Q2 2024 Pixelworks Inc Earnings Call
down in Newark, NY.
You You One
Speaker Change: Good day, and welcome to the Pixelworks Inc. 2nd Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session.
Speaker Change: To ask a question during the session, you will need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised.
Speaker Change: To withdraw your question, press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Mr. Brett Perry, with Shelton Group Investor Relations. Please go ahead, sir.
Brett Perry: Good afternoon, and thank you for joining us on today's call.
Speaker Change: With me on the call are Pixelworks President and CEO Todd DeBonis and Chief Financial Officer Haley Aman. The purpose of today's conference call is to supplement the information provided in Pixelworks' press release issued earlier today announcing the company's financial results for the second quarter of 2024.
Speaker Change: Before we begin, I'd like to remind you that various remarks that we make on the call, including those about projected future financial results, economic and market trends,
Unknown Speaker: and Competitive Physician 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 results to differ materially. All forward-looking statements are based on the company's beliefs as of today, Wednesday, August 7, 2024. 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 company's annual report on Form 10-K for the year ended December 31, 2023, and subsequent SEC filings for a description of factors that could cause forward-looking statements to differ materially from actual results.
Operator: The 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 results to differ materially. All forward-looking statements are based on the company's beliefs as of today, Wednesday, August 7, 2024. The company undertakes no obligation to update any such statements to reflect events or circumstances occurring after today.
Speaker Change: and Competitive Physician constitute forward-looking statements. These forward-looking statements and all other statements made on this call that are not historical facts are subjects to a number of risks and uncertainties that may cause actual results to differ materially.
Speaker Change: All forward-looking statements are based on the company's beliefs as of today, Wednesday, August 7, 2024. The company undertakes no obligation to update any such statements to reflect events or circumstances occurring after today.
Brett Perry: Please refer to today's press release, the company's annual report on Form 10-K for the year ended December 31, 2023, 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 statements during this conference call will include discussions of certain measures and financial information in GAAP and non-GAAP terms, including gross margin, operating expenses, net loss, and net loss per share.
Speaker Change: Please refer to today's press release, the company's annual report on Form 10-K for the year ended December 31, 2023, and subsequent SEC filings for a description of factors that could cause forward-looking statements to differ materially from actual results.
Brett Perry: Non-GAAP measures exclude restructuring costs 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 on core operating results and underlying cash flow dynamics. However, we caution investors to consider these measures in addition to, not as a substitute for, nor superior to, the company's consolidated financial results as presented in accordance with U.S. GAAP. Also note throughout the company's press release and management statements during this call, we refer to net loss attributable to Pixelworks Inc. as simply net loss.
Speaker Change: Additionally, the company's press release and management statements during this conference call will include discussions of certain measures and financial information in GAAP and non-GAAP terms, including gross margin, operating expenses, net loss, and net loss per share.
Speaker Change: Non- GAAP measures exclude restructuring costs and stock-based compensation expense.
Speaker Change: The company uses these Nod GAAP measures internally to assess operating performance.
Speaker Change: We believe these non-GAAP measures provide a meaningful perspective on core operating results and underlying cash flow dynamics. We caution investors to consider these measures in addition to, not as a substitute for, nor superior to, the company's consolidated financial results as presented in accordance with U.S. GAAP.
Speaker Change: Also note throughout the company's press release and management statements during this call, we referred to net loss attributable to Pixelworks Inc. as simply net loss.
Brett Perry: For additional details and reconciliations of GAP to non-GAP net loss and GAP net loss to adjust the DBDA, please refer to the company's press release issued earlier today. With that, it's now my pleasure to turn the call over to Pixelworks CEO, Todd DeBonis. Please go ahead.
Speaker Change: 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 Pixelworks CEO , Todd DeBonis. Please go ahead.
Todd DeBonis: Thank you, Brett. Good afternoon, and welcome to everyone on the phone and the webcast. We appreciate you joining today's call. As discussed on our conference call in May, we expected the second quarter to be a challenging one due to specific near-term headwinds in our mobile business. Earlier today, we reported revenue for the quarter at the midpoint of guidance, reflecting the anticipated pause in orders from a large mobile customer. Gross margin ticked up sequentially, remaining above 50% and representing more than 1,000 basis points of improvement year over year.
