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Smart Eye interim report January - March 2019

Continued success in a highly active market

January – March 2019

·         Net sales totalled SEK 11,670 (9,580) thousand which corresponds to a rise of 22 %.

·         Operating profit/loss totalled SEK -22 227 (-13,846) thousand, Earnings are developing according to plan and are affected by measures taken to meet higher demand above all from customers in the Automotive Solutions business area.

·         Profit/loss after financial items was SEK -22,293 (-13,974) thousand

·         Profit/loss after tax per share is negative.

·         Cash and cash equivalents totalled SEK 65,599 TSEK at the end of March

·         On May 15th the company earned two design wins from one of Japan’s and one of Europe’s largest OEM’s. The estimated revenue of the order is 150 MSEK based on product life cycle projections. 

·         In February, the company earned 14 new design wins from a global Korean car manufacturer.

·         In February and May, the company announced that an additional four new car models from BMW contain Smart Eye’s technology.

Estimated value of obtained design wins

As of the report for the second quarter of 2018, the company provides information on the estimated market value of obtained design wins at the time of publication of the report. The figures in brackets show the levels at the time of the publication of the preceding report, which in this case was 6 February 2019.

The total estimated value of the company’s 43 (43) design wins announced to date currently amounts to at least 1,000 MSEK (1,000) over a product life cycle.

If the company’s system had been used in all car models on existing platforms by the five (five) car manufacturers with whom design wins have been communicated, the estimated value would amount to at least 2,150 MSEK (2,150) over a product life cycle.

Comments from the CEO

EDIT May 15th 2019 

Today we received our first design win in Japan. I can’t emphasize how important it is for the company and how gratifying it is for everyone who has worked with this for a long time. A long-term view and confidence-building are the necessary building blocks for success on the Japanese market. The CEO's comments below was written before the contract was signed.

20 years of innovation 

Since the start in 1999 Smart Eye has established itself as a significant and leading player within measurement of eye movements. At the same time, it is my firm belief that we have only seen the beginning of what eye tracking can do to help us in our daily lives. For a start, the technology is now built into cars and research laboratories but it will soon be an integrated part of every imaginable context and feel just as natural as cameras in mobile phones. This journey started in Sweden 20 years ago but has only just begun. As so many times before, a Swedish company has managed to carve out a niche for itself as a leader within an expansive area of technology. This is an expression of the country’s proud engineering traditions, fearless entrepreneurial spirit and outstanding university education programmes which time after time create globally competitive technology companies. 

Research Instruments 

The business area for research applications does not live on its own merits. It also contributes to the exploration of exciting new market segments. The products are included as validation tools in series production projects and help to advance the technical front line for what can be achieved with eye tracking.

The first quarter started slowing but ended on a strong note. Sales grew by 95% compared with the corresponding quarter last year. The strengthened product range is actively marketed towards its intended customer groups. This means that the core segments, automotive and aviation, are both growing. We are proud to present new customers, including Canadian National Defence as well as several vehicle manufacturers in Asia and Europe. We intend to consolidate this growth journey within all geographies and customer segments through continued aggressive product development, marketing and strong partnerships with key players in the market. 

Automotive Solutions

The market for Automotive Solutions remains very strong and activities have actually exceeded our already high expectations. This is evident from an additional number of design wins to date but to an even greater extent in ongoing procurement processes which are expected to be announced during the current year. Smart Eye continues to be very strong in global competition for deals which are no longer confined to premium cars but increasingly moving towards the mass market with imminent high-volume projects. Our strategy is successful and our offering is powerful in all geographies. This can be seen in particular from our successes in the demanding Korean market which is known for its high quality requirements. A number of procurement processes are now underway in Asia, Europe and North America which will be decided during the current year and where we expect to defend our clearly market-leading position within driver monitoring.

Furthermore, activity in the regulatory area in Europe has increased significantly with the European Parliament recently voting through legislation which, subject to approval in all instances, will come into force as early as 2022 with full impact two years later, and will result in driver monitoring in all new cars sold in Europe. Euro NCAP has included driver monitoring in its 2025 Roadmap which in itself is expected to stimulate all European manufacturers. This means that the market, legislators and voluntary classification organisations collaborate to improve safety in the vehicle fleet, which suits Smart Eye very well. We expect that the American market will follow the same path shortly. Taken together, all this means that the major market potential that we have identified for some time has now become increasingly tangible and shifted closer in time. To meet this increased activity and fully capitalise on our market-leading positon, we have for some time been recruiting a number of talented employees of the highest quality. We now see a continued need to recruit and invest in the business in order to maintain our leading position and thus ensure our growth potential in the longer term.

Market development in China 

Legislators in China are expected to demand driver monitoring systems in vehicles which has already pushed market players into action. This is not confined to new cars but will also apply to existing ones which opens up major opportunities in the commercial aftermarket. In recent years, Chinese car companies have advanced their positions within technology-heavy areas such as vehicle-related AI and electric drivetrains. Lead times are considerably shorter than in the more traditional markets in the West, which among other things means that pre-developed standard solutions are often preferred.  

Smart Eye has been monitoring developments in China closely for some time and in view of the major market potential and our market-leading positon within eye tracking, decided to evaluate this opportunity in a more focused context. This means that the existing software-based business model may be supplemented to be adapted to the needs of the Chinese market.

Smart Eye reviews financing alternatives

Against the background of the increased growth potential in the short term within Automotive Solutions in general and the major opportunities we see in the Chinese market, and in order to maintain our market-leading positon, the Board of Smart Eye has commissioned Carnegie Investment Bank to review and evaluate additional financing alternatives in order to maximise our ability to take advantage of the highly favourable market conditions that currently prevail.

Dawn for safer vehicles

Never before has Smart Eye faced so many opportunities of the utmost size and quality. So far, we have carried out our strategy well given the conditions and this has put the company in a good position to take a firm grip on one of the global technology sectors’ fastest growing areas – artificial intelligence inside vehicles.

Martin Krantz

CEO Smart Eye 

Smart Eye is listed on First North. Erik Penser is Certified Adviser and can be reached at +46-8-463 8000 or certifiedadviser@penser.seThis information was published on May 15, 2019 at 1:00 pm (CET).