SAN JOSE, Calif. — (BUSINESS WIRE) — October 30, 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 third quarter ended September 30, 2014.

Revenue for the third quarter 2014 was $17.1 million, compared to $15.2 million in the prior quarter and $15.3 million in the third quarter of 2013. Strong chip sales resulted in sequential and year-over-year revenue growth, with chip revenue increasing 13% from the previous quarter and 63% compared to the year-ago quarter.

On a GAAP basis, gross profit margin in the third quarter of 2014 was 50.1%, compared to 50.5% in the second quarter of 2014 and 60.9% in the third quarter of 2013. Third quarter 2014 GAAP operating expenses were $10.5 million, compared to $9.6 million in the previous quarter and $7.5 million in the third quarter of 2013. For the third quarter of 2014, the Company recorded a GAAP net loss of $2.3 million, or $0.10 per share, compared to a GAAP net loss of $2.4 million, or $0.11 per share, in the second quarter of 2014 and GAAP net income of $1.5 million, or $0.07 per diluted share, in the third quarter of 2013.

On a non-GAAP basis, third quarter 2014 gross profit margin was 50.4%, compared to 51.0% in the second quarter of 2014 and 61.6% in the third quarter of 2013. Third quarter 2014 gross margin was lower compared to the year-ago quarter primarily due to a higher percentage of chip revenue in the third quarter of 2014. Third quarter 2014 operating expenses on a non-GAAP basis were $9.3 million, compared to $8.7 million in the previous quarter and $7.0 million in the third quarter of 2013.

For the third quarter of 2014, the Company recorded a non-GAAP net loss of $0.9 million, or $0.04 per share, compared to a net loss of $1.5 million, or $0.06 per share, in the second quarter of 2014 and net income of $2.1 million, or $0.10 per diluted share, in the third quarter of 2013. Adjusted EBITDA in the third quarter of 2014 was $0.4 million, compared to $0.2 million in the previous quarter and $3.5 million in the third quarter of 2013.

“We continued to build on the momentum that we generated in the first half of 2014, with Q3 chip revenue increasing 63% year-over-year,” said Bruce Walicek, President and CEO of Pixelworks. “Additionally, we launched our Iris family of mobile video processors, which are gaining strong interest across a wide range of mobile applications. Looking forward, Pixelworks remains ideally positioned to benefit from the increasing importance of video processing as resolutions increase across all displays.”

The Company will discuss the details of its business outlook for the fourth quarter of 2014 during its conference call scheduled for today, October 30, 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 18018808. 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, November 6, 2014, and can be accessed by calling 855-859-2056 and using passcode 18018808.

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 income (loss) and non-GAAP net income (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 income (loss) and adjusted EBITDA, which Pixelworks defines as GAAP net income (loss) before interest expense and other, net, income tax provision, 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.