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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Pixelworks Inc | NASDAQ:PXLW | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
-0.08 | -4.28% | 1.79 | 1.72 | 1.98 | 1.91 | 1.68 | 1.90 | 765,487 | 22:49:08 |
x
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
¨
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
OREGON
|
|
91-1761992
|
(State or other jurisdiction of incorporation or organization)
|
|
(I.R.S. Employer Identification No.)
|
|
|
|
224 Airport Parkway, Suite 400
San Jose, California
|
|
95110
|
(Address of principal executive offices)
|
|
(Zip Code)
|
Large accelerated filer
|
¨
|
|
Accelerated filer
|
x
|
Non-accelerated filer
|
¨
|
(Do not check if a smaller reporting company)
|
Smaller reporting company
|
¨
|
Emerging growth company
|
¨
|
|
|
|
|
|
|
|
|
|
Item 1.
|
||
|
|
|
|
||
|
||
|
||
|
||
|
||
|
|
|
Item 2.
|
||
|
|
|
Item 4.
|
||
|
|
|
|
|
|
|
|
|
Item 1A.
|
||
|
|
|
Item 6.
|
||
|
|
|
|
Item 1.
|
Financial Statements.
|
|
June 30,
2018 |
|
December 31,
2017 |
||||
ASSETS
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
17,443
|
|
|
$
|
27,523
|
|
Short-term marketable securities
|
2,726
|
|
|
—
|
|
||
Accounts receivable, net
|
6,589
|
|
|
4,640
|
|
||
Inventories
|
2,890
|
|
|
2,846
|
|
||
Prepaid expenses and other current assets
|
2,097
|
|
|
1,328
|
|
||
Total current assets
|
31,745
|
|
|
36,337
|
|
||
Property and equipment, net
|
5,299
|
|
|
5,605
|
|
||
Other assets, net
|
1,341
|
|
|
1,338
|
|
||
Acquired intangible assets, net
|
5,058
|
|
|
5,856
|
|
||
Goodwill
|
18,407
|
|
|
18,407
|
|
||
Total assets
|
$
|
61,850
|
|
|
$
|
67,543
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Accounts payable
|
$
|
2,932
|
|
|
$
|
1,436
|
|
Accrued liabilities and current portion of long-term liabilities
|
13,526
|
|
|
16,387
|
|
||
Current portion of income taxes payable
|
379
|
|
|
445
|
|
||
Total current liabilities
|
16,837
|
|
|
18,268
|
|
||
Long-term liabilities, net of current portion
|
985
|
|
|
1,487
|
|
||
Convertible debt
|
—
|
|
|
6,069
|
|
||
Income taxes payable, net of current portion
|
2,326
|
|
|
2,282
|
|
||
Total liabilities
|
20,148
|
|
|
28,106
|
|
||
Commitments and contingencies (Note 13)
|
|
|
|
|
|
||
Shareholders’ equity:
|
|
|
|
||||
Preferred stock
|
—
|
|
|
—
|
|
||
Common stock
|
424,369
|
|
|
418,891
|
|
||
Accumulated other comprehensive income
|
18
|
|
|
20
|
|
||
Accumulated deficit
|
(382,685
|
)
|
|
(379,474
|
)
|
||
Total shareholders’ equity
|
41,702
|
|
|
39,437
|
|
||
Total liabilities and shareholders’ equity
|
$
|
61,850
|
|
|
$
|
67,543
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Revenue, net
|
$
|
19,251
|
|
|
$
|
20,721
|
|
|
$
|
34,543
|
|
|
$
|
43,431
|
|
Cost of revenue (1)
|
9,717
|
|
|
9,520
|
|
|
17,207
|
|
|
19,838
|
|
||||
Gross profit
|
9,534
|
|
|
11,201
|
|
|
17,336
|
|
|
23,593
|
|
||||
Operating expenses:
|
|
|
|
|
|
|
|
||||||||
Research and development (2)
|
6,423
|
|
|
4,501
|
|
|
10,886
|
|
|
9,407
|
|
||||
Selling, general and administrative (3)
