Actions Semiconductor Reports Second Quarter 2016 Results

(PRNewswire) — Actions Semiconductor Co., Ltd. (Nasdaq: ACTS) ("Actions Semiconductor" or "the Company"), one of China's leading fabless semiconductor companies that provides comprehensive portable multimedia and mobile internet system-on-a-chip (SoC) solutions for portable consumer electronics, today reported its financial results for the second quarter ended June 30, 2016.

Commenting on the second quarter results, Dr. Zhenyu Zhou, CEO of Actions Semiconductor said, "Revenue for the quarter came in at the midrange of our expectations. Our multimedia business saw a healthy increase in shipments of Bluetooth 4.2 single-chip solutions, along with strong demand for solutions derived from our MP3 chipsets, such as digital audio recorders and digital toys. In our application processor business, shipments of tablet SoCs had another solid quarter while OTT set-top box solutions continued to perform below expectations. Our financial performance for the quarter was adversely impacted by write-downs of slower moving inventory and intangible assets as well as non-cash expenses related to the devaluation of the Chinese Renminbi relative to the US dollar. 

"Looking ahead, we expect revenue for the second half of the year to be slightly higher than the first half of 2016, with R&D expenditures below 2015 levels. Our multimedia business will continue to be the primary revenue driver, led by our Bluetooth solutions targeting the audio and music market along with newer verticals including wearables and automotive products. In our application processor business, we plan to maintain our position in the tablet market and are excited about the prospects for our newly launched products targeting the fast growing virtual reality market, the S900VR and the V700. Extensions of our existing 28-nm chipsets, these all-in-one solutions offer a superior virtual reality experience marked by high quality 3D surround sound, latencies below 20ms and low power consumption at attractive BOM costs. We expect the S900VR and V700 to be rapidly adopted by manufacturers of virtual reality headsets in the coming months," Dr. Zhou concluded. 

Second Quarter 2016 Results

All financial results are reported on a U.S. GAAP basis.

Revenue for the second quarter of 2016 was $13.9 million, as compared to revenue of $12.0 million for the first quarter of 2016, and $13.7 million for the second quarter of 2015. 

Actions Semiconductor reported gross profit in the second quarter of $2.2 million, as compared with $4.2 million in the first quarter of 2016 and $3.5 million in the second quarter of 2015.  Gross margin was 15.9% for the second quarter of 2016, compared to gross margin of 35.3% for the first quarter of 2016, and 25.7% for the second quarter of 2015. The second quarter of 2016 was adversely impacted by the write down of certain slower moving inventory that reduced gross margin by about 9.0%. Gross margin in the first quarter of 2016 was favorably impacted by the sale of previously written-down inventory. 

Operating expenses in the second quarter of 2016 were $11.4 million, as compared to $9.1 million in the first quarter of 2016 and $10.1 million in the second quarter of 2015.

Research and development expenses were $5.9 million for the second quarter, as compared to $6.6 million in the first quarter of 2016 and $7.3 million in the second quarter of 2015. The quarter-over-quarter and year-over-year decreases were mainly due to a lower mask expenses in current quarter.

General and administrative expenses were $2.1 million in the second quarter, as compared to $2.1 million in the first quarter of 2016 and $2.2 million in the second quarter of 2015. 

Selling and marketing expenses were $0.5 million for the second quarter, as compared to $0.5 million in the first quarter of 2016 and $0.6 million in the second quarter of 2015.

Impairment of intangible assets for the second quarter was $3.0 million, compared to nil in the first quarter of 2016 and nil in the second quarter of 2015. The impairment was based on management's best estimates of the market conditions for OTT set-top boxes and other products over the remaining useful life of these assets. 

Operating loss for the second quarter of 2016 was $7.9 million, as compared to the operating loss of $4.6 million in the first quarter of 2016 and the operating loss of $5.1 million in the second quarter of 2015.

Other expense for the second quarter of 2016 was $1.2 million, due to an unrealized, non-cash foreign exchange loss associated with the depreciation of the Chinese RMB against the U.S. dollar, as compared to other expense of $0.1 million in the first quarter of 2016 and other income of $79,000 in the second quarter of 2015. 

Interest income for the second quarter of 2016 was $0.9 million, down from $1.1 million in the first quarter of 2016 and down from $1.7 million in the second quarter of 2015. The year-over-year decrease was due to lower cash and interest bearing securities following the Dutch auction tender offer in September 2015.

Income tax credit was $18,000 for the second quarter of 2016, compared to an income tax expense of $0.1 million in the first quarter of 2016 and an income tax expense of $0.5 million in the second quarter of 2015.

Net loss attributable to Actions Semiconductor's shareholders for the second quarter of 2016 was $7.9 million or $0.179 per basic and diluted American Depositary Share ("ADS"). This compares to net loss attributable to Actions Semiconductor's shareholders of $3.9 million or $0.089 per basic and diluted ADS, for the first quarter of 2016, and net loss attributable to Actions Semiconductor's shareholders of $3.7 million or $0.063 per basic and diluted ADS, for the second quarter of 2015. 

Financial Condition

The Company ended the second quarter of 2016 with $116.6 million in cash and cash equivalents, together with time deposits, trading securities, marketable securities and restricted deposits.  Total current assets were approximately $115.4 million, and the Company had working capital of approximately $39.8 million and $61.0 million in short-term bank loans, and total shareholder's equity was $141.0 million as of June 30, 2016. 

Since the share repurchase program commenced in 2007, the Company has invested approximately $113.4 million in repurchasing its ADSs and ordinary shares, including $57.2 million representing the equivalent of 24.0 million ADSs repurchased through Dutch auction tender offers in September 2015 and 2014. As of June 30, 2016, the equivalent of approximately 49.1 million ADSs were repurchased. As of June 30, 2016, the total number of outstanding ordinary shares (including ordinary shares represented by ADSs) was 265,788,736.

Business Outlook

The following statements are based upon management's current expectations. These statements are forward-looking, and actual results may differ materially. The Company undertakes no obligation to update these statements.

Based on current market trends, the Company expects revenue in the third quarter of 2016 to be in the range of $14.5 to $15.5 million . The Company expects revenue for the second half of the year to be slightly higher than the first half of 2016, primarily driven by shipments of Bluetooth solutions and MP3 derivative product SoCs as well as initial shipments of new products targeting the virtual reality market. The Company will continue managing expenses, and anticipates R&D expenses in 2016 to be below 2015 levels. 

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