Todd DeBonis: Thank you, Brett. Good afternoon and welcome to everyone on the phone and the webcast.
Unknown Speaker: As discussed on our conference call in May, we expected the second quarter to be a challenging one due to specific near-term headwinds in our mobile business. Gross margin ticked up sequentially, remaining above 50% and representing more than a thousand basis points of improvement year over year.
Speaker Change: We appreciate you joining today's call.
Speaker Change: As discussed on our conference call in May, we expected the second quarter to be a challenging one due to specific near-term headwinds in our mobile business.
Speaker Change: Earlier today we reported revenue for the quarter at midpoint of guidance.
Speaker Change: reflecting the anticipated pause in orders from a large mobile customer.
Speaker Change: Gross margin ticked up sequentially, remaining above 50% and representing more than a thousand basis point improvement year-over-year.
Todd DeBonis: Operating expenses and bottom-line results for the quarter were both better than the midpoint of our. We continue to believe that the current headwinds are primarily near-term, with signs of initial improvement and sequential revenue growth expected in the third quarter, although acknowledging the current drawdown in quarterly revenue. We have implemented a number of cost-reduction actions to better align our operating expenses with near-term revenue levels. In addition to a series of other measures taken over the last several months, to maximize operational efficiency, we implemented a reduction in head count across all areas, effective June 30. It is never an easy action.
Speaker Change: Operating expenses and bottom line results for the quarter were both better than the midpoint of our guidance.
Speaker Change: We continue to believe that the current headwinds are primarily near-term, with signs of initial improvement and sequential revenue growth expected in the third quarter.
Unknown Speaker: We have implemented a number of cost-reduction actions to better align our operating expenses with near-term revenue levels, in addition to a series of other measures taken over the last several months to maximize operational efficiency. Turning to a review of our mobile business, which experienced unanticipated weaker sell-through of its newly launched smartphone models in the first half of 2024, although completely unrelated to Pixelworks. We continue to be closely engaged with this customer on the evaluation of our upcoming next-gen visual processor and our IRX ecosystem.
Speaker Change: Acknowledging the current drawdown in quarterly revenue, we have implemented a number of cost reduction actions to better align our operating expenses with near-term revenue levels.
Speaker Change: in addition to a series of other measures taken over the last several months.
Speaker Change: to maximize operational efficiencies.
Speaker Change: we implemented a reduction in head account across all areas of the business
Todd DeBonis: The reduced headcount is anticipated to result in approximately $4 million of annualized cost savings beginning in the third quarter. Combined with other cost containment measures, we believe the collective expense reductions we've implemented to date will contribute to total OPEC savings of $10 million over the next 18 months. Now, turning to a review of our mobile business. As previously indicated, second quarter mobile revenue was down significantly and primarily reflected the impact of a pause in new orders from what had recently been our largest mobile customer, this customer experience, experienced unanticipated weaker sell-through of its newly launched smartphone models in the first half of 2024, although completely unrelated to Pixelworks. This resulted in excess inventory of our visual process.
Speaker Change: Effective June 30th.
Speaker Change: Never an easy action, the reduced headcount is anticipated to result in approximately four million in four million of annualized cost savings beginning in the third quarter.
Speaker Change: Combined with other cost containment measures, we believe the collective expense reductions we've implemented to date will contribute to total OPEX savings of $10 million over the next 18 months.
Speaker Change: Turning to a review of our mobile business.
Speaker Change: As previously indicated, second quarter mobile revenue was down significantly and primarily reflected the impact of a pause in new orders from what had recently been our largest mobile customer.
Speaker Change: This customer experience.
Speaker Change: experienced unanticipated weaker sell-through of its newly launched smartphone models in the first half of 2024.
Speaker Change: Although completely unrelated to Pixelworks, this resulted in excess inventory of our visual processors.
