Preliminary Q3 2016 Cree Inc Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Hank Elder - Goldman Sachs - Analyst : Thanks for taking my questions. This is Hank on for Brian Lee. You mentioned the retrofit market, but is there a particular lighting end market, whether it was outdoor retail, that you can provide any specifics, and attribute that weakness to?

Question: Hank Elder - Goldman Sachs - Analyst :

Question: Jed Dorsheimer - Canaccord Genuity - Analyst : Thank you for taking my questions, Chuck. Most of the commentary has been around the lighting business, since that's where the shortfall was. On the components side, industry dynamics seem to have worsened from an oversupply situation. I'm curious if you have any commentary around that business, and I know that was an area that was actually strong for you this quarter, whether or not you could give an update on the overall business activity, or whether or not that is sustainable. Thanks.

Question: Jed Dorsheimer - Canaccord Genuity - Analyst : Great. Thank you.

Question: Tom Sepenzis - Northland Securities, Inc. - Analyst : Thanks for taking my question. I'm just wondering. You mentioned that you took a writedown. I believe that was in the lighting inventory. Is that correct, or was that LED?

Question: Tom Sepenzis - Northland Securities, Inc. - Analyst : Okay. Great. Also, could you provide any color around what specifically, which products, or what type of products you saw the delays in during the quarter, and if that has been resolved, and you expect those to start shipping here in the second quarter -- or in the June quarter?

Question: Tom Sepenzis - Northland Securities, Inc. - Analyst : Great. Thank you very much.

Question: Edwin Mok - Needham & Company - Analyst : Chuck, just a follow-up on that, with some of these new platforms coming out, does this customer still need some time -- I guess I'm trying to understand the cycle time of that, and if the customer has used or switched to other of your competitor product. Is there a risk that maybe it would take some time before they qualified a product, and therefore the ramp-up of these new products will take some time, and they might impact beyond this quarter?

Question: Edwin Mok - Needham & Company - Analyst : Okay. Great. That's helpful. Then on a year-over-year perspective, looks like because of this disruption, this year might end up being a down year on a FY16 versus FY15 on your lighting product part of the business. Do you see that as a short-term phenomenon, or do you believe that you can still grow the lighting business as you get through the June quarter?

Question: Jeff Osborne - Cowen and Company - Analyst : Just a couple follow-ups. One is, can you just mention how you are going to rebuild momentum with the brand, Chuck, and is there a way to quantify how many orders were canceled, and if any of those lingered into the June quarter?

Question: Jeff Osborne - Cowen and Company - Analyst : Got it. With the momentum building, normally I would think seasonally that the backlog would be building versus where you were entering the prior quarter. Has that been the trend in the past? As you expect the backlog to build through the June quarter, can you touch on where are the areas of growth and maybe weakness from the broader market? It sounds like industrial was softer, and commercial and outdoor were fine, but I just want to make sure. There was a couple different comments about the moving pieces on the chessboard here, so, I want to get a sense of, A, where backlog should be, assuming this ERP hadn't happened, I thought it would have grown, and B, where the orders are going to come from over the next couple of months.

Question: Kristen Owen - Oppenheimer & Co. - Analyst : This is Kristen Owen in for Colin. Just a quick one for me. The $5 million in operating expenses that you stripped out, can you talk a little bit about that, and maybe how you feel going forward? Are your operating expenses now properly sized for the growth that you see over the next 18 to 24 months?

Question: Kristen Owen - Oppenheimer & Co. - Analyst : Thank you.

Question: Sven Eenmaa - Stifel Nicolaus - Analyst : I wanted to ask in terms of your pricing strategy now, that you are focused on winning back some of the business. What is -- has your strategy on pricing changed, and what are your margin expectations for new products?

Question: Sven Eenmaa - Stifel Nicolaus - Analyst : What is the typical lead time for your retrofit projects you are doing?

Question: Srini Sundararajan - Summit Research Partners - Analyst : Thank you for taking my question. My questions are specific to the month of March, and looking forward to April. My first question is, the factory utilization, is it back to normal loss making levels in March? As a second part of the question, are the ERP problems behind you, and running without a hitch in the month of March, and looking forward to April?

Question: Srini Sundararajan - Summit Research Partners - Analyst : Thank you so much. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 05, 2016 / 9:00PM, WOLF.N - Preliminary Q3 2016 Cree Inc Earnings Call