Smart Eye AB (publ)

Good day everybody and a warm welcome to SmartEyes Q1 2025 earnings call hosted by RedEye. My name is Jacob Benon and I will be your host today and we will do as usual to start with the company presentation and thereafter we will follow up with the Q&A session with the company representatives. And with us today we have Martin Krantz, which is CEO of SmartEye and CFO Mats Benaminsson. So without further ado, I will leave the word over to Martin and Mats. So kick it off.

Thank you, Jacob. Let's jump right into the presentation. Here are the highlights. The savings program is on track and we are delivering on a yearly basis 40 million SEK, i.e. 10 million per quarter. And that will be completely in line with that goal in Q2. And already in Q1, we have come a long way towards that goal. We have increased the number of car models. It used to be 75 at the end of last quarter. Now it's 85. So 10 new car models. Very great. We have two new OEMs that went into production. So now 12 out of the 23 OEMs are in production. Some of them are like in early days ramp up, not very high volumes, but some of them are actually quite good in volume. Their license revenues are growing well above 100% in line with our expectations of course. So all in all automotive is growing with 27% organically. We are, unfortunately, we have had seen some, let's call it North American or US effect on behavioral research. So we have seen several delays in procurements for research equipment in different labs and universities and research institutes, primarily in North America. The other regions went reasonably okay. So there we have a pullback of 5%. The EBITDA is improving to minus 18 from minus 25 before. We go to the next slide. This is just to show how our number of design wins have been growing over time all the way from 2016 when we just had one BMW X5 up until today when we have 365 car models or design wins as we call them under contract. When you have a car model and it goes into production then you are You have it for a very, very long time. So this graph is sort of, you see that it starts expanding end of 2021. It starts expanding very, very fast after I say the COVID effect was over. Those cars, a lot of those cars are not yet in production. So that big acceleration is what is going to go into production this year and next year primarily. And that's what's going to give us the big boost on license revenues. And you can say also we had already in 2016 we got the first design from BMW. We are still this quarter actually a bit surprisingly producing a few BMW cars like not high volumes but they are still in production. So that's how long the production cycles are in automotive. Next slide. This is just to show you where are the assignments, where are they distributed and the regions here should be read as the regions where the headquarter of the OEM is. So if you look at the North American OEMs, three of them, we have a total of 126 car models. And one of them have entered production with 23 car models. So a lot of car models to be launched in the next few years in North America. In Europe we have 13 OEMs. That's where we have the most OEMs. But only six of them are in production and only 21 car models. So we are also in Europe still waiting for the big boost in terms of car models and OEMs. And in Asia that's where we have developed the most. We have 94 car models under contract up until now with seven OEMs. Five of them have gone into production and almost half of the cars have gone into production. So we are a bit more developed in Asia than in the rest of the regions. And this is just to show how the development up until 2022, 20 car models went into production. And I think 12 or 13 of them were BMWs. Now 20 more went into production in 2023 that year alone. 35 more car models in 2024. And this year already in the first quarter 10 car models. So you can see a clear acceleration. Our estimation is that 70 to 80 car models goes into production during the rest of the year. So it's an accelerating pace for sure. And of course, the first half of 2026 might be even better, but we haven't really talked a lot about that. the DMS market you have 91 million cars and trucks and buses and light vehicles and so on sold in 2024 and we see that there is a clear risk now with the tariffs and we have to watch out how that development goes but there is a risk that you will have a pullback in the automotive market It was growing with 1.5% last year. It might well shrink a little bit this year, the total car market. But then again, if you look at the lower curve there, our success is not so much hinged on the total number of cars. It's more about the take rate, the adoption rate of DMS in cars, which we see will grow rapidly with the next coming years. And financial summary, net sales 90 million. It's up from a year ago. 7% organically, 5% unorganically. You can see clearly how the EBDA is evolving. It's going better and better. And Mats will talk a little bit more about that soon. We can take the next slide. This is automotive. We have basically services or non-license revenue is flat or even shrinking. But licenses is what's growing. So that whole growth from 2023 until now, I would say, is to a very large extent driven by licenses. And they will continue to grow. behavioral research 5% back this quarter and I believe that I have not been sort of seeing that we have really lost deals because of the turbulence in the US. It's more about postponing deals. These deals are still alive but they have taken longer to secure and get the purchase order executed and so on. And

