Earnings call transcript Q1 2023

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Operator

Good day, ladies and gentlemen, and welcome to Pixelworks, Inc.'s First Quarter 2023 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.

turn Investor over Relations. to with Brett like Group, Shelton now the to call Perry I'd

Brett Perry

on Pixelworks' Thank you and on me for Liz. Chief joining call you, Good Aman. us today's afternoon Financial Officer, call. Todd and CEO, President and Haley thank the DeBonis are With

is today's the the information company's results supplement for provided earlier in The purpose to issued announcing of Pixelworks quarter today XXXX. of first conference call the press release financial

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

terms, these share. of expense, measures of of certain as loss compensation into consolidated these meaningful in the financial measures The non-GAAP effects company's operating provide performance. not company company's loss believe operating assess perspective and call this accordance and GAAP. measures include stock-based financial We core to and assets Additionally, for GAAP caution substitute including acquired in discussions flow in underlying the Non-GAAP conference a as these presented results per to expense, cash margin, information operating press and to We addition net non-GAAP net statements during dynamics. as amortization adjustments. measures and non-GAAP consider uses gross with truth well and release exclude as tax not-superior intangible the results a and internally non-GAAP management measures will investors

note during this we refer throughout and to statements net Inc. Also to loss. loss company's press the simply as management release Pixelworks, net attributable conference,

release refer GAAP loss non-GAAP additional company's the details GAAP press reconciliation of to and loss For and issued net EBITDA adjusted today. to earlier a please net to

to turn With that, Please now it's ahead. DeBonis. CEO, Pixelworks' my to pleasure the over go call Todd

Todd DeBonis

first to a the Brett, broader seasonality on smartphone participating market and due anticipated good in call. XX% will market. welcome the Coming growth be projector in inventory revenue well in combination afternoon down as off in you, significantly 'XX, Thank the of we those our that acknowledge as and today's to correction revenue quarter the

the with correction Today mobile press today's prior confident that of was the we first release, financial QX are in for our consistent outlined were results As guidance. bottom quarter our our business.

of clearing normal, all in well was growth second and the the way of by renewed held our previous momentum end of and both customers, inventory quarter. March, channel the below ICs, As for within mobile the

position our the reiterating than of recently sell the Pixelworks into ample prominent smartphone closer Rather segment. will and we some of general than been market, suppliers Taking different how there's that current market from a these focus at on on the comments commentary other is mobile market, the look companies. many

OEMs of distribution anticipated amassed overbuilt weaker due suppliers 'XX, QX demand continued channel smartphone inventory place Clearly taking been and than which and in to has into an the correction inventory many excess as both XXXX. the

inventory with out capacity that we As XXXX potentially we and to this a of for Specific end constrained result, of the were all extend could multiple that, year. Pixelworks, effectively indicated inventory digesting managed component that to suppliers conservatively.

current and demand buffer depleted partners' As shipping inventory. a refill result, today, are many unlike we channel to customer others fulfil

smartphone views inventory. on most China taking suggests to demand although differing the smartphone China's translates the which is than recovery, there digest demand, pace OEM are the softer hoped, Regarding previously global that commentary of longer industry excess into

the While predominantly softer that demand sell may and premium into mobile broader flagship segments are market, the we be market. broader true for outperforming the

that models models existing programs. have order preliminary exceeding customer's Since the a mobile are addition, combination customers processors pull-ins on forecasts. received February, visual from and upside mobile include soon-to-be-launched we In and of our demand

customers have tier expedite revised multiple demand their meet to We fees one the had agree cover to profile.

