Q3 2019 Earnings Call
Your operator for today's call at this time all participants are in listen only mode. Following management's prepared remarks, we will conduct a question answer session. This conference call is being recorded for replay purposes.
Now I'd like to turn call over to Pixelworks CFO Mr. Yu lies nadir.
What else on today's call just talked about it.
Especially on the field.
The purpose of today's conference call. This to supplement the information provided in Pixelworks press release.
Sure earlier today announcing the Companys financial results for the third quarter 2019.
Before we begin I would like to remind you that various remarks will make on this call.
Including those about our projected future financial results economic and market trends.
And our competitive position.
Constitute forward looking statements.
These forward looking statements and all other statements made on this call.
Historical facts are subject to a number of risks and uncertainties doesn't cause.
Actual results to differ materially.
All forward looking statements based on the company's beliefs ourselves today Thursday October 31 2019.
We undertake no obligation to update any such statements reflect events or circumstances occurring after today.
Please refer to today's press release.
Reports on Form 10-K for the year ended December 31 2018.
Oh subsequent Jesse she filings for a description of factors that could cause forward looking statements to differ materially from actual results.
Additionally, the company's press release management's statements. During this conference call well ignored discussions of certain measures on financial information in gap.
non-GAAP terms.
Including gross margin operating expenses net income loss and net income loss per share.
These non-GAAP measures exclude gain on sale of buttons.
Deferred revenue fair value adjustment.
Inventory step up and backlog amortization.
Well tradition of acquired intangible assets.
Based compensation expense.
Restructuring expenses.
Discount accretion or convertible debt fair value and gain on extinguishment of convertible debt.
We use these non-GAAP measures internally to assess operating performance.
The company believes these non-GAAP measures provide meaningful perspective on our core operating results underlying cash flow dynamics.
What do we caution investors to consider these measures in addition to.
Not a substitute for north superior to the company's consolidated financial results as presented in accordance with GAAP.
Also included an accomplished press release.
Finishes reconciliations of GAAP to non-GAAP net income loss on GAAP net income loss adjusted EBITDA.
Which provides additional details.
[noise] with that said I will now turn the call. It looked to talk for his opening remarks. Thank you.
Thank you realize some good afternoon to those joining today's call over the phone and webcast.
The third quarter played out largely as expected with revenue of $18.1 million coming in above the midpoint of our guidance range.
We continue to execute well across all areas of the business and mobile revenue grew 87% sequentially, becoming a larger portion of our overall revenue mix.
Gross margin was approximately 54% in operating expenses in the quarter for $10.3 million, resulting in adjusted EPS of a one cents loss.
All of which were Oh, all of which were also at or near the midpoint of our guidance.
Throughout this year, we remain focused on meaningfully advancing our growth initiative in mobile.
This has included expanding our portfolio a visual processing solutions to now include multiple Iris visual processors with select feature sets at compelling price points as.
As well as the introduction of our software only solutions soft Irish and also our innovative end to end cinematic video platform true cut.
[noise]. We've also secured a number of key strategic partnerships that are contributing to our current co marketing efforts and the further development of ecosystems that encourage increased adoption of Pixelworks technology.
Together with our broader portfolio of visual processing solutions, we have significantly expanded pixelworks total addressable market, resulting in a growing number of wins at existing and multiple first time mobile customers.
Taking a closer look at our mobile business in the third quarter.
As I mentioned revenue mobile from mobile grew 87% sequentially. It was up over 66% year over year to a quarterly record.
It was comprised almost entirely of revenue kind of contribution from our Irish solutions, including the first commercial revenue from our soft Iris solution.
As further evidence of our consistent growth momentum the third quarter represented the eighth consecutive quarter.
Dave consecutive quarter of year over year growth and mobile revenue for the first time nine months of 2019, which grew 90% over the same period over 2018.
During the third quarter, we formally announced a total of five design wins on newly launched smartphones across four different mobile Oems.
One of which Tcl was a first time new smartphone customer.
I just got to these wins as part of our second quarter conference call. The sharp to pro which was black shark sports device to include or Ivas visual processor.
And the Ace use launch of the argued R.O.G. phone to in conjunction with Tencent games.
As a reminder, both of these leading smartphones targeted for gamers leverage Qualcomm snap Dragon age 55, plus mobile platform.
