Actions Semiconductor Company Ltd. ( ACTS)

Q4 2010 Earnings Conference Call

January 27, 2011 5:30 PM ET


Grace Reyes – IR, The Blueshirt Group

Patricia Chou – CFO

Niccolo Chen – CEO


Rick Fearon – Accretive Capital Partners



Good afternoon, ladies and gentlemen, thank you for standing by. Welcome to the Actions Semiconductor Fourth Quarter and Fiscal Year 2010 Earnings Conference Call. During today’s presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be opened for questions. (Operator Instructions) This conference is being recorded, Thursday, January 27 of 2011.

I would pass over to Grace Reyes. Please go ahead, ma’am.

Grace Reyes

Good afternoon and thank you for joining us on today’s conference call to discuss Actions Semiconductor’s fourth quarter and fiscal year 2010 financial results. This call is being broadcast live over the web and can be accessed on the Investor Relations section of Actions’ website, 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 fourth quarter and fiscal year ended December 31st, 2010. The press release was 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.

And now, I would like to turn over the call to Patricia Chou.

Patricia Chou

Thank you for participating in Actions’ earnings conference call. We appreciate your continued interest and support for Action. I will provide a business update and discuss financial results for the fourth quarter, and the fiscal year 2010, as well as expectations for future performance.

Niccolo will be available during the Q&A portion of the call where I will translate from Mandarin to English on his behalf. First I will discuss our financial results for the fourth quarter. As a reminder, our financials are reported in accordance with U.S. GAAP.

For the fourth quarter ended December 31st 2010, we recorded revenue of $10.7 million, compared to $9.3 million in the third quarter. Revenue for the year 2010 was $37.6 million, compared to revenue of $44.1 million for the year 2009.

Our gross margin for the fourth quarter was 37.1%, compared to 40.1% for the third quarter. The decline in gross margin following three quarters of sequential increases was primarily due to an inventory write-off of $0.2 million.

For the fourth quarter, total stock-based compensation expense was a credit over $0.2 million than as the third quarter which included a true-up of underestimated forfeiture rate.

R&D expense was $4.4 million or 41.2% of revenue for the fourth quarter, compared to $3.9 million in the third quarter. We anticipate our R&D expense to continue to represent a high percentage of revenue, as we need more R&D talent to focus on our diversified product development initiative.

G&A expense was $2.2 million in the fourth quarter or 20.5% of revenue, which was slightly higher than the third quarter of $1.8 million. Sales and the marketing expense was $0.4 million in the fourth quarter or 3.9% of revenue, compared to $0.2 million in the third quarter. We continue to tightly manage the expense levels in this category as demonstrated by our hiring freeze of across non-engineering functions and the salary cuts at the management level.

Operating loss was $3 million for the fourth quarter, compared to operating loss of $1.8 million for the third quarter. As a result of the continued appreciation of Chinese Yuan against the U.S dollar, and payroll level increase in China sell in market, we expect our operating expense denominated in Chinese Yuan to increase gradually.

Net other income was $0.8 million as a net result of foreign exchange gain. Other income of $1.1 million for the third quarter was also related to a net foreign exchange gain. Increased income was $2.5 million for the fourth quarter, up directly from fourth – $2.4 million in the third quarter.

Income before taxes was $0.3 million for the fourth quarter, as compared to income of $1.7 million in the third quarter. Net income tax expense was $0.1 million for the fourth quarter, compared to income tax expense of $0.4 million in the third quarter. Net loss attributable to Action Semiconductor under the U.S. GAAP basis for the fourth quarter was $0.15 million or $0.2 per diluted ADS, compared to net income of $1.9 million or $0.03 per diluted ADS for the third quarter.

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