Good morning, and welcome, everyone. Great to see that we have so many participants. Welcome to this webcast, where we will introduce the quarter one results for NEXT Biometrics. I'm Peter Heuman, I'm the CEO, and with me I also have our CFO, Eirik Underthun. The material we will run through here today is also available already now on nextbiometrics.com. We will end today with a Q&A session, and you are free to send us, me or Eirik or to the events at nextbiometrics.com some questions, but even better, if you're here in the webcast, you can put the questions directly into the chat function here, and we will try to cater for all those questions by the end of the session.
Once again, welcome, and I think we try to get started, Andrea. If you go to the agenda slide. I'm gonna start off today, provide you with some reflections and a short update on the business for quarter one, while Eirik will run through the actual report. Then at the end, I'm gonna give you a little bit of what you can expect from us in the coming quarters in an outlook, and we end with a Q&A session. With no further ado, let's go to the next slide and get started.
While you are probably looking at this slide, I wanted to say that, you know, it's been obviously quite a challenging quarter for us, which is, you know, almost frustrating when you look at our performance of some of the most important KPIs. I mean, it is becoming a bit frustrating when we don't deliver higher revenues in this quarter, not delivering enough design wins either. Having that said, you know, I still feel very confident that we are executing in the right direction to make this company both profitable and successful.
I say that because if you then look at, yes, we did only book one large design win early in quarter one, and that was the India OEM, and we're gonna talk more about that later today. If you now look into quarter two here, we have already scored three design wins during the first month of quarter two. We are up to four design wins when we are starting off in May. As you know, we have communicated that we're gonna try to make sure that we keep an average pace of three design wins per quarter. That means that there are three new customers, new products that are integrating our sensors into their product.
Sitting here now in early quarter two, we already have four new design wins, and yes, we could only book one of them in quarter one, but I feel confident that by the end of quarter two, because we have so much time left of quarter two, and I can see what we have in the funnel, I feel that we're gonna be on our target average rate of design wins when we end quarter two. For quarter one, yes, a little bit frustrating, but do we execute in the right and continue to execute in the right direction? That's where I feel confident. Like I said, it's a bit frustrating as well, of course, that the revenue is not higher.
We book NOK 10.2 million this quarter, and of course, we could have booked a little bit more if we wouldn't have been challenged by the global supply chain challenges. In particular, it is the microcontrollers where we are challenged a little bit. I would actually say that we are in less of a challenge compared to many of our new customers. We have 28 design wins to date, but we see more and more that many of our customers, they also face this challenge, meaning they do not get enough components to build their product, even if we can supply them with our sensor. Hence, they are delaying their orders and we can't ship and book that as revenue.
That's a little bit where the frustration from my CEO perspective arrives, but why I also tell you that I feel confident that we are executing in the right direction. Gross margin this quarter, since the volume is rather low, is also a little bit lower and it depends on, as many of you who have followed us for a while now, you would know that very much depending on the number of FAP20s shipped in a quarter, that will influence our margin quite a bit. This quarter it was a little bit less of shipped FAP20s and more of standard sensors, where we have a little bit lower gross margin, and that's why you see that in the report. We still keep our low cost level.
I think Eirik will talk more about this, and I think one of the best indicators for this quarter, while these other figures look like they do, I mean, we have not burned a lot of cash at all. I think it's NOK 7.5 million looking at quarter one, but I think Eirik will come back to that. With that, Andrea, I think we should move into the next slide. I have two slides, I'm gonna try to run them through rather quickly, but I thought it could be interesting for you to understand where do we then ship? What kind of products are we talking about when we are talking design wins? Here I have two slides. I'm just gonna quickly give you a little bit of insight so you understand where are our sensors used.
This is one of the most recent design win, and it's related to Africa and an agricultural financial inclusion case. Here is the product from a company called Waxed Mobile. They're gonna start to launch in Nigeria, which is, as you might know, a very large African country with, I think, around 200 million citizens. This product will be used in management of microfinancing for farmers and create the cashless agriculture ecosystem. That's what they are doing. The good thing with this is that, as you can see on this quite rugged product, but you can probably understand why it needs to look and be a rather rugged product when you are in this use case. You see that they are using double FAP20 sensors from NEXT Biometrics.
If we are lucky enough that this product starts to take off for Waxed Mobile, then we can ship them for every product, two sensors. It's a FAP20 sensor, so that's good. I think we've, as you might have seen earlier, we have sent out press releases that we were first being certified and passing regulatory approval in Nigeria. It's something called NIBSS certification. Due to that our sensor was already certified in Nigeria, Waxed Mobile could easily pick NEXT Biometrics and put our sensors into their product. Okay. I think we can have a quick look at the next design win that we recently announced.
