Smart Eye Interim report January – March 2022

January - March 2022
· Net sales amounted to SEK 53.5 (18.1) million, which is an increase of 195% compared to the corresponding period previous year, of which 14% was organic growth.
· EBITDA amounted to SEK -36.1 (-12.8) million. Added resources from the Affectiva acquisition and continued investments in personnel are the main reasons for the deviation compared to last year.
· Operating loss amounted to SEK -71.5 (-18.4) million. Depreciation of the surplus value created in conjunction with the Affectiva and iMotions acquisitions amounts to SEK 25.6 million.
· Earnings after tax per share is negative.
· Cash and cash equivalents totaled SEK 214.6 million at the end of March.
· In February one new design win was received from one of Europe’s largest OEMs. The estimated revenue of the order is SEK 50 million based on estimated product life cycle projections. The potential of further design wins on this new platform is estimated at SEK 500 million.
· In April the company was selected by an existing customer to deliver its world-leading Driver Monitoring System software to three additional car models. The estimated revenue of the order is SEK 50 million based on estimated product life cycle projections.

Comments from the CEO

The pickup from the end of last year is continuing, but due to world events, at a sligtly slower pace than one could expect a quarter ago. The disruptions to global supply chains are affecting the automotive industry in two distinct ways: lower production volumes and longer development lead cycles. Although this is causing short term challenges, it’s important to stay focused on the long term goal of continue to be the market leaders in DMS and Interior Sensing, a position that will be increasingly valuable over time.

Automotive
Closing of the quarter we can summarize our recent success and current position within the automotive segment as follows;

· We now have 93 design wins with 14 different OEMs.
· It is to be expected that this stock of design wins will grow by the addition of more car models on existing platforms.
· 5 OEMs are in series production, thereby yielding license revenue.
· Software revenue is increasing, although hampered by hardware supply chain shortages.
· Deliveries of the fleet product AIS has started to a few select customers. The component sourcing situation is challenging but the market demand is rock solid. We are working hard to ramp up production during Q2.

During the quarter we have also spent time and effort to secure that we are in pole position to capitalize on the opportunities that we see ahead of us:
 
· We continue to participate in a large number of DMS procurements globally and we are standing strong. Smart Eye is a respected name in the industry thanks to our solid technological base and track record of succesful deliveries, second to none.
· The Interior Sensing market continues to develop and there will be nominations this year and next.
· The deployment of safety critical software in Automotive is governed by a set of rules and processes called functional safety, or FuSa for short. Going forward we’ll deliver programs with FuSa requirements on the same level as the most advanced active safety systems. We are the leaders in this development and these requirements will increase in the future.

Research
The behavioral research side of Smart Eye has grown significantly, mostly due to last year’s acquisitions. All our research units are growing organically as well. The organic growth consists of two separate parts, one is the abating effect of the pandemic and the other is the long term growth fueled by behavioral research transforming from qualitative to quantitative methods. There are strong indications that we will see both these growth factors in play during the rest of the year.

Final Words
Both Automotive and Research are affected by geopolitical events such as the war in Ukraine, supply chain disruptions and the tail end of the pandemic. However, the impressive acceleration in business activity both in Research and Automotive confirms the strong market demand ahead. Under more normal circumstances the growth rate would have been even higher. At the same time, according to plan we are investing in Interior Sensing at a good rate, enabling an even higher value add per car for the future.

Martin Krantz 
CEO Smart Eye