Actions Semiconductor CEO Discusses Q2 2011 Results - Earnings Call Transcript

Actions Semiconductor Co., Ltd. ( ACTS)

Q2 2011 Earnings Call

August 9, 2011 5:30 p.m. ET

Executives

Ellen Davis – Investor Relations, The BlueShirt Group

Patricia Chou – Chief Financial Officer

Niccolo Chen – Chief Executive Officer

Analysts

Rick Fearon – Accretive Capital Partners

Bob Snell - Daughtry

Presentation

Operator

Good afternoon, and welcome to Actions Semiconductor’s second quarter 2011 earnings conference call. (Operator Instructions).

I would now like to turn the conference over to Ellen Davis with The BlueShirt Group. Please go ahead.

Ellen Davis

Good afternoon, and thank you for joining us on today’s conference call to discuss Actions Semiconductor’s second quarter, 2011, financial results.

This call is being broadcast live over the web and can be accessed on the investor relations section of Actions’ website at www.action-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 the second quarter ended June 30 th, 2011. 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 email 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 further 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 file from time to time with the SEC specifically the company’s most recently filed forms F-1, 20-F, and 6-K’s. These documents identify important factors that could cause the actual results to differ materially from those contained in our projections or forward-looking statements.

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

Patricia Chou

Thank you for participating in Actions’ earnings conference call. We appreciate your continued interest in Actions. I will provide a business update and discuss financial results for the second quarter of 2011. 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 would like to comment on the press release issued today announcing the CFO transition. Effective August 31 st, I will be stepping down and Nigel Liu will be promoted to the job of CFO.

Nigel has been with Actions since 2007 in several finance-related functions. The Board of Directors and the management team are confident that his experience will provide a seamless transition for the position.

I have enjoyed my nearly five-year tenure with the company. And I continue to be optimistic about Actions long-term growth prospects. I will remain an adviser to the company following my departure.

Now, moving on to our financial results for the second quarter. As a reminder, our financials are reported in accordance with U.S. GAAP.

For the second quarter that ended June 30 th, 2011, we reported a revenue of $10.5 million compared to $9.4 million in the first quarter of 2011. Our gross margin for the second quarter was 37.9% compared to 39.1% for the prior quarter. This slight decline in gross margin was mainly due to the higher volume of lower margin products sold.

For the second quarter, total stock-based compensation was $27 million compared to an expense in the first quarter of $0.6 million.

R&D expense was $5.6 million or 53.4% of revenue for the second quarter compared to $5.1 million in the first quarter. We anticipate our R&D expense to continue to represent a high percentage of revenue as we increase R&D talent to focus on our diversified product development initiatives. In addition, we are focusing more than half of our R&D resources in high-end new product development.

G&A expense was $2.2 million in the second quarter or 21.2% of revenue compared to $1.7 million in the first quarter.

In the first quarter, G&A expense was lower due to the annual [inaudible] expense reimbursement from our AES depository bank.

Note the marketing expense was $0.3 million in the second quarter or 3.1% of revenue compared to $0.3 million in the first quarter. We continue to tightly manage expense levels in this category and maintain a hiring freeze for non-engineering functions. And it’s not because of the management and executive level.

Operating loss was $3.8 million for the second quarter compared to a loss of $3.1 million for the prior quarter. As noted last quarter, as the result of the continued depreciation of the Chinese yen against the U.S. dollar, non-recurring engineering charges in developing new high-end products, and a comparative compensation in China’s talent markets, we expect our operating expenses denominated in Chinese yen to increase gradually.

Net other income for the second quarter was $1.3 million as a net result of foreign exchange gain of $1.1 million and a total yen of one of [inaudible] invested companies of $0.2 million.

Other income of $1.1 million for the first quarter was over related to a net foreign exchange gain.

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