ESS Technology Reports 55% Sequential Revenue Growth for Third Quarter 2003
Wednesday October 29, 4:07 pm ET
FREMONT, Calif., Oct. 29 /PRNewswire-FirstCall/ -- ESS Technology (Nasdaq: ESST - News) today reported net revenues for the third quarter of 2003 of $48.2 million compared to $60.7 million for the same period last year and compared to $31.0 million for the second quarter of 2003.
GAAP net income for the third quarter of 2003 was $2.7 million, or $0.07 per diluted share, compared to GAAP net income of $2.8 million, or $0.06 per diluted share, for the third quarter of 2002. For the second quarter of 2003, GAAP net income was $15.9 million, or $0.40 per diluted share.
Non-GAAP net income for the third quarter of 2003 was $5.3 million, or $0.13 per diluted share, compared to the third quarter 2002 non-GAAP net income of $3.3 million, or $0.07 per diluted share. Non-GAAP net income excludes the effects of amortization of intangible assets, write-down of investments, in-process research and development and their related tax effects.
Both GAAP and Non-GAAP net income for the third quarter of 2003 include approximately $8.7 million of tax benefits. The $8.7 million consists primarily of $5.9 million related to the tax-exempt ruling from the Taiwan government, and a $2.7 million net favorable tax adjustment for prior years, which is no longer required.
Robert Blair, president and CEO of ESS Technology commented, "We are very pleased with our third quarter results as our new products are driving significant growth. All of our digital entertainment product lines grew during the third quarter, and all of the markets we serve are still expanding. Our new Vibratto II integrated DVD chips and our VibrattoS MPEG4/DivX chips led our DVD gains, and our VCD products again set new records as the VCD market continues its growth worldwide. And during Q3, our recordable products and digital imaging products started ramping to production volumes and will continue to grow. We believe all of the consumer digital entertainment markets we address are showing strength and robust growth which will enable ESS to grow in the future."
Mr. Blair continued, "Looking forward, we believe ESS is well-positioned for strong growth in 2004 for several reasons. Vibratto II's improved market share in the mainstream DVD player market will contribute significantly to annual revenue growth. Our new MPEG4/DivX and recordable products have higher selling prices than our MPEG2 playback products which will enable both revenue growth and margin improvement. Our VCD products continue their dominance in their growing market and we are forecasting significant growth in our digital imaging business, especially for our cameraphone products. With the strength of the digital entertainment and digital imaging markets, and our many new products, we are looking forward to increases in revenue and earnings in 2004."
December Quarter 2003 Guidance
The forward-looking statements in this release are based on current expectations. Actual results may differ materially from those expectations. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future events, or otherwise. Continuing uncertainty in global economic conditions makes it particularly difficult to predict product demand and other related matters. We expect net revenue for the fourth quarter of 2003 to increase by 35% - 40% over the third quarter to $65 to $68 million with gross margins to range from 32% - 35%. We also expect R&D expenses at 15% - 16%, and other operating expenses to be flat with the third quarter of 2003. Overall we expect a GAAP net income per diluted share to be in the range of $0.06 to $0.09 and non-GAAP net income per diluted share to be in the range of $0.10 - $0.13. Non-GAAP net income and loss excludes the effects of amortization of intangible assets, investment gains and losses and their related tax effects.
Earnings Conference Call
As previously announced, ESS Technology, Inc. has scheduled a conference call beginning 2:00 p.m. PST / 5:00 p.m. EST, October 29, 2003, to discuss its third quarter 2003 results. Investors are invited to listen to a live webcast of the conference call at www.esstech.com or videonewswire.com . A replay of the webcast will also be available at www.esstech.com and videonewswire.com or by telephone at 800-633-8284 (U.S./Canada) / 402-977-9140 (International), Reservation #2116217, beginning at 5:00 p.m. PST / 8:00 p.m. EST, October 29, 2003.
About ESS Technology
ESS Technology, Inc., is a leading supplier of high-performance feature-rich chips for the rapidly expanding digital video, digital imaging and digital entertainment markets. The company is also a leading provider of solutions for applications in the growing consumer entertainment market. ESS provides advanced products that enable the emergence of digital home systems that deliver and manage entertainment and information in the home. ESS, headquartered in Fremont, California, has R&D, sales, and technical support offices worldwide. ESS Technology's common stock is traded on the Nasdaq National Market under the symbol "ESST". ESS Technology's web site address is: esstech.com .
The matters discussed in this news release include certain forward-looking statements that involve risks and uncertainties, including, but not limited to, the impact of competitive products and pricing, the possible reduction of consumer spending occasioned by general economic conditions, the timely availability and acceptance of ESS' new products, the dependence on continued growth in demand for consumer multimedia products and other risks detailed from time to time in the SEC reports of ESS, including the reports on Form 10-K, Form 10-Q and Form 8-K (if any) which we incorporate by reference. Actual results could differ materially from those projected in the forward-looking statements. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future events, or otherwise.
NOTE: All trademarks mentioned in this news release are owned by their respective holders and are used in this news release for identification purposes only.
ESS TECHNOLOGY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(in thousands)
September 30, December 31,
2003 2002
ASSETS
Current Assets:
Cash and cash equivalents $48,833 $138,072
Short-term investments 55,127 61,030
Accounts receivable, net 38,796 28,468
Accounts receivable- MediaTek 50,000 --
Inventories 22,001 24,155
Prepaid expenses and other assets 3,483 2,834
Total current assets 218,240 254,559
Property, plant and equipment, net 21,192 18,985
Other assets, net 65,692 8,058
Total Assets $305,124 $281,602
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses $52,391 $35,084
Income taxes payable and deferred
income taxes 25,555 9,474
Total current liabilities 77,946 44,558
Non-current deferred tax liability 12,926 7,676
Shareholders' Equity:
Common stock 171,999 196,344
Accumulated other comprehensive
income 401 504
Retained earnings 41,852 32,520
Total shareholders' equity 214,252 229,368
Total Liabilities and Shareholders'
Equity $305,124 $281,602
ESS TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS-GAAP BASIS
(unaudited)
(in thousands, except per share data)
Three months ended Nine months ended
Sept. Sept. Sept. Sept.
