Good day, and thank you for standing by. Welcome to the Q1 2024 results webcast and conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one and one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one and one again. Alternatively, you may submit your questions via the webcast. Please be advised that today's conference is being recorded. I would now like to turn the conference over to your first speaker today, Stefan Pettersson, Head of Investor Relations. Please go ahead, sir.
Thank you, Sharon, and, good morning, everyone, and welcome to Fingerprint Cards' earnings call following the release of our first quarter report this morning. With me here, I have our CEO, Adam Philpott, and our CFO, Fredrik Hedlund, who will be presenting today. If you're following the call on the web, you can post questions throughout the call. With that, let me now hand over to our CEO, Adam Philpott.
Thank you, Stefan, and good morning, everybody. As Stefan said, I'm gonna be walking you through our Q1 interim earnings results. I will also be joined by Fredrik Hedlund, our CFO. Fredrik has just recently joined us, so I'm pleased to be here with him today. What I'm going to do is I'm not just going to focus on the Q1 results, but you will have seen that we made some announcements after Q1 as well. I'm gonna talk a little bit about those on the call today in the context of Q1, because it's a really important phase that we're now going through in our company's turnaround. So let's come to the agenda, please, Stefan.
I'll start with an executive summary, giving you some of the headlines from Q1, and then we'll spend a bit of time talking about those strategic initiatives that relate to the post-Q1 announcement. We'll talk about the transformation plan that we're going through, the transformation plan that I actually announced back in October on my first earnings call, when I joined the company. So we're gonna talk about the transformation plan to remind you the process that we're going through, what we're doing on the transformation. We're gonna talk about why we're winding down the mobile business. I know that's a big topic, so we'll spend a little bit of time on that.
We'll also talk about the core business we have outside of mobile, and why that's a really strong business that warrants extra focus, given the margins that we yield from that business and the growth that we see. We'll talk about the overall portfolio refresh that results from those two things. We'll then come and spend some time on the Q1 financials. I'll ask Fredrik to step in and help me there as we talk about our revenue and clients and some of the key figures. We'll talk about some of the other financial and operational changes we're going through before we pause, and I'm sure there'll be lots of questions today, so we'll pause for Q&A for the back half of the call. Let's keep moving. Let's go to the executive summary, please, Stefan.
First of all, top headline you can see is that we had great top-line revenue increase, 25% year-on-year increase in our revenue. Very, very strong performance. Also, what's most notable and what's most exciting for us is that we saw an 80% growth in our PC product group, and that's a much higher margin. That's really good revenue that we want to yield. There is a phrase, "Revenue is vanity, profit is sanity," so not all revenue growth is good. We saw good growth in our mobile, which you'll see a bit later on in the presentation, but because it's not profitable margin, that isn't the revenue we're looking for. What we are looking for is our core revenue, and certainly PC being our biggest, most mature core market, really, really pleased with that profitable growth, there.
Because of the mobile business, and we've been very consistent talking about mobile, and its poor profitability and the distraction that is mobile, because of the mobile performance, we did see a drop in gross margin. We saw gross margin come down year-on-year, six percentage points. However, what we also saw is a one percentage point increase quarter-over-quarter. So slight improvement, versus the 10% gross margin that we reported in Q4, but still not where we need to be. What we have done is stabilize it, but there's a lot more we need to do, and that's exactly why we're winding down the mobile business, that we'll touch on in a second and a bit later.
And of course, both the revenue and the margin, that margin performance then really falls down to both the Adjusted EBITDA line and the free cash flow line. We're gonna keep reporting the numbers in this way moving forward, and the reason we're gonna do that is because cash is absolutely critical. That's what we're really focused on as a new executive leadership team, is to ensure that there's sufficient cash, that we're running the business profitably, we're eradicating that cash burn, so really driving that free cash flow into positive. Part of what we're doing in order to do that is also taking cost out of the business. So again, we've spoken about this in the past on previous earnings calls. We'll continue to talk about it.
We'll spend a bit more time on that today, but you can see this isn't just something we've announced this quarter. It's something we've been doing for the last few quarters, and now something we are concluding as we move forward in Q2, that we announced after the Q1 results. And you can see headcounts coming down. Headcount is a huge part of our overall cost base, and so we're bringing that down obviously to drive profitability too. Post Q1, we did announce we're winding down the mobile business. I'm gonna touch on that in just a moment, but it's essential that we focus on profit. The revenue has been great, but the margin has been bad, so it's not the revenue we're looking for.