|
4,959
|
|
|
4,660
|
|
|
9,573
|
|
|
8,799
|
|
||||
Restructuring
|
602
|
|
|
—
|
|
|
621
|
|
|
—
|
|
||||
Total operating expenses
|
11,984
|
|
|
9,161
|
|
|
21,080
|
|
|
18,206
|
|
||||
Income (loss) from operations
|
(2,450
|
)
|
|
2,040
|
|
|
(3,744
|
)
|
|
5,387
|
|
||||
Interest income (expense) and other, net (4)
|
(131
|
)
|
|
(107
|
)
|
|
841
|
|
|
(200
|
)
|
||||
Income (loss) before income taxes
|
(2,581
|
)
|
|
1,933
|
|
|
(2,903
|
)
|
|
5,187
|
|
||||
Provision for income taxes
|
32
|
|
|
669
|
|
|
308
|
|
|
1,102
|
|
||||
Net income (loss)
|
$
|
(2,613
|
)
|
|
$
|
1,264
|
|
|
$
|
(3,211
|
)
|
|
$
|
4,085
|
|
Net income (loss) per share:
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
(0.07
|
)
|
|
$
|
0.04
|
|
|
$
|
(0.09
|
)
|
|
$
|
0.14
|
|
Diluted
|
$
|
(0.07
|
)
|
|
$
|
0.04
|
|
|
$
|
(0.09
|
)
|
|
$
|
0.13
|
|
Weighted average shares outstanding:
|
|
|
|
|
|
|
|
||||||||
Basic
|
35,704
|
|
|
29,766
|
|
|
35,445
|
|
|
29,526
|
|
||||
Diluted
|
35,704
|
|
|
31,974
|
|
|
35,445
|
|
|
31,601
|
|
||||
|
|
|
|
|
|
|
|
||||||||
(1) Includes:
|
|
|
|
|
|
|
|
||||||||
Amortization of acquired intangible assets
|
298
|
|
|
—
|
|
|
596
|
|
|
—
|
|
||||
Inventory step-up and backlog amortization
|
239
|
|
|
—
|
|
|
361
|
|
|
—
|
|
||||
Stock-based compensation
|
78
|
|
|
69
|
|
|
144
|
|
|
122
|
|
||||
(2) Includes stock-based compensation
|
627
|
|
|
362
|
|
|
1,222
|
|
|
676
|
|
||||
(3) Includes:
|
|
|
|
|
|
|
|
||||||||
Stock-based compensation
|
682
|
|
|
519
|
|
|
1,221
|
|
|
941
|
|
||||
Amortization of acquired intangible assets
|
101
|
|
|
—
|
|
|
202
|
|
|
—
|
|
||||
Acquisition-related costs
|
—
|
|
|
730
|
|
|
—
|
|
|
894
|
|
||||
(4) Includes:
|
|
|
|
|
|
|
|
||||||||
Gain on debt extinguishment
|
—
|
|
|
—
|
|
|
(1,272
|
)
|
|
—
|
|
||||
Discount accretion on convertible debt fair value
|
—
|
|
|
—
|
|
|
69
|
|
|
—
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Net income (loss)
|
$
|
(2,613
|
)
|
|
$
|
1,264
|
|
|
$
|
(3,211
|
)
|
|
$
|
4,085
|
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
||||||||
Unrealized loss on available-for-sale securities
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
||||
Total comprehensive income (loss)
|
$
|
(2,614
|
)
|
|
$
|
1,264
|
|
|
$
|
(3,212
|
)
|
|
$
|
4,085
|
|
|
Six Months Ended June 30,
|
||||||
|
2018
|
|
2017
|
||||
Cash flows from operating activities:
|
|
|
|
||||
Net income (loss)
|
$
|
(3,211
|
)
|
|
$
|
4,085
|
|
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
|
|
|
|
||||
Stock-based compensation
|
2,587
|
|
|
1,739
|
|
||
Depreciation and amortization
|
1,749
|
|
|
1,814
|
|
||
Gain on debt extinguishment
|
(1,272
|
)
|
|
—
|
|
||
Amortization of acquired intangible assets
|
798
|
|
|
—
|
|
||
Inventory step-up and backlog amortization
|
361
|
|
|
—
|
|
||
Discount accretion on convertible debt fair value
|
69
|
|
|
—
|
|
||
Deferred income tax benefit
|
(63
|
)
|
|
—
|
|
||
Reversal of uncertain tax positions
|
(19
|
)
|
|
(191
|
)
|
||
Accretion on short-term marketable securities
|
(2
|
)
