Q2 2022 Pixelworks Inc Earnings Call
Okay.
Good day, ladies and gentlemen, and welcome to Pixel works, Inc. Second quarter 2022 earnings Conference call I will be your operator for today's call.
At this time all participants are in a 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 Brett Perry of Shelton Group Investor Relations.
Thank you Elizabeth good afternoon, and thank you for joining us on today's call with me on the call is fixed works, president and CEO , Todd to bonus and Chief Financial Officer, Eric.
The purpose of today's conference call to supplement the information provided in <unk> press release issued earlier today announcing the Companys financial results for the second quarter of 2022.
Before we begin I'd like to remind you that various remarks, we make on the call, including those about our projected future financial results economic and market trends and competitive position can constitute forward looking statements. These forward looking statements and all other statements made on this call that are not historical facts are subject to a number of risks and uncertainties that may cause actual.
Our results to differ materially.
All forward looking statements are based on the company's beliefs as of today Wednesday August 10, 2022, 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. The Companys annual report on Form 10-K for the year ended December 31 2021.
John .
And 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's statements. During this conference call will include discussions of certain measures and financial information in GAAP and non-GAAP terms, including gross margin operating expense net loss and net loss per share non-GAAP .
Exclude amortization of acquired intangible.
Assets and stock based compensation expense. The company uses these non-GAAP measures internally to assess operating performance. We believe these non-GAAP measures provide a meaningful perspective.
Into core operating results and underlying cash flow dynamics, we caution investors to consider these measures in addition to and not as a substitute for nor superior to the company's consolidated financial results as presented in accordance with GAAP.
Also note throughout the company's press release and management statements. During this conference call. We refer to net loss attributable to <unk>, Inc. Is simply net loss for additional details and reconciliations of GAAP to non-GAAP net loss and GAAP net loss to adjusted EBITDA. Please refer to the company's press release issued earlier today with that it's now my pleasure to turn the call over to Todd.
For his opening remarks. Please go ahead.
Thanks, Brett and good afternoon to everyone joining us on today's call.
As reported in today's press release, we had a very solid quarter.
Second quarter revenue increased sequentially and grew 36% year over year, marking another consecutive quarter of strong double digit topline growth.
Revenue in our mobile business increased to a new quarterly record.
In our projector business reflected the highest quarterly revenue in more than two years.
Looking at the first half of the year total revenue grew more than 50% year over year.
And we realized nearly 30% improvement in our adjusted bottom line results compared to the first half of 2021.
I also wanted to highlight that we achieved these results with most of our employees at our pixel works Shanghai subsidiary.
As well as multiple key customers being impacted by the Covid related lockdowns for a significant portion of the second quarter.
Despite the associate a challenge our team did an excellent job remaining productive and continuing to advance our initiatives as well as fully supporting our customers.
As of today all of our offices throughout the region are open and employees are back to conducting business as usual.
Turning to the update on our primary end markets.
As previously mentioned we.
We had a record quarter in our mobile business with revenue, increasing 33% sequentially and 68% year over year.
Mobile also expanded to represent nearly 40% of the total revenue in the second quarter.
With both the revenue and growth driven predominantly by sales of our visual processor hardware.
A key factor underpinning our continued growth has been mobile gaming, which.
Which has increasingly become a cornerstone for smartphone Oems both in terms of how they spec phone performance and their associated marketing strategies.
This influence of mobile gaming on Oems is especially prevalent for premium models targeting consumers in China and broadly across Asia.
As outlined on previous calls we have embraced this market trend and continue to extend the differentiated value proposition that pixel works visual processing solutions enable for low power high frame rate mobile game.
The strategic focus and our traction to date is observable.
And the marketing campaigns of our mobile OEM customers and their newly launched smartphones, which are increasingly positioned around the advanced visual quality low power performance and features for gaming that ticks works technology enables.
To briefly highlight a few of the mobile wins launched since our last conference call.
