PXLW - Earnings call transcript Q2 2020

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Operator

Good day, ladies and gentlemen, and welcome to Pixelworks Second Quarter 2020 Earnings Conference Call. I will be your operator for today's call. At this time, all participants are in a listen-only mode.

Following management's prepared remarks, instructions will be given for the question-and-answer session. This conference call is being recorded for replay purposes. to call like CFO, to now Mr. would turn over the Pixelworks' I Nader. Elias Please go ahead.

Elias Nader

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

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

on and financial including these margin, We inventory assess restructuring measures expense operating loss income our and discussions and operating performance. on will during turn uses statements caution to and intangible results of operating to, expenses, meaningful company's investors gain a this definitions measures substitute to we to with details. – stock-based as Non-GAAP EBITDA, addition reconciliations The for, these press of sale net adjusted non-GAAP results of the Thank income loss loss terms, company's call measure Todd in acquired expense. gross our in non-GAAP GAAP not company’s the dynamics. net provide internally additional superior in accordance are non-GAAP Additionally, management GAAP and amortization said, net share. certain perspective exclude which as and measures backlog and of to non-GAAP included in release believe a and measures With consolidated include his assets, core release net net underlying cash per additional loss, amortization, to – nor step-up income GAAP. opening for company over loss patents, presented information flow comp results press conference these But the provide consider call will now remarks. that and GAAP I the to financial Also you.

Todd DeBonis

Elias, and good call joining and us you, on Thank those webcast. afternoon to today's

with our from outlined second pandemic on results end target the today's the associated our COVID-XX broad release, press headwinds anticipated impact As in reflected markets. the quarter

cost-improvement lower midpoint the guidance. in well provided, of at non-GAAP we guidance end at was product of as the mix initiatives EPS revenue Although, as range gross margin favorable better-than-expected resulted

indicate, a environment. be continue we challenging results our to As in

to the to Pixelworks important and believe clearly we progress. However, impacted being where ways areas we make it is which continued the in is distinguish have

in demand, end negative year-over-year experiencing In business are of we and projector effects with all markets seeing the decline. end-market sell-through terms of customer largest our the

the reduced towards remotely. a volume by learning of projector majority recent enterprise result customer as we've working total for shifts applications, large government for unit a of Given is and corporate that observed education tenders driven tenders naturally demand and

is inventory delivery business prolonged correction reflection our the has pandemic and our confident business, Similar video position when has of demand. projector Pixelworks and emerged. current of the market are leading market projector this through projector in customers' of to business a the that revenue a purely in COVID end weak been the uncertainty maintained working process We level the

has pandemic QX. the relatively we other as appeared consumer well predominantly the into countries, Japan and weather compared While some QX will discretionary to lower was sell products continue to and demand such are end into in

capturing Japanese We efforts, have and remained which engaged of new we electronics in support share programs believe XXXX. OEMs result in development with Pixelworks consumer our additional leading market will in

new Our XXXX and performance. consumer the received of models with the continued premium community execution demand in many considerably the well models specifically demand display of where and have green the More been and has recently, the been of have were of higher-priced analyst seen mobile stood the volumes during recovery out unit were quarter. given half mobile than the category, that lower we flagship in first shoots expected. weaker, on by premium launched fact the all programs the But at current

single to continue technology high displays remains will believe for there of XG between a the OEM's case high-performance use with video XG We as compelling most correlation adoption and smartphones, and be consumers.

