Pixelworks , Inc. (NASDAQ: NASDAQ:PXLW) has reported a stable performance in its third-quarter earnings call for 2024, despite a significant drop in mobile revenue.
The company's focus on cost reduction measures and strategic growth in the home and enterprise sectors, as well as the promising developments in its mobile gaming and digital projection technologies, were key highlights of the call.
CEO Todd DeBonis outlined the company's strategic objectives and financial results, emphasizing the steady demand in the home and enterprise sectors and the improved gross margin, which exceeded 51%.
Key Takeaways
- Mobile revenue fell by 7% sequentially and 76% year-over-year, but overall revenue met guidance.
- The company is focusing on expanding its IRX gaming ecosystem, securing design wins for its next-generation visual processor, and penetrating the mid-tier smartphone market.
- Gross margin improved due to a favorable product mix, and operating expenses decreased with cost reduction measures.
- A multi-year agreement with Universal Pictures for the TrueCut Motion platform is expected to enhance future visual experiences.
- Pixelworks Shanghai received the "Little Giant" designation, qualifying for government subsidies and exploring strategic options with Morgan Stanley (NYSE:MS)'s advisory.
- Revenue for Q3 2024 was $9.5 million, with expectations for Q4 revenue between $9 million and $10 million.
Company Outlook
- Pixelworks anticipates the first production shipments of its new projector SoC in Q4 2024, with gradual adoption throughout 2025.
- The company is phasing out consumer transcoding products to focus on core technologies.
- Significant revenue contributions from the mobile business are expected by late Q1 or Q2 2025.
Bearish Highlights
- Mobile revenue saw a substantial year-over-year decline, which impacted overall financial performance.
- The company reported a non-GAAP net loss of $7.1 million for Q3 2024.
Bullish Highlights
- The TrueCut Motion platform's success with Universal Pictures indicates potential for future revenue streams.
- The "Little Giant" designation for Pixelworks Shanghai opens up opportunities for government subsidies and strategic growth.
- The company is targeting the low-cost mobile phone market, which is expected to grow over time.
Misses
- Despite meeting overall revenue guidance, the company experienced a significant decrease in mobile revenue.
Q&A Highlights
- DeBonis discussed targeting the low-cost mobile phone market, with devices priced between $100 and $250.
- The company aims to ship high-end products in the near term, with the low-end segment expected to grow.
- Cost management efforts are expected to reduce annual expenses by $10 million over six quarters.
- Structural changes for Pixelworks Shanghai could delay an IPO but are anticipated to enhance revenue growth and profitability.
In summary, Pixelworks is navigating through a tough phase marked by a downturn in mobile revenue, yet it remains optimistic about its strategic initiatives and cost-saving measures.
The company's focus on new technologies and market segments, along with the recognition and support from the Chinese government, positions it for a potential rebound in the coming years. Investors and stakeholders are advised to look forward to updates in Q4 and the anticipated growth in late Q1 to Q2 of 2025.
InvestingPro Insights
Pixelworks' recent earnings call paints a picture of a company in transition, and InvestingPro data provides additional context to the company's financial situation. With a market capitalization of just $39.59 million, Pixelworks is operating in a challenging environment, which is reflected in its stock performance. The company's shares have seen a significant decline, with a 62.75% drop over the past six months and a 43.66% fall over the last year.
Despite the challenges, there are some positive aspects to consider. An InvestingPro Tip highlights that Pixelworks holds more cash than debt on its balance sheet, which aligns with the company's focus on cost reduction measures mentioned in the earnings call. This financial cushion could provide some flexibility as the company navigates its strategic shifts.
However, investors should be aware that Pixelworks is quickly burning through cash, according to another InvestingPro Tip. This is particularly relevant given the company's reported non-GAAP net loss and the anticipated delay in significant revenue contributions from the mobile business until late Q1 or Q2 2025.
The company's revenue for the last twelve months stands at $60.7 million, with a modest growth of 4.63%. However, the quarterly revenue growth shows a steep decline of 37.27%, which corroborates the significant drop in mobile revenue mentioned in the earnings call.
For those considering an investment in Pixelworks, it's worth noting that InvestingPro lists 12 additional tips for this stock, offering a more comprehensive analysis of the company's financial health and market position. These insights could be valuable for investors looking to make informed decisions in light of Pixelworks' ongoing strategic initiatives and market challenges.
