CREE - Earnings call transcript Q2 2019

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Operator

Good day, ladies and gentlemen, and welcome to Cree Earnings Call for Fiscal 2019 Second Quarter Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to introduce your host for today's conference, Raiford Garrabrant.

begin. may You

Raiford Garrabrant

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

earnings financial results, per trade challenges Wolfspeed on tariffs, the range, improvements exceeded highlights turmoil from that driven especially performing along more uncertainty. the I'll with non-GAAP to today's for performance you I'll record the gratifying quarterly This now quarter. we're to results consider discuss QX share provide we're another gross combined in certainly quarter with turn with global resiliency We how details delivered business is top the which businesses. I'll to associated on margin demonstrating each briefly right For current QX and shows regarding more our when served our our by immune end excellent while And in Neill the three for quarter. markets, provide Neill outlook with some on economic will of is next that, business over it call, the provide target in track not QX is with After results after tensions, our detail outlook. our and that and our an all update strategy.

Neill Reynolds

Thank you, Gregg.

get numbers, I to consistent the mention non-GAAP basis I'll statements Cree's need a on Before providing that our into commentary with do I measures internally. how on is results which management be financial

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

our $XX targeted diluted exceeded to quarter all Wolfspeed, first revenue gross fiscal in three strong $XXX per non-GAAP second to due ranges with revenue year-over-year consensus with XX% and or performances non-GAAP increased businesses. the For record $X.XX per earnings The net of income share. XXXX, of combined margin million million call share for

and notes, $X margin amortization, Year-over-year or XX.X% our $X.XX execution million being decrease licensing efficiencies, points exceeded higher X% share reductions, year-over-year of were was gross $XXX basis revenue Lighting ahead stock-based to interest revenue targets, targets revenue earnings million, for XXX totaled and QX above year-over-year at of which of basis slightly of sequentially intangibles with non-GAAP Non-GAAP almost reportable Our items. X% driven expense, gross reconcile exclude of profit selective net increase increased with compensation, X% on non-cash other our accretion to follows; $XX XXXX tax for growth the line segments a acquired from and fiscal per revenue. as X,XXX in sequentially. convertible with diluted XX% grew XXX targets. quarter quarter to second XXX consistent and non-GAAP and year-over-year improved our at are XXXX $XXX Wolfspeed gross operational Lighting XX.X% year-over-year our the line points cost points our profit X% well margin of XX.X%, due our RF $XXX of basis margin, primarily our and ahead Non-allocated we increase a for almost points. a our and our decrease Power sequentially. basis LED and targets the year-over-year sequentially, million. second were of to pursue. at targets was and year-over-year Products our excluding $XXX included Wolfspeed a of Products LED business and of product an million non-GAAP margin more slightly by million, business. represents an the expenses XX%, on gross in was at and million, point increase X% revenue was XX basis sequentially. strong exceeded operating cost XX% acquisition at a exceeded gross for million target target when with Infineon's gross organic targets basis of $XXX

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

line in targets tax our with non-GAAP at Our rate was XX%.

face related with cash million. the to in upfront quarter and agreements. $XX million working convertible $XXX $XX borrowed performance million, was flow supply flow This was quarter, cash value capital line well with by $XX wafer payment management in on million. We expenditures of capital million from resulting our cash $XXX free credit, free as cash During investments, second were driven ended zero the and our operations strong of and debt an a as a

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

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

outstanding year-over-year increase days of QX. approximately XXX targeted Cree's margin. revenue an continue days prior margin targeted year, We sequentially four basis LED margin due XX margin this lower could our at and to but margins Wolfspeed revenue. we XXX target sales volume an a approximately non-GAAP of may on variability X% approximately to down segment near-term capacity, in we production of also days compared normal on few to a down hand Day of As down that three at roughly to QX up to Wolfspeed increased approximately range yields but being million We factory September. from revenue Wolfspeed licensing due some sequentially ramp segment gross targeted our increase Inventory sequentially. approximately XX%, XX%, LED initial as of at to in have an seasonality consolidated approximately the new $XXX sequentially was utilization XX% QX reduce revenue is due normal lower trends; seasonality; gross following revenue due target lighting $XXX percent lower gallium by to and to target trends; the seasonality. based sequentially points nitride down adoption year-over-year, target based is range silicon XX the increase continues; XX% closer and XX%, days following million sequentially Lighting at and primarily revenue. primarily is seasonality company down QX. our incremental on approximately carbide to compared We

