Pixelworks Reports Third Quarter 2019 Financial Results

PIXELWORKS, INC. RECONCILIATION OF GAAP AND NON-GAAP FINANCIAL INFORMATION * (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
Reconciliation of GAAP and non-GAAP gross profit
GAAP gross profit	$	9,347		$	9,376		$	11,237		$	27,195		$	28,573
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
Deferred revenue fair value adjustment		—			—			52			—			52
Total reconciling items included in gross profit		387			381			534			1,173			1,635
Non-GAAP gross profit	$	9,734		$	9,757		$	11,771		$	28,368		$	30,208
Non-GAAP gross profit margin		53.9	%		54.1	%		54.7	%		53.8	%		53.9	%

Reconciliation of GAAP and non-GAAP operating expenses
GAAP operating expenses	$	11,791		$	11,697		$	10,806		$	35,420		$	31,886
Reconciling item included in research and development:
Stock-based compensation		570			703			609			1,934			1,831
Reconciling items included in selling, general and administrative:
Stock-based compensation		839			879			762			2,651			1,983
Amortization of acquired intangible assets		76			76			101			236			303
Restructuring		—			398			414			398			1,035
Total reconciling items included in operating expenses		1,485			2,056			1,886			5,219			5,152
Non-GAAP operating expenses	$	10,306		$	9,641		$	8,920		$	30,201		$	26,734

Reconciliation of GAAP and non-GAAP net income (loss)
GAAP net income (loss)	$	(2,306	)	$	(2,448	)	$	431		$	(4,621	)	$	(2,444	)
Reconciling items included in gross profit		387			381			534			1,173			1,635
Reconciling items included in operating expenses		1,485			2,056			1,886			5,219			5,152
Reconciling items included in total other income, net		—			—			—			(3,905	)		(1,203	)
Tax effect of non-GAAP adjustments		(84	)		(86	)		(181	)		49			(236	)
Non-GAAP net income (loss)	$	(518	)	$	(97	)	$	2,670		$	(2,085	)	$	2,904
Non-GAAP net income (loss) per share:
Basic	$	(0.01	)	$	(0.00	)	$	0.07		$	(0.06	)	$	0.08
Diluted	$	(0.01	)	$	(0.00	)	$	0.07		$	(0.06	)	$	0.08
Non-GAAP weighted average shares outstanding:
Basic		38,086			37,688			36,195			37,677			35,697
Diluted		38,086			37,688			37,993			37,677			37,634

*Set forth above are reconciliations of the non-GAAP financial measure to the most directly comparable GAAP financial measure. The non-GAAP financial measure disclosed by the company has limitations and should not be considered a substitute for, or superior to, the financial measure prepared in accordance with GAAP, and the reconciliations from GAAP to Non-GAAP actuals should be carefully evaluated. Please refer to "Non-GAAP Financial Measures” in this document for an explanation of the adjustments made to the comparable GAAP measures, the ways management uses the non-GAAP measures, and the reasons why management believes the non-GAAP measures provide useful information for investors.

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