Sigma Designs, Inc. Reports Fourth Quarter and Fiscal 2008 Results

MILPITAS, Calif. — 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 fourth fiscal quarter and year ended February 2, 2008.

Net revenues for the fourth quarter were $76.4 million, up 15% from $66.2 million for the previous quarter and up 145% from $31.2 million reported for the same period last year. The increase in net revenues was primarily attributable to increased SoC sales to manufacturers of IPTV set-top boxes. Net revenues for fiscal 2008 were $221.2 million, up 143% from $91.2 million in the prior fiscal year.

GAAP net income for the fourth quarter was $35.3 million or $1.12 per diluted share. This compares to GAAP net income of $21.0 million, or $0.72 per diluted share for the previous quarter and GAAP net income of $4.6 million or $0.17 per diluted share during the same period one year ago. Fourth quarter net income includes a tax benefit of $10.8 million principally due to a $12.7 million, or $0.41 per diluted share, release of the tax valuation allowance. GAAP net income for fiscal 2008 was $70.2 million, or $2.46 per diluted share, compared to net income of $6.2 million, or $0.24 per diluted share, for prior year.

Non-GAAP net income for the fourth quarter was $25.4 million or $0.80 per diluted share. This compares to non-GAAP net income of $23.0 million, or $0.79 per diluted share for the previous quarter and a non-GAAP net income of $7.1 million or $0.27 per diluted share during the same period one year ago. Non-GAAP adjustments for the fourth quarter of fiscal year 2008 consisted of the exclusion of $306,000 in amortization expense of acquired intangibles related to the Blue7 acquisition, $2.5 million in non-cash stock-option compensation expenses and the benefit of $12.7 million from the release of the company’s income tax valuation reserve. The reconciliation between GAAP and non-GAAP results for all referenced periods is provided in a table immediately following the GAAP financial tables below.

The company’s income tax benefit for the fourth quarter of $10.8 million was significantly higher than in past quarters, principally due to the one-time release of the valuation reserve as a result of the company’s recent history of sustained profitability and its expectation of profit in future periods.

Management Comment

“We are pleased to report another record setting quarter for the company in terms of revenue and profitability, capping off a year of phenomenal growth. In our fourth quarter, we achieved a revenue increase of 15% to reach $76.4 million, our ninth consecutive quarter of double-digit sequential revenue growth, and brought $35.3 million of that down to our GAAP net income line. Our revenue increase is a result of increased demand from the IPTV set-top box market. The ramp of continuing IPTV deployments coupled with our clear leadership position has resulted in strong demand from our worldwide base of set-top box and telco customers. Our current leadership in Blu-ray players, now taking on renewed significance due to the resignation of HD-DVD, is also contributing significantly to our top line. Additionally, we are encouraged by the potential opportunities emerging for our strategic initiatives, including penetration into the HDTV market, the Ultra-wideband (UWB) connectivity market, and digital media adapter products.” stated Thinh Tran, chairman and chief executive officer, Sigma Designs.

Recent business developments include:

• Announced that Sigma’s highly integrated SMP8634 media processor was selected by Sharp Corporation to power its new line of AQUOS® Blu-ray disc players and recorders. Sharp’s new products include the BD-AV1 and AV10 Series for the Japanese market and the recently introduced slim-profile AQUOS BD player, model BDHP20U, Sharp’s first Blu-ray offering in the U.S. market.
• Announced that its SMP8634 media processor was selected by Samsung Electronics Co., Ltd. to power its new HTBD2 home theater-in-a-box (HTiB), the first home theater product to combine a Blu-ray player and sound system into one product offering.
• Demonstrated a wide range of consumer technology solutions at CES 2008, including our next generation SoC media processor that showed a 50% increase in system performance, our latest Blu-ray player software supporting Profile 1.1, our VXP image processing, and several digital TV reference designs.
• Announced, along with Fujitsu Microelectronics America, Inc. (FMA), a collaboration to deliver Wireless HDAV™ technology solutions for consumer electronics manufacturers serving the High-Definition (HD), A/V, cable replacement market. Wireless HDAV is the first technology to leverage H.264 and WiMedia standards for streaming high definition content without cables.
• Received the Outstanding Financial Performance by a Public Fabless Company Award given by the Global Semiconductor Alliance (GSA), formally the Fabless Semiconductor Alliance (FSA), for our outstanding financial performance over eight consecutive quarters.
• Established a share repurchase program under which our board of directors authorized the repurchase of up to two million shares of common stock.
• Acquired certain assets of the VXP group from Gennum Corporation. The VXP image processing technology and skilled VXP design team will allow us to expand into the professional market and add broadcast studio quality to our product offerings for high-volume consumer applications in set-top boxes for IPTV, high-definition disc players and digital televisions.
• Announced an agreement to settle shareholder derivative litigation that had been filed in connection with historic stock-option grants. The settlement will result in dismissal of both federal and state derivative lawsuits.