SOURCE: Sigma Designs

Sigma Designs

June 09, 2015 16:05 ET

Sigma Designs, Inc. Reports First Quarter Fiscal 2016 Financial Results

Quarterly Revenues Up 52% Year-Over-Year

MILPITAS, CA--(Marketwired - Jun 9, 2015) - Sigma Designs® (NASDAQ: SIGM), a leading provider of intelligent system-on-chip (SoC) solutions for Smart TV, Internet of Things Devices for Smart home, IP-based set-top-boxes and Media Connectivity, today reported financial results for its first quarter of fiscal 2016, which ended May 2, 2015.

Financial Results

GAAP net revenues for the first quarter of fiscal 2016 were $55.9 million, up $1.1 million, or 1.9%, from $54.8 million reported in the previous quarter, and up $19.0 million, or 51.6%, from $36.9 million reported for the same period in fiscal 2015. 

Non-GAAP net revenues for the first quarter of fiscal 2016, which excludes $0.8 million for the reversal of accrued rebates, were $55.1 million. This compares with non-GAAP net revenues of $54.8 million reported in the previous quarter, and $36.9 million reported for the same period in fiscal 2015. 

GAAP gross margin in the first quarter of fiscal 2016 was 52.5%. This compares with a GAAP gross margin of 48.7% in the previous quarter, and 54.9% for the same period in fiscal 2015. 

Non-GAAP gross margin in the first quarter of fiscal 2016 was 53.8%. This compares with a non-GAAP gross margin of 50.8% in the previous quarter, and 58.1% for the same period in fiscal 2015.

GAAP operating expenses in the first quarter of fiscal 2016 were $27.9 million, compared with GAAP operating expenses of $29.1 million in the previous quarter, and $28.7 million for the same period in fiscal 2015.

Non-GAAP operating expenses in the first quarter of fiscal 2016 were $25.4 million, compared with non-GAAP operating expenses of $26.1 million in the previous quarter, and $25.5 million for the same period in fiscal 2015.

GAAP net loss for the first quarter of fiscal 2016 was $0.4 million, or $0.01 per diluted share. This compares with a GAAP net loss of $3.6 million, or $0.10 per diluted share in the previous quarter, and a GAAP net loss of $9.9 million, or $0.29 per diluted share, for the same period in fiscal 2015. 

Non-GAAP net income for the first quarter of fiscal 2016 was $3.2 million, or $0.09 per diluted share. This compares with non-GAAP net income of $1.5 million, or $0.04 per diluted share, for the previous quarter, and a non-GAAP net loss of $5.0 million, or $0.14 per diluted share, during the same period in fiscal 2015. 

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.

Management Comment
"We had a solid first quarter with revenue increasing for the fourth straight quarter. In addition, we increased our non-GAAP profitability for the third quarter in a row," said Thinh Tran, president and CEO of Sigma Designs, Inc. "Our higher revenue resulted primarily from a combination of increased customer volumes for both our Smart TV chipsets and IoT Devices. We are committed to sustaining this positive momentum."

Recent Highlights

  • We demonstrated the breadth of our Z-Wave ecosystem at the ISC West conference with a number of leading vendors demonstrating their compliant products. 
  • We released our new Z-Wave protocol 6.6 and ZIP stack, providing an enriched feature set.
  • We demonstrated our Dolby Vision High Dynamic Range television on our STV7700 series at this year's NAB show and also began production of this new chipset.
  • We jointly announced the introduction of a new G.hn powerline adaptor by Tecom that includes a 3G/4G add-on for distribution of mobile broadband access. 

