SIGM

Sigma Designs, Inc. (SIGM)

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Sigma Designs Inc. (SIGM)

Q2 2010 Earnings Call

August 26, 2009 5:00 pm ET

Executives

Edward McGregor – Manager Investor Relations

Thomas Gay – Chief Financial Officer

Thinh Tran – Chairman, Chief Executive Officer

Kenneth Lowe – Vice President, Business Development and Strategic Marketing

Analysts

Uche Orji – UBS

Scott for Tristan Gerra – Robert W. Baird

John Vinh – Collins Stewart

Daniel Amir – Lazard Capital Management

Sukhi Nagesh – Deutsche Bank

Gary Mobley – Noble Financial Group

Hamed Khorsand – BWS Financial

Quinn Bolton – Needham & Company

Dunham Winoto – Avian Research

Presentation

Operator

Welcome to the second quarter 2010 Sigma Designs earnings conference call. (Operator Instructions) I would now like to turn the presentation over to Mr. Ed McGregor.

Edward McGregor

Welcome to Sigma Designs conference call to discuss financial results for our second fiscal quarter 2010. I'm Ed McGregor, Sigma's Manager of Investor Relations. With me today are Thinh Tran, Sigma's Chairman and CEO, Tom Gay our CFO and Ken Lowe, Vice President of Strategic Marketing.

The press release containing the quarter results including selected income statement and balance sheet information was released after the market closed today. If you did not receive the results, the release is available in the investor section of our website.

Today's agenda will begin with my brief introduction, a review of selected financials by Tom, an executive overview of Thinh, a market update by Ken and comments on guidance by Thinh. We'll then open the call for questions from analysts and institutional investors and expect to conclude the call within one hour.

Before we begin I would like to remind everyone that today's call contains forward-looking information including guidance we provide about our future revenue, gross margins and other financial measures and anticipated trends and target markets. We caution you that the forward-looking information that we present today is based on our current beliefs, assumptions and expectations and speak only as of todays date and involve risks and uncertainties that could cause actual results to differ materially from our current expectations.

Specific factors that may affect our business and future results are discussed in the risk factors section of our annual report on Form 10-Q filed with the SEC on June 11, 2009. A partial list of these important risk factors is set forth at the end of today's earnings press release. 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.

Now I'd like to hand the call over to Tom who will review our financial results.

Thomas Gay

For the second quarter of fiscal 2010 revenue was virtually unchanged at $51.3 million compared to $51.2 million in the previous quarter. Compared to the year ago quarter, our revenue decreased $6.9 million or 12% from $58.2 million. Our revenue breakouts are as follows: by market segment and percentage of total revenues for the quarter, IPTV represented $43.1 million or 84% of the total.

Connected media players came in at $5.4 million or 11%. The consumer segment represented $1.6 million or 3% of the total and the category we are now going to be labeling connected home technologies which would be our wireless products came in at $1 million or 2% of the total.

By billing region, Asia represented $38.1 million or 74% of the total. Europe was $11.7 million or 23% of the total and North America $1.5 million or 3%. During the second quarter we had two customers that each exceeded 10% of our revenue; Motorola Singapore was $13.6 million or 26% and Gemtek was $8.5 million or 17% of the total.

Gross margins were 45.3% for the second quarter compared to 47.6% in the preceding quarter and 50.7% in the same period last year. The decrease is attributable to a higher concentration of larger Set-Top box customers during the quarter.

GAAP net income for the second quarter of fiscal 2010 increased over the prior quarter to $4.8 million or $0.18 per diluted share. This compares to GAAP net income of $2.7 million or $0.10 per diluted share in the previous quarter which included a tax write off of $3.5 million or $0.13 per diluted share due to changes in California corporate income tax laws. Compared to the second quarter of fiscal 2009, GAAP net income decreased $4.8 million or 50% from $9.6 million.

On a non-GAAP basis, net income for the second quarter was $7.8 million or $0.28 per diluted share. Compared to the previous quarter, this is a decrease of $0.5 million from $8.3 million or $0.30 per diluted share. Compared to the year ago quarter, this is a decrease of $4.9 million from the $12.7 million or $0.47 per share that we reported.

Please refer to our press release for a detailed reconciliation of our GAAP to non-GAAP performance. The reconciliation includes the following categories of differences for the second quarter. First was amortization of intangible assets associated with three acquisitions, a total of $0.8 million from Blue Seven, VEX and Zensus. The second category was stock based compensation that totaled $2.2 million for the quarter.

Read the rest of this transcript for free on seekingalpha.com