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Edited Transcript of PRKR earnings conference call or presentation 14-Nov-18 9:30pm GMT

Q3 2018 ParkerVision Inc Earnings Call

Jacksonville Jan 11, 2019 (Thomson StreetEvents) -- Edited Transcript of ParkerVision Inc earnings conference call or presentation Wednesday, November 14, 2018 at 9:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Cynthia L. Poehlman

ParkerVision, Inc. - CFO & Corporate Secretary

* Jeffrey L. Parker

ParkerVision, Inc. - Chairman of the Board & CEO

* Jean Marie Young

The Piacente Group - IR

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Conference Call Participants

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* John Reynolds

- Private Investor

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Presentation

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Operator [1]

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Greetings, and welcome to the ParkerVision Third Quarter 2018 Conference Call and Webcast. (Operator Instructions) As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Jean Young with The Piacente Group. Thank you, Ms. Young. You may begin.

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Jean Marie Young, The Piacente Group - IR [2]

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Thank you, Rocco. Good afternoon, everyone. Thank you all for joining us today.

Before we begin, I'd like to remind you that this conference call will contain forward-looking statements, which involve known and unknown risks and uncertainties about our business and the economy as well as other factors that may cause our actual results to differ materially from expected achievements and anticipated results. Included in these risks are the company's ability to maintain technological advances in the marketplace, the ability to secure new customers for our products and technologies, maintaining our patent protection and the outcome of litigation, among others. Given these uncertainties as well as other factors related to our business, we caution you 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 periodic filings with the U.S. Securities and Exchange Commission.

On today's call, we will hear from Cindy Poehlman, Chief Financial Officer, who will provide a review of the company's financial results for the third quarter of 2018. Following Cindy's remarks, Jeffrey Parker, Chief Executive Officer, will provide an update on the company's business.

Thank you again for joining us. And with that, I'd like to turn the call over to Cindy. Please go ahead.

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Cynthia L. Poehlman, ParkerVision, Inc. - CFO & Corporate Secretary [3]

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Thank you, Jean, and good afternoon to those of you joining us for ParkerVision's Third Quarter 2018 Conference Call.

We've reported this afternoon a net loss of $4.8 million or $0.19 per share for the third quarter of 2018, which compares to a net loss of $4.4 million or $0.24 per share for the third quarter of 2017. Our net loss for this past quarter included approximately $1.6 million in charges related to our recent restructuring of operations. Excluding these onetime restructuring charges, our operating expenses for the third quarter of 2018 decreased approximately $1.1 million or a little over 25% when compared to the same quarter last year. We anticipate further decreases on our operating expenses in the fourth quarter of 2018 and in 2019 as the full effect of our recent cost reduction measures are realized.

On a year-to-date basis, we've reported a net loss of $13.6 million or $0.59 per share for the first 9 months of 2018 compared to a net loss of $12.9 million or $0.76 per share for the same period last year. In addition to the $1.6 million in restructuring and impairment charges I already mentioned, the net loss for 2018 also reflected a $1.1 million loss resulting from an increase in the fair value of our contingent payment obligations to our litigation funder.

Our operating expenses, excluding restructuring charges, decreased by $2 million or approximately 16% for the 9 months ended September 30, 2018, when compared to the same period in 2017. We have undertaken significant steps this past quarter to reduce our cost of operations. This included a reduction in workforce of over 60%, an average 20% reduction in base salaries for all of our executives and senior management employees, closure of our engineering design facility in Lake Mary, Florida, and a comprehensive review of all service agreements and contractual relationships with a goal of cost reduction. We believe the measures we've taken will ultimately result in savings of approximately $8 million annually.

As part of our cost reduction measures, we significantly curtailed the cost deployed towards marketing of our Milo product line. As a result of those cost-cutting measures, we evaluated the level of Milo products inventory we have on hand against our historical sales and future projections and recorded a significant inventory impairment charge in the third quarter of 2018. As we head into the holiday season, we're continuing to explore opportunities to promote and sell our Milo products.

