SEEMF - Seeing Machines Limited (SEEMF) Q4 2023 Earnings Call Transcript
2023-10-16 15:29:06 ET
Seeing Machines Limited (SEEMF)
Q4 2023 Earnings Conference Call
October 16, 2023 05:15 AM ET
Company Participants
Paul McGlone - CEO
Martin Ive - CFO
Conference Call Participants
Presentation
Operator
Results Presentation. Throughout this recorded presentation, investors will be in listen-only mode. Questions are encouraged. You can be submitted anytime via the Q&A tab situated in the right hand corner of your screen. Just click Q&A scroll to the bottom, type your question and press send. Due to the number of attendees on today's meeting, the company won't be in a position to answer every question received during the meeting itself. The company will review all questions submitted today and publish responses where it's 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, Martin Ive, CFO. Good morning.
Paul McGlone
Good morning. Thank you. Well, this morning, Martin and I will take you through the results for FY ‘23, which I know everybody's seen already, but we'll give another layer of detail, which I'm sure will be helpful in understanding exactly what's going on, what we're focused on, and importantly, today we're going to give some insight into how our business will develop between now and financial year 2026. As you would all know, it will be the first time that we've presented a bit of an outlook, and we think now is the right time to do that.
But getting on, what is going on in our business that really has the potential to move the bar? Well, I've spoken before about the change in revenue, the change in mix that's driving higher margins. This is essentially the quarter-on-quarter increase in automotive royalties as cars start to hit the road. They come out of their engineering project environment and into the real world and that drives high margin royalties and we will continue to see significant quarter-on quarter-growth in those Royalties streams for business already won right through towards the end of FY ’27 and, of course, they will continue beyond that date.
Our fleet product has really improved over the course of the last two years, despite the supply constraints that we've had. They're largely sorted now, so we're not too worried about that. We're at well over 50,000 connected units, which deliver a really important cash flow into the business. The monthly recurring revenue is very, very stable, as a churn rate, as I've said before of less than 2% and we continue to grow at 30%, so for 30%.
Now, in Europe, GSR is causing all vehicles to require systems that can detect fatigue and distraction. And this has opened up a new market for us and it's a new market that's very significant. And still, there are very few competitors that can tick the technical boxes. Perhaps more so in the short term, but over the long term the requirements of GSR continue to increase as they do with Euro NCAP. So the launch of our Generation 3 product is a very, very important milestone in the history of the company. We expect it will deliver significant growth and expanding margins just as our automotive business is starting to do over the course of the last year and looking forward. So that's a really important new initiative for us.
We're expecting to have our kick-off launch at CES and we're expecting to move into an environment fully tested where we can get into higher volume production in the March to April timeline. What is interesting about this product and the first target market that we're going after, which is European GSR, and we're already starting to see purchase orders flow in for a product that will be delivered, say, six months from now.
Now, this is a really important difference between operating fleets, which has been our core business up to now and dealing with truck and bus OEMs. So they're taking a more structured view, looking at purchasing equipment to manage their production schedules. And it's my view that this new environment will deliver really important benefits to the way we are able to forecast, but also really important benefits in supply chain with lower working capital demands and the like. So this is a really important step for us.
In Aviation, we recently announced our relationship with Collins, and we are working very, very closely with them. You will have noticed also an announcement that we've kicked off our first program of work, which is a significant program of work developing the proof of concept, which will ultimately be marketed to all participants in the aviation value chain. So this is a really important part of that equation. The business that we announced today is in addition to the license values that we reported a couple of months ago. So Aviation is now well and truly on its way with Collins. We're delighted to have them as a partner.
The other area that I wanted to call out, and you might imagine that we, given the increase in scale that we've experienced over the last two years, that this would continue. And that is we're focusing on really the digital enablement of our business processes. If we're going to move our fleet business from what was a couple of years ago, 15,000 or 20,000 to 100,000 or 200,000 over time, that's obviously a very significant upscaling. And in order to do that, we need to automate effort internally and we need to automate the way our distributors and end customers communicate and interact with us. And that program, which is what we're calling the digital factory, is well underway for initial kickoff this calendar year.