even We we $XXX are sequentially to Wolfspeed. our targeting million growth to approximately increase QX non-GAAP as expenses decrease in investments operating

to IP target non-GAAP a operating of long-term to income and We spend in when increase million net QX between rate and to marketing We OpEx investments $XX timing approximately go of effective initiatives. While income variety non-operating R&D around million. a or be to reasons, growth sales million of income $XX $XX including be changes to million projects, $XX the as target in to a between of quarter-to-quarter be QX to even XX% lower remains for OpEx shows, non-GAAP share. our from QX for trial, diluted million can drive as $X.XX objective target and cases trade $X.XX vary our non-GAAP per we $X to fiscal XXXX non-GAAP we and tax percent

$X.XX EPS tariffs. non-GAAP the already of includes $X.XX impact from Our the to decrease target a

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

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

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

Gregg Lowe

of rapidly as targets gross Wolfspeed in all had three more differentiated Thanks and excellent XX% where a the Investor tremendous year do with achieved the job tipping point we it's an and top the quarter-on-quarter focus drive year-over-year At while adoption carbide. our adoption our the record to the vantage line Wolfspeed was revenue we pretty in Cree. In that year QX for yields. and silicon the basis. reached plan results maintaining Neill. initiatives. than Wolfspeed LED XX% vehicles the the ago, Day level, as were on team increasing more growth since, balancing on of business. of challenges and margins an in have straightforward; in Lighting we capacity an electric From the strategic improved increased engine, laid About point, progress the out plan we've markets, continues our organic made fix clear as

noted and vehicle Nowhere a the the level suppliers commitment OEMs automotive is as who to by that at have product than numerous on plans where projects. expanding The impressive their trade Tier billion was lines. analysis Electronica met carmakers electrification least evident and Reuters spend by electric CES with more $XXX are shows X recent this of I announced at OEMs

carbide carbide the These cooling supply the by smaller, which And is available the of market, an excess reduces better Utilizing production our These interest benefits as Within outweigh long-term cost. are the $XXX that million. utilizing EV agreements, the far will now battery. EV incremental merits in strong. trends this and because allows total so high value be shifting becoming to wafer with saves of extremely is for proposition silicon the a space, in conversation carbide lower-cost ramps. silicon understood, ensuring adequate requirements, is being supply from validated silicon

with worth Our $X.XX STMicro over is a alone billion. most announcement recent

are very total saw that with pipeline QX, of the promising the GaN towards is value XG products to of given to projects which wider XG In we faster in compared production the increasing in we Power business nicely. efficiency. continues Our is in process transition higher QX. telecom adding outlook growth moving that develop is the The and good the meet market very we're demand sales capacity In the and wireless a funnel higher RF, to building GaN, frequency, enables seeing. the and to bandwidth,

portfolios. as Finally, reach customers silicon a GaN this positioning RF salesforce markets quicker and carbide largest through Arrow distributor the to power global and an reached we proven product more global Electronics, agreement efficiently solution. and with allows past Arrow partner Arrow's of quarter, our us more

helped solution Valeo automotive the its functions revenue. objective high-beam Gross make marking in greater high-definition execution margins their solid single Monolithic this Products, lower for focus. lighting Powered quarter-on-quarter increasing of LED business PictureBeam progress by in For value together through target, low-beam this CES with another ahead earlier month, LED quarter LED came high-performance technology, demonstrated despite of breakthrough solution. LED driving on and our array of At combines road a compact Cree system slightly lighting.

towards In result revenue objective better solid terms of expected. were as Lighting, than both business fixing gross the of and the team another margin delivered the

