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NextBiometrics, a $2.17 billion market cap company trading at $8.30, announced its earnings for the first quarter of 2025, reporting a decline in revenue and gross margin compared to the same period last year. The company, known for its biometric authentication solutions, also shared insights into its future prospects, focusing on product innovation and market expansion. According to InvestingPro data, the stock has gained 17.56% over the past year, outperforming despite recent challenges.
Key Takeaways
- Q1 2025 revenue fell to NOK 6.9 million from NOK 12.8 million in Q1 2024.
- Adjusted gross margin decreased to 52% from 56% year-over-year.
- The company is targeting significant revenue growth in the second half of 2025.
- New product launches include the FAP 30 sensor and a match-on-chip product for point-of-sale terminals.
- NextBiometrics is focusing on expanding its market presence in India, China, and other emerging markets.
Company Performance
NextBiometrics reported a challenging first quarter with revenue and gross margin both declining compared to the previous year. The company attributed these results to market conditions and the timing of product launches. However, it remains optimistic about the latter half of the year, expecting a rebound in revenue driven by new product offerings and market expansions. InvestingPro analysts share this optimism, with price targets ranging from $9 to $10, suggesting potential upside from current levels. Get detailed analysis and 12+ additional ProTips with an InvestingPro subscription.
Financial Highlights
- Revenue: NOK 6.9 million (down from NOK 12.8 million in Q1 2024)
- Adjusted Gross Margin: 52% (down from 56% in Q1 2024)
- Adjusted Operating Expenses: NOK 17.3 million
- Adjusted EBITDA: Negative NOK 13.7 million
- Cash Position: NOK 39.9 million
Outlook & Guidance
NextBiometrics projects combined revenue of NOK 60-70 million for Q2 and Q3 of 2025, with the majority of this expected in the second half of the year. The company anticipates that its FAP 30 sensor will significantly contribute to revenue growth in late 2025 and 2026. The revenue pipeline is estimated to exceed NOK 300 million annually, indicating strong future potential.
Executive Commentary
CEO Ulf Ritzwal highlighted the company’s strategic focus on expanding its market share in India and the promising demand for the new FAP 30 sensors. "The demand for FAP 30 sensors is actually much greater than the original forecast," Ritzwal stated, emphasizing the product’s potential to drive future growth. He also noted, "We will have product revenues during 2025," underscoring the company’s commitment to delivering on its projections.
Risks and Challenges
- Market Recovery: The anticipated recovery in the Chinese market has yet to materialize, posing a potential risk to revenue targets.
- Certification Delays: Any further delays in certifications, particularly in India, could impact market entry and revenue.
- Competitive Pressure: With 70 design wins, maintaining competitive advantage remains crucial amid growing competition in the biometric sector.
- Economic Conditions: Macroeconomic pressures could affect customer spending and investment in new technologies.
Q&A
During the earnings call, analysts inquired about the details of a new ACPL contract and the technical specifications of upcoming products. The company also addressed questions about payment and delivery terms for a recent large order, providing clarity on operational strategies moving forward.
Full transcript - Next Biometrics Group ASA (NEXT) Q1 2025:
Ulf Ritzwal, CEO, NextBiometrics: Good morning, good afternoon, good evening, wherever you are. A warm welcome to this quarter one earnings call with NextBiometrics. We are online, and today we have today’s speakers, it’s me, Ulf Ritzwal, CEO of NextBiometrics, and we have Erik Anderson, CFO of NextBiometrics. We will today share the q one report and the as well as q one highlights. We will go through the q one financial numbers.
We will continue the business and market updates. We’ll share a bit of forward looking outlook, and we will end this session, with a q and a. Important thing here is to you have the in in your in your application, there’s a q and a link where you can ask questions to us, already now. So then we will bring that all on, in the end of this in the end of this session. Let’s move over to the highlights of q one.
So already in, in early April, we announced our our q one revenues didn’t reach our targeted value. However, I’m happy to see our improved revenue pipeline over the quarter and up until now. We have added new orders, and we have added long term revenue contracts. We are proud to have the adjusted gross margin of still high 52%. Even it was down from Q1 twenty twenty four, we maintain the high gross margin as we have communicated and guided on.
And this will we see will continue throughout throughout the next quarters. Happy to see that we have signed a new multiyear MOU valued NOK30 million. It’s a contract that will start delivering our enhanced FFAP 20 product during the fall and will continue for eighteen months of deliveries for those 30 millions. It’s MAU. The purchase orders will will arise when when in in the default.
Happy to announce, you know, that we are measuring the design wins. We have normally a target of doing three design wins every quarter. Actually, this quarter was a good quarter when it comes to design wins, and we added six new design wins. We have actually what’s worth to mention, maybe you remember, we added the touchpad segment as a complement to our fingerprint sensing technology. And we actually have the first design win for the touchpad segment.
