For its fiscal first-quarter 2014 (ended 29 September 2013), LED chip, lamp and lighting maker Cree Inc of Durham, NC, USA has reported record revenue of $391m, up 4% on $375m last quarter and 24% on $315.8m a year ago.
Fiscal Q1/2013 Q2/2013 Q3/2013 Q4/2013 Q1/2014 Revenue $315.8m $346.3m $348.9m $375m $391m
Specifically, by product sector, Power & RF product revenue was $25.1m, up 4.6% on $24m last quarter and 24% on $20.1m a year ago (remaining about 6% of total revenue). Power & RF product gross margin has risen from 51.8% a year ago to 53.7%. LED product revenue was $218m, up only slightly on $217m last quarter but up16% on $187.6m a year ago (though falling from 60% of total revenue to 56%). LED product gross margin has risen from 40.2% to 46.6%, due primarily to higher license payments received. Lighting product revenue was $147.9m, up 11% on $134m last quarter and 37% on $108.1m a year ago (rising from 34% of total revenue to 38%), driven primarily by growth in LED fixtures. Although down on 31.6% a year ago, Lighting product gross margin has risen from 25.1% last quarter to 26.9%.
"The strong performance was primarily due to increased sales of our lighting products, higher gross margins and improved operating leverage across the business," says chairman & CEO Chuck Swoboda.
Overall gross margin (on a non-GAAP basis) has risen from 37.5% a year ago and 38.2% last quarter to 39.2%, driven primarily by improvements in lighting as Cree realizes benefits from LED bulb cost reductions and higher fixture sales, as well as LED-related license revenue.
Net income has risen from $31.8m a year ago and $45.6m to $47.3m. Cash from operations was $69.2m, up from $61m last quarter. However, capital expenditures have risen from $27m last quarter to $38.4m (again including $5m related to patents). Hence, free cash flow fell from $34m to $30.8m. Depreciation and amortization was again $39m. Altogether, cash and investments rose by $64.9m during the quarter, from $1.024bn to $1.089bn.
During the quarter, Cree launched: the XLamp XQ-E LEDs (a new generation of lighting-class LEDs); the XLamp CXA 1520 LED array, the industrys first high-density (HD) LED array (delivering double the lumen density, to enable the next generation of LED spot lights); and the TW (TrueWhite) Series LED Bulb, which emits natural LED light with a color rendering index (CRI) of 93, making Cree the first firm to meet the California Energy Commission (CEC) LED bulb specification. Cree also earned ENERGY STAR qualification for its soft-white Cree LED Bulbs.
"Order backlog for Q2 is similar to this point last quarter as we see good order momentum in our LED lighting product line, and LEDs are tracking in a similar range," says Swoboda. "Based on our backlog, current sales activity and project forecasts, we are targeting growth in all product segments in Q2, led by growth in LED fixtures and the Cree LED Bulb [and slightly higher LED product and Power & RF sales]," he adds.
For fiscal second-quarter 2014 (ending 29 December 2013), Cree expects revenue to rise to $400-420m, with gross margin of 38.5% (as LED lighting fixture and LED bulb products become a greater percentage of total sales). Operating expenses are expected to rise by $5.5m, due mainly to higher marketing expenditure (to promote the Cree LED Bulb) as well as taking advantage of ENERGY STAR qualification and associated utility rebates (to drive increased sales momentum) and higher sales commissions (from the higher targeted revenue). Cree also targets incremental R&D spending to support new product development and cost-reduction programs. Net income is targeted to be $44-50m.
"Even with our success, LED lighting remains a largely untapped opportunity and we remain focused on investing in new products, new channels and building the Cree brand to grow our company and lead the market," concludes Swoboda.
