ParkerVision 2012 Q3 Conference Call
November 14, 2012
John Hickman of Ladenburg
Richard Thalmann with Burgess (?)
Philip Anderson with Pinnacle Funds
Steve Emerson with Emerson Investments
Peter Massaniso with Ponte Vedra Partners
Kate: Good afternoon, and welcome to the ParkerVision, Inc. third quarter 2012 conference call and webcast. Today's conference is being recorded, and all listeners are in a listen‑only mode. Following the presentation, we will open up the conference call for questions and answers. The company has requested that questions and answers be limited to one question and follow‑up per caller. As it is now time for opening remarks and introductions, I would like to turn the conference over to Ron Stabiner with the Wall Street group. Please go ahead, sir.
Ron Stabiner: Thank you, Kate. Good afternoon, and thank you for joining us. Before we get started, I would like to remind listeners that this conference call will contain forward‑looking statements which involve known and unknown risks and uncertainties about our business, 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 our patent protection, and the availability of capital, among others.
Given these uncertainties and other factors for 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'll hear first from Cindy Poehlman, Chief Financial Officer of ParkerVision, who will provide a review of the company's third quarter results. She'll be followed by Jeffrey Parker, 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 good afternoon to those of you joining us for ParkerVision's third quarter 2012 conference call. Today, we reported a net loss of $5 million or $0.06 per share for the third quarter of 2012, which compares to a net loss of $3.8 million also $0.06 share for the same quarter last year. During the nine months ended September 30, 2012, our net loss was $14.1 million or $0.19 per share, compared to $10.7 million also $0.19 per share for the same period in 2011. The increase in our aggregate net loss for both the third quarter and the nine‑month period was a result of increased professional fees - primarily litigation related expenses and an increase in non‑cash share based compensation. We used approximately $2.9 million in cash for operations during the third quarter of 2012. On September 19th, we completed the sale of approximately 4.4 million shares of common stock under our shelf registration statement, resulting in the receipt of net proceeds of approximately $9.2 million.
We also received just under $0.5 million during the third quarter of 2012 from the exercise of outstanding warrants and options. We ended the quarter with $13.4 million in cash and short‑term investments. I'm happy to answer any questions at the end of today's call, but at this time I'd like to turn things over to Jeff Parker for a business update.
Jeff Parker: OK, and thank you, Cindy, and good afternoon, and thank you for joining us on our third quarter conference call. Over the past quarter, we continued our focus on the development and commercialization of our technologies, securing patent protection for our innovations, the defense of our intellectual property portfolio and ensuring that we have the necessary capital to support our business plans. As Cindy stated, we raised $9.2 million in September with the sale of 4.4 million shares of common stock, utilizing Craig‑Hallum and Ladenburg Thalmann as co‑placement agents.
In September we also participated in two investor conferences, the MDB Capital's Bright Lights Conference and the Craig‑Hallum Alpha Conference, both in New York City. We plan on continuing to attend events of this nature to broaden awareness of the company within the investment community.
Our research and development team continues to invest in advancing our wireless technology and in securing protection on those investments. We have had 11 new patents issued since the 1st of July, which brings the total patents issued this year to 18. Among the patents that have recently issued are those covering additional embodiments of both our RF down‑conversion technology as well as our unified RF transmit power amplification technology.
We continue to believe that our technologies are enabling fundamental advances in the rapidly expanding wireless industry. We are certain that the adoption of smaller geometry semiconductors using lower voltages, and the desire for reduced power consumption and reduced heat, continues to drive the industry towards the type of advancements that our technologies enable.
Our patent portfolio now has a total of 206 patents issued, including both United States and foreign patents, with a number of pending applications still in the pipeline. Our intellectual property continues to be recognized by independent third parties.
On Monday of this week, the patent board issued their latest quarterly telecom and communications score card, and ParkerVision continues to be ranked in the top 50 at number 23. Out of the six measurement indicators that they publish, we were once again the only firm on the list that ranked number one in two of the six indicators, namely science, strength, and research intensity.
