Good day, ladies and gentlemen, and welcome to Pixelworks, Inc.'s third quarter 2022 earnings conference call. I'll 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 of the Shelton Group Investor Relations. Thank you, Andrew, and good afternoon, and thank you for joining us for today's call. With me on the call are Pixelworks President and CEO, Todd DeBonis, and Chief Financial Officer, Haley Aman. The purpose of today's 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 2022. Before we begin, I'd like to remind you that various remarks that we make on this call, including those about projected future financial results, economic and market trends, and 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, Monday, November 7th, 2022. 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, 2021, 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 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 on core operating results and underlying cash flow dynamics. We caution investors to consider these measures in addition to and not as a substitute for, nor superior to, the company's consolidated financial results as presented in accordance with 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 my pleasure to turn the call over to Pixelworks' CEO. Todd, please go ahead. Thanks, Brett, and welcome to everyone joining us on today's call. Starting with our reported results, we delivered another solid quarter with revenue at the midpoint of guidance and growing 16% year-over-year during what continues to be a very challenging environment for the broader semiconductor industry. The Pixelworks team has continued to execute despite the various macro challenges, and this quarter marked the sixth consecutive quarter of double-digit year-over-year growth in both our mobile and projector businesses. Total revenue year to date is up 38% over the first nine months of 2021, and we expect to close out 2022 with a full year growth in excess of 25%. Despite inflationary cost pressure throughout the year and our mobile growth contributing to an increasing portion of our total business, we've maintained healthy gross margins that were at 50% in the third quarter. Additionally, both OpEx and EPS for the quarter were better than the midpoint of guidance, reflecting our careful cost management and attention to improving bottom-line results over time. In addition to our solid operating performance, during the quarter, we closed a strategic investment in our Shanghai subsidiary at nearly 2x the valuation of the previous investment round. Our ability to execute this transaction in the current environment highlights the recognition and growing opportunity for our visual processing technology across Asia. It also enabled us to further strengthen our balance sheet in support of driving continued momentum in our mobile business and our growth initiatives for the TrueCut Motion platform. Turning to updates on our primary end markets. As expected, mobile business was down sequentially from the record quarter revenue we posted in the second quarter, primarily reflecting the start of a broadly acknowledged inventory correction in smartphones and weaker consumer demand in China. With that said, we maintained solid growth year-over-year, with mobile revenue increasing more than 25%, which represented the seventh consecutive quarter of year-over-year growth. Year to date, our mobile revenue was up 44% compared to the first nine months of 2021. Although the pace of new smartphone launches by mobile OEMs has slowed with various platform models either being pushed out or canceled as the industry focuses on working down excess component inventories, we have maintained a high level of engagement activity and continue to secure new design wins. As a result of the current market dynamics, we've experienced certain customer programs that were originally targeted for our latest X7 processor. Instead incorporate our X5 Plus solution as part of the efforts to either reduce existing component inventory and/or minimize the total BOM cost of devices. While this defers the opportunity to penetrate the market with our X7 solution. Mobile wins. In October, Vivo launched the iQOO Neo 7 smartphone, incorporating an upgraded Pixelworks X5 visual processor with the goal of delivering a more captivating gaming and video experience. Built on MediaTek's Dimensity 9000+ flagship 5G mobile platform, the iQOO Neo 7 leverages our patented MEMC technology with high efficiency interpolation algorithm to boost low frame rate gaming content to high frame rates of up to 120 frames per second. In addition to our motion engine now being adapted for optimal performance on 21 popular mobile games, we have worked closely with iQOO to incorporate a unique set of built-in visual effects and enhancement modes. These modes or gaming filters give the end user full autonomy to choose between preset visual styles or create their own custom filter by adjusting individual visual quality parameters. Earlier in the quarter, we also added Sharp as a first-time customer in mobile with Sharp's launch of