IDEX Biometrics : Q1 2024 report

Interim Report

First Quarter 2024

INTERIM REPORT		FIRST QUARTER 2024

CEO'S COMMENTS

Dear Shareholders,

Last year we focused on laying the foundation for biometric smart cards at scale, advancing our position as a full solution company with the introduction of IDEX Pay and IDEX Access, based on our scalable biometric platform.

IDEX has achieved unprecedented market recognition and uptake in a trust centric, highly regulated, and institutional ecosystem with a continuously expanding customer base.

This quarter, while we continue to engage with new potential customers, our primary focus has been to support our pipeline of committed customers worldwide as they complete their certifications and prepare for biometric card launches on the IDEX Pay solution. As a result, we saw our first IDEX Pay card launches coming to market, providing customers with highly secure and frictionless payment experiences.

KONAI and IDEX Biometrics partnered last year to bring state-of-the art secure ID and biometric payment card solutions to market. IDEX is entering new geographies as KONAI expands into new countries such as Japan. KONAI and IDEX Biometrics smart card platform provides the cybersecurity market with an end-to-end authentication platform focused on digital security, and compatible with standard protocols such as FIDO2, as well as biometric payments cards.

We continued our strategic focus on growth markets, and experience strong interest in our biometric payment card solution in Asia and eastern Europe. The first commercial launch was announced with Bangladeshi Eastern Bank Ltd (EBL) in December 2023. In March 2024 we announced that DenizBank in Turkey will be the first issuer to launch biometric payment cards in collaboration with Mastercard in this market, leveraging the sensor and biometric technology via our IDEX Pay solution.

Mutual Trust Bank Limited (MTB), followed in April 2024 in Bangladesh launching biometric payment cards based on IDEX Pay, adding to our growing customer base. This bank ranks among the top ten banks in Bangladesh and in September 2023 they were named 'Best Innovative Bank in Bangladesh' under the category "Fintech Innovation of the Year - Banks" at the Annual Bangladesh Fintech Awards Ceremony.

INTERIM REPORT		FIRST QUARTER 2024

In collaboration with Accomplish Financial, a UK fintech company, IDEX brings to market a biometric payment program for the visually impaired and other customer groups with special needs. This program will first launch in the UK and make it easier and more secure to pay for the visually and memory impaired, removing the obstacles of remembering PINs and avoiding the issue of "tap code to glass terminals". Digital inclusion is critical for economic growth and this launch comes as a direct response to the European Accessibility Act 2025, the call to action for businesses to be more inclusive, with an imperative to introduce accessible payment solutions.

Several of our card manufacturers and partners across the globe are currently in the process of commercializing their biometric solutions.

We received an initial IDEX Access biometric sensor system order from US-based Sentry Enterprises this quarter, to support the production ramp up of Sentry's industry leading biometric card product line, including solutions for digital and physical access as well as the crypto cold storage. Sentry's solution changes the paradigm of multi factor authentication and introduces seamless decentralized authentication with mobile and card. Biometric identity solutions ensure enterprise compliance with reinforced cybersecurity and data privacy regulations1. These solutions are becoming a critical part of enterprise security strategies for protecting digital assets and access for enterprises, governments, and individuals.

With IDEX Pay and IDEX Access, we have strong competitive platforms in the market. The increasing need for better security solutions is expected to drive the opportunity for biometric smart cards at scale. IDEX is committed to propelling this market together with our strong card manufacturing partners and by leveraging our implementation programs, reaching various segments of these massive populations in our target markets.

Financial comment

Revenue in the first quarter of 2024 was $0.4 million, compared to $0.5 million in the fourth quarter of 2023. The revenues in the first quarter continued to reflect the transition from our legacy components business to the deployment of our full IDEX biometric card solution. We expect the revenues to begin improving from the second quarter, as several of our card manufacturing partners are expected to complete full qualifications during the quarter enabling them to promote cards based on IDEX Pay to banks and issuers.

Gross profit margin on products was 36% for the first quarter of 2024, compared to 44% in the previous quarter when adjusted to exclude a charge for excess and obsolete

1 GDPR,CCPA, BIPA, NIS2 and DORA

INTERIM REPORT		FIRST QUARTER 2024

inventory. We continue working with our suppliers to reduce costs for the complete IDEX Pay and IDEX Access solutions with margins varying quarter-to-quarter based on product mix. We expect margins to trend higher when we reach scale.

