Seeing Machines Limited (SEE), a leader in computer vision technologies, utilized its H1 2024 investor presentation to discuss its latest results and future prospects. CEO Paul McGlone shared the company's significant milestones, including the start of production for a major $82 million cabin monitoring program.
With over 1.5 million cars equipped with its technology and a total awarded value of $366 million, Seeing Machines is poised for substantial growth. McGlone emphasized the expected 100% year-on-year growth in royalties, driven by hands-free driving features and upcoming European regulations mandating Driver Monitoring Systems (DMS). The company also showcased its strong aftermarket business performance, highlighted by a low churn rate and consistent growth in connections.
Key Takeaways
- Seeing Machines has begun production on its largest project to date, an $82 million cabin monitoring program, with royalties expected to flow from this quarter.
- The company's technology is currently used in over 1.5 million vehicles, with a total awarded value of contracts at $366 million.
- Regulations such as Euro NCAP and GSR are anticipated to increase the adoption of Seeing Machines' software in Europe, with a camera required for DMS from 2025.
- A 100% compound annual growth rate in royalties is forecasted, signaling robust year-on-year growth.
- The aftermarket business, including the Guardian product, continues to show consistent growth with a low churn rate of less than 2%.
- The cash position is strong at over $22 million, with a reduction in cash burn rate expected in H2 FY'24.
Company Outlook
- The company forecasts a 100% compound annual growth rate in automotive royalties, a primary driver of profit and cash.
- A continuous reduction in monthly cash burn is projected, aiming for a cash flow break-even run rate in FY’25.
- Seeing Machines is confident in meeting the expectations set for the second half of the year and beyond.
Bearish Highlights
- Despite a stable financial position, the company reported a free cash outflow of just under $14 million for the period.
- Questions about the share price were raised, suggesting it does not reflect the company's current value.
Bullish Highlights
- The Generation 3 product launch and potential growth in the enterprise market are anticipated to drive further expansion.
- Significant revenue increase in the aviation sector due to the start of work for the Collins contract.
- One-third of automotive royalties are backed by volume guarantees, providing confidence in future bookings.
Misses
- The company addressed criticism about missing targets but maintained that they are on track with their plans.
Q&A Highlights
- Management discussed the possibility of moving to NASDAQ in the future but confirmed no immediate plans.
- The technical sales process and two-stage sales plan for the aftermarket segment were explained.
- Progress with Collins and other training simulator manufacturers was updated, with ongoing programs and RFQs in progress.
- The relationship with Qualcomm (NASDAQ:QCOM) was clarified amidst discussions of market competition and missed targets.
Seeing Machines Limited remains focused on delivering its programs and increasing sales, with the CEO expressing confidence in the company's trajectory. The introduction of their largest program, interior sensing, is expected to make a significant contribution to quarterly numbers. With a strategic vision and a strong product lineup, Seeing Machines is well-positioned to capitalize on the growing demand for advanced driver-assistance systems and the regulatory environment that supports it.
Full transcript - None (SEEMF) Q1 2024:
Operator: Good morning and welcome to the Seeing Machines Limited Investor Presentation. Throughout this recorded meeting, investors will be in listen-only mode. Questions are encouraged. It can be submitted anytime via the Q&A tab situated in the right hand corner of your screen. Simply type in your question and press send. Due to the number of attendees joining today, the company may not be in a position to answer every question received during the meeting itself. However, the company can review all questions submitted today and publish responses where appropriate to do so. Before we begin, we'd like to submit the following poll. I'd now like to hand you over to Paul McGlone, CEO. Good morning, sir.
