CREE - Earnings call transcript Q1 2019

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day, ladies and gentlemen, and welcome to Cree's Fiscal Year 2019 First Quarter Earnings Call and Webcast. [Operator Instructions].

As a reminder, today's conference is being recorded. 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

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

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

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

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

like over call Now turn to Gregg. to I'd the

Gregg Lowe

good and Thanks, Raiford, afternoon, everyone.

This an and in trade to strong the Florence LED growth headwinds Mangkhut the target of gross in excellent Typhoon in with XXXX and Hurricane results, presented I'll with some After and highlights from after that call, result range, our off business per quarter combined the global share quarter. top regarding Asia. along a performing, is an year driven is non-GAAP each to with the is given I'll lighting. first by Neill briefly by today's robust update detail discuss our provide our provide in tariffs exceeded margin and U.S. more improvement For that, tensions, great challenges quarter of which Wolfspeed, outlook. financial earnings QX QX end related on start, Fiscal how the another

another the quarter. While we over execute bumps results next on outlook direction. in step I'll long-range some way know provide Neill to QX now detail it transformation more as along there the the right and will be quarterly the for we represented to our plan, turn

Neill Reynolds

you, Thank Gregg.

and the get am how here. a with our in with will numbers, mention Gregg a need say team strategy tremendous shareholder excited result executing is into history non-GAAP that, on to management and February. I to the the I measures by which me financial I a laid Day that statements I is basis, on internally. Cree to Cree's an drive let Investor commentary just long be of providing at by do how innovation value consistent the Before With out be opportunity company the

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

For to year-over-year XX% XXXX, the of million. revenue quarter first $XXX fiscal increased

with to share. strong and first income combined $XX or ranges consensus target five-fold margin OpEx. net share gross more million $X.XX earnings favorability performance diluted non-GAAP increased than per Our our in to per non-GAAP exceeded call The due

Wolfspeed year-over-year $X.X cost revenue sequentially basis due our points of product targets operational Products line to and Non-allocated tariff in to our X% respect totaled but and for gross $XXX exceeded on and grew which acquisition and our non-GAAP Year-over-year profit revenue $XXX increased an discussed first our was for XX% to targets the right-sizing intangibles business. amortization, $XXX targets. were Lighting exclude ASPs exceeded of above stock-based lighting the compensation, business call. earnings non-GAAP $XX QX than revenue the costs gross sequentially XXXX growth efficiencies or were gross more at due revenue projects. selective fiscal X% gross when of pursue. $XXX from spend Infineon's net per our for in LED targets. XX% we our mix, R&D reconcile discipline reportable for included and to discretionary non-GAAP expenses certain QX items. primarily as XX.X%. target, improved margin with year-over-year to year-over-year margin sequentially targets. which XX% above gross good segments million, with which better margin, line to execution, profit to and and organic million tax expense X% was Products Our Power sequentially our exceeded of Fiscal share XXXX impact targets on around other quarter was reductions, was well increased costs acquired of with and the excluding and million line follows, of is timing offset XX.X% XXX and our Lighting mix and was first we quarter basis, million better-than-targeted our the down decreased in Wolfspeed diluted million, being and favorable lower $X.XX factory more XX% million strong noncash operating million $XXX our Non-GAAP of than are to margin with lower targets. LED XX.X% a our gross revenue XX.X% RF as

level that in consider so previously, provide to is this you we QX guidance. our more into a moment detail OpEx As our said baseline. the OpEx from the reinvest around I'll savings providing plan when new lighting to be shouldn't restructuring Wolfspeed,

at $XX operating million. our non-GAAP targets income Our exceeded

tax non-GAAP Our to which was our rate the than was slightly higher due XX%, higher income. targets

in with credit expenditures with cash was convertible face million. and free the on capital resulted million million, operations $XX borrowed $X During $XXX from the $XXX negative debt million value cash $XX quarter, which ended a X of flow and in line investments, million. first and of cash of our We were quarter

This of Regarding reduce or $XX.XX fixed was at in XX% expense, issued rate per cash it attractive of interest to lock conversion convert, rate, sheet a balance it and is X.XXX% a to financing accretive. us share. premium add because the is allows coupon the with and

the only is the of share amount as available increased current result count. interest of net required issue double a Also, dilution of would each to and move stock line price additional the a to to income. earning expense the quite our shares of will to interest from we interest and invest compared our few the As net from capital quarter modest cash to incurring could working a relative a risk price position lower percent credit, rate