And spin specific to the RG phone to it is the first smartphone to incorporate our soft iris solution.
[noise] more recently, we announced wins on the Nokia 7.2, and Nokia 6.2 smartphones as part of our continued collaborative partnership with the H.M.D. global.
Both devices were launched in September and I asked a 2019 and feature pure display technology enabled by Pixelworks Irish visual Iris visual processor to deliver a premium mobile display experience at an affordable price.
As compared to similarly priced Android smartphones, the Nokia seven two and Nokia six to render a 64 fold increase in color tonality through the full 10 bit certified HDR display and produce up to three times improvement in video contrast by leveraging.
Dynamic that like backed like control in combination with Pixelworks industry, leading tolling mapping technology.
[noise] also launched it is a was the tcl plex smartphone, which utilizes our iris visual processor to provide a range of premium features including HDR 10, STR to HCR conversion advanced sharpness in contrast enhancement as well as auto adaptive display.
As the world's largest or second largest TV manufacturer Tcl chose to leverage Pixelworks technology and expertise as part of a relaunch ended the mobile market.
And bring a marquee leading TV experience to its first tcl branded smartphone.
In addition to representing a new mobile customer this win with Tcl also serves as further validation of our advanced visual display technology for mobile devices.
All of these recently launched smartphones that incorporate either our Irish visual processor or newly introduced soft Irish solution have received excellent reviews and recognition for having uniquely high high performance displays.
They each contributed to mobile revenue during the quarter and we expect a shift in support of follow on orders from these customers in the fourth quarter, which I will discuss more towards the end of my prepared remarks.
[noise] also complementing our longer term growth initiative in mobile is true cut.
Since our commercial introduction of this innovative end to end solution for cinematic notion and HDR earlier. This year. Our primary focus has been on expanding the platforms market reach as well as the amount of content available on to cut format.
[noise] through ongoing close collaboration with our lead customer you cool, we've continued to make consistent and substantial progress on several key metrics.
Over the last quarter the amount of video content available and true cut format has more than quadrupled from 2500 hours to more than 10000 hours of available contests.
Additionally, Pixelworks has expanded the number of true cut enabled smartphones utilizing the you who at from approximately 70 existing models across six mobile Oems at the end of June .
So now over 100 existing smartphone models across nine different mobile Oems.
Collectively these metrics translate into having successfully extended the reach of true cut content.
Well over 100 million mobile device users into more than 55% of all daily average users of you cool in China.
[noise] as a result, we firmly believe that Pixelworks true cut solution is enabling the single most comprehensive ecosystem for creation delivery and viewing of high quality HDR video and mobile devices in China.
On mobile devices in check.
Today, you COO now has more a more standardized process in place for efficient conversion of his existing content library and they also remain committed to developing new high quality HDR content mastered in original true cut format.
In addition to Pixelworks continuing to qualify additional existing mobile devices to treat the stream high quality HDR video content exclusively through the you grew up.
We are actively pursuing direct engagements for the true cut certification of next generation devices with mobile TV and set top box Oems.
[noise] I've discussed previously true cuts value proposition in total market opportunity extends well beyond the mobile device market a fundamental part of the end to end platform solution that we developed the true cut is a set of software tools.
Designed to expand the boundaries for for the creators of high quality cinematic motion and HDR content.
With this in mind I want to once again acknowledge our true cut team. Following the recently announced entertainment Technology Luminaire Award from the advanced imaging Society for true cut motion grading tools.
The second prestigious award serves as further recognition of true cuts innovation and unique value. It provides two content creators seeking to deliver superior quality content.
[noise] shifting to our video delivery business.
Following several consecutive quarters of double digit growth revenue was up slightly in the third quarter on both the sequential and year over year basis.
The growth of video delivery in recent quarters has been driven by initial customer ramps of new 80 us be compatible for K P. D ours and set top converter boxes for the Japanese consumer electronics market.
[noise] early in the third quarter, we observed a notable decline and forward bookings as our lead customers experienced much softer pull through from consumers.
Particularly for set top box converter products.
As a result, we believe our OEM customers are focused on reducing existing inventories in the fourth quarter and through the fifth their fiscal year that ends in March of 2020.
