Pixelworks, Inc. (PXLW) Q3 2023 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen and welcome to Pixelworks, Inc.’s Third Quarter 2023 Earnings Conference Call. I will be your operate for today’s call. [Operator Instructions] This conference call is being recorded for replay purposes. I would now like to turn the call over to Brett Perry with Shelton Group, Investor Relations. Please go ahead.

Thank you, Andrea. Good afternoon and thank you for joining us on today’s conference call. With me on the call are Pixelworks’ President and CEO, Todd DeBonis; and Chief Financial Officer, Haley Aman. The purpose of today’s conference call is to supplement the information provided in Pixelworks press release issued earlier today announcing the company’s financial results for the third quarter of 2023. Before we begin, I’d like to remind you that various remarks we make on the call, including those about 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, Tuesday, November 7, 2023. The company undertakes no obligation to update any such statements to reflect events or circumstances occurring after today. Please refer to today’s press release, the company’s annual report on Form 10-K for the year ended December 31, 2022, 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 statements during this conference call will include discussions of certain measures and financial information in GAAP and non-GAAP terms, including gross margin, operating expense, net loss and net loss per share. Non-GAAP measures, exclude amortization of acquired intangible assets and stock-based compensation expense, as well as the tax effects of these non-GAAP adjustments. The company uses these non-GAAP measures internally to assess operating performance. We believe these non-GAAP measures provide a meaningful perspective into core operating results and underlying cash flow dynamics. We caution investors to consider these measures in addition to and not as a substitute for nor superior to the company’s consolidated financial results as presented in accordance with U.S. GAAP. Also note throughout the company’s press release and management statements during this conference call, we refer to net loss attributable to Pixelworks, Inc. as simply net loss. For additional details and reconciliation of GAAP to non-GAAP net loss and GAAP net loss to adjusted EBITDA please refer to the company’s press release issued earlier today. With that, it’s now my pleasure to turn the call over to Pixelworks’ CEO. Todd, please go ahead.