The other area that is driving material improvements in performance or productivity is that we're starting to see a world where we're getting more and more reuse out of our core engineering platform. And over the last two years, we've been heavily investing in the development of an additional 50 plus new features, that's coming to its natural conclusion. And whilst that won't be the end of feature development, because really that's what we do to gain incremental value. We do see that we are and will continue to get more reuse and platform benefit from the features and the software structures that we currently have in place, which is really important.
Moving on now to the Regulatory environment. This is a space where we have really immense pride to be frank, I mean, we were instrumental in setting up the technology that's enabled the Euro NCAP five-star rating and what's going on now today with GSR in Europe. We've continued to stay involved with NCAP, Euro NCAP, and do so to this early (ph) day. We've shifted our emphasis into the U.S. and we're working with a whole range of regulators, academic bodies, researchers on things like the specific wording to go into legislation, exploring our technology and evidencing its capability with these regulators.
We're in third-party arrangements with academic associations and regulators in the U.S. using our technology. And all this is designed to have a stronger voice in the DMS, OMS environment to help craft what the regulations and the legislation ultimately lays down as requirements. And we're really pleased that, someone like Seeing Machines from Fyshwick, Canberra, listed on AIM, can have such an influence on global regulations. But it is in fact the case. And to put that into perspective, if we consider the key players here, NHTSA, NTSB, U.S. National Distracted Driving Coalition, of which we're a party, and many others.
We've had more than 150 meetings over the last two years with key decision makers, in order to enable them with the technical know-how to make good decisions around what should come next for driver and occupant monitoring. And JT Griffin and Mike Lanay (ph) have been leading this for us in the US.. and it's something that we will continue to invest in because whilst it benefits everybody, we think being a leading voice in the design of legislation and the definition of how technology needs to perform to deliver legislation is mission critically important and will continue to do that.
So just on the market opportunity most of this is known and we've mentioned it many times but I just want to see in [indiscernible] on two numbers on this page and that is third-party automotive analysts predicting a DMS fitment rate by the end of calendar 2027, as opposed to financial, of 54 million vehicles. And I've said before, we'll repeat again today, that we're at about a 40% share by volume and probably a little higher by value, and we expect that to continue. So the addressable market for us in auto, the place where we derive the royalties that I spoke about is really strong.
The second area, and this is by no means the total adjustable market for fleet, because as everyone would know, it's predominantly for fleets that are up and running in operation, and it's well and truly a retrofit where you have to take the vehicle off the road fit and then release. This new market driven by GSR in Europe, in Europe alone there are 330,000 new commercial vehicles manufactured per year, or certainly in FY ‘23. Now that's a market that didn't really exist for us in the past, and it's new, and it's time bound. So from 2024 there are requirements on all vehicle manufacturers to embed technology like ours.
There aren't many competitors, in fact there are very, very few, and it's hard to say as we sit here what percent share we will take of this new European market, but needless to say, we're already receiving POs and that's really, really unusual. So it augurs well for what might happen towards the end of FY ‘24 and throughout FY ‘25 and beyond.
So just to auto now for a minute and I've presented these numbers before, but just on the left-hand side, we can see the increase in the vehicles on road that are using our technology, and that's having an impact on safety without a doubt, 143% increase over the last 12 months with six OEM programs. We've got roughly double that number to be rolled out over the course of the next two years. And so we expect that, that quarterly run rate chart on the right-hand side to continue to increase, as I mentioned earlier. This is a really important factor in what's driving the margin shift and ultimately the cash flow generation of our business.
So if we pull that down to, I guess, more gross annualized numbers, still in financial year rather than calendar, we can see that the line at the top, the dotted straight line, is the forecast for fitment of DMS year-by-year out to 2033. And then you can see here that the volume that we've already won, and that's of the $320 million odd of business already won, and then our expectation of volume that we will win on top of that. And then the black chart, that's what we expect to receive in terms of RFQs between now and 2033.
But just the first two bars lead you very quickly to the conclusion that as you observe this picture with the quarterly picture that we are consistently moving towards significant revenue and therefore cash margin from automotive. And Martin will analyze that a little deeper as we go further in the presentation.
