Q4 2019 Earnings Call
Surely please continue to standby. Thank you for your patience.
[music].
I will be operator for today's call at this time, all participants are in listen only mode.
Following management's prepared remarks.
Construction will begin with question and answer question.
Conference call is being recorded for replay purposes.
I'll now turn the call to Pixelworks CFO Mr. last year.
Thank you.
Good afternoon, everyone.
Thank you for joining us today.
With us on today's call to stop the bonus.
So works precedent and she'll.
The purpose of today's conference calls.
Supplement information provided and Pixelworks press release.
They should earlier today announcing the Companys financial results for the fourth quarter.
Full year 2019.
Before we begin.
I would like to remind you that various remarks, we make on this call.
Including those about a projected future financial results.
Economic and market trends.
I'm not competitive position constitute forward looking statement.
These forward looking statements.
All the statements made on this call not historical facts.
Subject to a number of risks and uncertainties that may cause actual results to differ materially.
All forward looking statements are based on the company's beliefs today Thursday February six 2020.
We undertake no obligation to update any such statements reflect events or circumstances occurring after today.
Please refer to today's press release annual report on form 10-K for the ended December 31 2018.
Subsequent to that she she filings for a description.
That's good because forward looking statements to differ materially from actual results.
Additionally, the company's press release and management's statements. During this conference call will include discussion.
Sure I couldn't measures on the financial information in GAAP and non-GAAP terms.
[music].
Turning gross margin.
Operating expenses net income loss.
Net income loss per share.
These non-GAAP measures exclude gain on sale about them.
Deferred revenue.
The adjustment inventory step up.
Backlog amortization I'm not position.
Glad intangible assets.
Stock based compensation expense.
Restructuring expenses.
Gain on extinguishment of convertible debt.
Discount accretion on convertible debt fair value.
The company uses these non-GAAP measures internally to assess operating performance.
We believe these non-GAAP measures provide.
Meaningful perspective on a core operating results underlying cash flow dynamics.
But we caution investors to consider these measures in addition to lot substitute for.
No superior to the company's consolidated financial results.
Well as presented in accordance would go.
Also included in the company's press release definitions and reconciliations of GAAP to non-GAAP net income loss.
GAAP net loss to adjusted EBITDA, which provides additional detail.
[music].
With that said I will now turn the call about to Todd the bonus was opening remarks. Thank you.
Thank you alive and good afternoon, everyone joining us on todays call.
[noise], starting with a quick overview of our financial results for the quarter.
Consolidated revenue was $16 million.
Collars, which was at the midpoint of our guidance.
At a high level activity within our respective end markets played out as we anticipated.
With continued momentum and triple digit growth in mobile, resulting in record mobile revenue that exceeded 20% of total revenue in the quarter.
We.
We also saw the expected decline in both projector and video delivery as those markets work through previously indicated inventory corrections.
Gross margin in operating expenses were each within our targeted range and adjusted loss for the quarter came in at the top end of guidance.
Looking first at our digital projector business.
The overall market dynamics and profile the end market demand has remained very consistent with the commentary we provided on our third quarter conference call.
As a result of broad global macroeconomic headwinds ongoing trade tensions and slowing growth in China. The professional projector market declined approximately.
15% in 2019, according to plan they research.
Combined with what we would characterize as the first quarter seasonality in the projector market, we anticipate subdued demand to extend through at least the first quarter.
Also in Q1, we expect to begin ramping more meaningful.
Our next generation S., so see to our large co development customer.
As we have previously communicated we continue to believe that this transition will happen throughout 2020.
Also previously stated projector revenues will be impacted by lower E.S. piece of the new S., So see but we will see overall margin.
And our projector business as all of our customers transition to our newest esso seats.
Turning to our video delivery business.
As anticipated revenue declined sequentially in the fourth quarter as a result of an inventory correction in the Japanese consumer market for consumer PV ours and set.
Boxes.
Consistent with what we indicated on a previous cost conference call. The decline in forecasting bookings, we observe from our lead customer during the third quarter was a result to softer pull through on end products by Japanese consumers.
Despite this moderation and video delivery revenue during the fourth quarter related to our.
