Good day and thank you for standing by. Welcome to the Q2 2022 Results Conference 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 on your telephone. You will then hear an automated message advising your hand is raised. If you wish to ask a question via the webcast, please use the Q&A box available on the webcast link at any time during the conference. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Stefan Pettersson. Please go ahead. Thank you and good morning, everyone, and welcome to Fingerprint Cards earnings call following the release of our Q2 report this morning. We'll start with a presentation of the report by our CEO, Christian Fredrikson, and thereafter by our CFO, Per Sundqvist. We'll also have a Q&A session. If you're following this conference call on the web, you can post questions throughout the call. For those of you participating on the phone conference, instructions on how to ask questions will be given by the operator before we get into this session. With that, I now hand over to our CEO, Christian Fredrikson. Thank you, Stefan. Good morning, everyone, and welcome to this call, focusing on Fingerprint's progress and performance in the second quarter of 2022, which was a quarter for us impacted clearly by the COVID-related lockdowns in China. I did mention that already in connection with our Q1 reports as it then had just started. Now, these lockdowns continued mostly through second quarter and led to a sharp reduction in the sales of smartphones and PCs in the country. According to the China Academy of Information and Communications Technology, mobile phone shipments in China were down by about 27% in the first five months of this year compared to the same period in 2021. As a result of this, the whole ecosystem has been impacted. Mobile manufacturers have reduced their orders for all components, including now, obviously, for Fingerprint sensors to a minimum, while at the same time focusing on drawing down their inventories. Obviously, this had a significant impact on our sales, given our exposure to the Chinese smartphone market. This is reflected in our revenue, which decreased by 21% and by 33% in constant currency terms. Although lockdown policies in China have eased, there is still some uncertainty for the country. Given this situation, we are withdrawing our revenue forecast for 2022, as well as our EBITDA margin forecast for Q4 2022. In response to these market developments, we are taking swift action to lower our cost base to protect our financials and to keep ourselves the freedom to invest in according to our strategy. We are reducing our annual operating cost run rate by approximately 20% or SEK 80 million as a result of these measures with full effect from the fourth quarter. We will hence also reduce our global workforce by around 10% while we are also delaying some of our development projects. These cost reductions are necessary to safeguard our financials and to maintain our strategy during this, which we believe temporary, but still strong lockdowns that have happened in China. At the same time, we also saw positively our gross margin improved to 31% as the PC and access areas continued the growth and diversification, which is expanding their share of our total revenue. Let me come back to this point as well. Let's turn to the next slide. This data shows the fairly dramatic drop in mobile phone shipments in China with a 27% drop in the first five months of this year. Even though the numbers are now improving somewhat, we still expect, and Gartner also expects, an 18% decrease in 2022 versus 2021, which is of course, fairly significant still. In response, mobile OEMs have slashed their orders for components all across the mobile phone industry and now focusing on decreasing their inventories. We expect the situation to gradually improve. As we can see now, the ecosystem inventory is depleted and OEMs will need to start ordering components again. Nobody, of course, knows exactly when that normalization will happen, and we hope now that the worst of the lockdowns are over, which were quite dramatic in the second quarter. For us, there are many things we can do and we have done. We have accelerated our business development work, and as a result, Fingerprints has actually been gaining market share in capacitive sensors for mobile phones. At the same time, we are now entering a completely new product segment, under-display sensors, which means that our addressable market in the mobile segment is now considerably bigger. Let's look at this in more detail in a while, but let me first describe the cost measures we are implementing to mitigate the effects of the downturn in the mobile phone market in China. Let's look at this on the next slide, please. As I said, we are reducing our global workforce by approximately 10%, and we are also making other reductions, including postponing some of our projects. All in all, once again, these measures will reduce our annual operating cost run rate by around SEK 80 million or 20% with full effect from the fourth quarter. As you know, our industry is fast-moving and dynamic, to say the least, and Fingerprint continuously, we need to review and adapt fast our cost structure to current conditions. Given