Our remained in capital expanding Wolfspeed business. our capacity priorities allocation focused on

investment still target by Wolfspeed's of primarily production approximately $XXX we expanding For million, to support capacity driven demand. fiscal XXXX, customer forecasted capital long-term

some approximately production sales to capacity, As range our Inventory we could on target utilization have With our and ramp to compared outstanding days near-term was increased days. of variability XX initial in flat of XX our hand this new that is within $X.XX factory per margins. from June for combined yields QX days to and reduce gross XX Day QX. may we the by the impact continue our applied Wolfspeed guidance, seven into went XX. will to prior we share. QX $X.XX The to targeted share, and earnings tariffs some effect Products will effect consistent per additional target in respect QX in relates reduce reduce up with impact time, this that tariffs at of to earnings by September Lighting of

million We from these targeted further all of be the approximately to net evaluating Lighting of be higher revenue the by our the to as ways X consolidated We than to a Cree's revenue positive down X based QX. in tariffs. margins or LED to focus on revenue our offset we of QX focus based to segment sequentially We China compared are slightly mitigate target non-GAAP related to business. following for businesses; higher, as trends Margins softer in in impact on in $XXX on up trends, our range X% across target a million margins the are areas segments solid company tariffs. incrementally is so sequentially of revenue XX gross tariffs; round slightly targeted point reduction mix growth basis the gross QX increasing by Wolfspeed improving latest $XXX incrementally demand down sequentially the growth more

days We are the September, operating approximately non-GAAP targeting expenses QX as in to annual effect is quarter expenses higher of that $XXX into went Wolfspeed items. be of operating to increase sequential a non-GAAP impact quarter well plus a full the other number million. higher in in due R&D increases merit and primarily as The

our we or net benefit percent growth in target levels be be to be of a the objective around million spend to variety a offering, a borrowings as targeted compared and invested net of $X to the go in as approximately non-GAAP million can our target And as expense IP projects, to between XX% convertible a net $XX and from to to including rate We for income $XX OpEx result at marketing are lower of to $XX sales, when million trade We per a and R&D full we vary QX between QX $XX investments million. XXXX for $X.XX share. of in million timing to interest profit effective similar be drive diluted $X.XX fiscal target changes non-GAAP remains cash operating shows we to OpEx increase $XXX,XXX to While trial, long-term to of of quarter where exited revolver tax QX. cases of reasons, non-GAAP and even QX interest quarter-to-quarter QX income initiatives. QX.

went a QX. the Our in into non-GAAP target already tariffs that EPS the impact from decrease of effect $X.XX includes

Our convertible non-GAAP compensation, items. stock-based and accretion EPS our other notes noncash acquired intangibles interest on amortization, target excludes

of the value non-GAAP investment. to do Lextar impact any include Our the GAAP our changes of and targets not fair

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

Gregg Lowe

continues while on gross in from an of excellent as more a job in the did of capacity margins. with targets the the QX, businesses increasing rapidly XX% demonstrated performed than better-than-targeted and Neill. Wolfspeed an growth or resulting in team organic year-on-year our margins line basis. in Wolfspeed challenges growth XX% maintaining well our balancing All of were to progress lead revenue Thanks, delivering perspective, three QX. way

the device of expand projects on Wolfspeed growing to double over for over in the again our of couple since sales we these materials alone, however, there, is growing charging, vehicle to drivetrain, capacity next charging plan. of In quarters the the is total and we're conversion of capacity business and well a long-range a result materials fact, we funnel accomplished $X excess In devices doubled, our with plan. for with than improved more have time and rapidly revenues demand technologies. infrastructure. full as margins dozens roughly quarter plan, a products have partners plan These such devices, goal where include electric opportunity power and stopping span basis we working projects, segments XX material our frame ahead of The leadership as which our meet in embarked devices not billion. five engaged by power RF. of expansion power power and onboard points We're to on position doubling The and DC-to-DC our sales gross years for

