Pixelworks Inc (PXLW) 2008 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the First Quarter 2008 Pixelworks Earnings Conference Call.

My name is Amity, and I'll be your coordinator for today.

At this time, all attendees are in a listen-only mode.

We'll be conducting a question-and-answer session towards the end of today's conference.

(Operator Instructions.) I would now like to turn the presentation over to your host for today's call, Mr.

Steve Moore, Chief Financial Officer.

Please proceed, sir.

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 first quarter ended March 31, 2008.

The press release and contents of this conference call contain comments about our business outlook and include forward-looking statements.

Investors are cautioned that all forward-looking statements involve risks and uncertainties that could cause actual results to differ materially.

The forward-looking statements we may make today speak as of today, and we do not undertake any 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, 2007, and subsequent SEC filings for a description of factors that could cause forward-looking statements to differ materially from actual results.

During this conference call, we will also be making reference to non-GAAP gross margins, operating expenses, EBITDA, net income loss, and income loss per share.

These measures exclude a gain on the repurchase of long-term debt and other than temporary impairment of marketable securities, restructuring charges, amortization of acquired intangible assets, and stock-based compensation expense.

The Company uses these non-GAAP measures internally to assess its operating performance.

The Company believes these non-GAAP measures provide a meaningful perspective on its underlying cash flow dynamics but cautions investors to consider these measures in addition to, not as a substitute for nor superior to, its consolidated financial results as presented in accordance with GAAP.

A complete reconciliation between GAAP and non-GAAP financial measures is included in the press release, which is available in the Investor Relations section of the Company's website.

Bruce will begin today's call with a strategic update on the business, after which I will review our Q1 '08 results and discuss our outlook for the second quarter.

Thanks, Steve.

Good afternoon, and thank you for taking the time to join us today.

Before I begin, I would like to take a moment to recognize the contribution of Hans Olsen, who will be joining our Board of Directors.

Hans has spent a decade at Pixelworks and most recently as CEO.

He guided the Company over the last few difficult years and put it on the solid footing we have today.

We want to thank Hans for his service and look forward to his counsel as a Pixelworks Board member.

During Q1 '08, we continued to focus on our operational objectives of managing our expense base, streamlining our business model, executing our product roadmap, and aggressively marketing our products.

Revenue for the quarter came in at $24 million, at the high end of our guidance, during what is traditionally a slower seasonal period, although we began to see sluggishness in the market towards the end of the quarter as our customers began to feel the effects of a slowing macroeconomic environment for consumer products.

Non-GAAP operating expenses were reduced another $1.4 million from the previous quarter and were down $7.3 million from Q1 '07, a reduction of 41% year on year.

Non-GAAP gross profit margins were up slightly, at 51.7% versus Q4 '07 as a result of improved product mix and operational efficiencies, and up 7.2% versus Q1 '07.

Non-GAAP net income was $3.8 million in the first quarter of 2008, up from $2.3 million in Q4 '07 and compares to a net loss of $7 million in the first quarter of 2007.

Additionally, we were able to improve our balance sheet in the quarter, retiring $50 million of our convertible bonds, and we continue to execute our stock buyback program.

Steve will provide more detail on these items later during this call.

Going forward, we will continue to focus on closely managing these key operational metrics as we continue to execute our turnaround plan in the coming quarters.

During Q1, we initiated aggressive marketing programs for our new and existing products.

During the quarter, we introduced the PW9800 DNX Motion Engine, which is designed to significantly improve the performance and viewing experience of large high-end LCD TVs, advanced projectors, and other consumer products requiring 120 hertz support.

We also introduced the PW610 Post-Processor for digital projection systems, which provides advanced keystone correction.

Pixelworks has a long legacy of providing leading video technology solutions, and the market reception and customer feedback on these products confirms that Pixelworks has the ability to deliver industry-leading image quality.

We are exceptionally pleased and highly encouraged by the level of customer interest and engagement we have seen to date.

In addition to our new products, we also continue to leverage our established products based on their video quality to gain new design wins.

Our announcement today of our Pearl-based solution for Optoma Technology, which helped them develop and rapidly bring to market their HD80 full HD home theater projector is an example of the many ways we continue to be engaged with customers with our strong portfolio of video solutions.

The explosion of video applications presents significant long-term opportunity for Pixelworks.

