CREE - Earnings call transcript Q2 2021

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Operator

Ladies and gentlemen, thank you for standing by. And welcome to the Cree Inc Second Quarter FY ‘21 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation there will be a question and answer session. [Operator Instructions] I would now like to hand the conference to your speaker today, Tyler Gronbach, Vice President of Investor Relations. sir. ahead, go Please

Tyler Gronbach

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

to in after important Instructions] the of any today And the I’d impact us to Our that you mention pandemic. spread over to related SEC materially, Gregg. cause noted feel questions, COVID-XX like please [Operator release to call. the press release the differ actual risks turn free call additional have including contact and filings the the now could to factors If results and

Gregg Lowe

Thank staying the everyone. joining as you your hope and and good today. for healthy begin new families Thanks, Tyler, year. are us I afternoon, safe you and we

high and customers we’re for relationships continuing plan. silicon second end our range carbide we In in strategy exceptional our and our strong winning do revenue growth items competence the job to momentum our execute the with continues solutions. of quarter, an team by we above The seeing new fueled Our from building as carbide achieved on business. reinforces silicon operations demand long-term

in transition we solid addition, divestiture divestiture making of third quarter. LED to a global our during complete, the will fiscal the In and our company closest are milestone from to expect of on progress industry is as Cree’s play our transformational establish the have we to Once LED lead pure assets the silicon silicon achieved positioned well powerhouse, a our carbide. major journey semiconductor transaction

reputation we believe We this of Now time, the developing strong solutions to that market. has this competitive our over are the builds amplify of progression on further company the capitalizing our is while carbide on transition, silicon the brand name Wolfspeed XX in last to same years natural the positioning a that changing Wolfspeed. at the

the efforts more months the next change complete few the name be several have on in expect and share to these sometime to We quarters. over next

Our solid XXXX. substantial fact, and team XXX-millimeter made in has progress, has made breakthroughs in

to of solely begin to substrates for We a completion fab be in see investments carbide for previous Valley $XXX financial well spend with CapEx competition. I’ll to carbide will wafer and developments, to higher first many on ‘XX. leased approximately to the plan expecting fiscal As better a and over millimeters the Mohawk what as give calendar millimeters. from of and this versus XXXX. first construction further the million, as world’s The turn XXXX in Fab us CapEx are the calendar the a quarter overview Neill, will silicon half are third at XXX-millimeter important the fab XXX-millimeter year forgo we fab Mohawk positioning the and of the differentiating greater as percentage of raising an Valley company decided open steepening the initially in now directly ability Neill? establishing completion our instead, up And XXX silicon reflects carbide which us curve rate who we original an address our capacity. silicon of ramp Based XXX-millimeter of the these provide our XXX-millimeter capacity it ‘XX, now XXXX. plan demand this result, fiscal to and increased results epi beyond at fit-out have investment we’ll year outlook in our XXX Mohawk to of the the ramping half first Valley

Neill Reynolds

good above million, Gregg, for as and and our despite macroeconomic from uncertainty you, end the X% everyone. delivered of sequentially quarter the operations We Thank in of an quarter continuing during increase second devices fiscal an representing the XXXX solid and afternoon, to results increase of Revenues of ongoing for guidance, year-over-year. the were continues XX% high the materials $XXX demand second environment. improve

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

amortization, of quarter earnings $XX.X release. million notes, project of transaction and share accretion and on costs, investments costs, changes Our our exclude expense, diluted outlined Lextar other per earnings optimization net noncash value compensation, for the or stock-based in $X.XX non-GAAP transformation items our in acquired of second tax factory intangibles convertible today’s

gain momentum number Turning solutions. have our as to sectors. across a In platform to need pleased power, MOSFET demonstrated industry performance line. traction our with our for continued our build XXX-volt particular, of customers we’re In a product continues by to strong which

made levels in capacity remain expect our we measures, continue progress to quarter COVID-XX and plan. to execute we due improve to safety as normal below the expansion supply our While

to Turning RF.

providers. due performance quarter during to better infrastructure Our activity was increased the with communications XG

rolls to Our the across underscoring globe. XG continues the the have we opportunity as backlog grow, growing out

to gross throughout The quarter. to was device fiscal sequential remainder Gross Moving to Wolfspeed expect quarter, improvements yield uptick margin We order measures. XX.X% cost dampened and for the compared be our impact compared of driven in last corporate continue materials. the increase continued in in XX%. was our XXXX. non-GAAP modest by product saw XX.X% to continuing XX.X% was by we million continues margin also for a flow QX non-GAAP Cree’s was lines. which of items. gross the Non-GAAP operating to includes $XX were COVID-XX expenses $X safety rate and tax performance last but of XX.X% quarter operations QX million, our margin

