Earnings call transcript Q4 2023

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Operator

Thank you for joining the Wolfspeed Q4 Fiscal 2023 Results Call.

I'd now like to turn the call over to Tyler Gronbach, VP of External Affairs with Wolfspeed.

Tyler Gronbach

Thank you, operator, and good afternoon, everyone. Welcome to Wolfspeed's fourth quarter fiscal 2023 conference call.

Today, Wolfspeed's CEO, Gregg Lowe, and Wolfspeed's CFO, Neill Reynolds, will report on the results for the fourth quarter and full year of fiscal year 2023.

will we non-GAAP to believe we today's results our that which call, provides note be financial presenting during investors. Please useful information may non-GAAP are be companies. results not accordance GAAP Non-GAAP in comparable provided information and to by other with not considered should to, supplement financial be substitute GAAP. and accordance prepared in Non-GAAP with a for, as information not statements historical Investor reconciliation summary along release and press to in is our website, metrics. key the A other our in of most Relations the measures with of directly a comparable GAAP section posted

Today's we discussion statements and statements call. forward-looking outlook, includes risks statements about forward-looking may during business our Such are and numerous forward-looking subject to make other uncertainties. the

SEC Our differ results the noted to in import cause press and release actual release materially. the filings factors today mentioned that could

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

have after any questions, you free feel please call. the If contact us additional to

over now, turn And I'll to the Gregg. call

Gregg Lowe

Thanks, Tyler, everyone. good and afternoon,

look business. out strides of areas As we all across XXXX, our significant made back fiscal having close we

Our fab, Mohawk and shipping which Valley revenue. largest contributing began product XXX-millimeter silicon the fully world's automated fab, carbide is

silicon world's City, XXX-millimeter Valley, materials Siler at capacity largest break materials JP state-of-the-art to the our on secured outlined greenfield of we expand out the fit world's to achieve the us Mohawk then, Carolina. necessary Last October, silicon these out Since construct finish Durham and facility to $X the North footprint. ground our capital plans in carbide of carbide largest we've billion goals, allowing at

flagship base Xs, energy across in OEMs strides great and our Land agreements the with Mercedes, including Rover, and Jaguar with industrial, automotive, Tier BorgWarner, ZF. key made customer device and sectors, have we Finally, diversifying

energy customers segments We are and the growth to silicon traditional also the make carbide. as transition to see industrial in continuing

primarily solar air The driven conditioning, in these systems, UPS, and and is We opportunities motor segments growth for energy need are energy higher drives, more. many seeing efficiency. in by many the heat pumps,

and improve landing carbide initial range. addition, such In and industrial also silicon applications designs emergent are their system aircraft, electric vertical to weight reduce integrating take-off Wolfspeed as e-mobility, within

From pleased signed Widely a long-term the automotive secure as also agreement supply with Renesas as agreement Wolfspeed. a very a leader with XX-plus largest carbide I wafer were they which corridor a $X The carbide semiconductor of have ever perspective, a silicon in beginning years to have agreement a understands supply to Corporation. customer XX-year recognized of devices, wafer having in Electronics capacity is began ramp importance production will billion This materials semiconductors. technology includes the access XXXX. to we and Renesas deposit, my silicon seen one deposits in in secure device

it significance JP. Durham the customer was because decade, this material While in stream provide a has the forward-thinking expected also for campus investments is agreement construction over semiconductor significant the possible power Securing of and capacity an landscape. next even the greater at revenue to of with the this key our

which carbide supply-demand for wafers, carbide today the be will applications silicon address the from open XXX-millimeter the energy which to of uniquely industry XXX-millimeter silicon markets in We will new currently and transition potentially help drive up mismatch, positioned industrial some to and sectors. exists

building. the our the increasing world's XXXX. XX to producing foundation The now on is times half at carbide wafers of well at construction construction supply started begin track calendar the the remain we've built significantly capacity the Durham, operations add We perspective, second the site shell materials. and place, building in in out, more Fully on materials a current the will of of From total silicon to JP JP is in underway. compared

more our with immediate crystals, far. as more Durham very currently XX% than Building pleased the on we've production of are yields materials and facility. in They now XX growing increase installed that XXX-millimeter far at the growers been thus crystal have to strategy our campus, As we

it and recorded Mohawk Silicon and $X in team As relates business, revenue approximately of is difficult in how million carbide to of that's we our tirelessly to device fab out efforts complex to up Valley the device worked have proud ramp very technology fiscal has continued and QX. I'm a master, beginning device a revenue our production steeper to our in the production, increase half us highly new, in Valley modest second of XXXX, do the have with device in we half work a and a in XXXX. still of brand first some increase ramping as at We expect automated in Mohawk fab. revenues device scale fiscal get