So on Guardian, I mentioned this also before, and to some extent, I think this is conservative because we're really unsure of what the ultimate take-up rate and market share position will be with GSR. I mean it's not the only market that we're going for obviously we have our traditional markets. But we do expect at least a 2.5 times increase in connected units between now and 2026. So that starts to become quite a material number in terms of the recurring cash flow, the margin expansion from both hardware, given that the Gen 3 unit has a significantly lower unit cost of development, but also increasing margin through services as we digitize service delivery. So we feel really good about our position here, and we're ready for scale.
I'll hand over to Martin now, who'll take us through what I hope will be a really interesting and exciting part of the presentation, which is our outlook and over to you, Martin.
Martin Ive
Cool. Thanks, Paul. What I'd like to do here is, just kind of talk through the impact of some of the drivers that Paul has talked about and how that impacts revenue as we go out to FY ‘26. And then the impact of that on margins and the cash flow generation of the business. So you can see here in the left-hand chart on the slide, the current breakdown of revenue in FY ‘23. So $58 million broken out across the three business units, around $31 million for aftermarket, $26 million for automotive, and just under $1 million for aviation. And traditionally aftermarket has been the main revenue driver for the business. But in the current year, we've seen a significant increase in the revenue generated by Automotive and with that higher value or higher margin revenue streams, which are impacting the gross profit of the business.
Now as we see how that moves into FY ‘26 and combined with our expectation that in the year FY ‘26 we will be generating at least $125 million of revenue. We see the Automotive business taking up around 45% to 50% of that revenue stream. And the way that I kind of think about this is to break it out a little bit more simply is Automotive with $60 million, Aftermarket with $60 million, and Aviation with $5 million to make up the $125.
Now with the Automotive business, largely that's going to be coming from the growth in royalties. And by the time we get to FY ‘26, looking at the slide to slides back, you can see from the awarded business that we'll be getting around 6.5 million to 7.5 million units from business that has already been awarded. Now that is based on the minimum lifetime volumes at the start of the agreements with the OEMs.
So there is some upside in those numbers if production is increased. We also have about 10% of the overall number putting us up to in total around 7.5 to around 8. 5 million units from RFQs that are currently in play and with the expectation that they'll be awarded at some point before the end of the calendar year. So that will generate somewhere around $55 million of royalties for the Automotive business with the extra $5 million to make up the $60 million coming from the continuation of NRE.
Now in terms of how a good way to be able to track that over the period to FY ‘26 is looking at the quarterly KPI numbers. And in order to achieve those volumes, we'll need a compounded growth rate on a quarterly basis of somewhere around 23%. And when you go back and look at the KPIs, over the last 12 months, that's roughly around what we've been able to achieve. So we need to continue with that momentum over the next 12 quarters to the end of FY ‘26 to be able to achieve those numbers.
Moving on to Aftermarket. I see the $60 million there being broken out around $30 million worth of hardware revenue and around $25 million worth of services revenue for the monitoring of the connected units. An additional $5 million there, probably split between a small amount of NRE and also the royalties that we received from Caterpillar for the sales that go into the mining verticals.
Now, this is a little bit more difficult for us to forecast what we would expect to achieve in FY ‘26, largely because of the significant opportunity that Paul talked to earlier around the GSR requirements for commercial vehicles. So with annualized production of around 330 million units, we're just expecting here conservatively somewhere around 10% market share of that new opportunity that would mean for us around 33,000 units.
On top of what we are currently doing across Asia with our Gen 2 products, which by the time we get to FY ‘26, we'll change up to the Gen 3 products, and then also expansion into North America, where we've been setting up a direct sales channel. So in total, we feel that will get us to somewhere around 45,000 units and generate around $30 million of revenue.
Another unknown at this point is of that GSR opportunity, how many of the purchase units would take up monitoring services. It is possible to meet the GSR requirements with a closed loop system within a cabin, so that there would be alerts generated, whether that be a beeping noise by the unit itself or vibration under the seat and that closed loop unit wouldn't require any monitoring services. But we're expecting a take-up, or we've modeled a take-up rate of around 50% of all sold units over the course of the three years through to FY ‘26 to get to around 110,000 to 120,000 monitored units with around $25 million of revenue.
