CONTINUED GROWTH AND POSITIVE MARKET DEVELOPMENT

PRECISE BIOMETRICS AB (PUBL), CORPORATE IDENTITY NO. 556545-6596

INTERIM REPORT FOR THE PERIOD JANUARY-SEPTEMBER 2016

THIRD QUARTER

• Consolidated net sales increased to SEK 25.5 (18.3) million.
• EBITDA increased to SEK 6.7 Mkr (5.4) million.
• Profit after tax amounted to SEK 17.8 Mkr (3.0) million.
• Earnings per share for the period amounted to SEK 0.05 (-0.01).
• Cash flow from operations increased to SEK 8.4 (-1.9) million.

INTERIM PERIOD JAN-SEP

• Consolidated net sales increased to SEK 71.6 (32.9) million.
• EBITDA increased to SEK 21.1 Mkr (-6.2) million.
• Profit after tax amounted to SEK 28.5 Mkr (-13.8) million.
• Earnings per share for the period amounted to SEK 0.08 (-0.04).
• Cash flow from operations increased to SEK 25.9 Mkr (-13.3) million.
• Cash and cash equivalents were SEK 75.0 Mkr (45.2) million at the end of the interim period.

SIGNIFICANT EVENTS IN THE THIRD QUARTER

• Licensing agreements were signed with the sensor manufacturer Betterlife and Qualcomm Technologies, Inc. 

SIGNIFICANT EVENTS AFTER THE THIRD QUARTER

• Licensing agreements were signed with Image Match Design Inc, InvenSense Inc and Samsung System LSI Business, a division within Samsung Electronics Co., Ltd.
• Precise BioMatch™ Embedded was integrated in a credit card from Kona-i that was demonstrated at the trade show Money 20/20 in Las Vegas. The card is not commercialized.

CONFERENCE CALL
On the occasion of today’s interim report, we are pleased to invite investors and journalists to a conference call today at 10.00. More information can be found at the last page of the report.

CEO COMMENTS 
The third quarter of the year was one of the company’s single best quarters. Net sales increased by 16 percent compared with the previous quarter. Over the last 12-month period, net sales increased by 122 percent to SEK 95.0 million (42.7). EBITDA for the corresponding 12-month period totaled SEK 27.7 million, an increase on a full-year basis of SEK 40.2 million. I am particularly pleased with the new customer agreements we have concluded and with the fact that our broad customer base had an impact on the financial results for the quarter. 

The company’s strategy to create a broad customer base in order to take advantage of growth in the market is now starting to pay off. Our fingerprint software has become somewhat of a de facto standard among sensor manufacturers. During the quarter three more of our customers generated royalty revenues, and in total we received royalties from eight customers. Even if the royalties still come from initial sales volumes among our sensor partners, this is a good indication of increased competition in the market, which is positive for our future revenue growth. It is also pleasing that the partnership we entered into with Qualcomm in July has already generated initial royalty revenues. 

During the quarter 24 mobile devices were launched with Precise BioMatch Mobile. Our fingerprint software is now integrated into more than 160 mobile devices from over 40 different manufacturers. One of the most exciting launches was the Xiaomi Mi 5S, the world’s first commercial smartphone with a fingerprint sensor under 400 micrometers of glass, with Qualcomm’s Snapdragon Sense ID ultrasound sensor and our Precise BioMatch Mobile algorithm solution. At the same time, the Xiaomi Mi 5S Plus was launched, in which our algorithm solution has been integrated through the partnership with Fingerprint Cards. This reflects the ambition of mobile phone manufacturers to use multiple sensor suppliers and it is a first proof that our strategy to be an independent algorithm supplier, regardless of sensor technology, is sustainable. 

After the end of the quarter we concluded a licensing agreement with Samsung System LSI Business, a division of Samsung Electronics, which is now moving into the market for fingerprint sensors. This partnership creates additional growth opportunities for us, and we now have 23 licensing agreements for distribution of our algorithm solutions. Our customers give us global reach in both the market for mobile devices as well as new products with fingerprint technology, the embedded market.

Today, growth in the field of fingerprint technology primarily stems from mobile devices and is expected to grow by more than 35 percent each year until 2020. The embedded market is expected to start growing as early as next year. We are actively participating in many exciting projects with companies from the whole value chain, above all in the smart card sector, where we see major opportunities for growth. In collaboration with a South Korean partner that markets biometric solutions for smart cards, our algorithm solution was certified by the national institute for the Internet and security in South Korea. This certification is one step in ongoing development efforts with our partner to enable secure payments with, for example, smart cards using fingerprint technology. This opens up opportunities for us in the South Korean market. We can see similar developments in many other countries, not least in Asia.   

For nearly 20 years, Precise Biometrics has been investing in research and development in order to make sure that we can offer the market’s best user experience and security for products with small sensors and limited platforms. The company’s algorithm solutions are particularly suitable for products that have access to significantly smaller memory and processing resources than smartphones. Here our algorithm solutions differ from those of our competitors, whose software is often developed for products with far greater processing power and memory. This puts us in a good position to win a significant part of the embedded market, which will further strengthen our position as the leading supplier of fingerprint software. 

Sales in the Mobile Smart Card Solutions business area are at a lower level than originally expected. Sales to US Government are being affected by discussions about how digital alternatives can replace smart cards for mobile access to information. In the Swedish healthcare market, we won an order for a more wide-ranging pilot project from the City of Gothenburg. 

The company’s sales performance during the quarter reflects the strength of our market position and the company’s strategy. We have succeeded in increasing sales in the Fingerprint Technology business area by 21 percent compared with the previous quarter, despite a significant fall in revenues from our major customer. Growth during the third quarter comes from many of our customers having started to supply sensors to mobile phone manufacturers, and a positive impact of licensing fees from several of our customers.

The long-term revenue trend is positive, but will fluctuate from one quarter to another. That is due to the fact that our royalty revenues arise when the sensor manufacturers sell their sensors to be used with our software. These sales are guided by the end-customers’ demand in a single quarter. Furthermore, we receive royalty reports from our customers after the quarter-end, which makes it challenging for us to forecast future royalty revenues.  

I see continued growth opportunities for the company. Interest in fingerprint technology is greater than ever. There is rapid market growth in both mobile devices and new product areas. Our algorithm solutions provide the best user experience and security in the industry. Our scalable business model allows us to grow with good cost control. These conditions leave us well positioned for profitable growth. 

This information is information that Precise Biometrics AB is obliged to make public pursuant to the EU Market Abuse Regulation and the Securities Markets Act. The information was submitted for publication, through the agency of the contact person set out below, at 8.00 CET on November 15, 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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