SOURCE: Sigma Designs, Inc.

Sigma Designs, Inc.

March 02, 2011 16:01 ET

Sigma Designs, Inc. Reports Fourth Quarter and Fiscal 2011 Results

MILPITAS, CA--(Marketwire - March 2, 2011) - Sigma Designs®, Inc. (NASDAQ: SIGM) ("Sigma"), a leading provider of highly integrated system-on-chip, or SoC, solutions used to deliver multimedia entertainment throughout the home, today reported financial results and business highlights for its fourth quarter and fiscal year ended January 29, 2011.

Net revenue for the fourth quarter of fiscal 2011 was $70.6 million, down $7.2 million, or 9%, from $77.8 million reported in the previous quarter and up $2.5 million, or 4%, from $68.1 million reported for the same period last year. Net revenue for fiscal 2011 was $286.9 million, up $80.8 million or 39%, from $206.1 million reported for the previous year.

GAAP net income for the fourth quarter of fiscal 2011 was $2.5 million, or $0.08 per diluted share. This compares to GAAP net income of $5.1 million, or $0.16 per diluted share, for the previous quarter and a net loss of $2.8 million, or ($0.09) per diluted share, in the same period last year. GAAP net income for fiscal 2011 was $9.1 million, or $0.29 per diluted share, compared to $2.5 million, or $0.09 per diluted share, for the previous year.

At the end of fiscal 2011, cash, cash equivalents and marketable securities totaled $179 million, or $5.66 per share outstanding, an increase of $31 million, or $0.87 per share outstanding compared to the beginning of the fiscal year. This increase was primarily generated by income from Sigma's operating activities.

Non-GAAP net income for the fourth quarter of fiscal 2011 was $10.1 million, or $0.32 per diluted share. This compares to non-GAAP net income of $13.0 million, or $0.41 per diluted share, for the previous quarter and non-GAAP net income of $11.3 million, or $0.37 per diluted share during the same period one year ago. Non-GAAP adjustments for the fourth quarter consisted of $4.6 million in amortization expense for acquired intangibles related to acquisitions and $3.1 million in non-cash stock-based compensation expenses. The reconciliation between GAAP and non-GAAP net income (loss) for all referenced periods is provided in a table immediately following the GAAP financial tables below.

Non-GAAP net income for fiscal 2011 was $40.6 million, or $1.28 per diluted share, compared to $30.6 million, or $1.08 per diluted share, for the previous year.

Management Comment

"We reported over $70 million in revenue for the fourth quarter, matching the guidance provided at last quarter's earnings call. This 9% fourth quarter decrease in revenue was the result of moderate declines in three of our market segments, namely IPTV, Connected Home Technologies and VXP video processors. In the larger context, we believe that this revenue decline is more than offset by the strategic gains that were made this quarter. Our key strategic gains include the launch of a new premium line of differentiated media processors starting with the SMP8910, the extension of our value line of media processors with the SMP8670 and the successful demonstration of our new CG5110 which positions us as the technology leader for G.hn all-wire connectivity solutions. Moving forward, we are continuing to pursue major design wins in our current market segments with special initiatives for penetrating the hybrid IP Cable set-top box market, developing powerline accounts and the increased adoption of Z-Wave based home control solutions," stated Thinh Tran, chairman and chief executive officer, Sigma Designs.

Fourth Quarter Highlights

--  We announced the SMP8910, the first chip to integrate VXP studio
    quality video processing and highly flexible 3D video processing into a
    high-performance media processor forming the genesis of our premium
    line of set-top box media processors.

--  We demonstrated Sigma's new SMP8670, which gives OEMs and ODMs a
    compelling solution for connected media players with 40% more
    performance 30% less power consumption, and lower overall BOM costs
    compared to its predecessor.

--  We announced support for five exciting new TV development environments:
    Adobe® AIR® for TV, the Espial Browser with support for Adobe
    Flash® Player, a Hardware Accelerated Open GL ES 3D UI Framework,
    Skype TV HD video conferencing, and XBMC (XBMC Media Center) for
    delivering easy access to Internet-based video content and games.