In terms of Aviation, you would have seen the announcement that went out this morning about the development work for the first generation product. That will see us through to around the end of FY ‘24 with a second-phase of development being done through FY ‘25. So the FY ‘26 number of around 5% to 10%, so that's somewhere between $6.5 million to $13 million worth of revenue, is largely going to be coming from royalties at that point so it's the start of the royalty streams that we would be seeing from the sales of the first generation and… [Technical Difficulty]
Operator
[Operator Instructions]
Martin Ive
The second generation units, which would be.
Operator
[Operator Instructions] Ladies and gentlemen, do please bear with me if you can just click on the link and we'll get you back through. Guys, we have you back. Sorry, we lost you momentarily there. You're back. We can hear you perfectly well. Thank you very much indeed.
Martin Ive
Okay. Thank you. So now just to talk through what does this mean from a, not just from a revenue growth perspective but then also through to gross profit and we see the current split of the types of revenue that we have on the left-hand side charts in FY ‘23, which is a significant component of NRE and hardware. Now that hardware is our Gen 2 unit, which is a lower margin product than we will have with Gen 3.
And then NRE, which currently is undertaken, particularly on the auto side, at a very low margin. Now, the NRE, by the time we get to FY ‘26, becomes a much less significant part of the revenue streams. And the royalty streams, which currently are less than 20% by the time we get to FY ‘26, will be around 50% or slightly higher. Now, the benefit for gross profit in royalties is that all of the royalty revenue largely drops through to the bottom line, given that the development work that's done prior to the production starting has all been expensed or has been capitalized and then will be amortized over the life of those projects and that technology.
So the outcome of this is that in FY ’23, we have a gross profit margin of around 50%. As we go through to FY ’26, we're estimating that we would have a gross profit margin of coming up to, if not 70%, so a significant increase not just in revenue but also in the gross profit margin achieved on those revenues. Now the pathway between there and FY ’26, we'd expect in FY ‘24 to have a small increase in the gross profit margin, a more significant increase as we go into FY ‘25 and then the final step going up to 70% as we go through into FY ‘26 and we get a significant increase because of the royalty revenue streams that come through.
Now in terms of the operating costs, I'll just finish on the outlook by going through into the operating costs and the impact on cash overall. We don't expect to require a significant increase in costs in order to achieve the revenue growth and the gross profit in FY ‘26. As Paul mentioned, there's some work that has been undertaken to ensure that we have the infrastructure and the processes to be able to scale, particularly on the aftermarket side.
Most of those costs were incurred in the latter part of FY ‘23 and also in the start of FY ‘24, but we don't feel that there'll be a requirement for additional costs as we go further into FY ‘25 and ‘26, and we will start to see the benefit of the efficiencies that come from the digitization of those processes. Similarly, we don't feel that there will be a significant amount of NRE needed to be able to achieve the production royalty targets that we have for FY ‘25 and ‘26 either.
So I'd expect to see a slight increase in costs as we go into the first part of FY ‘24, and then that would start to reduce in the second half of FY ‘24 and then into FY ‘25. And we've talked about previously, how we've set up R&D resources in a flexible way, so that we could increase or decrease requirements or resources as and when the requirements change. So as we go through into ‘24, ‘25, and ‘26, we would see revenues increasing, we'd see costs stabilizing, and the impact for that on cash is that by the time we get to FY ‘26, we'll have a cash margin that would be in double-digits.
The impact in our cash burn rate as we go through FY ‘24, particularly in the second half would be that it would decrease and that we would be in a position with the growing revenue streams in FY ‘25 that will get to a point where we cash flow breakeven. And we have a cash flow breakeven run rate during FY ‘25. I'll talk a little bit more about that when we go through the next part of the FY ‘23 results.