Operating expenses excluding the cost of materials, were $5,7 million, compared to $4,2 million in the fourth quarter of 2024, and compared to $6.6 million in the third quarter of 2023. The Company continues to focus on reducing expenses and as such in March 2024 provided notice to about 25 combined employees and contractors. The Company is also consolidating its engineering functions to Europe and closing two engineering facilities in the US. These actions are part of the plan to reduce operating expense level below $4 million per quarter. All current actions are expected to be completed by the end of the second quarter of 2024. The Company does not expect to incur significant restructuring costs at this time.

Today, after market close, IDEX successfully conducted a private placement of 33.3 million shares at NOK 1.65 per share, compared to the closing price NOK 1.75 per share. The placement raised gross proceeds of NOK 55 million or USD 5.1 million. The subscribers will in addition receive one warrant at NOK 1.65 per share subscribed to. The board will also propose a subsequent rights offering (repair issue) of up to 8.0 million shares on the same terms as in the private placement.

Vince Graziani

Chief Executive Officer

INTERIM REPORT		FIRST QUARTER 2024

IDEX BIOMETRICS

About IDEX Biometrics

IDEX Biometrics is a global technology leader in biometric authentication solutions for smart cards, offering secure and convenient solutions for payments, access control, and digital identity. Through our patented and proprietary sensor technologies, integrated circuit designs, and software we make our biometric solutions unique and innovative, delivering secure, fast and seamless user experiences to customers worldwide. IDEX Biometrics partners with leading card manufacturers, technology companies and payment networks, bringing solutions to the market.

The IDEX Biometrics flexible technology platform supports a wide range of applications and use cases. Together with our partners, we provide end-to-end solutions to banks and other organizations seeking to launch their own biometric cards for payment or to support other authentication needs.

Business model and Strategy

Our commitment is to provide trusted proof of identity for all individuals. In an era where security and trust are paramount, our advanced biometric technology ensures that everyone, regardless of their background or circumstance, can rely on a secure and accurate means of confirming their identity, fostering inclusivity, and safeguarding personal information in an increasingly interconnected world.

We offer trusted biometric technology solutions that are scalable and meet the diverse needs of industries and applications. We are dedicated to market and consumer relevant innovation, research, and development, to provide resource optimized state-ofthe-art biometric platforms.

IDEX Biometrics is uniquely positioned as a provider of completely decentralized authentication solutions for card- based fingerprint biometric sensing technology. The IDEX Biometrics technology was purpose-built for biometric payment and access smart cards in response to the highest security standards and other requirements of these markets, such as power harvesting, transaction speed, durability, and cost effectiveness. Our technology is based on the biological markers of a person's unique fingerprint and confirms the user's identity through a 'handshake procedure' with the payment terminal, access reader or mobile phone. The biometric card solution eliminates the need for less secure credentials such as passwords, pins or the many costly and cumbersome multifactor authentication methods used today.

INTERIM REPORT		FIRST QUARTER 2024

IDEX Biometrics has evolved from a component company to an end-to-end solution company. With our own card operating system capabilities, the product offering supports additional market verticals, broadening the target markets and creating new market opportunities.

Global Market Trends and Regulatory Environment

IDEX Biometrics addresses large and well-established markets, with exposure to market mega-trends as trusted identity is a top priority in payments and for enterprises. There is demand for secure online transactions and convenient multi factor authentication solutions.

Credentials are increasingly stored online, together with other user information. This exposes people, enterprises and society to new types of threats. The costs for cybercrimes are accelerating, especially considering the emerging capabilities of AI and deep fake technologies. We believe this is an alarming global trend representing an opportunity at scale for IDEX to address, as protection of individual identity and integrity is a rising concern in today's society, manifested by increasing focus from regulators, governments and corporations.

The regulatory landscape world-wide strives to enhance end-user control and improve data accessibility for consumers. EU has recently sharpened directives and regulations, bringing stricter enforcement of multi factor authentication among organizations, who must upgrade their current IT infrastructures and find the right balancing between frictionless customer experiences and stricter security measures.

US Cybersecurity and Infrastructure Security Agency are promoting multifactor authentication including biometrics as a key ingredient to raise the bar against cyber threats across businesses and in society. Similar initiatives and mandates can be seen among governments globally.

