Entropic Communications Reports Fourth Quarter and Fiscal Year 2010 Results
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Revenue Up 15% Quarter-Over-Quarter to $70.8 Million, Annual Revenue Up 81%
Conference Call to be Webcast Today at 1:30 p.m. Pacific Time
SAN DIEGO, Feb. 2, 2011 (GLOBE NEWSWIRE) -- Entropic Communications, Inc. , a leading provider of silicon and software solutions to enable connected home entertainment, today reported its fourth quarter and fiscal year results for the period ended December 31, 2010. Entropic reported fourth quarter net revenues of $70.8 million, an increase of 15 percent compared with $61.3 million in the third quarter of 2010 and an increase of 102 percent compared to $35.1 million reported in the fourth quarter of 2009.
In accordance with U.S. generally accepted accounting principles (GAAP), the Company's fourth quarter net income was $48.6 million, or $0.55 per share (diluted). This compares with GAAP net income of $11.3 million, or $0.15 per share (diluted) in the third quarter of 2010. Included in GAAP net income for the fourth quarter of 2010 was a one-time tax benefit of $31.6 million, or $0.36 per diluted share, associated with the reversal of a valuation allowance related to certain deferred tax assets.
Non-GAAP net income in the fourth quarter was $20.3 million, or $0.22 per share (diluted), compared to non-GAAP net income of $14.5 million, or $0.18 per share (diluted) in the third quarter of 2010. Non-GAAP net income for the fourth quarter of 2010 excludes $406,000 in amortization of intangibles, $2.9 million in stock compensation expense and the $31.6 million one-time, non-cash tax benefit associated with the reversal of the valuation allowance described above. A reconciliation of the comparable GAAP financial measures to the non-GAAP measures used in this release is included in the attached tables.
Net revenues for the year ended December 31, 2010 were $210.2 million, an increase of 81 percent from the $116.3 million reported for the year ended December 31, 2009. Net income computed in accordance with GAAP for the year ended December 31, 2010 was $64.7 million, or $0.82 per share (diluted), compared with GAAP net loss of $13.2 million, or ($0.19) per share (diluted), for the year ended December 31, 2009. Non-GAAP net income for the year ended December 31, 2010 was $45.2 million, or $0.55 per share (diluted), compared to non-GAAP net income of $0.1 million, or breakeven on a per share basis (diluted) for the year ended December 31, 2009.
"I am very pleased with our results this quarter and am excited about our long-term opportunities. We turned in record quarterly and year-end revenue and generated more net income in Q4 2010 than we have in any other quarter in the Company's history," said Patrick Henry, president and CEO of Entropic Communications. "Entropic continues to penetrate the expanding connected home entertainment market and is building on its leadership position with the world's first MoCA 2.0 silicon. Looking forward, I expect Entropic will benefit from continued HDTV, DVR and multi-room DVR penetration worldwide, as well as the paradigm shift around streaming IP-based video and multimedia content and services throughout the home."
David Lyle, chief financial officer, commented, "This quarter marks a turning point in Entropic's history. As a result of our recent uptick in profitability, we reversed the valuation allowance previously placed on our deferred tax assets, comprised mainly of net operating loss carry forwards and research and development tax credits. This one-time, non-cash accounting entry indicates strengthened conviction in the Company's ability to generate sufficient future profits to fully utilize these tax assets. More importantly, our fourth quarter non-GAAP results show the continued strength of our business and the leverage in our model with 41 percent sequential earnings growth on 15 percent sequential revenue growth."
Three Months ended
Years ended Dec. 31,
(In millions, except per share data)
Dec. 31, 2010
Sept. 30, 2010
Dec. 31, 2009
2010
2009
Net revenues
$70.8
$61.3
$35.1
$210.2
$116.3
GAAP net income (loss)
$48.6
$11.3
$1.0
$64.7
($13.2)
GAAP net income (loss) per share (basic)
$0.58
$0.15
$0.01
$0.86
($0.19)
GAAP net income (loss) per share (diluted)
$0.55
$0.15
$0.01
$0.82
($0.19)
Non-GAAP net income1
$20.3
$14.5
$3.6
$45.2
$0.1
Non-GAAP net income per share1 (diluted)
$0.22
$0.18
$0.05
$0.55
$0.00
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 Communications Unveils World's First MoCA® 2.0 Solution
Answering the growing demand for powerful connectivity within the home, Entropic unveiled the world's first MoCA (Multimedia over Coax) 2.0 solution at the Consumer Electronics Show in January 2011. Entropic's fourth-generation silicon extends the popularity of the MoCA standard, offering up to 1Gbps of throughput for unparalleled home entertainment experiences. Entropic's MoCA 2.0 solution empowers a new revolution in home networking while satisfying the long-term whole-home digital networking needs of service providers, original equipment manufacturers (OEMs), and consumers by providing maximum throughput, enhanced reliability, new power management features, better security, and backwards interoperability to prior MoCA standards.