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

we've will With very nitride. with we is and turn and driving quarters, the excellent related take bumps closing, fact, that, new like over markets carbide there adoption we the any satisfaction. know way, the tariffs and be of served operator we XX along there underlying four In to some I'd the so levels and the our might optimistic field about in have. over it additional back to over silicon shipped you high some tensions in In while trends of can remain the to gallium questions new customer last and performance products those trade choppiness units global released XXX,XXX of products

Operator

from question first Canaccord Jed Our is Instructions] from [Operator Genuity. Dorsheimer

Your line open. is now

Jonathan Dorsheimer

with guess the at is share business we of looking Hi, carbide side how on XX% about if on the I device over the market was of I'm $XXX Or I quarter. silicon the million you thanks. could nitride? elaborate velocity what mean or foundry split CapEx; any the that to come to just the materials wondering growth revenue you think trying gallium could would provide more really at in I the in get Congratulations $XXX understand should Materials, from that. million that of detail.

Gregg Lowe

most in our it. signing time We're expanding expansion would is very, of expanding capacity. the long-range Wolfspeed going are come at that's the of own from details actually Obviously, business the because three all shot very in maybe most very we up. CapEx to capability the business. don't likely, businesses. we're the of Materials CapEx just you year; nicely. out give wafer very, We're of to fastest we the take the partners I'll the -- rapidly. into all the and CapEx look, Well, growth is market significantly noted. specific three as that And simply technology of to anticipate bigger we I We're That's I out that also think What chip a take the fact, growth as rolling those nearly say we're spend. going going to heading which period is to through see the last fab for the Wolfspeed growing had channels rolled plan materials the businesses out all on

Jonathan Dorsheimer

And thank -- a as follow-up you.

you follow-up, limiting I something -- at that a interesting of EV, the kind and the of around of are And the you adoption As auto price, brought OEMs EVs. if range conversations anxiety, metrics and up particular, top look find in with particularly are there. to rise kind that

I are to provide charge of be was side reduce accelerate size battery, of That times at to Thanks. big if that opportunity if could able you So, market. any a the the to color. seems wondering

Gregg Lowe

charge be faster you're fit And time. carbide. amount silicon range if think a with transferring amount means right, is of is a faster natural anxiety have big you They're to And the is. big times And of a been do to times a voltages going outstanding. that, issue significant definitely with and auto a energy absolutely exactly the that over OEMs and It going charge higher short for that's priority. conversations about

silicon. smaller substantial battery So, vehicles, a the utilizing with for the a over longer size In cost. carbide battery it automakers see allows silicon of benefits. very, ranges They're for same very the or at electric lower

excited happened So, has in And of electric and I about carbide. as the point tipping think we're adoption with I really kind the that. vehicles mentioned, of silicon

the Thanks And so the discussions really, prepared build Jed. how about as in really remarks, can the fast I capacity mentioned you capacity. are expand the all and

Jonathan Dorsheimer

you. Thank

Operator

Thank you.

Kumar Harsh next Jaffray. question Our Piper from is from

open. Your is line now

Harsh Kumar

pretty or of wafers wafer -- have few make to a had the I did have does in for country of one. in? point and were a take how a they a say kind two-man of the another let's carbide. What China, for And merchant wanted how it have to market, hey year, need simple LEDs Yes, And I to years had reasonable get get option, now, year want talking timeframe guys. I an a to lot -- mainstream. about business somebody there just companies so what here, they somebody of question. Last years even curious was would Gregg race to many Neill, like right to ago they this middle they market? the kind into silicon

Gregg Lowe

can sort I of hard would mean, One of in Well, this couple time. and is it's stamp this is recipe-type over to a a say XX you business is cookie-cutter we've not long developed just out for say. that been of different I a years period technology we've thing What of factory. in things. Harsh this a sort

these ourselves. we -- back because ability That crystals fact, machines intellectual positive are things obviously from we're an to to In building It can perspective. silicon build. the of is produce it our scale our use simply all holds that property obviously carbide

So, It's you it's not silicon like if a finicky, growing It's lot crystals. will. more silicon, difficult.

