PXLW - Earnings call transcript Q4 2017

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Operator

Good day, ladies and gentlemen and welcome to Pixelworks, Incorporated Fourth Quarter 2017 Earnings Conference Call. I will be your operator for today’s call. [Operator Instructions]. This conference call is being recorded for replay purposes. I would now like to turn the call over to Pixelworks' CFO, Mr. Moore. Steve

Steven Moore

call thank is us and press Todd purpose and today's XXXX. and on With CEO. year release for the fiscal for of call supplement the announcing the DeBonis, conference financial issued you earlier afternoon in the today. joining me The information today Good provided to company's our results is Pixelworks' quarter President fourth

actual those forward-looking on not about to remind forward-looking All to projected Before statements we statements. this historical other made that remarks differ economic number on of call, we and we would any including subject February and to today. based belief statements Thursday, circumstances occurring to XX, materially Annual are for that Form position, description on cause results, Please update begin, factors to are for cause that a financial to call today, uncertainties obligation after you results make trends to our ended These facts refer December and and the Report as results. XX, today's our various XXXX SEC such events future no XXXX of our release, like statements market constitute could I statements of and competitive materially. forward-looking or on all risks this press may filings that from company's the reflect year actual and differ subsequent are XX-K statements undertake forward-looking

income option, costs, share operating measures tax and terms, backlog per statements financial and margin, conversion to restructuring non-GAAP expenses, exclude in include of and compensation discussions and benefit gross Additionally, expense, information on accretion tax related reform. fair value, and income convertible fair These deferred stock-based inventory intangible debt the loss on share. will a adjustment, company's non-GAAP of and integration certain extinguishment press convertible debt amortization, during revenue net net this call value amortization debt value adjustment discount management's convertible acquisition expenses, loss conference release GAAP acquired measures and assets, of step-up related including

benefit the the for a of the assess to performance. these reconciliations but Systems. our consolidated Included as financial With compensation addition of company's to integration release non-GAAP are presented accordance the underlying exception to EBITDA cash non-GAAP opening provide operating adjusted said, results acquisition of consider believes loss and GAAP on the related operating his these in to, over company's stock-based meaningful superior turn net measures our internally tax use not in perspective and all we in to, company and With and as items adjusting GAAP remarks. The nor to definitions GAAP. to measures income these are non-GAAP ViXS call related which and will caution income net reform, for now We substitute to measures the results provide additional of dynamics that press I these flow investors Todd to with a tax details. core loss

Todd DeBonis

our to high $XX.X afternoon of $XX.X our quarter overview today's end present million everyone good and joining to Steve Beginning on guidance. an a with results, which you, Thank of us million million was $XX.X call. revenue fourth

marking organic Life a Operating our EOL in mix any the from high product excluding benefited the portfolio a year above achieved doesn’t we million from EPS For over the from of XX% pure $XX Pixelworks. for expenses well growth of the contribution over on full our guidance. delivered margins streamlining of expectation basis year-on-year revenue of products. year, consolidated our delivery line quarter growth also richer a contribution were on Fourth also fourth from And was transformational from and resulting in of as growth as XX%, of increased the quarter which was products. include midpoint guidance and of Pixelworks revenue XX.X% end we End previous we gross product the with of top margin as video contribution

impact weighed XXXX, on solid half non-GAAP from year EPS full acquisition for of the ViXS in Although back on the profitability achieved the a basis. the we

generated Importantly, notable, we acquisition QX on and XXXX. positioning flow delivery video over in to from I the have of to the operations $X.X million in year. want fully integration the now completed of cash that full Also accretive deliver commitment highlight us being business the we $XX for in million our

delivery. markets three of Turning end video and on commentary and projector, mobile highlights to our

revenue First, fourth Fourth over year EOL quarter. from in and seasonality business contribution XX% grew the When over sequential grew projector basis, a business. on our our X% typical prior year-on-year. excluding the quarter projector reflected than better approximately

