IDXAF: A Pure Play in Next-Gen Biometric Payment Cards

By Lisa Thompson



IDEX’s Low Cost Patented Fingerprint Card Technology Could Capture Large Market Share in This Nascent Industry

IDEX Biometrics (OTC:IDXAF) was founded in Norway in 1997 and has since 2014 largely become a US centric product company with extensive expertise in fingerprint biometrics and semiconductor and systems design. It is a fabless semiconductor company that targets primarily the payment card industry and is just starting to ship production volumes of its next generation sensors and solutions to major card providers.

Next generation credit cards will have fingerprint authentication embedded sensors and chips. Importantly this generational switch will not require new POS equipment as with chip and PIN and should occur much faster. This technology is expected to reduce fraud and increase usage easily providing payback for banks even with the incremental cost. IDEX’s unique patent-protected “off-chip” design allows cards to be manufactured at less than half the price of competitors by separating the fingerprint sensor from its controller chip thus allowing the use of a smaller, newer, and more powerful chips.

Despite the existence of smartphone-based payment systems, market researcher Nilson still believes the market for payment cards will increase 7.3% per year. There are 23.6 billion payment cards in use globally. Biometric payment card units are expected to grow from 2 million shipped in 2021 to a minimum of 400 million by 2024. IDEX could receive $3 per card of the market share it captures.

IDEX has already had its design certified by two out of the three major card networks, MasterCard and China UnionPay, who process over 45% of the cards in use worldwide. It has begun to provide cards in small quantities to card issuers to sample and conduct pilots at banks in various countries.

It has more than $7 million of revenue under contract, all booked in 2020, and is now shipping against these orders. In 2021 we expect the company will be providing product to many of the major card providers who in turn will sell to their customers worldwide. In addition, it will be selling production volumes to customers in the secure access control business and other applications such as IOT.

The company trades on the Oslo Børs and the OTCQB but has recently filed an F-1 to list its ADSs on NASDAQ.

As a fabless semiconductor company with high operating leverage, it is expected to be at very high pretax margins once it ramps revenues and it deserves a enterprise value to sales valuation in line with its peers that trade at 10.1 times. It currently trades at $241 million market cap. We believe that by 2025 it has the potential of $500 million in sales at which point it could be valued as a $5 billion company.

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