Neonode Reports Third Quarter Ended September 30, 2019 Financial Results

STOCKHOLM, SWEDEN – November 6, 2019 – Neonode Inc. (NASDAQ: NEON), the optical interactive sensing technology company, today reported financial results for the three and nine months ended September 30, 2019.

”There is significant interest for Neonode’s sensor and license technology in the automotive and other key markets but in our business, we have to accept long lead times in acquiring new customer contracts. Having said that, we are not satisfied with the development over the last 12-18 months. Our newly recruited CEO, Dr. Urban Forssell, brings a deep understanding of the automotive markets and has successfully managed embedded technology operations throughout his career. He will add a lot of energy to the company and continue to focus the business on all selected markets and use cases while driving ongoing cost efficiencies throughout the company. The company’s ability to convert the strong customer interest into revenue generating contracts is the absolute key moving forward”, said Ulf Rosberg, Board Chairman of Neonode.

FINANCIAL SUMMARY  FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019

  • Net sales totaled $1.3 million and $5.0 million for the three and nine months ended September 30,  2019 compared to $1.9 million and $6.2 million, respectively, for the same periods last year.
  • Operating expenses totaled $2.4 million and $8.0 million for the three and nine months ended September 30, 2019 compared to $2.5 million and $8.7 million, respectively, for the same periods last year.
  • Net loss totaled $1.1 million and $2.9 million for the three and nine months ended September 30, 2019 compared to a net loss of $0.8 million and $2.5 million, respectively, for the same periods last year.
  • Loss per share totaled $0.12 and $0.33 for the three and nine months ended September 30, 2019 compared to a loss per share of $0.14 and $0.42, respectively, for the same periods last year.
  • Net cash used in operating activities totaled $2.9 million for the nine months ended September 30, 2019 compared to $2.3 million for the same period last year.

HIGHLIGHTS SUBSEQUENT TO SEPTEMBER 30, 2019

  • In October 2019, Hakan Persson resigned as Chief Executive Officer and the Board of Directors appointed Urban Forssell as new Chief Executive Officer, effective latest January 1, 2020. Mr. Forssell has most recently served as Vice President and General Manager at Öhlins Racing AB. His positions at Öhlins Racing have included responsibility for sales and marketing of MC and Automotive suspension systems, research and development, and quality assurance.

THE CEO’S COMMENTS

“We have focused on sales, cost efficiency, marketing and technology development during the past few months and now expect to capitalize on our efforts while keeping our cost reduction focus. Over the course of the year, we participated in numerous relevant trade and industry shows where our latest version of our license and sensor module technologies have been well received. Our sales partner networks in North America and Japan have a growing number of opportunities which are in the evaluation and product development phase. We have signed with a sales partner in China, Serial Microelectronics, and they are in the final stages of product orientation and is beginning initial sales efforts. In addition, our distributor, Digi-Key has shipped a significant number of evaluation kits globally, primarily to industrial accounts in the U.S. and Asia. The leads generated through this channel are continuously being qualified by our local representatives and sales partners”, said Maria Ek, Neonode interim CEO and CFO.

“We are engaged with automotive OEMs and their Tier 1 suppliers in projects such as tailgate sensors and infotainment systems, military ruggidized control panels and medical device control panels to name a few. We are encourgaged by the increasing pipeline of customer discussions and activities that is being driven by the combination of our internal and external sales groups”, continued Ms. Ek. 
 
“In summary we have increased our sales and distribution network as well as our understanding of the market for Neonode’s technology. The task going forward will be to deliver revenue by focusing on the best opportunities”, concluded Ms. Ek.  

FINANCIAL OVERVIEW FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019
 

All of our sales for the three and nine months ended September 30, 2019 and 2018 were to customers located in the U.S., Europe and Asia.

Our net revenues for the three and nine months ended September 30, 2019 are $1.3 million and $5.0 million, respectively, and include revenues earned from technology license fees, NRE and module sales. Revenues for the three and nine months ended September 30, 2019 decreased by $0.6 million, or 32%, and $1.1 million, or 19%, year over year, respectively. 

Our total license fees for the third quarter 2019 decreased by $0.4 million, or 24%, primarily due to the adoption of a new technology platforms by an e-reader and a printer customer in the fourth quarter of 2018, resulting in a 96% decrease in total e-reader license fees and a 31% decrease in total printer license fees for the comparable quarters. The decrease in license fees from these two customers is partially offset by a 61% increase in license fees from our automotive customers.

In addition, non-recurring engineering revenue for the third quarter 2019 decreased $0.3 million, or 99% compared to 2018 due to NRE fees related to an automotive entry system project recorded in the third quarter of 2018. Revenues from sensor module sales increased $0.1 million, or 144%, compared to the third quarter in 2018. The overall decrease in revenues for the comparable nine month periods is primarily due to the same customer activities. 

Operating expenses for the three months ended September 30, 2019 are in line with the same period in 2018 but is lower by 8% for the nine months ended September 30, 2019 due to lower administrative payroll and professional fees compared to the same period in 2018. Net loss for the three and nine months ended September 30, 2019 increased by $0.3 million, or 34% and $0.5 million, or 19% compared to the same periods in 2018. 

Cash used by operations during the nine months ended September 30, 2019 increased by $0.6 million, or 26% year over year. Cash and accounts receivables totaling $5.0 million on September 30, 2019 is sufficient to execute according to our plan. Our third quarter Form 10-Q is available for download from the Investor Section of our website at www.neonode.com.