As of now channel market supply inventory and XXXX. has disruptions more following we the less yearend, believe the or normalized in

closely large overall customer on positioned and Booking visibility, for are healthy. project levels and supply we on the During product upon based consistent remain quarter chain execute future XXXX. complete SOC appear inventories activity engaged next-generation the with development for and broadly, and traditional the continue market roadmaps. well current patterns channel we and core quarter, dynamics customer in current track is market both we a current a Pixelworks seasonal on to in the on with with are their solid schedule and the late our to More

we we moderate gross can the feel however, largely increasingly year-over-year XXXX, in our business growth that through compare rate the margin mentioned last last our up to forward, comps. step as year quarter in Looking over sustainable will be as higher comfortable projected

at a Now look mobile. taking

Iris Mobile was XX% revenue generation though our sequentially from latest mobile small. and processor relatively in over of by support ASUS. grew in the full even the for remained increased our driven video mobile contribution tablets XXXX anticipated business shipments of at grew the of year As revenue

technology. relevance further serve and Pixelworks key that the number the back at Looking review processing XXXX to of support a escalate across took display our place market developments mobile of

OEMs this ACR reinforce of associated with and and phones two quality displays their in content. the gamut among flagship over video the consumers pipeline awareness largest HDR Not introduced display ecosystems it streaming wired but helped increase including First, mobile only investment available color playback. HDR mobile did

this similar on there of internal OEMs credence given next-generation marketing the features to few how and OEMs into incorporate and functionality. pressure of true, are display and believe platforms. top adopt to that processing to our we other to leaders display real effort know has advance the the three added All capability Moreover, have outside two or continue

good we dynamics these As such, remains market current and in are target with progress. our making on on OEMs capitalizing partnering Asia focus where

mobile, we to in we began production with recent sampling for since our our generation early device display last in customers progress and We’ve Iris engaged quarter fourth in our January. target fourth released evaluations related actively ongoing generation Specifically processor.

it we our certain given year wins Additionally, has we in for of third reference production. our to never particular programs grew streaming addition the like QX OEMs and caution in or been I make enables business continue design provider. the would that of with volatility be for and different quicker This that this smartphone in OEMs. active become now leading design design programs provider. by Iris activity to path all these that a with reference service is engagements the chip Iris a its Iris and eight Customer will approved XX to engaged for customers on generation at multiple design wait-listed HDR by want exited result

in the very upon expand encouraged processors design current we our Based expect begin our mid-XXXX. and are we in working hard However, interest mobile by ramping to engagements. volume to the production Iris we meaningful are activity

to video Turning delivery.

As million synergies. of quarter, has in during realizing annualized cost completed mentioned, this successfully enabled we $X integration and to which our us previously approximately begin restructuring the business fourth

a rate is we patterns de-legacy acquired was the normalized of with some order acquisitions, legacy $XX after with in As customer believe in demand now annual revenue run million business XXXX. future business typical for areas approximately the rationalizing and that

continue a this capable start XX% base we this is to XX% believe business Although in that growing XXXX. of lower to to is from, line

meaningful exclusively opportunities. our on video Going is delivery forward, team two focussed

is is and of broadcasting Blu-ray provides where the and service content consumer technology the Pixelworks as our Japan receive SoCs consumers OEMs way in Japanese recording end different these manage consumer set isn’t provider. significantly and and transcoding to standards in the by in Both the products. broadcast compared the first a to market family video issued Xcode electronics Most UHD decoding importantly, in opportunities meaningfully dedicated and markets the ability playback top U.S. products with are the to HD box The in of advanced equipment today, where Japan, their used differentiate

quarter, OEM and show we of for have agreement on office and at engineering end support early to with in year. of our Early with our in work success. consumer family the staffed products our electronics sales dollar release have expanding multimillion the Japan to the production of the this enabled share development We Japan finalized intention a next-generation targeted team

The OTA is focused other on opportunity or streaming. over-the-air are we

HD content, to dual media Here paying broadcast an to such to the want was TV Pixelworks of is two television which solutions in as any quarter free where driving consumers consumers such Roku players local they TV. they only their This live tuner for different device content that alternatives new recently when simultaneously OTA. or HD are TV broadcast demanding cord increasing OTA in channels subscribers in traditional as streaming number video conjunction with as it to consumers a on control content including were, Two the more incorporating transcoders two launched with enable or access over consumers and and U.S. to [Indiscernible] CES. watch can increasingly effectively devices, the stream watch. cut as for pay Apple the or of OTT announced choose favour and live OTA of decline device allows such the Pixelworks' products wireless

at device launched also with OTA TV soft TV’s Air not the home, its newest to watch compactible local free enabling channel sling effectively anywhere Second, with Internet users is HD access. but which

of examples upon get cut OTA are to and their largely are our cord. quad For user guide. dual devices an for of sling SOCs. anxious market the Today, the of the many two the consumers These channels that solutions benefit subscribers they Sling single, OTA adopters within based integrated and channel added early just consists

