Increased investments – mass market developing faster than expected

Regulatory•Interim report•6 February, 2019

October–December 2018 · Net sales totalled SEK 14,961 thousand (10,506), which corresponds to an increase of 42 per cent. · Operating profit/loss totalled SEK -15,628 thousand (-14,814). Earnings are developing according to plan as a result of investments, mainly in personnel, to meet the continued increasing level of activity in the Automotive Solutions business area. · Profit/loss after financial items was SEK -15,681 thousand (-14,984). · Profit/loss after tax per share was negative. · Cash and cash equivalents totalled SEK 89,946 thousand at 31 December. · The company have during the quarter accounted for the first license revenue for BMW X5 and 8 series that were produced during the last six months of 2018. · The company announced after the end of the reporting period that it has secured 14 design wins with a global Korean OEM. Production start is set for 2020 and the estimated order value may exceed 150 MSEK. January – December 2018 · Net sales totalled SEK 50,778 thousand (43,199), which corresponds to an increase of 18 per cent compared with the year-earlier period. · Operating profit/loss totalled SEK -55,998 thousand (-41,463). · Profit/loss after financial items was SEK -56,348 thousand (-41,896). · Profit/loss after tax per share was negative. 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 25 October 2018. The total estimated value of the company’s 43 (23) design wins announced to date currently amounts to at least 1,000 MSEK (675) 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 (2,000) over a product life cycle.

Comments from the CEO

Research momentum and mass market validation

The fourth quarter last year was marked by three positive developments. The first was the continued upward trend for Research Instruments. The second was the renewed confidence from our automotive premium manufacturers, awarding us with six new design wins on existing car platforms. The third was that at the same time the mass market developed faster than expected.

Research Instruments

The fourth quarter sales increased with 144% and for the whole year the increase was 42%, a continuation of the trend from the third quarter. Most of the sales stems from the main segments Aviation and Automotive research. Furthermore, the interest in use of Smart Eyes products in simulator training has been steadily increasing during the year, culminating in December when the military industrial giant Thales showcased their training concept at one of the biggest industry trade shows I/ITSEC. All geographical markets and all product families are in a positive trend. The team is committed to continue the expansion in the research and simulator training market.

Automotive Solutions

The extraordinary validation of the company as a mass market supplier consists of that we for the first time has been awarded a large program, on multiple car models, with one of the world’s biggest mass market manufacturers from Korea. It’s no less than 14 cars with the first SOP in 2020, with a potential product life cycle value exceeding 150 MSEK. It’s the result of a long process of collaboration, quoting and development together with one of the biggest Tier-1 suppliers.

Furthermore, after the end of quarter four, we’re finally allowed to reveal another one of our automotive customers, BMW. It is the SUV BMW X5 and the Coupe M8 that are available to order with eye tracking from Smart Eye built into the driving assistant active safety package.

The plan forward

Smart Eye Automotive Solutions has always championed a hardware agnostic strategy, piggybacking on the huge investments taken by the smartphone industry. Usually processors developed for mobile phones will later be qualified for automotive use, leading to a steady stream of improved chips available for series production. This strategy is in line with what the automotive industry demands. The execution of the strategy consists of three distinct steps. The first step, now to a big extent already accomplished, is to establish the company as the market leader in the premium automotive segment, where the initial development of driver monitoring has taken place. Step two which is ongoing, is to use the premium market position as a beachhead to establish leadership also in the mass market segment. Step three is to utilize the market position to expand the offering to multimodal interior sensing to automotive customers, ultimately yielding higher value add per produced car. The execution of step three is something we will have reasons to come back to.

Martin Krantz
CEO Smart Eye

Attachments

Q4 2018 English

Increased investments – mass market developing faster than expected