Q4 2020 Pixelworks Inc Earnings Call
Good day, ladies and gentlemen, and welcome to the pick Celebrex, Inc. Fourth quarter tiny tiny earnings conference call I will be your operator for today's call at this time, all participants in a listen only mode.
From a management 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 fix them free CFO Mr Alliance Theatre.
Thank you.
Good afternoon, everyone on thank you for tuning in to today's call.
With me on the call to start the bonus pixel works President and CEO.
The purpose of today's conference call is to supplement the information provided in digital works. This press release.
It should earlier today announcing the company's financial results for the fourth quarter of 2020.
Yes.
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 on market trends and our competitive position constitute forward looking statements.
These forward looking statements on all of the statements made on this call that are not historical facts.
Subject to a number of risks and uncertainties that may cause.
<unk> results to differ materially.
All forward looking statements are based on the company's beliefs as of today Thursday February 11 2021.
The company undertakes no obligation to update any such statements to reflect events or circumstances occurring after today.
Please refer to today's press release.
Oh annual report on form 10-K for the year ended December 31 2019.
And subsequent SEC filings.
For a description of factors that could cause forward looking statements to differ materially from my children zone.
Additionally, the company's press release and management statements during this conference call.
It will include discussions of certain measures on financial information on GAAP and non-GAAP terms.
Including gross margin.
Operating expenses net loss on net loss per share.
Non-GAAP measures exclude the inventory step up on backlog amortization.
Amortization of acquired intangible assets stock based compensation expense.
And the restructuring expenses.
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.
On the underlying cash flow dynamics.
We caution investors to consider these measures in addition to.
I'm not as a substitute for nor superior to the company's consolidated financial results as presented in accordance with GAAP.
Also included in the company's press release are definitions and reconciliations of GAAP to non-GAAP net loss.
And 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 those joining us on today's call on webcast.
As outlined in today's press release, our Q4 results were in line with our expectations and all metrics coming in near or above the midpoint of guidance.
Revenue increased 18% sequentially driven by the second consecutive quarter of solid growth in mobile and an initial recovery of customer demand on the projector market.
Reflecting on the full year the global pandemic has had a pronounced impact on end market demand across each of our target markets.
Which contributed to heightened uncertainty among our customers.
Despite the challenging environment and lower revenue, we maintained healthy gross margins in the low to mid 50 per cent range for the year.
We also carefully manage expenses and cash while continuing to fully support our customers and without impairing any critical R&D programs.
Additionally, during the fourth quarter, we successfully closed a.
Our strategic private placement with a private equity investors and completed a follow on equity offering, which together generated net proceeds of $18 $9 million.
As a result, we ended the year with a stronger balance sheet and $31 5 million in cash and zero debt.
Mobile revenue grew for the second consecutive quarter, increasing nearly 50% sequentially.
Overall conditions and visibility on mobile in the mobile market began to improve in the second half for the year.
As both consumers and Oems adjusted to the new Covid environment.
Even show 'twenty 'twenty remained a down year for the handset industry with global smartphone units decreasing an estimated 8% year on year.
And unit shipments in China for the full year down an estimated 20 per cent compared to 2019.
During the course of the year Oems delayed or cancelled numerous planned phone launches and while the rollout of five G enabled smartphones begin to gain momentum in the second half of the year total five G units shipped proved to be much lower than was forecast entering 2020.
Another notable trend was the introduction of the first mainstream handsets to feature higher frame rate displays couple.
Coupled with a broader shift by Oems from LCD to on the led <unk>.
Players due to an increased availability and more competitive pricing.
Against this market backdrop, we successfully drove increased adoption of pixel works visual processing technology across an expanded customer base in multiple tiers of smartphones.
For the year pixel works technology was incorporated into 16 models launched by seven Oems, including our first tier one opal.
This compares to six smartphones lost across for mobile OEM customers in 2019.
Another highlight of the past year was the notoriety associated with a series of smartphones launched.
Launched by customers, such as one plus and T C L.
Which were recognized by third party experts as having the best display performance in several categories of merit versus models across leading Oems at any price point.
