ParkerVision 2011Q1 Conference Call
August 15, 2011
Peter Massaniso from Ponte Verde Capital
Phillip Anderson from Pinnacle Fund
Robert Brown from Brill Securities
Greg Lewin from Forefront Capital
Matt: Good afternoon, and welcome to the ParkerVision, Inc., second quarter 2011 earnings conference call. Today's conference is being recorded and all listeners are in listen only mode. Following the presentation, we will open the conference call for your questions and answers. The company has requested that questions and answers be limited to one question and one follow‑up per caller. As it is now time for opening remarks and introductions, I would now like to turn the conference over to Ron Stabiner, with the Wall Street Group. Please go ahead, sir.
Ron Stabiner: Thank you, Matt. Good afternoon and thank you for joining us. Before we begin, I would like to remind listeners that this conference will contain forward‑looking statements, which involve known and unknown risks 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 demand, achieving timely market introduction and acceptance of product, maintaining our patent production and the availability of capital, among others. Given these uncertainties and other factors from our business, listeners are cautioned not to place undue reliance on any forward‑looking statement contained within this conference call. Additional materials concerning these and other risks can be found in our filings with the Securities and Exchange Commission.
On today's call, we will hear first from Cindy Poehlman, Chief Financial Officer of ParkerVision, who will provide a review of the company's second quarter results. She will be followed by Jeffrey Parker, the Chief Executive Officer, who will 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 welcome to those of you joining us this afternoon for ParkerVision's 2011 second quarter conference call. Today, we reported a net loss of $3.5 million, or six cents per share, for the second quarter of 2011, compared to a net loss of $3.8 million, or nine cents per share, for the same quarter last year. On the year to date basis, we reported a net loss of $6.9 million, or 12 cents per share, for the first half of 2011, which represents an 11% decrease from the 2010 first half net loss of $7.7 million, or 19 cents per share. The reduction in our net loss year over year was primarily the result of decreases in several non‑cash items, including share‑based compensation as well as depreciation and amortization of operating assets.
We did experience some increases in outside engineering design services related to preparation for production of our chips, as well as increases in personnel travel costs due to the number of international trips for executive sales and engineering support personnel during the first half of this year. However these increases were offset by decreases in other areas, particularly prototype fabrication cost.
In March of 2011, we raised $4.1 million in net proceeds from the sale of equity securities. Without the offsetting effect of these net proceeds, we used an aggregate of $5.2 million in cash during the first half of 2011. During the second quarter of 2011, our cash usage was about $1 million per month. To date, our rate of usage has continued at approximately that same rate.
As of June 30th 2011, we have $5.4 million in cash and short‑term investments. As I'm sure most of you have seen, last week we announced that ParkerVision has regained compliance with NASDAQ's minimum bid price listing requirement. We first received notice from NASDAQ in August of last year that we were out of compliance with the $1 minimum bid price requirement. We were granted two consecutive six‑month grace periods in which to regain compliance.
Regaining compliance required that our closing bid price remain at or above $1 for at least 10 consecutive trading days. As of August 5th, despite the overall market conditions, we received notice from NASDAQ that we are once again compliant.
With that, I'd like to turn the call over to our CEO Jeff Parker for an update on current sales efforts and other business activities.
Jeffrey Parker: OK. Thanks, Cindy and thanks to those of you joining us this afternoon. Many shareholders invested in ParkerVision years ago based on the merits of what we said our wireless innovations would bring to the mobile handset marketplace. While bringing these revolutionary innovations to market has happened in a manner differently than I had hoped, what is highly energizing, or maybe I should say reenergizing, is that what we predicted our technology would bring to handset market years ago was in fact highly accurate, especially based on the products in the marketplace that we found incorporating ParkerVision intellectual property.
I thought I would begin today by providing a little context which I believe is beneficial to understanding the recently announced patent infringement lawsuit. In the later part of the 1990s, ParkerVision developed a very novel approach to creating direct conversion RF receivers, direct conversion being where the receiver of an RF signal, like that which would be in your cell phone receiving a signal from a cell tower, would convert that signal into a data signal in a single step. So, RF directly to data.