the temporary market situation, these cost reductions are necessary. However, our strategy and long-term growth plans are unchanged. As we said in the report this morning, we assess and continue to believe that these challenges are of temporary nature and that the situation is gradually normalizing. Our strategy remains unchanged and we focus on strengthening our position, both in the mobile market and in the new fast-growing segment. That clearly helped lift our gross margin in the second quarter. Our revenue streams will continue to diversify at a rapid pace for the remainder of this year and in 2023. While we are postponing some projects, all of our short-term growth-oriented projects will continue as planned. Let's look at the different business areas and start with the mobile area first now. Let's turn to the next slide. Thank you. In June, we secured a design win for our optical under-display solution, the FPC1632 product, with a major Asian smartphone OEM following successful qualification test earlier this year. We expect to commence shipments during the fourth quarter of 2022. This is significant for us as it marks our entry into a new market segment, which will open up attractive new growth opportunities going forward. Our goal is to capture a significant share of this market, and we will get back to more design win during this year still. How big is this opportunity? From a volume perspective, the market for capacitive sensors is biggest, accounting for about 2/3 of the market, while under-display has about 1/3. Average selling prices are a bit higher for under-display sensors, so from a value perspective, the markets are more comparable in size. Clearly our entry into this market segment is expanding our total addressable market in an extremely meaningful way. We expect further design wins already this year and anticipate that under-display sensors will make a sizable contribution to our revenue from next year and starting in Q4. Next slide, please. If we consider the Android phones launched by the top 10 brands, which cover most of the market, around 2/3 had a capacitive fingerprint sensor, while 1/3 had an under-display sensor. As you know, we are a leading player in the capacitive sensors, while we have not had any share of the market for under-display sensor. I'm very pleased to see this now changing. Now, OEM's phone inventories have been going down as they sell their stock to customers, so we expect purchase orders for components to start picking up and things normalizing. Our product and business development work continues during the downturn, and it means that we are in a favorable position once again when the mobile capacitive market normalizes. Now, next slide, please. We are also diversifying our revenue to new application areas outside of the mobile industry. As you know, the PC market has emerged as an important new area for us. In fact, four out of the world's top six PC OEMs are already using our sensors in their products. During the quarter, we announced another two models launched by a new customer, a top-tier Taiwan-based OEM. We are also seeing solid growth in the access area, where access cards and door locks account for a good part of our business. Looking at our revenue mix, mobile has, as you know, accounted for around 90% of our sales in the past few years. During the first half of this year, however, we saw a significant increase in the proportion of our sales accounted by new areas, with the growth, particularly now in PC and access. We expect this share to continue to increase rapidly during this and next year. This is expected to drive growth and improve margins at the same time as our risk level decreases when we get more legs to stand on. Our operations within payments make a positive contribution, and it is also clearly growing, but of course, from a smaller number. We expect this strong growth in access and PC areas during this and next year. This year, we expect not only strong growth in actual revenues from business outside of mobile capacity, but it will also account for about 25% of our revenues versus 10% of our revenues last year. This diversification and growth will continue strongly also next year. Next slide, please. Finally, in payments, our business development efforts continue with high intensity. As you can see on this slide, we announced collaborations with a number of players in Asia during the quarter, with the objective of introducing biometric cards with our technology to all major markets in the world. These partners are based in markets such as Mainland China, Taiwan, India, and Japan. As previously communicated, we are supporting additional commercial launches in Morocco, bringing our total to eight launches worldwide. We still expect several banks to launch this year still with our solution in the biometric card business. Next slide, please. Looking ahead, despite the short-term pain in mobile capacitive business because of the lockdowns in China, our focus remains on profitable growth and cash flow generation. The slowdown in the mobile market that we saw in China during the second quarter was very strong and has, as we can all see now, negatively affected the whole ecosystem. That is OEMs