[noise] on a positive side during the quarter, we experienced a meaningful uptick in orders of our ex code trans quarters from a leading OTI a customer. This increase was in support of initial builds up new dual and quad tuner OTI eight devices in advance of our customers planned product launches during the next several quarters.
Based upon the current bookings associated with these new product launches. We currently expect to generate record revenue from OTI trans quarters in a photo fourth quarter.
[noise], although this anticipated increase in OTI revenue will will be more than offset in the near term by an inventory correction at the Japanese consumer electronics market.
Looking several quarters out we remain well positioned with multiple engagements on new programs for next generation in home media and OTI devices.
Additionally, we believed that the increased availability of high quality.
Broadcast content.
Particularly around Jeff Japan's hosting of the Olympics in 2020.
And new introductions, a feature rich for K ats be compatible devices.
We will contribute to a broader consumer adoption and the potential for a new growth in video delivery during the course of next year.
Turning to a brief update on digital projector.
As expected revenue declined sequentially and year over year.
Primarily reflecting increased caution among customers and reacting to prevent prevailing macro an economic headwinds.
More specifically the demand profile of several end markets has continued to remain soft, particularly in China, where government spending on education can account for as much as two thirds of the projector end market demand.
Although we had remained hopeful that the lower than normal book to bill entering the third quarter could from up as the year progressed, we have yet to see a sustainable uptick in order demand from customers. Instead, the current market environment within projector is more indicative of a prolonged inventory correction.
Also contributing to the headwinds in our cautious near term outlook for projector, we expect our large codeveloping customer to start transitioning to our next generation. So see in the beginning of the fourth quarter.
Although we still anticipate this customers transition to play out over at least several quarters, the new chips lower ASP will serve as an additional headwind to the projector revenue in future quarters.
As such we continue to expect lower than historical seasonal demand in the digital projector business.
Through at least early next year.
Looking forward and also circling back to my comments from last quarter regarding our engagement with a tier one mobile customer targeting a product launch before year end.
As a result at the tremendous effort put forth by our team in recent months the depth and scope of disengagement has expanded beyond the first program.
This involve further prioritizing our resources both on site at the tier one customers location and expanding our local team by approximately 10 software an application engineers.
Additionally, we negotiated a share a shared risk agreement with this customer that led to bookings significant iris five backlog in anticipation of ramp of a series of programs through Q1 of next year.
Although we are building this inventory in preparation for a positive outcome on all of the programs.
It increasingly looks like the launch schedule for the first program may be too aggressive for I was five visual processor to be included.
As such our guidance for the fourth quarter assumes no contribution from this first in a series of program engagements with this tier one customer.
[noise] given the concentrated effort, we're making at this tier one customer in addition to supporting our previously announced customers. We've had to become highly selective on further expansion of mobile customer engagements in the near term.
[noise] as you may have read China's three mobile service providers today launched their Fiveg service in 50 cities throughout China.
As of today, there is a limited number of Fiveg mobile devices available from the leading Chinese smartphone Oems and there is a race to see which OEM can still out there fiveg product line first.
In addition, there is a race to incorporate high frame rate high performance displays in conjunction with this fiveg rollout.
This has created a conducive environment for our visual processing solutions.
We're seeing strong interest from additional customers for both our premium mid range and software solutions, including from additional tier one mobile Oems.
As such we're aggressively working to position new and existing resources in order to address some of these additional engagement opportunities during the course of 2020.
In closing and specific to our outlook for the fourth quarter.
Our guidance reflects the combined impact of a softer macroeconomic environment.
Seasonality and more pronounced than anticipated in inventory corrections across both our projector and video delivery businesses.
We expect these headwinds to be somewhat offset by continued ramp and another quarter of solid sequential growth in mobile.
[noise] specific to the ongoing ramp in mobile I want to emphasize that we do not expect the overall macroeconomic backdrop to meaningfully meaningfully influenced the near term ramp either positively or negatively.
Additionally, based upon the current bookings associated with anticipated design wins, we believe that mobile will account for up to 20% of our revenue guidance in the fourth quarter.
And finally mobile revenue beyond the fourth quarter will be heavily dependent on two critical factors.
Our continued execution on the technical requirements between now and year end.
And also the market uptake of the of our tier one customers planned launch of these new devices.