While while to we to prudent leadership expand heightened in operating costs cost continue position. we control, remain we expect invest our our

cash on and excludes from the with agreements For and second days to future X negative days inventory hand line negative XXX in a and $X days. and debt withdrawn Inventory wafer supply flow connection related We healthy of our $XXX resulting value support quarter, LED strong convertible million, our was operations million. was divestiture. sheet on XX a the with on Cash balance growth capital to had days, billion. hand liquidity the in $XXX was were outstanding of million, expenditures inventory sales in strategy, days of $XXX $XX generated free with million face credit total

reflects fab percentage also business, the support other it’s million time continue is in support support now we $XXX of current of running and we our greater mentioned approximately to And expect million sooner invest investment now scale for the CapEx because million our set of ambitious will This XXX-millimeter spend not important out previously It’s year. as current the better demand for critical which higher out our assets XXX-millimeter determined support same $XXX operations investment as This long-term the XXX-millimeter XG communicated. in to out capital XXX-millimeter be of to To achieve we plans. than growth anticipate in while of calls plan to now. us Valley you automotive as we steepening assumed sectors of to beyond our of necessary planned, CapEx XXXX ramp. many our the capacity curve Mohawk at the Fab know, industrial our the peak We well important to needs equipment. be the completion book a $XXX building are higher fiscal expenditures our earlier, and customers, operating originally as versus remember meet additional Gregg to XXXX to the optimized and

currently as as continue we flexibility reimbursement state markets we is will ways fuel note timing XXXX important continue Mohawk well the to to that construction capital leadership evaluate ample to and our our liquidity our our plans, flow maximize to to Valley and be monitor have from It cash the financial York. our depending to as progress on expand While investment New we of variability during CapEx we position. may continue subject

to fiscal turning XXXX. our of outlook Now the third for quarter

of to operations be We to are targeting revenue $XXX in $XXX range million from million. the continuing

we seeing the RF power we’re willing continue product half the enter momentum of back in ramp to the We expect to line as product our our year.

to better to between supported post improvements Our is by QX from Cree’s XX.X% materials expected product modest is line XX.X%. a operations order and gross be non-GAAP continuing margin flow. expected

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

non-GAAP to The mix forecasted jurisdictional our continuing operations due be to rate of earnings expect the effective effective XX%. approximately basis. We a tax on tax decreased rate non-GAAP our

be $X.XX to share. from non-GAAP between diluted We’re continuing a loss million targeting net $XX $X.XX between $XX million, loss to or to operations per QX

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

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

Gregg Lowe

Neill. Thanks,

energy new bring products power infrastructure, rest our market. launch industrial month, markets, this in successfully which automotive in X,XXX our efficiency during Further, increase device the industrial, confidence to launch pipeline, also our the energy engineering of spread demand in which we’re impressive, renewable is strength team The solutions energy currently Wolfspeed pleased and approximately Customers scalable Earlier in charging, defense. quarter. and storage were converting customers and priorities. offering. EV of and but design-ins allow cadence across continue this systems. team than automotive power module the with awarded to silicon with are more and announced our products opportunities carbide of of this RF, demand the range million to of Volt not modules, Wolfspeed results a with at our stands opportunity for our to again, industrial A business technology with significantly and This including the portion MOSFET of aerospace the team task we’re for of Wolfpack packages for grow. the us constantly Once which delivers The We closely underscores interest more supports strength billion, is power, sales continues performance smaller, at give for that previous feedback we these quarter, maximum which family Solutions. $XX communications, demonstrate Arrow power these $XXX the to Energy power and reinforces to efficiency wide and and only be seeing, at new significant innovating strategic to continues working that our applications. for Electronics

of While long-term different business, prepared to that of across materials, industry recognized to well we with being are these agreement industries, automotive we supply merits silicon pleased the are businesses. our existing announce needs and anchor an now expansion example towards XXX-millimeter carbide quarter. $XXX extension wafers wafer extension semiconductor this the shifting other continues The silicon and agreement silicon and of carbide to customer major industry applications is we materials provider signed a Wolfspeed’s in to serve are carbide In epitaxial approximately and bare best another several the positioned of how during this and large is the lead how The next are million at the extended with past represents years. over we provides yet transition. and an

taken Massachusetts, limit steps countries post are over vehicles to in term, the Jersey that invest COVID-XX. and more sale new the look new engine California pleased by the long-term signal decades remains towards their of economy the as ban volatile environment, the intentions renewable few the XX XXXX. we in combustion have towards it with the sales near rebuilding markets serve. recent in cars New internal energy combustion restrict of and growth have of we they next macroeconomic Looking developments communicated Globally, than engine internal number while to or

Turning to XG.

the mobile regions. world in XG And infrastructure While Overall, solutions. are and opportunities encouraged multiyear China in we carbide build. progress and growth although a lead other of as pure-play opportunity semiconductor on to GaN a front our GaN are expand us to with position as in we and global we carbide in in as LED as expect silicon powerhouse still By signs on stages, today we’re successfully continues to rollout, by continues the we focus, of the momentum be years a early ahead. capitalizing we the ensuring ourselves assets, divesting our well have established leadership sharpened

and our XX-year win in of marketplace. to ambitious our expanding the working carbide plans rapidly name changing to on silicon are heritage We to with compete capitalizes which and speaks Wolfspeed, our

moving to a production are shift fab Valley the from range and of forward in wide sectors. greater we’ll industry XXX-millimeter, XXX-millimeter the industry supporting of We with Mohawk the adoption early across XXX-millimeter ‘XX, begin

And adoption forward increasing in the growth and the a I’ll for we plans we we it strong and the customers million and with the can interest best in ahead to spend up of XXXX $XXX running We believe because our crystal Durham quicker at shareholders. begin pulling turn a over have and long-term our in of a continuing that, our have saving industry. Fab session. for allowing it and to value the in XXX-millimeter We’re and believe, is we our to our Valley CapEx cycle, qualification deliver facilities Mohawk back Q&A us, look operator, to future to

