Sigma Designs, Inc. (SIGM)

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Sigma Designs (SIGM)

Q1 2012 Earnings Call

May 25, 2011 5:00 pm ET


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


Hamed Khorsand - BWS Financial Inc.

Daniel Amir - Lazard Capital Markets LLC

Gary Mobley - The Benchmark Company, LLC

John Vinh - Collins Stewart LLC

Quinn Bolton - Needham & Company, LLC



Good day, ladies and gentlemen, and welcome to the First Quarter 2012 Sigma Designs Earnings Conference Call. My name is Alicia, and I will be your coordinator today. [Operator Instructions] I would now like to turn the call over to Mr. Edward McGregor, Manager of Investor Relations. Please proceed.

Edward McGregor

Thank you, Alicia. And welcome to Sigma Designs conference call to discuss financial results for our first fiscal quarter 2012. I'm Ed McGregor, Sigma's Manager, Investor Relations. 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 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 read my brief introduction; a review of selected financials by Tom; an executive overview by Thinh; market update by Ken; and comments on guidance by Thinh. We'll then open the call to questions for the 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 to provide a better future revenue, gross margins and other financial measures, anticipated trends in our target markets. We caution you that the forward-looking information that we present today is based on our current beliefs and 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 annual report on Form 10-K as filed with the SEC on March 28 of this year. A partial list of these important risk factors is set forth at the end of today's earnings 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.

And now we'll hear from Tom.

Thomas Gay

Thank you, Ed. For the first quarter of fiscal 2012, revenue was $60.6 million, a decrease of $10 million or 14% compared to $70.6 million for the previous quarter. Compared to the year-ago quarter, our revenue decreased $4.6 million or 7% from $65.2 million.

Our revenue breakouts for the quarter are as follows: Our business segment and percentage of total revenues for the quarter, IPTV media processors represented $22.3 million or 37% of the total Connected Home Technologies was $27.2 million or 45% of the total; Connected Media Players, $8.1 million or 13%; and Prosumer, $2.9 million or 5% of the total.

During the first quarter, we had 2 customers that each exceeded 10% of our net revenue. First was Gemtek at $18.1 million or 30% of total and Motorola at $12.2 million or 20% of the total revenue.

GAAP gross margins were 49.1% for the first quarter compared to 49.4% in the preceding quarter and 49.3% in the same period last year. Non-GAAP gross margins were 53.7% for the first quarter compared to 53.3% in the preceding quarter and 54.1% in the same period last year. GAAP net loss for the first quarter of fiscal 2012 was $5.7 million or $0.18 per share. This compares to GAAP net income of $2.5 million or $0.08 per diluted share in the previous quarter and GAAP net income of $1.1 million or $0.04 per diluted share in the year-ago quarter.

On a non-GAAP basis, net income for the first quarter was $2.3 million or $0.07 per diluted share. Compared to the previous quarter, this was a decrease of $7.5 million from non-GAAP net income of $10.1 million or $0.32 per diluted share. Compared to the year-ago quarter, non-GAAP net income decreased $6.6 million from $9.2 million or $0.29 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 3 categories of differences for the first quarter: First, amortization of intangible assets associated with acquisitions, a total of $4.7 million; second, stock-based compensation of $3.2 million; and third, acquisition expenses of $0.1 million.

Now, I'd like to cover a few key areas from our balance sheet. Cash, cash equivalents, restricted cash and marketable securities totaled $169 million at the end of the quarter, a decrease of $10 million or $0.35 per share outstanding compared to the beginning of the fiscal year. Based on our shares outstanding at the end of the quarter, the total value of cash, cash equivalents, restricted cash and marketable securities equals $5.31 per share outstanding. The decrease in cash for the quarter was primarily driven by the timing of shipments, as well as a sharp increase in payments for fixed asset purchases, such as engineering design tools and software.

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