CREE - Earnings call transcript Q1 2021

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

Operator

Ladies and gentlemen, thank you for standing by. And welcome to the Cree First Quarter Fiscal Year 2021 Earnings Conference Call. At this time, all participant lines are in a listen-only mode. [Operator Instructions] After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] I'd now like to hand the conference over to your host today Mr. of President Vice Gronbach, Investor Relations. Tyler ahead, go sir. Please

Tyler Gronbach

report our Welcome Thank Today, Quarter First of good fiscal Reynolds Cree's first be Please press supplement accordance for everyone. substitute you, afternoon, to make historical website, with key and should subject and and uncertainties. Investor will the Neill Fiscal discussion CFO, includes that, Gregg year of release and business Cree's measures forward-looking the most of quarter Lowe; statements results the and Such numerous metrics. and risks statements in CEO, Cree's other we on note not call. for, reconciliation A not XXXX statements XXXX. Conference results consistent GAAP to the management Today's posted measures other on information may Cree's outlook along a we will results comparable financial GAAP considered about section how the non-GAAP a be forward-looking GAAP. in our during today's with directly Relations a prepared internally. information with other Non-GAAP our forward-looking are non-GAAP may be presenting financial to call, not summary accordance which in with statements provided is are Non-GAAP companies. to comparable to, results during and by Call. is

materially, results impact differ filings pandemic. the and mention release COVID-XX to that risks the SEC cause in and noted press the actual today the Our release important factors related of could spread including to

as one follow-up, accommodate we Q&A call. to limit would question During as possible and yourself today's can session, that you that during we the many questions ask so one

the contact now, questions, free to call. like over turn to have please to any us additional If call the And you Gregg. I'd feel after

Gregg Lowe

effort pleased headwinds and evolve, remain I'm Despite our deliver COVID-XX are uncertain to in the we pandemic of long-term everyone, focused continues extremely are for healthy see to we our to to hope and sequential I you quarter compared safe Good our for us on improvement you and staying situation short-term these goals. times. your team's strategic you, and Tyler. The families joining fourth today. business, afternoon, and customers. thank a Thank the of during the our proud

Turning to quarter first our performance.

Our facilities non-GAAP our revenue with stringent were the EPS our while team at the our operational. end we ensure safety and to of continued keep both our of protocols and guidance, have high

growing Our We execute building carbide to end how results well key across positioned on is Wolfspeed momentum our silicon demonstrate we pipeline. remain markets. believe

ahead industry to powerhouse, innovative our of and financial exclusively silicon strategy. with strong technology our our the need and business, our opportunity of lead having about with The reaffirm another maturing in of seller to for performance Cree Cree the up to future million business continue a of our note transformational commitment smart a we silicon critical will Wolfspeed recent Holdings, customers $XX in in the sell to shareholders. Importantly, approximately Cree to million to of we're milestone $XXX positioned XXXX, LED to and tremendous very have quarters definitive and conversations Global We're the LED four our cash, This focus long-term in on sharpens the accomplished depending close. global announcement This consideration total to us. establishes to transition August This of excited million a $XXX earn post up a journey a allow out, profile our transaction well $XXX semiconductor million. value for with includes divestiture the pure-play a as agreement us us carbide. underscore we from the and the our on deliver in for

of of as in our soft ongoing sequential our Overall, XX% Thank LED in for delivered quarter, plans representing Neill, revenue drive Wolfspeed related an effort X% silicon revenue to now expansion capacity the good million to an largely declined and the XX% over approximately to despite Gregg, us first to global it Revenues the of year-over-year. first macroeconomic year-over-year. of provide quarter year-over-year high silicon afternoon approximately overall a will help I'll increased and the X% will remains track decrease fiscal financial $XXX outlook and and at turn carbide Our sequentially X% remain improved you, who and a GaN. performance XXXX transition on results from decreased industry of we XX% pandemic. fiscal demand overview and increase solid Neill? XXXX. the headwinds. everyone. of for second Neill Reynolds the were guidance, quarter end sequentially our and

Our non-GAAP was or $X.XX per loss share. net $XX.X million diluted

transformation intangibles project costs, million amortization. convertible Our transaction-related of our stock-based accretion LED expense on share $XXX.X $X.XX Cree first release, as divestiture today's quarter notes the associated well diluted of factory outlined with net of LED exclude non-GAAP our a non-cash for our business. changes earnings and divestiture Lextar earnings tax as other in per acquired and compensation of million value $XXX restructuring optimization items the of costs in charge investment impairment

and momentum materials This revenue continued in performance some the million. our quarterly demand for business products. first to by performance segment, for are Moving quarter power, we're and we our totaled seeing power largely businesses. by our pleased was our better by $XXX on RF driven Wolfspeed In

experienced well are we As in supply levels. which dynamics below the the quarter, still normal as improving

prospective positive Arrow Electronics broad awareness have the seeing dialogues a our Our technology of with continue productive drive current benefits particularly with across numerous, the silicon and partnership in customers. traction other continuing is of continues to to industry. and Further, gain in to space and industrial applications. and carbide automotive the developments We're number

demand particularly are seeing release platform. traction XXX-volt the MOSFET coordinated our around the new We of from we're carbide efforts that pleased our silicon

Turning to RF.

