Q3 2023 Neonode Inc Earnings Call
And by and.
By the CEO and CFO of <unk>.
Followed by a Q&A session by the company's analysts.
And so with that said I will come.
A bunch of cell C of known item please take us through.
Thank you Jesper and welcome to our Q3 earnings call.
Today's presenters, whose myself or bump for cell and our CFO fredrik helium.
Before we go into the main part of our presentation.
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I will read loud a summary of the disclaimer.
Yeah.
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They may also include statements about the market opportunity and sales growth financial results use of cash product development and introduction of <unk>.
That's where it matters and sales efforts.
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Thank you and with this.
We move into the main part of our presentation today, we have a fairly short agenda, and we will jump right into it with a summary of the key points of this third quarter and of today's presentation. After this predict will take us through the highlights of the financial results for the quarter.
And.
After fredericks presentation, I will give it strategy and business update.
And as Jesper mentioned an interruption.
He will join us again and.
Yeah, a short Q&A session.
Yeah.
Summary of key points for the third quarter and also year to date, our licensing revenues in the third quarter decreased somewhat.
Yeah and that.
This has to do with certain customers reporting lower sales volumes for this quarter. However year to date, we are on par with the same.
Period last year. So that's why we say that license revenues for the full year. So far has been stable on the same level as last year.
Product sales improved in the third quarter and this obviously, we are grateful for and it proves that our increased level of activity and focused on pushing through sales and the closing deals is paying off all.
However, the slow start on the first two quarters this year.
It has made that we are below target for the first nine months.
And as we have discussed in previous earnings calls, we continue to adjust and sharpen our strategies and tactics to improve our sales performance we are not.
Satisfied with our performance to date, and we are working hard to improve on that.
And we are also encouraged by the interest level, we get from new and existing customers. So.
Although this quarter was similar to the previous quarter, we have a very optimistic view of the future and we continue to believe that we are on the right track and that we have a team in place that can.
Turning this business around and create growth and also improve our cash flow significantly in the coming years.
So with these three points as a summary.
I hand over to Fredrik.
Who will take us through the financial results summary for the third quarter critic.
Urban.
You can find our 10-Q and earnings release on our website the immuno dot com under Investor section I really asked in this presentation I'll just summarize the key points.
Revenues for Q3 and was $1 million that is a decrease of 18% compared to the same quarter last year.
License revenues license revenues was <unk> 8 million for the third quarter.
With a decrease of 20%.
And this is due to lower sales volumes at our customers.
Year to date license revenues are at the same level as 2020 to ask them about it.
Revenues from products was opened 2 million in Q3, an increase of 5% compared to the same period last year.
We maintained our focus on <unk>.
Certain sectors and.
Our increased activities within our sales and marketing.
Gross margin for Q3, 'twenty to 'twenty, three where product was negative 39%. This is due to a one time effect of costs in Q3 23 due to some customer claims.
If we adjust for that we are at 48% in Q3 2003, which is at the same level as in the quarter.
Same quarter last year.
Operating expenses was $2 2 million for Q3, 2023 it's an increase of 6% compared to the same period last year, it's mainly due to increased activities within marketing and sales.
Yeah.
We had one 8 million in net cash burn operating activities for Q3 2023.
An increase of 272%.
We have two explanations for this in Q3 2023.
We had purchased the components.
A production unit.
And we didn't do that in Q3 2022.
And Q3 2022 is exceptionally low because of a currency effect, we took in that quarter.
We have $19 4 million in cash and accounts receivable as of September 30th for instance, three it's an increase of three 5 million from year end 2022.
So we are still stable on the cash front.
With that I.
I will hand, the word back to you. Thank you fredrik.
And they have to continue our presentation here and give you a new followers and also old followers, an update about our strategy and business.
Let me first.
Talk about what we do with the interactive kiosks and they in particular, a holographic display applications are very very interesting.
So on here in the picture is a type of queuing a kiosk.
Deployed in a government office in Seoul, South Korea.
This kiosk is a manufactured by our customer market Tom.
And they also have a whole range of similar products.
Allowing people to in a touchless way here.
