Q3 2021 Pixelworks Inc Earnings Call
[music].
Good day, ladies and gentlemen, welcome to Pixelworks, Inc. Third quarter, 20th 21 earnings Conference call.
I will be operated for todays call.
At this time all participants are in a listen only mode.
How many management prepare.
Yeah.
This call is being recorded for recently purposes.
I'd like to turn the call over to Pixelworks C. F O mystery lies meter.
Thank you.
Good afternoon, everyone and thank you for choosing in to today's golf.
With me on the call Stubbed, a bona pixelworks presidents at G O.
The purpose of today's conference call Us to supplement the information provided and picks it all works this press release.
It should earlier today announcing the company's financial results for the third quarter of 2021.
Before we begin I would like to remind you that various remarks, we make on this call, including those of us that projected future financial results economic a market trends and our competitive position constitute forward looking statements.
These forward looking statements on all other statements made on just called 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 company's beliefs as of today Tuesday November 9th 2021.
The company undertakes no obligation to update any such statements to reflect events or circumstances occurring after today. Please.
Please there's lots of today's press release I'm going to report on Form 10-K for the year ended December 31 2020.
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 automatic misstatements. During this conference call will include discussions of certain measures and financial information in gap Ah non-GAAP terms.
Clothing gross margin operating expenses net lost a net loss for sure.
Non-GAAP measures exclude amortization of acquired intangible assets.
Stock based compensation expense and restructuring expense.
The company uses these non-GAAP measures attorney to assess our operating performance.
We believe these non-GAAP measures provided meaningful perspective on a call operating results and underlying cash flow dynamics with caution investors to consider these measures in addition to.
Not a substitute for.
No. It's just video to the companies consolidated financial results.
As presented in accordance with GAAP.
Also note throughout the company's press release and management of statements. During this conference will refer to a net loss attributable to Pixelworks ink are simply net loss.
The company's press release, our definitions and reconciliation of GAAP to non-GAAP net loss.
GAAP net lost adjusted EBITDA would provide additional details.
With that said I will now turn the call over to talk for his opening remarks. Thank you.
Thank you Elias and good afternoon.
One morning to everyone on the phone and webcast today.
As reported.
Press release earlier today takes a work had a solid quarter as we extended our recent momentum with sequential growth in each of our end markets.
Revenue increased for the fifth consecutive quarter to reach another quarterly record and combined with a sustained recovery and the projector market resulted in our highest quarterly revenue since the onset of the pandemic.
Total revenue for the quarter was up 85% year over year.
Gross margin expanded over the prior quarter driven by a combination of improved overhead absorption as well as our ability to pass a portion of the higher material costs to customers.
We also held opex flat sequentially contributing to another quarter of improvement in our bottom line results.
Also during the quarter, we closed on the previously committed investments and Pixelworks Shanghai subsidiary from a combination of private equity and new strategic investors as well as most of our employees.
In total we brought in the equivalent of approximately $40 million in net capital investment at a premium valuation.
Significantly strengthening our cash balance and overall financial position.
Since our last conference call. We have continued to finalize on a strategic realignment by transforming our Shanghai subsidiary, which has served as our primary r&d's are for many years into an established profit center, while maintaining majority ownership by picks It works Inc.
To briefly reiterate the rationale our strategic realignment accomplish several objectives that further supports accelerated longterm growth.
First.
If facilitates direct employee equity ownership and Pixelworks Shanghai.
Which provides a critical advantage for attracting and retaining key talent.
In a highly competitive China labor market.
Second it consolidates Pixelworks resources and focus on our mobile projector and video delivery businesses in Asia, bringing us closer to our core customers.
And as I just highlighted the reworked operating structure provides access to new sources of capital as well as the alignment with strategic investors and ecosystem partners on new potential opportunities and adjacent markets.
Finally, it positions us to address specific qualification requirements for the Pixelworks Shanghai subsidiary to pursue a future IPO enlisting on the star market in China.
