Q2 2023 Pixelworks Inc Earnings Call
Good day, ladies and gentlemen, and welcome to pick Steelworks incorporated second quarter 2023 earnings conference call I.
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 with Shelton Group Investor Relations. Please go ahead.
It will include discussions of certain measures and financial information in gap in <unk> terms, including gross margin operating extensive net loss in that loss per share non-GAAP measures exclude amortization of acquired intangible assets in stock based compensation expense as well as the tax effect of these non-GAAP adjustments to.
The company uses these non-GAAP measures internally to assess operating performance. We believe these non-GAAP measures provided meaningful perspective.
Enter core operating results in underlying cash flow dynamics, we caution investors to consider these measures. In addition to not as a substitute for Nord superior to the company's consolidated financial results as presented in accordance with U S gap.
Also know throughout the company's press release in management statements. During this conference we refer to net loss attributable to picks works, Inc. Is simply net loss for additional details and reconciliations of gap to non-GAAP net loss and getting that lost 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 fix a work CEO tied to bonus. Please go ahead.
Thank you Brett and good afternoon, and welcome to all of you joining us on today's call.
As reported in today's press release, our top and bottom line results for the quarter within guidance and reflected the rebound.
From a uniquely challenging first quarter.
Or 37% sequential revenue growth in the second quarter was primarily driven by increase shipments of our mobile I CS, resulting in mobile revenue more than doubling and reaching a record 50 per cent of our total revenue.
Combined with a moderate <unk> sequential increase in home and enterprise attributable attributable to stabilization in the projector market.
Q to Mark the end of a smartphone inventory correction for Pixelworks, which gives us confidence in resuming our growth trajectory.
Before jumping into commentary on our end markets I believe it would be helpful to first provide some brief high level perspective on what we're generally expecting in terms of the rest of the year.
First we believe are sequential revenue growth in Q2 was not a one quarter of event, even though it was coming off an unusually low base in the first quarter. We expect continued swim sequential growth in mobile for the balance of the year.
Looking at our internal forecasts for the second half of the year, which today is largely booked we also anticipate mobile revenue to reflect significant top line growth over the first half of 2023.
Would that as a background context, all started reviewing normal business.
Is widely reported many component suppliers that sell into the smartphone market or.
<unk> continued to experience weaker demand as distributors and smartphone Oem's continue to work down previously overbuilt inventories.
This combined with a more sluggish recovery than expected and in demand has contributed to a prolonged market weakness.
With rebelling consensus, suggesting that current inventory correction.
And the smartphone supply chain will likely extend.
Into next year.
As reflected by the sequential increase in mobile revenue for the second quarter and our current expectation for continued sequential growth in the second half.
The trend we are experiencing is meaningfully different than those of the broader smartphone market.
[noise], what pixel work certainly experienced the impact from a correction of mobile inventory during the fourth quarter of last year and the first quarter of this year.
Since April we've effectively been completely clear on inventory of our mobile iced teas, both within the channel inhaled by current customers.
In fact is mentioned on our prior call we experienced multiple instances of mobile OEM customers requesting upside orders due to better than anticipated sell through on several smartphone models, incorporating or X five and X seven visual processor iced teas.
This is continued into the current quarter as many of the programs were participating on have experienced upside demand post launch.
In addition to closely managing inventories, we sustained our aggressive mobile product and ecosystem development efforts throughout the downturn.
A significant portion of these efforts have been centered around cultivating and leveraging a robust mobile gaming ecosystem.
Our team has and continues to execute well and the strategy.
And our growth and and otherwise weak demand environment is evidence of our mobile strategy is working.
In July we expanded upon our existing mobile ecosystem initiatives with the announcement of the formal introduction of Pixelworks I R X gaming experience brandy.
I R X referencing image rendering accelerator.
In a first for Pixelworks, our new I R X gaming experience brand.
Directly targets smartphone end users.
The brand itself is underpinned by Pixelworks extensive portfolio of proprietary mobile visual processing solutions cobbled together with our unique and Indepth game tuning services.
In conjunction with the I R X brand. We are also establishing and supporting <unk> certification program that will comprise both a mobile device.
<unk>, a mobile device incorporating pixelworks mobile visual processor as well as a certified list of top mobile games that meet our minimum visual quality performance standards. After tuning. These games for play on I R X certified smartphones.
Concurrent with the launch of I R X gaming experience brand, we publish the initial pre certified list of 20 top mobile games.
Which we will continue to expand over time.
