PIXELWORKS, INC

Previous wording

As of June 30, 2025, we had an intellectual property portfolio of 249 patents related to the visual display of digital image data. We focus our research and development efforts on developing video algorithms that improve quality, and architectures that reduce system power, cost, bandwidth and increase overall system performance and device functionality. We seek to expand our technology portfolio through internal development and co-development with business partners, and we continually evaluate acquisition opportunities and other ways to leverage our technology into other high-value markets.

Current wording

As of October 22, 2025, we had an intellectual property portfolio of 201 patents related to the visual display of digital image data. We focus our research and development efforts on developing video algorithms that improve quality, and architectures that reduce system power, cost, bandwidth and increase overall system performance and device functionality. We seek to expand our technology portfolio through internal development and co-development with business partners, and we continually evaluate acquisition opportunities and other ways to leverage our technology into other high-value markets.

Previous wording

Net revenue for the three and six months ended June 30, 2025 and 2024, was as follows (dollars in thousands):

Current wording

Net revenue for the three and nine months ended September 30, 2025 and 2024, was as follows (dollars in thousands):

Previous wording

Revenue recorded in the second quarter of 2025 consisted of $8.0 million in revenue from the sale of integrated circuit ("IC") products and $0.2 million related to engineering services, license revenue and other. Revenue recorded in the second quarter of 2024 consisted of $8.4 million in revenue from the sale of IC products and $0.1 million in revenue related to engineering services, license revenue and other.

Current wording

Revenue recorded in the third quarter of 2025 consisted of $8.5 million in revenue from the sale of integrated circuit ("IC") products and $0.2 million related to engineering services, license revenue and other. Revenue recorded in the third quarter of 2024 consisted of $9.5 million in revenue from the sale of IC products and $0.1 million in revenue related to engineering services, license revenue and other.

Previous wording

Revenue recorded in the first half of 2025 consisted of $15.1 million in revenue from the sale of IC products and $0.3 million in revenue related to engineering services, license revenue and other. Revenue recorded in the first half of 2024 consisted of $23.8 million in revenue from the sale of IC products and $0.8 million in revenue related to engineering services, license revenue and other.

Current wording

Revenue recorded in the first nine months of 2025 consisted of $23.6 million in revenue from the sale of IC products and $0.5 million in revenue related to engineering services, license revenue and other. Revenue recorded in the first nine months of 2024 consisted of $33.3 million in revenue from the sale of IC products and $0.8 million in revenue related to engineering services, license revenue and other.

Previous wording

•Sales into the Mobile market decreased approximately $1.0 million or 48% in the second quarter of 2025 compared to the second quarter of 2024 and decreased approximately $8.9 million or 78% in the first half of 2025 compared to the first half of 2024, primarily due to decreased units sold associated with a delayed transition to our latest generation mobile products.

Current wording

•Sales into the Mobile market decreased approximately $0.8 million or 43% in the third quarter of 2025 compared to the third quarter of 2024 and decreased approximately $9.7 million or 74% in the first nine months of 2025 compared to the first nine months of 2024, primarily due to decreased units sold associated with a delayed transition to our latest generation mobile products.

Previous wording

•The decrease in sales into the Mobile market was partially offset by sales into the Home & Enterprise market, which increased approximately $0.6 million or 9% in the second quarter of 2025 compared to the second quarter of 2024 and increased approximately $0.2 million or 1% in the first half of 2025 compared to the first half of 2024.

Current wording

•Sales into the Home & Enterprise market decreased approximately $0.1 million or 1% in the third quarter of 2025 compared to the third quarter of 2024 and increased approximately $0.1 million or 1% in the first nine months of 2025 compared to the first nine months of 2024.