With that I'll turn the call over to Elias for a review of our third quarter financial results as well as a more detailed guidance for the fourth quarter.
[noise]. Thank you Todd.
Revenue for the third quarter of 2019 was 18.1 million.
Compared to 18 million to the second quarter of 2019 on revenue of 221.5 million in the third quarter of 2018.
Revenue for the third quarter of 2019 reflects continued sequential and year over year growth in both mobile and video delivery businesses, partially offset by weaker than normal seasonal demand into digital projector market.
The breakdown of third quarter revenue by end market. It was as follows.
Revenue from mobile was a record one point sixmillion predominantly from the sale of fiery solutions.
[noise] video delivery revenue was approximately 3.7 million.
Revenue from digital projectors, approximately 12.8 million.
non-GAAP gross profit margin in third quarter of 2019 was 53.9%.
Compared to 54.1% and the second quarter.
54.7% to the third quarter of 2018.
non-GAAP operating expenses in the third quarter of 2019 were 10.3 million.
Compared to 9.6 million in the second quarter of 2019.
And 8.9 million in the third quarter of 2018.
Adjusted EBITDA and the third quarter of 2019 was $452000 compared to EBITDA of 1 million and the second quarter of 2019 on 3.8 million in third quarter of 2018.
[noise] for third quarter 2019, the company reported non-GAAP net loss.
518000 or loss of one cents per share.
non-GAAP net loss of 97000, a breakeven on a per share bases in the second quarter of 2019.
non-GAAP net income of 2.7 million or seven cents per diluted share in the third quarter 2018.
Moving to the balance sheet, we ended the third quarter <unk> cash cash equivalents short term investments of approximately $22.3 million.
A decrease of approximately 1 million from the prior quarter.
Although our balance sheet metrics include a day sales outstanding of 44 days at quarter end.
Compared with 37 days at the end of the second quarter.
And then.
Excuse me inventory turns during the third quarter 2019 were 11 times the same level us in the prior quarter.
Turning to guidance for the fourth quarter of 2019, we expect revenue to be in a range of between.
15 billion on $17 million.
This guidance reflects an increase in more by revenue, which is expected to represent up to 20% of total revenue the fourth quarter.
The increase in mobile revenue will be offset by geopolitical and macroeconomic headwinds and weaker end market demand contributing to inventory correct.
Inventory corrections in both the digital projector digit delivery markets.
Additionally, we anticipate non-GAAP gross profit margin fourth quarter to being a range of between 40 hit on 50%.
We expect non-GAAP operating expenses to be in a range of between 10 million to 11 million.
Finally, we expect non-GAAP EPS in the fourth quarter to being a range of between a loss of five cents on a loss of nine cents per share.
That concludes our prepared remarks Unreal, we'll now open the call for questions.
Operator, Please proceed with managing to Q on a session [noise].
Ladies and gentlemen to ask a question you'll need to press star one on your telephone to withdraw your question press the pound <unk>.
Please standby, while we compile the Q and a roster.
Our first question comes from Suji de Silva with Roth Capital. Your line is now.
Todd how late last that congratulations on the mobile progress here.
So starting with the mobile say, hey, guys. So starting with the mobile segment. It sounds like it could be up at 20% of revenues in the fourth quarter. That's a nice sequential move here and that would exclude the tier one. So maybe you can give a sense of whether the growth ex the tier ones coming from the existing customers are new models and then maybe somebody at the magnitude with a tier one could do on.
Layering on top of that.
So first let me be clear that does not exclude the tier one.
That excludes the program that excludes the program from the tier one that was targeting a fourth quarter launch.
It is not done yet there's still a chance that that could happen we have what we've done as we speak signed into.
A risk sharing agreement.
We have booked and built over the last four months and continuing for the next two months.
Enough with to accommodate.
Multiple product launches, including the fourth quarter product launch.
The fourth quarter product launch was on an accelerated schedule that.
Given this race to Fiveg in China, most of the Oems are higher accelerating their launch plans to try to catch it.
And in integration of our product and making sure that what we do to a display in combination of what they're trying to do with these new fiveg phones is not an insignificant development.
And so to hit the criteria that the customer wanted we were on a very short schedule.
We're coming to the end of that schedule.
If.
Right now I'm, assuming that we will not make the cut on that program, but we haven't bookings for follow on programs. Some of the revenue in Q4 are basically any revenue that's in.
