Seeing Machines gains global partner to boost fleet sales

Today’s announcement by Seeing Machines (AIM: SEE) that it has signed a non-exclusive global distribution partnership with telematics provider Mix Telematics is great news on a number of levels.

Firstly, it provides a ringing endorsement of SEE’s Fleet technology, designed to drastically reduce accidents due to driver fatigue and distraction. Moreover, as a major player in the global fleet industry, with 578,000 subscribers across 120 countries MiX Telematics will enable SEE to leverage its global distribution and installation network.

As Lorne Daniels, analyst at house broker FinnCap notes: “Fatigue and distraction is a huge and growing issue for both private drivers and fleets, particularly with the growing mobile functionality and dependency. Telematics is vital for modern fleet management. Yet installing and subscribing for a number of different in-cab systems is difficult for fleet managers. Combining telematics and driver monitoring solutions in one device and from one supplier clearly makes sense, reducing cost and complexity.”

It should be a win for customers of both customers and Lorne confidently states: “…we expect a substantial increase in Guardian sales volumes over the next few years.”

I’m therefore very optimistic that within the next 6-12 months we should see substantial upward revision of sales estimates for Fleet.

Exclusive interview

Today, in an exclusive interview with Paul Angelatos, Chief Operating Officer at Seeing Machines, I put a few questions to him regarding this latest development. I’ve provided the full text in Q&A format below:

Chris Menon:  Given the amount of injuries and deaths caused by driver fatigue and distraction in trucks/lorries etc, how great an impact do you think the combined offering will have in reducing accidents among your customers?

Paul Angelatos: We have shown (peer reviewed paper written by Prof Mike Lenne and presented at this years ITS Conference in Melbourne) that when our Guardian solution is implemented, coupled with real time monitoring, we can reduce the occurrence of fatigue events and distraction by up to 91%.  When we integrate with MiX telematics, who are industry leaders in fleet safety in their own right, we will also have a greater understanding of what is occurring in front of the vehicle, how the vehicle is being driven (based on data MiX take from the vehicle), and then provide detailed analysis of a whole range of factors, including the driver’s state, in a single report.  This is a powerful tool for fleet operators who are focussed on safety.

Chris: What are the projected sales of the new offering over the next 1-2 years?

Paul: That is difficult to put a figure on this. What both companies know is that we are independently increasing our sales each year and both companies have identified demand for the other parties services with current and prospective customers. We already have overlapping customers that present opportunities for integration and we have a product that is complementary (rather than competing with each other). Even small percentages of the addressable market (both companies existing sales pipelines) will lead to solid returns.

Chris: Is it an exclusive global agreement across the world or is it restricted to certain territories?

Paul: It is a Global non-exclusive agreement. This is the first stage in our relationship and it is important for both companies to pursue opportunities as they see fit. As we progress and demonstrate our relative value to each other, the relationship may take a different shape.

Chris: Have you committed to a minimum order immediately?

Paul: There is no minimum commitment from either party.  This is an agreement that has been a long time in the making. We have developed a strong degree of trust with each other and are comfortable that our cultures a well aligned and we share the same motivation. An arbitrary minimum commitment from either party wasn’t deemed necessary.

Chris: What will be the approximate cost of the combined product in terms of upfront purchase and then monthly fees?

Paul: We will shortly be undertaking some joint marketing with MiX. We will save the release of our pricing for that occasion.  Needless to say, our customers will receive greater value by installing our combined integrated offering than they would by taking the two solutions independently.

The writer holds stock in Seeing Machines.

Sensible shift in strategy

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Following the news this week that Seeing Machines (AIM: SEE) is to raise £17m to fund the development of Fovio, its auto-focused division, I wanted to give my immediate reaction.

I view this as a positive development as my fear that SEE itself might risk losing control over its IP in spinning out the division with external funding appears to have been well founded.

If you want chapter and verse on this I’d recommend you read an excellent note published this week by Lorne Daniels, the analyst at SEE’s house broker FinnCap.

To be honest, though, the timing took me slightly by surprise: I’d half expected such a move in October when the finals were announced but had been reassured that funding was in place until June 2017.

Why raise now?

So why are they raising now and not at the end of the first quarter of 2017, given that SEE had sufficient cash till June 2017? Well, my guess is that funding concerns may have been holding up negotiations on some contracts.

That SEE is in negotiation for some big deals appears to have been confirmed in Lorne Daniels’ note this week, in which he wrote: “…fleet sales of Guardian v.1 have been sluggish but are set to be boosted by several large deals under negotiation”.

Certainly, the local Dubai media have quoted officials in Dubai appearing to confirm that SEE has won 2 separate tenders to supply its Fleet technology in both taxis and buses. However, SEE has not been officially named and so I’m guessing the contracts are still to be signed.

It’s also possible that other successful trials and negotiations (in auto/trains and aerospace) will move more swiftly as a results of this fundraise. Let’s hope so.

The timing of this raise could also prove to be very fortunate if stock markets do plummet by the end of the first quarter of 2017.

Despite the ‘Trump reflation’ effect that has boosted stock markets, which expect a huge US$1trillion stimulus and tax cuts, I’ve a strong feeling it will end in tears by the end of the first quarter of 2017.

This is because, as Jim Rickards has pointed out, the stimulus effect will be far less than the market expects (due to Republican opposition), while the Fed appears to be likely to further tighten monetary policy with another rate rise in March 2017.

When the market realises this, you can expect a fall, possibly even a crash. Raising money then will be much harder.

Now that SEE’s immediate funding concerns have been put to bed, I’m confident positive news flow will move this much higher over the next few months. According to Lorne Daniels SEE should now be funded to profitability.

However, if CAT and Fleet sales disappoint next year, it is conceivable that SEE might need to raise more funds. Hopefully, that won’t happen: as any such raise would then give rise to fears of a share consolidation, which rarely ends well for private investors.

I’ll certainly be keeping a keen eye on the news flow over the next 3-6 months.

Of course, this is a personal view and shouldn’t be taken as financial advice.

The writer holds stock in Seeing Machines.