Member Info for Brockwl

S2020,

Your correct about the 12m not being in these accounts, but where are all the cost savings the FD has been banging on about on every presentation I've watched in the last 18 months.

We have taken 500k out of monthly costs, is something I've heard more than once.

NRE work is coming to an end, so contracted Labour can be removed from costs.

I look at the figures and I don't see it anywhere.

All I see is costs increasing, 89m this year from their forecast, all this while the G3 kit is much cheaper, and should reduce cost of sales drastically.

I said quite clearly, I saw no cost savings in these results OR IN THE H2 FORECASTs.

If they have taken 12m out in costs from March, you would expect to see that reflected in their forecast. But it's not.

Well we'd already had the trading statement, so a lot was already known. However whilst they haven't, provided much more information, there is a little.

Here is my take.

Fears of further Auto license margin erosion look unfounded. Having dropped to $9.45 last year, it translates to $9.44 a unit for this period. Still no sign of the extra features adding value at $1 a pop, as was promised, but at least Auto margins have held steady.

The key stat for me was the yearly forecast of $58m revenue and EBITDA loss of $28.9m. (note 2)

That suggests H2 will show a $10.4m EBITDA loss.

This also suggests they expect a revenue increase of approx $8m, over the first half.

So any reduced loss is dependent, predominately on revenue increasing, rather than any cost savings.

Although to be completely fair that extra revenue will have an element of cost of sales , so there may be an small element of cost savings in those estimates.

This is interesting because I'm struggling to find where these cost savings they talk about have come from.

Everywhere you look, especially staff costs, there doesn't seem to be any reduction.

It feels like this £12m cost they say they have taken out of the business has mainly come from a reduction in cost of sales.

A lot of this will be as a result of reduced aftermarket hardware sales and reduced inventory costs from G3.

So I'm suspecting a bit of spin here.

If anyone else can show me where this $12m saving is in these accounts, apart from cost of sales, I'm all ears.

This worries me a little as I was expecting, far bigger staff cost savings, as people here have suggested is happening.

I'm not seeing any in these results, and their H2 forecast doesn't suggest too many either.

Hence I'm not convinced they really get that they need to cut costs.

Full year forecast is $58m revenue, with $28.9m loss, which suggest total costs this year will be nearly $87. That seems far too much.

The other thing I noticed which had pased me by, is that they still have to pay Asaphus $5m over 5 years for the acquisition.

S2020,

I wasn't suggesting I might bid as you well know. I was trying to put myself into the mind of those who might.

You are the last one to criticize others views. You've got this completely wrong for about 10 years, following and fully believing all the fan boy promotional BS and never once challenging those views.

You're had blinkers on as far as this company is concerned, and after all this time and poor execution still refuse to take them off.

There's clearly a buyer around today, who has an order in.

Virtually all sells today, yet price rising so expect to see a big trade show up when they are finished.

I was tempted, when it went below 2p briefly, but held off for a couple of reasons.

1. Results will be disappointing and don't want to buy until they are out of the way.

2. Its getting close to bid territory, which is why I'm tempted. However at 2p, bidder will have to pay at least 3 or 4p, plus need to cover the magna loan at some point. So that's 250m at 4p, which I think is a bit steep given where they are currently.

Also if I was intending to bid, I'd let results happen first.

The problem here is that this is no longer being valued on potential, as there has been too many delays and disappointments and the potential remains unfulfilled and now in doubt.

It's now being valued based on basic financials such as when it might turn a profit.

Given the latest presentation moved cash flow break-even back to the end of this CY, that means H1 2026 FY will almost certainly show a loss. Assuming H2 2026 FY makes some profit and balances the books 2026 FY is looking like it will be a break even year.

That means we are now at start of July 2026, without any profit and the Magna $47.65m loan needs repaying in 4 months time.

That suggests that in essence any 2027 FY profit will be needed to pay off the loan. So assuming there is enough profit to cover that it's FY 2028 before we see any real profit, and that assumes that 2027 and 2028 can produce more than $47.5m profit.

Other methods such as further dilution to deal with the loan would be disastrous.

Until results or management indicate something different, it's unlikely to change.

Seeing,

They disclose OEM (Auto) Royalty revenue, and also number of cars.

