ParkerVision Q3 2006
Earnings Call
November 02, 2006
Paul Henning, IR
Cynthia Poehlman, Chief
Financial Officer
Jeffrey L. Parker, Chief
Executive Officer
Philip Anderson from
Pinnacle Funds
Michael Donahue from
Emerging Growth Equities
Jim Litchen from Latela
?
Daniel Lewis from Gem
Partners
Ira Nathan from Nathan
Financial
Erick Peterson from ECT
Research
George Healy,
Shareholder
Operator: Good day, everyone and
welcome to the ParkerVision Incorporated Third Quarter 2006 Financial Results
Conference Call. Today’s call is being recorded. At this time, for opening
remarks and introductions, I would like to turn the call over to Investor
Relations Consultant, Mr. Paul Henning. Please go ahead sir.
Paul Henning: Thank you. Before we
get started, I want to remind 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 from our expected achievements and anticipated results.
Included in these risks are factors such as the ability to maintain
technological advantages in the marketplace, to achieve timely market
introduction and acceptance of our products, maintain product patent protection
and the availability of capital among others. Given these uncertainties and
other various factors about our business, listeners are cautioned not to place
undue reliance on any forward-looking statements contained in this conference
call. Additional information concerning these and other risks can be found in
our filings with the Securities and Exchange Commission.
We will begin today with Cindy Poehlman, CFO who will review the
quarter’s financials and she will be followed by Jeff Parker, the CEO of
ParkerVision who will report on the company’s business activities. Cindy?
Cynthia Poehlman: Thank you Paul and
welcome to the ParkerVision third quarter conference call. I would like to
briefly review a few financial highlights and then I will turn the call over to
Jeff Parker for an update on business development.
ParkerVision reported today a net loss for the third quarter
of 3.8 million or $0.16 per share, which
compares to a net loss of 3.9 million or
$0.19 per share in the third quarter last year. On a year-todate basis, the net
loss dropped from 19.6 million or $0.97 per share in 2005 to 12.5 million or
$0.54 per share for 2006. The year-to-date decrease in the net loss, as we
discussed last quarter results, primarily from our decision in June 2005 to
streamline our operations and focus on OEM opportunities for our wireless
technology. Since our exit from retail, our operating expenses have
consistently averaged around 4 million per quarter. For the first three
quarters of 2006, this amount includes
on average of 600,000 per quarter of
non-cash stock compensation expense.
As we noted in our last conference call, our cash usage has gone
down significantly over the past year. Cash used for combined operating and
investing activities has averaged slightly over 3 million per quarter this
year. We do expect our cash usage to be up about 30% in the fourth quarter, as
we pay accrued employee year-end bonuses and prepaid certain annual insurance
premium before the end of the year. We
ended the third quarter with 17.3 million in cash. Based on our current rate of
cash usage, we estimate that we have approximately five quarters of cash
remaining without accounting for any incoming payments from anticipated
business relationship.
As we’ve stated in our quarterly report that was filed this
morning, we do anticipate that our initial relationships will include a front
payment for technology access fees and non-recurring engineering design fees.
Although we don’t expect these fees alone to bring the company to a cash flow
positive position on a continuing basis, they will reduce the net cash outflow
and help bridge the gap until we realized revenue and cash from royalty
payments.
At this time, I would like to turn the call over to our CEO, Jeff
Parker for an update on business development activities. I will be available at
the end of the call to address any questions you might have regarding the
financials.
Jeff Parker: Thank you, Cindy and
welcome to our third quarter update. This past quarter has continued to reflect
for us an accelerated phase towards a very important milestone for this
company, namely our first technology design relationship. As we get further
down this path, it becomes increasingly difficult to convey to you the progress
we are making without violating any of the confidentiality and non-disclosure
agreements that we are operating under.
Believe me, nothing would make me happier than to be able to
provide all of our supporters the details of where we are at in our OEM relationship.