Within payments, EMVCo, the industry governing body, is now intensifying efforts for global standards for biometric payment cards. IDEX Biometrics is an engaged member and participates in EMVCo's industry expert group for biometric payment cards. IDEX is also an associate level member of the FIDO Alliance, a global consortium developing standards for password-less authentication.

Biometric smart cards provide multi factor authentication by design. Biometric authentication, using unique physical characteristics is a solution that protects individuals and the society efficiently and represents an untapped market potential. The user's biometric data is encrypted and stored only on the card making the biometric card the ultimate hack-resistant authentication device as it is never connected to the internet.

INTERIM REPORT		FIRST QUARTER 2024

Market Opportunity and Target Markets

The IDEX Biometric unique biometric platform solution can be applied in multiple market segments using smart cards with the use cases of biometrics expanding to new segments. The company has three main target markets with an accelerating need for biometric identity solutions: banking and payment, enterprise security and public services. IDEX Biometrics is today a fintech leader in biometrics technology offering decentralized authentication solutions across payments and access control.

As the market matures and technology on cards gets more powerful, we expect the solution for different use cases will converge. Our biometric card technology can already be seen in solutions that combine physical and digital access. The abilities to attach attributes related to ID and health records are emerging. Fiat and digital currencies could soon co-exist on the same card, and there are many other examples.

I - Payments

We see the market for biometric payment cards evolve in stages, with affluent consumers taking the role of early adopters. A product segment related to this is the metal card market of more than 40 million cards/year and a double-digit annual growth. As the IDEX biometric solution expands beyond metal and into the traditional market of payment cards, economy of scale will drive prices down and allow for biometric card services to become ubiquitous.

The global market for chip enabled payment cards is currently near 3 billion cards annually and estimated to be greater than 12 billion EMV cards in circulation today. The growth in the markets is driven by the rising adoption of contactless payments, increased use of digital payments and growing e-commerce.

II - Access Control

Investments in enterprise security continue to grow double digit and biometric technologies are quickly becoming necessities in solutions targeting access control and identity management. With growing cyber security threats, and higher potential liabilities, enterprises are stepping up their efforts to authenticate every person they let into their systems and onto their premises.

Biometric on-card authentication has proven to be the most secure and convenient solution for multi factor authentication. It is economically viable and reduces the risk for cloud-based data threats putting the user in total control of their own digital identity. In addition, the card form factor is ideal as it can also function as an employee identity badge and be visibly worn.

INTERIM REPORT		FIRST QUARTER 2024

In compliance with reinforced cybersecurity and data privacy regulations, biometric identity solutions protect assets and secure access for enterprises, governments, and individuals, by removing the need for PINs and passwords. Biometric authentication cards enable decentralized biometric identification and meet the demand for secure identity solutions with use cases for biometric access solutions expanding. With the global cost for cybercrimes reaching $8 trillion in 2023, secure access control solutions have become one of the highest priorities for CISO's and other decision makers.

Supply Chain and Operations

IDEX has an asset light, fabless business model, using external manufacturing partners for the fabrication, assembly and testing of its products. The majority of our card manufacturing partners are present in both payment and access.

The IDEX Biometrics operational strategy is to maximize efficiency and cost competitiveness by using industry standard design processes, incorporating verified high- volume components and materials, and outsourcing manufacturing to partners using established production processes.

Go-to-market Model

Customers of IDEX Biometrics are manufacturers of payment cards, access cards, and other products using fingerprint sensors as the key to prove identity. Our customers are part of a large ecosystem with a multiparty supply chain to reach the final customer. The ecosystem is different for payments and access. IDEX Biometrics therefore has a distinct engagement strategy to enable the eco system and have business relationships and go-to market models for various parties in the value chain. Our flexible solutions for smart card manufacturers, our implementation programs, and our user-friendly suite of enrollment solutions meet demands from various customer types and use cases, accelerating time to market.

Product Development and Innovation

The company has adopted to customer needs when developing products and solutions, focusing on a seamless user experience. Our industry leading solutions are software defined and we have the development expertise, plus over 200 patents, to fully support the end-to-end solutions recently certified.

Our vertical approach to product development covers the entire biometric smartcard technology stack from high level solution and system architectures, through secure biometric algorithms and software, down to the lowest level sensor and silicon hardware. Thanks to the combination of our large area sensor and its highly efficient, on-board image, biometric and security processor, we are able to achieve industry leading user experience and security.

