Earnings Call: Q4 2023

Feb 16, 2024

Hello. It's 10 am on Friday, February 16th here in Sweden. Welcome to this interactive Q and A with Precise Biometrics, which released its earnings report for Q4 and the full year 2023 today. My name is Joakim Bogen. I'm the moderator for this Q and A. Today, I'm in Stockholm, and I'm joined by Lynk from HQ in Lund by CEO Joakim Liedemaik and CFO Amne Kaffray. How are things with you guys? Fantastic. How are you? Good. Thank you. Fantastic. That's what I like to hear. All right. So this is how it works. For those of you who are listening live, you can click on the chat icon and enter your questions in the chat to the right here in the interactive video player, and then we can see them and address them. Simple enough. So we'll try to get to as many as possible. And I've also received a few questions in advance that I thought we would start with. So first question that was emailed into us. Congratulations on your increase in annual recurring revenue and reporting a positive EBITDA. Are you done now with the cost reductions? Well, we will always be cautious about our cost. But we have done some cost cutting here during the year. And I think what we are doing now is that we are looking forward. And as promised, when we did the rights issue here earlier this spring, we promised to explore and increase our activities on new markets and United States included, and that we will continue with. But of course, we will be cautious with costs, but also move fast and forward. All right. Now the question came in on a similar topic. You are hiring while implementing cost savings. How does this go together? Yeah. Well, I would say that most of the hiring has been, to some extent, that we are changing sort of towards the market and sales activities. We have also worked with moving consultants to employees. That is also a matter of cost reductions. So again, we are doing what we need to do to continue to accelerate our business, but also continuing to be cautious with cost. All right. Another question, maybe this is for you, Annika. When will you reach positive cash flow? Can you give any more guidance on what factors will affect when you will reach profitability on the bottom line? Yes. I mean, we don't give forecast, but it's, of course, important to keep costs in control, as Joakim said before as well. And also working on increasing the revenue. And we see a lot of positive signs in both different verticals and markets. So we are positive for the future. All right. Another question that came in. Joakim, why don't you communicate more about new business deals that you have closed? We only see a few being communicated through press release every quarter. Yes. This is a matter that very often comes up. And we are doing our best to change and be better on that. I think what we tend to say is that we are working in sensitive areas related to security and safety. And many of our customers, they are cautious with us sort of giving us the right to spread that we are part of their solutions, given that we are in that kind of sensitive solutions. But again, I know this is a matter, and we have also now our new CMO is driving this hard that we will increase the activities on that side. And I would like to say that we will increase and we will do our best to be more visible in different kinds of media here, including releasing and talk about sort of our activities here moving forward. Okay. Another question that was emailed into us here. Can you tell us more about how the U. S. Expansion is going? Can you comment on roughly how many clients you have signed by now? So, the U. S. Expansion is definitely ongoing and expanding. So we are doing a lot of efforts on the U. S. Market as we speak. Genetec is an important partner to us and we are in close cooperation with them in this expansion. And there are more partners also here in the pipe. But with that said, so Genetec is a very big company. And they, on their end, have companies that they work with for installation and actually doing the actual sales out there. And to build up these channels together with Genentech has taken time. And what we see now is that we have done sort of a lot of that work here during last year. Moving forward now, we are up and running. We have secured that the sales force in the Genetec ecosystem had the tools they need to now bring in the business. And we see that the pipeline is building up with new potential customers. So I'm very positive about 2024. And we are doing our very best to bring in sort of more business there coming here in the near future. All right. Thank you, Joakim, for that update. Another question that came in on the chat here. What is the status of your collaboration with Infineon? And what do you expect from the automotive market in 2024? Will it generate revenue? Or does it already? So, I'm very excited about the automotive industry in general. I think there are a lot of opportunities. I think the cooperation we have with Infineon is important to us, but also very dear. They are sincere in their efforts, and they invite us to participate in their activities. We had gotten the opportunity to educate both their partners, but also sales. So I think the opportunities we see here forward is joint efforts. We have joint demos at CES Consumer Electronics Show here early this year. So a lot of activities, I would say. I feel very positive about Surya Corporation, but I'm also very convinced that we will be able to bring business here during this year. And I see that the possibility for us to actually go commercial here is looking very promising. With that said, we are doing or making