Pixelworks Reports Third Quarter 2019 Financial Results

Safe Harbor Statement

This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements may be identified by use of terms such as “begin,” “continue,” “will,” “expect”, “believe,” “anticipate” and similar terms or the negative of such terms, and include, without limitation, statements about the Company’s digital projection, mobile and video delivery businesses, including market movement and demand, customer engagements, growth in the mobile market, strategy, and additional guidance, particularly as to revenue for the fourth quarter of 2019. All statements other than statements of historical fact are forward-looking statements for purposes of this release, including any projections of revenue or other financial items or any statements regarding the plans and objectives of management for future operations. Such statements are based on management's current expectations, estimates and projections about the Company's business. These statements are not guarantees of future performance and involve numerous risks, uncertainties and assumptions that are difficult to predict. Actual results could vary materially from those contained in forward looking statements due to many factors, including, without limitation: our ability to execute on our strategy, competitive factors, such as rival chip architectures, introduction or traction by competing designs, or pricing pressures; the success of our products in expanded markets; current global economic challenges; changes in the digital display and projection markets; seasonality in the consumer electronics market; our efforts to achieve profitability from operations; our limited financial resources and our ability to attract and retain key personnel. More information regarding potential factors that could affect the Company's financial results and could cause actual results to differ materially from those discussed in the forward-looking statements is included from time to time in the Company's Securities and Exchange Commission filings, including its Annual Report on Form 10-K for the year ended December 31, 2018 as well as subsequent SEC filings.

The forward-looking statements contained in this release are as of the date of this release, and the Company does not undertake any obligation to update any such statements, whether as a result of new information, future events or otherwise.

[Financial Tables Follow] 

PIXELWORKS, INC. 
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
     
   Three Months Ended  Nine Months Ended
   September 30,  June 30,  September 30,  September 30,  September 30,
   2019  2019  2018  2019  2018
Revenue, net (1) $18,057  $18,027  $21,472 $52,732  $56,015 
Cost of revenue (2)  8,710   8,651   10,235  25,537    27,442  
Gross profit     9,347       9,376       11,237     27,195       28,573  
Operating expenses:                    
Research and development (3)     6,458       6,364       5,322     19,294       16,208  
Selling, general and administrative (4)     5,333       4,935       5,070     15,728       14,643  
Restructuring           398       414     398       1,035  
Total operating expenses     11,791       11,697       10,806     35,420       31,886  
Income (loss) from operations     (2,444 )     (2,321 )     431     (8,225 )     (3,313 )
Interest income and other, net (5)     70       104       88     270       1,265  
Gain on sale of patents                     3,905        
Total other income, net     70       104       88     4,175       1,265  
Income (loss) before income taxes     (2,374 )     (2,217 )     519     (4,050 )     (2,048 )
Provision (benefit) for income taxes     (68 )     231       88     571       396  
Net income (loss)   $ (2,306 )   $ (2,448 )   $ 431   $ (4,621 )   $ (2,444 )
Net income (loss) per share:                    
Basic   $ (0.06 )   $ (0.06 )   $ 0.01     (0.12 )     (0.07 )
Diluted   $ (0.06 )   $ (0.06 )   $ 0.01     (0.12 )     (0.07 )
Weighted average shares outstanding:                    
Basic     38,086       37,688       36,195     37,677       35,697  
Diluted     38,086       37,688       37,993     37,677       35,697  
——————                    
(1) Includes deferred revenue fair value adjustment   $     $     $ 52   $     $ 52  
(2) Includes:                    
Amortization of acquired intangible assets     298       298       298     894       894  
Stock-based compensation     89       83       87     267       231  
Inventory step-up and backlog amortization                 97     12       458  
(3) Includes stock-based compensation     570       703       609     1,934       1,831  
(4) Includes:                    
Stock-based compensation     839       879       762     2,651       1,983  
Amortization of acquired intangible assets     76       76       101     236       303  
(5) Includes:                    
Gain on debt extinguishment                           (1,272 )
Discount accretion on convertible debt fair value                           69  
                     

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