U.S. Markets close in 4 hrs 6 mins

Edited Transcript of NEXT.OL earnings conference call or presentation 12-Nov-19 7:30am GMT

Q3 2019 Next Biometrics Group ASA Earnings Call

OSLO Nov 28, 2019 (Thomson StreetEvents) -- Edited Transcript of Next Biometrics Group ASA earnings conference call or presentation Tuesday, November 12, 2019 at 7:30:00am GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Knut Stålen

NEXT Biometrics Group ASA - CFO

* Peter Heuman

NEXT Biometrics Group ASA - CEO

================================================================================

Presentation

--------------------------------------------------------------------------------

Peter Heuman, NEXT Biometrics Group ASA - CEO [1]

--------------------------------------------------------------------------------

Okay. Hi, and welcome, everyone, to the NEXT Biometrics Quarter 3 2019 Report and Webcast. My name is Peter Heuman, and I'm the fairly newly appointed CEO. And I've been in the office since the 16th of September, so it's a fairly short period within the quarter 3 report, and I'm running now towards the 50-day mark in the company.

The plan for today was and also to what I just said was that I will have a small, short introduction here. And I will later hand over to our CFO, Knut Stålen, who will run through the quarter 3 results and the takeaways. At the end, I will come back, and I will try to resonate a little bit with you and inform you what I've been busy with during my first 50 days and also tell you a little bit how far I've come in my analysis of the company in the situation we are in. And most importantly, I will try to guide you a little bit what I and we, as a company, will be very much focused on going forward from here.

But before I hand over to Knut, I wanted to say a few words. And I would like to start with saying that I feel confident when I say that most probably, almost all of you shareholders are not satisfied with the numbers that we have shipped you the last 10 days. I dare to almost say that I'm a little bit surprised myself, but I think most importantly, I want you to also know that we, as a company, are not at all satisfied with those numbers. And I wanted to touch upon, and maybe this will be a little bit brief, but I want to touch upon a little bit what I have seen from my analysis of why we, as a company, have ended up where we are at this temporary revenue decline. I will do that in maybe a simplified version, but if I start to say that when NEXT established itself almost a decade back, it was an entrepreneurial-driven, technology-driven company. They brought technical skilled people on board. They brought IPs on board. They started to get their first customers. They even managed to actually get a large Tier 1 kind of customers. I would call that the establishment phase. And no matter what, I would say, I actually think that, that was impressive, and they did that in a fairly good way.

From there, of course, when you have these kind of customers, they start to enter the next phase so the company get into what I would define as the productification phase. What happens here? Yes, with these type of customers, with these type of road maps, with these type of technologies that you need to cater for, you probably need to start to add a few more competencies, you need to add another level of structure in your company, you need to add another type of supply chain. You need to prove your manufacturability. And I think NEXT showed, in a good way, how they have been doing this, and they have catered for that productification phase, I would say, in a fairly decent way.

However, here comes a little bit at least, my take on the challenge. I think the company has gone stuck a little bit in this productification phase because the next phase that a company, a technology company has entered is the more, what I would call, a commercial phase. In the commercial phase, you take your existing technologies, you ensure you develop and continue to develop your technologies for your customers, but you start to show your shareholders that you are actually getting commercial traction on the solutions and on the products that you build.

And this is what I mean that I have -- I'm sensing a little bit, and I will come back to this at the end, why the company is in the situation where we are, and that we got a little bit stuck as a company in the productification phase.

Having that said, I would almost argue that most probably, the reason for this situation is also why I'm here and why the Board have chosen me to be here. I have, throughout my career, turned around several different companies and business units. I have done a turnaround and scaled up the company in a similar size like NEXT in Scandinavia, smaller than public traded company, which after these years, started to deliver fantastic values for its shareholders. We deliver great service to our customers, and it was a fantastic place for our employees to work at. I've also done that in a much more global corporate environment for a fairly large business unit of a technology and software-related business. And with this background, I still feel confident that adding that kind of competence into this commercial phase, that's what I could potentially bring to the table.

