Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2016 | Oct. 31, 2016 | |
Entity Information [Line Items] | ||
Entity Registrant Name | Pixelworks, Inc. | |
Entity Central Index Key | 1,040,161 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Accelerated Filer | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2016 | |
Document Fiscal Year Focus | 2,016 | |
Document Fiscal Period Focus | Q3 | |
Amendment Flag | false | |
Entity Common Stock, Shares Outstanding | 28,656,137 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Sep. 30, 2016 | Dec. 31, 2015 |
Current assets: | ||
Cash and cash equivalents | $ 16,580 | $ 26,591 |
Accounts receivable, net | 3,895 | 5,988 |
Inventories | 3,084 | 3,266 |
Prepaid expenses and other current assets | 661 | 644 |
Total current assets | 24,220 | 36,489 |
Property and equipment, net | 4,269 | 6,543 |
Other assets, net | 759 | 810 |
Total assets | 29,248 | 43,842 |
Current liabilities: | ||
Accounts payable | 1,980 | 2,944 |
Accrued liabilities and current portion of long-term liabilities | 7,564 | 8,528 |
Current portion of income taxes payable | 152 | 221 |
Short-term line of credit | 0 | 3,000 |
Total current liabilities | 9,696 | 14,693 |
Long-term liabilities, net of current portion | 398 | 831 |
Income taxes payable, net of current portion | 1,926 | 1,942 |
Total liabilities | 12,020 | 17,466 |
Commitments and contingencies (Note 10) | ||
Shareholders’ equity: | ||
Preferred stock | 0 | 0 |
Common stock | 392,816 | 390,520 |
Accumulated other comprehensive income | 6 | 6 |
Accumulated deficit | (375,594) | (364,150) |
Total shareholders’ equity | 17,228 | 26,376 |
Total liabilities and shareholders’ equity | $ 29,248 | $ 43,842 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | ||
Revenue, net | $ 13,656 | $ 16,570 | $ 37,403 | $ 46,040 | |
Cost of revenue (1) | [1] | 7,099 | 8,292 | 20,839 | 23,561 |
Gross profit | 6,557 | 8,278 | 16,564 | 22,479 | |
Operating expenses: | |||||
Research and development (2) | [2] | 4,442 | 6,145 | 14,621 | 18,568 |
Selling, general and administrative (3) | [3] | 3,072 | 3,334 | 10,117 | 10,805 |
Restructuring | 3 | 0 | 2,608 | 0 | |
Total operating expenses | 7,517 | 9,479 | 27,346 | 29,373 | |
Loss from operations | (960) | (1,201) | (10,782) | (6,894) | |
Interest expense and other, net | (99) | (105) | (305) | (317) | |
Loss before income taxes | (1,059) | (1,306) | (11,087) | (7,211) | |
Provision (benefit) for income taxes | 183 | (63) | 357 | 192 | |
Net loss | $ (1,242) | $ (1,243) | $ (11,444) | $ (7,403) | |
Net loss per share - basic and diluted | $ (0.04) | $ (0.05) | $ (0.41) | $ (0.31) | |
Weighted average shares outstanding - basic and diluted 1 | [4] | 28,313 | 25,735 | 28,139 | 24,210 |
[1] | Includes: Stock-based compensation 49 52 139 147Restructuring 27 — 1,777 — Additional amortization of non-cancelable prepaid royalty — (14) 0 (14) | ||||
[2] | Includes: Stock-based compensation 401 524 1,222 1,442 | ||||
[3] | Includes: Stock-based compensation 334 443 495 1,401 | ||||
[4] | The increase in shares from the first nine months of 2015 to the first nine months of 2016 is primarily due to the sale of 3,738 shares of common stock in an underwritten registered offering during August 2015. |
Condensed Consolidated Stateme4
Condensed Consolidated Statements of Operations (Parenthetical) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Cost of revenue | ||||
Stock-based compensation | $ 49 | $ 52 | $ 139 | $ 147 |
Restructuring | 27 | 0 | 1,777 | 0 |
Additional amortization of non-cancelable prepaid royalty | 0 | (14) | 0 | (14) |
Research and development | ||||
Stock-based compensation | 401 | 524 | 1,222 | 1,442 |
Selling, general and administrative | ||||
Stock-based compensation | $ 334 | $ 443 | $ 495 | $ 1,401 |
Condensed Consolidated Stateme5
Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | |
Cash flows from operating activities: | ||
Net loss | $ (11,444) | $ (7,403) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation and amortization | 2,638 | 3,225 |
Stock-based compensation | 1,856 | 2,990 |
Write off of certain assets to restructuring | 1,744 | 0 |
Reversal of uncertain tax positions | (170) | (323) |
Other | 47 | 42 |
Changes in operating assets and liabilities: | ||
Accounts receivable, net | 2,093 | (86) |
Inventories | (101) | (613) |
Prepaid expenses and other current and long-term assets, net | (40) | 25 |
Accounts payable | (973) | (94) |
Accrued current and long-term liabilities | (297) | 83 |
Income taxes payable | 85 | 132 |
Net cash used in operating activities | (4,562) | (2,022) |
Cash flows from investing activities: | ||
Purchases of property and equipment | (1,783) | (2,544) |
Purchases of licensed technology | 0 | (55) |
Net cash used in investing activities | (1,783) | (2,599) |
Cash flows from financing activities: | ||
Payments on line of credit | (3,000) | 0 |
Payments on asset financings | (1,069) | (1,627) |
Proceeds from issuance of common stock under employee equity incentive plans | 403 | 990 |
Net proceeds from equity offering | 0 | 16,356 |
Net cash provided by (used in) financing activities | (3,666) | 15,719 |
Net increase (decrease) in cash and cash equivalents | (10,011) | 11,098 |
Cash and cash equivalents, beginning of period | 26,591 | 17,926 |
Cash and cash equivalents, end of period | 16,580 | 29,024 |
Supplemental disclosure of cash flow information: | ||
Cash paid for income taxes, net of refunds received | 411 | 340 |
Cash paid during the period for interest | 107 | 86 |
Non-cash investing and financing activities: | ||
Acquisitions of property and equipment and other assets under extended payment terms | $ 0 | $ 427 |
Basis of Presentation
Basis of Presentation | 9 Months Ended |
