SIGM

Sigma Designs, Inc. (SIGM)

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Sigma Designs, Inc. (SIGM)

F2Q2011 Earnings Call Transcript

August 25, 2010 5:00 pm ET

Executives

Ed McGregor – IR Manager

Tom Gay – CFO

Thinh Tran – Chairman and CEO

Ken Lowe – VP, Strategic Marketing

Analysts

Joseph Longobardi [ph] – RBC Capital Markets

Sukhi Nagesh – Deutsche Bank

John Vinh – Collins Stewart

Daniel Amir – Lazard Capital Markets

Hamed Khorsand – BWS Financial

Stephen Chin – UBS

Dunham Winoto – Avian

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the second quarter 2011 Sigma Designs earnings conference call. My name is Alisha and I'll be your coordinator for today. (Operator instructions) I would now like to turn the presentation over to your host for today’s call, Mr. Ed McGregor, Manager of Investor Relations. Please proceed, sir.

Ed McGregor

Thank you, Alisha. Welcome to Sigma Designs' conference call to discuss financial results for our second fiscal quarter of 2011. I am Ed McGregor, Manager of Investor Relations and with me today are Thinh Tran, Sigma’s 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 Investor 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 will 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 margins, 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 June 9, 2010. A partial list of these important risk factors are 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 items are described in more detail on today's earnings press release, along with a detailed reconciliation of our GAAP to non-GAAP results.

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

Tom Gay

Thank you, Ed. For the second quarter of fiscal 2011, revenue was $73.3 million, an increase of $8.1 million or 12% compared to the $65.2 million reported in the previous quarter. Compared to the year-ago quarter, our revenue increased $22 million or 43% from $51.3 million.

Our revenue breakouts are as follows. By business segment and percentage of total revenues for the quarter, IPTV media processors represented $39.1 million or 53%; Connected Home Technologies, $21.7 million or 30%; Connected Media Players, $10.2 million or 14%; and the Consumer product line represented $2.3 million or 3% of the total.

By shipped to region, Asia represented $68.9 million or 94% of the total for the quarter; Europe, $1.3 million or 2%; and North America, $2.7 million or 4% of the total.

During the second quarter, we had two customers that each exceeded 10% of our net revenue. First was Motorola at $17.1 million or 23% of the total, and Gemtek at $16.7 million, also 23% of the total.

GAAP gross margins were 47.7% for the second quarter compared to 49.3% in the preceding quarter and 45.3% in the same period last year. Non-GAAP gross margins were 51.6% in the second quarter compared to 54.1% in the preceding quarter and 47.4% in the same period last year. A one-time event contributed to the lower margin in the second quarter, a reduction by 0.7% due to a write-down of obsolete inventory from a product that was discontinued during the quarter.

GAAP net income for the second quarter of fiscal 2011 was $0.5 million or $0.02 per diluted share. This compares to GAAP net income of $1.1 million or $0.04 per diluted share in the previous quarter, and GAAP net income of $4.8 million or $0.18 per diluted share in the year-ago quarter. During the second quarter we wrote off an investment of $5.2 million in a privately held company, which had a net impact after taxes of $0.10 per diluted share.

On a non-GAAP basis, net income for the second quarter was $8.2 million or $0.26 per diluted share. Compared to the previous quarter this is a decrease of $1 million from non-GAAP income of $9.2 million or $0.29 per diluted share. Compared to the year-ago quarter, non-GAAP net income increased $0.2 million from $8 million or $0.29 per share that we reported.

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