Earnings Call Transcript - PXLW Q1 2021

Operator, Operator

Good day, ladies and gentlemen, and welcome to Pixelworks, Inc. First Quarter 2021 Earnings Conference Call. I will be your operator for today's call. At this time, all participants are in a listen-only mode. Following management's prepared remarks, instructions will be given for the question-and-answer session. This conference call is being recorded for replay purposes. I would now like to turn the call over to Pixelworks' CFO, Mr. Elias Nader. Thank you, sir. Please go ahead.

Elias Nader, CFO

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 4th, 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 descriptions 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 inventory step-up and backlog amortization, 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 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.

Todd DeBonis, CEO

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 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, this was 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 averages, 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 positively impact 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 marks the third consecutive quarter of 50% plus sequential growth in mobile. We believe the mobile market is primed 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 Cowan, total unit shipments of smartphones in China were up at an estimated 100% year-over-year in Q1 over the first quarter of 2020. Additionally, they projected that 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 one-third of total smartphone unit shipments in 2021. As 5G expands and 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 AMOLED displays that support higher refresh rates of 90 to 144 hertz. The primary benefit of these higher refresh rates is 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 its infancy, 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 two existing drawbacks for consumers. The first is the 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 processors address both challenges, providing the ability to upscale low frame rate content to higher rates while reducing the load on the processor, resulting in significant improvements in visual quality and power efficiency. Also, specific to AMOLED displays they create the need for additional color management in order to display colors accurately, an area that Pixelworks excels in and has 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 and high efficient color calibration. Third-party tests have consistently proven that Pixelworks delivers the best color accuracy in the industry. With the availability of AMOLED displays expanded 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, reducing 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 can only be applied on platforms with relatively high-end application processors that have 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 software solution is not feature static, and 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 can also 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 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 Pixelworks 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 create 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, contrast, and 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 and 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 application processor, 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 HDR conversion, dark noise suppression, and smooth auto-adaptive brightness control. As highlighted 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 inferencing that augments Pixelworks' extensive knowledge base and industry-leading display processing algorithms with numerous real-time inputs from content, sensors, displays, user preferences, and 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 the mobile wins we've announced here today, Pixelworks' visual processors and software solutions have been incorporated into a total of 11 models launched by six different mobile OEMs, including our second Tier-1 OEM, Vivo, as well as another first-time customer, Lenovo. Brief highlights from the recent wins include: our longtime 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 AMOLED 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 quarter, Oppo extended the use of our proprietary and industry-leading color calibration and flesh tone management in the launch of the Oppo Find X 3 and Find X3 Pro Series, while also retroactively incorporating Pixelworks' software solution via firmware upgrade into the Reno 5 Pro Plus. In mid-March, we were pleased to announce the second Tier-1 mobile OEM, Vivo, in conjunction with the launch of the iQOO Neo 5 smartphone designed to deliver an unmatched 5G gaming experience. The iQOO Neo 5 incorporates our X5 Pro processing solution to enable a unique gaming experience 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 Neo 5 is a dedicated optimization in close collaboration with Pixelworks that boosts the device's 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 Neo 5, 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 AMOLED display with WQHD+ resolution supporting 120 hertz coupled with our X5 Pro. Leveraging Pixelworks patented dual motion engine technology optimized for variable high refresh rates, the OnePlus 9 Pro can deliver superior visual quality across a wide range of content, video formats, 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 Dual 2. Utilizing Qualcomm Snapdragon 888 5G mobile platform and featuring a 6.9-inch AMOLED display that supports 144 hertz refresh rate, the Legion Phone Duel 2 incorporates our i6 processor to provide an immersive HDR experience with multiple levels of content optimization in color, depth, 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 TCL's new Next Vision 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 is a recent third-party report published by DSL Mark 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 display solutions and expertise to differentiate their next-generation devices with industry-leading display performance. We continue to have a robust pipeline of designs 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 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 managing 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 solidify alongside a steady recovery of demand from education and consumer segments in the U.S. Another contributing factor to the increased orders we are seeing is that the projector customers recognize the broadly reported supply constraints across the semiconductor industry. Lead times on orders have extended 20 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 projected 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 recovering projector market beyond Q2 is likely to be partly contingent on successfully mitigating the ongoing supply constraints in the second half of the year. More specifically, regarding supply constraints, we are seeing gaps in meeting 100% of our demand across all our product lines but 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 to 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 a TrueCut solution. As part of our ongoing effort to break through and secure a 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 advancing existing engagements and evaluations that are ongoing with a select group of leading U.S. studios and streaming service providers. Each of these prospective engagements recognizes the challenges associated with streaming ultra high-definition 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 they put on addressing the problem? While it’s 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 am 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 AMOLED 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'll hand the call over to Elias to review first quarter financials and provide guidance for the second quarter.

