SOURCE: Sigma Designs, Inc.

December 11, 2013 18:02 ET

Sigma Designs, Inc. Reports Third Quarter Fiscal 2014 Results

Non-GAAP Net Income of $3.3M or $0.10 EPS Achieved in the Quarter; Announces $20.0 Million Share Repurchase Program

MILPITAS, CA--(Marketwired - Dec 11, 2013) - Sigma Designs®, Inc. (NASDAQ: SIGM), a leader in connected media platforms, today reported financial results and business highlights for its third fiscal quarter of fiscal year 2014 ended November 2, 2013.

Sigma also announced that its Board of Directors has authorized a share repurchase program of up to $20.0 million through December 31, 2014. Share repurchases may be made by the Company from time to time in privately negotiated transactions or in open market transactions.

Net revenues for the third quarter of fiscal 2014 were $54.4 million, up $0.6 million, or 1.2%, from $53.8 million reported in the previous quarter and down $9.5 million, or 14.9%, from $63.9 million reported for the same period last year.

GAAP net loss for the third quarter of fiscal 2014 was $3.0 million, or $0.09 per share. This compares to GAAP net loss of $4.8 million, or $0.14 per share, for the previous quarter and GAAP net loss of $39.5 million, or $1.18 per share, for the same period last year.

Non-GAAP net income for the third quarter of fiscal 2014 was $3.3 million, or $0.10 per diluted share. This compares to non-GAAP net income of $2.0 million, or $0.06 per diluted share, for the previous quarter and a non-GAAP net loss of $9.5 million, or $0.28 per diluted share, during the same period last year. 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 are very pleased about our profitability on a non-GAAP basis for the third consecutive quarter. Our financial results were all positive, with an increase in revenues and gross margin, a decrease in operating expenses and positive pro-forma net income. We remain focused on our objective to maintain profitability," said Thinh Tran, President and CEO of Sigma Designs.

"Our Board's authorization of a share repurchase program reflects its confidence in the long-term strength of the company, as well as its commitment to returning value to shareholders," said Mr. Tran. "Our current cash balance combined with the early results of our ongoing restructuring efforts allows us to be confident in returning value to shareholders while continuing to invest in our business and our next generation of products."

The actual timing, number and value of shares repurchased under the program will be determined by Sigma's management and its Board of Directors at its discretion, and will depend on a number of factors, including the trading price of the stock, and general market and business conditions as well as applicable legal requirements. This program does not require Sigma to repurchase any shares under the authorization, and the program may be suspended, discontinued or modified at any time, for any reason and without notice.

Recent Highlights

  • We launched our new ARM-based chipsets for the set-top box market at the IBC show in Amsterdam. These chipsets ushers in a new era of performance, combining a high performance ARM A9 CPU with an Imagination SGX GPU, along with our premium media processing technology.

  • We announced a turn-key hybrid set-top box, based on a Sigma SoC and Ginga middleware, being developed by LATAM set-top box manufacturers for Argentina and other countries using ISDB-T.

  • We announced that a major European supplier Novabase has selected our SMP8674 media processor SoC for their next generation of small footprint hybrid set-top boxes.

  • We announced, along with the Z-Wave Alliance, the launch of a new certification program called Z-Wave Plus™, which is designed to help consumers easily identify products that offer the Next Gen Z-Wave platform features, such as over-the-air upgrading.

  • We announced that Portugal Telecom successfully completed their field trial using G.hn to deliver HD services to multiple rooms in actual homes using Sigma's G.hn chipset. 

  • We announced an expansion of our conditional access portfolio with the addition of Verimatrix Advanced Security support for our set-top box SoC family. 