At that time, direct conversion was not regarded as suitable for use in applications where achieving demanding RF specifications were required. At that time, direct conversion receivers were relegated to applications where RF performance was not particularly challenging. In this context, direct conversion RF receivers were not deployed in cell phones.
What was deployed were receivers that were known as superheterodyne receivers, where the RF carrier signal was converted to a data signal over multiple steps of frequency conversion, each step having its own filters, frequency plan and set of supporting components. The superheterodyne receivers delivered relatively good performance, but were too expensive and large and too power‑hungry for multi‑band, multi‑mode applications.
We felt at the time there was a better solution between the complex and expensive superhet and the low‑performance direct conversion receiver. ParkerVision established a research team in the mid‑1990s specifically to tackle this problem of simplifying RF hardware while at the same time not sacrificing excellent performance and low power consumption to do so.
The team was run by our CTO, David Sorrells, who is still today the company's CTO and a board member. Toward the latter part of the '90s, David and his team had a breakthrough. I remember David presenting his team and asking me what part of smaller, cheaper and higher‑performance would I, and certainly the broader marketplace, not like.
What he and his team had conceptualized was an RF receiver circuit architecture where direct conversion could be achieved that would meet or exceed the performance of a superheterodyne receiver but with a number of features that even superhets couldn't achieve.
Recognizing the importance of this breakthrough, we augmented our internal patent team by engaging one of the country's foremost intellectual property attorneys to help us construct a program that would protect our team's RF innovation. We believed that this technology was in its infancy and would require a significant amount of skill and experience to properly protect.
We engaged the firm of Sterne, Kessler, Goldstein & Fox with Rob Sterne, the firm's cofounder, architecting our IP protection strategy, and a team of experienced attorneys working closely with our engineers to capture and protect what we believed at the time would be a vast amount of highly valuable intellectual property. That firm has partnered with us these many years. Rob Sterne has been on ParkerVision's board of directors since the year 2000, the only public company board that he serves on.
Once our IP program was in place, we began the process of soliciting interest from companies who brought mobile handset RF chips to market. We solicited their interest in becoming licensees to our patented technologies and techniques. We also would speak at an occasional conference where we were invited to discuss our views on the subject of advancing RF chipsets.
I can still remember David's presentation at an Agilent RF chip conference in the early part of the last decade. His presentation was titled, "The Coming Revolution: Direct Conversion Radios." Wow, did it create a great deal of controversy.
Basically, David outlined the historical problems with traditional approaches to building direct conversion RF receivers. There were many. Unstable DC offsets in the resulting data signal, making the signal unusable. Receiver linearity limitations on performance that was far from what advanced cell phone specs required. On channel re‑radiation, where the receiver would block its own received RF signal, and the problems went on and on.
David would then offer a new idea for creating high‑performance direct conversion. Not where the RF receiver would be as good as the superhet it was replacing, but where it would actually be better. He would explain the limitations of using analog heterodyne mixer circuits for direct conversion, and then explain that ParkerVision had a new concept for direct conversion, one that was based on the novel principle of sampling the received RF carrier signal.
He would thoughtfully lay out the basis for our new concept and explain the benefits. An RF receiver that could be fully integrated in CMOS semiconductors, he would explain, that would be capable of receiving and processing multiple types of RF signals and standards. It could be tuned over a wide range of frequency bands and would produce better linearity, better dynamic range, and better sensitivity than the superhets it would replace.
David would end his presentation predicting something that the majority of his audience thought was totally ridiculous ‑ that RF direct conversion receivers would account for 50% of all receivers by the middle of that decade. I remember he and I having a heated discussion with my asking him why he wanted to make such an aggressive prediction.
But he stuck to his guns and to his credit, he was correct. By the middle of that decade, direct conversion receivers accounted for much greater than 50% of the marketplace, a prediction that nobody else in that era was willing to make.
Many of the firms we spoke with in those early days decided that they wanted to start their direct conversion programs using the familiar analog mixer approach. Yes, they would use more power than the superhets, yes, they would have less sensitivity and, therefore, lower performance than the superhets that they were replacing.
