Core Viewpoint - Pixelworks, Inc. reported its financial results for the second quarter of 2025, showing a sequential revenue increase driven by seasonal growth in product shipments, while also highlighting ongoing strategic opportunities and collaborations in the mobile sector [1][4][17]. Financial Performance - Revenue for Q2 2025 was $8.3 million, up from $7.1 million in Q1 2025 but down from $8.5 million in Q2 2024, indicating a 16% sequential increase [4][17]. - GAAP gross profit margin for Q2 2025 was 45.8%, compared to 48.7% in Q1 2025 and 50.7% in Q2 2024 [5][23]. - Non-GAAP gross profit margin for Q2 2025 was 46.0%, down from 49.9% in Q1 2025 and 51.0% in Q2 2024 [6][23]. - The company recorded a GAAP net loss of $6.7 million, or ($1.27) per share, an improvement from a loss of $7.8 million, or ($1.54) per share in Q1 2025, and a loss of $10.1 million, or ($2.09) per share in Q2 2024 [7][8][21]. - Non-GAAP net loss for Q2 2025 was $5.3 million, or ($1.00) per share, compared to a loss of $6.5 million, or ($1.30) per share in Q1 2025, and a loss of $7.7 million, or ($1.60) per share in Q2 2024 [8][21]. Business Developments - The company is focusing on advancing market opportunities through its Shanghai-based subsidiary, with increased interest in collaborations for mobile visual processors and ASIC design services [3][17]. - Pixelworks is experiencing momentum in its TrueCut Motion business, securing new titles and expanding partnerships in content and distribution [3][17]. - The Shanghai subsidiary received approximately $1.6 million in cash subsidies as part of China's "Little Giant" program [17]. Operational Efficiency - GAAP operating expenses for Q2 2025 were $11.1 million, down from $11.5 million in Q1 2025 and $15.1 million in Q2 2024 [5][6]. - Non-GAAP operating expenses for Q2 2025 were $9.7 million, compared to $10.4 million in Q1 2025 and $12.8 million in Q2 2024 [6][21]. - Adjusted EBITDA for Q2 2025 was a negative $4.3 million, an improvement from a negative $5.8 million in Q1 2025 and a negative $7.0 million in Q2 2024 [10][24].

Core Insights - Pixelworks, Inc. announced that Universal Pictures' "Nobody 2" will utilize its TrueCut Motion technology on premium screens worldwide, enhancing the visual experience for audiences [1][3][4] Company Overview - Pixelworks, Inc. specializes in content creation, video delivery, and display processing solutions, aiming to provide superior visual quality across various screens, including cinemas and smartphones [6] - The company has over 20 years of experience in image processing innovation, serving leading providers in consumer electronics, professional displays, and video streaming services [6] Technology Highlights - TrueCut Motion technology allows filmmakers to fine-tune motion looks shot by shot in post-production while maintaining the intended cinematic feel [4] - This technology ensures consistent delivery of creative choices across all viewing devices, optimizing the experience in both 3D and standard 2D environments [4] Upcoming Release - "Nobody 2," featuring Bob Odenkirk, is set to be released in theaters on August 15, 2025, continuing the story of the character Hutch Mansell [2][3]

Core Viewpoint - Pixelworks, Inc. is set to release its second quarter 2025 financial results on August 12, 2025, after market close, indicating ongoing transparency and communication with investors [1]. Group 1: Financial Results Announcement - The financial results will be discussed in a conference call hosted by Todd DeBonis, President and CEO, and Haley Aman, CFO [1]. - The conference call is scheduled for 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time) on the same day [1]. - Analysts and investors can participate via a live webcast or by registering for dial-in access [1]. Group 2: Company Overview - Pixelworks provides innovative video and display processing solutions, enhancing viewing experiences across various screens, from cinema to smartphones [2]. - The company has over 20 years of experience in image processing innovation, serving leading providers in consumer electronics, professional displays, and video streaming services [2].

Core Insights - Pixelworks' TrueCut Motion technology will be utilized in DreamWorks Animation's upcoming film "The Bad Guys 2," set to release on August 1, 2025, enhancing the viewing experience on premium screens worldwide [1][2][3] Company Overview - Pixelworks, Inc. specializes in content creation, video delivery, and display processing solutions, aiming to provide superior visual quality across various screens, including cinema and smartphones [6] - The company has over 20 years of experience in image processing innovation, catering to leading providers in consumer electronics, professional displays, and video streaming services [6] Technology Highlights - TrueCut Motion technology offers filmmakers an unprecedented ability to fine-tune motion looks during post-production while maintaining the intended cinematic feel [4] - This technology ensures consistent delivery of creative choices across all viewing devices, optimizing the experience in both 3D and standard 2D environments [4]

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]