SAN DIEGO, Aug. 5, 2008 (PRIME NEWSWIRE) -- Entropic Communications, Inc. (Nasdaq:ENTR), a leading provider of silicon solutions to enable connected home entertainment, today reported its second quarter results for the period ended June 30, 2008. Entropic reported second quarter net revenues of $42.8 million, an increase of 2% compared with $42.0 million in the first quarter of 2008 and 63% higher than in the second quarter of 2007. The revenues in the second quarter of 2008 included revenues related to the acquisition of RF Magic, compared with the second quarter of 2007 which was prior to the acquisition.
In accordance with U.S. generally accepted accounting principles (GAAP), the company's second quarter net loss was $6.4 million, or ($0.10) per share (basic and diluted) on 67.2 million weighted average shares outstanding. This compares with GAAP net loss of $3.9 million, or ($0.06) per share (basic and diluted) on 66.7 million weighted average shares outstanding, in the first quarter of 2008. Non-GAAP net income in the second quarter was $1.2 million, or $0.02 per diluted share on 73.4 million average shares outstanding, compared to non-GAAP net income of $3.2 million, or $0.04 per diluted share on 73.6 million average shares outstanding, in the first quarter of 2008.
"In the second quarter we delivered sequential revenue growth of 2%. This was our 17th consecutive quarter of revenue growth and our fourth consecutive quarter of non-GAAP net income," said Patrick Henry, chairman and chief executive officer. "Since the close of the quarter, we have seen a dramatic slowdown in our MoCA business, specifically related to the Verizon FiOS deployment. Due to the sequential drop in Verizon FiOS subscriber growth in the second quarter and a resulting increase in inventory positions of MoCA-based customer premises equipment for Verizon, we expect significant softness in sales of our MoCA product line for the third quarter. We expect this situation to be partially mitigated by the ramp in our DBS outdoor unit business at DIRECTV. Our primary focus this quarter will be to drive new design wins across our product lines and to drive next generation product development efforts, while focusing on operating expense control."
Three months ended
--------------------------------
(In millions, June 30, Mar. 31, June 30,
except per share data) 2008 2008 2007
Net revenues $42.8 $42.0 $26.2
GAAP net loss ($6.4) ($3.9) ($23.8)
GAAP net loss per share
(basic and diluted) ($0.10) ($0.06) ($3.82)
Non-GAAP net income (loss)(1) $1.2 $3.2 ($1.2)
Non-GAAP net income (loss)
per share(1) $0.02 $0.04 ($0.20)
(1) Please refer to the financial statements portion of this press
release for an explanation of the non-GAAP financial measures
contained in the table above and a reconciliation of such measures to
the comparable GAAP financial measures.
Second Quarter Highlights
* Expanded our product offering and technical talent with the April 3, 2008 acquisition of Vativ Technologies, a fabless semiconductor company that designs and markets HDMI compliant chips sold into consumer electronics equipment * Announced the compliance of Entropic Channel Stacking Switch (CSS) products with ASTRA Single Cable Low Noise Block (LNB) down converter technical specification * Announced an additional deployment of Entropic's c.LINK Access technology in conjunction with QuiQom Systems in Europe
Other Recent Highlights
* Expanded our relationship with EchoStar Technologies and announced that Entropic's Band Translation Switch chips will be integrated in new EchoStar products available later this year * Announced that DIRECTV has incorporated Entropic's CSS technology in DIRECTV's SWM-ODU dish unit, a mainstream follow-on to this year's earlier announcement of DIRECTV's use of CSS technology in its MDU MFH-2 system * Extended our partnership with Actiontec to deliver high performance, next generation customer premise equipment for High-Speed Fiber network installations utilizing Entropic's MoCA 1.1 compliant chipsets to enable superior network delivery of HD video
For More Information
Entropic management will be holding a conference call today, August 5, 2008, at 2:00 p.m. Pacific Time/5:00 p.m. Eastern Time to discuss the company's results for the second quarter and to provide guidance for the third quarter. You may access the conference call via any of the following:
Teleconference: 719-325-4863 Conference ID: 7496952 Web Broadcast: http://ir.entropic.com/events.cfm Replay: 719-457-0820
About Entropic Communications
Entropic Communications, Inc. is a leading fabless semiconductor company that designs, develops and markets system solutions that enable connected home entertainment. The company's technologies significantly change the way high-definition television-quality video and other multimedia content such as movies, music, games and photos are brought into and delivered throughout the home. For more information please visit: www.entropic.com.