From $X.X billion perspective, and approximately QX. seeing fiscal are secured continued we a across in markets strength we end device for design-ins our

For fiscal the approximately cumulative totaled $X.X XXXX, of billion. total four in now the in excess secured years. $XX stands design-ins And last billion

date share of decade. us wins ability market end to the confidence of capture to the meaningful give and now market device of Our the growth customer between and our our in the the addressable

More world the trends time, technology awareness a industry. realizing than the The truly as that driving silicon are importance anything, the space. our carbide role widespread receive public the recognition the is carbide, same proud the to in of we're greater at semiconductor in secular power game-changing have silicon started building adoption of semiconductor of for global

our financial and Neill? it to of overview turn results an Neill, provide over now outlook. who'll I'll

Neill Reynolds

afternoon, and you, everyone. Thank good Gregg,

discuss and to to are couple the we the of to I like I changes a of moment Before outlook outline presentation QX, take fourth our results. would a making of our for details results financial fiscal quarter

start-up Valley year costs, have call, for on excluded reported million and we in operating we non-GAAP last income statement. primarily fiscal At our an and the Mohawk as have expense have these and earnings from $XXX.X as each costs of the presented Over XXXX, costs several part years, totaled pre-production factory costs, start-up results. costs which other we outlook given update these at

will forecast will statements identify we them our filings. and in costs forward, and these the from financial in but and results Going our our not commentary footnotes to exclude non-GAAP

Valley as will and production transition quarter to will be fiscal an cost active part the first of Mohawk of sold. costs As be from XXXX, underutilization in pre-production of costs goods these facility we categorized

no longer capacity underutilization our silicon achieve results. margins and will exclude outlook free than gross technology change at as to profitability long-term flow we will carbide levels. from We corporate or for non-GAAP XX%, competitiveness costs This that generation XXX-millimeter greater these our not does provide cash non-GAAP our believe cost scale and start-up

margins were million the loss gross diluted primarily to and Mohawk early loss of net and margin $X.XX a and share, you a revenue per was loss to targeting of share. or in related XX% fourth the per costs for quarter, a our recall, which per City, range million; $XX per the materials non-GAAP million to million $XX.X materials Carolina. that Valley of of million $X.XX $X.XX for diluted we Siler XX%; non-GAAP in $XXX quarter non-GAAP of $X.XX includes $XXX.X JP share phase of North range As $XXX to revenue the our fourth or gross share, start-up included to and Against primarily related XX%; million; between diluted facility $XX in start-up costs guidance, expansion

about OpEx estimate which issued costs our to start-up QX materials press includes $X our related today, In be million release in outlook, our $XXX to approximately of we expansion XXXX earlier fiscal million, efforts.

week, separate shown today the file moment. will later changes item release in the and income into quarterly costs earnings statement. we further in I on a Form as start-up will and go operating XX-K expense this now forward Going will be our line quarter-over-quarter a our

about margin expect continues Mohawk In negative or ramp fiscal as be gross of million $XX costs, to range XX% the we which underutilization points to Valley includes representing at X,XXX XX%, production, basis of margin. midpoint of QX, the gross approximately approximately

Securities Exchange guidance these Commission, related for align which with presentation non-GAAP the public changes companies. We and to its has are our making measures to in clarified

I also forward. one mention to moving change last want

we well. have a quarters, XX-Qs and our future As file our breakout of breakout later will revenue our products, of lines: earnings see RF product this it release you as in products. power week, this will products, in you each Form materials and we included In when see by our three XX-K,

provide Now, let more of results. the quarter details me fourth

mentioned which quarter $XXX.X fiscal revenue compared our the of our I sequential out to when increase As generating strong the of note, the XXXX, X% in approximately fourth year-over-year. a we a outperformance to facilities. closed X% compared shipments due year This above, represents of production on of primarily is to product and guidance growth previous Durham quarter to related timing favorable million

from While Valley Mohawk Durham, said we primary contribution governor the production growth. will is out our see quarter, some variation of revenue last incremental future as of in I

in Mohawk As from mentioned, revenue recognized we $X Gregg million Valley.

the it out still second that XX% the expectations from the of will the are to we million calendar and we our note that fab of XXXX, we represent. customers. is of XXXX previous aligned time end Mohawk shipments reach of While that before it for starts will be utilization quarterly Valley by important fab accounts XX% half the on would $XXX utilization is to This revenue year between see -- this fiscal the

last last period, that compared gross the of margin was be in prior-year out quarter basis Gross automotive customers impacted mix to XX.X% the produced initially and income margin and to was the down to statement. compared decrease heavier fourth Valley. higher Non-GAAP quarter. quarter Moving XX%, were XXX XX.X% point slated Mohawk representing in by costs a for

anticipate future Mohawk improvements of levels higher of to in shift gross we As we production margin. out Valley,