Specific to the pursuit of an I P O and listening for Pixelworks, Shanghai I want to reemphasize that this is a lengthy process that requires meeting certain regulatory criteria and multiple periods of review.
Consistent with our previously communicated plan, we estimate the earliest we could apply for a listing would be the second half of 2022.
Turning to a review of our end markets.
And beginning with the mobile business.
During the quarter, we continued to extend our momentum and mobile achieving another consecutive quarter of growth and new Ah New quarterly record mobile revenue in the third quarter and for the first nine months, both increased more than 200% over the same periods in 2020, driven by growth from both our Iris hardware and soft Irish solutions.
One of the contributors to our growth in Q3 was the ramp of our most recent win with vivo on their Ike who brand eight series smartphones.
The incorporation of Pixelworks X five co visual processor in the IQ series eight builds on previous success of our first ever win with Viva when the haiku, Neil five which was launched earlier this year.
As the flagship device and the new eight series the <unk> a pro features that six eight inch slightly curved on the led screen and is capable of one to 120 Hertz variable frame rate adjustment with resolution a 14 40 by 3200 pixels.
Following an extensive lab tests and measurements. This smartphone earn display mates highest display performance great of a plus while also setting 14 performance records.
All phones in the <unk> eight series leverage Pixelworks content optimized motion estimation in motion compensation mimic to combine ultra smooth motion with high refresh rates.
Proving end users with ultra premium to slay performance and a truly differentiated gaming experience.
More broadly speaking gaming has emerged as the dominant market trend that is driving the next wave of innovation in mobile devices.
As advanced display panels and technology increasingly become mainstream.
Standard hard and standard hardware and smartphones mobile Oems are confronting new system related and display pipeline optimization challenges.
A prominent example of this higher frame rate high resolution.
Gaming, where in OEM of Lex to incorporate a high resolution display capable of 90 to 120 Hertz refresh rates, but encounters detrimental impacts of overall device performance such as reduced battery life, excessive heat and AP throttling, which ends up limiting the rendering performance cigar.
Inefficiently below the capabilities of the display.
These challenges do not apply only to gaming central phones. These are the exact issues that numerous Oems are facing on an increasing number of their next generation models as they adopt splayed panels capable of higher resolution higher frame rates and wider color damage.
Pixelworks visual display processors solve these critical system performance challenges by utilizing a distributed visual architecture to off load the intensive processing and upscaling associated with higher frame rate and resolution from the AP and GPU.
The result is dramatically lower power drain extended battery life and allows the user to take full advantage of the high frame rate capabilities at the display.
To date, the value proposition of our visual processing solution.
Has primarily been evaluated and adopted by Oems as a standalone solution for improving display quality and performance.
However, we have been working to position pixelworks more aggressively and cultivate an ecosystem that inherently drives accelerated adoption of our technology.
Consistent with this objective this week are Pixelworks, Shanghai subsidiary announced the collaboration agreement with Unity technologies China.
Unity is the world's leading gaming engine platform for creating real time three D content.
Unity provides game developers a comprehensive set of software solutions to create run and monetize interactive real time, two D and three D content across multiple categories of devices.
Unities platform is utilized to develop nearly 50% of all mobile games today.
The Genesis of this collaboration is the synchronized and enhance the mobile gaming ecosystem with our advanced visual display solutions that are optimized for gaming on mobile devices.
As part of our joint efforts, we aimed to bring together and integrate resources of the key players across the gaming ecosystem, including game developers mobile platforms and technology solution providers to a line on a shared goal of enabling superior visual display performance with high frame rate and higher resolution and did.
Liver, the highest quality immersive gaming experience possible.
Today, a growing number of Oems are looking to pixelworks visual processing solutions to make sustainable high frame rate mobile gaming reality across an expanding range of next generation smartphones.
We have a growing pipeline of new design ends for both our X five and soft Irish solutions with several of these smartphones targeted for customer launches in queue for and throughout Q1.
