MicroVision Inc (MVIS) 2011 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the third-quarter MicroVision, Inc., earnings conference call. My name is Larry and I will be your operator for today. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session. (Operator Instructions)

I would now like to turn the conference over to your host for today, Ms. Tiffany Bradford of Investor Relations. Please proceed.

Thank you. I would like to welcome everyone to MicroVision's third-quarter 2011 financial and operating results conference call. In addition to myself, participants on today's call include Alexander Tokman, President and Chief Executive Officer, and Jeff Wilson, Chief Financial 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; as well as statements containing words like believe, estimate, expects, anticipates, target, plans, 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 reason.

The agenda for today's call will be as follows. Alex will first give an update on the third-quarter business results. Jeff will then report the financial results. There will be a question-and-answer session; then Alex will conclude the call with some final remarks. I now would like to turn the call over to Alex Tokman.

Thank you, Tiffany. Thanks, everyone, for joining us this morning. Our tactics and strategy for 2011 were largely shaped by the late 2010 market developments in the green laser arena, as you know. Specifically, it was the acceleration in the development of the direct green laser technology by several suppliers, combined with the decision by one of the incumbents who knew of these developments to discontinue the commercialization of the existing synthetic green lasers. For those less familiar with our technology, the green laser is one of the key components of our display engine.

So in order to address the high-volume consumer and automotive markets, we need a low-cost, high-performing green laser that can be manufactured in high volume. And that is what we expect from the direct green laser that is being developed by a handful of global suppliers. As many of you know, today's synthetic green laser is the single most dominant cost-adder to our bill of materials.

So with this backdrop, we set the course for this year and focused on three key objectives. First one, advance in the development of the next-generation high-definition PicoP display engine in this year for commercialization next year. This timing happens to coincide with the commercial introduction of direct green lasers.

The second goal was, while limiting investment into the synthetic green products, we still wanted to moderately grow the year-over-year revenue. Finally, the third objective was to simplify operations and significantly reduce the operating cash burn by approximately 40% from last year.

Given these goals, I am pleased to tell you that we are on track for achieving all three of these important goals for us in 2011. Let me provide you with some additional detail on the status with respect of each one of these.

Let me start with the engine first. To date, both MicroVision and Pioneer Corporation -- as you know, they are working with us on this program -- have made very solid progress in the development of the next-generation direct green high-definition engine. The early samples of this new engine that is based on direct green lasers has been created, designed, and we actually tested the lasers from three different manufacturers.

One such sample was demonstrated earlier this month at the CEATEC in Japan by Pioneer. They actually include it in their head-up display.

One important characteristic of this engine -- that we have designed the opto-mechanical part to accommodate direct green lasers from different manufacturers. This means that we need to develop and commercialize only one engine for all green lasers, rather than one engine for each green laser as was done with the synthetic green lasers. This all translates into improved effectiveness and a lower investment required to commercialize this.

The high-definition engine is planned for release in the first half of 2012 and given to OEMs for integration into their own products. As you are well aware, Pioneer is expected to be one of the first OEMs who will introduce their own product, which is the aftermarket head-up display based on our technology. As far as direct green laser suppliers, they continue to indicate that they will be ready to supply lasers in support of our new engine and Pioneer product release in the first half of next year.

At this point I will conclude the update on the first goal and move on to the second goal, which is moderate growth in revenue while still limiting investment in the synthetic green laser product. First of all, I am pleased to report that we grew revenue by more than 40% from the same quarter last year and by almost 60% from the last quarter of this year.

The revenue was a mix between sales of SHOWWX products and the existing first-generation engines. The product sales came from several new channels including Amazon, Apple, Softline UK, Apple, Synnex Japan, Intel, and several others.

We also fulfilled several customer engine orders, which included the fulfillment of the order to ESPlus, a Korean consumer electronic manufacturer. ESPlus have integrated these engines into their media player and released it at the Korea Electronics Show earlier this month. We recently received a follow-on order from them for $3.5 million, and our target is to deliver it this quarter.

Earlier in the quarter we have announced a new distribution agreement with Intel, recall. Participation in the Intel channel access program offers us with the opportunity to reach Intel's broad base of premier channel partners, and also allow us to increase awareness and show unique benefits of the SHOWWX laser pico projection product line, particularly focus on the small business and education applications.