Additionally, late in the third quarter, we unveiled our sixth generation I six processor.
The first to incorporate our AI based adaptive picture quality.
This was also the first time in pixel works history. The design ins had been secured for our new mobile chip before it was sampled.
Since formally introducing the I six we secured an increasing number of design ins on customer programs with planned launches later this year.
We expect the first smartphone to incorporate our <unk> processor to be launched before the end of the first quarter.
One of our ongoing priorities has been to proactively utilize the shifting market dynamics as an opportunity to become more deeply engaged with our customers on expanded programs aimed at differentiating their next generation models with exceptional visual display quality.
It's one of the many positive byproducts from these efforts in January we announced an expanded multi year collaboration with T. C. L to incorporate pixel works visual processing and their planned next generation smartphone models featuring Tcl's next vision displays.
As part of this collaboration Tcl will be among a growing list of customers to utilize our ice six in upcoming models that are planned to be launched in 2021.
More broadly three prominent.
The trends are set to influence large portions of the mobile market in the coming year.
First is the ongoing but more pervasive rollout of five G enabled handsets.
As discussed on previous calls the most obvious applications for levering leveraging the substantially higher bandwidth and low latency of five G. In mobile devices is high quality video and gaming.
Simultaneously market data indicates that global consumer appetite for thousand dollar plus phones is shrinking.
As a result.
We expect mobile Oems to aggressively push five G technology down the cost curve to lower price models, which in turn opens the value proposition of pixel works visual processing to an expanded share of the total handset market.
The second trend gaining momentum is around color calibration.
As mobile Oems increasingly shift away from LCD panels, and a majority of next generation models feature high resolution high color OLED panels customers are actively looking to differentiate differentiate these OLED displays from the competition.
This trend is driving many Oems to pay closer attention to color accuracy, which can only be achieved through color calibration of each individual handset display a traditionally tedious time consuming and costly process that all but a few Oems have historically chosen to forego.
This represents a meaningful and growing opportunity for pixel works is our patented color calibration solution is a standard feature across all.
Across our entire family of mobile processors. In addition to our software only solution soft Iris.
Not only does our proprietary solution delivered the highest color accuracy scores on the industry.
But it also enables more efficient color calibration of each handset for Remanufacturing Cigna.
Significantly reducing the time required for calibration testing and in turn lowering the cost incurred by Oems.
The third and potentially most disruptive trend unfolding in the coming year is mobile gaming.
Well pixel works technology is being incorporated into many gaming phones released over the past two years the influence of gaming and the estimated two and a half billion smartphone users that play games on their mobile devices has only scratched the surface of what lies ahead.
China, which accounts for 25 per cent of the estimated 74 billion dollar mobile gaming market is projected to reach 637 million users by 2024. According to Nico partners May 'twenty 'twenty report.
Concurrently revenues in the fast growing cloud gaming segment in which mobile is the largest subset is forecast to triple from $4 billion in 'twenty 'twenty $1 billion to $12 billion in 2025.
In conjunction with extremely low latency offered by the rollout of five G. Smartphone Oems are aiming to capitalize on this expanded segment of the market.
Leveraging pixel works industry, leading and patented mimic technology, we are enabling a PC or console like gaming experience on a smartphone.
Moreover, we have a meaningful and first to market advantage for mobile gaming with our ability to deliver sustained higher frame rates at very low power.
Unlike relying on the AP only alternatives our solution avoids the need to step down frame rates or other performance throttling related to thermal or powered budgeting.
In addition, our visual processing solution provides a unique capability to offer end user customization of display attributes on their personal device.
While this mobile gaming opportunity that does include new dedicated gaming phones. We are also engaged with multiple Oems that are targeting to release mainstream devices that readily support high performance gaming mode or use case.
Taking this a step further we are currently in advanced joint collaborations with specific Oems and other leading platform providers within the gaming ecosystem.
To enable an immersive experience in the next generation of high frame rate mobile gaming.
Imagine a scenario in which gaming content could be specifically designed to take full advantage of pixel works advanced motion engine and AI adaptive display technology.
