Q3 2020 Neonode Inc Earnings Call
Thank you for standing by and welcome to Neonodes third quarter 2020 earnings Conference call.
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After the speakers remarks, there will be a question and answer session with the company's covering analysts if.
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Thank you at this time for opening remarks, and introductions I would like to turn the call over to David Brunton Neonodes head of corporate Investor Relations.
David Please go ahead and start the conference.
Welcome and thank you for joining us on today's call, we will review our third quarter.
2000 to 20 financial results and provide a corporate update.
Our update will include details of customer activities technology developments and other items of interest before turning the call over to our CEO Dr. urban for sell in CFO react I'd like to make the following remarks concerning forward looking statements.
All statements in this conference call other than historical facts are forward looking statements. The words anticipate believe estimate expect Tim will guides confidence targets projects.
And other similar expressions typically are used to identify forward looking statements.
These forward looking statements do not guarantee the future performance that may involve or subject to risks uncertainties and other factors that may affect neonodes business financial position and other operating results, which include but are not limited to the risk factors and other qualifications contained in Neonodes annual report.
On 10-K.
Quarterly reports on 10-Q, and other reports filed by Neonode with the FCC to which your attention is directed.
Therefore, actual outcomes and results may differ materially from what is expected or implied by these forward looking statements.
I don't know the expressly disclaims any intention or obligation to update these forward looking statements.
At this time, it's my pleasure to turn the call over to urban urban. Please go ahead.
Thank you, Dave and welcome to this call.
Yeah, I will review with you today, some strategy and business updates and that after this I really had turned over.
Over to Maria for some financial details about this third quarter.
To start off the strategy presentation.
I want to reiterate that today since the beginning of this year have organized our business into three separate dismiss areas and we called Hmm products into my solutions and the remote sensing solutions.
And in this call I will talk a little bit about each one of them.
Give you some insights to both the strategy and the current business activities that they have.
He might stands for human machine interface.
And are those of you that have followed neonodes for the last 10 or 12 years or so know that this has been.
A key focus for our business, a leading up to the 2020.
And it still continues to be very very important and that's why h. in my products an h. My solutions, both are focusing on these areas and actually my products.
<unk> sales are standardized sensor modules.
For context lets touch touch and gesture sensing.
The focus there is some customers in the elevator and interactive kiosk segments.
Hmm solutions.
It's a separate business maybe focus on customized engineering solutions, mainly for touch and gesture sensing at this point.
The focus is on customers in the military and avionics and the industrial segments.
Remote sensing solutions, it's a software business for us that'd be focused on driver on in cabin monitoring.
And in terms of customers, we are targeting OEM and tier one system suppliers in the automotive space.
In Europe, and North America, and Asia, respectively.
And with this as an introduction I will also we get the right.
Neonodes works with the two main technology platforms. One of you called ZEA force that underpins, our touch and gesture sensing technologies.
And.
Contact lets touch that you will hear us talk about in this call is a very hot and sought after.
Technology solution that we can provide now to customers.
That want to avoid.
Touching keypads and displays in public spaces, which is a very much in focus due to the COVID-19.
And then Mike.
Our software platform Multisensing under.
Underpins, our offerings and drive it I mean cabin monitoring and for driver monitoring.
Often the objective is to monitor and detect drowsiness and destruction, but the drivers and in cabin monitoring is more focused on occupancy and situational context monitoring inside the vehicle, including passengers it could be pets that could be a albeit in the passenger car.
Mark.
In this review I will start to talk a little bit more about the business area H. semi solutions baby as mentioned offer customized touch.
Touch and gesture control solutions for demanding customers in the military avionics and then into industrial segments.
Oh this is the solutions business and to be focused on 100% bespoke solutions that we adapt to each customer's specific needs and each application.
We offer scalable solutions and the business here is based on a consultative long term relationship approach.
And as mentioned also we target.
Customers in the military and avionics segment and the industrial segment.
We are leveraging here.
The.
Advantages with our advanced fee for second already.
That would be that it offers for instance, like cost effective touch and gesture control.
It has both.
Good Yeah, my any M.C. and that would be electromagnetic interference and also electrum like nothing yeah.
Yeah properties sorry for this.
We have very good functional performance, good quality low latency freedom and sign and so on.
And we also can operate for military applications with the.
Night vision systems that are.
