Pixelworks Reports Fourth 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’s growth opportunities and product momentum in 2014, 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 September 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     Year Ended
December 31,     September 30,     December 31, December 31,     December 31,
  2013     2013     2012     2013     2012  
Revenue, net $ 14,984 $ 15,309 $ 13,571 $ 48,118 $ 59,710
Cost of revenue (1)   6,495     5,987     6,979     21,708     29,862  
Gross profit 8,489 9,322 6,592 26,410 29,848
Operating expenses:
Research and development (2) 4,536 4,234 6,247 20,664 20,757
Selling, general and administrative (3)   3,715     3,296     3,576     13,883     14,944  
Total operating expenses   8,251     7,530     9,823     34,547     35,701  
Income (loss) from operations 238 1,792 (3,231 ) (8,137 ) (5,853 )
Interest expense and other, net   (109 )   (101 )   (108 )   (405 )   (412 )
Income (loss) before income taxes 129 1,691 (3,339 ) (8,542 ) (6,265 )
Provision (benefit) for income taxes   179     182     218     328     (571 )
Net income (loss) $ (50 ) $ 1,509   $ (3,557 ) $ (8,870 ) $ (5,694 )
Net income (loss) per share:
Basic $ (0.00 ) $ 0.07   $ (0.19 ) $ (0.45 ) $ (0.31 )
Diluted $ (0.00 ) $ 0.07   $ (0.19 ) $ (0.45 ) $ (0.31 )
Weighted average shares outstanding:
Basic   21,985     20,128     18,401     19,816     18,252  
Diluted   21,985     21,290     18,401     19,816     18,252  

——————

(1) Includes:
Additional amortization of non-cancelable prepaid royalty $ 103 $ 77 $ 135 $ 369 $ 565
Stock-based compensation 64 29 44 164 162
(2) Includes stock-based compensation 522 209 274 1,204 893
(3) Includes stock-based compensation 599 301 316 1,640 1,109
 
 
PIXELWORKS, INC.
RECONCILIATION OF GAAP AND NON-GAAP FINANCIAL INFORMATION *
(In thousands, except per share data)
(Unaudited)
 
    Three Months Ended     Year Ended
December 31,     September 30,     December 31, December 31,     December 31,
  2013     2013     2012     2013     2012  
Reconciliation of GAAP and non-GAAP gross profit
GAAP gross profit $ 8,489 $ 9,322 $ 6,592 $ 26,410 $ 29,848
Additional amortization of non-cancelable prepaid royalty 103 77 135 369 565
Stock-based compensation   64     29     44     164     162  
Total reconciling items included in cost of revenue   167     106     179     533     727  
Non-GAAP gross profit $ 8,656   $ 9,428   $ 6,771   $ 26,943   $ 30,575  
Non-GAAP gross profit margin   57.8 %   61.6 %   49.9 %   56.0 %   51.2 %
 
Reconciliation of GAAP and non-GAAP operating expenses
GAAP operating expenses $ 8,251 $ 7,530 $ 9,823 $ 34,547 $ 35,701
Reconciling item included in research and development:
Stock-based compensation 522 209 274 1,204 893
Reconciling item included in selling, general and administrative:
Stock-based compensation   599     301     316     1,640     1,109  
Total reconciling items included in operating expenses   1,121     510     590     2,844     2,002  
Non-GAAP operating expenses $ 7,130   $ 7,020   $ 9,233   $ 31,703   $ 33,699  
 
Reconciliation of GAAP and non-GAAP net income (loss)
GAAP net income (loss) $ (50 ) $ 1,509 $ (3,557 ) $ (8,870 ) $ (5,694 )
Reconciling items included in cost of revenue 167 106 179 533 727
Reconciling items included in operating expenses 1,121 510 590 2,844 2,002
Tax effect of non-GAAP adjustments   17     8     (20 )        
Non-GAAP net income (loss) $ 1,255 $ 2,133 $ (2,808 ) $ (5,493 ) $ (2,965 )
Non-GAAP net income (loss) per share:
Basic $ 0.06   $ 0.11   $ (0.15 ) $ (0.28 ) $ (0.16 )
Diluted $ 0.05   $ 0.10   $ (0.15 ) $ (0.28 ) $ (0.16 )
Non-GAAP weighted average shares outstanding:
Basic   21,985     20,128     18,401     19,816     18,252  
Diluted   23,468     21,290     18,401     19,816     18,252  

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