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Entropic Communications Reports Third Quarter Results

Oct 27, 2010 (GlobeNewswire via COMTEX News Network) --

          Revenue up 51% Quarter-Over-Quarter to $61.3 Million

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


SAN DIEGO, Oct. 27, 2010 (GLOBE NEWSWIRE) -- Entropic Communications, Inc. (Nasdaq:ENTR), a leading provider of silicon and software solutions to enable connected home entertainment, today reported its third quarter results for the period ended September 30, 2010. Entropic reported third quarter net revenues of $61.3 million, an increase of 51 percent compared with $40.7 million in the second quarter of 2010 and an increase of 98 percent compared to $31.0 million in the third quarter of 2009.

In accordance with U.S. generally accepted accounting principles (GAAP), the company's third quarter net income was $11.3 million, or $0.15 per share. This compares with GAAP net income of $3.1 million, or $0.04 per share in the second quarter of 2010. Non-GAAP net income in the third quarter was $14.5 million, or $0.18 per share, compared to non-GAAP net income of $6.1 million, or $0.08 per share in the second quarter of 2010.

"Entropic recorded its sixth consecutive quarter of revenue growth and posted record revenue and profitability for the quarter," said Patrick Henry, president and chief executive officer of Entropic Communications. "During the quarter we benefitted from increasing adoption of our MoCA home networking products by multiple Pay-TV service providers as well as a solid ramp in our solutions for the direct broadcast satellite market. We believe we are in the very early stages of a multi-year market expansion in the connected home entertainment market and are well positioned for continued revenue and earnings growth."

                                          Three months ended
                                        ----------------------

                                         Sept    June   Sept
                                         30,     30,     30,
  (In millions, except per share data)   2010    2010   2009
  Net revenues1                          $61.3  $40.7    $31.0
  GAAP net income (loss)                 $11.3   $3.1   ($1.2)
  GAAP net income (loss) per share
  (basic and diluted)                    $0.15  $0.04  ($0.02)

  Non-GAAP net income1                   $14.5   $6.1     $1.4
  Non-GAAP net income per share1
  (diluted)                              $0.18  $0.08    $0.02

  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

  --  Entropic ranked #44 as the fastest growing company in North America, and
      is the fastest growing semiconductor company on Deloitte's 2010
      Technology Fast 500(TM). For the San Diego region, Entropic ranked #3 in
      the fastest growing company category.

  --  In early October, Entropic completed a follow-on offering of 10.75
      million shares of its common stock, raising net proceeds of
      approximately $99.1 million after deducting underwriting discounts and
      commissions and estimated offering expenses.

  --  Entropic expanded its Board of Directors with the addition of Ted
      Tewksbury, president and chief executive officer of Integrated Device
      Technology, Inc. (IDT) and Bob Bailey, chairman of the board of PMC
      Sierra. Each is a seasoned executive in the semiconductor industry,
      offering expertise in mixed signal and analog application-specific
      standard products. With CEO and board experience, and strong operations
      and engineering background, both Tewksbury and Bailey are significant
      assets to the Entropic Board; complementing the expertise of the
      Company's current board members.

  --  Via Embratel, the premium telecommunications carrier in Brazil, deployed
      Entropic's Channel Stacking Switch (CSS) technology to deliver
      direct-broadcast satellite (DBS) entertainment services to consumers'
      homes via a single cable wire infrastructure. By adopting Entropic's CSS
      technology, Via Embratel can better serve customers in multiple-dwelling
      unit (MDU) environments by supporting multiple tuners over a single
      cable, enabling easy plug-and-play set-top box (STB) upgrades, and
      reaching potential new subscribers previously unserviceable due to
      access limitations or wiring restrictions.

