Entropic Reports Second Quarter 2014 Results

Entropic Reports Second Quarter 2014 Results

Conference Call to be Webcast Today at 1:30 p.m. Pacific Time

SAN DIEGO, July 30, 2014 (GLOBE NEWSWIRE) -- Entropic (Nasdaq:ENTR), a world
leader in semiconductor solutions for the connected home, today reported its
second quarter results for the period ended June 30, 2014. Entropic reported
second quarter net revenues of $50.2 million. This compares to net revenues of
$55.7 million in the first quarter of 2014, and $70.6 million in the second
quarter of 2013.

In accordance with U.S. generally accepted accounting principles (GAAP), the
Company's second quarter net loss was $21.8 million, or $(0.24) per share
(basic and diluted). This compares with GAAP net loss of $23.3 million, or
$(0.26) per share (basic and diluted) in the first quarter of 2014, and GAAP
net loss of $39.9 million, or $(0.44) per share (basic and diluted) in the
second quarter of 2013.

Non-GAAP net loss in the second quarter was $10.4 million, or $(0.12) per
share (basic and diluted), compared to non-GAAP net loss of $15.3 million, or
$(0.17) per share (basic and diluted) in the first quarter of 2014, and
non-GAAP net income of $0.6 million, or $0.01 (basic and diluted), in the
second quarter of 2013.

"We are actively taking steps to improve our overall financial position while
we work to ramp existing design-wins and pursue new designs that will drive
future revenue growth," said Patrick Henry, president and chief executive
officer, Entropic. "In early June, we implemented a plan to lower our
operating expenses and drive deeper engineering and operational efficiencies
in order to accelerate our path to profitability. We believe these actions,
coupled with a healthy design-win pipeline and strong product roadmap, will
allow us to transition the company to the next stage of growth."

                            
                            Three Months Ended
(In millions, except per     June 30, 2014    March 31, 2014   June 30, 2013
share data)
Net revenues                 $50.2          $55.7          $70.6
GAAP net loss                $(21.8)         $(23.3)         $(39.9)
GAAP net loss per share      $(0.24)         $(0.26)         $(0.44)
(basic and diluted)
Non-GAAP net (loss) income^1 $(10.4)         $(15.3)         $0.6
Non-GAAP net (loss) income   $(0.12)         $(0.17)         $0.01
per 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 News

  *On June 9, 2014, Entropic Announced its Plan to Sharpen its Engineering
    and R&D Resource Focus and Consolidate Global Offices to Improve
    Efficiencies and Reduce Costs

Awards and Milestones

  *Entropic's EN2810, its Second-generation, Single-chip Multimedia over Coax
    Alliance (MoCA®) 2.0 System Solution, Received a 2014 Cable Spotlight
    Product of the Year Award from Cable.TMCnet.com, a TMC Sponsored Cable
    Technology Website

Technology Innovation

  *Entropic Unveiled its EN5500-series, which is Recognized as the Industry's
    Lowest Power, Smallest Size and Highest Performance Digital Channel
    Stacking Switch (dCSS) Integrated Circuits (ICs) for the Worldwide Direct
    Broadcast Satellite Market

New Designs

  *Inverto Developed its Unicable II Digital Satellite Outdoor Unit Products
    Featuring Entropic's EN5520, which is Part of Entropic's Advanced
    Second-Generation dCSS Product Family

New Partnerships

  *Entropic and Cryptography Research, the Security Division of Rambus
    (NASDAQ:RMBS) Signed a Patent License Agreement Allowing for the Use of
    the Cryptography Research Side-channel Attack Countermeasures in
    Entropic's ICs
  *Entropic Selected OmniPhy's High-Speed Physical Interface Solution for its
    Next-Generation Set-top Box System-on-a-Chip Designs
  *Entropic Licensed Excellicon's Constraints Products to Develop a Robust,
    Efficient Timing Constraint Development Methodology for its Build Flow

For More Information

Entropic management will be holding a conference call today, July30, 2014 at
1:30 p.m. Pacific Time/4:30 p.m. Eastern Time to discuss the Company's results
for the second quarter of fiscal 2014, and to provide guidance for the third
quarter.

