Corporate Overview November 2020 - Pixelworks, Inc.
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Corporate Overview
November 2020
1
Cautionary Statements & Other Disclosures
This presentation includes forward-looking statements regarding Pixelworks’ business outlook.
These forward-looking statements involve risks & uncertainties & actual results may vary
significantly from those suggested here. Additional information concerning risk factors that
could cause actual results to vary from these forward looking statements can be found in
our Form 10-K for the fiscal year ended December 31, 2019 and subsequent SEC filings.
Financial results and financial outlook data provided in the slides is presented on both a
GAAP and non-GAAP basis. Our non-GAAP financial results and non-GAAP financial outlook
exclude restructuring charges and stock-based compensation expense, both of which are
required under GAAP. We use non-GAAP measures internally to assess our operating
performance, and believe non-GAAP measures provide meaningful perspective on our
underlying cash flow dynamics. However, we caution users to consider these measures in
addition to, not as a substitute for, nor superior to, our consolidated financial results
presented in accordance with GAAP.
2
Provider of industry-leading video processing
technology and solutions that enable highly authentic viewing
experiences with superior visual quality
Pixel Perfection®
3
Pixelworks At-a-glance (NASDAQ: PXLW)
Company Overview
Leading provider of the video and display SEMICONDUCTORS & SOFTWARE
Over 20-year heritage of display and visual processing innovation
Fundamental image processing IP with 360+ issued/pending patents
Target Markets Products and Solutions
Mobile (smartphone, gaming & tablet) Semiconductor Hardware
Home (broadcast video streaming, Visual processors for mobile devices
XCode® transcoders for media players, STB recorders
recording, projection)
SoCs for digital projectors
Cinema (TrueCut® content creation,
remastering and video streaming) Software and Platform Licensing
Enterprise (business and education) Pixelworks Pro display processing software for smartphones
TrueCut motion grading, HDR content creation SDK
4
Opportunity: 82% of Global Internet Traffic is Video
Video Ecosystem Mobile Video is >50%(driven by China)
Monthly Internet Traffic
Per Capita (Gb)
Web/OTT Video
Source: Cisco, 2/2019
44
13
2017 2022
$8.1T
Collective Video Ecosystem Market Cap
5
Collective market caps as of Sept 30, 2020. Reflects combined value of content providers’ parent companies. Apple market cap (for Apple TV+) is imputed in video ecosystem total.
Top Brands Invested in Gaming and Moving to Cloud
Gaming Ecosystem Gaming Dominated by APAC, Smartphones
2.7B 2.5B
Global Gamers Smartphone Gamers
Smartphone
(2.5B) Console
(0.8B)
PC
(1.3B)
…and Moving to Cloud 2020 2023 2025
Cloud Revenue: $0.5B $5B $12B
$8.5T Source: NewZoo, 2020 Global Cloud Gaming Report
Collective Market Cap
6
Collective market caps as of Sept 30, 2020. Reflects combined value of content providers’ parent companies. Apple market cap (for Apple TV+) is imputed in video ecosystem total.
