INCREASED SALES AND FURTHER FOCUSING OF BUSINESS OPERATION

Sales in the remaining operation, Fingerprint Technology, increased during the quarter. The partnership with Silead has resulted in substantial royalty revenues as Precise BioMatch Mobile has been launched in a number of phone models from one of the world’s biggest manufacturers. Precise Biometrics concluded an agreement with IDENTOS to divest the Mobile Smart Card Solutions business area in order to focus its activities on the Fingerprint Technology business area.

SECOND QUARTER 

  • Net sales for the remaining operation totaled SEK 20.2 (18.9) million.
  • The operating profit for the remaining operation totaled SEK 0.5 (5.3) million.
  • Profit after tax for the remaining operation totaled SEK 0.2 (5.3) million.
  • Earnings per share for the remaining operation totaled SEK 0.00 (0.02).
  • Earnings per share for the total operation totaled SEK 0.00 (0.01).
  • Cash flow from total operations totaled SEK -1.3 (7.5) million.

INTERIM PERIOD  

  • Net sales for the remaining operation during the interim period totaled SEK 36.8 (39.6) million.
  • The operating profit/loss for the remaining operation during the interim period totaled SEK -2.2 (12.4) million.
  • Profit after tax for the remaining operation totaled SEK -3.2 (12.4) million.
  • Earnings per share for the remaining operation totaled SEK -0.01 (0.04).
  • Earnings per share for the total operation totaled SEK -0.01 (0.03).
  • Cash flow from total operations totaled SEK 15.8 (17.5) million. Cash and cash equivalents for the total operation totaled SEK 115.0 (67.4) million at the end of the interim period. 

SIGNIFICANT EVENTS  

  • An agreement was concluded with German company IDENTOS GmbH, which will take over the Mobile Smart Card Solutions business area as of January 1, 2018.
  • A new security suite was launched with industry-leading software for fingerprint recognition with spoof and liveness detection, as well as standalone anti-spoof products and services.
  • A licensing agreement was signed with Korean sensor manufacturer Melfas. After the end of the quarter, a licensing agreement was signed with module house O-Film.
  • Precise BioMatch™ Mobile was integrated into Qualcomm® Fingerprint Sensors, next-generation ultrasound-based fingerprint solutions from Qualcomm.
  • Seven mobile phones and two smart cards were launched with the company’s fingerprint software.

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 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 before the divestment is completed and have therefore not been included in the divested business. Resources are being reinforced in order to meet the market’s demand for increasingly advanced solutions in the field of Fingerprint Technology.

The impact of the discontinued operation on the financial position has not been reported separately, as the company does not believe that it is possible to report the impact of the discontinued operation on cash flow. Cash flow is instead reported from the total operation.

Unless otherwise specified, reported figures in the interim report relate to the remaining operation.

KEY INDICATORS 

Amounts in SEK thousand unless otherwise stated  2017  2016  2017  2016  2016  Rolling 
   Q2  Q2  Q1-Q2  Q1-Q2  Full year  12 months 
Net sales   20,160  18,936  36,777  39,560  83,299  80,516 
Net sales growth, %  6.5%  175.1%  Neg  282.9%  95.7%  12.2% 
Gross margin, %  95.0%  97.8%  94.7%  97.9%  98.0%  96.5% 
Operating profit/loss  481  5,344  -2,179  12,402  25,407  10,826 
Operating margin, %  2.4%  28.2%  -5.9%  31.4%  30.5%  13.4% 
Operating cash flow, total operation -1,314  7,462  15,808  17,497  37,658  35,970 
Cash and cash equivalents, total operation 115,006  67,411  115,006  67,411  135,753  115,006 


CEO COMMENTS 

It is gratifying that we have increased sales during the quarter, both sequentially and compared with the corresponding period in the previous year. The partnership with Silead has resulted in substantial royalty revenues as Precise BioMatch Mobile has been launched in a number of phone models from one of the world’s biggest manufacturers. We now have royalty revenues from nine customers and continue to broaden the customer base in terms of both different technologies and geographical regions, in order to create good opportunities for growth and to reduce dependence on individual customer partnerships. We are also continuing to invest in development and support resources in Sweden and in the local markets in order to best support our customers.

During the quarter we made a strategic decision to divest the loss-making Mobile Smart Card Solutions business area to IDENTOS in order to create a greater focus in the business. This divestment means that we can free up resources in both development and sales in order to strengthen our offering and our opportunities for growth in the field of fingerprint technology.

There is currently a surfeit of sensor manufacturers offering capacitive sensors for fingerprint recognition. This has resulted in very tough competition with rapidly increasing demands for smaller sensors, better performance and lower prices, with suppliers that are already established enjoying competitive advantages. This makes it more challenging for many sensor manufacturers to break into the mobile phone manufacturers and capture bigger market shares. It is therefore more difficult to assess the sales volume of our customers during the second half of the year.

At the same time we can see that new sensor technologies such as ultrasound and optical sensors are on the rise, which changes the market dynamics and opens the door for new suppliers. Ultrasound and optical sensors make it possible to integrate fingerprint sensors in and under the display, creating new design possibilities and lower product costs. There is a large interest in these kinds of solutions among mobile phone manufacturers. Many of our customers are offering ultrasound or optical sensors, which means that we are well positioned for the upcoming technology shift. We are working together with customers on several test projects, which we expect to result in product launches starting in the first half of 2018 and provide a further boost to our growth. For example, Qualcomm recently launched a new generation of ultrasound sensors and demonstrated the product in a modified version of VIVO XPlay 6 with our Precise BioMatch Mobile fingerprint software.

We launched a new security suite during the quarter, offering industry-leading software for fingerprint recognition with the latest developments in spoof and liveness detection, as well as standalone anti-spoof products and services. The software is particularly suitable for optical and ultrasound sensors, and enhances security significantly for fingerprint recognition by identifying fake fingers and thereby combating fraud. The new solutions have generated a high level of interest among our customers and give us a unique position, as we are the only supplier that can offer software-based fingerprint software with spoof and liveness detection.

Cards with fingerprint technology are on the rise. We announced two projects during the second quarter. Elan MicroElectronics launched a payment card with fingerprint technology that is to be supplied to premium customers of a South Korean bank. MeReal announced that their V2 biometric smart card will be put into use by Pleinair Casino. It is clear from work with our customers that the card market is developing quickly for both payments and other areas of application. We are involved in a number of card projects and are holding advanced discussions with several players in the card industry.

OUTLOOK
We maintain our view on net sales for the remaining operation during 2017 and estimate that it will be on par with the comparable net sales for 2016 (SEK 83.3 million), even though the volume trend among our customers is more difficult to estimate than before. The company continues to expect an operating profit for the full year 2017 for the remaining operation.
 

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. 

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 CEST on August 16, 2017.