Cree Reports Financial Results for the Third Quarter of Fiscal Year 2021
Cree, Inc. (Nasdaq: CREE) today announced revenue from continuing operations of
On March 1, 2021, Cree completed the previously announced sale of certain assets and subsidiaries comprising its former LED Products segment to SMART Global Holdings, Inc. (SGH) and its wholly owned acquisition subsidiary CreeLED, Inc. (CreeLED and collectively with SGH, SMART) for up to
“We are building solid momentum and during our fiscal third quarter we continued to execute and drive our strategy, delivering strong top line performance as customers continue to realize the benefits of silicon carbide,” said Cree CEO, Gregg Lowe. “With the sale of our LED business now complete, we accomplished a critical milestone in our journey to becoming a pure-play semiconductor powerhouse and have an even greater focus on converting opportunities in our pipeline and expanding our manufacturing capacity."
Business Outlook:
For its fourth quarter of fiscal 2021, Cree targets revenue in a range of
Quarterly Conference Call:
Cree will host a conference call at 5:00 p.m. Eastern time today to review the highlights of the third quarter results and the fiscal fourth quarter 2021 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 an innovator of Wolfspeed® power and radio frequency (RF) semiconductors. Cree’s Wolfspeed product families include silicon carbide materials, power-switching devices and RF devices targeted for applications such as electric vehicles, fast charging inverters, power supplies, telecom and military and aerospace.
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 that 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.
Presentation:
The Company revised income tax expense for the three months ended March 29, 2020 to correct the income tax provision calculation for the third quarter of fiscal 2020. The Company decreased income tax expense for the three months ended March 29, 2020, resulting in a net decrease to net loss of
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 Cree’s actual results to differ materially from those indicated in the forward-looking statements. Forward-looking statements by their nature address matters that are, to different degrees, uncertain, such as statements about our plans to grow the Wolfspeed business and our ability to achieve our targets for the fourth quarter of fiscal 2021. Actual results could differ materially due to a number of factors, including but not limited to, issues, delays or complications in completing required transition activities to allow the LED Products business to operate under the SMART portfolio of businesses after the closing, including incurring unanticipated costs to complete such activities; risks relating to the COVID-19 pandemic, the risk of new and different government restrictions that limit our ability to do business, the risk of infection in our workforce and subsequent impact on our ability to conduct business, the risk that our supply chain or customer demand may continue to be negatively impacted, the risk that the COVID-19 pandemic will lead to a global recession and the potential for costs associated with our operations during the fiscal 2021 fourth quarter and future quarters to be greater than we anticipate as a result of all of these factors; the risk that we may not obtain sufficient orders to achieve our targeted revenues; price competition in key markets; the risk that we may experience production difficulties that preclude us from shipping sufficient quantities to meet customer orders or that result in higher production costs, lower yields and lower margins; our ability to lower costs; the risk that our results will suffer if we are unable to balance fluctuations in customer demand and capacity, including bringing on additional capacity on a timely basis to meet customer demand; the risk that longer manufacturing lead times may cause customers to fulfill their orders with a competitor's products