Cree’s (Nasdaq: CREE) latest financials on Tuesday drove share prices down nearly 4 percent in after-hours trading and close to 52-week lows. But the bad news, including $84 million in costs for restructuring its LED business, didn’t keep Cree’s top executive from delivering a pep talk to Wall Street analysts.
As summed up by SeekingAlpha, Cree’s financials were a hit-and-miss:
- Cree (NASDAQ:CREE): FQ4 EPS of -$0.19 misses by $0.15.
- Revenue of $382.2M (-12.4% Y/Y) beats by $3.28M.
- Expects FQ1 revenue of $410M-$430M and EPS of $0.18-$0.23 vs. a consensus of $418.5M and $0.20.
“We are focused on several key priorities in fiscal 2016 to take advantage of the growing market opportunities for all of our products, while responding to the competitive environment,” Swoboda said in a conference call.
“Our first priority is to build financial momentum.
“We target overall company revenue growth of approximately 10% in fiscal 2016 with operating margins increasing for the year.”
Cree has been hit by a good deal of bad news in recent months as the company prepares to spin off its Power and RF (radio frequency) business, which is led by longtime Triangle tech executive Frank Plastina. Swoboda tried to put a positive spin on Cree’s rejuvenation efforts.
“We target our commercial lighting business to drive revenue and profit growth from the combination of new product sales momentum and improved product margins,” he explained. “Consumer lighting is targeted to be lower for the year but at a similar run rate as our fiscal Q4, as we focus on our premium product position and building brand value that translates to our commercial products.”
But LEDs remain a challenge despite the recent restructuring that cost the company some $84 million.
“We’re focused on stabilizing the LED business and executing the previously announced restructuring. We believe the LED market will remain very competitive for at least the next year, but target the combination of design wins for our new SC5 LED products and lower cost structure to help offset the competitive challenges in the market,” Swoboda said, according to the transcript provided by financial news website SeekingAlpha.
“We target growth in Power and RF to also contribute to our overall growth goals for the year. We believe that we can generate operating leverage as we start to see benefits from our investments across the business over the last several years. We’re targeting lower legal expense in the second half of this fiscal year as some of the current patent litigation comes to a conclusion and have adjusted our brands spending lower to better align with the targeted levels of consumer business for the year.”
Swoboda noted a recent patent cross-licensing deal for LEDs as a positive step. He also said Cree will focus on innovation in business-focused operations and the forthcoming Power-RF spinoff.
“This is unique business with world class IT and technology in two exciting growth markets, energy efficient high power switching and next generation wireless,” Swoboda said of the Plastina-led group.
“Our Silicon Carbide power device technology and Gallium Nitride RF technology are both likely to reshape large markets that today are primarily served with older silicon and Gallium Arsenide technology. We announced our intent to spin off our Power and RF business with an initial public offering in fiscal 2016 to raise capital to invest directly in the business to support targeted future growth. As part of our increased focus on this business we recently acquired APEI to extend our leadership position as advanced power electronics and accelerate the market for high-performance, best-in-class Silicon Carbide power modules.”
Overall, Swoboda said in his view the changes he has directed are making a difference.
“The actions we took last year position us for solid revenue growth and margin expansion in fiscal 2016, driven by the strength of our commercial lighting business,” Swoboda explained.
“We remain focused on leading innovative technology to deliver better products and value to our customers and more profits to the bottom line. We remain on track to raise the focus on our Power and RF business with an IPO later this fiscal year which should provide additional capital or fund growth in that business and enable Cree shareholders to realize more value. We’re confident we can deliver revenue and profit growth in fiscal 2016 and we plan to utilize our stock repurchase program this quarter and across the fiscal year.”
Read the full transcript at: