Pixelworks Reports Third Quarter 2018 Financial Results

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 video delivery businesses, including market movement and demand, customer engagements, mobile wins and the timing thereof, 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 programs as planned, whether the expected amount of the costs associated with the restructuring programs 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 programs 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  Nine Months Ended
   September 30,  June 30,  September 30,  September 30,  September 30,
   2018  2018  2017  2018  2017
Revenue, net (1) $21,472  $19,251  $18,758  $56,015  $62,189 
Cost of revenue (2)  10,235   9,717   9,747   27,442   29,585 
Gross profit  11,237   9,534   9,011   28,573   32,604 
Operating expenses:                    
Research and development (3)  5,322   6,423     5,325       16,208       14,732  
Selling, general and administrative (4)     5,070       4,959       6,583       14,643       15,382  
Restructuring     414       602       1,481       1,035       1,481  
Total operating expenses     10,806       11,984       13,389       31,886       31,595  
Income (loss) from operations     431       (2,450 )     (4,378 )     (3,313 )     1,009  
Interest income (expense) and other, net (5)      (112 )      (131 )      (528 )      729        (728 )
Income (loss) before income taxes      319        (2,581 )      (4,906 )      (2,584 )      281  
Provision (benefit) for income taxes      88        32        (200 )      396        902  
Net income (loss)   $   231     $   (2,613 )   $   (4,706 )   $   (2,980 )   $   (621 )
Net income (loss) per share:                                        
Basic   $   0.01     $   (0.07 )   $   (0.14 )      (0.08 )      (0.02 )
Diluted   $   0.01     $   (0.07 )   $   (0.14 )      (0.08 )      (0.02 )
Weighted average shares outstanding:                                        
Basic      36,195        35,704        32,552        35,697        30,545  
Diluted      37,993        35,704        32,552        35,697        30,545  
——————                                        
(1) Includes deferred revenue fair value adjustment   $   52     $   —     $   25     $   52     $   25  
(2) Includes:                                        
Amortization of acquired intangible assets      298        298        199        894        199  
Inventory step-up and backlog amortization      97        239        1,016        458        1,016  
Stock-based compensation      87        78        57        231        179  
(3) Includes stock-based compensation      609        627        445        1,831        1,121  
(4) Includes:                                        
Stock-based compensation      762        682        855        1,983        1,796  
Amortization of acquired intangible assets      101        101        67        303        67  
Acquisition and integration      —        —        1,611        —        2,505  
(5) Includes:                                        
Gain on debt extinguishment      —        —        —        (1,272 )      —  
Fair value adjustment on convertible debt conversion option      —        —        122        —        122  
Discount accretion on convertible debt fair value      —        —        72        69        72  
                                         

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