INTERIM REPORT		FIRST QUARTER 2024

Our biometric algorithms and software integrate a wide range of both proprietary and industry-standard cryptographic security functions for privacy and tamper protection, as well as implementing critical biometric enrollment, liveness detection and authentication features.

IDEX Pay is a manufacturer-agnosticend-to-end biometric smartcard solution, providing all the necessary biometric performance, functionality and security certifications required by payment schemes such as Mastercard and VISA. It enables our customers and partners to take their own card manufacturing processes and complete a fast-track certification by incorporating IDEX Pay technology and leveraging our certified smartcard reference design into their own card manufacturing lines.

The IDEX Pay biometric solution is offered with a suite of enrollment methods to enable issuers to deploy turnkey biometric activation and on-boarding solutions allowing users to enroll via their smartphone, with a dedicated device at home or in a branch.

The Mastercard certification of the IDEX Pay solution marked a major milestone in the development of our Biometric Software Platform for cards.

IDEX biometric software platform, IDEX Pay, and access, IDEX Access are built on the same biometric platform, serving two different markets. The solution can be layered with different applets to provide new functions and capabilities for supporting payment, crypto wallets, and other digital authentication solutions such as digital access. The full card solution from IDEX Biometrics is complete with hardware (sensor, secure element modules and all accompanying components) and software (OS, applets, SDKs). The OS developed by IDEX allows our customers to provide their own customized applet for application specific functions.

Therefore, sensitive biometric information is never communicated to third parties or stored in a connected database. We are committed to investing in patents and other intellectual property protection measures that ensure our products are, and remain, the leading solution in our target markets.

Sustainability

Providing secure authentication to the world through sustainable technology solutions, IDEX Biometrics is embedding Environmental, Social and Governance (ESG) practices into its business and operating model. IDEX Biometrics is embedding Environmental, Social and Governance (ESG) practices into its business and operating model. IDEX Biometrics company strategy for sustainability reporting is based on the United Nations Sustainable Development Goals (SDGs). This framework is part of our business and operating models, aimed at contributing to secure value, trust and predictability for our operations.

INTERIM REPORT		FIRST QUARTER 2024

FINANCIAL REVIEW

Statements of profit and loss

IDEX Biometrics revenue amounted to $0.4 million in the first quarter. Sequentially, revenue decreased 23% from the fourth quarter of 2023. Year-over-year revenue in the first quarter 2024 was down 70% when compared to $1.2 million for the same period in 2023. In the first quarter of 2023 revenue largely originated from the two component customers at the time, while revenue in the first quarter of 2024 reflects initial volume sales to solution customers who are completing their certifications and preparing for biometric card launches on the IDEX Pay and IDEX Access solution platforms. This change reflects IDEX's strategy to transition from a component supplier to a full solutions provider.

Gross profit margin was 36% of revenue2 in the first quarter of 2024, compared to 26% in the corresponding period of 2023. Improved gross margin reflects the shift in product mix toward our complete payment card solution in 2024.

Compensation and benefits expenses amounted to $3.1 million in the first quarter of 2024 compared to $4.4 in the first quarter of 2023. The decrease is due to staff reductions implemented in both 2023 and 2024. Further reductions of staff are being implemented during the first half of 2024.

Share-based compensation expense, which is non-cash, totaled $0.3 million in the first quarter of 2024, compared to $0.4 million recorded for the first quarter of 2023 and $0.2 million recorded for the fourth quarter of 2023. Quarterly variances in share-based compensation are attributable to the number of subscription rights vesting in the period, and changes in the share price which influences the accrual of estimated employer's tax that will be due when a subscription right is exercised.

The staff is made up of employees and individual contractors. On a full-time equivalent (FTE) basis, the staff totaled 80 on March 31, 2024, down from 98 on March 31, 2023, and 87 at the beginning of 2024.

The company continues to focus on reducing expenses and in March 2024 served notice to about 25 staff members. IDEX is also consolidating the majority of its engineering

2 The gross profit and gross profit margin figures are alternative performance measures (APM) under IFRS. The gross profit and gross profit margin are measured as Revenue less the Cost of materials, net of inventory change. The cost of materials is the purchased cost of manufactured finished goods sold to customers.