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Pixelworks Reports First Quarter 2005 Financial Results
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TUALATIN, Ore.--(BUSINESS WIRE)--April 28, 2005--Pixelworks, Inc. (Nasdaq:PXLW):
-- Revenue of $40.3 million in the first quarter decreased 11%
from $45.3 million in the first quarter of 2004, and increased
5% over $38.5 million in the previous quarter.
-- Record advanced television revenue increased 13% sequentially
and 36% year-over-year.
-- GAAP net income in the first quarter was $836,000, or $0.02
per diluted share, pro forma(a) net income was $1.1 million,
or $0.02 per diluted share.
(a) Pro forma gross profit, income before income taxes, and net income, which differs from gross profit, income before income taxes, and net income in accordance with accounting principles generally accepted in the United States of America (GAAP), excludes non-cash expenses for amortization of purchased developed technology, stock-based compensation and amortization of assembled workforce. A schedule reconciling these amounts for the three months ended March 31, 2005 and 2004 is included in this news release. Pixelworks' management believes the presentation of these non-GAAP financial measures provides useful information to investors regarding Pixelworks' results of operations as these non-GAAP financial measures allow investors to better evaluate ongoing business performance. Pixelworks' management also uses these non-GAAP financial measures internally to monitor performance of the business. Pixelworks, however, cautions investors to consider these non-GAAP financial measures in addition to, and not as a substitute for, financial measures prepared in accordance with GAAP.
Pixelworks, Inc. (Nasdaq:PXLW), a leading provider of system-on-chip ICs for the advanced display industry, today announced financial results for the first quarter ended March 31, 2005.
Revenue for the first quarter of 2005 was $40.3 million, an 11 percent decrease from revenue of $45.3 million in the first quarter of 2004 and a 5 percent increase over revenue of $38.5 million in the fourth quarter of 2004.
Net income in accordance with generally accepted accounting principles (GAAP) in the first quarter of 2005 was $836,000, or $0.02 per diluted share, compared with net income of $6.6 million or $0.14 per diluted share, in the first quarter of 2004 and net income of $4.0 million, or $0.08 per diluted share, in the fourth quarter of 2004. GAAP results include non-cash expenses for stock-based compensation, amortization of assembled workforce, and amortization of acquired developed technology which, together, totaled approximately $269,000 in the first quarter of 2005 and $417,000 in the first quarter of 2004 (excluded for pro forma reporting purposes).
Pro forma net income in the first quarter of 2005 was $1.1 million, or $0.02 per diluted share, which decreased from pro forma net income of $7.0 million, or $0.14 per diluted share in the first quarter of 2004 and pro forma net income of $4.3 million, or $0.09 per diluted share, in the fourth quarter of 2004.
"We were pleased that first quarter revenues came in above our January outlook as better than expected growth in advanced television and LCD monitor business more than offset a decline in projector revenues that was greater than we had forecasted," said Allen Alley, President, CEO and Chairman of Pixelworks. "We continue to believe the advanced television business will continue to grow as a percentage of our revenues and holds great promise for future growth."
Conference Call at 2 p.m. PDT, April 28, 2005 -- Pixelworks will host a conference call at 2 p.m. PDT, April 28, 2005, which can be accessed at 719-457-2699 and using pass code 5425461. The conference call will also be available through a Web broadcast that can be accessed by visiting the Investor Relations section at www.pixelworks.com. A replay of the conference call will be available through May 1, 2005, and can be accessed by calling 719-457-0820 using pass code 5425461. A replay of the Web broadcast will be available through May 28, 2005.
Business Outlook for Second Quarter 2005
The following statements are based on current expectations. These statements are forward-looking, subject to risks and uncertainties, and actual results may differ materially. These statements do not include the potential impact of any investments outside the ordinary course of business, or mergers or acquisitions that may be completed after March 31, 2005. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The inclusion of any statement in this release does not constitute a suggestion by the Company or any other person that the events or circumstances described in such statements are material. The Company does not undertake to publicly update or revise these forward-looking statements even if experience or future changes make it clear that any projected results expressed or implied in this release will not be realized.
The Company estimates net income per share in the second quarter of 2005 will be $0.00 to $0.02 on a GAAP basis and $0.01 to $0.03 on a pro forma basis, based on the following estimates:
-- Revenue of $40.0 to $43.0 million. Revenue is highly dependent
on a number of factors including, but not limited to, general
economic conditions, timely new product introductions, the
Company's ability to secure additional design wins with
customers, growth rates in the flat panel monitor, multimedia
projector, and advanced television markets, levels of
inventory at distributors and customers, and increased supply
of products from the Company's third party foundries.
-- GAAP gross profit margin of 41.0 to 43.0 percent. Pro forma
gross profit margin, which excludes an estimated $132,000 in
non-cash expense for the amortization of acquired developed
technology, of 41.3 to 43.3 percent. Gross profit margin may
be higher or lower than expected due to many factors
including, but not limited to, competitive pricing actions,
changes in estimated product costs, revenue levels, and
changes in estimated product mix.