We are looking for profitable revenue, and that's what we get in our very profitable core business, and that's where we need to focus as an organization. We also announced a partially guaranteed rights issue of up to SEK 310 million. That's to strengthen the balance sheet, reduce the debt, and increase the equity, and it also means we're facilitating the repayment of the outstanding convertible bond that you're all aware of, too. What it also does is really allow us to focus in the expanding and large market that we're in. The identity and authentication market is a big market, and it's growing at about 14% CAGR, depending on who you ask. That's a pretty good credible study. So it's a great market to be in. Well, the good news is we're in the right place.
We also have a very strong core business in that market, as, as illustrated by our PC growth, so we're in a great market, but we need to focus on where, our premium is valued, and therefore, where we can monetize at the right level of profitability, and that's why we're moving away from mobile into those other areas and some new areas beyond, which we'll talk about also today. So those are the headlines, from Q1, and in terms of the announcements we made after the Q1 results. Let's move forward, please, Stefan. I will quickly remind all of you who are longer term followers of Fingerprint on the transformation initiatives that I announced back in the October earnings call. There was really a six-point plan that I put in place. I'd only joined in September.
The first 30 days I spent putting in place the pillars of this transformation plan, starting with a portfolio refresh to get out of the businesses or wind down those businesses that were not profitable, that's, that's mobile. To focus on the core businesses that are profitable, but also look at expansion opportunities. On cost optimization, ensuring that we have the right cost base, for the size of market that we're in, and to fuel the R&D necessary to pursue those markets. To strengthen the balance sheet, make sure that we've got a really good engine driving this business forward.
To refresh the strategy so that we're really capitalizing and moving up the value chain and staying ahead of technology as a leader, in this great market that I mentioned a moment ago, and that we have the right talent and the right organization in place, plus the right governance and incentives to drive that talent forward in pursuit of company goals. So that's the transformation plan I announced. We're in the first phase of that, which is about stability, tidying up the organization, getting out of areas that are just unprofitable and creating too much cash burn, focusing our capital where we can get a very, very strong return, which is exactly what we've announced. Next slide, please, Stefan. So the question I get asked is, why, why are we winding down Mobile?
Well, I've been pretty consistent in talking about the challenges of Mobile since I've joined, and there was some discussion about that before I joined. Mobile has had a long-term decline, as you can see on the right here, in terms of the average selling price. The selling price dropped significantly between 2016 and 2019, but then it's continued to drop double digit ever since. As a company, we are a premium provider, and we've been able to justify a premium in the market. However, even at our premium, we've been unable to sustain the level of margin necessary, based on the cost of capital and to return to shareholders, just too low margin, creating a cash burn, for us, despite us charging a premium. And so that creates a real challenge.
You can also see the drop in gross margin there for that business, too, which makes the mobile business simply untenable for us. And that's why we've chosen to wind it down. It's a mature market. There are also geopolitics at play that create challenges for us, some customers, some products that we can't fulfill, because of regulations and myriad other geopolitical challenges that as a non-Chinese company, we face in our ability to compete. It's also a highly commoditized market, so very little value left to offer there, despite having the best-in-class product, very price sensitive, and of course, as a silicon business, very, very high volume business, too, very capital intensive, with very, very low investment returns. And so our choice is to focus not on revenue, but to focus on margin in our core business, where we make very, very strong margin.
So that's why we've chosen to wind down mobile. I have, in the past, spoken about moving investments away. We started doing that when I joined, to start to invest in other areas, and instead of putting our capital into mobile, where we couldn't drive the right return, now we're going to go further and accelerate that and wind that business down. So let's also talk on the next slide, please, Stefan, about our core business, because we have a very, very strong core business, a mixture of markets as well. PC, a maturing market, really hitting that growth curve now. Great market, great margin. We have the access market. A little newer as a market, a little more fragmented as a market. Some interesting opportunities. They're starting to materialize there beyond physical access in the logical access space.