Operator

ROTH Our Instructions] question [Operator Partners. Craig Irwin first comes Capital from with

now line open. Your is

Craig Irwin

X-inch. at as while always be this made have execute really primetime will It’s is the the X-inch? development in with launch update think to to other there execute see from in as Cree far for a you technology X-inch be actually exciting any look potential maybe Niagara, early has on? Do stand XXXX. us you Gregg, technology in So the reactor on congratulations hunch. you success on production I had that going that Can to there? that will necessary more Do production where in you feel cost X-inch we of hand we massive move than Are MOSFET breakpoint processes ready the to transferable probably at potentially you you when risk areas down that that

Gregg Lowe

things and with One thanks A extensively Well, the the of I been engaged of the would on I’ve years Craig. been for in the having we’ve been have note. XXX-millimeter is, very last couple updates over question, pretty couple team. that involved

XXX to collectively on team it. at millimeter. that breakthroughs Our continuous Valley numerous has progress felt team made we were And as we ready and with a Mohawk go

we’re ramping Craig, early Now to going ‘XX. that be in

away. XX we So months are

review crystals where with thorough where the up, the on forward. reactors, quality technology, it forth, at and got did we’re at we’ve So where and pretty the we’re of a sums you we’re can we’re and moving of team on the so bet at

real that. feel Obviously, some actually the building XXX-millimeter we crystal spending about of growers. with incremental So CapEx is more associated good

all of So at own it, diameter as our on silicon the that’s our material crystal then carbide build size. well. and plan obviously in of we And side growers finally, on wafer the

at So we on about where XXX-millimeter. good feel we’re real

real And actually SUNY, As built it York the of relates to Albany in that York. with MOSFET, recall part a fab type running good while terms deal pilot where in site. prototype a line at when XXX was millimeter. at was pilot the this that We line We, that to about process we’re at ago, New New well. -- XXX-millimeter begin of line we activities as that pilot converted that feel X,

good about And so feel real we that.

that’s ramping cycles, X converting that and ramping go to risk. those X thing, having XXX I Craig, doesn’t there’s is on et it’s through total XXX cetera. and complete But and tell versus that then a focus Now and customers you, now XXX-millimeter mean would what

from very this the to would of that terms anticipating to So getting significant because they savings factory. in the a be for amount obviously, of we’re need announcement, customers, from we’ll do qualify to them feedback it’s positive this be work

Craig. question, of and We’ve amount enormous good on spent this really we’re an about great move. this, So energy feeling

Craig Irwin

availability Excellent. can of competitors on my call your than as side. Excellent. Then maybe anticipate today, And were and contribution rather released consumption? actually waiting sales make follow-up cap we major It’s the chip the more external the seen question. to commercial in the a of could of I’ve they lead since been customers mean, understand, do all X-inch internal I you have semi a of you even had year wafers, commercial than none wafers. far budgets them major as I have ‘XX, for necessary them sales engineers Do X-inch that that material

Gregg Lowe

no. I think for ‘XX,

I that focus of of think with that is quite that number on we’ve moving. and ramping our be a getting many going the a semiconductor of And long-term different have factory of inside all up to we really agreements variety We’ve players. those. got announced of

expanded said think these then quarters business previously ST. materials a three of our something one them to that And of these long-term expanded extended well. agreements. while with is ago and and subject one as we’ve extended more like of recently, We’ve another we’ve I

materials in at R&D customers of I would ramp really where a say they’re at perspective. where So terms perspective, they’re different from in of an variety the are is stages a from

absorbing this think I so the they’re sort ramp XXX. at point, of at And

Craig Irwin

that’s Well, a big announcement. congratulations,

Gregg Lowe

Craig. you, Thank

Operator

Our Genuity. Dorsheimer comes Jed from question Canaccord next with

open. Your line is

Jed Dorsheimer

question, on guess news XXX big It’s first millimeter. I’ll And Craig’s, the echo Gregg. congratulations. I

of straightforward two seems Mohawk. in up what components and Mohawk crystal benefit, area separate yields in respect particularly there. and business kind terms It to the thinking pretty do with of between yields and could Just then in of

greater -- On perspective, MPD was of that’s side with for caused seemed wafer. Clearly, assume of side, then, kind targets? it we in back Should a risk from that there’s in the that like long-term you was faster a kind on cost a go terms the crystal of margin always this. something to terms that seen of you’ve ramp

Gregg Lowe

do where got but crystal we wouldn’t cost that. detail getting about right of good the of to No, I at in like the a Neil XXX-millimeter, elaborate feel the and go point, us. let materials bit bit down the a on work for through more little Neil that. do We I’ll little so the and very feel on move at forth. maybe little that. on quality we’re quality terms a We’ve more on this it’s let I’ll But

Neill Reynolds

Yes, Jed.

it, think billion for as long-term of if plan laid look we out target. So XXXX a -- revenue you if you in XX% about model, there’s gross $X.X with at margin our the

we’ve talked margin that Gregg of I the for of think about that the is exactly the to both terms And previously are said. kind transition in same. reason the the time revenue line what and going transition kind of be

I of you think can you in the about interestingly, little to benefits but lot up a the bit see. where end going some higher of puts to periods, would were and diameter before. being of back XXX takes a So kind cost there, earlier offset we in there’s you think the And that’s a have

get out EBIT, billion but we’ll little ‘XX, what with our up I’ll and margin, of when bit position. a differently. gross we’ll, view, a time, XX% the in there then XX% is get end base. ‘XX, of for cycle we $X.X in going XXXX. of XX% model a that steeper to the better much out qualification which Gregg to So over several And in a top customers, well think revenue, the we’ll received to advance say ramp secondly, by beyond removes X as -- expect a years what that, we automotive run said, for On out customer We’ll XXX the couple be I more be OpEx is

