Q2 2021 Neonode Inc Earnings Call
[music]. Please standby your program is the balances again and you should need any audio assistance during your call today, please spread the R&D realm.
Hello, everyone. Thank you for standing by and welcome to the Neo No second quarter 2021 earnings Conference call. All lines have been placed on mute to prevent any background noise.
After the Speakers' remarks, now well the other question and answer session with the companies covering analyst who asked the question. Please press Star then the number one on your telephone keypad. If you would like to withdraw your question press the pound key.
And at the time for opening remarks, and introductions I would like to turn the call over to David Brunton, Neil nodes 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 second quarter 2021 financial resorts results and provide of corporate update.
Our update will include details of customer activities technology developments and other items of interest on today's call as our CEO of urban poor sell in of our new CFO Fredrik nylon.
Fredrik joined the company last week and provide and will provide a brief introduction of himself in just a few minutes you will also present the financial results of the company for the second quarter.
Before turning the call over to urban and I would 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 tend.
We'll guide.
The 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 nanos business financial position and other operating results, which include but are not limited to the risk factors and other qualifications contained in the notes. The annual report on 10-Q10-K quarterly reports on 10-Q and other reports filed by Neil node with the SEC to which your attention is.
Correct it.
Therefore, actual outcomes outcomes and results may differ materially from what is expected or implied by these forward looking statements.
The expressly disclaims any intent or obligation to update these forward looking statements.
At this time it is my pleasure to turn the call over to urban urban. Please go ahead.
Hey, David and also from my side Wildcards of its call.
It's a pleasure being here.
All of you and the 2% second quarter earnings per share some updates.
All of the business on our strategy.
Yeah.
Okay.
Okay.
Yeah.
Presenters during this call.
Besides the day, who you are the Matt and myself would be predicting the Lynn are needed.
Oh.
One of the two Frederic and let him take a couple of minutes to introduce himself.
Thank you Patrick Thank you one of them.
Yeah.
I'm excited to join the Nemo day I have worked with in finance since I graduated from.
I started in the auditing and accounting.
Moving of them more and more to control the analyzing and reporting.
All three positions have been the neither of the finance Department in the company I work flow.
There's the that's the finance director at the moment.
In the life.
Yes.
Iff's develops and delivers enterprise software for cash.
The moat around the world.
The manufacturer and the Super groups.
And then taking the assets and managed service.
Operations with a turnover of one 7 billion Swedish crops of about $200 million.
All of that region sounds from 24% of.
That's the total.
Before I start I want the group CFO of Seymour.
Listen on the personal matter of fact in Stockholm.
Sunoco of Swedish Fintech company, which states other all software.
They know the developed health class for the half.
Part of the stumpage change the trading system.
And also real time kidney system to the queue.
In the house.
Real time care of it means really of the time trade in the nation trading position management and risk calculation.
NASDAQ acquired Sunoco, Inc.
Print the 19th.
The the finance integration in the NASDAQ and some of them off the.
The student at that time.
And then the loss position of handled timing dips while holds up in the company, providing online payment solutions into one of the pace of increments.
In 2013 Gibbs of listed on NASDAQ of personal and Stockholm the.
Acquired by mix and the day listed and they led the finance integration.
Michael is the transform the finance team and me in the two.
A true business partner and to be of natural part of ongoing business decisions.
One prerequisite for this to happen we used to have data structures and the available. So it can the slice in different place turned into the information. So the decisions kind of made of knowledge.
The world is always changing and that means finance needs too.
Through the change.
Therefore, we always need to develop and strive to be more efficient.
There's always a better way.
As I said I'm excited to join Hamid I think net even though it has great technology and the potential.
But two of them.
Thank you Fredrik and again the welcome to the end of all down to the team.
The floor to working with you here.
That's the upfront summary.
And highlights of the must be the percentage of it's called I want to review the following the bullets with you.
First of all of its the.
It should be clear and we repeated that the continued to execute on our strategies and the build our business pipeline. We've been share of some positive updates all of our business today and are in the company and the AR and the management team. We are encouraged by the progress we are making.
Of course like net of the year, we are eager to see any of the business of <unk>.
And we are working hard every day to do but we have some good results to share with you in the call and you can find more details in the report.
And in the 10-Q.
Yeah.
Like many others, we are still affected by the COVID-19 pandemic.
And it negatively impacts our business that should be clear vs.
Have a direct impact in terms of knockdowns and problems in traveling and meeting with customers the.
The more indirect that are also we are affected especially for our licensed business with automotive customers and to some extent printer customers of the churches of all of the semiconductors in the world.
And.
In some.
Cases, we also see the effects of a general economic downturn, we see some effects of this but despite these headwinds.
We are quite happy with the progress we have been making during the first the second quarter.
And the lease Python.
We have our target is clear to grow the business.