So a slightly earlier market in the access space, and then a very early market on payment. On the payment market, we focused over the last few years on ensuring that we've got the right ecosystem, the right partners. We've got technology that can be delivered at scale so that it can be delivered with high volume to consumers with a high success rate in terms of Biometric Payment Cards. We've done a great job in getting that established. Now we're switching our attention over to the demand side. We've got a huge pipeline of banks that we're looking at now, developing and closing on the demand side now that the market's ready.
So a real premium product on the payment side, but still a nascent market that we're now switching gears to focus on demand side and the adoption side of that market, to move it from an early market into a growth market. On the access side, similarly, we've got a really strong ecosystem in the access space. We continue to make great announcements there in terms of new customers that we have. FIDO, as I mentioned, so that's logical access, really seeing demand take off in that space with our huge partners that we have, delivering FIDO solutions with biometric access.
Also, it's a fragmented market, and so we're about to launch a channel-ready product to get into our partners with documentation, with test kits, development kits, so that they can go out and embed our technology in other products and give us scale in the market, too, in a way that they monetize both through the product and through their integration services. Then, coming back to the top there, PC, you know, we're in four of the five top Windows players. We're talking to the fifth. Doesn't make sense for us not to be in the fifth one there as well. And we continue to be a leading innovator. We've won awards from our partners for their best supplier.
We've recently launched the Match-on-Chip solution, so expanding beyond just core systems. So very, very good, large, growing and profitable market. So as we look across these, really strong, really strong margin, but also a great track record of growth, across these markets, too. If we go to the next slide, please, Stefan, and here we'll touch on the, on how we're refreshing them. So if I bring all of this together, what are we doing with mobile? What are we doing with our core? And what beyond that? As I've said, in mobile, we're gonna discontinue, we're gonna wind that business down. We're gonna do that gracefully with our customers to ensure that we don't leave them stranded. But of course, we need to do that profitably as well.
You'll have seen from the chart here, we've been gradually winding that down or reducing the dependence the companies have in terms of the revenue mix there on, on mobile. But really, it's not about the revenue mix, it's about the margin that we make, and so that is our core focus, which is why in PC, payment, and access, those are the markets that we're really focused on. You know, you can see in the PC space, for example, strong, consistent growth. Last year, 63% for the full year. We talked about 80% a second ago for Q1, so really nice to see that continue and building out our capabilities there, continuing to add capability. On the payment side, we're starting to see an acceleration in deployments. We saw the Garanti BBVA announcement in Q1.
We've got a number of others in the pipeline. We've seen additional partnerships already. We haven't finished with our partnerships. We've got a really strong beachhead, but of course, we continue to close out with additional partners there, like Feitian, for example, and even some of the enrollment capabilities like Smart'Nroll that we announced in Q1, of course, also. And then on the access side, I talked about FIDO. We expect a surge of revenue from FIDO. That's a really popular capability to move away from passwords as people look at logical authentication for application access, for example. But what I haven't spoken about is then some of the new business. Beyond those core areas, there's some great new areas that we're in, too. You will all know that we have iris technology.
We see huge potential for Iris moving forward. In the age of deepfake, in the age of passive authentication, we think there's a huge capability or a huge need, rather, for Iris. But as always, we have best-in-class capability there. Very good at making the highest possible identification precision, but off the lowest possible signal. So some amazing work the team are doing there to make Iris technology ubiquitous, also. And of course, we've been very open about some of the things we're doing, for example, in the automotive space, and we see cross-sell opportunities, too. We see, for example, potential in PC for Iris. So there's a range of new business areas that we also have in the chamber for future growth, for longer term, medium to long-term growth, also.
And the final one I would call out in new business is monetizing our patents. You will have all seen a press announcement yesterday afternoon. We had our first monetization of our patents. We can talk about that a little later if there's any questions on that, but we've got lots of other areas where we can monetize patents that other players are potentially using. So lots of growth potential there with the incredible IP that we've built over many years. Let's keep moving and go to the Q1 financials in a little more detail, please, Stefan. So as we look at Q1, I'll give a quick view on some revenue and client insights, and then I'll hand over to Fredrik to give a few additional insights also.
