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Sigma Designs, Inc. Reports Third Quarter Fiscal 2013 Results

Sigma Designs, Inc. Reports Third Quarter Fiscal 2013 Results 
MILPITAS, CA -- (Marketwire) -- 12/05/12 --  Sigma Designs(R), Inc.
(NASDAQ: SIGM), a leader in connected media platforms, today reported
financial results and business highlights for its third fiscal
quarter ended October 27, 2012. 
Net revenue for the third quarter of fiscal 2013 was $63.9 million,
down $4.4 million, or 6%, from $68.3 million reported in the previous
quarter and up $24.2 million, or 61%, from $39.7 million reported for
the same period last year.  
GAAP net loss for the third quarter of fiscal 2013 was $39.5 million,
or $1.18 per diluted share. This compares to GAAP net loss of $13.4
million, or $0.41 per diluted share, for the previous quarter and
GAAP net loss of $121.6 million, or $3.78 per diluted share, in the
same period last year. 
Non-GAAP net loss for the third quarter of fiscal 2013 was $9.1
million, or $0.27 per diluted share. This compares to non-GAAP net
loss of $4.1 million, or $0.12 per diluted share, for the previous
quarter and non-GAAP net loss of $2.7 million, or $0.08 per diluted
share, during the same period one year ago. Non-GAAP adjustments for
the third quarter consisted of $2.0 million in amortization expense
for acquired intangibles related to acquisitions, $2.5 million in
non-cash stock-based compensation expenses, $1.1 million of inventory
mark-up, $0.8 million in restructuring expense associated with our
cost reduction program, $5.7 million settlement payment, $17.9
million reserve against our deferred income tax assets and $0.4
million in expenses associated with our acquisition of Trident's DTV
business. The reconciliation between GAAP and non-GAAP net income
(loss) for all referenced periods is provided in a table immediately
following the GAAP financial tables below. 
Management Comment
 "Sigma is strictly focused and committed to
returning to profitability in Q1 and to that end we continue to drive
our $45 million cost reduction plan to achieve this goal," said Thinh
Tran, CEO of Sigma Designs. "Accordingly, the Company has taken and
will continue to take the steps necessary to reach profitability in
our first quarter of fiscal 2014 including the natural synergies we
are pursuing in the merger of our media processor and DTV research
and developm
ent expenses. We have executed the initial phase of our
cost reduction and reorganization plan by reducing headcount by 44
employees in North America resulting in annual savings of $6.3
million. As we proceed with our strategy of combining our media
processor development and support teams with the DTV team acquired
from Trident, we have identified significant cost efficiencies to be
achieved by converging on a single technology platform to serve both
markets. As previously announced, additional operating expense
reductions of $33.7 million will become effective at the beginning of
fiscal 2014. This will be accompanied by product cost reductions
totaling $5.0 million for fiscal 2014."  
Recent Highlights 


 
--  We announced the launch of our SMP8680 series of media processors with
    integrated HPNA home connectivity for IPTV and hybrid Set-Top Boxes
    (STBs). These media processors also feature 3D video, integrated
    graphics processing, video scaling, DDR3 memory support, customizable
    UI and a power efficient CPU that can deliver Over-the-Top (OTT)
    content.
--  We announced a collaboration with European market leader LEA(R) to
    provide the first-to-market over-the-top thin client set top box with
    HomePlug AV powerline connectivity, ensuring Plug and Play
    installation and unmatched data transfer quality. LEA's new NetPlayer
    HD(R) is powered by Sigma Designs' SMP8671 secure media processor
    and CG2210 chipset HomePlug(R) AV modem with ClearPath(TM)
    technology.
--  We announced that Devolo(R), the European leader in Powerline
    communication (PLC) solutions, has selected Sigma's CG2210 HomePlug
    AV(R) as the basis for their new Powerline 200 AV Diversity+
    adaptor. The CG2210 chipset with ClearPath(TM) technology supports
    diversity technology by enabling the additional use of the protective
    ground wire, creating multiple transmission channels for improving
    overall throughput, higher robustness and better coverage.
--  We announced that Comtrend's PG9141s Powerline Single Port Adapter,
    which is based on Sigma's HomePlug AV(R) chipset, has won the 2012
    Communications Technologies Platinum Award in home networking
    announced at the 2012 SCTE Cable-Tec Expo in Orlando.

