For its fiscal third-quarter 2014 (to end-May), LED chip and component maker SemiLEDs Corp of Hsinchu, Taiwan has reported revenue of $4.6m, up 11% on $4.2m last quarter and 31% on $3.5m a year ago.
Revenue from LED chips fell by 44% sequentially (falling back from 51% to 26% of total revenue, similar to the 29% of the quarter before last). Revenue from lighting products grew by 48% (rising from 17% to 23% of total revenue). Revenue from LED components grew by 47% (rising from 30% to 40% of total revenue) through the combination of new product development and the integration of the firm’s acquisition of additional LED component technology and manufacturing capacity (an LED packaging production line).
“We continued to make progress on our strategy to focus on UV and component products, which generally have higher margins than our chip products,” says chairman, president & CEO Trung Doan.
Gross margin was negative 61%, compared with negative 75% last quarter. Operating margin has improved further, from negative 159% last quarter to negative 138%, due to the higher revenue, a shift in product mix to higher-margin products (including LED components and UV LED chips), sales of scrap materials and the provision of services (which had little or no associated cost of revenues) and cost-reduction efforts. Although selling, general & administrative (SG&A) expenses rose from $2.26m to $2.53m (due to an increase in professional service expenses for legal and advisory services), R&D expenses were cut from $1.2m to $1m.
“We continue to be encouraged by the progress we have made in reorienting our business toward more profitable segments of the LED industry, such as UV and components,” says Doan. "While we gain traction and grow our presence in these markets, we remain focused on operational cost improvements to lower our negative cash flow and accelerate our path to profitability,” adds Doan.
On a non-GAAP basis (excluding stock-based compensation expense of $482,000), net loss was $5.9m ($0.21 per diluted share), level with last quarter. Cash used in operating activities has been cut slightly from $4.2m last quarter to $4.1m. Capital expenditure has returned from last quarter’s $0.93m to $0.5m (roughly the same as the quarter before last). Total free cash outflow has been cut from $5.1m to $4.6m. During the quarter, cash and cash equivalents have hence fallen less, from $21.5m to $16.1m (a smaller drop than the $6.6m last quarter).
“To conserve cash, in the last two quarters, we initiated a number of actions including the consolidation of facilities, headcount reductions, and exploring opportunities to sell excess equipment,” notes Doan. “We expect to continue to incur costs associated with these actions in our fiscal fourth quarter, as we close and relocate our Sinwu Facility to our Chu-Nan Facility,” he adds. The Sinwu Facility is being shut down after 15 July and the firm is in the process of starting up the relocated equipment at the expanded area of its Chu-Nan Facility. “The relocation has caused a temporary production interruption and could impact our fourth-quarter manufacturing capability and revenue,” Doan warns. The relocation and start-up should be substantially completed during the fiscal fourth quarter. “Starting in the first quarter of our fiscal 2015, we expect to realize the benefits of operating cost reductions and operational efficiencies from these efforts,” Doan notes.
