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Pixelworks Reports Second Quarter 2003 Financial Results; Record Revenue Up 32 Percent Year-Over-Year
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TUALATIN, Ore.--(BUSINESS WIRE)--July 16, 2003--Pixelworks, Inc. (NASDAQ:PXLW):
-- Record revenue of $32.6 million in the second quarter
increased 32 percent from $24.6 million in the second quarter
of 2002
-- Second quarter GAAP net loss of ($0.2) million, or ($0.00) per
basic and diluted share, compared to net income of $1.4
million, or $0.03 per diluted share, in the second quarter of
2002
-- Pro forma(1) net income of $1.8 million, or $0.04 per diluted
share, increased 8 percent from $1.7 million, or $0.04 per
diluted share, in the second quarter of 2002
-- Record bookings increased 22 percent sequentially led by
advanced television bookings up 96 percent
(1) Pro forma net income (loss), which differs from net income (loss) in accordance with accounting principles generally accepted in the United States of America (GAAP), excludes merger-related expenses and non-cash charges for amortization of purchased developed technology, amortization of assembled workforce, in-process research and development expense, and amortization of deferred stock compensation. A detailed reconciliation between pro forma and GAAP net income (loss) is included with the attached financial statements.
Pixelworks, Inc. (NASDAQ:PXLW), a leading provider of system-on-a-chip ICs for the advanced display industry, today announced financial results for the second quarter ended June 30, 2003.
Revenue for the second quarter of 2003 was $32.6 million, a 32 percent increase over revenue of $24.6 million in the second quarter of 2002 and a 2 percent increase from $32.0 million in the first quarter of 2003.
Net loss in accordance with accounting principles generally accepted in the United States of America (GAAP) in the second quarter of 2003 was ($199,000) or ($0.00) per basic and diluted share. This compared to net income of $1.4 million, or $0.03 per diluted share, in the second quarter of 2002 and net income of $248,000, or $0.01 per diluted share, in the first quarter of 2003. Included in the current quarter's GAAP results were approximately $1.4 million in expenses related to the pending merger with Genesis Microchip.
Pro forma net income for the second quarter of 2003 was $1.8 million, or $0.04 per diluted share. This compared to pro forma net income of $1.7 million, or $0.04 per diluted share, in the second quarter of 2002 and pro forma net income of $2.4 million, or $0.05 per diluted share, in the first quarter of 2003. A detailed reconciliation between pro forma and GAAP net income (loss) is included with the attached financial statements.
"The highlight of the quarter came from advanced televisions, where revenues jumped 79 percent sequentially to $8.0 million from $4.5 million in the first quarter and grew to represent approximately 25 percent of second quarter revenue," said Allen Alley, President, CEO and Chairman of Pixelworks. "In particular, shipments to LCD TV and progressive scan CRT television manufacturers were up significantly. Advanced television bookings were also very strong in the quarter, up 96 percent over the prior quarter. These metrics further reinforce our belief that the advanced television market is continuing to emerge as the largest potential long-term growth opportunity for Pixelworks," added Alley.
"As anticipated after an unusually strong first quarter, shipments to projector manufacturers declined modestly during the second quarter. Bookings were very strong, raising our prospects for good growth in the third quarter in this part of our business. Overall, it was another very solid quarter," Alley concluded.
Conference Call
Conference Call at 2 p.m. PDT, July 16, 2003 - Pixelworks will host a conference call at 2 p.m. PDT, July 16, 2003, which can be accessed at 913-981-5520 and using pass code 143303. The Web broadcast can be accessed by visiting the Investor Relations section of the Company's website at www.pixelworks.com. For those unable to listen to the live Web broadcast, the Web broadcast will be archived through August 16, 2003. A replay of the conference call will also be available until 12 a.m. PDT, July 19, 2003, and can be accessed by calling 719-457-0820 using pass code 143303.
Business Outlook for Third Quarter 2003
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, 2003.
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 business outlook below does not include expenses that would only be incurred if the pending merger with Genesis Microchip were completed in the third quarter because the exact timing of the merger and the magnitude of these expenses cannot be reasonably estimated at this time.
Due to very uncertain and unpredictable economic conditions, it is particularly difficult to predict product demand and other related matters.
-- The Company estimates third quarter revenue will be $34.0 to
$36.0 million, a year-over-year increase of 27 to 34 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 industries, levels of inventory at distributors and
customers, and increased supply of products from the Company's
third party foundries.