Investor Conference Call

The conference call relating to Sigma's first quarter fiscal 2016 financial results will take place following this announcement at 5:00 p.m. Eastern Time/2:00 p.m. Pacific Time today, June 9, 2015. Investors will have the opportunity to listen live to the conference call via the Internet through www.sigmadesigns.com/IR. To listen to the live call, please go to the website at least 10 minutes prior to the commencement of the call to register, 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. 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 (loss), which excludes amortization of acquired intangibles, stock-based compensation, facility exit legal expenses, settlement expenses, net gain on sale of and impairment of privately-held investments, restructuring charges, impairment of purchased IP, mask sets and design tools used in production and the reversal of previously accrued rebates. The tax amounts included in Sigma's non-GAAP results approximate its operating cash tax expense, similar to the liability reported on Sigma's tax returns. In the GAAP to non-GAAP reconciliation at the end of this press release, we have disclosed the impact of these income tax adjustments in our calculation of our non-GAAP financial results. Sigma believes that its non-GAAP measures provide 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 may 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 may not reflect the full economic impact of Sigma's activities. Sigma's non-GAAP net income (loss) 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 our commitment to sustaining positive momentum. 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 and audit, the financial results for the first quarter and fiscal year 2016 are different than the results set forth in this press release, our ability to recognize revenue from design wins, general economic conditions, the ability to recognize the anticipated savings from our restructuring efforts, the rate of growth of Smart TVs, Internet-of-Things Devices, Set-top-Box and Media Connectivity, the ramp in demand from our Set-Top-Box, television and telecommunication customers, our ability to deploy and achieve market acceptance for our products, and the risk that such products will not gain widespread acceptance, or will be rendered obsolete, by product offerings of competitors or by alternative technologies, and other risks detailed from time to time in our SEC reports, including our report on Form 10-K as filed with the SEC on April 15, 2015 and available at www.sec.gov. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. We undertake 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, Inc. (NASDAQ: SIGM) is a global integrated semiconductor solutions provider offering intelligent media platforms for use in the home entertainment and home control markets. The Company designs and builds the essential semiconductor technologies that serve as the foundation for the world's leading IPTV set-top boxes, Smart TVs, Internet of Things Devices and Media Connectivity. For more information about Sigma Designs, please visit www.sigmadesigns.com.

Sigma Designs, Secure Media Processor, and the Sigma Designs logo are either registered trademarks or trademarks of Sigma Designs, Inc. and its subsidiaries in the United States and other countries. All other trademarks mentioned herein are believed to be trademarks of their respective owners.

 
 
SIGMA DESIGNS, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(GAAP)
(In thousands)
 
    May 2,   January 31,
    2015   2015
Assets            
             
Current Assets:            
  Cash and cash equivalents   $ 69,334   $ 83,502
  Short-term marketable securities     8,448     6,347
  Restricted cash     400     400
  Accounts receivable, net     31,562     26,415
  Inventory     24,446     20,445
  Deferred tax assets     3,386     3,319
  Prepaid expenses and other current assets     9,110     8,805
    Total current assets     146,686     149,233
             
Long-term marketable securities     9,176     4,249
Software, equipment and leasehold improvements, net     20,612     21,594
Intangible assets, net     23,190     24,642
Deferred tax assets, net of current portion     587     687
Long-term investments, net of current portion     3,268     3,267
Other non-current assets     1,656     1,661
             
    Total assets   $ 205,175   $ 205,333
             
Liabilities and Shareholders' Equity            
             
Current Liabilities:            
  Accounts payable   $ 23,094   $ 21,207
  Accrued compensation and related benefits     7,952     6,806
  Accrued liabilities     17,460     22,894
    Total current liabilities     48,506     50,907
               
  Other long-term liabilities     11,193     11,136
    Total liabilities     59,699     62,043
             
Shareholders' equity     145,476     143,290
             
      Total liabilities and shareholders' equity   $ 205,175   $ 205,333
             
   
   
SIGMA DESIGNS, INC.  
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS  
(GAAP)  
(In thousands, except per share data)  
                   
    Three months ended  
    May 2,
2015
    January 31,
2015
    May 3,
2014
 
                 
Net revenue   $ 55,912     $ 54,846     $ 36,873  
Cost of revenue     26,564       28,126       16,648  
Gross profit     29,348       26,720       20,225  
Gross margin percent     52.5 %     48.7 %     54.9 %
                         
Operating expenses:                        
  Research and development     16,313       17,324       17,103  
  Sales and marketing     5,811       5,806       5,450  
  General and administrative     5,772       5,247       5,031  
  Restructuring charges     9       (3 )     974  
  Impairment of IP, mask sets and design tools     33       689       110  
    Total operating expenses     27,938       29,063       28,668  
                         
