Investor Update

RNS Number : 9338T

Seeing Machines Limited

10 October 2014

 



Seeing Machines Limited

Investor Update - Building the Base for Future Growth

10 October 2014

Seeing Machines Limited (AIM: SEE, "the Company"), the AIM-listed technology company pioneering computer-vision based operator monitoring and intervention technology services, provides an update on its recent success in signing new distribution and product development agreements and its strategic outlook for the coming year.

Seeing Machines is also pleased to announce that it has been shortlisted in the Tech Innovation of the Year award category of the UK tech Awards 2014, sponsored by PwC and supported by the London Stock Exchange.  The winners will be announced at the UK tech awards dinner on Wednesday 12 November 2014.

Extending our sales reach in the Mining market

The Company continues to build sales of its DSS™ fatigue and distraction monitoring solution in the global mining market.  Mining was the first market the Company entered with DSS, selling directly to some of the world's largest mining companies, including BHP Billiton, Freeport McMoran, Teck and Toll Mining Services.  Almost 4,000 DSS units have been sold to customers in North America, Latin & South America, Australia / Asia-Pacific, Europe and Africa. 

Recognising the benefits of moving to an indirect sales model, in 2013 Seeing Machines signed an alliance agreement with Caterpillar as its global sales partner in mining.  To date, Seeing Machines has signed agreements with 16 Caterpillar dealers around the world.  

The pace of this activity is increasing, and the Company has recently signed agreements with the following Caterpillar dealers: Cashman Equipment Co. and Wyoming Machinery Company in the United States; Sotreq Inc. in Brazil; and Hastings Deering Ltd. in Australia.

Founded in 1931, Cashman Equipment is one of the highest rated Caterpillar equipment dealers in North America, serving customers in Nevada and parts of California.  Wyoming Machinery Company, established in 1969, supports mining, construction, and oil & gas customers in Wyoming.  Founded in 1941, Sotreq Inc. is Brazil's largest Caterpillar dealer with over 50 branches through the country.  Hastings Deering Ltd., based in Queensland and the Northern Territory in Australia, is one of the largest Caterpillar dealer networks in the world with over 23 branches, 26 sub-branches and nearly 5,000 employees. Hastings Deering serves customers in Queensland, Northern Territory, Papua New Guinea, New Caledonia and the Solomon Islands.

With training and support from Seeing Machines, early Caterpillar dealers are now starting to sell DSS products and services on their own.  Seeing Machines is continuing to invest in training and marketing support to help new Caterpillars dealers increase their own sales faster.  The speed and size of sales these dealers can generate depends in part on general economic conditions in the mining market.  The Company is taking steps to minimise the revenue impact of any change in mining conditions, including by marketing the DSS product for vehicles other than mining haul trucks - for example water trucks and buses - which increases the global market opportunity from 38,000 mining haul trucks to more than 150,000 vehicles plus the array of light vehicles used in the mining sector.  The Company is also working with Caterpillar to combine Seeing Machines' DSS technology with Caterpillar's own mining technology products and its range of safety services. 

More generally, Seeing Machines and Caterpillar are working together to determine how Seeing Machines' technology can be utilized in Caterpillar's product and service offerings for non-mining industries.

Beyond Mining - broadening our revenue base by entering new markets

Seeing Machines' technology can be applied in many large global markets.  In June 2014 the Company released details of its strategic plan, including its initial target markets.  In line with that strategy, the Company is diversifying its sources of revenue - away from just mining, to many markets; from direct sales to many sales channels; and from product sales to a mix of product sales, service fees and licence fees or royalties. 

In the current financial year the majority of the Company's revenue will still come from the mining sector.  Over the next two years the Company expects mining's share to reduce, as revenues begin to grow from the commercial road transport market, passenger vehicles and rail, and then consumer electronics, aviation and simulation.  These revenues will be derived from a combination of licensing fees from original equipment manufacturers (OEMs) as well as sales of after-market products and services.

The Company is successfully implementing this strategy and in September we announced three agreements that we believe can lead to significant future value for the Company. 

Automotive - Takata

The first major contract announced in September was a 15 year strategic alliance with TK Holdings Inc., the Americas subsidiary of Takata Corporation.  The companies have been collaboratively developing driver monitoring technology for two years and Takata has secured a contract to deliver its first ever mass-manufactured implementation of a driver-monitoring system.

Takata is one of the world's leading tier-1 automotive safety suppliers, with 35,000 global employees and forecast 2015 revenue of USD$5.3 billion.  Tataka supplies products to all the world's leading OEMs across all vehicle types. 

The Company and Takata have entered a mutually exclusive licensing agreement for driver monitoring systems, for OEM passenger vehicles, buses and commercial trucks.  The scope of the agreement includes ongoing funding of joint product and market development and priority access to Takata's technology for use outside the automotive market.  Seeing Machines will earn a mixture of guaranteed annual license fees and royalties on developed products. 

Seeing Machines and Takata have received strong interest from a large number of global automotive manufacturers.  The partners are assessing opportunities to develop new products for these customers, which would require investment in additional engineering resources.

This work is part of Takata and Seeing Machines' broader product road map for 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 technology is also a critical part of the move towards semi-autonomous and autonomous vehicles.  

