EXHIBIT 99.1
[ESS LOGO]
FOR IMMEDIATE RELEASE
Contact Information:
ESS Technology, Inc. Rebecca Mack
Investor Relations Bergman Mack & Associates
(510) 492-1161 (949) 981-4496
ESS TECHNOLOGY REPORTS SEQUENTIAL Q4 REVENUE
GROWTH OF 72% AND EPS GROWTH OF 200%
CELLULAR CAMERA PHONE REVENUES TRIPLES
FREMONT, CALIF., FEBRUARY 4, 2004--ESS Technology (Nasdaq: ESST) today
reported net revenues for the fourth quarter of 2003 of $82.9 million, a 75%
increase over the same period last year of $47.5 million and a 72% sequential
increase from the $48.2 million reported for the third quarter of 2003.
GAAP net income for the fourth quarter of 2003 was $8.8 million, or $0.21
per diluted share, compared to GAAP net income of $0.8 million, or $0.02 per
diluted share, for the fourth quarter of 2002. For the third quarter of 2003,
GAAP net income was $2.7 million, or $0.07 per diluted share.
Non-GAAP net income for the fourth quarter of 2003 was $9.5 million, or
$0.23 per diluted share, compared to the fourth quarter 2002 Non-GAAP net income
of $1.4 million, or $0.03 per diluted share. For the third quarter of 2003,
Non-GAAP net income was $5.3 million or $0.13 per diluted share. Non-GAAP net
income excludes the effects of amortization of intangible assets, write-down of
investments, investment gains, in-process research and development, and their
related tax effects.
Robert Blair, president and CEO of ESS Technology commented, "I am very
pleased to report that new products and recent acquisitions are driving
significant revenue and earnings growth. Our Vibratto II integrated chips and
our VibrattoS MPEG4/DivX chips led our strong DVD gains, and our VCD products
again set new sales records as the VCD market continues its growth worldwide.
And during the fourth quarter our recordable DVD products continued their rapid
growth and set a new revenue record. All of our digital video product lines grew
during the fourth quarter, and additionally and most importantly, growth in
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our new cameraphone business is exceeding our earlier expectations, with revenue
more than triple that of the third quarter."
Mr. Blair continued, "We are extremely excited by the rapid growth of our
CMOS image sensor revenue, the rapid expansion of the cameraphone market, and
the huge opportunity this represents for ESS. Industry forecasts for the growth
of cameraphones continue to rise, with recent industry forecasts as high as
150-250 million units in 2004. We recognize this great opportunity for ESS and
we plan to become a major player in this market. We are expanding our resources
in engineering, operations, sales and marketing to win and support more business
in this fast-growing market."
Mr. Blair concluded, "Overall, with the strength and growth of both the
digital imaging and digital video markets and our many new products for these
markets, ESS is looking forward to significant growth in the future."
Jim Boyd, CFO of ESS Technology commented, "ESS in the fourth quarter
achieved our strongest growth ever, with sequential revenue growth in all
segments of our business. Digital imaging revenue more than tripled and
sequential earnings per share also tripled. In addition, we ended the year with
approximately $165 million in cash and short-term investments and zero debt.
Overall, we are very pleased with ESS's results and financial position at the
end of 2003."
FIRST QUARTER 2004 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 seasonally slower first quarter of 2004 to be
$68 to $76 million with gross margins to range from 31% - 34%. We also expect
R&D expenses at 15% - 16%, and other operating expenses to be at 11% - 12% of
net revenue. Overall we expect GAAP net income per diluted share to be in the
range of $0.07 to $0.12 and Non-GAAP net income per diluted share to be in the
range of $0.10 to $0.15. Non-GAAP net income 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 at 2:00
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p.m. PST / 5:00 p.m. EST, February 4, 2004, to discuss its fourth quarter 2004
results. Investors are invited to listen to a live webcast of the conference
call at www.esstech.com or http://www.videonewswire.com/ESST/020404. A replay of
the webcast will also be available at www.esstech.com and
http://www.videonewswire.com/ESST/020404 or by telephone at (800) 633-8284
(U.S./Canada) / (402) 977-9140 (International), Reservation #21181940, beginning
at 5:00 p.m. PST / 8:00 p.m. EST, February 4, 2004.
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:
http://www.esstech.com.
(ATTACHMENTS: Consolidated Summary Financial Statements)
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, difficulties inherent in
integrating acquired businesses with ESS, and the 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.
All trademarks mentioned in this news release are owned by their respective
holders and are used in this news release for identification purposes only.
# # #
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ESS TECHNOLOGY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(in thousands)
December 31, December 31,
2003 2002
------------ ------------
ASSETS
Current Assets:
Cash and cash equivalents $ 98,938 $ 138,072
Short-term investments 65,908 61,030
Accounts receivable, net 57,674 28,468
Inventories 33,546 24,155
Prepaid expenses and other assets 2,959 2,834
------------ ------------
Total current assets 259,025 254,559
Property, plant and equipment, net 24,629 18,985
Goodwill 43,789 2,074
Other intangible assets 11,510 249
Other assets 13,640 5,735
------------ ------------
Total Assets $ 352,593 $ 281,602
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses $ 84,414 $ 35,084
Income taxes payable and deferred income taxes 29,390 9,474
------------ ------------
Total current liabilities 113,804 44,558
------------ ------------
Non-current deferred tax liability 11,708 7,676
------------ ------------
Shareholders' Equity:
Common stock 175,546 196,344
Accumulated other comprehensive income 929 504
Retained earnings 50,606 32,520
------------ ------------
Total shareholders' equity 227,081 229,368
------------ ------------
Total Liabilities and Shareholders' Equity $ 352,593 $ 281,602
============ ============
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ESS TECHNOLOGY, INC.