Frequently used in helicopters and the aircraft and also on the ground beacons every are looking today.
So this slide is just to illustrate the types of applications, we say that the deal. We did touch on this place was a touch on other surfaces, it's often in a very demanding.
Environments.
And rugged applications, where operators would like to have a touch operation all the system or a display function.
Where they can use gloved hands or stylist pens or any other object to control the underlying system.
We can also with our IR based technology offered touch on any surface not only linked to a display but actually we could do and glass windows on was on the tables and so on.
And a very strong offering lives, we have which is France is very important in medical applications is that we do not.
Deteriorate the image quality, neither the rest solution or to contrast order lightning on the underlying display which is sometimes a very important for instance for examining X ray images in a system that we indicate in the picture here second from the right.
We have two main variance of RC Force technology, one is a blocking technology NVS show an illustration on the left the working principle is that we have on two sides you have light emitting diodes and onto upholstery.
Did you have photo diodes, receiving these infra red lights means if you place a finger or an object you will break one or more of these lights beams, which can be detected and hence we can detect the touch.
So this is the same for an operating principle.
Behind the RC first blocking technology of course, there's much more to it but this is the simplest way I can explain it.
He also worked with a second variation of this technology would that be called reflective technology.
Where we have a one sided sensor element that Bose and Mitch infra Red lights, and the texts reflections from objects in that light field and by clever arrangement.
That light emitting diodes, and the photo diodes, and receiving a reflection and.
And use of advanced optical lenses.
We can position accurately objects in that two dimensional light field and that's like seem to be hovering above a display or any other surface or it can be directed into mid air.
Allowing us to develop.
In air touch or yester sensing applications, or if you would say contact less touch solutions.
The focus is on military and avionics and industrial two very interesting markets.
That are very large and also importantly, they grow at a steady cagar every year.
We think that we have a.
A lot to do in these two segments and they have not been in focus for Neonode until this year, but only this year and actually just a few months back since you really focus on trying to enter and penetrate these segments.
They are you can continue to see about segmentation and sub segmentation actually in military avionics. If you would say that defense is roughly one third of the total volume and civilian aircraft and similar two thirds of that volume.
The 150 K. units up estimate may not so much but typically in the military and avionics uh-huh the budgets for development and the average sales price for a display units with touch is quite high so.
Actually it's a very very interesting segment for us to operate in.
The industrial segment is larger in terms of volume and also turned over but on the other end so it's a fragmented but.
But still this is also a very interesting segments for us to operate.
And then you may ask what happened to printers and automotive applications and so on yes, Oh, we do not say that they are all our main focus but of course, we will.
Continue to work in this.
That sort of Neonode legacy segments printing automotive medical the white goods and so on but we will deal with this and the more opportunistic way as opposed to military and avionics and industrial that we would go after more strategically and with a stronger focus.
Huh.
Going forward.
[noise] Ah interesting market size and a interesting growth.
We think that we can have a.
A good growth in these two segments on a combined because they have a technical overlap which is substantial so we estimate that we can.
We use the same type of solutions for both.
The military avionics and industrial segments.
Typically the customer would be large companies and if you look at the largest companies in these two segments actually some 85% of the largest companies are based in the U.S. So it's a very strong focus on the U.S. market.
And large companies, but of course, we have customers that are both geographically located outside the U.S. in Europe. There are many strong industry countries on EPS Allison in Asia.
You have to look at the large companies, it's a 5% of them can be found in the U.S. and that's why we are increasing our presence in the U.S. and our focus on the U.S. Mark going forward.
Turning over to 18 my products.
This is still working with it you might and again h. milestones for human machine interaction and for Neonode that means infrared technology and means contact lets touch touch gesture sensing.
But here are offering is based on our standardized sensor modules that be producing our subsidiary prone nodes in the west and Sweden.
And that's we deliver directly or indirectly via distributors like did you can see area to our customers.
So a similar technology, but different product offering to customers and a different way of distributing products.
So this is a more classical product business maybe sell products.
Average sales prices typically higher compared to art.
Hmm solutions business, which will be a more licensing business.
Uh huh.
These sensor modules that we offer here they are easy to integrate and very well suited for both retrofit applications and new OEM designs.
And they are quite easy to use offer a great design freedom and still have a high accuracy and good performance and.
We are selling them direct just mentioned.
Also through value added partners and distributors and we are expanding basically every month, our network of partners and I will come back to that point later on.
