WOLF - Earnings call transcript Q4 2022

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Operator

Good afternoon. Thank you for standing by, and welcome to the Wolfspeed, Inc. Q4 Full Year 2022 Earnings Call. At this time, all participants are in a listen-only mode. All lines have been placed on mute to prevent any background noise. there a remarks, session. speakers' the will question-and-answer be After [Operator you. Instructions] Thank recorded. call today's note is Please being I now President like speaker would to today, your over Tyler first to Gronbach, Vice of Relations. hand Investor the conference ahead. go Please

Tyler Gronbach

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

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

Gregg Lowe

This afternoon, everyone. was Wolfspeed's pleased company. year XXXX Thanks a today. results fourth quarter Tyler share one pivotal and our full year for and to good I'm

and progress areas. made achieved in We formidable milestones several have key

Carolina. The This in Valley world's opened Marcy, the exceptional their of in continued a and April of fiscal Valley I'd when automated to to at materials site stronger team we've adding with we had the Since we Mohawk We've this factories wafer Valley Wolfspeed's us, to end fab. First, opening, entire through initial products visit New capacity which leading with ship this continued the and for is run the Mohawk our and major carbide complete agreements year made prior footprint like in lots XXX-millimeter initial work remain to the to year. the translating signing our accomplishment and of Mohawk operations especially of and and originally construction Fab we strides also is was in the expansion by fab York thank fully North first silicon fab track large this into to anticipated. qualifications customers several than demand on the fab.

we the work initiated have portion out As to tool a result, now fab. remaining the of

see we We course what believe are materials a in to support the silicon increased best expanding We demand planned the carbide. Valley. Mohawk steepening for action ahead as stay also to this of capacity production the is of

our that Second, a continues full in revenues year-over-year to XX% Annual our and materials work acceleration XXXX $XXX year hard led results. a significant strong grew of XXXX. compared devices million, to growth

improvement year. in with basis at point year XX.X%, over made previous the full a also margin, XXX non-GAAP margin improving in gross our gross We progress come

more pipeline this $XX for pipeline doubled has opportunity a billion year. energy transition. opportunity see traditional and sources bigger migrate play moves and to for a continue efficient to greener as that even Wolfspeed role carbide, we silicon is energy. High-voltage Lastly, to single The in of more to from of silicon carbide device silicon continue use the path applications world to to clear our an evidence than

had design-ins XXXX design-ins across a included the auto a design-in XXX% fiscal QX. $X.X year. and new we $XX OEMs, energy these representing totaled Tier industrial and compared have working with billion increase total secured This We We in customers of forward design-in fiscal last record-setting looking to to existing and fiscal customers, prior XX and the and X in increase design-ins from automotive now our markets. Our another Xx XXXX quarters. performance suppliers our billion, of billion in approximately are just $X.X

by overview we over are of XXXX. As it growth the now leader quarter will outlook in market. and provide Neill, financial results for silicon market an first our excited this the our in the encouraged technology, fiscal turn Neill? carbide and to I'll who of

Neill Reynolds

is prior fourth continue China year quarter. quarter to device ease Gregg. improved improvements by strong in million period. the multimillion third year more well everyone. staff $XXX and of overview fab forward. above of XX% improvement were a the compared an We of XXXX, by execution and good sequential back-end the for from closed perspective having shutdowns in the fiscal This COVID-XX the and which XX% on $XXX and of dollar of represent improvement this when device in was and impact start and afternoon, in the continued And a fourth the the operating operations. year the note, to quarter operations, than we moving back-end providing the driven million guidance in generated midpoint offset our growth Durham of a the The I'll Thanks, revenue quarter by expected this expect from

the margin point driven was basis the and P&L. gross XXX period, This and yield year XX.X%, to fabs. Non-GAAP cycle the a representing year-over-year. Durham last fab performance quarter in progress in improvement improvement fourth in XX.X% by quarter prior was Moving compared XX.X% to

and encouraged devices materials. between progress work still revenue is output resulted more devices, profitability by there also While in far. was be in so This which seen mix done, team and partially is operations offset to they've product our by the power some better shifts

from device strong to continue we to to We automated our We forward as From revenue fab. Mohawk business of is to start linked margin across we the and grow opportunity continue going the Durham gross demand benefits directly and overtime Valley to accelerates our ramp expect as in unfulfilled for quarter-over-quarter year-over-year realize see a shift Materials to perspective, XXXX XXX-millimeter moving year than available million power this wafer we the fiscal for $XXX to more silicon revenue to remain future. growth. anticipate a increase foreseeable and capacity. demand devices XXX-millimeter perspective, as production carbide with capacity exited to constrained substrates forward for of meaningful from be resulting strong, our and Similarly being expect capacity number very we continue constrained demand a the of

year-over-year In expectations. resulted line our in addition, with RF

$X.XX $X.XX All and the EPS of ago negative And by and per adjusted this fiscal favorably to negative result, we approximately a year. quarter and compared as to generated Notably, was fourth $X.XX in led dynamics same these non-repeatable on period much earnings of quarter income quarter the impacted profitability. negative the adjusted share $X.XX improved other in events of last lines. a tax

at items share share earnings, quarter. Excluding the nonrepeatable these $X.XX been from per during our approximately our would per loss earnings have

or of device loss or tax per was XXXX diluted XX% businesses. due For $XXX fiscal million $XX.X $X.XX Non-GAAP XXXX, increase $X.XX million our share. strong diluted per was to compared $XX.X revenue in growth Non-GAAP to a share. adjustments when net net excludes loss representing million, fiscal of

while negative overview our quarter plans. of days discuss width flow of and million sheet a million of and which ended on is XX negative We was than inventory times. I a operating with improved guidance, our before less on flow $XX better let days, me approximately provide days the of result balance comprised $XX cash thanks during position. of was than lower support to quick XX liquidity days, balance sheet DSO Free quarter fab, the capital growth $X.X was direct million Now expenditures. XXX QX, cash to the billion hand of cash our and our cycle $XX yields

