CREE - Earnings call transcript Q3 2018

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Operator

Good day, ladies and gentlemen, and welcome to the Cree Incorporated Third Quarter 2018 Earnings Call. At this time, all participants are in a listen-only mode. [Operator Instructions] Later, we will conduct a question-and-answer session and instructions will follow at that time. I'd now like to introduce your host for today's conference, Mr. Raiford Garrabrant, Director of Investor Relations. ahead. go please Sir,

Raiford Garrabrant

results and be of conference Welcome our the may call. our today’s note on Mike Liz, fiscal our and outlook, quarter quarter in to Today’s our measures press are XXXX. Investor numerous call non-GAAP and the Relations year CEO the Cree’s posted and and financial fiscal forward-looking subject McDevitt, reconciliation forward-looking section Please our a include risks report will statements XXXX Today, during is uncertainties. in we website. CFO, business the presentations good Such statements you, third to make of will afternoon. corresponding release our that third forward-looking and call. for presenting to Thank Gregg statements during GAAP about Lowe, other we results

the today factors differ noted Our that and cause the important materially. actual could press SEC results to release, mention filings release in

themselves that our allotted has During the within ask question the one participant Q&A a and limit opportunity each ask session, to analysts time followup to that question we so hour. one of one

If call. after you please the additional have us questions, contact

Gregg. like the turn I’d over call Now, to to

Gregg Lowe

Thanks, everyone. Raiford and good afternoon,

along financial results, we presented more at today's I'll discuss QX some of strategic plan. performing plan which I'll on recap with the against February briefly color business For is regarding provide Mike our will that, call, Day provide QX After after our how detail outlook. that our and a each in quick Investor

end range, progress each our initial of were gross strategy. the and as for right execute targets. were at of on versus with direction our EPS range margins an end results exceeded the and showing in our top QX business our Our the top step Revenues we

to call of provide our momentum. Mike the of it now I'll While the on quarterly businesses out turn encouraging more the coming the strategic results outlook stages plan, in the very quarter. over gates is next the with to and early see new to three we're details positive for

Mike McDevitt

commentary a will financial results I management which Gregg. on measures our on is be statements you, basis Thank internally. providing consistent with Cree's how non-GAAP

information However, by non-GAAP Non-GAAP accordance be to in companies. and information our with comparable release non-GAAP in to measures provided metrics. key considered website in not along substitute other the our on of GAAP provided all call information results prepared with and GAAP. periods for A may of not is press other to a posted with for summary should reconciliation corresponding be a this non-GAAP mentioned are accordance financial statements not on supplement GAAP the or historical

and quarter XXXX. These year-over-year ranges activities we third to from sequentially the XXXX, Call business million targeted the and of XX, or on non-GAAP $X.XX which March X% less were RF a all QX exceeded X% revenue acquired Infineon increased our For and results include earnings decreased $X share, million $XXX Power fiscal per consensus. than of First month's

above revenues February or Call $X range our First Excluding Non-GAAP our was share strategy. XXXX remained third which the and target acquired upper and XX, exceeding consensus. were targets $X.XX we On at end quarter $XXX our Call XXXX at Power RF fiscal long business First announced the per our million range of million consensus. earnings business

XX% in segment quarter. on which our considered growth. its As fixing in Products Lighting taken This impairment performed fiscal a non-GAAP to impairment Power share expense Products value of loss $XXX modest as segment items. segment grew or million triggering and on $XX XXXX. our test the than driver earnings was exclude Lextar plan therefore were value Fiscal was in in fair with of $X.XX goodwill of for close range our share third quarter and XX% was less we per charge gross From carrying growth financial and investment the impairment, execution. value testing, this XX% We largest $XXX.X adjusted connection the of outlook and third factory Lighting $X.XX and above for $XXX quarter. and part GAAP tax intangibles concluded of and or Lighting targeted our of this transformation third transaction, range. providing of transition sequentially reportable million resulted due third non-GAAP revenue amortization, revenue acquired million sequentially Lighting an from our Products Overall, XXXX business than our the our of the this based a the fiscal is other stock quarter and our year-over-year goodwill the we that Organic our XX% diluted event segment focused and profit non-cash per above decrease, million follows. costs Products better fair XXXX the net anticipated be RF our compensation, to year-over-year segments Wolfspeed targeted our acquisition to