ADAS systems are one of the fastest-growing segments in automotive electronics.  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.   

Rail - EMD

The Company has also signed a strategic agreement with Electro-Motive Diesel, Inc. (EMD), a subsidiary of Progress Rail Services Corporation, a Caterpillar company, related to operator fatigue and distraction monitoring systems for use in locomotives.  This exclusive agreement will allow Seeing Machines and EMD to develop and adapt Seeing Machines' DSS technology for the rail industry.

EMD and Progress Rail are the world's fourth largest global rail group, the largest supplier of rail and transit systems in North America and commercial suppliers to Bombardier and Siemens for European markets.  By leveraging our existing relationship with Caterpillar, this alliance gives Seeing Machines the opportunity to become a market leader in fatigue and operator monitoring technologies for the rail industry in both locomotive and ancillary rail maintenance and support vehicles. 

After successfully launching the alliance at the InnoTrans transport technology show in Berlin, EMD and Seeing Machines have already identified three potential trial partners and are now working together on the details of the joint product development and marketing plans. 

Consumer Electronics - SEMCo

Finally, in September we also announced the signing of a Memorandum of Understanding (MOU) with Samsung Electro-Mechanics Corporation (SEMCo) to facilitate joint development of face and eye tracking technology for the consumer electronics industry.  SEMCo is a multinational electronic component company and is one of the flagship subsidiaries of the Samsung Group.

Under the program, SEMCo and Seeing Machines will each appoint dedicated engineering teams to a collaborative R&D program, and assign business development resources to support key markets.  Initial efforts are focused on progressing SEMCo's existing R&D project pipeline, and working towards a joint development agreement. 

While the Company expects revenues from the consumer electronics market will take longer to develop than the automotive or rail markets, given the very large size of the global consumer electronics market, the Company believes our alliance with SEMCo has the potential to generate significant value for the Company over the longer term. 

Other markets

The Company is also continuing to expand into other markets as set out in the Company's strategic plan. 

The Company is particularly excited by opportunities in the commercial road transport market (trucks and buses), with active trials underway with customers in South Africa, Europe and Australia.  For this market the Company is developing a new product, based on the DSS technology used in the mining industry, but with broader functionality and a less rugged (and lower cost) design.  The Company expects this product to be available for customers by Q2-2015 as an aftermarket product and, in the longer term, integrated into new commercial vehicles as an OEM product. 

As part of this product development the Company is assessing opportunities to integrate or acquire other technologies which would allow Seeing Machines to offer expanded sensing and reporting capabilities beyond distraction and fatigue mitigation.  Ultimately the Company intends to integrate a number of sensing technologies and capabilities into a range of after-market "ADAS" solutions for commercial vehicles, expected to be launched in 2016.

The Company is also experiencing significant interest from the aviation and simulator markets.  We expect business and investment plans for this market to be completed by March 2015. 

Investing in future growth

The Company believes there are many opportunities for its technology to be deployed in many large global markets.  Identifying and pursuing these opportunities requires a skilled and well-resourced team.  Accordingly the Company has increased its staff numbers, from 47 in June 2013 to 90 at 30 June 2014.  These additional resources enable us to maintain quality and customer service while growing quickly and entering new markets.  During this year the Company has also assembled an executive management team including leaders in engineering, R&D, human factors research, product development, sales and marketing, operations, and legal & commercial. 

In August 2014 the Company announced the formation of Seeing Machines Latin America, a strategic joint venture with Chilean company GTD Ingenieria de Sistemas (GTD). The jointly owned entity, with 12 staff members, is now being integrated into Seeing Machines' global operations.

The Company is continuing to invest in order to build the foundation for future growth.  Apart from building its own resources, the Company will continue to assess any strategic options to accelerate its product portfolio and revenue growth and create long-term shareholder value.

As part of this investment, the priorities over the next 12-18 months include: 

•     Continuing investment to develop and embed Seeing Machines' technology into new products: OEM vehicle ADAS with Takata; an aftermarket product for commercial fleets (adding in other sensors and capabilities); a new product for rail locomotives (EMD); and consumer electronics applications (SEMCo).

•     Investment in our technology and engineering capabilities: including automotive-grade driver monitoring engine, value engineering to continue to reduce product costs, next-generation technology to encompass multi camera eye gaze tracking and additional operator contextualization and "sensing" capabilities.

•     Ongoing investment in staff, resources and infrastructure to drive sales in multiple markets, through distribution partners (Caterpillar) as well as direct sales (commercial road transport).

The Board and Management look forward to updating shareholders on the Company's continued progress at the Annual General Meeting on 21 October 2014 and beyond.

Enquiries:

Seeing Machines Limited	www.seeingmachines.com
Ken Kroeger, Managing Director and CEO	[phone] [e-mail]
James Walker, Finance Director	[phone] [e-mail]
finnCap Ltd, Broker for Seeing Machines
Ed Frisby / Ben Thompson Corporate Finance	[phone]
Victoria Bates, Corporate Broking
Newgate Threadneedle, Investment Communications for Seeing Machines
Robyn McConnachie Josh Royston	Tel: [phone] Mob: [phone] [e-mail] Tel: [phone] Mob: [phone] [e-mail]

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, Toll Holdings amongst its customers.

 

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