During million, communicated the line Mohawk to costs with incurred in related later. we totaling expectations quarter, $XX start-up approximately Valley, primarily

the XXXX, start-up continue the quarter expect fab. $XX of fiscal We million of we in to costs as ramp first

modulate for costs earnings start-up to and production There the start-up subsequent XXXX. release. in and we table the reconciliation expect as the in quarters these of to fiscal costs is adjustment We non-GAAP second half commercial shift a

on first moving outlook. our quarter Now to fiscal

to targeting the of are in revenue range million million. $XXX.X $XXX.X We

execution revenue expect growth driven strong demand our we We device also our to and be in XXX-millimeter Materials improvement business for power remain constrained. in by substrates, our continued where capacity carbide silicon

XX.X%, is QX mix. in non-GAAP as we the of Our to be execution power improvements by product to to XX.X% continued device expect in margin gross offset range expected be

for targeting $XX We the operating are to of million also year first between XXXX. $XX expenses million quarter of fiscal non-GAAP

be $X million. approximately be to between We nonoperating expect QX non-GAAP net to $XX million and and operating loss million loss $X

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

non-GAAP costs, target Our and as proceedings outlined in our start-up non-cash excludes costs, factory transformation transaction release project other intangibles press EPS from and stock-based acquired items gain arbitration compensation, today. amortization,

factors environment. are greatly, mix, vary COVID-XX, situation could the Our and factory QX targets several based that with the overall competitive on product including productivity demand,

pressure that upward XXXX. revenue fiscal $X in of momentum the generate This rate exit expect earlier, billion about than we're we at this see to and billion the spoke is all year the run secured have continuing on a made $X last expect direct design-ins in seeing that the in several revenue progress accomplishments Given we a quarters. market we've Gregg of the we're calendar from in to to result current pace positive and revenue and the more the

Day the net tool fiscal the million to we this billion for Valley to we As our back you Investor now Materials $XXX between and continue result, the growing a will increased for on a expand demand capital earlier our the is for in at XX% expansion with in than primarily revenue power to This Mohawk expenditures rest capacity due shared long-term we November standpoint, XXXX. are require higher planning $X.X XXXX meet believe footprint to from outlook Durham expected campus. of approximately XXXX, To devices. the demand of XX% of that out

XXXX In of subsidies these a stockholders. it CapEx all I'll expansions. have financing Materials timing that, we will customer With our of for dilution plans debt, net the capital addition, also visibility back current inclusive cost finance payments, device capacity, capital Gregg. upfront funding, pass million keen updates and investments, investment both we on The to markets, further we through keeping our avenues these are not our on and expansion to while give items, are including and of these of more capital CapEx our $XXX when in additional is nature and and to project of further we others, and eye government planning evaluating multiple and

Gregg Lowe

carbide Neill. accomplished portion well reflect are we've thanks, our in decades to year, to I extremely towards accomplished, push is to continues only this Wolfspeed a capture come. we also larger I'm adoption not change I be semiconductor the positioned broad When electrification. of on Electric of doors Wolfspeed silicon Well, up silicon the about am will market our has as all the proud growing leading anchor carbide, very this to the carbide world from of the opened and silicon for marketplace. what at to how high-power team silicon vehicles market excited

among appliances reminder taxi said, carbide a static rail, X,XXX of of portion users carbide. imaging the design-ins across is applications Now silicon other and in power for for technology electric heavy-duty EVs And Silicon that a medical generated device, a device a total important an an diverse years, only game-changing end as than that renewable equipments, filtering we've equipment industrial more being and of uses. and it's energy, set design-ins three many end for device. air including last non-automotive an matter fact, are

projects and can serve have team and can energy. in which to range help in non-automotive we're only surface our the world silicon pipeline, of we more than scratching Additionally, device find these the carbide applications continues power the opportunity diverse X,XXX more in our ways

strong provides of they directly some discussion and trends viewpoint to electric growth benefit technology all silicon growing industry finally, those recent secular that in the A green there's by expansion of for some corresponding vehicles, Wolfspeed. the through now energy trend power up in right of perspective, in for more we we sources and the realize movement increase a chips, a of on energy silicon as These and expect XX% this X%. The supports carbide presents using only the carbide While that of rapid more initiatives as decade customer grow charging share this Wolfspeed. silicon is growth to To been opportunity carbide that's this build-out silicon put yield great that slowdown, from urgency across include reach the infrastructure XXXX, larger. great years. of semiconductor market and report customers for see will opportunity legacy increased efficiently. and these tailwind the will Xx sources immense, forward. all vehicles, only the confidence strong grid just the have market is those over of silicon benefits carbide the drive five and that Collectively, of silicon carbide the support a The to power

stage. see We not amplified, being the sentiment to this but on only and continue also businesses, world echoed by

that and leaders funding the see Just the the last week, into President extension could to provide plans. I believe possible of some was Act House law, other next with semiconductor sign phase for the our at CHIPS this The White

and We plans to soon. with a prospective outside have support to site factory share selection for finalizing very seeing US. the are closely state working also new local and on current customers and more multiple some materials on strong from We're hope officials details

of to the years. European and planning Wolfspeed capitalize talking are our burgeoning geographies opportunities We time all potential spent applications. are our extremely offerings to coming great in exciting, The be are they on a and for to and in bullish ready have recently available new on these at we deal customers

dynamics prospects. All very of confident make and future these Wolfspeed's us

share to $XX invested We opportunity of billion a excellent powerful on well-positioned pipeline. are are building the an and greater model capture a with return capital

the five to semiconductor transforming powerhouse. a we've into global For years, committed company last the

embrace are the and of a energy-efficient industry, We and more robust still stages in opportunity to technologies. customers, world as early the growing continue the

all special consistent In drive your a come. growth thank closing, investor stakeholders for opportunity continued of like have We to I'd years our returns support. and compelling to many to for

this like happy the to to to for of hope Day questions, you over an many with see back operator operator, I'd year. it hosting be announce Investor that, turning we later any Before be that also we'd to take will And questions. there. I