It’s a keyboard that will be be launched during the first half of this year. We will see more orders coming in on in the touchpad segment, which is fantastic to see. We also have a f f 20 sensor that will be used in in a certification solution in a tablet for India’s largest banks. That’s two examples of our design wins. We have also design wins with our standard Oyster three three USB reader.
But maybe one of the major announcements came actually yesterday and after the q one closing. We signed an agreement and, at the same time, received a purchase order at a value of 55 to hundred and 7,000,000 new Norwegian kroner. And that’s with ACPL in this case. I I will have a more detailed slide on this deal later on, but it’s a fantastic milestone for us. It’s, I believe, the one of the biggest purchase orders in in in in Next history, actually, which is well achieved by by the by the team in in the Next Biometrics.
We can move to the next slide, and I will hand over to Eric to do the q one financial summary. You can take the next
Erik Anderson, CFO, NextBiometrics: slide, please. Next slide, please. Thank you, Ulf. I will now run you through the Q1 financial highlights. The revenues were NOK 6,900,000.0 versus NOK 12,800,000.0 in Q1 twenty twenty four.
The revenues were impacted by the pause in the India market as well as slowness in China that has been mentioned by Ulf before. The adjusted gross margin was 52% in Q1 twenty twenty five compared to 56% in Q1 twenty twenty four. We had operating expenses or adjusted operating expenses, as we reported, of 17,300,000 compared to $16,300,000 in quarter one twenty twenty four. The quarterly adjusted OpEx is increased in line with the plan to increase sales and R and D efforts. The adjusted EBITDA was negative $13,700,000 compared to negative $9,100,000 in quarter one twenty twenty four.
And the reduction in the adjusted EBITDA is mainly due to the reduced revenues we saw in this quarter. We ended up with cash of $39,900,000 compared to NOK 62,900,000.0 at the end of quarter four twenty twenty four. And the Q1 operational cash flow was negative due to the operating losses seen in the quarter, triggered by the lower revenues as well as negative contribution from working capital. The main message in this quarter is that India pause and the China market slowness is still impacting quarterly revenues as we already reported to the market in the April. And moreover, NEXT has increased its traction on accounts receivable collection during this quarter and cash collection of With this, I turn over to Ulf again.
Ulf Ritzwal, CEO, NextBiometrics: Thank you, Erik. Please move to the next slide. Okay. I will continue with the business and market updates. I have a few slides on what’s going on on the biometric markets.
You can move to the next slide, please. So I would say I focus on two different regions as we have the strongest presence in those two markets, and it’s China and it’s India. China market recovery is still pending. It’s the domestic China market is we have shipped limited number of units to during the Q1. We see somewhat recovering, and we see anticipations that it’s actually start to deliver.
But mainly, actually, the Chinese manufacturers are looking outside China. So for the the African market, we they look at the Indian market. They look at The US market to actually see where the electronic electronic manufacturing will be able to to deploy their products. Instead of domestic China, they’re looking outside China. Luckily, it’s basically the same OEMs, the same targeted customers that we are working with, but it’s also so that shifting their focus from domestic China to to Africa products require some some tuning and tweaking.
So so, basically, the result of the downturn in China gives them the opportunity to look outside and compete with other vendors that are already present in in Africa. We actually have ongoing collaborations. We have announced a few. We have as we have said, we have 70 design wins. Some of them are actually the OEMs where already have designed in the the fingerprint sensor into the their Chinese OEM devices.
But we actually expect in the in the near near term future that these will actually be deployed on the on the market. And as Eric said, the focus is on on also on collecting the the AR that it’s in in the channel where where we have the the products in the channel. We are also expecting actually stimulations in the Chinese economy for the domestic market. So so we we believe and we see that the Chinese economy and the need for big biometric fingerprint authentication is actually increasing this year compared to 2024. India, we we have talked a lot about.
We had a pause in the l one program for all vendors in in basically, November to during q one. We announced in in the March that our our product made by by refined by by ACPL were l one certified again in in the early March. So we, right now, see the the the ramp up again of of the l one products. And so the and what we also communicated previously was that we will see that fewer vendors will be able to certify in in the Indian at our system, and that that’s exactly what what what’s the case right now. We are anticipating an increased market share in India and supported by the contract we just signed yesterday.
We see that there’s a strong demand of biometric upgrades in in in the market. However, also very important, the ADHAR program is actually expanding. This is mid to long term very important for for NextBiometrics and for the Indian population as well as the biometric authentication. We are seeing that at our system is opening up for third party applications. So for so so today, the the l one is closed for the banking applications and the social welfare and a few others.
