Pixelworks Reports Third Quarter 2016 Financial Results

SAN JOSE, Calif. — (BUSINESS WIRE) — October 27, 2016 — Pixelworks, Inc. (NASDAQ: PXLW), an innovative provider of video display processing technology, today announced financial results for the third quarter ended September 30, 2016.

Quarterly Highlights

  • Revenue increased 9% sequentially to $13.7 million;
  • Initiated sampling of 3rd generation mobile display processing chip;
  • Joined the UHD Alliance as a contributing member; and
  • Ting Xiong appointed as Senior Vice President of Worldwide Sales

For the third quarter of 2016, revenue was $13.7 million, compared to $12.6 million in the prior quarter and $16.6 million in the third quarter of 2015. Revenue during the third quarter primarily reflected an expected sequential increase in the sale of chips sold into the digital projection market.

On a GAAP basis, gross profit margin in the third quarter of 2016 was 48.0%, compared to 51.0% in the second quarter of 2016 and 50.0% in the third quarter of 2015. Third quarter 2016 GAAP operating expenses were $7.5 million, compared to $7.8 million in the previous quarter and $9.5 million in the third quarter of 2015.

For the third quarter of 2016, the Company recorded a GAAP net loss of $1.2 million, or $0.04 per share, compared to a GAAP net loss of $1.6 million, or $0.06 per share, in the second quarter of 2016, and a GAAP net loss of $1.2 million, or $0.05 per share, in the third quarter of 2015.

On a non-GAAP basis, gross profit margin in the third quarter of 2016 was 48.6%, compared to 51.6% in the second quarter of 2016 and 50.2% in the third quarter of 2015. Third quarter 2016 gross margin was lower compared to the prior periods primarily due to a less favorable revenue mix specific to products sold into the digital projection market. Third quarter 2016 operating expenses on a non-GAAP basis were $6.8 million, compared to $7.0 million in the previous quarter and $8.5 million in the third quarter of 2015. Lower operating expenses compared to the prior periods reflected the net benefit of the Company’s announced restructuring in early 2016.

For the third quarter of 2016, the Company recorded a non-GAAP net loss of $438,000, or $0.02 per share, compared to a non-GAAP net loss of $756,000, or $0.03 per share, in the second quarter of 2016 and a non-GAAP net loss of $173,000, or $0.01 per share, in the third quarter of 2015. Adjusted EBITDA in the third quarter of 2016 was a positive $670,000, compared to a positive $296,000 in the previous quarter and positive $890,000 in the third quarter of 2015.

President and CEO of Pixelworks, Todd DeBonis, commented, “Third quarter revenue and earnings per share were both at the high-end of our guidance, reflecting continued sequential improvement across our business. Our projector business benefited from increased traction throughout the quarter as order patterns from OEMs and distributors began to normalize following the channel disruptions experienced earlier this year. In our mobile business, we are now sampling our 3rd generation IRIS processor at key smartphone and tablet customers, which in addition to having a smaller footprint and improved power consumption also enables OEMs to differentiate their devices with a superior mobile viewing experience. I’m also pleased to announce the appointment of Ting Xiong as Pixelworks’ senior VP of worldwide sales, who will be based in China and most recently headed the APAC sales organization at Qorvo’s IDP group. Ting fills-out our sales footprint and combined with other additions to the team earlier in the year gives us broad sales coverage across all of the key mobile markets in Asia.”

Business Outlook for the Fourth Quarter of 2016

The Company’s expectations for the fourth quarter of 2016 include:

  • Revenue to be between $15 million and $16 million;
  • Gross profit margin of approximately 50% to 52% on both a GAAP basis and non-GAAP basis; and
  • Operating expenses of $8 million to $9 million on a GAAP basis and $7 million to $8 million on a non-GAAP basis.

The difference in estimated operating expenses on a GAAP basis, versus a non-GAAP basis, is stock-based compensation expense, of which a range between $0.5 million to $1.0 million is included on a GAAP basis. Stock-based compensation expense is excluded from the calculation of estimated operating expenses on a non-GAAP basis.

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 99885866. 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, November 3, 2016, and can be accessed by calling 855-859-2056 and using passcode 99885866.

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