GROWTH WITH HIGH PROFITABILITY

PRECISE BIOMETRICS AB (PUBL), CORPORATE IDENTITY NO. 556545-6596

INTERIM REPORT FOR THE FIRST QUARTER 2016

  · Consolidated net sales increased to SEK 24.2 (4.5) million.
  · EBITDA increased to SEK 8.2 (-6.4) million.
  · Profit after tax increased to SEK 6.3 (-8.8) million.
  · Earnings per share for the period increased to SEK 0.02 (-0.03).
  · Cash and cash equivalents were SEK 58.6 (50.7) million.

SIGNIFICANT EVENTS IN THE FIRST QUARTER

  · Precise BioMatch Mobile was integrated in over 25 smartphones.
  · Licensing agreements were signed with sensor manufacturers Chipone and
MStar.
  · Gemalto, Fingerprint Cards, Precise Biometrics and STMicroelectronics
introduced the first end-to-end security architecture for biometric fingerprint
authentication at Mobile World Congress 2016.
  · The licensing agreement with Fingerprint Cards was expanded to include
Precise BioMatch Embedded for smart cards.
  · Follow-on order for Tactivo from the Defense Logistics Agency (DLA), an
agency of the U.S. Department of Defense.

SIGNIFICANT EVENTS AFTER THE FIRST QUARTER

  · Precise BioMatch Mobile was integrated in over 15 smartphones.
  · Licensing agreements were signed with the sensor manufacturer IDEX and the
digital security company Oberthur.
  · Precise Biometrics, won a framework agreement for Tactivo from the Defense
Logistics Agency (DLA) within the US Department of Defense.
  · Precise BioMatch Embedded was integrated in Fingerprint Cards (FPC) embedded
biometric module solution FPC-BM.

CONFERENCE CALL

On the occasion of today’s interim report, we invite investors and journalists
to a conference call today at 10.00. More information can be found at the last
page of the report.

CEO´s COMMENTS
I am pleased to report another strong quarter, our best financial performance
since 2009. Net sales increased with 438% compared with the corresponding
quarter in 2015, with a continued high gross margin. We continue to invest in
our business to strengthen our market position, while keeping our operating
expenses under control.
Sales in the Fingerprint Technology business area continue to grow at a rapid
pace with increased royalty revenues. During the quarter, more than 25 mobile
phones were launched with Precise BioMatch Mobile, which is currently integrated
in more than 90 mobile phones from more than 30 manufacturers. The smartphone
market for fingerprint technology continues to grow sharply. Last year, more
than 400 million smartphones were sold with fingerprint technology. The number
of smartphones with fingerprint technology is expected to reach 750 million
units in 2016, and analysts predict that up to three billion mobile devices with
biometrics will be sold as early as 2020.
Since the start of the year, we have signed license agreements with sensor
manufacturers Chipone, Mstar and IDEX. We now have a total of 13 of the most
significant sensor manufacturers as customers. We have also signed a license
agreement with the security firm Oberthur. The collaboration is the first of its
kind and an important step towards increasing payment security using fingerprint
technology. The broad base of customers who market solutions with different
technologies and advantages makes us well positioned to capture a significant
market share in a fast-growing market that faces stiffer competition between
sensor manufacturers. We are also in discussions with several companies that
provide additional sensor technologies.
We have received our first royalty revenues from our collaboration with
Synaptics, who are making great efforts to gain market share in China, as well
as many of our other customers. To help our customers more quickly gain market
share, we have expanded our offering with complementary software to our matching
algorithms and with integration services in order to facilitate the integration
of the fingerprint software in smartphones.
After the end of the quarter, our customer Fingerprint Cards (FPC) announced its
intention to incrementally begin to deliver its proprietary matching algorithm
to its customers in the smartphone segment, with a complete transition to its
proprietary solution in the beginning of 2017. Historically, the mobile industry
has used a dual source strategy for manufacturers of key components. The reasons
for this include wanting to secure production through several suppliers and to
establish competitive pricing. The extent to which mobile phone manufacturers
will want a proprietary solution remains to be seen, since it makes it harder
for them to have several sensor suppliers. The market is growing rapidly and is
facing more and more competition and greater price pressure. Many sensor
manufacturers will compete to take part in the tremendous growth. We remain
convinced that many of our present and future customers will claim a significant
share of the growing market, thus ensuring our ability to grow with high
profitability.
I see the market for smart cards as the next promising market for fingerprint
sensors, in particular the credit card market, because the costs of card fraud
are on the rise. Here, the demand for powerful and effective algorithm solutions
is even greater than for the mobile market because the cards have even more
limited processing power and memory. There are over 2.5 billion credit cards in
circulation that are changed on average every other year, resulting in an
addressable market of more than a billion cards per year. We are collaborating
with our customers on several projects related to smart cards and other products
like wearables and cars. Our integration in Fingerprint Cards embedded biometric
module solution FPC-BM is a good example of a product that facilitates
integration of fingerprint technology within new product areas. In the longer
term, we assess that this market can be larger than the market for mobile
phones.
Sales in the Mobile Smart Card Solutions business area were on par with the
previous quarter. After the end of the quarter we signed, through a channel
partner, a larger framework agreement with the DLA to facilitate a substantial
increase in the number of Tactivo users within their organization. Sales in the
Swedish and UK healthcare sectors are developing more slowly than expected due
to long sales processes with extensive pilot projects. However, interest remains
high in this market. In the fall, the City of Gothenburg will begin two pilot
projects, with the aim to implement a mobile solution with Tactivo for 10,000
employees during 2017.
Precise Biometrics is well positioned for continued profitable growth with a
goal of increasing sales and market share in the mobile devices segment. We are
also well positioned to become market leaders in new product areas that require
small sensors. The market for fingerprint technology continues to grow at a
rapid pace and is dominated today by FPC and Synaptics, both of whom are
customers of ours. As more of our customers establish themselves in the market,
our earnings capacity will increase due to higher volumes and improved average
revenue per sensor.
We expect continued growth over time in the Mobile Smart Card Solutions business
area. Sales within the US Department of Defense are proceeding in the right
direction. In the healthcare market we expect increasing volumes in the second
half of 2016. Interesting pilot projects with Tactivo is underway in the United
Kingdom and Swedish healthcare, as well as with German authorities at the
departmental level, which can provide substantial volumes in 2017.
In conclusion, I expect continued profitable growth for the company.

Håkan Persson, CEO
FOR MORE INFORMATION, PLEASE CONTACT
Håkan Persson, CEO, Precise Biometrics AB
Tel. 46 46 31 11 05 or 46 734 35 11 05
E-mail hakan.persson@precisebiometrics.com
ABOUT PRECISE BIOMETRICS
Precise Biometrics is a market-leading provider of solutions that prove people's
identities through smart cards and fingerprint recognition. The company´s
products can be used for ID, enterprise and bank cards as well as access to
mobile solutions, computers and networks. Precise Biometrics serves business and
government organizations throughout the world and its products are licensed to
close to 160 million users. For more information, please visit
www.precisebiometrics.com