Member Info for Seeing-2020

Seize, Cenkos was posted here the other day, Panmure not on research tree.

Cenkos 25p target06 Oct 2022 09:16
Just a one page note

US$65m game changer
Seeing Machines has announced an exclusive collaboration
agreement with Magna International for rear view mirror driver and
occupant monitoring applications. This will see Magna pay
US$17.5m for the application area exclusivity and Magna has agreed
to invest up to US$47.5m through an 11p convertible note. Today’s
news is without doubt a game changer demonstrating the great
value a major industry player sees in the company’s technology. We
view this deal as a poignant marker on what is likely to be a steep
trajectory over the next few years to Seeing Machines becoming a
multi-billion dollar technology company. With concerns over the
balance sheet and how to fund the NRE for the large quantity of
RFQs recently won allayed, the risk weighting has clearly reduced
for our valuation, and we raise our target price to 25p (from 20p).

? Exclusivity limited but valuable: The rear-view mirror position is both technically
challenging for DMS/OMS but also makes for a standalone component that is easy
to design in or retrofit. Only two other suppliers we know have demonstrated
prototypes in this location (Continental and Gentex) and so the risk of exclusivity
limiting market share for the company is not as significant as other application areas.
For this limited exclusivity Magna will make an upfront payment (non-dilutive 100%
margin) of US$10m, with an additional US$7.5m over 2 years. We note that for
Magna to make such a commitment for exclusivity, we would assume that all the
technical challenges of the mirror position have been overcome.

? Game changing moment signals the start of the next chapter. In our view the
company is generating huge long-term value as demonstrated by its revenue growth
and recent RFQ wins. The long-term position is benefiting from it underplaying the
strength of its position publicly as, in the auto industry, this will enable it to win a
larger market share for longer. This is also the start of a global technology adoption
curve driven by safety regulation across multiple sectors, not just automotive OEM.
Today’s deal should finally allay concerns over funding but also re-enforce our view
that Seeing Machines is the DMS technology market leader and likely to win even
greater share than publicly predicted by the company. With a NASDAQ listing as a
likely next step, and obvious parallels to the success of Mobileye, we see the stock
as a 22-year-old proven-technology unicorn that its current share price belies. We
will assess the impact of this news in more detail in due course, but we have raised
our target price to 25p to reflect a 1% decrease in our weighted average cost of
capital as this news significantly reduces the perceived risk weighting as we believe
the company is now well funded to profitability

Firstly it's nuts to do a note on a rival winning a deal

Then they say 35%, but let's remember Nick says 40% (by volume).

So if you read their logic for 35% you will also conclude how prudent Nicks 40% is.

Redeye
Combining 50% of cars with DMS having this in the rearview mirror, with Magna taking a 50% market share in this space, Seeing Machines gets a 25% market share of total DMS.
Considering that we think Magna owning almost 10% of Seeing Machines will give Seeing Machines a disadvantage towards other tier-1s, we think Seeing Machines won’t gain a market share above 20% for other DMS locations. A 20% market share in the remaining 50% of cars with DMS (i.e., excl. the 50% with DMS in the rearview mirror) gives another ten percentage points’ market share for Seeing Machines.

I went through these numbers with my 7 year old this morning, first she did some research and asked me some questions

1) Has Magna any DMS wins in the mirror = yes 3
2) Has gentex = no
3) Has Gentex a DMS solution for the mirror = no, they bought Guardian Optical Technologies for OMS but that doesn't do DMS.
- does Magna deal adversely (proud she knew this word) impact QC = no

Then she worked the numbers and made some assumptions
- mirror is 50% of DMS market
- Magna win 80% of mirror
- SM win 50% of the other locations

So she gets 80% of 50% = 40%

Add

50% of 50% = 25%

So my 7 year old gets 65% same as Colin B, she inherited the prudence from her mother.

65% by Volume

Sch, Magna is internal / rearview mirror

Whoever is selling today wasn't at the investor meet that's for sure

BDMS
- very high margin
- original TAM was 7,000 units
- now 100k's

After Manufacture
- we are being asked to bid for contracts of 100k units
- no one else is bidding
- we sell to say Volvo Bus the hardware
- higher margin
- monitoring is a separate transaction with the operator
- GSR requirement in 2024
- Gen3 Guardian insures the volume capacity
- we will have a manufacturing partner for Gen 3
- Gen3 launches this financial year

After market (Fleet)
- less than 2% churn
- Gen3 will launch in US and Europe
- supply issues are fixed from Nov
- Gen3 is auto grade
- internal aspiration is "way bigger" than any published targets

Very confident, whilst being careful not to appear arrogant

We had 447k cars on the road at June

Yesterday's RNS was worth more than all them combined

$17.5m of cash for a narrow (one location and 3 years) exclusivity deal)

Let's assume the cars on the road are $17.5 in revenue per car

Then yesterday's RNS was the same as 1m extra cars on the road.

