Sigma Designs, Inc. (SIGM)

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Sigma Designs (SIGM)

Q2 2014 Earnings Call

September 04, 2013 5:00 pm ET


Kenneth Lowe - Vice President of Strategic Marketing

Elias N. Nader - Interim Chief Financial Officer, Principal Accounting Officer, Principal Compliance Officer, Corporate Controller and Secretary

Thinh Q. Tran - Founder, Chief Executive Officer, President and Director

Mustafa Ozgen - Vice President and General Manager


Quinn Bolton - Needham & Company, LLC, Research Division

Hamed Khorsand - BWS Financial Inc.

Charles Iver Frumberg - Emancipation Capital LLC



Good day, ladies and gentlemen, and welcome to the Second Quarter 2014 Sigma Designs Earnings Conference Call. My name is Ayesha, and I will be your coordinator for today's call. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to your host for today, Mr. Ken Lowe, Vice President of Strategic Marketing. You may proceed, sir.

Kenneth Lowe

Thank you, Ayesha. Welcome to Sigma Designs' conference call to discuss our financial results for our second fiscal quarter of 2014. I'm Ken Lowe, Sigma Designs' Vice President of Strategic Marketing; with me today are Thinh Tran, Sigma's CEO; Elias Nader, Sigma's interim CFO; and Mustafa Ozgen, Vice President and General Manager of Home Multimedia Products. The press release contain 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 will be available in the Investors section of our website. Today's agenda will begin with my brief introduction, a review of selected financials by Elias and executive overview by Thinh, a business update by Mustafa, 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 that we provide about future revenue, gross margin and other financial measures and anticipated trends in our target markets. We caution you that the forward-looking information that we present today is based on our current beliefs, assumptions and expectations speak only as of 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 December 2012. A partial list of these important risk factors are set forth at the end of today's earnings press release, and Sigma undertakes no obligation to revise or publicly update 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 exclude certain cost 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 Elias.

Elias N. Nader

Thank you, Ken. Good afternoon, everybody. For the second quarter of fiscal 2014, revenue was $53.8 million, an increase of $1.3 million or 2.5% compared to $52.5 million in the previous quarter. Compared to the year-ago quarter, our revenue decreased $14.5 million or 21.2% from $68.3 million.

Our revenue breakouts for the quarter are as follows: DTV market, $14.4 million or 27%; set-top box, $11.5 million or 21%; home networking, $19.6 million or 37%; home control, $5.9 million or 11%; license and other, $2.4 million or 4%.

GAAP gross margins were 52.2% for the second quarter compared to 51.3% in the preceding quarter and 44.8% in the same quarter last year. Non-GAAP gross margins were 55.3% for the second quarter compared to 54.7% in the preceding quarter and 51% in the same period last year. The primary factor in our improved non-GAAP gross margins in Q2 was product mix that had higher gross margins.

In the second quarter, our non-GAAP operating expenses decreased by approximately $1.4 million to $26.9 million compared to the previous quarter mainly due to continued reductions in labor -- on labor-related expenses and other variable operating expenses. Operating expenses in Q2 were $11.8 million below the same quarter a year ago, a 30% reduction. Since announcing our restructuring in third quarter of 2013, we have reduced our operating expenses, on an annualized basis, by $40 million. As a result of our emphasis on cost control and the significant improvement in our cost structure, we expect our non-GAAP operating expenses in Q3 to trend lower than Q2 operating expenses. We remain focused on continued profitability in the remainder of FY '14 and beyond. We are also focused on achieving profitable revenue growth throughout the fiscal year. The GAAP net loss for the second quarter of fiscal 2014 was $4.8 million or $0.14 per share. This compares to a GAAP net loss of $4.5 million or $0.13 per share in the previous quarter and a GAAP net loss of $13.4 million or $0.41 per share the year-ago quarter. On a non-GAAP basis, the net income in the second quarter was $2 million or $0.06 per share. This compares to a non-GAAP net income of $300,000 or $0.01 per share in the previous quarter and a non-GAAP net loss of $4 million or $0.12 per share in the year-ago quarter. Please refer to our press release for a detailed reconciliation of our GAAP to non-GAAP performance.

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