Financials

 

August 8, 2005/4:30 PM, Q2 2005 Earning Conference Call

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August 8, 2005/4:30 PM, Q2 2005 Earning Conference Call

 

CORPORATE PARTICIPANTS
Cindy Poehlman
ParkerVision, Inc. – CFO
Jeffrey Parker
ParkerVision, Inc. – CEO
CONFERENCE CALL PARTICIPANTS
John Bucher
Analyst - Harris Nesbitt
Don Slovensky
Analyst - Winslow Asset Group
Devon Wait
Kent Williams
Cliff Calista

PRESENTATION

Operator
Good day, ladies and gentlemen, and welcome to the Q2 2005 ParkerVision, Inc. Results Conference Call. At this time all lines are in listen only mode, and we will be taking questions towards the end of the conference call.

Before we get started, I want to remind listeners that this conference call 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 - different from our expected achievements and anticipated results.

Included in these risks are factors such as the ability to maintain technological advantages in the marketplace, ability to sufficiently increase manufacturing capacity to meet demands achieving timely market introduction and acceptance of products, maintaining our 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 forward-looking statements contained in this conference call. Additional information concerning these and other risks can be found in our filings with the SEC. I will now turn the call over to Ms. Cindy Poehlman, Chief Financial Officer. Please proceed.

Cindy Poehlman - ParkerVision, Inc. - CFO
Thank you and thank you all for joining us this afternoon. I trust that all of you have seen our second quarter results in our Q that was released earlier this afternoon. I would like to spend just a few minutes highlighting a few items in our quarterly results and then I'll turn the call over to our CEO, Jeff Parker.

The financial results for 2005 reflect approximately 4.7 million in one time charges related to our decision to exit retail activities. 2.2 million of these charges are reflected in cost of sales as a reduction of inventory to estimated realizable value. The remaining 2.5 million is reflected in operating expenses for the quarter.

As you may recall, when we announced our retail exit decision in late June, we estimated charges of 4.5 to 5.7 million in the second quarter. Our actual results ended up in the lower end of that range. At this time, our exit activities are well underway.  We've completed a work force reduction of approximately 44 employees. These employees were predominately employed in manufacturing, retail product engineering and retail sales and marketing. We are in the process of working with our channel partners and others to sell our remaining Wi-Fi finished goods and component inventories.

In the second quarter, we reduced the carrying value of our inventories, as well as certain manufacturing facility assets and other intangible and licensed assets, to reflect their estimated net realizable values. We anticipate completion of our retail exit activities by the end of the third quarter. Although the charges related to the exit from retail were certainly significant, it is important to note that approximately 85% of these charges were noncash. More importantly, the cash savings as a result of the reduced personnel and retail promotional costs will reduce our rate of cash usage going forward.

That leads to another important item to highlight in this quarter's financial statements, which is our rate of cash usage. We used 3.1 million for operating activities in the second quarter of 2005. This compares to 4.8 million in the first quarter and 6.5 million in the second quarter of '04. Although the upcoming third quarter of '05 will reflect some cash impact from the retail exit, primarily payment of employee termination benefits, we do anticipate that our rate of cash usage will continue at lower than historical rates as a result of the exit from retail.

We ended the quarter with approximately 19 million in cash and short term investments, which we feel is sufficient to fund our first OEM design wins. And on that note, I will turn the call over to our CEO, Jeff Parker, to provide an update on our OEM business activities.

Jeff Parker - ParkerVision, Inc. - CEO
Thank you, Cindy, and thank you to our participants for taking the time to join our Q2 conference call update. 6 weeks ago in our last conference call, we announced that ParkerVision was narrowing its focus exclusively to those activities that are designed to secure OEM design wins for our wireless technology.

We reported to you that we were finding very positive reception by multiple OEMs to the concept of our direct to RF power or D2P technology, which we had announced earlier this year, and that we would focus all of our human and capital resources on working with OEMs to secure design wins as early as possible for our wireless technology and products.

I stated then, that I believed that taking this action now would in no small measure increase our chances for success with OEMs, and the resulting activities that we've been focused on these past 6 weeks have only increased this belief. As I stated previously, one of my own personal goals is to close our first design win this year. Based on our latest progress, I continue to be very optimistic about achieving this goal. Since our conference call update, we have made a number of visits both in the United States and abroad conducting D2P demonstrations to various OEMs.