Then I continue with the operational performance, looking into adjusted EBITDA and then we have excluded the one-time items. We have a minor decline between the years, minus 14.4, slightly lower than last year. Of course we have had a good revenue development referring to license revenue for automotive and also good sales for iMotion in Q1. But offset we have done some investments in sales and marketing so therefore we're declining a little bit. Our cost-saving program, as Martin mentioned before, 40 million on a yearly savings, a little bit better than we maybe expected from the beginning. We have done a downsizing of employees and contractors with 9%. And we finalized that in Q1, so we will have a full effect from Q2. And this will have effect of course both on expenses and OPEX in Q2. In Q3 we also have the summer and the vacation and that seasonal effect that we used to see in the third quarter. So we expect the OPEX and spending be a little bit lower in Q3. We also give some guidance there referring to OPEX and expenses before capitalization in Q2. So when do we become EBITDA positive? We are very close to become EBITDA positive in Q2. Maybe there is a 50-50% chance that it will be slightly above or slightly lower. But we see that the car production ramping up, more cars coming into production, and that will boost the license revenue. And of course, together with the seasonal effect on the OPEC side, we see a solid positive margin on EBITDA in Q3. And of course, that will continue to grow in Q4. Referring to cash flow development, we have a possibility to become cash flow break-even in this year. But we see the strong development in cash flow the coming year. And then finally, let's look into the balance sheet and some KPIs. We have done an investment in Iris Technology. 23 million was the first payment, and that has been settled via a set-off issue. We have 10 million in cash ending balance, and we have a total debt of 61 million. So together with our additional credit facilities, we have total available cash on 131 million. During the quarter, we have terminated one of the credit facilities of 50 million. We don't see that we need to renew it. If we had done so, it would have been some more spending, referring to that. So we think that 131 million will be fine until we become cash flow positive. And if there should be a case, of course, we have the possibility to take an additional credit facility if needed. Talking a little bit about the cash flow development, it nets with minus 13 million. We have added on 35 million in financing in Q1. And the free cash flow is minus 48 million. Half of that have been used to investment, and half of it is referring to operational activities, whereof 5 million is referring to one-time payments. That was all. Thank you very much. Over to you, Jacob.

Great. Thank you very much for that presentation, Martin and Mats. We'll kick off with the questions right away. We have got a lot of questions also from investors in the chat. So I urge everyone listening in online to keep asking questions. I will take them up. But first, some questions from my end. So can you kind of like explain if we talk about automotive in the quarter, it's you state that automotive is developing according to plan. But if you look like quarter over quarter, it seems like you had sort of like no growth organically within automotive. So how should we see like the effect with the license revenue and NRE here? You put some color on that.

Yeah. So let's say the non license revenue is not glowing quarter over quarter. It's standing still or decreasing a bit. And we see that the growth comes from licenses and really nothing else. So that's the status right now. And we predict that the licenses are continuing to grow in an increasing pace actually during this year. And for the second half of the year, we do also increase that service revenue will start increasing again due to more projects that we need to work with our customers.

Okay, so you estimate both license revenue, of course, to increase sequentially throughout the year, but maybe also some NRE revenues to increase from the Q1 base level as well?

Yeah, I believe that the service revenue will be flat in Q2, but from then on it will grow for the rest of the year. But not at the pace of license revenue. License revenue will grow much faster and overtake services as the most important part of the automotive revenue soon. first.

And can you talk a bit about in the report you on this presentation, you're actually you're guiding that you will reach close to neutral EBTA already in q2 and positive EBTA in q3. Can you like comment maybe a bit more on what makes you so confident in that you will you will be able to achieve these targets?

Yeah, we are in that sort of prediction or in that forecast, we are saying that we will have a slow or let's say a minor increase for behavior research. But the cost base for behavioral research is very low. So we are already profitable from that side of the business. But that will increase slightly over the year. But the license revenues will increase quickly and with the new and lower cost base that together gives us confidence that we need to be able to achieve that. And like Mats said, It's a very close call. We are on the cusp of EBITDA positivity for Q2. And of course, we don't really know beforehand exactly where the licenses will come in with. It gets reported, let's say, four to six weeks after the end of the quarter. So in, let's say, end of July, beginning of August, we will know exactly how much licenses were sold in Q2. But anyhow, with a bit of wind in the back, let's say, that will become BBTA positive. But it could also be that we are just slightly under zero. And why do we focus so much on EBITDA is because when it comes to banks, they look at the EBITDA when they decide if they're going to lend us money or not. So we will come into banking mode as soon as we have positive EBITDA.

