NEW CUSTOMER AGREEMENTS AND CONTINUED INVESTMENTS

Growth in the fingerprint market is still strong. Revenues from several of our customers are growing. As previously indicated, sales during the first quarter were lower than in the previous year and are a consequence of the ongoing market and customer transformation. Together with investments in the business for growth, operating profit ended up negative.

INTERIM REPORT FOR THE PERIOD JANUARY – MARCH 2017

  • Net sales for the period totaled SEK 19.2 (24.2) million.
  • The operating profit/loss for the period totaled SEK -2.7 (6.3) million.
  • Profit/loss after tax for the period totaled SEK -3.4 (6.3) million.
  • Earnings per share for the period totaled SEK -0.01 (0.02).
  • Cash flow from operating activities for the period improved to SEK 17.1 (7.5) million. Cash and cash equivalents were SEK 119.2 (58.6) million at the end of the period. 

SIGNIFICANT EVENTS 

  • The acquisition of NexID Biometrics was completed, which is an important step in order to be able to offer increased security of the company’s fingerprint software through liveness detection.
  • Licensing agreements were signed with NXP, a leading hardware vendor in the embedded market, and Zeitec, a Taiwanese sensor manufacturer. Another licensing agreement was signed after the end of the quarter with the Korean sensor manufacturer Melfas.
  • Extended licensing agreement with an existing sensor customer with guaranteed licensing revenue of at least SEK 17.5 million over 2017 and 2018.
  • During the quarter, six smartphones were launched with Precise BioMatch™ Mobile and another four after the end of the quarter.

 KEY INDICATORS

Amounts in SEK thousand unless otherwise stated  2017  2016  2016  Rolling 
   Q1           Q1         Full year     12 months    
Net sales   19,185  24,230  97,223  92,178 
Net sales growth, %  Neg  3.3%  72.6%  Neg 
Gross margin, %  85.1%  81.8%  78.8%  79.4% 
Operating profit/loss  -2,671  6,263  18,005  9,072 
Operating margin, %  Neg  25.9%  18.5%  10.0% 
Cash flow from operating activities  17,123  7,462  37,658  47,319 
Cash and cash equivalents  119,249  58,584  135,753  119,249 

PRESENTATION OF THE INTERIM REPORT         
In connection with today’s interim report, we issue an invitation to an information event today at 10:00. Please see the last page of the interim report for further information about participation.

CEO COMMENTS
Growth in the fingerprint market remains strong while the market is evolving with increased competition between established and new sensor manufacturers. Revenues from many of our customers are growing steadily and compensating to a large extent for the expected loss of revenues from Fingerprint Cards. Net sales during the first quarter were, as previously indicated, lower than in the previous year. I am not satisfied with the company’s negative operating result. It is a consequence of the ongoing revenue transition that we are carrying out at the same time as we are investing in our business for growth and a future positive revenue development. We have increased resources in the business area Fingerprint Technology to meet the market’s demand for increasingly advanced solutions and our customers’ requirements for closer cooperation.

During the quarter, Precise BioMatch Mobile was integrated into six mobile devices. In recent months, we were integrated into two phones through the partnership with Silead. It is important and very gratifying that our two-year partnership with Silead resulted in a leading Chinese mobile phone manufacturer using our software in their sensors. This is a proof of our common solution being able to meet the tough requirements on the market and it creates conditions for integration in further mobile phone models and with other mobile phone manufacturers. The partnership with Silead shows that it takes time to gain acceptance with the very biggest mobile phone manufacturers; the upside is that the volumes can be huge. Many of our customers are in corresponding evaluation processes, which is why we devote significant resources to work closely with our customers on the integration of the fingerprint solution with mobile phone manufacturers.

In April, Elan MicroElectronics launched a payment card with fingerprint technology, with our software, that is to be delivered to premium customers of a South Korean bank. It is one of the first commercial payment cards with fingerprint technology and shows that the market for payment cards with fingerprint technology is expanding rapidly. We are involved in several card projects through existing customers and expect initial volumes during the second half of 2017.

During the quarter, we signed new licensing agreements with Taiwanese company Zeitec and NXP Semiconductors. After the end of the quarter we signed a licensing agreement with the Korean company Melfas. The licensing agreement with NXP, a leading hardware vendor in the embedded market, opens exciting opportunities in several product areas. These agreements confirm our leading position in fingerprint software. We now have a total of 27 licensing agreements for the global distribution of our software for mobile devices, smart cards, wearables and other product areas.


In the beginning of the year we finalized the acquisition of NexID Biometrics. The work with integrating liveness detection in Precise BioMatch Mobile is ongoing and we plan that the product will be ready for the market in the second half of the year. Fingerprint technology will to an increasing extent be used in mobile payments, which is why we expect liveness detection will become a requirement to identify false fingers and increase security for mobile payments and other areas of application. We have received good feedback from our customers and expect the liveness solution to start generating revenues under the first six months in 2018.

We will continue to strengthen our leading position in a rapidly growing market through additional investments in product development to meet customers’ requirements for biometric performance and user-friendliness. Requirements that are becoming increasingly challenging as sensors become smaller and new sensor technologies reach the market. We will also grow our customer-focused organization to guarantee the success of our customers with mobile phone manufacturers and thus our royalty revenues.

OUTLOOK
Our view of the revenue development during the year remains unchanged. We expect, as previously announced, a weaker revenue development during the first half of the year, to be followed by a gradual increase in revenues with bigger volumes from our various customer partnerships during the second half of the year. Net sales for the full year are expected to be on par with net sales in 2016, and we expect a positive net result for the full year.
 

This information is information that Precise Biometrics AB is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact person set out below, at 8.00 CEST on May 16, 2017.