TranSwitch Corporation Announces Second Quarter 2011 Financial Results

TranSwitch Corporation (NASDAQ: TXCC), a leading provider of semiconductor solutions for the converging voice, data and video network, today announced financial results for the second quarter ended June 30, 2011.

Net revenues for the second quarter of 2011 were approximately $7.1 million, as compared to net revenues of $8.2 million for the first quarter of 2011 and $14.1 million for the second quarter of 2010. Net loss for the second quarter of 2011 was ($3.0) million, or ($0.11) per basic and diluted common share as compared to a net loss of ($3.1) million, or ($0.13) per basic and diluted common share for the first quarter of 2011, and net income of $0.5 million, or $0.02 per basic and diluted common share for the second quarter of 2010.

The GAAP gross margin for the second quarter was 67%. This is compared to the Company's GAAP gross margin of 64% for the first quarter of 2011, and 53% for the second quarter of 2010.

Total non-GAAP operating expenses for the second quarter of 2011 were $7.5 million, as compared to $7.4 million in the first quarter of 2011 and $6.6 million in the second quarter of 2010. Non-GAAP operating expenses for the second quarter of 2011 exclude $0.4 million in amortization of purchase price intangibles and $0.6 million in stock-based compensation along with a benefit of $0.8 million from the reversal of accrued royalties. Total GAAP operating expenses for the second quarter of 2011 were $7.7 million.

Non-GAAP operating loss for the second quarter of 2011 was ($2.7) million, compared to non-GAAP operating loss of ($2.1) million for the first quarter of 2011 and non-GAAP operating income of $0.9 million for the second quarter of 2010. On a GAAP basis, the operating loss for the second quarter of fiscal 2011 was ($2.9) million, compared to an operating loss of ($2.8) million for the first quarter of fiscal 2011 and an operating loss of ($0.1) million for the second quarter of 2010.

Non-GAAP net loss for the second quarter of 2011 was ($2.8) million, or ($0.10) per share compared with a non-GAAP net loss of ($2.4) million, or ($0.10) per share, for the first quarter of 2011 and non-GAAP net income of $1.5 million, or $0.07 per share, for the second quarter of 2010.

Further information about non-GAAP measures and reconciliation to the GAAP results is provided after the financial statements attached to this release.

“While we continue to experience near-term softness in demand for our telecom products, we have indications of stabilization and return to growth as we move forward in the second-half of 2011,” stated Dr. M. Ali Khatibzadeh, President and CEO of TranSwitch Corporation, “More importantly, we are making significant progress in our strategy of developing a new growth engine for the fast growing video connectivity market as we move into 2012.”

Additional details on TranSwitch’s second quarter 2011 financial results will be discussed during a conference call regarding this announcement today at 5:30 pm Eastern time. To listen to the live call, investors can dial 719-325-2112 and reference confirmation code: 7943943. The call will be recorded and a replay will be available two hours after the conclusion of the live broadcast through August 18, 2011. To access the replay, dial 719-457-0820 and enter confirmation code: 7943943. Investors can also access an audio webcast which will be broadcast through Vcall’s Investor Calendar at www.investorcalendar.com or the Company’s website at www.transwitch.com. This audio webcast will also be available on a replay basis for 10 business days.

About TranSwitch Corporation

TranSwitch Corporation designs, develops and markets innovative semiconductors that provide core functionality and complete solutions for voice, data and video communications network equipment. As a leading supplier to telecom, datacom, cable television and wireless markets, TranSwitch customers include the major OEMs that serve the worldwide public network, the Internet, and corporate Wide Area Networks (WANs). TranSwitch devices are inherently flexible, with many incorporating embedded programmable microcontrollers to rapidly meet customers’ new requirements or evolving network standards by modifying a function via software instruction. TranSwitch implements global communications standards in its VLSI solutions and is committed to providing high-quality products and services. TranSwitch, Shelton, CT, is an ISO 9001:2008 registered company. For more information, visit www.transwitch.com.

Forward-looking statements in this release, including statements regarding management's expectations for future financial results and the markets for TranSwitch's products, are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that these forward-looking statements regarding TranSwitch, its operations and its financial results, involve risks and uncertainties that could cause actual results to differ materially from those contained in the forward-looking statements, including without limitation the risks associated with downturns in economic conditions generally and in the telecommunications and data communications markets and the semiconductor industry specifically; risks in product development and market acceptance of and demand for TranSwitch’s products and products developed by TranSwitch’s customers; risks associated with foreign sales and high customer concentration; risks associated with competition and competitive pricing pressures; risks in technology development and commercialization; risks of failing to attract and retain key managerial and technical personnel; risks relating to TranSwitch’s indebtedness and available cash; risks associated with acquiring new businesses; risks of dependence on third-party VLSI fabrication facilities; risks related to intellectual property rights and litigation; and other risks detailed in TranSwitch's filings with the Securities and Exchange Commission.

