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Pixelworks Reports Second Quarter 2004 Financial Results
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TUALATIN, Ore.--(BUSINESS WIRE)--July 20, 2004--Pixelworks, Inc. (Nasdaq:PXLW):
Record Revenue Up 49 Percent Year-Over-Year; Earnings Per Share on GAAP Basis Increased to $0.12 From $0.01 in Second Quarter of 2003
- Record revenue of $48.5 million in the second quarter increased 49% from $32.6 million in the second quarter of 2003, and increased 7% over $45.3 million in the previous quarter
- Pro forma(a) net income of $6.1 million, or $0.13 per diluted share, increased 152% from $2.4 million, or $0.05 per diluted share, in the second quarter of 2003
(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 merger-related and restructuring expenses, and non-cash expenses for amortization of purchased developed technology, and stock-based compensation and amortization of assembled workforce. A schedule reconciling these amounts for the three and six months ended June 30, 2004 and 2003 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 second quarter ended June 30, 2004.
Revenue for the second quarter of 2004 was a record $48.5 million, a 49 percent increase over revenue of $32.6 million in the second quarter of 2003 and a 7 percent increase over revenue of $45.3 million in the first quarter of 2004.
Net income in accordance with generally accepted accounting principles (GAAP) in the second quarter of 2004 was $5.8 million, or $0.12 per diluted share, compared with net income of $420,000, or $0.01 per diluted share, in the second quarter of 2003 and net income of $6.6 million, or $0.14 per diluted share, in the first quarter of 2004. Second quarter 2004 GAAP results include non-cash expenses for stock-based compensation, amortization of assembled workforce, and amortization of acquired developed technology of approximately $345,000 (excluded for pro forma reporting purposes).
Pro forma net income in the second quarter of 2004 was $6.1 million, or $0.13 per diluted share, which compared to pro forma net income of $2.4 million, or $0.05 per diluted share in the second quarter of 2003 and pro forma net income of $7.0 million, or $0.14 per diluted share, in the first quarter of 2004.
"We were pleased with the financial results for the second quarter, which came in at the high end of our expectations and resulted in strong year-over-year revenue and earnings growth," said Allen Alley, President, CEO, and Chairman of Pixelworks. "Advanced television business continued to be the big growth driver with revenue growing 146 percent year-over-year and 15 percent sequentially. Projector business was up 25 percent year-over-year, but down 8 percent sequentially, which was slightly weaker than expected. Our LCD monitor business, while representing only 14 percent of total revenue, was up a better-than-expected 47 percent sequentially due to strength in high-resolution LCD monitor business in particular," concluded Alley.
Conference Call
Conference Call at 2 p.m. PDT, July 20, 2004 - Pixelworks will host a conference call at 2 p.m. PDT, July 20, 2004, which can be accessed at (719) 457-2618 and using pass code 510886. 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 July 22, 2004, and can be accessed by calling 719-457-0820 using pass code 510886. A replay of the Web broadcast will be available through August 19, 2004.
Business Outlook for Third Quarter 2004
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 June 30, 2004. 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.
Due to very uncertain and unpredictable economic conditions, it is particularly difficult to predict product demand and other related matters.
The Company estimates net income per share in the third quarter of 2004 will be $0.08 to $0.11 on a GAAP basis and $0.09 to $0.12 on a pro forma basis, based on the following estimates:
- Revenue of $47.0 to $50.0 million, a year-over-year increase of 32 to 41 percent. 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 45.0 to 47.0 percent. Pro forma gross profit margin, which excludes an estimated $132,000 in non-cash expense for the amortization of acquired developed technology, of 45.3 to 47.3 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 $14.8 to $15.3 million.
- Non-cash expenses for stock-based compensation and amortization of assembled workforce of approximately $250,000 (excluded for pro forma reporting purposes).
- Interest income, net of approximately $250,000.
- Effective tax rate of 34 to 36 percent of net income before income taxes.
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 owners.