Full transcript - Pixelworks Inc (PXLW) Q3 2024:
Operator: Good day, ladies and gentlemen, and welcome to Pixelworks, Inc.'s Third Quarter 2024 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. I would now like to turn the call over to Brett Perry with Shelton Group Investor Relations. Please go ahead.
Brett Perry: Thank you, [Lalla]. Good afternoon, and thank you for joining 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 2024. Before we begin, I'd like to remind you that various remarks we make on this 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 12, 2024. 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, 2023, 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 both GAAP and non-GAAP terms, including gross margin, operating expenses, net loss and net loss per share. Non-GAAP measures exclude restructuring costs and stock-based compensation expense. 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, 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 reconciliations 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.
Todd DeBonis: Thank you, Brett. Good afternoon, and welcome to everyone on the phone and the webcast. We appreciate you joining us on today's call. As reported in our press release earlier today, our third quarter results were consistent with our prior expectations for moderate sequential improvement. Revenue was at the midpoint of guidance, primarily reflecting steady demand in home and enterprise as we continue to work through the near-term headwinds in our mobile business. Gross margin expanded sequentially and year-over-year to over 51%, mainly due to a product mix during the quarter. Additionally, operating expenses decreased from the prior quarter, as we began to realize initial benefits of our previously implemented cost reductions. To briefly recap our recent and ongoing cost actions, as well as expected benefits. At the end of the second quarter, we initiated a broad series of actions to reduce expenses and focus on operational efficiencies, to better align operating expenses with anticipated near-term revenue levels. This included a reduction in headcount effective June 30, resulting in expected annualized cost savings of approximately $4 million. Due to certain one-time expenses incurred in the third quarter, we expect to realize a more significant reduction in operating expenses beginning in the fourth quarter. Together with our cost containment measures that we have taken, we continue to believe our collective actions will contribute to total cost savings of approximately $10 million over six quarters through year-end 2025. For a review of end markets, starting with our mobile business. Revenue was down by 7% sequentially and 76% year-over-year, reflecting the expected multi-quarter impact from the headwinds that I discussed last quarter. Mobile revenue in the quarter was primarily comprised of shipments of prior generation mobile visual processors, in support of smartphones initially launched by customers in the first half of the year. Due to the previously communicated delay of our next-generation visual processor, and the missed design cycle window for new device launches in the second half of this year, our primary focus has been on positioning for a return to growth in 2025. In support of achieving this renewed growth, we are focused on three key strategic objectives, First is the continued expansion of our IRX branded gaming ecosystem; second is to secure significant targeted design wins for our next-generation flagship visual processor, which I will provide an update in a moment. And third is to expand our available market in mobile by driving more meaningful penetration of visual processing technology in mid-tier and entry-level smartphones. For the mobile market, but particularly across Asia and in China, mobile gaming consistently ranks among the top influencing factors for consumers when choosing, which smartphone to purchase. Recognizing this and the increasing influence of mobile gaming, and the design and marketing of newly launched smartphones, our IRX gaming ecosystem continues to be a fundamental part of our mobile strategy. As highlighted on prior conference calls, Pixelworks' unique IRX rendering acceleration represents both a proven and practical solution to dramatically enhance visual performance for mobile gaming. More specifically, it enables simultaneous high image resolution, and ultra-high frame rate with desktop level photorealism, while also overcoming the device temperature, and power consumption challenges frequently associated with mobile gaming. By design, the differentiated visual display and device performance that IRX brings, to mobile gaming further elevates the core value proposition of our mobile visual processors. A larger and growing IRX ecosystem makes this value proposition even more compelling, and we believe further increases the incentive for smartphone OEM customers, to adopt our visual processors across a broader range of new models. As such, we are continuing towards expanding the size and awareness of the IRX gaming ecosystem. This includes our team's work ongoing with leading game studios - leading gaming studios on additional IRX-certified mobile games, as well as continuing