remain And XG the delays by transition backlog. pleased we're demand we're build the confident early our seeing in strengthening of despite regions. execute and in We continue signs to certain and that

safety materials Moving to continue safety throughout also and margin employees our fiscal better anticipate in and the continued all market modestly Health balance like order RF in by outputs was in to operating gross flow $X.X trend market. we by our power saw measures was Gross $XXX look product rate margin in investments increase prudent as Wolfspeed gross the expansion. quarter driven growth. improvements on XX.X%. $XX of term. Partially executed and non-GAAP XX.X% in Unallocated our million focused and reconcile and are factory be included balance were impact expansion to LED our protect fuel revenue offset lower safety to XX.X% yield XX.X% to business we we gross Longer to improvements materials. for performance continue top for We continue first the to was last compared while and the remain as cost and significant the million Non-GAAP output quarter tax demand the LED expenses profit we drive expenses our remainder we'd non-GAAP gross $XX our our sequential businesses. our this term, and utilization some non-GAAP despite in with million taking COVID-XX cost efficiency and capacity business continues LED the requirements. The quarter. expect plan will expect QX by expense measures. priority of aspects million in dampened was we're to margin control company. margin near and margin future We XXXX for to to costs XX%. our scale our totaled well help remain of was the challenges ongoing fiscal overall operating XXXX.

in than target billion marketing liquidity R&D face an spend, and sales support well our our expansion of to Our environment plans. balance sheet with remains strong more as as in the capacity $X uncertain and

with We and line have billion. total value on credit $X of debt our of face a zero withdrawn convertible

quarter, in For were the outstanding was and expenditures million. $XXX.X days. operations days was XX XXX flow was resulting first $XXX,XXX on days million capital inventory $XXX.X of and days cash generated free from negative hand Cash sales

of remainder the year, in growth the our of capacity to remain committed for support CapEx expansion outlook fiscal continue $XXX to CapEx and our net approximately we plans. to our expect to Turning investing million

we stated can ramp investment deployments and needs to production meet as we XXXX. supply peak be our ensure XXXX EV previously year fiscal we've As to commenced expect beginning calendar

in York. and on subject as to timing us scale Our allow progress, and and to commitments. facility materials customer of during Valley Durham construction from XXXX our New that reimbursement is business, well improve our the fiscal productivity Mohawk deliver state important to depending It Valley are cash flow variability fab as our on our Mohawk note CapEx

LED Holdings, our and second given to our is XXXX. of discontinued outlook reflects Cree operations as LED the fiscal classified Wolfspeed guidance note turning in Smart of therefore, second our to Global only. Now quarter pending sale continuing now our quarter operations, for Please

of are we For targeting $XXX fiscal operations from $XXX the XXXX, million. quarter revenue range be the to to in million of second continuing

and momentum the we XX% we XX% Wolfspeed COVID-XX improvements perspective, from to non-GAAP of impact in improvement in experiencing utilization modest increased to supported and do the to yields, is expected operations our our protocols gross power in RF safety business. which and million gross items. factory have capacity our place. continuing Cree margin some are we driven continued From to expansion initiatives. currently by of margin be QX continue XX%, between between expect business efficiency be corporate be while is in expected the $X materials includes XX%, We materials by an expect maintaining to

operations marketing the as by Valley development gradual The operating net We and million. continuing quarter. our in for expenses pursue loss including are in million between expenses from non-operating is as well non-GAAP target $XX second new fab, R&D and $XX $X targeting to we increased we expenses to QX and between operations We investment from be be Mohawk operating ramp our our continuing to $XX approximately at sales $XX non-GAAP million target operations projects million continuing in as million fueled loss operating opportunities.

tax the be decreased between earnings continuing loss operations loss $XX or effective to on We're effective tax $X.XX continuing QX diluted The from forecasted non-GAAP a share. rate a jurisdictional of mix $X.XX between targeting operations non-GAAP million million to approximately to to XX%. rate basis. to our non-GAAP net $XX our expect be per We due

convertible our compensation, other and transaction-related items. on costs, acquired notes, intangibles Our factory non-GAAP restructuring project target, EPS stock-based non-cash costs optimization LED amortization, and transformation accretion excludes

greatly, the situation Our environment. the back Gregg. I product productivity demand, factory to will QX could several on With based that overall COVID-XX turn competitive mix, and the are discussion including targets now factors of vary that,

Gregg Lowe

Neill. Thanks, our few over incredible journey past transformational years. We've on the made progress

long-term several has key leadership position. LED cash growth significant and business. supply divestiture, across our semiconductor capable with will business solidifying long-term further pure-play activities. our expertise Once and industries, high-margin well driven domain and have secured in the significant silicon Our secured a growth high R&D continue deep execute We've further effort, we high-growth design-ins Cree we sales company, and our in as as wafer carbide Wolfspeed generation fortify as our in device agreements which close customers, will with to global we invest innovation To be plans. this to support and initiatives, potential of marketing innovative

opportunities Exceeding And fiscal to approximately design-ins quarter our an Our pipeline the of we Wolfspeed. of company-wide in for XXXX. fourth secured from QX, of sales performance million convert continues $XXX $XXX million rate. team worth impressive at

and applications. Over defense, half industrial are the design-ins customers. the than rest last And are spread aerospace the three for of automotive communications across energy and quarters, infrastructure, more

products team As from this of XXX-Volt extend as We've a already ranging to new of end Arrow electric to leverage The motorcycles, Neill reach exceeded us $XXX into positive instruments. earlier, results. generate our target sales are million mentioned Arrow technology markets. to also generators, partnership continues increased the identification, of and our benefits customers range helping across looking our plasma electrosurgical for of platform our wide pipeline with is

well business to example, half industrials dedicated more anchored in For XX platform. quarter look and of expand industries. our XX in energy identified alone, our billion the execute In not in launch we in portfolio, effort, of a opportunities over our for for by products salesperson. product they've forward to to growing new continuing pipeline, of $XX now first did And communications, a with this is alone. continue the We support automotive, Wolfspeed the opportunities have XXX-volt on which those than countries we countries,

