SVRE: Restoring focus behind the wheel in a world full of distractions.
NASDAQ:SVRE
If you drive a vehicle, the odds are that you’ve done it despite all of the public service announcements that you’ve seen. You know the risks and yet, when a text pops up on your screen – “Hey, where are u?” – you ignore all of these warnings, grab your phone and send a quick “On my way” back on your cell phone. What’s the harm, right? Everyone does it and it only takes 5 seconds to send the text.
Of course, the risk is very real given the speed of vehicles, changing road and weather conditions, unpredictable drivers, pedestrians, and a host of other variables. According to the National Highway Traffic Safety Administration (NHTSA), a vehicle traveling at 55mph will cover the length of a football field in those 5 seconds while your eyes are off the road sending your “On my way” text.1
Despite a slew of safety improvements added to vehicles in the U.S. over the past 20 years – like forward collision warnings, emergency braking, lane departure warnings, blind spot detection, backup cameras, etc., nearly 43,000 people died in traffic accidents in 2022 in the U.S., up 30% from 2013.2 Experts agree that there is not one simple explanation for this apparent contradiction where we are driving safer vehicles and yet, traffic fatalities continue to climb. Some of the increase is simply driven by math, because while the U.S. population has grown by 5.4% over the past decade the number of registered vehicles in the U.S. has grown by over 16.8% during the same period. However, there has also been a notable increase in what the NHTSA calls “dangerous driving behaviors” – speeding, impaired driving, and failure to wear a seatbelt – which are pushing traffic fatalities up in the U.S.
However, there has been another significant factor that is contributing to increased traffic accidents and fatalities – the widespread adoption of smartphones. In 2013, a little over half of all Americans had a smartphone (56%) but that penetration rate of ownership had grown to 85% by 2022. If we exclude the very young and the oldest generations from this calculation to estimate the “driving population” it is clear that today almost all drivers in the U.S. own a smartphone.
Distracted driving can be defined to include any activity – eating, adjusting vehicle controls, or of course, using a smartphone – that takes a driver’s attention away from the task of driving. While there has been some progress made through the advent of hands-free technology to reduce the number of calls made with the handset, the explosive growth of social media and texting over the past decade makes smartphones one of the most dangerous items for drivers to use while driving. Both Apple and Android offer tools to mitigate distraction for drivers in moving vehicles but they require active opt-ins from the user and the reality is that many users (particularly young drivers) continue to use their phones while operating a vehicle.
Enter the SaverOne Solution
While protecting everyone on the roads from the dangers of distracted driving is an admirable goal, until legislation completely bars access to technology in our vehicles the reality is that economics will drive adoption of tools to prevent distracted driving. In the case of commercial fleets, think bus companies, trucking and delivery companies, the risk of litigation from a single distracted driver incident is so great, that these companies are looking for alternative solutions to eliminate a driver’s access to distracting phone apps. Again, while this technology largely exists in most phones, it requires the driver to actively opt-in, and in the case of commercial vehicles looking to mitigate liability risk, they want to remove the opt-in requirement and instead have a system that automatically limits a driver’s phone to only essential tools to prevent driver distraction.
SaverOne (NASDAQ:SVRE) has built its first commercial product to address just this need by detecting and locating a driver’s cell phone radiofrequency (RF) signal. The company’s first commercial product - an In-Cabin Driver Distraction Prevention Solution (DDPS) branded as the SaverOne system, can identify if a cell phone is in the vicinity of the driver’s seat and with the SaverOne App installed it will block access to the most distracting apps (social media/texting) while still allowing necessary apps like navigation and the ability to make hands-free phone calls. SaverOne is initially deploying this solution for the commercial market so companies operating commercial vehicles, buses, or vehicles provided to employees can mitigate their liability associated with distracted driving. The company launched this product in 2019 in Israel with several pilot programs and as of August 2023 about 4,300 systems have been ordered and roughly 3,000 of these systems have been installed. The company released a second generation of the distracted driver protection solution in the fourth quarter of 2022, which will target the larger global auto market and in 2023 the company announced its first international sales. We believe that the company is still identifying the best distribution, installation, and marketing strategies for global markets.
