Quarterly Revenue, Gross Margin and EPS at or above High-End of Guidance Range
Expects Sequential Revenue Growth of 17% to 24% in Second Quarter
SAN JOSE, Calif., May 02, 2018 (GLOBE NEWSWIRE) -- Pixelworks Inc. (NASDAQ:PXLW), a leading provider of power efficient visual processing solutions, today announced financial results for the first quarter ended March 31, 2018.
First Quarter and Recent Highlights
- Shipped volume production orders in support of recently launched Xiaomi Blackshark’s gaming smartphone
- Further expanded the number of engagements with mobile OEMs to incorporate Iris display processor
- Unveiled full feature set of 4th generation Iris mobile display processor
- Announced collaboration with Wanda Film Group to establish Film Innovation & Ecosystem Lab in China and develop new technologies for film production and cinema displays
- Satisfied all remaining convertible debt obligations from the 2017 acquisition of ViXS Systems
President and CEO of Pixelworks, Todd DeBonis, commented, “First quarter revenue was at the high-end of our guidance range, reflecting solid performance across our business and expected seasonality in the digital projection market. Favorable product mix contributed to better than anticipated gross margin, and our continued focus on operational efficiencies helped to drive lower than expected operating expenses. As a result, we delivered sequential bottom-line improvement despite the first quarter traditionally being a seasonally soft quarter.
“Since the start of the year, we have made notable progress on our mobile initiative, as highlighted by our recent win for Pixelworks 3rd generation Iris display processor in the Xiaomi Blackshark smartphone. Additionally, today we formally unveiled the full features and advanced video capabilities of our 4th generation mobile display processor, for which we already have multiple active customer engagements. During the first quarter, we also continued to advance the development project with our video delivery customer in Japan, where we are seeing increased traction for consumer electronics applications that leverage Pixelworks XCode family of advanced decoding and transcoding SoCs.
“The relevance of Pixelworks advanced display processing and video delivery technology continues to grow with the prevailing demand for higher quality displays, and we are experiencing increased customer interest across all of our end markets. In addition to our extensive efforts to capitalize on this momentum and drive further adoption of our existing solutions, we are continuing to make meaningful investments in product development as part of cultivating potential expanded opportunities. As a result of our ongoing efforts and progress, we are increasingly confident that Pixelworks is well positioned to deliver sustainable growth and increased profitability in the coming quarters.”
First Quarter 2018 Financial Results
Revenue in the first quarter of 2018 was $15.3 million, compared with revenue of $18.4 million in the prior quarter and $22.7 million in the first quarter of 2017. The fourth and first quarters of 2017 included approximately $1.0 million and $9.2 million of legacy end-of-life (EOL) product revenue, respectively. The sequential decrease in first quarter 2018 revenue reflects typical seasonality in the Company’s digital projection business.
On a GAAP basis, gross profit margin in the first quarter of 2018 was 51.0%, compared with 49.7% in the fourth quarter of 2017 and 54.6% in the first quarter of 2017. First quarter 2018 GAAP operating expenses were $9.1 million compared with $12.2 million in the fourth quarter of 2017 and $9.0 million in the year-ago quarter.
For the first quarter of 2018, the Company recorded a GAAP net loss of $598,000, or $(0.02) per share, compared with a GAAP net loss of $3.6 million, or $(0.10) per share, in the prior quarter and GAAP net income of $2.8 million, or $0.09 per diluted share, in the first quarter of 2017.
On a non-GAAP basis, first quarter 2018 gross profit margin was 54.2%, compared with 56.9% in the fourth quarter of 2017 and 54.8% in the year-ago quarter. First quarter 2018 non-GAAP operating expenses were $7.8 million, compared with $10.6 million in the prior quarter and $8.3 million in the first quarter of 2017. First quarter 2018 operating expenses, on both a GAAP and non-GAAP basis, included the recognition of approximately $2 million of offsets to R&D related to the Company’s ongoing co-development project with a large digital projector customer.
