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Edited Transcript of PRKR earnings conference call or presentation 14-Aug-18 8:30pm GMT

Q2 2018 ParkerVision Inc Earnings Call

Jacksonville Aug 30, 2018 (Thomson StreetEvents) -- Edited Transcript of ParkerVision Inc earnings conference call or presentation Tuesday, August 14, 2018 at 8:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Cynthia L. Poehlman

ParkerVision, Inc. - CFO & Corporate Secretary

* Jean Young

* Jeffrey L. Parker

ParkerVision, Inc. - Chairman of the Board & CEO

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Conference Call Participants

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* Jon Robert Hickman

Ladenburg Thalmann & Co. Inc., Research Division - MD of Equity Research & Special Situations Analyst

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Presentation

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Operator [1]

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Good day, and welcome to the ParkerVision Second Quarter 2018 Conference Call. (Operator Instructions) As a reminder, this conference call is being recorded.

I would now like to turn the conference over to you, Ms. Jean Young from The Piacente Group. Ma'am, you may begin.

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Jean Young, [2]

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

We reported this afternoon a net loss of $4.5 million or $0.18 per share for the second quarter of 2018 compared to a net loss of $3.7 million or $0.21 per share for the second quarter of 2017.

The increase in our net loss is primarily the result of a $500,000 increase in the estimated fair value of our secured contingent payment obligation that's payable to our litigation funding partner along with increases in operating expenses primarily related to our Milo product line.

On a non-GAAP basis, our adjusted net loss was $3.6 million or $0.14 per share for the second quarter of 2018 compared to $3.2 million or $0.18 per share for the second quarter of 2017.

For the first half of the year in 2018, we reported a net loss of $8.8 million or $0.39 per share, which compares to a net loss of $8.5 million or $0.52 per share for the first half of 2017.

The increase in net loss on a year-to-date basis is again the result of a nearly $1 million increase in the loss recognized from the change in estimate of our secured contingent payment obligation, and that increase was partially offset by decreases in research and development expenses and share-based compensation.

On a non-GAAP basis, our adjusted net loss was $7.1 million or $0.32 per share for the first half of this year compared to $7.5 million or $0.46 per share for the first half of last year.

We did see a decrease in our Milo revenue in the second quarter when compared to the first quarter of this year. We believe this decrease is a result of our decision to divert advertising dollars towards our national television campaign which launched last week.

We will be closely evaluating the results of this campaign over the coming weeks, as we work to maximize the potential revenue growth that it can generate. Liquidity continues to be an area of focus for the company. During the second quarter of 2018, we used amounts available under our ATM agreement and our Aspire equity line as well as additional proceeds from our litigation funding partner to provide working capital. We also recently entered into a private transaction with Aspire Capital for the sale of up to $2 million in equity securities in 2 tranches, the first of which closed on July 25.

Before I turn the call over to Jeff for his comments, I want to talk briefly about our NASDAQ listing. As we reported in our earnings release today, we have failed to regain compliance with NASDAQ's continued listing requirements, despite the extension granted to us by NASDAQ's Hearing Panel in March of 2018. It's our understanding that the Hearing Panel is unable to grant extensions beyond August 13 of 2018, which was yesterday. So although we have yet to receive the official notice from NASDAQ, we do anticipate a notice in the coming days. We have preemptively applied for listing on the OTC market and expect that we will be able to transition to the OTC market without delay.

I'm available for questions at the end of today's call, but for now, I'd like to turn things over to Jeff for his business update.

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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 to those of you who are attending our second quarter conference call today. So following up from Cindy's update and our comments in the earnings release today regarding our NASDAQ compliance, one of the significant contributing factors to our noncompliance is our nearly $16 million deficit in shareholder equity.

Because of the manner in which we must account for the contingent liability to our litigation funder, we have an $18.4 million liability on our balance sheet that creates this deficit. A liability that is completely contingent upon the receipt of future proceeds to be realized.

While this accounting treatment certainly defies logic, we're certain that the manner in which we've accounted for this contingent obligation is in accordance with generally accepted accounting principles, or GAAP. We, along with our funding partner, made significant efforts to try to find a way to modify the agreement such as that the investment the funder has made in our patent enforcement program is classified as equity rather than a long-term liability, but despite everyone's best efforts, we've been unable to achieve that goal.

