inside secure non deal investor presentation october 2016...6 | inside secure – october 2016...

INSIDE Secure U.S. Roadshow, October 2016

Amedeo D’Angelo, President & CEORichard Vacher Detournière, GM & CFO

October 2016

|2 INSIDE Secure – October 2016|

DISCLAIMERThis presentation and the information it contains are not intended to constitute, and should not be construed as an offer to sell or a

solicitation to buy or subscribe to any INSIDE Secure securities, in any jurisdiction. Any public offering of INSIDE Secure securities would be

made by means of a prospectus previously approved by the AMF that contains detailed information about INSIDE Secure. The disclosure,

distribution and publication of this presentation may be restricted by law in certain jurisdictions and persons into whose possession any

document or other information referred to herein comes should inform themselves about and comply with any such restrictions. INSIDE

Secure takes no responsibility for any violation of any restrictions by any person.

This presentation contains certain forward-looking statements relating to the business of INSIDE Secure, which shall not be considered per

se as historical facts, including the ability to manufacture, market, commercialize and achieve market acceptance for specific projects

developed by INSIDE Secure, estimates for future performance and estimates regarding anticipated operating losses, future revenues,

capital requirements, needs for additional financing. In addition, even if the actual results or development of INSIDE Secure are consistent

with the forward-looking statements contained in this press release, those results or developments of INSIDE Secure may not be indicative

of their in the future. In some cases, you can identify forward-looking statements by words such as "could," "should," "may," "expects,"

"anticipates," "believes," "intends," "estimates," "aims," "targets," or similar words. Although the management of INSIDE Secure believes

that these forward-looking statements are reasonably made, they are based largely on the current expectations of INSIDE Secure as of the

date of this communication and are subject to a number of known and unknown risks and uncertainties and other factors that may cause

actual results, performance or achievements to be materially different from any future results, performance or achievement expressed or

implied by these forward-looking statements. In particular, the expectations of INSIDE Secure could be affected by, among other things,

uncertainties involved in unexpected regulatory actions or delays related notably to building and operating permits and renewable support

policies, competition in general or any other risk and uncertainties developed or identified in any public documents filed by INSIDE Secure

with the AMF, included those listed in chapter 4 “Risk factors” of the 2015 registration document (“document de reference”) approved by

the French financial market authority (the Autorité des marchés financiers – the “AMF”) on March 30, 2016 under number R.16-014. In light

of these risks and uncertainties, there can be no assurance that the forward-looking statements made in this communication will in fact be

realized. Notwithstanding the compliance with article 223-1 of the General Regulation of the AMF (the information disclosed must be

“accurate, precise and fairly presented“), INSIDE Secure is providing the information in these materials as of this communication, and

disclaims any intention or obligation to publicly update or revise any forward-looking statements, whether as a result of new information,

future events, or otherwise.

©Inside Secure 2016. All Rights Reserved. Inside Secure,® Inside Secure logo and combinations thereof, and others are registered ®

trademarks or tradenames of Inside Secure or its subsidiaries. Other terms, logos and product names may be trademarks of others.

|3 INSIDE Secure – October 2016

CONNECTED WORLD IN 2020

4Billion Connected

People

200Billion Connected Devices

$432Billion Semiconductor market for

Connected Devices

Source: Gartner, PwC, Market & Research, MarketsandMarkets, JuniperResearch – 2015 / 2016

$132Billion Data Market

$8Trillion Digital Transactions Market

$

$154Billion Global Digital Market

|4 |

SECURITY IS AT THE TOP OF “TOMORROW’S CONNECTED WORLD” CHALLENGES

� Mobile vulnerabilities more than tripled

� Android Malware : Trojan attacks almost doubled

� Critical flaws discovered in all phones, including Apple and Samsung

of consumers won’t use digital wallets due to security concerns46% $20.5B estimated annual cost of

piracy to studios

!

39% security and privacy as top barriers to IoT investments

by 2019 cost of cybersecurity attacks in the world

� Cyber crime, the greatest threat to companies across the world

� Since 2010, there has been a dramatic increase ofover-the-top movie distribution

� The amount of VoDtraffic in 2019 will be the equivalent to 7 billion DVD’s per monthSource: Symantec 2016 Source: Movie Pilot

$2T

Source: Forbes 2016

Source: IOT Institute 2016

� Hacking is considered as a huge threat for the future of automobiles: Jeep, Tesla hacking’s stories

� In 2020, 25% of all identified security breaches will involve IoT

INSIDE Secure – October 2016


Security needs to be tightly embedded at the heart of any system, at the heart of the main processor of the device (e.g. Smartphone, IoT Device, etc.)