If I should touch on one more thing just so you understand and what I will come back to at the end is, of course, it's very unfortunate. And like in all companies, companies have strengthened weaknesses. You saw that I've been writing that in my CEO statement. It's clear to me that one of the weaknesses of NEXT Biometrics is that we have been a little bit too dependent on a single source, at least from a revenue point of view, and that we see the results of that right now. And as tough that -- as that might look, I try to see it from the other way around. For me, it's still a fairly small company. And if a single customer can help to get us into this situation, I try to see it the other way around. Perhaps one single customer, if we have a good commercial thinking right and focus in the company right, the one single customer could potentially help us to flip the company back into a very positive traction again. And that's what I will be very focused on. But as I said, I will come back to that a little bit later.

So let me introduce Knut Stålen, our CFO, who will now run through the quarter 3 numbers.

--------------------------------------------------------------------------------

Knut Stålen, NEXT Biometrics Group ASA - CFO [2]

--------------------------------------------------------------------------------

Thank you, Peter. I will jump briefly through the first -- if I'm able to make this work.

So first, the highlights of the quarter. Our revenue year-to-date ended on EUR 75.2 million, that is down 5% compared to previous years' year-to-date numbers. The revenue in Q3 ended on EUR 17.6 million in Q3, and that is down 42% from Q3 2018. That's mainly related to the U.S. Tier 1 that, as announced, has reduced their number of platforms and as we have not been able to mitigate and replace the revenues from this loss. The gross margin in the quarter was 27% if we adjust for a nonrecurring write-down of inventory. This is down 3% compared to the same period last year. EBITDA ex options ended on EUR 34.7 million, and the cash in the bank is NOK 132 million. And the last highlight on this slide is that Peter Heuman was appointed as CEO of NEXT end of the quarter.

Go a little bit more into the details. We have had a fairly stable revenue over many quarters, around NOK 30 million and is now down to NOK 17.6 million. The gross profit is also down to NOK 1.9 million and is mainly related to the extraordinary write-down on inventory that we did in this quarter. If we adjust for this write-down, the gross margin is then 27%. The EBITDA is probably one of the lowest losses we have had for many quarters, 31.8%. We had also a positive impact on option expenses in the quarter. So the adjusted EBITDA is NOK 34.7 million. If we look at the cost base, we had, in the quarter, NOK 40.4 million in running cost base. We had also a positive impact of a tax repayment in the U.S. So the actual cost base ended on NOK 36 million in the quarter. That's also quite low OpEx cost base if you compare to the same quarter a year ago, where we had NOK 45 million in expenses.

I have also touched on the EBITDA ex options, where we have a pretty stable financial performance over 4, 5 quarters. And if you see the cash flow, maybe that's the most important point in this part of the presentation, is that over the last 4 quarters, we have been between NOK 25 million and NOK 32 million in negative cash flow. If you also compare to a year ago, we have now NOK 10 million less negative cash flow this quarter compared to a year ago.

This is the overview of the balance sheet and the cash flow development. And as you can see here, we have a negative cash flow from operational, NOK 32 million, ending the cash flow at end period of NOK 132 million. If we go into the main, what we have been working on in Q3, in the Access Control, we announced our win, our $100,000 sensor modules agreement that we are going to deliver now in Q4 and a little bit into Q1. We have also launched a new module with extended temperature range so that we can then extend our offering to also other customers. And we are also promoting the FAP20 in the Access Control space.

When it comes to government ID, we have a few more designing contracts for the POS suppliers into the Aadhaar system. There are quite a high-tendering activity in India. Even yesterday, I signed 2 more tender documents of, in total, 30,000 units. One of them was a reissue of tenders. And that's one of the problems that we see in India is that they have now a tendency to just stop the tender, and then reissue it, and then restart all over again. We are in many tenders between 400,000, 600,000 units in different tenders in India, but they continued to delay and be reissued. So we don't really -- we cannot say that we have lost any specific tender. But we have not been getting too many of those either. When we are granted a tender, we have to deliver within 30 days. So it's a quite fast cycle when we are granted a tender.