Safe Harbor Statement
The statements by Allen Alley and the statements in the Business Outlook for Third Quarter 2004 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 Six Months Ended
June 30, June 30,
------------------ -----------------
2004 2003 2004 2003
--------- -------- -------- --------
Revenue $48,509 $32,559 $93,779 $64,564
Cost of revenue (1) 25,127 17,880 46,702 35,172
--------- -------- -------- --------
Gross profit 23,382 14,679 47,077 29,392
Operating expenses:
Research and development 7,471 6,854 14,725 13,601
Selling, general and
administrative 6,888 5,489 13,120 10,877
Merger related expenses - 1,398 - 2,977
Stock-based compensation and
amortization
of assembled workforce 213 468 498 873
--------- -------- -------- --------
Total operating expenses 14,572 14,209 28,343 28,328
--------- -------- -------- --------
Income from operations 8,810 470 18,734 1,064
Interest income 528 305 764 690
Interest expense (294) (4) (295) (10)
Amortization of debt issuance
costs (115) - (115) -
--------- -------- -------- --------
Interest income, net 119 301 354 680
--------- -------- -------- --------
Income before income taxes 8,929 771 19,088 1,744
Provision for income taxes 3,170 351 6,776 1,076
--------- -------- -------- --------
Net income $5,759 $420 $12,312 $668
========= ======== ======== ========
Net income per share:
Basic $0.12 $0.01 $0.26 $0.01
========= ======== ======== ========
Diluted $0.12 $0.01 $0.25 $0.01
========= ======== ======== ========
Weighted average shares
outstanding:
Basic 46,636 45,184 46,479 45,106
========= ======== ======== ========
Diluted 48,475 46,390 48,299 46,364
========= ======== ======== ========
(1) Includes amortization of acquired developed technology of $132
for each of the three months ended June 30, 2004 and 2003, and $264
for each of the six months ended June 30, 2004 and 2003.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (PRO FORMA BASIS)
(In thousands, except per share data)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------ -----------------
2004 2003 2004 2003
--------- -------- -------- --------
Revenue $48,509 $32,559 $93,779 $64,564
Cost of revenue 24,995 17,748 46,438 34,908
--------- -------- -------- --------
Pro forma gross profit 23,514 14,811 47,341 29,656
Operating expenses:
Research and development 7,471 6,854 14,725 13,601
Selling, general and
administrative 6,888 5,489 13,120 10,877
--------- -------- -------- --------
Total operating expenses 14,359 12,343 27,845 24,478
--------- -------- -------- --------
Pro forma income from
operations 9,155 2,468 19,496 5,178
Interest income 528 305 764 690
Interest expense (294) (4) (295) (10)
Amortization of debt issuance
costs (115) - (115) -
--------- -------- -------- --------
Interest income, net 119 301 354 680
--------- -------- -------- --------
Pro forma income before income
taxes 9,274 2,769 19,850 5,858
Provision for income taxes 3,170 351 6,776 1,076
--------- -------- -------- --------
Pro forma net income $6,104 $2,418 $13,074 $4,782
========= ======== ======== ========
Pro forma net income per share:
Basic $0.13 $0.05 $0.28 $0.11
========= ======== ======== ========
Diluted $0.13 $0.05 $0.27 $0.10
========= ======== ======== ========
Weighted average shares
outstanding:
Basic 46,636 45,184 46,479 45,106
========= ======== ======== ========
Diluted 48,475 46,390 48,299 46,364
========= ======== ======== ========
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
accounting principles generally accepted in the United States of
America (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
June 30, 2004
----------------------------
Pro
GAAP Adjustments forma
-------- ----------- -------
Revenue $48,509 $ - $48,509
Cost of revenue 25,127 (132)(1) 24,995
-------- ----------- -------
Gross profit 23,382 132 23,514
Operating expenses:
Research and development 7,471 - 7,471
Selling, general and administrative 6,888 - 6,888
Merger related expenses - - -
Stock-based compensation and amortization
of assembled workforce 213 (213)(3) -
-------- ----------- -------
Total operating expenses 14,572 (213) 14,359
-------- ----------- -------
Income from operations 8,810 345 9,155
Interest income 528 - 528
Interest expense (294) - (294)
Amortization of debt issuance costs (115) - (115)
-------- ----------- -------
Interest income, net 119 - 119
-------- ----------- -------
Income before income taxes 8,929 345 9,274
Provision for income taxes 3,170 - 3,170
-------- ----------- -------
Net income $5,759 $ 345 $6,104
======== =========== =======
Net income per share:
Basic $0.12 $0.13
======== ========
Diluted $0.12 $0.13
======== ========
Weighted average shares outstanding:
Basic 46,636 46,636
======== ========
Diluted 48,475 48,475
======== ========
Three Months Ended
June 30, 2003
----------------------------
Pro
GAAP Adjustments forma
-------- ----------- -------
Revenue $32,559 $ - $32,559
Cost of revenue 17,880 (132)(1) 17,748
-------- ----------- -------
Gross profit 14,679 132 14,811
Operating expenses:
Research and development 6,854 - 6,854
Selling, general and administrative 5,489 - 5,489
Merger related expenses 1,398 (1,398)(2) -
Stock-based compensation and
amortization
of assembled workforce 468 (468)(3) -
-------- ----------- -------
Total operating expenses 14,209 (1,866) 12,343
-------- ----------- -------
Income from operations 470 1,998 2,468
Interest income 305 - 305
Interest expense (4) - (4)
Amortization of debt issuance costs - - -
-------- ----------- -------
Interest income, net 301 - 301
-------- ----------- -------
Income before income taxes 771 1,998 2,769
Provision for income taxes 351 - 351
-------- ----------- -------
Net income $420 $1,998 $2,418
======== =========== =======
Net income per share:
Basic $0.01 $0.05
======== ========
Diluted $0.01 $0.05
======== ========
Weighted average shares outstanding:
Basic 45,184 45,184
======== ========
Diluted 46,390 46,390
======== ========
(1) Non-cash expenses for amortization of value assigned to an
acquired company's developed and other core technology at time of
acquisition.