in our processor. XX, To ROG. Together, Pixelworks these latest six been several our sub-brands, generation as and including smartphone Iris, announced premium OnePlus of well Realme, wins both Asus recap by Honor launched mobile represent mobile OPPO we've Soft multi-generational and visual year-to-date, wins and as with XX, customers, multiple models briefly models

now feature solution devices performance on previous to XXX Ace resolution, been the a adapted different the games. XX and combine ultra-low X on mentioned to two these the visual super power year of industry's flagship call, mobile of latency always-on devices These the first and engine, HDR. our low Both and processor. incorporate OnePlus at launched the were XX over were As smartphones for the functions first OnePlus beginning of motion popular have latest optimal

coupled smartphone as to latest fast incorporating Realme In Realme, February, charging visual other differentiation one launched innovations, OPPO's which enabled Plus Realme of together by processor. the the our such high-quality continues visual GT with capability. XXX-watt smartphone, series XX the display fastest-growing Pixelworks GT embrace this hardware NeoX brands, model XG processors,

mobile HDR first-ever of visual and the Pixelworks the featuring continued solutions customers, Phone Pixelworks' dimming our of of processing our it's in DC launch series, one enhancement, Asus, calibration adoption color Additionally, X professional ROG technologies. industry-leading

Plus quality launch, our processor. quarter, both Pro the smartphone display by Honor Ultimate third-party series performance. Magic XX Pro independent visual and with ranked to number The Magic DXOMARK's X an the X tested global the in display advanced was Honor its it during Magic Also evaluation an ranking released XXX DXOMARK, Magic scored X impressive test, one Pro Honor on smartphones, X Subsequent Honor incorporating lab. the X Magic and

our mobile we at Complementing our mobile with continue an partners to ecosystem. advanced initiatives OEMs, aimed gaming work establishing expand key with

Following studios' our a Unity as engines. with initial engines, collaboration with we verified custom partner, Unreal engagements gaming multiple solutions gaming leading other advancing and are including own

enabled their Sports simulation latest accelerator, soccer internationally. further Pixelworks' Football. game which of launched of major collaborations, Together differentiated of we mobile two rendering visual with processor the our version gaming on now uniquely Total first and performance, being collaboration the these The by We've increasing game SDK, are momentum announced studios. visual XX on this was Gala with is

top among ranked most However, when in mainland initially ranked sixth last downloaded category. year, and games in sports China launched the free downloaded it the games

Crystal developed low its combination Then frames yesterday, release delivers visual which Nuverse, SDK, X Pixelworks' rendering which with our processor of XX the second of we incorporate consumption. Atlan, of power is on latest with gaming games in second experience accelerator with per announced Unreal engine. XXX Both using our an collaboration these mobile exceptional

in recognition well These and types engagement, to continue awareness as of ecosystem, gaming and have of as the our other initiatives mobile increase Pixelworks. direct

our we mobile a with of and our production the Looking recently pipeline mobile first half Tier year, X of customer. ahead robust orders the and in second secured have fourth second This X OEM Tier quarter design-in includes programs.

in We this these will orders begin shipping support of quarter.

first With in launched to Pixelworks' this technology device customer's quarter. incorporating the scheduled be third

year. with this into our mobile Taken the of OEMs, Tier other together momentum renewed existing second across half accelerating design-ins X we expect

to turning update an Now TrueCut on platform. Motion our

play, ecosystem As since a we've a launch, solution. been to communicating Motion full not investors is standalone TrueCut

to decades frame from the will XX to continue cinematic been high ground out rate We take technology frames the time. for this the second Advancing per ecosystem used that's build from up. innovation

of several discussed reasons We've this the for past. in the

of shown premium However, integral how has six TrueCut our biggest are over an the large past Motion been grading technology the theaters. in format movies months, part

with Starting Way Titanic re-release XXth followed James and The Disney's to in theatrical release, the release late Century awakened year, Water of what's February, in the Studios' of then has Cameron's the then possible. Cameron global of of Avatar re-release by and industry James last in the truly December,

premium of featured platform. XD, films enabled these the the and indicative Motion interest of addition these These level high four additional titles released acceptance and being large cinematic HDR, format realism. theaters all TrueCut industry resulted for screen XK, each highest of high Pixelworks of time, by three rate in from content. demand of of true In represent is global frame they incredible cinematic films which consumer to in also grossing increased to of office titles all participants box success The has

has to frame led with deliver inbound high frame rate solution rate engagement the any by a screen, to ecosystem and remains proven participants. end-to-end increase TrueCut the significant Hollywood, high from cinematic capability in Today, only to and validated

home experience calls, in conference ecosystem. A on recreates as we offer look that increasingly previous superior theaters. establishing enjoy that premium higher important to the TrueCut on providers, becoming add and content that continue subscriptions Motion they global service focus entertainment discussed is proven experience streaming that As tier to today's video to unique in they the cinematic state-of-the-art

engagement from in TrueCut in opportunity solution. high motion that the the glimpse early our the believe initial leaders -- picture lies success represents Motion picture level into an ahead We commercial and for motion of significant industry

and Shifting enterprise to home market.

