Third Quarter and Recent Highlights
- Total revenue increased 12% sequentially
- GAAP gross margin expanded more than 50 basis points sequentially and 800 basis point year-over-year to 51.2%, primarily driven by favorable product mix and lower overhead expenses
- Entered into multi-year, multi-title agreement with Universal Pictures to bring TrueCut Motion™ technology to the theatrical releases of future Universal titles
- DreamWorks Animation's The Wild Robot was released globally by Universal Pictures to premium large format theaters in TrueCut Motion format
- Pixelworks Shanghai subsidiary received provincial and national-level recognition with the "Little Giant" certification, a designation for leading enterprises in China that have significant growth potential
- Pixelworks retains Morgan Stanley as financial advisor to assist with reviewing potential strategic options specific to inbound interest in the Company's Pixelworks Shanghai subsidiary
"Third quarter results reflected our expectations for moderate sequential improvement as we continue to work through the previously communicated headwinds in our mobile business," stated Todd DeBonis, President and CEO of Pixelworks. "Gross margin expanded sequentially and year-over-year to over 51%, while operating expenses decreased as we realized the initial benefits of our previously implemented cost reduction actions.
"Highlighting the most recent milestone for our TrueCut Motion platform, during the quarter we secured a multi-year agreement with Universal Pictures to utilize our industry-leading motion grading technology to enhance the visual experience of several major theatrical releases. Within our mobile business, we recently completed production qualification of our next-generation, flagship mobile visual processor. After successfully meeting or exceeding all performance metrics, we are now engaged with multiple customers on smartphone programs targeted for launch in the coming year. Separately, we are also engaged in customer evaluations for a cost-down version of an existing mobile visual processor that offers unique visual enhancement features. This newly optimized solution addresses broader use-cases, in addition to mobile gaming, as we aim to expand our served target market in higher unit volume mid- and entry-level smartphones.
"In summary, our team has continued to execute well toward overcoming recent challenges and positioning our mobile business for a return to growth in 2025. We currently have a strong pipeline of new program opportunities for our latest visual processor solutions, and we expect to maintain a high level of engagement activity over the next several quarters. We anticipate our previous and continuing cost reduction actions will contribute to meaningful improvement in our operating results as we drive renewed top-line momentum in mobile."
Third Quarter 2024 Financial Results
Revenue in the third quarter of 2024 was $9.5 million, compared to $8.5 million in the second quarter of 2024 and $16.0 million in the third quarter of 2023. The sequential increase in third quarter revenue was driven by increased sales in the home and enterprise market, while the year-over-year decrease primarily reflected the previously discussed headwinds in the Company's mobile business.
On a GAAP basis, gross profit margin in the third quarter of 2024 was 51.2%, compared to 50.7% in the second quarter of 2024 and 42.9% in the third quarter of 2023. Third quarter 2024 GAAP operating expenses were $13.5 million, compared to $15.1 million in the second quarter of 2024 and $14.5 million in the year-ago quarter.
On a non-GAAP basis, third quarter 2024 gross profit margin was 51.3%, compared to 51.0% in the second quarter of 2024 and 43.1% in the year-ago quarter. Third quarter 2024 non-GAAP operating expenses were $12.4 million, compared to $12.8 million in the second quarter of 2024 and $13.3 million in the year-ago quarter.
For the third quarter of 2024, the Company recorded a GAAP net loss of $8.1 million, or ($0.14) per share, compared to a GAAP net loss of $10.1 million, or ($0.17) per share, in the second quarter of 2024, and a GAAP net loss of $7.0 million, or ($0.12) per share, in the year-ago quarter. Note, the Company refers to "net loss attributable to Pixelworks, Inc." as "net loss".
For the third quarter of 2024, the Company recorded a non-GAAP net loss of $7.1 million, or ($0.12) per share, compared to a non-GAAP net loss of $7.7 million, or ($0.13) per share, in the second quarter of 2024, and a non-GAAP net loss of $5.7 million, or ($0.10) per share, in the third quarter of 2023.
Adjusted EBITDA in the third quarter of 2024 was a negative $6.3 million, compared to a negative $7.0 million in the second quarter of 2024 and a negative $5.0 million in the year-ago quarter.
Business Outlook
The Company's current business outlook, including guidance for the fourth quarter of 2024, will be discussed as part of the scheduled conference call.
Conference Call Information
Pixelworks will host a conference call today, November 12, 2024, at 2:00 p.m. Pacific Time. To join the conference call via phone, analysts and investors should dial +1-888-596-4144 and enter the following conference ID: 3689417; international participants should dial +1 646-968-2525 and enter the same conference ID. Additionally, a live audio webcast of the conference call will be available and archived for approximately 90 days in the Investors section of the Company's website at www.pixelworks.com.
A telephone replay of the conference call will also be available through Tuesday, November 19, 2024, and can be accessed by dialing +1-800-770-2030 and using passcode 3689417.