Digital video is becoming pervasive, and the demand for higher video quality is increasing as the industry transitions to higher resolutions.

This is placing new processing demands on next-generation products to ensure that manufacturers can deliver their new products quickly and that customers get the high-quality video experience they have come to expect.

For example, we are currently entering into the next wave of display technology upgrades, as the shift to large, high-resolution 120 hertz LCD panels combined with the transition to 1080p content is driving the need for high-performance, high-quality video solutions.

To give some market context, by 2010 it is estimated that 85% of all LCD displays shipped over 30 inches, which is about 21.5 million units, will be 100 hertz refresh and 1080p resolutions, up from 2.3 million units in 2008, nearly a tenfold increase.

This is one example, and we see many opportunities for our video processing technology in this changing landscape of demanding video requirements, but the key will be focusing on those opportunities where our ability to deliver industry-leading video solutions can be fully leveraged.

Since I was first appointed as acting CEO in late December, and subsequently have taken the position of President and CEO, I have had several months to visit and talk directly to our customers, employees, and suppliers, and to evaluate our strengths and challenges.

A few observations come to mind.

Even though 2007 was a difficult year as the Company underwent a significant restructuring, we continue to have the ability to deliver industry-leading, high-quality video solutions.

Investments in our advanced design technology over the last few years have resulted in the ability to deliver leading products with first-time silicon success.

Pixelworks continues to maintain its legacy of providing high-quality video, as evidenced by the feedback from our customers on our new products.

We have a great team, a strong reputation in the market, and a loyal customer base that includes some of the world's leading manufacturers of video and display products.

We have good discipline around our financial processes and have established a culture of efficiency that continues to deliver improvements in our business model.

In short, we have the core components needed to succeed in transitioning Pixelworks to consistent growth and profitability, and we are committed to this goal.

While it is still early in the next phase of our turnaround, and we will likely be facing macroeconomic headwinds in 2008 due to a challenging global economic environment for consumers, we are encouraged by our progress.

We understand it's extremely important we establish and maintain a business model that will create value for our shareholders, and we are working hard to achieve this and expect to be successful.

We are focused on ensuring that we continue to take the necessary actions to maintain the integrity of our business model, aggressively marketing our new and key existing products, efficiently leveraging our R&D investment into value-added products and markets, building on the engineering execution momentum established in 2007, and most importantly, focus on servicing our top-quality customer base of leading global consumer electronics companies.

Recent economic reports point to an increasingly weak environment for consumer products, and it is yet unclear as to what extent these trends will impact Pixelworks in 2008.

However, given the uncertainty in the near-term economy, we feel it is prudent to become more conservative with our outlook.

While a weaker economic environment presents an additional challenge, we believe that we can continue to drive our transition into new markets and higher growth opportunities by remaining focused on the key objectives for our business that I have outlined.

I'd like to now turn the call over to Steve for our first quarter financial review and second quarter outlook.

Thank you, Bruce.

Revenue in the first quarter of 2008 was $24 million, which was down $3 million or 11% sequentially from $27 million in the fourth quarter of 2007, and basically flat with $24 million in the first quarter of 2007.

Revenue in the first quarter of 2008 was at the high end of guidance that we gave at the beginning of the quarter of $22 million to $24 million, driven by stable sales in projector and AMP products.

The split for our first quarter revenue by market was 60% projectors; 14% advanced television; 16% advanced media processors or AMP; and 10% LCD panels, monitors, and other applications.

Our Q1 book-to-bill ratio was approximately 0.9 to 1.0, although we saw slower bookings toward the end of the quarter as our customers began to react to the weakening environment.

Now let's look at first quarter 2008 revenue by market, beginning with projectors.

First quarter projector revenue was approximately $14.3 million, down 11% sequentially and up 13% year over year.

ASPs were essentially flat.

Advanced television revenue in Q1 was approximately $3.3 million, down 19% sequentially and down 42% year over year.

ASPs improved 12% year over year, due primarily to product mix.

Revenue for the AMP market in the first quarter was approximately $3.8 million, up 3% sequentially and down 2% year over year.

First quarter revenue for LCD panel, monitor, and other applications was approximately $2.5 million, down 20% sequentially and up 58% year over year.

For the second quarter of 2008, we expect revenue to be in the range of $19 million to $21 million, reflecting the weakening customer outlook.

