Cree Well Positioned for Growth in Fourth Quarter, says CEO

Cree, Inc. announced revenue of US $405.3 million for 3Q14, ended March 30, 2014. This represents a 16 percent increase compared to revenue of US $348.9 million reported for 3Q13. GAAP net income for the 3Q14 was US $28.2 million, or US $0.23 per diluted share, an increase of 27 percent YoY compared to GAAP net income of US $22.2 million, or US $0.19 per diluted share, for 3Q13. On a non-GAAP basis, net income for the 3Q14 was US $47.7 million, or US $0.39 per diluted share, an increase of 17 percent YoY compared to non-GAAP net income for the 3Q13 of US $40.8 million, or US $0.34 per diluted share.

“Fiscal Q3 was a solid quarter as revenue and operating income were in line with our target range and the business is well positioned to grow in fiscal Q4,” stated Chuck Swoboda, Cree Chairman and CEO.
“These results once again demonstrate our ability to deliver strong operating results while continuing to make longer term investments in new technology and building the Cree brand.”
Q3 2014 Financial Metrics
(in thousands, except per share amounts and percentages)
 
Third Quarter
 
 
 
 
2014
2013
 
Change
 
(unaudited)
 
(unaudited)
 
 
 
 
Revenue, net
$
405,259
 
 
$
348,934
 
 
$
56,325
 
 
16
%
GAAP
 
 
 
 
 
 
 
Gross margin
37.0
%
 
38.1
%
 
 
 
 
Operating margin
7.5
%
 
6.7
%
 
 
 
 
Net income
$
28,164
 
 
$
22,157
 
 
$
6,007
 
 
27
%
Earnings per diluted share
$
0.23
 
 
$
0.19
 
 
$
0.04
 
 
21
%
Non-GAAP
 
 
 
 
 
 
 
Gross margin
37.8
%
 
38.8
%
 
 
 
 
Operating margin
13.2
%
 
12.9
%
 
 
 
 
Net income
$
47,710
 
 
$
40,761
 
 
$
6,949
 
 
17
%
Earnings per diluted share
$
0.39
 
 
$
0.34
 
 
$
0.05
 
 
15
%
  • Gross margin decreased 50 basis points from 2Q14 to 37.0 percent on a GAAP basis and decreased 40 basis points to 37.8 percent on a non-GAAP basis.
  • Cash and investments increased by US $39.0 million from 2Q14 to US $1.2 billion.
  • Accounts receivable (net) increased by US $8.8 million from 2Q14 to US $222.3 million, with days sales outstanding of 49.
  • Inventory increased US $16.8 million from 2Q14 to US $251.2 million, with days of inventory of 89 days.
Business Outlook:
For its 4Q14 ending June 29, 2014, Cree targets revenue in a range of US $430 million to US $460 million with GAAP gross margin targeted to be 36.8 percent +/- and non-GAAP gross margin targeted to be 37.5 percent +/-. Our GAAP gross margin targets include stock-based compensation expense of approximately US $3.2 million, while our non-GAAP targets do not. Operating expenses are targeted to increase US $7 million from 3Q14. The tax rate is targeted at 21.0 percent +/- for the 4Q14. GAAP net income is targeted at US $28.2 million to US $36.3 million, or US $0.23 to US $0.29 per diluted share. Non-GAAP net income is targeted in a range of US $46.5 million to US $54.6 million, or US $0.38 to US $0.44 per diluted share. The GAAP and non-GAAP net income per diluted share targets are based on an estimated 124.0 million diluted weighted average shares. Targeted non-GAAP earnings exclude expenses related to the amortization of acquired intangibles and stock-based compensation expense of US $0.15 per diluted share.
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