This is something we've been working on throughout 2020, and you'll be hearing more about it in the coming months.
In terms of broader mobile pipeline.
We remain closely engaged with an expanding customer base and we continue to secure a growing number of design ins on upcoming smartphones.
These collective engagements are comprised of increased penetration at existing customers across multiple tiers as well as programs that are in advanced stages with two new customers, including our second tier one mobile the mobile OEM that is scheduled to launch its first phone incorporating pixel works for visual processing in early spring in the <unk>.
Early spring time frame.
Well, it's still very early in the year.
We are on track with active mobile programs that represent an opportunity to double the number of models launched in 2020.
With the majority of these programs planning to feature high frame rate displays.
With our value proposition gaining broader acceptance. We currently anticipate triple digit revenue growth in both our visual processor and software only solutions this year.
In our markets, a projector and video delivery.
The weaker end market demand associated with the pandemic, which started out as an inventory correction continued throughout last year.
Following the multiyear low unit volumes in the third quarter, we began to observe improving order patterns from our lead projector customers in the November December timeframe.
As a result revenue grew sequentially in Q4 as customers started restocking unusually low inventories in response to some improving demand in certain geographies include including more normalized buying patterns in China.
Yeah.
We have recently seen customer slowly raising their demand forecast for 'twenty 'twenty one.
While we are encouraged by this recent improvement and believe it is likely to continue on the coming quarters, we still anticipate a broader recovery in projector in the projector market to be gradual for several reasons.
First improved demand in the emerging markets is likely to lag behind those in the developed markets shut such as China and the U S.
Second education applications remain the single largest driver for total projected unit volumes globally.
Therefore, the trajectory of the demand recovery will depend on the evolving decisions around in person versus remote learning at various regions around the world.
Another consideration and likely factor that may slow the pace of recovery within projector is the widely reported tightness of supply within the broader semiconductor industry.
Well, we've secured capacity to support customers' orders in Q1 challenges remain for the remainder of the year.
We are actively working with both our foundry in assembly and test partners to mitigate the impact on the recovery of the projector market as well as support the rapid growth of our mobile visual processor demand.
We anticipate that this effort will result in higher product costs that we will plan on passing on to our end customers.
Yeah.
We remain well positioned in terms of design in activity with customers on next generation projectors, including a growing number of innovative laser models with higher brightness and resolutions.
In addition to enabling many of these advanced features average selling prices for a project or SSC solutions have increased as customers migrate upstream towards higher price trajectory units.
Regarding video delivery market, we've begun to see renewed but gradual improvement in activity from both our Japanese OEM customers as well as increased order uptake from our leading customers for OTI devices here on the U S.
As stated in past, earning calls cord cutting in the U S continues to grow as consumers abandon cable in favor of a combination of OTT streaming services and live local Otas solutions, Inc.
In fact industry forecasts and their 5 million U S households will cut the cord over the coming year and increased by a similar number again in 2022.
Shifting to an update on true cut.
The ongoing COVID-19 mandates in the U S and specifically here in California significantly slowed the engagement process with prospective customers and partners.
Absent the pandemic I'm confident we would have had been able to communicate better progress on 2020.
That said, we have sustained ongoing dialogue with a number of prominent studios and streaming service providers and.
And we have meaningfully advanced the depth of a few of these engagements in recent months.
Underpinning these engagements is growing momentum of direct consumers are streaming.
Which is increasingly raising the stakes for the entire ecosystem competition among streaming service providers for a share of consumer's wallet and hours spent watching stream content makes differentiating direct to consumer offer offerings critical.
Which magnifies true cuts value.
To the consumer.
To our knowledge true cut remains the only comprehensive and commercially scalable solution that enables content to be created delivered and viewed.
With consistent artistic intent, including resolution color tone and motion.
On effectively any true cut certified displayed about device.
From a theater size screen T V or a smartphone.
We believe that we're on track towards securing an important first win with true cut in the U S. Even though the timing remains difficult to predict.
Therefore, we will continue to encourage that investors and analysts not try to model. It in our forward revenue estimates, perhaps the best way to convey our ongoing progress with true cut is to walk you through our current customer example.
