Precise Biometrics — Interim / Quarterly Report 2023

Aug 15, 2023

PRECISE BIOMETRICS INTERIM REPORT JANUARY-JUNE 2023

INTERIM REPORT FOR THE PERIOD JANUARY TO JUNE 2023

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SIGNIFICANT EVENTS AFTER THE END OF THE INTERIM PERIOD

• Precise Biometrics (Precise) entered into a 12-month development with RECO Biotek Co, Ltd. (RECO), a Taiwanbased provider of bio-sensing system integration solutions. Under the terms of this agreement, Precise will provide its groundbreaking sensor algorithm solution BioMatch® for integration into RECO's fingerprint systems.
• Precise Biometrics signed a 12-month evaluation license agreement with CanvasBio, a Korean manufacturer of fingerprint sensors. The aim of the agreement is to jointly develop a fingerprint module phones. The agreement is an important step in the continued commercialization of Precise Biometrics' algorithms in the Asian market.

FINANCIAL DATA AND KEY INDICATORS

Amounts in SEK thousands unless otherwise stated.

KEY INDICATORS

	2023	2022	2023	2022	2022	Rolling
Amounts in SEK thousands unless otherwise stated	Q2	Q2	Q1-Q2	Q1-Q2	Full-year	12 mth
Net sales	17 887	24 614	37 037	52 926	91 018	75 129
Net sales growth, %	-27,3%	31,9%	-30.0%	35,8%	9,2%	-22,8%
EBITDA	-568	942	-1 193	4 962	1 147	-5 008
Gross margin, %	60,3%	78.0%	62,6%	77,3%	71,5%	63.0%
Operating profit/loss	-6 895	-4 109	-13 757	-4 911	-20 016	-28 862
Operating margin, %	-38.5%	-16.7%	-37,1%	-9.3%	-22.0%	-38.4%
Cash flow from the operating activities	5 420	2 982	-390	10 085	3 931	-6 544
Cash and cash equivalents	75 584	54 644	75 584	54 644	46 405
Annual Recurring Revenue*	17 828	N/A	17 828	N/A	16 190

* Annual Recurring Revenue lacks comparative figures from Q2 2022.

See the Financial Glossary for definitions.

INTERACTIVE PRESENTATION OF INTERIM REPORT AND INVITATION TO Q&A

Precise Biometrics has published an interaction with today's interim report, which includes interviews with CEO Patrick Höjer and CFO Annika Freij, and is available on the Investor Relations page here: https://precisebiometrics.com/investors/

The material in the interactive video is designed to comple additional depth and better understanding of the stock market for the company's business operations.

The company also invites you to a live Q&A that starts at 10:00 AM (CET) on August 15, 2023.

To take part in the Q&A session, access it via the interactive video player on the Investor Relations page here: https://precisebiometrics.com/investors/

Questions can be asked directly in the chat functive player or submitted in advance to investor@precisebionetrics.com.

Participating on behalf of Precise: Patrick Höijer, CEO Annika Freij, CFO

The interactive video is in Swedish with English subtitles and the Q&A will be held in English.

CEO COMMENTS

As we sum up the first half of 2023, I would like to start by emphasizing that Precise Biometrics is now stronger than it has been for a long time, thanks to hard work in all parts of the company and continued support from shareholders through the preferential share issue that we completed in June. We have improved our cash flow, reduced our costs and streamlined work throughout the company. It is also positive that recurring revenues (ARR) during the second quarter increased.

I have now been CEO for just over a year, and it is my task to commercialize the company's unique technology. During the second quarter of the year, we signed several important partnership agreements in both our business areas, Algo and Digital Identity. The fact that we also strengthened our group executive with Joakim Nydemark, who took over as EVP and CCO of Algo in June, also marks a milestone in this commercialization phase. It is now clear that Precise Biometrics is a company that not only delivers world-leading solutions to the mobile phone market, but also has extremely significant potential in other areas.

As many people are aware, this has been a major challenge in the mobile phone market in recent years. The consumer electronics market in general, and mobile phones and laptops in particular, have been characterized by weak demand. This has naturally had an impact on us and has contributed to both net sales and earnings in the second quarter falling compared with the same period last vear. Most current market assessments now indicate that demand for consumer electronics will gradually recover towards the end of 2023 ahead of 2024. We are also seeing signs of this improvement in our dialogs with the various actors in the market.

"We have taken action and now I feel that we are in the desired position to maximize market potential with a solid financial position."

Cash and cash equivalents at the end of the period totaled SEK 75.6 (54.6) million, which is a result of the preferential share issue, in which the company received a total of SEK 39.7 million after issue costs, which means that we can now act to invest in growth going forward in this phase of the company's development.

In the Digital Identity business area, we continue to expand our footprint in the market for our access and visitor management systems for premises and buildings. These are systems that create increased security at workplaces and in public buildings, while at the same time reducing administration for end customers. The biggest market for these kinds of solutions is the USA, and we are therefore continuing work on our geographical expansion to the USA. Our partnerships with American access companies Genetec and Flowscape Technologies put us in a strong position, and we are now working to build up sales channels via system integrators.

l am firmly convinced that the investment in the American market, combined with the fact that we want to continue to expand our fingerprint software in Algo into new verticals, gives us the potential to create more diversified revenue flows and higher earnings for Precise Biometrics in the future.

Why? There are many trends that speak in our favor. Unfortunately, many people feel that the world is becoming increasingly insecure. There is war in Europe, and we often read about companies falling victim to digital sabotage and the fact that cyber-crime is spreading. This creates an increased understanding of the need for both digital and physical security solutions. In addition to this general focus on security, there are a number of other factors that affect our operations.

Mobile devices are expected to revert to fingerprint from facial recognition, or to a combination of these two technologies, for identification. It is primarily under-display sensors that are taking market shares, the kind of sensors that Precise primarily supports. Requirements for more secure identification even when laptops are powered up are being driven by Windows Hello, for example, which is expected to increase demand for biometric solutions in the laptop segment in the coming years.

As most people are aware, a great deal is happening in the automotive industry. The process of electrification means that the software in our vehicles is becoming increasingly important. As vehicles also become more autonomous, their passengers will have different needs during the journey. This is one of the driving forces behind the market for fingerprint readers in the automotive industry being expected to double between 2023 and 2024. In the past, these were solutions for convenience, but in the future, for example, it will be important to have convenient payment solutions in vehicles. Identification via fingerprints is expected to be a key issue in that area.

