Cree Reports Q2 Results
'Solid progress with operating margin higher than targeted'
Cree, which makes lighting-class LEDs, LED lighting, and semiconductors for wireless and power applications, has announced revenue of $413.2 million for Q2 of fiscal 2015, ended December 28, 2014, which is similar to revenue of $415.1 million reported for Q2 2014. The market responded positively with a share price rise of around over 3.5 percent.
GAAP net income for the Q2 was $12.2 million, or $0.10 per diluted share, a decrease of 66 percent year-over-year compared to GAAP net income of $35.7 million, or $0.29 per diluted share, for the second quarter of fiscal 2014.
On a non-GAAP basis, net income for the second quarter of fiscal 2015 was $37.9 million, or $0.33 per diluted share, a decrease of 33 percent year-over-year compared to non-GAAP net income for the Q2 of fiscal 2014 of $56.8 million, or $0.46 per diluted share.
"We made solid progress in Q2 with operating margin higher than targeted due to an improvement in gross margins in our lighting business," stated Chuck Swoboda, Cree Chairman and CEO. "The market for LED lighting is still in the early stages, our new product pipeline is strong, sales momentum is building and our brand is growing in the market. As evidenced by our significant share repurchases in Q2, we believe we are on the right track to continue to grow the company and increase profits over the next several years," he added.
The lighting business grew 3 percent sequentially and 33 percent year over year in the second quarter, driven by double-digit growth in lighting fixtures.
LED products revenue declined 29 percent year over year and 13 percent sequentially to $152 million and gross profit declined 12 percent sequentially to $59 million for a 39.1 percent gross margin, which was similar sequentially. Power and RF products grew 18 percent year over year and was similar sequentially at $31 million. Gross profit declined 3 percent sequentially to $17 million for a 55.5 percent gross margin.
Outlook
For its third quarter of fiscal 2015 ending March 29, 2015, Cree targets revenue in a range of $395 million to $415 million with GAAP gross margin targeted to be 32.6 percent+/- and non-GAAP gross margin targeted to be 33.5 percent+/-.
Its GAAP gross margin targets include stock-based compensation expense of approximately $3.4 million. Operating expenses are targeted to be similar to fiscal Q2. The tax rate is targeted at 17.0 percent+/- for the third quarter of fiscal 2015. GAAP net income is targeted at $3 million to $8 million, or $0.03 to $0.07 per diluted share. Non-GAAP net income is targeted in a range of $23 million to $28 million, or $0.21 to $0.25 per diluted share.
The GAAP and non-GAAP net income per diluted share targets are based on an estimated 112.4 million diluted weighted average shares. Targeted non-GAAP earnings exclude expenses related to the amortization of acquired intangibles, changes in the fair value of our Lextar investment, stock-based compensation expense and asset retirement charges of $0.18 per diluted share.
The company ended the quarter with $830 million in cash and investments, a $275 million decline sequentially. The sequential decrease was due primarily to spending $266 million to repurchase $8.1 million Cree shares, $80.5 million to purchase a 13 percent ownership in Lextar, and $55 million of capital expenditures, which were partially offset by $15 million of cash provided from operations and a net $105 million drawn on our line of credit within the quarter.
