Narrower-than-Expected Loss at Anadigics - Analyst Blog

Semiconductor manufacturer Anadigics, Inc. ANAD reported relatively modest first-quarter 2014 results with a balanced sales mix, efficient production and stringent cost-cutting initiatives. The company incurred an adjusted net loss of $9.6 million or 11 cents per share in the reported quarter, narrower than the loss of $14.8 million or 20 cents per share in the year-ago quarter. The adjusted loss was narrower than the Zacks Consensus Estimate of a loss of 12 cents.

GAAP net loss for the reported quarter came in at 14 cents per share vis-à-vis a loss of 26 cents per share in the year-earlier quarter. The narrower net loss was driven by a 12% improvement in operating expenses to $12.1 million.

Quarter Highlights

Total revenue for the reported quarter was at $23.3 million, down 11.8% year over year from $26.4 million in the prior-year period. Revenues missed the Zacks Consensus Estimate of $24.0 million. The Cellular wireless segment contributed $12.8 million to total revenue, while legacy WiFi and Infrastructure accounted for $5.1 million and $5.4 million, respectively. The Cellular and Wifi segments' revenues were hurt by seasonality factors and inventory overhang, but remain key growth drivers for the company.

Anadigics expanded its product pipeline by launching differentiated solutions while strengthening its relationships with major OEM (Original Equipment Manufacturers) and chipset partners. The company looks set to exploit the widening range of applications in the WiFi market. Its front-end Integrated Circuits (ICs) enable producers to save board space, extend battery life and expand high throughput connectivity, earning design wins and driving revenue growth for the company.

In response to strong customer demand, Anadigics is further expanding its power amplifier product family. In the Cellular wireless segment, the transition from 3G to 4G data services, especially in China and emerging markets, has accelerated demand for the company's products, fueled by brisk growth in wireless data use. The ProFicient and ProVantage solutions, which help producers to reduce design complexity and cost while extending battery life, have seen strong design win traction in the quarter.

During the reported quarter, Anadigics continued to improve its cost structure through stringent cost-cutting initiatives, while maintaining a sharp focus on new product developments. Adjusted gross margin for the quarter increased 1,020 basis points on a year-over-year basis to 10.9%. Combating headwinds such as sequentially lower revenues and factory absorption as well as an improved product mix drove the increase in gross margin.

Financial Position

Anadigics ended the quarter with cash and marketable securities of $14.1 million. Inventories stood at $22.5 million, up 6.6% sequentially. During the quarter, Anadigics incurred $400,000 million in capital expenditures while capacity utilization was 45–50%.

Outlook

Management did not provide any specific guidance for the ongoing quarter. For the second quarter of 2014, Anadigics expects sequential revenue growth of 8% to 12%, driven by stronger demand and positive seasonal factors. In addition, supply chain efficiencies, considerable improvements in the cost structure, and improved product mix are expected to enable gross margin expansion in the range of 250–550 basis points for the coming quarter.

Moving forward, Anadigics expects increasing mix of ILD (Inter Layer Dielectric) and continued product efficiencies to support growth in 2014 and beyond. The company is working on driving R&D and SG&A efficiencies further to achieve operational excellence.

Anadigics continues to focus on three market drivers that it believes will expand its market reach. These drivers include the rapid adoption of 3G and 4G data connectivity in wireless mobile devices, expansion of wireless and CATV infrastructure to support increased data use, and proliferation of high performance WiFi connectivity in mobile devices. Driven by these initiatives, the company expects to return to profitability in the later half of 2014.

Anadigics presently has a Zacks Rank #3 (Hold). Better-ranked players in the industry that are worth mentioning include PLX Technology Inc. PLXT, Rambus Inc. RMBS and Amkor Technology, Inc. AMKR. While PLX and Rambus sport a Zacks Rank #1 (Strong Buy), Amkor carries a Zacks Rank #2 (Buy).