During the second quarter we continued to execute on our strategies and build our business pipeline. As I have discussed over the past few quarters, our focus continues to be on contactless touch solutions for elevators and kiosks where our Touch Sensor Modules (”TSMs”) can offer an intuitive and safer user experience. We expected that the first adopters of our TSM solutions would be in Asia and our first and second quarter sales confirmed our expectations. Over 70% of our TSM sales during the first six months this year is to Asian customers, who are using the TSMs for contactless touch applications for elevators and different types of kiosk applications. We also have numerous development and pilot projects underway for elevators plus an array of different public space kiosks, such as contactless touch systems in airport self check-in and retail self check-out kiosks, in Asia. Asian customers are leading the way but we continue to see increasing interest in our contactless touch technology and our TSM solutions from European and North American customers as well
This solution by MiTAC is breaking new ground as it opens up for new kiosk segments with larger displays that we haven’t addressed before. Further, it’s suggestive to see how our contactless technology come into play in a context with sensor fusion and artificial intelligence and we look forward to growing our smart kiosk business with MiTAC
We are excited about the ever-increasing interest in Neonode’s contactless touch technology in the air transportation domain and the fact that it is now being extensively tested and will be available to international travelers during the Olympics and Paralympics. This is one step towards realizing our vision to transform the way people around the world interact with multi-user machines in public environments
The elevator segment is important to Neonode’s contactless touch business and I am happy to see Dewhurst’s achievements so far and look forward to deepen our win-win cooperation going forward
We are very impressed by Neonode’s contactless products and are keen to expand our contactless business together with Neonode. This partnership is a natural next step to accelerate adoption of contactless features as well as the product development efforts
During the first quarter we continued to build our business pipeline. Our main focus was and continues to be contactless touch solutions for elevators and kiosks, where our touch sensor modules provide an intuitive and safe user experience. The demand for our solutions is very high in Japan and Korea, where customers now have numerous development and onsite pilot projects underway for elevators and an array of different kiosks. We also have customers in other countries in Asia who are rolling out and installing retrofit contactless touch systems in airport ticketing and retail self-service checkout kiosks. In addition, we are seeing increasing interest in our contactless touch technology from European and North American customers. To better support our customers in these regions, as well as in Asia, we recently changed to a regional sales organization, which will help us accelerate growth
Our license revenue from existing legacy customers increased during the first quarter compared to the same period in 2020. We believe this to be a rebound effect from the slow printer and automotive sales last year due to the COVID-19 pandemic. Long term, we expect this legacy business to continue to decrease (a trend we observed prior to the pandemic) and to offset this we are focusing on growing our products business with elevator and kiosk customers. We are also continuing to promote our technology to new customers in the Military & Avionics, Industrial and Automotive segments. The sales and development cycles are much longer in these industries than in the elevator and kiosk industries, and although we do not expect royalty revenues from new customers in the short term, we strongly believe in these segments and we do expect to earn non-recurring engineering revenues related to product development
During the quarter, we continued to strengthen our team of talented and experienced people in sales, marketing, and engineering who will help us create and capitalize on the developing market opportunities. We have also deepened our relationship with our partner network and are actively exploring further partnerships as a means to drive growth. We believe that our contactless touch solution is the best technology in the market that supports the new health and pandemic-driven paradigm shift where users are becoming more and more reluctant to touch public space devices
I am very pleased to have Anthony join our team. Anthony’s extensive experience and track record in the touch screen industry and in B2B sales is a perfect fit to grow our business in the Americas. Further, the new regional sales organization will increase our customer focus and our ability to meet the market demands in all three regions, which will help us accelerate our topline growth
The quick service restaurant (QSR) segment is a key segment in the interactive kiosk market and we look forward to growing our contactless touch business for QSRs with Merim Groupe
Our AIR-CLICK solution is an attractive proposition for businesses, as it enables converting even inert, non-touch enabled, screens into contactless touch systems. Combining the AIR-CLICK solution with Merim’s contactless payment systems creates a 100% contactless ordering experience for customers
Neonode’s contactless touch technology is transitioning from customer validation to commercial deployment in multiple market segments, for instance self-checkout kiosks in retail, ordering terminals at quick service restaurants, and elevators, where our technology is simplifying and enhancing the customer experience and also making the interaction with the underlying device or system safer and more hygienic. Our vision is to transform the way people around the world interact with kiosks, elevators, and other multi-user machines in public environments through our contactless touch technology. This project with Japan Aerospace Corporation is one step towards realizing that vision.