|
|
—
|
|
||
Other
|
—
|
|
|
58
|
|
||
Changes in operating assets and liabilities, net of acquisition:
|
|
|
|
||||
Accounts receivable, net
|
(1,949
|
)
|
|
(2,558
|
)
|
||
Inventories
|
(405
|
)
|
|
849
|
|
||
Prepaid expenses and other current and long-term assets, net
|
(703
|
)
|
|
(328
|
)
|
||
Accounts payable
|
1,492
|
|
|
728
|
|
||
Accrued current and long-term liabilities
|
(2,838
|
)
|
|
4,714
|
|
||
Income taxes payable
|
(12
|
)
|
|
1,206
|
|
||
Net cash provided by (used in) operating activities
|
(3,418
|
)
|
|
12,116
|
|
||
Cash flows from investing activities:
|
|
|
|
||||
Purchases of short-term marketable securities
|
(2,725
|
)
|
|
—
|
|
||
Purchases of property and equipment
|
(1,326
|
)
|
|
(829
|
)
|
||
Net cash used in investing activities
|
(4,051
|
)
|
|
(829
|
)
|
||
Cash flows from financing activities:
|
|
|
|
||||
Payments on convertible debt
|
(2,220
|
)
|
|
—
|
|
||
Payments on asset financings
|
(636
|
)
|
|
(603
|
)
|
||
Proceeds from issuance of common stock under employee equity incentive plans
|
245
|
|
|
1,940
|
|
||
Net cash provided by (used in) financing activities
|
(2,611
|
)
|
|
1,337
|
|
||
Net increase (decrease) in cash and cash equivalents
|
(10,080
|
)
|
|
12,624
|
|
||
Cash and cash equivalents, beginning of period
|
27,523
|
|
|
19,622
|
|
||
Cash and cash equivalents, end of period
|
$
|
17,443
|
|
|
$
|
32,246
|
|
|
|
|
|
||||
Supplemental disclosure of cash flow information:
|
|
|
|
||||
Cash paid for income taxes, net of refunds received
|
$
|
383
|
|
|
$
|
153
|
|
Cash paid during the period for interest
|
307
|
|
|
10
|
|
||
Non-cash investing and financing activities:
|
|
|
|
||||
Value of debt converted into shares
|
$
|
2,644
|
|
|
$
|
—
|
|
Acquisitions of property and equipment and other
assets under extended payment terms
|
—
|
|
|
1,955
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||
|
June 30, 2018
|
|
June 30, 2018
|
||||
IC sales
|
$
|
18,575
|
|
|
$
|
33,131
|
|
Engineering services and other
|
676
|
|
|
1,412
|
|
||
Total revenues
|
$
|
19,251
|
|
|
$
|
34,543
|
|
Purchase price
|
|
|
$
|
16,975
|
|
|
Less net liabilities assumed:
|
|
|
|
|||
Assets acquired:
|
|
|
|
|||
Cash and cash equivalents
|
1,901
|
|
|
|
||
Accounts receivable
|
968
|
|
|
|
||
Inventories
|
3,175
|
|
|
|
||
Property and equipment
|
964
|
|
|
|
||
Other assets
|
1,562
|
|
|
|
||
Identifiable intangible assets
|
6,730
|
|
|
|
||
Liabilities assumed:
|
|
|
|
|||
Accounts payable
|
(1,736
|
)
|
|
|
||
Accrued liabilities and other current liabilities
|
(2,832
|
)
|
|
|
||
Revolving bank loan
|
(4,046
|
)
|
|
|
||
Convertible debt
|
(6,485
|
)
|
|
|
||
Other noncurrent liabilities
|
(1,633
|
)
|
|
(1,432
|
)
|
|
Goodwill
|
|
|
$
|
18,407
|
|
•
|
We performed a valuation of the convertible debt. We assigned
$4,762
of the purchase price to convertible debt, consisting of the contractual amount of
$6,068
offset by a debt discount of
$1,306
, and
$1,723
to the embedded conversion feature. No other features of the debt were assigned value at the Acquisition date.