as well as all component suppliers to the mobile phone industry. Clearly also it impacted us. We believe that the effect is temporary and the situation will and is gradually normalizing as we can see the inventory levels being depleted in the mobile ecosystem. Our strategy remains unchanged and we focus on strengthening our position, and we have gained market share in mobile capacitive. We are getting into a totally new market for us in mobile under-display from the fourth quarter this year, which is a substantial win for us. We will continue to drive diversification and growth in the new fast-growing segments, PC, access, and payments, that helped lift our gross margin in the second quarter to 31% from 27% in the second quarter last year and from 20.4% in the last quarter. Fingerprint's revenue stream will continue to diversify at a rapid pace for the remainder of this year and in 2023. Our business model is highly scalable, and even if we cut some costs now, we will focus on cash flow generation while maintaining a high level of R&D activity to focus on the growing new segments for our biometric. With all these actions, we also want to stay efficient in operation, and hence we will drive cost reductions, not only internally, but also in our products to keep us strong and have the freedom to invest and be ready for the rebound also as it is coming in mobile capacitive. With that, let me hand over to our CFO, Per Sundqvist. Go ahead, Per. Thank you, Christian, and good morning to everyone. Let's move to the first slide in the financial results section. As we have mentioned earlier, we saw a sharp and quick decrease in the quarter of our revenue, which corresponds to a drop by 21% in relation to Q2 last year. However, the drop is 33% in constant currency terms. As Christian pointed out earlier, this decline is due to the lockdowns in China, which were in effect during most of the Q2, and this in turn have had a significant impact on the domestic consumer market for smartphones. We view this situation as temporary, but the near term market outlook is still colored with quite a bit of uncertainty, which is the reason that we have withdrawn our previously communicated forecast for the year. Our gross margin developed favorably in Q2, increasing from 27.2% to 31.1%. The main explanation behind this improvement is, as has been mentioned before by Christian, the product mix effect as the PC and access areas' share of our revenue are steadily increasing, both organically as well as as part of our total revenue. We also expect this trend to continue into next year. Next slide, please. Looking at the development of the rolling 12 months trend this quarter, we see the impact of the Chinese lockdowns on our revenue, while the gross margin trend is going in the opposite direction as a result of the fact that higher margin products now account for a growing share of our revenue streams. We expect that the revenue will continue to diversify and thereby lowering our risk level as well as driving our long-term growth. Next slide, please. Operating expenses in Q3 were SEK 83 million, versus SEK 104 million in Q2 last year and SEK 96 million last quarter. Other operating income expenses increased to a SEK +21.4 million versus a SEK 2.5 million level last year. However, SEK 16.7 million is attributable to positive operating exchange rate effects in mainly the U.S. dollar, which can be compared to SEK 3.4 million last period. It should also be mentioned that significant movements in currency have had an impact also on the line's other comprehensive income and parent company shareholders, as the recalculation effect on the U.S. dollar has affected those assets. Development costs of SEK 23.4 million were capitalized during the quarter, which is to be compared with SEK 17.5 million in the same period last year. This corresponds to 41% of total development costs and to be compared to 32% in the same quarter of 2021. Even though we are making some quick necessary cost adaptations and reductions to mitigate for the short-term temporary demanding drop in the market, we will continue to invest in growth, both by driving product innovation and by broadening our supplier base. We will keep on maintaining a strong focus on cash, cost, and efficiency improvements as we move forward. Next slide, please. Our core working capital, that is accounts receivables plus our inventory, less our accounts payable, was SEK 251 million at the end of the quarter, which is to be compared to SEK 91 million in the same quarter last year and SEK 279 million last quarter. If we look at the development of core working capital in relation to our rolling 12-month revenue, it increased to 20.2% from 7.1% in Q2 last year, but decreased somewhat from 21% last quarter. The increasing trend in working capital that you see on this slide, although it reversed somewhat this quarter, has been the planned action and the result of weighing several factors necessary to support, secure, and serve growth in today's complex market environment. With, for example, inventory build-ups to meet the sales growth, as well as to mitigate and minimize any potential supply chain disruptions. However, having said that, the sharp drop in demand