Todd DeBonis: They are now working down this existing inventory through a combination of prior and recently launched models that incorporate our technology. We continue to be closely engaged with this customer on the evaluation of our upcoming next-gen visual processor and our IRX ecosystem. More broadly within our mobile business, we continue to make steady progress on the expansion of our IRX branded gaming ecosystem. With the goal of enabling a dramatically enhanced visual experience for mobile gaming, we established the IRX ecosystem to align and promote a collaborative end-to-end approach that benefits all industry participants, from gaming studios to smartphone OEMs.
Speaker Change: They are now working down this existing inventory through a combination of prior and recently launched models that incorporate our technology.
Speaker Change: We continue to be closely engaged with this customer on the evaluation of our upcoming next-gen visual processor and our IRX ecosystem.
Unknown Speaker: More broadly within mobile, our mobile business, we continue to make steady progress on the expansion of our IRX branded gaming ecosystem, a collaborative end-to-end approach, from gaming studios to smartphone OEMs. Leveraging our IRX rendering acceleration solution, ecosystem partners gain the unique ability to deliver ultra-high frame rate, desktop-level photorealism, and high image resolution without excess device temperature or power consumption. Available today, certified games were a product of collaboration with CSUN games to help adapt and optimize a mobile version of the popular game JX3L2.
Speaker Change: More broadly within our mobile business, we continue to make steady progress on the expansion of our IRX branded gaming ecosystem.
Speaker Change: With the goal of enabling a dramatically enhanced visual experience for mobile gaming, we established the IRX ecosystem to align and promote
Speaker Change: a collaborative end-to-end approach.
Speaker Change: that benefits all industry participants.
Todd DeBonis: Leveraging our IRX rendering acceleration solution, ecosystem partners gain the unique ability to deliver ultra-high frame rates, desktop-level photorealism, and high image resolution without excess device temperature or power consumption. Since our prior conference call, our team completed integration work on two additional IRX mobile games, making a total of 11 IRX-certified mobile games available today. The most recent of these two IRXs certified games was a product of collaboration with CSUN games to help adapt and optimize a mobile version of the popular game JX-3 Ultra.
Speaker Change: From gaming studios to smartphone OEMs.
Speaker Change: Leveraging our IRX rendering acceleration solution, ecosystem partners gain the unique ability to deliver ultra high frame rate, desktop level photo realism, and high image resolution without excess device temperature or power consumption.
Speaker Change: Since our prior conference call, our team completed integration work on two additional IRX mobile games, making a total of 11 IRX certified mobile games available to date.
Speaker Change: The most recent of these two IRX...
Speaker Change: certified games was a product of collaboration with CSUN Games to help adapt and optimize a mobile version of the popular game JX3 Ultimate.
Todd DeBonis: Unlike most mobile games created based on existing IP, JX3 Ultimate Mobile innovatively leveraged cross-platform data inheritance to produce full-platform, high-quality mobile graphics that are comparable to the PC version. Additionally, in June, we announced our latest collaboration with Tencent.
Speaker Change: Unlike most mobile games created based on existing IP, JX3 Ultimate Mobile innovated
Speaker Change: innovatively leveraged cross-platform data inheritance to produce full platform high-quality mobile graphics that are comparable to the PC version.
Unknown Speaker: In June, we announced our latest collaboration with Tencent and its TMI Studio Group on Honor of Kings at ChinaJoy 2024. In conjunction with the show, we also launched a new dedicated IRX website and promotional video, which I would encourage investors to check out at irxgaming.com. The IRX ecosystem is a fundamental part of our mobile strategy, serving to further differentiate the performance advantages and premium visual game experience that visual processors bring to mobile devices.
Speaker Change: Separately, in June , we announced our latest collaboration with Tencent and its TMI Studio Group on Honor of Kings.
Speaker Change: for those less familiar with gaming honor of kings is a multiple player online battle arena game that was first launched several years ago
Speaker Change: Today it's literally a household name in China. According to mobile gaming industry experts, Honor of Kings remains the single most played multiplayer game globally.
Speaker Change: it also ranks number one in revenue generated from in-ap purchases
Speaker Change: We continue to have a healthy engagement with new multiple leading game studios and plan to announce additional IRX certified mobile games this year.
Speaker Change: In addition to our direct collaboration with studios on certified games, we continue to expand a growing list of more than 100 IRX qualified mobile games.