Yeah.
To give you one kpis for the second quarter is that we grew our revenues by hundreds of thousands of 7% compared to the corresponding quarter last year.
I think the good herself personally of course I want to strike the more but under the circumstances, we think that the progress is really good and it proves that our strategies are working and that we are on the right track.
But the non part our contactless touch solutions, which is our main focus and our touch sensor modules the products.
We have embedded our the steep force technology in the standardized sensor modules that we produce in our own subsidiary and pro note here on the West coast of Sweden.
The demand for those are also picking up <unk>, leading the way.
With customers in Japan, South Korea, Taiwan and China.
But we also see interest.
And the growing interest from customers in Europe, and North America, which is very very positive.
Our license revenues have required when after the death of the soldiering of spring last year when the.
And then make of course.
With us.
The than it was the very very slow period for the printers and the automotive sales.
But during the second half of last year and also of the first half of this year. It has recovered very well for us and we see some of them with changes in the product mix, but overall it's the.
The good recovery out of the at the good level of now in the second quarter of this year.
Yeah.
Some.
Of the highlights of the call and I will now turn the word back to the Fredrick who will take us through some sort of detail on the financials. So all the key predict.
Yeah.
Thanks.
You can find our second quarter earnings release and 10-Q.
Download from the investors section on the left side the dot com.
Okay.
For the second quarter of our total revenues reached one 7 million that is an increase of 127 per cent compared from the second quarter previous year.
Revenues from sensor module has increased from the low levels of upscale with 439%.
We can see the south of modules.
The news has a positive trend.
Specially in APAC.
The life with the Blue bar, the Blue colored box.
As we expect the APAC is the first reading in terms of contactless the touch technology.
Yes.
Operating expenses for the second quarter increased the true.
The seventh compared to the same period last year and by 9% compared to previous quarter.
During the second quarter of last year costs are low due to the pandemic. We got the governmental support at the same time as we introduce the cost measures, meaning the battery cost conscious.
We are now investing expertise that is we are hiring come from people, who can help with the continuing doing the.
The cost level, we see in the second quarter. This year, it's more of in line with the expected cost of it.
Yeah.
Our total gross margin from the second quarter 2022 of them 187 per cent compared to 84% from the same quarter of 2020.
The increase is related to higher product sales with higher margins as you can see in the second chart.
In the second chart, you can see a trend of improved margin on the products. The main explanation of all the.
The margin from Q2, 2021 of them, it's not depress the low margin in of Boston and team.
Have update with the process the TCM.
We expect to see an increase in margins coming quarters.
The long term as volumes continue to increase the we'd.
Probably see a pressure on the Morgan, but short of medium term the confidence at the margin and the part of Houston.
It will be at least.
Yeah.
It's all from second quarter.
Yeah.
Net cash used in operating activities during the second quarter of 2010.12 of them last one from the $4 million.
Compared to the previous quarter and net cash from operating activities has decreased to 29% of the negative cash flow has actually decreased compared to the previous quarters.
The effective we took a one time items.
We expect the cash of two last well into next year.
A few of them.
Thank you Fredrik.
Now for the next part of this call.
I want to review with you.
Isn't it more in depth on our strategies and our business development.
First of all of that I'd like to share.
What is our vision and.
We have states like debt to transform the way humans interact with the machine.
At me I know this has been at the core of the company since its foundation.
20 years ago, the handle of astounded.
With the focus to develop new innovative smartphones. Since then we have developed a couple of solutions for easy the printers and the other innovation always with the focus on transforming and improving the interaction between humans and machines.
We continue to work towards this vision and everything we do every.
Every day of week every month.
Okay.
We have a broad.
Technology portfolio.
And the work with the.
Touch gesture control object detection.
[noise] analysis using camera.
Hmm.
Since last year without any.
Increased focus of what he called contact less cuts and other things.
The name and the minutes, what we mean by contactless touch.
Our technology and our offerings of.
Extend across multiple segments all of them.
<unk> focus.
Elevators and interactive kiosks, but the all.
The continued to work with automotive applications medical applications.
Military avionics consumer.
The consumer electronics and to some extent also visiting signage, which can see the scene as an expense in all of the interactive kiosks segment.
Our main focus however, since the last year.
And the continues to be this year and going forward the life and the center contactless touch for elevators and kiosks and this is where I want to go further into the details are not only of the presentation.
What is contactless touch.
For us.
The mean contactless.
But the top flight interaction with the display.
Display or with the T pad of keyboard or robustness of saying.
You have of your finger in front of the display and you click you swipe.
Gross but you do this with finger gestures.
Mid air.
This is what we mean by contactless touch.
Touch interfaces is very simple and intuitive and none of US dollar of very used to interacting with the machines to touch this isn't.