$X.XX of the last $X.XX compared share year. in a of We quarter to of period same loss generated loss -- and last fiscal quarter in loss fourth the last adjusted $X.XX per the a in

current As in Valley, start-up I share. related primarily million mentioned share the or per of was by above, loss impacted per $X.XX period to costs $XX.X Mohawk

a on would in we the plan government carbide a and year we that Before execute across have a funding. I now associated four footprint silicon industry. billion fortified financing in strategy. securing We including we private, provide approximately said balanced laid update a than nine flexible, will and build months capital financing initiatives. update, low year that raised capital dilution financing results, full public, the the our have leading moving our Less across last to all dilution customer, billion of plan Since would pillars, out ago, manufacturing quick balance out four be expansion pillars, $X those to low the sheet and $X.X

opportunities present to will remain continue as all future to themselves. it financing, on we evaluate as avenues structure our capital and relates nimble forward, Moving

at securing objective our is primary However, financing this time. not

Moving on year to full results.

fiscal or of due diluted million, $X.XX was For and loss materials per per $XXX.X was to the Non-GAAP share. net million in increase revenue strength Non-GAAP net lines. product of compared both adjustments, net XX% power million a or fiscal tax, share. when $XXX.X excludes XXXX, $X.XX representing loss $XXX negative diluted to XXXX negative

XX was the operating on days, while sheet. $X liquidity to cash of with negative $XX ended cash quarter negative our comprised during Free and Touching plans. balance We $XXX hand approximately $XXX and days. million, billion on XXX of on flow flow DSO million expenditures. days million support capital was inventory the was our hand of of growth cash quarter

first Moving outlook. to our quarter

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

quarter. capacity $XXX fourth factory's device at out QX forecast Durham quarter, our positively negative, in approximately and our or to which does subject approximately the revenue fiscal million As quarter. capability, change we not we and from device will view we the variability, it's beyond, per some Durham fab capacity generating said is that continue power from and positive forecasted quarter revenue to in last This of revenue per million be to on $XXX power benefited

we fiscal in line While this forecast. it be from to to be continues fiscal our will as headwind XXXX, with modest QX a QX transition XXXX

we've incremental devices the be contribution in the power past, from revenue main the driver growth As revenue for future Valley. will said Mohawk of

in we revenue $XX up of margin range XX%. with XX%, costs, to XX% at Valley. includes as the underutilization gross million the expecting or X,XXX also are the basis of Mohawk At approximately a negative of this midpoint We midpoint, points ramp

gross as fab. expect underlying improve to margin the more to customer Durham excluding serve We we out modestly of automotive the quarter continue performance, underutilization, in mix

million $XXX related the also of the start-up primarily Carolina. facility JP XXXX, is to targeting to million in costs first inclusive quarter related of of of expansion, North materials approximately non-GAAP $X our operating materials which Siler We City, are expenses for fiscal

we as Excluding increases new employee-related into year. fiscal start-up costs, quarter-over-quarter driven the expenses OpEx are by higher move

reservation the of expense, expect our completed $XX term non-operating Apollo We from of net in customer recently includes deposit. inclusive $XX interest of charges connection QX and which loan million, million approximately interest the with Renesas expense impacts

We as the invest as increase our expect earn that interest income on as expansion. facilities we to non-operating less we short-term in expense our progresses year cash use investments to

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

targets supply productivity, environment. chain mix, and are the factory demand, QX our based on overall significantly, including As several always, them competitive affect factors product that dynamics,

and approximately to we fiscal capital of to expect $X range $X expenditures continue XXXX in billion. billion Lastly, billion to revenue to for the fiscal expect XXXX be year be $X.X

With to that, I'll it back Gregg. pass

Gregg Lowe

Thanks, Neill.

driving of adoption, EV demand the capacity, pressure adoption materials. carbide with and driving the bolstering be the for continues seeing devices are silicon we The and recent on The EV need is of revolution more landscape. upward continuous further force to for developments both the

embrace energy-efficient chargers Just just vehicles. recently, with in of charge General Motors, The their more Mercedes, create a meet high-power America new the North demand as at charging explosive BMW, consortium the to start growing in including intention and Honda, world to production least OEMs, technology. to electric network XX,XXX Hyundai, announced is the a EV to continues growth

commitment to strategically, vertically generational because silicon is are at and and we next-generation purpose-built in we XXX-millimeter. investing substrates. Wolfspeed integrated, investment and global to operationally. fiscal on and a we XXX-millimeter This who by turn to XXXX, doing opportunity with Apollo, so so decisive silicon made to Renesas, focused financially wins out As this carbide firm, this positioned validated technology capital carbide saw facilities and requirements, a are close do our with assist intends better us year that opportunity an

all I'm stakeholders for what's continued In thank support, ahead. closing, like and our of excited I'd to your for

over take you to have. and it questions any turn operator, now I'll the we'll may

