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22 October 2009


Cree’s revenue grows 14% to record $169m

For its first-quarter 2010 (ended 27 September 2009), Cree Inc of Durham, NC, USA has reported record revenue of $169.1m. This is up 20% on $140.4m a year ago and 14% on last quarter’s $148.1m (and above the targeted $160-166m).

Growth was driven by higher XLamp LED sales for lighting application, higher LED chip sales (due to increased demand in notebook backlighting and lighting), and solid growth for LED lighting products as well as for GaN- & SiC-based power and RF devices. LED product revenue rose 14% sequentially to $156m (including $0.5m of government contract revenue), while power and RF device revenues rose 15% to $13.1m (including $3.6m of government contract revenue).

On a non-GAAP, gross margin has risen from 36.1% a year ago and 40.3% last quarter to 44.1%. This is above the targeted 40% due to: additional cost leverage from high factory utilization and increased production scale; better-than-planned yield; a more stable prizing environment for LED chips and LED components; and the continued progress in the power and RF product lines.

Non-GAAP net income was $27.4m, up from $16.3m last quarter and more than double $13.2m a year ago.

Operating cash flow has risen from just $43m last quarter to $61.2m. So, despite capital expenditure rising from $14.7m to $20.4m, free cash flow (operating cash flow minus capital expenditure) has still risen from just $28.3m last quarter to $40.8m.

Cash and investments almost doubled during the quarter from $447.2m to $888.5m, but this was due mainly to the secondary common stock offering in September, which raised a net $434.2m (intended mainly for capital expenditure to support accelerated growth, with the remainder for general corporate purposes including working capital and potential strategic investments).

“Both revenue and profits exceeded our targets due to solid factory execution and strong demand,” says chairman & CEO Chuck Swoboda. “We are benefitting from continued LED lighting adoption and high factory utilization and are well positioned for solid growth in Q2,” he adds.

Cree is still capacity limited in most product lines. However, the proportion of products migrated to 4-inch silicon carbide substrates should rise from more than 70% now to almost all by the end of December (while yield should also improve).

So, for fiscal second-quarter 2010 (ending 27 December 2009), Cree still expects revenue to rise 6-12% to $180-190m, driven by higher LED component sales for lighting applications and higher LED lighting product sales, followed by some growth in LED chips to support notebook and TV backlighting and incremental growth in power and RF device sales. Cree also expects non-GAAP gross margin to be steady at 44% and non-GAAP net income to rise further to $29-32m.

“As a result of the recent equity offering, we have the balance sheet to invest in the growth of our business,” says Swoboda. Quarterly capital expenditure was $32m in fiscal Q1 (above the forecast $25-30m) and should rise to $50-60m over the next few quarters. Cree has earmarked $150-165m for capital expenditure in fiscal 2010 to expand LED chip fab capacity in Durham and to more than double LED component packaging capacity in China (allowing growth in fiscal second-half 2010 to match growth in the first half). The firm recently announced its intention to grow its 3300 staff by 275 this calendar year in Durham and then 575 in total over the next three years in North Carolina. Swoboda adds that Cree is likely to also have to expand its back-end assembly & packaging operations in Asia.

Swoboda says that, after raising cash reserves to $888m, Cree is also in a good position to consider potential strategic acquisitions that could help it to accelerate the adoption of LED lighting.

See related items:

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

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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