Financial Results
Net revenues for the second quarter of fiscal 2015 were $42.8 million, up $5.9 million, or 16.1%, from $36.9 million reported in the previous quarter and down $11.0 million, or 20.4%, from $53.8 million reported for the same period last year.
GAAP net loss for the second quarter of fiscal 2015 was $7.6 million, or $0.22 per share. This compares to GAAP net loss of $9.9 million, or $0.29 per share, for the previous quarter and GAAP net loss of $4.8 million, or $0.14 per share, for the same period last year.
Non-GAAP net loss for the second quarter of fiscal 2015 was $2.0 million, or $0.06 per diluted share. This compares to non-GAAP net loss of $5.0 million, or $0.14 per diluted share, for the previous quarter and non-GAAP net income of $2.0 million, or $0.06 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 exceeded second quarter guidance on revenues, gross margins and operating expenses. We entered this second quarter with the goal of positioning ourselves for future growth and furthering the potential design wins in our pipeline. We feel strongly that the new products we launched over the past six months have put us in a position to secure increasing customer deployments and grow our top-line in the quarters ahead," said Thinh Tran, President and CEO of Sigma Designs.
Recent Highlights
- We entered production with our latest UXL product series, a complete SoC that provides a cost-effective basis for value-oriented SmartTVs that benefit from our industry leading picture quality.
- We began volume shipments this quarter of our SX6 SoC and our FRCX frame-rate conversion processor, which allow our customers to launch new 4K TVs with improved video quality along with BOM cost reductions.
- We announced and began sampling our SMP8758, the latest in a series of chipsets that feature an ARM CPU, HEVC decoding, and 3D graphics, supported by HTML-5 software stacks under Linux and Android operating systems.
- We jointly announced, along with Wyplay, a turnkey reference design that features the open-source Frog middleware running on top of our SMP8756 set-top box SoC.
- We announced collaboration with Digisoft.tv and Novabase on a solution designed to enable secure delivery of digital video content to viewers in South Africa.
- We launched a new feature-rich SDK for the Z-Wave 500 Series chips and modules to further enhance their ease of development.
- We announced the addition of Edge Electronics as an authorized distributor of Z-Wave development kits and components, expanding our distribution channels.
- We entered volume production for the Z-Wave® Serial Interface Module and also ramped into full volume shipments of our Z-Wave 500 series transceiver. We are making the world's first demonstration at this week's IBC conference of G.hn technology coexisting side-by-side with legacy HomePlug on the same powerline wiring, which is designed to enable seamless migration from HomePlug to the growing G.hn ecosystem.
Investor Conference Call
The conference call relating to Sigma's second quarter fiscal year 2015 financial results will take place following this announcement at 5:00 PM ET today, September 10, 2014. Investors will have the opportunity to listen live to the conference call via the Internet through www.sigmadesigns.com/IR 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. 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, 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 and the gain on the sale of an R&D development project to a third party 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. 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 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 that our new products we launched over the past six months have put us in a position to secure increasing customer deployments and grow our top-line in the quarters ahead. 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 second fiscal quarter of fiscal 2015 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 the set-top box, home networking, digital TV, and home control markets in general, 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-Q as filed with the SEC on June 12, 2014. 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. (
SIGMA DESIGNS, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(GAAP)
(In thousands)
August 2, February 1,
2014 2014
------------- -------------
Assets
Current Assets:
Cash and cash equivalents $ 69,848 $ 64,326
Short-term marketable securities 5,828 7,791
