Entropic Communications 8-K Entropic Communications Reports Third Quarter Results

Exhibit 99.1

ENTROPIC COMMUNICATIONS REPORTS THIRD QUARTER RESULTS

Conference Call to be Webcast Today at 1:30 p.m. Pacific Time

SAN DIEGO, November 3, 2011 — Entropic Communications, Inc. (Nasdaq: ENTR), a leading provider of silicon and software solutions to enable connected home entertainment, today reported its third quarter results for the period ended September 30, 2011. Entropic reported third quarter net revenues of $51.5 million, a decrease of 16 percent compared with $61.5 million in the second quarter of 2011 and a decrease of 16 percent compared to $61.3 million in the third quarter of 2010.

In accordance with U.S. generally accepted accounting principles (GAAP), the Company’s third quarter net income was $4.6 million, or $0.05 per share (diluted). This compares with GAAP net income of $7.8 million, or $0.09 per share (diluted) in the second quarter of 2011.

Non-GAAP net income in the third quarter was $10.4 million, or $0.12 per share (diluted), compared to non-GAAP net income of $15.1 million, or $0.17 per share (diluted) in the second quarter of 2011.

“Entropic delivered strong operating results and made significant progress toward our long-range strategic plan despite facing significant challenges entering the third quarter,” said Patrick Henry, president and CEO of Entropic Communications. “As we look forward, we believe we will benefit from continued HDTV, DVR and multi-room DVR penetration worldwide, as well as the paradigm shift toward streaming IP-based video and multimedia content and services into and throughout the home. In addition, our recent strategic investment and joint development agreement with Zenverge positions us to capitalize on the rising consumer demand to have video content delivered to portable devices, such as tablets, smartphones and laptops – in the home or on the go.”

	Three Months ended
(In millions, except per share data)	Sept 30, 2011		June 30, 2011		Sept 30, 2010
Net revenues	$	51.5	$	61.5	$	61.3
GAAP net income	$	4.6	$	7.8	$	11.3
GAAP net income per share (basic and diluted)	$	0.05	$	0.09	$	0.15
Non-GAAP net income1	$	10.4	$	15.1	$	14.5
Non-GAAP net income per share1(diluted)	$	0.12	$	0.17	$	0.18

1. Please refer to “Non-GAAP Financial Measures” below and the financial statements portion of this press release for an explanation of the non-GAAP financial measures contained in the table above and a reconciliation of such measures to the comparable GAAP financial measures.

Recent Highlights

Strategic Investment

• Strengthened Partnership with Zenverge: Entropic made a $10M strategic investment to co-develop and co-market products for the service provider and consumer electronics markets. Jointly the two

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ENTROPIC COMMUNICATIONS REPORTS THIRD QUARTER 2011 RESULTS PAGE 2

organizations will work on a silicon solution to provide powerful transcoding capabilities for converting and delivering pay-TV, over-the top or personal video content to any device – either to watch immediately in a connected mode, or to watch later with content stored locally. This investment in Zenverge deepens Entropic’s commitment to bring the best of both MoCA^® (Multimedia over Coax Alliance) home networking and video transcoding technologies together to create new products designed to satisfy the desire of consumers to watch, and service providers to offer, content — anytime, anywhere and on any type of device.

European Market Expansion

• Demonstrated the Power of MoCA 2.0 at IBC 2011, Amsterdam: Entropic showcased how European operators and original equipment manufacturers (OEMs) can monetize their home networking strategies by highlighting the benefits/features of MoCA 2.0 as a way to enable a rewarding consumer TV viewing experiences.

• Announced New European Design Win with Technetix: Designer and manufacturer of leading technology solutions, Technetix, demonstrated the first-ever push-on Ethernet-to-Coax (EoC) Network Adapter, powered by Entropic’s MoCA silicon; strengthening the standard and Entropic for greater penetration and expansion throughout Europe.