This rollout decision in South Korea represents a great milestone for Neonode and our contactless touch offering. We hope to see many contactless elevator control panels being installed in the field in the near future. Thanks to a strong cooperation with Finetek, we have yet another competitive product implementation featuring Neonode’s technology and a promising business case in the elevator segment
Through the collaboration with Neonode, Finetek completed the verification of the operation method and system for non-contact touch solution for the development of related products in 2020. We are preparing for commercialization of a variety of contactless touch products for elevators, kiosks, ATMs and automotive information systems, and we are expecting that these efforts will generate positive business outcomes for our company as we are moving into a touchless economy.
We are in a very positive and dynamic phase and see a strong and increasing demand for our contactless touch solutions and other offerings from customers worldwide. The recruitment of Fredrik Nihlén is a testament to our belief in the company’s growth potential and with Mr. Nihlén joining our team we get a person with financial expertise and business acumen that will reinforce our work to develop and grow the company and improve profitability
This order represents a breakthrough in an important market segment for Neonode and we look forward to growing our contactless touch business with this and other customers in the transportation domain
My first year as CEO has been characterized by periods of frustration and at the same time great satisfaction. We had to navigate some definite headwinds in 2020, including not only the general global economic downturn caused by the COVID-19 pandemic but also the effects of the world going on lockdown, which brought on new challenges for our business development work and slowed decision making processes at most of our customers. However, the pandemic also created an unexpected opportunity for us to leverage existing products and knowhow in contactless touch applications. This is a new market for which we feel we are uniquely positioned to provide the perfect technology solution with our Touch Sensor Modules. Building on this we have identified and engaged with several new customers and partners in Asia, Europe, North America, and other parts of the world that will help us increase our product sales significantly in the coming years. During the year we have also recruited several new, strong members to our Sales and Engineering teams, who are driving our efforts to capitalize on the growing opportunities in current and new markets. Coming out of 2020, we feel we are well positioned with a very good team, a strong technology and IP portfolio, a well-recognized brand, and an impressive and growing customer list, which we will capitalize on in 2021 and the coming years.
Although our license revenue from existing legacy customers decreased in 2020 compared to the prior year, we are encouraged by positive customer interest in our technology and solutions offerings in the Military & Avionics, Industrial, and Automotive market segments. We are engaged with several customers in these markets and have identified several application areas where we believe our technology is very competitive and adds value, which we will use to grow our solutions and licensing businesses in the coming years. Our presence in the new market for contactless touch continues to grow. Here our focus is on the Interactive Kiosk and Elevator market segments and we are addressing these markets both directly with our Sales team and indirectly via different types of partners, mainly value-added resellers and distributors. Growth in contactless touch for kiosks and elevator is currently led by our customers and partners in Asia with a growing demand in Europe and North America. Customers and partners in China and Singapore have installed aftermarket solutions in elevators and public space kiosks in airports, hospitals and hospitality businesses and are now installing new contactless-touch-enabled devices in hospitals, train stations and other locations. In Japan and South Korea our partners are increasing the number of devices incorporating our sensor modules in elevators and kiosks in both retrofit and new OEM applications. Europe and North America are not far behind. We strongly believe the increasing demand related to these customer activities will define 2021 as the transition year in our drive to profitability.
This agreement with NEXTY Electronics is an important step in Neonode’s strategy to increase product sales and marketing presence in Japan, following on our agreements with multiple value-added resellers in Japan announced during the second half of 2020. The Japanese market is critical to Neonode’s success and we are happy to partner with NEXTY to accelerate our business in Japan. Through this partnership with one of Japan’s largest electronics companies we significantly increase our footprint and reach, which will help us drive growth.
We are excited to work with Metatechno and increase our footprint in Japan.
