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Q4 2012 Earnings Call
March 08, 2013 9:00 am ET
Harriet C. Fried - Senior Vice President - New York Office
Zhao Yang - Founder, Chairman, Chief Executive Officer and President
Patricia Niu - Chief Financial Officer and Principal Accounting Officer
Richard C. Shannon - Craig-Hallum Capital Group LLC, Research Division
Ailon Z. Grushkin - SMG Indium Resources Ltd.
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Harriet C. Fried
Thank you, everyone, for joining MEMSIC's conference call today. With us from management are Dr. Yang Zhao, Chairman and CEO; and Patricia Niu, Vice President of Finance and CFO.
This morning, the company released its fourth quarter financial results press release, which can be found in the Investor Relations section of the company's website. Before we begin, I'd like to provide the following cautionary remarks regarding forward-looking statements.
During the course of the call, the company will make various remarks about its future expectations, plans and prospects. These statements constitute forward-looking statements for purposes of the Safe Harbor provision under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in the risk factors of the company's Form 10-K and other filings with the SEC. To supplement the company's consolidated financial statements, the company is using EBITDA, a measure defined as a non-GAAP financial measure by the SEC. A reconciliation of these results to GAAP is attached to this morning's release.
With that introduction, I would like to turn the call over to Yang Zhao. Go ahead, please, Yang.
Thank you, Harriet. This is Yang Zhao. Thanks for joining us this morning to go over our fourth quarter 2012 results. I'd like to start today's call by reviewing the highlights of the numbers.
For the fourth quarter, net sales were $14.2 million, down about 1/3 from the last year's period. The revenue decrease resulted primarily from our magnetic sensor product line in the mobile market where we diversified away from a low margin business with a large mobile customer. The decrease was partially offset by a substantial increase in our consumer business. We have been allocating resources to focus on over 100 mobile and consumer customers in Asia, as well as major customers in Europe and North America. We believe that ultimately, the change in focus will enable us to build a stable, higher-quality customers based on the long-term stability. We did achieve an increase in gross margin this quarter even though we were on the low side of our revenue guidance range.
Now breaking down the revenue by product applications. Mobile phones totaled $6.3 million, a 53% decrease from Q4 2011. For the Q4 2012, the mobile phone market accounted for approximately 44% of the total sales. Other consumer applications totaled $2.9 million, an increase of almost 45% from Q4 2011. The increase was mainly due to sales increase for high-end digital camera applications in Japan and also the sales growth from new consumer applications, such as tablet computers. For the quarter, consumer applications accounted for over 20% of our total sales compared to 9% of total sales in the last year's period.
Sales from automotive applications were $2.6 million, a 21% decrease over the last year period. This decrease is primarily due to pulling by our customers in Q3 as a result of their internal planning issue. In other words, being stable in this automotive market. In Q4, 2012, automotive applications accounted for close to 19% of our total sales compared to about 15% in Q4 2011.
Sales from industrial and other application totaled $2.4 million or approximately 17% of the total sales in the fourth quarter. The sales were down about 11% from 2011 quarter. This drop mainly due to continuing phase-out of old system product we acquired earlier, as expected. Patricia will go over our quarterly financial results with you in more detail in a minute. Before we do that, I'd like to give you some highlights of our business.
On the business-optic side, overall, I'd like to emphasize our focus still on developing high-margin industrial and automotive business while we continue driving the mobile and the consumer business to reach a balance in short- and long-term goals. So we are forging ahead with our initiatives to increase the design wins in mobile, consumer, automotive and industrial market altogether.
Mobile market, especially the market in Great China and Korea, still presents us the biggest revenue opportunity for the next 2 years. Although we recognize the margin in mobile market is generally lower, our accelerometer and eCompass products will continue to be the biggest revenue driver for the next 24 months. We have the technology and capability to stay highly competitive in this market. We will continue to drive our product performance and costs through technology innovation.
For example, we're working on small, much more cost-effective eCompass and accelerometer right now. All of this new product will be introduced in 2013.
At the same time, we invest our long-term future in industrial and automotive market. As an integral part of our strategy, we have a good pipeline of new products under development. These new product will be introduced into market in 2013 and '14. This new product ranges from low cost and high performance IMU, high-performance flow modules to new sensory components. Although very slow by nature, we're confident our continuous effort will turn into stable, higher-margin business.