Especially on the valuation of the way the interaction of it takes place in mid air and from the other display of our above the keyboard and I'll touch on it.
And here are the tough sensor modules or originally obviously developed for touch applications, but also intended for gesture sensing is the perfect fit.
They offer a simple and food the way of creating good user friendly contact with the touch interfaces and applications can be founded in a variety of different types of of kiosks in the elevators.
The other applications in the.
The wireless it's interesting.
We have talked about this on previous earnings calls on the.
Today I just wanted to share these two quotes from two.
The market reports.
Yeah, I think most of you have heard stories and the graduate porch about.
What can be found on the.
Parts of the screens and other devices in public spaces.
It's not a perhaps the most cuts the bank.
Think about.
But there is a lot of bacteria viruses in the us.
Other things sitting on the screens and the key pads and of course, the COVID-19 pandemic has increased the focus on debt.
We say that's a contact the touch is very very good in general for health and safety and this is of course true for it.
The buyers just like the Covid virus, but agenda. There are many other viruses as well and that's been the for the last of hundreds of years floating around what we're hearing of the world and north of bacteria and you have all of the other protocols.
The material.
The positive on these displays and he is out of contract let's touch.
Really cant add customer satisfaction.
A good user experience and also add to the grounding and the to the.
The customer is using.
And why do we think we have a right to win here of white yellow and the why are our top of the sensor modules. They are simple intuitive easy to use they're also very cost effective compared to many other solutions.
And if you look at cost of.
Ownership and ease of retrofits that we had very very strong offering here.
There are of course other ways to realize the contactless touch user interface and.
It's very clear to me and I want to be the first day I missed that in some applications for instance, the use of <unk>.
Personal devices like your mobile phone.
We are good the alternative.
But we still think that Oh, the type of contactless touch interfaces for displays for key core of buttons and the elevators.
All very natural simple ease of use relative.
The cheap and easy to install so we have actually a great opportunity with elevate the customers and with the kiosks customers.
And we can offer a lot of Abbott and the use of value.
Yeah.
Speaking about the elevators one of about two key areas.
We continue the progress of our business development with partners such as none of the elevated here from the Canada.
They have developed.
Products that the called.
Samsung.
And that it's a new product for them and realizing of contactless touch interface for the elevate the control panel.
They have the developed tested and that started the rollout of this product and.
They are getting more and more of a positive feedback from these rollouts and the the new installs, but they are making.
Here's one example from the.
Our health care Center in Toronto, Canada, Although we have very positive feedback out of their day.
I'm very satisfied.
By end customers and the end customers end users.
We have similar stories from our other partners you have in the U K and find tuck in Korea and they are also starting to approach elevate the Oems and the other players in the elevate the markets both in Asia, Europe, and North America.
Oh elevators is and will be one of our main focuses going forward and we have a two day.
Actually moved forward out of precision quite considerably compared to last year, and even compared to the first quarter of this year.
So personally I see that we have the better value of good the strong play and elevates the risk going forward.
He asks.
Perhaps even more interesting for two reasons one there.
There is around 20 of mainly on the elevators in the world, but if you would the count the number of interactive kiosks of all types, it's almost $40 million and that number is rapidly growing every year. So the CAGR for interactive kiosks and the adoption of this type of solution is very fast and it's fast both in.
Asia, Europe, and North America. So we are super positive about the opportunity and kiosks.
We have worked for instance, the death on the aerospace are targeting airports the headlines and the.
Recently, we started the new trial that never used the airport with the Sky team and the that involves for instance, KLM Air France Korean air them.
The Super happy customers.
Customers are the the first reactions on the first trials from the Arista and remember the resized the international Airport outside Tokyo. So all of the Olympian Olympic participants traveling through the re thought and that's why we wanted to have the kiosk day.
Of the here and show them.
The previously announced that we have already started to rollout from the more of a massive scale with the one of the major.
The Asian airline.
We are also doing other installations and trials in South Korea, and the Middle East and we are approaching it.
Also in Europe, and North America.
So the transportation sector, perhaps the led by airports Airlines, but don't forget we also have similar at true.
Transportation as the bus station of subway stations and so on.
Similar checking in the bag of stopped kiosks, and ticketing kiosk, where our contact of touch technology fits very very well so.
Self service.
Because of airports and other transportation hubs is another area of it.
<unk>.
The two to work and the way we have already seen some great results.
Another of segment. This quick service restaurants, and hospitality in general of self ordering kiosks at the Hamburger the restaurants are in the.
All over the world the.
We are working with the city of restaurants in the in Japan.
There are examples of our company.
Companies using our touch sensor modules to do tuck the contactless touch interfaces.
The hotel check in and other hospitality applications at the well.
Uh huh.
If you consider a hamburger restaurant for instance, I think and keeping.
