Sigma Designs, Inc. Reports First Quarter Fiscal Year 2017 Financial Results
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Sigma Designs, Inc. Reports First Quarter Fiscal Year 2017 Financial Results

FREMONT, CA--(Marketwired - June 06, 2016) - Sigma Designs, Inc.® (NASDAQ: SIGM), a leading provider of intelligent system-on-chip (SoC) solutions for Connected Smart TV platforms and Internet of Things (IoT) Devices, today reported financial results for its first quarter of fiscal year 2017, which ended April 30, 2016.

Financial Results

Net revenue for the first quarter of fiscal 2017 was $53.8 million, up $2.3 million, or 4.5%, from $51.5 million reported in the previous quarter, and down $2.1 million, or 3.8%, from $55.9 million reported in the same period in fiscal 2016.

GAAP gross margin in the first quarter of fiscal 2017 was 44.6%. This compares with a GAAP gross margin of 47.6% in the previous quarter, and a GAAP gross margin of 52.5% for the same period in fiscal 2016.

Non-GAAP gross margin in the first quarter of fiscal 2017 was 46.6%. This compares with a non-GAAP gross margin of 49.6% in the previous quarter, and a non-GAAP gross margin of 53.8% for the same period in fiscal 2016. The fluctuation in gross margin is primarily due to the revenue mix being more heavily weighted to the Connected Smart TV Platforms.

GAAP operating expenses in the first quarter of fiscal 2017 were $30.0 million, compared with GAAP operating expenses of $29.7 million in the previous quarter, and GAAP operating expenses of $27.9 million for the same period in fiscal 2016.

Non-GAAP operating expenses in the first quarter of fiscal 2017 were $27.5 million, compared with non-GAAP operating expenses of $27.4 million in the previous quarter, and non-GAAP operating expenses of $25.4 million for the same period in fiscal 2016.

GAAP operating loss in the first quarter of fiscal 2017 was ($6.0) million, compared with a GAAP operating loss of ($5.2) million in the previous quarter, and GAAP operating income of $1.4 million for the same period in fiscal 2016.

Non-GAAP operating loss in the first quarter of fiscal 2017 was ($2.5) million, compared with a non-GAAP operating loss of ($1.9) million in the previous quarter, and non-GAAP operating income of $4.3 million for the same period in fiscal 2016.

GAAP net loss for the first quarter of fiscal 2017 was ($8.1) million, or ($0.22) per share. This compares with a GAAP net loss of ($6.2) million, or ($0.17) per share in the previous quarter, and a GAAP net loss of ($0.4) million, or ($0.01) per share, for the same period in fiscal 2016.

Non-GAAP net loss for the first quarter of fiscal 2017 was ($4.2) million, or ($0.12) per share. This compares with non-GAAP net income of $0.9 million, or $0.02 per diluted share, in the previous quarter, and non-GAAP net income of $3.2 million, or $0.09 per diluted share, for the same period in fiscal 2016.

The reconciliation between the GAAP and non-GAAP financial results for all referenced periods is provided in a table immediately following the GAAP financial tables below.

Management Comment

"I am pleased with the revenue growth we achieved in the first quarter which was consistent with the guidance we provided last quarter. Our Connected Smart TV Platforms business grew nearly 10% over last quarter and we are confident that its underlying strength will continue to fuel our revenue growth this year," said Thinh Tran, President and CEO of Sigma Designs, Inc. "We are executing on strategies designed to build long-term momentum for each of these businesses and continue to see evidence of this success in our partnerships, design wins, and technology achievements. We are confident the overall revenue trends for our businesses are positive and will drive us back to profitability."

Investor Conference Call

The conference call relating to Sigma's first quarter fiscal 2017 financial results will take place following this announcement at 5:00 p.m. Eastern Time/2:00 p.m. Pacific Time today, June 6, 2017. Investors will have an opportunity to listen live to the conference call via the internet through www.sigmadesigns.com/IR. To listen to the live call, please go to the website at least 10 minutes prior to the commencement of the call to register, download and install any necessary audio software. For those who are unable to listen to the live broadcast, a replay will be available shortly after the call via the Internet through www.sigmadesigns.com/IR. The audio replay will be available for one week after the call.

