Pixelworks Reports Third Quarter 2013 Financial Results

Safe Harbor Statement

This release contains forward-looking statements, including, without limitation, the statements in Bruce Walicek's quote with respect to the Company continuing to see strong interest in its technology as demand for high resolution, high quality video increases across all displays, within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact are forward-looking statements for purposes of this release, including any projections of revenue or other financial items or any statements regarding the plans and objectives of management for future operations. Such statements are based on management's current expectations, estimates and projections about the Company's business. These statements are not guarantees of future performance and involve numerous risks, uncertainties and assumptions that are difficult to predict. Actual results could vary materially from those contained in forward looking statements due to many factors, including, without limitation: our ability to deliver new products in a timely fashion; our new product yield rates; changes in estimated product costs; product mix; supply of products from third-party foundries; failure or difficulty in achieving design wins; timely customer transition to new product designs; competitive factors, such as rival chip architectures, introduction or traction by competing designs, or pricing pressures; risks related to licensing our intellectual property; the success of our products in expanded markets; current global economic challenges; levels of inventory at distributors and customers; changes in the digital display and projection markets; changes in customer ordering patterns or lead times; seasonality in the consumer electronics market; our efforts to achieve profitability from operations; insufficient, excess or obsolete inventory and variations in inventory valuation; the outcome of any litigation related to our intellectual property rights; our limited financial resources and our ability to attract and retain key personnel. More information regarding potential factors that could affect the Company's financial results and could cause actual results to differ materially is included from time to time in the Company's Securities and Exchange Commission filings, including our Annual Report on Form 10-K for the year ended December 31, 2012, our Quarterly Report on Form 10-Q for the quarter ended June 30, 2013 and subsequent SEC filings.

The forward-looking statements contained in this release speak as of the date of this release, and we do not undertake any obligation to update any such statements, whether as a result of new information, future events or otherwise.

 
PIXELWORKS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
 
      Three Months Ended     Nine Months Ended
September 30,     June 30,     September 30, September 30,   September 30,
2013 2013 2012 2013   2012
Revenue, net $ 15,309 $ 9,554 $ 16,285 $ 33,134 $ 46,139
Cost of revenue (1)   5,987     4,932     8,497     15,213     22,883  
Gross profit 9,322 4,622 7,788 17,921 23,256
Operating expenses:
Research and development (2) 4,234 6,010 4,702 16,128 14,510
Selling, general and administrative (3)   3,296     3,274     3,557     10,168     11,368  
Total operating expenses   7,530     9,284     8,259     26,296     25,878  
Income (loss) from operations 1,792 (4,662 ) (471 ) (8,375 ) (2,622 )
Interest expense and other, net   (101 )   (97 )   (105 )   (296 )   (304 )
Income (loss) before income taxes 1,691 (4,759 ) (576 ) (8,671 ) (2,926 )
Provision (benefit) for income taxes   182     165     (176 )   149     (789 )
Net income (loss) $ 1,509   $ (4,924 ) $ (400 ) $ (8,820 ) $ (2,137 )
Net income (loss) per share:
Basic $ 0.07   $ (0.26 ) $ (0.02 ) $ (0.46 ) $ (0.12 )
Diluted $ 0.07   $ (0.26 ) $ (0.02 ) $ (0.46 ) $ (0.12 )
Weighted average shares outstanding:
Basic   20,128     18,652     18,338     19,085     18,202  
Diluted   21,290     18,652     18,338     19,085     18,202  

——————

(1) Includes:
Additional amortization of non-cancelable prepaid royalty $ 77 $ 98 $ 142 $ 266 $ 430
Stock-based compensation 29 31 42 100 118
(2) Includes stock-based compensation 209 215 214 682 619
(3) Includes stock-based compensation 301 354 296 1,041 793
 
 
PIXELWORKS, INC.
RECONCILIATION OF GAAP AND NON-GAAP FINANCIAL INFORMATION *
(In thousands, except per share data)
(Unaudited)
 
      Three Months Ended     Nine Months Ended
September 30,     June 30,     September 30, September 30,     September 30,
2013 2013 2012 2013 2012
Reconciliation of GAAP and non-GAAP gross profit
GAAP gross profit $ 9,322 $ 4,622 $ 7,788 $ 17,921 $ 23,256
Additional amortization of non-cancelable prepaid royalty 77 98 142 266 430
Stock-based compensation   29     31     42     100     118  
Total reconciling items included in cost of revenue   106     129     184     366     548  
Non-GAAP gross profit $ 9,428   $ 4,751   $ 7,972   $ 18,287   $ 23,804  
Non-GAAP gross profit margin   61.6 %   49.7 %   49.0 %   55.2 %   51.6 %
 
Reconciliation of GAAP and non-GAAP operating expenses
GAAP operating expenses $ 7,530 $ 9,284 $ 8,259 $ 26,296 $ 25,878
Reconciling item included in research and development:
Stock-based compensation 209 215 214 682 619
Reconciling item included in selling, general and administrative:
Stock-based compensation   301     354     296     1,041     793  
Total reconciling items included in operating expenses   510     569     510     1,723     1,412  
Non-GAAP operating expenses $ 7,020   $ 8,715   $ 7,749   $ 24,573   $ 24,466  
 
Reconciliation of GAAP and non-GAAP net income (loss)
GAAP net income (loss) $ 1,509 $ (4,924 ) $ (400 ) $ (8,820 ) $ (2,137 )
Reconciling items included in cost of revenue 106 129 184 366 548
Reconciling items included in operating expenses 510 569 510 1,723 1,412
Tax effect of non-GAAP adjustments   8     18     28     (17 )   20  
Non-GAAP net income (loss) $ 2,133 $ (4,208 ) $ 322 $ (6,748 ) $ (157 )
Non-GAAP net income (loss) per share:
Basic $ 0.11   $ (0.23 ) $ 0.02   $ (0.35 ) $ (0.01 )
Diluted $ 0.10   $ (0.23 ) $ 0.02   $ (0.35 ) $ (0.01 )
Non-GAAP weighted average shares outstanding:
Basic   20,128     18,652     18,338     19,085     18,202  
Diluted   21,290     18,652     19,105     19,085     18,202  
 

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