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Cree Reports Financial Results For The

per diluted share, for the

. On a non-GAAP basis, net income for the

$22.1 million

per diluted share, compared to non-GAAP net income for the

$29.6 million

per diluted share. During the

, Cree recognized

$15.9 million

of costs related to the LED business restructuring that was announced on June 24, 2015. The restructuring charges included factory capacity and overhead cost reductions which are included in the GAAP results only.

"Fiscal 2016 is off to a good start, with Q1 revenue and profits above the middle of our targeted range, driven by strong demand for commercial LED lighting and a solid quarter for our LED business,” stated Chuck Swoboda, Cree Chairman and CEO. “We’re confident in our strategy and optimistic about the future, as the commercial lighting business is growing, the LED results recovered nicely in Q1 and Power and RF design momentum is strong.”

Financial Metrics

(in thousands, except per share amounts and percentages)

First Quarter

Change

(unaudited)

Revenue, net

425,489

427,672

(2,183

Gross margin

Operating margin

Net (loss) income

(23,623

11,130

(34,753

(Loss) earnings per diluted share

Non-GAAP

Net income

22,119

29,550

(7,431

Earnings per diluted share

Gross margin

increased

from 20.1% in

on a GAAP basis, and

from 21.0% to

on a non-GAAP basis.

Cash and investments

decreased

$81.1 million

$632.1 million

Share repurchases were $70 million and $13 million of net cash was used for the acquisition of Arkansas Power Electronics International, Inc. during Q1 of fiscal 2016.

Accounts receivable, net

$7.6 million

$193.8 million

, with days sales outstanding of

Inventory

$8.5 million

$289.1 million

and represents

days of inventory.

Cash from operations was $47 million and free cash flow was ($7) million for Q1 of fiscal 2016.

Recent Business Highlights

Expanded our LED downlight portfolio with the introduction of the KR8

downlight, Cree’s first eight-inch downlight, and the newest generation LR6

downlight, which provides even better light at a lower price;

Released our new XLamp® XQ-E High Intensity LEDs, the industry’s first family of high power color LEDs optimized for optical performance;

Introduced the new Cree® LED bulb, which unlike compromised bulbs, delivers an even better light with better performance, a longer life and more energy savings;

Announced that the U.S. Air Force has awarded a follow-on contract to Cree that will enable the qualification of a high-performance power electronic module for the F-35 Joint Strike Fighter; and

Announced that Wolfspeed is the new name for the Power and RF division of Cree. The new name combines important elements of Cree’s culture and expertise, and allows the Power and RF division to build brand equity while operating as a separate business.

Business Outlook

For its

second

ending

December 27, 2015

, Cree targets revenue in a range of

$425 million

$445 million

, with GAAP gross margin targeted to be

+/- and non-GAAP gross margin targeted to be

+/-. Our GAAP gross margin targets include stock-based compensation expense of approximately

$3.1 million

, while our non-GAAP targets do not. GAAP operating expenses are targeted to be approximately $129 million, and non-GAAP operating expenses are targeted to be approximately $106 million. The tax rate is targeted at

+/- for the

. GAAP net income is targeted at

$1 million

$7 million

per diluted share. Non-GAAP net income is targeted in a range of

$21 million

$27 million

per diluted share. The GAAP and non-GAAP per diluted share targets are based on an estimated 103 million diluted weighted average shares. Targeted non-GAAP earnings exclude $0.20 per diluted share of expenses related to stock-based compensation expense, the amortization or impairment of acquisition-related intangibles, net changes associated with our Lextar investment, and charges associated with the LED business restructuring.

Quarterly Conference Call:

Cree will host a conference call at 5:00 p.m. EST today to review the highlights of the fiscal

quarter results and the fiscal

quarter business outlook, including significant factors and assumptions underlying the targets noted above.

The conference call will be available to the public through a live audio web broadcast via the Internet. For webcast details, visit Cree's website at investor.cree.com/events.cfm.

Supplemental financial information, including the non-GAAP reconciliation attached to this press release, is available on Cree's website at investor.cree.com/results.cfm.

About Cree, Inc.

Cree is leading the LED lighting revolution and making energy-wasting traditional lighting technologies obsolete through the use of energy-efficient, mercury-free LED lighting. Cree is a market-leading innovator of lighting-class LEDs, lighting products and semiconductor products for power and radio frequency (RF) applications.

Cree's product families include LED lighting systems and bulbs, blue and green LED chips, high-brightness LEDs, lighting-class power LEDs, power-switching devices and RF devices. Cree's products are driving improvements in applications such as general illumination, electronic signs and signals, power supplies and inverters.

For additional product and Company information, please refer to www.cree.com.

Non-GAAP Financial Measures:

This press release highlights the Company's financial results on both a GAAP and a non-GAAP basis. The GAAP results include certain costs, charges and expenses which are excluded from non-GAAP results. By publishing the non-GAAP measures, management intends to provide investors with additional information to further analyze the Company's performance, core results and underlying trends. Cree's management evaluates results and makes operating decisions using both GAAP and non-GAAP measures included in this press release. Non-GAAP results are not prepared in accordance with GAAP and non-GAAP information should be considered a supplement to, and not a substitute for, financial statements prepared in accordance with GAAP. Investors and potential investors are encouraged to review the reconciliation of non-GAAP financial measures to their most directly comparable GAAP measures attached to this press release.

Forward Looking Statements:

The schedules attached to this release are an integral part of the release. This press release contains forward-looking statements involving risks and uncertainties, both known and unknown, that may cause actual results to differ materially from those indicated in the forward-looking statements. Actual results, including with respect to our targets and prospects, could differ materially due to a number of factors, including the risk that we may not obtain sufficient orders to achieve our targeted revenues; price competition in key...


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