Operator

Certainly. question from Harsh [Operator The Please Piper the Kumar first proceed. line Instructions] Sandler. with is of

Harsh Kumar

Yes. Hey, guys.

all, strong or up of the the a if could you missed commercial curious was of apologize but of actually time Mohawk us guys I if on numbers putting Valley you're I is are the up there? I missed and And on three could First we can your you minutes follow-up. running if just and congratulations when had you that line I this. on tell kind of earlier, enlighten about there, product producing Gregg, I for guidance. us anything maybe quick out expect to then come call

Gregg Lowe

a Yes. Thanks Harsh. lot,

material We fab. are in running the

as this out full -- close or fab, in the each point. right end as pretty through this manufacturing not And know of now. calendar I -- now. quarter coming We're anticipate but we're progressing are entirely of We different of be various through the quite that the material at will right fab it well. out stages on this mentioned by some but earlier of -- of that We we're statements, still the beginning, flow our we in to the -- fiscal initial out and this year be at we to product missed track factory qualifying this are product fiscal fiscal shipping the planning in of that as are factory year, year the of the of we end still material you

Harsh Kumar

the you cash. build got clarification. sheet. want on understand guys something you, money wanted cash sitting in application $X.X to books have your I in to the for government $X.X looks like commentary your on on of CapEx the way will you for Thank you the that the I a balance for Neill, kind But plans It Fantastic, you you you maybe want question about of financing billion, do options. of anything and terms on Gregg. as mentioned And is in future Mohawk funding. the you understanding ask a be billion My then that

why up? And financing so, for So around the curious, topic. maybe would that maybe need is some I'd come be color if

Neill Reynolds

an kind on give to Sure, that. update Harsh, of No. I'm Yes. happy

as versus just being for just we XXXX So prepared we in the XX% at see XX% demand last higher. the Investor year. $X.X billion the Day period about look, products talked projected we That's the in to remarks,

capacity that's require that. match going So obviously, to pretty to increase significant

across need look that. in to market that you also going we're carbide, the If for to you silicon see capacity. see overall market you the certainly, and industry expanding more participate And need

would need that you that facility materials more of second at including capacity, Mohawk about materials, you end. when increase after that potentially also So in of CapEx a back we we have revenue of talked terms about all this Valley, things, fab additional would before, might we that of materials when both talked be -- X:X types look as CapEx, required all an fab about and and those of talked think And about include kind well, kind we ratio. roughly to in the

you of -- company, strong a combination believe if creating X:X So at pretty kind ratio, good we and that returns. look growing but also the for that's

in terms from looking at government various it quite bit go relates of of partnership terms as them. that. a Mohawk York our in to of for in that have with the we that So of kind more talked in and and investment, funding to do funding. ways, to a number We'll a in the about just support that prepared that And have of even from we and transition to to terms fund receiving remarks. order of reimbursements We're a of perspective, we Valley during financing how we'll New to options obviously, state increased obviously can thinking apply to

than remaining. I bit think million $XXX more we have a little

financing, back from I get got the on on wanted cash here thing on as of out guys want think Harsh, give billion But make fall. lot looking So perspective, to if you and I an you into that financing I do that, I $X.X at a just and second just vectors we all to me we'll step the we're sheet. of a as you and mean a say, just we're different clear. give balance update we've said, is sure one

of to of our the down last You've we going CapEx kind seen with the were couple initial inline as ramp company. the step plan quarters

CapEx any of – half you for about new require additional year. back of fab wouldn't that, think as sorry, the the facility So, fiscal really or fab kind

So.

to We're terms of well be remainder we're think we the going in of how put that of you put we'll financing We'll we'll give as very the call. in and think this. on I on returns ahead investors an and dilution move mind that and returns an thoughtful we of top And our update into investor our to update forward. our into we'll this. it's later and investors related about again, and right keep this

Harsh Kumar

for much so again. you thank Congrats color. and that congratulations guys, Hey

Gregg Lowe

Thanks, Harsh.

Operator

Thank you.

question Our is line next from with Chatterjee of JPMorgan. Samik the

Joe Cardoso

the for thanks This question, Joe fiscal My of you for to Hi, for raised XXXX first roughly is X.X expectation range revenue your one a to X.X Samik. guys. here, X.X. from on Cardoso

X.X is solidifying understand, fab, to line a did curious have And days is you a past on the new or just the X.X the that XXX XX that Just over demand? trends doesn't planned embed past then of it XX function more to sight clarify, And to days? about of CapEx like correct? to demand over already

Gregg Lowe

Yes.

the take first me of let that. part So

Investor – So, thanks row Day, we design-ins. had three record our basically in since question. a the the quarters last a Since of lot for

the that represented have billion $X.X higher $X.X XX% than that billion, at by design-in time little We over $X.X but record record. billion increase another of previous billion, a $X.X bit a followed

$X.X giddyap design-in. [ph] So whole of on going a there with worth that was of billion lot

billion, had double this of $X.X the followed X almost we billion, So, quarter $X.X by previous record. quarters of

$X billion been just know to happened it's we nearly this of Day. about So And Investor of gone to – the everybody at like. last have let just need that's what looking just talking upward design-ins since our We've point pressure. point,

say over the the is And originally automobile fab and auto increasing the I three, usage increase as in carbide is: anticipated what to And more happening of by fiscal we is at number, originally significantly silicon electrification is number and an the XX% side growth What design-ins. we the 'XX of XX%, well. and steeper rapid in I tremendous at the it. then then driven of a carbide the is non-auto adoption than would pace Neill than originally I'll is pace Two, think rate well. anticipated anticipated. we it design of happening in happening on turn than and silicon that higher earlier is is both largely the number So, had our happening that win of space, as one,

has looking is I fiscal combined that of revenue Neill bit us it mentioned. in expanding additional a turn you to had color. capacity all increase and for will So driving as over an for at outlook XXXX that little

