NEON

Neonode Inc. (NEON)

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Neonode, Inc. (NEON)

Q3 2012 Earnings Call

November 14, 2012 10:00 a.m. ET

Executives

Daniel Gelbtuch – Director of IR

Thomas Eriksson – CEO

David Brunton – CFO

Analysts

Rob Stone – Cowen & Company

Orin Hirschman – AIGH Investment Partners

Presentation

Operator

Hello everyone, thank you for standing by, and welcome to Neonode’s Third Quarter 2012 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. [Operator Instructions] Thank you.

At this time for opening remarks and introductions, I would now like to turn the call over to Daniel Gelbtuch, Director of Investor Relations. Daniel, please go ahead and start the conference.

Daniel Gelbtuch

Welcome and thank you for joining us. On today’s call we will review our third quarter financial results and provide a corporate update. Our update will include details of our design wins, technology developments and new customer agreements that we recently announced. The prepared remarks will be provided by Thomas Eriksson, our CEO and David Brunton, our Chief Financial Officer. Before turning the call over to Thomas and David, I would like to make the following remarks concerning forward-looking statements.

All statements in this conference call other than historical facts are forward-looking statements. The words anticipate, believe, estimate, expect, tend, will, guides, confidence, targets, projects and other similar expressions typically are used to identify forward-looking statements.

These forward statements do not guarantee the future performance that may involve or are subject to risks, uncertainties and other factors that may affect Neonode’s business, financial position, other operating results, which include but are not limited to the risk factors and other qualifications contained in Neonode’s Annual Report on 10-K, quarterly reports on 10-Q and other reports filed by Neonode with the SEC to which your attention is directed.

Therefore, actual outcomes and results may differ materially from what is expected or implied by these forward-looking statements. Neonode expressly disclaims any intent or obligation to update these forward-looking statements.

During this call, we may also present certain non-GAAP financial measures such as EBITDA, adjusted EBITDA, non-GAAP net income and certain ratios that use these metrics. In our press release with the financial payables issued today, which is located on our website at www.neonode.com, you will find our definition of these non-GAAP financial measures or reconciliation of these non-GAAP financial measures with the closest GAAP financial measures and a discussion about why these non-GAAP measures are relevant.

These financial measures are included for the benefit of investors and shall not be considered in addition to and not instead of GAAP measures. At this time, it is now my pleasure to turn the call over to Thomas Eriksson, Chief Executive Officer of Neonode. Thomas, please go ahead.

Thomas Eriksson

Good morning everyone and welcome to our third quarter 2012 conference call. With me today is David Brunton, our CFO. We will give you an overview of our performance for the quarter ending September 30, 2012. I will talk about our business highlights and David will walk you through our financial results. After the remarks, David and I will be available for questions.

To start with, I would like to highlight that our design activities for our Multisensing optical touch technology is very intense, as our 58 year-to-date design wins indicate, the software technology is about to ramp in high volume office equipments, handset, toys, and automotive market. While it’s difficult to size and time the ramps for our new markets, we are increasingly confident that most design wins will gain revenues over the next 6 to 18 months.

Most importantly, our business is starting to expand beyond [inaudible] into new higher volume markets, due to in large part to our first low power Multisensing controller manufactured by Texas Instruments. It has been shifting in volume since May 2012. Not only does our controller replaced most of the chips and discrete components, it also lower our customer’s building material costs and improve performance, but also continue high volume markets for Neonode.

At this point, I want to talk about some of our near-term challenges. Some of our customers have postponed and/or discontinued their anticipated product launches in 2012. Consequently this has been a negative effect on our near-term revenues. In addition, as we previously noted on our second quarter investor call, E-reader market which for the time being drives the majority of our revenues, has been softer than expected in 2012.

Moreover Amazon who has been a significant customer this year did not include our technology in their latest Kindle. We believe Amazon’s decision has nothing to do with our technology, but rather was a business decision that related to the supply bundling display with the touch together with a front light film. That said, we still have an ongoing license agreement with Amazon. While we are not currently including them in our future revenue predictions, we believe we will have opportunities to work with them going forward.

Based on our roadmap, new design wins, and stronger relationships with our current e-reader customers, including Sony, Kobo, and Barnes & Noble, along with many new international companies we’re highly confident that we’ll continue to be the leading touch solution provider for e-readers.

Moreover, while we are disappointed with the short-term loss of Amazon’s business we believe that e-readers represent declining percentage of our growing revenue side going forward. As our printer, handset, toys and automotive customers ramp in the upcoming 6 to 18 months.

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