has, of course, meant that we quickly have had to adjust our supply planning accordingly, but with some inertia in the process still lingering in the numbers this quarter due to the very sharp sales drop. Next slide, please. Our cash flow from operating activities was a SEK -28 million in the quarter, compared to a SEK +50 million in Q2 last year. At the end of the quarter, our cash position stood at SEK 213 million versus SEK 193 million last year and SEK 255 million at the end of Q1 2022. Cash flow from investing activities, that is capitalized development expenditure, was SEK -20 million and to be compared to SEK 19 million last year. Thank you, everyone, and we are now ready to take questions. Thank you. As a reminder, to ask a question, you will need to press star one on your telephone and wait for your name to be announced. If you're pressing star one on your mobile, please leave a slight gap between the star and the one. Once again, please press star and one if you would like to ask a question via the telephone. Once again, if you would like to ask a question via the telephone, please press star and one on your telephone keypad. There are currently no phone questions. I will pass the call back to Stefan. Okay, let's take questions from the web. First one is relating to payment cards in France. Do you have any news on the launches, the commercial launches in France? Yes, thank you. The launches in France are progressing. We haven't really released a number. There is growth every week. They are going to more. We have said that both Crédit Agricole and BNP Paribas are going nationwide. That is going on for them. They have still been doing so that you have to go to the branch to re-enroll, and that obviously is not the way it should be going forward in terms of getting it to mass market. Going to the branch to enroll still keeps the growth numbers in terms of size not at the level that it needs to be for mass market development. They are doing it. It continues. It's still more on the high end of the product. It is going well. There is basically only positive feedback from the consumers who are using the cards. They have very good feedback in terms of the performance of the sensor, of the payment. So no rejections. It is working well. There are no customers who have had problems with the cards, either physical or other, so that they would have returned the cards or wanted to jump off using the card. We will work on trying to get also some, of course, numbers to the market, when we will be allowed to release what kind of user numbers are coming there. There is growth every week in terms of the user numbers there. I think that's what we have from France at the moment. The expansion continues. Okay. Thank you. One question on our bond. Do you need to refinance this bond this year? I think I can. No, I think that. Yeah, go ahead. Yeah. No, I was just saying that, no, there's no need for that this year. Okay. Thank you. Yes, and can you explain what's behind the current receivables number? Current receivables? Yes, there's other current receivables. Yeah, the number, which number is that? Five, four- Five. There's SEK 1,546.1 million. I believe that's the. In disclosure. That's the parent company internal balance that you're looking at on that. The group-wise, that's being eliminated, its internal loans. The other current liabilities in the group is only SEK 8.9 million, and it's mainly taxes and social fees. Okay. Thank you. We had one question on UBS target. Is it still SEK 40? UBS is no longer analyzing FPC, so they have withdrawn that forecast. Yeah, I think that's it for questions from the web as well. We do have. I will. Oh, sorry, Stefan. We do have. Sorry. One phone question. Would you like to take it? Yes, go ahead. Thank you. We will now take our phone question. Please stand by. Yeah. Hi, can you hear me? The first question comes from Markus Almerud from Penser Bank. Please go ahead. Your line is open. Yes, we can hear you. Yeah. Hi, gentlemen, Markus Almerud here from Penser Bank. A couple of questions. If I can start with just China, because I mean, you keep saying that China is temporary, and it should be because it's due to lockdowns, and lockdowns will open up at some point in time. You show the numbers going up until May in terms of mobile phone shipments. Can you give us a little bit color from the ground on what's happened after that and how the market has been affected by kind of the I mean, China opening up? In terms of if consumers are actually coming back, if it's very slow, just some more color. Yeah, sure. Of course, we are following this daily and weekly, and the whole ecosystem is so. I mean, of course, with the dramatic closure, there was first a real hitting the wall stop in the whole ecosystem in terms of new orders and everybody has been focusing on trying to clean inventories and understand when the lockdowns are over. As we got into June and the lockdowns or the opening up happened, we could see that clearly that the inventories are being depleted across the whole chain, across the whole ecosystem. The first five months, we said it was - 27% down. Of course, when you do that kind of reduction suddenly and close down and the demand goes