Sigma Designs, Inc. reported financial results and business highlights for its third fiscal quarter ended October 30, 2010.
Sigma Designs trades on the NASDAQ under the symbol SIGM.
For more information visit: www.sigmadesigns.com
Unedited press release follows:
Sigma Designs, Inc. Reports Third Quarter Fiscal 2011 Results
MILPITAS, CA–(December 1, 2010) – 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 third fiscal quarter ended October 30, 2010.
Net revenue for the third quarter was $77.8 million, up $4.5 million, or 6%, from $73.3 million reported in the previous quarter and up $42.3 million, or 119%, from $35.5 million reported for the same period last year.
GAAP net income for the third quarter was $5.1 million, or $0.16 per diluted share. This compares to GAAP net income of $0.5 million, or $0.02 per diluted share, for the previous quarter and a net loss of $2.3 million, or ($0.09) per diluted share, in the same period last year. In the second quarter, Sigma wrote off $5.2 million associated with a strategic investment in a privately held company which reduced Sigma’s GAAP net income after taxes for the quarter by approximately $0.10 per diluted share.
At the end of Sigma’s third quarter, cash, cash equivalents and marketable securities totaled $175.4 million, or $5.59 per share outstanding, an increase of $27.5 million, or $0.80 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 third quarter was $13.0 million, or $0.41 per diluted share. This compares to non-GAAP net income of $8.2 million, or $0.26 per diluted share, for the previous quarter and non-GAAP net income of $2.8 million, or $0.10 per diluted share during the same period one year ago. Non-GAAP net income for the previous quarter would have been $11.6 million, or $0.37 per diluted share, after excluding the effect of the investment write-off described above. Non-GAAP adjustments for the third quarter consisted of $4.6 million in amortization expense for acquired intangibles related to acquisitions, $3.3 million in non-cash share-based compensation expenses and $0.1 million of gross profit reduction resulting from the mark-up on inventory purchased as part of Sigma’s Zensys acquisition. The reconciliation between GAAP and non-GAAP net income for all referenced periods is provided in a table immediately following the GAAP financial tables below.
Management Comment
“We are pleased to report over $77 million in revenue for the third quarter, representing approximately 6% growth over our second quarter. Our largest increase came from sales in our home connectivity product line in addition to a large increase from our prosumer product line. In the IPTV processor market, many accounts are beginning their transition to our new generation SMP8650 media processors, which represents a growing opportunity. Likewise, connected media players and other consumer products are undergoing a similar transition, which further validates these market opportunities and Sigma’s strong position. Moving forward, we are continuing to pursue major design wins in our target markets with special initiatives for penetrating the hybrid IP Cable set-top box industry and the increased adoption of Z-Wave based home control solutions,” stated Thinh Tran, chairman and chief executive officer, Sigma Designs.
Third Quarter Highlights
— We announced that our HomePlug® AV with ClearPath™ (CG2110CP) has
been named an International CES Innovations 2011 Design and Engineering
Award Honoree in the Enabling Technology category. It was also named a
TelcoTV Vision Award Winner. HomePlug AV with ClearPath is a
breakthrough home networking technology that enables carrier-class
streaming of HD video, voice, and data over existing powerlines in the
home.
— We announced the CG5110, the industry’s first G.hn chipset for home
entertainment networking. As the International Telecommunication
Union’s (ITU) next-generation standard for wired home entertainment
networks over any wire, G.hn represents an enormous step forward for
consumer electronics OEMs, PC manufacturers and broadband service
providers in terms of performance and ease-of-deployment.
— We announced that the SMP8633 secure media processor is the first and
only media processor powering wireless PC-to-TV display devices.
NETGEAR’s Push2TV™ adapter uses Sigma’s chipset to display content
from Intel® Wireless Display enabled notebook PCs on a big screen
HD-TV, wirelessly.
— We jointly announced, along with TDVision Systems, the leader in Full
HD 3D to the home technologies, that Sigma is the first chip company
to publicly support TDVision System’s Full HD stereoscopic video
decoding technology.
— We announced that our SMP8656 Secure Media Processor™ will enable
the new Android-based Over the Top (OTT) media player by Dvico. The
TVIX Xroid A1 is the first Android connected media player on the market
to use Sigma’s cutting edge media processor to deliver premium quality
video and music streaming services.
Investor Conference Call
The conference call relating to Sigma’s third quarter fiscal 2011 results will take place following this announcement at 5:00 PM ET today, December 1, 2010. 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, share 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 quarter 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 share-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.