a and single to And competitors day believe property, being a so That us have is experience substantial really that to we this about that going position of in. unique every worry we have we amount know-how, all in allow coming intellectual marketplace. said, continue to

focused we're on and driving forth. through and manufacturing scale, cost efficiencies, what improvements, the increasing so adoption And yield is so

job. done part our that outstanding driving we're the would we're driving, then researchers an sort terms that manufacturing this say in we're team finally, cost the have will. And you of curve, the area we I think in very, on reduction steep And if have it of very combined with of I rapidly.

it about we this day and worry control doing can at and a we every in just So, hands good our think job we're at point. what's I that

Harsh Kumar

that think, to you think Day your said was then and my Thanks. Okay. at I I then, double And goal to had chip double and follow-up, as materials Analyst the again. capacity capacity the

quarter the when ahead you obviously almost goal, a Do least? at you a to of us think, timeframe. to Materials two I have You double the again part potentially business timeframe think first or might double quarters for the try or of achieved about

Gregg Lowe

Yes.

again about actually and try For was in, timeframe. and our We business the the working a we that that that kind of what the talked quarterly our that call, Obviously, of had we -- doubling we're capacity had Power achieved ahead have Materials last that's mentioned of I schedule. we achieved doubling but capacity and In hard quarter to one pull business. for in to mind. our real XX-month

Harsh Kumar

That's nice. Thank you.

Operator

you. Thank

Our Goldman Sachs. Lee question is from next from Brian

now line open. Your is

Brian Lee

for of the on Maybe Thanks questioning. questions. staying that taking guys. Hey line

the you the have Gregg, Just call value you in at of business. contracted mentioned carbide wafer the plus on $XXX hand of silicon the beginning million that

high-level the or have been by large-scale feel X that players large-scale locked given players? landscape merchant wondering, the versus backlog see evolving. is just situation do hand hasn't And supplier just overall to know and view let's your of for So, on comments ago? in on today do I months got the you've to status, a that more And you it we market how you maybe But versus, contract materials or come? say, then them two you anticipate assume six like just disclosed. name at raw this some all point, you've these in fair year of the spot

Gregg Lowe

terms folks with continue be in discussions we different agreements. Brian, in of to number Well, of long-term a these

say So, I tuned. would kind of stay

excitement forth. I term people more about not the these having conversations, concerned about that to because into also we're very plans done the and yet. their think is so get more doing are longer say deals I meet we And would capacity the there

discussions say of So no, In that. market, we're tuned then kind a I right game TBD. long just When spot would there stay but on they with And But that. finalize? not done do here. the now. playing obviously, really is

And gives us, going it longer we're the is so capacity of assurance signing utilized. for interested much to for us, company, up putting periods more in as in a be because place time people that we're

earlier, is we're Neill see gives capacity. also it a actually cash payments us flow. to bit upfront -- going mentioned they're our from you which As obviously with there's can folks think on the that working get impact confidence confidence. I with And more together associated free that, giving that -- There's of that

say So, stay I'd tuned.

longer I these deals think more playing that's of game in we're how term here. more and interested we're long a

Brian Lee

maybe Okay. for No, helpful. that's And a Neill. second question just

near-term the subside? XX% Thank potential of ramp-up being of and on could view timing or then the XQ these Is that and the side the is some sort for start still potential of lower in silicon carbide give you. to mentioned to already if yield us magnitude issues impact gross the reflected they for and of that for You sense issues Maybe margins. just when come? you and

Gregg Lowe

color. That has the you're that or always can first a then at capacity a wrong ramp-up that a like to I'll saying temporary-type when we're there's for goes something capacity crack something some that. possibility is that take issue Neill be like What tends ramping the yield thing Maybe sure. new you add really and this,

done been to just faced you're far everybody doing -- just increase fast quarter It's has a team that get The operations through heads challenge a the maintain every marvelous can me we've has margins. and And fashion has when a you we've that sometimes to capacity of such of giving the can't able the so happen capacity yet manufacturing things and job. or is doubling and up; this in the overcome so. team actually the had, team a it. astounding We're through just and our sort in doubling, single

that's really think what about. I that's all

Neill Reynolds

my time. negative bringing Yes. ramping a you're Thanks you're Gregg. agree, been yields And can up as that. coming first when around, That have on has we gone In you've certainly seen haven't experience things you're and these shifting through I for up totally utilization capacity, impact are new obviously. technologies, the

seen really a and I same managing the team through is of job think as said we've good thing, that. Gregg by I've the seen kind

through. gross start is kind to accrete I would are margin. those So, the of we right that we I kind thought see But now And at and that expectation spot Analyst we we good as we'd about it grow as just the type Day. of talked are about our things of Wolfspeed the business, flow the the ebb the plan temporary the think be with where feel as long-term would of we kind towards move

