PXLW - Earnings call transcript Q2 2019

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Operator

Good day, ladies and gentlemen and welcome to Pixelworks, Inc.

Second Quarter 2019 Earnings Conference Call. I will be your operator for today’s call. At this time, all participants will be in a listen-only mode.

Following management's prepared remarks, we will conduct a question-and-answer session. being replay is call conference recorded purposes. for This

turn over Mr. to would Moore. now Vice call to like CFO, I Pixelworks’ the President Steven and

Steven Moore

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

forward-looking you remind our to various actual like that risks results, would I begin, materially. number call These our about on we make of and we historical those results made economic uncertainties to statements and this are may that this forward-looking projected to a statements. that and on position trends call Before remarks financial constitute differ cause all competitive and facts including statements other market not are future subject

subsequent based August today. statements press of filings from as today’s events are Annual to any Form beliefs such circumstances and on to Company’s on and statements obligation refer update no after for occurring XXXX forward-looking undertake for or year to X, results. All our actual ended to the cause Thursday, Please XXXX XX, a Report the description forward-looking could factors December materially that XX-K statements reflect release, today, of SEC we differ

convertible exclude this include expense, fair income amortization net acquired conference Additionally, step-up expenses, discount on including the restructuring measures of per intangible will gain and of gain margin, terms, during assets, debt. debt GAAP measures sale release on share. inventory amortization, compensation loss net of of and extinguishment convertible call and information gross statements expenses, press accretion on income stock-based in and non-GAAP and Company’s management value backlog These and patents, non-GAAP certain discussions loss financial operating

superior non-GAAP operating believes but release details. caution in the measures consolidated and on GAAP income perspective to, we assess and The definitions with our non-GAAP investors provide as reconciliations use results results these performance. in a press core dynamics, to these EBITDA, meaningful consider these to measures flow internally as operating net additional measures Company’s GAAP. adjusted accordance the Company loss not to our We a nor cash for, to, addition Included are non-GAAP income substitute of financial GAAP presented which and loss to Company’s provide net in underlying

call now I said, the that for will to With remarks. Todd opening over turn his

Todd DeBonis

good us afternoon, to on joining call. Thank welcome you, and everyone and today’s Steve,

have in line results solid outlined today's press our As release, we quarter guidance. than in better financial that with or were

XX was year-over-year continued $XX our and Second points expanded to guidance. quarter delivery and for growth XXX guidance at EPS was came expense adjusted businesses. of basis our operating video Gross revenue range, breakeven midpoint anticipated of in at margin XX.X%, in year-over-year the which high million sequentially of basis end reflecting and better mobile in the than points the a resulted quarter

of the areas During the business. all execute well to quarter, continue across we

portfolio advancing emphasized Customers Delivery. the and initiative responded I to continue calls, mobile to As have in priority previous positively maintaining projector Video position beyond solutions. our on Pixelworks focus in and visual our team's while expanded processing growth of

and needs specific Iris requirements expanded addressable flexibility as This solutions. Our customer software-only Soft now well distinctive to market. at points visual but our processors includes the multiple provides us as product portfolio price addition mobile for to and expanding sets meet in compelling with with total different devices portfolio feature greater Iris

the quarter half mobile year-over-year XXX% revenue for more second half during year. sixth the the at specifically for first and than increased over more quarter, XXXX Looking business first grew consecutive our of mobile of revenue last

announced of smartphones we Iris fifth actively Iris wins incorporating production solutions, the OEMs. continue processors generation targeted both volume Soft our launched to recently visual sample newly our we to In our addition mobile of introduced iris and on to processor group a visual

engagements of a Tier a launch these with customer is close OEM a before year X targeting collaboration One end.