Okay.
With Colgate came an important change for Neonode.
And we realized that we were actually sitting on a technology that was very well suited to solve all the problems caused by the cobi pandemic, namely that.
People do not want to touch displays keypads in public spaces like.
The airport in the shopping mall or in a hotel or office building.
So we have we have the technology, we have the products and we are building up our order book actually a week by week or more companies are joining in and.
Getting interested in starting to purchase these products.
Shown in the pictures here are some different examples where we have the together with value added Park has created new solutions that solve for this contract less.
Touch challenge.
Yeah.
This picture bottom left it's from the Chengdu Airport. If you have a press release on this or that a new.
We released I think in September.
And then there's the same an application with checking terminals.
My point, though sales.
And from the left.
And then to elevate their applications to the right one be the holographic display and one with a.
A more basic direct approach installation a retrofit installation from the partner in Hong Kong.
So shown.
Shown here is down examples all of our two target segments interactive kiosks and elevators.
And I will skip this and take all the time.
So when it comes to contact lets touch we have two ways to go we have our sensor modules you can use them to project a light fee on top of a surface.
Offering me there.
And if you arrange the sensor modules cleverly programs of software cleverly you can create what we call a parallel plane configuration. So.
A few centimeters or even millimeters in front of your display or even put in front of your key pad or similar you can have the invisible infrared light field. That's weekend, then used to detect one or more fingers.
Pointing at or through this night field.
And then you have to use or can interact with the underlying system without having any physical contact to do anything actually everything is done need air and straight forward and one example is the retrofit installation for the elevates or something so on the previous picture.
The other main.
Alternative would be today to use the holographic display.
And we are working with the.
Four or five companies in the world now actually the developing and selling holographic displays.
Huh.
Before they met with us they had like a passive components that could display images into a mid air but by using our sensor modules you can exit touch activate those hovering images that are projected into me there.
And all.
All of them work according to the principle to have a a semi opaque.
A piece of glass that reflects part of the life.
Shown on this into free air and depending on how you angle is a holographic plate you wouldn't have the holographic image and vertical arrangement or slight appeal.
And of course, you have to be little bit clever, but you can arrange our sensor margins to go with that a holographic picture.
So where we see the biggest opportunities for our solution is with interactive kiosks and elevators to very interesting markets segments.
Massive volumes, if you take all that attractive kills three other if you have an installed base on some 39 million units and the strong growth.
And.
Elevators things today close to 20 million yeah.
Yes show, 10th Amelia and strong growth with 1.3 million or 1.5 million elevators here.
And we have both the retrofit play and the new equipment playing bowl. So it's a very interesting market opportunity for us with our contact lets touch solution.
Interactive kiosk.
It could be than a sub segmented. According to this you talked about vending machines.
Turning to sales in the fast food restaurants coffee machines, ATM and different types of self service kiosks for instance, sales second self checkout at an airport tickets machines that train stations.
And.
Similar Ella.
Elevators, I think you'll know what you mean by elevators, what do you want to highlight here is Seth.
There are three main categories of companies that we are today engaged with them.
One group is the elevator Oems they are well known brands like who is corner to Syncrude Schindler.
Touchy and so on.
The second group that we are in contact with today's companies focusing on control panels or.
Push buttons for elevators.
They can sell them.
To the OEM manufacturers or a in the aftermarket and the.
Third category would be maintenance.
Parent companies.
And the.
The elevator market in the world is slightly different arranged in the U.S. in North America, and Europe, then Asia. So in some markets the Oems themselves they would do maintenance and repairs.
But in other markets.
These are third party.
Companies independent Tech companies in the impending service companies and.
We with our own sales force, but mainly with our partners. We try now to reach as many of these as possible and support them locally because this is how we win the city.
This is very much focused on contact lets touch we still have a lot other opportunities that we are exploring and that's the beauty of having the standardized products and ecosystem of partners up there. So we would serve also a cost.
Customers looking for a touch solution or a gesture sensing and that could be in medical office equipments white goods transportation other and we have several examples of other promising a use cases for our products in these segments as well, but our own focus will be going forward interactive kiosk.
Than elevators.
Looking more closely at the kiosk market.
We can see that vending machines coffee machines and.
They fast food restaurants terminals.