These are just some of the external factors that we believe will have a positive impact on Precise Biometrics' future. In addition, during the quarter I had the opportunity to visit several customers and partners in Asia, and to see that we have strong relationships with them.

To summarize, during the year, the entire company have taken steps to create a good platform from which to grow and commercialize further in order to maximize market potential. We are now in a good shape to focus on the business, winning new orders, creating shareholder value and contributing to satisfied customers and employees.

Patrick Höijer CEO

GROWTH STRATEGY

Precise is in a new phase with a greater focus on d new sales channels for the company's world-leading technology. The company is riding the global trend of interlinking electronic and physical ID verification, with great potential for growth in both business units.

REINFORCE THE LEADING POSITION IN THE ALGO BUSINESS AREA

• Capitalize on the strong position in biometric software for mobile telephony and grow within new verticals, such as vehicles, laptops and physical access
• Building new partnerships with new sensor suppliers regardless of sensor technology (optical, ultrasound and capacitive sensors)
• | Leverage our expertise in advanced image processing for applications even outside fingerprint biometrics

HARNESS THE MARKET POTENTIAL IN THE DIGITAL IDENTITY BUSINESS AREA

• . Focus on building sales channels through commercial and technical integration with strategic access and installation partners in Sweden
• Focus on the American market identified as a market with particularly high potential
  • Continue to develop our integrated solution based on existing products to manage customer flows of visits and access

Precise believes that the market for identification is there are thus good opportunities for strategic acquisitions. The company intends to primarily evaluate SaaS companis that can strengthen the Digital Identity business are through technological solutions and human capital. Precise assesses that such acquisitions can be financed with the available liquid funds at any time and through newly issued shares.

MARKET AND SALES

Precise is a qlobal supplier of identification software, access solutions and offers products for the convenient, secure authentication of people's identity. The company offers solutions in two product segments: Digital Identity and Algo.

ALGO

Precise BioMatch – Software (Al algorithms based on advanced image analysis) to verify a person's fingerprint

BioLiveTM – Software-based solutions to prevent fraud using false fingerprints

DIGITAL IDENTITY

Precise YOUNiQ - Secures digital identity in a simple, secure way

EastCoast Solutions – Safe and efficient visitor management systems

MARKET DEVELOPMENT

ALGO BUSINESS AREA

Precise has a strong position as a software supplier in the segment for fingerprint sensors for mobile phones, in terms of both optical and ultrasound sensors.

The product offered by Precise in this area is not only integrated in the fingerprint module itself, but in a larger module manufactured by so-called Original Design Manufacturers (ODMs), which are companies that build larger panels that are used to control various functions such as driver settings.

At the end of 2021, Precise entered into licensing agreements to provide fingerprint technology to the automotive industry, and work to commercialize the solution is continuing together with Infineon. There has long been talk of integrating biometrics in vehicles, and even though there are some solutions on the market today, the market is expected to take off in the coming years. The market is still young, but is characterized by higher unit prices and long product life cycles of around 7-10 years.

In 2022, the company continued to strengthen its relationships with partners through a local presence in order to provide better local support and customize solutions for the company's customers in the Asian market. Demand for these types of sensors is expected to continue to increase in the coming years. At the end of 2022 Precise signed an agreement with French company Isorg to deliver a completely new fingerprint technology for use in mobile phones. Within the framework of this, Precise delivers a full software solution including ISP, matches and liveness, which demonstrates the company's competitiveness.

In 2022, Precise signed a partnership agreement with Korean company CanvasBio to develop fingerprint sensors for laptops together with them. Laptops constitute a new, closely related vertical for Precise, and this collaboration enables Precise to continue to capitalize on its algorithms for fingerprint recognition. This collaboration has been further intensified after the quarter with an evaluation license agreement concerning fingerprint sensors for mobile phones.

FUTURE PROSPECTS - ALGO

Sales of mobile phones, which are important for Precise's variable revenues, are expected to recover in 2024, although with some gradual recovery at the end of 2023, from the downturn that occurred during the pandemic and in 2022. In parallel with the recovery in mobile phone deliveries, fingerprint sensors are expected to continue to be the leading biometric technology for mobile phones.

Trends that are positive for Precise Biometrics include the increasing demand for under-display fingerprint sensors (optical and ultrasound), with forecasts that the market for under-display fingerprint sensors will grow to a total value of USD 2.5 billion by 2030, which represents an annual growth rate (CAGR) of 21% between 2019 and 2030. Canalys, 2023; YOLE Intelligence

There is also significant demand from other verticals, such as in the automotive industry. According to Goode Intelligence, the market for fingerprint sensors in cars is expected to total 8 million units by 2023 and 16.5 million units by 2024. The corresponding annual growth rate (CAGR) is 12% from 2018 to 2024. This offers the biometrics industry a new market segment, which is expected to reach USD 1 billion by 2024, according to Allied Market Research, 2018.

DIGITAL IDENTITY BUSINESS AREA

In recent years, Precise has developed the business to meet the demand for biometric solutions that simplify and streamline the identification process. By combining different biometric technologies in order to verify a user's identity, it is possible to create the optimal balance between convenience and security.

Precise currently holds a leading position in the Nordic region in the area of visitor management systems and growing positions in solutions for physical biometric access. There is great international market potential for biometric access to buildings through facial recognition. Precise delivers the YOUNiQ service within this application area. Precise currently has partnerships with several system integrators and YOUNiQ is integrated with several security systems, which constitute important sales channels. In 2022, additional integrations of YOUNiQ were carried out with Swedish and foreign security systems, including Certego in Sweden and Genetec in North America.

Several new installations were also carried out in 2022, including in the USA. Precise continues to work on developing integrated solutions between the company's various product areas to manage customer flows of visits and entry, for example through an integrated solution for visitor management via facial recognition.

ln 2023, Precise joined the Genetec Technology Partner Program to strengthen its presence in the US market with its YOUNiQ Access solution and entered into an agreement with Flowscape Technology for the sale of the company's visitor management system in USA.

FUTURE PROSPECTS - DIGITAL IDENTITY

Global unrest and increased fraud further drive the need for biometric solutions to secure digital and physical access.Biometrics for physical access solutions offers a combination of greater security and convenience, and is being used to an increasing extent all around the world. There are a number of different scenarios in which biometric technology is used, such as fingerprint sensors embedded in smart door locks and facial sensors embedded in access systems. A biometric smart card can also be used.

