Good morning, and welcome to the Precise Biometrics Q2 2022 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing Star then zero on your telephone keypad. After today's presentation, there will be an opportunity to ask questions. To ask a question, you will press Star then one on your telephone keypad. To withdraw your question, please press Star then two. Please note, this event is being recorded. I would now like to turn the conference over to Patrick Höijer, CEO, and Annika Freij, CFO. Please go ahead.
Good morning, everyone, and thank you for joining today's conference call to present Precise Biometrics results for the second quarter of 2022. I am Patrick Höijer, recently appointed CEO of Precise. With me today, I have our CFO, Annika Freij. Before we switch slide, let me start by reflecting on my first month as CEO of Precise. I can conclude that I'm proud to run a company that is performing well in a turbulent environment. Both our Digital Identity and our Algo business segment show a strong Q2 and are growing compared to the same period last year. We also achieved a turn to a positive EBITDA for the quarter and for the first six months of 2022. Therefore, I feel privileged to guide you through the second quarter reporting today.
With that, please turn to slide number two. During Q2, we saw a decrease globally in the demand for smartphones. However, the early reported component shortage has improved in Q2, and we have continued to secure new projects with existing partners during the last 12 months. While we see a good revenue development, Algo revenue in total grows to SEK 19.1 million compared to SEK 17.5 million last year. We have seen a good demand for visitor management system in the quarter. In fact, during the quarter, we achieved the best software sales in EastCoast so far. This is a result of more employees returning to the offices, which drives the demand for convenient solutions for visitor management. In total, we grow revenue within Digital Identity to SEK 5.5 million compared to SEK 1.2 million last year.
This means that we are continuing to grow our recurring revenues in line with our ambition. In total, our revenue grew to SEK 24.6 million with a positive EBITDA of SEK 4.9 million versus last year where we had a negative EBITDA of SEK 0.8 million. As we communicated this Wednesday, our commercial partner, Egis Technology, has decided to make a strategic investment in Precise. In connection with this investment, we are also enabling for existing shareholders to partake in a rights issue subject to the AGM approval, of course. This is truly exciting, I have to say, as it gives us a significantly strengthened financial position, which together with Egis as a long-term industrial owner, will strengthen our ability to deliver on our strategic growth agenda. Please turn to slide number three.
Before we head to the segment updates, I think it's important as new CEO to remind us all of the core vision of Precise. This vision applies to both of our product segments. We focus our business around identification. Identification for the user must of course be done in a secure way, but to make sure that the solution is used by all parts of the trust chain, especially the end user, it must also be easy and convenient to use. This is why we have developed our identification solutions with a strong foundation in biometrics, always with the end user in mind.
After my first month as CEO of Precise, it is clear to me that the company has built up a global excellence in biometrics over a very long time and a good ability to apply it to multiple biometric applications. Taking this together, this provides a strong platform to continue to commercialize in line with our communicated strategy. Using our solution, she or he should know that no matter who you are, where you are, and what you do, you are the key. Please turn to the next slide. Our Algo business is truly demonstrating a robust business model in Q2. As stated earlier, there are overall in the industry a reduced demand for mobile phones due to the macroeconomic situation. However, the availability of components which has been flagged early quarters have improved.
In total, including new won projects during the last 12 months, it has contributed to our Algo revenues increasing despite this turbulence in the market. In Algo, we see growth in revenues for the second quarter to SEK 19.1 million from SEK 17.5 million last year with good margins. Furthermore, we maintain market share by continuing to win new projects with our strategic partners. I think some good examples is on this slide, and illustrated by the two projects we won, with our partner Qualcomm, the vivo X80 Pro and the iQOO 10 Pro. Please turn to slide number five. In the Digital Identity segment, we are focusing on growing our recurring revenue. As we touched upon earlier, we continue to grow our recurring revenue from our SaaS business in Q2.
As stated, the return of many businesses to working from the office has driven demand for visitor management systems. EastCoast achieving its best ever single quarter in terms of new sales. As communicated before, our focus within Digital Identity is the biometric physical access solution. We are seeing increased adoption of biometric access solutions, especially in verticals such as gym and construction sites, which I believe is a clear proof point that our solution is solving a clear customer demand. This quarter, we are completing new unique installation for customers like Algeco and Iver, just to mention two. Revenue grows to SEK 5.5 million in Q2 from SEK 1.2 million in 2021. This is primarily driven by EastCoast now being part of our family.
On the commercial side, we continue to have close dialogues with customers and partners, not least regarding further integration between our YOUNiQ and our EastCoast solutions. Please, now turn to slide number six, and over to you, Annika, for a financial walkthrough.
Thank you, Patrick. We are happy to present another quarter with growth in both our product segments despite the turbulent world. In the Digital Identity segment, we continue to integrate EastCoast and YOUNiQ, both from a product perspective and from an organizational perspective. Our strategy continues, where the profitable Algo segment is funding the development of the Digital Identity segment. Please turn to page seven. Net sales during the quarter were SEK 24.6 million versus SEK 18.7 million previous year. Net sales were split between royalty revenues of SEK 7.1 million versus SEK 7.0 million previous year. License fees, including supported maintenance of SEK 15.7 million versus SEK 9.2 million previous year, and other of SEK 1.9 million versus SEK 2.4 million previous year.
