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Sigma Designs, Inc. Reports Fourth Quarter and Fiscal Year 2018 Financial Results

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FREMONT, Calif., April 20, 2018 (GLOBE NEWSWIRE) -- Sigma Designs, Inc.® (NASDAQ:SIGM), a developer of technology for use in the mobile Internet of Things (IoT) market, today reported financial results for its fourth quarter and fiscal year 2018, which ended February 3, 2018.  Due to the previously announced asset sale to Silicon Labs (NASDAQ:SLAB) the Company will not hold an earnings conference call. 

Fourth Quarter Fiscal 2018 Financial Results

Net revenue for the fourth quarter of fiscal 2018 was $26.5 million. This compares with net revenue of $33.9 million reported in the previous quarter, and net revenue of $42.7 million in the same period in fiscal 2017. 

GAAP gross margin in the fourth quarter of fiscal 2018 was 42.1%.  This compares with GAAP gross margin of 50.5% in the previous quarter, and GAAP gross margin of 50.1% for the same period in fiscal 2017. 

Non-GAAP gross margin in the fourth quarter of fiscal 2018 was 38.0%.  This compares with non-GAAP gross margin of 54.7% in the previous quarter, and non-GAAP gross margin of 50.6% for the same period in fiscal 2017.

GAAP operating expenses in the fourth quarter of fiscal 2018 were $80.0 million, which includes impairment charges of $40.8 million and restructuring charges of $6.8 million. This compares with GAAP operating expenses of $36.0 million in the previous quarter, and GAAP operating expenses of $28.6 million for the same period in fiscal 2017.

Non-GAAP operating expenses in the fourth quarter of fiscal 2018 were $28.3 million. This compares with non-GAAP operating expenses of $27.8 million in the previous quarter, and non-GAAP operating expenses of $26.0 million for the same period in fiscal 2017. 

GAAP net loss in the fourth quarter of fiscal 2018 was ($73.4) million, or ($1.88) per share.  This compares with a GAAP net loss of ($19.1) million, or ($0.49) per share, in the previous quarter, and a GAAP net loss of ($8.7) million, or ($0.23) per share, for the same period in fiscal 2017. 

Non-GAAP net loss in the fourth quarter of fiscal 2018 was ($21.6) million, or ($0.55) per share.  This compares with a non-GAAP net loss of ($9.6) million, or ($0.25) per share, in the previous quarter, and a non-GAAP net loss of ($5.9) million, or ($0.16) per diluted share, for the same period in fiscal 2017. 

Cash and cash equivalents at the end of the fourth quarter of fiscal 2018 were $40.6 million.

Fiscal Year 2018 Financial Results

Net revenue in fiscal 2018 was $139.5 million, compared with $220.5 million in the previous fiscal year, prior to Assets held for sale adjustments of ($73.6 million) in fiscal 2018 and ($86.1 million) in fiscal 2017.   The Assets held for sale adjustments consist of the financial results of Sigma's Z-Wave business and Media Connectivity business, each of which were deemed to be held for sale as of February 3, 2018.

GAAP gross margin from continuing operations in fiscal 2018 was 47.1%, compared with 48.1% in fiscal 2017, prior to Assets held for sale adjustments.   

Non-GAAP gross margin from continuing operations in fiscal 2018 was 37.4%, compared with 41.5% in fiscal 2017, which is after adjusting for Assets held for sale. 

GAAP operating expenses from continuing operations in fiscal 2018 were $179.0 million, compared with $117.3 million in fiscal 2017, prior to Assets held for sale adjustments of $37.2 million in fiscal 2018 and $34.7 million in fiscal 2017. 

Included in the fiscal 2018 results were impairment charges of $50.4 million and restructuring charges of $9.3 million.

Non-GAAP operating expenses from continuing operations in fiscal 2018 were $73.1 million, compared with $74.9 million in fiscal 2017, which is after adjusting for Assets held for sale.

GAAP net loss from continuing operations in fiscal 2018 was ($120.0) million, or net loss of ($3.12) per basic share, which is the same result after adjusting for Assets held for sale. This compares with a GAAP net loss of ($18.3) million, or a net loss of ($0.49) per diluted share, in fiscal 2017, which is the same result after adjusting for Assets held for sale. 

Non-GAAP net loss in fiscal 2018 was ($51.3) million, or net loss of ($1.31) per share, after adjusting for Assets held for sale.  This compares with a non-GAAP net loss of ($9.5) million, or a net loss of ($0.66) per share, in fiscal 2017, after adjusting for Assets held for sale.

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.