opportunity successfully for increases, with again that remarks, at cord Pixelworks XXXX point of in fundamentals awareness executed my the To the year growth the over significant to improvement a good we basis line of profitability the key devices As and I year. on Pixelworks. to conclude gross top place XXXX year a the prepared has become of emphasize significant margin number transformational and reasonably want non-GAAP a market beginning for throughout potential deliver objectives was cutting to for XXX for alternatives OTA

mention balance and growth both over sampling successfully the our from market. the while acquire Life products X us $XX the more Iris to detail. opportunities and mobile Additionally we completed positioned cash in million to ? fourth video End complimentary in in quarter customers agreements size to the review year to engineers and part call we LCD are products, large group a we capital believe delivery sheet quarter of begin and approximately finally million from the in in I over With added with generated $XX display projector mobile a our the turn our highly two markets, to guidance over operations. maintaining synergistic leadership generation of of Also not the to Steve markets. With non-dilutive of financials of flow execute during respect centric XXX position Steve delivery leading enabled and and our to processor. for on and first well opportunistically two development also of and ahead XXXX, our And fourth we that, I’ll video This projector video ViXS patents. us secured portfolio capture

Steven Moore

well approximately in video revenue our in as of the Thank Revenues to contribution quarter of was the quarter of was projector year-on-year mobile from the fourth was projection ViXS was from reflects the XXXX. as combination digital of during revenue the business. $XX.X revenue million. for acquired The $X.X revenue fourth million approximately $XX fourth quarter quarter core follows; the was and $XX.X increase third breakdown continued as revenue from XXXX you, quarter quarter million revenue in revenue of compared fourth first million, delivery $XX.X business of $XXX,XXX full Todd. the and growth in The digital million

profit million gross favorable Additionally, quarter of XXXX TV year-over-year in expansion in sold. we quarter in to of and delivery high sequential fourth due operating of gross quarter and the solutions. an a the recognize third compared XXXX, expenses our revenue in margin expected video operating with in that was offset increased and $X.X XX.X% a with legacy of quarter fourth contribution during during $X.X fourth from including large the quarter quarter Non-GAAP approximately XXX,XXX profit margin margin XXXX to the to the did revenue reflected R&D customer. were of in in was the the sequential XX.X% increase This quarter. million in recorded third $XX.X project products monitor not million the fourth co-development Non-GAAP expenses the to projector XXXX, we quarter XXXX our fourth year mix compared ago XX.X% associated

to we project. approximately the in this benefited third quarter While credits in million related from $X.X

basis of XXXX per business. Adjusted as quarter XXXX GAAP share diluted third the be quarter press penny was ago income compared non-GAAP to net $X.X incurred non-GAAP share quarter today's $X.XX net XXXX a a adjusted of of found or $XXX,XXX per diluted $X.X Reconciliation we XXXX. income one $X.X of quarter per year in quarter. loss for the may of or million a in full – or fourth of in prior in the company fourth the in expenses the $XXX,XXX share and the to and to the loss the fourth income $X.XX net fourth delivery in release. Additionally, quarter quarter non-GAAP related million reported million video fourth EBITDA the EBITDA an $XXX,XXX On in to net acquired quarter

cash returns the operating sheet, activities $XX.X quarter, third $X.X days the outstanding XX we the quarter. of cash XX.X XX of quarter from of positive ended the fourth approximately equivalents to the Other quarter. quarter fourth balance of third million, days during the times end to during million end the an in and with compared days increase end flow to Inventory XXXX Moving of were include sheet metrics balance of compared cash fourth at sales the largely times quarter from prior the at quarter. reflecting XX.X

first be seasonality. the Turning is revenue $XX.X to range million, now with range million of of between to we and market for XXXX in the $XX.X guidance, this expect quarter consistent projector

We of XX% expect margin XX%. profit non-GAAP gross between and

expectation an offset of quarter ongoing quarter include of recognition expenses And we the now projector open for to operating will million that, and with to $X expenses basis. $X a Note, expect for the the co-development to With range be we project digital first share large operating approximately a For the $X $X.XX non-GAAP to quarter R&D in anticipated non-EPS on customer. finally of between million a of related first loss our we questions. range call first per and million in between breakeven. expect the

Operator

question & comes Thank of Our first you. with [Operator from Dougherty Instructions] Anderson line the Charlie Company.

