11 November 2013

Anadigics' sales grow 7.1% in Q3 to $37m, driven by Cellular growth of 27.8%.

For third-quarter 2013, broadband wireless and wireline communications component maker Anadigics Inc of Warren, NJ, USA has reported net sales of $37m, up 7.1% on $34.6m last quarter and 29.2% on $28.6m a year ago. The sole greater-than-10% customer was Samsung.

Fiscal	Q3/2012	Q4/2012	Q1/2013	Q2/2013	Q3/2013
Revenue	$28.6m	$30.5m	$26.4m	$34.6m	$37m

During the quarter, Anadigics announced in August that its AWT6751 and AWT6755 dual-band ProEficient-Plus WCDMA power amplifiers (PAs) had been selected by Samsung for its new Galaxy Mega phablet, and that its AWL9581 front-end integrated circuit (FEIC) is enabling 5GHz 802.11ac WiFi connectivity in LG Electronics’ new G2 smartphone. In early September, Anadigics launched its ProVantage PA product family. In early October, Anadigics said that its AWL9581 802.11ac FEIC, AWT6651 ProEficient PA, and ALT6702 HELP4 PA are enabling wireless connectivity in Samsung’s new GALAXY Note 3 smartphone. In late October, Anadigics launched a DOCSIS 3.1 Edge QAM amplifier and expanded its DOCSIS 3.1 infrastructure product family with new gallium arsenide (GaAs MESFET) and gallium nitride (GaN) line amplifiers.

“In addition to delivering targeted differentiated solutions, we continue to forge new industry relationships, achieve primary positions on key reference designs, and strengthen our collaboration with existing customers,” says chairman & CEO Ron Michels. “Design wins for flagship devices including the Samsung GALAXY Note 3, the LG G2 and the Samsung Note 10.1 (2014 Edition) are a direct result of the strategy and are contributing to our continued improvements and financial performance,” he adds.

“I am proud of our continued ability to deliver innovative new products for high-growth market segments,” says Michels. “This sharp focus, combined with our strong industry relationships, fueled customer demand during the third quarter, especially in our Cellular products group,” he adds. Cellular revenue was $23m, up 9% on $21.1m a year ago but 27.8% on $18.1m just last quarter.

WiFi revenue was $10m, down 12.4% on $11.4m last quarter, but this was due to some channel inventory balancing following that quarter’s 135% increase from just $4.8m in Q1. “Over the past four quarters, we have launched a completely new portfolio of front-end ICs and power amplifiers for the 802.11n and 11ac WiFi market,” notes Michels. “We’ve been specified on nine new leading reference designs and have secured design wins for a variety of market-leading smartphones, tablets and access points. This is fueled an unprecedented 633% year-on-year WiFi sales growth [from just $1.3m a year ago].”

Infrastructure revenue was $4m, down 22.7% on $5.3m last quarter (and $6.2m a year ago) as build-out spending continued to defer.

Capacity utilization was about 70%, down from 75% last quarter despite the revenue growth. Nevertheless, gross margin was 11.9%, a 640 basis point sequential improvement, expanding on Q2's 540 basis point sequential improvement over Q1 (and compared with breakeven a year ago). “We are pleased with the outstanding leverage our manufacturing investment is providing,” comments VP & chief financial officer Terry. “The 640 basis point sequential margin improvement was accomplished in spite of the sales mix cross wins where we faced decreases in WiFi and Infrastructure which were offset by Cellular’s revenue growth,” he adds. “Margin expansion was driven principally by operational improvement as we benefitted from higher manufacturing throughput and other efficiencies as we optimize our ILD [inter-layer dielectric] technology, improve yields, move newer products into larger volumes, and improve on production costs,” says Gallagher.

R&D expenses increased modestly by 2.5% sequentially from $8.6m to $8.9m, reflecting incremental project spend to help drive new products for 2014. Selling & administrative expenses fell slightly by 5.5% from $5.3m to $5m. Overall operating expenses of $13.9m were lower by $100,000 as the firm maintained tight control over costs.

