Pixelworks(US:PXLW)2025-08-13 20:02PART I – FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Unaudited financial statements for Q2 2025 reveal decreased revenue, a net loss, and reduced assets, with negative operating cash flow Condensed Consolidated Balance Sheets Total assets decreased to $51.8 million by June 30, 2025, driven by reduced cash and a significant drop in shareholders' equity Key Balance Sheet Items (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $14,255 | $23,647 | | Total current assets | $25,575 | $34,852 | | Total assets | $51,804 | $64,072 | | Total current liabilities | $9,141 | $8,346 | | Total liabilities | $23,453 | $24,194 | | Total shareholders' equity | $432 | $12,482 | Condensed Consolidated Statements of Operations Q2 2025 revenue slightly decreased, while the net loss narrowed; H1 2025 saw a significant revenue drop but a slightly improved net loss Statements of Operations Highlights (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | :--- | :--- | | Revenue, net | $8,250 | $8,535 | $15,344 | $24,589 | | Gross profit | $3,779 | $4,326 | $7,231 | $12,440 | | Loss from operations | $(7,301) | $(10,742) | $(15,397) | $(16,235) | | Net loss attributable to Pixelworks, Inc. | $(6,707) | $(10,149) | $(14,468) | $(15,215) | | Net loss per share - basic and diluted | $(1.27) | $(2.09) | $(2.80) | $(3.16) | Condensed Consolidated Statements of Cash Flows H1 2025 saw increased cash used in operations ($11.3 million), partially offset by investing and financing activities, leading to a $9.4 million cash decrease Cash Flow Summary for Six Months Ended June 30 (in thousands) | Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(11,268) | $(6,392) | | Net cash provided by (used in) investing activities | $514 | $(2,866) | | Net cash provided by (used in) financing activities | $1,362 | $(462) | | Net decrease in cash and cash equivalents | $(9,392) | $(9,720) | Notes to Condensed Consolidated Financial Statements Notes detail business operations, accounting policies, PWSH strategic review, restructuring, revenue decline in Mobile, and redemption obligations - The company initiated a formal review for its Pixelworks Shanghai (PWSH) subsidiary, receiving non-binding term sheets from three potential buyers, with a strategic direction expected by end of Q3 202532 - Restructuring plans in May and February 2025 led to workforce reductions of approximately 4% and 6%, primarily in R&D and operations5051 IC Sales by End Market for Six Months Ended June 30 (in thousands) | End Market | 2025 | 2024 | | :--- | :--- | :--- | | Home & Enterprise | $12,732 | $12,577 | | Mobile | $2,359 | $11,226 | - An investor requested PWSH share redemption; if a sale or extension is not achieved, the company may be required to repurchase shares, materially impacting its cash position9094 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses a 38% H1 2025 revenue decrease, driven by a Mobile market decline, reduced gross margin, and lower operating expenses, with a PWSH strategic review ongoing Results of Operations H1 2025 revenue fell 38% due to a 78% drop in Mobile sales, gross margin declined, and operating expenses decreased due to cost-cutting Revenue Change | Period | 2025 Revenue | 2024 Revenue | % Change | | :--- | :--- | :--- | :--- | | Three Months Ended June 30 | $8,250 | $8,535 | (3)% | | Six Months Ended June 30 | $15,344 | $24,589 | (38)% | - Revenue decrease primarily driven by a 78% drop in Mobile market sales in H1 2025, due to delayed product transition118 Gross Profit Margin | Period | 2025 Gross Margin | 2024 Gross Margin | | :--- | :--- | :--- | | Three Months Ended June 30 | 46% | 51% | | Six Months Ended June 30 | 47% | 51% | - Operating expenses significantly decreased in H1 2025, with R&D down 22% and SG&A down 19%, reflecting headcount reductions and cost controls124127128 Liquidity and Capital Resources Cash and cash equivalents decreased by $9.3 million to $14.3 million, despite capital raises, though management expects sufficient working capital for the next twelve months - Total cash and cash equivalents decreased by $9.3 million to $14.3 million by June 30, 2025133 - Capital was raised through an ATM program (net proceeds $0.5 million) and a registered direct offering (net proceeds $1.3 million) in H1 2025138139 - Management anticipates existing working capital will be adequate for at least the next twelve months143 Item 3. Quantitative and Qualitative Disclosure About Market Risk The company has indicated that this item is not applicable for this reporting period - Not applicable148 Item 4. Controls and Procedures Management, including CEO and CFO, concluded disclosure controls and procedures were effective, with no material changes to internal control over financial reporting - The CEO and CFO concluded that disclosure controls and procedures were effective as of June 30, 2025149 - No material changes to internal control over financial reporting occurred during the quarter150 PART II – OTHER INFORMATION Item 1. Legal Proceedings The company is engaged in legal proceedings from time to time in the ordinary course of business, but none are currently considered to have a material impact on its financial position or results of operations - No legal proceedings are expected to have a material impact on financial condition or operations153 Item 1A. Risk Factors Key risks include potential PWSH share repurchase obligations, China operations uncertainties, customer concentration, intense competition, and Nasdaq delisting risk - Significant risk of being required to repurchase PWSH shares, materially impacting the company's cash position, if a transaction is not closed or rights are not waived237 - Substantial risks arise from concentrated operations and customers in China, including political, economic, and legal uncertainties, and U.S.-China relations232234 - Dependence on a limited number of customers and distributors, with the top five end customers accounting for 94% of H1 2025 revenue167 - Risk of non-compliance with Nasdaq Listing Rules and potential delisting, despite a one-for-twelve reverse stock split on June 6, 2025, to meet minimum bid price250252 Item 5. Other Information Shareholders approved a stock incentive plan amendment, and the CEO entered a bonus agreement tied to the PWSH subsidiary sale proceeds - A Transaction Bonus Agreement with CEO Todd A. DeBonis links a cash bonus to the successful sale of the PWSH subsidiary by December 31, 2025257 - The bonus is contingent on net cash proceeds between $40 million and $70 million from the PWSH transaction, with a maximum bonus of $600,000257 Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including amendments to articles of incorporation, bylaws, stock purchase agreements, the amended stock incentive plan, the CEO's transaction bonus agreement, and required certifications