world's This signed leading our more announced companies. carbide we and validation long-term and technology today, $XX and Additionally, carbide. silicon silicon another we supply scale agreement in wafers of advantages silicon the our strategic bare wafers. valued The XXX-millimeter to have at than and is million produce covers is one to epi power agreement device another of agreement that

business further of to Turning The progress focus. objective through value demonstrated to Products. driving LED its greater relative

the in line more down its value, focusing targets years. the bit margins LED to revenue A actually X tariff-related where gross was than cost. combined team, differentiated our While was great strategy level of are effects in increased offset lower with the in almost a revenue with quarter-on-quarter, quarter-on-quarter and execution and on by our products highest

LEDs XP-GX XLamp this was architecture, line often component class. is S in lights lighting connected this number innovations During is Lighting, XXx switching its an and demonstrated than QX optimized LED compared lighting when the that lighting. systems with to more of cycles connected our Through quarter, This Revenue path margin off withstand better in double switch standard gross and in or the to Line, significant progress regard the introduced competing was continued we for With to dim will to because line systems. the can business. than targeted. fixing up targets, new

in XXX Neill quality The basis factors job outstanding touched a on that an by quarter through third has team of row, we driven more than For have processes. the by done earlier. margins improved the gross improved points, improving

over the shipped passed quality see as those my made. times. company shorter team vision, back, over with new and is that new I recently and gratifying products X quarters, progress improving The are QX output, reflect cycle where of employee paying fact, has record XX exited engagement business In One products and it's improved the excellent businesses. achieving we've demonstrate very the X-year is of the I has released yield processes last off. And anniversary. metrics our a example strategic to XXX,XXX X that new clear execution we in materials that has all of terrific in our materially improved

so line. acknowledge short the economy many direct times, respect to won't and we indirect must headwinds in really These that control, to businesses pleased seasonality of impacts the and employees trade so that all Lighting we the back make yet there and happen the can and on straight first how impact belief take With that we to things like typically to facing and like in our Liz, the questions that tensions that course, are possible our term. here rewarding my to businesses we're just LED said business, a are numerous it for helped note tariffs progress Of closing, turn the important in global in performing what's we've include I'd as terms Lighting in year getting with LED you have. I'd have March I'm that, it's of thanks say we the quarter. over to started might share any In Cree. to my that, our of experience

Operator

[Operator Instructions].

of Genuity. comes Our first Jed Canaccord the line from with Dorsheimer question

Jonathan Dorsheimer

pretty are strong not the like in so difficult of results easy, markets. Congratulations. Turnarounds it looks face

Gregg. So I question guess first though, the on Wolfspeed,

might talk looked it's on -- use that's to of you the agreement this you terms I of carbide I able provide wondering undeniable to is be and at was the out Cree what perspective I much of base As how silicon charging silicon actually your there carbide. in think if companies, supplying?

Gregg Lowe

of very over think comment, year, the capacity, And in would share. XX% carbide by something been leading Jed. We're that way, just company. leadership increased. is So What thanks we've for the has materials, our silicon of terms a I manufacturing say since strong we past have I expanding north the

I the tremendous capacity. very think a there's for rapidly. are I silicon led a and opportunity table the undeniable. thus, vehicle bring The forth. electric industry, things entire carbide pretty transition across and to advantages carbide like significant And think by to the we're And the so charging silicon transformation expanding happening is that

between cost giving and improvement silicon us driving us As down That capacity, yield it's we is expand a helping plus that advantage down as delta and us scale the well. advantage. cost carbide drive yield, is scale scale which helping improve silicon

silicon usage throughout I doing expand the of and our is is so the us to And example carbide agreement supply of think really industry, the that. just one mission

Jonathan Dorsheimer

of units. person. forward year? forward your in function XXX? should LED change Okay. combination been Has on Or any in an over the function from manufacturing number could you meeting as And business were whether not LED in just as to expect Neill, on and the any we or refresher that spreading just here Look that next platform just on terms give of the And I the margin you actual a Products, changes and look update XXX historically, the we welcome. the fixed to margins almost guess, utilization of completely of cost a in there

