NEXT Biometrics Announces 1st Quarter, Details 2016 Outlook

OSLO, NORWAY--(Marketwired - May 24, 2016) - NEXT Biometrics Group ASA (Oslo Bors: NEXT) today announced interim results for the first quarter ended March 31, 2016 and outlined year ended December 30, 2015. NEXT, the leader in high-quality low-cost fingerprint sensors based in Oslo, Norway, summarized highlights:

• Sales in 1^st Quarter of 2016 of 5.2 million Norwegian Krone (NOK). For currency conversion purposes $1 USD equals 8.34 NOK.
• Introduction of the world's first full size, low cost embedded module.
• First flexible sensors showcased (April).
• First biometrics Smart Card volume order received (April).
• NOK 165 million, or $20.32 million USD raised for smart card expansions and operational development (May).

Tore Etholm-Idsoe, CEO of NEXT Biometrics, detailed the company's outlook, noting:

• Sales in April grew to NOK 8.5 million (vs NOK 5.2 million in the first quarter)
• New Smart Card sales projects
• Increase mass production capacity of flexible sensors to 2 million per month from the first half of 2017
• "NEXT-Enabled Markets" to generate high volume long-term business
• Further investments in 2018 generation Smart Cards
• New ASIC Generation - Significant cost down

Etholm-Idsoe said, "NEXT Biometrics focuses its resources on quality dependent market segments that require high levels of security and convenience coupled with the ability to serve close to 100% of a given population. These markets for NEXT include Smart Cards, NEXT-Enabled markets, traditional markets, high-end security focused smartphones and quality notebooks. The NEXT technology is perfectly positioned for these markets."

He added, "The first Smart Card customers are able to generate substantial benefits from introducing fingerprint sensors in their applications-solutions. These early customer projects are larger than initially estimated, and are expected to generate positive margins from an early stage. NEXT sees significant opportunities within several of the major Smart Card market segments."

The CEO explained, "The negative cash flow in the first quarter of 2016 required new capital to expand flexible sensor production capacity, further Smart Card related R&D and operational developments. Consequently, the Company raised approximately NOK 165 million, or $20.32 million USD, in the beginning of May."

NEXT said during the first quarter of 2016 the company focused on the scale-up of mass production for deliveries to Dell. After initial deliveries in November and December volumes increased further in the first quarter of 2016. Costs related to transition to new products and volume ramp-up have been booked in Q1 2016. 

The NEXT ASIC project, a major element in the ongoing cost down program has completed its design phase and is targeting high volume shipment in March/April 2017, said Etholm-Idsoe.

The CEO said, "In February, NEXT introduced the world's first full size, low cost embedded module (1411-S). This is expected to open a range of new biometrics market segments. For the first time the market is being offered a full size, high quality sensor solution combined with embedded processing. Developers can now integrate these secure and convenient modules with specifications strong enough to be used by close to 100% of a given user group. This is key in applications such as keys fobs, remote controls or tokens, where there is no pin-code or password available as a backup for authentication."

He said, "Continuing into 2016, NEXT has focused most of its R&D resources to Smart Card activities. The Company has made great leaps in the development of fully flexible sensors meeting all the ISO requirements and will continue to focus on this market in the future. The announced Smart Card order in April demonstrates the quality of our products and the commercial viability of the Smart Card related R&D efforts."

NEXT said, operating revenue in the first quarter of 2016 was NOK 5.2 million, compared to NOK 1.7 million in the previous quarter and NOK 2.4 million in the first quarter of 2015. It added that due to low initial production volumes, the production costs were high for these initial delivered sensors and are currently included in other operating expenses. Several of the initial cost elements related to production and delivery of these units are one-offs or temporary and do not give a clear and relevant indication of cost of goods sold, said NEXT. 

Payroll expenses amounted to NOK 15.8 million in the first quarter of 2016, compared to NOK 20.9 million in the previous quarter and NOK 8.4 million in the corresponding quarter of 2015. The decrease from the previous quarter of NOK 5.1 million was mainly related to lower accrued social cost related to share-based remuneration, the company explained.

NEXT said other operating expenses amounted to NOK 37.3 million in the first quarter of 2016, compared to NOK 25.6 million in the previous quarter and NOK 15.9 million in the corresponding quarter of 2015. The company noted that the increase from the previous quarter of NOK 11.7 million was mainly related to increased R&D costs. R&D costs included in other operating expenses increased to NOK 17.1 million in the first quarter of 2016, compared to NOK 5.6 million in the previous quarter and NOK 6.8 million in the corresponding quarter of 2015.

Total R&D expenses, included in both payroll and other operating expenses, amounted to NOK 25.8 million in the first quarter of 2016, compared to NOK 13.9 million in the previous quarter and NOK 12.3 million in the corresponding quarter of 2015, said NEXT.

Depreciation and amortization amounted to NOK 1.0 million in the first quarter of 2016 compared to NOK 0.7 million in previous quarter and NOK 0.2 million in the corresponding quarter of 2015. Investments amounted to NOK 0.1 million in the first quarter of 2016 compared to NOK 0.7 million in previous quarter and NOK 1.4 million in the corresponding quarter of 2015.

Net financial items amounted to a net cost of NOK 0.4 million in the first quarter of 2016 compared to a net cost of NOK 2.0 million in the previous quarter and a net income of NOK 2.6 million in corresponding quarter of 2015. The decrease in net cost of NOK 1.6 million from the previous quarter was mainly related to the termination of the royalty agreement in the fourth quarter of 2015, the company said.

NEXT said the net loss in the first quarter of 2016 was NOK 49.5 million, compared with a loss of NOK 47.5 million in the previous quarter and a loss of NOK 19.6 in the corresponding quarter of 2015. NEXT operated at a loss and did not incur deferred or payable income taxes in the first quarter of 2016 or in 2015, except for an insignificant amount in the fourth quarter of 2015.

NEXT noted that cash and cash equivalents amounted to NOK 76.8 million by the end of the first quarter of 2016 compared to NOK 130.2 million by the end of 2015. The operations, including investments, consumed cash in an amount of NOK 53.7 million in the first quarter of 2016 compared to NOK 44.2 million in the previous quarter. The Company's share capital is NOK 13,511,855, divided into 13,511,855 shares with a par value of NOK 1 per share.

NEXT said equity amounted to NOK 125.2 million by the end of 2016 compared to NOK 172.7 million by the end of 2015. The new funds raised in the beginning of May 2016 gave total gross proceeds of approximately NOK 165 million. Etholm-Idsoe said that "After these new funds, NEXT will have adequate equity and liquidity for longer than 12 months from the date of this report."

ABOUT NEXT BIOMETRICS:
Enabled by its patented NEXT Active Thermal principle, NEXT Biometrics (www.NextBiometrics.com) offers high quality area fingerprint sensors at a fraction of the prices of comparable competitors. A wide range of product formats including Smartphones, Tablets, PC's, Doors, Time registration systems, Wearables, Payment terminals, Flashdrives, USB-tokens, Key fobs and many more are targeted.

NEXT BIOMETRICS GROUP ASA is a publicly listed company headquartered in Oslo, Norway and with sales, support and development subsidiaries in Seattle, Silicon Valley, Taipei, Prague and Shanghai. Media and Investor contacts for NEXT Biometrics: Tore Etholm Idsøe, CEO, Tore.Idsoe@NEXTbiometrics.com and Knut Stalen, CFO, Knut.Stalen@NEXTbiometrics.com.