Precise Biometrics : A message from our CEO – Q3 update

Last Friday we announced our financial report for the third quarter. It has been an eventful quarter for Precise, my first full quarter as CEO. Revenues grew to SEK 18.8 million (16.9) despite a low global demand for mobile phones. This growth is a direct effect of our efforts to broaden our Digital Identity business model through the acquisition of the visitor management system provider, EastCoast Solutions. However, as we see temporarily uncertainties in the global demand for mobile phones, we have during this quarter, increased our cost control and taken initiatives to reduce our OPEX going forward. This has been done by reducing the number of consultants and optimizing our R&D initiatives - which is in line with our strategy and increased commercial focus.

Today Precise has two distinct business areas. The Algo business area, offering a world-leading software (algorithms based on advanced image analysis) to verify a person's fingerprint, including the fingerprint recognition software BioMatch™ (mobile, car, card and, IoT), and the anti-spoof software BioLive™. With customers across the globe, Precise generates revenue from fixed annual licenses and from volume-dependent royalty fees. These volume-dependent revenues were negatively affected during the quarter due to the lower demand and high inventory levels of components and phones in the world. As soon as the mobile phone manufacturers are starting to reduce their inventories, we expect to see a gradual return of sales and thereby an increase in royalties. The timing of this is difficult to predict, but our best estimate is that we will see a gradual return to more normal inventory levels during the half of 2023. Looking ahead, our growth strategy for Algo remains clear. We continue to support our partners to win business in the mobile segment and support new sensor suppliers. At the same time, we are exploring new verticals and evaluating new types of sensors that can use our algorithms.

Our other business area, Digital Identity, offers the access solution based on facial recognition, YOUNiQ, and the visitor management solutions from EastCoast. Customers are mainly based in Sweden and the US, and primarily generate recurring revenue from a SaaS-based (Software as a Service) business model. Last year, we acquired EastCoast Solutions, a leading visitor management system provider in the Nordics. The reason for the acquisition was to build up a stronger recurring revenue base, and leverage go-to-market channels, which EastCoast has provided for our YOUNiQ solution in Sweden. I am happy to see that the order value sales of EastCoast's solutions, year-to-date, has increased with 50 percent compared to the same period last year.

Worth mentioning is that we have also increased our efforts in the US during the quarter. I see this as an important effort, as the US market has a strong potential, not only due to its size, but also as biometric considerations are more mature compared to Europe overall. The recently announced Genetec DAP certification as well as the YOUNiQ installation at St. Lawrence Health, underlines a growing interest in our solution, and this week we are pleased to be showcasing our YOUNiQ and EastCoast solutions at ISC East (the International Security Conference & Exposition) in New York.

Finally, during the autumn we have been present at several events, such as SKYDD, the biggest security exhibition in the Nordics, and at various partner fairs like the Certego Days and the mini fairs hosted by Prenad and SystemHouse Solutions. In addition to this, I have had the chance to physically meet our customers around the world, and I am happy to see the trust and confidence they put in Precise's technology.

I believe that that the above and our clear strategy for each business area, gives us a strong foundation for future growth. Now I look forward to continuing to commercialize our positions as a leading global supplier of identification software.

All the best,
Patrick Höijer, CEO

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