(2) Expenses related to proposed (now terminated) merger with
Genesis Microchip.
(3) 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 STATEMENTS OF OPERATIONS
RECONCILIATION OF GAAP TO PRO FORMA BASIS
(In thousands, except per share data)
(Unaudited)
Six Months Ended
June 30, 2004
----------------------------
Pro
GAAP Adjustments forma
-------- ----------- -------
Revenue $93,779 $ - $93,779
Cost of revenue 46,702 (264)(1) 46,438
-------- ----------- -------
Gross profit 47,077 264 47,341
Operating expenses:
Research and development 14,725 - 14,725
Selling, general and administrative 13,120 - 13,120
Merger related expenses - - -
Stock-based compensation and amortization
of assembled workforce 498 (498)(3) -
-------- ----------- -------
Total operating expenses 28,343 (498) 27,845
-------- ----------- -------
Income from operations 18,734 762 19,496
Interest income 764 - 764
Interest expense (295) - (295)
Amortization of debt issuance costs (115) - (115)
-------- ----------- -------
Interest income, net 354 - 354
-------- ----------- -------
Income before income taxes 19,088 762 19,850
Provision for income taxes 6,776 - 6,776
-------- ----------- -------
Net income $12,312 $ 762 $13,074
======== =========== =======
Net income per share:
Basic $0.26 $0.28
======== ========
Diluted $0.25 $0.27
======== ========
Weighted average shares outstanding:
Basic 46,479 46,479
======== ========
Diluted 48,299 48,299
======== ========
Six Months Ended
June 30, 2003
----------------------------
Pro
GAAP Adjustments forma
-------- ----------- -------
Revenue $64,564 $ - $64,564
Cost of revenue 35,172 (264)(1) 34,908
-------- ----------- -------
Gross profit 29,392 264 29,656
Operating expenses:
Research and development 13,601 - 13,601
Selling, general and administrative 10,877 - 10,877
Merger related expenses 2,977 (2,977)(2) -
Stock-based compensation and
amortization
of assembled workforce 873 (873)(3) -
-------- ----------- -------
Total operating expenses 28,328 (3,850) 24,478
-------- ----------- -------
Income from operations 1,064 4,114 5,178
Interest income 690 - 690
Interest expense (10) - (10)
Amortization of debt issuance costs - - -
-------- ----------- -------
Interest income, net 680 - 680
-------- ----------- -------
Income before income taxes 1,744 4,114 5,858
Provision for income taxes 1,076 - 1,076
-------- ----------- -------
Net income $668 $4,114 $4,782
======== =========== =======
Net income per share:
Basic $0.01 $0.11
======== ========
Diluted $0.01 $0.10
======== ========
Weighted average shares outstanding:
Basic 45,106 45,106
======== ========
Diluted 46,364 46,364
======== ========
(1) Non-cash expenses for amortization of value assigned to an
acquired company's developed and other core technology at time of
acquisition.
(2) Expenses related to proposed (now terminated) merger with
Genesis Microchip.
(3) 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)
June 30, December 31,
2004 2003
--------- -------------
ASSETS
Current assets:
Cash and cash equivalents $99,982 $75,165
Short-term marketable securities 102,761 5,656
Accounts receivable, net 19,499 8,468
Inventories, net 15,942 10,478
Prepaid expenses and other current assets 4,604 4,826
--------- -------------
Total current assets 242,788 104,593
Long-term marketable securities 65,804 19,875
Property and equipment, net 7,476 6,561
Other assets, net 8,650 12,511
Deferred tax assets, net 6,693 3,694
Debt issuance costs, net 4,709 -
Acquired intangible assets, net 3,028 3,535
Goodwill 82,007 82,548
--------- -------------
Total assets $421,155 $233,317
========= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $10,872 $4,330
Accrued liabilities and current portion of
long term liabilities 13,193 8,582
Income taxes payable 3,042 -
--------- -------------
Total current liabilities 27,107 12,912
Long-term liabilities 827 100
Long-term debt 150,000 -
--------- -------------
Total liabilities 177,934 13,012
Shareholders' equity 243,221 220,305
--------- -------------
Total liabilities and shareholders'
equity $421,155 $233,317
========= =============
CONTACT: Pixelworks, Inc.
Investor Inquiries:
Jeff Bouchard, 503-454-1750 ext. 1771
jeffb@pixelworks.com
www.pixelworks.com
or
Media Inquiries:
Chris Bright, 503-454-1750 ext. 1770
cbright@pixelworks.com
SOURCE: Pixelworks, Inc.