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Sigma Designs (SIGM)
Q3 2013 Earnings Call
December 05, 2012 5:00 pm ET
Kenneth Lowe - Vice President of Strategic Marketing
Thomas E. Gay - Chief Financial Officer, Principal Accounting Officer and Secretary
Thinh Q. Tran - Founder, Chief Executive Officer, President and Director
Mustafa Ozgen - Vice President and General Manager
Gary W. Mobley - The Benchmark Company, LLC, Research Division
Stephen Chin - UBS Investment Bank, Research Division
Hamed Khorsand - BWS Financial Inc.
Daniel L. Amir - Lazard Capital Markets LLC, Research Division
Previous Statements by SIGM
» Sigma Designs Management Discusses Q2 2013 Results - Earnings Call Transcript
» Sigma Designs Management Discusses Q1 2013 Results - Earnings Call Transcript
» Sigma Designs Management Host Conference Call to Discuss Acquisition of Trident's Digital Television Business (Transcript)
Thank you, Deanna, and welcome to Sigma Designs' conference call to discuss the financial results for our third fiscal quarter 2013. I'm Ken Lowe, Sigma's Vice President of Strategic Marketing, with me today are Thinh Tran, Sigma's Chairman and CEO; Tom Gay, our CFO; Mustafa Ozgen, our Vice President and General Manager of Sigma's Home Multimedia business; and Gabi Hilevitz, our Vice President and General Manager of Home Connectivity Business.
The press release containing the quarter results including selected income statements and balance sheet information was released after the market closed today. If you did not receive the results, the release is available in the Investors section of our website. Today's agenda will begin with my brief introduction, a review of selected financials by Tom, and an executive overview by Thinh, and a business summary by Mustafa and Gabi for their respective the business units. And finally, our forward guidance by Thinh. We'll then open the call to questions from analysts and institutional investors, and we expect to conclude the call within 1 hour.
Before we begin, I'd like to remind everybody that today's call contains forward-looking information, including guidance we provide about future revenue, gross margin and other financial measures and anticipated trends in our markets. We caution you that the forward-looking information we present today is based on our current beliefs, assumptions and expectations that speak as of only today's date and involve risks and uncertainties that could cause actual results to differ materially from our current expectations.
Other risk factors that may affect our business and future results are detailed from time to time in Sigma's SEC reports, including Sigma's quarterly report on Form 10-Q as filed with the SEC on September 10, 2012. A partial list of these important risk factors is set forth at the end of today's earnings release and Sigma undertakes no obligation to revise or update publicly any forward-looking statement, except as required by law.
In addition, during today's call we will be reporting certain financial information on a non-GAAP basis, such as non-GAAP net income, which excludes certain costs and expenses. These excluded items are described in more detail in today's earnings press release along with a detailed reconciliation of our GAAP to non-GAAP results.
And with that, I'll turn it over to Tom.
Thomas E. Gay
Thank you, Ken. For the third quarter of the fiscal 2013, revenue was $63.9 million, a decrease of $4.4 million or 6.4% compared to $68.3 million in the previous quarter. Compared to the year-ago quarter, our revenue increased $24.2 million or 61% from $39.7 million. Our revenue breakouts for the quarter are as follows: DTV, $27.8 million or 44% of the total; Home Networking, $19.7 million or 31% of the total; IPTV Media Processors, $6.3 million or 10%; Connected Media Player, $2.8 million or 4%; Home Control and Energy Management products, $2.7 million or 4%; Prosumer, $2.3 million or 4%; and Licensing and Other, $2.2 million or 4% of the total. During the third quarter, we had 1 customer that exceeded 10% of our net revenue, that was TP Vision for $14.6 million or 23% of our total.
GAAP gross margins were 39.9% for the third quarter compared to 44.8% in the preceding quarter and 45.3% in the same period last year. Non-GAAP gross margins were 44.4% for the third quarter compared to 51% in the preceding quarter and 52.4% in the same period last year. The primary factor in our reduced gross margin was product mix, which was heavily weighted with increased shipments to one of our large customers of DTV products, which have lower margins. The DTV product line continues to be based on customers and products acquired from Trident that have not had the benefit of various cost-reduction efforts we intend to make as part of our further integration of the DTV product line. As we will discuss later, we see an opportunity to increase the gross margin for the DTV product segment significantly over the course of the coming year. Gross margin on our non-DTV products continued to be above 50%.
During the quarter, the company announced a broad restructuring plan with the intent to reduce operating costs to a level which should put us at a breakeven financial position for our first fiscal quarter of 2014, ending April 2013. As a result of the actions taken, the company recorded a restructuring charge of $0.8 million during Q3 and expects to incur additional charges in fiscal Q4 as we continue to reduce our cost base. The impact of the reduction in force taken at the end of the quarter is approximately $4.8 million in annual salaries and benefits. The remaining portions of our previously announced program will result in expense reductions of approximately $16.8 million in annual cost for salaries and benefits, as well as $19.1 million in non-labor-related expenses. Additionally, we have taken various actions that are expected to lower our cost of production by $5 million in fiscal 2014. Total proforma expenses for the third quarter were $36.8 million compared to $38.8 million in the previous quarter.