I am very pleased to say that very recently we have signed a company called GlobalWare Solutions, who is the preferred distributor of Research In Motion, RIM. Our SHOWWX products will soon be available to global RIM customers through ShopBlackBerry.com. It's an official global accessories site for RIM. Our latest product, which is SHOWWX HDMI, will become the first pico projector that RIM will offer to its customers.

As a reminder, all of this is interesting; you have heard us talking about developing new ecosystem players -- RIM, Intel, Apple. Why are we doing this?

Most customers who are considering entering a new market segment are ultimately interested in integrating the display engine into their future products. However, as you know, everybody wants to validate this before they put significant investment. Before they do it, they want to test their channels and learn more from their customers through distribution of standalone pico projection products.

They want to understand what are the true delighters for this new use category before they integrate it into their own products. This is why it is important, and this is one of the main reasons for us establishing these important distribution channels this year, to enable future embedded product opportunities in 2012 and beyond, once the high-definition direct green display engine becomes available.

As you know, we also found customers who are embedding our current display technology based on synthetic green lasers today. The reason they are doing it is very simple. They're trying to build a market presence in anticipation of future growth once a direct engine becomes available.

At this point I'll conclude the update on the revenue and move to the third goal, which is the burn reduction by approximately 40%. Again, I'm pleased -- and Jeff will tell you a lot more about this -- to report that we are on target to reduce cash-using operations by approximately 40% compared to previous year. We reduced the cash required in operations this quarter to $6.3 million, which is about 50%-plus reduction from the same quarter a year ago and 15% reduction from the second quarter of this year.

This makes a third consecutive quarter where we reduced the operating cash requirements versus the previous quarter. Again, Jeff will give you more color and provide other financial metrics in a moment.

But before I pass the microphone to Jeff, let me update you on a couple more interesting developments. First of all, recall that we recently demonstrated a 3-D prototype pico projector that uses what is called mixed polarization approach to create focus-free immersive 3-D experience using the inexpensive passive 3-D glasses.

Because lasers are already polarized, combined with the uniqueness of our scanned beam technology, adding 3-D display capability does not increase the size of our small pico projector; adds very minimal cost to the overall solution; and makes it a great feature that our customers can enjoy in the future. It's consistent with our vision of redefining how people on the move view and interact with information, and you're going to hear a lot more from us regarding these topics -- new applications.

In terms of innovation, I don't know if you have seen this, but very recently we were recognized by a Patent Board in association with the Wall Street Journal as the Top 50 IP portfolio globally. Again, this ranking is the third for us, for the third consecutive year, and this includes all global companies. The Patent Board has developed more than 50 indicators that track the global patent activity relating to companies that innovate.

Finally I would be remiss if I would not give you update on the automotive front. We see a continued interest in our solutions from the automotive players. Regarding the recent contract announcement with the unnamed carmaker, our team is on track to deliver the hot prototype to the customer under the phase one deliverables that we signed up to.

At this point I will pause and pass the microphone to Jeff.

Thank you, Alex. This morning I would like to cover three major areas -- our revenue, operating results, and finally our cash position at the end of the quarter. Before I begin, I would like to highlight three key points from our financial results for the quarter.

First, as Alex mentioned, our revenue is on pace with 2010. And with our current backlog of $5.1 million, we expect to reach our goal of moderately increasing revenue in 2011. Also, we have reduced our operating and net loss quarter-over-quarter and year-over-year. Finally, as we continue to aggressively manage our cash, we are on target to reduce our cash used in operations by 40% from last year.

Let's move to revenue. For the third quarter, revenue grew by 41% to $1.8 million compared to $1.3 million for the same period in 2010. And as we discussed, revenue for the first nine months of both 2011 and 2010 was approximately $4.1 million.

Our backlog at the end of the quarter was $5.1 million, which is comprised mostly of orders for our PicoP engine and PicoP accessory projectors. As we have discussed, $3.5 million of the backlog represents orders from ESPlus targeted for delivery in the fourth quarter. With the current backlog we believe we are in position to meet our goal of moderately increasing revenue for 2011.