The market for biometric physical access solutions is expected to grow by USD 3.7 billion up to and including 2026, with an annual growth rate (CAGR) of 8% from 2021–2026, according to Technavion, 2022. Of the estimated global market of USD 3.7 billion, North America is expected to account for 21%, according to FACT MR, 2022. The global market for visitor management systems is expected to grow to USD 2 billion by 2026, representing an annual growth rate (CAGR) of approximately 16%, according to KBV Research 2020. North America is expected to be the single biggest region.

NET SALES AND OPERATING PROFIT/LOSS

NET SALES FOR THE QUARTER

Net sales during the quarter totaled SEK 17.9 (24.6) million, and net sales were divided between royalty revenues of SEK 3.5 (7.1) million, license fees (including support and maintenance) of SEK 12.5 (15.7) million and other revenues of SEK 1.9 (1.9) million. Comparative figures for licenses and other items for 2022 have been redistributed due to reclassification of EastCoast revenues. The fall in royalty revenues is due to a general temporary downturn in demand in the mobile industry compared with the previous year, combined with high stock levels at mobile manufacturers and their subcontractors. The fall in license fees is mainly attributable to certain changes in the composition of customers and renegotiated license agreements. This is combined with the fact that license fees for the second quarter of 2022 include non-recurring license fees of SEK 0.8 million.

SEGMENT - ALGO

Net sales for Algo totaled SEK 12.2 (19.1) million and are reported under royalties at SEK 3.5 (7.1) million, licenses at SEK 7.9 (10.8) million, and other at SEK 0.8 (1.2) million. Declining demand for mobile phones combined with high stock levels at various levels within the mobile industry resulted in lower royalty levels. License fees decreased compared with the second quarter of 2022, mainly due to changes in the composition of customers and renegotiated license agreements. The gross margin during the quarter totaled 78.7% (87.9).

SEGMENT - DIGITAL IDENTITY

Net sales for Digital Identity totaled SEK 5.6 (5.5) million and are reported under licenses at SEK 4.5 (4.0) million and other at SEK 1.1 (1.5) million. In the Digital Identity segment, 'other' consists largely of hardware. Comparative figures for licenses and other items for 2022 have been redistributed due to reclassification of revenues. The proportion of recurring revenues (Annual Recurring Revenue) increased, while revenues of a one-off nature decreased.

The gross margin during the quarter totaled 20.5% (43.4). The lower gross margin is mainly attributable to increased amortization/ depreciation. There was only minor depreciation of assets related to EastCoast during Q2 2022, and these have now increased because of changed accounting policies. Depreciation and amortization in the second quarter totaled SEK 2.9 (1.7) million.

EARNINGS FOR THE QUARTER

The gross margin during the quarter totaled 60.3% (78.0). This downturn is due to a change in the product mix. The Algo segment has generally had higher margins than is normally the case in the Digital Identity segment, where reduced royalties in Algo in particular have a negative impact on the margin, as this is based directly on the number of products sold by end customers. Total amortization and write-downs of capitalized development expenses was SEK 4.8 (3.5) million, with the increase relating to Digital Identity. Amortization of acquired intangible assets totaled SEK 0.6 (0.3) million.

Operating expenses for the quarter fell to SEK 17.7 (23.3) million due to a strong focus on cost control. The profit/loss at EBITDA level totaled SEK -0.6 (0.9) million. The decline in EBITDA can be explained by lower royalty revenues in Algo. The operating profit/loss for the quarter totaled SEK -6.9 (-4.1) million. Earnings for the quarter totaled SEK -6.8 (-4.3) million. Total depreciation amounted to SEK 6.3 (5.0) million, with the increase in depreciation due primarily to assets related to EastCoast. Earnings per share (average number of shares) for the quarter totaled SEK -0.09 (-0.11).

NET SALES FOR THE INTERIM PERIOD

Net sales during the interim period totaled SEK 37.0 (52.9) million. Net sales were split between royalty revenues of SEK 7.6 (17.3) million, license fees (including support and maintenance) of SEK 25.6 (31.2) million and Other of SEK 3.8 (4.5) million. Comparative figures for licenses and other items for 2022 have been redistributed due to reclassification of EastCoast revenues. Last year's component shortage was replaced by lower demand for mobile phones, which resulted in continued low production volumes in the mobile market, and consequently low royalty revenues. The fall in license fees is mainly attributable to changes in the composition of customers and renegotiated license agreements. This is combined with the fact that license fees for the interim period 2022 include non-recurring license fees of SEK 2.5 million.

SEGMENT - ALGO

Net sales for Algo totaled SEK 26.3 (41.4) million and are reported under royalties at SEK 7.6 (17.3) million, licenses at SEK 16.8 (22.0) million, and other at SEK 1.9 (2.1) million. Last year's component shortage was replaced by declining demand for mobile phones, which has resulted in continued low production volumes in the mobile market. License fees fell due to changes in the composition of customers and renegotiated license agreements. The gross margin during the interim period totaled 80.6% (88.3).

SEGMENT - DIGITAL IDENTITY

Net sales for Digital Identity totaled SEK 10.8 (11.5) million and are reported under licenses at SEK 8.8 (7.7) million and other at SEK 1.9 (3.8) million. Comparative figures for licenses and other items for 2022 have been redistributed due to reclassification of revenues. The decrease in revenues in Digital Identity is due to the fact that the proportion of Annual Recurring Revenue increased, while nonrecurring revenues decreased. Other consists mainly of hardware in the area of Digital Identity, and this has decreased due to the fact that sales of hardware for YOUNiQ are to a greater extent manaqed at the retail level. The gross margin during the interim period totaled 18.8% (37.6). The lower gross margin is due to increased depreciation.

EARNINGS FOR THE INTERIM PERIOD

The gross marqin during the interim period totaled 62.6% (77.3). The decrease is mainly due to a change in the product mix, as the Algo product segment has higher margins than the Digital Identity product segment. Amortization of capitalized development expenses totaled SEK 9.3 (6.8) million and the increase relates to Digital Identity. Amortization of acquired intangible assets totaled SEK 1.2 (0.6) million.

Operating expenses for the interim period fell to SEK 37.0 (45.8) million, due to a strong focus on cost control. The profit/loss at EBITDA level totaled SEK -1.2 (5.0) million. The decline in EBITDA can be explained primarily by lower royalty revenues in Algo.

