1 Sigma Designs Inc. confidential | Sigma Designs Inc.
Sigma Designs
Q2 FY 17 Corporate Summary
September 6, 2016
2 Sigma Designs Inc.
Safe Harbor Statement
During the course of this presentation, we will provide projections and other forward
looking statements regarding future events or the future financial performance of
Sigma Designs, Inc., including expectations concerning our business strategy and
our Q3 FY17 financial outlook. Such statements are only current expectations and
actual events or results may differ materially. We refer you to Sigma’s filings with the
SEC, particularly our most recent Reports on Forms 10-K, 10-Q and 8-K. These
documents identify important risk factors that could cause actual results to differ
materially from our projections or other forward looking statements.
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Sigma Designs
• Founded in 1982
• 34 Years of Innovation
• HQ in Fremont, CA
• ~725 Employees
• Fabless Manufacturing
•NASDAQ: SIGM
A Leading Supplier Of
Technologies Enabling
Smart Home IoT Convergence
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Mobile IoT
New Business Focus
Smart Home IoT
Smart Streaming Boxes
Video Connectivity
Connected Smart TV Platforms IoT Devices
Two Broad Businesses With Application Synergies
Smart TV
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World Class Customers
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Consumer interest creates demands
Connected Smart TV Platforms
Smart City
LTE & Z-Wave
Smart Televisions
- SoC
- FRC
- OTT Software
4K Smart Streaming Boxes
- SoC
- OTT Software
- IPTV Solutions
Video Connectivity
- Powerline
- Coax
Cloud Platforms
- Roku
- Google CAST TV
- Android
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4K SmartTV Innovator
Source: IHS
Industry First Innovations:
• OS integration with Roku and Google Cast
TVs
• HDR including Dolby Vision
• Single Chip 4K TV SoCs
SmartTV Platforms Leading Revenue
Growth
~40% percent share of US SmartTV market
now
Number of SKU design wins doubled from 16 to
32 models shipping in CY 2016
• Supporting all VIZIO 4K TVs >1 Million
units connected and accessing 4K content
• VIZIO expecting 4K TV to show strong
growth this year with new models entering
the market
• Roku-based 4K TVs ramping
• Roku has already sold >1 Million
Roku Smart TVs
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Next Generation STB Chips
Announced joint collaboration agreement with Telechips, a South Korean
Company, on Sept. 1, 2016
o Will develop and market advanced SoC solutions for the new generation
of ultra-high-definition 4KTV IP streaming set-top boxes
Value Proposition: Provide the lowest power consumption for a
SoC with 4KTV video plus universal HDR support
Integrating individual technology strengths into one product line
Collaboration will bring more products to market faster
o Sample chips available within 30 days
Sharing common development expenses
Capturing additional customers using individual territorial strengths
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Consumer interest creates demands
Global IoT Coverage
Smart City
Mobile Devices
LTE
Mobile IoT
Tracking- Keys
- Pets
- Luggage
- Packages
- Fleet
Sensors- Door/motion
- Smoke/water
- Metering
- Parking
- Retail
LTE–Z-Wave
M-M IoT
Smart City
Smart Home
Z-Wave IoT for the
Smart Home
Controls- Thermostats
- Appliances
- Door locks
- Lighting
- Cameras
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Smart Home Applications
Entertainment
Controller
Siren
Motion
Sensors
Door Window
Sensors
Light Switches
Fan Control
Moisture
Sensor
Temperature
Sensor
Security
Panel
Flood
Sensor
Water Leak
Sensor
Smart
Appliance
Smart
Power Strip
Cabinet
SensorGateway
Curtain
Motors
Smart
Outlet
Smoke
Sensors
Thermostat
Window Break Sensors
Door Lock
Garage Door
Opener
CO2 Sensor
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Z-Wave: The Industry Leader
Over 50 Million Z-Wave Chipsets Deployed
70% market share in smart home
>1500 home devices
>375 Z-Wave device manufacturers and service providers
90% US Market Share in traditional security monitoring providers
10% of US homes have Z-Wave powered products
Large and Growing Addressable Market
$1B in product sales in 2015
(20M units x $50 ASP)
$1B services market in 2015
(4M panels x 12 months x $20/month)
CY2016/2017: New growth coming in Asia
Marketshare and Addressable Market Data is Approximate
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Expanding Into Mobile IoT
Using standard LTE networks – available worldwide
• Most competitors rely on dedicated networks to achieve performance
• Why not use wide area ISM approaches (eg; Sigfox, LoRa)?