However, this was the era of 2G GSM cell phones, with the next generation being 2.5G EDGE phones on the horizon. In no way were the requirements of those standards anywhere near the challenge of the still‑new CDMA products and the coming 3G standards that would appear later in the decade, or the even more difficult 4G standards that would come later.
While David was predicting the future of direct conversion adoption, I was suggesting that our receiver technology had the merits to someday be adopted as an industry de facto standard. Just as David's predictions in the engineering community would raise more than a few eyebrows, so would mine in the investment community.
But based on the merits of our innovations combined with our belief that the cell phone of tomorrow would look vastly different than the cell phone of yesterday, we felt very strongly in our predictions. Today, I feel even more strongly about the prediction that our technology could become a de facto standard.
And so I take this historical walk with you down memory lane to tell the many of you that have stuck with us through thick and thin that the fundamentals of what we believed back then were not misplaced. That ParkerVision could become a valuable partner to those companies who bring wireless chipsets to market was a correct idea then and is even more relevant now.
Today we built a patent portfolio protecting our technologies, including our receiver innovations that are 118 patents strong in the United States, with over 60 patents overseas and still growing.
As you know from our recently initiated lawsuit against Qualcomm, we have found strong evidence that our IP has now been incorporated into Qualcomm's chipsets, and in fact, we believe it was first incorporated in those devices a number of years ago.
Further, we believe the technology has been widely deployed in their chipsets. More details about this will come out as the case progresses. However, I can tell you that the evidence we continue to find is only strengthening our case, and our view remains that this is a very widespread infringement.
So, ParkerVision's IP has enabled high‑performance receivers built out of the lowest‑cost semiconductor, CMOS. It has enabled the incorporation of both stand‑alone transceivers and transceivers on the same die with digital processors. It has enabled the ability to have many different receiver applications in a small handset while still maintaining excellent performance.
While we're encouraged to see our innovations enable such achievements, and in very high volume, our RF innovations cannot, and should not, be freely used by Qualcomm or any other firm without paying fair compensation for highly valuable and revolutionary technology.
Since the complaint was filed a couple of weeks ago, we've been actively working on the expansion of our team of professionals who will support ParkerVision in this case. We've met with some of the country's top intellectual property litigators, firms that have been very successful in bringing highly publicized and valuable awards to their clients.
Based on our situation, these firms have offered us a variety of financial terms to assist in funding the litigation. Everything from terms that include full contingency - where they fully fund the litigation in return for a percentage of the awards, or partial contingency - where we fully fund the litigation.
Having a strong IP portfolio with the help of the Sterne‑Kessler firm guiding us in building that portfolio provides us access to all financial models with the best IP litigators in the country. And when we select a financial path, it will have been a selection of our choice that balances the best outcome for the company. So stay tuned for more on this information to come on these developments.
We expect Qualcomm's initial response to our complaint to come over the next few weeks, and in the meantime, we continue to work with our team of legal and technical professionals to further develop our case and strengthen the body of evidence against Qualcomm.
On the other part of our business, which is our transmit chip technology, we continue to also make very good progress. As I mentioned in our call just a couple of weeks ago, we are seeing positive rapid forward progress with a second OEM with regard to our CDMA‑based RF chip product.
We are determined to commercialize this technology in the most timely manner possible, and to that end, we've been actively engaged in sales activities and product demonstrations with additional VIA customers as well.
One of these customers, a well‑recognized leading global handset OEM, has shown significant interest in both our current offering as well as our future product roadmap. This particular OEM started a fully‑funded internal program to integrate and evaluate our products for a platform solution which could then be deployed across their product lines for Asia‑based CDMA mobile phones.
The OEM has dedicated a team and resources to this effort, and we also have a dedicated team, including personnel to provide onsite support at the OEM's design efforts, which are overseas.
This OEM tends to move quickly and aggressively on new designs. We see both near and longer term opportunities available to us with this OEM, and our sales team continues to move forward with other OEMs and ODMs who are developing applications based on VIA baseband reference designs.