The Entropic Communications logo is available at http://www.primenewswire.com/newsroom/prs/?pkgid=4255
Forward Looking Statements
Statements in this press release that are not strictly historical in nature constitute "forward-looking statements." Such statements include, but are not limited to, statements regarding sales of our MoCA product line for the third quarter, the ramp of our DBS outdoor unit business at DIRECTV, and our focus on driving new design wins and product development efforts while controlling operating expenses during the third quarter. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause Entropic's actual results to be materially different from historical results or from any results expressed or implied by such forward-looking statements. These factors include, but are not limited to, our dependence on a limited number of customers for a substantial portion of our revenues; the ability of our customers or the service providers who purchase their products to successfully compete and continue to grow in their markets; the continued development of the market for HD video and other multi-media content delivery and networking solutions based on the MoCA standard; the effects of competition; risks related to international operations including political and economic conditions in foreign markets; our ability to effectively integrate acquired businesses and realize the anticipated financial and strategic benefits from businesses we acquire; risks associated with adverse U.S. and international economic conditions; and other factors discussed in the "Risk Factors" section of Entropic's Quarterly Report on Form 10-Q for the quarter ended March 31, 2008. All forward-looking statements are qualified in their entirety by this cautionary statement. Entropic is providing this information as of the date of this release and does not undertake any obligation to update any forward-looking statements contained in this release as a result of new information, future events or otherwise.
Entropic Communications(r) and the stylized Entropic "curve" logo are either trademarks or registered trademarks of Entropic Communications, Inc. in the United States and/or other countries.
ENTROPIC COMMUNICATIONS, INC.
GAAP Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended Six Months Ended
-------------------------------- --------------------
June 30, March 31, June 30, June 30, June 30,
2008 2008 2007 2008 2007
-------- -------- -------- -------- --------
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
Net
revenues $ 42,836 $ 41,988 $ 26,207 $ 84,824 $ 46,233
Cost of net
revenues 23,869 22,837 17,961 46,706 32,492
-------- -------- -------- -------- --------
Gross profit 18,967 19,151 8,246 38,118 13,741
Operating
expenses:
Research and
development 15,678 13,313 6,699 28,990 10,889
Sales and
marketing 4,455 4,144 1,859 8,599 3,359
General and
adminis-
trative 3,541 3,523 1,631 7,064 2,398
Write off of
in-process
research
and devel-
opment 1,300 -- 21,400 1,300 21,400
Amortization
of purchased
intangibles 713 596 42 1,309 42
Restructuring
charges (1) (10) 1,079 -- 1,069 --
-------- -------- -------- -------- --------
Total
operating
expenses 25,677 22,655 31,631 48,331 38,088
-------- -------- -------- -------- --------
Loss from
operations (6,710) (3,504) (23,385) (10,213) (24,347)
Other income
(expense),
net 191 (198) (337) (7) (487)
-------- -------- -------- -------- --------
Loss before
income taxes (6,519) (3,702) (23,722) (10,220) (24,834)
-------- -------- -------- -------- --------
Income tax
expense (72) 154 -- 82 --
-------- -------- -------- -------- --------
Net loss
before
accretion of
redeemable
convertible
preferred
stock (6,447) (3,856) (23,722) (10,302) (24,834)
Accretion of
redeemable
convertible
preferred
stock -- -- (31) -- (63)
-------- -------- -------- -------- --------
Net loss
attributable
to common
stock-
holders $ (6,447) $ (3,856) $(23,753) $(10,302) $(24,897)
======== ======== ======== ======== ========
Net loss per
share
attributable
to common
stockholders
(basic and
diluted) $ (0.10) $ (0.06) $ (3.82) $ (0.15) $ (4.33)
======== ======== ======== ======== ========
Weighted
average
shares (basic
and diluted) 67,215 66,662 6,223 67,023 5,756
======== ======== ======== ======== ========
(1) The restructuring charges are related to exiting the lease
agreement for the company's former headquarters in San Diego,
California, as well as charges for the impairment or property and
equipment and other long term assets.
ENTROPIC COMMUNICATIONS, INC.