There is working down channel inventory for the full year video delivery revenue grew 23% over 2018.
[noise] outside of Japan, we saw a continuation of the renewed demand and increased shipments during the quarter of our ex code Trans coders for new OTI a device is here in the U.S.
As announced.
In late December Pixelworks advanced Transcoding transcoding, So see provides the LTAC streaming and recording capability incorporate it into the recently launched air TV to OTI a DVR.
For those not familiar with their TV, which along with sling our wholly owned subsidiaries of dish the.
Our TV too is a Wi Fi enabled network tuner that delivers free local over the air TV channels in H.C. to nearly any smartphone.
Leading smart Tvs or streaming media devices.
In addition to the unique ability to integrate these live local OTI a channels into swings.
D Channel guide.
The air TV to device allows users to watch it record live OTI, a broadcast channels from both inside the home and anywhere in the U.S. combined with our ongoing support other smaller independent in home media device customers, we generated record revenue from our OTI a.
Builders in the fourth quarter.
Looking beyond the first quarter, we're well positioned on engagements for multiple next generation in home median OTI aid devices.
Combined with an anticipated increase in the availability of high quality broadcast content.
Particularly given Japan's hosting of the 2020 Olympics we.
Until we do anticipate renewed growth in our video delivery business as we progressed throughout the year.
[noise] I want to give some additional color on the restructuring plan, we disclosed in a filing in early January which involved at approximate 4% reduction in force based upon the company's head count at year end.
This strategic action wasn't part designed to achieve improved efficiencies and better line operating expenses with recent revenue levels.
Additionally, we took this action in order to facilitate our continued shift towards our growth initiatives and accelerate the allocation of increased resources in support of both our mobile and.
True cut the growth businesses.
As such the reductions were made primarily a non mobile areas of our business.
Conversely.
We recently announced the opening of a new Pixelworks office in Shenzhen, China.
This new engineering and customer support facility further expands.
Our existing presence in China, providing us with important local resources to support existing tenants and expanded engagements with smartphone customers, including for both our mobile and true cut solutions.
[noise] regarding true cut.
I would like to take the opportunity to highlight several.
But the milestones we achieved since our commercial launch of this innovative platform in April 2019.
As a reminder, true cut was developed to provide a true end to end solution for cinematic motion and HDR with the objectives are both expanding the boundaries for creators of high quality video content and then also preserving the.
Breeders original intent.
Regardless of the display on which content is ultimately have viewed.
Given the inherent wide disparity in streaming content quality and display capabilities, we decided to focus our initial efforts around mobile.
With the goals of rapidly expanding true cuts market.
Reach and also to dramatically increase the amount of true cut form added content available for potential viewers.
[noise] in conjunction with its commercial watch, we announced a multiyear marketing and license agreement with true cut or for true cut with you cool a subsidiary.
You have alibaba to jointly advance the ecosystem for high quality HDR video on mobile devices in China.
As one of the top three video content providers with over 500 million active users and an expansive existing library of content. You crew is also a creator of its own digital entertainment in China.
Which made them an ideal first customer.
As part of our ongoing collaboration.
We may we have made incredible headway on several metrics that we used to measure the platforms market reach.
Between April and as of year end or and roughly nine months the amount of video.
Content available in true cut HCR format has expanded to more than 20000 hours.
In addition, Pixelworks has now completed the qualification of over 130 existing models standing at least nine mobile Oems.
Making them true cut enabled smartphones whenever a user views content.
Utilizing the ukuleles.
This translates to true cut content, reaching more than 100 million mobile device users and an estimated 70% of all Daily Act average users in a view COO in China.
[noise] concurrently over the last nine months we've been.
Actively working to demonstrate the plot platforms value proposition and cultivate advocates for true cut in adjacent markets across the broader video ecosystem.
[noise] a fundamental element of the end to end solution, we developed our cloud based software tools that empower creators of high quality.
Quality cinematic motion and HDR content to target a predictable viewing experience independent of the target displayed device.
[noise]. This has enabled pixelworks to build growing support for true cut within the film industry.
As highlighted in recent quarters and with only a few with it only within only a few months.
Since of launching our true cut motion grading tools.
We received notable recognition and two prestigious awards.