Speaker Change: These qualified games have been individually tested and tuned for our solution to optimize their visual performance.
Speaker Change: IRX remains the first and only industry-wide ecosystem of its kind dedicated to improving the visual performance of mobile gaming.
Speaker Change: We have several ongoing initiatives underway to consistently drive increasing awareness of IRX.
Speaker Change: Not only with the game studios and device OEMs, but also targeting broader awareness directly with consumer gamers.
Speaker Change: Currently, these IRX promotion and co-marketing efforts are primarily targeted within the APAC region and specifically in China as the largest mobile gaming market.
Speaker Change: To highlight one recent example, in late July we showcased our IRX solutions.
Speaker Change: at ChinaJoy 2024.
Speaker Change: Held at the Shanghai New International Expo Center, ChinaJoy is widely recognized as China's largest annual global gaming convention.
Speaker Change: Our team hosted an IRX branded booth which featured hands-on demos allowing participants to experience playing several IRX certified mobile games on recently released IRX certified devices.
Speaker Change: In conjunction with the show, we also launched a new dedicated IRX website and promotional video, which I would encourage investors to check out at irxgaming.com.
Speaker Change: The IRX ecosystem is a fundamental part of our mobile strategy, serving to further differentiate the performance advantages and premium visual game experience that visual processors bring to mobile devices.
Speaker Change: We believe that as the IRX ecosystem continues to grow, so does incentive for OEM customers to incorporate our visual processors across a broader range of smartphone models.
Unknown Speaker: Consistent with my comments last quarter, we remain focused on addressing an expanded served available market in mobile. This includes both increased penetration of mid and lower tier smartphones, as well as expanded adoption in customer's models targeting for global markets outside of China.
Speaker Change: In April , we demonstrated progress on each of these expansion goals with our first announced program win with Transient on the launch of the Infinix GT20 Pro smartphone.
Speaker Change: It incorporated our X5 series processor and represented the first time that Pixelworks technology has been featured in a sub $350 smartphone that is targeting emerging markets outside of China.
Unknown Speaker: Also announced during the quarter, OnePlus incorporated our X7 Gen 2 visual processor in its newly launched OnePlus Ace 3 Pro smartphone.
Speaker Change: Positioned as a more affordable smartphone that delivers flagship-like performance, the OnePlus Ace 3 Pro is priced between $450 to $600 depending on memory configuration.
Unknown Speaker: make it the second win with our x seven g-two processor in the mid-tier smartphone model category
Operator: Good day and welcome to the Pixelworks Inc. At this time, all participants are in a listen only mode.
Operator: After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, press star 11 again.
Operator: Please be advised that today's conference is being recorded.
Brett Perry: I would now like to hand the conference over to your speaker, Mr. Brett Perry, with Shelton Group Investor Relations. Please go ahead, sir. Good afternoon, and thank you for joining us on today's call. With me on the call, our Pixelworks President and CEO, Todd DeBonis, and Chief Financial Officer, Haley Aman.
Brett Perry: The purpose of today's conference calls to supplement information provided in Pixelworks Press release issued earlier today announcing the company's financial results for the second quarter of 2024. Before we begin, I'd like to remind you that various remarks that we make on the call, including those about projected future financial results, economic and market trends, and competitive position constitute forward-looking statements. These forward-looking statements and all other statements made on this call that are not historical facts or subjects to a number of risks and uncertainties that may cause actual results to different materially. All forward-looking statements are based on the company's beliefs as of today, Wednesday, August 7, 2024.
Brett Perry: The company undertakes new obligation to update any such statements to reflect events or circumstances occurring after today.
Brett Perry: Please refer to today's press release, the company's annual report on form 10K for the year ended December 31, 2023, and subsequent SEC filings for a description of factors that could cause forward-looking statements to different materially from actual results. Additionally, the company's press release and management statements during this conference call will include discussions of certain measures and financial information in gap and non-gap terms, including gross margin, operating expenses, net loss, and net loss for share.
