Cree, Inc. reports 233% EBITDA decline in 2018 and 20.7 pp EBITDA Margin decline from 9.0% to -11.7%
08/14/2018 • About Cree, Inc. (
$CREE) • By InTwits
Cree, Inc. reported FY2018 financial results today. Overall the company's long term financial model is characterised by the following facts:
- EBITDA Margin is quite volatile: -11.7% in FY2018, 9.0% in FY2017, 9.2% in FY2016, 6.1% in FY2015, 18.0% in FY2014
- Cree, Inc. spends a lot for Stock Based Compensation (SBC): average SBC/Revenue for FY2014-FY2018 is 3.2%. Average EBITDA Margin for the same period was 6.4%
- Cree, Inc. has medium CAPEX intensity: 5 year average CAPEX/Revenue was 9.8%. At the same time it's a lot of higher than industry average of 7.6%.
- CAPEX is quite volatile: $63m in 2018, $31m in 2017, $19m in 2016, $12m in 2015, $13m in 2014
- The company has unprofitable business model: ROIC is -13.5%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
Cree, Inc.'s Revenue increased slightly on 1.4%. Revenue growth showed acceleration in FY18Q4 - it increased 14.1% YoY. During the last 5 years Revenue growth bottomed in FY2017 at -8.9%. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased slightly on 1.6 pp from 20.0% to 21.7% in 2018.
Gross Margin decreased on 2.2 pp from 29.5% to 27.3% in FY2018. SG&A as a % of Revenue showed almost no change in FY2018. SG&A as a % of Revenue grew at 0.64 pp per annum in FY2014-FY2018. Stock Based Compensation (SBC) as a % of Revenue showed almost no change in FY2018. During FY2014-FY2018 SBC as a % of Revenue topped in FY2015 at 3.9% and was declining since that time.
Net Income margin dropped on 12.1 pp from -6.7% to -18.7% in FY2018. Net Income margin followed a declining trend at -5.5 pp per annum in the last 5 years.
Investments (CAPEX, working capital and M&A)
The company's CAPEX/Revenue was 12.4% in FY2018. Cree, Inc. showed almost no change in CAPEX/Revenue from FY2015 to FY2018. It's average CAPEX/Revenue for the last three years was 8.6%.
Accounts receivable as a % of Revenue decreased on 4.3 pp from 10.1% to 5.8% in FY2018. Inventories as a % of Revenue decreased on 9.2 pp from 19.3% to 10.2% in FY2018. Accounts payable as a % of Revenue decreased on 3.1 pp from 12.8% to 9.7% in FY2018.
Cree, Inc. has spent
$429m on M&A in FY2018 which accounts for 28.7% of revenue.
Return on investment
The company operates at negative ROIC (-13.5%) and ROE (-13.1%). ROIC dropped on 12.7 pp from -0.74% to -13.5% in FY2018. ROE decreased on 8.8 pp from -4.3% to -13.1% in FY2018. ROE declined at -3.7 pp per annum in FY2014-FY2018.
Leverage (Debt)
Debt level is -0.5x Net Debt / EBITDA and Debt / EBITDA. Net Debt / EBITDA decreased on 0.1x from 0.1x to in FY2018. Debt jumped on 101% while cash dropped on 10.3%.
The company has no short term refinancing risk: short term debt is zero.
Management team
Cree, Inc.'s CEO Gregg A Lowe is a founder and has spent 1 year with the company. CEO total compensation was
$16,171,562 in FY2018 which included
$909,532 salary.
Insider ownership is 0.72%. Insider ownership didn't change in 2018.
The company has 6,796 employees. The number of employees surged on 12.5%. Average revenue per employee in FY2018 was
$219,788 and it decreased on 9.9%.
