Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ________________________________ or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to . Commission File Number: 000-30269 ____________________________________ PIXELWORKS, INC. (Exact name of registrant as specified in its charter) FORM 10-Q ________________________________ (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECU ...

Pixelworks (PXLW) came out with a quarterly loss of $0.11 per share in line with the Zacks Consensus Estimate. This compares to loss of $0.07 per share a year ago. These figures are adjusted for non-recurring items.A quarter ago, it was expected that this maker of chips used in high-end digital video devices would post a loss of $0.09 per share when it actually produced a loss of $0.07, delivering a surprise of 22.22%.Over the last four quarters, the company has surpassed consensus EPS estimates three times ...

Pixelworks (PXLW) Q1 2025 Earnings Call May 13, 2025 05:00 PM ET Company Participants Brett Perry - Managing Director - IR ServicesTodd DeBonis - President & Chief Executive OfficerHaley Aman - CFONick Doyle - Vice President Conference Call Participants Suji Desilva - MD & Senior Research AnalystRichard Shannon - Senior Research Analyst Operator a reminder, this conference call is being recorded for replay purposes. I would now like to turn the call over to Brett Perry with Shelton Group Investor Relations. ...

Pixelworks (PXLW) Q1 2025 Earnings Call May 13, 2025 05:00 PM ET Speaker0 a reminder, this conference call is being recorded for replay purposes. I would now like to turn the call over to Brett Perry with Shelton Group Investor Relations. Please go ahead. Speaker1 Thank you, Kevin. Good afternoon, and thank you for joining today's call. With me on the call are Pixelworks' President and CEO, Todd DeBonis and Chief Financial Officer, Haley Amun. The purpose of today's conference call is to supplement the info ...

Revenue Performance - First quarter 2025 revenue was $7.1 million, down from $9.1 million in Q4 2024 and $16.1 million in Q1 2024, reflecting anticipated seasonality and prior quarter's higher sales of end-of-life products[6] - Mobile market revenue increased 140% sequentially, indicating a recovery and growth in this segment[9] Net Loss and Earnings - GAAP net loss for Q1 2025 was $7.8 million, or ($0.13) per share, compared to a net loss of $5.4 million, or ($0.09) per share in Q4 2024[10] - Non-GAAP net loss for Q1 2025 was $6.5 million, or ($0.11) per share, compared to a non-GAAP net loss of $4.3 million, or ($0.07) per share in Q4 2024[11] - GAAP net loss attributable to Pixelworks, Inc. was $(7,761,000) in Q1 2025, compared to $(5,363,000) in Q4 2024 and $(5,066,000) in Q1 2024[28] - Non-GAAP net loss attributable to Pixelworks, Inc. was $(6,542,000) in Q1 2025, an increase from $(4,332,000) in Q4 2024 and $(3,991,000) in Q1 2024[28] - Non-GAAP net loss per share was $(0.11) in Q1 2025, compared to $(0.07) in Q4 2024 and $(0.07) in Q1 2024[26] Operating Expenses and Profitability - Operating expenses decreased by more than $2 million year-over-year, with Q1 2025 operating expenses at $11.5 million, consistent with Q4 2024[4][7] - Adjusted EBITDA for Q1 2025 was a negative $5.8 million, compared to a negative $3.6 million in Q4 2024[11] - Adjusted EBITDA for Q1 2025 was $(5,777,000), worsening from $(3,566,000) in Q4 2024 and $(3,211,000) in Q1 2024[28] - The company is focused on achieving profitability for its Shanghai subsidiary in the second half of 2025[6] Gross Profit and Margins - Gross profit margin on a GAAP basis was 48.7% in Q1 2025, down from 54.6% in Q4 2024[7] - GAAP gross profit for Q1 2025 was $3,452,000, down from $4,966,000 in Q4 2024 and $8,114,000 in Q1 2024[24] - Non-GAAP gross profit margin decreased to 49.9% in Q1 2025 from 54.8% in Q4 2024 and 50.7% in Q1 2024[27] Assets and Liabilities - Total current assets decreased to $30,593,000 in Q1 2025 from $34,852,000 in Q4 2024[30] - Cash and cash equivalents fell to $18,504,000 in Q1 2025 from $23,647,000 in Q4 2024[30] - Total liabilities remained relatively stable at $23,996,000 in Q1 2025 compared to $24,194,000 in Q4 2024[30] - Total shareholders' equity decreased to $6,931,000 in Q1 2025 from $12,482,000 in Q4 2024[30] Strategic Initiatives - The company formalized a strategic partnership for TrueCut Motion with a leading post-production company, expanding its ecosystem[5] - The company is in active discussions regarding adjacent revenue opportunities, including ASIC design services and IP licensing[5]

