Third Quarter Financial Review
Revenues for the third quarter of 2007 were $41.2 million with a GAAP net loss of $4.0 million or $0.11 per share. The non-GAAP adjusted net loss for the third quarter of 2007 was $2.0 million or a non-GAAP adjusted net loss of $0.06 per share. GAAP gross margin for the quarter was 42.8 percent and non-GAAP gross margin was 43.9 percent. See the reconciling charges set forth in the reconciliation of GAAP to non-GAAP results provided below.
As of September 30, 2007, SigmaTel had cash, cash equivalents, restricted cash and short-term investments of $74.6 million.
Business Update
"During the first nine months of 2007, we focused and restructured the company to help us strengthen our business and set a foundation upon which SigmaTel could grow," said Phil Pompa, CEO of SigmaTel. "Operating expenditures have been reduced, as we had previously committed, and we remain committed to focusing on our three core product lines: PMP, Consumer Audio and Printers."
Executive Summary:
-- The first 3700 player is on the market
-- Expansion of the 3700 product family can be expected in the first quarter of 2008
-- The 3600 product family has numerous new programs underway
-- The consumer audio design team is developing integrated power and audio chips for new market segments
-- The printer group continues to collaborate with key Taiwanese ODMs on new OEM printer designs worldwide
"SigmaTel's turnaround is a multi-phase process. We began by restructuring the company and managing our cash balance. In the second phase, we have begun to rebuild the business and focus on our strengths," said Phil Pompa, CEO of SigmaTel. "This is an on-going effort and we must continue to grow revenue to achieve profitability. In parallel, we are beginning the third phase of the turn-around: expanding into new markets and investing in new product areas."
Fourth Quarter 2007 Outlook
For the fourth quarter of 2007, the company anticipates revenue of $33 million to $38 million with non-GAAP gross margins of approximately 41 percent, plus or minus a couple of points. SigmaTel's gross margin percentage varies primarily with product mix, pricing, and unit costs.
GAAP diluted loss per share is expected to be $0.22 to $0.15 with non-GAAP adjusted net loss per share expected to be $0.17 to $0.10, based on 36 million diluted weighted average shares outstanding. Our effective tax rate for the third quarter is expected to be approximately 9%.
Conference Call Today
A conference call will be held today, October 31, 2007, at 3:30 p.m. Central Daylight Time (CDT) and will be simulcast over the Internet at www.streetevents.com and www.sigmatel.com. A replay will be available after the call until November 30, 2007, at the websites listed above and by phone at 888-203-1112 for domestic calls or 719-457-0820 for international calls. Please use passcode 4183212 when accessing the replay by phone.
For more information on SigmaTel, please visit www.sigmatel.com.
About SigmaTel: SigmaTel is a fabless semiconductor company which designs, develops, and markets mixed-signal ICs for the consumer electronics market. The Company's target market segments include portable media players, printers and digital televisions. SigmaTel provides complete, system-level solutions that include highly-integrated ICs, customizable firmware and software, software development tools and reference designs. The Company's focus is on enabling 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, worldwide 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: SigmaTel's ability to effectively implement changes which will increase operational efficiencies, reduce costs as planned, and ultimately improve SigmaTel's financial results; SigmaTel's ability to succeed in its more narrowly-defined market emphasis and the ability of those markets to support SigmaTel's business objectives; SigmaTel's ability to gain continued market acceptance of its 3600 and 3700 families of products, and to achieve additional product wins with those products; and SigmaTel's ability to correctly identify and pursue new market segments and to successfully develop new products for those segments. For a more thorough discussion of the risks to which the forward-looking statements are subject, please refer to recent SigmaTel filings with the SEC, particularly the Form 10-Q that was filed on August 9, 2007.
Discussion of Non-GAAP Financial Measures: SigmaTel provides a non-GAAP measure of gross profit, net (loss) income and net (loss) income per share in its earnings release. The presentation of gross profit is intended to be a supplemental measure of performance and excludes a non-cash charge related to amortization of intangible assets from acquisitions. The presentation of net (loss) income and net (loss) income per share is intended to be a supplemental measure of performance and excludes: (i) a non-cash charge related to amortization of intangible assets from acquisitions; (ii) a non-cash charge related to stock-based compensation; (iii) a non-cash benefit related to tax benefits of unwinding our IP migration strategy; (iv) a charge related to the abandonment of leased facilities; (v) a loss on the disposition of assets in conjunction with the lease abandonment; and (vi) a gain on the sale of the PC Audio product line. SigmaTel believes that excluding these items represents a better basis for the comparison of its current results to past, present, and future operating results, and a better means to highlight the results of core ongoing operations. The presentation of this additional information is not meant to be considered in isolation or as a substitute for results prepared in accordance with GAAP. The non-GAAP financial measures included in the press release have been reconciled to the corresponding GAAP financial measures as required under the rules of the Securities and Exchange Commission regarding the use of non-GAAP financial measures.
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.
