News

Cree Reports Challenging Conditions Reduce Income by 64%

October 23, 2014 by Jeff Shepard

Cree, Inc. announced revenue of $427.7 million for its first quarter of fiscal 2015, ended September 28, 2014. This represents a 9% increase compared to revenue of $391.0 million reported for the first quarter of fiscal 2014. GAAP net income for the first quarter was $11.1 million, or $0.09 per diluted share, a decrease of 64% year-over-year compared to GAAP net income of $30.5 million, or $0.25 per diluted share, for the first quarter of fiscal 2014. On a non-GAAP basis, net income for the first quarter of fiscal 2015 was $29.6 million, or $0.24 per diluted share, a decrease of 38% year-over-year compared to non-GAAP net income for the first quarter of fiscal 2014 of $47.3 million, or $0.39 per diluted share.

“We have good momentum in our Lighting and Power & RF segments, although fiscal Q1 results were below our targeted levels due primarily to lower than expected LED demand,” stated Chuck Swoboda, Cree Chairman and CEO. “While the LED industry conditions are challenging, we’re confident that innovation is still the key to leading the market and driving growth in all of our businesses. Given our technology leadership, new product pipeline and strong balance sheet, we remain uniquely positioned to capitalize as the industry transitions to LED lighting.”

Highlights included: Gross margin decreased 540 basis points from Q4 of fiscal 2014 to 31.8% on a GAAP basis, and decreased 550 basis points to 32.4% on a non-GAAP basis. Cash and investments decreased by $57.6 million from Q4 of fiscal 2014 to $1.1 billion. Accounts receivable, net increased by $11.8 million from Q4 of fiscal 2014 to $237.0 million, with days sales outstanding of 50. Inventory increased by $26.0 million from Q4 of fiscal 2014 to $310.8 million and represents 96 days of inventory.

For its second quarter of fiscal 2015 ending December 28, 2014, Cree targets revenue in a range of $400 million to $420 million with GAAP gross margin targeted to be 32.6%+/- and non-GAAP gross margin targeted to be 33.5%+/-. GAAP gross margin targets include stock-based compensation expense of approximately $3.4 million, while non-GAAP targets do not. Operating expenses are targeted to increase approximately $2 million from Q1. The tax rate is targeted at 22.5%+/- for the second quarter of fiscal 2015.

GAAP net income is targeted at $6 million to $10 million, or $0.05 to $0.09 per diluted share. Non-GAAP net income is targeted in a range of $24 million to $29 million, or $0.20 to $0.24 per diluted share. The GAAP and non-GAAP net income per diluted share targets are based on an estimated 120 million diluted weighted average shares. Targeted non-GAAP earnings exclude expenses related to the amortization of acquired intangibles, stock-based compensation expense and asset retirement charges of $0.15 per diluted share.