down so drastically, then of course, the inventories had been built for different volumes, right? It becomes an inventory depletion situation. We are probably or we are clearly one of the better off in terms of we haven't built that much inventory. We never got to that so much, and we have been fairly cautious on inventory. We can see that obviously June was much better than during the April, May, which were the worst months of the lockdown, right? We can see that July so far is much better than June. We can see that the depletion is happening. When we talk about temporary, we mean that we don't say that the zero-COVID policy from China would disappear. We're counting on it to continue, and there will be lockdowns happening in different parts of China. It is not on the same level as it was in the second quarter, where it was a total shutdown of extreme proportions. It's not saying because the whole year is still looking at - 18% in terms of mobile phones, but it's after the adaptation and the inventory depletion to more normal levels, which we see happening as long as the temporary move for us means that it's not a full lockdown anymore, but it is more as it is going on right now. There are still lockdowns in certain cities, in certain areas of certain cities, but they are shorter and it keeps moving around. It is still a zero-COVID policy that we're counting on, that will continue in the country for the foreseeable future at least. Two follow-ups on that. Firstly, have you seen? I know that when we had the shutdowns, we've had closures before, when we had the first COVID closures, we had massive stimulus money coming out for the government to try to stimulate, I mean, to stimulate consumers. Have you seen any of the likes or not yet? Or do you expect, or what's the talk, et cetera? Yes, we have. We have both, of course. I'm sure we've all read about it. We have seen, of course, big campaigns and discounts and tax benefits, rental taking rentals down, and huge amount of money being put into building infrastructure and trying to help the economy to kickstart it again, as they did in the last round. Now, these shutdowns were, of course, much more longer and more severe than in that perspective than from the last time in 2020. Yes, we have seen those so big campaigns and discounts and shopping centers doing many different things to get the economy going. That activity has been quite strong actually. During starting from June and going on in July. On the inventories across the value chain, is it possible to know where you are in terms of levels? We've finished sharp depletion of inventories, but how much further is meant to go? How much left is in the inventories? Are they quite empty now? Is it possible to say? I suppose it's. It depends a bit on different players. Some of our competitors had. For example, if I look at our competitors, they have much more inventory than us. Some of the OEMs have more than the others, depending on how aggressive they have been. I think the levels are getting more normal now. Then the question is, will they deplete them more. It's more in the normal situation now in general, but you still have players who have excess inventory still, if I look at it today. In general, it is getting more normal. You will have some point where of course they need to start again. It's also a question of what product mix you have, right? If you have more older products and inventory, you can push that down very low, right? In the new ones, you will have to move to start to fill in the channel with, to be able to do campaigns and get the products out. Maybe that's. Mm-hmm. That's where we are, right now, right. Okay. Thanks for that. Moving on to PC maybe. I mean, we read reports about the shipment of PCs being down quite dramatically. Then at the same time you have the mix within the PC with, you know, normal, in quotation marks, "PCs," and then you also have the Chromebooks, et cetera. Then from what I understand, right? I mean, both Access and PC are growing quite significantly. Can you talk a little bit about this to explain how this all hangs together, what you see going forward in terms of PC shipments, and if that really matters? If the penetration rates will kind of outweigh that. Just explain a little bit around that. Yeah. I think for this PC market, we see that this year is probably a 9% drop versus last year in the total global volumes. There is a reduction in the overall PC shipments as a market. Also because I suppose what everything that is happening in the world with the war, the inflation, and of course there was quite a lot of boost because of the COVID in terms of people getting more digital with PC buy as well. There is a drop of, you know, 9%-10% in that range in the overall market. That has less impact on us because the penetration for fingerprint sensors is coming from such a low point. It's below 20% and it is now growing, right? I think the... For us in terms of the PC growth, it continues very well, still as well as in access because there is so much still in terms of the low penetration there, right? That's why we can see that our revenue mix is changing outside of mobile capacitive. As I said, we will do at about 25% and above in