The company has also developed an OEM solution that could be integrated into a vehicle as it’s built to then be offered to the end users of the vehicle. Installation of the company’s solution (discussed below) is not simply “plug and play” and likely has limited broader adoption of their product. While we believe there would be a market for this solution (think parents with new teen drivers who wish to block distracting apps on their phones) absent legislation requiring such technology we think adoption rates by OEMs may be slow. At this point, the company has announced one OEM partnership with a major truck manufacturer (Iveco) and the company expects Iveco will begin integrating SaverOne’s products in 2024. Financial terms haven’t been disclosed but this has the potential to be a major development for the company.
SaverOne DDPS:
The NHTSA has identified three key aspects of any solution for the issue of distracted driving related to cell phones -
• It must have the ability to distinguish between the driver’s area of the vehicle and the rest of the vehicle (i.e., passenger use of cell phones should be permitted)
• It should not depend on the cooperation of the driver, and
• It should offer selective blocking (or permissions) of cell phone applications.
SaverOne’s DDPS was built with these features in mind and the fact that the system automatically engages when a phone (with the app installed) is in the vicinity of the driver is likely a key selling point relative to the alternatives on the market. The fact that the SaverOne solution only focus on cell phone signals around the driver’s seat (and does not impact passenger cell phones) may be an important point of differentiation in the market for consumer vehicles.
The company’s solution uses sensors and AI algorithms to identify and detect the position of a mobile phone in a vehicle. The company’s installation partners place a “Phone Location Unit” in the vehicle which is concealed under the dashboard. This sensor determines a phone’s location based on the relative strength of the phone’s RF signal.
A driver entering the vehicle with a cell phone has to have the SaverOne mobile app on their phone. If the app is not enabled an alarm will be triggered that can only be silenced by removing the phone from the driver’s area or downloading and activating the mobile app if the phone is to remain in the vicinity of the driver.
After the app is installed on a driver’s phone and is activated, the system blocks all applications while the vehicle is moving except calls, navigation, music apps and other hands-free or non-distracting apps. A corporate fleet manager could elect to “white list” specific apps (for example, a delivery company could add its internal delivery app to the approved list). For private vehicles, the list of allowed apps can be modified by a third party, such as a parent or an insurance company that might offer incentives for compliance.
Future Products: Protecting Vulnerable Road Users from Themselves
When looking at the entire roadway ecosystem, it’s important to recognize that there are people at risk outside of the vehicles that we are driving. Pedestrians, cyclists, scooter riders, etc. are all considered “Vulnerable Road Users” (VRUs) because they are unprotected by an outside shield or vehicle exterior. If you’ve driven a vehicle in the past decade in an urban or suburban part of the U.S. the odds are high that you’ve encountered a pedestrian engaged with their cell phone at an intersection or stepping out from between two parked cars, who may be distracted to the point where they could be in danger. SaverOne is hoping to protect VRUs by leveraging its existing RF-detecting technology to identify and locate a VRU ahead of the vehicle which will give the driver enough warning and time to avoid potential collisions. The company has indicated that following a successful proof-of-concept test last year with a major European OEM, its VRU solution can identify the location and direction of a cell phone based on its RF footprint. This would be an improvement over existing solutions (radar, lidar, or cameras) which can be impacted by adverse weather conditions or situations where the line of sight is limited. The company is in the early stages of development of this solution but we expect that once completed it will also be marketed to auto manufacturers (OEMs) for inclusion in the vehicle safety suite.
While we acknowledge the issue of distracted pedestrians, we think that the market will wait to see this product in action before assigning much value to the concept. The concept as displayed by the company in the figure below seems straightforward but the real-world application (where an intersection might have not 1 but 15 pedestrians and cyclists coming from each direction) will be fairly complex. Imagine as a driver proceeds up 6th Avenue in New York how many “distracted VRU” alerts might they encounter?
Distracted Driving: A Silent Killer
Traffic accidents, the associated costs of those accidents, injuries, and fatalities continue to rise in the U.S. and driver distraction plays a meaningful role in pushing these numbers higher. According to the National Highway Transportation Safety Administration over 3,500 lives were lost in 2021 representing 8% of all fatal crashes due to distracted drivers. However, despite these stunning statistics and many public awareness campaigns, there have been few calls for radical changes to address this issue through legislation or technology. A decade ago, companies were looking at solutions to address distracted driving as smartphones became ubiquitous including one company in Virginia that invented an ignition lock tied to a cell phone signal (the vehicle wouldn’t start unless the phone was placed in a cell phone dock)3. Frankly, however, it seems like the desire of consumers to have access to their cell phones while driving is more powerful than the societal desire to prevent deaths and injuries due to distracted driving. While several partial measures have been enacted – like banning texting while driving, implementing hands-free laws, etc. – the issue of distracted driving remains largely an issue for each individual or company to address on their own.
