OREGON | 000-30269 | 91-1761992 | ||
(State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) |
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
(d) | Exhibits. |
PIXELWORKS, INC. | ||
(Registrant) | ||
Dated: | January 31, 2012 | /s/ Steven L. Moore |
Steven L. Moore Vice President, Chief Financial Officer, Secretary and Treasurer |
• | Revenue increased 19% to $16.8 million over the prior year period |
• | Revenue from products for advanced TV grew 43% sequentially |
• | Recorded volume shipments of the PA136 MotionEngine® Video Processor to tier-one TV OEMs |
• | Began volume production for the Topaz family of projector products |
PIXELWORKS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) (Unaudited) | ||||||||||||||||||||
Three months ended | Twelve months ended | |||||||||||||||||||
December 31, | September 30, | December 31, | December 31, | December 31, | ||||||||||||||||
2011 | 2011 | 2010 | 2011 | 2010 | ||||||||||||||||
Revenue, net | $ | 16,828 | $ | 17,391 | $ | 14,145 | $ | 64,609 | $ | 69,529 | ||||||||||
Cost of revenue (1) | 8,908 | 8,935 | 7,579 | 34,242 | 37,366 | |||||||||||||||
Gross profit | 7,920 | 8,456 | 6,566 | 30,367 | 32,163 | |||||||||||||||
Operating expenses: | ||||||||||||||||||||
Research and development (2) | 5,375 | 5,982 | 6,305 | 22,906 | 22,810 | |||||||||||||||
Selling, general and administrative (3) | 4,134 | 3,641 | 3,732 | 15,266 | 15,167 | |||||||||||||||
Restructuring | — | — | — | — | 94 | |||||||||||||||
Total operating expenses | 9,509 | 9,623 | 10,037 | 38,172 | 38,071 | |||||||||||||||
Loss from operations | (1,589 | ) | (1,167 | ) | (3,471 | ) | (7,805 | ) | (5,908 | ) | ||||||||||
Interest expense and other, net | (89 | ) | (89 | ) | (133 | ) | (484 | ) | (511 | ) | ||||||||||
Gain on sale of marketable securities | — | — | 737 | 264 | 1,397 | |||||||||||||||
Gain on sale of patents | — | — | — | 1,600 | — | |||||||||||||||
Total other income (expense), net | (89 | ) | (89 | ) | 604 | 1,380 | 886 | |||||||||||||
Loss before income taxes | (1,678 | ) | (1,256 | ) | (2,867 | ) | (6,425 | ) | (5,022 | ) | ||||||||||
Provision (benefit) for income taxes | 279 | (173 | ) | 354 | 141 | (5,395 | ) | |||||||||||||
Net income (loss) | $ | (1,957 | ) | $ | (1,083 | ) | $ | (3,221 | ) | $ | (6,566 | ) | $ | 373 | ||||||
Net income (loss) per share - basic and diluted: | $ | (0.11 | ) | $ | (0.06 | ) | $ | (0.24 | ) | $ | (0.40 | ) | $ | 0.03 | ||||||
Weighted average shares outstanding: | ||||||||||||||||||||
Basic | 17,944 | 17,905 | 13,517 | 16,330 | 13,442 | |||||||||||||||
Diluted | 17,944 | 17,905 | 13,517 | 16,330 | 14,384 | |||||||||||||||
—————— | ||||||||||||||||||||
(1) Includes: | ||||||||||||||||||||
Additional amortization of non-cancelable prepaid royalty | $ | 120 | $ | 103 | $ | 79 | $ | 441 | $ | 84 | ||||||||||
Stock-based compensation | 36 | 34 | 19 | 129 | 60 | |||||||||||||||
Amortization of acquired developed technology | — | — | — | — | 1,050 | |||||||||||||||
(2) Includes stock-based compensation | 221 | 214 | 128 | 845 | 437 | |||||||||||||||
(3) Includes stock-based compensation | 266 | 260 | 207 | 1,037 | 707 |
PIXELWORKS, INC. RECONCILIATION OF GAAP AND NON-GAAP FINANCIAL INFORMATION * (In thousands, except per share data) (Unaudited) | ||||||||||||||||||||
Three months ended | Twelve months ended | |||||||||||||||||||
December 31, | September 30, | December 31, | December 31, | December 31, | ||||||||||||||||
2011 | 2011 | 2010 | 2011 | 2010 | ||||||||||||||||
Reconciliation of GAAP and non-GAAP gross profit | ||||||||||||||||||||
GAAP gross profit | $ | 7,920 | $ | 8,456 | $ | 6,566 | $ | 30,367 | $ | 32,163 | ||||||||||
Additional amortization of non-cancelable prepaid royalty | 120 | 103 | 79 | 441 | 84 | |||||||||||||||
Stock-based compensation | 36 | 34 | 19 | 129 | 60 | |||||||||||||||
Amortization of acquired developed technology | — | — | — | — | 1,050 | |||||||||||||||
Total reconciling items included in cost of revenue | 156 | 137 | 98 | 570 | 1,194 | |||||||||||||||
Non-GAAP gross profit | $ | 8,076 | $ | 8,593 | $ | 6,664 | $ | 30,937 | $ | 33,357 | ||||||||||
Non-GAAP gross profit margin | 48.0 | % | 49.4 | % | 47.1 | % | 47.9 | % | 48.0 | % | ||||||||||
Reconciliation of GAAP and non-GAAP operating expenses | ||||||||||||||||||||
GAAP operating expenses | $ | 9,509 | $ | 9,623 | $ | 10,037 | $ | 38,172 | $ | 38,071 | ||||||||||
