Neonode Reports Third Quarter Ended September 30, 2019 Financial Results

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Nov 06, 2019, 09:26 ET

STOCKHOLM, Nov. 6, 2019 /PRNewswire/ -- 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