Seeing Machines Regulatory News (SEE)

Seeing Machines Limited

Half Year Results to 31 December 2014

2 March 2015

Seeing Machines (AIM: SEE) the AIM listed technology company with a focus on operator monitoring and intervention sensing technologies and services, is pleased to release its unaudited financial results for the six months to 31 December 2014. 

Key Points:

Financial

· Total revenue for the half year increased by 41% to A$9,437,346 (December 2013: A$6,689,766);

· Increase in sales, licensing and service income (A$5,867,061 compared to A$5,640,100 for 2013);

· Sales to the mining industry increased by 26%, despite challenging market conditions;

· Mining revenue beginning to transition from hardware sales to recurring revenue streams, with services revenue increasing by 62% to A$1,351,944;

· Net loss increased to A$4,310,464 (December half 2013: loss of A$844,903), reflecting planned increase in R&D activities and investments in sales and marketing resources;

· Cash at 31 December 2014 decreased to A$21,185,430 (30 June 2014: A$22,764,774) mainly as a result of the increase in these activities but offset by capital raising of A$10,627,929.

Operational

· Executing our strategy to commercialise our technology in six global industries: mining; commercial fleets; road vehicles; rail; consumer electronics; and aviation and simulators;

· Strategic alliance agreement signed with TK Holdings Inc., the Americas subsidiary of Takata Corporation, an automotive industry leader in the supply of advanced driver safety systems (ADAS);

· First contract secured with Takata, and product development underway, to deliver a driver monitoring system to a global passenger car OEM, with more than 10 other OEMs at various stages in assessing our technology; 

· Strategic agreement signed with Electro-Motive Diesel, Inc. (EMD), a Caterpillar Company, related to in-cab operator fatigue and distraction monitoring systems for use in locomotives and other railway vehicles;

· Memorandum of Understanding (MOU) with Samsung Electro-Mechanics Corporation to facilitate joint development of face and eye tracking technology for the consumer electronics industry;

· A strategic alliance with Insurance Underwriting Managers in South Africa to trial DSSTM with a major South African logistics fleet to assess the technology's ability to reduce fatigue and distraction related road accidents;

· On track to launch DSSFleetTM product for the commercial road transport market in April 2015; and

· Strategic joint venture with Chilean company GTD Ingenieria de Sistemas to form Seeing Machines Latin America to enable the highest levels of service to both mining and road transport customers and our local Caterpillar dealers.

Commenting on the Results, Seeing Machines CEO, Ken Kroeger said:

"With our revenue still dominated by sales to the mining industry, we're pleased to have increased our first half revenue over the same period last financial year despite very challenging conditions in the global mining sector. Our sales revenue is a solid result in these market conditions. It's also notable that we are starting to see a change in our revenue mix, with a sizable shift from one-off product sales towards ongoing services revenue. We expect this transition to continue. 

We also expect our revenue sources to gradually reflect the transition of mining product sales to the Caterpillar dealer network and our strategic investment in non-mining sectors, in particular the commercial fleet and passenger car markets. 

Consistent with the strategy we outlined almost 12 months ago, during this half year we invested significantly in our capability and resources to commercialise our technology in six global industries. We have successfully delivered several important milestones in that strategic plan, by partnering with industry leaders in automotive safety (Takata), rail (EMD) and consumer electronics (Samsung), to build on our existing partnership in mining (Caterpillar). During this half year we also developed a new product for trucks and buses which we will launch in late April. 

In the road vehicle market, we're working with Takata to develop driver monitoring systems for a global car maker. We are seeing huge interest in our technology from other car makers, as part of their development plans for ADAS - Advanced Driver Assistance Systems. This will be a strong focus over the coming year. 

Our investment in these opportunities is reflected in increased expenses for R&D, sales and marketing and corporate activities, resulting in a higher loss for the half year than for the prior financial year. As is usual we are conducting an annual review of our strategy and fine-tuning our business plans for our six targeted industries to ensure we're focusing our resources on the opportunities that can deliver most value for our shareholders.

Consistent with previous years, we expect sales revenue for the full financial year to be weighted towards the second half, ending 30 June 2015, with full year sales revenue higher than last year. To achieve this we will need to see a continued increase in mining sales and a significant contribution towards the end of the half year from sales of our new DSSFleetTM product. We expect to convert a significant number of fleet opportunities into product trials before the end of the financial year, giving us a strong fleet-based sales pipeline for conversion the following financial year.

