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6 May 2014

Anadigics' revenue falls a more-than-seasonal 36% in Q1 due to inventory overhang

For first-quarter 2014, broadband wireless and wireline communications component maker Anadigics Inc of Warren, NJ, USA has reported revenue of $23.3m, down 35.9% on $36.3m last quarter and 11.8% on $26.4m a year ago. The firm had two greater-than-10% customers (Samsung and Huawei) and another three at 5-10%.

Fiscal Q1/2013 Q2/2013 Q3/2013 Q4/2013 Q1/2014
Revenue $26.4m $34.6m $37m $36.3m $23.3m

By segment, revenue for Cellular Wireless was $12.8m, down 23.4% on $16.7m last quarter and 21% on $16.3m a year ago. Wi-Fi was $5.1m, down 64.9% on last quarter’s surge to $14.4m but still up on $4.8m a year ago. Infrastructure was $5.4m, up 4.5% on $5.2m last quarter and up on $5.3m a year ago. The revenue split between Mobile (Cellular Wireless and WiFi) and Infrastructure was hence 77%:23%.

“In Wi-Fi, while we experienced sharp seasonality and inventory overhang in the first quarter, this market represents a key growth driver as high-speed Wi-Fi connectivity spreads across an expanding array of applications,” says chairman & CEO Ron Michels. During the quarter (in March), Anadigics reported that several new mobile devices are being powered by its Wi-Fi front-end ICs, including Huawei’s Ascend P6S and Samsung’s Galaxy Tab Pro.

Operating expenses were $12.1m, a 12% cut from last quarter (exceeding the targeted 10%). In particular, R&D expenses were cut by 9% to $8m, while selling & administrative expenses fell by 17% to $4.1m.

Capacity utilization has fallen from 55% last quarter to 45-50%. Despite this and the more-than-seasonal decline in revenue, the lower operating expenses plus improved product mix helped to yield the targeted double-digit non-GAAP gross margin of 10.9%, up from less than 1% a year ago (albeit down on a surge to 15% last quarter). “In our last earnings calls, we discussed our plans to reduce annualized expenses by more than $10m,” says Michels. With greater than $2m savings captured in the first quarter of 2014, we believe are on track to exceed our goal this year,” he adds. “We delivered overall cost-reduction progress ahead of our plan and are well positioned for continued improvement,” says VP & chief technology officer Terry Gallagher.

Net loss was $9.6m, cut from $14.8m a year ago but up from $8.4m last quarter. During the quarter, cash, cash equivalents and short- and long-term marketable securities fell from $24.4m to $14.1m. Capital investment has been cut further, from $1.3m last quarter to just $400,000. “We expect it to be insignificant over the balance of 2014,” notes Michels.

“We are improving our operating leverage as we continue our migration to the lower-cost ILD [inter-level dielectric] process,” says Michels. “The ILD process was used for approximately 60% of applicable production in Q1, and we expect this percentage to rise during Q2,” he adds.

Since the end of the quarter (in April), Anadigics has reported that it is now shipping production volumes of power amplifiers for Samsung’s Galaxy S 5 smart-phone for both Verizon Wireless and China Telecom networks. It also announced production shipments of new AWT6530 quad-band 3G/4G ProVantage power amplifiers. “I am encouraged by the progress we are making this year, with strong design-win activity across a broader customer base,” says Michels.

For second-quarter 2014, Anadigics expect revenues to rise by 8-12%. “Revenue growth and improved product mix should enable sequential gross margin expansion of 250-550 basis points,” says Gallagher. “We continue to manage expenses carefully and expect a further reduction in operating expenses by over 5%.”

In Q2/2014, Anadigics’ revenue split between Mobile and Infrastructure will be 72%:28% or 70%:30%, expects Michels. “We see that split changing to a 60%:40% split as we move further into the year… The Infrastructure side of it is growing,” he adds.

“Our improved manufacturing efficiency, substantial operating leverage and shift to a higher-margin product mix provides Anadigics with a foundation for profitable growth,” concludes Michels.

See related items:

Anadigics' revenue grows 19% year-on-year to $134.2m, driven by Wi-Fi

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

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

Tags: Anadigics

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