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. |
Exhibit No. | Description | |
99.1 | Press Release issued by Pixelworks, Inc. dated February 5, 2015. | |
99.2 | Pixelworks, Inc. Fourth Quarter Results Conference Call Script dated February 5, 2015. |
PIXELWORKS, INC. | ||
(Registrant) | ||
Dated: | February 5, 2015 | /s/ Steven L. Moore |
Steven L. Moore Vice President, Chief Financial Officer, Secretary and Treasurer |
Exhibit No. | Description | |
99.1 | Press Release issued by Pixelworks, Inc. dated February 5, 2015. | |
99.2 | Pixelworks, Inc. Fourth Quarter Results Conference Call Script dated February 5, 2015. |
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, | ||||||||||||||||
2014 | 2014 | 2013 | 2014 | 2013 | ||||||||||||||||
Revenue, net | $ | 15,105 | $ | 17,111 | $ | 14,984 | $ | 60,923 | $ | 48,118 | ||||||||||
Cost of revenue (1) | 7,546 | 8,545 | 6,495 | 29,142 | 21,708 | |||||||||||||||
Gross profit | 7,559 | 8,566 | 8,489 | 31,781 | 26,410 | |||||||||||||||
Operating expenses: | ||||||||||||||||||||
Research and development (2) | 6,390 | 6,634 | 4,536 | 25,296 | 20,664 | |||||||||||||||
Selling, general and administrative (3) | 3,776 | 3,900 | 3,715 | 15,434 | 13,883 | |||||||||||||||
Total operating expenses | 10,166 | 10,534 | 8,251 | 40,730 | 34,547 | |||||||||||||||
Income (loss) from operations | (2,607 | ) | (1,968 | ) | 238 | (8,949 | ) | (8,137 | ) | |||||||||||
Interest expense and other, net | (118 | ) | (123 | ) | (109 | ) | (493 | ) | (405 | ) | ||||||||||
Income (loss) before income taxes | (2,725 | ) | (2,091 | ) | 129 | (9,442 | ) | (8,542 | ) | |||||||||||
Provision for income taxes | 46 | 209 | 179 | 518 | 328 | |||||||||||||||
Net loss | $ | (2,771 | ) | $ | (2,300 | ) | $ | (50 | ) | $ | (9,960 | ) | $ | (8,870 | ) | |||||
Net loss per share - basic and diluted | $ | (0.12 | ) | $ | (0.10 | ) | $ | (0.00 | ) | $ | (0.44 | ) | $ | (0.45 | ) | |||||
Weighted average shares outstanding - basic and diluted | 23,175 | 23,007 | 21,985 | 22,766 | 19,816 | |||||||||||||||
—————— | ||||||||||||||||||||
(1) Includes: | ||||||||||||||||||||
Stock-based compensation | $ | 71 | $ | 61 | $ | 64 | $ | 262 | $ | 164 | ||||||||||
Additional amortization of non-cancelable prepaid royalty | (30 | ) | 4 | 103 | 65 | 369 | ||||||||||||||
(2) Includes stock-based compensation | 640 | 562 | 522 | 2,441 | 1,204 | |||||||||||||||
(3) Includes stock-based compensation | 690 | 634 | 599 | 2,599 | 1,640 |
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, | ||||||||||||||||
2014 | 2014 | 2013 | 2014 | 2013 | ||||||||||||||||
Reconciliation of GAAP and non-GAAP gross profit | ||||||||||||||||||||
GAAP gross profit | $ | 7,559 | $ | 8,566 | $ | 8,489 | $ | 31,781 | $ | 26,410 | ||||||||||
Stock-based compensation | 71 | 61 | 64 | 262 | 164 | |||||||||||||||
Additional amortization of non-cancelable prepaid royalty | (30 | ) | 4 | 103 | 65 | 369 | ||||||||||||||
Total reconciling items included in cost of revenue | 41 | 65 | 167 | 327 | 533 | |||||||||||||||
Non-GAAP gross profit | $ | 7,600 | $ | 8,631 | $ | 8,656 | $ | 32,108 | $ | 26,943 | ||||||||||
Non-GAAP gross profit margin | 50.3 | % | 50.4 | % | 57.8 | % | 52.7 | % | 56.0 | % | ||||||||||
Reconciliation of GAAP and non-GAAP operating expenses | ||||||||||||||||||||
GAAP operating expenses | $ | 10,166 | $ | 10,534 | $ | 8,251 | $ | 40,730 | $ | 34,547 | ||||||||||
Reconciling item included in research and development: | ||||||||||||||||||||
Stock-based compensation | 640 | 562 | 522 | 2,441 | 1,204 | |||||||||||||||
Reconciling item included in selling, general and administrative: | ||||||||||||||||||||
Stock-based compensation | 690 | 634 | 599 | 2,599 | 1,640 | |||||||||||||||
Total reconciling items included in operating expenses | 1,330 | 1,196 | 1,121 | 5,040 | 2,844 | |||||||||||||||
Non-GAAP operating expenses | $ | 8,836 | $ | 9,338 | $ | 7,130 | $ | 35,690 | $ | 31,703 | ||||||||||
