For full-year fiscal 2014 (ended 29 June), Cree Inc of Durham, NC, USA has reported record revenue of $1.65bn, up 19% on fiscal 2013’s $1.39bn.
Fiscal Q4/2013 Q1/2014 Q2/2014 Q3/2014 Q4/2014 Revenue $375m $391m $415.1m $405.3m $436.3m
Specifically, for fiscal fourth-quarter 2014, revenue was a record $436.3m, towards the low end of the targeted range of $430-460m but up 8% on $405.3m last quarter and up 16% on $375m a year ago. All three product segments grew.
Lighting Product revenue (mainly LED lighting systems and bulbs) was $208.2m, up 18% on $176.7m last quarter and 56% on $133.6m a year ago (rising from 36% of total revenue through 44% to 48% of total revenue). Full-year revenue has grown by 43% from fiscal 2013’s $495m to $706m in fiscal 2014.
LED Product revenue (LED components, LED chips, and silicon carbide materials) was $199.5m, down slightly from $201m last quarter and down by 8% from $217.4m a year ago (falling from 58% of total revenue through 49% to 46% of total revenue). Full-year revenue has grown by just 4% from fiscal 2013’s $801.5m to $834m in fiscal 2014.
Power & RF Product revenue was $28.6m, up 4% on $27.4m last quarter and 19% on $24m a year ago (remaining 6-7% of total revenue). Full-year revenue has grown by 20% from fiscal 2013’s $89.4m to $107.5m in fiscal 2014.
On a non-GAAP basis, overall gross margin rebounded slightly from 37.8% last quarter to 37.9%, still down on 38.2% a year ago but above the expected 37.5%. This was driven by Lighting Product gross margin rising from 25.1% a year ago and 27.4% last quarter to a slightly better-than-expected 29.1% (due primarily to cost reductions and productivity improvements for LED fixtures). In contrast, LED Product gross margin has fallen from 45.7% a year ago and 45.6% last quarter to 45.1%, while Power & RF Product gross margin has fallen further, from 57.1% last quarter to 56.9% (although still up on 53.7% a year ago). Nevertheless, overall full-year gross margin is down slightly from 38.4% in fiscal 2013 to 38.2% in fiscal 2014.
Operating expenses rose from $100m last quarter to $108m, at the upper end of the targeted range due to higher R&D spending to support increased development activities in both LEDs and lighting. For example, highlights during the quarter include introducing the XLamp XP-L LED, the first commercially available single-die LED to achieve efficacy of up to 200 lumens per watt (LPW) at 350mA.
Net income has risen from $45.6m ($0.38 per diluted share) a year ago and $47.7m ($0.39 per diluted share) last quarter to $51.3m ($0.42 per diluted share). Full-year net income has risen from $155m ($1.32 per diluted share) in fiscal 2013 to $203m ($1.65 per diluted share) in fiscal 2014.
During the quarter, operating cash flow was $91.1m (up from $60.2m last quarter). Capital expenditure has risen from $36.2m to $64m. Hence, free cash flow was $26.8m up from $19.3m). During fiscal 2014, operating cash flow was $319.3m (up from $285.2m in fiscal 2013). Capital expenditure has risen from $98.3m in fiscal 2013 to $198.7m. Hence, free cash flow was $120.6m (down from $187m in fiscal 2013).
During the quarter, cash and investments fell by $61m to $1.162bn. However, over the year, cash and investments rose by $139m from $1.024bn, due to increased profitability and solid execution that more than offset investment of almost $300m ($198.7m in capital expenditure and $100m in stock repurchases).
“The strength of our operating model gives us the flexibility to make investments to support our goal to grow the business and increase operating margin,” says chairman & CEO Chuck Swoboda. “Our new product pipeline, brand momentum and strong balance sheet put us in a great position to enable our long-term customer goal of 100% upgrade to LED lighting.”
For fiscal first-quarter 2015 (ending 28 September 2014), Cree expects revenue to grow to $440-465m, consisting of solid growth for Lighting Products (driven by strong growth in LED fixtures and LED bulbs in a similar range to fiscal Q4/2014), flat to single-digit growth for LED Products, and single-digit growth for Power & RF Products. Gross margin should fall slightly to 37.5% (even with an increased lighting mix). Operating expenses are targeted to be similar sequentially, as Cree starts to see incremental operating leverage from investments made over the last two years (hence operating profit should grow faster than revenue sequentially, and operating margin should rise). Net income is expected to be $48-55m ($0.40-0.45 per diluted share).
For fiscal 2015, Cree is targeting property, plant & equipment (PP&E) capital expenditure similar to fiscal 2014 ($200m) to support new product priorities, provide incremental capacity, and add infrastructure to support longer-term forecasted growth. “The amount we invest will vary, based on forecasted revenue demand and the degree to which we expand the use of third-party manufacturers to support our growth in lighting and LEDs,” notes chief financial officer Mike McDevitt.