Feedback from these demonstrations has been very encouraging. Certain OEMs have now seen enough proof of what the D2P is capable of to now begin discussions with ParkerVision to define how they might incorporate our chips and technology into their products. In other words, the OEMs have seen enough of our technology from the latest demonstrations to begin exploring the details not only of how our technology can be incorporated into some of their products, but also how a business relationship might be formed between the companies.

Therefore, it is from these conversations that I believe will come our most likely first design wins. Because of the nature of how our dialogues have advanced beyond the conceptual into that of specific product applications and business discussions, this has also influenced our D2P chip development program.

Earlier in the year, we believed that it would be necessary to show fairly generic D2P samples before OEMs would engage us in specific applications. However, based on our early conversations and the advancing business discussions we've been engaged in, we've evolved our chip development program to target both the applications and features that OEMs are looking for in their products.

To that end, our current progress has us providing these more targeted D2P samples to OEMs throughout the balance of these year. Going forward this will be an ongoing process where we will be providing a stream of samples that evolves with the needs of OEMs and certain relationships that we believe will emerge. In summary, I believe that our sharpened concentration on OEM customers will accelerate our drive toward establishing significant revenue streams and profitability for ParkerVision. Based on our progress of these past 6 weeks, I couldn't be more enthused about our future prospects.

And so, now I'd like to open up this call for our questions. So Jean , could we see what questions might be out there?

QUESTIONS AND ANSWERS

Operator
Thank you, sir. [Operator Instructions].
We'll take our first question from John Bucher of Harris Nesbitt. Please go ahead.

John Bucher - Analyst - Harris Nesbitt
John Bucher with Harris Nesbitt. Jeffrey, a question for you on the samples that you indicated would -- the targeted samples that will probably be going out later this year. Do you have the relationships in place to get those out? Or are those relationships just now coming together? Can you just talk a little bit about that?

Jeff Parker - ParkerVision, Inc. - CEO
Sure. No, we have the relationships in place now. You know, in previous announcements and dialogues we announced that our D2P chips, at least the initial ones, would be run on the IBM FAB, on an IBM fabrication plant. And that's where those first samples will come from. Although, even on our existing prototypes we have some of our own unique semi-integrated silicon that came from our previous runs on a Texas Instruments FAB. So, John, it's kind of a combination today, of custom silicon we did at TI, and some other supporting discrete hardware around that and then tomorrow, from the IBM FAB.

John Bucher - Analyst - Harris Nesbitt
Great. That was really the question, you were able to leverage the ongoing relationships you've already got there.

Jeff Parker - ParkerVision, Inc. - CEO
Absolutely.

John Bucher - Analyst - Harris Nesbitt
And then, can you talk a little bit about the applications? You indicated that there are some specific targeted applications. Can you say specifically which radio technologies? And then also, to the extent you can, the types of devices that you think that the initial wins might be in?

Jeff Parker - ParkerVision, Inc. – CEO
Yes, I wish I could share more with you. That's a great questions, but these OEMs are providing a lot of information to us in confidence, and have specifically asked us not to share outside of our conversations, where they're intending to use these first components. So, at this time I'm going to have to say that I wish I could tell you more, other than I can tell you that the OEMs we are talking to are tier one companies. And as such, maybe that gives you some indication of the type of applications they might be thinking about.

John Bucher - Analyst - Harris Nesbitt
Let me try a different approach here, perhaps.

Jeff Parker - ParkerVision, Inc. - CEO
Okay.

John Bucher - Analyst - Harris Nesbitt
Would it be reasonable to assume that one of the areas that their seeking to get better performance in, possibly, with your solution is better battery budget and battery power? And might we see that those types of applications would be, just a high level target candidate there?

Jeff Parker - ParkerVision, Inc. - CEO
That would be a reasonable assumption, yes.

John Bucher - Analyst - Harris Nesbitt
So, if (inaudible) made devices have a slightly lower talk time than other areas that might be an area where this would be productively applied?

Jeff Parker - ParkerVision, Inc. - CEO
That could be one. And there are several where OEMs are seeking to deliver better feature sets for consumers but are looking to do so while not robbing the devices they want to put this in of other performance metrics.

John Bucher - Analyst - Harris Nesbitt
Thank you very much.