The operating profit/loss for the interim period totaled SEK -13.8 (-4.9) million. The decline in operating profit/loss is due to lower net sales. Earnings for the interim period totaled SEK -13.7 (-5.5) million. Total depreciation/amortization totaled SEK 12.6 (9.9) million. Earnings per share (average number of shares) for the interim period totaled SEK -0.18 (-0.14).

NET FINANCIAL ITEMS AND TAX

Net financial items for the quarter totaled SEK 0.0 (-0.3) million and the tax expense totaled SEK 0.1 (0.1) million. Net financial items for the interim period totaled SEK -0.2 (-0.7) million and the tax expense totaled SEK 0.2 (0.2) million.

Net financial items are attributable to exchange rate differences in cash and cash equivalents, and also interest on the lease liability in accordance with IFRS 16, as well as interest expense on the deferred fixed purchase price related to the acquisition of EastCoast.

CASH FLOW AND INVESTMENTS

The cash flow from operating activities for the quarter totaled SEK 5.4 (3.0) million, of which SEK 5.9 (2.4) million is attributable to changes in working capital. During the quarter, the group invested SEK 0.0 (0.3) million in tangible fixed assets. Cash flow for the quarter totaled SEK 41.1 (-3.3) million.

Cash flow for the interim period from current operations totaled SEK -0.4 (10.1) million, of which SEK 0.7 (5.8) million is attributable to changes in working capital. The Group invested SEK 0.0 (0.3) million in property, plant and equipment during the interim period. Total cash flow for the interim period was SEK 29.2 (-9.6) million. During the interim period, a preferential share issue was carried out, in which the company received a total of SEK 39.7 million after issue costs.

CAPITALIZATION AND AMORTIZATION OF DEVELOPMENT WORK

Development expenses of SEK 3.6 (5.6) million were capitalized during the quarter, and amortization of capitalized development expenses in respect of Digital Identity and Algo totaled SEK 4.8 (3.5) million.

Development expenses of SEK 8.8 (10.4) million were capitalized during the interim period, and amortization of capitalized development expenses totaled SEK 9.3 (6.8) million.

FINANCIAL POSITION AND LIQUIDITY

Cash and cash equivalents at the end of the period totaled SEK 75.6 (54.6) million. A preferential share issue was carried out during the quarter. The company received a total of SEK 39.7 million after issue costs. Total equity at the end of the period totaled SEK 172.3 (122.7) million, and equity per share was SEK 2.20 (3.10).

THE PARENT COMPANY

The parent company's net sales for the quarter totaled 13.1 Mkr (20.0) and the operating profit/loss for the quarter totaled -8.0Mkr (-5.2).

Net sales for the interim period totaled SEK 27.3 million (43.8). The operating profit/loss totaled SEK -15.7 (-6.8) million and was affected by amortization of qoodwill totaling SEK 1.2 (1.2) million. Cash and cash equivalents at the end of the interim period totaled SEK 64.1 (41.1) million, and equity SEK 161.3 (109.5) million.

ORGANIZATION AND STAFF

The organization consists of the head office in Lund, Sweden, and offices in Stockholm, Sweden, Potsdam, USA, and Shanghai, China. At the end of the interim period, the Group had a workforce of 48 (62) people, including on-site consultants. The number of employees was 32 (31), of which 25 (24) were located in Sweden. Precise works in an agile way together with several partners, creating a fast-moving, scalable organization. The number of employees does not include partners.

FINANCIAL CALENDAR

Q3 Interim Report 2023 - November 10, 2023 Year-End Report 2023 - February 16, 2024 Q1 Interim Report 2024 - May 14, 2024

RISK FACTORS

The Group and parent company's business risks and risk management as well as the management of financial risks are described in detail in the Annual Report for 2022, which was issued in April 2023. There have been no incidents of significant importance since then that would affect or change these descriptions of the Group or parent company's risks and how they are managed.

OWNERSHIP STRUCTURE

Precise Biometrics AB (publ), corporate ID number 556545-6596, is the parent company in the Precise Biometrics Group. Precise Biometrics AB's shares are listed on the Small Cap list of the Nasdaq OMX Nordic. The number of shareholders at the end of the quarter was 16,993 (18,350). 10,004,524 PREC shares were traded during the quarter. The closing price on June 30 was SEK 1.25, and during the quarter the share price fluctuated between SEK 1.10 and SEK 3.34.

AUDIT

This interim report has not been audited by the company's auditors.

The undersigned certify that the quarterly report provides a true and fair view of the Group's operations, financial position and financial results, and describes the significant risks and uncertainty factors faced by the companies that belong to the Group.

Lund, August 15, 2023

Torgny Hellström Chairman of the Board

Jimmy Hsu Board member

Mats Lindoff Board member

Maria Rydén Board member

Åsa Schwarz Board member Peter Gullander Board member

Patrick Höijer CEO

For further information, please contact: Patrick Höijer, CEO Email: patrick.hoijer@precisebiometrics.com

This information is information that Precise Biometrics AB is obligated to disclose pursuant to the information was submitted for publication on August 15, 2023 at 08:00 AM.

CONSOLIDATED INCOME STATEMENT - IN SUMMARY

		2023	2022	2023	2022	2022	Rolling
Amounts in SEK thousand	Note	Q2	Q2	Q1-Q2	Q1-Q2	Full-year	12 mth
Net sales	2,3	17 887	24 614	37 037	52 926	91 018	75 129
Cost of goods sold		-7 096	-5 406	-13 837	-12 012	-25 982	-27 807
Gross profit		10 791	19 208	23 200	40 914	65 036	47 322
Marketing and sales expenses		-6 831	-8 980	-13 637	-18 114	-34 796	-30 319
Administrative expenses		-3 604	-6 503	-7 120	-10 950	-17 613	-13 783
R&D expenses		-7 358	-8 876	-16 269	-18 739	-34 905	-32 435
Other operating income/expenses		108	1 041	69	1 978	2 262	353
		-17 686	-23 318	-36 957	-45 825	-85 052	-76 184
Operating profit/loss		-6 895	-4 109	-13 757	-4 911	-20 016	-28 862
Finacial income/expenses	4	8	-285	-158	-731	-3 453	-2 880
Profit/Loss before tax		-6 887	-4 394	-13 915	-5 642	-23 469	-31 742
Tax		83	87	170	173	1 239	1 236
Profit/loss for the period attributable to
parent company shareholders		-6 804	-4 307	-13 745	-5 469	-22 230	-30 206
Earnings per share, remaining operations, SEK*
- before dilution		-0,09	-0,11	-0,18	-0,14	-0,48	-0,39
- after dilution		-0,09	-0,11	-0,18	-0,14	-0,48	-0,64
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Profit/Loss for the period		-6 804	-4 307	-13 745	-5 469	-22 230	-30 506
Other comprehensive income:
ltems that may be reclassified to profit or loss Changes in accumulated exchange rate differences
Other comprehensive income for the period		87 87	188 188	74 74	235 235	267 267	106 106
		0
Profit/Loss total attributable to holders of participations in the parent company		-6 717	-4 119	-13 671	-5 234	-21 963	-30 400

*Dilution effects are only considered in the earnings per share become worse. Dilution effects have not been considered, as the average price is below the price in current option programs.