First in May leave a launched its S 15 pro smartphone incorporating our X five visual processor.
Built on media text latest dementia 8100 flagship light <unk> mobile platform.
Vivo positioned it's S. E. S 15 pro smartphone is delivering premium display performance for mobile gaming.
Yes, 15 pro features of 656 inch full HD plus P. OLED curved screen with two K resolution and.
And supports refresh rates of up to 120 Hertz.
Hundred percent Dci desk P. Three wide color gamut and peak brightness of 500 nits.
Unique to the smartphone in addition to high frame rate game.
It works and they've worked closely with the design team at vivo to incorporate a series of newly customizable game display filters.
That enable optimal visual performance on several of the most popular mobile games in China.
In July our longtime mobile customer Aces launched the <unk> phone six series smartphone.
Incorporating our advanced visual processing, including pixel works industry, leading HDR professional color calibration, DC dimming and superior comfort.
Built on the latest Qualcomm Snapdragon eight plus Gen. One mobile platform.
Phone six series smartphone features a 678 inch OLED screen with resolution of $24 48 by 10, 80 pixels and supports refresh rates of up to 165 Hertz.
In addition to setting a new benchmark with its ultra high refresh rate. The smartphone models sold in China is being offered in collaboration with Tencent games, a division of cancer. It is optimized to provide uniquely vibrant colors, greater contrast, and even more visual detail for 10 cents gaming content.
As discussed last quarter.
Earlier this year <unk> became a unity verified solutions partner or VSP.
Our high frame rate rendering accelerator SDK available the leading mobile game developers and studios through Unities gaming engine platform.
This represented an important step in our strategy to establish a mutual beneficial mutually beneficial ecosystem and encourage expanded collaboration across the mobile gaming industry.
In June we took the next step with the announcement of pixel works first direct engagement with a major gaming studio movers are bite dance company.
Who we collaborated with to integrate our rendering accelerator SDK into the one of them into one of the more popular mobile games in China, one piece fighting path.
This is the first ever mobile game to leverage our ecosystem collaboration between gaming content provider and mobile gaming device itself.
This well publicized join up for it.
Served as an important example for other perspective ecosystem partners to emulate.
In recent months, we've expanded our pipeline of committed and prospective engagements with a growing number of gaming studios to integrate our SDK into additional games scheduled for release later this year and early 2023.
Building upon our ecosystem partnerships with both unity and bite dance.
In July <unk> affiliate brand real knee unveiled the GT to explore master, becoming the first smartphone launched with our latest generation X seven visual processor.
Also based on Qualcomm's newest Snapdragon eight plus Gen. One mobile platform.
The phone has $6 seven inch flexible OLED panel with two K resolution and supports a refresh rate of up to 120 Hertz.
In addition to benefiting from the full suite of features offered in our new <unk> processor, including our ultra low latency motion engine.
Low power Super resolution technology, and our proven AI based adaptive display functions.
Pixel works rendering an accelerator SDK was specifically designed to leverage the unique advanced capabilities built into our <unk> chip.
When utilized together for playing games, such as one piece fighting path.
On the real need G to GT to explore master smartphone it allows frame rate output to be increased by up to four times, the native rendering framing frame rate.
While maintaining much lower power consumption.
These previously contracting performance benefits provided by the combination of our X seven processor and SDK are truly groundbreaking for high frame rate mobile gaming.
We are engaged with several additional customers that are currently in late stage design in <unk>.
<unk> evaluations of our X seven visual processor for next generation models.
Due in part to the impact of Covid related China, Lockdowns on Oems overall design and decision processes.
As well as some shifts in the OEM schedules for new product introductions. These near term engagements are now likely to materialize in the fourth quarter and into early 2023.
Despite the current macroeconomic uncertainty and well documented decline in consumer and demand for smartphones for smartphones, especially mid range smartphones in China.
We are continuing to see strong interest in our X seven visual processor for mobile Oems.
