Pixelworks Reports Fourth Quarter 2015 Financial Results

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 loss and non-GAAP net loss per share, which excludes stock-based compensation expense and additional amortization of a non-cancelable prepaid royalty, which are required under GAAP. The press release also reconciles GAAP net loss and adjusted EBITDA, which Pixelworks defines as GAAP net loss before interest expense and other, net, income tax provision (benefit), depreciation and amortization, as well as the specific items listed above. The Company believes these non-GAAP measures provide a meaningful perspective on the Company's core operating results and underlying cash flow dynamics, but cautions investors to consider these measures in addition to, not as a substitute for, its consolidated financial results as presented in accordance with GAAP. A reconciliation between GAAP and non-GAAP financial measures is included in this earnings release which is available in the investor relations section of the Company's website.

Safe Harbor Statement

This release contains forward-looking statements, including, without limitation, the statements in Stephen Domenik's quote with respect to the Company’s growth opportunities, product shipments, product demand, customer engagements, 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, 2014 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 Twelve Months Ended
December 31,   September 30, December 31, December 31,   December 31,
2015 2015 2014 2015 2014
Revenue, net $ 13,477 $ 16,570 $ 15,105 $ 59,517 $ 60,923
Cost of revenue (1)   6,663     8,292     7,546     30,224     29,142  
Gross profit 6,814 8,278 7,559 29,293 31,781
Operating expenses:
Research and development (2) 6,076 6,145 6,390 24,644 25,296
Selling, general and administrative (3)   3,648     3,334     3,776     14,453     15,434  
Total operating expenses   9,724     9,479     10,166     39,097     40,730  
Loss from operations (2,910 ) (1,201 ) (2,607 ) (9,804 ) (8,949 )
Interest expense and other, net   (129 )   (105 )   (118 )   (446 )   (493 )
Loss before income taxes (3,039 ) (1,306 ) (2,725 ) (10,250 ) (9,442 )
Provision (benefit) for income taxes   128     (63 )   46     320     518  
Net loss $ (3,167 ) $ (1,243 ) $ (2,771 ) $ (10,570 ) $ (9,960 )
Net loss per share - basic and diluted $ (0.11 ) $ (0.05 ) $ (0.12 )   (0.42 )   (0.44 )
Weighted average shares outstanding - basic and diluted   27,697     25,735     23,175     25,088     22,766  

_________

(1) Includes:
Stock-based compensation $ 49 $ 52 $ 71 $ 196 $ 262
Additional amortization of non-cancelable prepaid royalty (14 ) (30 ) (14 ) 65
(2) Includes stock-based compensation 485 524 640 1,927 2,441
(3) Includes stock-based compensation 397 443 690 1,798 2,599
   
 
PIXELWORKS, INC.
RECONCILIATION OF GAAP AND NON-GAAP FINANCIAL INFORMATION *
(In thousands, except per share data)
(Unaudited)
   
Three Months Ended Twelve Months Ended
December 31,   September 30, December 31, December 31,   December 31,
2015 2015 2014 2015 2014
Reconciliation of GAAP and non-GAAP gross profit
GAAP gross profit $ 6,814 $ 8,278 $ 7,559 $ 29,293 $ 31,781
Stock-based compensation 49 52 71 196 262
Additional amortization of non-cancelable prepaid royalty       (14 )   (30 )   (14 )   65  
Total reconciling items included in cost of revenue   49     38     41     182     327  
Non-GAAP gross profit $ 6,863   $ 8,316   $ 7,600   $ 29,475   $ 32,108  
Non-GAAP gross profit margin   50.9 %   50.2 %   50.3 %   49.5 %   52.7 %
 
Reconciliation of GAAP and non-GAAP operating expenses
GAAP operating expenses $ 9,724 $ 9,479 $ 10,166 $ 39,097 $ 40,730
Reconciling item included in research and development:
Stock-based compensation 485 524 640 1,927 2,441
Reconciling item included in selling, general and administrative:
Stock-based compensation   397     443     690     1,798     2,599  
Total reconciling items included in operating expenses   882     967     1,330     3,725     5,040  
Non-GAAP operating expenses $ 8,842   $ 8,512   $ 8,836   $ 35,372   $ 35,690  
 
Reconciliation of GAAP and non-GAAP net loss
GAAP net loss $ (3,167 ) $ (1,243 ) $ (2,771 ) $ (10,570 ) $ (9,960 )
Reconciling items included in cost of revenue 49 38 41 182 327
Reconciling items included in operating expenses 882 967 1,330 3,725 5,040
Tax effect of non-GAAP adjustments       65     (6 )        
Non-GAAP net loss $ (2,236 ) $ (173 ) $ (1,406 ) $ (6,663 ) $ (4,593 )
Non-GAAP net loss per share - basic and diluted $ (0.08 ) $ (0.01 ) $ (0.06 ) $ (0.27 ) $ (0.20 )
Non-GAAP weighted average shares outstanding - basic and diluted   27,697     25,735     23,175     25,088     22,766  
 

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