in We and innings to of early multiyear this the transition corresponding market to battle OEMs XG the are share. capture by still

collectively reductions anticipated, taking high mid-tier immediately employees. previously Though third quarter displays XX%, than proposition enabled overview contain than the of began more increases In phones detailed costs. past believe to our and in those map. going process. opportunities operating want evidence frame and but we annualized I'd and is action technology delivery support in focus fully In we slow in our potential are restructuring ability road to on a and XXX% customers difficult, preserve we we cash a also and provided cost the in or more bottom advanced in support. headcount I global largest recovery the of proactive reduction million for a a both the that for without the projector the by a expenses and support we retaining businesses, and thank of I to in these product the of response, a our is more to reduction included The TrueCut XX% growth our all implemented mobile to marginalizing be within actions incremental while development expenses, call, $X.X an rapid we respective measures increasing Pixelworks' efforts resources addition, are today reduce the further into second to seeing that cost restructuring substantial employees the for their seeing early personally video rate to growth available plan being cycle Acknowledging more reduce conference last us businesses recovery in necessary which our for which hoped businesses. economy, avoid. of positive one affected the impacting of a initiatives a cash will This value prolonged of is devices. potentially these quarter Pixelworks operating new produce introduction mid-tier and

to and mobile We've increased prospective an gain existing Turning growth to our interest latest with and both TrueCut on update TrueCut. customers from continued technology. our initiatives. Starting for

theatrical slowed of in with worked question, has Against least the has North halting As pandemic. adoption effectively significant production to the overcome new some Hollywood, towards activity hurdles the well mandates on as previously brought Without our all work-from-home entered ecosystem creatively backdrop, momentum progress. this by releases of as at communicated, and America. our here all in we XXXX team

providers, example, studios post-production California. May an new our “on-prem” COVID-XX safety with one presence we installed representatives in and and the As processing onsite, TrueCut a Burbank now recently to can Pixelworks' where service demonstrations system GPU for in guidelines. room we private complying screening of experts we Hollywood an collaborative office host while is studio streaming office in major close expanded opening in of This most centric with

opportunities streaming As in is new with case providers. the delivery for Home acceleration now both is and than entertainment critical ever this cinematic emerge. direct-to-consumer all more that market consumers and disruptions, content of content. of And

is varied providing is algorithms of However, how consistent the home today casualties and of TrueCut on while that results difficult tools and one motion content, shift when digital experience of viewed by process is spectrum enable to display handheld a software-based proprietary quality tone delivering platform viewing device to was created, content is to TV ensure designed with different this hundreds This resolution, eliminate what and unpredictable users. viewing and experiences Pixelworks' of of Every direct-to-consumers Pixelworks' intent, leveraging they devices. creative across traveling. delivered certified millions and which color wide at all and or biggest display exactly be across which

TrueCut's although our relevant. extended pandemic the previous proposition never value has So, time more certainly been line has

reopening endorsement programs ecosystem in Our we series increased in and milestones look traction partners we from customers. team May, With had and several China's the secure been TrueCut adoption saw a achieving important we focused with pursuing. remains of coming an as early quarters, on to

second during expect We year. some the half close these of of programs to this

at have visual adoption, Looking announced Mobile been launches smartphone across business a our continued technology our business, to into different drive Iris six customers. we more processing incorporated challenging XX Year-to-date, landscape. despite has OEM incremental

take display mobile individual Pixelworks' smartphones leverages to calibration factory tuned ROG phone rate. smartphone color as XS the two wins, support mapping control software auto every launched XS. be XXX Tencent gaming the devices display Hertz the provides customers. This Phone were Black lighting latest the also The X since depth, conference that HDR X.XX-inch Our two Shark its released being Shark brightness our visual our calibration multiyear in with viewing and The patented tone which Black adaptive well with enhancement our recurring represent most full fifth by all features recently solution gaming announced contrast X unprecedented high-efficiency color with Phone quarter Iris call technology. Both our the seamless mobile refresh ROG first combines industry-leading ASUS with Tencent Pixelworks' industry-leading for advantage ultra-smooth as and generation optimized for environments. processor AMOLED of

enables mode superior processing advanced In leverages utilizing deliver quality of Tencent while text our Tencent This with XS device, this are dual-channel active to always the recombined playing Pixelworks' to and features dimming HDR motion separation MIPI. and dedicated visual underlying then and Shark technology games. engine feature which unique Black graphics addition

