ParkerVision 2009 Q3 Conference Call
November 16, 2009
Charles Bellows with White Pine Capital
Phil Anderson with Pinnacle Fund
Wilson Jaeggli with Southwell Partners
Jim Whitten with Laidlaw
Host: Please stand by, we're about to begin.
Good day, everyone, and welcome to the ParkerVision Third Quarter 2009 Conference Call. Today's call is being recorded. Now, I'd like to turn the call over to Ron Stabiner, with the Wall Street Group. Please go ahead.
Ron Stabiner: Good afternoon and thank you for joining us. Before we get started, I'd like to remind listeners that this conference call will contain forward‑looking statements which contain known and unknown risk and uncertainties about our business and the economy and other factors that may cause actual results to differ materially from our expected achievements and anticipated results.
Included in these factors is the ability to maintain technological advantages in the marketplace, the ability to increase manufacturing capacity to meet demands, achieving timely market introduction and acceptance of product, maintaining patent protections and the availability of capital, among others.
Given these uncertainties and other factors for our business, this is a caution not to place undue reliance on any forward‑looking statement contained within this conference call. Additional materials containing information about these and other risks can be found with our filings and the Securities and Exchange Commission.
On today's call, we'll hear first from Cindy Poehlman, chief financial officer, who will be followed by Jeff Parker, chief executive officer, ParkerVision, who will also provide an update on the business of the company.
With that, I will now turn the call over to Cindy. Please go ahead.
Cindy Poehlman: Thank you, Ron. And thanks to those of you joining us today for our quarterly conference call. On November 9th, we reported a $5.7 million or 17 cent per share loss for the third quarter of 2009. This compares to a $6.6 million or 25 cent per share net loss for the third quarter of 2008.
On a year‑to‑date basis for the first nine months of this year, we reported a net loss of $16.6 million, or 53 cents per share, compared to $17.3 million, or 66 cents per share, for the same period last year.
Although we did not recognize any revenue this quarter, we did see a reduction in our comparative operating expenses of approximately $1 million, or approximately 14% on a quarter‑to‑quarter basis, largely due to cost control programs we instituted earlier this year.
We ended the quarter with approximately $3.3 million in cash, after using approximately $4 million for operations during the third quarter. Our cash usage for the third quarter of 2009 was higher than average largely due timing on payables. Year to date through September, our cash usage for operating activities was approximately $10.6 million. We also invested an additional $700 000 in our patent portfolio during the first nine months of 2009.
Today we added $14.6 million in capital to our balance sheet with the closing of our underwritten offering with Piper Jaffray. Jeff Parker will discuss this offering in greater detail, as well as provide a general update.
So with that, I'm going to go ahead and turn things over to Jeff Parker.
Jeff Parker: Thank you, Cindy. Good afternoon and thank you for joining us in our third quarter conference call. There have been several significant events since our last call, so let me outline for you what I hope to cover today.
Since our last call, we received a purchase order from ITT that's the result of several of several initiatives that we've worked on with ITT and their customers for the incorporation of our technology into military radio products.
We've delivered and received acceptance of mobile phone handsets samples from our chip set licensee. And we've just finalized the capital financing for common shares of stock that resulted in $14.6 million additional working capital for the company.
I will briefly discuss each of these events, and I also want to provide an update on the progress with LG IT in our HEDGE program as well.
So I'm going to start with the most recent of these events and work back to the earliest. As you've likely seen we announced today the closing of an approximate $14.6 capital raised for the company. This resulted in an additional eight million shares of common stock being issued, and we now have 41 million shares outstanding.
Some of you asked what motivated the timing and the amount of this funding. As you know, we filled a $50 million shelf registration back in the middle part of September to provide the company the flexibility necessary to support our working capital and other corporate needs.
The Board and management determined that it was appropriate to increase our working capital before the end of 2009 in order to focus on our existing commercial opportunities without the distraction that a thin balance sheet could create. That distraction is not only on the part of management, but also on our customers, who need to understand that we have not only the technical wherewithal to support their current and future product needs, but also the financial wherewithal to hold up our end of the bargain.
We also felt the significant milestone of delivering our technology in mobile handsets samples was an important milestone to achieve before we sought additional support from the investment community.
As to the amount, our goal is to ensure that our working capital was sufficient to fund our revenue growth. We are pleased that we now have the necessary working capital to move our company to the next step, which is namely the production of chip sets that incorporate our d2p transmit technology into mobile phones.
At the same time, I can also say that it's our goal to use these monies to fund a revenue ramp so that we do not have to be back in the market seeking capital under these kinds of conditions again. As a large shareholder in this firm, I am as motivated as anyone to grow our shareholder values through the achievement of revenue growth and product design wins as quickly as possible.
