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.
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 statements that our new products introduced in the past six months puts us in position to secure increasing customer deployments, which we expect to realize in the second half of our new fiscal year, and statements about our intentions to repurchase additional shares under our previously announced stock repurchase program. 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 full fiscal 2014 are different than the results set forth in this press release, including the issuance of a final decision in an ongoing arbitration matter which may be announced after the date of this press release and prior to the completion of our audit, 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 and energy management markets in general, the ramp in demand from Sigma's set-top box, television and telecommunication customers, Sigma's ability to deploy and achieve market acceptance for Sigma 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 Sigma's SEC reports, including Sigma's report on Form 10-Q as filed with the SEC on December 12, 2013. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Sigma undertakes 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)
February 1, February 2,
2014 2013
------------ ------------
Assets
Current Assets:
Cash and cash equivalents $ 64,326 $ 51,218
Short-term marketable securities 7,791 17,455
Restricted cash 1,775 1,769
Accounts receivable, net 27,647 21,648
Inventory 20,403 24,929
Deferred tax assets 4,144 5,868
Prepaid expenses and other current assets 8,069 13,578
------------ ------------
Total current assets 134,155 136,465
Long-term marketable securities 15,505 14,253
Software, equipment and leasehold improvements,
net 27,089 17,106
Intangible assets, net 29,780 36,573
Deferred tax assets, net of current portion 439 2,681
Long-term investments and notes receivable, net of
current portion 3,873 8,943
Other non-current assets 4,934 4,810
------------ ------------
Total assets $ 215,775 $ 220,831
============ ============
Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable $ 16,184 $ 11,046
Accrued compensation and related benefits 6,288 10,070
Accrued liabilities 19,813 18,721
------------ ------------
Total current liabilities 42,285 39,837
Other long-term liabilities 15,099 18,976
------------ ------------
Total liabilities 57,384 58,813
Shareholders' equity 158,391 162,018
------------ ------------
Total liabilities and shareholders' equity $ 215,775 $ 220,831
============ ============
SIGMA DESIGNS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(GAAP)
(In thousands, except per share data)
Three months ended Fiscal year ended
------------------------------- --------------------
February November February February February
1, 2014 2, 2013 2, 2013 1, 2014 2, 2013
--------- --------- --------- --------- ---------
Net revenue $ 38,497 $ 54,394 $ 44,199 $ 199,193 $ 216,613
Cost of revenue 16,451 23,311 30,331 91,052 125,588
--------- --------- --------- --------- ---------
Gross profit 22,046 31,083 13,868 108,141 91,025
Gross margin percent 57.3% 57.1% 31.4% 54.3% 42.0%
Operating expenses:
Research and
development 16,634 17,555 26,973 73,162 103,478
Sales and marketing 4,820 5,608 7,093 21,637 34,550
General and
administrative 4,729 5,212 6,025 19,640 27,899
Gain on acquisition - - 28 - (1,389)
Restructuring
charges 267 1,104 2,443 2,261 3,264
Impairment of IP,
mask sets and
design tools 675 150 6,569 1,013 6,569
--------- --------- --------- --------- ---------
Total operating
expenses 27,125 29,629 49,131 117,713 174,371
Income (loss) from
operations (5,079) 1,454 (35,263) (9,572) (83,346)
Gain on sale of
development project - - - 1,079 -
Interest and other
income (expense),
net (164) (254) 1,293 394 2,325
--------- --------- --------- --------- ---------
Income (loss) before
income taxes (5,243) 1,200 (33,970) (8,099) (81,021)
Provision (benefit)
for income taxes (6,496) 4,178 1,227 2,950 20,747
--------- --------- --------- --------- ---------
Net income (loss) $ 1,253 $ (2,978) $ (35,197) $ (11,049) $(101,768)
========= ========= ========= ========= =========
Net income (loss) per
share:
Basic $ 0.04 $ (0.09) $ (1.04) $ (0.32) $ (3.06)
Diluted $ 0.04 $ (0.09) $ (1.04) $ (0.32) $ (3.06)
Shares used in
computing net income
(loss) per share:
Basic 34,421 34,518 33,722 34,206 33,205
Diluted 34,502 34,518 33,722 34,206 33,205
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
------------------------------- --------------------
February November February February February
1, 2014 2, 2013 2, 2013 1, 2014 2, 2013
--------- --------- --------- --------- ---------
GAAP net income
(loss) $ 1,253 $ (2,978) $ (35,197) $ (11,049) $(101,768)
Items reconciling
GAAP net income
(loss) to non-GAAP
net income (loss):
Stock-based
compensation
expenses 1,427 1,668 2,516 6,814 10,595
Amortization of
acquired
intangibles 1,772 1,782 2,073 7,152 7,931
Impairment of
purchased IP, mask
sets, designs
tools and other
assets 675 562 11,173 1,425 11,173
Restructuring
charges, net 279 1,104 2,443 2,306 3,264
Mark-up on
inventory acquired
in business
combinations sold
during the period
- - 162 436 3,769
Realized gain on
sale of
development
project - - - (1,079) -
(Gain) loss on
acquisition - - 28 - (1,389)
Facility exit legal
expenses 91 8 - 387 -
Settlement expenses - 100 - 100 5,700
Impairment of
investments, net 270 163 - 433 -
Acquisition
expenses - - - - 4,276
Income tax
adjustments (10,292) 901 (1,227) (5,826) 16,194
--------- --------- --------- --------- ---------
Total GAAP to Non-
GAAP adjustments (5,778) 6,288 17,168 12,148 61,513
--------- --------- --------- --------- ---------
Non-GAAP net income
(loss) $ (4,525) $ 3,310 $ (18,029) $ 1,099 $ (40,255)
========= ========= ========= ========= =========
Diluted net income
(loss) per share $ (0.13) $ 0.10 $ (0.53) $ 0.03 $ (1.21)
========= ========= ========= ========= =========
Shares used in
calculating diluted
net income (loss)
per share: 34,421 34,564 33,722 34,294 33,205
========= ========= ========= ========= =========
Diluted net income
(loss) per share:
Diluted GAAP net
income (loss) per
share $ 0.04 $ (0.09) $ (1.04) $ (0.32) $ (3.06)
Diluted GAAP to non-
GAAP adjustments $ (0.17) $ 0.19 $ 0.51 $ 0.35 $ 1.85
--------- --------- --------- --------- ---------
Diluted Non-GAAP net
income (loss) per
share $ (0.13) $ 0.10 $ (0.53) $ 0.03 $ (1.21)
========= ========= ========= ========= =========
Reconciliation of
shares used in
calculating non-GAAP
net
income (loss) per
share:
Shares used in
calculating basic
net income (loss)
per share 34,421 34,518 33,722 34,206 33,205
Adjustment for
dilutive securities - 46 - 88 -
--------- --------- --------- --------- ---------
Non-GAAP shares used
in calculating
diluted net income
(loss)
per share 34,421 34,564 33,722 34,294 33,205
========= ========= ========= ========= =========
SIGMA DESIGNS, INC.
