PORTLAND, Ore., Aug. 7, 2024 /PRNewswire/ -- Pixelworks, Inc. (NASDAQ: PXLW), a leading provider of innovative video and display processing solutions, today announced financial results for the second quarter ended June 30, 2024.

Second Quarter and Recent Highlights

  • OPPO affiliate, OnePlus, launched the OnePlus Ace 3 Pro smartphone, incorporating Pixelworks' X7 Gen 2 visual processor featuring AI-based distributed computing architecture and enhanced rendering capability
  • Announced collaboration with Tencent's TiMi Studio group and the integration of Pixelworks' IRX rendering acceleration technology in the Honor of Kings mobile game
  • Collaborated with Seasun Games to optimize visual processing and bring detailed 120fps display effects to JX3 Ultimate Mobile, making it the latest mobile game to leverage IRX certified rendering acceleration
  • Implemented reduction in workforce to better align operating expense with near-term revenue levels, anticipated to contribute approximately $4.0 million of annualized savings beginning in the third quarter

"Second quarter revenue was at the midpoint guidance and largely reflected the expected headwinds in our mobile business, primarily related to the inventory correction at a large mobile OEM customer," stated Todd DeBonis, President and CEO of Pixelworks. "In response and to better align expenses with near-term revenue levels, we implemented cost reduction actions during the quarter, which are anticipated to result in $4 million of annualized cost saving beginning in the third quarter of 2024.

"During the quarter, we made continued progress on the expansion of our IRX gaming ecosystem. Our recent announced collaborations with Tencent on Honor of Kings and Seasun Games on JX3 Ultimate Mobile represent the latest additions to the growing list of IRX certified mobile games. Coupled with one of Pixelworks' X-series of visual processors, our IRX rendering accelerator technology enables PC-quality visual performance on a smartphone without generating excessive heat or battery consumption. Growing this ecosystem remains a fundamental element of our multi-pronged mobile strategy to drive broader adoption of our mobile visual processors, and we currently engaged with multiple top gaming studios to release several additional high-profile IRX mobile games later this year.

"Looking ahead, we are confronting the recent challenges head-on while remaining focused on strategic and operational execution across all areas of the business. We are well positioned today for renewed growth in mobile, as we increasingly target an expanded served market for mid to lower tier smartphones. Additionally, the size and influence of our IRX gaming ecosystem continues to grow and will soon be further supported by the introduction of our next-generation mobile visual processor. Together with stable performance of our home and enterprise business, we expect to deliver sequential revenue growth in the third quarter as we continue to target improved operational results over the intermediate-term."

Second Quarter 2024 Financial Results

Revenue in the second quarter of 2024 was $8.5 million, compared to $16.1 million in the first quarter of 2024 and $13.6 million in the second quarter of 2023. The sequential and year-over-year decline in revenue primarily reflected the anticipated near-term headwinds in the Company's mobile business.

On a GAAP basis, gross profit margin in the second quarter of 2024 was 50.7%, compared to 50.5% in the first quarter of 2024 and 40.3% in the second quarter of 2023. Second quarter 2024 GAAP operating expenses were $15.1 million, compared to $13.6 million in the first quarter of 2024 and $12.0 million in the year-ago quarter.

On a non-GAAP basis, second quarter 2024 gross profit margin was 51.0%, compared to 50.7% in the first quarter of 2024 and 40.5% in the year-ago quarter. Second quarter 2024 non-GAAP operating expenses were $12.8 million, compared to $12.6 million in the first quarter of 2024 and $10.7 million in the year-ago quarter.

For the second quarter of 2024, the Company recorded a GAAP net loss of $10.1 million, or ($0.17) per share, compared to a GAAP net loss of $5.1 million, or ($0.09) per share, in the first quarter of 2024, and a GAAP net loss of $6.0 million, or ($0.11) per share, in the year-ago quarter. Note, the Company refers to "net loss attributable to Pixelworks, Inc." as "net loss".