Use of Non-GAAP Financial Information

In addition to reporting financial results in accordance with generally accepted accounting principles ("GAAP"), Sigma also reports non-GAAP financial measures, as Sigma believes that evaluating its ongoing operating results may be difficult if limited to reviewing only GAAP financial measures. Non-GAAP financial measures are not a substitute for financial information prepared in accordance with GAAP.  Therefore, 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 GAAP financials measures.  The Company presents non-GAAP financial measures to provide investors with an additional tool to evaluate its operating results in a manner that focuses on what management believes to be its core, ongoing business operations. Furthermore, non-GAAP financial measures used by the Company may not be the same non-GAAP financial measures as those utilized by other companies; specifically, non-GAAP financial measures used by the Company may be calculated differently than other companies. Investors should, therefore, exercise caution when comparing non-GAAP financial measures used by Sigma to similarly titled non-GAAP financial measures of other companies.

Sigma's non-GAAP financial measures exclude amortization of acquired intangibles, stock-based compensation, one-time legal and other professional fee expenses, net gain on the sale of and impairment of privately-held investments, impairment of purchased IP, mask sets used in production and one-time restructuring charges.  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.

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 Sigma's operating results in the same manner as the research analysts that follow Sigma's progress, all of whom present non-GAAP projections in their published reports. 

Sigma uses non-GAAP measures to evaluate and assess its performance and operating results on a consistent basis, and to measure and compare its performance with the financial projections published by analysts as well as its direct competitors in the industry, many of whom report financial results on a non-GAAP basis.  The economic substance behind its decision to use non-GAAP measures is that such measures approximate its controllable operating performance more closely than the most directly comparable GAAP financial results.  For example, Sigma's management has no control over certain variables that have a major influence in the determination of stock-based compensation. These variables include the volatility of its stock price and changing interest rates.  Sigma believes that all of these excluded expenses in its non-GAAP financial measures 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.

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) is developing technology for use in the mobile Internet of Things (IoT) market. For more information about Sigma Designs, please visit www.sigmadesigns.com.

Note to editors: Sigma Designs is a trademark of Sigma Designs, Inc. All other product names noted herein may be trademarks of their respective holders.

Investor Relations Contacts:                                                                                     
Jim Fanucchi
Darrow Associates, Inc.
(408) 404-5400
IR@sigmadesigns.com

Elias Nader, Interim President and Chief Executive Officer, and Chief Financial Officer
Sigma Designs, Inc.
(510) 897-0077
IR@sigmadesigns.com

 

 
 
SIGMA DESIGNS, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
PRO FORMA
 
  February 3, 2018   January 28, 2017
  Consolidated
Balance
Sheets
Held
for Sale
Other
Adjustments
As Reported   Consolidated
Balance
Sheets
Held
for Sale
Other
Adjustments
As Reported
                   
ASSETS                   
Current assets                   
Cash and cash equivalents $ 40,628   $ (2,000 ) $ - $ 38,628     $ 66,425   $ (2,000 ) $ - $ 64,425  
Short-term marketable securities   -     -     -   -       4,781     -     -   4,781  
Restricted cash   335     (335 )   -   -       303     (303 )   -   -  
Accounts receivable, net   17,120     (7,405 )   -   9,715       35,860     (15,874 )   -   19,986  
Inventory   14,064     (11,026 )   -   3,038       18,147     (8,684 )   -   9,463  
Prepaid expenses and other current assets   7,898     (1,127 )   -   6,771       8,017     (1,139 )   -   6,878  
Current assets held for sale   -     -     21,893   21,893       -     -     28,000   28,000  
Total current assets    80,045     (21,893 )   21,893   80,045       133,533     (28,000 )   28,000   133,533  
                   
Software, equipment and leasehold improvements, net   6,178     (1,839 )   -   4,339       18,523     (7,265 )   -   11,258  
Intangible assets, net   4,630     (2,079 )   -   2,551       30,744     (2,439 )   -   28,305  
Goodwill   -     -     -   -       10,594     -     -   10,594  
Deferred tax assets   770     (777 )   7   -       625     (658 )   33   -  
Long-term investments   -     -     -   -       2,000     -     -   2,000  
Non-current assets held for sale   -     -     4,703   4,703       -     -     10,370   10,370  
Other non-current assets   4,467     (8 )   -   4,459       5,755     (8 )   -   5,747  
Total assets  $ 96,090   $ (26,596 ) $ 26,603 $ 96,097     $ 201,774   $ (38,370 ) $ 38,403 $ 201,807  
                   
LIABILITIES AND SHAREHOLDERS' EQUITY                   
Current liabilities                  
Accounts payable $ 15,864   $ (6,531 ) $ - $ 9,333     $ 14,230   $ (5,918 ) $ - $ 8,312  
Accrued compensation and related benefits   6,512     (2,464 )   -   4,048       8,127     (2,609 )   -   5,518  
Accrued liabilities   14,679     (4,812 )   -   9,867       13,607     (4,762 )   -   8,845  
Current liabilities held for sale   -     -     13,807   13,807       -     -     13,289   13,289  
Total current liabilities    37,055     (13,807 )   13,807   37,055       35,964     (13,289 )   13,289   35,964  
                   
Income taxes payable   15,708     (4,128 )   -   11,580       15,752     (1,635 )   -   14,117  
Deferred tax liabilities   38     -     7   45       287     -     33   320  
Long-term liabilities held for sale   -     -     4,144   4,144       -     -     1,642   1,642  
Other long-term liabilities   3,169     (16 )   -   3,153       6,225     (7 )     6,218  
Total liabilities    55,970     (17,951 )   17,958   55,977       58,228     (14,931 )   14,964   58,261  
                   
Commitments and contingencies                  
                   
Shareholders' equity                   
Common stock and additional paid-in capital   522,985     -     -   522,985       513,168     (56,373 )   -   456,795  
Treasury stock   (88,336 )   (56,687 )   -   (145,023 )     (88,336 )   -     -   (88,336 )
Accumulated other comprehensive loss   18     -     -   18       (2,178 )   -     -   (2,178 )
Accumulated deficit   (394,547 )   48,042     8,645   (337,860 )     (279,108 )   32,934     23,439   (222,735 )
Total shareholders' equity    40,120     (8,645 )   8,645   40,120       143,546     (23,439 )   23,439   143,546  
                   
Total liabilities and shareholders' equity  $ 96,090   $ (26,596 ) $ 26,603 $ 96,097     $ 201,774   $ (38,370 ) $ 38,403 $ 201,807  
                   

 

 
SIGMA DESIGNS, INC.
 UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
PRO FORMA
(In thousands, except per share data)
 
  February 3, 2018   January 28, 2017
  Consolidated
Statements of
Operations
Held
for Sale
Other
Adjustments
As Reported   Consolidated
Statements of
Operations
Held
for Sale
Other
Adjustments
As Reported
                   
Net revenue $ 139,471   $ (73,566 ) $ -   $ 65,905     $ 220,544   $ (86,137 ) $ -   $ 134,407  
Cost of revenue   73,735     (32,289 )   -     41,446       114,565     (35,629 )     78,936  
Gross profit   65,736     (41,277 )   -     24,459       105,979     (50,508 )   -     55,471  
Gross margin percent   47.1 %   56.1 %     37.1 %     48.1 %   58.6 %     41.3 %
                   
Operating expenses:                  
Research and development   72,309     (19,653 )   -     52,656       73,993     (16,716 )     57,277  
Sales and marketing   23,806     (14,720 )     9,086       23,300     (15,727 )     7,573  
General and administrative   23,097     (2,710 )     20,387       18,860     (2,292 )     16,568  
Restructuring charges   9,327     -       9,327             -  
Impairment of IP, mask sets and design tools   50,431     (80 )     50,351       1,148         1,148  
Total operating expenses   178,970     (37,163 )   -     141,807       117,301     (34,735 )   -     82,566  
Loss from operations   (113,234 )   (4,114 )     (117,348 )     (11,322 )   (15,773 )     (27,095 )
Impairment of privately-held investments, net of gain on sale             (885 )       (885 )
Interest and other income, net   (1,929 )   (541 )     (2,470 )     539     (256 )     283  
Loss before income taxes   (115,163 )   (4,655 )     (119,818 )     (11,668 )   (16,029 )     (27,697 )
Provision for income taxes   4,878     (5,592 )     (714 )     6,647     (897 )     5,750  
Net (loss) income from continuing operations    (120,041 )   937     -     (119,104 )     (18,315 )   (15,132 )   -     (33,447 )
Income from operations held for sale       4,655     4,655           16,029     16,029  
Provision for income taxes       5,592     5,592           897     897  
(Loss) income on operations held for sale   -     -     (937 )   (937 )     -     -     15,132     15,132  
Net (loss) income $ (120,041 ) $ 937   $ (937 ) $ (120,041 )   $ (18,315 ) $ (15,132 ) $ 15,132   $ (18,315 )
                   
Net loss per share:                  
Basic $ (3.12 )     $ (3.12 )   $ (0.49 )     $ (0.49 )
Diluted $ (3.12 )     $ (3.12 )   $ (0.49 )     $ (0.49 )
Shares used in computing net loss per share:                  
Basic   38,527         38,527       37,429         37,429  
Diluted   38,527         38,527       37,429         37,429  
                   
Other comprehensive (loss) income:                   
Change in currency translation adjustments, net of tax $ (2,191 ) $ (129 ) $ 129   $ (2,191 )   $ (336 ) $ 63   $ (63 ) $ (336 )
Change in unrealized gains (losses) on marketable securities, net of tax   (5 )       (5 )     33         33  
Other comprehensive income (loss)   (2,196 )   (129 )   129     (2,196 )     (303 )   63     (63 )   (303 )
Comprehensive (loss) income  $ (122,237 ) $ 808   $ (808 ) $ (122,237 )   $ (18,618 ) $ (15,069 ) $ 15,069   $ (18,618 )
                   