Investor Conference Call
The conference call relating to Sigma's third quarter fiscal year 2014 financial results will take place following this announcement at 5:00 PM ET today, December 11, 2013. 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 (loss), which excludes amortization of acquired intangibles, stock-based compensation, the mark-up on purchased inventory sold during the period, acquisition-related expenses, facility exit legal expenses, settlement expenses, net impairment of privately-held investments, restructuring charges, impairment of purchased IP, mask sets, design tools used in production and other assets, the gain on the sale of an R&D development project to a third party and the gain upon acquisition of the DTV business that Sigma recognized in accordance with GAAP. 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. While the Company has historically not presented its non-GAAP tax provision in this manner, it believes this approach will enhance the ability of investors to understand the Company's actual tax expense on its current operations and provide improved modeling accuracy for analysts and investors. The Company intends to report its non-GAAP tax provision in this manner in future periods. Prior periods included in this release have been updated to reflect this new methodology. 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 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 (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 statements about confidence in the long-term strength of the company and continuing to invest in our business and our next generation of products. 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 third quarter of fiscal 2014 are different than the results set forth in this press release, general economic conditions, the ability to recognize the anticipated savings from our restructuring efforts, the rate of growth of the Set-Top Box, home networking, digital TV, and home control and energy management markets in general, the ramp in demand from Sigma's set-top box, television and telecommunication customers, Sigma's ability to deploy and achieve market acceptance for Sigma 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 Sigma's SEC reports, including Sigma's report on Form 10-Q as filed with the SEC on September 12, 2013. 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, Inc. (NASDAQ: SIGM) is a leader in connected media platforms. The company designs and builds the essential semiconductor technologies that serve as the foundation for the world's leading IPTV set-top boxes, connected televisions, connected media players, residential gateways, home control systems and more. For more information about Sigma Designs, please visit www.sigmadesigns.com

 
 
SIGMA DESIGNS, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(GAAP)
(In thousands)
    November 2,   February 2,
    2013   2013
Assets        
         
Current Assets:        
  Cash and cash equivalents   $ 50,326   $ 51,218
  Short-term marketable securities     11,412     17,455
  Restricted cash     1,771     1,769
  Accounts receivable, net     39,256     21,648
  Inventory     19,176     24,929
  Deferred tax assets     4,683     5,868
  Prepaid expenses and other current assets     8,845     13,578
    Total current assets     135,469     136,465
             
Long-term marketable securities     24,574     14,253
Software, equipment and leasehold improvements, net     16,398     17,106
Intangible assets, net     31,696     36,573
Deferred tax assets, net of current portion     43     2,681
Long-term investments and notes receivable, net of current portion     4,144     8,943
Other non-current assets     4,803     4,810
             
    Total assets   $ 217,127   $ 220,831
             
Liabilities and Shareholders' Equity            
             
Current Liabilities:            
  Accounts payable   $ 12,580   $ 11,046
  Accrued compensation and related benefits     8,381     8,773
  Accrued liabilities     19,749     20,018
    Total current liabilities     40,710     39,837
             
  Other long-term liabilities     20,210     18,976
    Total liabilities     60,920     58,813
             
Shareholders' equity     156,207     162,018
             
    Total liabilities and shareholders' equity   $ 217,127   $ 220,831
 
 
 
   
SIGMA DESIGNS, INC  
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS  
(GAAP)  
(In thousands, except per share data)  
                               
    Three months ended     Nine months ended  
    November 2, 2013     August 3, 2013     October 27, 2012     November 2, 2013     October 27, 2012  
                                         
Net revenue   $ 54,394     $ 53,762     $ 63,905     $ 160,696     $ 172,414  
Cost of revenue     23,311       25,696       38,423       74,601       95,257  
Gross profit     31,083       28,066       25,482       31,083       77,157  
Gross margin percent     57.1 %     52.2 %     39.9 %     19.3 %     44.8 %
                                         
Operating expenses:                                        
  Research and development     17,555       18,769       26,741       56,528       76,505  
  Sales and marketing     5,608       5,527       12,774       16,817       27,457  
  General and administrative     5,212       4,937       6,007       14,911       21,874  
  Gain on acquisition     -       -       -       -       (1,417 )
  Restructuring charges     1,104       680       821       1,994       821  
  Impairment of IP, mask sets and design tools     150       -       -       338       -  
    Total operating expenses     29,629       29,913       46,343       29,629       125,240  
                                         
Income (loss) from operations     1,454       (1,847 )     (20,861 )     1,454       (48,083 )
Gain on sale of development project     -       -       -       1,079       -  
Interest and other income (expense), net     (254 )     121       299       558       1,032  
                                         
Income (loss) before income taxes     1,200       (1,726 )     (20,562 )     3,091       (47,051 )
Provision for income taxes     4,178       3,065       18,889       9,446       19,520  
                                         
Net loss   $ (2,978 )   $ (4,791 )   $ (39,451 )   $ (6,355 )   $ (66,571 )
                                         