Reconciliation of GAAP and non-GAAP net income (loss) | ||||||||||||||||||||
GAAP net loss | $ | (2,771 | ) | $ | (2,300 | ) | $ | (50 | ) | $ | (9,960 | ) | $ | (8,870 | ) | |||||
Reconciling items included in cost of revenue | 41 | 65 | 167 | 327 | 533 | |||||||||||||||
Reconciling items included in operating expenses | 1,330 | 1,196 | 1,121 | 5,040 | 2,844 | |||||||||||||||
Tax effect of non-GAAP adjustments | (6 | ) | 91 | 17 | — | — | ||||||||||||||
Non-GAAP net income (loss) | $ | (1,406 | ) | $ | (948 | ) | $ | 1,255 | $ | (4,593 | ) | $ | (5,493 | ) | ||||||
Non-GAAP net income (loss) per share: | ||||||||||||||||||||
Basic | $ | (0.06 | ) | $ | (0.04 | ) | $ | 0.06 | $ | (0.20 | ) | $ | (0.28 | ) | ||||||
Diluted | $ | (0.06 | ) | $ | (0.04 | ) | $ | 0.05 | $ | (0.20 | ) | $ | (0.28 | ) | ||||||
Non-GAAP weighted average shares outstanding: | ||||||||||||||||||||
Basic | 23,175 | 23,007 | 21,985 | 22,766 | 19,816 | |||||||||||||||
Diluted | 23,175 | 23,007 | 23,468 | 22,766 | 19,816 | |||||||||||||||
* Our non-GAAP gross profit, non-GAAP gross profit margin, 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 loss and GAAP net loss per share due to the exclusion of 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) (Unaudited) | ||||||||||||||||||||
Three Months Ended | Twelve Months Ended | |||||||||||||||||||
December 31, | September 30, | December 31, | December 31, | December 31, | ||||||||||||||||
2014 | 2014 | 2013 | 2014 | 2013 | ||||||||||||||||
Reconciliation of GAAP net loss and adjusted EBITDA | ||||||||||||||||||||
GAAP net loss | $ | (2,771 | ) | $ | (2,300 | ) | $ | (50 | ) | $ | (9,960 | ) | $ | (8,870 | ) | |||||
Stock-based compensation | 1,401 | 1,257 | 1,185 | 5,302 | 3,008 | |||||||||||||||
Additional amortization of non-cancelable prepaid royalty | (30 | ) | 4 | 103 | 65 | 369 | ||||||||||||||
Tax effect of non-GAAP adjustments | (6 | ) | 91 | 17 | — | — | ||||||||||||||
Non-GAAP net income (loss) | $ | (1,406 | ) | $ | (948 | ) | $ | 1,255 | $ | (4,593 | ) | $ | (5,493 | ) | ||||||
EBITDA adjustments: | ||||||||||||||||||||
Depreciation and amortization | $ | 1,099 | $ | 1,130 | $ | 1,167 | $ | 4,514 | $ | 4,409 | ||||||||||
Interest expense and other, net | 118 | 123 | 109 | 493 | 405 | |||||||||||||||
Non-GAAP provision for income taxes | 52 | 118 | 162 | 518 | 328 | |||||||||||||||
Adjusted EBITDA | $ | (137 | ) | $ | 423 | $ | 2,693 | $ | 932 | $ | (351 | ) | ||||||||
* Adjusted EBITDA differs from GAAP net loss due to the exclusion of stock-based compensation expense, additional amortization of a non-cancelable prepaid royalty, interest expense and other, net, income tax provision and 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, 2014 | December 31, 2013 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 17,926 | $ | 20,805 | |||
Accounts receivable, net | 4,648 | 4,761 | |||||
Inventories | 2,898 | 1,663 | |||||
Prepaid expenses and other current assets | 888 | 2,858 | |||||
Total current assets | 26,360 | 30,087 | |||||
Property and equipment, net | 6,402 | 4,084 | |||||
Other assets, net | 1,382 | 2,573 | |||||
Total assets | $ | 34,144 | $ | 36,744 | |||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 3,154 | $ | 1,327 | |||
Accrued liabilities and current portion of long-term liabilities | 8,539 | 10,505 | |||||
Current portion of income taxes payable | 197 | 92 | |||||
Short-term line of credit | 3,000 | 3,000 | |||||
Total current liabilities | 14,890 | 14,924 | |||||
Long-term liabilities, net of current portion | 1,476 | 677 | |||||
Income taxes payable, net of current portion | 2,094 | 2,201 | |||||
Total liabilities | 18,460 | 17,802 | |||||
Shareholders’ equity | 15,684 | 18,942 | |||||
Total liabilities and shareholders’ equity | $ | 34,144 | $ | 36,744 |
