Entropic Reports Fourth Quarter and Fiscal Year 2012 Results Fourth Quarter Revenue of $89.7 Million, Record Annual Revenue of $321.7 Million Conference Call to be Webcast Today at 1:30 p.m. Pacific Time SAN DIEGO, Feb. 5, 2013 (GLOBE NEWSWIRE) -- Entropic (Nasdaq:ENTR), a world leader in semiconductor solutions for the connected home, today reported its fourth quarter and fiscal year results for the period ended December 31, 2012. Entropic reported fourth quarter net revenues of $89.7 million, a slight decrease compared with $89.8 million in the third quarter of 2012. In accordance with U.S. generally accepted accounting principles (GAAP), the Company's fourth quarter net income was $0.0 million, or $0.00 per share (diluted). This compares with GAAP net income of $0.4 million, or $0.00 per share (diluted) in the third quarter of 2012. Non-GAAP net income in the fourth quarter was $7.6 million, or $0.08 per share (diluted), compared to non-GAAP net income of $7.8 million, or $0.09 per share (diluted) in the third quarter of 2012. Net revenues for the year ended December 31, 2012 were $321.7 million, an increase of 34 percent from the $240.6 million reported for the year ended December 31, 2011. Net income computed in accordance with GAAP for the year ended December 31, 2012 was $4.5 million, or $0.05 per share (diluted), compared with GAAP net income of $26.6 million, or $0.30 per share (diluted), for the year ended December 31, 2011. Non-GAAP net income for the year ended December 31, 2012 was $33.8 million, or $0.37 per share (diluted), compared to non-GAAP net income of $55.3 million, or $0.62 per share (diluted) for the year ended December 31, 2011. "Our transformation into a broad-based platform silicon company in connected home entertainment is well underway following last year's acquisitions," said Patrick Henry, president and CEO, Entropic."We've already won significant design-wins with Tier-1 operators which is an early sign our strategy is playing out. We expect 2013 to be a key transitional year for the Company, as we now have a strengthened product portfolio, clear integration roadmap, and the right team focused on winning new designs globally." Three Months ended Years ended Dec. 31, (In millions, except per Dec. 31, Sept. 30, Dec. 31, 2012 2011 share data) 2012 2012 2011 Net revenues $89.7 $89.8 $56.2 $321.7 $240.6 GAAP net income $0.0 $0.4 $2.3 $4.5 $26.6 GAAP net income per share $0.00 $0.00 $0.03 $0.05 $0.31 (basic) GAAP net incomeper share $0.00 $0.00 $0.03 $0.05 $0.30 (diluted) Non-GAAP net income^1 $7.6 $7.8 $10.2 $33.8 $55.3 Non-GAAP net income per $0.08 $0.09 $0.12 $0.37 $0.62 share^1 (diluted) 1.Please refer to "Non-GAAP Financial Measures" below and 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. Recent Highlights Corporate Initiatives *New Corporate Brand Identity: The Company updated its brand identity to represent a significant shift in its overall vision, look and message since making two transformative acquisitions in 2012. *Achieved ISO 9001:2008 Certification: Entropic's Quality Management System (QMS) was awarded ISO 9001:2008 re-certification by the International Organization for Standardization (ISO); signifying the Company's commitment to producing high quality products, services and solutions. Industry Accolades *Winner of 2012 Global Semiconductor Alliance (GSA) Award: Entropic was awarded the 2012 GSA Award in the "Most Respected Public Semiconductor Company Achieving $100 million to $250 million in Annual Sales" category. Product Innovations *Entropic Unveiled Three Innovative Multimedia over Coax Alliance (MoCA^®)-Based Reference Designs to Extend Power, Performance and WiFi-to-Coax Connectivity in the Home: At CES 2013, Entropic showed the industry's first MoCA 2.0 multi-band adapter, MoCA 2.0 WiFi extender and MoCA 1.1 USB reference design, which are designed to ensure whole-home data coverage. Service Provider Activities *Tianjin Broadcast and TV Network Deployed Entropic's c.LINK^® Ethernet-over-Coax (EoC) Solution: Entropic announced the deployment of its latest c.LINK Broadband Access technology by Tianjin Broadcast and TV Network Co., Ltd. to increase speed and quality of broadband service. *InCablenet Deployed Entropic's Proven Set-top Box (STB) System-on-a-Chip (SoC) Technology: Entropic announced its STB SoC technology, the CX2448x, has been deployed by India's leading cable multi-system operator (MSO), InCablenet, to assist with the 'Analog Sunset' transition. *DIRECTV PanAmericana Selected Entropic's Silicon and Software to Roll-Out Advanced TV Viewing Services:Entropic announced its analog Channel Stacking Switch (CSS^®) and MoCA-based silicon and software have been selected by DIRECTV PanAmericana to enhance the way content is delivered into and connected throughout the home. OEM Activities *Technicolor