We continue to promote the FAP20 sensor in the government ID sector as a whole. When it comes to notebook, we have now stable Fujitsu volumes for a couple of quarters. We have also a target here to close more notebook customers that want a larger sensor like the FAP20. And we also see then, as I mentioned before, the regional shipment to U.S. Tier 1 customer. On the smart card side, we are completing development of the Dual Interface solution, as promised and stated, and we are continuing to expand the ecosystem.

I think that was what I wanted to say.

--------------------------------------------------------------------------------

Peter Heuman, NEXT Biometrics Group ASA - CEO [3]

--------------------------------------------------------------------------------

Okay. Thank you, Knut. So a little bit like I started. I will now -- I only have 2 slides. It's not going to be that many. But I wanted to give you a little bit of an insight since I was only part of the quarter 3 for a couple of days. But today, I've been here in almost 50 days. So I feel I have been fairly busy -- especially with, I would say, in my initial and early analysis of the company and of the traction that we currently have.

And just very quickly, so I would like to summarize. I mean this is not a very large company. So actually, the first couple of weeks, I gathered a lot of data, internal data, internal focused. I even had a survey all my staff, and they provided me all kinds of great input of what they believe we are good at and what we potentially can improve. I mixed that with all the figures and data and with not market data, and I would say that this is part of my internal analysis. But in parallel with that, I started to work on the external analysis. And in that phase, I have been managed to be out. I have talked to shareholders. I have met some of our important partners. And I have, even more importantly, I have spent time in both Americas, in India, in Czech, in Japan, and I have met both existing customers. I have met and been in dialogues with our sales people regarding new potential customers and with new potential customers. And I have also actually met customers, 2 of them who have reacted NEXT Biometrics just to understand why didn't we qualify in this procurement process. And this has been part of my external gathering and data points. And when I put all those together, I start to feel that I get a very good and solid picture of both, some of our strengths and also some areas where we can truly improve. And that's what I'm going to try to outline for you here and now.

And remember, like I said in the beginning, the company, according to me, got a little bit stuck in the productification phase. That's not all bad. From a product perspective, it's actually quite good. I would say that from a hardware skill, we are a very strong company. We have great hardware skills from architecture of our hardware and our fingerprint sensors, all the way to productification. We are building it on a global IP that provides us access in so many different markets. I think the company -- we have proven that we actually have a strong manufacturability. The company has delivered large volumes to Tier 1 global customers, not one of them, to several of them. I think that's a very strong asset in the company.

I also believe, with what I have seen so far, and that's the sense I have gotten when I've been out there meeting some potential customers. I have been out there with our sales team to actually discuss and see if we could sell this new FAP20 sensor. It looks like a fingerprint sensor. It's one of our larger, you see the size here, larger fingerprint sensors, which is very, very good. We believe in this one. But if I believe in it, it doesn't really matter. What I wanted to find out during my external and during my analysis is, do potential customers believe in this one? And like I've right here, this provides, from several different factors, a fantastic opportunity for the company. I would try to explain for you where larger sensors today are used is not in consumer electronics per se. It is more into corporate environment. The most frequently used larger-sized sensor of this size and larger is called optical sensor. It's just another sensor technology. They are heavily deployed throughout the world. But if you look at -- I have all technologies you need to compete with an optical sensor I have in this little small sensor. If I generalize, if you believe in an optical sensor, I will demonstrate it by putting the actual fingerprint sensor on top. But the actual technology, you need to deliver the whole cup to the customer. These sensors are today sold on a fairly expensive price, and as you can see, I have a form factor advantage, and I can guarantee you that I have a price advantage, which still can provide good margins for NEXT Biometrics.

So I feel that we have also road maps and products and solutions that actually has been the good part of getting a little bit stuck in the productification phase. If I can help the company now and ensure that we also take action on that and commercialize it, that's what I will be very focused on and that's what we, as a company, are going to be very focused on.

