ParkerVision Q4 2006 Earnings Call
March 8, 2007
Paul G. Henning, Vice President, Cameron Associates
Cynthia L. Poehlman, Chief Financial Officer
Jeffrey L. Parker, Chairman and Chief Executive Officer
Scott Cummings with Agile Asset Management
Kenneth Miller with Bonanza Capital
Ivan Nathan with Nathan Financial
Operator: Good day, ladies and gentlemen and welcome to todayís ParkerVision Fourth Quarter and Year-end 2006 Conference Call. Todayís call is being recorded. At this time for opening remarks and introductions, I would like to turn the conference over to Paul Henning. Please go ahead Paul.
Paul Henning: Before we get started, I want to remind listeners that this conference call will contain forwardlooking statements, which involve known and unknown risks and uncertainties about our businesses and the economy and other factors that may cause actual results to differ materially from our expected achievements and anticipated results. Included in these risks are factors such as the ability to maintain technological advantages in the marketplace to achieve timely market introductions and acceptance of our products, maintain product patent protection and the availability of capital among others. Given these uncertainties and other various factors about our business, listeners are cautioned not to place undue reliance on any of the forward-looking statements contained within this conference call. Additional information concerning these and other risks can be found in the filings with the -- our filings with the SEC, Securities and Exchange Commission.
We will begin todayís call with Cindy Poehlman, CFO, who will review the financials. She will be followed by Jeff Parker, the CEO of ParkerVision, who will report on the companyís business activity. Cindy, would you like to go ahead?
Cynthia Poehlman: Thank you, Paul and welcome to ParkerVisionís fourth quarter and year-end conference call. ParkerVision reported today a net loss for the fourth quarter of† 3.4 million or $0.14 per share, which compares to a net loss of† 3.5 million or $0.17 per share in the fourth quarter of 2005. For the year, the net loss dropped from 23.1 million or $1.14 per share in 2005 to 15.8 million or $0.68 per share for 2006. The year-to-date decrease in the net loss, as we discussed in previous quarters, is largely the result of our decision in June of 2005 to streamline our operations and focus on OEM opportunities for our wireless technology.
Itís important to note that the 7.3 million decrease in our net loss from 2005 to 2006 is despite 1.4 million increase in non-cash stock-based compensation expense resulting from our adoption of FAS 123R as of January 1st of† 2006. As you may recall, this new accounting standard requires the recognition as expense of the estimated fair value of employee and director stock-based award.
As we noted in our release this afternoon, our cash usage has also gone down significantly from the past year. Cash used for operating activities decreased from 15.7 million in 2005 to 11.4 million in 2006. Cash used for combined operating and investing activities averaged slightly over 3 million per quarter for the first three quarters last year and was slightly over 4 million in the fourth quarter.
As we mentioned in our first quarter conference call, we did expect our fourth quarter cash usage to be about 30% higher than average due to certain prepayments on insurance premiums and other items that occur at the end of the year. We ended 2006 with 13.2 million in cash. And based on our historical rate of cash usage, executive management and the Board determined that it was important to put the company in the best possible cash position as we move forward with our business negotiations.
We successfully completed a private placement transaction at the end of the last month with net at the company an additional 8.4 million. The transaction allowed us to solidify our balance sheet, and more importantly we believe, placed us on a solid financial position for negotiating potential business partners.
And on that note, I would like to turn the call over to our CEO, Jeff Parker to provide you an update on the companyís business development activities over the last quarter.
Jeff Parker: So, thank you Cindy and thanks to those of you on this call for joining us this afternoon. In last quarterís conference call, we spent some time discussing the progression of our sales effort over the past year and the various steps that are necessary for us to go through in order to achieve commercial adoption of our technology. So rather than providing you a look-back on 2006, I am going to focus today on what has happened since our last quarterly update in November and how we feel about our progress with our target customers.
