ANNUAL GENERAL MEETING 2017

Håkan Persson | CEOMay 16th, 2017

Convenient and secure identityauthentication, for everyone, everywhere

Founded in 1997

Head Office in Lund, Sweden

USA, Asia, Europe

40 employees & consultants

Nasdaq OMX Stockholm Small Cap

Market Cap: SEK 1 billion

COMPANY OVERVIEW

MOBILE SMART CARD SOLUTIONS(14 % of sales)

Tactivo - Smart card readers for smartphones and tablets that enables convenient and secure login to IT systems with smart cards from mobile devices

PRODUCTS:Tactivo™ for iOS (iPad and iPhone)Tactivo™ for Android

FINGERPRINT TECHNOLOGY(86 % of sales)

Software for convenient and secure fingerprint recognition in mobile devices, smart cards, products with small fingerprint sensors and ID cards

PRODUCTS:Precise Biomatch™ MobilePrecise Biomatch™ EmbeddedMatch-on-Card™

PROVEN

STRONG PATENTS

USER EXPERIENCE

TECHNOLOGY INDEPENDENT

WORLD-LEADING R&D

THE LEADER IN FINGERPRINT SOFTWARE

Precise Biometrics is the leading independent supplier of fingerprint software – Our software has become a de facto standard among sensor vendors

INTEGRATED IN OVER 180 DIFFERENT MOBILE DEVICES FROM +40 VENDORS

Precise BioMatch Mobile is used by leading mobile device manufacturers such as Coolpad, Google, Huawei, HTC, Lenovo, LG, Oppo, Sony, ZTE and Xiaomi.

PORTUGAL

THAILANDQATAR

BAHRAIN

VENEZUELA

BRAZIL

Over 160.000.000 licenses of Precise Biometrics’ fingerprint algorithm solution Precise Match-On-Card issued to citizens worldwide

NATIONAL E-ID CARDS

BUSINESS MODEL & CUSTOMERS

Primary customers – sensor vendorsMarket solutions directly to OEM:s, other suppliers in the mobile eco-system and security companiesRevenues:

► Royalty► Annual license fee► Support and maintenance

SUMMARY OF 2016

INCREASED NET SALES AND PROFIT

Increased net sales by 73% and an operating profit of SEK 24.8 million - the company’s best year so far

110 mobile devices with Precise BioMatch Mobile were launched in 2016 – double the amount in the previous year

14 licensing agreements for the distribution of our fingerprint software – Qualcomm and Samsung LSI

Acquisition of NexID Biometrics for spoofdetection and liveness

Reinforced our position and developed our product range in the field of fingerprint software

Sales of Tactivo fell short of our expectations –sales primarily to US government agencies

ACQUISITION OF NEXID BIOMETRICS EXPANDS OUR OFFERING TO INCLUDE LIVENESS DETECTION

Acquisition of NexID Biometrics, a specialist in solutions for spoof detection and liveness

Expands our offering with a software-based solution for spoof and liveness detection that enhances security and meets customer demand to prevent fraud

Access to academic research and senior experts

The acquisition was financed by a private placement of shares, which raised SEK 47.2 million for the company

2016 IN NUMBERS

INCREASED NET SALES AND GROSS MARGIN

(SEK million)

Net sales increased by 73% to SEK 97.2 million

Sales in the Fingerprint Technology business area increased by 95.7% to SEK 83.3 million

Gross margin increased by 9.1 per cent to 78.8 per cent

Gross marginNet salesNet sales0%

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IMPROVED OPERATING PROFIT

(SEK million)

The operating profit improved to SEK 18.0 million, an improvement of SEK 27.4 million

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IMPROVED CASH FLOW FROM OPERATING ACTIVITIES

(SEK million)

Cash flow from operating activities improved to SEK 37.7 million

Cash and cash equivalents available of SEK 135.8 million at the year-end –includes SEK 50 million from new share issue

Acquisition cost of SEK 31.4 million was paid in February

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SUMMARY OF THE FIRST QUARTER 2017

NEW CUSTOMER AGREEMENTS & CONTINUED INVESTMENTS

FINANCIAL

Net sales for the period totaled SEK 19.2 (24.2) million

The operating loss for the period totaled SEK -2.7 (6.3) million

The gross margin during the quarter increased to 85.1% (81.8%)

Cash flow improved to SEK 17.1 (7.5) million

Cash and cash equivalents were SEK 119.2 (58.6) million at the end of the period

SIGNIFICANT EVENTS

During the quarter six mobile phones were launched with Precise BioMatchTM Mobile

Integration into mobile phone from a world-leading Chinese mobile phone manufacturer through a partnership with Silead

Extended licensing agreement with existing sensor customer with guaranteed licensing revenue of at least SEK 17.5 million

New licensing agreements with Zeitec and NXP

Completed acquisition of NexID Biometrics

SIGNIFICANT EVENTS AFTER THE FIRST QUARTER

Four mobile devices have so far been launched with Precise BioMatch Mobile

Licensing agreement with Melfas, a South Korean sensor manufacturer

Elan Microelectronics launched a payment card with fingerprint technology with our software – to be supplied to premium customers of a South Korean bank

OUTLOOK

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 2020The market for smart cards and other products expected to grow from end of 2017

CONTINUED FAST MARKET GROWTH - ~2.5BN UNITS IN 2020

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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

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Number of customers

TotalFPCOther customers

Decreasing sales to Fingerprint Cards

Increasing sales to other customers

Royalty revenue from nine customers

ONGOING REVENUE SHIFT IN BUSINESS AREA FINGERPRINT TECHNOLOGY

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Q1’16 Q1’17

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

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