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19 February 2015

Anadigics' quarterly sales rebound by 10.6% to $20.9m

For full-year 2014, broadband wireless and wireline communications component maker Anadigics Inc of Warren, NJ, USA has reported revenue of $86.3m, down 36% on 2013's $134.2m. Mobile revenue more than halved, from $98m to $47.1m, while Infrastructure revenue grew 8.3% from $36.2m to $39.2m.

Fiscal Q4/2013 Q1/2014 Q2/2014 Q3/2014 Q4/2014
Revenue $36.3m $23.3m $23.3m $18.9m $20.9m

For fourth-quarter 2014, revenue was $20.9m, down 42% on $36.3m a year ago but rebounding by 10.6% from the low of $18.9m last quarter.

In particular, Mobile revenue was $11.2m (53% of total revenue), more than halving from $25m a year ago but rebounding by 26% from $8.8m last quarter (when there was an expected decline in sales of legacy products plus inventory reductions in the sales channel). "In accordance with our strategic plan, we continue to selectively engage mobile applications with products that provide our customers with unique value," says chairman & CEO Ron Michels. "In doing so, our mobile revenue - particularly in Wi-Fi [about two-thirds of Mobile revenue] - remains strategic to our plan," he adds. In addition to expected seasonal strength, growth was driven by design wins that entered production during second-half 2014, including Wi-Fi front-end modules in both the LG G3 Beat and Huawei Ascend Mate 7 smartphones (announced in late November).

Overall in Q4/2014, there were three greater-than-10% customers (Huawei, Samsung and distributor Alltech) and three customers in the 5-10% range (with a solid representation from Infrastructure).

Infrastructure revenue was $9.7m (47% of total revenue), down on $10m last quarter and $11.3m a year ago, due to continued inventory reductions in the firm's sales channel that masked higher sales from distribution partners to end-customers during the last two quarters. "Lowering inventory is a positive for working capital efficiency and cash but weighs slightly on our reported gross profit margin," notes executive VP & chief financial officer Terry Gallagher.

Gross margin rose from 16% last quarter to 18.7% in Q4 (above the expected 18%), driven by increased revenue, a more favorable product mix within Mobile, and continued expense improvements from the firm's restructuring. This more than offset the continuing light capacity utilization (up from 30% last quarter, but still only 35%) resulting from the ongoing inventory reduction.

In Q4/2014, research & development (R&D) and selling & administrative (S&A) operating expenses fell by a better-than-expected 2.7% from $8.7m last quarter to $8.5m, driven by efficient R&D investments (cut by 4.8%, from $5.2m to $5m), while S&A expenses were flat at $3.5m. For second-half 2014, operating expenses were $17.2m, down 38% on $27.7m in second-half 2013.

On a non-GAAP basis, net loss for Q4/2014 was $4.7m ($0.05 per share), cut from $5.7m ($0.07 per share) - the third consecutive sequential improvement of $0.02 per share - and $8.4m ($0.10 per share) a year ago. Full-year net loss has been cut further, from $44.7m ($0.55 per diluted share) to $27.8m ($0.32 per diluted share).

Likewise, earnings before interest, taxes, depreciation and amortization (EBITDA) loss has improved further, from $4.9m a year ago and $3.2m last quarter to $2.1m, "evidence that our strategic restructuring and focus on Infrastructure markets is working", says the firm.

Capital investment was basically zero for a second consecutive quarter (compared with $1.3m a year ago) and just $0.75m for full-year 2014 (versus $6.5m for full-year 2013). During the quarter, cash and cash equivalents rose from $13.5m to $18.4m. However, excluding $4m drawn under the firm's $10m credit facility, net cash was $14.4m (up $4.9m on last quarter, due to the continued improvements in EBITDA performance, a further decrease in working capital, and the sale of $1.3m in excess capital equipment). This is also $4.7m higher than at the end of Q2/2014, when Anadigics started its strategic shift to infrastructure. "We are exceeding our targeted $25m in annualized savings and we increased our net cash by approximately $4.7m, against the headwind of EBITDA losses and restructuring cost during second-half 2014," notes Michels.

"The benefits of our new business model are evident in our improving metrics, including cash efficiency and expanding gross margin," says Gallagher.  

"We have made remarkable progress since we announced our strategic restructuring late last June, and in virtually all aspects outperformed our stated objectives in the second half of 2014," says Michels. "Infrastructure is taking the leadership position in the company with strength across all of our key target markets, and we believe the company is well positioned for success," he adds. 

"For each of our targeted infrastructure markets, maximizing spectral efficiency or bits per second per hertz is critical to delivering a rich user experience. For our part in this broader challenge, Anadigics has developed core technology to optimize RF power, current consumption and linearity," says Michels. "In CATV, we launched 16 new products in the second half of 2014 and we are very pleased with the engagements they are driving at OEMs worldwide," he adds. "We are positioned for a new customer expansion in key markets such as China with C-DOCSIS and anticipate solid revenue growth in 2015. Our rate of growth will depend on continued deployment of existing DOCSIS equipment, DOCSIS 3.0 equipment and the ramp of new DOCSIS 3.1 and the shape of the crossover between the two. Our design-win penetration is strong and, pending further clarity from key customer deployments, we now estimate a growth rate in 2015 to be approximately 30-50% over that in 2014," continues Michels.  

For first-quarter 2015, Anadigics expects a less-than-typical sequential decline in revenue of only 10-13%, as the normal seasonal decrease in Mobile revenue will be offset by significant growth in Infrastructure revenue (to over 50% of total revenue) with channel inventory now closer to targeted levels. "With new designs and projects moving into production during 2015, we expect this trend will continue and should result in a year-end revenue split that is approximately 75% Infrastructure and 25% Mobile," says Michels.

Despite the drop in revenue in Q1/2015, driven by the higher mix of Infrastructure products and slightly improved factory utilization, gross margin is expected to improve sequentially (for a fourth consecutive quarter) by about 400 basis points (and to continuing improving through 2015). Operating expenses are expected to be roughly flat (with the expense base - particularly R&D investments - well aligned with the growth plan). Anadigics is not anticipating any material sales of excess capital equipment in Q1. "Cash usage will be slightly higher than our anticipated EBITDA loss due to a small forecasted increase in working capital," expects Michels. Nevertheless, Anadigics expects further improvement in EBITDA loss.

"Our existing net cash, in concert with the improved cash efficiency of our new operating model, provides us with adequate resources to realize cash flow positive operations," believes Gallagher. "With an expanding infrastructure product mix, we believe we can deliver EBITDA breakeven results [by mid-2015] at about $20m in total revenue with factory utilization approximating 40%," he adds.

"Our $10m line of credit with Silicon Valley Bank increases our flexibility to fund working capital needs in support of anticipated revenue growth," says Michels. "We have adequate capital resources to carry us through EBITDA breakeven and beyond."  

See related items:

Anadigics regains NASDAQ listing compliance

Anadigics' revenue falls 19% in Q3 due to decline in legacy Mobile

Anadigics' Q2 sales down 33% year-on-year, but infrastructure growth compensating for decline in legacy mobile

Anadigics lowers revenue guidance and cuts costs, including 30% of staff

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

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

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