Operator

with Our from [Operator Instructions] Piper question Harsh first is Sandler. Kumar

open. now is line Your

Harsh Kumar

one got It's clear you. pretty the Gregg. of me future Valley. Hey, the Mohawk ask I've with for letting Gregg, lies that company your for Yeah. growth question. you Thank

So $X could that a to that in you what ramp You million. maybe want about you talk to see happen did fab facility?

clear I think the you call. in pretty were

towards at for we talking You be the million to that kind Thank -- you a what the million talking in see And do more second $X quarter end Would did other talking fab half words, of get need $XXX but in beginning to quarter, the June or of are $XXX the you of second that of or last we then, March -- the XXXX. achievement you. to importantly, to you're towards what million? about number? half are to get

Gregg Lowe

Thanks Yeah. of things. Couple lot, a Harsh.

excellent, we is translating So, in in you very well Building that. very first which that and off, we density into at fab. the growth fab. material, a And obviously way brief fab, materials update are to XXX excellent on as I'll give products its defect we the quality Valley XXX-millimeter obviously flowing Epi excellent ramp nice now The that is wafers. have millimeter and speak. Mohawk on shipping ramping producing we're is crystal operation ramping into that also and XX from

testing products for We Valley we reliability and are three -- products that. final Mohawk currently end all have through eight XXX for of qualified the are millimeter at fully working fab, that in and qualification additional now have the pass that

shape. great really in all that's So,

ramp of billion, of of in million $X it's fab, kind ramping. we obviously, as revenue early that's fab capable the the innings of Now $X the

As dialing entitlement up and equipment, dialing we be in in will be fab, yield. ramp the ramp as our which the we fab, will we'll the processes that yields And take absolutely to happening. the

on and to the what of everything and crystal have me this. to excellent. a wafers of is So, really that deliver new the passed with fact shape excellent devices is to that fact standpoint, the we've the XXX-millimeter a this is Combine would defectivity from got ramping early entire a I expected deliver, we we're supply the that going quality we're that say has that three quality is, chain -- crystal, is and process epis that gives eight that's out great that that going qualified the going fab fab and be confidence reliability good

let quarter. of expect ramp for In is we'll the the at of terms into our by XX% of And and expectation revenue, can June expectation out the a utilization I'll production that what the of that you the translate be revenue. Neill amount

Neill Reynolds

Yeah.

wafers timeframe fab actually put (ph), the as final to until [back end] the you fab the you the think load you produce into the utilization shipment -- them Harsh, from utilization, remember, and Just the to time customer. from wafers, about the the then the perspective

So, the to the from expect somewhat of level. time reach delay a you'd utilization

equivalent you the get 'XX. sometime of second expect towards translation a So, year, translation million -- we the expect to of the utilization. be half revenue as June to we XX% the of the we wouldn't quarter, end after calendar by get see in $XXX the wouldn't the a revenue that that -- XX% of sometime of Say,

'XX, timeframe. of that half sorry, calendar fiscal first -- you about as So think

you So revenue a a last quarter. $X of see fab the QX, of a million half of way is. the into here tick again, ramp or in up there. then March I and on of think, should our And XQ, those in the get We back about pickup, are as quarter. from did modest fiscal be, then steeper the the timing ramp a we June We'll and year so to bit the

Harsh Kumar

Very the follow-up, then so now. of know that guys. Mohawk part plan. for customers And product was I off were original my to that there were Valley helpful. get Wonderful, of expecting right

my you And customer expectations those is are ramp for you as customers? is So, managing near you're to the balancing how the Valley? you that importantly, Mohawk for in how those that I guys? and guess, how you game important commitment And supply/demand question to more term

Gregg Lowe

an of things. of Mohawk near doing of Yes. We're ramp question. for delay impact Thanks creates a Valley. Yes. couple term, it Obviously, the that with the

So automotive Durham. shipping more you're seeing out first off,

and the to customers be with the to to with So we obviously, realigned transparent Valley. Mohawk concert We're what we to expect we in are, and ramp Durham. mix expectations how expectations being shifted obviously those engaging that as

going very an the them to cases, some can't got faster. it combine cases, have to a in JP, coming come it's got basis what of the not And what with that going and really communication encouraged Building on there's come else. out vertical love nearly and Mohawk there able back that [indiscernible] in going see around year, site. just daily, little forth. online. about enormous toward an to product anywhere lot of actually scale in intending of XX and that and -- obviously Many we've that's this in of coming actually a online we're earlier than production and, customers got remain they time the we've to And engaged fact on We're this But producing that, what that's encouragement them encouraging with some be some had they you been we've this time on several of next execute with bit is They because next that capacity we've and that then capacity ongoing and online we've we're -- weekly, level going coming. year. Valley

Neill Reynolds

Harsh, And giving then financing creating job also to a have done to just that and expansion. taken capacity here -- ability we've element add ourselves to good fund very the on think very the I customers notice significant that, a

what something into building and the to -- look gives deliver footprint based them capability build us So, manufacturing to to on that is our out parts we're future. out when we're funded they see look of gives to opportunity forward terms forward the in and the out

Harsh Kumar

for the clarity. you Thank much it. so guys. Appreciate Thanks,

Gregg Lowe

Sure.

