POET Technologies Inc.

about 9 years ago

ANADIGICS' (ANAD) CEO Ron Michels on Q2 2015 Results - Earnings Call Transcript

Aug. 6, 2015 8:36 PM ET | About: ANADIGICS, Inc. (ANAD) by: SA Transcripts

ANADIGICS. (NASDAQ:ANAD)

Q2 2015 Earnings Conference Call

August 6, 2015 05:00 PM ET

Executives

Ron Michels - Chief Executive Officer

Terry Gallagher - Chief Financial Officer

Dave Cresci - President

Analysts

Charles Kazarian - Credit Suisse

Quinn Bolton - Needham & Company

Jason Smith - Lake Street Capital Markets

Operator

Good afternoon. My name is Veronica and I will be your conference operator today. At this time, I would like to welcome everyone to the ANADIGICS Second Quarter Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks there will be a question-and-answer session. [Operator instructions]. Thank you.

I would now like to turn the conference over to Terry Gallagher, CFO of ANADIGICS. Please go ahead, sir.

Terry Gallagher

Thank you, Veronica, and good afternoon, everyone. Welcome to ANADIGICS’ second quarter 2015 conference call. With me on the call today is Ron Michels, our chairman and CEO.

For today’s call, I will take you through our adjusted financial results for the second quarter, and then Ron will comment on the business. I will then provide guidance for the third quarter of 2015, after which, Ron will provide some closing comments and then open the call for Q&A.

Before I begin, I would like to remind you that in light of the SEC’s fair disclosure rules we are limited in responding to inquiries in a non-public forum. Therefore, we encourage you all to ask questions of material nature on this call.

Some of the information we present today maybe forward-looking in nature. I must remind you that the forward-looking statements are subject to a number of important factors that may cause the actual results to differ materially from our projections, based on various risk factors, including those described in the press release issued earlier today and our reports on Forms 10-K, 10-Q, and other filings with the Securities and Exchange Commission.

All numbers during the call will be presented on a non-GAAP basis. Non-GAAP financial measures exclude equity compensation charges, marketable auction rate securities movements, restructuring charges, and other specifically non-routine items identified in our release.

The non-GAAP measures are provided to enhance the understanding of our core operating performance, and a full reconciliation of these non-GAAP measures to our GAAP results was presented in our press release.

Now, let me begin. In Q2, our revenues totaled $15.8 million representing a sequential decrease of $2.65 million or 14.4% driven principally by a sequential decline of $2.1 million or 32.3% in mobile revenues. The drop in mobile was largely attributable to a steeper than expected roll-off of our non-strategic mobile cellular business.

In infrastructure, we saw a modest sequential decline in revenue of $0.5 million or 4.7% which came in slightly better than our expected decline of 7% to 9%. The drop was mostly attributable to Wi-Fi as the key customer digested excess inventory and to small-cell, which as we stated in our last earnings call was expected to slow over delays at key carriers in Asia.

Partly offsetting this sequential decline observed in both Wi-Fi infrastructure and small-cell, our CATV business achieved over 20% sequential revenue growth. Infrastructure as a percent of total revenue increased from 65% in Q1 to 72% in Q2. For Q2, we had four greater than 10% customers, Railway [ph], Richardson RFPD, Cisco and Sierra.

Our gross margin for Q2 decreased sequentially by 270 basis points to 20.5%. The drop in gross margin was attributed to lower overall sequential revenues and the sell-through of legacy mobile products from existing inventory that did not require replacement.

While this had an incremental positive impact on cash, it drove lower fab utilization presenting a headwind to the P&L. The gross margin drop was partly offset by reductions in fixed cost that came as part of the expense reduction activities we outlined in our last earnings conference call.

Operating expenses in Q2 totaled $7.7 million this represented a sequential decrease of $0.4 million or 4.6% driven by our ongoing expense reduction efforts. The below the line expense improvement was observed in both SG&A and in research and development.

The net loss for the quarter was $4.5 million or $0.05 per share and aligned with the consensus analyst estimates. Our EBITDA loss was $2.5 million.

