Pixelworks Inc (PXLW) 2021 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to Pixelworks Incorporated's First Quarter 2021 Earnings Conference Call. (Operator Instructions) This conference call is being recorded for replay purposes. I would now like to turn the call over to Pixelworks' CFO, Mr. Elias Nader. Thank you, sir. Please go ahead.

Thank you. Good afternoon, everyone, and thank you for tuning in to today's call. With me on the call is Todd Debonis, Pixelworks' President and CEO. 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 first quarter of 2021.

Before we begin, I would like to remind you that various remarks we make on this call, including those about our projected future financial results, economic and market trends and our competitive position, constitute forward-looking statements. These forward-looking statements and all other statements made on this call that are not historical facts are subject to a number of risks and uncertainties that may cause actual results to differ materially. All forward-looking statements are based on the company's beliefs as of today, Tuesday, May 4, 2021. 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, our annual report on Form 10-K for the year ended December 31, 2020 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 expenses, net loss and net loss per share. Non-GAAP measures exclude amortization of acquired intangible assets, stock-based compensation expense and restructuring expense. The Company uses these non-GAAP measures internally to assess our operating performance. We believe these non-GAAP measures provide a meaningful perspective on our 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 for -- nor superior to, the Company's consolidated financial results as presented in accordance with GAAP. Also included in the company's press release are definitions and reconciliations of GAAP to non-GAAP net loss and GAAP net loss to adjusted EBITDA, which provide additional details.

With that said, I will now turn the call over to Todd for his opening remarks. Thank you.

Thank you, Elias, and good afternoon to those joining us on today's call and webcast. As outlined in today's press release, our first quarter financial results were in line with our expectations and with all metrics coming in, at or above the midpoint of guidance. While anticipated Q1 seasonality in the projector market resulted in lower consolidated revenue sequentially, with weakness largely offset by record revenue from mobile, which expanded to 44% of total revenue. Consistent with our guidance, gross margin in Q1 was lower than historical average due to a combination of higher supply chain costs, product mix and a new mobile OEM that ramped during the quarter. This anomaly is now behind us and we are positioned for gross margin to return to our historical range in the second quarter. Starting in Q2 we have passed on higher material costs to customers, while also benefiting from increased unit volumes, and improved product mix.

Coming off a challenging global demand environment in 2020 due to the pandemic, we saw improving order patterns during the first quarter that will have a positive impact on our guidance for Q2. Additionally, we have seen a positive response to our increased lead times across all product lines and now have better visibility on product demand through 2021. Most importantly, we sustained all fundamental R&D efforts over the past year, which was critical to securing the new wins we've announced year-to-date and the expanded opportunity pipeline we have today.

Specific to the mobile business in the first quarter, revenue grew 91% sequentially and was up 58% year-over-year to a quarterly record. This marked the third consecutive quarter of 50% plus sequential growth in mobile. We believe the mobile market is prime for growth in 2021 as the industry and end-market demand recovers. Third party research firms are forecasting global smartphone units to grow 7% to 8% this year, with OEMs returning to their more traditional seasonal launch cycles for next-generation phones.

A significant portion of the expected growth this year will come from China, where consumer demand has fully recovered. According to research from Cowen, total units shipped -- shipments of smartphones in China were up at an estimated 100% year-over-year in Q1 over the first quarter of Q -- of 2020. Additionally, they projected the penetration of 5G enabled smartphones shipped in China was a record 76% of units in the month of March.

All these data points and current market dynamics bode well for Pixelworks in the mobile segment, where we have focused a large majority of the company's resources. More broadly, the ongoing global adoption of 5G technology will continue to be an important trend this year as it enables the efficient delivery of higher-quality video and gaming content to mobile devices. Research firms including Gartner and Counterpoint project the global mix of 5G enabled devices to more than double year-over-year and represent at least 1/3 of total smartphone unit shipments in 2021. As 5G expands, it becomes mainstream. The high associated value proposition of our leading visual processing technology becomes applicable to an increasing share of total smartphone units. Another prominent and favorable trend is the growing shift by OEMs to more advanced home OLED displays that support higher refresh rates of 90 to144 Hertz. The primary benefit of these higher refresh rates are smoother scrolling and animation with the early adoption largely concentrated in flagship and gaming centric phones.