What an RNS

CB post
"The short-term priority for #DMS #OMS is a "land grab" to meet Euro NCAP, For Safer Cars 2023 testing and EU General Safety Regulation #GSR starting mid-2024. The Magna mirror represents a "get-out-of-jail-free" card for many #automakers, who seem to have been asleep to changes in the regulatory outlook for #distraction, #drowsiness and #impairment monitoring. Events will likely move very rapidly now this agreement is signed."

Colin B on linkedin, so this deal looks even better after reading his post, he makes the point that they pay $17.5m just for
- exclusivity in one location
- 3 years only

He also predicts "100% of units". So win win for SM. Not sure how they got this deal done.

BREAKING: Seeing Machines enters key collaboration with Magna International. Read on for my immediate thoughts.

The agreement states the parties will "exclusively co-market driver and occupant monitoring, solely where the Company's IP is fully integrated inside the rear-view mirror, until the end of June 2025." This implies exclusivity applies only where the image processor is integrated inside the mirror. Until June 2025, my assessment is that will be near to 100% of units.

The short-term priority for #DMS #OMS is a "land grab" to meet Euro NCAP, For Safer Cars 2023 testing and EU General Safety Regulation #GSR starting mid-2024. The Magna mirror represents a "get-out-of-jail-free" card for many #automakers, who seem to have been asleep to changes in the regulatory outlook for #distraction, #drowsiness and #impairment monitoring. Events will likely move very rapidly now this agreement is signed.

The competitive position sees Magna/Seeing Machines pitted against Gentex/Guardian Optical in the mirror. This is brilliant strategic thinking by Magna and Seeing Machines, and the exclusivity rights (with associated investment) gives Magna maximum incentive to place massive sales, marketing, engineering, and manufacturing resource behind this product family. The Guardian algorithms simply have to work to compete, but there is no identifiable design-win at SoP to confirm this. High-stakes stuff indeed for Gentex.

The pieces of the technology puzzle are quickly falling into place. The mirror becomes a #zonal #controller with co-designed optical path and integrated image processor feeding DMS/OMS signals and #metadata to central compute #processors from Qualcomm and NVIDIA over CAN-FD and in future, #automotive #ethernet.

The Magna mirror is one part of a trend enabling the coming together of #eyegaze, #gesture and #voice, powerful #AI and deep-learning #DL on-chip #accelerators, with #5G car-to-cloud #connectivity, to drive a complete revolution of the #digital #****pit. Investors need to get over #selfdriving and look here instead.

Ultimately I see this becoming a four-way race between Apple (with #Siri), Amazon (with #Alexa), Google (with #Assistant) and Cerence Inc. to find a way to revolutionize the "immersive user experience." These big tech companies must get the Seeing Machines automotive development kit, put it in the hands of their most creative people and completely redefine what is possible in the ****pit.

https://www.proactiveinvestors.com/companies/news/994640/seeing-machines-shares-jump-11-after-it-inks-us-65mln-driver-monitoring-deal-994640.html

Up, there was a link to NextBase, from memory it was Amberella

Brock, let's see what Naomi says tomorrow before assuming I am wrong.

Accounting rules on revenue recognition don't require the cash to be in the bank before revenue is recognised

Brock, that's why I posted the CAT RNS.

Read both RNS they are similar in that the "upfront cash" was spread over a few years, but for the CAT deal the whole USD17.5m was revenue and 100% margin in that financial year, I assume the same for this deal.

So in my view this mornings RNS has added $17.5m profit in this year, $10m of which they receive the cash for in this year.

Just a one page note

US$65m game changer
Seeing Machines has announced an exclusive collaboration
agreement with Magna International for rear view mirror driver and
occupant monitoring applications. This will see Magna pay
US$17.5m for the application area exclusivity and Magna has agreed
to invest up to US$47.5m through an 11p convertible note. Today’s
news is without doubt a game changer demonstrating the great
value a major industry player sees in the company’s technology. We
view this deal as a poignant marker on what is likely to be a steep
trajectory over the next few years to Seeing Machines becoming a
multi-billion dollar technology company. With concerns over the
balance sheet and how to fund the NRE for the large quantity of
RFQs recently won allayed, the risk weighting has clearly reduced
for our valuation, and we raise our target price to 25p (from 20p).

? Exclusivity limited but valuable: The rear-view mirror position is both technically
challenging for DMS/OMS but also makes for a standalone component that is easy
to design in or retrofit. Only two other suppliers we know have demonstrated
prototypes in this location (Continental and Gentex) and so the risk of exclusivity
limiting market share for the company is not as significant as other application areas.
For this limited exclusivity Magna will make an upfront payment (non-dilutive 100%
margin) of US$10m, with an additional US$7.5m over 2 years. We note that for
Magna to make such a commitment for exclusivity, we would assume that all the
technical challenges of the mirror position have been overcome.