most and This wins. DC X introduced auto-adaptive Black which our device View highlight processor. our Dimming to Earlier Pixelworks' generation fourth Iris technology include True briefly enhance visual for recent our the is leverages To designed week, phone gaming announced the newest this displays. Shark next its Shark to Shark Pro, AMOLED capabilities flagship visual including smartphone system display performance specifically Black also

smartphone Iris Plus visual Snapdragon also Calibration. Enhancements Pro Platform, well embraces mode as Pixelworks’ that MEMC, combination SDR-to-HDR conversion processor, Always-HDR and technology, Mobile Shark a Quality enhancements suite on provided X as Engine, full visual provides of industry-leading Display including Built Picture the XXX of the real-time Qualcomm’s our by High-efficiency Motion

our Qualcomm’s on in recently smartphone technology ROG the Also Platform. Iris smartphone and introduced industry-leading II Soft color mapping. is XXX calibration ASUS solution, The Phone recently II running announced, tone with our XXX flagship and its Plus conjunction Mobile II the first ROG launched next-generation features Leveraging Tencent utilize Iris ROG to Snapdragon Soft Games. HDR

a to Soft As of technology March on to Iris and provide in incorporating implement Soft devices win months than as Pixelworks’ commercial part a commitment launch based initiatives. introduced to and accomplishment Qualcomm Iris our team’s first our OEMs This the advancing a smartphone agreement with on platform. with in is to seamless a mobile five a visual mobile smartphone XXX reminder, announced the growth we significant cooperative solution enhancement Snapdragon less of testament

sub-set provides re-emphasize that by we quarter’s Iris want our only Iris on last As enhancement discussed I visual conference processors. offered call, a processing of the to Soft

Iris that are an flagship requires why of our cannibalizing pipeline Qualcomm’s display TAM two complementary high-quality display our available our existing processors. exclusively Iris Iris solution distinguishing family and on Iris Soft expands visual mobile is pipeline XXX Soft our mobile These important, and high-quality demonstrate platform. they Additionally, Snapdragon because currently, versus to solutions is total factors

is that early comprehensive QX, update creation, in end-to-end enabling on our video of an TrueCut and to as cinematic high-quality and innovative HDR of what’s result delivery the introduced viewing with arguably our now China. a in collaboration HDR YouKu, today motion and single ongoing ecosystem the most solution on Turning TrueCut, for close we customer mobile our for lead devices solution

to significant on format, metrics over expanded users. mobile content over TrueCut and demonstrate as number enabled content April: reach platform extending were our available video our Video in device X we existing XXX available following early since quarter-end, in mobile of XX of OEMs, million TrueCut TrueCut’s different over TrueCut this from progress models to smartphones there the making The of introduction Delivery innovative X,XXX hours of

announced TrueCut re-mastering to as percentage qualifying content through HDR significant our exclusively video the to its Concurrently, As is committed previously YouKu new mobile YouKu agreement, app. streaming to in content original of of high-quality well part developing committed is additional existing mastered Pixelworks format. HDR of as enable high-quality a library existing devices

direct on We and their devices. increasingly focused TV next-generation mobile also are engagements offer TrueCut on with certification OEMs to

our to YouKu be model, As experienced TrueCut-quality app. on these independent certifications TrueCut opposed part True-cut content entirely viewed across content allowing enable device-specific and content as the via to all enabled only licensing the of broader device to be

and mobile the content display creator’s for maintaining regardless viewed. the early our on creation, expand video cinematic which of intent ecosystems, boundaries fundamentally while and high-quality original - been designed primarily the motion on content Although to focus smartphones TrueCut it’s was HDR has also

and as value TrueCut’s entertainment total such, cinematic home theaters, used beyond as opportunity to systems As creation/mastering. well associated software market include extends content tools proposition and mobile the for

