Executive Summary

Q4 2024 revenue was $9.1M (vs. $9.5M in Q3 and $20.1M in Q4’23) as mobile remained weak; GAAP gross margin expanded to 54.6% (non-GAAP 54.8%), marking the fourth straight quarter of margin improvement and reflecting favorable mix and cost actions .
Non-GAAP EPS improved to ($0.07) from ($0.12) in Q3, with non-GAAP OpEx reduced to $10.4M; adjusted EBITDA improved to ($3.6M) from ($6.3M) in Q3, aided by cost reductions and subsidies at the Shanghai subsidiary .
Q1 2025 guidance: revenue $7–8M, non-GAAP gross margin 49–51%, non-GAAP OpEx $10–11M, and non-GAAP EPS of ($0.13)–($0.10); management reiterated an additional ~10% OpEx run-rate cut by end-Q2 and expects the Shanghai subsidiary to be profitable in 2025 .
Potential stock catalysts: (1) mobile revenue recovery with cost-down X5 ramp starting Q2; (2) TrueCut Motion device integrations and additional theatrical titles; (3) strategic review of Pixelworks Shanghai; (4) potential multi-million-dollar legacy transcoder order upside in 2H25 .

What Went Well and What Went Wrong

What Went Well

Margin execution and cost discipline: “Gross margin exceeded expectation, expanding over 340 basis points sequentially and nearly 1,000 basis point year-over-year,” while OpEx fell meaningfully on cost actions .
Strategic pipeline building: Management highlighted ASIC design services and IP licensing opportunities that could contribute mid-year and are “high margin” sources of upside if closed .
TrueCut Motion momentum: “We are in active discussions or formal evaluations with three major device brands” and targeting to double five committed 2025 theatrical releases by year-end, potentially making 2025 “transformational” for TrueCut .

What Went Wrong

Mobile remained severely depressed: Q4 mobile revenue was ~ $0.55M (vs. ~$2.0M in Q3 and ~$2.1M in Q2), driving the revenue decline .
Continued losses and cash burn: Q4 GAAP net loss was ($5.36M) and adjusted EBITDA remained negative; cash fell to $23.6M from $28.8M in Q3 .
Balance sheet pressure: Pixelworks, Inc. shareholders’ equity stood at ($10.6M) at year-end 2024; management also disclosed a repurchase-option dispute tied to the PWSH capital increase agreement (currently asserted as suspended), adding governance/complexity risk .

Financial Results

Headline P&L, Margins and EPS (chronological: oldest → newest)

Metric	Q4 2023	Q2 2024	Q3 2024	Q4 2024
Revenue ($M)	$20.074	$8.535	$9.527	$9.090
GAAP Gross Margin %	44.7%	50.7%	51.2%	54.6%
Non-GAAP Gross Margin %	44.8%	51.0%	51.3%	54.8%
GAAP EPS (loss)	($0.07)	($0.17)	($0.14)	($0.09)
Non-GAAP EPS (loss)	($0.05)	($0.13)	($0.12)	($0.07)
Adjusted EBITDA ($M)	($1.945)	($7.041)	($6.260)	($3.566)

Segment Revenue Mix (Mobile vs. Home & Enterprise)

Segment ($M)	Q2 2024	Q3 2024	Q4 2024
Mobile	~$2.1	~$2.0	~$0.55
Home & Enterprise	~$6.4	~$7.5	~$8.5

KPIs and Cash/OpEx Trend

KPI	Q2 2024	Q3 2024	Q4 2024
Non-GAAP OpEx ($M)	$12.75	$12.392	$10.437
Cash & Equivalents ($M)	$37.824	$28.830	$23.647
Pixelworks, Inc. Shareholders’ Equity ($M)	$0.486	($8.029)	($10.568)

Additional items

Shanghai subsidiary received $1.8M in “Little Giant” program subsidies; $1.1M recognized in other income, balance allocated to expense/balance sheet .
Q4 GAAP OpEx was $11.5M; non-GAAP OpEx was $10.4M, reflecting cost reductions .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue	Q1 2025	—	$7.0–$8.0M	New
Non-GAAP Gross Margin %	Q1 2025	—	49–51%	New
Non-GAAP OpEx	Q1 2025	—	$10–$11M	New
Non-GAAP EPS	Q1 2025	—	($0.13)–($0.10)	New
Non-GAAP OpEx (YoY)	FY 2025	~$10M total savings over six quarters guided in Q3 call	~ $10M YoY OpEx decrease in 2025 reiterated	Maintained/clarified
OpEx run-rate	By end Q2 2025	—	Additional ~10% run-rate OpEx reduction captured by end-Q2	New qualitative guidance

Note: Q3 2024 call provided Q4 2024 guidance (revenue $9–10M; non-GAAP GM 49–51%; non-GAAP OpEx $10–11M; non-GAAP EPS loss $0.08–$0.11), which Q4 actuals landed within/near for revenue and above for margins as highlighted by management .

