Cree’s Q1 results decline but exceed expectations

LED lighting company Cree reported lower revenue and net income in its fiscal first quarter versus a year ago, but the Durham company’s financial performance managed to exceed Wall Street’s expectations.

Cree posted $425.5 million in revenue for the quarter that ended Sept. 27, down 1 percent from a year ago but 11 percent higher than the immediately preceding quarter. The consensus projection among analysts was that revenue would be $418.5 million, according to Bloomberg News.

Adjusted net income totaled $22.1 million, or 21 cents per share – a penny per share more than analysts projected. Net income was down from $29.6 million, or 24 cents per share, a year ago.

“We’re confident in our business strategy and optimistic about the future,” CEO Chuck Swoboda said during a conference call with analysts.

Cree reaffirmed its earlier projection that revenue for the entire fiscal year will rise 10 percent.

Cree also boosted its gross margins from 20.1 percent in the immediately preceding quarter to 31 percent.

“We’re continuing to get incremental benefit in each of the businesses,” Swoboda said.

Gross margins also were helped by the $102 million restructuring of the LED business that Cree announced in June in light of a diminished revenue outlook. The net impact of that restructuring was that the company’s worldwide workforce at the end of June was down by 743 workers, or 10 percent, compared to a year ago. Just 33 full-time jobs were eliminated from the company’s U.S. workforce.

Cree is the No. 1 producer of LED light bulbs and also makes indoor and outdoor LED light fixtures and components that other companies use in LED lights. In additions, its LEDs illuminate mobile phones, televisions, electric signs and car dashboards.

Sales of Cree’s LED lighting products, which accounted for 58 percent of sales, rose 11 percent from a year ago, driven by demand for commercial lighting. But revenue from LED products, which accounted for 35 percent of sales, fell 15 percent.

Revenue from the company’s power and RF division, recently renamed Wolfspeed, fell 6 percent from a year ago. Swoboda said in an interview after the conference call that the decline was due to a delay in orders on the RF side of the business stemming from the delayed rollout of an LTE cellular network in China.

Wolfspeed makes power components used in computer servers and for solar energy, among other applications; its radio frequency transistors and integrated circuits are used in radar and telecommunications systems.

Cree plans to spin out Wolfspeed as a publicly traded company next year but will retain a majority ownership stake in the business after the spinout.

“We’re going to be patient and get the timing right,” Swoboda said of Wolfspeed’s IPO.

Cree released its earnings Tuesday after the markets closed. Earlier in the day, the company’s shares closed at $24.91, down 57 cents. Cree shares were trading above $39 in February.

This story was originally published October 20, 2015 at 4:42 PM with the headline "Cree’s Q1 results decline but exceed expectations."