Two factors that could cause wider adoption of tools to combat distracted driving include rising rates for personal auto insurance and corporations seeking to limit their risk with employee-driven vehicles.
Personal auto insurance rates in the U.S. have jumped sharply in the last two years, with average rates climbing 11% in the first 8 months of 2023 and 8 states recording 30% increases in car insurance rates since 2022.4 There are very few options for drivers to mitigate these soaring costs and while no insurer currently offers a discount for installing a Distracted Driver Prevention Solution, we think that the company will advocate for discounts down the road if their solution becomes integrated in the vehicle when built by auto manufacturers.
While the market for corporate-owned vehicles, delivery vehicles, commercial trucks, and buses is smaller in size than the market for personal vehicles the need to mitigate risk for these vehicles is great and is a driver of early demand for solutions like those offered by SaverOne.
A single settlement of a large truck accident can range from between $75,000 - $110,000 while the average jury award in these cases is nearly $500,000.5 A driver distraction prevention solution won’t eliminate all risk or all corporate liability in the event of a crash but having a system in place demonstrates a level of risk management that should help limit the operator’s liability in the event of an accident.
The advent of various new safety features in vehicles should ease the adoption of new tools to combat distracted driving and we think it is likely that commercial installations will lead the way for SaverOne in the near future.
Competition:
In the market that SaverOne operates in the competition today effectively consists of using the built-in tools on cell operating systems or turning off a phone/silencing notifications.
The Android Auto and Apple Focus tools for driving offer many of the features of SaverOne’s DDPS like automatic replies and silencing notifications but it does require a few steps to customize the solution to your specific needs. However, the biggest difference is that it requires the driver to elect to turn on this feature rather than automatically engaging when a phone is only in the vicinity of the driver as is the case with the SaverOne solution. However, the built-in solutions in Android and IOS phones are already on your phone, require no specialized equipment and cost nothing to install or use. This is in contrast to the estimated $300-$600 price of the SaverOne solution which currently requires an aftermarket installer to place the sensor inside the vehicle’s dashboard. There is likely room in the market for solutions on both ends of the spectrum with built-in, free solutions meeting the basic needs of many personal drivers and a premium solution like SaverOne for commercial applications where the vehicle owners do not want to leave it up to the driver to opt into a system that will prevent distraction.
TRUCE Software (www.trucesoftware.com) offers several tools to manage employees’ mobile devices including in the vehicle while driving. While there appear to be some technical differences between the SaverOne solution and that offered by TRUCE, the company has established a fairly large presence in the market and its estimated annual revenues (the company is private so confirming these numbers is difficult) are likely 15x+ the revenue of SaverOne currently.
Other potential competitors:
● Katasi offers a small plug-in device but it is not clear how much traction the company has gained.
● Cipia (TASE:CPIA) offers a wide variety of driver monitoring solutions to track a driver’s behavior, direction of gaze, and activity. Cipia appears to be slightly larger than SaverOne based on current revenue levels and has announced several OEM partnerships to install its tools inside newly manufactured vehicles to enhance safety.
Recent financial results and news:
In the first half of 2023, the company reported a sharp jump in year-over-year revenues to roughly $400k as the number of installed systems grew to 3,000 as of August 29, 2023 (up from 1,750 installed units as of 3/31/23). While this growth rate is impressive it is important to note that SaverOne is still a fairly small company and managing its growth as the company moves from initial pilot installations to full fleet installations will be a challenge. The company’s first-half operating loss of $4.8 million was due in large part to the $3.3 million R&D expenditure. The company has indicated that as it develops its OEM solution and VRU product R&D expenditures will likely remain elevated.
Cash balances fell from $8.3 million at the end of 2022 to $5.0 as of 6/30/2023 indicating a monthly burn rate of roughly $550,000. With less than one year of cash on the balance sheet in June it seems likely that the company will require additional financing.
Other recent events:
- The company announced that Electra Afikim (a large public transportation company in Israel) would install the SaverOne System in its entire bus fleet representing roughly 1,200 vehicles, SaverOne’s largest order to-date.
- The company announced a meaningful expansion of its pilot projects outside of Israel with an additional pilot project on buses in the Gulf region; a second pilot project in the U.S.; and its first pilot in Europe.