Great. And follow up on that then. Do you already have established relationships with potential banks that could lend you money once you come into banking mode?

Yeah, we have good relations with our current banks. But what happens is that as soon as we have can sort of deliver EBITDA positivity on our quarterly reports. It opens up new opportunities for us. So we have a wider array of opportunities at that point.

Sure. Maybe a question to Mats regarding the quarterly report. You state that one of your credit facilities expired during the quarter, but you chose not to renew it. Would it really hurt to have an extra credit facility just in case?

Yes, there is always a sort of a startup fee for establish a credit facility. And of course, if we had renew it, it will have some additional cost and looking into the development, referring to profitability and cash flow and so on. We think that it's unnecessary to take that course now. But we also, as I said before, we had the opportunity to add on later on if needed. And what Martin say that when we become EBITDA positive, we have another situation referring to bank and additional financing in another way. So we are fine with those 131 million that we have available for now.

Perfect. Crystal clear. So I'm going to move on a bit to away from the maybe specific financial questions. If we start a bit more about automotive. So in April, you announced and correct me if I'm wrong here, but the largest DMS deal in the history of both SmartEye and the industry overall. with the major japanese oem and of course i feel like we have to talk a little bit about this uh so maybe we can start with just why do you think smart i was chosen as a supplier to this software defined vehicle platform like what are some key specific factors that you think made the oem shoes you yeah so so first of all i mean software defined vehicles are they are clearly the future for automotive i mean

What it is, is that you create, let's say, computer or digital platform for the car that's going to live over a long time with over a lot of car models. And also a car is not maybe at its best when it's first delivered to a customer because the software will evolve and become better and better over time. So everyone in the industry believes very much in software defined vehicles, but also it has required a lot of investments and it has taken a lot of time to get the first software defined vehicles out in the industry. But it opens up the opportunity for us to become software tier one. The VM is looking for a different type of partner. It's not that you deliver, let's say, one box with one computer and one software, and then we deliver the same box for seven years for quality reasons and nothing else happens. You want a more dynamic partnership with your software tier one than what you had with the traditional hardware tier ones. And you want to be able to evolve over time because who knows what the future will bring in terms of software improvements or software features. So in that context, it becomes very attractive to select smart as a software team one. And we are the market leaders we have. more contracts with more OEMs than anyone else and we had more features we have a very strong offering a very stable and dependable solution for our customers to stand on so The move towards software-defined vehicles has been good for SmartEye. We have landed contracts now with two of the biggest VMs in the world, and we are very proud for it. And I got asked, I mean, how do you mean it's the biggest deal in the history of DMS? This is only two cars. but usually in the automotive industry you get an award for like when we got the award for the BMW x5 back in 2016 and then we got awarded for a total of 13 BMW cars which was all of the BMWs let's say large platform larger car platform It's very common that that's the way it works in the automotive industry, that once you're nominated, if you deliver a good product, you get automatically almost transferred to a lot of more car models. And that's what we expect will happen here as well. And that's why the potential add-on volume is so large for this deal.

I see. But can you maybe then summarize it? Because the question was like, why do you think you win? So could you summarize it like SmartEye is both the stable or the safe choice for NOEM, but also the one with the broadest feature sets?

Yes, SmartEye is in the view of the stock market, SmartEye has everything to prove because we have a lot of design ways, but not much revenue yet. And this is sort of strange. It makes a strange appearance maybe to the stock market. But in the automotive world, everyone is very used to this, that you get the award, you get the design wins, you get the nominations, and the revenue comes several years afterwards. So everyone in the automotive industry knows that SmartEye is here to stay. We are a stable company from that perspective. So we are a very good choice for large OEMs. They don't want to nominate and work with a player that is not stable and not going to be here for the long run. SmartEye is very credible in that respect.