Now, given that much of this information had already been provided in the trading update, I'll just focus on a few areas and take it as read and maybe we can go through some of the Q&A about specific items of the FY ‘23 results. But I think it's important particularly to talk about the balance sheet strength and the cash flow, particularly with respect to the supply that the working capital and the impact from the supply chain and how we see that unwinding as we go into FY ‘24.
So at the end of June, we had just over $36 million worth of cash. And largely that reduction in the cash balance was due to a build-up in working capital of around $16.5 million in the second half, around $20 million overall in the financial year, which came from the timing of when we had the Guardian Gen 2 units delivered to us for the aftermarket business. So in the 12 months prior, so the end of the final half of FY ‘22 and the first half of FY ‘23, we had supply chain shortages, which meant that we didn't have any stock to sell.
So we committed to ensuring that we had sufficient stock through the second half of FY ’23, a significant portion of that stock was delivered in the fourth quarter. We were able to meet the backlog of demand that we had that had built up over that previous six months with many of those deliveries going out towards the end of June. So what that meant is that we had a build-up in our receivables balance where we'd sold units and not yet collected the cash.
And we also had a build-up in the inventory which we had already paid for, but which meets the demand requirements that we have, largely for the first half of FY ‘24 and going into the first part of the second half. So we expect that that inventory balance would be largely unwound by the time we get to the end of the third quarter in FY ‘24. And we'll continue from that point on with a significantly reduced inventory balance of Gen 2 units.
As we go into production of Gen 3 and the sale of the Gen 3 units, it's a much more forecastable sale into the OEM market in the EU. Given that what we're doing is, we're meeting the requirements or the manufacturing schedules of those OEMs. We'll be able to plan out much more effectively what stock we're going to require from our suppliers and the production schedules that we have that aligns with and matches with the OEMs that we'll be selling to. So that will enable us to run a much tighter inventory schedule and management process and keep that working capital investment at a much lower level.
The receivables balance has started to unwind as we go into the -- or we've gone through the first quarter of FY ‘24, and that will continue to unwind as we go through to the end of the first half. Now I expect that we'll have somewhere around $15 million to $20 million of unwind from that working capital throughout the course of the year with somewhere around 70% of that being in the first half and around 30% being in the second half. And you can start to see the impact of some of that as we look at the cash balance at the end of September, just under $31 million. So we've had a $5 million reduction in cash for the first quarter.
Now, normalized burn rate, so that's taking away the impact of the working capital movements in the second half of FY ‘23 was around $3 million per month. I expect that that's going to slightly -- has slightly increased on normalized basis in the first quarter. I'd expect it to level off at around $3 million in the second quarter, and then as we go into the second half of FY ‘24, it would then start to reduce to the point where we'd be getting to an average monthly burn rate of somewhere between $1 million and $1.5 million for Q4 of FY ’24, with the expectation that we'll be, with a cash position in the high-single -- high double-digits, potentially up to $20 million, which will put us in a good position to breakeven from a cash flow run rate perspective during FY ’25 and if we meet those targets that I talked about there towards the end of FY ‘24, I would expect that to be in the first half of FY ‘25.
Now I'll leave the majority of the slides reviewing FY ‘23 performance with the exception of the automotive chart. And one thing I just want to talk about here is the impact of the license revenue from Magna. So in FY ‘23 that contributed around $10.9 million of revenue. As we go into FY ‘24, that will probably be around $3.5 million to $4 million for the year. So it's a significant reduction.
In terms of the revenue growth, if you strip out the impact of Magna in FY ‘23, I think the revenue growth from the Automotive business was around -- was 54% still, and for the Seeing Machines Company around 20%. Now as we go into FY ’24, we will probably refer to the underlying growth in the Automotive sector just so that it gives people a better idea of how we're tracking in terms of getting to those numbers in FY ‘26.
[Technical Difficulty] Paul with the FY ‘24 outlook.
Paul McGlone
Thanks, Martin. So, FY ‘24 is a very important year. We're one quarter down and we feel good about what's ahead of us, in terms of the next three quarters. What we are expecting is a doubling of the automotive production units and therefore Royalties. That's really important. We expect that to continue at that run rate out to 2027 also. But in terms of 2024, we're confident of the doubling of Royalties in that area.