Charlie Anderson

Yes. taking questions. Thanks for my

little script, your you it you’re rate was think higher run bit the business million in think video XX I referenced at looking Todd I delivery previously.

view you’ve given just wondered still about revisit Then in you there, seen quarter update mobile? I video think pretty to I Thanks. talk if the good, what change expect you of follow-up. I so Is beyond. business a accelerating some you pickup that? the still just grow got I’ve delivery So on about can and think could and growth an your then wonder happened also XXXX you if last that talk

Todd DeBonis

video was was million first require two delivery mean, business variance. to grow, sort business. setting run closer – view There’s gone into question a regarding probably of rate to was at going right. our around I of So, $XX level this that that the sort we

customers starting business a legacy there of And it we but and one a that margin second And did was quite that the it. and not of sitting lot over seeing Where they which was group of customers, million are. take couple wasn't $XX weakness that somewhat customers one about the it are product boxes saw that XK the they there I one was smaller are unpredictable large on is areas, had first starting year. it know of two the that talking deal. was of the up, run bit you’re fairly still that high one then in inventory that the we the into at pick where rate was That on it in the to rate there’s set-top out point the million anticipated – I going with So but at of piece a did Japan. the is clear was

an at if Japan. when at focused business acquisition place. large point So customers streaming with that this we’re that I were was mean, main And space then it its expansion the the vectors of in under is a OTA front both that. it sharp, I and areas we these think look consumer I we of at products acquired bit the of in in seeing sharp. still we stick you end The little weakness starting the the in consumer an still Japan very acquired in those

to announced The quickly it to not started – process ramping shipping first as I XXXX, say mid vicious the I that line ramp is was product thought in they the just product. a it new And think as quickly. fairly going with but was ramp so It thought. was want it project the was

I then So were if – your as far question, do. rate I do that’s growth still the for accelerated area's XXXX, And think office still there. positioned as I expect second in

Charlie Anderson

housekeeping the guys acquired on you And Texas? could wonder maybe of you for the question from if just Great. I converts update then Steve, status

Steven Moore

worth the in conversion we about the million million would We remainder January million, about U.S. we approximately purchased the that of of not that they and had million had When but in worth would the bonds. back Sure. fourth convert or before either about $X small company, mentioning of $X.X $X.X have acquired of of out the quarter, a end conversions be expect quarter. $X seen convertible

Charlie Anderson

it. Got

so Thanks much. Okay.

Operator

next from And Desilva with Roth our Capital. comes of you. question Suji Thank the line

Suji Desilva

Todd, XQ well housekeeping and XQ inventory Hi, XXXX. the Steve. hi, the is the the question Congrats balance first, projector there? progress just in Steve, of as sheet went up as that on business

Steven Moore

gross decline inventory the and of acquired do step we of that ViXS. from had lot came to inventories that the up actually The down with

to yes, decrease. the standpoint, revenue a relative From with to changes has So turn automatic more was in it base. that that do

Suji Desilva

housekeeping then quarter question Okay. one legacy the And there of product? TV with fourth XXX,XXX in that where revenues

Steven Moore

was we we our one – knew this We fact Yes. the we that was our quarter very OLED. of had performance so which margin in guidance contributing we was in It It our to that ASP things gave and in orders a before higher them. a guidance margin high had that gave part this was of of good also is guidance. number

Suji Desilva

of Okay. customers type Great. business. launches does for Todd, mid questions And revenues on mobile will or launches then couple a second holiday more a Todd, the some some be you being the talking with possibility to of timing of launches of the our of in about XXXX, that presume phones the half for be get going?

Steven Moore

out, I Suji, XX all too programs. are with I Telephones those talk mentioned -- them, will about say don’t but like to I much that

are the front those half of Some year. programs of

XXXX year, launched the them of back in them programs. of some Some are of

So of of different development. they’re at in where all various are their they stages cycle

Suji Desilva

Okay. That’s helpful.

as tacking you in XXXX trend? What for watch note an suggest inflection keeping that metric on eye an is we would growth? be ViXS Pixelworks OTA Lastly what to should to,

Steven Moore

pay mean, and really it’s market. people definitely want adopter. an a to intent that I still called it either broadcast want Today not television group free satellite or of for the they cable TVs early do their I their hobbyist stations. there’s

And pay you’ll you think a instead when conjunction think the fees off integrated OTA the broadcast, I streaming is that’s when not incrementally there base, I have service they driving will the to ones broader so and when chose see OTT user or has what the sales, with retrans in see inflection but streaming but It guide, I once free user and OTT the And channels that and bundle that are we to with over have large you their channels. air it think so a get solutions seamless the software come regional the provider of the there’ll for. hit growth And general the that when of of hobbyist. look that’s you’re types then more a to pay market rates. be both an beyond go think then you those EPG will hit and see a will I will you pay -- you populace. start free you channels the And choose offers

