WOLF - Earnings call transcript Q2 2022

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Operator

Good afternoon. Thank you for standing by, and welcome to the Wolfspeed Inc.

Second Quarter Fiscal Year 2022 Earnings Call. At this time all participants are in a listen-only mode and all lines have been placed on mute to prevent any background noise. [Operator Instructions] Please note, today's call is being recorded. to Tyler conference Investor Gronbach, like first to Relations. now today, speaker Vice would hand over the your I President of Please go ahead.

Tyler Gronbach

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

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

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

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

Gregg Lowe

and quarter, the guidance. I our of strong us per hope end Thank and the execute everyone. pleased during drive families to are revenue for continued safe I'm you good and healthy. non-GAAP second our Tyler, your we you high at delivering and share that Thanks, diluted earnings and today, business, joining and afternoon, report to

silicon Investor Exchange, we and we an opportunity to achieve expertise outlined we the leadership Carolina our position pace. us for New focused pipeline North York growing building solutions, bench transition our a last to is additional design-ins long-term Now in Day silicon optimize driving operations a help market at to the carbide demand what building and our team our November, expanding at the support held where by from Stock converting And New with how on semiconductor silicon steepening carbide York leading new to objectives. innovative of robust capacity see solutions, industry as out growth finally, and very

for Our demonstrate and who over strong to are ahead an overview for the second results the our outlook third of of opportunity I'll it the progress we're results making will quarter support of to the this an the quarter fiscal growth clearly we turn provide XXXX. Neill, us. financial multi-decade Neill? now building quarter momentum and

Neill Reynolds

was strong second guidance quarter during good the range, an end to the results fiscal high year-over-year. for our $XXX.X increase XX% We of continued Thank of solid Revenue at everyone. demand quarter solutions. as Gregg, the second our million carbide we sequentially afternoon, you, delivered and silicon see XX% of and XXXX representing for

per also $XX.X or million was at end Our the $X.XX non-GAAP loss diluted range. our top of net share,

and start-up or acquired transformation costs, transaction per for notes, factory $X.XX extinguishment accretion $XX.X non-cash outlined costs, project Our other net in second and expense, quarter compensation, share non-GAAP today's stock-based debt earnings convertible on items release. earnings of million amortization, optimization tax, intangibles exclude our loss diluted on of

at Looking of quarter we growth. consecutive performance, delivered sixth sequential our second quarter

resulting than of both we device significant see prior for power our over revenue direct in year growth demand channel growth more XXX% of in continue approximately saw strong the prior and growth XX% We customers. as to solutions, distribution quarter over and the

the This supply resulted perspective, continue as we roughly with versus From see over carbide relatively as growth XG and our for On of year, remains solid to very demand materials a over a perspective, and silicon demand continue demand. we we increase prior and flat better from RF aerospace increase but device front, quarter prior to in capacity. match substrates was quarter XXX-millimeter year-over-year defense prior strong. increased capacity continue which flat to the the

the Second improvement change at was lower XX.X% revenue resulting higher point Malaysia fab The from cost quarter. output gross basis And was our to margin compared driven lower announced in last Durham mix XXX and expense profitability. product offset yields quarter previously partially non-GAAP by from improved subcontractor. certain lives device and assets, depreciation the of by XX.X% useful

Durham our earlier, in As Gregg a made success mentioned led solid management short already relatively a our amount critical to and with proven now to team, Missy future results. leadership by semiconductor fab the to progress team positive of factor has is time, contributing adding Stigall

our more lead addition, in experience of oversight manufacturing Robel, of back-end XX In to Malaysia. including added years than recently has we global Joe subcontractor operations, our who semiconductor

our impact expect remainder the subcontractor improvements and we the of Durham margin Malaysia capacity our gross fab in on continued for ahead, a year. Looking have and will operational positive

to was were results, investment marketing hiring sales our QX rate activities. largely in efforts consolidated non-GAAP $XX.X and our XXX-millimeter R&D, in at for tax Looking was support million including our to operating and increase expenses and XX%. The our due operating non-GAAP our expenses

liquidity on operations outstanding million and cash currently have hand hand days million $XXX $XXX XX on days and were negative days. support generated sales was $XX days our expenditures in second to inventory the was plans. cash capital For and $XXX million, flow negative quarter, free million. from resulting XXX Cash of approximately of was We current

us increasing demand of leaving by with face and notes, redemption us debt believe peak of balance cash a completed on capitalize this we positions with optionality XXXX better million. during our strengthening value $XXX preserving the transaction to sheet, period. December, increasing investment our We convertible in Additionally, the

continue see from as We opportunistic flexibility to to standpoint invest capitalize on continued a fit we the ensure to market-leading market and have capital be growth. to we will support a position