The Entertainment Technology Luminaire award from the advanced Imaging Society.
And the Hollywood professional associations Engineering Excellence Award.
True cut motion.
Rendering has been used for for motion picture titles released in China cinemas and two additional titles leveraging true cut our due to be released in 48 frames per second format in the near future.
[noise] Lastly, we're also actively engaged in a series of true cut evaluations with influential in perspective.
Aetna's here in the U.S.
We currently plan I'm, beginning shipping a beta release of our true cut motion rendering software tools to select film Studios and post production partners in the current quarter.
We look forward to announcing additional milestones over the course of the year.
[noise].
Now looking more broadly at our mobile business.
Which as a reminder includes licensing revenue generated from true cut in which we do not break out separately.
For the full year mobile revenue grew more than 170% and was driven.
By a combination of increased sales of our Irish solutions as well as licensing royalty revenue associated with our previously discussed true cut agreement with you could.
Underpinning this growth for a number of significant milestones we achieved during 2019, including the commercial introductions of both our fifth generation Iris visual.
Processor and soft Iris advanced display color calibration software.
We also seeking successfully negotiate an entered into an eye SB cooperative agreement with Qualcomm.
Providing smartphone Oems with the ability to easily implement our industry, leading visual enhancement technology using our soft iris.
And on devices running on the Snapdragon 855, and a 55 plus mobile platform.
Additionally earlier in the year, we secured a multiyear multi phone and co branding agreement with H.M.D. global to incorporate Pixelworks Iris technology in a broad range of next generation Nokia smartphones.
HM de subsequently launched the first two devices under this agreement in September the Nokia 7.2 in the Nokia 6.2.
Both of these smartphones feature Nokia's pure display technology.
Enabled by the incorporation of Pixelworks Iris visual processor.
In total during.
2019, Pixelworks Iris solutions were incorporated into six smartphones launched across four different mobile OEM customers, including one new first time, OEM Tcl communications as well as the first implementation of our soft Iris solution in a flagship gaming form the basis or would you too.
[noise].
Civic to the fourth quarter.
Mobile revenue, which was comprised almost entirely of sales of our Iris visual processors increased 140% sequentially and by the more than 400% year over year.
As mentioned in my opening remarks, our record mobile business represented 20.
4% of total revenue.
And it was also the ninth consecutive quarter of year over year growth.
Since year end, we've entered into two new publicly announced collaboration agreements with customers to incorporate pixelworks, leading visual processing and this play enhancement technology in.
Total plan next generation devices.
The first of which was Coolpad, which we announced in conjunction with their participation at the consumer electronics show.
Their intent to launch the first of multiple new products later, this year that leverage pixelworks industry, leading STR to HDR conversion.
HDR tone mapping and contrast enhancement solutions.
[noise] then most recently, we announced the signing of a multiyear collaboration agreement with Opel group.
For the development and integration of advanced display and visual processing solutions.
Well this customer is the lead tier one OEM that we.
Made reference to last quarter I want to emphasize that this collaboration agreement represent a significant milestone in the scope.
Of our engagement with Opel.
In addition to closely collaborating for the last eight months on a series of upcoming programs. We're also working together.
There to align in shape, our respective product roadmaps.
As indicated in the announcement, we anticipate the first in a series of smartphones derived from this collaboration to be launched in the first half of this year.
We are obviously excited about working closely with OPO to raise the bar on visual and displays.
Experience in the next generation Fiveg smartphones.
Having said that I want to acknowledge and thank our pixelworks team in China.
Listen closely working with the Opel's engineering team, while simultaneously advancing engagements with numerous other existing and new smartphone customers.
As a result.
Our current pipeline of customer commitments to incorporate one or more of our Irish solutions in their next generation devices is at an all time high.
[noise] following the recent launches a five you service throughout the globe. We are seeing numerous OEM Oems adopting advanced mobile displays in order to couple.
For the expanded capabilities of Fiveg with the ability to deliver premium video and enhance gaming experiences.
While the visual appeal of these advanced high performance displays is extremely compelling.
They also present, new challenges due to higher due to higher frame rates higher pixel count and wired wider color.
Got it capabilities.