At this time, I expect there are a number of questions, and so perhaps we should go ahead. Operator, open up the call so that we can have an opportunity to address those.
Matt: Thank you, sir. Ladies and gentlemen, if you would like to ask a question at this time, please press star, then one on your touch‑tone telephone. If your question has been answered or you wish to remove yourself from the queue, please press the Pound key. Once again, if you would like to ask a question, please press star, then one on your touch‑tone telephone. We'll pause while we wait for participants to queue for questions.
Our first question is from Peter Massaniso from Ponte Verde Capital. Your question, please?
Peter Massaniso: Good afternoon, Jeff.
Peter: I want to verify this. Over the years, the major question that you've been asked has been, "Why aren't you doing any business? You have such great technology." I'm assuming the answer is Qualcomm was doing the business with your technology. Is that a correct assumption?
Jeffrey: I believe that is the correct assumption, Peter. It's hard to sell a technology when someone's already decided to adopt it but isn't paying you for it.
Peter: So if we take it to the next step, you were calling on all their customers, or your customers, or your hoped‑to‑be customers, your baseband partner was probably calling on them... What's the exact feedback from these customers? All they would have to say was, "Well, we have that technology now with this chip or that chip."
Jeffrey: Well, we're not aware of Qualcomm having put out public information back in that day that explained how they were achieving the figures of merit or the benefits that they were achieving from our technology. Qualcomm would simply market their chipset, offer up the spec sheets, and the customers would make a decision on what they thought was the best product for their mobile handsets. In Qualcomm's case ‑ I mentioned it in my review just a few minutes ago ‑ our technology helped their levels of integration, smaller form factors, better performance, et cetera. How they got that performance in incorporating our technology, I'm not aware that they were going around explaining that.
Peter: And the customer just accepted the specs, and they weren't aware of it either, then.
Jeffrey: No, the customers simply, I think, probably tested the chipsets and said, "Wow, I like these chipsets, I think I'll use them."
Peter: That's amazing. Well, good luck to you on the lawsuit.
Jeffrey: Thank you, Peter.
Matt: Our next question's from Phillip Anderson from Pinnacle. Your question, please?
Phillip Anderson: Hi, Jeff. In your prepared remarks, you were saying that, after you had the initial discovery of infringement, you and your legal team have been working to substantiate how broadly Qualcomm has infringed. I think you used the expression they'd widely infringed. My question is, as you have been investigating the technology landscape, have you come across other companies which you think are also infringing on our technology?
Jeffrey: Well, at this time, let me just say this. The Qualcomm infringement has certainly opened our eyes to looking in a lot of other places. As we discover additional infringement, we will certainly be aggressive in protecting the rights of our intellectual property, just as we are with the Qualcomm situation. The question will be, how many other companies that Qualcomm had a competitive advantage over due to our intellectual property decided to go off and incorporate it as well? Time will tell, but copycatting in this particular space is not uncommon. We'll see what we find. It's going to be very interesting, I think.
Phillip: As Qualcomm has competitors, now that this has become a matter of the public record, have any of Qualcomm's competitors come to you and asked proactively to get a license, which would be a means to disadvantage Qualcomm in the marketplace?
Jeffrey: You know, I'd rather not, Phil, comment on that right now, but the fact that Qualcomm has incorporated our technology into their chipsets certainly has demonstrated that what ParkerVision, who was an unknown in that industry, certainly back then, was suggesting it could accomplish has now been proven in very high volume commercial product. So it certainly wouldn't surprise us that it's going to be very attractive for a number of companies to want to incorporate this technology into their chipsets.
Phillip: That makes complete sense. Lastly, then I'll jump back in queue, when can the public expect to see some type of an announcement about the legal strategy, what type of court you might pursue, who may be on our legal team? Can you give us a sense of a timeframe when there may be an announcement?
Jeffrey: Yeah, I think that we'll have gone through the process of building out the initial legal team in the coming weeks, not months, so you'd likely hear about that in that timeframe. Coincident with that, maybe just a short while beyond that, we may be able to talk more further about our longer‑term strategies, but I think that's more appropriate once we have the legal team built out here.