So that takes me to our second topic, which is the recent announcement of the acceptance of our sample handsets and the significance of that event.
First of all, while it took longer than expected to get this handset completed, I'm very pleased with the results that we achieved. One of the greatest attributes of our d2p technology is the power savings that it delivers. We said that by incorporating d2p versus the standard RF transmitter chains that are used today that we could increase the talk time in a 3G handset by up to 50%.
I'm pleased to report that the performance that we achieved not only met that expectation but exceeded it. We took an existing mobile phone reference design that's owned by our chip set licensee. We removed the existing transmit chain, which is a volume production, state‑of‑the‑art solution, and we replaced it with d2p. Everything else in the phone remained the same, the same basic processor, the same receiver, etc.
The net result is when power consumption for the total phone is measured during a phone call, the d2p‑based phone consumes less power at every single level of RF transmitted output power, regardless of whether the phone is close to the base station, far from the base station, or any place in between.
A mobile phone network is laid out so that the majority of the time you're not on the outer fringe of a cell and you're not right under a base station. Most of the time you're somewhere between those two extremes. The most significant talk time gains in the d2p technology are realized when you're in between those two extremes. In this case, the d2p phone measured power savings that translates up to a 60% increase in talk time. And even on the extremes, being adjacent to a base station or on the fringe, the d2p savings result in meaningful power savings over what is shipping today.
In addition to the d2P phones delivering excellent talk time increases, we also saw very good performance in terms of the signal quality that we transmit. Our customer told us that we exceeded their expectations in both power savings and in this kind of performance.
One of the benefits of our technology is that because it is a unified solution it has the ability to translate from the laboratory to the mobile handset form factor and still deliver the same excellent results.
Today's mobile phone transmit solutions, which are created from multiple subsystem, often have some degradation in moving from a lab to a mobile phone form factor some degradation in moving from a lab to a mobile phone form factor. This is what our customer expected to see in the d2p implementation as this is the norm.
They were pleasantly surprised to experience that d2p installed in the small form factor of a mobile handset displayed exactly the same performance as on the laboratory demonstration board, thus exceeding their expectations. This is one of the many subtle d2p benefits.
The next step with our chip set licensee is that we will support them as they solicit orders from their customers, who are handset OEMs and ODMs. And we will continue to assist them in putting d2p into volume production as a result of orders that they expect to receive.
Our customer has indicated to us that they would expect to see mobile handsets shipping with d2p inside by the second to third quarter of next year. In order to facilitate that goal, we would anticipate that chip sets would need to ship as early as Q1 2010, which means taking orders for those chip sets in the very near term. We certainly look forward to supporting them with their goals.
The next topic I want to discuss is our HEDGE program. Although most of our recent updates have been focused on the sample phones, we've also continued to make progress on the development for a HEDGE module that we're developing with LG Innotek, or LG IT.
They field the data sheets powered by ParkerVision, and together we've succeeded in generating interest from handset OEMs who are looking at what we're developing and how it could be used in their future phone products. We're well on our way to having all the HEDGE performing compliant data from the platform we've been putting together in cooperation with LG IT.
Based on the expected results from this platform along with our experience in putting together the sample phones for our licensing customer, I am very confident that our technology will deliver the same extraordinary results in HEDGE that we delivered in our sample 3G phones.
Our focus with LG IT is to make the shortest path possible between now and first production samples so we can get to revenue generation with this HEDGE product as early as possible in 2010.
Last but not least, you've seen that ITT was awarded a contract by an arm of the military, CERDEC, to fund ITT and ParkerVision in demonstrating the d2p technology in a military radio application that's of interest to the government.
The intent of this program is to verify the d2p in a particular application, and once verified, CERDEC may then choose to fund the additional steps it may take for production of devices based on our technology, which ITT would then ultimately manufacture and ParkerVision would receive royalties.
ITT has several other contract proposals out that typically are multi‑phased programs where ITT's customers fund various stages from prototype proof through initial volume production for various military and other government applications.
So in synopsis, our focus here is to remain engaged in activities that grow near-term revenue for ParkerVision, mainly to support our chip set licensees as they incorporate d2p in the volume handsets. To continue working with LG IT and some of the handset OEMs to incorporate our technology into HEDGE phones. And to continue supporting ITT as they secure orders from their military and government customers to test and then incorporate d2p into their products.
With that update, I would like to open this call for your questions, please.
Host: Thank you. Ladies and gentlemen, if you would like to ask a question today, do so by pressing *1 on your telephone keypad. For joining us on speakerphone, please ensure mute function has been turned off to allow the signal to reach our equipment.