DRIVING TRUST AT THE HEART OF A CONNECTED WORLD

Security evolution: Through a deeper software & hard ware integration

SmartCard Technology

User

Application

Operating System

Hardware


INSIDE SECUREPOSITIONING

INSIDE Secure is at the heart of security solutions for mobile and connected devices, providing software,

silicon IP, tools and know-how needed to protect customers’ transactions, content, applications, and

communications.

With its deep security expertise and experience, the company delivers products having advanced and

differentiated technical capabilities that span the entire range of security requirement levels to serve the

demanding markets of network security, IoT security, content & application protection, mobile payment

& banking.

INSIDE Secure’s technologies protects solutions for a broad range of customers including service

providers, content distributors, security system integrators, device makers and semiconductor

manufacturers.


INSIDE Secure have protected over 2 billion

digital products

An IPR portfolio in excess of800 patents and patent

applications

Over 160 employees worldwide with development

centers in Europe

Focus on software security solutions & silicon IP licensing

$70M revenue* in 2015

Global operations:Europe, America, Asia

INSIDE SECURE, AT A GLANCE

Over 25 years of experience and

expertise in security for mobile and connected

devices

* consolidated, including semiconductorbusiness discontinued in 2016


INSIDE SECURE’S GLOBAL FOOTPRINT


1/3 of the world’s top 200

broadcasters

The world’s top IT companies

Payment Systems

Top banks in the US and payment

systems

TRUSTED BY THE WORLD’S TOP COMPANIES

Top semiconductor

companies

|10 |

TECHNOLOGIES & PRODUCTS OVERVIEW

SILICON IPsAPPLICATIONPROTECTION

CONTENT PROTECTION

SECURE COMMUNICATION &

PROTOCOLS

Silicon IPs fittingchip profile

� IP Layer secure Communication

− Packet Engine� Link Layer Secure

Communication− MACSec Engine

� Platform Protection− VaulIP Familiy

� High speed crypto, hash public key crypto & TRNG

− EIP Family

State-of-the-art, certified cryptography and security protocol

Anti-Tampering, Obfuscation, Jailbreak detection for software

& Application

� Mobile Payment & Banking (Pre-certified Solution )

− Matrix HCE− Matrix Issuer

� Mobile Financial (Retailers, Insurances...)

− Matrix SSE− Matrix Issuer− Core, Whitebox

� Mobile IoT Application Protection (Autmotive, Healthcare, Industry 4.0)

− Matrix SSE

� Secure Playback solution to stream contents

− DRM Fusion server− DRM Fusion Essential

� Embedded Software− DRM Fusion

Embedded Agent− DTCP SW Solution− HDCP SW Solution

� Playback Application Protection

− Matrix SSE− Core, Withebox

Protect content anywhere, anytime

from any device

� Secure Communication Toolkits

− QuickSec Ipsec Client& Server

− QuickSec MACsec− Matrix SSL / SSH

� Safezone IoT Security Framework

− Safezone FIPS Security, FIPS Crypto SDK+Matrix SSL / SSH

� Mobile OEM / Device− QuickSec VPN Client− Safezone Data at Rest

/ FIPS crypto


Device architecture needs to take into

consideration the right and adapted

security solution

Security needs to be integrated at the

heart of the system

The world of security is evolving and demanding

INSIDE SECURE – THE TRUSTED SECURITY PARTNER

The security solution must be adapted to

the profile of the device and the use case :

software, hardware or a combination of

both

One security solution cannot fit all needs

Security must considered early in the design process

INSIDE Secure provides a unique combination of soft ware and silicon IP solutions to secure tomorrow’s connected world

FINANCIAL UPDATE

October 2016

|13 |

Q3 2016 Revenue

13

- Continuing core software business revenue (excluding semi conductors and NFC patentlicensing) up 55% sequentially and up 22% year-on-year, dri ven by exceptionally highroyalties

in thousands of US$

Q3-2016 consolidated



Q3-2016 vs. Q3-2015

Q3-2016 vs. Q2-2016

Licenses 686 5 504 1 708 -88% -60%

Royalties 10 084 2 937 4 690 243% 115%

Maintenance, development agreements and other

1 144 1 291 1 296 -11% -12%

Total Revenue from software and IP 11 913 9 732 7 69 4 22% 55%

Unallocated - 8 12 577 - -

Total Revenue 11 913 9 740 20 271 22% -41%

Notes:

Sums may not equal totals due to rounding.