Gregg Lowe

shot me I'll add color Neill take let wants if Well, and it. that, a to see at any to

going of market, And is what largely lower revenue with haven't is and higher changed more had the value X business that, LEDs So that And has good transition of we our QX the focused, and or so deliver capability technology, segments I after dynamic XXX-millimeter, customers. much we're the margin the would One is forth. the of strategy our performance a the and XXX-millimeter. to in think highly that a contexts. say example and more I is to --

The LED the fungibility assets with second is there I is between manufacturing thing that and say associated would Wolfspeed.

using And our to that drive capability increase so fungibility growth. to we're Wolfspeed's

So as we LED to to capacity if demand -- Wolfspeed. have see there's you, or we've capability on that changes in move what got

sort that well. doing as we're fact, In of proactively

know I that much it's -- a -- don't utilization so I don't issue. it's So

from that Wolfspeed. changed ago that more segments Of choose to course, focused guess, we LED years the extent dynamics market. some better But to of X And so, to our manufacturing there's the do business, margin of elements, of I I move can on have we capability to maybe say that. would of the we're the that

Operator

Osha Our next Joe from question comes Securities. with JMP

Hilary Cauley

on Hilary for improvement year, on Wolfspeed from room and added there further much first coming kind just to there looking just CapEx. next question question on of actually how is is that kind out This follows Joe. of the versus first up My capacity yields for

Gregg Lowe

got organizations, the so a team was X Mcfarland. for of forth. yield, That's spectrum manufacturing throughput broader X organizations, so it the put or across we've good terrific job leader. attack Rick He's semiconductor things guess, of to go continued under together about, the in allowing room to kind and it's months of manufacturing X manufacturing some I cycle improvement and think done We asset. in unified, getting us times, manufacturing our our We in

future, of industry. a silicon down improvements cycle to improvements see, cost and time. driving in And continued across had up continue great adoption the in us QX. carbide We opportunity yield. for for foreseeable good had we costs improvements in We So great had we the in

really the team's really, think hard that. So on driving I

But kind amazing with of some made progress. first some steps. the think would I say I of we've we're early

of We have decent to pretty further there's reductions. and a sight ways to still cost go, have line some -- long we

Hilary Cauley

then a your great. little look more Okay, capacity. the And if year-end I provide power might doubling color one me. better you just wondering that like. again on was more meeting Congratulations on towards the capacity target to for double what ramp could

Gregg Lowe

to line. XX one incremental the happen happen is different next be more things targeting to and won't dramatic that capacity. double things we're quarter straight be in a What going definitely There's in that quarter. months a It over some that

so ago. capacity from quadrupled that our have XX And months will

describe some of we overcome high a a pretty as I have and that's before. That's pretty have a of working what would team And time work would about we has is same the set with that along I doubled say we of as all R&D, So we'll I'm challenges step-in. lot meet those together challenges job a just But significant XX-month million what the product challenges. way. lot to activity, sure the talked capacity really over remarkable manufacturing, working groups done that with together period and the

our And points basis this a gross double where the margins we we -- business and of XXX process began were yet from ahead job. being really so that done team says at you has being when I when good look think that,

Operator

Krysten Nomura next Sciacca comes question Instinet. Our from with

Krysten Sciacca

generation, $X opportunity Or like in to that you all with a would do that assuming carbide-based you noted the OEMs My the win you're potential that design -- devices. power the revenue just question overall market? with? or Is engaged first currently just SAM silicon is power that the the has devices billion on for the wins the clarification I the

Gregg Lowe

opportunity we market. generation. the that in not revenue definitely it's for the Yes, have It's an SAM

everything of You don't win that.

is of Certainly, the in that that. all activity, engaged SAM we're design at time. than that But the design-in bigger win activity the this don't You that. is currently

Krysten Sciacca

term, are some I describe either of then Got impacts maybe know that definitely shorter the you an of or the actions can if tariffs the these maybe impact it. remedies And to And diffuse taking, the or term this year. you're tariffs. the -- that longer in just

Gregg Lowe

important is don't Well, I we're number all come up, obviously, through thing tariffs But to what things, that we them. one pretty the $X.XX of a the really, been chain impact this on a and quarter, different at is, done as looking I a could the And It's bigger looking detail supply at there's attenuating, it much it direct minimizing, the of out think have these want or but, $X.XX job impact at in see. we've than was. quarters. least decent of go

is just tensions to we'll right of trade continue that secondary the So the tariffs that to kind are a And now. also things impact at customers continue on impact those down. driving looking have related then going forth of second that's the so and uncertainty of related impact

out Our meantime, all and trade eventually abate, for belief is headwinds, that done China that would to imagine In have a good the think the works U.S. -- end really up tensions figuring the and we're I with a dealing will parties. will just we're I way agreement and some that the we've job.