In parallel, we are continuing to work closely with Caterpillar dealers to preserve and grow sales in the mining industry, as well as broadening our activities with Caterpillar into their other industry sectors.

Our Board and management thank shareholders for their support and we look forward to updating the market on our continued progress over the coming months."

The half year financial report is available at http://www.seeingmachines.com/investors/financial-reports/ 

Enquiries:

About Seeing Machines

Seeing Machines, (AIM: SEE), is an AIM-listed technology company that specialises in operator monitoring and intervention technologies and services. Its software and engineering services are used in products and applications that range from devices that improve driver safety and save lives to assessing trainees in simulators and simplifying the relationships between people and technology. Seeing Machines technology is used worldwide across the automotive, mining, transport and aviation industries; as well as many of the leading academic research groups and transportation authorities. Seeing Machines is headquartered in Australia, and has offices in Tucson, Mountain View, and Santiago. The Company counts Caterpillar, Takata, Eye Tracking Inc and Samsung Electro-Mechanics (SEMCo) as its partners and BHP Billiton, Freeport McMoran, Teck and Toll Holdings amongst its customers.

Directors' Report

Review and results of operations

The Company's total revenue for the half year to 31 December 2014 was A$9,437,346 (2013: A$6,689,766), including A$5,867,061 (2014: A$5,640,100) from the sale of goods and services.

The first six months of trading in the 2015 financial year was an improvement over the corresponding period in the previous financial year. This was primarily driven by significant growth in recurring revenue from the services component of our DSSTM offering.

The Company made a net loss of A$4,310,464 for the six months to 31 December 2014 compared to a net loss of A$844,903 for the period to 31 December 2013. The loss was a result of planned investments to implement the Company's business strategy outlined in mid-2014. During this half year we invested significantly in our capability and resources to commercialise our technology in six global industries: mining; commercial fleets; road vehicles; rail; consumer electronics; and aviation and simulators. This investment is reflected in increased expenses for R&D, sales and marketing and corporate activities, resulting in a higher loss for the half year than for the prior financial year.

Operational highlights for the half-year include:

· Executing our strategy to commercialise our technology in six global industries:

· An increase in sales, licensing and service income (A$5,867,061 compared to A$5,640,100 for 2013);

· Continued growth in the DSSTM customer base and corresponding recurring revenue stream;

· Significant capital raising of A$10,627,929 completed in December 2014;

· Capital raise of A$1,025,009 from existing shareholders completed in January 2015;

· Strategic joint venture with Chilean company GTD Ingenieria de Sistemas to form Seeing Machines Latin America to enable the highest levels of service to both mining and road transport customers and our local Caterpillar dealers; and

· Formation of a new joint venture, NuCoria Pty. Ltd., with The Australian National University to commercialise TrueField Analyzer (TFA) Intellectual Property.

Financial Results

The Company achieved revenues of A$5,867,061 (2014: A$5,640,100) from sale of goods and services and other income resulting in total revenue for the half year to 31 December 2014 of A$9,437,346 (2013: A$6,689,766). Of the revenue from sale of goods and services, A$4,120,417 was from the sale of goods and A$1,746,644 was from providing services. Revenue for the half year for each of the three products; DSSTM, FovioTM and Other Income compared to the same period last year is shown in the following table.

Cost of sales at A$3,195,156 (2013: A$2,317,165) was higher due to upfront tooling, setup and freight costs incurred in preparation of the commercial fleet product setup at our contract manufacturer In-tech, as well as the expansion of the Company's logistics facilities in Australia and the USA.

Indirect expenditure for the half-year was A$10,552,654, up from A$5,217,504 for the period to 31 December 2013, reflecting the planned increased investment in research and development, and increased activity in DSSTM sales, distribution and marketing, to underpin commercialisation and future sales of DSSTM and other products in our chosen markets.

Cash reserves at 31 December 2014 were A$21,185,430 compared to A$22,764,774 at 30 June 2014 and A$26,449,133 at 31 December 2013. The decrease was due to the deposits paid for the large stock orders placed with In-Tech for the commercial fleet product, due to be launched in late April 2015.