For the second quarter of 2024, the Company recorded a non-GAAP net loss of $7.7 million, or ($0.13) per share, compared to a non-GAAP net loss of $4.0 million, or ($0.07) per share, in the first quarter of 2024, and a non-GAAP net loss of $4.8 million, or ($0.09) per share, in the second quarter of 2023.

Adjusted EBITDA in the second quarter of 2024 was a negative $7.0 million, compared to a negative $3.2 million in the first quarter of 2024 and a negative $4.0 million in the year-ago quarter.

Cash and cash equivalents at the end of the second quarter of 2024 were $37.8 million, compared to $47.5 million as of the year ended December 31, 2023.

Business Outlook

The Company's current business outlook, including guidance for the third quarter of 2024, will be discussed as part of the scheduled conference call.

Conference Call Information

Pixelworks will host a conference call today, August 7, 2024, at 2:00 p.m. Pacific Time. To join the conference call via phone, participants are required to complete the following registration form to receive a dial-in number and dedicated PIN for accessing the conference call. Additionally, a live and archived audio webcast of the conference call will be accessible via the investors section of Pixelworks' website at www.pixelworks.com.

About Pixelworks, Inc.

Pixelworks provides industry-leading content creation, video delivery and display processing solutions and technology that enable highly authentic viewing experiences with superior visual quality, across all screens – from cinema to smartphone and beyond. The Company has a 20-year history of delivering image processing innovation to leading providers of consumer electronics, professional displays, and video streaming services. For more information, please visit the company's web site at www.pixelworks.com.

Note: Pixelworks, MotionEngine, TrueCut Motion and the Pixelworks logo are trademarks of Pixelworks, Inc.

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 stock-based compensation expense and restructuring expense which are both required under GAAP. The press release also makes reference to and reconciles GAAP net loss and adjusted EBITDA, which Pixelworks defines as GAAP net loss attributable to Pixelworks Inc. before interest income and other, net, income tax provision, depreciation and amortization, as well as the specific item listed above.

Pixelworks management uses these non-GAAP financial measures internally to understand, manage and evaluate the business and establish its operational goals, review its operations on a period-to-period basis, for compensation evaluations, to measure performance, and for budgeting and resource allocation. Pixelworks management believes it is useful for the Company and investors to review, as applicable, both GAAP information and non-GAAP financial measures to help assess the performance of Pixelworks' continuing business and to evaluate Pixelworks' future prospects. These non-GAAP measures, when reviewed together with the GAAP financial information, provide additional transparency and information for comparison and analysis of operating performance and trends. These non-GAAP measures exclude certain items to facilitate management's review of the comparability of our core operating results on a period-to-period basis.

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 Pixelworks website.

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 future collaborations with game studios, the expected growth of the IRX ecosystem, expected adoption rates for our mobile visual processors, expansion into mid- to low-tier smartphones, continued performance of our home and enterprise business, and expected cost savings. 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: the actual performance of the smartphone market throughout 2024; 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; and our ability to attract and retain key personnel. 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 Securities and Exchange Commission filings, including its Annual Report on Form 10-K for the year ended December 31, 2023, as well as subsequent SEC filings.

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]

 

PIXELWORKS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)



Three Months Ended

 Six Months Ended


June 30,

 March 31, 

 June 30,

 June 30,

 June 30,


2024

2024

2023

2024

2023

Revenue, net

$                8,535

$              16,054

$              13,605

$              24,589

$              23,571

Cost of revenue (1)

4,209

7,940

8,121

12,149

13,720

Gross profit

4,326

8,114

5,484

12,440

9,851

Operating expenses:






Research and development (2)

7,943

8,073

6,507

16,016

15,173

Selling, general and administrative (3)

5,722

5,534

5,468

11,256

11,540

Restructuring

1,403

1,403

Total operating expenses

15,068

13,607

11,975

28,675

26,713

Loss from operations

(10,742)

(5,493)

(6,491)

(16,235)

(16,862)

Interest income and other, net

327

434

473

761

1,144

Loss before income taxes

(10,415)

(5,059)

(6,018)

(15,474)

(15,718)

Provision for income taxes

32

105

126

137

160

Net loss

(10,447)

(5,164)

(6,144)

(15,611)

(15,878)

Less: Net loss attributable to non-controlling
interests and redeemable non-controlling interests

298

98

107

396

445

Net loss attributable to Pixelworks Inc.