We that developments underscore ahead. the opportunities long-term are pleased by recent the

represents Importantly, approximately tremendous we device are a which seeing pipeline. automotive, our in traction of half

two We regulatory for than out decades. are vehicles electric More vehicles. plans to of encouraged new the countries next momentum XX by the over begin have gasoline continued powered sales phasing

goal their of voted this Additionally, emissions EU to reduction cutting in the by from a production emissions parliament XX% now XXXX. month, to increase a XX%

companies catalyst in respectively. for a XXXX Uber fleets We Europe. vehicle to demand to and are and XXX% electric having vehicle by and be this committed electric Rideshare clean transportation a expect positive XXXX Lyft

Turning the globe and the to performance impacted to which XG, while across in intensive is delays next-generation greater related Europe pandemic building for technology, bandwidth headwinds U.S. delivers the and some for regulatory rollouts applications. momentum this

in still Outside to for be growth silicon as we expect early multiyear of picks of XG carbide. we're opportunity what up. auto XG, Now, GaN, applications and we're growing seeing for the phases momentum a

cost and advantages to different our is end They markets. of our potential of As scale the growing we silicon our carbide industries and customer in continue technology. are down, the utilizing base include business drive to interested

Our expand carbide plans capacity to schedule. progressing on silicon are

well positioned to as as business. summary, in transformational In an both our remain we our and we solid, are pending operations, our our grow uncertain With the a sale, fund is LED sheet we balance executing critical reached investments journey. well environment. in make milestone well necessary Our to

opportunity and device pipeline Our well in performing to continues design-in. converting to we are opportunity grow,

We our with helping the solutions. I'll the deliver to call the customers next-generation over and that, we'll and opportunities look ahead our to for turn back begin for are operator, session. our forward excited Q&A technology, And their

Operator

Genuity. from with [Operator Instructions] line Jed Canaccord comes the Dorsheimer question Our first of

is line Your now open.

Jed Dorsheimer

thanks. Hi,

not a have question, example, the on And little -- but quarter? The was came that. about I then may other power for talk shifted this XG and looking EV bit as then you're has that for I'm say, at backlog, if backlog terms electronics. rough And amounts, wondering But how RFQs exact working inquiries, late. in the First have as of Gregg, on building. you that between you a could versus well just all not are that and do you sorry I could the you mentioned breakdown I ranges? follow-up. backlog but

Gregg Lowe

Yes.

a lot thanks Jed. So

pipeline a now pipeline opportunity well It's here the And the $XX our So for really business. device it's pipeline well. obviously, we're talking we grew, over about as billion.

vast terms and right electric In It's is also now. be that past made of automotive, And XX%. those north decisions the north vehicle related $XXX going majority those majority design-ins. the related so a of to XX% that quarter, this design-in, majority of in terms were out that therefore that of that's split of of of were in of automotive the million actually of

growth the the the is of of applications pipeline those of rest applications pipeline, that together industrial and a with Arrow mix the terms platform. type In the we're industrial a of activities XXX-volt with doing pretty type significant on

some as and activities communications have defense opportunities infrastructure we aerospace have and well. We some

electric solidly the of But the and those kind really it's mix of automotive related pipeline, for of device the So a it. is pretty rest vehicle pipeline related.

Jed Dorsheimer

it. Got

Or or best articulate, into other and to we we X-inch my milestones be so as up development? XXX-millimeter that Thanks. you of just read manufacturing Should in Just related? follow-up pivoting might is that of question, related able bump there can track are terms that that to the R&D. that any increase

Gregg Lowe

obviously, Yes. we'll Thanks activity, planned work so that new XXX-millimeter continuing and going some that be technologies is be that of new related like on for future sure. it's to introducing. that Jed. got interactions We're, technologies we've But generation out also to related product to to the

of combination a say I those. So it's would

Operator

Our next Charter question Equity. comes from Edward Snyder with

now is line open. Your

Edward Snyder

on Thanks a lot. maybe touch we bottlenecks. Gregg could

And I'm we a stretched? production far flow quarters starting mentioned wafer out $XXX that talking that to that $XXX but stretch? then quarter there revenue? up? far -- years, million about ePi a the at have two a bottlenecks pipeline. couple This as kind Your guidance, Thanks. How of for is any does What Are was years? Is all? looking you for of saying then million Is for freed and how pipeline is And the three there. not likely What's bottleneck a question follow-up. last I point.

Gregg Lowe

Yes.

Okay.

first bit question second the first than the hit hit a maybe maybe probably talk me. but that Neill I'll can question, me let So about and little better

-- at On three into mentioned, most related. you and over sort automotive an is that we that -- I north Investor this and of are that that it of of the designed-in steeper more XX% got acceleration you about to Day ramp a goes get when four it years Most if automotive talked XXXX we're had XX% see and production. XXXX, the $XXX to well million Neill of of out XXXX, last the as quarter past ramp design-ins some of ramp in products in will. of a our starting these we'd really designs

out. typically there's but is that. like did It is a And follow, in the company the wide. related more of million three bit are four design-ins of a automotive. processes more whether quarter we to some on $XXX ones $XXX newcomer of remind for or automotive depends bogey this Tesla and it's printed companies quarter that I that historically million last think years example kind of a obviously the more three last different The automotive years for ones are we So just or four just little that everybody, was but to pretty good quarter than for

to Wolfspeed terms So Wolfspeed. let Neill $XXX nice of And ePi, million one. design-ins have step in I'll just it's that cover a for now at for

Neill Reynolds

has customers capacity. part the of still look mix Yes. to Part the up continue ePi bring relatively heavy investing. ePi Jed, we're that that on expansion side capacity the CapEx additional ePi to for as of

the think on progress as versus corner gap to capacity demand. relates we're it we're think good there. closing kind making ePi the turning I of So I And