We also ranked number two in the third indicator, which is that of industry impact. This is especially impressive if you consider that all but two companies in the top 25 achieved their ranking as a result of hundreds, or even a thousand, patents issued during the measurement period, whereas ParkerVision's score was based on 22 patents issued. We believe this speaks to the quality and the influence our patents and the underlying innovations are making in our industry.
As you are all aware, we're working closely with our patent litigators at McKool Smith, and we are vigorously prosecuting our willful patent infringement claims against Qualcomm. This effort entails a great deal of work, as evidenced by the number of additional court documents in this case.
Since the first of July, there have been nearly 70 court‑filed documents added to our case, bringing the current total to approximately 185. This is also a particularly busy time as both sides work to finish their activities in both discovery as well as depositions.
Based on the court's current case management schedule, we are now approximately nine months away from the trial date in early August of 2013. We look forward to showing the court and the jury how Qualcomm has used and is continuing to use ParkerVision's technology, which was developed at great expense, despite the thorough legal patent protections that we have secured.
We also look forward to receiving the court's ruling on claim construction terms, or what you may know as a Markman ruling. Our team at McKool is expecting that ruling to come at any time. Once that ruling has been issued, we will analyze the court's interpretation of the terms at issue, and we will provide guidance on the impact it has on the claims of infringement that we have asserted in this case.
On the topic of commercialization of our intellectual property, namely our D2P transmit chips, our team has continued to work closely with an Asian mobile products OEM. They continue to indicate to us their enthusiasm for our technology. We are currently at the stage with the OEM where they've asked for certain commitments on the part of ourselves and their baseband supplier in order to satisfy their requirements to enter into a program where our IP is ultimately adopted into production products.
These commitments are not material financial commitments. Rather, they are the typical supplier commitments you would expect in a high‑volume supply relationship. We are discussing those requirements with the baseband provider, VIA Telecom, and hope to be able to satisfy this OEM's requests in the near term so that we can move to the milestone we've all been working so hard to achieve, namely a contract that incorporates ParkerVision ICs along with basebands supplied by VIA into one or more of this OEM's products.
We also announced earlier today that we along with our legal counsel, McKool Smith, have engaged the firm of 3LP to assist us as we evaluate a number of strategic options. The principals of this firm are well known for their expertise as intellectual property analysts, strategists, and advisors.
We believe 3LP is a strong complement to the intellectual property services that John Cronin and ipCapital Group have been working on with us for some time now. As you can see from the information on 3LP's website, the principals are highly accomplished professionals who have much spent much of their careers in the field of intellectual property.
Mr. Rivette, one of the managing directors, is a co‑author of the book, "Rembrandts in the Attic," which has been widely read and credited as an important work in the area of intellectual property analysis and strategy.
Both ParkerVision and 3LP strongly believe that our technology has enabled a wide range of wireless products ‑‑ from those that are used in smartphones and tablets to wireless networking, Bluetooth, global positioning, and numerous others. It is ParkerVision's belief that not all companies who require the advances that our technologies enable expect to use another company's innovations for free.
The strong analytics and expertise of the 3LP team, combined with the know‑how of our advisors at Wilson Sonsini and McKool Smith, among others, we believe form a top‑notch team that will assist ParkerVision in capturing the value that our technologies are generating in the marketplace right now.
So, we appreciate your listening today for our update. Now I'd like to open this call to your questions. Operator?
Kate: Thank you. Ladies and gentlemen, if you have a question at this time, please press star and number one key 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. One moment for our first question. Our first question comes from the line of John Hickman of Ladenburg. Your line is open.
John Hickman: Good afternoon Jeff.
Jeff Parker: Hi, John.
John Hickman: I'd like to ask you about Asian OEM and that contract. Is there an issue? Is there something that would prevent VIA from entering into a supplier agreement?
Jeff Parker: No. We are hopeful that VIA will work with us to satisfy the requirements that the handset OM has asked us to both commit to. The commitment that they have asked for are very traditional kinds of things that you would expect, when a product is going to go into volume production. We are at the point now, which is further than we have ever been with a handset OEM of getting to that part of the discussion. So we are hopeful that we will be able to move through that quickly, quickly being in the near‑term, and satisfy that.
John Hickman: So you are past the point that the OEM is comfortable that the product works?
