CONTINUED GROWTH AND STRATEGIC ACQUISITION

PRECISE BIOMETRICS AB (PUBL), CORPORATE IDENTITY NO. 556545-6596, YEAR-END REPORT 2016

FOURTH QUARTER 

• Consolidated net sales increased to SEK 25.7 (23.5) million.
• The operating profit before depreciation (EBITDA) totaled SEK 3.8 (6.7) million.
• Profit after tax totaled SEK 2.7 (4.3) million.
• Earnings per share totaled SEK 0.01 (0.01).
• Cash flow from operations improved to SEK 11.8 (8.8) million.

FULL-YEAR PERIOD, JANUARY-DECEMBER 

• Consolidated net sales increased by 72.6% and totaled SEK 97.2 (56.3) million.
• The operating profit before depreciation (EBITDA) improved to SEK 24.8 (0.5) million.
• Profit after tax totaled SEK 31.2 (-9.5) million.
• Earnings per share for the period totaled SEK 0.09 (-0.03).
• Cash flow from operations improved to SEK 37.7 (-4.5) million.
• Cash and cash equivalents were SEK 135.8 (52.4) million at the end of the full-year period.  

SIGNIFICANT EVENTS IN THE FOURTH QUARTER

• Licensing agreements were signed with the sensor manufacturers Samsung System LSI Business, a division of Samsung Electronics Co., Ltd., Image Match Design Inc., InvenSense Inc. and VKANSEE.
• Precise BioMatch™ Embedded was integrated into a credit card from Kona-i that was exhibited at the Money 20/20 trade fair in Las Vegas.
• Agreement to acquire NexID Biometrics in the USA for SEK 32 million was signed, extending Precise Biometrics’ industry-leading fingerprint software to include liveness detection.
• Targeted new share issue of SEK 50 million to finance the acquisition of NexID Biometrics.

SIGNIFICANT EVENTS SINCE THE END OF THE QUARTER

• Extended licensing agreement with existing sensor customer with guaranteed licensing revenue of at least SEK 17.5 million over two years.
• The acquisition of NexID Biometrics was made following final authority approvals in the USA.

PRESENTATION OF THE YEAR-END REPORT 

In connection with today’s year-end report, we invite to an information event today at 10:00. Please see the last page of the year-end report for further information about participation.

CEO COMMENTS
The final quarter of the year was another good quarter for the company. I am proud that in 2016 we succeeded in increasing net sales by 73%, delivering the company’s best year so far. Sales of our fingerprint software almost doubled during the year. We have led the company to profitability and are still only at the beginning of our journey. We have strengthened our position in a fast-growing market, developed our product offering and acquired many new customers who are important players in the ongoing development of the biometrics market. In 2017 we will continue to prepare the company for growth. I look forward to what I am convinced will be yet another exciting year in the company’s development.

During the quarter, Precise BioMatch Mobile were integrated into 21 mobile devices. Our fingerprint software was integrated into a total of 110 models of mobile devices in 2016, a doubling compared with the previous year. The majority of all major manufacturers are now using our fingerprint software. During the quarter we signed licensing agreements with four new customers, including Samsung System LSI Business. Like Qualcomm, Samsung System LSI Business is a large, established component supplier to the mobile industry, which creates additional growth opportunities for us in this rapidly expanding market. At the end of January 2017 we extended an agreement with an existing customer, which guarantees us at least SEK 17.5 million over two years. This is further evidence that our fingerprint software is the industry leader and of the faith that our customers have in us. We now have 24 licensing agreements for the global distribution of our software for mobile devices, smart cards, wearables and other product areas.

The fingerprint technology market continues to grow rapidly. Sales of mobile devices with fingerprint sensors, excluding Apple, doubled in 2016 from 300 to 600 million devices. We believe that the mobile market will continue to develop rapidly and reach a total of almost 900 million devices in 2017. There is also a lot of activity in the areas of smart cards, wearables and IoT devices. We are involved in a large number of well-advanced projects in which we are expecting modest initial volumes during the year. It is difficult to assess how quickly the market for new product areas will grow, but I am convinced that over time the market has the potential to be at least as large as the market for mobile devices.