Edward Snyder

then And as I could. if follow-up my

heavy the is will statement even of move a is been it's it operations. some in bit now? macro and bunch to if order been now maybe were which of you some has revenue is from stuff been make of CTs mean more the starting your be of preponderance down. on industrial But that in big But XG not can to to kind Is suburban and China's rural the We've and reflected RF, probably going Huawei the to sites that but that's up. overall a I the driver. majority like sites. given picked Are that fair MIMO the policy all into solar. that industrial Wolfspeed seen you companies. your it's shut seem So preponderance vast And of continuing through primarily strong. they slow of that seeing XG urban But patterns a comments because been other XG rollout an as you

Gregg Lowe

Yes.

think I And related. XG to Huawei overall this rollout. in unable been we're of you're time. obviously It's China right there's terms primarily with engage -- the at

So of of in any the We're pickup we and seeing a forth. RF so that in business. have don't some plans the

really are dominated been in right -- the We of that. type seeing a I kind you're it's story. But a think pickup that China

Operator

Our Goldman Brian next with Sachs. from Lee question comes

Your line is open. now

Brian Lee

Maybe Hi, wins in question the in XXXX begin on following I does for ramp one, and here like the guys. first steeper Thanks automotive cadence. correctly taking the and is heard you earlier it up sounds it Gregg, the questions. timing just on although XXXX if 'XX.

device you're guys? you today Mohawk comments those impact we really being around take meaningful and the to of to ramped that volume should until the really Valley wins I'm become fiscal also against for out capacity some you automotive trying just triangulate XXXX? when Mohawk and supplied into revenue seeing for your ramp overlaid production guys So doesn't in of specifically Valley's mean

Gregg Lowe

Brian. Thanks No problem. Yes.

XXXX. in by actually the believe part It part are we the are customers a as XXXX. beginning Valley of So we automotive in in it of won't these be for equation XXXX coming Mohawk will substantial the online, question. XXXX. Brian, pretty substantial volume thanks a be ramping Yes, But

ask we'll did the as see before And up your get you So follow about fragmentation. didn't that. the well. just I of Brian, that part Ed hit question

is so Wolfspeed actually fragmented And quite the today. Ed, business

industrial type defense of aerospace customers, a type lot of and a it's lot customers so well. as And

very very, today, as So fragmented. we it's sit

move we future, an be the As play. more of will towards type it automotive

that last that about didn't I time. Ed sorry hit So

So Brian had a you follow-up.

Brian Lee

follow-up maybe the better a in Wolfspeed understand had. I the That's pretty trying to was for Yes. I good the segue diversification/fragmentation mix.

talked unit have a disclosures XXXX weeks the fiscal for couple guys LED you You being around on about flat ago. sale updated of based the some of

et clearly we changed with EV China think cetera. a So has months mix over trends about as XX the Wolfspeed lot past in Huawei

be bit carbide you silicon there a can the So expecting in you kind us to XXXX? And about power fiscal about buckets mix I'm RFs. devices of was broader thinking what then Wolfspeed any talk guys what is of revenue fiscal then we should set level the way of XXXX? and And materials, in as sort

Just changed have it would seem like bit. things a

we mix a how And should you. what that to roughly revenue flat be on base now? thinking shifted about so Thank has

Gregg Lowe

Neill, I'll of to you want take a And crack at a color. little add it. bit if

the of So were materials of in those now that than over as and years terms device four years to ago. case mix. has you our faster business XX-XX device between the wasn't split the of of a We business four business, business last the have business our think And the grown kind kind -- of the can XX-XX. materials roughly

knocking and faster As in. we opportunities specifically design and the to we as device look materials XXXX and grow now converting the down these I'll substantially we start than some XXXX will business between of into future our opportunities anticipate point to

I that by ramp if revenue, don't add and So nicely see than greater additional the be you'll to XX% the will the know XXXX. than device steeper to And greater businesses you of Neill, a want revenue color XX% so any of that.

Neill Reynolds

right. I that's think

timing and one about to of or recovery as thing Brian a and movements move to think customers to here trying year you're COVID last compare inventory around. this there things changes year, the lot of just of has think with in been I shorter-term

MOSFET sizing looks side. what of Gregg of seeing then lot a terms like. revenue what look of the our we're the in power think on for And I accurate demand right said the device is now

look device people the seen over to longer we've the where movement manage growth I the faster. from But in there'll Gregg as as the had here we little as think as substantial the as medium short-term pretty said bit we'll of inventory well. I and a you But see term materials grow think see pandemic. business recover able materials in in periods front, be

the move of there's So out out be say to stages the but areas. starts of as always say these, business in and in fits early growth business going time I'd we the And of will materials take device over business. I'd different -- kind

Operator

Coster Our with next from question comes JPMorgan. Paul

Your line is open. now

Paul Coster

for happening market. thanks question. in space my than passenger taking vehicle like markets in Yes, I guess moment the around there niche commercial seems I'm and looking lot the nonetheless innovation large, what's a EV of rather at the vehicles at but

stand to sticker it than passenger the like rather mean going that next indicators price kind the sort Do should you those the compelling ownership of be of that comes the go lead as the the Total are are makes truck EV. for markets So, couple where concur? those that bus watching cost the coming first. side? And and years sort does of feels of markets sectors of for sort EV your proxies a more the vehicle than in that's those is that on demand and from we of vehicle passenger

Gregg Lowe

I is in No, I've last them electric win. electric the matching the was week were that Union a YUTONG a internal I age. We of greenhouse years the customer of mentioned of would quarter to mirroring you Group end say reduction is announced say combustion of YUTONG engine manufacturer win I'd is one or the that internal European customers cost real of will had bus point XX% with -- and kind comments that the crossover reduction And cost design witnessing to that they some the vehicles Paul on announced a and a we going combustion going believe. forth. me both. there's this ice -- what engine basically But European if the to visits the the what one set reduction of increasing We largest say is I XX% nice reports be China. over to by design said at seen of of so last from an from a are gases coming looking XXXX.