and Entropic Partnered to Deliver a Powerful Client STB: Entropic announced its technology is part of Technicolor's MediaPlay (Xi3) client solution, which is based on hardware and software specifications developed by Comcast. The Technicolor MediaPlay client is fully compliant with the Comcast-developed X1 client-server architecture, and uses Entropic's TSC188 STB SoC bundled with its MoCA 1.1 silicon and software to bring the power of cloud-based applications to every screen in the home. *Humax and Entropic Announced Development of an IP-Client Device:Entropic announced its TSC188 STB SoC bundled with its MoCA 1.1 silicon and software are being used in Humax' Xi3 IP-Client device to enable the shift from broadcast to IP-based services and applications in the home. The device leverages the Comcast Reference Design Kit (RDK) to enable device manufacturers to rapidly develop, optimize and deploy new broadcast and IP-based solutions for richer consumer TV experiences. *Entropic's MoCA 2.0 Utilized by ARRIS in New Advanced Headless Video Gateway: Entropic announced its MoCA 2.0 silicon and software solution has been selected by ARRIS Group, Inc. for use in the ARRIS MG2402 Video Gateway that uses XG5 and Reference Design Kit (RDK) specifications developed by Comcast. This is the first official product announcement of MoCA 2.0 designed into a headless gateway and paves a path to economically deliver more services to cable customers across a broader range of devices. Partner Activities *Entropic and Cortina Systems Announced Development for an Advanced Broadband Router/Headless Gateway Reference Platform: Entropic announced a joint collaboration with Cortina to accelerate the development of high performance customer premise equipment (CPE) including broadband routers and headless gateways. The cooperation leverages Entropic's MoCA 2.0 solution with Cortina's CS7542 scalable digital home multi-service platform. *Entropic and MobileTREC Collaborate on Reverse Mass Notification Alert Solution Leveraging the Consumer STB Platform: In cooperation with MobileTREC, Entropic showed at CES 2013, how its latest generation of high-performance STB SoC solutions, the TSC17x family, can be used to develop a next generation Machine-to-Machine (M2M)-based reverse mass notification alert solution for public safety agencies that leverages the cable STB platform. *Partnerships in Automatic Content Recognition (ACR) with Flingo and Audible Magic: Entropic partnered with Flingo and Audible Magic to show how its STB SoC platform, embedded with ACR software, can drive new opportunities for service providers and advertisers to monetize the STB platform by obtaining higher ARPU and finer granularity and insight into viewership trends. For More Information Entropic management will be holding a conference call today, February 5, 2013, at 1:30 p.m. Pacific Time/4:30 p.m. Eastern Time to discuss the Company's results for the fourth quarter of fiscal 2012, and to provide guidance for the first quarter of fiscal 2013. You may access the conference call via any of the following: Teleconference: 617-213-4855 Access Code: 89426579 Web Broadcast: http://events.entropic.com/ Replay: 617-801-6888 Replay Passcode: 58229857 About Entropic Entropic (Nasdaq:ENTR) is a world leader in semiconductor solutions for the connected home. The Company transforms how traditional HDTV broadcast and IP-based streaming video content is seamlessly, reliably, and securely delivered, processed, and distributed into and throughout the home. Entropic's next-generation Set-top Box (STB) System-on-a-Chip (SoC) and Connectivity solutions enable Pay-TV operators to offer consumers more captivating whole-home entertainment experiences by transforming the way digital entertainment is delivered, connected and consumed – in the home and on the go. For more information, visit Entropic at: www.entropic.com. The Entropic logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=4255 Non-GAAP Financial Measures This press release and the accompanying tables contain the following non-GAAP financial measures: net income and net income per share.These non-GAAP financial measures exclude the effects on the Statement of Operations of all forms of stock-based compensation, transaction and integration costs related to the Trident Microsystems and the PLX Technology transactions, amortization of intangible assets, the loss related to equity method investment, the impact of fair value adjustments related to contingent consideration payable in the acquisition of PLX Technology assets, the cash tax difference and the restructuring charge. Management uses these non-GAAP financial measures to manage the Company's business, including setting operating budgets and executive compensation plans. These non-GAAP measures are also used to (i) supplement the