Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message|
( followers)  

Executives

Tom Steipp - President and Chief Executive Officer

Tony Chung - Chief Financial Officer

Liquidmetal Technologies, Inc. (OTCQB:LQMT) Q4 2013 Earnings Conference Call March 5, 2014 4:30 PM ET

Operator

Good afternoon. Welcome to the Liquidmetal Technologies’ Fourth Quarter 2013 Earnings Conference Call. My name is Yolanda, and I will be your conference operator this afternoon.

Joining us on today’s call are Liquidmetal’s President and CEO, Tom Steipp; and CFO, Tony Chung. Following their remarks, we will open up the call for your questions.

Before we proceed, I would like to provide the company’s Safe Harbor statement with important questions regarding forward-looking statements made during this call as follows. All statements made by management during this call that are not based on historical facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and the provisions of Section 27A of the Securities Act of 1933 as amended, and Section 21E of the Securities Exchange Act of 1934 as amended.

Such forward-looking statements include, but are not limited to those made by Mr. Steipp and Mr. Chung regarding the company’s cash revenue outlook and technology development. While management has based any forward-looking statements made during the call on its current expectations, the information on which such expectations were based may change. These forward-looking statements rely on a number of assumptions concerning future events and are subject to a number of risks, uncertainties and other factors, many of which are outside the company’s control that could cause actual results to materially differ from such statements. Such risks, uncertainties and other factors include, but are not necessarily limited to those set forth under risk factors in the company’s Annual Report on Form 10-K for the year ended December 31, 2012.

Accordingly, you should not place any reliance on forward-looking statements as a prediction of actual results. The company disclaims any intention and undertakes no obligation to update or revise any forward-looking statements. You are also urged to carefully review and consider the various disclosures in the company’s Annual Report on Form 10-K for the year ended December 31, 2012, as well as other public filings with the SEC since such date.

I would also like to remind everyone that this call will be available for replay starting later this evening via a link available in the Investor Relations section of the company’s website at www.liquidmetal.com.

Now, I would like to turn the call over to the company’s President and CEO, Mr. Tom Steipp.

Tom Steipp - President and Chief Executive Officer

Thank you, Yolanda. The fourth quarter and fiscal 2013 turned out to be significant in the ongoing evolution of Liquidmetal. Here is a recap of the significant advancements that we have made as a corporation throughout the year leading up to this call.

Revenue for fiscal 2013 was $1 million versus $650,000 for 2012. During the year, we shipped 18 prototypes, up from 10 in 2012. During 2013, we were pleased to announce the availability of a standard Liquidmetal injection molding solution from Engel. One of the world’s leading suppliers of this kind of equipment. This allows current and future licensees to have direct control over research, development and production of Liquidmetal alloy parts for their unique and leading-edge applications.

As part of the ongoing program to expand the footprint of our technology, we announced last month the commercial availability of our first non-beryllium based alloy, LM 105. This offers, for the first time, our customers and licensees access to the same great material qualities of our earlier alloys, but without the special handling precautions necessary for our beryllium containing materials. At this point, both Engel and Materion are certified Liquidmetal partners, capable of supplying quality sales, service and support for all current and future licensees.

We continue to build our network of manufacturing sales representatives, now up to 5 with a total of 15 reps. As you know, MSRs are the key to increasing awareness of Liquidmetal during the design stages across a broad array of industries that benefit from our performance and cost benefits. The MSR reps learn from our in-house technical team and then work closely with customers who they have longstanding relationships with on the technical design parameters unique to Liquidmetal partners.

With the commercially available machines and alloy and with the expansion of our MSR network, I am very excited to announce the appointment of Paul Hauck as Vice President of Worldwide Sales and Support effective March 3, 2014. Paul comes to Liquidmetal with a 30 year background in the field of powder metallurgy including 27 years in metal injection molding. He has been involved in the development and growth of mill startups and was a 2013 Distinguished Service to Powder Metallurgy Award recipient. He served three terms as the Metal Injection Molding Association President and also six years on the Metal Powder Industries Federation Board of Governors.