We are seeing an increase in demand for our offering and our competence to secure the integration of fingerprint software into the mobile device. During the quarter we intensified our collaboration with many of our customers in major integration projects at the premises of mobile phone manufacturers. We expect this to be generating major volumes during the latter part of the year and continuing into 2018. These partnerships reinforce our position and we are planning to expand our organization in Asia to meet demand and be even closer to our customers.

The competitive situation in the market, and thus the revenue trend among our customers is currently difficult to assess. Revenues from our biggest customer, Fingerprint Cards (FPC), continue to fall quarter on quarter in the mobile devices segment and is expected to cease completely during the second half of the year. We are in the final stages of several projects with other customers that are expected to start generating substantial volumes and revenues during the second half of the year, and these will compensate in full for the lost revenues from FPC.

We acquired NexID Biometrics in the USA during the quarter. This acquisition is strategically important. By extending our product to include liveness detection, we can significantly improve the security of fingerprint authentication with a great user experience and meet customers’ demands for increased security, for reasons including the prevention of fraud. This is important not least in order to secure mobile payments, an area that is expected to start taking off in 2017. By the end of 2020 it is expected that more than 60 percent of all payment transactions will be authenticated by means of biometric authentication, primarily fingerprints. The response from the market has exceeded our own very high expectations. All of our customers are interested in seeing what opportunities there are in integrating the software into their solutions, and many want to initiate evaluation projects immediately. We have started work to integrate liveness detection into our software and plan to have a product ready for the market during the third quarter of 2017, to offer a unique solution that will set a new standard for secure fingerprint recognition. We expect to receive revenues from this product from the beginning of 2018, when it has been integrated into our customers’ fingerprint sensors and tested to completion by end customers. This acquisition is an important piece of the puzzle in developing our product offering and technological leadership, as well as meeting the market’s increased demands for security.

Sales of Tactivo during the fourth quarter were better than expected. We received several large orders from US government agencies and several small orders from the Swedish health care market. For the year as a whole, however, sales of Tactivo did not meet our expectations. It is primarily demand from the US government agency market that was lower than expected, although sales to the healthcare markets in the UK and Sweden also experienced a weak trend, with customers being slow to move from pilot tests to deployment in larger volumes.

OUTLOOK
We have a leading market position, the market’s best fingerprint software and a global distribution network that gives us opportunities to take advantage of the rapidly expanding market for fingerprint technology.

We anticipate a weaker revenue development during the first half of the year because of reduced revenues from FPC. Our other customers show solid growth and we expect gradually increasing volumes starting from the second half of the year, which is why we expect net sales for the full year to be in line with net sales for 2016. I am confident that Precise Biometrics thereafter will continue to have a high growth considering our position in the market.

To meet increased demand for our software and to create improved conditions for long-term growth, we are increasing our investments in research and development in order to secure our technological leadership and develop the product range, and also to grow our customer-focused organization for support and integration. Through these investments, we are building the organization to be able to manage the growth in sales that we envisage in the future. 

This information is information that Precise Biometrics AB is obligated to disclose pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact person set out above, at 08:00 on February 14, 2016.

FOR MORE INFORMATION, PLEASE CONTACT
Håkan Persson, CEO, Precise Biometrics AB
Tel. 46 46 31 11 05 or 46 734 35 11 05 
E-mail hakan.persson@precisebiometrics.com 

ABOUT PRECISE BIOMETRICS
Precise Biometrics is a market leading supplier of solutions for convenient and secure authentication of people’s identity. We develop and sell fingerprint software and mobile smart card readers that provide the market’s best user experience and security. Our solutions are used hundreds of millions of times every day by people all over the world and are marketed together with strong business partners. For more information, please visit www.precisebiometrics.com

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