For its fiscal fourth-quarter 2013 (to end-June), LED chip, lamp and lighting maker Cree Inc of Durham, NC, USA has reported record revenue of $375m, up 7% on $348.9m last quarter and 22% on $306.8m a year ago, due mainly to strong sales of the Cree LED bulb and LED components.
Fiscal Q4/2012 Q1/2013 Q2/2013 Q3/2013 Q4/2013 Revenue $306.8m $315.8m $346.3m $348.9m $375m
By sector, Lighting product revenue grew 33% year-on-year to $134m; LED product revenue grew 17% to $217m; and Power & RF product revenue grew 14% to $24m.
On a non-GAAP basis, gross margin has risen from 36.3% a year ago to 38.2% (at the low end of the targeted range due to the shift in product mix to Lighting products, for which margin is just 25.1% compared with 45.7% for LED products and 53.7% for Power & RF products).
"We made great progress ramping up the Cree LED bulb and implementing a series of cost reductions during the quarter," says Swoboda. "Although the LED bulb gross margin is lower than our overall lighting segment margins, it is improving."
Operating expenses were $92m, lower than targeted due to reduced sales commissions on lower lighting fixture sales plus lower-than-targeted IP litigation costs.
Net income has risen from $29.2m ($0.25 per diluted share) a year ago and $40.8m ($0.34 per diluted share) last quarter to $45.6m ($0.38 per diluted share). Cash from operations was $61m and capital expenditures were $27m (including $5m related to patents), yielding free cash flow of $34m. Depreciation and amortization was $39m. During the quarter, cash and investments rose by $86.9m to $1bn.
"Our fiscal fourth quarter was a strong finish to a great year, with record revenue and good earnings growth in line with our targets," says chairman & CEO Chuck Swoboda.
For full-year fiscal 2013, revenue was a record $1.39bn, up 19% on $1.16bn for fiscal 2012. This was driven by Lighting product revenue growing 48% to $495m, whereas LED product revenue grew just 6% to $801m. Power & RF product revenue grew 22% to $89m. Net income has risen from $109.2m ($0.95 per diluted share) for fiscal 2012 to $155.4m ($1.32 per diluted share). Cree generated $285.2m of operating cash flow (up from $242.3m a year ago) and $186.9m of free cash flow (up from $130m a year ago).
"After only 5 years, we created one of the largest lighting businesses in the USA," notes Swoboda. "We grew our LED component product line to $801m by leveraging our innovative SC3 LED Technology to more than 50% of our LED sales in Q4," he adds. "We utilized our technology lead in Power & RF to open a new generation of applications for these products as we grew sales 22% to $89m for the year."
Cree listed a range of recent highlights from the latest quarter's activities, including launching: the XSPR LED residential street light (described as "the first $99 LED street light targeted to compete with low-cost traditional street lights in residential applications"); its new UR Series LED Upgrade Kit (said to deliver payback in under two years for upgrading from linear fluorescent lamps); the XLamp XH Series of mid-power, ceramic LEDs; and the Cree LED BR30 Flood Light (an extension of its series of LED bulbs). Cree also expanded its CXA LED family with new 95-CRI options. The firm also announced that the University of North Carolina General Administration has selected LED lighting by Cree as part of its ongoing efforts to reduce energy usage by at least $25m over seven years.
Business outlook
"Total company backlog is ahead of this point last quarter, as we see good order momentum in our LED lighting product lines and LEDs are tracking in a similar range," says Swoboda. "We are currently targeting solid growth in LED lighting in Q1, driven primarily by our fixture products, as well as incremental growth in LED bulb sales," he adds.
For its fiscal first-quarter 2014 (ending 29 September 2013), Cree expects rises in revenue to $380-400m and gross margin to 39%.
"Our targeted margin increase is based primarily on incremental lighting improvement due to an increased mix in higher-margin LED fixture sales and LED bulb cost reductions that we implemented during Q4," says chief financial officer & executive VP Michael McDevitt. "This target is based on a number of factors that could vary, including overall demand, product mix, factory execution and a competitive environment," he adds.
Operating expenses are targeted to rise by about $3m sequentially, due to: incremental R&D spending (to support new product development and cost-reduction programs), higher sales commissions (from a higher targeted revenue) and increased general & administrative (G&A) cost, offset partially by lower marketing spending. Net income is expected to be $44-50m ($0.36-0.41 per diluted share).
"Our new products have opened new applications, improved payback, and fuelled growth in LED lighting," says Swoboda. "We remain focused on driving mass adoption and our goal of 100% upgrade to LED lighting."
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