And now moving to the balance sheet. We finished the quarter with total cash and cash equivalents of $15.2 million, which included $4 million drawn on our $10 million line of credit. Our resulting net cash of $11.2 million represents a sequential decrease of $1.8 million. This decrease in net cash reflects Q2s EBITDA loss and the restructuring costs incurred in the quarter. The decrease was partly offset by the sell-through of non-strategic legacy mobile inventory.

At the close of the second quarter, accounts receivable was $5.8 million or 33 days. Inventories were reduced by $1.7 million to $9.7 million or approximately 77 days sales. Depreciation expense in the quarter was approximately $2 million, our wafer fab capacity utilization approximately 25%. Capital investment was approximately $100,000 in the quarter.

And now, with that, I’ll turn the call over to our Chairman and CEO, Ron Michels. Following Ron’s comments, I’ll discuss our guidance for Q3.

Ron Michels

Thank you, Terry. And thank you all for joining us. In addition to reviewing our Q2 performance and near-term outlook, I’d like to update you on our broader progress since announcing our plan to shift from mobile to infrastructure which is a little over a year ago.

With that shift, we anticipated the following four things. One: a decline in our mobile revenue over time, two: a ramp in our new infrastructure revenue, three: a reduction in the number of wafers needed from our fab allowing us to streamline fixed costs, and four: the development of the unique VCSEL manufacturing technology to expand our business and make more efficient use of the wafer fab.

The good news is that all four things have happened. The challenge however is that the timing has not quite aligned to our original expectations. First, mobile revenue was declined but at a faster rate than we anticipated. Second, infrastructure revenue for new products has grown but at a slower pace than we had anticipated. We can attribute much of this delay in the DOCSIS 3.1 transition and the deployment of small-cell networks worldwide.

On reducing fixed costs we’ve made tremendous progress streamlining our wafer fab operations to better match our business model. However, with the faster mobile decline and slower infrastructure growth, there remains more unused fab capacity than anticipated. If used wisely, the available fab capacity can create very favorable operating leverage. However, in the near-term the additional fixed cost burden weighs on the P&L.

Regarding VCSELs we expect the business to increase fab utilization and contribute meaningfully to our revenue over time. While we continue to make progress on our core infrastructure business and VCSEL with new design wins, new customer expansion and the launch of new products, we expect the near term market softness in CATV and small-cell to persist through the end of 2015.

To address the impact this may have on the company’s financials, we’re exploring capitalization options that may provide adequate cash infusion over the next 12 months. We further believe that if such a cash infusion is secured, the company financials will be adequately strengthened to a level that mitigates any growing concerns that may arise as a result of continued infrastructure market softness.

With a sound long-term growth plan and solid company execution, we expect any new capital infusion should contribute to the long-term value creation for our shareholders. While we are optimistic, we cannot guarantee at this time that we’ll be able to secure additional financing on satisfactory terms or at all.

Now, let’s turn our attention to the company’s progress and the outlook in our key product areas and we’ll start with CATV. When we entered 2015 we envisioned growing our CATV revenue by 30% to 50%. This was based on forecast that U.S. cable companies with ramp purchases of DOCSIS 3.1 equipment and then ANADIGICS would add a second tier 1 customer in the U.S.

As investors that follow U.S. cable companies will attest the ramp of demand for DOCSIS 3.1 equipment has not yet materialized. As a matter of fact, many equipment suppliers are reporting a decline in revenue from U.S. cable companies this year.

While the timing of DOCSIS 3.1 network deployment is outside of our control, our focus is to win sockets in either DOCSIS 3.0, those would be 3.0 upgrades or early DOCSIS 3.1 systems. And we’re doing just that. We’re doing it in the U.S., Europe and Asia.

Moreover, we’re pleased to state that we’ve made great strides with new products as a tier 1 U.S. based CATV customer, what we think is well positioned to gaining significant market share in 2016.

While we believe the balance of these puts and takes will result in only modest CATV growth for this year, we expect to exit 2015 with higher design win penetration and broader customer diversification. As a result, we believe we will be well positioned to benefit from the ramp of DOCSIS 3.1 demand that is widely forecast to materialize in 2016.

While the rollout of small-cell base stations has been slower than many industry experts were forecasting early this year, we are still on course to nearly double our revenue in 2015 over 2014. More importantly though, we’ve broadened our design win penetration throughout China and other markets and continue to invest in new product development for small-cell markets.