Today, adoption of higher frame rates by mobile OEMs is still in the early end as smartphones supporting 90 plus Hertz likely accounted for less than 10% of the market in 2020. While the penetration will be much higher in 2021, there are 2 existing drawbacks for consumers. The first is limited available content that supports being displayed at higher frame rates, and the second is the increased power consumption associated with refreshing the screen at higher rates. Our visual processes -- processors address both challenges, providing the ability to upscale low frame rate content higher rates, while reducing the load on the apps processor, resulting in significant improvements in visual quality and power efficiency.

Also specific to OLED displays, they create the need for additional color management in order to display colors accurately, an area that Pixelworks excels, and we have been actively promoting for many years. While some degree of color management is frequently offered in the applications processor, our solutions take color accuracy to another level, providing both meaningful differentiation as well as high-efficient color calibration. Third party tests have consistently proven Pixel works delivered the best color accuracy in the industry. With the availability of OLED displays expanding beyond Tier 1 flagships and the cost coming down, more OEMs are adopting these displays and thus paying more attention to delivering accurate color. The increased focus on color accuracy only makes sense when implemented together with color calibration due to the frequent manufacturing variances inherent in OLED displays.

Pixelworks' patented color calibration, which can be integrated using our Soft Iris solution or with our visual processors is extremely efficient and reduces the time required to calibrate a mobile device across all standard color gamuts during the manufacturing process to under 30 seconds. I also want to emphasize a few important elements of our Soft Iris solution or software-only solutions to address certain common misconceptions.

First, our Soft Iris solution could only be applied on platforms with relatively high-end application processor that has certain video display pipeline capabilities. Although simpler and less expensive to incorporate into our smartphone than a chip, the requirement for Soft Iris to run on a reasonably robust video-display pipeline prevents it from being a solution for most lower-end smartphones. Perhaps most important, our Soft Iris solution is not feature static, and it is -- in fact is currently in its third generation. We continue to upgrade the solution with new and optimized capabilities to deliver incremental value to OEMs. As we add functionality, we're also able to gradually increase the price of Soft Iris when used as a standalone solution.

At a more macro level, one of the fastest growing use cases is mobile gaming. The combination of a more -- of more powerful GPUs, ultra-low latency 5G and Wi-Fi 6, is enabling multiple very popular interactive games that previously could only realistically be played on a console or a PC, to now be played on a mobile device. In addition to the gaming phones announced in recent months, that incorporate Pixel works Technology, we have strong indications from multiple mobile OEMs that gaming will be a lasting and growing trend. They are focused on optimizing the gaming use case in both their premium and flagship phones. Higher frame rates are fundamental to providing the most immersive and realistic gaming experience. Yet, also creates several pain points in a mobile environment. Our family of visual processors provide a distributed visual architecture that solves multiple challenges, such as motion clarity, color depth and contrast and eye comfort.

However, the single largest pain point for mobile gaming is battery life and heat dissipation. Rendering and displaying dynamic content, whether gaming or video, consumes battery life faster than all other use cases. Combined distributing or offloading the visual processing to our processor and upscaling the frame rate of the displayed content with Pixelworks' smart motion processing algorithms, decreases the workload of the AP, reducing overall system power consumption. We've demonstrated that this distributed visual architecture with Pixelworks co-processor results in up to a 30% less battery drain and up to 10 degrees Celsius lower phone temperature during sustained high frame rate gaming.

Beyond solving key pain points, we provide a path to higher frame rate modes that fully utilize the capabilities of the display. This includes providing advanced features such as AI optimized picture quality, real-time SDR to Asia, conversion, dark noise suppression and smooth auto adaptive brightness control.