As we think about it, I've structured it with our core business here, followed by mobile. As I said earlier, PC, absolutely fantastic growth in PC. It's by far the most mature market we're in, in our core business, and we're seeing really good strength there. Not only that, we see a lot of gas in the tank. We see a lot of potential for that market to continue to run. We are expanding the offers that we have there, increasing to a systems level with MCUs, that you will have seen we completed that in Q1. That system is now ready for mass production. We're winning awards with our customers. You can see the Lenovo award on the screen here that we won recently. I mentioned earlier the ASUS Match-on-Chip PC launch.
So continue to launch with new PCs. We see more penetration of biometric on PC as a share of mix, and so we see a great opportunity there. But we also see multimodality as a future, and I talked about Iris as an example of that. So really good to see that. As I mentioned earlier, Access and Payment, much smaller markets, much more lumpy. We talked about this in the past. We have fits and starts in terms of when you get, you know, a deal or two makes a big difference to the quarter. And then when you don't, it also makes a difference in a different way. And so, you know, we saw some patchy business. I think on Payment, our focus, as I've said, is switched over to driving long-term growth.
We've spent a lot of time with our ecosystem, and they've spent money with us in the past to build out their capability. Now, we're switching gears to then drive demand upon that. We saw Garanti BBVA, for example, in payments, in Q1. That was our eleventh biometric card launch with Thales. Looking to ramp more of those up, and we have a great pipeline. As I said, our focus is on both building pipeline, but also converting. We've already got a significant pipeline of banking demand, so now the focus is on converting those in a meaningful way. And so that's where our focus is as a go-to-market organization. On the access side, as I said, early stage, our focus is primarily outside of China. We've seen a construction industry decline in China for some time.
That market has been pretty depressed, which has impacted the numbers. However, it's had a greater impact on the revenue than on the margin. Lower margin in China, and so our focus is outside of that, looking at both physical access, we still see lots of opportunity there. We made an announcement a few days ago around a new vector for sales, which was on some e-scooters in India, for example. We see lots and lots of different potentials as where fingerprint access is superior to other forms of access, passwords, phones, et cetera. So we see more opportunity in physical access, but FIDO and logical access is really where we see big market growth.
In terms of that physical access, that's where the channel product that's now ready to market comes into play because we can scale significantly through channels into lots and lots of different use cases with those partners. So lots of potential ahead, a good growth in the core, very good profitability in the core. With that, Fredrik, let me hand over to you to talk about some other data points from Q1.
Yep. Thank you, Adam. I mean, you did a good job talking about the revenue where, you know, we up 25%, quarter-over-quarter, and, you know, it's really PC that's driven that. And also you talked about the gross margin side of things, where it's really mobile that's caused the six percentage point decrease in gross margin quarter-over-quarter. But I want to spend some time on Adjusted EBITDA and free cash flow. I mean, first, we are absolutely laser-focused to get the EBITDA and free cash flow to a positive territory. And what I mean by that is we're really taking control over our destiny by, one, winding down the mobile in a controlled manner, and with that, we are rightsizing our cost structure.
In terms of definitions, Adjusted EBITDA, what we do is, we adjust for one-time, non-recurring items. But actually, in the first quarter, 2024, and also in the first quarter of 2023, we didn't have any adjustments. I just want to make that clear. In terms of free cash flow, what we're doing is we're taking the operating cash flow from the cash flow statement and, the investing cash flow, so the investment we're making, and we're combining the two, and this is how we look at the cash burn of the business. If you look a little bit further below, we have cash and cash equivalents. So when we get the questions, Why are you doing a rights issue now? Well, look at the cash and cash equivalents.
At the end of the first quarter, we had SEK 45.6 million in cash. We had a cash burn of SEK 65.5 million. Okay? So what are we doing? Well, we are recapitalizing in order to fund the stability phase that Adam talked about. We are also strengthening the balance sheet, and we're funding core investments. Let's move to the next page to talk a little bit more about one of the key enablers to get the EBITDA and the free cash flow to positive territory. And that's cost. So this page talks about how we are reducing our cost.
So a key enabler is what we call gross OpEx, and we have a year-end target to get the gross OpEx to SEK 150 million, and that's a SEK 30 million reduction from what Adam and the team announced in the fourth quarter. So how are we gonna execute on this? Well, first, since we are winding down mobile, which is by far the biggest product in terms of revenue, we can right size the company to fit the new core business. Second, we're putting in place real operational and financial disciplines. And Adam talked about reducing the headcount, and we are fully in control over our headcount.