fiscal XX.X% sequentially gross were for sequential margin primarily gross was mix. incremental demand profit reconcile strong X% QX margin quarter our upper gross XXXX screen lower Our our our profit target. a are due primarily sequentially million margin million demand $X and year-over-year of margin and and great the primarily XX% XX% X% team the Gross Products related. with quarter to lower sequentially profit million capacity to $XX a was factory high or profit strong of third Lighting a million XX% lighting our for to million were margin done point R&D sequentially XX% year-over-year than The XX.X% and XXX $XX warranty to The was XX% Non-GAAP product which for for at profit profit sequentially targeted Non-allocated of increase range $XXX operating basis million XXX expenses gross end expansion Gross lighting, our growth up specialty was for favorable gross related line LED during XX% managing due million declined sequential $XX due a exceeding to of $XX to has and for and revenue was cost the plus gross targeted to basis online general which million down revenue year-over-year XX.X% included target upper more of and in ramp margin, to our increases that X% new $XXX slightly minus non-GAAP in improvements. beginning products bring which down was to target. the a point power at costs X% at $XX and increased applications. range. due gross which job totaled for the and and timing yielded Products above video end lower gross increase. increase. increased is to

and Our our non-GAAP was million exceeded Call operating income $X target First end upper consensus. which of the

ended on business March rate our targeted. as quarter our million million assets We is that credit. cash spent tax Infineon line the part reported X% RF of $XXX of non-GAAP Our in XX, certain to and XXXX of was segment. we Power as On million investments $XXX Wolfspeed the and with $XXX borrowed had acquire

free $XX from operations target. was million capital was $XX line million cash cash negative in that quarter $XX resulted flow were third in the including expenditures of and with patents which During million our

support expanding our the remained in the Wolfspeed business capacity exceed in on In by to to for million of demand carrying XXXX expanding capital these options million employee $XX from Additionally ability exercise target supply. priorities allocation focused $XXX production driven we we products spending primarily our Wolfspeed's quarter. plus our capacity demand. current as forecasted minus fiscal received of capital or stock customer

to Overall XXXX with current a cash efforts or we than target solely fiscal capacity plan, free our flow While forecast in being timing. are lower increase $XX line is cash to due announced negative previously plus the minus. outflow

investments due previously, free mentioned the opportunity flow to over is cash the negative accelerating support several substantial forecasted As next to growth capacity the the years. Wolfspeed

We are for end customers external calendar the with XXXX. double target capacity by plan our materials of on to wafer

device also intended our to the capacity exited with and in calendar plan our device Power double fiscal on This power is end We start we target where from coming are fiscal online QX. additional XXXX RF of capacities by XXXX.

this in current Wolfspeed minus target based a $XXX strong we several we inventory be X% of million days having We products finished hand on Power following ending growth Wolfspeed the sequentially December share up support We or Inventory trends. the QX due plus our in XX inventories non-GAAP The at to $XXX remainder of of than the technology over is gross quarter; at primarily at million and on company Days million as and RF and within last business a sales end term as the LED million factory up. March XXX XX% could basis ban to purchase the increase seasonally X% based reduce March. to $XXX a by power target ZTE less up plus revenue this sequentially company growth step revenue levels increased export outstanding of work and range or plus preliminary to QX QX revenue which Due quarters. year. that $X ahead the near XXX margins. business in ramp components; from quarter company the in of million, increase LED target on of decreased included relates of the to tracking process a dilutive days with sequentially initial we variability inventory grow to new may organic to revenue high the $XX lighting QX. ZTE. anticipate minus acquisition to million total inventory profit full and next of ban revenue recent the of impact production growth accounting the to RF we JV XX acquired lighting of utilization components, solid capacity earnings days. on is this to in gross Chinese come minus out Wolfspeed inclusive Power target export the modest yields $X.XX to XXX acquired now or we days sequentially increased last QX We despite back range for power point backlog up days our end inventories mid growth QX of segment the Wolfspeed is our to slow goods. $XX per our some target have As day

