Q3 2020 Pixelworks Inc Earnings Call
Good day, ladies and gentlemen, and welcome to Pixelworks Inc.'s third quarter 2020 earnings Conference call I will be your operator for today's call. At this time all participants are in listen only mode. Following management's prepared remarks instructions will be given for the question and answer session.
This conference call is being recorded for replay purposes, I would now like to turn the call over to Pixelworks CFO Mr. Elias Nader.
Thank you good afternoon, everyone and thank you for tuning into today's call.
With me on the call and joining from China is taught the boneless Pixelworks President Jim Scheel.
The purpose of today's conference call is to supplement the information provided in pitching works. This press release.
Issued earlier today announcing the company's financial results the third quarter of 2020.
Before we begin I would like to remind you.
That various remarks, we 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 on all those people that made on this call that are not historical facts are subject to a number of risks and uncertainties that may cause actual results to differ materially.
All forward looking statements are based on the companys beliefs as of today.
Close date October 29 2020.
The company undertakes 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 year ended December 31 2019.
Subsequent SEC filings for a description of factors that could cause forward looking statements to differ materially from actual results.
Additionally, the company's press release and management statements during this conference call.
Will include discussions of certain measures.
On financial information.
<unk> GAAP.
Our non-GAAP terms.
Including gross margin.
Operating expenses.
Net income loss and net income loss per share.
Non-GAAP measures exclude gain on sale of buttons.
Inventory step up and backlog amortization.
Amortization of acquired intangible assets stock based compensation expense and restructuring expense.
The company uses these non-GAAP measures internally to assess our operating performance.
We believe these non-GAAP measures provide a meaningful perspective on our core operating results.
Underlying cash flow dynamics.
But we caution investors to consider these measures in addition to.
Not a lot of stuff that you had for no superior to the company's consolidated financial results as presented in accordance with GAAP.
Also included in the company's press release.
Our definitions and reconciliations of GAAP to non-GAAP net loss.
GAAP net loss to adjusted EBITDA.
Which provide additional details.
With that said I will now turn the call over to Todd for his opening remarks.
Thank you Elias and good afternoon to everyone participating on today's call.
I'm joining you today from Shanghai.
You know it was a difficult journey during the pandemic and associated travel restrictions the company has seen increasing activity and opportunities for our technology here in.
Including multiple exciting and recently announced developments.
First as announced last week, we completed the agreement on a private placement to facilitate an investment by end the EM.
He investment limited.
In the amount of $6.6 million.
And the N. is a China based consortium comprised of strategic investors from the Chinese semiconductor and mobile ecosystem with deep industry experience and expertise.
The investment brings significant significant value to pixelworks as we continue to prioritize China and Asia, that's key regions for growth opportunities and our future success.
As a financially vested partner and M will contribute local resources and relationships that will enhance our ongoing strategic efforts.
Separately, we also announced a appointed an executive VP and president of Pixelworks, China, Dr. Allen gel.
Who will oversee and drive expansion of our operations in the region.
With over 30 years of experience in wireless communications. He previously served in multiple roles at global companies, such as Qualcomm Uglier systems, Lucent technologies, and they tend to Bell labs.
Alan is a significant addition to our team and brings extensive China based leadership to the Pixelworks organization.
In addition to supporting our growing customer engagements and organization in the region. Both the appointment of Allen and intends investments to strengthen our strategic position in China as we execute on our mobile growth initiatives.
As outlined in today's press release, our Q3 results were in line with our expectations and reflected the challenging environments.
Continued impact on end market demand.
Especially in our mature markets are projected video delivery.
Although customers continue to place orders demand has continued to be weak as they attempt to navigate fluctuations in the end market demand due to the pandemic.
Our mobile business saw sequential growth in the quarter as previous distributor inventory was worked down and we made initial shipments in support of new phone launches.
Notably, we sustained <unk> call gross margin levels near the higher end of our historical range.
Our previous restructuring actions, along with ongoing cost containment efforts.
Minimized our cash burn in recent quarters.
Although we don't expect a V shaped recovery.
We are beginning to see some signs of improvement or mature markets.
In projector demand appears to have bottomed during the third quarter.
We've begun to see evidence of a gradual recovery in orders led by near term improvement in developed markets.
Customers have indicated that the man has remained more muted in emerging markets and is unlikely to meaningful recover until mid next year.