Now the Indian government would like to double at least double the amount of Aadhaar interactions, and they are doing that by enabling third party applications using the Aadhaar ecosystem. That will, of course, boost also the volumes in in in India. You will see new type of applications in India. You will see new hardware designs. You will see new IDs in how you can actually use the AdHar authentication system by verifying different identities.
So that that is yet to to come, which is fantastic news for for the biometric industry and also for next biometrics. If we move over to to the next slide showing what we actually announced yesterday. We we announced a longer term strategic partnership with with ACPL, and that’s demonstrating the increased demand they see and their market share. It also shows their global expansion deployment of sensors. They are not only looking at India, they are also targeting Mexico, Morocco, South Africa, and more, which is great for for NexBiometric sensors to be deployed globally.
We, of course, have the proven technology in this. We have the compliance in the different applications in Adhar, l one. We have most compliant in FBI and so on. And this this contract is valued at 55 to hundred 7, and many of you may think, oh, that’s a big span. Yes.
It is. There’s two products in this contract. There’s a standard fab 20 product that we already shipped today. And then as we announced in last year, October, we are building a product jointly with ACPL, which will increase our average selling price, maintain our gross margins on on the product. And this product are soon to be be launched in in NexBiometrics and available for the for the for the public.
But this product has a higher ASP. It’s targeted for different applications such as point of sales terminals and more integrated products. It’s a match on ship product including a MCU compared to the standalone fab 20. So we’re increasing the ASP, and this product will be available for shipments during second half this year. This significant order, of course, increases the complete confidence in NextBiometric product and also the the outlook, the revenue outlook for second half and also 2026.
Because these volumes, this 55 to hundred and seven will be delivered during during first deliveries in in q two and onwards in 2025 and 2026. So it’s a it’s a major milestone for for NexBiometrics taking this this order and this agreement. We can move to the next slide, please. I would like to mention the step 30 as well in this call. The progress is fantastic.
We have samples that customers has communicated previously. It’s a product that are more sophisticated than the FAP 20. It serves different market and different use cases compared to FAP 20. So it’s it’s not a replacement for Feb twenty. So we actually see see the two products in in parallel.
We maintain the the communication that we will have product revenues during 2025. We are in various discussions with with customers and partners, and we actually see stronger interest than we anticipated for our FAP 30. As I explained in the q four earning call, market is is kind of smaller than the FAP 20, but the ASP and our our gross margins are by far higher than the FAP 20. And the market as such is a high end market for the government ID and health care voting system and and others. And it’s typically use cases for the FAP 30.
Customers are primarily in the Western market and enhancing our geographical diversification. And, again, mark market launch of the product itself is during during first half. So yeah. Q two is only remaining in in first half, so during q two. And we will get it back to you on on on expected high vol value contracts and key customers on on this.
Okay. You can go to the next slide. So just, of course, a a question that many many of you have, is, of course, our cash flow. We have as Eric mentioned, we have improved the the receivables collecting collections during q one. We are targeting significantly growth in the cash inflow in q two, q ’3.
We will actually have more in a cash in in q two compared to q one. And as Eric mentioned, we are actually enhancing our trade terms towards, our customers and distributors. We are even, getting some of them upfront payment partial upfront payment of the purchase orders, which is enhancing our cash flow in the company. And then, of course, our fab 30 is positioned in a in a different way. It’s more for the western customers, meaning standard, more reliable payment terms.
So I would say the AR situation is definitely under control and and solved. And by q q one twenty twenty six, those will be the memory and and gone. So, yes, we can, as we said, we will go into a summary and outlook. You can take the next slide, please. And if there’s any question, of course, please raise it.
So we move to the summary and outlook. We had a very low revenue in q one as you as you saw due to the Indian pause that, of course, shift our our revenue and revenue pipeline basically one quarter. And therefore, we reduced the guidance of the of the full year. We still have, I would say, still have an upside of of of this. And the revenue pipeline is well above communicated previously.
We have more than NOK 300,000,000 per year in in full swing. So that, of course, will will be starting ramping. The revenue major majority of the revenue will be done in h two. We have as we have explained, we have a higher ASP product in the in the l one product, and we have Fab 30, which is selling at a higher average selling price. We are also expecting q two, q ’3 to for the combined revenue being between 60 and 70 with a slow ramp up during q two with the Indian cost in in mind.
So that’s how we project the the revenue going forward. I said, continue to focus on strong, fab 20. It’s a unique product. It, it has hits competitive advantages. We are now transforming this 70 design wins to purchase orders and revenue.
The primary growth market are India and China And, of course, our our short term goal is, of course, to achieve a breakeven in quarters with this strong Feb twenty sales. And then on the as icing on the cake, I would say, the Fab 30 is expected to drive revenues growth in towards second half twenty twenty five and in even in even more in 2026. We have a strong security market out there. We have very, very good requirements in this field, and meaning, we have greater potentials in in the in the FAP 30 markets.