Use of Non-GAAP Financial Information

In addition to reporting financial results in accordance with generally accepted accounting principles ("GAAP"), Sigma reports non-GAAP net income (loss), as Sigma believes that evaluating its ongoing operating results may be difficult if limited to reviewing only GAAP financial measures. Accordingly, non-GAAP financial measures exclude amortization of acquired intangibles, stock-based compensation, one-time legal fee expenses, settlement expenses, net gain on sale of and impairment of privately-held investments, restructuring charges, impairment of purchased IP, mask sets and design tools used in production, the reversal of previously accrued rebates and the one-time gain from the gain on sale of development project. The tax amounts included in Sigma's non-GAAP results approximate its operating cash tax expense, similar to the liability reported on Sigma's tax returns. In the GAAP to non-GAAP reconciliation at the end of this press release, we have disclosed the impact of these income tax adjustments in our calculation of our non-GAAP financial results.

Legislative and regulatory requirements encourage the use of and emphasis on GAAP financial metrics and require companies to explain why non-GAAP financial metrics are relevant to management and investors. Sigma believes that its non-GAAP measures provide useful information to management and investors regarding financial and business trends relating to its financial condition and results of operations. Sigma also believes the non-GAAP measures provide useful supplemental information for investors to evaluate its operating results in the same manner as the research analysts that follow Sigma, all of whom present non-GAAP projections in their published reports. As such, the non-GAAP measures provided by Sigma facilitate a more direct comparison of its performance with the financial projections published by the analysts as well as its competitors, many of whom report financial results on a non-GAAP basis. The economic substance behind its decision to use such non-GAAP measures is that such measures approximate its controllable operating performance more closely than the most directly comparable GAAP financial measures. For example, Sigma's management has no control over certain variables that have a major influence in the determination of stock-based compensation such as the volatility of its stock price and changing interest rates. Sigma believes that all of these excluded expenses may not accurately reflect the underlying performance of its continuing operations for the period in which they are incurred, even though some of these excluded items may be incurred and reflected in Sigma's GAAP financial results in the foreseeable future. Sigma believes that the inclusion of these non-GAAP financial measures provides consistency and comparability with past reports and provides a better understanding of the overall performance of the business and its ability to perform in subsequent periods.

Non-GAAP financial measures are not a substitute for financial information prepared in accordance with GAAP. Non-GAAP financial measures should not be considered in isolation, but should be considered together with the most directly comparable GAAP financial measures and the reconciliation of the non-GAAP financial measures to the most directly comparable GAPP financials measures. The Company presents such non-GAAP financial measures to provide investors with an additional tool to evaluate our operating results in a manner that focuses on what management believes to be its core, ongoing business operations.

Investors should note that the non-GAAP financial measures used by the Company may not be the same non-GAAP financial measures, and may not be calculated in the same manner, as those of other companies. Investors should, therefore, exercise caution when comparing non-GAAP financial measures used by us to similarly titled non-GAAP financial measures of other companies. Sigma intends to calculate the various non-GAAP financial measures in future periods consistent with how they were calculated for the periods presented within this press release.

Safe Harbor Statement

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 31E of the Securities Exchange Act of 1934, including our confidence that the underlying strength of our Connected Smart TV Platforms business will continue to fuel our revenue growth this year, our belief that the overall revenue trend for our Connected Smart TV Platforms and our IoT Devices is positive and the ability of the strategies that we have in place to build long-term momentum for each of these businesses. The forward-looking statements in this press release involve risks and uncertainties. Actual results may differ materially from expectations discussed in these forward-looking statements due to a number of factors, including the risk that, upon completion of further closing and review procedures, the financial results for the first quarter fiscal year 2017 are different than the results set forth in this press release, our ability to recognize revenue from design wins, general economic conditions, the ability to recognize the anticipated savings from our restructuring efforts, the rate of growth of each of our business segments, the ramp in demand of our Connected Smart TV Platforms business, an increase of our television and telecommunication customers, our ability to deploy and achieve market acceptance for our products, unanticipated costs and risks related to the integration of Bretelon and further development of Bretelon technology and the risk that such products will not gain widespread acceptance, or will be rendered obsolete by product offerings of competitors or by alternative technologies, and other risks detailed from time to time in our filings with the Securities and Exchange Commission. In particular, see Sigma's recent quarterly and annual reports filed with the Securities and Exchange Commission and available on the SEC website at www.sec.gov and on our website. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. We undertake no obligation to publicly release or otherwise disclose the result of any revision to these forward-looking statements that may be made as a result of events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

Sigma Designs is a registered trademark of Sigma Designs, Inc. in the United States and other countries.

