News Article
Cree Quarterly Revenues Miss the Mark
Revenues were $257 million and lower than the firm’s targets mainly due to lower sales to LED component distributors in Asia. On the positive side, the share price has climbed from $48 to $62, a 29% increase, since the firm’s financial announcement last quarter.
Cree, a market leader in LED lighting, has announced revenues of $257.0 million for its second quarter of fiscal 2011, ended December 26, 2010. The share price has also increased ~15% (from $54) at the same time last year.
This represents a 29% increase compared to revenue of $199.5 million reported for the second fiscal quarter last year and a 4% decrease compared to the first quarter of fiscal 2011. GAAP net income for the second quarter increased 47% year-over-year to $49.8 million, or $0.45 per diluted share, compared to GAAP net income of $33.8 million, or $0.32 per diluted share, for the second quarter of fiscal 2010.
“Q2 results reflected continued growth in our LED lighting product line, but revenue and earnings were lower than our targets due primarily to lower sales to our LED component distributors in Asia,” stated Chuck Swoboda, Cree chairman and CEO.
“We are managing through an inventory correction in Asia in the near term, but the opportunity in LED lighting has not changed. Quarterly revenue increased 29% year-over-year and based on the market trends we are seeing, and the success of our own LED lighting business, we are more confident that we will see continued adoption of LED lighting over the next several year,” he continued.
Cash flow from operations was $57.2 million. Free cash flow (cash flow from operations less capital expenditures) was ($7.5) million having spent $64.7 million on capital expenditures. Accounts receivable (net) increased $12.1 million from Q1 of fiscal 2011 to $135.1 million, resulting in days sales outstanding of 47, an increase of 6 days from Q1 of fiscal 2011.
Inventory increased $19.6 million from Q1 of fiscal 2011 to $145.5 million and represents 96 days of inventory, an increase of 14 days from Q1 of fiscal 2011. Effective tax rate for Q2 was 13.7% primarily due to the benefit from an extension of the R&D tax credit.
In the last quarter, Denny’s Corporation chose Cree’s LED lights as the preferred lighting standard for all its new and remodeled stores across the United States. Cree also claims to have shattered LED industry performance standards with the release of the Cree XLamp XM-L LED. The firm also introduced the LED industry’s first lighting-class LED array, the Cree XLamp CXA20, to accelerate indoor LED lighting. Cree also released the XLamp XP-E High Efficiency White (HEW), the first high-power LEDs featuring Cree’s new Direct Attach LED technology.
For its third quarter of fiscal 2011 ending March 27, 2011, Cree targets revenue in a similar range as the second quarter at $245 million to $265 million due to seasonality and the on-going inventory correction in Asia. Q3 GAAP gross margin is targeted at +/- 46%. GAAP operating expenses are targeted to increase by approximately $7 million to $73 million, due to increased spending to support new product development, 150mm qualification and additional sales and application resources. The tax rate is targeted at 21% for fiscal Q3. GAAP net income is targeted at $32 million to $40 million, or $0.29 to $0.36 per diluted share.
Cree hosted a conference call to review the highlights of the fiscal second quarter 2011 results and the fiscal third quarter 2011 business outlook, including significant factors and assumptions underlying the targets noted above. The conference call will be available to the public through a live audio web broadcast via the Internet from www.cree.com under “Investor Relations — Financial Events and Presentations”. The call will be archived and available on the website through March 1st, 2011.