Highlighting this point the X seven is our first visual processor being evaluated by all four tier one mobile Oems in China introduction.
Yeah.
Turning to an update on Truecar.
Which many of you have been following closely as we continue to grow the ecosystem around our true cut motion platform.
For those who are new to what true true cut is about true cut motion as a technology platform.
Developed in house over multiple years, specifically designed to solve the inherent and broadly acknowledged challenges associated with motion, resulting from how and where content is created and viewed.
As the industry's first and only end to end platform solution promotion grading.
True cut also ensures the concrete content creators original intended motion look and feel is consistently delivered regardless of the screen on which it is viewed.
As discussed on previous conference calls commercializing the full potential of true cut motion platform requires acceptance and buying from ecosystem partners across three primary domains.
Content creation content distribution and device manufacturers.
Early this year Tcl became the first foundational ecosystem partner on the device side.
And then in April we announced picks of logic as a certified services partner for providing true cut motion Postproduction services.
The consistent feedback we receive from other interested device and streaming ecosystem partners going back more than a year.
Was that the content creators needed to get behind the technology first.
Following our long standing and formal engagement in July we announced a multi title license agreement with James Cameron's Light Storm Entertainment.
As part of this latest ecosystem milestone pixel works true cut motion platform is being used to remaster, both avatar and Titanic in cinematic high frame rate <unk> HDR for theatrical release.
Notably these respective titles rank as having the number one and number three highest grossing global box office sales of all time.
Which together with James Cameron's public endorsement, we expect to significantly elevate the awareness and interest for true Cup motion platform.
We cannot comment on what comes next specific to these two theatrical releases with lightstone. However, I can highlight our prevailing thesis related to the broader content distribution in general.
A large portion of the Tvs currently in People's living rooms, and effectively all new Tvs for manufacturers like Tcl.
Have a dramatically higher luminance than what you would experience in a movie theater.
This increased brightness when combined with HDR and larger screen sizes.
Further accentuates motion issues, such as stroke being Jud Randy blur.
All of which the true cut motion platform soles without the viewer having to adjust any settings on their TV.
Therefore, the value proposition absolutely extends beyond the theater and in every living room, which we believe is one of the primary opportunities to monetize our true cut motion platform technology.
Shifting to our projector business revenue increased 20% sequentially and 12% year over year.
Reflecting the highest quarterly revenue in more than two years.
Yeah.
The post pandemic recovery in the end market demand has continued to exceed our customers' ability to source supply of various projected components, including timing controllers and panels.
Due to the longer lead times for the other components order panders for our projector associates have remained very healthy.
Projector Oems work to backfill and demand as well as build certain levels of buffer inventory of all critical components.
While we've largely been successful at securing the requisite supply each quarter to meet customer demand for our projector ssds.
Available capacity has continued to be extremely tight.
As of today, we are effectively fully booked through the end of the year in our projector business.
To summarize.
We delivered another quarter of strong top line growth, although a large portion of our team and customers were subject to lockdowns for multiple months, we were able to grow revenue in the first half of 2022 by more than 50% year over year.
We've also continued to execute on our strategic initiatives, including the cultivation of expanded synergistic ecosystems that further support our anticipated long term growth of both the mobile business and the true cut motion platform.
And over the last six months, we've achieved a series of notable milestones.
Additionally, we continue to make progress on preparing our pixel works Shanghai subsidiary for a local listing in China.
We've taken the necessary steps to convert to a joint stock Corporation, which we expect to complete in the next couple of months.
And for the next step.
Ply to begin what the CRC calls the tutoring period.
Which is a key prerequisite for submitting the subsidiaries application for a new listing.
More broadly related to the second half of the year.
Theres, obviously increased uncertainty with respect to the.
Macroeconomic environment and consumer end demand.
With that said, we feel good about our pipeline of new and expanding opportunities and I'm confident that we have a very strong sound strategy in place to achieve our intermediate and long term growth objectives.