This in mind about the transmission of the viruses and bacteria from the top of surface on the kiosk then you sit down and Easter Hamburger and you are free.
Good day.
The hands, it's the little bit disgusting I personally I have the tasteful. This now so I would really appreciate if the hamburger restaurants I frequent stay was also convert their kiosk the contactless interfaces.
It brings a lot of value I think and we the continued to push here the.
The different partners on different customers are to grow our business with quick service restaurants and other hospitality.
The applications.
Retail and the <unk>.
I'll turn on all of this is another big play for us.
And.
I'm happy to announce that the NFC the Japanese IP company awarded Us with the master of appreciation last month.
For the good cooperation in the a couple of projects that we have been working with them on four of retail application of one in particular.
Self checkout.
The minutes for supermarkets in the similar.
So both the retail and self service kiosk there.
It is a great play for us and the M. A C is just the one of the large OEM customers that's the art.
Engaged with.
And we are happy to work with NFC and debt to grow our business with them in Japan and also internationally.
As the final example of this export to say all of the customer activities.
I wanted to review with you of this case the mitek.
We have at the beginning of the summer released the press release, but I like that so our touch sensor modules for smart AI kiosks I. This is significant for two reasons for US one is that the mitek, you're kind of starting to inch screen and the mitek the use for sensor modules per key.
He asked the realized the contact that interface and to reach the performance day, we're looking for.
Second.
This is a smart AI kiosks can we think this is pointing the way to the future for obviously for Mitek and day believes strongly in the stem cells.
The other key off of manufacturers and we asked me I know using our camera based technology to monitor human activity in the cars are.
Or in other spaces.
We will certainly continue to look into this and the work on smart kiosk applications combining our.
Contactless touch technology, the camera technology, So look out for more news on the smart kiosks and the technology solutions from the Ono in this area in the future.
Yeah, that's the feedback samples and.
This is what we mean that the we are continuing to execute on the strategies I remember our main focus areas of the elevators and kiosks and kiosks consists of many of sub segments everything from transportation.
Yeah, two restaurants.
And to repay debt and other segments as well.
Right opportunity and.
But we kind of work both the retrofit the new equipment.
Yeah.
Also I'm.
Very eager to share with you that the.
No no. The we are of value of different company.
Our core values of shown in the slides.
One thing with purpose of customer focus to make tomorrow better.
And the building of them make tomorrow better we are continue relentlessly to execute.
On the assessments, we have and also to try to do it.
Input of the way, we work and the everything.
Everything we do.
So during the last month during the second quarter and throughout the summer we.
We've had the special focus on the face of the marketing and engineering activities.
And to.
The work.
To improve.
Improve how these teams work together and how they work are individually.
I Wonder yourself is that we decided during the second quarter to reorganize our sales team into regional.
Responsibilities and the as you know from the previous earnings call that we discuss.
This in some detail the are now working with one team focusing on sales in the APAC region and another team of sales from the EMEA region and the third team with focus on the Americas.
The older and you're starting to see some really good results from this in terms of increased focus and Inc. A bigger some of them in all three of aegis and also a bigger set of especially we have reported in this call are there.
And we will continue to work on debt and build on this we are encouraged by the software was achieved from the reorganization of the.
The recruitment that we have done all of the new talent and our experience to the team.
And this is what motivates me to come to the office every day to see the pockets of they're making and a whole.
How much we can achieve together in the different teams.
Another thing I wanted to comment on here.
Our of go to market strategy with.
Continue to get questions from.
Shareholders.
From other partners customers and you are interested people, especially the one question. This.
Repeat the by many.
Why have you focused so much on your part of the network in the last year and I.
I wanted to really use this picture and talk a little bit more about this agenda of the ballpark what the market strategy.
First of all the think that this type of pyramid.
Australia is very suitable to describe the both the elevator in the kiosk market at the top here of these two markets there are like.
10, or so really big multinational companies are representing.
The large fraction of the total market share.
For elevators, it's in fact of four companies that make up more than 60% of the market all of the new elevators read the kiosks. It's the gamut five companies that have a dominating market share. If you look globally, but on the other half of them. They know of batten. There's we've got the number of.
Quite sizable and hear the represented by the <unk>.
The segment the year mid sized Oems are debt.
Have a very very big business.
And at the bottom there are many many small players that the work more locally.
The more we work on the elevators the kiosk the more of US to think that this illustration is suitable to describe these two markets and how do we.
Approach these customers yeah, we do with the combination of direct sales with our own sales resources.
Because we are a small team relatively.
We direct the focus here on the larger accounts.
And the more strategic accounts.
Our two Inc. Help us increase the speed of the market penetration.
Of the worst of our close to us.
Interest in Asia, because the way the business is typically done income countries like Japan, and South Korea.
And also you have the interest coverage and.
Add resources, both of the marketing sales and engineering and technicians to go out and install the solutions in the field.
