MEMSIC, Inc. (NasdaqGM: MEMS), a leading MEMS sensing solution provider, today announced financial results for the third quarter ended September 30, 2010.
  • Revenues totaled $10.8 million compared to $7.1 million in the third quarter of 2009.
  • Gross margin was 37.8% compared to 41.3% in the 2009 quarter. Gross margin in the 2010 quarter was negatively impacted by a $0.4 million sales credit granted to a customer for estimated engineering and screening costs incurred during 2010. The credit reduced gross margin by 2.4 basis points.
  • Operating expenses rose to $6.4 million from $3.1 million in the 2009 quarter, including an increase in R&D expense to $2.4 million from $1.2 million.
  • Net loss in the 2010 third quarter was ($1.9) million, or ($0.08) per diluted share, compared to net income of $52,000, or $0.00 per diluted share, in the prior-year period.
  • EBITDA in the 2010 third quarter was ($1.0) million compared to $0.4 million in the 2009 quarter.

MEMSIC Chairman, President and CEO, Dr. Yang Zhao commented, “We again surpassed the top end of our quarterly revenue guidance, with our magnetic sensor and new series of ultra-low-cost accelerometers contributing significantly to our growth in this quarter. We are pleased that the market for smartphones is picking up worldwide and that MEMSIC is benefiting from this trend through a ramp up in sales to a major manufacturer of GPS-enabled mobile phones.

“In the near term, the continuous cost reduction of sensor products is helping us penetrate more cost-sensitive applications such as toys and games. In the long term, we expect continuous product development in integrated smart sensor and sensing systems to drive higher ASP and margin as well as revenue growth. With our Crossbow acquisition in January 2010, we significantly increased our R&D investment in next-generation multi-sensor and MCU integrated system products at both the IC level for the consumer and mobile market and the module level for the high-end industrial, automotive, and general aviation markets. Our next-generation product lines will naturally combine MEMSIC’s core competency in ultra-low-cost sensor product design and manufacturing with the core competency in multi-sensor system integration we acquired from Crossbow. One example is the high-performance MEMS inertial systems we recently introduced, which offer the superior reliability of our advanced MEMS technology for integrated navigation systems and in stabilization and control applications.”

“The transition to China of manufacturing operations for the sensor system product lines we acquired is progressing as planned. Manufacturing for all of the wireless sensing products has been transferred, and we will finish transferring our inertial navigation system and solution products by Q1 next year except for our FAA-certified product line, which takes longer due to the nature of FAA regulations. We continue to expect cost savings through the transfer process and increased product performance and functionality through redesigning most of the product lines.”

The company’s third-quarter 2010 results include revenue from the products MEMSIC acquired from Crossbow Technology, Inc. in January 2010 and costs related to the addition of Crossbow engineering and sales staff. The 2010 and the 2009 results include $0.4 million and $0.3 million, respectively, in stock-based compensation.

Outlook

For the fourth quarter of 2010, MEMSIC anticipates revenue in the range of $10.0 to $11.0 million. Net loss, including stock-based compensation of $0.4 million, is expected to be in the range of ($0.08) to ($0.11) per share. Average diluted share count for the fourth quarter is estimated to be 24 million.

Conference Call

Management will hold a conference call and webcast at 10:00 a.m. EST on November 8, 2010 to review and discuss the Company's results.
What:         MEMSIC 3Q 2010 financial results conference call and webcast
When: Monday, November 8, 2010
Time: 10:00 a.m. EST
Live Call: (877) 291-1367, domestic
(914) 495-8534, international
Replay: (800) 642-1687 pass code 16895977, domestic
(706) 645-9291, pass code 16895977, international
Webcast:

http://investor.memsic.com (live and replay)

About Non-GAAP Financial Information

Earnings before interest, taxes, depreciation and amortization, or EBITDA, is a measure used by management to evaluate the company’s ongoing operations and as a general indicator of its operating cash flow (in conjunction with a cash flow statement which also includes, among other items, changes in working capital and the effect of non-cash charges). The Company defines EBITDA as net income, plus interest expense, net of interest income, provision for income taxes, and depreciation and amortization. Management believes EBITDA is useful to investors because it is frequently used by securities analysts, investors and other interested parties in the comparative evaluation of companies. Because not all companies use identical calculations, the company's presentation of EBITDA and EBITDA per share may not be comparable to similarly titled measures of other companies. EBITDA is not a recognized term under GAAP and does not purport to be an alternative to net income as a measure of operating performance or to cash flows from operating activities as a measure of liquidity. Additionally, EBITDA is not intended to be a measure of free cash flow for management's discretionary use as it does not reflect certain cash requirements such as interest payments, tax payments and debt service requirements.

Pursuant to the requirements of Regulation G, we have provided a reconciliation of EBITDA to GAAP net income as an exhibit to this release.

About MEMSIC, Inc.

MEMSIC Inc., headquartered in Andover, Massachusetts, provides advanced semiconductor sensors and multi-sensor system solutions based on micro-electromechanical systems (MEMS) technology and sophisticated integration technologies in both the IC level and module level. MEMSIC's unique and proprietary approach combines leading-edge sensor technologies, such as magnetic sensors and accelerometers, with mixed signal processing circuitry to produce reliable, high quality, cost-effective solutions for the mobile phone, automotive, consumer, industrial, and general aviation markets. The company shares are listed on the NASDAQ Stock Exchange (NASDAQ GM: MEMS).