Consistently with the revised industry forecast, we see signs of small-cell market growth picking up in 2016 we think its early 2016. We believe that our broad design win penetration has us well positioned to capitalize on the ramp and that small-cell will contribute to our infrastructure growth in 2016.

Wi-Fi infrastructure revenue was down sequentially in Q2 as our target customer work through some excess inventory. With this inventory digesting cycle now complete, we are forecasting a sequential increase in Wi-Fi infrastructure revenue in Q3.

In addition to expanding our design base with our largest Wi-Fi customer, we’ve also won two in 5 gigahertz sockets at two brand new infrastructure customers. One is a well-known retail router manufacturer in Japan and the other an LTE Wi-Fi hotspot maker in Korea. We expect both companies to begin production ramps by the end of Q3. We believe that these initial projects can open opportunities for us to expand our business with these two customers.

Overall, despite the minor interruption in sequential growth in Q2, Wi-Fi infrastructure revenue is on pace to more than double in 2015 compared to 2014. And we see a healthy growth rate continuing in 2016.

For our 3G, 4G products addressing the IOT space, we’re seeing a decline in the second half of the year. This is largely attributable to a roll-off of two major customers, roll-off at two major customers.

In the automotive area of IOT, our design win progress is steady and we expect that business to enjoy multiyear product lifecycles. We believe that automotive applications in particular will be a nice niche market for us and will contribute to our overall infrastructure focus heading into 2016.

In addition to our four core infrastructure markets, we cover several other sectors that we lump into other infrastructure, the largest of these remains to be WiMAX. With LTE and Wi-Fi largely displacing WiMAX, we anticipate WiMAX sales will be declining significantly during the second half of 2015 and then holding relatively flat through 2016.

In spite of the headwinds I described which are largely attributable to market forces outside of our control, we still believe we can grow our total infrastructure revenue by approximately 10% this year.

More importantly, we believe we can grow our core infrastructure revenue in CATV small-cell and Wi-Fi by more than 30% relative to 2014. Based on that outlook, we believe infrastructure can account for over 70% of our total revenue in 2015.

Now turning our attention to core from core infrastructure to our VCSEL initiative, we are pleased with the progress we’ve made so far this year. While we were modeling VCSELs to represent only 1% or 2% of total revenue this year, we are seeing a steady increase in activity and anticipate a ramp in production during 2016.

During the first half of 2015, we recognized revenue from NRE contracts that funded product development. We expect this will be ongoing as we add new partners.

During the second half of 2015, we’re scheduled to initiate shipments of qualified devices to some of our partners. From there, we expect we will ship pre-production volumes during early 2016 before moving to full production later in that year.

Due to NDA agreements we have with our partners, I can’t provide you with much more color. However, I can say that we are partnered with some very large companies. It’s important to understand as the substantial economic advantages of our 6-inch wafer process and that it’s enabling the market opportunities that our partners see. And if our partner is all right, the market opportunities are very significant.

Lastly, we are exploring the expansion of specialized foundry services to include more than just VCSELs. As noted earlier, the wafer demand on the factory drops as mobile declines, even as we grow our infrastructure business long-term.

The wafer fab is a powerful asset but it’s essential to both our core business and our VCSEL initiative. Since we have certain proprietary technologies in our fab that we consider unique, we’ve been approached by several potential customers looking to take advantage of that to make products for a variety of end markets.

As a result, this may lead to expanded foundry service revenues. Beyond having the potential to improve our cash flow, this strategy also helps us absorb rapidly absorb fixed cost. While it is too soon for us to provide any forecasts, we believe that this strategy has the potential to provide a meaningful contribution to our revenue and gross margin expansion within a year or so.

With that, I’ll turn it over to Terry, so he can provide color on the Q3 outlook. And then return for my closing comments before we open the call for questions. Terry?

Terry Gallagher

Thanks Ron. For the third quarter of 2015, we anticipate a sequential total revenue decline of 20% to 24%, including a decrease in mobile of approximately 22% to 27%.

Infrastructure revenues are expected to decline sequentially by 20% to 23%, due to CATV market softness and a sequential decline in both Legacy WiMAX and Legacy IOT.

We expect gross margin to decline sequentially in the third quarter by approximately 500 to 800 basis points on the lower revenue. While we cannot provide specific guidance beyond the third quarter, we are hopeful that both the revenue and gross profit dollars in Q3 will represent a trough.

