Net sales in the quarter were SEK22.8m, against our estimate of SEK22.5m, corresponding to a c1% beat. Annual recurring revenue (ARR) was SEK18.4m, compared to our forecasted SEK19.3m. EBITDA-capex (excluding leases) came in at SEK4.1m, up from SEK-4.1m last year. This represents a significant increase from the previous quarter, and we are highly impressed by the company’s cost control. Given that the last quarters saw a slightly lower rate of capex, we were cautious in extrapolating the trend, although this has now continued. Net income was SEK1.4m, against our estimates of SEK-3.4m, representing a significant beat.

Based on the news flow regarding Infineon, it seems the Automotive vertical is moving in the right direction. It is stated that some Automotive revenue has now hit the company’s books, although volumes are expected to ramp up over the coming quarters. We also learnt that Precise’s algorithms have been integrated into a mobile device from Google that reached the market in the quarter, presumably the Pixel 9. This bodes well for sales in Q4 and beyond, as the Pixel 9 was launched in late August, meaning there was only about one month of sales from the device in the third quarter. A large portion of sales for a new model naturally occurs within a couple of weeks of its launch, but still, Q4 should benefit from three full months of sales leading up to Christmas.

Following the report, we increase sales estimates slightly for Biometric Technologies and nudge down our estimates for Digital Identity. More broadly, profitability is increased for the near and medium term, which is the primary driver for the increase in our valuation. Our fair value range is SEK1.0(1.0)-SEK5.8(4.6), with a Base Case of SEK3.4(2.6) per share. The stock is currently trading at an EV/EBITDA-capex multiple of 7x for 2027e.