By Lisa Thompson
OSLO:IDEX.OL
READ THE FULL IDEX.OL RESEARCH REPORT
IDEX Biometrics Awaits Formal Master Card Certification Before Big Orders Finally Kick In
Q2 results showed continued progress for IDEX. However, IDEX (OSLO:IDEX.OL) did not get its full Mastercard approval in June as was expected, and it still has not gotten it to date making us reduce estimates for Q3 and Q4. The approval will be press released and the timing affects our estimate for Q4 and thus the year. We expect that after approval, orders for IDEX Pay (the full solution including software) will pop. If Q4 comes in at $2 million in sales, then we could easily expect Q1 2024 to be $4 million. The company has already built the inventory in anticipation of these orders. In the meantime, the company continues to ship to IDEMIA, access card manufacturers, and others.
IDEX now has 19 card manufacturers as customers for payments and 18 banks launching cards. It also has nine customers launching digital authentication and identity access solutions including crypto wallets.
Q2 2023 Financial Results
In Q2 of 2023, the company generated $1,463,000 in revenues up from $1,108,000 in Q2 2022 and compared to $1,242,000 in Q1 2023. Revenues continue to ramp up as customers begin to place production-level orders. Taking out other income, product sales were up $458,000 or 46%.
Q2 sales yielded a gross margin of 21.7% versus 59.0% last year. Gross margin in the second quarter of 2023 was negatively impacted by inventory adjustments. Without those adjustments, the gross margin would have been similar to Q1 2023 or 26.5%. Last year’s revenues also included $103,000 in other income which is a much higher margin than product sales. Gross margins are to improve as volumes ramp to production levels and the company adds higher-margin customers and software and solutions to the mix. In Q4 we expect IDEX Pay to be a large part of sales which yield 40% gross margins and even higher margins from access solution sales.
Operating expenses decreased to $7.7 million in Q2 2023 versus $8.4 million in Q2 2022 as staff was reduced. Expenses decreased by $50,000 sequentially; we expect further expense reduction from the NASDAQ delisting running about $1 million per year. Management plans to decrease operating expenses by approximately 30% in Q4 compared to the first quarter of 2023 which would put it around a $5.5 million per quarter level with the goal of $5 million. In July European staff were given their required three months' notice so savings will be delayed there while US staff were given one month.
At the end of June, there were 99 employees the same as at the end of 2022 but down from 108 at the end of Q2 2022. R&D staff was reduced as development work wound down. Further reductions were taken in July.
The operating loss was $7.4 million compared to a loss of $8.3 million last year. The net loss was $7.4 million versus $9.2 million a year ago. The non-GAAP loss was $7.1 million versus $8.6 million, a decrease of $1.5 million. The non-GAAP loss takes out stock-based compensation and one-time items.
GAAP loss per share was $0.006 versus $0.009, and non-GAAP was also a loss of $0.006 compared to $0.008 a year ago.
Going forward we will no longer use earnings per ADS but for comparative purposes, GAAP loss per ADS this quarter was $0.48 versus a loss of $0.68 last year. The non-GAAP loss per ADS was $0.43 versus $0.62.
Adjusted EBITDA loss in this quarter was $6.6 million compared to $7.4 million in Q2 2022. Free cash flow (not including changes in working capital) was a negative $6.9 million compared to a negative $8.4 million a year ago.
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