Interim Report January - September 2021

July - September 2021

· Net sales amounted to SEK 30.9 (15.2) million, which is an increase of 103% compared to the corresponding period previous year, of which 35% was organic growth.
· Operating loss totaled SEK -46.8 (-12.8) million. The acquisition of Affectiva contributes to SEK -11.2 million of the operating result. Depreciation of the surplus value created in conjunction with the Affectiva acquisition amounts to SEK 18.6 million.
· Profit/loss after financial items was SEK -46.8 (-12.9) million.
· Profit/loss after tax per share is negative.
· Cash and cash equivalents totaled SEK 326.3 million at the end of September
· In July, four design wins were obtained from a global North American OEM. The order is for four new car models on an existing platform with an estimated order value of SEK 100 million, and 1st of October an additional design win with an existing Japanese customer was communicated. Estimated order value SEK 25 million.

January - September 2021

· Net sales amounted to SEK 66.0 (46.8) million, which is an increase of 41% compared to the corresponding period previous year, of which 19% was organic growth
· Operating loss amounted to SEK -87.3 (-57.7) million.
· Profit after financial items amounted to SEK -87.3 (-58.0) million.
· Earnings after tax per share are negative.
· In May the company entered into an agreement to acquire Affectiva, a Boston based Emotion AI company, for a consideration of USD 73.5 million. In conjunction with the acquisition a directed share issue of SEK 275 million were completed.

Comments from the CEO

We are back and have surpassed our pre-covid levels of business activity. All our business areas are performing very well and our position in the market is as good as it has ever been. We stand strong in the business pursuits in Automotive Solutions, we have a pent-up market demand for our brand new fleet product soon to be delivered, and our research products are picking up speed post pandemic. 
 
Automotive
Let’s put some color on our existing automotive production programs. We have been hamstrung by NDAs to talk openly about all but a few OEMs, but it is possible to give more information in general terms. 
· We have three OEMs in production with cars equipped with our software being produced out of Europe, US, Korea, and China. 
· Since the start of series production in 2018, we have equipped more than half a million cars with Smart Eye software, and are rapidly approaching one million in total delivery, a number that we will surpass during the first half of 2022. 
· We expect two more car OEMs to start production in Q4 this year, or latest early next year. 
· Next year we will add production in Japan. 
· The majority of the 89 car models that we won until now will be in production before the end of 2023.
 
Let’s now put some color on the ongoing automotive procurements where we are currently participating. Generally speaking, our competitive position contionues to be very strong thanks to our long history of delivering DMS and Eye Tracking to highly qualified customers during the last 22 years. 
 
· Three of the largest procurements of DMS to date are due for sourcing in coming quarters. Smart Eye is a force to be reckoned with in all three. There are also several smaller procurements soon to be decided in the near term. 
· Close to all global OEMs will procure their first or second generation DMS during the next couple of years, fueled by regulatory tailwind in Europe, and soon in other regions of the world. 
· We stand firm by our previously communicated estimate that there is an estimated lifetime value of 10 billion SEK or higher in the procurements that we expect during the coming 18 months, including the three big ones mentioned above. 
· We hold a very positive view on the outlook of winning more car models on the current platforms. The recently communicated Japanese design win is an example of that. 
· Interior Sensing is a budding market opportunity that soon will be in full swing in the automotive procurement circles. By joining forces with Affectiva we are perfectly positioned for this development. 
· We believe that Interior Sensing is heading towards integrating multiple sensors into one multimodal sensing unit. This is logical for reasons of functionality, cost, physical size, and power consumption. We already see this trend in the sensors on the outside of the car. Smart Eye will continuously explore this exciting development and how it applies to automotive and other industries in the future. While selling software to the world’s largest car OEMs is our main task, we also have the business unit AIS, developing an offering for the aftermarket and small OEMs. The system consists of hardware and software bundled together. We are still pre-revenue in that deliveries have not yet started, except that a handful customers have tested early production samples. We are making ourselves ready to start production ramp-up and deliveries for early next year. 

Research
Starting in quarter three we now have two business units offering products to research customers. The first one is Research Instruments, selling high-end eye tracking products to advanced customers for more than 20 years. The growth was 51% in the third quarter. 
In addition we have the new business unit Media Analytics, which is now a part of Smart Eye since the acquisition of Affectiva. The main business is advertisement testing with Emotion AI. Media Analytics also had a strong quarter where business is rebounding after Covid. 

Affectiva Integration
One quarter has passed since we acquired Affectiva. The integration is in full swing,.Even though we have not finalized every aspect of the ingration yet, the most important thing is that we have already started to work on Interior Sensing prucurement processes for automotive customers. This shows that the timing for the merger was right. The automotive side of Affectiva is being tightly integrated with Smart Eye´s automotive team, while Media Analytics’ team operates more independently. It is pleasing to see the positive spirit and energy that has been created by the teams. 

Final Words
The pandemic and the subsequent semiconductor shortage has affected everyone in the car industry negatively. For Smart Eye it has been even more important, that thanks to regulatory tailwind we have seen our market grow and now even surpass pre-covid levels. We stand stronger than ever. The palette is full of colors in the automotive production and procurement programs. With Affectiva, our operations have widened and accelerates our development of interior sensing. All combined this creates exciting perspectives for the future that makes smart eyes sparkle with anticipation. 

Martin Krantz
CEO Smart Eye