TranSwitch Corporation's CEO Discusses Q1 2013 Results - Earnings Call Transcript

May.14.13 | About: TranSwitch Corp. (TXCCQ)

TranSwitch Corporation (TXCC) Q1 2013 Earnings Call May 14, 2013 5:30 PM ET

Executives

Mary Lombardo - IR Manager

Ali Khatibzadeh - President and CEO

Robert Bosi - CFO

Analysts

Shepherd Davis - Private Investor

Richard Shannon - Craig-Hallum Capital

Edward Walbridge - Ergon Institute

Mark Robinns - Private Investor

Robert Dickson - Private Investor

Sung Hong Chen - Private Investor

Peter Jadrosich - Private Investor

Operator

Good day, everyone, and welcome to the TranSwitch First Quarter 2013 Earnings Release Conference. Today's call is being recorded. At this time, for opening remarks and introductions, I will turn the call over to Ms. Mary Lombardo, Investor Relations Manager. Please go ahead, Ms. Lombardo.

Mary Lombardo

Thank you and good afternoon. With me today are Dr. Ali Khatibzadeh, our President and CEO, and Mr. Robert Bosi, our CFO.

This call will include forward-looking statements that involve risks and uncertainties that could cause TranSwitch’s results to differ materially from management’s current expectations. We encourage you to review the Safe Harbor statements contained in the earnings release published today as well as TranSwitch’s most recent SEC filings for a more complete description.

At this point, I would like to hand it over to Dr. Khatibzadeh for his remarks.

Ali Khatibzadeh

Thank you, Mary, and good afternoon, ladies and gentlemen. Thank you for joining us. I'm pleased to report that since our last call we have made good progress on three important fronts. First, were on plan for expanding our customer base with our new HDplay product. Second, we are now sampling our latest HDplay product with MHL mobile video connectivity. This new product is expected to drive significant revenue in the second half of this year and beyond. Third, and very importantly, we have many significant strides in generating the cash required to fund the ramp of our new video connectivity business towards our goal of reaching breakeven in the second half of 2013.

Let me start with a brief overview of our results for the first quarter. Bob Bosi will have more details later in the call.

Our first quarter revenue came in at $4.6 million, which is 24% higher than the same quarter in 2012, but lower than the preceding quarter due to delay of an IT contract. Gross margin came in at 81%, principally due to the higher mix of licensing and IP revenue in the quarter. We continue to see a significant IP licensing opportunity funnel that can augment our product sales as we ramp our new video connectivity business.

Non-GAAP operating expenses came in at $5.9 million, which included a one-time $600,000 charge for production tooling of new HDplay product. Excluding this one-time charge, our recurring expenses were lower than the previous quarter. As we said before, we expect our non-GAAP operating expenses to be in the range of $5 million to $5.5 million per quarter excluding one-time charges.

Since the beginning of the year, we made significant progress towards raising the cash necessary to ramp our new video business. We raised a total of about $4.8 million through the sale of equity, $1.1 million of which came through our equity line with Aspire Capital and $3.7 million through the secondary offering. We have since closed the equity line with the Aspire Capital.

In addition, we have signed a contract for the sale of ten of our legacy telecom patents for $1.5 million total. We have completed sale of five patents for about $0.8 million and anticipate closing on the remaining five patents next. We will continue to market the balance of our roughly 50 telecom patents to generate additional cash and strengthen our balance sheet and will update you when material information becomes available.

Now I would like to turn to our HDplay customer traction. As of today, we have over 75 customer opportunities for HDplay products. While we cannot guarantee that 100% of these opportunities will translate to revenue. We are remaining very bullish about growth our HDplay business this year.

Given the quarter we announced new customer including Yudong for high-definition video switch, and Tecnoroll for a variety and video encoder solutions. As I mentioned on our last call, the total level of our video business in 2013 is more a function of the timing of our customer production plan in the opportunity side. And that remains engaged.

As of the end of 2012, we have started the shipment of HDplay products for four customers. That number has now grown to nine active customers, and we expect to have 14 active customers for HDplay products by end of June. This is consistent with our plan and with the projections that I provided last quarter.

I would like to point out that we have multiple projects with most of these customers and expect revenue contribution from each customer to grow as we move on a quarterly basis throughout the rest of this year. We have a very full and exciting funnel of new HDplay-based products and we expect to see new customer products coming on line almost every month during this period. We are also actively working with global top-tier OEMs and hope to be able to announce those to you over the next few months.

