Okay, I think we can get started. You can swap to the next slide. So dear shareholders, I would like to welcome you all to this presentation of our Q3 report. My name is Ulf Ritsvall. I'm the CEO of NEXT Biometrics. With me here today, I, of course, also have our CFO, Eirik Underthun. As most of you already know, since October 1, I'm the new CEO of NEXT Biometrics. Apart from giving you the latest update on our numbers and the progress in our operations, as today is my first report as CEO, I also look forward to introducing myself a bit more so you can get to know me better. But before that, I do that, I'd like to thank my predecessor, Peter Heuman, who played an important role in this turnaround of NEXT Biometrics.
Thanks to Peter's structured works, it's a financially healthy and well-capitalized company I will lead from now on. You can go to the next slide, please. Before I get started, I need to comment on the not at all satisfactory Q3 result. As a new CEO, and based on what I see in the pipeline and already orders booked for Q4 and onwards, I believe that this was the last slow quarter from NEXT. I would like to emphasize what I see is that 2024 will be a completely different year, and I will get back to you with more details in my outlook going forward. Now, let's take a look, quick look at our agenda. I would like to start with a brief introduction of myself. After that, I would like to give you an updated tour of the biometric market and our position on it.
After that, my colleague, Eirik, will walk you through the Q3 numbers. He will tell you all about the highlights and key figures. I will then present our key markets and outlook, maybe the most important part of this presentation. After that, we opening up for a Q&A. Okay, let's move on. Next slide, please. So who am I? Who is Ulf? What have I been doing before, and what should you expect from me? How come I was appointed the CEO of NEXT Biometrics and not somebody else? Okay, let me start by taking you through a little bit of my background. Many of you already know me, or at least have heard my name, or seen me in these presentations previously, as I've been working at NEXT for roughly two years.
I joined in 2021 as Head of Sales and Marketing, a role which felt very natural, as I've spent roughly the past 20, 25 years within the area of sales, marketing, business development. I've always been very curious person and had a strong interest in technology already as a kid. So when it was time for me to figure out what to do with my life, I went for a degree in engineering. Shortly after that, I started working at an employer, which I think most of you already know. I'm talking about the telecom company, LM Ericsson. Especially, I was with the affiliated company doing smartphones and consumer electronics in Lund, in the, in the south part of Sweden. Although I started off as an engineer, and I'm an engineer, I quickly understood that I was good in interacting with people.
Magic happened when I met people, the suppliers, vendors, the customers. So for example, I spent 3 years in South Korea. I hosted some 300 customer meetings with on one of the most difficult market and with the most difficult customers, Samsung and LG. When working at my previous company, FPC, I managed to win over and had a 100% market share in the smartphone industry in Japan. Four out of four. So this, in combination with my personality, has helped me to succeed. It has shaped me to the person I am today. People often tell me that I don't come across as a typical engineer, and perhaps I'm not. However, I can assure you that my background in engineering has been both essential and beneficial throughout the years in telecom and biometric industry.
To fully understand your customers and really help them with their pain points, knowing your competitors, as well as your own unique selling points and how to manage a team, is not simply enough today. The competition is fierce out there. The market is brutal. However, this of course, also means that once our partners and customers realize that we are as passionate as them about technology, this is usually the beginning of a very long relationship. What stands out with NEXT is that we take great pride in supporting our customers all the way through all the many different phases, including this industry, before the product is launched. And I'm delighted to tell you, most of our customers also say they choose us for our knowledgeable and supportive way of working. We always put the customer first....
Unique technology is, of course, needed if you want to compete on this market. But once that is in place, the customer also wants to know that they can trust NEXT, and NEXT products as security is key. This is how I am. Now you know a little bit more about me, what I'm capable, or what I do, and what I enjoy. So let's why not take a further look into where me and my colleagues spend our days? Next slide, please. So let me take you through the biometric market. Little bit recap, a little bit new information. Let's talk about the market. It's very large, and it, it exists around the globe. Very much of it, it is concentrated into a few areas, even though it's paving the way for market outside those areas.