- In 2022, the company entered into a memorandum of understanding with IVECO (one of the leading medium/heavy truck manufacturers in the world) to integrate its solution within IVECO trucks. This has the potential to be a game-changing agreement for the company based on IVECO’s size (producing over 150,000 vehicles annually). The companies announced a side letter to the MOU in June 2023, reaffirming the companies’ intention to co-develop the OEM solution. Initial integration was set to begin in late 2023 with a full rollout in 2024.
IPO/Financing:
A little over a year ago, in June 2022, the company closed on its initial public offering of 2.94 million units (consisting of an ADS and one warrant to purchase an ADS) at a price of $4.13 per unit raising roughly $13 million in gross proceeds. Each ADS represents 5 shares of common stock.
In December 2022, the company completed a private placement of 0.8 million ADSs at $1.854 per ADS raising roughly $1.5 million in gross proceeds.
Management
The company has assembled an experienced management team given its stage of development.
Ori Gilboa – CEO since 2019 – Mr. Gilboa previously served as the CEO of Negev (a home furnishings retailer) and a senior role at James Richardson (a travel retailer). Mr. Gilboa also previously held management positions with a leading Automotive Group in Israel.
Yossi Cohen – COO/Co-Founder – Prior to co-founding SaverOne in 2014, Mr. Cohen spent more than two decades at Motorola with his last role being as Senior Manager of Program Management & Business Operations.
Aviram Meidan – VP of R&D - Prior to joining SaverOne in 2018, Mr. Meidan was the VP of R&D for Micronet Ltd, as well as CTO of the automotive division in Telit Wireless Solutions and a Senior Manager at Motorola.
As of December 31, 2022, insiders and officers hold roughly 28% of the ordinary shares of the company.
Items to note:
As with most early-stage technology companies, there are some items that potential investors should take into consideration when looking at a company of this size.
1) The shares trading in the U.S. are American Depository Shares (ADSs) and the tax laws regarding the treatment of these holdings for U.S. taxpayers can be complex. Additionally, the ADSs typically trade very low volumes, often under 20,000 ADSs per day, so establishing a meaningful position in the company without impacting the price may be challenging.
2) As we’ve seen with many microcap stocks lately there have been some trading days with incredibly high volumes and large price swings without any fundamental explanation. In May, for example, 45 million ADSs were traded (nearly 8 times the total number of outstanding ADSs) on a single day as the stock doubled when they announced a small pilot program in Abu Dhabi. It is hard to predict or anticipate this kind of volatility but potential investors should be aware that the stock has traded like this in the recent past.
3) In the company’s annual report, it noted a “material weakness in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis”. While these weaknesses are not uncommon for startups, potential investors should be aware of this issue.
4) In June 2023, the company entered into a Standby Equity Purchase Agreement with YA II PN (“Yorkville) to sell to Yorkville up to $10 million of the Company’s ADSs over the next four years at 95% of the 3-day volume weighted average price. Depending on the price of the ADS at the time of these sales, it is possible that the total outstanding number of ADSs could significantly increase under this agreement and the potential dilution to existing holders could be meaningful.
Conclusion
SaverOne (NASDAQ:SVRE) is an emerging company addressing the challenging issue of cell phone device use inside a moving vehicle. Distracted driving continues to get worse around the globe despite numerous public awareness campaigns. Corporate fleets and commercial transportation companies need tools to limit distracted driving that operate seamlessly without requiring a driver to opt-in and that is the solution that SaverOne has brought to the market.
The opportunities in front of SaverOne as they expand into fleets, push into international markets, launch an OEM solution for car makers, and build a tool to protect Vulnerable Road Users will have to be weighed by investors against the dilution risk related to any pending financing.
There is no doubt that distracted driving remains a huge problem around the globe, but absent significant legislative action (the EU has recently enacted some distracted driving measures to be rollout over the next few years), the current half-hearted approach to the problem (relying on driver compliance) is likely going to be the default in most markets. As more advanced features are built into new vehicles, it is likely that adoption rates of Driver Distraction Prevention Solutions like those offered by SaverOne with grow.
SaverOne is an early-stage market entrant but investors watching for next-generation safety solutions in the transportation market should have it on their radar.
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1. https://www.nhtsa.gov/risky-driving/distracted-driving
2. https://www.ghsa.org/resources/news-releases/NHTSA-2022-Traffic-Deaths23