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Pixelworks Reports First Quarter 2021 Financial Results


SAN JOSE, Calif., May 4, 2021 /PRNewswire/ — Pixelworks, Inc. (NASDAQ: PXLW), a leading provider of innovative video and display processing solutions, today announced financial results for the first quarter ended March 31, 2021.

First Quarter and Recent Highlights

  • Mobile revenue increased sequentially for the third consecutive quarter, driven by growing adoption of Pixelworks’ visual processing solutions in newly launched smartphones
  • OnePlus 9 Pro smartphone launched with X5 Pro visual processor, leveraging Pixelworks dual MotionEngine®, color calibration, flesh tone management and adaptive display technologies
  • vivo launched its iQOO Neo5 smartphone, incorporating the X5 Pro visual processor to enable ultra-premium display performance and advanced 5G gaming experience
  • OPPO Find X3, Find X3 Pro and Reno 5 Pro+ smartphones incorporated with Pixelworks’ patented, high-efficiency calibration technology and color management solution
  • TCL 20 Pro 5G power by AI-based i6 visual processor launched and received an overall display score of 89 by DXOMARK, placing it among the industry’s top performing displays on a smartphone
  • ASUS ROG Phone 5 launched as the industry’s first smartphones to incorporate Pixelworks’ sixth-generation mobile visual processor (i6) with dedicated Artificial Intelligence (AI) engine
  • Lenovo Legion™ Phone Duel 2 launched with i6 visual processor, featuring real-time SDR-to-HDR conversion and industry-leading multi-refresh-rate color calibration for immersive HDR gaming and video experiences
  • Year-to-date, Pixelworks technologies incorporated into 11 new models across 6 mobile OEMs

“We continued to execute and make steady progress on our mobile growth initiative in the first quarter, with record Mobile revenue expanding to 44% of total revenue,” stated Todd DeBonis, President and CEO of Pixelworks. “As advanced AMOLED displays, higher refresh rates and 5G-enable mobile gaming become increasingly mainstream, mobile OEMs are turning to Pixelworks’ visual processing solutions and display expertise to differentiate their next-generation devices with industry-leading display performance. Our growing momentum is demonstrated by the expanding number of new smartphone models launched across a series of new and existing customers, including our second tier-one mobile OEM. The models launched year-to-date span numerous product tiers and price points, from feature-packed flagships and ultra-high performance gaming phones to more affordable smartphones with premium displays. We continue to have a robust pipeline of design-ins on upcoming smartphones in support of our goal for 2021 to double the number of devices that were launched by customers in 2020.

“Also, during the quarter we saw improving demand in the Projector market. While we anticipate the broadly reported supply constraints across the semiconductor industry to moderate the pace of recovery throughout the year, we expect a meaningful uptick in revenue from Projector in the second quarter. Together with continued sequential growth in Mobile, we expect to deliver strong top-line growth, gross margin expansion and improvement in our operating results in the coming quarters.”

First Quarter Fiscal 2021 Financial Results

Revenue in the first quarter of 2021 was $9.3 million, compared to $9.6 million in the fourth quarter of 2020 and $13.8 million in the first quarter of 2020. The sequential and year-over-year decline in first quarter revenue reflected weaker end market demand in the projector and video delivery markets, partially offset by continued strong growth and record revenue in the mobile market.

On a GAAP basis, gross profit margin in the first quarter of 2021 was 40.2%, compared to 45.5% in the fourth quarter of 2020 and 49.2% in the first quarter of 2020. First quarter 2021 GAAP operating expenses were $11.6 million, compared to $11.3 million in the fourth quarter of 2020 and $12.1 million in the year-ago quarter.

For the first quarter of 2021, the Company recorded a GAAP net loss of $8.1 million, or ($0.16) per share, compared to a GAAP net loss of $6.4 million, or ($0.15) per share, in the fourth quarter of 2020 and a GAAP net loss of $5.4 million, or ($0.14) per share, in the year-ago quarter.

