On Thursday evening, Cree (NASDAQ:CREE), reported impressive fiscal second-quarter results and forecasted a better-than-expected third quarter. In response, the shares lit up, jumping 22.4% on Friday to close at $25.85.

Strong LED sales -- particularly for mobile phone applications -- continued to drive performance. For the second quarter, total revenues jumped 28% year over year to $72.7 million. LED sales alone accelerated a whopping 12% sequentially and 34% year over year to $56.5 million.

Meanwhile, net income came in at $13 million, or $0.17 per share, up 45% year over year.

Helping the bottom line, gross margins rose to 47% from 43% in the first quarter, driven by the first sequential rise in average selling prices (ASPs) since the second quarter last year, and a 7% decline in LED costs per unit. Margins can be partially attributed to a slight shift in favor of higher-margin, high-brightness LEDs.

Interestingly, low-end LED sales -- which face price pressure from competitors in Taiwan -- remained essentially flat at about $4.5 million, or a mere 8% of LED revenue.

Alleviating last quarter's balance sheet concerns, accounts receivables backed down from $57.7 million to $39.2 million at quarter's end, with days sales outstanding (DSO) down from 71 days to a crisp 44. But as we noted last quarter, Cree had already made some of those collections by the time it reported those figures in October.

Put it all together, and Cree managed to garner a record $52.4 million in cash flow from operations in the second quarter. The company also generated $33 million in free cash flow, for a total of $45 million over the past four quarters.

This builds off an impressive first quarter. It also should have come as no surprise, as the company had 80% of its second-quarter sales booked by the time it reported its first-quarter in October.

Yet, the stock had remained in a rut even after a seemingly baseless family feud-sparking lawsuit -- which had been pressuring the stock since June -- was both dismissed and settled. That left some investors wondering what else short sellers -- which had 30% of Cree's shares sold short -- could possibly have in the cards.

But money talks, and Cree has generated gobs of it of late. That trend should continue, as the company expects margins to remain in the mid-to-high 40s, and even better earnings next quarter.

Jeff Hwang owns shares of Cree and can be reached at JHwang@fool.com.