As you are already aware we increased the authorization for available shares from 500 million to 700 million. This provided us with much needed flexibility to continue operating the company in a manner that will allow us to maximize shareholder value over the next year. In addition, to increasing the authorized number of shares, we were able to secure a $20 million equity line of credit. Utilizing this equity line facility, we have now raised $3 million since the middle of February.

As you know, we filed an 8-K on November 1, 2013 indicating that we are having a disagreement with Visser Precision Cast over a number of issues relating to the agreement that we signed with them on June 12, 2012. At this point we are in an arbitration process that has been fully disclosed. The company is vigorously pushing for a solution that will be in the best interest of our shareholders.

Now I would like to turn the call over to Tony to take us through the financial details for the quarter.

Tony Chung - Chief Financial Officer

Thanks Tom and good afternoon everyone. Our financial results for fiscal 2013 reflect our company’s continued advancement through a development stage for both prototype parts production and our IP, the continued implementation of our core business strategy and our continued partnering with our customers and licensees for the advancement of our technology.

In this context, let’s turn to the financial results for fiscal year ended December 31, 2013. For fiscal 2013 revenue was $1 million versus $650,000 for fiscal 2012. The period-over-period increase is attributable to increased revenues from shared research projects with licensees. For fiscal 2013 our gross margin decreased to $252,000 from $296,000 for 2012. Consistent with previous periods, much of our current product mix consists of prototype parts, research and development and other revenues. As such our gross margin percentages may fluctuate based on volume and quoted production prices per unit and may not be representative of our future business. As we increase our revenues with shipments of production level parts, we expect our gross margins to stabilize and become more predictable.

Selling, marketing, general and administrative expenses totaled $5.2 million for fiscal 2013, which is $4.9 million for 2012. The increase was primarily due to increased headcount by our sales and business development efforts as we continue to aggressively expand our sales and marketing presence within our current account base. R&D expense was $1.2 million for fiscal 2013 compared to $943,000 for 2012. The increase from the prior year was mainly due to the additional company research during 2013, inclusive of testing programs related to our Golf subsidiary and the hiring of our Vice President of Engineering at the end of 2012. Excluding non-recurring expenses, our operating loss was $6.1 million in 2013 compared to $5.5 million in 2012. In 2012 we had a one-time non-cash expense of $6.3 million for the discount pricing received under Visser Precision Cast master transaction agreement in June 2012.

Turning to our balance sheet, we ended 2013 with $2.1 million of cash in the bank. As Tom has alluded to previously, we now have the ability to draw down on a $20 million equity line of credit in order to fund our operations during 2014 and beyond. I am happy to announce that as of today we have raised $3 million under the equity line of credit. Whether it’s through the equity line of credit or other funding alternatives, we will continue to evaluate market conditions and strategize on ways to fund our operations with minimal dilutive impact to our shareholders.

I will now turn the call back over to Tom.

Tom Steipp - President and Chief Executive Officer

Thanks, Tony. As we have indicated, 2013 represented another milestone on our march to commercialize Liquidmetal technology. We now have a core of customer partners who have prototype parts and who are actively testing those as part of their product acceptance process. We have certified Liquidmetal partners, ENGEL and Materion, who have the ability to sell, service and support state-of-the-art injection molding machines and both beryllium and non-beryllium alloy solutions. We have attracted a world-class R&D team, which has been instrumental in the filing of 54 patent applications since August of 2010.

We have significantly expanded our sales and support footprint by adding five organizations and 15 MSRs capable of selling Liquidmetal application into our target markets at the engineering level. We believe that the addition of Paul Hauck, a 27-year veteran of the metal injection molding industry will allow us to take advantage of the recent advances in machine and alloy development and take our sales and marketing program to the next level. Finally, we have put the necessary financial instruments in place to assure our long-term viability as we go through the process of commercializing this exciting new technology.