We are also engaged with the multiple with multiple William customers to incorporate the I R X does that device for certification on.
On their next Gen models.
In advance of the phone officially been launched a press briefing held last week <unk>.
The Red meat K 60, Ultra smart smartphone was pre announced in collaboration with media Tek, Xiaomi and pixel word Shanghai.
This announcement.
With our formal fourth tier one mobile customer Xiaomi also revealed that the red meat K 60, ultra smartphone will be the first ever ire X certified phone when it was officially launched later this month.
Also last week Opal affiliate, one plus previewed the scheduled launch of its one plus H two pro.
Flagship.
Smartphone <unk>.
Reminding consumers of one pluses groundbreaking multi year partnership with Pixelworks and featuring simultaneous super frame rate in Super resolution functionality enabled by Pixelworks X seven digital processor.
As additional mobile games and devices are certified we believe the ire X gaming experience will contribute to higher consistency and quality mobile gaming for end users. While also bringing increased consumer awareness two picks it works and are content and OEM partners.
Turning to a brief update on our Truecut motion platform.
Truecut motion has now been established is the only commercially validated scalable and.
And filmmaker endorsed end to end solution for creating and delivering premium experience through the <unk> cinematic high framerate content.
Today, though most of us are accustomed to new technology seemingly been adopted and proliferating overnight the.
The professional film industry is different.
Despite all the technology technological advancements, including most of device display systems capable of high frame rate in high resolution output.
Hollywood Center content production has continued to utilize 24 frames per second since the early commercialization of motion pictures.
Why are there are multiple reasons behind the store cool.
The historical aversion to embracing higher frame rates. There is growing evidence that the adoption of higher frame rates is necessary to deliver high resolution H E R content without artifacts.
Most prominently the future motion pictures was four shattered by the theatrical release of James Cameron's Avatar of the way of the water.
As well as re releases of Avatar and Titanic.
All three of which were released globally. The theaters in four K H D. R and featured cinematic high frame rate enable by Pixelworks Truecut motion platform.
The box office success of these three titles instilled.
Instilled a new motivation among multiple industry participants to not only accept change, but also pivot towards increased releases of premium large format content.
Specific to pixel works in our Truecut motion platform, we believe that we are making significant progress toward broader commercialization.
I want to reemphasize the Truecut motion is a full ecosystem play.
And the opportunity for Truecut motion is bigger than any one customer or partner announcement we.
We do expect how we do however expect that will be making.
Additional announcements before year end that will serve as tangible proof points of truecut motions value proposition and continued adoption.
Continuing with an update of our on our home and enterprise business, which now predominantly consists of visual process or S. O C's.
For the digital projector market.
Revenue was up sequentially over the first quarter. However continued to reflect subdued orders from the projector Williams in response to macro related uncertainty and softer in market demand, particularly in China.
Additionally, our largest projector OEM customer is still working to normalize their internal inventories and lead times, followed by the prolonged period of supply constraints and demand imbalances.
With that said <unk>.
An order patterns have stabilized in recent months and we currently expect a slow recovery in customer demand during the second half as the ongoing inventory correction continues to run its course.
During the second quarter, we delivered initial samples of our next generation S. O C. As part of our co development project with our largest project your customer.
As a result, we recognize than anticipated milestone payment as in R&D credit that reduce total opposite opex for the quarter.
We continue to expect this new associated with cheese volume production and contribute to overall revenue growth beginning in 2024.
Finally, an update on the progress related to our picks were Shanghai subsidiary and the status of our progress towards a listing on the star exchange.
As briefly highlighted in our last call, we retain Citic securities as our advisor and sponsored to support pixel word Shanghai throughout the application and underwriting process.
During the quarter, we submitted the application to formally begin the tutoring process, which is now well under way.
The tutoring process is a prerequisite for any company seeking to apply for a new listening.
Dissipated to take roughly two or three to four months.
Team is can currently compiling a draft of the perspective and supporting the associated multi you're on it for the subsidiary.
I'm very pleased with our continued preparation and advancement toward a local listing and today, we remain on track to formally file before year end.
In conclusion, I continue to be inspired by our team's execution of strategic initiatives and a renewed growth and momentum and mobile in spite of the current environment.
Although the ultimate recovery in the end market demand specifically in China's slower than most had anticipated.
We are optimistic about our positioning and growth prospects for the second half of the year.
Specific to the third quarter, we are fully booked to achieve sequential top line growth.
Coupled with expected improvement and gross margins as the projector market continues to gradually recover and we further ramp mobile shipments in support of customers upcoming launches a new smartphone models.
