Actions Semiconductor Reports Third Quarter 2015 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 third quarter ended September 30, 2015.

Commenting on the third quarter results, Dr. Zhenyu Zhou, CEO of Actions Semiconductor said, "Revenue in the third quarter came in at the low end of expectations, primarily due to a global slowdown in demand for smartphones, tablets and other consumer electronics. Two of our key target markets, tablets and China's open market for OTT set-top boxes, both experienced a decline in shipments during the quarter.  Although we saw a third consecutive quarter gross margin improvement, our bottom line was impacted by a write-down of intangible assets, along with mask expenses associated with the latest chipset in the 28nm series product family, expenses from the Dutch auction tender offer and non-cash expenses related to the devaluation of the Chinese Renminbi relative to the US dollar.

"On a positive note, we continued to see new design wins for our Bluetooth 4.2 solutions for speakers and other Bluetooth enabled audio devices along with stronger than anticipated sales of video boomboxes and other traditional multimedia products. Consumer demand for smart connected devices remains strong, and volumes of our smart product solutions, including our open source SoCs and reference design platforms, continue to ramp. 

"As we approach year end, the worldwide semiconductor industry has now experienced slower growth and has not seen the typical ramp in sales leading up to the holiday season.  In addition, the PRC government recently imposed a new policy on the OTT set-top box market that is negatively impacting demand. We expect these factors to limit our ability to increase revenue for the next several quarters.  As a result, we now expect revenue for the full year to be slightly below 2014 levels. However, we are encouraged by the success of our Bluetooth solutions and are hopeful that strong consumer demand for smart products will drive adoption of our latest 64-bit chipset based on 28nm process technology, along with our open source SoCs and reference design platforms in the year ahead," Dr. Zhou concluded.

Third Quarter 2015 Results

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

Revenue for the third quarter of 2015 was $13.0 million, as compared to revenue of $13.7 million for the second quarter of 2015, and $13.1 million for the third quarter of 2014. 

Actions Semiconductor reported gross profit in the third quarter of $3.5 million, as compared with $3.5 million in the second quarter of 2015 and $1.9 million in the third quarter of 2014. Gross margin was 26.6% for the third quarter of 2015, compared to gross margin of 25.7% for the second quarter of 2015, and 14.6% for the third quarter of 2014. The quarter-over-quarter increase in gross margin reflects the contribution of higher margin smart product SoCs in the product mix. In the year ago period the Company recorded a write-down of certain slower moving inventory which reduced gross margin by about 7%. 

Operating expenses in the third quarter of 2015 were $16.4 million, as compared to $10.1 million in the second quarter of 2015 and $14.4 million in the third quarter of 2014.

Research and development expenses were $8.3 million for the third quarter, as compared to $7.3 million in the second quarter of 2015 and $10.7 million in the third quarter of 2014. The quarter-over-quarter increase was due to mask expenses related to the latest chipset in the Company's 28nm series product family. The year-over-year decrease was mainly due to higher mask expenses in the year ago period associated with new 28nm chipsets and lower headcount in the current quarter. The Company expects full year R&D expenses in 2015 to be below 2014 levels.  

General and administrative expenses were $3.1 million in the third quarter, as compared to $2.2 million in the second quarter of 2015 and $3.1 million in the third quarter of 2014. The Company recorded expenses related to Dutch auction tender offers in the third quarters of 2015 and 2014 of $0.6 million and $0.5 million, respectively.

Selling and marketing expenses were $0.5 million for the third quarter, as compared to $0.6 million in the second quarter of 2015 and $0.6 million in the third quarter of 2014.

Impairment of intangible assets for the third quarter of 2015 was $4.5 million, compared to nil in the second quarter of 2015 and nil in the third quarter of 2014. The impairment was based on management's best estimates of the market conditions for tablets and OTT set-top boxes over the remaining useful life of these assets. 

Operating loss for the third quarter of 2015 was $12.0 million, as compared to the operating loss of $5.1 million in second quarter of 2015 and the operating loss of $12.4 million in the third quarter of 2014.

Other expense for the third quarter of 2015 was $1.8 million, due to an unrealized, non-cash foreign exchange loss associated with the rapid depreciation of the Chinese RMB against the U.S. dollar, compared to other income of $0.1 million in the second quarter of 2015 and other income of $0.8 million in the third quarter of 2014. 

Interest income for the third quarter of 2015 was $1.3 million, down from $1.7 million in the second quarter of 2015 and down from $2.0 million in the third quarter of 2014. The year-over-year and quarter-over-quarter decreases were due to lower cash and interest bearing securities following Dutch auction tender offers in September 2015 and 2014.

Income tax expense was $0.1 million for the third quarter of 2015, compared to income tax expense of $0.5 million in the second quarter of 2015 and an income tax credit of $0.4 million in the third quarter of 2014.

Net loss attributable to Actions Semiconductor's shareholders for the third quarter of 2015 was $12.6 million or $0.217 per basic and diluted American Depositary Share ("ADS").  This compares to 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, and net loss attributable to Actions Semiconductor's shareholders of $9.2 million or $0.137 per basic and diluted ADS, for the third quarter of 2014. 

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