Reconciling item included in research and development: | ||||||||||||||||||||
Stock-based compensation | 221 | 214 | 128 | 845 | 437 | |||||||||||||||
Reconciling item included in selling, general and administrative: | ||||||||||||||||||||
Stock-based compensation | 266 | 260 | 207 | 1,037 | 707 | |||||||||||||||
Restructuring | — | — | — | — | 94 | |||||||||||||||
Total reconciling items included in operating expenses | 487 | 474 | 335 | 1,882 | 1,238 | |||||||||||||||
Non-GAAP operating expenses | $ | 9,022 | $ | 9,149 | $ | 9,702 | $ | 36,290 | $ | 36,833 | ||||||||||
Reconciliation of GAAP and non-GAAP net income (loss) | ||||||||||||||||||||
GAAP net income (loss) | $ | (1,957 | ) | $ | (1,083 | ) | $ | (3,221 | ) | $ | (6,566 | ) | $ | 373 | ||||||
Reconciling items included in cost of revenue | 156 | 137 | 98 | 570 | 1,194 | |||||||||||||||
Reconciling items included in operating expenses | 487 | 474 | 335 | 1,882 | 1,238 | |||||||||||||||
Gain on sale of marketable securities | — | — | (737 | ) | (264 | ) | (1,397 | ) | ||||||||||||
Gain on sale of patents | — | — | — | (1,600 | ) | — | ||||||||||||||
Tax effect of non-GAAP adjustments | 7 | 2 | (63 | ) | — | (26 | ) | |||||||||||||
Non-GAAP net income (loss) | $ | (1,307 | ) | $ | (470 | ) | $ | (3,588 | ) | $ | (5,978 | ) | $ | 1,382 | ||||||
Non-GAAP net income (loss) per share - basic and diluted: | $ | (0.07 | ) | $ | (0.03 | ) | $ | (0.27 | ) | $ | (0.37 | ) | $ | 0.10 | ||||||
Non-GAAP weighted average shares outstanding: | ||||||||||||||||||||
Basic | 17,944 | 17,905 | 13,517 | 16,330 | 13,442 | |||||||||||||||
Diluted | 17,944 | 17,905 | 13,517 | 16,330 | 14,384 | |||||||||||||||
* Our non-GAAP gross profit, non-GAAP operating expenses, non-GAAP net income (loss) and non-GAAP net income (loss) per share differs from GAAP gross profit, GAAP operating expenses, GAAP net income (loss) and GAAP net income (loss) per share due to the exclusion of gain on the sale of patents, gain on the sale of marketable securities, restructuring charges, amortization of acquired developed technology, stock-based compensation expense and additional amortization of a non-cancelable prepaid royalty. Pixelworks' management believes the presentation of non-GAAP gross profit, non-GAAP operating expenses, non-GAAP net income (loss) and non-GAAP net income (loss) per share provides useful information to investors regarding Pixelworks' results of operations by allowing investors to better evaluate underlying cash flow dynamics. Pixelworks' management also uses each of these non-GAAP measures internally to better evaluate underlying cash flow dynamics. Pixelworks, however, cautions investors to consider these non-GAAP financial measures in addition to, and not as a substitute for, our GAAP financial measures. |
PIXELWORKS, INC. RECONCILIATION OF GAAP AND NON-GAAP FINANCIAL INFORMATION * (In thousands, except per share data) (Unaudited) | ||||||||||||||||||||
Three months ended | Twelve months ended | |||||||||||||||||||
December 31, | September 30, | December 31, | December 31, | December 31, | ||||||||||||||||
2011 | 2011 | 2010 | 2011 | 2010 | ||||||||||||||||
Reconciliation of GAAP net income (loss) and adjusted EBITDA | ||||||||||||||||||||
GAAP net income (loss) | $ | (1,957 | ) | $ | (1,083 | ) | $ | (3,221 | ) | $ | (6,566 | ) | $ | 373 | ||||||
Stock-based compensation | 523 | 508 | 354 | 2,011 | 1,204 | |||||||||||||||
Additional amortization of non-cancelable prepaid royalty | 120 | 103 | 79 | 441 | 84 | |||||||||||||||
Gain on sale of patents | — | — | — | (1,600 | ) | — | ||||||||||||||
Gain on sale of marketable securities | — | — | (737 | ) | (264 | ) | (1,397 | ) | ||||||||||||
Amortization of acquired developed technology | — | — | — | — | 1,050 | |||||||||||||||
Restructuring | — | — | — | — | 94 | |||||||||||||||
Tax effect of non-GAAP adjustments | 7 | 2 | (63 | ) | — | (26 | ) | |||||||||||||
Non-GAAP net income (loss) | $ | (1,307 | ) | $ | (470 | ) | $ | (3,588 | ) | $ | (5,978 | ) | $ | 1,382 | ||||||
EBITDA adjustments: | ||||||||||||||||||||
Depreciation and amortization | $ | 1,314 | $ | 1,290 | $ | 1,209 | $ | 5,114 | $ | 4,537 | ||||||||||
Interest expense and other, net | 89 | 89 | 133 | 484 | 511 | |||||||||||||||
Non-GAAP Provision (benefit) for income taxes | 272 | (175 | ) | 417 | 141 | (5,369 | ) | |||||||||||||
Adjusted EBITDA | $ | 368 | $ | 734 | $ | (1,829 | ) | $ | (239 | ) | $ | 1,061 | ||||||||