The areas I'm thinking about is the geographical areas, India, China, Brazil, and Americas. These are the key areas, the largest markets when you look outside the smartphone and laptop segments. We develop our products to addressing four different market segments, which are within these geographical areas, and we serve them with different products since they have different requirements. We have pro- products within public security. That is public safety and security. High-security fingerprint sensors that prevents crime, fraud, and protect voting systems. We are also present in the payment and fintech segment. That is a global payment industry, including KYC, Know Your Customer, as well as point of sales terminals. For example, to be able to buy a train ticket in India, you actually need to put your fingertip on a biometric-enabled point-of-sales terminal, so you know that actually you book, and you bought, and you ride the train.
Pretty amazing. The third market segment we're selling products into is access control. This is access control for office buildings, schools, hotels, and other sensitive locations. We have a very nice example of that. We have a jewelry company using a unique active thermal technology from NEXT Biometrics for accepting personnel into the production site, as well as the warehouse. Fourth and last segment is the office and notebook area, where we had our first design win, and we have deployed quite a large number of laptops already. We are addressing this with higher security, higher requirements than the traditional, smaller, convenient sensors. So why address four segments? I think you can say it's four segments, but we address the complete and mostly of the B2B segment, where you have high security, and sensitive information that you need to, that needs to be protected.
So this is the biometric market and segments we are addressing with our unique active thermal technology. There's other technologies out there, similar types of market, but we have what we call sort of the big and bulky optical sensor. They are larger in size, they're image-based, and quite easy to spoof. On the other end, we have the capacitive sensors, which are traditionally very smaller. They are located in, for example, the laptop keyboard or the power button, which gives you very high convenience, but the security is actually slightly lower than the large active thermal sensors that we provide. We move to next slides . So we are very, very well positioned to capitalize on the market.
So now we understand a bit more about the market, how we are addressing it, and we are addressing with our disruptive active thermal technology. So we are, if you compare, addressing the market in between optical and capacitive technology, giving us a very unique possibility in this market, and we believe, and we see that this market is increasing every year. So our flagship FAP20 product is security certified by FBI, UIDAI, NIBSS, which is Nigeria, and it's also GSA approved, and I think you've heard previously, we're soon China ID certified. So we're taking it step by step into the different markets, and this is a great foundation and must-have requirements on the product to capitalize on this market.
The foundation with 44 secure design wins and volume contracts with key OEMs, original equipment manufacturers, is paving the way for future revenues. So the strategic partnership with OEMs and distributors have been implemented in a way to accelerate growth in the target geographical areas. Key for success is then extensive experience within the industry for NEXT teams. Next slide, please. So I think you've seen this in the blog before, trying to explain how the product. The product does not only show up on the market, they actually are developed in a certain process, and almost all OEMs follow the same process. It's a long journey from the design, from the idea to the design, to then the product hit the market. And we have rather complex design win process, where we recognize that the design win.
So let's, let's try to explain it a bit. If you see the slide in front of you, the OEM, our customer, or even our customer's customer, in the case we work with a system integrator, they design the product, they build it in a certain way with its unique features. It could be a, can be a specific form factor with a specific feature. It could be something else that they see as a unique selling point. They build a prototype of their, their idea. They understand they need a fingerprint sensor for their prototype. They contact NEXT Biometrics and active thermal technology fingerprint sensors. We provide them with a few samples, and they make a printed circuit board, which is inside all electronics today. It's the green board inside, where we are connected.
If successfully demonstrating this, they probably have selected us, and now we are actually designed in into the design itself, into the customer's design, and we can recognize the design win. We, we could potentially get a small purchase order in a small volume for those prototype builds, and depending on size, we recognize it as a design win. The OEM, the customer, will then start building and developing its prototype to actually a mass-produced, production-ready product. Once they finalize the mass production steps, we will actually see initial ramp-up of purchase orders, and we will see repeating sales orders in this stage. Then, of course, the OEM needs to say have their own sales channels, sales marketing resources, and sell their product to be successful on the market.
