Pixelworks Reports Second Quarter 2018 Financial Results

PIXELWORKS, INC. RECONCILIATION OF GAAP AND NON-GAAP FINANCIAL INFORMATION * (In thousands, except per share data) (Unaudited)
	Three Months Ended									Six Months Ended
	June 30,			March 31,			June 30,			June 30,			June 30,
		2018			2018			2017			2018			2017
Reconciliation of GAAP and non-GAAP gross profit
GAAP gross profit	$	9,534		$	7,802		$	11,201		$	17,336		$	23,593
Amortization of acquired intangible assets		298			298			—			596			—
Inventory step-up and backlog amortization		239			122			—			361			—
Stock-based compensation		78			66			69			144			122
Total reconciling items included in gross profit		615			486			69			1,101			122
Non-GAAP gross profit	$	10,149		$	8,288		$	11,270		$	18,437		$	23,715
Non-GAAP gross profit margin		52.7	%		54.2	%		54.4	%		53.4	%		54.6	%

Reconciliation of GAAP and non-GAAP operating expenses
GAAP operating expenses	$	11,984		$	9,096		$	9,161		$	21,080		$	18,206
Reconciling item included in research and development:
Stock-based compensation		627			595			362			1,222			676
Reconciling items included in selling, general and administrative:
Stock-based compensation		682			539			519			1,221			941
Amortization of acquired intangible assets		101			101			—			202			—
Acquisition and integration		—			—			730			—			894
Restructuring		602			19			—			621			—
Total reconciling items included in operating expenses		2,012			1,254			1,611			3,266			2,511
Non-GAAP operating expenses	$	9,972		$	7,842		$	7,550		$	17,814		$	15,695

Reconciliation of GAAP and non-GAAP net income (loss)
GAAP net income (loss)	$	(2,613	)	$	(598	)	$	1,264		$	(3,211	)	$	4,085
Reconciling items included in gross profit		615			486			69			1,101			122
Reconciling items included in operating expenses		2,012			1,254			1,611			3,266			2,511
Reconciling items included in interest expense and other, net		—			(1,203	)		—			(1,203	)		—
Tax effect of non-GAAP adjustments		(154	)		99			270			(55	)		425
Non-GAAP net income (loss)	$	(140	)	$	38		$	3,214		$	(102	)	$	7,143
Non-GAAP net income (loss) per share:
Basic	$	(0.00	)	$	0.00		$	0.11		$	(0.00	)	$	0.24
Diluted	$	(0.00	)	$	0.00		$	0.10		$	(0.00	)	$	0.23
Non-GAAP weighted average shares outstanding:
Basic		35,704			35,183			29,766			35,445			29,526
Diluted		35,704			37,306			31,974			35,445			31,601

*Set forth above are reconciliations of the non-GAAP financial measure to the most directly comparable GAAP financial measure. The non-GAAP financial measure disclosed by the company has limitations and should not be considered a substitute for, or superior to, the financial measure prepared in accordance with GAAP, and the reconciliations from GAAP to Non-GAAP actuals should be carefully evaluated. Please refer to "Non-GAAP Financial Measures” in this document for an explanation of the adjustments made to the comparable GAAP measures, the ways management uses the non-GAAP measures, and the reasons why management believes the non-GAAP measures provide useful information for investors.

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