the AQUOS sense7 plus smartphone. Primarily targeted for consumers in Japan, this device, based on Qualcomm's Snapdragon 695 5G mobile platform, features an impressive 6.4-inch IGZO OLED display with a 10-bit color depth and 1,300 nits peak brightness. As a result of our collaboration and the incorporation of our X5 Plus advanced visual processing solution, the AQUOS sense7 plus enables 5x video frame insertion or up to 120 hertz and also supports variable refresh rate. Stepping back, year to date, our mobile visual processor solutions have been incorporated in smartphones launched by three of the four tier one OEMs and their respective affiliate brands in China, including Vivo, iQOO, Oppo, Realme, OnePlus and Honor. More broadly, our technology has enabled devices launched this year by ASUS and Sharp. Effectively, all of these models by these OEM customers were either directly targeted at or marketed as supporting advanced visual quality for higher frame rate mobile gaming at low power. Together with our efforts to spearhead an engaged ecosystem for mobile gaming through ongoing collaboration with multiple leading game engine platforms and design studios, Pixelworks has distinguished itself within China as a technology leader in the area of mobile visual processing. This recognition creating expanded opportunities for our technology, both in the form of deeper strategic engagements with AP platform vendors and increasing inbound interest from IC design firms to license and incorporate certain Pixelworks visual processing IP into their next generation solutions. We are currently in late stage discussions on multiple prospective license engagements. One point I'd like to emphasize about any prospective deal involving IP licensing is that they are carefully evaluated and subject to key engagement criteria. Most important, we will not pursue a licensing arrangement which erodes existing market potential that we could otherwise address it directly. In other words, we believe these current prospective IP deals are incremental opportunities to further monetize our technology. Turning to an update on our TrueCut Motion platform. We are excited to see the successful re-release of Lightstorm Entertainment's Avatar this September, the first globally available title remastered with TrueCut Motion. Our tools were used on every frame of this iconic movie, allowing cinemas to play at 4K resolution in high dynamic range with the motion look tuned shot by shot to achieve exactly what the filmmaker intended. This re-release was seen in 47 markets worldwide, achieving a gross box office sales of over $76 million, further cementing its position as the highest grossing movie of all time. We can now confidently say that we have a global TrueCut Motion cinema ecosystem in place. As part of our previously announced multi-license agreement with Lightstorm Entertainment, today we are actively working to replicate the same level of success with the re-release of Titanic, which is slated to hit theaters in early February. With growing momentum on the content side of the ecosystem, our team's focus is now on securing a global entertainment ecosystem. Shifting to the projector business. Revenue grew single digits sequentially and increased 10% year-over-year, reflecting the highest quarterly revenue in more than two years. Although customers have more recently indicated some improvement in their ability to source other key projector components, such as timing controllers and panels, the extremely tight supply environment and long lead times for components earlier in the year hampered projector OEMs from meeting total end demand. So far, this demand is still present and our projector customers believe they will no longer be supply constrained by early next year. Also notable within the projector business, our co-development project with our largest projector customer remains on track and we expect to complete the development work on this next generation SoC by year end. Upon completing the development work, we are entitled to receive a contract milestone payment, which will be recognized as a credit to R&D and meaningfully reduce our reported OpEx for the fourth quarter. As a reminder, we anticipate this new SoC to be in production in late 2023 and continue to ramp in support of an ever-increasing number of our lead customers projector models. Finally, I want to highlight a recent strategic action we took in our video delivery business to end the life of a series of legacy ICs. As a reminder, we acquired this business as part of the ViXS Systems in the second half of 2017. It has been comprised of several transcoding ICs that we've primarily sold into consumer applications in Japan, as well as OTA devices here in the U.S. Another area these transcoders are used is in video delivery infrastructure. These specific applications often require unique packaging and are generally much lower volume, making them increasingly difficult to source and supply efficiently over time. As a result, we've implemented an EOL, or end of life, on certain portion of these