By dividing number of cars into the Royalty revenue, you can get a price per car at each point in time.

They don't break that down into DMS, DMS + OMS, Fovio or anything else.

But using the above math my model shows the following price per car over the years.

2021 $12.36

2022 $12.10

2023 $11.86

2024 $9.45

They have never addressed why the price is falling, in fact they guided that the price should increase as customers took some of the additional 50 features they developed. Clearly that never happened.

Next results will show if they have maintained, increased or decreased price per car.

Sharesplease,

The Magna loan was at an "all in yield" of 8%. Which means the overall cost is 8%, and not 8% a year.

Also the method of repayment of interest is at See's discretion, which means they can pay cash or shares.

This works out at about $477k or 14.7m shares using $1.30 to the pound.

So there is definitely more dilution coming there. Albeit fairly small

Your maths for 2 seems reasonably close to the true figure.

I don't know the position re 3, but would not be surprised if that is correct.

Bonzo,

The stuff I wrote earlier was all from memory, so have taken a quick look at the last results figures and what I had for this year and why, to be certain it was accurate.

Auto revenue is made up of Royalties, 10.6m Licenses, 6m, NRE 9.24m, and hardware 0.6m.

Licenses should be the same for 2025, but will reduce to about 2.5m in 2026 when Magna licence is fully paid.

Note the remaining license is the Collins avaiation license which they currently include under OEM.

NRE - if as stated major work is coming to an end and we are cutting costs by removing developers, I'd expect that to be reduced revenue. My conservative guess is 5m.

Royalties are probably running at about just 6.3m for the first 6 months, so a conservative guess would be 14m for the year. That could be generous.

So I'm seeing OEM revenue possibly down on the year, albeit costs should also have reduced.

Cost reduction is an unknown quantity

Aftermarket I'm seeing as also down for 2 main reasons.

1. The G3 kit they are selling is cheaper, and they are not selling much of it from the last KPI's. Clearly with cheaper kit cost of sales goes down.

2. The revenue from " the CAT licence" reduces by about 2.4m, because they took an extra lump in 2024 to help shore up those results.

Monitoring should increase by about 1m, as is usual.

So overall I see aftermarket performing worse currently.

What comes across very clearly is this isn't currently showing any growth.

That may change in time but I see 2025 and 2026 as very challenging revenue wise.

Hence why I am currently out.

I won't be going to the Town Hall, I'll watch the replay later.

But if I was I'd be asking:-

1. How do they plan to pay back Magna the 45m in Oct 2026? Given when it is due they should be planning for that.

2. Where is the 392m contracted OEM revenue, which we are expected to see mostly by 2028? Because so far we haven't seen much.

3. Have we lost any OEM contracts? ie GM

Slight correction to the previous post.

No way will OEM do 35m. They'd need to do 3.5m cars for that, and from memory are just short of 700k for 6 months.

Should say

No way will OEM do 35m. They'd need to do 2.5m cars for that, and from memory are just short of 700k for 6 months.

I'm assuming that 10m comes from NRE and magna licence payments. Which I missed before.

However still look a long way short.

Bonzo,

They are the sort of cautious numbers I would have had in my model 6 months ago.

But given the latest KPIs, I'd say they are now optimistic, particularly the early years, and definitely 2025.

No way will OEM do 35m. They'd need to do 3.5m cars for that, and from memory are just short of 700k for 6 months.

That also assumes margins are maintained, which is a risk going forward.

I no longer believe this 392m will happen. It's this which made me stay way too positive for to long.Cheers

In 2026 the magna licence money drops of revenue, so that's another 3m plus they need to find to make that up before revenue increases.

Sales of G3 last quarter don't suggest any increase in aftermarket revenue this year, in fact it might retreat.

So whilst I was thinking like you some time back, I don't see it like that any more.

I also don't see

You would have thought it should, but so far every big name involved has got it wrong with this company. Lots of institutional investors, Magna, even the FD.

So Mitsu also getting it wrong, wouldn't come as a great surprise.

However I can see them taking the company out, if it continues to fall.

Mapps,

I'm answer to " what price will I buy back this time".

It's no longer about price, it's about them demonstrating that at some point in the future they can become profitable, to the tune of 100m a year.