Pixelworks Mobile SAM
Near Term Opportunity 1380 Mu TAM in 2020
2020
~370Mu SAM OPPO
Samsung
16 new PXLW models at 7 OEMs Vivo
PXLW technology now in phones with Xiaomi
MSRPs from $100 to $1,400 Longer-Term
Lenovo
Huawei Opportunity
2021
~500Mu SAM
Others
OPPO, vivo, Xiaomi (and affiliates)
Apple
take other tier ones’ share
PXLW YoY increase in active OEMs,
new models and volume per OEM
7
Bringing Big Screen Technology to Mobile
Key Features Behind the World’s Most Exceptional Smartphone Displays
Unique Visual
Unprocessed Processed
Processing
Features
• X5 • All Processors
• X5 Pro • Pro Software
• Except DLV
Processed Unprocessed
MotionEngine® Auto Adaptive Display
Smooth, Natural Motion Brightness/temp, DLV*/night/reading
Color Calibration
• All Processors Industry Leading Accuracy ∆E
New Pixelworks Mobile Processor Positioning
Product Strategy
• X5 processor
• MEMC drives premium, high frame rate video
experience and smoother gaming at low power
• i6 processor
• AI improves quality and margins in high/mid tiers
• i3 processor positioned as mid/low end leader
• Pro Software
• Enhances value and margins for X5 Pro and i6 Pro
by enabling broader use cases and lower power
Tech Roadmap/Next Gen Processor
• Extreme low latency, low power cloud gaming
• Extend AI to advanced features & higher resolution
9
Expanding Portfolio with New AI Based Processor
Existing Tiered Solutions
New Pixelworks i6 processor
Premium/Flagship Solution
with Dedicated AI Engine
Snapdragon
MIPI MIPI
865 platform
Display Panel
AI Scene
Visual Processor Pro Software
Detection
AI
OnePlus 8 Pro Example
Mid/High-End Solution With Adaptive
Picture Quality
MIPI MIPI
Snapdragon
765 platform
Visual Processor
Plus higher resolution and
added power optimization
Nokia 8.3 Example
102020 Models to-date with Pixelworks Solutions
Growing Partnerships and Tier-one Adoption
OnePlus 8 Pro Find X2 Pro Find X2 Black Shark 3 Pro Black Shark 3 Black Shark 3S
Models with
Pixelworks
X5 Pro
Models with
Pixelworks i3
or Pro Software
ZenFone 7, 7 Pro Legacy
ROG III 8.3 5G 10 Pro 10 5G 10L OnePlus 8, 8T Brisa
11
Phones not shown to scaleMobile Momentum – New Designs Wins and Active OEMs
35
30 Range
25
20
New Design Wins:
Pro Software 15
High Tier (X Series)
10
Mid Tier (i Series)
Target
5
-
2018 2019 2020 2021 target
12
(est.)Mobile Momentum: New Design Wins Per Active OEM
3.5
3.0 Range
Number of New Models
2.5
2.0
1.5
1.0
0.5
-
2018 2019 2020 2021 target
(est.) 13
Note, OEM base number of 10 used in 2021 range calculation aboveMobile Momentum: Unit Volumes Shipped
20
183%
Range
15
85%
Millions
10
90%
5
141%
0
2018 2019 2020 est. 2021 target
14TrueCut® End-to-end Cinematic Content Platform
Driving Ecosystem Development and Revenue Opportunities
CREATE MASTER DELIVER PLAY
Customer/ Production Studios Post-Production houses Streaming distribution TV
Partner services Mobile
Cinema
Engagement On-set and dailies tools Post-production tools Distribution platform & tools Playback SDK for streaming apps
Monetization Tools license Tools license Distribution license Device playback license
Tools licenses kick start ecosystem and original content development
One-time streaming distribution licenses provide market validation and visibility
Strategy
• Example: YOUKU remastering SDR library to HDR. 130 mobile devices certified, accessible to ~100M users
The above creates pull-through for larger device (TV) playback license opportunity 15OTA Broadcast TV to Any Device
Efficient, high-quality streaming of TV over wireless networks
XCODE processor: up to 4 simultaneous free HDTV streams
Qualcomm Partnership Expands
Cord Cutting Opportunity with 5G
Compatible with All OTT Platforms
(OTA HDTV) + (OTT via 5G)
5G
OTT
Video over