Operator

is question Jed next Dorsheimer with Blair. Our from William

line now open. is Your

Jed Dorsheimer

my for taking questions. thanks Hi, thanks, and

question, address in begs first I my don't now. know Neill change accounting to if you for want why but Gregg, guess, the -- I or this, my Just

the you're that. defending In spent you're past You've gate, out the year of first underutilization. changing quarter, the

around a I something maybe that was in be And by auditors color So, helpful. what business? would And -- have this your that caused do follow-up. driven some that the Or seeing change?

Neill Reynolds

Yes. Sure, Jed.

I want is quarterly talk our a plan gross So how basis. this than change to first our of we only. about think for in It's presentation terms a greater all, a driving change margin. presentation long-term or doesn't of financials This change on business outlook the XX%

a perspective. couple terms from that a in So, things drove of timing

play just going remarks, we from to said pre-production if I a now the the our adhere you updated utilization presentation a production role forward. Valley, Mohawk I think that's fab SEC. facility, updated in think of full much our facility in start to will prepared to our results as margin a transitioning the bigger to guidance about of really trajectory from Also,

So, putting that the along a made pieces this right fiscal moving time that make we're together kind fact year, into to new just of those with the transition.

Jed Dorsheimer

this was guess the So underutilization? you drove your it SEC What change I that be presentation? do questions. what at. just to getting this? getting be clear, couldn't going Was I'm to asked Or I'm these That's though, to the decision

Neill Reynolds

Yes.

had the completion make guidance So, from update presentations. We've then And upon updated decided we there's correspondence with the that, -- them. to we've SEC. to of the

Jed Dorsheimer

reason help a I'm it. in could Got in are guide months you're correct? operational. understand that a Valley? sequential should then the together that think congratulations it's the are that different Mohawk to load And numbers, about XX% XX% help materials producing I heard, guess the And you -- give you I for of XX better and you. Thank this six bunch me while more Building utilization? asking and pushout that the me down so if then How if And of stitch Is revenues is, I true, the follow-up. there growers in can just me.

Neill Reynolds

utilization fiscal from to in we're would perspective, a of thought think the line get with year. XX% what XX% So by we the we I end

line. So, in I that's think all

out... bring we As

Jed Dorsheimer

calendar thought the said I you Sorry, on call. year

So, 'XX XX%? it for year is fiscal the

Neill Reynolds

yes. Fiscal,

timing in the the the So XX%. no bringing up change fab outlook to online up of to terms of

the getting anticipate utilization of end year. by So, to XX% this fiscal we

Building of on crystal we're seeing We're that. positive We the campus the from from yield growers. additional to the continue seeing turning that signs positive and growth We're good crystal output in Durham during XX. out see momentum

shape. So that's pretty good in

bit back bringing mentioned, So, tuning really that's tools to process the perspective working as and on bringing a now from things that what up a we're entitlement, tick up year revenue. in. -- the pickup dramatic QX. now is yields of the that right wafers the fiscal up of And means bringing again, in through substrate year. matter to more fab, from What a treating a of get to as those [indiscernible] some we is half it's But revenue to Gregg the also the pickup see the the see to revenue perspective in see, we'll fab we the of drive capacity. back a capacity beginning and We'll

Jed Dorsheimer

So up, that's dropping Neill, picking what's if though, off?

Neill Reynolds

So Jed, pieces two there's here.

QX a performance from out the of Durham of saw better out perspective, devices both campus, So, we Durham I as think power well. in materials and

was in better performance it So, the quarter. just

that So the what so we'll back forecast speak. to do is to we'll mean,

would So Durham a plus positive We will have good of There move be some minus. saw last that and QX. good we a as performance. headwind bit a into quarters performance quarter, will or be

of to mean. come will that back a kind So

But we time time. looked kind maintenance some an it facility, be older that's how Durham. always there's and from It we've requires at campus, to there, what was forecast of variation to going older an

back we'll that if Mohawk you kind talked mean. the from growth the Durham perspective look quarter, to the like So just power substantial of million meantime And we'll kind out really from quarter. any comes devices. were kind to order or what of future, historically to kind for Valley. a And revenue of that then, back ahead $XXX always just about of this forecast In normal last we've we of forecast so

Jed Dorsheimer

queue. the it. back Got in jump I'll Thank you.