Jeff Parker: The OEM has designed a reference design, using our chips and VIA’s baseband that meets a reference design form factor that they are happy with. My expectation is that, once they get through this commitment from both parties, there are some last things that they will want to verify that won't take long. I think it will be after that that we will get moved to a production program and all the activities that are entailed with that, yes.
John Hickman: So, do you feel like you are on track there with the formal timetable?
Jeff Parker: I do. Yes.
John Hickman: My follow‑up question is this. Can you explain how 3LP might be working in conjunction with the law firm of Wilson Sonsini on business development?
Jeff Parker: Sure. As we mentioned in our press release, 3LP has done some research and believes that our technology has enabled a wide range of wireless products, as you read in Mr. Rivette's quote today. We believe that the strong analytical research that comes with the expertise of the 3LP folks, along with the legal background and know‑how of our advisors at Wilson Sonsini as well as McKool Smith, will give us a team that is really capable of capturing value from our technologies, in a variety of different types of business relationships. I think it is the aggregate, John, of those skill sets on common team that gives us a very good place to be working from in approaching different business strategies. So, I think that 3LP brings some analytics to the party or to the activities that Wilson Sonsini is certainly known for, being involved in all kinds of business dealings in their history. Of course, McKool Smith has a great deal of expertise in intellectual property and legal matters. So, we put those three together and we think we've got a really great team. That's how we are approaching the situation.
John Hickman: Just one more comment, from me. It appears, from Kevin's bio that he used to work with the General Counsel at Qualcomm. Is that true?
Jeff Parker: Well, I know that Kevin, in his career, was at IBM for a time period. I believe that the GC, the General Council at Qualcomm was at IBM for some part of his career. Whether they were there at the same time or not, I don't know. I do know that it is a small technology community and lots of people, within that community, know each other either from having worked in common organizations or having been involved in deal‑makings between common organizations. So I don't know for sure whether Kevin Rivette and Qualcomm General Counsel know each other or not. But, given they were both at IBM, I guess that certainly is possible.
John Hickman: That's it for me, thanks.
Jeff Parker: Thank you.
Kate: Thank you. Our next question comes from the line of Richard Thalmann with Burgess(?). Your line is open.
Richard Thalmann: Hi, Jeff.
Jeff Parker: Hi.
Richard: We have been over it and it makes sense to me how you came later on to understand that Qualcomm was infringing on your patents, after they had been using them for quite some time. In reading the quote today, in the press release, it seems like the technology is pretty basic to a litany of wireless chips in the market today. Could you just explain how that is going to work out, in terms of whether the laches issues will affect your ability to sue or license? Can you go through that a little bit?
Jeff Parker: Sure. Our understanding of laches is that, when you become aware of infringement, if you are going to file litigation against an infringer for past damages, you must do that within, I guess, what is deemed a...an appropriately timely manner. I'm not exactly sure what the exact legal phrase for that is. But it has to be done timely. Timely, from my understanding of talking with our litigators from McKool Smith is typically a year or two. It's not that you have to do something in weeks or a couple of months. So we don't feel like we are anywhere near a situation today, where we learned about infringement, where we have a really short period of time to sort through what we are going to do. This is why we engage with people like Wilson Sonsini and 3LP to put in place the right team that can sort through this strategy and discover and work through business deal‑making that doesn't necessarily hinge on litigation.
Not all companies, as I mentioned in my comment, feel that they should be using another company's innovations for free. We think that this team we have now with Wilson Sonsini and 3LP and the legal expertise of McKool Smith in the patent litigation area, is a really good team to help us sort through though strategies and try to find additional roots of business opportunities to secure value for our shareholders, in all of this innovation that we have created and that is being used in a lot of products that are in the market today.
Richard: Yeah. Well, right. I get that, so what made you aware that it was used in all these different product areas? Because...
Jeff Parker: Well, once the Qualcomm situation became verified by us, we then had some time to start applying some of those processes that we put in place to discover the Qualcomm infringement to other situations. Sometimes it's through industry conference papers. Sometimes it's through patents. Sometimes it's through reverse engineering that can be done on products. In our situation it's all of the above and a few others I'd rather not mention. But all of these are legal approaches to determining if other products have incorporated our intellectual property. So we have a formal program in‑house now to do that, and 3LP was engaged by us and McKool Smith to help us further formalize that process, put in place best practices, and to help us verify some of this other infringement that we found in an absolute ‑‑ what we think is a best practices way.