Core Insights - Pixelworks has announced a strategic collaboration with PerfDog to introduce the "Frame Generation" index, a new benchmark for gaming performance evaluation that aims to redefine mobile game testing standards in the AI era [1][2][4] Group 1: Collaboration and Development - The collaboration between Pixelworks and PerfDog has led to the development of the Frame Generation index, which enhances performance testing capabilities for mobile games [1][2] - PerfDog 11.1 integrates the Frame Generation index, providing developers with richer and more precise testing data on smartphones equipped with Pixelworks' hardware rendering accelerators [1][4] Group 2: Industry Challenges and Solutions - Traditional mobile game performance testing often relies on average frame rate and frame stability, which limits the industry's ability to optimize gaming performance accurately [3] - The introduction of the hardware-accelerated frame rate evaluation standard by Pixelworks and PerfDog addresses these challenges by enabling real-time visualization of post-acceleration frame rate data [4] Group 3: Impact on Developers and Players - The new Frame Generation index allows developers and OEMs to identify rendering bottlenecks more precisely, streamlining performance optimization [4] - For gamers and reviewers, this index provides reliable measurements of system stability and visual smoothness, facilitating intuitive performance assessments [4] Group 4: Company Background - Pixelworks has over 20 years of experience in delivering visual processing innovations across various platforms, including consumer electronics and video streaming services [8] - PerfDog is recognized for its performance testing and analysis capabilities, supporting developers in optimizing application performance through real-time data monitoring and diagnostics [6]

