Mobile Grows 49% Sequentially, Expanding to 22% of Total Revenue

SAN JOSE, Calif., Feb. 11, 2021 — (PRNewswire) — Pixelworks, Inc. (NASDAQ: PXLW), a leading provider of innovative video and display processing solutions, today announced financial results for the fourth quarter and full year ended December 31, 2020.

Fourth Quarter and Recent Highlights

• Mobile revenue grew 49% sequentially, driven by increased demand from OEM customers in support of recent and upcoming launches of new smartphones
• Commenced initial production shipments of new sixth-generation mobile visual processor (i6) to leading smartphone customers in advance of scheduled product launches in early 2021
• GAAP gross margin was 45.5% and non-GAAP gross margin was 49.6%
• Expanded multi-year collaboration agreement with TCL to incorporate Pixelworks visual processing in next-generation smartphone models featuring TCL's NXTVISION displays
• Closed a strategic private placement round with MTM-Xinhe and other accredited investors as well as a follow-on public offering of stock, generating combined net proceeds of $18.9 million
• Ended the quarter with $31.5 million in cash, cash equivalents and short-term investments, no long-term debt and no outstanding balance on existing line of credit

"Fourth quarter revenue increased 18% sequentially, driven by second consecutive quarter of solid growth in Mobile and an initial recovery of customer demand in the Projector market," commented Todd DeBonis, President and CEO of Pixelworks. "Following the pronounced impact the global pandemic had on our target end markets during the year, we've begun to observe gradual but improving order patterns from a majority of our lead customers. Specific to our Mobile business, we proactively utilized this period of disruptive market dynamics to become more deeply engaged with our customers on expanded programs aimed at differentiating their next-generation models with exceptional visual display quality. As a result, we have continued to secure a growing number of design-ins on upcoming smartphones that feature industry-leading color accuracy, HDR, higher frame rates and superior gaming performance. Also, during the quarter, we secured additional capital to significantly strengthen our balance sheet in support of expected near-term growth.

"Today, we believe our existing pipeline of active Mobile programs comfortably represents the opportunity to double the number of models launched in 2021 that incorporate Pixelworks' technology. These collective engagements are comprised of increased penetration at existing customers across multiple tiers and at least two new customers, including our second tier-one mobile OEM. While we expect continued sequential growth in Mobile and improving dynamics in our non-mobile businesses to be offset by seasonality in the first quarter, we believe we are positioned to achieve significant year-over-year growth in our Mobile business as well as on a consolidated basis in 2021."

Fourth Quarter Fiscal 2020 Financial Results

Revenue in the fourth quarter of 2020 was $9.6 million, compared to $8.2 million in the third quarter of 2020 and revenue of $16.0 million in the fourth quarter of 2019. The sequential revenue growth in the fourth quarter was driven by a combination of increased demand for mobile visual processors and an initial recovery of customer orders in the projector market. For the full year 2020, revenue was $40.9 million compared to full year revenue of $68.8 million in 2019. The year-over-year decline in revenue primarily reflects the impact of the global pandemic on end market demand in the projector and video delivery markets.

On a GAAP basis, gross profit margin in the fourth quarter of 2020 was 45.5%, compared to 48.5% in the third quarter of 2020 and 45.6% in the fourth quarter of 2019. GAAP gross profit margin for the full year 2020 was 49.4% compared to 50.2% in the prior year. Fourth quarter 2020 GAAP operating expenses were $11.3 million, compared to $12.1 million in the third quarter of 2020 and operating expenses of $12.2 million in the year-ago quarter. For full year 2020, GAAP operating expenses were $46.9 million compared to $47.6 million in the prior year.

For the fourth quarter of 2020, the Company recorded a GAAP net loss of $6.4 million, or ($0.15) per share, compared to a GAAP net loss of $8.1 million, or ($0.20) per share, in the third quarter of 2020 and a GAAP net loss of $4.5 million, or ($0.12) per share, in the year-ago quarter. GAAP net loss for the full year 2020 was $26.5 million, or ($0.65) per share, compared to a GAAP net loss of $9.1 million, or ($0.24) per share, for the full year 2019.

On a non-GAAP basis, fourth quarter 2020 gross profit margin was 49.6%, compared to 55.6% in the third quarter of 2020 and 48.0% in the year-ago quarter. Fourth quarter 2020 non-GAAP operating expenses were $9.5 million, compared to $8.9 million in the third quarter of 2020 and $10.4 million in the year-ago quarter. Non-GAAP gross profit margin for the full year 2020 was 53.8% compared to 52.5% in the prior year. Non-GAAP operating expenses for full year 2020 were $37.3 million compared to $40.6 million in the prior year.