Company Overview - Pixelworks (PXLW) shares increased by 20.8% to $12.66 in the last trading session, with a notable trading volume and a total gain of 36.9% over the past four weeks [1] - The company is experiencing benefits from cost reduction actions, strategic partnerships, and advancements in mobile and TrueCut Motion ecosystems [1] Financial Performance - Pixelworks is expected to report a quarterly loss of $1.08 per share, reflecting a year-over-year change of +30.8%, with revenues projected at $8.5 million, a decrease of 0.4% from the previous year [2] - The consensus EPS estimate for Pixelworks has remained unchanged over the last 30 days, indicating a lack of upward trend in earnings estimate revisions [3] Industry Context - Pixelworks operates within the Zacks Electronics - Semiconductors industry, where another company, Silvaco Group, Inc. (SVCO), saw a 5.3% increase in its stock price to $4.59, but has returned -9.7% over the past month [3] - Silvaco Group's consensus EPS estimate for the upcoming report is -$0.09, representing a significant change of -228.6% from the previous year, and it also holds a Zacks Rank of 3 (Hold) [4]

Core Insights - Pixelworks Shanghai has received approximately $1.6 million in new subsidies, recognizing its contributions to technology innovation and advanced R&D capabilities [1][2] - The subsidies are linked to Pixelworks Shanghai's designation as a "Little Giant" enterprise by the China Ministry of Industry and Information Technology, highlighting its investments in semiconductor design and R&D [1][3] Group 1 - Pixelworks Shanghai is integral to the company's 25-year history of developing innovative image processing solutions that enhance visual quality and user experience [2] - Recent advancements include the integration of AI enhancements with distributed rendering architecture, significantly improving rendering performance for mobile devices and gaming [2] - The awarded subsidies aim to offset previous investments in intellectual property, EDA software, and initial chip production [2] Group 2 - The "Little Giant" designation was achieved after an extensive certification process, recognizing outstanding small and medium-sized enterprises based on strict criteria [3] - Certified enterprises benefit from increased visibility and can apply for local and national government subsidies, including grants and reimbursements for R&D investments [3] - Pixelworks has a 20-year history of delivering image processing innovations to various sectors, including consumer electronics and video streaming services [4]

PART I – FINANCIAL INFORMATION [Item 1. Financial Statements (Unaudited)](index=6&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements for Q1 2025, including balance sheets, statements of operations, comprehensive loss, cash flows, and shareholders' equity, with notes on strategic plans and restructuring [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of March 31, 2025, total assets decreased to $58.5 million from $64.1 million, primarily due to reduced cash, while total shareholders' equity significantly declined Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $18,504 | $23,647 | | Total current assets | $30,593 | $34,852 | | Total assets | $58,460 | $64,072 | | Total current liabilities | $8,834 | $8,346 | | Total liabilities | $23,996 | $24,194 | | Redeemable non-controlling interest | $27,533 | $27,396 | | Total shareholders' equity | $6,931 | $12,482 | [Condensed Consolidated Statements of Operations](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Q1 2025 net revenue declined to $7.1 million from $16.1 million in Q1 2024, resulting in an $8.1 million operating loss and a $7.8 million net loss attributable to Pixelworks, Inc Q1 2025 vs. Q1 2024 Statement of Operations (in thousands, except per share data) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Revenue, net | $7,094 | $16,054 | | Gross profit | $3,452 | $8,114 | | Loss from operations | $(8,096) | $(5,493) | | Net loss attributable to Pixelworks, Inc. | $(7,761) | $(5,066) | | Net loss per share - basic and diluted | $(0.13) | $(0.09) | [Condensed Consolidated Statements of Comprehensive Loss](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Loss) Comprehensive loss attributable to Pixelworks, Inc. increased to $8.0 million in Q1 2025 from $4.3 million in Q1 2024, including a negative foreign currency translation adjustment Comprehensive Loss (in thousands) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net loss | $(8,020) | $(5,164) | | Foreign currency translation adjustment | $(252) | $775 | | Total comprehensive loss attributable to Pixelworks, Inc. | $(8,013) | $(4,291) | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operating activities significantly increased to $6.7 million in Q1 2025, leading to a $5.1 million net decrease in cash and cash equivalents Cash Flow Summary (in thousands) | Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(6,716) | $(815) | | Net cash used in investing activities | $(17) | $(386) | | Net cash provided by (used in) financing activities | $1,590 | $(150) | | Net decrease in cash and cash equivalents | $(5,143) | $(1,351) | [Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes detail accounting policies, the strategic plan to list Chinese subsidiary PWSH on the STAR Market, recent restructuring activities, and risks from redeemable non-controlling interests - The company is pursuing a strategic plan to re-align its Mobile and Home & Enterprise businesses under its Chinese subsidiary, PWSH, with the intention of an IPO on the Shanghai STAR Market, though market conditions are not currently conducive[31](index=31&type=chunk)[32](index=32&type=chunk) - A restructuring plan was executed in February 2025, involving a **6% workforce reduction** and incurring **$468,000 in total restructuring expenses** during Q1 2025[48](index=48&type=chunk)[49](index=49&type=chunk) - Investors in PWSH hold redemption rights exercisable if a STAR Market listing is not completed by June 30, 2024, and the company is in discussions to extend or remove this option, while ESOPs hold similar rights with a December 31, 2024 deadline[83](index=83&type=chunk)[84](index=84&type=chunk)[89](index=89&type=chunk) - Subsequent to the quarter end, on May 1, 2025, the Board approved another restructuring plan involving a **4% workforce reduction**, with expected charges of approximately **$600,000 in Q2 2025**[99](index=99&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes the 56% Q1 2025 revenue decline to a significant Mobile market drop and delayed product transition, with operating expenses decreasing due to cost-cutting Revenue by End Market (in thousands) | End Market | Q1 2025 | Q1 2024 | % Change | | :--- | :--- | :--- | :--- | | Home & Enterprise | $5,761 | $6,198 | (7)% | | Mobile | $1,310 | $9,200 | (86)% | | **Total IC Sales** | **$7,071** | **$15,398** | **(54)%** | - The decrease in IC revenue was primarily due to an **86% ($7.9 million) decline** in the Mobile market, associated with a delayed transition to the company's latest generation mobile products[112](index=112&type=chunk) - Operating expenses decreased year-over-year, with R&D down **$1.6 million (19%)** and SG&A down **$0.9 million (16%)**, mainly due to reduced headcount from the June 2024 restructuring and other cost control measures[114](index=114&type=chunk)[116](index=116&type=chunk)[118](index=118&type=chunk)[119](index=119&type=chunk) - The company's cash and cash equivalents decreased by **$5.1 million** to **$18.5 million**, and during the quarter, the company raised approximately **$1.8 million** in net proceeds from a registered direct offering and its 'at the market' equity program[123](index=123&type=chunk)[128](index=128&type=chunk)[129](index=129&type=chunk) [Item 3. Quantitative and Qualitative Disclosure About Market Risk](index=31&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosure%20About%20Market%20Risk) This section is noted as not applicable for the current reporting period - This item is noted as 'Not applicable'[138](index=138&type=chunk) [Item 4. Controls and Procedures](index=32&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including CEO and CFO, deemed disclosure controls effective as of March 31, 2025, with no material changes to internal control over financial reporting - Management concluded that the Company's disclosure controls and procedures were effective at the reasonable assurance level as of the end of the period[139](index=139&type=chunk) - No changes occurred during the quarter that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[140](index=140&type=chunk) PART II – OTHER INFORMATION [Item 1A. Risk Factors](index=33&type=section&id=Item%201A.%20Risk%20Factors) This section details significant risks, including those from China operations, potential failure of the PWSH STAR Market listing, dependence on limited customers and manufacturers, and Nasdaq delisting risk - The company faces significant risks from its majority operations in China, including changes in political/economic conditions, PRC legal system uncertainties, and potential difficulties in transferring funds from its Chinese subsidiary, PWSH[221](index=221&type=chunk)[222](index=222&type=chunk)[223](index=223&type=chunk) - The strategic plan to list PWSH on the STAR Market is uncertain, and investors and ESOPs hold redemption rights that could trigger if the listing is not completed by set deadlines (June 30, 2024, and Dec 31, 2024, respectively), which would materially impact the company's cash position[226](index=226&type=chunk)[227](index=227&type=chunk) - The company is highly dependent on a limited number of customers and distributors, with the top five end customers accounting for **98% of revenue** for Q1 2025[156](index=156&type=chunk) - The company is not in compliance with Nasdaq's minimum bid price requirement of **$1.00 per share** and has until September 6, 2025, to regain compliance, which may necessitate a reverse stock split[244](index=244&type=chunk) - The company relies on a limited number of sole-source, third-party manufacturers, exposing it to risks of shortages, price increases, and supply chain disruptions[191](index=191&type=chunk)[192](index=192&type=chunk) [Item 5. Other Information](index=54&type=section&id=Item%205.