Paul McGlone: Thank you very much, and good morning everybody. So welcome to our presentation on our H1 2024 results. Martin and I will take you through the content of today, referencing back to the RNS that was put out just a little while ago, and let's kick off. So, what are the highlights? Well, I think an important highlight for us is what's going on with our KPIs, in particular for royalties. And I just want to make the point that our largest win-to-date, which was U.S.$82 million for cabin monitoring, including DMS and OMS, has now gone live. So we are at the start of production for that program, and it is the first start of production program for the combined DMS, OMS feature set in the market. What I think the market is generally referring to is interior sensing these days. So we're really pleased with that. It's been a very technical program. Of course, we're using a single camera from the mirror location. So a very unique and game-changing program of work, which we’ll now start to see royalties flow from this quarter. In addition to that, more than 1.5 million cars on road. We continue to produce our KPIs each quarter in order to give all shareholders as much visibility as possible into how we're tracking. We have a total awarded value of U.S.$366 million. And we'll talk in a minute about how we see that rolling out over the next few years, and with our fleet or aftermarket business, approximately 57,000 Guardian connections as at the end of calendar year or the end of H1, and that continues to grow. Through I’d take a minute to just talk about the behavior that we're seeing in the OEM landscape, and we've had quite a number of queries and questions around royalties, growth rates, why was one quarter up and not down or down and not up? The reality is there are many moving parts in this environment. Now in the RNS, we've put a considerable detail that should explain all of the moving parts and what the OEMs are doing to move forward, to meet the initial year OEM cap requirements of July 24 and how they are achieving that, but I'm just going to summarize it here this morning. Now, the first point is the majority of royalties that we derive to-date are driven by hands-free driving features, the likes of BlueCruise, for example. I think everyone is well aware of that. But it is today the primary driver of the take rate of DMS software. Now for Europe, GSR is in force from July this year, and that's a focus on drowsiness, and this is an important point. So for that, there is a direct camera-based or in fact, indirect steering wheel-based capability for cars, vans, trucks, etcetera. So there are options in European GSR to achieve the requirements without being 100% required to have a camera. Now, GSR continues to develop and extend, and it extends to distraction in FY’26. Now, for this, a camera is required. So DMS through a camera on all new vehicles sold in Europe. So that's a step change in the requirements that takes some of the variability out of the take rate, so that's an important consideration. Then when we consider what's going on with NCAP, Euro NCAP in particular, there's a similar scenario. So the OEMs that have taken up DMS and for that matter OMS up until now have essentially been the early adopters, and many of those vehicles that have gone into production, the OEMs are actually managing the different technology that's running in these vehicles to minimize their overall cost, and they can do that under the current rules and requirements for Euro NCAP. So they can be allocated at points for certain features and capabilities within the ADAS domain and also for certain features and capabilities within the indirect DMS domain, as well as the domain that we provide, which is camera-based. So leading right up until the launch date for Euro NCAP this year, there is variability in what OEMs are shipping, and the two primary reasons for that are their choices around how they can deliver the points and of course Level 2, Level 3 hands free driving. So that's a really important point for me to get across. But GSR and NCAP from 2025 and GSR from 2026 will require a camera, and at that point we'll be able to see with much more certainty, not just take rates for certain vehicles or decisions made in OEMs for what percentage of minimum feature versus all features they take, but it will essentially be a standard, and that's a really important consideration. Now, on the U.S. front, there is significant progress with NHTSA. So, they are working specifically on distraction, but also impairment, and of course now drowsiness, and we've been quite central to the regulators position in the U.S. as we were in Europe. So we're quite pleased with how that's rolling out. It's obviously important to the long run of our business that there are regulations that kind of support the preferably mandate protect as they do Europe, and we think this will happen. So, let's just take a look at the numbers for a minute. And we've gone through this slide several times before, but I think it's important to reflect on it once again. So the green line is really the forecast from external parties on the production volumes by year for DMS Systems. Essentially, the take up rate for DMS in production as opposed to awarded, which is a significant distinction. Then as you look at the bar charts, the dark blue line represents the starter production volumes for the $366 million that we've been awarded already. The next bar, which is the light blue, that represents the current RFQs that are visible to us and our expected