Battling European auto thefts, and the bottom line

Hands off: If you're in Sweden and thinking about stealing this, think again.
By GREGORY ZELLER //

Holiday gift guide update: The once-mighty “Grand Theft Auto” videogame series no longer cracks most-wanted lists on the top gaming consoles.

Newsflash: The real thing has also lost some luster across northwestern Europe, where Applied DNA Sciences’ SmartDNA security solutions are contributing to major vehicular-theft declines – and sending a growing gang of international grand thieves to the clink.

On a “quest to protect automobiles in Scandinavia,” the Stony Brook-headquartered provider of DNA-based supply-chain, anti-counterfeiting, product-authentication and anti-theft solutions netted about $500,000 in Fiscal 2016 revenues from programs marking European luxury cars imported into the Scandinavian region – good news for a company that this month reported another subpar fiscal quarter, capping a financially shaky FY 2016.

Stopp sign: You’ve been warned, Scandinavian car thief.

The Scandinavian revenue came via a deal announced in the spring, between Applied DNA and Safesolutions AB, Applied DNA’s Swedish distributor. Through the arrangement, the biotech would mark 2,000 imports per month with its flagship SigNature DNA anti-theft solutions, known in Sweden as “SmartDNA.”

Fiscal 2017 revenues are projected to increase, the company said, based on new SmartDNA automotive orders. But while Applied DNA won’t sneeze at the new revenues, arguably more impressive than the sales are the statistics.

In 2015, Applied DNA conducted an extensive pilot program that resulted in stratospheric vehicular-theft reductions: 80 percent, according to the company, largely through warning labels and similar deterrents. And since commercial deployment this summer, investigators have used SmartDNA markers and Applied DNA laboratory analyses to “convict active criminal teams to further reinforce the deterrent effect,” the company said in a statement.

To date, 106 criminals have been convicted in the United Kingdom, the Netherlands and Sweden “as a result of the evidence presented from the company’s products,” Applied DNA said, with combined sentences “exceeding 500 years.”

Applied DNA President and CEO James Hayward said company executives are “pleased with the increasing revenue stream” from the Scandinavian security effort, and with fresh evidence of SmartDNA’s effectiveness are ready to make a case to a wider European audience.

“We are encouraged by the success of the automobile-protection program in Scandinavia,” Hayward said.

Applied DNA’s business ventures in Europe’s chilly northern environs date back several years. After various deployments in the UK, the company announced in 2012 that Swedish police would use SmartDNA anti-theft technology to deter widespread thefts of copper wire and electrical systems from the Swedish national rail system.

In 2014, Applied DNA reported that it had slashed copper thefts by 85 percent for one client, citing numbers provided by a “partner company in the European Union” it could not name for security reasons.

But while things are going well overseas, Applied DNA’s bottom line continues to take it on the chin. On Dec. 6, the company reported another decline in quarterly revenues – $1.64 million in the fourth quarter of fiscal 2016, which ended Sept. 30, down 59 percent from revenues reported in Q4 FY2015 – and pinned it on significant declines in product sales and service-based revenues, including the expiration of lucrative government contracts.

Applied DNA also reported a fourth-quarter net loss of $2.4 million (or 10 cents per share), compared to a net loss of $496,000 (2 cents per share) reported for Q4 FY2015, and adjusted EBITDA of negative $1.7 million – a significant slide from the adjusted EDITDA of $213,000 for the same quarter last year.

James Hayward: Likes where this is going.

It was the fourth consecutive down quarter for the company. However, the losing streak – which company officials also traced to plummeting textile-industry sales – does follow an impressive string of record-setting fiscal quarters.

And while the fourth quarter showed multiple year-over-year declines, it also marked the third straight three-month stretch in which the company posted a quarterly revenue gain – as well as quarter-over-quarter improvements in net loss (down from $3.4 million) and adjusted EBITDA (down from negative $2.6 million) compared to 3Q FY2016, which ended June 30.

Applied DNA is also wrapping up a strong calendar 2016 that included key personnel moves, a hefty influx of working capital and some solid wheeling-dealing on the domestic front, particularly with government clients.

In October, the company announced that former KeySpan and National Grid chairman Robert Catell was coming aboard, taking a seat with the Applied DNA Board of Directors. The biotech followed that happy news with a powerhouse November that included a single-investor, $5 million stock deal and back-to-back distribution deals with the U.S. Department of Defense and ActionPak Inc., a Pennsylvania distributor with strong federal-government ties.

To grow SmartDNA’s automotive-protection vertical in northwestern Europe, Applied DNA will be counting on some new partners – including a “Scandinavian car manufacturer” that will promote the anti-theft solution to more than 1 million customers, according to the company.

That will be key to pushing the product through the region and beyond, Hayward noted.

“Based on the successes and support we have been receiving, we look forward to growing the program with more brands and more countries,” the CEO said.