Release Date: November 12, 2024

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

Positive Points

• Pixelworks Inc (NASDAQ:PXLW) reported a sequential increase in revenue for Q3 2024, driven by increased sales in the home and enterprise market.
• The company's gross margin expanded to over 51%, reflecting a favorable product mix and ongoing focus on healthy margins.
• Pixelworks Inc (NASDAQ:PXLW) has successfully completed production qualification of its next-generation flagship mobile processor, which is expected to be a disruptive force in the mobile gaming market.
• The company has initiated cost reduction measures, including a reduction in headcount, expected to result in annualized cost savings of approximately $4 million.
• Pixelworks Inc (NASDAQ:PXLW) announced a multi-year agreement with Universal Pictures to utilize its TrueCut motion technology, marking a significant milestone in its cinematic motion grading efforts.

Negative Points

• Revenue from the mobile segment was down 7% sequentially and 76% year over year, reflecting ongoing headwinds in the mobile business.
• The company reported a net loss of $7.1 million for Q3 2024, compared to a net loss of $5.7 million in the same quarter of 2023.
• Cash and cash equivalents decreased to $28.8 million from $37.8 million at the end of the previous quarter.
• The delay in the launch of the next-generation visual processor led to missed design cycle windows for new device launches.
• Pixelworks Inc (NASDAQ:PXLW) is facing challenges due to the geopolitical environment, which may impact the structure and operations of its Shanghai subsidiary.

Q & A Highlights

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

Q: Can you talk about what customer interest has been like for the next-gen processor and the expected timeline from initial samples to design wins to revenue? A: We have sampled production-qualified engineering samples to several tier-one customers. The evaluation process involves assessing existing and new features, including those enabled by our IRX gaming ecosystem. We expect decisions for new programs within the next several months, with the solution being valid through 2026. Todd DeBonis, CEO

Q: What are the details on the engagement and potential timeline for the cost-down version of your processor? A: The engagement is specific to one tier-one customer, and we anticipate broad interest. This product targets the broader market of phones under $250, focusing on enabling high frame rate experiences on lower-end phones. Todd DeBonis, CEO

Q: How do you expect your revenue and unit profile to balance out with both high-end and low-end product families? A: In the near term, the high-end will likely dominate, potentially 50/50 by 2025-2026. Beyond that, the low-end could become a larger part of the business. Todd DeBonis, CEO

Q: When do you expect to see the inflection point of your mobile business start? A: The earliest substantial contributing revenue could be late Q1 or Q2 of 2025, with a ramp-up expected in the back half of the year. Todd DeBonis, CEO

Q: Can you clarify the financial model going forward, especially regarding break-even and cost reductions? A: The $4 million annual savings is from workforce reductions, while $10 million over six quarters includes additional cost-saving measures. Most reductions are in operating expenses. Todd DeBonis, CEO

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