Entropic Announces First MoCA 2.0 Design Win
Entropic and Actiontec Electronics have partnered to deliver MoCA 2.0 enabled home routers to be powered by Entropic's fourth-generation MoCA silicon. These home routers will deliver virtually unconstrained bandwidth for enhanced data and video distribution throughout the home. Actiontec and Entropic have a long and successful history of delivering MoCA 1.0/1.1 enabled home routers, which create a whole-home network used to distribute broadband data access and enable multi-room DVR/VOD service. With a MoCA 2.0-enabled home router, consumers gain an even higher performance home network that can be used to deliver faster tiers of Internet access speeds, support more simultaneous HD and 3D video streams, and deploy new network architectures — all with the same high-quality and robustness that consumers have come to expect from a 'no excuses' MoCA network.
Entropic Partners with Leading OEMs to Deliver MoCA 2.0 Solutions
Entropic and Marvell , a worldwide leader in integrated silicon, announced their collaboration to accelerate the development of a new class of industry first MoCA 2.0 enabled consumer electronics and customer premise equipment designed to allow service providers to distribute virtually unconstrained bandwidth to and within the home.
Entropic and Cavium Networks , a leading provider of semiconductor products that enable intelligent processing for networking and wireless applications, announced their collaboration on a MoCA adapter reference design that utilizes the latest MoCA 2.0 solution from Entropic Communications.
Leveraging Entropic's industry-first complete MoCA 2.0 solution with BroadLight's world class GPON (gigabit passive optical network), the two companies are aligning silicon and software solution roadmaps to develop optimized MoCA 2.0 enabled optical network terminals for Fiber to the Home markets, worldwide.
European Market Expansion
InCoax Networks, a leading provider of equipment for broadband access over existing in-building coaxial cables, deployed Entropic Communications' Ethernet-over-Coax Solution (EoC) to deliver high-speed broadband access to the European market in October 2010. Featuring Entropic's EoC technology in InCoax's new platform, the solution enables service providers to serve the needs of their subscriber base for high speed Internet access and IPTV services by bringing fiber to the coax, eliminating the need for costly new cabling.
Awards & Recognition
Entropic earned the 2010 TechAmerica High Tech Awards for the Company's MoCA silicon solution in the Communications Products and Services category. The highly-competitive TechAmerica High Tech Awards celebrate the achievements of technology companies and their innovative contributions to the industry and their communities.
Actiontec Electronics' Ethernet-To-Coax Network Adapter, a MoCA adapter based on Entropic's silicon, was named Best New Product in CEDIA's 2010 Manufacturers' Excellence Awards by CEDIA, a national trade association of companies specializing in home theater installation.
For More Information
Entropic management will be holding a conference call today, February 2, 2011, at 1:30 p.m. Pacific Time/4:30 p.m. Eastern Time to discuss the Company's fourth quarter and fiscal year 2010 results and to provide guidance for the first quarter of fiscal year 2011. You may access the conference call via any of the following:
Entropic Communications, Inc. 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.
