Good day, ladies and gentlemen, and welcome to Pixelwork Inc.'s fourth quarter 2025 earnings conference call. I will be your operator for today's call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. As a reminder, this conference call is being recorded for replay purposes. I would now like to turn the call over to Brett Perry with Shelton Group Investor Relations. Please go ahead.

Thank you, Didi. Good afternoon and thank you for joining us on today's call. With me on the call are FixedWorks Chairman and CEO Todd DeBonis and Chief Financial Officer Haley Amon. The purpose of today's conference call is to supplement the information provided in Pixelworks press release issued earlier today announcing the company's financial results for fiscal year 2025. Before we begin, I'd like to remind you that various remarks we make on this call including those about projected future financial results, economic and market trends, and our competitive position constitute forward-looking statements. These forward-looking statements and all other statements made on this call that are not historical facts or subject to a number of risks and uncertainties that may cause actual results to differ materially. All forward-looking statements are based on the company's beliefs as of today, Thursday, March 12, 2026. The company undertakes no obligation to update any such statements to reflect events or circumstances occurring after today. Please refer to today's press release, the company's annual report on Form 10-K for the year ended December 31, 2025, Inc. 5 and subsequent SEC filings for a description of factors that could cause forward-looking statements to differ materially from actual results. Please note throughout the company's press release and management statements during this conference call, we refer to net loss attributable to Pixelworks Inc. as simply net loss. With that, it's now my pleasure to turn the call over to Pixelworks Chairman and CEO. Todd, please go ahead.