Pixelworks’ our the to want related note, merit-based is take I on Association’s acknowledge the Motion TrueCut This Professional Hollywood award announced opportunity of Award tools. to to team. And for prestigious team a Excellence this capabilities Pixelworks testament Grading technical the recently a following impressive and Engineering

we XX% revenue Video from our business, quarter, Delivery recorded to more Video solid slightly although grew from Delivery year-over-year. than QX, another Turning moderated revenue and

of key first half been was Delivery Japanese has media several Japan. ADSB-compatible for in and this largely year-over-year Our for of to processors demand quarters customers’ More of XXXX demand of back-half set-top-box specifically, a Video in-home family the devices in our revenue growth. low-power products contributor highly-integrated converter year by our XCode consecutive early-adopter driven utilized and during

call, this meaningfully has our QX anticipated toward converter personal demand Japanese higher recorders, or set-top-box volume indicated advanced began and devices our leading to following from customer’s now on As ramp video last PVRs. and shifted initial subside in

XK Although a utilize they price, devices represent typically processors lower these two unit PVR that incorporate compared or higher more XCode volumes due their to boxes significantly converter single-chip to solution.

designs, in end we XCode continued a than market demand for existing solutions QX will and devices. converter While PVRs this demand XK more be offset transcoder for by decline steady set-top-box steep our in on decoder anticipate

positioned demand and content with come additional a gains. price of both ADSB-compatible becomes market combination and beyond We boxes customers remain share available. renewed well QX, over market the benefit out down to and incremental broadcast of high-quality time from Looking as key PVRs converter

during as of seasonally Touching briefly with weakened yet inventory came quarter. by as on expected we lower revenue growing off the discussed year-over-year the sequentially, correction performed just that over last Digital QX down XX% also a further second Projector, the was business quarter

customers successfully second inventory to quarter. normalize the down at As March, in fiscal-year in end worked our projector channel began their inventories

our market. the soften to end expectations market profile and with particularly in the the macroeconomic in earlier in year, the projector commentary continued China, However, demand has consistent of backdrop,

normal XXXX, to our to in demand seasonal we large anticipated our in Projector result with than transition combined a beginning As business. our and co-development lower customer’s late SoC continue Digital expect next-generation

close my meaningfully well mobile our to To opening strong the out initiatives. focus execution team’s as as advancing first our want emphasize remarks, reiterate on I

processing of also while Our engagements, mobile number and expanded solutions advance existing portfolio opportunities. to software-based hardware accelerating visual has of a new helped engagement

opportunities deliver quality on order engagements with we the and engineering resources. highest pipeline, sales our and In efforts the return consistently those probable are prioritizing our to in our the of up-leveling on

increased for models on to multiple multiple offer to placing platform strategic and the on includes This be potential engagements Iris that designed-in generations. priority solutions

benefit platform strategic is and leverage the of co-marketing the engagements these negotiate and customers resources Another opportunity partners. to of and budgets marketing larger

depth of As current engagements. made we with of we’ve we pipeline consider pleased to-date, very our the are progress the

of will that well on XXXX. support extending as We a XXXX revenue reach ramping for approach relevant resulting we these believe and are our active hiring into We inflection year-end, of successful exiting program the programs if meaningful mobile are programs. point acceleration and focused in execution

and review guidance quarter With results the to turn for quarter. the our that a of detailed second over financial I'll third more Steve call for

Steven Moore

second Todd. continued Mobile Projector normal $XX.X of market. by first Revenue the Revenue Thank million offset reflects businesses, in XXXX the Video growth quarter of seasonal quarter of in in below XXXX million the Digital Company’s of for second Delivery revenue million, in $XX.X for XXXX. and you, second $XX.X was compared XXXX to and of the the quarter quarter the demand

Delivery Video revenue by The from And approximately Revenue breakdown end $XXX,XXX. quarter Digital approximately $X.X follows: second Projector million. was was of million. Mobile as was approximately was from revenue market revenue $XX.X

