<<<<< NEXT BIOMETRICS GROUP ASA Q Investor Presentation Tore Etholm-Idsøe, CEO / Knut Stålen, CFO

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1 NEXT BIOMETRICS GROUP ASA Q Investor Presentation Tore Etholm-Idsøe, CEO / Knut Stålen, CFO

2 Summary Q sensors shipped in Q1 Initial order for units received in Smarthome segment First tier 1 customer increases volume estimates by a minimum of units Organisation expanded by 13 people now counting a total of 52 employees Significant growth in NEXT-Enabled markets. Several leads with 7-digit potential Product portfolio expanded from 1 generic to 6 market adapted modules. Now optimized for high volume sales in all key markets. 2

3 Financial Highlights Knut Stålen, CFO The Fundamentals 3

4 Key Financial Figures MNOK Q1-15 Q4-14 Q1-14 Comments Q1-15 Revenue Shipment of 52K units Total operating expenses Includes ramp-up and production Net operating earnings (EBIT) (see next slide) Net profit (loss) Cash flow in Quarter Cash Inventory Increase of electrical components Accounts receivables Other receivables Incl. Coating machine MNOK 11.2 Equity

5 Operating Expenses Payroll expenses Comments Payroll expenses increased to MNOK 8.4 in Q1-15 (MNOK 6.4 in Q4-14) Increased activities in R&D Currency impacts Other operating expenses (including cogs) Other operating expenses reduced to MNOK 15.9 in Q1-15 (MNOK 33.6 in Q4-14) Increased activities in R&D Ramp up of production including production costs Currency impacts Extraordinary write-down of inventory in Q4-14 No capitalization of R&D

6 The NEXT Technology Tore Etholm-Idsøe, CEO The Fundamentals 9

7 Unique access to game changing cost efficiency Protected by patents and trade secrets at sensor and ASIC level.. 10 The Active Thermal Principle, patented and owned by NEXT, is based on transfer of heat from sensor into finger ridges and valleys The unique simplicity of the NEXT Active Thermal pixel designs allows for mass production in standard high quality display fabs. Facilitating mass production at a fraction of comparable competitors costs.

8 Proof of Technology -> The Madrid Report A comparative analysis of size and quality - NEXT vs 2 other market leading sensors THE MADRID REPORT - UNIVERSIDAD CARLOS III de MADRID MAY 2015 The TCS1 integrated in the Eicon Touch 510 The NB-1010 integrated in the NB-3010 PROF. RAUL SANCHEZ-REILLO - Highly respected biometric industry resource - Member of multiple biometric industry ISO-committees THE STUDIES - The largest, commercial fingerprint sensor test ever done - Analysis of image quality, biometric performance and effect of small sensors - ISO best practices methodology applied persons participated over a period of 4 months - Origin of sensors kept confidential to operators and subject - Sequence of sensors randomized - All test subjects made 2 visits separated by at least 2 weeks - Small sensors simulated by cropping full-sized images - FRR/FAR and FNMR/FMR are synonymous for one trial. The FPC- 1011F3 integrated in the FPC-ASD IN TOTAL PRINTS COLLECTED (roughly from each sensor) - OVER 300 MILLON COMPARISON TRANSACTIONS ANALYZED 11

9 Proof of Technology > The Madrid Report False Rejection Rate measured at 0,01% False Acceptance Rate Images from full size sensors THE TCS-1 13*18 mm 230 mm dpi Capacitive Principle 0,42% THE NB-1010-U 12*17 mm 201 mm dpi Active Thermal Principle 0,63% THE FPC-1011-F3 10.4*14 mm 148 mm dpi Capacitive Principle 1,54% 12

10 Proof of Technology > The Madrid Report False Rejection Rate measured at 0,01% False Acceptance Rate Images from full size sensors Images cropped at 12*12 mm 144 mm 2 Images cropped at 10*10 mm 100 mm 2 Images cropped at 8*8 mm 64 mm 2 THE TCS-1 13*18 mm 230 mm dpi Capacitive Principle 0,42% 1,58% 6,72% 8,31% Average FRRs under 1% are considered robust. THE NB-1010-U 12*17 mm 201 mm dpi Active Thermal Principle THE FPC-1011-F3 10.4*14 mm 148 mm dpi Capacitive Principle 0,63% 1,54% 3,17% 3,95% * 5,89% 4,75% * 11,43% 27,03% * 1%-2,5% (ok - application dependent) At above 2,5% averages a significant %-age of the users will not be able or willing to use the system. KEY MADRID CONCLUSIONS : 1) The Active Thermal principle performs in line with significantly more expensive - same sized - capacitive sensors 2) Sensor size is the dominant factor determining sensor system performance 3) At acceptable FAR levels, reduced size comes with a dramatic effect on FRR levels (false rejection of genuine user) 13 * FPC 12x12 cropped is actually 10.6x12 because original image is only 10.6x14. Therefore also little difference between 12x12 and 10x10. The pre-processed FPC images seem not to work well below a critical size and result in a significant drop in accuracy for 8x8.