Thank you, Brett and good afternoon and welcome to everyone joining us on today’s call. Consistent with preliminary third quarter revenue we announced in early October, we had solid third quarter results with all financial metrics coming in, at or better than the midpoint of guidance. Total revenue increased 18% sequentially driven by record quarterly revenue in our mobile business, as well as seasonally stronger demand in the home and entertainment enterprise market. As planned during the quarter, we began passing through previously absorbed supplier across our end markets, which contributed to gross margin expanding 260 basis points sequentially. We also successfully managed OpEx for the quarter especially given the significant number of product and ecosystem initiatives we currently have underway to support future growth. Turning to our end markets, mobile revenue increased 20% sequentially and 37% year-over-year, achieving new quarterly record and contributing a record 52% of total revenue. During the quarter, we received positive responses to our newly introduced IRX Gaming Experience branding and certification program. The launch of the first IRX certified smartphone models were well received by the market with demand for these models exceeding customers’ expected unit volumes. Among these were two new smartphones that had just been pre-announced and which we previewed on our previous conference call. As a reminder, these were Xiaomi’s Redmi K60 Ultra and the OnePlus Ace 2 Pro. Both of these premium smartphones incorporate Pixelworks’ X7 visual processor and have contributed to our recent revenue growth. Also launched during the quarter incorporating both our X7 visual processor and IRX certification was the Realme GT5 smartphone. Built on Qualcomm Snapdragon 8 Generation 2 platform, the Realme GT5 features a 6.74-inch flat display with narrow bezels, supporting up to 144 hertz refresh rate and 2K dimming. With its integration of our X7 processor, this phone leverages all of Pixelworks’ core visual processing technology, including our ultra-low latency motion engine, low power super resolution, and always-on HDR, resulting in enhanced visual performance and optimized picture quality for both gaming and video content. As part of our ongoing strategic initiatives to facilitate a cooperative mobile gaming ecosystem, we recently disclosed our latest collaborations with 2 of the world’s largest mobile game studios. In August, we announced Perfect World Games had incorporated the Pixelworks’ Rendering Accelerator SDK in the mobile game Persona 5: The Phantom X, more commonly referred to as P5X. Then in September, we announced our partnership with NetEase Games Studio, Thunder Fire Business Group. And the integration of [Technical Difficulty] release of Revolution Mobile, based upon the original flagship game Revolution. When played on a smartphone equipped with one of the X7 series visual processors, the integration of our SDK Rendering Accelerator serves as a connecting bridge, enabling these games to be played at the displays full resolution [Technical Difficulty] 120 frames per second while significantly lowering system power over native rendering. More recently, in October, we completed two notable milestones with the formal launch of our latest X7 Gen 2 mobile visual processor, which we unveiled Pixelworks’ hosted mobile visual computing event in Shenzhen, China. In addition to being an opportunity to promote the launch of our latest mobile visual processor, the event itself was centered around what we believe to be the future of mobile visual processing and advanced mobile gaming. Endorsing and adding [Technical Difficulty] the Vice President of Perfect World Games was a keynote speaker. This was followed by customer acknowledgments and then members of the Pixelworks team presenting the benefits of our ecosystem-based distributed processing architecture. Attendees of this inaugural event also had the opportunity to experience live demos of 5 announced IRX certified mobile games. With regards to our new X7 Gen 2, this latest visual processor takes picture quality to a new level. In order to achieve this performance, we incorporated newly internally developed AI based [Technical Difficulty] that utilizes our self-developed neural network processing. Our X7 Gen 2 enables more accurate upscaling and rendering of gaming content while maintaining power efficiency. The overall feature set of our new Gen 2 processor is different from the X7 predecessor. However, both chips incorporate Pixelworks’ industry-leading ultra-low latency MotionEngine, MEMC, as well as other core visual and picture quality enhancement capabilities. Looking ahead to the fourth quarter and into next year, there are three primary drivers that underpin our current expectations for sustained year-over-year growth in mobile. The first is to quickly scale the growth of the gaming ecosystem that we’ve established with leading mobile gaming studios. We’re working with new and existing studios and are targeting a 400% increase in announced games by the end of 2024. [Technical Difficulty] launch of our IRX gaming brand and certification, which is designed to increase awareness as well as simplify the evaluation and purchase decision of consumer gamers, Pixelworks is positioned to drive expanded adoption of our mobile visual processing solutions. The second growth driver for mobile is our expanded product portfolio and roadmap. Our new X7 Gen 2 visual processor when combined with Pixelworks rendering Accelerator SDK provides a unique value proposition in the form of rendering efficiency and superior cinematic gaming experience. The first production volume shipments are scheduled to begin this month in support of a customer’s planned phone launch in the first quarter of 2024. Lastly, another growth opportunity for our team has been focused on is the expansion within the existing Tier 1 handset customers into international models sold out. We have secured our first design on an existing customer’s planned international model that is scheduled to be launched early next year. To the extent we can leverage this win into additional international models with one or more Tier 1 customers would represent continued [Technical Difficulty] to latter half of next year. Turning to an update on TrueCut Motion platform. Our focus throughout much of this year has been securing a select group of commercial engagements to complete the initial foundation for bringing together a larger supportive ecosystem as [Technical Difficulty] an ecosystem takes time and is a dynamic process. Despite the distraction of recent Hollywood strikes for many industry executives and decision makers, we have continued to demonstrate our TrueCut Motion platform to influential creatives across the filmmaking community, including a growing number of directors, cinematographers, and colors. Additionally, we’re seeing increased interest from global theatrical exhibitors with business strategy centered around delivering a premium experience. This not only includes growing demand for new premium large-format content, but also the rerelease of remastered classic and catalog tiles in superior formats. With this push towards premium experiences featuring higher resolution and HDR content, there is strong and growing acceptance with the adoption of cinematic high frame rate is [Technical Difficulty] theatrical and home entertainment content without undesirable artifacts. Next, in our Home and Enterprise business, which as a reminder now predominantly consists of our visual processor SoCs for the digital projector market. Revenue increased sequentially as expected, primarily reflecting typical positive seasonality for the projector business and their order shipments in the third quarter. Although the sequential uptick in demand is an encouraging indication of normalization, the broader projector market is continuing to work through an inventory correction in response to more subdued end demand and macro uncertainty. Following the industry’s extended period of supply constraints, projector OEMs are continuing to adjust their build forecast and buffer inventories to reconcile previous supply and demand imbalances. Feedback from customers just going to normalize. However, it will be likely next year before the industry achieves a more sustainable balance between supply and demand. While speaking about supply chain, I want to briefly highlight the recent recognition we received from our largest projector customer, in September, Pixelworks with its Supplier of the Year Award for their fiscal 2022. Similar to many other companies, Epson was confronted with shortages of key components across various product lines and Pixelworks was the only vendor that was able to fully support Epson’s demand to [Technical Difficulty]. Also notable, Pixelworks was the only supplier across all of Epson’s product lines to receive this award. This is a true testament to the contributed performance and dedication of our entire team, including our operational, sales, and technical support teams. Separately, multiyear co-development project with the same customer continues to progress well. We remain on track to achieve conditional acceptance of our next-generation SoC by year-end. Upon completion of this development milestone, we expect to recognize the final milestone as an R&D credit, which will reduce our reported OpEx in the fourth quarter. Following the planned delivery of production samples early next year, the new SoC will go into volume production in the second half of 2024. Shifting to an update on our Pixelworks’ Shanghai subsidiary [Technical Difficulty]. We are now in the final preparation and tutoring process that is required before an application before listing can be filed. Getting to where we are today has taken roughly 2 years and countless hours of hard work by numerous members of our team. With respect to the larger Pixelworks organization and our Shanghai subsidiary being ready, we believe we are effectively there. As with any IPO on a major exchange, underlying market conditions play an important role in their ultimate timing. Given the current environment for technology IPOs in China, we are closely monitoring market conditions sponsor CITIC Securities. While a definitive decision has not yet been made to the respect of the timing for filing an application to list, our continued plan is to pursue a local listing of our Pixelworks Shanghai subsidiary when we believe market conditions are supportive. In closing, despite recently heightened macro uncertainty, including indications of weaker global demand and a slower ongoing recovery in China, we remain confident about our near-term outlook for sustained growth, especially in our mobile business. Specific to the fourth quarter, our current order backlog [Technical Difficulty] invisible visual processors fully support achieving continued double-digit sequential growth in mobile while also returning to solid year-over-year top line growth. Even with mobile poised to continue to become an increasing percentage of our overall business, we remain committed to and [Technical Difficulty] the next several quarters. Overall, our team continues to execute well on strategic initiatives, which have been a key to enabling our renewed growth during a broadly challenging environment. I am pleased with the recent achievement [Technical Difficulty] all important milestones as well as our expectations to close out the year with a strong fourth quarter. With that, I’ll hand the call to Haley to review the financials and provide our fourth quarter guidance.