We continue to identify ways to operate with a leaner cost structure especially in light of the infrastructure market softness we anticipate through the end of 2015. As a result, we expect a marginal sequential reduction in our operating expenses.

We expect cash usage will largely align with our anticipated EBITDA loss. In addition, we continue to maintain a close working relationship with our banking partner Silicon Valley Bank. In light of the market softness we see in CATV and small-cell through the end of the year, we’re already in discussions to revise certain covenants of the existing debt agreement, to maintain access to the capital that that facility provides.

As noted, while we’re optimistic, we cannot guarantee at this time that we will be able to secure additional financing on satisfactory terms at all.

Looking ahead, we believe the EBITDA breakeven is achievable at a quarterly revenue level below $19 million with fab utilization approximately only 25% to 30%.

With that, I’ll turn the call back over to Ron.

Ron Michels

Thanks Terry. While we are facing some headwinds due to near-term market slowness in core areas like CATV and small-cell, we believe that we are well positioned with design wins and a broad product portfolio to take advantage when the stronger market growth resumes.

Given the nature of the market uncertainty near-term and the potential impact it might have on our company’s financials, we are exploring capitalization options that may provide cash infusion as needed over the next 12 months.

As we see it today, we believe Q3 will mark the trough for both total infrastructure and infrastructure - for both total revenue and infrastructure revenue.

In summary, we are committed to our infrastructure strategy. I firmly believe we are executing well in the areas that we can control and that our infrastructure business model can succeed.

With that, I’ll turn it over to the operator and look forward to your questions. Operator?

Question-and-Answer Session

Operator

[Operator Instructions]. Your first question comes from the John Pitzer.

Charles Kazarian

Hi guys, this is Charles Kazarian here on behalf of John. Thanks for letting me ask a question.

Terry Gallagher

Sure.

Charles Kazarian

I suppose I’m curious about the mix shift in the back half of the year, given your guidance I see infrastructure kind of nearing that 75% target. I’m just wondering how I should think about reaching that by the end of CY15 given expectations for weak infrastructure?

Terry Gallagher

Okay. It’s as a percent of revenues, we remain on pace to get infrastructure rising as a percent of total revenues. So, I don’t see that as an impediment to getting to our 75% target.

Charles Kazarian

Okay, great. And then I guess one just small follow-up is maybe how you’re thinking about the 2016 rebound around CATV and small-cell and what gives you confidence that 3Q is going to be a trough in infrastructure?

Ron Michels

Yes. Good question. So, in CATV we were very hopeful that DOCSIS 3.1 hits in 2016. It was supposed to have hit in 2015, at least that’s what everybody thought back a year ago and all the way up to probably three or four months ago. So I think there were some architectural issues that had to be worked out.

I think that most of that is behind us. I think the equipment manufacturers who build the equipment and go to companies like ANADIGICS have a good portion of what they need to be able to present product to the MSOs that look extremely compelling.

As a matter of fact, I think before the year is out, and maybe as soon as in the next two months we’ll see trials happening at large MSOs that will be incorporating DOCSIS 3.1 equipment which is very important in these field trials OE’s, head-up production is been like that with every change in bandwidth that ANADIGICS has been involved with for many years. So that’s good news.

And I think, so we’re counting on DOCSIS 3.1 actually hitting next year. We’ve been waiting for that, it’s kind of a low in purchasing that’s taking place today. For a number of reasons there has been acquisitions that have almost happened, that have changed things a bit and delayed bills that were supposed to happen this year. And now it’s reached the point where things have been delayed I think to the point where now it’s worthwhile for companies to wait for 3.1 and not by 3.0.

There is a number of reasons and a number of theories why the business is soft this year but I think that 3.1 will be the reason why it isn’t soft next year.

On the small-cell question, we spent a lot of time in China, where a lot of this stuff, where most of the demand is currently for small-cell. It will spread and be worldwide at some point. But there has been a slowdown there and it’s been based on issues specific to the Chinese government and how people can bid for business and win business and that kind of thing.

What we’re hearing is that the bidding process for a lot of these things at ANADIGICS is designed into starts up again in the next month or two. It will take some time for the awards to be made and production to start. And we think that that happens in 2016.

