Good day, ladies and gentlemen, and welcome to Pixelworks Second Quarter 2014 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, we will conduct a question-and-answer session. As a reminder, this conference call is being recorded for replay purposes. I would now like to turn the call 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 second quarter ended June 30, 2014. 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, July 31, 2014, and we undertake no obligation to update any such remarks 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, 2013, and subsequent SEC filings for a description 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 discussions of certain measures and financial information in GAAP and non-GAAP terms, including gross margin, operating expenses, net loss, and net loss per share. These non-GAAP measures exclude stock-based compensation expense and additional amortization of a prepaid 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 loss and GAAP net 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 second quarter financial results, and then provide our outlook for the third quarter of 2014.

Thanks, Steve. Good afternoon, everyone, and thanks for joining us today. Q2 2014 was another outstanding quarter of growth, as revenues of $15.2 million were up 59% year-over-year, driven by accelerating growth in our product business, which grew 42% sequentially. All other metrics were solidly within the range of guidance, and we generated positive EBITDA and cash flow from operations for the quarter. The strong start to 2014 continued in Q2 as overall book-to-bill was significantly greater than 1, with bookings at their highest level since 2009, reflective of good visibility going into Q3, driven by strong product demand, and the continuation of a strengthening overall environment at our customers. During the quarter, we hit a number of key milestones, but most importantly, at Computex in June, we introduced and delivered silicon samples of our first device in a family of mobile video processors, code named Iris. Iris is the industry’s first mobile video processor designed to bring the cinematic experience of large screens to mobile screens while enhancing system performance and lowering power consumption. It represents the culmination of several years of work to leverage Pixelworks’ technology and expertise in large screen applications to create the best video quality in mobile devices, and it positions the company to address a large market opportunity and ride the explosive third wave of video as resolutions and video consumption rise across all screens, increasing the importance of advanced video processing. Historically, the level of dedicated video processing found in Iris, has only been applied to large screens, but we believe the time has come to apply this technology to all displays and Iris is seeing tremendous interest as companies begin to recognize the importance of video to the differentiation of their products. By re-targeting our display processing and MEMC technologies for low…

Thank you, Bruce. Revenue for the second quarter of 2014 was $15.2 million, up 12% sequentially and up nearly 59% year-over-year. The increase in revenue during the quarter was driven by strong chip sales, particularly in the projector market. The split of our second quarter chip revenue by market was; 74% digital projection, 26% TV and panel. Digital projection revenue was $11.1 million in the second quarter, compared to $7.3 million in the prior quarter, as new products began to ramp in line with previous expectations. Revenue from TV and panel, which also includes Ultra-HD Monitors, totaled $4 million in the second quarter, compared to $3.3 million in the prior quarter. Licensing revenue was approximately $100,000 in the second quarter, compared to approximately $2.9 million during the prior quarter. Non-GAAP gross profit margin was 51% in the second quarter, compared to 60.1% in the prior quarter. The sequential decline in gross margin was primarily a result of a higher percentage of chip revenue in the quarter. Non-GAAP operating expenses were $8.7 million in the second quarter, compared to $8.8 million in the prior quarter. Adjusted EBITDA was a positive $182,000 for the second quarter, compared to a positive $464,000 in the prior quarter. A reconciliation of adjusted EBITDA to GAAP net loss may be found in today's press release. On a non-GAAP basis, we recorded a net loss of $1.5 million, or loss of $0.06 per share, in the second quarter of 2014. This compares with non-GAAP net loss of $786,000, or loss of $0.04 per share, in the prior quarter. Moving to the balance sheet, we ended the second quarter with cash and cash equivalents of approximately $20.9 million, compared to $21.9 million at the end of the first quarter. The company has no long-term debt and similar to the previous quarter, the company had a balance of $3 million on its working capital line of credit. Other balance sheet metrics include days sales outstanding of 24 days at quarter-end, compared to 29 days at the end of the first quarter, and inventory turns during the second quarter remained in line with the previous quarter at approximately 12 times. Looking ahead to the third quarter of 2014, we expect revenue to increase to a range of $16 million to $18 million, driven by a continued increase in chip sales. We expect gross profit margin for the quarter to range between 49% to 52% on a non-GAAP basis and 48% to 51% on a GAAP basis. In terms of operating expenses, we expect the third quarter to range between $9 million and $10 million on a non-GAAP basis, and $10 million and $11 million on a GAAP basis. And finally, we expect non-GAAP third quarter net income of between breakeven and $0.11 loss per share, and we expect a GAAP net loss of between $0.05 and $0.16 per share. That concludes my comments. We will now open the call for your questions.