On a non-GAAP basis, first quarter 2021 gross profit margin was 43.7%, compared to 49.6% in the fourth quarter of 2020 and 52.1% in the year-ago quarter. First quarter 2021 non-GAAP operating expenses were $10.2 million, compared to $9.5 million in the fourth quarter of 2020 and $9.7 million in the year-ago quarter.

For the first quarter of 2021, the Company recorded a non-GAAP net loss of $6.4 million, or ($0.12) per share, compared to a non-GAAP net loss of $4.9 million, or ($0.11) per share, in the fourth quarter of 2020, and a non-GAAP net loss of $2.6 million, or ($0.07) per share, in the first quarter of 2020.

Adjusted EBITDA in the first quarter of 2021 was a negative $5.2 million, compared to a negative $3.8 million in the fourth quarter of 2020 and a negative $1.5 million in the year-ago quarter.

Cash, cash equivalents and short-term investments at the end of the first quarter of 2021 were $25.4 million, compared to $31.5 million at the end of the fourth quarter of 2020.

Business Outlook

The Company’s current business outlook, including guidance for the second quarter of 2021, will be provided as part of the scheduled conference call.

Conference Call Information

Pixelworks will host a conference call today, May 4, 2021, at 2:00 p.m. Pacific Time, which can be accessed by calling 1-877-359-9508 and using passcode 5768008. A live audio webcast of the call can also be accessed by visiting the Company’s investor page at www.pixelworks.com. For those unable to listen to the live webcast, it will be archived for approximately 90 days. A replay of the conference call will also be available through Tuesday, May 11, 2021, and can be accessed by calling 1-855-859-2056 and using passcode 5768008.

About Pixelworks, Inc.

Pixelworks provides industry-leading content creation, video delivery and display processing solutions and technology that enable highly authentic viewing experiences with superior visual quality, across all screens – from cinema to smartphone and beyond. The Company has a 20-year history of delivering image processing innovation to leading providers of consumer electronics, professional displays and video streaming services. Pixelworks is headquartered in San Jose, CA. For more information, please visit the company’s web site at www.pixelworks.com.

Note: Pixelworks, the Pixelworks logo and MotionEngine 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 exclude amortization of acquired intangible assets, stock-based compensation expense, and restructuring expenses, which are all required under GAAP as well as the tax effect of the non-GAAP adjustments. The press release also makes reference to and reconciles GAAP net loss and adjusted EBITDA, which Pixelworks defines as GAAP net loss before interest income and other, net, income tax provision, depreciation and amortization, as well as the specific items listed above.

Pixelworks management uses these non-GAAP financial measures internally to understand, manage and evaluate the business and establish its operational goals, review its operations on a period-to-period basis, for compensation evaluations, to measure performance, and for budgeting and resource allocation. Pixelworks management believes it is useful for the Company and investors to review, as applicable, both GAAP information and non-GAAP financial measures to help assess the performance of Pixelworks’ continuing business and to evaluate Pixelworks’ future prospects. These non-GAAP measures, when reviewed together with the GAAP financial information, provide additional transparency and information for comparison and analysis of operating performance and trends. These non-GAAP measures exclude certain items to facilitate management’s review of the comparability of our core operating results on a period-to-period basis.

Because the Company’s non-GAAP financial measures are not calculated in accordance with GAAP, they may not necessarily be comparable to similarly titled measures employed by other companies. These non-GAAP financial measures should not be considered in isolation or as a substitute for the comparable GAAP measures and should be read only in conjunction with the Company’s 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 Pixelworks’ website.

Safe Harbor Statement
This release contains forward-looking statements 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,” “expect”, “believe,” “anticipate” and similar terms or the negative of such terms, and include, without limitation, statements about the Company’s digital projection, mobile, and video delivery businesses, including market movement and demand, customer engagements, growth in the mobile market, recovery of the projector market, strategy, and additional guidance, particularly as to the business outlook and current market environment and the impact of the COVID-19 pandemic on the same. 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 execute on our strategy; competitive factors, such as rival chip architectures, introduction or traction by competing designs, or pricing pressures; the success of our products in expanding markets; current global economic challenges; changes in the digital display and projection markets; seasonality in the consumer electronics market; our efforts to achieve profitability from operations; our limited financial resources; our ability to attract and retain key personnel; and the impact of the COVID-19 pandemic on our business and on our suppliers and customers. More information regarding potential factors that could affect the Company’s financial results and could cause actual results to differ materially from those discussed in the forward-looking statements is included from time to time in the Company’s Securities and Exchange Commission filings, including its Annual Report on Form 10-K for the year ended December 31, 2020 as well as subsequent SEC filings.

