25 February 2014

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

For full-year 2013, broadband wireless and wireline communications component maker Anadigics Inc of Warren, NJ, USA has reported revenue of $134.2m, up 19.2% on 2012’s $112.6m. “We achieved this top-line performance by developing innovative new products, targeting growth markets, and by strengthening our customer relationship,” says chairman & CEO Ron Michels.

Fiscal	Q4/2012	Q1/2013	Q2/2013	Q3/2013	Q4/2013
Revenue	$30.5m	$26.4m	$34.6m	$37m	$36.3m

Growth was driven by Wi-Fi rising roughly seven-fold from $5.1m in 2012 to $40.5m, while Cellular Wireless contracted by 11.5% to $74.2m (through reductions in CDMA) and Infrastructure fell by 17.5% to $19.5m (as CATV multi-service operator capital spending was deferred). The three greater-than-10% customers were Samsung, Huawei and Murata.

For fourth-quarter 2013, revenue was $36.3m, down 2% on $37m last quarter but up 19.1% on $30.5m a year ago. The year-on-year growth was driven by Wi-Fi revenue rising from just $1.1m a year ago to $14.4m, up 44.5% on $10m last quarter. Infrastructure revenue was $5.2m, down 7% on $5.6m a year ago but up 30.8% on $4m last quarter. However, the quarter-to-quarter growth in Wi-Fi and Infrastructure was more than counteracted by Cellular Wireless revenue falling to $16.7m, down 27.6% on $23m last quarter and 29.5% on $23.7m a year ago. The sole greater-than-10% customer in Q4/2013 was Samsung.

The substantial sequential growth in both Wi-Fi and Infrastructure revenue strengthened the overall product mix in support of higher gross margin. On a non-GAAP basis, quarterly gross margin has risen from 2.5% a year ago and 11.9% last quarter to 15%, due to a more profitable product mix both across and within the three business units more than offsetting sequentially lower production. Capacity utilization has fallen from about 70% last quarter to 55%, as more production was moved to Anadigics’ smaller-die (and hence higher-margin) inter-level dielectric (ILD) process due to the efficiencies it offers. Exiting Q4, ILD is now Anadigics’ dominant process and is rising in the mix. “I am very pleased by our fourth quarter results, which completes a year of consistent gross margin improvement,” comments Michels.

Full-year R&D and SG&A operating expenses collectively fell by 10.3% from $68.2m in 2012 to $62.4m in 2013, including R&D alone falling 12% from $43.9m to $38.6m.

Full-year net loss has been cut from $62m to $44.7m, as quarterly net loss has been cut from $13.9m a year ago and $9.5m last quarter to $8.4m. EBITDA loss has been cut further, from $10.1m a year ago and $5.9m last quarter to $4.9m.

Capital investment was $6.5m for full-year 2013 (up from $2.8m in 2012 as the firm continues to ramp its ILD process), although this slowed from $1.7m in Q3 to $1.3m in Q4.

During the quarter, cash, cash equivalents and short-term marketable securities fell further, from $32m to $24.4m.

“Q4’s sequential improvement in gross profit and EBITDA, despite slightly lower revenue, speaks to the operating leverage Anadigics has and the improvements we are making,” says VP & chief financial officer Terry Gallagher.

However, due to significant seasonal and inventory-related softness in Cellular and Wi-Fi, for first-quarter 2014 Anadigics expects revenue to fall 34-37% sequentially. Despite this, a substantial reduction in cost structure -combined with greater efficiency and continued improvements in overall product cost and mix - should enable double-digit gross margin. Also, operating expenses should fall by 10%, establishing a lower expense baseline for 2014.

“Anadigics is committed to returning to profitability, which demands a cost structure that is better aligned to our business strategy and direction,” says Gallagher. “We continue to see favorable adjustment in our product mix for 2014,” he adds.

“This overall transition in our product mix is a critical component in returning the company to profitability,” says Michels. “In our Wi-Fi group we are increasing the balance of revenue generated by high-power Wi-Fi power amplifiers for infrastructure applications, which bring richer margins than Wi-Fi and modules in mobile devices. In our Cellular Group, we continue to transition the portfolio and legacy to new products manufactured in our ILD process, which enriches margins as well. Lastly, revenue from our Infrastructure group - which typically has higher gross margin than the other two groups - is growing as a percentage of our total revenue. All three of these transitions contributed substantially to our profitability improvement in the fourth quarter and, more importantly, we anticipate this will continue to do the same looking into our model for 2014,” he adds. “Another benefit of this healthy transition is that we have an opportunity to realign our cost structure and better match the new product mix,” continues Michels.

“To sustain this forward momentum towards our EBITDA objectives, we have implemented efficiency and expense reduction initiatives that should provide annual savings of over $10m,” notes Gallagher. “These savings were the result of two initiatives. First, as we entered 2014 we took efforts to further improve efficiencies in R&D and SG&A, yielding an expected annual savings of over $5.5m. This will help to drive a reduction of greater than 10% in total R&D and SG&A in Q1 as compared to Q4,” he expects. “For the second initiative we implemented a workforce reduction which will reduce our annual payroll related expense by roughly $4.5m. This will result in approximate $1.5m restructuring charge in the first quarter. In total, the anticipated annualized savings of greater than $10m aligns us to a level of operations appropriate to surplus our target revenues and continue toward our goal of reaching targeted EBITDA in the second half of 2015,” Gallagher summarizes.

“Achieving these expense reduction - in combination with our improved product mix - should allow Anadigics to reach EBITDA break-even at a revenue per quarter of $33-34m… significantly lower than was modeled previously,” comments Michels.

Anadigics expects capital investment to be largely insignificant in 2014, as manufacturing investments are effectively completed. “Increasing mix of ILD and continued product efficiencies positions us with ample available capacity to support 2014 and beyond,” reckons Gallagher.

“Wi-Fi, Cellular and Infrastructure solutions have strong design-win traction,” says Michels. “With a sharp focus on new product introduction, product mix improvements and prudent expense management, we believe Anadigics is well positioned on our path to profitability.”

See related items:

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

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

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