ANNUAL GENERAL MEETING 2017 Hkan Persson | CEO May 16th, 2017 - PowerPoint PPT Presentation

ANNUAL GENERAL MEETING 2017 Håkan Persson | CEO May 16th, 2017

COMPANY OVERVIEW Convenient and secure identity authentication, for everyone, everywhere Founded in 1997 Head Office in Lund, Sweden USA, Asia, Europe 40 employees & consultants Nasdaq OMX Stockholm Small Cap Market Cap: SEK 1 billion

FINGERPRINT TECHNOLOGY (86 % of sales) Software for convenient and secure fingerprint recognition in mobile devices, smart cards, products with small fingerprint sensors and ID cards PRODUCTS: Precise Biomatch™ Mobile Precise Biomatch™ Embedded Match-on-Card™ MOBILE SMART CARD SOLUTIONS (14 % of sales) Tactivo - Smart card readers for smartphones and tablets that enables convenient and secure login to IT systems with smart cards from mobile devices PRODUCTS: Tactivo™ for iOS (iPad and iPhone) Tactivo™ for Android

THE LEADER IN FINGERPRINT SOFTWARE Precise Biometrics is the leading independent supplier of fingerprint software – Our software has become a de facto standard among sensor vendors WORLD-LEADING PROVEN USER EXPERIENCE R&D STRONG TECHNOLOGY INDEPENDENT PATENTS

INTEGRATED IN OVER 180 DIFFERENT MOBILE DEVICES FROM +40 VENDORS Precise BioMatch Mobile is used by leading mobile device manufacturers such as Coolpad, Google, Huawei, HTC, Lenovo, LG, Oppo, Sony, ZTE and Xiaomi.

PORTUGAL NATIONAL BAHRAIN E-ID CARDS THAILAND VENEZUELA QATAR BRAZIL Over 160.000.000 licenses of Precise Biometrics’ fingerprint algorithm solution Precise Match-On-Card issued to citizens worldwide

BUSINESS MODEL & CUSTOMERS Primary customers – sensor vendors Market solutions directly to OEM:s, other suppliers in the mobile eco-system and security companies Revenues: Royalty ► Annual license fee ► Support and maintenance ►

SUMMARY OF 2016

INCREASED NET SALES AND PROFIT Increased net sales by 73% and an operating profit of SEK 24.8 million - the company’s best year so far 110 mobile devices with Precise BioMatch Mobile were launched in 2016 – double the amount in the previous year 14 licensing agreements for the distribution of our fingerprint software – Qualcomm and Samsung LSI Acquisition of NexID Biometrics for spoof detection and liveness Reinforced our position and developed our product range in the field of fingerprint software Sales of Tactivo fell short of our expectations – sales primarily to US government agencies

ACQUISITION OF NEXID BIOMETRICS EXPANDS OUR OFFERING TO INCLUDE LIVENESS DETECTION Acquisition of NexID Biometrics, a specialist in solutions for spoof detection and liveness Expands our offering with a software-based solution for spoof and liveness detection that enhances security and meets customer demand to prevent fraud Access to academic research and senior experts The acquisition was financed by a private placement of shares, which raised SEK 47.2 million for the company

2016 IN NUMBERS

INCREASED NET SALES AND GROSS MARGIN (SEK million) Net sales increased by 120,0 100% 73% to SEK 97.2 million 90% 100,0 Sales in the Fingerprint 80% Technology business area 70% increased by 95.7% to 80,0 SEK 83.3 million 60% 60,0 50% Gross margin increased by 40% 9.1 per cent to 78.8 per cent 40,0 30% 20% 20,0 10% Gross margin Net sales Net sales 0,0 0% 2014 2015 2016

IMPROVED OPERATING PROFIT (SEK million) 30,0 The operating profit improved to SEK 18.0 million, an 20,0 improvement of SEK 27.4 million 10,0 2014 2015 0,0 2016 -10,0 -20,0 -30,0 -40,0 Operating loss Operating profit -50,0

IMPROVED CASH FLOW FROM OPERATING ACTIVITIES (SEK (SEK million) million) 50,0 Cash flow from operating 160,0 activities improved to SEK 40,0 37.7 million 120,0 30,0 Cash and cash equivalents 80,0 available of SEK 135.8 20,0 million at the year-end – 40,0 includes SEK 50 million 10,0 from new share issue 2014 2015 0,0 0,0 2016 Acquisition cost of SEK -10,0 31.4 million was paid in February -20,0 -30,0 Cash and cash equivalents Cash flow Cash flow -40,0

