Pixelworks Reports Third Quarter 2020 Financial Results

Executing on Strategic Growth Initiatives Despite Challenging Environment;
Mobile Revenue Increased Sequentially, Driven by Expanded Wins on Newly Launched Smartphones

SAN JOSE, Calif., Oct. 29, 2020 (GLOBE NEWSWIRE) -- Pixelworks, Inc. (NASDAQ: PXLW), a leading provider of innovative video and display processing solutions, today announced financial results for the third quarter ended September 30, 2020.

Third Quarter and Recent Highlights

  • Mobile revenue grew more than 230% sequentially, driven by increased shipments in support of a growing number of smartphones launched by new and existing mobile OEM customers
  • GAAP gross margin was 48.5% and non-GAAP gross margin was 55.6%, reflecting sustained progress on product cost reduction initiatives and a favorable product mix
  • Combination of new and existing Mobile OEM customers launch three new phones incorporating Pixelworks advanced visual processing technology, the ASUS ZenFone 7 flagship 5G smartphone, the Coolpad Legacy Brisa and the OnePlus 8T smartphone
  • Formally launched and secured initial design-ins for sixth-generation mobile visual processor, the first Pixelworks visual processor to leverage innovative, low-power Artificial Intelligence (AI) technology
  • Entered into securities purchase agreement with MTM-Xinhe Investment Limited, a consortium of strategic investors in China, to enhance mobile strategy and customer base in China
  • Appointed Dr. Alan Zhou as Executive VP, President of China in support of strategic and mobile growth initiatives in Asia
  • Ended the third quarter with $16.8 million in cash, cash equivalents and short-term investments, with an additional $6.6 million in cash from the MTM-Xinhe private placement investment anticipated to close in November 2020.

“Although the overall environment has remained challenging, particularly in our Projector and Video Delivery markets, customers’ order patterns began to stabilize during the third quarter in conjunction with early indications of a bottom in end market demand. Our previous actions to aggressively contain costs have enabled us to minimize cash burn, as we’ve continued to focus on and advance our growth initiatives in Mobile and for our TrueCut platform solutions,” stated Todd DeBonis, President and CEO of Pixelworks.

“Our Mobile business returned to sequential growth in the quarter, as we continued to expand the number of year-to-date wins on smartphones launched by a growing list of mobile OEM customers. We have also maintained a very healthy pipeline of engagements comprised of next-generation programs with existing customers as well as programs with multiple new customers, including a second tier-one mobile OEM. Additionally, we recently hired Dr. Alan Zhou as Executive VP, President of China as part of our effort to strengthen the strategic position of our mobile business and expand the capabilities of Pixelworks operations in China.

“While we anticipate the recovery in our mature markets to be gradual, we remain well positioned with a compelling portfolio of visual processing solutions to capitalize on the dominant market trends in mobile, as OEMs increasingly push to incorporate 5G, HDR, higher frame rates and superior gaming performance across multiple tiers of smartphones.”

Third Quarter 2020 Financial Results

Revenue in the third quarter of 2020 was $8.2 million, compared to $9.3 million in the second quarter of 2020 and revenue of $18.1 million in the third quarter of 2019. The sequential and year-over-year decline in revenue reflected a combination of inventory corrections and the impact of the global pandemic on end market demand in the projector and video delivery market, partially offset by a sequential increase in shipments of visual processing solutions in the mobile market.

On a GAAP basis, gross profit margin in the third quarter of 2020 was 48.5%, compared to 54.6% in the second quarter of 2020 and 51.8% in the third quarter of 2019. Third quarter 2020 GAAP operating expenses were $12.1 million, compared to operating expenses of $11.5 million in the second quarter of 2020 and $11.8 million in the year-ago quarter.

For the third quarter of 2020, the Company recorded a GAAP net loss of $8.1 million, or ($0.20) per share, compared to a GAAP net loss of $6.6 million, or ($0.17) per share, in the second quarter of 2020 and a GAAP net loss of $2.3 million, or ($0.06) per share, in the year-ago quarter.

On a non-GAAP basis, third quarter 2020 gross profit margin was 55.6%, compared to 59.2% in the second quarter of 2020 and 53.9% in the year-ago quarter. Third quarter 2020 non-GAAP operating expenses were $8.9 million, compared to $9.3 million in the second quarter of 2020 and $10.3 million in the year-ago quarter.

For the third quarter of 2020, the Company recorded a non-GAAP net loss of $4.5 million, or ($0.11) per share, compared to a non-GAAP net loss of $3.9 million, or ($0.10) per share, in the second quarter of 2020 and a non-GAAP net loss of $0.5 million or ($0.01) per share, in the third quarter of 2019.

Adjusted EBITDA in the third quarter of 2020 was a negative $3.5 million, compared to a negative $2.9 million in the second quarter of 2020 and a positive $0.5 million in the year-ago quarter.

Cash, cash equivalents and short-term investments were $16.8 million in the current quarter versus $21.4 million in the second quarter of 2020.

Business Outlook

The Company’s current business outlook, including guidance for the fourth quarter of 2020, will be provided as part of the scheduled conference call.

Conference Call Information

Pixelworks will host a conference call today, October 29, 2020, at 2:00 p.m. Pacific Time, which can be accessed by calling 1-877-359-9508 and using passcode 5276154. 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 Wednesday, November 4, 2020, and can be accessed by calling 1-855-859-2056 and using passcode 5276154.

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

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