Thank you, Todd. Revenue for the third quarter of 2023 increased sequentially to $16 million from $13.6 million in the second quarter and was lower compared to $17.6 million in the third quarter of 2022. As Todd previously highlighted, the sequential increase in the third quarter revenue was driven by continued strong growth as well as seasonally higher demand in the Home and Enterprise market. The breakdown of revenue in the third quarter was as follows: Revenue from mobile increased 20% sequentially to approximately $8.3 million, which was a record quarter in terms of mobile revenue and also the contribution of a record 52% of total revenue. Home and Enterprise revenue was approximately $7.8 million, an increase of 16% sequentially from the prior quarter. Within Home and Enterprise, sales into the projector end market represented over 95% of the business. Third quarter non-GAAP gross profit margin expanded 260 basis points sequentially to 43.1% from 40.5% in the second quarter of 2023 and compared to 49.8% in the third quarter 2022. As discussed on our prior conference call, during the third quarter, we began passing through an increased portion of the higher cost of materials that we previously chose not to immediately push through to our customers. Combined with the anticipated benefits from higher unit volumes [Technical Difficulty] absorption as we grow top line revenue, we expect to achieve continued incremental improvement in gross margin over the next several quarters. Non-GAAP operating expenses were $13.3 million in the third quarter compared to $10.7 million in the prior quarter and [Technical Difficulty] quarter of 2022. With respect to the higher sequential OpEx in the third quarter, as a reminder, operating expenses in the second quarter benefited from a $1.9 million credit to R&D related to our co-development agreement. On a non-GAAP basis, third quarter 2023 net loss was $5.7 million or a loss of $0.10 per share compared to a net loss of $4.8 million or a loss of $0.09 per share in the prior quarter and a net loss of $3.2 million or a loss of $0.06 per share in the year ago quarter. Adjusted EBITDA of 2023 was a negative $5 million compared to a negative $4 million in the second quarter and a negative $2.1 million in the third quarter of 2022. Turning to the balance sheet. We ended the quarter with cash and cash equivalents of $50.3 million and the company continued to have no outstanding debt. Shifting to our current expectations and guidance for the fourth quarter of 2023. Based on recent order trends and our current backlog, we anticipate fourth quarter total revenue to be in a range of between $19 million and $21 million. At the midpoint of this range, total revenue would represent an increase of approximately 25% over the third quarter, driven by expected sequential growth in both our mobile and home and enterprise end markets. Total revenue at the midpoint would also represent [Technical Difficulty] growth with revenue being approximately 18% over the fourth quarter of 2022. In terms of gross profit margin, consistent with my earlier remarks, we expect to drive incremental gross margin expansion in the fourth quarter and also throughout 2024. Specific to the fourth quarter, we anticipate non-GAAP gross profit margin to be between 44% and 46%. We expect operating expenses in the fourth quarter to range between $11.5 million and $12.5 million on a non-GAAP basis. Note, this range reflects our expectation to complete the last scheduled milestone related to our co-development agreement before year-end, which will be recognized as a credit to R&D expense. Lastly, we expect fourth quarter non-GAAP EPS to [Technical Difficulty] per share and a loss of $0.03 per share. That concludes our prepared remarks, and we look forward to taking your questions. Operator, please proceed with the Q&A session. Thank you.

