NEON - Earnings call transcript Q3 2017

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Operator

Hello, everyone. Thank you for standing-by. And welcome to Neonode's Third Quarter 2017 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. you. Thank Instructions] [Operator for the and Brunton, call Investor of time like Neonode's I to Corporate turn over Relations. opening this introduction, remarks would Head At to David ahead go David, conference. start please and the

David Brunton

review update. you thank results On we XXXX joining Welcome our a and quarter corporate for third provide today's us. call, will and financial

PowerPoint this items I'd go also a like Our update customer to of we've interest. details presentation first activities, technology that you and comments. as or of I that is guide company will include developments, the time we and have you through the call, other you hope the remind we'll that had through so up all

At time, pleasure any projects, intent following please go this Thomas statements. with these forward-looking materially filed All turning Neonode Report these and it results by Neonode's is call but outcomes over expect, Thomas, remarks statements results, to and Quarterly the our are by may not conference Neonode is before differ be limited targets, Executive other the Neonode. or forward-looking the the similar over to uncertainties SEC guides, operating Eriksson of statements. Reports other expected subject statements business, performance anticipate, than that to words forward-looking Thomas tend, affect call financial turn directed. disclaims from and your other to other on update not and my attention XX-K, Annual involve forward-looking reports call, Neonode's actual or the statements. XX-Q, are to I Eriksson, do the contained in These and position that will, or Officer expressly is historical to risk facts, implied may ahead. confidence, would may risks, qualifications include, other used what future in forward-looking now Therefore, factors identify factors obligation CEO, estimate, to on guarantee other which which this and Chief So statements. the believe, statements. concerning The like make expressions typically are to forward-looking

Thomas Eriksson

Thank everyone. you, good David, and day,

we said, this have bit for different presentation. format David As little will a

we're showing this develop there me I and use what have is back start going talking a and on according Lindqvist, and to like and Neonode step what to that send the and presentation. today I customers. for to slides some Lars solutions With our taking CFO, - our we So, outline would call products to does

company with our two in is call said, zForce. number would that slide laser machine to Neonode We delivered with technology like base a I for three. optical start formats. based We to So, interaction. technology that sensors human zForce provides

completely a First second, themselves. a under on the agreement. license our sensors as our integrated customer component And supply sensor build agreement that with fully

work two-dimensional correct also Our for with as solutions sensors the aperture, locations. and screen three-dimensional with it applications, be work can high objects camera used a of capture, It speed and collision to sense sensor. front They can sensors as objects. so precision objects detection really the in touch a proximity low-resolution with gestures well, and detect an and and report and extended replace and size

into sensor a on our custom than agreement. provide components typically to license easier are integrate sensors previously we Our that customer’s our product

any of with I'd volumes. sensor addressable shape have applications. for a market support and Our projects sensor interfaces a many like a configurations as: components large come and in multiple product a to the and We summarize this to that applications many support multiple components offering with different of size of

are we the of company and let where Next, milestones some me highlight today.

slide please number four. So to move

actively platform our investments license convert product produce market that demand our the customer build actions components. a and We to products create component. to company priorities that roadmap our the our top have on provides and to our and We strategy new capitalize brand our drives sensor to with AIR awareness in zForce

Our agreement large and projects. supply sales for is at directed partner volume different and customers marketing

a DigiKey. is network developing distribution of which global first are We half

is million aware how for that quality, address issues. are large products. their requirements any supplier quality technology customer to-date have selecting our We production solutions with shipped we a capacity, when We top over redundancy requirements for know without our OEMs, to as XX sensor

demand actively all volume and working processes customers. OEM large are requirements We our qualifying our of from meet in to

and our to of top develop to Another technology it future and products roadmaps. our is our customers' for continue priorities make relevant improve to

different strategic great to continue And our as and our consumer such know zForce operating. years. during profitable coming now, We already the is to I directed the this printers. diverse, component focus products to on volume market like high five. very and capturing and large business are electronic about of and nurture the solid lots we OEM with eReaders into contract move very would number where our applications potential sensor in The are slide manufacture solutions and While embedded is business, licensing market

already with HP and and this the their Amazon, deals. heavily of involved like know are some requirements to market, We in largest win OEMs

and small to addressing are customers. in We are customers, working our market next shipping we XX started with but platform. all the our current win to component quantities, components and different directly still sensor standardised selling to with license our customers We it sensors our already distribution this through large

In sensor components electronic flexible several for exciting our with deliver our example complete and the XD directly and applications such standardized We to module are partners for our we with sensors scanners. products, solution consumer identified the as space, also a toys as drones, combine their the OLED have displays working to OEM.