Liquidity continues to be an area of focus for the company. During the third quarter of 2018, we used proceeds from equity and equity-linked transactions to fund our operations. These transactions included a private placement transaction with Aspire Capital for the sale of warrants and pre-funded warrants for an aggregate of $2 million and the sale of $1.3 million in convertible notes. Three of our current directors participated in the convertible note transaction. We are continuing to explore opportunities to properly finance our future operations albeit our capital needs on a going forward basis are significantly less following our cost reduction measures.

I believe Jeff will also further comment on this in his update. So with that, I will turn the call over to Jeff for his comments.

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Jeffrey L. Parker, ParkerVision, Inc. - Chairman of the Board & CEO [4]

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Thank you, Cindy, and good afternoon, and thanks to those of you who are joining us for our quarterly update. So since our last quarterly update, we made the decision to scale back the company's operating expenses, as Cindy already mentioned. That decision was made as a result of our assessment that it's in our best interest to focus resources on support of our patent enforcement program and the resulting litigations that are well underway.

As we've discussed previously, patent enforcement, particularly in the United States, can be lengthy, but I would like to discuss today why our focus is a worthwhile endeavor and why we believe with growing optimism that we will succeed in our enforcement and what we're expecting in near-term results and of course, what's at stake with regard to the financial results.

So first, I'll start with an update on our recent validity decision from the German Federal Patent Court. This validity action stemmed from infringement cases against LG and Apple for their use of Qualcomm chips. As you may recall, we received a preliminary infringement ruling in the LG case, which was stayed pending a review in the German Federal Patent Court for validity. The court unfortunately decided that the asserted patent was invalid, a decision that we are determining if we want to appeal. Interestingly, that court did not invalidate the patent for the reason that it was originally challenged, but rather the court combined a number of separate references to reach an invalidity decision.

Needless to say, we were somewhat surprised by that outcome. But rather than dwell on this, what I want to address is whether this decision informs anything we're concerned about with our other case against Apple using Intel chips. That case against Qualcomm chips is a transmitter case, meaning the case with the invalidity decision, and against Intel chips is a completely different technology. It's a receiver case. More importantly, unlike the transmitter case, there is no prior art that Apple has shown in this receiver patent case that hasn't already been considered by the patent office before issuing the patent.

If the Munich court had wanted to send our Apple-Intel case to a validity review, this could have already been done from the our first or second hearing. We believe it wasn't because the prior art here can be easily shown to be irrelevant. In fact, the prior art that's been shown by Apple has already been ruled on by the United States Appellate Court. And while the German court is not bound by The United States court, it is likely that it has a strong influence when a U.S. court, especially at the appellate level, has already said that the prior art is different and does not anticipate ParkerVision's energy sampling receiver technology.

So our enforcement in Germany against Apple's iPhones and tablets that incorporate Intel chips has 2 hearings already in the Munich court. And at the last hearing, the court requested that we provide additional detail and indicated that it would then schedule a final hearing and a decision would be made.

We filed our final brief several months ago, and Apple replied with their final brief as well. There's nothing in Apple's final brief that was new or different from what they've been saying, and our counsel believes that our brief provided the level of information that the court was looking for.

In addition, we also filed with the court a report that was written by an expert, Dr. Allen, who is a widely known expert in this field. He taught in this area for many years at Georgia Tech and today is hired by well-known multinational companies to train their engineers on how to design similar circuits in the very semiconductors that the infringing products are built from.

Dr. Allen has taught worldwide, including for a number of years in Germany. Dr. Allen's report further explains, from his viewpoint, why the accused products infringe, why the patent is valid and not taught by any prior art and how the patent claims should be read in relationship to the infringement. It is our counsel's view that this is a very strong supporting report and is extremely helpful to the court.

We expect a hearing to be scheduled at the next open date that this Munich court chamber has. The court has scheduled a date in March as the latest date; however, we've been advised that the court will work to schedule our hearing on the next available date that opens on the court's calendar. It's my understanding that it is expected that a significant percentage of cases will settle, and it's reasonable to anticipate that an earlier date will be made available for us.