At Mcdonalds or similar where your order your food and beverage they make up the largest portion ATM. It's actually is a smaller portion of self check in checkout altitudes thing going on those are pretty small there is a interesting growth in all of these except ATM sales, which.
Which is basically flat.
Hey, Dan this is on the decline in Western Europe, and North America, but on the other hand are increasing in developing countries.
Countries in for instance, Africa, South America and so on.
So that's why in the in the combination means that the there's a flat market size for ATM.
Some of the Oems, we are talking to in the space.
They of course cover multiple of these sub segments.
We are not focusing on single of them, but we are we are monitoring. This we see that some Oems are stronger in some sub sub segments or in some geographic regions.
But overall the volumes are very high there's a good growth rate and we think is a very very interesting segment to work on.
[noise] elevators, its little bit different the world market is totally dominated by some twin 10 or 12 big OEM companies.
And that we should see this pie chart. Okay. So its ambitions schindler cone ask isn't crook touches alone.
And some Chinese or the biggest growth in installed volumes, we can see in China and other parts of South East Asia.
But because there is a huge installed base also in North America, Europe, and they will be serviced and refurbished and upgraded on a regular basis.
It's very much an active market also in these developed countries.
And last and say we have a play both to be the big Oems and the control panel companies on the maintenance and service companies and we can do both retrofit and new equipment. So elevators is also super interesting for us.
And promising.
I mentioned before that we work both direct sales and with the different types of partners.
We have this year now in a very strategic way and very systematic way.
Working to expand our partner network.
From before from 2019 Liana, it's been working we did you can cereal and they are examples of fulfillment distributors.
We could add one or two more in this category.
Later, this year or beginning next year.
Have you see that we have a.
Very.
Important channel to the market this through our value added resellers or partners, they could be and shown here.
Companies that we Americans so far they are a mixture of a tech companies and the engineering firms or both.
And they are typically a regional or national So for instance high line. They have headquarters in Munich in Germany, and they work mainly in the German speaking countries in Europe.
Noble electronics coal and Jeff on Aerospace are based in Japan, that's fine.
Hi Tech TMB Tech are in South Korea, and they typically have a strong focus in their respective markets and we have all the other partners and they range from technology companies like whole industry and yes, our let's work on holographic displays and convergence, which is a network of sales reps that we work with.
In the U.S.
So we think this network.
Although.
It doesn't automatically mean that we have increased our sales they are very important to for us to penetrate different markets and segments that we are targeting and to speed up that penetration and growth.
We are very happy to have these partners on I would especially like to emphasize the value added resellers, which we think are going to be important for us going forward.
And to see what they have been doing so far let's look here to success stories with elevators Finetech from South Korea have developed a very neat.
Retrofit solution actually in two or three different variants that they are now promoting to customers in South Korea, both Oems.
And.
For new equipment and for retrofits to Oems and local landlords and.
Service companies.
And very similar to the company called Hong Kong productivity Counsel I've done a similar solution, which they are promoting in the Hong Kong and China.
And there are there have seen a actually a good growth of their business. Thanks to the corporation with Us and that's a win win both with fine Tech and it's.
HK PC and that's motivates them to promote our solution because it helps them to win and at the same time. It helps us to win so it's really a win win and we think of the.
Two very good success stories.
In the air.
Airport kiosks space I mean, we have together with a company called happy hover in the Singapore.
Good.
Story to tell about Changi airport and now they're in the second or third phase of installing more context lets touch interfaces in the airport terminals at Sandy they're also expanding to other airports on two other.
Customers besides.
Air airports and aerospace companies.
Quite similarly, Jeff on Airlines.
Have picked up.
A proposal from Japan aerospace to do a contact less touch check in checkout terminals down there is a pilot ongoing at the Haneda Airport in Tokyo, and both jobs and.
The other nip on air and in the Japan are very interested installed its across all their airports and depend on all their terminals.
Jeff an aerospace and happy however, they are actually pushing this quite hard because they feel that they can expand significantly.
Using our technology and at the same time, which helps us to grow and penetrate these respective markets.
So these are four examples of what we are doing with our value added partners on the other value added parts. We haven't Tech Park has we have they are working in similar projects with their respective customers in their respective markets. So all in all we think that this combined direct sales approach on the partner.
Torches very very important for our future growth and success.
Yep.
So why do we have these two business areas when they are sort of similar they both worked with human machine interface technology.
Yeah.
They are.