DigiKey during will focus our sales and initially training and key, will stock, Our our market, this sensor such in start partners as already kits development distribution it's on November. components first marketing

we largest type car of terms sensors. and believe total growth us to our time slide automotive. application you components XX for main different systems. the collission of sockets per different car, market can automotive and this avoidance Another sensors show, We volume. This exterior see car. in picture number with for up ASP have market picture in can important The few is move In sensors a Please with will be our sensors six. standardized ASPs systems $XXX a to for entry like exceeding in

just are to made currently components, some number applications for and We our this slide to platform. move tail delivering have on applications from working software some the Please shows supplier our by year. the new gate that At picture, by it support, car Tier of seven. standardized altering OEM in sensors interior and next agreement X with of sensor these early start a

is focus we sensor for main self-driving cockpit the touchscreen wheel still And with a Our AutoLiv. steering applications. and which inside work on cars

with assist In been objects years suppliers automotive to meter we autonomous reality, Please have This this looking like in slide the the not of X safety car We cars. from control our two we slide, interaction. our wheels, are to window AutoLiv, are of can with things what self-driving one focused to anti-pinch car. sensors system to, self-driving other Neonode develop but enable a is different sense during steering and largest support the we last still of our distance. to typically in autonomous sensor example to our close working for move at technology for roadmap, possibilities number eight. - a an need drive. that see X showing the on full view have lot top to and of is detect sensors, This In out

and like have they a not cameras extended they do contamination sensitive to are aperture, camera. Our dead spots, like or so an not produce sensors LIDAR

environment. object the a an an lot there precision, do a by information car a have the of report image, need about also that camera Our camera sensor information expensive unlike size blind complex spots is can limited very any not actual in and or But which processing solution processor. where produce its

camera the enough cars not fast, fast start a produce very map. to As the and will produce distorted move, environment to is

financial of very sensors technical update. the like and some position car. that ahead. produce turn Lars around for please With Lars, call Our over the I'd the info, fast to objects to go are correct will

Lars Lindqvist

Thanks, Thomas.

You I start page go earnings the for our for and investors XXQ our to section at highlights, of release up find nine. thoughts with some can to quarter. available website the Please www.neonode.com. important third number like quarter download at

net million of selling $X.X we August. and $X.X used those expenses of legal million First, from completed pay proceeds About in see off was to loan. a placement private short-term a

presence million in We in shipped to our customer fees continue have to expand XXXX. revenues with $XX customers generate our million since and XX now license the products products

new sensors our We nurture the shipping and process continue targeted of major components the business. focus market. milestone, sales first-generation we sensor This marketing is profitable touch we the increasing and rollout started solid have we and as are in our licensing for to

license the fees increased due revenue quarter in to XXXX increased and Our revenues. AirBar same XX% compared to

our units the operations cash used X at million year. however net stability our third some third third XXXX XX. fees, additional I'm the fees, XXXX XXXX a components. third want revenues of In presents Our components. quarter that and top for fees, to you the second business for license The by to BXC business more in license slide third are not is over to last I Revenues added third business revenue the sale That's and quarter AirBar in expenses of NRE of approximately slides fees, in components million go the quarter following increase, Please will quarter slide I quarter only nice non-cash going last and give number XXXX. includes are: our license there compared has details. increased story, X feel, provide of a of year. look the new unit sensor of the tracking to each XX% BXB XXXX but first, AirBar, and sensor full and first XXXX. quarter

