Pixelworks Reports Second Quarter 2014 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, product demand, technology portfolio, and the Company’s potential and position for the future, 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,” “believe,” and similar terms or the negative of such terms. 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, 2013 as well as 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       Six Months Ended
June 30,     March 31,     June 30, June 30,     June 30,
2014 2014 2013 2014 2013
Revenue, net $ 15,166 $ 13,541 $ 9,554 $ 28,707 $ 17,825
Cost of revenue (1)   7,505     5,546     4,932     13,051     9,226  
Gross profit 7,661 7,995 4,622 15,656 8,599
Operating expenses:
Research and development (2) 5,887 6,385 6,010 12,272 11,894
Selling, general and administrative (3)   3,709     4,049     3,274     7,758     6,872  
Total operating expenses   9,596     10,434     9,284     20,030     18,766  
Loss from operations (1,935 ) (2,439 ) (4,662 ) (4,374 ) (10,167 )
Interest expense and other, net   (130 )   (122 )   (97 )   (252 )   (195 )
Loss before income taxes (2,065 ) (2,561 ) (4,759 ) (4,626 ) (10,362 )
Provision (benefit) for income taxes   317     (54 )   165     263     (33 )
Net loss $ (2,382 ) $ (2,507 ) $ (4,924 ) $ (4,889 ) $ (10,329 )
Net loss per share - basic and diluted $ (0.11 ) $ (0.11 ) $ (0.26 )   (0.22 )   (0.56 )
Weighted average shares outstanding - basic and diluted   22,667     22,204     18,652     22,437     18,554  
——————
(1) Includes:
Additional amortization of non-cancelable prepaid royalty $ 35 $ 56 $ 98 $ 91 $ 189
Stock-based compensation 41 89 31 130 71
(2) Includes stock-based compensation 413 826 215 1,239 473
(3) Includes stock-based compensation 487 788 354 1,275 740
 
 
PIXELWORKS, INC.
RECONCILIATION OF GAAP AND NON-GAAP FINANCIAL INFORMATION *
(In thousands, except per share data)
(Unaudited)
 
    Three Months Ended       Six Months Ended
June 30,     March 31,     June 30, June 30,     June 30,
2014 2014 2013 2014 2013
Reconciliation of GAAP and non-GAAP gross profit
GAAP gross profit $ 7,661 $ 7,995 $ 4,622 $ 15,656 $ 8,599
Additional amortization of non-cancelable prepaid royalty 35 56 98 91 189
Stock-based compensation   41     89     31     130     71  
Total reconciling items included in cost of revenue   76     145     129     221     260  
Non-GAAP gross profit $ 7,737   $ 8,140   $ 4,751   $ 15,877   $ 8,859  
Non-GAAP gross profit margin   51.0 %   60.1 %   49.7 %   55.3 %   49.7 %
 
Reconciliation of GAAP and non-GAAP operating expenses
GAAP operating expenses $ 9,596 $ 10,434 $ 9,284 $ 20,030 $ 18,766
Reconciling item included in research and development:
Stock-based compensation 413 826 215 1,239 473
Reconciling item included in selling, general and administrative:
Stock-based compensation   487     788     354     1,275     740  
Total reconciling items included in operating expenses   900     1,614     569     2,514     1,213  
Non-GAAP operating expenses $ 8,696   $ 8,820   $ 8,715   $ 17,516   $ 17,553  
 
Reconciliation of GAAP and non-GAAP net loss
GAAP net loss $ (2,382 ) $ (2,507 ) $ (4,924 ) $ (4,889 ) $ (10,329 )
Reconciling items included in cost of revenue 76 145 129 221 260
Reconciling items included in operating expenses 900 1,614 569 2,514 1,213
Tax effect of non-GAAP adjustments   (47 )   (38 )   18     (85 )   (25 )
Non-GAAP net loss $ (1,453 ) $ (786 ) $ (4,208 ) $ (2,239 ) $ (8,881 )
Non-GAAP net loss per share - basic and diluted $ (0.06 ) $ (0.04 ) $ (0.23 ) $ (0.10 ) $ (0.48 )
Non-GAAP weighted average shares outstanding - basic and diluted   22,667     22,204     18,652     22,437     18,554  
 

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