As discussed on prior calls effectively all projector Oems are responding to the lower total unit volumes.
By moving upstream to higher priced projectors with the more advanced features.
We are nearing the direction of our customers in terms of pricing and Pixelworks continues to be a key enabler for many of these advanced features.
Overall design activity has remained somewhat healthy across customers next generation projects.
And we currently anticipate a small uptick in projected revenue in the fourth quarter.
[noise] in video delivery and demand in the Japanese consumer electronics market remained subdued through the end of the quarter and these customers have given limited clarity on the timing of expected recovery.
In the U.S., we have seen increased customer activity for ultimate streaming solutions during.
During the quarter Sling launched air TV anywhere its newest device to incorporate pixelworks ex code for transcoding of lives local Ats see signals to high quality digital video for viewing on almost any connected mobile what streaming media device.
[noise] unique to the air TV anywhere product that includes a one terabyte hard drive with a full digital TDR and is capable of delivering up to four simultaneous streams of OTI a content to connected viewing devices, both within and outside of the home.
Additionally.
Unlike previous generations that were sold exclusively all online.
Air TV anywhere is being carried on the trucks, a dish authorized installers to provide consumers with the option of a rational onsite setup.
Turning to an update on true cut.
Following a brief attempt at a partial reopening in the summer most of the major studios in the U.S. when they close due to covert related mandates.
Like important progress.
Shifting to a mobile business.
As previously mentioned, we saw a return to sequential revenue growth in the third quarter.
And we continue to add to our growing list of mobile wins for the year.
Since our last conference call three new phones relaunch by to exist you know Williams.
And one first time mobile customer.
In late August atheist, launched the latest device to incorporate picks works technology Zen phone seven series flagship five G smartphone.
Utilizing a $6 six seven inch Samsung all the display with 90 hurts refresh rate the Zen phone seven Leverages a series of pixel works visual processing technologies, including HDR tone mapping high efficiency color calibration in D. C dimming to provide consumers with an impressive display performance.
And superior viewing experience.
Also during the quarter coup had released its first ever mobile device to feature picks it works advanced visual processing.
The coup had load legacy bracer smartphone.
Currently available exclusively through boost mobile.
The legacy Breece, it brings true premium visual quality, including STR to HDR conversion and enhance color tuning and accuracy to consumers on a budget.
Notably this well featured smartphone is priced below $200.
The most recently one plus.
Then excuse me than most recently one plus expanded it's eight series lineup introduced earlier in the year and again chose to incorporate picks works technology in the newly launched one plus H T.
Building on the recognition garnered from the record breaking display performance enabled by picks it works in the one plus a pro.
The one plus a T uses a dynamic 120 hurts almost display couple.
Coupled with a series of pixel works visual enhancement features including our patented high efficiency color calibration flesh tone correction flicker free screen gaming and ultra smooth 8-K adaptive great. This.
In early September, we unveiled or sixth generation mobile visual processor.
The first to incorporate low-power artificial intelligence or AI technology.
The AI processing unit built into our ice six process or Leverages pixel works extensive mobile display and datasets to adaptively optimize overall visual quality and power efficiency by intelligently mapping feature set and modes across the widest range of apps and use cases for both the L. C D.
An old Ed displays.
This dynamic optimization brings together numerous advanced features such as upscaling, the dynamic range of video and gaming content to the highest possible resolutions and refresh rates, while simultaneously adjusting for optimal contrast, sharp minutes brightness and color temperature of the display based.
An ambient lighting conditions content attribute and display characteristics.
In addition to AI based optimizations.
Provide the potential for accelerated backend development and reduced phone specific customization and the ice six processor.
We further enhanced picks it works leading industry color accuracy with display calibration processing that requires up to 40% lower power than our previous generation mid range processor.
Our sixth generation visual processor was picks works first mobile chip to have secured a design and before being taped out in fact.
We secured multiple design ins across several different O M customers prior to successfully tape it out and sampling we've.
We expect the first designs incorporating R. I six processor to be launched around here and and we continue to gain traction.
An increasing number of customer programs planned over the coming year.
More broadly within mobile a number of third party reviews of multiple previously launched smartphones than incorporate our technology have continued to validate the significant and differentiating value of pixel works visual processing.
We will continue to aggressively develop and introduce additional advanced capabilities as part of our new each new generation.
While focusing heavily on incremental adoption across both existing and new mobile OEM customers.
