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2016-05-17

Precise Biometrics: 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

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http://news.cision.com/precise-biometrics/r/growth-with-high-profitabili...
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