SAN DIEGO, Feb. 5, 2009 (GLOBE NEWSWIRE) -- Entropic Communications, Inc. (Nasdaq:ENTR), a leading provider of silicon solutions to enable connected home entertainment, today reported its fourth quarter and fiscal year results for the period ended December 31, 2008.
Entropic reported fourth quarter net revenues of $29.5 million, a decrease of 7 percent compared with $31.7 million in the third quarter of 2008 and 26 percent lower than in the fourth quarter of 2007.
During the fourth quarter, the company performed an annual review of its goodwill and long-lived assets to determine if any of these assets were impaired. Based on a combination of factors, including the current economic environment, Entropic's operating results, and a sustained decline in Entropic's market capitalization, the Company recorded a non-cash charge of $113.2 million in the fourth quarter of 2008 to write down the carrying amount of goodwill and certain intangible assets. The goodwill and intangible asset impairment charges do not affect the Company's day-to-day business operations, cash balance or long-term competitive position. Reflecting these charges, the Company reported a net loss for the fourth quarter of $118.9 million, or ($1.74) per share (basic and diluted). On a non-GAAP basis, without the effect of the goodwill and intangible asset impairment charges as well as other non-GAAP adjustments, net loss in the fourth quarter was $0.4 million, or ($0.01) per share (basic and diluted).
Net revenues for the year ended December 31, 2008 were $146.0 million, an increase of 19 percent from the $122.5 million reported for the year ended December 31, 2007. Net revenues in the year ended December 31, 2008 included a full twelve months of revenue from the acquisition of RF Magic, versus six months of revenue for the year ended December 31, 2007, as the acquisition closed on June 30, 2007. Net loss computed in accordance with GAAP for the year ended December 31, 2008 was $136.4 million, or ($2.01) per share (basic and diluted), compared with GAAP net loss of $32.1 million, or ($2.47) per share (basic and diluted), for the year ended December 31, 2007.
"Although the current macroeconomic environment is challenging, we remain positive about our mid- and long-term prospects. Our largest end customers are financially strong and appear to be faring well despite the economy, and we continue to see momentum for additional service provider deployments and retail opportunities of our MoCA(r) home networking solutions," said Patrick Henry, president and CEO of Entropic Communications. "While we have experienced a slow down in demand for our products as both our direct and end customers scale back inventory, we believe the market for our home networking products will expand as more service providers deploy MoCA solutions, and our fundamental strategy is unchanged. We continue to add to our product portfolio and remain committed to our ongoing product development efforts and prudent management of our resources."
Three Months ended Years ended Dec. 31,
-------------------- --------------------
(In millions, except per Dec. 31, Sept. 30,
share data) 2008 2008 2008 2007
--------------------------------------------------------------------
Net revenues (1) $29.5 $31.7 $146.0 $122.5
GAAP net loss ($118.9) ($7.1) ($136.4) ($32.1)
GAAP net loss per share
(basic and diluted) ($1.74) ($0.11) ($2.01) ($2.47)
Non-GAAP net (loss) income
(2) ($0.4) ($1.2) $2.8 $3.5
Non-GAAP net (loss) income
per share (2) ($0.01) ($0.02) $0.04 $0.06
1. Net revenues in the year ended December 31, 2008 included a full
twelve months of revenue from the acquisition of RF Magic,
versus six months of revenue for the year ended December 31,
2007, as the acquisition closed on June 30, 2007.
2. Please refer to 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.
Entropic also announced today that it has separated the positions of chairman of the board and chief executive officer. The Company's board of directors has appointed Umesh Padval as non-executive chairman. Entropic's board has always recognized the importance of strong independent leadership and believes the separation of chairman and CEO roles strengthens this independent leadership. This move is the next step in following best practices in corporate governance. Patrick Henry, who has held both positions of chairman and chief executive officer since July 2007, will continue in his role as president and chief executive officer of the Company as well as board director.
