Neonode Inc. (NASDAQ:NEON) Q3 2023 Earnings Call Transcript

Neonode Inc. (NASDAQ:NEON) Q3 2023 Earnings Call Transcript November 9, 2023

Jesper Von Koch: Hi. And warm welcome to the Neonode Q3 2023 Earnings Call. So, we’ll start with a company presentation by the CEO and CFO of Neonode, followed by a Q&A session by the Company’s analyst. So with that said, I welcome Urban Forssell, CEO of Neonode. Please take us through.

Urban Forssell: Thank you, Jesper. And welcome to our Q3 earnings call. Today’s presenters is myself, Urban Forssell and our CFO, Fredrik Nihlén. Before we go into the main part of the presentation, please take a moment and read this legal disclaimer. I will read loud a summary of the disclaimer. This presentation contains oral and written statements of Neonode Incorporated, the Company and its management, may contain forward-looking statements. Forward-looking statements include information about current expectations, strategy, plans, potential financial performance or future events. They may also include statements about market opportunity, sales growth, financial results, use of cash, product development and introduction, regulatory matters and sales efforts.

Forward-looking statements are based on assumptions, expectations and information available to the Company and its management and involve a number of known and unknown risks, uncertainties and other factors that may cause the Company’s actual results, levels of activity, performance or achievements to be materially different from any expressed or implied by these forward-looking statements. Prospective investors are advised to carefully consider these various risks, uncertainties and other factors. Any forward-looking statements included in this presentation are made as of today’s date. The Company and its management undertake no duty to update or revise forward-looking statements. This presentation has been prepared by the Company based on its own information as well as information from public sources.

Certain of the information contained herein may be derived from information provided by industry sources. The Company believes such information is accurate and that the sources from which it has been obtained are reliable. However, the Company has not independently verified such information and cannot guarantee the accuracy of such information. Thank you. And with this, we move into the main part of our presentation. Today, we have a fairly short agenda, and we will jump right into it with a summary of the key points of this third quarter and of today’s presentation. After this, Fredrik will take us through the highlights of the financial results for the quarter. And after Fredrik’s presentation, I will give a strategy and business update.

And as Jesper mentioned in the introduction, he will join us again and chair a short Q&A session. Summary of key points for the third quarter and also year-to-date. Our licensing revenues in the third quarter decreased somewhat. And this has to do with certain customers reporting lower sales volumes for this quarter. However, year-to-date, we are on par with the same period last year. So, that’s why we say that license revenues for the full year so far has been stable on the same level as last year. Product sales improved in the third quarter and this obviously, we are grateful for, and it proves that our increased level of activity and focus on pushing through sales and closing deals is paying off. However, the slow start on the first two quarters this year has made that we are below targets for the first nine months.

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Q&A Session

And, as we have discussed in previous earnings calls, we continue to adjust and sharpen our strategies and tactics to improve our sales performance. We are not satisfied with our performance to date, and we are working hard to improve on that, and we are also encouraged by, the interest level we get from new and existing customers. So, although this quarter was similar to the previous quarter, we have a very optimistic view of the future, and we continue to believe that we are on the right track and that we have a team in place that can turn this business around and create growth and also improve our cash flow significantly in the coming years. So, with these three points as a summary, I hand over to Fredrik, who will take us through the financial results summary for this third quarter.

Fredrik?

Fredrik Nihlén: Thank you, Urban. You can find our 10-Q and earnings release on our website, the neonode.com under Investors section. I will just — in this presentation, I’ll just summarize the key points. Revenues for Q3 was $1 million that is a decrease of 18% compared to the same quarter last year. License revenues was $0.8 million for the third quarter, that is a decrease of 20%. And this is due to lower sales volumes at our customers. Year-to-date, license revenues are at the same level as 2022, as Urban said. Revenues from products was $0.2 million in Q3, an increase of 5% compared to the same period last year. We maintain our focus on certain sectors and increased activities within sales and marketing. Gross margin for Q3 2023 for products was negative 39%.

This is due to a one-time effect of costs in Q3 2023 due to some customer claims. If we adjust for that, we are at 48% in Q3 2023, which is at the same level as the quarter — same quarter last year. Operating expenses was $2.2 million for Q3 2023. It’s an increase of 6% compared to the same period last year. It’s mainly due to increased activities within marketing and sales. We had $1.8 million in net cash burn operating activities for Q3 2023, an increase of 272%. We have two explanations for this. In Q3 2023, we purchased components to our production unit, and we didn’t do that in Q3 2022. And Q3 2022 is exceptionally low because of a currency effect we took in that quarter. We have $19.4 million in cash and accounts receivable as of September 30, 2023.

It’s an increase of $3.1 million from year-end 2022. So, we are still stable on the cash front. With that, I will hand the word back to you, Urban.

Urban Forssell: Thank you, Fredrik. And just to continue our presentation here and give you new followers and also old followers, an update about our strategy and business. Let me first talk about what we do with the interactive kiosks, and in particular, holographic display applications are very, very interesting. Shown here in the picture is a type of queuing kiosk deployed in a government office in Seoul, South Korea. This kiosk is manufactured by our customer, Marketon, and they also have a whole range of similar products, allowing people to in a touchless way here sign up for a queue and get a ticket while waiting for the next clerk to become available. This is just one example. But why we want to highlight this is that interactive holographic displays, is a very interesting application example, where our touch sensor modules fit very well.

And the combination of holographic display and our touch sensor module technology is a perfect one, and we make these types of holographic images interactive using our touch sensor module technology. So, all kinds of holographic display applications are of interest, and we have a lot of customers, especially in Asia, but also in France that are very, very active in this space. And they work with information kiosks, ticketing kiosks, payment terminals, ordering terminals, and other types of interactive kiosks. So, we continue to be very, very active here and support our partners, as said, in China, South Korea, China, Japan and France. Another interesting area that we have some considerable efforts in is MedTech, an especially touchless interaction for MedTech devices is something that we are pushing.