Pixelworks Reports First Quarter 2014 Financial Results

SAN JOSE, Calif. — (BUSINESS WIRE) — May 8, 2014 — Pixelworks, Inc. (NASDAQ: PXLW), an innovative provider of video display processing technology enabling the highest quality viewing experience for displays of all sizes, today announced financial results for the first quarter ended March 31, 2014.

Revenue for the first quarter 2014 was $13.5 million, compared to $15.0 million in the prior quarter and $8.3 million in the first quarter of 2013. Revenue declined sequentially as a result of typical seasonality for sales of the Company’s chip products.

On a GAAP basis, gross profit margin in the first quarter of 2014 was 59.0%, compared to 56.7% in the fourth quarter of 2013 and 48.1% in the first quarter of 2013. First quarter 2014 GAAP operating expenses were $10.4 million, compared to $8.3 million in the previous quarter and $9.5 million in the first quarter of 2013. For the first quarter of 2014, the Company recorded a GAAP net loss of $2.5 million, or $0.11 per share, compared to a GAAP net loss of $50,000, or $0.00 per share, in the fourth quarter of 2013 and a GAAP net loss of $5.4 million, or $0.29 per share, in the first quarter of 2013.

On a non-GAAP basis, first quarter 2014 gross profit margin was 60.1%, compared to 57.8% in the fourth quarter of 2013 and 49.7% in the first quarter of 2013. First quarter gross margin improved primarily due to a more favorable mix. First quarter 2014 operating expenses on a non-GAAP basis were $8.8 million, compared to $7.1 million in the previous quarter and $8.8 million in the first quarter of 2013. Operating expenses for the fourth quarter of 2013 included a reimbursement to research and development expense as the result of achieving the final payment milestone related to a previously announced customer co-development agreement.

For the first quarter of 2014, the Company recorded a non-GAAP net loss of $0.8 million, or $0.04 per share, compared to net income of $1.3 million, or $0.05 per diluted share, in the fourth quarter of 2013 and a net loss of $4.7 million, or $0.25 per share, in the first quarter of 2013. Adjusted EBITDA in the first quarter of 2014 was positive $0.5 million, compared to positive $2.7 million in the previous quarter and a negative $3.7 million in the first quarter of 2013.

“Pixelworks is off to a solid start in 2014 with first quarter revenue up 64% year-over-year, driven by growth in our chip business and continued successful execution on our licensing partnerships,” said Bruce Walicek, President and CEO of Pixelworks. “We begin Q2 with significant momentum driven by strong product demand, further monetization of our technology portfolio, and the introduction this quarter of our first product for the mobile market. We are excited about Pixelworks’ potential and are well positioned for the future.”

The Company will discuss the details of its business outlook for the second quarter of 2014 during its conference call scheduled for today, May 8, 2014, at 2:00 p.m. Pacific Time.

Conference Call Information

Pixelworks will host a conference call today at 2:00 p.m. Pacific Time, which can be accessed by calling 877-359-9508 and using passcode 29483023. 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, May 15, 2014, and can be accessed by calling 855-859-2056 and using passcode 29483023.

About Pixelworks, Inc.

Pixelworks creates, develops and markets video display processing technology for digital video applications that demand the very highest quality images. At design centers around the world, Pixelworks engineers constantly push video performance to keep manufacturers of consumer electronics and professional displays worldwide on the leading edge. The company 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 excludes stock-based compensation expense and additional amortization of a non-cancelable prepaid royalty, which are required under GAAP. The press release also reconciles GAAP net income (loss) and adjusted EBITDA which Pixelworks defines as GAAP net income (loss) before interest expense and other, net, income tax provision (benefit), depreciation and amortization, as well as the specific items listed above. The Company believes these non-GAAP measures provide a meaningful perspective on the Company's core operating results and underlying cash flow dynamics, but cautions investors to consider these measures in addition to, not as a substitute for, its 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 Company's website.

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