automotive the last engine away. being on so seeing based on closed million be $XXX activity quarter. that. going of And to design combustion just reflective And it internal fact Most based sure seems the I'm of the design-ins that worth is we of those

I ballpark moving forward. So, be it's seem to think that

Paul Coster

Okay, happening, got sort of it. power a observation it's generates it's mean gray that -- And still whether motors coming -- sort that fuels other or is green and using Gregg the taking new gas or place innovation whether lot technologies or that it's are there's whether right fuel does of to into product be of in hybrid electric train fueling whether I battery to powertrains -- change kind and you sources? vehicles seem this your to that converging the matter market all of happening any these of regardless changes are go just the on is of of them it of market every the electric middle the and the with Does technology decade.

Gregg Lowe

and a there's there of terms infrastructure these hybrid there's OEMs. battery is street. because the would just they And because of less. several I reason much not because chargers. really that's high -- a substantially would electric last are lot of an that lot cell I problem the again what people and But they're don't getting just with don't week saying visited And are probably to again, I'm difference And a example. requiring transition. the think what of Tier a the with or they Europe capacity be that you're than I There's say in it converting lot plug-in that typically really in. energy And as to like on with to just electric motors. in then not based versus a think vehicle, -- you're Europe. solve emissions, and of on definitely vehicles a me I do park is a is bigger especially power that hybrids There's places turning plug for opportunity energy starting a of in Whereas in several a electric for fuel into those for feedback Xs And places there. electric is the this

a You're and out worth so one telling and and you've what seeing XXX a cars again now all were customer if this now coming week from is once you whole to me work of got week's and forth. -- -- for ranges a just of plugged mile going of in with sudden

to internal might sort from is of But there's thinking be final be way the the through fully it's of is there stops on a them those to hybrid not regulators a that European most electric. car. incentives that advantage of So, along combustion buy plugging I think are to they're of some then think that in are to And are going to those And the for understand people -- but be would are sense incentives, transition going therefore hybrid. I say plug-in the electric. starting then really I hybrids. transition the with people that taking There thing

going you're it's not have the opposite of And if a way efficient substantially terms in, it emissions less kind so of plugging that actually in is powertrain. worse. going And because you

are those So, that taken table point. there's off going at the incentives some some to be talk

Operator

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

line Your your line maybe mute. is now Craig, open. on

Craig Irwin

ask you. wanted to the little a Thank LED about bit I business.

sun take Can share space to business? sets expecting part metric? small as the other or fab a business this how floor us. you of of losses due transitions And us? previously for of of cost revenue on increase for some this the this behind costing second overhead based business Were or some fiscal the mechanics estate type real going other maybe it's is overhead us expectations really with you some that you in that full or to the in we're over that virtual Now, quarter

Neill Reynolds

Craig, yes. Hey,

LED So I on costing, won't segregated reported. think on the that, between tell pretty to I Wolfspeed details but all and going the previously we've as well it's

it through we're have the months. to cost as manage stranded of -- is going and some there we'll to bit A investments obviously forward. what standpoint important working Wolfspeed. next it XX more of little continued expansion is, activity, forward, execution Whether large manage the for got. on the that you that of the there pieces look you through a a and lot we've deal on move the As in that does over and pipeline But really an be us from focus in lot dilution some of us deal the to capacity OpEx gives by start

in talked and Smart that we as take remains well we schedule of standpoint about lot capacity move terms the over And forward, schedule of that all from the will after as the outsourcing we close deal. a a same. business that So

so And that pretty forward. and the large, plan it's had on much same we by moving before

Craig Irwin

you Gregg Okay. the, at rest then of improved of in efficiency the improved the believe I or with efficiency Excellent. footprint as business Can and last you talk opportunity fab? the And challenges its of Analyst LED one of overall or for things ground as layout the of the discussed called not Chase was the the it creates the fab, far layout Day the whether facility. vacating maybe about there, an Bay

Gregg Lowe

of the our the substantially that's than Yes, a Durham both is Carolina. LED North Durham Bay fab is And here in is. is fab. Chase And our fabs fab to Craig. a fab where the operation format Thanks RTP smaller and

style it -- New ballroom design, the be what is convert So called what's York. in to going fab is won't the style to the ballroom

Wolfspeed, transition create LED signed prior for was So Global. we with activity as is of to And we we new an us an to had of form a it it going the that Smart But course definitive agreement you ongoing of that the outsourced space if that business increase capacity definitely to model. won't to sort allow will. our

of kind schedule. on continuing just that's So

ballroom style of it Durham fab of our an outsourced doesn't no, led for more change capacity the modern to That's wafer So, in we're building style. New increases transition the York. model But Wolfspeed. again, the in what up to

Operator

from Our next question comes with Colin Oppenheimer. Rusch

now is line Your open.