RECONCILIATION of GAAP to NON-GAAP RESULTS
(in thousands, except per share data)
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ------------------
2007 2006 2007 2006
-------- -------- -------- --------
Gross profit as reported $ 17,633 $ 17,207 $ 37,037 $ 50,858
Non-GAAP adjustments:
Amortization of intangible
assets from acquisitions 455 783 1,365 2,349
-------- -------- -------- --------
Adjusted gross profit $ 18,088 $ 17,990 $ 38,402 $ 53,207
======== ======== ======== ========
Adjusted gross profit
percentage 43.9% 40.0% 41.0% 43.7%
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ------------------
2007 2006 2007 2006
-------- -------- -------- --------
Net (loss) income as reported $ (4,018) $ 11,510 $(33,783) $(10,289)
Non-GAAP adjustments (tax
effected):
Amortization of intangible
assets from acquisitions 505 831 1,515 2,512
Stock-based compensation 1,489 1,523 5,279 5,760
Net tax benefit of
unwinding IP migration
strategy - - - (9,271)
Loss (gain) on asset
disposition - (24,312) 594 (24,312)
Lease abandonment charge - - 619 -
-------- -------- -------- --------
Adjusted net (loss) $ (2,024) $(10,448) $(25,776) $(35,600)
======== ======== ======== ========
Diluted weighted average
shares outstanding 35,845 35,043 35,864 35,245
Diluted net (loss) per share,
non-GAAP $ (0.06) $ (0.30) $ (0.72) $ (1.01)
======== ======== ======== ========
SIGMATEL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
September 30, December 31,
2007 2006
-------------- -------------
ASSETS
Current assets:
Cash and cash equivalents $ 27,134 $ 30,686
Restricted cash 184 7,354
Short-term investments 47,237 62,800
Accounts receivable, net 20,099 12,556
Inventories, net 17,502 20,794
Income tax receivable 2,486 3,365
Prepaid expenses and other assets 2,735 5,591
------------- ------------
Total current assets 117,377 143,146
Property, equipment and software, net 10,337 13,301
Intangible assets, net 15,023 15,370
Non-current income tax receivable 5,250 -
Other assets 1,193 1,574
------------- ------------
Total assets $ 149,180 $ 173,391
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 20,439 $ 16,338
Accrued compensation 6,551 8,712
Other accrued expenses 2,802 5,328
Deferred revenue 5,507 1,242
Income tax payable 3,025 2,728
Current portion of long-term
obligations 345 229
------------- ------------
Total current liabilities 38,669 34,577
Non-current income taxes payable 4,787 4,453
Other liabilities 2,189 809
------------- ------------
Total liabilities 45,645 39,839
------------- ------------
Stockholders' equity:
Common stock, $0.0001 par value; 170,000
shares authorized; shares issued and
outstanding: 36,111 and 36,021 at
September 30, 2007 and 35,603 and 35,513
at December 31, 2006, respectively 4 4
Additional paid-in capital 203,628 197,711
Notes receivable from stockholders - (5)
Treasury stock, 90 common shares at cost (741) (741)
Accumulated deficit (99,679) (63,687)
Accumulated other comprehensive income 323 270
------------- ------------
Total stockholders' equity 103,535 133,552
------------- ------------
Total liabilities and
stockholders' equity $ 149,180 $ 173,391
============= ============
SIGMATEL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2007 2006 2007 2006
------- -------- -------- --------
Revenues, net $ 41,178 $ 45,008 $ 93,931 $ 121,841
Cost of goods sold 23,545 27,801 56,894 70,983
------- -------- -------- --------
Gross profit 17,633 17,207 37,037 50,858
Operating expenses:
Research and development 16,363 23,416 51,966 68,670
Selling, general and
administrative 6,519 11,294 24,628 37,925
Loss (gain) on asset
disposition - (45,673) 594 (45,673)
------- -------- -------- --------
Total operating expenses
(income) 22,882 (10,963) 77,188 60,922
------- -------- -------- --------
Operating (loss) income (5,249) 28,170 (40,151) (10,064)
Interest income, net 1,048 914 3,084 2,118
Foreign exchange (loss) benefit 56 (67) (77) (171)
------- -------- -------- --------
Total other income 1,104 847 3,007 1,947
(Loss) income before income
taxes (4,145) 29,017 (37,144) (8,117)
Income tax (benefit) expense (127) 17,507 (3,361) 2,172
------- -------- -------- --------
Net (loss) income $(4,018) $ 11,510 $(33,783) $(10,289)
======= ======== ======== ========
BASIC NET (LOSS) INCOME PER
SHARE $ (0.11) $ 0.33 $ (0.94) $ (0.29)
======= ======== ======== ========
DILUTED NET (LOSS) INCOME PER
SHARE $ (0.11) $ 0.32 $ (0.94) $ (0.29)
======= ======== ======== ========
WEIGHTED AVERAGE SHARES USED TO
COMPUTE:
Basic net (loss) income per
share 35,845 35,043 35,864 35,245
Diluted net (loss) income per
share 35,845 35,608 35,864 35,245
Contact:
SigmaTel, Inc., Austin
Martha Aviles, 512-744-9968
Corporate
Communications Manager
Email Contact