“The hard work of the past year has started to pay off and while it’s still early, it feels like the business is turning the corner.”
Cree CEO Gregg Lowe made that statement during the company’s 3Q conference call on Tuesday, April 24.
In it’s earnings press release, Cree announced, “Revenue for the third quarter of fiscal 2018 was $356 million, which represents a 4% increase compared to revenue of $342 million for the third quarter of fiscal 2017. GAAP net loss for the third quarter of fiscal 2018 was $241 million, or $2.40 per diluted share, which includes impairment charges of $247.5 million attributable to Cree’s Lighting Products segment. This compares to a GAAP net loss of $99 million, or $1.02 per diluted share, for the third quarter of fiscal 2017. Non-GAAP net income for the third quarter of fiscal 2018 was $3.8 million, or $0.04 per diluted share, compared to non-GAAP net income for the third quarter of fiscal 2017 of $0.7 million, or $0.01 per diluted share.
“The third quarter revenues and gross margins were at the top end of our targeted range, and non-GAAP earnings per share exceeded the top end of our range, with each business showing progress,” Lowe added in the press release. “While we still have a lot of work to do and the progress won’t happen in a straight line, Q3 was a good first step and we are committed to executing our new strategic direction going forward.”
After the earnings report was announced, Cree stock jumped 7% in late trading.
While most of the earnings conference call focused on Wolfspeed, the acquisition of Infineon, and the silicon carbide business, there were a few questions related to Cree’s LED and lighting products.
“For LED Products we concluded from the strategic review process that the business could drive value through greater focus. We have an incredible brand, a great channel, and a tremendous amount of IP positioning us as a leader in high power technology,” Lowe said. “Going forward, we’re going to take those capabilities and focus them in areas like automotive lighting and application optimize solutions that are stickier and have an opportunity for us to create more value, enabling us to deliver modest revenue growth and gross margin expansion and resulting in great free cash flow generation.”
Lowe added that he is seeing more demand for Cree’s LED products. “Our target for gross margin is similar to last quarter, so kind of staying level with that, but (we are) getting good demand growth. And right now in the near term with what we’ve seen, backlog is in a good position as we started this quarter versus last quarter and the same period a year ago.”
In the lighting business, Cree is still working on its strategic plan for improvement. That includes improving relationships with Cree’s channel partners. “Moving on to Lighting, the single objective coming out of the strategic review process was to fix the business,” Lowe announced. “We’ve made significant changes to our design and product release methodologies resulting in great initial revenue traction on new products and lower warranty claims. We’ve also improved relationships with our channel and distribution partners giving us a larger footprint and a better customer facing presence.”
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