of Additionally, which our announce of our next-generation and like team the visual generation tape-out road technology I as new completed industry-leading plan in sixth of year. Iris features our that later engineering introduce development support would processor our this recently an of to we to ambitious products. successful the continuous formally and map strength emphasize we to pleased I'm as commitment to well

development algorithm Additionally, underway second work on advanced the is in and half design which release processor for already of seventh-generation XXXX. currently slated is engineering our

smartphones programs some have expectations extending that with numerous to We visual incorporated throughout solid pipeline into in least track remainder of to launched customers year. multiple for models a XX price processing year. full on to span our this plans engagements we eight growing the and next of work year, our continue the of tiers across at different are currently by Specific a total solutions for OEMs on

For Tier-one our is our In XXXX. market-leading compares OEM end to six this launches OEMs disruptor across perspective, Included closing, target challenging of of for despite position or the half the XXXX I reiterate with in business full our second planned in in these year models environment, this want we for maintained four engagement. each that markets. market second mobile have

done Difficulty] conditions with and respond action. the to changing continue in As past, will [Technical decisive to we've we proactively appropriate

Todd DeBonis

where Yes, could me you dropped please off? we're tell

Operator

mute line your went sir, blue. of out the No, just on

Todd DeBonis

to statement you tell off I'll what, and closing Listen my closing start then hand Okay. with -- Elias. I'll

So, our markets. I market-leading of have this in or in despite to closing, that environment, each disruptive want maintained our end position market we business challenging target reiterate

in and respond focused As initiatives. remaining proactively actions, past, we confident extremely to continue term winning in that longer changing execution Pixelworks' we've intact. decisive mobile while on to the with today have of and TrueCut done team are strategy fully growth and our a simultaneously appropriate prospects the still conditions and growth successful I'm we'll place

viewing to visual third their Elias? of devices generate with have second new time incorporate conjunction in a displays provide as guidance in As frame over and I'll advanced the auto pipeline in the of for With smartphones. customers and to review call enhancements second the previously of mentioned, including solid our half adapted more variable the financials frame XG-enabled and Elias that, HCR, are hand mobile, rate, quarter. momentum higher quarter to and the more year we rate, well-positioned introductions one premium new engagements

Elias Nader

of to XXXX. quarter million quarter you, to Thank million Todd. first $X.X for for second the the compared the Revenue quarter XXXX revenue $XX XXXX of of million and was of in $XX.X second compared

in the sales of largely in ongoing in the a to opening XX.X% second delivery and from XXXX demand newer end corrections quarter of million or market projector gross per drive $X $X.X inventory second loss pandemic his the compared in last primarily second and XXXX. reflects was revenue, markets improvements, ongoing the negative in quarter the of a first of the cost and Soft $X.XX loss to $X.X the Iris in XXXX expenses XXXX. by our a compared particularly margin a second of of prior and indicated our Todd resulting million gross same expanded in XXXX, loss of As $XXX,XXX EBITDA quarter a quarter of expenses share first $X.X quarter period $X.XX a breakeven remarks, was $X.X product in reduction quarter continued quarter delivery million the product of in comprised The to XXXX from XXXX. as our second of basis quarter to second million our on of reflected profit from non-GAAP was The visual mix to products. target for increase $X.X positive on approximately Adjusted last million negative operating the from On of all a share in compounded a and was loss combination business. net revenue the approximately quarter on initiatives quarter The million global per as favorable a million net share or XXXX across reflects in Iris as a video of and solutions. cost loss the decreased well in of revenue especially quarter lower margin quarter $XX,XXX across digital the second our the in $X.X follows; $X.X a of operating $X.X quarter of XX.X% year. per million. basis, million million. the XX.X% quarter Non-GAAP XXXX net Non-GAAP approximately projector Revenue to containment in second breakdown markets. XXXX was compared Video in of $X.X was mobile or focus digital second revenue processes