prior seasonality, with typical OEMs weaker As as quarter reflecting down managed in year inventory quarter the to the anticipated, fiscal revenue declined demand, end. primarily their Japanese first

constrained Following customers period all throughout chains. last indicated for key components their year, improvement of of supply have projector the generally extended supply in projector late incremental

projector expect the will and to that I'm progress fully project address that second to and With currently take demand said, on quarter through least we remains pleased it continues to track. well at Also, imbalances. OEMs report remaining more co-development the supply

production deliver continue driver this this payment to R&D. to the quarter, become in year, major and Once through next associated within fact, In beginning this decade. next projector triggering expect and the of the of SoC end business of a during latter XXXX current released we the revenue new part toward milestone we expect samples to this credit initial generation to the SoC

mentioning our previously in closing Shanghai Pixelworks highlight of subsidiary. investment is that Another February the successful strategic the in announced quarter merit's our in

As interest this the $XXX a subsidiary in reminder, implied more equity than roughly million. X% exchanged transaction an valuation of and

cash transaction to interest and in of equity our quarter investment. approximately majority the a strategic end Inc. Pixelworks, the continues hold balance million. the reflected of Following proceeds $XX.X from are XX%,

local helping strategic Pixelworks properly Star to our for a Shanghai, public addition continue the served also Exchange In we investments preparations ongoing the as growth China. have broader we support secured on to in listing capitalize initiatives,

an in our thrilled the on listings process, Securities. this investment one recently to I'm report CITIC China number update expertise in expect Pixelworks an on bank and multi-phase the subsidiary during the of that Exchange with serve process the we important application CITIC we As they quarter. retained to extensive remainder where will begin are and Shanghai the tutoring current currently has Star the through process. underwriting formal as partner We

am I quarter. work the team's headwinds end of conclusion, through proud during manage impacts diligent efficiently to the market In of the macro specific the and

Our fully the projector prudent many our mobile, today are market. management of and improvement peers rebound industry we growth sequential faster inventory strong to the in and revenue of order in positioned than initial also us has in our seeing bookings support patterns

global remains there the in about increasingly year. economy, we optimistic Acknowledging the of are the feeling balance uncertainty

continue our as We and advanced an platform. both as while TrueCut well initiatives motion aggressive roadmap product for are capitalized gaming executing on to ecosystems on focus growth well expanded mobile our new maintaining

for review financials guidance that With I'll to provide and the said, Haley second our hand to the call quarter.

Haley Aman

correction first Todd. combined driven of to in seasonality sequential with was the first our XXXX mobile with you. market. quarter related in in the guidance. the historical year-over-year midpoint of lower and line in the for The was million by $XX inventory demand decline Thank projector smartphone, industry-wide Revenue quarter

video delivery revenue during certain as the products following sequentially sales fourth higher Additionally, anticipated, end-of-life quarter. of declined

was of from revenue breakdown followed. approximately quarter and Revenue $X.X resulting first million. was home mobile The $X.X as was in million, approximately enterprise revenue the

quarter, for majority home and video home and end reminder, a in of of enterprise of to approximately revenue reflects now home and Projector future markets. and projector quarters. enterprise we from to represent accounted expect the As in delivery continue it a enterprise XX% revenue and revenue first the combination

margin in margin the to with of the gross XX.X% XX.X% product of XXXX. of to Gross in quarter revenue. the mix reflected compared Non-GAAP profit first and first combination XXXX, reduced and quarter absorption of a was quarter in rate fourth the XX.X% for quarter lower associated XXXX, compared

in million $XX.X and in $XX.X were expenses to operating last of Non-GAAP XXXX. compared first first quarter the million quarter $XX.X the quarter million

to million R&D As our co-development related from a quarter reminder, in to project. operating the expenses fourth a benefited $X.X credit

largely consistent XXXX. were first operating the fourth Excluding quarter with the of OpEx this quarter credit, expenses level in