Our Irish solutions, where specifically designed to not only overcome these hurdles, but to fully optimized and take advantage of the superior performance capabilities offered by advanced displays.
As a result, the value proposition of our mobile solutions gaining strength.
And.
So works is increasingly recognized as having the enabling technology and expertise to help a number of smartphone Oems achieved the desired and highly differentiated performance on their next generation devices.
To help quantify the pipeline for our mobile visual processing engagements.
In the first half of 2020, we expect to announce wins on approximately 12 models across several different mobile customers.
Three of which are first time customers, including noble.
Again.
These are all devices with planned launches during the first half of this year.
And collectively they represent multiple flagships and mid tier smartphones. In addition to several high end gaming phones.
We also expect additional launches in the second half of the year.
[noise] regarding the recent Corona Iris Corona virus outbreak.
We have taken.
Can necessary precautions to ensure the safety of our employees and adhere to the respective provincial government policies in both Shanghai in Shenzhen.
This includes extending the lunar holiday through February nine.
And resuming work in our offices on February 10th.
Although some employees have resumed work from home.
This week supporting critical projects.
We have also issued a near term hold on work related travel into and out of China.
Our supply chain is currently uninterrupted and we have ample inventory to meet Q1 customer demand.
Many of our customers have also.
So resumed work from their homes and plan on returning to their offices as of February 10.
Some flexibility in on venue.
And timing.
Planned Q1.
Product launches.
Has been required by our customers, but as of now.
We have seen no cancellations.
Our management team is monitoring the situation closely and we will adapt to changes if and when they come.
[noise] in closing the progress made over the last six months continues to validate our strategy and ability to achieve our ultimate objective of.
Transforming picks works into a mobile centric growth company.
Although the impact of the prolonged inventory corrections in our projector and video delivery markets are contributing to lower guidance for the first quarter and disappointingly slow start to to the year on a consolidated level.
We don't believe the current conditions.
In either of these markets are permanent in fact, we anticipate both of these businesses to show improvement by the middle of this year.
That said, our highest priority will remain focused our successful execution on our growing number of mobile engagements and mobile growth initiatives, including achievement relevant milestones.
On our true cut platform.
Specific to mobile revenue in the first quarter, we expect to maintain the trend of consecutive year over year growth.
Looking further out the trajectory of our mobile business in the second half a 2020 will largely depend on the reception of our technology and customer.
Summers devices that are launched in the first half of the year.
However, our goal continues to be far mobile business to contribute 50% a more or more of total revenue by Q4 this year.
With that I'll turn the call over to Elias for review of the fourth quarter financials as well as.
More detailed guidance on expectations for the first quarter.
Thank you Todd.
Revenue for the fourth quarter of 2019 was 16 million.
Compared to 18.1 million a third quarter.
Compared to revenue of 20.5 million, probably your fourth quarter, which include.
At approximately 1.5 million of end of life product revenue.
The sequential and year over year decline in fourth quarter revenue reflects the respective inventory corrections in both a digital projector on video delivery end markets, which was partially offset by record revenue contribution from.
On the mobile market.
The breakdown of revenue during the fourth quarter was as follows.
Revenue from digital projectors, approximately 9.4 million.
Video delivery revenue was approximately 2.8 million.
Revenue from mobile I was approximately 3.2 million comprise almost entirely.
Sales of Iris visual processing solutions.
Non-GAAP gross profit margin was 48% and the fourth quarter of 2019.
Compared to 53.9% in the third quarter of 2018 on 55.1% to the fourth quarter of 2018.
Non-GAAP operating expenses were 10.4 million in the fourth quarter of 2019 compared to 10.3 million in third quarter, 2019, and 10.3 million in the fourth quarter of 2018.
Adjusted EBITDA for the fourth quarter of 2019 was a negative 1.7 billion.
Compared to a positive.
So far enough into $2000 and the third quarter 2019.
Positive 1.7 million in the fourth quarter of 2018.
[noise] on a non-GAAP basis, we reported a net loss of 2.3 million or loss of six cents per share in the fourth quarter of 2019.
I bet, Joe non-GAAP net loss of 500 doesn't $18000 or loss of one penny per share in the prior quarter.
Our non-GAAP net income of 1.3 million or three cents per share in the fourth quarter of 2018.