Phillip: Yeah, OK. I totally agree, just wondering when we might hear something. Thanks very much, Jeff.
Jeffrey: Thank you, Phil.
Matt: Our next question is from Robert Brown from Brill Securities. Your question, please?
Robert Brown: I would like to ask a question about, warrants were issued on moneys raised for ParkerVision. Have any of these warrants been exercised, and if so, how much money has ParkerVision realized from these exercises?
Jeffrey: You know, I'm going to ask for Cindy's help. You're talking about, Robert, from the recent warrants that were issued? The ones that in the money now, is that what you were asking?
Robert: Yeah, the ones that have been in the money for... The recent ones. Not that that's necessarily the last one. I think that...
Jeffrey: Yeah, I think the ones that are in the money now...
Cindy: I'll address that.
Jeffrey: OK. Good.
Cindy: We've had a small number of exercises today. But you're not incorrect. There are a not insignificant number of warrants that are in the money. Those, if exercised, would result in proceeds to the company of roughly three million dollars. Some of those most recent ones are actually not exercisable until the end of September, but the bulk of those are currently exercisable and they are quite significantly in the money. So we've gotten some enquiries about exercises on those. It won't surprise me if we see some of that starting to come in.
Robert: That's good. The second part of the question would be, do you think you'd have to raise money considering your burn rate now, before you get some contract.
Jeffrey: You know, Robert, I think it depends on number one; do these warrants get exercised sooner than later? That obviously would be very helpful. The other thing that we're doing the analysis on ‑ this is why we're moving this process along ‑ besides wanting to get the litigation team built out, it'll also give us the visibility into the finance... It's part of the financing equation because it'll depend on, do we decide to go full contingency, part contingency, no contingency. I can tell you this. I'm pretty comfortable, although this isn't a guarantee, that we're not going to fully fund this ourselves. We've been given a really wide range of financing options from the litigators, and I'm telling you, these are some of the top litigators in the country. That's very encouraging, but I think we need to nail down exactly what that looks like.
Robert: OK. Thank you.
Jeffrey: Thank you.
Matt: Once again, ladies and gentlemen, if you'd like to ask a question, please press star, then one on your touchtone telephone. Again, to ask a question, please press star, then one.
Jeffrey: Well, operator, if we do not...
Matt: I apologize, sir. We've one from Greg Lewin from Forefront Capital. Your question please.
Greg Lewin: Hi Jeff.
Jeffrey: Hi Greg.
Greg: Could we diagram a little bit where we are in the process with this potential customer? Go through what processes have been completed, what processes are in front of us. Some hands around some of the timeframes we may be dealing with. A little color on how they may or may not be reacting to the lawsuit also would be helpful.
Jeffrey: OK. Sure. I'll start with the last part first. Thus far, the lawsuit hasn't had an impact on the discussions and the activities with this handset OEM, one way or the other. They are very focused on working with us to get our chip built into a platform that they have which is used for fielding a number of phones in the Asia geography that are CDMA phones. The next steps basically are, they've committed to have those platforms built. We've committed to deliver the chips that go onto those platforms, which will be arriving in coming literal weeks. They tested the technology before off our demonstration system, but they obviously want to put it on their own platform and make sure that all that translates properly ‑ which we fully believe they'll be very pleased with what they see. And based on that kind of a timetable, Greg, that's why we're comfortable suggesting that there should be an order that we believe will come from this activity before the year is over.
Did I answer all your questions with that?
Greg: Is that a very conservative estimate on timing? I was just trying to get some feel for what the timing...
Jeffrey: I think that's average. These guys that we're working with are, I would consider them to be aggressive. They put a dedicated team on this. They've asked that we have a dedicated team, which we have. They've asked for on‑site support, which we have. They have a history, this particular firm, that once they decide to do something they're pretty focused on getting the job done, and they've been very successful in executing on those types of focus.
Greg: Do you think it could be another three months or so before we hear from them, definitively?
