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OK, since Sly and Ring both beat me to the good news, let me see if I can add something to this discussion.

Back up the truck!

Q4 Numbers:

EPS $.30 versus estimates of $.27 and whisper number (whispernumber.com) of $.28.

Revenues $33,359,000, up 13% sequentially and 82% over Q4 FY1999

Net Income $11,357,000, up 26% sequentially and 183% over Q4 FY 1999

Gross Margins were 54.54%, up from 53.5% in Q3

Operating Margins were 38.6%, up from 31.8% in Q3

Net Margins were 34.04%, up from 30.35% in Q3

FY 2000 Numbers:

EPS $.87, up 112% over FYE 1999

Revenues $108,562,000, up 74% over FYE 1999

Net Income $30,520,000, up 145% over FYE 1999

Gross Margins were 51.75%, up from 45.25% for FYE 1999

Operating Margins were 33.85%, up from 25.86% for FYE 1999

Net Margins were 28.11%, up from 19.93% for FYE 1999

SG&A expenses were 10.2% for FY 2000, just about even with FY 1999's 10.37%. (Either Neal or Cindy said that SG&A would continue to run at about the same percentage of revenue as in the past). So between 9.8% and 11.5% is a pretty good range to use.

Other notes from the 45 minute conference call:

Days Sales Outstanding (DSO) was 33 days, the lowest it has been for CREE (ever?) versus an industry average of 55 days.

Inventory is up, but that results not from a decrease in demand, but from a dsire to be able to sell some products on "spot" orders which have higher margins. (I really wished I had asked a question here, since backlog is so great, why aren't they using these products to meet backlog, but I didn't)

Neal said that Backlog and demand are still strong, with $77.6 million in backlog

Blue Laser is meeting with great success with internal CW (constant wavelength?) records being set weekly. They are having success with the Blue Laser for optical data storage (I think this is what he said, but I was scribbling furiously about 15 seconds behind the call). Look for qualified product launch at FYE 2002

RF Microdevices - test stuff they sent out in June is receiving favorable response and comment from beta group and CREE has a small backlog of qualification orders

LED market continues to grow with new uses always being developed. ASP declined 47% in FY 2000 and expect another 25% decline in FY 2001. Believe that this will be more than offset by cost reductions of greater than 50%

Transition to 3" wafer is slower than anticipated (due to epitaxial capabiliities?), but all FY 2001 outlooks and cost reductions are based on 2" wafers and not 3" wafers.

When the 3" comes on line, it will like be like a light switch, turn it on and the demand will be there. Then after the initial light switch effect, demand will continue to grow. I gather there is suppressed demand for a 3" wafer just waiting to be filled.

And the greatest part of the call

CFO Cindy Merrell estimates EPS will grow 55% - 60% in FYE 2001.

Can you say EPS of $1.34 - $1.39! I can!!!!

As I said, back up the truck!

I will try and listen to the replay and pick up somethings I missed. Sorry this is so jumbled, but I wanted to get it out to you as quickly as possible.

ZaksDad
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<<Inventory is up, but that results not from a decrease in demand, but from a dsire to be able to sell some products on "spot" orders which have higher margins. (I really wished I had asked a question here, since backlog is so great, why aren't they using these products to meet backlog, but I didn't)>>


My take on that part of the call was as you said-

Better margins on "spot" orders.

If they have a contract commitment to provide x units, at y price, at a certain rate, over a period of time, why provide them early, if they can be sold elsewhere for more? They don't. They sell them on "spot" orders.

You did a great job of taking notes and paying attention. I only tried to understand it, not report it. My hat is off to you.

It was a VERY positive call. Many congratulations. Quite relaxed. No tight jaws. We should recover from recent nervousness well.

If there is fear of a decline in cell phone sales, we should not be hurt since those are the backlog sales. As the cell phone features we provide, migrate to lower cost units, demand for LEDs will increase, not decrease. Since these features roll in about six months, we will be right on time with additional capacity.

Again great report.

Make your plans for the meeting in October?
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All the numbers are great for the quarter and last year, BUT... The historical growth rates have been 100% per year. If the 2001 EPS growth drops down to 55-60%, then the Projected earnings and projected value suffer.

TTM EPS .87 * (.87/.41)*100% = 184 $

last Qtr .3*4 *(.87/.41)*100% = 254 $

The projected values says buy buy buy.

But if growth is only 55 to 60 %

.87 * 55 = 47.85

.3*4 * 60 = 72

or using 2001 est

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One more clarification to my expectations.

It seems that the blue laser has some compatibility issues with much of the current fiber optic capacity. A wave length thing. Any way, it really didn't seem to be a huge issue to anyone.

If I missed something here, help me out.
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I think that the reason it wasn't an issue, is that no one has promised that the new LED will be used as a fiber optic wavelength source. The main application I've heard about is to pack more info onto a CD and other optical storage uses (correct me if my info is incomplete). The analyst asking the question was just fishing for other possible applications for the blue laser.

I listened to the call and was impressed again. The forward projections of 60% growth in the coming year are no doubt conservative as they have always been in the past. Neal and company seem very good at managing expectations, always keeping a couple of cards up their sleeves.

After today, Cree is my second biggest holding (only behind ORCL). Now if only ELON would ever start to take off...

Synchros
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"Days Sales Outstanding (DSO) was 33 days, the lowest it has been for CREE (ever?) versus an industry average of 55 days."

I'm not sure how to read this, calculating backwards that means CREE has ~$12 in A/R compared to $24.6 a quarter ago (~50% decrease in a single quarter). They may have netted out the interest receivables from trade receivables though, that could do it.

Marv

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The forward projections of 60% growth in the coming year are no doubt conservative

I guess that my enthusiasm for the 55%-60% statement grew, not from the percentages themselves, but from the fact that CREE was so comfortable making them. Maybe they were trying to guide expectations lower bcause they can't continue to do 100%+ years any more, but I had never heard it, in the year that I have followed CREE, to make any such forward looking statement.

No matter whether it is conservative, or slower growth than in the past, that piece of information is something I never had before to factor into my valuation model.

I am happy for the guidance.

ZaksDad
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ScubaSimpleton writes:
It seems that the blue laser has some compatibility issues with much of the current fiber optic capacity. A wave length thing. Any way, it really didn't seem to be a huge issue to anyone.


That's true. Nobody in the know has ever insinuated that blue or UV lasers are better for fiber transmission (they're not). Lower wavelengths are better for that. Optical storage, on the other hand, is an application hungering for shorter-wavelength lasers in the blue and UV range.
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