Pixelworks Reports Fourth Quarter and Fiscal Year 2018 Financial Results

SAN JOSE, Calif., Feb. 07, 2019 (GLOBE NEWSWIRE) -- Pixelworks, Inc. (NASDAQ: PXLW), a leading provider of power efficient visual processing solutions, today announced financial results for the fourth quarter and fiscal year ended December 31, 2018.

Fourth Quarter and Recent Highlights

  • Mobile revenue increased 78% year-over-year, reflecting volume production in support of a growing number of smartphone design wins
  • Video Delivery revenue increased 31% year-over-year, driven by ramping shipments of XCode transcoding chips to leading consumer electronics OEMs in Japan
  • GAAP gross profit margin increased 340 basis points year-over-year to 53.1%; non-GAAP gross profit margin was 55.1%
  • Nokia 7.1 and Black Shark Helo smartphones, featuring Iris visual processor, recognized for superior display performance
  • Monetized non-strategic patents for an after-tax gain of $3.9 million, net, to be recognized in first quarter of 2019
  • Entered into an agreement with HMD Global to provide visual processing solutions for next-generation Nokia smartphones

Full Year 2018 Business Highlights

  • Secured five smartphone wins across four OEMs for 3rd and 4th generation Iris visual processors
  • Launched 4th generation Iris mobile visual processor, and taped-out 5th generation Iris
  • Successfully integrated previously acquired Video Delivery business which became accretive to quarterly operating results
  • Completed multi-year SoC co-development project with large Projector customer

President and CEO of Pixelworks, Todd DeBonis, commented, “I’m pleased with our team’s execution in 2018, as we demonstrated substantial progress on both operational improvements and our growth objectives. In addition to the successful integration of ViXS Systems, we ramped a meaningful number of programs at new and existing customers across our targeted end markets. Notably, we maintained our investments in research and development in support of future growth, while also generating positive adjusted EBITDA and cash flow from operations for the year. In late December, we entered into an agreement to monetize non-strategic patents acquired as part of ViXS, which will result in recognizing a net gain of $3.9 million for the transaction in the first quarter of 2019 – further underscoring the realized value from this highly-accretive transaction for Pixelworks.

“2018 was also a transformative year in our Mobile business with announced wins on five smartphones, two of which were launched in the fourth quarter. Awareness and interest in our Iris family of mobile visual processors continue to build, and we exited the year with the strongest pipeline of active engagements to-date. Further highlighting our recent momentum, most recently we announced an agreement with HMD Global to incorporate Pixelworks’ Iris solution into a broad range of next-generation Nokia smartphones.

“In our Video Delivery business, we continue to see strong demand from our lead Japanese consumer electronics customers for our XCode family of transcoding solutions for ADSB-compatible 4K set-top-boxes and advanced PVRs. Initial uptake for these devices has been strong, and we expect healthy follow-on orders as OEM customers replenish the sales channel in order to meet future consumer demand in Japan.”

DeBonis concluded, “Looking to 2019, we are focused on realizing the next leg of growth and targeting expanded opportunities across flagship and mid-tier mobile devices as well as next-generation consumer platforms for high-quality video streaming and delivery. As we ramp our growing pipeline of customer engagements and additional production orders, we expect to drive continued year-over-year growth in both our Mobile and Video Delivery end markets.”

Fourth Quarter and Fiscal 2018 Financial Results

Revenue in the fourth quarter of 2018 was $20.5 million, which included approximately $1.5 million of planned end-of-life (EOL) product revenue, compared to $21.5 million in the third quarter of 2018. Revenue in the fourth quarter of 2017 was $18.4 million, which included approximately $1.0 million of EOL product revenue. The year-over-year increase in fourth quarter revenue was driven by growth in all of the Company’s target end markets. For the full year 2018, revenue was $76.6 million, which included approximately $2.0 million of EOL product revenue, compared to full year revenue of $80.6 million in 2017, which included approximately $15.3 million of EOL product revenue. Excluding the respective contributions from EOL products and the inclusion of a full year of Video Deliver revenues, full year 2018 revenue grew more than 14% year-over-year.