 

 
SIGMA DESIGNS, INC.
RECONCILIATION OF PRO FORMA NET LOSS TO NON-PRO FORMA NET LOSS AS REPORTED
(Unaudited)
(In thousands, except per share data)
       
  Twelve months ended
  February 3, 2018   January 28, 2017
       
Pro Forma Net Revenue $ 65,905     $ 134,407  
       
Non-Pro Forma Net Revenue $ 65,905     $ 134,407  
       
Pro Forma Cost of Revenue $ 41,446     $ 78,936  
Items reconciling Pro Forma Cost of Revenue to Non-Pro Forma:      
Stock based compensation expense   (204 )     (274 )
Amortization of acquired intangibles   -       -  
Impairment of IP, mask sets and design tools   -       -  
Restructuring charges, net   -       -  
Pro Forma to Non-Pro Forma adjustments   (204 )     (274 )
Non-Pro Forma Cost of Revenue $ 41,242     $ 78,662  
       
Pro Forma Gross Profit $ 24,459     $ 55,471  
Pro Forma Gross Margin %   37.1 %     41.3 %
Non-Pro Forma Gross Profit $ 24,663     $ 55,745  
Non-Pro Forma Gross Margin %   37.4 %     41.5 %
       
Pro Forma Operating Expenses $ 141,807     $ 82,566  
Items reconciling Pro Forma Operating Expenses to Non-Pro Forma:      
Stock based compensation expense   (3,966 )     (4,942 )
Amortization of acquired intangibles   (1,603 )     (1,603 )
Impairment of IP, mask sets and design tools   (50,431 )     (1,148 )
Legal and other professional expenses   (3,332 )     -  
Restructuring charges   (9,327 )     -  
Pro Forma to Non-Pro Forma adjustments   (68,659 )     (7,693 )
Non-Pro Forma Operating Expenses $ 73,148     $ 74,873  
       
Pro Forma Other Income (Expense) and Tax $ (1,756 )   $ (6,352 )
       
Items reconciling Pro Forma Other Income (Expense) and Tax to Non-Pro Forma:      
(Gain on sale) impairment of privately held instruments, net   (110 )     885  
Pro Forma to Non-Pro Forma adjustments   (110 )     885  
       
Non-Pro Forma Other Income (Expense) and Tax   (1,866 )     (5,467 )
       
Non-Pro Forma loss from continuing operations   (50,351 )     (24,595 )
Income (loss) from operations held for sale   4,655       16,029  
Provision for income taxes   5,592       897  
Income (loss) on operations held for sale   (937 )     15,132  
       
Non-Pro Forma Net loss $ (51,288 )   $ (9,463 )
       
Non-Pro Forma Net loss per share:      
Basic $ (1.31 )   $ (0.66 )
Diluted $ (1.31 )   $ (0.66 )
Shares used in computing Non-Pro Forma net loss per share:      
Basic   38,527       37,429  
Diluted   38,527       37,429  
   

 

 
SIGMA DESIGNS, INC.
QUARTERLY FINANCIAL INFORMATION
UNAUDITED, PRESENTED WITHOUT EFFECT TO ASSETS HELD FOR SALE
                 
  Fiscal Quarters Ended
  February 3,
2018
October 28,
2017
July 29,
2017
April 29,
2017
January 28,
2017
October 29,
2016
July 30,
2016
April 30,
2016
                 
Net revenue $ 26,537   $ 33,862   $ 39,508   $ 39,564   $ 42,724   $ 62,729 $ 61,316   $ 53,775  
Gross profit   11,176     17,116     18,820     18,624     21,401     30,995   29,582     24,001  
(Loss) income from operations   (70,019 )   (18,884 )   (10,954 )   (13,377 )   (7,163 )   2,169   (313 )   (6,015 )
Net (loss) income   (73,421 )   (19,084 )   (12,677 )   (14,859 )   (8,716 )   221   (1,722 )   (8,098 )
Basic net (loss) income per share $ (1.91 ) $ (0.49 ) $ (0.33 ) $ (0.39 ) $ (0.23 ) $ 0.01 $ (0.05 ) $ (0.22 )
Diluted net (loss) income per share $ (1.91 ) $ (0.49 ) $ (0.33 ) $ (0.39 ) $ (0.23 ) $ 0.01 $ (0.05 ) $ (0.22 )
                 
                 
This table, differing from financial statement presentation herein, presents condensed financial information without effect to the reclassifications resulting from discontinued operations.

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