Pixelworks Reports Fourth Quarter 2013 Financial Results

SAN JOSE, Calif. — (BUSINESS WIRE) — February 6, 2014 — Pixelworks, Inc. (NASDAQ: PXLW), a pioneer in innovative video display processing technology enabling the highest quality viewing experience for displays of all sizes, today announced financial results for the fourth quarter ended December 31, 2013.

Revenue for the fourth quarter 2013 was $15.0 million, compared to $15.3 million in the prior quarter and $13.6 million in the fourth quarter of 2012. Revenue during the quarter reflects increased chip revenue across the Company’s product lines, but was offset by sequentially lower licensing revenue.

On a GAAP basis, gross profit margin in the fourth quarter of 2013 was 56.7%, compared to 60.9% in the third quarter of 2013 and 48.6% in the fourth quarter of 2012. Fourth quarter 2013 GAAP operating expenses were $8.3 million, compared to $7.5 million in the previous quarter and $9.8 million in the fourth quarter of 2012. For the fourth quarter of 2013, the Company recorded a GAAP net loss of $50,000, or $0.00 per share, compared to GAAP net income of $1.5 million, or $0.07 per diluted share, in the third quarter of 2013 and a GAAP net loss of $3.6 million, or $0.19 per share, in the fourth quarter of 2012.

On a non-GAAP basis, fourth quarter 2013 gross profit margin was 57.8%, compared to 61.6% in the third quarter of 2013 and 49.9% in the fourth quarter of 2012. Fourth quarter gross margin declined compared to the third quarter as a result of lower licensing revenue. Fourth quarter 2013 operating expenses on a non-GAAP basis were $7.1 million, compared to $7.0 million in the previous quarter and $9.2 million in the fourth quarter of 2012. Operating expenses for the third and fourth quarter of 2013 each include a reimbursement to research and development expense as the result of achieving certain milestones related to a previously announced customer co-development agreement. Fourth quarter 2012 research and development expense did not include a reimbursement credit.

On a non-GAAP basis, net income in the fourth quarter of 2013 was $1.3 million, or $0.05 per diluted share, compared to net income of $2.1 million, or $0.10 per diluted share, in the third quarter of 2013 and a net loss of $2.8 million, or $0.15 per share, in the fourth quarter of 2012. Adjusted EBITDA in the fourth quarter of 2013 was positive $2.7 million, compared to positive $3.5 million in the previous quarter and a negative $1.3 million in the fourth quarter of 2012.

“The fourth quarter was another solid quarter for Pixelworks, as increased sales across our product lines combined with licensing revenue resulted in another quarter of non-GAAP profitability,” said Bruce Walicek, President and CEO of Pixelworks. “We enter 2014 with significant traction on a number of exciting growth opportunities driven by strong product momentum, including the ramping of our product created as part of a co-development agreement, further monetization of our valuable technology portfolio, as well as the formal introduction of our technology into the mobile market.”

The Company will discuss the details of its business outlook for the first quarter of 2014 during its conference call scheduled for today, February 6, 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 855-671-1185 and using passcode 45315200. 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, February 13, 2014, and can be accessed by calling 855-859-2056 and using passcode 45315200.

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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