CHANGING MARKET CONDITIONS PROVIDES NEW OPPORTUNITIES

YEAR-END REPORT FOR THE PERIOD JANUARY TO DECEMBER 2017 

FOURTH QUARTER  
  • Net sales for the remaining operation totaled SEK 14.2 (20.8) million.

  • The operating profit/loss for the remaining operation for the quarter totaled SEK -5.3 (4.4) million.

  • The profit/loss for the period for the remaining operation totaled SEK -12.0 (4.4) million.

  • Earnings per share for the remaining operation totaled SEK -0.03 (0.01).

  • Earnings per share for the total operation totaled SEK -0.03 (0.01).

  • Cash flow from total operating activities totaled SEK 3.1 (11.8) million.

FULL-YEAR PERIOD, JANUARY-DECEMBER 
  • Net sales for the remaining operation during the full-year period totaled SEK 61.0 (83.3) million.

  • The operating profit/loss for the remaining operation for the full-year period totaled SEK -13.9 (25.4) million.

  • The profit/loss for the period for the remaining operation totaled SEK -22.7 (38.6) million.

  • Earnings per share for the remaining operation totaled SEK -0.06 (0.11).

  • Earnings per share for the total operation totaled SEK -0.05 (0.09).

  • Cash flow from total operating activities totaled SEK 22.8 (37.7) million. Cash and cash equivalents for the total operation totaled SEK 117.0 (135.8) million at the end of the full-year period. 

SIGNIFICANT EVENTS AFTER THE PERIOD 
  • After the end of the quarter it was announced that Precise BioMatch Embedded is being used in the first pilot project in the USA with dual-interface biometric payment cards, which is being carried out by Visa and Mountain America Credit Union.
  • After the end of the quarter an extended licensing agreement was signed with Crossmatch, a supplier of biometric identity solutions for government, enterprise and healthcare.
  • The disposal of the Mobile Smart Card Solutions business area was completed as planned as of January 1, 2018.
  • After the end of the quarter, Stefan K. Persson was appointed as new CEO instead of Håkan Persson. Stefan K Persson is currently Executive Vice President BO Home in the Bang &Olufsen Group and will take up his position on August 1, 2018 at the latest.

FINANCIAL DATA AND KEY INDICATORS    

As a consequence of the fact that the Mobile Smart Card Solutions business area has been classified as a business held for sale, previously reported figures have been converted in order to improve comparability. In order to obtain comparable historical data, previously reported figures have only been adjusted for the expenses relating directly to the discontinued business area, which will no longer affect the company's remaining operation. The resources that were previously allocated to the Mobile Smart Card Solutions business area will be transferred to the Fingerprint Technology business area at the latest in connection with the disposal and have therefore not been included in the business held for sale. This reinforcement of resources is taking place in order to meet the market's demand for increasingly advanced solutions in the field of Fingerprint Technology.

The discontinued operation's impact on the financial position has not been reported separately, as the company does not consider it possible to report the discontinued operation's impact on cash flow. Cash flow is instead reported for the total operation.
Unless otherwise specified, reported figures in the year-end report relate to the remaining operation.
KEY INDICATORS 

+---------------------+--------+--------+---------------+---------------+
| |2017 Q4 |2016 Q4 |2017 Full year |2016 Full year |
+---------------------+--------+--------+---------------+---------------+
|Net sales   |14,181  |20,780  |61,039  |83,299  |
+---------------------+--------+--------+---------------+---------------+
|Net sales growth, %  |-31.8%  |10.7%  |-26.7%  |95.7%  |
+---------------------+--------+--------+---------------+---------------+
|Gross margin, %  |91.7%  |98.0%  |93.3%  |98.0%  |
+---------------------+--------+--------+---------------+---------------+
|Operating |-5,279  |4,429  |-13,936  |25,407  |
|profit/loss  | | | | |
+---------------------+--------+--------+---------------+---------------+
|Operating margin, %  |-37.2%  |21.3%  |-22.8%  |30.5%  |
+---------------------+--------+--------+---------------+---------------+
|Cash flow from |3,093  |11,751  |22,788  |37,658  |
|operating activities | | | | |
+---------------------+--------+--------+---------------+---------------+
|Cash and cash |116,955 |135,753 |116,955  |135,753  |
|equivalents, total | | | | |
|operation  | | | | |
+---------------------+--------+--------+---------------+---------------+

PRESENTATION OF THE YEAR-END REPORT
In connection with today's year-end report, we issue an invitation to an information event today at 10:00. Please see the last page of the year-end report for further information about participation. 

THE CHAIRMAN'S COMMENTS
The market for capacitive fingerprint sensors for mobile phones in the higher price segments was characterized in 2017 by increased pressure on price and tougher competition, with a small number of suppliers dominating the market. We can conclude that the company, together with its customers, did not win the business we expected in this segment during the year.  

We are now seeing a shift in the market for capacitive sensors, which is gradually being transformed into a volume market primarily for mobile phones in the lower price segments. This new market has been created as a consequence of the pressure on price that is prevailing, and it has opened up the opportunity to use capacitive sensors in cheaper mobile phones in several geographical markets. The company has several customers working in this segment.  

We are also seeing the design of mobile phones in the higher price segments moving towards displays that cover the entire front side, while at the same time induction charging ("wireless charging"), which requires a glass back, is growing. In both cases, optical or ultrasound sensors are the best alternative for a fingerprint solution. We have more than ten customers working with such sensors.  

Precise Biometrics is supplying fingerprint software for smart cards to the first pilot project in the USA with biometric payment cards, which is being carried out by Visa and Mountain America Credit Union. The payment card can be used for contactless payments, where authentication takes place by placing the finger on the card's fingerprint sensor in connection with payment. This enhances both the user experience and security for contactless payment cards. The card can also be used in the retail sector's existing infrastructure, which reduces the introductory phase for putting it into commercial use. The pilot project is a milestone in the development of biometric payment cards and enhances our position in the market. 

Our vision of convenient and secure authentication of identity for everyone, everywhere, is more relevant now than ever. Biometrics will increasingly replace passwords and other forms of authentication for cars, door locks and wearables, areas in which we are involved in several projects and intend to drive and continue to be part of developments in the future. 

We look forward to seeing Stefan K. Persson, with his extensive experience of China and business development in technology companies, take over as the company's CEO by August 1 at the latest. He will further intensify our focus on the broad application of biometrics. 

The company is in a strong financial position, which allows for continued investments in the future markets we have identified and where we hold an attractive position, which means that all in all I have a positive view of the company's outlook. 

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 below, at 08:00 on Tuesday, February 13, 2018.