to grow the existing list of over 100 games that we have IRX qualified. Regarding an update on our next-generation flagship mobile visual processor. Following our engineering team's incorporation of the requisite design changes, during the quarter, we received new samples of our next-gen device and conducted further extensive testing and verification. Today, I'm pleased to report that we recently completed production qualification of our new flagship mobile processor with it successfully meeting, or exceeding all qualifications criteria and targeting performance metrics. We have since delivered early production samples, and are now engaged with multiple customers on smartphone programs targeted for launch in the coming year. As Pixelworks' first-ever visual processor utilizing 12-nanometer process technology, and specifically architected to fully leverage the advantages of our IRX gaming ecosystem, we continue to believe our new flagship mobile visual processor stands to be a disruptive force, within the mobile gaming market. Complementing this now production-ready flagship solution for a high-end segment of the market, we are simultaneously focused on addressing a larger served market, with a cost-down version of a prior generation visual processor, specifically targeting higher unit volume opportunities in the mid and entry-level smartphones. Leveraging a cost-down derivative of our prior generation X5 visual processor, we have worked closely with one of our Tier 1 customers to increase several high frame rate, graphical use cases in addition to high frame rate mobile gaming. As a display technology has evolved faster than a display pipeline in lower-end application processors, the OEMs have a very challenging time utilizing the high frame rate capabilities of the display. This mismatch has created an opportunity for a new tier of visual processors from Pixelworks. We are currently engaged in customer evaluations of this new solution, on programs targeted for launch in the first half of next year. In addition, our visual processor product road map, has now prioritized this new low-cost graphical-focused solution. Turning to an update on our TrueCut Motion platform. Our team continues to focus on cultivating new and expanding ecosystem partnerships. The progress we are making from this persistent activity, and its contribution towards new commercial engagement is difficult to assess externally. However, we believe there are growing indications of a dramatic shift in perception with broader industry recognition that motion grading, is required for new theatrical and home entertainment displays that are being introduced, and that TrueCut is the only solution for cinematic motion grading. As evidence of this evolving perception, during the quarter, we announced a multiyear agreement with Universal Pictures, to utilize our industry-leading motion-graded technology, to enhance the visual experience for major theatrical releases of future Universal titles. This multi-title commitment by one of the world's largest movie studios represented another tangible milestone. Unlike previous announcements of a single title, this agreement demonstrated recognition in advance that multiple planned future releases would benefit from using TrueCut Motion technology. In September, DreamWorks Animation's The Wild Robot became the first major title released as part of this agreement. The movie was released globally in TrueCut Motion format on over 300 of the world's highest grossing premium large-format screens, and achieved domestic opening box office of $35 million. The Wild Robot movie has recently received universally high praise from both critics and audiences. It has since succeeded in grossing over $270 million in worldwide box office on an estimated $78 million production budget. In addition to TrueCut being endorsed by two of the largest global premium large-format exhibitors, we are also seeing growing interest from top post-production companies. Independent (LON:IOG) of work on any specific title or studio, we are exploring how post-production shops could add TrueCut Motion grading to their existing service offerings. This concept is still in early discussion; however, it could effectively bring motion grading upstream as part of the standard post-production process. It would then be more readily accessible to a broader group of filmmakers, contributing to accelerated adoption. The simple fact that these types of conversations are taking place with leading post-production companies is further evidence that the film industry is moving in the direction of motion grading, becoming a future standard practice. Shifting to our home and enterprise business, predominantly consisting of our visual processor system-on-a-chips for 3LCD digital projector market. Revenue increased sequentially, and was consistent with expected positive seasonality for the third quarter projector shipments. The overall demand for digital projector SoCs has remained reasonably stable in recent quarters, although end market demand for projector systems has continued to be relatively flat, primarily reflecting the prolonged period of macroeconomic uncertainty in China, as well as the U.S. and European education markets. As