So, I don’t know if I’d go so far as to say that there is a lot of pent-up demand and this thing is going to take off like a rocket. However there are serious issues with how carriers can handle all the bandwidth requirements from customers. Small-cell solves that, it also takes care of other issues like coverage issues and things like that, it’s very - it’s very much needed. And I think we’re going to see that take off very, very quickly and be substantial next year. So, that’s what we’re hoping for.

And by the way, we have all the sockets. So there is nobody else in our space that we feel has the portfolio that ANADIGICS has, and we have just a number of companies that have designed our product in, some of that product has been in field trials and some has not. But most of the people that would be bidding for that business and I think it’s a number pretty high, 80% or higher have ANADIGICS parts designed into their offerings.

So, we need small-cell to happen, we’re hopeful that it will happen next year, when it does, we’re designed into most of it and that’s what we believe today.

Charles Kazarian

All right, great. Thanks a lot for asking, letting me ask question.

Ron Michels

You’re welcome.

Operator

[Operator Instructions]. Your next question comes from Quinn Bolton.

Quinn Bolton

Hi, guys. I just wanted to come back to the discussion around financing options. And first, Terry, you had mentioned going back to Silicon Valley Bank to try and address some of the covenants. Is the financing options you’re looking at primarily focused around that credit line with Silicon Valley Bank, is it broader than that?

Terry Gallagher

I think it would be broader than that Quinn. Look, let me - and I’m not plugging Silicon Valley Bank but they’ve been a very good partner and when they partner up, it’s for a long term. So, I’ve talked with the guys and I think we’re well positioned to kind of just modify things moving forward.

But we’ve got an operating plan and we just feel like the operating plan benefits and it’s prudent for the business just to add a bit to the cash reserves to bridge us into 2016 where we do see an attractive future. So, that’s the background.

Quinn Bolton

Can you, obviously it sounds like you’re four different types of financing options probably including equity. But are you looking or could the potential range of financing include say strategic investments from one of your VCSEL partners or greater NRE contracts or prepayments, I mean, does it necessarily have to be dilutive equity. Is there any additional insight you can provide on kind of the various range of financing alternatives you may be considering?

Ron Michels

Hi Quinn, this is Ron. I think we’re pretty much considering everything that you’ve listed. So, we’re exploring a number of things. And some is strategic and some isn’t. So, we’re not in a huge rush to get any deals done. And we will do what we think is most prudent for shareholders. But strategic options are something we’re also looking at.

Quinn Bolton

Okay. And then, Terry on the gross margin, if I just quickly look at the September guidance relative to June, it looks like the revenue decline that you’re forecasting in September on a dollar basis is not that dissimilar from the decline in revenue you saw in the June quarter. But in June your gross margin, it did come down a little bit but it seems like you really take a big step down in the September quarter. So, just wondering are you really throttling back on fab loadings and that larger step-down in September, is that more of utilization or loading issue, is there a product mix issue?

And then a second part of my question, as you look at revenues kind of down in that $12 million to $12.5 million or so range, in September, do you need revenue to get back up close to $19 million before you start seeing significant increase the gross margin rate, I guess if revenues only see a modest recovery over the next couple of quarters, what kind of gross margin recovery should we be thinking about, would it be gradual as well or do you think there could be more of a step function recovery in margin because of loading patterns?

Terry Gallagher

Right, thanks Quinn. So, loading is piece of it but not the largest piece, it’s really about mix, when you talked about the Q1 to Q2 change not being so substantial on, in terms of margin percentage. And what happened there was it was a much greater decline in the mobile business, we didn’t care for the lower margin mobile side and a lesser decrease in infrastructure.

What we’re seeing is it’s a bit more of a both of businesses are a little softer here in Q3. And that’s driving this outsized I guess I’ll call it reduction in margin. As we move forward as infrastructure revenues come back on, those are our contributing at a larger rate. And you should be able to see that step-function come back.

Quinn Bolton

Yes, so, then just to clarify, if infrastructure revs in the first half of the year were sort of in that $11.5 million to $12 million range and that drives you 20% plus gross margins to the extent infrastructure revenues get back up to $11.5 million or $12 million. It’s not - it would be a reasonable assumption to think that the gross margin, the overall corporate gross margin could get back over 20%. Whatever quarter we think infrastructure rev to get back to where they were in Q1, Q2?