--  We announced that our SMP8652 Secure Media Processor™ is being used
    inside Verismo's Broadband TV set top box and overall we continue to
    see high interest in our low cost thin client solutions.

--  We were the first to announce and demonstrate a working G.hn solution,
    the CG5110 G.hn chipset. This solution delivers substantially higher
    performance than every wired home entertainment networking solution on
    the market today.

--  We announced that our HomePlug AV® with ClearPath™ technology has
    won the TV Innovation Award in the category of "Home Networking," in
    addition to two other recent awards.

Investor Conference Call

The conference call relating to Sigma's fourth quarter fiscal 2011 results will take place following this announcement at 5:00 PM ET today, March 2, 2011. Investors will have the opportunity to listen live to the conference call via the Internet through www.sigmadesigns.com/IR or www.earnings.com. Institutional investors can access the call via Thomson StreetEvents at www.streetevents.com. To listen to the live call, please go to the website at least 10 minutes early to register and download and install any necessary audio software. For those who cannot listen to the live broadcast, a replay will be available shortly after the call via the internet through www.sigmadesigns.com/IR or www.earnings.com. The audio replay will be available for one week after the call.

Use of Non-GAAP Financial Information

In addition to reporting financial results in accordance with generally accepted accounting principles, or GAAP, Sigma reports non-GAAP net income, which excludes amortization of acquired intangibles and developed technologies, stock-based compensation and the mark-up from cost to fair market value of sold inventory acquired from purchased companies and, with respect to the third and fourth quarters of fiscal 2010, acquisition-related expenses and, with respect to the first quarter of fiscal 2010, the expense resulting from the write-off of the deferred tax asset due to the change in California tax laws. Sigma believes that its non-GAAP net income provides useful information to management and investors regarding financial and business trends relating to its financial condition and results of operations. Sigma also believes the non-GAAP measures provide useful supplemental information for investors to evaluate its operating results in the same manner as the research analysts that follow Sigma, all of whom present non-GAAP projections in their published reports. As such, the non-GAAP measures provided by Sigma facilitate a more direct comparison of its performance with the financial projections published by the analysts as well as its competitors, many of whom report financial results on a non-GAAP basis. The economic substance behind its decision to use such non-GAAP measures is that such measures approximate its controllable operating performance more closely than the most directly comparable GAAP financial measures. For example, Sigma's management has no control over certain variables that have a major influence in the determination of stock-based compensation such as the volatility of its stock price and changing interest rates. Sigma believes that all of these excluded expenses do not accurately reflect the underlying performance of its continuing operations for the period in which they are incurred, even though some of these excluded items may be incurred and reflected in Sigma's GAAP financial results in the foreseeable future.

The material limitation associated with the use of the non-GAAP financial measures is that the non-GAAP measures do not reflect the full economic impact of Sigma's activities. Sigma's non-GAAP net income is not prepared in accordance with GAAP, is not an alternative to GAAP financial information, and may be calculated differently than non-GAAP financial information disclosed by other companies. Accordingly, investors are cautioned not to place undue reliance on non-GAAP information.

