It’s clear from the latest spate of redundancies that Seeing Machines management is laser focused on achieving breakeven this calendar year.

In addition to cutting staff numbers by 77 in CY2024, the recently announced strategic reorganisation was accompanied by another wave of redundancies (70 people?) from Jan-March 2025, that is set to further cut costs, by £12m annualised. 

According to a note issued on 27th March by analyst Peter McNally at house broker Stifel: “The $12m annual cost reduction means there should be a clear path to monthly cash flow breakeven in 9 months time.”

I’m naturally sad that so much talent at Seeing Machines is being let go and am well aware that the delayed development of Guardian Gen 3 played a large part in slowing the company’s progress to cashflow breakeven. Hopefully, these talented folks will find good jobs elsewhere and may even return to Seeing Machines as the business grows.

Still, as an investor it’s my job to assess if the reason for originally investing in Seeing Machines is still valid. I’m still convinced it is and reading Peter McNally perceptive analysis is reassuring. He explains: “Seeing Machines results show the company is adapting to a more challenging environment by adjusting its internal costs with the goal of reaching cash flow breakeven in the current calendar year.”

That doesn’t mean I don’t have questions and I hope to get answers to some of those questions at this week’s investor event – the so called ‘Town Hall’. (I can’t think of a Town Hall meeting without a bit of argy bargy — but let’s try and keep it civilised).

Whatever management mistakes delayed bringing Guardian Gen 3 to market it has developed and commercialised world class technology in multiple industries, making some super deals with partners ranging from Collins Aerospace to Mitsubishi and Magna. As someone who knows I could never run a company, I do respect those who possess that ability. Let’s not forget that Seeing Machines is actually saving lives. Not many of us can say that. 

Scandalous

If I’m angry and disappointed, it’s with the car and lorry manufacturers who have delayed implementation of life saving driver monitoring tech in order to save a few dollars. A few dollars that could have been shaved off the bill of materials somewhere less critical. That’s scandalous.

However, even that delay can only be temporary thanks to Euro NCAP’s sterling work and GSR2 regulations. All those OEMs are really doing is damaging their own reputations for safety alongside sales.

Guardian Gen 3

The good news is that in his note McNally confirmed that Guardian Gen 3 is now totally ready, in production and shipping now for various trials, which should lead to much larger orders in due course. 

“The biggest news in today’s results to us is that the Gen 3 Aftermarket product is ready, tested and now in production with early shipments commenced. This is not just the GSR-ready version of Gen 3, but the full Gen 2 replacement equipped to handle over the air updates in a better form factor. This is one of the main factors in revenue and profitability growth going forward, in our view. It should also improve recurring revenue from Driver Monitoring as units go live in the field.”

I obviously want more details on maximum monthly production volumes, prices and so forth. Yet, McNally is right when he describes Guardian Gen 3 as “a significant swing factor in future revenue and profitability, especially with the Mitsubishi partnership referral agreement in place”. 

Moreover, If the Mitsubishi partnership referral agreement delivers the volume of sales of Gen 3 that I expect, breakeven in 9 months may prove overly conservative. 

The main issue I have is separate to that, and relates to the truck manufacturers installing factory fit DMS for ADDW. The EU GSR legislation absolutely demands it. Yet, so far, there is little evidence of the likes of Volvo, DAF, Mercedes-Benz etc installing it. Only in buses have I seen much evidence. I’d certainly like to know if trucking OEMs are dragging their feet on that for the same reason some auto OEMs have.

Fortunately, large enterprise customers appear to be complying and those 7 “big trials” for Guardian Gen 3 that Paul McGlone recently confirmed are clear evidence of that. A win with Amazon would be huge news that could double the share price of Seeing Machines in a day. (I’m hoping we get official confirmation by the end of April). 

Breakeven

Let me be clear. Achieving cashflow breakeven will be a game changer for Seeing Machines. I know, from previous conversations with fund managers and recent ones with City contacts, that there is a tsunami of fund manager cash keen to come into SEE once it has proven beyond any shadow of doubt that it is set to be profitable. I still believe Paul McGlone, Martin Ives, John Noble, Mike Lenné and the rest of the team at Seeing Machines can make that happen. 

As evidence of the appetite for investment in the company Peel Hunt has now upgraded Seeing Machines from ‘Reduce’ to ‘Buy’, because of the “upside potential” though the price target remains at 3p. (I’m also expecting Singer to soon initiate detailed coverage).

With US$39.6m in cash Peel Hunt believes SEE has “at least 12 months of runway” and I believe that is more than sufficient time for it to become profitable and the share price to take off. 

I look forward to seeing our guests from Australia this week along with my fellow investors – some of whom have grown older with me.

It’s been a hard few months for SEE and for its investors. Still, I hope the smiles will be back on our faces very soon. 

The writer holds stock in Seeing Machines.