Announces Restructuring to Reduce Operating Expenses by $3.2 Million Annually
Anticipates Additional Smartphone Wins to Drive Mobile Revenue Growth in Second Half
SAN JOSE, Calif., Aug. 10, 2020 (GLOBE NEWSWIRE) -- Pixelworks, Inc. (NASDAQ: PXLW), a leading provider of innovative video and display processing solutions, today announced financial results for the second quarter ended June 30, 2020.
Second Quarter and Recent Highlights
- Mobile revenue for the first half of 2020 grew 24% year-over-year, driven by increased shipments of Iris visual processing solutions in support of 12 smartphones launched across six OEM customers
- GAAP gross margin expanded to 54.6% and non-GAAP gross margin increased to 59.2%, reflecting a combination of ongoing product cost reduction initiates and a favorable product mix
- Restructuring plan implemented in August to further reduce operating expenses and minimize cash used from operations, while focusing resources on Mobile growth initiatives
- ASUS ROG Phone 3 leverages Pixelworks’ patented high-efficiency color calibration, HDR tone mapping and brightness smoothing features to deliver an exceptional visual experience to mobile gamers
- Black Shark incorporated Pixelworks’ 5th generation visual processor with dual-channel MIPI support and color calibration software in the latest cutting-edge gaming smartphone, the Tencent Black Shark 3S
- Continued to advance TrueCut® platform initiatives in North America with expanded Hollywood presence and newly opened office in Burbank, California and installation of on-premises TrueCut evaluation tools
- Completed successful tape-out of 6th generation Iris visual processor for mobile in advance of planned product introduction during the second half of 2020
- Ended the quarter with $21.4 million in cash and short-term investments
President and CEO of Pixelworks, Todd DeBonis, commented, “Our second quarter results reflected the broad economic impact from the COVID-19 pandemic on all of our target end markets. While our team has continued to do an excellent job of operating effectively in the current environment, the pandemic has significantly impacted customer demand and our business in the Projector and Video Delivery markets. As a result of this negative impact, we have implemented a restructuring to further reduce operating expenses, preserve cash and focus available resources on the largest growth opportunities of our business. We anticipate these actions will generate an incremental $3.2 million in annualized cost savings, while minimizing the impact on our ability to fully support Pixelworks’ customers and advance our new product development.
“Despite the current challenging business environment, we have maintained our market-leading position in our respective target end markets, and we’ve continued to execute on our Mobile and TrueCut growth initiatives. In 2020, Pixelworks’ Iris visual processing solutions have been incorporated in 12 smartphones launched across six different OEM customers. We have also sustained a solid pipeline of new programs and are well positioned to build on our momentum in the second half of the year as customers continue to incorporate more advanced displays and premium viewing experiences, including HDR, higher frame rates and auto-adaptive visual enhancements, in conjunction with their introductions of new 5G-enabled smartphones.”
Second Quarter 2020 Financial Results
Revenue in the second quarter of 2020 was $9.3 million, compared to $13.8 million in the first quarter of 2020 and revenue of $18.0 million in the second quarter of 2019. The sequential and year-over-year decline in revenue reflected an ongoing inventory correction in the Projector and Video Delivery market, compounded by significantly lower customer demand due to the negative impacts of the COVID-19 pandemic across each of the Company’s target end markets.
On a GAAP basis, gross profit margin in the second quarter of 2020 was 54.6%, compared to 49.2% in the first quarter of 2020 and 52.0% in the second quarter of 2019. Second quarter 2020 GAAP operating expenses were $11.5 million, compared to operating expenses of $12.1 million in the first quarter of 2020 and $11.7 million in the year-ago quarter.
For the second quarter of 2020, the Company recorded a GAAP net loss of $6.6 million, or ($0.17) per share, compared to a GAAP net loss of $5.4 million, or ($0.14) per share, in the first quarter of 2020 and a GAAP net loss of $2.4 million, or ($0.06) per share, in the year-ago quarter.
On a non-GAAP basis, second quarter 2020 gross profit margin was 59.2%, compared to 52.1% in the first quarter of 2020 and 54.1% in the year-ago quarter. Second quarter 2020 non-GAAP operating expenses were $9.3 million, compared to $9.7 million in the first quarter of 2020 and $9.6 million in the year-ago quarter.
For the second quarter of 2020, the Company recorded a non-GAAP net loss of $3.9 million, or ($0.10) per share, compared to a non-GAAP net loss of $2.6 million, or ($0.07) per share, in the first quarter of 2020 and a non-GAAP net loss of $97,000, or ($0.00) per share, in the second quarter of 2019.
Adjusted EBITDA in the second quarter of 2020 was a negative $2.9 million, compared to a negative $1.5 million in the first quarter of 2020 and a positive $1.0 million in the year-ago quarter.
Cash and cash equivalents and short-term investments increased to $21.4 million in the current quarter from $20.4 million in the first quarter of 2020.
The Company’s current business outlook, including guidance for the third quarter of 2020, will be provided as part of the scheduled conference call.
Conference Call Information
Pixelworks will host a conference call today, August 10, 2020, at 2:00 p.m. Pacific Time, which can be accessed by calling 1-877-359-9508 and using passcode 7672736. 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 Monday, August 17, 2020, and can be accessed by calling 1-855-859-2056 and using passcode 7672736.
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 loss and non-GAAP net loss per share, which exclude gain on sale of patents, inventory step-up and backlog amortization, 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.