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PIXELWORKS, INC (PXLW)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 revenue was $7.1M, down sequentially from $9.1M and down year-over-year from $16.1M; GAAP gross margin declined to 48.7% and non-GAAP to 49.9%, while non-GAAP OpEx fell ~$2.2M YoY reflecting cost actions .
  • Mobile revenue increased 140% sequentially off a small base, aided by shipments on previously launched models and early traction for a new low-cost mobile graphics accelerator aimed at mid/entry smartphones .
  • Q2 2025 guidance: revenue $8.0–$9.0M, non-GAAP gross margin 40–42% (call color: 41–43% due to ramping yields), non-GAAP OpEx $9.0–$10.0M, and non-GAAP EPS loss of $0.11 to $0.08; margin compression in Q2 is driven by lower initial yields on a new projector chip .
  • Strategic catalysts: Morgan Stanley-led review of the Shanghai subsidiary is “nearing closure” with a strategic direction likely within ~90 days; TrueCut Motion ecosystem expanded via a signed post-production partnership and completion of certification testing with a major non-Chinese device brand .

What Went Well and What Went Wrong

  • What Went Well

    • Mobile sequential rebound: revenue +140% q/q; renewed engagement with OEMs on X7 Prime and flagship visual processors; co-development on a low-cost graphics accelerator targeting broader adoption in mid/entry devices .
    • TrueCut Motion ecosystem momentum: formalized partnership with a market-leading post-production house and completed certification testing with one major device brand, enabling joint engagement with streaming providers; premium theater footprint now >1,500 .
    • Cost structure improvement: non-GAAP OpEx down ~$2.2M YoY in Q1; management expects ~$10M YoY OpEx reduction for 2025 from cumulative actions .

  • What Went Wrong

    • Top-line and margin pressure: revenue $7.1M vs $9.1M in Q4 and $16.1M in Q1’24; GAAP gross margin fell to 48.7% on mix and lower overhead absorption .
    • Losses widened: GAAP net loss ($7.8M) and adjusted EBITDA ($5.8M) deteriorated vs Q4’24, reflecting lower revenue and margin compression .
    • Near-term margin headwind: Q2 non-GAAP gross margin guided down to 40–42% (call color 41–43%) due to lower initial yields on a new projector chip; mobile margin mix remains lower than projector .

Financial Results

MetricQ1 2024Q4 2024Q1 2025
Revenue ($USD Millions)$16.054 $9.090 $7.094
GAAP Gross Margin (%)50.5% 54.6% 48.7%
Non-GAAP Gross Margin (%)50.7% 54.8% 49.9%
GAAP Net Loss ($USD Millions)($5.066) ($5.363) ($7.761)
GAAP Diluted EPS ($)($0.09) ($0.09) ($0.13)
Non-GAAP Net Loss ($USD Millions)($3.991) ($4.332) ($6.542)
Non-GAAP EPS ($)($0.07) ($0.07) ($0.11)
Adjusted EBITDA ($USD Millions)($3.211) ($3.566) ($5.777)
Non-GAAP Operating Expenses ($USD Millions)$12.550 $10.437 $10.414

Segment revenue breakdown:

Segment Revenue ($USD Millions)Q3 2024Q4 2024Q1 2025
Home & Enterprise$7.5 $8.5 $5.8
Mobile$2.0 $0.55 $1.3

KPIs and ecosystem metrics:

KPIQ3 2024Q4 2024Q1 2025
TrueCut premium theaters (count)1,100+ 1,100+ 1,500+
TrueCut titles pipeline“Multi-year Universal” announced; The Wild Robot in PLF Entering 2025 with 5 additional releases committed Targeting 10 titles in 2025 (vs 5 in 2024)
IRX certified/qualified games——100+ games qualified
Mobile ASP commentary——“ASPs are sub $2”

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueQ2 2025N/A$8.0M–$9.0M New
Non-GAAP Gross MarginQ2 2025N/A40%–42% (call color 41%–43% )New; call indicated slightly higher midpoint
Non-GAAP Operating ExpensesQ2 2025N/A$9.0M–$10.0M New
Non-GAAP EPSQ2 2025N/A($0.11)–($0.08) New
Projector business outlookFY 2025“Similar to 2024” “Similar to 2024” reaffirmed Maintained
Pixelworks Shanghai profitability timing2025“Profitability for full year 2025” “Poised to reach profitability in H2 2025” Clarified timing (H2)