Elias Nader, CFO

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 projectors 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% in 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 product mix and aggressive pricing that was temporarily extended to a new mobile customer. Having completed the initial ramp of this unique customer program during the first quarter, we anticipate gross margins to return to a historical range in the second quarter and then expand as 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 operating expenses 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 a loss of $0.11 per share in the prior quarter and a net loss of $2.6 million or a loss of $0.07 per share in the first quarter of 2020. Adjusted EBITDA for the first quarter of 2021 was a negative $5.2 million, compared to 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 in 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 returns were 10.1 times in the first quarter, up from six times in the prior quarter. Now during the 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 projectors, specifically, we expect total revenue in the second quarter to range between $13 million 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 pricing within mobile normalizes and projected gross margin expands. We will also benefit from improved overhead absorption associated with higher consolidated revenue. More specifically, we expect non-GAAP gross profit margin in the second quarter between 51% and 55%. We anticipate operating expenses in the second quarter to range between $10.5 million and $11.5 million on a non-GAAP basis. The anticipated increase in operating expenses 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 of mobile visual processors. 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 a Q&A session. Thank you very much.

Operator, Operator

Your first question comes from the line of Suji Desilva from ROTH Capital. Your line is now open.

Suji Desilva, Analyst

Hi, Todd, hi, Elias. Congratulations on the very strong guidance here. The whole business is looking very good. So great execution. Just a quick question first on the segment guidance for 2Q. Can you just give us some sense about the different segments track? I know projector is coming back, mobile is going back. Any color there would be a good helpful start?

Todd DeBonis, CEO

On your last point, projector is coming back strong, right? I mean, I think sequentially, it's going to be up over 100%.

Elias Nader, CFO

Correct.

Todd DeBonis, CEO

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.

Suji Desilva, Analyst

Can you walk us through a comparison from the fourth quarter of 2019 for mobile, where it was $3.7 million, to the current $4 million and how you see it increasing from here? What are the key differences? Clearly, you have more customers and more wins, but I’d like to understand how the business has changed over time. This will help us with our future outlook.

Todd DeBonis, CEO

If we look back at Q4 2019, that period involved multiple initiatives with our first major customer, Oppo. They had planned for more than we ultimately achieved because they were trying to accomplish a lot quickly from an R&D standpoint. As you might remember, we had to reduce some of that inventory in the first half of 2020, and then the pandemic struck in the midst of that, which delayed our inventory management further. During that time, we had fewer programs, and I would argue that the programs we did have did not perform as well as we hoped. The key difference now is that we don’t see that situation repeating itself. If we compare Q4 mobile revenue from two years ago to our Q2 guidance for mobile revenue now, we have sustained growth. In fact, if you listen closely, you'll notice that we aren't even meeting all the demand. We ended the quarter with outstanding orders for both mobile and projectors, indicating that demand exceeded our capabilities. While we are managing our supply chain effectively, it hasn't been enough to clear all backorders, and there is no excess inventory that needs to be liquidated. Another positive aspect is the diversity among our customers, with some experiencing strong performance. One standout is the iQOO product line from Vivo, which has effectively introduced a gaming experience characterized by significant power reduction and improved heat dissipation. This advancement enables sustained high frame rate gaming, where some games can maintain 90 frames per second without frame loss, even at higher resolutions. The entire iQOO lineup is generating remarkable demand due to this capability, and as we move forward, we anticipate more models utilizing this technology will be launched throughout the year. However, most of the success stories are being reported in Chinese, which may not resonate with many investors on this call.