Interesting. And if we just keep up with some questions regarding this design win or these design wins, like often when we talk about the DMS industry, you talk a lot about Europe, that Europe is coming first due to legislation. Is this order that you have received mainly for cars to be sold in Europe or is it more on a global level?

It's a bit of everything. So Europe and European requirements and the combination of general safety regulations and Euro NCAP, that's sort of the spear, the tip of the spear. But there's so much more that you can do except just fulfilling your NCAP requirements once you have the camera in your car. So that's sort of on the top of the list of things to do in the project and to be able to deliver that on the first car model and so on. But there's a roadmap of many more exciting things that will come later.

Okay, but with the OEM, the signings that you have won and that you expect to maybe win in the future on the same platform, are these targeted mainly to be sold in the European market or is it also in other markets?

No, they will be sold in other markets, but only Europe will have a 100% take rate. And other markets, maybe, you know, they will hover somewhere around 20 to 40% take rate until there is legislation.

Perfect. Thanks for clarifying. And like, you touched a bit upon upon this. But how what will maybe like differ in your role here in this contract as a software tier one, compared to other contracts where you have been contracted a software tier two, if you could just like briefly explain.

uh what what we do is that we deliver like a set um like a set scope of features and performance criteria for the first launch but then expected to just continue there will be continuous improvements there will be new features coming there will be new car models new say maybe new camera a hardware and things like this coming so there will be a continuous development path following after the first sop okay and uh

Moving on with the question about interior sensing, sensing them. Do you have any rough estimate on what kind of take rate one could expect within this? I mean, you're going to start deliveries in 2026 and 2027. But if we look at maybe like 2030 and beyond, and five years from now, how many cars do you think would have what you would classify as interior sensing features worldwide?

I think of it as the development of airbags in the 1990s. First there came airbags in luxury cars like BMW and Volvo. Then it became mandatory for the driver's seat and that for me is the equivalent to driver monitoring. then you have today cars are filled with various types of airbags that's compares you can compare that to cabin monitoring that you will make sure in the whole cabin not just on the driver so today airbags are you know most car on most markets for both the driver and the passenger and that's the way I see it too with cabin monitoring it will go into every car just like driver monitoring the same thing in every car so it will come maybe within like a five year or so approximately let's say a five year delay when driver monitoring goes into the car

okay so that's interesting because i mean interior sensing features are not in this to the same extent at least not yet like driven by legislation such as dms and uh so but you still like it seems like you still believe that penetration will be um

maybe not as full as DMS but pretty similar but with a lag of five years or so is that the correct interpretation yeah I think like if you buy a car in 2035 it will measure everything inside and outside will be measured so it's like processed on the computers inside of the car so It's hard to predict exactly how that take rate curve, what it looks like. I mean, it's been hard to predict for DMS, even though there's a little requirement in 2006. But in the end, every call will just be measured. I mean, and you have some, actually some legislative and safety aspects that child left behind, pet left behind. These kind of applications are being taken care of by buying an interior sensor.

Yep. Okay, very interesting. Moving on to another question I have and it regards facelifts. So I've seen that some OEMs have started to release like facelifted versions of their best selling cars and include DMS either as a standard feature or as an option on various trim levels. So for example, just one specific car model I've seen is the Kia Sportage 2026 version that previously did not have DMS in the 2025 version, but now it seems to have it in the 2026 version. And actually, if you ask resellers, it's a standard feature, at least here in Sweden. So my question is, what kind of impact does this kind of dynamic with facelifts have on SmartEye? That is my first question.

I've heard the Kia Portage has a very good DMS too. But the facelifts, I mean, let's say like pre-COVID or pre-software vehicles, the typical case was that the car modeled for seven years and there was a facelift either after three or four years there was a facelift. which was just like a small minor design update of the car but also there was a small budget for these to have some new technology put onto the car let's say But now what you've seen since COVID and let's say that you have had many software-defined vehicle projects that have been delayed and also some battery electric vehicle projects that have been the last five years where you have had a lot of delays in automotive. and more major facelifts occurring in many video games they have done it on more models and they have let's say have bigger facelift budgets than their traditional ones so i would say another example of that is called xc90 and over xc60 So both of these old platforms will live alongside the newly developed Volvo EX60 and Volvo EX90. So Volvo is not unique here. You see that in many ways. Okay. And more like bigger scope in terms of facelifts and more higher budgets for doing a facelift also creates opportunities for DMS in, let's say, older platforms. So it's good for us.

