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Sigma Designs, Inc. Reports Financial Results for the Fourth Quarter and Fiscal Year 2015

MILPITAS, CA -- (Marketwired) -- Apr 01, 2015 -- Sigma Designs® (NASDAQ: SIGM), a leading provider of system-on-chip (SoC) solutions for SmartTV, Internet of Things (IoT) for Smart home, Media Connectivity and Set-Top-Boxes (STBs), today reported financial results for its fourth fiscal quarter and fiscal year 2015, which ended January 31, 2015.

Fourth Quarter Fiscal 2015 Financial Results

Net revenue for the fourth quarter of fiscal 2015 was $54.8 million, up $1.1 million, or 2%, from $53.8 million in the third quarter of fiscal 2015, and up $16.3 million, or 42%, from $38.5 million in the fourth quarter of fiscal 2014.

GAAP gross margin was 48.7% in the fourth quarter of fiscal 2015. This compares with a GAAP gross margin of 49.3% in the prior quarter and 57.3% in the fourth quarter of fiscal 2014.

Non-GAAP gross margin in the fourth quarter of fiscal 2015 was 50.8%. This compares with a non-GAAP gross margin of 51.4% in the prior quarter and 61.1% in the fourth quarter of fiscal 2014.

GAAP operating expenses in the fourth quarter of fiscal 2015 were $29.1 million, compared with GAAP operating expenses of $27.8 million in the third quarter of fiscal 2015 and $27.1 million in the fourth quarter of fiscal 2014.

Non-GAAP operating expenses in the fourth quarter of fiscal 2015 were $26.1 million, compared with non-GAAP operating expenses of $24.8 million in the third quarter of fiscal 2015 and $24.3 million in the fourth quarter of fiscal 2014.

GAAP net loss in the fourth quarter of fiscal 2015 was $3.6 million, or $0.10 per share. This compares with a GAAP net loss of $0.6 million, or $0.02 per share, for the previous quarter and GAAP net income of $1.3 million, or $0.04 per share, in the same period last year.

Non-GAAP net income in the fourth quarter of fiscal 2015 was $1.5 million, or $0.04 per diluted share. This compares with non-GAAP net income of $1.5 million, or $0.04 per diluted share, in the previous quarter and a non-GAAP net loss of $4.5 million, or $0.13 per diluted share, in the same period last year.

Fiscal Year 2015 Financial Results

Net revenue in fiscal 2015 was $188.3 million, a decrease of $10.9 million, or 5.5%, from $199.2 million in the previous year.

GAAP gross margin in fiscal 2015 was 50.6%, compared with 54.3% in fiscal 2014.

Non-GAAP gross margin in fiscal 2015 was 53.0%, compared with 57.5% in fiscal 2014.

GAAP operating expenses in fiscal 2015 were $113.2 million, compared with $117.7 million in fiscal 2014.

Non-GAAP operating expenses in fiscal 2015 were $101.2 million, compared with $105.5 million in fiscal 2014.

GAAP net loss in fiscal 2015 was $21.7 million, or a net loss of $0.63 per share. This compares with a GAAP net loss of $11.0 million, or a net loss of $0.32 per share, in fiscal 2014.

Non-GAAP net loss in fiscal 2015 was $4.1 million, or a net loss of $0.12 per diluted share. This compares with non-GAAP net income of $1.1 million, or net income of $0.03 per diluted share, in fiscal 2014.

The reconciliation between GAAP and non-GAAP net income (loss) for all referenced periods is provided in the reconciliation table immediately following the GAAP financial tables below.

Management Comment
"We are pleased to report another quarter of sequential revenue growth in Q4, which comes after Q3, our seasonally strongest quarter. We also delivered continued non-GAAP profitability for the second quarter in a row," said Thinh Tran, president and CEO of Sigma Designs, Inc. "We achieved this revenue growth through a combination of increased customer volumes for our new Smart TV chipsets and substantial growth in our IoT devices. We are committed to sustaining this momentum by securing increased customer deployments to continue to drive the top line while maintaining our focus on sustained profitability."

Recent Highlights

Investor Conference Call

The conference call relating to Sigma's fourth quarter and fiscal year 2015 financial results will take place following this announcement at 5:00 p.m. Eastern Time today, April 1, 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, 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 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 momentum by securing increased customer deployments to continue to drive our top line while maintaining our focus on profitability. 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 fourth quarter and fiscal year 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 SmartTVs, Internet-of-Things, 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-Q as filed with the SEC on December 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 world leader in enabling smart home convergence. The company designs and builds the essential semiconductor technologies that serve as the foundation for the world's leading IPTV set-top boxes, Smart TV, connected media players, Internet of Things (IoT) for smart home devices and residential gateways and whole home media connectivity. For more information about Sigma Designs, please visit www.sigmadesigns.com.