Brett Perry: Non-gap measures exclude restructuring costs and stock-based compensation expense. The company uses these non-gap measures internally to assess operating performance. We believe these non-gap measures provide a meaningful perspective on core operating results and underlying cash load dynamics. We caution investors to consider these measures in addition to not as a substitute for nor superior to the company's consolidated financial results as presented in accordance with U.S, gap. Also, note throughout the company's press release and management statements during this call, we refer to net loss attributable to PIXWORKS Inc, as simply net loss.
Brett Perry: For additional details and reconciliations of gap to non-gap net loss and gap net loss to adjust the divida, please refer to the company's press release issue earlier today.
Todd DeBonis: With that, it's now my pleasure to start the call over to PIXWORKS CEO, Todd DeBones. Please go ahead. Thank you, Brett. Good afternoon and welcome to everyone on the phone and the web. Inc. We appreciate you joining today's call. As discussed on our conference call in May, we expected the second quarter to be a challenging one due to specific near-term headwinds in our mobile business. Earlier today, we reported revenue for the quarter at midpoint of guidance, reflecting the anticipated pause and orders from a large mobile customer.
Todd DeBonis: Gross margin ticked up sequentially, remaining above 50 percent, and representing more than a thousand basis point improvement year over year. Operating expenses and bottom line results for the quarter were both better than the midpoint of our guidance. We continue to believe that the current headwinds are primarily near-term with signs of initial improvement and sequential revenue growth expected in the third quarter. Acknowledging the current drawdown in quarterly revenue, we have implemented a number of cost reduction actions to better align our operating expenses with near-term revenue levels.
Todd DeBonis: In addition to a series of other measures taken over the last several months to maximize operational efficiencies, we implemented a reduction in head count across all areas of the business, effective June 30. Never an easy action, the reduced head count is anticipated to result in approximately four million in four million of annualized cost savings beginning in the third quarter. Combined with other cost containment measures, we believe the collective expense reductions we've implemented to date will contribute to total off-ex savings of $10 million over the next 18 months.
Todd DeBonis: Turning to a review of our mobile business, as previously indicated, second quarter mobile revenue was down significantly and primarily reflected the impact of a pause in new orders from what had recently been our largest mobile customer. This customer experience unanticipated week or so through of its newly launched smartphone models in the first half of 2024. Although completely unrelated to pixel works, this resulted in excess inventory of our visual processors. They are now working down this existing inventory through a combination of prior and recently launched models that incorporate our technology.
Todd DeBonis: We continue to be closely engaged with this customer on the evaluation of our upcoming next-gen visual processor and our IRX ecosystem. More broadly within our mobile business, we continue to make steady progress on the expansion of our IRX branded gaming ecosystem. With the goal of enabling a dramatically enhanced visual experience for mobile gaming, we established the IRX ecosystem to align and promote a collaborative end to end approach that benefits all industry participants from gaming studios to smartphone OEMs.
Todd DeBonis: Leveraging our IRX rendering acceleration solution, ecosystem partners gained the unique ability to deliver ultra high frame rate, desktop level photorealism and high image resolution without excess device temperature or power consumption. Since our prior conference call, our team completed integration work on two additional IRX mobile games, making a total of 11 IRX certified mobile games. Games, available today. The most recent of these two IRX certified games was a product of collaboration with CSUN Games to help adapt and optimize a mobile version of the popular game JX3 Ultimate.
Todd DeBonis: Unlike most mobile games created based on existing IP, JX3 Ultimate mobile, innovatively leveraged cross-platform data inheritance to produce full platform, high-quality mobile graphics that are comparable to the PC version. Separately in June, we announced our latest collaboration with Tencent, and it's TMI Studio Group on Honor of Kings. For those less familiar with gaming, Honor of Kings is a multiplayer online battle arena game that was first launched several years ago. Today, it's literally a household name in China.
Todd DeBonis: According to mobile gaming industry experts, Honor of Kings remains the single most played multiplayer game globally. It also ranks number one in revenue generated from in-app purchases. We continue to have a healthy engagement with new multiple leading game studios and plan to announce additional IRX certified mobile games this year. In addition to our direct collaboration with studios on certified games, we continue to expand a growing list of more than 100 IRX, 100 IRX qualified mobile games.