win rate, and then the black line is the balance of the RFQs which we expect to be awarded, driven essentially by the regulations worldwide. Now, what that means is, despite a change in what would appear to be a change in the direction of royalties for the last quarter, which we think is an anomaly, but what that means is that we're still growing at 100% per annum for our production volumes or royalties year-on-year and this is a major driver of profit and cash flow for the business. We see no change to that number at all. Euro OEM and GSR, we've mentioned already, are the key drivers to increasing the fitment rate. So as we see more OEMs come onboard, more starter production occurring, it'll move from a variable fitment or fitment from driven by customer choice, to a required fitment rate for 100%. So those are the two factors that will impact the business going forward. We still have a significant pipeline and it's fair to say that that pipeline continues to change as we've moved towards the June ‘24 milestone date, that we all thought would be the real trigger for everything going forward. A lot of OEMs have really pressed the pause button, taking stock on what to do. Do they implement DMS and OMS through central compute, standalone compute, what's the best location of the camera? Now, with the introduction of the mirror, that's caused a lot of questions to be asked and a lot of challenges to be put out there with regard to other camera placement. There's a very significant cost performance trade-off, and the engineering complexity of moving whole programs or whole portfolios of vehicles more quickly has for the last six to nine months been reconsidered and reconsidered again. Now, we are seeing that the OEMs are planning more certainty around RFQ dates and are beginning to make decisions; engineering and technical decisions that will ultimately flow into awards. So that's an important factor that I've also mentioned before, but we outlined in some detail in the RNS, and we still expect for our market share to remain as previously stated at around 40%. And I think if you look at the comp on royalties with the rest of the market, we'd be materially above that. If you look at the comp on wins or awards, however they're calculated, you could argue that it's less. But if you look at both of those metrics together, we remain confident in that market share number. So, let's just talk about the KPIs for a minute. And on the left-hand side, we present this number of cars on road, which is really just the accumulation of the vehicles that have taken up our software. We think that's an interesting number. We're very happy to supply it. In fact, I think it's an absolute requirement that we do so. We also provide the quarterly production volumes. Now, as we saw last quarter, there was a reduction in the growth rate. And to be frank, there was a lot of questions asked, is this the end of growth? What's the problem? Are you not implementing the start of production programs that you said you would? The answer to all of those questions is no. All of the programs that we have in production are producing. And look, the reality is there is some volatility in the early stages of production ramp up. We expect that volatility to be averaged out as more programs start production. But I'll just draw your attention to the other bar chart. And if we look in the FY’24 period Q2, and if you look at the top of the bar, what you'll see is OEM four, which has been in production for some time, has been relatively consistent for several quarters. But in Q2, we did see a significant reduction. Now we're investigating that reduction. There could be a whole host of reasons for that. It could be sales related, it could be stock related, it could be parts related, or it could be a mistake. So we're well underway in an investigation with our customers on that particular issue, but we don't see it as being a long-term. So, we're not calling out a change in the trend here is the important part of this slide. At the moment and going forward, we expect royalties will remain the largest proportion of automotive revenue, and that proportion will continue to grow quarter-on-quarter, year-on-year. And as I've said before, it is the primary driver of profit and cash flow. Just turning to Guardian now and the annual recurring revenue, which is the important metric for this business. Again, we can see the connections in the black bar, quarter-on-quarter, stable, consistent growth. And then we tend to track those units that have been sold, but not yet connected, which is just the time lag between selling and installing largely through our distribution network. But, so we're relatively pleased with that number. We're coming to kind of end of life, perhaps another 12 months to go on our generation two product and we've spoken about Gen 3 and I'll cover some more detail on that in a minute and expand on what we put into the RMS. But we're still seeing a 30% CAGR for connections over the last three years. And the annual recurring increase 9% from the year prior, and we expect that to continue. And the other factor that we've constantly talked about here is the very low level of churn, it is still less than 2%. It's remained low since inception. And that gives us great confidence that not only will we see growth through the general demand and the regulatory support for this product, but churn has a very positive impact on our profitability in the long run. So, I'll hand over to Martin now, who will take us through the financials. Martin.
