SAN JOSE, Calif.—(BUSINESS WIRE)—February 7, 2008— Techwell, Inc., (NASDAQ: TWLL), a leading provider of mixed signal integrated circuits for multiple video applications in the security surveillance, automotive and consumer markets, today announced financial results for the fourth quarter and fiscal year ended December 31, 2007.

Fourth Quarter and Fiscal Year 2007 Highlights:

-- Reported net revenue of $16.5 million in the fourth quarter of 2007

-- Improved gross margin for the third consecutive quarter, achieving 61 percent in the fourth quarter

-- Achieved fourth quarter net income of $4.3 million, representing $0.20 earnings per diluted share

-- Recorded fiscal year revenue of $59.9 million, representing an annual growth rate of 11.5 percent

-- Increased security surveillance revenue by 47 percent compared to 2006

Fourth Quarter 2007 Results:

Total revenue for the fourth quarter of 2007 was $16.5 million, as compared to revenue of $15.1 million in the preceding quarter and $16.0 million in the fourth quarter of 2006. Total revenue was comprised of $12.3 million in security surveillance, $1.6 million in LCD display, $2.5 million in video decoders and $94,000 of other revenue.

"During the fourth quarter, growth in security surveillance remained strong and was complemented by our return to growth in the LCD display market," stated Hiro Kozato, President and Chief Executive Officer of Techwell. "We have secured key design wins for our LCD Display products and most recently introduced several new products targeted at the in-car infotainment market. We believe our existing design wins combined with our recent product introductions will enable us to establish a leadership position in this market."

Gross margin for the fourth quarter of 2007 was 61 percent, compared to gross margin of 60 percent in the preceding quarter and 57 percent in the same period a year ago. Operating expenses for the fourth quarter of 2007 totaled $7.2 million, or 43 percent of total revenue. This compares to operating expenses of $6.6 million, or 44 percent of revenue, in the preceding quarter and $4.8 million, or 30 percent of revenue, in the same period one year ago.

Net income for the fourth quarter of 2007 was $4.3 million, or $0.20 per diluted share, which included pre-tax stock-based compensation expenses under Statement of Financial Accounting Standard No. 123R (SFAS 123R) of $1.3 million, before the tax effect of $810,000, or a charge of $0.02 per diluted share. This compares to $5.4 million in the third quarter of 2007, or $0.25 per diluted share, which included a $2.2 million tax benefit primarily from the release of the remaining balance of the Company's valuation allowance on all of its deferred tax assets. Shares used to compute net income per diluted share under Generally Accepted Accounting Principles (GAAP) for the fourth quarter of 2007 totaled 21.8 million shares.

Cash, cash equivalents and short and long term investments increased by $3.0 million in the quarter, resulting in cash, cash equivalents and short and long-term investments of approximately $68.4 million as of December 31, 2007, compared to approximately $65.4 million as of September 30, 2007.

Fiscal 2007 Results:

For the full year 2007, net revenue was $59.9 million, compared to net revenue of $53.7 million in 2006. Revenue within each of the Company's product lines consisted of $40.6 million in security surveillance, $6.0 million in LCD display, $12.3 million in video decoders and $957,000 of other revenue.

Mr. Kozato further commented, "Looking back at the full year of 2007, our security surveillance business continued to grow driven by worldwide demand, and in particular, growth in the China market. Our results benefited from operational efficiencies and additional cost savings associated with the increased percentage of our revenue coming from products manufactured at .18 micron. Concurrently, we made a significant commitment to invest in research and development in order to further our growth and enter new markets."

Gross margin for the full year of 2007 was 60 percent, compared to gross margin of 57 percent in 2006. Operating expenses totaled $24.5 million or 41 percent of total revenue, as compared to $17.9 million, or 33 percent of revenue in 2006.

Net income for 2007 was $14.8 million, or $0.68 per diluted share, which included pre-tax stock-based compensation expenses under SFAS 123R of $4.5 million, before the tax effect of $1.4 million and the favorable tax effect from the release of the valuation allowance of $1.2 million. This compares to 2006 net income of $13.2 million, or $0.64 per diluted share. Shares used to compute GAAP net income per diluted share for 2007 totaled 21.8 million shares. Non-GAAP net income for the year, which excludes stock-based compensation charges, was $16.7 million, or $0.77 per diluted share.

Cash, cash equivalents and short and long term investments increased by approximately $13.8 million, resulting in cash, cash equivalents and short and long term investments of approximately $68.4 million as of December 31, 2007, compared to approximately $54.5 million as of December 31, 2006.

Mr. Kozato concluded, "As we enter 2008, we continue to build upon the positive momentum and market share leadership that we have established in 2007, particularly in the security surveillance market. Additionally, we expect to capitalize on the numerous opportunities within the automotive market, which we anticipate will translate into additional design wins and market share gains in 2008 and beyond. We also believe we are well positioned to penetrate markets where small panels and high quality video displays are required, including remote monitoring devices, in-flight entertainment systems and portable video products."

Business Outlook

Techwell expects revenue for the first quarter of 2008 to range between $15 million and $16 million. Additional financial details regarding the Company's business outlook will be provided during their conference call at 2:15 p.m. Pacific Time (PT) on Thursday, February 7, 2008.

Fourth Quarter 2007 Conference Call and Webcast Information

Techwell, Inc. will host a conference call with the financial community today, February 7, 2008, at 2:15 p.m. Pacific Time (PT), 5:15 p.m. Eastern Time (ET). The conference call will be broadcast live on the Company's Investor Relations website at http://www.techwellinc.com. Those parties interested in participating via telephone should dial 1-888-679-8038 with the conference ID number 38682777. International participants should dial 1-617-213-4850 and provide the same pass code at the prompt. A telephonic replay of the call will be available approximately two hours after the end of the call and will be available until midnight ET Tuesday, February 22, 2007. The replay number is 1-888-286-8010 with a pass code of 65491002. International callers should dial 1-617-801-6888 and enter the same pass code at the prompt. An archived version of the webcast will also be available on the Company's website.

Forward-Looking Statements

This press release and related conference call contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements may be identified by terminology such as may, will, could, should, anticipate and expect and the negative of these terms or other similar expressions. These are statements that relate to future events and include, but are not limited to Techwell's leadership position in the security surveillance and automotive display market, anticipated design wins and future market penetration and, statements related to anticipated revenue for the first quarter 2008. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those discussed in these forward-looking statements. These risks and uncertainties include but are not limited to: a determination, upon completion of further quarterly closing and review procedures, that the financial results for the fourth quarter and full fiscal year of 2007 are different than the results set forth in this press release, Techwell's dependence on increased demand for digital video applications for the consumer, security surveillance and automotive markets, the potential decline in average selling prices for Techwell's products, competition, dependence on key and highly skilled personnel, the ability to develop new products, as well as other risks detailed from time to time in its SEC filings, including those described in Techwell's Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 9, 2007. Statements included in this release are based upon information known to Techwell as of the date of this release, and Techwell assumes no obligation to update information contained in this press release.

About Techwell

Techwell is a semiconductor company that designs, markets and sells mixed signal integrated circuits for multiple video applications in the security surveillance, automotive and consumer electronics markets. Techwell designs both general purpose and application specific products that enable the conversion of analog video signals to digital form and perform advanced digital video processing to facilitate the display, storage and transport of video content. Headquartered in San Jose, CA, Techwell currently has over 125 employees in the U.S., Korea, Taiwan, China and Japan. Please visit www.techwellinc.com for more information.