Neonode Reports First Quarter Ended March 31, 2020 Financial Results
STOCKHOLM, SWEDEN, May 13, 2020 — Neonode Inc. (NASDAQ: NEON), today reported financial results for the three months ended March 31, 2020.
“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,” said Urban Forssell, CEO of Neonode Inc.
FINANCIAL SUMMARY FIRST QUARTER 2020
- Net sales totaled $1.3 million compared to $2.0 million for the same period last year.
- Net loss totaled $1.0 million compared to a net loss of $0.6 million for the same period last year.
- Loss per share totaled $0.11 compared to a loss per share of $0.07 for the same period last year.
- Net cash used in operating activities totaled $1.0 million compared to $0.5 million for the same period last year.
BUSINESS HIGHLIGHTS DURING THE QUARTER
- Launch of new business area organization.
- Release of MultiSensing platform for driver and cabin monitoring in automotive applications. Strong customer interest; engaged with European premium OEM and shortlisted for sourcing process for 2024+ platform design win.
- Discussions regarding several new development projects around zForce touch and gesture sensing solutions with existing and new customers, for example in the printer, white goods and industrial segments.
- Expansion of partner network and increased focus on marketing activities to drive sales of sensor modules.
BUSINESS HIGHLIGHTS SINCE THE END OF THE QUARTER
- Growing interest in the company’s contactless touch solutions and increased sales of sensor module evaluation kits.
- Increased OEM pipeline for additional driver and cabin monitoring system proof of concepts in second half 2020.
THE BOARD OF DIRECTOR’S CHAIRMAN SUMMARY
- As we have earlier communicated, the company’s Board of Directors has started preparations for a dual public company listing during the second half year on both Nasdaq New York and Nasdaq Stockholm.
- There are several strong reasons for this:
- The company’s headquarters, management team and all critical operations are located in Stockholm
- A significant number of the company’s shareholders are located in Sweden
- A parallel listing in Stockholm would provide shareholders in Sweden a more efficient marketplace for trading shares and it would add to the company’s financing alternatives
- In general, we believe a Nasdaq Stockholm listing will enhance overall shareholder value
THE CEO’S COMMENTS
“Although the current business environment is challenging, we have been making steady progress towards rebuilding the company to return to a path to growth and thereafter profitability. Our comprehensive review of strategies and opportunities have resulted in several measures. We have narrowed our focus to B2B and segments and customer applications where our technologies have clear technical advantages and add value.
We believe current and potential customers appreciate our efforts to focus the business and that we are targeting attractive business segments. We feel confident that we are on the right path but, having said this, it is important to note that the lead time to acquiring new and profitable customers is fairly long.
To support and execute on our overall strategy, we restructured the company into three distinct and mutually supporting business areas and are hiring new talented managers to run the sales and business development activities in each. Our traditional business around touch and gesture control have been placed into two separate business areas: HMI Solutions for bespoke customer solutions and HMI Products for standardized sensor modules. We also concluded that Neonode is well positioned for significant growth in driver and cabin monitoring in automotive applications, and formed a new business area, Remote Sensing Solutions, to address this opportunity. Our revenue and gross margin for each of these business areas are included in our first quarter 2020 financial statements.
The aim of the restructuring is to gain a stronger focus in the organization and to facilitate a return to growth. We have identified and started to address several segments where we have competitive technology and/or price advantages including medical, military, automotive, industrial equipment and white goods. Recently, our first medical customer began selling a mobile ultrasonic examination system using our sensor module and we are currently engaging in customer projects in the military and white goods markets.
An unexpected development that arose out of the coronavirus pandemic is a focus on contactless touch applications for elevators, self-service kiosks and other devices that are used in public spaces where multiple people touch to activate. We have showcased our contactless touch holographic displays providing solutions for many of these applications and are in discussions with companies who provide products for these markets. We believe that the move to contactless touch interaction is just beginning and will intensify as initial applications become a desired requirement for devices used in public spaces.
In the business area Remote Sensing Solutions, we have increased our marketing efforts towards automotive OEMs and Tier 1 suppliers, which has been well received. We are currently engaged in discussions around proof of concept projects with several customers and have been shortlisted for a sourcing process for a 2024+ program with a European premium OEM.
The COVID-19 outbreak has had a negative impact on the company’s near term growth and overall business because of the global economic slowdown and the negative effects of the virus outbreak on our customers’ businesses. We continue to monitor the developments to mitigate the aforementioned risks but also recognize potential opportunities with our optical touch and gesture control for safe and germ free people transportation, access and daily tech interface as well as applications within medical, transportation and other systems,” concluded Dr. Forssell.
FINANCIAL OVERVIEW FOR THE QUARTER
Net revenue for the quarter ended March 31, 2020 was $1.3 million, a 35.7% decrease, compared to the same period in 2019. HMI Solutions were the majority of our total revenue and decreased by 39.1% in 2020 as compared to 2019, primarily due to an 87.8% decrease in license fees earned from our e-reader customers and 41.8% decrease in license fees earned from our printer customers and a 19.0% decrease in license fees from our automotive customers. Revenue from our HMI Products increased 60.0% for the comparable quarters and partially offset the decrease in license fees. We sold $98,000 of sensor modules in the first quarter of 2020 compared to $50,000 in the same period of 2019.
Our combined total gross margin was 97% and 95% for the three months ended March 31, 2020 and 2019, respectively. The increase in total gross margin in 2020 as compared to 2019 is primarily due to non-recurring engineering within our business area HMI Products. For the three months ended March 31, 2020, license fees accounted for 90% of total revenue compared to 97% in the same period in 2019. There were $27,000 of NRE revenues for the three months ended March 31, 2020 compared $20,000 during the same period 2019. Our operating expense decreased 9.3% in the first quarter of 2020 compared to 2019. The decrease is primarily related to lower staff expenses and scrapped inventory included in the comparable quarter in 2019.
Net loss attributable to the company for first quarter of 2020 was $1.0 million, or $0.11 per share, compared to a net loss of $0.6 million, or $0.07 per share, in first quarter 2019.
Cash used by operations was $1.0 million for first quarter of 2020 compared to $0.5 million in the first quarter 2019.
Cash and accounts receivable totaled $2.3 million and working capital was $1.4 million at March 31, 2020 compared to $3.7 million and $2.4 million at December 31, 2019, respectively.
The company's commitment to innovation and protecting our inventions has resulted in two new patent grants, US10585530 and US10534479, and two new patent applications being filed this quarter, bringing the portfolio to a total of 122 patents.
ORGANIZATION AND STAFF
Neonode Inc., a Delaware corporation, with its executive head office in Stockholm, Sweden are organized in four wholly owned subsidiaries located in Sweden, Japan, Korea and Taiwan and with a majority owned subsidiary in Kungsbacka, Sweden. At the end of the first quarter, our company had a workforce of 57 people, including 11 consultants compared to a workforce of 55 people at the same date last year. Our workforce is primarily located in Sweden.
FUTURE REPORTING DATES
|Q2 Interim Report 2020||August 14, 2020|
|Q3 Interim Report 2020||November 10, 2020|
For more information, please contact:
Chief Financial Officer