Separate but mutually supportive so we have different focus for the two business areas Asian light product sales of standardized products. It's you might solutions here, we offer customized solutions and that it's a.
Technology licensing business.
It's an eye products, we would have many many customers mainly indirect sales through distributors and partners.
And typically the customers have been buying and use our products at CES.
And then you see the contrast to what we do in H. My solutions very few customers mainly to direct sales and per program could be quite large development efforts. This is the solutions business.
But we think the strategy is right.
And there are many synergies that we can use between them about business opportunities product ideas partners technology et cetera, So we eat.
Feel encouraged and progress we have made so far this year and we will definitely continue to work on these two.
Separate button each in the sporting business areas and we think it's the right way for us going forward.
Want to optimize and improve in each one of them that we want to grow in each one of them, but the combination is a very strong points I think in the Neonode, Oh 10 to 20 and going forward.
Finally, some words about our newest business area remote sensing solutions that we officially launched this year.
And it's a new business for us, it's a software business, where we aim at becoming a tier two software supplier.
Two tier one system suppliers and Oems in the automotive industry.
The focus is so far.
100% on driver and even cabin monitoring.
Long term that may change that we've made.
Also look at other types of applications for this type of.
Software that we are developing but right now in the next years they'll be fully focus on driver in cabin monitoring.
So our technology here is a scalable AI software platform.
That supports different types of driver and cabin monitoring features it's a scalable platform its hard about agnostic. It has a very limited footprint that can run on virtually any processor out there.
And then we can achieve high performance, even with the lower resolution camera, which.
Which is the main sensory input that we are using.
And by having this low system requirements means that we can solve Florida. The amounts to for instance stipulated in the European GSR and the U.N. kept guidelines for dry and monitoring features a new vehicles from the 2024 and on.
We can solve for that with very low system cost.
This is a strong point in our offering compared to our competitors both other tier twos software suppliers.
And tier one system suppliers that are.
Sometimes I have resorted to more brute force approach is the quite a.
Expensive hardware comply.
Components.
Well again one of.
If if he gets.
A chance to right to me the customer in an elevator. Once we will always pits is that our solution is scalable to target agnostic no competition on footprint than we are there to help them increase safety and fulfill the legislation going forward.
The main drivers in this market its.
Safety concerns and.
Indeed.
European markets for instance, the European Commission have looked very closely at driver distraction drive a drought and that somehow this causes a lot of the accidents in the traffic and in view of the sphere of vision to try to avoid any kind of accidents.
The Commission in November last year, published a GSR requiring a an advanced driver monitoring feature in every vehicle that will be sold in the European Union thrown fans attend the four and on.
So it's a safety concern about the drivers state easily distracted. This is falling asleep and then linked to autonomous driving also it's the driver actually holding his hands on the steering wheel or not.
Uh huh.
Another type of safety concern is what's known as side left behind.
On the especially in the U.S., there's a big debate and there's an upcoming Miss the regulation for.
These type of features so that you cannot accidentally forget your child or your pet in when I look at car and Uh Huh.
Today.
This is another type of safety concern also.
Also people are realizing that you could monitor the seatbelt use on the actually how you apply the seatbelt.
That's it it's positioned right and.
This type of technology to be working on here can actually support. This so these are all examples of safety features and.
At the same time, all the Oems in the end is automotive business. They are looking at the comfort features.
And then it's everything from autonomous driving which is a safety and a conflict feature down to very personal preferences and how you prefer your climate control or audio control in the car.
And so.
The software we are developing and in cabin monitoring features we can offer they would support this type of feature in modern cars and if you have an OEM would invest in a camera in the cabin of the car and hardware to run softer on.
What we are seeing is that all of them will have a quite long list of features that they want to realize using that hardware and.
We have anticipated this from the beginning with our development of the multi stuff sensing software platform, we can actually support a wide range of this.
Types of safety and comfort features and still at the low cost some distance really our right to win in this space.
In in real time, I will skip forward here.
And say that how do we differentiate from competition. Those of you that have followed US. This year. You may also be aware about some of our competitors and May also follow them or you are just.
I was interested in automotive markets. So you may have understood that there's development for driving long term features going on.
What we rely on very much she's some unique proprietary software algorithms they are AI.
<unk> using machine learning.
Cold.
Oh, it's very tailored.
So in the end our approach.