Once again, that's *1 if you have a question today. We'll pause for just a moment to allow for everyone to signal.
Host: Once again, that's *1 if you have a question today.
Host: If you have a question today, again press *1 on your telephone keypad.
Host: We'll take our first question from Charles Bellows with White Pine Capital.
Charles Bellows: Yeah, Jeff, I want to be clear on this, that right now you're in the design, but you have no orders and we're in the process of going out to see if it's acceptable to the handset makers. Is that correct?
Jeff: You're close. Our customer, the chip set vendor, is in the process of doing that with their customers. So the program is to create the sample phones, prove the technology as I described, take that to the handset OEMs and ODMs that our customer sells chip sets to, and to then get orders from those companies that they already do business with in volume and to begin a production ramp that incorporate d2p in their chip sets.
Charles: But as I had understood it before, one of the benefits was this was going into an existing model, is that correct?
Jeff: It is. Well, it's an existing reference design. They have a reference design and they sample that reference design to companies who can then take it and push and pull it around a little bit and change the form factor entirely. It's really at the discretion of the customer.
I'm obviously now very familiar with this reference design from working with our team and this company for a while with this, and I've seen volume phones shipping in the marketplace that are very close to this reference design. So I see what the customers do. They don't ship it exactly that way. They may modify it slightly. At least that's what I saw in this particular one. But that's the starting point from which they work.
Charles: What's the cost savings between this and what it would be with the normal structure?
Jeff: It really depends on how our customer wants to price it. That's really their decision. If they want, they can offer a cost savings. They can offer no cost savings. That's really their call. It also depends on how they want to deal with the increase in battery life, meaning they sent back to me some thoughts from some of the people they've been speaking to already that they can cut the cost even further if they don't want to offer longer battery life. There are certain phone models that may end up with the same talk time and a smaller battery, and that offers even further cost savings. So there's different ways that this can go.
Charles: So it sounds as though what we now have is we're out at the handset people and they will have the decision if they even want to use the product.
Jeff: They will have the decision. Our customer has indicated that they think they will be shipping chip sets that'll be in models that'll be on the market in the second or third quarter next year.
Charles: OK. So in that case we would maybe see some orders flowing in on the first quarter.
Jeff: That's right.
Charles: And you feel that with the cash you have and given everything going on that this is all the cash you're going to need, given a burn of $4 million?
Jeff: You know, we're going to hold our operating expenses, we're going to very carefully manage this cash. As I said in my presentation, I don't ever want to be back to the market again in this type of situation. I'm glad we got the capital to get this company moving forward. But...
Charles: Well, you were out of money if you don't have cash coming in until the first quarter.
Charles: So you have to be very happy.
Jeff: The goal is to get this company self‑sustaining so we don' have to do this again. And the only way you can do that, obviously, is by generating revenue.
Charles: So there won't be any confirmation of acceptance of the phone by the people who actually have the final say in it. How are we going to see any of that other than wait until maybe we see some orders coming in in that first quarter?
Jeff: I think that's the best way. I think we need to wait and see orders come in and then I hope that I can communicate to you guys that I've seen orders come in and that's now initiated the launch. And I think that's the absolute best way to do it.
Charles: At one point you had said when you got a model phone, and I understand the need to get it to the handset people, that you were going to be able to show that to the shareholders so that they could see that you actually had one that worked.
Jeff: We can definitely do that. And I've been traveling with one and I will continue to travel with one. And should our paths cross or we end up in some mutual location, I'll be happy to show it to you. Or maybe we'll do some kind of a demo. I'd be thrilled to show it to you or make a call to you on it.
Charles: And when do you think your customer is going to be willing to state who they are as opposed to staying under the covers?
Jeff: I hope sooner than later, because I think we've delivered and then some. But I can tell you that when we see chips shipping from them to their customer and we have an invoice to them, then we have a material event with revenue.
As a revenue‑generating event, I would assume that would become material and we'll have to make known certain facts based on the way the securities laws work.
Charles: OK, I'll get out of the queue.
Jeff: Thanks, Charles.
Host: Our next question comes from Phillip Anderson with Pinnacle Fund.
Phillip Anderson: Hi, Jeff, how are you?
Jeff: Good, Phil.
Phillip: Jeff, approximately how many sample phones did we ship to our customer, and do have a sense as to how many customers our customer either would have forwarded them to or intends to forward them to for evaluation.
Jeff: I do. I don't know that it's appropriate for me to share that information. It's confidential. I can tell you that they've indicated that they have multiple customers. Not one customer, but a number of them.
We've created somewhere between a dozen and 18 of these phones and we have more that are in the process of being created. Although they've indicated that they don't feel they'll need a whole lot more phone samples. Which I think is great, because candidly, what they've indicated to us ‑ and I'm very happy to hear ‑ is that they don't think ParkerVision should be focused on them too much going forward, other than getting this thing into production and getting revenue going.