Neill Reynolds

it as so in higher. to the think change relates devices change power lot in Yes, that out much seeing the capacity, things revenue revenue entirely one is a to about related to just in we're 'XX of pretty –

So flow roughly. you through $X to provide Valley be that Valley, really if about between that And would talked about Mohawk think and revenue able $X.X path. billion being million we've the Mohawk would

I numbers thinking having time the at type revenue point and thing, and both starting can fab really heavier be devices, they're the design-in of that to that it. higher utilization end of fab that that depending is not for how in of with we it we're out the with heavy that it think we've this lot range. seen, frame, that in Obviously, making support So of materials our levels you important. course, behind of says fab, But range to for power something much at of maybe customers a profile of then, of even XX the bringing that through push revenue utilization capacity on kind at the commitments substrates pretty need in to whole get

the revenue but additional -- growth, really the with not come to that. the only that's requirement think also but the -- what's capacity online I for the driving

Joe Cardoso

then sense, Makes guys. quick follow-up. a Got it. And just

any On $X.X if color markets you've versus auto fourth in was quarter. the that could you design that in I then I the provide non-auto more numbers. And of the those this the quarter. How was seeing you curious deal and like are between there sizes each coming guys what -- larger that between every if there average versus you driving volume color any that's Is provide of quarter. in the billion much particular deals mentioned around just through? a trend curious these was numbers could are

to any see could if that? curious Just you provide color on

Gregg Lowe

a Yeah. Thanks lot.

that The $X.X billion I'll it. take We're excited is number. huge about obviously So super one. a

business would order that Somewhere though number was The of XX% quarter non-automotive on our we design-ins. designs just where year the the on from so power of this it, we wide in of the example, variety non-automotive pretty different thing for I a it's for design-in of an around good first a actually is were And of actually the Xx side that across non-automotive as record for is customers. the printed in quarter perspective. XX%, one that that automotive note just

I the were we've design-ins the we've couple non-automotive. had of had the that years, On three last X,XXX design-ins that over last years, over mentioned

categorize things into And actually to buckets. from a XX% put of few those of to three design-in about or different we things kind bucket is into three have win. design astounding we perspective, design-ins quite quite of transitioned in What's So design-ins, design-ins. me just things those

have on here's customers or letter something a You to when And official It that's want first an transitioned something design-in pipeline, "Hey, opportunity revenue, start it? and form award, from say, a design the customer that's in comes do design we're transition we will as selecting you where opportunity when like spec when says, of an is that. a into to award when volume. we've in book we or that the year's then we speed typically with XX% estimated the bid letter of MOU of an made the decision and you the win,

good it's that -- into it's area indication So from of a at transitioned kind you've initial the R&D a production. the customer

the is we those The billion. range, something fact prepared was then our into when actually transitioned a in in looking piece. as opportunity the it remarks, I pipeline, number And started way, $XX opportunity really mentioned years $X is of at last like add the just that. XX% of I have So that design-ins the X,XXX pipeline I by good. one believe believe now ago, billion production we

we're carbide in and a an we're increasing with percent adoption the we've opportunity electrification and got, substantial the seems increase increasing then of non-automotive heard Xx to in of design-ins ins. So and talking this there's amount of pipeline feeling increasing increase storyline you about design a like in We're of the adoption be of -- share talking an of silicon market design-in us for terms by about. supported numbers X,XXX

Operator

line Thank you. of Goldman with Please proceed. from The Lee Sachs. the question is next Brian

Brian Lee

execution any nice XXXX out to past my but then as for XXXX in implications including existing imply guess. upside factory? It couple for the from of fitting increase this design-in activity I'll here. does on the seems and pretty the Mohawk sold targets, Kudos afternoon. Valley there questions year Good now those end, guys. A fiscal evident, the Any Hey is I are fiscal out And targets? the the entire additional fully well? capacity over

Gregg Lowe

that of year. production end that flowing, through that despite we've calendar we open of Well, quarter and factory detail. And the the made a in half to it March more because had and the turn decision netting a end the by continue build of fab I'll to Obviously, take flow fact little able that crack we for a by a of we're have over now first two and at over to to pandemic then bit Neill to goodness, would ago global in and when we material thank we we'll process this shovel fiscal Actually, about year, stuck ground that a made XXXX. this on thing years in decision happening this I material say fab put then initial and years ago. this three got we this ramping the full going April

talking sign obviously So, would in the that there's enough capacity that additional all wafer out fact the we're isn't pretty being looks be that required, fab say Mohawk Valley a I good. years. about to going

that we think a so and begin and today have construction now before get and the normal sold out of to time ramping on bringing of forth cycle it I we building still go new it color. of through give to time fab, up the to that, a With be little think of bit decisions to kind But it -- those more making maybe us. hand for factory. is over on Neill I right

Neill Reynolds

right, Gregg. think Yes, absolutely I that's

said capacity at you required It's going fab all think the that revenue and the high for like device and at look and of to of talking factory potentially be increase. with the the of Valley you billion revenue part, the in some to before, pretty have we're the capacity I $X.X numbers even XXXX if $X running through up point. out that’s if we'd at Mohawk against to that end power the run most again, about a billion at I heavy utilization change of look range,

cycle-times some as improvement fab, have Durham yields from you've seen in an help, standpoint, that the improving. I we think are addition, In and seen can execution

looking online out to role you're we're to looking a that you time, of beyond really play rate I decade that’s But timeframe. growth that out something have continue think to end Gregg's out what us is if beyond XXXX manage have at. So, as come in to out I And clearly that or going the think needs XXXX, in through think that. the helping can to point

the of in to that going of Mohawk we're secondly, to and whole out, going but additional beyond So, Valley for and Durham we're can, clearly capacity need think as much to need even into bringing we what that Valley, materials likely edges then site fab site. we're going I We'll need factory the Mohawk I we us tour factory outside tells push kind think Durham capacity additional of the in a factory. we're somewhere to leverage our now, it as material second additional terms seeing, tools of right current

to that coming So, online putting that’s need together, we what all out that timeframe. start in