As highlighted in our, on our previous call we introduced our most recent sixth generation i6 visual processor in Q4, which is the first to incorporate AI adaptive picture quality. The dedicated AI engine in our i6 processor utilizes power-efficient influencing that augments Pixelworks' extensive knowledge base and industry leading display processing algorithms, with numerous real time inputs from content, sensors, display, user preferences in the environment. This enables increased adaptability of the overall picture quality in real time, including color depth, contrast and sharpness, while adaptively preserving viewing clarity in any lighting environment.

Looking at mobile wins we've announced year-to-date, Pixelworks' visual processors and software solutions have been incorporated into a total of 11 models launched by 6 different mobile OEMs, including our second Tier 1 Vivo, as well as another first-time customer, Lenovo. Brief highlights from the recent wins include; our long time customer and consistent early adopter ASUS, became the first OEM to incorporate Pixelworks' sixth generation i6 visual processor with its launch of the ASUS ROG Phone 5. Featuring a 6.78-inch OLED capacitive touchscreen display and supporting up to 144 Hertz refresh rate, this ultra-high-performance gaming phone leverages the full suite of advanced features in our i6 chip, including AI based adaptive picture quality as well as AI-enhanced real time SDR to HDR conversion.

Also during the year quarter, Oppo extended the use of our proprietary and industry leading color calibration and flesh tone management in the launch of the OPPO Find X3 and Find X3 Pro series, while also retroactively incorporating Pixelworks' software solution via firmware upgrade into the Reno5 Pro+. And in March, we are pleased to have announced the second Tier 1 mobile OEM, Vivo, in conjunction, the launch of the iQOO Neo5 smartphone. Designed to deliver an unmatched 5G gaming experience, the IQOO Neo5 incorporates our X5 pro processing solution to enable a unique gaming experiencing mode, while also leveraging Pixelworks' patented motion estimation and motion compensation technology that optimizes content for power-efficient HDR gaming at refresh rates up to 120 Hertz. Also unique to the iQOO Neo5, is a dedicated optimization in close collaboration with Pixelworks that boosts the devices' display performance while playing a select group of popular mobile games, including Game for Peace, Honkai Impact 3 and Perfect World.

Subsequent to the launch of the Neo5, iQOO released a derivative and renamed version of this smartphone in India. The iQOO 7 5G, which also incorporates the X5 visual processor. Additionally, OnePlus incorporated Pixelworks' technology across its flagship OnePlus 9 series of phones, following the success of the highly acclaimed display performance of its 8 series in 2020. The OnePlus 9 Pro, features a 6.7-inch fluid on OMLED display, with WQHD plus resolution supporting 120 Hertz coupled with our X5 Pro. Leveraging Pixelworks' patented Dual MotionEngine Technology, optimized for variable high refresh rates, the OnePlus 9 Pro can deliver superior visual quality across a wide range of content, video format frame rates and apps, while simultaneously optimizing power consumption.

As previously mentioned, Lenovo became a new mobile customer in early April, with the launch of the Lenovo Legion Phone Duel 2. Utilizing Qualcomm Snapdragon 888 5G mobile platform and featuring a 6.9 inch OMLED display, that supports a 144 Hertz refresh rate, the Legion Phone Duel 2, incorporates our i6 processor to provide an immersive HDR experience with multiple levels of content optimized color dip, contrast and screen adaptiveness. Most recently announced was the TCL 20 Pro 5G, which also incorporates our i6 processor with AI enhanced picture quality. Featuring TCLs new NXTVISION 2.0 display and positioned as a more affordable flagship, the TCL 20 Pro 5G is targeted at disrupting the premium tier of the smartphone market. Also notable a recent third party report published by DxOMark ranked the TCL 20 Pro 5G as having one of the highest ever overall display scores across top performing smartphones.