CONSOLIDATED BALANCE SHEET - IN SUMMARY

ASSETS	Note	2023-06-30	2022-06-30	2022-12-31
FIXED ASSETS
Material assets		8 014	11 472	9 090
Goodwill and immaterial assets		137 156	137 792	138 898
TOTAL FIXED ASSETS		145 170	149 264	147 988
CURRENT ASSETS
Inventories		468	311	311
Accounts receivable		9 613	12 836	11 478
Other current receivabels		3 882	1 547	3 643
Accruals and deferred income		3 107	4 488	3 397
Cash and cash equivalents	4,6	75 584	54 643	46 405
TOTAL CURRENT ASSETS		92 654	73 825	65 234
TOTAL ASSETS		237 824	223 089	213 222
EQUITY AND LIABILITIES
EQUITY
Equity		172 299	122 685	146 302
TOTAL EQUITY ATTRIBUTABLE TO PARENT COMPANY
SHAREHOLDERS		172 299	122 685	146 302
LONG-TERM DEBT
Long term debt	ട്	24 584	40 389	25 350
TOTAL LONG-TERM DEBT		24 584	40 389	25 350
SHORT-TERM LIABILITIES
Short-term liabilities	4,6	40 941	60 015	41 570
Total Short-term liabilities		40 941	60 015	41 570
TOTAL EQUITY AND LIABILITIES		237 824	223 089	213 222

CONSOLIDATED CASH FLOW STATEMENT - IN SUMMARY

		2023	2022	2023	2022	2022	Rolling
Amounts in SEK thousand	Note	02	02	Q1-Q2	Q1-Q2	Full-year	12 mth
Cash flow from operating activities
Operating profit/loss		-6 895	-4 109	-13 757	-4 911	-20 016	-28 862
Adjustments for items not included in cash flow		6 327	4 992	12 568	9 919	21 188	23 837
Interest payments, net		131	-285	87	-731	-299	519
Tax paid		-6	-6	-10	-14	-21	-17
Cash flow from operating activities		-443	592	-1 112	4 263	852	-4 523
before changes in working capital
Cash flow from changes in working capital
Change in inventories		-157	130	-157	237	237	-157
Change in current receivables		5 824	-235	1 956	10 648	11 075	2 383
Change in current liabilities		195	2 495	-1 078	-5 063	-8 233	-4 248
		5 862	2 390	721	5 822	3 079	-2 022
Cash flow from operating activities		5 420	2 982	-390	10 085	3 931	-6 544
Acquisition of subsidiaries	6	0	0	0	0	-38 268	-38 268
Investment in fixed assets		-27	-255	-44	-255	-284	-73
Investment in intangible assets		-3 823	-5 749	-9 014	-10 664	-21 456	-19 806
Cash flow from investing activities		-3 850	-6 004	-9 058	-10 919	-60 008	-58 147
New share issue		49 523	0	49 523	0	44 319	93 842
Commission expenses		-9 433	0	-9 856	-130	-3 936	-13 662
Repurchase of own shares		0	0	0	0	-326	-326
Payment for sale/buy-back of options		0	0	0	-3	156	159
Payment of lease liability		-532	-480	-1 061	-927	-1 900	-2 034
Cash flow from financing activities		39 558	-242	38 606	-8 729	38 313	85 648
Total Cash flow		41 127	-3 265	29 158	-0 563	-17 765	20 956
Cash & cash equivalents at beginning of year		34 434	57 815	46 405	64 102	64 102	54 644
Exchange rate differences in cash & cash equivalents		24	તે ઉર્ડ	22	105	67	-16
Cash & cash equivalents at end of period 1)		75 584	54 644	75 584	54 644	46 405	75 584

1) The balance sheet item Cash & Cash Equivalents only includes bank balances at both the beginning and end of the period.

CONSOLIDATED CHANGE IN EQUITY - IN SUMMARY

Amounts in SEK thousand		2023	2022	2022	Rolling
	Note	Q1-Q2	Q1-Q2	Full-year	12 mth
Equity at start of period		146 302	128 053	128 053	146 302
Comprehensive income
Profit/loss for the period		-13 745	-5 469	-22 230	-30 506
					0
Other comprehensive income					0
Exchange differences		74	235	267	106
Total other comprehensive income		74	235	267	106
Total comprehensive income		-13 671	-5 234	-21 963	-30 400
Transactions with shareholders
Stockoptions	5	0	-3	156	159
Repurchase of own shares	5	0	0	0	0
Set-off issue		0	0	0	0
New share issue		49 523	0	43 993	93 516
New issue cost		-9 856	-131	-3 936	-13 661
Total transactions with shareholders		39 667	-134	40 212	80 013
Equity end of period		172 299	122 685	146 302	195 917

ANALYSIS OF RESULTS - IN SUMMARY

		2023	2022	2023	2022	2022	Rolling
Amounts in SEK thousand	Note	Q2	Q2	Q1-Q2	Q1-Q2	Full-year	12 mth
Net sales	2,3	17 887	24 616	37 037	52 926	91 018	75 129
Cost of goods and services sold excluding depreciation		-1 880	-1 592	-3 586	-4 603	-9 047	-8 030
Operating costs excluding depreciation		-16 576	-22 080	-34 645	-43 362	-80 824	-72 108
EBITDA		-569	944	-1 194	4 962	1 146	-5 009
Total depreciation		-6 327	-5 052	-12 564	-9 873	-21 163	-23 854
Operating profit/loss		-6 896	-4 107	-13 757	-4 911	-20 016	-28 862

NOTE 1 - ACCOUNTING POLICIES

This interim report has been prepared in accordance with IAS 34 Interim Financial Reporting. The parent company's financial statements have been prepared in accordance with the Swedish Annual Reporting Board's recommendation RFR 2, Accounting for Legal Entities. The recognition and measurement policies and bases of estimates applied in the Annual Report for 2021 report have also been used in this interim report, supplement reporting in accordance with IFRS 8.