The Digital Identity segment has increased with the acquisition of East Coast that was done the 30th of November last year. Net sales for segment Digital Identity were SEK 5.5 million versus SEK 1.2 million last year. The increase depends mainly on East Coast, which contributed with a net sales of SEK 4.5 million. Gross margin for the segment was 43.4%. The margin for Digital Identity is lower than the Algo segment due to margins on hardware is a lot lower than on software. The Algo segment is healthy and profitable, delivering a strong cash flow. Net sales for segment Algo was SEK 19.1 million versus SEK 17.5 million previous year. Last year's component shortage in Q2 was replaced by declining demand for mobile phones during Q2 this year, which has resulted in low production volumes in the mobile market.
License fees increased compared with the second quarter of 2021, driven primarily by new customers in the automotive industry and increase in customers in the mobile industry. The gross margin during the quarter totaled 87.9%. Total gross margin during the quarter was 78% versus 73.3% previous year. The improvement in gross margin is due to higher sales, while costs are only increasing marginally. Total amortization of capitalized development expenses was SEK 3.5 million compared to SEK 2.9 million previous year. The increase in amortization of development expenses relates primarily to EastCoast. Amortization of acquired intangible assets was SEK 0.3 million compared to SEK 0.2 million previous year. Please turn to page eight. The profit at EBITDA level was SEK 0.9 million in Q2 versus - SEK 0.8 million previous year.
Operating expenses for the quarter increased to SEK 23.3 million versus SEK 18.3 million previous year. The increase in operating expenses is explained primarily by the added cost for EastCoast. Earnings per share for the quarter was -SEK 0.11 versus -SEK 0.13 in quarter two last year. The operating loss for the quarter was -SEK 4.1 million versus -SEK 4.6 million previous year. The slightly improved operating profit can be explained by higher net sales, although these are offset by the higher cost level. Please turn to page nine. The cash flow for the quarter from current operation was SEK 3 million versus -SEK 1.6 million last year. Of this, SEK 2.4 million is due to changes in working capital.
The group invested SEK 0.3 million in property, plant, and equipment during the quarter versus SEK 2 million last year. Total cash flow for the period was -SEK 3.3 million versus -SEK 7.9 million previous year. Capitalization and amortization of development work. Development expenses of SEK 5.6 million were capitalized during the quarter compared to SEK 4.2 million in Q2 last year. Amortization of capitalized development expenses was SEK 3.5 million during the quarter versus SEK 2.9 million previous year. Capitalized expenses are amortized over a three-year period for Algo as well as for Digital Identity. Cash and cash equivalents at the end of the period totaled SEK 54.6 million compared to SEK 62.5 million last year. The cash position will strengthen during the second half of the year after Egis's strategic investment in Precise and the rights issue. Back to you, Patrick.
Thank you, Annika. As already stated, we have continued the year in a strong manner where we have grown our recurring and SaaS revenues and our license revenues despite the challenging macroeconomic development. Before I summarize the key takeaways from this quarter, I would like to go through the overall strategy of Precise, which we announced already in December last year. I would also like to further emphasize the positive implication of the investments by Egis Technology and the proposed shares issued to existing shareholders. Please turn to slide number 11. Let's start by looking at the DI segment. Our progress and growth within DI is not a coincidence.
We have and will continue to work according to the strategy agenda presented in December, where we continue to expand our customer base organically by securing that our products are integrated with existing platforms and security companies in the market we operate in. We continue to integrate our two product families, YOUNiQ and EastCoast, both from a technical as well as from a sales perspective. Further, we are continuously evaluating strategic partnerships to address new geographies and new market verticals when opportunities arise. We are also open to look at further potential acquisitions when opportunities present themselves, as we have proven that we can work fast to integrate new acquisitions, such as the recent addition of EastCoast to the Precise family. Please turn to the next slide.
Our Algo business provide a balanced and resilient product portfolio, which is clearly demonstrated by our performance in Q2. Our strategy includes focus on strategic partnerships in the mobile vertical and expanding our position in new verticals. Overall, the market for sensor vendors is consolidating. Given the turbulence around the earlier component shortage now being replaced by oversupply, the mobile OEMs are selective in qualifying new vendors. This means that it is critical to continue to win new projects with established partners, and of course, this underlies the strategic upside of deepening our cooperation with players such as Egis. We are also aiming to broaden our position in Algo to all sensor types. Today, we have strong position in optical and ultrasound. However, the strength of our software in Algo is that it is generic and can be adapted to other sensor types.
We can also see that closer cooperation with our sensor partners leads to better end customer insights, and we believe a close cooperation with, for example, Egis can substantially improve the quality of the solution that we deliver to these OEMs. Precise has built a stable and global Algo business in the mobile vertical for many years, providing strong margins and good cash flow. This has enabled us to explore expansion into new Algo verticals. In the end of 2021, we entered into a new vertical, the automotive sector. This vertical has significantly longer product life cycle than our main vertical, the mobile. In addition, we expect the market to grow the coming years as it will become more mature and biometric solutions will become more widely available in future vehicles for various use cases.