Martin Ive: Thanks. Paul. And good morning everybody. I'll start off by going through a view of the balance sheet and the cash-flow, what that looked like during the first half and what we can expect in the second half. So, the cash position at the end of December was just over $22 million. That was down from just over $36 million at the end of June, so a free cash outflow for the period of just under $14 million. That was helped by an unwind of working capital in the first half of just over $12 million. And just to kind of give a reminder of this, that we had a buildup of inventory and of receivables at the end of June, which was largely due to the timing of aftermarket hardware deliveries to us from our manufacturer. And a significant portion, I think we talked about $15 million to $20 million of unwind happening in FY’24. So $12 million of that has occurred during the first half. And we expect to see another $5 million to $6 million flow through into the second half. Now, if you take the, what I call the gross cash burn. So adding back that working capital unwind, we had a monthly cash burn rate of around $4 million for the half. Now, what we'd be expecting as we go through into the second half is for that cash burn to reduce with the expectation that by the time we get to Q4 of FY’24, we'll have a cash burn rate of less than a $1 million a month. Now we have around $6 million of annualized savings from external providers. And that's in place as at the end of December. So approximately $3 million of cost savings flowing through into the second half, and we've talked about how we've been able to ramp up our development organization by using external contractors and other external organizations where we can increase or decrease capacity depending on our resource requirements. So we've been able to reduce some of those ongoing costs for the second half. We also have a number of other opportunities of cost savings throughout the second half, which will help improve the cash burn. Some of those are also going to be with external providers, but also a number of opportunities that we have within the organization that we'll be following through over the next few months. We also have a standard weighting or a trend that we've seen over the last few years of around 40% of revenue in the first half and 60% in the second half. We'd expect to see something similar in the second half of this year, which will provide an increase in the gross profit flowing through into cash. Some of that will be a benefit of sales mix changes as we see royalties increase, particularly with the large German OEM coming online earlier this month. So that will help in terms of gross profit. And then we also have the Gen 3 product for aftermarket, which has a much higher margin than the current Gen 2 products. So, we're expecting to see a benefit not only from reduced costs, also improved gross profit, and also the unwind of, continued unwind of working capital. So, that'll leave us with a good foundation for a cash-flow break-even run rate in FY’25. We also have a number of other revenue opportunities that we're looking into, and also some receivables funding to be in place before the end of June. And the expectation is from a cash position that we'll be in mid-teens by the time we get to the end of FY’24. And like I say, with a good foundation for getting to a cash-flow break-even run rate in FY’25. Moving on just to run through the financial performance, particularly on the revenue side through the organization. The details of the auto royalties, Paul has already talked to, and there's a significant amount of detail in the RNS. Overall royalties in the organization increased year-on-year 43%. We did have a reduction in license revenue, and that's largely from the Magna contracts with a reduction compared to the H1 of last year, around $4 million. And one of the impacts of that reduction in license fees is a reduction in gross profit margin due to the mixed change with the reduction in license fees. But we also incurred some lower margin on services, which was mostly related to NRE for the aftermarket business and also for the automotive business. Going on to aftermarket, the revenue for aftermarket increased 38% compared to the first half of last financial year to $14.3 million, and we had over 6,000 Guardian units sold. Included within that was around 1,200 units which were upgraded. And this is something that we continue, or we expect to continue as we go through the second half to continue to support growth in the aftermarket market revenue stream. This is because of the phase out of the 3G networks across Australia and New Zealand, and some of the older versions of the product don't support 4G and 5G. Annual recurring revenue increased 9% from June and 22% over the last 12 months, up to $14.5 million. And that was consistent with the increase in the number of connected units, which is now just short of 57,000. One thing to note here is that ARR includes monitoring revenue that's included in the services line in the P&L, but then also the monitoring royalties that we get through our Caterpillar (NYSE:CAT) arrangement. So, it's split between royalties and monitoring services in the P&L. Going on to automotive. The automotive royalties increased 35% compared to H1 of last year, albeit slightly lower than H2 of FY’23. However, as we've said, the large German OEM goes into production, or went into production earlier this month, and so we're likely to see an increase in both volumes and revenue as we go through the rest