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Sigma Designs, Inc. Reports Second Quarter 2015 Financial Results

MILPITAS, CA -- (Marketwired) -- Sep 10, 2014 -- Sigma Designs®, Inc. (NASDAQ: SIGM), a leader in intelligent media platforms, today reported financial results and business highlights for its second fiscal quarter of fiscal year 2015 ended August 2, 2014.

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

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. (NASDAQ: SIGM) is a leader in intelligent 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)                               
                                                                            
                                                   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