So this process is actually gone through with all the different 44 design wins we have, and they are in different steps and in different phases, all of them. This is. The key is that this is establishing a foundation for long-term growth. Sensors are designed into products with various life cycles. It can be years, and the stickiness of the active thermal technology products is great compared to smartphones, which lasts very short. Some design wins are more important than others, as there can be a high potential for revenue and volumes. I would like to hand over to Eirik for the Q3 highlights. Next slide, please.
Thank you, Ulf. Next, slide, please. So, I will run you through the Q3 financial highlights. During this quarter, we added three new design wins, and we are now at 44 accumulated design wins. As Ulf mentioned, Q3 was a slow quarter for NEXT, and the company had NOK 6 million in revenues. The reduction in revenues compared to earlier quarters is due to low notebook sensor shipments. The global laptop market is awaiting 2024, with new updated products that are based on the new Microsoft Windows version. Additionally, the new India L1 standard has been launched, but as expected, there was limited revenue in Q3 from India. We are expecting more in Q4 this year, and Ulf will talk more about that.
I think, as you remember, in contrast, there was a large order shipped in Q3 2022, so this compares to the previous year. In China, we are working on preparing for the FAP20 launch with partners and OEMs, and this is expected to provide revenues from Q4 onwards. During this quarter, we had an adjusted gross margin of 37%. Relating to finance and accounting, there was the following main highlights: Towards the end of the quarter, we completed a NOK 60 million private placement, and we also had some accounting one-offs on inventory and property, plant, and equipment during this quarter. NEXT booked a NOK 4 million inventory write-off.
This was mainly related to the expected end of life for India L0 related products, where we have a current inventory of L0 products with now reduced forecasted future sales volumes. NEXT also booked at 1.1 million kroner property, plant, and equipment impairment related to unused machinery. More importantly, you can see the graph on the right side, where we have summarized NEXT's annual revenue potential from notebooks, India, China, Asia, and design wins. To sum up, NEXT has had continued strong business development progress in China and India, which leaves us with a higher future revenue potential than what was communicated in Q2 2023. Next slide, please. On this slide, you can see the Q3 P&L and also the key indicators for our profitability and progress.
The revenues, as mentioned, were NOK 6 million during this quarter, compared to NOK 14.4 million in Q3 2022. The adjusted gross margin was 37%, compared to 38% last year. On operating expenses, we ended up with OpEx ex options of NOK 12.8 million, compared to NOK 13.4 million in Q3 2022. The adjusted EBITDA was -NOK 10.5 million, compared to -NOK 8 million in Q3 2022. On cash and cash flow, we already mentioned the private placement, raising NOK 60 million, and, and, with this private placement, we ended the quarter with cash of eighty-six point one million, compared to NOK 38.6 million at the end of Q2 2023, and the Q3 cash burn was NOK 9.7 million.
The main message from this quarter is that NEXT has continued low quarterly OpEx, and that we're still in the preparation phase for our shipment ramp-up. With this, I turn you over to Ulf again. Thank you.
Okay. Thank you, Eirik. Next slide, please. So let's move into the more future part. I think I've listed it, previous communication and new communication. So as mentioned, India is actually already taken off. We have a great momentum in India. We have a team of people in place, led by my colleague, DJ, who's also been in the industry for many years. A lot of momentum is not only driven by India's legacy of leapfrogging technology, but it also due to the upgrade of Aadhaar specification, as we have spoken about before. Earlier this year, the government of India decided to finally upgrade the Aadhaar system to the next generation security. That means security with improved hardware tampering and improved encryption.
But to make a very technical matter short and understandable, it actually means that as of right now, there's 4.5 million devices in the Indian market, in the Aadhaar ecosystem, that either needs to be replaced or upgraded to be compliant to the new security standard. On top of this, there's a new market with about 1.5-2.5 million devices annually. So will this not mean a lot of competition for Next? Well, yeah, it will, actually. However, any technology partner looking to be integrated into the Aadhaar must first make sure their products and corresponding integrations are L1 certified and accepted for the new security standard. Not everyone have received their L1 certificate yet. However, as of June 2024, the previous L0 certified product are not allowed to enter the market.