* Adjusted EBITDA differs from GAAP net income (loss) per share due to the exclusion of gain on the sale of patents, gain on the sale of marketable securities, restructuring charges, amortization of acquired developed technology, stock-based compensation expense, additional amortization of a non-cancelable prepaid royalty, interest expense and other, net, income tax provision (benefit), depreciation and amortization. Pixelworks' management believes the presentation of adjusted EBITDA provides useful information to investors regarding Pixelworks' results of operations by allowing investors to better evaluate underlying cash flow dynamics and core operating results and are used by Pixelworks' management for these purposes. Pixelworks, however, cautions investors to consider these non-GAAP financial measures in addition to, and not as a substitute for, our GAAP financial measures. |
PIXELWORKS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited) | |||||||
December 31, 2011 | December 31, 2010 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 15,092 | $ | 16,872 | |||
Short-term marketable securities | — | 12,366 | |||||
Accounts receivable, net | 4,557 | 4,487 | |||||
Inventories, net | 4,107 | 4,858 | |||||
Prepaid expenses and other current assets | 2,341 | 2,337 | |||||
Total current assets | 26,097 | 40,920 | |||||
Long-term marketable securities | — | 603 | |||||
Property and equipment, net | 7,366 | 5,830 | |||||
Other assets, net | 2,914 | 5,061 | |||||
Total assets | $ | 36,377 | $ | 52,414 | |||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 4,428 | $ | 4,804 | |||
Accrued liabilities and current portion of long-term liabilities | 8,247 | 8,983 | |||||
Current portion of income taxes payable | 212 | 282 | |||||
Short-term line of credit | — | 3,000 | |||||
Debentures currently payable | — | 15,779 | |||||
Total current liabilities | 12,887 | 32,848 | |||||
Long-term liabilities, net of current portion | 2,467 | 2,061 | |||||
Income taxes payable, net of current portion | 3,223 | 3,574 | |||||
Total liabilities | 18,577 | 38,483 | |||||
Shareholders’ equity | 17,800 | 13,931 | |||||
Total liabilities and shareholders’ equity | $ | 36,377 | $ | 52,414 |
• | 2011 was a year of solid progress for Pixelworks, as we expanded our product lines for the digital projection and advanced TV markets. |
• | Building on our new product momentum in 2010, we delivered a series of new products, that extended our product lines and experienced strong customer traction. |
• | While overall revenues for 2011 were down 7%, as the year began on a difficult note characterized by an inventory correction and major EQ in Japan, our new products gained significant traction and are now driving growth. |
• | On a year over year basis new products were up 66% over 2010 and represented 56% of total sales, compared with 31% in the prior year |
• | While Projector products were down for the year, that was largely offset by Advanced TV products which grew 97% year on year driven by our new product momentum and Tier 1 customer penetration. |
• | And lastly embedded video products were down 32% year over year reflecting the winding down and discontinuation of legacy products in 2011 versus 2010. |
• | Our products enable advanced applications in the Business and Consumer segments as well as the Education Market which now accounts for “over 50%” of the global projector market and is driving growth. Applications such as interactivity, 3D Video, and network as well as mobile connectivity are increasingly being demanded as the global education market shifts to the digital classroom. |
• | In 2011 we introduced our next generation PJ platform code named TOPAZ that offer unparalleled integration, video performance and connectivity as well as support for advanced keystone correction and 3D video. |
• | The Topaz family of products covers multiple segments of the projector market, from entry level 2D education and business projectors, to high end 3D home theatre systems. |
• | Topaz is a significant operational milestone for the company, since it is the first comprehensive upgrade to our product line since 2005, and is based on a next generation video processing architecture designed from the ground up. |
• | We believe the TOPAZ family of products will serve the market well for the foreseeable future, as projector platforms tend to last 3-5 years or more. |