With that I'll have to call the Hayley review financials and provide guidance for the third quarter.
[noise]. Thank you time.
Revenue for the second quarter at 20, twenty-three increased 37% sequentially to 13.6 million from 10 million in the first quarter and was lower compared to 19.1 million in the second quarter.
May 20th the sequential revenue growth in the second quarter, that's driven primarily by increased shipments into the mobile market.
The breakdown of revenue in the second quarter with Us <unk>.
Revenue from mobile increased by over 100 per cent sequentially to approximately 6.9 million, which represented a record 50 per cent of total revenue in the quarter.
<unk> enterprise revenue, what's approximately 6.79, reflecting a small sequential increase compared to the prior quarter.
Well then home in enterprise.
<unk> into the projector market continued to represent approximately 90 per cent of this business during the second quarter.
non-GAAP gross profit margin was 40.5% in the second quarter of 2023.
Compared to 44.1% in the first quarter of 2023 and.
And 49.3% in the second quarter of 2022.
Discuss last quarter.
The lower gross margin level in the second quarter reflected not only the shift and product next word mogul, but also previous increases in cost of materials that we chose not to immediately pass through the customers.
Beginning in the third quarter, we have began passing through a portion of the higher cost of materials to customers and as a result, we believe the second quarter March the bottom you progressed corporate gross margin <unk>.
And expect to realize incremental improvement and gross margin starting in the second half of this year.
Nine <unk> operating expenses <unk> $10.7 million in the second quarter <unk>.
Compared to $13.6 million and the prior quarter and 12.9 million in the second quarter of 2022.
During the second quarter, we achieved another anticipated milestone related to our code development agreement, resulting in a 1.9 million dollar credit.
R&D, which contributed to a reduced total operating expenses for the second quarter.
<unk> second quarter, 2023, net loss, but 4.89 or a loss of nine cents per share compared to a net loss of approximately $8.2 million or a lots of 15 cents per share in the prior quarter and a net loss of 3.39 or a loss of six cents per share in the.
Year ago corner.
Adjusted EBITDA for the second quarter of 2023 was a negative for a million compared to a negative 7.8 million last quarter and a negative 2.4 million in the second quarter of 2022.
Turning to the balance sheet, we ended the quarter with cash and cash equivalents at 54.5, $9 and the company continued to have no outstanding debt.
[noise] shifting to our current expectations and guidance for the third quarter of 2023.
Based on current order transient backlog, we anticipate third quarter total revenue to be in a range of between $15 million and 17 million.
At the mid point of this range total revenue would represent an increase of approximately 17% over the second quarter driven by expected sequential growth in both of our mobile and home and enterprise and markets during the third quarter.
In terms of gross profit margin.
I have discussed in my earlier remarks, we've recently began passing through incrementally higher of material costs to our customers.
Combined with higher unit volumes and increased overhead absorption from higher total revenue, we expect to drive a steady expansion of gross margin over the course of the next several quarters.
Specific to the third quarter, we expect non-GAAP gross profit margin to be between 42 per cent and 44 per cent.
We expect operating expenses in the third quarter to range between $13 million and $14 million on a non-GAAP basis.
Keep in mind, the operating expenses in the second quarter had the benefit of a milestone credits R&D and we do not expect a credit associated with the code development agreement during the third quarter.
Lastly, we expect third quarter non-GAAP EPS to arrange between the loss of 13 cents per share in a loss of nine cents per share.
That completes our prepared remarks, and we look forward to taking your questions.
Upgrade or you can proceed with the Q&A session. Thank you.
Thank you.
A reminder to ask a question. Please press one one on your telephone and wait for your needs to be announced to withdraw. Your question. Please press star one one again.
Please stand by while B compile the Q&A roster.
Our first question comes from the line up Sushi Desilva upfront capital. Your line is now open.
Hi, Todd Hi, Hayley Congrats on the progress here I know, it's coming out of the bottom it I'm sorry.
I feel good luck, so <unk> the new for the <unk> for the tier one I'm just try understand that ramp versus the other three have already had an uhm. The initial ramp here you know how it sizes first you have a three and more importantly, your confidence that there's steady sequential growth given the sometimes the newer customers.
Have an initial build and then at a policy to see how the program goes before they move forward so any color their <unk>.
Okay, well, that's all the customers analysis Xiaomi, we can talk yep.
They had you know like you said.
Let me just talk about what I feel are the differences between this product launch and previous product launches with other two one.