Thank you. [Operator Instructions] Our first question comes from Suji Desilva with ROTH MKM. Please go ahead.

Hi, Todd. Hi, Haley. Congratulations on the progress here. I apologize there may some interference when you were talking about the outlook. Can you just repeat the revenue guide real quick, sorry about that, in the segments.

Yes. Well, we don’t guide by segment, but the revenue guide is $19 million to $21 million.

Okay. I thought I heard something about 18% sequential. I wasn’t clear what that was.

That was me. And then I think that was mobile.

Mobile, got it. Okay. And then the pricing actions that you guys have done in terms of being able to pass through some of the costs, where are we in that process in terms of recovering to sort of prior pricing versus some of the – to match the cost increases that you’ve seen through the supply constraints?

Well, can you be a little more specific, Suji? What are you asking?

I’m sure there’s a lag here, Todd, in trying to catch up to the cost adjustments in terms of getting pricing back to where gross margin would be similar to past levels. So, I’m just curious how long I guess that process will take.

Well, I think as we talked about last call, our goal was to get it by the end of next year to the mid-50s. By the end of 2024, right? So, a steady increase, right? And it’s not through just price increases, Suji, it’s through a collimation of rationalizing some pricing, but also introducing new products that have better margin profiles.

Okay. And then just maybe the broader – your strength in mobile, kind of contrast that with the overall demand environment in China. Has the China smartphone demand environment return to normal? Or are you guys kind of running uphill and what you still consider a weaker demand environment there?