Yeah, I don't think this is gonna be the largest potential volume driver, but I find it an interesting use case, and this is also from an already existing customer, Televic, in Belgium. They have already bought sensors from us at NEXT Biometrics that was for a product used in a voting system for the Turkish parliament. Since they then believe that our sensors are working well and fits their solutions, they are now building a second product with where they are integrating our FAP20 sensor. This use case is a access control, within access control. They are linking their CCTV cameras in a jewelry chain, where they do that in the shops, in the manufacturing, and in warehouse.
Where you have high-end goods that needs high security to be able to enter the shops or for the people working in the manufacturing or in the warehouse, et cetera, they link the camera with a fingerprint biometric verification, and then they can keep a good security around this. It's a leading European jewelry chain. They are based in three countries, and they are gonna try to expand this and then include this solution in there. But like I said, I don't think you're gonna see the biggest volume. This as a very large volume driver, but I find it very interesting that we have an existing customer building yet another product and picking NEXT Biometrics. I think that's something that we bring with us as a very positive.
That was two quick use cases of design wins that we have recently won. Andrea, if you go to the next slide. I think another important part that we and why I say that I think we're executing in the right direction is something I wanna and that we have executed upon during quarter one is how we could in an efficient way scale up our sales capabilities both in improving our market reach as well as without building up a lot more OpEx or binding capital in the company. How can we do that? What we have done is that we have signed contracts with two distributors biometric distributors in two interesting markets. The first one is the distributor in Brazil which is I think the third-largest biometric market globally.
They have a large installed base of primarily optical sensors, and that's where we also believe that our technology fits very well to start to compete with. The market need is high since there is a lot of security around Brazil. There are many use cases, so we think it has some potential there. The distributor itself is already experienced, and they have already existing biometric business volumes. We have signed an agreement, we are training their staff, and we hope, and we start to see that our funnel is increasing a little bit by working through these distributors. The other market is Vietnam, where we have signed with another biometric distributor. It's a little bit different use cases.
It's an up-and-coming biometric market, but it's a large country again, and it's mainly related to governmental authentication and identification of citizens in the market. This distributor, again, has already existing biometric volumes that they are driving. You know, I think this is a way for us with limited resources to try in smart ways to scale our business. I hope I will come back here, hopefully during the second part of this year, where we can inform you about our first wins coming via these distributors. I think it's in good activity and good execution by the team that we have managed to get this in place during quarter one. Okay. With that, I think I will hand over to Eirik, and he will run you through the numbers. You can change slide, Andrea.
Thank you. Next slide, please. We now turn to the financial figures for quarter one, 2022. The revenues were NOK 10.2 million in the quarter. This was versus NOK 14.1 million in quarter one, 2021. The NEXT revenues continued to be impacted by the semiconductor shortage, particularly in the PC sensor segment. Quarterly revenues would have been NOK 18.2 million if all components had been available. NEXT gross margin was 21% during the quarter. In comparison, the gross margin was 27% in quarter one, 2021. The product mix that we had in quarter one, 2022 was less favorable than the product mix in the same quarter last year, but also compared to quarter four, 2021.
The OpEx options was NOK 14.0 million versus NOK 14.9 million in the quarter last year. The adjusted EBITDA was - NOK 11.1 million, which is similar to last year. As you understand, the cash burn was low in the quarter, both as a result of continued low OpEx, but also as a favorable development in the working capital. NEXT had a cash position of NOK 94.7 million at the end of quarter one, 2022. To summarize, NEXT experienced a temporary softness in gross margin due to the product mix, and there was a low quarterly cash burn with only NOK 7.5 million. Next slide, please.
The Q1 takeaways, as you can see, we have continued to have a low operating cost, and we're below the NOK 15 million per quarter target and continue to operate in this at this level. The cash burn was only -NOK 7.5 million, confirming the positive trend that started in 2021. On design wins, we achieved one design win in the quarter, but then already now, as per today, we have four design wins year to date. We added two distributors with focus on two different promising large biometric markets. In summary, operating cost, operating cash flow, and design wins continue to trend in the right direction. Thank you. I turn to Peter.
All right. Thank you, Eirik. On there, we can move to the next slide. Very good. We can move yet another slide, so we get to the outlook. I will try to brief you here. If you look, if we now, as quarter one has already passed, and we look into a little bit of the future and what you should expect from us, of course, you should expect that by end of quarter two already, we should be very close to our average three design wins per quarter. As you heard, and as we have both communicated, me and Eirik, we are already at four design wins. Should we keep our average, we should have six design wins by end of quarter two.