of the second half. And then onto aviation. A significant increase in revenue here, and this is largely because of the start of the work for the Collins contract, which is NRE revenue, is now being recognized, and we're on track to complete the first milestone product for them in May of 2024, which is a Blue Label product, and we'll go then into the production of a Red Label product through FY’25. Moving on, review of the OpEx investment. So, we've got continued investment for auto, which is largely due to the start of the various projects that we've had in FY’24, including in the second half. Given that we have the flexible arrangements, we're likely to see some reduction in resource requirements. As, I've said previously, we've got around $6 million of annualized savings that we've already made, which will flow through into the second half, and there'll be further savings there as we get to the end of other development projects throughout the second half. We've also been incurring development costs for the Gen 3 products. Again, the resources required for that is likely to reduce as we go through the second half, which will provide benefit mostly flowing through into FY’25. But some external capacity there has already been reduced as well. The increase in operations costs is largely, as we talked about in the full year results, about building scalable infrastructure, and this supports both the aftermarket business from the perspective of monitoring and support, but also for the development methodologies that we have. So, using large-scale data and including a lot of machine learning operations in the cloud. So that infrastructure is now largely being put in place, and so we don't expect to see further increases in the operations expenses, and so that will moderate as we go into the second half and will be scalable as we increase in terms of volumes and production. But overall, we expect that the second half costs will be less than H1, somewhere in the region of $3 million to $5 million. I'll just hand over back to Paul to go through the outlook and the Q&A.
Paul McGlone: Thanks, Martin. So, importantly, as we said in the beginning, we will continue to see a doubling of our automotive royalties, and this is obviously a very key metric for the company, if not the major metric, and it's the metric that will drive the consistent increase in profit and cash. We expect a 25% increase in our connections for Guardian, and as we look into FY’25, and we start moving our Generation 3 product from GSR to the, let's say, the enterprise market or the typical logistics market that we serve, we do think that there's upside in that growth rate. The Gen 3 launch is, we're right at the doorstep of that, and our focus in the first phase is GSR. We will be moving units in this final quarter of the year, as we've stated previously, and towards the end of Q1, next financial year, we'll be looking at launching for the broader market worldwide. Aviation contribute circa 5% of revenue. Now, as Martin's just said, there are two steps in the development of this product for aviation, and step one will be complete by the end of June, and step two, the Red Label product, in the following financial year, and I'll cover off a lot of questions that we've got on aviation in a moment, but we continue to increase the pipe of RFQs in aviation. It's a big industry with long lead times and much longer production runs, and that is a feature of the sector, but we are deeply engaged with Collins, who we still believe, by any stretch, is by far the best partner for us at this stage. We expect, as Martin said, to see a continuous reduction in our monthly cash burn, both driven by an increasing margin, a reduction in absolute cost, and a continuous unwind of working capital, so we expect that to continue, and cash flow break-even run rate in ‘25. So that's the summary. What I'd like to do now is turn to the questions that were submitted prior to the session. Now, we have a very significant number, just short of 100 questions. So what I'll attempt to do here, it's obviously impossible for me to answer all of them individually. There was considerable duplication and crossover in the questions, so I've categorized them into what I think are three sort of logical buckets, and I'll just go through these now and give it my best shot at answering, hopefully, the majority of those 90-odd questions, and then, of course, the floor will be open for additional questions, assuming we have time for that. So, the three categories, typically to do with financial strength, cash, what are you doing with AIM versus NASDAQ? Quite a lot of questions around Guardian, in particular, Gen3, and then a few questions around aviation. So, I'll just go through these in turn, and what I'll do is break each of these points down in what I hope will be enough detail for the audience. But look, I'm not going to cover the cost, cash, funding, and break-even points, as I think Martin's covered those off adequately in his financial presentation, so I'll really start from there and attempt to answer the balance of the questions. The first one, share price, lots of questions on, what's going on with the share price. Why is the share price depressed? Why are other companies' share prices higher? I mean, they're really difficult questions to answer, and there isn't a single answer to them, but needless to say, yes, the share price remains challenged, and we are of the view that the share price doesn't reflect the current value, but we press on. Now, we continue to present