News Release |
View printer-friendly version |
<< Back |
Pixelworks Reports Third Quarter 2020 Financial Results
|
Executing on Strategic Growth Initiatives Despite Challenging Environment;
Mobile Revenue Increased Sequentially, Driven by Expanded Wins on Newly Launched Smartphones
Third Quarter and Recent Highlights
- Mobile revenue grew more than 230% sequentially, driven by increased shipments in support of a growing number of smartphones launched by new and existing mobile OEM customers
- GAAP gross margin was 48.5% and non-GAAP gross margin was 55.6%, reflecting sustained progress on product cost reduction initiatives and a favorable product mix
- Combination of new and existing Mobile OEM customers launch three new phones incorporating
Pixelworks advanced visual processing technology, the ASUS ZenFone 7 flagship 5G smartphone, the Coolpad Legacy Brisa and the OnePlus 8T smartphone - Formally launched and secured initial design-ins for sixth-generation mobile visual processor, the first
Pixelworks visual processor to leverage innovative, low-power Artificial Intelligence (AI) technology - Entered into securities purchase agreement with
MTM-Xinhe Investment Limited , a consortium of strategic investors inChina , to enhance mobile strategy and customer base inChina - Appointed Dr.
Alan Zhou as Executive VP, President ofChina in support of strategic and mobile growth initiatives inAsia - Ended the third quarter with
$16.8 million in cash, cash equivalents and short-term investments, with an additional$6.6 million in cash from the MTM-Xinhe private placement investment anticipated to close inNovember 2020 .
“Although the overall environment has remained challenging, particularly in our Projector and Video Delivery markets, customers’ order patterns began to stabilize during the third quarter in conjunction with early indications of a bottom in end market demand. Our previous actions to aggressively contain costs have enabled us to minimize cash burn, as we’ve continued to focus on and advance our growth initiatives in Mobile and for our TrueCut platform solutions,” stated
“Our Mobile business returned to sequential growth in the quarter, as we continued to expand the number of year-to-date wins on smartphones launched by a growing list of mobile OEM customers. We have also maintained a very healthy pipeline of engagements comprised of next-generation programs with existing customers as well as programs with multiple new customers, including a second tier-one mobile OEM. Additionally, we recently hired Dr.
“While we anticipate the recovery in our mature markets to be gradual, we remain well positioned with a compelling portfolio of visual processing solutions to capitalize on the dominant market trends in mobile, as OEMs increasingly push to incorporate 5G, HDR, higher frame rates and superior gaming performance across multiple tiers of smartphones.”
Third Quarter 2020 Financial Results
Revenue in the third quarter of 2020 was
On a GAAP basis, gross profit margin in the third quarter of 2020 was 48.5%, compared to 54.6% in the second quarter of 2020 and 51.8% in the third quarter of 2019. Third quarter 2020 GAAP operating expenses were
For the third quarter of 2020, the Company recorded a GAAP net loss of
On a non-GAAP basis, third quarter 2020 gross profit margin was 55.6%, compared to 59.2% in the second quarter of 2020 and 53.9% in the year-ago quarter. Third quarter 2020 non-GAAP operating expenses were
For the third quarter of 2020, the Company recorded a non-GAAP net loss of
Adjusted EBITDA in the third quarter of 2020 was a negative
Cash, cash equivalents and short-term investments were
Business Outlook
The Company’s current business outlook, including guidance for the fourth quarter of 2020, will be provided as part of the scheduled conference call.
