• Revenue: $9.1 million in Q4 2024, down from $9.5 million in Q3 2024 and $20.1 million in Q4 2023.
• Home and Enterprise Revenue: Approximately $8.5 million in Q4 2024.
• Mobile Revenue: Approximately $550,000 in Q4 2024.
• Non-GAAP Gross Margin: 54.8% in Q4 2024, up from 51.3% in Q3 2024 and 44.8% in Q4 2023.
• Non-GAAP Operating Expenses: $10.4 million in Q4 2024, down from $12.4 million in Q3 2024 and $12 million in Q4 2023.
• Non-GAAP Net Loss: $4.3 million or $0.07 per share in Q4 2024, compared to $7.1 million or $0.12 per share in Q3 2024 and $2.6 million or $0.05 per share in Q4 2023.
• Adjusted EBITDA: Negative $3.6 million in Q4 2024, compared to negative $6.3 million in Q3 2024 and negative $1.9 million in Q4 2023.
• Cash and Cash Equivalents: $23.6 million at the end of Q4 2024, down from $28.8 million at the end of Q3 2024.
• Q1 2025 Revenue Guidance: Expected to be between $7 million and $8 million.
• Q1 2025 Non-GAAP Gross Margin Guidance: Expected to be between 49% and 51%.
• Q1 2025 Non-GAAP Operating Expenses Guidance: Expected to be between $10 million and $11 million.
• Q1 2025 Non-GAAP EPS Guidance: Expected to range between a loss of $0.13 per share and a loss of $0.10 per share.

• Warning! GuruFocus has detected 7 Warning Signs with PXLW.

Release Date: February 12, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Pixelworks Inc (NASDAQ:PXLW) achieved significant improvement in gross margin, expanding over 340 basis points sequentially and nearly 1,000 basis points year over year.
• The company has secured multiyear agreements with major studios like Walt Disney Studios and Universal Pictures for its TrueCut Motion platform.
• Pixelworks Inc (NASDAQ:PXLW) is in active discussions with three major device brands for potential incorporation of TrueCut Motion capability into future devices.
• The company has established a new framework for providing ASIC design services, which could contribute to revenue growth by mid-year.
• Pixelworks Inc (NASDAQ:PXLW) expects its Shanghai subsidiary to achieve profitability for the full year of 2025, aided by cost reductions and subsidies.

Negative Points

• Revenue for the fourth quarter of 2024 decreased to $9.1 million from $20.1 million in the fourth quarter of 2023, primarily due to headwinds in the mobile sector.
• The company reported a non-GAAP net loss of $4.3 million for the fourth quarter of 2024, compared to a net loss of $2.6 million in the same quarter of 2023.
• Pixelworks Inc (NASDAQ:PXLW) anticipates a slower start to 2025 in terms of total revenue, with a forecasted range of $7 million to $8 million for the first quarter.
• The strategic review process for the Pixelworks Shanghai subsidiary is ongoing, with no definitive timeframe for completion, creating uncertainty.
• The company is not expecting to be fully profitable at the top level in 2025, although it aims to be close by the end of the year.

Q & A Highlights

Q: Hi, Todd. Hi, Haley. Regarding mobile revenues for the second half of '25 and '26, what's your visibility on program recovery and potential run rate compared to past levels? Specifically, how does the X5 product factor into this? A: Todd DeBonis, President and CEO: We expect growth throughout the year, ending with higher mobile revenue than in 2024. Progress will be sequential, likely more back-end loaded. On the high side, we could match 2023 numbers; on the low side, we'll still see growth over 2024. The new graphics acceleration solution for mid- to low-end markets is expected to contribute over 50% of the revenue.

Q: You mentioned several new opportunities, including TrueCut device partnerships and ASIC support. Can you elaborate on these, particularly the geographies and end devices involved? A: Todd DeBonis, President and CEO: The legacy product is a ViXS transcoding product. As for other opportunities, I won't specify device manufacturers or regions, but they are leading global brands. The IP opportunities span several markets, indicating broad-based excitement.

Q: Regarding the China subsidiary benefits, do these impact COGS and gross margin, or are they all operating expense-related? A: Haley Aman, CFO: A portion of the subsidies impacted COGS and gross margin, specifically related to subsidies received for mask purchases in the past.

Q: You mentioned getting around 10 films out this year. How many films would it take for streaming services to broadly adopt this technology? A: Todd DeBonis, President and CEO: It's not just about the number of titles. Having a history and quantity of key titles helps, but tentpole titles are crucial. Streaming services and device manufacturers need to see commitment from each other. We're approaching critical mass with tentpole titles, but other factors are also important.

Q: Can you provide an update on the breakeven model for Pixelworks, whether it's a '25 or '26 story? A: Todd DeBonis, President and CEO: We expect the Shanghai subsidiary to be profitable in 2025. For the whole company, it depends on the strategic review process and progress with both the Shanghai subsidiary and TrueCut. We may not be fully profitable at the top level, but probably close, possibly exiting the year.

Q: Is there a timeline for the strategic process, and could it take up to two years? A: Todd DeBonis, President and CEO: I doubt it will take two years. If it were to take that long, we would likely shut down the current process and restart. I'm encouraged by the progress, but I don't have a specific timeline yet.

Q: Can you expand on the ASIC design services and IP licensing, particularly what you're offering and to whom? A: Todd DeBonis, President and CEO: We're under confidentiality agreements, but the IP discussions involve our display and motion processing expertise. Historically, we've avoided licensing due to resource constraints, but now we're pursuing it vigorously as it's high-margin business and easier to transfer.

Q: Regarding the digital projector, you started shipping the next-gen SoC last quarter. Is the segment expected to be flattish for the year? A: Todd DeBonis, President and CEO: The home and enterprise business is expected to be similar to 2024, excluding the potential upside from the transcoding opportunity. The newest co-developed product will ramp but won't be the major revenue portion in 2025. It may take until 2026 to become the largest portion of projector revenue.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.