Semileds (NASDAQ:LEDS)

On February 8, 2012, the Company received a notice from The NASDAQ Stock Market acknowledging that the Company no longer complies with the audit committee requirements as set forth in Listing Rule 5605 and confirming the Company’s opportunity to regain compliance within the cure period provided in Listing Rule 5605(c)(4).

First Quarter 2012 Results

Revenue for the first quarter of fiscal 2012 was $6.7 million, a 48% decrease compared to $13.0 million in the first quarter of fiscal 2011.

On a non-GAAP basis, net loss attributable to SemiLEDs stockholders for the first quarter of fiscal 2012 was $7.1 million, or a loss of $0.26 per diluted share, compared to non-GAAP net income attributable to SemiLEDs stockholders of $3.9 million, or $0.12 per diluted share, for the first quarter of fiscal 2011.

Financial Outlook 

For its second quarter of fiscal 2012 ending February 29, 2012, SemiLEDs expects revenue in a range of $7 million to $8 million with GAAP net loss attributable to SemiLEDs stockholders of $7.6 million to $7.1 million, or a loss of $0.28 to $0.26 per diluted share, based on an estimated 27.4 million diluted weighted average shares. GAAP gross margin is expected to be negative.

Fourth Quarter 2011 Results

• Revenue for the fourth quarter of fiscal 2011 was $5.3 million, a 54% decrease from $11.5 million in the fourth quarter of fiscal 2010.
• On a non-GAAP basis, net loss attributable to SemiLEDs stockholders for the fiscal year 2011 was $14.3 million, or a loss of $0.79 per diluted share, compared to non-GAAP net income attributable to SemiLEDs stockholders of $11.0 million, or $0.25 per diluted share, for the fiscal year 2010.

“As expected, the market remained challenging in Asia for LED chips and components. The China market is not improving due to inflationary and monetary issues together with depressed economic conditions around the world. We continue to see pricing pressure due to the weak demand in the China outdoor street lighting market, together with the overcapacity of backlight that has spilled over to the general lighting market. The ASP erosion is not as extreme as in prior quarters and prices have stabilized somewhat,” said Trung Doan, Chairman and CEO of SemiLEDs. “With so much uncertainty, we remain cautious in our near term outlook but continue to believe in the industry’s long term market opportunities. When the Chinese government releases funds for the five year plan, we expect to benefit given that we are one of the few companies that meets the program’s requirements and that we have local presence with our JV, China SemiLEDs,” continued Doan.

Financial Outlook

For its first quarter of fiscal 2012 ending November 30, 2011, SemiLEDs expects revenue in a range of $6.0 million to $7.0 million with GAAP net loss attributable to SemiLEDs stockholders of $8.5 million to $8.0 million, or a loss of $0.31 to $0.29 per diluted share, based on an estimated 27.3 million diluted weighted average shares. GAAP gross margin is expected to be negative.

We have incurred significant losses since inception, including net losses of $0.8 million and $3.7 million during the years ended August 31, 2008 and 2009, respectively. For the year ended August 31, 2010 and the nine months ended May 31, 2011, we generated net income of $10.8 million and net loss of $2.5 million, respectively. We believe that, based on our current level of operations and spending needs, the net proceeds from our initial public offering, together with our existing liquidity sources and anticipated funds from operations, will satisfy our cash requirements for at least the next 12 months. However, if we are not able to continue to generate positive cash flows from operations, we may need to consider alternative financing sources and seek additional funds through public or private equity financings or from other sources to support our working capital requirements or for other purposes. There can be no assurance that additional financing will be available to us or that, if available, such financing will be available on terms favorable to us.

• Revenue for the third quarter of fiscal 2011 was $5.6 million, a 43% decrease compared to $9.9 million in the third quarter of fiscal 2010.

• GAAP net loss for the third quarter of fiscal 2011 was $5.1 million, or a loss of $0.19 per diluted share, compared to GAAP net income of $3.2 million, or $0.09 per diluted share, for the third quarter of fiscal 2010. The Company recorded a foreign currency transaction loss of $0.2 million in the quarter.

• On a non-GAAP basis, net loss for the third quarter of fiscal 2011 was $4.3 million, or a loss of $0.16 per diluted share, compared to non-GAAP net income of $3.3 million, or $0.09 per diluted share, for the third quarter of fiscal 2010.

• GAAP gross margin for the third quarter of fiscal 2011 was 9%, compared with 51% in the third quarter of fiscal 2010.

• Operating margin for the third quarter of fiscal 2011 was negative 70%, compared with 36% in the third quarter of fiscal 2010. Margins were negatively impacted by a charge of $1.1 million for the write-downs of inventory.

• The Company's cash and cash equivalents was $94.4 million at the end of the third quarter, compared to the prior quarter ending balance of $102.6 million. Cash used in operations was $3.3 million in the third quarter of fiscal 2011.