Looking now to gross profit margin, GAAP gross profit margin in the first quarter of 2008 was 48.7%, unchanged from 48.7% in Q4 '07, and up 7.6 percentage points from 41.1% in the first quarter of 2007.

Included in cost of sales during the first quarter of 2008 was approximately $723,000 of non-cash expenses for the amortization of acquired intangible assets and stock-based compensation.

Excluding these costs, non-GAAP gross profit margin was 51.7% in the first quarter compared with 51.5% in Q4 of '07 and 44.5% in the first quarter of 2007.

Compared with the prior year's first quarter, gross profit in Q1 2008 was positively affected by the lower cost of materials, continued improvement in production yields, and a more favorable mix of products sold.

We expect GAAP gross profit margin in the second quarter of 2008 to be in the range of 46% to 49%, and non-GAAP gross profit margins to be in the range of 49.5% to 52.5%, excluding an estimated $725,000 in non-cash expenses for the amortization of acquired intangible assets and stock-based compensation and restructuring charges.

GAAP operating expenses were $12.5 million in the first quarter, including $1 million in restructuring charges and $1 million in non-cash stock-based compensation and amortization of acquired intangible assets.

Excluding restructuring charges and non-cash expenses, non-GAAP operating expenses in the first quarter were $10.5 million, at the low end of guidance.

Q1 '08 non-GAAP expenses decreased $1.4 million from $11.9 million in the fourth quarter, and were down $7.3 million from $17.8 million in the first quarter of 2008--2007.

The sequential and year-on-year decreases in operating expenses are the direct result of the Company's restructuring actions through 2007 and continuing into 2008, which have included headcount reductions, facility closures, lower depreciation, and a tight rein on discretionary spending.

The goal of our restructuring program has been to position the Company to be consistently profitable, and we continue to make measurable progress.

We expect GAAP operating expenses in the second quarter of 2008 to be between $11.5 million and $12.5 million, and non-GAAP operating expenses to be between $10 million and $11 million.

Excluded from non-GAAP operating expenses are an estimated $1.5 million of non-cash expenses for stock-based compensation and amortization of acquired intangible assets and restructuring charges.

Going forward, we will continue to evaluate our operations and pursue additional efficiencies while investing in the development of our next-generation products.

Non-GAAP EBITDA was approximately $3.6 million in Q1, down from $5 million in Q4, and up from EBITDA of $2.7 million in the third quarter of 2007.

We realized a gain on the repurchase of long-term debt in Q1 of approximately $11.6 million.

This gain was the net result of repurchasing approximately 50.2 million of convertible bonds for a cost of approximately $37.9 million, plus the write-off of previously capitalized debt issuance costs of approximately $700,000.

We also recorded an unrealized loss of $6.5 million in Q1 on a long-term marketable security investment.

The specific security is an equity investment that we made several years ago in one of our strategic foundry partners.

This quarter, we reclassified the unrealized loss on the security from shareholder to equity to the statement of operations based on the significant decrease in the stock price of the investment this quarter, as well as the long duration that the investment has traded below our cost.

The net positive impact of these two one-time items was $5.1 million on a GAAP basis.

Excluding the bond repurchase and the reclassification of the unrealized investment loss, interest and other income net was approximately $264,000 in the first quarter, compared with $557,000 in the fourth quarter.

Lower net interest income in Q1 was the result of lower cash balances due to cash used for the bond repurchase.

We expect interest and other income to be approximately $150,000 in the second quarter of 2008.

We recorded a benefit for income taxes of $1.6 million in the first quarter, which was due to refundable credits we anticipate receiving in Canada, the reversal of a tax contingency item due to the expiration of the statute, and a true-up in deferred tax assets in China due to a change in the enacted tax rate.

These benefits were partially offset by tax accruals in profitable jurisdictions.

We expect to record income tax expense of between $250,000 and $750,000 in the second quarter of 2008.

First quarter GAAP net income was $6.1 million, or $0.14 income per share compared with GAAP net loss in Q4 of $6.4 million, or a $0.14 loss per share, and a GAAP net loss in Q1 of '07 of $12.4 million, or $0.25 loss per share.

Excluding the bond repurchase, the reclassification of the unrealized loss on the investment, and non-cash expenses in the quarter, we recorded non-GAAP net income in Q1 '08 of $3.8 million, or $0.08 per share, compared with $2.3 million, or $0.05 per share in the fourth quarter of 2007, and a non-GAAP net loss of $7 million, or $0.14 loss per share, in Q1 of '07.

