Q2 2023 Neonode Inc Earnings Call
Hi, and welcome to the Q2 2023 earnings call for near node.
We will start with a company presentation and a walk through of the financial results are by the company's CEO urban core settled and CFO Fredrik an island. So then we will have a Q&A session in which the company's covering analysts can ask their questions. So with that said I leave the word over to and you know that.
And to your urban force out.
Thank you very much Jesper and.
From EMEA and Frederick here welcome to this earnings call.
And.
I don't see the presentation now so I don't know where we are thank you.
Today's presenters saves me a little while for sale I'm, the CEO of <unk> and with me here today Frederik Nielsen our CFO .
Before we go into the main part of the presentation I would like to go through and summarize the following legal disclaimer.
This presentation contains and related oral and written statements of near not incorporated the company and its management may contain forward looking statements.
Forward looking statements include information about current expectations strategies plans potential financial performance or future events.
They may also include statements about the market opportunity sales growth financial results use of Cas product development and introduction regulatory matters and sales efforts.
Forward looking statements are based on assumptions expectations and information available to the company and its management and involved in a number of known and unknown risks uncertainties and other factors that may cause the company's actual results.
Level of activity.
Performance or achievements to be materially different from any expressed or implied by these forward looking statements.
Prospective investors are advised to carefully consider these various risks uncertainties and other factors.
Any forward looking statements included in this presentation are made as of today's date the company and its management undertake no duty to update or revise forward looking statements.
This presentation has been prepared by the company based on its own information as well as information from public sources.
Certain of the information contained herein may be derived from information provided by industry sources. The company believes such information is accurate and that the sources from which is has been obtained our reliable. However, the company has not independently verified such information and cannot guarantee the accuracy of such information.
Thank you for patients and with this we will move on to the presentation and.
We have a.
Short agenda today, we are going to keep this call fairly short.
I will start the presentation with a summary of the main points from the second quarter.
After this I hand over to Fredrik, who will go through and summarize the financial results for the second quarter.
And after this.
I will take.
Take you through a short business update before yes, where it comes back and that leads a Q&A session.
So with that I.
Go into the summary slide.
Uh huh.
Summary of key points in Q2 for Neo node.
Licensing revenues were stable.
We saw a clearly that the the previous.
Supply chain issues with semiconductors.
Has been resolved or at least the situation has improved greatly worldwide.
This is a factor and another factor is also that our printer and automotive customers.
Sales have been strong or at least stable. So that's very good for us and hence our licensing revenues were stable in the second quarter.
Product sales revenues were.
Low and clearly below targets.
And also below expectations I can I can admit.
Yeah.
Overall weaker customer demand.
But also in some cases, where we actually have a good relationship with customers and they are.
Developing or have developed new products, incorporating our sensor modules.
Several of these projects have been pushed out into the future which of course affects our sales in that quarter.
As a consequence of these results and also this the sales results in the first quarter of the year, we are adjusting our strategies and tactics.
To improve sales in the coming quarters.
And we have started seeing some time to focus more strongly on certain key geographical markets and segments.
We also.
Intensifying our marketing efforts and we are also fine tuning our product portfolio and our customer offering to be a more sharp and to.
To deliver more customer value.
We believe this will clearly.
Clearly improve our sales performance in the coming quarter and.
Even though the product sales in the second quarter will slow.
I still believe we can turn this around and that this is a very interesting business for the future.
So with this.
Three summarizing points I would like to hand over to Frederic.
Thank you everyone.
And you can find our 10-Q and earnings release on our website Nuno Dot com under the Investor section I will in this presentation.
Summarize the key points.
Revenues for the second quarter of 2023. It was one 2 million that is a decrease of 5% compared to the same quarter last year.
Revenues from license was 1.1 million, an increase of 15% compared to the second quarter of last year.
As urban said this is thanks to the demand for our customers' products within the printer and automotive industry.
It's still strong.
Our revenue from products was <unk> 1 million for the second quarter of 'twenty three.
It's a decrease of 60% compared to the same quarter last year.
And also here as <unk> said it has to do with that low demand from customers and delayed launches.
Low volumes, given our high gross margin for products and we are at 6% to 7% for Q2 2023.
11 percentage points higher than last quarter of last year.