Terry Gallagher

Yes, very, very clearly. And I think they can even get on the higher end of that because we’ve taken some cost out inside manufacturing.

Quinn Bolton

Got it, okay. Great. Thank you.

Terry Gallagher

Thanks Quinn.

Operator

Your next question comes from Jason Smith.

Jason Smith

Hi guys, thanks for taking my questions. And I apologize if it’s already been asked. I was wondering if you’re seeing any changes in the competitive landscape within any of your infrastructure submarkets.

Ron Michels

Okay. First, I’ve invited our President Dave Cresci to sit in with us on the Q&A, so Dave is here, hello Dave. And that might be a good question for Dave to answer. And maybe, I’m not sure Dave heard you, so could you repeat it again for us?

Jason Smith

Yes, just wondering if you’re seeing any changes in the competitive landscape in any of your end-markets within the infrastructure segment?

Dave Cresci

Sure. Hi Jason, so let me break that down and focus mainly on the three infrastructure areas that we’re investing in for growth as we go forward again those are small-cell, CATV and Wi-Fi. I’ll start with Wi-Fi, because Wi-Fi it’s a very, very broad and diversified market, we see a lot of competitors in that space, some very big, some very small.

But given the size of the market opportunity in Wi-Fi, we think that there is plenty of business that we’re positioned to capture with the technology and the product features that we offer. So, I don’t see things changing dramatically in the competitive landscape in Wi-Fi.

In CATV, it’s a fairly limited market with respect to the competitive landscape, certainly when we compare it to Wi-Fi. And we’ve got a couple of major competitors in that space that we’re essentially positioned head-to-head with. We don’t see a whole lot of changing there outside of a couple of folks actually exiting the space. And that’s a good thing for us.

So, we see the competitive field in CATV actually quite favorably. We’ve got technology in that space that is essential to delivering the performance for 3.1. And as the industry works its way towards 3.1 we’re seeing some competitors actually exit. So, we’re excited about that space going forward.

And then lastly in small-cell, we do recognize that while the market’s been generally pretty small, that’s essentially probably kept some competitive threats out. We do recognize going forward that as that market does grow competitors are likely to enter the space. But for now, we’re very happy with the positioning that we’ve created for ourselves given the design win penetration that we’ve established with our portfolio.

Jason Smith

Okay, perfect. Thanks a lot guys.

Terry Gallagher

Thanks Jason.

Operator

And there are no further audio questions.

Ron Michels

Great. Thank you very much everybody for attending the call. And on behalf of everyone here at ANADIGICS, thanks for your participation again. And we’ll speak to you again in a few months.

Operator

Ladies and gentlemen, this does conclude today’s conference call. You may now disconnect.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

ANADIGICS. (NASDAQ:ANAD)

Q2 2015 Earnings Conference Call

August 6, 2015 05:00 PM ET

Executives

Ron Michels - Chief Executive Officer

Terry Gallagher - Chief Financial Officer

Dave Cresci - President

Analysts

Charles Kazarian - Credit Suisse

Quinn Bolton - Needham & Company

Jason Smith - Lake Street Capital Markets

Operator

I would now like to turn the conference over to Terry Gallagher, CFO of ANADIGICS. Please go ahead, sir.

Terry Gallagher - Chief Financial Officer

Thank you, Veronica, and good afternoon, everyone. Welcome to ANADIGICS’ second quarter 2015 conference call. With me on the call today is Ron Michels, our chairman and CEO.

The net loss for the quarter was $4.5 million or $0.05 per share and aligned with the consensus analyst estimates. Our EBITDA loss was $2.5 million.

And now, with that, I’ll turn the call over to our Chairman and CEO, Ron Michels. Following Ron’s comments, I’ll discuss our guidance for Q3.

Ron Michels - Chief Executive Officer

During the first half of 2015, we recognized revenue from NRE contracts that funded product development. We expect this will be ongoing as we add new partners.

With that, I’ll turn it over to Terry, so he can provide color on the Q3 outlook. And then return for my closing comments before we open the call for questions. Terry?