Padval has served on Entropic's board since December 2004 and also serves on the nominating and governance committee and as chairman of the compensation committee. Padval is an operating partner at Bessemer Venture Partners. Prior to joining Bessemer in September 2007, Padval served as executive vice president, Consumer Products at LSI Logic Corporation. Prior to his promotion to executive vice president, consumer products, Padval was senior vice president and general manager for LSI Logic's Broadband Entertainment Division, a position he held since 2001. Padval served as chief executive officer of C-Cube from 2000-2001, as president of C-Cube from 1998-2000 and as a member of the C-Cube board of directors from 1998-2001. Padval also serves as a member of the board of directors of Monolithic Power Systems and Integrated Device Technology. He received a bachelor's degree in technology from the Indian Institute of Technology, Bombay, and an M.S. in engineering from Pennsylvania State University and Stanford University.
Other Recent Entropic Highlights
-- Introduced our 65nm, third-generation, single-chip c.LINK solution
for MoCA home networking providing higher performance, a smaller
footprint and lower overall system costs to our customers.
-- Partnered with NETGEAR to bring the industry's first MoCA 1.1
certified bridge for multimedia home networking to the consumer
market.
-- Partnered with Actiontec Electronics on a MoCA Network Adapter
targeting home theatre installers and offering a simple way to
deliver high-speed Internet to the entertainment center.
-- Conducted live HD multimedia demonstrations with DLNA-enabled
products and MoCA networking at 2009 International CES.
-- Announced that BSkyB will use our Channel Stacking Switch in its
new four-channel satellite channel router produced by Global
Invacom to address demand from residents in multi-dwelling units.
-- Partnered with MTI to embed CSS in the award-winning MTI DODECA
Low Noise Block Feedhorn, a 12-Channel One Cable Solution that
received the "2008 Innovation Product Award" from the Hsinchu
Science Park Administration.
-- Introduced the world's first all-CMOS, multi-mode (DVB-T, ATSC,
DVB-C, ISDBT) hybrid (analog/digital) tuner -- the EN4020, the
first low-cost, CMOS tuner in production to offer Nordig
compliance for cable and terrestrial applications.
-- Released a joint reference design incorporating our CMOS silicon
tuner with STMicroelectronics for digital video broadcasting over
cable (DVB-C) set-top box applications.
-- Announced multiple design-wins for our new multi-mode hybrid RF
CMOS silicon tuner.
-- Shipped our 20 millionth c.LINK chipset and our 20 millionth DBS
ODU silicon solution.
For More Information
Entropic management will be holding a conference call today, February 5, 2009, at 2:00 p.m. Pacific Time/5:00 p.m. Eastern Time, to discuss the Company's results for the fourth quarter of fiscal 2008 and to provide guidance for the first quarter of fiscal 2009. You may access the conference call via any of the following:
Teleconference: 719-325-2162
Conference ID: 5633154
Web Broadcast: http://ir.entropic.com/events.cfm
Replay: 719-457-0820
About Entropic Communications
Entropic Communications, Inc. is a leading fabless semiconductor company that designs, develops and markets system solutions that enable connected home entertainment. The company's technologies significantly change the way high-definition television-quality video and other multimedia content such as movies, music, games and photos are brought into and delivered throughout the home. For more information please visit: www.entropic.com.