Suji Desilva, Analyst

Okay. Well, it's in the numbers. So again, great job and execution. Thanks, guys. I'll jump back in the queue.

Todd DeBonis, CEO

Thank you, Suji.

Operator, Operator

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

Richard Shannon, Analyst

Hi, guys. Thanks for taking my questions. I'll offer congratulations on really nice guidance.

Todd DeBonis, CEO

Thank you.

Richard Shannon, Analyst

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

Todd DeBonis, CEO

So, I'll answer the latter first. So 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. And if you look around at, 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 a challenge. We've done okay, so far. But that's a challenge. Because it's a land grab for 40 to 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 projector.

Richard Shannon, Analyst

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

Todd DeBonis, CEO

Yes, our mobile segment is showing consistent sequential growth, although it won't reach 100%. The projector market is recovering strongly. While this sector represents a significant portion of our customers in Japan, they have been slow to recognize the supply constraints affecting semiconductor processes. They reduced their inventories in the first quarter, so they'll be working to replenish for some time. We anticipate at least 100% growth in the projector segment, and we expect this year-over-year growth to continue for a while.

Richard Shannon, Analyst

Okay. And that's a good segue to my next question, Todd, which is to what degrees oftentimes, we see bookings go this far out in industries where they don't typically happen. There's some double booking. And as soon as you start meeting, supply equals demand, we started to see those disappear. Do you feel like these are not double bookings, and they're going to sustain or do you have methods to make sure that those orders sustain? 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 perceive this happening?

Todd DeBonis, CEO

I believe that a general drop-off in the industry will occur at some point, though I can't predict when. For us, we are experiencing two different situations. First, we are a small player in the market. Additionally, the projector segment was significantly affected, unlike other areas that benefited from the stay-at-home and Zoom effects. Although we are seeing substantial growth, this aligns with our expectations as the market returns to pre-pandemic levels. Therefore, I don't foresee a large downturn in the projector market, and it will take time for inventory levels to normalize. Currently, I don’t expect to see a significant inventory overflow in the projector segment or in mobile. Even though we plan to announce several new programs and continue growing the business, we've had to decline some major projects due to customers wanting to secure capacity before their engineers start working. Given this situation, I don’t anticipate a significant inventory buildup out there.

Richard Shannon, Analyst

Okay, Todd. Do you anticipate sustained growth in the mobile sector throughout the year? Additionally, can you describe the customer profile? Are we primarily adding significant new customers or are we focusing on new models with existing clients? How should we view this as we progress through the year?

Todd DeBonis, CEO

Well, first of all, I don't want to really give too much color on the rest of your guidance. And the reason is, 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 two 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 a customer, they don't just design in our chip, we have a team of applications 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, 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, that 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. And so, with all that said, well, what does it mean? It's not going to be about the quantity of design, it's going to be that quality of design.

Richard Shannon, Analyst

Okay. Good color there. Last quick question for me, Elias. How many 10% customers that you have? And were any of them mobile in the first quarter?

Todd DeBonis, CEO

How many 10% customers? I don't know. I mean, I didn't guess. Do you have the numbers?

Elias Nader, CFO

No.

Todd DeBonis, CEO

My guess is we had probably 2 10% mobile customers and then we had another at least 1 10% projector customer, my guess.

Elias Nader, CFO

About three total.

Richard Shannon, Analyst

Okay. Alright, guys. Thank you very much.

Operator, Operator

No further questions. At this time, I'll turn it back to Elias.

Elias Nader, CFO

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

Todd DeBonis, CEO

Thanks, everyone.

Operator, Operator

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