SAN JOSE, Calif. — (BUSINESS WIRE) — July 31, 2014 — 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 second quarter ended June 30, 2014.

Revenue for the second quarter 2014 was $15.2 million, compared to $13.5 million in the prior quarter and $9.6 million in the second quarter of 2013. The sequential and year-over-year increase in revenue was a result of strong chip sales across our products for large screen display applications. Second quarter chip revenue increased 42% from the previous quarter and 58% compared to the year-ago quarter.

On a GAAP basis, gross profit margin in the second quarter of 2014 was 50.5%, compared to 59.0% in the first quarter of 2014 and 48.4% in the second quarter of 2013. Second quarter 2014 GAAP operating expenses were $9.6 million, compared to $10.4 million in the previous quarter and $9.3 million in the second quarter of 2013. For the second quarter of 2014, the Company recorded a GAAP net loss of $2.4 million, or $0.11 per share, compared to a GAAP net loss of $2.5 million, or $0.11 per share, in the first quarter of 2014 and a GAAP net loss of $4.9 million, or $0.26 per share, in the second quarter of 2013.

On a non-GAAP basis, second quarter 2014 gross profit margin was 51.0%, compared to 60.1% in the first quarter of 2014 and 49.7% in the second quarter of 2013. Second quarter gross margin declined sequentially due to a higher percentage of chip revenue as compared to the prior quarter. Second quarter 2014 operating expenses on a non-GAAP basis were $8.7 million, compared to $8.8 million in the previous quarter and $8.7 million in the second quarter of 2013.

For the second quarter of 2014, the Company recorded a non-GAAP net loss of $1.5 million, or $0.06 per share, compared to a net loss of $0.8 million, or $0.04 per share, in the first quarter of 2014 and a net loss of $4.2 million, or $0.23 per share, in the second quarter of 2013. Adjusted EBITDA in the second quarter of 2014 was positive $0.2 million, compared to positive $0.5 million in the previous quarter and a negative $2.9 million in the second quarter of 2013.

“Pixelworks’ strong start to 2014 continued in Q2 with revenue increasing 59% year-over-year, driven by strong chip sales in our products for large screen display applications,” said Bruce Walicek, President and CEO of Pixelworks. “Also during the quarter, we sampled our first mobile video processor solution, Iris, which brings cinematic picture quality to mobile screens, while improving performance and reducing system power. The interest-level in Pixelworks’ technology has never been higher, and Iris represents a significant milestone as we are now well positioned from a product and technology standpoint to address the explosive growth in video regardless of screen size.”

The Company will discuss the details of its business outlook for the third quarter of 2014 during its conference call scheduled for today, July 31, 2014, at 2:00 p.m. Pacific Time.

Conference Call Information

Pixelworks will host a conference call today at 2:00 p.m. Pacific Time, which can be accessed by calling 877-359-9508 and using passcode 72511052. A Web broadcast of the call can be accessed by visiting the Company's investor page at www.pixelworks.com. For those unable to listen to the live Web broadcast, it will be archived for approximately 30 days. A replay of the conference call will also be available through Thursday, August 7, 2014, and can be accessed by calling 855-859-2056 and using passcode 72511052.

About Pixelworks, Inc.

Pixelworks creates, develops and markets video display processing technology for digital video applications that demand the very highest quality images. At design centers around the world, Pixelworks engineers constantly push video performance to keep manufacturers of consumer electronics and professional displays worldwide on the leading edge. The company is headquartered in San Jose, CA.

For more information, please visit the company’s Web site at www.pixelworks.com.

Note: Pixelworks and the Pixelworks logo are registered trademarks of Pixelworks, Inc.

Non-GAAP Financial Measures

This earnings release makes reference to non-GAAP gross profit margins, non-GAAP operating expenses, non-GAAP net loss and non-GAAP net loss per share, which excludes stock-based compensation expense and additional amortization of a non-cancelable prepaid royalty, which are required under GAAP. The press release also reconciles GAAP net loss and adjusted EBITDA, which Pixelworks defines as GAAP net loss before interest expense and other, net, income tax provision (benefit), depreciation and amortization, as well as the specific items listed above. The Company believes these non-GAAP measures provide a meaningful perspective on the Company's core operating results and underlying cash flow dynamics, but cautions investors to consider these measures in addition to, not as a substitute for, its consolidated financial results as presented in accordance with GAAP. A reconciliation between GAAP and non-GAAP financial measures is included in this earnings release which is available in the investor relations section of the Company's website.