Operator

from is Sachs. Lee Brian Goldman with question next Our

now is open. line Your

Unidentified Analyst

is underutilization for my Brian. Gregg. questions. Neill, And they can this ever just first see Hey, Siler When guess can on and for out you, taking fab. costs I understand the moving you the costs question, This for to Valley XXXX coming quickly Neill. those cadence down? start-up to Grace to go Thanks. build Mohawk through we as trying is and City the of ramp zero? Thanks more how Hey, maybe continue

Neill Reynolds

I these of so, important you go speak. so to that's utilization of different margins gross say, use, that is or of, the see the we it to [indiscernible] But that a the up north to to pieces. the I eventually bit you'll kind unpack zero. they'll Yes, kind Once marker think XX% maybe explain get

guided to changes, if what going be look at these So, at XX% midpoint of you about with margin we presentation the midpoint. at is the just gross

As prepared about represents said underutilization, which XX impact that's -- of the impact. I in $XX negative points from about million remarks, of

you as driven is things. be margin look forward, gross So, by expansion to really two going

utilization levels just to First, you of of more through underutilization XX% and year, end see down utilization a out business. driving we fab revenue the the as to the $XX as look get higher in the million-s million we $XX drive the start as fiscal of we'll low that

be significant will positive. that a So

presentation, actually So gross based utilization on start forward. the largest will new the move be to as impact we on margin

a performance, to there's that well. piece second utilization, Now improve as should well. Underlying modestly as excluding

expand as more And the drive see we margin as So, well. substrates. Valley, XXX-millimeter those we'll start through to see business of Mohawk that we'll start to the benefits of

to gross expect a on XX%-s the of up these or low end P&L at the the two at of as fiscal the you mid margin take these look we would expect to new year. areas, areas you look the presentation new basis, get, we -- as to overall, perspective a So, both to from

Unidentified Analyst

second fab. a super the previous on the ramp And That's just question my Great. the question, helpful. to Mohawk of follow-up Valley

Thanks. Now got why to you all or forward like these pull ramp? any ability out overhang Valley the the not? Mohawk is there financing Why way,

Neill Reynolds

look Mohawk from And think out look utilization drive to have the what you if at a right Valley JP. that we now. couple build across today, the Valley is, and and a across I think is XX% Mohawk really And business, our if perspective, you we and I we Look, of business focuses look on employees sorry, our every what two our here -- main And as that our be is outlook focuses, what that those to are you can. see today. and resources, day we -- fast table and that the -- to that's drive bringing can the in our as we're everything that's focused our

Unidentified Analyst

Okay. take rest you. offline. the Thank Thank you. I'll

Operator

Edward next is Equity question with Snyder [Charity] Research. Our (ph) from

open. now is line Your

Edward Snyder

like question Jed's Guys, up Mohawk forma didn't the yields was your not and this want the problems And based Research? those forced how Thank you to of if of about or Give mix terrible, here, Did were it it Valley would sounds most were you of by said, year out SEC. operational of spent kind do Jed targets SEC now very right? ramp for it me this, looks all talking you. the living if away. the frank. pro if Charity last you what confused quarter to glimpse public answer, not. numbers report to I'm to Neill, decision so we be and why to tell with your how expectations margins to this, get your up first I we good Correct back Equity a and they and to come so We And do wrong. just it you you tell make you, that this? had do would on in I'm

to to you're yet. treated in get four significant very look mean have about to it in and your of that been, I printing have well but I -- frank, disappointments the doesn't go we've you stock not what quarters and tomorrow going document, like for row it's expectations as before, a talked be well,

to you these with this out just I'm to digest what would to if all you do, So, going do gate, very had pieces. the sticking and moving easier what's different said it any it discretion why you on curious make would

were forced you this first So by to make tell SEC? of maybe all, decision you me, can,

Neill Reynolds

to First details the is a change. same presentation you math give the this going that Ed, and I think We're we've before. given of all,

disclosures before. we'll as So, give given presentation, underutilization start-up same [indiscernible] non-GAAP the cost always and we've

no So there's really perspective. from that change

correspondence guidelines. our company SEC with accounting to decision the We deal had and in -- SEC the to we presentation the made the updated changes on based that comply with the a around how it's the Secondly, appropriate. change as with was job in would that guidance

Edward Snyder

analyst see would to then to press a this out can leg that you're of look COGS? included and work not COGS, especially set and but I charges into in when include release. than know of now we had sounds they your both quarters of just for problems calculate your rolled the these these explain going other to that to people I you obviously, this. saying be, different without the going another tomorrow, you after take is mean all it's not Will the have it is going to as do the press react at parts but it part calling stock on our going it release, moving have release all it's numbers in what parts it's trivial, press what we to lot

were that EPS hey, have just it you we COGS, to other this out calling rolled have and charges the So is been than those would going into out call if are saying, this charges? didn't