For the first quarter of 2018, non-GAAP net income was $38,000, or $0.00 per diluted share, compared to a non-GAAP net loss of $379,000, or $(0.01) per share, in the previous quarter and non-GAAP net income of $3.8 million, or $0.12 per diluted share, in the first quarter of 2017. Adjusted EBITDA in the first quarter of 2018 was $1.3 million, compared to $778,000 in the fourth quarter of 2017 and $5.0 million in the first quarter of 2017.
Business Outlook
Pixelworks expects revenue to be between $18.0 million and $19.0 million for the second quarter of 2018. Additional guidance will be provided as part of the Company’s earnings conference call.
On April 27, 2018, Pixelworks’ Board of Directors approved a restructuring plan to further streamline the Company’s operations and increase efficiencies in certain areas of the business. The Company expects this restructuring to be substantially completed by the end of the third quarter ending September 30, 2018, and anticipates related charges totaling approximately $2.0 million to be recorded during the second and third quarters of 2018.
Conference Call Information
Pixelworks will host a conference call today, May 2, 2018, at 2:00 p.m. Pacific Time, which can be accessed by calling 877-359-9508 and using passcode 5398377. A Web broadcast of the call can be accessed by visiting the Company's investor page at www.pixelworks.com. For those unable to listen to the live Web broadcast, it will be archived for approximately 30 days. A replay of the conference call will also be available through Thursday, May 10, 2018, and can be accessed by calling 855-859-2056 and using passcode 5398377.
About Pixelworks, Inc.
Pixelworks creates, develops and markets high efficiency visual display processing and advanced video delivery solutions for the highest quality display and streaming applications. The Company’s 20 year history of Image Processing innovation has yielded 500+ patents covering Display Processing and Video Delivery. The Company is headquartered in San Jose, CA. For more information, please visit the Company’s web site at www.pixelworks.com.
Note: Pixelworks and the Pixelworks logo are registered trademarks of Pixelworks, Inc.
Non-GAAP Financial Measures
This earnings release makes reference to non-GAAP gross profit margins, non-GAAP operating expenses, non-GAAP net income (loss) and non-GAAP net income (loss) per share, which exclude amortization of deferred revenue fair value adjustment, inventory step-up and backlog amortization, amortization of acquired intangible assets, acquisition and integration related costs, stock-based compensation expense, restructuring expenses, fair value adjustment on convertible debt conversion option, discount accretion on convertible debt fair value, gain on extinguishment of convertible debt and a tax benefit associated with new tax treatment under the tax reform, which are all required under GAAP as well as the tax effect of the non-GAAP adjustments. The press release also makes reference to and reconciles GAAP net income (loss) and adjusted EBITDA, which Pixelworks defines as GAAP net income (loss) before interest expense and other, net, income tax provision, depreciation and amortization, as well as the specific items listed above.
Pixelworks management uses these non-GAAP financial measures internally to understand, manage and evaluate the business and establish its operational goals, review its operations on a period to period basis, for compensation evaluations, to measure performance, and for budgeting and resource allocation. Pixelworks management believes it is useful for the Company and investors to review, as applicable, both GAAP information and non-GAAP financial measures to help assess the performance of Pixelworks’ continuing businesses and to evaluate Pixelworks’ future prospects. These non-GAAP measures, when reviewed together with the GAAP financial information, provide additional transparency and information for comparison and analysis of operating performance and trends. These non-GAAP measures exclude certain items to facilitate management’s review of the comparability of our core operating results on a period to period basis.
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, impact of inventory step up and deferred revenue both related to fair valuing the items, acquisition and integration related costs such as accounting and legal fees and CEO severance, restructuring expenses related to a reduction in workforce, accretion on convertible debt of ViXS fair value adjustments on embedded derivative features of such convertible debt and extinguishment of such 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.
