Interim report January – March 2021

• Net sales totaled SEK 18.1 (17.7) million which corresponds to an increase of 2 %.
• Operating loss totaled SEK -18.4 (-22.0) million. This improvement is primarily due to a decrease in costs during the quarter.
• Profit/loss after financial items was SEK -18.4 (-22.1) million.
• Profit/loss after tax per share is negative.
• Cash and cash equivalents totaled SEK 201.4 million at the end of March.
• In January, a design win was obtained from one of China’s largest OEMs. The new order is for a new car model on a new platform and has an estimated order value of SEK 50 million. This is Smart Eye’s third customer on the Chinese market.
• As of first quarter 2021 Smart Eye classifies operating expenses by function instead of nature of expense. This transition has been made to offer a more true and fair view of the Company and its activity.

Comments from the CEO

Another quarter is now over. Unfortunately, the pandemic has not abated at the pace we had all hoped for, but it has not affected Smart Eyes' everyday work to any greater extent. We have had a high level of activity in all of our business areas and we are starting to get used to the “new normal”, with fewer face-to-face meetings and less travel. In the current situation, the local offices we had managed to open up in Japan, China and Detroit before the pandemic broke out have proved to be of great value.

Our local offices have been important for our ongoing delivery projects and also for the procurements that are yet to be decided. Due to the fact that our offices outside Sweden have been so successful, we have now begun the process of establishing a new office, this time in Germany. Regardless of the future of the pandemic, we will be even closer to the important German automotive market from the beginning of Q3.

Automotive Solutions
At the beginning of the quarter, we were able to announce a design win with yet another new OEM, the thirteenth so far. The OEM is one of China's largest car manufacturers, to which we will supply DMS together with a large and reputable global T1 supplier. It is with great pleasure that we can state that Smart Eye’s offer is strong on all important markets. Our technological leadership is undisputed and the main reason for our success.

At the same time as we work relentlessly with DMS and the important procurements that are underway, we are also seeing an increasing interest in what is referred to as Interior Sensing; even more advanced solutions where the entire car interior is analyzed. We are seeing a demand for both focused monitoring of the driver’s state and more zoomed out monitoring of the entire cockpit of the car.
We estimate that the total market potential will be greater than what we have previously communicated for only DMS.

It is still too early to be talking about proper procurements, but we believe procurement processes are due to be initiated in the not-too-distant future. The situation is reminiscent of what we saw on the DMS market back in 2014, at which point we were already quite confident that DMS would be installed in premium cars in the near future. We are preparing for a situation where our customers will soon be requesting both DMS and Interior Sensing from us, which will lead to an increased added value per car.

Aftermarket AIS
On March 11, we launched the aftermarket product AIS. It has been under development for two years but suffered some delays caused by the Covid-19 pandemic. Since the launch, we have had an increasing number of inquiries and we are optimistic about the market for the aftermarket product, which will be sold on a global market.

Research Instruments
Demand has continued to recover but is not yet completely back to pre-corona levels. Our customers have not fully returned to the universities and research laboratories where our equipment is used.

Final words
The pandemic is affecting most of what is happening right now. But there are not only problems, we also see opportunities. We are seeing a further development of the technology, with more and more AI and technologies extending to the entire car interior. In combination with the Covid-19 pandemic, this creates a dynamic market situation where the right strategic actions can have major consequences. We are looking at several different strategic alternatives in order to best take advantage of the opportunities we are seeing. DMS and, by extension, Interior Sensing are here to stay in the automotive industry, where we are currently the leading supplier. And it is our definite ambitions and goal to remain so in the future.

Martin Krantz

CEO Smart Eye