|
•
|
We performed a valuation of acquired intangible assets. We assigned
$5,050
of the purchase price to acquired developed technology with estimated lives of
5 years
or less,
$1,270
to customer relationships with estimated lives of
3 years
or less, and
$410
to backlog and trademark with estimated lives of
2 years
or less. ViXS had no in-process research and development.
|
•
|
We recorded an inventory step-up of
$2,191
to record inventory at fair value. We will recognize this within cost of goods sold as the inventory is sold which we expect to be over a period of approximately 12 months.
|
|
June 30,
2018 |
|
December 31,
2017 |
||||
Accounts receivable, gross
|
$
|
6,611
|
|
|
$
|
4,687
|
|
Less: allowance for doubtful accounts
|
(22
|
)
|
|
(47
|
)
|
||
Accounts receivable, net
|
$
|
6,589
|
|
|
$
|
4,640
|
|
|
Six Months Ended
|
||||||
|
June 30,
|
||||||
|
2018
|
|
2017
|
||||
Balance at beginning of period
|
$
|
47
|
|
|
$
|
32
|
|
Additions charged (reductions credited)
|
(25
|
)
|
|
25
|
|
||
Balance at end of period
|
$
|
22
|
|
|
$
|
57
|
|
|
June 30,
2018 |
|
December 31,
2017 |
||||
Finished goods
|
$
|
1,500
|
|
|
$
|
1,115
|
|
Work-in-process
|
1,390
|
|
|
1,731
|
|
||
Inventories
|
$
|
2,890
|
|
|
$
|
2,846
|
|
|
June 30,
2018 |
|
December 31,
2017 |
||||
Gross carrying amount
|
$
|
24,515
|
|
|
$
|
23,072
|
|
Less: accumulated depreciation and amortization
|
(19,216
|
)
|
|
(17,467
|
)
|
||
Property and equipment, net
|
$
|
5,299
|
|
|
$
|
5,605
|
|
|
June 30,
2018 |
|
December 31,
2017 |
||||
Developed technology
|
$
|
5,050
|
|
|
$
|
5,050
|
|
Customer relationships
|
1,270
|
|
|
1,270
|
|
||
Backlog and tradename
|
410
|
|
|
410
|
|
||
|
6,730
|
|
|
6,730
|
|
||
Less: accumulated amortization
|
(1,672
|
)
|
|
(874
|
)
|
||
Acquired intangible assets, net
|
$
|
5,058
|
|
|
$
|
5,856
|
|
|
June 30,
2018 |
|
December 31,
2017 |
||||
Accrued payroll and related liabilities
|
$
|
3,981
|
|
|
$
|
5,400
|
|
Accrued interest payable
|
2,920
|
|
|
2,770
|
|
||
Accrued royalties
|
2,647
|
|
|
2,610
|
|
||
Current portion of accrued liabilities for asset financings
|
1,401
|
|
|
1,701
|
|
||
Deferred revenue
|
255
|
|
|
418
|
|
||
Accrued costs related to restructuring
|
168
|
|
|
352
|
|
||
Liability for warranty returns
|
12
|
|
|
17
|
|
||
Other
|
2,142
|
|
|
3,119
|
|
||
Accrued liabilities and current portion of long-term liabilities
|
$
|
13,526
|
|
|
$
|
16,387
|
|
|
Six Months Ended
|
||||||
|
June 30,
|
||||||
|
2018
|
|
2017
|
||||
Deferred revenue:
|
|
|
|
||||
Balance at beginning of period
|
$
|
418
|
|
|
$
|
—
|
|
Revenue recognized
|
(713
|
)
|
|
—
|
|
||
Revenue deferred
|
550
|
|
|
—
|
|
||
Balance at end of period
|
$
|
255
|
|
|
$
|
—
|
|
Liability for warranty returns:
|
|
|
|
||||
Balance at beginning of period
|
$
|
17
|
|
|
$
|
28
|
|
Provision (benefit)
|
(1
|
)
|
|
10
|
|
||
Charge-offs
|
(4
|
)
|
|
(5
|
)
|
||
Balance at end of period
|
$
|
12
|
|
|
$
|
33
|
|
|
Cost
|
|
Unrealized Gain (Loss)
|
|
Fair Value
|
||||||
Short-term marketable securities:
|
|
|
|
|
|
||||||
As of June 30, 2018:
|
|
|
|
|
|
||||||
Commercial paper
|
$
|
1,237
|
|
|
$
|
—
|
|
|
$
|
1,237
|
|
Corporate debt securities
|
1,490
|
|
|
(1
|
)
|
|
1,489
|
|
|||
|
$
|
2,727
|
|
|
$
|
(1
|
)
|
|
$
|
2,726
|
|
|
|
|
|
|
|
||||||
As of December 31, 2017:
|
|
|
|
|
|
||||||
Commercial paper
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Corporate debt securities
|
—
|
|
|
—
|
|
|
—
|
|
|||
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Level 1:
|
Valuations based on quoted prices in active markets for identical assets and liabilities.
