Pixelworks Reports Record Revenue and Earnings in Third Quarter
Net Income Triples over Second Quarter
TUALATIN, Ore., Oct 17, 2000 (BUSINESS WIRE) -- Pixelworks, Inc. (Nasdaq: PXLW chart, msgs)
Selected Quarter Highlights
-- Record revenue of $15.3 million increases 256 percent
year-over-year, 26 percent sequentially
-- $1.8 million net income triples from second quarter 2000
-- Gross profit margin improves for third consecutive quarter to
41.5 percent, up from 33.6 percent in the third quarter 1999
and 38.9 percent in second quarter 2000
Pixelworks, Inc. (Nasdaq: PXLW chart, msgs) a leading designer and developer of system-on-a-chip semiconductors and software that enable the visual display of broadband content, today announced record financial results for the third quarter ended September 30, 2000.
Revenue for the quarter totaled $15.3 million, a 256 percent increase over revenue of $4.3 million in the third quarter of 1999 and a 26 percent increase over revenue of $12.1 million in the second quarter of 2000.
Net income for the third quarter was $1.8 million, or $0.05 per diluted share, based on 39.4 million weighted-average diluted shares outstanding. This compared to a net loss of $2.3 million or $0.35 per diluted share based on 6.6 million weighted-average diluted shares outstanding for the comparable prior year period, and net income of $0.6 million or $0.02 per diluted share based on 35.8 million weighted-average diluted shares outstanding in the second quarter of 2000.
Net income for the third quarter, excluding non-cash charges related to amortization of deferred stock compensation expense, was $2.4 million, or $0.06 per diluted share. This compared to a net loss of $1.0 million, or $0.15 per diluted share for the comparable prior year period, excluding non-cash charges for amortization of deferred stock compensation and accretion of preferred stock redemption preference. Excluding non-cash charges for amortization of deferred stock compensation expense, third quarter net income and earnings per share doubled over second quarter net income of $1.2 million, or $0.03 per diluted share.
"This was a terrific quarter by any measure, with better than anticipated revenue and earnings growth, improved gross margins, and positive cash flow," said Allen Alley, president, CEO, and chairman of Pixelworks.
"Demand for our products has been exceptionally strong. We're particularly pleased with the 39 percent sequential growth in shipments to flat panel monitor manufacturers," added Alley.
"Looking forward, we believe we are very well-positioned for the future with added fab capacity coming on line, a recently announced strengthening of our strategic partnership with Analog Devices, and products in development that will further strengthen our competitive position and enable us to enter new markets," Alley concluded.
Business Outlook
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 Oct. 1, 2000.
-- The company expects fourth quarter 2000 revenue will be higher
than previously estimated, but will be supply-constrained to
11 to 13 percent above third quarter 2000 revenue of $15.3
million. Although demand for the company's products is
anticipated to be sufficient to meet or exceed this projected
level of revenue growth, supply of product from the company's
primary foundry is expected to constrain fourth quarter
revenue growth to these rates. Revenue in 2001 is expected to
grow approximately 70 to 75 percent over 2000, but is highly
dependent on a number of factors. These factors include timely
new product introductions, the company's ability to secure
additional design wins with customers, actual growth rates in
the company's primary flat panel monitor, multimedia
projector, and advanced television markets consistent with
current projected growth rates and increased supply of
products from the company's third party foundries.
-- Gross profit margins in the third quarter of 2000 were 41.5
percent, approximately two percentage points higher than
expected due to a greater than forecasted proportion of higher
margin products shipping and fixed expenses being spread over
higher revenue. The company expects gross profit margin in the
fourth quarter of 2000 to increase to approximately 42 percent
based on current projections for product mix. Gross profit
margin in 2001 is anticipated to increase gradually throughout
the year and to reach approximately 45 percent by the fourth
quarter of 2001. The increase in gross profit margin is
dependent on timely introductions of new products with higher
individual gross profit margins, a continuing shift in product
mix toward products that are currently shipping with higher
than average gross profit margins, and no significant increase
in the cost of manufacturing products.
-- The company expects operating expenses in the fourth quarter
of 2000, excluding non-cash charges related to the
amortization of deferred stock compensation expense, to
increase 13 to 15 percent over third quarter operating
expenses, excluding non-cash charges related to the
amortization of deferred stock compensation expense, of $5.6
million. The anticipated increase in operating expenses is
expected to result primarily from planned hiring and increases
in non-recurring engineering expenses. Operating expenses in
2001, excluding non-cash charges related to the amortization
of deferred stock compensation expense, are expected to be 50
to 55 percent higher than 2000 operating expenses, excluding
one-time charges for patent settlement expenses and non-cash
charges related to the amortization of deferred stock
compensation expense, of approximately $20.0 million. The
anticipated increase in 2001 operating expenses is based on
current hiring plans, product development schedules, and the
anticipated revenue levels referred to above.
-- The company expects non-cash charges related to the
amortization of deferred stock compensation expense, to remain
unchanged at $0.6 million in the fourth quarter of 2000. In
2001, the company expects non-cash charges related to the
amortization of deferred stock compensation expense to be
approximately $1.3 million.
-- The company expects interest income of approximately $1.5
million in the fourth quarter of 2000, which is dependent in
part on cash balances and interest rates, and assuming no
unanticipated items. Interest income in 2001 is expected to be
approximately $6.0 million, which is dependent on no material
changes in current cash balances or interest rates. While the
company does not currently have any agreements that would
materially reduce current cash balances, the company may enter
into agreements in the future without notice that would
consume large amounts of cash and materially reduce the amount
of interest income earned in the future.