Jed Dorsheimer

it. Got

I thanks, As -- back going guess just follow-up. to back Neil, my going Gregg.

about is benefits XXX all lot of ramp are not existing XXX terms to sort of because particular, the in that over out sort going how But want there customers in the to of transitioning having recall. You -- going there’s right of a and XXX are XXX, I pointed thinking benefit. you assume would to your

to thinking So process? this how the sort approach of practically, you are about pragmatic

Gregg Lowe

our Well, recall, Jed, fab now wafer in expanding we’re right Durham.

beyond ramping XXX as XXXX. then of really, that the would it anticipate greater it of intention of selling as As Durham greater and Durham the of up It at shift some a ‘XX, be we percentage than factory time. will become XXX, XXX. be I as output it the would move Mohawk begin no in derm we remain be out ramp output the we will will a greater XXX-millimeter than And than and percentage, will we’re factory, XXX XX% LED factory XX% And out, we output. total ramp and to producing by the smaller greater while for obviously. the a Durham will It to be then is to substantially and and Valley, it from so remains there smaller

Mohawk going have raw be a so be say New substantial and Valley. increase its is terms in And that’s we’re plan So it to expanding capability The expanding what fab to expand we recall, it’s try a better a enormously have be derm factory, move simply be York I going versus emphasis what factory space as going move putting the we’d of is, would off XXX go-forward on -- small Durham. out There’s way highly at relatively our why all an we just to -- XXX. would in to automated. that larger this capability is to what intention it’s in here fab, just in LED modern and be to no from the in then the finally, XXX, continue

Operator

Hettenbach Our with next Craig from Morgan Stanley. question comes

now open. is line Your

Craig Hettenbach

had into a Gregg, little gears bit I lot the the maybe shift of partnership. with know just a industrial market. to you’ve Arrow And momentum specifically,

just typically timing takes think products it because get we in industrial the ramp. the industrial to sense designed cycle. type partnership get off, So How for terms of should to kind an Craig. question, of related want time revenue I about first on in It’s your an to -- little into that Just than of know update a quarters? like coming earlier that is thanks for automotive

So automotive is typically a X-year type.

into revenue, start sort to but ramping quite X. of kind the depends X fragmented. industry, bit you industrial when designed is It a of it’s little get You on

I ins, at the think range. But of energy. awarded kind look is can automotive. So X past the sort other type about then would $XXX of you over of this little was in that X And industrial it million bake that I were of point X/X of we Craig, design if quarter, to a you make it on half was about that, and

So real broader momentum good we work footprint this been family to just to fantastic capability to on able don’t just substantial that’s we’ve that about we X,XXX in as has really it’s again, space. why and we have one we one races like have volt newest And leverage. we a feel the looked promoting that been a after they’re Aero, already that opted introduced sales And that. partner the got that They’ve where Aero go of when there with. well. modules,

Craig Hettenbach

kind of traction as insights automotive of interested of with kind those Got you are And partnerships partnerships just a design of just and in follow-up, of any the suppliers, from relates of number that just a then in kind it how a having some X those are side. terms it. have perspective the on as the progressing Tier to

Gregg Lowe

point couple I a I I Well, to. things but repeating. mentioned it last quarter, worth of think it it’s would

on the of appetite that at electric by become definitely factors. cars giving decade. to base the feedback pulling it. that several end the different and or customer Tier that of and going consistent Our customers, of X is electric the are this customers looking us the possibly Tier across X pretty Most that vehicles One percentage were are increasing adoption is rate along

now EV. well XXXX, I’ve customers XX%. would That to some of get past by by the of a about cars the decade. seen So rate is XX% the XX% adoption thinking end maybe

to sort their incentives, well. number bases point rate for increasing That’s governmental of of the vehicles. substantially adoption they kind that of as reasons electric include the So consumer customer end also push but of

whether car interest number the different silicon to it’s that cuts higher and get or vehicles. across of the increasing. one. two different greater more cost the success a is solutions of distance ability segments everyday end The that’s decrease also number is the platforms, the they’re carbide per a battery number rate car cars across types, on of vehicles. So a rate Number and/or of their getting cuts And all amount charge of really

So they’re there. seeing really a lot of strong interest

they So XXXX. had that see And for one that’s just especially a last interest beyond and encouraging of showed the just kind from had presentation the from week, recently, of as market their they we really silicon have layered customers it’s our customers on carbide us. and

Operator

Sachs. with comes Lee next Our question from Brian Goldman

is Your line open.