Financial Overview

Amounts in USD thousand unless otherwise stated   Three months ended
September 30,
    Nine months ended
September 30,
   
    2019     2018     2019     2018    
Net sales     $   1,310       $   1,923       $   5,032       $   6,174    
Net sales decline %     (31.9 )%             (18.5 )%          
Gross margin %     95.1 %     82.4 %     95.3 %     92.3 %  
Operating loss     $    (1,189 )     $    (934 )     $   (3,171 )     $ (2,974 )  
Operating margin %     (90.8 )%     (48.6 )%     (63.0 )%     (48.2 )%  
Net cash used in operating activities                     $   (2,873 )     $ (2,275 )  

  

Revenue Distribution by Business Model 

    2019     2018         2019     2018  
Revenue Distribution By Business Model   Q3     Q3         Nine months     Nine months  
License fees     $  1,213       $  1,597           $  4,622       $  5,681  
Sensor modules     95       39           368       176  
Non-recurring engineering     2       287           42       317  

License Fee Revenue Distribution per Market 

    2019     2018         2019     2018  
License Fee Revenue Distribution Per Market   Q3     Q3         Nine months     Nine months  
Printers     $  805       $ 1,159           $  3,162       $  3,830  
E-Readers and Tablets     8       190           124       700  
Automotive     400       248           1,336       1,151  
                                     

Link to full press release: https://www.neonode.com/neonode-reports-third-quarter-ended-september-30-2019-financial-results/

FOR MORE INFORMATION, PLEASE CONTACT:
 

Investor Relations
David Brunton
E-mail: david.brunton@neonode.com

Chief Financial Officer
Maria Ek
E-mail: maria.ek@neonode.com

ABOUT NEONODE

Neonode Inc. (NASDAQ:NEON) develops, manufactures and sells advanced sensor modules based on our company’s proprietary ZFORCE AIR technology. Neonode ZFORCE AIR Sensor Modules enable touch interaction, mid-air interaction and object sensing and are ideal for integration in a wide range of applications within the automotive, consumer electronics, medical, robotics and other markets. Our company also develops and licenses user interfaces and optical interactive touch solutions based on its patented ZFORCE CORE technology. 

NEONODE, the NEONODE logo, ZFORCE and ZFORCE AIR are trademarks of Neonode Inc. registered in the United States and other countries. ZFORCE CORE is a trademark of Neonode Inc.

For further information please visit www.neonode.com

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SAFE HARBOR STATEMENT

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These include, but are not limited to, statements relating to expectations, future performance or future events, business plan and strategy, revenue guidance for 2019 from license fees and module sales, proceed from patent licensing, revenue from patent monetization, customer shipments and orders, and product cost, performance, and functionality matters. These statements are based on current assumptions, expectations and information available to Neonode management and involve a number of known and unknown risks, uncertainties and other factors that may cause Neonode’s actual results, levels of activity, performance or achievements to be materially different from any expressed or implied by these forward-looking statements.

These risks, uncertainties, and factors are discussed under “Risk Factors” and elsewhere in Neonode’s public filings with the U.S. Securities and Exchange Commission from time to time, including Neonode’s annual report on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K. You are advised to carefully consider these various risks, uncertainties and other factors. Although Neonode management believes that the forward-looking statements contained in this press release are reasonable, it can give no assurance that its expectations will be fulfilled. Forward-looking are made as today’s date, and Neonode undertakes no duty to update or revise them.

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Quotes

There is significant interest for Neonode’s sensor and license technology in the automotive and other key markets but in our business, we have to accept long lead times in acquiring new customer contracts. Having said that, we are not satisfied with the development over the last 12-18 months. Our newly recruited CEO, Dr. Urban Forssell, brings a deep understanding of the automotive markets and has successfully managed embedded technology operations throughout his career. He will add a lot of energy to the company and continue to focus the business on all selected markets and use cases while driving ongoing cost efficiencies throughout the company. The company’s ability to convert the strong customer interest into revenue generating contracts is the absolute key moving forward.
Ulf Rosberg, Board Chairman of Neonode.
We have focused on sales, cost efficiency, marketing and technology development during the past few months and now expect to capitalize on our efforts while keeping our cost reduction focus. Over the course of the year, we participated in numerous relevant trade and industry shows where our latest version of our license and sensor module technologies have been well received. Our sales partner networks in North America and Japan have a growing number of opportunities which are in the evaluation and product development phase. We have signed with a sales partner in China, Serial Microelectronics, and they are in the final stages of product orientation and is beginning initial sales efforts. In addition, our distributor, Digi-Key has shipped a significant number of evaluation kits globally, primarily to industrial accounts in the U.S. and Asia. The leads generated through this channel are continuously being qualified by our local representatives and sales partners.
Maria Ek, Neonode interim CEO and CFO
We are engaged with automotive OEMs and their Tier 1 suppliers in projects such as tailgate sensors and infotainment systems, military ruggidized control panels and medical device control panels to name a few. We are encourgaged by the increasing pipeline of customer discussions and activities that is being driven by the combination of our internal and external sales groups.
Maria Ek, Neonode interim CEO and CFO
In summary we have increased our sales and distribution network as well as our understanding of the market for Neonode’s technology. The task going forward will be to deliver revenue by focusing on the best opportunities.
Maria Ek, Neonode interim CEO and CFO