Thank you, Brett. Good afternoon and welcome to everyone joining us on today's conference call. As a foundation for discussing our go-forward business and strategy, I want to begin today's call with a review of our recently completed sale of the company Shanghai-based subsidiary. Following a roughly year-long process, in October, we signed a definitive purchase agreement to sell all of Pixelworks Inc.'s ownership of its Shanghai semiconductor subsidiary to a special-purpose entity controlled by Verisilicon. Then on January 6th of this year, we announced the successful closing of the transaction, which resulted in net cash proceeds to Pixelworks of approximately $51 million. The cash proceeds from the sale were received in early January, and with the approximate $11 million we had on hand at the end of 2025, our cash balance starting this year was approximately $62 million. In addition, there is still approximately $1.2 million in escrow for a tax dispute that looks to be resolved in our favor. As outlined in my letter to shareholders last November, the rationale for the transaction was threefold. First, it unlocked significant value for our shareholders by monetizing a key asset that was exposed to increasingly complex business and geopolitical environments. In addition to repatriating the cash proceeds to the U.S., the transaction also completely eliminated all prior obligations of Pixelworks, Inc., to minority investors in the Shanghai subsidiary. Second, with the exit of the semiconductor hardware business, we were able to reposition Pixelworks as a global technology licensing business focused on cinematic visualization solutions, which I'll talk more about in a minute. Lastly, the transaction meaningfully strengthened our balance sheet, increasing both the company's financial stability and flexibility. Without the financial and capital burdens associated with operating a resource-intensive semiconductor business in China, Pixelworks can focus on expanding our core strengths in visualization enhancement solutions, pursuing new and existing licensing initiatives, and allocating capital to the highest ROI market opportunities. Since the transaction closed in January, we have taken additional steps to transform the remaining organization. These included reducing headcount that primarily were supporting the Shanghai subsidiary, as well as adding a few key hires, most notably the appointment of our new EVP of Business Development, Seven Brown. We also made changes to Pixel Works Board of Directors to better align with and support our go-forward strategy having provided that background I want to frame what our business looks like today post transaction we have effectively transformed pixel works into a lean asset light global technology licensing company we continue to have a hundred percent ownership of a significant intellectual property portfolio underpinned by over 60 issued and pending patents related to our true cut motion grading platform as well as broader visual enhancement technologies as of today the company is comprised of less than 25 full-time employees with roughly 60 percent being dedicated to r d to the extent we choose to grow the size of our team it will be based upon demand for our technology as opposed to arbitrary growth targets today and going forward As a pure play technology licensing company, we are focused on providing a combination of new and existing cinematic visualization solutions that enable truly differentiated viewing experiences. Our current portfolio of solutions is anchored by Pixelworks TrueCut motion platform, which continues to be utilized by leading filmmakers to enhance the cinematic experience across premium theatrical screens. In 2025, we were credited with several notable releases featuring True Cut Motion, including DreamWorks Animations, The Bad Guys 2, and Universal Pictures, Nobody 2, released to worldwide premium large format theaters. Additionally, Jurassic World Rebirth was showcased in TrueCut motion format on Synity premium screens. And then our motion grading technology was most recently used in Universal Pictures theatrical release of Wicked for Good. As part of our refined strategy to accelerate expanded adoption of our TrueCut motion platform, we are putting increased emphasis on supporting premium, visually stunning films that are released theatrically. Together with today's growing premium large format theatrical experiences, these tentpole titles generate an outsized share of the total theater box office sales. Further validating this fact is the rapidly growing number of premium large format, or PLF, screens with the industry's largest exhibitors allocating a majority of their new capex spending to expand their premium theatrical experiences. As such, we are pursuing further direct engagement with the leading premium exhibitors who are nationally aligned with our objective of engaging studios and filmmakers to deliver more premium format content. The initial results of these direct engagement efforts have been very positive in January we announced a partnership with Marcus theaters to prioritize true cut motion across their premium screens for context Marcus is the fourth largest theater chain in the United States with nearly a thousand screens across 78 cinema complexes operated under multiple different brands most recently we secured a similar endorsement from Odeon Cinemas Group, the largest cinema operator in Europe, and also affiliate of AMC, to bring additional titles to TrueCut motion format to their premium auditoriums. We are currently in discussions with and expect to announce partnerships with additional leading premium exhibitors in the near future. Collectively, we anticipate these collaborations with exhibitors will result in increased demand for a true cut motion format our near-term objective is to be associated with many of the most visually impactful titles released to theaters in a given year which we believe will accelerate our growth path towards increased market awareness and expanding ecosystem partnerships with true cut motions unique ability to enable the most authentic high fidelity viewing experience and a growing number of premium screens we continue to believe there is a large and compelling market opportunity for our motion grading technology and expertise the primary focus of our advanced algorithm team is to further expand the capabilities of our motion grading tools both for productivity and better picture quality today we are working on on our most complex projects to date which is providing us with real-time feedback from our motion grading supervisors in addition to this activity we identified adjacent opportunities for our motion processing technology we like others are leaning into the benefits that ai technology can bring to our development process in summary the successful exit from our previous semiconductor business has enabled us to transform the company into a more nimble, scalable, and assetized organization that's well capitalized. Our immediate strategic focus is enabling additional premium large format theatrical experiences and currently have a growing demand for our true cut motion grading services. I also want to emphasize that maintaining a robust balance sheet remains a high priority. We are committed to prudently managing resources and efficiently using our cash on operations as we work to build a broader and highly profitable licensing business centered around cinematic and visual enhancement solutions. With that, I'll turn the call over to Haley to provide some additional information and details, as well as our current balance sheet position. Thank you, Todd.