That said, so what do I think we need to improve. So this is just a temporary revenue decline. I have divided them into 3 main areas. It's a growth agenda, but it has all to do with what I just have spoken about now, both at the beginning and here. It's about how we commercialize our products, how we bring valuable contracts to the company and to our shareholders. It's about being customer-centric. I can have the world's best engineers, and we can be very good at developing product. If we don't have very big ears and listen very well for what our customers are demanding right now, we won't sell. So I think we can improve in being a little bit more customer-centric. I will try to exemplify this. And then resource and capital allocation. We need to balance, and in my capacity now, I think that if I look back, there are improvement areas in how I can, both from a product development point of view, from a sales focus point of view, I have the capacity now to ensure that I balance this in a little bit different way because what this company needs is to get commercial traction and everyone within our product development or within our sales force, that's what we need to be very focused on. So I can play with this a little bit. And I have a slide here, just explaining it a little bit further.

So basically, without me going into every detail here. There are 3 things I want you to know that -- and what I'm aiming for, and I will try to demonstrate that here now is what you can expect from me and from us as a company when we meet again during the quarter 4 report, which is somewhere in February, then I have passed my 100-day program. And you should be able to see some effects of what we are executing as a company.

One thing that I will try to see how I can prove to you that we have put a higher commercial focus that is regarding our growth agenda. And this is -- what I'm aiming for is that you hopefully should be able to see already before we announce the quarter 4 that we have a few tangible volume-based orders that creates financial impact on NEXT Biometrics P&L. That's what we are aiming for. That's what I'm balancing our resources right now to ensure that we try to do everything we can, both from a product perspective, like I just showed you, and from a sales perspective. So you should expect us to hopefully be able to deliver, and that's what we are committed to try to do, commercial-traction when we meet again in February.

Customer-centric. I think it speaks for itself. I will honestly say, I think the company has been a little bit too engineer-driven. And -- but like I said, it doesn't matter how good salespeople I have or how good products I build, if they are not carefully and very selectively guided by customer input, it might not matter what we do. And I see a clear improvement area here. One area, for example, where I have a lot of experience myself, where I think we, as a company, can potentially improve is to bring a little bit more software into our -- in close to our fingerprint solution. I think from at least 2 reasons, we can be much better off if we also improve how we handle the softwares that are linked to our fingerprint sensor. First of all, it might become much easier for our potential customers to plug in and get started with our sensor if it's very easy to work with our software interfaces. Second of all, that means that we can potentially both quicker close our deals and get revenue into our company if it make it easier for our customers. And secondly, software, will, long term, potentially, if we can get a proportion of software next to our hardware, also provide a little bit higher margin potential. It's a little bit early for me to say, but I see an improvement area here. And potentially long term, a potential, something I probably will know much more about when we meet again at the quarter 4.

I also wanted to touch upon this since the numbers and our revenue is heavily going down. I, for sure, hope that this is going to be then a temporary setback, and that I wanted to know that we are very focused on solving. I also wanted then, of course, like I said, there's going to be a balancing for me here on making sure and ensuring that a large part of our capital and resources are being put and allocated towards what can bring commercial traction here and now. I also will be very focused on and will try to show you much more during the quarter 4 what we have actually executed or what I will execute in more detail regarding -- I will be very focused on making sure that we, as a company, have a little bit longer runway compared to what you probably would read out from the numbers that you see that we are reporting today. So one aim I have is to make sure that we get a little bit longer runway before we would need any injection of further capital. So commercial traction is one main focus, a longer runway is another focus. And I hope this, in parallel, puts us in a much better position later on during this year.

And I think with that, I should just summarize. So what you can take with you from this? I think you have heard enough about this notebook, temporary setback that we have and dependency we have there on the revenue. It's going to be even for me due to the sales cycles we have, so short term like we have already guided, it's going to be tough to mitigate this to the full extent.

But what I said, be rest assured that we are putting in a very strong commercial focus in the company. We are going to deliver customer-centric solutions. And it's going to be a lot of cost-consciousness going forward, while the temporary is at lower levels. And I think that's what you should take with you.

And with that, I would like to thank you, and maybe we should open the floor if there are questions.

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Peter Heuman, NEXT Biometrics Group ASA - CEO [1]

--------------------------------------------------------------------------------

Yes, [Christopher]?