Well, I think you’ve seen other more broadly exposed participants on previous calls talk about that their inventory is finally cleaning up, and they expect because they’re inventory cleaning up that they’re going to start to show some better numbers. I wouldn’t call it vigorous growth, but I would – it’s going to get a little bit better. If you follow the various analysts from Gartner, etcetera, people have the mobile phone industry next year pegged at anywhere between a 6% to 12% unit growth. We haven’t seen it yet, right? If you really look at the numbers that came out for Q3 and the guidance for Q4, I would say that the market’s so-so. So specific to Pixelworks, what we’re seeing is, I think we are starting to see a broader participation of models that want to incorporate this improved mobile gaming experience, right? And you should see – like the phones that we launched, the three I just mentioned they use last year’s – or the beginning of this year is actually flagship from both MediaTek and Qualcomm, they storage, DRAM and flash, and I mean ample quite a bit. Reasonably high-quality OLED displays, 1.5k, 120 or 144 frame per second displays, and they put reasonable quality cameras, and they sell these phones, 6.5-inch screen phones. They’ll sell them from $350 to $450 ASPs. And so we call this the premium segment. These all these customers have flagship models, too, that they sell at a much higher ASP. We are included in some of these flagships as well. But the premium models seem to be getting a lot more from our exposure, I can only talk about our exposure, seem to be getting a lot more traction with the consumer. This could be countercyclical. This could be given that the economy is struggling in China. And today, up to today, all of our models have been targeted in China, right? That will change. We’re going to start being included in international models. But I have a feeling the consumer in China, it’s [Technical Difficulty] what value, and you get a lot of value for these models that I’m talking about, right? Whether that continues into next year, we still see a reasonably robust demand for us, both through unit growth and ASP growth as we introduce new higher ASP products.

Alright. Thanks, Todd. Thanks, Haley.

Thank you. [Operator Instructions] Our next question comes from Quinn Bolton with Needham.

Hey, guys. This is Nick Doyle on for Quinn. Congrats on that progress also. I also wasn’t able to hear the EPS guide. I heard the down $0.03. I think you hear the first part.

Okay. The EPS guide is – this is non-GAAP EPS, $0.07 loss to $0.03 loss.

So the Home and Enterprise was seasonally strong in third quarter, but it’s unusually up in the fourth quarter kind of despite this inventory correction you’re talking about with the digital projector. Could you just talk about how fourth quarter will be up sequentially. What’s driving that?

I think it’s – I’ll let Haley comment. I think it’s – we don’t really forecast by sector or that’s for our prepared remarks.

Yes, I did say that it was both mobile and home and enterprise would be up sequentially in the fourth quarter, but most of that is coming from mobile. Home and Enterprise is up a little bit, but most of the growth in the fourth quarter compared [Technical Difficulty] mobile.

Okay. Could you talk about yesterday’s MediaTek announcement related announcement? I guess this Dimensity 9300 using your VPU and software, is that kind of incremental to the software contributions were you seeing in term gross margins?

So I understand when we sell our visual processor, we also include software. There are a few customers we sell software only to. That is becoming a smaller percentage of the total phones we ship into. But when we collaborate with both MediaTek and Qualcomm, we make sure that all of our software works as an independent software vendor on their platform so that when we engage with customers, the solution is effectively ready to go. Right?

Okay. So that – it reads like this was a software specific win? Is that accurate?

That’s accurate. That’s accurate. But like I said, most of that is software [Technical Difficulty] our GPU when we get design wins with our VPU.

Okay. And if I could ask another just a high-level question. Could you just again discuss your gaming strategy? Is the IRX gaming platform expected to drive gaming platform-related revenues via partnership? Or is it kind of meant to broaden Pixelworks and 5x7 reach kind of using popular games to drive hardware adoption?

So today, I can’t speak about too far into the future. But for today and into next year, it is purely meant to provide differentiation, traction and demand for our visual processors. The more ecosystem partners, top 10 games that optimize their game to take advantage of features on our visual processor that improve the immersive experience while maintaining very low power consumption, system power consumption, the more the OEMs prefer to adopt it. So, it’s reinforcing. It is not by itself a revenue meant to be an independent revenue generator.