Brian Lee

to, to some plans out XXXX of you the my it's for new as you continued vertically how obviously kind online. integrated? involved the capacity here, mostly for out anticipate long-term the also new today you growth the you there? the second know did some at okay. -- on do don't capacity outlined roll you anticipate you to the on capacity As in great. – think going they’re And device, here. wafers years targets know material you new of and be then materials expansion, rolling LTAs here the be speak point, Can do on on speak as but Thanks, or Yes, I just out to side this just here drive That’s and performing Just to kind a but sense is seeing LTAs question going upside about get then that seeing to all get target fiscal trying demand guys. some I increase capacity have is

Gregg Lowe

color, long-term number a is would feel if have those Customers, of we've those different Yes, And good we're you Basically, what thanks. the in agreements say with to announced any of suppliers. we've that. Brian. in through LTAs. and jump then additional crack I in. LTAs, at free to I'll And terms relationships previously. about got terms very Neill, a of take XX% delivering

of agreement. we've in got commitments of still another XX% value to So the and go terms volume rough

of in looking all originally for what tends demand it than to think – And there's higher these has capacity them. a in for, way and to what of The they have kind is nicely an come still the agreement nearly go. what we ways is they them make with put customers they're in, agreements go gone a with. request in quite be I happened So eventual that

to we've work extending And and to of them of been with and expanding do agreements adding these and subsequently so looking a quarterly them at carefully we And various very different things. kind that. on basis, all

side demand from agreements the we into of like to very space And really like all And to goes market. the kind that carbide these the in increase. long-term market, says, to think really as stay market of -- so in to the in of spot that’s power not we extent going to X% work them the have with We're and close with our the eat We continues So electronics is way them. power business. XX% think I silicon forth that terms and requirements of probably materials so silicon continue things. their the to in I

the that think have don't there. you know pretty good additional that -- I that, or I think And that comments for we’re so any extent you to to us, provides an upside be if Neill, would fantastic.

Neill Reynolds

Nothing great, else. Gregg. That's

Operator

the from comes question proceed. next with of Cowen. The line you. Ramsay Matt Thank Please

Matt Ramsay

everybody. wanted Thank with the start afternoon, revenue the I targets. much. you raise of Neill, XXXX very Good to

you give XXXX as that the Day guys How the number? higher had operating you there And XXXX of and curve X.X. color some Analyst bit that margin - think see fiscal You gross could around that into a you out on ramp? shape What's you maybe you targets at about little of see the laid how Thanks. do it? us or on leverage

Neill Reynolds

Thanks. Yes.

unfulfilled have aware in model, execution in time, if we you over seeing fabs $XXX our that think QX you the look in We're execution have upward to million of you or end, the We obviously, of I the back be pressure. we're Durham as improved one So in at can of look results. better currently demand. seeing seeing is, things the see out

remember to one in to terms is billion of that in kind we've executing some Mohawk the confidence all what between Valley. out of The revenue the XXXX confidence Mohawk that good here revenue ship good of that thing seeing that improvement still $X.X think we're we're Valley, as supply I us the demand got target. and as of ramping well gives will the

of bring we beyond. potential more there ’XX XX, see upside even just at cautious we we kind in seeing And think on those to But as period -- earlier a changing I capacity want any and there. little think some into the get demand in as point. clearly, be this ’XX ’XX, So, start outlooks upswing we're of and outside we can of I to

more less think I or So at. that's the trajectory that we're looking

at and at detail update the look you investor we if that around give you again. we'll this do. more Secondly, the

If margin. gross that at margin in in at margins timeframe, out XX% think time I XXXX looking gross you XX% talked look about out the we we're and

looks solid. pretty that think I

through the XXX-millimeter a see combination for fab is blueprint Mohawk think starting we carbide combination of a great Mohawk starting I we're for together, our us. to Valley we're highly a really as have running Valley wafer come And automated is modern to and silicon I cost business the and solid really runway. that, about think the basically OpEx good see about XXX-millimeter, meet the for in looks out profile after trajectory it's And that capability time. managing pretty you the execution I the on feel cost just to think

mid rate, XXs, that OpEx of little that solid. maybe of So, is bit kind in-time still better than kind I a think pretty

a standpoint, solid model look to time you and you into from overall, getting the model. at out start think I as shape certainly this coming So profitability in see leverage

meet we've blueprint meantime, to So, But work we're this got in demand, online I the speak. and and together how chopping it to how kind wooden margins. rate, terms the the together and in a all trajectory moment of we've bring on capacity in not think we've this just terms the of run them of of of in terms the do topline got to lot for seeing so the comes but that lot a steeper of the the revenue, and meet got needs of come to

Matt Ramsay

there, Got it. Thank Neil. you for the color

you're sort your I and what and whatnot revenue up, in carbide to guys silicon industry, about the my a ask of seeing lines As peers along of doing. their forecasts lot wanted are raised you of Gregg, follow outlook the

target there, give are from You doing the programs? backing commitments? a the those steeper today. the I'm get of the on from of may your customers of sort back Thank order numbers, raise an firm idea from on question visibility on with revenue? Are from that's be bit firm are of you question shareholders customers just investors of sort you place out that you. How to raises I the perspective the And the firm in kind you there LTSAs I that get everyone's some as and look it. sort in because pretty that some trying that the than commitments one How get but that up investors XXXX just hard revenue often?