|
Level 2:
|
Valuations based on inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
|
Level 3:
|
Valuations based on unobservable inputs in which there is little or no market data available, which require the reporting entity to develop its own assumptions.
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
As of June 30, 2018:
|
|
|
|
|
|
|
|
||||||||
Assets:
|
|
|
|
|
|
|
|
||||||||
Cash equivalents:
|
|
|
|
|
|
|
|
||||||||
Money market funds
|
$
|
14,458
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
14,458
|
|
Commercial paper
|
—
|
|
|
497
|
|
|
—
|
|
|
497
|
|
||||
Short-term marketable securities:
|
|
|
|
|
|
|
|
||||||||
Corporate debt securities
|
—
|
|
|
1,489
|
|
|
—
|
|
|
1,489
|
|
||||
Commercial paper
|
—
|
|
|
1,237
|
|
|
—
|
|
|
1,237
|
|
||||
As of December 31, 2017:
|
|
|
|
|
|
|
|
||||||||
Assets:
|
|
|
|
|
|
|
|
||||||||
Money market funds
|
23,402
|
|
|
—
|
|
|
—
|
|
|
23,402
|
|
||||
Liabilities:
|
|
|
|
|
|
|
|
||||||||
Convertible debt - including conversion feature
|
—
|
|
|
5,300
|
|
|
—
|
|
|
5,300
|
|
||||
Conversion feature - convertible debt
|
—
|
|
|
2,350
|
|
|
—
|
|
|
2,350
|
|
|
Six Months Ended
|
||||||
|
June 30,
|
||||||
|
2018
|
|
2017
|
||||
Operating expenses — restructuring:
|
|
|
|
||||
Employee severance and benefits
|
$
|
621
|
|
|
$
|
—
|
|
Total restructuring expense
|
$
|
621
|
|
|
$
|
—
|
|
|
Balance as of December 31, 2017
|
|
Expensed
|
|
Payments
|
|
Balance as of
June 30, 2018
|
||||||||
Employee severance and benefits
|
$
|
352
|
|
|
$
|
621
|
|
|
$
|
(805
|
)
|
|
$
|
168
|
|
Accrued costs related to restructuring
|
$
|
352
|
|
|
$
|
621
|
|
|
$
|
(805
|
)
|
|
$
|
168
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
June 30,
|
|
June 30,
|
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Interest expense
1
|
$
|
(198
|
)
|
|
$
|
(137
|
)
|
|
$
|
(486
|
)
|
|
$
|
(246
|
)
|
Interest income
|
67
|
|
|
30
|
|
|
124
|
|
|
46
|
|
||||
Gain on debt extinguishment
|
—
|
|
|
—
|
|
|
1,272
|
|
|
—
|
|
||||
Discount accretion on convertible debt fair value
|
—
|
|
|
—
|
|
|
(69
|
)
|
|
—
|
|
||||
Total interest income (expense) and other, net
|
$
|
(131
|
)
|
|
$
|
(107
|
)
|
|
$
|
841
|
|
|
$
|
(200
|
)
|
1
|
Increase in the six months ended June 30, 2018 compared to the six months ended June 30, 2017 is due to contractual interest on convertible debt, as well as imputed interest on short and long-term liabilities acquired as a part of the Acquisition.
