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Sigma Designs (SIGM)

Q1 2013 Earnings Call

May 23, 2012 5:00 pm ET


Ed McGregor - Director of Investor Relations

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

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

Kenneth Lowe - Vice President of Strategic Marketing


Philip Lee

Vahid Khorsand - BWS Financial Inc.

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

Stephen Chin - UBS Investment Bank, Research Division



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Good day, ladies and gentlemen, and welcome to the First Quarter 2013 Sigma Designs Earnings Conference call. My name is Deana, and I'll be your operator for today. [Operator Instructions] And as a reminder, today's conference 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.

Ed McGregor

Thank you, Deana. Welcome to Sigma Designs conference call to discuss financial results for our first quarter of fiscal 2013. I am Ed McGregor, Sigma's Director, 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 quarterly results, including selected income statements and 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 with my brief introduction, a review of selected financials by Tom, an executive overview by Thinh, a market update by Ken and comments and 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'd like to remind everyone that today's call contains forward-looking information including guidance we provide about our future revenue, gross margins and other financial measures and anticipated trends in our target market. We caution you that the forward-looking information that we present today is based on our current results. 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 29, 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 statements 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 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 first quarter of fiscal 2013, revenue was $40.3 million, an increase of $4.7 million or 13% compared to $35.6 million in the previous quarter. Compared to the year-ago quarter, our revenue decreased $20.3 million or 34% from $60.6 million.

Our revenue breakouts for the quarter are as follows. By target market and percentage of total revenues for the quarter, Home Networking represented $20.8 million or 52% of the total; IPTV media processors, $10.4 million or 26%; Connected Media Players, $3.2 million or 8%; Home Control and Energy Management, $3.2 million or 8%; Prosumer, $2.6 million or 6%.

During the first quarter, we had 3 customers that each exceeded 10% of our net revenue. Motorola at $6.4 million or 16% of the total; Flextronics, $6.3 million or 16% of the total; and Gemtek, $5.6 million or 14% of the total.

GAAP gross margins were 52.4% for the first quarter compared to 46.6% in the preceding quarter and 49.1% in the same period last year. Non-GAAP gross margins were 56.4% for the first quarter compared to 51.4% in the preceding quarter and 53.7% in the same period last year. One significant factor in our better-than-expected margin was the benefit from the sale of product that have been previously reserved which decreased our cost of goods sold by $1.1 million and added 2.7% to the margin on both a GAAP and non-GAAP basis.

GAAP net loss for the first quarter of fiscal 2013 was $13.7 million or $0.42 per diluted share. This compares to GAAP net loss of $18.8 million or $0.58 per diluted share in the previous quarter, and GAAP net loss of $5.7 million or $0.18 per diluted share in the year-ago quarter.

On a non-GAAP basis, net loss for the first quarter was $8.5 million or $0.26 per diluted share. This compares to non-GAAP net loss of $14 million or $0.43 per diluted share in the previous quarter and non-GAAP net income of $2.3 million or $0.07 per diluted share in the year-ago quarter. 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 $1.9 million. Second, stock-based compensation of $2.8 million. And third, expenses related to our recent acquisition of Trident's DTV business, which totaled $0.5 million.

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