Achieves Record Quarterly Mobile Revenue, Increasing 29% Sequentially and 194% Year-over-Year

PORTLAND, Ore., Feb. 10, 2022 — (PRNewswire) — Pixelworks, Inc. (NASDAQ: PXLW), a leading provider of innovative video and display processing solutions, today announced financial results for the fourth quarter and fiscal year ended December 31, 2021.

Fourth Quarter and Recent Highlights

• Delivered strong year-over-year revenue growth across target end markets, with margins and operating results at the high end of expectations for the fourth quarter
• Mobile revenue increased sequentially for the sixth consecutive quarter, driven by record sales of both hardware and software-based visual processing solutions
• Introduced latest X7 mobile visual processor, combining high frame rate and high resolution with ultra-low latency and low power consumption, to enable breakthrough display performance for mobile gaming
• Pixelworks Shanghai certified as an independent software vendor with MediaTek, bringing Pixelworks' advanced visual display processing to MediaTek's Dimensity 5G Open Resource Architecture
• vivo launched the iQOO Neo5S series smartphone, incorporating Pixelworks' X5 Pro visual processor, unlocking ultra-premium visual performance and an unmatched mobile gaming experience
• vivo launched the iQOO 9 Pro smartphone with visual quality powered by Pixelworks' X5 Pro visual processor and MotionEngine® technology, enabling 1-120Hz variable frame rate for high-performance mobile gaming
• OPPO Find N, the brand's first-ever foldable smartphone, and the OnePlus 10 Pro smartphone launched, each utilizing Pixelworks' software and patented high-efficiency color and brightness calibration technology
• Formally launched TrueCut® Motion, the industry's first end-to-end platform for the consistent delivery of comprehensive motion imaging and a filmmaker-approved viewing experience across all screens
• Announced ecosystem partnership with TCL, one of the world's best-selling TV brands, to bring TrueCut Motion platform to future TCL televisions in North America
• Appointed two highly experienced senior vice presidents for Pixelworks Shanghai, further strengthening the growing operations and leadership team in Asia

"We closed out 2021 with another consecutive quarter of sequential and year-over-year growth, highlighted by record revenue contribution from both our mobile hardware and software visual processing solutions," stated Todd DeBonis, President and CEO of Pixelworks. "Consolidated revenue for the full year increased 35%, led by mobile business growing 3x year-over-year, coupled with a sustained recovery in the projector market. We also delivered solid gross margin for the year and achieved meaningful improvement in our bottom-line results.

"In recent months, we've demonstrated continued momentum in mobile through a series of announced wins for our hardware and software solutions on newly launched smartphones, including OPPO's first foldable smartphone and vivo's latest iQOO phones targeting high-performance visual gaming. Together with our Shanghai subsidiary, we also unveiled cooperative agreements with multiple industry-leading ecosystem partners. In mobile, we began collaborative efforts with MediaTek to bring Pixelworks' visual processing technology to its Dimensity 5G Open Resource Architecture, and separately engaged with Unity Technologies to incorporate advanced visual performance capabilities into its gaming engine platform. Then, in conjunction with the CES tradeshow TCL announced plans for TCL TVs to support our TrueCut Motion platform.

"Entering 2022, customer demand remains strong in our target end markets and we have solid bookings extending well into the year. We are poised to drive continued growth in mobile with expanding design-ins across a growing number of programs and customers, including tier-one mobile OEMs. With global supply constraints anticipated to persist through at least the next several quarters, we are continuing to aggressively work together with our supply chain partners to secure incremental capacity in support of our growth expectations for the coming year."

Fourth Quarter and Fiscal 2021 Financial Results

Revenue in the fourth quarter of 2021 was $16.6 million, compared to $15.2 million in the third quarter of 2021 and $9.6 million in the fourth quarter of 2020. The sequential increase in fourth quarter revenue primarily reflected continued growth and record revenue in the mobile market. For the full year 2021, revenue was $55.1 million compared to full year revenue of $40.9 million in 2020. The year-over-year increase in revenue reflected strong growth in the mobile market, combined with a sustained recovery in the projector market.

On a GAAP basis, gross profit margin in the fourth quarter of 2021 was 53.5%, compared to 52.5% in the third quarter of 2021 and 45.5% in the fourth quarter of 2020. GAAP gross profit margin for the full year 2021 was 50.3% compared to 49.4% in the prior year. Fourth quarter 2021 GAAP operating expenses were $12.6 million, compared to $11.9 million in the third quarter of 2021 and $11.3 million in the year-ago quarter. For the full year 2021, GAAP operating expenses were $47.7 million compared to $46.9 million in the prior year.

On a non-GAAP basis, fourth quarter 2021 gross profit margin was 55.0%, compared to 53.1% in the third quarter of 2021 and 49.6% in the year-ago quarter. Non-GAAP gross profit margin for the full year 2021 was 52.0% compared to 53.8% in the prior year. Fourth quarter 2021 non-GAAP operating expenses were $11.0 million, compared to $10.1 million in the third quarter of 2021 and $9.5 million in the year-ago quarter. Non-GAAP operating expenses for the full year 2021 were $41.4 million compared to $37.3 million in the prior year.

For the fourth quarter of 2021, the Company recorded a GAAP net loss of $3.3 million, or ($0.06) per share, compared to a GAAP net loss of $4.1 million , or ($0.08) per share, in the third quarter of 2021, and a GAAP net loss of $6.4 million , or ($0.15) per share, in the year-ago quarter. GAAP net loss for the full year 2021 was $19.8 million , or ($0.38) per share, compared to a net loss of $26.5 million , or ($0.65) per share, in the prior year. Note, the Company refers to "net loss attributable to Pixelworks Inc." as "net loss".