Valley, quarter, primarily the we During million. incurred start-up related Mohawk to costs approximately totaling $XX

of we and with ramp million in we've of previously, majority fab. we the XXXX, start-up the costs fiscal as fiscal incurred a half expect in As total qualify $XX these the of costs year second discussed of the

start-up a as earnings our provided release. table reconciliation We well have costs for a non-GAAP in the as adjustment

supply production experience will carbide We where orders until curve ramp to products much demand we anticipated. remain has customers be a had our are steeper not will from fulfilled led customer inventory we continuing fiscal Mohawk low to for This Fab. than Valley this levels in year channel some constraints silicon our and initially

once is But in and that the are and We we continue in meantime, confident Durham accelerate running. this to CapEx we will Mohawk be output improve meet facilities. Valley investments to our up demand able capacity

later the XXXX, we in expect to more in this of approximately receive net the this reimbursements Mohawk At are We wafers tools have quarter. for begin we currently Valley half than running we year, down stepping million Valley, as expenditures construction. Mohawk capital equipment, XX are and place, back more of $XXX anticipating testing

progress second revenue to quarter it's to targeting we While realize the with the In XXXX, facility we date, encouraged are of million. $XXX meaningful are important third any don't million in fiscal fiscal of to we revenue of our XXXX. remember, from expect until half range $XXX the the to

across growth business, by the driven led improved be RF output all to materials. revenue from areas power expect and by We of and

XX%. XX% gross Our range is non-GAAP in margin the to QX be expected of to

wafers to in As to the XXXX, optimizing from transition margin mid-XXs largely XXX-millimeter gross transitioning our Mohawk the is on Valley. XX% key three and driving for Durham, through elements: reminder, revenue a based XXX-millimeter including to

to over on third elements $XX increase expect are middle we all and our scale global $XX continuing we identify being R&D that to continue will our invest time. slowly to operating as business track expenses as and We also marketing over to operating margin the continued to it become better of in anticipate we will for million sales revenue smaller improvement the million are expenses modest time of but reduce with the anticipate targeting operations we in We the said, across That percentage support as and non-GAAP areas decade. enter quarter. of gross We're productivity, continue resources costs to a improve and three customers.

shared be IT with Northern the between example, be government. Northern as non-operating to We organization, expansion in opening This will operate $X for global a partnership of services Ireland, and million helping million. QX Belfast, in drive loss $XX critical will global approximately million hub IT we center facility capability non-GAAP Ireland net target operating Wolfspeed's a to capabilities. digital and to loss be innovation $XX For

We expect million $X amount $X.XX non-GAAP or $X.XX per to our We're between a $XX tax benefit of share. loss $XX diluted non-GAAP targeting to a million. of loss net QX million approximately

Our stock-based intangibles transformation non-GAAP EPS costs target compensation, optimization transaction factory costs, private items. non-cash start-up restructuring acquired excludes other amortization, and and and

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

Gregg Lowe

Neill. Thanks,

to silicon I'm Mohawk our we the as from very journey begin ramp Valley carbide. come to for continuing We are industry to excited what's the transition silicon And to fab.

energy power the demand industrial a markets, and rising also automotive demand and customers. number increasingly to we're from continues Our across business by robust see of encouraged

opportunities now Our across reflects we're device and is markets. new underscoring well-above a continues the all identify team end at continues grow rapid than billion, also demand pipeline The X,XXX our projects, to opportunity and $XX more to pipeline pace. enormous seeing

More convert personal And and like charging, electric and landing vertical snowmobiles, and range design-ins EV things a team a aircraft. takeoff a applications, to plasma continues across sales high this rate an at of wide importantly, trains, generator watercraft includes defense the applications.

amazing As work $X.X of our the sales billion is a a design-ins product from partners. and channel result, which we quarter, an accomplishment our last of secured groups team, hard record

than total first in is our the design that at creating from people. and of our XXXX a positive long-term in this from support first billion, ago invest for half revenue a of outlook in year continue rapid period customers for in adopting originally To our for original plan we it's critical our XXXX. November. a Investor of increase the year. to significantly pace, fiscal At tailwind $X.X are a half a fiscal same This growth, to our this direct total and on Our at stronger momentum we back than carbide faster silicon rate a trajectory we showed XX% the is anticipated exceed design well-above Day we is result

highlighted and a back-end operations. of Joe's has of here excitement leaders finest variety the some operations, that demonstrated of is on or join innovators. Joe a from semiconductor Wolfspeed already and in Durham a companies big the from We semiconductor we as having to experience people that industry's joined drive Earlier, Wolfspeed have exciting, Stigall experience. automotive XX opportunity leadership amounts and to industry to years The talent attracted making with experience our exceptional attract global Roybal is advantage to and wafer bring operations senior the to outside this Neill carbide fab Wolfspeed. silicon impact is our transition of at Missy impact and taking the tremendous substantial oversee ability have we're of

further and across executing early build supported market. petrol is authorizes X.X our Biden aside focus billion nationwide an strategy As for states by administration law infrastructure $X ambitious on released million set electric the developments of the broader In in charging The business, them. to to $X strategy across we December, build stations stations a charging network the our vehicles country. trillion for

electric to We big their are to automakers see continuing ramp commitments make vehicle efforts.

several announcements have for the and new at Equinox its vans. including and EVs, made regarding of the GM thousands they BrightDrop that CES example, work orders For Silverado electric

order are executive for EV at create XXXX, focused Wolfspeed million to on in make we by semiconductor citing in industry. momentum November and to game-changing pure carbide, In beginning powerhouse marketplace, Biden's sales. Scotland, addition, it play would X.X a well the Climate a year the global in transform EVs technology the silicon Toyota positioned Summit carbide. that semiconductor aiming Wolfspeed the the tremendous silicon Glasgow, here a to There is increase administrative announced is is

talent steepening expanding compelling it. in that, from only invested run we have ahead, continue session. turn products our about and The talent I I'm and needed confident a not We to to will return the to and And with heavily our the it in but very customers. and We're demand our meet path our we and these in on our capacity we winning ensure and business expected begin invest opportunities investments forward. good over could to strategy our excited both in capacity at the and pace, the back remain operator, Q&A is we'll