In the absence of specifics, I think it’s maybe helpful to review with you the
progression we’ve gone through over the last year or so with our target
customers and where that brought us to. When I look back at the progression of
our sales effort, I can categorically classify the steps in the process into
five distinct categories. The first step being when we’ve introduced our new
GDP architecture, and allow the customer time to digest our claims. The next
step, step two, I would call high-level technical due diligence, kind of a kick
the tires if you will in an attempt to flush out any obvious problems with the
technology for our related clients. The third step, I would call detailed level
technical due diligence. This is the phase in the process where the customer is
evaluating our technology against other technologies that they have evaluated
in the past that have fallen short. This is a very important step in order for
them to satisfy themselves that there are no gaps that we haven’t contemplated
and this is obviously a critical step before they are willing to invest the
time and to move into a more meaningful discussion. The fourth step I would
quantify is product design evaluation. And at this point, the customer has for
the most part completed enough technical due diligence to believe that you
brought something of real tangible value. But they now need to study that
against their specific product road map and their portfolio needs to determine
what it means to them, which can mean dozens of things. Things like how will
they design us into their product, where will it be manufactured, how does this
impact their supply chain, what is this due for their future benefit and cost
goals and on and on. This is where customers start to require us to complete
their confidentiality and non-disclosure agreement as they are now sharing
their sensitive information with us. And step five or the last step I would
call the business arrangement. This is a combination obviously of all the
preceding steps and in and of itself represents a cadence of dialogue,
discussion and ultimately negotiation. This step represents that all levels of
the company that need to buy in have done so.
As we’ve indicated in previous calls, we are at different stages
in this process with different customers. And the steps are not always
sequential meaning that, for example, you could be going through steps four and
five with the company in parallel. To answer the unasked question, yes, we have
reached step five with certain targets.
In our opinion, the announcement of our first deal is simply a
win, not an if question. We are extremely confident because the more time we
spend in this industry talking with the executives of companies that are
clearly the market leaders. The more we come to understand how our technology
provides them with a compelling solution to problems they are facing today and
even more importantly problems they see looming in the not too distant future.
Problems that their other suppliers simply do not have a solution
for us. We stated in our 10-Q that was filed earlier today that we expect our
first relationship to be consummated in the next few months. Some of you maybe
wondering does this mean that we’ve taken our eye of the end of the year goal?
The answer to that question is absolutely not.
We did want to convey the message, and while we are working
feverishly towards this goal by the end of the year, whether an announcement is
made this month, next month, or even the following months, this shouldn’t be a
factor engaging the significance of this important milestone or the shareholder
value that can be built from the technology we’ve developed. In fact, as a
company, we have more visibility today than ever before to understand the
significance and the depth of the value proposition our technology brings to
both wireless OEMs and to the network carriers.
As many of you are aware, our CFO and I will be attending AeA’s
conference in
Operator: The first question is
from Philip Anderson from Pinnacle Funds. Please proceed with your question.
Philip Anderson: Hey, Jeff. How are you?
Jeff Parker: Phil.
Philip Anderson: I’ve been on a
sabbatical for a little bit. Could you just elaborate and help refresh my mind
about the current problems that your chip would solve for your potential
customers, and then are these elaborating with those future problems that you
foresee and that they now foresee that your technology can in effect cure
before the problem becomes reality?
Jeff Parker: Today, the
third-generation cell phone standards, which are represented by wideband CDMA
and CDMA are very inefficient in terms of the power consumption required to
transmit those signals from a mobile device, like a handset. And so, battery
life today is falling short of what consumers would like to see, certainly
short of what the carriers who are trying to sell the consumer lots of talk
time would like to see. In addition to that, the spectrum, the frequencies that
these carriers are operating over have continued to grow broader over more
frequencies, and so, what’s happening is, you have very inefficient
transmitters that drain the batteries too quickly and the hardware that it
takes to support all these different frequencies is duplicated at various frequency
stands, hence we end up with lots and lots of duplicate-type hardware to make a
phone that will work over the various networks and the various geographies that
these providers want to offer.
So you end up with transmitters that are expensive, they’re big
relative to what the OEMs what to see, and they are very inefficient. So, the
first thing our technology does is, it helps them collapse the redundant chains
into a much more elegant solution, it helps significantly reduce the cost to
the goals and objectives that many of them have told us that they are trying to
achieve and we’ve proven to them that we can get there, and it is much more
efficient, if you
took an advanced CDMA network, a typical suburban network. You
would find that today’s transmitters are only about 8 or 9% efficient, so that
means over all of the operating time, for every lot, let’s say a power that it
is consuming, it’s only putting out 8 or 9% of that at the antenna. By
comparison, we are 20, 22% efficient, so that’s an increase of about 300% or
so, which is a huge increase. I mean typically when they see a new technology,
they are seeing 5% increases, 10% increases not hundreds of percent. So, those
are the three key benefits that we bring right away. So, the future, all of the
service carriers and many of the OEMs have already announced that they are
going to be adding broadband data features to their networks and phones. Some
of them are going to be using WiMAX, some of them are going to be using WiBRO,
some of them are going to be using other kinds of standard generally - are left
to the end base. And those particular standards are even more inefficient than
Wideband CDMA. I mean you drop from 8 or 9% efficiency down into the low
single-digits, and we have already shown them that we can again meet their cost
goals, meet their size goals, and bring them hundreds of percent of increase in
efficiency to where OFDM broadband services and mobile devices becomes
practical.