Operator

Thank you.

Rusch question is from next from Oppenheimer. Our Colin

line Your now is open.

Colin Rusch

it you dollar terms can of just so what that guys. in Wolfspeed Can generate share capital of any revenue? metrics much provide of terms can in for intensity Thanks CapEx the per on us you

Neill Reynolds

Look, for said we haven't the intensity Wolfspeed. specifically

we has would Over year, we -- Our CapEx that XX% Analyst as laid to and that -- which I about expand million towards goals the earlier, of should start investment. though, at XXXX $XXX been, intensity lower. out the time, capacity, mentioned this think is Day, a that goal drive putting we that had as

that So, go in move should see of both kind we down forward. and dollars percent we as

about think it. that's the of So, to kind framework

Colin Rusch

then that on shortage how for And material XXXX view in And XXXX? taking be? Okay, might wafer are potential and guys shortages a great. you severe

Gregg Lowe

with pretty that from of the that's agreement there running we're time the long-term a be folks with a wafer going keep up through discussions perspective. on to through these the extended we're demand Based having really, out really period process, to fast

from on far that potential be view to and about long-term really ramping up going ones to to working in two with the potential again. be We're future, we're the ones signed pull going that going hard. the so based these addition, keep and We in But doubling hard capacity -- to to try years that in talked agreements we're through so very the we're there's forth. the So, demand. getting we've

Operator

you. Thank

Our next Irwin Capital. question is from from Roth Craig

Your line is open. now

Craig Irwin

thanks and questions. taking Evening, for my

So, supply is what anything to put this you for have you what waiting projects for there what's us before all maybe X-inch Gregg, when work be to capitalize available people that the year-over-year. right, market? I pick polishing like they the move talk a chips, actually selective And seems some on the mean, we a like across to people the chain, to of to finished activity pursue. from way would slurries maybe out demand increase could space, discuss about faster? have that in you capital support everybody's hanging fourfold pointing larger Can it very to there you're in

Gregg Lowe

in all is be be of it. All the that capacity we're in is Nearly place the we're the going capacity putting saying all that putting -- capable. to might X-inch of place way wrong

so, And us -- that so holding back. obviously isn’t

how now and right adding grow we're capacity we'll have that X-inch. transition at to to do we eventually, and capacity So, then looking

than this. going give this overreactions better just doing And sort move long-term it forward. think this and holding in sort to all we're us So, much these our in all. way that's agreements handling we're perspective, the all of of spot and all us agreeing partners it's we're From get not together times our like market you because back I at and

really that which we pretty about we come. number have are we earlier down a it Brian, done? -- long-term about our So, anticipate to that. was And about think obviously still as hey, these of or good I And There's do and contractual kind pretty we asked say, of different with he with Harsh We're are tight. associated We have would sit contracts partners. need and need? -- feel you engaged obligations we'll these what of been that folks more it might with Harsh,

Craig Irwin

second picture, right. question Great. And then bigger my about is

So, forward that of you the guys into [Indiscernible], LIDAR like are leaning touching of and the edge. what's with technology-oriented that's companies These most although actively sort automotive people coming. sort on some guys a really at same are technologies little exact bit of engaged them are

Your M&A as as whether in for could teams markets. on adjacent you far these address there's or the potential horizon? things Can very not easily comment

Gregg Lowe

want specific on What nitride say adoption now silicon I is transition electric focused that. gallium in I don't to the and carbide and get of on RF we're would vehicles, forth. so right course, the solar, in

options that our can so. acquired shown be have business of M&A or We nine part months strategic ago as we Infineon the about

obviously, specific it, to going be more so, And obviously, it's can't any I piece of about get that. a but

Operator

you. our Thank [Operator And Markets. Capital from Instructions] next question is Ambrish Srivastava from BMO

open. now is line Your

Ambrish Srivastava

bit from for that little right Actually, Gregg, what's timing get Hi, signing just about perspective about the multiple are way these? there the long-term or to think wanted the agreements a more But thank you're you I much. talk up. very to customers.