Sep. 30, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | BASIS OF PRESENTATION Nature of Business Pixelworks designs, develops and markets video and pixel processing semiconductors, intellectual property cores, software and custom ASIC solutions for high-end digital video applications. Our products allow manufacturers and developers of digital display and projection devices to manufacture screens of all sizes that display the highest video quality with minimum power consumption. Our core video display processing technology intelligently processes video signals from a variety of sources and optimizes the image for the viewer. The continued advancement of display technology and rapid growth of video consumption on digital delivery systems and mobile applications has increased the demand for video display processing technology in recent years. Our products are used in a range of devices from large flat panel displays to small low power mobile applications. Our products are designed to reduce overall system power requirements and reduce costs for our customers by minimizing bandwidth, reducing panel costs and optimizing the video display pipeline efficiency. Our primary target markets include digital projection systems, tablets and smartphones. As of September 30, 2016, we had an intellectual property portfolio of 144 patents related to the visual display of digital image data. Pixelworks was founded in 1997 and is incorporated under the laws of the state of Oregon. Condensed Consolidated Financial Statements The financial information included herein for the three and nine month periods ended September 30, 2016 and 2015 is prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and is unaudited. Such information reflects all adjustments, consisting of normal recurring adjustments, that are, in the opinion of management, necessary for a fair presentation of the Company's condensed consolidated financial statements for these interim periods. The financial information as of December 31, 2015 is derived from our audited consolidated financial statements and notes thereto for the fiscal year ended December 31, 2015, included in Item 8 of our Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 9, 2016, and should be read in conjunction with such consolidated financial statements. The results of operations for the three and nine month periods ended September 30, 2016 are not necessarily indicative of the results expected for future periods or for the entire fiscal year ending December 31, 2016. Comprehensive Income (Loss) The Company reports comprehensive income (loss) and its components following guidance set forth by the Financial Accounting Standards Board (the “FASB”), Accounting Standards Codification section 220-10, Comprehensive Income, which establishes standards for the reporting and display of comprehensive income or loss and its components in the financial statements. During the three and nine month periods ended September 30, 2016 and 2015, aside from our net loss, there were no other items of comprehensive income or loss and therefore the Company has not included a statement of comprehensive income (loss) in our interim condensed consolidated financial statements. Recent Accounting Pronouncements In March 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Shared-Based Payment Accounting ("ASU 2016-09"). ASU 2016-09 makes several modifications to Topic 718 related to the accounting for forfeitures, employer tax withholding on share-based compensation and the financial statement presentation of excess tax benefits or deficiencies. ASU 2016-09 also clarifies the statement of cash flows presentation for certain components of share-based awards. The standard is effective for the Company on January 1, 2017, although early adoption is permitted. The Company is evaluating the potential effects of the adoption of this update on its financial position, results of operations and cash flows. In February 2016, the FASB issued Accounting Standards Update No. 2016-02, Leases (Topic 842) ("ASU 2016-02"). ASU 2016-02 requires a dual approach for lessee accounting under which a lessee would account for leases as finance leases or operating leases. Both finance leases and operating leases will result in the lessee recognizing a right-of-use (ROU) asset and a corresponding lease liability. For finance leases the lessee would recognize interest expense and amortization of the ROU asset and for operating leases the lessee would recognize a straight-line total lease expense. ASU 2016-02 will become effective for the Company on January 1, 2019. The Company is evaluating the potential effects of the adoption of this update on its financial position, results of operations and cash flows. In July 2015, the FASB issued Accounting Standards Update No. 2015-11, Simplifying the Measurement of Inventory ("ASU 2015-11"), which changes the measurement principle for inventory from the lower of cost or market to the lower of cost and net realizable value. ASU 2015-11 defines net realizable value as estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. ASU 2015-11 is effective prospectively and is effective for the Company on January 1, 2017, with early adoption permitted. We do not expect the adoption of this accounting standard update to materially impact our financial position, results of operations, or cash flows. In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers ("ASU 2014-09"), which requires that an entity recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. ASU 2014-09 allows for either full retrospective or modified retrospective adoption and will become effective for the Company on January 1, 2018. The Company is evaluating the alternative transition methods and the potential effects of the adoption of this update on its financial position, results of operations and cash flows. Use of Estimates The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires us to make estimates and judgments that affect amounts reported in the financial statements and accompanying notes. Our significant estimates and judgments include those related to revenue recognition, product returns, warranty obligations, bad debts, inventories, property and equipment, impairment of long-lived assets, valuation of share-based payments, income taxes, litigation and other contingencies. The actual results experienced could differ materially from our estimates. |