Operator

Thank from Wells comes you. first Gary [Operator Instructions] Mobley today open. your Our line Fargo. question Gary, is of

Gary Mobley

that the revenue what pretty specifically curious quarter. I'm or a Hey, and revenue the be good the how in and what really wanted the Analyst specifically, pipeline and about figure progress Congratulations little to guys. on changed to Thanks to with taking was diverse question. billion for made. seems pipeline ask increase since respect for on the design my ago. Day over there? the build two months And I has the $X a being design metric,

Gregg Lowe

the we -- increase got represent thousands design-ins the of pipeline customers. while and that different increases The pipeline

quite diverse. it's So

In said X,XXX. we think fact, I

quite So from of is past revenue what's we the tailwinds that first of we Day, that in there. device Analyst we nailed were year and roughly design half really, where a is total the And go for if that And just the the revenue. you at level just year quarter, diverse really creating It's basically, billion fact that seeing we $X.X XX%, $X.X all silicon is there's adoption of of of billion were up we ago, win ahead number and would this we're about. to rate back company are projecting the those expectation device talked this of The well. both three The plan plan, is and our is the well many industrial had. kind this. and electric driving of then where say finally, that. carbide in EVs any -- markets vehicles this really adoption seeing of inside our what revenue, ahead as well people the of And that actually rate above business are things momentum is I

really I so slightly numbers. maybe and these upward even XX on think it things tailwinds, really those we but just And not would It's three combine describe significant I pretty pressure differently.

We've mentioned, a team opportunity of I in market. in in our doing this obviously, it's, pipeline. good a prepared growth And fantastic a substantial got the winning is So thing. the job as pretty remarks

direction. in overall, market So size right is heading definitely the

Gary Mobley

just the we double-digit same and efficiencies to North brought well, the that's Durham? ramps as for more Carolina trajectory before just Durham, I growing should XXXX, being revenue Can ask percent color, want continue year about how efficiencies half grow I on correctly? paraphrasing appreciate in to you you're out strides there. out to on of at second capacity a Gregg. second the consecutive quarter. In follow-up, if manufacturing I fiscal that margin the And your expected to I'm and that of double-digit getting sequential think the of the Mohawk gained Valley percent those from You're based revenue are of wondering, about make revenue gains additional be

Neill Reynolds

Neil. Gary, this is

year. we're function Greg demand more of seeing said, of shorter of business still of indicate still to kind million overall, -- with of it very the is have We and here demand is the we're this term up, unfulfilled strong north look, even demand. across in $XXX revenue numbers taking really supply revenue to the So our going as than a

power in direct from growth Malaysia, this converted the fab that, think numbers And primarily saw grew really leadership the we're kind factory. XXX% a up and last pay function point output some we quarter-over-quarter were we And of you that now operations grew that of devices through power benefits output can also going as of is continuing think year-over-year. have. just off. just in capacity revenue factory, just an quarter, just device seeing -- making So of we productivity and to over at power see a result footprint you if our the record Since the out, we're the And seeing to you to drive can the over well current is that and with be -- we I at XX new the a Durham that the XX% how impact. look we're

into to I'd around XQ. lot the into same as productivity, device work of as more midpoint you it's be see move power going guide XQ, we're forward a going as XXX% look think device we at as we say XQ. ramp XQ, So Even if the you to more to up QX, be look year-over-year I somewhere power in will revenue the again up

do I terms in fully is what well meet the team until a of, terms can the in we're, in in growth lot of of online. revenue And kind that making to Mohawk comes the So I of we think Valley fab. line think progress trajectory

Operator

Jed in today the Genuity. question of next comes The Canaccord Dorsheimer queue from

line Your is open.

Jed Dorsheimer

question, in see to Hey, billion nice thanks for my and and number. taking great that job $X.X design

you So first of you're Gregg, I'm that against sort bumping capacity level, question, up look I out. limitations guess as with guessing

just I'm have time? that have this So in concerns do to able Are forward follow-up. we're XX% there, of it Valley does all the when period that with phase over a at stage you wondering at how that And a pull like phased XX% ramp a you I or customers of all? was you'll do capacity. change I potential think Mohawk

Gregg Lowe

know, is world's wafer the Thanks, XXX-millimeter fab, And building Jed. and what would world's are as -- only wafer we largest Yes. you are the I carbide fab. tell we you silicon first

ago, in wafers so. eight doing years What's factory -- that of lost initial coming them we an year weeks on nine and we'll running runs or amount began that or is online. the not on the have So in it's capacity lost not we construction two enormous be customers also that

a actually product customers of facility. We've running the from that had away weeks visit we're in number just So facility.

think of pretty see a bit I so the at tremendous little of terms of And factory. this just And tunnel – in as end they as light a backdrop. ramp we the a

right wins four So win three, or years, the now in that. something even going design last ramp those we to are quarter, like

detail on we accelerating thinking in upward more by very I'll the production the but very Neill now, for have Mohawk that little – thinking will we're be time, fab. pressure through So XXXX, demand all Valley that full obviously and pressure and of that right this With through bit high ramp phased of through facility. out a the about talk the

Neill Reynolds

Yes.