So I guess one could ask has this investment been worth it? Should we continue to pursue the unauthorized use of our most valuable asset, our patent-protected intellectual property? We believe the answer is, a resounding, absolutely. Because of the significant contribution, our innovations have made to one of the largest-ever product categories namely mobile wireless products and the communications associated with that, the infringement of our patented technology is widespread, currently shipping in the billions of units just here in the United States. And so while the cost of ParkerVision and its shareholders has been significant, the value of the damages that we believe will ultimately be recognized makes this investment very worthwhile and one that we should remain steadfast to pursue.

It's frustrating beyond what I can express, the inability to timely enforce patent infringement in the United States. It's led to the United States being ranked #12 in the world in patents for the first time in history. It's lead venture investors to now place more investment in China than the United States for the first time in history. And it sends a clear signal that the kind of innovation that needs patent protection, which historically has been our most important and valuable advances, should be developed and protected in other countries than the United States where innovators are protected and the risks that they take are recognized.

The encouraging news is that of the recent dialogue on Capitol Hill has shifted away from an obsession with patent troll mania and abolishing bad patents, and it's shifted to a concern about the health of the overall innovation economy of the United States and the need to have a patent system that supports innovation by truly protecting innovators in a timely manner.

There are now multiple bills in Congress. They are being readied by both sides of the aisle, with aim to bring back the kinds of patents enforcement protections for innovators that have been eroded or taken away altogether in recent times.

The STRONGER Patents Act, which is working its way through a committee in both The Senate and The House with sponsorships by both parties, aims to bring back conjunctions, curtail or eliminate IPR patent challenges and to advance our patent systems to create better quality patents, not indiscriminately eliminate patents.

So while our endeavor to enforce the infringement of our patented technology has taken much longer than we could've ever imagined, we remain committed to the successful conclusion of our enforcement.

There appears to be the start of a trend to put an effective system back in place for the health and future welfare of our country's economy. As hopeful as we are, however, the nearest term results that can achieve significant success for ParkerVision are to be found in our enforcement actions ironically enough in Germany, where we have 3 cases underway, 1 case each against Apple and LG using Qualcomm chips and 1 case against Apple using Intel chips. All 3 of these cases have the opportunity to get an injunction in the near term, we believe this year, if the court finds favorably for ParkerVision.

Any one of these cases, we believe, can achieve meaningful results for the company. So as I said earlier, we're going to remain steadfast in the enforcement of our intellectual property. It is a little ironic that the larger the value that the invention brings, the more difficult it is to actually get a result that makes any kind of sense.

Anyway, on to the progress of the sales and marketing of our Milo Wi-Fi products. We launched a national direct response TV campaign a week ago. The key to a successful direct response campaign is the continuous analysis and adjustment in order to maximize the potential of the campaign with the goal of scaling up the campaign once we've calibrated the efficiency of the program.

We're in the very early stages with this campaign and are determining on a nearly real-time basis, which markets are most effective and continuously adjusting and improving our media plan to reinforce the effectiveness of the campaign.

Candidly, I wish our call was a few weeks later because I think we'd have more to talk about, but we look forward to bringing you an update once we have some weeks under our belt, probably just several weeks of this campaign under our belt.

And in the meantime, you can see the Milo commercials for yourself on channels such as ESPN News, ESPN Classic, Bravo, Discovery and many other channels.

And so, I think, that's about our update for this quarter. And I'd like to open the question -- the call to your questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) And our first question comes from the line of Jon Hickman from Ladenburg.

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Jon Robert Hickman, Ladenburg Thalmann & Co. Inc., Research Division - MD of Equity Research & Special Situations Analyst [2]

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Jeff, this is Jon. I got on a little bit late. Could you give us any kind of indication of the number of advertisements that have been delivered so far either in print, radio, Internet, TV from the national ad campaign?

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

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John, I think, the first week is -- I don't have the exact -- the way that the direct marketing campaign looks at this is not so much by the number of ads, but I mean they just partially look at the number of advertisements but it's more on, what they call, the number of impressions. Impressions meaning how many people were watching the commercials when you aired those advertisements. And so our first week was probably somewhere between 1 million and maybe 1.25 million impressions. And that's just the very beginning of the program. Ultimately, that'll be scaled up to a multiple of that and it wouldn't surprise me if we get to a multiple of that by the end of this week. But that's really how the direct response campaigns are measured. It's how many people were watching your ads, and then from there, you look for a certain response, and then you look for a certain conversion from that response depending upon whether it's calls into the 800 number or call -- or response to the website where people can order. But it's -- I find this to be a very interesting campaign because you really can see things happen in real-time, and you can make changes -- you can't make changes quite in real time, but you can make changes, compare it to anything else they've been involved in almost in real time. And we're working with people who've done a lot of campaigns and have placed a lot of dollars in advertising and we're getting a lot of good guidance on what to do next and what to expect. And I'm, right now, pretty encouraged. But let's wait and see this thing play out over the coming weeks and then we'll give you an update.

