For its fiscal second-quarter 2013 (to end-December 2012), LED lighting giant Cree Inc of Durham, NC, USA has reported revenue of $346.3m, up 14% on the same quarter of 2012 ($304.1m) and up 10% on Q1/2013’s $315.8m. On a non-GAAP basis, net income was $36.9m ($0.32 per diluted share), up 29% year-on-year compared to Q2/2012’s $28.7m ($0.25 per diluted share). Fiscal Q2/2012 Q3/2012 Q4/2012 Q1/2013 Q2/2013 Revenue $304.1m $284.8m $306.8m $315.8m €346.3m
“Fiscal Q2 was another strong quarter with record revenue and earnings per share higher than our target range due to stronger sales in both LEDs and lighting, combined with improved gross margins that more than offset higher operating expenses [up $2m on last quarter to $88.4m due to higher sales & marketing spending that supported the higher revenue],” commented chairman & CEO Chuck Swoboda.
“Revenue trends in Q2 were as follows: lighting sales increased more than $14m (or 14%) from Q1 [to $122.7m], as we saw a better-than-targeted growth for both our indoor and outdoor product lines; LED sales increased more than $13m (or 7%) from Q1 [to $201m], which was on the high side of our target for the quarter; power & RF sales increased more than $2m from Q1 [to $22.6m], which was slightly higher than our target for the quarter,” he added.
Between Q1 and Q2/2013, gross margin on a non-GAAP basis increased from 37.5% to 39.2% (above the targeted 38.5%), driven by factory cost reductions, improved production yields, product mix, lower cost of new products, and higher factory utilization. Cash and investments increased $69.5m to $885.8m due to good working capital management, focused capital spending and higher profitability.
Swoboda described the company’s Q2 highlights as: releasing its 200 lumen-per-watt XLamp MK-R LED; launching the LM16 LED lamp (designed to replace halogen MR16 lamps); launching XLamp XM-L2 LEDs (said to be the industry's brightest single-die LEDs, delivering 186 lumens per watt); and releasing the industry's first fully qualified, production-ready, all-SiC power module. Notable new installations include more than 130 locations of US restaurant chain Sheetz, which now feature state-of-the-art LED lighting by Cree.
“Overall company backlog is in line with seasonal trends for our fiscal Q3,” notes Swoboda. For fiscal Q3/2013 (to end-March), Cree is targeting revenue of $325-345m. On a non-GAAP basis, gross margin is expected to rise slightly to about 39.5%, as Cree builds on momentum from the last several quarters while it continues to target incremental gains and factory efficiency and the benefit of higher new product sales to offset price decline. Operating expenses should be similar to Q2. Net income is targeted to be $35-41m ($0.30-0.35 per diluted share).
“Longer term, we remain focused on driving adoption through innovation. We see opportunities to move the market even faster than we have experienced to date,” says Swoboda.
At the announcements of the results, Swoboda gave more information about recent his objectives and views on likely market conditions. He detailed Cree’s four key priorities that the company is focusing on:
“Firstly, to accelerate adoption of LED lighting and increase sales of our indoor and outdoor lighting products. [Our] lighting product line grew 14% sequentially in Q2 due to strong sales for both indoor and outdoor products. Sales growth is coming from a combination of new products and overall momentum in our sales channels.
“Our second priority is to drive growth in our LED component product line through innovation by leveraging the SC3 LED technology into new products. We saw an increase in SC3 product sales in Q2, and based on the design activity, so we target this product family to continue to increase as a percentage of LED sales over the next few quarters.
“Thirdly, we want to leverage our technology lead in power and RF areas to open a new generation of applications for these products. We released our first all-silicon carbide high-frequency power module, which sets a new standard as the industry's first fully qualified all-silicon carbide module. The new high-frequency module, which is targeted at power converters and high-voltage transportation applications, is rated at 100 amp current handling and 1200-volt blocking.
“Cree’s fourth priority is our ongoing effort to translate our product innovation into revenue and profit growth. Our new products are driving growth in sales for LED lighting, LED component and our power and RF product line.”
In conclusion, Swoboda added, “We remain focused on driving adoption through innovation. Our new products have improved payback and fueled growth in LED lighting. Based on the trends over the past few quarters, I think it is clear we're on the right track. Despite our success, we are not satisfied with the rate of LED lighting adoption.”
“With Cree’s broad understanding of the technology levers from materials through systems, we see opportunities to move the market faster. LED lighting is not an incremental improvement for the lighting industry. It is a completely new way to deliver light. It is an LED lighting revolution, and we continue to be intensely focused on our long-term goal of 100% upgrade to LED lighting.”
