Entropic Communications (ENTR) Q2 2012 Earnings Call August 01, 2012 4:30 pm ET Executives Debra Hart - Director of Investor Relations Patrick C. Henry - Chief Executive Officer, President and Director David Lyle - Chief Financial Officer Analysts Ruben Roy - Mizuho Securities USA Inc., Research Division Blayne Curtis - Barclays Capital, Research Division Gary W. Mobley - The Benchmark Company, LLC, Research Division Anthony J. Stoss - Craig-Hallum Capital Group LLC, Research Division William S. Harrison - Wunderlich Securities Inc., Research Division Hamed Khorsand - BWS Financial Inc. Rajvindra S. Gill - Needham & Company, LLC, Research Division Aalok K. Shah - D.A. Davidson & Co. Tore Svanberg - Stifel, Nicolaus & Co., Inc., Research Division Alex Gauna - JMP Securities LLC, Research Division Krishna Shankar - Roth Capital Partners, LLC, Research Division Presentation Operator
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During this conference call, we will make forward-looking statements regarding future events and anticipated operating or financial results of the company. Actual events or results could differ materially from those projected in the forward-looking statements.Please refer to our SEC filings, including our most recent 10-K and 10-Q, which contain important factors that could cause actual results to differ materially from the forward-looking statements. We undertake no obligation to revise or update publicly any forward-looking statements to reflect future events or circumstances. And now, it's my pleasure to introduce Patrick Henry. Patrick C. Henry Thank you, Debbie, and thanks, everyone, for joining the call today. Entropic delivered record revenue of $83.1 million and better-than-expected EPS for the second quarter. We saw strengths from both our connectivity and set-top box SoC products, which led us to outperform our initial revenue targets. We also reported stronger earnings and gross margins due to mix, solid product cost improvements and expense discipline. All in all, we made significant progress towards our longer-term objectives. I'll provide some highlights before turning the call over to Dave, who will review the Q2 numbers in more detail and provide guidance for the third quarter. Then I'll provide a bit more color on our business trends and opportunities before opening the call for your questions. From an organizational standpoint, we recently made an addition to our executive team. I'm pleased to welcome Charlie Lesko, as our new Senior Vice President of Worldwide Sales. Charlie is a seasoned executive, with more than 20 years of experience in direct sales, management, operations, marketing and business development, in the semiconductor industry. Charlie brings a strong combination of experience in energy that will be instrumental to Entropic's growth, as we continue to lead the charge toward ubiquitous connected home entertainment. Moving to business highlights. The integration of set-top box SoC acquisition is going extremely well. With the addition of the set-top box SoC assets, we are now a broader-platform company that has world-class SoC products and technology optimized for the delivery of traditional pay-TV broadcast,, with support for IP video-streaming services today and into the future. We also recently announced a small technology acquisition of assets from PLX Technology. Through this transaction, we acquired PLX's digital channel stacking switch technology and corresponding assets. The acquired IPN assets are complementary to our current DBS ODU product portfolio and will strengthen our long-range strategic position in the satellite IP market.
Satellite to IP is where satellite signals are converted to Internet protocol, or IP, for distribution over an IP network to any IP-enabled client device, making content available to more devices throughout the homes. We believe home connectivity is a multi-years secular growth market, driven by several industry and service-provider trends.First, there continues to be increases in HD attach rate and upgrades in multi-room DVR deployments. Second, pay-TV operators are rolling out new services as they migrate to IP-based video delivery. And finally, the transition to digital signals internationally continues to open up new opportunities for us. Now I'll turn the call over to Dave for a review of our second quarter results and our third quarter guidance. Dave? David Lyle Thanks, Patrick. Second quarter revenue was $83.1 million, a 41% sequential increase, primarily due to revenue contribution from the acquisition of the set-top box SoC business from Trident. Connectivity product revenue and set-top box SoC product revenue, each exceeded our original expectations by several million dollars. We did our original revenue and non-GAAP EPS guidance by about $7 million and $0.05, respectively. We beat the revised revenue guidance provided in late June by over $1 million, which allowed for $0.01 of upside to the revised non-GAAP EPS guidance. Read the rest of this transcript for free on seekingalpha.com