You can see in the text on the left-hand side how the headcount has been trending down, and with a SEK 150 million Gross OpEx target, we obviously have to get more efficient when it comes to headcount. But we're not only looking at headcount, we're looking at every discretionary cost bucket, and we're looking at our footprint, for example, our offices. With this, Stefan, let's go to the next one, and let's take a look at how we are strengthening our balance sheet. This page talks about strengthening our balance sheet by redeeming our convertible bonds. On the right-hand side, you have 6 positive effects, but let me just talk about three that are very close to me.
One, and Adam alluded to it earlier, it is to reduce or lower the cost of capital, which becomes the hurdle rate in terms of our new investments, right? We are really focused on new investments into the core business, but we also need to focus on lowering the hurdle rate, and the cost of capital is the hurdle rate. And by redeeming the bonds, we are lowering our cost of capital. Also, we're gaining financial flexibility, which we need in this transformation phase. And finally, we're putting all investors on the same playing field. With that, Adam, back to you.
Thank you, Fredrik. So let me bring us home with a few other things that are part of the transformation plan. So on the next slide, I wanna talk just. I wanna come back to the strategy that we announced back in October and give you a kind of refresh on that and how that sits in the market. We've done a significant amount of work on the strategy since that time frame, but let me start with the opportunity and the challenge. So the opportunity is that this is a $40 billion market, US dollar, 14% CAGR, so it's a great growth market to be in. Why? Well, here's the challenge: passwords aren't working. They're, they are the primary threat vector today. So the space that we're in is absolutely necessary to solve that problem.
We can solve it in a couple of ways, and I'll touch on that in a second. But the other challenge we have is that, well, why isn't that being solved today? The other challenge is that the adoption of biometrics is spotty. It's too hard for many. Forget the phone and PC that we've already been in, but it's also at the application level. When you're using those devices and you're already logged in, it's the logical access that becomes a challenge, which is why we're seeing growth in FIDO, but it's not just about FIDO. So part of solving this challenge is also about making it easier to insert identity technologies like biometrics into the workflow of our customers as they seek to authenticate their users. The challenge, however, is also not staying still.
We're seeing a rise in deepfake, so things like face, that's been around for a long time, is no longer sufficient on its own. It's becoming more challenging to rely on face as a means of authentication, particularly for higher risk applications, but that risk is gonna come down and down and down as deepfakes become easier and easier to execute. We see the same in voice for that matter as well. And then the final challenge that remains largely unsolved is security is about defense in-depth. Security is about zero trust, a paradigm whereby you don't just authenticate once, you authenticate on a continuous basis.
And therefore, to do that, you need a multimodal offering, an offering that allows you to, for users to use whatever modalities they have at their disposal, face, finger, voice, et cetera, but to bring those together and also offer on a continuous basis in a passive way. So that's the size of the opportunity. Where we are today is we're already multimodal. We have fingerprint, we have Iris, we actually have a few other assets as well, but we see a great opportunity today. Our immediate focus in this strategy is about building those out, virtualize them, and turn them into software. I talked about Iris in that regard earlier, so that we can deliver them ubiquitously, we can deliver them anywhere, and we can then start to combine them.
So the initial opportunity is to continue to build out those existing modalities and add to them, whether that's through the organic work we have, whether it's through buying, or more likely, whether it's through partnerships because having the best additional modality may not be the best value. Partnering is a great opportunity there, so we can bring those together to offer a multimodal solution. But it's also then not just about biometric modality, it's also about data. We all have a digital exhaust. We all emit data that actually tell us very closely to our identity. So there's an opportunity to partner with data providers to also bring that together as part of a very rich set of identity-based data sets.
So as you bring that together, that's where this platform in the middle comes in, where we ingest our own modalities, we ingest third-party modalities, partnerships, and we also ingest data to bring together to make a very, very strong prosecution of an individual. But it's also about orchestrating. As I said earlier, the challenge that a lot of clients have is that it's not very easy for them to be able to use these types of capabilities. So orchestrating that for them in a very streamlined way is where we see great potential in the future. And you can see some of the things that we're able to achieve as we bring that platform. However, our immediate focus is very much in the pink area, moving across to the white.