Yeah first I would <unk> I would say we've had some larger we've had smaller so it's in the mail.
From a quantity perspective.
They did up there quantities twice prelaunch.
So they feel they're gonna get good demand for this but the most notable difference between this launch and all the other launches.
Is they fully embraced.
<unk>.
Marketing the differentiation Pixelworks visual processing brings ma'am and.
Fully embraced co marketing the ire X ecosystem brand.
And they did this in a large event last week, where 70 local press attended.
And the effectively launched a three way partnership between ourselves Mediatek Mediatek is on this.
Particular gaming platform their newest immensity.
And off you know executives from Mediatek Pixelworks and show me presented the output of this collaboration.
And so I would say that's.
That's the most notable both marketing and how they presented it in if you go back and look at some of our previous tier one launches the customers tried to present. This our technology is their technology.
We had some co marketing, but they sort of buried it they wanted to present at the.
Their innovation was was differentiate in the market I think what you're going to see go forward is the market. The brand launches are going to acknowledge us.
And our ecosystem.
Okay. That's helpful and the this I R X brand I'm curious how this is gonna be marketed going forward. It sounds like it could be a good way of pulling an incremental demand for your product. So what what what are the ways that's gonna be marketed.
Well, we're gonna marketed.
R O M customers are gonna market or gaming vendors are gonna market. It, but we will be the predominant marketeer of the branch.
But understand.
Right now I'm talking to.
Predominantly U S investors.
A big part of our marketing will be local marketing in China, and southeast Asia and targeted towards the end markets, where these phones go.
Okay last question for me on the smartphones, how do you think bifurcation of the demand that's kind of recovering modestly here between the premium smartphones, where I think pixelworks is represented well versus the broader smartphone market is that part of the dynamic that's giving you more confidence maybe for the rest of it.
Smartphone component pairs you have sex.
Well, what's giving me confidence is backlog.
What.
But I I do believe that.
The premium market held up much better than the low cost market.
This year.
Okay.
Thank you <unk>.
Thank you <unk>.
Please spell your next question.
Our next question comes frontline of Quinn Bolton off need him and company LLC. Your line is now open.
Hi, Todd wanted to follow up on non Stooges question. Obviously, you know we we've all gone through this sort of inventory correction on the China market and you're sort of coming out of it much earlier than many others and I guess I'm wondering did you get pretty good shell through data for the models that you're in and and do you have a way of tracking whether.
<unk> you know is is pretty clean obviously, the xiaomi as a new launch but for the run rate business. I think keep you know you'd mentioned multiple customers I believe we're upside and orders and a quarter. So it sounds like that activity was broader than than xiaomi. So just trying to get a sense of if you have a pretty good view into this.
Sell through of of those phone models.
You know I I <unk> I wish I had a better view our view is through our customer dialogue through executives at the customer dialogue and then.
You know when they come in and with short notice start up citing us on quantities, then I cleared to get a picture right.
My take on this is I think in general the premium brands held up a little bit better.
I think specifically the brands we were the models we were in are doing well.
But when I say doing well I meant doing well to the oem's.
Expectations for the model when we first started on it alright.
Alright.
You know one of the things I.
Witness is if you go back to 2021.
The forecast data and the order coverage that customers gave us for models going into 21 was all inflated I mean, we realized that today.
Probably didn't realize it as much then.
The behavior of the customers today is the opposite.
You know they <unk>, they really I mean in some cases they bit off on <unk>.
Two extra three X the amount of inventory they would digestive a particular component not us, but other components in an entire year.
They have gone over the last six to nine months of trying to burn through some of this old inventory, but this is the smartphone market place.
And if you use old inventory too long your products not competitive.
So what they're doing is you will I think they're gonna get towards the end of this they won't burn through all these old inventories they'll start just genesis right.
They'll they'll scrap it they'll write it off their books and there'll be clean.
That exercise.
Has left all of the odium in China extremely cautious so.
So I think going into this year.
The projections they gave us for some of these model launches was was low because one thing that happened over the last three years and I think it's definitely happened for us I don't know if it happened for all the suppliers going into it.
China Odm's would not give component suppliers full coverage, we might have a 26 week.
Cycle time to build our products.
We going into the into the constraint period, everybody tightened up.
Their requirements.
<unk> cancel nonreturnable orders full cycle time lead times.
I see other suppliers and more commodity oriented.
<unk> of the supply chain, they're backing off to where they're absorbing the cycle time and they don't get a lateral recovered we've retained it.
So if somebody comes in and wants to do a program with us.