3LP has their own techniques and expertise that they use to do this as well. So we have a process in place now, and that's what allowed us to build this picture that we now have and we'll start forming business strategies around.
Richard: OK, great. Just one more question. On the VIA product, do you have any idea of what kind of volumes? Is it going to be a high‑volume phone? Is there any call you can give us to what that might be?
Jeff Parker: The most I can really tell you right now is that particular OEM has been talking with our team about products that will be shipped in Asia, so that's where the geography would be and have been talking about some different phone models. It would be phones, possibly also some complementary products that would use the same kind of chips that go in phones such as tablets or other mobile products that use cell phone chip sets. So it's a potpourri of things, but it's mostly focused on Asian‑based phones.
Richard: OK, thanks.
Jeff Parker: OK, thank you.
Kate: Our next question comes from the line of Philip Anderson with Pinnacle Funds. Your line is open.
Philip Anderson: Hi, Jeff. How are you?
Jeff Parker: I'm good. Thank you.
Philip Anderson: You know, in one of the original court filings, of which there are now 185, McKool Smith in this filing stated they've conducted over 100 hours of due diligence before they took on ParkerVision as a client. Can you talk to us about the kind of diligence 3LP did before they became interested in taking us on as a client?
Jeff Parker: You know, Phil, I don't think I can. I don't think it's appropriate to go into the specifics. But I can tell you that I think if you looked at Kevin Rivette's quote in today's release, it's pretty evident that they did a significant amount of due diligence covering a variety of factors that they studied both on the innovations themselves and in the associated patent portfolios. 3LP has a number of proprietary tools and processes that they've developed over the years that really help them sort through determining quality of innovation, quality of intellectual property, et cetera. So I really am not at liberty to go into the specifics, but I will tell you that we consider 3LP to be a very strong firm in how they go about building their analytics and their assessments and that they did do a significant amount of due diligence.
Philip Anderson: What is their compensation agreement with the company?
Jeff Parker: Well, good question. So the vast majority of 3LP's compensation is based on the financial success of ParkerVision. We do not have any equity compensation arrangements in place with 3LP, so their compensation will be non‑dilutive. In our opinion, the type of fee arrangements that we have with them speaks not only to the belief that 3LP has in the value of our innovations but certainly also speaks to their confidence in their ability to assist us in capitalizing on that value. I don't know if that gives you a little guidance there?
Philip Anderson: Yeah, it's helpful. Switching gears for a second, talking about the cell phone OEM opportunity. If I'm remembering my chronology correctly, at the time of the annual meeting I think the company represented that the OEM prospect had completed testing of the reference design the company had made for it, had asked for a new reference design to be built and tested because that new design would satisfy their specific needs more than the design in which ParkerVision had come up with before they knew specifically what this company wanted. Then when you were in New York in September for a couple of conferences, you had commented that you thought that testing would be completed in late September, early October. I'm wondering if that testing has been completed and, if so, if you can talk to us at all qualitatively or quantitatively about the results of the testing, particularly relative to whatever benchmarks or milestones the prospect gave ParkerVision.
Jeff Parker: Well, OK. So I think about the most I can tell you right now is this OEM has developed phone boards with the reference design on it that meets their goal that incorporates our chips with VIA's as they stand and really feel they're looking now for the commitments from both parties, both ParkerVision and VIA, to move to the step where they can then use those boards to complete some final verifications, which then would move them forward with the production program. We have independently of them created a reference design that is very, very close to what they have now on those phone boards. In anticipation of what they're going to want to do, we tested that out ourselves as well, and it meets all the specifications and them some that we communicated to them.
So from our perspective we believe once they've received the proper commitments from both us and VIA, it should not take them long to complete these final verifications and then move onto the steps that we've all been looking for, which is let's get this technology and products into production programs.