You may access the conference call via any of the following:

Teleconference: 888-680-0890
Access Code:     68776322
Web Broadcast:  http://events.entropic.com/
Replay:         888-286-8010
Replay Passcode: 37340882

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'snext-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, please visit Entropic at: www.entropic.com,
read our blog Entropic Topics, or get social with us at @Entropic_News, or on
Facebook, Google+, YouTube and LinkedIn.

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 (loss) income and net (loss) 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,
amortization of intangible assets, losses related to equity method investment,
impairment of investment, the impact of fair value adjustments related to
contingent consideration payable in the acquisition of PLX Technology assets,
the deferred tax asset valuation allowance, the cash tax difference, IP
litigation costs and restructuring charges.

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 financial position, our design wins
and engineering and operational efficiencies and our ability to drive future
revenue growth and accelerate our path to profitability.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 and, ultimately,
service providers 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; and other factors discussed in the "Risk Factors"
section of Entropic's Quarterly Report on Form 10-Q for the quarter ended
March 31, 2014. 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 © 2014 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
                  June 30,    March 31,   June 30,    June 30,    June 30,
                   2014        2014        2013        2014        2013
                  (unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
                                                              
Net revenues       $50,200   $55,655   $70,612   $105,855  $145,069
Cost of net        26,662     29,593     36,356     56,255     75,974
revenues
Gross profit       23,538     26,062     34,256     49,600     69,095
Operating                                                      
expenses:
Research and       31,216     35,266     28,334     66,482     56,404
development
Sales and          5,878      7,445      6,017      13,323     12,472
marketing
General and        6,121      6,132      5,456      12,253     11,539
administrative
Amortization of    290        443        495        733        1,425
intangibles
Restructuring      1,796      --         1,763      1,796      1,763
charges
Total operating    45,301     49,286     42,065     94,587     83,603
expenses
Loss from          (21,763)   (23,224)   (7,809)    (44,987)   (14,508)
operations
Loss related to
equity method      --         --         (335)      --         (1,115)
investment
Impairment of      --         --         (4,780)    --         (4,780)
investment
Other income, net  192        81         255        273        683
Loss before income (21,571)   (23,143)   (12,669)   (44,714)   (19,720)
taxes
Income tax         278        110        27,244     388        22,597
provision
Net loss           $(21,849) $(23,253) $(39,913) $(45,102) $(42,317)
                                                              
Net loss per share
- basic and        $(0.24)   $(0.26)   $(0.44)   $(0.50)   $(0.47)
diluted
Weighted average
number of shares
used to compute    89,566     89,705     90,281     89,635     89,795
net loss per share
- basic and
diluted
                                                              
                                                              

ENTROPIC COMMUNICATIONS, INC.
GAAP Condensed Consolidated Balance Sheets
(In thousands)
                                                                
                                          June 30     March 31    December 31
                                          2014        2014        2013
                                          (unaudited) (unaudited) (unaudited)
ASSETS                                                           
Current assets:                                                  
Cash and cash equivalents                  $11,054   $11,453   $16,298
Marketable securities                      73,835     94,821     71,922
Accounts receivable                        30,879     33,726     30,204
Inventory                                  13,907     14,479     13,503
Deferred tax assets, current               51         51         51
Prepaid expenses and other current assets  17,797     18,706     18,739
Total current assets                       147,523    173,236    150,717
Property and equipment, net                19,454     18,174     17,994
Long-term marketable securities            36,005     30,740     69,534
Intangible assets, net                     41,159     44,166     47,326
Goodwill                                   4,688      4,688      4,688
Other long-term assets                     5,734      4,767      5,001
Total assets                               $254,563  $275,771  $295,260
LIABILITIES AND STOCKHOLDERS' EQUITY                             
Current liabilities:                                             
Accounts payable                           $10,522   $15,225   $8,601
Accrued expenses and other current         6,380      5,711      6,318
liabilities
Accrued payroll and benefits               8,525      8,489      7,077
Total current liabilities                  25,427     29,425     21,996
Deferred rent                              1,991      1,858      1,751
Other long-term liabilities                2,060      1,848      1,688
Stockholders' equity                       225,085    242,640    269,825
Total liabilities and stockholders' equity $254,563  $275,771  $295,260
                                                                
                                                                

