Third Quarter and Recent Highlights
- Total revenue increased 18% sequentially, in line with previously announced preliminary results
- Mobile revenue increased 20% sequentially and 37% year-over-year, reaching a record 52% of total revenue
- Home and Enterprise revenue increased 16% sequentially, reflecting seasonal upside in the projector market
- Hosted well attended inaugural Mobile Visual Computing Event in Shenzhen, China, highlighted by the unveiling of Pixelworks' latest X7 Gen 2 mobile visual processor
- OPPO affiliate, realme, launched the realme GT5 smartphone with Pixelworks the X7 visual processor, featuring ultra-low latency MotionEngine®(MEMC), low power super-resolution and always-on HDR
- Xiaomi's Redmi K60 Ultra and the OnePlus Ace2 Pro flagship smartphones were each formally launched incorporating both Pixelworks' X7 visual processor and unique IRX Gaming Experience device certification
- Partnered with leading game developer NetEase to integrate Pixelworks' Rendering Accelerator SDK in the flagship mobile game, Revelation Mobile, enabling exceptional 120fps visual gaming experience
- Announced collaboration with Perfect World Games and the integration of Pixelworks' Rendering Accelerator SDK in Persona 5: The Phantom X ("P5X"), enhancing the game's visual display and immersive experience
- Recognized with 'Supplier of the Year' award by Seiko Epson for Pixelworks' reliable performance and timely fulfillment of order demand during the recent semiconductor and projector component supply shortages
"Consistent with our announced preliminary third quarter revenue, we delivered solid third quarter results driven by continued sequential growth and record revenue in our mobile business as well as seasonally stronger demand in the home and enterprise market," stated Todd DeBonis, President and CEO of Pixelworks. "Concurrent with mobile growing to represent 52% of total revenue, our initial actions to pass through previously absorbed supplier costs more broadly across our end markets contributed to gross margin expanding by 260-basis points sequentially.
"During the quarter, we received very positive responses to our newly introduced IRX gaming experience branding and certification program. The launch of the first IRX-certified smartphone models was well received by the market, with demand for multiple phones exceeding customers' expected unit volumes. We also continued to execute on our strategy to facilitate a cooperative mobile gaming ecosystem, and today we are engaged in ongoing collaborations with three of the top global gaming studios. More recently, we completed two notable milestones with the formal launch of our latest X7 Gen 2 visual processor as part of the first Pixelworks-hosted Mobile Visual Computing event. Unique to the X7 Gen 2 processor is the incorporation of our internally developed AI-based super resolution, which dramatically improves image rendering efficiency. The first customer smartphone featuring our newest mobile processor is scheduled to be launched early next year.
"Despite recently heightened macro uncertainty, including indications of weaker global demand and a slower ongoing recovery in China, we remain confident about near-term outlook for sustained mobile growth and overall margin expansion. Our current order backlog for mobile visual processors fully supports achieving continued double-digit sequential growth in mobile as well as year-over-year top-line growth in the fourth quarter."
Third Quarter Fiscal 2023 Financial Results
Revenue in the third quarter of 2023 was $16.0 million, compared to $13.6 million in the second quarter of 2023 and $17.6 million in the third quarter of 2022. The sequential increase in quarterly revenue was driven by strong continued growth in Pixelworks' mobile business as well as seasonally higher demand in the home and enterprise market. The year-over-year decline in third quarter revenue primarily reflected lower revenue contribution from the Company's home and enterprise business, which was partly offset by strong growth and record revenue contribution in the mobile market.
On a GAAP basis, gross profit margin in the third quarter of 2023 was 42.9%, compared to 40.3% in the second quarter of 2023 and 50.1% in the third quarter of 2022. Third quarter 2023 GAAP operating expenses were $14.5 million, compared to $12.0 million in the second quarter of 2023 and $13.5 million in the year-ago quarter.
On a non-GAAP basis, third quarter 2023 gross profit margin was 43.1%, compared to 40.5% in the second quarter of 2023 and 49.8% in the year-ago quarter. Third quarter 2023 non-GAAP operating expenses were $13.3 million, compared to $10.7 million in the second quarter of 2023 and $12.2 million in the year-ago quarter.
For the third quarter of 2023, the Company recorded a GAAP net loss of $7.0 million, or ($0.12) per share, compared to a GAAP net loss of $6.0 million, or ($0.11) per share, in the second quarter of 2023, and a GAAP net loss of $4.5 million, or ($0.08) per share, in the year-ago quarter. Note, the Company refers to "net loss attributable to Pixelworks, Inc." as "net loss".
For the third quarter of 2023, the Company recorded a non-GAAP net loss of $5.7 million, or ($0.10) per share, compared to a non-GAAP net loss of $4.8 million, or ($0.09) per share, in the second quarter of 2023, and a non-GAAP net loss of $3.2 million, or ($0.06) per share, in the third quarter of 2022.
Adjusted EBITDA in the third quarter of 2023 was a negative $5.0 million, compared to a negative $4.0 million in the second quarter of 2023 and a negative $2.1 million in the year-ago quarter.