• | 2014 was an outstanding year of progress and strong growth for Pixelworks as overall revenues came in at $61M, up 27% year over year, driven by product revenues which increased 44% over 2013. |
• | It was also a key year for confirming our thesis of the growing need for video processing technology as trends driving our business accelerated and we enter 2015 with significant momentum and an exciting set of opportunities. |
• | During the year, we completed key milestones that advanced our progress and moved the company forward as we completed our co-development partnership to develop a highly integrated next generation SOC. |
• | We delivered initial prototype samples right on schedule and ramped the mass production version into high volume production in Q3 with on time execution. |
• | We successfully executed and delivered on our licensing partnership engagements which are a major validation of our innovation, technology and expertise. |
• | And we launched our first product line of mobile video processors targeted at laptop/UltrabooksTM/tablets and smartphones with screen sizes from 5.5” to 14.9”, and delivered initial silicon samples in the 2nd half of the year. |
• | And finally we strengthened our board of directors with the addition of David Tupman, who brings extensive experience in management and advisory roles at leading consumer electronics companies. |
• | Turning to the results for the quarter, Q4 2014 was in-line with guidance as revenues of $15M, were down sequentially but we had outstanding product revenue growth which increased 27% over Q4 2013. |
• | All other Non-GAAP metrics came within the range of guidance, and despite seasonality at year end, we expect to see solid double digit growth in our core business in 2015. |
• | Steve will review the results of the quarter and provide the outlook for Q1 2015 later in this call. |
• | At the Consumer Electronics Show (“CES”) in Las Vegas this quarter we demonstrated the range and breadth of our current and future generation technology across large and small displays from 5.5” to large projected images. |
• | And we introduced our “True Clarity” branding concept, which is our brand name for the totality of PXLW display technology enhancements such as smooth motion video, daylight viewing, and color accuracy, as it applies across all screens. |
◦ | What is truly remarkable is that True Clarity brings out the fullest capabilities of the display. |
◦ | This means that every display can now deliver its optimum performance in order to show whatever is on the screen to its best advantage and provide the best visual user experience. |
◦ | Next generation displays are requiring innovative video solutions as companies begin to recognize the importance of the visual experience to the differentiation and positioning of their products. |
◦ | And as products merge and become not only productivity devices but content consumption devices as well, True Clarity provides a framework for positioning their product. |
• | At the show we also demonstrated the power and capability of Pixelworks technology for all displays across our product lines from VueMagicTM collaboration applications running on Topaz chip based projectors, to Iris mobile video processor silicon running on Intel and Qualcomm platforms. |
• | Iris brings the cinematic experience of large screens to mobile screens, while enhancing system performance and lowering power consumption. |
• | Iris represents several years of research to leverage Pixelworks' technology for large screen applications to create the best video quality in smaller mobile displays, and our first product includes the full array of advanced video processing techniques. |
• | Iris technology not only optimizes all aspects of the display that affect video quality, but it also works at the system level, improving battery life and freeing up valuable system resources to create the optimal viewing experience. |