TranSwitch expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any such statements to reflect any change in expectations or any change in events, conditions or circumstances on which any such statement is based.

TranSwitch is a registered trademark of TranSwitch Corporation.

Reconciliation of Non-GAAP Financial Measures to Comparable U.S. GAAP Measures (Unaudited)

Pursuant to the requirements of Regulation G, the Company has provided a reconciliation of each non-GAAP financial measure used in this earnings release and related conference call or webcast to the most directly comparable financial measure prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). The reconciliation for historic non-GAAP measures is provided herein on a quantitative basis and for non-GAAP measures that are forward-looking is provided herein on a qualitative basis.

The non-GAAP measures used in this earnings release and related conference call differ from GAAP in that they exclude expenses related to stock-based compensation, amortization of intangible assets, the effects of special charges such as asset impairments, restructuring charges and benefits from the reversal of accrued royalties. The Company’s basis for these adjustments is described below. Management uses these non-GAAP measures for internal reporting and forecasting purposes. The Company has provided these non-GAAP financial measures in addition to GAAP financial results because it believes that these non-GAAP financial measures provide useful information to certain investors and financial analysts for comparison across accounting periods not influenced by certain non-cash items that are not used by management when evaluating the Company’s historical and prospective financial performance.

Management uses these non-GAAP financial measures when evaluating the Company’s operating performance and believes that such measures are useful to investors and financial analysts in assessing the Company’s operating performance due to the following factors:

  • The Company believes that the presentation of non-GAAP measures that adjust for the impact of stock-based compensation expenses, amortization of intangible assets, the effects of special charges such as asset impairments and restructuring charges and benefits from the reversal of accrued royalties provides investors and financial analysts with a consistent basis for comparison across accounting periods and, therefore, are useful to investors and financial analysts in helping them to better understand the Company’s operating results and underlying operational trends.

We do not provide forward-looking GAAP measures or a reconciliation of the forward-looking non-GAAP measures to GAAP measures because of our inability to project special charges, asset impairments, employee separation costs and stock-based compensation related expenses.

The non-GAAP financial measures we provide have certain limitations because they do not reflect all of the costs associated with the operation of our business as determined in accordance with GAAP. The non-GAAP measures are in addition to, and not a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP and may be different from non-GAAP measures used by other companies. We endeavor to compensate for the limitations of these non-GAAP measures by providing GAAP financial statements, descriptions of the reconciling items and a reconciliation of the non-GAAP measures to the most directly comparable GAAP measures so that investors can appropriately incorporate the non-GAAP measures and their limitations into their analyses. Please see our financial statements and "Management's Discussion and Analysis of Results of Operations and Financial Condition" that will be included in the periodic report we expect to file with the SEC with respect to the financial periods discussed herein.

TranSwitch Corporation

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

(in thousands, except for per share amounts)

Three Months EndedSix Months Ended
June 30,

2011

Mar. 31,

2011

June 30,

2010

June 30,

2011

June 30,

2010

Net revenues:
Product revenues $ 4,016 $ 5,811 $ 11,881 $ 9,827 $ 23,821
Service revenues 3,037 2,416 2,196 5,453 3,062
Total net revenues 7,053 8,227 14,077 15,280 26,883
Cost of revenues:
Cost of product revenues 1,305 1,780 5,331 3,085 10,559
Provision for excess and obsolete inventories

--

160 269 160 561
Cost of service revenues 1,034 1,004 1,001 2,038 1,529
Total cost of revenues 2,339 2,944 6,601 5,283 12,649
Gross profit 4,714 5,283 7,476 9,997 14,234
Operating expenses:
Research and development 4,490 4,565 3,636 9,055 7,708
Marketing and sales 2,076 1,988 1,914 4,064 3,732
General and administrative 1,915 1,859 2,013 3,774 3,830
Restructuring charges

--

467

--

467 402
Reversal of accrued royalties (825 ) (750 )

--

(1,575 )

--

Total operating expenses 7,656 8,129 7,563 15,785 15,672
Operating loss (Note 1) (2,942 ) (2,846 ) (87 ) (5,788 ) (1,438 )
Other (expense) income:
Other (expense) income (8 ) (5 ) 848 (13 ) 970
Interest income (expense):
Interest income 68 24 26 92 37
Interest expense (68 ) (125 ) (205 ) (193 ) (374 )
Interest expense, net

--

(101 ) (179 ) (101 ) (337 )
Total other (expense) income, net (8 ) (106 ) 669 (114 ) 633
(Loss) income before income taxes (2,950 ) (2,952 ) 582 (5,902 ) (805 )
Income tax expense 49 197 99 246 165
Net (loss) income$(2,999)$(3,149)$483$(6,148)$(970)
Net (loss) income per common share – basic $ (0.11 ) $ (0.13 ) $ 0.02 $ (0.24 ) $ (0.05 )
Net (loss) income per common share – diluted $ (0.11 ) $ (0.13 ) $ 0.02 $ (0.24 ) $ (0.05 )
Weighted average common shares outstanding - basic 26,853 23,655 21,510 25,263 20,926
Weighted average common shares outstanding - diluted 26,853 23,655 22,326 25,263 20,926
Note 1: Stock-based compensation expense included in cost of revenues and operating expenses is as follows:
Cost of revenues $ 16 $ 21 $ 26 $ 37 $ 38
Research and development 218 211 221 429 412
Marketing and sales 122 128 100 250 136
General and administrative 295 322 254 617 427
Total $ 651 $ 682 $ 601 $ 1,333 $ 1,013

