Good afternoon and welcome to the Pixelworks Incorporated Fourth Quarter 2013 Financial Results Conference Call. At this time, all participants are in a listen-only mode. At the conclusion of today's conference call, instructions will be given for the question-and-answer session. (Operator Instructions) As a reminder, this conference call is being recorded today, Thursday, February 6, 2014. I would now like to turn the conference over to Mr. Steve Moore.

Good afternoon and thank you for joining us. This is Steve Moore, Chief Financial Officer of Pixelworks. With me today is Bruce Walicek, President and CEO. The purpose of today's conference call is to supplement the information provided in our press release issued earlier today announcing the Company's financial results for the fourth quarter ended December 31, 2013. Before we begin, I would like to remind you that various remarks we make on this call, including those about our projected future financial results, economic and market trends and our competitive position constitute forward-looking statements. These forward-looking statements and all other statements made on this call that are not historical facts are subject to a number of risks and uncertainties that may cause actual results to differ materially. All forward-looking statements are based on the company's beliefs as of today Thursday, February 6, 2014, and we undertake no obligation to update any such statements to reflect events or circumstances occurring after today. Please refer to today's press release, our Annual Report on Form 10-K for the year ended December 31, 2012, and subsequent SEC filings for descriptions of factors that could cause forward-looking statements to differ materially from actual results. Additionally, the Company's press release and management's statements during this conference call will include discussion of certain measures and financial information in GAAP and non-GAAP terms including gross margin, operating expenses, net income loss and net income loss per share. These non-GAAP measures exclude stock-based compensation expense and additional amortization of a pre-paid royalty. We use these non-GAAP measures internally to assess our operating performance. The Company believes these non-GAAP measures provide a meaningful perspective on our core operating results and underlying cash flow dynamics, but we caution investors to consider these measures in addition to, not as a substitute for, nor superior to, the Company's consolidated financial results as presented in accordance with GAAP. Included in the Company's press release are definitions and reconciliations of GAAP to non-GAAP net income loss and GAAP net income loss to adjusted EBITDA, which provide additional details. Bruce will begin today's call with a strategic update on the business. After which, I will review our fourth quarter financial results and provide our outlook for the first quarter of 2014.

Thanks Steve. Good afternoon everyone and thank you for taking the time to join us today. 2013 was a year of significant progress for Pixelworks, as we finished up the year on a strong note with momentum across our product lines, and partnership initiatives. It was also an important year for validating our thesis of the growing importance of Video Processing technology and the need for video quality for all screens, as the megatrend of increasing resolutions across all displays accelerates. Overall revenues for 2013 came in at $48 million, and while the year started on a sluggish note, 2013 had a strong finish with second half revenues and profitability up strongly over the first half, and we enter 2014 with significant momentum and an expanding set of opportunities. 2013 was a pivotal year for the company as we completed a number of key milestones that significantly improved our business, financial position and demonstrated our leadership in video. In Q3 we closed a significant licensing partnership for our advanced video display technology, which validates Pixelworks' leading position in providing innovative video solutions. This is a major validation of our innovation, technology and expertise, and reinforces our thesis regarding the growing importance and need for video processing. During the year, we completed key milestones on our co-development partnership to develop a highly integrated next generation SOC, as we delivered initial prototype samples in Q3 and taped out the mass production version in Q4. We also completed a $10 million equity offering in Q3 that strengthened our balance sheet, significantly improving the financial strength of the company and putting Pixelworks in the strongest financial position in years. We ramped the PA168 advanced video processor into volume production, leading the transition to Ultra HD 4K large screen displays. We continued to see strong…