$X.X $X.XX $X.XX net XXXX $X.XX the On loss was or and a share net million of prior non-GAAP basis, approximately loss a loss of to first or quarter, first $X.X a $X.X loss XXXX. a million a quarter per negative in million negative loss quarter loss first the compared in $XXX,XXX $X XXXX. quarter per of XXXX per of of and quarter of or million Adjusted first of for share quarter a $X.X net a the of million a share negative last compared in the a to EBITDA was

the to of with $XX.X quarter the and sheet, equivalent balance Turning we entered million. cash cash

increased balance our announced Shanghai of call, mentioned, just and cash which discussed the conference As quarter, the quarter interest closed last our subsidiary, during the contributor in previously Todd end. on we at first as was to the primary sale equity

from the during used of by two mask purchase quarter. offset the operations, portion the were cash to proceeds addition transaction a the sets from cash of In

million our based order between quarter sales and second of At total sequential we growth represent by to of for backlogs, and the revenue a of led current into current quarter the total $XX.X in anticipate in expectations of an on Shifting revenue would increase second million. the guidance ICs $XX.X anticipated mobile range approximately this and XX% range, of to trends be XXXX, market. midpoint

second margin product contribution profit margin mobile. and in quarter revenue including the expected mix, higher range between reflects gross to be from XX%. Non-GAAP gross This is XX% anticipated

the of gross a previous XXXX period not mobile the Additionally, inventory of portion to the to immediately which margin lower materials, of reflect of cost in smartphones. associated half customers in chose than increases through pass demand we during levels historical a first correction with in weaker

improved sales second ICs the incrementally mobile. unit and XXXX, in of in in particularly expect higher gross customers of resulting to demand margins, through half costs increase material to we As pass

to near returning continue XX%. margins We to target levels growth

the operating million on expect a We in basis. expenses and to $XX range between non-GAAP quarter second $XX million

to related expectation our reflects co-development range our planned agreement. This to milestone achieve another

reducing treatment, As -- previous as for our second anticipated with a the quarter. payment recognized R&D to be will milestone reporting operating expenses credit the reported

per $X.XX second between loss of non-GAAP Lastly, to a range we share $X.XX share. a EPS loss quarter and per expect of

to That completes our Operator, forward taking remarks prepared session. proceed your questions. and we Q&A the look with please

Operator

the Needham. first instructions] of from comes [Operator question line Rajiv with Gill

Rajiv Gill

throughout market you're momentum business. mobile is and indicating in a that questions suppliers In for been congrats trends what the and China what my seeing on take in expected. the saying bucking Yes, market the a of thanks recovery the China the correction of to market's going than for steeper the really you're longer and taking quarter handset good lot kind year, the your the phone handset that lot Todd, second have and of in you're

that trend. guys You really bucking are

talk is, talk way then last and one, So, I channel is you you inventory question Maybe about guess quarters. your had channel can first of the and are terms able could pretty rebound in kind from my where effectively inventory on managed how that seeing in terms customers you're your a of just customers, diverge sitting your your in levels of the couple that about, the that kind little trends. in on to are both clarity you inventory with -- of you're of