ZTE rest unsellable at Additionally, become a $X.XX charge would ban, acquisition. future determine the The we being to be minus. equal a due this for portion need gross that We as term primarily impact Wolfspeed the margins export of term higher margins kper targeted share. lower non-GAAP Power approximately the XX.X% plus to long our we just Cree's RF we to still the improvement margin than target the loading due remain or mix. Wolfspeed the Wolfspeed Power QX and intact is is improvement confident sequential custom business target RF strategic of we lower acquired we become Despite impaired, portfolio that could In sequentially point. record has if has LED the margins are export of revenue lighting near-term is inventory total made had and ban. one-time have similar Sequentially inventory to for margins. some factory which we near to incremental benefit the consolidated ZTE lower

from of our size plan to expense of resources the plus in this are excluded $XX GAAP quarter align implemented plan operating our or targets. the target reductions. with strategy. which our we that minus restructuring after QX During We end implementing part before will we million a target million incurring XXXX Lighting effort $X to right to annual charge a The be realizing Products fully September aimed non-GAAP as is business be fully restructuring

revenue minus non-GAAP QX targeting are XX.X% similar of to We plus to be which is operating expenses QX. or

QX our between incremental expense cost $X bearable cost our QX trade OpEx We RF IP profit the semiconductor $X.XX $XX of and are targeted to quarter cash be revolver business at related rightsizing target related Wolfspeed show to operating R&D, spend implement by sales a income a we includes an target higher sales QX as to non-GAAP target million or between minus. full lighting similar interest initiatives. to operating begin offset to to slightly per non-GAAP lower net the of higher additions, non-GAAP $X.X million. and levels $X million which are team be effective result to rate spend X% to be illegal cost, acquired or target expense and Our Power $X invested tax partially share. we QX to we exited and to QX as net borrowings to million million be We diluted where $X.XX plus

amortization, acquired charge Our costs, target Lighting transaction other excludes the stock integration compensation, and EPS non-cash acquired items. and restructuring non-GAAP intangibles based business

potential the do ZTE include and non-GAAP specific reserve any targets inventory. Our not GAAP for

include RF GAAP outlined excluded our million inventory plus $X bases our and Additionally, $X Power or up. acquired non-GAAP or targets million QX step are amortization integration press in acquisition release minus plus in earnings our costs of targets. from minus of These costs the

understand the point, our our response are the States Comment Request April the like many United our customers, we published certain Public determine the including of Trade the we fully Lastly, potential LEDs. impact on our from to for this our global working on Office manufacturers published At goods business imported certain China, within Representatives, suppliers, on noticing XXXX tariffs potential of monitoring timeframe. are to in USTR's and

potential not tariff. non-GAAP Our targets Chinese a QX GAAP LED from include any impact and do

factors Our competitive now and environment. vary back including that QX based several discussion product factory on a turn could I'll to overall targets demand, execution are Gregg. the mix,

Gregg Lowe

adoption was business. Mike. signed carbide million process, for strategic tremendous silicon Wolfspeed strategic is team ramping to as resolve acquired completed teams Thanks hard supply production associated production illustrates drivers Power opportunity potential and held new XXX are the decade. vehicles, received with coming industrial materials, solar silicon of business the demand technologies production performance quickly transformation power carbide communications, the agreement for review QX carbide excess a XX% our of a the year-on-year expansion. nearly the with the From are of the remained perspective, one meet and in together the to The signals QX substantial use basis The electric RF and growing of businesses silicon increasing we and and gross us demand Investor increasing points. plan, and Wolfspeed's for working GaN Infineon in margins present almost busy to revenues rapid engineering increasing working and rate $XXX the with of a our Wolfspeed in Day strong for primary GaN materials an challenges organic company. markets RF growth