SUMMARY OF THE FIRST QUARTER 2017

NEW CUSTOMER AGREEMENTS & CONTINUED INVESTMENTS SIGNIFICANT EVENTS FINANCIAL During the quarter six mobile phones were launched Net sales for the period totaled SEK 19.2 with Precise BioMatch TM Mobile (24.2) million Integration into mobile phone from a world-leading Chinese mobile phone manufacturer through a The operating loss for the period totaled partnership with Silead SEK -2.7 (6.3) million Extended licensing agreement with existing sensor The gross margin during the quarter customer with guaranteed licensing revenue of at increased to 85.1% (81.8%) least SEK 17.5 million Cash flow improved to SEK 17.1 (7.5) million New licensing agreements with Zeitec and NXP Completed acquisition of NexID Biometrics Cash and cash equivalents were SEK 119.2 (58.6) million at the end of the period

SIGNIFICANT EVENTS AFTER THE FIRST QUARTER Four mobile devices have so far been launched with Precise BioMatch Mobile Licensing agreement with Melfas, a South Korean sensor manufacturer Elan Microelectronics launched a payment card with fingerprint technology with our software – to be supplied to premium customers of a South Korean bank

OUTLOOK

CONTINUED FAST MARKET GROWTH - ~2.5BN UNITS IN 2020 Addressable market of 1 billion units in 2017 Estimated 40 % average annual growth between 2016-2020 with a total addressable market of 2.5 billion units in 2020 The market for smart cards and other products expected to grow from end of 2017 The number of sensors in smartphones, smart cards and other products (Bn) 3 2,5 0,6 2,1 2 0,4 1,6 0,6 0,5 0,2 0,3 1,0 1,3 1,2 1 1,1 0,1 0,6 0,8 0,3 0,2 0 2014 2015 2016e 2017e 2018e 2019e 2020e Smartphone ex. Apple Smart cards Other Source: Pareto Securities Equity Research

GLOBAL CUSTOMER BASE KEY FOR GROWTH Larger customer base - 22 new customers Number of customers the last 18 months 30 25 Global reach for distribution of fingerprint 20 software, covering both the mobile and embedded market 15 10 Several customers in final stages of the 5 evaluation process 0 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Continue to grow the customer base

ONGOING REVENUE SHIFT IN BUSINESS AREA FINGERPRINT TECHNOLOGY Decreasing sales to 20,00 Fingerprint Cards Increasing sales to 15,00 other customers Royalty revenue from 10,00 nine customers 5,00 Total FPC Other customers 0,00 Q1’17 Q1’16

MARKET GROWTH DRIVERS Increased consumer demand for biometrics for convenient identity authentication and payments Payment providers see opportunity to increase security and mitigate fraud through biometrics – lowering the cost of fraud Market growth, increased competition and lower costs enable more price sensitive segments These factors pave the way for continued market growth and new product segments: Low-end smartphones Smart cards, wearables and IoT Cars and access control

MARKET DEVELOPMENT Sensors are becoming increasingly smaller to reduce cost – increased requirements on biometric performance Increased usage and adoption has led to advanced requirements to manage “difficult” fingers Growing competition is driving differentiation of fingerprint solutions – size, technology, industrial design and use cases Growth in mobile payments increase focus on security - Spoof detection and liveness will become increasingly important Adoption of other biometric modalities will increase and become complementary to fingerprint technology

OUR TECHNOLOGY ROADMAP Continued software development to power very small sensors Support for new sensor technologies Spoof detection and liveness for mobile devices to significantly increase security and mitigate fraud through fake finger detection More resource effective algorithms for smart cards, wearables and other products Certified algorithms for Secure Elements to provide bank-grade security

SUMMARY Year of customer and revenue transition – creating conditions for growth Increase investments in product development to ensure technology leadership Grow the organization to ensure customer success Continue to grow our customer base Unchanged view on revenue development Weaker revenue development during the first half 2017 Gradually increasing revenues during the second half of the year Revenues for the full year are expected to be in line with 2016 revenues Positive operating result for 2017

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