The forward-looking statements contained in this release are as of the date of this release, and the Company does not undertake any obligation to update any such statements, whether as a result of new information, future events or otherwise.

[Financial Tables Follow] 

PIXELWORKS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)



Three Months Ended


March 31,

December 31,

March 31,


2021

2020

2020

Revenue, net

$                 9,270

$                 9,638

$               13,774

Cost of revenue (1)

5,545

5,253

6,999

Gross profit

3,725

4,385

6,775

Operating expenses:




Research and development (2)

6,785

6,397

6,267

Selling, general and administrative (3)

4,854

4,870

5,193

Restructuring

19

592

Total operating expenses

11,639

11,286

12,052

Loss from operations

(7,914)

(6,901)

(5,277)

Interest income and other, net

56

7

54

Gain on loan extinguisment

796

Total other income, net

56

803

54

Loss before income taxes

(7,858)

(6,098)

(5,223)

Provision for income taxes

217

341

176

Net loss

$               (8,075)

$               (6,439)

$               (5,399)

Net loss per share – basic and diluted

$                 (0.16)

$                 (0.15)

$                 (0.14)

Weighted average shares outstanding – basic and diluted

51,673

43,735

38,868

——————




(1) Includes:




Amortization of acquired intangible assets

245

298

298

Stock-based compensation

79

87

101

Restructuring

7

(2) Includes stock-based compensation

581

669

648

(3) Includes:




Stock-based compensation

772

1,000

1,073

Amortization of acquired intangible assets

60

76

76

PIXELWORKS, INC.
RECONCILIATION OF GAAP AND NON-GAAP  FINANCIAL  INFORMATION *
(In thousands, except per share data)
(Unaudited)



Three Months Ended


March 31,

December 31,

March 31,


2021

2020

2020

Reconciliation of GAAP and non-GAAP gross profit




GAAP gross profit

$                 3,725

$                 4,385

$                 6,775

Amortization of acquired intangible assets

245

298

298

Stock-based compensation

79

87

101

Restructuring

7

Total reconciling items included in gross profit

324

392

399

Non-GAAP gross profit

$                 4,049

$                 4,777

$                 7,174

Non-GAAP gross profit margin

43.7 %

49.6 %

52.1 %





Reconciliation of GAAP and non-GAAP operating expenses




GAAP operating expenses

$               11,639

$               11,286

$               12,052

Reconciling item included in research and development:




Stock-based compensation

581

669

648

Reconciling items included in selling, general and administrative:




Stock-based compensation

772

1,000

1,073

Amortization of acquired intangible assets

60

76

76

Restructuring

19

592

Total reconciling items included in operating expenses

1,413

1,764

2,389

Non-GAAP operating expenses

$               10,226

$                 9,522

$                 9,663





Reconciliation of GAAP and non-GAAP net loss




GAAP net loss

$               (8,075)

$               (6,439)

$               (5,399)

Reconciling items included in gross profit

324

392

399

Reconciling items included in operating expenses

1,413

1,764

2,389

Reconciling items included in total other income, net

(796)

Tax effect of non-GAAP adjustments

(20)

144

(25)

Non-GAAP net loss

$               (6,358)

$               (4,935)

$               (2,636)





Non-GAAP net loss per share – basic and diluted

$                 (0.12)

$                 (0.11)

$                 (0.07)





Non-GAAP weighted average shares outstanding – basic and diluted

51,673

43,735

38,868





*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.