As the year progresses, we expect to be in production with considerably more costumers, including large tier one customers, leading to a rapid expansion of our HDplay revenues. Our target is to reach breakeven in the third quarter and profitability in the fourth quarter of 2013, and based on the designing opportunities we see in front of us, we are confident we can reach this goal.

The most important recent development has been the launch of our HDplay receiver with MHL mobile connectivity feature. This product is optimized for too high volume areas, mid-range TVs and that includes monitors as well as projectors, both front projectors and pico projectors. In the front projector business, our references on relationship with Texas Instruments is paying off. We have now four new customers, four new and leading Japanese projects OEMs and one major U.S. brand adopting HDplay for their new products.

With these customers expecting to reach production by the end of this year or earlier next year, they should bring the total number of our projector customers to seven of the leading OEMs putting us in a position to gain significant share of the estimated 40 million projector market in 2014.

On the pico Projector front which is the faster growing segment of the projector market, we are in track to launch HDplay in to production by the fourth quarter of this year working closely with our references and partners.

We have a number of new pico projector customer opportunities including the world’s leading electronic OEM. Our target is to ship over $10 million of HDplay products for the pico projector market alone in 2014.

In the TV and monitor segment, we see strong adoption of MHL and DisplayPort especially in Korean brands as well as Chinese and Taiwanese ODM models exported to U.S. and Europe under different brands. We’re actively engaged with these ODMs and expect HDplay to have high-volume customers in the second half of this year.

In addition to these market segments, we’re also seeing very decent traction and opportunities in sound bars for TVs and video downloads for leading popular small phone and tablets. So, we’re really seeing a good expansion of HDplay in a number of market segments. All consumers with a exciting growth opportunities.

Overall, I’m very pleased with our traction and the size and diversity of market and customer opportunities that we have for us this year and 2014. As you know, MHL is rapidly becoming a dominate in mobile video standard and is being adopted by many tier one mobile devices such as Samsung Galaxy phones and tablets. And of course this is driving their penetration of MHL in TVs and other products such as sound bars, home entertainment electronics.

We believe HDplay is the first product in the market that offers HDMI DisplayPort and MHL features all in one device. We’re experiencing strong pull from multiple ODMs for this product and we’re currently sampling to numerous customers worldwide.

Another important market trend that is presenting growth opportunities for us in 2014 is the launch of ultra-definition TVs incorporating HDMI 2.0 DisplayPort and MHL connectivity expanders. Ultra-definition TVs used in new generation LCD panels capable of four times a pixel resolution of current generation 1080p TVs.

And as a result of that their video data speed on the cable needs to double to deliver the crisp and compelling images. As a member of HDMI 2.0 forum, we’ve been participating of course in the definition and standardization of this technology. And we’re expecting we will have products on the market next year for this generation TVs. We are getting strong requests from tier one OEMs for these products in 2014, and as we’re seeing from prior technology migrations was that initial chips are going to be imbedded into the high-end products, we believe that we’ll find our way into low end and mid-tier higher volume TVs soon out there.

Today, 1080p is the standard technology for LCD panels but it’s going to start to coming in legacy technology. The 4k, 2k or ultra-definition TVs are already showing up on the market and you’re seeing actually, we’re seeing a downwards price, rapid downward price on 4k TVs so you can actually find 4k TVs online for less than $2,000 which is kind of very interesting and I think it’s going to drive up the adoption of these TVs.

Sony is predicating that in three years’ time it will be hard to find the 1080p television as it is today to find the 720p television. And in fact Sony has over 100 movies available in the 4k, 2k format and is insisting that all of the new television shows shot at Sony Pictures must also be filmed in 4k resolutions. So that’s definitely a growing trend and we see that as an opportunity to drive demand for the next generation HDplay products.

Now, let me briefly switch to the telecom side of our business as we see some positive developments there in the voice-over LTE market. We've shifted our R&D resources to focus on the video interconnect business and then we’re taking steps to dramatically reduce our operating expenses on the telecom side. We will continue to leverage our existing telecom products as the source of revenue.

In the quarter, we announced that our Atlanta processer was selected by TELES for 3G Cellular Broadband Gateways which are being currently qualified at U.S. carriers. Additionally, leading OEM has designed our Atlanta processor in voice-over LTE gateway solution for Reliance Infocom. Reliance is the leading tier one carrier in India which is in the process of expanding its service offering to add voice capabilities to their Pan India 4G LTE network.