Brian Lee

couple I had here. a

accelerated you about and forward quantification of I given revenue very can and impact the has But you here Neill, a around, leaving And And can as accelerated you funding something would the the get-go? your made move to the CapEx, thoughts Mohawk margins, any window and would in congratulations then be know some also Valley, to well. do the seeing of can just from sort forward to the open said there’s of what it the New breakthroughs I you ‘XX additional capital but York to talk on we on I’ll echo given like of state, from sounded, sense related CapEx should of XXX timing? expect no us you’re maybe it’s what for timing in you’re fiscal the if pull sentiment the have us that pull that. then Maybe go with And that of imagine targets just terms on that, Just potentially at helpful. others, give around CapEx. Mohawk to it yields. make real XXX-millimeter That maybe sense give

Gregg Lowe

Brian. Yes,

back the that, of first can let half me of part the So and take address then Neil it.

program first involved forth So breakthroughs pretty the at a since I’ve with had. that XXX-millimeter of what continuous would so I’ve And been we’ve say, and been the actively there’s company. and success been off, I basically progression

Tuesday move And came a quite somebody flipped our been where wasn’t in it. point result, last obviously of confidence this is So sudden, a in we’ve gotten to towards confidence week, the this. we and with gradual a high. It’s building all

making we’re announcement ramping We’re talking it in today, this XX and about months.

feeling So about good very that. we’re

And coming exceptional density of this it’s care of In customers that point. point. really about. that out, the sort at this exceptional defect at terms of the quality materials includes normal Is

So about there’s consistent decision of years has as do over couple progress work this do. last we’ve of it as to would we semiconductors, been. positive move describe for made And real where always good still I that the feel to good forward. but There’s really is quite that. in the drumbeat said, about into work we right feel that that made again, culminated a just a we’ve us going we’ve Obviously, that

turn terms and the let I’ll with Neill timing that. So with York I’ll New forth, of that, so -- in address

Neill Reynolds

Brian. Thanks, Yes.

into first and funding -- and the of the I maybe a just impact the bit things. and maybe the CapEx kind best those then think is we can types little thing of get me Let to do timing

million of million. Valley the that in So that the completion had about a rate in is we CapEx of is and $XXX result higher now bad a the $XXX talked Mohawk higher we anticipated all, really first

of what of ramp the half going that is us to XXXX. confidence in first gives this kind this So we’re

There’s at also chunk spend a of of there XXX-millimeter, handling that incremental materials Durham, So sort on tools, thing. this expansion an the for for that is is large timing.

the we’ll building So the business at both just be at while millimeter, XXX-millimeter same out time. to XXX have supporting remember,

while earlier. there XXX-millimeter that’s timing coming investment overall, some is bit this in a is So there,

continue peak will XXXX So our year. you’ll drop CapEx. to a XX, still be investment see the in

time I maybe will And at ‘XX, off think before. what it ‘XX in higher anticipated drop then level we frame. be than the again

and with is say, but So higher the the ‘XX. or requirements slope same, ‘XX more I’d less in

point. And New markets then the into shape cash standpoint is liquidity. standpoint, the soon, but of kind capital seeing at a great in year of I we’re relatively a those of that now. say in and out come a from mentioned some I York we $XXX think from some should point got of from right start the perspective, We’ve a next although Now liquidity majority in million script, benefits would we

So good we that. about feel

steepening the going we’re meet beyond make that continue XXXX, and can to sure ramp to with we However, out invest to opportunity.

we’ll So look time we kind the that in at particularly and forward opportunities to as those beyond of what XXXX frame. seeing marketplace, continue given be opportunistic we’re here look

Brian Lee

and And I it could I’ll squeeze All super right. on. pass X a in second if Great. maybe here, That’s helpful. just

here. quarter, of improvement, kind million guidance the business. sort kind in you some to on the you modest have Just June the revenue, really of guys on improvement when based Wolfspeed $XXX closing you’re did shifting seen lows of off XXX-plus the in

So I $XXX you segment million -- at and think ‘XX. peaked in in fiscal that

environment. you’re So not off current really in even the level that

organic of So going just COVID is how in just maybe maybe they’re can wondering, growth? a it market? side, recent then is just of materials just RF? away on also coming the on picking impacts volumes drivers improvement normalization it of from? where trends it business kind unpack top then coming Is much and Maybe line all much organic and you up of the again? the the how the EVN sense from is Is any And

Gregg Lowe

audio think with trouble I Neill. we have some

post power Obviously, enthused audio take we seeing we’re on to from we trying the based really humming as next idea RF a business is to is picking couple service would I’ll that then that to working Neill greater but Yes, One the is fruition years, even will extent, of for real That the again. beginning ramps business that start we from crack be that of really say if the production the pretty hard some a to in that into the I able associated back on -- a business, and But at really on on in that to revenue. and the to things ‘XX, the over going into these that win get for to design about the it, terms maybe and last way ramp turning early I things frame. click activity years. going progress had and really say we’re device demand That’s we’d we to design-ins nicely are the of and of design-ins in be So teams couple up ‘XX factories the and we’re want really ‘XX post initial with have. to were. be able and that. where for what had trajectory would we’ve pretty

good Brian. quite feeling it, actually, So we’re about

can I it’s say. our mostly know stuff think new I old returning, way would I things don’t Neill And if coming versus -- the

Tyler Gronbach

just Yes, Tyler. going Brian, it’s -- was hey, Gregg, I to

just throughout other we to just around The of the going in modest Asia. that’s rollout too, add, some Brian. the continues I And there’s And RF thing globe. a function improvement was -- saw

So we’re in the opportunity, of there’s that. still but stages good early

there’s productivity period. work great that’s by experience and technology creates So to for people start from -- leveraging as that a And greater XG. home multi growth opportunity

just on and little said, here I going Gregg as on. a what’s So color added bit of

Operator

Research. Edward Our Equity Snyder next from with Charter question comes

line open. Your is

Edward Snyder

Gregg, brilliant has market, with been discussed congratulations on in in of module business can, help past, But given premium kind the the not into devices a XXX-millimeter, customer/competitors Wolfspeed’s would biggest if your as doesn’t your device think idea. and should and you we’ve all power device ST the millimeters that I capacity, diversified But diversified XXX power but have addressing once largest -- assuming pull we should markets. biggest addressing? your the you that some the XXX that? and are about given fab how if maybe power which, if New largest, on you make fab up millimeter, once follow-up, York power at capacity, that And out, And get mark-to-market the get cost down shook of same be the running, sick that what Or please. more historically, your customers on markets us anywhere.