We expect to record a GAAP net loss per share in the second quarter of 2008 of $0.03 to $0.10 per share and to record non-GAAP net income, or loss per share, of between $0.05 loss and $0.02 income per share.

Now let's move to the balance sheet.

Cash and marketable securities, which consists of cash and cash equivalents and short- and long-term marketable securities, were $81.4 million at March 31, 2008, a decrease of $37.6 million from $119 million at December 31, 2007.

This decrease primarily resulted from $37.9 million of cash used for the repurchase of debt; $1.2 million used to repurchase approximately 1.6 million shares of Pixelworks stock; $2.3 million in investment in tools, property, and equipment; and $1.3 million of unrealized loss on marketable securities, offset by positive cash flow from operations of approximately $5.1 million.

Accounts receivable net at March 31, 2008, was $5.8 million, compared with $6.2 million at December 31, 2007.

Day sales outstanding on March 31 was 22 days compared with 21 days on December 31.

Inventories net at March 31 was $8.3 million, down $3 million from $11.3 million at December 31.

Inventory turns increased to 4.7 times in the first quarter compared with 3.9 times in the fourth quarter.

Property and equipment net on March 31 was $6.2 million, basically flat with the $6.1 million at December 31.

Q1 '08 additions of $1.3 million were offset by depreciation and amortization of $1.3 million for the quarter.

In the second quarter of 2008, we expect our depreciation and amortization expense to be approximately $1.6 million and Q2 capital expenditures to be approximately $1 million.

To wrap up, I'd like to give you a brief summary of our two buyback programs.

As I've already mentioned, we bought back 1.6 million shares of Pixelworks stock during the quarter.

Under our stock repurchase program, which runs for 12 months from December 2007 (sic--see 9/25/07 press release) to September 2008, we have repurchased 5.4 million shares to date, with 4.5 million remaining of the $10 million authorized.

During our first quarter, we also completed a bond buyback program, under which we successfully repurchased approximately $50.2 million of debt for a net cost of approximately $37.9 million.

We are pleased with the reception and the outcome of this program.

The program was oversubscribed by approximately $27 million and resulted in a favorable pricing at $740 per $1,000 par value bond.

After the tender offer, expenses, and the write-off of capitalized offering costs, we have recognized a gain of approximately $11.6 million on the transaction.

I'd like to close with a brief update on the status of our delisting notice received from NASDAQ on December 24.

Pixelworks' Board and management remain active in our efforts to regain compliance with the minimum bid listing qualifications.

In addition to our stock buyback program, our ongoing actions to strengthen the Company's financial base through restructuring, expense management, and the repurchase of debt, we've asked shareholders to grant authority to the Board to effect a reverse stock split at an exchange ratio within a specified range.

Shareholders will vote on this proposal at the annual meeting on May 20.

We will continue to communicate with you on the status of our efforts as we get closer to the compliance date NASDAQ has set of June 23, 2008.

That concludes my comments.

We now open the call for your questions.

(Operator Instructions.) Your first question comes from the line of Tayyib Shah with Longbow Research.

Please proceed.

Hi, guys.

I'm sorry if you already addressed this, but where do you think you can take the OpEx cost base in the second half of this year?

Do you continue to drive down the cost reductions, and is there a minimum level at which you expect to operate in the second half?

Well, of course, we don't give guidance beyond Q1, but I think we clearly are continuing to look for opportunities to reduce our expenses and will do so wherever we can.

We do have a number of initiatives which we are still progressing upon to further reduce expenses.

However, they are--relative to actions taken in the past, they're relatively minor.

Looking at the guidance for Q2, overall expenses on a non-GAAP basis relative to our actual expenses in Q1 will give you some sense of the possibility for reduction in the short run.

I think the bottom line is the heavy lifting is done, so now we're just looking for opportunities and executing on initiatives for opportunities to streamline our business model.

Okay.

And can you take us through your new product initiatives, especially in the TV space?

What's the status on getting some design wins, and when should we expect to see you guys start building some revenue momentum in those products?

Well, we don't talk in granular detail about our activities.

Just suffice it to say our sales force and marketing force are diligently working with customers on our new products.

