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Entropic Communications Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: November 1, 2012 02:02PM

Entropic Communications Inc. (ENTR) filed Quarterly Report for the period ended 2012-09-30. Entropic Communications, Inc. has a market cap of $399.7 million; its shares were traded at around $4.855 with a P/E ratio of 18.1 and P/S ratio of 1.7.



Highlight of Business Operations:

Since inception, we have invested heavily in product development and have only achieved profitability on an annual basis for the first time in 2010, with net income of $64.7 million. For the year ended December 31, 2011 net income was $26.6 million and for the three and nine months ended September 30, 2012 net income was $0.4 million and $4.5 million, respectively. In 2011, our net revenues increased to $240.6 million from $210.2 million in 2010. Our net revenues were $232.0 million for the nine months ended September 30, 2012 compared to $184.5 million for the nine months ended September 30, 2011. The annual revenue increase in 2011 was primarily due to the increased demand for our Connectivity solutions, which was directly related to the increased deployment of our products into consumer homes by satellite and cable operators. The increase in net revenues during the nine months ended September 30, 2012 compared to the nine months ended September 30, 2011, was primarily due to the additional revenues generated by the STB SoC solutions that we acquired from Trident in April 2012, as well as an increase in the demand for our Connectivity solutions during the nine months ended September 30, 2012. As of September 30, 2012, we had an accumulated deficit of $146.2 million.

Our net revenues for the three months ended September 30, 2012 were $89.8 million compared to net revenues of $51.5 million during the same period in 2011, an increase of $38.3 million or 75%. Our net revenues for the nine months ended September 30, 2012 were $232.0 million compared to net revenues of $184.5 million during the same period in 2011, an increase of $47.5 million or 26%. The increase in net revenues during the three and nine months ended September 30, 2012 compared to the same periods ended September 30, 2011 was due to revenues from the STB SoC solutions that we acquired from Trident in April 2012 as well as an increase in the demand for our Connectivity solutions during these periods.

Sales and marketing expenses increased by $2.9 million, or approximately 71%, to $7.0 million during the three months ended September 30, 2012 from $4.1 million during the same period in 2011. This increase was due to increased personnel costs of $1.9 million (of which $0.2 million was due to stock-based compensation) which was due to a 29% headcount increase in the number of employees engaged in sales and marketing activities, primarily resulting from our acquisition of the STB Business from Trident, as well as overall increase in variable compensation expenses during the three months ended September 30, 2012 as compared to the same period in 2011. General customer support and marketing and trade show related activities accounted for $0.7 million of the increase and facility costs and overhead allocations accounted for the remaining $0.3 million of the increase during the three months ended September 30, 2012 as compared to the same period in 2011.

Sales and marketing expenses increased by $5.8 million, or approximately 44%, to $19.0 million during the nine months ended September 30, 2012 from $13.2 million during the same period in 2011. This increase was due to increased personnel costs of $4.0 million (of which $0.2 million was due to stock-based compensation) which was due to a 15% average headcount increase in the number of employees engaged in sales and marketing activities, primarily resulting from our acquisition of the STB Business from Trident, as well as overall increase in variable compensation expenses during the nine months ended September 30, 2012 as compared to the same period in 2011. General customer support and marketing and trade show related activities accounted for $1.3 million of the increase and facility costs and overhead allocations accounted for the remaining $0.5 million of the increase during the nine months ended September 30, 2012 as compared to the same period in 2011.

Income tax expense for the nine months ended September 30, 2012 was $4.2 million compared to $12.4 million for the nine months ended September 30, 2011, or approximately 49% and 34% of pre-tax income, respectively. The effective tax rate for the nine months ended September 30, 2012 was comprised of federal expense at statutory rates plus an increase in our tax rate of 14% due to the impact of certain permanent items and reserves for uncertain tax positions. The effective tax rate for the nine months ended September 30, 2011 was comprised of federal and state expense at statutory rates less research and development credits which resulted in a benefit of approximately 3%, offset by an increase in our tax rate due to the impact of certain permanent items of approximately 1% and reserves for uncertain tax positions of approximately 1%. Our net state income tax rate was less than 0.1% for the nine months ended September 30, 2012 and September 30, 2011, due to the impact of the California single sales factor election to calculate our tax liability. Due to the expected utilization of the remainder of our net operating loss carryforwards and research and development credits that offset our taxes payable, our current income tax expense in 2012 is significantly higher than our actual cash tax liability.

Read the The complete Report



Stocks Discussed: ENTR,
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