Revenue Increases Sequentially and More than 85% Year-over-Year, Driven by Record Mobile Sales and Continued Recovery in Projector Business

SAN JOSE, Calif., Nov. 9, 2021 — (PRNewswire) —  Pixelworks, Inc. (NASDAQ: PXLW), a leading provider of innovative video and display processing solutions, today announced financial results for the third quarter ended September 30, 2021.

Third Quarter and Recent Highlights

• Mobile revenue increased sequentially for the fifth consecutive quarter and was up nearly 3.5x year-over-year to a record, driven by expanded customer adoption of both hardware and software-based visual processing solutions
• vivo launched its high-end iQOO 8 series of smartphones, incorporating Pixelworks' X5 Pro visual processor to enable ultra-premium display performance and support for variable frame rates of up to 120 Hz
• Pixelworks' Shanghai subsidiary entered collaboration agreement with Unity Technologies China to synchronize and deliver advanced visual display solutions across the mobile gaming ecosystem
• Projector revenue increased over 6% sequentially and 84% year-over-year, reflecting a continued recovery in customer and end market demand
• Closed previously announced investments in Pixelworks' Shanghai subsidiary by a combination of private equity and new strategic investors as well as from employee stock ownership platforms, adding total capital net proceeds equivalent to approximately $40 million USD
• Ended the quarter with $66.6 million in cash and cash equivalents

"During the quarter, we extended our recent momentum with sequential growth in each of our end markets and total revenue increased more than 85% year-over-year," stated Todd DeBonis, President and CEO of Pixelworks. "Mobile revenue increased for the fifth consecutive quarter to reach another quarterly record, and a sustained recovery in the projector market resulted in the highest quarterly revenue since the onset of the pandemic. Gross margin also expanded sequentially, and we were able to hold operating expenses roughly flat to the prior quarter, contributing to another quarter of sequential and year-over-year improvement in our bottom-line results.

"Additionally, we continued to execute on our strategic realignment to establish our Shanghai subsidiary as a profit center and significantly strengthened our balance sheet with $40 million of invested capital at a premium valuation. These actions have been well received by our partners and employees in Asia, while also successfully positioning the Company for accelerated growth and fueling expanded customer engagement, particularly with leading mobile OEMs. Looking ahead, we have strong bookings across each of our end markets and a growing number of mobile design-ins that include follow-on wins with existing tier-one customers and a first win with our third tier-one mobile OEM. Acknowledging the ongoing challenges associated with a supply-constrained environment, we believe the underlying market trends in mobile and increasing demand for higher performance displays will continue to result in expanded adoption of Pixelworks' visual display technology and drive sustained long-term growth."

Third Quarter Fiscal 2021 Financial Results

Revenue in the third quarter of 2021 was $15.2 million, compared to $14.1 million in the second quarter of 2021 and $8.2 million in the third quarter of 2020. The sequential and year-over-year increase in third quarter revenue reflected the sustained recovery of demand in the projector market combined with continued growth and record revenue in the mobile market.

On a GAAP basis, gross profit margin in the third quarter of 2021 was 52.5%, compared to 50.6% in the second quarter of 2021 and 48.5% in the third quarter of 2020. Third quarter 2021 GAAP operating expenses were $11.9 million, compared to $11.6 million in the second quarter of 2021 and $12.1 million in the year-ago quarter.

On a non-GAAP basis, third quarter 2021 gross profit margin was 53.1%, compared to 52.7% in the second quarter of 2021 and 55.6% in the year-ago quarter. Third quarter 2021 non-GAAP operating expenses were $10.1 million, compared to $10.1 million in the second quarter of 2021 and $8.9 million in the year-ago quarter.

For the third quarter of 2021, the Company recorded a GAAP net loss of $4.1 million, or ($0.08) per share, compared to a GAAP net loss of $4.4 million, or ($0.08) per share, in the second quarter of 2021, and a GAAP net loss of $8.1 million, or ($0.20) per share, in the year-ago quarter. Note, the Company refers to "net loss attributable to Pixelworks Inc." as "net loss".

For the third quarter of 2021, the Company recorded a non-GAAP net loss of $2.2 million, or ($0.04) per share, compared to a non-GAAP net loss of $2.6 million, or ($0.05) per share, in the second quarter of 2021, and a non-GAAP net loss of $4.5 million, or ($0.11) per share, in the third quarter of 2020.

Adjusted EBITDA in the third quarter of 2021 was a negative $1.6 million, compared to a negative $1.8 million in the second quarter of 2021 and a negative $3.5 million in the year-ago quarter.

Cash and cash equivalents at the end of the third quarter of 2021 were $66.6 million, compared to $23.6 million at the end of the second quarter of 2021.

Business Outlook

The Company's current business outlook, including guidance for the fourth quarter of 2021, will be provided as part of the scheduled conference call.

Conference Call Information

Pixelworks will host a conference call today, November 9, 2021 , at 2:00 p.m. Pacific Time , which can be accessed by calling 1-877-359-9508 and using passcode 7737029. A live audio webcast of the call can also be accessed by visiting the Company's investor page at www.pixelworks.com . For those unable to listen to the live webcast, it will be archived for approximately 90 days. A replay of the conference call will also be available through Tuesday, November 16, 2021 , and can be accessed by calling 1-855-859-2056 and using passcode 7737029.