detail on our quarterly KPIs. There's been some critique that we haven't won as much business as others in this sort of last six months, which is true. We did win a divisional $45 million U.S. worth of business. I think what's important to note here is that there is a sense of frustration externally on this, as there is internally for us, but I just want to be clear, and I've said this before, we don't sit on announcements. We announce as soon as we're able. The relationships we have with our customers are solid, and when we have information that is announceable and able to be announced, we do so, and that is our obligation, and we don't move away from that. Now, hopefully what you can see in what we announce, and in particular, if we talk about an automotive award, where we talk about minimum lifetime value, I mean, that's the language that we get presented in our purchase orders. So that's what we announce. We don't make assumptions about what it could be, what it could be if it goes longer, what it could be if we get all the models. We don't see any meaningful utility in that. But what we are presenting now is the announcement of what we get awarded, which is minimum lifetime value, and a correlation to production volumes. And I think certainly in our direct market, that's unique, but that's, we think, as transparent as we can be, and it gives all shareholders the ability to triangulate between those two numbers. And as we've said already, our largest program has started production, so we're very confident that we'll see continued strong increases. Whilst we may see volatility quarter to quarter, I'm not sure that's very important. What's important is that we are seeing the run rate annualized increases that we've called out. The other question here around our exchange. Look, there are lots of questions about, do we stay on AIM? Do we move to NASDAQ? Comments that I've made in the past, all of which in context are accurate. The point is, we look at the exchange question from time-to-time. It's not anything that drives us. And it's fair to say that we have shareholders that think we ought to just move to NASDAQ because it's better, and U.S. investors are more knowledgeable on the sector and have deeper pockets, and there are others that are very clear that that would be a mistake, a distraction, and a costly exercise. And depending on what point of the cycle you're in, both of those could be right. Our focus today is to remain exactly where we are. We're focused on delivering our programs that drive royalties, that drive cash, and to increase sales of our aftermarket and aviation businesses that do likewise. That is our primary focus today. Now, under what conditions would we consider where we're listed? Well, the conditions could be a year or so from now, the growth rate that's spinning off lots of cash, market conditions in the U.S. that are way more favorable, a market cap potential for us that is more appropriate for U.S. listing. All of those things we look at from time to time, and we'll continue to do so. But there are no immediate plans for us to do that. So, I hope that answers the question. I think it's consistent with what I've said each time I speak on the question. And then there were several questions about incentives and goals, particularly for me around share-based awards. And there was an announcement some time ago now about my awards. And the key metrics for those, just to be clear and open about it, is 75% anchored to share price and 25% anchored to EBITDA over the next three years. The minimum share price target is 12.00p up to 20.00p, and the transfers of shares would be awarded progressively between 12.00p and 20.00p. So that accounts for the 75%. So, it's predominantly share price-based, which I think delivers strong alignment with all shareholders. And there was other questions around change of control. So on a change of control event, the board has discretion on this, but I'd expect that, depending on the price of a change of control, well then, part or all of those awards would vest. But again, totally up to the discretion of the board. Okay, so moving on to aftermarket. And I just want to explain some of the detail of Gen 3, this after-manufacture segment that we're chasing. It is different to what we traditionally do, selling into fleet companies that are already on the road. The supply chain is different, the sales process is different. There's a lot of sort of dot point questions in here about being late or delayed. I don't see that as the case. We've called out Q4 for a very long time. We do have purchase orders, we do expect them to close, and we expect them to continue well into 2025. But just to be clear, we're selling to an OEM. And at the moment, because this is new and it's driven by GSR, it's actually a much more technical sale than if we're selling our existing Generation 2 product into a transport company. So, there is a technical agreement, there's an engineering process to go through, and there's the homologation that the customer has to go through in order to be certified. And then there's, I guess, the official financial procurement that is triggered by all of those things being ticked off, all of those milestones being ticked off. So it's a very different process for selling into an existing transport company, which essentially, we sell it in, we'll look at the number of trucks in the fleet, we'll agree how many they can implement. Typically, they implement as trucks come in for maintenance, and then we'll be selling n numbers of units per