With increased volumes the gross profit gross margin will decrease.
Operating expenses was $2 8 million for the second quarter of 2023, it's a decrease of 2% compared to the same quarter last year.
The main reason is lower personnel and related costs.
Net cash burn from operating activities was <unk> 6 million for the second quarter of 'twenty three.
An improvement of seven 9% compared to the same quarter last year. This is mainly due to lower purchases of components.
But also the timing of customer payments.
As of the third as of June 23, we had $26 621, 6 million cash and accounts receivable.
And with that strong cash.
Our cash position will continue to execute on our strategy.
And with that I will leave the word back to you Bob.
Okay that takes us to.
Business update and.
Those who view that have followed us for some time know that in our products business.
It's less solutions.
Here exemplified by a.
Holographic control panel for elevators is one of the key focus areas for us.
We see quite some interest here not least in Asia.
And when I say Asia, I mean, mainly China, Japan, and South Korea, where we have the most activity we have most customers and also the.
The most partners.
Yeah.
But also in Europe here is an example of a recent install together with our partner do her strong U K.
We see that this type of touch less elevator control panels is gaining traction and drawing a lot of attention.
So this is the luxury hotel, the Mabel and Riviera laws installed contactless controls from a Jew Hearst and all of their elevators.
Which are reportedly had been very well received recently, we also joined our <unk>.
World elevate their expo in China, and together with some different partners.
And our partners boots, and our booth for very.
Well visited and the feedback we got from several large and medium sized OEM that came to explore and experience. Our solutions were very very positive so for elevators.
Clearly think there is a market for this type of touchless or contact less.
Operating solutions that we can offer with our touch sensor modules.
The other main.
Sex segment or sector that we focus on is interactive kiosks.
Actually there's a very broad sort of segment that we talk about here is one example, we have a new cooperation with the French company in my script.
Experts in handwriting recognition.
And they have developed some different solutions that incorporate our touch sensor modules.
In particular Farhan.
Handwriting recognition solutions here shown a holographic display where you signing.
Our sign out to a hotel using your fingers and you're right their signature on the holographic image and they also have other solutions.
More related to normal.
Normal displays so not holographic displays. So this is just one type of kiosks and we also have examples of other customers and partners doing similar solutions for.
For retail.
For for instance, transportation ticketing.
And vending machines.
Still quite a lot of interest in this again, especially in Asia, but also in Europe , we see still quite strong demand and interest for our solutions.
Yeah.
And so I want to highlight here is a fairly large electronics company from South Korea and.
They have been a customer.
For the last couple of years and.
Earlier this year in.
In Q2, we signed a new value added reseller agreement with them.
They work, both with smart home products like the mirror, we see here, but also other types of kiosks and retrofit kits are solutions for various different products. So we are very very happy of this corporation and we think this will help us to grow.
Our market share.
And our sales volume in South Korea in particular.
Yeah.
Yeah.
We also work a lot today on rugged touch solutions, both using our products that touch sensor modules.
This illustration shows.
Here the touch sensor module is integrated in the bar sitting on top of the display and allows an operator here illustrated where having a rather thick working gloves for protection.
To operate hi.
They're directly on the touch screen or in front of it using a touch less interface.
We see quite some interest here are both in Europe and other markets for this type of solution that they can offer and.
It's about 50 50.
Percentage between.
Customers are interested in that our touch sensor modules for this to create both retrofit and new equipment solutions and customers that want to license our technology to create their own bespoke solutions. So rugged touch I say on behalf of both our licensing business and our products business.
Yeah.
And here's another example of rugged touch med Tech and <unk>.
As illustrated here doctors and nurses in the surgery room Orient and other claim.
Clinics and so on they often have gloves on their hands.
And.
They are also more and more controlling very advanced machines using their fingers.
Like shown here.
To be able to do this with a rugged touch feature on that the display is very valuable and with our infrared technology. We can also do things like replace the buttons that you see directly to the right of the display in this picture.
So we can make those.
Virtual buttons saving a lot of cost for a manufacturer and still are.
Providing a.
Good ROE robust touch interface.
Sure.
We are proposing to many med tech companies today that rather than using rugged touch. They can also consider touch less interfaces for some of these systems and these are the ideas are fairly new to them, but we feel that we have a good resonance and a lot of positive feedback for our ideas and the prototypes.