• | PXLW projector solutions provide a full suite of software and the Topaz family products are compatible with our Ruby series allowing customers to maintain their investment in software, while migrating to a next generation, highly integrated solution. |
• | During the year we introduced the PW878, which is the Industry's first cost-effective 3D display processor with advanced geometry correction capabilities, that is designed for the business, education and mainstream home theatre projector markets. |
• | We also sampled our second device in the Topaz family, the PWC868 which is the non 3D/networked version of the Topaz family, and offers the latest video processing technology, combined with extensive connectivity capabilities. |
• | Design win momentum is very strong for these products and we received key design commitments from Tier 1 customers and are now ramping Topaz products into production and we will be rolling out additional family members during 2012. |
• | In 2011, we introduced and ramped into high-volume production the PA136 family, which is our 5th generation Advanced Video Processor. |
• | The PA136 family provides industry leading video quality, and incorporates a number of advanced features, such as real-time static and motion based 2D-to-3D conversion, and Pixelworks' innovative n2m technology which improves low frame-rate internet video. |
• | The PA136 family offers significant improvements over previous generations by simplifying design and significantly reducing overall system cost, all at a compelling price/performance point and with PXLW “industry leading” Video Quality. |
• | We followed up the 136 with the PA138, which includes all the improvements and features of the 136, but targeted for advanced high end systems and supports the latest generation high performance panel interface technology. |
• | These devices are in high volume production and we enter 2012 with significant momentum for these products. |
• | During 2011 we penetrated several additional Top 5/Tier 1 TV OEMs for our PA series products. |
• | Continuing to penetrating the Top Tier customer base, validates Pixelworks' leading innovative solutions in video processing. |
• | These customers are selecting Pixelworks because, as the focused supplier in this market we provide: |
◦ | A combination of superior video quality, innovative value added features, and highly efficient system implementation cost. |
◦ | This combined with the ability to deliver top quality, high volume production, with world Class customer support is why Pixelworks is winning. |
◦ | At CES this year advanced large screen TVs from Tier 1 customers incorporating PXLW technology were prominently displayed on the floor. |
• | In our Projector Product Line we demonstrated: |
◦ | Our 3D Home Cinema Reference Design for DLP platforms and our Topaz 3D and connected display products |
◦ | We also showed our Network Display technology demonstrating smooth playback of low frame rate wireless video streaming from a mobile device |
• | In our Advanced TV product area we demoed: |
◦ | Our 2D/3D conversion technology on a PR panel which allows the use of low cost passive glasses |
◦ | And we showed our 4Kx2K platform based on our PA138 as well as a demonstration of our PA168 Halo free MEMC technology |
• | In 1H 2012 we will introduce the PA168 which is the next generation of video processing performance with advanced 4Kx2K support. |
• | This product puts Pixelworks in a leadership position at the high end of the market and sets the stage for further Tier 1 customer penetration in 2012. |
• | At CES this year TVs demonstrating the coming transition to 4Kx2K resolution were prominent at the show. |
• | Brands such as LG Electronics and Sharp unveiled Ultra Definition TVs with four times more pixels compared to Full HD TV. |
• | These systems deliver hyperrealism thanks to large screens and a real full HD 3D picture with no cross talk and require an order of magnitude increase in video processing performance. |
• | Other technologies such Internet Connectivity enabling Smart TVs as well as voice recognition and gesture control, are all adding complexity to the TV platform, creating opportunity for separate advanced video processors. |
• | All of these trends imply increasing complexity and requirements on the TV platform for functionality and video processing. |