Cree, Inc. (NASDAQ: CREE) stock surged 7.20% on October 16th, 2018 and rose over 2.3% in the pre market session on October 17th, 2018. The firm posted better than expected results for the first quarter of FY 19 driven by robust growth in Wolfspeed combined with strong gross margin improvement in LED and lighting. Cree has signed a strategic long-term agreement, valued at more than $85 million, to produce and supply its Wolfspeed silicon carbide wafers to “one of the world’s leading power device companies” but didn’t name the company. In the first quarter of FY 19, CREE’s non-GAAP net income increased more than fivefold to 22 million.
CREE in the first quarter of FY 19 has reported the adjusted earnings per share of 22 cents, beating the analysts’ estimates for the adjusted earnings per share of 12 cents. The company had reported the adjusted revenue growth of 13 percent to $408.3 million in the first quarter of FY 19, beating the analysts’ estimates for revenue of $407 million.
Wolfspeed revenue grew 93% year-over-year and 16% sequentially to 127 million and was above the company’s targets. Year-over-year growth has exceeded 50% on an organic basis when excluding the acquisition of Infineon’s RF power business. Wolfspeed gross margin was in-line with CREE’s targets at 47.4%. LED products revenue increased 2% year-over-year but decreased 6% sequentially to 147 million which was in line with the company’s targets. LED gross margin of 28.1% exceeded the company’s targets as strong factory execution, favorable mix, and better than targeted ASPs more than offset the lower revenue and tariff impact. Lighting products revenue was down 10% year-over-year and 7% sequentially to 134 million, which was in-line with the company’s targets. Lighting gross margin of 23.2% exceeded the company’s targets and increased 290 basis points sequentially due to the better mix, product cost reductions, improved operational efficiencies, and being more selective with respect to the business.
Moreover, during the first quarter, cash from operations was 34 million and capital expenditures were 40 million, which resulted in negative free cash flow of 6 million. The company has ended the quarter with 666 million in cash and investments, zero borrowed on the line of credit, and convertible debt with a face value of 575 million.
For FY19, CREE projects capital investment of approximately 220 million, primarily driven by expanding most feeds’ production capacity to support forecasted, long-term customer demand. For Q2, revenue is expected to be in a range of 398 million to 418 million