Restructuring Plan Designed to Accelerate Path to Profitability; Annualized Cost Savings of Approximately $24 Million
Company Lowers Guidance Range for Q2 2014
Conference Call to be Webcast Today at 2:00 p.m. PT/ 5:00 p.m. ET
SAN DIEGO, June 9, 2014 (GLOBE NEWSWIRE) -- Entropic (Nasdaq:ENTR), a world leader in semiconductor solutions for the connected home, today announced a plan designed to sharpen its engineering and research and development (R&D) focus and increase the efficiency of its global operations. The initiative calls for a closing and consolidation of several global facilities impacting approximately 23 percent of Entropic's global headcount. Through these efforts, Entropic will seek to align its cost structure around providing more focused engineering, R&D and product development programs, deliver improved performance through a stronger operating profile and create value for its shareholders.
Today's actions, which are expected to be substantially completed by the fourth quarter of 2014, will place a higher concentration of engineering, R&D and product development efforts in San Diego, Irvine and San Jose, California, with specialized and local efforts maintained in Shanghai and Shenzhen, China and Belfast, Northern Ireland. Entropic will close major engineering sites in Austin, Texas; Israel; India; and Taiwan. By consolidating sites, Entropic anticipates it will be able to reduce product development complexity, create immediate operational efficiencies, and lower structural overhead costs. Entropic offered approximately 30 percent of the staff in the facilities closing an opportunity to relocate to one of its California sites and expects to have approximately 500 employees at year's end. Entropic is offering transition assistance to those impacted by the restructuring.
"Our actions today, while difficult to make as they affect our team of dedicated, talented employees, will enable Entropic to better target resources, improve short-term performance and accelerate our path to profitability while maintaining the proper level of investment in product development, the commercialization of new products, and general customer and design-win support," said Patrick Henry, president and chief executive officer, Entropic. "We believe our restructuring and site consolidation plan will enable a stronger Entropic that will be more focused on innovating silicon and software solutions with greater speed and efficiency."
Beginning in the fourth quarter of 2014, Entropic expects to realize approximately $6 million in quarterly savings, primarily in operating expenses mainly related to personnel and facilities expenses, with annualized savings in those same areas projected at $24 million.
The Company expects to incur a total pre-tax restructuring charge of approximately $5 million, of which roughly 75 percent is expected to be cash expenditures.
Today, Entropic also announced it lowered its previously announced financial guidance for the second quarter of 2014. Entropic now expects revenue for the second quarter to be in the range of $50 million to $51 million. The Company also lowered its prior guidance for non-GAAP loss per share to approximately $0.13 for the same period, and lowered its guidance for GAAP loss per share to approximately $0.23 for the same period.
For More Information
Entropic management will be holding a conference call today, June 9, 2014 at 2:00 p.m. Pacific Time/5:00 p.m. Eastern Time to discuss the restructuring plan. You may access the conference call via any of the following:
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.
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Non-GAAP Financial Measures
Management uses 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 Entropic's ongoing operational performance. Non-GAAP earnings per share can be reconciled to GAAP earnings per share by excluding the effects of all forms of stock-based compensation, transaction and integration costs related to the Company's prior acquisitions, amortization of intangible assets, the loss related to equity method investment, the impact of fair value adjustments related to contingent consideration payable in the Company's acquisition of PLX Technology assets, the cash tax difference and restructuring charges.
The non-GAAP financial measures disclosed by Entropic should not be considered in isolation or as 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 Entropic 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 the expected costs of the restructuring plan, the goals and expected benefits of the restructuring plan, including the operating expense reductions and engineering efficiencies, Entropic's ability to make strategic investments and continue product development, Entropic's growth opportunities and expectations for future revenue and earnings per share. 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, risks and uncertainties associated with estimating revenues and earnings per share prior to Entropic closing its books and verifying such information; Entropic's ability to successfully implement its restructuring plan to leverage synergies and optimize its resources; the impact of the restructuring plan on Entropic's business, including a potential adverse effect on revenues and Entropic's other financial results; unanticipated charges not currently contemplated that may occur as a result of the restructuring plan, Entropic's ability to continue to attract and retain key engineering and management employees, Entropic's dependence on a limited number of supply chain partners for the manufacture of its products and other factors that could affect its ability to meet customer demand; Entropic's dependence on a limited number of customers for a substantial portion of its revenues; risks associated with adverse U.S. and international economic conditions; the ability of Entropic's 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 Entropic's 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; risks associated with acquisitions including their integration into Entropic's existing operations; 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.
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