Jeff Parker - ParkerVision, Inc. - CEO
You bet. Thank you.

Operator
[Operator Instructions]. Thank you for standing by as your questions are collected.

Jeff Parker - ParkerVision, Inc. - CEO
Well, Jean, let me say to our audience then, we appreciate you joining in...

Operator
...We do have a question from Devon Wait (ph). Please go ahead.

Devon Wait
Yes, hi. I wondering if you could help me understand -- I'm sort of new to your Company - help me understand when you discontinued the retail line, there was no -- it seemed to me there was some value in the technology that had been created. Is there -- was there an attempt made to sell that? I'm just trying to get a little better understanding of sort of the unwinding of that.

Jeff Parker - ParkerVision, Inc. - CEO
Devon, when we decided to exit our retail activities, it was really to take advantage of what we had started to now stimulate on the OEM side. Our retail activities, in part were stimulated, to help prove to OEMs and answer some questions that they had had about, you know, could the Company actually deliver chips that had the level of integration we had suggested a few years ago?

Could we put products together out of that technology that actually delivered the metrics that we had forecasted would be achieved? So, the kind of -- the fork in the road that we arrived at in our thinking a couple of months ago is, as we started to see a pretty strong and serious interest in our latest technology advancements spin up, we knew that there was an opportunity to grab that moment. And that the best way to grab that was to narrow our focus.

That particular area that we had focused on, the Wi-Fi area, we have had some conversations with OEMs, there are still some conversations ongoing with OEMs, but I would suggest to you that there are actually other areas which, frankly, are more exciting to us for growth in margin opportunities that OEMs have actually been even more responsive and more interested in using this technology for.

So, I guess that's my long winded way of saying to you that, yes, there are some activities to explore how our technology in the Wi-Fi space can be embraced. But there are other areas that seem to be more enthusiastic to embrace our technology. And frankly, it's much larger business opportunities and what we believe has much larger margin dollar opportunities associated with that. So, those are the ones that we are more focused on than anything else at this time.

Devon Wait
Okay, great.

Jeff Parker - ParkerVision, Inc. - CEO
Thank you. Well, folks, listen, we appreciate you're joining in. I know it's only been 6 weeks since our last call, so there probably aren't an enormous number of questions, but I hope ...

Operator
...And we have a few more questions lined up at this time. And we'll take a question from Kent Williams (ph). Please go ahead.

Kent Williams
Good afternoon, Jeff.

Jeff Parker - ParkerVision, Inc. - CEO
Hi, Kent.

Kent Williams
I just wanted to ask, you're obviously moving on multiple front with, I would assume, talking to multiple OEMs. Is the possibilities exclusive or non-exclusive? Or how are you pushing this? And if you do enter into a design win will it be an announceable event?

Jeff Parker - ParkerVision, Inc. - CEO
Yes, we believe that a design for our Company at this time would be a material event, therefore it would be announceable, yes.

Kent Williams
Could you talk about the cash burns now that you've exited this area? What kind of cash do you have? What kind of sense of, actually, if we get a design win when we could see product in the market or revenues coming back to the Company?

Jeff Parker - ParkerVision, Inc. - CEO
Well, okay, so let me address that a couple of ways. As we mentioned in our Q that we released today, because of the way we've sharpened our focus we have enough cash with our reduced cash usage to go, at least through the first half of next year. How far beyond that is a measure of how much cash, how tightly we manage that and some of that, I think, will be impacted by what kind of OEM design wins we get, what kind of activity with the OEMs, et cetera.

My focus right now is on seeing that the Company gets its design wins early enough that we have plenty of cash still to work with and that we have a variety of funding or financing opportunities going forward at that point. I believe once this Company has proven that important tier one or high tier two OEMs have decided to start incorporating our technology in products, that there will be a variety of ways to fund the Company going forward, including the possibility of some help from some of the OEMs themselves.

One of your questions, I think, was, are we seeing requests for exclusivity or how would we deal with that? Currently, the OEMs that we're speaking to are looking for -- I mean conceptually, what they talk about is being first movers, getting some first mover advantage. But I think by and large, OEMs today recognize that it's not, really necessarily in their best interest to try to lock you down in a way that you can't create a healthy, growing Company.