month or per quarter that matches their capacity to implement. So, it's a very different process. Now, I do expect that as time goes on, of course, once these manufacturing, these bus and truck OEMs have more experience with us and frankly, others, this process will become very smooth, and it will become simply a procurement exercise as opposed to a technical engineering exercise. That's the reality of starting in this new market. We had other questions around the services part of the business, in particular, as it relates to after-manufactured customers driven by GSR. Look, we don't expect there to be 100% takeout. And in fact, we won't know until we get there, but we have a two-stage sales plan. Stage one is selling into the OEM to meet the requirements. And stage two is working with the OEM to sell into the purchaser of those trucks to expand the services program. And we're also offering tiered support. So, very low cost, low touch automated alerts versus what we offer today, which is the traditional full 24/7 service. So, there's a whole range of options that we've put in place with Gen 3 in order to give new customers choices on the take rate. So, we'll know more about that as the vehicles move out of the OEM and into the transport companies. So, I think that should cover a lot of the questions on Gen 3. I will say though, on Gen 2, it is still the largest proportion of our aftermarket sales for FY’24 and will remain a significant proportion, in fact, in FY’25. We are looking to run down the stock by the end of H1’25, but we are expecting that there will be continued purchases for the 4G rollout, for example, for existing customers, for replacement stock, et cetera, et cetera. So, that's certainly not a hard close and we don't anticipate making our Gen 3 product available in the Southern Hemisphere until post H1 FY’25. So, I hope that helps with that question. There was a couple of questions about BDMS, Backup Driver Monitoring Systems, and this is, we've seen some volatility in this business. Of course, we saw a lot of the AV companies disappear, but we're seeing a lot of AV trucking companies reappear. So, we are still selling BDMS units, and in fact, the relatively modest numbers, but I'm expecting those numbers to increase over the next couple of years. I'm not calling out this as a game changer for us, but it is a significant contributor to the margin mix for fleet, and we're still in the business of selling BDMS. Some questions on competition and look, I think it's similar to auto. We do see some new competitors. We're focused on the near-end core competitors that have, to some extent, a comparable product, even if they don't have a comparable service. There are, strengths and weaknesses of each of our offers that customers will consider, price, service, connectivity, 24/7 support, etc., etc., etc. So there is an increase in the number of players, whether those players will have the technical capability and the field-based knowledge to run large volumes of network technologies, only time will tell. But we're still seeing strong engagement and strong demand for what we offer and strong pent-up demand as I've said over and over for our next generation product. The other point here is that GSR, as it is in auto, is really making this distinction between how you can get by versus having to have a camera. So by ‘26, new vehicles in Europe, sold in Europe, need a camera-based system, but until then, they can get by with other systems, and typically that system is doing well. And we know that it's inferior. All the science tells us that. It's a very practical solution to a timing problem, and some organizations have gone down that path and went down that path some time ago. But by 2026 that won't work for them. So our product I think is well set for the ever-increasing requirements across the board, whether that be in capital or GSR. So, just over to aviation. So, we are progressing with Collins. There's no issue with that at all. We're working on the first phase of our proof-of-concept product as we've outlined, second phase next financial year. Lots of questions around the other fields of use, in particular simulation and training. And look, the Collins Agreement that we have includes the field of use for simulation and training. However, there are several programs that we're continuing to run with other manufacturers of training simulators, and this is simulation systems going into Collins, Emirates and others. And Collins has full visibility into this and is supportive of it. They do have first right of refusal, but those programs are continuing. So we haven't reported anything meaningful for a while here, but there are numerous programs underway and RFQs in progress. And look, I'd like to be able to give a specific date on when they will fall, but clearly that's really difficult for us, given that's one of the major disappointments that most investors talk about. I mean you’d say something's coming in the next quarter or the next half and it doesn't come, and it doesn't come because the customer hasn't made a decision typically. But that's just a reality of where we are in the life cycle and it's difficult to manage. But it is progressing in each of the areas that we've previously talked about and we're quite pleased with that. So just some points in general now, and there are lots of sort of random questions, but I've tried to categories them into three areas. Firstly, there were a fair number of quite critical questions that talk about us missing targets or failing or not