TranSwitch Corporation Announces Fourth Quarter 2012 Financial Results

  TranSwitch Corporation Announces Fourth Quarter 2012 Financial Results

Business Wire

SHELTON, Conn. -- February 12, 2013

TranSwitch Corporation (NASDAQ: TXCC), a leading provider of semiconductor
solutions for multimedia connectivity and processing, today announced
financial results for the fourth quarter ended December 31, 2012.

Net revenues for the fourth quarter of 2012 were approximately $5.6 million,
as compared to net revenues of $4.8 million for the third quarter of 2012 and
$6.3 million for the fourth quarter of 2011. Net loss for the fourth quarter
of 2012 was ($3.1) million, or ($0.09) per basic and diluted common share, as
compared to a net loss of ($3.0) million, or ($0.09) per basic and diluted
common share for the third quarter of 2012, and a net loss of ($11.9) million,
or ($0.39) per basic and diluted common share for the fourth quarter of 2011.

The GAAP gross margin for the fourth quarter was 75%. This is compared to the
Company's GAAP gross margin of 64% for the third quarter of 2012, and 58% for
the fourth quarter of 2011.

Total non-GAAP operating expenses for the fourth quarter of 2012 were $5.6
million, as compared to $5.7 million in the third quarter of 2012 and $7.7
million in the fourth quarter of 2011. Non-GAAP operating expenses for the
fourth quarter of 2012 exclude $0.1 million in amortization of purchase price
intangibles, $0.7 million in stock-based compensation, $0.6 million in
intangible impairments and $0.4 million in restructuring charges, along with a
benefit of $0.2 million from the reversal of accrued royalties. Total GAAP
operating expenses for the fourth quarter of 2012 were $7.2 million, as
compared to $6.0 million in the third quarter of 2012 and $15.4 million in the
fourth quarter of 2011.

Non-GAAP operating loss for the fourth quarter of 2012 was ($1.4) million,
compared to a non-GAAP operating loss of ($2.7) million for the third quarter
of 2012 and a non-GAAP operating loss of ($4.1) million for the fourth quarter
of 2011. On a GAAP basis, the operating loss for the fourth quarter of 2012
was ($3.0) million, compared to an operating loss of ($2.9) million for the
third quarter of 2012 and an operating loss of ($11.8) million for the fourth
quarter of 2011.

Non-GAAP net loss for the fourth quarter of 2012 was ($1.5) million, or
($0.04) per share, compared with a non-GAAP net loss of ($2.7) million, or
($0.08) per share, for the third quarter of 2012 and a non-GAAP net loss of
($4.2) million, or ($0.14) per share, for the fourth quarter of 2011.

Further information about non-GAAP measures is provided below and a
reconciliation of the non-GAAP measures to the comparable GAAP results is
provided after the financial statements attached to this release.

“We continued to make progress in the fourth quarter toward our business
objectives,” stated Dr. M. Ali Khatibzadeh, President and CEO of TranSwitch
Corporation. “Our financial metrics improved with an approximately 18%
sequential increase in quarterly revenue and an increase in gross margin to
75%, driven by a favorable mix of IP licensing revenue. More importantly, on
the new video connectivity business, we are tracking to our customer and sales
expansion plans. Starting with our first customer at the beginning of the
quarter, we exited the fourth quarter by commencing production shipments of
HDplay™ products for four customers. We anticipate the list of active HDplay™
customers to grow to seven by the end of the first quarter of 2013 and to
continuously increase throughout 2013. We have announced some of our new
customers during the quarter and more recently. Our list of new customer
opportunities for HDplay™ products has increased to over 70 potential
customers and we anticipate a marked increase in revenue in the second half of
2013 as more customers reach production phase. Another important catalyst in
the ramp of our new business has been the introduction at the 2013 CES of the
new members of the HDplay™ product family, which support the new MHL mobile
video connectivity standard , in addition to HDMI and DisplayPort , for pico
projectors, digital TV’s and other applications. MHL is becoming widely
adopted by smart phone and tablet OEM’s with over 220Mu installed base and
rapid growth in forecasted volume. TranSwitch is the first company to announce
a multi-mode transceiver covering all three major standards. With regards to
improving our balance sheet, we have signed an agreement for the sale of one
set of our legacy telecom patents and continue to market the balance of our
legacy patent portfolio. We will report financial information relating to
patent transactions only after the contracts are concluded and closed.”