RF product the also RF business leadership to are Power and Infineon's acquired have additional in to expand which domain our broader scale, excited will quarter We expertise. offering increase during a

this employees still in are and the but committed to the a integration stages success. We early team are of the process, the making management

strategic this short with business some the while the change Now acquisition. of this restriction creating sales benefit ZTE is it doesn’t term headwinds term long in

For through LED the from concluded process Products review we the that focus. greater strategic business could value drive

a positioning have great in We and amount a technology. of as a an power incredible IP us channel, brand, leader tremendous high

This Going lighting deliver like capabilities focus that are create enabling an margin margin opportunity from QX resulting in solutions against to manufacturing generation. increasing application revenue the and reallocate going more us in and free Wolfspeed. gross expansion gross forward, both value, year-over-year. LEDs take them growth to and have solid end well as we automotive demand In us for good business some and optimize with those and execution goals driven modest was capacity and areas factory revenue and we're to flow to these cash great performed stickier by

to and and it presence. on has channel Moving in and while the of partners better like improved corner. combination the in revenue pay target new traction continued higher is by QX significant demand than will is and profitable a significant objective long-range distribution channel XXX revenue and profitable turning our being the our and better and This quarter-over-quarter it's year largest and work the hard transformation. basis larger our still review QX. resulting Gross our today process business margins lower on a the timeframe more the a become new with early, create margin strategic past relationships the feels points in great business improved The plan of we roughly made also of will off XXXX. additional a customer Lighting, in We've us increasing new release single In the giving and quality, product footprint pretty our facing smallest out improvements quadrupling improvement factors; started to engagements, for by and was the company's revenue business. claims. over Wolfspeed, strategic methodologies design We've plan, initial to business of warranty products. changes coming most to fix products most driven

gross will at combined from Our companywide with growth and LED margins. improvements, business where growth This also see to margins a XX% on organizational around us modest see will points shift, our Lighting growth focus business segments business we're margins, XXXX To gross margins. improvement will we've with of mix improving on and drive focusing and XX/XX/XX establishing in some model, changes. today a some made modest XX% by to this about efficiency XX% stickier help quality model, XX% enable operating significant facilitate basis OpEx,

execution were between with team efficiency who allow many the will shift and industry one seven extensive manufacturing and brings do to semiconductor a been still has in improvements, Devices. for Wolfspeed automotive, multiple to asset so be can type opportunities. lot growing the for a opportunity QX and split any the executing line. substantially us and turn and Marketing Sales recently and in towards the as combined might Rick significant tremendous our and amount lead the Instruments tremendous the first operation industrial fungibility He over at the new semiconductor before combined questions face All-in-all, require I'd step LED from of capitalize the leadership that, running of work progress has Putting lighting semiconductor of Texas years to equally challenges. for communications, under Our Wessel. strategic Cree Thomas the leader. have. a we the under in good LED forward. higher-margin of an will and take more in business, experience yield also we one We've business have give it improvements, will a organizations like the Global Freescale LED the going distribution. With won't been happen plan we to we're those our leader us sales Fixing have Thomas under straight to Wolfspeed committed Cree operator in you for working combined on important, assets enormous has operations. the McFarland, of and experience that, experience years as will is Analog to and focusing Wolfspeed them which back

Operator

[Operator Instructions] Joe of Osha comes JMP the Our first with question from Securities. line

now Your open. line is

Joseph Osha

my hello, and complements. you Thank

On for silicon at through you I'm if of decide this long it to have were how the at take carbide you tools for you – that capacity that you. wanted would what business to Thank even times to example, add kind looking the wondering lead point the process? for more filter