transcoding ICs, which will result in a one-time increase in video delivery revenue in the fourth quarter. In summary, we are executing well in the face of many macro-related headwinds and continue to pursue strategic actions to mitigate the near-term impacts of the current environment. We have kept our inventory in check and at healthy levels. We are being prudent on costs and spending, including limiting any incremental new headcount, and we've added cash to the balance sheet at a very attractive valuation with minimal dilutive impact to shareholders. During the quarter, we also completed the planned conversion to a joint-stock corporation as part of our preparation for our Pixelworks Shanghai subsidiary for a local listing on the STAR Market in China. This structural change brings us one step closer to Pixelworks Shanghai beginning the CSRC's tutoring process and ultimately submitting its formal application for the listing. While we remain cautious about the near-term macro environment and consumer demand, we are in a strong financial position to fully execute on our growth initiatives and fully extend Pixelworks' technology leadership into our target end markets. With that, I'll hand the call to Haley to review the financials and provide our guidance for the fourth quarter. Haley? Thank you, Todd. Revenue for the third quarter of 2022 was $17.6 million, down 8% sequentially from $19.1 million in the second quarter, and representing an increase of 16% from $15.2 million in the third quarter of 2021. Our top line results for the quarter were driven by a combination of continued strong year-over-year growth in our mobile business and sustained customer demand in our projector business, with projector revenue once again reaching the highest quarterly level since the onset of the pandemic. The breakdown of revenue in the third quarter was as follows. Revenue from mobile increased more than 25% year-over-year to approximately $6 million, which represented just over 34% of total revenue in the third quarter. Similar to recent quarters, sales of our integrated circuits were the largest contributor to mobile revenue this quarter. Revenue from projector was approximately $9.9 million, increasing 5% sequentially and 10% year-over-year, again, reflecting sustained customer demand. Video delivery revenue was approximately $1.6 million in the third quarter. Non-GAAP gross profit margin was 49.8% in the third quarter of 2022, compared to 49.3% in the second quarter of 2022, and compared to 53.1% in the third quarter of 2021. Non-GAAP operating expenses were $12.2 million in the third quarter, compared to $12.9 million last quarter, and $10.1 million in the third quarter of 2021. On a Non-GAAP basis, third quarter 2022 net loss was $3.2 million or a loss of $0.06 per share, compared to a net loss of $3.3 million or a loss of $0.06 per share in the prior quarter, and a net loss of $2.2 million or a loss of $0.04 per share in the third quarter of 2021. Adjusted EBITDA for the third quarter of 2022 was a negative $2.1 million, compared to a negative $2.4 million last quarter, and a negative $1.6 million in the third quarter of 2021. Turning to the balance sheet. We ended the quarter with cash and cash equivalents of $57.6 million. The sequential increase primarily reflected $10.7 million in net proceeds from closing the transaction to transfer approximately 2.7% of Pixelworks' equity interest in our Shanghai subsidiary to new private equity investors. This increase was partially offset by cash used in operating activities. Shifting to our current expectations and guidance for the fourth quarter of 2022. We anticipate fourth quarter total revenue to be in a range of between $16 million and $18 million. At the midpoint of this range, total revenue for the full year 2022 would represent annual growth of approximately 27.5% over 2021. Non-GAAP gross profit margin in the fourth quarter is expected to be between 56% and 58%. The anticipated sequential increase reflects a more favorable product mix comprised of an expected increase in licensing revenue and an increase in revenue related to the end of life of certain legacy chips sold into the video delivery market. In terms of operating expenses in the fourth quarter, we currently expect to achieve a planned milestone related to our co-development agreement. As with previous treatment, the milestone payment will be recognized as a credit to R&D, reducing our anticipated reported operating expenses in the fourth quarter. Taking this credit into account, we expect 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 $0.04 per share and income of $0.01 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. Thank you. Ladies and gentlemen, if you have a question at this time, please press star one one on your telephone. Once again, if you have a question at this time, please press star one one. One moment, please. Our first question comes from the line of Suji Desilva with Roth Capital. Hi, Todd. Hi, Haley. I was hoping you could talk about the video delivery, how much revenue benefit you'll see from