SIGM

Sigma Designs, Inc. (SIGM)

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Sigma Designs (SIGM)

Q4 2011 Earnings Call

March 02, 2011 5:00 pm ET

Executives

Thomas Gay - Chief Financial Officer, Principal Accounting Officer and Secretary

Edward McGregor - Manager, Investor Relations

Thinh Tran - Founder, Chairman, Chief Executive Officer and President

Kenneth Lowe - Vice President of Strategic Marketing

Analysts

Dunham Winoto - Avian Securities, LLC

Stephen Chin - UBS Investment Bank

Gary Mobley - The Benchmark Company, LLC

Hamed Khorsand - Beating Wall Street, Inc.

Quinn Bolton - Needham & Company, LLC

Sukhi Nagesh - Deutsche Bank AG

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the Fourth Quarter 2011 Sigma Designs Earnings Conference Call. My name is Melanie, and I will be your coordinator today. [Operator Instructions] I would now like to turn the call over to Mr. Ed McGregor, Manager of Investor Relations. Please proceed.

Edward McGregor

Thanks, Melanie. Welcome to the Sigma Designs conference call to discuss financial results for our fourth fiscal quarter of 2011. I am Ed McGregor, Sigma's Manager of Investor Relations, and with me today are Thinh Tran, our Chairman and CEO; Tom Gay, our CFO; and Ken Lowe, our 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 Investors section of our website. Today's agenda will begin with my brief introduction, a review of selected financials by Tom, an executive overview by Thinh, a market update by Ken and comments on guidance by Thinh. We'll then open the call to questions from analysts and institutional investors, and we 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 margin and other financial measures and anticipated trends on 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 7, 2010. A partial list of these important risk factors are set forth at the 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.

Before I hand the call over to Tom, who will review our financial results, I would like to let everyone know that Sigma Designs will be holding an Investor Day in New York City on Tuesday, March 15. Investors, analysts and members of the media are welcome to join us that day and meet our management team, experience live product demonstrations and learn more about industry trends and new projects that are underway. A press release providing further details of this event will be forthcoming.

And now we'll hear from Tom.

Thomas Gay

Thank you, Ed. For the fourth quarter of fiscal 2011, revenue was $70.6 million, a decrease of $7.2 million or 9% compared to $77.8 million in the previous quarter. Compared with the year-ago quarter, our revenue increased $2.5 million or 4% from $68.1 million.

Net revenue for fiscal 2011 was $286.9 million, an increase of $80.8 million or 39% from $206.1 million reported for the previous year. Our revenue breakouts for the quarter are as follows: By business segment and percentage of total revenues for the quarter, IPTV media processors came in at $31.3 million or 44% of the total; Connected Home Technologies $24.1 million or 34%; Connected Media Players, $10.6 million or 15% of the total; and Prosumer, $4.5 million or 6%.

By shipped to region, Asia represented $64.7 million or 92% of the total. Europe, $2.1 million or 3%; and North America, $3.3 million or 5%. The high concentration in Asia is caused by the fact that the largest contract manufacturers in the world are located in that region. The end products are distributed worldwide.

During the fourth quarter, we had two customers that each exceeded 10% of our net revenue. Motorola came in at $16 million or 23% of the total, and Gemtek at $15.2 million or 21%. We would like to note that our largest customers are purchasing multiple products and represent a supply chain to more than 10 service providers each.

GAAP gross margins were 49.4% for the fourth quarter, compared to 49.6% in the preceding quarter and 41.1% in the same period last year. Non-GAAP gross margins were 53.3% for the fourth quarter compared to 53.2 in the preceding quarter and 51.7% in the same period last year.

GAAP gross margins were 49.0% for fiscal 2011 compared to 44.5% for the previous year. GAAP net income for the fourth quarter of fiscal 2011 was $2.5 million or $0.08 per diluted share. This compares to GAAP net income of $5.1 million or $0.16 per share in the previous quarter, and GAAP net loss of $2.8 million or $0.09 per diluted share in the year-ago quarter.

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