Gregg Lowe

build know, you of we're the of like growth – capacity these everybody, end capability thing kind we lot it's the tools year just piece of street not by A the that, are parts and in remind going We and down Joe, ramping one and we're that silicon them we right The basically well. tools. exceptionally getting that now, midst to ourselves. can is doubling buy go the are the

now brining to capacity online. up we'll speed grow c on limit to there a the that that we're track as year. growing continue in So of the some and terms process. these capacity of continue planned next And anticipating We're very proprietary things is right it's currently

to want a time, In terms you lead couple? of add Mike

Mike McDevitt

it anywhere of take is and we've there as the but team Yes, and we up depends some in bunch comes that to it and full from XX months into saying, of toolsets are getting on extent when the X the operational, set, Gregg stuff then to but was customize buying there a in. so it that's effectively our so - get bandwidth to that some factored

Joseph Osha

we followup some heard about? sharing that planning number just quick as gross contributions that on for where the a you, XX% margin Mike Thank divisional you, you and of would you to

Mike McDevitt

the range long goals? For

Joseph Osha

That's correct.

Mike McDevitt

businesses lined the Lighting percent intent approximating that is out haul the the and low leader our at Yes, margin it in then over that is would call both Wolfspeed we XX Investor and range the Day the continue, to would be like XXs. the be LED the be in would and long

Operator

Brian Our next from question of with Lee Goldman Sachs. comes the line

is line open. Your now

Brian Lee

the guys, taking questions. thanks for Hey

just First us out the wondering into time quarter timing dollars breaking to rate I nonorganic is maybe it sense the the acquisition. QX, based QX organic one implying seems about for QX. It were just full the Infineon but you Infineon pickup much contribution give there or revenue on for guys like you you than a what acquisition, are in was is and at run contribution million some appreciate seasonality on expecting fiscal just lower $XX of If was you doing rate that. Infineon you in can set the Wolfspeed is would grow imply described run issues. organically a

wondering So reconcile? how could we Thanks.

Gregg Lowe

bit Yes of I'll selling helpful. a you but little detail. probably restriction in normally biggest out is break is ZTE. of specifically, it impact will more and impact give the percentages We think this customer then off start I the case Mike don't The to Brian,

business, able headwind. of to revenue ship Infineon from to large So being customer the so Power a approximately the not ZTE created obviously a was XX% them

Mike McDevitt

or we million about announced flatline. the revenues, annual wasn't targeting anticipating acquisition when And $XXX but it a talked we

to four get ramp you the up. So basically million to $XX divide it going to to and was by have

it you time that. then should So if building think how out lower people and is of starting over model

Brian Lee

that's right, with I'll helpful. followup offline there. some all follow-ups Okay,

be going maybe another math something there am in Just margins or sequentially, to walk? margin I is Wolfspeed it lighting a points kind that the the of at you. missing on snitch, and a Mike, XXX suppose basis the would probably consolidated quickly Thank I XX/X up is down is that LED imply is flat the margins fair

Mike McDevitt

couple targeting on XXX Yes, basis what we point be a sequentially would Lighting. is kind improvement

Operator

the from JPMorgan. with Our of Paul Coster line next question comes

open. now is line Your

Paul Coster

taking Wolfspeed mix but Mike, margins, the my same? confused question. that might on the Is for with ZTE weigh product have I the may the one mentioned comments. it thanks and you Yes

Mike McDevitt

to two it. So, pieces

packaging, first the bought overall. that accretive still so is part broader portfolio, Wolfspeed margin has systemic component we Cree it lower the So to is than RF our business Power but

one not to and unloading just it and factory second able ZTE so with do part the being And of that's make is some part ship then we parts. have

Paul Coster

and into Okay wise you plan largest know be followup, the then are quick Thank I'm for a this that the in selling probably right, China tried least will volume how world market you does few EV at unit that? already and you. market wondering trade relationships and just

Raiford Garrabrant

Paul we our ones like we've EV into U.S. customers, continue around wins that the out impact a we and Hey, we're world it's doing but to of world map or discussions, that and selling of activity would intent Cree. punish wins acceleration generally fully have around the to said, yes but road companies to what the don't design to discussions the and Raiford, OEMs is the doesn't and tier decision an here and hurt we market understand assess we TR get number the is speaking potential capacity from and seen not believe with U.S. hope with the there, design break

