News

20 February 2009

 

Hittite grows in Q4, but expects 20% revenue drop in Q1

For full-year 2008, Hittite Microwave Corp of Chelmsford, MA, USA, which designs and supplies analog and mixed-signal RF, microwave and millimeter-wave ICs, modules and subsystems, has reported a rise in net income from 2007’s $51.2m to $53.8m, on revenue up 15.2% from 2007’s $156.4m to $180.3m.

In particular, fourth-quarter revenue was $46.4m: $19.1m (41%) from the USA (after 7.6% year-on-year growth) and $27.3m (59%) from outside the USA (after 21.2% growth). This is up 9.2% on $42.5m a year ago and up 1.9% on Q3/2008’s $45.5m, aided by the launch of new products and increased market penetration with new and existing customers. “Our fourth quarter was an excellent finish to the year,” says chairman & CEO Stephen Daly.

The revenue distribution across Hittite’s eight target markets was more concentrated in Q4. Apart from automotive, broadband, fiber optic, space, and test & measurement), three markets (cellular infrastructure, microwave and millimeter-wave communications, and military) accounted for 82% of total revenue (up from 76% last quarter), reflecting strong sequential growth in military business in particular.

Broadband revenue fell by 15% year-on-year (due to reduced shipments to certain direct broadcast satellite receiver customers, where Hittite exited low-margin business). However, the other seven markets grew between 12% and 97% year-on-year. “In light of the difficult economic conditions of 2008, we believe these growth rates confirm we are taking market share,” says Daly.

Q4 gross margin rose from 70.8% a year ago to 72%, but this is down slightly from Q3/2008's 72.5% due to product mix, production costs, and non-standard manufacturing costs. Net income was $13.6m, down slightly from Q3's $13.7m. Total cash and cash equivalents fell during the quarter by $4.8m to $180.9m. Starting in May, Hittite repurchased 1,317,000 shares of its stock for $41.6m during 2008 (including 679,000 shares for $19.4m in Q4), and completed the planned buy-back of 1.7 million shares (for a total of $52.1m) on 17 February 2009.

Net bookings rose by 15.9% from 2007’s $158.3m to $183.4m for full-year 2008, boosting order backlog from $36.5m to $39.6m. In particular, Q4 orders included $2.7m from a $35m multi-year defense production contract received in December for microwave subsystems to be used in a US military weapon system. “Moving to the production phase of this project marks the successful completion of several years of effort by our advanced subsystems development team,” says Daly. Deliveries and related revenue are expected to start in first-half 2010 and be completed by the end of 2011 (with 20% of the revenue recognized in 2010 and the remainder in 2011), although further orders are anticipated.

However, in the meantime, reflecting greater-than-normal uncertainty in the markets that it serves, over the past eight weeks (particularly January) Hittite has experienced an abrupt slowdown in orders across all markets, mostly from the Americas (followed by Europe then Asia), and mainly from the microwave and millimeter-wave communications markets (due to inventory corrections).

Consequently, for first-quarter 2009 Hittite expects revenue of just $36-38m (down 18-22% sequentially and 11-15% year-on-year). Net income will drop to $8.3-10.2m. The firm attributes the decline to the likely impact of the current global economic downturn and related disruption in credit markets on the firm's target markets (rather than any loss of market share in any one industry, the effect of any one competitor, or the loss of any one significant customer).

“While we cannot predict the length or severity of the recession, we will establish a range of plans which will protect the company’s long-term position in the multi-billion dollar markets we serve,” says Daly. Consequently, for 2009, Hittite will remain focused on expanding its technology portfolio, gaining market share, managing expenses, and positioning the company for growth, he adds. Cost-cutting actions that have been taken include implementing activities to preserve cash, eliminating the use of all contractors and temporary staff, reducing or eliminating all overtime, managing R&D expenses to ensure that the firm invests in priority programs, reducing sales & marketing expenses by 50%, and reducing or eliminating discretionary spending and benefits.

“Hittite’s profitable business, cash position and proprietary technology give me great confidence we will maximize our opportunities during this recession... In these difficult times, customers tend to select best-in-breed suppliers that are profitable and have experience managing through downturns. Hittite is in this category and we are in a great position to service our industry and push out financially weak competitors that are just looking to survive,” Daly reckons.

See related items:

Hittite’s growth sustained by Asia and Eastern Europe telcos

Hittite rebounds slightly, but next quarter to be flat

Hittite’s Q1 revenues rise 19% year-on-year

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