Demos that we are showing them. So med tech will continues to be one of the focus segments or areas that we would work on in the future clearly so.
Rugged touch.
We also have quite some interests today from automotive commercial vehicle and off highway customers.
Which is very close to industry.
Customers I would say.
In a truck or in off highway machine on a construction site.
The drivers of the operators.
It's very common that they have thick working gloves for protection or for other reasons and still they want to operate touch displays inside their vehicles and that's.
That's not trivial to do with other touch technologies than ours. So we have been joining some.
Some different events, showing our solutions and the presenting what we can offer and that we.
We have got a lot of leads from that that we are now working to convert into new businesses.
It's quite interesting area and some of these customers have products that run in in high volume. So we are also quite excited for this.
Yeah.
Moving over to our licensing business, we had talked before and we still have a strong focus on.
Object detection and one that application in particular, that's interested interesting is head up display obstruction detection.
As illustrated in this picture.
Yeah.
Foreign objects like coins keys parking tickets credit cards.
And other loose objects in the cabin or sitting on the dashboard.
That may fall on top of the head up display projector they will all be all.
Obviously obscure.
The projected image and if that protected image is showing an important.
The symbol warning message or other type of critical information for a driver.
That can lead to.
Obviously very serious problems and even accidents.
And the trend in automotive is that more and more vehicle manufacturers are considering to have only head up displays and not keep the traditional instrument clusters in front of the driver.
This has several advantages both from an economics point of view, but also safety point of view.
And.
We have seen at recent auto shows are also concept vehicles and other prototypes with new types of head up displays being presented.
So we believe that the head up display market will actually explode in the coming years and.
With the very very strict requirements for safety.
In automotive, we think that this type of solution that we can offer at low cost and with very great robustness and performance will become more and more interesting for <unk>.
Vehicle manufacturers and also their tier one suppliers and indeed, we are working together with several tier one suppliers now and.
We hope that.
Within this quarter.
We can win our first major businesses in this segment.
Segment.
Yeah.
Another super important and very very interesting.
Application area that we work on this driver in in cabin monitoring, where we have developed and launched an innovative and quite novel software platform, which is a <unk>.
Kinetic platform that can be used to create both driver monitoring features and other in cabin monitoring features in a very very quick efficient and controlled way.
So the platform itself is a super.
Super powerful and that can be used for different types of cameras.
And they're also easily incorporates other sensor inputs in a way that we haven't seen anyone being able to do and the b.
We are getting very very good feedback from this when we started to market. That's early this year and we are today also here, hoping that within this quarter to win our first major breakthrough bits.
Businesses with this offering of ours.
So both driving in cabin monitoring and head up display obstruction of the Texan They remain a.
Key focus areas for us in our licensing business and in general the automotive sector is our main target now and will be so also in the future.
And.
Just to round this overview of.
And also to link to what I said earlier on in the presentation that we are increasing our marketing efforts.
I just wanted to show.
Ah the physical events, we join in Q2.
And they were.
Uh huh.
In both China, Europe , and actually in North America.
And you can see that there was a mix of automotive and other events.
And.
This has.
Been very very good for us and very successful I would say, we have a lot of new prospects and leads that we are currently working on to convert to new businesses and four Q3 Q4 and also into next year. We will certainly continue this work and actually intensify it.
And we look forward to meeting with you and also other new customers in a different events in Europe , North America and Asia.
I also want to mention here that we are joining the C. F. 'twenty 'twenty four show in Las Vegas in January and also the week after the equally interesting and RF show in New York.
The later in January .
So if you happen to be in Vegas, or in New York around that time come and see us and we were surprised here with several.
Value, adding and innovative solutions that I'm sure you will like and want to incorporate into your products.
Thank you very much.
And this concludes our presentation and we are now heading into a short Q&A session with our analysts over to you yes, Sir.
[music].
Great. Thank you so much for that presentation and Fredrik.
I'll start with some questions.
From from my side, so as the first an update on on automotive it it seems like Youre seeing some strong traction and.
Perhaps especially in the head up display offering and I just want to ask regarding competition there Ann.
I know some of the Dms suppliers, but what do you see your main competitors for your head up display offerings and do they have like similar technologies you are or is it a different one.