financial results and forecasts reported to the Company's board of directors, (ii) evaluate the Company's operating performance, (iii) compare the Company's performance to internal forecasts, and (iv) manage the Company's business and benchmarking performance internally. The non-GAAP measures have been made available to stockholders consistently in the past to provide transparency on how management manages the Company's operating performance. Management believes that these non-GAAP operating measures are useful to investors, when used as a supplement to GAAP measures, in evaluating the Company's ongoing operational performance. The non-GAAP financial measures disclosed by the Company should not be considered in isolation or a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP, and the financial results calculated in accordance with GAAP and reconciliations to those financial statements should be carefully evaluated. The non-GAAP financial measures used by the Company may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies. Forward-Looking Statements Statements in this press release that are not strictly historical in nature constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include, but are not limited to, statements regarding our expectations for Entropic's transformation into a broad-based semiconductor company in Connected Home Entertainment, the impact of new product design wins, market penetration, continued and/or future revenue, earnings and product sales growth and gross margin improvement, and the factors that may contribute to such growth and improvement including industry trends.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 supply chain partners for the manufacture of our products and other factors that could affect our ability to meet customer demand; our dependence on a limited number of customers for a substantial portion of our revenues; risks associated with adverse U.S. and international economic conditions; 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 High Definition (HD) video and other multi-media content delivery and networking solutions; risks associated with competing against larger and more established companies and our ability to compete successfully in the connected home entertainment market; risks associated with timely development and introduction of new or enhanced products including those associated with IP Video delivery; risks related to international operations; risks related to intellectual property, including third party licensing or patent infringement claims; risks associated with the Trident Microsystems and PLX Technology acquisitions including their integration into Entropic's existing operations; and other factors discussed in the "Risk Factors" section of Entropic's Quarterly Report on Form 10-Q for the quarter ended September 30, 2012. 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. Copyright © 2013 Entropic. All rights reserved. All other product or company names mentioned are used for identification purposes only and may be trademarks of their respective owners. ENTROPIC COMMUNICATIONS, INC. GAAP Condensed Consolidated Statements of Operations (In thousands, except for per share information) Three Months Ended Year Ended December 31, September December 31, December December 2012 30, 2012 2011 31, 2012 31, 2011 (unaudited) (unaudited) (unaudited) Net revenues $89,698 $89,825 $56,169 $321,678 $240,628 Cost of net 45,789 45,778 25,341 157,675 107,922 revenues Gross profit 43,909 44,047 30,828 164,003 132,706 Operating expenses: Research and 29,139 28,072 17,626 98,353 60,065 development Sales and 6,327 6,966 4,373 25,313 17,569 marketing General and 5,882 5,718 4,425 25,474 14,568 administrative Amortization of 930 930 -- 2,575 -- intangibles Restructuring 897 -- -- 897 -- charges Total operating 43,175 41,686 26,424 152,612 92,202 expenses Income from 734 2,361 4,404 11,391 40,504 operations Loss related to equity method (779) (799) (700) (3,315) (791) investment Other income, net 34 31 278 601 904 Income (loss) before income (11) 1,593 3,982 8,677 40,617 taxes Income tax (benefit) (57) 1,185 1,674 4,157 14,053 provision Net income $46 $408 $2,308 $4,520 $26,564 Net income per $0.00 $0.00 $0.03 $0.05 $0.31 share - basic Net income per $0.00 $0.00 $0.03 $0.05 $0.30 share - diluted Weighted average number of shares used to compute 88,912 88,399 87,017 88,164 86,258 net income per share - basic Weighted average number of shares used to compute 91,710 90,885 88,600 90,364 89,018 net income per share - diluted ENTROPIC COMMUNICATIONS, INC. GAAP Condensed Consolidated Balance Sheets (In thousands) December 31 September 30 December 31, 2012 2012 2011 (unaudited) ASSETS Current assets: Cash and cash equivalents $17,206 $22,511 $20,193 Marketable securities 79,981 90,560 91,625 Accounts receivable 