Operational Highlights

DSSTM

DSSTM revenues were A$5,438,697 for the six months to 31 December 2014, reflecting a significant increase over A$4,311,755 achieved for the six months to 31 December 2013. This was the result of the increase in the DSSTM installed unit numbers across our customers leading to an increase in the recurring services and reporting portion.

Revenue was generated from:

· sales of DSSTM units;

· software licensing;

· installation services;

· maintenance and support fees;

· field support services; and

· DSSiTM information reporting services including event classification.

During the half year the Company signed distribution agreements with four additional Caterpillar dealers (bringing the total to 16), further increasing the reach of DSSTM sales to customers in the mining industry. In addition to this, the Group's results included revenue of A$1,645,030 from Seeing Machines Latin America, the Company's subsidiary in Chile established during this half year.

The Board expects the Company's revenue sources to gradually reflect the transition of mining product sales to the Caterpillar dealer network and our strategic investment in non-mining sectors, in particular the commercial fleet and passenger car markets.

Consistent with previous years, the Board expects sales revenue for the full financial year to be weighted towards the second half, ending 30 June 2015, with full year revenue higher than last year. In order to achieve this we will need to continue to increase sales in the mining industry - in challenging market conditions - and drive a significant contribution from sales of our new DSSFleetTM product, to be launched in late April 2015. Management expects to convert a significant number of fleet opportunities into product trials before the end of the financial year, giving us a strong fleet-based sales pipeline for conversion the following financial year.

In parallel, we are continuing to work closely with Caterpillar dealers to preserve and grow sales in the mining industry, as well as broadening our activities with Caterpillar into their other industry sectors.

Automotive opportunities - 'ADAS'

One of the Company's six target markets is road vehicles. The opportunity in this market is to integrate the Company's technology into passenger cars as part of Advanced Driver Assistance Systems, or "ADAS". ADAS is an industry term for systems developed to automate, adapt and enhance vehicle systems for safety and better driving. ADAS systems include safety features designed to avoid collisions and accidents by offering technologies that alert the driver to potential problems, or to avoid collisions by implementing safeguards and taking over control of the vehicle. ADAS technology can be based upon vision/camera systems and sensor technologies that monitor the driver and the external environment.  

During this half year the Company signed a strategic alliance with TK Holdings Inc., the Americas subsidiary of Takata Corporation and, through Takata, secured a contract to develop driver monitoring systems for a global car maker. Following the announcement of our agreement with Takata, the Company experienced strong initial indications of interest from multiple further OEMs. This strong interest has continued after the Company demonstrated its technology at the Consumer Electronics Show in early January 2015. While no guarantee can be made that any of these OEMs will ultimately decide to purchase the Company's technology, the Board believes there is a significant opportunity to capitalise upon the Company's early work in this market.

FOVIOTM

Following the discontinuation of the FaceLAB & FaceAPI product line, FOVIOTM has now been established as the technology platform with all research based interest and opportunities directed to Eye Tracking, Inc, the Company's distributor for this field.

Core technology team integration services

With the recent marketing and demonstration initiatives, the Group has received an overwhelming response resulting in a broader focus on the automotive sector through the Company's product development agreement with Takata, signed during the half year. The Company generated revenue of A$261,412 from the core technology services provided to Takata in the development of a product for our first automotive OEM customer.

Summary

The Directors remain committed to delivering significant growth in shareholder value.

The additional capital raised over the past three months allows the Company to accelerate investment, both capitalised and uncapitalised, in our targeted six industries: mining; commercial fleets; road vehicles; rail; consumer electronics; and aviation and simulators. The Company will seek to leverage its current competitive advantage in order to more rapidly scale revenues in future years. The acceleration of investment in the second half is expected to result in a reported loss before tax for this financial year.

In line with usual corporate practice the Board and Management are conducting an annual review of the Company's strategy and fine-tuning its business plans for our six targeted industries to ensure we are focusing the Company's resources on the opportunities that can deliver most value for our shareholders.

Interim Consolidated Statement of Financial Position

The above interim condensed consolidated statement of financial position should be read in conjunction with the accompanying notes.

Interim Consolidated Statement of Comprehensive Income

The above interimcondensed consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.

Interim Statement of Changes in Equity

The above interimcondensed consolidated statement of changes in equity should be read in conjunction with the accompanying notes.

Interim Consolidated Statement of Cash Flows

The above interimcondensed consolidated statement of cash flows should be read in conjunction with the accompanying notes.