Safe Harbor Statement

This press release contains 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, including statements regarding potential opportunities emerging for Sigma's strategic initiatives, anticipated features and benefits of Sigma's new products, and the potential impact of special initiatives for penetrating the hybrid IP Cable set-top box industry, developing powerline accounts and the increased adoption of Z-Wave based home control solutions. Actual results may vary materially due to a number of factors including, but not limited to, the risk that, upon completion of further closing procedures, that the financial results for the fourth quarter and fiscal 2011 are different than the results set forth in this press release, general economic conditions, including continuance of the current economic conditions specific to the semiconductor industry, the rate of growth of the IPTV, connected home technologies, connected media player and prosumer and industrial audio/video markets in general, the ramp in demand from Sigma's set-top box and telecommunication customers, Sigma's ability to deploy and achieve market acceptance for Sigma products in these markets, the ability of Sigma's SoCs to compete with other technologies or products in these emerging markets, the risk that such products will not gain widespread acceptance, or will be rendered obsolete, by product offerings of competitors or by alternative technologies, the risk that anticipated design wins will not materialize and that actual design wins will not translate into launched product offerings, and other risks including delays in the manufacturer's deployment of set-top boxes or consumer products. Other risk factors are detailed from time to time in Sigma's SEC reports, including Sigma's quarterly report on Form 10-Q as filed December 7, 2010. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Sigma undertakes no obligation to publicly release or otherwise disclose the result of any revision to these forward-looking statements that may be made as a result of events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

About Sigma Designs, Inc.

Sigma Designs is a leading fabless semiconductor provider of highly integrated system-on-chip (SoC) solutions that are used to deliver entertainment and control throughout the home. SoC solutions include media processing, wired and wireless networking, video image processing and home control along with system software to form the critical components of consumer electronic products that include internet protocol TV (IPTV) set-top boxes and gateways, Blu-ray players and media communication devices. Headquartered in Milpitas, California, Sigma Designs has offices in the United States, Europe, Hong Kong, Israel, Japan, Singapore and Taiwan and sales representatives in Brazil, China, India, Korea and Russia. For more information, please visit Sigma Designs' web site at www.sigmadesigns.com.

                            SIGMA DESIGNS, INC.
        PRELIMINARY UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
                                  (GAAP)
                              (In thousands)

                                                January 29,   January 30,
                                                    2011          2010
                                                ------------- -------------
Assets

Current Assets:
  Cash and cash equivalents                     $      72,732 $      81,947
  Short-term marketable securities                     47,482        51,176
  Restricted cash                                       1,616         1,500
  Accounts receivable, net                             31,348        36,127
  Inventories                                          37,714        18,187
  Deferred tax assets                                   4,670         2,235
  Prepaid expenses and other current assets             7,493         8,925
                                                ------------- -------------
        Total current assets                          203,055       200,097

Long-term marketable securities                        57,308        13,257
Software, equipment and leasehold improvements,
 net                                                   28,392        23,810
Goodwill                                               44,910        44,910
Intangible assets, net                                107,628       125,568
Deferred tax assets, net of current portion            13,051        11,575
Long-term investments                                   4,300         4,000
Other non-current assets                                  595           680
                                                ------------- -------------

        Total assets                            $     459,239 $     423,897
                                                ============= =============

Liabilities and Shareholders' Equity

Current Liabilities:
  Accounts payable                              $      15,650 $      10,943
  Accrued liabilities                                  24,209        23,164
                                                ------------- -------------
        Total current liabilities                      39,859        34,107

  Other long-term liabilities                          21,339        20,968
                                                ------------- -------------
        Total liabilities                              61,198        55,075

Shareholders' equity                                  398,041       368,822
                                                ------------- -------------

        Total liabilities and shareholders'
         equity                                 $     459,239 $     423,897
                                                ============= =============



                            SIGMA DESIGNS, INC.
 PRELIMINARY UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


                                 (GAAP)
                  (In thousands, except per share data)

                           Three months ended          Fiscal year ended
                     -------------------------------  --------------------
                      January    October    January    January    January
                     29, 2011   30, 2010   30, 2010   29, 2011   30, 2010
                     ---------  ---------  ---------  ---------  ---------
Net revenue          $  70,605  $  77,805  $  68,093  $ 286,915  $ 206,083

Cost of revenue         35,708     39,192     40,096    146,271    114,381
                     ---------  ---------  ---------  ---------  ---------
Gross profit            34,897     38,613     27,997    140,644     91,702
Gross margin percent      49.4%      49.6%      41.1%      49.0%      44.5%