Previous wording

Cost of revenue and gross profit for the three and six months ended June 30, 2025 and 2024, were as follows (dollars in thousands):

Current wording

Cost of revenue and gross profit for the three and nine months ended September 30, 2025 and 2024, were as follows (dollars in thousands):

Previous wording

Gross profit margin decreased to 46% in the second quarter of 2025 compared to 51%, in the second quarter of 2024 and decreased to 47% in the first half of 2025 compared to 51% in the first half of 2024.

Current wording

Gross profit margin decreased to 50% in the third quarter of 2025 compared to 51%, in the third quarter of 2024 and decreased to 48% in the first nine months of 2025 compared to 51% in the first nine months of 2024.

Previous wording

The decrease in gross profit margin in the second quarter of 2025 compared to the second quarter of 2024 is primarily due to product mix within the Home & Enterprise and Mobile markets, partially offset by reduced inventory charges recorded in the second quarter of 2025 compared to the second quarter of 2024.

Current wording

The decrease in gross profit margin in the third quarter of 2025 compared to the third quarter of 2024 is primarily due to product mix within the Home & Enterprise and Mobile markets, partially offset by reduced inventory charges recorded in the third quarter of 2025 compared to the third quarter of 2024.

Previous wording

The decrease in gross profit margin in the first half of 2025 compared to the first half of 2024 is primarily due to product mix within the Home & Enterprise market and reduced absorption due to reduced revenue, partially offset by reduced inventory charges recorded in the first half of 2025 compared to the first half of 2024.

Current wording

The decrease in gross profit margin in the first nine months of 2025 compared to the first nine months of 2024 is primarily due to product mix within the Home & Enterprise market and reduced absorption due to reduced revenue, partially offset by reduced inventory charges recorded in the first nine months of 2025 compared to the first nine months of 2024.

Previous wording

•Non-recurring engineering expense and depreciation and amortization expense decreased by $0.4 million due to the timing of development activities.

Current wording

•Non-recurring engineering expense and depreciation and amortization expense decreased by $1.4 million due to the timing of development activities.

Previous wording

•Non-recurring engineering expense and depreciation and amortization expense decreased by $0.7 million due to the timing of development activities.

Current wording

•Non-recurring engineering expense and depreciation and amortization expense decreased by $2.1 million due to the timing of development activities.

Previous wording

•Accounting and other professional fees decreased $0.4 million primarily due to a decrease in fees incurred related to our strategic plan with our subsidiary, PWSH.

Current wording

•Compensation expense decreased $0.4 million primarily due to decreased headcount associated with our 2024 and 2025 restructuring plans.

Previous wording

Restructuring expense for the three and six month periods ended June 30, 2025 and 2024, was as follows (dollars in thousands):

Current wording

Restructuring expense for the three and nine month periods ended September 30, 2025 and 2024, was as follows (dollars in thousands):

Previous wording

During the three months ended June 30, 2025, we recorded $0.6 million in restructuring expense related to the May 2025 Plan. During the three months ended June 30, 2024, we recorded $1.4 million in restructuring expense related to the 2024 Plan. During the six months ended June 30, 2025, we recorded $0.6 million in restructuring expense related to the May 2025 Plan and $0.5 million in restructuring expense related to the February 2025 Plan. During the six months ended June 30, 2024, we recorded $1.4 million in restructuring expense related to the 2024 Plan. We do not expect to incur additional restructuring charges related to the February 2025 Plan or the May 2025 Plan.

Current wording

During the three months ended September 30, 2025, we did not record any restructuring expense. During the three months ended September 30, 2024, we recorded $0.1 million in restructuring expense related to the 2024 Plan. During the nine months ended September 30, 2025, we recorded $0.6 million in restructuring expense related to the May 2025 Plan and $0.5 million in restructuring expense related to the February 2025 Plan. During the nine months ended September 30, 2024, we recorded $1.5 million in restructuring expense related to the 2024 Plan. We do not expect to incur additional restructuring charges related to the February 2025 Plan or the May 2025 Plan.