I can confidently say that we now fully expect this timeframe to include a launch of the first of multiple plan models with our third tier one mobile OEM.
Separately, we've continued to make a very good progress.
To make very good progress on our initiative aimed at expanding soft irises capability to run on a new application processor platform, which will represent an expansion of our current mobile Sam.
Additionally, following the tape out of our new seventh generation visual processor that I mentioned last quarter. We have successfully brought up initial samples and finalize the preparation to demonstrate the solution to customers. Our newest visual processor is by far our most advanced processor to date incorporating improvers.
<unk> of all the features from both are X five nics devices, including improved mimic performance as well as advanced AI optimized picture quality that we first introduced in our eyes six processor.
We will formally announce the solution later this month and will be able to expand on all the benefits. This solution will bring the mobile gaming and entertainment experience.
Shifting to the projector business.
We continue to see a sustained recovering customer demand throughout the quarter revenue increase sequentially from a strong initial setback in orders that we experienced in Q2, resulting in the highest quarterly projected revenue since the onset of the pandemic.
While both customer and and market demand have demonstrated steady improvement customers have noted ongoing concerns related to the tight supply of no. Other non pixelworks components Ltd, limiting further upside volume in the near term.
Specific to fix it works ability to supply our operations team is continue to work closely with both our projector OEM customers and supply chain partners. As a result, we've largely been able to mitigate any significant impact we have extended the required lead times on purchase orders and modified cancellation terms to better reflect the current.
We expect supply conditions remain very tight in the coming quarters and we're currently having bookings from certain projector Oems that extend as far out as the second half of next year.
With respect to an update on the broader supply and capacity constrained environment.
The industry wide challenges are considerable and costs have increased across our supply chain.
That said to date I believe with the support of our supply chain partners. The team has done a terrific job to mitigate the impact on our overall business the biggest challenge as securing the incremental capacity allocation nah.
Needed to meet the accelerated growth are mobile customers are currently demanding.
In the current environment upside capacity is priced at a premium which further adds to the higher cost of materials.
Through a combination of efforts we've largely been successful in passing through this higher pricing to customers and all of our visual display solutions through this and similar collective efforts, we've been able to maintain our historical gross margins.
Looking beyond queue for it remains difficult to forecast how current supply chain dynamics will evolve throughout 2022.
Although we believe new capacity from our partners will start coming on line in the second half of next year.
Currently we have indications from our customers for demand that meaningfully.
Exceeds the supply we have secured to date for next year.
We believe that we will have enough headroom to grow however, the magnitude of growth is likely to be gated based upon how much supply. We ultimately are able to secure.
Turning to an update on Truecut.
As part of our recent and ongoing evaluations by several of the World leading entertainment companies. We continue to receive positive feedback affirming the truth cut remains unmatched as a solution for preserving and delivering the original artistic intent of video, including resolution HDR color tone emotion.
Our truecut tools and solution.
Or a platform technology. Therefore, the trigger for adoption has always required the alignment of supporting ecosystem partners.
This includes.
Content creators post production studios content distributors as well as leading device manufacturers.
In recent months, we've made continued progress on advancing multiple in depth engagements across all categories of the ecosystem.
Our goal remains to coordinate buying from multiple parts of the ecosystem simultaneously.
In summary.
We are executing well and continue to build a momentum in our mobile business as well as support the steady demand recovery and are projected business.
Despite the natural challenges associated with driving accelerated growth in a supply constrained environment.
There are several positive catalysts and potential milestones on the horizon for Pixelworks in 2022.
The most immediate of which include a healthy pipeline of design ends with mobile customers. The availability of our most advanced seventh generation visual processor, and and and expanded engagements with both strategic and ecosystem partners.
We have recently begun adding to our team and capabilities in support of these expanding opportunities, which also demonstrates our confidence about the broadening adoption of Pixelworks technology.
