Sigma Designs, Inc. (SIGM)

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Sigma Designs, Inc. (SIGM)

Q1 2015 Results Earnings Conference Call

June 11, 2014; 05:00 p.m. ET


Thinh Tran - Chief Executive Officer

Elias Nader - Chief Financial Officer

Mustafa Ozgen - Vice President & General Manager of Home Multimedia Products

Ken Lowe - Vice President of Strategic Marketing


Quinn Bolton - Needham & Co.

Hamed Khorsand - BWS Financial

Robert Strobel - Deutsche Bank

Dan Scovel - Edison Group

Orin Hirschman - AIGH Investments

Blaine Marter - Lobe Financial



Good day ladies and gentlemen and welcome to the Q1, 2015, Sigma Designs earnings conference call. My name is Whitney and I’ll be your operator for today.

At this time all participants are in listen-only mode. Later we will conduct a question-and-answer session. (Operator Instructions).

I would now like to turn the conference over to your host for today, Mr. Ken Lowe, Vice President of Strategic Marketing. Please proceed.

Ken Lowe

Thank you. Welcome to Sigma Designs conference call to discuss financial results for our first fiscal quarter of 2015. I’m Ken Lowe, Sigma's Vice President of Strategic Marketing. With me today are Thinh Tran, Sigma's CEO; Elias Nader, Sigma's CFO; and Mustafa Ozgen, the Vice President and General Manager of Home Multimedia Products.

The press release containing the quarterly results including selected net income statement and balance sheet information was released after the market close 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 Elias, an executive overview by Thinh, and finally our forward guidance by Elias. 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'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 target markets.

We caution you that the forward-looking information we present today is based on our current beliefs, assumptions and expectations speaking only 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 Form 10-K as filed with the SEC on April 17, 2014. 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 to today’s call, we’ll 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 the detailed reconciliation of our GAAP to non-GAAP results.

And with that, I'll turn it over to Elias.

Elias Nader

Thank you, Ken. Good afternoon ladies and gentlemen.

Net revenues for the first quarter of fiscal 2015 was $36.9 million, a decrease of $1.6 million or 4.2% compared to $38.5 million in the previous quarter. Compared to the year ago quarter, our revenue decreased $15.7 million or 29.8% from $52.5 million

Our revenue breakout for the quarter are as follows: I'll cover this by target markets and percentage of total revenues. DTV, $6.1 million or 16%; set-top box $5.7 million or 15%; Home networking $16.1 million or 44%; home control $6.1 million or 16%; license and other $2.9 million or 9%.

Revenues declined in the first quarter by $1.6 million, primarily due to a decrease in sales of set-top box by $2.4 million, a decrease in license and order by $3.4 million, which was offset by an increase on home networking by $2.3 million and home control by $2 million. The year-to-year revenue decline was mainly driven by the sales of legacy products that declined faster than the ramp up of new products.

Gross margins. GAAP gross margins were 54.9% for the first quarter compared to 57.3% in the preceding quarter and 51.3 % in the same quarter last year. Non-GAAP gross margins were 58.1% for the first quarter, compared to 61.1% in the preceding quarter and 54.7% in the same period last year.

Our gross margins will fluctuate over time due to a variety of factors, including product mix, the initial yields of new products and the contribution of IP licensing revenues. Our gross margin in the first quarter of fiscal 2015 was particularly strong primarily as a result of increased shipments of home networking products with higher margins and strong IP licensing revenue.

The new products across our entire target markets that we have introduced over the past six months have positioned us to secure increasing customer deployments, which we expect to begin to realize in the second quarter of fiscal 2015, with a stronger momentum in the second half of fiscal 2015. I will cover our forward guidance in more detail towards the end of our call.

Operating expenses; we have stabilized our operating expenses and in the first quarter of fiscal ’15 our non-GAAP operating expenses were in line with our guidance of $25.5 million. GAAP net loss and non-GAAP net loss on earnings. The GAAP net loss for the first quarter of fiscal ’15 was $9.9 million or $0.29 per share. This compares to a GAAP net income of $1.3 million or $0.04 per share in the previous quarter and a GAAP net loss of $4.5 million or $0.13 per share in the year ago quarter.

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