Additional details on TranSwitch’s fourth quarter 2012 financial results will
be discussed during a conference call regarding this announcement today at
5:30 pm Eastern time. To listen to the live call, investors can dial
719-325-2361 and reference confirmation code: 4955948. The call will be
recorded and a replay will be available two hours after the conclusion of the
live broadcast through February 23, 2013. To access the replay, dial
719-457-0820 and enter confirmation code: 4955948. Investors can also access
an audio webcast which will be broadcast through Vcall’s Investor Calendar at
www.investorcalendar.com or the Company’s website at www.transwitch.com. This
audio webcast will also be available on a replay basis for 10 business days.

About TranSwitch Corporation

TranSwitch Corporation (Nasdaq:TXCC) provides innovative integrated circuit
(IC) and intellectual property (IP) solutions that deliver core functionality
for video, voice, and data communications equipment for the customer premises
and network infrastructure markets. For the customer-premises market, we offer
multi-standard, high-speed interconnect solutions enabling the distribution
and presentation of high-definition (HD) video and data content for consumer
electronics applications. We also provide a family of best-in-class
communications processors. For the network infrastructure market we provide
integrated multi-core network processor System-on-a-Chip (SoC) solutions for
Fixed, 3G and 4G Mobile, VoIP and Multimedia applications. TranSwitch’s
customers are leading consumer electronics and telecom equipment companies
around the globe. For more information, please visit www.transwitch.com or
follow us at Facebook or Twitter.

Forward-looking statements in this release, including statements regarding
management's expectations for future financial results and the markets for
TranSwitch's products, are made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. Investors are cautioned that
these forward-looking statements regarding TranSwitch, its operations and its
financial results, involve risks and uncertainties that could cause actual
results to differ materially from those contained in the forward-looking
statements, including without limitation the risks associated with downturns
in economic conditions generally and in the telecommunications and data
communications markets and the semiconductor industry specifically; risks in
product development and market acceptance of and demand for TranSwitch’s
products and products developed by TranSwitch’s customers; risks associated
with foreign sales and high customer concentration; risks associated with
competition and competitive pricing pressures; risks in technology development
and commercialization; risks of failing to attract and retain key managerial
and technical personnel; risks relating to TranSwitch’s available cash; risks
associated with acquiring new businesses; risks of dependence on third-party
VLSI fabrication facilities; risks related to intellectual property rights and
litigation; and other risks detailed in TranSwitch's filings with the
Securities and Exchange Commission.

TranSwitch expressly disclaims any obligation or undertaking to release
publicly any updates or revisions to any such statements to reflect any change
in expectations or any change in events, conditions or circumstances on which
any such statement is based.

TranSwitch is a registered trademark of TranSwitch Corporation.

Reconciliation of Non-GAAP Financial Measures to Comparable U.S. GAAP Measures
(Unaudited)

Pursuant to the requirements of Regulation G, the Company has provided a
reconciliation of each non-GAAP financial measure used in this earnings
release and related conference call or webcast to the most directly comparable
financial measure prepared in accordance with accounting principles generally
accepted in the United States (“GAAP”). The reconciliation for historic
non-GAAP measures is provided herein on a quantitative basis and for non-GAAP
measures that are forward-looking is provided herein on a qualitative basis.

The non-GAAP measures used in this earnings release and related conference
call differ from GAAP in that they exclude expenses related to stock-based
compensation, amortization of intangible assets, the effects of special
charges such as asset impairments, restructuring charges and benefits from the
reversal of accrued royalties. The Company’s basis for these adjustments is
described below. Management uses these non-GAAP measures for internal
reporting and forecasting purposes. The Company has provided these non-GAAP
financial measures in addition to GAAP financial results because it believes
that these non-GAAP financial measures provide useful information to certain
investors and financial analysts for comparison across accounting periods not
influenced by certain non-cash items that are not used by management when
evaluating the Company’s historical and prospective financial performance.

Management uses these non-GAAP financial measures when evaluating the
Company’s operating performance and believes that such measures are useful to
investors and financial analysts in assessing the Company’s operating
performance as the Company believes that the presentation of non-GAAP measures
that adjust for the impact of stock-based compensation expenses, amortization
of intangible assets, the effects of special charges such as asset impairments
and restructuring charges and benefits from the reversal of accrued royalties
provides investors and financial analysts with a consistent basis for
comparison across accounting periods and, therefore, are useful to investors
and financial analysts in helping them to better understand the Company’s
operating results and underlying operational trends.

We do not provide forward-looking GAAP measures or a reconciliation of the
forward-looking non-GAAP measures to GAAP measures because of our inability to
project special charges, asset impairments, employee separation costs and
stock-based compensation related expenses.