Previous wording

The provision for income taxes during the 2025 and 2024 periods is primarily comprised of current and deferred tax expense in profitable cost-plus foreign jurisdictions, accruals for tax contingencies in foreign jurisdictions and benefits for the reversal of previously recorded foreign tax contingencies due to the expiration of the applicable statutes of limitation. We recorded a benefit for the reversal of previously recorded foreign tax contingencies of $0.3 million during the first six months of 2025 and a negligible benefit during the first six months of 2024.

Current wording

The provision for income taxes during the 2025 and 2024 periods is primarily comprised of current and deferred tax expense in profitable cost-plus foreign jurisdictions, accruals for tax contingencies in foreign jurisdictions and benefits for the reversal of previously recorded foreign tax contingencies due to the expiration of the applicable statutes of limitation. We recorded a benefit for the reversal of previously recorded foreign tax contingencies of $0.5 million during the first nine months of 2025 and a negligible benefit during the first nine months of 2024.

Previous wording

Total cash and cash equivalents decreased $9.3 million to $14.3 million at June 30, 2025 from $23.6 million at December 31, 2024. The net decrease during the first six months of 2025 was primarily the result of $11.3 million used in operating activities, $0.6 million used for payments on other asset financings and $0.2 million used for purchases of property and equipment, partially offset by $1.3 million in net proceeds from our registered direct offering, $0.8 million in asset related government subsidies and $0.6 million in net proceeds from our at the market equity offering.

Current wording

Total cash and cash equivalents decreased $9.0 million to $14.6 million at September 30, 2025 from $23.6 million at December 31, 2024. The net decrease during the first nine months of 2025 was primarily the result of $14.1 million used in operating activities, $1.0 million used for payments on other asset financings and $0.4 million used for purchases of property and equipment, partially offset by $3.0 million in net proceeds from our at the market equity offering, $1.4 million in proceeds from our short-term line of credit, $1.3 million in net proceeds from our registered direct offering and $0.8 million in asset related government subsidies.

Previous wording

As of June 30, 2025, our cash and cash equivalents balance consisted of $13.2 million in cash, $1.0 million held in U.S. dollar denominated certificates of deposit and $0.1 million in cash equivalents held in U.S. dollar denominated money market funds. Although we did not hold short- or long-term investments as of June 30, 2025, our investment policy requires that our portfolio maintain a weighted average maturity of less than 12 months. Additionally, no maturities can extend beyond 24 months and concentrations with individual securities are limited. At the time of purchase, the short-term credit rating must be rated at least A-2 / P-2 / F-2 by at least two Nationally Recognized Statistical Rating Organizations ("NRSROs") and securities of issuers with a long-term credit rating must be rated at least A or A3 by at least two NRSROs. Our investment policy is reviewed at least annually by our Audit Committee.

Current wording

As of September 30, 2025, our cash and cash equivalents balance consisted of $13.7 million in cash, $0.8 million held in U.S. dollar denominated certificates of deposit and $0.1 million in cash equivalents held in U.S. dollar denominated money market funds. Although we did not hold short- or long-term investments as of September 30, 2025, our investment policy requires that our portfolio maintain a weighted average maturity of less than 12 months. Additionally, no maturities can extend beyond 24 months and concentrations with individual securities are limited. At the time of purchase, the short-term credit rating must be rated at least A-2 / P-2 / F-2 by at least two Nationally Recognized Statistical Rating Organizations ("NRSROs") and securities of issuers with a long-term credit rating must be rated at least A or A3 by at least two NRSROs. Our investment policy is reviewed at least annually by our Audit Committee.

Previous wording

Accounts receivable, net decreased to $5.1 million as of June 30, 2025 from $5.8 million as of December 31, 2024. The average number of days sales outstanding increased to 55 days as of June 30, 2025 from 48 days as of December 31, 2024. The decrease in accounts receivable was due to a decrease in revenue in the second quarter of 2025 compared to the fourth quarter of 2024 as well as the timing of revenue within the quarter.