Sign up for a queue and get the ticket while waiting for the next Clark they become available.
This is just one example, but why we want to highlight this is that interactive holographic displays is a very interesting application example, where all our touch sensor modules fit very well and the combination of a holographic display and our touch sensor module technology is a perfect one.
And we make these type of olive graphic images interactive using our touch sensor module technology.
No.
All kinds of holographic display applications are of interest and we have a lot of customers, especially in Asia, but also in France that are very very active in this space and that they work with information kiosks ticketing kiosks.
Payment terminals ordering terminals.
<unk> and other types of interactive kiosks.
So we continued to be very very active here.
And support our partners are said in China, South Korea, China, and Japan and France.
Okay.
Another interesting area that we have some considerable efforts in is med tech.
And especially the touchless interaction for Med Tech devices is something that we're pushing and shown here is an example of a machine that we retrofitted with a touch sensor module a unit.
To allow for touch less interaction with a control panel.
And this for this type of industry, it's very interesting because it avoids any risk for cross contamination. The machine shown here in the picture.
It's used for our DNA.
Testing.
For instance.
Check for different diseases or adult bean controls are similar and then these laboratories cross contamination is a huge problem and that costs them considerable amounts every year to control that here, we offer them a totally different and the smart solution to avoid any risk for cross comparable nomination with the operators of these.
Machines.
Yeah.
We have presented is also had other events and with direct customer meetings and it has been very well received so we continue to push in the med tech sector.
Starting especially with analytical instruments, but we also see obviously other med tech devices.
Also can benefit from our touchless solutions.
Yeah.
Our technology being an optical touch technology also supports rugged touch.
For gloved finger operation or even operation with stylus pens or other pointers, which is also very much appreciated in the clinics in hospital settings.
Our optical touch.
Touch Technology Z Force also supports touch on any surface and the combination if I combine interactive kiosks in med Tech.
We'd touch on displays.
What we also can offer that is fairly unique is.
Is that we can offer them touch beside or.
Outside of the display surface.
Sometimes you want to quick buttons on the side of the display and we can cover that in a very simple and straightforward way of using a say software defined buttons. So called soft buttons. We can also create solutions, where you can touch on any other surface being glass plastic wood leather.
The ore zone.
Joan here as an example in AR.
In a vehicle in the center console, where you have a traditional instrument infotainment screen.
Above and then you have some kind of touch panel below and our optical touch technology. It fits very well for these type of applications that you can like here for instance use your finger to Reits.
Yeah.
Airport and then the navigation system picks up this and the guys who are in the right way so any kind of use user machine interface solution.
Where you have touch you have touched on this place on other surfaces.
And in our case also we support obviously touch less interaction and a mid air interaction through holographic displays or other means.
We continue to be active in these areas and we see potential for this technology scale and.
What's even more interesting for us is that the same basic technology can be used for say more passive or reactive object detection.
So a particular application area, where we have some focus on where we spend a lot of time in the last year and we'll do so in the future is head up display obstruction detection.
We see a trend in the market that more and more vehicle manufacturers will.
Change the layouts, all the interior or the vehicles and the probably remove the traditional instrument cluster altogether and instead start to use the head up displays as their main information display who can say.
And head up display works in a way that it's a projector shining a projecting an image onto the windshield and given a like a.
A picture that looks to sit in front of the vehicle a few meters in front of the vehicle and that this has certain advantages.
In terms of safety because you can keep your eyes on the road and it's very clear for the driver.
However, if you have this type of solution and no backup in the form of a normal instrument cluster.
Is very important to avoid.
Avoid the risk of objects obscuring parts of the image or the whole image.
So without that backup over traditional instrument cluster you cannot.
Have something blocking for instance, the speed.
Reading for the driver so it's mandatory by law to always show the speed of the vehicle and all the other warning symbols. So what do we have being.
Being the working on and discussing with both our automotive Oems and tier ones is a solution, where we can help them to detect.
Foreign objects, such as parking tickets credit cards keys, and other things that may fall on top of the head up display which is normally.
