How Did Cree Fare In Q4’16 Earnings?

by Trefis Team
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Cree’s (NYSE:CREE)  fiscal Q4’16 revenues rebounded after weak prior quarter results, as its commercial lighting business regained momentum due to customer service improvements. Cree’s lighting revenues were affected in Q3 due to an ERP system upgrade that caused service disruptions. With its restructuring efforts, the company has been able to improve its non-GAAP operating margins to 5.5% for the quarter and 6.6% for the year. Going forward, with the sale of its Power & RF Wolfspeed business (see below), the company will  become a more focused on LED lighting diodes and products for both commercial and consumer applications.

Cree expects its commercial lighting revenue to grow in line with the markets in FY 2017. However, in an effort to improve its revenue growth further, the company is focused on expanding into new market segments, which it doesn’t serve currently. Additionally, Cree launched nine new products in Q4. The company is in the process of transitioning to its next generation LED bulbs, which will likely drive the consumer demand for its LED bulbs higher in the coming quarters. Furthermore, Cree is likely to consider M&A opportunities as they arise, to expand its business inorganically.

In Q4, Cree announced the sale of its Power and RF division to Infineon with the aim to become a more focused LED lighting company. This transition is likely to happen now at a faster rate as the company is selling off the division instead of taking the IPO route. Furthermore, it will also help Cree improve its cash position, which the company can use to accelerate the growth of its lighting and LED business. Cree’s LED and lighting businesses were significantly affected in the past year due to severe decline in margins, as a result of heightened competition.

In the table below we list out the key metrics as reported by the company in Q4:

Earnigns_Cree_Q4

We are in the process of updating our model for Cree.

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