Moving to the balance sheet.
We ended the fourth quarter of 2019 with cash.
Cash equivalents on short term investments of approximately 14.2 million.
Compared to approximately 22.3 million at the end of the third quarter.
Because cash usage was affected by timing on for sheet I want to point out of the sizable portion of the sequential decrease in their reported cash bonds.
Well as it related to a small group of customers around year end.
Together these payments amounted to a significant portion of our reported accounts receivable at year end.
We collected these payments within the first week of January 2020, subsequent the resulting in both it meaningfully meaningfully higher cash bonds.
And lower accounts receivable so early January.
Therefore cash bonds in Q4, 19 would have been 18.4 million.
We believe a cash usage in Q1 2020 will be similar to the ending cash balance off Q4 2019.
[noise].
Inventory turns general fourth quarter of 2019 was 7.8 times compared to 11 times in the prior quarter.
Now turning to guidance for the first quarter of 2020.
We expect revenues to be in a range of between 13 million and 15 million.
It's largely reflects.
First quarter seasonality.
And the digital projector market combined with an expected contribution on a prolonged inventory corrections in both our digital projector.
Video delivery end markets.
Partially offsetting these primary contributing factors, we anticipate continued year over year revenue growth in the mobile market.
We expect non-GAAP gross profit margin of between 49% 51%.
We anticipate operating expenses in the first quarter to range between 10.5 million, an 11.5 million on a non-GAAP basis.
Lastly, we expect first quarter non-GAAP EPS.
To be in the range of between a loss of seven cents loss of 30 cents per share.
That concludes our prepared remarks, and I will turn the call of so Todd for closing remarks, then we'll open it up for.
During this session.
[noise].
Well I think we'll do.
QNX, let's really kicking in now sorry, Mark yes.
Thank you.
Ladies and gentleman asked the question. Please press Star then one on your Touchstone telephone.
I would draw your question. Please press the pound King.
Sanbolic impact you many roster.
One moment please.
Our first question.
Suji de Silva of Roth Capital Your line is open.
Hi, Todd highlights congratulations on the progress here across multiple fronts. So let me start off maybe with mobile obviously the exciting story here I just want to make sure I heard correctly, you think mobile will be Todd by the end to two.
20 half the revenue just want to make sure I heard that and if that's the case what.
How many tier ones.
Do you expect to be embedded in that sort of growth, maybe a hospital, where maybe more than up.
So let me let me make sure that unclear I said our goal.
He is in the fourth quarter.
To have mobile, which is a combination of true.
And our.
Iris visual processing solutions to be more than 50% of our total revenue.
I would suggest to you that.
To achieve that goal.
You would have to have a at least two.
[noise].
Tier one Oems as part of that group.
Okay that helps absolutely and then on Truecar, just maybe a subtlety here.
How is the maybe perhaps the U.S. strategy, you're talking about versus Asia different and that you're talking about guys you're engaged within the U.S.
Is it content providers like are you cool or just the production houses were both sides of the the equation there.
Good.
So.
Before I give you specific answer to what you're asking which I will I just want to make sure they understand the difference between China.
And the U.S.
When you when it comes to content acquisition or content creation in China, when the streaming service providers acquire the rights to content. They have they also acquired the rights to re format that content.
So that it makes it very simple that we.
Rupture deal.
That requires reformatting of content, just with the streaming provider itself, whether they created the content themselves or whether they acquired the content.
In the U.S., it's different in the U.S.
Most of the creators of content do not released the Reformatting rights to the streaming.
Writers when they licensed then that content that that requires a new license.
In addition, when you put motion render when you really not just dealing with converting from STR HDR, but also converting from lower frame rate to high frame rate or vice versa.
Filming in higher frame rate and.
Plane and lower freight rate.
This is not something that that's usually a string of provider will go re format. This will be done.
That during the post production process.
Of the original content.
So with that said in the U.S.
You know.
What we're really focused on is the full ecosystem, we're focused on studios tier one studios.
There are post production partners.
The creative.
Oh directors and then.
In addition, the streaming platform providers.
And then finally the device devices that would would.
That content would be stream to mobile TV. These cinema.
