Precise Biometrics AB (publ)

It's Wednesday the 14th of May and Precise Biometrics has just released their quarterly report for the first quarter of 2025. And with me is Joakim Nydemark, CEO of Precise Biometrics. How are you doing?

Yes, but it's good with me. How about you?

Yes, but it's brilliant here. Yes, you have just released your report here for the first quarter. What were the most important messages from your point of view?

I would say that we still have a good demand for our products. We have a customer flow, we write new customer agreements and we connect new partners to us. We have also made an agreement in India with our BioLive solution for what is called national ID, which is very exciting. Then if you look at the result, we are not really up to the growth that we have done in previous quarters. And I would say that it is to a very large extent, depending on the somewhat turbulent market situation that we are in right now.

Just that. And if we dive a little deeper into that, then you have had a nice suite here with five profitable quarter in a row with strong growth. Would you like to go in a little more on what is behind that? So that you now don't have a as strong quarter?

As you say, last year we had good growth and actually five quarters in a row. It may be natural that sooner or later there will be a small cut in the curve. That's how I want to see it, as a cut in the curve. It also depends on three factors in general, I would say. The first is the currency. We have a very large share of our income in US dollars. And we have our costs in Swedish kronor. And now we have a dollar that has lost almost 12% since the change of year. And of course it affects us. The other thing is that we Vi ser en liten försiktighet bland våra kunder i ljuset av tulldiskussionerna som pågår. Man är lite försiktigare med produktionen. Man har fortfarande Covid i färsk minne där you got an overproduction and ended up with large batches and you don't want to get into that situation again. So that's why you're a little reluctant and maybe a little lower in production than you should, of course, just because you want to see where it goes. And we have customers in both China and the USA who are affected by this. Then the third thing I want to highlight is that we have negotiated a customer agreement with one of our largest customers. Under Q1, it will have an effect. If you look at the whole year, the new contract will give us more revenue, so the contract is better. But it has an effect on the first quarter with about 1 million that we will get back in the coming quarter. So the effect in general is not there. So if you look at this together, the currency from Q1 2024 to Q1 2025, the value of the currency is 2.3 million. If you look at the currency effect and the customer agreement where the money actually comes back, then a adjusted EBITDA will end up at almost one million. So I think it's important that you see the whole thing there, that we continue to execute the business and are still positive for the rest of this year.

That's right. The macro-factors and the effects of the war can't do much about it, and of course it affects your customers as well as many other company customers. What does the cost picture look like for the company? Because that's something that you can influence yourself. And how do you see it changing here, if it will change during the rest of the year?

And if you look at the comparison with the first quarter of last year, we have increased the costs a little. But what has happened is that we have increased our sales power, we have more resources for sales and marketing, we have increased on the technical side towards our customer projects to be able to handle the increase in the number of customer projects that we have. fått och ser här framåt. Vi har även etablerat oss i Norge säljmässigt. Så det är ett antal saker här som har skett som kommer att få effekt här under detta året på ett positivt sätt. Parallellt med det så jobbar vi fortsatt med optimeringar av våra kostnader, omförhandlingar av leverantörsavtal och annat. Så att nettoförändringen här i kostnaderna är ändå... I would say quite small on the margin over time, but with that large increase we will have with this increased power forward.

So you are not expecting any further increases in the cost mass during the year?

No, what we see now is that we have a load that somehow reflects this business and what we see forward.

I also read in the report that you have made an exciting breakthrough in India, and you write a little more about your anti-spoof product BioLive. Can you tell us a little more about these two things and what it means for the company in the future?

Det är väldigt spännande. Det finns ju det som heter nationalt ID som används av väldigt många bland annat i Indien. Det som har hänt, och det bygger på biometri, det som hände i slutet av förra året var att man spoofade det här systemet, eller man hackade, skulle man kunna säga, vilket innebar att Myndigheterna drog tillbaka, inte drog tillbaka kanske, men backade tillbaka vad det gällde specifikationen och höjde då den här nivån ganska så markant på vad de här lösningarna skulle kunna leverera. Och så kom man ut med en ny specifikation för det och baserat på den tydligt då tuffare specifikationen så har vi tillsammans med en partner nu kvalificerat oss för det här ad hoc-programmet då som det heter. And what is very exciting about this is that, of course, the Indian market is big and has good potential. But it's not like it only exists in India, but there are solutions for this both in Southeast Asia, North Africa and South America. So we see the potential here as good. So we are very positive and optimistic about what this will be able to do.

Exciting. Ultralight-based mobile phones have also been described as a growing market and an area that Precise Biometrics is strong on. Is it still true and do you see any effect of this ongoing war on that part of your market?