                                                                            
                             SIGMA DESIGNS, INC.                            
               UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS              
                                   (GAAP)                                   
                                                                            
                               (In thousands)                               
                                                                            
                                                    January 31,  February 1,
                                                        2015         2014   
                                                    -----------  -----------
Assets                                                                      
                                                                            
Current Assets:                                                             
    Cash and cash equivalents                       $    83,502  $    64,326
    Short-term marketable securities                      6,347        7,791
    Restricted cash                                         400        1,775
    Accounts receivable, net                             26,415       27,647
    Inventory                                            20,445       20,403
    Deferred tax assets                                   3,319        4,144
    Prepaid expenses and other current assets             8,805        8,069
                                                    -----------  -----------
      Total current assets                              149,233      134,155
                                                                            
Long-term marketable securities                           4,249       15,505
Software, equipment and leasehold improvements,                             
 net                                                     21,594       27,089
Intangible assets, net                                   24,642       29,780
Deferred tax assets, net of current portion                 687          439
Long-term investments and notes receivable, net of                          
 current portion                                          3,267        3,873
Other non-current assets                                  1,661        4,934
                                                    -----------  -----------
                                                                            
      Total assets                                  $   205,333  $   215,775
                                                    ===========  ===========
                                                                            
Liabilities and Shareholders' Equity                                        
                                                                            
Current Liabilities:                                                        
  Accounts payable                                  $    21,207  $    16,184
  Accrued compensation and related benefits               6,806        6,288
  Accrued liabilities                                    22,894       19,813
                                                    -----------  -----------
    Total current liabilities                            50,907       42,285
                                                                            
  Other long-term liabilities                            11,136       15,099
                                                    -----------  -----------
    Total liabilities                                    62,043       57,384
                                                                            
Shareholders' equity                                    143,290      158,391
                                                    -----------  -----------
                                                                            
      Total liabilities and shareholders' equity    $   205,333  $   215,775
                                                    ===========  ===========
                                                                            
                                                                            
                                                                            
                            SIGMA DESIGNS, INC.                             
         UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS          
                                   (GAAP)                                   
                   (In thousands, except per share data)                    
                                                                            
                             Three months ended          Fiscal Year Ended  
                      -------------------------------  -------------------- 
                       January    November   February   January    February 
                       31, 2015   1, 2014    1, 2014    31, 2015   1, 2014  
                      ---------  ---------  ---------  ---------  --------- 
                                                                            
Net revenue           $  54,846  $  53,784  $  38,497  $ 188,313  $ 199,193 
Cost of revenue          28,126     27,272     16,451     92,967     91,052 
                      ---------  ---------  ---------  ---------  --------- 
Gross profit             26,720     26,512     22,046     95,346    108,141 
Gross margin percent       48.7%      49.3%      57.3%      50.6%      54.3%
                                                                            
Operating expenses:                                                         
  Research and                                                              
   development           17,324     16,603     16,634     67,482     73,162 
  Sales and marketing     5,806      5,559      4,820     22,290     21,637 
  General and                                                               
   administrative         5,247      4,808      4,729     19,641     19,640 
  Restructuring                                                             
   charges                   (3)       (18)       267        999      2,261 
  Impairment of IP,                                                         
   mask sets and                                                            
   design tools             689        856        675      2,811      1,013 
                      ---------  ---------  ---------  ---------  --------- 
    Total operating                                                         
     expenses            29,063     27,808     27,125    113,223    117,713 
                                                                            
Loss from operations     (2,343)    (1,296)    (5,079)   (17,877)    (9,572)
Gain on sale of                                                             
 development project          -          -          -          -      1,079 
Interest and other                                                          
 income (expense),                                                          
 net                        661        188       (164)     1,169        394 
                      ---------  ---------  ---------  ---------  --------- 
                                                                            
Loss before income                                                          
 taxes                   (1,682)    (1,108)    (5,243)   (16,708)    (8,099)
Provision for                                                               
 (benefit from)                                                             
 income taxes             1,928       (551)    (6,496)     4,993      2,950 
                      ---------  ---------  ---------  ---------  --------- 
                                                                            
Net income (loss)     $  (3,610) $    (557) $   1,253  $ (21,701) $ (11,049)
                      =========  =========  =========  =========  ========= 
                                                                            