• | The PX3883 is the first device in the product line of Iris chips on our roadmap based on our video display processing technology. |
• | We have an aggressive roadmap that will expand the Iris product line in the first half of 2015. |
• | And we will be previewing our next generation Iris technology at the upcoming Mobile World Congress Conference in Barcelona later this quarter. |
• | The value propositions of Iris are resonating with customers and partners alike. |
• | Interest in Iris in our customer base and partner ecosystem has never been stronger, and we are seeing design win traction at new and existing customers, as well as a wide range of licensing opportunities for Pixelworks' video technology. |
• | Increasing mobile video consumption is a key driving factor of the need for next generation video solutions, as consumers increasingly view their content on UltraBooksTM, tablets, and smartphones. |
• | China in particular is an explosive opportunity for mobile video as China smartphone users are expected to exceed 700 million by 2018 and video is expected to reach 50% of mobile traffic by 2019. |
• | Another driving factor is ongoing progress in new display technology as the industry accelerates advancements with no end in sight. |
• | The entire video ecosystem will upgrade to 4K resolutions in the coming years and we are just at the beginning of a multi-year transition to more capable displays across all screens. |
• | Delivering great video quality is an art as well as a science, and it takes many years to develop the expertise necessary to provide solutions that are tested by the industry’s most demanding customers. |
• | Leveraging a portfolio of 130 patents, and over 15 years of TV industry experience in the marketplace solving the most difficult video problems, we have now brought that expertise and innovation to mobile screens as well. |
• | At CES we showed our latest VueMagicTM connectivity application running on VueMagicTM Mate and projectors based on Topaz, that allow up to 4 devices to connect and share their displays with a projector. |
• | Unlike traditional screen sharing solutions such as Miracast, VueMagicTM allows interaction and collaboration with the content. |
• | And during the quarter we announced that BenQ licensed VueMagicTM for their Qpresenter line of projectors. |
◦ | BenQ reviewed all solutions, and VueMagicTM was adopted due to its multi-screen and annotate features that make it easy to interact with content, making it ideally suited for education and collaborative meetings. |
• | During the quarter we also delivered high volume production of the advanced SOC we developed under our co-development partnership. |
• | And we expect this product to continue to ramp into 2015 and drive year on year growth in our overall product business for large screen applications. |
• | Design win momentum remains strong as we continue to see outstanding adoption for our Topaz family of SOCs for projectors. |
• | And we continue to see opportunities across our families of video co-processors for large screen panels, as 4K applications broaden out to include monitors, digital signage, and projected displays in addition to large screen TVs. |
• | 2014 was a great year of growth driven by product revenues which were up 44% and overall revenues of $61M that increased 27% over 2013. |
• | Q4 was a solid quarter of product growth which increased 27% year over year and we expect to see solid double digit over growth in our core business in 2015. |
• | During the quarter we shipped high volume production of the advanced SOC for large screen applications, which we developed under our co-development partnership. |
• | And we will be demoing our current and latest technology and products for mobile displays at the upcoming Mobile World Congress Conference later this quarter. |
• | Now, I’d now like to turn the call over to Steve to review the financial results of the quarter. |