Today, we have a pixel works developed server equipped with our suite of true cut tools on site.
Large prospective customer.
This company is actively conducting a meticulous evaluation of true cuts capabilities like critiquing samples of their own content remastered and the true cut format.
And then that content is reviewed on a theater size state of the art LCD display.
Well I'm not going to go in and expand further on this ongoing evaluation I believe it demonstrates the level of attention and interest that prospective customers have and the potential benefits of true cut.
We continue to have increasing confidence this technology will be deployed in the near future.
In closing.
We have successfully navigated a difficult year in which the pandemic negatively impacted demand in all of our end markets.
Despite the challenging environment, we maintained our existing customer base and market share on the projector market, while making significant inroads in mobile.
We've recently seen stabilization and initial signs of recovery in our non mobile business.
And mobile is positioned to deliver record revenue in the current quarter and continued sequential growth in the coming quarters.
We launched our newest <unk> visual processor, and we remain well aligned with prevalent my market trends in mobile and the Roadmaps of our mobile OEM customers.
We're starting the year with a robust pipeline of design ins and engagement on new programs.
Over the coming year, we anticipate devices to be launched by both our existing and several new Oems, including our second tier one customer.
Importantly, we believe pixel works has a sustainable technology advantage in mobile and we are actively working to further extend this advantage with the introduction of the new first ever gaming features for advanced mobile devices later in the year.
And the more immediate term and over the next couple of months, we're primed to benefit from a series of newly launched phones across a number of OEM customers that are seeking to challenge the existing boundaries of visual performance on mobile displays.
With that I'll hand, the call over to Elias to review fourth quarter financials and provide guidance for the first quarter.
Thank you Todd.
Revenue for the fourth quarter of 2020.
Well, its $9 6 million compared to $8 2 million in the third quarter of 2020.
And compared to revenue of $16 million in the fourth quarter of 2019.
I'll start indicated in his opening remarks.
Fourth quarter 2020 revenue, primarily reflected solid sequential growth in mobile.
Coupled with an initial recovery of customer demand in our projector business.
The breakdown of revenue in the fourth quarter was as follows.
Revenue from digital projector was approximately $5 9 million.
Revenue from mobile was approximately $2 1 million comprised largely of sales of our visual display processor on software solutions.
Video delivery revenue was approximately $1 6 million.
Non-GAAP gross profit margin equaled 49, 6% in the fourth quarter of 2020.
Compared to 55, 6% from the third quarter of 2020.
And 48% in the fourth quarter of 2019.
The sequential change in gross margin was mainly due to product mix with a higher contribution from mobile.
Non-GAAP operating expenses increased to $9 5 million in the fourth quarter of 2020 compared.
Compared to $8 9 million last quarter on $10 4 million and it shouldn't period last year.
The majority of the sequential increase in Opex.
It was due to employee merit increases in China.
Competition for talent is heating up on ramping up of expense associated with next generation visual process of development.
On a non-GAAP basis.
Fourth quarter 2020, net loss was $4 9 million.
Our loss of 11 cents per share.
Compared to a net loss of $4 6 million or a loss of 11 cents per share in the prior quarter.
On a net loss of $2 3 million on loss of six cents per share on the fourth quarter of 2019.
Adjusted EBITDA for the fourth quarter of 2020.
It was a negative $3 8 million.
Compared to a negative $3 five minutes on the third quarter of 2020.
And a negative $1 7 million in the fourth quarter of 2019.
Moving to the balance sheet, we ended the fourth quarter for 'twenty and 'twenty with cash cash equivalents on short term investments of approximately $31 $5 million.
Compared to approximately $16 8 million at the end of the third quarter of 2020.
Yeah approximate breakdown on the $14 7 million on increase in our cash balance quarter over quarter was as follows.
Net proceeds of $6 2 million from the strategic private placement with M to M on combined net proceeds.
Approximately $13 5 million from the follow on equity offering on shelf stock through our ATM vehicle.
That we completed during the fourth quarter.
Which were partially offset by the repayments of for previously outstanding balance for $4 million.
On a net on our existing line of credits on approximately.