? Game changing moment signals the start of the next chapter. In our view the
company is generating huge long-term value as demonstrated by its revenue growth
and recent RFQ wins. The long-term position is benefiting from it underplaying the
strength of its position publicly as, in the auto industry, this will enable it to win a
larger market share for longer. This is also the start of a global technology adoption
curve driven by safety regulation across multiple sectors, not just automotive OEM.
Today’s deal should finally allay concerns over funding but also re-enforce our view
that Seeing Machines is the DMS technology market leader and likely to win even
greater share than publicly predicted by the company. With a NASDAQ listing as a
likely next step, and obvious parallels to the success of Mobileye, we see the stock
as a 22-year-old proven-technology unicorn that its current share price belies. We
will assess the impact of this news in more detail in due course, but we have raised
our target price to 25p to reflect a 1% decrease in our weighted average cost of
capital as this news significantly reduces the perceived risk weighting as we believe
the company is now well funded to profitability

Gentex bought the IP from Guardian Opticial Technologies, so thats's who they work with for DMS, I am not aware of any design wins from Gentex for DMS in the mirror location

https://www.guardian-optech.com/2021/09/23/gentex-acquires-guardian-optical-technologies/

Cenkos who haven't updated their forecasts in while show a loss of ~A$30m this financial year, well this deal has just removed A$26m of that loss.

Naomi, Are we profit making this financial year?

This is why I think it's the best RNS ever

- We were working with Magna in the mirror anyway and they look very well placed to dominate that location
- They are paying A$26m for the privilege of exclusivity
- in my view that needs to be recognised at revenue and 100% now, as in this financial year, same as CAT was, when the cash flows doesn't matter
- This is better than the CAT deal as all we give is exclusivity, whilst CAT took on the mining division (and paid a royalty)

CAT RNS Sept 2015 - (The $17.5m was revenue and margin that financial year)
"Caterpillar will pay Seeing Machines US$17.5M over four years as well as royalty fees for DSS hardware, software licensing, monitoring and analytics services. Caterpillar will also purchase existing inventory of DSS units from Seeing Machines. Current DSS customer agreements will be transitioned to Caterpillar and supported by Caterpillar dealers. Additional consulting services, system monitoring and data analysis will be offered by Caterpillar Safety Services."

Magna RNS
"Under the terms of the Agreement, subject to certain exceptions, Seeing Machines and Magna will exclusively co-market driver and occupant monitoring, solely where the Company's IP is fully integrated inside the rear-view mirror, until the end of June 2025. In return for Seeing Machines granting exclusivity to Magna for the mirror, Magna will make an upfront payment to Seeing Machines of US$10m, with an additional US$7.5m payable over the following 2 years."

I am in shock this morning, been here 10 years and that"s the best RNS in my time

I think in terms of questions, they will do a presentation and open the floor for a few questions, my aim will be to learn something new and ask them some questions they can answer.

In the meantime for fun I will try answer Nathan999 questions:

Happy to kick off with a couple
1) Which models are currently on the road today with See DMS? = We updated you this morning on the overall cars on road, we can't name models until OEM gives permission
2) If there are vehicles on the road today that cannot be named what are the reasons for this? = see Q1
3) Does the board feel that non disclosure of vehicles on the road or with a definitive route to SOP has the danger to risk investor sentiment and depress valuation negatively. = No, we explain to investors that situation and we issue 'cars on the road' data on a quarterly basis
4) Does the board feel the valuation of seeing machines should be viewed as similar to Mobileye at 1ST IPO? Mobileye at Intel acquisition? Or do they feel that the new IPO potential value for Mobileye is more realistic in 2026 as a comparator to seeingmachines? = We have some views, but wouldn't be right to express them publicly
4) What threats do you see from competitors now and again in 2026, do seeing machines feel there future offers will be market leading and technology leading? = We spend a lot of time understanding the features our OEM and Tier Ones need today and in the future, our focus on HF puts us in a strong position, "we saw this coming and we are ready"
5) What barriers exist other than the previously disclosed supply chain issues for Guardian roll out? Engineers are in global shortage - do we or distributors have enough bandwidth to scale installations fast enough and is there a ceiling to what can be expected to be added on a yearly basis for aftermarket. = G3 will open us up to higher volumes
6) What number of vehicles on the road could we expect 1 year from today? Surely these vehicles will be close to finalised for specs and suppliers? Even if they can't be named,likely numbers could be projected? = 1m+
7) Are there any areas we maybe less advanced vs our competitors and what plans are in place to.address this? = We believe we are the tech leader, however we always look for ways to improve our offering such as the recent license deal
8) are Smarteye still them leading competitor or.do you feel others may supplant such as Gentex or Cipia? = Gentex compete with Magna, we feel our investor Magna is the stronger offering, for Tier 2 we have been very successful in recent RFQ and expect that to continue

Tesla need a creditable solution for DMS, pretty quick. GM were slow to take advantage

VW will win the EV race not Tesla, not GM.

If not VW then 'a leading European Car Manufacturer'