New strategic partnerships within Digital Identity and Mobile Devices

INTERIM REPORT FOR THE PERIOD APRIL – JUNE 2019

SECOND QUARTER

  • Net sales totaled SEK 13.4 (18.7) million.
  • Net operating profit/loss totaled SEK -7.3 (-3.3) million.
  • The profit/loss totaled SEK -7.6 (-4.1) million.
  • Earnings per share totaled SEK -0.02 (-0.01).
  • Cash flow from operating activities totaled SEK -1.1 (-8.6) million.

INTERIM PERIOD

  • Net sales totaled SEK 25.6 (36.9) million.
  • Net operating profit/loss totaled SEK -15.1 (-5.3) million.
  • The profit/loss totaled SEK -15.5 (-6.6) million.
  • Earnings per share totaled SEK -0.04 (-0.02).
  • Cash flow from operating activities totaled SEK -11.3 (-16.8) million.

SIGNIFICANT EVENTS DURING THE QUARTER

  • Precise entered into a strategic partnership within mobile devices with Egis Technology, a leading sensor manufacturer
  • Precise entered into a strategic partnership within digital identity with Covr Security, to jointly offer products that enable convenient and secure identity verification for digital services
  • Revenue from pilot projects within Digital Identity
  • The reorganization initiated in fall 2018 has been completed and the Shanghai office is fully operational

SIGNIFICANT EVENTS AFTER THE END OF THE QUARTER

  • Precise integrated in the first biometric smart card module with Mastercard CAST certificate
  • First delivery of mobile devices together with Egis Technology

FINANCIAL DATA AND KEY INDICATORS

KEY INDICATORS

20192018201920182018Rolling
Amounts in SEK thousand unless otherwise statedQ2Q2Q1-Q2Q1-Q2Full year12 months
Net sales13,44618,72825,59036,88067,64556,355
Net sales growth, %-28.2%-7.1%-30.6%0.3%10.8%0.0%
Gross margin, %78.8%82.8%75.2%87.4%85.2%79.2%
Operating profit/loss-7,274-3,296-15,143-5,329-19,958-23,936
Operating margin, %-54.1%-17.6%-59.2%-14.5%-29.5%-42.5%
Cash flow from the operating activities-1,089-8,609-11,295-16,835-26,055-18,535
Cash and cash equivalents65,41693,58065,41693,58079,54365,416

PRESENTATION OF THE INTERIM REPORT
In connection with today’s interim report, we include an invitation to 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
Another intensive quarter has passed, and it has been an eventful first half of 2019 for Precise. We continue our journey according to the strategy presented in the fall of 2018, in which we have made important progress in our three business areas; digital identity, smart cards and mobile devices. The cost savings as a result of the reorganization 2018, has resulted in a more controlled cost base during the quarter, while we continue to gradually increase the investment pace in the digital identity business area.

In the digital identity business area, we continue to develop biometric solutions to meet users’ demand for easy and secure authentication in everyday life. In June it was announced that we had entered into a partnership with Covr Security – which enables secure transactions online via mobile devices in combination with Precise YOUNiQ – our product for verification of the digital identity. We aim at offering a common product that enables convenient and secure verification of identity for digital services, in sectors such as finance, betting, retail and healthcare. Together with Covr we are developing a scalable solution for end users.

We have several pilot projects running, which during the quarter generated approximately SEK 1 million in revenue, and our target is to initiate additional pilot projects in 2019 to reach the commercialization phase in 2020.

The mobile devices business area has also developed strongly. In June, we entered into a strategic partnership with a leading fingerprint sensor supplier, Egis Technology. The collaboration has resulted in the first integration of our software into a series of mobile devices, which is expected to generate about SEK 10 million in revenue during the second half of 2019. The order is an acknowledgement, but we still see 2019 as a challenging year from a financial perspective given the volatility in the mobile device market.

The technology shift in which optical sensors are gaining ground over capacitive and ultrasonic sensors paves the way for us to gain more market shares. The price pressure on sensors continues, which means lower margins for us as well. Through the establishment of our office in Shanghai we strengthen our local presence and enables us to extend our customer relationships. Together with our partners, we are working on a number of projects that are expected to generate revenue during the current year and the years that come.

Within the smart card business area, we announced after the end of the quarter that our partnership with NXP has resulted in the first biometric product, a secure processing module for smart cards, to obtain a Mastercard CAST Certificate. The certification is a confirmation of the quality of our fingerprint software and an important step towards commercialization. As previously communicated, we are expecting modest initial volumes of biometric smart cards to be delivered at the end of 2019, followed by larger volumes in 2020. We are now working intensively to complete the product before launch, to in the next step, focus on the cost structure prior to volume production.

In conclusion, Precise continues to achieve important milestones in its work to reach a higher level in the value chain. Demand for biometric solutions is high and we are working intensively to make it convenient and secure for users to authenticate themselves, and in the future be able to own and control their data regardless of the area of application. We are confident in our initiatives to deliver world-leading biometric solutions that enable secure and convenient verification that is “Verified by You”.

Stefan K Persson, CEO