Thank you, Bruce. Revenue for the fourth quarter 2013 was $15 million, compared to $15.3 million in the third quarter of 2013. As Bruce mentioned, revenue during the quarter reflected increased chip revenue across the company's product lines compared to the third quarter, offset by sequentially lower licensing revenue. The split of our fourth quarter chip revenue by market was: 67% digital projection, 25% TV and panel, and 8% embedded video display. Licensing revenue was $3.2 million in the fourth quarter, compared to approximately $4.8 million during the third quarter of 2013. Revenue from digital projection in Q4 was up 20% sequentially to $7.9 million on strong demand across our customer base. Revenue from TV and panel grew for the third consecutive quarter, increasing to $2.9 million in the fourth quarter. The ongoing ramp of our PA168 for Ultra High Definition televisions and positive seasonal demand continued to support growth in this market. Embedded video display revenue in Q4 was approximately $900,000. Non-GAAP gross profit margin was 57.8% in the fourth quarter, compared to 61.6% in the prior quarter. The sequential decline in gross margin was primarily driven by lower licensing revenue. Non-GAAP operating expenses were $7.1 million in the fourth quarter, compared to $7 million in the third quarter of 2013. Operating expenses for both the third and fourth quarter of 2013 include a reimbursement credit to research and development expense as the result of achieving certain milestones related to our previously announced co-development agreement. As we discussed in prior quarters, the chip created as a part of this co-development agreement is expected to result in revenue beginning in the first half of 2014. Adjusted EBITDA was $2.7 million for the quarter, compared to $3.5 million in the third quarter. A reconciliation of adjusted EBITDA to GAAP net income/loss…

(Operator Instructions) And we have a question from the line of Krishna Shankar with Roth Capital.

Yes, Bruce and Steve congratulations on a nice 2013. And as you look for the first quarter for 2014, you indicated normal seasonality and you did also say that the co-development project was sort of in the production ramp stage. Can you talk about the revenue profile beyond Q1 as this major customer ramps up their products? And also what kind of demand trend you're seeing for your TV chip in the Ultra High Def TV marketplace?

Quite a number of questions there but the Q -- we don't give guidance beyond Q1 but we have indicated that we do expect a ramp starting in the first half of the year for the co-development chip. And we've said a number of times that that chip will result in significant revenue, in the last half of the year, although we do expect revenue within the first half of the year related to it. The general demand from both our projection customers and TV customers is seasonally normal, strong given the season and we continue to work on design wins in those areas.

Yes, there is normal consumer cycle in terms of seasonality and then at least for our Japan customers listen the first calendar quarter is their fiscal fourth quarter which is typically a seasonally weak period for them at the end of their fiscal year as well.

And then can you give us an update on the recent $10 million IPV licensing deal? How the milestones for that project are coming along and what you will recognize there in terms of revenues in the first quarter? And Bruce, you also said you had a healthy pipeline. Can you perhaps comment a little more on the nature of deals that you may have in the pipeline?

Yes, let me get the last one first. We don't break that out and we kind of don't really go into detail as to who those people might be or what the configuration of those deals might be. But I just I guess I make that comment in -- with regard to what we're seeing in the marketplace in terms of kind of the demand, what I call the demand for video processing technology. But I think that it's really sort of indicator and a testament to the importance of being able to really produce efficient, low power high quality video on a growing number of platforms not just the large screens as well. So I think we're seeing opportunity across all those streams and in various forms. I also mentioned that we have a nice portfolio, video IP in addition to what I would call 168 class IP as well.

From that the $10.3 million license and services deal we had indicated earlier that we expected most of that to be recognized over six to nine months and we're now through six months of that. So we do expect another tranche of it within the first quarter. I would indicate that we do have other licensing opportunities and deals that we continue to work on and would also expect to recognize within 2014.

And then my final question. At CES you had some good demos of the mobile video processor chip; can you talk about the timeline for but in terms of getting that prototype to set up a production pit box and the opportunity there for design wins and revenues?

Yes, so as I mentioned in my commentary we're expecting to introduce products, silicon products into the market in the first half of the year. I would characterize where we are, is on track with that development. And I think we've been heartened by the level of reception and level of interests that we have in bringing a solution like this to mobile platform as well. So we're pretty excited about it.

And there are no further questions at this time.

Thank you all for tuning in and we'll look forward to talking to you on our Q1 2014 earnings announcement conference call. Thank you.