Today, truthfully, we all announced enough they are going to do
it, they are all scratching their head, what do we are going to put into these
phones, that will make practical. You wouldn’t stand for a handset, if that is
going to operate for 15 or 20 or 30 minutes of battery life if you are using
the broadband services. So, they know they have got a big gap between what they
would like to deploy and what’s available and we show them how they can close
that gap with something practical.
Philip Anderson: And with the same chip
or chipset solve both the current problem in this feature, problem coming down
their order, or would that be an additional product?
Jeff Parker: That’s really up to the
OEM. We have shown them how a single IC implementation can do everything I just
described or a subset of that, and I think in some of these OEMs, there would
be parallel programs running along that will bring the technology to market
faster for certain things they want to do. They are out in the market today and
take longer to add some of the features for the future products if they want to
apply this to. So, I expect it will be multiple programs, it will bring it to
market for different needs in different times.
Philip Anderson: And will you, does the
company have at present or a product or a marketable product that you will be
upgrading to demonstrate in the power some other going to manifestation as a
non-engineer to the absorb and what you are talking about?
Jeff Parker: We won’t do that
because frankly the demonstration is like, when you have a laboratory and it’s
very involved and frankly with the 30, 40 minutes we get to have a presentation
discussion with the group - you wouldn’t - it wouldn’t be a practical thing,
but we will bring with us many of the technical documents that we - I will
bring some snippets out of that to show some of the things that OEMs are seeing
on the equipment that can bring into their facilities or they come to our
facilities and see.
Philip Anderson: Okay, thanks very much
sir.
Jeff Parker: Thanks, Phil.
Operator: Thank you very much. Once
again for those parties who have a question, please press star one on your
touch-tone phone. The next question is from Michael Donahue from Emerging
Growth Equities, please proceed with your question.
Michael Donahue: Hi guys.
Jeff Parker: Michael.
Michael Donahue: Would it be fair to say
that you guys are in the final stages of negotiations with as many as - or is
up to three major cell phone OEMs?
Jeff Parker: It would be fair to say
we are in the - we believe to be in the final stages of negotiations with
several - I don’t want to really go into the specific number, but certainly
more than one. And cell phone OEMs are part of the mix of OEMs we are talking to,
but as you know, there is actually other types of OEMs as well that we are in
dialog with, some are chip providers of various nature.
Michael Donahue: Right. How about -
would it be fair to say that you’ve reached some sort of deal at least in
principle up to a handshake, let’s say and what is left to do with paper work
and legal issues?
Jeff Parker: Michael, I really would
- I would love to give you an answer, believe me, but I just can’t go into that
level of detail.
Michael Donahue: Okay. All right.
Thanks, guys. Jeff Parker: Thank you.
Operator: Thank you very much.
The next question is from Jim Litchen from Latela. Please proceed with your
question.
Jim Litchen: Hi, Jeff.
Jeff Parker: HI, Jim.
Jim Litchen: Two questions, first
question is, it sometimes rolls over, it has been rolling over for years. Is
there any competition lurking in the space that could challenge us? Number one.
And number two, what is starting up, as you’ve said at the annual meeting like
to have this to be the standard at sometime, and we hope will be standard, what
kind of numbers are we talking about as far as future usage here in the next
two years?
Jeff Parker: So, competition, we
have to yet to see anything either that the OEMs have kind of pulled up and
said, how do you guys compare to this, that is the [indiscernible] over
technology attempts that have failed, just to make sure that we are going down
the same path, but there is nothing that they have shown us, or that we have
found on our own that does anything close to what we do. We continue to see
more of the same in terms of incremental improvement taking traditional, analog
linear power amplifiers and reaching out a couple of percent here and a couple
of percent there, but nothing that is a truly new approach to doing the RF
transport.