cost $X.X AirBar compared For last fees to fees sensor million $XX,XXX. third-quarter. Operating in XXXX quarter and the million of year. third-quarter million for sales last $X.X Compared license our license was $X.X $XXX,XXX million, of third year goods to $X.X expenses were components XXXX,

is gross at XXX% business margin. licensing Our

XXXX, was the $XXX,XXX of quarter to million $X.X the sensor allocate cost for and AirBar we $XXX,XXX third cost representing the components $X.X compared year. However, last cost investment portion million. our third of overhead for and quarter

our years sensors up our for manufacturing, that the a cost. design, have commercialization in of two invested and of last We large portion total make

revenue has AirBar volumes. through from achieved discuss reviews has received AirBar know at product moment. Let even a though the very for consumer is We challenging sales expected that the AirBar market. not selling positive me it

the used component all processes that of management, sensor products. sensor in AirBar was are underlying chain part developing of and However, component supply the journey technologies, BXB our manufacturing

include which has successful, focus be limiting investment consumer understand BXB. for Our to that very primary been product is substantial us. sales We efforts a and marketing factor

our of all evaluating options on large therefore, strategic our BXB focus for so AirBar, are we put market selling diverse components. sensor We the the for very can and

$X.X net share Our share, $X.XX loss per to in loss XXXX. was million compared QX, per $X.X or or million $X.XX

Let's slide XX. move number to

business explain licensing where are. which I support the of a solid largest be Our time want will some to to continued and and our spend is representing profitable revenue so today, part they to

Our fees continues primarily to between license to stable throughout for I it sales Epson. and per million million future. printer $X.X quarter expect increase fee $X driven and new has license the XXXX, foreseeable by to from be Canon remained Printer

Our increase to coming automotive license expected quarters. over is business the

during Our than more million X.X third the and XX products license XXXX XXXX. customers million since shipped quarter

as a move $X.X talking proceeds placement. sufficient And the believe about balance sheet plan. let's XX. number talked million on private go I cash with [indiscernible] net our execute August, received cash. slide and over the to about we in in business have we cash from to We I've So,

of million approximately million are expenses range quarter. per expected million $X.X our used continue be And operations to $X.X cash per operating to currently at total by to in Our are quarter. $X the

And XX, We we of $X.X capital. September probably near-term we million $X.X XXXX, million components. expected for sufficient had have sensor working of than cash demand and inventory of as

our revenues is Our account account including plan business. and capital to sufficient before liabilities working grow accrued expenses within and payable our are well

Now, to to back Thomas. call turn the like I would over

Thomas Eriksson

Lars. you, Thank

sensor that to conclude, supplier the in to Directors, we're sensor strengthen work our back direct the sales the operation together advanced the deliver with look forward initial to excellence, I'm steps of as business. strategy of in our leading a quarter, I taking Looking to to continue at components positioning technology. new happy on Board

would like open Q&A. the for I call Now, to

Operator

question comes Cowen and with Our Rob first instructions] Stone [Operator Company. from

Robert Stone

Hi guys. questions. couple have a I of

significant breakout volumes? low, as the sensor for I by one, first more potentially components to to sensor volume see The it's or for segments, nice recognize the you get see business where are you the components modules still various do margins gross that quite

Thomas Eriksson

Hi, Rob.

at has AirBar for the reach but approximately as currently applications. product automotive and So, we obviously And to numbers are we consumer XX% increasing go. low, are our

Robert Stone

as would OEM the for both be AirBar that components? So, as well

Thomas Eriksson

Yeah, absolutely.

Robert Stone

could future components? Okay. And years and opportunities vehicles is sensors design doing cycles of for few thing be a the are but do vehicles your lot a different clearly cycles and the autonomous we in are long that you for vehicles where there product see out, know in near-term the pretty still

Thomas Eriksson

I most but projects is a the bit Well, little earlier, have think talked we wheel that we within about steering applications. advanced

out is already We of are Further and market, handles next sensors and door next in systems systems a entry quite typically tailgate come long and year. year different area first already is out have way in going start sensors, market. where the hit and and advanced early we that testing segment entry to shipping to that this early

Robert Stone

product other component I comments from approach to in thought your categories might opportunities licensing like other for than even from that printers sensor instance are you in automotive? move that a sensor XXXX within categories OEM might be segment a So, seeing a approach, revenue

