FOURTH QUARTER

• Net sales totaled SEK 19.3 (27.4) million.
• EBITDA totaled SEK –2.0 (1.7) million.
• The operating profit/loss totaled SEK –7.8 (–2.7) million.
• Earnings for the period totaled SEK –9.3 (–2.4) million.
• Earnings per share totaled SEK –0.20 (–0.07).
• Cash flow from operating activities totaled SEK 0.3 (3.2) million.

 
FULL-YEAR PERIOD, JANUARY-DECEMBER

• Net sales totaled SEK 91.0 (83.3) million.
• EBITDA totaled SEK 1.1 (1.9) million.
• The operating profit/loss totaled SEK –20.0 (–14.1) million.
• Earnings for the period totaled SEK –22.2 (–13.4) million
• Earnings per share totaled SEK –0.47 (–0.34).
• Cash flow from operating activities totaled SEK 3.9 (–1.5) million.

 
SIGNIFICANT EVENTS DURING THE QUARTER

• Precise received around SEK 41 million after issue costs from the preferential share issue and the directed share issue to Egis Technology.
• Precise announced a strategic reorganization in Digital Identity. This reorganization will allow Precise to merge the functions in sales, customer service, and R&D for EastCoast with the corresponding functions for YOUNiQ.
• Precise renegotiated the payment plan for the acquisition of EastCoast completed in November 2021. The renegotiation means that the remaining payments of SEK 25 million and SEK 30 million, which were previously planned for 2022 and 2023, will instead be made through a payment of SEK 30 million in 2022, SEK 10 million in 2023, and thereafter SEK 5 million each year up to and including 2026. Precise has the option to pay off the entire remaining purchase price early without incurring any interest expenses.
• In connection with the issue and repurchase of C shares as part of the LTI 2022/2028 incentive program, and the completed preferential share issue and directed new share issue to Egis Technology, the total number of shares in Precise as of December 31, 2022 was therefore 47,512,597, of which 46,427,597 were ordinary shares and 1,085,000 were C shares, corresponding to a total of 46,536,097 votes.
• Precise entered into a partnership with CanvasBio to develop sensors for laptops.
• Precise entered into a licensing agreement with Isorg to provide new technology for fingerprint sensors to the mobile industry. Precise will receive a total of at least SEK 11 million in fixed license and support fees during the initial term of the agreement up to the end of 2024.

 
SIGNIFICANT EVENTS AFTER THE END OF THE FULL-YEAR PERIOD

• On January 1, 2023, the strategic reorganization of Digital Identity was initiated in order to strengthen sales channels and optimize the organization.
• Precise joined the Genetec Technology Partner Program to strengthen its presence in the US market with its YOUNiQ Access solution.
• The Board of Directors of Precise has appointed Joakim Nydemark to EVP and CCO Algo for Precise. Joakim comes most recently from the tech company Crunchfish and the role as COO and CEO of the subsidiary Crunchfish Gesture Interaction AB. Joakim Nydemark succeeds Fredrik Sjöholm, who has been appointed as CEO of another company.

 
FINANCIAL DATA AND KEY INDICATORS
Amounts in SEK thousands unless otherwise stated

KEY INDICATORS

* Annual recurring revenue was estimated at approximately SEK 13 million for 2021.
See the Financial Glossary for definitions.

 INVITATION TO PRESENTATION OF THE YEAR-END REPORT
In connection with today’s year-end report, Precise invites investors and the media to an informational conference call.

The conference call starts at 10:00 AM (CET) on February 17, 2023.

Link to webcast:
https://financialhearings.com/event/45968

To take part, click on the link above to listen and follow the presentation online.

Please send any questions to investor@precisebiometrics.com.

The conference call will be held in English.

Participating on behalf of Precise:
Patrick Höijer, CEO
Annika Freij, CFO

CEO COMMENTS

The same high level of activity as before continued in the final quarter with the purpose of developing the company for long-term success. During the quarter, we were able to present clear progress in line with our strategy, including new partnerships with sensor manufacturers such as the French company Isorg and the Korean company CanvasBio. We also note that during the year, annual recurring revenue (ARR) in Digital Identity increased by around 25 percent to SEK 16.2 million (the previous year's figure was estimated at around SEK 13 million). Total revenues for the quarter were SEK 19.3 (27.4) million, with EBITDA of -1.9 (1.7), driven by a continued weak mobile market, although to some extent offset by an increase in recurring revenue in Digital Identity. Overall, revenues for the full year 2022 increased by 12 per cent to SEK 91 million (82), with EBITDA of SEK 1.1 million (1.9).