Balance Sheet Components
Balance Sheet Components | 9 Months Ended |
Sep. 30, 2016 | |
Balance Sheet Related Disclosures [Abstract] | |
Balance Sheet Components | BALANCE SHEET COMPONENTS Accounts Receivable, Net Accounts receivable are recorded at invoiced amount and do not bear interest when recorded or accrue interest when past due. Accounts receivable are stated net of an allowance for doubtful accounts, which is maintained for estimated losses that may result from the inability of our customers to make required payments. Accounts receivable consists of the following: September 30, December 31, Accounts receivable, gross $ 3,934 $ 6,048 Less: allowance for doubtful accounts (39 ) (60 ) Accounts receivable, net $ 3,895 $ 5,988 The following is the change in our allowance for doubtful accounts: Nine Months Ended September 30, 2016 2015 Balance at beginning of period $ 60 $ 301 Reductions credited (21 ) (2 ) Accounts written-off, net of recoveries — (250 ) Balance at end of period $ 39 $ 49 Inventories Inventories consist of finished goods and work-in-process, and are stated at the lower of standard cost (which approximates actual cost on a first-in, first-out basis) or market (net realizable value). Inventories consist of the following: September 30, December 31, Finished goods $ 2,218 $ 2,174 Work-in-process 866 1,092 Inventories $ 3,084 $ 3,266 Property and Equipment, Net Property and equipment consists of the following: September 30, December 31, Gross carrying amount $ 26,326 $ 26,220 Less: accumulated depreciation and amortization (22,057 ) (19,677 ) Property and equipment, net $ 4,269 $ 6,543 Accrued Liabilities and Current Portion of Long-Term Liabilities Accrued liabilities and current portion of long-term liabilities consist of the following: September 30, December 31, Accrued commissions and royalties 2,389 2,220 Accrued interest payable 1,993 1,754 Accrued payroll and related liabilities 1,990 2,419 Current portion of accrued liabilities for asset financings 523 1,241 Accrued costs related to restructuring 80 — Liability for warranty returns 25 49 Other 564 845 Accrued liabilities and current portion of long-term liabilities $ 7,564 $ 8,528 The following is the change in our liability for warranty returns: Nine Months Ended September 30, 2016 2015 Liability for warranty returns: Balance at beginning of period $ 49 $ 105 Charge-offs (20 ) (12 ) Benefit (4 ) (67 ) Balance at end of period $ 25 $ 26 Short-Term Line of Credit On December 21, 2010, we entered into a Loan and Security Agreement (the "Revolving Loan Agreement") with Silicon Valley Bank (the "Bank"). On December 14, 2012, we and the Bank entered into Amendment No. 1 to the Revolving Loan Agreement (the "Amendment No. 1"). The Revolving Loan Agreement, as amended, provides a secured working capital-based revolving line of credit (the "Revolving Line") in an aggregate amount of up to the lesser of (i) $10,000 , or (ii) $1,000 plus 80% of eligible domestic accounts receivable and certain foreign accounts receivable. On December 4, 2013, we and the Bank entered into Amendment No. 2 (the "Amendment No. 2") to the Revolving Loan Agreement which changes the maturity date of the Revolving Line to January 1, 2016. The maturity date was previously December 14, 2014, as provided by Amendment No. 1. On December 18, 2015, we and the Bank entered into Amendment No. 3 to the Revolving Loan Agreement which changes the maturity date of the revolving line of credit provided pursuant to the Revolving Loan Agreement to December 30, 2016. The maturity date was previously January 1, 2016, as provided by Amendment No. 2 to the Revolving Loan Agreement. In addition, the Revolving Loan Agreement, as amended, provides for non-formula advances of up to $10,000 which may be made solely during the last five business days of any fiscal month or quarter and which must be repaid by the Company on or before the fifth business day after the applicable fiscal month or quarter end. Due to their repayment terms, non-formula advances do not provide the Company with usable liquidity. The Revolving Loan Agreement, as amended, contains customary affirmative and negative covenants as well as customary events of default. The occurrence of an event of default could result in the acceleration of the Company's obligations under the Revolving Loan Agreement, as amended, and an increase to the applicable interest rate, and would permit the Bank to exercise remedies with respect to its security interest. As of September 30, 2016, we were in compliance with all of the terms of the Revolving Loan Agreement, as amended. As of September 30, 2016, we had no outstanding borrowings on the Revolving Line. Short-term borrowings outstanding under the Revolving Line as of December 31, 2015 consisted of a non-formula advance of $3,000 which was repaid within required terms. The weighted-average interest rate on short-term borrowings outstanding as of December 31, 2015 was 3.75% . |
Fair Value Measurements
Fair Value Measurements | 9 Months Ended |
Sep. 30, 2016 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements | FAIR VALUE MEASUREMENTS Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Three levels of inputs may be used to measure fair value: 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. The following table presents information about our assets measured at fair value on a recurring basis in the condensed consolidated balance sheets as of September 30, 2016 and December 31, 2015: Level 1 Level 2 Level 3 Total As of September 30, 2016: Money market funds $ 15,112 $ — $ — $ 15,112 As of December 31, 2015: Money market funds $ 25,343 $ — $ — $ 25,343 We primarily use the market approach to determine the fair value of our financial assets. The fair value of our current assets and liabilities, including accounts receivable and accounts payable approximates the carrying value due to the short-term nature of these balances. We have currently chosen not to elect the fair value option for any items that are not already required to be measured at fair value in accordance with U.S. GAAP. |
