Pixelworks Reports Second Quarter 2019 Financial Results

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,
	2019			2019			2018			2019			2018
Reconciliation of GAAP and non-GAAP gross profit
GAAP gross profit	$	9,376		$	8,472		$	9,534		$	17,848		$	17,336
Amortization of acquired intangible assets		298			298			298			596			596
Stock-based compensation		83			95			78			178			144
Inventory step-up and backlog amortization		—			12			239			12			361
Total reconciling items included in gross profit		381			405			615			786			1,101
Non-GAAP gross profit	$	9,757		$	8,877		$	10,149		$	18,634		$	18,437
Non-GAAP gross profit margin		54.1	%		53.3	%		52.7	%		53.7	%		53.4	%

Reconciliation of GAAP and non-GAAP operating expenses
GAAP operating expenses	$	11,697		$	11,932		$	11,984		$	23,629		$	21,080
Reconciling item included in research and development:
Stock-based compensation		703			661			627			1,364			1,222
Reconciling items included in selling, general and administrative:
Stock-based compensation		879			933			682			1,812			1,221
Amortization of acquired intangible assets		76			84			101			160			202
Restructuring		398			—			602			398			621
Total reconciling items included in operating expenses		2,056			1,678			2,012			3,734			3,266
Non-GAAP operating expenses	$	9,641		$	10,254		$	9,972		$	19,895		$	17,814

Reconciliation of GAAP and non-GAAP net income (loss)
GAAP net income (loss)	$	(2,448	)	$	133		$	(2,442	)	$	(2,315	)	$	(2,875	)
Reconciling items included in gross profit		381			405			615			786			1,101
Reconciling items included in operating expenses		2,056			1,678			2,012			3,734			3,266
Reconciling items included in total other income, net		—			(3,905	)		—			(3,905	)		(1,203	)
Tax effect of non-GAAP adjustments		(86	)		219			(154	)		133			(55	)
Non-GAAP net income (loss)	$	(97	)	$	(1,470	)	$	31		$	(1,567	)	$	234
Non-GAAP net income (loss) per share:
Basic	$	(0.00	)	$	(0.04	)	$	0.00		$	(0.04	)	$	0.01
Diluted	$	(0.00	)	$	(0.04	)	$	0.00		$	(0.04	)	$	0.01
Non-GAAP weighted average shares outstanding:
Basic		37,688			37,247			35,704			37,469			35,445
Diluted		37,688			37,247			37,369			37,469			37,372

*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.

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