Suji Desilva

Thanks Okay, color, for Todd. great. Thanks guys. the

Operator

Thank comes you. Craig-Hallum. [Operator with Richard of Instructions] from question line the next Our Shannon

Richard Shannon

between of sequential you taking my relative questions for quarterly us Thanks maybe sequentially give as split some the on guess, there, guys. to in how if you sense the well. you the Hi, the up first describe of if any seasonality? describe of I buckets changes those guide, and question quarter kind the would

Todd DeBonis

seen the and projector going normal lower by break The or year the Japan of We run in end our leading perhaps of re-inventory end our are delivery in the the as customers don’t Japanese I the the a higher but where number of year inventories rebuilding end their more declines, discussed components to to into within a out are you inventories traditional this its depressed, – products. we the think understand at already that but over driven we projector QX not is so with most and that at video years, rate. I of past, starting from still a we’re guidance, revenue mostly decline we their the think base consistent certainly, our in range on

Richard Shannon

further? maybe development suggest potentially kind foreseeable development done and anytime going what’s to to make Are the Question you look real in more on OTT market for timeframe once can regarding the any you hobbyist integrate a providers you market the less market Todd, that you, work reality I Okay. in become going seeing OTA exactly of and mainstream questions Fair to what of wonder one said to to OTA, and the And you so think is future? earlier being enough. there. if

Todd DeBonis

Yes.

today programs We’re in I no, actively can't on comment engaged it. and

Richard Shannon

Okay. I’ll comment in more not surprising, But I there guess but forward to a future.

and guess question Let’s I’ll see, out me jump one from line. of I last

You what design release some you that related HDR. and drive think extent will Can help that for remarks sort design fashion? at get of or with using your streaming you reference towards mentioned in describe enhanced access just versus this preferred reference to design win by a press and design service to going reputation marketing traditional reference

Todd DeBonis

the mentioned way to they quality the they content users. version user of to meant mobile mobile qualify to high to that seen, it’s today Well, the content it it’s it’s great whitelisted. and on sees definitely And large as that be content, each actually I money deal a healthy. earlier on their is or programs phone that some spent model helping stream ensure of that was somebody we’re And that their engaged And an a in. content initiative provider, own get and of can high-quality service has acquiring a that then

minimum and effort their both that’s we’re and manner it technology this that as could to able basically if should long it phone we we And control LCD is the do on diligent display many what in of consumer, And display with a LCD so, what right. demonstrations the right. OLED get met stream access either of going to through And experience to make streaming technology that’s goes just And not they meet convince available with provider certain OLED if when HDR that video phones or non-whitelisted whitelisted. itself mobile content to would a in content their how it’s capability screen that phone they to website, access we processing criteria to, that when would was not be. whitelisted this our your been viewed it they criteria conjunction have will the it be don’t

offering exercises. effectively And our point. us went with They so we agreed our And will they we to the proved as us. manufacturers. go support We phone through several market,

in think phone aftermarket, the video it they service care if us that compelling effort, with definitely. or its bundling marketing provider’s the just about helps either streaming our path So particular manufacturers

Richard Shannon

helpful. That’s Okay.

guys. I think out Thank from me. all jump it’s I’ll line the questions the you.

Operator

that management you. the the answer for to any to And like remarks. today. session I’d Thank closing question back turn and concludes over for floor

Todd DeBonis

over So, that that to delivery today, But I’d these actually believe are to and will This wing in rapidly usually, stakeholders growth. in three expand their markets into multi-device Pixelworks investing five next continue rapidly participate prepared is going markets sustainable management balance an to it. opportunity consumption. content highly of well-positioned disruptive we believe best developing while I'd XXXX, the will so Pixelworks and infancy all of position remark the long-term to We high-quality the achieve years. our that interest

asked Our model we leveraged strategy someone the final resource put other and pixel a the if me on last works. was focused On is executing working fun note are we place well day in year. I still having

having team Thank a I you. we entire speak think that are when blast. saying the I for

Operator

for conference. have may does concludes you program a thank great day. Ladies and and participation now you today the Everyone your This gentlemen, in disconnect.

Pixelworks (PXLW) 15 Feb 182017 Q4 Earnings call transcript