-- The Company expects gross profit margin in the third quarter
to be 44.0 to 45.5 percent of revenue. Excluding an estimated
$132,000 in non-cash expenses for the amortization of acquired
developed technology resulting from the acquisition of nDSP,
pro forma gross profit margin is expected to be 44.4 to 45.9
percent of revenue in the third quarter. 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.
-- The Company expects combined operating expenses for R&D and
SG&A of approximately $12.4 to $12.8 million in the third
quarter.
-- The Company anticipates merger-related expenses of $1.0 to
$1.5 million in the third quarter related to the proposed
merger with Genesis Microchip.
-- The Company expects non-cash charges for the amortization of
assembled workforce of approximately $242,000 in the third
quarter. These non-cash charges result from the September 2002
acquisition of Jaldi Semiconductor.
-- The Company expects non-cash charges related to the
amortization of deferred stock compensation to be
approximately $350,000 in the third quarter.
-- The Company expects interest income of approximately $300,000
in the third quarter. This estimate is dependent on no
material change to average cash balances and interest rates
from those at June 30, 2003.
-- The Company expects the tax provision in the third quarter
will be 35 to 40 percent of pro forma income before income
taxes. Pro forma income (loss) before income taxes represents
income (loss) before income taxes excluding merger-related
expenses and non-cash expenses for the amortization of
developed technology, amortization of assembled workforce,
in-process research and development expense, and amortization
of deferred stock compensation. Pro forma income (loss) before
income taxes excluding these expenses differs from income
(loss) before income taxes in accordance with GAAP.
About Pixelworks, Inc.
Pixelworks, headquartered in Tualatin, Oregon, is a leading provider of system-on-a-chip ICs for the advanced display market. Pixelworks' solutions process and optimize video, computer graphics and Web information for display on a wide variety of devices used in business and consumer markets, including flat-panel monitors, digital televisions and multimedia projectors. Our broad IC product line is used by the world's leading manufacturers of consumer electronics and computer display products to enhance image quality and ease of use. 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 Third Quarter 2003 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. In addition, such statements are subject to the risks inherent in investments in and acquisitions of technologies and businesses, including the timing and successful completion of technology and product development through volume production, integration issues, unanticipated costs and expenditures, changing relationships with customers, suppliers and strategic partners, potential contractual, intellectual property or employment issues, accounting treatment and charges, and the risks that the investment or acquisition cannot be completed successfully or that anticipated benefits are not realized. 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.
Additional Information and Where to Find It
In connection with the proposed merger with Genesis Microchip, Inc. (NASDAQ:GNSS), Pixelworks has filed a registration statement on Form S-4, which includes a joint proxy statement/prospectus, with the Securities and Exchange Commission (the "SEC"). INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE JOINT PROXY STATEMENT /PROSPECTUS BECAUSE IT CONTAINS IMPORTANT INFORMATION ABOUT THE TRANSACTION. Investors and security holders may obtain a free copy of the joint proxy statement/prospectus and other documents filed by Pixelworks and Genesis Microchip with the SEC at the SEC's web site at www.sec.gov or by contacting Pixelworks at 503-454-1750 extension 527 and through Pixelworks' website at www.pixelworks.com.
Pixelworks and its directors and executive officers may be deemed to be participants in the solicitation of proxies from the stockholders of Pixelworks and Genesis Microchip in connection with the proposed merger. Information regarding the special interests of these directors and executive officers in the proposed merger is included in the joint proxy statement/prospectus described above. Additional information regarding these directors and executive officers is also included in Pixelworks' proxy statement for its 2003 Annual Meeting of Stockholders, which was filed with the SEC on April 18, 2003. This document is available free of charge by contacting the SEC or Pixelworks as indicated above.
PIXELWORKS, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (GAAP BASIS)
(In thousands, except per share data)
(Unaudited)
Three Months Six Months
Ended Ended
June 30, June 30,
----------------- -----------------
2003 2002 2003 2002
------- ------- ------- -------
Revenue $32,559 $24,644 $64,564 $46,649
Cost of revenue (1) 17,880 12,266 35,172 22,810
------- ------- ------- -------
Gross profit 14,679 12,378 29,392 23,839
Operating expenses:
Research and development 6,250 5,275 12,344 10,727
Selling, general and
administrative 6,093 5,839 12,134 11,027
Amortization of assembled
workforce 242 - 485 -
In-process research and
development - - - 4,200
Amortization of deferred stock-
based compensation 226 170 388 1,191
Merger-related expenses 1,398 - 2,977 -
------- ------- ------- -------
Total operating expenses 14,209 11,284 28,328 27,145
------- ------- ------- -------
Income (loss) from
operations 470 1,094 1,064 (3,306)
Interest income, net 301 594 680 1,238
------- ------- ------- -------
Income (loss) before
income taxes 771 1,688 1,744 (2,068)
Provision for income taxes 970 327 1,695 478
------- ------- ------- -------
Net income (loss) $ (199) $ 1,361 $ 49 $(2,546)
======= ======= ======= =======
Net income (loss) per share:
Basic $ 0.00 $ 0.03 $ 0.00 $ (0.06)
======= ======= ======= =======
Diluted $ 0.00 $ 0.03 $ 0.00 $ (0.06)
======= ======= ======= =======
Weighted average shares:
Basic 45,184 42,804 45,106 42,613
Diluted 45,184 44,298 46,364 42,613
----------------------------------
(1) Includes amortization of acquired developed technology of $132
for each of the three months ended June 30, 2003 and 2002, and $264
and $220 for the six months ended June 30, 2003 and 2002,
respectively.