Europe on 5 million cash used from operations.
Note. Please at quarter end picture walks have no long term debt on zero outstanding balance on our line of credit.
Yeah.
In terms of other balance sheet metrics for the fourth quarter day sales outstanding were 44 days at quarter end.
This compared to 60 days at the end on the third quarter.
Inventory turns was six times in the fourth quarter up from three three times in the prior quarter.
Now turning to our guidance for the first quarter of 2021.
Based on recent order trends on our current backlog, we expect total revenue in the first quarter to range between <unk>.
8 million net $10 million.
We expect non-GAAP gross profit margin in the first quarter.
Of between 42% on 45 per cent.
Yes.
We believe this lower anticipated range, which is below our historical trend would.
It will be temporary on.
On unique to the first quarter of the year due to record revenue from mobile.
Bind with low pricing for the first models from a new OEM.
And low absorption in Q1.
As we progressed through the year, we expect a better margin profile for mobile.
As we drive cost efficiencies on ramp higher production volume.
Volumes are for <unk> chip.
Additionally.
The expected gradual recovery in our projected and.
In our projector business will contribute to improving margins.
As order patterns continue to normalize during the remainder of the year.
Finally, as Tom mentioned, we will be passing on the cost increases associated with detecting on the supply chain.
All of this.
With improved absorption due to a higher revenue should result in quickly getting back to our previous year's corporate margin profile.
We anticipate operating expenses the first quarter in between $9 5 million on $10 5 million on a non-GAAP basis.
We anticipate a sequential increase in opex.
It was mainly due to planned hiring both engineering on marketing.
To support our expanding mobile projects in China.
As well as higher expected traveling on expenses as we get back to normalcy.
Finally, we expect first quarter non-GAAP EPS.
To be in the range of between a loss of 10 cents on a non-GAAP loss.
On <unk> 14 per share.
That concludes our prepared remarks, and we will now open the call for questions. Thank you very much operator. Please proceed with managing the Q&A session.
And then if.
If you ever comes from.
Yes.
That's fine.
Hum.
Good question.
It's true.
Yourself from the queue.
Hum.
For our first question is from Sugiyama.
From Roth capital.
Judy your line's open.
Hi, Todd higher lines get to hear the business.
Back here.
First question on.
The first question on the supply chain tightness, any particular segment overly impacted by that or is it across the board as mobile in particular being impacted.
But some of the new customers coming out the gate.
You know so.
There's two aspects to supply chain that impact us and our that's our investors one is our ability to supply, but another is the ability of the other suppliers to our customers and will it affect models that they're trying to launch.
In general what I would say is more.
Most technology that gets put on advanced smartphones today is is fairly leading node technology I mean.
Clearly the Aps and modems are the most advanced nodes.
Some of the supporting chips like ours are in fairly advanced nodes, you know our newest chips for them.
<unk>.
The most advanced node that the TSMC offers for ultra low power.
It's called 22 nanometer U L P.
You know there there's clearly Uh huh.
And for cash that demand for these nodes, but it is not as severe.
As some of the other legacy nodes that are out there and so I would say our projector business.
We have products that some very some old legacy products that are on 90 nanometer I don't think that that much that legacy node, probably not affected 55, and 40 seem to be the most acutely affected.
Which which.
You know a good chunk of our chips are in.
But we are also not someone that came in with a bunch of upside demand.
Well, we're not scrambling to qualify our chips from another fab that was in another country.
We've been a long term partner and.
We're pretty stable with our forecast and were weak.
We go out of long lead time with our forecast in order so.
We're definitely going to feel the impact, but I don't think we're going to feel it as great as others.
The question is how much demand how much increased demand will come.
From projected this year, how fast the recovery will happen.
If it was a quick recovery I'm sure that we.
We would we would have difficulty supplying them the heavier ramp than we currently anticipate because of the supply because at least in Q2 and Q3, we'll see how long it takes two a day.
I mean right now.
We're feeling comfortable.