11 4 strong and significant competitive advantages.. Significantly lower pricing 70-80% cheaper than same size silicon area sensors 20-35% lower cost than tiny competitive area sensors Uncompromised security & convenience Polysilicon technology allows robust sizes at low cost Company not forced to reduce size to stay price competitive Clean IP NEXT owns and controls the Active Thermal Principle No close competitors No overlap with others.. Flexibility of integration The NEXT module design allows low cost and fast adoptions to customer integration needs at module level 14

12 Business Outlook Tore Etholm-Idsøe, CEO The Fundamentals 15

13 Outlook -> Traditional Markets.. Adressable Market -> Competition -> Products -> Status Årstallene LARGE SENSORS ONLY NEXT CROSSMATCH FPC OPTICALS (LARGE) NB-1010 NB-1011 NB-1411 MODEL DEL.. LEADS NB-1010 Q NB-1011 Q NB-1411 Q DEL = Realistic period of first mass deliveries Some multiproject customers represents several leads Lead times 3-12 months Higher level security segments NEXT aims to be a leading provider in all stronghold & segments 16

14 Outlook -> Traditional Markets.. Adressable Market -> Competition -> Products -> Status Årstallene LARGE SENSORS ONLY NEXT DP/CROSSMATCH FPC OPTICALS (LARGE) NB-1010 NB-1011 MODEL DEL.. LEADS NB-1010 Q NB-1011 Q NB-1411 Q DEL = Realistic period of first mass deliveries NB-1411 Some multiproject customers represents several leads Lead times 3-12 months Higher level security segments THE TCS-1 13*18 mm 230 mm dpi Capacitive Principle THE NB-1010-U 12*17 mm 201 mm dpi Active Thermal Principle FULL SIZE 0,42% 0,63% 17 THE FPC-1011-F3 10.4*14 mm 148 mm dpi Capacitive Principle NEXT aims to be a leading provider in all stronghold & segments 1,54%

15 Outlook -> Notebooks & Tablets.. Adressable Market -> Competition -> Products -> Status Årstallene SMALL SIZES SYNAPTICS FPC EGISTEC LARGER NEXT NB-2021 MODEL DEL.. LEADS NB-1020 Q NB-2020 Q NB-2021 Q NB-2020 DEL = Realistic period of first volume deliveries Some multimodel customers may represent multiple leads Lead times months Higher level security segments 18 NEXT aims to be a leading provider in all stronghold & segments 5

16 Outlook -> Notebooks & Tablets.. Adressable Market -> Competition -> Products -> Status Årstallene SMALL SIZES SYNAPTICS FPC EGISTEC LARGER NEXT NB-2021 MODEL DEL.. LEADS NB-1020 Q NB-2020 Q NB-2021 Q NB-2020 DEL = Realistic period of first volume deliveries Some multimodel customers may represent multiple leads Lead times months Higher level security Excerpt form Microsoft Mangement Presentation on May 8 th. segments NEXT aims to be a leading provider in all stronghold & segments 19 5

17 Outlook -> Smartphones.. Adressable Market -> Competition -> Products -> Status Årstallene SMALL SIZES LARGER SYNAPTICS NEXT FPC (APPLE) GOODIX EGISTEC Idex 6 New Chinese - Capacitive Qualcomm - Ultrasound Vkansee - Optical Holtek - Optical NB-1012 NB-2011 MODEL DEL.. LEADS NB-1012 H NB-2011 Q DEL = Realistic period of first mass deliveries All leads in this segment require custom built modules Lead times months Higher level security segments JAPANESE DISTRIBUTOR HAKUTO : Japanese electronics companies are very concerned about patent situations, as all of them aim to grab a foothold in the US market. NEXT s offering was considered by Hakuto to be the strongest in terms of IP position. The key reason for selecting NEXT was their clean IP ARCTIC SECURITIES CHANNEL CHECK: 20 NEXT aims to be a leading provider in all stronghold & segments 5