Conference Call Information
About
Note:
Non-GAAP Financial Measures
This earnings release makes reference to non-GAAP gross profit margins, non-GAAP operating expenses, non-GAAP net loss and non-GAAP net loss per share, which exclude gain on sale of patents, inventory step-up and backlog amortization, amortization of acquired intangible assets, stock-based compensation expense, and restructuring expenses, which are all required under GAAP as well as the tax effect of the non-GAAP adjustments. The press release also makes reference to and reconciles GAAP net loss and adjusted EBITDA, which
Because the Company’s non-GAAP financial measures are not calculated in accordance with GAAP, they may not necessarily be comparable to similarly titled measures employed by other companies. These non-GAAP financial measures should not be considered in isolation or as a substitute for the comparable GAAP measures and should be read only in conjunction with the Company’s 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
Safe Harbor Statement
This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements may be identified by use of terms such as “begin,” “continue,” “will,” “expect”, “believe,” “anticipate” and similar terms or the negative of such terms, and include, without limitation, statements about the Company’s digital projection, mobile and video delivery businesses, including market movement and demand, customer engagements, growth in the mobile market, strategy, and additional guidance, particularly as to the business outlook and current market environment and the impact of the COVID-19 pandemic on the same. All statements other than statements of historical fact are forward-looking statements for purposes of this release, including any projections of revenue or other financial items or any statements regarding the plans and objectives of management for future operations. Such statements are based on management's current expectations, estimates and projections about the Company's business. These statements are not guarantees of future performance and involve numerous risks, uncertainties and assumptions that are difficult to predict. Actual results could vary materially from those contained in forward looking statements due to many factors, including, without limitation: our ability to execute on our strategy; competitive factors, such as rival chip architectures, introduction or traction by competing designs, or pricing pressures; the success of our products in expanding markets; current global economic challenges; changes in the digital display and projection markets; seasonality in the consumer electronics market; our efforts to achieve profitability from operations; our limited financial resources; our ability to attract and retain key personnel; and the impact of the COVID-19 pandemic on our business and on our suppliers and customers. More information regarding potential factors that could affect the Company's financial results and could cause actual results to differ materially from those discussed in the forward-looking statements is included from time to time in the Company's
The forward-looking statements contained in this release are as of the date of this release, and the Company does not undertake any obligation to update any such statements, whether as a result of new information, future events or otherwise.
[Financial Tables Follow]
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||||||
(In thousands, except per share data) | |||||||||||||||