Yeah, that makes sense. And the last questions I have regarding automotive before we move on to behavior research is that you can maybe comment a bit on the competitive landscape in China. I mean, Smarter is very successful as we have seen in Europe, the US, Korea, Japan. But if you can talk a little bit about China, what's happening over there, it seems a bit maybe like a black box and you don't know everything.

Yeah, I just came home one and a half week ago. I came home from Shanghai Auto Show and it was the first time I was visiting China since before COVID. And I have to say that things have developed so fast in China in terms of defining or lifting the digital experience in the car. uh china they have it like this to us in the west system it's a little bit peculiar peculiar way of uh developing everything so fast So we usually take three years when we develop a new core platform here in the West. The typical time it takes in China is 12 to 18 months. And this is, of course, when you're looking at a digital platform or a compute platform, that actually gives you advantages to develop it that fast. and the the cars in in china it's like going into some sci-fi man cave when we sit in the car you can control things and gestures i tried that in one of the cars and the screens that cover the whole dashboard curved screens calling the whole dashboard and the graphics is immaculate and yeah it's it's uh it was a great experience i think china has surpassed us in certain aspects and we should definitely pick up uh pick up the ball here and learn from from the chinese audience looking at the in terms of the digital experience in the car very fascinating actually and dms is everywhere in china in let's say every car that has some sort of premium feel or like the upper one-third of the car segment in China they have DMS and many of them have cabin monitoring gestures are being marketed in many cars and generative

AI and agentic AI I mean it's not only talked about it's already there in many cars in China so very interesting future okay but do you see like how do you see your competitive position in regards to like Chinese DMS surprise do you see I guess like it's a tough race standing in the Chinese market but How do you think the competitive landscape will change in Europe and the US between SmartEye and potential Chinese competitors going forward?

We have some Chinese competitors and I would say that both These Chinese competitors were left alone for a few years during COVID where it was hard for Western companies to reach out and reach their customers in China. But that's not the case anymore. So now they will feel competition from Western. Companies like smart are just like when you feel it for your competition from Chinese companies here in the West. And I think that competition is always good. Competition lifts everyone. When you compete, it brings out the best in every company. So I think it will be a very interesting time now I think just that's there is competition and and say challenges in China there is also very strong opportunities to for Smaka in China so we we are sort of looking at at relaunching China and we want to save all lives on all markets including China so

Thank you for that. It's a large market indeed. So it will be interesting to follow. And if we move on to behavioral research, then you commented on it a bit in the quarterly report, but can you maybe comment a bit about the market sentiment again and add some flavor to that i mean you said that in the us your customers were maybe a bit reluctant but in the other markets demand seemed pretty normal is that how we should interpret it and how do you see this going forward into 2025

Yeah, I mean, Q1, let's say the seasonal effect for behavioral research is like this, that you sell the most in Q4 because the research budgets in many cases needs to be spent on a particular calendar year. So that's why you have a lot of sales in Q4. So we were expecting to decrease the sales quarter on quarter. for behavioral research from q4 to q1 but not by this much and what happens was with the new administration they really got off with a head start and did all sorts of changes and they really Many customers who had secured research budgets and they wanted to purchase equipment for their labs, they just scratched their head and didn't know exactly what kind of consequences does this have. There were so many things, so many stones that were turned and so many things that were sort of changed during 2001. so so we saw a lot of delays things we thought would be uh purchased and purchase orders that we should have received and delivered into one day were postponed i would say most of those are are still alive now here in q2 and they are we're still working on them but but uh definitely there was delays in in terms of that And if you think about it on a bigger, like the bigger picture, there's a lot of commotion right now in the US, but I've seen from a bigger picture, I mean, US is the, I would say, preeminent research nation on Earth. they have always spent a lot of money on research and they will continue to do so. So I don't expect there to be like a permanent plunge in the US demand. I expect it to be stabilizing quite soon actually. And I do think that we soon see growth in the US and the other markets like Europe and Asia, they were quite normal.