• Enabled High-Performance Connectivity and Advanced IP-based Services for Finnish Operator, Blue Lake Communications: Entropic customer, InCoax, leveraged Entropic’s cost-effective, MoCA-based EoC solution for its Gigabit over Coax Access (GoCA) platform to enable Blue Lake Communications, to offer higher-speed broadband and more advanced IPTV services to its subscribers.

Global c.LINK^® Broadband Access Momentum

• Announced General Availability of the Next-Generation c.LINK^® Broadband Access Silicon for EoC Implementations: Entropic introduced its EN3510 c.LINK Broadband Access single-chip solution that runs 60-percent faster on coaxial cable than current c.LINK implementations. The new c.LINK solution is unique to the China EoC market, as it is a high radio frequency (RF) implementation — making it ideal for multiple system operators (MSOs) or cable network operators to upgrade their networks for bi-directional communication or to coexist with other advanced IP-based services on the same coaxial cable.

• Partnered with H3C Technologies Co., Limited: A wholly-owned subsidiary of Hewlett-Packard Company (NYSE:HPQ), and a leading global supplier of IP-based products and solutions, H3C leveraged Entropic’s c.LINK Broadband Access silicon in its EPCN 2.0, a universal broadband system that supports an optical to coax platform for high-RF IP delivery of video and broadband services to multi-dwelling units over the existing coaxial cable in China.

• Strategic Design Win with LG Electronics (LGE): LGE turned to Entropic’s field-proven c.LINK Broadband Access solution to power its Pro:Centric^™ hospitality solution; allowing guests to take advantage of new infotainment and over-the-top video services via the hotel room TV. LGE’s Pro:Centric solution was designed to enhance the guest experience, while providing hoteliers a consistent revenue stream for their property.

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Accolades

• Entropic ranked #224 on Technology Fast 500™, Deloitte’s ranking of the 500 fastest growing technology, media, telecommunications, life sciences and clean technology companies in the United States and Canada. Rankings are based on percentage of fiscal year revenue growth from 2006 to 2010. This marks the third consecutive year Entropic has been included in the Technology Fast 500.

For More Information

Entropic management will be holding a conference call today, November 3, 2011, at 1:30 p.m. Pacific Time/4:30 p.m. Eastern Time to discuss the Company’s results for the third quarter of fiscal 2011 and to provide guidance for the fourth quarter. You may access the conference call via any of the following:

Teleconference:	631-813-4729
Conference ID:	15932607
Web Broadcast:	http://ir.entropic.com/events.cfm
Replay:	404-537-3406

About Entropic Communications

Entropic Communications, Inc. (Nasdaq:ENTR) is a leading fabless semiconductor company that is engineering the future of connected home networking and entertainment by providing next-generation silicon and software technologies to the world’s leading cable, telecommunications and satellite service providers, OEMs and consumer electronic manufacturers. As a co-founder of MoCA (Multimedia over Coax Alliance), Entropic pioneered and continues to evolve the way high-definition television-quality video and other multimedia and digital content such as movies, music, games and photos are brought into and delivered throughout the home. For more information, visit Entropic at www.entropic.com.

Non-GAAP Financial Measures

This press release and the accompanying tables contain the following non-GAAP financial measures: net income and net income per share. These non-GAAP financial measures exclude the effects on the Statements of Operations of all forms of stock-based compensation, non-cash acquired intangibles amortization, the loss related to equity method investment, and the cash tax difference and their related effects on the number of diluted shares used in calculating non-GAAP income per share, among other items.

Management uses these non-GAAP financial measures to manage the Company’s business, including setting operating budgets and executive compensation plans. These non-GAAP measures are also used to (i) supplement the financial results and forecasts reported to the Company’s board of directors, (ii) evaluate the Company’s operating performance, (iii) compare the Company’s performance to internal forecasts, and (iv) manage the Company’s business and benchmarking performance internally. The non-GAAP measures have been made available to stockholders consistently in the past to provide transparency on how management manages the Company’s operating performance. Management believes that these non-GAAP operating measures are useful to investors, when used as a supplement to GAAP measures, in evaluating the Company’s ongoing operational performance.