Gregg Lowe

decade, But right a you're just specifics. the I going on thumb zip be kind a Well, we don't give if out half of about of to rule code. think you

Ambrish Srivastava

the it Is you last out my breaking follow-up billion. is the on you correctly, the the Okay. then the on on And side -- then is earnings pipeline in exactly infrastructure? or $X talked if the on between? inverter charging more, device that Where about the I side, call side in said and remember

Gregg Lowe

in inverter growth with seeing most And is pretty good power the in the electric some it, side seeing of and associated both we're flow that we're On charging. of vehicles.

about very, So, now. We the very it's good pretty pipeline. solid and pretty substantial feel right it's

Ambrish Srivastava

Okay. Thank you.

Operator

you. Thank

Our Genuity. from next from question is Jed Canaccord Dorsheimer

open. now is line Your

Jonathan Dorsheimer

Hey thanks.

respect in associated with Gregg, looked this. the and with on to markets, business the at you've to as follow-up. costs well business and lead-time the I'm that? insight with respect a LED the But some switch of terms just out provide as any clarity could associated sure you tightness Just and the in with maybe Wolfspeed fungibility greater

Gregg Lowe

so to fast, in the and base can carbide readily and growth Sure. capability material running one wafer that we extremely very, from or is be pretty revenue silicon wafer into perspective, a pretty, other extremely production and quickly. and fungibility up very the From move crystal high turning

highly bit the course, a power you very can't similar. was qualify standpoint, a qualifying -- relatively recently going are From longer. go wafer very of the it that fab highly tools running fungible that I very in and fab. of takes to fungible. give through be production that's little another a two, were to exact products line percentage of high so some but a fast. to these very, different process So, Between product don't and is a so you forth, the There, also percentage, in have a in LED We able I

So, get But bit relief of to obviously, little there. we're a that you and things. takes seeing all a you get And sort yes, qualification got more customer to work. got right these lot of approval,

faster. in instances, fungible, capacity highly is lot ramps the So, it a in both one,

Jonathan Dorsheimer

Got it.

million two, that LED when So could we demand that XXX% essentially whatever that that $XXX look to at the logarithmic three, you within is increase on four based EVs, at over half just shutter plus, whether keep a correct? shift on quarter utilization or and curve the the it's or five, capacity,

Gregg Lowe

shift that. or two from probably to that think about and quarter little it's guys need I don't acceptance forth, customer a can we Timing longer so but but yes, the over. know through, than really

Operator

you. Thank

from is from Jaffray. Our Kumar Piper next question Harsh

see. please Harsh is line Kumar, and Your check open. now

Harsh Kumar

on on -- I was apologize, was I mute.

been Gregg, have there executing going nearly well. Margins been quarter. Particularly short-term the each any curious or up that even really business. Are about Lighting goals, have mid-term you have? might guys You

Gregg Lowe

Lighting can near-term. you hit maybe And Yes. on Neill, first,

Neill Reynolds

Yes.

and on think so the quality the mentioned progress first now, foremost, I made, as good I and Just has think Lighting on Lighting, cost at you -- distribution. look and we very, if very team right

So, It's and we think think also of the pursuing orders going as then, kind will the you I then into that's revenue forward go going -- managing straight book continue. kind And that price think seasonally orders kind and down it of better you the quality not well. follow been XQ. would line, has a of of -- kind easily will business margins goes order and of well. it about margin the going that. later go back The the as and go up

of kind So, that's go continue to up. --

way business in at So, short-term. the about the of that's least kind we're thinking the

Gregg Lowe

other a there's will products at that were take the that margin the is where have out add that's bunch the business, we're a you new in that the products of products to today. at the thing working on. then above of those new on got pipeline And team to new there we've whole and I'd look if XXX% Lighting a

for favorable -- So, begin things obviously, us. ramp, be will those mix as to it'll the

Harsh Kumar

Thanks Gregg.