<unk> of the prevailing environment as we've done in the past, we will remain focused on execution and the variables we can control.
With that I'll hand, the call to Hayley review, the financials and provide our guidance for the third quarter.
Thank you Todd.
Revenue for the second quarter of 2022 was $19 1 million.
<unk> percent from $16 6 million in the first quarter of 2022 and represented an increase of 36% from $14 1 million in the second quarter of 2021.
Our strong top line results were driven by a combination of another record quarter in our mobile business.
And the highest quarterly revenue in the projector market since before the pandemic began.
The breakdown of revenue in the second quarter was as follows.
Revenue from mobile increased sequentially and year over year to approximately $7 5 million, which represented nearly 40% of total revenue in the second quarter of 2022.
Revenue from digital projector was approximately $9 5 million, increasing 20% sequentially and up 12% year over year, reflecting the sustained recovery of ball and market demand and order patterns from projector customers.
Video delivery revenue was approximately $2 1 million in the second quarter.
non-GAAP gross profit margin was 49, 3% in the second quarter of 2022 compared to 53, 2% in the first quarter of 2022.
And compared to 52, 7% in the second quarter of 2021.
As anticipated gross margin in the second quarter reflected the result of expected product mix.
non-GAAP operating expenses were $12 9 million in the second quarter compared to $11 6 million last quarter and $10 1 million in the second quarter of 2021.
On a non-GAAP basis second quarter 2022, net loss was $3 3 million or a loss of <unk> <unk> per share compared to a net loss of $3 5 million or a loss of <unk> <unk> per share in the prior quarter.
And a net loss of $2 6 million or a loss of <unk> <unk> per share in the second quarter of 2021.
Adjusted EBITDA for the second quarter of 2022 was a negative $2 4 million compared to a negative $2 2 million in the first quarter of 2022, and a negative $1 8 million in the second quarter of 2021.
Turning to the balance sheet, we ended the quarter with cash and cash equivalents of $49 6 million.
Shifting to our current expectations and guidance for the third quarter of 2022.
We anticipate third quarter total revenue to be in a range of between $16 million and $19 million.
At the midpoint of this range total revenue would represent growth of 15% year over year.
non-GAAP gross margin in the third quarter is expected to be between 49% and 51%.
We expect operating expenses in the third quarter to range between 12 million and $13 million on a non-GAAP basis.
Lastly, we expect third quarter non-GAAP EPS.
To be in a range of between a loss of nine <unk> per share and a loss of five cents per share.
That completes our prepared remarks, and we look forward to taking a few of your questions. Operator. Please proceed with the Q&A session. Thank you.
If you'd like to ask a question at this time. Please press. The Star then one one on your telephone Thats Star one one to ask a question.
Okay.
Our first question comes from the line of Raj Bindra Gill with Needham. Your line is now open.
Okay.
Yes, thanks for taking my questions I appreciate it.
Just on the on the guidance for September , indicating 17 half.
Understandable in terms of what's going on in the macro and the Chinese handset market.
But I'm curious on how youre thinking about the kind of the individual segments as we go into the third quarter should we be expecting kind of mobile to be down sequentially.
Sequentially as we kind of.
Clear out this excess inventory situation is happening in the market or any comments there in terms of the dynamics in the mobile phone market.
Appreciate it.
Yes so.
I'll take this one daily.
So.
Yeah. So what we're seeing is we don't.
Listen there are many of the.
Semiconductor calls that are targeting the mobile consumer space and there is clearly a lot of inventory out in the market right now both.
At the Oems and finished goods or with that the channel probably the biggest issue is channel inventory and then of course at the SEC.
Semiconductor manufacturers themselves.
For ourselves we have no inventory.
We were pretty prudent.
We clearly had strong demand.
Six months ago, when most of this capacity was booked.
And.
Well beyond what we could.
We could secure.
From a foundry standpoint.
So we were pretty disciplined in taking.
We changed our order methodology.
Two fixed non cancel nonreturnable non changeable orders with 26 week lead times and pretty much stacked it.