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
June 30,
|
|
June 30,
|
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Net income (loss)
|
$
|
(2,613
|
)
|
|
$
|
1,264
|
|
|
$
|
(3,211
|
)
|
|
$
|
4,085
|
|
Weighted average shares outstanding - basic
|
35,704
|
|
|
29,766
|
|
|
35,445
|
|
|
29,526
|
|
||||
Dilutive effect of employee equity incentive plans
|
—
|
|
|
2,208
|
|
|
—
|
|
|
2,075
|
|
||||
Diluted weighted average shares outstanding
|
35,704
|
|
|
31,974
|
|
|
35,445
|
|
|
31,601
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Net income (loss) per share:
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
(0.07
|
)
|
|
$
|
0.04
|
|
|
$
|
(0.09
|
)
|
|
$
|
0.14
|
|
Diluted
|
$
|
(0.07
|
)
|
|
$
|
0.04
|
|
|
$
|
(0.09
|
)
|
|
$
|
0.13
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||
|
June 30,
|
|
June 30,
|
||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||
Employee equity incentive plans
|
3,441
|
|
|
271
|
|
|
3,438
|
|
|
7
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
June 30,
|
|
June 30,
|
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Japan
|
$
|
17,057
|
|
|
$
|
18,167
|
|
|
$
|
30,402
|
|
|
$
|
33,361
|
|
China
|
1,712
|
|
|
320
|
|
|
2,638
|
|
|
596
|
|
||||
United States
|
283
|
|
|
—
|
|
|
873
|
|
|
121
|
|
||||
Korea
|
102
|
|
|
—
|
|
|
314
|
|
|
787
|
|
||||
Taiwan
|
97
|
|
|
2,229
|
|
|
266
|
|
|
6,097
|
|
||||
Europe
|
—
|
|
|
5
|
|
|
50
|
|
|
1,941
|
|
||||
Other
|
—
|
|
|
—
|
|
|
—
|
|
|
528
|
|
||||
|
$
|
19,251
|
|
|
$
|
20,721
|
|
|
$
|
34,543
|
|
|
$
|
43,431
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||
|
June 30,
|
|
June 30,
|
||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||
Distributors:
|
|
|
|
|
|
|
|
||||
All distributors
|
35
|
%
|
|
41
|
%
|
|
36
|
%
|
|
49
|
%
|
Distributor A
|
27
|
%
|
|
30
|
%
|
|
25
|
%
|
|
29
|
%
|
End customers:
1
|
|
|
|
|
|
|
|
||||
Top five end customers
|
82
|
%
|
|
87
|
%
|
|
81
|
%
|
|
75
|
%
|
End customer A
|
58
|
%
|
|
51
|
%
|
|
56
|
%
|
|
43
|
%
|
End customer B
|
4
|
%
|
|
15
|
%
|
|
4
|
%
|
|
10
|
%
|
1
|
End customers include customers who purchase directly from us, as well as customers who purchase our products indirectly through distributors.