Neill Reynolds

future, Ed, presented it the And compliance we're way in do underlying is what the we'll on way impact the will the components. SEC margin today, the gross we with that disclosing and is the guidelines. in that it be we in with alignment

Edward Snyder

And for maybe Gregg. question a Okay. then

You mentioned that XX Building good. is looking

Mohawk? you problem? XX. a bit material not time that out you you the machines is Valley, bottleneck XX Can Is relatively a little to revenue just I'm you it us it no what bottleneck seem Is clarity growth got know delay for give in XXX that of Mohawk longer from know in. the more on us to maybe give But long just epi. feeding. in sorry, millimeters. your out focus just how quarter, is Durham? last business side XX% a the ramping in Maybe which growth? I on put Building the epi can is powder -- the You've of to getting the Is door was I of there's Building

Gregg Lowe

with and say it I right forth. into and The points, ramping of crystals and a so but I the that's now. Probably, and are goes is right dramatic through very as test now. that's good great, density then pinch would the packaging flow XX epi and in fab, it at quality both, that the expanding back And is end would the then say wafer There translating Valley, to shape good, defect it's excellent Mohawk runs is bottleneck operation some we very we're well. growth through also inspect sites, materials capacity. crystal Building level.

dramatic -- utilization. this shortage would points. there's I right a capacity -- pretty different as as towards would XX% we pinch not now, I going be fab, we the there's right But now So say to ramp ramp say

Edward Snyder

Great.

Okay.

line because is mean, of the gross you it through the it past. And in impact material real it quick. through working moving a problem lower, And it is were of along margins was the in then, bull now, as if a correct isn't quarter? versus your problem your built like should lot revenue have I'm had already there, an that's Neill I through of bull there? higher chain the much to and how stuff or, the quarters me if So yields sounds taller some the wrong, you was And you COGS ago. had where several

Neill Reynolds

think on of during that's we fourth we were worked multi from kind through I that longer a bull the behind quarter. yield, I think perspective us, --

move XXX-millimeter seeing anticipate there going from a solid performance We to we're forward. performance platform. consistent more to we on as So, of materials XQ, sustained perspective kind see from

Edward Snyder

any passing -- revenue quarter... weren't June inventory the you So, through high-cost this in

Neill Reynolds

There the now and QX and think us some to I are were XQ. moving behind that's quarter, we in

Edward Snyder

had Okay. And nothing if how relief? an does in provide of much else mean, quarter. apples-to-apples, impact curious I'm any the just I that it fourth changed,

Neill Reynolds

have transitional, down based call was from And those XQ Well, output there points did that if the look going longer I during through of was automotive again, feed somewhat The out for really transition things QX. Mohawk quarter, a and that think you working to challenges to good job gold. going I fourth customers we slated other we the solid two to originally And through I would we quarter were worked for in yield Durham. the piece One call. were more related with that. from And Valley XQ. that pieces. two at we've good into and the performance team several on seen margin really of

started So transition that we as made well. make that to --

a is And in what things. bottom going perspective, period. from those of anticipate transitional in seeing you're seeing kind I think QX a I of So think We've we the sustained managing kind Durham forward. through performance terms hit of

pickup the versus an think ex utilization. underlying in basis into in QX QX that's margin on gross going reflected I

Edward Snyder

Okay.

sorry, And it's confusing a -- quarter. but so

more So into it's have automotive the move as you Valley you XXX-millimeter safe problems the build product then, stuff out to with you say don't of out Mohawk that, and of Durham.

XXX-millimeter into quarter I'm So time out by pretty thicker and much you had quarter March that gross -- or plagued margins. -- the that improves sorry, the the December? bull wound problems are September get bull the the June But

Neill Reynolds

Correct.

we'll So, revenue, is as what And we should we previously as see us. here. Valley, see benefit we'll utilization margin. We'll and we work and we more -- -- in from improvement better as about improved Mohawk talked behind more see wafers get we margin XXX-millimeter through

Edward Snyder

Thank you. Great.

Operator

Our is America. Bank next Vivek Arya with with of question

Your line is now open.

Blake Friedman

on This for taking for Hi. my Thanks is Blake Vivek. Friedman question.

