Cree Reports Financial Results for the Third Quarter of Fiscal Year 2012

DURHAM, N.C. -- Cree, Inc. (Nasdaq: CREE), a market leader in LED lighting, today announced revenue of $284.8 million for its third quarter of fiscal 2012, ended March 25, 2012. This represents a 30% increase compared to revenue of $219.2 million reported for the third quarter of fiscal 2011 and a 6% decrease compared to the second quarter of fiscal 2012. GAAP net income for the third quarter was $9.5 million, or $0.08 per diluted share, a decrease of 50% year-over-year compared to GAAP net income of $18.9 million, or $0.17 per diluted share, for the third quarter of fiscal 2011. On a non-GAAP basis, net income for the third quarter of fiscal 2012 was $23.3 million, or $0.20 per diluted share, a decrease of 22% year-over-year compared to non-GAAP net income for the third quarter of fiscal 2011 of $30.1 million, or $0.27 per diluted share.

"Our third quarter earnings per share were in the middle of our target range as strong factory execution and a tax benefit offset the impact of revenue being slightly below our target range," stated Chuck Swoboda, Cree Chairman and CEO. "Overall company backlog is stronger than it was at this point last quarter, with Lighting, LEDs and Power and RF all tracking ahead of Q2, although order visibility is still limited. Our focus remains on driving adoption through innovation and we believe we are well positioned to continue leading the transition to LED lighting and drive growth in our business."

Q3 2012 Financial Metrics

(in thousands except per share amounts and percentages)

Third Quarter

2012

2011

Change

(unaudited)

(unaudited)

Net revenue

$

284,801

$

219,168

$

65,633

30

%

GAAP

Gross Margin

34.9

%

41.7

%

Operating Margin

1.8

%

9.0

%

Net Income

$

9,489

$

18,881

$

(9,392

)

(50

)%

Earnings per diluted share

$

0.08

$

0.17

$

(0.09

)

(53

)%

Non-GAAP

Gross Margin

35.6

%

42.4

%

Operating Margin

8.6

%

14.9

%

Net Income

$

23,322

$

30,064

$

(6,742

)

(22

)%

Earnings per diluted share

$

0.20

$

0.27

$

(0.07

)

(26

)%

  • Gross margin increased 30 basis points from Q2 of fiscal 2012 to 34.9% on a GAAP basis and 35.6% on a non-GAAP basis.
  • Cash and investments increased $22.8 million from Q2 of fiscal 2012 to $710.1 million.
  • Accounts receivable (net) increased $11.8 million from Q2 of fiscal 2012 to $168.2 million, with days sales outstanding of 53.
  • Inventory increased $9.5 million from Q2 of fiscal 2012 to $196.8 million and represents 96 days of inventory.

Recent Business Highlights:

  • Released our new XSP Series LED Street Lights, which are redefining the economics of LED street lights by more than doubling the lumens per dollar and taking payback to the next level;
  • Introduced the XLamp® XT-E LED, the second product based on our new SC3 Technology Platform, which doubles the lumens per dollar of lighting-class LEDs;
  • Expanded our CR Troffer Series to address more applications and eliminate the use of antiquated fluorescent technology in new or retrofit commercial and industrial settings;
  • Set a new R&D performance record with a prototype LED, which produced 254 lumens per watt;
  • Released our new AerobladesTM outdoor lighting product line, which combines cutting-edge technology with high design.

Business Outlook:

For its fourth quarter of fiscal 2012 ending June 24, 2012, Cree targets revenue in a range of $295 million to $315 million with GAAP gross margin targeted to be 35% +/- and non-GAAP gross margin targeted to be 36% +/-. Our GAAP gross margin targets include stock-based compensation expense of approximately $2.5 million, while our non-GAAP targets do not. Operating expenses are targeted to increase by +/- $5 million on a GAAP basis and +/- $4 million on a non-GAAP basis. The tax rate is targeted at 13.0% for fiscal Q4. GAAP net income is targeted at $5 million to $12 million, or $0.04 to $0.10 per diluted share. Non-