antenna
via 5G Mesh Wi-Fi
Backhaul TV Tuner
+ 5G Wi-Fi
Transcoder Streaming
OTA
HDTV
Local Broadcast
antenna
to devices
Channels
at home
Reference design for OEMs
16Projector and Japan PVR Businesses
Built on unique transcoder IP. Funds mobile & TrueCut growth initiatives
Projector business Japan PVR business
Mature Market Mature Market
8M units annually, long product cycles 2M units annually, long product cycles
Limited Competition – #1 Market Share Limited Competition – #2 Market Share
Business Focus Business Focus
Ramping co-developed SoC with large Support wins in new 4K ADSB (ISDB-S3 standard)
customer in 2020 compatible PVR and STB converter devices
Transition broader customer base to new- Evaluate potential increased customer penetration,
generation SoC with advanced features including expanded opportunities in 4K & 2K devices
Customers Customers
17Projectors Well-positioned for Rebound
Customers moving to new, higher-priced Pixelworks SoC
Increased customer ODM outsourcing over last 3 years
Customer expansion into laser and high brightness models
Greater differentiation in new segments
Large venues
Retail, Museums, Entertainment / ambient lighting applications
Smart Projection
Next generation SoC in planning with latest PQ technologies
18Mobile + TrueCut License Revenue
$4.0
Millions
$3.5
$3.0
$2.5
72% CAGR (TTM)
$2.0 Mobile expected to be
up sequentially in Q4
$1.5
$1.0
$0.5
$0.0
Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 Q4 19 Q1 20 Q2 20 Q3 20
19Overall Revenue Trend by Segment
Historical Revenue Mix
100% Target Revenue Mix at Scale
90% (at $100M Annual Run Rate)
80%
70%
60%
Projector/Video
50% Delivery
Mobile/TrueCut (40%)
40%
(60%)
30%
20%
10%
0%
FY 18 FY 19 Q1-Q3 FY20
Projector/Video Delivery Mobile/TrueCut
20Non-GAAP P&L Trend
Q3 19 Q4 19 Q1 20 Q2 20 Q3 20
Revenue $18,056 $16,023 $13,774 $9,253 $8,189
Gross Margin (1) $9,733 $7,699 $7,175 $5,473 $4,557
Gross Margin % 53.9% 48.0% 52.1% 59.1% 55.6%
R&D (2) 5,888 6,113 5,619 5,508 5,242
SG&A (3) 4,416 4,313 4,045 3,770 3,632
Total Opex (4) 10,304 10,426 9,664 9,278 8,874
Income/(Loss) from Operations (571) (2,727) (2,489) (3,805) (4,317)
Other Income 71 324 54 (24) (28)
Tax Provision 16 (69) 202 89 111
Net Income/(Loss) (516) (2,334) (2,636) (3,917) (4,456)
EBITDA 452 (1,714) (1,467) (2,934) (3,457)
Net Income/(Loss) per share ($0.01) ($0.06) ($0.07) ($0.10) ($0.11)
21Balance Sheet Trend
Q3 19 Q3 20
Assets
Cash and Investments $22,279 $16,798
Accounts Receivable 8,857 5,417
Inventories 3,133 3,895
Property, Plant & Equipment 4,215 5,631
Operating Lease Assets 4,607 6,943
Goodwill 18,407 18,407
Acquired Intangibles 3,077 1,581
Prepaid Expenses & Other Assets 3,090 2,871
Total Assets $67,665 $61,543
Liabilities
Accounts Payable $2,318 $687
Accrued Payroll Liablities 3,552 4,235
Operating Lease Liabilities 5,011 7,243
Other Accrued Liabilities 3,963 5,441
Income Taxes Payable 2,624 2,389
Line of Credit - 3,953
Shareholders Equity 50,198 37,594
Total Liabilities and Shareholder's Equity $67,665 $61,543
22GAAP/Non-GAAP Reconciliation
Q3 19 Q4 19 Q1 20 Q2 20 Q3 20
(1) Excludes:
Amortization of acquired intangible assets 298 298 298 298 298
Stock-based compensation 89 100 101 127 117
Restructuring - - - - 165
(2) Excludes stock-based compensation 570 611 648 806 820
(3) Excludes:
Stock-based compensation 839 1,085 1,073 1,310 913
Amortization of acquired intangible assets 76 76 76 76 76
(4) Excludes Restructuring - - 592 - 1,430
23Thank You ©2020 Pixelworks, Inc. 24 Pixelworks, the Pixelworks logo, TrueCut and MotionEngine are registered trademarks of Pixelworks, Inc. All other trademarks are the property of their respective owners.
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