Restricted cash 1,540 1,775
Accounts receivable, net 24,792 27,647
Inventory 20,305 20,403
Deferred tax assets 4,194 4,144
Prepaid expenses and other current assets 6,700 8,069
------------- -------------
Total current assets 133,207 134,155
Long-term marketable securities 6,346 15,505
Software, equipment and leasehold improvements,
net 22,283 27,089
Intangible assets, net 26,067 29,780
Deferred tax assets, net of current portion 292 439
Long-term investments and notes receivable, net
of current portion 3,271 3,873
Other non-current assets 4,852 4,934
------------- -------------
Total assets $ 196,318 $ 215,775
============= =============
Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable $ 16,313 $ 16,184
Accrued compensation and related benefits 6,236 6,288
Accrued liabilities 13,660 19,813
------------- -------------
Total current liabilities 36,209 42,285
Other long-term liabilities 14,076 15,099
------------- -------------
Total liabilities 50,285 57,384
Shareholders' equity 146,033 158,391
------------- -------------
Total liabilities and shareholders' equity $ 196,318 $ 215,775
============= =============
SIGMA DESIGNS, INC
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(GAAP)
(In thousands, except per
share data)
Three months ended Six months ended
------------------------------ --------------------
August 2, May 3, August 3, August 2, August 3,
2014 2014 2013 2014 2013
--------- -------- --------- --------- ---------
Net revenue $ 42,810 $ 36,873 $ 53,762 $ 79,683 $ 106,302
Cost of revenue 20,921 16,648 25,696 37,569 51,290
--------- -------- --------- --------- ---------
Gross profit 21,889 20,225 28,066 42,114 55,012
Gross margin percent 51.1% 54.9% 52.2% 52.9% 51.8%
Operating expenses:
Research and
development 16,452 17,103 18,769 33,555 38,973
Sales and marketing 5,475 5,450 5,527 10,925 11,209
General and
administrative 4,555 5,031 4,937 9,586 9,699
Restructuring
charges 46 974 680 1,020 890
Impairment of IP,
mask sets and
design tools 1,156 110 - 1,266 188
--------- -------- --------- --------- ---------
Total operating
expenses 27,684 28,668 29,913 56,352 60,959
Loss from operations (5,795) (8,443) (1,847) (14,238) (5,947)
Gain on sale of
development project - - - - 1,079
Interest and other
income, net 372 (52) 121 320 812
--------- -------- --------- --------- ---------
Loss before income
taxes (5,423) (8,495) (1,726) (13,918) (4,056)
Provision for income
taxes 2,197 1,419 3,065 3,616 5,268
--------- -------- --------- --------- ---------
Net loss $ (7,620) $ (9,914) $ (4,791) $ (17,534) $ (9,324)
========= ======== ========= ========= =========
Net loss per share:
Basic $ (0.22) $ (0.29) $ (0.14) $ (0.51) $ (0.27)
Diluted $ (0.22) $ (0.29) $ (0.14) $ (0.51) $ (0.27)
Shares used in
computing net loss
per share:
Basic 34,622 34,367 34,259 34,459 34,008
Diluted 34,622 34,367 34,259 34,459 34,008
SIGMA DESIGNS, INC.
RECONCILIATION OF GAAP NET LOSS TO NON-GAAP NET INCOME (LOSS)
(Unaudited)
(In thousands, except per share data)
Three months ended Six months ended
------------------------------ --------------------
August 2, May 3, August 3, August 2, August 3,
2014 2014 2013 2014 2013
--------- -------- --------- --------- ---------
GAAP net loss $ (7,620) $ (9,914) $ (4,791) $ (17,534) $ (9,324)
Items reconciling GAAP
net loss to non-GAAP
net income (loss):
Stock-based
compensation
expenses 1,385 1,488 1,686 2,873 3,719
Amortization of
acquired
intangibles 1,408 1,441 1,783 2,849 3,598
Restructuring and
impairment charges 1,202 1,135 680 2,337 1,111
Mark-up on inventory
acquired in
business
combinations sold
during the period
sold during the
period - - 176 - 436
Realized gain on
sale of development
project - - - - (1,079)
Facility exit legal
expenses 34 190 288 224 288
Settlement expenses - 107 - 107 -
Impairment of
privately held
investments 601 - - 601 -
Income tax
adjustments 952 582 2,222 1,534 3,565
--------- -------- --------- --------- ---------
Total GAAP to Non-GAAP
adjustments 5,582 4,943 6,835 10,525 11,638
--------- -------- --------- --------- ---------
Non-GAAP net income
(loss) $ (2,038) $ (4,971) $ 2,044 $ (7,009) $ 2,314
========= ======== ========= ========= =========
Diluted net income
(loss) per share $ (0.06) $ (0.14) $ 0.06 $ (0.20) $ 0.07
========= ======== ========= ========= =========
Shares used in
calculating diluted
net income (loss) per
share: 34,622 34,367 34,259 34,459 34,008
Investor Relations Contact: Elias Nader Chief Financial Officer Sigma Designs, Inc. Tel: (408) 957-9847 IR@sigmadesigns.com