Smart Eye Interim Report Q3 January – September 2023 - Seite 2

Quarter three continued in the same direction as the previous quarter. The high organic growth continued at 32% (25% in Q2 2023), mostly fueled by increased automotive activity. Our costs are firmly under control and we are pursuing according to our previously communicated plan. The market demand is at an all-time high for our products.

Automotive
The Automotive business area is fueled by favorable safety regulations in Europe, stipulating that every car, truck and bus sold in 2026 will have DMS. But already in 2024 it's mandatory for new type approvals. To further clarify, if a new motor vehicle is going to be launched after July 2024 it will have our type of product inside. This is true whether the vehicle is newly developed or imported. The new regulation is the root cause to why our automotive business area is growing with 83% (73% in Q2 2023) compared to the same quarter last year. The accelerating growth comes from production ramp up, especially in Korea, from production development programs with global OEMs as well as increased activity from smaller OEMs that will use the aftermarket product AIS to fulfill the upcoming regulation. The business activity is at an all time high and we expect further increase the closer we get to the legislative deadlines.

Behavioral Research
The positive momentum from last quarter continues with profitable organic growth of 17% (14% in Q2 2023). It's quite common that research organizations purchase equipment towards the end of the year so we expect the positive trend to continue into the fourth quarter. Our teams have handled the increased customer demand very well, especially in the light of the reduction in head count earlier this year. We have identified several very interesting synergies when combining the technologies of iMotions, Affectiva and Smart Eye. We are implementing these new product offerings and expect to see the results starting early next year.

Final Words
The car programs that we won in 2019 and 2020 are now starting to go into production, delayed from Covid and supply chain issues. Our forecast that we will turn profitable next year is based on three pillars. Firstly, that the profitable growth of our research unit continues. Secondly, that the OEM programs that were already won several years ago are ramping up and lastly that we continue to focus on cost control until profitability has been achieved and beyond. The recently finished third quarter is perfectly in line with this ambition. Also, we increased our financial margins with a 50 MSEK credit facility after the quarter ended. Any large deals or projects that we will win from here on will be like a cherry on top of an already delicious cake.