That's why we worked with partners.
And that also we've tried to direct.
As many customers as possible to our.
Distributors like it'd be the key in cereal and the yesterday manage the sales to them automatically assets.
Save time and money for us and yes.
Push outs of products.
No.
We are finding that this hybrid go to market strategy of combining direct sales and indirect states of partners.
It's a very.
Effective and suitable for our type of products and all the type of business and the customers on the markets. We are addressing these continues to build this there will be regional and national variation and the there'll also be some variations between the different sub segments of the overall.
This is the model of it and continue the are quite happy with the subsidiary of achieved so.
So far and we are happy with the pockets of the.
Have signed up so far this is not the maybe not a lifelong commitment and maybe even the move on and the.
Why I say this because I also wanted to share this with you the.
Same site of typically for us starts with the retrofits and here is the one area, where we have good use of partners. They can be integrators tech companies.
The their own products, where they can integrate and use our sensor modules and in some cases it can be Oems also working in the aftermarket themselves.
Some of these integrators from Tech companies, we have signed up as the value added resellers of course, when they approach their customers.
The 8% of status as a public company or a systems integrators and from the good thing is that when they do so they include.
All of the contactless touch technology in their offering and help us reach new customers.
Even long term the.
The retrofits the severity.
The largest potential.
It's also.
Quite short to say the fact, the relatively speaking.
Uh huh.
But we have to be clear.
Debt forever elevator for every kiosks that has to be at least one person.
Visiting the site and physically installing the device in the elevate the on the kiosk.
And.
In all countries in the world It will be very very challenging for me to do this all by ourselves. So this is another obvious reasons why it's good for us to work with partners to help us.
Penetrates the market and get these solutions.
What's the are starting to see the the elevators and in some cases the T O.
Oh, yes, they get the whereabouts of solution they see the paucity of it.
The improvement of our.
And the use of value and the satisfaction.
Our solution brings and then they want to integrate this in the new equipment from the beginning.
And this is sort of the second pace of envy of kind of address new installs and then the.
The customers that's the need to focus on shifts a little bit away from the small tech companies and some local players into more of the Oems.
On the other hand, the sales prices tend to be longer and in some cases also impossible of to go directly to the Oems.
But as mentioned we the elevators on some types of the kiosk we are at.
The OEM.
The level now in our sales cycle.
And you have the.
The name drop again and they see obviously the NFC is the major.
The only company and kiosks.
And they are interested and they are installing it upfront and Theyre also doing retrofits on their own kiosks in the field.
With the Oems. We can also take this further and forget about them develop of realized.
The new innovative functionality and that's the sort of the third phase of the sales cycle.
This is typically even longer sales cycle, but then on the other hand, if you have good momentum in the two previous faces and the you.
We have established a good relationship with these Oems.
It's been sort of play by itself when we get there so taking together with the the.
Other slide.
I reviewed with you guys before this and this one this shows the the good benefits of the value of having partners, but also shows that.
We in parallel work with direct sales as part of the thing, especially main Oems the larger accounts.
So we will continue with this hybrid go to market strategy.
Partners play an important role, but it's not the only channel youre using to reach customers onto the drive sales.
You have to understand that it's the investors' faces in the state of the cycle and it's built off of the different depending on the what customers we are targeting.
And.
At the knee I noted we are well positioned.
To work with Oems and the larger system integrators.
And also we are very aware of all of unhappy with the owning and controlling the technology in the IP.
So we are building on this and we are confident that long term, we didn't come out of the winners in this.
And on the way, they're all sort of partners that we've worked with can have a good run on the good business of yoga to see and some examples of their partners have.
The significant.
Significantly increase their business.
Two of being able to offer our type of sensor modules in context of tough solutions to the customers. So it's a win of me.
But we are happy with our position in the vehicle.
As of the defendant the completeness of develop it.
The same.
Simply we are having a good time and.
This is.
The generic sales cycle that's the.
We are working on every day here every week.
Yeah. So thank you for your.
Your patience then of your time I just wanted to review this and make a few comments on.
Seem to be continuing as we get questions on from from different parts of it so as I mentioned upfront.
With this overview.
We have come close to the end of the presentation.
That's one of the to give you some summarizing remarks from my side.
Yeah.
Yeah.
The first is that we see of high and increasing demand for a couple of tough solutions on the touch sensor modules.
Of course, we can always hope and ask for more we ask ourselves what we can do more.
We are very happy with the progress we have made during the second quarter. Despite the headwinds caused by the.
COVID-19 pandemic and other challenges.
We have said since last year.
The debt.
This is a new business for us and it will not be like something that we can implement and achieve overnight.
It's more of like out.
MIT media more long distance from that we are into a do you think that.
The progress is good.
And the that's.