|
|
June 30,
2018 |
|
December 31,
2017 |
||
Account X
|
58
|
%
|
|
38
|
%
|
Account Y
|
30
|
%
|
|
29
|
%
|
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||||||||
|
June 30,
|
|
June 30,
|
||||||||||||||||||
|
2018
|
|
2017
|
|
% Change
|
|
2018
|
|
2017
|
|
% Change
|
||||||||||
Revenue, net
|
$
|
19,251
|
|
|
$
|
20,721
|
|
|
(7
|
)%
|
|
$
|
34,543
|
|
|
$
|
43,431
|
|
|
(20
|
)%
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||||||||||||||
|
2018
|
|
% of
revenue
|
|
2017
|
|
% of
revenue
|
|
2018
|
|
% of
revenue
|
|
2017
|
|
% of
revenue
|
||||||||||||
Direct product costs and related overhead
1
|
$
|
9,177
|
|
|
48
|
%
|
|
$
|
9,535
|
|
|
46
|
%
|
|
$
|
16,193
|
|
|
47
|
%
|
|
$
|
19,643
|
|
|
45
|
%
|
Amortization of acquired developed technology
|
298
|
|
|
2
|
|
|
—
|
|
|
0
|
|
|
596
|
|
|
2
|
|
|
—
|
|
|
0
|
|
||||
Inventory step-up and backlog amortization
|
239
|
|
|
1
|
|
|
—
|
|
|
0
|
|
|
361
|
|
|
1
|
|
|
—
|
|
|
0
|
|
||||
Stock-based compensation
|
78
|
|
|
0
|
|
|
69
|
|
|
0
|
|
|
144
|
|
|
0
|
|
|
122
|
|
|
0
|
|
||||
Inventory charges
2
|
(75
|
)
|
|
0
|
|
|
(84
|
)
|
|
0
|
|
|
(87
|
)
|
|
0
|
|
|
73
|
|
|
0
|
|
||||
Total cost of revenue
|
$
|
9,717
|
|
|
50
|
%
|
|
$
|
9,520
|
|
|
46
|
%
|
|
$
|
17,207
|
|
|
50
|
%
|
|
$
|
19,838
|
|
|
46
|
%
|
Gross profit
|
$
|
9,534
|
|
|
50
|
%
|
|
$
|
11,201
|
|
|
54
|
%
|
|
$
|
17,336
|
|
|
50
|
%
|
|
$
|
23,593
|
|
|
54
|
%
|
1
|
Includes purchased materials, assembly, test, labor, employee benefits and royalties.
|
2
|
Includes charges to reduce inventory to lower of cost or market and a benefit for sales of previously written down inventory.
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||||||||
|
June 30,
|
|
June 30,
|
||||||||||||||||||
|
2018
|
|
2017
|
|
% Change
|
|
2018
|
|
2017
|
|
% Change
|
||||||||||
Research and development
|
$
|
6,423
|
|
|
$
|
4,501
|
|
|
43
|
%
|
|
$
|
10,886
|
|
|
$
|
9,407
|
|
|
16
|
%
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||||||||
|
June 30,
|
|
June 30,
|
||||||||||||||||||
|
2018
|
|
2017
|
|
% Change
|
|
2018
|
|
2017
|
|
% Change
|
||||||||||
Selling, general and administrative
|
$
|
4,959
|
|
|
$
|
4,660
|
|
|
6
|
%
|
|
$
|
9,573
|
|
|
$
|
8,799
|
|
|
9
|
%
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
June 30,
|
|
June 30,
|
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Employee severance and benefits
|
$
|
602
|
|
|
$
|
—
|
|
|
$
|
621
|
|
|
$
|
—
|
|
Total restructuring expense
|
$
|
602
|
|
|
$
|
—
|
|
|
$
|
621
|
|
|
$
|
—
|
|
Item 4.
|
Controls and Procedures.
|
Item 1A.
|
Risk Factors.
|
•
|
difficulties in managing international distributors and manufacturers due to varying time zones, languages and business customs;
|
•
|
compliance with U.S. laws affecting operations outside of the U.S., such as the Foreign Corrupt Practices Act or changes relating to national security concerns;
|
•
|
reduced or limited protection of our IP, particularly in software, which is more prone to design piracy;
|
•
|
difficulties in collecting outstanding accounts receivable balances;
|
•
|
changes in tax rates, tax laws and the interpretation of those laws;
|
•
|
difficulties regarding timing and availability of export and import licenses;
|
•
|
ensuring that we obtain complete and accurate information from our Asian operations to make proper disclosures in the United States;
|
•
|
political and economic instability;
|
•
|
difficulties in maintaining sales representatives outside of the U.S. that are knowledgeable about our industry and products;
|
•
|
changes in the regulatory environment in China, Japan, Taiwan and Korea that may significantly impact purchases of our products by our customers or our customers’ sales of their own products;
|
•
|
outbreaks of health epidemics in China or other parts of Asia;
|
•
|
imposition of new tariffs, quotas, trade barriers and similar trade restrictions on our sales;
|
•
|
varying employment and labor laws; and
|
•
|
greater vulnerability to infrastructure and labor disruptions than in established markets.
