Continued focus on Digital Identity

INTERIM REPORT FOR THE PERIOD JANUARY TO MARCH 2019

FIRST QUARTER

· Net sales totaled SEK 12.1 (18.2) million.

· The operating profit/loss totaled SEK -7.9 (-5.3) million.

· The profit/loss totaled SEK -7.8 (-2.3) million.

· Earnings per share totaled SEK -0.02 (-0.01).

· Cash flow from operating activities totaled SEK -10.2 (-8.2) million.

SIGNIFICANT EVENTS DURING THE QUARTER

· Proof of Concepts within the business area digital identity have been initiated

· The reorganization of the company, communicated during the fall, was completed

· The establishment of the new office in Shanghai continued during the quarter

· The company’s algorithm was integrated into Hyandai Motors’ Smart Fingerprint Access and Start-up System

FINANCIAL DATA AND KEY INDICATORS

KEY INDICATORS

201920182018Rolling
Amounts in SEK thousand unless otherwise statedQ1Q1Full year12 months
Net sales12,14418,15267,64561,637
Net sales growth, %-33.1%9.2%10.8%-1.5%
Gross margin, %71.2%92.1%85.2%80.4%
Operating profit/loss-7,868-2,033-19,958-25,793
Operating margin, %-64.8%-11.2%-29.5%-41.8%
Cash flow from the operating activities-10,206-8,226-26,055-28,035
Cash and cash equivalents67,474105,29779,54367,474

PRESENTATION OF THE INTERIM REPORT

In connection with today’s interim report, we include an invitation a telephone conference/webcast today at 10:00 AM. Please see the last page of the interim report for further information about participation.

THE CEO’S COMMENTS

During the quarter we have continued our journey according to the strategy that was presented during the fall. The new strategy supports our ambition to develop world leading biometric solutions and focuses operations on three main business areas; digital identity, smart cards and mobile devices.

As part of the revised strategy we have completed the reorganization of the company during the quarter. This included closing the office in Karlstad and centralizing operations in Sweden by relocating all research and development (R&D) to Lund to enable synergies in our ongoing operations. During the quarter we continued to establish the office in Shanghai to strengthen our presence in local key markets. From our operations in Shanghai we offer customer service, support and product development for customers in Asia.

Given the new technological developments and the market’s demand for convenient, secure verification identification of identity for digital services there is a large interest in our product, Precise YOUNiQ. The product verifies the digital identity by recognizing fingerprints, face or behaviour in combination with geographical data. The product is marketed for companies and organizations in sectors such as finance, gaming, healthcare and transportations. Our efforts in the business area continues with pilot tests and Proof of Concept (PoCs). Discussions regarding additional projects outside of the Nordics are also carried out. We are expecting a commercialization of the product during 2020.

In the area of smart cards, we continue our strong partnership with NXP and other partners. Regarding contactless payment cards, several PoCs are ongoing and we are expecting modest initial volumes during the fourth quarter 2019.

The technological development within mobile devices continues and is developing towards having the fingerprint sensor over the entire display. The first product with this technology is expected to be launched during the end of 2019, at the earliest. Our collaboration with actors such as Qualcomm and partners in Asia continues.

In addition to our three main business areas, digital identity, smart cards and mobile devices we are also engaged in projects within cars and door locks. During the quarter our algorithm for fingerprint recognition was integrated into Hyandai Motors’ Smart Fingerprint Access and Start-Up System via a collaboration with the sensor supplier Dreamtech.

The cost savings made possible by the reorganization reduces the yearly cost level by SEK 10 million. In accordance with previous communication we expect 2019 to be a challenging year from a financial perspective considering the volatility in the market for mobile devices.

We are operating in an industry that is expanding, in a market that is demanding biometrical solutions and we have a strong financial position with SEK 67 million in cash flow and cash equivalent, which allows for further initiatives in our business areas. We are confident that the initiatives we are conducting during 2019 will have an effect during 2020 and onwards.

Stefan K Persson, CEO