Currently in our guidance for the tier one as well as other customers.
I would be for the follow on programs.
And just to be clear you're building up chip inventory for those programs. The models may go into the market in early twenties that way to think about it.
Not only my building up I have backlog the problem is the backlog could shift out into 2020 right today. It was shorter term backlog.
Okay. That's helpful. It sounds very exciting and just to be clear. This tier one is not one you've talked about in the past as a new customer to Pixelworks mobile is that correct.
We have not had a tier one by my definition.
Yet so that's I mean as such this is a new customer.
Okay. Good shifting over to soft Iris I don't know, how we should think about the the magna the opportunity relative to your revenue run rate clearly it says is doing it is there a pipeline beyond the Susan how should we think about the revenue margin opportunity being material or or not do you guys.
Absolutely one of the multiple opportunities with tier one and I'm not going to say how many there are there are multiple and it's more than multiple means more than two I'll give you that okay.
One of them one of them as a soft Iris you know and then we have some follow on soft iris opportunities with the existing customers.
It could start to first of all its pure profit and it could start to actually meaning it will definitely contribute to the gross margin line as it accelerates, which right now we're thinking back half of 2020, when it when it actually impacts the gross margin line.
Okay.
And then a couple more questions on the Japan weakness there is the driver Todd from where you sit macro consumers sort of caution in the in the current environment are there other factors <unk> Pampe AWS Oh God. It's a that's all that's a long answer to a short question.
I'll just separate the two projector.
I think it's a combination of twofold I think one.
Pricing.
Those are flat panel displays has dropped large flat panel distress has dropped dramatically in the last 12 months.
This is corresponded at the same time when we've seen I mean, we will finish the year off at probably below a 20% decline in our projector business now we had forecasted a slight decline we did not forecast that large of a decline.
I do not think the majority of its contribute from the large fat flat panel pricing I think the majority is contributed from the global economic environments, but specifically in China trying to infrastructure. If you think about it.
Most of the projectors that we're in today.
Get put around globally.
In new offices, most people don't upgrade their projectors and existing office they move to a new office they build out a new office. That's when these systems go in or if it's large venue et cetera.
If that type of construction and build out slows down dramatically projector acquisition slows down dramatically.
So I think thats the number one contributor right, but I also do think that this I mean.
Probably a year ago, a 75 inch that flat panel display or 65 inch lets say, that's even more aggressive.
Was was probably to the 212 to 1500 Bucks on an average ASP.
I would say that that it's almost half that right now.
And so I think that is provided some headwinds and I'd love to be optimistic there are some new markets the projector.
Our projector customers are going after that we'll show growth.
There are pivoting, but you add it all together and I'm, believing that over a five year trend projectors, a flat market.
Okay, alright, thanks, not all possible.
Thank you thank you Susie.
Our next question comes from Charlie Anderson with Dougherty and company. Your line is now yeah. Thanks for taking my questions kind of a two parter on mobile one that sort of precise someone's big picture, you're sort of on the precise aspect you mentioned the 20% in Q4 I Wonder Todd if you have any early thoughts on top 20 in terms of mobile as a percent of revenue and then you know as you've gotten a lot more clever.
I'd on these programs in China, I Wonder if maybe you have sort of a any updated views on the size of the Tam for you guys over the next few years what's out there.
Yup.
Okay. So first I said up to 20%, okay. So there's still a variability and because of the way I articulated this engagement with the customer they're still uncertainty on all this right. This is a new engagement, it's a very intense engagement and its during a very key.
Hey, Arctic time.
As as this acceleration to Fiveg and high frame rate displays happens so because of that uncertainty we have a wide revenue guidance range and I'm, saying up to 20%.
Far as next year.
Let me tell you what the I'm not going to make any comments I'm not going to give 2020 guidance, but what I will say is the goal of all 220 people that pixelworks today.
Is the exit 2020 with mobile being the majority revenue.
Business.
From this company.
Great and then sort of a follow on to that the gross margin guidance.
Guidance for Q4, you stepped down from the level you're out you know mobile with a larger portion of mix I Wonder if that's a how much of that as the factor versus maybe just a lower.
Overall business from everything else maybe.
Big picture view on where you see the trend of gross margin as you go through this transition. Thanks.
