Pixelworks, Inc 10-Q for FY2020 Q1

Pixelworks, Inc (PXLW)

10-Q 2020-05-08 For: 2020-03-31

Added on April 08, 2026

About this 10-Q

Pixelworks, Inc filed this 10-Q on May 8, 2020, covering the quarter ended March 31, 2020 (FY2020 Q1).

Headline figures

Quarter ended March 31, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $13.77M; down 17.3% from $16.65M a year earlier
Net loss: $5.4M; compared with net income of $133K a year earlier
Diluted EPS: -$0.14; compared with $0.00 a year earlier

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Oregon			91-1761992
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

226 Airport Parkway, Suite 595
San Jose	,	California	95110
(Address of principal executive offices)			(Zip Code)



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001 per share	PXLW	The Nasdaq Global Market



Large Accelerated Filer	☐	Accelerated Filer	☒
Non-accelerated Filer	☐	Smaller Reporting Company	☒
Emerging Growth Company	☐




	Note regarding COVID-19	3

	PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements	4

	Condensed Consolidated Balance Sheets	4
	Condensed Consolidated Statements of Operations	5
	Condensed Consolidated Statements of Comprehensive Income (Loss)	6
	Condensed Consolidated Statements of Cash Flows	7
	Consolidated Statements of Shareholders' Equity	8
	Notes to Condensed Consolidated Financial Statements	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24

Item 3.	Quantitative and Qualitative Disclosure About Market Risk	30

Item 4.	Controls and Procedures	31

	PART II – OTHER INFORMATION

Item 1A.	Risk Factors	32

Item 6.	Exhibits	51

	SIGNATURE	52



	March 31, 2020			December 31, 2019
ASSETS
Current assets:
Cash and cash equivalents	$	17,933		$	7,257
Short-term marketable securities	2,484			6,975
Accounts receivable, net	8,850			10,915
Inventories	4,540			5,401
Prepaid expenses and other current assets	2,067			1,689
Total current assets	35,874			32,237
Property and equipment, net	5,284			4,608
Operating lease right of use assets	7,494			5,434
Other assets, net	1,355			1,267
Acquired intangible assets, net	2,329			2,704
Goodwill	18,407			18,407
Total assets	$	70,743		$	64,657
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	2,297		$	818
Accrued liabilities and current portion of long-term liabilities	9,412			8,692
Short-term line of credit	5,157			—
Current portion of income taxes payable	200			164
Total current liabilities	17,066			9,674
Long-term liabilities, net of current portion	1,579			982
Operating lease liabilities, net of current portion	5,567			4,212
Income taxes payable, net of current portion	2,260			2,260
Total liabilities	26,472			17,128
Commitments and contingencies (Note 12)
Shareholders’ equity:
Preferred stock	—			—
Common stock	438,269			436,122
Accumulated other comprehensive income	6			12
Accumulated deficit	(394,004		)	(388,605		)
Total shareholders’ equity	44,271			47,529
Total liabilities and shareholders’ equity	$	70,743		$	64,657



☒	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


•	Implemented work-from-home and social distancing policies throughout our organization


•	Suspended all company travel other than business critical travel within China


•	Drew down $5.2 million from our working capital-based revolving line of credit to help with liquidity


•	Received a loan for $0.8 million pursuant to the Paycheck Protection Program to help with certain qualifying expenses, including payroll costs


•	Our CEO and the CFO have taken a 10% base salary reduction


•	Our Board of Directors has agreed to take Restricted Stock Units (RSUs) in lieu of their director fees for the full year of 2020


•	Our Executive staff has reduced their base salary by 10% in exchange for RSUs


•	Annual Merit increases for all employees have been delayed by one quarter


•	All hiring has been put on hold other than a few critical hiring requisitions



	Three Months Ended March 31,
	2020			2019
Revenue, net	$	13,774		$	16,648
Cost of revenue (1)	6,999			8,176
Gross profit	6,775			8,472
Operating expenses:
Research and development (2)	6,267			6,472
Selling, general and administrative (3)	5,193			5,460
Restructuring	592			—
Total operating expenses	12,052			11,932
Loss from operations	(5,277		)	(3,460		)
Interest income and other, net	54			96
Gain on sale of patents	—			3,905
Total other income, net	54			4,001
Income (loss) before income taxes	(5,223		)	541
Provision for income taxes	176			408
Net income (loss)	$	(5,399	)	$	133
Net income (loss) per share:
Basic	$	(0.14	)	$	0.00
Diluted	$	(0.14	)	$	0.00
Weighted average shares outstanding:
Basic	38,868			37,247
Diluted	38,868			38,692



(1) Includes:
Amortization of acquired intangible assets	298	298
Stock-based compensation	101	95
Inventory step-up and backlog amortization	—	12



(2) Includes stock-based compensation	648	661


•	All employees have been given the opportunity to exchange up to 10% of their quarterly base salary for RSUs



(3) Includes:
Stock-based compensation	1,073	933
Amortization of acquired intangible assets	76	84