Jeffrey: No. I think there will be milestones all along the way. I think what'll happen is, they will get the platform turned on with our chips on them and they'll run some tests. I think that will give us another favorable indication that we've achieved another milestone in their mind. And hopefully, that'll keep this thing moving on to the next steps, which will then lead to the initial order that we would expect. So I think we'll get good feedback all along the process in the coming weeks. Whether that translates into something material that we make an announcement before we get an order or not, don't know that. But I think that we'll have good visibility to that. Not daily, but in the weeks to come.
Greg: So really, the way that I have thought of it is the lawsuit, there's an enormous amount of alternatives and flexibility in financing a lawsuit, and you've expressed that you have those. So when I think of financing the company, it's much more related to what would be required should you get an order from an OEM customer. Have you approached them or have they approached you about financing as a possibility?
Jeffrey: This is a company that has an interest not just in our existing product but in longer term, broader use of the product throughout a wider range of applications. I think the right time that we would expect to engage with them in a bigger discussion than just an initial order, but potentially more strategic type conversation, would be after that platform has been turned on and verified, or is in the process of being verified. And they have seen the goodness in the technology that we've shown them that they should expect from our demonstration hardware. As they say, the proof is in the eating. So let's get the meal on the table for them to start sampling the technology. I think when that happens, it opens up a number of other doors for us, with this OEM and I wouldn't be surprised with others, as well.
Greg: And just to that point. Given the discussion of financing as thematically in the company, to what degree, if you are... you feel extremely confident in the suit and the pursuit of the suit and you are comfortable, thus far, that this OEM is moving toward a positive outcome, potentially. To what degree is it pragmatic at all to even spend any time with second and third potential customers?
Jeffrey: Well, it's pragmatic because we have a good sales/marketing organization that's geared up to do that. They're out there in the marketplace, have shown this product to other VIA customers; have gotten some very good feedback. We're now geared up to start delivering chips in greater quantities. I think it's very pragmatic. I think we continue down the exact path we're on and I think that these two activities are very complimentary, frankly.
Greg: Mm‑hmm. And you believe that even though that money is tight, somewhat, that spending money on marketing beyond our two core programs, let's call them, Qualcomm and the primary OEM potential, is still worthy?
Jeffrey: I do, because it's an incremental add to that program. It's not a significant additional amount of monies invested.
Greg: OK. Thank you.
Jeffrey: You bet. Thank you.
Matt: We have a follow‑up question from Robert Brown, with Brill Securities. Your question, sir?
Robert: I would like to ask, what happened to the previous OEM which we were working on for so long? Are they dead or are they...? What's happened with them?
Jeffrey: You know, they were not moving along at a timeframe that was what we thought was reasonable to get this product into the marketplace, Robert. So we basically looked around to some of the other VIA customers that were moving more quickly and more aggressively and, candidly, have even more resources to deploy on a program like this and decided, "You know what? We need to get this product to market. We've assured our investors, our employees. We need to get this product into the handset marketplace. It's taken long enough." I know that some of the investors are anxious to see this get into the marketplace, given that the market's been screaming for a product that can add battery life to 3G and 4G handsets. We agree with that, so we need to get it out there.
I think we've got the good fortune that VIA actually has a number of very good customers who can deploy the resources that it takes to get a product like this out there. And this particular one has, as I mentioned earlier, has a track record of being aggressive and in moving relatively quickly on these kinds of programs.
Robert: Thank you.
Jeffrey: So I would expect the guys... Well, that's fine.
Jeffrey: Any other questions?
Matt: Sir, at this time it appears that we have no further questions from the queue. Now I'd like to turn it back over to you for any closing remarks.
Jeffrey: OK. No, I appreciate the interest, the continued interest and your support of our company. I look forward to bringing you more news about both the Qualcomm litigation as well as the positive progress that we're expecting to make on the deployment of our transmit chips. So have a good evening and look forward to bringing you more news sooner than later. Thank you very much. Bye‑bye.
Matt: Ladies and gentlemen, that concludes today's conference. If you wish to access archived audio, cast replay of this call, you may do so by visiting the company's website at www.parkervision.com. This concludes the program. You may now disconnect. Thank you. Have a good day.
Transcription by CastingWords