I would like to take a brief moment to discuss the significance of the orders from ESPlus. ESPlus is the first customer to release a commercial product that uses our embedded PicoP technology. We are targeting to supply PicoP engines in the fourth quarter of 2011 at volumes higher than we have historically, and we have the opportunity to receive additional follow-on orders from ESPlus for both our current and next-generation PicoP engines.

Next, to our operating results. Our operating loss decreased by 36% during the third quarter of 2011 to $7.8 million compared to $12.3 million for the third quarter a year ago. And our operating loss for the first nine months of 2011 declined by 21% to $26.1 million compared to $32.9 million for the same period last year.

During the third quarter of 2011 we reduced our net loss to $7.8 million or $0.07 a share compared to $11.9 million or $0.13 per share the same quarter a year ago. For the first nine months our net loss was $26 million or $0.25 a share compared to $32 million or $0.36 per share for the first nine months of 2010.

Finally, moving to our cash position. As we have discussed on prior calls, we have been aggressively managing our cost; and I am pleased to report that we are on target to reduce our cash used in operations for the full year by 40%. For the third quarter we reduced our cash used in operations to $6.3 million, a 51% reduction from the same quarter a year ago and 15% reduction from the second quarter.

For the first nine months of 2011 our cash used in operations declined to $21.8 million compared to $35 million for the same period last year. This reflects a 38% decrease for the first nine months of 2010.

As of September 30, our cash balance was $9.4 million, which included $6.3 million raised during the third quarter through our committed equity facilities. As previously announced, during the quarter we entered into a new equity facility with Azimuth.

With that, I would like to open the call to Q&A.

(Operator Instructions) Joe Dubrof, Morgan Stanley.

Good morning, Al, good morning, Jeff. Can you give me a little light going forward on your business model? so Pioneer is making these (technical difficulty)

Joe?

Operator, did we lose the caller?

Yes, we did. (Operator Instructions) Joe Dubrof, Morgan Stanley Smith Barney.

Going forward, will Pioneer be the sole provider of these -- of your engine units? Are they also -- they are a customer as well as part of your supply chain or your operating chain?

Yes, Joe, they are a customer as well as part of our supply chain, and we don't have exclusivity with Pioneer.

You did say that no matter who the manufacturer of the green laser is, it will just be a plug-and-play?

Mechanically, yes. This is something we did not have. The direct green laser, it's consistent with a standard packaging that is used for red and blue lasers. So it simplifies greatly our design.

We basically have to do one holder for these lasers rather than having two separate engines built around each individual laser, as was the case with Corning and Osram for synthetic. So it helps us tremendously in many respects.

Right. Do you have samples to any other customers yet? And if not, when do you expect to get them there?

Good question. Right now we develop initial samples. They are being tested internally by Pioneer and by MicroVision. Once we feel comfortable with the performance of these early samples, the expectation is sometimes at the end of the year, early next year, these would be start getting into a customer hands for evaluation.

Thank you.

(Operator Instructions)

Looks like it's a quiet morning, so I think we will go ahead. We have got no more callers in the queue, so let's go ahead and turn to Mr. Tokman, Alex, for final remarks.

Thank you, Tiffany. First of all, I am pleased to report that we are on track to hit our three main objectives for the year. At the same time, I am fully, painfully aware that today's economy, volatile markets, and MicroVision's most recent stock performance has tested your patience and patience of our investors.

What we are doing, we are keeping eyes on the big prize. The vision and goals that I set forth for this Company and where this road leads are fully intact.

These are -- redefining how people on the move view and share information and to become a prefer, displace, solution providers for consumer electronic and automotive customers. This vision, which I believe most of you are invested in this Company -- and I believe we are closer than ever to realizing it.

Why? The direct green lasers will become a reality next year. Our progress on the new engine with Pioneer is on track. The market demand for our technology has intensified as evidenced by agreements with Pioneer, unnamed carmaker, Apple, Intel, RIM distribution channels. We are seeing increased interest from other potential customers for our technology.

We also creating new and exciting applications that further facilitate the adoption of our engine, such as gaming, such as 3-D. There will be more others.

All of these leading indicators make me feel good about our future. I am grateful for your support, and I am confident that with the execution of our business plan, combined with the strong focus on the road ahead, we have the capability to achieve this vision. Thank you for joining us and we will speak in three months.

Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may disconnect at this time. Have a great day.