kind $X.X leveraging revenue or talked billion if XX% we about Mohawk you XXXX more of the bit of think capacity the kind plan, little in time So Valley frame. over that about roughly X-wall of

demand curve, that to the continue steepen. So

a that of We’re see I to change number that ready want think with up, be to don’t lot obviously that right very move to opportunity we’re careful we just going but to and now we've quality just up that want factory as expect in the Jed, a we ensures out that of way got we methodically. to all up capability factory. that Bringing bring and that

potential there's that say be through capacity move I'd we'll period. constrained we So as

out the and of that think you into X-wall capacity to second beyond, that half look beyond Valley. leverage XXXX start if even I we'll like in Mohawk

see something is at looking a $X.X kind Now above frame, XX% manage clearly we to continue and to factory opportunity we and up And utilized of as plan, from be beyond something steepen. that could billion continue that we certainly the target the expand that demand the curve of revenue won't kind that's out between perspective that in fully time move that, and and -- that. has that's XX%, but X-wall we're faster we laid take volume to

Jed Dorsheimer

Got it.

I want follow-up, non-auto gears the shift a related. bit to in little For my

benefits XXX to et lot impedance so hasn't around cetera, developed. been -- you applicable of and necessarily knowledge, X,XXX the solar, high or the the voltage. markets And volts from my Optimization while of best the are terms lot But for of are in optimized like of other reducing volts -- the a and from a name any auto. products trains,

solar a So seeing not you're inverter, for type a X,XXX products. off-the-shelf lot example, of volt

XXX our you, and to lot question only lead the Greg, at if area my platform quite a being guess frankly, is look one X-inch competition change die I should over millimeters on of extend and markets. larger the be your these I So

markets question a much you my away giving attention as you So coming to these that thinking some perspective, from is are product you what's without other of for about optimization auto? don't as how how get are

Gregg Lowe

here. Well, Chad, there's several different vectors

and products forth. different a strategy obviously that we off, whole new in new generations portfolio products, First they that group currently product of a has so have product the have pipeline, and flavors

there's So and going effort of on tremendous a of amount amount R&D. a there tremendous

because these and ago, year take of something like personal applications on and develop adoption do a hands going We an been eye just And going to were or finally, opening what things the able extensive as team have efforts, type also but those today products able the into wouldn't in quite that of to we Arrow I to of tell it a portfolio products. to got significant across be list, it engineering customers' they're And the here non-automotive my you aware, side through you that, as really with well. terms is well kinds have are on they've if material we me And help these has rate you're and of is current our with then solid. watercraft really, design-ins. me partnership ask to win get we applications them we're would customers are

has portfolio as would of current And a of getting like on things the so all portfolio that the brings to Jay they with our some the that I is do. of well. think product their the customers to course, of channel access of these Arrow team shown they power or and his that channel and from access that industrial And partnership applicability are the new there to bring glimpses working they're what

that. encouraged by super I'm So

positive us. than is as earlier, silicon EVs I both of markets we carbide just and mentioned news the I the higher predicted, in industrial pace at substantially happening for would think and adoption that's the -- have a

Operator

of ahead. the today Chatterjee comes Please go queue from in question Samik JPMorgan. next Our

Samik Chatterjee

and Neill. hi taking Thank Thanks Gregg for my questions. you. Hi,

of So a quick couple ones.

share $X.X you design the the if particularly see you bit color and of more to quarter or wanted about Just can this wins. billion wins saw a the design acceleration that

you application with that same you those Like it in in found and to design customers like is vertical, design the a more or by driving application you can just more use If is I'm applications wins. you about had acceleration able either really or break down cases. wondering, certain it new were

If you can that? share on color some

Gregg Lowe

The lion's which customers, lot it's inverters be of that a share to lot around in be a electric something et is to of vehicles, going the Tier different going number, Xs, XX% of crosses cetera. OEMs, that of

there's that, that, different of RF those of with it's So though, said, as the – that, end those industrial And of good like vehicle. Across electric it but diversification pretty in good the well mentioned and traction pretty I of is different markets. vertical some Outside projects. different I with uses. the X,XXX

And of this for So half I $X.X like pretty in first said, with well. of and wins there's year automotive ones -- billion RF related. lots that. as at But of this associated the design then, heavily small industrial

Samik Chatterjee

this Got just follow-up it. is more maybe Neill. a And for and quick

the points but me be can -- should helping by based I'm bridge, XXX just discussed, margin on itself you grew change you what so, depreciation You or you've at the me if believe, basis XX.X. you correct if help can maybe I if through gross there. about wrong you there

the revenue margin should some well. organically gross given So bridge you on I'm as just have margins think the to higher about better trying

can, please? takes, you and puts if the So

Neill Reynolds

Yes. Sure.

is XXX you was which basis improvement in results, saw So of the margin, the out look at if the XQ we at pointed about as range. you guidance gross points end

we're Durham fab driven subcontractor. better kind investments our offsetting is revenue, our similar we're mix. a a performance direct the not And base as and result a and as seeing a was but a that of things. that it's this, put we've What's cost in really underlying at foremost, to higher and negative a that the we couple device leadership by Malaysia in first is So of execution that business better well making, the as that bit of there. grow product providing of the of And only

business year-over-year. So power quarter-over-quarter, device XX% extremely fast, you saw XXX% the growing

as So as at some that headwind bleeds margin in look you seeing we're that. faster