GAAP Condensed Consolidated Balance Sheets
(In thousands)
June 30, March 31, Dec. 31,
2008 2008 2007
-------- -------- --------
(unaudited) (unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 17,027 $ 16,545 $ 51,533
Marketable securities 12,009 18,586 2,965
Accounts receivable, net 35,588 37,852 24,489
Inventory 21,079 14,242 15,332
Prepaid expenses and other
current assets 1,925 2,004 2,238
-------- -------- --------
Total current assets 87,628 89,229 96,557
Property and equipment, net 12,612 12,027 8,952
Intangible assets, net 33,185 32,309 34,145
Goodwill 88,082 86,256 86,256
Other long-term assets 283 389 416
-------- -------- --------
Total assets $221,790 $220,210 $226,326
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued
expenses 22,141 19,053 18,909
Accrued payroll and benefits 5,490 4,314 4,253
Deferred revenues 187 303 303
Current portion of line of credit
and loans payable -- -- 2,860
Current portion of software
licenses and capital lease
obligations 119 268 384
-------- -------- --------
Total current liabilities 27,937 23,938 26,709
Stock repurchase liability 1,208 1,591 1,765
Lines of credit and loans payable -- -- 5,547
Other long-term liabilities 3,165 3,061 1,907
Commitments and contingencies
Stockholders' equity 189,480 191,620 190,398
-------- -------- --------
Total liabilities and
stockholders' equity $221,790 $220,210 $226,326
======== ======== ========
ENTROPIC COMMUNICATIONS, INC.
Unaudited Reconciliation of Non-GAAP Adjustments
(In thousands, except per share amounts)
This press release contains the following non-GAAP financial measures: net income (loss) and net income (loss) per share. The presentation of such measures is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. Our non-GAAP net income (loss) and net income (loss) per share exclude stock-based compensation expense, inventory step-up costs, amortization of developed technology and purchased intangible assets, and in-process research and development charges.
The following table sets forth such non-GAAP measures for the applicable periods as well as the reconciliation of such measures to the directly comparable GAAP measures for the periods shown.
Three Months Ended Six Months Ended
----------------------------- ------------------
June 30, March 31, June 30, June 30, June 30,
2008 2008 2007 2008 2007
------- ------- ------- ------- -------
GAAP net loss
attributable
to common
shareholders $(6,447) $(3,856) $(23,753) $(10,302) $(24,897)
Non-GAAP
adjustments:
Stock-based
compensation:
Cost of net
revenues 64 46 3 110 3
Research and
development 1,829 1,758 397 3,587 450
Sales and
marketing 611 623 145 1,234 210
General and
administrative 868 1,197 186 2,065 208
------- ------- ------- ------- -------
Total stock-
based
compensation 3,372 3,624 731 6,996 871
Acquisition-
related items:
Amortization
of purchased
intangible
assets:
Cost of net
revenues 1,590 1,240 -- 2,830 --
Operating
expenses 713 596 42 1,309 42
Restructuring
charges (10) 1,079 -- 1,069 --
Write off of
in-process
research and
development 1,300 -- 21,400 1,300 21,400
Vativ retention
bonuses and
related payroll
taxes 698 -- -- 698 --
Write off of
debt issuance
costs -- 476 -- 476 --
Loss on fair
value of
preferred stock
warrant
liabilities -- -- 340 -- 612
------- ------- ------- ------- -------
Total of non-GAAP
adjustments 7,663 7,015 22,513 14,678 22,925
------- ------- ------- ------- -------
Non-GAAP net
income (loss) $ 1,216 $ 3,159 $(1,240) $ 4,376 $(1,972)
======= ======= ======= ======= =======
GAAP weighted
average shares
(basic) 67,215 66,662 6,223 67,023 5,756
Non-GAAP
adjustment
for dilutive
shares (a) 6,146 6,980 -- 6,429 --
------- ------- ------- ------- -------
Non-GAAP weighted
average shares
(diluted) 73,361 73,642 6,223 73,452 5,756
------- ------- ------- ------- -------
GAAP net loss
per share (basic
and diluted) $ (0.10) $ (0.06) $ (3.82) $ (0.15) $ (4.33)
Non-GAAP
adjustments
detailed
above (a) 0.12 0.10 3.62 0.21 3.99
------- ------- ------- ------- -------
Non-GAAP net
income (loss)
per share
(diluted) $ 0.02 $ 0.04 $ (0.20) $ 0.06 $ (0.34)
------- ------- ------- ------- -------
(a) Shares included for calculating diluted earnings per share for
periods with non-GAAP net income. For the periods shown with a net
loss, no shares were included for the diluted earnings per share
calculation, as including such shares would be antidilutive.
ENTROPIC COMMUNICATIONS, INC.