-- R&D and SG&A expenses, combined, of $17.0 to $17.5 million.
-- Non-cash expenses for stock-based compensation and
amortization of assembled workforce of approximately $125,000
(excluded for pro forma reporting purposes).
-- Interest income of approximately $900,000.
-- Effective tax rate of 22 to 26 percent of net income before
income taxes on a pro forma basis and 24 to 28 percent of net
income before taxes on a GAAP basis. Both the pro forma and
GAAP effective tax rates are subject to significant variation
on an ongoing basis due to changes in the level of income
before taxes, research and development tax credits, and other
factors.
About Pixelworks, Inc.
Pixelworks, headquartered in Tualatin, Oregon, is a leading provider of system-on-chip ICs for the advanced display industry. Pixelworks' solutions provide the intelligence for advanced televisions, multimedia projectors and flat panel monitors by processing and optimizing video and computer graphics signals to produce high quality images. Many of the world's leading manufacturers of consumer electronics and computer display products utilize our technology to enhance image quality and ease of use of their products.
For more information, please visit the company's Web site at www.pixelworks.com.
Pixelworks is a trademark of Pixelworks, Inc. All other trademarks and registration marks are the property of their respective corporations.
Safe Harbor Statement
The statements by Allen Alley and the statements in the Business Outlook for Second Quarter 2005 above are forward-looking statements within the meaning of the Securities Litigation Reform Act of 1995. Such statements are based on current expectations, estimates and projections about the Company's business. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict. Actual results could vary materially from the description contained herein due to many factors including those described above and the following: business and economic conditions, changes in growth in the flat panel monitor, multimedia projector, and advanced television industries, changes in customer ordering patterns, competitive factors, such as rival chip architectures, pricing pressures, insufficient, excess or obsolete inventory and variations in inventory valuation, continued success in technological advances, shortages of manufacturing capacity from our third-party foundries, litigation involving antitrust and intellectual property, the non-acceptance of the combined technologies by leading manufacturers, and other risk factors listed from time to time in the Company's Securities and Exchange Commission filings. The forward-looking statements contained in this press release speak only as of the date on which they are made, and the Company does not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of this news release. If the Company does update one or more forward-looking statements, investors and others should not conclude that the Company will make additional updates with respect thereto or with respect to other forward-looking statements.
PIXELWORKS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (GAAP BASIS)
(In thousands, except per share data)
(Unaudited)
Three Months Ended
March 31,
-----------------
2005 2004
------- -------
Revenue $40,261 $45,270
Cost of revenue (1) 23,343 21,883
------- -------
Gross profit 16,918 23,387
Operating expenses:
Research and development 9,442 7,704
Selling, general and administrative 7,068 5,474
Stock-based compensation and amortization of
assembled workforce 137 285
------- -------
Total operating expenses 16,647 13,463
------- -------
Income from operations 271 9,924
Interest income 1,715 236
Interest expense (657) (1)
Amortization of debt issuance costs (177) -
------- -------
Interest income, net 881 235
------- -------
Income before income taxes 1,152 10,159
Provision for income taxes 316 3,606
------- -------
Net income $ 836 $ 6,553
======= =======
Net income per share:
Basic $ 0.02 $ 0.14
======= =======
Diluted $ 0.02 $ 0.14
======= =======
Weighted average shares outstanding:
Basic 46,969 46,320
======= =======
Diluted 47,887 48,141
======= =======
(1) Includes amortization of acquired developed technology of $132 for
each of the three months ended March 31, 2005 and 2004.
PIXELWORKS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (PRO FORMA BASIS)
(In thousands, except per share data)
(Unaudited)
Three Months Ended
March 31,
-----------------
2005 2004
------- -------
Revenue $40,261 $45,270
Cost of revenue 23,211 21,751
------- -------
Pro forma gross profit 17,050 23,519
Operating expenses:
Research and development 9,442 7,704
Selling, general and administrative 7,068 5,474
------- -------
Total operating expenses 16,510 13,178
------- -------
Pro forma income from operations 540 10,341
Interest income 1,715 236
Interest expense (657) (1)
Amortization of debt issuance costs (177) -
------- -------
Interest income, net 881 235
------- -------
Pro forma income before income taxes 1,421 10,576
Provision for income taxes 316 3,606
------- -------
Pro forma net income $ 1,105 $ 6,970
======= =======
Pro forma net income per share:
Basic $ 0.02 $ 0.15
======= =======
Diluted $ 0.02 $ 0.14
======= =======
Weighted average shares outstanding:
Basic 46,969 46,320
======= =======
Diluted 47,887 48,141
======= =======
The above pro forma financial statements are presented for
informational purposes only. Our presentation of pro forma financial
information excludes non-cash expenses resulting from acquisitions and
the issuance of stock options, as well as unusual or infrequent
expenses that are not directly attributable to our ongoing operations
and are expected to be incurred over a limited period of time. Because
of these exclusions, our presentation is not in accordance with U.S.
generally accepted accounting principles (GAAP). Additionally, our
presentation of pro forma financial information may not be consistent
with that of other companies.