That completes the formal part of our call. I am happy to open it up for questions. Yolanda, if you would poll the audience and we will respond to them.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) We will take our first question from (Chris Johnston).

Unidentified Analyst

Yes. Can you tell me do you receive any revenue from the sale of product from Engel or Materion, including possibly to Apple should they be interested in purchasing equipment or material through your partners?

Tom Steipp

We really haven’t disclosed the content of the agreements we have on those. And at this point in time, since we haven’t had any of those sales what I would say is we are trying to keep all options open, but we certainly have not received any revenue from either of those at this point in time, Chris.

Unidentified Analyst

Thank you.

Operator

We will take our next question from (Bob Davis with JF Securities).

Unidentified Analyst

Yes, hi. Can you comment on the collaboration with Lockheed Martin and how the missile canard testing is going to be?

Tom Steipp

Sure, Bob. As we have announced we are in ongoing collaboration with Lockheed to provide missile canards for one of their programs. Each program we continue to deliver on a fairly regular basis, new parts for them to test and that we are scheduled to be on their next flight, I don’t off top of my head recall exactly when that is, but sometime later this year. So that continues to be an ongoing program. The only thing to be aware of there is that the program we will recognize is not a funded one by the government at this point in time.

Operator

We will take our next question from (Alan Ashworth).

Unidentified Analyst

Hello, Tom. Thank you for taking my questions.

Tom Steipp

Hi, Alan.

Unidentified Analyst

I am curious to learn if you have anything to share on the Apple contract and its expiration and whether that might be renewed?

Tom Steipp

Alan, we really can’t comment on our communications or negotiations with Apple, but what I can say is if and when we entered into such an extension, we would be required by SEC rules to disclose it and we would do that properly.

Unidentified Analyst

Thank you very much.

Operator

We will move to our next question and that will come from (Lloyd Corton).

Unidentified Analyst

Hello gentlemen.

Tom Steipp

Hi, Lloyd.

Unidentified Analyst

Hi, I have a few questions. I have been following you guys since you built a factory in Korea at the beginning and made (indiscernible) for Samsung and I guess as an investor when someone came up with a real, real disruptive technology and it’s been many, many years that the company has been around. Still a few questions. First, in that particular order, the switch from beryllium was beryllium a problem, did it create problems with any of your customers and we not do business because of it in the past?

Tom Steipp

Well, let me comment on beryllium. For starters, it was not a switch from beryllium. We offer two different versions. There is a beryllium-based alloy, which we called LM 1 and a non-beryllium alloy, which we effectively referred to as LM 105. Beryllium in our material is not extraordinarily hazardous substance. Beryllium by itself is require special handling if you grind it and turn it into a powder. It can have pretty significant health.

Unidentified Analyst

It hasn’t been a big factor, is that right?

Tom Steipp

It is in some industries. And one of the reasons we were excited to add a new alloy that has been through the very extensive testing and certification process at Materion is that it now gives some of our customers in particular guys in some areas of medical. It gives them the ability to make products without having to do with beryllium. So I want to be clear we are offering both.

Unidentified Analyst

I understand that. Apple, I read an article and whether it’s all true or I don’t know that the first agreement was a three-year agreement, which I think was 2010, which were expired in 2013 with 1-year extensions, is that correct?

Tom Steipp

No, that’s not correct. We signed the agreement in August of 2010. There was a capture period tail that was 18 months, that was extended in June I think of 2012 retroactively for two years. So it goes – again, it was retroactive at the time and it covered the period from February 2012 to February 2014.

Unidentified Analyst

And going forward, are there – is it a perpetual license forever or is it just more years?

Tom Steipp

To be clear, the license we file, all of that information is available online, but the license we granted Apple at the time was for consumer electronics. It was a perpetual non-royalty bearing license.

Operator

Thank you. We will take our next question from (Daniel McNamara).