About Sigma Designs, Inc.

Sigma Designs, Inc. (NASDAQ: SIGM) designs and builds the essential semiconductor technologies that serve as the foundation for the world's leading Connected Smart TV platforms and the IoT Devices. For more information about Sigma Designs, please visit www.sigmadesigns.com.

                                                                            
                            SIGMA DESIGNS, INC.                             
              UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS               
                                   (GAAP)                                   
                               (In thousands)                               
                                                  April 30,     January 30, 
                                                     2016          2016     
                                                 ------------  -------------
Assets                                                                      
                                                                            
Current Assets:                                                             
  Cash and cash equivalents                      $     56,328  $      63,790
  Short-term marketable securities                      6,840          4,805
  Restricted cash                                         823            900
  Accounts receivable, net                             38,205         30,362
  Inventory                                            24,308         26,709
  Prepaid expenses and other current assets            15,608         14,085
                                                 ------------  -------------
    Total current assets                              142,112        140,651
                                                                            
Long-term marketable securities                         1,502          3,527
Software, equipment and leasehold improvements,                             
 net                                                   11,520         14,086
Goodwill                                               11,068         11,068
Intangible assets, net                                 34,754         37,050
Deferred tax assets                                       902            911
Long-term investments, net of current portion           2,586          2,884
Other non-current assets                                6,524          6,492
                                                 ------------  -------------
                                                                            
    Total assets                                 $    210,968  $     216,669
                                                 ============  =============
                                                                            
Liabilities and Shareholders' Equity                                        
                                                                            
Current Liabilities:                                                        
  Accounts payable                               $     23,552  $      26,181
  Accrued compensation and related benefits             8,648          7,360
  Accrued liabilities                                  15,558         14,632
                                                 ------------  -------------
    Total current liabilities                          47,758         48,173
                                                                            
  Other long-term liabilities                          16,138         15,691
                                                 ------------  -------------
    Total liabilities                                  63,896         63,864
                                                                            
Shareholders' equity                                  147,072        152,805
                                                 ------------  -------------
                                                                            
    Total liabilities and shareholders' equity   $    210,968  $     216,669
                                                 ============  =============
                                                                            
                                                                            
                            SIGMA DESIGNS, INC.                             
         UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS          
                                  (GAAP)                                    
                   (In thousands, except per share data)                    
                                                                            
                                               Three months ended           
                                      --------------------------------------
                                       April 30,   January 30,              
                                         2016         2016      May 2, 2015 
                                      ------------ ------------ ------------
Net revenue                           $    53,775  $    51,450  $    55,912 
Cost of revenue                            29,774       26,949       26,564 
                                      ------------ ------------ ------------
Gross profit                               24,001       24,501       29,348 
Gross margin percent                         44.6%        47.6%        52.5%
                                                                            
Operating expenses:                                                         
  Research and development                 19,155       19,030       16,313 
  Sales and marketing                       5,723        5,937        5,811 
  General and administrative                5,138        4,771        5,772 
  Restructuring costs                           -            -            9 
  Impairment of IP, mask sets and                                           
   design tools                                 -            -           33 
                                      ------------ ------------ ------------
    Total operating expenses               30,016       29,738       27,938 
                                                                            
Income (loss) from operations              (6,015)      (5,237)       1,410 
Interest and other income (expenses),                                       
 net                                         (751)         132          671 
                                      ------------ ------------ ------------
                                                                            
Income (loss) before income taxes          (6,766)      (5,105)       2,081 
Provision for income taxes                  1,332        1,086        2,463 
                                      ------------ ------------ ------------
                                                                            
Net loss                              $    (8,098) $    (6,191) $      (382)
                                      ============ ============ ============
                                                                            
