MicroVision, Inc.
Q4 2012 Earnings Call Transcript

Published: 27 Feb 2013

[Operator:]

Welcome to the 2012 MicroVision Inc. Financial Results Call. My name is John, and I'll be your operator for today's call. [Operator Instructions] Please note that this conference is being recorded. I will now turn the call over to Mr. Jeff Wilson, Chief Financial Officer. Mr. Wilson, you may begin.

[Jeff T. Wilson:]

Thank you. I'd like to welcome everyone to MicroVision's 2012 Financial and Operating Results Conference Call. In addition to myself, participants on today's call include Alexander Tokman, President and Chief Executive Officer. The information in today’s conference call may include forward-looking statements, including statements regarding projections of future operations and financial results, product development, applications and benefits, availability and supply of product and key components, business partnering expectations, market opportunities and growth in demand, ability to manage cash used in operations, as well as statements containing words like believes, estimate, expects, anticipates, target, plan, will, could, would and other similar expressions. These statements are not guarantees of future performance. Actual results could differ materially from the future results implied or expressed in the forward-looking statements. Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements are included in our most recent Annual Report on Form 10-K filed with the Securities Exchange Commission, under the heading Risk Factors relating to the company’s business and our other reports filed with the Commission from time to time. Except as expressly required by the federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements whether as a result of new information, future events, changes in circumstances or any other any reason. The agenda for today's call will be as follows

[Alexander Y. Tokman:]

Thank you, Jeff. Good morning. I will highlight, as Jeff mentioned, key business milestones we accomplished in 2012 and will come back after Jeff is done with financials to discuss key goals for 2013, as well as what we see as external enablers in the market that should facilitate adoption of our technologies by OEM. Overall in 2012, we accomplished or made significant progress on all of the business goals that we articulated at the beginning of 2012. We believe the foundation established in 2012 should significantly strengthen our fundamentals and provide a strong platform for future growth. Ultimately, as a result of this strategy, tactics and execution in 2012, we were able to improve on each key financial metric in 2012 versus 2011. Revenue grew 49%, cash used in operations was reduced by 26% and net operating loss was reduced by 37%. Jeff will have more shortly in the financial summary section. The availability of high-definition PicoP Gen2 display technology design around emerging direct green laser technology was absolutely instrumental in achieving the improved financial performance in 2012. Advancing our technology platform also was fundamental contributor to make a solid progress in the design win process with OEMs in 2012, as well as achieving our other critical goals which included

[Jeff T. Wilson:]

Thank you, Alex. This morning, I'd like to cover 3 areas

[Alexander Y. Tokman:]

Thanks, Jeff. Moving on to 2013. Our key objectives for the year include the following

[Operator:]

[Operator Instructions] And our first question comes from Mike Latimore from Northland Capital.

[Ryan Macdonald:]

This is Ryan MacDonald down for Mike Latimore. What percent of the Pioneer backlog has now been fulfilled?

[Jeff T. Wilson:]

This is Jeff. It's approximately -- just a second. We cut, paste the number here. It's approximately 2/3 of [indiscernible].

[Ryan Macdonald:]

Okay, okay. And then are there any -- I mean, of the current companies that you're in, like, negotiations with that you've ranked, I mean, how many of those do you think could lead to a structure of an up-front-royalty-payment-type structure?

[Alexander Y. Tokman:]

Our goal is to have -- this is one of the motivations and one of the selection criteria for us, as I mentioned, Ryan, and we expect that some of these companies will have up-front components and we're counting on them as a revenue for 2013. In terms of your backlog question, I think we had about a total approximately 6 million order backlog from Pioneer. Our total order from Pioneer, I think, will -- we fulfilled about 4 million of those.

[Ryan Macdonald:]

Okay. 4 million of the 6 million. Okay, got you. And then Japan's fiscal year is in April. How are you positioned for products in -- or projects in Japan?

[Alexander Y. Tokman:]

Great question. A lot of our discussions are with -- some of them are with Japanese entities and some negotiations are aligned with their fiscal operating year and some of the decisions are being made are in line with their transition to the new year in April 1.

[Ryan Macdonald:]

Got you. And then just a final question, what was stock comp during the quarter, if any?

[Jeff T. Wilson:]

Stock comp, I can get you that number. It is 5 -- for the quarter, it was $500,000 approximately. For the year, $2.2 million.

[Ryan Macdonald:]

For the year, $2.2 million.

[Operator:]

Our next question comes from Joel Achramowicz from Merriman Capital.

[Joel W. Achramowicz:]

I'm trying to get a handle, Alec (sic) [Alex], on the -- your -- can you give us an indication of the 50 -- that the vendors that you sampled last year. How many are in the second or third stage of the model you articulated?

[Alexander Y. Tokman:]

Well, it's a good question, Joel. Remember, 3 key phases to get to a final product revenue

[Joel W. Achramowicz:]

So you must have a focused team or your multiple teams that are constantly triaging these opportunities and allocating resources efficiently in order to optimize the progress.

[Alexander Y. Tokman:]

Absolutely. You have to have laser focus on this, no pun intended. And once we grow, once we become larger, we'll be able to handle more cases simultaneously. Right now, we're focusing on the vital few, get something accomplished and then, build on this with others. Because the others are not going away. They simply understand that we're focusing on other opportunities.