In that area competition, mainly comes from the tier ones means.
Meaning the head up display manufacturers.
And.
Some of them have prepared.
Similar you can say a similar solution based on infrared technology. Some have tried to use our time of flight sensors and cameras.
The problem with that is that the performance is very very poor.
And some of the Oems, leaving leading this.
A new focus on head up displays have a at least in a couple of cases that we are now engaged in they have disqualified. These other solutions, although they were quite simple and cheap. The problem is that they had also quite poor poor performance. So we.
We are well positioned here with a fairly advanced yet cost effective solution.
And I would say that.
The main competition would come from a camera based solution and.
Maybe we will see that in the future, but this is non trivial.
And the question is if the vehicle manufacturer in the tier one that really want to add this type of complexity just for this.
Application alone or this feature alone so we are well positioned and.
We are mainly competing here with our.
Customers, the tier one suppliers or the head up display manufacturers.
Alright, alright, and is it only the premium segment that you're seeing interested or is it all over the the volume segment that youre seeing.
Currently there says as it usually is in automotive, it's mainly something that's driven by.
Premium vehicle manufacturers.
And.
This is a question about.
Timing I think and when you do the math and develop the business case, you will also see a clear cost advantage with having only head up displays compared to having.
These modern lodge a normal displays that are many manufacturers are now working with <unk>.
For their dashboards. So I think that this will be both for premium for some Oems that preferred is in this type of interior design.
But also that it can be like a cost advantage for the volume manufacturers. So this is why we are super excited about this opportunity.
But let me underline yesterday, we have equally high hopes for our driver and in cabin monitoring software platform.
Yeah, and even though we are.
Late income or to this.
To this market and we have some strong competition we know this.
The type of feedback and the restaurants, we have with many customers is a very stimulating and are good for us to see and we.
We hope that we can surprise.
Both our competition and also customers that.
Haven't met us before.
In the future with what we can offer here and driver in in cabin monitoring.
Alright.
And then regarding product sales and this is obviously a continuous disappointment for you as you as these states and yet I mean, you continue to invest additional efforts, which is obviously when they get there for the burn rates. So.
How do you think about capital allocation in general and and for how long can you permit a prolonged efforts in this area without regard yourselves.
Yeah, I see your point and then I can also confirm that this is something we have been discussing.
Actually for several years and we have kept a close eye on this.
We are.
Trying to establish and build up a new business here for touch less our contactless interfaces and we have a good technology for this but this is a new market that we are maybe one of the key drivers are that are establishing this new market and that's always a tough challenge. So it's a <unk>.
So you have to be persistent and you have to invest but as you say we cannot do this forever and indeed, we are now taking steps and we will take further steps.
So that we not only just a pump.
Pump in new capital into this without seeing in our results. So we are sort of honing and sharpening our strategies here and we will within the products business area, we will shift our capital allocation and clearly during the last quarter also we shifted more.
Aimed to the licensing business. So all we are already taking steps in line with what you sort of suggest here and we will continue to work on those details in the strategy and we will.
Present.
Updates on this and the next earnings call and also probably that we will continue to evolve both regarding our strategy and tactics.
In into next year.
So.
We get the point we agree.
You should never just continue blindly to invest in our profit a non-profit our business of course, we are here to make money.
And.
We are very conscious of this.
Yeah. So.
I ask everyone to stay tuned for updates and I will also want to reassure you and.
Every other person listening in that we are very much aware of this and really working hard on this issue and to turn around the products business and if if it doesn't succeed.
Yeah, we have to.
Think about doing something else clearly and we certainly appreciate that and we are discussing it in the company and we will get back to you with updates shortly.
Perfect.
Thank you so much that's all for me and I'm, just going to see if we have any other questions from the other analysts.
Let me just see for a few seconds.
Yep.
We do not so yeah, I think we've asked and I'm very satisfied with all the answers. So I leave the back and leave the word back to you and everyone for some closing remarks.
And I will be very very short.
Thank you for joining this earnings call, where we have presented.
<unk> financial results for Q2 for nano and also reviewed.
Some strategic highlights and the gave a short business update.
Thank you very much and have a nice day.
Okay.
Okay.
Sure.
Yeah.