Earnings call transcript: NEXT Biometrics reports margin boost amid revenue decline in Q4 2025

NEXT Biometrics reported Q4 2025 revenue of NOK 2.5m, down 13.8% YoY (from NOK 2.9m), while adjusted gross margin expanded to 69% from 40% YoY. Adjusted OpEx fell to NOK 16.9m (from NOK 19.9m) and adjusted EBITDA improved to -NOK 15.2m (from -NOK 18.6m); cash was NOK 8.3m at quarter end. The company raised NOK 20m via private placement, announced a contemplated rights issue up to NOK 50m, and expects market momentum to build through Q2 2026 with normalization by Q3 2026; product IP (Anywhere-on-Display) and two U.S. patents were highlighted as growth drivers. Key risks include continued market headwinds in India/China/Bangladesh, reliance on capital markets for liquidity, and ongoing litigation/partner investigation costs.

Analysis

Certification and testing capacity have become structural choke points in national ID rollouts; vendors that already meet higher anti-spoofing standards and hold relevant IP will capture a disproportionate share of restart volumes because procurement teams will favor low-integration-risk suppliers. NEXT’s patent position and display partner put it in the subset of vendors that can both defend share in government tenders and pursue higher-margin handset opportunities, but OEM qualification cycles mean revenue realization is lumpy and front-loaded into multi-quarter conversion windows.

The current setup creates a classic bridge-finance / delivery-risk trade: inventory and accumulated design wins form optionality that only materializes if backlogs clear and large tenders resume cadence. Conversely, the company remains exposed to capital-market overhang and illiquid equity dynamics — financing events that dilute existing holders can compress multiples even if operating metrics improve. Active liquidity management and visible conversion of inventory into repeat orders are the two most important near-term read-throughs for valuation re-rating.

Supply-chain and geopolitical vectors are non-trivial. Anchoring a prototype pathway through a Taiwanese display partner accelerates handset TAM access but imports Taiwan–China geopolitical exposure and single-supplier concentration risk. Separately, litigation or partner disputes in Asia can cascade into order delays given the narrow set of authorized testing agencies — a regulatory reversal or new testing standard would reintroduce a multi-month backlog and postpone any upswing.

Monitor three catalysts on a 3–18 month horizon: (1) first commercial shipments tied to recent design wins, (2) OEM qualification milestones for in-display fingerprint prototypes (meaningful at trade shows like MWC), and (3) visible resolution of any partner litigation or testing-agency bottlenecks. Each is binary and will drive high volatility; position sizing should assume asymmetric outcomes.

Key Decisions for Investors

• Speculative long NEXT (NEXT:OSE) — size small (<=2% portfolio). Entry: scale in over 4–8 weeks to average into volatility; horizon 6–18 months. Hedge: buy 6–12 month protective puts if liquid, otherwise pair with short exposure to a broader small-cap tech index to limit tail downside. R/R: asymmetric — successful conversion of design wins + OEM qualification could drive a 2–4x re-rating; failure to convert or further dilution can erase capital. Tight stop at 50% loss.
• Supply-chain play: long TPK Holdings (3673.TW) or a diversified display/component supplier — horizon 9–18 months to capture incremental in-display fingerprint adoption. Rationale: capture upstream revenue as handset OEMs adopt in-display biometric tech. R/R: moderate (1.5–2x) with downside via cyclical display weakness; use 6–12 month covered-call overlays to improve income if view is medium-term constructive.
• Event-driven pair: long NEXT / short Fingerprint Cards (FPC:STO) — small relative sizes to isolate IP/feature premium. Entry around certification and prototype milestones; horizon 3–12 months. Rationale: if market rewards anti-spoofing and in-display IP, expect NEXT to outperform legacy capacitive players. Risk: competitor pivots or large tender awards to incumbents; cap pair exposure to limit portfolio beta.