Okay, Great. Todd This is maybe kind of a more broader general question, but I'll try it anyway, but the game. The game developers you said would leverage pixel works as processor without being explicit kind of software tool mechanism or just implicitly as they as they tried to mobile gaming and then also things like Disney plus the Paramount plus.
I'm curious if that's kind of driving your more bullish comments on true cut on mobile.
Processor in general.
Okay I didn't quit completely for the second question, but let me dress. The first question for so we can come back for the final question.
The regarding mobile gaming, what we're referring to and I don't want to go into too much detail because at some point, we will have formal announcements with ecosystem partners and we will have product announcements.
So I don't want to front run either of those too much but what I am suggesting is if you really look at how games are delivered to the mobile market today.
They're most games are developed to our game engine.
Okay. Some of the large game engine providers for the mobile marketplace or companies like unity.
Unreal.
Some proprietary gaming engines from the game companies themselves right like Tencent.
And so they they design games to a game engine because it allows them to bring out new derivatives of those games much.
<unk> than they would if they had the design the game from the ground up.
So if.
We worked with gaming the gaming engine engine ecosystem.
To provide an SDK.
Net unlocked.
Capabilities.
That as long as our chip was on the phone.
That would.
Demonstrate certain performance enhancements that otherwise you could not unlock unless you targeted that SDK.
That's sort of what we're talking about.
Okay. So the gaming manufacturers would still have to engage and want to optimize their game towards the SDK that would interface to our visual processor.
But it would be much easier for them to do that versus if we if we engage with the gaming ecosystem the game engine developers.
What was your last question.
Sure that just reminds me of Nvidia is positioning.
So it sounds like the last question was separate and really.
Things like Disney plus and probably months losses that driving some of your more bullish comments on.
On things like true cut and the mobile ramp.
Hum.
I mean, clearly the moneys flowing towards large streaming service providers that also are the largest spenders of content creation.
But just the money flow itself is not what's making us optimistic what's also making us optimistic.
Is.
The companies that run these large platforms.
<unk>.
Have finally become aware of the acutely aware of the problems. If you go look and usually when a technology provider comes out there trying to solve a problem.
And we.
We were trying to solve several problems with true cut.
In some cases one of our challenges early on was getting these content creators.
On to recognize that this was an acute problem.
What's making us optimistic is as larger flat panel screens go out and the amount of content being consumed on these flat panel screens dramatically increases.
The problems that we've been trying to educate the market on.
Have.
Become very apparent.
And so the people that were engaged with on trying to demonstrate the value proposition of true cut.
Clearly get it now.
They get the problem, we're trying to solve and they acknowledge.
Our tools solve the problem.
Okay very helpful. Todd I'll jump back in the queue. Thanks, guys.
Thanks, Susan.
For next question, we have reached strength from Craig Hallum.
Your line is open.
Great. Thanks, Todd for lives for taking my questions.
Just a very quick one on the guidance here I'm trying to read the tea leaves here it sounds like you're suggesting mobile should be up to some degree in the first quarter and probably projectors down I'm not sure about total video delivery is that is it kind of a way to think about any more detail you want to provide for us there.
No.
You know pretty much it seasonally so you know this that seasonally projectors always the weakest in Q1.
Given the Japanese.
Full year okay.
In and we expected.
Hey.
They have been forecasting a rather dramatic inventory rebuild starting in Q2.
<unk> started two to wake up to the <unk>.
Supply shortages around the world, we gave them a little bit of a heads up and I think they they woke up as well so.
They would probably take a lot more in Q1, if we could supply it right.
But that's just because they're interested in getting in front of it plus they clearly understand their prices are going up.
Right because.
That's what's going to happen in an environment like this prices go up for semiconductors.
And so of course, if they could buy more prior to the price is going up they would love to do so.
But yes traditionally Q1 is it is our low quarter and then it grows from there I think you know you'll see that happen again.
And then video deliveries is also a seasonal thing.
So yes, a combination of those two.
If you look at it sequentially from Q4, or I think slightly down from.
Maybe even a little more than slightly down, but mobile is up considerably.
Okay. That's helpful detail. Thanks Todd.
Maybe a quick question on true cuts.