We're looking at a 25% increase in connected units for Guardian, as we've said before. It's a bit unknown what GSR could deliver for us. We're making the switch between Gen 2 and Gen 3. We still have significant market for Gen 2, by the way. It's very important to our relationship with Caterpillar, at least for the next three to five years, so that will continue. And we expect to get a better handle on our ability to forecast this new market by the end of this financial year.
So as I've said, launching at CES, moving to full run rate production, March, April timeframe, processing purchase orders into sales that we've already received and will continue to receive through the course of this next six months. Aviation, really important. The announcement this morning was the first project in addition to the exclusive license arrangement that we mentioned a month or two ago.
So that's now well and truly on track to begin to deliver and contribute to the business in a meaningful way, even at a 5% to 10% contribution by FY 2026, it will be a meaningful margin contributor. The monthly cash burn will be reducing over the course of this year and throughout FY ‘25 to get us to the profitable position that Martin mentioned.
Now, what's important here is that several years ago, when we were gearing up and increasing the cost base across the board in order to deliver what we had in front of us technically. We did that in what I think is a responsible way. We used a range of different collaboration partners. We outsourced wherever we could and we continue to operate that way. Now, if we consider those methods of operation, that affords us significant flexibility going forward in terms of being able to manage the supply-demand relationship in our cost base. So we're well set to be able to capitalize on that where we need to.
And we'll just reiterate the cash run rate break even by FY’ 25. Point of inflection, I mentioned this before, we've got this crossover in revenue, two more high margin royalty revenue streams. We've got increasing margins from hardware in fleet. We've got increasing margins by a reduction in our cost to serve in fleet driven by automation or digitization. And we expect to be able to demonstrate those improvements throughout the course of FY ‘24, which hopefully will give significant confidence into what we're saying is our 26 hours.
Thank you.
Question-and-Answer Session
Operator
Fantastic. Thank you very much indeed for the presentation. I'd like to remind attendees that recording the presentation along with a copy of the slides and the published Q&A can be accessed via your investor dashboard. Let's move on to some questions please. We have received a number of questions and thanks to the investors who have submitted those today. They did look to focus around several things we looked to address and just to remind you that due to the number of attendees on the call today the company won't be able to answer every question it receives. Have a review all questions submitted today and we'll publish responses where appropriate to do so.
Right the first question we've got, we've had a couple in just around the theme of profitability, when will Seeing Machines reach profitability?
Martin Ive
Thanks, Dan. I'll maybe answer this in a couple of ways. I think the thing that we're most focused on right now is getting to the point where we are -- we have a cash flow breakeven run rate. Now as we discussed we expect that that is going to be during FY ‘25 depending on how successful we are in maintaining our cash balance during FY ‘24 and getting to a cash burn rate during the final quarter of FY ‘24 to that $1 million to $1.5 million a month mark, I think that would mean that it would be towards the end of the first half of FY ‘25 that we would end up in that break even position.
I think through the period, taking the full period of FY ‘25 into account would likely just be cashflow positive for that full year and then be in a fully cash positive position as we go into FY ‘26. Now what that means in terms of accounting profit or EBITDA. I think from an EBITDA perspective, statutory EBITDA, it's likely to be FY ‘25 as well. In terms of statutory profit after tax, one of the things that we would need to take into account is that we'd likely start to recognize tax losses on our balance sheet at some point during FY -- either late ‘24 or in FY ‘25, which would put us into a profit after tax position.
But I think, the thing that we're focused on, I'll reiterate again, is that cash flow break even and I think that run rate will happen during FY ‘25 and hopefully, that's something that we can report when we get to our half year results for FY ‘25.
Operator
That's great. Thank you very much indeed. Next group we've got really around RFQ, please can you clarify the RFQ process for the Automotive program?
Paul McGlone
Yeah. Well, RFQs received [indiscernible] Tier 1 from an OEM. So they're managed by the Tier 1. And of the RFQs that we've been talking about, probably for the most part of a year that we expected would be awarded in early January, decisions were taken by the OEMs, not the Tier 1s, by the OEMs to rethink essentially the technical strategy, given the complexity of what had to be done in a very short time frame and essentially reproduce RFQs that accounted for this different range of technical options.