Metatechno stands out for their mobility and flexibility. They are focused on becoming the global number one in their market niche.
At Metatechno, we see innovation in new combinations of existing things – technologies, people and methodologies. We recognize that innovation is not always bound by the high hurdle of creating something new from zero, but includes creating new combinations for our customers’ benefit. Our philosophy is encapsulated in the term ‘New Combination’. We strongly feel that the ‘New Combination’ that incorporates the Neonode sensor module has great potential.
License fees earned in the third quarter from our printer and automotive customers continued to be at reduced levels due to slower sales in the global markets amid the COVID-19 crisis. We expect these markets to rebound in the future as the pandemic is controlled but hesitate to speculate how quickly any recovery will be. We also continue to see certain customers delaying decisions regarding new development projects and investments due to COVID-19-related challenges in their businesses, in particular in Europe and North America. On the other side, COVID-19 has also rapidly projected our technology into new areas of growth. Our contactless touch sensor technology is an elegant, cost-effective solution that can protect consumers from having to physically touch surfaces on devices in public spaces. COVID-19 has been a paradigm shift in global consumer behavior, where people want to avoid touching buttons, keypads, and screens on public space devices.
We are currently engaged with numerous customers around the world assisting them in development and product release of innovative solutions for contactless touch in elevators and self-service, multi-user kiosks. These customer activities have resulted in an increase in the manufacture and shipment of evaluation kits and sensors modules. We anticipate the worldwide demand for our sensor modules will continue to build over the coming quarters and years from these and new customer applications in self-service kiosks, vending machines, elevators, and other applications. We are also experiencing strong customer interest for our touch and in-cabin monitoring solutions offerings from customers in the military and avionics, industrial, and automotive segments. To expand our reach and accelerate growth we continue to build our sales and partner eco-system. For example, we recently added four new value-added resellers in Asia and hired two highly qualified salespersons. We also completed a significant financing transaction that included the participation of several investment funds along with company insiders. The proceeds from the financing not only strengthen the company’s cash position, but also provide the liquidity to accelerate growth by adding critical assets needed to meet growing customer demand.
This agreement expands our earlier relationship with Finetek, to address contactless touch opportunities in elevators and interactive kiosks. I am pleased to deepen our cooperation with Finetek.
Finetek is a leading provider of display solutions ranging from high-tech display production equipment to electronics manufacturing services. This expansion of our Neonode product offering addresses key market verticals for contactless touch displays where we see heightened interest from customers.
Cutting edge technology has always been our priority and Atsushi's appointment brings a wealth of relevant knowledge in multidisciplinary technology and product development to the company. I look forward to working with Atsushi and he and the rest of our engineering team will help us maintain and strengthen our technical leadership.
This agreement with TNBTECH provides a local sales and engineering team to work with customers in the Korean market to achieve rapid deployment of Neonode contactless touch products in customer projects
Over the past decade, TNBTECH has established its reputation as the full-service partner organizations to turn to for IoT innovation, and more quickly bringing products to market. We look forward to a fruitful partnership with Neonode.
This agreement with GEC increases our presence in Japan and Southeast Asia. We are happy to partner with GEC to increase the technical and commercial offerings of Neonode products to customers in this region.
We see many opportunities for contactless touch interfaces and believe that Neonode sensor modules will provide the best value to our customers.
Japan Aerospace has a history of more than 60 years delivering premium, unique services to the Japanese aerospace market. As Japan Aerospace expands its offering of new value-added engineering and technical services, we think they are an excellent partner
We are excited to work with the Japan Aerospace team and customers in Japan to offer superior contactless solutions into many new applications.
Our corporate mission is to provide qualified and unique services that enhance safety, comfort and affordability in social infrastructure and Japanese skies. We believe Neonode's unique technology is the right choice for us to enable contactless solutions in response to customer needs.
I am extremely proud of the focused effort of our HMI Solutions team to secure this business and we are looking forward to building and delivering this mission-critical technology. Our customer is an agile and innovative global technology corporation and we see potential to expand our business with them significantly in the coming years. We also know that working on demanding aerospace and defense applications will give positive impact also on broader commercial applications, which is an added value.