• Only limited areas of coverage with many years to build-out networks
• Network limitations for real-time response, 2-way links, and security
• Why not use modified LTE networks designed for IoT (eg; LTE-M, NB-IoT)?
• Limited carriers adopting them with some taking take 1-3 years to complete
• Imposes limitations of bandwidth and spectrum efficiency.
Sigma’s unique patented architecture is designed for:
• An order of magnitude lower power for very long battery life
• Ultra-sensitive geo-location ability – for short range uses
• Smaller size and lower cost – to suit any tracking application
Product introductions
• Formal market entry targeted for early CY 2017
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Design concepts
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Mobile IoT Applications
Tracking
Vehicles, Bikes, People, Pets,
Parking, Luggage, Packages
IoT Backhaul
Security Panels, Utilities
Resource, Traffic
Sensor-Actuators
Temperature, Pressure,
Moisture, Chemical
WearablesFitness, Watches, PERS
Medical, Diagnostics
Telematics to reach over US
$80 billion by 2020
Initial Focus
Future Opportunities
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Sigma Designs Inc.Financial Summary
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Q2 FY17 Results Summary(Non-GAAP)
Revenue
• $61.3M compared with $53.8M in Q1 FY17
• Connected SmartTV $51.7M or 84.3%
• IoT Devices $9.5M or 15.5%
• Other $0.2M or 0.2%
Non-GAAP Gross Margin
• 49.9% vs. 46.6% in Q1 FY17
Non-GAAP Operating Income (Loss)
• $3.4M vs. ($2.5)M in Q1 FY17
Non-GAAP EPS
• $0.07 vs. ($0.12) in Q1 FY17
Outlook
• Q3 revenue to increase with continued profitability
Reported September 6, 2016
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Trended Revenue By Market(GAAP)
$44.9$51.0
$39.5$43.7
$51.7
$13.0
$10.2
$11.3$9.9
$9.5$0.4
$0.4
$0.6$0.2
$0.2
$0.0
$10.0
$20.0
$30.0
$40.0
$50.0
$60.0
$70.0
Q2'16 Q3'16 Q4'16 Q1'17 Q2'17
Connected Smart TV Platforms IoT Devices License & Other
$53.8M
$58.3M
$61.6M
$51.5M
$61.3M
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$5.3 $5.8
($1.9)($2.5)
$3.4
-$4
-$2
$0
$2
$4
$6
Q2'16 Q3'16 Q4'16 Q1'17 Q2'17
Operating Income ($M)
Trended Financial Performance(Non-GAAP)
50.5%
51.7%
49.6%
46.6%
49.9%
44.0%
48.0%
52.0%
Q2'16 Q3'16 Q4'16 Q1'17 Q2'17
Gross Margin %
$0.12 $0.13
$0.02
($0.12)
$0.07
($0.15)
$0.00
$0.15
Q2'16 Q3'16 Q4'16 Q1'17 Q2'17
EPS
$9.1$9.7
$3.1
$1.5
$8.1
$0.0
$2.0
$4.0
$6.0
$8.0
$10.0
Q2'16 Q3'16 Q4'16 Q1'17 Q2'17
EBITDA ($M)
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Trended Non-GAAP P&L
FY 2015 FY 2016 Q1 2017 Q2 2017Long-Term
Model
Revenue 100% 100% 100% 100% 100%
Gross Profit 53% 51% 47% 50% 47%-50%
Research & Development 34% 29% 33% 29% 23%-25%
Selling, General & Admin. 20% 16% 18% 16% 12%-16%
Total Operating Expense 54% 45% 51% 45% 35%-41%
Operating Income (1%) 6% (5%) 6% ~7%-13%
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Balance Sheet Highlights
Q2 FY16
$ MillionsMetrics
Q2 FY17
$ MillionsMetrics
Cash and Marketable Securities $83.2 $74.0*
Accounts Receivable $38.4 60 days $45.9 68 days
Inventory $30.7 3.6 turns $21.5 5.6 turns
Accounts Payable $27.4 $23.1
* The change was primarily due to the purchase of Bretelon, Inc. on November 4, 2015