|
•
|
reduced end user demand due to the economic impact of any natural disaster;
|
•
|
a disruption to the global supply chain for products manufactured in areas affected by natural disasters that are included in products purchased either by us or by our customers;
|
•
|
an increase in the cost of products that we purchase due to reduced supply; and
|
•
|
other unforeseen impacts as a result of the uncertainty resulting from a natural disaster.
|
•
|
difficulties in hiring and retaining necessary technical personnel;
|
•
|
difficulties in reallocating engineering resources and overcoming resource limitations;
|
•
|
difficulties with contract manufacturers;
|
•
|
changes to product specifications and customer requirements;
|
•
|
changes to market or competitive product requirements; and
|
•
|
unanticipated engineering complexities.
|
•
|
stop selling products using technology that contains the allegedly infringing IP;
|
•
|
attempt to obtain a license to the relevant IP, which may not be available on terms that are acceptable to us or at all;
|
•
|
attempt to redesign those products that contain the allegedly infringing IP; or
|
•
|
pay damages for past infringement claims that are determined to be valid or which are arrived at in settlement of such litigation or threatened litigation.
|
•
|
actual or anticipated fluctuations in our operating results;
|
•
|
changes in or failure to meet expectations as to our future financial performance;
|
•
|
changes in or failure to meet financial estimates of securities analysts;
|
•
|
announcements by us or our competitors of technological innovations, design wins, contracts, standards, acquisitions or divestitures;
|
•
|
Failure to realize the anticipated benefits of the acquisition of ViXS, and unanticipated costs related thereto;
|
•
|
the operating and stock price performance of other comparable companies;
|
•
|
issuances or proposed issuances of equity, debt or other securities by us, or sales of securities by our security holders; and
|
•
|
changes in market valuations of other technology companies.
|
•
|
if the number of directors is fixed by the board at eight or more, our board of directors is divided into three classes serving staggered terms, which would make it more difficult for a group of shareholders to quickly replace a majority of directors;
|
•
|
our board of directors is authorized, without prior shareholder approval, to create and issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to acquire us or to effect a change of control, commonly referred to as "blank check" preferred stock;
|
•
|
members of our board of directors can be removed only for cause and at a meeting of shareholders called expressly for that purpose, by the vote of 75 percent of the votes then entitled to be cast for the election of directors;
|
•
|
our board of directors may alter our bylaws without obtaining shareholder approval; and shareholders are required to provide advance notice for nominations for election to the board of directors or for proposing matters to be acted upon at a shareholder meeting;
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•
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Oregon law permits our board to consider other factors beyond stockholder value in evaluating any acquisition offer (so-called "expanded constituency" provisions); and
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•
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a supermajority (67%) vote of shareholders is required to approve certain fundamental transactions.
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Item 6.
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Exhibits.
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3.1
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3.2
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3.3
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31.1
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31.2
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32.1*
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32.2*
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101.INS
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XBRL Instance Document
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101.SCH
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XBRL Taxonomy Extension Schema Document
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101.CAL
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XBRL Taxonomy Extension Calculation Linkbase Document
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101.DEF
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XBRL Taxonomy Extension Definition Linkbase Document
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101.LAB
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XBRL Taxonomy Label Linkbase Document
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101.PRE
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XBRL Taxonomy Extension Presentation Linkbase Document
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*
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Exhibits 32.1 and 32.2 are being furnished and shall not be deemed to be "filed" for under the Securities Act of 1933, as amended (the “Securities Act”) or the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liability of that section, nor shall such exhibits be deemed to be incorporated by reference in any registration statement or other document filed under the Securities Act or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language contained in such filing, except to the extent specifically stated in such filing.
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PIXELWORKS, INC.
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Dated:
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August 10, 2018
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/s/ Steven L. Moore
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Steven L. Moore
Vice President, Chief Financial Officer,
Secretary and Treasurer
(Duly Authorized Officer and Principal Accounting and Principal Financial Officer)
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