"The results for the first quarter are disappointing and we have re-focused our business strategy and management team to regain our market leading position in the portable multimedia market," said Ron Edgerton, chairman, CEO and president of SigmaTel. "The company must execute to reverse this setback. To remain competitive, our customers not only need the best multimedia solutions on the market for their products, but we also need to provide them with a roadmap of leading edge features for the next generation of products."
As of March 31, 2006, SigmaTel had cash, cash equivalents and short-term investments of $51.4 million, which declined from $118.9 million as of December 31, 2005. The reduction during the quarter was primarily due to a $30 million share repurchase and $21 million in changes to working capital and capital expenditures.
Business Summary
The product mix during the first quarter was more diversified than in the past. Revenue from portable SoCs accounted for approximately 64% of total revenues in the first quarter. More than 10% of total revenue came from the STMP3600. The software development kit, or SDK for the STMP3600, is available and a video SDK is expected in the second quarter. "We continue to see design wins across many SigmaTel products and customer interest on increasing functionality at lower bill of material costs," said Phil Pompa, senior vice president of the Portable Systems Group. Contribution from the Integrated Components Group grew at a healthy pace in the first quarter and the company expects to see growth from this group throughout the year.
Additional Highlights
-- SigmaTel launched its new Software Development Kit for its STMP3600, providing customers with Microsoft(R) PlaysForSure(TM) version 1.2 support for Windows(R) Media(WM) DRM10.
-- SigmaTel entered into an agreement with Infineon Technologies to jointly develop a Bluetooth chip that is optimized for use in digital multimedia devices.
-- SigmaTel introduced the SGTV5800 family of solutions with a cost effective high fidelity TV audio processor whose feature rich design can be integrated into all analog, digital and hybrid TVs.
-- An Administrative Law Judge in the International Trade Commission, or ITC, ruled that Actions Semiconductor Co., Ltd. infringed two SigmaTel patents. Included in the ruling was a recommendation that the ITC issue an order barring any MP3 players based on infringing Actions chips and containing two gigabytes or less of flash memory from being imported into the United States.
-- Techsplosion joined the SigmaTel global licensing program and plans to transition all of its product to SigmaTel solutions in the near future.
-- MP Man is switching its entire portfolio of MP3 player offerings to SigmaTel-based solutions. MP Man provides MP3 players to many of Europe's major retail chain stores.
-- DSG International PLC, the largest specialist electrical retailer in Europe, agreed to use SigmaTel solutions in its branded players including Matsui, Napa and Logik lines.
-- SigmaTel filed a lawsuit in Federal District Court alleging Telechips, Inc. is infringing three SigmaTel patents and plans to initiate an investigation against Telechips products at the ITC.
-- SigmaTel announced a new family of 8 and 10 channel High Definition Audio Codecs providing theater quality audio codec solutions that enable systems to simultaneously play 7.1 channel audio and VoIP or a second stereo audio stream.
-- Swissbit and Victorinox, makers of the world-renowned Swiss Army Knife, introduce the SWISSMEMORY(TM) s.beat digital audio player powered by the SigmaTel STMP3550.
Second Quarter 2006 Business Outlook
"We expect to see better results for the second quarter of 2006 and a more efficient use of our resources. It is imperative that we focus on our market strengths that will drive growth in revenue and our bottom-line," said Mr. Edgerton.
Specific guidance for the second quarter of 2006:
-- Revenues are expected to be between $40 to $46 million.
-- Pro forma gross margins are expected to be approximately 48% on a pro forma basis plus or minus a couple of points. SigmaTel's gross margin percentage varies primarily with product mix, pricing, and unit costs.
-- Stock-based compensation under FAS 123R is expected to be $2.4 million after tax or $0.07 per diluted share.
-- Diluted pro forma loss per share is expected to be between $0.50 to $0.57, excluding approximately $0.07 per diluted share of stock-based compensation expense and approximately $0.02 per diluted share of expense related to amortization of acquired intangibles.