Financial and operational results
FY ended 06/24/2018
Cree, Inc. ($CREE) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 1,648 | 1,633 | 1,617 | 1,473 | 1,494 | 1.4% |
| Gross Profit | 619 | 474 | 487 | 435 | 408 | -6.2% |
| SG&A | 268 | 291 | 283 | 277 | 283 | 2.3% |
| EBITDA | 297 | 100 | 149 | 132 | -175 | -232.9% |
| EBIT | 134 | -74 | -10 | -19 | -329 | |
| Tax | 23 | -19 | -2 | 93 | -38 | -140.2% |
| Net Income | 124 | -65 | -22 | -98 | -280 | |
| Stock Based Compensation | 42 | 63 | 59 | 48 | 43 | -9.5% |
Balance Sheet
|
|---|
| Cash | 287 | 140 | 166 | 133 | 119 | -10.3% |
| Accounts Receivable | 225 | 186 | 166 | 148 | 86 | -41.8% |
| Inventory | 285 | 281 | 304 | 284 | 152 | -46.7% |
| Accounts Payable | 202 | 163 | 132 | 133 | 105 | -20.9% |
| Short Term Debt | 0 | 0 | 0 | 0 | 0 | |
| Long Term Debt | 0 | 200 | 160 | 145 | 292 | 101.4% |
Cash flow
|
|---|
| Capex | 179 | 206 | 120 | 87 | 186 | 113.6% |
| Acquisitions | | | 13 | | 429 | |
Ratios
|
|---|
| Revenue growth | 18.9% | -0.9% | -1.0% | -8.9% | 1.4% | |
| EBITDA growth | 19.0% | -66.4% | 49.0% | -11.3% | -232.9% | |
|
|---|
| Gross Margin | 37.6% | 29.0% | 30.1% | 29.5% | 27.3% | -2.2% |
| EBITDA Margin | 18.0% | 6.1% | 9.2% | 9.0% | -11.7% | -20.7% |
| EBIT Margin | 8.1% | -4.5% | -0.6% | -1.3% | -22.0% | -20.8% |
| SG&A, % of revenue | 16.3% | 17.8% | 17.5% | 18.8% | 19.0% | 0.2% |
| SBC, % of revenue | 2.6% | 3.9% | 3.6% | 3.2% | 2.9% | -0.3% |
| Net Income Margin | 7.5% | -4.0% | -1.3% | -6.7% | -18.7% | -12.1% |
| CAPEX, % of revenue | 10.8% | 12.6% | 7.4% | 5.9% | 12.4% | 6.5% |
|
|---|
| ROIC | 4.6% | -2.6% | -0.4% | -0.7% | -13.5% | -12.7% |
| ROE | 4.3% | -2.4% | -0.9% | -4.3% | -13.1% | -8.8% |
| Net Debt/EBITDA | -1.0x | 0.6x | -0.0x | 0.1x | |
People
|
|---|
| Insider ownership | 0.7% | 0.7% | 0.7% | 0.7% | 0.7% | 0.0% |
| Employees | 7,130 | 6,387 | 6,237 | 6,039 | 6,796 | 12.5% |
| Revenue/Employee, th. $ | 231 | 256 | 259 | 244 | 220 | -9.9% |
Cree, Inc. ($CREE) key quoterly financial indicators
| mln. $ | FY18Q1 | FY18Q2 | FY18Q3 | FY18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 360 | 368 | 225 | 409 | | -2.9% | -8.3% | -34.1% | 14.1% |
| EBITDA | 23 | 11 | 33 | 20 | | -24.2% | -76.3% | 6.7% | -16.3% |
| Net Income | -20 | 14 | -241 | -33 | | -3,608.3% | 120.7% | | |
Balance Sheet
|
|---|
| Cash | 152 | 170 | 101 | 119 | | 18.9% | 23.8% | -13.6% | -10.3% |
| Short Term Debt | 0 | 0 | 0 | 0 | | | | | |
| Long Term Debt | 141 | 124 | 316 | 292 | | -24.6% | -27.1% | 106.5% | 101.4% |
Ratios
|
|---|
| Gross Margin | 27.8% | 25.2% | 33.2% | 28.2% | | -1.8% | -9.9% | 8.0% | 0.9% |
| EBITDA Margin | 6.5% | 3.0% | 14.7% | 4.9% | | -1.8% | -8.5% | 5.6% | -1.8% |
| Net Income Margin | -5.5% | 3.7% | -106.8% | -8.1% | | -5.7% | 2.2% | -77.8% | -6.5% |
Peers in Semiconductors
Below we provide Cree, Inc. benchmarking against other companies in Semiconductors industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| NanoFlex Power Corp ($OPVS) | | | | 72.5% | 354.8% |
| MoSys, Inc. ($MOSY) | | -18.4% | 37.2% | 46.8% | 87.7% |