The non-GAAP financial measures we provide have certain limitations because
they do not reflect all of the costs associated with the operation of our
business as determined in accordance with GAAP. The non-GAAP measures are in
addition to, and not a substitute for, or superior to, measures of financial
performance prepared in accordance with GAAP and may be different from
non-GAAP measures used by other companies. We endeavor to compensate for the
limitations of these non-GAAP measures by providing GAAP financial statements,
descriptions of the reconciling items and a reconciliation of the non-GAAP
measures to the most directly comparable GAAP measures so that investors can
appropriately incorporate the non-GAAP measures and their limitations into
their analyses. Please see our financial statements and "Management's
Discussion and Analysis of Results of Operations and Financial Condition" that
will be included in the periodic report we expect to file with the SEC with
respect to the financial periods discussed herein.


TranSwitch Corporation

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

(in thousands, except for per share amounts)

                  Three Months Ended                     Twelve Months Ended
                     Dec 31,      Sep 30,      Dec 31,       Dec 31,         Dec 31,
                                                                        
                     2012         2012         2011          2012            2011
Net revenues:
Product              $ 3,148      $ 1,631      $ 5,018       $ 10,315        $ 19,700
revenues
Intellectual
property and           2,472        3,121        1,292         7,563           8,555
service
revenues
Total net              5,620        4,752        6,310         17,878          28,255
revenues
                                                                                       
Cost of
revenues:
Cost of
product                1,045        694          2,131         3,724           6,641
revenues
Provision for
excess and             264          154          42            869             228
obsolete
inventories
Cost of
service                94           844          499           1,274           3,454
revenues
Total cost of          1,403        1,692        2,672         5,867           10,323
revenues
Gross profit           4,217        3,060        3,638         12,011          17,932
                                                                                       
Operating
expenses:
Research and           3,553        3,325        5,158         15,892          18,885
development
Marketing and          928          1,144        1,499         5,031           7,335
sales
General and            1,838        1,851        1,758         7,751           7,457
administrative
Restructuring          426          —            (6,949  )     1,427           (5,558  )
charges
Impairment of
goodwill and           648          —            14,312        648             14,312
other
intangibles
Reversal of
accrued                (171   )     (332   )     (333    )     (1,003  )       (2,363  )
royalties
Total
operating              7,222        5,988        15,445        29,746          40,068
expenses
Operating loss         (3,005 )     (2,928 )     (11,807 )     (17,735 )       (22,136 )
(Note 1)
                                                                                       
Other
(expense)
income:
Other income           (30    )     41           8             (33     )       18
(expense)
Interest
income
(expense):
Interest               (14    )     32           25            58              125
income
Interest               (46    )     (37    )     (6      )     (124    )       (243    )
expense
Interest
(expense)              (60    )     (5     )     19            (66     )       (118    )
income, net
Total other
income                 (90    )     36           27            (99     )       (100    )
(expense), net
                                                                                       
Loss before            (3,095 )     (2,892 )     (11,780 )     (17,834 )       (22,236 )
income taxes
Income tax             47           108          157           388             636
expense
Net loss             $ (3,142 )   $ (3,000 )   $ (11,937 )   $ (18,222 )     $ (22,872 )
                                                                                       
Net loss per
common share –       $ (0.09  )   $ (0.09  )   $ (0.39   )   $ (0.55   )     $ (0.82   )
basic and
diluted
                                                                                       
Weighted
average common
shares                 35,907       34,269       30,555        33,130          27,911
outstanding –
basic and
diluted
                                                                                       
                                                                                       
Note 1:
Stock-based
compensation
expense
included in
cost of
revenues

and
operating
expenses is as
follows:
Cost of              $ 7          $ 8          $ 6           $ 7             $ 54
revenues
Research and           198          147          156           543             780
development
Marketing and          131          93           107           374             468
sales
General and            376          259          269           1,213           1,172
administrative
Total                $ 712        $ 507        $ 538         $ 2,137         $ 2,474



TranSwitch Corporation

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)

(in thousands)

                                             December 31,         December 31,
                                                        
                                             2012                 2011
ASSETS
Current assets:
Cash, cash equivalents, restricted           $   2,244            $   7,554
cash and short-term investments
Accounts receivable, net                         4,238                6,375
Inventories                                      748                  1,988
Prepaid expenses and other current              1,409              1,876
assets
                                                                      
Total current assets                             8,639                17,793
                                                                      
Property and equipment, net                      1,111                1,355
Goodwill                                         5,271                5,271
Other intangible assets, net                     548                  1,461
Other assets                                    2,028              1,738
                                                                      