Operator

Thank you.

from is Ho from question next Deutsche Bank. Our Sidney

is line open. Your now

Sidney Ho

for my question. taking Thanks

XX% that beyond? you can any volume? a up on or factors just long-term to another? gross Can too have push Is the So, you long-term margin the way impact quarters. signed help far Wolfspeed XX%, from few your around the in margin, us XX% XX%, on what it or the And not do of some you've you agreements you're target past but bouncing been are of matter of one understand that

Gregg Lowe

the obviously, kind of into area. basis couple line Yes, are our up our of of hundred points that margin long-term with and low-XXs growing target a gross we're in -- agreements

So, we that margin be hard. driving over part in we've to terms down. costs that. gross that curve really, going hit on targets that out we're we're really bullish very of feel on steep Team's able very, of team to working comfortable the And the we're set long-range The plan. pretty -- the with to the

you setback. mentioned a talked when and sometimes bit, about you're can little this, temporary a Neill As I like have ramping

haven't because executed team's had this well. We that just the point at so

we'll be we'll temporary, business. as we margin be grow have it we gross marching growing and a temporary will but and then forward setback, if the with deal it, that So,

Sidney Ho

if follow-up profit talked the had whether the tariffs my to as business by plans have about quarter from trying has talk an impact. of the generating think segment every I'm well Then And targeting and is most what margin and Wolfspeed segment? are and is generate I out segment. term? at the Lighting maybe question you actually LED you longer guys today these if gross by in margin by operating about figure Great. operating operating margins positive margins Do you to levels maybe operating

Neill Reynolds

internally, looking business. running about how obviously, the we're always we're Look,

out about kind internally we manage disclosed is and the that think good give that forward. the terms business revenue of indicator in about of haven't externally. information We gross how But we we margin how it the and we both think a moving for

kind the that point, I So, we're this at comfortable pretty with think business is way operating. we're how the of communicating

Operator

Thank you.

Our next question Markets. is from Ambrish Srivastava from BMO Capital

now Your open. line is

Ambrish Srivastava

the come to has on new earnings there the you that tariff new versus tariff if a impact Is have given Neill. past remember modeling change last call, out-quarter guided some side, have what have I -- had I the there effect? in been there some from Yes, rules been follow-up the to in quick any

Neill Reynolds

Ambrish. little Yes. time think we so a bit Thanks said, last higher. Yes, I

both half we're $X.XX we've doing So, $X.XX supply really, year. relates to with at of is XQ is better chain. right then and for kind back thinking for the a that of bit. about $X.XX at some of It to the by And $X.XX and been work work on this little the to XQ now, the customers

a spending, managing and So, of lot the obviously, time team's is it.

way the kind about now, Right inside about margin numbers. mentioned I the news of as gross kind on to out baked think tariffs. think got with communicated is also tariffs now, I pressure from the those as we've about guidance we of think what hit -- impact, the that it, will will points and So, the side, it's basis that, fully there's of our XX when in comes and be think I

one that I got think So, pretty identified. well we've

Ambrish Srivastava

the bps And right? you gave last Okay. that in time XX was guide,

Neill Reynolds

It's Yes. about XX in bps, XX, range. that yes,

Ambrish Srivastava

you. Thank Okay.

Operator

questions. like I the I to would closing showing Gregg Thank am for to back you. no At turn over call time, further remarks. Lowe this

Gregg Lowe

time for today. good support look you, night. your you, speaking and Thank report again quarter your and you to we We interest when thank Thank really forward Gigi, with and appreciate all results. and you our third everybody

Operator

thank participation gentlemen, conference. the today's program. your concludes in and you Ladies This for

You may now disconnect.

Wolfspeed (WOLF) 30 Jan 192019 Q2 Earnings call transcript