Works, well with a very very lean and modems that then take very little to execute on the even a small processes. We are also relying very very much on synthetic data.
And that that supports a short development cycle of excellent change management, and the weekend upfront and the with precision calculate or estimate.
Future development efforts.
So yeah.
In sum compared to other companies working with room based driver monitoring software algorithms or AI based we are more efficient we are faster we are more transparent and.
Plan above.
So we bring different values to our customers and this.
Business area.
And.
With this overview of our strategy and the business I will turn.
The word to Maria Eric our CFO Maria Thanks.
Thanks Darren.
And.
Our third quarter earnings release, and the 10-Q available for download from the investors section of our website Neonode Dot com.
So I would like to start within a summary of the quarter.
Revenues are up by zero point $2 million compared to the same quarter 2019.
This is driven by sales those sales and sensor modules well licensees were almost flat between years.
Operating expenses are higher than planned for the quarter.
Three points here.
<unk> million compared to $2.1 million to same quarter 2019.
However, on a pro forma basis, removing one time costs and operating expenses for the third quarter 2020 would eat through cost 2019.
You said the evolving our operating loss was up I see your point $6 million compared to the same quarter 2019.
We had net revenues of $1.5 million for the third quarter to 2020.
Yeah, which is an increase of 14.1% from the comparable quarter last year and almost the double compared to the second quarter. This year.
Revenues from our solutions business consists almost exclusively of licensees.
We added $1.2 million during the third quarter 2020, as well as 2019.
How many other revenues related to automotive.
<unk> increased from 2.1 million to $2.5 million, while revenues from consumer electronics decreased from $7.8 million to $2.7 million.
We see generally lower license revenue due to slower sales in the global markets related to the company's 19, and then so the increase in automotive is a positive development.
It relates to assessment project that was completed a couple of years ago went into production in 2020 and is expected to be in production, but at least five years.
In the third quarter 2020, I just mentioned I think that technology is shipped 1.7 million devices.
Which licensee of 69 cents and he total.
To date more than 77 million devices didn't you know technology has consumed.
Let me now each of my opponents business area, we have seen an increase in the number of she could actually the third quarter with revenues, though to your point threemillion compared to $4.1 million the same period last year.
Most of the credit sales.
Has been to have partners me you asked in China and that's the end of September we had a backlog of $2.5 million to the planned shipment within the next three quarters.
Can you answer to received purchase orders for new sensor module shipments have increased and manufacturing activities to meet increased demand.
Our gross margin.
Well it.
8% to 10% for the third quarter to 20 to 20.
That's 95% the same period in 2019.
Decrease you can make some higher product sales and gross margins ranging between 30% to 50% in 2020 compared to 100% gross margin nice to see some 2019.
We expect this trend to continue as a sensor module sales increase as a percentage of total revenues.
Operating expenses increased by 25% to $3.0 million for the third quarter 2020 compared to 2019.
Which is due to one time costs, partially offset by lower payroll costs and this traveling.
Excluding the onetime costs, our operating expenses have decreased by 2%.
Our net loss for the third quarter to 2020 was $1.7 million was 16 cents per share compared to a net loss of $1.1 million or 12 cents per share for the.
Third quarter 2019.
Excluding the onetime costs, our net loss for the third quarter would have been $1.1 million or 11 cents per share.
Net cash used in operating activities during the quarter 2020 increased by <unk> points, when meeting known as compared to the same period last year.
The main reason is the increase in its not us.
We had cash and cash and accounts receivables.
$13.3 million at the end of September, which we believe is sufficient capital to position the company to capture the growing customer demand across all our business units.
And with that I would like to hand back or whichever one.
Thanks Nelson remark.
Thank you Maria.
And.
In.
Closing this presentation.
I would love to highlight a few points here first of all.
That.
Our sales force technology, which neonode has been developing from.
Mead.
2000 and on.
And that is very well patent protected by US is an enabling technology addition, ideally positioned to solve for a lifestyle shifts to contact desktop solutions brought on by Koby 19.
In comparison to other companies that now I will try to exploit it.
The search.
And the demand for contactless solutions.
Actually we have a existing and proven and ready technology and we are ramping up.
Our production.
It was given the increase in demand that youre seeing.
Yeah.
We see that and we still believe that there is an enormous market opportunity for this both in new a retrofit the equipment.
Focusing on the two very large segments interactive kiosks and elevators, we have a global reach.