Todd DeBonis: These qualified games have been individually tested and tuned for our solution to optimize IRX remains the first and only industry wide ecosystem of its kind dedicated to improving the visual performance of mobile gaming. We have several ongoing initiatives underway to consistently drive increasing awareness of IRX. Not only with the game studios and device OEMs, but also targeting broader awareness directly with consumer gamers. Currently, these IRX promotion and marketing efforts are primarily targeted within the APEC region and specifically in China as the largest mobile gaming market.
Todd DeBonis: To highlight one recent example, in late July, we showcased our IRX solutions at ChinaJoy 2024. Held at the Shanghai New International Expo Center, ChinaJoy is widely recognized as China's largest annual global gaming convention. Our team hosted an IRX branded booth which featured hands-on demos allowing participants to experience playing several IRX certified mobile games on recently released IRX certified devices. In conjunction with the show, we also launched a new dedicated IRX website and promotional video, which I would encourage investors to check out at IRXgaming.com.
Todd DeBonis: The IRX ecosystem is a fundamental part of our mobile strategy serving to further differentiate the performance advantages and premium visual game experience that visual processors bring to mobile devices. We believe that as the IRX ecosystem continues to grow, so does incentive for OEM customers to incorporate our visual processors across a broader range of smartphone models. Consistent with my comments last quarter, we remain focused on addressing an expanded served available market in mobile.
Todd DeBonis: This includes both increased penetration of mid and lower-tier smartphones, as well as expanded adoption in customers' models targeting for global markets outside of China. In April, we demonstrated progress on each of these expansion goals with our first announced program win with Transion on the launch of the Infinix GT20 Pro smartphone. It incorporated our X5 series processor and represented the first time that Pixelworks technology has been featured in a sub $350 smartphone that is targeting emerging markets outside of China.
Todd DeBonis: Also announced during the quarter, OnePlus Incorporated our X7 Gen 2 visual processor in its newly launched OnePlus A3 Pro smartphone. Positioned is a more affordable smartphone that delivers flagship-like performance. The OnePlus A3 Pro is priced between $450 to $600 depending on memory configuration. Make it the second win with our X7 Gen 2 processor in the mid-tier smartphone model category. These two newly launched smartphones both feature IRX certified solution while utilizing different generations of our visual processor.
Todd DeBonis: Both models have been well received in their targeted markets. Lastly, within mobile, I want to provide an update on our next-gen mobile visual processor. As discussed on our prior call, we pushed out the production release of our next-gen solution after encountering a few technical hurdles that were impairing the device's full range of capabilities and intended performance. As an update, our engineering team has completed the work on the required design changes, and we are confident we have resolved all previously identified issues.
Todd DeBonis: We are scheduled to receive new samples of our next-generation device for testing and final verification at the end of this month, which will position us to be ready for its production launch in the fourth quarter. As anticipated, this push out and timely, unfortunately, results in missing the design in window for customer smartphone models in the back half of 2024. We do, however, remain engaged with multiple customers on our next-gen solution on their subsequent plan models.
Todd DeBonis: Architected with direct feedback from existing IRX ecosystem partners, this will be pixel works first mobile visual processor in 12 nanometer process technology. We believe this newest generation solution is poised to bring to market disruptive performance to mobile gaming, with a series of new industry first features and the ability to deliver a true immersive PC-like gaming experience to mobile devices. We look forward to a planned formal market introduction of our next-generation visual processor We continue to see growing interest from premium large format exhibitors that are specifically requesting true cut motion for movie titles shown on their screens.
Todd DeBonis: As further evidence, two of the largest global premium large format exhibitors are now actively recommending true cut motion, citing a demonstratably better viewing experience on their premium large screens. Movie shown in premium large format theaters represent a growing portion of the global box office, outperforming non-premium formats, both in viewer satisfaction and box office sales. As a result, premium large format exhibitors not only have increased influence, they're also engaging more than ever directly with filmmakers.