That's the <unk> have all of the combinations, we need to continue to execute on our strategies.
Yeah.
Our main focus continues to be elevators in the interactive kiosks as I've described.
Described.
In the previous slides.
And the answer is pretty straightforward.
The first one obvious application is to convert the control kind of thing the elevators.
B is it the control of the kind of the physical buttons or the top of display that is come on and some more modern elevators today.
We kind of convert both to contactless touch operation.
Can also convert the so called whole call of buttons or the spaces you have outside the home each floor.
So for the typical elevate the installation we have actually an <unk>.
The team that is the seller multiple touch sensor modules to the customer for the elevate the itself and the whole call button.
This is pretty straightforward.
In the next I mean, the future offerings from the unknowns targeting the elevated customer. So he could also include the more innovations in smart features that's makes yesterday.
User experience more personal and more convenient and fast.
So elevators continues to be one of the focus areas. The other one of interactive kiosks, an interactive kiosk with many of them comes in menu.
Shapes of force.
Points of sense terminals self service kiosk the airports in restaurants.
And so on all of this the group in the interactive kiosk is a very exciting market.
Good gross numbers, they're all of around 40 million kiosk is the count all types in the world the installed today and the.
The growth rate is.
Uh huh.
High single digit numbers and present and growing and we see it here in Sweden, we see at the in so many places in the restaurants and the other hospitality and retail applications.
<unk>.
The didn't have to get used to more and more of the self service kiosks and the Neal the out here to make some conflict in us for it.
Or is that the user experience for a safe and healthy interaction between man and machine.
Yeah.
Overall.
We are.
We are convinced that the well positioned to accelerate growth and capitalize on the.
The current and future opportunities.
And encouraged by this we continue to invest in the human resources, but also in our product development marketing the sales.
So are we.
Our accelerating and the VR.
We are also accelerating the business and the gross.
And the this is the current status after the second quarter and claims expense of one.
And in the second year of the pandemic.
Happy to be able to share this update on our progress and the unknown at this point.
This brings me to an end of the presentation I. Thank you for your attention and the.
I gave the word of back to you David.
Thanks Robyn.
I now open the call for Q&A from our covering analysts.
And at this time, if you would like to ask the question. Please press star one on your Touchtone phone.
The first question from Christian Schwab with Craig Hallum. Please go ahead of your line is open.
Hi, guys. This is Tyler on for Christian Thanks for letting us ask a couple of questions first.
It seems like everything is progressing well here as expected. So I was just wondering if you could maybe give some more color you'll break out maybe what was better than expected our worst I expect over the last 90 days of if that's the high end market or geography, or EBIT, just regarding your pipeline and outlook that'd be great.
Yeah.
During the second quarter of you saw actually a <unk>.
Gross numbers for both the our licensing business and that.
It's mainly related to our automotive customers Prince of customers.
Actually we are quite happy and we are up more than 50% of the at least the licensing revenues.
So that we can say that we are back on the good level.
And this is the trend that also was present during the first quarter, but this is this is the good news and yes.
We are satisfied with this.
So working on some new licensing.
Or in the REIT project that's the.
In the longer term generate new licenses so.
Our solutions business continues to be one of our focuses that we work on.
The most of the military avionics medical this type of customers you are talking about.
Uh huh.
But even.
Even more interesting I think is the growth of our products business.
Which which is growing quite nicely and the.
Achieved several hundred per cent like I talked about from the previous earnings calls with you guys.
We are not seeing the type of growth and the person that.
I think that were left in the beginning of the gross curb for our product sales.
So this is what we mean by and we are building a pipeline.
And so far the Asia, leading the way and in particular, the Japan and South Korea.
This is no secrets of mixed it's also what the expected.
But we.
We are happy to see that our sales funnel both in Asia.
In Europe, and North America is filling out the quite interesting leads that we are now working to qualify and push forward into.
The new deals for us a.
But of course, even though theres, a pandemic and many many customers and end customers feel like of pressure to come out with like contactless touch interfaces.
You have to remember that the OEM customers together if.
If youre working directly or indirectly with the.
They are still large fortune 500 companies many of them they won't change there.
Purchasing processes and development processes or the launch processes. So they've taken at the time.
And in some cases in Japan, and South Korea actually the projects. We are seeing now of being rolled out. They started last last year in the second quarter or third quarter.
And now we are seeing the results from them so.
It's true Europe, North America of little bit behind but the the sales funnel is also there are starting to fill up with a lot of interesting leads that we are now working to qualify and.
It's it's exciting for us and it's looking very very promising for the coming months and quarters.
That's great I appreciate the color and second question you know I understand the focus near term here is on the kiosk and elevators and I I think you outlined that very well so not to distract from that but I wanted to ask you about the you know your Inc. Car cabin monitoring solutions, you know any change update there you know.