Net loss per share:                                                         
  Basic                               $     (0.22) $     (0.17) $     (0.01)
  Diluted                             $     (0.22) $     (0.17) $     (0.01)
Shares used in computing net income                                         
 (loss) per share:                                                          
  Basic                                    36,872       36,568       35,395 
  Diluted                                  36,872       36,568       35,395 
                                      $       580  $     4,687  $     1,478 
                                      ============ ============ ============
                                                                            
                                                                            
                            SIGMA DESIGNS, INC.                             
  RECONCILIATION OF GAAP NET INCOME (LOSS) TO NON-GAAP NET INCOME (LOSS)    
                                (Unaudited)                                 
                   (In thousands, except per share data)                    
                                                                            
                                               Three months ended           
                                      --------------------------------------
                                       April 30,   January 30,    May 2,    
                                         2016         2016         2015     
                                      ------------ ------------ ------------
GAAP Net Revenue                      $    53,775  $    51,450  $    55,912 
Items reconciling GAAP Revenue to                                           
 Non-GAAP:                                                                  
  Reversal of rebate                            -            -         (806)
                                      ------------ ------------ ------------
  GAAP to Non-GAAP adjustments                  -            -         (806)
  Non-GAAP Net Revenue                $    53,775  $    51,450  $    55,106 
                                                                            
GAAP Cost of Revenue                  $    29,774  $    26,949  $    26,564 
Items reconciling GAAP Cost of                                              
 Revenue to Non-GAAP:                                                       
  Stock based compensation expense           (104)         (69)         (36)
  Amortization of acquired                                                  
   intangibles                               (949)        (965)      (1,062)
                                      ------------ ------------ ------------
  GAAP to Non-GAAP adjustments             (1,053)      (1,034)      (1,098)
  Non-GAAP Cost of Revenue            $    28,721  $    25,915  $    25,466 
                                                                            
  GAAP Gross Profit                   $    24,001  $    24,501  $    29,348 
  GAAP Gross Margin %                        44.6%        47.6%        52.5%
  Non-GAAP Gross Profit               $    25,054  $    25,535  $    29,640 
  Non-GAAP Gross Margin %                    46.6%        49.6%        53.8%
                                                                            
GAAP Operating Expenses               $    30,016  $    29,738  $    27,938 
Items reconciling GAAP Operating                                            
 Expense to Non-GAAP:                                                       
  Stock based compensation expense         (1,788)      (1,610)      (1,698)
  Amortization of acquired                                                  
   intangibles                               (699)        (648)        (345)
  Impairment of IP, mask sets and                                           
   design tools                                 -            -          (33)
  One time legal fee expenses                 (11)         (85)        (498)
  Restructuring costs                           -            -           (9)
                                      ------------ ------------ ------------
  GAAP to Non-GAAP adjustments             (2,498)      (2,343)      (2,583)
  Non-GAAP Operating Expenses         $    27,518  $    27,395  $    25,355 
                                                                            
GAAP Other Income (Expense) and Tax   $    (2,083) $      (954) $    (1,792)
Items reconciling GAAP Other Income                                         
 (Expense) and Tax to Non-GAAP:                                             
  Impairment (gain on sale) of                                              
   privately held instruments, net            300          251         (518)
  Income tax adjustments                        -        3,463        1,182 
                                      ------------ ------------ ------------
  GAAP to Non-GAAP adjustments                300        3,714          664 
  Non-GAAP Other Income (Expense) and                                       
   Tax                                $    (1,783) $     2,760  $    (1,128)
                                                                            
Non-GAAP Net Income (Loss)            $    (4,247) $       900  $     3,157 
                                      ============ ============ ============
                                                                            
Non-GAAP Net Income (Loss) per share:                                       
  Basic                               $     (0.12) $      0.02  $      0.09 
  Diluted                             $     (0.12) $      0.02  $      0.09 
Shares used in computing Non-GAAP net                                       
 income (loss) per share:                                                   
  Basic                                    36,872       36,568       35,395 
  Diluted                                  36,872       36,995       36,291 
                                                                            



Investor Relations Contacts: 

Jim Fanucchi
Darrow Associates, Inc.
(408) 404-5400

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Elias Nader
CFO and Corporate Secretary
Sigma Designs, Inc.

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