Unallocated amounts correspond to non-recurring revenue, in particular patent licenses

|14 |

9-month 2016 Revenue

14

in thousands of US$

9-month 2016 consolidated

9-month 2015 consolidated

Y-o-Y %

Licenses 3 720 7 683 -52%

Royalties 18 178 9 477 92%

Maintenance, development agreements and other

3 847 3 338 15%

Total Revenue from software and IP 25 745 20 497 26%

Unallocated 13 867 1 045

Total Revenue 39 612 21 542 84%

- Continuing core software business revenue up 26% vs. 2015

- Consolidated revenue (IFRS, excluding semiconductors and including NFC patent licensing)up 84% vs. 2015, driven by royalties in the third quarter and N FC patent licensing in thesecond quarter

Notes:

Sums may not equal totals due to rounding.

Unallocated amounts correspond to non-recurring revenue, in particular patent licenses


FIRST HALF 2016 EARNINGS - KEY FIGURES

• Consolidated revenue 1: $27.7 million in H1 2016

• Strong trends in mobile payment and banking markets dri ving revenue from corebusiness (excluding semiconductors and NFC patent licensing):

• $7.7 million in Q2 2016 (+25% vs. Q1 2016, +28% vs. Q2 2015)

• $13.8 million in H1 2016 (+28% vs. H1 2015)

• Adjusted operating income2 from continuing operations1: $4.7 million in H1 2016 (vs. $6.4 million loss in H1 2015)

• EBITDA from continuing operations: $5.3 million in H1 2016 (vs. $6.2 million loss in H1 2015)

• Net loss from continuing operations (IFRS): $1.0 million in H1 2016 (vs. $11.2 million loss in H1 2015)

• Execution of strategic transformation projects in l ine with the objectives and timetable

• Strengthened liquidity and solid financial position ($20.4 million cash as at June 30, 2016) thanks to improved operating performance and completion of capital increase

1) IFRS, continuing operations, excluding semiconductor business – see definition in Appendix2) Definitions of adjusted measures in Appendix


FIRST HALF 2016 ADJUSTED * INCOME STATEMENT(CONTINUING OPERATIONS)

* Definitions of adjusted measures and continuing operations in Appendix

Change essentially explained by revenue mix (NFC patent licences in 2016)

Reallocation of certain company’s resources to the core software business

Results from continuing operations include Mobile Security division, NFC patent licensing program and corporate costsnot intended to be transferred or discontinued with sale of semiconductor business

in thousands of US$6 months

2016 6 months

2015

Revenue 27,699 11,102

Cost of sales (adjusted) (4,648) (1,139)

Adjusted Gross profit 23,051 9,963

in % of revenue 83.2% 89.7%

R&D expenses (adjusted) (6,907) (5,005)in % of revenue -25% -45%

Selling & marketing expenses (adjusted) (5,922) (5,07 9)in % of revenue -21% -46%

General & administrative expenses (adjusted) (5,091) (4,840)in % of revenue -18% -44%

Other (losses)/gains, net (adjusted) (434) (1,445)

Total adjusted operating expenses (18,353) (16,370)

Adjusted operating income 4,698 (6,407)in % of revenue 17.0% -57.7%

EBITDA 5,320 (6,218)in % of revenue 19.2% -56.0%


0

5

10

15

20

25

FIRST HALF 2016 CASH FLOW

in millions of US$Continuing and discontinued operations

(+0,9)

(-2.0)

(-0.2) (+5.4)

(-0.2)

Net profit excluding non-cash items

Change in working capital * Capital

expenditureRights issue

Other

Dec. 31, 2015

Jun. 302016

16.4

20.4

* Including annual financing of R&D tax credit and restructuring expense

Appendix


� September 20, 2016: completion of the sale of the semiconductor business (pro forma unaudited revenue of $33.6 million in 2015) to WISeKey International Holding Ltd, a Swiss cybersecurity company (SIX Swiss Exchange: WIHN).

� Final stage in the process of repositioning INSIDE Secure around software security and technology licensing.

� CHF2 million in cash received at completion of the transaction, together with a loan note redeemable into WISeKey International Holding Ltd Class B listed shares for an amount of CHF 11 million.