Algo business area
The end of 2022 was characterized by low end-customer demand in the mobile market and continued large stocks at mobile manufacturers and module houses. This meant that their suppliers, our customers, sold significantly lower volumes compared with the previous year, which affected Precise’s royalty revenues. Revenues in Algo (fingerprint software) decreased to SEK 13.4 (22.8) million, which can be explained by the fact that royalty revenues decreased by 71 percent (corresponding to SEK 4.6 million), which is in line with the market, and that Precise, last year, received a non-recurring license fee of SEK 6 million from two customers in the automotive industry. Adjusted for non-recurring revenue and the temporary exceptional situation surrounding royalties, Algo shows more stable underlying business. Precise has a strong position in its strategic partnerships, and as soon as the mobile market recovers, we expect normalization of royalty revenues. However, the macroeconomic situation remains uncertain and difficult to predict, but our assessment is that we will see a slow gradual recovery during the first half of the year, and a return to more normal levels in the second half of 2023.

In the Algo business area, which is the company’s core business, we have built up world-leading expertise in fingerprint reading in mobile phones, laptops, and smart door locks. Today, we work methodically according to a clearly communicated growth strategy for the business area. In accordance with this strategy, we are focusing on our existing key customers in order to win new mobile projects together with them, as well as supporting selected new sensor vendors in both mobile and new verticals. In line with the strategy, at the end of the year we entered into a development partnership with the Korean company CanvasBio to deliver fingerprint technology for portable computers, which is an interesting vertical for Precise. At the end of the year, we also entered into an agreement with Isorg, a French sensor vendor with a new type of sensor for mobile phones, to deliver fingerprint software. It is encouraging that as part of this business deal we are supplying more software components, not just matching (Precise BioMatch), which shows our competitiveness. The deal will generate a total of at least SEK 11 million in fixed license and support fees for Precise until the end of 2024.

I can confirm that our strategic partnerships were in good shape during the quarter, and we are also delivering on our strategy of building new ones. Going forward, we will continue to explore new adjacent verticals, such as the automotive industry, and evaluate new types of sensors that over time could give Precise a larger market for our world-leading competence in advanced image analysis.

Digital Identity business area
The Digital Identity business area, where we offer system solutions for physical access through facial recognition and visitor management, delivered a strong end to the year. Revenues increased to SEK 5.9 (4.7) million, driven by our visitor management solutions. In terms of sales, 2022 was a strong year. Our recurring revenues (ARR), which constitute the core of Digital Identity business, increased from around SEK 13 million at the beginning of the year to SEK 16.2 million at the end of the year. This is important for us, as it shows a development of a customer base that generates recurring revenues.

In order to improve the conditions for commercialization of the YOUNiQ service, we decided, during the quarter, to integrate EastCoast’s and YOUNiQ’s respective organizations. This means that the entire sales force can now reach out to the market with both our products.

The strategy for Digital Identity in Sweden is clear; we are working with a focus on building sales channels through partnerships with access system suppliers and with the most important system integrators. Furthermore, we are continuing to focus our sales efforts on the US market through local presence and partnerships. It is therefore gratifying that we in February were able to announce that YOUNiQ is integrated into Genetec’s access platform. This is an important step in building up sales channels in the USA after we won our first contract for YOUNiQ in the US market in Q4 2022.

During the quarter, we won YOUNiQ deals with companies including Iver and Bravida, as well as additional projects with Algeco. We also won EastCoast deals with Mathem, Office Management and Visma Spcs.

Increased commercial focus and cost control
The macroeconomic situation remains uncertain, which means that we have a strong focus on cost control, including by reducing the number of consultants in favor of employees, and by optimizing our R&D initiatives. These savings are expected to have a clear impact in 2023 and we expect operating costs to reach the same level as in 2021, even though we will also include EastCoast’s cost base in the 2023 figures. These efficiency increases are fully in line with our strategy of increased commercial focus. It is also worth noting that, despite the prevailing macroeconomic situation, Precise continues to have a positive cash flow from its operating activities.

I have continued to meet our customers around the world at the end of the year, and I am pleased and impressed by the good partnerships we have with leading suppliers in the market. Precise is well positioned to take advantage of the global underlying trend of increased use of biometrics and I am therefore looking forward to continuing to capitalize on our leading position in identification software, and growing positions in access solutions and visitor management.

Patrick Höijer, CEO