The magnitude of our growth in the coming year will continue to depend on the supply chain dynamics and our operations team focus on securing additional capacity to support the significant growth potential we believe exists.
Near term, we are well positioned unexpected deliver another consecutive quarter of sequential and year over year revenue growth in the fourth quarter.
With that I'll hand, the call over to allow us to review third quarter financials and provide guidance for the fourth quarter.
Thank you Todd.
Revenue for the third quarter of 2021 was $15 2 million.
Bed to $14 $1 million in the second quarter of 2021 and.
$8 $2 million in the third quarter of 2020.
Ah start previously highlighted.
The sequential increase in revenue and year over year growth of 85% reflected a combination of continued traction on record revenue in the mobile market.
And this sustained recovery in demand from project from projector customers during the quarter.
The breakdown of revenue in the third quarter was as follows.
Revenue from mobile increased to approximately $4.8 million, representing 32% of total revenue.
Driven by strong sales of both our visual display processes and software solutions.
Revenue from digital projector increased to approximately 9 million.
Did your delivery revenues approximately 1.4 million.
Non-GAAP gross profit margin expanded by 40 basis points sequentially to 53.1% of the third quarter of 2021.
From 52.7% in the second quarter of 2021.
Bed to $55, 6% in the third quarter of 2020.
We anticipate gross margin to remain steady.
Historical read for the balance of the year as.
Should we continue to pursue initiatives targeted at offsetting generally higher material costs.
As well Ah succeed in passing through increased pricing to customers.
Non-GAAP operating expenses were $10 $1 million in the third quarter of 2021 flat with the $10 $1 million reported last quarter.
Bed to $8 9 million in the third quarter of last year.
Under non-GAAP basis third quarter of 2021 net loss was 2.2 million also four cents per share.
Compared to a net loss of 2.6 million on most of five cents per share in the prior quarter on.
And a net loss of 4.5 million on most of 11 cents per share the third quarter of 2020.
Adjusted EBITDA for the third quarter of 2021 was a negative $1.6 million compared to a negative $1.8 million in the second quarter of 2021 on a negative $3.5 million in the third quarter of 2020.
Moving to the balance sheet, we ended the quarter the third quarter of 2021 with cash and cash equivalents of approximately $66 6 million.
A significant increase from $23.6 million at the end of the second quarter.
The primary contributors to the 43 million increase.
Was it previously discussed closing of investments in that picture workshop, guys subsidiary my combination of private equity a strategic investors.
Swell assemblies of the company.
Also contributing to the increase cash bonus quarter over quarter or receipt of the first $5.8 million payment from a projector code development customer.
We expect to use these phones over the next six months. She continued this development activity associated with previous getting out of school development agreement.
In terms of other balance sheet metrics for the third quarter days sales outstanding with 36 days at quarter end.
Compared to 41 days at the end of the second quarter.
Inventory turns where 17 eight times of the second quarter up from 16 times in the prior quarter.
Now turning to our guidance for the fourth quarter of 2021.
Based on recent other trends in a current backlog.
We expect continued sequential growth on another quarter strung yogurt.
Over a year revenue growth in the fourth quarter, driven by solid demanded both mobile and projector spit.
Specific to the supply chain for Q4, we expect supplied sort of being very types across both businesses.
With with 40 nanometers for project to continue to be the most acutely constrained.
Taking all factors into account, we currently anticipate total revenue in the fourth quarter to range between 15.5 million.
17.5 million.
Consistent with my previous comments, we anticipate gross margin to remain historical range of the third quarter supported by sustained trends in mobile and project to US one of the benefits of better overhead absorption associated with a higher total revenue.
More specifically, we expect on that gross profit margin the fourth quarter of between 53% from 55%.
We anticipate operating expenses fourth quarter to arrange between $11 million $12 million in a non-GAAP basis.
The I anticipated range for Opex in the fourth quarter, primarily reflects a combination of annual minutes increases as well as planned hiring to supports a growing number of customer engagements on new mobile programs in Asia.