Income (loss) from operations     1,410       (2,343 )     (8,443 )
  Interest and other income (expense), net     671       661       (52 )
                         
Income (loss) before income taxes     2,081       (1,682 )     (8,495 )
Provision for income taxes     2,463       1,928       1,419  
                         
Net loss   $ (382 )   $ (3,610 )   $ (9,914 )
                         
Net loss per share:                        
  Basic   $ (0.01 )   $ (0.10 )   $ (0.29 )
  Diluted   $ (0.01 )   $ (0.10 )   $ (0.29 )
Shares used in computing net loss per share:                        
  Basic     35,395       35,036       34,367  
  Diluted     35,395       35,036       34,367  
                         
   
   
SIGMA DESIGNS, INC.  
RECONCILIATION OF GAAP NET LOSS TO NON-GAAP NET INCOME (LOSS)  
(Unaudited)  
(In thousands, except per share data)  
                   
    Three months ended  
    May 2,     January 31,     May 3,  
    2015     2015     2014  
                         
GAAP Net Revenue   $ 55,912     $ 54,846     $ 36,873  
Items reconciling GAAP Net Revenue to Non-GAAP:                        
  Reversal of accrued rebates     (806 )     -       -  
  GAAP to Non-GAAP adjustments     (806 )     -       -  
  Non-GAAP Net Revenue   $ 55,106     $ 54,846     $ 36,873  
                         
GAAP Cost of Revenue   $ 26,564     $ 28,126     $ 16,648  
Items reconciling GAAP Cost of Revenue to Non-GAAP:                        
  Stock based compensation expense     (36 )     (39 )     (50 )
  Amortization of acquired intangibles     (1,062 )     (1,062 )     (1,095 )
  Restructuring charges     -       (15 )     (51 )
  GAAP to Non-GAAP adjustments     (1,098 )     (1,116 )     (1,196 )
  Non-GAAP Cost of Revenue   $ 25,466     $ 27,010     $ 15,452  
                           
  GAAP Gross Profit   $ 29,348     $ 26,720     $ 20,225  
  GAAP Gross Margin %     52.5 %     48.7 %     54.9 %
  Non-GAAP Gross Profit   $ 29,640     $ 27,836     $ 21,421  
  Non-GAAP Gross Margin %     53.8 %     50.8 %     58.1 %
                         
GAAP Operating Expenses   $ 27,938     $ 29,063     $ 28,668  
Items reconciling GAAP Operating Exp to Non-GAAP:                        
  Stock based compensation expense     (1,698 )     (1,662 )     (1,438 )
  Amortization of acquired intangibles     (345 )     (346 )     (346 )
  Impairment of IP, mask sets and design tools     (33 )     (689 )     (110 )
  Settlement expenses     -       -       (107 )
  Facility exit legal expense     (498 )     (258 )     (190 )
  Restructuring charges     (9 )     3       (974 )
  GAAP to Non-GAAP adjustments     (2,583 )     (2,952 )     (3,165 )
  Non-GAAP operating expenses   $ 25,355     $ 26,111     $ 25,503  
                         
GAAP Other Income (Expense) and Tax   $ (1,792 )   $ (1,267 )   $ (1,471 )
Items reconciling GAAP Other Income (Expense) and Tax to Non-GAAP:                        
  Impairment (gain on sale) of privately held investments, net     (518 )     4       -  
  Income tax adjustments     1,182       1,016       582  
  GAAP to Non-GAAP adjustments     664       1,020       582  
  Non-GAAP other income (expense) and tax   $ (1,128 )   $ (247 )   $ (889 )
                         
Non-GAAP net income (loss)   $ 3,157     $ 1,478     $ (4,971 )
                         
Non-GAAP net income (loss) per share:                        
  Basic   $ 0.09     $ 0.04     $ (0.14 )
  Diluted   $ 0.09     $ 0.04     $ (0.14 )
Shares used in computing Non-GAAP net income (loss) per share:                        
  Basic     35,395       35,036       34,367  
  Diluted     36,291       35,449       34,367  
                         

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