I would assume still a very interesting but longer term opportunity maybe just the commentary would be great.
Yeah. It's a it's one of the technology area that I personally find very interesting here, we are using cameras and camera inputs.
And combining this with AI software to detect humans for instance are inside the car and we can obviously use it also the detect human things on the elevator.
So for me, it's the little bit more generic, but yes, you're right some of the controls and once again.
Our main focus of us being the driver monitoring and in cabin monitoring perhaps the most of the application so far.
We continue to develop the technology platform to develop also applications.
The round us for automotive customers, we are involved in.
In a number of interesting discussions we are invited to participate in some of our skus that we're answering up to right now, but it is a longer process and.
This is something that.
Even when we can win some of these projects.
The that'd be followed by our interest in development phase of two or three years before the corresponding week of Microsoft launched and then we can start to see some royalties from the business.
The long term more long term.
The venture what Youre doing on the.
Technology, the development is progressing well the win.
And also use the lost and the elevation of applications and it fits very very well into our technology portfolio. So there is both of the business aspect of this.
The product of totally on the technology aspect of this of venture that's what I'm doing here the drive it in cabin monitoring.
Yes.
That sounds great. That's all from thanks, guys.
So we'll take the next question from Jesper Hinrichsen with Red athletes go ahead.
Hi, guys. Thanks for the presentation.
Fredrik mentioned that you had the updated your pricing less of some products, which had the positive effect on margins could you repeat the what.
And the elaborate a little on this.
Yeah, what about here other than the answer the question on the.
The health of both me I'm correct.
Obviously, we have spoken in previous earnings calls and all of the presentations depth of our main focuses of grow our top line. So many of them just to grow the net revenues from product sales that is true but.
Although the gross margin is super important for us and we have continuously monitor this and the Beast.
We saw for instance in the previous quarter.
What I think are not got the factory gross margins on our product sales.
Each.
To be clear the writers in the report are this is a low due to onetime effects from the sales of.
Oh, the error bar products.
That's the dead in the beginning of the year.
But the during.
During the first second quarter of like the end of first quarter and the beginning of all of the second quarter, we have implemented new price lists for our distributors some of our customers.
Sure.
The sensor modules, but also the evaluation kit.
That's most of the increase.
The gross margin to a more a healthy level like.
About 40% the target under the terms of all of them.
So actually on the running business, we have a very very good the gross margin between 40, and 50% and the the average numbers from showing the report includes also some sales from the beginning of the year debt.
The breakfast dawn.
No we are on a good level of.
Of course, we are.
Tried to all of them.
Apply.
Value based pricing.
And that's the place both core and when the work.
Yes, and when we do for instance software developing the first time customers and for the sensor modules.
That is kind of an opportunity to increase the prices to improve our margins. We will do the are also working on the cost side. Obviously, we are a part of company reproduce the sensor modules ourselves. So we have a continuous focus on on the cost.
Options in terms of our component cost of manufacturing costs and so on.
So that's also helped to some degree.
I am going forward.
The have still the main focus on growing the top line, but we will the.
Make sure. That's also the gross margin is on the good level because that gives us the.
Indiana the profit that's real that.
He helped us improve.
The improved the cash flow into black figures and positive cash flow. Our first obviously the month by month, but then year on year.
That's the background.
Housekeeping and the year.
He's focused on out of business and other markets.
Great and you're also saying that you have moved forward your positions considerably even compared to Q1 I think that was made mainly in regards to each of you might products could you elaborate in the numbers.
Yeah. This is.
The safe contactless tough of elevators in kiosk, that's where it continues to be our main focus of this is awful lot of the measure the most and then we have the highest activity in the marketing sales of its development.
So yes.
It's also why we have now.
Covered.
The larger parts of the sales cycle for us that we have.
Started to feel that we have in some cases penetrated the retrofit opportunity and moving into the new installs. The you had good pent up the team.
And the customers that are pulling up the alone. So that's quite encouraging at the same time, if I move.
From say ACL.
The Europe and North America, you can see that yeah, they are a little bit behind but during the second quarter and we believe.
To a large expense.
The expense.
Supported by our moving to a reasonable sales organization, where we could focus our resources much more efficiently.
We haven't been able to increase first the.
The sales funnel sphere, and the also start to convert some of these opportunities into deals.
And the converse prospects into real customers Oh. This is an ongoing work and the.
We are of global team. So I can promise you we work literally of 24 seven of them. This starting in the Asia.
And then the completing of Europe, and ending the day and the accident in Southern California. So we have a pretty global team and the.
Hi, everyone and the team is working on this the around the channel.
Yeah.
The nice and as a follow up question on the back you say that you have come in basically all of the way in the sales cycle of a process and retrofit solutions as the Kid you could you talk a little bit about how you expect sales game of the retrofit solutions okay.
Yeah and develop going forward.