Finally, we expect fourthquarter non-GAAP EPS to be the range of between the loss of seven cents under non-GAAP loss of three cents per share.
That concludes our prepared remarks, and we will now open the cultural questions. Thank you very much operator police procedure managing the Q&A assertion. Thank you.
Thank you to ask the question you would need to press, Tom lighting telecom to withdraw your.
Question press the pound key.
Please stand by what we compiled acuity rosner.
Our first question comes from Rodriguez.
You need a big company your line is open.
Yeah. Thank you for taking my question you guys on the grill.
And the rest of the segment.
Just on the on the mobile business.
You kind of get a record quarter and three Q based.
Based on the guidance and looks like it's going to grow again sequentially in queue for.
I'm wondering if you could kind of talk a little bit about.
Three.
<unk>.
For the X five that you see.
How would you kind of characterize that you kind of look at the funnel going into 2022.
How do we think about the designs going into production.
It appears that the capacity.
More on the digital projector side, but can be able to make it a little bit elaborate on.
The environment.
Affecting the mobile business as you go into the 2022 any thoughts there and how you're going to mitigate that.
Okay. So there's two questions and one's a market driven question and the other one's a supply constrained quick question and I'll try to separate the two.
So on the market demand for mobile.
What we set out to do we had.
We've had success on both our ice six processor and the X five processor initial success with with both we're really focused at it proved display quality metrics and delivering a better video experience for the most part even though we delivered a better gaming experience it didn't really focus.
On differentiate in that gaming experience with the <unk> brand of products, which is is a sub brand of vivo in.
One of the four large providers in China.
The entire Ecu brand of products and there's probably between eight and a dozen models launched a year at various price points.
With the Neil five in the early part of this year, we went out and the.
The two teams collaborated.
And worked with third party game manufacturers to really do this off load render an idea. So that you could bring high frame rate and improved high frame mobile gaming experience with.
40% to 50% longer battery life, while you're operating at higher frame rates and higher resolution.
And what the brand of vivo found out is that this was a highly desired feature.
And so they went from.
Bringing it out investigating whether the market really wanted this and would give them.
That proved that they needed to differentiate in a crowded space.
And they've they've come back and said, yes, we are all in.
And so.
What we have not only seen as they're all in.
Their competitors targeting the same demographic are all in.
And so the demand we have four X five.
Going into.
Q4, and then the first half of 22.
Yeah.
I gave up designs three months ago, because I knew I wouldn't have the capacity even with that we're going to grow significantly on trying not to give up any more designs, but.
At some point you have to make a decision on whether you have the capacity to align the design or not so far we've been done a good job with our partners at securing additional capacity both through our fab and through Assembly and test.
We are not meeting.
The demand in the market right. So we're going to be demand constrained through the front half of 22.
We expect.
In the back half of 22.
There's.
There's two things happened, we will still see demand for these X five programs, but our newest seventh generation will be hitting production in the second half the programs that are targeting they're all second half 22 programs.
This is a bigger chip.
So less die per wafer.
If we continue to grow.
With the with an increased quantity of phones and models, which were targeting.
As you can imagine that we have an exponential demand increase for supply in the second half.
And then this will continue our roadmap continues beyond seven generation and now a roadmap really is starting to reflect.
Feedback from all the ecosystem partners game content providers game engine providers, the tier one mobile phone companies and AP partners, what they're putting in their phones and not putting her in there chipsets and not putting in their chips.
So we expect that demand to continue through through 2023. The question is when do we get ahead.
Of supply constraints for mobile.
So in the past I would say projector was more acute on the supply constraints. Because we were most of our projected products were in 40 or 55 nanometer. This isn't the same domain that a lot of the automotive constraints existed.
We're working our way through that in fact, we're probably.
Shouldn't be constrained somewhere in the front half of 22, we'll see I mean, we've managed through it I mean.