And I really am right now not concerned at all about striking the balance between helping an OEM find an attractiveness in being a first mover, working with us early, taking a little risk in helping us finish off specifications and interfaces, et cetera. And not being locked down so tightly that we can't work with multiple OEM. I think we'll be able to strike that balance very nicely.

Kent Williams
Could you also talk about the science and the physics? And obviously, as you demonstrate this to OEMs, how quickly do they get it? Is there doubt and do they look at the patent position? And can you talk about that?

Jeff Parker - ParkerVision, Inc. - CEO
Sure. OEMs on the D2P get it very quickly. We've conducted now many, many demonstrations all over the world. And one of my greatest pleasures has been that every demonstration has gone flawlessly. The technology comes up, it runs just like it should, it demonstrates from time to time exactly the same.

We've had OEMs who have actually asked us to modify our demonstration in the middle of while we're giving it to try to cleverly break the technology. And what they find out is that it's very robust. And so, it's pretty short order. I think I predicted this in earlier conversations, just a few hours that after they see it they pretty much get on the page that this is what we've described it to be. And then we're, moving into the dialogue about, hey, I want to use it here, I want to use it there or multiple places.

They're always interested in knowing, is the technology protected. We always point them back to our historical investment on patents and explain that, yes, we have not changed the discipline within the Company at all. That we file patents often and early and that we believe that the D2P, which is kind of a follow on or an extension of the art and science of the D2D technology, will be well protected in a myriad of ways and claims. And beyond that it's, I mean, they're pretty quick studies on the benefits. And it has thus far been a very pleasant and exciting experience.

Kent Williams
One last question. Have they had engineers come and visit you in Jacksonville? Or have you been moving people back, and forth and how quickly do you think these specific designs can be created?

Jeff Parker - ParkerVision, Inc. - CEO
We've had visitors both to our Florida facilities as well as gone out. It's a big job to go out because we have to take a fair amount of equipment with us to do the right demonstrations, but that's okay. We do that.

And I think that -- I maintain that we'll get our first design and maybe it will have an S to it, I don't know, this year. I guess the other comment I'll make on that is there really isn't an OEM that we're speaking to at this time that when we discuss these design wins are really talking about a one off deal.

What I mean by that is, we're discussing their first use in a specific product in a specific way. But there are, with all OEMs we're talking to, multiple product opportunities. And we've just become - we've disciplined ourselves to say, let's get the first one defined and the agreement between us defined so that we have a template to work with. But fully expect that once we do that with a particular OEM that there will be other design ends that will come fairly rapidly behind that.

So, I think we're starting to fill up the pipeline and I think that that pipeline will build. It will have a ramp of design wins.

Kent Williams
Are you dealing at the very highest product design level -- or I mean, decision making level at these organizations?

Jeff Parker - ParkerVision, Inc. - CEO
We have - yes, we have very good access and are dealing at the utmost senior levels in these organizations.

Kent Williams
Congratulations.

Jeff Parker - ParkerVision, Inc. - CEO
Thank you. We're pleased.

Operator
And we'll take a question from Cliff Calista (ph). Please go ahead.

Cliff Calista
Hi, Jeff. Well, that was -- some of my questions were answered -- but can you tell me geographically where the strongest interest is coming from?

Jeff Parker - ParkerVision, Inc. - CEO
Well, again, in the interest of respecting the wishes of these OEMs, which is that they'd like for us to kind of consummate whatever we're going to do with them before we start talking about it, I'd rather not. But I can tell you that OEMs abroad seem to be moving more quickly than certain OEM's at home. And that's about as far as I'd like to go. But in today's world, which is getting ever smaller and quicker to access geographic locations, that's a little bit of a travel inconvenience, but it doesn't slow us down.

Cliff Calista
And how long will it take to get sample chips that have some of these new applications that they're working for or different applications --?

Jeff Parker - ParkerVision, Inc. - CEO
It will really be, Cliff, throughout the year. You know, what's happened is a number of OEMs have seen enough on our demonstration hardware to start moving to these next stages. And then with that conversation has come the visibility to know exactly how they want to use and what the interface is. And I mean, a lot of very valuable information.

And so, that allows us now to deliver the balance of this year and even there's plans even throughout the first quarter of next year, various implementations of this that will not only help them verify how this fits into their system, but will be a long way down the path of actually being usable as manufacturable chips. So, this has been a really -- very helpful evolution as these conversations have advanced.

