Pixelworks, Inc. Q1 FY2026 earnings call

• Corporate Restructuring and Post-Transaction Positioning • Completed the sale of the Shanghai semiconductor subsidiary in early January 2026, receiving $51 million in net cash proceeds after transaction costs and taxes • Executed all planned restructuring actions to streamline the organization, recognizing $2 million in one-time severance and restructuring costs during Q1 2026 • Ended Q1 2026 with $58 million in cash and cash equivalents and zero debt, eliminating all prior legacy liabilities and contingencies related to the sold subsidiary • The board of directors authorized a new $5 million 2-year share repurchase program starting May 15, 2026, after canceling the previously unused at-the-market stock facility • The reorganized company has a core permanent workforce of 25 people, over half of which are focused on R&D, with flexible access to project-based contractors common in the media production industry

• Core Business Progress on TrueCut Motion • Pixelworks is now repositioned as a focused, asset-light global technology licensing business centered on its TrueCut Motion visualization platform and over 60 issued/pending patents • Completed a high-profile complex motion grading project for Billie Eilish, Hit Me Hard and Soft: The Tour Live in 3D, a major theatrical release distributed by Paramount Pictures that grossed $20 million worldwide in its opening weekend, recouping full production costs • The project validated TrueCut Motion's ability to solve unique technical challenges for novel camera systems and mixed source frame rates, earning positive critical reception for the resulting image quality • Expanded the premium exhibitor partner ecosystem, adding Vue (Europe's largest privately owned cinema operator) to previously announced partners including Marcus Theatres, Odeon Cinemas Group, and CineD; Vue will prioritize TrueCut content in its premium Epic brand cinema experiences

• Industry Trend Validation • Observed strong positive trends at the April 2026 CinemaCon conference, with year-to-date box office up 20% compared to 2025 • Major studios are increasing theatrical release volumes and committing to longer theatrical exclusivity windows: Paramount plans 30 annual releases, Amazon MGM is scaling to 15 targeted releases with a 45-day theatrical exclusivity window • Industry momentum is growing for premium large format (PLF) theatrical experiences, which generate significantly higher margins than standard format screens, highlighted by Disney's new Infinity Vision premium screen certification program

Pixelworks completed the sale of its Shanghai-based semiconductor subsidiary in early January 2026, with immaterial operating contribution from the business prior to close that is not included in Q1 2026 results. The only active product segment for the repositioned company is the TrueCut Motion platform and related motion grading services. This segment generated total Q1 2026 revenue of $450,000, accounting for 100% of the company's total revenue. Gross profit for the segment was $253,000, representing a 56.7% gross margin. Full year 2025 revenue from this segment was $690,000.

• The company does not provide quarterly detailed financial guidance, but reaffirms its prior high-level operating framework starting in Q2 2026
• Target cash operating expense run rate of approximately $2 million per quarter, representing a ~$900,000 reduction from the pre-restructuring run rate
• Expected quarterly interest income of between $400,000 and $500,000 based on the current cash balance and interest rate environment
• The $5 million share repurchase authorization is discretionary, with no set timeline for repurchases

No explicit discussion of material new risks or operational failures was included in the call. Forward-looking statements were standardly noted to be subject to existing uncertainties that could cause actual results to differ materially from projections, with risks outlined in prior SEC filings including the company's 2025 Form 10-K.

Q: Can you confirm that the $2 million Q2 target cash operating expense represents ~$900,000 in cost savings from pre-restructuring levels, which is the expected ongoing run rate? / A: Yes, that is correct. The Q1 2026 operating expense total of $5.2 million included $2 million in one-time restructuring costs that will not recur, and headcount reductions implemented in Q1 will deliver the full expected savings starting in Q2. The $2 million level is the appropriate ongoing run rate going forward.

Q: Which of your announced exhibitor partners is most critical for near-term revenue, what is your overall partnership strategy, and do you have the team and necessary partners in place to build your licensing base? / A: The near-term focus is on growing the ecosystem of premium large format exhibitor partners, with four already announced and many more targeted. The entire exhibition industry is prioritizing capital investment in premium screens, which generate roughly 10x higher returns than standard screens. Pixelworks is currently focused on building demand by convincing studios and filmmakers to provide premium motion-graded content for these screens, and formal revenue-generating licensing arrangements will develop over time as the ecosystem expands.

Q: What adjacent market opportunities could you leverage your existing TrueCut Motion technology into, beyond current theatrical motion grading? / A: TrueCut Motion already relies on 5 years of development of AI-trained motion modeling fine-tuned for both 2D and 3D immersive environments. The core technical tools developed for this application can be leveraged in fast-growing emerging AI-focused visualization segments, but management is not ready to share specific details on these opportunities at this time.

Q: With your strong current cash balance, do you plan to pursue organic growth, acquisitions, or other strategic uses of cash after launching the share repurchase program? / A: The ample cash balance gives Pixelworks strategic flexibility, including the ability to pursue technology investments, content development deals, and complementary acquisitions that align with the company's licensing strategy. Management is not actively rushing to deploy all capital immediately, and the balance sheet is structured to provide ammunition to pursue strategic opportunities as they arise.