Neonode Posts 25% Revenue Drop in Q2

Key Points

• GAAP revenue of $0.6 million exceeded expectations for Q2 2025.

• Total GAAP revenue declined 25.2% year over year for Q2 2025, reflecting continued weakness in legacy markets.

• Cash burn increased year over year for Q2 2025.

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Neonode (NASDAQ:NEON), a licensing-focused developer of touch, gesture, and sensing technologies, released its earnings results for the second quarter of fiscal 2025 on August 13, 2025. Top-line GAAP revenue of $0.60 million for Q2 2025 surpassed analyst expectations of $0.57 million. The company posted a GAAP earnings per share (EPS) loss of $(0.12) for Q2 2025, a greater loss than the anticipated $(0.10). Overall, The quarter showed further contraction in legacy business lines, pressured profitability, and continued cash use, with ongoing attempts to ramp up newer segments still in early stages.

Source: Analyst estimates for the quarter provided by FactSet.

Business Overview and Strategic Focus

Neonode develops and licenses optical touch, gesture, and sensing technology. Its solutions power human-machine interfaces (HMI) in products like printers and in-car infotainment systems. The company serves original equipment manufacturers (OEMs) and Tier 1 automotive suppliers with its core technology platforms: MultiSensing and zForce.

After phasing out its manufacturing operations, Neonode restructured into a licensing-only model. The company aims to leverage research and development (R&D) and its intellectual property portfolio to create new licensing opportunities. Key success factors include expanding its customer base beyond a current cluster of large clients and seeking license revenue growth from automotive and printing applications, as well as entering new technology verticals.

Quarterly Performance and Notable Developments

GAAP revenue was $0.60 million for Q2 2025. This was above the $0.57 million GAAP estimate. However, This represented a 25.2% decrease compared to the same period in 2024. The main revenue source—license fees—declined by 34.2% year over year, primarily due to lower demand from legacy applications like printer and car touchscreen systems. Non-recurring engineering revenue, which tracks income from development projects, grew modestly by 4.3% to $0.2 million, suggesting ongoing but still limited new partnerships and design activity.

The company's gross margin was 98.99%. However, Operating expenses from continuing operations rose 5.3% year over year to $2.7 million. Key areas of increased spending for the three months ended June 30, 2025, compared to the same period in 2024, were R&D (up 10.2%) and sales and marketing (up 9.6%). General and administrative costs decreased slightly for the three months ended June 30, 2025, compared to the same period in 2024.

Loss from continuing operations (GAAP) widened to $(2.0) million, compared to $(1.7) million for Q2 2024. The corresponding per-share loss was $(0.12) (GAAP). Cash used by operations was $1.7 million for the three months ended June 30, 2025, compared to $1.2 million for the same period in 2024, a 41.7% increase. The increase in cash used by operations was primarily due to a lower net loss and fewer component purchases following the phaseout of TSM manufacturing. Cash and accounts receivable totaled $13.6 million as of June 30, 2025, down from $17.2 million as of December 31, 2024, narrowing the liquidity cushion.

During the quarter, Neonode continued investing in its MultiSensing (optical sensor platform) and zForce (infrared-based touch and gesture) product lines. These technologies target automotive, office automation, and new market segments. While the company highlighted efforts to expand business opportunities and advance its roadmap, revenue from new licensing customers contributed during the period. High revenue concentration remains a key risk, with the company dependent on a limited set of large customers for the bulk of its cash flow. No major one-time events or material changes in the customer portfolio were reported in the release.

Outlook and What to Watch

Management did not provide specific financial guidance for the coming quarter or for the remainder of fiscal 2025. The company reiterated its intent to increase licensing revenue through new customer wins and by advancing current technology deployments into production. It stated, “Despite these challenges – that we expect to remain until new customers have moved from deployment phase to production phase – we are actively working to expand business opportunities and advance the product roadmap across our two core technology platforms: MultiSensing® and zForce®. This will drive the company’s sustainable future growth and will in time offset the negative trend within the legacy business,”

Without clear outlook or quantitative goals, investors are left to watch for signs of forward momentum in the licensing business. Key areas to track include efforts to expand the customer base and the contribution of new licensing customers to revenue. Until then, attention is likely to focus on expense management and cash preservation as revenue continues to trend lower.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.

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