� Convertible loan note key terms:

�9-month maturity

�2% coupon

� convertible at the option of INSIDE Secure, after a 2-month lock-up period, into freely tradeable Class B shares with a minimum 10% discount on the volume-weighted average quoted price during the 15 trading days prior to the conversion date

�WISeKey would have a right to redeem the convertible loan note in cash, and INSIDE Secure may request, 20 days prior to maturity, redemption in cash for up to 30% of the principal amount of the convertible loan note

SALE OF THE SEMICONDUCTOR BUSINESS


DEFINITIONS

20

Continuing and discontinued operations� Following INSIDE Secure’s announcement on May 19, 2016 of the sale of its semiconductor

business to WISeKey and in accordance with IFRS 5, INSIDE Secure semiconductor activity qualifies as a discontinued operation. Consequently, income and expense items for this discontinued operation are recognized directly in “net income from discontinued operations” and thus are excluded from adjusted operating income, EBITDA, and operating and net incomes from continuing operations.

� Accordingly, results from continuing operations reflect the performance of the Mobile Security division, the NFC patent licensing program and corporate costs not intended to be transferred or discontinued with the sale of the semiconductor business (mostly general and administrative expenses and, to a lesser extent, selling & marketing expenses, and research & development expenses).

� Figures for the first half of 2015 have been restated in a similar manner to allow comparisons with the corresponding first-half 2016 figures.


DEFINITIONS

21

Adjusted measures� Certain financial measures and performance indicators are presented on an adjusted basis. These indicators are

not defined under IFRS; they should be considered to be supplementary information, not substitutable for any other indicators of operating and financial performance that are strictly accounting measures, such as those presented in the Group's consolidated financial statements

� Adjusted gross profit is defined as gross profit before (i) the amortization of intangible assets and masks related to business combinations, (ii) any potential goodwill impairment, (iii) share-based payment expense and (iv) non-recurring costs associated with restructuring and business combinations carried out by the Group.

� Adjusted operating income/(loss) is defined as operating income/(loss) before (i) the amortization of intangible assets and masks related to business combinations, (ii) any potential goodwill impairment, (iii) share-based payment expense and (iv) non-recurring costs associated with business combinations carried out by the Group.

� EBITDA is defined as adjusted operating income before depreciation, amortization and impairment losses not related to business combinations.

Net cashis defined as cash at hand, cash equivalents and short-term investments, the net amount of derivatives, less finance lease liabilities, bank overdrafts and bank loans, cash received in return of assignment of trade receivables under factoring agreements and deferred payments due in connection with business combinations. Debt related to the financing of research tax credit (CIR) claims are not taken into account since they are intended to be extinguished upon repayment by tax authorities of CIR claims.


RECONCILIATION FROM ADJUSTED TO IFRS2016

22

in thousands of US$

2016 Adjusted

Business combination

Sharebased payments

Other non-recurring costs

2016 IFRS

Revenue 27 699 - - - 27 699

Cost of sales (4 648) (1 764) (1) - (6 413)

Gross margin 23 051 (1 764) (1) - 21 286

in % of revenue 83,2% 76,8%

R&D expenses (6 907) (151) (74) - (7 132)

Selling & marketing expenses (5 922) - (138) - (6 060)

General & administrative expenses (5 091) - (150) - (5 241)

Other (losses)/gains, net (434) - - (2 400) (2 834)

Operating income 4 698 (1 915) (363) (2 400) 20



RECONCILIATION FROM ADJUSTED TO IFRS2015

23

in thousands of US$

2015 Adjusted

Business combination

Sharebased payments

Other non-recurring costs

2015 IFRS

Revenue 11 102 - - - 11 102

Cost of sales (1 139) (4 371) (3) - (5 513)

Gross margin 9 963 (4 371) (3) - 5 589


R&D expenses (5 005) (1 420) (106) - (6 532)

Selling & marketing expenses (5 079) - (119) - (5 199)

General & administrative expenses (4 840) - (61) - (4 901)

Other (losses)/gains, net (1 445) - - - (1 445)

Operating income (6 407) (5 791) (290) - (12 488)

in % of revenue 6,5% -112,5%

|24 INSIDE Secure – October 2016|24

INVESTOR INFORMATION

INSIDE Secure

Corporate communications

Géraldine Saunière

Marcom Director

+33 (0) 4 42 39 33 01

[email protected]

INSIDE Secure

Investor relations

Richard Vacher Detournière

GM & CFO

[email protected]

Financial Calendar

FY 2016 Earnings February 20, 2017

www.insidesecure.com

http://www.insidesecure-finance.com

CONTACTS

inside secure non deal investor presentation october 2016...6 | inside secure – october 2016...

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