Market Focus - Pixelworks targets three key markets: Mobile, Home & Enterprise, and Cinema, focusing on high-performance visual processing solutions [21]. - The Mobile market includes smartphones and tablets, with a growing demand for high-resolution and high refresh rate displays, driven by increased video and gaming consumption [22][24]. - The Home & Enterprise market is expanding due to the adoption of digital projectors and video delivery devices, with technology improvements enhancing performance and reducing size [26][27]. - The company focuses on developing solutions for Mobile, Home & Enterprise, and Cinema markets, aiming for higher video performance and integration [62]. Product Development and Technology - Pixelworks' TrueCut Motion platform allows filmmakers to fine-tune motion appearance, addressing issues like judder and strobing in high dynamic range displays [32]. - The company continues to refine its semiconductor hardware and software offerings to meet the specific requirements of its target markets [33][34]. - The company’s visual processing technologies are designed to improve video quality as pixel densities and screen sizes increase, addressing challenges posed by digital video [47]. - The company’s AI-based display processing technology supports dynamic refresh rates of up to 144 Hz, enhancing picture quality on both LCD and OLED displays [49]. - The company’s advanced scaling technology ensures high-quality up-conversion of lower resolution content to maintain image fidelity on high-resolution displays [49]. - The company’s visual processing solutions are designed to optimize power consumption for mobile devices, improving color, contrast, sharpness, and de-blur [49]. - The company’s product strategy emphasizes superior video quality and efficient delivery, targeting high-resolution market segments [83]. Financial Performance - Net revenue for the year ended December 31, 2024, was $43.2 million, a decrease of $16.5 million or 28% compared to $59.7 million in 2023 [213]. - Revenue from integrated circuits (IC) products in 2024 was $42.3 million, while revenue from engineering services, license revenue, and other was $0.9 million [214]. - Gross profit margin increased to 51.6% in 2024 from 43.1% in 2023, primarily due to decreased unit sales in the Mobile market and increased average selling prices in the Home & Enterprise market [215]. - Sales into the Mobile market decreased by $15.7 million or 54%, attributed to a delayed transition to the latest generation mobile products [216]. - Sales into the Home & Enterprise market decreased by $0.6 million or 2% [216]. Revenue Sources and Customer Concentration - Sales to distributors accounted for 47% of revenue in 2024, down from 66% in 2023 [52]. - Revenue through direct relationships accounted for 53% of total revenue in 2024, up from 34% in 2023 [53]. - Revenue attributable to the top five end customers represented 88% of revenue in 2024, compared to 87% in 2023 [53]. - Sales to the top distributor represented 30% and 48% of revenue for the years ended December 31, 2024 and 2023, respectively, while revenue from the top five end customers accounted for 88% and 87% of revenue for the same periods [92]. - Sales outside the U.S. accounted for approximately 98.3% of revenue in 2024, down from 99.7% in 2023 [56]. Research and Development - Research and development expenses were $31.3 million in 2024, up from $30.9 million in 2023, with a $3.2 million reduction in 2023 due to reimbursements [63]. - The company anticipates continued investment in research and development to enhance product offerings and meet market demands [63]. Competition and Market Risks - The company faces competition in the semiconductor industry, characterized by rapid technological change and evolving industry standards [58]. - The semiconductor industry is highly competitive, with potential competitors including major companies like Apple, Samsung, and NVIDIA [60]. - The company faces risks related to global economic uncertainty, which could impact business operations and customer demand [78]. - Intense competition from established companies and potential new entrants may reduce market share and profit margins [136]. Intellectual Property and Legal Risks - The company held 261 patents as of December 31, 2024, down from 280 patents in 2023, with 14 pending applications [66]. - The company faces risks related to intellectual property protection and potential infringement claims [149][150]. - The company may face significant additional costs or operational disruptions due to potential IP litigation or claims [152]. Operational Challenges - The company relies on a limited number of third-party manufacturers, increasing the risk of inventory shortages or excesses due to inaccurate sales forecasts [117]. - The company does not own semiconductor fabrication facilities and is dependent on sole-source suppliers, which may lead to increased costs and delays in product delivery [129]. - Shortages of critical materials and components may impair the company's ability to ship products on time, adversely affecting results of operations [131]. - The complexity of semiconductor manufacturing leads to a higher likelihood of defects, which can increase costs and delay product availability [132]. - Lengthy product development cycles may result in substantial costs before generating associated revenue, impacting financial results [144]. Corporate Structure and Future Plans - Pixelworks Semiconductor Technology (Shanghai) Co., Ltd. operates as a full profit-and-loss center, with plans for an initial public offering on the STAR Market pending favorable market conditions [20]. - The company is exploring an initial public offering of its subsidiary, Pixelworks Semiconductor Technology (Shanghai) Co., Ltd., on the STAR Market in China [205]. - The company has engaged Morgan Stanley as a financial advisor to review potential strategic options for its Shanghai subsidiary [206]. - The company has not yet completed the initial public offering (IPO) for PWSH, which is required by June 30, 2024, for private equity investors, and December 31, 2024, for employee-owned entities [161]. - The company is not currently profitable under China GAAP standards, which may hinder its ability to file an IPO application on the STAR Market [163]. - The company’s strategic plan aims to transform PWSH into a profit center to improve access to capital, customers, and talent in China [162]. Employee and Resource Management - The company employs 196 individuals as of December 31, 2024, a decrease from 239 employees in 2023 [72]. - The company may face increased compensation expenses to hire and retain qualified engineering personnel, particularly in its Shanghai design center [87]. - The company has significantly fewer financial resources than most competitors, limiting its ability to implement new products or enhancements [89]. Regulatory and Compliance Issues - The company has identified material weaknesses in internal controls over financial reporting, which could lead to a loss of investor confidence and a decline in stock price [114]. - The effective income tax rate is subject to changes and uncertainties, which could adversely affect future operating results [122]. - The company is subject to various anti-bribery, anti-corruption, and anti-money laundering laws, which could lead to penalties and adverse consequences if violated [112]. - The company faces challenges in maintaining effective disclosure controls and compliance with regulatory requirements, which could lead to significant penalties [120]. Financial Risks and Shareholder Concerns - The company has incurred operating losses each fiscal year since 2010, with an accumulated deficit of $505.9 million as of December 31, 2024 [90]. - The company may seek additional financing through debt and equity, which could result in dilution for existing shareholders [97]. - The company may face significant dilution of existing shareholders' ownership if additional equity is issued in the future [178]. - Anti-takeover provisions in Oregon law and the company's articles of incorporation could hinder favorable acquisition offers [184].

Core Viewpoint - Pixelworks, Inc. will present at the 37th Annual ROTH Conference on March 17, 2025, showcasing its innovative video and display processing solutions [1] Group 1 - The company is scheduled to host a fireside chat at 3:00 P.M. Pacific Time during the conference [1] - Management will be available for meetings with analysts and investors throughout the day [1][2] - A live and archived webcast of the fireside chat will be accessible in the Investors section of the Pixelworks website [2] Group 2 - Pixelworks provides industry-leading content creation, video delivery, and display processing solutions, enhancing viewing experiences across various screens [3] - The company has a 20-year history of delivering image processing innovation to major providers in consumer electronics, professional displays, and video streaming services [3]