Colin Rusch

what to evolutions? bit these side? competitive are device design much the so to little product about that and assuming on you're terms bit in the But the wins bit Thanks you some you're price talk of product competitive get those evolving cadence of dynamics And for customers. sort seeing a a wondering little the have the closer guys. Can you little get these I'm how a expand of is the of as the with as going of you evolution dynamics

Gregg Lowe

Yes.

so of an relates They look as are their key competitors So technical pricing like at they supply and look the it in Customers your with capability -- a competitive dynamics as do do is forth. and things our pretty their well. well, manufacture as straightforward. need part things they well. at at of ability course, of design that They that analysis to what continuity design, look like and to they

I And supply we'll gives of delivering I score So it's this I fact $XXX items. for internal XXXX. different nicely actually comes accomplishment in especially And would mosaic dynamics, a design most what business to say, think points up -- that these the that pretty as design on capability the And us pretty activity of million when we the into got carbide with We was well. at. it quarter we've win, billion typical, translate in nicely look past pretty us. on it silicon extra terms in what a nice $X.X really typically lines

we that. about feel good pretty So

million $XXX have been And $XXX worth I think going $XXX if lines basically about of of to design-ins. the pretty much think over quarters, to were three they went we designs of design last have be. you it we cadence the million to million the decisions thought from what along

billion pipeline. a on $X.X design-ins billion a that's device So little over bit of $XX

me we thought. it to with in feels accordance decisions like So are what pretty the down coming much

some but and forth, feel be that. pretty takes Now about going we so every puts to and quarter good there's

Colin Rusch

of the I evolution take was more the I'll that think but product my offline. is, question really about

on, going short on going Just on steady those that there kind think forward? housekeeping be How What's payables state on here separately payables point maybe -- growth. term? a the about is unwind is some at over an just we question just -- of that the should on going to And there?

Neill Reynolds

Yes.

So some execute of in the Mohawk that's capacity related brings to the fact that up. we Valley, that have larger we invoices particularly, expansion, DPO as

it come normal had You could to the back I in kind we've levels, the days more previously. as of XX-plus see think,

Gregg Lowe

market the of Outside expansion.

Operator

comes Morgan the with line Stanley. question next from Hettenbach Craig Our of

open. now is line Your

Craig Hettenbach

Since you. Day to time? you XXXX. traction Analyst particular that of laid we as of out come any up path the Yes. that kind that just terms on on and $X.X that year get over the the that you're to developments billion for Gregg, target in of there fiscal Thank seeing are you'd time, and a the point to

Gregg Lowe

things. A of Yes. couple

Craig. So thanks for question the

is acceleration to impact all And the the a see, is One a that they I hard for shutdown. -- able in same we've $X.X COVID a is we industry to easy get And design-ins billion OEMs to the of going in fact about deliver on an as a is of XXXX. I other COVID we'll impacts was and to skies the seeing the cities couple adoption And able So, that customers quarters lot that think sky our three conversations the discussion the our what been electric industry to mentioned, worth because basically said Tier global to the forth. in blue of warming of thing is out have our but And the time then consumers a to are the the reasons. this. today, for just of on had in and And blue of number bolsters, lot the us and the panel, that's talking good vehicles. And we're obviously, is last so I've with see. basically, that happen an first a were of different that thing. of really gives confidence of be Xs talking do auto and different about thing, thing that

are polluted Los healthy want saying, And and to and clean what back Delhi or Angeles have to so be a I go We want to have you. polluted to so, air a forth. consumers don't able air or

So money with of leading on recovery. a to will. wouldn't at, side it this that Why you've it, pull, we really And got we dedicate flip got that a spend is consumer European you Union clearly going big countries bunch green staring the and do of then to recovery. if climate Europe going are the XX% you've And initiatives. a type towards to of

electric And and is so driving that -- industry auto vehicles. the also towards

if Craig. the thing that's think the will, didn't silver what you COVID. COVID, EVs. about lots So for I there's -- would linings we say it's accelerator, the hitting on Day, But mean, lots is I at I adoption really anticipate of of And one Analyst the there's things bad of the

Craig Hettenbach

the of know follow-up, about this. Got think how your extension it. you've I When just could things And are just I if partnerships? an with maybe and significant announced then, I Delphi. go-to-market

an having Or about Is should You've over talked you to a Arrow towards as lot impact are we about exclusive these think reach Arrow. time? partnerships model? going remain that of target how of how much kind

Gregg Lowe

Yes.

any time. for exclusive We distributors, that our they're do distributor don't changing and Wolfspeed but have So, the exclusive see local products. Arrow is the I some global global

the really of million when part the still earlier Europe about team sort launched we on their and And of one and think, April, the the early. it were which pretty in lockdown. that, astounding. platform program deliver on pipeline is able were you worst I and that knees. And was that goal. XXX-volt pandemic. results we've of U.S. to was in think just worth gotten probably identification That just we is together the did the down. our was It hit they goal quarter $XXX despite -- bad of than that China

terms Danfoss doing with time. with Met them then of good that together for with to the an last working those Volkswagen fantastic Delphi them had many will of relationships partnership and So strong with we've a market. we're all customers of customers ZF very will that with FAST And week. to and got just a These a and I products like Program, long Yutong announcement with announced ABB. in bring anticipate very they're job. last are we've We've period

to process those they very bring in years of and support -- especially, industry, And years four on production as end-of-life end well; as when you aftermarket there's industrial automotive up where begin or stay you you or on their you product customers got for ramp. end products then the bring five from and supplier to go so on then period to for bringing forth. a when long time. six and So, to three It's you for an they're they a

marriage this years. that is a XX, last So XX

these to so, good And long-term have. customers are

Operator

comes the from next question Our Gary line Fargo Wells Mobley with Securities. of

Your now is open. line

Gary Mobley

about you Wolfspeed for my everyone. way operate business guess, the about Thanks Hey, I I us in first to I gave appreciate think the off, quarter. should you wanted December as a to -- ask the taking to well question. how baseline

think by in baseline OpEx, that $XX business to see million that in do sale? non-GAAP of OpEx million quarter you being is affected you LED million off I so the $XX $XX quarterly mentioned per how that $XX of And separate million savings. to once

in preparation rate presumably a for the ramping and you OpEx benefit But quarter. up for time other same whatnot. December that's capacity be that run at to to gave the you're reasons So for going expansion

within that about think quarter we should OpEx of pieces off how December moving So different the baseline?