Since we've reached that stage.
Adding one slide.
Uh huh.
All of them pyramid sitting upside down.
Yeah, Yeah on the slides.
The rest of your face opportunity off of long term will continue to be our main opportunity and this is because the installed base in both the elevators on the relevant types of the obviously sort of.
The surround.
Tens of million then the plus $20 million. So there is a huge installed base both on the elevators and kiosks and every year I mean the realistically.
How many of these can be reached.
Some of a few percentage for a 5% or something like this but doing the math, that's a good number and the.
The lifetime of an elevator.
Got it.
Well beyond five years, I would say manage price to keep the gates there as far of say 50 years, but of course with the regular refurbishments and upgrades.
At every such upgrade we have the retrofit opportunities.
Perhaps.
Yeah.
Real estate the owner of the landlord that will not replace the whole elevate your bad debt.
Perhaps the.
Place an uptake the.
The non tours the control electronics on the inside of the control the walls and the control kind of inside of the elevator and then we have an opportunity to get out of the waitress kiosks.
And you can check yes, there are a typical key off the cost everything between five and $10000. I mean, if you have the you are the owner of the Hamburger the restaurants that the represents a huge investment for you.
And if they buy five or 10 kiosk for the for the restaurants, which is column.
Yeah.
But they will not replace them of a year or so on day.
We will use them.
Of course as long as possible and also for the key of the.
Have a good the retrofit opportunity.
Every year.
The to penetrate and the supply of certain portion of the market with our solutions.
Now the installed it.
In every kiosk wouldn't have the elevator, we need a bunch of you could say boots on the ground.
They need to be in Japan, they need to be in Korea, they need to be in France, and Sweden, and the U S, Canada and again, here's the way we see a good opportunity.
Opportunity for the right partners to come in and build the business and we have several of the subject samples that Uh huh.
Have the engineering resource and capabilities. So that they can develop the good hardware solution, which is mainly a mechanic of housing but also of that can work on the software application.
And then they have the technicians are or.
Or they work in turn with service providers in different countries in different locations to go out of an installed base.
Uh huh.
And one of our partners that the.
Just talk to just the other day, they worked a lot with airports and.
They have started to use the.
The airport pick me up.
The work S installers and.
I'm afraid the yourself kiosks, so that's another channel for us.
Yeah.
Alright, and do you see it and the any specific.
Partner sort of Oems, starting to starting to ramp up and their installations.
Yes, several it's.
It's the gradual NFC is one that you can obviously name a.
But we are working with the a few of elevate the Oems and the <unk>.
Did you have to find techs are also.
Okay. They are from snow kind of Oems the payoffs.
All of it already to the rollout.
Got it.
The launch of their product awareness in the market.
But this is coming along and it's the gradual process. It will not happen overnight and this is what's the mean again by way of building our business pipeline.
The good and then the my my last question about the about the do Hurst.
And what about the Ines.
The only target the the U K market and if so what are the chances of a global expansion and Inc.
What's the time horizon.
Yeah.
Oh.
Did you have to get the math of both they are interesting companies day. They are leaders in the control panels and buttons for elevators they work internationally.
Nowadays located at the headquarters in Canada. The paid cover North America, and then also a scale of into Europe.
Hurst ease of use.
The company they have a big market share of the U K, but they also sell in other parts of Europe at least.
Both now and do Hurst they work both the.
The most of it.
The sales and the Oems names so.
The had heard from one of the four leading elevator of we haven't seen the world that yes, they use control kind of talk.
The projects from both nod and diverse.
So are these type of companies interesting both of our direct customer true ups and as the leap into the.
And the major Oems.
And.
They are they.
They have basically of the catalogs they are doing installs on rolling this out.
Finally tech as a public company very similar and I can also mentioned up in China. We have two companies one is.
Guardian, Ginger and the other one is called Robo on them. They are doing installs and the third Chinese or Hong Kong companies H K T. Z. That's have a all of the during the winter is starting to roll out the launch there.
Their own conflict, that's tough to loosen the elevators in Hong Kong and China.
So.
Elevators.
It's happening and again this is a gradual rollout and you can realize if you talk retrofitting and elevate the or even in the union. So Nathan.
You have to visit every building and you have to install the elevation of all of the control of opinion.
So it's just the dynamics of this market that they were working it and the real sounds like the stuff, but all of the module fits very well to these applications.
And the simple to use easy to install and the.
So far of customer reactions of our unanimously positive.
Great.
Thanks, a lot for our fracturing microcap.
Thank you Sir.
And there are no further questions I'll turn the call back over to you Mr. Benton for any additional or closing remarks.
Thank you we want to thank you all for joining us for our call today.
Have a great day.
Bye bye.
Thank you and this does conclude today's program. Thank you for your participation you may disconnect at any time.
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