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TranSwitch Corporation Announces First Quarter 2013 Financial Results

  TranSwitch Corporation Announces First Quarter 2013 Financial Results

Business Wire

SHELTON, Conn. -- May 14, 2013

TranSwitch Corporation (NASDAQ: TXCC), a leading provider of semiconductor
solutions for multimedia connectivity and processing, today announced
financial results for the first quarter ended March 31, 2013.

Net revenues for the first quarter of 2013 were approximately $4.6 million, as
compared to net revenues of $5.6 million for the fourth quarter of 2012 and
$3.7 million for the first quarter of 2012. Net loss for the first quarter of
2013 was ($3.1) million, or ($0.08) per basic and diluted common share, as
compared to a net loss of ($3.1) million, or ($0.09) per basic and diluted
common share for the fourth quarter of 2012, and a net loss of ($6.1) million,
or ($0.20) per basic and diluted common share for the first quarter of 2012.

The GAAP gross margin for the first quarter was 81%. This is compared to the
Company's GAAP gross margin of 75% for the fourth quarter of 2012, and 59% for
the first quarter of 2012.

Total non-GAAP operating expenses for the first quarter of 2013 were $5.9
million, as compared to $5.6 million in the fourth quarter of 2012 and $7.5
million in the first quarter of 2012. Non-GAAP operating expenses for the
first quarter of 2013 exclude $0.1 million in amortization of purchase price
intangibles, $0.6 million in stock-based compensation and $0.2 million in
restructuring charges, along with a benefit of $0.2 million from the reversal
of accrued royalties. Total GAAP operating expenses for the first quarter of
2013 were $6.6 million, as compared to $7.2 million in the fourth quarter of
2012 and $8.1 million in the first quarter of 2012.

Non-GAAP operating loss for the first quarter of 2013 was ($2.2) million,
compared to a non-GAAP operating loss of ($1.4) million for the fourth quarter
of 2012 and a non-GAAP operating loss of ($5.3) million for the first quarter
of 2012. On a GAAP basis, the operating loss for the first quarter of 2013 was
($2.9) million, compared to an operating loss of ($3.0) million for the fourth
quarter of 2012 and an operating loss of ($5.9) million for the first quarter
of 2012.

Non-GAAP net loss for the first quarter of 2013 was ($2.4) million, or ($0.07)
per share, compared with a non-GAAP net loss of ($1.5) million, or ($0.04) per
share, for the fourth quarter of 2012 and a non-GAAP net loss of ($5.5)
million, or ($0.18) per share, for the first quarter of 2012.

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.

“Since the beginning of this year, we have successfully raised about $4.8
million to support the ramp of our video connectivity business,” stated Dr. M.
Ali Khatibzadeh, President and CEO of TranSwitch Corporation. “Additionally,
as we have previously announced, we have signed a contract for the sale of ten
of our legacy telecom patents. We have so far completed sale of five patents
in the amount of $0.8 million and anticipate completing sale of the remaining
five patents. On the business front, we continued to make progress in
expanding our active customer list for HDplay™ products to nine customers so
far. Our list of new customer opportunities for HDplay™ products is over 75
potential customers and we anticipate the list of active HDplay™ customers to
increase throughout 2013. We have also made substantial headway in the launch
of the new HDPlay™ products with MHL mobile connectivity feature and have
begun sampling the product in the market. TranSwitch’s new HDplay™ products
are the first products to support HDMI, DisplayPort and MHL video connectivity
modes making them very attractive for a number of applications such as pico
projectors and digital TVs.”

Additional details on TranSwitch’s first quarter 2013 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
719-457-2628 and reference confirmation code: 8221873. The call will be
recorded and a replay will be available two hours after the conclusion of the
live broadcast through May 24, 2013. To access the replay, dial 719-457-0820
and enter confirmation code: 8221873. 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
                                    Mar 31,       Dec 31,       Mar 31,
                                    2013           2012           2012
Net revenues:                                                     
Product revenues                    $   2,098      $   3,148      $   3,162
Intellectual property and              2,545         2,472         519
service revenues
Total net revenues                      4,643          5,620          3,681
                                                                             
Cost of revenues:
Cost of product revenues                686            1,045          1,119
Provision for excess and                82             264            231
obsolete inventories
Cost of service revenues               119           94            161
Total cost of revenues                 887           1,403         1,511
Gross profit                            3,756          4,217          2,170
                                                                             
Operating expenses:
Research and development                3,781          3,553          4,336
Marketing and sales                     975            928            1,642
General and administrative              1,784          1,838          2,132
Restructuring charges                   254            426            -
Impairment of goodwill and              -              648            -
other intangibles
Reversal of accrued royalties          (179   )      (171   )      (58    )
Total operating expenses               6,615         7,222         8,052
Operating loss (Note 1)                 (2,859 )       (3,005 )       (5,882 )
                                                                             