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Q3 FY17 Financial Guidance
* Guidance ranges provided on September 6, 2016 for the period ending October 30, 2016
$ Millions Guidance Ranges*
Revenues $62 million - $65 million
Non-GAAP Gross Margin % 47% – 50%
Non-GAAP Operating Expenses Under $28.0 million
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Continued Financial Improvement
Multiple Growth Drivers In PlaceConnected Smart TV Platform
• Common Smart TV, Connectivity and Set-Top Box ecosystem to drive growth
• Capitalizing on rapid 4K UHDTV adoption; market growing at 30% CAGR
• Doubled the number of TV SKUs for CY 2016
• Supplier of all 4K SoCs supporting VIZIOs product lines
• Leading provider of SoCs for Roku and Google Cast TVs
IoT Devices
• Z-Wave is THE undisputed standard in Smart home applications
• Penetrating worldwide market for Telco-based IoT services
Continued Financial Improvement
• FY 2017 total revenue to be higher than FY 2016
• Expecting multiple growth drivers to deliver higher revenue
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Enabling Smart Home and IoT Convergence
Thank You
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Reconciliation of GAAP Net Income/(Loss) to Non-GAAP Net Income/(Loss) 1 of 2
July 30, April 30, August 1,
2016 2016 2015
GAAP Net Revenue $ 61,316 $ 53,775 $ 58,307
Items reconciling GAAP Net Revenue to Non-GAAP:
Reversal of rebate - - (221)
GAAP to Non-GAAP adjustments - - (221)
Non-GAAP Net Revenue $ 61,316 $ 53,775 $ 58,086
GAAP Cost of Revenue $ 31,734 $ 29,774 $ 29,783
Items reconciling GAAP Cost of Revenue to Non-GAAP:
Stock based compensation expense (74) (104) (44)
Amortization of acquired intangibles (940) (949) (968)
GAAP to Non-GAAP adjustments (1,014) (1,053) (1,012)
Non-GAAP Cost of Revenue $ 30,720 $ 28,721 $ 28,771
GAAP Gross Profit $ 29,582 $ 24,001 $ 28,524
GAAP Gross Margin % 48.2% 44.6% 48.9%
Non-GAAP Gross Profit $ 30,596 $ 25,054 $ 29,315
Non-GAAP Gross Margin % 49.9% 46.6% 50.5%
(Unaudited)
(In thousands, except per share data)
Three months ended
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Reconciliation of GAAP Net Income/(Loss) to Non-GAAP Net Income/(Loss) 2 of 2
GAAP Operating Expenses $ 29,895 $ 30,016 $ 27,316
Items reconciling GAAP Operating Expenses to Non-GAAP:
Stock based compensation expense (1,677) (1,788) (1,211)
Amortization of acquired intangibles (696) (699) (316)
Impairment of IP, mask sets and design tools (300) - (955)
One time legal fee expenses - (11) (747)
GAAP to Non-GAAP adjustments (2,673) (2,498) (3,229)
Non-GAAP Operating Expenses $ 27,222 $ 27,518 $ 24,087
GAAP Other Income (Expense) and Tax $ (1,409) $ (2,083) $ (912)
Items reconciling GAAP Other Income (Expense) and Tax to Non-GAAP:
Impairment (gain on sale) of privately held instruments, net 584 300 126
Income tax adjustments - - 20
GAAP to Non-GAAP adjustments 584 300 146
Non-GAAP Other Income (Expense) and Tax $ (825) $ (1,783) $ (766)
Non-GAAP Net Income (Loss) $ 2,549 $ (4,247) $ 4,462
Non-GAAP Net Income (Loss) per share:
Basic 0.07$ (0.12)$ 0.13$
Diluted 0.07$ (0.12)$ 0.12$
Shares used in computing Non-GAAP net income (loss) per share:
Basic 37,182 36,872 35,604
Diluted 37,527 36,872 36,602