They're pretty much booked you know most of these programs get fully built out nine months.
There are almost fully booked for the entire program before we launched the phone.
Non cancel amount returnable.
Hopefully they'll give you a little insight Quinn yeah, no. That's that was great and then I guess, maybe two two for Haley you got it margins to arrange a 46, 44% how quickly or should we expect margins can can get back to the kind of 48% to 50% level.
Especially as mobile becomes Ah.
Greater part of the overall May I ask is that you know with 48 to 50 still something you see happening perhaps in 2024.
Yeah actually 2024, we're targeting to end the year.
With <unk>.
Mid fifties from Oregon.
So absolutely getting up to the 48 50, but even further than that by the end of 2024.
Perfect and then last for me the NRA payments that that Ah offset R&D in the June quarter, you're not expecting a payment in Q3, but you said your your that that program ramps and 24.
They're still additional and a repayment for milestones before that project completes and begins to ramp or was was the second quarter payment. The the last large <unk> with that program.
There is still one more <unk>, which we currently expect to achieve in Q4.
A similar size.
No a little smaller.
Okay, not not quite 1.9, a little a little less than that.
Great. Okay. Thank you.
Thank you one moment please for our next question.
Our next question comes from the line up Richard Shannon of Craig Hallum Capital Group. Your line is now open.
Alright, and Haley thanks for taking my questions as well.
Maybe I'll start of a technical question you just send the third quarter guidance in terms of sales were talking about some nice sequential growth here anyway like a delay the eighth where there's a meaningful difference in growth rates between mobile projector to get into that appointment.
Okay, then you won't answer that question.
Yeah, I I would think about it you know both mobile and how may I enterpriser kind of contributing.
Equally to that growth in Q3 compared to Q too.
[noise] Okay. Good that's that's good to see here in the context of the increase in gross margin shot.
Shot there.
Todd maybe a couple of questions on <unk> I guess I'm, just asking both right off you just wanted to get your sense of breath of acceptance Cross Lvl's poems, the gaming studios doesn't even the gaming engines.
Agree to their important here and then maybe you could talk a little bit about the cost of implementation of spending exercise.
So I you know listen this is this is something we've we've been.
Mmm taken out about for awhile.
We've been in the implementation mode for maybe three to five months [noise].
And it's in the early stages. So you you should see.
That would be much broader adoption, which makes the area.
Alright.
[noise].
And in that we had to cross our odium customers and models and across the games that we too.
And you know.
We we we definitely will see increased marketing costs.
But I [noise].
We will leverage.
The ecosystems marketing costs as well [noise].
[noise] mmk to that last point in time, there, you're saying it's gonna be.
Barely noticeable.
Sort of noticeable impact on your Opex going forward or is it with my email or shaken.
You know I.
That you defined noticeable, but we can definitely caffeine head count.
In both the gaming ecosystem team, which is a technical team and the outbound marketing communications team.
Mmm.
<unk>, if you're asking me right are we funding market development funds.
Today, we are not.
It sounds like you're suggesting that might be a possibility down the road is that fair to thank you <unk>.
Well so.
I really believe in.
Communicating.
A a common theme in brand.
Around a differentiated experienced the consumers.
[noise] and the the hardware space.
[noise], we live in this world all the time when you marketed to consumers, we think they understand all of the aspirin.
[noise] and speeds that we live they don't.
So if we can get them to understand.
Definitely on the mobile gaming.
They spend a lotta time, it's probably the top three use for mobile phones right [noise].
Yep, David [noise].
If they can understand the difference of experience of an I R X.
Brandon ecosystem, meaning the game, the odium et cetera, and they noticed the difference they noticed the difference in the look the feel of the speed the smoothness and the power consumption I mean, some of these games understand.
They give you. One example, there's this very the.
There's a game called <unk> impact that [noise].
Most of the Oem's in China will use to demonstrate the performance of your solution because of his attacking game.
[noise] and [noise].
You you try to render in real time in native mode.
On the most advanced.
Or media Tech T P U U.
You will be lucky too.
Sustained 50 grams per second.
[noise] and play for maybe two hours before you burn to.
Rather large battery unloading new phones, if you're displaying.
New Roman [noise].
[noise] the same phones that you hit that we just launched.
We render we offload the G P U.
Now rendered at a lower framerate like 30 frames per second.
At a lower resolution, we do post processing, we render the game at 144 frames per second at full capability of the display. This there shall be the case I think it was a one and a half K display.
And then we increase.
The ability for the user to.
