Second Quarter and First Half 2007 Highlights:
-- Reported gross margin of 59 percent in the second quarter
-- Achieved second quarter net income of $2.6 million, representing $0.12 earnings per diluted share on a GAAP basis
-- Grew revenues 25 percent during the first half 2007 when compared to the same period of 2006
Net revenue for the second quarter of 2007 was $14.7 million, compared to net revenue of $13.5 million in the preceding quarter and $12.8 million in the second quarter of 2006.
Net revenue in the second quarter for each of the Company's product lines consisted of $9.1 million in security surveillance, $1.5 million in LCD display, $3.9 million in video decoders and $238,000 in other revenue. Gross margin for the second quarter of 2007 was 59 percent, compared to gross margin of 57 percent in the preceding quarter and 59 percent in the same period a year ago. Operating expenses for the second quarter of 2007 totaled $5.7 million, or 39 percent of total revenue. This compares to operating expenses of $5.0 million, or 37 percent of revenue, in the preceding quarter and $4.4 million, or 34 percent of revenue, in the same period a year ago.
Net income for the second quarter of 2007 totaled $2.6 million, or $0.12 per diluted share, which included pre-tax stock-based compensation expenses under Statement of Financial Accounting Standard No. 123R (SFAS 123R) of $1.2 million, before the tax effect of $283,000, or a charge of $0.04 per diluted share. This compares to net income in the first quarter of 2007 of $2.5 million, or $0.11 per diluted share, and net income of $2.9 million, or $0.15 per diluted share, in the second quarter of 2006. Shares used to compute GAAP net income per diluted share for the second quarter of 2007 totaled approximately 21.8 million shares.
Cash and cash equivalents, short and long term investments increased by $3.9 million in the quarter resulting in cash and cash equivalents, short and long-term investments of approximately $60.9 million as of June 30, 2007, compared to approximately $54.5 million as of December 31, 2006.
"Business continued to be solid during the quarter driven by the success of our high-performance products for digital video applications. As a result, we recorded another quarter of year-over-year revenue growth and strong gross margins," stated Hiro Kozato, President and Chief Executive Officer of Techwell, Inc. "During the first six months of 2007, we continued to aggressively invest in research and development and expect as new products come to market they will drive future revenue growth."
Mr. Kozato further commented, "Revenue from security surveillance accounted for the majority of our revenue growth during the quarter due to the leading market share we have within this space. Our video decoder business grew sequentially and we anticipate this business to grow in 2008 with the introduction of our integrated audio/video decoder. With regard to LCD Display revenues, we continue to believe that our earlier design wins will result in significant future growth. However, we expect LCD Display revenues in the short term will remain constrained by the slowdown in the sale of vehicles installed with entertainment LCD displays and the lack of available small LCD panels. Overall, we are confident in our product road-map and believe we are well-positioned in the markets we serve."
Business Outlook
Techwell expects revenue for the third quarter of 2007 to be in a range of $14.5 million to $15.5 million.
Second Quarter 2007 Financial Results Conference Call and Web Cast
Techwell, Inc. will host a conference call with the financial community today, August 2, 2007, at 2:15 P.M. Pacific Time (PT), 5:15 P.M. Eastern Time (ET). The conference call will be broadcast live on the Company's Investor Relations website at http://www.techwellinc.com. Those parties interested in participating via telephone should dial 888-679-8037 with the conference ID number 13496585. International participants should dial 617-213-4849 and provide the same pass code at the prompt. A telephone replay of the call will be available approximately two hours after the end of the call and will be available until midnight ET Thursday, August 9, 2007. The replay number is 888-286-8010 with a pass code of 58528196. International callers should dial 617-801-6888 and enter the same pass code at the prompt. An archived version of the Web cast will also be available on the Company's web site.
Forward-Looking Statements
This press release and related conference call contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements may be identified by terminology such as may, will, could, should, anticipate and expect and the negative of these terms or other similar expressions. These are statements that relate to future events and include, but are not limited to the expected impact of Techwell's research and development investments on future products and revenue, the growth of Techwell's video decoder business in 2008, the anticipated impact of earlier design wins on Techwell's LCD Display business, expectations regarding Techwell's LCD Display revenues in the short-term and statements related to anticipated revenues for the third quarter of 2007. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those discussed in these forward-looking statements. These risks and uncertainties include, but are not limited to: a determination, upon completion of further quarterly closing and review procedures, that the financial results for the second quarter of 2007 are different than the results set forth in this press release, Techwell's dependence on increased demand for digital video applications for the consumer, security surveillance and automotive markets, the potential decline in average selling prices for Techwell's products, competition, dependence on key and highly skilled personnel, the ability to develop new products and enhance existing products, as well as other risks detailed from time to time in its SEC filings, including those described in Techwell's Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on May 14, 2007. Statements included in this release are based upon information known to Techwell as of the date of this release, and Techwell assumes no obligation to update information contained in this press release.
About Techwell
Techwell is a fabless semiconductor company that designs, markets and sells mixed signal integrated circuits for multiple video applications in the consumer, security surveillance and automotive markets. Techwell designs both general purpose and application specific products that enable the conversion of analog video signals to digital form and perform advanced digital video processing to facilitate the display, storage and transport of video content. Headquartered in San Jose, CA, Techwell currently has over 100 employees in the U.S., Korea, Taiwan, China and Japan. Please visit www.techwellinc.com for more information.