Mounted and the front of the dashboard in the low position shown here the picture. So as a driver is sitting down in the driver seat. It may be invisible to you. If there's a parking ticket for instance, sitting on this surface.
And then you will never know if theres a warning sign coming on that you don't see.
So this is a very interesting application area for us and we have a <unk>.
Good restaurants, with several tier ones offering head up displays to Oems and also from.
Oems, especially here in Europe, and I would say also premium manufacturers of the more advanced and exclusive vehicles. So probably this is where it will start but we see that in the future more and more Oems will follow the trend to move into head up display as the main information.
S projector, so to say for the driver in their vehicles and that we are super excited about our opportunities here and.
We continue to work.
With customers in Asia, and Europe, and North America to promote this in and work with them to develop different solutions.
Also we continue to be <unk>.
Very optimistic about our chances to break in through the expanding driver monitoring market.
Yeah, our solution is very generic and it's both a driver and an in cabin monitoring solution and we offer a very flexible and scalable platform here that also has very efficient algorithms to do this.
<unk>.
With our customers today that we are talking to and we are in advanced stages of negotiations with some.
They may have in some cases, we know for sure that they have and sort of the first wave here chosen other dms solutions, but are they have now.
Refocused and they are very interested in our flexible and scalable platform and a and a.
We feel that we have a good chance now to come into sort of a second wave here and offer our solution to both.
Both customers that have Dms solutions in the vehicle today and those that are new and planning also for further features in their vehicles based on cameras in inside the cabin.
That could be comfort features could be safety features and it can also be combination features such as special control of the augmented reality head up display system.
Or that could be identification systems for fleet management and control alkyl meters that could be also automatic adjustments of seats in the rearview mirrors and so on based on the head positions all the drivers and so on so a lot of different features are being contemplated and will surely be launched in the coming years.
Yes.
And that our platform is ideally suited for this type of scalable.
Architecture, and also continuous feature growth and over the air updates.
So we believe that this is a the most.
Most modern and most flexible platform there is and it's also very very efficient in and require very little.
System resources.
For.
Its implementation.
In the last.
Two years, especially this year, we have increased levels of activity in our marketing and sales and I repeat that we continuously adjust this and we are not happy with our sales performance to date, hence we work more and more focused on marketing and demand creation.
And one way is through a different types of events and the only in the third quarter would be joined several events automotive events medic events and also some other events shown here.
Some we participated ourselves in some with partners and are shown in the picture here is a solution from our French customer M said technology.
Yeah, that'd be cool exhibited word at the Ventura show in Munich.
And met with the different types of kiosk manufacturers and vending machine manufacturers are and this touch less solution for displays and buttons was very well received there.
As one example, and the upcoming events in November December we have a few events and then we are also working hard now to prepare and we will join the CES show in Las Vegas in January and also the Big World and RF show in New York for the retail industry.
So if you are around please join us and the visit our booths at these events and otherwise stay tuned for also our online content sharing from the events.
And in general.
Please follow us we have a lot of exciting things in the making and we hope that we can.
<unk> announced some new business wins in the near future.
This takes me to the end of the presentation and now as promised we will go into the Q&A session.
[music].
Great. Thank you so much for that presentation, alright, so well, we'll start with our with the automotive in this industry and what's happening in the procurements around the M. S N. The the HUD.
And offering and in the in the last conference call that that perhaps you and you didnt promise, but but but you sounded very optimistic about already before it before at the end of Q3 being able to announce a perhaps a design win could.
Could you just.
Talked about the development on the end and what you see.
We are still optimistic to be honest, we have a in a couple of these cases, we have experienced a slight delay it's not our fault but.
It's very complex deals and there is also a multi year.
And in some cases, we are we deal with the.
Large Oems with multiple brands and the like our global operations and there is many interested parties that should have their say so sometimes these processes take longer to unexpected also for them.
In other cases, we are dealing with even bigger tier one system suppliers are then probably the main decisions are centralized to Germany, or Japan or wherever they all have their headquarters.
But still they are some of them.
Large corporations in the.
It takes time to process, but oh.
Okay. So we shouldn't air like Yeah, we shouldn't a.