Financial Data and Key Metrics Changes - Revenue for Q4 2024 was $9.1 million, down from $9.5 million in Q3 2024 and $20.1 million in Q4 2023, primarily due to expected headwinds in mobile [30] - Non-GAAP gross profit margin expanded 350 basis points sequentially to 54.8% from 51.3% in Q3 2024 and increased 1,000 basis points from 44.8% in Q4 2023 [31] - Non-GAAP operating expenses decreased to $10.4 million in Q4 2024 from $12.4 million in Q3 2024 and $12 million in Q4 2023 [31] - Non-GAAP net loss for Q4 2024 was $4.3 million or a loss of $0.07 per share, compared to a net loss of $7.1 million or a loss of $0.12 per share in Q3 2024 and a net loss of $2.6 million or a loss of $0.05 per share in Q4 2023 [31] Business Line Data and Key Metrics Changes - Home and enterprise revenue was approximately $8.5 million in Q4 2024, while mobile revenue was approximately $550,000 [30] - The home and enterprise business was effectively flat for the full year, reflecting stable market dynamics and end demand for digital projectors [23] - Mobile revenue continued to reflect headwinds, but new smartphone programs are expected to drive growth in 2025 [20][21] Market Data and Key Metrics Changes - The company is entering 2025 with momentum across filmmakers and studios, targeting to double commitments on major theatrical releases by year-end [13] - The Pixelworks Shanghai subsidiary received $1.8 million in cash subsidies as part of its certified status in China's Little Giant program, which serves as reimbursement for certain purchases [32] Company Strategy and Development Direction - The long-term plan is to bring TrueCut Motion to the mass market through home entertainment devices, with active discussions with three major device brands [14] - The company is pursuing new opportunities in ASIC design services and licensing specific intellectual property to enhance revenue [15][17] - A strategic review process is underway for the Pixelworks Shanghai subsidiary to evaluate potential ownership and collaboration structures [27] Management Comments on Operating Environment and Future Outlook - Management expects mobile revenue to grow throughout 2025, with a sequential increase each quarter [39] - The company anticipates a slower start to 2025 in terms of total revenue but expects a rebound starting in Q2 due to multiple growth drivers [24][28] - The Pixelworks Shanghai subsidiary is expected to achieve profitability for the full year of 2025 [26] Other Important Information - The company is implementing additional cost reduction measures, expecting a total year-over-year decrease in operating expenses of approximately $10 million for 2025 [31][25] - The company ended Q4 2024 with cash and cash equivalents of $23.6 million, down from $28.8 million at the end of Q3 2024 [33] Q&A Session Summary Question: What is the visibility for mobile revenues in the second half of 2025 and 2026? - Management expects growth throughout the year, with higher mobile revenue than in 2024, progressing sequentially [39][40] Question: Can you elaborate on the new opportunities mentioned? - The legacy product refers to the transcoding ViXS product, and discussions are ongoing with leading device manufacturers for TrueCut partnerships [43][44] Question: How does the China subsidiary benefit impact COGS and gross margin? - A portion of the subsidies received impacts COGS and gross margin related to mass purchases [46] Question: What is the timeline for the strategic review process? - Management does not expect the process to take two years and is encouraged by the progress made [68] Question: Can you provide more details on ASIC design services and IP licensing? - The company is pursuing high-margin IP licensing opportunities, focusing on display and motion processing IP [70][73] Question: What is the outlook for the digital projector segment? - The home and enterprise business is expected to be similar to 2024, with potential upside from a legacy product order [75]

Company Performance - Pixelworks reported a quarterly loss of $0.07 per share, better than the Zacks Consensus Estimate of a loss of $0.09, but worse than a loss of $0.05 per share a year ago, indicating an earnings surprise of 22.22% [1] - The company posted revenues of $9.09 million for the quarter ended December 2024, missing the Zacks Consensus Estimate by 4.32%, and a significant decline from year-ago revenues of $20.07 million [2] - Over the last four quarters, Pixelworks has surpassed consensus EPS estimates four times and topped consensus revenue estimates three times [2] Stock Outlook - Pixelworks shares have increased approximately 15.3% since the beginning of the year, outperforming the S&P 500's gain of 3.2% [3] - The current consensus EPS estimate for the coming quarter is -$0.09 on revenues of $9.5 million, and -$0.23 on revenues of $56 million for the current fiscal year [7] - The estimate revisions trend for Pixelworks is currently favorable, resulting in a Zacks Rank 2 (Buy) for the stock, indicating expected outperformance in the near future [6] Industry Context - The Electronics - Semiconductors industry, to which Pixelworks belongs, is currently ranked in the bottom 40% of over 250 Zacks industries, which may impact stock performance [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, suggesting that investors should monitor these revisions closely [5]