We believe that the exclusion of non-cash charges may help the
investor better understand our liquidity position and the use of
tangible resources in our operations, and the exclusion of unusual or
infrequent items provides an alternative measure which may help the
investor evaluate our underlying operating performance. Pro forma
information is not, and should not be considered, a substitute for
financial information prepared in accordance with GAAP.
PIXELWORKS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
RECONCILIATION OF GAAP TO PRO FORMA BASIS
(In thousands, except per share data)
(Unaudited)
Three Months Ended Three Months Ended
March 31, 2005 March 31, 2004
---------------------------- ----------------------------
Pro Pro
GAAP Adjustments forma GAAP Adjustments forma
-------- ------------------- -------- -------------------
Revenue $40,261 $ - $40,261 $45,270 $ - $45,270
Cost of
revenue 23,343 (132) (1) 23,211 21,883 (132) (1) 21,751
-------- ----- -------- -------- ----- --------
Gross
profit 16,918 132 17,050 23,387 132 23,519
Operating
expenses:
Research and
development 9,442 - 9,442 7,704 - 7,704
Selling,
general and
adminis-
trative 7,068 - 7,068 5,474 - 5,474
Stock-based
compen-
sation and
amorti-
zation of
assembled
workforce 137 (137) (2) - 285 (285) (2) -
-------- ----- -------- -------- ----- --------
Total
operating
expenses 16,647 (137) 16,510 13,463 (285) 13,178
-------- ----- -------- -------- ----- --------
Income from
operations 271 269 540 9,924 417 10,341
Interest
income 1,715 - 1,715 236 - 236
Interest
expense (657) - (657) (1) - (1)
Amortization
of debt
issuance
costs (177) - (177) - - -
-------- ----- -------- -------- ----- --------
Interest
income,
net 881 - 881 235 - 235
-------- ----- -------- -------- ----- --------
Income
before
income
taxes 1,152 269 1,421 10,159 417 10,576
Provision for
income taxes 316 - 316 3,606 - 3,606
-------- ----- -------- -------- ----- --------
Net income $836 $269 $1,105 $6,553 $417 $6,970
======== ===== ======== ======== ===== ========
Net income
per share:
Basic $0.02 $0.02 $0.14 $0.15
======== ======== ======== ========
Diluted $0.02 $0.02 $0.14 $0.14
======== ======== ======== ========
Weighted
average
shares
outstanding:
Basic 46,969 46,969 46,320 46,320
======== ======== ======== ========
Diluted 47,887 47,887 48,141 48,141
======== ======== ======== ========
(1) Non-cash expenses for amortization of value assigned to an
acquired company's developed and other core technology at time of
acquisition.
(2) Non-cash expenses associated with certain stock options issued to
employees prior to the Company's Initial Public Offering and to
employees of acquired companies. Also includes non-cash expense
associated with amortization of the intangible assembled workforce
asset recorded in connection with the Jaldi Semiconductor asset
acquisition.
PIXELWORKS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
March 31, Dec. 31,
2005 2004
--------- ---------
ASSETS
Current assets:
Cash and cash equivalents $ 50,542 $ 32,585
Short-term marketable securities 166,073 160,213
Accounts receivable, net 15,205 14,605
Inventories, net 13,580 18,575
Prepaid expenses and other current assets 5,468 4,856
-------- --------
Total current assets 250,868 230,834
Long-term marketable securities 53,407 79,483
Property and equipment, net 12,243 12,444
Other assets, net 11,246 8,101
Debt issuance costs, net 4,310 4,483
Deferred tax assets, net 4,868 4,868
Acquired intangible assets, net 2,266 2,520
Goodwill 80,836 80,836
-------- --------
Total assets $420,044 $423,569
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 4,861 $ 5,946
Accrued liabilities and current portion of long
term-liabilities 11,712 12,842
Income taxes payable 853 2,393
-------- --------
Total current liabilities 17,426 21,181
Long-term liabilities 297 365
Long-term debt 150,000 150,000
-------- --------
Total liabilities 167,723 171,546
Shareholders' equity 252,321 252,023
-------- --------
Total liabilities and shareholders' equity $420,044 $423,569
======== ========
CONTACT: Pixelworks, Inc.
Jeff Bouchard, 503-454-1771 (Investors)
jeffb@pixelworks.com
Chris Bright, 503-454-1770 (Media)
cbright@pixelworks.com
www.pixelworks.com
SOURCE: Pixelworks, Inc.