We have a major laser focus on both our new products, not only the PW9800, but the PW610 as well, which is an advanced co-processor chip for the projector market.

So we have a major focus on design wins.

We don't announce design wins, not unless our customers let us announce design wins, and that's typically after they've got the product out in the market or close to the market, as the Optoma design announcement today is sort of indicative of that.

And I'd say, just commenting, we've been pretty pleased with the level of performance that our product has been demonstrating in the market relative to the competition, the customer feedback.

And so we're pretty encouraged and pleased with the level of engagement today.

And do you have a similar outlook for the products that you have for the TV space?

Are those also getting the same level of customer acceptance?

The PW9800 is aimed at largely TVs, but not only TVs.

It's motion--estimation and motion compensation is a technology that applies to a couple of other type of products in addition to TVs.

But largely it's a large-screen LCD TV kind of product.

As you know, we're not pursuing the standalone SOC business per se.

We're looking, our strategy is to provide value-added, performance-oriented type of solutions for the various markets that we address.

So maybe a little more color on your question, and I could maybe answer it a little clearer.

Okay.

Within the projector space, how do you see your competitive position for your existing business?

I think it's pretty good.

Like I said, we just announced a new part.

We're not ready to talk about that, but we have developments underway, as you might imagine, for the projector space, because we intend to continue to pursue it.

It's not without competition.

There are other companies that do projector products.

There's also, and this is true in the TV space as well, a lot of these customers do their own products as well.

Samsung does and so forth.

But I think we have a long legacy and history in the projector space.

We understand the technology.

We have very good technology in the projector space, and a product roadmap and developments underway.

So--.

Okay.

Thank you.

Your next question comes from the line of Mr.

Eric Reubel with MTR Securities.

Please proceed.

Gentlemen, good afternoon.

Thanks for taking my call.

Bruce, you mentioned that you've been out and have met with all the customer base over the past couple of months.

Can you give any color on sort of the design win cycle that we're in right now.

And if I could frame it within the context of coming out of consumer electronics and then sort of that--going back to the last conference call, it seemed like there might have been some extended time to try to get some designs that might ramp into the back half of the year in the first months over the quarter here, and then once we got to, say, this time of year--April, May--things are pretty much locked up for '08 on the big OEM designs.

And then maybe there are ODM opportunities that could ramp into the back half.

Can you give us a little color, not necessarily on who, if there are customer design--the names of the customers--but what the activity has been and if anything has changed since last quarter?

Yes, the activity's pretty high.

I think that the sort of cycles are ranging from six to eight months to 12 months or longer, depending on who the customer is, what sort of window they're targeting.

We have Olympic window in 2008.

Obviously, people are driving towards that.

We have the normal cycles in the industry of fourth quarter and Super Bowl and World Cup and so forth, so there tends to be, seems like, some kind of cycle running all the time.

Right.

But I would say some customers, depending on who they are and kind of what their strategies are, they're longer in the 12-month, kind of plus or minus range, and then other ones, as you mentioned, ODM.

But there are also some kind of name-brand types that are a little shorter horizon.

I will say one thing, though, just a general commentary about the TV space and my last sort of travels through Asia a couple of weeks ago.

I think the cycles are getting a little shorter.

I think that TV companies are having to try to react quicker, so we're seeing a lot of--maybe the cycle's accelerating a little bit in terms of customers starting more programs more often, just to create some differentiation and so forth for their products.

Thanks for the color there.

Any kind of specific information on what customers are, how, any customers that have taken the PW98 and put it on a board with other SOCs from any of the other television chip companies and said, "This, this really enhances the performance.

We want it.

What kind of pricing do we talk about?"

I'm not going to talk about specific customers.

Of course.

We've been, the process you just mentioned is the sales process in this industry.

We have a lot of that going on with different SOC vendors.

Okay.

I think that I look at this market as a price-performance market.

Certainly, anything around the high-volume--and again, this sort of technology is being looked at in other products besides super high-volume TVs.

But certainly, when you get around super high-volume TVs, price is always a component.

But in this particular instance, it's price-performance, I think, is what customers are looking for.

And there's a major noticeable, discernible difference between a 120 hertz TV and a 60 hertz TV right now--for LCD panels of above, say, 37 inches or so.

So customers are extremely focused on this technology right now.

And you framed the market as sort of 22 million units for this year?

I think I said that was in 2010.