We see a commercial opportunity in strengthening the relationship with partners such as system integrators in the automotive vertical to increase chances to jointly win new car models. As we see biometric being used in other verticals than mobiles, we are continuing to explore possibilities to extend our product offering where we see commercial opportunities in the same way as we have done within the automotive industry. With that, please turn to slide number 13. As announced this Wednesday, Egis has committed to make a strategic investment in Precise. In connection with this investment, I'm really happy that we have proposed to our existing shareholders to take part of the journey by taking in a preferential rights issue. I would like to spend a minute or so on the positive implication this investment will have on Precise.
By Egis's investment, we get a long-term industrial owner with a significant sector experience. By being a commercial partner to Precise since 2019, Egis knows us and our products, which is a clear proof point of Precise global strength in biometric solutions. In addition, Egis has a strong position in the important Asian consumer electronics market. As we are deepening our cooperation, we are then getting a strong partnership in that new geographic area. I'm also very happy about Egis's long-term commitment to Precise as they have signed a lock-up agreement for 24 months. Further, the proceeds of up to SEK 83 million strengthen our cash position substantially and our ability to deliver on our strategic growth agenda. As we are operating in the same industry, closer cooperation between us will improve our joint commercial capabilities.
This investment enables closer cooperation within product development, which we believe will improve our joint offering to current and to new customers. In addition, Egis has a strong experience and expertise within hardware, which we believe can over time benefit both our Algo and Digital Identity segment. Please turn to next slide, number 14. Finally, summarizing our strategic growth agenda. We see significant potential, both commercially and in terms of market potential for physical access and visitor management. With our business model within DI, we focus on achieving recurring revenues with strong margins over time. Part of our strategy is also to explore M&A activities that would add competence to our digital identity offering. We have recently expanded our Algo business into automotive, as earlier stated.
We will going forward continue to serve our customers in existing segments, but also explore possible commercial opportunities in additional segments to grow our business. Please turn to next slide. To conclude, as I said earlier in this presentation, we are continuing to grow in a turbulent macro environment. Digital Identity continues to grow in Q2 primarily as a result from a growing demand for visitor management system. As stated, we see an industry decline in demand for smartphone as a result of the macroeconomic uncertainty in the world. Despite this, our revenues are growing, which demonstrates the robustness within our Algo business model.
As we announced this Wednesday, the strategic investment from Egis and the share issue, subject to the EGM's approval of course, are contributing with up to SEK 83 million, which will provide us with the financial strength and commercial support to deliver on our strategic growth agenda. With that, thank you for listening in, and a big thank you to the full Precise team. Remember, at Digital Identity, you are the key. With that, please turn to slide number 15, and we conclude our presentation and hand over for potential questions.
We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. Pat, no questions on the phone.
Okay, we have got some questions by email that I'll start with some of these. One question we have is, are you present in any new mobile phones? As stated also in presentation, we continue to win new generations of phones with partners such as the ones described in the presentation, the Vivo's new, for example, the vivo X80 Pro and the iQOO 10 Pro. However, as also stated earlier, we're not always able to communicate which models we are included in due to the fact that we don't, in some cases don't know, and in some cases we are bound to NDA. When we get to know major wins that has significant financial impact, we will of course be press released in line with our communication policy. Another question we...
We have quite a few questions around the automotive area. Automotive is an interesting vertical, but we're lacking information, so please share which cars you will be in. In the same way as in the mobile Algo space, for commercial reason and for security reasons, our two customers that we announced in December have chosen not to go public, which car model that is. We are working closely together with our partner Infineon to deliver on them. We see that the automotive industry is an attractive industry where we will continue to look to explore opportunities together with them and other strategic partners.
We also expect that the royalty from the deals signed last year will gradually start coming in by the second half of this year. Another question by email is, how does the Doro cooperation progress as you have communicated earlier about? We see a strong market for biometric solutions in the public sector, and there are interesting use cases, for example, in the elderly care area. However, working with public sectors, the process are generally quite heavy and takes a very long time. We will of course when we achieve major milestones ensure that we communicate those swiftly to the market. What kind of M&A activities can we expect in terms of company and size?
We have said that our M&A activities are mainly focused on the Digital Identity area. Right now, we are focusing on physical access, but we are also continuously exploring strategic M&A-driven growth opportunities to acquire competence in this space in areas such as, for example, eID, among other things. Right. I also have one question, how do you see the geopolitical tensions that are in Taiwan? Is there a risk that it will be able to affect your business? Do you see any risk with having a Taiwanese major owner in the current situation? I think it's clear that Precise has built up a globally leading position in biometric solutions.
We operate in a global market where Asia and Taiwan are a large part of the global market, both on the demand and the technical know-how side. I therefore see this from another point of view, rather in the sense that this is a real strength to Precise to have a strong partner in this geography, in the world. Right. Any other questions from the audience?
There are no questions from the phone.
All right. I think there are questions similar to the ones we already got were answered here. I think with that, we will conclude from our side.