Sigma Designs F1Q11 (Qtr End 05/01/2010) Earnings Call Transcript

Sigma Designs F1Q11 (Qtr End 05/01/2010) Earnings Call Transcript
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Sigma Designs (SIGM)

F1Q11 (Qtr End 05/01/2010) Earnings Call

May 26, 2010 5:00 pm ET

Executives

Ed McGregor - Investor Relations Manager

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

Thinh Tran - Founder, Chairman, Chief Executive Officer and President

Kenneth Lowe - Vice President of Strategic Marketing

Analysts

Dunham Winoto - Avian Securities, LLC

Quinn Bolton - Needham & Company, LLC

Scott Hirleman - Robert W. Baird

Vahid Khorsand

Mark Sue - RBC Capital Markets Corporation

Sukhi Nagesh - Deutsche Bank AG

John Vinh - Collins Stewart LLC

Presentation

Operator

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Good day, ladies and gentlemen, and welcome to the First Quarter 2011 Sigma Designs Earnings Conference Call. My name is Emety, and I'll be your operator for today. [Operator Instructions] I would now like to turn the conference over to your host, Mr. Ed McGregor, Manager of Investor Relations. Please proceed, sir.

Ed McGregor

Thank you. Welcome to Sigma Designs' conference call to discuss financial results for our first fiscal quarter of 2011. I am Ed McGregor, Sigma's Manager of Investor Relations and with me today are Thinh Tran, our Chairman and CEO; Tom Gay, our CFO; and Ken Lowe, our Vice President of Strategic Marketing.

A 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 in 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.

Specific factors that may affect our business and future results are discussed in the Risk Factor section of our annual report on Form 10-K filled with the SEC reports on April 1, 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 to today's call, we will be reporting certain financial results 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 on today's earnings press release, along with a detailed reconciliation of our GAAP to non-GAAP results.

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

Thomas Gay

Thank you, Ed. For the first quarter of fiscal 2011, revenue was $65.2 million, a decrease of $2.9 million or 4% compared to the $68.1 million in the previous quarter. Compared to the year-ago quarter, our revenue increased $14 million or 27% from the $51.2 million that we reported.

Our revenue breakouts are as follows. By business segment and percentage of total revenues for the quarter, IPTV [internet protocol television] processors represented $31.1 million or 48% of the total; Connected Media Players came in at $9.9 million or 15%; Connected Home Technologies, $21 million even or 32%; and the Consumer Group came in at $3.2 million or 5% of the total.

By shipped to region, Asia represented $60.9 million or 93% of our total revenue for the quarter; Europe, $1.9 million or 3%; and North America, $2.4 million or 4% of the total.

During the first quarter, we had two customers that each exceeded 10% of our net revenue. It was with Motorola for $16.1 million or 25% and Gemtek at $12.4 million or 19%.

GAAP gross margins were 49.3% for the first quarter compared to 41.1% in the preceding quarter and 47.6% in the same period last year. Non-GAAP gross margins were 54.1% for the first quarter compared to 51.7% in the preceding quarter and 49.5% in the same period last year. GAAP net income for the first quarter of fiscal 2011 was $1.1 million or $0.04 per diluted share. This compares to a GAAP net loss of $2.8 million or $0.09 per share in the previous quarter, and GAAP net income of $2.7 million or $0.10 per diluted share in the year-ago quarter.

On a non-GAAP basis, net income was $9.2 million or $0.29 per diluted share compared to the previous quarter. This is a decrease of $2.1 million from non-GAAP income of $11.3 million or $0.37 per diluted share. Compared to the year-ago quarter, non-GAAP net income increased $0.8 million from $8.4 million or $0.31 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 categories of differences for the first quarter. First was amortization of intangible assets associated with four acquisitions, a total of $4.6 million from Blue7, VXP, Zensys and CopperGate; share-based compensation of $3.1 million; and the fair value markup on inventory purchased through acquisitions and sold during Q1 of $0.4 million.

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