Restructuring
Restructuring | 9 Months Ended |
Sep. 30, 2016 | |
Restructuring and Related Activities [Abstract] | |
Restructuring | RESTRUCTURING In April 2016, we executed a restructuring plan to streamline the Company’s operations and product offerings and to align the Company’s expenses with current revenue levels. The plan included an approximately 24% reduction in workforce, primarily in the area of development, however, it also impacted operations, sales and marketing. The plan also included abandonment of certain assets resulting in impairment charges to write off the assets associated with markets we are no longer pursuing. We expect to incur additional restructuring charges of $27 over the remainder of 2016. Total restructuring expense included in our statement of operations for the nine month period ended September 30, 2016 is comprised of the following: Nine Months Ended September 30, 2016 Cost of revenue — restructuring: Tooling and inventory write offs $ 1,679 Employee severance and benefits 98 1,777 Operating expenses — restructuring: Employee severance and benefits $ 2,513 Licensed technology and other assets write offs 65 Other 30 2,608 Total restructuring expense $ 4,385 The following is a rollforward of the accrued liabilities related to restructuring for the nine month period ended September 30, 2016: Balance as of December 31, 2015 Expensed Payments Balance as of September 30, 2016 Employee severance and benefits $ — $ 2,611 $ (2,531 ) $ 80 Other — 30 (30 ) — Accrued costs related to restructuring $ — $ 2,641 $ (2,561 ) $ 80 |
Income Taxes
Income Taxes | 9 Months Ended |
Sep. 30, 2016 | |
Income Tax Disclosure [Abstract] | |
Incomes Taxes | INCOME TAXES The provision for income taxes during the 2016 and 2015 periods is primarily comprised of current and deferred tax expense in profitable cost-plus foreign jurisdictions, accruals for tax contingencies in foreign jurisdictions and benefits for the reversal of previously recorded foreign tax contingencies due to the expiration of the applicable statutes of limitation. We recorded a benefit for the reversal of previously recorded foreign tax contingencies of $170 and $323 during the first nine months of 2016 and 2015, respectively. As we do not believe that it is more likely than not that we will realize a benefit from our U.S. net deferred tax assets, including our U.S. net operating losses, we continue to provide a full valuation allowance against essentially all of those assets, therefore, we do not incur significant U.S. income tax expense or benefit. We have not recorded a valuation allowance against our other foreign net deferred tax assets as we believe that it is more likely than not that we will realize a benefit from those assets. As of September 30, 2016 and December 31, 2015, the amount of our uncertain tax positions was a liability of $1,434 and $1,519 , respectively, and a reduction to deferred tax assets of $561 and $473 , respectively. A number of years may elapse before an uncertain tax position is resolved by settlement or statute of limitation. Settlement of any particular position could require the use of cash. If the uncertain tax positions we have accrued for are sustained by the taxing authorities in our favor, the reduction of the liability will reduce our effective tax rate. We reasonably expect reductions in the liability for unrecognized tax benefits and interest and penalties of approximately $183 within the next twelve months due to the expiration of statutes of limitation in foreign jurisdictions. We recognize interest and penalties related to uncertain tax positions in income tax expense in our consolidated statements of operations. |
Earnings Per Share
Earnings Per Share | 9 Months Ended |
Sep. 30, 2016 | |
Earnings Per Share [Abstract] | |
Earnings Per Share | EARNINGS PER SHARE The following table sets forth the computation of basic and diluted net loss per share (in thousands, except per share data): Three Months Ended Nine Months Ended September 30, September 30, 2016 2015 2016 2015 Net loss $ (1,242 ) $ (1,243 ) $ (11,444 ) $ (7,403 ) Weighted average shares outstanding - basic and diluted 1 28,313 25,735 28,139 24,210 Net loss per share - basic and diluted $ (0.04 ) $ (0.05 ) $ (0.41 ) $ (0.31 ) 1 The increase in shares from the first nine months of 2015 to the first nine months of 2016 is primarily due to the sale of 3,738 shares of common stock in an underwritten registered offering during August 2015. The following weighted average shares were excluded from the calculation of diluted net loss per share as their effect would have been anti-dilutive (in thousands, except per share data): Three Months Ended Nine Months Ended September 30, September 30, 2016 2015 2016 2015 Employee equity incentive plans 4,952 4,302 4,643 4,234 Potentially dilutive common shares from employee equity incentive plans are determined by applying the treasury stock method to the assumed exercise of outstanding stock options, the assumed vesting of outstanding restricted stock units, and the assumed issuance of common stock under the employee stock purchase plan. |
Shareholders' Equity
Shareholders' Equity | 9 Months Ended |
Sep. 30, 2016 | |
Equity [Abstract] | |
Shareholders' Equity | SHAREHOLDERS' EQUITY On August 12, 2015, we completed the sale of 3,737,500 shares of common stock, in an underwritten registered offering at a price to the public of $4.75 per share. Net proceeds to the Company, after deducting underwriting discounts and commissions and other expenses payable by us were approximately $16,356 . |
Segment Information
Segment Information | 9 Months Ended |
Sep. 30, 2016 | |
Segment Reporting [Abstract] | |
