Sigma Designs, Inc.® (NASDAQ:SIGM), a leading provider of
intelligent system-on-chip (SoC) solutions for Connected Smart TV
Platforms and Internet of Things (IoT) Devices, today announced
restructuring activities intended to refocus its operating expenses
and accelerate the return to profitability. These actions, which
will focus on streamlining the Company’s Connected Smart TV
Platforms business will commence in the second half of October 2017
and are expected to be fully implemented by the end of the fourth
quarter of fiscal year 2018, ending February 3, 2018. Sigma
currently estimates that these actions will result in lowering
quarterly non-GAAP operating expenses from approximately $26
million in the second quarter of fiscal 2018, ended July 29, 2017,
to an approximate $17 million to $18 million starting in fiscal
year 2019. The Company anticipates these activities will
reduce annual fiscal year 2019 non-GAAP operating expenses by
approximately $34 million from expected fiscal year 2018 levels.
Management Comment “As part of
our business review, we have decided that in the near-term, the
most prudent action is to significantly reduce expenses,” said
Thinh Tran, President and CEO of Sigma Designs, Inc. “This
will not only bring expenses in line with our current revenue
levels, but we believe it will also improve our ability to pursue
other strategic alternatives. I recognize this will be a difficult
transition period for the Sigma team. However, I am confident these
actions will deliver the improved financial performance that our
shareholders expect while continuing to support our existing major
customers."
Restructuring Plan Activities
Include:Restructuring will result in, among other things,
reducing headcount of between 200 to 250 positions worldwide and
the consolidation of certain facilities.
The Company expects to incur total one-time
charges for severance and lease termination of approximately $8
million to $10 million over the third and fourth quarters in the
current fiscal year. The Company expects all other
restructuring and restructuring-related charges to be between $5
million to $7 million, which includes estimated asset impairment
charges and other costs.
In addition, the Company is continuing with its
strategic alternatives review process.
Sigma Designs does not plan to hold a conference
call in association with the information in this news release.
The Company will provide an update on these actions when it
determines that further disclosures are appropriate.
Use of Non-GAAP Financial
Information
In addition to reporting financial results in
accordance with generally accepted accounting principles (“GAAP”),
Sigma 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 intends to calculate the various
non-GAAP financial measures in future periods consistent with how
they were calculated for the periods presented within this press
release.
In this press release, Sigma has provided its
future expectations as to non-GAAP operating expenses. These
estimated future non-GAAP operating expenses exclude
amortization of acquired intangibles, stock-based compensation,
impairment of purchased IP, mask sets and design tools, and
estimated one-time restructuring charges. The tax amounts
included in these estimated future non-GAAP operating expenses
approximate Sigma’s operating cash tax expense, similar to the
liability reported on Sigma’s tax returns. With respect to
the non-GAAP operating expenses expectations provided in this press
release, quantitative reconciliation to the most directly
comparable GAAP financial measure is not feasible, because
unpredictable fluctuations in Sigma’s stock price makes it
difficult to accurately estimate future stock-based compensation
expenses that are excluded from these non-GAAP financial
measures. Sigma expects that the variability of the above
charges may have a significant and unpredictable impact on Sigma’s
future 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.
Forward-Looking Statements
This press release contains forward-looking
statements within the meaning of Section 27A of the Securities Act
of 1933 and Section 31E of the Securities Exchange Act of 1934,
including but not limited to statements about the expected impact
of the proposed restructuring to Sigma’s operating expenses in the
future, the anticipated amount of the one-time restructuring
charges that Sigma expects to incur as a result of the
restructuring, the potential impact of this restructuring on
Sigma’s ability to pursue other strategic alternatives, the overall
impact these restructuring activities are expected to have on
Sigma’s financial performance, Sigma’s ability to support its
existing customers and Sigma’s continued review of strategic
alternatives.
The forward-looking statements in this press
release involve risks and uncertainties, actual results may differ
materially from those referred to in these forward-looking
statements due to a number of factors, including but not limited
to: the risk that, Sigma incurs unanticipated costs as it
implements its restructuring plan, Sigma’s inability to recognize
the anticipated costs savings in the expected period, or at all,
adverse consequences to Sigma’s business as a result of these
restructuring activities, including an adverse impact on Sigma’s
sales efforts, customer relationships and relations with employees
that remain with Sigma; the ability of Sigma to identify and
execute strategic alternatives, the risk that its review of
strategic alternatives, including these restructuring activities,
may have unintended consequences, such as the distraction of
management, the loss of one or more customers and a negative impact
on the retention of employees; the effect these restructuring
activities may have on product introductions and transitions; and
the impact of significant competition in an industry that
experiences rapid technological changes and advancements. These and
other risks that could affect Sigma’s financial results and the
success of these restructuring activities are set forth in the
“Risk Factors” section of Sigma’s public reports filed with the
Securities and Exchange Commission at www.sec.gov, including its
Form 10-K for the fiscal year ended January 28, 2017 filed with the
SEC. 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.
Sigma Designs and Z-Wave are registered
trademark of Sigma Designs, Inc. in the United States and other
countries.
About Sigma Designs, Inc.Sigma
Designs, Inc.® (NASDAQ:SIGM) is a world leader in enabling smart
home convergence. The Company designs and builds the essential
semiconductor technologies that serve as the foundation for the
world’s leading Connected Smart TV platforms and Internet of Things
(IoT) for smart home devices. For more information about Sigma
Designs, please visit: www.sigmadesigns.com.
Investor Relations
Contacts:
Jim FanucchiDarrow Associates, Inc.(408)
404-5400IR@sigmadesigns.com
Elias Nader, CFO, SVP and Corporate
SecretarySigma Designs, Inc.IR@sigmadesigns.com