Actions Semiconductor Co., Ltd. (ACTS)

Q1 2010 Earnings Call

May 13, 2010 5:30 pm ET

Executives

Pia Kristiansen – Blueshirt Group

Niccolo Chen - CEO

Patricia Chou – CFO

Analysts

Bill Lu - Morgan Stanley

Rick Fearon - Accretive Capital Partners

P resentation

Operator

Welcome to the Actions Semiconductor first quarter 2010 earnings conference call. (Operator Instructions) This conference is being recorded today, Thursday, May 13, 2010. I would now like to turn the conference over to Ms. Pia Kristiansen. Please go ahead, ma’am.

Pia Kristiansen

Good afternoon and thank you for joining us on today’s conference call to discuss Actions Semiconductors first quarter 2010 financial results. This call is being broadcast live over the web and can be accessed on the Investor Relations section of Actions’ website, www.actions-semi.com for 90 days. On today’s call are Niccolo Chen, Chief Executive Officer and Patricia Chou, Chief Financial Officer.

After the market closed in the U.S. today, Actions issued a press release discussing the results for its first quarter ended March 31, 2010. The press release is also filed on Form 6-K with the U.S. Securities and Exchange Commission. The press release is accessible online at the company’s website as well as the SEC’s website or you can call The Blueshirt Group at 415-217-7722 and we will fax or e-mail you a copy.

We would like to remind you that during the course of this conference call, Actions management team may make projections or other forward-looking statements regarding future events or the future financial performance of the company. We wish to caution you that such statements are simply estimates and actual events or results may differ materially.

We refer you to the documents that Actions files from time to time with the SEC, specifically the company’s most recently filed Forms F-1, 20-F and 6-Ks. These documents identify important factors that could cause actual results to differ materially from those contained in our projections or forward-looking statements.

Now I would like to turn over the call over to Patricia Chou.

Patricia Chou

Thank you for participating on Actions’ earnings conference call. We appreciate your continued interest and support for Actions. Similar to our first earnings call, I will provide the business update and discuss financial results for the first quarter as well as the expectations for future results. Then Niccolo Chen, our CEO, will be available during the Q&A portion of the call where I will translate from Mandarin to English on his behalf. As a reminder, our financials are reported in accordance with U.S. GAAP.

We were pleased that we saw some improvement in demand in the consumer electronics market as we entered 2010. A few positive indicators show that we continue to be well positioned to benefit from the anticipated market rebound in 2010. Our first quarter results reflect the solid demand for our high end products, particularly our Series 13 and Series 25 products [inaudible] in the QVGA and D1 segments respectively.

In addition to our traction in sales diversification, we saw an improvement in our ASP, unit cost and gross margin, a decrease in our operating expenses and continued preservation of our cash position.

Our results for the first quarter exceeded our guidance for the quarter as we began to see some positive indicators for a rebound in PMP demand. For the first quarter ended March 31, 2010 we recorded revenue of $7.9 million compared to $7.9 million in the fourth quarter of 2009. Our gross margin for the first quarter of 2010 was 39.6% compared to 34.9% for the fourth quarter of 2009. We are pleased to see continuing improvement in our gross margin has increased the shipments of our Series 13 and Series 25 products to a more favorable shift in our product mix and offset ASP erosion during the first quarter.

We remain committed to our cost down activities which also contributed to improving our results although we expect that margins will remain [inaudible] in the near-term due to the ongoing presence of ASP pressure and competitive pricing. For the first quarter of 2010 total stock based compensation expense amounted to $1 million compared to $0.9 million in the fourth quarter of 2009. R&D expense was $4.5 million or 57.8% of revenue for the first quarter of 2010 which was flat with the fourth quarter of 2009. We expect our R&D expense to represent a higher percent of our revenue as we expand our resources by growing our pool of engineering talent working on next generation PMP products and new business initiatives.

During the first quarter we hired approximately 10 senior engineers who strengthened our R&D credibility. G&A expense was $1.7 million in the first quarter or 22.1% of revenue as compared to $2.2 million in the fourth quarter or 27.7% of revenue in the fourth quarter due to receiving the ADS related expense reimbursement from our depositor bank in the first quarter.

Sales and marketing expense was $0.2 million in the first quarter or 3.1% of revenue, flat with the fourth quarter of 2009. We are pleased to see these categories trending to lower levels as a result of our hiring freeze and salary cuts imposed on non-engineering functions.

Operating loss was $3.3 million for the first quarter of 2010 compared to operating loss of $3.7 million for fourth quarter 2009. This is related to the sequential improvement in profitability and our continued cost management in the first quarter. Net income of $31,000 was recorded in the first quarter of 2010 as a result of a foreign exchange gain on Renminbi and Taiwanese Dollars versus U.S. dollars. This compares to other income of $29,000 for the first quarter 2009 also related to foreign exchange gains.

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