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024)Previous Mentions (Q4 2024)Current Period (Q1 2025)Trend
Mobile ramp and product roadmapFlagship visual processor qualified; cost-down X5 derivative for mid/entry Expect ramp starting Q2; mobile revenue very low in Q4 ($0.55M) Sequential mobile revenue increase; co-development on low-cost graphics accelerator; multiple OEM engagements Improving engagement; ramp biased to H2
Margins and yieldsGM 51.2% GAAP; mix-driven GM 54.6% GAAP; strong mix Q2 GM guide 40–42% (call 41–43%) due to new projector chip yields; mobile margins lower than projector Near-term compression, recovery as yields improve
TrueCut Motion ecosystemUniversal multi-year deal; Little Giant certification; The Wild Robot PLF launch Entering 2025 with 5 additional releases committed; device brand dialogues (3) Post-production partnership signed; 1,500+ PLF theaters; certification testing with non-Chinese device brand Building critical mass; closer to home device enablement
Strategic review (Shanghai)Retained Morgan Stanley; inbound interest Ongoing; cost actions to reduce run-rate OpEx Process “nearing closure” with likely direction within ~90 days Approaching decision
Adjacent revenue (ASIC/IP/licensing)—Framework established; potential meaningful revenue mid-year Advanced discussions; design services could contribute as soon as Q3; IP licensing across end markets Potential upside in H2
Regulatory/legal & capital structure—Capital Increase Agreement update (share repurchase option dispute context) Deposit liability and negative Pixelworks, Inc. shareholders’ equity on balance sheet Watch legal/structural developments

Management Commentary

  • “First quarter results were consistent with our expectations... with first quarter operating expenses down more than $2 million year-over-year.” — Todd DeBonis, CEO .
  • “We formalized a strategic partnership with a market-leading post production company... bringing TrueCut Motion further upstream.” — Todd DeBonis .
  • “We recently completed rigorous certification testing with one of [three] major device brands, allowing us to start jointly engaging with streaming service providers.” — Todd DeBonis .
  • “Collectively, the cost reductions we have implemented over the past 12 months are expected to contribute to a total year-over-year decrease in operating expenses of approximately $10.0 million for the full year of 2025.” — Haley Aman, CFO .
  • “We continue to believe that our Pixelworks Shanghai subsidiary is poised to reach profitability in the second half of 2025.” — Todd DeBonis .

Q&A Highlights

  • Shanghai subsidiary profitability model: OpEx expected at ~$7.0–$7.5M per quarter in H2; profitability feasible with a mix of home/projector, mobile, IP licensing, and design services revenue .
  • TrueCut device ecosystem: Certification testing partner is not a Chinese OEM; focus on devices marketed to North America and Europe for home entertainment .
  • Mobile revenue profile: Predominantly low-end revenue this year; “ASPs are sub $2” highlighting value-tier accelerator strategy .
  • Margin clarification: Q2 gross margin headwind tied to lower initial yields of a new projector chip; yields already improving and expected to normalize in Q3/Q4 .
  • Design services sizing: Full turnkey 12nm SoC design services could range ~$10M–$20M depending on scope, with flexible engagement models (turnkey/partial/IP) .

Estimates Context

  • Q1 2025: Revenue consensus $7.43M* vs actual $7.09M — modest miss; Primary EPS consensus -1.36* vs GAAP EPS -$0.13 and non-GAAP EPS -$0.11 (note: consensus EPS reflects a different reporting basis than management’s non-GAAP EPS) .
  • Q2 2025: Revenue consensus $8.50M* aligns with guidance midpoint ($8.0M–$9.0M); Primary EPS consensus -1.12* vs guided non-GAAP loss ($0.11)–($0.08) .
MetricQ1 2025 Consensus*Q1 2025 ActualQ2 2025 Consensus*Q2 2025 Guidance
Revenue ($USD Millions)$7.433$7.094 $8.500$8.0–$9.0
Primary EPS ($)-1.36GAAP: -$0.13 ; non-GAAP: -$0.11 -1.12-$0.11 to -$0.08 (non-GAAP)

Values marked with * are retrieved from S&P Global.

Key Takeaways for Investors

  • Near-term, expect margin pressure in Q2 from yield ramp on a new projector SoC; watch for GM normalization in Q3/Q4 as yields improve, and monitor the mix impact as mobile ramps with lower margins than projector .
  • Revenue trajectory hinges on H2 execution: design services/IP licensing could provide upside by Q3+, while mobile design-ins for the low-cost accelerator and flagship visual processor are critical for sustained growth .
  • Strategic event risk/opportunity: outcome of the Morgan Stanley-led Shanghai review is likely within ~90 days and could be a stock catalyst depending on ownership/collaboration structure chosen .
  • Cost actions are material: ~$10M YoY OpEx reduction targeted in 2025; cash declined to $18.5M, making execution and potential subsidies/design-services timing important to manage burn .
  • TrueCut Motion narrative strengthening: broader ecosystem via post-production partnership and device certification progress; monitor announcements of device partnerships and incremental title releases toward the 10-title target .
  • Mobile pricing dynamics: management indicates ASPs “sub $2” for low-end accelerator; trajectory depends on unit volumes rather than price, suggesting high-volume, lower-margin growth path .
  • Watch for potential legacy transcoding chip limited-run orders and IP licensing deals as incremental H2 revenue levers, which could help the path to Shanghai profitability .