Gregg Lowe

Yeah, kind well, of industry first, perspective. an let just frame me from it

think adoption rate is at would of substantially happening I silicon carbide steeper a have anyone anticipated. than the

forth. rapidly because carbide my impossible get range energy a lot systems the been what efficient. use are is, of to almost of the for or and the TAM a changing a more got last seeing more questions to so energy, wide based product systems to moving just silicon conserve it's you're need shortage amplified silicon make I efficiently across to silicon-based And has and calculate denominator applications, the driven there's is one the predominantly that This more So, fact more we say, to by because this two been And customers customers by your share? from keeps years.

designers company that silicon, carbide-based there silicon efficient capacity have redesign today. a ago our you've why shovel so that a customers ground out a I lot our a has of systems So, can't where and years we got stuck the the to opportunity have take more now I don't said, get bringing in is system have move the and to X.X

the kind So of is I of that all think that. to backdrop

is, kind second across been that years. industry I in I've a over time, say way would the for of long works same the and industry this The thing it these

to things, and lot of You use. And we've confidence supplier that the a we've X,XXX pipelines. the vernacular customer then put into fact speak. and design-in design-in application. for they doing design-in to choice That, to going so at different turns then going start a opportunity says, this a are with from looking The our who it Wolfspeed Customers you're decision design-ins make design design convert me win. and book, awarded be so they're gives bids had of that they moves forth, as in of out various win and order to to to

corridor as for money supply capacity of that kind got guarantees programs in payment. we've we've customers the layered of of upfront those that we've that where companies. assurance number We've is well top of kind that terms, announced we've simple some different number nailed put Now -- that of signed them customers. with This on of a some with a upfront

about pretty feel good I it. So

their amplify a really repeat want and you. what is I increase to design up over want last of that very And XX% fact me the to last years The different adds feel those non-automotive about very had, program, think carbide share but adoption to one that from increasing Xx it it's whether of of combined, is I number The to put billion. design-in mouth have are which I confidence good the would perspective, silicon your we've think silicon companies gives number that opportunity the Wolfspeed of supply ability just your it's just The where of our assurance kind of customer kind for design-ins carbide, is sign win. versus thing. the a going a pipeline to think increasing outlook TAM amplify a good take I of I said, -- of those or this all money upfront from a of I things going of the $XX what number. X,XXX money we --

are what the is growing silicon market calculation such to their early Thank you. of carbide Does a is. share to that it's in I so the think that denominator silicon but rapid help? conversion a rate, almost at of impossible we anybody from for do

Operator

you. Thank

the Our Oppenheimer. with Please Rusch line next question proceed. of is Colin from

Colin Rusch

guys. Thanks so much

talk the bit little strategy diverse would a as composition well customer and pricing more that addressing carry customer can ASP? optimal talking base as that little you the you're that you landscape as some Given about, of a potentially your needs bit about think higher about base

Gregg Lowe

Yeah.

to we to is, record customer and had tend non-automotive we've diversified Those price elasticity ASPs. quarter good. projects the smaller tend it have individual base is last that obviously, the in be had really what higher So more design-ins smaller being projects -- fact

at another carbide with best and years who's Arrow, give the we of that the we to that phenomenal to evangelizing have are extent, the so, design-ins partnership Arrow. just large of of done nod partner market I for last X,XXX five largely been a really a they've Here, over job a silicon or ours super have where the

there. a fantastic So, thanks again for Arrow job the for doing team

I is to here think going last is and a that to long time. stay partnership

with alternative So that's go direct choice that's on as thing now on if strong. an have especially we a we I source that right opportunities. our else be we're an customers, The and to with to primary don't source, we'd I source obviously large say primary bandwidth that been would focused that say have that a any pretty we've opportunities pretty they've one would made somebody is where to area love but the -- be of basically for these

really as what gone what chips that's on of source. side have something telling want chasing down alternate really customers have focus primary on table in we're in got we is, right put basically, and being capacity capacity our kind you something the customers our So, of a where that's not now. is or we're our quiver focus source, our through things to to supply, pricing the what on and whether lot of we an We've limited and that's want the

Colin Rusch

Can just a us that that. the of of Okay. like the year ordering capacity? build and out through give around increment balance you as sense deposits equipment then you cadence seems And just lead-time the of the this

Neill Reynolds

Yes.

that. over and -- very type and as -- thinking to additional of as get two ahead things been as manage they been we've a were and and lead-times. in we early, capacity, continue ago can this couple And to ago, get long it the Colin, and know, lead-time of you So, we far able fab equipment stay York continuing about earlier talked New of ahead about this. to orders in we've like we years years I

pretty the kind lead and that think have that's extended, I times that clearly, effectively. been we of baked kind we've of continue be but all to equipment into plans managing

Colin Rusch

so much Thanks guys. Okay.

Operator

Fargo. of next the is from Wells The Ashley with Please proceed. [indiscernible] line question

Unidentified Analyst

has Mobley. is or your of your there with any Curious shortage like in for business? with of pricing Gary been materials business, additional materials on supply supply. is customers terms, And Ashley environment power the Hi, the pricing there are This what sticking pricing agreements pre-negotiated given the [indiscernible] the long-term

Gregg Lowe

agreements Well, in we've spot long-term had want really we the a on where to strategy play to very don't consistent so our speak. market,

that is call So, be long-term We from of like they on their look We down fee at the demand negotiated with that the next, so. to at capacity and going stick with then with look over secure with pricing associated that volume of, We've or have through over kind we would We decade those reservation sort agreements. period it, here. us. sit capacity pricing what have. entire the customers There to what is, with an stuck we upfront pricing. they them that kind of

this committed entire And that's I've and the with we time it. something stuck through So, that been policy our company. we this to at entire through been

stick So, pricing would pricing would continue with that that extent have se, as pricing pricing the again, agreements, power associated that stick got we've agreement we buying of in with that long-term that put per well. have, in terms with agreements long-term new more it place. the customers place to the we we long-term we will And doing in and and

Operator

of from Ben New proceed. is Street Please next the Harwood Research. The question with line

Ben Harwood

Thank you questions. for the

you to you you. today. your XXXX meet will to frame, XX% your demand up gives be just So demand you the constrained incremental then think given What confidence business ramping substrate that of the still you you is the the accelerating? complexities the on just on how do Thank your ramp time that capacity? And substrate materials of given can mentioned much constrained XX% capacity supply inherent