-- The company does not expect a tax provision will be necessary
in the fourth quarter of 2000 due to net operating loss
carry-forwards that are projected to be sufficient to offset
income through 2000. Based on projected earnings through 2001,
the company estimates a tax provision of 26 to 28 percent will
be necessary, which is up from 22 to 23 percent previously
estimated due to an increase in projected earnings. The
company expects to begin recording a tax provision of 26 to 28
percent in the first quarter of 2001, and assuming no change
in earnings estimates or projected tax adjustments, continue
at that rate through the remaining three quarters of the year.
About Pixelworks, Inc.
Pixelworks, headquartered in Tualatin, Oregon, designs, develops and markets system-on-a-chip semiconductors and software that enable the visual display of broadband content through a wide variety of electronic devices. 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. 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 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.
Get conference call information at the Pixelworks Investor Relations Web site: www.pixelworks.com
PIXELWORKS, INC.
CONDENSED STATEMENT OF OPERATIONS
(In Thousands, Except Per Share Data)
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
----------- ----------- ----------- -----------
Revenue $ 15,285 $ 4,289 $ 34,472 $ 6,755
Cost of revenue 8,941 2,850 20,847 4,332
----------- ----------- ----------- -----------
Gross profit 6,344 1,439 13,625 2,423
Operating expenses:
Research and
development 3,112 1,342 7,146 3,217
Selling, general and
administrative 2,497 1,270 6,402 2,789
Patent settlement
expense - - 4,078 -
Amortization of
deferred stock
compensation 600 140 1,627 173
----------- ----------- ----------- -----------
Total operating
expenses 6,209 2,752 19,253 6,179
----------- ----------- ----------- -----------
Income (loss) from
operations 135 (1,313) (5,628) (3,756)
----------- ----------- ----------- -----------
Interest income 1,677 195 2,898 336
Interest expense - (38) (38) (69)
Other income (34) - (24) -
----------- ----------- ----------- -----------
Interest and other
income, net 1,643 157 2,836 267
----------- ----------- ----------- -----------
Income (loss) before
income taxes 1,778 (1,156) (2,792) (3,489)
----------- ----------- ----------- -----------
Income tax provision - - - 3
----------- ----------- ----------- -----------
Net income (loss) 1,778 (1,156) (2,792) (3,492)
Preferred stock
beneficial conversion
feature - - 9,995 -
Accretion of preferred
stock redemption
preference - 1,163 2,100 2,885
----------- ----------- ----------- -----------
Net income (loss)
attributable to
common shareholders $ 1,778 $ (2,319) $ (14,887) $ (6,377)
=========== =========== =========== ===========
Basic net income
(loss) per share $ 0.05 $ (0.35) $ (0.68) $ (1.15)
=========== =========== =========== ===========
Diluted net income
(loss) per share $ 0.05 $ (0.35) $ (0.68) $ (1.15)
=========== =========== =========== ===========
Weighted average
shares-basic 36,309,018 6,580,503 21,879,089 5,553,991
=========== =========== =========== ===========
Weighted average
shares-diluted 39,386,761 6,580,503 21,879,089 5,553,991
=========== =========== =========== ===========
Net income (loss)
excluding amortization
of deferred stock
compensation, patent
settlement expense,
accretion of preferred
stock redemption
preference and
preferred stock
beneficial conversion
feature $ 2,378 $ (1,016) $ 2,913 $ (3,319)
=========== =========== =========== ===========
Basic net income
(loss) per share $ 0.07 $ (0.15) $ 0.13 $ (0.60)
=========== =========== =========== ===========
Diluted net income
(loss) per share $ 0.06 $ (0.15) $ 0.09 $ (0.60)
=========== =========== =========== ===========
Weighted average
shares-basic 36,309,018 6,580,503 21,879,089 5,553,991
=========== =========== =========== ===========
Weighted average
shares-diluted 39,386,761 6,580,503 33,082,995 5,553,991
=========== =========== =========== ===========
PIXELWORKS, INC.
CONDENSED BALANCE SHEET
(In Thousands, except share data)
September 30, December 31,
ASSETS 2000 1999
---------- ------------
CURRENT ASSETS
Cash and cash equivalents $ 79,025 $ 12,199
Short-term investments 20,469 -
Accounts receivable, net 5,966 2,537
Inventories 1,358 1,404
Prepaid expenses and other
current assets 897 21
---------- ------------
Total current assets 107,715 16,161
Property and equipment, net 2,760 1,730
Other assets, net 2,061 503
---------- ------------
Total Assets $ 112,536 $ 18,394
========== ============
LIABILITIES, PREFERRED STOCK AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable $ 4,899 $ 712
Accrued liabilities 4,201 1,518
Line of credit - 669
Current portion of long-term
obligations - 492
---------- ------------
Total current liabilities 9,100 3,391
Long-term obligations - 591
Other liabilities - 6
---------- ------------
Total liabilities 9,100 3,988
Redeemable convertible preferred stock - 23,701
Shareholders' equity (deficit) 103,436 (9,295)
---------- ------------
Total liabilities, preferred stock and
shareholders' equity (deficit) $ 112,536 $ 18,394
========== ============ |