Gregg Lowe

Thanks appreciate a question. lot. I the Yes.

big we highly is it’s fab, a us fab significant modern larger than substantially because, York obviously, with that it’s So automated equally what Carolina. real But for be benefit first capability. in off, going New expansion important, to have pretty here a North in

So we’re that. excited about super

has we’re In footprint a And been that very sales this well where together with diversified really that’s Aero than the of really market, worked with partnership positive out related on more addressing more them, our it’s tightly huge and challenge related. has terms been for and technology us, coupled broader, for us.

going fundamentally first In terms believe And we silicon as that really the cranking to carbide that, XXX-millimeter It world’s only start the believe I be silicon production ramp we the will just factory it’s us it. good a of itself, the give to fab. world’s XXX-millimeter going and that’s the carbide be fab. Ed, opportunity in fab

Edward Snyder

the that as But and next I the follow could if then Maybe if business I it. just speak could. for orders. Gregg, of your next no limited to quarters. if don’t at is mature so out the Neill is about quarter now least couple capacity increase fill business in the business epi maybe you of Kind suggests longer your looking you’re material in orders in I Great. And or on comments know to driving modest growth much

offset look that on on Fab for for balance are So far will shipping epi the that, can with shifting now people almost be some the to is get your large of Fab look anything of larger -- X idea between like and your to are probably internally some in of do year their good. so? customers, help growth epi to how the still and all, that like internal your what -- can next orders X to if is own fastest you done plans or of Is wafer areas, is enough for demand of increasingly and first native coming source been to of the what process us we an example, get or and you epi if their capacity has balance epi take material up enough, at be that. we mark-to-market you at and one What

Gregg Lowe

and more and is Yes, is guess Ed, customer what little maybe it just materials turn base is take typically, to I certain a with for to Neill desire been I’ll start bit happening desire to then over a base our our I materials a what’s good. and with customer a would color. say,

Gregg Lowe

just seen and is we into for get there actually haven’t more all. and epi much bit a do a be pretty really are to quality change epi wanting it, I the little I competitive, quite that more because high. guess we color. what pretty simply trend of tends at well Actually,

more at at transition all. So I I’ll bit you haven’t color. give let Neill, seen little a much those of a

Neill Reynolds

Yes.

of you think of on supply modest caught on a just I pick as kind about demand more the and I Ed. side, think that’s I up the demand we’re But the think situation. -- materials up talk just

some good MOSFET. seeing are We strength in pretty

little We’re RF seeing pickup on device side a on bit more the side.

ebb the I there’s we that that back those a still think of bit it’s is Right of go I supply of the we’ve quality within think solid And time, expect we see balance as come little as that So over now, forward. And think continue I And the market. we’ll modest. manage got. think flow as said, to customer just of epi Gregg things But kind understanding stronger. demand how and through. and out, from materials more standpoint a I works we’ll we’ll see what

Edward Snyder

squeeze I can real Durham, I maybe for if little could us on remind X remember, going LEDs start But you I when it’s while. X be of moving will to apologize. If a in, too quick out there

will can crystal expand wafer you start LED move facility before growth So the When significantly we there. to see out? wafer

Neill Reynolds

I of already growth side chunk So seen out. Ed, move on yes, crystal the LED think a we’ve side, big the

done point of real that had planned we’ll on this that focused previously. And the that I came that same the we that’s on smart but fab deal that line underway. -- we and at positives really had the think continue outsourcing time was the We’re or the

really no there’s model. the So changes to

think made side, right path I progress I great on got now. we’ve the think working side the -- postage through we’ve we’re and

Operator

with question Coster next JPMorgan. comes from Our Paul

line Your open. is now

Paul Coster

it not with get is a I if you little model. hybrid outcome? like you you’re Why sounds structure better heard ‘XX heard a as to you Or XXX-millimeter, margin same explain that Can Neill, the you to in maybe might it I the bit? correct, kind with going wrong. have of done

Neill Reynolds

starting higher a where diameter, the No, think that’s about is expand there’s what a of that’s new time Paul. right, And technology at cost. I and period think you you’re when

-- get all the you the full benefit get don’t of diameter. you don’t So bigger

at et you You’ve times cycle of as then take an intersection kind of work fab, you a ramp years utilization, will to the yields, for cetera. kind it run improved on look of improved couple there’s it bring factory. a through eventually, that, And us And the while, for point.

takes. So crossover a point. I there’s think And and lot puts right now, of

We’re CapEx depreciation. some and adding

We’re get back but end pieces lot in in there’s it of to you you when a same moving kind all, the a new up at out said, at diameter. there, end adding of ‘XX, I also Like of the spot.