We continue to have a flurry of activity ongoing with numerous target customers and although I canít go into the specifics of those activities, I can say that we remain highly confident that our first design wins will become a reality in the near-term. We indicated in the last call that we are at what we consider to be the final stage of the sales cycle with more than one target customer. Some of you might be asking, ďIf you are at the final stages, what is taking so long to consummate a deal? And I would like to address that question.
First of all, we are as eager as you may be more so to get this first business arrangement under our belt. The sooner we get underway, the sooner our technology will be designed into products and the sooner the company begins to build revenue generated income. We are all striving for the same goals. But unlike you, we also have the benefit of knowing all the different activities that are ongoing and understanding how those can cause the timeline to stretch out a bit. Again, while I canít give you specifics, I might be able to point out a couple of things that help you understand what is involved in negotiating these types of business arrangements.
One important factor to recognize is that for the companies adopting our technology, there is still development work to be done post-adoption in order to implement the technology into their platform of choice. And each customerís needs and desires are unique to that customer. I fully expect that our first design wins and possibly all of our design wins will not only consist of a licensing arrangement for access to the technology, but also will include development arrangements whereby we are providing development services to those companies to assist their implementation.
These development arrangements are extremely technical and detailed as they spell out the expectation, the deliverable timeline and fees over the project lifecycle. As you might imagine, putting one of these documents together involves not only the business people, but also the technical engineering staff for both parties. The good news is that these arrangements will bring in additional revenues for the company in the form of engineering design services fees, which should help offset some of our engineering development costs.
If there is a positive indicator to take away from the time it is taking us to consummate these initial agreements, it is that the firms we are working with look at adoption of this type of technology as a long-term comprehensive activity. And hence, the amount of detail and thought
that goes upfront into the business and the engineering arrangements is reflection of that. I do believe that since we are a newcomer to the space that once weíve established our first agreements and contracts that those templates will make additional business feeling significantly easier and faster to consummate.
One other area that Iíd like to spend a few minutes on before we turn this over for your question is this regard to our intellectual property portfolio. As you know, protection of our intellectual property has always been a key strategy for this company. We have seen the results of this strategy particularly over the past year with over 20 patents issuing in 2006 alone. Just a couple of weeks ago, we were granted our first patent, which specifically relates to our D2P technology.
We continue to file new patents on our technologies every quarter and we feel confident that our patent protection strategy will be both valuable and crucial in both the near- and the longer-term. Near-term, obviously is the entrant to initial commercial adoption of our technologies, protection of that IP is essential to our business model and our customers. But longer-term as well, we continue to identify other markets and other uses for our technologies that we believe will provide this company numerous business opportunities over the long-term.
So our focus remains crisp at the goals without ambiguity and hence there isnít anything further to update you on. My greatest hope for both you as well as our internal dedicated team is that we have to have another conference call updates sooner than later. I want to wrap up my comments today by thanking our many supporters, who continue to believe in our business plan and management, and so now I think I would like to open up our call to your questions.
Operator: Thank you. Our first question comes from Scott Cummings with Agile Asset Management.
Scott Cummings: Simple question, Cindy, could you, given the private placement you did in February, could you update us on what your total shares out are and any warrants et cetera?
Cynthia Poehlman: Sure, Scott, how are you doing?
Scott Cummings: I am fine, thanks.
Cynthia Poehlman: Good. With the recent price, it was just under 1 million additional shares, so our total shares outstanding are about 24.38 million. This last transaction was done at a price of $8.50, there were no warrants in that transaction.
Scott Cummings: Okay. And yet there are warrants at the company, are there not?
Cynthia Poehlman: Yes, we do have both options and warrants outstanding. Let me get you that.
Scott Cummings: Give me some idea as to what that is, so I can get a fully diluted number?
Cynthia Poehlman: I certainly will. Total outstanding options and warrants is approximately 7.5 million additional shares.
Scott Cummings: Okay.
Cynthia Poehlman: Just to give you a sense, the weighted average of exercised price on that is around $20, okay.
Scott Cummings: Weighted average is around 20, okay.