Non-GAAP Reporting
Techwell reports both GAAP and non-GAAP measures to evaluate our financial results. The non-GAAP measures used are: net income, excluding stock-based compensation expense and related tax effect, and net income per diluted share, excluding stock-based compensation expense and related tax effect. We believe that the non-GAAP measures, excluding stock-based compensation expense, when viewed in addition to and not in lieu of our reported GAAP results, assist investors in understanding our results of operations. We also believe non-GAAP measures provide useful supplemental information for investors to evaluate our operating results in the same manner as the research analysts that follow Techwell, all of whom present non-GAAP projections in their published reports. As such, non-GAAP measures provided by Techwell facilitate a more direct comparison of its performance with the financial projections published by the analysts. However, non-GAAP measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP.
Techwell, Inc. and the Techwell, Inc. logo are trademarks of Techwell, Inc. All other trademarks are the property of their respective owners.
TECHWELL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
Three Months Six Months Ended
Ended
June 30, June 30,
2007 2006 2007 2006
-------- -------- -------- --------
Revenues $14,743 $12,800 $28,260 $22,601
Cost of Revenues 5,989 5,241 11,780 9,738
-------- -------- -------- --------
Gross Profit 8,754 7,559 16,480 12,863
-------- -------- -------- --------
Operating Expenses
Research and development 2,870 2,461 5,085 4,951
Selling, general and
administrative 2,874 1,884 5,632 3,702
-------- -------- -------- --------
Total operating expenses 5,744 4,345 10,717 8,653
-------- -------- -------- --------
Income from operations 3,010 3,214 5,763 4,210
Interest income 737 252 1,416 407
-------- -------- -------- --------
Income before income taxes 3,747 3,466 7,179 4,617
Provision for income taxes (1,106) (588) (2,074) (754)
-------- -------- -------- --------
Net income $ 2,641 $ 2,878 $ 5,105 $ 3,863
======== ======== ======== ========
Net income per share
Basic $ 0.13 $ 0.52 $ 0.25 $ 0.77
======== ======== ======== ========
Diluted $ 0.12 $ 0.15 $ 0.23 $ 0.20
======== ======== ======== ========
Shares used in computing net income
per share
Basic 20,765 5,521 20,701 4,995
Diluted 21,826 19,163 21,810 19,022
TECHWELL, INC.
RECONCILIATION OF GAAP NET INCOME
TO NON-GAAP NET INCOME
(In thousands, except per share amounts)
(Unaudited)
Three Months Six Months Ended
Ended
June 30, June 30,
2007 2006 2007 2006
-------- -------- -------- --------
GAAP net income $ 2,641 $ 2,878 $ 5,105 $ 3,863
Stock-based compensation expenses:
Cost of Revenues 71 24 116 37
Research and development 517 138 835 735
Selling, general and
administrative 591 252 977 465
-------- -------- -------- --------
Total stock-based
compensation expenses 1,179 414 1,928 1,237
-------- -------- -------- --------
Tax effect on stock-based
compensation expenses (283) (20) (441) (26)
Non-GAAP net income $ 3,537 $ 3,272 $ 6,592 $ 5,074
-------- -------- -------- --------
Non-GAAP net income per share
Basic $ 0.17 $ 0.59 $ 0.32 $ 1.02
======== ======== ======== ========
Diluted $ 0.16 $ 0.17 $ 0.30 $ 0.27
======== ======== ======== ========
Shares used in computing net income
per share
Basic 20,765 5,521 20,701 4,995
Diluted 21,826 19,163 21,810 19,022
In addition to disclosing financial results calculated in accordance
with U.S. generally accepted accounting principles (GAAP), the
operating results presented contains non-GAAP financial measures that
excludes the income statement effects of stock-based compensation
expense.
We believe that the non-GAAP measures, excluding stock-based
compensation expense, when viewed in addition to and not in lieu of
our reported GAAP results, assist investors in understanding our
results of operations. We believe non-GAAP measures provide useful
supplemental information for investors to evaluate our operating
results in the same manner as the research analysts that follow
Techwell all of whom present non-GAAP projections in their published
reports. As such, non-GAAP measures provided by Techwell facilitate a
more direct comparison of its performance with the financial
projections published by the analysts. However, non-GAAP measures
should not be considered in isolation from, or as a substitute for,
financial information prepared in accordance with GAAP.
TECHWELL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
June 30, December
31,
2007 2006
----------- ---------
(unaudited) (audited)
Assets
Current Assets:
Cash and cash equivalents $13,177 $ 13,201
Short-term investments 39,095 36,364
Accounts receivable 2,438 2,765
Inventory 4,791 4,584
Prepaid expenses and other assets 1,976 1,406
----------- ---------
Total Current Assets 61,477 58,320
Property and equipment - net 1,003 625
Long-term investments 8,634 4,963
Other assets 160 85
----------- ---------
Total Assets $71,274 $ 63,993
=========== =========
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $ 3,341 $ 3,503
Accrued expenses and other liabilities 2,167 3,344
----------- ---------
Total Current Liabilities 5,508 6,847
Deferred rent 212 -
----------- ---------
Total Liabilities 5,720 6,847
----------- ---------
Stockholders' Equity:
Common stock 21 21
Additional paid-in capital 70,807 67,734
Deferred stock compensation (304) (546)
Accumulated comprehensive loss (51) (39)
Accumulated deficit (4,919) (10,024)
----------- ---------
Total Stockholders' Equity 65,554 57,146
----------- ---------
Total Liabilities and Stockholders' Equity $71,274 $ 63,993
=========== =========
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