Paul Coster

sounds you. judging is, year by beginning the remarks Got Gregg’s prepared other like of it is that the And question XXXX then ramp. at

how how they’ll the what ‘XX margins function? think it do Is -- Both ‘XX accelerating like? kind step X-year look do smooth think and So is And adoption? that evolve -- over does period? you it a of and you

Neill Reynolds

what I think it Paul. will be we talked to about previously, similar

still of think that about about as improvement, So an going kind here we really you modest think then be And think investment it’s I to transition. I forward. year, there’s next as think

Edward Snyder

real I maybe If squeeze could quick X in, I X out.

look we really Mohawk how about continue function from We’re transition focused standpoint as to on Valley. as go we you a margin

of frame So the the where coming capacity Valley. out you’re time of well isn’t ‘XX XX% Mohawk ‘XX, until it really of north

Durham, the the move So more the the Valley, up will you’re in lower the they longer higher the and Mohawk are margins the be. capacity margins

different, talked bit ‘XX, of better The kind for key positioned, ‘XX, several are inflection with the will before. talked about as the plan the we’ll ‘XX I be we same much XXX-millimeter CapEx business, of kind difference having about So years. is a on before, be of as what our point that it and trajectory think and the view, in we’ve

Operator

Colin from Oppenheimer. with comes question Rusch next Our

Colin Rusch

to there at look assets that to a XXX ramping are you’re you the you bolt-on As XXX-millimeter, on? you’re Or going little bit ramping all going focusing that particular is voltage be be this initially? going Is a

Gregg Lowe

Mohawk understood know it as it’ll to product will products first. range the but driver It -- the it the from Colin, spectrum entire our the we’re XXXX of have turn in And than greater of already coming but will be if products, -- what’s will do be of that technology. majority to don’t be got Valley I we We’ve what targeting, go output of time since vast to the going be frame. XX%

Colin Rusch

on equipment Okay. suppliers of those working there in risks are on so your you the deposition That’s the And around time any then multiple far vendor? terms side, helpful. what delivered are And with get tools you’re suppliers? with with seeing

Gregg Lowe

in have gone that things regard. it on okay far, So

and I’ll the pilot -- SUNY. in So line recall, back. add We do have

of there. delivery some been there’s So amount

We’re expanding here the capability in Durham.

there’s of that. been So some

I don’t anticipate I So don’t problem to Neill, to have huge know there. if that. add you additional on any want you color

Neill Reynolds

working again, that’s while. think quite in on we’ve Durham. long And a are I this for These been No, right.

some that. there’s of So been

I Neill, there. the don’t problem know We huge do time anticipate So items. type lead have

good So on. as going visibility we’ve pretty to what’s been

really So I any there. disruption see don’t

Operator

next comes with Joseph Securities. Osha question JMP Our from

Joseph Osha

First, a question. simple just very

of versus Wolfspeed disclose a have do to all business, pure power versus materials the breakdown? any think a I follow-up. you is I have all RF plans

Neill Reynolds

Joe, yes.

with one to decided go segment I forward. moving we’ve So right now, think

as type I million of And of internally. kind the business. business how think that’s right kind run a $XXX know, we run we’re you rate now,

sense makes that think time being. we the for So

Joseph Osha

Okay. questions, other And then to particular, follow-up in on a couple of the Collin’s.

move economics more out performance levels. the some happen? do whatnot? to -- platforms going white XXX some Or XXX SSD platforms power those MOSFETs to to into Do you up voltage sort we car drive think volt? of lower trying Could or and city those of you what’s improve. performance see products designs you’ve And of there, of still vehicle is I’m using but they’re lower platforms volts. out again, lot your then IGBTs seeing lower a wondering XXX at platforms at You’re got for especially power

Gregg Lowe

Yes, Joe.

the mission So the what the three to silicon that a we epi which fundamental have years, couple to is technology, on by the carbide transition to to part from drive of carbide. and down. for silicon the challenge reiterating high-voltage of last start And things, me do of a been electronics is market cost I’ve the power saying and silicon the been basically substrates let

marching made ahead been an for with we amount you pretty there, driving opportunity to and the decent intensity, we’ve years, to us. make further tremendous imagine, wouldn’t so over that three see And last progress and continue even still we’ve us of that progress on like of

we’ve that gets parity the a anything the substrate at well. doing substrates, what or to that fact to like give been three over having never The continued silicon it us level. that. gap fab that. to some to Obviously, carbide between decreasing so there modern silicon moving XXX-millimeter success is last But be and the we’ve pretty going we’re moving And that fact good been at years as is opportunity we’re

the transition the we’ve fundamentally, carbide driving on via been transition been substantial from of driving this mantra from So pretty silicon the mantra on been been of transition this this on cost on we’ve fundamental driving from silicon of of the mantra this to reductions technology.

silicon substantial technology. to reductions Now via carbide silicon the fundamental pretty of cost

to the of Now technology. silicon substantial reductions fundamental carbide pretty silicon via cost

volts. increased our thing and is of is Now we’re part feedback auto look getting the the carbide customers other getting from and this seeing, this we’re including customers our at seeing, the other an from silicon XXX part the is across feedback we’re thing of we’re is all platforms, the an

as the of carbide So silicon see voltage at well. and the of we’re higher seeing advantage volts, advantage taking Obviously, customers that. XXX

good future. there, think of see So for down. real it’s been around been but for the things, in of still really some pretty cost hard haven’t reductions think out but the it on a And not we driving to of play pretty good pretty we I heart, sight of done cost it’s faint side job the costs we’ve we’ve of sort driving still I those line amazing sitting just

think we them. that, They that see our offer that we to customers quote, too. vis-à-vis I what obviously, are seeing economics our

see fab is to pretty going as So it well. a I as

give fundamentally, us, opportunity we’ve big Joe. So been ahead there continued we’ve us on this opportunity of