Earnings Call Themes & Trends

Topic	Q-2 (Q2’24)	Q-1 (Q3’24)	Current (Q4’24)	Trend
Mobile trajectory	Headwinds from a large OEM pause; IRX ecosystem expansion; next-gen processor delayed to Q4’24 samples	Next-gen flagship passed production qualification; engaging customers; cost-down X5 for mid/entry tiers in evaluation	Mobile trough persists (Q4 mobile ~$0.55M); cost-down X5 ramp expected in Q2’25; multiple customer programs targeted	Improving from Q2’25
TrueCut Motion	Growing PLF exhibitor endorsements; new AI-enhanced tools; Disney agreement referenced	Multi-year, multi-title deal with Universal; industry shift toward motion grading	“Active discussions” with 3 major device brands; aiming to double five committed 2025 theatrical titles; 2025 could be transformational	Building momentum
Cost actions / OpEx	Workforce reduction (~16%); targeting $10M savings over 18 months	Initial OpEx benefits realized; design-revision one-time costs	Additional ~10% OpEx run-rate cut by end-Q2; non-GAAP OpEx down to $10.4M in Q4	Further reduction in H1’25
Projector/Home & Enterprise	Stable demand; co-developed projector SoC to volume in Q4	First production shipments targeted Q4’24; broader adoption in 2025	First shipments completed; 2025 projector revenue similar to 2024; typical seasonality	Stable
Strategic review (Shanghai)	—	Morgan Stanley retained; inbound interest	Multiple vetted indications; no firm timeline but progress ongoing	Active
Subsidies (China)	—	‘Little Giant’ certification obtained	$1.8M subsidies received; expect further subsidies in 2025	Supportive tailwind

Management Commentary

CEO on margin/cost execution: “Gross margin exceeded expectation, expanding over 340 basis points sequentially and nearly 1,000 basis point year-over-year… [and] ongoing initiatives to reduce costs and increase operational efficiencies” .
CEO on TrueCut acceleration: “We are in active discussions or formal evaluations with three major device brands… 2025 has the opportunity to be a transformational year for our TrueCut Motion business” .
CEO on 2025 OpEx: “Once fully implemented, we expect an additional 10% reduction in our run-rate operating expenses… fully captured by the end of Q2” .
CEO on profitability at subsidiary: “We believe that our Pixelworks Shanghai subsidiary will achieve profitability for the full year 2025” .
CFO on subsidies: “We recognized $1.1 million as Other Income in the fourth quarter, with the balance… allocated as offsetting credits to applicable expense and balance sheet items” .

Q&A Highlights

Mobile recovery path: Management expects sequential growth through 2025 with a back-half bias; high-end could approach 2023 levels on the upside, with cost-down visual processor “over 50% of the revenue” for the broader market .
TrueCut tipping point: It’s more about tentpole titles plus simultaneous commitments from streaming and device OEMs; “we’re probably approaching that critical mass” (double-digit titles), and announcements could be simultaneous .
IP licensing/ASIC services: Focused on display/motion IP; historically avoided due to resource demands, but now pursuing for high-margin profitability acceleration .
Strategic review timing: “I doubt it’s going to be two years… I’m encouraged… no timeline yet” .
Subsidy accounting: Portion impacted COGS/gross margin (mask purchases) .
Legacy transcoder upside: Evaluating feasibility of one-off, multi-million-dollar run for an EOL ViXS transcoding chip; if feasible, 2H25 revenue upside .

Estimates Context

Wall Street consensus (S&P Global) for Q4 2024 revenue/EPS was unavailable at time of query due to data limits; therefore, comparisons vs. consensus are omitted. Management noted Q4 results were within or better than guided ranges .
Implication: With Q1 2025 guide below Q4 on seasonality and EOL impacts, estimate revisions may tilt lower near term, with potential upward revisions tied to Q2+ mobile ramp, TrueCut device wins, and any strategic review outcomes .

Key Takeaways for Investors

Near-term softness, but improving setup: Q1 guide reflects seasonality/EOL; management points to mobile recovery starting Q1 and accelerating with cost-down X5 ramp in Q2 .
Operating leverage potential: Four straight quarters of margin improvement and additional ~10% OpEx run-rate cuts by end-Q2 provide downside protection and operating leverage as revenue recovers .
Strategic optionality: Multiple vetted indications of interest for Pixelworks Shanghai; structure/outcome could be a significant catalyst (timing not specified, but not a multi-year process) .
TrueCut Motion optionality: Device integrations plus more tentpole theatrical titles could catalyze ecosystem adoption; management views 2025 as potentially “transformational” .
Upside wildcard: Potential multi-million-dollar limited-run legacy transcoder order for 2H25 .
Risks: Mobile recovery timing/design wins, balance sheet pressure (negative shareholders’ equity at parent), reliance on subsidies, and governance/structural complexity around the PWSH capital increase/repurchase option update .
Actionable: Monitor Q2 mobile shipment ramp, any TrueCut device OEM announcements, progress in the strategic review, and confirmation of legacy transcoder production feasibility for 2H25 .

Additional Relevant Press Releases in Q4

iQOO Z9 Turbo L integrates Pixelworks X5 Turbo; highlights mid-tier device gaming/video enhancements aligned with cost-down strategy for broader market penetration .

PIXELWORKS, INC (PXLW)·Q4 2024 Earnings Summary