This press release and the accompanying tables contain the following non-GAAP financial measures: net income and net income 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, restructuring charges, and the tax benefit associated with the valuation allowance reversal, 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 Entropic's market penetration and overall 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; the risk that management's financial estimates, including estimates used in the calculation of the effective cash tax rate upon which we base our non-GAAP earnings, will be different than expected; 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 September 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® 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
December 31, 2010
September 30, 2010
December 31, 2009
December 31, 2010
December 31, 2009
(unaudited)
(unaudited)
(unaudited)
Net revenues
$ 70,796
$ 61,310
$ 35,078
$ 210,237
$ 116,305
Cost of net revenues
32,764
28,774
16,962
98,070
57,399
Gross profit
38,032
32,536
18,116
112,167
58,906
Operating expenses:
Research and development
13,023
12,410
10,912
48,717
45,161
Sales and marketing
4,376
5,054
3,578
17,199
13,955
General and administrative
3,624
3,798
2,825
13,134
10,868
Amortization of intangibles
--
--
--
--
16
Restructuring charges (1)
--
--
--
--
2,173
Impairment of goodwill and intangible assets (2)
--
--
--
--
208
Total operating expenses
21,023
21,262
17,315
79,050
72,381
Income (loss) from operations
17,009
11,274
801
33,117
(13,475)
Other income, net
63
33
27
141
142
Income (loss) before income taxes
17,072
11,307
828
33,258
(13,333)
Income tax (benefit) provision
(31,511)
36
(193)
(31,446)
(93)
Net income (loss)
$ 48,583
$ 11,271
$ 1,021
$ 64,704
$ (13,240)
Net income (loss) per share - basic
$ 0.58
$ 0.15
$ 0.01
$ 0.86
$ (0.19)
Net income (loss) per share - diluted
$ 0.55
$ 0.15
$ 0.01
$ 0.82
$ (0.19)
Weighted average number of shares used to compute net income (loss) per share - basic
83,979
72,777
70,820
75,040
69,834
Weighted average number of shares used to compute net income (loss) per share - diluted
88,068
77,605
73,142
78,916
69,834
(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 year ended December 31, 2009, the Company recorded restructuring charges of $2,173,000, 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)
December 31,
September 30,
December 31,
2010
2010
2009
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents
$ 98,100
$ 53,628
$ 35,252
Marketable securities
48,275
--
--
Accounts receivable
18,244
29,108
15,468
Inventory
39,915
24,331
16,353
Deferred tax assets, current
14,307
--
--
Prepaid expenses and other current assets
6,226
2,428
3,302
Total current assets
225,067
109,495
70,375
Property and equipment, net
11,354
11,362
11,581
Long-term marketable securities
22,386
--
--
Intangible assets, net
--
406
1,623
Deferred tax assets, long-term
17,304
--
--
Other long-term assets
2,697
430
235
Total assets
$ 278,808
$ 121,693
$ 83,814
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable
$ 18,278
$ 13,391
$ 5,726
Accrued expenses and other current liabilities
3,634
2,256
3,045
Accrued payroll and benefits
6,666
7,480
3,396
Total current liabilities
28,578
23,127
12,167
Deferred rent
1,568
2,045
1,795
Other long-term liabilities
72
687
939
Stockholders' equity
248,590
95,834
68,913
Total liabilities and stockholders' equity
$ 278,808
$ 121,693
$ 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 and net 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 income and net 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
December 31,
2010
September 30,
2010
December 31,
2009
December 31,
2010
December 31,
2009
(unaudited)
(unaudited)
(unaudited)
GAAP net income (loss)
$ 48,583
$ 11,271
$ 1,021
$ 64,704
$ (13,240)
Non-GAAP adjustments:
Stock-based compensation:
Cost of net revenues
128
104
36
384
138
Research and development
1,397
1,362
1,028
5,049
4,552
Sales and marketing
445
419
353
1,558
1,401
General and administrative
968
898
724
3,479
3,276
Total stock-based compensation
2,938
2,783
2,141
10,470
9,367
Acquisition-related items:
Amortization of intangible assets:
Cost of net revenues
406
406
405
1,623
1,622
Operating expenses
--
--
--
--
16
Impairment of goodwill and intangible assets
--
--
--
--
208
Benefit related to the release of deferred tax asset valuation allowance
(31,591)
--
--
(31,591)
--
Restructuring charges
--
--
--
--
2,173
Total of non-GAAP adjustments
(28,247)
3,189
2,546
(19,498)
13,386
Non-GAAP net income
$ 20,336
$ 14,460
$ 3,567
$ 45,206
$ 146
GAAP weighted average shares (basic)
83,979
72,777
70,820
75,040
69,834
Non-GAAP adjustment for dilutive shares
7,405
7,294
4,110
6,663
2,889
Non-GAAP weighted average shares (diluted)
91,384
80,071
74,930
81,703
72,723
GAAP net income (loss) per share (basic)
$ 0.58
$ 0.15
$ 0.01
$ 0.86
$ (0.19)
Non-GAAP adjustments detailed above
(0.36)
0.03
0.04
(0.31)
0.19
Non-GAAP net income per share (diluted)
$ 0.22
$ 0.18
$ 0.05
$ 0.55
$ --
CONTACT: Investor Contact:
Debra Hart
Director, Investor Relations
858.768.3852
debra.hart@entropic.com
Media/Industry Analyst Contact:
Ruder Finn for Entropic Communications
Chris Fallon
212.715.1691
fallonc@ruderfinn.com
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