The second quarter was impacted by softer sales in the global printer and automotive market due to COVID-19, as anticipated in earlier announcements. We expect these markets to rebound. COVID-19 has also rapidly projected our technology into new areas of growth. Our contactless touch sensor technology is an elegant and cost-effective solution that can protect consumers from having to physically touch surfaces on devices in public spaces. We see COVID-19 as a paradigm shift in global consumer behavior, where people do not want to touch buttons, keypads, and screens on public space devices.
I am pleased that we completed a significant financing transaction that included the participation of several investment funds along with company insiders. We anticipate the worldwide demand for contactless touch will continue to build over the coming quarters and years from new customer applications in self-service kiosks, vending machines, elevators, and other applications. The proceeds from the financing not only strengthens the company’s cash position, but also provides the liquidity to accelerate growth by added critical assets needed to meet growing customer demand.
With the urgency of the situation in mind, we were keen to develop a practical solution that could reconcile hygiene with convenience. We found that the Neonode’s touch sensor modules were very well-thought-out and Neonode support was crucial to develop a solution in very short time. We will continue working closely with the Changi Airport team to support their push to improve safety for travelers amid the COVID-19 pandemic.
We have identified transportation hubs as one of several areas we intend to focus on in the near term. Contactless interfaces for check in, baggage drop, and ticketing are appreciated by travelers today and our touch sensor modules are ideal for this type of applications. It has been our pleasure to work with Pierre and his skilled team to quickly implement this contactless solution at Changi.
The second quarter was impacted by softer sales in the global printer and automotive market due to COVID-19, as anticipated in earlier announcements. We expect these markets to rebound. COVID-19 has also rapidly projected our technology into new areas of growth. Our contactless touch sensor technology is an elegant and cost-effective solution that can protect consumers from having to physically touch surfaces on devices in public spaces. We see COVID-19 as a paradigm shift in global consumer behavior, where people do not want to touch buttons, keypads, and screens on public space devices. We anticipate this demand will continue to build over the coming quarters and years from new applications of our contactless touch sensors in self-service kiosks, vending machines, elevators, and other applications. We look forward to reporting more on these developments on our conference call on August 14.
This agreement with HY-LINE increases our presence in key markets in central Europe. We are happy to partner with HY-LINE to increase the technical and commercial offerings of Neonode products and solutions to customers in this region.
We are impressed with the capability and range of Neonode’s sensor solutions, and we look forward to better solving our customers’ problems and a fruitful collaboration for both companies.
We are seeing tremendous demand for our holographic solutions in several product categories. Neonode touch sensor modules are a key component to enable these exciting futuristic products.
There is a rapidly growing role for contactless technology that is both transformative and accessible. We are extremely proud that Neonode technology is a catalyst to making amazing new products possible.
Neonode's touch sensor modules are truly a breed apart from anything we’ve seen. We were able to easily incorporate the touch sensor modules with an in-air projection of a keypad for our elevator customers to provide a futuristic, elegant solution for our times.
I am proud that Neonode is able to offer a practical and economical solution to address how the public can safely interact with elevator controls, ATMs, gas pumps, restaurant kiosks and other devices. We call it ‘Contactless Touch.’ We are excited to see early adopter Easpeed swiftly moved forward to roll out their holographic button solution with our products across China.
Johan’s experience and track record of success in the B2B technology sector make him an ideal candidate to grow our sensor products business and lead the sales and marketing activities in our business area HMI Products.
Neonode’s sensor products are great enablers for touchless interaction and I am truly excited to build a strong customer base for these revolutionary sensor products.
The past few months have been challenging in light of the global coronavirus pandemic. The company’s operations have been disrupted when we paused all travel and required our employees to work remotely. The pandemic is also affecting our customers and we expect to see sales volumes dropping for several printer and automotive customers. Despite these headwinds, we continue to make progress on our path towards growth with new customer development projects and by actively engaging in new exciting sales opportunities, but, having that said, it is important to note that the lead time to acquiring new and profitable customers is fairly long.
I am pleased to have Jonas join our management team. His extensive international sales and product portfolio management experience and overall business acumen is a perfect fit to lead and drive the growth of our HMI Solutions business.