indicated last quarter, we've received initial purchase orders for our co-developed next-generation projector SoC from our lead customer. We have since begun initial volume production and remain on schedule to deliver the first production shipments of this new projector SoC during the fourth quarter. Based on previews of our customers' planned product introductions, we continue to anticipate gradual, but healthy incremental adoption of our newest projector solution throughout 2025 and beyond. Lastly, related to home and enterprise. During the third quarter, we began a process to end-of-life, our small remaining portfolio of consumer transcoding products. Collectively, these legacy video delivery products have consistently amounted to less than 5% of our total revenue in recent years. As unit volumes of these products declined, it became increasingly difficult and prohibitively expensive to source the required substrate, and packaging capabilities to support their continued production. We expect to fulfill a relatively small number of last time purchase orders for these EOL products during the fourth quarter. The end-of-life of these legacy products will also further streamline our home and enterprise business, to be primarily comprised of our digital projection solutions, contributing to more optimized allocation of our resources and improved operational efficiencies. Switching gears, I want to briefly highlight a couple of recent developments related to our Pixelworks Shanghai subsidiary. As a reminder, for those newer to our story, several years ago, we restructured the entire organization to operate all of our semiconductor business through our Shanghai-based subsidiary. There were several strategic reasons for adopting the structure, including the majority of our employees are based in China in addition to our largely Asia-centric customer base. We also previously leveraged the structure to secure additional equity capital at a time when valuations were very attractive in China. Today, the U.S. parent company, Pixelworks, Inc. continues to hold 78.7% equity interest in our subsidiary. Of note, our Pixelworks Shanghai subsidiary was recently awarded with the designation of Little Giant, contributing to both provincial and national level recognition within China. The designation Little Giant is part of an ambitious government program overseen by China's Ministry of Industry and Information Technology, with the purpose of identifying and issuing formal certification, to outstanding small and medium-sized enterprise-based businesses, on a series of strict criteria. In addition to completing an extensive application process to be considered, certification requires undergoing multiple stages of in-depth business reviews that a majority of applying companies fail to pass. Designated Little Giants benefit from the increased local and national prominence, having been recognized by the Chinese government, as a leading company with unique strengths in areas such as innovation and R&D capabilities as well as having - as for having significant growth potential. Also notable, these designations qualify enterprises to apply for various forms of government-mandated subsidies, including grants and R&D credits. Pixelworks Shanghai was recently awarded one such subsidy, and our team is now in the process of applying for other potential financial awards as part of the Little Giant program. Separately, I want to briefly highlight on another new, and ongoing development in China. We recently received inbound strategic interest in our Pixelworks Shanghai subsidiary, and we have formally retained Morgan Stanley as a financial adviser to assist with reviewing various potential strategic options, specific to our Shanghai entity. I want to emphasize that we are still just beginning a comprehensive review process. Given the recent designation of Little Giant and the inbound interest, we continue to have strong confidence in our Shanghai-based subsidiary, and its highly innovative technology, as well as its long-term growth potential. We are evaluating different ownership, and collaboration structures that could enhance and accelerate this potential. In summary, our teams continued to execute well toward overcoming recent challenges, and we believe our mobile business is well positioned for a return to growth in 2025. We have a strong pipeline of new program opportunities for our latest mobile solutions, including our newest flagship visual processor as well as the cost-down derivative solution that we are particularly excited about. We expect to sustain a high level of customer engagement activity over the next several quarters, particularly as we target an expanded served market, for our visual processing solutions in mid to entry-level smartphones. Moreover, we remain committed to optimizing near-term operational efficiencies, in order to reduce the financial impact of temporarily lower revenue. Coupled with our previous and ongoing cost reduction actions, we expect to realize meaningful improvement in our operating results, as we drive renewed top-line momentum in mobile in the coming year. With that, I'll hand the call to Haley, to review the financials and provide our guidance for the fourth quarter.