  
Investor Conference Call
 The conference call relating to Sigma's third
quarter fiscal 2013 results will take place following this
announcement at 5:00 PM ET today, December 5, 2012. 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 10 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 and developed
technologies, stock-based compensation, the mark-up on purchased
inventory sold during the period, acquisition-related expenses,
restructuring charges, a settlement payment, write-down of
acquisition-related goodwill and intangible assets, the reserve of
deferred income tax assets and the gain upon acquisition of the DTV
business that Sigma recognized in accordance with GAAP. 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 stock-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 meas
ures 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 about taking the steps necessary to reach
profitability in the first quarter of fiscal 2014, becoming
profitable in the first quarter of fiscal 2014, the amount of the
anticipated savings from Sigma's expense reduction efforts and the
anticipated features, benefits and market acceptance of Sigma's
products. Actual results may vary materially due to a number of
factors including, but not limited to, the risk that, upon completion
of further closing procedures, the financial results for the third
quarter of fiscal 2013 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 ability to recognize the anticipated
savings from our restructuring efforts, the rate of growth of the
IPTV, connected home technologies, digital TV, connected media player
and prosumer and industrial audio/video markets in general, Sigma's
integration of the assets and employees related to the DTV business
it recently acquired from Trident Microsystems, Inc., the ramp in
demand from Sigma's set-top box, television and telecommunication
customers, Sigma's ability to deploy and achieve market acceptance
for Sigma products in these markets, the ability of Sigma's 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 detailed
from time to time in Sigma's SEC reports, including Sigma's quarterly
report on Form 10-Q as filed with the SEC on September 10, 2012.
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, Inc. (NASDAQ: SIGM) is a
leader in connected media platforms. The company designs and builds
the essential semiconductor technologies that serve as the foundation
for the world's leading IPTV set-top boxes, connected televisions,
connected media players, residential gateways, home control systems
and more. For more information about Sigma Designs, please visit
www.sigmadesigns.com. 


 
                                                                            
                             SIGMA DESIGNS, INC.                            
         PRELIMINARY UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS        
                                   (GAAP)                                   
                               (In thousands)                               
                                                     October 27, January 28,
                                                         2012        2012   
                                                     ----------- -----------
Assets                                                                      
                                                                            
Current Assets:                                                             
  Cash and cash equivalents                          $    49,331 $    44,283
  Short-term marketable securities                        17,366      42,134
  Restricted cash                                          1,768       1,769
  Accounts receivable, net                                37,872      21,180
  Inventories                                             30,529      22,037
  Deferred tax assets                                      2,170       4,832
  Prepaid expenses and other current assets               23,515       7,234
                                                     ----------- -----------
    Total current assets                                 162,551     143,469
                                                                            
Long-term marketable securities                           30,403      62,022
Software, equipment and leasehold improvements, net       21,699      19,609
Intangible assets, net                                    44,349      45,656
Deferred tax assets, net of current portion                  874      16,595
Long-term investments                                      6,445       6,443
Other non-current assets                                   6,112       3,430
                                                     ----------- -----------
                                                                            
    Total assets                                     $   272,433 $   297,224
                                                     =========== ===========
                                                                            
Liabilities and Shareholders' Equity                                        
                                                                            
Current Liabilities:                                                        
  Accounts payable                                   $    22,482 $     8,438
  Accrued liabilities                                     42,116      24,081
                                                     ----------- -----------
    Total current liabilities                             64,598      32,519
                                                                            
  Other long-term liabilities                             15,096      16,230
                                                     ----------- -----------
    Total liabilities                                     79,694      48,749
                                                                            
Shareholders' equity                                     192,739     248,475
                                                     ----------- -----------
                                                                            
    Total liabilities and shareholders' equity       $   272,433 $   297,224
                                                     =========== ===========
                                                                            
                                                                            
                                                                            
                            SIGMA DESIGNS, INC.                             
   PRELIMINARY UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS    
                                   (GAAP)                                   
                   (In thousands, except per share data)                    
                                                                            
                             Three months ended          Nine months ended  
                      -------------------------------  -------------------- 
                       October   July 28,    October    October    October  
                       27, 2012     2012     29, 2011   27, 2012   29, 2011 
                      ---------  ---------  ---------  ---------  --------- 
Net revenue           $  63,905  $  68,251  $  39,725  $ 172,414  $ 147,051 
Cost of revenue          38,422     37,671     21,723     95,256     86,263 
                      ---------  ---------  ---------  ---------  --------- 
Gross profit             25,483     30,580     18,002     77,158     60,788 
Gross margin percent       39.9%      44.8%      45.3%      44.8%      41.3%
    
                                                                        
                                                                            
Operating expenses:                                                         
  Research and                                                              
   development           26,741     27,975     21,633     76,505     65,034 
  Sales and marketing    12,774      7,795      8,545     27,457     25,475 
  General and                                                               
   administrative         6,007      9,489      4,828     21,875     15,460 
  Gain on acquisition       ---     (1,417)       ---     (1,417)       --- 
  Restructuring                                                             
   charges                  821        ---        ---        821        --- 
  Write-down of                                                             
   goodwill,                                                                
   intangible assets                                                        
   and acquired in-                                                         
   process R&D              ---        ---    111,278        ---    111,278 
                      ---------  ---------  ---------  ---------  --------- 
    Total operating                                                         
     expenses            46,343     43,842    146,284    125,241    217,247 
                                                                            
Loss from operations    (20,860)   (13,262)  (128,282)   (48,083)  (156,459)
Interest and other                                                          
 income (expense),                                                          
 net                        299        242        542      1,032      2,095 
                      ---------  ---------  ---------  ---------  --------- 
                                                                            
