Hi, and welcome the Q3 2022 Neonode Earnings Call. And we’ll start today with a company presentation and a walk through of the financial results, but the company’s CEO and CFO. Then we have a few minutes for Q&A hosted by me and -- both me and the other company’s -- or the company’s covering analyst we’ll ask questions. So with that said I welcome Urban Forssell on stage.

Thank you, Jesper to all listeners online welcome. And thank you for joining us. On today’s call we will present third quarter 2022 financial results and provide the corporate update. The update the will include comments about our business strategies, ongoing customer activities and other items of interst. Joning me today, on our call is our CFO Fredrik Nihlen, who will present the details of the financial results. After Fredrik has done that, I will come back and talk about overall strategies, customer activities and other operational topics. Before we proceed with the main part of the presentation, I would like to draw your attention to this legal disclaimer. This presentation contains and the related oral and written comments from us may contain forward-looking statements. Forward-looking statements include information about current expectations, strategy, plans, potential financial performance or future events. They also may include statements about market opportunity, sales growth, financial results, use of cash, product development and launch, regulatory matters and sales efforts. Forward-looking statements are based on assumptions, expectations, 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, uncertainties and other factors. Any forward-looking statements included in this presentation are made as of today’s date. We undertake no duty to update or revise forward-looking statements. This presentation has been prepared by us the company based on its own information, as well as information from public sources. Certain of the information contained in the presentation may be derived from information provided by other industry sources. The company believes that such information is accurate and the sources from which we have obtained it are reliable, however, we have not independently verified such information and cannot guarantee the accuracy of such information. Thank you for your patience. And with this, we swiftly move on to the next point in the agenda, the presentation of the financial results. Fredrik?

Thank you, Urban. You can find our earnings release and 10-Q on our website neon.com under our IR section. I will in this presentation, just summarize the key points. Revenues for the third quarter was $1.2 million, that is an increase of 26%, compared to the same quarter last year. We saw a recovery in license revenues for the third quarter, mainly due to that our license customers within the printer and automotive market, has had more volumes. We also saw in products, a slight recovery to $155,000, an increase of 14%, compared to the same quarter last year. We are still affected by the COVID pandemic lockdowns and also the long cycle for our customer to launch and develop products. Our gross profit and gross margin for Q3 2020 was 48%. That is an increase of 20 percentage points, compared to the same quarter last year. It is on decrease compared to the previous quarters, and it is due to the product mix. For the fourth quarter, we think that the product or the gross margin for products will increase again, thanks to favorable product mix from customer -- current customer orders. Operating expenses for the third quarter 2022 was $2.1 million, that is a decrease of 22%, compared to the same quarter last year. We are very cost conscious and that is one-off effects that it goes down, but we are also helped by the weak Swedish currency. As we stated in the last earnings call, our main part of our costs are in Swedish krona. So our net loss for Q3 2022 was $0.8 million, compared to $1.7 million for last -- for record last -- compared to the same quarter last year. And this is due to increased revenues and decreased costs, as explained in this in previous slides. Cash used in operating activities was $0.5 million. That is a decrease of 69%, compared to the same quarter last year. This is due to an effect from currencies on inventory and also a reduced net loss. The first half of 2022, we purchased components to secure the production of TSMs and that affected our cash flow heavily. For the third quarter, we have not purchased components to the same extent. Cash and accounts receivable decreased with $1.2 million for Q3 2022, as compared with $2.7 million for Q2 and 2.4% for Q1. And with that, I will leave the word back to, again, Urban.

Thank you, Fredrik. Moving on, next point in the agenda is a strategy and business update. And for those of you that haven't followed us in the last year or so, I just wanted to underline and explain our overall business strategy to combine technology licensing and product sales. If you start with technology licensing, we illustrate that in the left part of this slide. We address the printer and automotive markets mainly today with our offerings. We licensed two technology platforms, one we call zForce, which is based on infrared technology and suitable for different types of applications, as I explain shortly; and multi-sensing which is camera-based scene analysis technology. The business model we apply here is to combine sales of engineering services, NRE, non-recurring engineering services and technology licensing or software licensing. In the other part of our business that we internally refer to as our products business, we sell products that we call touch sensor modules or TSMs for short. They are a particular realization of our zForce technology platform. And these are ideal for use for touch contactless touch gesture sensing applications and similar. Here, we mainly today target elevator customers and customers within the interactive kiosk segment. And the main revenue opportunity for us is to sell these products as standard products. There's also some opportunity to sell adaptation services or NRE in this case, which we have used in the last couple of years, and we hope that we can expand on going forward. Regarding zForce to understand what this platform is and what it can be used for, we have just included one simple slide today. This is a very proven and battle harden technology platform featured in close to 90 million products from leading printer manufacturers, automotive suppliers and also other customers.…

Perfect. Thank you very much for that presentation. So I mean let's start with your, I mean, kind of optimistic and ending words that it seems like, okay, it's been very slow for quite a while, but now things are starting to happen. Is this mostly in terms of new customers that are starting to be coming interested? Or is it existing customers that are starting to kind of placing orders on these TSMs?