(Unaudited) | |||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||
2020 | 2020 | 2019 | 2020 | 2019 | |||||||||||
Revenue, net | $ | 8,190 | $ | 9,253 | $ | 18,057 | $ | 31,217 | $ | 52,732 | |||||
Cost of revenue (1) | 4,214 | 4,204 | 8,710 | 15,417 | 25,537 | ||||||||||
Gross profit | 3,976 | 5,049 | 9,347 | 15,800 | 27,195 | ||||||||||
Operating expenses: | |||||||||||||||
Research and development (2) | 6,062 | 6,314 | 6,458 | 18,643 | 19,294 | ||||||||||
Selling, general and administrative (3) | 4,621 | 5,156 | 5,333 | 14,970 | 15,728 | ||||||||||
Restructuring | 1,430 | - | - | 2,022 | 398 | ||||||||||
Total operating expenses | 12,113 | 11,470 | 11,791 | 35,635 | 35,420 | ||||||||||
Loss from operations | (8,137 | ) | (6,421 | ) | (2,444 | ) | (19,835 | ) | (8,225 | ) | |||||
Interest income (expense) and other, net | (28 | ) | (24 | ) | 70 | 2 | 270 | ||||||||
Gain on sale of patents | - | - | - | - | 3,905 | ||||||||||
Total other income (expense), net | (28 | ) | (24 | ) | 70 | 2 | 4,175 | ||||||||
Loss before income taxes | (8,165 | ) | (6,445 | ) | (2,374 | ) | (19,833 | ) | (4,050 | ) | |||||
Provision (benefit) for income taxes | (26 | ) | 107 | (68 | ) | 257 | 571 | ||||||||
Net loss | $ | (8,139 | ) | $ | (6,552 | ) | $ | (2,306 | ) | $ | (20,090 | ) | $ | (4,621 | ) |
Net loss per share - basic and diluted | $ | (0.20 | ) | $ | (0.17 | ) | $ | (0.06 | ) | (0.51 | ) | (0.12 | ) | ||
Weighted average shares outstanding - basic and diluted | 40,766 | 39,444 | 38,086 | 39,697 | 37,677 | ||||||||||
—————— | |||||||||||||||
(1) Includes: | |||||||||||||||
Amortization of acquired intangible assets | 298 | 298 | 298 | 894 | 894 | ||||||||||
Restructuring | 166 | - | - | 166 | - | ||||||||||
Stock-based compensation | 117 | 127 | 89 | 345 | 267 | ||||||||||
Inventory step-up and backlog amortization | - | - | - | - | 12 | ||||||||||
(2) Includes stock-based compensation | 820 | 806 | 570 | 2,274 | 1,934 | ||||||||||
(3) Includes: | |||||||||||||||
Stock-based compensation | 913 | 1,310 | 839 | 3,296 | 2,651 | ||||||||||
Amortization of acquired intangible assets | 76 | 76 | 76 | 228 | 236 | ||||||||||
RECONCILIATION OF GAAP AND NON-GAAP FINANCIAL INFORMATION * | |||||||||||||||
(In thousands, except per share data) | |||||||||||||||
(Unaudited) | |||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||
2020 | 2020 | 2019 | 2020 | 2019 | |||||||||||
Reconciliation of GAAP and non-GAAP gross profit | |||||||||||||||
GAAP gross profit | $ | 3,976 | $ | 5,049 | $ | 9,347 | $ | 15,800 | $ | 27,195 | |||||
Amortization of acquired intangible assets | 298 | 298 | 298 | 894 | 894 | ||||||||||
Restructuring | 166 | - | - | 166 | - | ||||||||||
Stock-based compensation | 117 | 127 | 89 | 345 | 267 | ||||||||||
Inventory step-up and backlog amortization | - | - | - | - | 12 | ||||||||||
Total reconciling items included in gross profit | 581 | 425 | 387 | 1,405 | 1,173 | ||||||||||
Non-GAAP gross profit | $ | 4,557 | $ | 5,474 | $ | 9,734 | $ | 17,205 | $ | 28,368 | |||||
Non-GAAP gross profit margin | 55.6 | % | 59.2 | % | 53.9 | % | 55.1 | % | 53.8 | % | |||||
Reconciliation of GAAP and non-GAAP operating expenses | |||||||||||||||
GAAP operating expenses | $ | 12,113 | $ | 11,470 | $ | 11,791 | $ | 35,635 | $ | 35,420 | |||||
Reconciling item included in research and development: | |||||||||||||||
Stock-based compensation | 820 | 806 | 570 | 2,274 | 1,934 | ||||||||||
Reconciling items included in selling, general and administrative: | |||||||||||||||
Stock-based compensation | 913 | 1,310 | 839 | 3,296 | 2,651 | ||||||||||
