The third quarter was characterized by continued ramp-up of production programs in automotive and a slowdown in the behavioral research market. This resulted in slower than expected overall growth but thanks to tight cost control we came out with an improved EBITDA. It is currently at SEK -17 million and is expected to continuously improve during Q4 and 2025.
As the car sales statistics for July came in it was clear that Q3 was going to be challenging for the whole automotive industry. We did not sit on our laurels but immediately started to work with our cost base in order to optimize it to our revenue yet ensure that we can meet our customers' expectations. Furthermore, we also procured a debt facility of SEK 150 million just to be sure that we have funding for all circumstances.
These two actions are the cornerstones going forward towards profitability, as we expect the license revenues from production cars to rise very fast in the near future, supported by ramp-up of the car models affected by the European safety regulation GSR for 2024.
Automotive
The general automotive market faced headwinds during the third quarter. The sales of new cars went down significantly in July, with some recovery seen in the later part of the quarter. Nevertheless, we announced no less than 37 new design wins in Q3, bumping the total number up to 359. These design wins are the foundation for the profitable growth of the company in the years to come.
The overall growth for Automotive was 35% but the licenses grew with more than 100% year on year (with non-BMW volume growing even faster). We expect the license growth rate to increase in Q4, followed by even higher growth in 2025. The non-license revenue declined due to some engineering projects (NRE) getting close to final delivery, for production programs that will ramp up next year.
More than 67 car models had reached production by the end of Q3 with an expected 80 before year's end. Next year we expect an increased rate of ramp up of car models affected by GSR. The legislation also mandates bus manufacturers to install the new generation safety systems, and for that purpose the fleet and aftermarket product AIS have recently been sourced to numerous bus manufacturers. At present we are selected by 14 brands, Solaris being one of them (in addition to the 22 brands for cars and trucks). The production volumes are expected to start picking up in this year's fourth quarter.
We are in the best position for nominations that we have ever been in. It looks extremely good for DMS, CMS, software T-1 as well as for our fleet business.
Behavioral Research
The Behavioral Research business area had an unusually weak third quarter and fell by 13%. All three business units came in lower than expected. The whole market shrunk and was characterized by slowdown of the procurement cycles and price pressure, with some competitors using aggressive discount tactics. We, however, kept our gross margin intact.
The normal seasonal effect is that Q4 is the strongest quarter, due to research budgets being spent on calendar year basis. We expect the same market behavior this year. It is very likely that Q4 will bounce back and become the strongest quarter of the year for us.
Final Words
The measures that we have taken and continue to take enable us to retain our goal of being EBITDA positive in early 2025 with positive cash flow following 2-3 quarters thereafter. This is our primary focus.
At the same time, we see the rate of industry consolidation picking up pace since the summer. However, for the time being and all things equal, short-term profitability is more important than pursuing M&A opportunities for Smart Eye, given the current market climate.
Martin Krantz
CEO Smart Eye
Find the full report and all previous financial reports at https://smarteye.se/investors/financial-reports/ .
For more information:
Martin Krantz, CEO Smart Eye AB
Phone: +46 70-329 26 98
Email: martin.krantz@smarteye.se
About Smart Eye
Smart Eye is the leading provider of Human Insight AI, technology that understands, supports and predicts human behavior in complex environments. The company is on a mission to bridge the gap between humans and machines for a safe and sustainable future. Supported by Affectiva and iMotions - companies it acquired in 2021 - Smart Eye's multimodal software and hardware solutions provide unparalleled insight into human behavior.
In automotive, Smart Eye's driver monitoring systems and interior sensing solutions improve road safety and the mobility experience. The company's eye tracking technology and iMotions biosensor software platform are also used in behavioral research to enable advanced research in academic and commercial sectors. In media analytics, Affectiva's Emotion AI provides the world's largest brands and market researchers with a deeper understanding of how consumers engage with content, products, and services.
Founded in 1999, Smart Eye is a global company headquartered in Sweden, with customers including NASA, Nissan, Boeing, Honeywell, Volvo, GM, BMW, Polestar, Geely, Harvard University, 26 percent of the Fortune Global 500 companies, and over 1,300 research organizations around the world.
Visit www.smarteye.ai for more information.
Visit our investor web for more financial information: https://smarteye.se/investors/
Smart Eye is listed on the Nasdaq First North Growth Market. The Company's Certified Adviser is Carnegie Investment Bank AB (publ).
This information is information that Smart Eye is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact persons set out above, at 2024-11-14 08:00 CET.
Attachments
Smart Eye Interim Report Q3 2024
SOURCE: Smart Eye
View the original press release on accesswire.com