Terry Gallagher - Chief Financial Officer

Thanks Ron. For the third quarter of 2015, we anticipate a sequential total revenue decline of 20% to 24%, including a decrease in mobile of approximately 22% to 27%.

Infrastructure revenues are expected to decline sequentially by 20% to 23%, due to CATV market softness and a sequential decline in both Legacy WiMAX and Legacy IOT.

As noted, while we’re optimistic, we cannot guarantee at this time that we will be able to secure additional financing on satisfactory terms at all.

Looking ahead, we believe the EBITDA breakeven is achievable at a quarterly revenue level below $19 million with fab utilization approximately only 25% to 30%.

With that, I’ll turn the call back over to Ron.

Ron Michels - Chief Executive Officer

As we see it today, we believe Q3 will mark the trough for both total infrastructure and infrastructure - for both total revenue and infrastructure revenue.

In summary, we are committed to our infrastructure strategy. I firmly believe we are executing well in the areas that we can control and that our infrastructure business model can succeed.

With that, I’ll turn it over to the operator and look forward to your questions. Operator?

Question-and-Answer Session

Operator

[Operator Instructions]. Your first question comes from the John Pitzer.

Charles Kazarian - Credit Suisse

Hi guys, this is Charles Kazarian here on behalf of John. Thanks for letting me ask a question.

Terry Gallagher - Chief Financial Officer

Sure.

Charles Kazarian - Credit Suisse

Terry Gallagher - Chief Financial Officer

Okay. It’s as a percent of revenues, we remain on pace to get infrastructure rising as a percent of total revenues. So, I don’t see that as an impediment to getting to our 75% target.

Charles Kazarian - Credit Suisse

Ron Michels - Chief Executive Officer

There is a number of reasons and a number of theories why the business is soft this year but I think that 3.1 will be the reason why it isn’t soft next year.

So, we need small-cell to happen, we’re hopeful that it will happen next year, when it does, we’re designed into most of it and that’s what we believe today.

Charles Kazarian - Credit Suisse

All right, great. Thanks a lot for asking, letting me ask question.

Ron Michels - Chief Executive Officer

You’re welcome.

Operator

[Operator Instructions]. Your next question comes from Quinn Bolton.

Quinn Bolton - Needham & Company

Terry Gallagher - Chief Financial Officer

Quinn Bolton - Needham & Company

Ron Michels - Chief Executive Officer

Quinn Bolton - Needham & Company

Terry Gallagher - Chief Financial Officer

Quinn Bolton - Needham & Company

Terry Gallagher - Chief Financial Officer

Yes, very, very clearly. And I think they can even get on the higher end of that because we’ve taken some cost out inside manufacturing.

Quinn Bolton - Needham & Company

Got it, okay. Great. Thank you.

Terry Gallagher - Chief Financial Officer

Thanks Quinn.

Operator

Your next question comes from Jason Smith.

Jason Smith - Lake Street Capital Markets

Ron Michels - Chief Executive Officer

Jason Smith - Lake Street Capital Markets

Yes, just wondering if you’re seeing any changes in the competitive landscape in any of your end-markets within the infrastructure segment?

Dave Cresci - President

Jason Smith - Lake Street Capital Markets

Okay, perfect. Thanks a lot guys.

Terry Gallagher - Chief Financial Officer

Thanks Jason.

Operator

And there are no further audio questions.

Ron Michels - Chief Executive Officer

Great. Thank you very much everybody for attending the call. And on behalf of everyone here at ANADIGICS, thanks for your participation again. And we’ll speak to you again in a few months.

Operator

Ladies and gentlemen, this does conclude today’s conference call. You may now disconnect.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Single page view

« Previous |

page 1 / 5

| Next »

About this transcript

Expand

Emailed to: 1,227 people who get ANAD real-time alerts, 224,685 people who get SA Tech Stock Report daily and 31,182 people who get Today's Transcripts daily.

type="hidden" />

Top Authors | RSS Feeds | Sitemap | About Us | Contact Us

Symbol	Price	% Chg	Remove
Loading... Symbols:	-	-
Loading... Symbols:	-	-
Loading... Symbols:	-	-
Loading... Symbols:	-	-
Loading... Symbols:	-	-
Loading... Symbols:	-	-
Loading... Symbols:	-	-
Loading... Symbols:	-	-