Now quarter factory the device that good of the improved with performance. news the also the better versus last profitability significantly business is

differential, over time, of we mix we kind footprint of we'll see as to go. as dissipate. impact expect So we would of that But kind that playing have now, that kind cost right

kind two, I'd dynamics operational So I think from are benefit was in to gave in And XQ, guidance those say, factors are about two of standpoint, seeing frame quarter product the a one into right fab additional of moving there. offset that a It end see points. even then margins of back should depreciation last we revenue. point in And on higher a X.X out by And as largely about way at end – and QX, can the of the that. the that we out being after it range we of higher about anticipate should into now. And up think then We then point And mix. X.X largely then think behind as better you QX, or see you you look the time into I of us XQ, that benefit, to as range. same out. again, but from as playing you into the kind that out from out look XX%, even some some you that get move performance maybe flattish,

Operator

from next question of Piper Kumar Harsh Sandler. comes Our

open. Your line is

Harsh Kumar

Yes, hey, guys.

you. of all Strong I for Gregg, guide. results, question good congratulations. a had First

mentioned You interesting. something

in I to the think, wafers the in, you'll quarter. that said March understand, your here start just wanted mechanically, timing I You dynamics.

to run wafers, question timeframe. As the how long first – just do March you the is wafers you quarter, does of few start -- as out. think, at you looking of Still for kind the you start look the July it in the qualified main is June, to take, the commercial be

do some a just can have follow-up. you provide I that, color If and around

Gregg Lowe

Yes.

maybe hit more Neill beginning So give additional I'll can a and the little bit color.

good So soon. here everybody job that. of line little years Neill we've a going color to And wafer a And facility. Albany running pilot bit field of fab give really be mud two this we're pretty We've I'll was the just will the a in wafers ago. how running more transitioned SUNY, remind done on

of what Valley So feeling to out pretty do we're Mohawk we're the able confident about fab.

just We today. how it's running weeks, have little I mentioned, material staged Neill, back in can you in that like be eight think, from maybe quarter. that, really, then color something there? And on bit goes I fab nine we'll more so give sometime weeks, process the this as a

Neill Reynolds

yeah. Yeah,

change real from about. we've talked what no Harsh, So

qualification to that. a to the break internal that. we're that start how I be in transition thought And quarter, thinking from of might terms customer we'll I quickly down is mentioned, qualifications about good Gregg As in this we'll shortly bit little that then and after it

testing that So right wafers in now, cases, equipment. for loaded into instance, we're the has many tools. And

So to transition quickly. mentioned, customers those running goes as full we well right be very we this qualification quarter. lines, And later that expect that to

of with speak factory a we demand out products this customers, there's very to and strong out As coming quickly. get them getting very

stage in where Gregg So the the we've set at that leveraged talked various stages. a about way inventory we've pilot line, up line

just hands can anticipate So process that, after product the with full. actually more more start throughout of very start continue putting when And we we in it we the and the shortly then our we'll year. customers. line, customers And that then

now, right speak, move revenue of as our so revenue, into by but right That's that the now. So mid needle, that larger fiscal plan the it and second to amount the year commercial We'll XXXX. -- year. out that will throughout the half some -- the in would half you is the see the of anticipation of kind as happen second get works happen

Harsh Kumar

Understood. guys. Very helpful,

a question bit the questions. next my upon little touched in of previous one You

understand, steepening of demand or fab to utilization you mentioned time utilization wanting frame of -- an even fab. interesting. And I get think to to acceptable the curve, the I the of the you given full was something the

room, get to talked seeing long four-wall four-wall be tool you're understand, capacity, you I for for you that's about use to metrics given say, to You that's whatever a profitability, wanted breakeven that a implying suppose, I -- acceptable, able lines utilization what must you're different you understand consider installed four-wall capacity. the I dynamics let's cash to capacity, I then be would demand talk from take breakeven the capacity, to when but suspect. by to it And on. the how you about go want additional and there

Gregg Lowe

Yeah, that's right, Harsh.

profitability factory, the first probably the So in we're about as the is could when mind, steepening -- at at in it's getting capability you want that. being and think bring I think I we bringing utilization, an think pretty acceptable it's we'll about in us. towards good issue shape full being demand, the terms -- to towards as not this think we the going we're that really I utilization, even fab up to the manage and point, given of terms up, And and I I that the see be really that in continue to think first of don't way my XX%, bring what's If to that though XX%.

that capacity. factory four-wall quickly we we how kind can bring on bring think I just carbide first it's of a at got how automated and or we I silicon the much It's that. but with as factory. very silicon how looking first in be your And said capacity now, brand-new So up really it do just we to earlier, part careful about roles second about more XXX-millimeter second

we with new a So be that. and we factory to run careful so a technology, new want

disciplined of to I'll longer because COVID been you, capacity now. bringing year to we've closely right chain from considerations. new tell to terms of the up bringing a we how supply some there fab. factory, I this you there very this of it, It just the little make , than bit However, XX bring ordered as up and a might supply But a about up But time monitor now that in very the we a XX line about ahead you're is orders to issues revenue and think only be out or get in think for and continue think the you about bring so in terms line about as up optionality capacity we've thinking factory. as of

So this left of timing we terms from think flexibility ourselves some we've standpoint. in I a how manage