Several key market trends are strongly aligned to drive an increase need an adoption of our technology.
The first is five G, which enables the delivery of higher quality video content over the cellular connection.
Is oem's aggressively push five G capability down the price curve to them more.
Premium and Mid-tier devices.
Our value proposition becomes increasingly relevant on mainstream devices, the potential to ship substantially larger unit audience.
Another benefit of five G is it's extremely low latency.
Which is particularly important for mobile gaming.
In fact, we are continuing to see growing interest to utilize our technology to an age enable a visually superior gaming experience.
Following our initial and ongoing success and dedicated gaming phones, we are observing an emerging trend by Oems wanting to feature a stronger and more marketable gaming use case on more mainstream high performance smartphones.
[noise] pixel works, leading industry, leading mimic enables exceptional performance for high frame rate gaming.
And I also having the ability to significantly reduce power consumption as compared to relying solely on the devices a P and associated G. P U.
As evidenced by my temporary relocation and focused efforts here in China, we continue to be closely engaged with our current and prospective mobile customers.
We have a very healthy pipeline of new programs comprised of next generation programs with existing customers as well as the active near too near term programs with more than one new customer, including a second tier one mobile only am.
We're also seeing improving backlog and forecasts from our mobile customers. We believe this uptick in demand is in response to improving and market demand and expected market share shifts among the leading Oems.
In closing we are continuing to make tangible progress in our growth initiatives, despite a very challenging environment.
Our team is critically focused on advancing a growing number of mobile and true cut engagements, while remaining well positioned to support current customers and market demand recovers.
We continue to believe in the value proposition that picks it works technology and our strategies to capitalize on cycolor market trends in our growth businesses.
We expect the fourth quarter to Mark the beginning of the turning of the corner or turning around the corner and reflect sequential improvement buoyed by recovery mobile demand.
With that I'll have to call over to Elias review third quarter financials and provide guidance for the fourth quarter.
Thank you Todd.
<unk> for the third quarter of 2021 8.2 million compared to 9.3 million in the second quarter of 2020.
And compared to revenue of 18.1 million third quarter of 2019.
Ah started indicated in his opening remarks Street.
Corner of 2020 revenue, primarily reflected inventory connections with digital projector.
Did you do you need the mortgage compounded by noon and market demand, resulting from the global pandemic across each of our target markets.
The breakdown of revenue in the third quarter will cause I suppose.
Revenue from digital projector was approximately 4.9 million.
Did you deliberately revenue was approximately 1.9 million.
Revenue from mobile was approximate you 1.4 million comprised largely of shields off of Irish vision processor shopping solutions.
Non-GAAP gross profit margin equaled, 55.6% in two <unk> 2020.
259.2% to the second quarter of 2020, 53.9% and you can quote of 2019.
Do you.
Do you over here you should <unk>, primarily reflects ongoing and you should you.
And you should just you drive <unk>, especially on new products.
Non-GAAP operating expenses decreased to 8.9 million neutral corner of 2020.
Two 9.3 million a squirrel.
10.3 million and you should period lost Ya.
The declining operating expenses and sexy combination of my previously taken actions to reduce cash expenses.
As well as an ongoing cost containment jeffers across the businesses.
Adjusted EBITDA for the third quarter of two.
20 was a negative 3.5 million.
Compared to negative 2.9 million second quarter of 2020.
On the positive 0.5 million you take one of 2019.
On the <unk>.
<unk> 2020 that loss was 4.5 million.
Oh, most of 11 cents per share.
<unk> two net loss of <unk> of 3.9 million.
Oh, most of <unk> and the <unk>.
On the net loss of 0.5 million almost off.
One sense for sure and the two <unk> 2019.
Moving to the balance sheets, we ended the third quarter of 2020 with cash.
Josh equivalents and short term investments are approximately 16.8 million.
Compared to approximately 21.4 million that the second at the end of the second quarter of 2020.
Just sequential D T <unk> for approximately 4.6 million reflected the net of approximately 3.4 million cash.
Used for a pretty activities.
1.9 million for capital expenditures.
And the repayment of approximately $400000 on the outstanding balance of online of credits.
Partially offset by approximately 1.2 million <unk> January <unk> from the Sheila stock.
<unk> a T M vehicle June 3rd quarter.
I was discussing with the second quarter conference call, we implemented restructuring plan to further reduce operating expenses I presume gosh.