That leads us driving towards we ended 2021 with 24 design wins. If we keep our pace, you should be able to expect us to deliver around 36 total design wins by end of 2022. I think we are heading in the right direction, looking at the first three, four months and we are doing everything we can to live up to this KPI. I think it's really the foundation for us to scale up NEXT Biometrics. Like I also communicated here earlier, we have added now two distributors in two interesting markets. It's gonna take a little bit of time before we have trained them, before they have filled their funnel with cases that can materialize.
I think we are expecting, you should expect us to start to deliver some news around these initial deals during the second half of 2022 at least. Just briefly coming back, I find it very important, it's around some of our historic press releases around partners. We talked quite a lot about this during our quarter four, about the potential we have with our new go-to-market in India, where we are now working with two large players, and they are well-positioned for the India market. Our customers are sitting there waiting, running through biometric certification, validation, and testing that is currently ongoing. That's to get the government approval to enter the India market under the new regulatory certification program by the authorities of India. This is all heading fairly well.
What concerns me is point number two here, and that is when the authorities finally will launch what they call then the L1 certification for all these companies to start to ship volumes into the market. This is already delayed due to primarily COVID in India with almost a year or around a year. I do see risk of further delays because what's included in this government certifications in India is that the biometric providers need to use also a Buy India authority certified microcontroller. Then as you understand, there is a global challenge, particularly around microcontrollers, so-called MCUs. I do see a risk that we're gonna see further delays even though our partners are being certified and they can use the certified MCUs connected to the sensors they are buying from us, so they can have a ready-to-go product.
If they can't get enough of these certified MCUs, then the authorities cannot launch. I think the whole program in India is somewhat delayed due to, first it was delayed due to COVID, now it's getting delayed too, because even if all the product manufacturers and the authorities, even if everyone wants to launch, if they don't have enough MCUs available, and line of sight when they will have those volumes, that speaks to that we're gonna see a somewhat further delay. Unfortunately, I think for us, that we, I say it more because I think we have a tremendous good position, and we have good partners, customers that we are working with locally, that we have introduced to you. We believe that this is gonna be potentially large volume. It is a large volume market.
Unfortunately, we most probably gonna have to see a little bit further delay in this important market. I think that goes to how I started today a little bit. Of course, it's a little bit frustrating feeling that we are executing in the right direction, bringing these design wins. Still we can't give you as shareholders what I would say high enough revenues coming out of these. This is somewhat of the explanation for why, but I still believe the day they launch, I think we are in a very good position. I think with that, we should start to round off. You have heard about the new distributors. We see an improved funnel in the company.
We have interesting customer targets and design wins in our funnel, and we think we can add that up even further, starting to execute with these initial two distributors, and we might even come with further distributors during 2022. With that, Eirik, I think we are more or less done with the presentation for today, and I think we should start to open up for a Q&A. I believe you have some questions already.
Thank you, Peter. We still have the possibility to enter the questions on the chat function here in this webcast. Please add your question if you have any. We will continue as long as we have new questions coming in. Peter, I mean, how do you view this quarterly report?
Yeah. I think, like I started, Eirik, I'm not gonna say too much around it. Yeah, I think for those of you who are here, you heard I said, you know, underneath I feel confident that we are executing in the right direction. Of course it's a bit frustrating that we can't get the revenues on the right level. There are things here that I don't wanna use it as an excuse. I have the confidence we are doing the right thing. Of course, I will be very happy the day India is opening up so we can enter the L1 market. When the global MCU and supply chain challenges are gone, 'cause I think they are influencing, unfortunately, not only us, but many companies, but for us it's so obvious.
I would love to see that open up and ease up, and then I think we're gonna bear the fruit of well-executed direction that we are in. I think that's a little bit how I will summarize it.
Thank you, Peter. The next question is related to the Televic design win on the jewelry chain. Can it really be any high volumes on this design win?
Oh, let's see. No, it's a good question, Eirik. You know, to be honest, no, I don't see that this is gonna be a major volume driver. I think we're gonna see a small to mid-size volume customer. What I take away from the Televic customer is actually, and that use case that I introduced today, is rather more the confidence it provides to me and our organization that our product is good, solid, and working well. Because if a customer already build a product and then decide to build yet another one and continue with our FAP20 sensor, I think that's one of the best proof points we can get that we have a solid product. I think that's more important for me looking at that specific use case.
Right. Here comes the next question. It was interesting to hear about your new distributors. What kind of volumes and business do you think you can get from these these players?
