Neonode Reports Third Quarter Ended September 30, 2020 Financial Results
STOCKHOLM, SWEDEN, November 10, 2020 — Neonode Inc. (NASDAQ: NEON), today reported financial results for the three and nine months ended September 30, 2020.
FINANCIAL SUMMARY THIRD QUARTER 2020
- Net sales totaled $1.5 million compared to $1.3 million for the same period last year.
- Net loss attributable to Neonode Inc. totaled $1.6 million compared to a net loss of $1.1 million for the same period last year.
- Loss per share totaled $0.16 compared to a loss per share of $0.12 for the same period last year.
- Net cash used in operating activities totaled $1.8 million and $1.4 million for the three months ended September 30, 2020 and 2019, respectively.
BUSINESS HIGHLIGHTS DURING THE QUARTER
- The company completed a $13.9 million private placement financing transaction receiving cash proceeds of $13.0 million, net of offering costs. The company’s CEO and two members of the Board participated in the transaction purchasing a total of $3.1 million in stock.
- In addition, as part of the private placement financing transaction, the company fully repaid $1.0 million in short-term working capital loans owed to the two members of the Board.
- Continued marketing of touch sensor modules with a focus on contactless touch applications with customers in the elevator and interactive kiosk segments.
- Increased sales of touch sensor modules and evaluation kits to end customers and value adding partners.
- Advanced discussions regarding several new development projects around zForce® touch solutions with existing and new customers, including in the avionics and industrial control systems segments.
- Continued development and marketing of MultiSensing® platform for driver and in-cabin monitoring in automotive applications.
- Strengthened technical leadership through recruitment of Mr. Atsushi Ishii as new Vice President Engineering.
BUSINESS HIGHLIGHTS SINCE THE END OF THE QUARTER
- Expansion of sales team in North America and Europe and of partner network in Asia.
- Focused work on execution of marketing and business development plans to drive sales.
- Continued trend of growing interest in the company’s contactless touch solutions and increased sales of touch sensor modules and evaluation kits.
- Prototype development agreement signed with leading U.S. defense contractor.
THE CEO’S COMMENTS
“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,” commented Dr. Urban Forssell, CEO of Neonode.
“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,” concluded Dr. Forssell.
FINANCIAL OVERVIEW FOR THE THREE AND NINE MONTH PERIOD ENDED SEPTEMBER 30, 2020
The increase of 14.1% in total net revenues for the three-month period in 2020 as compared to the same period in 2019 was primarily related to significantly higher revenues from sensor module sales which was partially offset by slightly lower license revenues. The decrease of 29.5% in total net revenues for the nine-month period in 2020 as compared to the same period in 2019 was primarily related to lower license revenues across all customers. In accordance with our revenue recognition policy, we record unbilled license fees using prior royalty revenue data. In 2020, due to the uncertainty in the global economy, we recorded lower estimated license fees than in the same period in 2019.
Our combined total gross margin was 86.6% and 89.6% for the three and nine months ended September 30, 2020 and 95.1% and 95.3% for the three and nine months ended September 2019, respectively. The decrease in total gross margin in 2020 as compared to 2019 was primarily due to the increase in sales of sensor modules with lower gross margins compared to the 100% gross margin on license fees, plus certain costs relating to inventory adjustments in 2020. Our operating expense increased 24.8% and decreased 2.5% in the three and nine months ended September 30, 2020, respectively, compared to same periods in 2019. The increase for the three months in 2020 is primarily due to actual and estimated one-time legal costs. The decrease for the nine months period in 2020 is primarily related to lower staff expenses and scrapped inventory included in the comparable periods in 2019.
Net loss attributable to Neonode Inc. for the three and nine months ended September 30, 2020 was $1.6 million and $4.3 million, or a loss of $0.16 and $0.45 per share, respectively, compared to a net loss of $1.1 million and $2.9 million, or a loss of $0.12 and $0.33 per share, in the comparable periods in 2019, respectively.
Cash used by operations was $1.8 million and $3.7 million for three and nine months ended September 30, 2020, respectively, compared to $1.4 million and $2.9 million in the same periods in 2019, respectively.
Cash and accounts receivable totaled $13.3 million on September 30, 2020 compared to $3.7 million at December 31, 2019.
CONFERENCE CALL INFORMATION
The company will host a conference call Tuesday November 10, 2020 at 10AM Eastern Standard Time (EST)/4PM Central European Time (CET) featuring remarks by, and Q&A with, Urban Forssell, CEO, Maria Ek, CFO, and David Brunton, Head of Investor Relations.
The dial-in number for the conference call is toll-free: (877) 539-0733 (U.S. domestic), +1 (678) 607-2005 (international) or 085 661 9361 (Stockholm, Sweden). To access the call all participants must use the following Conference ID: #6708249. Please make sure to call at least five minutes before the scheduled start time.
To register for the call, and listen online, please click:
For interested individuals unable to join the live event, a digital recording for replay will be available for 30 days after the call's completion – 11/10/2020 (13:00PM EST) to 11/24/2020 (23:59PM EST). To access the recording, please use one of these Dial-In Numbers (800) 585-8367, (855) 859-2056 or (404) 537-3406, and the Conference ID #6708249.
Neonode will post a link to the presentation from the conference call in the Investor Relations section of the Neonode website www.neonode.com after the call.
For more information, please contact:
Phone: +1 925 768 0620
Chief Financial Officer