Okay very helpful. Just as as a quick follow up question to that question because the U.S. kinda careers as so tight about.
You can do with the content.
Streaming service providers challenge of delivering that content, even harder and it is even more of a requirement for to cut and iris in the U.S. than China, where you can just downshifted and delivered is that a fair statement.
What I would suggest to you is well first of all.
Today.
The large streaming providers that there's new large streaming providers and there is old school studios that have now become large streaming providers in both cases.
They have large studios within their ranks that produces a lot of their own content.
So you can.
Will directly with a studio slash stream provider and provide an end to end solution.
So to say, whether they're more motivated here or in China, I think they're both motivated in delivering a improved experience to the consumer it's a highly competitive market if if.
Once training.
Provider or once one studio can get ahead of another they like the edge.
Okay.
We should that color and last question then I'll go back in the Q2 segments here projector in Japan, and the video delivery boat.
Recovering I'm curious, where the run rates will fall out in your opinion versus say where.
They were in 18 average your peak and I guess, the moving parts in project or the associates p. versus prior and in Japan, It's kind of rebuilding from the initial ramp so any thoughts there and how the run rates might fall out and 20 versus where they had been in 18 would be helpful. Thanks.
So we expect growth.
Overall in the video delivery business from 2018, although with a slow start this year in this call at modest growth.
For digital projector.
The market itself will not achieve the the I mean, it's down a good 15 to 18.
10% of units shipped and this is all the professional market, including DLP. We we don't really serve the DLP market much the DLP market actually had the largest.
Market loss within the segment this year in the professional projector market.
But I expect.
Right.
And you never know, where it's going in but I do not expect that we'll see 2018 levels again I expect that we'll see.
Where we end up in 2020, I think that's sort of where the market is gonna be right. Now my expectation I mean, you can go get research data from Pn, a research, but they're probably.
Looking at a total market down 20%.
Friday morning, I brought from 2018 as your reference point right.
Okay. Thanks, guys. Congrats again on the progress in mobile.
You're welcome surgery.
Thank you. Your next question comes from Charlie Anderson of Dougherty and company. Your line is open.
Yeah. Thanks for taking my questions and congrats on all the solid progress on mobile design traction.
I wanted to start on true cut I Wonder if maybe you could frame up Russia in any way possible just sort of the revenue potential opportunity. There I know you don't have a lot of customers. So maybe a little bit difficult, but the degree you could maybe talk about the addressable.
The market or.
We should think about pricing relative to volume.
That's out there just any color would be helpful. Philip.
[noise] you know I've tried to I've tried to really you know we're in we're not really going to compete against something its existing in the market we're trying to create.
So.
The format, so you say or a solution for delivering creators and test at high frame rate to these new devices that are now coming to the market that it's a challenge that the creators have that they don't really have a good solution for.
And as we're creating that market, it's hard for me to peg exactly how big it is.
But with that said I can tell you our approach is we will be.
Marketing the licensing of our tools and support to studios and post production houses.
We will be marketing our streaming.
Platform.
The licensing of our streaming platform to streaming providers like we did with you cool.
And we'll we.
Marketing.
The end devices supporting that that format and so there's three areas that would be.
In our business model.
Those three areas, how big that market is I mean, I can go tell ya.
How much they spend on movies every year I can go tell you how much the streaming provider spread on their platform every year and I can go tell you how much device manufacturers TV is mobile devices and tablet spend each here, it's a very large.
So we're just going to go in and capture IHS segment of that.
I do expect it to be a material contributor to the business.
Probably next year going in going into 2022.
Great. Thanks for all that color and then Elias just question on like a cash burn.
Just so I understand it or are you, saying that.
You will and Q1 with similar level of cash that you ended Q4, and then any thoughts you can share on just cash usage and exactly.
No exactly what you're.
Shane.
We intend to two to grow cash for the second half of 2020 for short doesn't go on and we're very comfortable with where we're Alex on cash so cash burn would be similar.
Do you want to Q O Q4.
Okay got it thanks, so much.
You're welcome.
Thank you. Our next question comes from Richard Shannon of Craig Hallum. Your line is open.
And Richard I talked a lot.
Hey, John.
So low venture.