	Common Stock			Accumulated Other Comprehensive Income			Accumulated Deficit			Total Shareholders' Equity
2020	Shares	Amount		Accumulated Other Comprehensive Income			Accumulated Deficit			Total Shareholders' Equity
Balance as of December 31, 2019	38,434,488	$	436,122	$	12		$	(388,605	)	$	47,529
Stock issued under employee equity incentive plans	815,375	325		—			—			325
Stock-based compensation expense	—	1,822		—			—			1,822
Unrealized gain on available for sale securities	—	—		(6		)	—			(6		)
Net loss	—	—		—			(5,399		)	(5,399		)
Balance as of March 31, 2020	39,249,863	$	438,269	$	6		$	(394,004	)	$	44,271

2019
Balance as of December 31, 2018	36,937,458	$	428,903	$	15		$	(379,528	)	$	49,390
Stock issued under employee equity incentive plans	605,911	315		—			—			315
Stock-based compensation expense	—	1,689		—			—			1,689
Unrealized gain on available for sale securities	—	—		4			—			4
Net income	—	—		—			133			133
Balance as of March 31, 2019	37,543,369	$	430,907	$	19		$	(379,395	)	$	51,531



	Three Months Ended
	March 31, 2019
	Previously Reported			Correction		Revised
Interest income (expense) and other, net	$	(66	)	$	162	$	96
Total other income, net	3,839			162		4,001
Income before income taxes	379			162		541
Net income (loss)	(29		)	162		133
Net income (loss) per share:
Basic	$	(0.00	)	$	0.00	$	0.00
Diluted	$	(0.00	)	$	0.00	$	0.00



	Three Months Ended March 31, 2019
	Previously Reported		Correction		Revised
Operating activities:
Net income (loss)	(29	)	162		133
Change in accrued current and long-term liabilities	(2,198	)	(162	)	(2,360	)
Net cash used in operating activities	(2,034	)	—		(2,034	)



	March 31, 2020			December 31, 2019
Accounts receivable, gross	$	8,915		$	10,938
Less: allowance for doubtful accounts	(65		)	(23		)
Accounts receivable, net	$	8,850		$	10,915



	Three Months Ended
	March 31,
	2020		2019
Balance at beginning of period	$	23	$	21
Additions charged	42		17
Balance at end of period	$	65	$	38



	March 31, 2020		December 31, 2019
Finished goods	$	2,580	$	1,630
Work-in-process	1,960		3,771
Inventories	$	4,540	$	5,401



	March 31, 2020			December 31, 2019
Gross carrying amount	$	24,491		$	22,866
Less: accumulated depreciation and amortization	(19,207		)	(18,258		)
Property and equipment, net	$	5,284		$	4,608



	March 31, 2020			December 31, 2019
Developed technology	$	5,050		$	5,050
Customer relationships	1,270			1,270
Backlog and tradename	410			410
	6,730			6,730
Less: accumulated amortization	(4,401		)	(4,026		)
Acquired intangible assets, net	$	2,329		$	2,704



Nine months ending December 31:
2020	$	1,122
Years ending December 31:
2021	1,117
2022	90
	$	2,329



	March 31, 2020		December 31, 2019
Accrued payroll and related liabilities	$	2,910	$	3,440
Operating lease liabilities, current	1,945		1,545
Current portion of accrued liabilities for asset financings	1,211		483
Accrued commissions and royalties	592		663
Accrued interest payable	396		397
Deferred revenue	186		146
Accrued costs related to restructuring	—		66
Other	2,172		1,952
Accrued liabilities and current portion of long-term liabilities	$	9,412	$	8,692



	Cost		Unrealized Gain (Loss)			Fair Value
Short-term marketable securities:
As of March 31, 2020:
Commercial paper	$	1,247	$	—		$	1,247
Corporate debt securities	1,243		(6		)	1,237
	$	2,490	$	(6	)	$	2,484

As of December 31, 2019:
Commercial paper	$	2,487	$	—		$	2,487
U.S. government treasury bills	2,249		1			2,250
Corporate debt securities	2,236		2			2,238
	$	6,972	$	3		$	6,975


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 March 31, 2020:
Assets:
Cash equivalents:
Money market funds	$	13,435	$	—	$	—	$	13,435
Short-term marketable securities:
Commercial paper	—		1,247		—		1,247
Corporate debt securities	—		1,237		—		1,237

As of December 31, 2019:
Assets:
Cash equivalents:
Money market funds	$	1,307	$	—	$	—	$	1,307
Short-term marketable securities:
U.S. government treasury bills	2,250		—		—		2,250
Commercial paper	—		2,487		—		2,487
Corporate debt securities	—		2,238		—		2,238



	Balance as of December 31, 2019		Expensed		Payments			Balance as of March 31, 2020
Employee severance and benefits	$	66	$	592	$	(658	)	$	—
Accrued costs related to restructuring	$	66	$	592	$	(658	)	$	—



Operating Lease Payments
Nine months ending December 31, 2020	$	1,744
Years ending December 31:
2021	2,056
2022	2,027
2023	1,136
2024	797
2025	283
Thereafter	356
Total operating lease payments	8,399
Less imputed interest	(887		)
Total operating lease liabilities	$	7,512


¹	End customers include customers who purchase directly from us, as well as customers who purchase our products indirectly through distributors.