21 May 2013

Anadigics’ revenue falls 13.4% in Q1 to $26.4m

For first-quarter 2013, GaAs-based broadband wireless and wireline communications component maker Anadigics Inc of Warren, NJ, USA has reported revenue of $26.4m, down 7.2% on $28.4m a year ago and 13.4% on $30.5m last quarter. The firm had three greater-than-10% customers (Samsung, Murata, and Huawei) and another four at 5-10% (Cisco, ZTE, World Peace, and Richardson Electronics).

Fiscal	Q1/2012	Q2/2012	Q3/2012	Q4/2012	Q1/2013
Revenue	$28.4m	$25.1m	$28.6m	$30.5m	$26.4m

The drop in total revenue was driven by a seasonal decline of 31.6% in Cellular revenue, from $23.7m last quarter to $16.3m. Revenue for Infrastructure (formerly termed broadband) fell by 5.7% from $5.6m last quarter to $5.3m, due to lower CATV subscriber revenue. However, some of this seasonality was offset by strong market demand for 802.11 front-end ICs that led to WiFi revenue growth of more than 300%, from $1.1m to $4.8m (18% of total revenue). 

Selling & administrative expenses increased 6% to $5.2m as Anadigics invested in its WiFi sales efforts. R&D expenses were flat at $9.9m, maintaining the cost improvements put in place in 2012. “We continued to improve our cost efficiency via select cost reductions while retaining a sharp focus on new product development,” says VP & chief financial officer Terry Gallagher.

“During the first quarter, we repositioned the company to grow revenues with an improved cost structure,” continues Gallagher. “We implemented further workforce reduction, resulting in a $1.9m restructuring charge in the quarter. While this required some upfront cash, it improves our cost structure and business leverage,” he adds. “We remain diligent in capturing efficiencies, but we’ll also continue to act decisively to capitalize on growth opportunities.” 

Despite the sequential decline in revenue, capacity utilization has risen again, from 55% last quarter to 65%, and non-GAAP gross margin remained positive, falling only slightly from 2.5% last quarter to about 1% due to a more favorable product mix.

Non-GAAP net loss was $14.8m, compared to $14.9m a year ago and $13.9m last quarter. Earnings before interest, taxes, depreciation and amortization (EBITDA) loss has risen from $10.1m last quarter to $11.1m.

During the quarter, cash was used to fund the EBITDA loss and restructuring payments of around $1.5m. “At the same time, we grew current assets by $3.3m through increased accounts receivable, inventory, and the prepayment of our annual insurance,” says Gallagher. Also, capital expenditure (CapEx) has risen from $0.4m last quarter to $1.5m. “These investments support our WiFi and Cellular product ramps and position the company for growth [including incrementing fab capacity],” he adds.

During the quarter, cash, cash equivalents and short- and long-term marketable securities fell only slightly, from $51.5m to $50.9m. In Q1, Anadigics raised about $18.4m in equity by issuing 10 million shares. After quarter-end, the firm realized an additional $1.3m in proceeds as the underwriters exercised just over 700,000 shares of their overall allotment. “Solidifying our cash and equity base allows us to capitalize on growth opportunities, add the inventories fueling Q2 growth, and expand capacity for our unique ILD [inter-level dielectric] process,” says Gallagher. Anadigics is investing about $1m each quarter to be more or less 100% ILD by the end of 2013.

“For the second quarter, we are seeing strong bookings to date, driven by design wins of our Cellular and WiFi products,” says Gallagher. “We attribute the increase in customer demand to our aggressive growth strategy, which leverages innovative new products in high-growth markets and strong industry relationships,” adds chairman, president & CEO Ron Michels.

“To provide a strong foundation for both short- and long-term growth, we remain sharply focused on three drivers that expand our served available market and are capable of driving significant product ramps. The first driver is the rapid adoption of WiFi connectivity across an expanding array of applications. The second driver is the acceleration of data consumption and adoption of 3G and 4G connectivity in wireless mobile devices. And the third driver is the expansion of infrastructure networks to support greater bandwidth and wireless data use,” says Michels. “Our solid execution on addressing these three market drivers has placed our business on a growth trajectory as we capture design wins by getting superior products into customer’s hands quickly for feedback and refinement. This is exemplified by the significant traction in our new WiFi and Cellular products, including our strong position at Samsung, where we have more content on the Galaxy S4 than we did on the S3,” he adds.

“The WiFi group continues to secure design wins and is ramping production of our 802.11n and -11ac front-end ICs,” says Michels. “These front-end ICs (FEICs) are specified on several reference designs by leading WiFi chipset manufacturers. This is creating significant end-customer demand and we are now shipping production volumes for smartphones such as the Samsung Galaxy S4 as well as tablets, access points and other devices.” WiFi is expected to rise from 18% to more than 30% of total revenue in Q2.

“Regarding the Cellular product group, we are also making solid progress as we continue to build momentum for our ProEficient Plus and Penta-Band products,” says Michels. “The production ramp of these solutions as a replacement for our legacy portfolio is enriching our product mix and positioning the cellular group to contribute to the profitable growth,” he adds. During the quarter, Anadigics continued to roll out new cellular solutions, including the expansion of its dual-band ProEficient Plus power amplifier family in February.

The Infrastructure group remains focused on developing new CATV, wired network and small-cell solutions to support the acceleration of data consumption. “We continue to expand our CATV infrastructure product offering although our GaN surface-mount line amplifiers and our new eco power doublers are gaining design and traction,” says Michels. “We plan to ramp all of these product families into production during the second half of 2013,” he adds. “Our CATV infrastructure product development pipeline is robust, as we prepare to launch DOCSIS 3.1 solutions that we expect will provide revenue later this year and into 2014.” However, the small-cell market ramp has been delayed due to a lower-than-expected carrier adoption and is now expected to occur later in the year. “Our manufacturers wait for carriers to place orders as we continue to work closely with leading chipset developers,” notes Michels. “We are specified on a number of leading reference designs that we anticipate will drive revenue when the market expands.” 

“The aggressive ramp of our WiFi products to meet accelerating customer demand, coupled with design-win momentum of our new Cellular and Infrastructure products, should drive higher factory utilization and significantly improve our financial performance,” believes Michels.

“As we look ahead for 2013, we expect revenue growth to be the prime driver of margin improvement,” comments Gallagher. EBITDA loss is expected to improve as revenues and margins rise. The firm is hence still targeting EBITDA breakeven at quarterly revenue of $40-45m by the end of 2013, with gross margin in the low to mid 20s, aided by reductions in operating expenditure.

See related items:

Anadigics’ sales continue recovery, up 6.4% to $30.5m in Q4

Anadigics grows 14% in Q3, driven by wireless and CATV infrastructure

Anadigics’ revenue falls 12% in Q2 to $25.1m

Anadigics’ revenue falls 22% in Q1 to $28.4m

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