performing and I'm happy to take that on. I wouldn't see it that way. I mean, for the last few years, we've been on consensus. We've delivered exactly what we said we would from a financial point of view. I get the fact that there's disappointment that RFQs haven't fallen more frequently and when they have with others. I get the fact that last quarter we saw a dip in royalties instead of an increase, but I think if you stand back from that and look at the numbers, which is the scorecard of the game that we're playing, we certainly as a management feel like we're on track rather than continuing to miss targets. I think from my perspective, that's not the case. Clearly, there's an expectation gap between winning business or the expectation of this winning business and the actual reality of this winning business. But I think for me, as I've said, if we combine the book, the win rate and the KPIs, that gives solid insight into how we're performing in aggregate, rather than just talking about wins that are years down the track. There's also a number of questions around Qualcomm. Now, are we offering their stack? What's going on? Well, we did present again, integrated in their right platform at CES, so we are still working with them. They are not selling out DMS. As I've said several times before, they are selling the digital cockpit. Now, where their sales process intersects with an RFQ, so we're responding to an RFQ, it's running the digital cockpit and the Snapdragon chip. That's when we come together and that makes the sale easier, and we've announced one of those wins already. So the relationship continues. We continue to present with them, and I expect that it will continue, but this is a long game as opposed to a short burst. And finally, I made mention of a certain proportion of our automotive royalties having a guarantee, a volume guarantee, and it's very clear that that statement was misunderstood. So let me try and clear it up. So we won $366 million worth of awards so far. And as we have said many times, what we quote is the initial minimum volume. We don't imagine what it could be, guess what it could be, say what it is, if it's all models, we just say what we've been awarded. Now, of that number, $366 million, in addition to what the market would say or what we have said in terms of initial minimum volume, we have roughly one-third that is guaranteed and that is time and volume. So effectively, it's a take or pay agreement for a significant proportion of our total volume. So this doesn't call into question what we've said about the $366 million. That is exactly what it is, initial minimum volume as quoted by the OEM. What we have in addition to that is that 30% of the volume today is effectively take or pay, and that's very unique in this industry, and it gives a level of confidence over a proportion of our bookings around not just the volume, but the timing of the volume. And what I was trying to say in that statement is that this is really positive. It's essentially an insurance policy over a third of our awarded business, and I don't think it's anything that anyone else has been able to negotiate. So it's not a negative, it's a positive. It doesn't call into question what we've previously announced, but in addition to what we've announced, we have a guarantee for a third of the book. That hopefully summarizes the majority of the questions that were pre-sent.
Operator: Fantastic Paul, I think you have covered off those questions from investors and thank you very much indeed for that. And of course, just to remind the attendees, the company can review all questions submitted today and we publish responses on the Investor Meet company platform. Just before redirecting investors to provide you with their feedback, which I know is particularly important to the company, Paul, could I just ask you maybe for a few closing comments?
Paul McGlone: Thank you. Really, I think the key point is we're of the view that we've performed in the first half, we've called out in our experience is that we are typically weighted 40/60 to the second half. We are expecting no change to that weighing this year. So we feel good about our current position and we think we're on track. Importantly, rather than just talking about interior sensing and what might be and what we could win or even what we have won, we have our largest program, which is interior sensing, the combination of DMS and OMS through a single camera in a mirror location going live now. So we'll see that reflected in our quarterly numbers from here on, so that's a very important milestone for us. We will see 100% CAGR in automotive royalties, and that is the primary driver of profit and cash, as I've said before. And we are continuing to manage our cost base with the expanding gross margin, not just in auto, but in aftermarket as well, and that gives us the confidence here as management that we're going to meet the expectations that we've previously laid out. So that's how I'd like to end it. Thank you.
Operator: Fantastic. Thank you very much indeed. Paul, Martin, thank you for updating investors today. Could I please ask investors not to close the session? You should be automatically redirected to provide your feedback in order the team can better understand your views and expectations. This will only take a few moments to complete and is greatly valued by the company. On behalf of the management team of Seeing Machines Limited, we'd like to thank you for attending today's presentation.
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