The Entropic Communications logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=4255
Forward-Looking Statements
Statements in this press release that are not strictly historical in nature constitute "forward-looking statements." Such statements include, but are not limited to, statements regarding our mid and long term prospects, the financial position of our end customers, momentum for additional service provider deployments and retail opportunities, and our focus on operational execution. 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 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 HD video and other multi-media content delivery and networking solutions based on the MoCA standard; 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 related to international operations including political and economic conditions in foreign markets; and other factors discussed in the "Risk Factors" section of Entropic's Quarterly Report on Form 10-Q for the quarter ended September 30, 2008. 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 Years Ended
------------------------------- --------------------
Dec. 31, Sept. 30, Dec. 31,
2008 2008 2007 2008 2007
--------- --------- --------- ---- ----
(unaudited)(unaudited)(unaudited)
Net revenues $ 29,531 $ 31,678 $ 40,168 $ 146,033 $ 122,545
Cost of net
revenues 15,397 17,308 21,705 79,411 76,196
--------- --------- --------- --------- ---------
Gross profit 14,134 14,370 18,463 66,622 46,349
Operating
expenses:
Research and
development 12,876 13,902 12,423 55,769 35,235
Sales and
marketing 3,672 3,991 3,706 16,262 10,348
General and
administra-
tive 2,890 2,798 3,581 12,752 8,685
Write off of
in-process
research and
development -- -- -- 1,300 21,400
Amortization
of purchased
intangibles 713 713 1,296 2,735 2,634
Restructuring
(benefit)
charge (1) (19) 209 -- 1,259 --
Impairment of
goodwill and
intangible
assets (2) 113,193 -- -- 113,193 --
--------- --------- --------- --------- ---------
Total
operating
expenses 133,325 21,613 21,006 203,270 78,302
--------- --------- --------- --------- ---------
Loss from
operations (119,191) (7,243) (2,543) (136,648) (31,953)
Other income,
net 80 156 2,101 229 31
--------- --------- --------- --------- ---------
Loss before
income taxes (119,111) (7,087) (442) (136,419) (31,922)
--------- --------- --------- --------- ---------
Income tax
(benefit)
provision (168) 37 44 (49) 44
--------- --------- --------- --------- ---------
Net loss before
accretion of
redeemable
convertible
preferred (118,943) (7,124) (486) (136,370) (31,966)
Accretion of
redeemable
convertible
preferred
stock -- -- (23) -- (118)
--------- --------- --------- --------- ---------
Net loss
attributable
to common
stockholders $(118,943) $ (7,124) $ (509) $(136,370) $ (32,084)
========= ========= ========= ========= =========
Net loss per
share attribu-
table to common
stockholders
(basic and
diluted) $ (1.74) $ (0.11) $ (0.02) $ (2.01) $ (2.47)
========= ========= ========= ========= =========
Weighted
average shares
(basic and
diluted) 68,239 67,669 27,494 67,733 13,011
========= ========= ========= ========= =========
(1) During the three months ended December 31, 2008 and September 30,
2008, the Company recorded restructuring charges of $(19,000) and
$209,000, respectively, related to the implementation of a
restructuring plan to improve its operating cost structure which
included a reduction-in-force.
(2) During the three months ended December 31, 2008, the Company
performed an impairment analysis over goodwill and purchased
intangible assets and recorded an impairment charge of $88,081,000
and $25,112,000, respectively, as the carrying value of these assets
exceeded the fair value at December 31, 2008.
ENTROPIC COMMUNICATIONS, INC.
GAAP Condensed Consolidated Balance Sheets
(In thousands)
Dec. 31, Dec. 31,
2008 2007
--------- ---------
ASSETS
Current assets:
Cash and cash equivalents $ 30,071 $ 51,533
Marketable securities 4,339 2,965
Accounts receivable, net 13,915 24,489
Inventory 18,693 15,332
Prepaid expenses and other current assets 2,785 2,238
--------- ---------
Total current assets 69,803 96,557
Property and equipment, net 13,046 8,952