41,847 36,104 25,896 Inventory 26,395 39,532 20,253 Deferred tax assets, current 7,157 13,658 13,565 Prepaid expenses and other current 11,988 23,323 9,927 assets Total current assets 184,574 225,688 181,459 Property and equipment, net 17,629 14,969 11,250 Long-term marketable securities 71,748 53,255 104,708 Intangible assets, net 46,997 49,953 -- Deferred tax assets, long-term 19,255 9,953 9,600 Goodwill 4,664 4,664 -- Other long-term assets 8,683 9,501 11,542 Total assets $353,550 $367,983 $318,559 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $11,380 $20,083 $11,559 Accrued expenses and other current 8,067 16,005 4,078 liabilities Accrued payroll and benefits 9,474 13,057 3,835 Total current liabilities 28,921 49,145 19,472 Deferred rent 683 727 1,098 Other long-term liabilities 1,281 1,307 196 Stockholders' equity 322,665 316,804 297,793 Total liabilities and stockholders' $353,550 $367,983 $318,559 equity ENTROPIC COMMUNICATIONS, INC. Unaudited Reconciliation of Non-GAAP Adjustments (In thousands, except for per share information) This press release contains the following non-GAAP financial measures: net income and net income 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 and net income per share exclude the items listed below. 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 Year Ended December 31, September 30, December 31, December 31, December 31, 2012 2012 2011 2012 2011 (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) GAAP net income $46 $408 $2,308 $4,520 $26,564 Non-GAAP adjustments: Stock-based compensation: Cost of net 261 217 167 828 557 revenues Research and 1,874 2,030 1,675 7,428 6,272 development Sales and marketing 609 675 541 2,288 1,986 General and 1,091 1,283 938 4,273 3,932 administrative Total stock-based 3,835 4,205 3,321 14,817 12,747 compensation Acquisition-related items: Amortization of intangible assets: Cost of net 2,025 2,025 -- 5,827 -- revenues Operating expenses 930 930 -- 2,575 -- Transaction and 61 183 1,415 4,545 1,415 integration costs Loss related to equity method 779 799 700 3,315 791 investment Adjustments to the fair value of PLX acquisition 201 230 -- 431 -- contingent consideration Income tax effects of pre-tax (2,741) (2,930) (1,903) (11,029) (5,234) adjustments Cash tax difference 1,534 1,899 4,368 7,891 18,975 ^ (1) Restructuring 897 -- -- 897 -- charges ^ (2) Total of non-GAAP 7,521 7,341 7,901 29,269 28,694 adjustments Non-GAAP net income $7,567 $7,749 $10,209 $33,789 $55,258 Weighted average 88,912 88,399 87,017 88,164 86,258 shares (basic) Adjustment for 2,798 2,486 1,583 2,200 2,760 dilutive shares Weighted average 91,710 90,885 88,600 90,364 89,018 shares (diluted) GAAP net income per $0.00 $-- $0.03 $0.05 $0.31 share (basic) Non-GAAP adjustments 0.08 0.09 0.09 0.32 0.31 detailed above Non-GAAP net income per share $0.08 $0.09 $0.12 $0.37 $0.62 (diluted)^ (1) The Company's non-GAAP net income per share is calculated using the cash tax rate of 13%, 22%, and (8%) for the three month periods ended December 31, 2012, September 30, 2012, and December 31, 2011, respectively.The Company's non-GAAP net income per share is calculated using the cash tax rate of 18% and 1% for the years ended December 31, 2012, and 2011, respectively.The estimated cash tax rate is the estimated tax payable on the Company's projected tax returns as a percentage of estimated annual non-GAAP pre-tax net income.The Company uses an estimated cash tax rate to adjust for the historical variation in the effective book tax rate associated with the reversal of valuation allowances, the utilization of research and development tax credits, and the utilization of loss carryforwards which currently have an overall effect of reducing taxes payable.The Company believes that the cash tax rate provides a more transparent view of its operating results. The Company's effective tax rate used for the purposes of calculating GAAP net income for the three month periods ended December 31, 2012, September 30, 2012, and December 31, 2011 was approximately 518%, 74%, and 42%, respectively. The Company's effective tax rate used for the purposes of calculating GAAP net income for the years ended December 31, 2012 and 2011 was approximately 48% and 35%, respectively. (2) In November, 2012, we incurred a restructuring charge of $0.9 million pursuant to a plan to rebalance our operations in an attempt to leverage synergies from our acquisitions. This plan resulted in a reduction of our personnel by 40 employees or approximately 6% of our workforce. CONTACT: Investor Contact: Debra Hart +1 858.768.3852 firstname.lastname@example.org Media/Industry Analyst Contact: Chris Fallon + 1 858.768.3827 email@example.com Entropic Logo
Entropic Reports Fourth Quarter and Fiscal Year 2012 Results
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