Manufacturers

Cree Shares Drop, Profit Outlook Falls Short of Targets

Cree Shares Drop, Profit Outlook Falls Short of Targets

DURHAM, N.C. — Cree, Inc. announced consolidated revenue of $321 million from continuing operations, and $50 million from discontinued operations, for a combined revenue of $371 million for its first quarter of fiscal 2017. This represents a 13% decrease compared to combined revenue of $425 million ($381 million from continuing operations and $44 million from discontinued operations) for the first quarter of fiscal 2016 and a 4% decrease compared to the fourth quarter of fiscal 2016. Combined GAAP net income for the first quarter of fiscal 2017 was $0.6 million, or $0.00 per diluted share, compared to combined GAAP net loss of $24 million, or $0.24 per diluted share, for the first quarter of fiscal 2016. On a non-GAAP basis, combined net income for the first quarter of fiscal 2017 was $15 million, or $0.15 per diluted share, compared to combined non-GAAP net income for the first quarter of fiscal 2016 of $21 million, or $0.21 per diluted share.

Revenue from continuing operations was $321 million in the first quarter of 2017 compared to revenue from continuing operations of $381 million in the first quarter of fiscal 2016. Loss from continuing operations for the first quarter of fiscal 2017 was $3 million, or $0.03 per diluted share, compared to loss from continuing operations of $26 million or $0.25 per diluted share for the first quarter of 2016. On a non-GAAP basis, income from continuing operations for the first quarter of fiscal 2017 was $9 million, or $0.09 per diluted share, compared to non-GAAP income from continuing operations of $15 million or $0.14 per diluted share, for the first quarter of 2016.

Revenue from discontinued operations was $50 million in the first quarter of 2017 compared to revenue from discontinued operations of $44 million in the first quarter of 2016. Income from discontinued operations, net of tax for the first quarter of fiscal 2017 was $3 million, or $0.03 per diluted share, compared to income from discontinued operations, net of tax of $1 million, or $0.01 per diluted share for the first quarter of 2016. On a non-GAAP basis, income from discontinued operations, net of tax for the first quarter of fiscal 2017 was $6 million, or $0.06 per diluted share, compared to non-GAAP income from discontinued operations, net of tax of $7 million, or $0.07 per diluted share, for the first quarter of 2016.

“We delivered solid results in fiscal Q1, as Lighting, LED Products and Wolfspeed all achieved revenue and gross margins that were in line with our targets,” stated Chuck Swoboda, Cree Chairman and CEO. “We continue to make progress with our transition to a more focused LED lighting company and building a more valuable business by bringing better light to our customers.”

Q1 2017 Financial Metrics

(in thousands, except per share amounts and percentages)

     
 
First Quarter
2017   2016 Change
(unaudited) (unaudited)
Revenue, net $321,329 $381,549 ($60,220 ) (16 )%
GAAP
Gross margin 26.9 % 28.1 %
Operating margin (3.2 )% (3.1 )%
Loss from continuing operations ($2,858 ) ($25,736 ) $22,878 89 %
Income from discontinued operations, net of tax $3,424 $1,247 $2,177 175 %
Net income (loss) $566 ($24,489 ) $25,055 102 %

Per share information:

Loss from continuing operations ($0.03 ) ($0.25 ) $0.22 88 %
Income from discontinued operations, net of tax $0.03 $0.01 $0.02 200 %
Earnings (loss) per diluted share $0.00 ($0.24 ) $0.24 100 %
Non-GAAP
Gross margin 27.7 % 28.8 %
Operating margin 2.8 % 4.9 %
Income from continuing operations $9,500 $14,744 ($5,244 ) (36 )%
Income from discontinued operations, net of tax $5,709 $6,590 ($881 ) (13 )%
Net income $15,209 $21,334 ($6,125 ) (29 )%

Per share information:

Income from continuing operations $0.09 $0.14 ($0.05 ) (36 )%
Income from discontinued operations, net of tax $0.06 $0.07 ($0.01 ) (14 )%
Earnings per diluted share $0.15 $0.21 ($0.06 ) (29 )%
  • Gross margin from continuing operations increased from 26.4% in Q4 of fiscal 2016 to 26.9% on a GAAP basis and decreased from 28.2% to 27.7% on a non-GAAP basis.
  • Consolidated cash and investments decreased by $16 million from Q4 of fiscal 2016 to $589 million.
  • Accounts receivable from continuing operations, net increased by $7 million from Q4 of fiscal 2016 to $146 million, with days sales outstanding of 41.
  • Inventory from continuing operations increased by $10 million from Q4 of fiscal 2016 to $292 million and represents 112 days of inventory.
  • Consolidated cash from operations was $18 million for Q1 of fiscal 2017.
  • We repurchased $36 million of shares during Q1 of fiscal 2017.

Recent Business Highlights:

  • Announced the appointment of Danny Castillo as President, Lighting, effective November 7, 2016
  • Released the following new Lighting products:
    • Essentia® by Cree LED Surface Wrap
    • A completely new portfolio of next generation LED bulbs
  • Launched the following new LED products:
    • XLamp® XP-L2 LED
    • XLamp XQ-E and XP-E High Efficiency (HE) Photo Red LEDs
    • QLS6A and QLSB6 LEDs

Business Outlook:

For its second quarter of fiscal 2017 ending December 25, 2016, Cree targets combined revenue, which includes both continued and discontinued operations, in a range of $360 million to $380 million. Combined GAAP net income is targeted at $10 million to $11 million, or $0.10 to $0.11 per diluted share. Combined non-GAAP net income is targeted in a range of $13 million to $19 million, or $0.13 to $0.19 per diluted share. Targeted combined non-GAAP earnings exclude $21 million of expenses related to stock-based compensation expense, the amortization or impairment of acquisition-related intangibles and transaction costs associated with the sale of the Wolfspeed business. The GAAP and non-GAAP targets do not include any estimated change in the fair value of Cree’s Lextar investment.

For continuing operations, revenue is targeted in a range of $310 million to $330 million. GAAP income from continuing operations is targeted at $2 million to $5 million, or $0.02 to $0.05 per diluted share. Non-GAAP income from continuing operations is targeted in a range of $4 million to $10 million, or $0.04 to $0.10 per diluted share. Targeted non-GAAP income from continuing operations exclude $18 million of expenses related to stock-based compensation expense and the amortization or impairment of acquisition-related intangibles. The GAAP and non-GAAP targets do not include any estimated change in the fair value of Cree’s Lextar investment.

For discontinued operations, revenue is targeted at +/- $50 million. GAAP income from discontinued operations, net of tax is targeted at +/- $7 million, or +/- $0.07 per diluted share. Non-GAAP income from discontinued operations, net of tax is targeted at +/- $9 million, or +/- $0.09 per diluted share. Targeted non-GAAP income from discontinued operations, net of tax excludes $3 million of expenses related to stock-based compensation expense, the amortization or impairment of acquisition-related intangibles and transaction costs associated with the sale of the Wolfspeed business.

 

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