Operating expenses:
  Research and
   development          20,205     20,484     17,682     77,270     52,644
  Sales and
   marketing             8,689      8,357      7,436     31,712     17,617
  General and
   administrative        4,712      4,781      6,021     18,745     18,240
                     ---------  ---------  ---------  ---------  ---------
     Total operating
      expenses          33,606     33,622     31,139    127,727     88,501

Income (loss) from
 operations              1,291      4,991     (3,142)    12,917      3,201
Interest and other
 income (expense),
 net                       580        425        296     (3,020)     1,906
                     ---------  ---------  ---------  ---------  ---------

Income (loss) before
 income taxes            1,871      5,416     (2,846)     9,897      5,107
Provision for
 (benefit from)
 income taxes             (601)       351        (57)       750      2,652
                     ---------  ---------  ---------  ---------  ---------

Net income (loss)    $   2,472  $   5,065  $  (2,789) $   9,147  $   2,455
                     =========  =========  =========  =========  =========

Net income (loss)
 per share:
  Basic              $    0.08  $    0.16  $   (0.09) $    0.29  $    0.09
  Diluted            $    0.08  $    0.16  $   (0.09) $    0.29  $    0.09

Shares used in
 computing net
 income (loss)
 per share:
  Basic                 31,479     31,327     30,344     31,245     27,597
  Diluted               32,099     31,646     30,344     31,732     28,235







                            SIGMA DESIGNS, INC.
RECONCILIATION OF PRELIMINARY GAAP NET INCOME (LOSS) TO NON-GAAP NET INCOME
                                (Unaudited)
                  (In thousands, except per share data)


                            Three months ended          Fiscal year ended
                      -------------------------------  -------------------
                       January    October    January    January   January
                      29, 2011   30, 2010   30, 2010   29, 2011   30, 2010
                      ---------  ---------  ---------  ---------  --------
GAAP net income
 (loss)               $   2,472  $   5,065  $  (2,789) $   9,147  $  2,455

Items reconciling
 GAAP net income
 (loss) to non-GAAP
 net income:

  Included in cost of
   revenue:
      Amortization of
       acquired developed
       technologies      (2,587)    (2,586)    (2,462)   (10,350)   (4,610)
      Mark-up on
       purchased inventory
       sold during the
       period               ---        (52)    (4,620)      (538)   (5,385)
      Stock-based
       compensation        (129)      (159)      (105)      (560)     (359)
                      ---------  ---------  ---------  ---------  --------
        Total related
         to cost of
         revenue         (2,716)    (2,797)    (7,187)   (11,448)  (10,354)



  Included in operating
   expenses:
    Research and
     development:
      Amortization of
       acquired
       intangibles          (11)       ---        ---        (11)      (19)
      Stock-based
       compensation      (1,557)    (1,806)    (1,700)    (6,745)   (5,333)
    Sales and marketing:
      Stock-based
       compensation        (569)      (541)      (759)    (2,094)   (1,861)
      Amortization of
       acquired
       Intangibles       (1,995)    (1,996)    (1,845)    (7,981)   (2,103)
    General and
     administrative:
      Stock-based
       compensation        (796)      (824)      (677)    (3,178)   (1,240)
      Acquisition
       expenses             ---        ---     (1,896)       ---    (3,651)
                      ---------  ---------  ---------  ---------  --------
        Total related
         to operating
         expenses        (4,928)    (5,167)    (6,877)   (20,009)  (14,207)
                      ---------  ---------  ---------  ---------  --------

    Write-off of
     deferred tax
     asset                  ---        ---        ---        ---    (3,540)
                      ---------  ---------  ---------  ---------  --------

    Net effect of
     non-GAAP
     adjustments         (7,644)    (7,964)   (14,064)   (31,457)  (28,101)
                      ---------  ---------  ---------  ---------  --------

Non-GAAP net income   $  10,116  $  13,029  $  11,275  $  40,604  $ 30,576
                      =========  =========  =========  =========  ========

Non-GAAP net income
 per diluted share    $    0.32  $    0.41  $    0.37  $    1.28  $   1.08