Neill Reynolds

good And I Thanks. that's think question. really a

There So we related the but primary indicated the is as of going that's to to element the to as OpEx kind of short kind Cree OpEx the think an driver start not divestiture modestly here forward move really we elevated term. of I is forward. in move

project Valley to substantial that including is related we that alluding investments we're ramp of Mohawk ensuring well. ready to of we're move you're process a things R&D in earlier, mentioned think the kind have what Fab as through number to investing I Gregg As and

our and the In large But to sales is opportunities an to be the related some spend. and and go the work had addition G&A And marketing going I laid -- is -- functions. on to of do the it that of Mohawk by R&D a in an portion execute element we within think same way, look of of before. the lot really our we spend, through. as plan increase on the There's to continue There really the divestiture this to elevated out a and we marketing go sales to pipeline. identify have is

of I is we're visibility the just this To as getting cut just Wolfspeed the now. we think -- move forward.

Gary Mobley

LED your goods it down? to line. it That’s cost And to got for that, bring XXX Thanks. that basis see expenses of looks about of unallocated like points opportunity divestiture, do you've sold Okay. related an Post you in me.

Neill Reynolds

about related a away. of that cost Well, whether be kind types necessarily or a think scales margin two of it to goes week, sits standpoint. But that corporate is to that's I these that is lot of is the there's do kind I we don't bucket lot we I when kind managed things. of in benefits over think from a time. LED about last that gross the points incentives, divestiture And of think talked said three of that

post I evaluate think we those forward that how do we look at But you here close. think can what is this we shorter the will same consider kind we And the as in about manage how of about company. levels. talk and company term the

Operator

Our comes next with JMP question Securities. Joseph Osha from

open. now line Your is

Joseph Osha

Hello, everyone.

on need do at absorption Or think run following we in billion of If sort model? that to And have about get cost forth. rate given a model operating the target we we bit up What conversation of so a about be previous pure would then that And looks order to I target Just be? $X.X operating to Wolfspeed question. and the operating that all that like talked follow-up. about? what little this

Neill Reynolds

we're and billion it on talked is where earlier, earlier, about rate is talked that. about the supports as we X% EV as everything what predicated that. kind like Joe all, of first seeing of as Well, looks the we adoption We'll relative timing see $X.X

through, to that is think now capture period I relates time position got our that kind large to as a pretty the and how on The that and go fall as of you point we inflection be a opportunity to it how But we here. this frame. you, is think XXXX, of it. beyond we pull depends we I'll tell anticipation we right go in we're forward. we up really it see to XXXX manage Obviously, modulate can As get kind out

we'll it. think as kind the OpEx of still move terms and of then I So we'll into in kind see of we grow forward some accretion

Joseph Osha

you'd business put of what there look to there pure you specific is like about in a Wolfspeed? the operating might talk for past, might of in what -- markers margin, of some willing gross look terms sort margin that But Are kind out like.

Neill Reynolds

Yes.

you We be about of the So XX% Wolfspeed little go a just between and cost. look margin. I is gross and think corporate XX% time week, at what last the bit announcement talked if back XXXX frame we said to

level then that's level. company OpEx So get out about And a you XX% XX% as roughly to XXXX. a about

Joseph Osha

or I the Are this heard then I answer relationship whether refer then platform can know MEB Wolfspeed FAST And at is When you the business [ph] to you Volkswagen. don't carved you're expect with point for Okay. works, And if segment you into we not. business in how to see to actually this you. able And there? an up just segment. a quick say that's one. independent might third the FAST reporting it reporting more than given one me. Thank

Gregg Lowe

Yes.

something designs these for levels get and It access They English FAST forth. They stands that is FAST. is award use they're the of a XX,XXX get that targeted for to to into trying XX access it's on suppliers as have terms suppliers They access different of Automotive And suppliers think give program way the -- on as specific suppliers And not gives Future of of different designated projections suppliers. subset their something would of quickly. they engineering you any Supply so program. is a order give that is you normally which new a into out to figure In and small FAST FAST Volkswagen have intention, acronym that they their the are Track. at FAST to. wouldn't of an the order vehicles to program Volkswagen basically their

Neill Reynolds

through reporting the to a just the And Joe get new -- as we how very just working then more definitive recently to on we're from as business into give year. the updates sell forward. move LED we we're look managing agreement segment we're standpoint, look signed and we going that We'll

Operator

with Exane Paribas. O'Connor David from comes question next BNP Our

open. now is line Your

David O'Connor

for the XX now Analyst on Great. ago within a the of about year question. taking a Gregg Day A my decided XX% Thanks and question you $X at billion we time months. pipeline. the said pipeline that's

follow-up. on from that pipeline a is I decided? X-year half now have already the So And

Gregg Lowe

pretty closely million $XXX decisions didn't pretty certainly, obviously I win one I I quarters recall are then X and nicely. $XXX XX million ago worth quarter quarters in we've to that are million this the ago, alone I moving past would some say And XX ago had moving that things of $XXX to And well. And months. Wolfspeed that think as X we correctly, design-ins design won. if track. we or They're now said quarter. those There's

of a pre-COVID. different got that lock about I kind getting in pretty customers into amazing of prediction that would you David when went that's we way. actually that quickly because down their tracking mode say actually made And to then very nicely. So move think it's continuing it, kind And back to and designs basically

So kind it is what tracking think we thought. I of pretty much

David O'Connor

Okay. side. one Great. That's on material the maybe quite And helpful. then

shipments. about in I mentioned think last deferred quarter, the materials order some You talked flow that if you to And better there was quarter. back

pulled question is though have all my So been again? back Thanks. in they

Neill Reynolds

Yes.

a that's yes good -- think question. I

time. you should that And is how agreements that modest start look to have So of the that customers some way is, management of kind with seeing can the then of And some we're dynamics that in has kicks say you improvement, going customers. itself. you quarter you We of think that and long-term guidance to resolved been that think by forward, largely think start as I about some kind particularly of the this in forward. the LTAs the inventory about I last -- there about giving talked some