--------------------------------------------------------------------------------

Unidentified Analyst, [2]

--------------------------------------------------------------------------------

Christopher (inaudible). So my first question is on what you finished off with on the last slide on the runway. So you plan to extend the runway without raising more cash. Could you just elaborate on how you will do that? Will you kind of initiate a new restructuring program to cut costs, how much, et cetera?

--------------------------------------------------------------------------------

Peter Heuman, NEXT Biometrics Group ASA - CEO [3]

--------------------------------------------------------------------------------

Yes, and it's a little bit early for me to give you the specifics, but you are around those lines. As I see the revenues potentially then temporarily go down quite heavily as we have introduced to you during the last 10 days. Of course, I will be focused on to see what kind of cost avoidance can I do? What kind of efficiencies and optimizations can I create? But still with keeping and increasing a commercial focus. But around those lines, absolutely. But I will come back in quarter 4 and give you more on the specifics.

--------------------------------------------------------------------------------

Unidentified Analyst, [4]

--------------------------------------------------------------------------------

Does this mean that you should have sufficient cash at least for the next 12 months?

--------------------------------------------------------------------------------

Knut Stålen, NEXT Biometrics Group ASA - CFO [5]

--------------------------------------------------------------------------------

Yes.

--------------------------------------------------------------------------------

Unidentified Analyst, [6]

--------------------------------------------------------------------------------

Great. And then if you could just try to help us understand how the rest of the business, excluding Dell, is evolving? Could you share anything or the Tier 1 notebook bender? And then if you could share anything about, for example, how much of gross profit in the quarter was almost derived from this biggest notebook customer? And also, how much in the previous quarter?

--------------------------------------------------------------------------------

Knut Stålen, NEXT Biometrics Group ASA - CFO [7]

--------------------------------------------------------------------------------

So we are not ready to disclose the details on that. But as you see, the main reduction in revenue compared to previous quarter is related to the Tier 1. We have been increasing other customers. About 4x the revenue number from Q4 2018 until now is coming from new customers, but it's not growing fast enough compared to our expectations.

--------------------------------------------------------------------------------

Unidentified Analyst, [8]

--------------------------------------------------------------------------------

Okay. And then you mentioned that you required sight on the FAP20 in the business-to-business segment. Could you give some kind of elaboration on time line? How long do you expect before these customers can ramp up on the FAP20?

--------------------------------------------------------------------------------

Peter Heuman, NEXT Biometrics Group ASA - CEO [9]

--------------------------------------------------------------------------------

So I would divide that into two. So 47 or 48 days into the office, I can tell you already, as a company, we are extremely commercial, focused on delivering this commercial traction. Part of that, and what I also said here earlier is that I have also been with the sales force myself out, having dialogues about this FAP20. We are currently in dialogues with potential customers. And what I'm aiming for is to be able to -- before even we announce quarter 4 that, hopefully, we should be able to inform you what those deals look like that we potentially strike. Now remember, that's when we get the deals, the potential deals. I think that's a proof point of commercial traction. I will try to make sure that in those contracts, we can either see how many sensors? How many dollars? When will the revenue kick in because the revenues will kick in a little bit later due to the design in phases, et cetera. But the commercial traction I talk about, and there I hope to be able to show, and you can feel comfortable that we are full speed ahead, focused on this to even provide some of these proof points before we announce our quarter 4.

--------------------------------------------------------------------------------

Unidentified Analyst, [10]

--------------------------------------------------------------------------------

All right. And then on the smart card space, you have previously announced partnerships with card integrators in Asia, for example, in Vietnam. And you've announced partnerships with, for example, Infineon. But in this slide deck, I felt you focused a little bit less on the smart card space. Does that mean that you're not seeing traction there? Or do you share something on these partnerships, how long before it will materialize in volume, et cetera?