Philip Anderson: That all sounds good. The company not having gotten this far with an OEM before, you mentioned earlier that the commitments they're looking for I think were not financial. I presume they're related to manpower or time commitments or something like that. But since the shareholders of the company have not had the benefit of having gone down this path before, can you be at all more specific in the types of commitments they're looking for, which would be from ParkerVision? But if you're comfortable talking about the commitments from our consortium partner, VIA, as well?
Jeff Parker: I mean these are typical business commitments that I think any volume OEM would expect to see in a supply relationship with high‑volume productions of products. For instance, do both parties have and are they committed to continuing to support adequate resources to the production of this product? When you put a product into production, it's not just a fire and forget. It's a continual maintenance, and there are requirements that you have to step up to so you make sure you don't shut down production lines.
So there are a number of things. None of them though are atypical or out of the norm, and I'm pretty hopeful that both parties will be able to meet those commitment requirements in the near term. But of course I can only speak for ParkerVision on this regard, but we're working to get this done as quickly as we can.
Philip Anderson: All right. One last question. I guess speaking solely for ParkerVision since you are the public front of the company, are these the kinds of things or commitments you made that if proper attention by all parties, which would include parties outside of your company and law firms that draft the contracts and so on, was focused, are these commitment which could be made before the calendar year is over? Not that we would necessarily know with shareholders, but from a practical purpose could they be made that quickly?
Jeff Parker: I don't know what other commitments VIA has, so I can't really speak to that. But I would think that that could be done in that time frame. But my caveat is I don't know what other commitments they've made and how that may or may not enable them to commit to what the handset OEM wants them to commit to. I would hope they'd be able to do that. But honestly, Phil, as I said, I can really only speak for ParkerVision. I can say ParkerVision could do that this year.
Philip Anderson: Right, right. OK, well, that's really what I was interested in. So thanks very much, Jeff. I appreciate the answers.
Jeff Parker: Sure. Thank you.
Kate: And our next question comes from the line of Steve Emerson with Emerson Investments. Your line is open.
Steve Emerson: Thank you for taking my call, Jeff.
Jeff Parker: Steve?
Steve Emerson: Yes. What are the major advantages of yours and VIA's chip set for this OEM versus the latest and greatest competitive chip set, obviously Qualcomm's. If you don't prevail in the litigation, does your relative advantage become significantly less for winning this order?
Jeff Parker: I'm going to take it backwards from the way you asked it. I don't really see this order and the litigation having strong linkage together, and they should be moving at very different time frames. Our trial is scheduled for August of next year. I'm certainly hoping that we can satisfy the requirements of the OEM, work with VIA, and get those commitments in place long before then and start moving down the path of getting our product into production. In terms of benefits, our technology in this particular instance is a transmit technology that replaces the traditional RF transmitter and RF power amplifier. It replaces it with a much more power‑efficient way of creating that transmitted signal that leaves the antenna. In so doing it extends the battery life over what is currently shipping, even what's shipping based on Qualcomm's chip set.
Keep in mind, Qualcomm to the best of our knowledge doesn't make RF power amplifiers, though they certainly make the RF transmitter. But then other companies connect the traditional RF power amplifier to that. That amplifier is responsible for a very significant portion of battery power consumption in a cell phone.
So we bring significant power reduction in terms of battery power consumption, and we bring significant reduction in the amount of heat that those transmit chains, which include the power amplifier, are generating which helps the OEM in making more reliable phones, adding additional features and things like that.
Steve Emerson: Excellent. So, you're basically saying that should we, let's say, lose the litigation, we still have this potential order and we still can demonstrate a tremendous advantage to offer companies in terms of power consumption and other advantages?
Jeff Parker: I believe, yes, and furthermore, based on the work that McKool Smith and 3LP and Wilson Sontini are working on with us, we also have identified what we believe are additional business strategies from the use of our technology, Steve, in a whole host of other applications that are currently sitting in the marketplace, both in cellphones as well as many other devices that use wireless.
Steve Emerson: OK. And shifting to the Markman hearings, how much later are we in getting a decision from this particular judge than other Markmans that he has recently presided over?
