PIXELWORKS, INC Q3 FY2024 earnings call

Cost Reduction Actions - At the end of the second quarter, initiated broad cost - cutting actions to align operating expenses with revenue levels, resulting in expected annualized cost savings of approximately $4 million, and total expected cost savings of approximately $10 million over six quarters through year - end 2025. ### Mobile Business - Strategic Objectives: Continued expansion of the IRX branded gaming ecosystem; securing significant targeted design wins for the next - generation flagship visual processor; expanding available market in mobile by driving penetration of visual processing technology in mid - tier and entry - level smartphones. Next - Generation Flagship Mobile Visual Processor: Completed production qualification, successfully met or exceeded all qualification criteria and targeting performance metrics, and is engaged with multiple customers on smartphone programs for launch in the coming year. ### TrueCut Motion Platform - Announced a multiyear agreement with Universal Pictures to enhance visual experience for future Universal titles; Pixelworks Shanghai subsidiary was awarded the Little Giant designation, qualifying for government subsidies; exploring collaboration with top post - production companies to potentially bring motion grading upstream as part of the standard post - production process. ### Home and Enterprise Business - Revenue from home and enterprise increased sequentially, consistent with positive seasonality for third - quarter projector shipments; began the process to end - of - life the small remaining portfolio of consumer transcoding products, which have accounted for less than 5% of total revenue in recent years.

Revenue for the third quarter of 2024 was $9.5 million. Mobile revenue was approximately $2 million, accounting for about 21% of total revenue; home and enterprise revenue was approximately $7.5 million, accounting for about 79% of total revenue. Third quarter non-GAAP gross profit margin expanded 30 basis points sequentially to 51.3% from 51% in the second quarter of 2024, and increased 820 basis points from 43.1% in the third quarter of 2023.

Fourth - Quarter Guidance - Total revenue for the fourth quarter is expected to be in the range of $9 million to $10 million. Non - GAAP gross profit margin is expected to be between 49% and 51%. Operating expenses are expected to be in the range of $10 million to $11 million on a non - GAAP basis. Non - GAAP EPS is expected to be in the range of a loss of $0.08 per share to a loss of $0.11 per share.

Risks - Uncertainty in securing design wins for the next - generation mobile visual processor within the expected timeline. - Geopolitical factors could impact the ownership structure and growth prospects of the Pixelworks Shanghai subsidiary. - Fluctuations in market demand for mobile and home/enterprise products may affect revenue and margins.

Q: Can you talk about what customer interest has been like and engagements for the next - gen processor and expand on the expected timeline from initial samples to design wins to revenue?

A: Sampled engineering samples to several Tier 1 customers, and the evaluation process involves assessing performance of existing features on a new 12 - nanometer device, new features enabled without IRX ecosystem support, and features only supported with IRX gaming ecosystem. The evaluation will take time, and decisions for new programs are expected but no guarantee within the next several months, with substantial revenue likely in the back half of 2025.

Q: How does the revenue and unit profile balance out between the premium and lower - end mobile products and what about the inflection point of the mobile business?

A: Near - term, high - end is likely the majority, but low - end could be a bigger part beyond. The inflection point in the mobile business is expected to start in the back half of 2025, with earliest substantial contributing revenue likely in late Q1 or Q2 but ramping in the back half of 2025.

Q: Regarding the financial model breakeven and the interest in Pixelworks Shanghai: How to fit the $4 million annual expenses reduction and the $10 million total savings? And what about the interest in Shanghai and its impact on Star listing?

A: The $4 million is from workforce reduction, and total $10 million savings over six quarters includes other cost reductions beyond employee cuts, predominantly from OpEx. There is inbound strategic interest in Pixelworks Shanghai, and changing the controlling interest structure may delay a public offering as it would require a new tutoring process, with current geopolitical structure having challenges.