Sigma Designs, Inc. Reports First Quarter Fiscal 2010 Results

MILPITAS, Calif.--(Business Wire)--
Sigma Designs®, Inc. (NASDAQ: SIGM), a leading provider of highly integrated
system-on-chip, or SoC, solutions that are used to deliver multimedia
entertainment throughout the home, today reported financial results for its
first fiscal quarter ended May 2, 2009.

Net revenue for the first quarter was $51.2 million, up $3.9 million, or 8%,
from $47.3 million in the previous quarter and down $5.7 million, or 10%, from
$56.9 million reported for the same period last year.

GAAP net income for the first quarter was $2.7 million, or $0.10 per diluted
share which includes a charge of $3.5 million, or $0.13 per diluted share, for
the write-off of deferred tax assets due to changes in California corporate
income tax laws. This compares to GAAP net income of $6.6 million, or $0.24 per
diluted share, for the previous quarter which included a tax benefit of $2.4
million, or $0.09 per diluted share, due to Sigma`s reduction of its effective
income tax rate for fiscal 2009. GAAP net income was $6.6 million, or $0.22 per
diluted share, in the first quarter one year ago.

At the end of Sigma`s first quarter, total cash, cash equivalents and marketable
securities totaled $221.3 million, or $8.32 per share outstanding. The increase
of $29.1 million, or $1.08 per share, during the quarter was due to the
reduction of inventory, an increase in accounts payable and accelerated
collections that resulted in a temporary reduction of accounts receivable.
Additionally, other operating activities generated $10.1 million, or $0.38 per
share outstanding.

Non-GAAP net income for the first quarter was $8.3 million, or $0.30 per diluted
share. This compares to non-GAAP net income of $10.1 million, or $0.38 per
diluted share for the previous quarter and non-GAAP net income of $13.6 million,
or $0.46 per diluted share during the same period one year ago. Non-GAAP
adjustments for the first quarter consisted of $832,000 in amortization expense
for acquired intangibles related to the Zensys, VXP and Blue7 acquisitions, $1.2
million in non-cash share-based compensation expenses and $3.5 million from the
write off of the deferred tax assets associated with the benefits from
California state income tax credits no longer expected to be received in future
periods. The reconciliation between GAAP and non-GAAP results for all referenced
periods is provided in a table immediately following the GAAP financial tables
below.

Management Comment

"We are pleased to report a sequential increase in our revenue for the first
quarter, which we feel provides continued signs of stabilization and strength in
our primary markets. We are continuing to place heavy efforts on bolstering
sales as well as expanding the breadth of our market opportunities. The IPTV
market is continuing to show resilience to current economic issues and we are
confident that it will continue to demonstrate some level of growth for this
year. We are also pursuing design activity in the cable industry and helping to
drive the transition to Tru2way IP cable solutions, which will substantially
increase our addressable market. We are also pushing forward with our consumer
products agenda by working with a widening range of vendors for Blu-ray player
designs, digital media adapter products and home entertainment connectivity
devices. Additionally, we are encouraged about the potential opportunities
addressed by our recent acquisition of the Z-Wave brand home control products
and anticipate a growing synergy within the set-top box market," stated Thinh
Tran, chairman and chief executive officer, Sigma Designs.

First Quarter Highlights

* Announced that Sigma`s highly integrated SMP8654 media processors will be used
to power Celrun`s TD-1100 set-top box (STB), which has been selected by telecom
provider LG Dacom to be deployed throughout Korea.
* Announced that Z-Wave technology has reached a new milestone by providing IP
interoperability. As part of a public showing which took place at Interop 2009,
Sigma announced complete interoperability between its Z-Wave wireless home
control standard and IP (Internet Protocol), with the single chip "IP-Wave"
solution demonstrated in real products for energy management, remote home
monitoring and security.

Investor Conference Call

The conference call relating to Sigma`s first quarter fiscal 2010 results will
take place following this announcement at 5:00 PM ET today, May 27, 2009.
Investors will have the opportunity to listen live to the conference call via
the Internet through www.sigmadesigns.com/IR or www.earnings.com. Institutional
investors can access the call via Thomson StreetEvents at www.streetevents.com.
To listen to the live call, please go to the website at least 15 minutes early
to register and download and install any necessary audio software. For those who
cannot listen to the live broadcast, a replay will be available shortly after
the call via the internet through www.sigmadesigns.com/ir or www.earnings.com.
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, or GAAP, Sigma reports non-GAAP net income, which
excludes amortization of acquired intangibles, stock-based compensation
calculated under APB No. 25 and SFAS No. 123(R) and, with respect to the first
quarter of fiscal 2010, the expense resulting from the write-off of the deferred
tax asset due to the change in California tax laws and, with respect to the
first quarter of fiscal 2009, in-process development costs acquired during the
quarter. Sigma believes that its non-GAAP net income provides 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 share-based compensation
such as the volatility of its stock price and changing interest rates. Sigma
believes that all of these excluded expenses do 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.

The material limitation associated with the use of the non-GAAP financial
measures is that the non-GAAP measures do not reflect the full economic impact
of Sigma`s activities. Sigma`s non-GAAP net income is not prepared in accordance
with GAAP, is not an alternative to GAAP financial information, and may be
calculated differently than non-GAAP financial information disclosed by other
companies. Accordingly, investors are cautioned not to place undue reliance on
non-GAAP information.