Okay. If I can sneak one more in there. Margins keep improving, and a big chunk of that was through passing on the cost, do you expect to pass on additional costs next quarter?

So when we do that, usually, our customers are booking orders out anywhere between 18 and 26 weeks lead time. So, when we start to roll out either new devices or new pricing on a [Technical Difficulty] it usually doesn’t take effect for a period of time. There’s a lag effect, right? Because they’ve already – it doesn’t affect the current backlog. And so, we have rolled out pricing for an extended period of time as it takes its traction with new orders, margins will improve from that pricing. Also, we have a road map of new devices as we introduce and production increases on those new devices, the margin profile on those devices is better than past devices. So, a combination of the two things are what provides us margin improvement. We do expect to see a gradual improvement over the next several quarters.

Thanks, Todd.

Thanks, Nick.

Thank you. Our next question comes from Richard Shannon with Craig-Hallum. Pleas go ahead.

Hi, Todd. Thanks for the taking my question. I think I’ll start with the first question, similar to what the other 2 asked, which is Haley, your prepared remarks were very garbled. I didn’t catch your OpEx or your gross margin numbers either. So, could you repeat this for me, please?

Okay. Yes. Sorry about that. So, guidance for the fourth quarter for gross margin is 44% to 46%. And OpEx guidance for the fourth quarter is $11.5 million, $12.5 million on a non-GAAP basis. And then I just pointed out that we do expect to have the final milestone achieved in our co-development agreement, so there will be a credit recognized in Q4, which is why it’s down from Q3.

Okay. I apologize, Haley, but it was garbled again. Did you say 11.5 to 12.5 OpEx?

Yes. Wow, I’m sorry.

Okay. That one wasn’t garbled. So, no problem. Let’s see here. Going off the topic of financial structure here, I think for the first time in a while we could start talking about and thinking about a breakeven model for you guys. And so, I want to get your best sense of what that looks like. You talked about gross margins last quarter getting into the 50s. Maybe give us a sense of where that kind of baseline for OpEx goes? And then how do we get to a breakeven level here in the near term, please?

I will take it, Haley. So, we are keeping tight on OpEx, right. We are trying to do a lot with a little. I mean if you look at what our game plan is, and I haven’t been super detailed and probably nor will I in the short-term on TrueCut. It is an ambitious plan. And it’s an ambitious plan with a very small core team. It is making headway. And I would suggest the same thing in mobile. Our plan with the IRX ecosystem, and we expect within a year from now to have upwards of 20 top-tier games in the mobile gaming community. Fully to our SDK, our family of processors, including we just introduced X7 Gen 2, there will be another flagship VPU launched [Technical Difficulty] quarter of next year, we will be sampling customers probably in Q2 of next year. And so, when we go out and suggest that we want to ramp up upwards of 20 top-tier games and have that SDK work across [Technical Difficulty] the processors. So, that would be – there will be X7, X7 Gen 2, this new device and our older X5 Pro, which you will see the X5 Pro launched in some newer interesting models that are probably targeting a different demographic in the next year. So, what I am trying to articulate is it’s an ambitious plan with a small team. So, in both categories, and we are trying to hold tight on OpEx through that because we would like to get to breakeven and profitability sooner than later. So, a lot of variables. Do I feel the opportunity is too great, and we start spending more OpEx. Do I hold the line, okay. Are we able to get back to the mid-50s sooner than target or later and does revenue grow, with all of that in play, I would suggest as we approach $25 million, $26 million in revenue with all in the mix, we should be close to breakeven.

Okay. Great. That was very helpful color. Thanks for that. I guess touching on a few different topics within mobile here that really revolved around margins and pricing here. I think you have talked about increased pricing over the last few years and few generations of products with harder levels of features here. You seem to be alluding to that angle continuing, but it also seems like what you are alluding to is somehow improved cost structures or at least increase value, I guess. So, how do we see the progress of ASPs? And then whether you can quantify or characterize how do you expect that to go over the next year or more, Todd?