Well, maybe Richard I hate to interrupt you I apologize, but I don't want to give you one more clarification on this because it's not just the mix between mobile and our other businesses.
Our mobile business is specifically in Q1 is also heavily weighted with a program.
Where a win.
When we engaged with that customer in that program we.
We gave them a pretty aggressive price to kick the whole program off.
And so that pricing.
I would say that our mobile margins are abnormally low for Q1, we don't expect that to continue.
As mobile grows we expect actually margins to expand.
Okay.
Because of this this unique situation we have in Q1.
So sorry about interrupting your Richard Noll from.
No problem. That's helpful. I was kind of gets me on was the case, but thanks.
Quick question on true cut you had some good detail on your prepared remarks Todd.
I guess I was I was expecting at least addressing.
Situations like that you seem to allude to in the last conference call about our progress from China, and you seem to largely address just a the U S.
Opportunity here can you kind of give us a sense of the relative progress on those two geographies and where do you expect to see the first kind of full license with a major studio or streaming provider.
Sure. So we still have a lot of activity in China. In fact, we signed a deal with us.
Ah.
Our value added reseller that debt.
Prominent in the.
Selling their tools too.
And these are encoder decoder tools to the to the broadcast markets. So broadcast companies that want to take their broadcast content and then in coded to be streamed simultaneously to the broadcast network.
And they want to move to high frame rate and and for Caged you are and so there they are strongly looking at it.
And they can do it on a channel by channel basis. So we've enabled the.
Our bar there to be able to resell true cut.
On a channel by channel basis.
So look there's still activity going there.
We're engaged with them.
Some of the largest short form video providers on the planet with formal evaluations on the technology, especially moving to high frame rate, they're very interested in high frame rate.
But with that said.
I think the more compelling.
Opportunity for US is here in North America.
Yeah.
And so that's I chose to talk about North America, and I would say, we're still you know.
We're a small company.
With reasonable.
Reasonable resources, but limited.
We did raise money to to make give ourselves the capability to not be as limited as we were before the capital raise and we will continue to look at partnerships et cetera. So that we can expand.
As in pace with the level of the opportunities, we're engaged with which could be significant.
But with that said, we still have to be choosy on where we put our resources. We do not have unlimited resources and so we will target our resources, where we feel we have the most compelling opportunity.
Okay. That's fair enough. Thanks for the detail My last question Todd is kind of a two parter on mobile here, obviously have a very high profile tier one customer you announced about a year ago and you just mentioned the second when you're ramping up here.
It sounds like very soon here, how do we think about first of all with existing tier one customer how your how your are proliferating throughout there.
On their portfolio and then how can you characterize the use.
Use case and the range that are that you may be getting in with the second tier one.
Okay.
Oh, I don't want to go into too much detail because all front run the announcement.
But I will say that the second.
Tier one.
When we engage with these tier ones, they're large right. They they have several product lines that target various different elements of the market.
With Opel a lot of our.
Coverage right now has been in the flagship arena I would say right and we're moving into the premium arena.
With this new tier one.
They're gonna go.
Accentuate a slightly different area of the market and they are focused on using pixel works to help accentuate. These phones in that portion of the market, It's a big deal for them.
Okay, we'll look forward to hearing about to that isn't that's all the questions from you Todd. Thank you.
Thank you so much rich thanks Richard.
Again, ladies and gentlemen, if you would like to ask a question press star one on your Touchtone telephone again star one on your thoughts.
Todd.
Okay.
Okay.
Got it.
Isn't that cool.
We do have another question, it's from John Roy from water camera.
John Your line is open.
So I'm very interested in the color calibration you were talking about and so I kind of wanted to get a feel for.
How much it's in use today within the 60 models that are out there and if it's not a lot do you see it is gonna be a differentiator for you going forward them because differentiation is obviously a very key element.
Hey, John Thanks for the question actually it's pretty good question.
<unk>.
Yeah.
I wasn't prepared to answer that question I'm trying to think of in my mind, how many of the 16 models actually use we offer it to all of them okay.
But you know and if they buy the solution. It's included you know if they are buying our hardware. It's included if they buy the software. That's the only reason you buy the software.