To play the game for up to three hours [noise].
[noise] if they just [noise].
If you can quantify that differentiated experience with a brand.
Everybody benefits Vod M benefits, the gaming manufacturers' benefits and the consumer benefits and of course fixed.
So to me, it's about bringing the benefit you're asking me specific questions about are we willing to spend money to build that that branch.
And recognition within the consumer marketplace and we absolutely are we're doing it today.
And will ramp up more [noise].
As we see success [noise].
Okay Alright.
Alright, well, we look forward to seeing that happen here couple of last questions from you know jump on the line.
I've got a follow up on the answering the gross margins from alert earlier, Hayley you're talking about a goal of gross margins in the mid fifties exiting next year.
I I would think everyone would assume that the mix of mobile will be noticeably higher than even this today.
Uhm with that correct correct my assumption, if I'm wrong and the mobile tends to be you know a lesser mixed 40 ended up wrapping from the forties mid fifties to be a pretty impressive.
Impressive scenario and I would assume that are also excluding the potential for truecut carpet contribution in there. So I wonder if you could help me understanding bridge between today and that mid fifties, how does that happen either set the volume or any diet. Other dynamics here that can help them mixed improve that much.
Yeah. So.
We will be increasing margins for mobile more than.
Projects are over that period.
Coming from ourselves right now [noise].
Mmm.
No problem.
All of that kind of.
Oh two.
That number that [noise].
Feel free to jump in.
[noise] alright.
Be clear for Richard questions. So Richard.
<unk>. If you look historically, we are input costs went up quite a bit over the last two years.
[noise] use C as in for you Sir [noise].
[noise] some of those input costs Scott.
Forward to the customers not all right and certainly not all of them with Martin.
Alright, so we're now catching.
Catching up with some of that activity as things settle down as part of it [noise].
But in mobile specifically.
As part of it is.
You're gonna see is to introduce a new visual processor.
Publicly the customers had been reduced over six months ago.
They're already.
They're working on phones with it.
That's beyond the X seven [noise].
And we made sure that the margin profile on that device is better [noise].
Then the previous device the next seven [noise].
And we are introducing.
Yet another device in I'd say mid twenties, 14th there'll be our first 12 nanometer base device. That's why you've seen so part of the reason why some some of our Opex R&D go up as we're focused on a 12 nanometer devices.
[noise] and the margin profile that device.
Is incrementally better than the device, we're gonna run out.
So as the adoption [noise].
Of our roadmap happened.
We will see significant increase in margin profile for the mobile specific business.
Okay excellent that's that's great detail. Thanks for that time, the last one will jump on the line here.
Truecut U T S. Some announcements or at least a announcement before the end of the year about a tangible proof point of the ecosystem developing here wondering if you Wanna give us any clues as to what part of that ecosystem work. So just how should we think about what kind of events can happen to you.
You know I don't want to give too much food Oh, what what I'll say is.
There are several things we're working on.
You know life's dorm has been a big advocate.
For using.
Truecut technology and high frame rate in general [noise].
To deliver.
A unique experience to premium large format theaters.
[noise] and screaming large format theaters are all types of theaters, but I would say the most recognized ones for you know for this audience on the call would be Dolby Selma.
Max [noise].
And in China, there's something called <unk> [noise].
And as you go to the premium large format theaters and you wanted to deliver.
Hi resolution four K N high dynamic range in either two D or three D, but even more noticeable in three D. [noise].
[noise].
Because of the contrast and brightness.
And he expanded resolution.
Artifacts are much more noticeable.
Did you deliver it to <unk>.
[noise] okay.
If you go to 48, it's even more noticeable unless you do use our technology to do something about it.
<unk>.
And so.
What we've seen is we've seen other people [noise].
Other you know.
What we would call.
On the creative side want to take advantage of this technology to do a similar delivery.
You also seem premium large what we've seen premium large format technology leaders come to us and say how do we get more content to R. P O L.
So it might give you a little bit of color of where we've been spending a lot of time and energy.
There's more there's more than that I, just don't want to go into it.
Fair enough that <unk> I will step out of line. Thank you.
Yep. Thank you Richard.
Thank you.
Okay I did not see any other questions at this point I would like to change the <unk> conference back to management for closing remarks.
Okay. So thank you I have no further closing remarks continued progress in.
And a reasonably difficult environment, but what we feel pretty good about our prospects right now so thanks to everybody for participating.
This concludes today's conference call. Thank you for participating you may now disconnect.
Mmm Mmm mmm.
[music].