And our current expectations based on their announcements, so that there will be a soft launch in the third quarter of this year in two major cities; I believe its New Delhi and Mumbai. And so culminate in volumes ramping in significant levels in 2014 across other cities.

While this opportunity has now reached the designed win stage for us and the customer product is in further testing as a carrier, we believe this opportunity represents meaningful revenue potential estimated at about $12 million in 2014 for our telecom business.

Our existing telecom products continue to provide advantages on the infrastructure and customer premises equipment markets and we plan to continue to harvest telecom revenues, opportunistically.

Now, finally while I remain confident about reaching our goal of breakeven in the second half of this year to ramp up our new video business. I would like to emphasize that we continue to explore all strategic options to maximize shareholder value. To that end and based on recent developments we have hired Needham & Company to assist us in the evaluation of strategic alternatives.

I’ll now hand it over to Bob, who’ll discuss our financials in more detail.

Robert Bosi

Thank you Ali and good evening to everyone. Our Q1 revenue was 4.6 million as compared to our Q4 2012 revenue of 5.6 and our Q1 2012 revenue of 3.7. Product revenue in the quarter was approximately 2.1 million compared to product revenue in Q4 in 2012 with 3.1 million and 3.2 million in Q1 2012.

Product revenue included $200,000 of sales of our new HDplay product line. Intellectual property and service revenue for the quarter was 2.5 million compared to service revenue in Q4 2012 of 2.5 million and 0.5 million in Q1 2012.

In the quarter, we recognized $800,000 to the sale of five telecom patents, as Ali already mentioned. Intellectual property and service revenue included revenue related intellectual property licensing our HDMI DisplayPort and HDP technologies as well as telecom voice processing software, royalties and patents.

By product line our CPE revenue for the quarter 1.7 million compared to CPE revenue in Q4 2012 of 0.9 million and 0.7 million in Q1 2012. Our infrastructure revenue for the quarter was 2.9 million compared to infrastructure revenue in Q4 2012 of 4.7 million and 2.9 million in Q1 2012. Our gross margin increased to 81% in the first quarter compared to 75% last quarter and 59% in the first quarter of 2012.

Our margin increase was due to the high level of IP licensing and the patent sale. On a non-GAAP basis operating expenses were 5.9 million compared to our prior quarter’s operating expenses of 5.6 and the prior year’s operating expenses of 7.5. Operating expenses in this quarter included a charge of 0.6 million for mass set cost or second generation HDplay product which features HDMI MHL connectivity but for this cost non-GAAP operating expenses would have been 5.3 million which is consistent with our guidance of 5 million to 5.5 million. Also during the quarter we again took further action to reduce our operating expenses and recognize additional restructuring reserves of 0.3 million.

Non-GAAP operating results for Q1 was a loss of 2.2 million on a comparable basis our prior operating loss was 1.4 million in Q1 of 2012 we had a loss of 5.3 million. Non-GAAP net loss for Q1 was 2.4 million or $0.07 per share on a basic and diluted basis as compared to a net loss of 1.5 million in Q4 2012 and 5.5 million net loss in Q1 of 2012. Q1 2013 GAAP diluted net earnings per share was $0.08 as compared to a net loss per share of $0.09 in Q4 2012 and a net loss of $0.20 per share in Q1 2012. Comparable measures of gross margin operating expenses to operating income and net income are reconciled to related non-GAAP amounts in our reconciliation of GAAP to non-GAAP measures included in the press release today. The reconciling items for Q1 were as follows; expense of 0.6 million in stock-based compensation, expense of 0.3 million in restructuring charges, and a benefit of 0.2 million from the reversal of accrued royalties. These items are described in our press release.

Moving to the balance sheet, cash and marketable securities ended the quarter with approximately 0.6 million versus 2.2 million at December 31, 2012. At quarter-end, the company had 1.3 million balance on its working capital loan with Bridge Bank versus 2.4 million at the end of the year. And as we announced on the third of April, we raised 3.7 million in public secondary offering which significantly improve our financial position from the quarter end.

You should also note that we cancelled our equity line arrangement we have with this prior capital. With that said, I'd like to open it with question. Operator?

Question-and-Answer Session

Operator

(Operator Instructions) We will go first to Shepherd Davis, Private Investor.

Shepherd Davis - Private Investor

Just a financial question; in the last couple of years as you will know revenues are going down. We had huge losses and you guys continue to pay yourselves these outlandish cash payments, high salaries, the board gives cash money and we are just really sure, how do you justify that?