Definitely continued growth in this area, I would say. I have touched on this in a previous report. It is about a new generation of displays that drives the use of this type of new sensors, ultraviolet based. And we see that trend continue. And as always when new technology comes in, it usually starts in these flagship models and the more expensive models, and then it bubbles down. And that's it, if we look one to two years ahead, we see that this is what will happen, that you will increase the use of A-ultra-EV sensors in the various segments of mobile phones. Så efterfrågan på detta ser vi definitivt bra på även framåt. Absolutely, there has been an impact here that has affected us during the first quarter. But we see it as a rather temporary, temporary, what shall I say, sustainability. We continue to see very positively throughout the year and see that we have good opportunities to have good development in this year.

When I have interviewed you in connection with previous quarterly reports, you have expressed a hope for stronger growth for digital identity in your other business area. What do you see there? What is happening right now? What measures have you taken and what results have you given?

I am definitely not satisfied with the growth in digital identity. With that said, there is a lot that has happened in the last two quarters that we do not really see the effects of. We have increased sales power, we have established ourselves in Norway, we have made a packaging of the products to increase the value towards our customers. We have new products that have come in, so all of that combined with the measures that we see will drive the distribution forward. What we have seen as a little paradox here in what is happening is that For our visit solution, we go from what we call on-premises solutions typically to an online solution. And in that migration, in parallel with a new sale, we have a migration of old customers to online. And when we do that migration, there is a certain loss of customers, those who do not want to participate in it. Why do we do that? With an online solution, we get a completely different scale effect in this product. We get the opportunity to work with updates and upgrades in a completely different way. We can add much more value, which we can also pay more for over time. In a way, the shift is incredibly important for us. And that's what we see happening here now forward. So I'm still optimistic about this case. There is actually one more thing I can mention, and that is that if you look at the agreements that we have written here during last year, but that we have under negotiation here now also forward, then we have a number of large corporations that we have signed today. som ett ramavtal med. Och de här ramavtalen då är det ju, de avropas ju så att då tecknar vi ett avtal med en stor koncern och låt oss säga att de har 100 kontor runt om i världen. Då sätter man liksom formerna för vad kostnaden är, vad som ska levereras och så vidare. Och sen när avtalet är klart så innebär inte det på en dag ett att det är 100 kontor som är uppe och snurrar utan sen kommer detta att införas över tid. Och det är det vi ser här också att vi Vi har en god möjlighet att öka på intäkterna framåt i kölvattnet av de ramavtal. Det är väldigt mycket som händer på det området som jag tycker talar för att vi är på en bra väg.

Exciting. We are going to start this conversation here for landing. If we are to summarize, then still talk about the future prospects a little here. How do you see the attractiveness and relevance in your offer? Is there anything that has changed here during the first quarter and that you are adjusting the course and direction forward for? Or is it just to continue executing on the plan you have laid out?

Jag skulle säga att vi fortsätter exekvera på den planen som är lagd. Vi ser snarare en ökad efterfrågan givet de market trender och den osäkerhet som finns i världen nu där många företag och Yes, individuals and people in general are more and more interested in increasing security. Whether it's by logging into computers or phones where you don't want to be exposed to a cyber attack, or it's about access to buildings and other things, we see a... en ökad attraktionskraft för den typen av lösningar. Sen så har vi naturligtvis sett en viss återhållsamhet här under Q1 men min bedömning är att vi kommer att svänga tillbaka där saker och ting tenderar att gå ganska fort och jag är väldigt hoppfull här om resten av året.

As I understood you correctly, based on the outfall in the first quarter, you are still positive, you have a nice pipeline, you will turn back to profitability hopefully quite soon under 2025?

I think that the limbo that the world has had during the first quarter will turn back a bit. So we will see a change to the positive here in the future. We have a plan that is in place. We have made a number of measures both on the product side but also with increased energy and so on, as I mentioned earlier. And all that combined, I think we stand strong in our offer and in the relationship we have with our partners. So the plan is still there. Growth, profitability, that's what counts even in 2025.

Du är en optimist, det gillar vi att höra i de här tiderna av osäkerhet. Tack så mycket Joakim Nydmark och jag vill också uppmärksamma tittarna på att ni idag på rapportdagen också kommer hålla en livesend frågestund med dig Joakim och bolagets CFO Maria Wester here in the afternoon for those of you who are interested in being live. Then you can ask your questions directly in the live chat, right?

That is absolutely excellent. So look forward to meeting as many as possible.

Awesome. Thank you again, Joakim Nydemark. Thank you.