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Entropic Reports Fourth Quarter and Fiscal Year 2012 Results



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 income per 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
         debra.hart@entropic.com
        
         Media/Industry Analyst Contact:
         Chris Fallon
         + 1 858.768.3827
         chris.fallon@entropic.com

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