Collectively, these announced wins demonstrate expanding adoption across a series of new and existing customers that are turning to Pixelworks' mobile displays solutions and expertise to differentiate their next generation devices with industry leading display performance. We continue to have a robust pipeline of design wins on smartphones with planned launches in the coming months and quarters. Looking at our current pipeline, we are on track with our goal for 2021 to double the number of devices launched by customers in 2020. This includes a healthy mix of phones incorporating our i6, X5 and Soft Iris. We expect the growth trajectory in 2021 to be strong for both our hardware and software solutions.

Shifting to the projector business. As anticipated, we saw a decline in orders for Q1, which is consistent with the seasonally weak first quarter of Japanese OEMs managed-down inventory prior to the fiscal year-end. However, during the quarter, we started to receive upside orders from projector customers for Q2 and extending into the second half of the year. Improving order patterns have been driven in part by stronger demand in China where the recovery continued to solid and steady recovery of demand from education and consumer segments in the U.S.

Another contributing factor to the increased orders we're seeing is that the projector customers recognize the broadly reported supply constraints across the semiconductor industry. Lead times on the orders have extended to twenty weeks, with some customers now willing to place orders as far out as Q4 of this year. As a result, we have bookings in support of a meaningful uptick in projector revenue in Q2. We've also put in place dedicated and aggressive initiatives focused on securing supply from our foundry and assembly and test partners to close the gap between supply and demand. That said, the magnitude and pace of the continued recovery in projector beyond Q2 is likely to be partly contingent on successfully mitigating the ongoing supply constraints in the second half of the year.

More specifically, to comment on supply constraints. We are seeing gaps to meeting 100% of our demand across all our product lines that have made significant progress with the help of our supply chain partners in closing those gaps to meet approximately 90% of our Q2 demand. Similar to other semiconductor companies, we expect these constraints remain a headwind throughout 2021.

Turning to a brief update on TrueCut. As discussed on previous conference calls, the growth and sustained trend of direct consumer video significantly increases the value proposition for our TrueCut solution. As part of our ongoing effort to breakthrough and secure first TrueCut customer in North America we are continuing to work closely with high-profile creatives and leveraging key influencers in Hollywood. We've also continued to narrow our focus on advanced -- advancing existing engagements and evaluations that are ongoing with a select group of leading US studios and streaming service providers. Each of these prospective engagements recognize the challenges associated with streaming UHD content to high frame-rate capable smart TVs, and TrueCut's unique ability to mitigate those challenges.

The remaining gating question is how high of a priority, do they put on addressing the problem. While it is still too premature to model or forecast the exact timing, we remain optimistic about securing the first commitment for TrueCut in the U.S. in the coming quarters. In summary, coming off a challenging year in 2020, I'm very pleased with the progress we have made across our business and expect strong growth from both mobile and projector in the second quarter. While the supply constraints I just discussed could moderate the trajectory of projectors continued recovery, as well as limit the full potential of our rapid growth in mobile, we are confident that we've reached an inflection point from the impacts of the pandemic.

As a result, we expect to achieve strong top-line growth, expanded gross margins and improved operating results over the coming quarters. The value proposition of Pixelworks' visual processing solutions and display expertise in mobile is poised for continued growth commensurate with the mainstream adoption of advanced OMLED displays, higher refresh rates and 5G enabled mobile gaming. Today, we have a solid and growing pipeline of new mobile customer design-ins for the remainder of 2021. And, we remain on track with our goal to double the number of new smartphone models launched.

With that, I will hand the call over to Elias to review first quarter financials and provide guidance for the second quarter. Elias?

Thank you, Todd. Revenue for the first quarter of 2021 was $9.3 million compared to $9.6 million in the fourth quarter of 2020, and compared to revenue of $13.8 million in the first quarter of 2020. The decline in revenue for the first quarter reflected a combination of seasonality and weaker end-market demand in the projector and video delivery markets, which was partially offset by strong sequential and year-over-year growth in our mobile business.