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 (loss)
income and net (loss) 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 (loss) income and net (loss) 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                        Six Months Ended
              June 30, 2014 March 31,     June 30, 2013 June 30, 2014 June 30, 2013
                             2014
              (unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
GAAP net loss  $(21,849)   $(23,253)   $(39,913)   $(45,102)   $(42,317)
Non-GAAP                                                           
adjustments:
Stock-based                                                        
compensation:
Cost of net    88           167          230          255          431
revenues
Research and   3,535        3,202        1,975        6,737        3,964
development
Sales and      772          562          516          1,334        814
marketing
General and    1,167        937          1,054        2,104        2,020
administrative
Total
stock-based    5,562        4,868        3,775        10,430       7,229
compensation
Amortization
of intangible                                                      
assets:
Cost of net    2,717        2,717        2,228        5,434        4,456
revenues
Operating      290          443          495          733          1,425
expenses
Transaction
and            --           --           244          --           244
integration
costs
Loss related
to equity      --           --           335          --           1,115
method
investment
Impairment of  --           --           4,780        --           4,780
investment
Adjustments to
the fair value
of PLX         --           --           (143)        --           (131)
acquisition
contingent
consideration
Income tax
effects of     --           --           2,591        --           --
pre-tax
adjustments
Cash tax
difference ^   134          (113)        (2,274)      21           (4,371)
(1)
IP litigation  935          21           --           956          --
costs ^(2)
Deferred tax
asset          --           --           26,695       --           26,695
valuation
allowance
Restructuring  1,796        --           1,763        1,796        1,763
charges ^ (3)
Total of
non-GAAP       11,434       7,936        40,489       19,370       43,205
adjustments
Non-GAAP net   $(10,415)   $(15,317)   $576        $(25,732)   $888
(loss) income
                                                                  
Weighted
average shares 89,566       89,705       90,281       89,635       89,795
(basic)
Adjustment for
dilutive       --           --           2,152        --           2,500
shares
Weighted
average shares 89,566       89,705       92,433       89,635       92,295
(diluted)
                                                                  
GAAP net loss
per share      $(0.24)     $(0.26)     $(0.44)     $(0.50)     $(0.47)
(basic)
Non-GAAP
adjustments    0.12         0.09         0.45         0.21         0.48
detailed above
Non-GAAP net
(loss) income  $(0.12)     $(0.17)     $0.01       $(0.29)     $0.01
per share
(diluted)
                                                                  
(1) Non-GAAP net (loss) income per share is calculated using the cash tax rate of
(1)%, (1)%, and 29% for the three month periods ended June 30, 2014, March 31, 2014
and June 30, 2013, respectively, and (1)% and 24% for the six month periods ended
June 30, 2014 and 2013, respectively. The estimated cash tax rate is the estimated
tax payable on our projected tax returns as a percentage of estimated annual
non-GAAP pre-tax net income (loss). We use an estimated cash tax rate to adjust for
the historical variation in the effective book tax rate associated with the
valuation allowance adjustments, the utilization of research and development tax
credits, and the utilization of loss carryforwards which currently have an overall
effect of reducing taxes payable. We believe that the cash tax rate provides a more
transparent view of our operating results. The effective tax rate used for the
purposes of calculating GAAP net loss was (1)%, 0%, and (215)% for the three month
periods ended June 30, 2014, March 31, 2014 and June 30, 2013, respectively, and
(1)% and (115)% for the six month periods ended June 30, 2014 and 2013,
respectively.
(2) While litigation may arise in the ordinary course of our business, we
nevertheless consider the current IP litigation to be an unusual, non-recurring and
unplanned activity and therefore exclude this charge when presenting non-GAAP
financial measures.
(3) In June 2014, we announced a corporate restructuring plan to accelerate our path
to profitability. The restructuring plan includes the closures and consolidations of
several global facilities including facilities located in Austin, Texas; India;
Taiwan and Israel. We expect that approximately 150 positions will be eliminated in
connection with the restructuring plan, representing about 23% of our work force. We
recorded restructuring charges of $1.8 million during the three months ended June
30, 2014. We expect to incur a total restructuring charge of approximately $6.4
million, the majority of which is expected to be cash expenditures.

In June 2013, we incurred a restructuring charge of $1.8 million pursuant to a plan
to rebalance our operations in an attempt to leverage synergies from our
acquisitions and refine our business operations. This plan resulted in a reduction
of our personnel by 66 employees, or approximately 10% of our work force.
                                                                  

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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