Intangible assets, net 3,469 34,145
Goodwill -- 86,256
Other long-term assets 284 416
--------- ---------
Total assets $ 86,602 $ 226,326
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 7,873 $ 18,909
Accrued payroll and benefits 3,498 4,253
Deferred revenues 467 303
Current portion of line of credit and loans
payable -- 2,860
Current portion of software licenses and
capital lease obligations -- 384
--------- ---------
Total current liabilities 11,838 26,709
Stock repurchase liability 784 1,765
Lines of credit and loans payable -- 5,547
Other long-term liabilities 3,231 1,907
Stockholders' equity 70,749 190,398
--------- ---------
Total liabilities and stockholders' equity $ 86,602 $ 226,326
========= =========
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 (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 Years Ended
------------------------------ --------------------
Dec. 31, Sept. 30, Dec. 31,
2008 2008 2007 2008 2007
--------- --------- --------- ---- ----
GAAP net loss
attributable to
common share-
holders $(118,943) $ (7,124) $ (509) $(136,370) $ (32,084)
Non-GAAP
adjustments:
Stock-based
compensation:
Cost of net
revenues 78 63 71 251 159
Research
and deve-
lopment 1,627 1,834 1,215 7,048 3,141
Sales and
marketing 453 647 489 2,334 1,174
General and
adminis-
trative 875 914 918 3,854 2,044
--------- --------- --------- --------- ---------
Total
stock-
based
compen-
sation 3,033 3,458 2,693 13,487 6,518
Acquisition-
related
items:
Amortization
of inven-
tory step-
up charge
to cost of
net reven-
ues -- -- 687 -- 2,749
Amortization
of pur-
chased
intangible
assets:
Cost of
net
revenues 1,590 1,590 1,240 6,010 2,480
Operating
expenses 713 713 1,296 2,735 2,635
Impairment of
goodwill &
intangible
assets 113,193 -- -- 113,193 --
Write off of
in-process
research and
development -- -- -- 1,300 21,400
Restructuring
(benefit)
charge (19) 209 -- 1,259 --
Accretion of
redeemable
convertible
preferred
stock -- -- -- -- --
Write off of
debt issu-
ance costs -- -- -- 476 --
Vativ reten-
tion bonuses -- -- -- 698 --
Gain on fair
value of
preferred
stock
warrant
liabilities -- -- (2,180) -- (173)
--------- --------- --------- --------- ---------
Total of non-
GAAP
adjustments 118,510 5,970 3,736 139,158 35,609
--------- --------- --------- --------- ---------
Non-GAAP net
(loss) income $ (433) $ (1,154) $ 3,227 $ 2,788 $ 3,525
========= ========= ========= ========= =========
GAAP weighted
average shares
(basic) 68,239 67,669 27,494 67,733 13,011
Non-GAAP
adjustment
for dilutive
shares (a) -- -- 7,950 5,010 7,731
Non-GAAP
adjustment
for assumed
conversion
of redeem-
able
convertible-
preferred
stock (-) -- -- 32,697 -- 35,354
--------- --------- --------- --------- ---------
Non-GAAP weigh-
ted average
shares
(diluted) 68,239 67,669 68,141 72,743 56,096
========= ========= ========= ========= =========
GAAP net loss
per share
(basic and
diluted) $ (1.74) $ (0.11) $ (0.02) $ (2.01) $ (2.47)
Non-GAAP
adjustments
detailed
above (a)(b) 1.73 0.09 0.07 2.05 2.53
--------- --------- --------- --------- ---------
Non-GAAP net
(loss) income
per share
(diluted) $ (0.01) $ (0.02) $ 0.05 $ 0.04 $ 0.06
========= ========= ========= ========= =========
(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.
(b) Non-GAAP adjustment to weighted average shares represents the
assumed conversion of redeemable convertible preferred stock into
common stock as of the later of their issuance or the beginning of
their respective periods for the periods presented.
ENTROPIC COMMUNICATIONS, INC.
Unaudited Non-GAAP Supplemental Financial Information
(In thousands, except percentage data)
The following table sets forth certain non-GAAP financial measures
used in calculating Entropic's non-GAAP net (loss) income for the
periods presented. Such non-GAAP financial measures are based upon
Entropic's unaudited consolidated statements of operations for the
periods presented and give effect to certain adjustments identified
in the table. The presentation of such non-GAAP financial 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. In addition, investors should not rely on the
results of prior periods as an indication of Entropic's future
performance.
