Uni-Pixel\'s (UNXL) CEO Jeff Hawthorne on Q1 2014 Results - Earnings Call Transcript
Uni-Pixel, Inc. (NASDAQ:UNXL) First Quarter 2014 Earnings Call 20144: 30 08:30 P. M. Toma – Craig- Harum Capital Group Ltd. Hillman-Fort bin Laden, Inc. Good afternoon, ladies and gentlemen. Thank you for your support. Welcome to the University- Pixel Company 2014 conference call in the first quarter. In today\'s speech, all the parties will be listening. only mode. After speaking, questions will begin. ( Operator instructions) I would now like to hand over the meeting to our host, Jeff Hawthorne. Please continue. Thank you, Luke. Good afternoon, everyone. thank you for joining us today. As most of you know, I joined the university. Pixel is president and chief executive at mid In April, a few weeks after serving as a company operations consultant. During this time, I have worked on the company\'s processes, development activities, and Uni- Pixel touch sensors for smartphones, tablets, laptops and all devicesin-one PCs. I was deeply impressed by the company\'s innovation culture and motivation for success. I believe that the company\'s touch sensor products have a strong technical foundation, which will enable it to overcome the near Long-term challenges, but also provide a huge long-term This term has the potential to rise for the company and its stakeholders. I look forward to leading the company through the key stages of development. In today\'s conference call, we will address these challenges and discuss the progress we have made in 2014 to finalize a reliable mass manufacturing process for touch screen sensors. But before I go further, I \'d like to transfer the call to our chief financial officer, Jeff Thomas, for a brief look at the financial details of this quarter. Jeff? Thanks, Jeff. Earlier today, we submitted the form 10- Q: The Securities and Exchange Commission also released our financial results and press releases for the first quarter. Both can be downloaded from the investor section of our website. In the first quarter of 2014, when we focused on the development of the touch screen manufacturing process, we did not generate revenue. In contrast, revenue is $5. 1 million at the beginning of 2013, this was mainly due to the payment of $5 million by the licensee of our pc oem. Our SG & A costs A total of $2. Compared to $2, it was 9 million per cent in 2014. 2 million in the same yearago quarter. The increase was mainly due to an increase in depreciation expenses, in part to an increase in the number of employees. The increase in SG & A is partially offset by the decrease in legal fees and the decrease in bonus accumulation and the reduction in stock compensation fees and SG & A\'s restricted stock fees Our total R & D cost is $3. Compared to $1, it was 3 million per cent in 2014. The same period last year was 9 million. The main reason for the increase is the increase in laboratory costs associated with prototype development of products based on the company\'s performance engineering film. The increase in the number of employees and the increase in stock compensation costs and the increase in restricted stock costs caused by R & D also contributed to this increase to some extent. The increase in R & D costs was partially offset by a decrease in the associated bonus accumulation. Our net loss for the first quarter was $6. $2 million or $0. The basic share and diluted share are 50 each. In contrast, net income is $0. $9 million or $0. 07 per share in the same quarter last year. Cash and cash equivalents totalled $34. As at March 31, 2014, it was $4 million, compared to $39. December 31, 2013 for 4 million. Non- The cash program for the first quarter of 2014 included a total depreciation expense of $1. 5 million restricted stock fees totaled $0. 1 million and stock compensation costs $0. 7 million. We believe that in the foreseeable future, as we continue to make prudent use of these resources, our existing capital resources are sufficient to fund our operations. Now, I want to transfer the call to Jeff Hawthorne. Jeff? Thanks, Jeff. Overall, I am encouraged by our recent progress, our basic technologies and our new ways to address the remaining process development challenges. That\'s why I joined the company at this critical moment. According to the past few weeks, I have been involved in the company. I can say that we are developing a truly unique product based on complex material science and leading flexo printing and chemical plating technologies. Great efforts have been made to address the challenges of substrate inks and plating. Our development team has learned a lot about how substrate and electroplating chemical interactions affect optical quality. Our substrate and ink interactions affect adhesion and line width, and how ink and plating interactions affect adhesion. In the first quarter, we made good progress in overcoming the new challenges needed to complete the manufacturing process of touch screen technology, especially in ink and printing. We have finalized the base catalytic inks at the Kodak Rochester plant and confirmed the production scale performance. A state-of-the- Art manufacturing and testing facilities in Eastman Business Park, Rochester, New York. An important focus of our development work has now shifted to the key process of electroplating conductive materials on rollers --to-roll basis. Our laboratory-based single-center batch plating process, which