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12 August 2009


Cree grows 15% to record annual revenue of $567m

For its fiscal 2009 (ended 28 June), LED chip, lamp and lighting fixture maker Cree Inc of Durham, NC, USA has reported record revenue of $567.3m (up 15% on fiscal 2008’s $493.3m). The two greater-than-10% customers were Seoul Semiconductor (13%) and Arrow Electronics (11%), which has become Cree’s largest distributor.

Fiscal Q4 revenue was a record $148.1m, up 9% on $135.9m a year ago and 13% on last quarter’s $131.1m. This is also up on the original guidance (given on 21 April) of $136-143m (and at the high end of the revised target of $143-150m). Product revenue was $143.7m (up from $129.4m last quarter) and contract revenue was $4.4m (down from $6.5m).

LED product revenue grew 12% on a year ago and 17% sequentially to $131.3m, driven by higher XLamp and high-brightness LED sales for lighting-related applications, higher LED chip sales due to increased demand in notebook backlighting, and sequential double-digit growth in LED lighting product sales. Non-LED product revenue (power and RF devices) and contract revenue combined was $16.8m, down 12% on a year ago and 9% on last quarter. In particular, contract revenue (which is mostly power and RF related) is down to about $4m (just 2% of total revenue).

“Our strong Q4 results were an outstanding finish to a very good year and reflect the success of our strategy to drive growth in LEDs and LED lighting applications,” says chairman & CEO Chuck Swoboda.

On a non-GAAP basis, net income for fiscal year 2009 was $59.2m, up on fiscal 2008’s $47.2m. This included a greater-than-expected $16.3m in fiscal Q4 (up from $14.5m last quarter).

Gross margin has risen from last quarter’s 34.2% to a better-than-expected 40.3%, taking fiscal 2009 to 38.1%, up from fiscal 2008’s 34.2% (and just above the targeted 36-38%). The rise is due to: better cost leverage from higher factory utilization; better-than-planned progress in using 4-inch substrates (the conversion from 3-inch is now more than half through, and should be almost complete by the end of calendar 2009); a more stable pricing environment in LED chips; and improved yield performance in the power and RF product lines (more than offset pricing declines in LED components due to increased competition in lighting applications).

During fiscal 2009, Cree generated $177.9m of operating cash flow (up from $103m in fiscal 2008). Q4 operating cash flow was $43m (down on last quarter’s $49.9m) and free cash flow (operating cash flow minus capital expenditure of $14.7m) was $28.3m (down from $40.5m). Cash and investments grew by $42.3m to $447.2m.

Entering fiscal 2010, record order backlog is being driven by increasing demand across Cree’s LED product lines. Factories are hence operating near maximum capacity.

Despite perhaps being capacity constrained for some product lines, for its fiscal Q1/2010 (ending 27 September 2009) Cree targets revenue of $160-166m (up 8-12% sequentially), driven by double-digit growth in LED lighting products, LED components for lighting, and LED chips for notebook and TV backlighting. Non-GAAP margin should remain about 40%, as increased volume and improved yields are offset by the continued aggressive pricing environment for LED components.

In contrast, LED chips pricing has stabilized. The rapid adoption of LED backlighting for notebook computers and TVs has changed the market dynamics for small chip-based white LEDs and increased demand for high-end blue LED chips, says Swoboda. This has created near-term supply constraints, extended lead times across the industry, and resulted in a more favorable LED chip pricing environment.

“We are well positioned to benefit from the worldwide growth in LED lighting, which remains our strategic focus,” says Swoboda. “As such, we continue to invest in the new products, channels and technical support needed to accelerate the LED lighting revolution,” he adds. The growth in LED demand has shifted Cree’s near-term focus to factory execution, which it is addressing through increased capital spending at its factories in both the USA and Asia. For fiscal Q1, Cree targets increased capital expenditure of $25-30m, mainly for LED component capacity increases in China and LED chip capacity in the USA. The firm plans to roughly double LED component capacity over the next year, says Swoboda.

Cree is also targeting slightly higher R&D operating expenses (to accelerate new LED product development) and $3m higher spending in sales & marketing (to staff new global customer service and application centers, as well as higher sales commissions and increased compensation expense).

See related items:

Cree’s revenue falls 11%, but 5-9% rebound expected this quarter

Lighting products sustain Cree's record revenues

Cree grows 24% year-on-year to record $140m revenue

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