Ali Khatibzadeh

Shepherd this is Ali; so obviously we do a comparison in terms of our compensation package for the board and management will continuously review that at almost every comp committee, we review that against our peer group and we have taken steps by the way to align our compensations. For example, as the executives in this company have taken salary reduction and certainly EBIT on the board side, we have taken steps to reduce board cash compensation, so I am sure I am not specifically answering your question but we have taken steps and we will continue to look at ways to make sure that the board and the management compensation is aligned with the save the company as well as the market factors.

Shepherd Davis - Private Investor

Ali look I have been in this stock eight, nine years, I once owned almost over 1%, it was worth more than $1 million, it’s now worth $50,000 and we have taken a haircut you can't believe. And you guys are still getting high pay and you are giving yourself all these extra cash bonuses it shows in your statements. I mean how can you justify it? You are everywhere in (inaudible); this same work, everybody makes a lot. You (ought to be wearing a hair and shirt) if this thing works everybody makes a lot. But you guys should be really, really cutting every expense now.

Ali Khatibzadeh

I think your point is well taken again I am not aware of any cash bonuses we've given out, did enough but just.

Robert Bosi

There have been low cash bonuses and all that at ten years probably or.

Ali Khatibzadeh

But the point is well taken and I think we will certainly continue to look for opportunities to allowing our compensation with them.

Just a point I would like to make is while we understand and share the frustration I think in terms of our strong performance; there is a lot of hard work that has gone to try to position the company in the new direction which we're beginning to pay off you see the, although it hasn't yet quite fully reflected in terms of our financials.

It is coming; I am confident there that it will reflect in our financial metrics as we go forward. And generate a significant value for the company, I believe going forward.

Operator

We will move to the next question, it comes from Richard Shannon with Craig-Hallum.

Richard Shannon - Craig-Hallum Capital

Can you just give us a sense of what you are looking for revenues here in the second quarter relative to the first and then Bob if you can remind us what’s your break even model looks like now you talked about some OpEx; just some minor OpEx reductions, this is a reminder where we sit there.

Robert Bosi

In terms of revenue ends; or we are not giving guidance for second quarter and again what we are seeing in terms of transfer, seeing our HDplay revenues growth as we expect from quarter-to-quarter, we are seeing our telecom business somewhat stabilized and so we don’t expect that to change from this quarter; there might be; again I think what we said, you can expect somewhere of the order $2.5 million of telecom product sales per quarter for the rest of this year. It could be higher one quarter.

In terms of IP license opportunities, we have still significant opportunities in front of us. It's more difficult to forecast those accurately because of the timing and the granularity of those opportunities which come in in chunks and depending on timing it could skew our revenues, until we get into the second half where the HDplay revenue becomes a meaningful portion of our business and we expect it to exceed our legacy business as go from Q3 to Q4, we expect HDplay revenue to significantly exceed our legacy business.

We're not giving guidance for Q2, I expect things to gradually improve from where we are today and as get into the second half we see a significant uptick in our forecasted revenue. And we have publicly stated our breakeven was about $8 million. We have an objective to get it down to at least 7.5 or lower.

Richard Shannon - Craig Hallum

Okay, second question from me. Ali, it sounds like you’re increasingly more confident in the outlook for your HDplay product as MHL. I'm not sure if you're still calling it HD Mobile today or not. But can you talk to us a little bit more about what you're hearing and seeing there and maybe a little more specifics on timeframe? Could we see meaningful revenues at the end of this year or is this really more of a 2014 story?

Ali Khatibzadeh

So you’re referring to HD mobile product?

Richard Shannon - Craig Hallum

Yes.

Ali Khatibzadeh

So we're on target to launch this product this year, our first product in that family will be launched this year. We are targeting sampling customers, sometimes late Q3 timeframe and with revenue into 2014 we're expecting significant, we're already getting a strong pull from OEMs we’re expecting significant traction as we launch the product. And we're expecting that to contribute significantly to our revenue in 2014.

Richard Shannon - Craig Hallum

And can you give us a sense of the breadth there? You mentioned strong pulls from OEMs. Can you give us a sense of breadth and how many of those are tier 1s.

Ali Khatibzadeh

Well in that space, as you well know Richard, the business is concentrated among the handful of top tier OEMs that comprise the majority of the market. So we believe we have significant opportunities with some of these OEMs. And we can't be specific at this time, but as we go forward, we think the volumes are very significant in that market and at the moment the competitive landscape is definitely is such that, we believe we can get a decent market share as we get into the markets later this year.