[Joel W. Achramowicz:]

And one of the questions, Alex. How do you feel that your progress -- it's been a year since the 2012 show and went CES and of course you attended the 2013 show. And I mean, can you describe the progress that you feel you've made over this last year? I mean, is it are you in a better or more aggressive position now than you were 12 months ago?

[Alexander Y. Tokman:]

No question, Joel. No question. In 2012 CES, remember, we first introduced the first samples of the Gen2 technology. It was 15 lumen. We were showing the path to higher than 15 lumens but fundamentally we have something. It was better than Gen1 technology. It was built around green lasers. We have some product concepts. This year we introduced -- we basically did create our own demonstration devices to show product concepts and we implemented 35 lumen engines that were low-power, brighter, into the off-the-shelf commercial result product to show -- hey, look. It's very simple stretch between taking this and putting in something that you would sell. And the fact that we increased the brightness by more than 2x without increasing the power and without increasing the size created the extreme, very positive buzz in the -- in all the meetings that we held during the CES. And people also observed that we launched our technology inside a commercially viable product, which was Pioneer launch in the middle of last year. So they now not only see a great technology, they see complimentary supply chain with direct green lasers, they see we already launched something inside automotive, which is typically requires much more stringent requirements than consumer products. All these factors added together increased the confidence of the partners who approaching us for their product solutions.

[Joel W. Achramowicz:]

And one final question. I mean, it's the end of February now. Would you be disappointed if you did not have some kind of an announcement by June?

[Alexander Y. Tokman:]

Yes.

[Operator:]

The question from Andrew Uerkwitz from Oppenheimer.

[Andrew Uerkwitz:]

The first one is, Alex, is has the competitive landscape gotten tougher, whether it's pico projectors or alternative technologies? And can you kind of give us an update on that landscape?

[Alexander Y. Tokman:]

Sorry, could you repeat this. I did not hear the first portion of your question.

[Andrew Uerkwitz:]

Yes. Could you -- sorry, could you kind of discuss how the competitive landscapes changed over the past 6 to 9 months, and has it gotten tougher, easier? And how does it look to you guys?

[Alexander Y. Tokman:]

Okay, great. We carefully monitoring what's happened with competition, obviously. TI just introduced at CES a new chips [indiscernible] with 30% brighter. The problem is, they didn't say what was the initial condition, 30% brighter than what? We know today that our technology allows to manage brightness with power and size much more effectively than panel technologies which include DLP and LCOS. So fundamentally there's been a progress in competitive fronts. For example, we launched, if I can give you a little historical information, we launched our first product, Gen1 product based on synthetic green lasers since -- end of 2009, early 2010. We launched it with the WVGA resolution where everybody else came into market with half VGA, so resolution, far inferior, and brightness was far inferior. Now people at CES showing WVGA technology for pico projectors. We're moved on to HD. People are just showing 20 lumen projectors with the WVGA. We're showing 35 lumen projectors with 720. So even though there isn't been significant progress on the competitive front, and there are several LCOS players enter the market, one of them Compontetonics [ph] and somebody else, we fundamentally feel that our roadmap keeps us ahead of competitive offerings. And we actually anticipate that improvement in their part and that's what drives our technology roadmap to be always ahead, 2 steps ahead of them. So we feel comfortable about performance, about value, and now with direct green laser supply coming from 2 sources in 2012 and more in 2013, we feel, look, finally we can address the cost and volume issue that had been hindered us with synthetic green lasers in 2010 and 2011.

[Andrew Uerkwitz:]

Great. If I could ask around the Pioneer deal, is that an exclusive deal, meaning you couldn't do other automotive deals?

[Alexander Y. Tokman:]

No. Pioneer was one of the very few companies who wanted to introduce us to market head-up display. The big momentum right now in the HUD market is for the embedded HUD. There are, I believe, 6 to 7 car manufacturers pulling on about 10 to 11 Tier 1 and Tier 2 in automotive sectors to come up with laser head-up display, and as you can imagine, most of these people referring back to us.

[Andrew Uerkwitz:]

Sure. And the last question, when you look across the landscape of your list of potential customers, is it pretty traditional end-users as far as automotive, entertainment? Or are there some sort of innovative ideas out there that could really change the market?

[Alexander Y. Tokman:]

You know what, that's a great question. There are a few, few see -- looking for innovative ideas. Most think traditionally. But what we have been trying to do very, very selectively is pick people who derive their revenue not just from hardware, from -- but from other sources

[Operator:]

And I'll turn the call back over to Alexander Tokman for closing remarks.

[Alexander Y. Tokman:]

Well, first of all, thanks for joining today. Let me just wrap this up. Achieving the commercialization milestone for Gen2 display technology and the availability of direct green laser from several sources in 2012 were the 2 cornerstones that should position the company for growth moving forward. We believe the progress we're seeing in 4 critical areas, which include mobile ecosystem maturity, MicroVision's display technology advancement, transition to the core Image by PicoP licensing model, and as availability to green laser supply broadens the prospects for OEMs adopting our differentiating technology in 2013 and beyond. We're looking forward to updating you on the progress throughout the year, focusing on the 3 primary goals, which include

[Operator:]

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.