In terms of - and by the
way, it is really hard to do, which I think is maybe why we haven’t seen
anything. It takes a real commitment and investment as we have shown. In terms
of volume opportunities, this year appears to be the first year that the
handset industry will ship over a billion handsets. And if you turn the clock
up to 2009, 2010 time frame, it appears that about half of those will be
3G-type handsets. So, really people find us to bring really nice solutions to problems
they’ve got, with 3G and beyond although some may incorporate it into some of
the other 2.5 and 2G phones, but if you are limit it to 3G, that is about a 0.5
billion unit per year market and that kind of a time frame. And then if you
turn the clock forward a couple of more years, that goes by the year 2011 or
so, the forecasts are in the 1.5 billions unit per year. Area, was again 50% or
greater than being 3G and beyond. So it is a very large market, one that we
will be thrilled to be a participant and eventually will be a leader in.
Jim Litchen: And are we at the same
time working on a receiver?
Jeff Parker: We have nice receiver
technology as for those of you who followed us for a while, you know D2D.
Several of the OEMs have solicited us for more information about D2D, they are
seeing that it also has the potential to solve some interesting challenges
they’ve got, and we have to an OEM ask that we not get into a detailed
discussion about that until we have completed the deal because, as you, we also
want our first deal done sooner than later and we would rather grow foundation
of a relationship and try to make the relationship ever more complex with even
more due diligence. So, and they have all agreed to that. So, I think we will
see our receiver technology emerge, but it will come after we have our
relationships and after we get into a working cadence with these OEMs. There is
plenty to do to get the D2D into their product, so I don’t want to derail that
or defuse any of that, I want to make sure that we are absolutely successful of
adding growth from that base.
Jim Litchen: Thank you.
Jeff Parker: Thank you.
Operator: Thank you very much.
Our next question is from Daniel Lewis from Gem Partners. Please proceed with
your question.
Daniel Lewis: Hi, Jeff.
Jeff Parker: Hi, Dan.
Daniel Lewis: In terms of your cash
requirements, you have indicated that you wouldn’t - that you have five
quarters less of cash. That implies that by the end of the year, you will have
four quarters of cash and you would be okay going throughout ‘07, correct?
Jeff Parker: Yes, that is correct.
Daniel Lewis: So, there wouldn’t be
any issue of a letter from auditors like you had pressure last year, correct?
Cynthia Poehlman: First, let me jump in
and answer that one Dan. This is Cindy. I think the right answer to that is
obviously at the point in time that the auditors were in - they were doing
their year-end fieldwork, they will assess all the circumstances at that point
in time. They will look at our projections going forward in terms of cash
usage. They will look at our historical usage. They will look at what deals we
have on the table and what cash will be coming in from that in order to make
their assessments. So, I mean, your statement is correct, we feel comfortable
that we get through the end of ‘07, and
the auditors will make that assessment at that point in time, but it is not
something that we or the company are concerned about.
Daniel Lewis: To what degree would
you anticipate that - the up-front payments and the NREs and the access keys
would be meaningful relative to your current cash balance?
Jeff Parker: Dan, I am sorry, maybe
elaborate just a little bit, if you could, on that question.
Daniel Lewis: I mean would it be
enough - would you expect that your cash consumption would go up as you sign
the first OEM deal, what would your needs be once you did sign the deal?
Jeff Parker: Yes, okay. Now I
understand. So, you may handle it.
Cynthia Poehlman: Let me start and you
jump in if you would like to - I think the answer to that question is Dan,
certainly there is a lot of the answer is going to be - it depends on what that
first deal looks like and how it is structured. Our expectations are that certainly
there maybe some additional resource requirements, so we would certainly hope
that our plan for non-recurring engineering fees or other access fees incoming
that would offset or more than offset any additional requirements we have for
resources. Is that the answer what you are asking?
Daniel Lewis: Yes. Would you also
dramatically increase your infrastructure or, I mean, you probably have a sense
of what the first OEM deal is going to look like?
Jeff Parker: Yes, Dan. I don’t see
us dramatically increase our infrastructure. Some of that will be dependant on
how much of the heavy lifting on circuit design some of the these OEMs wanted
to do if they want us to do a lot of heavy lifting, they are going to expect to
pay for it. So, I am frankly, I think that problem is kind of a non-issue. And
they are certainly used to that type of arrangement and the cost for NREs in
this industry and this particular space are pretty well understood. So, I am
really comfortable either way though that they want to have us do a lot of the
heavy lifting, we can do that if they want us to do. Some of the heavy lifting,
which is by the way what I think is going to happen that is fine also.