One of our partners, as communicated September 6, is actually L1 certified. So currently, L1 is deployed, moving from few open tenders today to over 40 in 12 months' time, and we see banks, post office already start using the new standard. NEXT has four customers in India, with the newly announced yesterday. Three out of them are currently in the certification process. Previously, this was a process that lasted about 1.5 years. However, we now have indications that Indian authorities are speeding up the process and enabling faster certification for our customers. As explained previously, NEXT's strategy involves local Indian OEMs. We sell active thermal sensors to this market and not end products, and when NEXT OEMs are in full operation, NEXT target 30% market share of this market. Next slide.
Moving over to the NEXT big market, and we have had a structured way of addressing this market. We have now secured sales channels, we have secured relevant OEM contracts, and on top of this, we have a new hire preparing for this acceleration of the Chinese market. We have seen an initial stocking order, and we're expecting initial launch late in Q4, early Q1, from the first China ID certification products. As you all know, China is a market that are highly competitive. However, NEXT has a unique feature due to our technology. Our technology is reading out the fingerprint with an active thermal technology, compared to the other technologies I spoke about earlier. We have a unique situation with an anti-spoofing feature, making sure that the system and the sensor itself can not as easily be spoofed as the other technologies.
Our sensors are most probably the highest security sensors of all fingerprint sensors out there. We are expecting the China ID certificate to be in place in end November, and we are expecting the initial stocking order from the Asian distributor communicated earlier, shortly thereafter. Let's move to next slide, please. So most important slide, I believe, the last slide. If Q3 was a slow quarter, Q4 will be more exciting. I have already significant orders booked in Q4, and I tend to say that we're expecting revenues north of NOK 50 million in Q4. And as we previously communicated, in Q1, Q3, we are targeting to be profitable. For the year, for full year 2024, contracts are secured, as you have heard and seen, for potentially reaching NOK 200 million .
That is a substantial growth compared to 2023, and it's because the foundation is now settled with the channels, the OEMs, and the ramp is now starting. Potential growth beyond this is, of course, large, both from already existing customers and new potential customers, and we are expecting 40% and above gross margin on all new contracts. We maintain the run rate of OpEx very low, about NOK 60 million per year. With this foundation, I'm thrilled, I'm excited for the next round, the next Q1, the next year. We are set to mid- to long-term success. Let's move on to the Q&A, if we have any questions out there.
Yeah, I have some questions that we have received, and it's still possible to enter questions in the Q&A or chat function in this webcast. So on China, you seem to be very excited about China. Why is that?
Two reasons. I visited China last month. I've spoken to the OEMs. They're eager to get started with our unique feature. During the Q3 , we have seen very good business progress with our partners. We have the first initial stocking order from WLZR, XM Holder , sorry, through the partner go-to-market partner, WLZR . During this quarter, we secured one design win coming from China. Again, on the Asian distributor, which is the larger game-changing contract, we've had very good progress in securing the launch of the first initial China ID certified product in Q1 from this, and we believe we will see a stocking order from the Asian distributor very, very soon.
Okay, we have a new question here. Okay, that's already answered on the orders for in Q4 from the Chinese distributor. Okay, and India. Earlier this year, you said India's Aadhaar program is upgrading its security to the next level, for forcing all ecosystem partners to meet stricter security requirements. What is the latest status in India right now?
So we've had our first Indian partner, called ACPL, our first customer. They became L1 certified during Q3. They have picked up a significant part of sensors from our distributor that we sold to them last year, actually. Certification process is now speeding up, and the three OEMs we see will be certified beginning of 2024. And the large Indian banks have already started these deployments of the tenders, which is the definitely sign of the waiting for a increasing from L0 to L1. And that's why I'm so excited about this, and the market is actually opening up for NEXT. The strategy we have is playing very well in our hands with the different OEMs.
Yeah, there's a new question here. It's about the US market. I saw the announcement on the GSA approval of NEXT sensors in the US. What's the recent status on the US market? Can you provide us an update on that?
Yes, U.S. market is one of the largest. We, they typically sell slightly larger sensors, but for the FAP20, which we now are FBI certified with, we actually have our Oyster out in the GSA ecosystem for trials, and we're expecting first is stocking orders from the distributor, but then actually deployment throughout the U.S. for access control for buildings, access control for computers in the near term.
