Tobii resolves on a rights issue of approximately SEK 450 million for large-scale initiatives on eye tracking in virtual reality and smartphones

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Tobii AB (publ) (the “Company” or “Tobii”) intends to strengthen its organization and make substantial investments in technology and market development to capture the rapidly increasing interest for eye tracking in virtual reality and smartphones. Tobii’s ambition is to take the same world-leading position in eye tracking for consumer electronics that Tobii Dynavox and Tobii Pro have within their respective segments. To finance the new expanded business plan, the Board of Directors has resolved on a rights issue of shares of approximately SEK 450 million, subject to approval by a subsequent extraordinary general meeting.

“The interest for eye tracking in various consumer applications has developed at a substantially more rapid pace than we anticipated at the time of the IPO in April 2015. At that point, we believed it would take longer time for eyetracking to become current for use in smartphones and VR-headsets than what we see today. The capital raise of just above SEK 400 million that was conducted in connection to the listing is sufficient to complete the business plan we decided on then, but to create the conditions to take a leading position also within these new segments, we now need to further increase our efforts in market and technology development. We are convinced that the time is right to expand our investments and that there is good potential to create great value for our shareholders,” said Henrik Eskilsson, CEO of Tobii.

Summary

• The rights issue is carried out with the intention of strengthening the organization and investing in technology and market development in the new volume markets for virtual reality (“VR”) and smartphones, and to give Tobii increased financial flexibility to quickly carry out acquisitions.
• Tobii has earlier today announced its first design win with a large smartphone manufacturer, which is deemed to be an important first step towards a long-term goal of integrating eye tracking in smartphones on a larger scale.
• The complete terms of the rights issue, including the increase in share capital, the number of shares issued and subscription price are expected to be announced at the latest on November 24, 2016. Provided that the rights issue is approved by the extraordinary general meeting, the record date for the rights issue will be December 2, 2016 and the subscription period will run from December 6, 2016 up to and including December 20, 2016.
• Shareholders corresponding to approximately 40 percent of the voting rights, have expressed their support for the rights issue.
• Today the Board of Directors announces a notice for an extraordinary general meeting to be held on November 30, 2016.

Background

In connection with Tobii’s initial public offering on Nasdaq Stockholm in April 2015, Tobii presented the two profitable business units Tobii Dynavox and Tobii Pro and the business unit Tobii Tech, in which Tobii invested heavily to establish eye tracking in the market for gaming computers.

Since the listing, Tobii Dynavox and Tobii Pro have developed well, with profitability and increased sales within the two business units and with good potential for continued positive development.

The investments in gaming computers within Tobii Tech have also been successful and in a short period of time the business unit has reached several important milestones. Dell, Acer and MSI have all released computers that integrates Tobii’s eye tracking sensors. In addition, Acer has launched three monitors with built-in eye tracking. Some 40 games with support for Tobii’s eye tracking have been launched, including several of the year’s largest game titles, such as Tom Clancy’s The Division, Assassin’s Creed Syndicate, Deus Ex: Mankind Divided and Watch Dogs 2. The business unit’s sales to external customers are rapidly increasing, albeit from low levels. The market for eye tracking in gaming computers is still at an early stage.

New planned initiatives financed by the rights issue

Recently the development and interest for eye tracking has accelerated considerably, particularly within the virtual reality and smartphone segments. An example of this is illustrated by Tobii’s recently announced design win with a large smartphone manufacturer and by Google’s acquisition of the eye tracking company Eyefluence.

During the last twelve months it has become increasingly more apparent that eye tracking will be a central component in future VR-headsets and smartphones. Tobii now intends to substantially increase the pace of investment within these segments to be able to take a leading market position. As already established within Tobii Dynavox, Tobii Pro and in the gaming computer segment within Tobii Tech, Tobii also intends to become the leading supplier of eye tracking technology in VR and smartphones.

In order to build an attractive long-term business model, Tobii’s strategy is to, in addition to eye tracking algorithms, also develop and supply hardware components such as ASICs and custom designed image sensors, as well as application software, all supported by Tobii’s world-leading portfolio of patents related to eye tracking.