Can I interpret this as it has been the worn by a buyer any other plano. So the our main opportunities in this space. We are still in the race. We think we are in a good position and I want to explain to you and also the listeners here that we are addressing both.
Passenger car Oems and commercial vehicle Oems and a third although tier one system suppliers.
And we have a global reach and indeed, we have interesting dialogues here in Europe.
And in North America.
And in some cases also in these.
The three countries I have talked about before Japan, South Korea and China.
And.
Yeah, it's a different stages, but.
We are very optimistic to break in first into this market, which is quite dynamic and I know you are somewhat of an expert following a different companies.
Active here.
And we are doing things.
Things in a slightly different way and like I tried to explain in the presentation. We see now that some customers are into the sort of second round of sourcing and then they have experiences from their first.
Projects and they are in some cases, where we obviously have the greatest interest.
They have had perhaps not the perfect experience with other solutions or other suppliers and that's why we have a chance now to enter assortment of second phase here.
Quite interesting alright, and then.
How would you compare the M I mean the.
The the meanings from from it from the Oems and and the or the interest from the Oems and the tier a tier ones about like the the hardware offering versus the D. M. S. Do you see yeah.
Do you see a neighborhood and a difference or so or one big difference at the Dms is and driven by a regulatory requirements in Europe, but.
But in other markets. It's not so then it's more.
Comfort driven or a branding driven but we expect that this type of the mats regulations will come also in the U S and in China for instance.
Made up at exactly the same as in Europe, but something will come and some manufacturers in these markets. They want to sort of preclude this by starting to offering a good solution even before a for instance in North America before and as TSA releases.
It releases in U S.
Further the motor vehicle safety standard on this topic.
Head up display is not.
Directly driven by any legislation, but S. I tried to explain also if you remove any kind of backup and only rely on the head up display are you cannot sellier vehicles without this type of safety guard.
Because you must.
Show all our important information to the driver or turn on another warning sign that something is wrong. Please stop the vehicle.
So that is why we see our temps and indeed, some Oems are going in this direction.
And it's because it's a they.
They want to achieve a different look and feel of the interior of the vehicle they want to use the space differently and of course it has to do with electrification. So when you go to a fully electric vehicle. They want to also experiment and there is this company a tesla that does sort of triggered a little bit. This so now everyone.
One is thinking about interior.
You don't need to do in the same way as we've always done it and I believe that this is also very much driven by cost.
So I gave you this as a final comment that the theres been a trend for 10 15 years towards bigger and bigger screens you.
Can you talk about pillar to pillar displays in front of the driver and passengers in the we have some examples from Chinese Oems is on massive curved displays and the high resolution color displays with touch features are.
They are very very costly so a way to break that cost spiral and complexity.
Is to simply moving to head up displays altogether.
And.
Obviously that.
It's much more cost effective.
And for the manufacturers other than competing with bigger and bigger screens.
So let's see how this plays out but automotive is a very dynamic industry, but India and everything and it takes quite a long time. So we have a long sales cycles.
Then you have a development phase of two three years.
And then are the new solutions are launched into production and this is where we can then start to get the royalties.
Yeah.
But ultimately there is a very important let's say industry or sector for us and.
We have been active there for at least 11 years. Since 2012 I was the first automotive product developed with nano technology and to date, we have licensed our technology to more than 7.5 million vehicles closing up to $8 million.
And going forward, we hope to increase that significantly with the DFS offering and also other offerings like this head up display obstruction detection right. Now is promising and then also one question for you for your project are I mean, you are kind of like well it seems that you're changing folk.
With more and more towards and the automotive industry, perhaps less so less so in the in the products or product sales.
How does this affect your cost space like parts now, but also but also going forward what do you see well, we see that refocusing our current business to two words.
The motive so it's not that we are growing our cost base is that we are refocusing our cost base and looking for that in future. So but of course if we.
Get some good news out there we need to also expand.
On that sense so.
For the year engineering are part of the year of the implementation and so okay. Good. That's all of my questions do we have any other questions from the analysts.
Now we have we have no no other questions alright, and thank you so much for coming here and good luck going forward. Thank you. Thank you.
Okay.
Okay.