| SMART Global Holdings, Inc. ($SGH) | | | -16.9% | 42.5% | 69.3% |
| Micron Technology, Inc. ($MU) | | -1.0% | -23.4% | 63.9% | 49.5% |
| Adesto Technologies Corporation ($IOTS) | | 4.3% | 1.6% | 27.6% | 48.8% |
| |
|---|
| Median (67 companies) | 54.6% | 9.7% | 5.2% | 11.0% | 5.0% |
|---|
| Cree, Inc. ($CREE) | | -0.9% | -1.0% | -8.9% | 1.4% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| CEVA, Inc. ($CEVA) | 90.2% | 90.9% | 91.6% | 92.1% | 89.8% |
| NVE Corporation ($NVEC) | 77.9% | 80.3% | 76.1% | 78.5% | 79.0% |
| Rambus, Inc. ($RMBS) | 85.9% | 84.7% | 80.1% | 79.9% | 76.8% |
| Universal Display Corporation ($OLED) | 76.0% | 64.2% | 83.9% | 80.8% | 75.5% |
| Intermolecular, Inc. ($IMI) | 48.3% | 57.4% | 66.5% | 67.5% | 70.3% |
| |
|---|
| Median (65 companies) | 46.4% | 47.7% | 48.0% | 49.1% | 51.0% |
|---|
| Cree, Inc. ($CREE) | 37.6% | 29.0% | 30.1% | 29.5% | 27.3% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| NVE Corporation ($NVEC) | 58.8% | 66.0% | 61.8% | 65.6% | 65.1% |
| Micron Technology, Inc. ($MU) | 31.7% | 35.0% | 25.4% | 47.9% | 65.0% |
| NXP Semiconductors N.V. ($NXPI) | 25.7% | 41.5% | 21.6% | 46.2% | 49.9% |
| Texas Instruments Incorporated ($TXN) | 39.7% | 42.0% | 43.5% | 46.7% | 48.6% |
| Intel Corp ($INTC) | 42.8% | 41.0% | 35.2% | 41.7% | 45.7% |
| |
|---|
| Median (66 companies) | 9.6% | 11.5% | 9.2% | 10.7% | 10.0% |
|---|
| Cree, Inc. ($CREE) | 18.0% | 6.1% | 9.2% | 9.0% | -11.7% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Alpha and Omega Semiconductor Limited ($AOSL) | 3.0% | 6.6% | 6.5% | 12.2% | 42.2% |
| Renesola Ltd. ($SOL) | 3.5% | 0.0% | 0.0% | 78.0% | 41.7% |
| First Solar, Inc. ($FSLR) | 7.6% | 4.0% | 7.9% | 17.5% | 33.0% |
| Sigma Designs Inc ($SIGM) | 11.0% | 6.5% | 6.2% | 14.1% | 29.3% |
| Micron Technology, Inc. ($MU) | 19.0% | 24.8% | 46.9% | 23.3% | 29.2% |
| |
|---|
| Median (66 companies) | 3.6% | 4.0% | 3.6% | 4.7% | 4.4% |
|---|
| Cree, Inc. ($CREE) | 10.8% | 12.6% | 7.4% | 5.9% | 12.4% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| SMART Global Holdings, Inc. ($SGH) | | | 2.5% | 21.5% | 51.7% |
| Texas Instruments Incorporated ($TXN) | 25.1% | 29.8% | 34.9% | 43.1% | 47.5% |
| Micron Technology, Inc. ($MU) | 18.8% | 15.8% | 0.8% | 21.5% | 42.9% |
| Applied Materials Inc ($AMAT) | 15.8% | 15.2% | 19.0% | 31.2% | 36.4% |
| NVIDIA Corporation ($NVDA) | 9.2% | 13.3% | 13.1% | 27.3% | 35.3% |
| |
|---|
| Median (73 companies) | 5.7% | 3.8% | 1.7% | 3.2% | 5.2% |
|---|
| Cree, Inc. ($CREE) | 4.6% | -2.6% | -0.4% | -0.7% | -13.5% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| MACOM Technology Solutions Holdings, Inc. ($MTSI) | 25.4x | 3.3x | 3.0x | 7.2x | 98.6x |
| Inphi Corporation ($IPHI) | | -6.4x | 4.5x | 33.7x | 32.2x |
| JinkoSolar Holding Company Limited ($JKS) | 4.2x | 3.3x | 4.1x | 11.0x | 8.2x |
| Lattice Semiconductor Corporation ($LSCC) | -1.8x | | 6.5x | 19.0x | 3.9x |
| Renesola Ltd. ($SOL) | 7.0x | 35.0x | 123.6x | 2.3x | 3.3x |
| |
|---|
| Median (46 companies) | -0.5x | -0.3x | 0.4x | 0.4x | 0.3x |
|---|