Now, we're a participant in that process. We don't lead it. We don't drive it. We're involved in the technical discussions with the OEMs and obviously the Tier 1s. A 100% of the commercial discussion is with the Tier 1 and the sales process is driven entirely by the Tier 1. That's always been the case, and it's I guess more pronounced now that there have been a number of RFQs that have been delayed as I've discussed and we are still confident that they will be awarded because they must be. And those numbers are reflected in the material that we presented here this morning.
Operator
That's great. Thanks, Paul. Next one we've got is around rail. Can you provide an update on the rail opportunity? Thank you.
Paul McGlone
Look, years ago we had an arrangement with Progress Rail, which was a division of Caterpillar, that proved in the end to be not (ph) only impossible to get off the ground. So we took back the exclusive nature of that. And as it happens, we're in the midst of a range of trials with rail providers as we speak. So it's really a relaunch of rail and we're managing the relationship this time around directly as opposed through the likes of a distributor like, Progress and it's effectively a new market for us.
Operator
Fantastic. Thank you very much indeed, Paul. Okay. Next one is around the Collins arrangement. Could you give an overview on this? How do we expect to see wards managed?
Paul McGlone
Well, we’re going to be managed in a similar fashion to Automotive. Collins are the Tier 1 in essence. They're the systems integrator. So we provide a lot of technical input. We're working on the proof of concept as we announced this morning. We did bring to the party a whole range of highly developed relationships with regard to our tech in consoles, in aircraft and in simulators. And so they essentially become warm to hot leads. But Collins will take full responsibility for sales and management of end-use customers, and will be participating from a technical perspective along the way with Collins. But the responsibility for sales is well and truly with the Collins team as the owner of the customers.
Operator
Fantastic. Thanks, Paul. Also around listing plans, what are your listing plans for our Seeing Machines going forward?
Paul McGlone
Look, I guess it depends on what happens with the trajectory of our business and what happens with world markets. One thing is for sure is that we as a company and an executive and a board review from time to time exactly where we're at, what's going on, are we in the best place we can be, are there things that we can do differently. So this kind of review is a semi-regular event for us. We're about to undergo the same process again towards the end of this calendar year.
And based on our combined view, plus the view of the advisors that we bring into this discussion, we'll take a decision on that. I mean, all things being equal. We still think we're about a year away of having any scale that would facilitate a successful shift to NASDAQ, for example, if that's the question. But all of the things that we're doing with that kind of event in mind, whether that's the exact event or not, time will tell. The scale isn't quite there just right now and markets aren't quite there just right now. But it's something that we take a very serious look at on a semi-regular basis and we'll continue to do so.
Operator
That's great. Thanks very much, Paul. Something you have touched on, I think Martin you touched on this, but kind of a couple of questions again just blending into that theme of fundraise. Are you confident that you won't need a further fundraise ahead of cash flow break even and should break even shift further than our cash or working cash where we seek debt rather than future shareholder dilution?
Martin Ive
So I think I kind of go back to one of the comments I made earlier, that our priority is getting to that cashflow breakeven position. One of the things that we need to navigate is the requirement for us to do continued development and particularly research so that we have technology being developed that isn't just meeting the current RFQs, but also the RFQs that we'll receive that will be generating revenue for us through to the end of FY 2030 and onwards. And that's something that we need to balance, what we're investing in research from that perspective versus hitting our cashflow targets.
Now, if we got to a point where we felt that our cashflow breakeven point was in jeopardy, then we have other levers that we can pull from a cost perspective which would enable us to keep on track in terms of breaking even from a cash perspective. So for our plans are all centered around being able to achieve that. So yes, we do have the funds needed in order to achieve that breakeven point.
Now in terms of whether we would look to raise additional debt other than the Magna convertible note that we have. I think it's unlikely that we would have any structured debts, but there are, particularly with the kind of blue chip customers that we have, we may be able to get something like a receivables funding that would provide us with a short-term benefit from a cash flow perspective. But I think that would be the limit of any debt that we would consider.