On a non-GAAP basis, net loss has been cut further, $15.3m a year ago and $12m last quarter to $9.5m. Compared with just $0.25m a year ago, capital investment was $1.7m, supporting the more efficient ILD capacity. During the quarter, cash, cash equivalents and short- and long-term marketable securities hence fell further, from $41m to $32m.

“I am pleased with this quarter’s impressive revenue growth, more efficient production and outstanding leverage on our largely fixed expense base,” comments Gallagher.

“We’re ramping the fourth quarter as customers demand for WiFi world-class solutions increases,” says Michels. “Specifically we’re gaining traction on our 802.11n and ac FEICs with both module and OEM chip-on-board opportunities. We believe that this growth is being driven by the exceptional combination of linearity, efficiency and thermal characteristics that they provide,” he adds.

“For the fourth quarter, we are seeing an uptick in Infrastructure and WiFi orders offset by market softness in Cellular,” says Gallagher. “Overall, we expect revenues in the fourth quarter to be flat to down 5% sequentially [with capacity utilization below 70%], while the revised mix supports an improvement in gross margin,” he adds. “The increasing mix of ILD and realizing further production efficiencies leaves adequate available capacity beyond our expected 2014 growth.” Michels adds: “We have incremental increases with capacity that we can kick in when we decide to depreciate certain pieces of equipment. So at the moment we can comfortably get up into $55-60m, and we can go beyond that if we chose to late into next year or after that.”

“Through continued close collaboration with leading chipset providers and tremendous design-win activity, we anticipate that WiFi products will continue to fuel company growth moving forward,” says Michels.

The new ProVantage 3G/4G power amplifier family combines high power-added efficiency with space-saving integration and lower overall systems costs. “They are also ideally positioned to support the transition of 2G to 3G in emerging markets with compatibility across multiple low-cost WCDMA chipset suppliers,” believes Michels. “Customer response has been extremely positive and we now have design wins at several OEMs ramping into production,” he adds. “The significant traction we are achieving in WCDMA phones for emerging markets with our ProVantage power amplifiers is expected to fuel Cellular growth in 2014.”

“Our expanded Cellular portfolio now includes ProEfficient, ProEfficient plus, ProVantage and Penta-band power amplifiers. By segmenting the market we are now able to offer solutions optimized for a wider variety of applications,” says Michels. “While we are seeing some market softness in the start of the fourth quarter as key OEMs manage inventory and portfolio transitions, we believe that Anadigics is well positioned to resume profitable sales growth over the longer term with our Cellular products.”

“Moving to our Infrastructure products, we are positioned for growth with the launch of several new DOCSIS 3.1 solutions,” says Michels. “We will continue launching new products to address DOCSIS 3.1 as MSOs prepare the transition of networks to the new standard over the next couple of years.” The new standard extends frequencies above 1.2GHz (with a high split return path to enable ultra-high data speeds as well as additional HDTV content in IP voice capabilities). But “We also have new design wins with our 1GHz power doubler at key OEMs. We are helping a number of our customers expand the use of our existing infrastructure amplifiers into new applications,” says Michels.

“In addition to CATV solutions, our Infrastructure group continues to work closely with leading small-cell OEMs and chipset developers. We believe that these relationships, coupled with our high-performance products, will enable us to capture a leadership position as the small-cell industry expands,” he adds. “Additionally, we are developing opportunities in new markets with targeted R&D taking place within this group. We expect results from these efforts to meaningfully contribute to revenue growth in the second half of 2014.”

“Moving forward, we remain dedicated to operational excellence and cost-efficiency improvements that we believe will further expand our gross margins,” says Michels. “We anticipate that these efforts, in addition to continued enhancements in product mix, position Anadigics for long-term profitability.”

See related items:

Anadigics’ sales up 31% to $34.6m in Q2, driven by 138% growth in WiFi

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

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

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

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