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Jon Robert Hickman, Ladenburg Thalmann & Co. Inc., Research Division - MD of Equity Research & Special Situations Analyst [4]

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Okay. How many weeks did you say? Couple...

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

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Several weeks. More -- probably more than a couple, but not a month, so 3 weeks, maybe a month, something like that.

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Jon Robert Hickman, Ladenburg Thalmann & Co. Inc., Research Division - MD of Equity Research & Special Situations Analyst [6]

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So out of all of your legal things, the one that's most interesting to me in near term is that Germany case with Intel chips against Apple. Can you give us any kind of further update on where we are with the -- like a final hearing or ruling from that judge? Or...

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

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Sure.

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Jon Robert Hickman, Ladenburg Thalmann & Co. Inc., Research Division - MD of Equity Research & Special Situations Analyst [8]

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It's August, Germany is on vacation, but what can you say about that?

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

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Sure. So I share your interest, in that case. I also believe that case has some very interesting elements to it. First of all, I think the patent in that case is clear about what's being infringed. I've been closely working with the briefs, and I candidly like our position a lot. And I think I reported in an earlier conference call that the last hearing we had, the judge called out the Apple litigator for changing his position, waffling around and out and out not telling the truth. And so I can just tell you that the final brief that Apple filed in this case, did not bring anything new to the argument. It was really the same things they've been saying in the past. The only thing that I've seen that's new, which, I think, is interesting is they've expressed what they claim is used inside of the phone to do the down conversion, and they specifically cite a patent that they show. And I find it pretty incredible because there is no way that what they're saying can be used in a phone -- would be used in a phone.

So in any event, what we expect next is that the court will set -- well, 2 things. It's possible, according to our litigator, that the judge will issue a preliminary ruling, and I would hope that he'd issue a preliminary ruling at the minimum of infringement. He certainly wouldn't make us unhappy if he issued a preliminary ruling of an injunction, which, I think, they've earned, but that's his call, not ours. And then he will likely set a final hearing date, which we've been told will be in the very near term. He's going to have to find dates that both parties can accommodate.

But we're expecting that would be hopefully in September, hopefully not past October, but some time in that time range. And that should be the final hearing. And from there, he should make a decision. And my view is that we currently see that the decision should be an injunction unless Apple would like to figure out a way to come to a business agreement on this.

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Jon Robert Hickman, Ladenburg Thalmann & Co. Inc., Research Division - MD of Equity Research & Special Situations Analyst [10]

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And what about -- do you -- from the IPR appeal, you haven't heard anything on that yet, I take it? Or you would suggest...

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Jeffrey L. Parker, ParkerVision, Inc. - Chairman of the Board & CEO [11]

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No. But that appeal occurred on Tuesday of last week. You can listen to the recording, it's available. I was there and I listened to the recording a couple of times. And I think that our litigator did a very good job of explaining our position, and I thought the judges -- we have a 3-judge panel at the appellate court. I thought the judges were engaged and actually quite knowledgeable about the case. And just as a synopsis, the lower courts, which is the PTAB ruled that the method claims of the challenged patents were not invalid, so they've found for ParkerVision and they ruled that the apparatus claims were anticipated and so those were not -- those did not remain, not in the hood.

And so we appealed the apparatus claims, Qualcomm appealed the method claims, and now we await for the court to make a decision on that. If they were going to make a fast decision, which would've just affirmed the lower court ruling, they would've done what's called Rule 36, which is just basically a single sentence that says we affirm the lower court. And typically, Rule 36s occur, I've been told, within 10 business days or less. And from what I've seen, a Rule 36 is usually more like 5 days, 6 days. So we're kind of getting to the point where it doesn't look like we're going to get a Rule 36, but it's possible. Again, they say it can -- up to 10 days is not unheard of.