Operator

question Our of the from with Jeff comes next Cowen. Osborne line

now open. line Your is

Jeff Osborne

afternoon. good Yes,

time share the just if are and Just making silicon versus question…? some two progresses? would business, own was what quick you curious over that in then is using of carbide the you're strategy I silicon the as margins assume I ones carbide have acquired packages could more materials And roughly silicon to move then percentage on which Infineon and based you the your other as

Gregg Lowe

we position with intent would I nitride. LDMOS Yes, silicon most of technology capitalize the and it on gallium to our bought is say the today business certainly with traditional

be station. will for XG we G based more transitioning obviously gallium nitride near five business that at bandwidth demand for with the then base So the on and necessity

So would to an business a that from GaN predominantly migrate based LDMOS would predominately anticipate capability we that based capability. silicon

make and we to as gross certainly we'd up transition. that be margins we anticipate As make that go able we

Jeff Osborne

is in that? any possibly as there the thought on and that is context and mix any and it RF giving to there there some within Got provide to it can color materials is Power as you relates Wolfspeed

Mike McDevitt

that I think think representative of more and breaking at talk out haul business. to overall this it time We just specifically. about contemplating the not it's the we're better

Operator

from comes Harsh line question next Our of with Jaffray. Kumar Piper

now line is open. Your

Harsh Kumar

carbide the Yes, the results. curious midterm Congratulations and was as market follow the to have one fastest the do I silicon mention off you up? on which then grower see in hey near guys. you for strong I Gregg, a

Gregg Lowe

Well, It's I near amount the would I vehicle for mid-to-long market market. huge electric in that's a that certainly even is say largest of also term term a as think driving got potential. activity lot the the well. sure the of

manufacturers they improvements capability for what amount certain amount increase get, you a amount they of the with the efficiency the you amount helps use or either of Just looking really for that range range nicely get density and for certain people car aligns of of are batteries reduce battery. power that in terms the get of electric vehicle. It

of are are electric things those that high And list those and vehicle. people so are buying the an on

got So lot the is and an that of expand interest lines a team the new so news we've sort additional of will in footprint a that driver. so you other objective have. think really the coming that's trying The solar and if forth water got to is in sales good lot and onboard, I and industrial we've with we

Harsh Kumar

and can do follow models? when mentioned, I'm that of start you reduction And up, think then modeling for not sure that million complete into but when our Gregg Lighting if we to $XX the OpEx in my you

Gregg Lowe

'XX I it long within have is we're out the the thing the that savings September we baked that reinvest of you our funneling guess expect I'd to fiscal to can models choose fully when those for we So to XXXX may as put had well rolling is out that of Wolfspeed QX into out only of fully our there have plan so… some growth in. speak, we and implemented quarter, so we then quarter like that coming as so that expect and

Operator

line the of from Our Needham. Edwin next Mok comes question with

now Your line is open.

Edwin Mok

Congrats Thanks guys. for good for question. Hey quarter. a my taking

competition I was demand the the seen I question capacity, the, any on guess carbide those wafering you and have side also adding have silicon some the the capacity add have have of So captive first manufacturers added at on you you capacities? those your given guys guys and capacity, of growing the device on seen market, actually material competitor

Gregg Lowe

the may And lot certainly we're and few tremendous with and I a forth. so start add what engaged point. of is a can of a comments I’ll customers with Well they be and would are amount capacity There and cranes expanding this wafer around at demand of come and base. we've see impressed technology that see the on pretty a got a here they tremendous also customers campus say bunch is, when whole they

to I secure discussions you would the is, to increased time. amount agreement so demonstrated solid. now far capacity $XXX our I the than period they the has amount very do customers The good been indication Our ability And that $XXX capacity, more how very, think and we're is million, quarter million capacity how of greater simply tell of a more of be inked the that supply has this to what ramp of that. do get we last those relative discussions having right over

Mike McDevitt

long scale relative market well, we're to and capacity clearly and from point internally is data make the others term of are starting as at with and enter adding are I the based some then track wanting we sell us. which customers what Yes to the where lead to off in leading think supply with agreements both others what's we can into large on capacity to adding Gregg’s rate others but we're in externally terms

