After five consecutive quarters of declining year-on-year sales, Cree LED turned a corner this week, as sales rose 11.5% for the first fiscal quarter ending Dec. 1.
The increase to $69.8 million from $62.5 million in the first quarter of fiscal 2023 upheld the outlook by parent firm Smart Global Holdings CEO Mark Adams last October that Cree’s performance should continue to recover.
Losses for Durham, N.C.–based Cree on a same-period basis had narrowed in the final two quarters of 2023, but had not managed to show a gain until SGH yesterday reported its corporate first- quarter results covering Cree and SGH’s two other and larger business divisions, which are both computing related and are not in the LED or lighting sectors.
“For the first quarter of 2024, LED revenue totaled $70 million or 25% of total SGH sales, making this the third consecutive quarter of top line improvement,” Adams said on a web call with analysts to discuss the results. “We expect to build on this momentum over the course of fiscal 2024.”
While second quarter sales are likely to decrease sequentially per the normal business cycle (which does not preclude a year-on-year gain), Adams expressed confidence in ongoing prospects at Cree, which makes LEDs for specialty lighting, video screens, gaming displays, outdoor illumination, horticultural, and architectural applications.
“While we believe that the gradual recovery in the overall LED market will continue, we are proactively managing our Cree LED operating expenses, in order to improve the profitability of this business line,” he said. “This prudence in our short-term operating approach does not diminish our focus on shaping the future of LEDs by continuing to invest in pioneering technologies for our customers with an emphasis on high-value specialty applications. As both a technology and brand leader with a robust portfolio of intellectual property, Cree is at the forefront of lighting innovation. We remain confident about the long-term performance of our LED business line given improvements in the macro environment.”
Cree’s share of revenue at Milpitas, Calif.–based SGH continued to creep up, hitting 25% compared to 21% last quarter and 17% before that. Some of that was attributable to SGH’s sell-off the SMART Brazil operations within its Memory Solutions division, which is a computer memory outfit.
SGH as a whole reported revenue for the quarter of $274.2 million, down 30% from the year-earlier first quarter total of $391.8 million. It also reported a GAAP loss of $11.8 million compared to a loss of $3.9 million in the same quarter a year ago. On a non-GAAP basis, it showed a quarterly profit of $12.5 million, down considerably from $37.4 million profit in the first quarter of 2023.
On a positive note, the company reported what it called “record” gross margins for the quarter of 30.2% on a GAAP basis and 33.3% on a non-GAAP basis. It does not not break down profits or margins by business sector.
SGH’s largest division is its Intelligent Platform Solutions group, which at $118.8 million (down from $211 million a year ago) comprised 43% of total revenue. Adams emphasizes IPS’ abilities in artificial intelligence (AI) with hardware, software, and services. It includes the Stratus and Penguin brands. Memory Solutions provides memory products. At $85.7 million (down 27.5%) it represented 31% of SGH revenue.
More than Cree and Memory Solutions, IPS defines SGH’s identity.
“We have made tremendous progress in our journey towards becoming a high-performance, high- availability enterprise solutions company,” Adams said in his opening remarks on the web call, before repeatedly emphasizing SGH’s enormous potential in providing AI capabilities across many sectors including defense, finance, social media, energy, healthcare, and retail.
MARK HALPER is a contributing editor for LEDs Magazine, and an energy, technology, and business journalist ([email protected]).
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