Haley Aman: Thank you, Todd. Revenue for the third quarter of 2024 was $9.5 million, which was at the midpoint of our guidance, and compared to $8.5 million in the second quarter, and $16 million in the third quarter of 2023. The sequential increase in third quarter revenue, was driven by increased sales in the home and enterprise market, while the year-over-year decline primarily reflected the previously discussed headwinds in mobile. The breakdown of revenue in the third quarter was as follows: revenue from mobile was approximately $2 million; home and enterprise revenue was approximately $7.5 million. Third quarter non-GAAP gross profit margin expanded 30 basis points sequentially, to 51.3% from 51% in the second quarter of 2024, and increased 820 basis points from 43.1% in the third quarter of 2023. The significant year-over-year expansion in gross margin reflects a more favorable product mix, and our ongoing focus to drive healthy margins. Non-GAAP operating expenses decreased to $12.4 million in the third quarter from $12.8 million in the prior quarter and $13.3 million in the third quarter of 2023. The sequential and year-over-year decrease in third quarter operating expenses reflected the initial benefit, from the cost reduction actions implemented at the end of the second quarter. However, were partially offset by a one-time expense associated with the design revisions completed on our next-generation mobile visual processor. We continue to expect to realize approximately $4 million in annualized savings from our previously taken cost reduction measures. On a non-GAAP basis, third quarter 2024 net loss was $7.1 million, or a loss of $0.12 per share, compared to a net loss of $7.7 million, or a loss of $0.13 per share in the prior quarter and a net loss of $5.7 million, or a loss of $0.10 per share in the third quarter of 2023. Adjusted EBITDA for the third quarter of 2024 was a negative $6.3 million, compared to a negative $7 million in the prior quarter, and a negative $5 million in the third quarter of 2023. Turning to the balance sheet. We ended the third quarter with cash, and cash equivalents of $28.8 million, compared to $37.8 million at the end of the second quarter. The cash used in the third quarter included approximately $3.6 million in one-time severance and related cash payments, associated with the restructuring implemented at the end of June, as well as a one-time expense associated with the design revision completed on our next-generation mobile visual processor that I just mentioned. Absent these non-recurring cash expenses, we expect to realize significantly lower cash burn in the fourth quarter of 2024. Shifting to our current expectations and guidance for the fourth quarter of 2024. Based on existing backlog and anticipated order trends, we currently expect total revenue for the fourth quarter to be in a range of between $9 million and $10 million. In terms of gross profit margin for the fourth quarter, we expect non-GAAP gross profit margin, to be between 49% and 51%. With respect to operating expenses, we expect to realize incremental benefits from our previously implemented cost reduction actions. So specific to the fourth quarter, we anticipate operating expenses, to range between $10 million and $11 million on a non-GAAP basis. Lastly, we expect fourth quarter non-GAAP EPS, to range between a loss of $0.08 per share and a loss of $0.11 per share. That completes our prepared remarks, and we look forward to taking your questions. Operator, please proceed with the Q&A session. Thank you.
Operator: [Operator Instructions] Your first question comes from the line of Nick Doyle with Needham & Company. Please go ahead.
Nick Doyle: Yes. Thanks for taking my questions. Great to see you guys completed production and qualification with the next-gen processor. Can you talk about what customer interest has been like and engagements for this product, and expand on what the expected timeline is from initial samples to design wins to revenue? Thanks.
Todd DeBonis: Yes. I don't want to get into too much detail, Nick, but I will say that we have sampled engineering samples, but they are production qualified to several Tier 1 customers, and we're going through a thorough analysis. I mean one thing to note with this device is we incorporated features that - all the previous features we've had in our visual processes are included. But in addition, we've included features that can only be enabled with our IRX-certified gaming partners. And so when we go through these evaluations with the customer, it's evaluating three sets of things: the performance of the existing set of features on a new 12-nanometer device; the performance of new features that are still one-sided, new features that we've incorporated that the OEM can enable without the support of the IRX ecosystem. And then the third set is features that can only be supported, if the IRX gaming ecosystem have enabled them. So this evaluation process will take some time. We do expect decisions for new programs will be made. We are still strongly encouraged that they'll be made positively, but there's no guarantee of that within the next several months. But that's just for programs that they have to make a decision for midyear. We expect this solution to be a valid solution for - through 2026.
Nick Doyle: Okay, yes, that makes sense. Thank you for that. And then kind of the same questions for the cost-down version. I mean, any details on the type of engagements you're having and potential timeline? Thank you.
Todd DeBonis: So that engagement is right now specific to one Tier 1 customer. We know that if we introduce this solution, the way we are collaborating with this customer, it will get broad interest. I think as a reminder to everyone on the call, our flagship gaming processors targeted either what they call flagship killers or flagship devices of these Chinese Tier 1 OEMs. They're very good phones. They don't sell a ton of them. Their total market share compared to Apple (NASDAQ:AAPL) and Samsung (KS:005930) is quite small when you look at phones over $500. We do participate in those. We've done - I think in our best year, we probably shipped over 12 million units into a market that may absorb all of the premium phones and maybe 50 million units from these Tier 1s combined, if you don't include Huawei. So, going after this broader market, you're going after where the majority of the volume from Chinese Tier 1s comes from. The majority of their volume shipped comes from phones that are under $250 and as low as $100. And so this is the range that we're targeting this new low-cost derivative product. And it's not just mobile gaming. It's how do you enable several use cases, for high frame rate experience on one of these lower-end phones.
Nick Doyle: Thank you.