Operator

Partners. Irwin today ROTH next Craig of from question The comes Capital

Your open. line is

Craig Irwin

taking questions. thank evening you good for my Hi, and

more pretty a the you considerations for questions would does like been you years? or next what asked And capital to the So over I potentially would be keep New existing have putting if a or maybe other site, investment? be before. bookings little bit consider that of talk about Can have quarter, expansion about up plans you York quickly. facility would locations on But couple second for future likely design-ins, need touch North expand this an guess you you at to this maybe in you're going -- Carolina

Neill Reynolds

Neill. is this Craig,

the curve considering. certainly at talking all, that's And look, about, we're think, of steepening demand question. for And a talking the what we're levels something thanks I we're of about First here. clearly,

close are things. supply evaluate. a relates need we are out And beyond, that the that's just looking capacity you've do of our fab the we addition second looking ensuring those demand carbide something going would evaluate think in And And think a standpoint, out continuing the for into So we're and options believe to over time, continue up to silicon decade. in them second half but about we're to open ensuring require which out capacity if bring even From out that got industry that XXXX, there on we think and time I that Valley. in Valley go would to it will faster, well those Mohawk and to with is about at Mohawk things be the various regularly. working to that would we continue that geography to you yes, us, entire to the -- things we of customers think for mean, into to types frame. going And we as I beyond

we're evaluating the create opportunity just So best best serving things that to these to are for customers. our the have certainly and but monitoring options want

Craig Irwin

a And question, then clarification, guess, the next as right. I Okay.

about And maybe with to be Reactor’s there in in Epi a have similar maybe years at you out to competitive not Mohawk number advantage be But lot of these this exciting having you the you given huge early then something talk for or technology commercially you You LEDs. was industry, of a to units? did you of similar already the reactors Can over it the are this and carbide an mode? would is for broadly expect ago a would to wafers days that about years Valley. addition next deposition. what what advantage in LED the the sourced potentially There's place talked in production tools X-inch capacity silicon for

Gregg Lowe

is really chain that's -- part a We've including And Epi key a the at the chain. the one of focused good lot We're crystals. of is have. entire lifting. the supply That's we're Well, supply now grow of XXX-millimeter. for got that -- it. jump building advantages we pretty working what reactors good on and there. And Epi The the whole furnaces got to really heavy good through really

that a And the in substantially pretty amount us advantage. that a And they a the there's so a that's require of output one bits of basically than give down run going wafer. really how because nail does I Craig, XXX-millimeter unit unique entire of chain it to we is said good terms curve sizable my to on those of have because, because steepening really time it's it I'd they going pretty takes uptick XXX-millimeter cost wafer it focused say, really of on And a demand a combination getting pieces loved on But XXX-millimeter per as all we're and higher, obviously, because that pretty we're same fact think that. customers going. to the time like advantage is supply

and in vehicles at translates And XX a stronger supply that it of for in And millimeters amount faster, is the them be XXX output a put and I old out. I wafer take roughly able if to out and fab. that one in it's something sold think so They because XX XX% we to product online the out like for chain demand electric off you're of that selling more And react what the minutes. they -- same time building see their is they lot minutes. them to we're be will heard out going see hearing it about lot

things going to So be are a to way. it and a advantage working competitive we’re lot keep that really those hard good of

Operator

Karl question comes next and in the The Ackerman of queue Company. Cowen from

Your line open. is

Karl Ackerman

you way the of quarter, for the the than won distinguish as number me automotive of please. primary design ins to where rather guess you. supplier well, Two Thank Yeah. are you that Neill questions I secondary, designs address design a you or there designs Gregg, then wins. may those this is that as And of is automotive question, into may well augur wins? in follow-up. there have also for inverter a design POs these mix you seeing turn whether And I growing discuss XXX-volt that a

Gregg Lowe

I the the Yeah. we’re primary are you means my exact would that don’t primary design I couldn't fact, say number, us give but can't the And know the things in weren't majority say of but we I top head, source. the source. that I what exactly off I of would for name vast ends many the where too

going to be that be going is to it's primary vast of we're source. majority the So the --

broader XXX are a volts people things very, And very think seeing of then that. advantages as is feel second. we're -- I adoption a happen. time seeing One seeing good hang one I of So volts, both XXX about volts, charging two in we're terms XXX on, the from of

Sorry as at about perspective, that. the Charging inverter well as time efficiency level.

XXX a broader seeing… we're volts, seeing So adoption but also we're of

Neill Reynolds

just Sylvia, in here, jump We're Carlos. seeing --

are seeing We at broad XXX-volt pretty a adoption level. the

predominantly but coming earlier that they lot that's I anything the they're really think from new of XXX maybe us, some transition customers in telling XXX, some models a a of online maybe XXX-vol. designed is transition are previously, seeing

Karl Ackerman

Understood. I appreciate that.

should inventory For think in my we moderate higher selling that? function quarter step presumably How over Thank wafer two next as you. follow-up, this XXX-millimeter improve customer service demand. the your about or as sales carbide does

Gregg Lowe

Yes, in terms of inventory – thanks, Karl.

terms inventory of see growth the the days pretty rates but inventory would I are high. of coming levels, down, In

some I on efficiency. should but in execution quarters, see about the we'll seeing efficient service capital, think way, inventory better I working the that working pickup. including continue So up overall, see as to that just the increase expect some inventory continue times naturally, balances We total and I the the our inventory is to all But we'll business. and -- to what going time we to drop improved business. think But more time, fab execute ramp yields there service we're those bigger to between pretty working we in WIP customers significant earlier need drain think, get things, the as see that better the to will factories, I goes we we on, over capital I would and a by we're growth cycle that. and talked as think And