Non-GAAP Supplemental Financial Information
(Unaudited; in thousands, except percentage data)
The following table sets forth certain non-GAAP financial measures used in calculating Entropic's non-GAAP net income (loss) for the periods presented. Such non-GAAP financial measures are based upon Entropic's unaudited consolidated statements of operations for the periods presented and give effect to certain adjustments identified in the table. The presentation of such non-GAAP financial measures is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. In addition, investors should not rely on the results of prior periods as an indication of Entropic's future performance.
Three Months Ended Six Months Ended
----------------------------- ------------------
June 30, March 31, June 30, June 30, June 30,
2008 2008 2007 2008 2007
------- ------- ------- ------- -------
(unaudited)(unaudited)(unaudited) (unaudited)
NET REVENUES: $42,836 $41,988 $26,207 $84,824 $46,233
COST OF NET
REVENUES:
GAAP cost of net
revenues $23,869 $22,837 $17,961 $46,706 $32,492
Add:
Stock-based
compensation
expense 64 46 3 110 3
Amortization
of developed
technology 1,590 1,240 -- 2,830 --
------- ------- ------- ------- -------
Non-GAAP cost of
net revenues $22,215 $21,551 $17,958 $43,766 $32,489
======= ======= ======= ======= =======
GROSS PROFIT:
GAAP gross
profit $18,967 $19,151 $ 8,246 $38,118 $13,741
Add:
Stock-based
compensation
expense 64 46 3 110 3
Amortization
of developed
technology 1,590 1,240 -- 2,830 --
------- ------- ------- ------- -------
Non-GAAP gross
profit $20,621 $20,437 $ 8,249 $41,058 $13,744
======= ======= ======= ======= =======
GAAP gross
margin 44.3% 45.6% 31.5% 44.9% 29.7%
Non-GAAP gross
margin 48.1% 48.7% 31.5% 48.4% 29.7%
OPERATING
EXPENSES:
GAAP operating
expenses $25,677 $22,655 $31,631 $48,331 $38,088
Less:
Stock-based
compensation
expense 3,308 3,578 728 6,886 868
Amortization
of purchased
intangibles 713 596 42 1,309 42
Write off of
in-process
research and
development 1,300 -- 21,400 1,300 21,400
Retention
bonuses 698 -- -- 698 --
Restructuring
charges (10) 1,079 -- 1,069 --
------- ------- ------- ------- -------
Non-GAAP
operating
expenses $19,668 $17,402 $ 9,461 $37,069 $15,778
======= ======= ======= ======= =======
OTHER INCOME
(EXPENSE), NET:
GAAP other income
(expense), net $ 191 $ (198) $ (337) $ (7) $ (487)
Add:
Loss on fair
value of
preferred
stock warrant
liabilities -- -- 340 -- 612
Write off of
debt issuance
costs -- 476 -- 476 --
------- ------- ------- ------- -------
Non-GAAP other
income (expense),
net $ 191 $ 278 $ 3 $ 469 $ 125
======= ======= ======= ======= =======
INCOME TAX BENEFIT
(PROVISION): $ 72 $ (154) $ -- $ (82) $ --
ACCRETION OF
REDEEMABLE
CONVERTIBLE
PREFERRED
STOCK: $ -- $ -- $ (31) $ -- $ (63)
RESEARCH AND
DEVELOPMENT
EXPENSE:
GAAP research
and development $15,678 $13,313 $ 6,699 $28,990 $10,889
Less:
Vativ retention
bonuses and
related
payroll taxes 648 -- -- 648 --
Stock-based
compensation
expense 1,829 1,758 397 3,587 450
------- ------- ------- ------- -------
Non-GAAP research
and development $13,201 $11,555 $ 6,302 $24,755 $10,439
======= ======= ======= ======= =======
SALES AND
MARKETING
EXPENSE:
GAAP sales and
marketing $ 4,455 $ 4,144 $ 1,859 $ 8,599 $ 3,359
Less:
Vativ retention
bonuses and
related
payroll taxes 50 -- -- 50 --
Stock-based
compensation
expense 611 623 145 1,234 210
------- ------- ------- ------- -------
Non-GAAP sales
and marketing $ 3,794 $ 3,521 $ 1,714 $ 7,315 $ 3,149
======= ======= ======= ======= =======
GENERAL AND
ADMINISTRATIVE
EXPENSE:
GAAP general and
administrative $ 3,541 $ 3,523 $ 1,631 $ 7,064 $ 2,398
Less: stock-based
compensation
expense 868 1,197 186 2,065 208
------- ------- ------- ------- -------
Non-GAAP
general and
administrative $ 2,673 $ 2,326 $ 1,445 $ 4,999 $ 2,190
======= ======= ======= ======= =======