Non-GAAP XX.X% the gross second and second was of million XXXX. of XX.X% of in quarter XXXX. XX.X% second compared in first were to XXXX, and quarter the to million in compared XXXX million expenses in XXXX, profit the second Non-GAAP quarter margin $X.X operating quarter in the in quarter quarter $XX.X of of $XX.X the the first

positive of may XXXX, quarter first net Adjusted be a positive adjusted press EBITDA compared the in in income/loss to the million was of release. negative GAAP $X.X today's of quarter second to XXXX. second A $X.X for XXXX quarter of reconciliation and million the found $XXX,XXX EBITDA in

of to quarter net a reported share per prior of quarter, the non-GAAP in $XX,XXX, of per non-GAAP in million, or the on non-GAAP share in $XX,XXX, breakeven second compared breakeven diluted basis, of XXXX. a second of loss basis, We per on a of quarter or or and loss income net the net $X.XX share, a XXXX, $X.X loss

balance we from a the $XX.X quarter cash, to investments of XXXX. cash and equivalents of the Moving year-end approximately sheet, ended approximately with decrease short-term second million, $XXX,XXX

at outstanding to prior days the turns the sales XX.X quarter the XX.X sheet at XX days during compared in times, with first quarter-end, balance end day include quarter. of compared times Inventory second the Other metrics of of quarter. were XX XXXX

of for the follows: third guidance is quarter as Our XXXX

between of business Mobile primarily $XX.X combined in and expect in to our and the Projection reflecting Digital normal seasonal $XX.X demand in million, lower year-over-year growth be than million We range revenue with market. a sequential

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

For $X.XX in we be third And non-GAAP share. quarter third and range operating to $ expenses, EPS finally, earnings a per non-GAAP X.X expect $XX.X of between and of range on to between we loss million expect a $X.XX the basis. the quarter million loss

call With we for that, the open will questions. now

Operator

Capital. [Operator question Instructions] from Suji Our with first comes Desilva ROTH

Your line is now open.

Suji Desilva

ramp to any So, Video just and the recovers the the takes be business color there in on of move would the they forward couple exactly are a initial of as growth absorbing and Delivery of competence Japan, quarters, And helpful? with product? puts what, we'll understand in are what then

Steven Moore

we now, anticipate Right growth recovering.

QX, one. that of we we of see but First having don't all, in are downtick big a some headwinds,

so the set what continued is the in And got that, say of PVR quarters. a I inventory over seeing that strength digestion first that two you're by shift offset is the top would XK effectively box

We And as did that PVR actually well. really, at expect a is looking up the what mention certainly growth then OTA continue And the fourth in is, the remarks market bit little we prepared market. to the quarter. in actually just hit

So, we growth in things, expect the of two quarter. a those resume combination to fourth

Suji Desilva

new win a versus you what they leading of and Iris had side, months, that Any the are, you've couple trending between are choice out seeing design Iris. the way Soft what customers not have which their the now software on decision least Soft customers that about there are with And by customers have at for Iris on Iris two? as point color going toward you

Steven Moore

mean, to I so Well, Suji, we both phone. further customers I that have designing single are am a complicate into it server going

just not and an chip make think make features the not okay. -- Soft the -- to software. in This just can really integration. This So, it’s is -- I and Iris, chip, adding adding you to the commitment Iris remember, easier we're is when really commitment just of Soft you a we're

are have been more for resources with we're probably engage we mechanics so, and than seeing And so we we broad picky. a to that have the

in off. system experience our you not for you use But with when that processor, you use visual cases, you the commitment our optimizing that effort a engage power you a MEMC, it consumption do When then really a display when and that customers. and And phone you there MEMC, the full mapping, you a when the us, to is visual engineering straight for and do is with some when picked do do AP do tone use not. experience picked

processor solutions, where under all Soft right. combining our a then But get on. a way bank experience processors our software by putting certain you power And are effectively, get and a using just visual to state, visual state low consumption very a get Iris improvement suite there our many our only it’s the a with processors conditions, and you the different easy you have --

