The tables really began to turn, though, when CREE acquired Wolfspeed from Infineon Technologies this past March for EUR345 mln. The Wolfspeed assets positioned CREE in the much higher-growth silicon carbide and gallium nitride components space, which address key secular themes such as the transition from 4G networks to 5G, the electrification in transportation markets, and high voltage applications in industrial automation. This has had the additional effect of lessening its dependence and exposure to the slower growth, lower margin lighting business, as well.
The impact of the acquisition is quite evident in the turnaround of its financial results. Before reporting its Q4 results last night, CREE was coming off an impressive beat-and-raise Q3 report in which revenue grew (+4%) on a year/year basis for the first time since 4Q16. CREE's strong results last night further confirm that a turnaround is underway.
Specifically, it posted EPS of $0.11, up 175% year/year, beating the $0.08 consensus. Revenue increased by 14%, showcasing the strongest growth since 4Q14, to $409.5 mln, also ahead of the $399.7 mln expectation. Driving the better-than-expected results was its Wolfspeed division, in which revenue surged by 81% (now accounting for 22% of total revenue). Gross margin also expanded by 240 bps year/year, helping to push CREE's total gross margin to 28.2% from 27.3% in the year ago quarter.
The LED segment also performed well, as revenue climbed by 9% to the highest level in nearly four years, while gross margin also improved by 150 bps.
But looking ahead, CREE's primary growth driver figures to derive from its Wolfspeed segment. In fact, during the conference call last night, management stated that it is continuing to expand capacity at a fast pace, given the huge growth opportunity for silicon carbide and GaN RF, across a wide range of markets (e.g, auto, industrial, telecom networking). The company is actually on track to meet its goal of doubling capacity for power devices and external materials sales by the end of Q2.
To conclude, CREE's results and bullish outlook provide further evidence that its transition from a no-growth to a high-growth story is taking hold.