$             (10,149)

$               (5,066)

$               (6,037)

$             (15,215)

$             (15,433)

Net loss attributable to Pixelworks Inc. per share - basic and
diluted

$                 (0.17)

$                 (0.09)

$                 (0.11)

$                 (0.26)

$                 (0.28)

Weighted average shares outstanding - basic and diluted

58,151

57,472

55,917

57,812

55,666

——————






(1) Includes:






Restructuring

16

16

Stock-based compensation

10

18

22

28

46

(2) Includes stock-based compensation

316

330

527

646

1,018

(3) Includes stock-based compensation

599

727

710

1,326

1,361

 

PIXELWORKS, INC.
RECONCILIATION OF GAAP AND NON-GAAP  FINANCIAL  INFORMATION *
(In thousands, except per share data)
(Unaudited) 



 Three Months Ended

 Six Months Ended


June 30,

March 31, 

 June 30, 

 June 30,

 June 30,


2024

2024

2023

2024

2023

Reconciliation of GAAP and non-GAAP gross profit






GAAP gross profit

$                 4,326

$                 8,114

$                 5,484

$               12,440

$                 9,851

Restructuring

16

16

Stock-based compensation

10

18

22

28

46

Total reconciling items included in gross profit

26

18

22

44

46

Non-GAAP gross profit

$                 4,352

$                 8,132

$                 5,506

$               12,484

$                 9,897

Non-GAAP gross profit margin

51.0 %

50.7 %

40.5 %

50.8 %

42.0 %







 Reconciliation of GAAP and non-GAAP operating expenses






GAAP operating expenses

$               15,068

$               13,607

$               11,975

$               28,675

$               26,713

Reconciling item included in research and development:






Stock-based compensation

316

330

527

646

1,018

Reconciling items included in selling, general and administrative:






Stock-based compensation

599

727

710

1,326

1,361

Restructuring

1,403

1,403

Total reconciling items included in operating expenses

2,318

1,057

1,237

3,375

2,379

Non-GAAP operating expenses

$               12,750

$               12,550

$               10,738

$               25,300

$               24,334







 Reconciliation of GAAP and non-GAAP net loss
 attributable to
Pixelworks, Inc.






GAAP net loss attributable to Pixelworks Inc.

$             (10,149)

$               (5,066)

$               (6,037)

$             (15,215)

$             (15,433)

Reconciling items included in gross profit

26

18

22

44

46

Reconciling items included in operating expenses

2,318

1,057

1,237

3,375

2,379

Tax effect of non-GAAP adjustments

74

74

Non-GAAP net loss attributable to Pixelworks Inc.

$               (7,731)

$               (3,991)

$               (4,778)

$             (11,722)

$             (13,008)







Non-GAAP net loss attributable to Pixelworks Inc. per share -
basic and diluted

$                 (0.13)

$                 (0.07)

$                 (0.09)

$                 (0.20)

$                 (0.23)







Non-GAAP weighted average shares outstanding - basic and diluted

58,151

57,472

55,917

57,812

55,666







*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.

 

PIXELWORKS, INC.
RECONCILIATION OF GAAP AND NON-GAAP  EARNINGS PER SHARE *
(Figures may not sum due to rounding)
(Unaudited)




Three Months Ended


Six Months Ended



June 30,


March 31,


June 30,


June 30,


June 30,



2024


2024


2023


2024


2023




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           
attributable to Pixelworks, Inc.






















GAAP net loss attributable to Pixelworks Inc.



$     (0.17)


$     (0.17)


$     (0.09)


$     (0.09)


$     (0.11)


$     (0.11)


$     (0.26)


$     (0.26)


$     (0.28)


$     (0.28)

Reconciling items included in gross profit



0.00


0.00


0.00


0.00


0.00


0.00


0.00


0.00


0.00


0.00

Reconciling items included in operating expenses



0.04


0.04


0.02


0.02


0.02


0.02


0.06


0.06


0.04


0.04

Non-GAAP net loss attributable to Pixelworks Inc.