“Our fiscal third quarter was challenging as pricing pressure and end demand weakness continued from the fiscal second quarter. However, we are seeing pricing stabilize,” said Trung Doan, Chairman and CEO of SemiLEDs. “We remain focused on improving our cost structure by accelerating our efforts to transition to four inch wafer production at our Taiwan facility, continuing to ramp four inch production volume at China SemiLEDs, as well as supporting our customers to maximize the benefits of our metal vertical chip structures to reduce the total cost of ownership.”

Financial Outlook

• For its fourth quarter of fiscal 2011 ending August 31, 2011, SemiLEDs expects
• revenue in a range of $5.5 million to $6.5 million
• GAAP net loss of $6.7 million to $6.4 million
• loss of $0.25 to $0.23 per diluted share, based on an estimated 27.3 million diluted weighted average shares.
• GAAP gross margin is expected to be negative.

On June 16, 2011, SemiLEDs Optoelectronics Co., Ltd. (“Taiwan SemiLEDs”), a wholly-owned subsidiary of SemiLEDs Corporation (the “Company”), renewed a loan agreement with E. Sun Bank (the “Lender”) that had expired on March 18, 2011. The renewed loan agreement (the “Comprehensive Loan Agreement”) provides for the following three facilities: (i) an unsecured revolving credit facility that permits Taiwan SemiLEDs to borrow loans from time to time in an aggregate principal amount of up to NT$100,000,000 (approximately US$3.5 million at the exchange rate of NT$28.82 to US$1.00) (the “Line of Credit”) for working capital purposes; (ii) the issuance of overseas letters of credit of up to an aggregate of US$6.5 million (the “Overseas Letters of Credit”); and (iii) financing of up to US$6.5 million in the aggregate for international transactions using the documents against acceptance (D/A), documents against payment (D/P) or open account (O/A) payment methods (the “International Financing”). Under the Comprehensive Loan Agreement, the total amount drawn down by Taiwan SemiLEDs from the three facilities may not exceed NT$200,000,000 (approximately US$7.0 million at the exchange rate of NT$28.82 to US$1.00) in the aggregate. The term of the Comprehensive Loan Agreement is from May 19, 2011 to May 19, 2012.

 

Under the Line of Credit, the term of each borrowing must not exceed 180 days and the interest rate on such borrowing is to be calculated on a variable basis based on the market interest rate for commercial paper of the Lender recorded on the date of each respective loan drawdown application, plus an annual rate of 0.75%.

 

Under the Overseas Letters of Credit, the application fee is 0.075% of the draft or advance payment under each respective letter of credit but in no event less than NT$400. The term under each respective letter of credit must not exceed 270 days. The interest rate for a draft or advance payment is to be calculated on a variable basis based on: (i) the fixed one-month deposit rate index of the Lender plus an annual rate of 0.61% in the event that Taiwan SemiLEDs applies for a short-term loan in New Taiwan Dollars to offset the borrowings under each overseas letter of credit. The term for such short-term loan must not exceed 180 days; or (ii) the SIBOR rate (or the LIBOR rate if the draft or advance payment is denominated in currencies other than U.S. dollars) plus an annual rate of 0.7% divided by 0.946 for U.S. dollar loans. The term for such short-term loan must not exceed 180 days.

 

Under the International Financing, the financing period must not exceed 180 days and the interest that is payable is to be calculated on a variable basis based on: (i) the SIBOR rate (or the LIBOR rate if the financing arrangement is denominated in currencies other than U.S. dollars) plus an annual rate 0.7% divided by 0.946 for U.S. dollar loans; or (ii) the fixed one-month deposit rate index of the Lender plus an annual rate of 0.61% in the event that Taiwan SemiLEDs applies for a short-term loan in New Taiwan Dollars to offset the borrowings under the International Financing.

 

The Comprehensive Loan Agreement expires if the first drawdown is not made on or prior to September 19, 2011. In addition, the properties that Taiwan SemiLEDs previously pledged to the Lender pursuant to existing loan agreements between Taiwan SemiLEDs and the Lender will not be released if there is any outstanding balance under either such existing loan agreements or the Comprehensive Loan Agreement.

HSINCHU, Taiwan--(BUSINESS WIRE)--SemiLEDs Corporation today announced its financial results for the second quarter of fiscal year 2011, ended February 28, 2011.

• Revenue for the second quarter of fiscal 2011 was $10.0 million, a 30% increase compared to $7.7 million in the second quarter of fiscal 2010.

"While we believe the long term market opportunity of LEDs has not changed, the quarter did not meet our expectations relative to revenue, EPS or gross margin due to the aggressive, competitive pricing environment and our decision to preserve our market share," said Trung Doan, Chairman and CEO of SemiLEDs. "Efforts to improve our gross margin include taking actions to improve our yield, transition to four inch wafers in our Taiwan facility, as well as ramping volume production of our new high brightness LED chip, I-Do, which delivers up to 135 lumens per watt, enabling us to provide our customers with a very cost effective lighting solution."

