that's part of the deal structure that we've already announced with Aegis. So it's multifaceted. There's different capabilities that they value from us. Some of those were assets and some of them were skills that we have. I mentioned our ASIC team, for example. know really strong set of capabilities globally that our customers value so for me when i joined you know my starting point was just was to understand what are we good at and what do people need you know what problems can we solve and when i married those two things up it wasn't just well we sell products and they do this it was also well actually we have skills we have licenses we have ip so we had a variety of different things that we could monetize beyond traditional products. And so my desire was that we were able to diversify and unlock that value. And I think that's what we've been able to show that we've done not just once, but multiple times. And I think there's other interesting opportunities for us to explore in that realm as well.

Because I know that you said before, and you said on the last call as well, that there is more to come from this, from the asset monetization. There's more opportunities. Where are you most optimistic? Is it to, I mean, the old technology, the mobile and PC, let's say that's gone, there might be more, but the big parts should be done. The smart kind deals and the capabilities, where are you most optimistic about?

I've always been a huge believer in partnerships because there's lots of locked up capabilities in different organizations that one another can benefit from. And so I actually think that the capability side of it really interests me because we've got a unique set of skills that is valued both by some of the partners we've already done business with and then some new partners too. So that really interests me as to What are other organizations out there trying to achieve and how can we share capacity and therefore share the value that that creates monetarily as we look to help them pursue those different products possibilities? So for me, I think capabilities is a really hot one that I'm super interested in where I see more potential.

Okay, okay. And then finally, maybe on the cash flow. So minus a few million in operating cash flow, which is very encouraging. And is that including the 20 million from Aegis? Because you mentioned also the 5 million in revenues. So kind of just try to put those two together and then follow up on that after that.

Yeah, yeah. So Marcus, the way you... Let's see how we... EBITDA is pure, right? EBITDA is EBITDA. It has no discontinued operations in there, right? And then if you want to see revenue or cost related to discontinued operations, you go to that page 29 table where I said there was, I think it was around 17 million of revenue and not a whole lot of cost, right? And then when you look at free cash flow versus EBITDA, the free cash flow, is burn is lower than the EBITDA, negative EBITDA. Now, those two should normally fairly close, free cash flow and EBITDA, unless a major working capital changes, a capex changes, a cash taxes changes, which we don't really have. So the delta will be explained by going to the cash flow statement. There you will see that discontinued operations impact is broken out, that it's 6.6 million. So the way you reconcile between the two is you take the free cash flow of negative 2.3, and then you have a little bit more than 6 million of positive cash flow coming from discontinued operations. So if you take that out, you get to kind of a negative 9 or so of free cash flow. And then you reconcile back to the EBITDA. So that's the best way to do the math.

And all the 20 million that you were going to get from Aegis, you've gotten everything? Everything is in now?

No, we haven't gotten everything from Aegis yet. We've gotten the majority. So we have some value left to deliver to them. And when we deliver that value, we're going to be able to send them the invoice.

And obviously, the Pixar was closed in October. So there's nothing of the Pixar in these numbers. That's still to come in Q4 and maybe some spillover in Q1.

Correct.

Yeah. Okay. Okay. That's all from me for now.

Thank you very much. Appreciate the rigor, the detail. Really, really helpful questions. Stefan, let's hear what else there is.

Yes. One question from the web here on payments. Do you see any projects in this area?

Yeah, that's a really good question. I mean, we follow up on the pilots that we've done on a regular basis. I mean, it is frustratingly slow, I have to say, because, you know, I think things move at a fairly slow pace because of the levels of risk associated for the banks in offering something new to their consumers. I mean, you look at chip and pin, probably took the best part of a decade to get off the ground. And so, you know, we do follow those pilots Interestingly, I was at the Global FinTech Festival in India, in Mumbai, about three or four weeks ago. And so that was a really interesting opportunity. I mean, goodness me, you know, I go to lots of the payment events, 100,000 people participating. go to the Global Fintech Festival. I mean, the scale is phenomenal. The energy there was incredible. We spent a lot of time with a number of card manufacturers, with the industry overall in the Indian community. And they actually still see a lot of good potential over there in India too. So I think There's some interesting things going on geographically that we can see. I spend time with our partners on a regular basis as well. So they're very focused on some of their key pilots that they're working on too. So we still see activity there. We do see new opportunities come into the fore. One thing I've spoken about on the earnings call in the past is multifunction. Some of the interesting conversations in India was about a really focused multifunction card where you have biometric on the card, for card presence. So instead of chip and pin or signature, you have biometric for the POS terminal. But you also use that very same card on your mobile phone for card not present for authentication, like a FIDO token, for example. And so there's some really interesting things that our partners are talking about there to solve a macro set of issues, not just one, but multiple problems, because card not present is also a significant fraud vector, probably greater than card present. So some really interesting things going on over there, but it is still slow.

All right. Thank you very much, Adam. Let me hand back to you then for any closing remarks that you may have.

Very good. Well, listen, thank you for all the questions. Thanks for coming along to the earnings call. Hopefully you can see the great progress we're making towards EBITDA positive results, continuing to focus with real rigor on the cost line, but also on the top line. And hopefully you can see that there are some really nice pillars of opportunity geographically. but also through assets that we can monetize through core businesses. We move up the value chain into systems. And then as we get our new business lift off, as we start to deliver new products and pivot towards our go to market, multiple ways in which we can continue to drive incremental growth, breakthrough growth as we pursue profitability. So thank you for joining and we'll see you next time.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.