Segment Information | SEGMENT INFORMATION We have identified a single operating segment: the design and development of integrated circuits for use in electronic display devices. The majority of our assets are located in the United States. Geographic Information Revenue by geographic region, is as follows: Three Months Ended Nine Months Ended September 30, September 30, 2016 2015 2016 2015 Japan $ 11,255 $ 14,295 $ 31,207 $ 38,835 Taiwan 1,268 1,602 3,537 4,682 China 394 189 891 608 Korea 273 217 688 803 Europe 175 124 475 463 United States 20 23 74 92 Other 271 120 531 557 $ 13,656 $ 16,570 $ 37,403 $ 46,040 Significant Customers The percentage of revenue attributable to our distributors, top five end customers, and individual distributors or end customers that represented 10% or more of revenue in at least one of the periods presented, is as follows: Three Months Ended Nine Months Ended September 30, September 30, 2016 2015 2016 2015 Distributors: All distributors 35 % 48 % 42 % 46 % Distributor A 17 % 32 % 24 % 29 % End customers: 1 Top five end customers 83 % 85 % 82 % 83 % End customer A 62 % 48 % 54 % 49 % End customer B 7 % 13 % 9 % 11 % 1 End customers include customers who purchase directly from us, as well as customers who purchase our products indirectly through distributors. The following accounts represented 10% or more of total accounts receivable in at least one of the periods presented: September 30, December 31, Account X 72 % 49 % Account Y 6 % 34 % |
Risks and Uncertainties
Risks and Uncertainties | 9 Months Ended |
Sep. 30, 2016 | |
Risks and Uncertainties [Abstract] | |
Risks and Uncertainties | RISKS AND UNCERTAINTIES Concentration of Suppliers We do not own or operate a semiconductor fabrication facility and do not have the resources to manufacture our products internally. We rely on a limited number of foundries and assembly and test vendors to produce all of our wafers and for completion of finished products. We do not have any long-term agreements with any of these suppliers. In light of these dependencies, it is reasonably possible that failure to perform by one of these suppliers could have a severe impact on our results of operations. Additionally, the concentration of these vendors within Taiwan, the People’s Republic of China and Singapore increases our risk of supply disruption due to natural disasters, economic instability, political unrest or other regional disturbances. Risk of Technological Change The markets in which we compete, or seek to compete, are subject to rapid technological change, frequent new product introductions, changing customer requirements for new products and features, and evolving industry standards. The introduction of new technologies and the emergence of new industry standards could render our products less desirable or obsolete, which could harm our business. Concentrations of Credit Risk Financial instruments that potentially subject us to concentrations of credit risk consist of cash equivalents and accounts receivable. We limit our exposure to credit risk associated with cash equivalent balances by holding our funds in high quality, highly liquid money market accounts. We limit our exposure to credit risk associated with accounts receivable by carefully evaluating creditworthiness before offering terms to customers. |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | COMMITMENTS AND CONTINGENCIES Indemnifications Certain of our agreements include indemnification provisions for claims from third-parties relating to our intellectual property. It is not possible for us to predict the maximum potential amount of future payments or indemnification costs under these or similar agreements due to the conditional nature of our obligations and the unique facts and circumstances involved in each particular agreement. We have not made any payments under these agreements in the past, and as of September 30, 2016, we have not incurred any material liabilities arising from these indemnification obligations. In the future, however, such obligations could materially impact our results of operations. Legal Proceedings We are subject to legal matters that arise from time to time in the ordinary course of our business. Although we currently believe that resolving such matters, individually or in the aggregate, will not have a material adverse effect on our financial position, our results of operations, or our cash flows, these matters are subject to inherent uncertainties and our view of these matters may change in the future. |
Basis of Presentation (Policies
Basis of Presentation (Policies) | 9 Months Ended |
Sep. 30, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In March 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Shared-Based Payment Accounting ("ASU 2016-09"). ASU 2016-09 makes several modifications to Topic 718 related to the accounting for forfeitures, employer tax withholding on share-based compensation and the financial statement presentation of excess tax benefits or deficiencies. ASU 2016-09 also clarifies the statement of cash flows presentation for certain components of share-based awards. The standard is effective for the Company on January 1, 2017, although early adoption is permitted. The Company is evaluating the potential effects of the adoption of this update on its financial position, results of operations and cash flows. In February 2016, the FASB issued Accounting Standards Update No. 2016-02, Leases (Topic 842) ("ASU 2016-02"). ASU 2016-02 requires a dual approach for lessee accounting under which a lessee would account for leases as finance leases or operating leases. Both finance leases and operating leases will result in the lessee recognizing a right-of-use (ROU) asset and a corresponding lease liability. For finance leases the lessee would recognize interest expense and amortization of the ROU asset and for operating leases the lessee would recognize a straight-line total lease expense. ASU 2016-02 will become effective for the Company on January 1, 2019. The Company is evaluating the potential effects of the adoption of this update on its financial position, results of operations and cash flows. In July 2015, the FASB issued Accounting Standards Update No. 2015-11, Simplifying the Measurement of Inventory ("ASU 2015-11"), which changes the measurement principle for inventory from the lower of cost or market to the lower of cost and net realizable value. ASU 2015-11 defines net realizable value as estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. ASU 2015-11 is effective prospectively and is effective for the Company on January 1, 2017, with early adoption permitted. We do not expect the adoption of this accounting standard update to materially impact our financial position, results of operations, or cash flows. In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers ("ASU 2014-09"), which requires that an entity recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. ASU 2014-09 allows for either full retrospective or modified retrospective adoption and will become effective for the Company on January 1, 2018. The Company is evaluating the alternative transition methods and the potential effects of the adoption of this update on its financial position, results of operations and cash flows. |
