7 February 2014

Hittite's profits fall more than expected in Q4 due to low-margin military development contracts

For fourth-quarter 2013, Hittite Microwave Corp of Chelmsford, MA, USA (which designs and supplies analog, digital and mixed-signal RF, microwave and millimeter-wave ICs, modules and subsystems as well as instrumentation) has reported revenue of $68.8m, up slightly on $68.7m last quarter and $68.5m a year ago (and above the expected $66.5-68.5m). Full-year revenue was $273.8m, up 3.6% on 2012’s $264.4m.

Of total Q4 revenue, 41.3% ($28.4m) came from customers in the USA (down from 43.4%, or $29.8m, last quarter) and 58.7% ($40.4m) came from customers outside the USA (up from 56.6%, or $38.9m, last quarter).

“We were able to meet our revenue targets despite challenges in some of our markets,” comments president & CEO Rick Hess.

However, gross margin has fallen further, from 73.3% a year ago and 71.2% last quarter to 67.3%. Full-year gross margin is down from 73.7% in 2012 to 71.1% for 2013.

Full-year net income was $70.9m, up from $68.6m in 2012. However, quarterly net income has fallen from $17.7m a year ago and from $18.7m last quarter to $16.5m in Q4, below the expected $16.7-17.7m. During the quarter, total cash and marketable securities rose by $15.2m to $472.5m.

“The decrease in profitability in the quarter was primarily the result of gross margins that, in the aggregate, were on the low end of our range, due to an unfavorable mix in products and markets, as well as several military development contracts that carry relatively low margins,” says Hess. “These contracts, while less profitable in the near term, provide important opportunities for growth through future production contracts at higher margin levels,” he adds. “We are confident that our innovation and engineering leadership will continue to drive our business growth.”

Net bookings for full-year 2013 were $267.1m, up on $264.2m in 2012. Nevertheless, order backlog at the end of 2013 was $60.5m, down from $67.2m a year previously.

For first-quarter 2014, Hittite expects revenue of $67.5-69.5m and net income of $15.3-16.5m.

Hittite also announced that its board of directors has approved the initiation of a quarterly cash dividend, and has declared a dividend of $0.15 per share, payable on 27 March, to shareholders of record as of the close of business on 4 March. Future dividend declarations, as well as record and payment dates, are subject to board approval.

“Our operating model provides the financial foundation to support both a dividend and our growth plans,” says Hess. “The board’s decision to initiate a quarterly dividend reflects our confidence in our financial position and in our future prospects.”

See related items:

Hittite’s Q3 revenue and profit exceed guidance

Hittite reports rise in profit on 4.9% growth year-on-year in Q2

Hittite reports Q1 revenue up 6.9% year-on-year, and rebound in gross margin

Hittite sustains growth for fourth quarter

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