Jeff Parker: I can't say that we've actually done a comparative analysis of his Markman ruling timeframes, probably because each case has its own unique attributes. We have a situation where this is a case with 44 terms that are in dispute, which is a large number of terms. I don't think you would want to compare a case with 44 claim terms that are in dispute, that a judge is sorting through, versus maybe a case with 10 claim terms, or 8, or 12, or whatever the number might be.
I have been told by McKool Smith our claim term numbers being 44 is a large number of claim terms in a patent case, but that's the function of the fact that we asserted six patents against Qualcomm. Those patents have a total of 430‑some claims. Qualcomm isn't infringing all of those claims, but they're infringing a lot of them. That defines some of our situation.
I think McKool Smith's view is that this is not taking an unusually long time, but thoughtful judges take the time that is required to sort through the issues, and in their opinion ‑‑ this is just their opinion ‑‑ they expect that we'll all see a ruling here anytime now. I think their view is this is taking about the amount of time that you would expect it to take given the nature of our case.
Steve Emerson: OK. Thank you, Jeff.
Jeff Parker: Thank you, Steve.
Kate: Thank you. Our next question comes from the line of Peter Massaniso with Ponte Vedra Partners. Your line is open.
Peter Massaniso: Hi, Jeff. How are you?
Jeff Parker: Oh, thank you Peter. I'm well. I hope you are, too.
Peter Massaniso: Yes, sir. Kevin Rivette, rumor has it, that he has prepared a major report on your IT technology, and it's very bullish. Can you comment on that? Would we ever see such a report if it's available?
Jeff Parker: Well, I can't really comment on what Kevin Rivette and his team at 3LP have or haven't prepared. I do not have a problem saying that they've done a significant amount of work. We are going to try to sort through what is it out of the work that 3LP has done that we could perhaps pull together and share with the public, and with investors. I think there are things that they've prepared that would be insightful and of interest to investors, so we are looking at that. I don't want to commit to a time frame. I do think out of the work they've prepared, there are some areas that could be useful, and would be something we'd be in a position to publish.
Peter Massaniso: Well, that would be good. The other question I have is, again, with 3LP, have they looked at your litigation? Have they looked at the infringement claims? Have they given you an insight into their attitude towards that, and their analysis of that?
Jeff Parker: You know, we don't really look to 3LP for that, Peter. Kevin Rivette early in his career was a patent litigator, but that's not really what we look to 3LP for. We look to 3LP for more general "Help us understand our entire patent portfolio." Remember, we have six patents that are asserted to be under Qualcomm here, but we own 206 patents. We have different pools of technology we've developed. What we were really wanting 3LP to help us understand is more around our entire portfolio, and the analytics that they can apply to that. Which led to an understanding of the fact that a number of our technology areas that we've developed and spent a lot of research dollars to develop, and have protected, are what 3LP would call "in market" today, and not in an insignificant way.
That's really the area that they've studied, along with some others that I'm really not at liberty to go into, but not really the area of the specifics of our Qualcomm suit. We feel very comfortable with the expertise of McKool Smith, and what they've done for us and continue to do.
Peter Massaniso: If I could just make a statement, and you can agree to it or not. Then you're comfortable with McKool to the point that you don't think you need a third party endorsement of your own feelings about this and their feelings, so it would have no value.
Jeff Parker: Absolutely. I don't believe that it would bring any additional value. McKool is very experienced in identifying infringement and then how patent litigation can be applied to bring an infringer to justice. I think that's [indecipherable 39:10] their expertise. Neither I nor the board feel additional need to verify their findings, assumptions, et cetera.
Peter Massaniso: That's great. Thank you, and happy Thanksgiving.
Jeff Parker: You as well, thank you.
Woman: Thank you. We have no further questions in the queue at this time. I'd like to turn the conference back to Mr. Parker for any closing remarks.
Jeff Parker: Well, folks, as always, thank you for taking the time to listen in to our update and for your questions. I will also extend a happy Thanksgiving to all of you. If we don't speak to a number of you before the end of the year, I also hope you have a good holiday season, and be well. Have a good evening, thanks.
Kate: That does conclude today's conference. If you wish to access our audio of this call, you may do so by visiting the company's webcast at www.ParkerVision.com. Thank you.
Transcription by CastingWords