Use of Estimates | Use of Estimates The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires us to make estimates and judgments that affect amounts reported in the financial statements and accompanying notes. Our significant estimates and judgments include those related to revenue recognition, product returns, warranty obligations, bad debts, inventories, property and equipment, impairment of long-lived assets, valuation of share-based payments, income taxes, litigation and other contingencies. The actual results experienced could differ materially from our estimates. |
Receivables, Policy | Accounts receivable are recorded at invoiced amount and do not bear interest when recorded or accrue interest when past due. Accounts receivable are stated net of an allowance for doubtful accounts, which is maintained for estimated losses that may result from the inability of our customers to make required payments. |
Inventory, Policy | Inventories consist of finished goods and work-in-process, and are stated at the lower of standard cost (which approximates actual cost on a first-in, first-out basis) or market (net realizable value). |
Balance Sheet Components (Table
Balance Sheet Components (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Balance Sheet Related Disclosures [Abstract] | |
Accounts Receivable, Net | Accounts receivable consists of the following: September 30, December 31, Accounts receivable, gross $ 3,934 $ 6,048 Less: allowance for doubtful accounts (39 ) (60 ) Accounts receivable, net $ 3,895 $ 5,988 |
Allowance for Doubtful Accounts | The following is the change in our allowance for doubtful accounts: Nine Months Ended September 30, 2016 2015 Balance at beginning of period $ 60 $ 301 Reductions credited (21 ) (2 ) Accounts written-off, net of recoveries — (250 ) Balance at end of period $ 39 $ 49 |
Inventories | Inventories consist of the following: September 30, December 31, Finished goods $ 2,218 $ 2,174 Work-in-process 866 1,092 Inventories $ 3,084 $ 3,266 |
Property and Equipment, Net | Property and equipment consists of the following: September 30, December 31, Gross carrying amount $ 26,326 $ 26,220 Less: accumulated depreciation and amortization (22,057 ) (19,677 ) Property and equipment, net $ 4,269 $ 6,543 |
Accrued Liabilities and Current Portion of Long-Term Liabilities | Accrued liabilities and current portion of long-term liabilities consist of the following: September 30, December 31, Accrued commissions and royalties 2,389 2,220 Accrued interest payable 1,993 1,754 Accrued payroll and related liabilities 1,990 2,419 Current portion of accrued liabilities for asset financings 523 1,241 Accrued costs related to restructuring 80 — Liability for warranty returns 25 49 Other 564 845 Accrued liabilities and current portion of long-term liabilities $ 7,564 $ 8,528 |
Liability for Warranty Returns | The following is the change in our liability for warranty returns: Nine Months Ended September 30, 2016 2015 Liability for warranty returns: Balance at beginning of period $ 49 $ 105 Charge-offs (20 ) (12 ) Benefit (4 ) (67 ) Balance at end of period $ 25 $ 26 |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Fair Value Disclosures [Abstract] | |
Schedule of Fair Value, Assets Measured on Recurring Basis | The following table presents information about our assets measured at fair value on a recurring basis in the condensed consolidated balance sheets as of September 30, 2016 and December 31, 2015: Level 1 Level 2 Level 3 Total As of September 30, 2016: Money market funds $ 15,112 $ — $ — $ 15,112 As of December 31, 2015: Money market funds $ 25,343 $ — $ — $ 25,343 |
Restructuring (Tables)
Restructuring (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Restructuring and Related Activities [Abstract] | |
Restructuring Expense by Components | Total restructuring expense included in our statement of operations for the nine month period ended September 30, 2016 is comprised of the following: Nine Months Ended September 30, 2016 Cost of revenue — restructuring: Tooling and inventory write offs $ 1,679 Employee severance and benefits 98 1,777 Operating expenses — restructuring: Employee severance and benefits $ 2,513 Licensed technology and other assets write offs 65 Other 30 2,608 Total restructuring expense $ 4,385 |
Schedule of Accrued Restructuring Liabilities | The following is a rollforward of the accrued liabilities related to restructuring for the nine month period ended September 30, 2016: Balance as of December 31, 2015 Expensed Payments Balance as of September 30, 2016 Employee severance and benefits $ — $ 2,611 $ (2,531 ) $ 80 Other — 30 (30 ) — Accrued costs related to restructuring $ — $ 2,641 $ (2,561 ) $ 80 |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Earnings Per Share [Abstract] | |
Earnings Per Share | The following table sets forth the computation of basic and diluted net loss per share (in thousands, except per share data): Three Months Ended Nine Months Ended September 30, September 30, 2016 2015 2016 2015 Net loss $ (1,242 ) $ (1,243 ) $ (11,444 ) $ (7,403 ) Weighted average shares outstanding - basic and diluted 1 28,313 25,735 28,139 24,210 Net loss per share - basic and diluted $ (0.04 ) $ (0.05 ) $ (0.41 ) $ (0.31 ) |