Gregg Lowe

not to question experience is it's lot. finicky, we've that of something doing delivered substantial heart. we've It a ramping years news speak. of a on. is for so XX great in It's capacity five very that. very that just of years because the carbide also is And the silicon faint a material, is thanks and got good expansion we've But got just Well, tricky -- materials is a

not. and When a a is we've we've place, good we the tell scientists that that We easy don't cut so what So got manufacturing capacity, Ben, forth. sets I But the place, about we knows it. engineering worry and this deliver short how ramp through with in that and very the got everything have you, we say, look run a normal feel the you "Hey, challenges blow don't those folks would at it result. is because it's good have team of team into you to challenges that when and

a definitely we've said, with of we capacity be for challenges. that, something the it's I got will handle. Like with ramp high that faint not It lot of of a heart. that So confidence a – can of lot lot comes

manufacturing on good years we that doing experience. of team to of We've those that call think And we of ton pretty and got was guys a night. lot think materials. at ramping yes. I materials there's of the But keeps a think one challenges asked answer just I our I -- I And you're XX when just them of up what the a the when challenges. date. I people can has meet has different job team done

lot Act as kind local the is discussions we longer-term, guess, well. facility perspective. was to campus I week authorities going facility. at from states so on We've new looking expand can that we passed look an We're like the Durham because super in decision We've on make a So with Act CHIPS on number or here of already been got need our we hope of that the We're of that definitely a that in different terms excited in could – here. know we that doing last of a and post-haste in incentive materials materials business. some that that what

we've what good that experience, So there of us all the looks substantial say Ben. that, be put date would and some of gives help XX years the fact those of I is that to things to capacity incentives ramp already confidence pretty do government that the together, combination fact us demonstrated to in

Ben Harwood

Gregg. great. That’s Thanks,

Operator

you. Thank

Next of Edward question the Research. Snyder proceed. comes with Equity Charter line Please from

Edward Snyder

below your had what some on or much. you're provide with it's are, issues just sense, in and which maybe, yet, a very a trouble they but breakage experience line running down high know I'm Mohawk there, I given larger X-inch And much wondering then how this the not at point? sure was and for diameters, volume first. Thanks expectations you've shake those handling was X-inch proceeding, Valley more is wafers, it much I the Neill, with Mohawk the had know And hoping a could I in Durham. any first follow-up? how with through brittle is color with in I your all I you

Neill Reynolds

those seeing the With results things. automated of and in types factory, we're better handling

what we're working Although lot kind still kind of think, you the setup early factory. I phases a through of in call of, the

ups those right of We're factory process we're line with work in we'll lots I each learning. kind we first through it fully through some I'd still two to And there and step. the factory. some now. kind So, mean, step of now. new are as kind year, of running less the I the our when But end at expect up processes what through kind expect worked until take with the annual gets the through are back right manage the as of that as kind more said. it's moving manage qualification. and that through continue would between running and of I it tweaking the fab of kind or would steps, forward But we a but normal I things we kind we steps you one of say get and along ramp capacity we now and downs We're just fab. the here of as think your to

half expectations, the bump the as in we're of for here having revenue on-track think but revenue in the any fiscal do and there's a still think don't road year. Gregg I ramp hit there, or I we said, So, to that back want ramping

Edward Snyder

profile And in material factor Mohawk material? a also, your And expect then in the throughput revenue or significantly And for factory with new material – more than I then margin from up material a could we have to a what ground squeeze mentioned – you quarter different be Durham ground-up facility? Gregg. the if new a could for Mohawk existing one

automotive number revenue current automotive. and know good Thanks. could? us between in what's give a the your of I revenue are out design-ins glimpse. you XX%, Maybe number put Generally, you today. if a XX% said breakdown nonautomotive, You

Neill Reynolds

maybe maybe Gregg, I'll take there. other and if you the on first the part follow piece to want there up then

of 'XX, see as on inline fab, as to rapidly from we'll goes we XQ revenue some Obviously, So, the in expecting kind terms start of to timing, half of kind numbers of what been year, we we've consistent see ramp. into revenue the kind kind kind think of that about ramp back more talked said the XQ with we'll what I it's recently. of but ramp in we of line the with

perspective. in As from about November. that be early feel Mohawk about and that and new to We've in detail potential that. what would we for Valley talking materials, for it too able cost But been to a clearly, really good with into probably a some a up for new translate facility relates give new primarily it's we the you scale update fab, advantage wafers get potentially being used XXX-millimeter

Gregg Lowe

And that revenue wrong, is revenue I and from and probably Neill than is of nonautomotive got greater that from right? a perspective about, touched device if like perspective, then area. a half it's definitely Ed, me, our Neill, XX% more

Neill Reynolds

That's about right.

Gregg Lowe

unfulfilled a So got demand. look right that's base. that of nonautomotive is about at, Neill $XXX business A have nonautomotive million worth if about of we And substantial – that lot talked so we've now. you

volume gone mentioned, XX% So, from the X,XXX design-in at of of already tend win them to it's And I of pipeline typical design a have the design-in, the folks as nonautomotive nature pace. initial into design and opportunity to pretty fast go kind production. nonautomotive

So of that's kind normal.

as ramping. couple step start automotive up I customers various years, think over you'll next the see of different

higher obviously perspective the And like so, next I years. couple than go from an right the over automotive. got But that number not more automotive of XX%, if right is it's we'll now,

Operator

Thank you.

next question from line Please proceed. Vivek of Arya Our comes America. of the Bank with

Vivek Arya

mentioned sense balance hear think this of so a year growth outer online time curious, supply-demand Japanese works frame? How coming incremental several to do from what's your industry of lot capacity in Korean same over some Because and in competitors. taking for capacity questions. out, grow analysts Gregg, the US that year, you not of Xx I'm projecting next industry demand my or Chinese years. Thanks several you and we and or but the years? the next

Gregg Lowe

capacity. it's building us, seen on thing as And of and build, we what now. factory instance, -- I when probably a because the X.X we in that's it's can tough online this as made and in some I've will going a reports And market see on and talking echoed materials mind. three years was years ability to my to simply viewpoint actually demand look come. to silicon and carbide they they well. that for And to they growth is about that it things brand-new tell come you see And we time a analyst to customers, the ago of coming that's that ramp definitely ago, decision started talk one market bring I the just almost their at to the when it's is for I outstrip for the some the capacity that ramp.