Okay. There's a question about the active thermal technology. So you said that the active thermal sensors are superior to the other products out there in the market. What are the key factors that make this NEXT active thermal technology more secure than other competitors' solutions?
Thanks for a very good question. The fact that the sensor measurement is done with thermal, thermal technology, it needs to be made by human flesh and not dead material. Compared to other technologies, this is the unique selling point with NEXT Biometrics active thermal, and that is what the Chinese market is seeing, and that is what other countries are seeing in the different ecosystems.
Okay, we have a new questions. How, how long will it take to develop FAP30 or FAP40 or FAP50, and, and what will the cost be? And then there is also a related question about how large are the market for FAP30, FAP40, and FAP50 products, respectively?
Thanks for the question. Yeah, it will be, I will try to divide it. Development cycles, I mean, I'm new to my assignment, so I'm right now looking at the exact how we actually develop it in the fastest possible way. And I think we can do a lot of things with partners. And I actually have my lead hardware engineer in one of the vendors doing parts of our design tomorrow. So it's hard to say it will be within 3 months, 8 months, 2 years. It's very hard to say before we actually have the lining up the exact product plan.
Scaling this technology is fantastic since it's similar cost base, depending on the size of the actual sensor. Then I think the question was about how large the markets are. If you look at globally, FAP20 has the largest presence. FAP30 smaller. FAP30 and FAP40, FAP60 are mainly used in border controls, and of course, there's a limited number of border controls compared to the amount of police stations in China, where a police person have a tablet with a FAP20 product, China ID certified. There's a lot of more police stations in China than there are border controls. So I believe the market is still large with FAP20, FAP30, FAP40, FAP60, but it's not as large as the FAP20 size as we have today.
Did I answer all the question, Eirik? Were there more?
Yeah, we have some more questions, or at least one more question. But, I mean, I've probably it should be mentioned also that FAP20 is a standard FBI standard for the size of sensors, and FAP30 is a larger sensor with a higher security level than the FAP20, and 40, FAP40 is an even larger size sensor with even higher security and so on. So, also, what should be mentioned is that these are technologies and products that we are looking at, but no decision has been made whether we're gonna start developing this kind of product. But, it should be further analyzed and discussed internally before we will make any decisions.
When such a decision has been made, then obviously it will be communicated to the market. But here's the next question: "So I just saw the press release that was announced on a new NEXT management team with a enlarged management team. Can you elaborate on this? When do you think you can see the effects from this reorganization?
Thanks for a good question. Yes, I'm 30 days into my job, and my primary mission is, of course, to make this a profitable company and to accelerate the sales and the growth of that. As you've heard, India and China is the main market for NEXT, where we will grow the most. And to accelerate that, I've hired Joshua. He is a former colleague of mine. He knows the biometrics market. He knows the Chinese market very well. He knows the Asian distributor very well, and I'm expecting him to be up and running very quickly, within 1 or 1 to 3 months, with, we will see a significant contribution from him after that.
Joshua will be a part of the management team, reporting to me and taking care of the Southeast Asia. And then we have DJ, which I spoke about previously. He's been on the Indian market. He's been in NEXT for about one year. As you've seen, he's quite active, so we have quite a lot of press releases from him, and engagement in India, and paving the way going forward. He will now report directly to me and take care of the India business, as well as the Americas, EMEA. Thirdly, I have hired Marcus Lorén . He will be the Chief Product Officer.
He will be responsible for all product-related items, such as the software configuration, quality of the product, and make sure that we support the customers in the best possible way. Marcus will report to me. So we will have four people reporting to me. It will be Eirik, CFO, CPO, Marcus; it will be Head of Sales India, and Head of Sales China. So going forward, this is the management team I've set up, and I believe we will accelerate the 2024 business with this winning team.
We have no more questions.
Okay. Thank you. Thank you, all. Thanks for the questions. Thank for the, participants. If you have any questions, additional to this, my email is open. Please, email me, and, I wish you a great day ahead. Thank you very much!