Antidilutive Securities Excluded from Computation of Earnings Per Share | The following weighted average shares were excluded from the calculation of diluted net loss per share as their effect would have been anti-dilutive (in thousands, except per share data): Three Months Ended Nine Months Ended September 30, September 30, 2016 2015 2016 2015 Employee equity incentive plans 4,952 4,302 4,643 4,234 |
Segment Information (Tables)
Segment Information (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Segment Reporting [Abstract] | |
Schedule of Revenue by Geographic Region | Revenue by geographic region, is as follows: Three Months Ended Nine Months Ended September 30, September 30, 2016 2015 2016 2015 Japan $ 11,255 $ 14,295 $ 31,207 $ 38,835 Taiwan 1,268 1,602 3,537 4,682 China 394 189 891 608 Korea 273 217 688 803 Europe 175 124 475 463 United States 20 23 74 92 Other 271 120 531 557 $ 13,656 $ 16,570 $ 37,403 $ 46,040 |
Schedule of Revenue from Significant Customers | The percentage of revenue attributable to our distributors, top five end customers, and individual distributors or end customers that represented 10% or more of revenue in at least one of the periods presented, is as follows: Three Months Ended Nine Months Ended September 30, September 30, 2016 2015 2016 2015 Distributors: All distributors 35 % 48 % 42 % 46 % Distributor A 17 % 32 % 24 % 29 % End customers: 1 Top five end customers 83 % 85 % 82 % 83 % End customer A 62 % 48 % 54 % 49 % End customer B 7 % 13 % 9 % 11 % 1 End customers include customers who purchase directly from us, as well as customers who purchase our products indirectly through distributors. |
Schedule of Accounts Receivable Percentage from Significant Customers | The following accounts represented 10% or more of total accounts receivable in at least one of the periods presented: September 30, December 31, Account X 72 % 49 % Account Y 6 % 34 % |
Basis of Presentation (Details)
Basis of Presentation (Details) | Sep. 30, 2016patent |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Number of patents held | 144 |
Balance Sheet Components (Accou
Balance Sheet Components (Accounts Receivable) (Details) - USD ($) $ in Thousands | Sep. 30, 2016 | Dec. 31, 2015 | Sep. 30, 2015 | Dec. 31, 2014 |
Accounts Receivable, Net [Abstract] | ||||
Accounts receivable, gross | $ 3,934 | $ 6,048 | ||
Less: allowance for doubtful accounts | (39) | (60) | $ (49) | $ (301) |
Accounts receivable, net | $ 3,895 | $ 5,988 |
Balance Sheet Components (Allow
Balance Sheet Components (Allowance for Doubtful Accounts) (Details) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | |
Allowance for Doubtful Accounts Receivable [Roll Forward] | ||
Balance at beginning of period | $ 60 | $ 301 |
Reductions credited | (21) | (2) |
Accounts written-off, net of recoveries | 0 | 250 |
Balance at end of period | $ 39 | $ 49 |
Balance Sheet Components (Inven
Balance Sheet Components (Inventories) (Details) - USD ($) $ in Thousands | Sep. 30, 2016 | Dec. 31, 2015 |
Balance Sheet Related Disclosures [Abstract] | ||
Finished goods | $ 2,218 | $ 2,174 |
Work-in-process | 866 | 1,092 |
Inventories | $ 3,084 | $ 3,266 |
Balance Sheet Components (Prope
Balance Sheet Components (Property Plant and Equipment) (Details) - USD ($) $ in Thousands | Sep. 30, 2016 | Dec. 31, 2015 |
Balance Sheet Related Disclosures [Abstract] | ||
Gross carrying amount | $ 26,326 | $ 26,220 |
Less: accumulated depreciation and amortization | (22,057) | (19,677) |
Property and equipment, net | $ 4,269 | $ 6,543 |
Balance Sheet Components (Accru
Balance Sheet Components (Accrued Liabilities and Current Portion of Long-Term Liabilities) (Details) - USD ($) $ in Thousands | Sep. 30, 2016 | Dec. 31, 2015 | Sep. 30, 2015 | Dec. 31, 2014 |
Balance Sheet Related Disclosures [Abstract] | ||||
Accrued payroll and related liabilities | $ 1,990 | $ 2,419 | ||
Accrued commissions and royalties | 2,389 | 2,220 | ||
Accrued interest payable | 1,993 | 1,754 | ||
Current portion of accrued liabilities for asset financings | 523 | 1,241 | ||
Accrued costs related to restructuring | 80 | 0 | ||
Liability for warranty returns | 25 | 49 | $ 26 | $ 105 |
Other | 564 | 845 | ||
Accrued liabilities and current portion of long-term liabilities | $ 7,564 | $ 8,528 |
Balance Sheet Components (Reser
Balance Sheet Components (Reserve for Warranty Returns) (Details) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | |
Movement in Standard Product Warranty Accrual [Roll Forward] | ||
Balance at beginning of period | $ 49 | $ 105 |
Charge-offs | (20) | (12) |
Benefit | (4) | (67) |
Balance at end of period | $ 25 | $ 26 |
Balance Sheet Components (Short
Balance Sheet Components (Short-Term Line of Credit) (Narrative) (Details) - USD ($) $ in Thousands | Sep. 30, 2016 | Dec. 31, 2015 | Dec. 18, 2015 |
Balance Sheet Related Disclosures [Abstract] | |||
Maximum borrowing capacity | $ 10,000 | ||
Line of credit facility, component of calculation for maximum borrowing amount under formula advances | $ 1,000 | ||
Line of credit facility maximum borrowing capacity limited by eligible AR | 80.00% | ||
Line of credit facility, maximum borrowing capacity under non-formula advances | $ 10,000 | ||
Line of credit facility, amount outstanding | $ 0 | $ 3,000 | |
Short-term debt, weighted average interest rate | 3.75% |
Fair Value Measurements (Detail
Fair Value Measurements (Details) - USD ($) $ in Thousands | Sep. 30, 2016 | Dec. 31, 2015 |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||
Money market funds | $ 15,112 | $ 25,343 |
Level 1 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||
Money market funds | 15,112 | 25,343 |
Level 2 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||
Money market funds | 0 | 0 |
Level 3 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||
Money market funds | $ 0 | $ 0 |
Restructuring (Details)
Restructuring (Details) - 2016 Restructuring Plan $ in Thousands | 1 Months Ended |
Apr. 30, 2016USD ($) | |
Restructuring Cost and Reserve [Line Items] | |