Thomas Eriksson

we XX quite the at have quantities. - should be low currently still we customers We which have

try for We beginning going are ramping adding next as ship of in the year This the we and of the been end of put electronic we're this products. component they so have to during product year. application, automotive year

expected for on qualification plan be timeframe. with little and have we together this that So, manufacturing automotive a by the ready quality we plant company bit itself work we qualification of the our to

are we doing. what that's So

Robert Stone

Okay.

recognized products, be products consumer or might can't some I a you us of product So, on get categories sense in? of customers specific but your can probably in you names give with front the those electronics of

Thomas Eriksson

where market. It's mostly applications to go initially that are in were tablet we like application we panels e-Readers and areas are the and will printer

Robert Stone

Okay. A couple questions Lars. for of

unusual OpEx quarters, would so run rate up that OpEx driving actually there for that fourth quarter you sequentially are quarter, within the was that suggest decline do mentioned and range? than higher it in Thanks. few this we was next been You down anything at the and have the see somewhat modeling to going OpEx QX in what

Lars Lindqvist

Lars Yes. here.

quarter that are explain, there in certain to do. started talked X.X extent not it's X.X we and as early of roughly quarter this a per certain to that such. This recurring in million sort have but investments put depending we - all closing we components But about or to we X honestly actions

have to it little take everything expense, good related [indiscernible] that We is that, not to number like manufacturing bit So into a to expect. could a be

Robert Stone

to come expect inventory And Okay. capital. so respect level we to inventory the quarters? segments working the of you mentioned relatively moment licensing inventory and high with got few since is next revenue inventory, require over sufficient inventory the doesn't levels should with to The compare any to your at your to happy you you're down

Lars Lindqvist

so say long little we can forth. lead inventory times sufficient would that near-term I bit is components and those. decrease. long we want would with time would that expect we is a to Yeah, in so now, That have I we inventory, because for correct could, even that managing to we near-term, lead build have say very

Robert Stone

Okay, lastly the the by have working finished you to raw process happen breakdown of in inventory?

Lars Lindqvist

have of front is it don't [indiscernible]. me. in I It

Robert Stone

We'll take that offline.

Lars Lindqvist

Sure.

Robert Stone

back in I'll jump gentlemen. queue. the Thanks,

Thomas Eriksson

Thank you.

Operator

Mike is Our next from Capital. from Malouf Craig-Hallum question

Mile Malouf

strategic perhaps XXXX With than able been question. a we are headed my for there and somebody that, for a holiday sell are what to going give Thanks them you options the to could quarter regards to can AirBar obviously or is Great. market to taking last little you through options stop as guys to to units be only the starting for season that look better bit are any to few try the trying are thing into much talk about fourth this Thanks else? quarter just expectation quarters, been you do you these about the that, and it just

Thomas Eriksson

not Mike, product marketing business a we lot the will be more, in and tested we that from that have that learn proportional and brand and customers. still are but still is and its we product. to components component approach, successful and the OEM is this we of and the with Hi the beginning marketing been doing believe build sensor Thomas. been that however, and We in into some to our factory can expected customers also a refined the have it's we put of around build that core and our selling during with work is process we sure built resource, this, we deliver all into translate to this AirBar limited the the meanwhile good make a to has thing - by really we going this business, ready awareness expect we production The to AirBar, component

So different lot. a right perhaps, and AirBar, partner, we with sell still think right brand can a marketing

So, we of marketing selll business, are then at over in if with we would companies into are exactly burden will to of money and so this go I AirBar, we they say associated will the in their but, the looking having interested but and product hopefully can't largest who with this accessory contact this some take own of directly providing still see it this them, we AirBar provide the cost away. the inside and make on components, be components

Mile Malouf

nine that? mean, have to be that sooner than months talking you to I more to it that are sense we is lot a like a take get do or long of something how would And, six signed, going

Thomas Eriksson

market I obviously we I do been while, a very can't optimistic soon time on update product for in on say this optimistic we are with to the think there's we very about are thing working always some a AirBar it we that. when, get exactly product. that we to and interest back think have and that this But have to pretty lot of takes

Mile Malouf

give the what that be you to selling to Rob a sort next regards of with you ones lot you year especially lead obviously pointed with have sense can these the have times, are of you're regards of for auto have in then out. have modules contracts And the side to that these are to us a modules these upcoming signed as

looking unit that So, big they you cars sense eventually something on, are we number are are announce give and of us of that these a which how will at?