Yeah, good question again. Yeah, you know, I can't say any specifics around what we should expect from the distributors. You know, when I hired Ulf Ritsvall, who's now heading our sales and marketing, when he arrived with his experience from the biometric market, this was one of his main focus and proposals to do, and he started the execution of that. I think we're gonna have to come back in, like I said, maybe during second half of this year. I think that's when we're gonna start to see the initial deals coming in. I start to see a little bit how it influence, in a positive way, our funnel, but I wanna see how it materializes before I guide or dare to guide anything on it.
I think it is a very good way for a small company like us, which should mainly make sure that we develop and ship very good solid product to our customers, that this could be a good and smart way to scale up and get a better market reach. I'm gonna try to come back during the second half of this year, hopefully with some of the first design wins arriving from these distributors and then maybe I can try to have some kind of guiding of what we should expect in terms of both number of distributors and markets we're gonna try to focus on and what they potentially can bring.
Yeah, I got another question. This is about the supply chain challenges. How large are your customers' supply chain challenges? How many NEXT customers or percentage of quarterly business volume is affected?
Yeah. Yeah, that's a very good question. You know, a percentage I wouldn't say because this is also, you know, more soft information we get through all the communication we have with these or so soon 30 product companies that have decided to bring our sensors in. Clearly, I mean, like I spent quite a bit of time here talking about India, where it's now mainly held back a little bit due to the global supply chain challenges related to microcontrollers. I mean, the day the Indian authorities and our customers there can feel confident that they can have supply of this, I mean, in quarter four, we talked about the total market in India and what the potential is there, where we are working with two of the potentially five largest companies now.
For us, it has a tremendous potential, but we need to see that opens up. I think, like I said, I'm less worried about our own challenges rather than for some of these customers that we have introduced to you as shareholders. I think this India-related one, what I mean is the tech giant that we have talked quite a bit about historically, who are in a very good position there, and then these other India OEM that we introduced here in quarter one. Another example that I think I touched upon during quarter four that timeframe was the crypto wallet with the Belgian company, NGRAVE, and I know that he is challenged.
I mean, he has a waiting list on his website with customers who are buying his product, just waiting for him to ship. But he can't build more than he has components, and he has a challenge finding them. That, you know, that might also be a company who can take off in a very positive direction. I can say when these global supply chain challenges arrived, I think I was worried about our capability towards some of our main customers. Today I'm a little bit more concerned over our customers' capability of finding the components required for them to build their products, because it's only when they can build their product that they will place the orders with us. That was maybe a long answer to a shorter question. Sorry for that. We have another?
Yes, there is a follow-up here as well, on the tech giant. When do you think the next order will come?
Yeah, I think the biggest volume potential with the tech giant that we have communicated and like I have earlier today is related to India. There are some other use cases and products that we are in dialogue with them about, but I don't wanna say exactly when and so you should expect, but I think the largest volume potential through that contract is related to India. There we have to wait and see when the authorities are finally launching this new certification.
Right. There is a question about India again. Can you say something about the potential in India when it finally comes? How many sensors can it be in the total market? Is it possible that NEXT can take 30%-50% of this market together with its partners?
I think we communicated quite a bit around this during quarter four, but to put it in some perspective, there are two things that's gonna happen when this new certification launch in India. First of all, there will be a long-term replacement of the existing biometric products, and there we are talking, you know, up to tens of millions of products. On a yearly basis, historically, under the current license, you have at least biometric products sold in the millions. Everything between NOK 3 million-NOK 6 million, I think, is at least not an overestimation. It's a good question. This is kind of the potential market, which is for us very big then. Like we have explained what we have done, we have partnered with two large players. There are mainly five companies who are providing these volumes.
Two of them have now decided to work with NEXT Biometrics on the new certification. The tech giant, for example, you know, I don't know what exact market share that we through our partners can gain out of that volume. I know for sure that the tech giant is a large company enough, so they are not gonna go for, you know, a 1%, 2% market share. They are probably gonna go for at least a double-digit market share of that volume. The other India OEM already historically looking at the current certification has a double-digit market share of that volume.
I think in combination with those two and when that launches, and we succeed with them, there is a great potential to at least be part of a potential somewhere double-digit market share coming from these partners. I think that maybe guides a little bit in terms of volume, market share potential and with respect to the partners we have chosen to work with.
There are no further questions. If you have a question, then please enter it through the chat function. Otherwise, we will shortly finish this session. Thank you.
Yeah. Eirik, I think we should finish the session and close, and we thank everyone who have attended. If there's any question coming, you know, feel free to connect with me or Eirik directly, and we're gonna try to cater for any questions you might have. Thank you everyone for joining.