$     (0.13)


$     (0.13)


$     (0.07)


$     (0.07)


$     (0.09)


$     (0.09)


$     (0.20)


$     (0.20)


$     (0.23)


$     (0.23)























*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.

 

PIXELWORKS, INC.
RECONCILIATION OF GAAP AND NON-GAAP  GROSS PROFIT MARGIN *
(Figures may not sum due to rounding)
(Unaudited)




Three Months Ended


Six Months Ended



June 30,


March 31,


June 30,


June 30,


June 30,



2024


2024


2023


2024


2023

Reconciliation of GAAP and non-GAAP gross profit
margin











GAAP gross profit margin


50.7 %


50.5 %


40.3 %


50.6 %


41.8 %

Stock-based compensation


0.1 %


0.1 %


0.2 %


0.1 %


0.2 %

Restructuring


0.2 %


— %


— %


0.1 %


— %

Total reconciling items included in gross profit


0.3 %


0.1 %


0.2 %


0.2 %


0.2 %

Non-GAAP gross profit margin


51.0 %


50.7 %


40.5 %


50.8 %


42.0 %












*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.

 

PIXELWORKS, INC.
RECONCILIATION OF GAAP AND NON-GAAP  FINANCIAL  INFORMATION *
(In thousands)
(Unaudited)



 Three Months Ended

 Six Months Ended


June 30,

 March 31,

 June 30,

 June 30,

 June 30,


2024

2024

2023

2024

2023

Reconciliation of GAAP net loss attributable to Pixelworks Inc. and
adjusted EBITDA 






GAAP net loss attributable to Pixelworks Inc.

$          (10,149)

$            (5,066)

$            (6,037)

$          (15,215)

$          (15,433)

Restructuring

1,419

1,419

Stock-based compensation

925

1,075

1,259

2,000

2,425

Tax effect of non-GAAP adjustments

74

74

Non-GAAP net loss attributable to Pixelworks Inc.

$            (7,731)

$            (3,991)

$            (4,778)

$          (11,722)

$          (13,008)

EBITDA adjustments:






Depreciation and amortization

$              1,059

$              1,109

$              1,077

$              2,168

$              2,158

Non-GAAP interest income and other, net

(327)

(434)

(473)

(761)

(1,144)

Non-GAAP provision  (benefit)  for income taxes

(42)

105

126

63

160

Adjusted EBITDA

$            (7,041)

$            (3,211)

$            (4,048)

$          (10,252)

$          (11,834)







*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.

 

PIXELWORKS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited) 


 June 30,

2024 

December 31,
2023 

 ASSETS 



Current assets:



Cash and cash equivalents

$                   37,824

$                   47,544

Accounts receivable, net

4,910

10,075

Inventories

5,021

3,968

Prepaid expenses and other current assets

2,222

3,138

Total current assets

49,977

64,725

Property and equipment, net

7,051

5,997

Operating lease right of use assets

4,547

4,725

Other assets, net

1,652

2,115

Goodwill

18,407

18,407

Total assets

$                   81,634

$                   95,969

LIABILITIES, REDEEMABLE NON-CONTROLLING INTEREST AND SHAREHOLDERS' 
EQUITY 



Current liabilities:



Accounts payable

$                     2,500

$                     2,416

Accrued liabilities and current portion of long-term liabilities

9,148

9,692

Current portion of income taxes payable

220

189

Total current liabilities

11,868

12,297

Long-term liabilities, net of current portion

673

1,373

Deposit liability

14,098

13,781

Operating lease liabilities, net of current portion

2,463

2,567

Income taxes payable, net of current portion

1,006

939

Total liabilities

30,108

30,957

Redeemable non-controlling interest

27,517

28,214

Total Pixelworks, Inc. shareholders' equity

486

12,541

Non-controlling interest

23,523

24,257

Total shareholders' equity

24,009

36,798

Total liabilities, redeemable non-controlling interest and shareholders' equity        

$                   81,634

$                   95,969

 

(PRNewsfoto/Pixelworks, Inc.)

 

 

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