the last time buys in the fourth quarter. you know, I can let Haley answer that. Yeah. I don't think we're gonna break out exactly how much it is, but she'll give you a big picture. I think you can. In a way. Yeah. I think for video delivery revenue in the fourth quarter, you can expect it to increase over 100%. Got it. With the congrats on the Shanghai equity valuation. It certainly looks going well there. What percent of that are you willing to potentially sell, Todd, pre-IPO? Like, that could be a source of funding for you guys as well, I understand. Well, I mean, listen, this particular financing was a unique financing. I mean, one thing that we did with this financing is we actually sold our equity, Pixelworks, Inc.'s ownership equity, to a new round of investors versus a dilutive event to all the investors in Pixelworks Shanghai. The net cash from that financing actually all came back to the U.S., to Pixelworks, Inc. That was nice because we wanna make sure not only do we have a great balance sheet, but we wanna have a great balance sheet for both here in the U.S., but also for our China subsidiary, and making sure that both are properly financed for their strategic goals. I would say we were very focused on that event, and that event had to be completed before we completed the conversion of the joint-stock corporation. Got it. There was a lot in that financing. We are now post-conversion, pre-IPO. It doesn't prevent you from doing financing. There's some limitations about doing financing in this particular window we're in pre-IPO. I haven't really thought about how much I'm you know I know at the end how much we would still like to own after we finance the public offering. We will still control a large percentage of the subsidiary post-financing. Okay. That's helpful. Looking ahead to the gross margin guidance for Q4, what areas are the licensing benefit coming from? Is that from mobile or is that TrueCut they anticipate? We're not gonna break that out at this time. As you know, we've had software licensing in the past. We've had some TrueCut licensing in the past. On the earnings call, I talked about IP licensing from our mobile group. We now have inbound interest for IC IP licensing. All of those would still be rolled up underneath our mobile revenue. We're not gonna. We may break out after the quarter's over, how much of mobile revenue in total was licensing revenue, but I don't think we're gonna break it out on an individual basis at this point, Suji. Okay. Well, that's helpful color. Todd, last question on the, I guess, the more broader trend of new model designs being pushed out, X7 designs being swapped in for X5 to work down inventory. I'm curious on that. What might be the margin impact of having to kind of put X5 through versus having got the uplift for maybe newer X7 models? Any thoughts there would be helpful. Thanks. I would say that where we were trending with that, we've already launched an X7 phone with Realme, and we have several new phones that have designed in the X7. They'll be launched in early 2023, or they're in the process of designing them. I look at where we are with pricing on those and where we are with X5, and there's not a big difference in them today in the gross margin profile. Okay, great. Thanks, guys. Thank you. Our next question comes from the line of Sam Peter with Craig-Hallum Capital Group. Hi, Todd, Haley. Thanks for taking my question. I wanted to ask first on mobile. I'm just kinda curious, you know, a lot of companies in the industry talking about, you know, maybe fourth quarter is kind of where mobile sales in China kind of bottom and maybe there could be a little bit of growth in the first and second quarter of next year. I guess I'm curious just broadly how you're seeing kind of inventory trends in China with phones. Then specifically to your mobile business, if I do the numbers, it looks like, or it seems like you're guiding to, you know, maybe mobile being down quarter-over-quarter in December. Can you kind of talk to where you see that segment in the fourth quarter? That'd be great too. First of all, if the first part of the question, Sam, was specific to the mobile market, the end market you are seeing. I think you saw a slightly better sell-through in Q3 versus Q2. In Q2, you know, Shanghai was locked down for 80 days, right? There was quite a bit of fear in China. You know, we expect that Q4 will be better than Q3. As you go into Q1, I think it somewhat depends on the position of the dynamic COVID policy and zero COVID. You know, if they start to come out of it, I think you could see the consumer come back. We still see. You know, there's certainly finished good inventory with the mobile OEMs there, but the bigger issue that they're having is it depends on the component. They went in the environment where we were highly constrained to trying to buffer inventory and order a lot of components. Depending on the components, they have quite a bit of inventory that they have to pull through, and they have to push it into new models. The bigger impact is if the OEM has