I should results recorded a one time restructuring charge of approximately 1.6 billion third quarter.
We anticipate these actions to January and incremental $3.2 million in a new lines cost savings beginning in the fourth quarter.
In terms of other balance sheet metrics would take <unk>.
Days sales outstanding with 60 days, a corner in which compared to 58 days at the end of the second quarter.
And that's H Orange was 3.3 times in a dark wood or up slightly from 3.1 times in the prank order.
Now turning to our guidance for the fourth quarter of 2020.
As previously indicated.
Why we believed in your change environment, just like you to read me challenging.
Which we send feedback from customers, indicating that and market d'amato's be going to slowly turned the corner.
Can I projected on view the delivery markets.
Specific to a mobile business, we anticipate another photo of sequential groups and the four quarters.
Actually supports a combination of existing smartphones wins.
And lumped into shipments associated with customers planned launches of your devices in the coming months.
Based on decent order trends on a current backlog, we expect kitchen revenue in the fourth quarter to range between 8.5 million and 10.5 million.
We expect non-GAAP gross profit margin in the fourth quarter of between 48% and 53%.
We anticipate operating expenses and the fourth quarter to range between 9 million 10 million on the beaches.
Please note fourthquarter operating expenses will include the first two cor benefit from a restructuring plan announced earlier this year.
Finally, we expect fourthquarter known gap EPS should be in the range of between your loss of nine cents a named up now.
Most of 15 cents for sure.
That concludes our prepared remarks.
I will now open the call for questions.
Upgrade. Please proceed with management, if you're a new session. Thank you <unk>.
Thank you as a reminder to ask a question you will need to press star one on your Touchtone telephone to withdraw your question press the pound key again, that's star one on your Touchtone telephone to ask a question. Please standby, while we compiled the Q&A roster.
Our first question comes from the lineup Charlie Anderson of color your security.
Your question please.
Yeah. Thanks for taking my question good morning over there in China tub, So I wanted to start with.
The the the investment the strategic investment and then also the new hire in China I Wonder if you could obviously you guys have made good progress them in China today, with Iris, but I'm sort of curious.
What you see it in terms of the relationships enhancement that you get with the with the new higher and then also the new Investor what are some of the relationships that your game that maybe you didn't have before maybe just to be expand on that and then I'll get a follow up.
Okay. Good morning.
You hear me Okay Jerry.
Absolutely.
Okay.
So I don't know Allen's pretty well known within the investment community. If you look at Alex background.
He he he's.
Got a doctorate from M. I T came in and really focused on mm fab development. It to AT&T microelectronics. This at a time when both of US were back there long ago and he traveled around.
As we were expanding fab capacity around the world both in China in Madrid.
He evolved out of that into.
Secondly, running the business in China for Lucent micro at the time and then.
Various other companies here.
The last.
To be half a dozen years, he he transitioned into and.
An investment at all with the last four or five years.
At a private equity firm here in China that was focused on and.
Heavily and focused investment in the compound semiconductor industry, which they call here.
[noise] semiconductor three dato, which they have a big initiative to try to they they feel it is that the the table has not been set on on market share there and there's and there's an opportunity for trying to participate in a much bigger way.
It remains to be seen if they get there, but but Alan was focused in this area for the last four or five years.
So.
You know I've known Allen for awhile highly energetic extremely well connected.
If you look at his near term focus clearly Allen.
Alan can come in and help with.
Bringing localized investment to China and help get our story you know most of our mobile customer base if.
90, plus percent of all of our design activity for mobile is here in China.
There is some activity outside of China, but it's still in the Asian.
Domain and.
You know have an investment focused in pixel works.
That that is on the ground here.
And understands the the dynamic environment is extremely helpful. Extremely helpful. So Alan actually prior to joining the company had been already participating in helping us and.
I expect more to come from Maryland, So that that's probably the background I'd like eating on the island.
As far as them damn.
You know there is there is.
[laughter] so.
So I'm.
I've been in this business I know 35 years and I remember.
In in the U S and in in the Valley back in the mid nineties to 2000, there was a feverish.
Ecosystem in financial.
Industry focused on trying to build up Ah quickly expanding communications semiconductor industry.
Here in China, It feels like that all over again.
And it it it it actually in a much bigger level.
And the way that they go about it is is there is a lot of money.
Maybe has been initially spurred on by by China government investment, but predominantly as leverage by local private money in various different private equity companies and venture capital companies.