Todd DeBonis: Our current focus is on leveraging these endorsements of true cut motion by premium large format exhibitors to facilitate increased awareness among filmmakers, studios, and consumers in support of driving accelerated use of true cut technology for new release titles. Additionally, our true cut motion R&D team will soon release a new generation of motion grading and reproduction tools to be used on upcoming projects. These new tools leverage a combination of both expertly trained AI and new patented algorithms to deliver fast results at higher resolution.
Todd DeBonis: In addition, these tools are more tightly integrated with leading post-production tools and formats. As motion grading becomes standard practice within the film industry, this new generation of tools will be increasingly important for supporting new and expanded true cut motion engagements.
Todd DeBonis: Shifting to our home and enterprise business, which as a reminder is predominantly comprised of our visual processor system on ships for the 3 LCD digital projector market. For the second quarter, total revenue from home and enterprise was roughly flat on both sequential and year-over-year basis. This was consistent with our internal expectation and also mirrors the recent feedback from our projector customers that market supply and demand dynamics are generally well balanced. As I mentioned on the last call in April, we secured final acceptance from our largest projector customer on production samples of our co-developed next generation projector SOC.
Todd DeBonis: We subsequently received the first purchase orders and new code and the new code developed SOC is now scheduled for volume production in the fourth quarter. The first volume production shipments will support two new planned projector models and then this new chip will gradually be adopted more broadly over time as our lead customer introduces new additional projector models.
Todd DeBonis: In conclusion, we knew the quarter was going to be difficult, I'm proud of our team which is confronted the recent challenges head on while remaining focused on strategic and operational execution across the business. We remain encouraged by our recent progress and look forward to delivering improved results for the year. Specific to mobile, we believe that we are positioned for renewed growth in the coming quarters. We are increasingly targeting an expanded, served market for mid to lower tier smartphones as well as incremental customer adoption in international models.
Todd DeBonis: Additionally, engagements and the influence of our IRX gaming ecosystem continue to grow and will soon be further supported by the introduction of our next generation mobile visual processor. We also expect to benefit from a continued stable performance with our home and enterprise business. Together with our recently implemented cost reduction actions, we expect to deliver sequential revenue growth in the third quarter while continuing to target improved operation results over the intermediate term.
Haley Aman: With that, I'll hand the call over to Haley to review financials and provide our guidance for the third quarter. Thank you Todd. Revenue for the second quarter of 2024 was 8.5 million, which was at the midpoint of our guidance.
Haley Aman: The revenue decreased from the prior quarter was primarily driven by the anticipated near-term headwinds in mobile. The breakdown of revenue in the second quarter was as follows. Revenue from mobile was approximately 2.1 million, comprised primarily of shipments of our ex-series visual processors. Home and enterprise revenue was approximately 6.4 million.
Haley Aman: Second quarter non-gap gross profit margin expanded 30 basis points sequentially to 51 percent from 50.7 percent in the first quarter of 2024 and increased over 1,000 basis points from 40.5 percent in the second quarter of 2023. The significant year-over-year expansion and gross margin reflects our ongoing focus to drive healthy margins.
Haley Aman: Non-gap operating expenses were 12.8 million in the second quarter compared to 12.6 million in the prior quarter and 10.7 million in the second quarter of 2023. With respect to the year-over-year comparison, as a reminder, lower operating expenses in the second quarter of 2023 included the benefits of a $1.9 million credit to R&D related to the now completed co-development agreement with our largest projector customer.
Haley Aman: As to our previously highlighted, we've recently implemented expense reduction actions to more appropriately align expenses with current revenue levels, including in approximately 16 percent reduction in workforce, which was affected at the end of the second quarter. As a result, we expect to realize approximately 4 million in annualized savings.
Haley Aman: On an on-gap basis, second quarter 2024 is at last with 7.7 million or a loss of 13 cents per share compared to a net loss of 4 million or a loss of 7 cents per share in the prior quarter and a net loss of 4.8 million or a loss of 9 cents per share in the second quarter of 2023. Adjusted eva-daw for the second quarter of 2024 was a negative 7 million compared to a negative 3.2 million in the first quarter and a negative 4 million in the second quarter of 2023.