Operator
That's great. Thank you very much indeed. Next question, any comment around the AIS aftermarket after manufacturer offer from Smart Eye for trucks and heavy vehicles? Are they a threat to our Guardian solution?
Paul McGlone
Well, it's a big market, and there are lots of competitors of different types in different places with different capabilities. I think if you analyze our products side by side, you can very quickly come up with some key differences. So it's not really for me to say whether they're better or worse. But then your product is still a two box system, and your product will be a single box system. Uniquely, we have this 24/7 connected environment.
Now from a metrics perspective, we know that by having this additional service that we provide we improve the reduction in fatigue and distraction risks from something like 60% odd to 90% odd. Now, that's a 50% improvement. And that's why our product has a churn rate of less than 2%. Because once a company has experienced that kind of impact, typically no one's going to put their hand up to say, let's stop doing this.
So look, we think we're really well positioned. Certainly we're not going to be the price leader. We're not going to be the guys going to the small end of town offering the cheapest product. We don't do that in auto. We don't do it in our fleet product today. And we won't do it into the future. But what we will offer is an appropriately priced product with a unique service that has a profound impact on risk. And I think in balance that will position us well. But there will be other competitors, whether it's Smart Eye or anybody else.
Operator
Great. Thanks very much indeed, Paul. What have we got here? Gentex have shown a mirror solution. Any comment on what that means for the Magna based solution might this go legal? Are they approaching it in a different way?
Paul McGlone
Gentex have been in mirrors for a very, very long time. And so I suspect there's nothing like a legal conversation we had. They'll be developing their own technology and they'll come a day when they have a good product. I'm absolutely certain of that and so no it's just a normal competitive response I think we've provided Magna with a head start and it'll be interesting to see how that unfolds over the next couple of years. But I think they're very, very well positioned.
Operator
Okay. Thank you, Paul. We've got one here. It says, at the town hall (ph) last year, it was implied that several post-production G3 contracts for 50,000 to 100,000 units each are expected to be won to coincide with its launch. Is that still the case? Are we still hoping for a step change in fleet on launch of G3?
Paul McGlone
Yeah, we are. Now those contracts are kind of, the discussions around those contracts are multi-year. So this is what Martin was explaining. One of the big benefits in dealing with an OEM as opposed to a fleet manager is that they have a production schedule. So we fully expect to be engaging with an OEM that is satisfied with our product, and then entering into a multi-year production relationship as opposed to sort of a one-off sale. So as I said earlier, we've started receiving purchase orders from European customers already. We expect that that will continue because in the first six months, stock will be limited. So it's really a first invest risk arrangement. But yeah, I mean, the volumes are significant.
Operator
That's great. Thanks very much indeed. And thank you both for answering those questions from Investors. And of course, the company will review all questions submitted today and will publish responses where appropriate to do so on the Investor Meet company platform. Paul, Just before redirecting investors to provide you with their feedback, which is particularly important to you and the team, can I ask you for a few closing comments please?
Paul McGlone
Well, look, I'd like to thank everybody for taking the time out to listen to the story of your company. I think that we've made material progress over the last few years. I'm quite pleased with the numbers that we've just published. I'm also quite pleased that we're now at a point in time, or level of maturity, if you will, where we can talk sensibly and confidently about an outlook. So as Martin said, we're focused on cash.
What enables us to be confident about the plan that we've outlined is that we are very confident about the quarter-on-quarter growth rate of automotive royalties, but also the impact of a higher margin fleet product in an environment that's been driven again by regulators. So this inflection point is not just in order, it's also in fleet. And given the size of our business today, the contribution of both has a material impact. So we sit here feeling good about the future. The team that works with us every day of the week is equally positive. And I'd just like to thank you all for continuing to support us.
Operator
Fantastic. Thank you both for updating investors today. Can I please ask investors not to close the session as you'll 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 those are greatly valued by the company. On behalf of the management team of Seeing Machines Limited, I'd like to thank you for attending today's presentation and good morning to you all.
Paul McGlone
Thank you very much.
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Seeing Machines Limited (SEEMF) Q4 2023 Earnings Call Transcript