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 multimedia entertainment 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, gateways, Blu-ray players and media communication devices. Headquartered in Milpitas, Calif., Sigma Designs has direct sales representatives in the United States, Brazil, China, Europe (Denmark), Israel, Japan, Singapore, Taiwan and a third-party distributor in Korea. 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)
October 30, January 30,
2010 2010
----------- -----------
Assets
Current Assets:
Cash and cash equivalents $ 81,999 $ 81,947
Short-term marketable securities 46,683 51,176
Restricted cash 1,583 1,500
Accounts receivable, net 38,216 36,127
Inventories 31,991 18,187
Deferred tax assets 2,739 2,235
Prepaid expenses and other current assets 7,393 8,925
----------- -----------
Total current assets 210,604 200,097
Long-term marketable securities 45,126 13,257
Software, equipment and leasehold improvements, net 26,538 23,810
Goodwill 44,910 44,910
Intangible assets, net 111,819 125,568
Deferred tax assets, net of current portion 11,143 11,575
Long-term investments 3,000 4,000
Other non-current assets 611 680
----------- -----------
Total assets $ 453,751 $ 423,897
=========== ===========
Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable $ 18,755 $ 10,943
Accrued liabilities and other 25,679 23,164
----------- -----------
Total current liabilities 44,434 34,107
Other long-term liabilities 20,874 20,968
----------- -----------
Total liabilities 65,308 55,075
Shareholders' equity 388,443 368,822
----------- -----------
Total liabilities and shareholders' equity $ 453,751 $ 423,897
=========== ===========
SIGMA DESIGNS, INC.
PRELIMINARY UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(GAAP)
(In thousands, except per share data)
Three months ended Nine months ended
------------------------------- --------------------
October July October October October
30, 2010 31, 2010 31, 2009 30, 2010 31, 2009
--------- --------- --------- --------- ---------
Net revenue $ 77,805 $ 73,326 $ 35,464 $ 216,310 $ 137,990
Cost of revenue 39,192 38,343 19,396 110,563 74,285
--------- --------- --------- --------- ---------
Gross profit 38,613 34,983 16,068 105,747 63,705
Gross margin percent 49.6% 47.7% 45.3% 48.9% 46.2%
Operating expenses:
Research and
development 20,484 17,823 11,727 57,065 34,961
Sales and marketing 8,357 7,344 3,488 23,023 10,181
General and
administrative 4,781 4,317 5,467 14,033 12,220
--------- --------- --------- --------- ---------
Total operating
expenses 33,622 29,484 20,682 94,121 57,362
Income (loss) from
operations 4,991 5,499 (4,614) 11,626 6,343
Interest and other
income (expense),
net 425 (4,749) 564 (3,600) 1,610
--------- --------- --------- --------- ---------
Income (loss) before
income taxes 5,416 750 (4,050) 8,026 7,953
Provision for
(benefit from)
income taxes 351 254 (1,752) 1,351 2,708
--------- --------- --------- --------- ---------
Net income (loss) $ 5,065 $ 496 $ (2,298) $ 6,675 $ 5,245
========= ========= ========= ========= =========
Net income (loss)
per share:
Basic $ 0.16 $ 0.02 $ (0.09) $ 0.21 $ 0.20
Diluted $ 0.16 $ 0.02 $ (0.09) $ 0.21 $ 0.19
Shares used in
computing net
income (loss) per
share:
Basic 31,327 31,180 26,782 31,167 26,681
Diluted 31,646 31,598 26,782 31,610 27,354
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 Nine months ended
---------------------------- ------------------
October July October October October
30, 2010 31, 2010 31, 2009 30, 2010 31, 2009
-------- -------- -------- -------- --------
GAAP net income (loss) $ 5,065 $ 496 $ (2,298) $ 6,675 $ 5,245
Items reconciling GAAP net income (loss) to non-GAAP net income:
Included in cost of
revenue:
Amortization of
acquired developed
technologies (2,586) (2,587) (712) (7,763) (2,148)
Mark-up on purchased
inventory sold
during the period (52) (96) (335) (538) (765)
Share-based
compensation (159) (141) (89) (431) (254)
-------- -------- -------- -------- --------
Total related to
cost of revenue (2,797) (2,824) (1,136) (8,732) (3,167)
Included in operating
expenses:
Research and
development:
Amortization of
acquired intangibles --- --- --- --- (19)
Share-based
compensation (1,806) (1,682) (1,178) (5,188) (3,633)
Sales and marketing:
Share-based
compensation (541) (532) (384) (1,525) (1,102)
Amortization of
acquired Intangibles (1,996) (1,995) (85) (5,986) (258)
General and
administrative:
Share-based
compensation (824) (717) (560) (2,382) (563)
Acquisition expenses --- --- (1,755) --- (1,755)
-------- -------- -------- -------- --------
Total related
to operating
expenses (5,167) (4,926) (3,962) (15,081) (7,330)
-------- -------- -------- -------- --------
Write-off of deferred
tax asset --- --- --- --- (3,540)
-------- -------- -------- -------- --------
Net effect of non-GAAP
adjustments (7,964) (7,750) (5,098) (23,813) (14,037)
-------- -------- -------- -------- --------
Non-GAAP net income $ 13,029 $ 8,246 $ 2,800 $ 30,488 $ 19,282
======== ======== ======== ======== ========
Non-GAAP net income per
diluted share $ 0.41 $ 0.26 $ 0.10 $ 0.96 $ 0.70