The non-GAAP financial measures disclosed by the Company should not be considered in isolation or a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP, and the financial results calculated in accordance with GAAP and reconciliations to those financial statements should be carefully evaluated. The non-GAAP financial measures used by the Company may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies.

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Forward-Looking Statements

Statements in this press release that are not strictly historical in nature constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include, but are not limited to, statements regarding our expectations for market expansion, product development, continued and/or future revenue, earnings and product sales growth and the factors that may contribute to such growth. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause Entropic’s actual results to be materially different from historical results or from any results expressed or implied by such forward-looking statements. These factors include, but are not limited to, our dependence on a limited number of customers and service providers for a substantial portion of our revenues; risks that the market for high-definition and standard-definition video and other multi-media content delivery and networking solutions in the United States, China and elsewhere will not develop as we expect; risks associated with competing against larger and more established companies and our ability to compete successfully in the market for MoCA-compliant chipsets; risks associated with timely development and introduction of new or enhanced products; risks that our collaborations and partnerships will not yield their anticipated benefits; risks associated with adverse U.S. and international economic conditions; and other factors discussed in the “Risk Factors” section of Entropic’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2011. All forward-looking statements are qualified in their entirety by this cautionary statement. Entropic is providing this information as of the date of this release and does not undertake any obligation to update any forward-looking statements contained in this release as a result of new information, future events or otherwise.

Entropic Communications^® and the stylized Entropic “curve” logo are either trademarks or registered trademarks of Entropic Communications, Inc. in the United States and/or other countries.

Investor Contact:

Debra Hart

Director, Investor Relations

858.768.3852

debra.hart@entropic.com

Media/Industry Analyst Contact:

Ruder Finn for Entropic Communications

Chris Fallon

212.715.1691

fallonc@ruderfinn.com

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ENTROPIC COMMUNICATIONS, INC.

GAAP Condensed Consolidated Statements of Operations

(In thousands, except for per share information)

	Three Months Ended						Nine Months Ended
	September 30, 2011		June 30, 2011		September 30, 2010		September 30, 2011		September 30, 2010
	(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)
Net revenues	$	51,465	$	61,473	$	61,310	$	184,459	$	139,441
Cost of net revenues		22,996		27,646		28,774		82,581		65,306
Gross profit		28,469		33,827		32,536		101,878		74,135
Operating expenses:
Research and development		15,142		14,148		12,410		42,439		35,694
Sales and marketing		4,073		4,303		5,054		13,196		12,823
General and administrative		2,939		3,515		3,798		10,143		9,510
Total operating expenses		22,154		21,966		21,262		65,778		58,027
Income from operations		6,315		11,861		11,274		36,100		16,108
Other income, net		133		213		33		535		78
Income before income taxes		6,448		12,074		11,307		36,635		16,186
Income tax provision		1,803		4,318		36		12,379		65
Net income	$	4,645	$	7,756	$	11,271	$	24,256	$	16,121
Net income per share – basic	$	0.05	$	0.09	$	0.15	$	0.28	$	0.22
Net income per share – diluted	$	0.05	$	0.09	$	0.15	$	0.27	$	0.21
Weighted average number of shares used to compute net income per share – basic		86,541		86,046		72,777		85,993		72,003
Weighted average number of shares used to compute net income per share – diluted		88,884		89,290		77,605		89,165		75,791

ENTROPIC COMMUNICATIONS, INC.