Yeah. That's it that's a really good question Charlie So first of all I don't know the exact numbers, but my guess is a at least 100 basis points is probably due to.
Absorption low revenue number et cetera.
But that would still say that there was a significant downtick in our overall product mix gross margin that's an attribute a two things one.
Our projector video delivery business have a higher gross margin than our mobile product line. We are ramping our role will product line, we're ramping a new product hard.
You usually go through a learning curve in yield I mean, youre when you're ramping this hard you will throw away some wafers right.
And you will improve your yields and so we're going through that and then even with in our light projector portion of our guidance.
It is weighted heavily towards our co development customer, which is a lower margin profile than than the other customers. So combination of all the above is why you see the margins guided where we are to the second part of your question you know I've said that even though we have the headwinds with this.
Our development customer this new product, it's a lower ASP, but it's a higher margin.
If you really look out in time, if we are successful with the mix of mobile.
That we're pursuing.
We're able to maintain the A.S. piece, we think we can maintain in the mobile market.
We should we shift this projector customer to the large projector customer to the new chip and that's the predominant chip that thereby in the back half the year.
And then we get the.
The headwind of if not a lot, but some soft iris and troop at revenue, which is pure software.
You know if we exit where we want to exit we're going to exit 2020 at a higher corporate gross margin.
Then we exited 2019.
Got it okay. Thanks, so much guys.
Welcome.
Thank you. Our next question comes from Richard Shannon with Craig Hallum. Your line is no.
Well, Hi, Todd wise, Thanks for taking my questions as Joel.
Sure.
HM maybe pull quickly on the the mobile.
Commentary on the fourth quarter being up to 20%.
Todd you referred to a provided a floor for that number.
[laughter] zero.
I mean.
No.
I've been flip and I'm, sorry, Richard I you know.
<unk>.
I'll put it this way.
We are currently over 100% booked for the quarter on the guidance we gave you.
So the the uncertainty is not bookings.
The uncertainty is how many of those bookings will ship in Q4 cannot.
Okay, and it's all related because that's a one engagement, which is trying to rush out to market in China.
For Q4, yes.
Okay.
Interesting.
Maybe stepped back here and take a look at this is a tier one OEM that you're talking about here, maybe if you can kind of the talk a little bit about the history of this this customer here how long you've been engaged with them in any length. So how long these have been serious what's kind of push them over the edge.
And maybe you described the breadth of their engagement what are they looking at any.
Characterize the.
Type of phone, the it's probably not gaming or anything but he will you characterize just wanted to be held the.
Richard you are bold today.
It was bowl because you know I'm not going to answer that question, but I appreciate you asking that level of detail.
I'll give you a very broad stroke.
We we have been engaged with this at this first of all.
If you consider the sales and marketing process, we've engaged with this customer for probably two years.
If you consider when they thought they needed visual processing technology.
To be included in their product portfolio, I would say less than six months.
Beyond that I, just don't want to talk about the scope I mean, there's there's there's still.
There's still some uncertainty in this we're still having to prove ourselves there is nothing guaranteed in this world.
And.
Every one of these tier ones that still exist are fighting for their own survival. Even if there are large cuss company.
And so given that level uncertainty and until they rollout products.
With our visual processor I, just don't want to give a lot of insight.
Sorry, Okay.
That's fair certainly understand but just wanted to go to the edge, what you're willing to that's helpful.
I appreciate it I appreciate your basket.
That's very interesting topics here I'm sure as you can talk about a more will level, probably even deeper so.
With that said, let me jump into a true cut you see introduced this in April .
Given up the last quarter, maybe you can just kind of the discuss the the the engagements.
Since the last quarterly updates, where you're seeing some pickup here and streaming guys are content guys are studios or wherever you're seeing it maybe give us the thought process and.
When could we see a it's kind of a major milestone about announcement relative to one of those leaders in those categories.
[noise].
Ladies and gentlemen, please standby your conference will resume momentarily.
Really.
[noise].
Oh.
[noise] [noise] speakers you may resume.
Richard sorry about that pause looks like we drop.
That's right you can hear me now.
I can't so you were just starting your next question and we dropped so.