We have not caused any of our customers to not build product in the projector space they've had bigger issues with non pixelworks suppliers alright. So far we have not left any business on that off the table.
But mobile because of this.
Dramatic uptick in demand.
Will be constrained for sure and the Prince half of 22.
Thank you for that.
It's really helpful.
The gross margins.
The margins are.
The mid one so about 100 basis points, when you're breaking points.
<unk>.
Steady increases in the morning would be great to see.
What's driving the margin you have all the supply constraint on the cost on the on the back in.
The margins are kind of moving up.
Is it more of a mix the virus better pricing.
Better yield.
What's driving the Martin despite some of the cost pressures.
Yeah.
There's a couple of factors for sure better yield and.
We kept as you can until we kept opex, it's a very low range and a quarter.
And.
Start as mentioned in his comments, we did pass on some of the price increases so I'm sure that also helped.
Gross margin is going to be steady and we're very pleased where we're at on what we're looking for.
Got it thank you.
Thank you our next question comes from.
Roth Capital your line is open.
Todd highlights congratulations on the progress.
Yep, so understanding tie that there's supply constraints gave.
Gating your mobile growth, but is there a point in time, where kind of the wins proliferate.
Right from the premium phones to more of the mainstream and.
Potential for an inflection and the demand and unit run rates if supply allows it does that.
What timeframe could that be potentially.
Hum.
Some of the programs that are being.
Positioned or requested for us to support our.
Mid tier mainstream high volume for us today.
So the demand part of that inflection point is here.
Okay. The question is when when do I expect supply too.
Catch up with the demand profile.
Oh.
Yes.
As a tougher question to answer.
I'm pretty good our partners are the right partners they've done a very good job of supporting us in tightened vitamins that particular process knows we're in are in high demand.
For our partners have done a very good job of trying to get as well as much as they can.
They did not expect this much demand from us.
We gave them.
We gave them inside nine months ago to a demand profile I would say the demand we're receiving today surpasses the inside I gave him nine months ago, and we were bullish on the business.
Well I appreciate you joining into the difficult supply question twice so.
Yeah can you talk about the the work you're doing with unity and more generally the gaming guys and have you kind of.
Hit all the guys in the ecosystem you want two or is it are they are still more folks.
That you can partner with the kind of to grow.
The presence of the Pixelworks products.
From video gaming.
Oh I would say, we're just scratching the surface on the gaming ecosystem right now we have we announced this partnership with unity. They are leading game engine provider, but there there are people that do custom game engines and there are other game engine providers that server portion of the market.
We're very focused because we're focused on if you look at our roadmap, which.
We'll talk a little bit about as we announced the seventh generation.
We're very focused on delivering a cinematic immersive mobile gaming experience there has been a big push by the content providers that saw this during.
During the pandemic this.
This <unk>.
Strong demand.
As an alternative entertainment experience too to video and so many other things to go do.
Some mercy of cinematic gaming experience.
Now that we're post pandemic.
Both the consumers and the content providers want to deliver one.
Experienced and the content providers deliver that same immersive experience, we called AAA games and the Triple a game companies were starting to talk to because they want to overcome.
The current <unk>.
<unk> that I alluded to in my prepared remarks that exist with delivering that immersive experience on a mobile platform.
So I would say today, we're just scratching the surface with how many content providers, we can engage with early on and gain ninja providers.
So.
We ratcheted back and kept steady with our business plan through the pandemic, but I kept the lid on hiring at least as a company. We were about 200 people in the third quarter. We added net 12 in the fourth quarter will probably add a similar amount and we're on a growth rate.
And so even though near term.
We're a bit constrained by capacity doesn't mean, we're not growing as soon as we're not growing as fast as I would like it to grow.
We are growing.
We don't believe that the supply constraints are going to last.
Forever.
And we do believe this is a multi your opportunity and so we're going to go and try to expand.
The number of ecosystem partners and get content providers, and then mobile platforms.