Right, yes.

That's just kind of, I was really sort of differentiating the 120 hertz penetration above 30 inches, roughly.

But I think that shift is definitely in earnest right now.

You see the first 120 hertz TVs out of the market right now.

You can see them in Best Buy.

Just early ones right now.

But I think there's an earnest effort in those kind of TV customers to shift to 120 hertz to get some higher quality, more differentiation, higher video quality.

Well, I appreciate--you know, everyone wants to see this business segment kind of ramp, and the hope is that 2Q is the trough and that there's some momentum in the back half of the year.

Steve, congratulations on another good quarter from a free cash flow perspective.

I didn't, if you could just repeat for me depreciation and CapEx on the quarter?

I missed it.

They were both approximately $1.3 million.

Depreciation and amortization was $1.3 million, and CapEx adds were $1.3 million.

And what's your sort of expectation for working capital in the second quarter?

You did, it seems like you generated cash, particularly from inventory.

How do you think you could do on that in the second quarter?

Well, I'm not going to promise that we're going to take any more out of inventory.

But certainly we're going to manage it as closely as we can.

Our CapEx expectations are only $1 million going into Q2, and we do expect, we've been EBITDA positive now since Q2 of last year, and that is a very serious ongoing goal for us, to maintain that positive attribute.

Okay.

Fair enough.

Thanks, guys.

(Operator Instructions.) And you have a follow-up question from the line of Tayyib Shah with Longbow Research.

Please proceed.

Hi, guys.

Can you give us an idea of how much of your existing revenue is still coming from SOC products?

Well, the, what we break out in television is about 14% this quarter, but not all of that would be SOC.

There are also processors, post-processors in that and pre-processors in that number.

But, so we don't break it out precisely.

I don't think we have in the past, either, that would be just SOC.

We do, in fact, have an SOC product that plays within a TV, in the television market, and to a smaller extent, in the projector market.

Okay.

And maybe if you can give us an idea of what sort of longevity you would expect to see in your existing TV design, especially the ones on the SOC side.

Are these designs which would go out of production through, within calendar '08, or will you expect to get some revenue in calendar '09 as well?

I can't give you any specific guidance, of course, out that far.

But the longevity of some of the designs in television has been greater than you would expect, perhaps that of some of the tier one competitors.

We are selling products into the television market in Asia and in Europe in situations where I do believe that the products will have a longer period of time.

However, you can also see that we have been, that that area has grown smaller, both as a percentage and in real terms.

We expect that to continue until the ramp-up of the new products in that area.

Okay.

And if you look at the new 6000 series product that you have for the TV segment, is it just a question of taking your existing co-processor customer base and just migrating it to the new product, or do you basically have to attract a new customer base?

Very often it's the same customers, but it's not the same socket, if that answers your question.

Yes.

We are, we're engaged with all of the major, and many of the ODMs as well, but all the major television companies at some level.

So they're not new to us or to our sales organization.

Yes, I would say that across our product line, we're engaged with names you would know--large consumer electronics companies.

And so these are customers that Pixelworks has historically serviced and marketed to over the last number of years.

So we've been engaged with those customers, maybe not with SOC products per se for TVs, but other parts of our product line.

Okay.

And if I look at your R&D efforts now, are they mostly concentrated around the PW9800 and 6000 series products now, or are you also continuing to work on your existing co-processors and co-processing products to come out with the next generation and continue to do business in that segment as well?

No, we're not only working on the motion engine products.

Like I had mentioned, we also are continuing to support our projector business with new developments as well.

One thing that we have instituted over the last couple of years--and I mentioned it in my prepared comments--was that we have instituted an advanced design methodology at Pixelworks that was begun in 2006, so we have sort of the ability to do derivatives and those sorts of things and more efficiently sort of pipeline our design activity because of the investments that we made over the last couple of years.

So I guess the answer to your question is, "No, it's not just the motion engine product line.

It's also projector product line and other things that we'll be talking about in the future." But right now it's motion engine and projector.

Okay.

Thank you.

I would now like to turn the presentation over to Mr.

Bruce Walicek for closing remarks.

I want to thank you for your time today, and we appreciate your interest in Pixelworks.

We'll look forward to talking to you on our Q2 '08 conference call.

Thank you.

Thank you for your participation in today's conference.

This concludes the presentation.

You may now disconnect.

Good day.