-- on, in power the I gaming And level processor you but how get power this type goes in dramatically, to system complexity we on into our going environment fact in of when of some consumption. want that, total down the specifics the turn do to the And engagement. I’m not articulate

for the back can software line mean maximize hardware bottom customers. integrating profile your the that customers, I by to that customers and answer So, get together experience for the their and end to

Suji Desilva

kind menu its iris with YouKu's Last is not wide relationship how to quick gaining A in on sounds see of you like YouKu anticipate to it it of hardware leap question, the of with of clean translates? traction progress [indiscernible] TrueCut there? incremental cause Or the terms How and a soon do there. cut conversion sales. B kind that Do it you product,

Steven Moore

I your Well, seen value. face dramatically. will at We've it question take already

Now I’m are me one. not asking going when going to that what answer show you to is financials. my to it's

Operator

Dougherty comes question next Our instructions] Charlie with Company. & from Anderson [Operator

now open. Your line is

Charlie Anderson

guide a than industry? what's going if just projector, sell-through times a I've happening for lead of Then seasonal you're sub Just of you the on be or basis. reflecting kind talk follow-up. agree to Are demand about on got in end I there changing sort wonder out

Todd DeBonis

it. sorry, you're I projector I'm The missed asking

Charlie Anderson

projector, on Yes, correct.

Todd DeBonis

from seeing, in subsided that in our tenders we're customers No, seeing is have just China what we're consistent business considerably. both general I feedback mean, Okay.

into cetera. part need right, environment. a built rest the you getting the in et little into that. or new you technology, when impact projectors world slowdown a demand. let When some dig clearly of loaded so I And out, -- There of auditorium some mean, office, say it projector is new would color I or up couple new and me, of that is infrastructure to things uptick is move with a probably happen. new school degree, a can I

yen the bit, making and Secondly, the Japanese it's China Japanese RMB has more to exports quite expensive. a to moved

two the seeing demand, together manufactures you're one think of lack and in To out from I there. put some have of that degree, You one customer, a customer an some product we Japanese China.

until they're my to today if that an issue little so, And get way, you up coming about tariffs this presence our tweet. reference worried wasn't

Charlie Anderson

No, absolutely.

Okay. to any is versus across maybe to how three you Perfect. that pipeline in on you're ago looking light going I if market Todd, the said anything mobile as And months the then, Thanks. just wonder, pipeline. qualitative it today relates mobile?

Todd DeBonis

I pipeline articulated it's the engagement don't today's levels resources ever prior quality I that Three, best thought, well. of mentioned is point to is call, been. one. is to ever I've pipeline clearly quite respond. our Two, at mean, X I it the a the Tier I think outstripped the the the of

the and And so, let I have hiring are hiring. finally go we

Charlie Anderson

And for out from competitive changing media think standpoint? HDR I then tech is one last with came me, support. your new SoC tone a with environment Anything noticed, I just some

Todd DeBonis

tone previously. I'm way such mapping. no. to with But No, as a we support Qualcomm. supported came HDR it, new sure tone out one they more They mapping than do just

our So, compete and features into don't got really is mapping. We solution tone on you to functionality. -- just the buy all

benchmarking. versus on go of tone will We a else's mapping somebody compete on straight our

not those we why us. win that's far, benchmarks. But using So people are

the best you primary HDR probably Iris, of you've it's efficient put you on want subtract, that, buying the reason. you is mapping, done one the can can phone. They're once into the tone tone And mapping. calibration then probably reduced, a our even even though them your So being highly is Soft

use ours. So, these

Operator

any showing I'd turn the DeBonis to questions not remarks. Todd back over for call this at further I'm you. now time. closing to Thank like

Todd DeBonis

few for if I is All of excited. my don't really you and know questions. right. Well, time. can your unveiling strategy moving forward only strategy voice, good we're call today, the Things but the we're tone excited. itself -- are Thanks is tell and very extremely

you're as hopefully you. So, excited. you investor Thank also

Pixelworks (PXLW) 1 Aug 192019 Q2 Earnings call transcript