And most of those terms and conditions were passed on to the Oems from our distributors.
So there is a bit of channel inventory there is no inventory at our facility.
Because some of the phones that they expected to sell well didn't sell as much as they thought so there is some extra five channel inventory that probably it will take a quarter or two and what it's going to what happens is it goes to our customers. They have to go actually pick a new model.
To put the X spine.
To some degree we're competing.
Against our old inventory for six seven months.
So I think that that's probably.
There is still a lot of churn.
That's why we gave the wide variance.
On the on the revenue guidance.
Theres, some things that could happen for the upside.
There's also things that could happen on the downside.
But I would say, it's good for us, it's going to take a quarter.
Plus.
Before we start seeing burned through that I see other vendors that are going to take six to nine months to burn through their channel.
On inventory, so I think for us we're in a pretty good shape.
<unk>.
The features and functionality of the X seven or.
Desirable, let's say.
Yes, I appreciate all that insight.
So do we.
When we're thinking about the attach rate than for <unk> seven given all the kind of the dynamics you described in the handset market in China is there any push out of the attach rates or the adoption or is that still on course.
We have strong interest for <unk>, seven I will I will say that.
Wave of X seven press releases, which is really where the market will find out.
What phone, we're designed in with who because we usually don't announce it until it's out in the market.
That wave is going to get pushed out you might see something the tail end of the Q4, but predominantly is going to get pushed out to Q1 2023.
Thank you.
Thank you. Our next question comes from Richard Shannon with Craig Hallum. Your line is now open.
Hi, guys. Thanks for taking my question.
I'm going to complete the question here on the guidance clearly mobile is coming down.
I wanted to get your take on projector not only for the third quarter, which I think typically its maybe flattish in a normal environment, which clearly this isn't but also get your thoughts on the fourth quarter, we can see a seasonally normal.
End of the year or something different time.
I would say if you go back pre pandemic.
What usually saw was Q fiscal Q1 was our.
Which is our calendar is.
It was our lowest quarter and Q3 was our highest quarter I think what youre seeing this year is a return to somewhat of that seasonality. So we do expect Q3 to be slightly higher in projector than what we saw in Q2.
And then.
A slight settling in Singapore.
Okay.
Okay fair enough.
Over to.
T mobile here.
Sounds like based on the last answers here, we're expecting to see.
Fourth quarter, not a great mobile environment, either while Oems kind of figure out their forward plans and then start to take up X seven here.
Just wanted to I guess confirm that that's the message youre trying to convey here is first of all is that right John .
With a message let me be clear the message.
In my prepared remarks, and what I want to convey is we have a lot of activity with X seven.
It has been weak so we hit wades of designs.
And in the China market, there is usually two large wages.
Of designs, there sort of some sub waves that happen right and but the large waves of designs.
Happen.
Right before.
Or or during Chinese new year right. So, let's just say very ended December youll see us.
Launches start and it will run until early February right, which was traditionally towards mobile World Congress, that's a big wave of phone designs.
Then you see a secondary large wave of designs in the second half of the year right we had expected.
When we launched X seven it was tight.
Get into.
A large portion of 2020 to second half of the year designs, we expected to see.
A good number of models, but we knew some of the design activity would push it out to the wave.
That is the December to February of 2023, so that was always the plan what youre seeing with the downturn is some of the models that could have been used for X seven that may have been on a short leash.
With the excess X five plus inventory in the market. Some of those models have switched over to X five plus.
So we're not losing sockets. We're just it's taken a little more time for <unk> to get into the market.
But the design activity is still pretty strong okay. So that's the message I wanted to say.
Okay, and I guess to that last point here.
Along with your comment that all four of the tier ones in China.
Starting to evaluate that seven and its introduction here how should we think about the the breadth and the ultimately the volumes across all their portfolios as we get.
A good distance into 2023 is looking.
Better in line with what they've done so far with the X five generation.
