Cree Updates Q4 FY 2019 Financial Guidance

DURHAM, N.C.–(BUSINESS WIRE)–Cree, Inc. (Nasdaq:CREE), the global leader in silicon carbide (SiC)
semiconductors, announced an update to its financial guidance for the
fourth quarter of fiscal 2019.

This update to the financial guidance, which was previously provided in
the company’s third quarter results release on May 1, 2019, is in
response to the decision on May 15, 2019, by the Bureau of Industry and
Security (BIS) of the U.S. Department of Commerce to add Huawei
Technologies Co., Ltd. and 68 of its affiliates (collectively,
“Huawei”), to the “Entity List” maintained by the U.S. Department of
Commerce, and softer than originally expected demand for the company’s
LED products.

Revenue for products and materials associated with Huawei’s wireless
infrastructure build-out were expected to be up to $15 million in the
fourth quarter of fiscal 2019.

Pending any further guidance from BIS, the company does not expect to
ship any additional products in the fourth quarter for the Huawei
build-out and cannot predict when it will be able to resume such
shipments.

The company will continue to monitor and provide updates for the impact
of the BIS action on its business, including the company’s ability to
apply for and obtain licenses from BIS to allow it to ship products to
Huawei going forward.

In addition to the Huawei matter, the company is also updating its
financial guidance for its LED Products business due to softer than
originally expected demand as global trade uncertainties persist.

For the fourth quarter of fiscal 2019, ending June 30, 2019, Cree now
expects:

  • Revenue from continuing operations in the range of $245 million to
    $252 million

    • Wolfspeed revenue is expected to be between $132 million to $135
      million
    • LED Products revenue is expected to be between $113 million to
      $117 million
  • GAAP net loss from continuing operations to be between $(23) million
    to $(28) million, or $(0.23) to $(0.27) per diluted share
  • Non-GAAP net income from continuing operations to be in a range of $8
    million to $13 million, or $0.08 to $0.12 earnings per diluted share

Targeted non-GAAP income from continuing operations excludes $36 million
of estimated expenses, net of tax, related to stock-based compensation
expense, the amortization or impairment of acquisition-related
intangibles, interest accretion on our convertible notes’ issue costs
and fair value adjustments, executive severance and expenses relating to
the disposition of the company’s former Lighting Products business. The
GAAP and non-GAAP targets from continuing operations do not include any
estimated change in the fair value of Cree’s Lextar investment.

Q4 FY2019   Updated   Prior
    (as of June 11, 2019)   (as of May 1, 2019)
Revenue   $245M to $252M   $263M to $271M
Non-GAAP Net Income   $8 million to $13 million   $12 million to $17 million
Non-GAAP Diluted EPS   Between $0.08 and $0.12   Between $0.12 and $0.16
 

About Cree, Inc.

Cree is an innovator of Wolfspeed® power and radio frequency
(RF) semiconductors and lighting class LEDs. Cree’s Wolfspeed product
families include SiC materials, power-switching devices and RF devices
targeted for applications such as electric vehicles, fast charging
inverters, power supplies, telecom and military and aerospace. Cree’s
LED product families include blue and green LED chips, high-brightness
LEDs and lighting-class power LEDs targeted for indoor and outdoor
lighting, video displays, transportation and specialty lighting
applications.

For additional product and company information, please refer to www.cree.com.

Non-GAAP Financial Measures:

This press release highlights the company’s targeted financial outlook
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 set
forth at the end of this press release.

Forward Looking Statements:

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 the
impact of US government actions with respect to Cree’s customers, global
trade uncertainties generally and future financial and operating
results. Actual results, including our ability to achieve our targets
for the fourth quarter of fiscal 2019, could differ materially due to a
number of factors, including the risk that we may not obtain sufficient
orders to achieve our targeted revenues; price competition in key
markets; 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 we may experience production difficulties that preclude us from
shipping sufficient quantities to meet customer orders or that result in
higher production costs 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; the risk that the
economic and political uncertainty caused by the already imposed and
proposed tariffs by the United States on Chinese goods, and
corresponding Chinese tariffs in response, may negatively impact demand
for our products; the risk that US government actions with respect to
Huawei or other foreign customers or vendors may have a greater impact
on our business and results of operations than our expectations,
including our inability to obtain a license to continue to transact
business with counterparties on the Entity List; 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; 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, including costs associated with warranty
returns or the potential recall of our products; 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, such as our
pipeline of Wolfspeed products, improved LED chips and LED components;
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; 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 24, 2018, 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.
Business Outlook Unaudited GAAP to Non-GAAP Reconciliation
(in millions)
 
Three Months Ended
June 30, 2019
GAAP net loss from continuing operations outlook range ($23) to ($28)
Adjustments:
Stock-based compensation expense 11
Amortization or impairment of acquired intangibles 4
Corporate restructuring charges or gains 8
Amortization of debt issuance costs and discount 6
Transaction-related costs 10
Total adjustments to GAAP net loss before provision for income taxes 39
Income tax effect 3
Non-GAAP net income from continuing operations outlook range $8 to $13

Contacts

Tyler Gronbach
Cree, Inc.
Vice President, Investor Relations
Phone:
919-407-4820
[email protected]

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