TranSwitch Corporation

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)

(in thousands)

June 30,

2011

December 31,

2010

ASSETS
Current assets:
Cash, cash equivalents, restricted cash and short-term investments $ 16,394 $ 7,835
Accounts receivable, net 7,476 7,907
Inventories 1,879 2,555
Prepaid expenses and other current assets 2,324 2,089
Total current assets 28,073 20,386
Long-term investments 486

--

Property and equipment, net 1,278 1,239
Goodwill 14,144 14,144
Other assets 9,382 10,049
Total assets $ 53,363 $ 45,818
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable, accrued expenses and other current liabilities $ 12,735 $ 14,120
Current portion of restructuring liabilities 1,076 891
Current portion of 5.45% Convertible Notes 1,256 3,758

Total current liabilities 15,067 18,769
Restructuring liabilities 10,119 10,317
Total liabilities 25,186 29,086
Total stockholders’ equity 28,177 16,732
Total liabilities and stockholders’ equity $ 53,363 $ 45,818
TRANSWITCH CORPORATION
Supplemental Reconciliation of GAAP Results to Non-GAAP
(Unaudited)
(In thousands, except per share data)
Three Months EndedSix Months Ended
June 30,March 31,June 30,June 30,June 30,
20112011201020112010
GAAP gross profit $ 4,714 $ 5,283 $ 7,476 $ 9,997 $ 14,234
Add:
Stock-based compensation 16 21 26 37 38
Non-GAAP gross profit $ 4,730 $ 5,304 $ 7,502 $ 10,034 $ 14,272
GAAP gross margin 66.8% 64.2% 53.1% 65.4% 52.9%
Inventory write-up acquired 0.0% 0.0% 0.0% 0.0% 0.0%
Stock-based compensation 0.2% 0.3% 0.2% 0.2% 0.1%
Non-GAAP gross margin 67.1% 64.5% 53.3% 65.7% 53.1%
GAAP research and development expenses $ 4,490 $ 4,565 $ 3,636 $ 9,055 $ 7,708
Less:
Amortization of purchase accounting intangibles 113 113 113 226 227
Stock-based compensation 218 211 221 429 412
Non-GAAP research and development expenses $ 4,159 $ 4,241 $ 3,302 $ 8,400 $ 7,069
GAAP selling, general, and administrative expenses $ 3,991 $ 3,847 $ 3,927 $ 7,838 $ 7,562
Less:
Amortization of purchase accounting intangibles 283 283 283 566 566
Stock-based compensation 417 450 354 867 563
Non-GAAP selling, general, and administrative expenses $ 3,291 $ 3,114 $ 3,290 $ 6,405 $ 6,433
GAAP operating expenses $ 7,656 $ 8,129 $ 7,563 $ 15,785 $ 15,672
Less:
Amortization of purchase accounting intangibles 396 396 396 792 793
Stock-based compensation 635 661 575 1,296 975
Reversal of accrued royalties (825) (750) - (1,575) -
Restructuring charges - 467 - 467 402
Non-GAAP operating expenses $ 7,450 $ 7,355 $ 6,592 $ 14,805 $ 13,502
Non-GAAP operating (loss) income $ (2,720) $ (2,051) $ 910 $ (4,771) $ 770
GAAP net loss $ (2,999) $ (3,149) $ 483 $ (6,148) $ (970)
Add:
Amortization of purchase accounting intangibles 396 396 396 792 793
Stock-based compensation 651 682 601 1,333 1,013
Reversal of accrued royalties (825) (750) - (1,575) -
Restructuring charges - 467 - 467 402
Non-GAAP net (loss) income $ (2,777) $ (2,354) $ 1,480 $ (5,131) $ 1,238
Non-GAAP basic net (loss) income per share $ (0.10) $ (0.10) $ 0.07 $ (0.20) $ 0.06
Basic shares used to calculate non-GAAP net loss per share 26,853 23,655 21,510 25,263 20,926

Contacts:

TranSwitch Corporation
Robert A. Bosi, 203-929-8810 ext. 2465
Vice President and Chief Financial Officer
or
Ted Chung, 203-929-8810 ext. 2004
Vice President Business Development

Data & News supplied by www.cloudquote.io
Stock quotes supplied by Barchart
Quotes delayed at least 20 minutes.
By accessing this page, you agree to the following
Privacy Policy and Terms and Conditions.