Currently that looks 4 years away, with 2 years of difficult times before that happens.

So far they have completely misjudged the market, and the last presentation finally started to show they recognised that.

The worry now is that auto margins have to be reduced to get contracts away, which is the next risk.

Results in April will be telling, and I suspect will cause another share price drop.

I'll continue to monitor what's happening, but have no intention of buying back for some time.

Of course there is a point where the price reached a point where a bid is likely.

At that point I might be tempted to buy a few, but not the amount I previously held. Maybe 1.5p

Good luck I hope it works out.

Where does it say I won;t post again. Watching from the side lines means I'm not a holder nothing else.

I sold, never said I wouldn't post again, still watching the story.

Whats Mitsu being 55% down in a few weeks got to do with there not being further dilution.

I gave my analysis ( more then you have), big revenue shortfall pushes break-even closer to when Magna need paying back. You seem to know so much how is that going to play out?

What they know is that revenue has taken a hit. No fleet sales to talk of, and Auto had a massive backtrack.

So break-even put back 6 months to end of CY 2025, and continuing to burn cash.

Because of this they need to cut costs more aggressively, but show no signs of that.

When they break-even is a guess now, and could push out further.

October 2026 the Magna $45 loan is due, and the risk is that it will have to be paid back. I don;t see Magna offering another exclusivity deal, so either more dilution or break even gets pushed back a further year or so.

The lower the share price goes the greater the dilution will be.

There is absolutely no reason to buy at the current price.

Apologies it appears the figure I got back from a Google search is incorrect.

It looks Iike the real EU figure is about 10.6m cars per year.

I didn't mean to deceive, just trusted the search I did, which was wrong, thanks for pointing that out guys.

So that improves the position, and they may get 20m revenue in their 2027 FY ie. July 2026 to June 27

That may get them to breakeven with less severe cost cutting, but is still some way off and they would be brave to count on it given how it's gone so far.

I remember a presentation some years ago which showed a graph, showing cars per year and DMS penetration.

80m cars per year sold in the world, and SEE would be in 40%.

40% of 80m is 32m and at 10 dollars a pop that's 320m dollars a year.

That's just for Auto, so you can see why people got excited about the potential.

Some people were suggesting that the product was so good and cheap at 10 dollars, that SEE would get 70% penetration, 560m a year.

I got fully seduced by that potential.

However it just hasn't happened. I suspect 40% is now a pipe dream.

Also price is being continually squeezed and our cost base doesn't fit with that.

I also got sucked in to the whole Euro regulations driving sales etc, forcing auto makers to comply. But what I didn't do until just now, is look into how many cars are sold in Europe per year.

I'd assumed it was a decent total given nearly 80m in the world.

Well turns out it's just over 1m cars.

So all this stuff about regulation being the answer to the company's prays ain't that great. If they win a good share its probably worth about 3m dollars a year.

No where near what they need, or nothing close to all the hyped yearly auto revenue figures forecast some years ago.

The story hasn't played out anything like as expected.

There may still be a decent business here at some point, but it's all looking much further away, and there are quite a few issues to navigate before then.

Firstly they need to cut costs to the bone. They actually have a decent revenue stream, trouble is their cost base at about 70m plus the 20m they don't capitalize from R and D, means they currently need about 90m revenue, to be truly breakeven.

With revenue somewhere around 50 to 60m and currently stalling, that's a big shortfall.

They owe Magna about 45m due next October, as they certainty won't take the shares at 11p. So good chance of another dilution there.

The 39m they have left only buys them so much time without severe cost cutting.

Maybe just over a year.

Be very interesting to see what they say about that at the town hall.

Are they just a director's life style company, or are they going to get serious making sure the company doesn't need to come to the market again with a begging bowl.

Time will tell.

Just for you Maps as you seem so interested. I sold 1.5m shares at various prices because couldn't sell in one go, but all prices were higher than where the buy is now.

Won't be buying back no matter how low it goes until something changes.

I think it is going lower.

Chutz,

"The CFO sees the bigger picture."

Surely the bigger picture was that this is going to get much worse before it gets better, so I'll wait until then before I buy all my shares. That way I'll get twice as many.

It's only his buying that made me buy back in, and he was clearly either clueless, or having people over.