-- GAAP diluted loss per share is expected to be between $0.59 to $0.66.
-- EPS guidance is based on 35 million weighted average shares outstanding.
Conference Call Today
A conference call will be held today, April 25, 2006, beginning at 3:30 P.M. Central time. The call will be simulcast over the Internet at www.streetevents.com and http://ir.sigmatel.com. A replay of the conference call will be available at the websites listed above or by calling 888-203-1112 (U.S.) or 719-457-0820 (international) and entering pass code number 9004294. These replays will be available through May 25, 2006.
For more information on SigmaTel, please visit www.sigmatel.com.
About SigmaTel:
SigmaTel, Inc., a fabless semiconductor company headquartered in Austin, Texas, designs, develops, and markets proprietary, analog intensive, mixed-signal ICs for a variety of digital multimedia products in the consumer electronics and computing markets, including portable compressed audio players, such as MP3 players, notebook and desktop PCs, digital video cameras, multi-function peripheral products, digital televisions, and set-top boxes. SigmaTel provides complete, system-level solutions that include highly-integrated ICs, customizable firmware and software, software development tools, reference designs, and applications support. The Company's focus is on providing system-level solutions that enable customers to rapidly introduce and offer electronic products that are small, light-weight, power-efficient, reliable, and cost-effective. SigmaTel is ISO 9001:2000 certified and is committed to providing customers with high performance, quality products along with superior customer service.
Cautionary Language:
This press release contains forward-looking statements based on current SigmaTel expectations. The words "expect," "will," "should," "would," "anticipate," "project," "outlook," "believe," "intend," and similar phrases as they relate to SigmaTel or future events are intended to identify such forward-looking statements. These forward-looking statements reflect the current views and assumptions of SigmaTel, but are subject to various risks and uncertainties that could cause actual results to differ materially from expectations. A number of important factors could cause actual results to differ materially from those in the forward-looking statements, and there will be events in the future that SigmaTel is not able to accurately predict or control. These risks and uncertainties include, but are not limited to, the ability of SigmaTel to execute on its strategy to regain market share, attract new customers, more efficiently use resources and return to profitability; the successful development and introduction of SigmaTel's software development kit for the STMP3600; the ability of SigmaTel to continue to grow revenues related to its integrated components group; customer acceptance of SigmaTel's new product offerings, including the TV audio processor and the High Definition Audio Codecs; obtaining a final favorable judgment from the ITC on SigmaTel's patent infringement case involving Actions Semiconductor; the successful transition to SigmaTel products by certain customers, including Techsplosion, MP Man and DSG International PLC; delays in product introductions; our ability to compete effectively; fluctuations in the prices of components used in our customers' products; and, other risks detailed in our SEC filings, including our Form 10-K for the year ended December 31, 2005. For a more detailed discussion of factors that could impact SigmaTel's financial results and cause actual results to differ materially from those in the forward-looking statements, please refer to recent SigmaTel filings with the SEC, particularly the Form 10-K that was filed on February 24, 2006.
Non-GAAP Financial Measurements
In addition to the GAAP results provided by this document, the company has provided non-GAAP financial measurements that present gross margin, net income (loss) and net income (loss) per share on a basis excluding certain non-cash charges. Details of these excluded items are presented in the table below, which reconciles the GAAP results to non-GAAP financial measurements described in this press release. Also, this press release and the reconciliation from GAAP results to these and other additional non-GAAP financial measurements that may be discussed in the Q1 2006 earnings conference call can be found on the company's website at http://ir.sigmatel.com.
SigmaTel is a registered trademark of SigmaTel, Inc. All other products and brand names as they appear in this release are trademarks or registered trademarks of their respective holders. All specifications may be changed without notice.
SIGMATEL, INC.