we use to demonstrateof- The concept sample unit and low volume customer orders have been stable and the yield is relatively high. However, rollingto- The rolling plating process still requires modifications and adjustments to the hardware, geometry, and chemistry in order to produce production at our target production level. To do this, we have some teams looking for several parallel development paths to improve the scrollingto- Roll plating process. Our roll-to- The rolling electrical test system can run and then provide important yield data. We\'re also reviewing our overall. Process and then perform final test metering to ensure we have the proper equipment and procedures to measure and correct Ensure the overall quality of the final product. While it is time consuming to solve these and other issues, it does not result in a longer development time than expected. We believe in the scientific knowledge and country of proprietary materials. of-the- The art flexo printing and chemical plating equipment and processes we are developing further keep us away from our competitors and make our innovative touch screen solutions more attractive to our customers. Another important reason why the baseline manufacturing process is longer than originally planned is because of the additional complexity that multiple teams create for the full range of product development technologies and manufacturing processes from amartphone, tablets and laptops-in- One per common stock. To reduce complexity and speed up time to market, we now focus our technical work on development projects in order to produce initial products together with the tablet market. We also hired Development customers for this product. The development project was led by Rob Rusenko, our recently promoted COO, and in the weeks leading up to my recent appointment as President and CEO, I had the opportunity to work closely with Rob, I believe he\'s in roll-to- Roll manufacturing and an in-depth understanding of our technology will provide the key operational leaders we need as we work closely with Kodak to finalize a reliable mass manufacturing process for our touch sensor film. We have built a new product and technology roadmap that will be built on the initial tablet product development. Our new roadmap for the company\'s touchscreen technology will enable us to address other touchscreen segments and expand our business opportunities. I had the opportunity to work closely with the Kodak team to review the Kodak Rochester Manufacturing Plant and engage with Kodak\'s senior management. Kodak\'s global commitment to quality and quantity impressed me. We have a strong working relationship with the technical team. Manufacturing facilities and operations have been established and trade-offs have been made in process development activities. We are aligned with Kodak\'s senior management at a strategic level and Kodak continues to be committed to the full potential of this exciting business opportunity. I also met with our touch screen ecosystem partners to discuss our progress and new strategies. They were encouraged by our strategy and expressed their continued desire to work with us before we successfully demonstrated the rollto- Roller manufacturing process. As we move forward with these process development activities, we continue to look forward to our additional volumesto- Due to its lower cost base, the roll flexible electronic process is fully competitive in price and performance, especially compared to the traditional exposure difference reduction ITO base and ITO alternative touch sensor solutions. The tablet market has a touch penetration rate of 100%, showing research firms search, which is expected to grow at a CAGR of 13% from 2013 to 2018. This is a special growth that highlights the scale of the initial opportunities we are pursuing. Now let\'s talk about our hard coating technology-Diamond shield. While we focus primarily on touch sensors, the special features of our Diamond protective hard coating continue to attract the attention of potential customers. As most of you know, the diamond guard is a low Cost replacement of glass on touch screen devices. It has a rated hardness of 6 h, scratch resistance, high wear resistance and crushing resistance. This film is also very light and flexible with glass equivalent gloss. Our go-to- The market strategy for diamond Shields is to sell them as liquid resin. This enables customers to use the diamond shield in their own manufacturing process and apply the diamond shield function hard coating to planes such as film and various other substrates. Selling Diamond shields as resin allows us to support more applications than being the sole supplier of diamond shield film. It enables us to reach more customers through Diamond Shield technology and to do this more quickly and easily. As we said on our last phone call, we are currently working with several end customer applications covering a wide range of different substrate and coating methods to validate Diamond protection technologies and support the marketing of resins. We are working on some application-specific development issues and have made good progress. We are conducting the PET film coating test with two film coating machines. We have also coated polycarbonate and PVC plates and have evaluated these samples at the main suppliers of each corresponding substrate. We expect results in the second quarter to further