second the increase proceeds $XXX,XXX sale sequential useful vehicle net capital Moving balance from $X at approximately XXXX. million quarter of to in of with balance the of sheet. outstanding on the an quarter through investments compared in of cash generated protection our the stock $XXX,XXX of $XX.X million from $XX.X the reflected the approximately We repayments of by of operating offset the approximately $X.X end $XXX,XXX approximately XXXX short-term and ended paycheck loan, million, ATM our million of first equivalents, and approximately cash, credit The approximately to in cash line and $XXX,XXX activities, partially expenditures. proceeds approximately program of

of beginning year. additional conference our since we the a As meaningfully expenses series operating reduce discussed the on call last actions taken of have quarter, to

to program participation our June employee offered Chinese of form $XXX,XXX the the salary benefits of an cut providing the resulting included have company a $XXX,XXX. our savings the the of in employees to government to RSG approximately X% an receive or quarter. unexpected approximately in of RSGs compensation other to pay lower of taken in to through cash XX% per addition program In benefit option lieu amounted relief We payments steps from check XXXX protection

plan further cash. as outlined implemented we Additionally, restructuring expenses and Todd to previously, a preserve operating reduce

$X.X these As approximately onetime anticipated cost to quarter. fully we generate million charge the actions an $X.X savings. are expect Whilst in to annualized a result, a restructuring incremental million in record third implemented of

XX at the of quarter, quarter, quarter. day was metrics quarter. consistent in days second X.X the balance times the in was which turns outstanding at times of sales XX were end end X.X second for prior the the to terms the quarter days to compared sheet In other Inventory the first

Now, third quarter turning of guidance our to for XXXX. the

for to digital challenging, projector large markets. remain near-term As previously the expect environment especially of the indicated, portions delivery we and

we magnitude to heightened the in planned between to with shipments customers the devices due the our and ramp quarter While growth support and of of we the demand. to of meaningful in anticipate said, order backlog, continue related $XX market of total for impact third smartphones patters recent we range second year. expect uncertainty varies, conservative $X.X more That we mobile million. associated and Based their in trends customers' to customers the million expect do to remain market end order new third as this business announced many previously half launches quarter the in on current our and revenue the

of margin gross third partial on in anticipate We quarter only to include benefit million the XX% basis. non-GAAP announced $X in operating between quarter non-GAAP expect million quarter profit will plan. expenses range today's expenses and XX%. third third between Please quarter the operating a We note and a $X from restructuring

expect quarter of will Lastly, of our please EPS for That we concludes third Operator, between managing $X.XX loss prepared $X.XX proceed range share. non-GAAP with now the be loss remarks, a call per a the of and session. we to the Q&A non-GAAP in questions. you. Thank open and

Operator

Securities. Your Anderson [Operator the from Certainly. line question Charlie Instructions] comes from first Collier of

Your line is open.

Charlie Anderson

the then maybe and I just And some margin QX, QX, in gross mid-XXs to questions. trajectory you'd very And we're if got Thanks talk a QX as gross like in out relative back there? be I willing to factors sound maybe additional the delivery to I've you what about could like taking have about so projector well there. their and the guide. mobile follow-up. growing margin, want to video coming a to for segments. of it's margin the Yeah. bit but little looks wonder then and It just each any did my of this challenges did the hit high it you seeing on start comment low in also talk on QX gross just

Todd DeBonis

Thanks Charlie.

we what to mobile. and range guidance. we not video with continued to going pretty coming know are companies we said, But a know down with and both in of we talk we giving give I that start projector to QX grow. mobile delivery now that not And giving break growth to won't lot usually But yeah, we we we video we're don't we we forward uncertainty But say affected QX wide as and probably projector the So sequentially back expect businesses several you what when still that's about and with move how to the probably expect each a there's for – guidance. magnitude. sequentially delivery expect we grow I and and our know with pandemic. expect is will mean I I today, mean, economies sequential be do And forward on this today. still as going there's of not expect

Regarding we to the due down that come in mix margins, it's partly back QX.

