Financial Results
Net revenue for the fourth quarter of fiscal 2014 was $38.5 million, down $15.9 million, or 29.2%, from $54.4 million reported in the previous quarter and down $5.7 million, or 12.9%, from $44.2 million reported for the same period last year.
GAAP net income for the fourth quarter of fiscal 2014 was $1.3 million, or $0.04 per share. This compares to GAAP net loss of $3.0 million, or $0.09 per share, for the previous quarter and GAAP net loss of $35.2 million, or $1.04 per share, for the same period last year.
In the fourth quarter, we reached settlements with two tax authorities that allowed us to reduce our income tax provision by $5.4 million on a GAAP basis. Non-GAAP net loss for the fourth quarter of fiscal 2014 was $4.5 million, or $0.13 per diluted share. This compares to non-GAAP net income of $3.3 million, or $0.10 per diluted share, for the previous quarter and non-GAAP net loss of $18.0 million, or $0.53 per diluted share, during the same period last year.
Net revenue for fiscal year 2014 was $199.2 million, a decrease of $17.4 million, or 8.0%, from $216.6 million in the previous year.
The GAAP net loss for fiscal year 2014 was $11.0 million, or $0.32 per share. This compares to GAAP net loss of $101.8 million, or $3.06 per share in the previous year.
Non-GAAP net income for fiscal year 2014 was $1.1 million, or $0.03 per diluted share. This compares to non-GAAP net loss of $40.3 million, or $1.21 per diluted share in the previous year. Non-GAAP net income for fiscal 2014 would have been $9.9 million had we not recorded an $8.8 million provision for income taxes
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
"As we entered fiscal 2014, our goal was to significantly reduce operating expenses while focusing on completing important product development programs and achieve profitability for the fiscal year. These goals were achieved. However, due to products transitions and inventory adjustments by our customers across multiple product lines, our revenue for the fourth quarter was disappointing. The new products that we have introduced over the past six months put us in position to secure increasing customer deployments, which we expect to realize in the second half of fiscal year 2015. Below the top line, we continue to tightly manage our business and we're pleased to deliver a strong gross margin of 61.1% (non-GAAP) and a substantial reduction to our operating expenses of over $1.5 million (non-GAAP) in the fourth quarter compared to the prior quarter," said Thinh Tran, President and CEO of Sigma Designs.
In the fourth quarter of fiscal 2014, we announced a $20.0 million share repurchase program of which we used $2.3 million in the fourth quarter to purchase shares in the open market. 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.
"Our cash, cash equivalents, marketable securities and restricted cash remain strong at $89.4 million. Our share repurchase program reflects confidence in the long-term strength of the company, as well as our commitment to returning value to shareholders. While we ceased repurchasing shares when our corporate trading window closed last quarter, we intend to continue to repurchase stock under our previously announced plan," said Mr. Tran.
Recent Highlights
- We launched our new SX6 series of SmartTV processors, which is the first fully-integrated SoC chip for Smart televisions designed to support Ultra HD video, which includes all the key technologies required for advanced connectivity and OTT services for SmartTVs.
- We launched our new SMP8756 ARM-based set-top box chipset family, which features High Efficiency Video Coding and offers a unique combination of performance, user experience and video quality.
- We announced our FRCX single chip Ultra HD frame rate conversion chip, which combines the functionality of as many as five devices into a single chip to reduce overall BOM costs and improves performance for OEMs that need to deliver cutting-edge Ultra HD.
- We demonstrated a number of critical new technologies at the CES2014 show, including our 4K Ultra HD technology in the form of a prototype SmartTV chipset and our new G.hn based TR-069 remote management and diagnostics capability.
- We began shipments of our Z-Wave and HomePlugAV chipsets for the AT&T Digital Life solution, one of the highest profile home monitoring products in the market.
- We began shipments of our Z-Wave chipsets for Centurylink's SmartHome monitoring and security system.
- We announced that Portuguese leader Novabase Digital TV Technologies is the first operator to launch an HDMI-stick form factor IP-STB that is HbbTV compliant which will support the hybrid set-top box markets that delivers OTT services.
- We jointly announced, along with Mitsumi, that Mitsumi is now a licensed second source for Z-Wave 500 series technology.
- We jointly announced, along with Comtrend, that Belgium cable leader Telenet will deploy their Powerline Ethernet Adapters based on Sigma Designs' HomePlug AV chips.
- We announced that advanced networking supplier ST&T has selected our new G.hn family of chipsets for their MIMO and SISO products.
- We jointly announced with Wyplay a collaboration to port their middleware code onto Sigma's new ARM based set top box SoC product line.
Investor Conference Call
The conference call relating to Sigma's fourth quarter and fiscal year end 2014 financial results will take place following this announcement at 5:00 PM ET today, April 9, 2014. 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. 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.