That's where we see with the capital we have, that's where we see the immediate opportunity, for us, and that's where we wish to go over time. Let's talk just about one more aspect of the transformation plan, and that was, of course, about talent. I introduced Fredrik on the call earlier, Fredrik's first earnings call with us. What's necessary to drive this broader transformation and these key initiatives that I've spoken to in a company like Fingerprint's, is a very strong executive team. And so I've had to put together I've put together a team of leaders who are used to driving change. It started with Christian, who came in as chairman of the board with a mandate to drive change.
Christian brought me in back in September last year, and then I set about bringing in Fredrik to transform the way we're operationalizing the business, but also Hila, to come in and help us really drive a focus on growth and performance and sales rigor in the organization for that transformation. So these leaders, not only, you know, highly focused on performance, but these are leaders who have strong operational excellence and leaders who are very, very seasoned in driving change and change at scale. So great to have this team together. This is absolutely essential for what we need to do to now execute this really important phase of the change that we announced just after Q1, and we've spent some time on today. So let's go to the final slide, Stefan, and then we'll close to some questions.
We're pretty much on time. Key headlines from today: number one, we're winding down mobile. We are an organization that is focused on being profitable, and so winding down mobile is absolutely core to focusing on profit and focusing our amazing technology capabilities on where a premium is valued. That's what we're focusing on. To run that business as a profitable going concern is about optimizing costs. A lot of costs come down by winding down mobile. There's some other tweaks, Fredrik alluded that. We originally said we were gonna get to SEK 180 million annualized OpEx. We've actually managed, found a few other things, we'll get that down to SEK 150 million. So we'll run a profitable company. We'll focus then on the higher margin segments.
By winding down Mobile, not only does it take the cash burn away, but is historically 70% or more of the revenue, not the profit, of course, but the revenue, it's been a distraction. Everybody's focused on that large part of the sensors, and by taking that away, we then apply all of that remaining focus on those high value, high margin segments that have a long way of growth to still run. And the good news is, those segments have good growth ahead, and we're in a large and growing market in the biometric authentication and identification space.
So a great market to be in, particularly as we then look to go beyond where we are today, realize some of those adjacencies we're already working on, but expand into other adjacencies that I articulated as part of this strategy just a moment ago. So with that, let me close, and Stefan, perhaps I can come to you and you can help us with some of the questions.
Yes, I think we will begin by taking questions from the phone line.
Thank you. To ask a question, you will need to press star one and one on your telephone keypad and wait for your name to be announced. To withdraw your question, please press star one and one again. To ask a question via the webcast, please use the Ask a Question box and click Submit. We will now go to our first question. One moment, please. Your first question comes from the line of Markus Almerud from Carnegie. Please go ahead.
Yeah, hi. Hi, good morning. Markus Almerud here from Carnegie. I'd like to start asking maybe on Access, 'cause revenues there have also been kept falling, and I guess it's the Chinese locks part, which has been coming down. And are we at the base level now where that part of the business is virtually nil? So that's my first question.
Yeah, I'll take that one, Markus. So your attribution is absolutely right. So, you know, there has been some decline in the revenue in Access, and it has absolutely been associated with our physical access business in China, which is a volume business. The other thing I would say about that is that that business is typically weaker profits also. So it's not been a huge focus for us. Once again, it's that trap of revenue being vanity and profit being sanity, I would say. The other thing I would add about the Access market is it is very project driven, so you see it comes in kind of peaks and troughs and lumps of business. It's a lumpy business, and so we certainly see that.
What I would also say about access, I see two areas that are a focus for us that are profitable. One is that there is there's a fragmented physical market, lots of opportunity for fingerprint, but to scale to that appropriately requires a channel strategy. There's, you know, a small team, we can't reach all of those customers globally. They're just too many, right? And so scaling that through a channel is important, and that's absolutely part of a new product launch that we have coming. And the second part is on that FIDO side. Logical access we see is a real growth area for the future, and so that kind of that's how we see the access market.
Yeah. Hey, can I jump in, Adam, on this one?
Yeah, please. Yeah, go for it, Fredrik.
Yeah. Hey, hey, Markus, it's a good question. So Adam is talking about the first quarter, 2024, but we're gonna have comparison points, you know, going backwards. So we stuck with this tail until we get through to the first quarter of 2025. We don't make excuses in our financial statements, you know, so if you look at the 1Q results, either in this presentation or you look at what we published, you're gonna have that unfavorable comp in there, and I guess we have to think through how we talk to it, but we don't split it out. So you're right. I mean, so Adam is correct.