Unidentified Analyst

Hi, Tom. Just one quick question for you. From the website and from what you guys developed on the chess set, I know a lot of other investors have the same question. I know it was just drawn up to show the design capabilities with chess set. Is there any plan whatsoever to manufacture and commercialize that?

Tom Steipp

What I would say, at this point in time, there are not plans to commercialize that. One of the things that certainly I come to understand since I have been here at Liquidmetal, Daniel is that the benefits of Liquidmetal are most apparent when we get engineers to think outside the box. When they think about the problems that they have been trying to solve from a different perspective, because the qualities of Liquidmetal are significantly different than those you get in normal metals. And in this particular case, the chess set discussion well it is something we might do in the future. When we look at our resources we have got probably not something we are going to do in the short-term although obviously if we come back later on and decide to do it under some license or something like that. And I’ll have left the door open to that.

Operator

Thank you. And we’ll move to our next caller, (Tyler Milan).

Unidentified Analyst

Yes, Thomas, long time was your first time caller. Just I was noticing on the Miami Heat game with LeBron James. He was wearing a mask, did LQMT decided that maybe that’s a potential market, I know now it’s up to beryllium we are trying in the biomedical, would any sports apparel be a potential market for us?

Tom Steipp

Tyler, I appreciate the question and I appreciate the link to LeBron James. For starters, that particular mask LeBron James is wearing is larger than we would be able to make with the current technology. Beyond that, I would say we have had a number of discussions in athletic applications and there may at some point in time be those. Our focus over the last couple of years has been more in the area of industrial, medical and aerospace, not burling those out, just probably not something we will be doing in short-term.

Unidentified Analyst

Perfect. Thanks for answering my questions.

Operator

We will go next to (Van Adamson).

Unidentified Analyst

Hi, how are you all doing today?

Tom Steipp

Hi, Van. We are doing well.

Unidentified Analyst

Hi. I have two questions. The first question is, is the Engel machine that you all worked with them, with the machine that you and Engel have together, is that designed to cut down on the time that you get a contract from prototype the contract or is that more so just a finished product machine that once all the prototypes have been evaluated and vetted, then the Engel machine would come in and be sold?

Tom Steipp

Well, let me clarify couple of things. One is the machine that Engel is providing is built upon Liquidmetal technology. So we have got patents that we filed with that, but the machine that they are selling is strictly their machine that they manufacture it, they did the final designs on it, they sell it and support it. But to answer I think your secondary question, our sales process goes through a valuation of drawings. We then prototype a product, and when we prototype it, we do this prototypes on exactly the same machine that we are going to do on production. So…

Unidentified Analyst

So it may not be the Engel machine at all then?

Tom Steipp

No, we only use the Engel machine.

Unidentified Analyst

Okay.

Tom Steipp

So what I am going to say as a follow-up is we are in the process of taking lot of their brand new automated machines and putting it in our facility, because the one we have got is an older version and all of our future research from this point forward as well as any of the work we do with customers will b relative to that newest technology machine. That doesn’t mean the old ones aren’t capable of doing certain things, it’s just that we want to stay up on the newest technology that’s available, because it’s got the shortest cycle times, it’s got the highest reliability, every remedies gets you a little bit better machine, but again these are coming from Engel and their production facilities.

Operator

Thank you, sir. Our next question will come from (Dan Bentoff).

Unidentified Analyst

Hi, how are you doing Tom?

Tom Steipp

Hi, Dan. We are doing well. How are you?

Unidentified Analyst

Good. I was just wondering what stage or where do we stand with our iGolf and our plans?

Tom Steipp

iGolf and what was the second part?

Unidentified Analyst

The medical clamps to clamps?