30, 30, 30, 30,
2003 2002 2003 2002
Net revenues $48,243 $60,746 $112,405 $225,898
Cost of revenues 33,281 45,665 77,639 141,321
Gross profit 14,962 15,081 34,766 84,577
31% 25% 31% 37%
Operating expenses:
Research and development 10,090 7,160 23,676 20,584
In-process Research and Development 1,270 -- 2,690 --
Selling, general and administrative 8,874 6,452 22,208 27,859
Operating income (loss) (5,272) 1,469 (13,808) 36,134
Nonoperating income (loss), net (659) 1,438 44,472 1,256
Income (loss) before provision for
(benefit from) income taxes (5,931) 2,907 30,664 37,390
Provision for (benefit from) income
taxes (8,680) 148 14,127 923
Net income $2,749 $2,759 $16,537 $36,467
Net income per share
Basic $0.07 $0.06 $0.42 $0.83
Diluted $0.07 $0.06 $0.40 $0.77
Weighted average common shares:
Basic 38,694 43,484 39,669 44,127
Diluted 40,579 45,706 40,925 47,408
ESS TECHNOLOGY, INC.
NON-GAAP CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS (1)(2)
(unaudited)
(in thousands, except per share data)
Three months ended Nine months ended
Sept. Sept. Sept. Sept.
30, 30, 30, 30,
2003 2002 2003 2002
Net revenues $48,243 $60,746 $112,405 $225,898
Cost of revenues 32,781 45,665 77,139 141,321
Gross profit 15,462 15,081 35,266 84,577
32% 25% 31% 37%
Operating expenses:
Research and development 9,869 6,946 22,816 20,064
In-process research and
development -- -- -- --
Selling, general and
administrative 8,231 6,452 21,565 27,859
Operating income (loss) (2,638) 1,683 (9,115) 36,654
Nonoperating income (loss),
net (659) 1,788 46,459 4,562
Income (loss) before provision for
(benefit from) income taxes (3,297) 3,471 37,344 41,216
Provision for (benefit from) income
taxes (8,548) 176 14,461 2,026
Net income $5,251 $3,295 $22,883 $39,190
Net income per share
Basic $0.14 $0.08 $0.58 $0.89
Diluted $0.13 $0.07 $0.56 $0.83
Weighted average common shares:
Basic 38,694 43,484 39,669 44,127
Diluted 40,579 45,706 40,925 47,408
(1) Use of Non-GAAP Financial Information:
To supplement our consolidated financial statements presented in
accordance with GAAP, we use non-GAAP measures of operating results, net
income/(loss) and earnings per share, which are adjusted from results
based on GAAP to exclude certain expenses, gains and losses. These
non-GAAP measures are provided to enhance the user's overall understanding
of our current financial performance and our prospects for the future.
Specifically, we believe the non-GAAP results provide useful information
to both management and investors by excluding certain expenses, gains and
losses that we believe are not indicative of our on-going core operating
results. Our non-operating income includes licensing fees from MediaTek.
In addition, since we have historically reported non-GAAP results to the
investment community, we believe the inclusion of non-GAAP numbers
provides consistency in our financial reporting. Further, these non-GAAP
results are one of the primary indicators management uses for planning and
forecasting results for future periods. The non-GAAP information is
presented using consistent methodology from quarter-to-quarter and
year-to-year. These measures should be considered in addition to results
prepared in accordance with GAAP, but should not be considered a
substitute for or superior to GAAP results.
(2) Non-GAAP adjustments are detailed within the schedule entitled
"Reconciliation of GAAP Basis Net Income to Non-GAAP Net Income"
ESS TECHNOLOGY, INC.
RECONCILIATION OF GAAP BASIS NET INCOME TO NON-GAAP NET INCOME
(unaudited)
(in thousands)
Three months Nine months
ended ended
Sept. Sept. Sept. Sept.
30 30 30 30
2003 2002 2003 2002
Net income - GAAP basis $2,749 $2,759 $16,537 $36,467
Non-GAAP Adjustments:
Amortization of intangible assets
(3) 1,364 214 2,003 428
Write down of investments (4) -- 350 1,987 3,337
In-process research and
development (5) 1,270 -- 2,690 --
Cisco Sale (6) -- -- -- 61
Tax effect to items (3) to (6) (132) (28) (334) (1,103)
Net income - Non-GAAP $5,251 $3,295 $22,883 $39,190
(3) Non-GAAP amounts for all periods presented exclude the effects of
amortization of intangible assets, amounting to $1,364 and $214 for
the three months ended September 30, 2003 and September 30, 2002,
respectively, and $2,003 and $428 for the nine months ended September
30, 2003 and September 30, 2002, respectively.
(4) Non-GAAP amounts exclude the effect of the write-down of investments,
amounting to $350 for the three months ended September 30, 2002,
and $1,987 and $3,337 for the nine months ended September 30, 2003
and September 30, 2002, respectively.
(5) Non-GAAP amounts exclude the effect of in-process research and
development resulting from Divio and Pictos acquisitions,
amounting to $1,270 for the three months ended September 30, 2003,
and $2,690 for the nine months ended September 30, 2003.
(6) Non-GAAP amounts exclude the realized losses on the sale of Cisco
stock, amounting to $61 for the nine months ended September 30,
2002.
Source: ESS Technology |