Cynthia Poehlman: Correct.
Scott Cummings: All right. Thank you very much.
Cynthia Poehlman: You are welcome.
Scott Cummings: I am waiting with bated breath for further news.
Jeffrey Parker: Good, Scott, thanks.
Scott Cummings: You bet.
Operator: Weíll go to the Q next from Kenneth Miller with Bonanza Capital.
Kenneth Miller: Hi, guys, good afternoon.
Jeff Parker: Good afternoon.
Kenneth Miller: I just wondered if you could go a little bit more into the reasoning behind the pipe transaction? I know youíve been talking about getting a licensing deal in the near term for a while, and presumably that will be a very -- that will create a lot of value for shareholders. Iím trying to understand why you guys wanted that dilution when you still have a year of cash in the balance sheet?
Cynthia Poehlman: Why donít I start with that and Jeff can jump in if necessary. You are correct, as we are sitting at the end of† Ď06, based on our historical cash usage, we did have just enough cash to get us through Ď07 without consideration obviously of any incoming revenue, any budgetary increases that we might have. And we are also you know at the point in time where we were preparing for our year-end audited financial statements and obviously liquidity is something that our auditors take a close look at. And from managementís perspective and the boardís perspective, it really was kind of a risk mitigation for us. We didnít want to find ourselves in the situation where we are kind of hanging or just kind of wait, you know, and see when that first win comes in, and see if that suffices from an auditors perspective. We didnít want to find ourselves in the final stages of negotiation with someone who throws our balance sheet in our face. So we thought -- we are very sensitive to dilution, but we felt like it was prudent for management to put a little additional cash into the company, really for assurance for our auditors and our shareholders, so that we can move forward.
Kenneth Miller: Okay, well, certainly we like to see the shares sold at a higher price. But, I think smart investor [indiscernible] my money is always good?
Jeffrey Parker: Ken, thank you.
Kenneth Miller: Thanks, thatís all I had.
Operator: Weíll hear next from Ivan Nathan with Nathan Financial.
Ivan Nathan: How are you, Jeff, good afternoon. In the beginning of your statement, you used the term near-term. If you are able to, how do you define near-term?
Jeffrey Parker: Well, I would have the good question. You know, near-term - look, if we, I in particular, would love to be able to just point a date, like this is the date by which we are going to have this thing done. Unfortunately, we only control, you know, one side of the negotiation, and there have got to be two pens on the agreement, we only control one pen. But the reason I consider near-term to be an appropriate statement is because several of the OEMs we are negotiating with have moved through so much of† -- there is so much agreement between us that even though these companies still, you know, move at their own pace, they are still, you know, multiple voices within these companies that are involved, you know, these are big tier 1 companies, so you are not dealing with an individual. We see a pretty clear path to getting, you know, getting the stuff done in what we consider to be the near-term. When I said in my comments that, you know, I hope -- my greatest hope was that we, you know, have another conference call sooner than later, it was to express that. You know, obviously, we will have to have another conference call with our first quarter earnings. So, you know, with maybe a little luck and a little good, you know, events coming together maybe we will have to have one of those before then, thatís how I would define near-term.
Ivan Nathan: Yeah, okay. In other words, you would in your own mind, you would think of a period of less than six months?
Jeffrey Parker: Oh, yeah, certainly.
Ivan Nathan: Okay, thank you.
Jeffrey Parker: Thank you.
Operator: And at this time, I will turn the conference back over to Mr. Henning for additional and closing remarks.
Jeff Parker: Well, folks, this is Jeff, thank you for attending this afternoon. Again, as I said earlier we appreciate your support. We are myopically focused on getting these first design wins in the boat. Everybody here understands where the value to be built is going to come from. And so, we look forward to our next conference call with you and as I say hopefully it will be a call that we will be making with you sooner rather than later. Have a great balance to your week, and thanks so much. Bye, bye.
Operator: That does conclude todayís conference. We thank you for your participation. Have a great day.