On a GAAP basis, gross profit margin in the fourth quarter of 2018 was 53.1%, compared to 52.3% in the third quarter of 2018 and 49.7% in the fourth quarter of 2017. GAAP gross profit margin for the full year 2018 was 51.6% compared to 51.8% in the prior year. Fourth quarter 2018 GAAP operating expenses were $12.4 million, compared to $10.8 million in the third quarter of 2018 and $12.2 million in the year-ago quarter. For full year 2018, GAAP operating expenses were $44.3 million, compared to $43.8 million in full year 2017.

For the fourth quarter of 2018, the Company recorded a GAAP net loss of $1.6 million, or ($0.04) per share, compared to GAAP net income of $231,000, or $0.01 per diluted share, in the third quarter of 2018 and a GAAP net loss of $3.6 million, or ($0.10) per share, in the year-ago quarter. GAAP net loss for the full year 2018 was $4.6 million, or ($0.13) per share, compared to a GAAP net loss of $4.2 million, or ($0.13) per share, for the full year 2017.

On a non-GAAP basis, fourth quarter 2018 gross profit margin was 55.1%, compared to 54.7% in the third quarter of 2018 and 56.9% in the year-ago quarter. Fourth quarter 2018 non-GAAP operating expenses were $10.3 million, compared to $8.9 million in the third quarter of 2018 and $10.6 million in the year-ago quarter. Operating expenses in the fourth quarter of 2018 included the recognition of approximately $220,000 of anticipated offsets to R&D related to the Company’s co-development project with a large digital projector customer compared to $1.8 million of related offsets in the prior quarter. Non-GAAP gross profit margin for the full year 2018 was 54.2% compared to 55.2% in the prior year.

For the fourth quarter of 2018, the Company recorded non-GAAP net income of $1.1 million, or $0.03 per diluted share, compared to non-GAAP net income of $2.5 million, or $0.07 per diluted share, in the third quarter of 2018 and a non-GAAP net loss of $379,000, or ($0.01) per share, in the year-ago quarter. For the full year 2018, non-GAAP net income was $3.4 million, or $0.09 per diluted share, compared to net income of $7.7 million, or $0.23 per diluted share, for the full year 2017.

Adjusted EBITDA in the fourth quarter of 2018 was $1.8 million, compared to $3.8 million in the third quarter of 2018 and $778,000 in the year-ago quarter. For the full year 2018, adjusted EBITDA was $8.0 million, compared to adjusted EBITDA of $12.9 million for the full year 2017.

Business Outlook

For the first quarter of 2019, Pixelworks expects revenue to be in a range of between $15.5 million and $16.5 million, reflecting more than typical seasonality in the Digital Projection market partially offset by continued year-over-year growth in the Company’s Mobile and Video Delivery businesses. Additional guidance will be provided as part of the Company’s earnings conference call.

Conference Call Information

Pixelworks will host a conference call today, February 7, 2019, at 2:00 p.m. Pacific Time, which can be accessed by calling 1-877-359-9508 and using passcode 4458566. A Web broadcast of the call can be accessed by visiting the Company's investor page at www.pixelworks.com. For those unable to listen to the live Web broadcast, it will be archived for approximately 30 days. A replay of the conference call will also be available through Thursday, February 14, 2019, and can be accessed by calling 1-855-859-2056 and using passcode 4458566.

About Pixelworks, Inc.

Pixelworks creates, develops and markets high-efficiency visual display processing and advanced video delivery solutions for the highest quality display and streaming applications. The Company has a 20-year history of delivering image processing innovation to providers of leading-edge consumer electronics and professional displays. Pixelworks is headquartered in San Jose, Calif. For more information, please visit the company’s Web site at www.pixelworks.com .

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