As Todd previously discussed, on January 6, 2026, we completed the transaction to sell all equity interests and associated assets of our Pixelworks Shanghai semiconductor subsidiary business. In December, this business met all criteria to be considered held for sale, at which time the operating results of our Shanghai subsidiary became designated as discontinued operations. Therefore, the company's reported financial results contained in today's press release for fiscal years 2024 and 2025 represent the company's results on a continuing operations basis. With respect to the reported approximately $690,000 in revenue from continuing operations for fiscal year 2025, this is comprised entirely of revenue generated from our TrueCut motion platform and related motion grading services. With a large portion of our business prior to January 2026 now classified as discontinued operations, I will predominantly focus the remainder of my comments on continuing operations in the company's financial position subsequent to the sale of the subsidiary on January 6, 2026. Starting with the balance sheet, I want to briefly review several items that contributed to our current and projected cash balance. Following our previously announced and completed registered direct offering and sale of non-strategic patents during the fourth quarter, the continuing company ended the year with approximately $11.2 million in cash and cash equivalents. Then, in January, we closed the sale of Pixelwork Shanghai Semiconductor Subsidiary, resulting in cash proceeds to Pixelwork, net of transaction costs, and withholding taxes paid in China, totaling approximately $51 million. Hypothetically, had all of these items taken in place before year-end, we would have entered 2026 with approximately $62 million. Subsequent to closing the sale of our Pixelwork Shanghai subsidiary, we paid out all remaining transaction expenses including accounting legal and advisory fees as well as bonuses. We also completed a series of restructuring actions to streamline the remaining organization which will result in recognizing certain severance costs in the first quarter. Lastly, we believe that a previously pending tax matter in China has been fully resolved, and we expect an additional approximately $1.2 million of cash proceeds from the transaction to be released from escrow in the coming weeks. Taking all of these items into account, combined with expected results from continuing operations in the first quarter, However, we currently anticipate our cash-in-cash equivalence balance, as of March 31st, to be approximately $58 million. We believe this cash balance provides ample runway and flexibility to execute on our strategy of building a pure-play technology licensing business. As such, in early March, we elected to cancel our previously available but recently unused at the market stock facility. Lastly, with respect to the balance sheet, I want to reiterate that all previously reported liabilities and commitments, including redeemable non-controlling interests associated with our prior Shanghai subsidiary, were fully released in conjunction with the closed sale. The elimination of these prior contingencies will be reflected in the company's reported financial statements for the first quarter ending March 31st. Another important change to our financial profile going forward relates to operating expenses. As mentioned earlier, during the first quarter, we took a number of actions to meaningfully reduce the company's overall cost structure and streamline the continuing operations portions of the business. These measures included a reduction in headcount and associated organizational expenses, reflecting our transition to focus on technology licensing. As a result, we expect cash used for operating expenses to be approximately $2 million per quarter beginning in the second quarter. Although we are not providing quarterly financial guidance, I would like to provide a high-level framework for thinking about the company's current cash position and anticipated near-term operating results. First, we expect to maintain cash operating expenses of $2 million or less, again starting in the second quarter. Then, based on the current interest rate environment, we expect to generate at least $1.5 million of interest income annually from the cash currently held on the balance sheet. That completes our prepared remarks and we look forward to taking your questions. Operator, please proceed with the Q&A session.

Thank you. As a reminder to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we can plow the Q&A roster. And our first question comes from Suji De Silva of Roth Capital. Your line is open.

Hi, Todd. Hi, Haley. Congratulations on the transaction here and the go-forward opportunity. So maybe, Todd, you can start with sort of the big picture in terms of the media chain, from content creators to the end theaters and, you know, streaming guys in between. You know, where are the best near-term opportunities for you to drive revenue? Maybe we can start there and talk about the model for those given components.

Well, you know, I think I've been through this before. I think maybe people didn't focus in last year when we were in the middle of the transaction. but but i'll bring it up again so you know our business model is first we have advanced tools and technology where we create cinematic high frame rate or motion graded content that's branded under the true cut motion brand when we do this work we get paid for it but we usually don't charge what the cost structure is okay so even though we make revenue there we do not want it to be an inhibitor for content creators to come to us. So all the revenue that we've had so far have come in the last couple of years has come from this content creation. But it's in a subsidized format. We're as busy as we've ever been. We're working on more complex projects today. We're advancing the tools that work on these projects. And, you know, so you could probably see an increase in revenue, but once again, that it will not be the primary source of revenue. Then today, for those content creators and studios that engage with us, we give the theatrical rights to that content for effectively free, right? It's included in the engagement to do the motion grading work. And so we encourage them and we encourage more theaters to bring cinematic high frame rate content, true cut motion content, to as many theaters and as many visually stunning pieces of content as possible. We expect, and we've been in discussions with several people, that as this continues to expand, studios and distributors of content will want to deliver this premium experience to premium home entertainment devices. We will engage with those studios and distributors that want to distribute the content, and we will engage with device manufacturers of premium devices that want to have that differentiated content on their device. They need to be certified. They need to meet certain criteria. It needs to operate in a mode that effectively guarantees the creator's intent will be shown on those devices. And so we expect most of the revenue to come from this home entertainment ecosystem. True Cut Motion is not the only technology we're working on. We're working on other licensing technologies. They may or may not use the same model as far as our revenue profile. But we're running pretty lean, Suji. and I believe if we execute on this, we will be profitable with TrueCut Motion standalone.

