Previously announced restructuring expected to generate $5 million in annualized cost savings
SAN JOSE, Calif. — (BUSINESS WIRE) — April 28, 2016 — Pixelworks, Inc. (NASDAQ: PXLW), an innovative provider of video display processing technology enabling the highest quality viewing experience for displays of all sizes, today announced financial results for the first quarter ended March 31, 2016. Concurrently, the Company’s board of directors announced the promotion of Todd DeBonis to president and chief executive officer of Pixelworks, effective immediately, replacing interim CEO Stephen Domenik, who will continue to serve as a director on the Board.
For the first quarter of 2016, revenue was $11.2 million, compared to $13.5 million in the prior quarter and $14.4 million in the first quarter of 2015. The sequential and year-over-year decline in revenue was primarily due to inventory adjustments made by digital projection customers as a result of macroeconomic concerns in emerging markets.
On a GAAP basis, gross profit margin in the first quarter of 2016 was 32.2%, compared to 50.6% in the fourth quarter of 2015 and 48.4% in the first quarter of 2015. First quarter 2016 GAAP operating expenses were $12.1 million, compared to $9.7 million in the previous quarter and $10.2 million in the first quarter of 2015.
For the first quarter of 2016, the Company recorded a GAAP net loss of $8.6 million, or $0.31 per share, which included $4.3 million, or $0.15 per share, in charges related to the previously announced restructuring. This compared to a GAAP net loss of $3.2 million, or $0.11 per share, in the fourth quarter of 2015 and GAAP net loss of $3.4 million, or $0.14 per share, in the first quarter of 2015.
On a non-GAAP basis, gross profit margin in the first quarter of 2016 was 48.0%, compared to 50.9% in the fourth quarter of 2015 and 48.8% in the first quarter of 2015. First quarter 2016 gross margin was lower compared to the prior periods due to a less favorable product mix and reduced overhead coverage. First quarter 2016 operating expenses on a non-GAAP basis were $9.2 million, compared to $8.8 million in the previous quarter and $9.2 million in the first quarter of 2015.
For the first quarter of 2016, the Company recorded a non-GAAP net loss of $4.0 million, or $0.14 per share, compared to a non-GAAP net loss of $2.2 million, or $0.08 per share, in the fourth quarter of 2015 and non-GAAP net loss of $2.3 million, or $0.10 per share, in the first quarter of 2015. Adjusted EBITDA in the first quarter of 2016 was a negative $2.9 million, compared to a negative $0.9 million in the previous quarter and a negative $1.1 million in the first quarter of 2015.
“Consistent with the Company’s announcement of preliminary results on April 7th, first quarter revenue of $11.2 million was above the high-end of guidance, reflecting an improvement in order patterns at several of our digital projection customers. Over this past month, we have been diligently focused on implementing the announced restructuring plan, and we remain committed to realizing the expected $5 million in annualized cost savings as well as the achievement of cash flow break-even,” said Stephen Domenik, a director on Pixelworks’ Board. “I am also pleased to announce that we have completed our search for a permanent CEO with today’s appointment of Todd DeBonis. Since joining Pixelworks earlier this year, Todd has demonstrated in-depth knowledge of the industry, a strong understanding of Pixelworks’ technology as well as the required sales and operational capabilities to lead the organization going forward. I am confident he is the right candidate to capitalize on Pixelworks’ opportunity in the mobile market.”
Todd DeBonis, president and CEO of Pixelworks, stated, “I am very enthusiastic about accepting this role and the future of Pixelworks. Since joining the Company in January, I have been actively engaged across all levels of the business as well as with the Company’s current and prospective customers. These interactions provided further validation of Pixelworks’ video processing technology and the differentiation it offers OEMs in our target markets. Moreover, we have favorable existing positions in these respective markets, with leading market share in SoCs for digital projectors and a first-mover advantage as an enabler of high-quality video processing for mobile devices. I look forward to supporting the Pixelworks team and continuing to build on the Company’s heritage of video processing excellence.”
On April 7, 2016, the Company announced a restructuring plan to streamline its product offerings and organization, including an approximately 24% reduction in workforce. Restructuring charges of approximately $4.3 million, or $0.15 per share, were recorded in the first quarter, and the Company expects to incur charges totaling approximately $0.2 million across the remaining quarters of 2016. Pixelworks expects the restructuring to result in annualized savings of at least $5.0 million. In addition, the Company also announced the promotion of Richard Miller to executive vice president of technology in support of its mobile initiative.
Business Outlook for the Second Quarter of 2016