Well, I can give you historical. Haley may have it on the tip of her tongue. I can give you a rough estimate. My guess is in general, if I go back over a 3-year period, and I – with the guidance we gave for Q4 2023, so this would be ‘21, ‘22 and ‘23, we probably average, if I look – if I add Soft Iris and a combination of all of our visual processors, we were probably in the mid [Technical Difficulty] ‘21, ASPs across all platforms, and we probably shipped 10 million to 12 million models. And a good chunk of them were software, not the majority, but a good chunk. In 2022, we probably shipped a couple of million [Technical Difficulty] probably flat on the software model. So, we grew hardware model, and we grew the hardware models on higher ASP devices. So, we probably averaged low $2 ASPs, right. I mean we did $22 million. So, we did 12 million units, probably about two months, so, a little over, right. And we just finished off the year if we – once we close Q4, we and meet the guidance we gave, we will finish off the year, I don’t know, $30 million for mobile, somewhere around this range, slightly more units, but probably pushing upper $2 in the ASP across all software and then all visual processors. I would expect that 2024, you would continue to see at least that kind of growth in ASP and unit one, and probably more in the unit one.

Okay. Great. That’s a great perspective, Todd. Maybe one or two more questions, and I will jump on the line here. I think you talked about this last conference call as well, but some of your Tier 1s in China are now starting to introduce new phones in additional markets using your product. So, how big of an adder do you expect that to be versus more attach, more models coming from them in their domestic markets?

Well, if you look at the – almost every model we have launched, there is an international version of that almost everyone. Not everyone, but – and what they offer to take our chip off the international version. And it’s not just the saving the money of our chip in the national version. Their challenge is mobile gaming is a very big deal in China. They understand how to market to that audience in China. They have struggled because when we say international, it’s multiple countries, right. And so, they have struggled with how do they go out and put a cohesive marketing plan for mobile gaming. They know they should. They know the demand is there. They have been challenged to how to do it. And if they put it down on the PCB and market it, they have to figure out how to market. It’s not just this future, but really the whole mobile gaming value proposition. And so this is what we are trying to convince them to go do. I would say I have looked – I have asked almost every customer that has an international version. There are some OEMs that ship actually more internationally than they do domestically, but most of our customers ship more domestically than they do internationally. But you could – it’s a rough yes, if every model we were in, they chose to include us in the international version our business would dump.

That’s fair enough. And one last question from me, Todd and I’ll jump on the line on TrueCut. I think last quarter you talked about the opportunity or the likelihood of having some important announcements by year’s end. And I did hear that language from you on this call. You did see you did mention some impact from actor strike. Is that the reason why you didn’t repeat that or just an afterthought and is still something you expect or can you just kind of clarify and verify those past comments are still active and true currently?

I am going to be a little [indiscernible]. Richard, we are actively engaged in some very important dialogues with our TrueCut platform and the technology. I can’t really allude to it any more than that. And I hope something comes out of it. I can’t guarantee as well. I feel very confident. I am convinced for all the interactions we’ve had that it is not [Technical Difficulty] value, absolutely. So, the value proposition we provide for the type of content that we target and then the displays, whether they be premium large-format theaters or devices that really display content in a more immersive way. It is clear to me from all these discussions that the technology is valued. So, I’m at a point now, I don’t believe if this technology will be adopted and when. And so I left – I can’t tell you exactly when.

Okay, that’s fair enough and that’s certainly understandable. That’s all for me Todd and Haley. Thank you.

Thank you. I’m showing no further questions at this time. I’d now like to turn it back to management for closing remarks.

Well, thanks, everybody, for joining the call. Thanks to our analysts for the great questions, and we look forward to continuing to discuss our progress next quarter.

Thank you for your participation in today’s conference. This concludes the program. You may now disconnect.