Three Months Ended Years Ended
------------------------------- --------------------
Dec. 31, Sept. 30, Dec. 31,
2008 2008 2007 2008 2007
--------- --------- --------- ---- ----
NET REVENUES $ 29,531 $ 31,678 $ 40,168 $ 146,033 $ 122,545
COST OF NET
REVENUES:
GAAP cost of
net revenues $ 15,397 $ 17,308 $ 21,705 $ 79,411 $ 76,196
Less:
Stock-based
compensation
expense 78 63 71 251 159
Amortization
of developed
technology 1,590 1,590 1,240 6,010 2,480
Amortization
of inventory
step-up -- -- 687 -- 2,749
--------- --------- --------- --------- ---------
Non-GAAP cost
of net
revenues $ 13,729 $ 15,655 $ 19,707 $ 73,150 $ 70,808
========= ========= ========= ========= =========
GROSS PROFIT:
GAAP gross
profit $ 14,134 $ 14,370 $ 18,463 $ 66,622 $ 46,349
Add:
Stock-based
compensation
expense 78 63 71 251 159
Amortization
of developed
technology 1,590 1,590 1,240 6,010 2,480
Amortization
of inventory
step-up -- -- 687 -- 2,749
--------- --------- --------- --------- ---------
Non-GAAP gross
profit $ 15,802 $ 16,023 $ 20,461 $ 72,883 $ 51,737
========= ========= ========= ========= =========
GAAP gross
margin 47.9% 45.4% 46.0% 45.6% 37.8%
Non-GAAP
gross margin 53.5% 50.6% 50.9% 49.9% 42.2%
OPERATING
EXPENSES:
GAAP operating
expenses $ 133,325 $ 21,613 $ 21,006 $ 203,270 $ 78,302
Less:
Stock-based
compensation
expense 2,955 3,395 2,622 13,236 6,359
Amortization
of purchased
intangibles 713 713 1,296 2,735 2,635
Write off of
in-process
research and
development -- -- -- 1,300 21,400
Vativ reten-
tion bonuses -- -- -- 698 --
Restructuring
(benefit)
charge (19) 209 -- 1,259 --
Impairment of
goodwill &
intangible
assets 113,193 -- -- 113,193 --
--------- --------- --------- --------- ---------
Non-GAAP
operating
expenses $ 16,483 $ 17,296 $ 17,088 $ 70,849 $ 47,908
========= ========= ========= ========= =========
OTHER INCOME
(EXPENSE), NET:
GAAP other
income, net $ 80 $ 156 $ 2,101 $ 229 $ 31
Add:
Write off of
debt
issuance
costs -- -- -- 476 --
Gain on fair
value of
preferred
stock
warrant
liabilities -- -- (2,180) -- (173)
--------- --------- --------- --------- ---------
Non-GAAP other
income
(expense), net $ 80 $ 156 $ (79) $ 705 $ (142)
========= ========= ========= ========= =========
INCOME TAX
BENEFIT
(PROVISION) $ 168 $ (37) $ (44) $ 49 $ (44)
ACCRETION OF
REDEEMABLE
CONVERTIBLE
PREFERRED
STOCK $ -- $ -- $ (23) $ -- $ (118)
RESEARCH AND
DEVELOPMENT
EXPENSE:
GAAP research
and develop-
ment $ 12,876 $ 13,902 $ 12,423 $ 55,769 $ 35,235
Less:
Vativ
retention
bonuses -- -- -- 648 --
Stock-based
compensation
expense 1,627 1,834 1,215 7,048 3,141
--------- --------- --------- --------- ---------
Non-GAAP
research and
development $ 11,249 $ 12,068 $ 11,208 $ 48,073 $ 32,094
========= ========= ========= ========= =========
SALES AND
MARKETING
EXPENSE:
GAAP sales and
marketing $ 3,672 $ 3,991 $ 3,706 $ 16,262 $ 10,348
Less:
Vativ
retention
bonuses -- -- -- 50 --
Stock-based
compensation
expense 453 647 489 2,334 1,174
--------- --------- --------- --------- ---------
Non-GAAP sales
and marketing $ 3,219 $ 3,344 $ 3,217 $ 13,878 $ 9,174
========= ========= ========= ========= =========
GENERAL AND
ADMINISTRATIVE
EXPENSE:
GAAP general
and administr-
ative $ 2,890 $ 2,798 $ 3,581 $ 12,752 $ 8,685
Less: stock-
based compen-
sation ex-
pense 875 914 918 3,854 2,044
--------- --------- --------- --------- ---------
Non-GAAP
general and
administrative $ 2,015 $ 1,884 $ 2,663 $ 8,898 $ 6,641
========= ========= ========= ========= =========