--------------------------------------------------------------------------------

Peter Heuman, NEXT Biometrics Group ASA - CEO [11]

--------------------------------------------------------------------------------

Yes, I can try to do that rather. Since I have a little bit of a background from the payment industry and part of my analysis has, of course, been to see what and how we are going about in the smart card space. So first of all, there is no strange strategy in the company. There's some respect for how long time. And part of the customers that I have met and customers that might have reacted is also part of the smart card industry. We keep this, you will see next on this Trustech here in November, where we will announce and talk with -- regarding some of the partners that we have. I think you have seen, historically, that we have quite a lot of partnerships for such a small company. I just think that the focus that we will -- that potentially change right now is that we need to have partnerships that actually drives revenue short and midterm. That said, the company is still focused on what's potentially more long term, how we can position us more long term. And I think you will see -- and we will continue that focus.

--------------------------------------------------------------------------------

Unidentified Analyst, [12]

--------------------------------------------------------------------------------

Okay. Last one from me, Dual Interface. When should we expect that now to be completed?

--------------------------------------------------------------------------------

Peter Heuman, NEXT Biometrics Group ASA - CEO [13]

--------------------------------------------------------------------------------

You should be able to see that and be demonstrated during Trustech in, I think it's 26 November.

--------------------------------------------------------------------------------

Unidentified Analyst, [14]

--------------------------------------------------------------------------------

In a few weeks.

--------------------------------------------------------------------------------

Peter Heuman, NEXT Biometrics Group ASA - CEO [15]

--------------------------------------------------------------------------------

In a few weeks.

--------------------------------------------------------------------------------

Unidentified Analyst, [16]

--------------------------------------------------------------------------------

Customers can buy that in volumes in Q1 or Q4?

--------------------------------------------------------------------------------

Knut Stålen, NEXT Biometrics Group ASA - CFO [17]

--------------------------------------------------------------------------------

We are going to demonstrate it, and then it's up to the customer that decides when and how many and so to buy it. But we will demonstrate it during Trustech.

--------------------------------------------------------------------------------

Peter Heuman, NEXT Biometrics Group ASA - CEO [18]

--------------------------------------------------------------------------------

All right. And do we have more questions coming in?

--------------------------------------------------------------------------------

Knut Stålen, NEXT Biometrics Group ASA - CFO [19]

--------------------------------------------------------------------------------

We have a few questions from the web. I can take the first one. Where are you in terms of fulfilling the Aadhaar sales targets in India?

--------------------------------------------------------------------------------

Peter Heuman, NEXT Biometrics Group ASA - CEO [20]

--------------------------------------------------------------------------------

That's a good question. I think Knut elaborated on this. And with the sales targets for the company, then I can just refer to what Knut said. We are established in India. We have a sales force in India. We are in many of these bidding processes. It's a bit too early for me to say whether we are fulfilling our company targets as such. I think it's -- with my experience from India, I think we have also done a little bit of the early mistakes you can do when you enter the market, but I also see some good traction coming from our organization. Exactly what that will lead to? I would like to come back to during quarter 4.

--------------------------------------------------------------------------------

Knut Stålen, NEXT Biometrics Group ASA - CFO [21]

--------------------------------------------------------------------------------

Another question. Can you give some color on why customer is choosing capacitive silicon technology instead of NEXT active thermal?

--------------------------------------------------------------------------------

Peter Heuman, NEXT Biometrics Group ASA - CEO [22]

--------------------------------------------------------------------------------

I don't understand the statement because, yes, of course, there are -- I will say like this, there are different technologies providing fingerprint sensors. They are all fit for different purposes. Capacitive sensors have their pros and cons, just like our thermal technology has. I would say that, that statement is fundamentally wrong. But however, that said, capacitive sensors are very fit for purpose for certain market segments, while thermal sensors might be even more fit for purpose for other segments. There is, of course, an overlap here sometimes when the customer can decide to go for one technology or the other. But I wouldn't be bothered. I think there's room in the market for several different technologies.

--------------------------------------------------------------------------------

Knut Stålen, NEXT Biometrics Group ASA - CFO [23]

--------------------------------------------------------------------------------

I can just comment very briefly on it because it's quite important that we are best where it's largest. And so the silicone sensors are better than the smaller sensors. It's a cost point. So basically, when you need a larger sensor, you need active thermal from NEXT, when you need smaller sensor for cost reason, you would use a silicon sensor.