Joseph Osha

to But are wafers? to want the And a more their epi to pure more sign going let’s quick -- become And just materials supplier you’ve obviously, contracts would you rather just in imagine me. you sell the you end that’s it’s Or one. got existing I sneak for market? obligations. any one it And can

Gregg Lowe

and obviously with We they included have we an customers. bar that extension strategy. signed own work long-term all expansion a and agreement work we a customer We epi. And and of No, understand customers. with with that Yes. just their

epi. them more of to Some want do

bar ask percentage percentage and of So for they higher lower a a epi. of

some for want don’t so mostly them of epi do do to Some that come and after them then higher want percentages. and it of to then and back epi find difficult, ask

we and have in a don’t So particular that X model find pretty ourselves we’re regard. to don’t there, flexible we

Operator

comes O’Connor BNP Exane question David from with last Paribas. Our

David O’Connor

Firstly, maybe the on XXX millimeter.

issues go you XXX-millimeter the XXX to does the a the part And that yield you learning now now just the around on the X, X-inch be won issues beyond that as down with they’re solves you’ve millimeters? billion, MOSFET XXXX, on on Gregg, X-inch, X-inch you wins So $X.X solved? in follow-up they to move that have will clarify, do how on materials in of yield, kind then that the to I the need we And automotive the design had the side. had already? all Or all now on cycle well? should are And on through that reconcile road mean that

Gregg Lowe

Yes. Thanks a David. lot,

with ramping customers, an existing facility obviously, have in in of Durham. off, first we So terms

shipping to early product then production that begin and have year, next of we’ll XXX-millimeter work and Valley in customers. Mohawk XXX we’re We’ll So qualify at millimeters. in with

to really lack that to or relates to be the Valley initially really happened on issues. XXX, yield associated blend of it’s And will be XXX-millimeter I transition over the issues double really mostly and will our transition factory a time those then a going as move just substrate small MOSFETs. yield It’s and would a It’s design transition but in there’s Mohawk Valley then a we the in towards XXX really in then will of like and again, and a cycle. period there’s associated itself, with a qualify ramp is characterize -- simply those of independent important yield of XXX-millimeter it’s the Mohawk XXX going with to a and is there’s be added that It the blend relatively are to factory things then a now really XXX So it what’s Durham a going up with two, as and relatively single of be yield to And factory. the -- automation a be factory. transition it that the it that. of issues, millimeter. to And are dated versus

progress on We dated -- goals The they’re and going But the we’ve we achieved the yield lot are about. think I relatively of making well. with And as working not we’re they little best grinding it’s automation. had exceeded improvement to as going can, team for actually quarter on factories yields this are this goals an quarter, factories to but continue that. a talk bit we past as our that example, obviously and for the quarter, got the a

again, actually have, And to SUNY, line through David, pilot as our now actually As I mentioned we earlier, working we disposal, pilot of issues some move Valley, to Mohawk we’re millimeter. Albany. a line right that XXX we’ve at in those because converted

beginning out and overall the that we’ve that let’s part gave with and got move already the too. there the So forward a was right go/no-go of learning through Valley, chute of organization had in some the the pilot we’re of of cycles team line the we’ve thumbs run up preproduction there, Mohawk on we XXX-millimeter number running,

our that be that I There we’re very like be typically nothing to but automated because factories. have is to -- intervention So transition we going easy, going nonautomated is going human better is be transition will out a highly of that error be factory. feel little to

So your had hopefully, I think a question. helps you with follow-up. that And

David O’Connor

on Yes, on maybe the material great things. side color. of the quickly And that’s follow-up

about one when this you’ve materials model for customers. Does forward? time, the for out your advanced someone kind deal look extended perspective of deals Infineon like long-term a boules. At should on how the silicon a Or see struck the side? a GT in same anything change with carbide the we we going those So agreement type material you few of think of years with

Gregg Lowe

yes, things. of a couple Well,

at well-known with And pretty very in kind pursuing this think from of is of honest terms about. to and with there internal perspective. customers from materials And that have So to are first strategy There that many silicon they’re transparent try off, plans very industry carbide. it’s And us are in that that’s big I to own sense we’ve -- capability materials. the large. been they’ve silicon about entry tremendous the have -- of to and with that’s transition barriers it’s be -- that I you, a my the industry their but makes our talked think to

got is we’re leading that in I XX the difficulties think gone we’re of have transition of which barriers work XXX us the that got our in scars, and industry position putting the the years we’ve things millimeter. pretty in find they’ll those this battle now We’ve area. set are challenging. today, And into all and of to

feel So good pretty we about that.

announcements think that to don’t I that from us. change perspective to up these want customers So anything any the with sign of extent

very of a kind sort but this can about decade not The kind of we a don’t only. this agreements frame. how half much We’re time that that. year of we excited of for of are have give detail, and year There think lot as

them long-term us cycle a and that helps learning material products and a of from assure and us these scale a are revenue assure stream a of And so perspective. agreements supply that

Operator

closing like would to the now to the Lowe question-and-answer session. concludes remarks. This Gregg over for turn call back I

Gregg Lowe

next Wolfspeed, earnings catching you we up look to for in on with everybody, interest and thanks, our Well, Thank forward call. you. your

Operator

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

disconnect. now You may

Wolfspeed (WOLF) 28 Jan 212021 Q2 Earnings call transcript