made a decision that they don't wanna write off any inventory, then they will have to try to use the existing component inventory then, whether they be APs, image signal processors, displays, so on and so forth. What it means is they're gonna focus on putting models out in the market that probably don't have a lot of differentiation than previous models. In our particular case, you know, our distributor really doesn't have much inventory. Most of it has already been sold to the OEMs. One particular OEM has quite a bit of X5 inventory. That's why they're deciding to put many more models with X5 than they originally anticipated to burn off that inventory. We have other customers that have no inventory and are migrating to X7 and our next generation solutions that we haven't announced to the market yet. For us, I'm not really worried about an obsolete inventory issue. I'm worried about when the demand comes back, and it comes back strong enough that the OEMs have burnt through all their various inventory decisions and they can be more agile in how they market their new phones. Some OEMs will be there early. I think they may take market share. Some OEMs are gonna take longer to get through it. I don't believe that we'll be through it by the end of Q4. I believe the end of Q1 at the earliest. Could linger into Q2 of next year. Okay. That's helpful color. Thanks for that, Todd. I guess also on mobile, just broadly with the X7, you know, maybe some of those designs are being pushed out, but can you talk about, I guess just what you're seeing from OEMs in terms of the enthusiasm for, you know, differentiating phones based on gaming performance? Is that focus shifting at all with kind of the macro being weak, or are you still seeing just as strong of a interest and engagement with kind of mobile gaming being a key factor? You know, I think these OEMs that we do business with do business globally. They don't do much business here in North America, but they do business globally. Their largest position for all four of them is in China. You know, Honor is probably the most concentrated in China. Xiaomi has the most business outside of China, but they all have a large chunk of business in China. China mobile gaming is still a very big area of differentiation that they wanna put in phones, especially the premium and flagship phones. I think there's still a big focus there. We've done very well with the ecosystem engagement. The content providers, the mobile gaming content providers, leading mobile gaming content providers, they want to put out more immersive versions of their games for the mobile environment, not just the desktop environment. They see the same issues, the system level issues, the heat issues, the battery issues, and the frame rate issues. They see us as a great opportunity for them to reach their goals on how to bring a more immersive AAA gaming experience to them. The more content providing ecosystem we can create and the more pull and the more games that get announced supporting our platform, the more pull we'll get from OEMs with our solutions. Gotcha. Thanks for that, Todd. If I can ask one more just quickly on TrueCut. You had a nice comment in the press release about it. But I'm curious just with Avatar having been released and, you know, getting to see some of the reviews of that, can you talk about how, I guess, engagement in the industry has been since that, whether that's with other content creators or with streaming services or anything like that? Any color there would be great. You know, twofold. There's, like, two things going on with the team. We have a small team in TrueCut, and they're very busy, and they're busy twofold. One, they are focused. You know, we try to enable third parties with this announcement with Pixelogic, and we've talked to others to leverage the capability of bringing TrueCut motion grading to the content creators, but not just have to do it ourselves. The first couple engagements we've done, people have wanted to work with us directly. All the work on Avatar was done with Pixelworks employees. All the work that's going on with Titanic and the other content that we're working on right now is with Pixelworks employees. We have a very good team, not that large, but is extremely busy doing this content creation and making it look very good. We have another team that's out trying to do demand creation, and demand creation in twofold. One is we are engaged with. There has been a lot of studio engagement since the re-release of Avatar. Secondly, we're very focused on getting the streaming and device ecosystem up and running. Effectively what we've done is we've created movies to look really good at high frame rate and 4K HDR in the theater. We have the ability to make that same content look really good for the home entertainment ecosystem. We stream to the home entertainment ecosystem. We have not licensed the ability for any of this content to be TrueCut Motion streamed yet. We are working very hard to do. Okay, thanks, Todd. That's it for me. Great. Thanks, Sam. Thank you. Our next question