It's typical in this court that from the hearing date to a ruling is about 4 weeks. If we prevail, as we believe we will and an enforceable injunction is issued, then it's our opinion this will be the catalyst for us to resolve our differences with Apple. While I don't have exact numbers, it's our belief that an injunction in Germany would cover hundreds of millions of dollars in products shipped each month. We've been thoughtful and careful in how we've approached both infringement and validity, and we don't take this action lightly. We hope that it will result in both parties wanting to resolve differences in a respectful way, and this, we believe, will occur in the coming months in the near term.

Moving to our enforcement in Jacksonville, Florida, against Qualcomm and Apple, we are expecting a Markman order any time now, resulting from our Markman hearing that was held on August 31. This case involves the damages from what we believe are approximately 0.5 billion infringing units. The court asked us to provide suggested dates for next steps. And assuming a Markman order is issued soon, we would expect a trial in the fall of next year. This case was the -- or this case has the benefit of a patent that was issued specifically from the knowledge of how the district court and the appellate court from our first Qualcomm case ruled.

Because of this knowledge, it informed decisions that we strongly believe this patent is valid, and I note that neither Qualcomm or Apple ever filed validity challenges on this patent. And our counsel's view of infringement is also fully informed by these prior rulings. We are quite anxious for our day in court for this case. I also note that a case we have against LG in New Jersey has agreed to be bound by the Markman decision in the Jacksonville case as well. That case is stayed pending the outcome of the Jacksonville case.

The last enforcement action I'll discuss today is our case in Orlando, which was filed in 2014 but has been stayed awaiting the final outcome of some IPRs Qualcomm filed against some of the patents in that case. The appellate court recently ruled on the last pending IPR, and that ruling determined that the method claims of the 940 Patent are in fact patentable. With that ruling, we are now preparing to request the district court lift the stay in that case. That case has both transmitter and receiver patents asserted, and we believe infringing products in that case go back to at least 2008. We believe that there are billions of infringing units, and we are anxious to get this case underway.

This case also benefits from some of the previous rulings as well as 2 patents that survived IPR validity challenges. Although this date is behind the other 2 cases I've just discussed, we would hope we could establish a trial date not too long after the Jacksonville trial. After all, this case has been pending due to the IPRs for several years now.

And the last topic I'm going to cover today is funding. As you know, our current case in Germany and Jacksonville have been funded by our litigation partner, Brickell. One of the reasons we scaled our overhead down was to demonstrate that we are committed to see this litigation through and to achieve the positive results that we believe are not too far down the road.

While I won't speak for Brickell, I will tell you this. I believe Brickell and ParkerVision share the following common beliefs. We are both committed to seeing these actions through to what we believe will be successful conclusions. We both believe that ParkerVision has fundamentally valuable assets in its intellectual property, especially given that these assets are the result of hundreds of millions of research and development investment, not some patents we just bought.

We both also believe there is great value that extends beyond the actions that are currently underway, and our outlook goes beyond just the actions I discussed, including potential actions predicated on some of the other several hundred plus patents we own. Given those common points of view and ParkerVision's willingness to manage the cost of its operations, between ParkerVision and Brickell, we will continue to support these actions. In the not-too-distant future, I believe that will become more evident.

So that's our update for now. And I look forward to sharing more updates in our program as events unfold. And so now I'd like to open this call up to your questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) And today's first question comes from [John Reynolds], a private investor.

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John Reynolds, - Private Investor [2]

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It seems that the dates that we had discussed on prior calls and I've had conversations with you have now been pushed back quite a bit. The -- I mean the court was ready to hear some things or look at some information that you had over the summer, but that date was missed. Now you're saying that this could be pushed off until March possibly, but you feel that there is enough cases that will settle and that'll be moved up maybe to January or February hopefully. But why were those pushed back? Was that because they were waiting on information from us? Or was that the court system? That's where I'm having a big problem on the disconnect here.