Current wording

Accounts receivable, net decreased to $5.7 million as of September 30, 2025 from $5.8 million as of December 31, 2024. The average number of days sales outstanding increased to 58 days as of September 30, 2025 from 48 days as of December 31, 2024. The decrease in accounts receivable was due to a decrease in revenue in the third quarter of 2025 compared to the fourth quarter of 2024 as well as the timing of revenue within the quarter.

Previous wording

Inventories were $4.1 million as of June 30, 2025 compared to $4.2 million at December 31, 2024. Inventory turnover decreased to 3.9 as of June 30, 2025 from 5.1 as of December 31, 2024. Inventory turnover is calculated based on annualized quarterly operating results and average inventory balances during the quarter.

Current wording

Inventories were $3.1 million as of September 30, 2025 compared to $4.2 million at December 31, 2024. Inventory turnover decreased to 4.8 as of September 30, 2025 from 5.1 as of December 31, 2024. Inventory turnover is calculated based on annualized quarterly operating results and average inventory balances during the quarter.

Previous wording

During the six months ended June 30, 2025, we sold an aggregate of 69,175 shares of our common stock under the 2024 ATM Program, resulting in aggregate net proceeds to us of approximately $0.5 million and gross proceeds of approximately $0.6 million. Roth commissions and fees and other expenses related to the 2024 ATM Program were $0.1 million in the first six months of 2025.

Current wording

During the nine months ended September 30, 2025, we sold an aggregate of 347,559 shares of our common stock under the 2024 ATM Program, resulting in aggregate net proceeds to us of approximately $3.0 million and gross proceeds of approximately $3.1 million. Roth commissions and fees and other expenses related to the 2024 ATM Program were $0.1 million in the first nine months of 2025.

Previous wording

As of June 30, 2025, our cash and cash equivalents balance of $14.3 million was highly liquid. We anticipate that our existing working capital will be adequate to fund our operating, investing and financing needs for at least the next twelve months. If our cash is insufficient to meet our needs, including in the longer term, we may seek to raise capital by pursuing financing arrangements, including the issuance of debt or equity securities, or reducing expenditures, or both, to meet our cash requirements. There is no assurance that, if required, we will be able to raise additional capital or reduce discretionary spending to provide the required liquidity which, in turn, may have an adverse effect on our financial position, results of operations and cash flows.

Current wording

As of September 30, 2025, our cash and cash equivalents balance of $14.6 million was highly liquid. We anticipate that our existing working capital, together with the cash proceeds from our registered direct offering and sale of patents and related rights and materials, each of which we entered into in October 2025, will be adequate to fund our operating, investing and financing needs for at least the next twelve months. If our cash is insufficient to meet our needs, including in the longer term, we may seek to raise capital by pursuing financing arrangements, including the issuance of debt or equity securities, or reducing expenditures, or both, to meet our cash requirements. There is no assurance that, if required, we will be able to raise additional capital or reduce discretionary spending to provide the required liquidity which, in turn, may have an adverse effect on our financial position, results of operations and cash flows. For more information regarding the registered direct offering and patent sale, see “Note 16: Subsequent Events”.

Previous wording

Other than as set forth above, there were no material changes to our liquidity and capital resources during the six month period ended June 30, 2025 from those set forth in our Annual Report on Form 10-K for the year ended December 31, 2024, as amended.

Current wording

Other than as set forth above, there were no material changes to our liquidity and capital resources during the nine month period ended September 30, 2025 from those set forth in our Annual Report on Form 10-K for the year ended December 31, 2024, as amended.

Previous wording

There have been no material changes to these estimates, or the policies related to them during the six months ended June 30, 2025. For a full discussion of these estimates and policies, see “Critical Accounting Estimates” in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2024, as amended.

Current wording

There have been no material changes to these estimates, or the policies related to them during the nine months ended September 30, 2025. For a full discussion of these estimates and policies, see “Critical Accounting Estimates” in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2024, as amended.