advance our 2014 licensing strategy How paint companies sell with resin. Finally, Introduction to complex material engineering and leading new products Edge manufacturing technology is challenging. With our new product roadmap and initial product development focus strategy, I believe our development team will work closely with Kodak to overcome remaining technical barriers in due course and achieve reliable, high-volume, roll-to- Our projection capacitor, multi-roller production process Touch sensor film. I understand the level of frustration and concern in the investment community, especially given the company\'s missed record of commitment. Its focused development program will increase the visibility and predictability of our development milestones. As we said earlier, we expect to achieve certain progress milestones in 2014, which will enhance our outlook on the exact time of mass commercial shipments of touch screens. We plan to report these activities in the course of the development of these and other product activities. In that case, I want to drive the phone to the problem? Building, please provide the appropriate instructions. Question-and- Answer session operator ( Operator instructions) Our first question came from the lines of Mike Malouf and Craig. Harlem Capital Group Please continue. Louis M. Toma – Craig- LLCHi, harum Capital Group, this is Louis Toma of Mike Malouf. Just, I have a few questions for you. to- When you talk about the target production level, roll. Can you tell us your definition in this regard? Jeff HawthorneYes, we\'re talking about hundreds to thousands of sensors generated from the production line, so that\'s what we mean by at least the initial starting volume. Louis M. Toma – Craig- Hallum Capital Group LLCAnd is used for single sensor batch bidding process, when you say relatively high yield, it is 50, 80 range . . . . . . Jeff horsouniyes, in general, you will never report the exact number. But let\'s put it 50% kilometers north. Louis M. Toma – Craig- LLCOkay Hallum Capital Group, thank you. Then, can you give us an update? If there are any changes in the past few months, such as competitive prices, how the prices in this industry look competitive. Jeff HawthorneNo, I mean, I think we \'ve all seen constant price pressure and it\'s really hard on ITO-based technology, so we did see that we\'re following trends, we \'ve built this model in the COGS model, but we haven\'t seen any major changes that are being tracked now? Louis M. Toma – Craig- Hallum Capital Group in terms of price decline, what are your expectations for industry pricing this year? Jeff horsone doesn\'t know what the exact number is, but this is probably the third one. The party\'s marketing organization is reporting. Louis M. Toma – Craig- Hallum Capital Group LLCI is not familiar with it, I don\'t have these numbers in front of me, is it 5%, 10%, 20%? Jeff horsonne is not sure what exact number you are looking. I don\'t have them in front of me either, so we can get them for you if needed. Louis M. Toma – Craig- LLCOkay, Llum Capital Group, that\'s all I have. thank you. Welcome, Jeff horsone. The next question comes from the lines of Jon Hickman and lundenburg. Please continue. Jon R. Hillman-Fort bin Laden, Inc. Thank you for picking me up. Jeff, can you explain to me the changes in all focus within 24 hours? Inch product for tablet, you focus on 10- Is there an inch tablet? Jeff horsone, that\'s not-we haven\'t given the exact size yet. Jon, it\'s smaller in size. The real focus-from a product development perspective, there are several factors that affect it, where we think the technology we can first apply the easiest is, and the other factor is, do we have candidates queuing up for several potential development customers. Then look at the terminal market, the tablet market is growing very well, and I think there are a wide range of options for Target Development customers. So that\'s why we\'re focusing on the target app in the first place. Jon R. Hillman-Fort bin Laden, Inc. So when you say you \'ve arranged a development partner, does this mean that a potential customer will buy (indiscernible)ready? Jeff horsone is what we mean. Jon R. Hillman-Fort bin Laden, Inc. Okay. Is this still being talked about by your ecosystem partners? Jeff HawthorneWe declined to comment on ecosystem partners. Jon R. Hillman-Fort bin Laden, Inc. I thought it was already in the public domain. Okay, one more question. Can you give us some when you say you have some development milestones and you are now here to focus on the second quarter? Jeff in, SonyJon R. Hillman-Fort bin Laden, Inc. Can you-did you say you were reporting this? Jeff horsone CoreyJon R. Hillman-Fort bin Laden, Inc. So we didn\'t hear anything, which means nothing happened. Jeff horsonne John, look, we said we\'re going to report development milestones in the second quarter, so we are. Jon R. Hillman-Fort bin Laden, Inc. Okay. Jeff in, SonyJon R. Hillman-Fort bin Laden, Inc. Then there were some talks before, or maybe going out and check out the Kodak factory. Is this possible in the future? Jeff in, Sony Of course we intend to do that. As I said, we set development milestones for the projects we are working on and move along those development milestones in due course, and we certainly would like someone to come in and have a look at Kodak\'s facilities. Therefore, we will give people enough preparation