Cynthia Poehlman: Yes. And I think the
answer to that is our expectation is that those first deals are going to help
our cash flow position, not hurt it.
Daniel Lewis: And what kind of lag
would you expect there to be between the time when you sign your first OEM deal
and when you start to generate royalties from those - from that deal?
Cynthia Poehlman: As we said in our
quarterly report earlier this morning, that lag is probably at 12 to 24 months
timeframe. It depends on the breadth of the product that we are going to put it
in that tank, how quick they are willing to move. As Jeff as said earlier, are
they going to want to eke out every penny out of it before they put it out or
they are going to want to go to markets faster with certain product lines. So,
our best guess at this point is there is probably a 12 to 24-month period of
time before you see the royalties stream coming in.
Daniel Lewis: And is there a sense of
how eager they are to put this into all their 3G handsets or some of it?
Daniel Lewis: And the ones - the ones
we are the furthest along with seem to indicate that this is a platform
decision, meaning that when they have dropped it, it will be across their
product lines as a platform. They tend to not design handset-by-handset, but
they tend to pickup a technology platform that then becomes the basis for many
handsets and maybe they have a couple of platforms, but they don’t have dozens
of platforms. So, you know, my opinion at this point is that we would be either
in all of the 3G or certainly in a vast majority of those.
Daniel Lewis: Well, that would be
exciting.
Jeff Parker: That would be exciting.
We are certainly getting excited about the prospects of that happening in the
near future.
Daniel Lewis: Good luck.
Jeff Parker: Thank you.
Operator: Thank you very much.
The next question is from Ira Nathan from Nathan Financial. Please proceed with
your question.
Ira Nathan: Yes Jeff. I was just
curious if this is a question you can answer. Have you signed any
confidentiality agreements bilaterally with any OEMs at this point?
Jeff Parker: Yes, we’ve signed
several of them.
Ira Nathan: Okay and one other
question, which has nothing to do with the operation of the business truly. Is
- you studied the short interest figures which seems to be far out way the
float of the stock, isn’t there certain requirements that they cover those
shares?
Jeff Parker: Cynthia, you may know
more about those regulations and ideas. Anything you want to comment on?
Cynthia Poehlman: No, really I mean,
honestly our focus is on the business and I am furthering the business and
although certainly we are seeing the same report you are and to a certain
degree scratching our heads about how these numbers have gotten so high. We
really I don’t think have any more insight into it than you do.
Ira Nathan: Okay. Thank you.
Operator: Thank you very much.
The next question is from Erik Peterson from ECT Research. Please proceed with
your question.
Erik Peterson: Hi, if you are going to
deal with XYZ Company and in the future, the engineers of that company make
further IP enhancements on your basic technology for the deal that you cover
with then, are you trying to work out some provisions that you somehow share on
these advancements or how would something like that work?
Jeff Parker: Yes, I don’t really
want to go into the specifics other than to tell you that there are a couple of
different ways to handle that issue that we have seen both industry, kind of
industry wide that are pretty well accepted and even within some of the
specific companies we’re talking to from other technologies that have been
licensed by them. But they tend to contemplate fairness to both parties and how
the parties can share in the benefits of those improvements and that’s not a
showstopper by any means at all.
Erik Peterson: Okay.
Operator: Thank you very much.
Our next question is from George Healy from Shareholder. Please proceed with
your question.
George Healy: That’s A shareholder.
Jeff Parker: Oh, George Healy.
George Healy: Just a little further
on the questions [indiscernible] what are the current numbers for both the
shortage risk most recent and total shares issued outstanding, same year, look
up on it?
Cynthia Poehlman: The shortage risk
position, I believe that I don’t have the exact numbers in front of me but I
believe that it’s just over 5m. And our total shares outstanding are around 23
million.
George Healy: Okay, thank you.
Cynthia Poehlman: You are welcome.
Operator: At this time, I have no
questions. Mr. Parker, I will turn the call back over you.
Jeff Parker: Thank you for
participating in our call today and we look forward to the next time we have an
opportunity to communicate with you and have a great balance of your week, and
thank you again for your continued support, bye, bye.
Operator: Thank you very much for
the joining the ParkerVision Incorporated third quarter 2006 financial results
conference call. Today’s call has concluded. You may now disconnect.