Amortization of acquired intangible assets | 76 | 76 | 76 | 228 | 236 | ||||||||||
Restructuring | 1,430 | - | - | 2,022 | 398 | ||||||||||
Total reconciling items included in operating expenses | 3,239 | 2,192 | 1,485 | 7,820 | 5,219 | ||||||||||
Non-GAAP operating expenses | $ | 8,874 | $ | 9,278 | $ | 10,306 | $ | 27,815 | $ | 30,201 | |||||
Reconciliation of GAAP and non-GAAP net loss | |||||||||||||||
GAAP net loss | $ | (8,139 | ) | $ | (6,552 | ) | $ | (2,306 | ) | $ | (20,090 | ) | $ | (4,621 | ) |
Reconciling items included in gross profit | 581 | 425 | 387 | 1,405 | 1,173 | ||||||||||
Reconciling items included in operating expenses | 3,239 | 2,192 | 1,485 | 7,820 | 5,219 | ||||||||||
Reconciling items included in total other income, net | - | - | - | - | (3,905 | ) | |||||||||
Tax effect of non-GAAP adjustments | (137 | ) | 18 | (84 | ) | (144 | ) | 49 | |||||||
Non-GAAP net loss | $ | (4,456 | ) | $ | (3,917 | ) | $ | (518 | ) | $ | (11,009 | ) | $ | (2,085 | ) |
Non-GAAP net loss per share - basic and diluted | $ | (0.11 | ) | $ | (0.10 | ) | $ | (0.01 | ) | $ | (0.28 | ) | $ | (0.06 | ) |
Non-GAAP weighted average shares outstanding - basic and diluted | 40,766 | 39,444 | 38,086 | 39,697 | 37,677 | ||||||||||
*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. | |||||||||||||||
RECONCILIATION OF GAAP AND NON-GAAP EARNINGS PER SHARE * | |||||||||||||||||||||||||||||||||||||||
(Figures may not sum due to rounding) | |||||||||||||||||||||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||||||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||||||||||||||||
2020 | 2020 | 2019 | 2020 | 2019 | |||||||||||||||||||||||||||||||||||
Dollars per share | Dollars per share | Dollars per share | Dollars per share | Dollars per share | |||||||||||||||||||||||||||||||||||
Basic | Diluted | Basic | Diluted | Basic | Diluted | Basic | Diluted | Basic | Diluted | ||||||||||||||||||||||||||||||
Reconciliation of GAAP and non-GAAP net loss | |||||||||||||||||||||||||||||||||||||||
GAAP net loss | $ | (0.20 | ) | $ | (0.20 | ) | $ | (0.17 | ) | $ | (0.17 | ) | $ | (0.06 | ) | $ | (0.06 | ) | $ | (0.51 | ) | $ | (0.51 | ) | $ | (0.12 | ) | $ | (0.12 | ) | |||||||||
Reconciling items included in gross profit | 0.01 | 0.01 | 0.01 | 0.01 | 0.01 | 0.01 | 0.04 | 0.04 | 0.03 | 0.03 | |||||||||||||||||||||||||||||
Reconciling items included in operating expenses | 0.08 | 0.08 | 0.06 | 0.06 | 0.04 | 0.04 | 0.20 | 0.20 | 0.14 | 0.14 | |||||||||||||||||||||||||||||
Reconciling items included in total other income, net | - | - | - | - | - | - | - | - | (0.10 | ) | (0.10 | ) | |||||||||||||||||||||||||||
Tax effect of non-GAAP adjustments | - | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||
Non-GAAP net loss | $ | (0.11 | ) | $ | (0.11 | ) | $ | (0.10 | ) | $ | (0.10 | ) | $ | (0.01 | ) | $ | (0.01 | ) | $ | (0.28 | ) | $ | (0.28 | ) | $ | (0.06 | ) | $ | (0.06 | ) | |||||||||
*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. | |||||||||||||||||||||||||||||||||||||||
RECONCILIATION OF GAAP AND NON-GAAP GROSS PROFIT MARGIN * | ||||||||||||||
(Figures may not sum due to rounding) | ||||||||||||||
(Unaudited) | ||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||
2020 | 2020 | 2019 | 2020 | 2019 | ||||||||||
Reconciliation of GAAP and non-GAAP gross profit margin | ||||||||||||||
GAAP gross profit margin | 48.5 | % | 54.6 | % | 51.8 | % | 50.6 | % | 51.6 | % | ||||
Amortization of acquired intangible assets | 3.6 | % | 3.2 | % | 1.7 | % | 2.9 | % | 1.7 | % | ||||