SoC us QX Software have in continue an of But progress. go-forward to at do had QX. absorption we bit gross mix that is still for still helping levels. in corporate we basis, mix the Also, those revenue product a a to margins little changes expect the there. benefit make some product On issue especially

Charlie Anderson

second view earlier just the of reset big great potentially half to there at maybe so Perfect. did news revenue was getting year some X And mobile then, picture. mobile congratulations in what mention the OEM, our I I point. this means expectations that's you wonder, the on want if that. maybe a to and you Tier know,

all your where taking that thoughts account Todd? So, update on just there into could us and maybe on go views taking this maybe previous

Todd DeBonis

the some impacted very if even Chinese market with Huawei them. Tier focus that of of inventory at So, targeted is large And on the especially define arena had get dealing look a market. have been China, and Chinese one coming to there being – aggressive back three in for China, focused in we're we're especially, of rid the ones by are and exposure most Xs, we've in And of the in part three you have Xs Tier within to trying I mobile China. those the the four and as pretty things that

India, they're international and and that soon short-term Europe that I their and market And on business impact, a our economies on Now will maintain starting seen. of are Western elsewhere. longer-term whether out put footprint to belief and into it's companies is this that grow longer we're believe start three that a to as of pandemic. share all these big or also have just be the a it term focused reasonable as impact a these companies emerge will in in three We think remains to they focused exposures China,

been a and take a a Tier for So leap program working long a time X is them that gaining second with we've finally ground for us. to convincing big at deal on then a

place been that had time, one far to any at least over able program So we've multiple. we've secure

future of certainly it guarantee no success, is it's in many but So an multiple. to one leads cases that indicator

secondly, quarter. very it X for – and QX. it tool And this fab through suite the We customers then working to us. so encouraging it's got out in far sampling So taped looks we'll be we're We good. on Iris

capabilities I we're that that our We X enable And to early changes engaged currently sample for would even. visual week very are and of processors think none ecosystem innovative some scheduled on next Iris architectural customers, enable.

of Tier they of And could – a see the I what their we as many especially predecessor engagements these so with engagements two have Xs, current think be.

execute, convinced they'll stay their And with us. so with engaged will we us. I'm they footprint to if And expand continue

they're because at and delivery So we year, high-growth video year. going expect next Mobile reduction next be not that the the over year to is. induced do But say, would back it's by pandemic overall, markets. some one point come projector this growth will

least And us. at for so

will our the still that. leave but to that anticipated It anticipated in predict future. part -- become some we will be we be -- happen our it Previously of it predominant near fail, will at we pre-COVID more probably revenue and the this point year revenue. XX% unlikely year, our of to mobile at some unless point. all so this And It's was that than at

Charlie Anderson

Thank Great. so you much.

Operator

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

open. Your is line

Suji Desilva

Hi, gentlemen.

high So guys perhaps with in constructively or challenge? that's how end you phones XG ramp? with China it's and a midrange flagship whether phones the can talk affecting the crossing you about that the dynamic And

Todd DeBonis

XG, Well, I’m versus the -- XG trying Suji? to so question is

Suji Desilva

-- toward are XG, the the of midrange maybe I the think leaning flagships more customers In No. the versus perhaps.

Todd DeBonis

Well, where I to I mean, understand from point. would to say say, now the I that going They XG and XXXX, I into you're it flagship premium price were would XG. coming was -- late question. lower pushing much bring are a now

by some fact, the have In launched of XG phones of customers were $XXX. pushed that some below our

launch You XXXX will program left. of programs fact search see I -- in there's don't any now we're targeting trying to think XXXX. forward-looking that either any or I'm right in XG

XG. the environment in. working to a they're economic I slowdown, the on is reacting group And everything And very customers. reaction that's we call of given they're reactive So on particular think we're OEMs a natural are nimble

year, do have and wave you throughout And wave year. -- year, the so part these there's at part a the but really they big a the if of the at they launches the customers, big -- of at and look latter front there's

margin, higher that were XXXX. decisions products. lower back of a half In And in so made on ASP people happened, They skinner higher-margin the almost rhythm. half on focused And six-month on, because focused products. XXXX, of the back they're clearly were they have they ASP, focused launches the