It depends on the OEM.
Some Oems.
Want to fully embrace the demographic tire targeting mobile game.
Gaming I mean, the demographic for mobile gaming.
Is a.
20, something to mid 30, something demographics okay.
It's more male than female, but there's a lot of female gamers out there.
There are brands sub brands and families of models that are <unk>.
Targeting that demographic.
At various different price points.
If youre going to target.
I think we've accomplished.
As we have accomplished that if you wanted to be serious in marketing into the phone device in China and in southeast Asia that has premium mobile gaming experience and you don't have picks of works inside.
One would question why.
So.
This is the segment we're targeting there is a portion of that segment, that's a lower ASP.
<unk> did put in the <unk>.
Cost of an X seven in there.
Sometimes they put not very good displays in there which is.
We need a certain level of quality of display to achieve the results we achieved.
But.
I'm confident.
Yeah.
The market, we are targeting which is let's.
Let's say.
$400 and up all the way to flagship phones that are targeting that demographic.
<unk>.
We're seriously engaged with all models and sub brands that are targeting that demographic in that price point in.
In China.
That's helpful.
The question will be when the next big expansion will be do they just put pixel works inside because they want to have these features in in a demographic.
Graphic theyre targeting thats outside that demographic I just talked about.
Okay.
Okay.
Okay. That's helpful. I'll ask one more question and get aligned here and Thats, an untruth cut obviously been a few weeks here since you had that great announcement last month here of Av.
Lights from entertainment adopting the technology.
Can you talk a little bit about the Halo effect of this in the rest of the industry. Since then what's been the outreach to you.
Any way you can characterize the conversations with others after that was announced.
Well I mean.
It's been a very positive halo.
Yes, let me start with that.
Sure.
The team is very busy in fact, the team is meeting with some of them.
Potential ecosystem partners right now in the other room as we speak.
So I would say the activity level has increased.
Dramatically.
But the most notable event because we were in discussion with many of these parties already anyway.
But there is a difference when you are in discussion with somebody and you're educating them.
This is something new.
Some things in the market and what we deliver from pixel works is better than what else has already been in the market, we're bringing some of the market that nobody has ever seen.
So we're having to educate the market what it is and the value proposition and why you should do it.
By having somebody like Cameron and light Storm Entertainment.
I'll now and endorse it enthusiastically like he has and like the group has.
The attention.
The level of.
People are standing up at attention and saying Okay. This is this is something I need to strongly consider.
They are not looking at it is just something that pixel works.
Trying to pitch in sale. This is something that is being adopted.
By an innovator in the.
The motion picture technology space.
And so I think it's changed the dynamic of the conversation we were having with people already.
Okay.
That's helpful perspective, Tom that I'll jump out of line. Thank you.
Our next question comes from the line of <unk> de Silva with Roth. Your line is now open hi.
Hi, Todd Hi, Haley congrats on the growth here.
Todd if I heard the last few question. The way you asked the smartphone questions correctly I'm trying to get into the kind of a heads the Oems here given the downturn that you're seeing this as a cyclical downturn or are they thinking about repositioning to go after than the smartphone gaming smartphone niche that maybe smaller companies had previously been looking after and if so that would I assume puts you guy.
And to a much more strategic sort of position with these guys is that what I kind of heard you saying.
Well I think that trended started.
First of all there is a cyclical downturn, that's just a fact.
Okay, I mean I.
I've heard all kinds of numbers right.
Such as total China phones shipped most people, we're planning six months ago between 300, and 330 million phones shipped into China.
Or shipped to Chinese consumers, just maybe how we should put it.
Hum.
Today, I've heard numbers as low as $2 $50 million to $280 million.
Now within that.
It looks like the premium segments, holding up a little bit better.
Then.
The mid range segment mid.
Midrange segments struggling.
Low end segments doing okay consumers, a pull back and so there's a pullback in China for different reasons than they have here or starting to happen here in the U S, but they're pulling back.