So I think they feel like we've done what we needed to do, we've held up our end of the bargain. They've provided us with a very nice formal acceptance along those lines and have indicated it's all about production now.
Phillip: Does that mean that they think they can go out and get orders without having much involvement from ParkerVision?
Jeff: Yeah. I think they can get the orders without a whole lot of our involvement. I think that we'll have to continue to support them as they get into the production ramp, and we're happy to do that. Obviously we're motivated to generate revenue as quickly as possible.
Phillip: OK. Picking up on a comment that the previous caller had made, the idea of putting up a demonstration on your website, a picture of the phone if you can do that, maybe some performance specs, so that investors can actually see the phone in lieu of having paths with you kind of intersect one another might be an interesting idea.
Jeff: Yeah, we'll look at that, Phil. It might be an interesting idea.
Phillip: OK, thanks very much, Jeff.
Jeff: Thanks, Phil.
Host: Our next question comes from Wilson Jaeggli with Southwell Partners.
Wilson Jaeggli: Thank you. Jeff, I can tell you as someone who has received a phone call on one of your phones, I wish my Blackberry Bold sounded as good as your new phone did.
Jeff: Thank you. I appreciate that.
Wilson: Can you give us your best idea of these presentations that would be given to customer number one's customers? Will they have a phone? Will they have it hooked up to anything? Will they test it on site at these potential customers? What will they actually do, do you know?
Jeff: I don't know for sure. I can tell you what the phones are capable of. The phones are capable of connecting to actual networks. I've used them on actual networks. They're capable of hooking up to test equipment that can also verify the performance of the phone. It's a base station simulator type of piece of equipment that most of the handset OEMs and ODMs already own, so they could do it that way. Or they could do it both ways.
You can get the phone up on an operating network if you have permission of the network owner in literally minutes, and it's not a big deal.
Wilson: So we've delivered the physical product to customer number one as needed and it's in their marketing and sales hands. What physically are you going to deliver to LGI here. Are you delivering a phone to them also? A board? What are you delivering?
Jeff: LGI is more of a platform. It's a platform that showcases all the performance attributes for their HEDGE application. It shows that we're compliant and we have all the performance figures of merit that we agreed to deliver to them.
And what I hope that they'll do, but this is obviously really a collaboration between our two companies, I hope that they'll go right to modules that are satisfactory to their handset‑targeting customers, and that we do as few steps between here and there as possible. Preferably none that don't have a revenue generating activity.
Wilson: So once they're satisfied with it, it is our job to deliver modules.
Jeff: No. It's our job to deliver the silicon from with they will build the model, which then gets sold by them to the customer.
Wilson: I see. We deliver silicon and they will package and test.
Jeff: Correct. They have their own module production facility.
Wilson: And do we have any ‑ you mentioned the hopeful timeline with customer number one. Do you have a similar timeline with LGI, or is it just too early.
Jeff: It's too early, Wilson. Not ready to share just yet.
Wilson: I appreciate it. Congratulations on the money raised. Keep doing a good job.
Jeff: Yeah, let's get the revenue going. Thank you.
Host: Our next question come from Jim Whitten with Laidlaw.
Jim Whitten: Hey, Jeff, congratulations. I wanted to ask a question in response to a prior question. Will customer number one have to produce any spec sheets that they'd sending out? Would they be doing any advertising of the new product? Thank you.
Jeff: I don't know if they'd be doing any advertising, but I do believe that they're creating spec sheets. They have spec sheets today for their other chip sets and it's my impression that they're creating or have created spec sheets which features the end results of the technology that we've delivered to them.
Jim: So that's in the works, or about finalized, I take it?
Jeff: Jim, honestly, I don't know if it's finalized or it's in the works, but it's one or the other.
Jim: OK, very good. Thank you.
Jeff: Thank you.
Host: As a reminder, if you have a question today, please press *1 on your telephone keypad. Once again, that's *1 if you have a question at this time.
Once again, we'll pause for just a moment to allow for everyone to signal.
Host: Again, that's *1 if you have a question today.
Jeff: Well, it doesn't sound like we do, so I'm going to thank everyone for joining us on this call today. I certainly appreciate the time you've spent with us this afternoon, and I look forward to bringing you more updates in the future that hopefully will showcase the goals of the company, which is revenue generation and products in the marketplace. Thank you very much and have a good evening.
Host: That does end today's conference. If you wish to access audio archived broadcasts of the replay, you may do so by visiting the company' website at www.parkervision.com. Thank you.
Transcription by CastingWords