time in terms of the time of the event. Jon R. Hillman-Fort bin Laden, Inc. Okay. Thank you. Welcome, Jeff horsone. Operator( Operator instructions) Our next question comes from (indiscernible) Garden State Securities Please continue. An unidentified analystHi, good noon. Can you hear me? We can hear you, yes. Unknown analyst, great. Okay. I have a question. I was listening to Kodak on the phone the other day and they mentioned Kodak\'s relationship with Uni In the second half of this year, they are expected to receive $ x in revenue. So I gather from this that you may soon be ready to increase your income rather than generate it from what I understand. I was just wondering if you could draw a clearer picture for me? Of course, Jeff horsoneyes. So I think Kodak doesn\'t just mean Uni- Pixels, but another touch sensor technology they are working on, which is not part of the program they are developing. Kodak is well aware of our milestones. I don\'t have information about their other technology developments, but that\'s how they developed those comments, which will be based on what we\'re working on and what other technologies are working on. For unexplained analysts, then it\'s only a matter of time before you actually pick the engineering product you\'re experiencing right now, and then you can start production, is that correct or? I said in the statement that I think we understand some of the issues with the team-they have the right focus now, so we have a clear development plan and as the milestones come, we\'re working on them thoroughly, and I think it\'s time, as I say now, to scrollto- Rolling plating is probably the biggest limitation. Analysts of unknown causes understand OK, thank you very much-very good wishes for good luck with the new position and one more thing, that is, I hope everyone has a wonderful happy Mother\'s Day. Okay, take care. thank you. Thank you so much Jeff horsone. Thank you. Our next question comes from (indiscernible) New England Securities Please continue. Good afternoon. Good afternoon Jeff horsoni. Unidentified analysts asked me, what is the situation with the SEC\'s ongoing investigation? Jeff HawthorneWe is working fully with the SEC, but beyond that, they are moving forward on their own schedule. We know nothing about it. Analysts of unknown reasons thank you Welcome to Jeff horsone. Operator( Operator instructions) Our next question comes from (indiscernible). Please continue. The analysis of unknown reasons may be three problems; First of all, who will assemble the module for the tablet you are working on? Excuse me, can you repeat this question? Analytes for unknown reasons, so you will not produce touch modules, you only produce sensors, is this correct? Jeff horsonne is right. Who will assemble the sensor into a module? We are working with Jeff horsone-we have worked with a variety of touch sensor module integrators-The Development customers we now have, who have their own integrators, so this is the person we work with this integrator. An unexplained analysis and your confidence that you can achieve the selling price, say $7 $11inch tablets? Jeff TomzWell, we don\'t comment directly on the price, so the $11 you\'re referring to may be the full sensor module. This is correct. Jeff TomzYes, so where are our components, we don\'t have to pay for the entire building material. Since the previous management has said that your cost-competitive is related to the IPO, but it is not suitable for this way at this point, I just want to confirm that you still think you will be cost-competitive? Jeff HawthorneYes, we still believe that we are still very cost-competitive when you only see part of the sensor. Unidentified analyst, I missed part of the call, did you provide any guidance on revenue for this year. Jeff Tomano, we don\'t. Unknown analyst So in 10- Q: I see a statement about today\'s material, what happens if there is a major breach of the license agreement with Intel, so can you explain what a major breach might look like? This is Jeff Thomas. Could you please repeat this question because I don\'t think we have mentioned any material breaches from Intel? We are not partners in the ecosystem because we disclose what I think is 10- When we applied to them a few months agoBut in 10- Q. it said that if the company is facing bankruptcy liquidation due to a material breach of the license agreement, certain improvements of the company will be allocated to the customer at an original cost of approximately $10 million. Jeff TomzCorrect. What, then, would constitute a serious breach of the license agreement? Jeff HawthorneThe, a serious breach of the license, is now going to happen-if we go into liquidation or bankruptcy proceedings, it\'s the only two unidentified analytical factors, basically no other. Jeff Tomz is right. Basically nothing else. Analysts with unknown identities of Jeff horthorne\'s bankruptcy or liquidation understand. Okay, that\'s all I said. Thank you. Thank you, Jeff horsone. Thank you. ( Operator instructions) There are no other issues in the queue, please proceed. Operator Jeff horsonne, thank you. I would like to thank our staff, partners and shareholders for their continued support. We look forward to talking to you on our next call. Thank you very much. Ladies and gentlemen, the university is over. Pixel Company 2014 conference call in the first quarter. Thank you for your participation. You can disconnect now.