Operator

Our next question Harsh Piper Kumar comes Jaffray. with from

Harsh Kumar

versus follow-up. Two wondering got give me. is be and even your wafer you if a some are And what materials You was appreciated. us some X? business color have numbers to how us think Gregg, exact don't big growth you business your questions device would color could the rates those give but for I've do for on or I

Raiford Garrabrant

it's Hey, Raiford. Harsh,

out that I think we've say businesses It's any provided have it's specifics you are with Materials since showing specifically. late. sure of X of all not breaking the showing business fair the good power acquisition we're of a strong while been there, including that. organic As at been But to the know, and looking business. for Power RF growth growth RF around Infineon

Harsh Kumar

That's a point. fair

the that I one talking my that MIMO maybe of mean or But antennas replace these are outline us that carbide is in you, some other you I silicon opportunities and ask for people has the Gregg, For in perhaps LDMOS could obvious are GaN massive chips with. opportunities, antennas clustered there some XG? the of about? perhaps the should PA or follow-up, can

Gregg Lowe

and had ripe just it the is Yes. We're with side power X opportunity. looking you that Certainly, amplifier those talked about. at of areas all

the in fact is But some As of give GaN advantages. they ZTE like that in lift that that of back we're unique come silicon opportunity. to we're space, we doing with and terms The bullish to bit what as starting customers going us technology. little pretty really carbide a about well. engage offer a is

And and well given them a opportunity integrating so terms I very Infineon very, bringing has think tailwind us to in team business. nice from that the in of grow

Operator

Lee question comes Brian Goldman next Our Sachs. from with

Brian Lee

I Actually, two on had margins, specifically.

First of basis from I consolidated just on one sort gross got you Neill, that up clarification for drag is a XQ. would right. outlook be margins if mentioned the XX sequentially, net points of tariffs,

we So in what you're that like down we head and basically margin the March expect And new calling tariffs point XX you into out be year, gross look as given sequentially. that drag basis the reported should then quarter? lighting think to do will additional calendar seasonality

Neill Reynolds

tariff. we Hey, And on after said be go sequentially, the of -- up -- even the to just be margin would that's that, target clear it. net the gross would

what said margins. an with a a see then the impact was, previously, we'll going bit full we'll said consistent a in we I on what see we increase think QX impact, and beyond. which $X.XX was $X.XX of on So there tariffs, And the and then XQ,

Brian Lee

Okay.

tariff margins even gross with XQ? impact up, into are the So

Gregg Lowe

That's correct.

Neill Reynolds

right. That's

Brian Lee

Wolfspeed. an how you different around another, in we're seeing eventually more But a gross mix can to you you're mix just doing difference wafer a these contracts you with business class the device-based push Okay. sign earn makers, are And economics when into wafer you you break any -- devices? I product wafer expecting relative toward us don't seeing sense margin chip give a between you question versus in out one versus what like to bigger-picture shift appreciable on want you for of of business the i.e. appreciable silicon that are margins. as then maybe seeing more carbide an much supplier the long-term know are

Raiford Garrabrant

that interest for but Hey, that's it's again. get specific reasons. of can't Raiford we Brian, Understand a question, in area just an number the about

is talked said Wolfspeed that significantly. for Investor of roughly to goal horizon, to the the over at the which also We and back in long-range plan just top million an level or I line Day factors we're almost working we margin point grow terms striving would quadrupling company So long-range in what about for the things all improvement these on. $XXX gross to

Operator

Our Rusch with from Colin next Oppenheimer. question comes

Colin Rusch

terms progress MOSFETs, following that us up the the Just of automotive point? the you're sense sales platforms in you're a getting this the you of diodes give making carbide -- at modules into in and power in on at and in cycle where silicon question. industry Can designed