Hi, sorry, I'm trying not to cost too much.
Uhhuh here, so apologize if I have got a longer.
[noise].
[noise] excuse me.
Let's see a lot of interesting things to ask about against Todd The first thing characterizing youre.
Your mobile customers and how the ramp out here, you're talking about 12 models with seven Oems three of which are new when some of them or our flagships and so we're kind of high end premium gaming ones, maybe if you can.
Help us understand the extensive which these these flights ships can be a can be large ones either.
Absolute or relative context.
Well, I mean, given where we're coming from.
You know a tier one flagship is material to us.
At any volume right.
You know I think.
What I will say is these the flagships that are going to come out.
Our not only incorporating pixelworks technology, but they're also incorporating hi frame rate.
Displays that at it at a pixel count in color gamut range that have not been available on the market before.
So there's a whole new visual experience that these Oems and it's more than one.
Or targeting to bring to the market.
They do believe.
At this experience will be a key differentiator.
For consumers deciding on which flagship to upgrade to.
At least in the Android community right and.
You know there there's been a lot of effort over the last two years in.
The focus is on camera and the capabilities of the camera and sort of increase or removing the bezel display, but not really improving the full visual experience of the display. So I think this is a its new collectively we're working with the Oems to market. These features.
And you.
You will see how that goes shortly.
Ah you know we clearly.
Anticipate a.
Materially increase in revenue in 2020 versus 2019 for mobile.
It's going to be highly dependent on.
How these models as they.
They launch our received in the market.
Some of them are targeting.
China Southeast Asia, some of them are targeting.
International market, including the U.S.U.S. carriers.
Okay. That's helpful perspective. Thanks.
That.
One follow up on new year's agreements you now Smith with also last months here I know that also was as part of the larger group I think it's called BBK would sell so has there been large OEM in that group pacira possibility. It kind of cross fertilization of work that you're doing that them into the other affiliates within that group.
Yeah, well I mean.
They operate as independent companies.
But I would say that the large Oems in China.
[music].
Our very aware what there.
Competitors in China.
Our are doing when it comes the new technology, and if one going down a path of adopting.
Technology to differentiate the others are very aware that that's happening and it it's not coming from the technology provider. It just its a.
The nature of that community there is a.
[music].
<unk>.
They're very closely tied.
So.
There's no.
Corporate.
Don't read too much into you know just because OPO as part of BBK that corporate wide they'll use it.
But clearly.
Several I mean, we're engaged with several Oems tier one Oems in China. They are very aware of our technology.
Okay Fair enough probably couple of more questions for me, Vicki, Switzerland and true cut.
[noise].
Within the U.S. community, Todd how would you characterize or what's your.
Vacation of how the sales cycle will go and what are what are going to be kind of the next milestones. The view that the lease you should be able to report on us how should we be able to judge is going forward.
Well I mean, I think that that to me.
Tier one studio backing.
Okay.
Down out of Hollywood beyond just these technical organizations that have given US awards that have given us backing if we now get endorsement by by a large studio I think thats. It thats, a very key indicator of.
The progress, we're making with throughput.
[music].
Subsequent to the studio and.
And large post productions.
Adopting the technology.
The next milestone would be in my mind would be a.
You mean content provider outside of China, adopting the technology.
And as you look at these constituencies studios streaming guys device, guys et cetera reserve one the kind of drives the rest of the ecosystem to move towards a visit the stream you guys said of the next the other studios or.
The ways you can describe we're we're kind of your your biggest focus should be folks should be on.
From what you know this is somewhat new to me, but.
I've been spent a lot of time and energy on it recently.
I would say that there are a handful of.
Sort of Evangelist directors and Creatives.
That go out on a lim with new technology, because they believe the experienced they're going to deliver.
Their.
Would be a better experiences that new technology.
I think that if you if these people these evangelists adopt.
And publicly endorse your technology.
The rest follow pretty quickly.
Okay.
Fair enough last question financial one to realize.
You just reported this quarter.
I think 40% gross margins you're now guiding for.
40 to 49 to 51, if I remember correctly, yes.
A few on.
And we have lower revenues.
Susan I imagine a little bit higher contribution from mobile which seems a.