revenues from that segment since earlier. But obviously, I hope to be able to increase that here moving forward. Okay. We have another question that came in here in advance, which regards to your geographical expansion, I guess. You made investments for Younique in the U. S. And in Europe. Do you see potential in other such as Dubai or the Arab Emirates, where large investments are being made in technology and infrastructure right now? So we will not go sort of with our own sales force in any new markets as of now. So we have the U. S, we are increasing now to the Netherlands and the Benelux. And that is sort of that focused increase. With that said, I know that a partner of us is making business in other parts of the world, including the Middle East. So I wouldn't outrule any installations in that region for that matter. But we will not have any of our own sales in those regions as of today. Okay. So just in general, is that the strategy going forward to work with resellers and partners for sales in new market rather than to staff up yourself? I think it will be a combination. But yes, a lot of that will be driven by partners since that is how we make this scale. But I think that looking at specifically the unique businesses, I think that we are really strong in Sweden and the Nordics. And I see that we are now making this effort in the U. S, which is a big step for us. But now moving forward here in Europe, I think it's good to dig where we are in the region. So I think that the Netherlands is a good next step. And then we'll see where we bring it from there. All right. I want to remind everyone that Joakim and Annika are busy, and they need to get to investor meetings later today. So if you have a question, feel free to put it in the chat right now. And we're just going to continue with 2 more questions that came in advance, otherwise. What is your view on the smart card market from a biometric perspective? Yes, this is a very special market segment, I would say. Historically, Precise Biometric has spent a lot of effort in that, both investing in solutions, but also in market approach and building sort of the ecosystem around that business. But it has to be honest, it has never really taken off. And now it seems like there are new activities and we are definitely sort of keeping active in that. But I would say, to my opinion, it remains to be seen. I think one of the problems there are in this segment is that the cost for building and manufacturing this kind of cards is still high. So that limits sort of the rate of expansion opportunities. But we are there. We are active, cautiously following sort of if this is going to happen in big scale or it will eventually be sort of more of a mobile phone payment kind of game. All right. So I think it's about time to start summing up. And Joakim, what are your views now? You have 2023 behind you, and you mentioned in the report that it's been a tough year, especially on the mobile phone sales market, which has affected Precise? What is the outlook now going forward? I think that 20 24 will be better than 2023. I think market wise, in the end, it's still sort of on a sort of challenging path. But I see that 2024 will be a better year for us. I see that the revenues from the mobile phone industry will increase. I can foresee that we will gain more business in some of the new verticals we are addressing. I also see that the growth here for our unique businesses both in Europe and United States will be on a good pace for 2024. So all in all, I'm very optimistic about 2024. And I think we have very good opportunities and we are gaining new projects as well. So I think all in all, it looks promising. All right. I think we have time for one more question before we wrap this up. How will you stay competitive in the fingerprint market? And how will PRECICE benefit from the latest trends take? Yes. So there are 2 parts of this answer, I would say. So one path is that looking at sensors in general, we have a trend that is moving from capacitive sensor to optical sensors and now lately to ultrasonic sensors. And when it comes to the ultrasonic, that is an area where we are world leading with our algorithm. So basically what is driving these new sensors is that you first of all you want to have the sensor the fingerprint sensor in a mobile device under the display. But now the display resolution is becoming higher and higher, which limits the possibility for the optics and reach through. So therefore, the ultrasonic sensors are needed. And again with our cooperation with among others Qualcomm in this space and our sort of position in the ultrasonic algorithm space, I think we have very, very good opportunities here when that market's really, really changed now. The other area is within security and safety. I think we see that the inner society and in general that there is more and more need for biometrics to secure their identity. A lot of talk about fake news and fake that and fake that. And I mean, at the end of the day, a very safe way to authenticate something, whether that is login, payments, access is using biometrics. And I think that is our offering and that is where I think we have the big opportunities for our company. All right. I think that is all the questions that we have today. For those of you who are watching this live and we didn't have time to get your questions or you came in late, you can always email your questions into the IR inbox at investor atprecisebiometrics.com. And someone will get back to you as soon as possible. Thank you for joining us today. Until next time, have a nice day, and thank you for listening in. Thank you.