I putting a your your If various a and go, where start terms spaces we get remarks, that go, actually with of is. will they wafering I and a a of announcing prior kind new to visit make see customers what nailing little we're factories deal expansion, think And come the signing mentioned this or expansion". a that emphasize, give office I think stuff, I of capacity see contract sort And to want closer kind what space good crystal prepared of of and you're to us. they materials that's that. capacity also breadth we thing customers okay, and mouth as times, and of of different a I guys money growth you well. I'd say and materials, a faint sure not for all you see know kind you'll in right of now, And happens terms doing feel doing with "Okay, just think guys you bit that other doing last those of factory They in repurposing materials us as are to and doing and factory campus our problems. of epi about they that we are that the and the as down, lot air they in heart again, customer drive pretty fresh on you And of solving construction on that campus and

Vivek Arya

Got it.

Neill, follow-up, gross my so margins. And on

they first, maybe believe the half take of could or or Mohawk you margins? Do kind year, head calendar as a perhaps of gross gross of next puts the product think of down I what other you depreciation margins and selling they up into step Just to first what are So do start takes continue that year? happens as you that said the given next you things? half in move from first Valley, to

Neill Reynolds

Yeah.

it pretty it's with consistent how I what laid think out, back. we've -- of kind

this improvement even this if calendar we of maybe margins of in the half, you revenue back I as coming think half year, look of the back we year. the in Valley, modest kind back see of have kind at Mohawk will half of out

writing half you year. you Valley, to that We've next we fab. the would pick the margin of you Mohawk we start see back costs of up, the numbers. see get that the the start through pulled into have we time start-up we -- As of kind over year, start decline ramp to and in start see some as we obviously out non-GAAP that to And revenue

So I are dynamics. the those think

see over to shrink time. deliver we more So starts start start-up see up and has to labor the just those go capacity to more the costs margins fab

Operator

Thank you.

from is question next Our the proceed. Scarnati with of line Please Amanda Citi.

Amanda Scarnati

fiscal this demand taking or Quickly been question. in ability for have year? meet to Any XX% customers year, how customer on any your the customers? for customers thanks in shift the Hi ordering

Gregg Lowe

$XXX kind of starting right the the the is at Jeff facilities. perspective. there to and direction. there, and in test kick our that pretty that, in if have still we that. nice That Cycle-time manufacturing yields been long doesn't to give -- way mean starting But add into and manufacturing some done can we've to in corner Joe turning color. shipments now completely million are happening give customers down as our to still the got improve, credit back-end has are now than bit when you of come move so ship a I there's seeing the it I right say dependent job Missy I'll terms the really predictable long better unconsolidated terms really coming have I we're yields a definitely, want pretty from of of still ways opportunity of -- in improves to about a of And on-time We seen improving then product there, better starting team would cycle-times near-term we of ability some a a new a partners seen we've our Neill, maybe lot of team mentioned facility. and with to to more lead-times. that turn job good and activity. team our huge whole assembly a associated organization, improves Basically, execution feel activity team that are deliver, our improvement still but add. have more right down, to bit our that customer to to We demand. are off go and And a whole our a a things forth. little different actually really that come Neill might a want with And have well. and nice to what's nicely, kind fantastic I doing customers of really be and ability terms little on really manufacturing the of when Durham shipping a job folks and and more Rex of the We've as looking done in starting Durham in out in

that. it's near-term, I for really of be So, the a going think improving to story

that there. more some and on a maybe good of are lot not a doing we you to have customers, improvement Still And it but but think that. fabs of teams can lot turn out Neill, them. here in I XX% of the see perfect, come, do to then getting terms more I to are a to job nice over

Neill Reynolds

the mentioned but seeing, been like see. than as see the model to that inventory customers. And We're think just of, The transition. one the see demand come not pretty that numbers more I higher channel, to the XX% through then at over remained I time, start customers of Yes, strong much and turns managing Gregg remain we'd as think automotive online, more aware thing we're I be business. earlier, We've that. think, to so the But still looking I across low.

think So, just kind the really see to that in there's disconnect. I -- don't demand let and We're of a time. supply up going in over

broad-based a the to it of guess We'll supply little demand that. But we bit. think automotive having. I obviously could Some relatively continues the through challenges shift time to I as on over as be manage relates of that some we're see come more customers,

Amanda Scarnati

quick we the where guidance, And then a in at the looking. versus the Can member June Street follow-up was more a upside greater or saw? Was When came of that on this. you look we're where it about saw talk just quarter you able that you profile matter a that from? the being upside seeing out Durham just of to squeeze demand and

Neill Reynolds

is really It's of really more supply demand. with about our -- revenue a function than

So in capacity end primarily I of got Durham execution that's, better back and that there, directly I operations kind think of the plays it devices in will out, execution be related that. was the in kind better I – And and power but team fab and we forward. strength, think, back-end to driving think, the devices about powered materials talked that how going we've the and really

Amanda Scarnati

Thanks

Operator

Thank over I you. That now for the will question-and-answer session. Lowe closing remarks. Gregg call to hand the concludes

Gregg Lowe

Investor much, you and great participating visiting our then our We next release year and being with a the to look Thank later at earnings everybody, very next Well, quarter Day. and next thanks at in have a forward for us. lot, you today evening. on

Operator

That concludes for your today's call. Thank participation. you

your disconnect lines. now may You

Wolfspeed (WOLF) 17 Aug 222022 Q4 Earnings call transcript