Of course, it's a mixture of both. But in many cases, actually, we have had relationships. We have had some orders from these customers, but maybe just for evaluation or maybe just small ramp-up orders and then some actually stopped during the preceding 12-months, and then they came back now, so it's a mix. But we have to realize that when you work with, for instance, one of the top 10 elevator companies, we talk about companies with hundreds thousands, if not more employees, billions of U.S. dollars in turnover. They are huge companies. And they have global operations. And in different regions, they don't really talk to each other. So there's also that issue. And they are, of course, cautious and watching trends in the market. But what we can say now during the third quarter, we have confirmation that also, say, the water lilly effect, so one of these top -- actually, top five elevator OEMs came back now. They have evaluated technology, they have also offered it before but a little bit passively. Now they said that they want to actively start to promote this and scale up. And I believe that this is also because they are seeing what other competitors are doing. And this is a slowly, but steadily effect that we have been of course, prepared for and working for. But I agree it has taken a little bit longer than I expected, but I strongly think we are on the right track here and that this is now the base is to scale now seriously in the coming couple of years.

Yes because -- I mean, as you mentioned previously, you have -- in the first half of 2020, you built up quite an inventory of $4.3 million. So I mean, how -- for how long can you stock that I mean, of course, you can stock it for a long time, but when do you expect it to be reduced by producing the sales?

Yes, is probably next year or say 24 months, we have enough stock. So some of these minimum order quantities I referred to before, they are like $10 million or $50 million of a single component. Now our TSMs use up to $53 per TSM. So there is also a ratio how quickly we consume this. But yes, we have been forced to buy certain -- not all, but certain components in very, very high numbers. And on the other hand, now we have them, they can be stocked. And we can also -- when I mentioned that in the future, we are looking to have a second source production partner we can, of course, share some of our components with that production partner as part of the commercial agreement. So it's on our balance sheet. I don't see it as a big liability. It's like we have it, it cost cash flow in the first and second quarter this year, but now we have it, and we will consume it in the coming, say, 18, 24 months.

Good. And then also, I mean, you went into some of the elevator OEMs as customers and their progress. Could you mention anything about any other of your like largest customer contracts that you see in a tendency towards moving into larger volumes?

Yes. So elevator, I would say, we are solidly in a beachhead situation, we are scaling, and this is looking quite good, both in Japan, Korea, China and Europe and so there's a lot of things going on there. Interactive kiosk, you must understand that, that segment is much more fragmentized from the beginning. So many of the players, they are regional or national, and their products are also sort of fragmentized. So they have number of different kiosks. And they can look even if it's a big -- one of the big companies, global companies, they will have one product in Japan, another one in France and the third one in Canada, and it's still branded in the same way. So that's why we are seeing like it's more diverse. But we have explained before that we always see this market as a pyramid, where at the bottom, we have many small customers there can be big corporations, but one program can be fairly small, but we need to add more of these. And it's slowly but steadily going upwards. If I can highlight a couple of examples, one I can mention is with our partner, MZ Technology in France, they are working with a company called ION Group, they are a leading provider of kiosks for passport controls, identity controls and similar. There is one area where we have quite good hopes retail self-checkout point of sales. Similar to this 7-Eleven project in Japan several such projects, both in Asia and Europe and some in U.S. Also this Mastercard project could pan out. And then it's like a POS again. So there is some retail self-checkout POS maybe transportation, we have been talking about this type of self-check-in, self-service kiosks there you have the main drivers, I think, for the coming period.

So if I just understand it correctly, it seems like you can grasp the -- or you can sense like the upcoming volumes in elevators, whereas you see the traction in other segments, but it's harder to quantify price?

Yes. And I think what we have is the case is that it will not be just one silver bullet like one customer steps up and at one time orders, 2 million TSMs, it's going to be slowly, but steadily even from these large corporations, because today, everyone works just in time. They don't stock up on anything. So they order as they deliver or as they produce, so more and more of this. And hopefully, then more orders and more frequent, but it's definitely potential here to scale definitely.

Good. And then we have one other question from one of the other analysts. So it's okay. Okay, and that's about the OpEx. And I mean that was reduced from like $2.8 million in the quarter and down to $2.1 million. So how much of that was currency effect? And how much is more of you being a cost conscious?

Well, cost conscious is a piece of it, but also we have had a development in currency that is favorable for us. So of course, a lot of it is currency effect, but it is still also that we are cost conscious and we save costs and do things with purpose.

Okay. Good. And then -- it doesn't seem like we have any other questions from the other analysts. So with that said, I thank you very much for this conference call, and wish you good luck.

Thank you.

Thank you.