Neonode Inc.

Hi and welcome to Neonode's Q4 2022 earnings call hosted by Redeye. We will today start with a company presentation and also a presentation of the Q4 results, followed by a Q&A session by me and the companies of their analysts. So with that said, I leave the word over to the CEO, Urban Forssell, for the company presentation.

Thank you very much. Also from my side, welcome to our Q4 and full year 2022 earnings call. With me today is our CFO, Fredrik Nylén, and he will present the financial results. And before we go into the main presentation, we'd like to take a minute to read a legal disclaimer. And you find it here on the screen as well. This presentation contains and related oral and written statements of Neonode Inc. and its management may contain forward-looking statements. Forward-looking statements include information about current expectations, strategy, plan, potential financial performance, or future events. They also may include statements about market opportunity, sales growth, financial results, use of cash, product development and introduction, regulatory matters, and sales efforts. Forward-looking statements are based on assumptions, expectations and information available to the company and its management and involve a number of known and unknown risks, uncertainties and other factors that may cause the company's actual results, levels of activity, performance or achievements to be materially different from any expressed or implied by these forward-looking statements. Prospective investors are advised to carefully consider these various risks and certainties and other factors. Any forward-looking statements included in this presentation are made of today's date. The company and its management undertake no duty to update or revise forward-looking statements. This presentation has been prepared by the company based on its own information as well as information from public sources. Certain of the information contained herein may be derived from information provided by industry sources. The company believes such information is accurate and that the sources from which it has been obtained are reliable. However, the company has not independently verified such information and cannot guarantee the accuracy of such information. Thank you very much. With this, let's have a quick look at today's agenda. I will give first here a brief strategy and business update that will also connect to our previous earnings call in November. After this, I will invite Fredrik Nylén to come up on stage and present the Q4 and full year 2022 financial results, followed by some comments regarding financing. When I return for point four, I will discuss current status and our plans going forward. I will also today give some comments about the patent litigations versus Apple and Samsung. And we finish off with some concluding remarks. With this as an outline for today's presentation, let's just go right into it. For new followers and listeners to this presentation, I want to just give a brief update on our business strategy. And this is a combination of technology licensing and product sales. So we work today two business areas, one where the focus is technology licensing. Looking at our current customers, they include printer manufacturers and automotive tier one suppliers. and also some other customers. We work here with two technology platforms. We call them ZForce and MultiSensing. I will give examples of applications in the next slide. Whereas on the right side we illustrate our products business where we target customers in the elevator and interactive kiosk segments with our touch sensor module products. Key application areas. and what we are working on in our day-to-day operations. In the licensing business, it's a lot of focus today on head-up display obstruction detection and also interior controls. This is something we base on our C-Force platform, and we use our multi-sensing platform to work on driver and in-cabin monitoring solutions and features. In our products business, we mainly work on contactless touch. either touchless touch on displays and other surfaces and keypads, keyboards and buttons, or holographic touch. So with our touch sensor modules, you can make holographic display images interactive, which is quite futuristic and cool, we think. We also work on rugged touch and gesture sensing with the TSM products. Recently we updated our website quite fundamentally and now what you will see there is different illustrations and descriptions that underline and reflects our strategy. So please visit neonon.com and check out the nice contents that our marketing team has added to the website recently. What you will see is that we do a lot of sector based marketing and this is to support our growth strategy. And especially if you look here to the left in the first step, we have a very, very strong focus today in several of our businesses to establish beachheads in important segments and markets. And everything we do in marketing and sales and also product development is aimed at supporting this strategy. We also work with proof of concepts and different types of demo projects to also further show and demonstrate the value of our technology. This is very, very important and we follow this beachhead strategy to break through in key segments so that we later can focus on scaling up. In some of the segments we are active, we feel that we already have achieved the breakthrough and we have established beachheads. One example is elevators and also certain sub-segments of the interactive kiosk market. But in others, we admittedly still are working really to establish the beachheads. So this is the clear strategy that we have been following for some time. We have refined it and we believe that this is really now the right way forward for us. More regarding marketing, during the second half of last year, especially during the fourth quarter, we are glad that we could again start to travel and join physical live events. And that you will see here some examples from automotive events in Detroit, in Munich, and also a virtual event in China that we joined during November. They all focus on head-up display, obstruction detection, interior controls and driver and in-cabin monitoring. We also attended Japan Build, which is focused on prop tech. And this is different aspects of interactive kiosk applications that we showed here together with partners. Very, very interesting and successful event for us with huge attention to our different offerings and our partners' products. In line with this, we were, as late as last week, part of retail tech in Tokyo, Japan, also with great attendance and a lot of appreciation from people visiting our booth and taking part of our different solutions and our partners' different products on display. So this is where we are today and a little bit of a short summary and overview of our business strategies and what we do in terms of marketing and sales. I will come back in a short while, but now I want to give the word to Fredrik Nylén, our CFO.

Thank you, Urban. You can find our 10K and earnings release if you visit our investor section on our webpage, Nino.com. I will, in this presentation, just summarize the key highlights. I will also say a few words on financing. Total revenues for 2022 was 5.7 million. That is a decrease of 3% compared to 2021. We saw a slight decrease in license revenues in 2021 compared to 2022 compared to 2021. And this is due to component shortages within the automotive and printer industries, which affect our customers and hence affecting our license revenues. However, we saw a recovery in the second half of 2022 in license revenues. For products revenues, we reached 995,000 in 2022. That is an increase of 4% compared to 2021. Also here, we saw a recovery in Q4 on product revenues. However, in 2022, we are still affected by lockdowns in Asia, and we are also affected by long development and large cycles at our customers. Gross margin for 2022 was 22%. That includes a one-time effect of right-hand obsolete stock in Q4. Adjusting for that, we would have a gross margin of 51%, which we think is a good level. Operating expenses was 10.2 million for 2022. That is a decrease of 15% compared to 2021. Main reason is that we have cost control, but we are also helped by the weak Swedish currency. As I stated in the last earnings call, the majority of our costs are in Swedish krona. Summarizing 2022 in a P&L, we had a net loss of 4.9 million compared to 6.5 million in 2021. And that is, as I discussed in previous slides, less operating expenses, but keeping the revenue at approximately the same level as 2021. Net cash burn in operating activities for 2022 was 6.8 million. That is a decrease of 11% compared to last year. We had a cash balance and accounts receivable balance of 16.3 million as of the 31st of December 2022. That is a decrease of 2.4 million for the year. I will now just say a few words on financing. During October 22 to January 23, we selectively used our ATM facility and we raised net proceeds of 12.6 million to an average price per share of $7.24. The 4.7 million we raised in Q4 are a part of the balance that I've talked about in previous slides. but we increased also the balance by adding additional 7.9 million of net proceeds in January 2023. We think that the improved cash position will give financial stability to execute on our strategy. And to give some more color to this, I will give the word back to Uban.