PIXELWORKS, INC Q1 FY2025 earnings call

• TrueCut Motion: Made progress in the film industry with more theatrical titles, formalized a strategic partnership with a post-production company, engaged with device companies for incorporation of TrueCut Motion, and completed certification testing with a device brand.
• Pixelworks Shanghai: Mobile revenue increased sequentially, making progress on product transition to latest solutions, collaborating with Tencent's PerfDog for mobile gaming, and ongoing strategic review of the Shanghai subsidiary.
• Cost Reduction: Significantly reduced overall cost structure, with first quarter operating expenses down over $2 million year-over-year, and expecting continued benefits from a streamlined organization.
• Adjacent Opportunities: Engaged in ASIC design services with a large international OEM, advancing discussions to license IP, and potential limited production of legacy transcoding chips.

Revenue for the first quarter of 2025 was $7.1 million. Home and enterprise revenue was approximately $5.8 million, contributing ~81.7% of total revenue, while mobile revenue was approximately $1.3 million, contributing ~18.3% of total revenue. For TrueCut Motion, progress was made in the film industry with more titles, partnerships, and device engagements. In the Pixelworks Shanghai subsidiary, mobile revenue increased sequentially, with progress on product transition and mobile gaming collaborations; home and enterprise revenue was down sequentially due to seasonality but projector revenue was flat year-over-year.

• Second quarter revenue expected to be in the range of $8 million to $9 million.
• Second quarter non-GAAP gross profit margin expected between 41% and 43%.
• Second quarter operating expenses expected to be in the range of $9 million to $10 million non-GAAP.
• Second quarter non-GAAP EPS expected to range between a loss of $0.11 per share and a loss of $0.08 per share.
• Pixelworks Shanghai expected to reach profitability in the second half of 2025.

• Uncertainty regarding the outcome of the strategic review process for Pixelworks Shanghai.
• Fluctuations in product mix impacting gross margin.
• Risks associated with achieving expected revenue and margin targets as a result of product ramping and cost reduction efforts.

Q: Pixelworks Shanghai reaching profitability. Can you give help with revenue levels and OpEx attribution?

A: OpEx for Shanghai is approximately $7 million to $7.5 million per quarter. Revenue mix includes home and entertainment, projector, mobile, IP licensing, and design services. To reach profitability, a chunk of these revenue streams need to materialize.

Q: TrueCut device discussions. Are they Chinese brands or global?

A: Device discussions are with global OEMs, not exclusively Chinese; completed certification testing with one global brand.

Q: ASIC design services sizing and revenue models. How to size opportunities and revenue models?

A: Revenue size depends on the scope of design services for customers, ranging from $10 million to $20 million for 12nm SoC designs, depending on the extent of turnkey or partial design services provided.