Safe Harbor Statement

Statements included in this press release that are not historical in nature are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements are based upon the current beliefs and expectations of the company's management and are subject to significant risks and uncertainties. Actual results may differ materially from those set forth in the forward-looking statements for reasons identified under the heading "Risk Factors" in the company's most recent annual report on Form 10-K and other periodic reports filed with the Securities and Exchange Commission. The forward-looking statements contained in this press release are made as of the date hereof, and the company does not undertake any obligation to update any forward-looking statements, whether as a result of future events, new information or otherwise.
 
 
MEMSIC, Inc.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
  September 30,   December 31,
2010   2009
 
ASSETS
Current assets:
Cash and cash equivalents $ 56,756,071 $ 66,970,736
Restricted cash 2,614,515 863,439
Short-term investments 500,000 -
Accounts receivable, net of allowance for doubtful accounts of $6,441
as of September 30, 2010 and December 31, 2009, respectively 4,048,875 2,670,144
Inventories 6,896,596 4,988,611
Other assets   2,698,129     1,004,458  
Total current assets 73,514,186 76,497,388
 
Property and equipment, net 21,922,331 14,591,828
Long-term investments 5,020,000 5,353,000
Goodwill 4,869,599 -
Intangible assets, net 12,113,093 988,270
Other assets   84,191     81,455  
Total assets $ 117,523,400   $ 97,511,941  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 4,327,157 $ 1,115,694
Accrued expenses 3,126,004 1,662,518
Advance research funding   2,614,515     863,439  
Total current liabilities 10,067,676 3,641,651
 
 
Note payable to bank 17,930,000 -
 
Stockholders’ equity:
 

Common stock, $0.00001 par value; authorized, 45,000,000 shares; 23,805,363 and 23,793,113shares issued and outstanding at September 30, 2010 and December 31, 2009, respectively
238 238
 
Additional paid-in capital 99,233,128 98,112,408
Accumulated other comprehensive income 2,615,109 2,218,496
Accumulated deficit   (12,686,178 )     (6,460,852 )
MEMSIC, Inc. stockholders' equity 89,162,297 93,870,290
 
Noncontrolling interest related to joint venture in Japan   363,427     -  
Total equity   89,525,724     93,870,290  
 
Total liabilities and stockholders’ equity $ 117,523,400     $ 97,511,941  
         
 
MEMSIC, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 
Three Months Ended September 30,

Nine Months Ended September 30,
2010 2009 2010 2009
 
Net sales $ 10,844,719 $ 7,067,583 $ 27,212,338 $ 22,759,693
Cost of goods sold   6,751,194     4,147,180     16,584,892     12,505,427
Gross profit 4,093,525 2,920,403 10,627,446 10,254,266
 
Operating expenses:
Research and development 2,377,649 1,210,197 6,386,394 4,088,923
Sales and marketing 1,376,893 502,829 3,557,223 1,622,890
General and administrative 2,212,399 1,342,290 6,525,484 4,115,447
Amortization expense   406,561     38,067     1,146,844     110,012
Total operating expenses   6,373,502     3,093,383     17,615,945     9,937,272
 
Operating income (loss) (2,279,977 ) (172,980 ) (6,988,499 ) 316,994
 
Other income:
Interest and dividend income 99,026 205,322 319,803 665,171
Other, net   325,074     68,651     430,361     107,286
Total other income   424,100     273,973     750,164     772,457
 
Earnings (loss) before income taxes (1,855,877 ) 100,993 (6,238,335 ) 1,089,451
Provision (benefit) for income taxes   36,392     48,927     (79,102 )   289,021
Net income (loss) (1,892,269 ) 52,066 (6,159,233 ) 800,430
 
Less: net income attributable to noncontrolling interest   39,004     -     66,093     -
Net income (loss) attributable to MEMSIC, Inc. $ (1,931,273 ) $ 52,066   $ (6,225,326 ) $ 800,430
 
Net income (loss) per common share:
Basic $ (0.08 ) $ 0.00   $ (0.26 ) $ 0.03
Diluted $ (0.08 ) $ 0.00   $

(0.26
) $ 0.03
 
Weighted average shares outstanding used in calculating
net income (loss) per common share:
Basic   23,805,072     23,764,284     23,802,357     23,724,587
Diluted   23,805,072     24,102,339     23,802,357     23,981,367
 
 
MEMSIC, Inc.

Reconciliation of Net Income (Loss) to Earnings Before Interest, Taxes and Depreciation and Amortization (EBITDA (Unaudited)
         
 
Three months ended September 30, Nine months ended September 30,
2010 2009 2010 2009
 
Net income (loss) $ (1,931,273 ) $ 52,066 $ (6,225,326 ) $ 800,430
Interest (income) expense, net (99,026 ) (205,322 ) (319,802 ) (665,171 )
Income tax expense (benefit) 36,392 48,927 (79,102 ) 289,021
Depreciation and amortization   1,002,616     493,769     2,822,667     1,518,353  
EBITDA $ (991,291 ) $ 389,440   $ (3,801,563 ) $ 1,942,633  

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