NOTE 2 - REVENUE ALLOCATION

	2023	2022	2023	2022	2022	Rolling
Amounts in SEK thousand	Q2	Q2	Q1-Q2	Q1-Q2	Full-year	12 mth
Segment
Algo
Royalty	3 489	7 065	7 574	17 295	21 150	11 429
Licenses, incl. support & maintenance	7 948	10 849	16 786	22 013	42 046	36 819
Other	803	1 234	1 905	2 110	4 634	4 429
Digital Identity
Royalty	0	0	0	0	0	0
Licenses, incl. support & maintenance	4 517	4 016	8 847	7 671	15 954	17 129
Other*	1 130	1 451	1 925	3 837	7 236	5 324
Total	17 887	24 614	37 037	52 926	91 018	75 129
Timing of revenue recognition*
At point in time**	2 082	2 935	4 047	6 292	12 644	10 400
Over time**	15 805	21 679	32 990	46 634	78 354	64 709
Total	17 887	24 614	37 037	52 926	91 018	75 129
Region/Country
Europe	7 465	6 171	14 702	13 521	27 218	28 399
- whereof Sweden	5 508	3 332	10 902	8 717	20 737	22 921
Asia	7 123	14 682	15 529	32 332	51 039	34 235
- whereof China	1 127	3 870	2 447	7 726	15 364	10 085
- whereof Taiwan	5 728	8 924	11 794	20 642	29 576	20 728
USA	3 287	3 761	6 807	7 072	12 762	12 496
Total	17 887	24 614	37 037	52 926	91 018	75 129

* Comparative figures for licenses and other items for 2022 have been redistributed due to reclassification of revenues.

** Sales at point in time means revenue is reported point-in-time at the beginning of the control has passed to the customer. Sales over time means that revenue is accrued linearly over the contract period.

	2023			2022
Amounts in SEK thousand	Q2			Q2
	Algo	Digital	Total	Algo	Digital	Total
		Identity	Segment		Identity	Segment
Net sales	12 239	5 648	17 887	19 148	5 465	24 614
Cost of goods sold	-2 606	-4 490	-7 097	-2 312	-3 094	-5 406
Gross profit	9 633	1 158	10 791	16 836	2 371	19 208
	2023			2022
Amounts in SEK thousand	Q1-Q2			Q1-Q2
		Digital	Total		Digital	Total
	Algo	Identity	Segment	Algo	Identity	Segment
Net sales	26 265	10 772	37 037	41 419	11 506	52 926
Cost of goods sold	-5 090	-8 747	-13 837	-4 836	-7 176	-12 012
Gross profit	21 175	2 025	23 200	36 583	4 330	40 914

Amounts in SEK thousand	Full-year			12 mth
	Algo	Digital Identity	Total Segment	Algo	Digital Identity	Total Segment
Net sales	67 829	23 189	91 018	52 675	22 455	75 129
Cost of goods sold	-9 070	-16 913	-25 982	-9 324	-18 484	-27 807
Gross profit	58 759	6 277	65 036	43 351	3 972	47 322

Other information

Only net sales and product costs are allocated to each segment. Other costs are not allocated at segment level as these items relate to group operations

Reconciliation profit/Loss	Q2 2023	Q2 2022	Full-year 2022	Rolling 12 mth	Full-year 2022	Rolling 12 mth
Segment profit/Loss	10 791	19 208	23 200	40 914	65 036	47 322
Marketing and sales expenses	-6 831	-8 980	-13 637	-18 114	-34 796	-30 319
Administrative expenses	-3 604	-6 503	-7 120	-10 950	-17 613	-13 783
R&D expenses	-7 358	-8 876	-16 269	-18 739	-34 905	-32 435
Other operating income/expenses	108	1 041	69	1 978	2 262	353
Finacial income/expenses	8	-285	-158	-731	-3 453	-2 880
Profit/Loss before tax	-6 887	-4 394	-13 915	-5 642	-23 469	-31 742

NOTE 4 - FINANCIAL INSTRUMENTS

The fair value in respect of financial assets and liabilities corresponds in all material respects with the balance sheet.

INTEREST-BEARING LIABILITIES

On November 30, 2022, a supplementary agreement was signed that changed the terms and conditions for the remaining liability of SEK 5,000 thousand for the acquisition of EastCoast Solutions AB (see Note 6). SEK 30,000 thousand will be paid on November 30, 2023, SEK 5,000 thousand on November 30, 2024, SEK 5,000 thousand on November 30, 2026. Interest will be added to the amounts of SEK 5,000 thousand due on November 30, 2025 and SEK 5,000 thousand due on November 30, 2026. The interest, if 3 months 5780R + 8%, will be added from November 23 until the liability is recognized as an interest-bearing liability as of June 30, 2023.

The liability has been calculated at current value at the original effective interest rate of 1.8% and is recognized as other current liabilities (SEK9,834 thousand) and other non-current liabilities (SEK 16,789 thousand). The effect on earnings of the liability was estimated at SEK 2,1 12 thousand and is eported under financial expenses in Q2 2023. Precise has the option to pay off the entire remaining purchase price early without incurring any interest expenses.

NOTE 5 - OPTION PROGRAM AND LTI PROGRAM

The 2022 shareholders' general meeting made a decision to offer an incentive plan for the company's CEO to the effect that a maximum of 100,000 (after consolidation) stock options could be issued, with each stock option providing entitlement to one (1) share in the company. Subscription through the exercising of stock options may take place during the period July 1, 2025 until June 30, 2025. The subscription price for the shares is set at SEK 9.24. At the end of 2022, 100,000 warrants had been subscribed, corresponding to 100% of the total warrants. Asuming that all stock options are exercised to subscribe to new shares in the company will increase by 100,000 shares.