Total assets                                 $   17,597          $   27,618
                                                                      
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities:
Bank debt                                    $   2,432            $   —
Accounts payable, accrued expenses               10,457               10,932
and other current liabilities
Current portion of restructuring                2,016              1,995
liabilities

Total current liabilities                        14,905               12,927
                                                                      
Restructuring liabilities                       1,463              2,485
                                                                      
Total liabilities                               16,368             15,412
                                                                      
Total stockholders’ equity                      1,229              12,206
                                                                      
Total liabilities and                        $   17,597          $   27,618
stockholders’ equity



TRANSWITCH CORPORATION
Supplemental Reconciliation of GAAP Results to Non-GAAP
(Unaudited)
(In thousands, except per share data)

                        Three Months Ended                      Twelve Months Ended
                              Dec 31,     Sep 30,     Dec 31,         Dec 31,      Dec 31,
                              2012       2012       2011            2012        2011
GAAP gross                  $ 4,217      $ 3,060      $ 3,638         $ 12,011      $ 17,932
profit
Add:
Stock-based                   7           8           6              7            54      
compensation
Non-GAAP gross              $ 4,224     $ 3,068     $ 3,644        $ 12,018     $ 17,986  
profit
                                                                                      
GAAP gross                    75.0   %     64.4   %     57.7    %       67.2    %     63.5    %
margin
Stock-based                   0.1    %     0.2    %     0.1     %       0.0     %     0.2     %
compensation
Non-GAAP gross                75.2   %     64.6   %     57.7    %       67.2    %     63.7    %
margin
                                                                                      
GAAP research
and                         $ 3,553      $ 3,325      $ 5,158         $ 15,892      $ 18,885
development
expenses
Less:
Amortization
of purchase                   7            38           39              122           379
accounting
intangibles
Stock-based                   198         147         156            543          780     
compensation
Non-GAAP
research and                $ 3,348     $ 3,140     $ 4,963        $ 15,227     $ 17,726  
development
expenses
                                                                                      
GAAP selling,
general, and                $ 2,766      $ 2,995      $ 3,257         $ 12,782      $ 14,792
administrative
expenses
Less:
Amortization
of purchase                   25           39           127             143           976
accounting
intangibles
Stock-based                   507         352         376            1,587        1,640   
compensation
Non-GAAP selling, general,  $ 2,234     $ 2,604     $ 2,754        $ 11,052     $ 12,176  
and administrative expenses
                                                                                      
GAAP operating              $ 7,222      $ 5,988      $ 15,445        $ 29,746      $ 40,068
expenses
Less:
Amortization
of purchase                   32           77           166             265           1,355
accounting
intangibles
Stock-based                   705          499          532             2,130         2,420
compensation
Reversal of
accrued                       (171   )     (332   )     (333    )       (1,003  )     (2,363  )
royalties and
other
Impairment of
goodwill and                  648          -            14,312          648           14,312
intangibles
Restructuring                 426         -           (6,949  )       1,427        (5,558  )
charges
Non-GAAP
operating                   $ 5,582     $ 5,744     $ 7,717        $ 26,279     $ 29,902  
expenses
Non-GAAP                    $ (1,358 )   $ (2,676 )   $ (4,073  )     $ (14,261 )   $ (11,916 )
operating loss
                                                                                      
GAAP net loss               $ (3,142 )   $ (3,000 )   $ (11,937 )     $ (18,222 )   $ (22,872 )
Add:
Amortization
of purchase                   32           77           166             265           1,355
accounting
intangibles
Stock-based                   712          507          538             2,137         2,474
compensation
Reversal of
accrued                       (171   )     (332   )     (333    )       (1,003  )     (2,363  )
royalties and
other
Impairment of
goodwill and                  648          -            14,312          648           14,312
intangibles
Restructuring                 426         -           (6,949  )       1,427        (5,558  )
charges
Non-GAAP net                $ (1,495 )   $ (2,748 )   $ (4,203  )     $ (14,748 )   $ (12,652 )
loss
                                                                                      
Non-GAAP basic
net loss per                $ (0.04  )   $ (0.08  )   $ (0.14   )     $ (0.45   )   $ (0.45   )
share
Basic shares used to
calculate non-GAAP net loss   35,907       34,269       30,555          33,130        27,911
per share


Contact:

TranSwitch Corporation
Robert A. Bosi, 203-929-8810 ext. 2465
Vice President and Chief Financial Officer
or
Mary Lombardo, 203-929-8810 ext. 2254
Investor Relations
 
Press spacebar to pause and continue. Press esc to stop.