                                         
Net loss per share:                                        
  Basic   $ (0.09 )   $ (0.14 )   $ (1.18 )   $ (0.19 )   $ (2.02 )
  Diluted   $ (0.09 )   $ (0.14 )   $ (1.18 )   $ (0.19 )   $ (2.02 )
                                         
Shares used in computing net loss per share:                                        
  Basic     34,518       34,259       33,383       34,129       33,032  
  Diluted     34,518       34,259       33,383       34,129       33,032  
                                           
                                           
   
SIGMA DESIGNS, INC.  
RECONCILIATION OF GAAP NET LOSS TO NON-GAAP NET INCOME (LOSS)  
(Unaudited)  
(In thousands, except per share data)  
                               
    Three months ended     Nine months ended  
    November 3,     August 3,     October 27,     November 3,     October 27,  
2013     2013     2012     2013     2012  
GAAP net loss   $ (2,978 )   $ (4,791 )   $ (39,451 )   $ (12,302 )   $ (66,571 )
                                         
Items reconciling GAAP net loss to non-GAAP net income (loss):                                        
                                         
  Stock-based compensation expenses     1,668       1,686       2,503       5,387       8,078  
                                           
  Amortization of acquired intangibles     1,782       1,783       1,985       5,380       5,858  
                                           
  Impairment of purchased IP, mask sets, designs tools and other assets     561       -       -       749       -  
                                           
  Restructuring charges, net     1,104       680       821       2,027       821  
                                           
  Mark-up on inventory acquired in business combinations sold during the period during the period     -       176       1,078       436       3,607  
                                           
  Realized gain on sale of development project     -       -       -       (1,079 )     -  
                                           
  Gain on acquisition     -       -       -       -       (1,417 )
                                           
  Facility exit legal expenses     8       288       -       296       -  
                                           
  Settlement expenses     100       -       5,700       100       5,700  
                                           
  Impairment of investments, net     163       -       -       163       -  
                                           
  Acquisition expenses     -       -       352       -       4,276  
                                           
  Income tax adjustments     901       2,222       17,548       4,466       17,421  
Total GAAP to Non-GAAP adjustments     6,287       6,835       29,987       17,925       44,344  
                                         
Non-GAAP net income (loss)   $ 3,309     $ 2,044     $ (9,464 )   $ 5,623     $ (22,227 )
                                         
Diluted net income (loss) per share   $ 0.10     $ 0.06     $ (0.28 )   $ 0.16     $ (0.67 )
                                         
Shares used in calculating diluted net income (loss) per share:     34,564       34,135       33,383       34,176       33,032  
                                         
                                         
Diluted net income (loss) per share:                                        
                                         
Diluted GAAP net loss per share   $ (0.09 )   $ (0.14 )   $ (1.18 )   $ (0.36 )   $ (2.02 )
                                         
Diluted GAAP to non-GAAP adjustments   $ 0.19     $ 0.20     $ 0.90     $ 0.52     $ 1.35  
                                         
Diluted Non-GAAP net income (loss) per share   $ 0.10     $ 0.06     $ (0.28 )   $ 0.16     $ (0.67 )
                                         
                                         
Reconciliation of shares used in calculating non-GAAP net income (loss) per share:                                        
                                         
Shares used in calculating basic net income (loss) per share     34,518       34,259       33,383       34,129       33,032  
                                         
Adjustment for dilutive securities     46       (124 )     -       47       -  
                                         
Non-GAAP shares used in calculating diluted net income (loss) per share     34,564       34,135       33,383       34,176       33,032  
                                         
                                         
   
SIGMA DESIGNS, INC.  
SECHEDULE OF SELECTED GAAP TO NON-GAAP ADJUSTMENTS  
(Unaudited)  
(In thousands, except per share data)  
                               
The following schedule reconciles selected line items from the GAAP basic statements of operations to non-GAAP statements of operations:  
                               
                               
    Three months ended     Nine months ended  
    November 3,     August 3,     October 27,     November 3,     October 27,  
2013     2013     2012     2013     2012  
GROSS PROFIT:                                        
                                         
GAAP gross profit   $ 31,083     $ 28,066     $ 25,482     $ 86,095     $ 77,157  
                                         
  Stock-based compensation expenses     64       67       131       214       380  
                                           
  Amortization of acquired intangibles     1,403       1,403       1,591       4,241       4,676  
                                           
