Pixelworks Reports First Quarter 2018 Financial Results

Because the Company’s non-GAAP financial measures are not calculated in accordance with GAAP, they may not necessarily be comparable to similarly titled measures employed by other companies. These non-GAAP financial measures should not be considered in isolation or as a substitute for the comparable GAAP measures, and should be read only in conjunction with the Company’s consolidated financial results as presented in accordance with GAAP. A reconciliation between GAAP and non-GAAP financial measures is included in this earnings release which is available in the investor relations section of the Pixelworks' website.

Safe Harbor Statement
This release contains forward-looking statements 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. These statements may be identified by use of terms such as “begin,” “continue,” “will,” “expect”, “believe,” “anticipate” and similar terms or the negative of such terms, and include, without limitation, statements about the Company’s digital projection, mobile and OTA businesses, including market movement and demand, customer engagements, and growth in the mobile and video delivery markets, synergies and additional guidance. 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: whether the Company will be able to implement the restructuring program as planned, whether the expected amount of the costs associated with the restructuring program will differ from or exceed the Company's estimates and whether the Company will be able to realize the full amount of estimated savings from the restructuring program or within the timeframe expected; our ability to execute on our strategy, including the integration of ViXS; competitive factors, such as rival chip architectures, introduction or traction by competing designs, or pricing pressures; the success of our products in expanded markets; current global economic challenges; changes in the digital display and projection markets; seasonality in the consumer electronics market; our efforts to achieve profitability from operations; 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 from those discussed in the forward-looking statements 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, 2017 as well as subsequent SEC filings.

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

[Financial Tables Follow]

 
PIXELWORKS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
 
  Three Months Ended
  March 31,  December 31,  March 31,
  2018  2017  2017
Revenue, net (1) $  15,292  $  18,448  $  22,710 
Cost of revenue (2)   7,490    9,288    10,318 
Gross profit   7,802    9,160    12,392 
Operating expenses:      
Research and development (3)   4,463    6,695    4,906 
Selling, general and administrative (4)   4,614    5,068    4,139 
Restructuring   19    439    — 
  Total operating expenses   9,096    12,202    9,045 
  Income (loss) from operations     (1,294 )      (3,042 )      3,347  
Interest income (expense) and other, net (5)      972        (919 )      (93 )
  Income (loss) before income taxes      (322 )      (3,961 )      3,254  
Provision (benefit) for income taxes (6)      276        (409 )      433  
  Net income (loss)   $   (598 )   $   (3,552 )   $   2,821  
Net income (loss) per share:            
Basic   $   (0.02 )   $   (0.10 )   $   0.10  
Diluted   $   (0.02 )   $   (0.10 )   $   0.09  
Weighted average shares outstanding:            
Basic      35,183        34,359        29,283  
Diluted      35,183        34,359        31,146  
——————            
(1) Includes deferred revenue fair value adjustment   $   —     $   68     $   —  
(2) Includes:            
Amortization of acquired intangible assets      298        298        —  
Inventory step-up and backlog amortization      122        949        —  
Stock-based compensation      66        64        53  
(3) Includes stock-based compensation      595        527        314  
(4) Includes:            
Stock-based compensation      539        556        422  
Amortization of acquired intangible assets      101        101        —  
Acquisition and integration      —        (45 )      —  
(5) Includes:  
Gain on debt extinguishment      (1,272 )      (29 )      —  
Discount accretion on convertible debt fair value      69        124        —  
Fair value adjustment on convertible debt conversion option      —        621        —  
(6) Includes benefit related to tax reform      —        (343 )      —  
 

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