The breakdown of revenue in the first quarter was as follows. Revenue from Mobile increased approximately $4.1 million or 44% of total revenue, driven by strong growth in sales of both visual display processors and software solutions. Revenue from digital projector decreased approximately $4.1 million, video delivery revenue was approximately $1.1 million. Non-GAAP gross profit margin was 43.7% in the first quarter of 2021 compared to 49.6% for the fourth quarter of 2020 and 52.1% in the first quarter of 2020. As previously indicated in our guidance for the first quarter, the lower than historical gross margin in Q1 was due to -- was a result of product mix and aggressive pricing that was temporarily extended to new mobile customer. Having completed the initial ramp of this unique customer program during the first quarter, we anticipate gross margin to return to our historical range in the second quarter then expand us mobile continues to grow and the projector market recovers.

Non-GAAP operating expenses were $10.2 million in the first quarter of 2021 compared to $9.5 million last quarter and $9.7 million in the same period last year. The higher OpEx in the first quarter reflected social benefits in China returning to pre-COVID levels as well as administrative costs that are typically higher in the first quarter. On a non-GAAP basis, first quarter 2021 net loss was $6.4 million or a loss of $0.12 per share, compared to a net loss of $4.9 million or loss of $0.11 per share in the prior quarter and a net loss of $2.6 million or loss of $0.7 per share in the first quarter of 2020. Adjusted EBITDA for the first quarter of 2021 was a negative $5.2 million compared to a negative $3.8 million in the fourth quarter of 2020 and a negative $1.5 million in the first quarter of 2020.

Moving to the balance sheet, we ended the first quarter of 2021 with cash and cash equivalents of approximately $25.4 million. At quarter end, the company had no long-term debt and zero outstanding balance on our line of credit. In terms of other balance sheet metrics for the first quarter, day sales outstanding were 54 days at quarter end, which compared to 44 days at the end of the fourth quarter. Inventory turns were 10.1 times in the first quarter, up from 6 times in the prior quarter.

Now turning to our guidance for the second quarter of 2021. Based on recent order trends and our current backlog, we anticipate strong sequential and year-over-year revenue growth in the second quarter, driven by a combination of another record quarter for mobile and a significant recovery in projector. Specifically, we expect total revenue in the second quarter to a range between 13 and $15 million. Consistent with my previous comments, we anticipate gross margin to return to our historical range in the second quarter as the mix of price in within mobile normalizes and projected gross margin expands.

We will also benefit from the improved overhead absorption associated with higher consolidated revenue. More specifically, we expect a non-GAAP gross profit margin in second quarter of between 51% and 55%. We anticipate operating expenses in the second quarter to range between 10.5 and $11.5 million on a non-GAAP basis. The anticipated risk and the anticipated increase in OpEx is mainly due to planned hiring in both engineering and marketing to support our expanding mobile projects in China. As well as development costs associated with our next generation mobile visual processor. Finally, we expect second quarter non-GAAP EPS to be in a range of between a loss of $0.04 and a non-GAAP loss of $0.09 per share.

That concludes our prepared remarks and we will now open the call for questions. Operator, please proceed with managing, the Q&A session. Thank you very much.

(Operator Instructions) Your first question comes from the line of Suji Desilva from ROTH Capital.

Todd, Elias, congratulations on a very strong guidance here. Mobile business is looking very good, so, great execution. Just a quick question first on the segment guidance for Q2. Can you just give us some sense about the different segments? I know projector's coming back, mobile's coming back, any color there would be a good helpful start.

Elias, might give (inaudible) projectors coming back strong, right? I think sequentially, it's going to be up over 100%.

Correct.

Year-over-year, it's still going to be up quite a bit. And then mobile will be up sequentially and up year-over-year.

Year-over-year, correct.

And then, Todd, I hate to make you do this, but can you walk through a bridge from 4Q '19 for mobile where it's $3.7 million to the $4 million you broke now and then obviously going higher from here? What the difference is, obviously have more customers and more wins all that, but just give us a sense of how the business has evolved because it's helps understand for the go-forward look.