Sure. So asked a question on true cut wanted to get a sense a an update over the last three months since your last conference call and what's going on there you could discuss any characterizing engagements are in discussions with either the major players that your which the engaged with like a streaming guys contact guys studios and what kind of a timeframe could we see a.
You know kind of a major milestone public announcement that they kinda confirms traction with with circuit.
Well I I consider that you cut it you could announcement and then the fact that they have converted 10000 hours a content and reach.
The majority of their mobile customer base and then now they are out marketing heavily this advanced.
Dance format I consider that already validation, so if you're talking about further validation well how about what.
From Western are you at such companies How's that okay. So you talk about North America, I mean listen we are yeah.
We're very focused <unk> as as a reflection from the awards I've announced.
You know awards don't pay bills, but what the those awards do is they create a very first of all you don't get an award like that in less.
These are.
You go through a technology review process right and it's this technology is reviewed by a peer group of people that are.
Our deep in the creative process of Hollywood and we won a couple awards and so what that does is that helps influence.
The people that need tools that we have I mean, let's just make sure we scope the problem.
Today.
Or up to today most of the content produced was regionally target I'm talking about cinematic content.
Was regionally produced to be displayed first in cinema, and then either sent out in the old days on Dvds or VHS.
To consumers or played on a premium networks.
Or today streamed.
Bruce for the its streaming services.
As we move forward.
I don't know what the actual number is but we're getting close to the crossing point that most cinematic video is.
Either prepared to be delivered directly to streaming customers or quickly thereafter after a cinematic release and when you do that.
When you deliver via streaming you're delivering to devices, whether their mobile devices, whether their tablets or whether they're TV.
And all of these devices are at higher frame rate and a brighter environment and with ambient light around them.
Then a movie theater at a movie theaters a controlled environment.
And so as more content is being delivered to the uncontrolled environment and to these high frame rate displays.
The content creators are now very conscious of how do I create my content. So it is seen as I intended to be seen on those new devices.
In addition.
They are moving the technology in the cinema itself, even though it's a controlled environment. They are moving a tie frame rate displays and brighter in HDR.
And so as they do that they ran into problems how do you keep the cinematic feel.
When you want the cinematic deal and then how do you.
Best display motion or action.
And through that whole process retain.
The viewer retain their attention.
And so that's the problem, we're trying to solve the problem, we're trying to solve as the given the tools to do exactly what I just said so that not only they can.
Make sure that creators intent reaches all their customers no matter, where they're viewing their content, but does it in a manner that that.
That they can be proud of and so getting these awards and then influencing the people that that have to deliver that technology not just the story, but the technology. These are directors of photography, either cinematography and their colorist.
We have been trying to influence this group of ecosystem here in North America, as well as China for over a year.
[noise] through that influence.
We have been directly going to and I'm not going to name any of them, but there's there's a lot of them.
But there's probably only six or seven large streaming companies here in North America.
Many of these streaming companies fund their own.
Studio work right.
And many of them by a lot of content.
But for this to really work.
The streaming companies are coming very powerful some of them are already powerful.
Endorsement of this technology.
Makes all the difference in the world.
And so that is where we're focused were first focused in influencing the creative ecosystem.
And then targeting directly these large streaming companies the large streaming if you get an endorsement of the large streaming company the device manufacturers.
It's that's almost a done deal.
New done preliminary discussions with many TV set top box and of course mobile device manufacturers.
And they're very interested in the true cut format.
But they want US you know what they're interested in is that the large streaming guys are supporting.
And so really comes down to that.
If we get that kind of adoption and recommendation.
And then what we believe we have is validated in North America, we believe we somewhat and already done that in China.
And remember China's a mobile first market.
I hope that answered your question.
To agree to extend the did coghlan lot more detail and I appreciate that that's all my questions I'll jump in line. Thanks. Thanks.
Yeah.
Thank you.
I'm not showing any further questions at this time I would now like to turn the call back over to talk to bonus for any closing remarks.
Well, thanks for joining us today, obviously, we are disappointed by.
By these corrections inventory corrections that we're anticipating in the short term, but at the same time, we're extremely excited about our our mobile in true cut initiatives.
This has been our focus for a long time and we're starting to see some real traction on it and it's a lot of hard work, but.
We are having fun.
Thank you.
Ladies and gentlemen, this concludes todays conference call. Thank you for participating you may now disconnect.
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