We are talking.
Talking to customers, both in North North America, Europe and Asia.
And we'll continue to do so in the coming quarters and years.
So this is a very exciting time for us and we continue to build.
Orders for these products at the same time. We are also pleased to see that we have a significant interest for our.
See force and multi sensing technologies from customers in avionics and industrial control system industries and the automotive system.
Automotive industry, respectively.
So in sum.
We think that we have a good play and the good future in all three.
Business areas.
We also have a by the private placements the.
Completed in August adequate cash resources to grow and accelerate.
And the the focus for US now and the coming 12 18 months or so it's clearly on execution.
Yeah on the growing sales and growing the topline and by this we are expecting also to be able to present to incoming calls or an improved bottom line.
Turning to earnings.
By this we have come to them the floor, our presentation and we will now open up for questions from our analysts and.
And I will ask you, Dave Duncan to moderate sales.
Thank you.
Okay.
So Chris do you want to open it up for questions.
Certainly at this time, if he would like to ask a question Press Star then the number one on your telephone keypad.
And you have a question from Victor Wesman of Red eye.
Hello. Thank you can you hear me.
Yes.
Okay great.
And you.
You have been doing quite a rebuild of the organization on them.
And I just wanted to ask him what how long time, you think it would take before we see some effect from the transcript.
Transformation and that changes and what are the first effect.
Oh I see.
Yes, yes, we are.
Actually rebuilding in the on the old from.
Outside in any inside out so we are doing a quite massive overhaul but.
But he of course, we do it's tied to do it in a sensible way and step by step.
During the second quarter or two.
Two strong additions to our team represented missed a you on shots on Mr units van.
And they had up.
Our business units each of my products and H. My solutions, respectively. They haven't really made starting to make an impact on our business and our strategy and what I percent here and also they are working to expand our own sales force on the partner network that I mentioned, so here, we see examples of.
Results already.
Yes, the other week a missed so she is she joined us a new VP of engineering.
It's too early for him to make a strong impact on the well to present here obviously.
But I expect that he together would you want to join us and the rest of our team here will.
Have a stronger and stronger and more clear and more clear impact on our business and our strategy. So we are quite excited about these new additions.
Recently, we also I can mention we hired two senior sales person is one in the U.S. that's been focused on the military and avionics market and one in Europe.
That's been focused more on the industrial an elevator segments both of them have a more than 20 years in sales and sales management positions in very very relevant industries and actually working for competitors of ours.
So.
This is the way the step by step and gradually are.
Our revealing the scheme and strengthening the team.
So I think we will continue.
On my personal agenda I have some more things I want to do before I'd say that we are down on the other hand.
In companies like this you are never done so it will be more to come.
Continuous development as we go forward.
And.
We always try to be agile and that we are prepared to change our plans and adjust and what we discussed with the team here last week. It was one example is that in January February.
I commit I could not see that the Cobi 19 pandemic would hit us so hard.
And that we will see this increasing demand for contactless touch, but I think we have responded well and adjusted.
In a very good agile way and this is the approach to them take regarding our organization and recruitment and how.
How we use our resources going forward.
Yeah.
Good and then you mentioned military market there.
I think you know military the military market moving a really really fast compared to automotive. So can you say I mean in other words, we do you know can you say.
Something about it.
Speed up the process.
Arrive a quick yeah.
Crime show sales in the <unk>.
Breaking up.
Its rights that we have a we still have work with automotive customary remarks now also tried to target military customers and we also have other customers that work in industries, where typically the sales cycles are quite long and the development cycles are also alone.
And we have been quite open and clear about this we think from a actually beginning this year that the transformation that we are trying to achieve in Neonode will take some time, maybe a couple of years.
But [noise].
Of course, we tried to shorten this time and also use a state that.
Our scalable platforms and reuse a lot of the designs and developments.
And this is to help our customers to have a shorter time to market and this is a I think a value in our offering to these customers that we can actually speed up things compared to their normal development and this is thanks to our.
Good technology platforms and also our know how from 15 years working on tops yester sensing applications for printers E readers automotive and medical for instance.
Yeah.
And and I think the military avionics quite clear, but you know what you mean, but what.
You referred to.
Industrial segment is that the dark the very rugged industrial can you give us some examples on the sweet spot.