Restructuring | 2.0 | % | - | % | - | % | 0.5 | % | - | % | ||||
Stock-based compensation | 1.4 | % | 1.4 | % | 0.5 | % | 1.1 | % | 0.5 | % | ||||
Inventory step-up and backlog amortization | - | % | - | % | - | % | - | % | 0.0 | % | ||||
Total reconciling items included in gross profit | 7.1 | % | 4.6 | % | 2.1 | % | 4.5 | % | 2.2 | % | ||||
Non-GAAP gross profit margin | 55.6 | % | 59.2 | % | 53.9 | % | 55.1 | % | 53.8 | % | ||||
*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. | ||||||||||||||
RECONCILIATION OF GAAP AND NON-GAAP FINANCIAL INFORMATION * | |||||||||||||||
(In thousands) | |||||||||||||||
(Unaudited) | |||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||
2020 | 2020 | 2019 | 2020 | 2019 | |||||||||||
Reconciliation of GAAP net loss and adjusted EBITDA | |||||||||||||||
GAAP net loss | $ | (8,139 | ) | $ | (6,552 | ) | $ | (2,306 | ) | $ | (20,090 | ) | $ | (4,621 | ) |
Stock-based compensation | 1,850 | 2,243 | 1,498 | 5,915 | 4,852 | ||||||||||
Restructuring | 1,596 | - | - | 2,188 | 398 | ||||||||||
Amortization of acquired intangible assets | 374 | 374 | 374 | 1,122 | 1,130 | ||||||||||
Tax effect of non-GAAP adjustments | (137 | ) | 18 | (84 | ) | (144 | ) | 49 | |||||||
Gain on sale of patents | - | - | - | - | (3,905 | ) | |||||||||
Inventory step-up and backlog amortization | - | - | - | - | 12 | ||||||||||
Non-GAAP net loss | $ | (4,456 | ) | $ | (3,917 | ) | $ | (518 | ) | $ | (11,009 | ) | $ | (2,085 | ) |
EBITDA adjustments: | |||||||||||||||
Depreciation and amortization | $ | 861 | $ | 871 | $ | 1,024 | $ | 2,754 | $ | 2,824 | |||||
Non-GAAP interest expense (income) and other, net | 28 | 24 | (70 | ) | (2 | ) | (270 | ) | |||||||
Non-GAAP provision for income taxes | 111 | 89 | 16 | 401 | 522 | ||||||||||
Adjusted EBITDA | $ | (3,456 | ) | $ | (2,933 | ) | $ | 452 | $ | (7,856 | ) | $ | 991 | ||
*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. | |||||||||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||
(In thousands) | ||||||
(Unaudited) | ||||||
2020 | 2019 | |||||
ASSETS | ||||||
Current assets: | ||||||
Cash and cash equivalents | $ | 16,062 | $ | 7,257 | ||
Short-term marketable securities | 735 | 6,975 | ||||
Accounts receivable, net | 5,417 | 10,915 | ||||
Inventories | 3,895 | 5,401 | ||||
Prepaid expenses and other current assets | 1,685 | 1,689 | ||||
Total current assets | 27,794 | 32,237 | ||||
Property and equipment, net | 5,631 | 4,608 | ||||
Operating lease right of use assets | 6,943 | 5,434 | ||||
Other assets, net | 1,187 | 1,267 | ||||
Acquired intangible assets, net | 1,581 | 2,704 | ||||
18,407 | 18,407 | |||||
Total assets | $ | 61,543 | $ | 64,657 | ||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||
Current liabilities: | ||||||
Accounts payable | $ | 687 | $ | 818 | ||
Accrued liabilities and current portion of long-term liabilities | 9,649 | 8,692 | ||||
Short-term line of credit | 3,954 | - | ||||
Current portion of income taxes payable | 5 | 164 | ||||
Total current liabilities | 14,295 | 9,674 | ||||
Long-term liabilities, net of current portion | 1,982 | 982 | ||||
Operating lease liabilities, net of current portion | 5,304 | 4,212 | ||||
Income taxes payable, net of current portion | 2,368 | 2,260 | ||||
Total liabilities | 23,949 | 17,128 | ||||
Shareholders’ equity | 37,594 | 47,529 | ||||
Total liabilities and shareholders’ equity | $ | 61,543 | $ | 64,657 | ||
Contacts:
Investor Contact
P: +1-214-272-0070
E: bperry@sheltongroup.com
Company Contact
P: +1-408-200-9271
E: enader@pixelworks.com
Source: Pixelworks, Inc.