Gregg Lowe

kind touched a greater of billion, of I on itself just applications We've in associated those in little power a billion, with pipeline bit. $X of well got of different all that excess vehicles. than $X in electric

than committed ago. of we've the really proposition value customers think number would in is I really terms customers. -- year a that it And good pretty with higher it's So vehicles the that silicon carbide in traction -- is got are say significantly engagement to was that The of customers I straightforward. electric we're with working

battery, have number certain electric go battery car has further silicon use of going vehicle a have and versus that the Or a you you charge. of car, for a IGBTs, to car same if a goes that you carbide silicon versus if an If need you amount miles, is less use the if silicon. on you that silicon -- certain carbide,

They electronics because there's I cost electric is seen huge battery. as of down goes in all is the whole the substantially size things, for there's cars goes But think car that. item it. value vehicle pretty manufacturers #X there. the And that I in so the not the additional it's believe that And inverter proposition have well. a lot And too. understand And of the in a room

module So Xx, improvement. down Xx, when a of goes factor it's the size by of also the substantial a

good has And in industry space. so think traction The to certainly we've point. the got electric I hit vehicle that tipping in a really conversion

and more traction seeing on more that. You're

more diesel, to With the of manufacturers in the anymore companies being having introducing of -- based car says having are vehicles. the more their it significantly challenges really with have standards amount electric battery of on that platforms the new and driving car emission option really WLTP, more not basically Europe,

opportunity think the for we it's that right great said at So it us. as growth a spot, before caught I We've and multi-decade we opportunity, this right a see think. I

Colin Rusch

initiatives Okay. good out I'll X and can business? what changing specifics over Lighting that with on that follow gears and what about that talk near-term to up on business driving better the optimizing focus X flow terms the cost a you the to of generating business, But offline. more next areas the are some in quarters for cash just are --

Gregg Lowe

really that is -- get the say, business. primarily And the business straightforward, like, such that focus looks up I revenue means is the lighting the that is that quality would margin of the company. really well-run a Well, fix team of to and

made quarter. points now a alignment so of lower significant improved couple issues, hundred channel forecasting of XXX primarily there. a additional that's row gross We're forth. warranty in for product, or better sorts of this for And of improvement We're quality more quarter or and improvement gross have basis X done quarters We the margin improvement in margin. through been

in business I in So of points margin to mean, at just XXX I lighting. gross think sort we have in least improvement that still basis of to normal be several, XXX more

basics a of opportunity And right. got improvement, so lot continued I of for the getting focused kind on think we've

year more I blocking it still describe really have is of think That is last team us. marvelous I the We a opportunity on the opportunity focused -- done ahead tackling, a and team's lot the as and that. of over improvements. job think I'll the making

Operator

question comes Paul Coster from Our with next JPMorgan.

Paul Coster

impact share the per the increase does why sequentially? of off, tariffs First

Raiford Garrabrant

to September Paul, of that coming Products that on to are tariffs the round into from China. XX applies went that in relates latest Lighting that effect

source Lighting products some the period business when about China. from some -- hit of products already we So And would manufacturers from there's we does our a in lag the do have P&L. sourced

of not an in So and much QX. effects impact QX, started feel to we've in of the that

Paul Coster

Has of sort a And on JV. question And really impacted seeking first it. customers all, Got impact JV? from a are this of counterparts, tit-for-tat supply the your then alternative Chinese it in part Chinese perspective, day-to-day this of two having chains San'an is view your on the situation? it

Raiford Garrabrant

customers relatively terms sales China, at LED the not have that did And China in been our of we the sales the mention this small into has impact The Power globally point, just JV in fact been customers talked in for for U.S. is LEDs -- in JV about in for that's that. talked demand lighting it mentioned both also and that China I've And there, impacted, our QX why lower. excluding we export QX, we that about

up Our in demand tariffs business. focus from the because weaker to QX QX the on felt be trends in areas, of is that LED four would business the but being probably based

Operator

with Our next Craig Partners. Roth question comes from Capital Irwin

Craig Irwin

to number ago I contract is release on wanted press about X-inch was $XX waiting other you this for move of approvals customer give from as been it? months as And that X-inch question contract us color clarify to whether the So Gregg, pricing the ask and us X-inch? far with you've there signed any from this couple us recently, a this can contract. the if Can last or million this to first inked of you maybe weeks wafer for in the very was