And efficient scaling of this should, of course, lead to even stronger revenue growth in in for next biometrics. And as I said, the demand of up 30 sensors are actually much greater than the original forecast and business case we actually did. So I’m I’m looking forward to to drive this expansion further in in 2025 and 2026. It will be a fantastic journey. I think with this, I’m opening up for q and a.
Do we have any questions out there?
Erik Anderson, CFO, NextBiometrics: Yes. We have a few questions. But as Ulf mentioned, it’s still possible to write questions in the Q and A chat of this call. So please write a question if you have any. So it’s the one of the questions says, enhanced credit terms now in place supporting next growth strategy.
So they want to know what this means. But so I think Ulf mentioned this. So what we are talking about is the credit terms we’re setting towards our customers and distributors. And as I mentioned earlier also, we are working on working capital financing options. So we’re looking into how we can finance our receivables and various kinds of other working capital financing options.
But right now, we don’t have anything to announce on that point. And and we’re not able to provide the the detailed terms and conditions that we’re having in our contracts. That’s private information between our customers and ourselves. But we said earlier that normally, we are now having thirty to sixty days credit terms. And in some instances, we also have prepayments in our agreements and purchase orders with our customers.
Then there is a question on the new order, Ulf. So first question is, have the shipments started? And this is about the contract that we announced yesterday, and the contract the shipments haven’t started. And and then the question will face, what is the contract period? How how long is this contract lasting?
And what are the payment terms?
Ulf Ritzwal, CEO, NextBiometrics: Okay. Thank you for the question. The delivers has not yet started. It will start in Q2. So it’s we’ll they will pick up the goods very, very soon during May and June.
And the payment terms, it’s hard. It’s it’s under NDA, but I I would say that we have actually one portion of the actual purchase order, is with the distributor, and we have an upfront, partial upfront payment on this, which, enhance our, cash flow in this. So and then, of course, we have yeah. The the cash upfront payment and then a credit on on a sort of fixed days of of of that. So so lot more favorable than compared to previously.
We also see that the channel is is shrinking, and we will actually get get paid in a in a faster way, compared to previously when we actually built up this, this channel in in in in India.
Erik Anderson, CFO, NextBiometrics: Yeah. And that’s one, some more questions relating to the same, contract. One is, I will answer that one. Next guesstimate for sales value. We have provided the the interval of fifty five five to NOK 107,000,000.
And this is depending on the mix of products that the customer is ordering. So it’s both the existing Fab 20 product and there’s this newer advanced product that’s also based on the Fab 20. That and are we able to comment on that really, Ulf? Are we I mean, wider range, and and we we probably have wider range because we don’t know the exact mix that we’re gonna have have here. Right?
Ulf Ritzwal, CEO, NextBiometrics: No. That’s correct. We believe that towards the end of the of the the purchase order, the majority will be the more advanced product. But in the beginning, so as the product is not in mass production yet, so for q two, it will be fab 20 sensors only. But then it will gradually move over to to this more advanced product, during fall.
And, in 2026, we believe that the majority of the products will be based out of the more advanced product. And sorry. I forgot to answer. The contract is we believe that the purchase orders will be over and out in ’20 end of twenty twenty six. So that the all those volumes and revenues will be accounted for during 2025, the remaining, and 2026.
Erik Anderson, CFO, NextBiometrics: And there’s another question relating to the new product. Are we are we in a position to explain more about the details of this product, Ulf, or will that be announced later?
Ulf Ritzwal, CEO, NextBiometrics: I I can try to to explain it a bit. There will be a more published announcement on the website with pictures, images, and unique selling points and so on. But it’s a it’s basically one more advanced product. We have we’ve we had a product to you can compare it with a product that we we sold to Fujitsu previously. I have to sell.
They it was a match on ship product, and it was called Next Secure Bio. It’s actually the sensor itself and the and a MCU where you actually store the biometric data into in encrypted. And those two will then be a golden match and ship. There’s a secured communication between the MCU and the sensor itself. And in this case, we will we will actually have have a single single board type of solution, more integrated, and more suitable for higher integration products like the point of sales terminals.
They have certain size requirements. So with with this product, they we actually make a slimmer product compared to what’s existing, and this will then be able to integrate into a point of sales terminal for example. This can also go into a reader and can also go in other various products. But there will be be public announcement on on the products a bit later this quarter, and there will be more information about about it at at that time.
Erik Anderson, CFO, NextBiometrics: Okay. Thank you, Ulf. That concludes the q and a session. So, please, you can call for myself, Eric, on the email or or or a phone call, and and, then we can talk, and we can answer any other questions you might have. Thank you.
Ulf Ritzwal, CEO, NextBiometrics: Thank you, and have a good day.
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