instead; product mix; risks associated with the ramp-up of production of our new products, and our entry into new business channels different from those in which we have historically operated; risks associated with our factory optimization plan and construction of a new fabrication facility, including design and construction delays and cost overruns, issues in installing and qualifying new equipment and ramping production, poor production process yields and quality control, and potential increases to our restructuring costs; the risk that we or our channel partners are not able to develop and expand customer bases and accurately anticipate demand from end customers, which can result in increased inventory and reduced orders as we experience wide fluctuations in supply and demand; the risk that the economic and political uncertainty caused by the tariffs imposed by the United States on Chinese goods, and corresponding Chinese tariffs and currency devaluation in response, may negatively impact demand for our products; risks related to international sales and purchases, including the risk that U.S. government actions with respect to Huawei Technologies Co. and its affiliates or other foreign customers or vendors may have a greater impact on our business and results of operations than our expectations; ongoing uncertainty in global economic conditions, infrastructure development or customer demand that could negatively affect product demand, collectability of receivables and other related matters as consumers and businesses may defer purchases or payments, or default on payments; risks resulting from the concentration of our business among few customers, including the risk that customers may reduce or cancel orders or fail to honor purchase commitments; the risk that our investments may experience periods of significant stock price volatility causing us to recognize fair value losses on our investment; the risk posed by managing an increasingly complex supply chain that has the ability to supply a sufficient quantity of raw materials, subsystems and finished products with the required specifications and quality; the risk we may be required to record a significant charge to earnings if our remaining goodwill or amortizable assets become impaired; risks relating to confidential information theft or misuse, including through cyber-attacks or cyber intrusion; our ability to complete development and commercialization of products under development; the rapid development of new technology and competing products that may impair demand or render our products obsolete; the potential lack of customer acceptance for our products; risks associated with ongoing litigation; the risk that customers do not maintain their favorable perception of our brand and products, resulting in lower demand for our products; the risk that our products fail to perform or fail to meet customer requirements or expectations, resulting in significant additional costs; risks associated with strategic transactions, including the possibility that we may not realize the full purchase price contemplated in connection with the sale of our former LED Products or Lighting Products business units; and other factors discussed in our filings with the Securities and Exchange Commission (SEC), including our report on Form 10-K for the fiscal year ended June 28, 2020, and subsequent reports filed with the SEC. These forward-looking statements represent Cree's judgment as of the date of this release. Except as required under the U.S. federal securities laws and the rules and regulations of the SEC, Cree disclaims any intent or obligation to update any forward-looking statements after the date of this release, whether as a result of new information, future events, developments, changes in assumptions or otherwise.
Cree® and Wolfspeed® are registered trademarks of Cree, Inc.
CREE, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) |
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Three months ended |