Gregg Lowe

Yes.

of deal things. was a days last within ago, agreed So few so to the days. literally couple This

agreed in to -- did we wording long as as the so agreed. of release time, had it something any the we that's been it's -- period and soon the we release press press So not released

from customer what -- we it's secure a We that kind is out standpoint. laid a cash with obviously, there's the a think of The of our an would gross it. a plan purchase a Day. give would we XXXX, And we a pretty at set of we'd forecast will we're And we it's amount can line to have margin, up I that in that model Wolfspeed in of $XXX agreement long-term element that mentioned, the in spans time of in upfront multiyear area the kind lot details drive recall, Investor can't fiscal say you very million. and, the capacity is plan. frame long-term out secure What thing. as of our had as think to of on be So pricing the of set business where February new Raiford long-term obligations today. would the And it deposit have from decent margins,

with of So lines all up that. it kind

Craig Irwin

spend do of And your power question out what you plans LED CapEx wafer to follow-up Lighting for XXXX. business? maybe Can expansion for spend Wolfspeed My and is you're Great. us you about looking expect what silicon for semis refresh carbide your to business? for the for

Neill Reynolds

break Yes, that relatively don't out. we

the CapEx our year, for kind is of plan capacity, think I to in invest Wolfspeed same. the

long flows purchased. I lead it kind terms you'll what will already be think ebbs time equipment type of that in is as of that we've things level of forward kind here, kind of the of move and see of

kind So I out play year. throughout think will itself that the here of

Operator

Osborne comes Jeff with question Our Cowen. next from

Jeffrey Osborne

can Gregg, Two most that a pipeline think have Is production. lag year car automotive, would billion $X you what through suppliers for lag three when a X or the something P&L? flowing is about start similar? quick into between talk the when just Tier the I about it goes on from ones. opportunity

Gregg Lowe

Yes.

right. think I that's about

the But engaged we sounds years, three ramp ramp tomorrow. a will be not from going if things we're And that -- yes, are in design of that. some perspective. right Now today, ramping probably that it's before in about something to

Jeffrey Osborne

And then navigate competing point? like you do it. longer-term ambitions Is supply a the wafer your today that tension with of Got you agreements with the how customers? signed

Gregg Lowe

the but, as carbide of will we're to quite it would the deliver we extent to are drive in the capacity, And to on frankly, that helping the what to similar focused our think be really -- be to You from we'll came trying to what able industry convert would very is that carbide, customers with our silicon silicon happened power CMOS silicon -- bipolar materials years ago. expanding XX adoption the drive believe which we'll get get last that And advantages lower where cost. the of continue saw substantially. when scale. silicon into the had quarter cost had we carbide addition, which in But our advantages -- that we output, we record that And of drove learning, We improvements. increased yield drives expand faster yield, expand industry. we SAM scale, obvious power silicon capacity and of we'll of our

for, And So product capacity. expand we these real something north that out. is capability we've that investing the we're the because The They the these of announced. XX% customers leads capacity, today. with That's all we're deals comfortable pleased parties. sign think, got they I one agreements you in we've fact share think can that discussions that and fact We're able got a them to long-term a right of like the other to because great of number imagine, doing put very the both now. that capacity to ongoing that like with growing we getting -- another just in we're we we're deal us. with trying And as quality

advantages And of here in silicon a are we're ballgame really the of terms so carbide. to new industry kind where and that to trying fundamental get the things are from amount exactly carbide people silicon with whole for And so an battery mileage of change the improved we're for silicon same kind looking efficiency, in forth. you of

some We today. so, so think I we'll We're have future. ago working or right months agreements, announced we've now some hoping anticipate have the in Infineon it's one us the more to So or well this And the for X future. X more one in now.

I'd so just tuned. stay just say, And

Operator

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

Gregg Lowe

you second Thank Well, we thanks report We quarter interest appreciate you. a support, your lot, your and and look to today. when results. and time your forward interest everybody, our again for speaking with

Operator

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

Wolfspeed (WOLF) 16 Oct 182019 Q1 Earnings call transcript