%20Other%20Information) During Q1 2025, no director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement - During the three months ended March 31, 2025, no director or officer adopted or terminated a 'Rule 10b5-1 trading arrangement' or a 'non-Rule 10b5-1 trading arrangement'[249](index=249&type=chunk) [Item 6. Exhibits](index=55&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including corporate documents, a common stock purchase agreement, and CEO/CFO certifications - The exhibits include key corporate documents, the Form of Common Stock Purchase Agreement dated March 24, 2025, and required CEO/CFO certifications[251](index=251&type=chunk) SIGNATURE - The report was signed on May 14, 2025, by Haley F. Aman, Chief Financial Officer[253](index=253&type=chunk)[255](index=255&type=chunk)

Core Viewpoint - Pixelworks reported a quarterly loss of $0.11 per share, aligning with the Zacks Consensus Estimate, compared to a loss of $0.07 per share a year ago [1] - The company’s revenues for the quarter ended March 2025 were $7.09 million, missing the Zacks Consensus Estimate by 5.41%, and down from $16.05 million year-over-year [2] Financial Performance - Over the last four quarters, Pixelworks has surpassed consensus EPS estimates three times and topped consensus revenue estimates two times [2] - The company has experienced a stock price decline of approximately 21.8% since the beginning of the year, while the S&P 500 has only declined by 0.6% [3] Future Outlook - The future performance of Pixelworks' stock will largely depend on management's commentary during the earnings call and the trends in earnings estimate revisions [3][4] - The current consensus EPS estimate for the upcoming quarter is -$0.06 on revenues of $10 million, and for the current fiscal year, it is -$0.21 on revenues of $48 million [7] Industry Context - The Electronics - Semiconductors industry, to which Pixelworks belongs, is currently ranked in the top 39% of over 250 Zacks industries, indicating a favorable outlook compared to the bottom 50% [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can impact Pixelworks' stock performance [5]

Financial Data and Key Metrics Changes - Revenue for Q1 2025 was $7.1 million, down from $9.1 million in Q4 2024 and $16.1 million in Q1 2024, reflecting anticipated seasonality and previous higher sales of end-of-life products [22][25] - Non-GAAP gross profit margin for Q1 2025 was 49.9%, compared to 54.8% in Q4 2024 and 50.7% in Q1 2024, primarily due to product mix shifts [23][24] - Non-GAAP operating expenses were $10.4 million, flat sequentially but down $2.2 million year-over-year, with total expected reductions of approximately $10 million for the full year of 2025 [24][25] Business Line Data and Key Metrics Changes - Home and Enterprise revenue was approximately $5.8 million, while mobile revenue was approximately $1.3 million in Q1 2025, with mobile showing sequential growth [22][23] - The TrueCut Motion platform is targeting to double the number of titles from five in 2024 to ten in 2025, indicating growth in the film industry [9][10] Market Data and Key Metrics Changes - The mobile business saw sequential revenue growth in Q1 2025, driven by shipments of visual processors for previously launched smartphone models [12][22] - The projector market remained stable, with no significant impacts noted from the global macro environment, and revenue expected to mirror 2024 levels [15][16] Company Strategy and Development Direction - The company is focused on expanding the TrueCut ecosystem and achieving critical mass for broader adoption in both theaters and home entertainment devices [21] - A strategic review process for the Pixelworks Shanghai subsidiary is underway, with potential outcomes expected within 90 days [19][20] Management's Comments on Operating Environment and Future Outlook - Management anticipates a challenging first half of 2025 from a revenue perspective but is optimistic about engagements across diverse opportunities to drive growth [18][20] - The company expects Pixelworks Shanghai to reach profitability in the second half of 2025, contingent on various revenue streams materializing [19][20] Other Important Information - The company has engaged in a formal review process for its Shanghai subsidiary after receiving strategic interest, indicating potential changes in ownership or collaboration structures [19] - The company has implemented additional cost reduction measures since the beginning of 2025, which are expected to yield further benefits [24][26] Q&A Session Summary Question: What revenue levels might Pixelworks Shanghai achieve for profitability? - Management indicated that operating expenses for Shanghai could be