Go off and they focus on different areas of the semiconductor market. So some are focused like I said previously in the compound semiconductor industry summer focused in a I.
And the M actually stands for more than more and they're focused on technologies that <unk> that aren't completely contingent on the most advanced process technology out there. So they're they've been looking at censor companies algorithm type environment and companies like us.
Most of our value comes from systems know, how an algorithm development and so we fit in their profile, they're very professional organization they see.
The long term horizon with what we're doing they see the the.
Technology trend of of high frame rate display.
In addition to five G.
Connectivity.
And now.
The the rapid expansion of performance mobile gaming he.
Here in in China, and in India, and see this is a long term trend that picks works is uniquely positioned to participate in.
And so they they wanted to come in quickly we have a lot of interest in the company and and the M. It was clear was it's gonna be a very good partner and so that's why we concentrated to deal with them.
Great. Thank you. Thank you for all the color.
Charles Yeah, Yeah.
Yeah for my follow up I'm Gonna ask you about projector you know this time of year. You guys are doing you know 12 $13 million now we're down around five obviously, there's a big gap to fill their.
For all the reasons were aware of so I guess I'm curious in your commentary it sounded like.
There are some geography is that a recovery and others are gonna taken until mid next year, So I wonder.
You know are those are those joggers that a recovering enough to fill a portion of the gap.
A small portion of the gap just kind of lay out for us how do you think projector trends over the next year.
Well you know remember this is one of those markets that has a a long reaction time too abrupt movements, usually does not that.
This big of an abrupt movement for a market like projector, but you know.
There's there's inventories of existing product makeup of all different you know from 500 dollar projectors to 10000 20000 dollar projectors throughout the world for for large companies like <unk>.
And and others.
And when you have an abrupt movement like this the customers will back off if you go all the way back to food chain, where there by advanced silicon from us.
You know work at least six to nine months down the chain from that project are being sold.
And so.
They had gone into this thing with a fairly robust view that 20 was actually gonna be a rebound year off of.
Somewhat slow 2019.
And so they had started at the tail end of 2019 and 2020 to build up the order book with us and to build up their channel and then you had this abrupt dislocation in the market. So what's happened over the last six months is is the industry is is basically been holding off on refilling the channel.
In addition, they have decided to to put their art indeed of work to to migrate to where they feel the market's going to be so.
A lot of the new product development slightly different projectors high luminance laser based connectivity higher resolution.
So what they Wanna do is bleed out the old inventory of all those channels and then fill the new and I think what you saw so far is is we're we're feeling the impacts of that as they bleed off that channel. So what they're seeing now is is that the uptick is starting to happen in in China first and foremost I mean, I'm I've been here.
<unk>.
Oh, a little over a month now although I spent the first couple of weeks in quarantine, which means I just stay in the hotel for two weeks.
But upon getting out.
This places vibrant and happening.
The businesses back here I mean, they figured out how to contain.
At least in the large cities and and and the <unk>. The the cities are back and vibrant and and moving.
And so schools are back in the educational tenders are are being offered in your scene business here for the projector market, you're starting to see it in the U S to some degree you probably had had some inklings of it kicking back off in Europe, although that may.
Slow down again.
But.
Emerging markets, you know South East Asia, India et cetera, still they they haven't bounce back at all and so I think that's what the market scene and and.
You know the the inventories will be lean so is the market's pop back on we should see demand kick back in we're expecting.
We're expecting a rather robust turned back on you know bye bye.
Q2 of next year, but you know a lot can happen between now and then.
Gotcha, Okay. Thanks, a lot.
Yeah.
Thank you once again to ask a question. Please press star one on your Touchtone telephone again, that's star one on your Touchtone telephone to ask a question.
Next question come from the line of Richard to Shannon have Craig Harlem. Your question. Please.
Oh, Thanks, guys. Thanks for taking my questions, maybe more of a technical question on the guidance for the fourth quarter have been able to run the math here in my head or an excel here very quickly here, but excuse me with the gross margins here at this level and your discussion would suggest most of the growth dollar why should come from mobile she'll be.
Aspect of video up at all or should we think about that flat I guess, you're looking at it from the mid point of view and then from an Opex point of view I wasn't clear to me through the degree to which the restructuring has made an impact in here cause it seems like a minute wait a little bit higher than the last course, if you're going to help us out with run right there that'd be great.