18 Outlook -> Smartphones.. Adressable Market -> Competition -> Products -> Status Årstallene SMALL SIZES LARGER SYNAPTICS NEXT FPC (APPLE) GOODIX EGISTEC Idex 6 New Chinese - Capacitive Qualcomm - Ultrasound Vkansee - Optical Holtek - Optical NB-1012 NB-2011 MODEL DEL.. LEADS NB-1012 H NB-2011 H DEL = Realistic period of first mass deliveries All leads in this segment require custom built modules Lead times months Higher level security segments For players targeting high end applications APPLE SAMSUNG HUAWEI NEXT APPROACH 21 Sept 2013 & 2014 Tiny area sensor under home button March Tiny area sensor under home button Sept 4th Medium area sensor NEXT aims to be a leading provider in all stronghold & segments 5 92 mm2 sensing area Back side Significantly better performance (144/92=1.52) Lower cost

19 Outlook -> NEXT-Enabled.. Adressable Market -> Competition -> Products -> Status Årstallene LARGE SENSORS AT LOW PRICE ONLY NEXT NB-0510 MODEL DEL.. LEADS NB NB-0910 Q NB-1411 Q NB-0910 NB-1411 DEL = Realistic period of first mass deliveries Lead times 6-12 months Higher level security segments Segments dependent of a combination of large area and low cost uniquely offered by NEXT Biometrics, 22 NEXT aims to be a leading provider in all stronghold & segments 5 PER MAY 2015: Several new leads with 7 digit volume potential

20 Outlook -> Summation competitive situation Traditional markets Smartphones Notebooks & Tablets New NEXT-enabled markets Higher level security segments LARGE SENSORS ONLY NEXT DP/CROSSMATCH FPC OPTICALS (LARGE) SMALL SIZES SYNAPTICS FPC (APPLE) GOODIX EGISTEC Silead Focaltech MD Chipone MicroArray Pixir. Qualcomm Idex Vkansee Holtek LARGER NEXT SMALL SIZES SYNAPTICS FPC EGISTEC LARGER NEXT LARGE SENSORS ONLY NEXT H2-2015/2016 Product Portfolio grants NEXT - Leading positioning in the Traditional Markets - Leading positioning in Notebooks - Strong positioning in Tablets - Strong positioning in biometric focus high-end Smartphones - Unique positioning within NEXT-enabled markets 23 In 2016 NEXT will have access to larger combined - markets than any other player in our industry NEXT aims to be a leading provider in all stronghold & segments 5

21 On Track -> Expansion of capacity mass production Sensor Sensor coating ASIC Module & Assembly 3 ISO-9000 APPROVED PARTNERS Component. Capacity May 2015 Unlimited capacity 1.2 mill units per month Unlimited capacity 0,5 mill per month Scalebility/ Yield 8 volume lots completed High yield 5-6 months leadtime for extra coating machines ASICs are delivered yielded Scalable with 3-6 months notice 24

22 On Track -> Organisation pr May 2015 HIRED 1. VP Of Operation & Sales Asia, Taiwan Acer - President PC Global Operations 2. Supply Chain Director, Taipei Wistron 10 years - Supply Chain Manager 3. Product Director, Munich NEXT 17 years in biometrics 4. FAE, Prague STM 10 years in embedded systems 5. FAE, Prague STM 10 years in embedded systems 6. FAE Jupiter, Taiwan Qualcomm - 15 years experience 7. Program Manager Europe, Munich G&D 15 years in biometrics, payments.. 8. Product Manager, Seattle Cypress 10years - Product Manager 9. Software Director, Seattle Microsoft 15 years Principle SW lead 10. Finance Manager, Oslo BDO 6 years - CPA 11. Product engine. & NPI Director, Taiwan Acer, HP 13 years in product management 12. Quality Assurance Director, Taiwan Qualcomm 9 years in quality process man. 13. Operations Admin, Taiwan Acer Administrative 14. PC-related software expert Authentec - 5 years - SW specialist = TOTAL STAFF AS OF MAY An organization set for high volume growth.. 25

23 Highlights & Outlook As of May 2015 Outlook 2015 Mass production bottle-neck removed Coating machine fully operational 1 st Multinational Brandname TIER 1 to launch in Q3-15 NEXT-Enabled Markets set for significant volumes Significant opportunities in High End smartphone segment Additional TIER 1 design wins targeted in 2015 Significant module cost reduction on-track for end of 2015 Product portfolio expanded from 1 generic to 6 market adapted modules. Now optimized for high volume sales in all key markets. 26

24 Q&A.. 27