MEMSIC, Inc. (MEMSIC), a US based provider of semiconductor solutions based on micro electro-mechanical systems (MEMS), has reported net sales of $20.1 million for the year-end 2008, down 20%, compared with the net sales of $25.3 million in the previous year-end. It has also reported a net loss of $1.7 million, or $0.07 loss per diluted share, for the year-end 2008, compared with the net income of $6.1 million, or $0.25 per diluted share, in the previous year-end.
Financial Results:
Revenue for the fourth quarter of 2008 was $5.2 million, down 20% from the fourth quarter of 2007. Net loss in the fourth quarter was $1.9 million on a GAAP basis, or $0.08 loss per diluted share, compared to net income of $1.4 million or $0.06 per diluted share in the fourth quarter of 2007. The company’s net loss reflects a non-cash charge recorded in the fourth quarter due to the company’s establishment of a full valuation allowance against its deferred tax assets in the US. On a non-GAAP basis, which excludes stock-based compensation charges of $0.3 million as well as the impact of the valuation allowance of $1.2 million, the company’s net loss was $0.4 million, or $0.02 loss per diluted share. The company’s non-GAAP net income for the fourth quarter of 2007 was $1.7 million, or $0.07 per diluted share, which excludes stock-based compensation charges of $0.3 million.
On a non-GAAP basis, which excludes stock based compensation charges in accordance with FAS 123R of about $1.3 million as well as the impact of the valuation allowance of $1.2 million; the company’s 2008 net income was $0.8 million, or $0.03 per share. Non-GAAP net income for 2007 was $6.8 million, or $0.29 per diluted share, which excludes stock-based compensation charges of $0.7 million.
The non-cash tax-related charge for the establishment of a valuation allowance against the company’s deferred tax assets was the result of US GAAP requirements that apply when a company is in a three-year cumulative loss position, which for MEMSIC, occurred during the fourth quarter of 2008. The charge does not affect MEMSIC’s revenues, pre-tax results from operations or overall liquidity.
Yang Zhao, chief executive officer of MEMSIC stated, We are pleased to have exceeded the upper end of our revenue guidance for the fourth quarter. We received unanticipated orders for products targeting mobile phones ahead of the Chinese New Year that pushed revenue above expectations, though revenue would have been near the top of our expected range even without them. While we anticipate additional business in Q1 from handset customers, visibility beyond the first quarter remains cloudy. Pricing pressure for device-level products continued in this challenging market resulting in lower average selling prices and gross margins in the fourth quarter, though we were still able to produce non-GAAP earnings slightly better than our expected range. We are pleased with the recent orders in the handset market, though instability in this market highlights the importance of our strategy to diversify our product line.
Zhao added, Recently, we announced a new line of magnetic sensors with enhanced digital compass capabilities, with our first product launched in December. We expect to launch additional products in this line in 2009 that will enable device manufacturers to incorporate location-based functionality into their next-generation devices. We are making progress with the development of our gas flow meter solutions, as well as other value-added solutions that complement our devices with integrated hardware and software to target the consumer, automotive, and industrial markets. In response to the global economic slowdown, we have reduced headcount in our sales and marketing and G&A organizations. We have also reduced discretionary spending company-wide. We continue to invest in our R&D organization, as a part of our strategy to expand our product line to optimize longer-term opportunities. We believe these long-term opportunities combined with our strong balance sheet put MEMSIC in a healthy position to achieve long-term success.
Outlook:
For the first quarter of 2009, MEMSIC expects revenue in the range of $5.5 to $6.0 million, based primarily on larger than anticipated orders received from handset manufacturers in China during the first quarter. GAAP net loss for the first quarter of 2009 is expected to be in the range of $0.05 to $0.03 loss per diluted share. Non-GAAP net loss, which excludes about $350,000 in stock-based compensation expenses, is expected to be in the range of $0.04 to $0.02 loss per diluted share. Average diluted share count for the first quarter is expected to be 24 million.