Richard Shannon - Craig Hallum

Okay, that's fair enough, maybe I'll jump out of line here so I can let others get in.

Operator

We'll take the next question from Edward Walbridge with Ergon Institute.

Edward Walbridge - Ergon Institute

Gentlemen I have two comments. First, I don't think you're over compensated, I think you're trying to do something quite remarkable, turn the company around in a new direction and I'm grateful that you seem to be doing that. It looks like there's a real possibility that that could happen successfully. So I'm grateful to you. I don't think you're overcompensated. Second comment, you mentioned strategic alternatives, could you give us some examples of what exactly you mean by that?

Ali Khatibzadeh

So in terms of strategic alternatives I cannot be specific. I think what we said and I referred it in the press release is that, based on recent inquiries we hired Needham to assist us in evaluating available options to us, to make sure that we can make the best decision for the shareholders of this company. So and this could range and at this point I cannot give you a specific comment, but I think you could, what we're trying to see, how do we best get the value of the new business that we developed for the shareholders of this company. And there are different ways I think we can generate this value and unleash it, so that it gets reflected into our stock price going to the shareholder returns.

Operator

The next question come from Mark Robinns. Please go ahead.

Mark Robinns - Private Investor

I've been a shareholder for at least three years, actually I was in the stock many years ago and I bought it because you said there was going to be a shift in the company, turning the company around to an electronics company. But I've become very discouraged over the last number of years. And I wonder how long this stock that I paid a lot more for, that's now sitting at $0.40, what the chances are, we hear that there're 70-75 companies that you're possibly doing business with. But I wonder how many contracts you're going to need to keep this company survive to 2014.

I mean this I believe is the second or third secondary that was done, and the stock is getting diluted and I don't hear any idea of where the contracts are, how much longer this could go on before the company is going to have to fold. So that's my biggest concern and will you be ready with mobile at the end of the year for HD Mobile? And are there clients? I mean how closely you'd be getting accounts. This is my concern, and I am holding quite a lot of shares with a number of friends as an individual investor. Thank you.

Ali Khatibzadeh

Thank you for the question and I certainly understand, we tend to share your frustration with the way that the stock has performed. We feel very confident with the steps we have put in place with the new products that we have on the market. Now we are getting traction. As we said, over 75 customer opportunities we have, and we continuously say that we cannot guarantee all of those customers will turn into revenue for us. And we are not counting on all those customers to turn into revenue for us. The combined value of these opportunities today is over $20 million this year for us. And we are targeting to get to breakeven in the third quarter of this year and that is not very far from where we are sitting.

And become profitable in the fourth quarter of this year. Obviously with, starting with the last year, actually 2011 but going into 2012 with a reduction in our, material reduction in our legacy business it did put us in a difficult position of having to go raise cash. We looked at a number of alternatives including sale of legacy products, sale of, we continue to look at sale of patents as alternative ways to generate the cash we need to rent the new business. But at the end of the day we wanted to make sure that we had the cash required and if we resorted to sale of equity as sort of as the last option to make sure we have the cash we need to get to the ramp-up phase of this business.

Robert Bosi

I understand again your frustration and what we can do on this end is to keep marching forward and we do have the cash we need to get to breakeven. And in terms of the mobile product, we are on target to put this product in the hands of the customers in the second half of this year. And I believe based on everything I'm hearing, the opportunities are there and we should get decent traction in the market.

Mark Robinns - Private Investor

Well let’s hope so. I was hoping, I heard the numbers and they are discouraging, but I thank you very much for your answer sir.

Ali Khatibzadeh

And again, that’s, just to comment again, we also as I said that we look at all options including strategic options to make sure that we get the best value for our shareholders.

Operator

(Operator Instructions) And we will move next to Robert Dickson.

Robert Dickson - Private Investor

Gentlemen just want a couple of quick questions here. Basically the telecom, the patents that sold at, five of them for $800 million, excuse me $800,000 it seems to me a very disappointing in the number. What is your take on that and the remaining five, are you looking at pretty much the same dollar value at 800,000?

Ali Khatibzadeh

Yes, again we have a contract for 1.5 million for the sale of 10 patents. And we have collected on five of those patents of the $800,000. And the balance of that which is about $700,000, we expect payment soon. We do not want to out a timeline on it, obviously, but the buyer has promised payment to us soon and we are expecting to close on that on the remaining five patents. And so that is a firm contract that we have in place. And about the other 50 or so patents, we are continuing to market that. There is some additional work we are doing to develop claims charts for these patents to enhance the value of the patents. And that is ongoing and we expect based on that we should be able to monetize these as we go forward.