Todd DeBonis

Thanks sure. Rajiv. Yeah,

through inventory whatever QX new were much of we into in probably month so ramping So when were anticipated, mobile. We me than was that By overall -- there, clear significantly. we would probably channel I in of channel in inventory, in included programs burn QX the the for and we February became all down guided went QX of for and that went February of to we in April. start was I we sometime clear projecting harder some became that that it in the the it were for

to trend, we're ramping while we bucking So test. to were because forecasted we had what but WIP our time, February both up expedite orders is into that, were in started access than capacity the getting particular March, I right, to foundry in assembly term doing our programs was through this [ph]. even The news supply a going new with not chain better good challenge, and customers trying in there and short those was

anticipated. to programs inventory multiple we needed that XX multiple quicker ones and through what then we ran were both had so have tier and us paying Wip, had and simultaneously through expedite that XX expedited -- They for for in fees for than foundry to get expedite our product

to the the least. So today, say channel lean is

you, a be gave beat probably than guidance the quicker we we could anticipate, the midpoint we expedited With challenge. we get wafers will which if

It's that is QX. probably early. through So into too pool demand exceeding

in launched being of models these second to year the new models. add the have We that'll half

but sticks optimistic, back, if right and through we're optimistic. with pretty comes that I how want to So we're China consumers see now the but

Rajiv Gill

kind some up, and little Great. near follow takes my a the Appreciate of gross And of puts margins for it. you term. about talked bit in the the

seeing XX, over the you're that Thanks. pickup Now couple the how thinking which curious I'm you're just environment a next have higher pricing about ASPs in quarters.

Todd DeBonis

question. Yeah, good

has increase XX So way higher kept it new but though it bunch on seven definitely a a is higher it, adoption we a than it's profile of even and -- purpose XX. we we when where of priced has it. that lower ASP, it And XX, does a a margin to ASP, larger dye try features to have than

to price When we we originally the supply increases it chain priced from expected abate. the

and well 'XX got think some that supply have there price into known extended chain. was out increases I they there that fully abated it's not new the through

absorbing longer no those. are We

this year. to now second of price customers our in the of for all increases of are through markets we our passing in So half all the starting

Operator

with Our instructions] Suji next [Operator from question Capital. DeSilva Roth comes

Suji Desilva

if programs, And these resuming are I programs, Todd the the of paused were Haley. newer new -- like more smartphone presume you of two? they they they Are what aggressively. Hi the are said, these coming some is now? Todd. some back during a or These lockdowns, Hi it they're for back, and the from coming mix sound seven they of XX fairly

Todd DeBonis

mix was of It the two. a

in channel, to at it for we to there I out 'XX take through but if burn when some months would us customers, thought inventory with inventory. the of channel predominantly was it XX. was the went six XX months look inventory So and the XX eight was sure it -- the you

expedites of on are the Some devices. XX

to just they mentioned through models, those I expediting wafer the of excess which and such with that had same inventory our and I went new demand some included they that for of strong phones So mentioned then XX. XX, our starts, ones and XX

that released of are models much this to now went on. January the of all Some Suji, line. our all been I later to XX% upon based sure was were the models it's demand they models expediting high the through the be were XX, demand make wafers from released. demand, over clear, well through early is pretty of and or inventory December all have and part got be They're either are that want to

not to like needed you is it in came cycle four and XX the is had were conservative the within case, the to through this it when like These that year they through and parts. easier that harder in models eight had models the of further to got for being that the are they the expedite they went think, weed, into different quote prior blowing you're in forecast, to forecast these And blew we because time, closer is all older our realized it and burnt out customers five to us and when particular they new initial guys were weeks inventory. not the these we or models expedite. conservative been new all a So models through I rejuvenation understand the expediting

Suji Desilva

this where then your starting understand or of and you're a to great. just typical had the what Okay, year. to curious not demand year? on over updated the Todd, terms that the what's know view I kind back of headwind end 'XX in expecting what I'm it's come projector demand versus switching into market, normal obviously starts year? -- for

Todd DeBonis

digits, as say end that the be half to TrueCut. mobile any as guidance expect year XX% finish We right on 'XX, right for us I We a of correction We by don't year growth now to had expecting guidance, do year-over-year QX. with give annual growth in expect we're the the be business. on the want to projector, to we inventory trough really compared low projector the down we I the through. mobile, to expect back just XX% give still double be probably but, correction takes the business but through this growth to year-over-year will year to year this for of don't even

Operator

Richard next Shannon Our comes from with question Craig-Hallum.