This is happening at the same time that.
Sure.
All the all of the suppliers into the industry.
Had.
We're trying to fulfill.
And order backlog from exuberant customers six months ago.
And there are many LTA signed.
Supply agreements et cetera.
Youre going to have to the problem is there is a boatload of supply not by us.
But by other people in the market.
And so that.
Given the.
The cyclical downturn being exacerbated by all of this material in the market. The phone Oems are having to make decisions how do we digest all of these obligations. We already have in all of this inventory we have.
And so there is some shift in.
What kind of models, they do and what components they put into those models.
This is an industry that likes to move quickly to the next greatest chip. The next greatest display the next greatest networking whatever it may be.
It is now having to deal with the fact that it has to.
So a lot of phones with older technology.
So we are selling newer technology, we don't have a lot of inventory.
But into that environment.
Okay.
I think prior to that cyclical downturn, there was a <unk>.
Trend for the large tier ones.
We're all trying to start to adopt a sub brand <unk>.
<unk> brand in vivo.
Case.
Or a model like the real knee gaming series models coming out of Xiaomi all of the large phone manufacturer we are starting to adopt.
Yeah.
I wouldn't call it a gaming phone I would call it a product line that accentuated gaming performance.
Under a certain portion.
Of their product portfolio.
And that's helpful for us I think that trend is continuing.
But its continuing in the midst of this broader cyclical downturn and a group of people trying to digest a lot of <unk>.
Inventory display inventory Cmos sensor inventory.
Yeah.
You named plus work.
RF inventory there are a lot of RF inventory out in the market right now.
You're familiar with that and that's why there's a lot of that's a very helpful background and then.
And Truecar very exciting announcement this quarter can you just update us or remind us kind of how the revenue model evolves here or the incremental opportunity for Truecar revenue in the next one to two years.
Well, we don't break out true cut revenue, we haven't given guidance on it.
Today, we have revenue, we're getting revenue, let me just remind the model and revenue to everybody on the call. So our goal is.
Is to.
Be very reasonable with our tools services and support to the content creators like light storm and others, but we do charge.
For our technology, and our support and services to help them create content.
That is true cut motion.
Certified.
So there is some revenue there.
Okay.
In some cases, we negotiate a deal with those content creators so that they have theatrical rights of that content. So they can distribute it in theaters right.
They may not have the streaming rights. So if that content that has now been created and shown in theaters.
And.
The distributors that want to stream that same content to your homes to devices.
Got it.
In the secondary market the tertiary market they would have to license the streaming rights from us if they want to use that high frame rate version of the content.
And in addition.
The devices that it would be shown on would have to be true cut certified devices.
So there's that.
Revenue from device royalties from shortcut to cut mobile certified devices. So that's the model.
Our expectation is that.
We still have a lot of work to do.
We're very focused on.
<unk>.
I would say the streaming portion of the ecosystem right now we're continuing to be very focused on the content creation portion.
We're convinced that as those two elements of the ecosystem get onboard the device manufacturers.
Are they want this they want something to help solve these problems.
<unk> their devices and compel people to go out and buy new devices.
So we don't feel that's the issue the.
The issue is is more content.
And then having that content streamed in true cut motion.
And so as that all happens we expect that.
<unk>.
The licensing revenue that would come.
In addition to the service and support revenue would start to make a meaningful impact on our aggregate financials.
Okay I appreciate the color.
That started to happen, we'll break it out, but it's a long ways from that right. Okay.
Got it alright, great. Thanks, a lot.
That concludes today's.
That concludes today's question and answer session I would like to turn the call back to management for closing remarks.
Alright, thanks to everybody on the call.
We do have.
A series of financial conferences coming up so there'll be more opportunity for any investors that if you are attending those conferences. We can we can chat more then thank you for attending.
This concludes today's conference call. Thank you for participating you may now disconnect.
The conference will begin shortly to raise your hand during Q&A you can dial star one one.
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Okay.
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