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#Thinfilm: “Very high margins” on new Xerox products

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Yesterday, Norwegian Thin Film Electronics (OTCPK:TFECF), a global leader in printed electronics and smart systems, announced that Xerox will launch two new products that feature Thinfilm Memory. The Xerox Printed Memory solutions are geared toward  supply-chain security applications and provide anti-counterfeiting capabilities for pharmaceutical products, governmental tax stamps and refill authentication.

In an interview with Norwegian business newspaper TDN Finans, Thin Film’s CFO Jon Afzelius-Jenevall said that Thin Film can not guide on the size of their share of revenue from the deal, but underlined that revenues will have a very high margin. In-line with previous comments, the CFO pointed out that the unit price is expected to be between four and ten cents. Given a volume of 1.3 billion units a year, which is Xerox’s goal, this provides revenue for Xerox at USD 50-130 million. Thin Film will then be paid a royalty based on sales revenues. CFO Afzelius-Jenevall did not want to specify what royalties are set in the contract, but makes it clear that it is set to follow established criteria for licensing. “The revenue for Thin Film will have a very high margin, since it is royalty-money“, the CFO emphasised.

Thin Film’s CFO went on to say that Xerox will start to increase production towards the end of 2015 or beginning of 2016, while he is aware that the expectation is that it will take some time before Xerox will reach the production target of 1.3 billion units per year. “It will initially be relatively modest volumes when production starts, and then it’s up to Xerox to decide how fast they increase the production volume“, he said.

Elsewhere, the CFO stated that Thinfilm is free to enter into similar agreements for the same product with other companies: “We have no exclusive agreement with Xerox. However, I would also emphasize that Xerox is in many ways an ideal partner for us. They have very relevant skills, and they are also a household name in printing.

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