You Wanna start kick off this one lives and I can fill in if you. If you need help yeah. Yeah. Let me give you a rundown on the on the auto X Richard.
Two four.
We will be initiating all the marriage increases so that's that's the increase in the Irish seven starting in Q4, we're spending on.
So it really if you look at the the mid range of the of the Opex guidance is about 95.
That's basically what's happening those are the two big ticket items.
The fourth quarter.
Okay.
Okay.
And then.
I'll I'll take the question Richard I'll take the question regarding the the mix and margin for Yeah, I mean, clearly the margin guidance, given where we just came out of the last two quarters were margin was <unk> was really healthy would suggest that a much bigger portion of.
Of the revenue is coming out of mobile. We also indicated that projectors sequentially. We think is going to be sequentially up so clearly video would be flat to down.
Okay. That's helpful. Second question kind of Ah, perhaps a two part of the room and mobile here you talked about some some wins with your Iris six even before it was taped out could you help us understand the reasons for success, how broad will this be it's access your versus somebody other prior wins and then are you seeing.
Any benefit from you know <unk> to some degree whatever we're calling it the wind down of always mobile business that could help you out of their customers.
So I'll take the second question first yeah, there was a mad scramble right now in anticipation the.
<unk>.
While we will have a significant.
Market share loss in the next six months to a year in their consumer business and so.
There's a view prevailing view that.
Most of those games now if you go look at the last six months of of Wawa's business Uhm, We don't do business with them, but I am an observer.
I think they they still maintained a very healthy position in the global market.
I think as of the end of cute too.
They were.
The second largest mobile phone, but they had <unk>.
Concentrated a lot of that growth near term.
Hear back it in their home turf in China.
And so as as they.
You know are unable to address.
The market demand because the supply chain.
Issues.
A big chunk of their market's gonna go to the other local suppliers alright, and this is.
Xiaomi Opal empty, though.
E. As you know this is where we've concentrated a lot of our effort.
And internationally. All these companies are have had they started a big push and they are accelerating that push too.
Try to capture some of the market that that Huawei held in Europe and.
In South East Asia.
All of these companies were already strong market share participants in India.
But they know we're looking in an opportunity to.
<unk> to capture.
<unk>, where they hadn't really participated in improve their position here and there and in China.
And so with that said I don't think it's just me.
You know, we're a small company, but I think the large participants in this market are probably seen strong order coverage over the next six months probably to the tune where they're a little nervous that everybody thinks they're gonna win that sure.
[laughter]. My guess is you know you know my my old industry B R. F suppliers and other people are probably seen very strong order demand and trying to discern who the winters are gonna be and who aren't and try not to overbuild, but in the near term. It's gonna feel like you know a very hell.
The market.
Although for those that we're.
We're gonna have the downside of not getting business from Huawei, maybe it's more balance for those that weren't doing business with Huawei and only doing business with the others, It's gonna feel healthy.
Healthy.
So that's the market share shift that we're talking about as far as as a strong interest in Irish six you know part of this is we've been now participating in the market. We've had enough healthy response, we'd had really no negative response to anybody incorporates our solution on the phone we've had some.
Really I mean, it's really been positive for like T. C L.
There was a recent you know there's a company called <unk> Mark that does camera benchmarking and they have now kicked off a and they're pretty much use debit they're they're they're benchmarking results are used to for all the different phone manufacturers to go measure how their cameras subsystems due on objective empirical.
<unk>.
And at the end you get a score.
They have now kicked off a display benchmarking the test suite using the trying to do the same thing with objective, but in some cases visual experiences are subjective environment.
And get back to T. C. L. They you know they they evaluated all these best in class phones, and they did a couple of mid tier phones to see how the display and one of them was the T. C O Pearl which is a 500 dollar phone and they benchmarked it against Apple's top to your one plus an opal phones, we were in.
And Samsung Galaxy S twenties and.
This phone's visual experience and it's benchmarking was in the middle of the pack.
Fective Lee you know some of this user scores were better than the 11th pro.
And this is by adding a very low cost, but very compelling solution from pixel works.
And so I think as we've made headway with items like this and and where some of these customers. We're on our third or fourth generation of of design and they've become comfortable that we can execute.
No our last three or four devices that we've done three and mobile and one and projector.
All four of them first silicon work.
No metamathematics so.
So the the customers have become very comfortable with us they know we can execute they.