• GAAP net loss for the second quarter of fiscal 2011 was $1.2 million, or a loss of $0.05 per diluted share, compared to GAAP net income of $1.9 million, or $0.04 per diluted share, for the second quarter of fiscal 2010. The Company recorded a foreign currency transaction loss of $0.2 million in the quarter.
• On a non-GAAP basis, net loss for the second quarter of fiscal 2011 was $0.7 million, or a loss of $0.03 per diluted share, compared to non-GAAP net income of $1.9 million, or $0.04 per diluted share, for the second quarter of fiscal 2010.
• The Company's cash and cash equivalents was $102.6 million at the end of the second quarter, an increase over the prior quarter ending balance of $9.9 million. SemiLEDs completed an initial public offering in December 2010, generating net proceeds of $95.5 million, before deducting expenses of the offering of $3.4 million. Cash flow from operations was $1.7 million in the second quarter of fiscal 2011 compared to $1.6 million in the first quarter of fiscal 2011.

Financial Outlook

• For its third quarter of fiscal 2011 ending May 31, 2011, SemiLEDs expects revenue in a range of $6.0 million to $7.0 million with GAAP net loss of $2.6 million to $2.0 million, or a loss of $0.10 to $0.07 per diluted share, based on an estimated 27.3 million diluted weighted average shares. GAAP gross margin is expected to be in the range of 25% to 30%.

We believe that, based on our current level of operations and anticipated growth, the net proceeds from our initial public offering, together with our existing liquidity sources and anticipated funds from operations, will satisfy our cash requirements for at least the next 12 months.

• Our revenues increased by approximately 94.1% from $6.7 million during the three months ended November 30, 2009 to $13.0 million during the three months ended November 30, 2010. The $6.3 million increase in revenues reflects a $3.6 million increase in revenues attributable to sales of LED chips and a $2.3 million increase in revenues attributable to sales of LED components.
• Our gross profit increased from $1.8 million during the three months ended November 30, 2009 to $6.6 million during the three months ended November 30, 2010. Our gross margin percentage increased from 27.4% during the three months ended November 30, 2009 to 51.0% during the three months ended November 30, 2010, primarily due to a change in our product mix to higher margin products and improved capacity utilization as we operated at or near full capacity as a result of increased customer demand for our LED chips and LED components, and improved production yields.

SEMILEDS CORPORATION

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands, except for share and per share amounts)

 

		November 30, 2010			August 31, 2010
ASSETS
CURRENT ASSETS:
Cash and cash equivalents		$	9,871		$	13,520
Accounts receivable, net of allowance for doubtful accounts of $108 and $101		10,249			7,620
Accounts receivable from related parties		376			73
Inventory		13,295			11,362
Prepaid expenses and other current assets		3,456			2,269
Total current assets		37,247			34,844
Property, plant and equipment, net		41,833			31,929
Intangible assets, net		445			380
Investments in unconsolidated entities		15,785			15,961
Other assets		784			792
TOTAL ASSETS		$	96,094		$	83,906
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable		$	4,626		$	2,814
Accrued liabilities		5,248			4,355
Long-term debt, current portion		4,450			1,752
Total current liabilities		14,324			8,921
Long-term debt, net of current portion		3,787			3,786
Total liabilities		18,111			12,707
Commitments and contingencies (Note 6)
STOCKHOLDERS’ EQUITY:
Common stock, $0.0000056 par value—29,071,428 and 29,071,428 shares authorized; 7,486,570 and 7,427,905 shares issued and outstanding as of November 30, 2010 and August 31, 2010		—			—
Convertible preferred stock issuable in Series A to E, $0.0000056 par value—13,718,873 shares authorized; 13,718,852 shares issued and outstanding as of November 30, 2010 and August 31, 2010		—			—
Additional paid-in capital		70,664			70,510
Accumulated other comprehensive income (loss)		2,369			(441		)
Retained earnings		4,950			1,130
Total stockholders’ equity		77,983			71,199
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	96,094		$	83,906

 

See notes to condensed consolidated financial statements.

 

3

Hsinchu, Taiwan (January 13, 2011) — SemiLEDs Corporation today announced its financial results for the first quarter of fiscal year 2011, ended November 30, 2010.

 

• Revenue for the first quarter of fiscal 2011 was $13.0 million, a 94.1% increase compared to $6.7 million in the first quarter of fiscal 2010.
  
• GAAP net income for the first quarter of fiscal 2011 was $3.8 million, or $0.11 per diluted share, compared to GAAP net income of $0.4 million, or $0.00 per diluted share
  
• On a non-GAAP basis, net income for the first quarter of fiscal 2011 was $3.9 million, or $0.12 per diluted share, compared to non-GAAP net income of $0.4 million, or $0.00 per diluted share.