The Annual General Meeting resolved, in accordance with the Board's proposal, to establish a long-term share bonus program (LT) 2022/2028) for all employees in Precise Biometrics. In order to facilitate the implementation of LTI 2022/2028 and to ensure the delivery of shares to the participants, and to cover the company's costs for social security contributions, the meeting also decided to amend the Articles of Association in the form of the introduction of new Class C shares, authorization for the Board of Directors to issue Class C shares, authorization for the Board of Directors to buy back Class C shares, and approval of the transfer of shares to participants in LTT 2022/2028. The implementation of Class C shares took place in Q4 2022. As of June 30, 2023, Precise Biometrics held 1,085,000 Class C shares.

NOTE 6 - BUSINESS COMBINATIONS

As of November 30, 2021, the group acquired 100% of the shares in EastCoast Solutions AB and Besöksystem Sverige AB.

The purchase price totaled SEK 86,203,000 was paid as at 31 December 2021, partly via a cash payment of SEK 18,000,000 and partly via the issuing of new shares totaling SEK 6,466,000. An additional SEK 8,268 thousand was paid in cash in January 2022.

On November 30, 2022, a supplement was signed that changed the terms and conditions for the remaining liability of SEK 5,000 thousand for the acquisition. See Note 4 for details of the new terms and conditions.

IMPACT ON CASH AND CASH EQUIVALENTS IN 2023 (REPORTED IN INVESTING ACTIVITIES)

There is no impact on the Group's cash and cash equivalents during 2023.

* See Note 4 regarding repayment of liability

PARENT COMPANY INCOME STATEMENT - IN SUMMARY

		2023	2022	2023	2022	2022	Rullande
Amounts in SEK thousand	Note	Q2	Q2	Q1-Q2	Q1-Q2	Full-year	12mth
Net sales	1	13 107	19 992	27 284	43 823	72 048	55 509
Cost of goods sold		-8 796	-8 149	-17 246	-17 304	-33 203	-33 145
Gross profit		4 311	11 843	10 038	26 519	38 845	22 364
Marketing and sales expenses		-4 597	-7 084	-9 488	-14 296	-27 356	-22 548
Administrative expenses		-3 411	-5 310	-6 680	-8 758	-16 567	-14 489
R&D expenses		-4 366	-5 686	-9 637	-12 272	-19 903	-17 268
Other operating income/expenses		103	1 042	18	1 971	2 287	334
		-12 271	-17 038	-25 787	-33 355	-61 539	-53 971
Operating profit/loss		-7 960	-5 195	-15 749	-6 836	-22 694	-31 607
Financial income/expenses		64	-211	-39	-593	-3 196	-2 642
Group contributions received		0	0	0	0	6 045	6 045
Profit/loss before tax		-7 896	-5 406	-15 788	-7 429	-19 845	-28 204
Tax		0	0	0	0	0	0
Profit/loss for the period		-7 896	-5 406	-15 788	-7 429	-19 845	-28 204

Amounts in SEK thousand

ASSETS Note	2023-06-30	2022-06-30	2022-12-31
Fixed assets
Fixed assets	2 368	3 487	2 869
Immaterial assets	36 781	41 207	40 009
Deferred tax assets	90 558	90 558	90 558
TOTAL FIXED ASSETS	129 707	135 252	133 436
CURRENT ASSETS
Inventories	311	311	311
Accounts receivable	6 969	10 901	6 603
Accounts receivable Group	967	0	2 161
Other receivables	8 808	1 754	8 917
Accruals and deferred income	2 701	4 250	2 971
Cash and cash equivalents	64 065	41 090	33 140
TOTAL CURRENT ASSETS	83 821	58 306	54 104
TOTAL ASSETS	213 528	193 558	187 540
EQUITY AND LIABILITIES
Restricted Equity
Share capital	23 539	11 879	14 254
Paid-in unregistered share capital	0	0	0
Statutory reserve	1 445	1 445	1 445
Reserve for development expenses	25 120	26 334	26 761
Total restricted equity	50 104	39 657	42 460
Unrestricted Equity
Share premium reserve	168 439	99 920	138 058
Retained earnings	-41 413	-22 616	-23 210
Profit/loss for the year	-15 788	-7 429	-19 845
Total non-restricted equity	111 238	69 876	95 003
Total Equity	161 342	109 533	137 463
LONG-TERM DEBT
Long term debt	16 943	29 119	16 789
TOTAL LONG-TERM DEBT	16 943	29 119	16 789
SHORT-TERM LIABILITIES
Short-term liabilities	35 243	54 906	33 288
Total Short-term liabilities	35 243	54 906	33 288
TOTAL EQUITY AND LIABILITIES	213 528	193 558	187 540

CONSOLIDATED KEY INDICATORS

	2023	2022	2023	2022	2022	Rolling
Amounts in SEK thousands unless otherwise stated	Q2	02	Q1-Q2	Q1-Q2	Full-year	12 mth
Net sales	17 887	24 614	37 037	52 926	91 018	75 129
Net sales growth, %	-27,3%	31,9%	-30,0%	35,8%	9,2%	-22,8%
Gross margin, %	60,3%	78,0%	62,6%	77,3%	71,5%	63,0%
EBITDA	-568	941	-1 193	4 962	1 147	-5 008
Operating profit/loss	-6 895	-4 109	-13 757	-4 911	-20 016	-28 862
Working capital *	61 637	38 513	61 637	38 513	33 498	61 637
Capital employed	172 299	122 685	172 299	122 685	146 302	172 299
Liquidity ratio, %	225,2%	123%	225,2%	123%	156,0%	225%
Equity/assets ratio, %	72,4%	55,0%	72,4%	55,0%	68,6%	72,4%
Earnings per share before dilution, SEK	-0,09	-0.11	-0,18	-0,14	-0,47	-0,39
Earnings per share after dilution, SEK	-0,09	-0,11	-0,18	-0,14	-0,47	-0,64
Equity per share, SEK	2,20	3.10	2,20	3,10	3,08	2,20
Number of shares (thousands)	78 464	39 596	78 464	39 596	47 513	78 464
Weighted avg. number of shares, adjusted for dilution effect
(thousands)	78 464	39 596	78 464	39 596	41 304	47 932
Number of employees at the end of the period	32	31	32	31	30	32
Average number of employees during the period	32	30	32	30	30	32
Annual Recurring Revenue***	17 828		17 828		16 190

* The key indicator is calculated excluding current liabilities to EastCoast International AB