Cliff Calista
Okay, thank you.

Jeff Parker - ParkerVision, Inc. - CEO
Thank you.

Operator
We'll take our next question from Don Slovensky (ph) of Winslow Asset Group.

Don Slovensky - Analyst - Winslow Asset Group
Hi, Jeff, how are you doing?

Jeff Parker - ParkerVision, Inc. - CEO
Well, Don, fine thank you.

Don Slovensky - Analyst - Winslow Asset Group
I thought you were going to get off the hook with one question.

Jeff Parker - ParkerVision, Inc. - CEO
Yes, so did I!

Don Slovensky - Analyst - Winslow Asset Group
The queue is taking a little while here.

Jeff Parker - ParkerVision, Inc. - CEO
Yes, I made the mistake of not thanking everybody and getting off quicker.

Don Slovensky - Analyst - Winslow Asset Group
I'm going to try to keep it brief. Just a little follow-up, I guess, on Devon's earlier question. I guess the short version would be that the cell phone market is a priority versus the wireless router market?

Jeff Parker - ParkerVision, Inc. - CEO
Yes, cellular is, in our opinion, probably the best and highest use for this technology at this time.

Don Slovensky - Analyst - Winslow Asset Group
Okay. Were you aware that Clark Howard, who is a television and radio personality here in the Atlanta Metro area, was touting the ParkerVision wireless router over the weekend?

Jeff Parker - ParkerVision, Inc. - CEO
No, I didn't know that!

Don Slovensky - Analyst - Winslow Asset Group
He's a very well respected consumer advocate and he had a lot of good things to say about ParkerVision.

Jeff Parker - ParkerVision, Inc. - CEO
Oh, that's terrific.

Don Slovensky - Analyst - Winslow Asset Group
So, maybe you'll some pull and some of these manufacturers will knock on your door.

Jeff Parker - ParkerVision, Inc. - CEO
Well, I will tell you, I have had numerous extremely nice feedback. We've sent a number of these OEMs routers and cards to try.  And often times they'll land in their own residences or offices. And it's definitely been helpful because they use them and they like them a lot. So, that' been very helpful.

Don Slovensky - Analyst - Winslow Asset Group
He's like the "Good Housekeeping Seal of Approval" if he says something is good.

Jeff Parker - ParkerVision, Inc. - CEO
Great.

Don Slovensky - Analyst - Winslow Asset Group
The second question is, IBM last week announced the availability of the new fourth generation SiGe process.

Jeff Parker - ParkerVision, Inc. - CEO
Yes.

Don Slovensky - Analyst - Winslow Asset Group
They say it's -- they claim it provides twice the performance of the previous generation. In regards to your D2P designs, performance-wise, does this help you or is it neutral?

Jeff Parker - ParkerVision, Inc. - CEO
I'll be frank with you. I heard that announcement and I know that we have a team of people here that work with IBM on a regular basis. I mean, literally...

Don Slovensky - Analyst - Winslow Asset Group
...But it's possible from what you've shown us or what you've shown just in the recent samples -- it's possible that this new process could actually enhance your performance even more?

Jeff Parker - ParkerVision, Inc. - CEO
Oh, yes.

Don Slovensky - Analyst - Winslow Asset Group
Okay, so the potential is there for that.

Jeff Parker - ParkerVision, Inc. - CEO
Oh, yes, the potential is there.

Don Slovensky - Analyst - Winslow Asset Group
Okay.

Jeff Parker - ParkerVision, Inc. - CEO
And frankly, as we evolve the implementations of the technology, there is advancements to all of our performance metrics just because every step of the way you learn more about your assumptions. And so far, what we've learned is there's a lot of legs to this technology to grow in a whole range of ways. In terms of performance, smaller size, better efficiency. All sorts of ways.

Don Slovensky - Analyst - Winslow Asset Group
Fantastic. Okay, well, good job and I look forward to talking to you soon.

Jeff Parker - ParkerVision, Inc. - CEO
Thank you. Well, I think with that we will thank all of our participants in joining into our conference call. And I look forward to our next one and hope that we'll have exciting news to deliver to you as the year continues on. So, thank you very much. Have a good evening. Bye-bye.

Operator
Ladies and gentlemen, thank you for joining us on the call. You may now disconnect.