Pixelworks Reports Fourth Quarter and Full Year 2019 Financial Results

SAN JOSE, Calif., Feb. 06, 2020 (GLOBE NEWSWIRE) -- Pixelworks, Inc. (NASDAQ: PXLW), a leading provider of innovative video and display processing solutions, today announced financial results for the fourth quarter and full year ended December 31, 2019.

Fourth Quarter and Recent Highlights

  • Mobile revenue increased 140% sequentially and more than 400% year-over-year, driven by increased customer engagements and initial ramp to support multiple next-generation smartphones
  • Signed multi-year collaboration agreement with OPPO Group to develop advanced display systems for smartphones, including the integration of Pixelworks’ visual processor and software solutions
  • Entered collaborative partnership with Coolpad to incorporate visual processing technology in next-generation devices
  • Expanded footprint in China with new Shenzhen engineering facility to support growing engagements with smartphone OEM customers
  • AirTV 2 Wi-Fi-enabled tuner for HD over-the-air (OTA) TV launched with Pixelworks’ video processing and transcoding technology
  • Launched new EasyOTA solution, a universal OTA integration platform for service providers

Full Year 2019 End Market Highlights

  • Mobile revenue increased over 170%, with Iris visual processing solutions launched in six smartphones across four OEMs, and qualification of TrueCut-enabled HDR expanded to over 130 phone models
  • Expanded mobile product portfolio and market opportunity with the introductions of 5th generation Iris visual processor, Soft Iris display calibration software and TrueCut video content platform
  • Entered collaboration agreements with key mobile ecosystem partners, including Qualcomm, HMD Global and YouKu
  • Video content in TrueCut format expanded to more than 20,000 hours, with potential reach increasing to approximately 70% of YouKu’s 140 million daily active users
  • Video Delivery revenue grew 23% in support of demand for transcoding solutions from both leading consumer electronics customers in Japan and OTA devices in the U.S.

President and CEO of Pixelworks, Todd DeBonis, commented, “The fourth quarter played out as expected, with results that were in-line with our guidance. Although consolidated revenue reflected the anticipated headwinds in both our projector and video delivery end markets, we continued to gain further momentum in mobile with triple-digit growth for the quarter and full year. Further highlighting the recent traction of our Iris visual processing solutions, revenue contribution from mobile reached a record 24% of total revenue in the fourth quarter.

“Throughout 2019, Pixelworks technology was incorporated into several innovative smartphones, including the first implementation of Soft Iris in a flagship phone. We’ve recently begun ramping shipments in support of multiple customers’ upcoming launches of new smartphones for the first half of 2020. Many of these planned mobile devices will feature one or more of the expanded mobile solutions we introduced in 2019, including Pixelworks’ 5th generation Iris visual processor and our Soft Iris solution. In support of growing engagements, we continue to allocate additional resources toward our mobile growth initiatives and pipeline expansion in key geographies for both our Iris solutions and TrueCut video content platform.”

Fourth Quarter and Fiscal 2019 Financial Results

Revenue in the fourth quarter of 2019 was $16.0 million, compared to $18.1 million in the third quarter of 2019 and revenue of $20.5 million in the fourth quarter of 2018, which included approximately $1.5 million of end-of-life (EOL) product revenue. The sequential and year-over-year decline in fourth quarter revenue reflects lower demand in the Company’s digital projector and video delivery end markets, partially offset by record revenue contribution from the mobile market. For the full year 2019, revenue was $68.8 million, compared to full year revenue of $76.6 million in 2018, which included approximately $2.0 million of EOL product revenue.

On a GAAP basis, gross profit margin in the fourth quarter of 2019 was 45.6%, compared to 51.8% in the third quarter of 2019 and 53.1% in the fourth quarter of 2018. GAAP gross profit margin for the full year 2019 was 50.2% compared to 51.6% in the prior year. Fourth quarter 2019 GAAP operating expenses were $12.2 million, compared to $11.8 million in the third quarter of 2019 and $12.4 million in the year-ago fourth quarter. For full year 2019, GAAP operating expenses were $47.6 million, compared to full year 2018 operating expenses of $44.3 million, which included approximately $4.0 million of offsets to R&D expense related to a since completed co-development project with a large digital projector customer.

For the fourth quarter of 2019, the Company recorded a GAAP net loss of $4.5 million, or ($0.12) per share, compared to a GAAP net loss of $2.3 million, or ($0.06) per share, in the third quarter of 2019 and a GAAP net loss of $1.5 million, or ($0.04) per share, in the year-ago quarter. GAAP net loss for the full year 2019 was $9.1 million, or ($0.24) per share, compared to a GAAP net loss of $3.9 million, or ($0.11) per share, for the full year 2018.

On a non-GAAP basis, fourth quarter 2019 gross profit margin was 48.0%, compared to 53.9% in the third quarter of 2019 and 55.1% in the year-ago quarter. Fourth quarter 2019 non-GAAP operating expenses were $10.4 million, compared to $10.3 million in the third quarter of 2019 and $10.3 million in the year-ago quarter. Non-GAAP gross profit margin for the full year 2019 was 52.5% compared to 54.2% in the prior year.

For the fourth quarter of 2019, the Company recorded a non-GAAP net loss of $2.3 million, or ($0.06) per share, compared to a non-GAAP net loss of $0.5 million, or ($0.01) per share, in the third quarter of 2019 and non-GAAP net income of $1.3 million, or $0.03 per diluted share, in the year-ago quarter. For the full year 2019, non-GAAP net loss was $4.4 million, or ($0.12) per share, compared to non-GAAP net income of $4.2 million, or $0.11 per diluted share, for the full year 2018.

Adjusted EBITDA in the fourth quarter of 2019 was a negative $1.7 million, compared to positive $0.5 million in the third quarter of 2019 and positive $1.8 million in the year-ago quarter. For the full year 2019, adjusted EBITDA was a negative $0.7 million, compared to positive adjusted EBITDA of $8.0 million for the full year 2018.

Business Outlook

For the first quarter of 2020, the Company expects revenue to be in a range of between $13.0 million and $15.0 million, primarily reflecting a combination of seasonality and continued inventory corrections in the digital projector and video delivery markets, coupled with continued year-over-year growth in the mobile market. Additional guidance will be provided as part of the Company’s scheduled earnings conference call.

Conference Call Information

Pixelworks will host a conference call today, February 6, 2020, at 2:00 p.m. Pacific Time, which can be accessed by calling 1-877-359-9508 and using passcode 6816609. 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, 2020, and can be accessed by calling 1-855-859-2056 and using passcode 6816609.

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 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 income (loss) and non-GAAP net income (loss) per share, which exclude gain on sale of patents, deferred revenue fair value adjustment, inventory step-up and backlog amortization, amortization of acquired intangible assets, stock-based compensation expense, restructuring expenses, gain on extinguishment of convertible debt, and discount accretion on convertible debt fair value 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 (benefit), depreciation and amortization, as well as the specific items listed above.

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