Operator: [Operator Instructions] Your next question comes from the line of Richard Shannon with Craig-Hallum. Please go ahead.
Richard Shannon: Well, hi Todd and Haley. Thanks for taking my questions as well. Maybe I'll follow-up on the topic in the past questions here in the mobile space and maybe just kind of take a big top down here. I know, Todd, I'm probably asking you to look a little far ahead when the mobile business generally doesn't allow you to look too far forward without a lot of confidence. But when you're starting to add processors for the lower end part of the market, how do you think your revenue and unit profile balances out when you've kind of got both product families humming at once? I mean, is this something where the premium or the higher end is still the majority, a clear majority? Or can the low end be a majority of your business over time?
Todd DeBonis: I would say if you look in the near-term, which is '25, first half of '26, I would still - maybe it could be 50-50, but I'm still leaning on the high end right now. But I think beyond that, the low end will - if we're successful, the low end will be a much bigger part of the business.
Richard Shannon: Okay. And what's the relative ASP we're talking about between these two? Is it more than half the price or…?
Todd DeBonis: About half - probably about half the price.
Richard Shannon: Okay. And then just any thought process on how to think about the trajectory and timing of inflection point of your mobile business back? I know we had a bit of a delay with the product development, and it sounds like you're back on track here. But obviously, it takes, I would assume, a number of months here to get there. When do you start - when do you expect to see that inflection point in your mobile business start?
Todd DeBonis: Well, first step is to secure the design wins. The next step is - I mean, we've already started some preproduction runs so that we'll have inventory and be ready to go so we can move fairly quickly. So I expect probably the earliest you could see substantial contributing revenue would be late Q1, Q2, but we expect really to ramp in the back half of the year of '25.
Richard Shannon: Okay. Okay, that was consistent with what I was thinking. I just want to make sure. Maybe a couple of last questions here. Just want to understand the financial model going forward here, especially on how to think about breakeven. I think you said $4 million annual expenses - expense reductions here, but I heard something about $10 million. I wasn't sure where that came from. So I just want to make sure how to fit those two together?
Todd DeBonis: So the $4 million is just referencing the reduction in workforce. That was the cost savings for those salaries period. We have done other things beyond employee reductions that combined - and that $4 million is over annually, right? So what I'm saying is $10 million over six quarters, right? It would suggest that just the employee reductions are about $6 million of the $10 million. But we have identified another $4 million of reductions that we've implemented effectively. And so, we will secure them. And actually, since that, we are now identifying further reductions.
Richard Shannon: Okay. Does that come out of OpEx mostly or other parts of the cost structure?
Todd DeBonis: Predominantly OpEx.
Richard Shannon: Okay. One last question from me. You mentioned engaging a banker for early interest in Pixelworks Shanghai. I guess I just want to get a sense of the nexus of the situation here, where the interest is coming from. And does this mean anything about the lower prospects or at least near-term prospects of getting a Star listing for that subsidiary?
Todd DeBonis: Well, so understand if you change the controlling interest structure, you would delay any public offering, right, okay? Possibly. Right now, they're not really open for business, right, for IPOs. So - but by the rules of the Star Exchange, if you change controlling interest, then you set back yourself a year from filing for a public offering, because it would be the new controlling interest party that would be doing the filing and all what they call a tutoring process would have to be redone with that entity, okay? So frankly, if you're looking at a structural change, it's not because you think that you're about ready to go public. It's because that you are being patient and you think that changing the ownership structure potentially, would give advantages to this entity to, one, fulfill its promise, dramatically grow revenue, become profitable, and then have a liquidity event. Given the current geopolitical state that we're in, having a U.S. public company, and a U.S. CEO of that public company be the Chairman of the subsidiary, and the U.S. public company being the controlling shareholder with almost 80% interest, it creates challenges in the environment we're in that a different structure may alleviate.
Richard Shannon: Okay. Fair enough. That's something to move on. I think that's all the questions from me. I'll step out of line, Todd. Thank you.
Todd DeBonis: Thanks, Richard.
Operator: Seeing as we do not have any more questions at this time. I will now turn the call back over to management for closing remarks.
Todd DeBonis: All right. Well, thanks for attending this conference call. We look forward to updating you as we move forward in the fourth quarter. A lot on our plate. As things happen, we will announce them. Thank you.
Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.
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