Edwin Mok

acquisition, now support and to term margins invest will need your you’re driving guys improving capacity on how I kind you business to in-house helpful a about the you just, think in or Okay, I of guess then business of there have a into long is And have deals in terms that that. margins right? facility great do term Infineon you that increase longer question long or your benefit packaging facility call your bought that guess, to that to some now the much clarifying patching the growth? see term better I working it insight packaging way that’s Is how

Gregg Lowe

we're things, of an incredible say of at great a couple It's team. great the operation, stage. now a team. early so I into great two engineering It's It's leadership workforce. kind this owning team. months operations we're would It's So that a

factory. excited So The underutilized they that. it's highly hurts automated ZTE situation really we're that. point have is factory about At and obviously this the

have to ability grow an certainly we that capacity. So

will be think of LDMOS in the to margin it I accretive it silicon will of to transition gallium Cree’s a and gross substantially we be nitride business as incremental, more certainly be business GaN increases terms business. or certainly will margin, it a from in overall

So we real feel good that. about

transition of that high the sort We are, be and nice that, of the of towards ahead is is those to demand that also we've trajectory growth got sweetspot us bandwidth a see GaN for transition. kind being XG continues in of the

selling same to a overall with about feel started mean, ban off it. our on customers. bummer. bigger the good really one of So I I We a it's

really but that's I think term change the said what we're rationale doesn't about headwind, potential. a it we're strategic excited the I doing and around certainly short like

Mike McDevitt

XX/XX/XX Yes, would of add doesn't just all Edwin range actually the our I is it's model. support long change that in is it model

Operator

comes the question Daniel KeyBanc of next Our with Capital. from Baksht line

now Your open. line is

Daniel Baksht

for thanks. and some growth sequential in related? talk light revenue gross capacity you Hi, is targeting Wolfspeed, related or you're reallocate of in margin about both to JV mix Could Thanks. the this a improvement how LED products

Gregg Lowe

demand good some mentioned JV. so So quarter, growth the for in similar sequentially products, ago. in Actually to And comments versus with level term then is near growth. backlog our in power last modest growth getting our the got last target period a but seen, some we've this same now right that high the kind and staying of position in margin gross in demand so started good a the as what and we're my as I in quarter we quarter quarter good with is expecting good we've year

near winning the high screen, in those in lighting specialty least term at and video power lighting, we're So general applications.

Daniel Baksht

previously in less mention year-over-year CapEx Thanks you'd then XXXX. on great. Okay, and you spent

XXXX I the $XXX right, will CapEx XXXX Thanks. statement million year that heard that that is Now this stand? CapEx about does if

Mike McDevitt

the the is originally with it effort the XXX, undertaking same the at that just and we're Yes, that effort. timing lined still of of It think is the outflow. XXX cash as the the

projects still on Day kind that with at of and is Investor place. we line macro So initiating targets the so what in about we're in all plan, that the FYXXs in plans still talked are

Operator

Our comes ROTH next Partners. Capital question Craig from the line with of Irwin

line Your open. is now

Craig Irwin

for my questions. Thanks Evening. taking Good

Can A or we're among investors share opinions them at need lot attractive is wafer prices all to carbide multi-billion years. silicon that next fairly for to strategy customers us there supports what whether looking side customers ahead you your we believe not sustained make unlock as Gregg, with the out looking are the necessary over of your So margins maybe conversation believe number are for have hoping of wafers, the more wafer where, any prices whether about next wafers. years? at color dollar some you that you there factor of the the aggressive should a over far TAM where and to that lively few Cree those pricing as, else on the other think on your are thoughts you gross