Net income (loss) per                                                       
 share:                                                                     
  Basic               $   (0.10) $   (0.02) $    0.04  $   (0.63) $   (0.32)
  Diluted             $   (0.10) $   (0.02) $    0.04  $   (0.63) $   (0.32)
Shares used in                                                              
 computing net income                                                       
 (loss) per share:                                                          
  Basic                  35,036     34,790     34,421     34,693     34,206 
  Diluted                35,036     34,790     34,502     34,693     34,206 
                                                                            
                                                                            
                                                                            
                            SIGMA DESIGNS, INC.                             
   RECONCILIATION OF GAAP NET INCOME (LOSS) TO NON-GAAP NET INCOME (LOSS)   
                                (Unaudited)                                 
                   (In thousands, except per share data)                    
                                                                            
                             Three months ended          Fiscal year ended  
                      -------------------------------  -------------------- 
                       January    November   February   January    February 
                       31, 2015   1, 2014    1, 2014    31, 2015   1, 2014  
                      ---------  ---------  ---------  ---------  --------- 
                                                                            
Net Revenue           $  54,846  $  53,784  $  38,497  $ 188,313  $ 199,193 
                      =========  =========  =========  =========  ========= 
                                                                            
GAAP net income                                                             
 (loss)               $  (3,610) $    (557) $   1,253  $ (21,701) $ (11,049)
                                                                            
GAAP Gross Profit     $  26,720  $  26,512  $  22,046  $  95,346  $ 108,141 
                                                                            
Items reconciling                                                           
 GAAP Gross Profit to                                                       
 Non-GAAP Gross                                                             
 Profit:                                                                    
COST OF REVENUE                                                             
    Stock based                                                             
     compensation                                                           
     expense                (39)       (49)       (53)      (189)      (266)
    Amortization of                                                         
     acquired                                                               
     intangibles         (1,062)    (1,062)    (1,403)    (4,281)    (5,644)
    Restructuring                                                           
     charges                (15)         -        (12)       (66)       (45)
    Mark-up on                                                              
     inventory                                                              
     acquired in                                                            
     business                                                               
     combinations                                                           
     sold during the                                                        
     period                   -          -          -          -       (436)
                      ---------  ---------  ---------  ---------  --------- 
    Non-GAAP Gross                                                          
     Profit              27,836     27,623     23,514     99,882    114,532 
    Non-GAAP Gross                                                          
     Margin %              50.8%      51.4%      61.1%      53.0%      57.5%
                                                                            
OPERATING EXPENSES                                                          
Items reconciling                                                           
 GAAP Operating Exp                                                         
 to Non-GAAP                                                                
 Operating Exp:                                                             
    Stock based                                                             
     compensation                                                           
     expense             (1,662)    (1,654)    (1,374)    (6,089)    (6,548)
    Amortization of                                                         
     acquired                                                               
     intangibles           (346)      (345)      (369)    (1,383)    (1,508)
    Impairment of IP,                                                       
     mask sets and                                                          
     design tools          (689)      (856)      (675)    (2,811)    (1,424)
    Settlement                                                              
     expenses                 -          -          -       (107)      (100)
    Facility exit                                                           
     legal expense         (258)      (133)       (91)      (614)      (387)
    Restructuring                                                           
     charges                  3         18       (267)      (999)    (2,261)
    Gain on sale of                                                         
     development                                                            
     project                  -          -          -          -      1,079 
    Gain on sales                                                           
     (impairment) of                                                        
     privately held                                                         
     instruments, net        (4)         3       (270)      (602)      (433)
    Income tax                                                              
     adjustments         (1,016)     2,055     10,292       (495)     5,826 
                      ---------  ---------  ---------  ---------  --------- 
Total GAAP to Non-                                                          
 GAAP Adjustments        (3,972)      (912)     7,246    (13,100)    (5,756)
                                                                            
Non-GAAP net income                                                         
 (loss)               $   1,478  $   1,466  $  (4,525) $  (4,065) $   1,098 
                      =========  =========  =========  =========  ========= 
                                                                            
Diluted Non-GAAP net                                                        
 income (loss) per                                                          
 share                $    0.04  $    0.04  $   (0.13) $   (0.12) $    0.03 
                      =========  =========  =========  =========  ========= 
                                                                            
Shares used in                                                              
 calculating diluted                                                        
 Non-GAAP net income                                                        
 (loss) per share:       35,036     34,790     34,502     34,693     34,206 
                                                                            
                                                                            

Investor Relations Contacts: 
Jim Fanucchi
Darrow Associates, Inc.
(408) 404-5400

IR@sigmadesigns.com

Elias Nader
CFO and Corporate Secretary
Sigma Designs, Inc.

IR@sigmadesigns.com