GAAP Condensed Consolidated Balance Sheets

(In thousands)

	September 30,		June 30,		December 31,
	2011		2011		2010
	(unaudited)		(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	24,722	$	33,728	$	98,100
Marketable securities		105,942		102,986		48,275
Accounts receivable		35,133		35,942		18,244
Inventory		25,780		33,880		39,915
Deferred tax assets, current		2,445		5,463		14,307
Prepaid expenses and other current assets		8,844		6,404		6,226
Total current assets		202,866		218,403		225,067
Property and equipment, net		11,389		11,802		11,354
Long-term marketable securities		58,894		51,331		22,386
Deferred tax assets, long-term		17,304		17,304		17,304
Other long-term assets		11,819		2,481		2,697
Total assets	$	302,272	$	301,321	$	278,808
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	6,138	$	13,632	$	18,278
Accrued expenses and other current liabilities		3,006		3,962		3,634
Accrued payroll and benefits		5,684		4,565		6,666
Total current liabilities		14,828		22,159		28,578
Deferred rent		1,218		1,336		1,568
Other long-term liabilities		126		71		72
Stockholders' equity		286,100		277,755		248,590
Total liabilities and stockholders' equity	$	302,272	$	301,321	$	278,808

ENTROPIC COMMUNICATIONS, INC.

Unaudited Reconciliation of Non-GAAP Adjustments

(In thousands, except for per share information)

This press release contains the following non-GAAP financial measures: net income and net income per share. The presentation of such measures is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. Our non-GAAP net income and net income per share exclude the items listed below.

The following table sets forth such non-GAAP measures for the applicable periods as well as the reconciliation of such measures to the directly comparable GAAP measures for the periods shown.

	Three Months Ended								Nine Months Ended
	September 30, 2011			June 30, 2011			September 30, 2010		September 30, 2011			September 30, 2010
	(unaudited)			(unaudited)			(unaudited)		(unaudited)			(unaudited)
GAAP net income	$	4,645		$	7,756		$	11,271	$	24,256		$	16,121
Non-GAAP adjustments:
Stock-based compensation:
Cost of net revenues		143			118			104		390			256
Research and development		1,533			1,631			1,362		4,597			3,652
Sales and marketing		517			500			419		1,445			1,113
General and administrative		933			1,097			898		2,994			2,511
Total stock-based compensation		3,126			3,346			2,783		9,426			7,532
Acquisition-related items:
Amortization of intangible assets:
Cost of net revenues		—			—			406		—			1,217
Loss related to equity method investment		91			—			—		91			—
Income tax effects of pre-tax adjustments		(1,126	)		(1,171	)		—		(3,331	)		—
Cash tax difference (1)		3,653			5,137			—		14,607			—
Total of non-GAAP adjustments		5,744			7,312			3,189		20,793			8,749
Non-GAAP net income	$	10,389		$	15,068		$	14,460	$	45,049		$	24,870
Weighted average shares (basic)		86,541			86,046			72,777		85,993			72,003
Adjustment for dilutive shares		2,343			3,244			7,294		3,172			6,207
Weighted average shares (diluted)		88,884			89,290			80,071		89,165			78,210
GAAP net income per share (basic)	$	0.05		$	0.09		$	0.15	$	0.28		$	0.22
Non-GAAP adjustments detailed above		0.07			0.08			0.03		0.23			0.10
Non-GAAP net income per share (diluted) (2)	$	0.12		$	0.17		$	0.18	$	0.51		$	0.32

(1) The Company's non-GAAP net income per share is calculated using the cash tax rate of (7%) and 2% for the three and nine month periods ended September 30, 2011, respectively. The estimated cash tax rate is the estimated tax payable on the Company's tax returns as a percentage of estimated annual non-GAAP pre-tax net income. The Company uses an estimated cash tax rate to adjust for the historical variation in the effective book tax rate associated with the reversal of valuation allowances, the utilization of research and development tax credits, and the utilization of loss carryforwards which currently have an overall effect of reducing taxes payable. The Company believes that the cash tax rate provides a more transparent view of the Company's operating results. The Company's effective tax rate used for the purposes of calculating GAAP net income for the three and nine month periods ended September 30, 2011 was approximately 28% and 34%, respectively.

(2) During 2011, the Company changed its methodology for calculating non-GAAP net income per share by using the GAAP share count in the calculation of non-GAAP net income per share, and has reflected the effects of such change for all periods presented in 2011.