L&G Energy Transition Commodities UCITS ETF

Revenue in Q3 2014 was $43.2 million, down 14% from Q2 and in line with revised guidance. Non-GAAP gross margin was 59%, non-GAAP operating expense was $35.4 million, non-GAAP net loss was about $10 million, and non-GAAP loss per share was $0.11; GAAP net loss was about $28 million and GAAP loss per share was $0.31. Cash and investments at September 30 were approximately $107 million. For Q4, management guided to revenue of $42 million to $43 million, non-GAAP gross margin of 55% to 57%, non-GAAP operating expense of about $30 million, non-GAAP loss per share of $0.07, and cash and investments of about $100 million at quarter-end. Looking ahead to Q1 2015, management said revenue should be about $40 million, non-GAAP operating expense should fall to $20 million to $21 million, and the company is targeting non-GAAP profitability.

Ted Tewksbury said the company is narrowing its focus to its core strengths in RF, analog/mixed signal, and DSP, describing these as difficult-to-replicate capabilities that should support a return to profitability. He framed the restructuring as a way to accelerate profitability while still investing in differentiated connectivity products and preserving support for existing customers. His tone was cautious but constructive: disappointed in recent results, yet confident the refocus can create a more streamlined and valuable company.

Dave Lyle said Q3 revenue of $43.2 million was down 14% sequentially, gross margin was 59%, and non-GAAP operating expense came in at $35.4 million, about $1.1 million better than prior guidance due to additional savings and restructuring-related cost reductions. He noted cash and investments of about $107 million at September 30, a roughly $14 million sequential decline, including $2.8 million of share repurchases, $1.5 million of restructuring cash outlays, and about $8 million of cash used in operations. For Q4, he guided to $42 million to $43 million of revenue, 55% to 57% gross margin, about $30 million of non-GAAP opex, and a $0.07 non-GAAP loss per share, while also saying the new restructuring should lower quarterly non-GAAP opex to $20 million to $21 million by Q1 2015 and bring breakeven revenue down to about $40 million.

Analysts focused on why Entropic would keep any set-top box exposure after exiting new integrated SoC development, and management said existing products are already commercialized or in production, have customer programs underway, and could contribute revenue for three years or more. Questions also centered on whether the digital CSS transition and bundled SoC+MoCA design wins could offset declines elsewhere; management said digital CSS should start to matter in 2015 but become more meaningful in 2016, and that two bundled wins are expected to ramp in Q1 2015 while one other was dropped because a customer changed its device roadmap. Analysts pressed on competitive standing and scale, and management argued Entropic can compete through product innovation, features, and performance rather than size, while acknowledging the company lacked the scale to pursue the prior integrated roadmap.