The old.
The only reason it's the most compelling reason, we'd do some other things with our software but that is the most compelling reason you buy the software.
But but.
It's not you.
You'll also have to go make a commitment to put in.
Capabilities in your manufacturing test line to <unk>.
Cash certain color points within every screen manufacturers' now, we do that more efficiently than anybody else that has attempted to do this and so we are by far the most affective weighted to implement this but it still comes at a cost not all of our customers want to incur that cost, especially if they're targeting.
Two or 300 dollar phones, which we have customers that target 200, they're not going to calibrate those phones.
We have some customers that I would say in the mid tier range want to do an average calibration. So what they'll do is they can go in and take.
Try to take a sigma sample of their.
Their production and they sort of have to work with the display vendor to do that so one that hit a certain color capability of mid range couple of capability of local color range capability and then we will calibrate those couple of phones and we'll come up with a.
Sort of a calibration format for them that will give them better color accuracy across that spectrum, but it doesn't calibrate every phone that you don't have to test every phone right. So it applies sort of on average algorithm across the phones and then and then the third element is just to calibrate every phone.
And I would say.
Every flagship customer every flagship phone that we've been designed into Calibrates every phone.
They definitely if theyre going to play at that level, they want to do that and I think that will continue.
So even though I don't know the exact quantity I could probably go get it to you, but that sort of gives you some answer and I you know.
I E.
It is calibration important going forward it absolutely is and the flagship it's moving down to the premium level and then if this is ware.
This is where it gets really interesting if we are successful with true cut.
And you now are optimizing the content.
So that you ensure.
Accurate creator intent to be displayed on these devices.
And it will be not just phones, but T v's and could be theater size devices et cetera.
The phone manufacturers will probably be more compelled, especially if our customers are the largest streaming companies in the world. They will be more compelled to want to have their displays color.
Color accurate and calibrated and and your color on accuracy.
Well, we would hope it's our color accuracy right now I think I would I would say that I do want to be clear that we are not the only one providing.
Color accuracy algorithms in the market some AP vendors bundle it with their a piece.
That's really the only one right now that we compete against I might my guess is there could be other competitors, but we benchmarked ourselves when we benchmarked ourselves not only with the result, but.
How much how many how long does it take the test the phone to get the accurate results and today, we're a third.
<unk> that our closest competitor is so if somebody serious about this they use us and the story.
Great. This is perfect color. This is what I was looking for some type of a barrier to entry and on once they've been to lock in but.
On the element that you now points to wins that you'll get thank you very much.
Well, maybe I'll give you one follow on net debt. So it is so compelling that.
In many cases I get customers that we wanted to engage it it still takes resources from our side, if we do a software only engagement.
And.
Over time, I've pushed because we would try to prioritize where our resources can go that okay, well, if you're designing and a full suite of visual processor and software and then we get more leverage on our resources as far as the revenue per phone.
Right and and our customers are constantly pushing me to do certain.
Certain things they they definitely want the capabilities of the hardware, but theres. Some phone models that they're like Wow I sort of like the hardware, but I definitely have to have the software, but I really only want the software can you just give me the soft from I'll say no.
You take both or none there's others customers that I'll say, okay, I'll do it but we're going to do it at these prices in this engagement.
Every customer is a battle right. Some customers, we have a longer strategic relationship with and its over many phones and I'll be more willing to do software only engagements with them other customers. It's no it's hardware nothing.
Right. So anyway, there's a little follow up to you. So I would say net we have right now we have sounded like we have found we have found it to be pretty sticky.
Thank you Todd.
Youre welcome Thanks for the question.
I am showing no further questions at this time on the like it's nine o'clock from back to the management for any.
Closing remarks.
Okay, Thanks, everybody for their patience and listening and and definitely a patients through a very difficult 2020.
2021 is looking like a brighter future we still have to.
Navigate through the supply chain shortages, but.
It is looking pretty bright right now so thanks for your patience and time to all of those investors out there that have been with us through the thick and thin.
Ladies and gentlemen, this concludes today's conference call. Thank you all for participating you may now disconnect.
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