NEW CUSTOMER AGREEMENTS

AND CONTINUED INVESTMENTS

Interim report January-March 2017Published May 16th, 2017

INTEGRATED IN

SIX MOBILE DEVICES

Six mobile devices were launched with

Precise BioMatch Mobile in the first quarter

Device integration with a world leading

Chinese OEM through partnership with

Silead

NEW LICENSE AGREEMENTS

License agreements with Taiwanese sensor

manufacturer Zeitec and NXP, a leader in

secure connectivity solutions for embedded

applications

Extended license agreement with an

existing sensor customer that guarantees

total license revenues of a minimum of 17.5

million SEK during 2017 and 2018

27 license agreements for distribution of our

fingerprint software – Precise BioMatch

Mobile and Precise BioMatch Embedded

FINALIZED ACQUISITION OF

NEXID BIOMETRICS

Finalized acquisition of NexID Biometrics, a specialist in spoof mitigation

and liveness solutions

Increased industry attention on spoof-detection and liveness

Expanding our offering with a software based solution for spoof-

detection and liveness that significantly increases security and meets

market demand for fraud mitigation

TACTIVO SALES IN LINE WITH

EXPECTATIONS

Low sales volumes during the first quarter

Sales primarily to the US Government, banks

in the Middle East and South America, and the

Swedish healthcare market

Göteborgs Stad has initiated roll-out of Tactivo

and is expected to continue in 2017

Several interesting pilot projects with German

authorities and in Swedish healthcare – slow

moving customer segments

MAIN EVENTS AFTER

THE FIRST QUARTER

Four mobile devices with Precise BioMatch

Mobile have been launched so far

License agreement with Melfas, a South Korean

sensor manufacturer

Elan Microelectronics launched a payment card

with fingerprint technology, with our software, for

premium customers at a South Korean bank

NET SALES & GROSS MARGIN

Gross margin

Net sales

Net sales

Net sales of 19.2

MSEK (24.2)

Net sales for Business

Area Fingerprint

Technology 16.6

MSEK (20.3)

Improved gross

margin

0

5

10

15

20

25

30

Q2'15 Q3 '15 Q4 '15 Q1 '16 Q2 '16 Q3 '16 Q4 '16 Q1'170%

20%

40%

60%

80%

100%

(MSEK)

Total

FPC

Other customers

Decreasing sales to

Fingerprint Cards

Increasing sales to

other customers

Royalty revenue from

nine customers

ONGOING REVENUE SHIFT IN BUSINESS

AREA FINGERPRINT TECHNOLOGY

0,00

5,00

10,00

15,00

20,00

Q1’16 Q1’17

Net sales increased

with 16.1 MSEK to 92.2

MSEK (76.1)

Net sales for Business

Area Fingerprint

Technology improved

with 33% to 79.3 MSEK

(59.7)

(MSEK)

0

20

40

60

80

100

120

Q2'15-Q1'16 Q3'15-Q2'16 Q4'15-Q3'16 Q1'16-Q4'16 Q2'16-Q1'17

NET SALES ROLLING 12-MONTHS

OPERATING PROFIT IMPACTED BY

LOWER SALES & INCREASED COSTS

-8

-6

-4

-2

0

2

4

6

8

10

-8

-6

-4

-2

0

2

4

6

8

10

Q3’15 Q4’15 Q1’16 Q2’16 Q3’16 Q4’16

Q2’15 Q1’17

EBITDA

Operating profit

Operating profit

(MSEK) (MSEK)

Operating profit of -2.7

MSEK (6.3) impacted by

lower sales and

increased operational

costs.

EBITDA amounted to

-1.1 MSEK (8.2)

Cash at Bank

Cash flow

Cash flow

Operational cash

flow increased to

17.1 (7.5) MSEK

during Q1 2017

Available cash

119.2 MSEK (58.5)

Payment of 31.4

MSEK for the

acquisition of NexID

Biometrics

-5

0

5

10

15

20

0

20

40

60

80

100

120

140

160

(MSEK) (MSEK)

Q2’15 Q3’15

OPERATIONAL CASH FLOW

Q4’15 Q1’16 Q2’16 Q3’16 Q4’16 Q1’17

Operational cash flow

rolling 12 months

numbers increased with

36.4 MSEK to 47.3

MSEK (10.9)

(MSEK)

0

5

10

15

20

25

30

35

40

45

50

Q2'15 - Q1'16 Q3'15-Q2'16 Q4'15-Q3'16 Q1'16-Q4'16 Q2'16 - Q1'17

IMPROVED OPERATIONAL CASH FLOW

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

CONTINUED FAST MARKET GROWTH - ~2.5BN

UNITS IN 2020

0,3

0,6 0,8

1,11,2

1,3

0,1

0,3

0,5

0,6

0,2

1,0

0,2

0,4

0,6

0

1

2

3

2014 2015 2016e 2017e 2018e 2019e 2020e

The number of sensors in smartphones, smart cards and other products (Bn)

Smartphone ex. Apple Smart cards Other Source: Pareto Securities Equity Research

1,6

2,1

2,5

GLOBAL CUSTOMER BASE KEY

FOR GROWTH

Larger customer base - 22 new customers

the last 18 months

Global reach for distribution of fingerprint

software, covering both the mobile and

embedded market

Several customers in final stages of the

evaluation process

Continue to grow the customer base

0

5

10

15

20

25

30

Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17

Number of customers

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

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

SUMMARY & OUTLOOK

precisebiometrics.com

THANK YOU!