Techwell Reports Second Quarter 2007 Financial Results

SAN JOSE, Calif.—(BUSINESS WIRE)—August 2, 2007— Techwell, Inc., (NASDAQ: TWLL), a leading provider of mixed signal integrated circuits for multiple video applications in the consumer, security surveillance and automotive markets, today announced financial results for the second quarter ended June 30, 2007.

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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