Seems to be going contrary to the makes you wonder if you could help us understand bridge the difference here.
Just a really mobile gross margins improving more that you've got in the past or any way you can help us reach that please.
Well it will improve.
Because our expectation is that you know.
There's not going as Jeff these levels of 40% to 49% when we are looking up to.
There's a huge improvement for the for the for the whole year.
But the mixture of Q4.
I mean off Q1, the way we're looking at it is of course.
Yes.
Computing to these.
Ranges, we're giving you which is 49 to 51.
But for the only other peers improvements.
Very comfortable with that.
Okay Fair enough. Okay of course, you can you guys think thank you.
Sure. Thank you Richard.
Thank you. Our next question comes from Jason Smith Lake Street. Your line is open.
Yes, thanks for taking my questions on Todd when you adjust your mobile.
When you look at your mobile pipeline are you seeing more interest on the chip side or the soft iris side or a combination.
So you know there soft Iris is is it is a very small subset of the features of what our car.
Chips deliver right.
But it does one thing really well it does a couple of things, but what does one thing really well and that is.
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You know device calibration. So you can do unit by unit calibration at the manufacturing line.
In a very low test time.
And in fact, I mean, we I think we were a third of what the competing way to do it wasn't more accurate so.
If.
He wants to just calibrate your phone.
And it isn't interested in the other features they could have a high interest or they want to do.
Oh mapping.
They they could have interest in the soft Irish solution, but if they really want to use the fit the full suite.
Visual processing features that we bring.
Including you know motion.
They they have to use our visual processors and I would suggest to you we have some customers using both in conjunction on the same platform.
And I don't want to go into too much detail why they use both.
We'll do that after the phones launch.
At a very high level. They you know, they're very focused on bringing introducing new features but trying to maintain the the the power budget.
The use budget throughout the day and so they have to come up with creative ways to implement.
Some of these these features that can be power intensive, but still maintain that power budget.
And one way is to use both or processor and our software are soft iris together.
But but I would say you know what's going to drive the revenue growth and the majority of the models that that I.
Highlighted in that that will you will see launched in the first.
Half the majority.
Our our processors.
So there are a couple of soft Iris only solutions.
The Grand majority use either Iris three ribas five.
Okay. That's helpful.
And just more of kind of Big picture question. What do you think are really driving this acceleration in mobile for you guys.
Finally, recognizing the value proposition, but need for differentiation in the market or some of these newer technologies such as the high.
Primary too.
And I really needing a wage rate drops that well what do you think it sort of kind of pushing this mobile.
The center stage finally.
Add fiveg to your three scenarios and I say, yes, it's all okay.
It's all in we have a push in for four years, we've been evangelize and the technology.
And through that process, we didn't stay still with development right, we're developing new probably even if we didnt sell a lot two years ago. We still spent a lot of money on R&D on our roadmap and we continue to do that and so I think they see that there's a lot of what level of comfort from the customers that were not going away we're gonna be.
Here and we're constantly innovating.
There are new problems that we sold with high frame rate displays, which now they want to implement.
Fiveg.
A big part of Fiveg at least initially marketing fiveg and the value proposition to.
Source is video consumption.
And interactive video and gaming and interactive gaming.
And so you put them all together, that's all coming together right now it's sort of a right place right time.
Okay that makes sense.
And.
Just the last one for me a life it looks like 11 million at the midpoint for Opex, how should we think oh that trending that fear factor in their recent Chris restructuring.
Yeah, it's still going to me the same range I'm expecting you know.
For the short time.
For the time being I should say I don't expect Opex to golf massively. This year I mean, we are comfortable where we're out in terms of fund investments it's growing businesses.
You know like you know we are using the [laughter] the cash very efficiently.
Okay.
Perfect.
Okay.
Youre welcome. Thank you Jay.
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Thank you.
I'm showing no further questions at this time I'd like to turn the call back over to Todd the bonus for any closing remarks.
Thank you.
Thank you for joining today's call and for those investors and analysts.
That'll be traveling to mobile World Congress I look forward to meeting you there and updating you on our progress.
That's it.
Thank you.
Ladies and gentlemen, this does conclude today's conference. Thank you participating you may now disconnect.
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