Thomas Eriksson

Yes, we're number slide. in going put in to this a

is our that up typically - and up goes sensors different to other at of $X As of these collision gate can, it for in sensors sensor goes you it further entry a and systems is on and to depending it can ASP. lot different typically, look range of be and of the opportunities lot the in infotainment type for sensors to sensors it tail up for number maybe there can systems, a application. used at see if a for type applications, And it $XX starts then few dollars $XX U.S. $XX starts for you but and display $XX $XX depending – on

Mile Malouf

to there do you sense contracts trying have a going just, actually to the just car. on Okay. this Or ramp And new is on a new of start with here? is how If actual is cars? roll-outs car, get

Thomas Eriksson

a signed have going But, OEMs. OEM different quite shipping few very We that we engaged to with are customer start one we're a to.

platform for easier is expect type take this, touch to first that also is get early customers next shipment trying more screen. that example year, this the we're module What solution. all we these next the features other of customers. gesture and the controls much coming sensors for integrate these to with to But makes place of we're next the for it into with adding to First components,

first different. announce the have go We that to things when But and they wheel the these is will systems, in are validation that's system of entry to happen. primarily the deals and tailgate with market. handle going steering sensors, we The pipeline, doors customers

it is and car. go take would so an the in wheel, much long to is safety into a which example, is this that, it steering area a be to real reason to For longer the qualify why considered taking zone,

with been in that's into get we've a knows However, for that some a as working out car, that real coming perhaps and quite now we ready self-driving specifically everyone forward. and to XXXX cars time, Because, good that's and - thing.

Mile Malouf

for Thanks your great. Okay, help.

Operator

Westman Our Redeye. with comes instructions] [Operator next question from Viktor

Viktor Westman

thanks me? question. Hi my hear for guys, you Can taking

Thomas Eriksson

Yes.

Viktor Westman

Okay.

first that steering of components the ask XX sensor to ship, customers perhaps those? wanted the you to to, several areas related are Just the the if in And or wheel? about what one them

Thomas Eriksson

low is prototypes electronics in to point. off several But, products, not that at we're It's automotive primarily this not by to the go customers but sampling and expect our anything it buid automotive that This goes it's quantities, like next take to We're year. shipping of we actually these up market, applications. products are into consumer still that. or in

Viktor Westman

the if understand. self-driving I and possible the wheel solely your Okay, looking value an steering that for also value was based on on cars? I And Are update propositions? other is proposition there with maybe starting

Thomas Eriksson

in the we one first on itself. sensing of is the wheel with the of things wheel of hands steering several the and steering First the direction in have steering wheel. position all, And

wheel, thru example display to illumination The from the module rear lower resolution we user wheel move driver windows to of for a other indicators have to provide the interface the steering directly steering module car. like that guide can directed the different the the enable the is on

do of thing provide track third wheel. to the is The steering the center in we pad functionality

the where thing the to you car wheel, the wheel, is The wheel with with itself. is hand is have quite automatically sounds that that. you the the wheel if but so of fingers steering are car is if on steering is turns of sensor a something when if So, you car there knows, in directly steering navigate for also do touch can function inside we inside self-driving are the with on fourth your which the dangerous a

the not depending part, modular can customers for the so of can sort we that we functions, wheel it's completely steering one multiple So needs but customer other on components. with modular, tailor for select so provide particular the one, and

Viktor Westman

and contract And receive last to does that question - or the does with on you information, announce win regards able are how work? steering wheel design the look a how it you to if