PIXELWORKS, INC.
RECONCILIATION OF GAAP AND NON-GAAP  EARNINGS PER SHARE *
(Figures may not sum due to rounding)
(Unaudited)




Three Months Ended



March 31,


December 31,


March 31,



2021


2020


2020



Dollars per share


Dollars per share


Dollars per share



Basic


Diluted


Basic


Diluted


Basic


Diluted

Reconciliation of GAAP and non-GAAP net loss













GAAP net loss


$          (0.16)


$          (0.16)


$          (0.15)


$          (0.15)


$          (0.14)


$          (0.14)

Reconciling items included in gross profit


0.01


0.01


0.01


0.01


0.01


0.01

Reconciling items included in operating expenses


0.03


0.03


0.04


0.04


0.06


0.06

Reconciling items included in total other income, net




(0.02)


(0.02)



Tax effect of non-GAAP adjustments







Non-GAAP net loss


$          (0.12)


$          (0.12)


$          (0.11)


$          (0.11)


$          (0.07)


$          (0.07)














*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.

PIXELWORKS, INC.
RECONCILIATION OF GAAP AND NON-GAAP  GROSS PROFIT MARGIN *
(Figures may not sum due to rounding)
(Unaudited)




Three Months Ended



March 31,


December 31,


March 31,



2021


2020


2020

Reconciliation of GAAP and non-GAAP gross profit margin







GAAP gross profit margin


40.2 %


45.5 %


49.2 %

Amortization of acquired intangible assets


2.6 %


3.1 %


2.2 %

Stock-based compensation


0.9 %


0.9 %


0.7 %

Restructuring


– %


0.1 %


– %

Total reconciling items included in gross profit


3.5 %


4.1 %


2.9 %

Non-GAAP gross profit margin


43.7 %


49.6 %


52.1 %








*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.

PIXELWORKS, INC.
RECONCILIATION OF GAAP AND NON-GAAP  FINANCIAL  INFORMATION *
(In thousands)
(Unaudited)



Three Months Ended


March 31,

December 31,

March 31,


2021

2020

2020

Reconciliation of GAAP net loss and adjusted EBITDA




GAAP net loss

$            (8,075)

$            (6,439)

$            (5,399)

Stock-based compensation

1,432

1,756

1,822

Amortization of acquired intangible assets

305

374

374

Tax effect of non-GAAP adjustments

(20)

144

(25)

Gain on loan extinguishment

(796)

Restructuring

26

592

Non-GAAP net loss

$            (6,358)

$            (4,935)

$            (2,636)

EBITDA adjustments:




Depreciation and amortization

$              1,016

$                 983

$              1,022

Non-GAAP interest income and other, net

(56)

(7)

(54)

Non-GAAP provision for income taxes

237

197

201

Adjusted EBITDA

$            (5,161)

$            (3,762)

$            (1,467)





*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.

PIXELWORKS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)


March 31,
2021


December 31,
2020

ASSETS




Current assets:




Cash and cash equivalents

$                 25,437


$           31,257

Short-term marketable securities


250

Accounts receivable, net

5,522


4,672

Inventories

1,670


2,445

Prepaid expenses and other current assets

1,923


1,010

Total current assets

34,552


39,634

Property and equipment, net

4,384


5,103

Operating lease right of use assets

6,625


6,606

Other assets, net

1,005


1,081

Acquired intangible assets, net

902


1,207

Goodwill

18,407


18,407

Total assets

$                 65,875


$           72,038

LIABILITIES AND SHAREHOLDERS’ EQUITY




Current liabilities:




Accounts payable

$                   1,726


$                995

Accrued liabilities and current portion of long-term liabilities

8,523


9,452

Current portion of income taxes payable

155


147

Total current liabilities

10,404


10,594

Long-term liabilities, net of current portion

790


1,007

Operating lease liabilities, net of current portion

4,791


5,088

Income taxes payable, net of current portion

2,600


2,479

Total liabilities

18,585


19,168

Shareholders’ equity

47,290


52,870

Total liabilities and shareholders’ equity

$                 65,875


$           72,038

SOURCE Pixelworks, Inc.



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