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.