Gregg Lowe

our numbers cost attacking certainly over time it, silicon at well. active you might the that cost towards much those Well, be, silicon carbide. terms get technology interesting of but the this very the a in of pretty of out Craig look we're of integrated of looking you’re as with operations reason and what there gains carbide if stages why out get obviously right the of kind better the of driving the with our part down silicon versus take period combining In are carbide efficiency operations the It's you of we people efficiency early is moving are silicon at now, vigorously. and good that manufacturing

pretty cost get thing add programs then we're inside lot working a just to intensive that business, you going that better. I just If on think good cost analysis value is to that the that it's and

carbide we're obviously that We working let's at. any it's is just not market still know something say a But So, we're share wow numbers and on. now. I'm where we're that of for it standing costs this continue we you will silicon will if silicon carbide if for up absolutely use that that's [ph] and what it expand the demand is. driving the just drive the not really intention right the and to SAM saying, great going down will

that's going of at company very on right costs work lot down. now hard driving focused on So a

Craig Irwin

Good to hear.

on to agreement other silicon carbide it's for additional producers really you to Cree carbide, in participants market, nice on licensing future, Lighting take the this other technology expect So GaN Nexperia, is see silicon we maybe color to the whether this create the pulling years? Can similar GaN momentum give licenses license achieved on would other in us producers, pull GaN my what many into business should followup check you on not question customers. silicon, in to you'd over with helping similar expect or see chips In potentially. and the if last Cree some its fixtures to maybe power

Gregg Lowe

Infineon other with a carbide we've than that purpose. approach having materials works for that the the there. exactly business is silicon inked greater Craig on deal folks had think million really that $XXX I with Well, We out

for really I of what you point silicon carbide substantially. that silicon that absolutely So take, think a in there mindset movement will is pretty is of tipping same real to expand opportunity we are if to a the us that kind and

absolutely we're that. So doing yes,

electronics deal with we're to working for Nexperia to make silicon carbide separate thought try of with to I I think the as process, was think technology folks but a lot of silicon power it a carbide, choice the the licensing sort industry. relates GaN of

Craig Irwin

again taking questions. for thanks Great, my

Gregg Lowe

you. Thank

Operator

next and from Our with line the comes company. Instructions] of [Operator Rusch question Colin Oppenheimer

now Your open. line is

Colin Rusch

term the mix those looking are about of little can you the many automotive customers, are the sawing that many and talk getting interest on then selling? a and much were at so product about how from actually supply you Thanks customer interest wafer how that, just long of guys bit the and thinking them devices

Gregg Lowe

a it's think combination. I

the about capacity, to for the wafer capacity the As we've ability make talked both and the to as third expanding well parties power as sales devices. fab reason our we're materials

we're who having we're having reasons these companies source and with ones having device are and either with interested are supply. conversations automotive of conversations makers globally For who and discussions Tier similar

So the what reason are is ways. both the reason we're seeing business the we we're significant the growth in participating you're because we're seeing investments making

Colin Rusch

of the capacity, bit about the you potentially lumpiness talk how ramp do expect you some capacity a you as up? much you of can as And little strength gross margins bring

Gregg Lowe

that tell together. We the a like the a model. past engineering through and What we capacity normal. quarter the always that's would a manufacturing with and faced I've of challenges. able impressed of I and would you it been there's hard What is were You very know, you, I and picked to lot I you, seems crisis to couple Cree very know day This tell was some operations. so We team of forth. get ramps

issues going I'm going not great organization think to big. be forward. cooperation most to and just by but going some and that trying result will and these I'm of anything foreshadow they'll us I across large the big. anything anticipate a that allow forward, is the teamwork things it I don't like are news normal to and very going this it's and good executing as have we're team together great to a job that you're capacity to did we saying quarter. something really is the put ramping team up past of come

Operator

further at no questions back closing showing like I’d I'm queue in this call Lowe time. any turn Mr. to the And remarks. for to

Gregg Lowe

and everybody results you. thanks Well, Thank We your Cree. in support interest August. interest your today forward quarter and our your for we in reporting time to look appreciate and fourth

Operator

now great Everyone participation This conference. gentlemen, a you may in have the concludes and your and for program thank day. disconnect. today's Ladies you

Wolfspeed (WOLF) 24 Apr 182018 Q3 Earnings call transcript