Haley Aman: Turning to the balance sheet, we ended the second quarter with casting cash equivalent of $37.8 million, compared to $46.2 million at the end of the first quarter, and $47.5 million at year end 2023. In addition to cash use for operations, the cash balance, at quarter end, also reflected approximately $2.5 million, using during the quarter for a one-time purchase of the masks that associated with our next generation mobile visual processors.
Haley Aman: The thing is to our current expectations and guidance for the third quarter of $20.4. As well as it felt inconsistent with the expectations we outlined on our previous conference call, we expected to return to sequential revenue growth in the third quarter. Based on current order patterns and existing backlog, we currently anticipate total revenue for the third quarter to be in a range of between $9 million and $10 million. In terms of growth profit margins for the third quarter, we expect non-gap growth profit margin to be between 49% and 51%.
Haley Aman: With respect to operating expenses, we expect to realize the initial benefits from the previously discussed top production beginning in the third quarter. However, we anticipate the resulting reduction in expenses to be partially offset by a one-time expense associated with the design revisions completed on our next generation mobile visual processor.
Haley Aman: That is these factors. We expect operating expenses in the third quarter to range between $12 million and $13 million on a non-gap basis.
Haley Aman: Lastly, we expect third quarter non-gap APS to range between a loss of 11 cents per share and a loss of 14 cents per share.
Haley Aman: That completes our prepared remarks and we look forward to taking your questions.
Operator: Operator, please proceed with Q&A. Thank you. As a reminder to ask a question, please press star 11 on your telephone and wait for your name to be announced.
Operator: To withdraw your question, press star 11 again. One moment while we compile the Q&A roster.
Nick Doyle: Our first question comes from the line of Nick Doyle with Needham and Co. I guess thanks for the question. The first one would be on the International Expansion. Did you have any shipments this quarter or just otherwise what's the kind of interest you're getting in any detail on orders and general needs? And then also if there is, I mean, are you seeing more interest on the low side of the mid tier?
Nick Doyle: I didn't hear what if you were on Nick, I didn't hear you. I just heard you at the end there. Okay, I'll repeat. The International Expansion, just looking for, you know, if you had any shipments in the quarter and just generally, you know, what kind of interest you're getting. And if that's tilted to the low tier, the mid tier. Thanks.
Todd DeBonis: Sure. So just to summarize for everybody that the two previous models that were targeted to the International Market were. One Plus in Q1 launched a phone, they're one plus, 13th, they're flagship, and I would say it's more of a flagship oriented phone. They did include our visual processor and target IRX internationally, but it wasn't all in in gaming, let's say. And then the second phone was this phone that we did with the Division of Transion, the Infinix GT20.
Todd DeBonis: That was absolutely targeted at competitive gaming, but they've seen good demand. It's probably tripled over their previous model, their GT10. They did a very good job marking it towards competitively priced international markets. They ship no phones into China, their target markets are Africa, South America, Southeast Asia, Central Asia, and they did a very good job in marketing and right now we see reasonable volume from from that volume for what we expected going into the design actor.
Todd DeBonis: Okay, that tells one that's great to hear about the transition stone for the new projector, so see congrats on the progress there. Will the ramp in the fourth quarter be able to offset, you know, the general seasonality. Yeah, I would, I would say that yes, normally Q4 is a little bit seasonally down over Q3, I would say it won't be this year, but in general, what they're going to do is slowly replace some of the older models.
Todd DeBonis: So what you'll do is as the new processor comes online, it will give a little bit of positivity to the overall projector numbers. The ASP is higher than the previous devices, so as it replaces, it does two things, it replaces some of our own devices, but it also replaces a competitor's device. So once it's been fully adopted, we'll have a higher market share at our largest customer.
Operator: And then we have a derivative product that we're introducing to the rest of the market, but those models will not start shipping till 2025. Thank you. You're welcome. Thanks, Nick. Thank you. And as a reminder, if you would like to ask a question, please press star 11. I'm showing no questions in the queue at this time.
Todd DeBonis: I would like to turn the call back over to management for any closing remarks. Thank you for attending today's call. We look forward to bringing progress over the next coming months.
Todd DeBonis: We'll talk to you on the next quarterly call.
Operator: This concludes today's program. Thank you all for participating.
Operator: You may now disconnect.