SECHEDULE OF SELECTED GAAP TO NON-GAAP ADJUSTMENTS
(Unaudited)
(In thousands, except per share data)
The following schedule reconciles selected line items from the
GAAP basic statements of operations to non-GAAP statements of
operations:
Three months ended Fiscal year ended
------------------------------- --------------------
February November February February February
1, 2014 3, 2013 2, 2013 1, 2014 2, 2013
--------- --------- --------- --------- ---------
GROSS PROFIT:
GAAP gross profit $ 22,046 $ 31,083 $ 13,868 $ 108,141 $ 91,025
Stock-based
compensation
expenses 53 64 106 267 487
Amortization of
acquired
intangibles 1,403 1,403 1,651 5,644 6,327
Acquisition
expenses - - - - 101
Restructuring
charges, net 12 - 14 45 14
Impairment of
purchased IP and
mask sets used in
production - 4,604 4,604
Mark-up on
inventory acquired
in business
combinations sold
during the period
during the period - 162 436 3,769
--------- --------- --------- --------- ---------
Non-GAAP gross profit $ 23,514 $ 32,550 $ 20,405 $ 114,533 $ 106,327
========= ========= ========= ========= =========
OPERATING EXPENSES:
GAAP operating
expenses $ 27,125 $ 29,629 $ 49,131 $ 117,713 $ 174,371
Stock-based
compensation
expenses (1,374) (1,604) (2,410) (6,547) (10,108)
Amortization of
acquired
intangibles (369) (379) (422) (1,508) (1,604)
Impairment of
purchased IP, mask
sets and designs
tools (675) (562) (6,569) (1,425) (6,569)
Restructuring
charges, net (267) (1,104) (2,443) (2,261) (3,264)
Gain on acquisition - - (28) - 1,389
Facility exit legal
expenses (91) (8) - (387) -
Settlement expenses - (100) - (100) (5,700)
Acquisition
expenses - - - - (4,175)
--------- --------- --------- --------- ---------
Non-GAAP operating
expenses $ 24,349 $ 25,872 $ 37,259 $ 105,485 $ 144,340
========= ========= ========= ========= =========
INCOME TAX EXPENSE:
GAAP income tax
expenses $ (6,496) $ 4,178 $ 1,227 $ 2,950 $ 20,747
Income tax
adjustments 10,292 (901) 1,227 5,826 (16,194)
--------- --------- --------- --------- ---------
Non-GAAP income tax
expenses $ 3,796 $ 3,277 $ 2,454 $ 8,776 $ 4,553
========= ========= ========= ========= =========
RESEARCH AND
DEVELOPMENT:
GAAP research and
development $ 16,634 $ 17,555 $ 26,973 $ 73,162 $ 103,478
Stock-based
compensation
expenses (660) (778) (1,394) (3,381) (5,740)
Amortization of
acquired
intangibles (22) (33) (41) (121) (141)
Acquisition
expenses - - - - (1,417)
--------- --------- --------- --------- ---------
Non-GAAP research and
development $ 15,952 $ 16,744 $ 25,538 $ 69,660 $ 96,180
========= ========= ========= ========= =========
SALES AND MARKETING:
GAAP sales and
marketing $ 4,820 $ 5,608 $ 7,093 $ 21,637 $ 34,550
Stock-based
compensation
expenses (246) (365) (399) (1,275) (1,811)
Amortization of
acquired
intangibles (347) (346) (381) (1,387) (1,463)
Settlement expenses - (100) - (100) (5,700)
Acquisition
expenses - - - - (257)
--------- --------- --------- --------- ---------
Non-GAAP sales and
marketing $ 4,227 $ 4,797 $ 6,313 $ 18,875 $ 25,319
========= ========= ========= ========= =========
GENERAL AND
ADMINISTRATIVE:
GAAP general and
administrative $ 4,729 $ 5,212 $ 6,025 $ 19,640 $ 27,899
Stock-based
compensation
expenses (468) (461) (617) (1,891) (2,557)
Impairment of other
assets - (412) - (412) -
Acquisition
expenses - - - - (2,501)
Facility exit legal
expenses (91) (8) - (387) -
--------- --------- --------- --------- ---------
Non-GAAP general and
administrative $ 4,170 $ 4,331 $ 5,408 $ 16,950 $ 22,841
========= ========= ========= ========= =========
Investor Relations Contact: Elias Nader Chief Financial Officer & Secretary Sigma Designs, Inc. Tel: (408) 957-9847 IR@sigmadesigns.com