Safe Harbor Statement

This press release contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934, including statements regarding potential opportunities
emerging for Sigma`s strategic initiatives, growth in the IPTV market and the
potential impact of new products and technology. Actual results may vary
materially due to a number of factors including, but not limited to, the risk
that, upon completion of further closing and audit procedures, that the
financial results for the first quarter are different than the results set forth
in this press release, general economic conditions, including continuance of the
current economic conditions specific to the semiconductor industry, the rate of
growth of the IPTV, high definition DVD and HDTV markets in general, the ramp in
demand from our set-top box and telecommunication customers, our ability to
deploy and achieve market acceptance for Sigma products in these markets, the
ability of our SoCs to compete with other technologies or products in these
emerging markets, the risk that such products will not gain widespread
acceptance, or will be rendered obsolete, by product offerings of competitors or
by alternative technologies, the risk that anticipated design wins will not
materialize and that actual design wins will not translate into launched product
offerings, and other risks including delays in the manufacturer`s deployment of
set-top boxes or consumer products. Other risk factors are detailed from time to
time in our SEC reports, including our annual report on Form 10-K as filed April
2, 2009. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date hereof. Sigma
undertakes 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.

About Sigma Designs, Inc.

Sigma Designs is a leading fabless provider of highly integrated SoC solutions
that are used to deliver multimedia entertainment throughout the home. Sigma`s
SoC solutions include media processors and wireless communication devices which
combine semiconductors and software as critical components of high-growth
consumer applications including IPTV-based set-top boxes, Blu-ray players,
HDTVs, entertainment connectivity devices and RF-based home control devices.
Headquartered in Milpitas, Calif., Sigma Designs also has design centers or
sales offices in Canada, China, Denmark, France, Japan, Korea (third party),
Singapore and Taiwan. For more information, please visit Sigma Designs` web site
at www.sigmadesigns.com.

SIGMA DESIGNS, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(GAAP)
(In thousands)
May 2, January 31,
2009 2009
Assets

Current Assets:
Cash and cash equivalents $ 124,662 $ 90,845
Short-term marketable securities 19,129 28,862
Accounts receivable, net 20,989 30,719
Inventories 29,806 36,058
Deferred tax assets 1,417 1,417
Prepaid expenses and other current assets 5,016 5,909
Total current assets 201,019 193,810

Long-term marketable securities 77,491 72,523
Software, equipment and leasehold improvements, net 20,968 21,124
Goodwill 9,913 9,928
Intangible assets, net 16,393 17,520
Deferred tax assets, net of current portion 9,080 12,824
Long-term investments 3,501 3,000
Other non-current assets 246 218

Total assets $ 338,611 $ 330,947

Liabilities and Shareholders' Equity

Current Liabilities:
Accounts payable $ 9,899 $ 5,655
Accrued liabilities and other 11,876 12,826
Total current liabilities 21,775 18,481

Other long-term liabilities 7,376 7,216
Total liabilities 29,151 25,697

Shareholders' Equity:
Total shareholders' equity 309,460 305,250

Total liabilities and shareholders' equity $ 338,611 $ 330,947

SIGMA DESIGNS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(GAAP)
(In thousands, except per share data)

Three months ended
May 2, January 31, May 3,
2009 2009 2008
Net revenue $ 51,243 $ 47,306 $ 56,882

Cost of revenue 26,856 25,952 28,862
Gross profit 24,387 21,354 28,020
Gross margin percent 47.6 % 45.1 % 49.3 %

Operating expenses:
Research and development 11,517 11,194 10,856
Sales and marketing 3,211 3,575 2,641
General and administrative 3,131 3,766 6,468
Acquired in-process R&D --- --- 1,571
Total operating expenses 17,859 18,535 21,536

Income from operations 6,528 2,819 6,484
Interest and other income, net 778 1,316 2,168

Income before income taxes 7,306 4,135 8,652
Provision for (benefit from) income taxes 4,563 (2,444 ) 2,070

Net income $ 2,743 $ 6,579 $ 6,582

Net income per share:
Basic $ 0.10 $ 0.25 $ 0.23
Diluted $ 0.10 $ 0.24 $ 0.22

Shares used in computing net income per share:
Basic 26,592 26,433 28,296
Diluted 27,196 26,908 29,483

SIGMA DESIGNS, INC.
RECONCILIATION OF GAAP NET INCOME TO NON-GAAP NET INCOME
(Unaudited)
(In thousands, except per share data)
Three months ended
May 2, January 31, May 3,
2009 2009 2008
GAAP net income $ 2,743 $ 6,579 $ 6,582

Items reconciling GAAP net income to non-GAAP net income:

Included in cost of revenue:
Amortization of acquired
developed technology (724 ) (630 ) (541 )
Share-based compensation (85 ) (98 ) (83 )
Tender offer to exchange
employee options --- --- ---
Total related to cost
of revenue (809 ) (728 ) (624 )

Included in operating expenses:
Research and development:
Amortization of acquired
noncompete agreement (19 ) (117 ) (116 )
Share-based compensation (1,258 ) (1,403 ) (1,411 )
Sales and marketing:
Share-based compensation (299 ) (579 ) (358 )
Amortization of acquired
Intangibles (89 ) (66 ) (50 )
General and administrative:
Share-based compensation 484 (659 ) (2,902 )
Acquired in-process development costs --- --- (1,571 )
Total related to operating expenses (1,181 ) (2,824 ) (6,408 )

Write-off of tax valuation allowance (3,540 ) --- ---

Net effect of non-GAAP adjustments (5,530 ) (3,552 ) (7,032 )

Non-GAAP net income $ 8,273 $ 10,131 $ 13,614

Non-GAAP net income per diluted share $ 0.30 $ 0.38 $ 0.46

Sigma Designs, Inc.
Ed McGregor, 646-259-2999 (Investor Relations)
IR@sdesigns.com

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