Robert Dickson - Private Investor

Alright any of these patent sales to Drakes Bay are these ones that you had prior to hiring Drakes?

Ali Khatibzadeh

Yes the first 10 patents that I referred to that we have contract on, was not through Drakes Bay. That was the one that was, we initiated in a separate, separately.

Robert Dickson - Private Investor

So we have not gotten anything from Drakes Bay at all at this point. Okay. Breakdown for your product line, could you give for REITs like the telecom, for HDplay, have you delineated that I must have missed it if you did?

Ali Khatibzadeh

I think what Mark said is we have in the quarter about $2.2 million of total product sales. I believe 200,010 of that was in HDplay and the rest were telecom products. Now that the HDplay products were 65% increase on a quarter-to-quarter basis from last quarter to this quarter.

Robert Dickson - Private Investor

And you said that there was a miss of some value in the telecom area for this quarter?

Robert Bosi

You were referring to the comment on the IP contract.

Ali Khatibzadeh

Well, I said that the revenue in this quarter, total revenue was lower than the fourth quarter revenue, primarily due to delay in a contract, in an IP contract that we had anticipated in the first quarter.

Robert Dickson - Private Investor

And projected that will be into the next, into quarter two?

Robert Bosi

We are pursuing that, yes.

Operator

And the next question comes from Sung Hong Chen.

Sung Hong Chen - Private Investor

I'm just wondering, of the strategic alternatives there you mentioned evaluating, are any of them potentially a merger or acquisition?

Ali Khatibzadeh

It ranges all strategic options. So the answer is yes, that we'll be looking at all options, including the ones you mentioned.

Operator

(Operator Instructions) And we'll go to Peter Jadrosich.

Peter Jadrosich - Private Investor

You mentioned that you're going to be breakeven cash flow in the third quarter. What's your cash position now? The cash burn has been probably about 3 million per quarter? And what kind of bank relationship do you have?

Robert Bosi

We ended the quarter with $0.6 million. We raised $3.7 million and we have a very good bank relationship with Bridge Bank, it's a $5 million asset base lending facility which is based on receivables.

Ali Khatibzadeh

Just again, we ended Q1 at $0.6 million. $3.7 million came in immediately after the end of the quarter. Our cash use is not $3 million per quarter. I believe it was actually less than $2 million in the first quarter. Our cash use typically should correlate well with our non-GAAP operating loss or income. I believe both in Q4 and Q1, it was less than the actual profit that we reported.

Peter Jadrosich - Private Investor

And how much money do you need, how much cash do you think you need to ramp the business up?

Ali Khatibzadeh

So we have of course a receivable baseline of credit that we tap into as working capital.

Peter Jadrosich - Private Investor

It's going to be available now?

Robert Bosi

It's available, yes.

Peter Jadrosich - Private Investor

The full $5 million or?

Robert Bosi

Based on 80% of our accounts receivable balance at any point in time.

Operator

And at this time we have no further questions. I’d like to turn the conference back over to our speakers for any additional or closing remarks.

Ali Khatibzadeh

Thanks again for joining us. Let me summarize a few key points. First, while I would not consider it a strong balance sheet, our balance sheet has improved. We've gotten some relief with the additional cash we have raised this year.

Our video connectivity revenue is growing and it's on the way to becoming a sizeable portion of our total business in the second half. We expected to exceed our legacy business as we move from Q3 to Q4 of this year, when we're targeting to become profitable again. And we're confident we can reach that. Our newest product that we've introduced to market with MHL mobile feature is receiving significant interest amongst several potential customers, including world leading OEM. Our collaboration with leading reference design partners in the projector space has given us a lot of momentum in both the front and Pico Projector markets.

Our HD mobile product, our first HD mobile transmitter product is on target for launch in the second half of this year. We have a strong interest from leading Smartphone and tablet OEMs. This product family should give us another strong growth engine in 2014.

So with all that said, we are expecting a significant ramp in our business, but we're also cognizant that as board and management of this company, that we are committed to exploring all strategic options that could result in the best interest of the shareholders. And based on recent developments, as we said earlier, we have hired Needham & Company to assist us in evaluating these options. With that, I'd like to thank you again.

Operator

That does conclude today's presentation. Thank you for your participation.

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