Fingerprint Cards' Strategic Transformation and Path to EBITDA Positivity

Fingerprint Cards AB (FPC) has embarked on a bold strategic transformation, pivoting from low-margin biometric sensor manufacturing to high-margin identity management and passwordless authentication solutions. This shift, driven by aggressive cost-cutting, IP monetization, and market expansion, has positioned the company to capitalize on the surging demand for secure digital identity systems. For investors, the question is whether FPC can sustain its momentum and achieve EBITDA positivity in a competitive, high-growth sector.

Monetizing IP: A Catalyst for Liquidity

FPC's ability to monetize its intellectual property has been a cornerstone of its turnaround. The licensing deal with Smart Eye in Q1 2025, which generated SEK 29.5 million in revenue (including SEK 12 million in non-cash income), exemplifies this strategy. By leveraging its iris recognition technology for automotive applications, FPC not only secured immediate liquidity but also opened doors to recurring royalty streams. Similarly, the August 2025 licensing agreement with Egis Technology for PC-related assets added SEK 24 million in proceeds, further reducing operational drag from legacy businesses.

These moves underscore FPC's focus on converting underutilized IP into cash, a critical step in stabilizing its balance sheet. For context, the company's EBITDA improved from a loss of SEK 67.3 million in Q1 2024 to a profit of SEK 10.7 million in Q1 2025, driven largely by such monetization efforts. While one-time gains may not sustain long-term profitability, they provide the runway needed to scale higher-margin solutions.

Scaling High-Margin Solutions: A Focus on Enterprise and Decentralized Identity

FPC's strategic pivot to high-margin markets has been equally impactful. The company's partnerships with Anonybit and Ping Identity are expanding its reach into decentralized identity and enterprise authentication, sectors projected to grow at a 16.8% CAGR through 2030. For instance, its collaboration with Anonybit to integrate biometric solutions into privacy-first identity platforms aligns with the rising demand for FIDO2/WebAuthn standards, which prioritize security without compromising user experience.

The gross margin improvement from 11.3% in 2024 to 56.6% in Q1 2025 highlights the financial benefits of this shift. By focusing on software-driven solutions like its System-in-Package (SiP) module and AI-powered liveness detection, FPC is capturing value from recurring SaaS-like revenue streams rather than commoditized hardware. This transition is critical, as the passwordless authentication market is expected to outpace traditional biometric segments in both growth and profitability.

Operational Efficiency: Leaner Costs, Stronger Margins

Cost discipline has been another pillar of FPC's transformation. The company reduced headcount by 70% year-on-year in Q1 2025 and plans to bring annualized operating expenses below SEK 70 million by Q2 2025. These cuts, combined with the exit of low-margin mobile and PC operations, have narrowed operating losses from SEK 67.3 million in Q1 2024 to SEK 0.3 million in Q1 2025.

The impact of these measures is evident in FPC's cash flow trajectory. While free cash flow remains negative (SEK -22 million in Q1 2025), the decline in losses—from SEK -60.1 million in Q1 2024 to SEK -36.4 million in Q1 2025—signals progress. A successful rights issue in February 2025 further bolstered liquidity, increasing cash reserves to SEK 52.6 million. This financial flexibility is essential for funding R&D in high-margin areas without diluting shareholder value.

Path to EBITDA Positivity: Risks and Opportunities

FPC's path to EBITDA breakeven by mid-2026 hinges on three factors: sustaining revenue growth, managing R&D costs, and scaling partnerships. The company's first-half 2025 revenue grew 66% year-on-year to SEK 33.9 million, with gross margins averaging 53.0%. If this trend continues, and assuming cost discipline is maintained, EBITDA could turn positive by 2026.

However, risks remain. The capital intensity of R&D in AI and decentralized identity could strain cash reserves, and the company's reliance on one-time IP monetization may not be sustainable. Additionally, competition from established players like Apple and Google in the passwordless authentication space could pressure margins.

Investment Thesis: A High-Risk, High-Reward Play

For investors with a medium-term horizon, FPC offers a compelling case. The company's strategic alignment with the passwordless authentication and enterprise identity markets—both of which are growing rapidly—positions it to capture significant value. Its ability to monetize IP, coupled with a leaner cost structure, provides a clear path to EBITDA positivity.

However, the stock remains speculative. FPC's market cap is small, and its success depends on executing its transformation without relapsing into past inefficiencies. Investors should monitor key metrics: revenue growth in high-margin segments, the pace of cost reductions, and the success of partnerships like those with Anonybit and Ping Identity.

In conclusion, FPC's transformation is a work in progress. While the road to EBITDA breakeven is not without hurdles, the company's focus on innovation, operational efficiency, and strategic monetization makes it a high-conviction opportunity for those willing to navigate the risks of a turnaround story.