(Operator Instructions) And at the moment I’m showing one question coming from Krishna Shankar from Roth Capital. Krishna, please go ahead.

Bruce, and Steve, congratulations on the good results and outlook. I had a couple of questions on Iris. It’s very good to see the momentum and interest level you are seeing in the Iris mobile video processor chip. Can you talk about the timeline for the production ramp of the Iris chip and any design wins that you might have there in the mobile market?

Design cycles in this market, and again, this includes smartphones, Ultrabooks, and tablets and each of these segments have a little bit different of a timeline but roughly they are the same. They are anywhere from six to nine months to 12 or much plus months depending on what kind of product, what kind of customer, so forth and so on. So, I think we’ve always sort of said in terms of revenue and mass production, this is sort of [2050] [ph], but we’re seeing extreme interest in Iris right now and I’m very excited about sort of the initial feedback of the launch because it’s only a couple of weeks old right now.

And then, can you talk to the licensing and royalty pipeline, what you might have in terms of potential licensing opportunities over the near term and longer term also?

I think I mentioned on the conference call we’re seeing sort of the increasing interest in licensing. I think in terms of sort of our opportunity set, it has certainly grown from the last time we talked to investors. Again, I want to frame potential licensing deals, they can range from below a million dollars to the kind of things that we’ve seen, that we’ve had the 8K before which are in the large range. We have a range of video processing technologies that are encompassed by a number of different techniques and so forth that we bring together to really bring that video quality to a system. Sometimes there is pieces of this, or sometimes there is a holistic license that happens as well, so quite a wide range, but I’d say that we’ve seen increasing interest across segments in terms of our technology. I think it’s a testament to a lot of the trends that I talked about, the intensifying need for this, based on the trends that we’re seeing, we talk about in this conference call just driving the demand for our technology.

And with regard to the 8-K that you filed in December regarding the large licensing contract, do you have any update on that in terms of activity with that strategic partner, the potentials for additional licensing or royalty or other kinds of revenues with that large strategic partner?

I’m not going to single out any customers that we’re talking to or any talks that we have. I think that it’s fair to say that it’s well known who the big impact players are in the industry across these different segments that we focus on, I’d say we’re seeing really good interest on a number of fronts and corners of the various sort of market segments that we’re interested in from meaningful customers, I would say, in the industry, and I wouldn’t comment on any specific one. We’re seeing a lot of interest from various corners of the industry from meaningful customers.

The third quarter forecast guidance that you gave us does not include any significant IP licensing or royalty revenues in it?

I think, Krishna, that you can come to that conclusion from a forecast standpoint. As you know, our IP revenue has been lumpy, will continue to be so. We do have some in our internal forecasts, but given the margin range that we gave, you can conclude that there is not a large amount. That would not preclude that from happening, but we chose not to include it in the guidance.

And then, turning to your large screen business, it sounds like your – you’ve just entered mass production of the custom platform for the large screen customer and can you talk about the potential ramp of that, how that’s going and then the outlook for the holiday season in terms of large screen TVs and 4K resolution?

I think -- we’re pretty excited about that one. That was a very long project. It’s been a real great success for our customer and for Pixelworks, and as I mentioned, if that all schedules right on time and we sort of began mass volume production in the – begin to ship mass volume production in Q2. I think we’ve been saying consistently over the last number of quarters as we talked about this that it will ramp in the second half of 2014 and beyond. This has been layered into products and so forth, so we’ll continue to see good acceptance of this for the balance of this year and into next year. In terms of the season, it’s kind of early to predict. I think I will say and I’ve made this in the comments as well, that we’ve seen a pretty strong environment and I compare that relative to the last two or three years where – I think I said this last quarter too as well, where we saw a pretty significant weakening environment. I think we’ve seen sort of so far this year in 2014, the opposite of what we experienced last year in 2013.

So you are seeing good demand for your kind of large screen, the PA168 high-end TV processor chip globally from both the top tier OEMs in all regions, Japan, Korea and the U.S.?

I’ll just talk about it across the application set. You talked a little about projection, but I mean it’s across sort of our large screen application set and yes we’re still seeing good success and opportunities in that segment as well as 4K begins to broaden out beyond TVs into monitors and other types of applications as well. And again, I’ll point that we have a product line of video processors for large screen applications that are also not 4K as well, and those go into a lot of different type of applications like digital signage and things like that, so we’re still seeing a lot of good success there and pretty stable environment in those products.

Okay. Thank you. I would now like to turn the call back to management for closing remarks.

Thanks everyone for joining us. And we'll look forward to talking to you on our next conference call. Thanks.