Richard Shannon

taking you hi my and thanks me? for Haley, Todd hear Well, questions. Can

Todd DeBonis

We can, thanks Richard.

Richard Shannon

about a missed for the second I comments coming includes expected redoing bucket. some growth understand sure time any this, and on just it of to moving quarter enterprise that pieces some make mobile? want the here little home wasn't but or apologies so the the Whether got clear to is here, have I all for I within guidance it late any on buys from of and me whether may you last

Todd DeBonis

finished projector be no. time slightly, and time we buys. overall expect we enterprise, 'XX. last in slightly transcoding up and of had home No, on products is to which buys up the fourth Last QX. the quarter from transcoding The And

be and mobile we up expect up. sequentially then significantly So to

Richard Shannon

my substantially right? if And like that's Okay. it getting of almost that in to here, about time then. close Todd model real Is running here, doubling seems I'm kind

Todd DeBonis

about right. is That

Richard Shannon

sure this or… were this through few trying we kind adjust we points about come makes for which might what gross of, price Is a on or the could year, as thinking the here. here, I had I cost, but your margins. number that One to other in could pace what think to kind We think you a sense we without number topics your of I'm second of those think couple you're increases, passing see? Okay. here back passing through couple what not a hit but fiscal quarter if from points

Todd DeBonis

time that are reason we margin lead our a low price plenty no the numbers. guiding into so increases and customers, we're to give is we price of the guided loaded QX to Well, the there our to QX increases

growth is get that markets, back different two the there's unit things One, mix, all happening. So increases we're price to mobile on we're the Depending growth. board on -- and our passing mix QX centric. customers, QX to is various all across all trying more levels.

Okay. And it on a going be probably foreseeable for go-forward than just and future. in be much growing basis will home projector entertainment. the It's a business to faster

But absorb pass through absorbed we or didn't now that. to all the price increases doing that continue are we we and

goal we we -- with back the Now XX% it's a we centric gross at mobile going get a that more to corporate get back mobile higher be margin, the above with that a back mix. if mix, level get to still reasonable

they're still any Once once goals low licensing but significantly fifties. will margin the this re-advice business, significant this of to TrueCut, TrueCut modeling in, We are, higher corporate kicks our than revenue. in the not we for analysts are the all what

Richard Shannon

TrueCut I'll that jump you've the helpful. ecosystem. lot your process Todd. question Well is and last in of long had milestones Obviously year Okay. is line, me, nice events One developing clear outta and an a been a last business this for you

streaming customer, maybe reality? kind streaming do to make with assuming you to you apply sign I'm time, ecosystem any before you'd this trying with that the partners expect milestones to in not only a this, what that, at able be to assuming other customer would but to a So not up point of announce timeframe

Todd DeBonis

question. good a that's So,

our frame there. investors see, and eye good that's do helping would you any are are theaters we're in on given an not hitting suggest we interest how to for to studios and releases. that I in the financial large the format milestones, premium putting we're new listening other deliver think around if see keep world high call strong that interest with I getting milestones rate that

that hear than sooner will later. probably some you So, of activity

think people using content better our us to I and partners technology monitor if experience. more deliver a see

premium that end with want the the company that's this world, that device announce entertainment of a and to then our think see first home deliver streaming you distribution announcing on Upon telling manufacturers delivery. to partners other that format us content quickly entertainment partnerships are will to I home tale.

it that, partners streaming once that's see you and one. the see So to I multiply multiple out, distributor I device and zero major it companies that device next roll first and think. beyond that's question is, think expand how those does you to Then partners? multiple that

Richard Shannon

follow that's sure I'm all we'll questions the think for in future, on me. Todd. lot, I that up Okay. but the a Thanks

Operator

That concludes to back I'd the closing for today's session. call turn like question-and-answer to remarks. management

Todd DeBonis

you updates forward to of it the today's progresses. hope for Look your giving helpful. time. those For thank I call, was you as you attending year

Operator

This concludes today's for conference call. Thank you participating.

You may now disconnect.

Pixelworks (PXLW) 9 May 232023 Q1 Earnings call transcript