Perfect. Thank you for that. I will continue with the question. It seems like we maybe have some technical difficulties with the camera, but we can at least still hear each other. And I wanted to ask you about affective and emotions as well. So background story, you acquired them both in 2021 and 2022, I believe. And so far, it seems like the companies have made a really great impact on your behavioral research business. But can you put some more flavor on that? How have these two companies impacted your research business unit, both from a financial perspective, but also on an operational level?

Yeah. First of all, if you back the tape all the way to 2021, we were partners with iMotions. They were resellers for Smartire equipment in the period before 2021, but they were also resellers for Affectiva. uh the emotion ai from affectiva and but affective and smarter were competitors before before the acquisition and affectiva they were the primary they were the primary company like the pioneers inside of inside of Emotion AI. There were two companies who were competing in the beginning for having the strongest Emotion AI. It was Emotion who got purchased by Apple and it was Affectiva. So Affectiva was the only one left there. And they were selling it to advertisement testing. They were selling it to research customers, but they were also making inroads into automotive. But in automotive, they needed to do much more than just Emotion AI, because to be honest, Emotion AI is part of a tab in monitoring. offering more than a driver monitoring offering and that the cabin monitoring is just now taking off let's say end of this year we at Smarket would have our first deliveries of cabin monitoring and our competitors as well they will also start delivering a cabin monitor this year so So Affectiva, they were pioneers in emotion, but they were maybe a bit early or they were too early with emotions in terms of automotive markets, but not for ad testing in these markets. But now we believe that this is one of the fundamental signals that we want to know about, whether it's a driver or a passenger, anyone who drives a car. You can also think of other applications. You want to know the gaze or the eye tracking information or the DMS information, which is how the eyes are moving, how the eyelids are moving, how the head is moving. And you can translate that into drowsiness, to attention. But another fundamental signal and intoxication, of course, but another fundamental signal is the emotional state. And it's not like that you can read 100% of the time. You can sort of understand the emotional state of a person who is in front of their But it's these transitions when you get some stimulus and you react, those reactions can be tracked. And that's what gives you very valuable cues. And now with generative AI and agentic AI making it into the car in a big way, which is happening extremely fast in China, and it's about to happen extremely fast here in the West as well. Together with the DMS signals, together with all these emotion AI is one of the fundamental signals that we really want to keep track of to be able to create this. You want to create an environment where everything about a driver or passenger in the car is understood well and adapted to a specific person. And we're getting there. But the safety DMS that we're working on now is the first step and this is the next building.

Yeah. And like, as you touched upon, like you touched upon affective and your research units impact on automotive. And I mean, that was actually one reason for you acquiring both affective and emotions. So my first question regarding like that is, how Affectiva has contributed to your automotive business post acquisition. So you have, for example, received ten interior design wins so far. Does this include technology from Affectiva

They actually do not include Emotion AI yet. So we are still working on more basic features than that. But it's definitely on the roadmap and it's something that will be included. And the day we actually get our first design win for Emotion AI, we will tell the world for sure. I expect it to be soon. So we have a lot of discussions, many OEMs and today ones.

Okay, so OEMs are actively procuring these kind of features?

Yeah, let's say they procure cabin monitoring. At first they procure driver monitoring, then they procure cabin monitoring. And this is one of the things that are on the roadmap, sort of like You have different levels of cabin warning. The first level could be detecting a seat belt. Is there a seat belt or not that you can see on the driver? And then you start detecting maybe child seats and things like this. But the next level is to do more elaborate things.

Okay. More to come then, hopefully. And I will move over to some financial questions. So maybe for Mats to answer. So you talked a lot about your savings program here and provided some guidance, which was very appreciated. So I guess that work with this savings program has developed according to plan or above or below. What would you say about that?

I think we came in actually a little bit higher than we expected from the beginning. But it's always difficult to put a target on the savings referring to the pace in the car production ramp up with our DMS. But yeah, so the short answer is a little bit higher than we expected.

And with higher, you mean better than expected? Yes, of course. Perfect. We like that. And maybe just a question about salary revisions that often occur in Q2. I guess that your forecast for Q2 includes your expected salary revisions that you have made during Q2.

Yes, that's correct. We will have it from the 1st of April, the salary review for this year. And we expect it to follow the national union agreements in line with that, we can say. Okay, great.