  --  Robust Electronics, a leading manufacturer of top end televisions for
      the European market, announced selection of Entropic's EN4020 multi-mode
      hybrid silicon tuner .With its internal design, the EN4020 allows the
      complete lineup of MINERVA televisions to operate regardless of
      broadcast service -- digital video broadcast terrestrial (DVB-T),
      digital video broadcast cable (DVB-C), or analog. A single chip
      solution, the EN4020 delivers high performance and enables significant
      cost reduction by simplifying design complexity and drastically lowering
      development costs. Deliveries of the MINERVA TV line are scheduled to
      begin in late 2010.

  --  Entropic expanded and strengthened its supplier capacity agreement with
      silicon foundry, TowerJazz to assure high-volume production for
      Entropic's family of outdoor unit (ODU) silicon, which comprises both
      its CSS and Band Translation Switch (BTS) products, as well as its
      multi-mode silicon TV tuner products.


For More Information

Entropic management will be holding a conference call today, October 27, 2010, at 1:30 p.m. Pacific Time/ 4:30 p.m. Eastern Time to discuss the company's results for the third quarter of fiscal 2010 and to provide guidance for the fourth quarter. You may access the conference call via any of the following:

  Teleconference:       631-813-4729

  Conference ID:        16100191

                        http://ir.entropic.
  Web Broadcast:        com/events.cfm

  Replay:               706-645-9291

About Entropic Communications

Entropic Communications, Inc. (Nasdaq:ENTR) is a leading fabless semiconductor company that is engineering the future of connected home networking and entertainment by providing next-generation silicon and software technologies to the world's leading cable, telecommunications and satellite service providers, OEMs and consumer electronic manufacturers. As a co-founder of MoCA (Multimedia over Coax Alliance), Entropic pioneered and continues to evolve the way high-definition television-quality video and other multimedia and digital content such as movies, music, games and photos are brought into and delivered throughout the home. For more information, visit Entropic at www.entropic.com.

The Entropic Communications 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 (loss) and net income (loss) per share. These non-GAAP financial measures exclude the effects on the Statement of Operations of, among others, all forms of stock-based compensation, non-cash acquired intangibles amortization and impairment charges, and restructuring charges, and their related effects on the number of diluted shares used in calculating non-GAAP income (loss) per share.

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 market expansion, continued and/or future revenue, earnings and product sales growth and the factors that may contribute to such growth. 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 customers and service providers for a substantial portion of our revenues; risks that the market for HD and SD video and other multi-media content delivery and networking solutions in the United States, China and elsewhere will not develop as we expect; risks associated with competing against larger and more established companies and our ability to compete successfully in the market for MoCA-compliant chipsets; risks associated with timely development and introduction of new or enhanced products; risks that our collaborations and partnerships will not yield their anticipated benefits; risks associated with adverse U.S. and international economic conditions; and other factors discussed in the "Risk Factors" section of Entropic's Quarterly Report on Form 10-Q for the quarter ended June 30, 2010. 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.

Entropic Communications(R) and the stylized Entropic "curve" logo are either trademarks or registered trademarks of Entropic Communications, Inc. in the United States and/or other countries.

                                       ENTROPIC COMMUNICATIONS, INC.
                           GAAP Condensed Consolidated Statements of Operations
                   (In thousands, except for share information and footnote disclosures)


                                                   Three Months Ended               Nine Months Ended


                                           September    June 30,     September    September    September
                                           30, 2010       2010       30, 2009     30, 2010     30, 2009
                                          -----------  -----------  -----------  -----------  -----------
                                          (unaudited)  (unaudited)  (unaudited)  (unaudited)  (unaudited)

  Net revenues                               $ 61,310     $ 40,680     $ 30,958    $ 139,441     $ 81,227

  Cost of net revenues                         28,774       18,831       15,332       65,306       40,437
                                          -----------  -----------  -----------  -----------  -----------
  Gross profit                                 32,536       21,849       15,626       74,135       40,790
  Operating expenses:
   Research and development                    12,410       11,746       10,824       35,694       34,249
   Sales and marketing                          5,054        3,991        3,345       12,823       10,377
   General and administrative                   3,798        3,012        2,642        9,510        8,043
   Amortization of intangibles                     --           --           --           --           16
   Restructuring charges (1)                       --           --           70           --        2,173
   Impairment of goodwill and intangible
    assets (2)                                     --           --           --           --          208
                                          -----------  -----------  -----------  -----------  -----------