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Jeffrey L. Parker, ParkerVision, Inc. - Chairman of the Board & CEO [3]

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Sure. No, listen, that's a legitimate question. So let me give you some detail on that. So the way these courts in the district courts in Germany work is it's a panel of 3 judges. You have what's called a presiding judge, who leads the court, and then there's 2 other judges: a reporting judge, who does a lot of the heavy lifting for the technical work; and then what's called a sleeping judge. In any event, in this particular court, the reporting judge left the court and is no longer with the court. So that left them shorthanded. And the question was, do they wait to find a replacement judge or what do they do. In our situation, they agreed to hire an expert, which I think, by the way, is going to be very good for us, but an expert in this field, who will counsel the judge, and the law there says that the presiding judge can actually have the 2 votes, his vote and the missing judge's vote. But he doesn't have the time bandwidth and all of the background to do the all the work. So it took him a little while to find the consultant. We had to agree with who the consultant was. Apple had to agree with who the consultant was. And by the time they got him in place and they got on his calendar, it just took a little bit of time. But he's in place now and that's what is allowing the case to move forward. By the way, he's not just being used for our case. I understand that he was on a case last week, and our legal counsel went to the hearing. It's another technology case. And he thought that the expert did a great job and is a good choice. So things are starting to move forward again in that court, but that's what delayed it.

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John Reynolds, - Private Investor [4]

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So with that, you're -- they're not waiting on any other information from ParkerVision?

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Jeffrey L. Parker, ParkerVision, Inc. - Chairman of the Board & CEO [5]

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No, that's correct.

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John Reynolds, - Private Investor [6]

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Okay. And on the Markman side, is that still -- is that a week away, a month away? Or what is (multiple speakers)?

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Jeffrey L. Parker, ParkerVision, Inc. - Chairman of the Board & CEO [7]

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Well, let me give you -- John, let me give you the information I know, and then you can kind of come to your own best estimate. So the court asked the parties, both ParkerVision and Qualcomm, to provide proposed dates for all those key milestones that have to occur up to a jury trial, including our proposed date for the jury trial. And we said to the court that all of the dates really need to key off of when the Markman ruling is issued. The judge at the hearing on August 31, at the end of the hearing, informed us that he was going to do what he said was a quick ruling that he understood that we wanted to move the case along. So when we filed our proposed dates, which are agreed upon by both ParkerVision and Qualcomm, we had all assumed that, that ruling would occur no later than November 15, which is tomorrow.

So we're hoping that the ruling is going to happen any time now so that those dates we proposed are valid because they all start once we see what the Markman says. Then you can go finish off the discovery and get the other motions in and all these other things that have to occur up to a trial. So how influenced the court is by our date of November 15, being the date when everything else kind of starts to move, I don't know. We all kind of thought that, that would be a date that the Markman would be issued by, and so we thought that was a reasonable date. Maybe it will come out tomorrow. Maybe it will come out next week.

I honestly, John, at this point, I just don't know what to tell you other than that's where we're at. And it's not -- look, I don't want to speak for the judge. I don't know what else he's got on his docket, but this Markman is not a really -- it's a relatively contained Markman. I think there's only 6 or 7 terms that are in dispute here. So hopefully, it would be something that he and his staff can handle and get out in the very near future. But that's where we're at.

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Operator [8]

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And there's no further questions at this time. I'd like to turn the floor back over to Mr. Parker for closing comments.

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Jeffrey L. Parker, ParkerVision, Inc. - Chairman of the Board & CEO [9]

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Well, folks, thanks for joining us today, and hopefully, we will be able to inform you soon when our hearing date in Germany has been set. We believe, hopefully, it will be before March. We're ready for that hearing to occur sooner than later. Ditto on the Markman, and stay tuned for other news for how we're planning on taking the company forward in some other ways as well. So thanks. Have a great week, and we'll speak with you again soon. Bye-bye.

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Operator [10]

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And thank you, sir. This concludes today's teleconference. You may disconnect your lines at this time, and thank you for your participation.