Yeah, we think that there are actually two sweet spots, but indeed rugged industrial applications that could be in a sort of a.
If you have actually a factory environment that could be a production hall or something where you have.
You can have both.
Moisture in terms of water oil and.
The air you can have the dust you can have also outdoor applications that should work in the wintertime.
Hawking called on similar so ruggedness.
What we have in mind in the first place, but speaking about synergies between our HMS products business area and H. and my solutions I think also in kiosks and elevators, what we will see.
Is that especially large OEM customers in those segments. They will I think to a larger and larger degree how skus for more bespoke solutions that are specifically tune them the adapted to their products and.
Here. We are are we are still neonode, and we will definitely try to capitalize on such opportunities as well in each of my solutions.
So there are these two sweet spots from say Victor.
Yeah, good and can you give a short update on that pilot for the city.
Okay lives with the big good self service kiosk manufacturer and they had a quite.
Aggressive rollout time, if I recall get can you say something about that.
Yes, no no our customer in this case it is a leading.
Player in the interactive kiosk market they have a worldwide.
And reach on a very large organization. They are quite committed still they are pushing ahead.
We have the.
Their own quite aggressive plans, we know that they have the right now it seems very positive reston on strong a big retail chain operating in South America.
They are still working with the few chains in North America and in different parts of Asia Pacific.
But I don't have any more substantial news that I can share at this point, but it's still looking promising and solutions are and have passed some different internal approval stages at our customers.
So we are quite optimistic about this how it will play out but I can say personally I think that the growth anyway will be.
Like.
Step by step.
<unk>. This is a very big company that we are dealing with and there are many customers but of course, each customer will make their own decision.
And they will come one by one I expect so I don't expect like first of December for instance, I think it will come an explosion of 15, new programs with this customer has become one by one over the next quarters.
But we are still optimistic and it's looking good and we have the encouraging feedback from our customer that they Oh I also think that this will fly in a very good way going forward.
And Okay last question, if I may add them on and from the competition for.
Well on the competing technologies for it elevates person kiosks.
What.
What are the typical a you know a card.
Acknowledge your could you did you see a lot of great daughter or time of flight from FERC in the market for pumping out.
Yeah.
I would say personally for a kiosks and ATM is.
Personally I regard mobile phone apps outside one serious comps.
Competitor in terms of an alternative technology or turning the way of solving this problem.
But it will be up it's it's a fragmented market. So some will use capacitive sensors and boost up the power in those so that they will react.
Actually.
A few more limit yourselves.
But compared to capacitive solution, we think actually our solution is much more straightforward, but investor.
But there are also some companies doing like with cameras and then it can be more three d. gesture sensing and.
I'm sure that it also applications their radars are being used plus voice controls actually if you look at this whole market, there's everything from mobile phone apps to camera based yester sensing voice control and then we work in a portion.
On where infra red these more directly competing would say peak up solutions.
Overall, I think we have a very strong and the compelling offer its simple intuitive.
And it doesn't interfere with if there is an underlying display or keep Todd.
So its works perfectly for retrofits and very easy to use and can also be integrated very nicely new product.
In.
In elevators are I know some elevator Oems are promoting their own mobile phone apps, but if you think of it how intuitive is that if I go into a an office building or a apartment building that I have to pull up my mobile phone and this building there.
Happened to have like a otis elevator as a download the oldest up.
That's a knowing we have a much more straightforward solution and it works perfectly with insufficient type of.
Control panels touch buttons that you're having in elevators and for instance, the very nice solution developed by Finetech and some other companies that we work with in North America. They looked magnificent they look actually very stylish and they work excellent. So there.
In elevators, I'd say mobile phone apps and other advanced solutions.
They are not so intuitive and easy to use as our so we have a very strong offering there.
Great.
Thank you very much a button on the money on the I'm, Dave that's well keep up the good work.
Okay. Thank you Victor.
And thank you everyone for joining we will publish the slide deck from this presentation on our website later.
Later today.
On Neonode Dot com.
And I will also mention hearing closing that in the slide deck, we have an appendix with some reference to market data that we have used to build up the diagrams on the pie charts that we showed during this presentation. So.
So if you're interested.
Lucas immuno dotcom later today and you.
You can.
See that slide deck from this presentation. Thank you very much and the join US again for our.
Fourth quarter call beginning next year. Thank you.
Thank you. This does conclude today's conference call you may now disconnect.
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