Suji Desilva

the if your guys could of position. that to content of Todd, follow-up just terms in on with you And kind impact and you Yes. market

Todd DeBonis

family X the And But what yet, our good a the a high-end very and between X. Well, pushing of job a that, Iris the the good we formally have so haven't will X. X, price to of And Iris I Iris of team features in falls very is of point. it with have done introduction say going it ops we previous I'm announced cost talk done has solutions. not about our The Iris down solution low-cost job. we

X devices. have very at Iris at we mid-tier so positioning low-cost aggressive been And

a have family follow of across we fit that the can So reaction. products board gap our the customers' and

Suji Desilva

color, one quick the Todd. Okay. TrueCut. on That's very just helpful then And question

in or now sort out to I think still it talk new of that model programs early efforts? some customers? of, days Is for that coming of, is a new revenue able you'd And there these you customers that? mentioned existing about China. those Or be is kind

Todd DeBonis

license, be who licensing customer It program. past program They talking business. I'm said the actually the they that's until about And depends in the announce depends can like programs new the customers. a as can over But on TrueCut go. how onetime be I multiple go would be it's engagements The is. far years. to as and going probably I'm we the And

Suji Desilva

Okay. Fair guys. enough. Thanks,

Todd DeBonis

Thank you, Suji.

Operator

you. [Operator the from question line Street. Instructions] from comes Schmidt your Thank next Lake And Jaeson of

is line Your open.

Jaeson Schmidt

expected new Is inventory or I questions. you really driven Hey, that delivery being launches guys. my taking QX. in the for fully in the just you by Thanks said know believe digested projector having video QX? and back been confidence businesses come

Todd DeBonis

fairly a Japanese both. customers across combination are mean, I the say stayed the OEMs one board There of I'd is focused. -- thing I'll have say that had

their off. even approach. their We haven't seen not way business mass though was typical layoffs It's

usually us. on they program new working start and transitioning some working is been already and They'd new hunker development. what newer to do programs down they so And products on from

enterprise And I and expect so We anticipate the of is it tenders. tenders it in tenders think main delayed. these -- the back? We we've them like seen we expected be will away, just their get to to the go It's not thing education customers. QX. of shoots anticipate And QX. more green they start we in do when to already some And question come the

Jaeson Schmidt

adjusted the models the mobile orders, business. year That's size of second But macro this the POs mentioned you helpful. into for seen given the I know have going the just all Okay. at half XX environment? And get you downwardly

Todd DeBonis

our all Well business our through goes of channel. mobile

ready on channel let until they're how the they sit to so digest it. just is the And adjust they inventory

they're deplete not So the inventories is of inventories those convince from to going until wait the see depleted. then the we do the being to way distributors see we end it to customers. it, demand we at And to to the have for quarter refill. And not the

some on to programs So and inventory seeing new year second half are the of start there that we're in coming QX. deplete the for are then

So mobile. more with we're feeling why comfortable that's

Jaeson Schmidt

That’s lot Okay. guys. a Thanks helpful.

Todd DeBonis

Thank you, Jaeson.

Operator

Thank questions to like any you. conference I And I'm to showing turn no remarks. now the back the closing at time. further for would management this

Todd DeBonis

Thank you.

challenging bit obviously, somber a So and at day Pixelworks. times of a little

our hard over Some with and we to Pixelworks, and very people And several where at you we see to years this to grow forward forced Thank part very dig were good your way us. quickly trying today. last look out that that takes worked for time. ways the of

Operator

this today's conference. Thank and you all Ladies for joining. gentlemen, concludes

now all disconnect. You may

Pixelworks (PXLW) 11 Aug 202020 Q2 Earnings call transcript