It's, we're getting through it here in the first quarter, but we're gonna live with a legacy where we're gonna have an unfavorable comparison point.
Okay. And is it fair to say that if I look at the access business, and I looked at the slides that you had, I think it was last Monday, and you look at the opportunities you have, there's plenty of access opportunities, but they're also quite small in it in each one, so there's no volume business, except maybe FIDO, that I can see straight away in the near term, whereas PC is more the volume business. Is that a fair assumption to make?
I think that's a really good question. I mean, I would say there are volume deals to be had in the access space as well. I think PC is naturally a more consolidated market. So as you think about the customers in the PC market, you know, we talk about the big five a lot, right? The big five Windows PC players. Because of the market consolidation, that tends to lend itself towards more consolidated volume, right? Greater volume per customer. So I would say that there is volume in the access market, but it's more distributed across a broader set of customers. There are some larger volume customers in there, of course, as well, and that is also true of the FIDO space. But that, that's how I would look at the market dynamics there.
Mm-hmm. And then moving on maybe to the mobile business. So you're winding it down, but what kind of pace should we expect? I mean, will it be... I know that you've said that there will be basically no revenues from 2025 onwards, but will it be back-end loaded, or will you be able to close down the business quite rapidly, and then you will have a lingering tail at the back end of the year?
Yeah, I would say the latter profile would be more what you would expect in the mobile business. So what we are moving now immediately to wind that down, we started that process. As I mentioned earlier in my talk track, we of course want to do that gracefully. You know, we are there to support our customers. We have long-term relationships, and there will be future opportunities with those customers in other software ways, perhaps in future. So of course, you know, we wanna make sure we maintain good relationships and just do the right thing. That's just the company that we are. But I would expect us to wind that business down pretty rapidly.
Of course, you know, there'll be inventory, there'll be ongoing orders that come from some of those customers, over the next few months, but I would expect that to taper off as we get towards the end of the year. So I wouldn't expect a hockey stick. I would expect us to wind down.
Okay. Okay. And then finally, maybe on the growth margins. I mean, I appreciate that you don't really wanna quantify the growth margins in the different businesses, but if you could give us some hints, and maybe you're talking about very good margins, when do you think you will be ready to talk a little bit more about what kind of profitability you have in the other businesses?
Fredrik, let me hand to you on that one.
Yeah, I mean, yeah, you're gonna see... I mean, you will see an improvement because mobile is being graciously wound down during the year. It will be done by end of the year, so you'll see the full margin, the full new margin of the core business in the first quarter of 2025. You know, Markus, you can make some pretty educated assumptions, I think, by looking at what we said before-
Mm-hmm.
and, you know, our revenue mix. You know, so actually, I think you can back into something that's pretty good. But like, like Adam said, we, we're really happy with the margin in the core business.
Okay. All right, fair enough. Thank you very much.
Thank you. Once again, if you would like to ask a question via the telephone, please press star one and one. There are currently no further phone questions. I will hand back to Stefan for web questions.
Okay. Thank you, Sharon. So, first question then on automotive. When can we expect Iris to take off in the automotive sector?
... Yeah, I'll, I'll take that one. Thank you, Stefan, and thanks to whomever asked that question. For anyone who's worked in automotive, automotive has long development cycles, so I would expect that market to take off around 2026. It, there are t he reason for that is there's a phrase in automotive, automotive grade. Of course, safety is everything in automotive, and so is durability. And so there's a very careful process around technology implementation in automotive. We're very early in that. We've been engaged with the world's largest driver monitoring systems partners, so we're ahead of the curve in that. I would say our technology is proving out extremely well.
And so I think we're in a great place for that, but I wouldn't expect that market to happen overnight.
All right, thank you. On your headcount reductions, how will those affect the company's capacity to innovate and compete, particularly in technology and R&D?