comes from the line of Nick Doyle with Needham & Company. Hi, guys. This is Nick Doyle in for Rajvindra Gill. Thanks for taking my question. You just gave really good color on my earlier question on trying to enhance the market, so thanks for that color. My question would be if you could just talk a little bit more about the projector business. A couple moving pieces into next year, customers won't be as supply constrained, and then we have kind of the offset with the macro environment, dragging production, but then we have the new SoC coming maybe late end of the year. Just if you could give more color on the direction of that business. I think last quarter you mentioned that 4Q would be a flattening out or something along those lines. Any more detail there would be great. Yeah. Yeah, Nick, thanks for the question. I appreciate it. So on projector, you know, we normally have a seasonality where, you know, Q3 has usually been our highest in the past, if you go over the last five years, and Q1 is the lowest, mainly because most of our Japanese customers run off a fiscal year that ends in March, and they try to lean their inventories, whatever they may be, going into the March quarter. We sort of bucked that seasonality this year. Going into next year, you might see it. It's somewhat being offset by, they have this built-up demand for systems that they couldn't deliver. I mean, if I looked at it combined, it's about... If you look at how many devices we ship to all our OEMs for a quarter, I think these guys have built up demand that they can't address because of past shortages of at least a quarter's worth of shipments, right? That's about the severity of where their shortages cost them in the past. Not by us. We kept in front of it barely, but by other component vendors, predominantly T-CON, and panel vendors. We see that freeing up now. The question is, and it's a good question, with the macro environment softening, will that demand stay there until it gets fulfilled, or will it erode as they come out of the supply challenges? We don't have an indicator of it yet, right? So far the demand has stayed strong. Even with zero COVID in China, they've had a reasonable bounce back for the end markets for projector demand in China. Both the U.S. was very strong. Will that subside now with the economy going down? Europe was starting to slide, mainly because of what's going on in Europe. I don't. That will sort of dictate how projector will look in the front half. It doesn't look doom and gloom. It could be good, but I think it's too early to tell you the truth. Then the new SoC will be sampling the customer in the front half of the year, but it takes them a good. They've got identified programs that they wanna ramp quickly, high volume programs with this new SoC. Even if they move quickly, it'll take them at least six months after we have approved silicon in their hands to start ramping those models. The soonest you'd start to see us ramp that volume would be from the new SoC probably Q4, maybe a little bit in Q3, but most likely Q4 of 2023. Okay, that makes sense. Thanks. Just to nitpick just a little bit, I guess the gross margins, they were up quarter-over-quarter, but maybe I guess the Non-GAAP gross margins were just, what? 20 basis points below. I mean, is that just? Is that all mixed? It's mixed. You know, Q2 and Q3, what we had was we had strong mobile business on a comparative basis. You know, in projector, we pretty much passed through all price increases that the industry has seen. You know, the supply chain has seen price increases from fabs, from assembly, from test, you name it, right? Several of them. In our projector video delivery businesses, we passed all of that on. In the mobile business, we passed most of it on, but not all. You know, there was. We're trying to get a broader attach rate in mobile, and we just didn't wanna push it to a limit where it would inhibit somebody trying to use it. The margins compress a bit in mobile, and the more mobile business we do, it is a downward compression on our combined gross margins. We believe, though, that these price increases from the supply chain will start to stabilize. Whether they start to go down or not, I think will depend on the demand. Fabs need to be full. Assembly and test facilities need to be full. If they can stay full without lowering prices, they will do that. If they can't stay full without lowering prices, we will start to see prices come down on the supply. That should help us a bit in the mobile. What's really gonna help us on an aggregate basis is if we supplement with licensing in all the areas that we've talked about before. Software licensing, TrueCut licensing, and now the licensing. Thank you. Thank you. I'll now hand the call back over to management for any closing remarks. Nope. Thanks to the analysts for some good questions. Thanks to everybody else for attending. We'll keep you posted on our progress. Thank you for your time. Ladies and gentlemen, this concludes today's conference call. Thank you for participating, and you may now disconnect.