PRO FORMA VS. GAAP RESULTS
(in thousands, except per share data)
Three Months Ended
March 31,
---------------------
2006 2005
------- -------
Gross profit, as reported $ 14,730 $ 57,044
Pro forma adjustments:
Amortization of intangible assets from
acquisitions 783 --
------- -------
Pro forma gross profit $ 15,513 $ 57,044
======= =======
Pro forma gross margin 47.0% 57.4%
======= =======
Three Months Ended
March 31,
-----------------------
2006 2005
--------- --------
Net income (loss), as reported $ (24,726) $ 25,530
Pro forma adjustments (tax effected):
Partial reversal of lease abandonment
charge -- (250)
Amortization of intangible assets from
acquisitions 840 --
Stock-based compensation 2,057 117
--------- --------
Pro forma net income (loss) $ ( 21,829) $ 25,397
========= ========
Diluted weighted average shares outstanding 35,787 37,756
Diluted net income (loss) per share, pro
forma $ ( 0.61) $ 0.67
========= ========
SIGMATEL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
Three Months Ended
March 31,
--------------------------
2006 2005
--------- ---------
Revenues, net $ 33,021 $ 99,338
Cost of goods sold 18,291 42,294
--------- ---------
Gross Profit 14,730 57,044
Operating Expenses:
Research and development 22,192 12,001
Selling, general and administrative 13,993 7,163
--------- ---------
Total operating expenses 36,185 19,164
--------- ---------
Operating income (loss) (21,455) 37,880
Other Income:
Interest income, net 783 822
Foreign exchange loss 52 --
--------- ---------
Total other income 731 822
--------- ---------
Income (loss) before income taxes (20,724) 38,702
Income tax expense 4,002 13,172
--------- ---------
Net income (loss) $ (24,726) $ 25,530
========= =========
BASIC NET INCOME (LOSS) PER SHARE $ ( 0.69) $ 0.72
========= =========
DILUTED NET INCOME (LOSS) PER SHARE $ ( 0.69) $ 0.68
========= =========
WEIGHTED AVERAGE SHARES USED TO COMPUTE:
Basic net income (loss) per share 35,787 35,398
Diluted net income (loss) per share 35,787 37,756
SIGMATEL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
March 31, December 31,
2006 2005
------------ ------------
ASSETS
Current Assets:
Cash and cash equivalents $ 21,063 $ 65,712
Short-term investments 30,351 53,172
Accounts receivable, net 30,276 48,633
Inventories, net 35,733 23,534
Income tax receivable 5,241 5,492
Deferred tax asset, net 2,760 1,760
Prepaid expenses and other assets 8,168 6,963
---------- ----------
Total current assets 133,592 205,266
Property, equipment and software, net 14,242 14,200
Intangible assets, net 37,168 37,678
Goodwill 84,087 84,203
Other assets 1,868 2,095
---------- ----------
Total assets $ 270,957 $ 343,442
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 28,723 $ 50,146
Accrued compensation 5,161 7,020
Other accrued expenses 6,005 6,442
Deferred revenue 8,416 10,093
Current portion of long-term
obligations 330 528
---------- ----------
Total current liabilities 48,635 74,229
Non-current income taxes payable 10,519 7,906
Other liabilities 3,333 2,113
---------- ----------
Total liabilities 62,487 84,248
---------- ----------
Stockholders' Equity:
Common stock, $0.0001 par value;
170,000 shares authorized; shares
issued and outstanding: 35,200
and 35,110 at 2006 and 37,507 and
37,417 at 2005, respectively 4 4
Additional paid-in capital 188,516 218,492
Notes receivable from stockholders (5) (5)
Deferred stock-based compensation -- (3,874)
Treasury stock, 90 common shares
at cost (741) (741)
Accumulated surplus 20,611 45,337
Accumulated other comprehensive
income (loss) 85 (19)
---------- ----------
Total stockholders' equity 208,470 259,194
---------- ----------
Total liabilities and
stockholders' equity $ 270,957 $ 343,442
========== ==========
Contact:
SigmaTel, Inc., Austin Investors: Debbie Laudermilk, 512-381-3931 Email Contact or Media: Martha Aviles, 512-744-9968 Email Contact