    Total operating expenses                   21,262       18,749       16,881       58,027       55,066
                                          -----------  -----------  -----------  -----------  -----------
  Income (loss) from operations                11,274        3,100      (1,255)       16,108     (14,276)

  Other income, net                                33           20           26           78          115
                                          -----------  -----------  -----------  -----------  -----------

  Income (loss) before income taxes            11,307        3,120      (1,229)       16,186     (14,161)
                                          -----------  -----------  -----------  -----------  -----------

  Income tax provision                             36           28            9           65          100
                                          -----------  -----------  -----------  -----------  -----------

  Net income (loss)                          $ 11,271      $ 3,092    $ (1,238)     $ 16,121   $ (14,261)
                                          ===========  ===========  ===========  ===========  ===========

  Net income (loss) per share
   attributable to common stockholders -
   basic                                       $ 0.15       $ 0.04     $ (0.02)       $ 0.22     $ (0.21)
                                          ===========  ===========  ===========  ===========  ===========
  Net income (loss) per share
   attributable to common stockholders -
   diluted                                     $ 0.15       $ 0.04     $ (0.02)       $ 0.21     $ (0.21)
                                          ===========  ===========  ===========  ===========  ===========
  Weighted average number of shares used
   to compute net income (loss) per
   share - basic                               72,777       71,972       70,146       72,003       69,473
                                          ===========  ===========  ===========  ===========  ===========
  Weighted average number of shares used
   to compute net income (loss) per
   share - diluted                             77,605       75,616       74,459       75,791       69,473
                                          ===========  ===========  ===========  ===========  ===========

  (1) In March 2009, the Company implemented a restructuring plan to improve its operating cost structure
   which included a reduction-in-force and the closing
  of its France location and one of its Israel locations. During the three and nine months ended
   September 30, 2009, the Company recorded restructuring charges
  of $70,000 and $2,173,000, respectively, related to the restructuring plan.

  (2) During the three months ended March 31, 2009, the Company recorded an impairment charge on
   intangible assets of $208,000. The Company determined
  that the intangible assets associated with its 2007 acquisition of Arabella Software, Ltd. were fully
   impaired as the developed technology acquired would no longer
  be used in its ongoing business operations.

                     ENTROPIC COMMUNICATIONS, INC.
               GAAP Condensed Consolidated Balance Sheets
                             (In thousands)

                                   September                 December
                                      30,       June 30,       31,

                                     2010         2010         2009
                                  -----------  -----------  ---------
                                  (unaudited)  (unaudited)

  ASSETS
  Current assets:
   Cash and cash equivalents         $ 53,628     $ 41,329   $ 35,252
   Accounts receivable                 29,108       19,917     15,468
   Inventory                           24,331       23,077     16,353
   Prepaid expenses and other
    current assets                      2,428        2,772      3,302
                                  -----------  -----------  ---------
    Total current assets              109,495       87,095     70,375
   Property and equipment, net         11,362       11,706     11,581
   Intangible assets, net                 406          811      1,623

   Other long-term assets                 430          213        235
                                  -----------  -----------  ---------

    Total assets                    $ 121,693     $ 99,825   $ 83,814
                                  ===========  ===========  =========

  LIABILITIES AND STOCKHOLDERS'
   EQUITY
  Current liabilities:
   Accounts payable                  $ 13,391      $ 9,979    $ 5,726
   Accrued payroll and benefits         7,480        3,730      3,396
   Accrued expenses and other
    current liabilities                 2,136        2,538      2,217