VR: Tobii and other market players such as Facebook-owned Oculus, believe that eye tracking will become a standard component in future generations of VR headsets, due to the many benefits that the technology enables in the user experience, as well as the performance and design of VR products. Within the framework of the Company’s existing financing, Tobii has invested in developing basic technology for eye tracking for VR, and has initiated dialogues with several headset manufacturers. Since the VR market has developed at a very rapid pace, there is a need to further strengthen Tobii’s organization in order to increase the pace of technology development and to have the capacity to collaborate simultaneously with a large number of customers and technology partners.

During a three-year period (2017-2019), and assuming the proposed rights issue, Tobii intends to invest approximately SEK 150 million (net cash flow) in VR.

Smartphones: Tobii recently announced its first design win with a large smartphone manufacturer. The market for eye tracking in smartphones is still at an early stage, but Tobii estimates that there is a longer term opportunity for eye tracking to be integrated into smartphones on a large scale. Tobii intends to further strengthen the organization to develop eye tracking technology which is custom designed for smartphones, and together with customers develop applications within this area.

During a three-year period (2017-2019) and assuming the proposed rights issue, Tobii intends to invest approximately SEK 150 million (net cash flow) in the smartphone area.

Acquisitions and additional opportunities: Tobii has, in addition to the above-mentioned initiatives, identified several potentially interesting acquisition targets within the three business units Tobii Dynavox, Tobii Pro and Tobii Tech. A strengthened cash position will give the Company increased flexibility and capacity to rapidly execute on opportunities to acquire companies, technology or intellectual property rights.

Tobii Tech also intends to make initial investments in technology and market development within the automotive industry, which, in a few years’ time, could develop into another large opportunity for Tobii.

Investment plan

Today, Tobii has an investment plan that was approved by the Board of Directors in September this year that extends to 2019. This plan includes extensive initiatives within gaming computers but does not include the larger initiatives within VR and smartphones presented above. This investment plan is fully financed partly from the positive cash flows generated by Tobii Dynavox and Tobii Pro and partly through existing funds within the Company, which is estimated to be sufficient for the business unit’s investments up until it delivers a positive operating profit.

The expected gross proceeds from the rights issue of approximately SEK 450 million, before transaction costs, will be utilized to accelerate the Company’s investment plan to quickly and forcefully execute the above-mentioned initiatives. Tobii estimates that the additional investments will generate significant future values for shareholders.

The rights issue

On November 5, 2016 the Board of Directors of Tobii resolved, subject to approval at the extraordinary general meeting on November 30, 2016, to conduct a rights issue of new shares. Those who are registered as shareholders by Euroclear Sweden AB on the record date December 2, 2016 have preferential right to subscribe for new shares in proportion to their existing shareholdings. Application to subscribe for shares without the use of subscription rights will also be possible.

The complete terms of the rights issue, including the increase in share capital, the number of shares issued and subscription price are expected to be announced at the latest on the November 24, 2016. The subscription period is expected to run from December 6, 2016 up to and including December 20, 2016, or a later date as decided by the Board of Directors.

The Board of Directors today announces the notice of an extraordinary general meeting to be held on November 30, 2016.

Shareholders corresponding to approximately 40 per cent of the voting rights, have expressed their support for the rights issue.

Prospectus

Complete information regarding the rights issue will be included in a prospectus that is expected to be published December 2, 2016.

Timetable

The below timetable is preliminary and may be adjusted.

| November 24, 2016 | Estimated date for publication of rights issue terms, including subscription price, number of new shares being issued and the subscription ratio | | ---------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | | November 30, 2016 | Extraordinary general meeting to approve the rights issue resolved by the Board of Directors | | November 30, 2016 | Last day of trading in Tobii with right to participate in the rights issue | | December 2, 2016 | Record date for the rights issue, i.e. holders of shares who are registered in the share register on this date will receive subscription rights for participation in the rights issue | | December 2, 2016 | Estimated date for publication of the prospectus | | December 6 – December 16, 2016 | Trading with subscription rights | | December 6 – December 20, 2016 | Subscription period | | December 23, 2016 | Estimated date for announcement of outcome of the rights issue |

Advisors in connection with the rights issue

Carnegie Investment Bank AB is financial advisor to Tobii and Baker McKenzie is legal advisor in connection with the rights issue.

This information is information that Tobii AB (publ) is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact person set out below on November 7, 2016, at 07:02 a.m. CET.