terms of our revenues will be outside of mobile capacitive. That will be even more next year, clearly even more next year. It will continue now in terms of diversification that is happening for us. We see that happening and we see that continuing to happen. Now of course it is more about having a bounce back and getting to a little bit, and a clearly better situation in mobile capacity business, which has been, of course, dramatic for us in Q2. I assume, yeah, I think you're right also that you have a match-on-chip solution which is being sold in the enterprise computer market, I guess, which would be a first for you. In terms of discussions, I mean, do you see? Do you have several discussions ongoing so that we might see more of this? I mean, if you measure kind of like the discussions that you have both on the enterprise and on the consumer market in terms of PC, are they kind of accelerating or are we keeping a fast, steady pace, or how would you describe them in terms of direction of? I think I would say that it goes as planned, and it is an accelerating pace. We have gotten into the four out of the six largest OEMs in the market in the world, and now we are in an accelerating phase of working with match-on-host and match-on-chip in terms of doing new models and getting into the models and all that work is expanding into more models. That's a fantastic phase to be expanding the business. We're also looking at expanding our offering so that we can go and do more in terms of the full solution, in terms of the security and everything that comes with it. That is of course when we look at next year, where we want to get, because that will bring us more revenue when we take a bigger portion of the offering. That is also when we talk about that we need to do cuts here, that there are areas where we will absolutely not cut because we can increase our not only the penetration, not only the models that we get into, but actually also increase our offering, even going up to maybe doubling our revenue in terms of just the offering capabilities. There's a lot that we can do in the PC because we only just kind of got into it, right? Excellent. Finally, just a couple of words about access, because access is also contributing quite well and it's gonna continue. Can you talk a little bit about what is it that grows mostly there? What is the largest contribution? Is it the access card? Because I would assume that the smart locks in China is also kind of suffering at the moment on the back of everything that's going on there. A little bit more about that. Yeah, you're right that of course, you know, because of the lockdowns, the building projects have also stopped. Obviously, you know, selling access and door locks into new buildings has been much slower, has been impacted. That has clearly had the same impact for us. We have other access business. Access business is very scattered, so we don't have one as huge a market as the door lock market has been for us, especially in China. Door lock market is now growing in other parts as well. In some countries in Europe, in U.S., some in other Asian countries are also moving into door locks. You have a lot of these sub-segments, if I may say, or different segments. You know, you have electric scooters, you have the cards, access cards, you have all kind of devices, crypto keys, you have different dongles and so forth. There are many different places now where the access market is taking off and those are proving right. You have different security solutions coming in as well, right? I think those combined means that the access market is growing in different areas and you just need to keep the R&D effort on so that we do those a little bit different solutions into those. Utilize the basic solution, but then maybe do a little bit more on the software side and so to get into different places. But they are all quite big volumes in itself, right? Okay. All right. Well, excellent. That was all for me, for now. Thank you very much. Yes, thank you. Thank you. There are currently no further phone questions. I will hand the call back to you. Okay, thank you. Let me hand back to Christian then for some final remarks before we close the call. All right. Thank you very much. Thank you for joining. It has been quite a rollercoaster again for us in terms of mobile capacity business with the lockdowns in China. I am positive about the new diversification and new products that are coming. We hope that the worst is over, if the worst is over when it comes to the lockdowns in China. They will not do a total shutdown as forceful as it was in the second quarter, but more of a zero-COVID with less of a total shutdown that happens going forward for us. Then we see a rebound in the mobile capacity business when the inventories are depleted. We look forward to push forward in the new growth areas for us as well, which obviously is now extremely important for us and continues as planned. I thank you very much for joining. We will speak soon again in this forum in the next quarter. I wish you well. Take care of yourselves, and we will talk soon again. Thank you very much. Bye now. Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect. Speakers, please stand by.