Well, okay, so if you go back to Q4 2019, that was a -- there were multiple programs with our first large customer Oppo, and they were slating more then we ended up being in, because it was -- they were trying to do quite a bit in a short period of time from an R&D perspective. So I think if you recall, we had to burn off some of that inventory in the front half of 2020. And then of course the pandemic hit in the middle of that. So it took us a little while to burn off that inventory, we did not have as many programs and I would suggest even in their case their programs weren't as successful as we anticipated, the ones we weren't. So the biggest single difference is, we don't see that right now. Okay? We -- because if you go to Q4 revenue for mobile, Q1 mobile revenue, and now Q2 guidance mobile revenue. It has been sustained and growing. And, frankly, if you listen to all the notes, you can tell, we're not -- even with that guidance, we are not filling all demand. We will leave the quarter delinquent to orders for both mobile and projector. Demand was higher than what we could sustain, and we're doing a very good job with our supply chain, but not enough to clear out all delinquencies. And so, there's no inventory that needs to be burnt, that I can tell, by any means. So that's probably the biggest single difference. It little bit of helps that there is breadth across customers. Some are seeing strength. One in particular seeing great strength. I'll call them out. The iQOO product line of Vivo, the way they launched this gaming experience with dramatic power reduction and key dissipation savings allows them to deliver what they call, I think they call it Marathon high frame rate gaming or something. It effectively allow -- allows you to put a white list of games into -- most of these games, if you don't use us, the GPU may be able to do 60 frames per second gaming, in some cases 90, but not sustained, because the GPU starts heating up, and then it starts throttling back and drops frames and may go down to like a 45 frame per second type mode. By using us, it allows them in some cases to go 90 frames per second sustained with no frame rate loss and at higher resolution, because we do SDR to HDR and scaling or even up to 120. And their particular demographic that the entire iQOO product line, today it's in these the Neo5 and the target model for the -- for India. We expect more models to use this same type of set up to be launched throughout the year. They're seeing incredible demand for this capability. And so, it's nice to have a success. And most of the success you read about it a lot, but it's all in Chinese. So I don't think most of the investors who are on this call are probably attuned to what we're seeing in China.

Your next question comes from the line of Richard Shannon from Craig-Hallum.

I'll offer congratulations on a really nice guidance.

Thank you.

Todd, let me peel back the onion on Suji's question here in 2 ways here. Just -- first of all in the guidance is -- and I haven't been able to run these numbers but I think you said projectors growing 100%. I'm assuming that you're expecting that to grow on a percentage basis meaningfully higher, is mobile going to be in that range. And then secondarily here as we think about the capacity and supply constraints out there, which business is being affected more there?

So I'll answer the latter first. Our projector business is predominantly 40 and 55-nanometer. We have some trailing edge 90-nanometer stuff still in production, but the bulk of the business is in 40 and 55-nanometers. And if you look around, we're -- probably the most acute shortage globally is for process technology, it is in the 40 and 55 domain. Most of the automotive parts that we read about every day in the newspaper, are in these process nodes. DDICs are in these process nodes. So that's the challenge. We've done okay so far, but that's a challenge, because it's a land grab for 40 and 55-nanometer process technology. The mobile today everything is in 22-nanometer ultra-low power, and that is also constrained but not to the same severity. And then your question -- I didn't completely get your question on the growth for projector.

Just a relative growth here for the segments here in the second quarter especially with the mobile. If I were to guess here, not having run the numbers, seems like mobile sequential growth will be less than the 100% you're calling out for projector. I just want to make sure.

Yes, oh yes. Because we've had strength in mobile -- it's sequentially continuing to grow but it's not going to grow100%. Projector's coming back from -- it's coming back, and so it's coming back strong. I think that particular industry, which is -- not all of our customers' in Japan, but they're predominantly in Japan. I would suggest woke up late to the situation for supply constraints for general semiconductor process technology to be in a constrained mode, and they had bled off inventories in Q1, so they're going to be scrambling to build up their inventories for a while. We're seeing at least 100% growth with projector. And we expect probably that kind of year-over-year growth to continue for a little while.