We have also a few more questions here. After you joined Peter, NEXT have issued less announcement and press releases. Is this a change in policy and what's the company's policy on press releases?

--------------------------------------------------------------------------------

Peter Heuman, NEXT Biometrics Group ASA - CEO [24]

--------------------------------------------------------------------------------

The company policy on press releases, I will probably not comment. But if you perceive that there is a change, I think it might be correct. I think my job as the CEO, and for us as a company in the situation where we are, I would like us to actually send less press releases and information out to the market when it comes to partnerships, et cetera. They might be good activities and things going on, but they might be more for the long term. They might be more difficult for you as shareholders to understand what value they actually bring.

My focus will be to deliver press releases and news, including short- to midterm tangible and valuable and understandable press releases where we prove our commercial traction. I think that's a little bit the change that you might perceive now for a while going forward. But like I said, I hope we're going to increase the speed in which we come with these press releases. That's our focus.

--------------------------------------------------------------------------------

Knut Stålen, NEXT Biometrics Group ASA - CFO [25]

--------------------------------------------------------------------------------

Another question here. What has been the driver of the falling volumes for the notebook Tier 1? Is it weak sales of the notebook Tier 1? Is it issues with NEXT sensor or is it cost of sensor?

--------------------------------------------------------------------------------

Peter Heuman, NEXT Biometrics Group ASA - CEO [26]

--------------------------------------------------------------------------------

And this, I should probably be very careful in elaborating on and maybe invite you, Knut, since I was not even part of the company when the dialogues between the 2 companies occurred.

--------------------------------------------------------------------------------

Knut Stålen, NEXT Biometrics Group ASA - CFO [27]

--------------------------------------------------------------------------------

I can explain that.

--------------------------------------------------------------------------------

Peter Heuman, NEXT Biometrics Group ASA - CEO [28]

--------------------------------------------------------------------------------

Maybe it's better, you're better positioned to explain that.

--------------------------------------------------------------------------------

Knut Stålen, NEXT Biometrics Group ASA - CFO [29]

--------------------------------------------------------------------------------

Yes. So we have been part of the U.S. Tier 1s platforms for delivering fingerprint sensor for quite a few years. And they are introducing new platforms in different cycles. In the cycles that this is coming up now, they wanted to have a different design on their sensor and with a much smaller sensor size. And we do not see that we are the best provider of sensors with a small size. So it was mainly a choice by the Tier 1 that they wanted to have a different design compared to what we could deliver or would deliver. They have also a big platform for larger sensors similar to FAP20, and that's one of the targets we have for the FAP20 sensor. But it was mainly related not to their weak sales or anything related to that, but they wanted to have a different design on their sensors in their notebooks.

And we can take one more question.

Yes. Peter, how many shares do you own in NEXT, excluding options?

--------------------------------------------------------------------------------

Peter Heuman, NEXT Biometrics Group ASA - CEO [30]

--------------------------------------------------------------------------------

I actually don't own any shares right now. That's the brutal truth. But like I said, I'm in the middle of a 100-day program. And I have been granted options from the Board. And I also said that I'm willing to look into how I can contribute and become a larger shareholder, but I also asked for some time due to the situation we're in to make sure that I have done a proper analysis. That's what I would have done with any other investment. Here, I can probably faster but with good accuracy, make my investments. So I will come back to that.

--------------------------------------------------------------------------------

Knut Stålen, NEXT Biometrics Group ASA - CFO [31]

--------------------------------------------------------------------------------

One last question. Is it possible to reach cash breakeven in Q2 2020?

--------------------------------------------------------------------------------

Peter Heuman, NEXT Biometrics Group ASA - CEO [32]

--------------------------------------------------------------------------------

Everything is possible, but I'm not going to guide on these kind of numbers. I just said, focus is commercial traction, and I'm going to try to ensure that we have a longer runway. So let's come back to that in our dialogue around quarter 4, where I've been in a little bit longer, and I will try to go much more detail into also providing some guidance about those kind of figures.

Okay. With that, if no further questions from here or from the web, we would like to say thank you for listening and taking part of this quarter 3 report for NEXT 2019. Thank you.