Maybe, Todd, you can help think about the margin structure of this as the revenue forms, where you think it'll head, and, you know, as a pathway of thinking about what the break-even revenue opportunity might be so we can think about, you know, your runway there.

So our margin is very high, even on the content creation. But understand we put a lot of R&D investment in, and we have a lot of administrative costs in both marketing and as a small public company. And so those aren't always absorbed. So you'll see gross margins to be very high. So, most revenue, whether it comes from content creation or distribution licensing or device certification licensing, will have extremely high margins.

And again, as we look forward, can you maybe talk about your pipeline or how it's formed today and maybe some metrics we'd be using in the future to track your progress?

Yeah. You know, we're not going to go out and set that. I mean, I would say how we're going to track our progress is today we are, you know, clearly we have a good cash position, okay? And as much as we're not subsidizing the content, like some people have in the licensing business, they've gone out and subsidized the engagement early on prior to making money on it. We're not doing that, okay? We're being somewhat selective. But the way to gauge this is how fast are we expanding the exhibitor footprint that's pulling and pulling the studios to deliver more premium content to them, true cut motion content, and how much content do we deliver to those theatrical experiences? That's the best way. That's the best way to figure out how we're succeeding in the near term, right? And then you'll see announcements at some point from the home entertainment portion of the ecosystem.

Yeah, that makes sense. And then, I think, Hayley, I appreciate you giving us 1Q some guidance we can work with, the OPEX being less than $2 million, the interest income for the year. What was the cash burn number you gave? Did you give a 1Q expected cash flow from operations?

I just said we expect to end the quarter with $58 million approximately, so that's very Did you imply an amount of cash used in the quarter? Well, so, I mean, we're paying severances and bonuses and other transaction costs plus operating cash, and we started sort of with the $62 million number.

That's $62 million, right. And then I saw some patent sales, was that maybe last year? Was that a one-off, or is that something that could recur, Todd, or Ellie?

No, that's not going to be recurring revenue. Recurring revenue is going to come from licensing. Listen, we sold off some patents that were not really specific to our true cut business. If you go back and looked at pre-transaction of the subsidiary sale, I would say 60% of Our total patent portfolio was in the subsidiary, so that went with the subsidiary and the sale. Of what remains from what we didn't sell with the subsidiary transaction or outright to this person that wanted to buy these other patents, I would say we have no real intention of selling any more patents, and we're actively trying to add to that patent portfolio specific to our go-forward business.

And then, Todd, I might as well just ask this question. asked a lot of companies, you know, who are kind of embarking on newer paths, what are maybe, as an executive, your two or three top priorities to try to accomplish in 2026 to get this off and running in the right direction?

Well, I mean, first and foremost, today, our technology is only used by Pixelworks two-cut motion editors. We are working on getting the product in a place where we can actually license it, and so you could expand upon our own people working on the technology to where we have third parties doing motion grading work using our tools. So that's a big priority for us. And then developing the demand profile. Now, those are the two biggest issues I have right now. I mean, frankly, I was very focused on a transaction. I had a group of people running this. They gave me something, now I'm very focused on this business, that was in a good place. It takes a long time to create an awareness for technology like this. and I would say that the awareness is strong. Now we need to convert that into pull and content.

Okay, great. And just one quick housekeeping, just to be 100% sure, the cash that you've gotten, it's all in the U.S. at this point? Is that correct? All right, thanks.

It's been in the U.S. since mid-January.

Got it. Appreciate it. Todd, Haley, thanks. Thank you, Suji.

Thank you. This concludes our question-and-answer session. I'd like to turn it back to management for closing remarks.

Yeah. Thanks, everybody, for keeping up to speed on this transition of the company. From time to time, we'll have some more salient information to give to you. Thank you.

This concludes today's conference call. Thank you for participating, and you may now disconnect.