REVISED STRATEGY TO GENERATE NEW BUSINESS

INTERIM REPORT FOR THE PERIOD JANUARY TO SEPTEMBER 2018

THIRD QUARTER 

  • Net sales for the remaining operation totaled SEK 16.8 (10.1) million.
  • The operating profit/loss for the remaining operation totaled SEK -0.4 (-6.5) million.
  • The profit/loss for the remaining operation totaled SEK -0.7 (-7.5) 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 (-0.02).
  • Cash flow from total operating activities totaled SEK -0.2 (3.9) million.

INTERIM PERIOD

  • Net sales for the remaining operation totaled SEK 53.7 (46.9) million.
  • The operating profit/loss for the remaining operation totaled SEK -5.7 (-8.7) million.
  • The profit/loss for the period for the remaining operation totaled SEK -7.2 (-10.7) million.
  • Earnings per share for the remaining operation totaled SEK -0.02 (-0.03).
  • Earnings per share for the total operation totaled SEK -0.02 (-0.02).
  • Cash flow from total operating activities totaled SEK -17.0 (19.7) million.
  • Cash and cash equivalents were SEK 91.3 (116.7) million at the end of the period.

SIGNIFICANT EVENTS DURING THE QUARTER 

  • Stefan K Persson took over as new CEO as of August 1.
  • Ulrik Nilsson took over as new CFO as of September 27.
  • Oppo R17 was launched, in which Precise BioMatch Mobile has been implemented with an optical sensor beneath the glass from Silead.

SIGNIFICANT EVENTS SINCE THE END OF THE QUARTER

  • A revised strategy was presented in which the company will develop biometric authentication solutions in new areas of application.
  • A planned re-organization of the business was announced with the purpose to improve customer service and enable growth in new areas.

FINANCIAL DATA AND KEY INDICATORS 

As a result of the Mobile Smart Card Solutions business area having been disposed of as of January 1, 2018, previously reported figures have been restated in order to improve comparability. The business area was reported as a business held for sale starting in the interim report for the second quarter of 2017. 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 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 interim report relate to the remaining operation.
 

KEY INDICATORS 

Amounts in SEK thousand unless otherwise stated  2018  2017  2018  2017  2017  Rolling 
   Q3  Q3  Q1-Q3  Q1-Q3  Full year  12 months 
Net sales  16,817  10,081  53,697  46,858  61,039  67,878 
Net sales growth, %  66.8%  -56.1%  14.6%  -25.0%  -26.7%  0.4% 
Gross margin, %  84.3%  90.5%  86.4%  93.8%  93.3%  87.5% 
Operating profit/loss  -367  -6,479  -5,696  -8,658  -13,936  -10,974 
Operating margin, %  -2.2%  -64.3%  -10.6%  -18.5%  -22.8%  -16.2% 
Cash flow from operating activities  -153  3,887  -16,988  19,695  22,788  -13,895 
Cash and cash equivalents, total operation  91,309  116,722  91,309  116,722  116,955  91,309 


PRESENTATION OF THE INTERIM REPORT

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

THE CEO’S COMMENTS
I took up the position of CEO on August 1, 2018, which means that these are my first “CEO’s comments.” I am delighted to be on board, and since taking up my position I have observed an extremely interesting industry in a phase of expansion, one in which biometric solutions are being made increasingly available to the public through a number of applications. Historically, Precise Biometrics’ core activities have been in the field of fingerprint biometrics, with a focus on mobile devices. With the increased use of smart devices such as mobile phones, vehicles, consumer electronics and wearables, we are seeing increased demand for biometric solutions that make life more convenient and secure. 

By studying the market and technical developments, we have identified opportunities to expand our existing business into new areas, and I am convinced that we are well positioned to take the next step in our development. Having previously delivered high-quality biometric solutions for fingerprints, we now have an opportunity to enter into a broader system of solutions, in which we intend to combine different biometric modalities for sectors such as finance, gaming, medicine and security. The ability to read data through a fingerprint, iris, face, behavior and geodata enables the kind of user experience and security that the market is demanding. 

We intend to restructure our organization with the aim of improving customer service and support, and enhancing our ambitions to combine different biometric modalities. The Asian market for biometrics is growing rapidly, which is why we recently announced our intentions to set up an office in Shanghai during the first half of 2019, in order to offer customer service and support locally. At the same time, we are planning to centralize our research & development in Sweden in Lund. This will enable us to continue to develop solutions that combine different biometric modalities. Tests of our new offerings will be starting during the first half of the year, but are not expected to have any significant financial impact during 2019. 

We have seen increased net sales and reduced losses during the quarter compared with the corresponding quarter last year. The improved profit is primarily due to increased royalty revenues and a restated provision. 

We have good collaboration with a large number of customers who focus on optical and ultrasound sensors, and we will continue to focus on these areas. We are competing for several mobile projects in these new sensor technologies, but competition is tough in this area and there is a high level of uncertainty about which technical solutions will be used. 

The first contact-based biometric payment cards are approaching their commercial launch, which will be a milestone in the development of biometric payment solutions. It takes us one step closer to the introduction of contactless biometric payment cards, which will become the preferred payment solution, as this provides a much better user experience than contact-based cards. We are expecting initial smaller volumes in the field of smart cards during the second half of 2019, with higher volumes during 2020. 

As has been communicated previously, our efforts to generate profitable growth remain our top priority, and we are convinced that the planned reorganization of our business will make a positive contribution to our development. 

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 8:00 AM on November 13, 2018.