They anticipate some of the improvements we're putting in these these next visual processors and they were willing to commit programs to us before they software silica. This is new for us.
Every other device generation device that we've had to come out we've had to come out.
Prove how the solution worked demonstrated over and over maybe with multiple panels and then engage in a development process.
So it's just I think it's an evolution of of being persistent and engaging in this market and and it's nice to see that we're starting to earn the trust of some of these customers.
Okay actually talking to appreciate all the details all stuck on one.
Thank you. Our next question comes from the line surgery. The Sofa a rock your line is open.
Hi, Todd Hyalitis, so maybe following up on.
Five other private question with some of the China guys trying to export take some of the sure in Europe and so forth is there a difference we should think about in your content and the drivers of use of your content for domestically targeted phone for China customers versus export phones or shall we think of them as fairly fungible.
Well, a little bit I mean, I wouldn't I wouldn't let me put it this way.
Traditionally on the tier ones that we've engaged with they're focused on either flagship differentiation.
Or.
Or high performance gaming.
Some of the tier two customers that that that are now up and comers and I mentioned Tcl previously, but no keys in this category and others.
They've focused on trying to use us to differentiate in in the mid tier pricing.
Four.
So what you'll see is these large tier one O M. So the first and foremost area that they're trying to expand and is the flagship and high performance arena. If they if they're trying to enter into Europe et cetera. They're you know, they're they're trying to go take some of that business that one way had on the flagship space.
You'll see them follow up with mid to your plus I think you know.
You <unk>, you clearly see a shift.
To.
Lower a S. P phones I mean, some of the phones here you know I've I've gone around and I visited you know there are some.
You know Xiaomi has all their own stores. There are others that are chios, where people should sell through.
The quality of the the two to 500 dollar phone Android phone here is incredible I mean, it doesn't have the newest apy's. It may not have a you know a two K hundred 20 hurts display or the.
The best camera sub system, but it is amazing it will have a six and a half inch full H D plus screen it'll have a pretty good hey, P. All the connectivity.
I think it's gonna be harder and harder.
Or companies to sell.
A device over a thousand dollars, just because not because people won't wanna spend that kind of money, but because the differentiation between the.
A 500 dollar phone and a thousand dollar phone is not as great as it once was it just isn't and and so that you know there's gonna be a lot of effort to go differentiate in this mid tier pack, but to get back to your original question I think you'll see these companies go off and try to established with the flagship in the gaming high performance.
But they'll follow up with the mid chairs.
Got it Okay, and maybe you could kind of circle back to the investment you got recently from M. T M and uhm, what the implications are for your your China mobile and true cut businesses, you know what that perhaps unlocks in terms of relationships. So forth. If he could cover that again that'd be helpful.
Well I mean, yeah.
Yeah, I'm not gonna go on any specifics a.
Maybe give you just a broad understanding.
One of the things I've noticed here is which is different than what I see in the U S is.
Well it.
Did you become a public company I mean really we this company. If you look at today's environment. It's it's like a startup okay, where startup it happens to be a public company. There's been funding these growth initiatives through up to this point you know since my tenure here, we've been doing it through the cash flow.
Two or mature businesses, right and and by doing some scrappy things with I P et cetera, and raising cash outside of looking at outside investment now recently, you know we've gone out outside.
The.
The industry here.
Where it may invest in public or private companies.
Is very much like so the the the private equity is is an active participant in a way that venture capital is an active participant in private companies in the U S.
And I think that's a nuanced that's just might be lost a little bit you know once you become public in the U S. Most of the investment as it comes in a professional investors professional investors.
Aren't really trying to help you improve your business, they're trying to figure out how they put your portion of the investment into a portfolio that serves their client base.
It's much different here.
Alright, they're here, they're a little longer term focused they see a big shift going over the next decade, they're betting for the next decade, not for the next quarter or year and.
Yeah.
They also or well connected with an ecosystem in industry and if they can help you.
Your business and thus their investment.
And they'll do so.
Okay.
I don't want on the specifics aimed yeah, but I I've taken investment here is the reason the reason we went in pursuit that investment here is because of the attribute so I just explained.
Okay. Yeah, that's that's fair enough alright, thanks, guys.
Thank you at this time I'd like to turn to call back over to management for closing remarks.
Alright, well.
Thanks for the interest it's early morning here I'm Gonna go get a second cup of coffee enjoy your afternoon in the U S. Thank you.
Thank you.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
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