And... Yes, that was actually the financial questions I had. I had another one about your EBTA positive guidance, but you provided so much information in the presentation, so I will not take it here. But we have gotten some questions from investors. I will start asking them. And the first one is... MartEye has on several occasions been compared to Mobileye which now has its solution implemented in over 200 million vehicles. Is this still a relevant comparison in terms of growth potential?

Yeah, that's a great question and that is a question that I have had so many times. But what happened was that Mobili, with a combination of skill and luck, they became the last man standing in the financial crisis of 2008. So when the Lehman crash happened, they were well funded and they also had their first production programs with, for example, BMW and Volvo starting up. So they sort of got through the door before the big financial crash of 2008 happened and the competitors were weeded out and they ended up with an 80% market share at the peak. They don't have 80% market share anymore, but at some point during 2010s they had 80 percent market share so i do not think smart i will get an 80 percent market share that was a combination of factors that made mobilize so uh successful in terms of market share so we always said that we we strive and we are confident in being able to deliver at least 40 percent market share but not not like nobler But I mean, they do image processing and measure stuff outside of the car. We do it inside of the car. So the comparison is not at all unwarranted.

Thank you for that. And moving on to another question from an investor. Will it be possible for SmartEye to start reporting licensing fees separately? If not, why?

yeah yeah no i i think that's a possibility with it we we have sort of made a conscious decision to to report the way we do where we don't uh split it out i also got a lot of questions can we report uh the number of cars each quarter just like some competitors do uh We just feel like we don't want to report both the license revenue and the number of cars at the same time and pretty soon almost all of the revenue in automotive solutions will be licensed and nothing else so we just felt like we shouldn't report that and that's giving away too much information to the competitors and to the market if we tell them exactly what our you know average license fee or whatever so that's what we don't want to do With that in mind, you have to hide one of the two at least.

Yeah, I see. To answer this investor's question, there is a possibility that you can report license fees maybe in the future, but maybe not at the same time as cars produced.

We see it that we will indirectly report license fees when the NRI or non-licensed revenue is fairly flat and the license is just taking off like this. Indirectly, it would be very easy to calculate the license fees if we don't. So we might as well maybe in a few quarters down the road. I don't know exactly when, but we might as well start reporting it like that, but not at the same time as we report the number of cars. That's not our intention.

Fair enough. How much more can SmartEye get as a tier one provider compared to a tier two provider on a per license basis?

That's another great question. So if you say that like this, that there's an ad, if a tier one licensed SmartEye software and putting into a product and sells that product to the VM, there's an adder, but that adder is not very high. So that's not the reason why SmartTag gets contracted as a software tier one. When you're software tier one, you do deliver a larger scope in terms of liabilities and integration. So you do deliver a higher value per core, actually. But I think what the software-defined vehicles are promising is that you will have feature growth. on another level than what you could have with the old models. I think that the big plus lies in the future growth. And there I see a lot of possibilities of getting more higher average sales price per car by delivering more value, more features.

Okay, that's, that's very clear. Moving on with another question. Someone is asking, in the q4 presentation, you mentioned license revenue growing by more than 200%. If I read the report correctly today, the license revenue grew by more than 100%. Can you explain the difference?

Yeah, we were just above 200% and this time we were not above 200%. But actually we see that we are still like we were showing with the picture or in the presentation with the map on the different markets. We still expect to have a lot of new car models and a lot of ramp up happening in Europe, especially in the coming four quarters. So we expect us to break that 200% record during this period.

Thank you for that. And another question then seeing machines have mentioned that they expect a 10 times a tenfold increase in European volumes into June 2026. Do you expect the same? Or have has the seeing machines volume come from winning BMW from smarter?

But I mean, if the question is the volumes, let's say, before July 26 versus the volumes after July 26, we are currently, what is it Mats? We're currently calculating, is it 15 or 14 million cars in Europe in 2026? We are around 50 million cars. So the total European market should be starting July 26 should be 15 million cars in Europe and July. But at one point in time, the European market was only 1.5 million. I don't know by heart when that was, but I mean, there is a tenfold difference. tenfold increase happening over some period of time there. But in terms of DMS, I mean, legal required DMS, you will not get very much over that. I mean, at 15 million cars, it's 100% take rate. I do believe that the opening market can grow again back to the precode levels of about 17 to 18 million cars. I think that can happen, but it's hard to say when. There are so many geopolitical factors right now.