|
Nine months ended |
||||||||
(in millions of U.S. Dollars, except per share data) |
March 28, 2021 |
|
March 29, 2020 |
|
March 28, 2021 |
|
March 29, 2020 |
||||
Revenue, net |
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue, net |
93.3 |
|
|
72.6 |
|
|
259.0 |
|
|
232.9 |
|
Gross profit |
44.0 |
|
|
41.3 |
|
|
120.8 |
|
|
129.4 |
|
Gross margin percentage |
32 |
% |
|
36 |
% |
|
32 |
% |
|
36 |
% |
|
|
|
|
|
|
|
|
||||
Operating expenses: |
|
|
|
|
|
|
|
||||
Research and development |
46.0 |
|
|
38.6 |
|
|
132.7 |
|
|
112.5 |
|
Sales, general and administrative |
44.2 |
|
|
41.7 |
|
|
135.0 |
|
|
135.7 |
|
Amortization or impairment of acquisition-related intangibles |
3.7 |
|
|
3.7 |
|
|
10.9 |
|
|
10.9 |
|
Loss on disposal or impairment of other assets |
0.1 |
|
|
0.1 |
|
|
0.8 |
|
|
1.7 |
|
Other operating expense |
11.4 |
|
|
5.2 |
|
|
22.6 |
|
|
22.2 |
|
Operating loss |
(61.4) |
|
|
(48.0) |
|
|
(181.2) |
|
|
(153.6) |
|
Operating loss percentage |
(45) |
% |
|
(42) |
% |
|
(48) |
% |
|
(42) |
% |
|
|
|
|
|
|
|
|
||||
Non-operating expense, net |
8.1 |
|
|
14.7 |
|
|
18.9 |
|
|
8.1 |
|
Loss before income taxes |
(69.5) |
|
|
(62.7) |
|
|
(200.1) |
|
|
(161.7) |
|
Income tax benefit |
(3.0) |
|
|
(6.5) |
|
|
(4.0) |
|
|
(8.3) |
|
Net loss from continuing operations |
(66.5) |
|
|
(56.2) |
|
|
(196.1) |
|
|
(153.4) |
|
Net (loss) income from discontinued operations |
(41.6) |
|
|
(3.7) |
|
|
(178.8) |
|
|
1.7 |
|
Net loss |
(108.1) |
|
|
(59.9) |
|
|
(374.9) |
|
|
(151.7) |
|
Net income from discontinued operations attributable to noncontrolling interest |
0.8 |
|
|
0.2 |
|
|
1.4 |
|
|
0.5 |
|
Net loss attributable to controlling interest |
( |
|
|
( |
|
|
( |
|
|
( |
|
|
|
|
|
|
|
|
|
||||
Basic and diluted loss per share |
|
|
|
|
|
|
|
||||
Continuing operations |
( |
|
|
( |
|
|
( |
|
|
( |
|
Net loss attributable to controlling interest |
( |
|
|
( |
|
|
( |
|
|
( |
|
|
|
|
|
|
|
|
|
||||
Weighted average shares - basic and diluted (in thousands) |
112,891 |
|
|
108,115 |
|
|
112,330 |
|
|
107,718 |
|
CREE, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) |
|||||
(in millions of U.S. Dollars) |
March 28, 2021 |
|
June 28, 2020 |
||
Assets |
|
|
|
||
Current assets: |
|
|
|
||
Cash, cash equivalents, and short-term investments |
|
|
|
|
|
Accounts receivable, net |
84.1 |
|
|
72.4 |
|
Inventories |
147.5 |
|
|
121.9 |
|
Income taxes receivable |
9.1 |
|
|
6.6 |
|
Prepaid expenses |
23.8 |
|
|
26.2 |
|
Other current assets |
38.5 |
|
|
8.7 |
|
Current assets held for sale |
2.0 |
|
|
1.3 |
|
Current assets of discontinued operations |
— |
|
|
116.0 |
|
Total current assets |
1,598.3 |
|
|
1,592.8 |
|
Property and equipment, net |
1,165.1 |
|
|
770.8 |
|
Goodwill |
359.2 |
|
|
349.7 |
|
Intangible assets, net |
144.6 |
|
|
156.9 |
|
Long-term receivables |
137.8 |
|
|
— |
|
Other long-term investments |
67.2 |
|
|
55.9 |
|
Deferred tax assets |
1.2 |
|
|
1.2 |
|
Other assets |
33.0 |
|
|
33.6 |
|
Long-term assets of discontinued operations |
1.3 |
|
|
270.1 |
|
Total assets |
|
|
|
|
|
|
|
|
|
||
Liabilities and Shareholders' Equity |
|
|
|
||
Current liabilities: |
|
|
|
||
Accounts payable and accrued expenses |
|
|
|
|
|
Accrued contract liabilities |
24.5 |
|
|
14.2 |
|
Income taxes payable |
— |
|
|
1.2 |
|
Finance lease liabilities |
0.4 |
|
|
3.6 |
|
Other current liabilities |
37.8 |
|
|
22.2 |
|
Current liabilities of discontinued operations |
0.6 |
|
|
60.2 |
|
Total current liabilities |
382.8 |
|
|
291.2 |
|
|
|
|
|
||
Long-term liabilities: |
|
|
|
||
Convertible notes, net |
813.7 |
|
|
783.8 |
|
Deferred tax liabilities |
2.3 |
|
|
1.8 |
|
Finance lease liabilities - long-term |
10.1 |
|
|
11.4 |
|
Other long-term liabilities |
51.1 |
|
|
43.8 |
|
Long-term liabilities of discontinued operations |
0.7 |
|
|
9.8 |
|
Total long-term liabilities |
877.9 |
|
|
850.6 |
|
|
|
|
|
||
Shareholders’ equity: |
|
|
|
||
Common stock |
0.1 |
|
|
0.1 |
|
Additional paid-in-capital |
3,658.9 |
|
|
3,106.2 |
|