Approximate reduction in workforce from restructuring plan (percent) | 24.00% |
Additional restructuring charges expected to be incurred over remainder of 2016 | $ 27 |
Restructuring (Components of Re
Restructuring (Components of Restructuring Expense) (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Restructuring Cost and Reserve [Line Items] | ||||
Total restructuring expense | $ 3 | $ 0 | $ 2,608 | $ 0 |
2016 Restructuring Plan | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Total restructuring expense | 4,385 | |||
2016 Restructuring Plan | Cost of revenue — restructuring: | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Tooling and inventory write offs | 1,679 | |||
Employee severance and benefits | 98 | |||
Total restructuring expense | 1,777 | |||
2016 Restructuring Plan | Operating expenses — restructuring: | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Employee severance and benefits | 2,513 | |||
Licensed technology and other assets write offs | 65 | |||
Other | 30 | |||
Total restructuring expense | $ 2,608 |
Restructuring (Restructuring Re
Restructuring (Restructuring Reserve Rollforward) (Details) - 2016 Restructuring Plan $ in Thousands | 9 Months Ended |
Sep. 30, 2016USD ($) | |
Restructuring Reserve [Roll Forward] | |
Balance as of December 31, 2015 | $ 0 |
Expensed | 2,641 |
Payments | (2,561) |
Balance as of September 30, 2016 | 80 |
Employee severance and benefits | |
Restructuring Reserve [Roll Forward] | |
Balance as of December 31, 2015 | 0 |
Expensed | 2,611 |
Payments | (2,531) |
Balance as of September 30, 2016 | 80 |
Other | |
Restructuring Reserve [Roll Forward] | |
Balance as of December 31, 2015 | 0 |
Expensed | 30 |
Payments | (30) |
Balance as of September 30, 2016 | $ 0 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Thousands | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 | |
Income Tax Disclosure [Abstract] | |||
Reversal of uncertain tax positions | $ 170 | $ 323 | |
Liability for uncertain tax positions | 1,434 | $ 1,519 | |
Reduction to deferred tax assets | 561 | $ 473 | |
Estimated decrease in total gross unrecognized tax benefits as a result of resolutions of global tax examinations and expiration of applicable statutes of limitations, including interest and penalties | $ 183 |
Earnings Per Share (Earnings Pe
Earnings Per Share (Earnings Per Share) (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | ||
Earnings Per Share [Abstract] | |||||
Net loss | $ (1,242) | $ (1,243) | $ (11,444) | $ (7,403) | |
Weighted average shares outstanding - basic and diluted 1 | [1] | 28,313,000 | 25,735,000 | 28,139,000 | 24,210,000 |
Net loss per share - basic and diluted | $ (0.04) | $ (0.05) | $ (0.41) | $ (0.31) | |
Stock issued during period under registered offering, shares | 3,737,500 | ||||
[1] | The increase in shares from the first nine months of 2015 to the first nine months of 2016 is primarily due to the sale of 3,738 shares of common stock in an underwritten registered offering during August 2015. |
Earnings Per Share (Antidilutiv
Earnings Per Share (Antidilutive Effect on Weighted Average Shares) (Details) - shares shares in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Earnings Per Share [Abstract] | ||||
Employee equity incentive plans (in shares) | 4,952 | 4,302 | 4,643 | 4,234 |
Shareholders' Equity (Details)
Shareholders' Equity (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | |
Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Equity [Abstract] | |||
Stock issued during period under registered offering, shares | 3,737,500 | ||
Offering price per share | $ 4.75 | $ 4.75 | |
Net proceeds from equity offering | $ 16,356 | $ 0 | $ 16,356 |
Segment Information (Geographic
Segment Information (Geographic Information) (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Revenue, net | $ 13,656 | $ 16,570 | $ 37,403 | $ 46,040 |
Japan | ||||
Revenue, net | 11,255 | 14,295 | 31,207 | 38,835 |
Taiwan | ||||
Revenue, net | 1,268 | 1,602 | 3,537 | 4,682 |
China | ||||
Revenue, net | 394 | 189 | 891 | 608 |
Korea | ||||
Revenue, net | 273 | 217 | 688 | 803 |
Europe | ||||
Revenue, net | 175 | 124 | 475 | 463 |
United States | ||||
Revenue, net | 20 | 23 | 74 | 92 |
Other | ||||
Revenue, net | $ 271 | $ 120 | $ 531 | $ 557 |
Segment Information (Major Cust
Segment Information (Major Customers) (Narrative) (Details) | 9 Months Ended |
Sep. 30, 2016 | |
Segment Reporting Information | |
Number of customers included in five largest customer concentration disclosure | 5 |
Revenue, net | Minimum | |
Segment Reporting Information | |
Concentration risk benchmark percentage | 10.00% |
Accounts Receivable | Minimum | |
Segment Reporting Information | |
Concentration risk benchmark percentage | 10.00% |
Segment Information (Revenue by
Segment Information (Revenue by Major Customer) (Details) - Revenue, net | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | ||
All distributors | |||||
Revenue, Major Customer | |||||
Percentage of revenue | 35.00% | 48.00% | 42.00% | 46.00% | |
Distributor A | |||||
Revenue, Major Customer | |||||
Percentage of revenue | 17.00% | 32.00% | 24.00% | 29.00% | |
Top five end customers | |||||
Revenue, Major Customer | |||||
Percentage of revenue | [1] | 83.00% | 85.00% | 82.00% | 83.00% |
End customer A | |||||
Revenue, Major Customer | |||||
Percentage of revenue | [1] | 62.00% | 48.00% | 54.00% | 49.00% |
End customer B | |||||
Revenue, Major Customer | |||||
Percentage of revenue | [1] | 7.00% | 13.00% | 9.00% | 11.00% |
[1] | End customers include customers who purchase directly from us, as well as customers who purchase our products indirectly through distributors. |
Segment Information (Accounts R
Segment Information (Accounts Receivable by Major Customer) (Details) - Accounts Receivable | 9 Months Ended | 12 Months Ended |
Sep. 30, 2016 | Dec. 31, 2015 | |
Account X | ||
Segment Reporting Information | ||
Percentage of accounts receivable | 72.00% | 49.00% |
Account Y | ||
Segment Reporting Information | ||
Percentage of accounts receivable | 6.00% | 34.00% |