** Annual Recurring Revenue (ARR) has no comparative figures from previous periods.

RECONCILIATION OF CONSOLIDATED ALTERNATIVE KEY INDICATORS

Q2 Q1-Q2 Full-year Q2 Q1-Q2 12 mth 24 614 37 037 52 926 75 129 17 887 91 018 31,9% 35,8% 9,2% -27,3% -30,0% -22,8% 10 791 19 208 23 200 40 914 63 036 47 322 17 887 24 614 37 037 52 926 91 018 75 129 60,3% 62,6% 77,3% 71,5% 63,0% 78,0% -6 895 -4 109 -13 757 -4 911 -20 016 -28 862 17 887 24 614 37 037 52 926 91 018 75 129 -38,5% -16,7% -37,1% -22,0% -38,4% -9,3% -1 193 -568 942 4 962 1 147 -5 008 -6 327 -12 564 -23 854 -5 051 -9 873 -21 163 -6 895 -4 109 -4 911 -20 016 -13 757 -28 862 92 654 73 825 92 654 65 234 84 063 73 825 35 066 31 017 35 066 31 017 31 736 27 687 61 637 38 759 61 637 38 759 33 498 56 376 -6 831 -8 980 -13 637 -18 114 -34 796 -30 319 -3 604 -6 503 -10 950 -17 613 -13 783 -7 120 -7 358 -8 876 -16 269 -18 739 -34 905 -32 435 1 041 108 69 1 978 2 262 353 -17 686 -23 318 -36 957 -45 825 -85 052 -76 184 Cost of goods and services sold -7 096 -5 406 -13 837 -12 012 -25 982 -27 807 Depreciation Cost of goods sold 5 216 3 814 10 251 7 409 19 777 16 935 Cost of goods and services sold excluding -3 586 -1 880 -1 592 -4 603 -9 047 -8 030 depreciation -85 052 -76 184 -17 686 -23 318 -36 957 -45 825 1 239 2 312 4 074 1 110 2 466 4 230 -72 110 -16 576 -22 079 -34 645 -43 359 -80 823 223 089 237 824 223 089 213 222 237 824 237 824 100 404 65 525 100 404 65 525 66 930 65 525 172 299 172 299 122 685 146 302 172 299 122 685 172 299 122 685 172 299 122 685 146 302 172 299 120 147 153 343 120 147 153 343 137 909 153 343 Current assets minus inventories 64 923 92 186 73 514 92 186 73 514 92 186 Current liabilities 40 941 60 015 40 941 60 015 41 570 40 941 Liquidity ratio, % 225% 122% 225% 122% 156% 225% 172 299 122 685 172 299 122 685 146 302 172 299 Equity 237 824 223 089 237 824 237 824 Total assets 223 089 213 222	Amounts in SEK thousands	2023	2022	2023	2022	2022	Rolling
	unless otherwise stated
	Net sales
	Net sales growth, %
	Gross profit
	Net sales
	Gross margin, %
	Operating profit/loss
	Net sales
	Operating margin, %
	EBITDA
	Depreciation and amortization
	Operating profit/loss
	Current assets
	Current liabilities excl. current liabilities EastCoast
	International*
	Working capital
	Sales expenses
	Administrative expenses
	R&D expenses
	Other operating income/expenses
	Total operating expenses
	Operating expenses
	Depreciation Operating expenses
	Operating costs excluding depreciation
	Balance sheet total
	Non-interest-bearing liabilities *
	Capital employed
	Closing equity
	Average equity
72,4% 55,0% 72,4% 55,0% 68,6% 72,4%	Equity/assets ratio, %

* The key indicator is calculated including long-term and short-term liabilities to EastCoast International AB

FINANCIAL GLOSSARY

Net sales growth

Percentage change compared with the corresponding period in the previous year. A measure of whether a company's net sales are increasing.

Gross margin

Gross profit/loss divided by net sales. Indicates the proportion of sales that is left over to cover wages, other operating expenses, interest and profit.

Operating profit/loss

Profit/loss before financial net and tax. A measure of a company's profit before interest and taxes, i.e., the difference between operating income and operating expenses.

Operating expenses

Operating expenses excluding cost of goods sold. Operating expenses that do not belong directly to a particular product or product group. Common operating expenses include, for example, wages and other personnel expenses, as well as rental of premises.

EBITDA

Profit/loss before financial items and depreciation. This key figure shows the group's profit/loss before depreciation/amortization of capitalized assets. This measure make comparisons with other companies, regardless of whether the operation is based on acquisitions or through organic growth.

Operating margin

Operating profit/loss divided by net sales. Defines what proportion of each Swedish krona of sales is left over to cover interest, taxes and any possible profit.

Cash flow

Cash flow from operating activities after changes in working capital. The operating cash flow indicates whether a company can generate a sufficiently positive cash flow to maintain and expand its operation, or whether it needs external financing.

Working capital

Current assets less current liabilities. This measure shows the company needs to finance operating activities.

Capital employed

Total assets less non-interest-bearing liabilities and provisions. This measure shows how much capital is and is thus one component of measuring the return from operations.

Equity

Equity at the end of the period. Equity is the difference between the group's assets and liabilities, which corresponds to the Group's equity that has been contributed by shareholders and the Group's accumulated profit for the year.

Average equity

The average equity was calculated as equity for the last four quarters divided by four.

Liquidity ratio

Current assets excluding inventories divided by current liabilities. This key fiqure shows the short term.

Equity/assets ratio

Equity divided by assets on the balance sheet date. This key indicator shows what proportion of assets is funded by equity. This measure can be of interest when assessing the group's ability to pay in the long term.

Return on equity

Profit/loss after tax divided by average equity. This key figure shows the operation's repital invested and is thus a measure of how profitable the group is. Investors can compare this measure with the current rate or return from alternative investments. The measure can also be used to compare profitability between companies in the same industry.

Earnings per share before dilution

Profit/loss for the period divided by average number of shares.

Earnings per share after dilution

Profit/loss for the period divided by weighted average number of shares.

Equity per share

Equity on the balance sheet date divided by the number of shares on the balance sheet date. A measure of equity per share, which is used when valuing the share in relation to the share price.

Annual Recurring Revenue (ARR)

ARR is defined as repeat revenues at the quarter for Digital Identity, converted to a 12-month period. Consequently, there is no direct link between the ARR figure and future revenues for Digital Identity. The ARR metric is used for contractual recurring revenues for the Digital Identity has a large customer base based on SaaS revenues. There are a small number of large customers in Algo, and therefore license fees are not followed up using the definition of ARR in this segment.