If we don't get a Rule 36, that means that they're going to write an opinion, and that could take 1, 2, 3 months, you just don't know. But if you'll listen to the recording, you can kind of come to your own conclusion, but the opinion, if they're not going to do a Rule 36 means that they're likely going to flip the ruling at the PTAB in 1 direction or the other, meaning, they're either going to say okay, we don't think that the lower court got the correct decision either by invalidating the apparatus claims or by giving us the method claim, one way or the other. So it's probably all going to go one way or the other. I think, that from the conversation in the hearing, it -- well, I'll tell you what. I don't want to predict what a judge is going to do. I've been doing this too long now to foray into that. Let's just say I like our position a lot, and we'll have to wait and see what they do. But seems like it's becoming less likely there's going to be a Rule 36 and more likely there's going to be a full opinion. So let's wait and see what they do.

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Operator [12]

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And our next question comes from the line of [Louis Teardon], private investor.

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Unidentified Participant, [13]

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Well, obviously, and Cindy alluded to this, liquidity is just a huge deal right now. And you did do the deals with this buyer, and that's going to provide liquidity. But there's a giant hope out there that the sales of Milo do well, and I know it's early in the game -- it is 9 days since you started -- this is our 9th day since you started sales. Can you give us some idea of units sold?

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Jeffrey L. Parker, ParkerVision, Inc. - Chairman of the Board & CEO [14]

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[Lou,] I'd rather not give guidance on that till we get a little further in. I can only tell you this, the guys who do these for a living and who've been doing them for decades and we're working with firms who've been doing this for 30-plus years, have told us that what you really expect to see in a campaign like this, you can start to get some kind of meaningful analysis at the earliest at the end of the second week and more likely in the third and fourth week. So right now I think it's hopeful from what we've seen, but I want to see how this thing evolves, and I want to see how this thing scales. Part of the trick of a campaign is how many times can you repeat the commercial? And you've got to mind the balance between the cost of that commercial and the repetition and the profile of the customer that you think is the right buyer and who watches those channels, et cetera. To be candid with you, if we unlock the secret to all that, which I'm kind of optimistic that we will, the last place I'm going to communicate that is going to be on a conference call. We work too hard and spent too much money for me to give to our competition the recipe and the key to the store. So what I hope to be able to bring you guys is hey, here's a nice result. You how we're getting them? Good, you shouldn't. Okay? So I don't mean to be kind of jerk about it, but honestly, this is really a ton of effort and work that the team has put into this. And I'm beginning to see how this kind of campaign can really provide a meaningful revenue growth for the company and if we're able to get to that goal, and right now, I think that we can, we're going be pretty tight-lipped about how we did it.

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Unidentified Participant, [15]

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Okay. Follow-up, because I'm just obviously interested in liquidity, I think every investor is. You filed your S1 the other day, all right? And can you sort of tell us -- that has to be approved, so that you can do the second drawdown from Aspire, can you tell us where that all sits?

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Jeffrey L. Parker, ParkerVision, Inc. - Chairman of the Board & CEO [16]

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Currently, the way it's been organized is once we have the registration statement approved then we get the next tranche of funding, and we'll also be likely working with Aspire on putting our equity line into a situation that it's also usable. I mean they've extremely supportive and helpful and from my conversations with them is -- they want to continue to remain very supportive of this campaign. So...

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Cynthia L. Poehlman, ParkerVision, Inc. - CFO & Corporate Secretary [17]

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[Lou,] it's Cindy. It's just -- it's a little bit too early. It's only been I think two full, maybe three full business days since we filed the S1. So it's a little too early yet to say how quick it can go effective, but we've had them go effective as early as a week to 10 days after we filed it, so we should hear something here in the next few days.

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Operator [18]

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And this concludes today's Q&A session. I will now turn the call back to Jeff Parker, CEO, for any closing remarks.

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Jeffrey L. Parker, ParkerVision, Inc. - Chairman of the Board & CEO [19]

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Well, folks, thank you for tuning in to hear the update today. As I mentioned earlier, I wish our call would be just a little bit -- a few weeks from now, so we could give you more a sense on the Milo, but we will keep everybody updated, and we'll talk with you again soon. Have a good evening. Bye-bye.

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Operator [20]

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Ladies and gentlemen, thank you for your participation in today's conference call. This concludes today's program, and you may all disconnect. Everyone, have a great day.