Entropic Reports Second Quarter 2014 Results
July 30 2014 - 4:05PM
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 share
data) |
June 30,
2014 |
March 31,
2014 |
June 30,
2013 |
Net revenues |
$ 50.2 |
$ 55.7 |
$ 70.6 |
GAAP net loss |
$ (21.8) |
$ (23.3) |
$ (39.9) |
GAAP net loss per share (basic and
diluted) |
$ (0.24) |
$ (0.26) |
$ (0.44) |
Non-GAAP net (loss)
income1 |
$ (10.4) |
$ (15.3) |
$ 0.6 |
Non-GAAP net (loss) income per share1
(diluted) |
$ (0.12) |
$ (0.17) |
$ 0.01 |
|
|
|
|
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,
July 30, 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'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, 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,
2014 |
March 31,
2014 |
June 30,
2013 |
June 30,
2014 |
June 30,
2013 |
|
(unaudited) |
(unaudited) |
(unaudited) |
(unaudited) |
(unaudited) |
|
|
|
|
|
|
Net revenues |
$ 50,200 |
$ 55,655 |
$ 70,612 |
$ 105,855 |
$ 145,069 |
Cost of net revenues |
26,662 |
29,593 |
36,356 |
56,255 |
75,974 |
Gross profit |
23,538 |
26,062 |
34,256 |
49,600 |
69,095 |
Operating expenses: |
|
|
|
|
|
Research and development |
31,216 |
35,266 |
28,334 |
66,482 |
56,404 |
Sales and marketing |
5,878 |
7,445 |
6,017 |
13,323 |
12,472 |
General and administrative |
6,121 |
6,132 |
5,456 |
12,253 |
11,539 |
Amortization of
intangibles |
290 |
443 |
495 |
733 |
1,425 |
Restructuring charges |
1,796 |
-- |
1,763 |
1,796 |
1,763 |
Total operating
expenses |
45,301 |
49,286 |
42,065 |
94,587 |
83,603 |
Loss from operations |
(21,763) |
(23,224) |
(7,809) |
(44,987) |
(14,508) |
Loss related to equity method
investment |
-- |
-- |
(335) |
-- |
(1,115) |
Impairment of investment |
-- |
-- |
(4,780) |
-- |
(4,780) |
Other income, net |
192 |
81 |
255 |
273 |
683 |
Loss before income taxes |
(21,571) |
(23,143) |
(12,669) |
(44,714) |
(19,720) |
Income tax provision |
278 |
110 |
27,244 |
388 |
22,597 |
Net loss |
$ (21,849) |
$ (23,253) |
$ (39,913) |
$ (45,102) |
$ (42,317) |
|
|
|
|
|
|
Net loss per share - basic and diluted |
$ (0.24) |
$ (0.26) |
$ (0.44) |
$ (0.50) |
$ (0.47) |
Weighted average number of shares used to
compute net loss per share - basic and diluted |
89,566 |
89,705 |
90,281 |
89,635 |
89,795 |
|
|
|
|
|
|
|
|
|
|
|
|
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 liabilities |
6,380 |
5,711 |
6,318 |
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,
2014 |
June 30,
2013 |
June 30,
2014 |
June 30,
2013 |
|
(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
revenues |
88 |
167 |
230 |
255 |
431 |
Research and
development |
3,535 |
3,202 |
1,975 |
6,737 |
3,964 |
Sales and
marketing |
772 |
562 |
516 |
1,334 |
814 |
General and
administrative |
1,167 |
937 |
1,054 |
2,104 |
2,020 |
Total stock-based
compensation |
5,562 |
4,868 |
3,775 |
10,430 |
7,229 |
Amortization of intangible
assets: |
|
|
|
|
|
Cost of net
revenues |
2,717 |
2,717 |
2,228 |
5,434 |
4,456 |
Operating
expenses |
290 |
443 |
495 |
733 |
1,425 |
Transaction and integration
costs |
-- |
-- |
244 |
-- |
244 |
Loss related to equity method
investment |
-- |
-- |
335 |
-- |
1,115 |
Impairment of investment |
-- |
-- |
4,780 |
-- |
4,780 |
Adjustments to the fair value
of PLX acquisition contingent consideration |
-- |
-- |
(143) |
-- |
(131) |
Income tax effects of pre-tax
adjustments |
-- |
-- |
2,591 |
-- |
-- |
Cash tax difference (1) |
134 |
(113) |
(2,274) |
21 |
(4,371) |
IP litigation costs (2) |
935 |
21 |
-- |
956 |
-- |
Deferred tax asset valuation
allowance |
-- |
-- |
26,695 |
-- |
26,695 |
Restructuring charges (3) |
1,796 |
-- |
1,763 |
1,796 |
1,763 |
Total of non-GAAP
adjustments |
11,434 |
7,936 |
40,489 |
19,370 |
43,205 |
Non-GAAP net (loss)
income |
$ (10,415) |
$ (15,317) |
$ 576 |
$ (25,732) |
$ 888 |
|
|
|
|
|
|
Weighted average shares (basic) |
89,566 |
89,705 |
90,281 |
89,635 |
89,795 |
Adjustment for dilutive
shares |
-- |
-- |
2,152 |
-- |
2,500 |
Weighted average shares (diluted) |
89,566 |
89,705 |
92,433 |
89,635 |
92,295 |
|
|
|
|
|
|
GAAP net loss per share (basic) |
$ (0.24) |
$ (0.26) |
$ (0.44) |
$ (0.50) |
$ (0.47) |
Non-GAAP adjustments detailed
above |
0.12 |
0.09 |
0.45 |
0.21 |
0.48 |
Non-GAAP net (loss) income per share
(diluted) |
$ (0.12) |
$ (0.17) |
$ 0.01 |
$ (0.29) |
$ 0.01 |
|
|
|
|
|
|
(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. |
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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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