“We are very pleased with our recent accomplishments. We achieved excellent financial results in our first fiscal quarter of 2011 including record revenues and strong gross margins, and successfully completed our IPO in December 2010,” said Trung Doan, Chairman and CEO of SemiLEDs. “The LED lighting market remains strong particularly within Asia and we are well positioned to take advantage of this opportunity both through our Taiwan operations and China SemiLEDs.”

 

Financial Outlook

• For its second quarter of fiscal 2011 ending February 28, 2011, SemiLEDs expects:
  
• revenue in a range of $10.5 million to $12.5 million
  
• GAAP net income of $1.6 million to $2.6 million, or $0.06 to $0.09 per diluted share, based on an estimated 27.7 million diluted weighted average shares.
  
• GAAP gross margin is expected to be in the range of 44% to 46%.

 

Second quarter guidance reflects pricing pressure being experienced by the Company during the quarter.

 

 

SemiLEDs Corp plans initial public offering.

Company Snapshot:

Develops, manufactures and sells LED chips and LED components

Industry Snapshot:

• Light emitting diodes, or LEDs, are solid-state electronic components that emit light in a variety of brightness levels and colors. LEDs are increasingly used in a growing number of applications ranging from consumer electronics, such as backlighting for handsets, laptops and televisions, to general lighting, such as outdoor and indoor lighting.

• LEDs have recently begun penetrating the general lighting market, which includes applications for architectural, replacement lamp, retail display, commercial, industrial, outdoor area and residential uses. According to the Freedonia Group, an independent market research firm, the general lighting market, including sales of the light fixtures and bulbs, is estimated to be in excess of $100 billion.

• Currently LED lighting accounts for a small portion of the general lighting market. However, we believe that increased LED performance, reduced LED cost, growing awareness of the advantages of LEDs and government policies that discourage the use of some traditional lighting technologies and support LED adoption will continue to drive the adoption of LEDs in the general lighting market. LED lighting consists of the LED components, optics, heat sinks, power supplies and fixtures. An LED component is an LED chip that has been packaged. According to Strategies Unlimited, an independent market research firm, revenues attributable to LED components for general lighting applications were $665 million in 2009 and are estimated to grow to $4.3 billion by 2014, which represents a compound annual growth rate of 45%.

• However, to increase penetration of the general lighting market, LED chip and package manufacturers must continue to reduce the total cost of ownership of LED lighting. Total cost of ownership primarily includes: (i) the upfront cost of the LED device, which includes the LED chip costs and the cost of packaging the LED chips; (ii) the lifetime energy cost; and (iii) the frequency of replacement, which is in part a function of the product lifespan. Although energy cost and lifespan tend to favor LED lighting over some traditional lighting technologies, currently the upfront cost of an LED device is significantly higher than that of traditional lighting technologies.

Use Of proceeds:

• approximately $40.0 million to expand production capacity in Taiwan, including to (i) pay for the purchase of additional manufacturing space and build out existing space in Hsinchu, (ii) pay the purchase price for the three additional reactors that are expected to be delivered by the end of December 2010, and (iii) purchase additional manufacturing equipment, including reactors, as well as hire additional employees in the next 12 months;

• approximately $10.0 million to build a test line and for research and development expenses related to LED chip production based on 6" wafers;

• the balance of the net proceeds for general corporate purposes, including working capital and capital expenditures.

• We may also use a portion of the net proceeds to acquire or invest in complementary technologies, solutions or businesses or to obtain rights to such complementary technologies, solutions or businesses. There are no agreements, understandings or commitments with respect to any such acquisition or investment at this time. See "Use of Proceeds."

Underwriter:

• BofA Merrill Lynch
• Barclays Capital
• Jefferies & Company
• Canaccord Genuity
• Caris & Company, Inc.

Proposed offering price: $14.50 and $16.50

Post Merger Share Calculation:

•   7,723,346: Pre IPO shares
• 13,718,852: Shares from convertible preferred
•     594,760: Shares from class B conversion to class A 
•  5,250,000: Registered shares of Common Stock
•     787,500: Underwriter shares 

GeoTeam® best effort calculation of total post IPO shares assuming full conversions:  28,861,958

Financial Snapshot: August Year End

2010 vs 2009

• Revenues: 37.8 million vs. $11.6 million
• Adjusted Net Income: $1.8 million vs. loss  (Note that 2010 net income was reduced by about $9 million due to dividends and undistributed earnings on convertible preferred stock).

Pro Forma Valuation: using price of $15.50 and new share count

• Trailing EPS (ADS): $0.06 (or $0.37 after adding back dividend).
• Trailing P/E:  285.3 (or 41.9 after adding back preferred stock adjustments).