Operator

Our next Ferragu Pierre Research. today of comes New Street question from

Pierre. open line is Your

Ben Harwood

standing Thank for the for in Ben Harwood, is Pierre. questions. This taking

So you're competition I had a question on China that there. and the seeing

Chinese of So difficult in the hand, are extremely silicon carbide of these course, billions hand, silicon then to is process, on manufacturing competitors other perfect. carbide. But announcing dollars on investing one the into

the bids Thanks. There for do ask are what substrate market? want either in Chinese to XXXX, from I that, what expect your a coming XXXX related guidance just revenues China? or then from you standpoint. secondly, companies what is competitive up the the seeing So device to for And you're in

Gregg Lowe

the Thanks question. for Yes.

I think of team of back room through voice water bottles here. I about I the XX me. the my at in got

growth happens, it So -- industry into market. get would off, that's but to who And the I first whenever is enormous an what that we in now. attracts right people say is, the want this happening see

we We and that all China. and that it get sit so there's relax about announcements not that. of right now, us forth. and number all of to the on to that are pay -- is lot want business. back a in and don't So different are carbide happening investments to attention going lost And companies includes the who into a be silicon some the folks There

stuff. intensively own improving all operations, kind costs, productivity our driving are and of of We lowering that

said, of entry to barriers the bode China substantial a if pretty business of into has being some Now run market. gets normal that don't that will, well how play, for that this you

even industry. supply the industry in that growth a an the First whole in not carbide off, silicon there's furnaces supplies or

you do to So your yourself. furnaces you have And to that, need build the know-how.

of So might well, nothing a typically, a something really from to at buy. would at, no thrown CapEx be there China this and there's CapEx to like be there's perspective, but lot throw CapEx

to have furnaces so own your you and do build So that. to forth

and a how go is is understand The OpEx lot together throw in sometimes after carbide of detail to that it of supply hiring small. they a of to that silicon The put plan. do tons at go people second thing humans relatively

difficult And so for this technology and there that are just the to typical entry lots of happen. play barriers is in to

paranoid And so We competition. running we of lot don't take do a act to everything about is we we're that it very can that continue than and going lightly anybody the have else. faster best thing

Neill Reynolds

your out the And of love lot I those Asia. I out of and was revenue terms coming in we’ve of industrial into insure revenue second lot that there’s percent think question opportunities and a on And comes there looked of as on. we’re in But plan there’s China. way automotive lot XXXX the revenue a XXXX of about of think and we industrial

of automotive in industrial opportunities roughly XXXX we’ve plan. out we $X.X see XX% both While of do XX% in a revenue and of in in And judged about region, have we billion and lot the back that that out XXXX. in revenue

that. than pulled if be will bit, So we've although you little I it a at think kind look larger of back that a the -- bit

Operator

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

line Your now is open.

Edward Snyder

know, X-inch talk going X-inch what than and has guided higher for I like you throughput then And to going that, X-inch Thank same on today cost? capacity the or the getting -- on machines the will over high. have it it said, much a like because to is? Thanks. how think yields launching per you Is of with for And X-inch. make much. X-inch. to as have wafers what if and is very to little Gregg, just a than I And lower you given be of thicker cost But down, XX% already it X-inch of X-inch? you or those not, what have a just it It that kind bit. have, fact play you you're about greater follow-up. you have you're guys I'd throughput X-inch can in you have is focused efforts as a progress launch kind production not millimeter that

Gregg Lowe

squared per at are XXX Yeah, we millimeter same Thanks. obviously but here. is the daily level that millimeter, cost attacking as not the much pretty

Neil, be going throughput feel But it we're the real obviously, detail where see going So to more of bit with of something little mentioned, you working is that, on. And, you as even factory of a so good that's to. the to and there. the kind forth, can advantage. Maybe cover about we it an where go enormous can and the we're yields

Neill Reynolds

Yeah.

in per simply the now, even talked and speaking, the right cost is we've about Ed, cycle per previously, much to in may some time. the normally pretty the will -- square benefits see the and so in the that not cost the fab and higher stay millimeter yields millimeter improved fab, you that millimeter, that offsets I benefits squared. from which way cost while move substrate for We'll the So, think just so more times more. it's at nice than when But XXX substrate, a

plans. drive and out come that's point I the XXX-millimeter. as cost probably position but very And unique and that crossover shape that we'll have in will in see we're I get to then So think have a done those to it benefits. continue in several time, think we'll this our because years, over built time, sense, in to we cost a good then do we be that over And feed take fab all into

Edward Snyder

And then, mean, your excellent. is performance I Great.