GAAP CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(in thousands, except per share data)
Three months ended Twelve months ended
-------------------------- ---------------------------
December 31, December 31, December 31, December 31,
2003 2002 2003 2002
----------- ----------- ----------- -----------
Net revenues $ 82,868 $ 47,544 $ 195,273 $ 273,442
Cost of revenues 55,051 35,133 132,690 176,454
----------- ----------- ----------- -----------
Gross profit 27,817 12,411 62,583 96,988
34% 26% 32% 35%
Operating expenses:
Research and development 9,508 6,380 33,184 26,964
In-process research and development - - 2,690 -
Selling, general and administrative 9,553 6,311 31,761 34,170
----------- ----------- ----------- -----------
Operating income (loss) 8,756 (280) (5,052) 35,854
Nonoperating income, net 1,474 1,151 45,946 2,407
----------- ----------- ----------- -----------
Income before provision for income taxes 10,230 871 40,894 38,261
Provision for income taxes 1,476 61 15,603 984
----------- ----------- ----------- -----------
Net income $ 8,754 $ 810 $ 25,291 $ 37,277
=========== =========== =========== ===========
Net income per share
Basic $ 0.22 $ 0.02 $ 0.64 $ 0.85
=========== =========== =========== ===========
Diluted $ 0.21 $ 0.02 $ 0.61 $ 0.80
=========== =========== =========== ===========
Weighted average common shares:
Basic 39,014 43,378 39,517 44,044
=========== =========== =========== ===========
Diluted 42,169 44,188 41,238 46,731
=========== =========== =========== ===========
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ESS TECHNOLOGY, INC.
NON-GAAP CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (1)(2)
(unaudited)
(in thousands, except per share data)
Three months ended Twelve months ended
-------------------------- --------------------------
December 31, December 31, December 31, December 31,
2003 2002 2003 2002
------------ ------------ ------------ ------------
Net revenues $ 82,868 $ 47,544 $ 195,273 $ 273,442
Cost of revenues 54,352 35,133 131,491 176,454
----------- ----------- ----------- -----------
Gross profit 28,516 12,411 63,782 96,988
34% 26% 33% 35%
Operating expenses:
Research and development 9,287 6,159 32,103 26,223
Selling, general and administrative 8,850 6,311 30,415 34,170
----------- ----------- ----------- -----------
Operating income (loss) 10,379 (59) 1,264 36,595
Nonoperating income, net 854 1,501 47,313 6,063
----------- ----------- ----------- -----------
Income before provision for income taxes 11,233 1,442 48,577 42,658
Provision for income taxes 1,733 90 16,194 2,115
----------- ----------- ----------- -----------
Net income $ 9,500 $ 1,352 $ 32,383 $ 40,543
=========== =========== =========== ===========
Net income per share
Basic $ 0.24 $ 0.03 $ 0.82 $ 0.92
=========== =========== =========== ===========
Diluted $ 0.23 $ 0.03 $ 0.79 $ 0.87
=========== =========== =========== ===========
Weighted average common shares:
Basic 39,014 43,378 39,517 44,044
=========== =========== =========== ===========
Diluted 42,169 44,188 41,238 46,731
=========== =========== =========== ===========
(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. 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
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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 Net Income to Non-GAAP Net Income".
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ESS TECHNOLOGY, INC.
RECONCILIATION OF GAAP NET INCOME TO NON-GAAP NET INCOME
(unaudited)
(in thousands)
Three months ended Twelve months ended
-------------------------- --------------------------
December 31 December 31 December 31 December 31
2003 2002 2003 2002
------------ ------------ ------------ ------------
GAAP net income $ 8,754 $ 810 $ 25,291 $ 37,277
Non-GAAP Adjustments:
Amortization of intangible assets (3) 1,623 221 3,626 649
Write down of investments (4) - 350 1,987 3,687
In-process research and development (5) - - 2,690 -
Cisco Sale (6) - - - 61
Investment Gain (7) (620) - (620) -
Tax effect to items (3) to (7) (257) (29) (591) (1,131)
----------- ----------- ----------- -----------
Non-GAAP net income $ 9,500 $ 1,352 $ 32,383 $ 40,543
=========== =========== =========== ===========
(3) Non-GAAP amounts for all periods presented exclude the effects of
amortization of intangible assets, amounting to $1,623 and $221 for the
three months ended December 31, 2003 and December 31, 2002, respectively,
and $3,626 and $649 for the twelve months ended December 31, 2003 and
December 31, 2002, respectively.
(4) Non-GAAP amounts exclude the effect of the write-down of investments,
amounting to $350 for the three months ended December 31, 2002, and $1,987
and $3,687 for the twelve months ended December 31, 2003 and December 31,
2002, respectively.
(5) Non-GAAP amounts exclude the effect of in - process research and
development resulting from the Divio and Pictos acquisitions, amounting to
$2,690 for the twelve months ended December 31, 2003.
(6) Non-GAAP amounts exclude the realized losses on the sale of Cisco stock,
amounting to $61 for the twelve months ended December 31, 2002.
(7) Non-GAAP amounts exclude the investment gain of $620 for the three and
twelve months ended December 31, 2003.
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