                                                                            
Loss before income                                                          
 taxes                  (20,561)   (13,020)  (127,740)   (47,051)  (154,364)
Provision for                                                               
 (benefit from)                                                             
income taxes             18,890        398     (6,165)    19,520     (5,157)
                      ---------  ---------  ---------  ---------  --------- 
                                                                            
Net loss              $ (39,451) $ (13,418) $(121,575) $ (66,571) $(149,207)
                      =========  =========  =========  =========  ========= 
                                                                            
Net loss per share:                                                         
  Basic               $   (1.18) $   (0.41) $   (3.78) $   (2.02) $   (4.67)
  Diluted             $   (1.18) $   (0.41) $   (3.78) $   (2.02) $   (4.67)
                                                                            
Shares used in                                                              
 computing net loss                                                         
 per share:                                                                 
  Basic                  33,383     33,052     32,139     33,032     31,928 
  Diluted                33,383     33,052     32,139     33,032     31,928 
                                                                            
                                                                            
                                                                            
                            SIGMA DESIGNS, INC.                             
RECONCILIATION OF PRELIMINARY GAAP NET INCOME (LOSS) TO NON-GAAP NET INCOME 
                                   (LOSS)                                   
                                (Unaudited)                                 
                   (In thousands, except per share data)                    
                                                                            
                             Three months ended          Nine months ended  
                      -------------------------------  -------------------- 
                       October   July 28,    October    October    October  
                       27, 2012     2012     29, 2011   27, 2012   29, 2011 
                      ---------  ---------  ---------  ---------  --------- 
GAAP net loss         $ (39,451) $ (13,418) $(121,575) $ (66,571) $(149,207)
                                                                            
Items reconciling                                                           
 GAAP net loss to                                                           
 non-GAAP net loss:                                                         
  Included in cost of                                                       
   revenue:                                                                 
    Stock-based                                                             
     compensation          (130)      (133)      (123)      (380)      (352)
    Amortization of                                                         
     acquired                                                               
     intangibles         (1,591)    (1,590)    (2,701)    (4,676)    (8,066)
    Acquisition                                                             
     expenses              (101)       ---        ---       (101)       --- 
    Mark-up on                                                              
     inventory                                                              
     acquired in                                                            
     business                                                               
     combinations                                                           
     sold during the                                                        
     period              (1,078)    (2,529)        (3)    (3,607)       (71)
                      ---------  ---------  ---------  ---------  --------- 
      Total related                                                         
       to cost of                                                           
       revenue           (2,900)    (4,252)    (2,827)    (8,764)    (8,489)
                                                                            
  Included in operating                                                     
   expenses:                                                                
    Research and                                                            
     development:                                                           
      Stock-based                                                           
       compensation      (1,375)    (1,508)    (1,544)    (4,346)    (4,760)
      Amortization of                                                       
       acquired                                                             
       intangibles          (34)       (33)       (31)      (100)       (98)
      Acquisition                                                           
       expenses             ---     (1,417)       ---     (1,417)       --- 
    Sales and                                                               
     marketing:                                                             
      Stock-based                                                           
       compensation        (457)      (483)      (475)    (1,412)    (1,634)
      Amortization of                                                       
       acquired                                                             
       intangibles         (360)      (360)    (2,033)    (1,082)    (6,086)
      Settlement                                                            
       Payment           (5,700)       ---        ---     (5,700)       --- 
      Acquisition                                                           
       expenses             ---       (257)       ---       (257)       --- 
    General and                                                             
     administrative:                                                        
      Stock-based                                                           
       compensation        (539)      (626)      (664)    (1,940)    (2,387)
      Acquisition                                                           
       expenses            (251)    (1,781)       ---     (2,501)       (89)
                                                                            
    Restructuring                                                           
     charges               (821)       ---        ---       (821)       --- 
    Gain on                                                                 
     acquisition
            ---      1,417        ---      1,417        --- 
    Write-down of                                                           
     acquisition                                                            
     related goodwill                                                       
     and intangible                                                         
     assets                 ---        ---   (111,278)       ---   (111,278)
                      ---------  ---------  ---------  ---------  --------- 
        Total related                                                       
         to operating                                                       
         expenses        (9,537)    (5,050)  (116,025)   (18,159)  (126,332)
                      ---------  ---------  ---------  ---------  --------- 
                                                                            
    Deferred tax                                                            
     assets             (17,932)       ---        ---    (17,932)       --- 
    Net effect of                                                           
     non-GAAP                                                               
     adjustments        (30,369)    (9,302)  (118,852)   (44,855)  (134,821)
                      ---------  ---------  ---------  ---------  --------- 
                                                                            
Non-GAAP net loss     $  (9,082) $  (4,116) $  (2,723) $ (21,716) $ (14,386)
                      =========  =========  =========  =========  ========= 
                                                                            
Non-GAAP net loss per                                                       
 diluted share        $   (0.27) $   (0.12) $   (0.08) $   (0.66) $   (0.45)

  
Investor Relations Contact: 
Thomas Gay
CFO
Sigma Designs, Inc.
Tel: (408) 957-9794
IR@sigmadesigns.com 
 
 
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