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12 February 2015

GigOptix reports record profit in Q4, and first ever annual non-GAAP profit

For fourth-quarter 2014, GigOptix Inc of San Jose, CA, USA (a fabless supplier of analog semiconductor and optical communications components for fiber-optic and wireless networks) has reported revenue of $9m, up 7% on $8.5m last quarter and 15% on $7.8m a year ago (exceeding the original guidance range of $8.5-8.8m, and the firm's highest revenue since third-quarter 2012). 

Alcatel was again GigOptix's sole greater-than-10% customer, but falling from 32% of total revenue in Q3 to 18%.

Of total revenue, 34% came from the Industrial (ASIC) product line (down from 36% last quarter) and 66% (up from 63% last quarter) came from the High-Speed Communications product line (i.e. Datacom and Telecom optical communications products plus wireless RF point-to-point products).

The better-than-expected results were driven primarily by continued strength in Industrial business (about $3m) plus strong demand in Datacoms. Of the High-Speed Communications products, Telecom revenue was $2.4m (40% of High-Speed Communications sales). For the first time, this was exceeded by Datacom revenue, which grew more than 40% sequentially to a record $3m (rising from 29% of High-Speed Communication revenue a year ago and 39% last quarter to almost 50%). This rapid growth is driven by the ever-growing demand for the new generation of active optical cables (AOCs) and transceivers based on 40Gb/s QSFP+ technology being deployed to enhance the connectivity and capacity of newly installed data-centers. Back-haul point-to-point wireless RF product revenue rose by 110% from $0.3m last quarter to more than $0.6m (although that was after temporarily withholding a major device shipment to a slow-paying customer that is now making timely payments under a new payment plan). In addition, joint development program (JDP) revenue was $0.9m, up from $0.7m.

Driven by constant quarter-over-quarter stable growth through the year, full-year revenue has risen for the sixth consecutive year (since the firm's inception in 2008), by 14% from $28.9m in 2013 to $32.9m in 2014 (exceeding both the initial guidance of 10% growth and updated guidance of 12% growth). This includes product revenue of $29.8m, up 20% on 2013's $24.8m. Industrial ASIC product revenue grew 18% from $9m to almost $11m. Of High-Speed Communications products, Datacom revenue rose 80% to $9m. Telecom revenue has fallen by 13% from $11.8m to $10.1m (falling from 60% of High-Speed Communication sales to 45%), driven by aggressive 15-20% annual price erosion offsetting record unit volume shipments. Wireless RF point-to-point product revenue almost doubled to $3.1m (being the first year of volume sampling by customers).

"For the last two years, we executed on several initiatives to redefine our business and enhance efficiencies in all our product offerings while continuing to invest heavily in innovation," says chairman & CEO Dr Avi Katz. "Through our product development efforts, and swift commercialization, we substantiated our strong position in all markets of our activities, especially in the fast-growing 40Gbps and 100Gbps High-Speed Communications market," he adds. "We also maintained our dominant position in sales of coherent 100Gbps telecom products, while continuously extending our product offerings to cover all required terrestrial long-haul and metro limiting and linear products. These products are also extendable for use in the upcoming 400Gbps generation that customers are currently sampling," says Katz. 

"In the RF market, we nearly doubled our annual revenue in the emerging high-speed point-to-point backhaul E-band market in fiscal 2014, and launched our development toward the next generation of V-band products," notes Katz.

On a non-GAAP basis, Q4 gross margin has risen further, from 60% a year ago and 61% last quarter to 62%, driven mainly by the higher mix of datacom shipments plus the increase in JDP revenue (which is generally at 100% gross margin due to the complicated nature of the projects, the uncertainty in achieving the associated milestones, and GigOptix's ownership of the underlying IP generated from such programs). However, full-year gross margin of 61% was down on 2013's 63%.

Operating expenses were $4.7m, up slightly from $4.5m last quarter and $4.6m a year ago, driven mainly by R&D tape-out spending of new devices to enhance the firm's product range. Despite this, operating expenses have fallen from 64% of sales in full-year 2013 to 57% in 2014 (including just 52% in Q4).

Net income has risen further, from $0.1m ($0.00 per diluted share) a year ago and $0.7m ($0.02 per diluted share) last quarter to a record $0.9m ($0.03 per diluted share). Full-year 2014 saw the firm's first ever annual non-GAAP net income, of $1.2m ($0.04 per diluted share), compared with a net loss of $0.4m ($0.02 per diluted share) in 2013. Likewise, adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) has risen further, from $0.9m a year ago and $1.4m last quarter to a record $1.6m. Adjusted EBITDA for full-year 2014 was a record $4m, up 66% on $2.4m in 2013.

Excluding one-time quarter events, cash generated from operations was a record of almost $900,000. Spending on property, plant & equipment (PP&E), including production assets, was about $0.4m. During the quarter, cash and cash equivalents rose from $18.1m to $18.4m. The firm has no debt outstanding.

"We view 2014 as a real inflection point in the company's history," says Katz. "We have fully integrated and consolidated all the technologies and assets we acquired since the company's inception [most recently Tahoe RF Semiconductor Inc of Auburn, CA, USA, a turnkey provider of RF/analog RFICs, IP and systems and subsystems on a chip, acquired in June], structured the company in an efficient manner, and experienced a meaningful improvement in our financial and business performance," he adds. "We are confident about our ability to continue these positive trends and enhance shareholder value through 2015 and the years to follow." 

For first-quarter 2015, GigOptix expects revenue of $8.5-8.7m, up 15-18% on $7.4m a year previously and down only slightly on last quarter (a lower first-quarter sequential decline than is the norm for High-Speed Communications). Gross margin should remain about 60%. Operating expenses are expected to rise by about 10%, due to higher payroll taxes at the beginning of the year, normal year-end audit fees, and industry tradeshow expenses. GigOptix expects to spend about $0.4m on property, plant & equipment to support the fast-growing High-Speed Communications business.

"For fiscal 2015, it is our current expectation that we will continue to see double-digit revenue growth for the third consecutive year [growing about 14% to $37-38m]," says VP & chief financial officer Darren Ma. "We are increasing our R&D investments to support revenue growth in 2015 and beyond," he adds.  

See related items:

GigOptix's revenue rises 6% in Q3, driven by telecoms growth of 49%

GigOptix's revenue grows more-than-expected 9% in Q2 to $8m, as datacoms exceeds telecom for first time

GigOptix to acquire Tahoe RF

GigOptix grows more-than-expected 7% year-on-year to $7.4m in Q1 as E-band sales triple

GigOptix's Q4 revenue grows more-than-expected 7% sequentially to $7.8m

Tags: GigOptix

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