To deliver this mobile gaming experience that I talk about.
Okay <unk> color and then one last question.
If you don't mind for Truecut I'm curious.
Kind of waiting foresee that U S announced that you would have to follow the strong trying to progress you have I'm curious just order of magnitude how many active engagements there are that you're working in the pipeline that one of these can come out of and you mentioned device manufacturers I'm curious as Truecut being talked about with guys, who are also visual processor customers, but to understand that overlap.
So.
Truecut today.
Is is narrow and our focus to people that really want to deliver.
Premium.
Motion based experience.
The number one there's two sides of that equation the guys in the middle.
They're not going to be the leading that these are the content distributors.
The ecosystem partners on both ends so the car the true content creators and we're talking about people that are pushing the envelope of filmmaking.
They are evaluating truecut and its capabilities to deliver.
A different experience both on a theatrical release of their content as well as a streaming release of their content.
And then all the way on the other end the device manufacturers.
Predominantly for the streaming and of the delivery of that same content.
They are very interested in solving these motion problems they've looked at alternatives to solve these problems like filmmaker mode. They have concluded that is not the way to go. The particular device manufacturers were engaged with and frankly, they're all in helping us build that ecosystem acceptance.
But to get back to your question, which was are they visual processor companies, which is mobile no.
They are tier one television manufacturers.
Okay, great sector.
Thank you. Our next question comes from Sam Peterman with Craig Hallum Capital. Your line is open.
I got a congrats on the announcements and thanks for taking my question.
Jason all up.
Anyway, So I wanted to follow up on the question about unity, there Uhm, maybe ask you a little bit different way.
I'm kind of kind of two things I'm curious kind of what the partnership looks like practically speaking.
And kind of any if you think that'll be any.
Direct financial benefit and what that could look like.
Overtime or if it's more just to get kind of exposure to the wire ecosystem of your technology.
And then I'm also curious kinda why.
Sitting area nearly specifically rather than.
No unity as a whole was this sort of other testing the waters.
He spent that might lead to something bigger.
The strategic rationale that that'd be great.
Okay, well I'm gonna start with the last part of your question first why are subsidiary and the subsidiary in China into deal and that one is a simple one to answer.
Our focus at delivering the cinematic mobile gaming experience is in China, the leading mobile gaming market is in China, the leading mobile game content providers are in China.
So unity, China is a very important part of unity global to execute on our strategy. So.
To say that will evolve into something bigger up but.
I'm not sure that.
Doing something with the parent corporate that makes it any bigger we're very focused at the China mobile gaming experience.
Those content providers will export their content outside of China, but if it doesn't succeed in China, it probably not going to succeed elsewhere.
So this is this is the hotbed of where a triple a mobile gaming experience is going to be in so.
One thing so unity as far as adding money et cetera, I mean, you have to bring in.
The more content that.
So I'm not going to lose too much because until we announced I was seven you won't understand.
Exactly.
Why we brought in the game engine and the content providers. When we're only a couple of weeks away from announcing the products. So I don't want to get too far in front of that but what I will say is.
As we bring in the content providers it creates.
Much larger demand.
For our visual processors.
So it helps create the demand profile for our visual processors it improves the experience and the performance.
For the cinematic mobile gaming experience if the content providers are on board with what we're trying to do.
And so.
Will give much more clarity on this.
In the coming weeks.
And so that's how we improve performance of it but to get back to the unity trying to think this is this is where the hotbed.
Of development is going on right now and so this that's our subsidiaries. The one focused on this in unity China is their group focused on solving this problem.
Hopefully the answer to your question.
Yeah, that's great. Thank God and then one on on mobile on your new tier one.
I think I just want to clarify that this was her phone that was launching sometime between four Q and one too.
Then I want to ask kind of how you would size the opportunity if its nuclear one relative to what you have it.
Two tier one, but I know you said multiple models I think but curious for any kind of.