Yeah, great, great question. I mean, that's, that's, I think, our lifeblood and what we've been very, very strong at in the past. I would actually say there's a, there's a positive opportunity here, because if you look at how we're making changes, the significant bulk of those changes are in mobile-related headcounts and other associated costs. And so what it means is that the remaining talents can actually really focus on those core markets rather than be distracted by this huge revenue, but poor margin on the mobile side. So for me, it's actually about our focus, and as you then, as you're then able to focus, you become much more agile as a company, much more customer responsive, instead of everyone getting pulled over to the Goliath theme in the mobile side. So I actually see opportunity.
That doesn't mean it's easy, by the way, but I think there's opportunity for us to be much more fleet of foot, much more agile, in responding to our customers, in innovating new ideas, in being creative, and exploring new possibilities in partnership with our core customers.
Okay, thank you. And why is your revenue and payments not increasing faster? And how is it going with helping customers spread knowledge about these cards?
Yeah, that's a great question. That's something that really interested me when I joined. You know, I think the team have done a really good job on understanding the ecosystem, engaging with the ecosystem, and then building out a capability with the ecosystem. You can't do this alone, so we're involved with all of the major partners, both, you know, the card manufacturers. We're engaged with the secure element providers. We're engaged with obviously EMVCo, Mastercard, Visa, etc . So very, very engaged with all of the participants in the ecosystem to be able to stand up a product that can easily be deployed, can allow for enrollment. You know, there's a lot of things that we've done to remove friction from the process.
It's not just having a card that works, and it's easy to use, but it's also ensuring that it's easy for banks to deploy as part of their logistics workflow for them to be able to enroll customers in. To do all of that seamlessly without significant extra cost. And so we've done a great amount of work on that. So for me, the focus wasn't just to then sit back and wait. The focus, when it's ready, and now that it's ready, was to then to move our efforts over to the demand side, which is what we've, what we've been doing this year. I'm really pleased to see the number of banks that we have in our pipeline. We've got a strong pipeline of banks, so my focus is almost less on building more.
We are doing that. Of course, we want to continue to get more banks in the pipeline, but I'm really interested in driving conversion, driving what we call funnel throughput, moving those deals through the pipeline towards closure. So that's part—that's a big part of where our focus is. So in terms of the question, you know, spreading knowledge, I think that's—that's exactly what we've been doing by going out with our partners to go and see their end customers and drive demand. Talk about, you know, why this is valuable, talk about what's in it for them, and help them understand how they might go about doing this to make it as easy as possible for them.
Not even just selling our product, learning lessons from some of the other launches we've had around, you know, the workflow and how to get customers signed up, doing it on the app versus doing it in the branch, for example, and making it very easy for customers to sign up to use these cards. So that's where we've been spending our time this year, and that's what I expect to bear fruit.
Okay, thank you. What are your views on the markets in the U.S. and Europe?
Mm.
Can those markets kind of replace the Asian market that you're now winding down in mobile?
Yeah, I mean, I would say absolutely. I mean, I think certainly from a profitability point of view, that's relatively straightforward, I would say, because the profit's been so weak. I think the U.S. is a particularly interesting market. I myself have spent a number of years selling in the U.S. as well and working in the U.S., so I see a really big opportunity. I actually think we're a little understaffed personally in the U.S., and that's something Hila, our CRO, is looking to remedy. So I see opportunity to expand in that market there. But absolutely, on our doorstep, I see good opportunity there. We have good local partnerships. You know, FIDO isn't just with the U.S., it's also locally here in Europe, too.
So in the access market, we see potential. I think the channel potential lends itself very well to Europe. Europe tends to be a very channel-centric technology market. And so there's good opportunity, good potential with some of our distributors and some of our partners also on the access space here in Europe.
Okay. Well, thank you all for your questions, and, let me now hand back to you, Adam, for any final remarks that you may have.
Very good. Thank you, Stefan. So thank you everyone for joining. This is a really important phase in our company. This is a transition that's been necessary for a period of time, and I'm actually really excited about us now getting into the real meat of this transformation. It's what we need to do. I think there's a great core market now that we can spend all of our time focusing on without any unprofitable distractions. And so we see a great roadmap ahead in terms of growth in those markets, profit in those markets, but also expansion within and beyond those markets, too. So lots to be optimistic about. Of course, our focus is on good fiscal discipline to execute the transformation plan, and that's what we'll spend our time doing.
With that, I want to thank all of you for joining and look forward to seeing you on a future call.
Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect. Speakers, please stand by.