Okay. That's a good segue to my next question, Todd, which is, to what degree is -- often times we see bookings go this far out in industries where they don't typically happen, there's some double booking and -- so you just start meeting supply growth domain, we start to see those disappear. Are these, do you just feel like these are not double bookings and they're going to sustain or do you have methods to make sure that those order sustain, they don't just get -- they don't just disappear? I mean are we going to see a fourth quarter drop off much more than normal as things catch up here? How do you foresee this happening?

Well, I think it's going to happen within the industry in a general nature. I think at some point you will see that drop off, I don't know when it's going to be. For us though, I think we have 2 different anomalies going on. We're -- first of all, we're small, but with that backdrop, projector -- remember this industry was severely impacted, this is not a segment of the market that had the stay-at-home effect, the zoom effect. This is a market that was severely impacted. And so even though we're seeing these pretty large jumps, we aren't -- we expected this to happen. They're coming back to what we expected them to be pre-pandemic. I don't think there's going to be a giant hangover for the projector market. Plus, I think it's going to take a while for them to build up buffer inventories. So I don't -- right now, I'm not anticipating a big inventory bubble dropped in the projector segment. As far as mobile, I really don't expect it either. I can tell you that even though we're on track to do quite -- to announce quite a few more programs and continue to grow the business, we have had to pass on some significant programs with customers, the growth rate would have been immense. And that's just because customers today, they want to secure capacity before they even let their engineers work on the program. So if they're in that environment, I would say that -- for us, I don't see us -- I don't see a big buffer of inventory being built out there.

Okay. Maybe 1 or 2 quick questions in here (inaudible) In mobile as you go through the year here, do you see -- you see sustained growth throughout the year. And then also, what's the kind of the constructive of the customer profile here? Is this more adding new customers that are significant or more new models with your existing customers. How would you help us think about that as we go through the year?

Well, first of all, I don't want to really give too much color on the rest of the year guidance, and the reason is that I certainly know where the demand profile is, I could give that, but I don't know where the supply profile is. And so we have to work through both, we have to work through demand related issues and supply related issues. I'm feeling confident we'll show continued growth in mobile, we'll be able to support our projector customers through this bounce-back. How much we can grow, I just don't know yet. And then as far as customers go, I would say in general, we're looking for quality programs versus quantity of programs. I have 2 supply constraints going on. One, is getting access to our wafers and assembly and test and substrates, but the other is R&D resources. When we engage with the customer, they don't just design in our chip. We have a team of application and software engineers that become an extension of the display engineering team of the OEM. And if we use that valuable know-how and critical resource on programs that just don't ship a lot, or we don't anticipate to ship a lot -- and we may have to do that from time-to-time depending on customer relationships, but we don't really want to do that. And so, what we're looking for is quality of programs and not just from a volume perspective. We're trying to build a business here, and what we want is to build the feature -- the capability to where the consumer really wants to go out and buy phones that have Pixelworks technology, and they give that input to the OEM. Because if we can create that environment, we don't have a demand issue, we have different issues. And so we're focused on the programs that we think are aligned with the OEM. They're going to go out and really embrace this high frame-rate gaming or video experience that we're trying to bring to the marketplace. With all that said, what does it mean, it's not going to be about quantity the design is going to be about quality of design.

Okay. Last quick question for me, Elias. How many 10% customers did you have and were any of them mobile in the first quarter?

How many 10% customers, I don't know. I mean I can guess. You have the numbers?

No.

My guess is, we had probably two 10% mobile customers, and then we had another, at least one 10% projector customer?

My guess.

(Operator Instructions)

Well, I think that's it today, operator.

No further questions at this time, I'll turn back the call to Elias.

Thank you very much for showing up, guys, and we appreciate it. See you next quarter.

Thanks, everyone.

This concludes today's conference call. You may now disconnect.