Color you can provide that.
I don't want to get in front of the product announcements. This particular company is.
Is doing okay in the market doing fairly well in the market. They are trying to re establish themselves.
In the the higher end range and they're going to come out with a new higher end range of products that include our products and so when they announce.
We'll also announced and then I'll be able to elaborate a little bit more on it but not until then.
Okay Fair enough and then if I could squeeze her last one and I wanted to ask.
M B a.
It's an arris cute, though that you said you were expanding that's run on a new a T platform.
Fans of Sam I'm curious give me can you talk at all about how much that improves the Sam and then are you guys targeting.
It's new platform cause you think it's a good opportunity and at the right time to try to.
Go after this customer or does this customer kind of come to you solve a problem they can bowl.
So.
The AP partner.
We sort of discussed this in and.
And we're coming to a conclusion of collaboration and then that AP partner was prodded by a common large customer to make sure they work with us.
And now that that effort is expanding into too not just soft iris development, but but also hardware collaboration.
Okay, great. Thanks, guys.
Thank you. Our next question comes from Derek Seiberg with Collier's.
Your mind is open.
Hey, guys. Thanks for taking my questions.
Just curious the new strategic investors could help you guys at all on the supply front, but also on the business side, you know I imagine there are some opportunities.
For both some help on the supply and business side.
Is that the case or should I be thinking about.
You know that partnership more in a different way or how should I be thinking about that on the business development side on time, just generally how how do you hope to leverage those new relationships.
So so the strategic investors that came into Pixelworks Shanghai all had.
Various adjacent markets that they would like us to collaborate in that we're sort of noncompetitive, they're all in unique areas, where we have technology and may have an interest in investing.
And so it was a wide range of opportunities for us, they're all long term for us not short term they were not none of the relationships were driven by support in the supply constraint environment.
I'm not sure they could even help us in the particular slot supply constrained environment. We're in right now.
Anybody that can help us we do leverage but I'm not sure those strategic partners are there to help us so it's more on.
Ken.
Depending on which strategic partner. It is can we collectively focus our expertise in a particular adjacent market that we both see has been.
A potential.
And have that adjacent market.
<unk> and business. So I would say that's more of a multi year opportunity for us not short term on the capacity Sir.
Okay that makes sense and then just looking for it on Opex I mean, you guys have done a good job of managing expenses.
But with the new operating structure, you guys sort of consolidated resources.
Sort of appointment, which we can expect opex to come down or is it more of a case that you know this really you just freeze up room for you guys to invest more in the business you know new products things like that how should we think about.
The move as it relates to Opex looking forward.
Yeah.
What you're going to see is we kept a tight lid on opex through two three even with the new ads that we had we still kept the type that on Opex.
But as we move forward.
We're investing for this.
I mean, we we see a multiyear three four year accelerated growth in the mobile domain and some of these adjacent markets in order to fully capture that and we see only the front end of that three or four year period being capacity constrained.
We're not going to be capacity I mean, there is a ton of new capacity coming online some as soon as nine months away some 18 months away.
We do not believe a year to 18 months down the road, we will be in a supply constrained environment.
So we are investing now.
For the three four year horizon, and so you will start to see our opex creep up a bit.
And we're still a good steward of the shareholders money, we will do it in a controlled fashion.
But.
There in my mind.
The.
There is very little risk.
To invest the money now there's more risk if I don't invest we will miss this huge opportunity sitting in front of us.
Got it that's that's great to hear thank you guys.
Thank you and I'm currently showing no further questions at this time I tried to call back over to tie the bonus for closing remarks.
Well.
For those of you that are long term investors and I see a couple of names up there that I know of in in this as long as I've been the CEO. This company, it's been a long time coming and I appreciate your patience and for those new investors hats off to you came at the right time.
The company is executing on its long term strategy and.
We look like we're in good shape right now so thank you for your patience.
This concludes today's conference call. Thank you for participating you may know.
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