   Deferred revenues                      120          161        174
                                  -----------  -----------  ---------
    Total current liabilities          23,127       16,408     11,513
  Stock repurchase liability              146          211        345
  Other long-term liabilities           2,586        2,751      3,043

  Stockholders' equity                 95,834       80,455     68,913
                                  -----------  -----------  ---------
    Total liabilities and
     stockholders' equity           $ 121,693     $ 99,825   $ 83,814
                                  ===========  ===========  =========

                                     ENTROPIC COMMUNICATIONS, INC.
                            Unaudited Reconciliation of Non-GAAP Adjustments
                 (In thousands, except for share information and footnote disclosures)

  This press release contains the following non-GAAP financial measures: net income (loss) and net
   income (loss) 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 (loss) and net income (loss) 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               Nine Months Ended
                                       -------------------------------------  ------------------------

                                        September    June 30,     September    September    September
                                        30, 2010       2010       30, 2009     30, 2010     30, 2009
                                       -----------  -----------  -----------  -----------  -----------
                                       (unaudited)  (unaudited)  (unaudited)  (unaudited)  (unaudited)
  GAAP net income (loss)                  $ 11,271      $ 3,092    $ (1,238)     $ 16,121   $ (14,261)
  Non-GAAP adjustments:
   Stock-based compensation:
    Cost of net revenues                       104           89           41          256          102
    Research and development                 1,362        1,211        1,006        3,652        3,524
    Sales and marketing                        419          382          354        1,113        1,048

    General and administrative                 898          875          797        2,511        2,552
                                       -----------  -----------  -----------  -----------  -----------
     Total stock-based compensation          2,783        2,557        2,198        7,532        7,226
  Acquisition-related items:
   Amortization of intangible assets:
    Cost of net revenues                       406          405          406        1,217        1,217
    Operating expenses                          --           --           --           --           16
   Impairment of goodwill and
    intangible assets                           --           --           --           --          208

  Restructuring charges                         --           --           70           --        2,173
                                       -----------  -----------  -----------  -----------  -----------

  Total of non-GAAP adjustments              3,189        2,962        2,674        8,749       10,840
                                       -----------  -----------  -----------  -----------  -----------

  Non-GAAP net income (loss)              $ 14,460      $ 6,054      $ 1,436     $ 24,870    $ (3,421)
                                       ===========  ===========  ===========  ===========  ===========

  GAAP weighted average shares
   (basic)                                  72,777       71,972       70,146       72,003       69,473
   Non-GAAP adjustment for dilutive
    shares (a)                               7,294        5,907        4,313        6,207           --
                                       -----------  -----------  -----------  -----------  -----------
  Non-GAAP weighted average shares
   (diluted)                                80,071       77,879       74,459       78,210       69,473
                                       ===========  ===========  ===========  ===========  ===========

  GAAP net income (loss) per share
   (basic)                                  $ 0.15       $ 0.04     $ (0.02)       $ 0.22     $ (0.21)
   Non-GAAP adjustments detailed
    above (a)                                 0.03         0.04         0.04         0.10         0.16
                                       -----------  -----------  -----------  -----------  -----------
  Non-GAAP net income (loss) per
   share (diluted)                          $ 0.18       $ 0.08       $ 0.02       $ 0.32     $ (0.05)
                                       ===========  ===========  ===========  ===========  ===========

  (a) Shares included for calculating diluted earnings per share for periods with non-GAAP net income.
   For the periods shown with a net loss, no shares were included for the diluted earnings per share
   calculation, as including such shares would be antidilutive.

This news release was distributed by GlobeNewswire, www.globenewswire.com

SOURCE: Entropic Communications

CONTACT:  Entropic Communications, Inc.
Investor Contact:
Debra Hart, Director, Investor Relations
858.768.3852
debra.hart@entropic.com
Ruder Finn for Entropic Communications
Media/Industry Analyst Contact:
Chris Fallon
212.715.1691
fallonc@ruderfinn.com

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