NEXT Biometrics Announces Interim 3rd Quarter Results

OSLO, NORWAY--(Marketwired - Nov 24, 2015) -  NEXT Biometrics Group ASA (OAX: NEXT) today announced interim results for the third quarter and first nine months ended September 30, 2015. NEXT, the leader in high-quality low-cost fingerprint sensors based in Oslo, Norway, summarized highlights:

• Completion of new ultrathin, design-friendly fingerprint sensor generation
• Implementation of new fingerprint sensors in all modules
• Final preparation leading to the first Dell announcement
• Negotiations leading to NOK 120 million private placement by Greenbridge Partners
• Negotiations leading to termination of inventor royalty agreement
• Preparation for listing NEXT stock on the main list at the Oslo Børs

In discussing results, NEXT Biometrics CEO Tore Etholm-Idsoe said, "A major development during the first nine months of 2015 is NEXT's introduction of its ultra-thin fingerprint sensor design that enhances product ESD-resistance and removes the need for the large bezels (metallic frames) used in the first generation of NEXT sensors. It allows more flexibility when building the ultra-thin NEXT fingerprint into design-focused devices, such as notebooks, tablets and smartphones. Close to 100% of all on-going customer processes have over the past months been transferred to the new designs. Many customers are in the process of implementing these in their targeted future products."

He added that, "During Q3 the market has continued a trend where all quality dependent market segments focus on larger sensor sizes whereas the smartphone markets trend toward smaller sizes. Quality dependent markets are markets where both security and convenience are equally important to close to 100% of the population. These markets include traditional markets, high-end smartphones, quality notebooks, smartcards and NEXT-Enabled markets. Combined, these markets are larger than the smartphone segment. Going forward, the company will focus its resources on these attractive market segments."

He noted, "NEXT Biometrics during the 4^th quarter has secured a private placement of NOK 120 million (Norwegian Krone) from Greenbridge Partners, a privately held Investment Company founded by Melker Schörling and Ola Rollén. This placement of 2 million new shares and the exercise of warrants of 93,750 by Icreate Investments Limited, an affiliate of the Foxconn group, resulted in increased funds of Norwegian Krone (NOK) 127.5 million."

NEXT CEO Etholm-Idsoe discussing outlook noted NEXT has:

• New generation modules to generate orders
• Further expansion within the Notebook & Tablet markets
• "NEXT-Enabled Markets" to generate high-volume long-term business
• Increased focus on SmartCard projects

He said that, "With the private placement and the exercise of warrants in November 2015 that gave total gross proceeds of NOK 127.5 million, NEXT has adequate equity and liquidity to support operations for more than 12 months from the date of this report."

In its financial statements, NEXT said operating revenue in the third quarter of 2015 was NOK 0.2 million, compared to NOK 0.3 million in the previous quarter and NOK 1.2 million in the third quarter of 2014. The revenue in the third quarter of 2015 all consisted of operating revenue and was generated by shipment of 5,000 fingerprint sensors. NEXT said, for the first three quarters of 2015, operating revenue amounted to NOK 2.9 million compared with NOK 1.9 million for the first three quarters of 2014. The revenue for the first three quarters of 2015 was generated by shipment of 61,000 fingerprint sensors compared with 47,000 sensors for the first three quarters of 2014. 

The company added that due to low production volumes and high manufacturing costs, the calculated gross margin is still negative. The Cost of goods sold for these initial delivered sensors are currently included in other operating expenses. Several of the initial cost elements related to production and delivery of these units are one-offs and do not give a clear and relevant cost of goods sold. 

Detailing results, the company said payroll expenses amounted to NOK 14.4 million in the third quarter of 2015, compared with NOK 10.3 million in the previous quarter and NOK 5.2 million in the corresponding quarter of 2014. Increased research and development (R&D) costs included in payroll expenses, increased operational activity in Asia and share based remuneration cost after new issue of options in the second quarter, were the main reasons for the increase from the previous quarter and the corresponding quarter of 2014. Payroll expenses for the first three quarters of 2015, amounted to NOK 33.1 million compared with NOK 15.5 million for the first three quarters of 2014. The increase was mainly due to higher research and development costs and increased operational activity in Asia. 

