SIGM

Sigma Designs, Inc. (SIGM)

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Sigma Designs (SIGM)

Q2 2013 Earnings Call

September 05, 2012 5:00 pm ET

Executives

Edward McGregor

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

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

Kenneth Lowe - Vice President of Strategic Marketing

Ed McGregor - Director of Investor Relations

Analysts

Stephen Chin - UBS Investment Bank, Research Division

Hamed Khorsand - BWS Financial Inc.

Gary W. Mobley - The Benchmark Company, LLC, Research Division

Quinn Bolton - Needham & Company, LLC, Research Division

Daniel L. Amir - Lazard Capital Markets LLC, Research Division

Charles Iver Frumberg - Emancipation Capital LLC

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the Second Quarter 2013 Sigma Designs Earnings Conference Call. My name is Regina, and I will be your conference operator for today. [Operator Instructions] Today's event is being recorded for replay purposes.

I would now like to turn the conference over to your host for today, Mr. Ed McGregor, Director of Investor Relations. Please go ahead, Mr. McGregor.

Edward McGregor

Thank you, Regina, and welcome to Sigma Designs conference call to discuss financial results for our second fiscal quarter of 2013. I am Ed McGregor, Sigma's Director 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 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 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 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 7, 2012. A partial list of these important risk factors is 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 exclude 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 with that, I'll turn it over to Tom.

Thomas E. Gay

Thank you, Ed. For the second quarter of fiscal 2013, revenue was $68.3 million, an increase of $28 million or 70% compared to $40.3 million in the previous quarter. Compared to the year ago quarter, our revenue increased $21.6 million or 46% from $46.7 million. The increase in revenues was mostly due to $26.6 million of revenues added to Sigma's acquisition of the DTV business assets from Trident.

Our revenue breakouts for the quarter are as follows: by target market and percentage of total revenues for the quarter, DTV represented $26.6 million or 39% of the total; home networking, $22.4 million or 33%; IPTV media processors, $10.2 million or 15%; connected media player, $1.8 million or 3% of the total; and control and energy management products, $3.1 million or 5%; licensing revenue on -- from the home control and energy management segment recognized $1.4 million or 2% of the revenue for the quarter; and Prosumer, $2.7 million or 4% of the total for the quarter. During the second quarter, we had one customer that exceeded 10% of our net revenue. That was TDVision or $12.2 million or 18% of the total.

GAAP gross margins were 44.8% for the second quarter compared to 52.4% in the preceding quarter and 27.8% in the same period last year. Non-GAAP gross margins were 51% for the second quarter compared to 56.4% in the preceding quarter and 34% in the same period last year. One significant factor in our reduced gross margin was the sale of DTV inventory that was fired from Trident and marked up to a selling price in the valuation of the acquired assets. Without that adjustment, we would have realized $2.5 million more gross profit and an adjusted GAAP gross margin of 48.5%.

GAAP net loss for the second quarter of fiscal 2013 was $13.3 million or $0.40 per diluted share. This compares to GAAP net loss of $13.7 million or $0.42 per diluted share in the previous quarter and GAAP net loss of $22 million or $0.69 per diluted share in the year ago quarter. On a non-GAAP basis, net loss for the second quarter was $4.1 million or $0.12 per diluted share. This compares to a non-GAAP net loss of $8.5 million or $0.26 per diluted share in the previous quarter and non-GAAP net loss of $14 million or $0.44 per diluted share in the year ago quarter.

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