around $7 million per quarter, with profitability achievable if a mix of revenue streams materializes as anticipated [29][30] Question: Are the device discussions for TrueCut with Chinese brands or global OEMs? - Management clarified that the certification testing mentioned is not with a Chinese brand, focusing instead on North American and European markets for home entertainment devices [32][38] Question: Can you provide a framework for sizing ASIC design services opportunities? - Management explained that revenue size for design services depends on the extent of involvement, with potential costs ranging from $10 million to $20 million for full turnkey services [39][42] Question: How are mobile engagements lining up for revenue expectations? - Management noted that replicating 2023 revenue levels in mobile would be challenging, with expectations closer to 2024 levels, but an uptick is anticipated in the second half of the year [46][47] Question: What is the status of the collaboration with the post-production house? - Management confirmed a signed agreement with a large post-production house, emphasizing the benefits of motion grading for premium large format experiences [50]

Financial Data and Key Metrics Changes - Revenue for Q1 2025 was $7.1 million, down from $9.1 million in Q4 2024 and $16.1 million in Q1 2024, reflecting anticipated seasonality and previous higher sales of end-of-life products [21] - Non-GAAP gross profit margin for Q1 2025 was 49.9%, compared to 54.8% in Q4 2024 and 50.7% in Q1 2024, primarily due to product mix shifts [21][22] - Non-GAAP operating expenses were $10.4 million, flat sequentially but down $2.2 million year-over-year, with expectations for a total year-over-year decrease of approximately $10 million for 2025 [22][23] - Non-GAAP net loss for Q1 2025 was $6.5 million, or a loss of $0.11 per share, compared to a net loss of $4.3 million in Q4 2024 and $4 million in Q1 2024 [24] Business Line Data and Key Metrics Changes - Home and Enterprise revenue was approximately $5.8 million, while mobile revenue was approximately $1.3 million in Q1 2025 [21] - Mobile revenue increased sequentially in Q1 2025, driven by shipments of visual processors for previously launched smartphone models [12] - Projector revenue was effectively flat year-over-year, with no significant impacts noted from the global macro environment [15] Market Data and Key Metrics Changes - The film industry is showing signs of recovery, with an uptick in activity from filmmakers and studios, indicating a positive shift from previous headwinds [8] - The exhibition ecosystem for TrueCut Motion includes over 1,500 premium theaters, with significant capital investments from exhibitors [10] Company Strategy and Development Direction - The company is focused on expanding the TrueCut Motion ecosystem and achieving critical mass for broader adoption in both theaters and home entertainment devices [20] - The strategic review process for Pixelworks Shanghai is nearing closure, with expectations for a clear strategic direction within 90 days [18] Management's Comments on Operating Environment and Future Outlook - The first half of 2025 is expected to be challenging from a revenue perspective, but the company is well-positioned to benefit from diverse opportunities for growth [17][19] - Management remains optimistic about reaching profitability for Pixelworks Shanghai in the second half of 2025 [19] Other Important Information - The company has engaged in a formal review process for Pixelworks Shanghai after receiving strategic interest, with ongoing due diligence with several parties [18] - The company anticipates continued benefits from cost reduction measures implemented over the past year [23] Q&A Session Summary Question: What revenue levels might Pixelworks Shanghai achieve for profitability? - Management indicated that operating expenses for Pixelworks Shanghai could be around $7 million per quarter, with a mix of revenue sources needed to reach profitability [29][30] Question: Are the device discussions for TrueCut with Chinese brands or global OEMs? - Management clarified that the focus is on global home entertainment devices, primarily targeting North America and Europe [37] Question: Can you provide a framework for sizing ASIC design services opportunities? - Management explained that revenue size depends on the extent of design services provided, with potential costs ranging from $10 million to $20 million for full turnkey services [41] Question: How are mobile engagements lining up for revenue levels? - Management noted that replicating 2023 revenue levels in mobile would be challenging, with expectations closer to 2024 year-over-year levels [44] Question: Can you elaborate on the collaboration with the post-production house for TrueCut? - Management confirmed a signed agreement with a large post-production house, emphasizing the benefits of motion grading for premium large format experiences [48]

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]