NEXT said other operating expenses amounted to NOK 15.5 million in the third quarter of 2015, compared with NOK 13.5 million in the previous quarter and NOK 10.9 million in the corresponding quarter of 2014. R&D costs included in other operating expenses increased to NOK 7.6 million in the third quarter of 2015, compared to NOK 4.8 million in the previous quarter and NOK 5.4 million in the corresponding quarter of 2014. Other operating expenses amounted to NOK 44.9 million for the first three quarters of 2015 compared to NOK 33.2 million for the first three quarters of 2014. Total R&D expenses, included in both payroll and other operating expenses, amounted to NOK 38.7 million for the first three quarters of 2015 compared to NOK 28.7 million for the first three quarters of 2014.

During the 3^rd quarter, depreciation and amortization amounted to NOK 0.7 million compared with NOK 0.2 million in the third quarter of 2014. For the first three quarters of 2015, depreciation and amortization amounted to NOK 1.2 million compared with NOK 0.2 million for the first three quarters of 2014. 

Investments amounted to NOK 0.9 million in the third quarter of 2015 compared to NOK 0.4 million in the third quarter of 2014. Investments for the first three quarters of 2015 amounted to NOK 17.8 million compared to NOK 0.9 million for the first three quarters of 2014. The main investment in the first three quarters of 2015 was the coating machine with a capacity of 1.2 million units per month and a total investment of NOK 15.5 million completed in the second quarter of 2015.

NEXT said, net financial items amounted to a net income of NOK 0.5 million in the third quarter of 2015 compared with a net cost of NOK 0.7 million in the previous quarter and a net income of NOK 0.3 million in the third quarter of 2014. The increase in net income from the previous quarter was mainly related to foreign exchange gains compared to foreign exchange losses. For the first three quarters of 2015 net financial items amounted to a net income of NOK 1.9 million compared to a net income of NOK 0.4 million for the first three quarters of 2014. The increase was mainly due to foreign exchange gains. 

Net loss in the third quarter of 2015 was NOK 29.9 million compared to a loss of NOK 24.5 million during the previous quarter and a loss of NOK 14.4 in the third quarter of 2014, the company said. It added that the net loss for the first three quarters of 2015 amounted to NOK 74.0 million compared with a loss of NOK 46.3 million for the first three quarters of 2014. The increased loss was mainly due to increased R&D costs and production ramp up cost. NEXT Biometrics said it is exposed to currency effects, as it reports in NOK while most our transactions are in US dollars (USD). As NOK has weakened in 3Q compared to the first half of 2015, this has had a significant impact on our reported cost in NOK in the third quarter. Parts of the increased costs in 3Q are due to this currency effect. NEXT operated at a loss and did not incur deferred or payable income taxes for the first three quarters of 2015 or in 2014, it said.

Discussing its balance sheet, NEXT said cash and cash equivalents amounted to NOK 45.3 million by the end of the first three quarters of 2015 compared with NOK 129.3 million by the end of 2014. The operations, including investments, consumed cash in an amount of NOK 30.6 million in the third quarter of 2015 compared to NOK 22.8 million in the previous quarter and NOK 26.0 in the third quarter of 2014.

Total amount for the first three quarters of 2015, including investments, amounted to NOK 83.9 million compared to NOK 77.0 million for the first three quarters of 2014, the company noted. The cash consumed for the first three quarters of 2015 was mainly related to the loss of NOK 74.0 million and inventory build-up of NOK 6.4 million. Equity amounted to NOK 90.1 million at the end of the third quarter of 2015 compared with NOK 161.6 million by the end of 2014 and NOK 190.5 million by the end of the first three quarters of 2014.

About NEXT Biometrics
Enabled by its patented Active Thermal Principle, NEXT Biometrics offers high quality area fingerprint sensor at low prices. A wide range of products format including Smartphones, tablets, PC's, doors, time registration systems, payment terminals, flashdrives, USB-tokens, keyfobs and many more are targeted. NEXT Biometrics Group ASA (OAX: NEXT) is a publicly-listed company headquartered in Oslo, Norway and with sales, support and development subsidiaries in Seattle, Silicon Valley, Taipei, Prague and Shanghai. For more information about the company, please visit www.nextbiometrics.com. Media and Investor contacts for NEXT Biometrics are Tore Etholm-Idsøe, CEO, Tore.Idsoe@NEXTbiometrics.com and Knut Stalen, CFO, Knut.Stalen@NEXTbiometrics.com.