Tom Steipp

Well, so two slightly different thrusts there. With respect to iGolf, we are continuing to explore the use of Liquidmetal in golf applications that is an ongoing, we continue to make parts, get them tested. Some of those have shown great promise, some of them not so much. And I guess I would just harken back not specifically to an individual clan, but we now have what the – I am not sure of the total number outstanding, but over the last two years, we have shipped 28 different prototypes to customers which are in the process for are being evaluated at this point in time. And as I alluded to in the call, we have added I think a terrific resource to the team, a new guy by the name of Paul Hauck, who actually has a great deal of experience in technologies associated to this. And I think he is going to be a very instrumental in helping us kind of drive to closure. We are really good at the R&D discussions with customers. We think one of the reasons we brought Paul on is he is good at getting closure on these sales transactions and that’s certainly one of the items that we have outlined for him as he comes on board.

Unidentified Analyst

Okay, thank you.

Tom Steipp

Sure.

Operator

We will take our next question from (Eric Yu). And Mr. Yu, your line is open. Please go ahead.

Tom Steipp

Eric – your line – Eric.

Unidentified Analyst

Yes, hello. Yes, hi sorry about that, okay. My second is related to the beryllium free product LM 105. And just comment a little bit about how it is compared to your classic product LM 1 in three areas, one the availability and on maturity, second, the cost differentials, and thirdly in terms of the Apple IP agreement, are they any different?

Tom Steipp

The answer to those is there is no difference is any of the three of those. Materion is a fully certified supplier of both LM 1 and LM 105. The lead-times on both are about the same, there is no discernible difference. In terms of cost at this point in time they’re roughly the same, there are some differences in the constituents but they pretty much wash out in terms of the total cost and relative to a Apple’s availability to either of those two – it really – it’s a – there is not a distinction.

Unidentified Analyst

I’m not saying about the availability to Apple, I’m talking about in terms of the Apple IP agreement with Liquidmetal. Is it the same meaning of is this hard IP package?

Tom Steipp

Yes. I mean to be clear the LM 105 is not a patented alloy. It is a unique alloy and that it’s been fully tested and I’m not sure that lot of other people could make it through the same quality standards that we do. But Apple has the rights to anything that we have rights to so anything that we have talked about, file patents on, they have rights too. So there is no distinction there.

Operator

We’ll take our next question from (Lloyd Corton).

Unidentified Analyst

Yes, hi guys. Couple of more questions from earlier. You use to have a coating business for the drilling industry. Is that still active?

Tom Steipp

No, we separated from coatings two years ago I want to say. There really wasn’t a lot of synergy between the two organizations; there was a significant amount of debt that was tied to that wholly-owned subsidiary and there were some costs associated with moving forward. And the Board and I both agreed that it would be better for us to focus just on the Liquidmetal portion of our business.

Unidentified Analyst

This is not broader. Thank you. Next question, based upon the prototypes that you are doing out there, what industry do you see are certainly, there are some of the industries that you could use your product, what industry do you think the revenue flow is going come from first?

Tom Steipp

It’s difficult to say that although obviously we are all focused on getting that stream started. I would say if I had to handicap it at all, Lloyd, I would say the first stream is likely to come out of medical or dental out of that area. And it will obviously be under out of something that’s not terribly regulated by the FDA. But then what I would also say is that somebody asked about Lockheed before when and if we get to the point where that EAPS missile system is a funded government program. Those tend to be very long running programs and generally tend to be very profitable. So I would say the longer duration programs most likely will come out of aerospace defense. I’m guessing the earliest revenue will probably come out of either medical dental or some kind of industrial application that we’ve already shipped on.

Operator

And that will end our question-and-answer session for today. I’d like to turn the call back to Mr. Steipp for additional or closing remarks.

Tom Steipp - President and Chief Executive Officer

Well, I just want to thank everyone for their attendance at the call this afternoon. We look forward to giving you all an update on the first quarter results on our next call. Thank you very much.

Operator

That will conclude today’s conference. Thank you all once again for your participation. You may now disconnect.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: Liquidmetal Technologies' CEO Discusses Q4 2013 Results - Earnings Call Transcript
This Transcript
All Transcripts