PIXELWORKS, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (PRO FORMA BASIS)
(In thousands, except per share data)
(Unaudited)
Three Months Six Months
Ended Ended
June 30, June 30,
----------------- -----------------
2003 2002 2003 2002
------- ------- ------- -------
Revenue $32,559 $24,644 $64,564 $46,649
Cost of revenue 17,748 12,134 34,908 22,590
------- ------- ------- -------
Pro forma gross profit 14,811 12,510 29,656 24,059
Operating expenses:
Research and development 6,250 5,275 12,344 10,727
Selling, general and
administrative 6,093 5,839 12,134 11,027
------- ------- ------- -------
Total operating expenses 12,343 11,114 24,478 21,754
------- ------- ------- -------
Pro forma income from
operations 2,468 1,396 5,178 2,305
Interest income, net 301 594 680 1,238
------- ------- ------- -------
Pro forma income before
income taxes 2,769 1,990 5,858 3,543
Provision for income taxes 970 327 1,695 478
------- ------- ------- -------
Pro forma net income $ 1,799 $ 1,663 $ 4,163 $ 3,065
======= ======= ======= =======
Pro forma net income per share:
Basic $ 0.04 $ 0.04 $ 0.09 $ 0.07
======= ======= ======= =======
Diluted $ 0.04 $ 0.04 $ 0.09 $ 0.07
======= ======= ======= =======
Weighted average shares:
Basic 45,184 42,804 45,106 42,613
Diluted 46,390 44,298 46,364 44,349
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 intangible 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.
RECONCILIATION OF GAAP TO PRO FORMA BASIS
(In thousands, except per share data)
(Unaudited)
Three Months Ended
June 30, 2003
----------------------------------
GAAP Adjustments Pro 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 6,250 - 6,250
Selling, general and
administrative 6,093 - 6,093
Amortization of assembled
workforce 242 (242)(2) -
Amortization of deferred stock-
based compensation 226 (226)(3) -
Merger-related expenses 1,398 (1,398)(4) -
-------- ------- --------
Total operating expenses 14,209 (1,866) 12,343
-------- ------- --------
Income (loss) from
operations 470 1,998 2,468
Interest income, net 301 - 301
-------- ------- --------
Income (loss) before
income taxes 771 1,998 2,769
Provision for income taxes 970 - 970
-------- ------- --------
Net income (loss) $ (199) $ 1,998 $ 1,799
======== ======= ========
Net income (loss) per share:
Basic $ 0.00 $ 0.04
======== =========
Diluted $ 0.00 $ 0.04
======== =========
Weighted average shares:
Basic 45,184 45,184
Diluted 45,184 46,390
Three Months Ended
June 30, 2002
-----------------------------------
GAAP Adjustments Pro forma
---------- ------------- ---------
Revenue $ 24,644 $ - $ 24,644
Cost of revenue 12,266 (132)(1) 12,134
-------- -------- --------
Gross profit 12,378 132 12,510
Operating expenses:
Research and development 5,275 - 5,275
Selling, general and
administrative 5,839 - 5,839
Amortization of assembled
workforce - - -
Amortization of deferred stock-
based compensation 170 (170)(3) -
Merger-related expenses - - -
-------- -------- --------
Total operating expenses 11,284 (170) 11,114
-------- -------- --------
Income (loss) from
operations 1,094 302 1,396
Interest income, net 594 - 594
-------- -------- --------
Income (loss) before
income taxes 1,688 302 1,990
Provision for income taxes 327 - 327
-------- -------- --------
Net income (loss) $ 1,361 $ 302 $ 1,663
======== ======== ========
Net income (loss) per share:
Basic $ 0.03 $ 0.04
======== =========
Diluted $ 0.03 $ 0.04
======== =========
Weighted average shares:
Basic 42,804 42,804
Diluted 44,298 44,298
----------------------------------
(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 for amortization of intangible assets,
consisting of assembled workforce recorded in connection with
the asset acquisition of Jaldi Semiconductor.
