Thinfilm's revenue and other income in the first six months of 2016 amounted to US$ 1,997,000. Sales revenue was largely related to product development projects, delivery of prototypes and products to strategic customers and partners, technology transfer revenue as well as product deliveries.
The increase in sales revenue, year on year, is primarily due to the kick off of a Joint Development Agreement (JDA) with the announced global pharmaceutical company. The increase in JDA revenue was offset by decreased EAS product sales during the same period. Revenue related to government grants and other funded projects amounted to US$ 1,040,000 in the first half of 2016. The 19% increase is largely explained by new funded projects and higher activity in existing projects in the first six months of 2016. Other was entirely related to sublease income from the San Jose site.
Operating costs primarily attributable to:
- 1) US$ 2,041,000 higher costs for premises and supplies, mainly since the costs for manufacturing supplies and equipment maintenance were higher than a year ago. Production activities increased significantly towards the end of 2015, particularly at The NFC Innovation Centre, in San Jose, which is a front-end production facility, currently in operation 24 hours per day, 7 days per week. While the bulk of the production currently remains non-revenue generating (engineering lots used for yield-, design, and product development work), the cost impact is close to that of a fully ramped facility. The activity level was similarly high as in the previous two quarters.
- 2) USD 1,773 thousand higher payroll costs, mainly due to i) a shift in number of employees located in US versus Sweden. US employees generally command higher compensation compared with Swedish employees thus creating an increase in labour costs and ii) an overall increase in number of global employees to 114 as of June 30, 2016 compared 106 one year earlier. This increase is a result of a strengthening of the organisation, primarily in the US, as the focus has shifted from development to production. The number of employees in Linköping was reduced due to the scale back of organic transistor development as well as Xerox assuming responsibility for volume production of Thinfilm Memory.
- 1) an outflow of US$ 17,770,000 from operating activities
- 2) a US$ 3,082,000 outflow from investing activities
- 3) a US$ 41,546,000 inflow from financing activities, primarily as a result of the issuance of shares to Woodford Investment Management
- In Q1 2016, Thinfilm completed technology transfer of its printed memory IP to Xerox, including process knowledge and testing technology. This transfer enabled Xerox to start manufacturing which, in turn, is expected to lead to royalty payments to Thinfilm.
- Thinfilm began mass-production of wireless tags for electronic article surveillance (EAS), shipping over 10M units during 2015, and completing the original 13 million order in H1 2016.
- Thinfilm plans to continue to increase production capacity, which currently allows seven-figure monthly production of NFC labels and multi-million monthly production of EAS tags, to reach an overall 40-million annual unit production capacity, based on NFC label equivalents, in Q2 2016.
- The process of migrating transistor manufacturing from sheet-based to roll-based PDPS production has progressed, and Thinfilm plans to relocate its San Jose, California-based NFC Innovation Center and current US headquarters in H1 2017.
- The planned upgrade, which features a significantly larger manufacturing clean room, enables Thinfilm to support the Company's plans to scale current production and implement a high-volume roll-to-roll manufacturing line for EAS (electronic article surveillance) by year-end 2017 and for transistor-based products in 2018 – including NFC OpenSense and NFC SpeedTap.
- Due diligence on the planned new facility is progressing, and completion of the transaction – including Thinfilm’s long-term lease of the facility – is expected to conclude by end-Q3.
- By accelerating the transition to roll-to-roll printed electronics manufacturing through capex investment, Thinfilm expects to be prepared to support up to a billion-unit annual production volume in 2018.
- In parallel, the Company will look to partner with scale-up qualified, industrial companies to maintain its low-capex business model, as exemplified by its Thinfilm Memory partnership with Xerox.
- Thinfilm expects to maintain a significant investment in new product development, focusing on new sensor labels, with launch dates later this year for temperature sensors.
While resources allocated to production related activities are increasing markedly, Thinfilm still uses a significant share of its resources on R&D activities. In the first six months of 2016 some US$ 7,916,000 were spent developing e.g. printed batteries, displays and roll-to-roll printing processes. The corresponding amount for the first six months of 2015 was US$ 4,084,000.
Investments in fixed and intangible assets amounted to US$ 3,086,000 in H1 2016. The investments in the first half were mainly related to equipment and tools for the Printed Dopant Poly Silicon (PDPS) line as well as improvements to the San Jose site.
The group’s cash balance increased by US$ 20,869,000 in the first six months of 2016. The increase in cash balance is explained by three principal elements:
| Thin Film Electronics reports financial results for Q2 2015 (US$ ,000) |
2016 Q2 |
2015 Q2 |
2016 H1 |
2015 H1 |
|---|---|---|---|---|
| Revenues - Sales | 597 | 478 | 747 | 731 |
| Revenues - Others | 483 | 492 | 1,040 | 872 |
| Revenues - Total | 1,186 | 1,077 | 1,997 | 1,775 |
| Operating Costs | (10,558) | (7,738) | (19,787) | (14,880) |
| Operating Profit(loss) | (10,057) | (6,969) | (19,026) | (13,757) |
| Net (loss) for the period | (10,511) | (6,916) | (20,747) | (13,643) |