For fiscal first-quarter 2014 (to end-November 2013), LED chip and component maker SemiLEDs Corp of Hsinchu, Taiwan has reported revenue of $3.4m, down 45% on $6.2m a year ago but level with last quarter.
However, LED chip, component and lighting product sales comprised a greater proportion of total revenue than last quarter. Revenue from LED chips rose 6% sequentially (comprising 29% of total revenue, up from 27% last quarter). Revenue from LED components rose 4% sequentially (comprising 34% of total revenue, the same as last quarter). Revenue from lighting products rose 25% sequentially (comprising 36% of total revenue, up from 29% last quarter).
While R&D expenses have remained steady at $1.1-1.2m, selling, general & administrative (SG&A) expenses have been cut further, from $3.7m a year ago and $2.9m last quarter to $2.6m. Total operating expenses have hence fallen further, from $4.9m a year ago and $4.1m last quarter to $3.8m.
Due to the reduction in revenue and an excess capacity charge for LED chips and LED components, gross margin was negative 68%, worse than the negative 53% a year ago. However, this is an improvement on negative 103% last quarter.
“We are encouraged by the progress we have made in the most recent quarter,” says chairman, president & CEO Trung Doan. “While we are still in the early stages of executing on our strategy, the sequential improvement in gross margin demonstrates the initial impact of our efforts.”
On a non-GAAP basis, net loss has been cut further, from $8.6m a year ago and $7.3m last quarter to $5.8m.
Cash used in operating activities has risen further, from $3.3m a year ago and $4.7m last quarter to $5.4m. However, capital expenditure has been cut from $1.7m a year ago to just $483,000. Also, SemiLEDs paid about $1.6m as partial payment for an LED component production line and related products and technology acquired last quarter (prior to an additional payment of $450,000 in December). Hence, total cash burn (free cash flow) has risen from $4.9m a year ago to $5.9m. During the quarter, cash and cash equivalents fell from $36.3m to $28.1m.
“Starting almost a year ago we made a conscious decision to refocus our business on profitable segments within niche LED markets such as UV and specialty lighting (e.g. architectural),” says Doan. “Given the level of chip commoditization in high-volume markets such as back-lighting and general illumination, we have chosen to focus our effort on selected markets where we can also differentiate solutions and generate a higher margin,” he adds. “As a part of this strategy we are also focused on developing greater value-added products such as components and lighting solutions. While we are still in the midst of executing on our strategy, we believe the combination of focusing on niche market opportunities and the greater value-add products will allow us to substantially improve our gross margins and bottom line.”
For fiscal second-quarter 2014, SemiLEDs expects revenue to rebound to $4-5m. Gross margin is expected to continue to be negative, as SemiLEDs will not fully utilize its production capacity. However, net loss should be cut slightly.