(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.
(4) Expenses related to the proposed merger with Genesis Microchip.
PIXELWORKS, INC.
RECONCILIATION OF GAAP TO PRO FORMA BASIS
(In thousands, except per share data)
(Unaudited)
Six Months Ended
June 30, 2003
-----------------------------------
GAAP Adjustments Pro 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 12,344 - 12,344
Selling, general and
administrative 12,134 - 12,134
Amortization of assembled
workforce 485 (485) (2) -
In-process research and
development - - -
Amortization of deferred stock-
based compensation 388 (388) (4) -
Merger-related expenses 2,977 (2,977) (5) -
------- ------- ----------
Total operating expenses 28,328 (3,850) 24,478
------- ------- ----------
Income (loss) from
operations 1,064 4,114 5,178
Interest income, net 680 - 680
------- ------- ----------
Income (loss) before
income taxes 1,744 4,114 5,858
Provision for income taxes 1,695 - 1,695
------- ------- ----------
Net income (loss) $ 49 $ 4,114 $ 4,163
======= ======= ==========
Net income (loss) per share:
Basic $ 0.00 $ 0.09
======= ===========
Diluted $ 0.00 $ 0.09
======= ===========
Weighted average shares:
Basic 45,106 45,106
Diluted 46,364 46,364
Six Months Ended
June 30, 2002
-----------------------------------
GAAP Adjustments Pro forma
--------- ------------- -----------
Revenue $46,649 $ - $ 46,649
Cost of revenue 22,810 (220)(1) 22,590
------- ------- ----------
Gross profit 23,839 220 24,059
Operating expenses:
Research and development 10,727 - 10,727
Selling, general and
administrative 11,027 - 11,027
Amortization of assembled
workforce - - -
In-process research and
development 4,200 (4,200)(3) -
Amortization of deferred stock-
based compensation 1,191 (1,191)(4) -
Merger-related expenses - - -
------- ------- ----------
Total operating expenses 27,145 (5,391) 21,754
------- ------- ----------
Income (loss) from
operations (3,306) 5,611 2,305
Interest income, net 1,238 - 1,238
------- ------- ----------
Income (loss) before
income taxes (2,068) 5,611 3,543
Provision for income taxes 478 - 478
------- ------- ----------
Net income (loss) $(2,546) $ 5,611 $ 3,065
======= ======= ==========
Net income (loss) per share:
Basic $ (0.06) $ 0.07
======= ==========
Diluted $ (0.06) $ 0.07
======= ==========
Weighted average shares:
Basic 42,613 42,613
Diluted 42,613 44,349
----------------------------------
(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 for amortization of intangible assets,
consisting of assembled workforce recorded in connection with
the asset acquisition of Jaldi Semiconductor.
(3) A one-time, non-cash expense for the value assigned to an
acquired company's existing research and development projects
at time of acquisition.
(4) 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.
(5) Expenses related to the proposed merger with Genesis Microchip.
PIXELWORKS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
June 30, December 31,
2003 2002
----------- ------------
ASSETS (Unaudited)
CURRENT ASSETS
Cash and cash equivalents $ 88,760 $ 62,152
Short-term marketable securities 13,051 24,915
Accounts receivable, net 10,230 10,421
Inventories, net 9,722 6,788
Prepaid expenses and other current assets 4,215 3,896
---------- ----------
Total current assets 125,978 108,172
Long-term marketable securities 4,089 14,500
Property and equipment, net 8,502 9,073
Goodwill 82,548 82,548
Acquired intangible assets 5,133 5,882
Other assets, net 6,518 7,037
---------- ----------
Total assets $ 232,768 $ 227,212
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 7,030 $ 5,084
Accrued liabilities and current portion
of long-term debt 9,773 7,312
---------- ----------
Total current liabilities 16,803 12,396
Shareholders' equity 215,965 214,816
---------- ----------
Total liabilities and shareholders'
equity $ 232,768 $ 227,212
========== ==========
CONTACT: Pixelworks, Inc.
Investor Inquiries
Jeff Bouchard, 503-454-1750 ext. 604
E-mail: jeffb@pixelworks.com
Media Inquiries
Chris Bright, 503-454-1770
E-mail: cbright@pixelworks.com
Web site: www.pixelworks.com
SOURCE: Pixelworks, Inc.