January-March 2023

• Net sales amounted to SEK 64.3 (53.5) million, an increase of 20% compared to the corresponding period the previous year. Underlying invoicing was approximately SEK 6 million higher during the quarter, but as iMotions started periodization of recurring revenue as from Q3 2022, this revenue will instead be recognized over the contract period. With the above effect in consideration, the organic growth for the total group was 31%.
• EBITDA amounted to SEK -44.2 (-36.1) million. The lower result is largely due to an addition of resources to deliver more advanced content on Driver Monitoring Systems (DMS) and Interior Sensing. The quarter was burdened by one-time costs due to the funding process amounting to SEK 2.8 million.
• Operating loss amounted to SEK -81.9 (-71.5) million. Depreciation of the surplus value created in conjunction with the Affectiva and iMotions acquisitions amounts to SEK 28.2 million.
• Earnings after tax per share is -2.34 (-2.75), and after full dilution -2.34 (-2.75).
• Cash and cash equivalents totaled SEK 239.1 million at the end of March.
• The funding process of a fully covered rights issue was finalized in late February 2023, with total proceeds of approximately SEK 324 million before deduction of transaction costs.
• Late January Smart Eye was nominated to deliver its DMS software to 3 additional car models with an existing Japanese OEM customer. The estimated revenue of the order is SEK 30 million based on estimated product life cycle projections.
• Late February the company was awarded its first design win for heavy trucks by a global commercial vehicle customer. The company was chosen to deliver its technology to eight new heavy vehicle models. The estimated revenue of the order is SEK 150 million based on product life cycle projections.
• Early March Smart Eye was nominated to deliver its DMS software to 12 additional car models with an existing Korean OEM customer. The estimated revenue of the order is SEK 350 million based on estimated product life cycle projections.

Comments from the CEO

We are pursuing our focus on cost control and increasing sales. We are expecting that both Behavioral Research and Automotive will increase their revenue significantly during the coming quarters. That together with high gross margins and tight control over costs and cash flow will bring us to profitability no later than the second half of 2024. The first quarter of this year was a very important steppingstone towards that goal. We decreased our OPEX with 10% compared to quarter four 2022. We also increased top line slightly more than expected primarily thanks to strong Research sales. Together with that we managed to decrease the working capital, we improved the cash flow from operating activities from -54 MSEK in Q4 2022 to -34 MSEK, ending the quarter with 239 MSEK in the bank. We are expecting the growth of sales to continue in the coming quarters without us having to increase the cost base in any significant way.

Automotive
We are still in the starting blocks for several of the large platform SOP:s with many of the world’s largest car OEMs. In several cases the production has started but isn’t ramping as fast as the original production plan schedules. Sometimes it’s because of components and sometimes because of general car software architectural issues. We are carrying on with the development work and the organic revenue increase of 20% is mostly coming from NRE, development services. Another source is that the fleet and aftermarket product has started to sell albeit at low levels. We are very positive in our outlook that our customers will ramp up production in the coming quarters and are expecting growth at higher levels than the current 20%. The upcoming European legislation is a hard stop for the OEMs and yields a market size of more than 18 million cars in Europe alone by 2026.

Behavioral Research
The research side of Smart Eye was already making profit on a stand-alone basis last quarter at a revenue of 41 MSEK. This quarter at 50 MSEK the three units were even more profitable. Organic growth has more than doubled, from 15% to 34% compared to last quarter, which is clearly above the market. Hence we are gaining market share.
Our offering is very complete with eye tracking hardware, Emotion AI SaaS as well as the leading multi modal software platform, so it’s no surprise that we are gaining momentum as the effects of the pandemic are losing its grip on the research market. We are expecting continued strong traction for the rest of the year.

Final Words
The first quarter gave us record topline, 31% organic growth, improved capital structure and subsequently better cash flow than last quarter. We are sitting on the most important contracts and customers in Automotive and our sales of aftermarket product is starting to ramp up. We are gaining market share in our business area Research, growing at a record pace. We will continue with tight cost control and extreme sales focus to make sure we break even next year. The upcoming regulations regarding DMS and our market- leading product has put us in a very advantageous position, to say the least.

Martin Krantz
CEO Smart Eye

Find the full report and all previous financial reports at https://smarteye.se/investors/financial-reports/ .