) reported second-quarter 2014 adjusted net loss of $7.8 million or
loss of 9 cents per share, narrower than the loss of $12.0 million
or loss of 14 cents per share in the year-ago quarter. The adjusted
loss with employee stock option adjustments was in line with the
Zacks Consensus Estimate of a loss of 11 cents.
Anadigics, Inc - Earnings Surprise |
GAAP net loss for the reported quarter came in at 18 cents per
share versus a loss of 17 cents a share in the year-earlier
quarter, primarily due to significantly lower revenues that was
partially offset by lesser operating expenses.
Total revenue for the reported quarter was $23.3 million, down
32.7% year over year from $34.6 million in the prior-year period.
Revenues missed the Zacks Consensus Estimate of $26.0 million. The
sharp fall in revenues was largely attributable to a decline in
demand for its legacy mobile business, partly offset by a
stronger-than-expected progress in infrastructure-targeted
Moving forward, Anadigics will report its revenue in two
categories: Infrastructure and Mobile. For the infrastructure
market, Anadigics manufactures RF and optical products for cable
television, cellular wireless small cell, WiFi and
machine-to-machine (M2M). The Infrastructure segment contributed
$10.2 million to total revenue, up 12.1% year over year. The Mobile
segment, comprising WiFi and Cellular products that primarily
address the smartphone, handset and tablet markets, generated $13.1
million revenues - down 48.6% year over year.
Corporate Restructuring Initiatives
As the fulcrum shifted towards the infrastructure-based business,
Anadigics decided to initiate corporate restructuring activities to
reduce operating costs and better align its resources in accordance
with the evolving demands of the business. In addition, the
infrastructure-targeted products have a higher revenue and profit
margin than mobile-targeted products. As such, Anadigics decided to
reduce its fixed costs by unwinding production of RF (radio
frequency) power amplifier and front-end products for a variety of
mobile applications including handsets, tablets and data cards in
the cellular 3G/4G and WiFi markets. The company also decided to
monetize some of the wafer processing equipment for these products
to partially fund this restructuring process.
As global demand for high-data-rate connectivity to the Internet
increases exponentially, demand for high-performance
infrastructure-based products is set to rise as well. In order to
capitalize on this revenue potential, Anadigics has also decided to
align its R&D investment focus and in-house manufacturing
capacity toward a higher mix of infrastructure products.
Post-completion, the restructuring activities are anticipated to
lower manufacturing costs by approximately $5 million and operating
costs by approximately $10 million through workforce reduction by
140 positions to eliminate redundant manufacturing operations.
Anadigics will record a cash workforce restructuring charge of
approximately $2.3 million and a non-cash charge of about $5
million for fixed asset and inventory write downs. All these
measures are expected to strengthen its presence in key
infrastructure markets, reduce fixed costs and generate EBITDA
breakeven revenue level of approximately $26-27 million.
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 183 basis points on a
sequential basis to 12.8%. Combating headwinds such as sequentially
flat revenues and lower factory utilization, an improved product
mix drove the increase in gross margin.
Anadigics has 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.
Anadigics ended the quarter with cash and cash equivalents of $13.7
million. Inventories stood at $18 million, up 6.6% sequentially.
During the quarter, Anadigics incurred $350,000 million in capital
expenditures while capacity utilization was 35%.
Management did not provide any specific guidance for the ongoing
quarter. For the third quarter of 2014, Anadigics expects
sequential revenue decline of 18% to 20%, driven by lesser demand
in the legacy business. However, considerable improvements in the
cost structure and improved product mix are expected to enable
gross margin expansion of 200 basis points for the coming quarter.
Operating expenses are expected to decrease by over 15%
sequentially, leading to EBITDA improvement of about 25%.
Anadigics presently has a Zacks Rank #3 (Hold). Better-ranked
players in the industry that are worth mentioning include Avago
Technologies Limited (
), Advanced Semiconductor Engineering Inc. (
) and Amkor Technology, Inc. (
), each carrying a Zacks Rank #2 (Buy).
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