Operator

Our Ambrish next with Srivastava from BMO. question comes

open. now is line Your

Ambrish Srivastava

Thank if XX%, the the -- into Hi. large very much. auto increases auto I sequential at very we're you device had growth Gregg, seeing XX%. that you sell the the question companies on look a industry, device Q-over-Q

ago. year an And to a example some those back businesses where is was TI as it of

time half composition how the contribution right legacy second that So in device a would that that primary is just the business. Q-over-Q are it's because And turns materials much that. auto has devices. pretty from a has not you're then RF and factors seeing? to the also assume rebound that I that the reason? is why the Wolfspeed Is of so And explain the fair it obviously meaningful lead the in business companies in the is that the used is RF growth side the -- assuming into of side, Am longer on that two curious, that and those word seeing question before auto

You kind of talked stabilization you're about that seeing. some

So Huawei have please if you you you. to is exactly out these of Thank you that non-Huawei with that the be Where are ramp? new helpful. are are numbers. these seeing wins And -- that would could beginning to that talk customers

Gregg Lowe

Okay.

it's something the just first of than revenue Wolfspeed. So the kind is baseline on Automotive first of XX% question less of things.

year And as well. so ago and that's -- even a

to not place a revenue be like you but footprint -- have have or at a substantial TI our automotive. a down, they NXP in what of like would was automotive So substantial or substantial part automotive. we're It's not it a where

-- in a a announced last number all we design-ins we it one. of So in into design-in Number is lot production XXXX 'XX 'XX. of activity that's is going that set two -- is in automotive year our couple are won

swing a us. think for So way the either down and dramatic in that's near-term have I automotive up doesn't

In some got that of And But with terms more of we've manufacturers. engaged well. in give a that as there. we're than with of wins handful -- that. color all we're there's engaged all winning I are can't RF non-Huawei customers out RF, them. there non-Huawei We're

Ambrish Srivastava

you. Thank

Operator

of line from Charter comes Snyder Our question next with the Edward Equity.

is open. now Your line

Edward Snyder

follow-up. for Thanks

that? on that it I play we can will in frame you clarification to more I unit and scale to us death, on projecting agreement a follow-up this? in whether mean, wins. difference tries a a it is can how design-ins not give Sorry Or that the firm periods sales Gregg to out? a because depending opportunity wait on count talked sales, onto to kick is some but RF. for to terms do Or about that then revenue out see a of makes you had the the have like PO? and on or lot obviously you And automotive you

Gregg Lowe

Yes.

forms have letter come awarded different it where of chosen moves on etcetera. working And us. say that's So to way works typically, is, where customers the made And this. stuff a award we're kinds it let's with pipeline design-in in when and congratulations say they've can that you've they the an we when opportunity customer decision bidding has been

projected the is Here volume.

is the like pricing to things Here that we've agreed that. and

that classify goes So it decision into a going they're with a they've that we us. design When win. made production as

automotive from of get to design design that And that we in So it's is you out in that. win. of production first go and I $XXXX revenue typically think

typically so closer lot they when And to ramping a that's production. start into

leakage of of will to you $XXX in in to comfortable the have. on points that put design going kind $XXX we that and happen to win. amount we've going if opportunity some the is million the from very, have board, that million design-in design-ins But there we So put design-in we're very with numbers to million with the that $XXX

to it's is they about all so, an how It's end And in product commitment then there marketplace. their right. going and they're agreement that how with a us go customer. from And from a the do it's viewed ramp

Edward Snyder

you is of Cree news. incentive got change performance industry and course primarily top there's of it frank a EV they the of the be because unions got over and up shipping the But late really here growth to actually got years It's a up Cree profile rolling haven't best long of share line actually problem way to for shown several all time. design-in not the get excellent to a has because too. people of cost wanting to of this BEVs from the buy the because most these programs especially plans folks for lot versus in in solve is

only have expect you I competition was this because shipping other ZTE probably So RF just them. a we China point. big into Huawei. Huawei is make want Are shipping to seeing I sure Sumitomo understanding. crisp outside big one And increased of funnel the then at you're to I on mean for

And to everybody off Sumitomo other marker not RF commercial? they then starting get before markedly other as got significantly do of other is say is fair problems defense seen when commercial. shipping now cut product So kept just components a these. Huawei Thanks. statement? terms in can't Is that fair is competition there. areas they a with running you've into the in than as to and here, their to increase aerospace your it that Is in -- still RF larger your

Neill Reynolds

aerospace there. and front have very I have exact don't we of business a the in defense but numbers nice me,

your with a competitor. -- is, of really a as to I want portion with we that opportunity. engaged So a talk want Sumitomo company. good say competitor good to don't But that as on that customers ZTE model. And don't the They're the growth of assumption. it's a going to I a X% kind good And nice a about we're say be not They're first see and pretty see would business. back we're and part them. I comment It's RF that what of the have heroic our world to baseline adoption just in we comment good a beginning of recall one Ed, of the is, Huawei some then pretty traction. EVs thing non and flip to to other would I around

like think short I put. feel And pundits so, a pretty most that's there out

rate, what hear you're but baking heroic adoption we're some I the not So the saying assumptions. plan into on

Operator

That concludes today's Gregg question-and-answer session. Lowe I'd like to turn remarks. call closing to back the for

Gregg Lowe

everybody Well quarter. look and to to for you. you results forward your in talking thanks call next Thank Cree our we at interest

Operator

today's Ladies conference and call. Thank for you gentlemen concludes this participating.

now may disconnect. You

Wolfspeed (WOLF) 29 Oct 202021 Q1 Earnings call transcript