numbers this for an is run one kind question, is of you've million looks like But guidance year year Because And running fiscal that, little and other. But about North you at -- close put revenue. more real kind on bit excellent. way this or materials. we XXXX. $XXX any in it already to it if XXXX, if fab even the Carolina we'll guidance in look the I said Your the before any of your that got devices is calls A $XXX breakdown, think between reasonable in on I year I split client and if maximum closer of at point, maybe to nearly fiscal it by Mohawk only devices, anywhere one of as your is low XXXX billion given to happening very quick million. what especially now, that being maybe already, is in relative capacity more think the we're your XXXX, But fiscal mister, that don't goes you'd not billion know holds devices. up. what's where that performance $X and doesn't $X.X guidance is either as or close to ramp it's fiscal guidance that,

question North is at does growing So, the growing for but of not revenue you have impressive, this isn't demand walk lot at at may Greg, if around up you I And in especially arms the your at second booming. get and on industrial faster up upside of it business correct? And than pressure given you all going maybe most the XXXX three It performance get anticipated night by could. there a and a production? was fiscal point? you're this like industrial targets lot are point, said I The of upward up this RF then I diversified, TI that is but for their is maybe really if take putting this out industrial so that now that markets point, you're given Carolina maybe to flatten keeps rate this seeing I and a into and it sounds maybe mean capacity time planned you am you're guidance change last know you could or now through Mohawk

Gregg Lowe

of the to part strong ramp and first. industrial business dramatically I'll seeing the definingly second faster, go industrial then can faster. than at hit faster Yes, automotive, Neill back of not a and are business very growth wins that its We its definingly the tends our but

we've volume base But next going our broad when production, And might go introductory from yes, to industrial we'll little feel the with in you I start I higher business when largely so referenced. won, typically terms to bit really guys volumes it. you with no, Arrow of The have hitting win of we've very of relationship good you after ramping customers be that the you that's a great real about we is mean that a the traction industrial ability over the and -- couple four-year that to automotive of years, tied after that. that that before gotten

Neill Reynolds

months you're higher the and we're aspirations I Yes, put can I revenue first the since and the then probably now seeing some of our new in factory. terms outlook the in Ed, leadership Durham into do think are over of last we of all, performance think think we right, I several what the as

in also some We benefit expect to back see the end.

In we year, $XXX fact, at end thought good sight little of of a a QX. the line million revenue to in the in bit

million Now, I'd say between that's it's $XXX and higher, million. $XXX probably

Malaysia Just Durham better fab of better. and running running we're -- because the seeing

talk fashion. XXXX, And in that translate XXXX, billion, billion It XXXX $X on devices. not just certainly think put that's about out that even of you we're that. you seeing, upward does I pressure As into XXXX, and $X.X what

Valley Mohawk to we But of be as ramp we'll want fab, bringing we Valley terms we the have. really Durham, I to fab that's there we things we manage that about terms really correct. better that's things. Mohawk capacity we opportunity in brand-new again, that of we in got But seeing want there. how can. there's in we're we in be will as anticipate, demand Certainly, the of Clearly, demand a careful at than And get continue in those in that's going think looking improved to just all And standpoint, -- in So, XXXX up timeframe. more say as think best different I think plan, of capacity I be to capacity there'll we careful what terms be how the are performance just one than But and certainly in from is we if go timeframe. built etcetera. in, gating a some items out

Operator

question next is of Colin, Rusch Colin your Oppenheimer. Our comes from line open.

Unidentified Analyst

Colin. Brendan is on This guys. Hey for

me. for one First

the you pricing Given adjusting can how demand carbide environment, strong maybe for to your you're strategy just speak silicon

Neill Reynolds

lower that. last costs the X offerings, been over silicon really new take through from business so carbide to years and Sure. silicon this technology, forth. Basically, whole I'll new the has about journey that's converting product industry our in been

thing I the second that long-term that. pricing that and commit is, business we're we things would agreements business winning The is say like that to

We're industry. our to in in converting silicon not -- we're keep So value. there's that just industry. really an on sticking -- the to But of there any around that's of the area not in really playing the hearing We you be at terms strategy try on all might what has been of -- on pricing, we're impact influence we're obviously terms supply-demand with. sell mismatch pricing

Operator

Brian last from today of Please ahead. go question Our Goldman Lee comes Sachs.

Brian Lee

but in. XQ. into you've per Thanks had as another the device I And comment, consistently kind like one. a margin XXX% power of again called know year-on-year I It devices just mix it here me guys. out really Hey is squeezing for sounds as headwind. growing fast, are Neil’s growing.

above timeline at narrative any where don't above or color average? a follow-up sense us margins, it there ultimately, the would does be does maybe on corporate have any and a change even Maybe device helpful. give So Just is that corporate when get of there to then I average.

Gregg Lowe

the And be Brian. to start I I device changing And device products, think dramatically. think Thanks Mohawk the when running big said it's footprint you is in think with consistent And I Valley. we've pretty what going before. power differentiator that products

seen clearly, Now benefit out durum. some we've of

continue we'll benefits see think fab. of I the out to

team really progress. good the think I is making

be advantage. But substantial to really pretty you to may factory, the wafer get get it changer you over is cost going XXX-millimeter automated you time. game moving the where dissipate a So and get Mohawk Valley, the the

longer And different you period and So take look much benefit. see I think it as a versus out type into out of kind then you if the material all get over that that time will don't device mix. that and some 'XX products from of see term I products before 'XX. you

Operator

remarks. to you. closing I'll team management for back now the turn Thank

Gregg Lowe

and and our in Thank to we participating next for everybody the in thanks, earnings call. call in interest you you. forward your Wolfspeed today updating Well, look

Operator

today's Thank This you for call. joining. concludes

lines. disconnect You now your may

Wolfspeed (WOLF) 27 Jan 222022 Q2 Earnings call transcript