  Acquisition expenses     -       -       101       -       101  
                                           
  Restructuring charges, net     -       -       -       33       -  
                                           
  Mark-up on inventory acquired in business combinations sold during the period during the period     -       176       1,078       436       3,607  
Non-GAAP gross profit   $ 32,550     $ 29,712     $ 28,383     $ 91,019     $ 85,921  
                                         
                                         
OPERATING EXPENSES:                                        
                                         
GAAP operating expenses   $ 29,629     $ 29,913     $ 46,343     $ 90,588     $ 125,240  
                                         
  Stock-based compensation expenses     (1,604 )     (1,619 )     (2,372 )     (5,173 )     (7,698 )
                                           
  Amortization of acquired intangibles     (379 )     (380 )     (394 )     (1,139 )     (1,182 )
                                           
  Impairment of purchased IP, mask sets, designs tools and other assets     (561 )     -       -       (749 )     -  
                                           
  Restructuring charges, net     (1,104 )     (680 )     (821 )     (1,994 )     (821 )
                                           
  Gain on acquisition     -       -       -       -       1,417  
                                           
  Facility exit legal expenses     (8 )     (288 )     -       (296 )     -  
                                           
  Settlement expenses     (100 )     -       (5,700 )     (100 )     (5,700 )
                                           
                                           
  Acquisition expenses     -       -       (251 )     -       (4,175 )
Non-GAAP operating expenses   $ 25,873     $ 26,946     $ 36,805     $ 81,137     $ 107,081  
                                         
                                         
INCOME TAX EXPENSE:                                        
                                         
GAAP income tax expenses   $ 4,178     $ 3,065     $ 18,889     $ 9,446     $ 19,520  
                                         
  Income tax adjustments     (901 )     (2,222 )     (17,548 )     (4,466 )     (17,421 )
Non-GAAP income tax expenses   $ 3,277     $ 843     $ 1,341     $ 4,980     $ 2,099  
                                         
                                         
RESEARCH AND DEVELOPMENT:                                        
                                         
GAAP research and development   $ 17,555     $ 18,769     $ 26,741     $ 56,528     $ 76,505  
                                         
  Stock-based compensation expenses     (778 )     (853 )     (1,375 )     (2,721 )     (4,346 )
                                           
  Amortization of acquired intangibles     (33 )     (33 )     (34 )     (99 )     (100 )
                                           
  Acquisition expenses     -       -       -       -       (1,417 )
Non-GAAP research and development   $ 16,744     $ 17,883     $ 25,332     $ 53,708     $ 70,642  
                                         
                                         
SALES AND MARKETING:                                        
                                         
GAAP sales and marketing   $ 5,608     $ 5,527     $ 12,774     $ 16,817     $ 27,457  
                                         
  Stock-based compensation expenses     (365 )     (315 )     (458 )     (1,029 )     (1,412 )
                                           
  Amortization of acquired intangibles     (346 )     (347 )     (360 )     (1,040 )     (1,082 )
                                           
  Settlement expenses     (100 )     -       (5,700 )     (100 )     (5,700 )
                                           
  Acquisition expenses     -       -       -       -       (257 )
Non-GAAP sales and marketing   $ 4,797     $ 4,865     $ 6,256     $ 14,648     $ 19,006  
                                         
                                         
GENERAL AND ADMINISTRATIVE:                                        
                                         
GAAP general and administrative   $ 5,212     $ 4,937     $ 6,007     $ 14,911     $ 21,874  
                                         
  Stock-based compensation expenses     (461 )     (451 )     (539 )     (1,423 )     (1,940 )
                                           
  Impairment of purchased IP, mask sets, designs tools and other assets     (411 )     -       -       (411 )     -  
                                           
  Acquisition expenses     -       -       (251 )     -       (2,501 )
                                           
  Facility exit legal expenses     (8 )     (288 )     -       (296 )     -  
Non-GAAP general and administrative   $ 4,332     $ 4,198     $ 5,217     $ 12,781     $ 17,433  
                                         

Contact Information

  • Investor Relations Contact:
    Elias Nader
    Interim CFO
    Sigma Designs, Inc.
    Tel: (408) 957-9847
    IR@sigmadesigns.com