PIXELWORKS, INC Q4 FY2024 earnings call

• Todd DeBonis provided a recap of Q4 financial results, noting revenue was within guidance with sequential growth in home and enterprise offsetting mobile product transition. Gross margin exceeded expectations. - TrueCut Motion platform remains industry-leading with key ecosystem milestones like multi-year agreements with studios and a large premium large-format theater footprint. Targeting to double theatrical release commitments by yearend. - Pixelworks Shanghai subsidiary is pursuing ASIC design services for a large international OEM, engaging in IP licensing discussions, and evaluating a legacy transcoding chip order. - Mobile business faced headwinds but had a win with Vivo's iQOO Z9 Turbo L. Home and enterprise revenue was up sequentially with projector SoC business and EOL transcoding product contribution. - Identified additional cost reduction measures to reduce operating expenses by ~$10M in 2025. Shanghai subsidiary expects profitability in 2025 due to subsidies and cost cuts. - Ongoing strategic review process with Morgan Stanley to evaluate ownership and collaboration structures for Shanghai subsidiary.

In the fourth quarter of 2024, revenue was $9.1 million. Home and enterprise revenue was approximately $8.5 million, making up about 93.4% of the total revenue. Mobile revenue was approximately $550,000, accounting for around 6.6% of total revenue. Non-GAAP gross profit margin expanded 350 basis points sequentially to 54.8% from 51.3% in the third quarter of 2024 and increased 1,000 basis points from 44.8% in the fourth quarter of 2023.

• First quarter 2025 total revenue expected between $7 million and $8 million. - Non-GAAP gross profit margin预计 between 49% and 51%. - First quarter non-GAAP operating expenses预计 between $10 million and $11 million. - First quarter non-GAAP EPS预计 between a loss of $0.13 per share and a loss of $0.10 per share. - Pixelworks Shanghai subsidiary expected to be profitable for the full year of 2025.

• Forward-looking statements subject to risks and uncertainties that may cause actual results to differ materially. - Outcomes of the strategic review process for Pixelworks Shanghai subsidiary are uncertain. - Potential delays in mobile revenue recovery and challenges in executing on new business opportunities.

Q: What's the visibility on mobile revenues for the second half of 2025 and 2026, and on the X5 product's unit revenue compared to premium programs?

A: Todd expects growth throughout 2025 with mobile revenue ending the year higher than 2024, progressing sequentially each quarter. The new graphics acceleration solution for mid to low-end devices is expected to be over 50% of revenue.

Q: Can you provide details on TrueCut device partnerships, ASIC support end devices, and legacy product mention?

A: The legacy product is the transcoding ViXS product, a longstanding customer wanting to restart production. TrueCut device partnerships involve leading global device manufacturers. IP opportunities are in several markets.

Q: How does the China subsidiary benefit impact COGS and gross margin?

A: There was a portion of the subsidy that impacted COGS and gross margin related to subsidies from past mass purchases.

Q: How many films are needed to create a tipping point for streaming services to adopt TrueCut technology?

A: It's not just the number of titles; a history of key titles and established track record in premium large format will make streaming services and device manufacturers more comfortable, leading to broader adoption.

Q: Any timeline for the strategic review process?

A: Todd doubts it will take two years, but no specific timeline is available yet; progress is encouraged and will be updated as soon as known.

Q: Details on ASIC design services and IP licensing?

A: Discussions are under confidentiality agreements, involving display and motion processing IP; preparing IP for transfer and licensing, with high margin potential if deals are successful.

Q: Digital projector segment update?

A: Newest co-developed projector SoC is ramping, but will not be the major revenue portion in 2025; likely to be a larger portion by 2026.