Other (expense) income:
Other income (expense)                  (20    )       (30    )       (101   )
Interest income (expense):
Interest income                         3              (14    )       23
Interest expense                       (58    )      (46    )      (9     )
Interest (expense) income, net         (55    )      (60    )      14
Total other income (expense),          (75    )      (90    )      (87    )
net
                                                                             
Loss before income taxes                (2,934 )       (3,095 )       (5,969 )
Income tax expense                     173           47            114
Net loss                            $  (3,107 )   $  (3,142 )   $  (6,083 )
                                                                             
Net loss per common share –         $   (0.08  )   $   (0.09  )   $   (0.20  )
basic and diluted
                                                                             
Weighted average common shares          36,873         35,907         30,685
outstanding – basic and diluted
                                                                             
                                                                             
Note 1: Stock-based
compensation expense included
in cost of revenues and
operating expenses is as
follows:
Cost of revenues                    $   7          $   7          $   6
Research and development                153            198            120
Marketing and sales                     127            131            111
General and administrative             287           376           295
Total                               $   574        $   712        $   532
                                                                             

                                                              
TranSwitch Corporation
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(in thousands)
                                                                  
                                                    March 31,     December 31,
                                                    2013          2012
ASSETS
Current assets:
Cash, cash equivalents, restricted cash and         $  602        $   2,244
short-term investments
Accounts receivable, net                               4,821          4,238
Inventories                                            833            748
Prepaid expenses and other current assets             1,525        1,409
                                                                      
Total current assets                                   7,781          8,639
                                                                      
Property and equipment, net                            1,060          1,111
Goodwill                                               5,271          5,271
Other intangible assets, net                           515            548
Other assets                                          2,007        2,028
                                                                      
Total assets                                        $  16,634    $   17,597
                                                                      
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Bank debt                                           $  1,288      $   2,432
Accounts payable, accrued expenses and other           12,470         10,457
current liabilities
Current portion of restructuring liabilities          1,649        2,016

Total current liabilities                              15,407         14,905
                                                                      
Restructuring liabilities                             1,497        1,463
                                                                      
Total liabilities                                     16,904       16,368
                                                                      
Total stockholders’ equity (deficit)                  (270   )      1,229
                                                                      
Total liabilities and stockholders’ equity          $  16,634    $   17,597
(deficit)
                                                                      

                                                              
TRANSWITCH CORPORATION
Supplemental Reconciliation of GAAP Results to Non-GAAP
(Unaudited)
(In thousands, except per share data)
                                        
                                      Three Months Ended
                                        Mar 31,        Dec 31,        Mar 31,
                                       2013       2012       2012   
GAAP gross profit                   $   3,756      $   4,217      $   2,170
Add:
Stock-based compensation               7            7            6      
Non-GAAP gross profit               $  3,763     $  4,224     $  2,176  
                                                                      
GAAP gross margin                       80.9   %       75.0   %       59.0   %
Stock-based compensation               0.2    %      0.1    %      0.2    %
Non-GAAP gross margin                  81.0   %      75.2   %      59.1   %
                                                                      
GAAP research and development       $   3,781      $   3,553      $   4,336
expenses
Less:
Amortization of purchase                7              7              35
accounting intangibles
Stock-based compensation               153          198          120    
Non-GAAP research and               $  3,621     $  3,348     $  4,181  
development expenses
                                                                      
GAAP selling, general, and          $   2,759      $   2,766      $   3,774
administrative expenses
Less:
Amortization of purchase                25             25             43
accounting intangibles
Stock-based compensation               414          507          406    
Non-GAAP selling, general, and      $  2,320     $  2,234     $  3,325  
administrative expenses
                                                                      
GAAP operating expenses             $   6,615      $   7,222      $   8,052
Less:
Amortization of purchase                32             32             78
accounting intangibles
Stock-based compensation                567            705            526
Reversal of accrued royalties           (179   )       (171   )       (58    )
and other
Impairment of goodwill and              -              648            -
intangibles
Restructuring charges                  254          426          -      
Non-GAAP operating expenses         $  5,941     $  5,582     $  7,506  
Non-GAAP operating loss             $  (2,178 )   $  (1,358 )   $  (5,330 )
                                                                      
GAAP net loss                       $   (3,107 )   $   (3,142 )   $   (6,083 )
Add:
Amortization of purchase                32             32             78
accounting intangibles
Stock-based compensation                574            712            532
Reversal of accrued royalties           (179   )       (171   )       (58    )
and other
Impairment of goodwill and              -              648            -
intangibles
Restructuring charges                  254          426          -      
Non-GAAP net loss                   $  (2,426 )   $  (1,495 )   $  (5,531 )
                                                                      
Non-GAAP basic net loss per         $   (0.07  )   $   (0.04  )   $   (0.18  )
share
Basic shares used to calculate          36,873         35,907         30,685
non-GAAP net loss 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