Thomas Eriksson

I believe, first and in have We to solutions We with AutoLiv, the relationship integrate on happens. when we aswell of That course. it depending sensor very depends so in steering work for the so the also be we primarily they that provide AutoLiv connection a segment, believe ready on customer the for are but with good supplier of type we that steering licensing largest requirements. will we component announced with wheel the - two the provide wheel, solution on into the steering wheel have them,

Viktor Westman

much. very you Thank

Thomas Eriksson

you. Thank

Operator

Our [indiscernible] next [indiscernible]. comes question from with

Unidentified Analyst

just my the taking countries, for larger you the countries AirBar itself, different selling know on product now you in do have see difference to a any interest? Thanks are the that see on in do Hello. see you you countries of call. interest I want many

Thomas Eriksson

of in US- on primary focus so the focusing markets been we United and area States target has market but limited we're marketing we to with China, interest a few on have specific primarily lot us. as marketing a a homogen the resources had have initially we India a seeing think I for for been AirBar, but

the is first been but touch, lot being China step India markets as think sort PCs different upgraded of a with market of and course a have market. to of U.S have We other that at our needs to is interesting and looking I be an second

Unidentified Analyst

any QVC, talk there about that use happening marketed again? from be you to is So,

Thomas Eriksson

well, Not a in of unique can't you that really at which we to We of product type AirBar application the what It understand this how these that, cost. solves lot lot that what relate point. cost, a else. sort it processes new can is quite a think does learned is we something and to the compare and needs education, it through problems of

I educate make So, it. to position how need sell of how and … to terms take consumers the and that's it exactly And retailers, to successful, we another the to approach in we to product think marketing think

Unidentified Analyst

is? because that, includes Dell, I type that you that of now far how But not see arrangements some but have it sure I'm with

Thomas Eriksson

not Yes, buy go a a you Dell's a for a like you you would were mouse people doesn't PC we of What that basically select it example. website, understand so can like seem can and that touch or through we're somewhat model screen AirBar selective separate see with consumers seeing accessory. an do is it's the challenge how group a going marketing and looking from to It’s are can using we're believe we an educational the understand to partner forward we need been to than that for at when selling and that we because ourselves, separate with to is do keyboard we and - product. that understand in

Unidentified Analyst

the On change Hewlett-Packard on to having licensing? plan you've side, module from module

Thomas Eriksson

into working and next to get all We're actually, our our platform actively HP, with customers the with component.

with so components and platform. their into So, just goes into play thing - basically and and protocols our it and plug and smaller components compatible previous but it's makes our it we earlier, called modules this them is

trying is and obviously are production that a which technology as are of our applying concern production demand or to a always the We problems take we company. action so scale a few hardware to address the a issuess solve And is component. also

partners, product. that And We margins demand. our that's sure supply with HP like we important dealing an are get with meet the dealing are just make expected boost to for this in we factor ourselves with large to to volume someone

Unidentified Analyst

Okay. that plan, is take. the will question That's the how long

Thomas Eriksson

Yes.

project module volume we very to Displays DigiKey work are as solution. for Instruments consider like third actively Amazon there with need because on with solution. and customers. And which their small Texas HP they working signs example distribution, we quite substantial the lot for for and example, we sales, them indirect OEM have And direct large customers, one with are targets and as FT, some actively the for simple customers is then our with through there but in integrating working a be a primary X We have touch and going grow, have is is secondly, we three can our that are projects partners then we we Samsung that for a all our Tier of

we So, attack we and HP. to angles low-hanging how trying our we're fruit different today, three like that course have from of this works, current customers the but see is

Unidentified Analyst

you Thank much. Okay. very

Thomas Eriksson

you. Thank

Operator

conclude today's for additional remarks. our conference and hand question-and-answer over This will management to segment for it call. I'll closing back

Thomas Eriksson

on sensor like is excited our I'd ramping component call, is about our some where we're we're production this going, say running customers. you. business very with obviously Thank and and to

for joining this Thank thank a for day. And So, you and good have call. you. everything

Operator

Conference conclude this Neonode's will and Ladies Investor Third Call. Quarter XXXX gentlemen,

You may now disconnect a wonderful your lines and day. have

Neonode (NEON) 9 Nov 172017 Q3 Earnings call transcript