Yes. And another question. Seeing machines have announced 3.2 million cars on the road at March 2025. Have Smarter got above 1 million cars yet?

We are above 2 million cars. We are not yet at 3 million. So when it comes to the total accumulated number of cars, Seeing Machines is a little bit in the lead ahead of SmartEye. But this is not like a key performance indicator for us that we are sort of broadcasting all the courtroom. But maybe we'll tell the world when we surpass 3 million cars or so. But in terms of looking at the history, if there's, say, 2 point something or 3.2 million cars, it's not so very interesting. What's interesting is in the future. I mean, it's not long until we have delivered 5 million, 10 million, 15 million cars. And how do you predict that trajectory from where we are today up until those numbers? That prediction needs to be based on the number of design wins. You have car models, you have a tape rate, you have a ramp up, you have peak production on these car models. And all that goes into like a big Excel model. And we have one. And I suppose our competitors also have this kind of Excel models. And we are trying our best to predict the future based on that.

Thank you for that. And maybe a question to Mats regarding the cost savings program again. What type of positions have you reduced in the new cost savings program?

That is mainly referring to administration and to say support. So we have not done so much referring to engineering. It's more. Yeah. So it's. more supportive position that we have terminated during this cost savings activity.

I see. And maybe another question for you, Mats, is regarding your guidance of probably or hopefully posting positive cash flow in Q4. Does this also include working capital, tax, leasing, or is it more on a operating cash flow plus capex investments? Or is it cash flow on the bottom line, so to say?

Yes, the short answer is yes, we focus on the free cash flow and that will become positive. But of course, at the same time, if it will happen late this year, it's depending a lot about the pace in the car production ramp up with smart IDMS and also the pace in how we win new energy contracts, new service contracts and the tailwind runs for them. So yeah, so that is the background, the main driver for when we become

Okay, so it's on a free cash flow basis, which means including changes in networking capital as well. Correct. Perfect. I will keep on going here. I'm not sure how many we will have time for, but maybe a couple more. Okay, so a question about behavioral research and the deals that you talk about not having lost, but that are rather postponed. When do you see them return? Is it the Q2 event or rather later in 2025?

Yeah, so I don't expect them to be lost. Let's say that you're a North American laboratory doing behavioral research. and you have the been promised budget to buy equipment there has been some turmoil in clue one so you were unsure if you could place those purchase orders or not i expect that to be resolved let's say within a few quarters and i i also don't expect those deals to be lost per se I expect them to materialize, let's say, a couple of quarters later than what we first thought.

I see. And another question is, Sting Machines mentioned 40 features when they won the Volkswagen Group contract. Can Martin give examples of the features at Smart I have?

Yeah, absolutely. In terms of 40 features for Volkswagen and C-Machines. I cannot speak about competitors, but I can speak about Smartride. So we have typical cabin monitoring features when you sort of instead of just measuring in a portrait photo a face, you measure the whole body or even the whole car. Typical features are objects left behind, you have child seats, position of child seats, you have auto position, is a person sitting too close to an airbag or not. You have seat belts are very typical and you have also been able to measure gestures, you can measure hand gestures. counting the number of passengers in the car yeah all sorts of things there's a long list i mean the list of features that you can accomplish with cabin monitoring is much longer than the driver monitoring feature list and then what we haven't really talked about but let's say that you would take the technology that i motions is selling to research today and start putting that multimodal technology into the part and start measuring with more measurement devices and and combining those signals then you can increase the feature list even further

solid I think we have a meeting that's starting out for me yeah that's a fair point we have a lot of questions from investors here but I guess we will have to take them another time so thank you very much everyone for watching the presentation today thank you Mats and Martin would you like to wrap this call up maybe with some final words maybe big in Japan is a good way to summarize it

Yeah, you're right. That old Alphaville hit in Japan did came to mind a couple of weeks ago when we announced the big Japanese car OEM. We announced that car OEM on the same day as Donald Trump announced the US tariffs. The most beautiful. What did he say? The most beautiful word in the English language or whatever he said. But yeah, we did rain on our parade, but I guess there are bigger things going on in the world than driver monitoring design programs. All right. We're big in Japan. Thank you very much, Martin and Mats.

Thank you, everyone, for listening.