Pixelworks Reports First Quarter 2019 Financial Results

In calculating the above non-GAAP results, management specifically adjusted for certain items related to the acquisition of ViXS Systems, Inc., including amortization of acquired intangible assets, and impact of inventory step up, both related to fair valuing the items, restructuring expenses related to a reduction in workforce and facility closure and consolidations, gain on debt extinguishment, and accretion on convertible debt. Management considers these items as either limited in term or having no impact on Pixelworks’ cash flows, and therefore has excluded such items to facilitate a review of current operating performance and comparisons to our past operating performance.

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 video delivery businesses, including market movement and demand, customer engagements, mobile wins and the timing thereof, growth in the mobile and video delivery markets, strategy, seasonality, the impact of our agreement as to non-strategic patents and additional guidance, particularly as to revenue for the second quarter of 2019. 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 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 its Annual Report on Form 10-K for the year ended December 31, 2018 as well as subsequent SEC filings.

The forward-looking statements contained in this release are 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,
    2019     2018     2018 
Revenue, net $  16,648  $  20,539  $  15,292 
Cost of revenue (1)   8,176    9,634    7,490 
Gross profit   8,472    10,905    7,802 
Operating expenses:      
Research and development (2)   6,472    6,673    4,463 
Selling, general and administrative (3)   5,460    5,310    4,614 
Restructuring   —     429        19  
  Total operating expenses      11,932        12,412        9,096  
  Loss from operations      (3,460 )      (1,507 )      (1,294 )
Gain on sale of patents      3,905        —        —  
Interest income (expense) and other, net (4)      (66 )      (82 )      972  
 Total other income (expense), net      3,839        (82 )      972  
 Income (loss) before income taxes      379        (1,589 )      (322 )
Provision for income taxes      408        52        276  
 Net loss   $   (29 )   $   (1,641 )   $   (598 )
Net loss per share - basic and diluted   $   (0.00 )   $   (0.04 )   $   (0.02 )
Weighted average shares outstanding - basic and diluted      37,247        36,736        35,183  
——————            
(1) Includes:            
Amortization of acquired intangible assets      298        298        298  
Stock-based compensation      95        93        66  
Inventory step-up and backlog amortization      12        17        122  
(2) Includes stock-based compensation      661        635        595  
(3) Includes:            
Stock-based compensation      933        910        539  
Amortization of acquired intangible assets      84        101        101  
(4) Includes:            
Gain on debt extinguishment      —        —        (1,272 )
Discount accretion on convertible debt fair value      —        —        69  
             



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