I previous answer First, wanted just to an to clarify question.

exiting Just gross the just year? did somewhere I mid-XX%-s? right, year, for in to heard you I that was margins and the that this be make it would full say want the sure

in Analyst is target target if you're mentioned that more to well, the that that I unchanged, XX% 'XX. the aspirational Is believe a you fiscal look as had XX% secondly target margin term? Day, that XX% at? remains still working gross at XX% timeframe Or that then last And you I longer

Neill Reynolds

the I any be think be challenges, you'll capacity, utilized. because the bring facilities ahead you to of underutilization will well obviously, as facility

will time, it dissipate. So over

about bit there'll margin way timing as work want you So an the be the think you a underutilization. I XXXX, overhang from is of XXXX the think into gross to and of

to outside that to more start ramp the somewhat. utilize then Durham a of City we'll and in 'XX that we'll and we in out that then of back as up, 'XX campus to the see bring start down timeframe. factors both start north this 'XX better And and and that factories that brings faster out to to after trajectory get see up a As come of you year, substrate Siler to level 'XX and of the capacity XX% get

Blake Friedman

just perspective. in growing know thinking several There's well. entering Great. of of ecosystem kind a as just vendors own Helpful. lot then from market of focus there's with kind a And China I a capacity. more their as my a internal of follow-up, the capacity

So a and a starts I guess a more device from material a a growing perspective, when of supply standpoint, both perspective, into supply market standpoint -- become from entrance just the the to maybe concern. maybe it from

Gregg Lowe

XX% for now. explicit it's growth take annual rate is that. are Obviously, And silicon compounded some carbide the I'll Maybe many forecasts time. the Yes. right of have market to quite that growth going

time carbide do a technology. to would We've We of capability many attracting players. their master. that I is silicon been So have is and have difficult And that. new materials this own lot at -- our they've It's tricky you long for time. plans to that's a a what of our got tell customers a have obviously materials for frames different very

them, by expecting is I this internal calendar the of think, One year. fully end to be of

of revenue. over XX% have long in all of plans our period terms time. into I XX% of modeled be, internal, And to wants a think, that we internal Another

kind we've baked plans. and it's into online, capability be got So fully materials of expected that that there our coming would more

Blake Friedman

you. Great. Thank

Operator

Colin Rusch Oppenheimer. question is from with next Our

line Your is open. now

Colin Rusch

the you of a spend? much, guys. the that focus year kind that Could the magnitude growth the of talk key OpEx balance about you're little expecting for Thanks of through bit the so and of areas

Neill Reynolds

an OpEx line expenses from in excluding see, we'll expected So where in start-up with the we perspective, that that QX. came right

So, XX% to continue to that Mohawk invest up helps really anything the we'll in us drive and R&D Valley year. exiting utilization the

costs. So well we'll see the that major see see us. focus -- a we underlying. that, then some be into of for both as And continues to QX, of on top expenses get start-up some We employee-related we'll as

about related $X prepared mentioned City in I Siler from remarks, primarily we to the -- think the in JP million in QX.

million of you end year. out at end of the that probably to $X the we'll probably get the by the look as year, we So, double that see the time

we'll out of pickup expense see we as in modest pipe So get some it. start-up non the

Colin Rusch

for to side, Thanks. to see in customer given some this And you've all on table other on dynamics change of to the Are willing the supply? are agreement you long-dated What's signed, real customers that terms in then to massive that deposits around more put behavior of of from contracts? wanting the the make sure any access starting folks sensibility those dynamic they now? Is changing? right have

Gregg Lowe

on that's that in electric say for sure being years, OEMs that engine interested cetera. et replaced capacity, is with the would making by probably demise happened got in combustion spending that, the customers. industry XXX the important of vehicles the key folks the CapEx, the a are and I building very auto lined money most remains up We've internal Yes. transition in installing that capacity, are priority all last which they're

So there's activity a that. on lot of

a guess access it point I've largest billion ever $X strong have From and seen, deal. shows is important the I I technology, an deposit perspective, silicon then Renesas is Renesas to a capacity quite it's perspective And that for think from corridor it's commitment. you customer to. the one And really can my a that they carbide

So, we've It's It's partnership. a a deal. XX-year done. got the we've great supply longest agreement

deposits. in say, these still sort So there high upfront level yes, of interest would of capacity a I remains reservation

Colin Rusch

guys. Thanks,

Operator

from is TD with question Cowen. next Our Joshua Buchalter

open. is line Your now

Joshua Buchalter

for a guys. taking to ones. Hey, couple question. my Thanks up I wanted on previous of follow

to is quarter this you utilization on installed. XX% installed guess, of until I furnaces the close time that cadence So, normal turning XX% And support think the Mohawk from are to be out sort of XXXX. there running? having you're being -- mentioned Building installed sounds clarify, or first of you're forward? we mean pretty Durham not it to going Valley to if of like of to the furnaces June Thank I expecting get Valley, able of should at expecting to the but you. furnaces XX all, running you're Is the devices support Mohawk

Gregg Lowe

Basically, point the things. would couple a different I Joshua, is to of And Yes. answer to that. yes,

those of process epi turning into XXX-millimeter brand-new and We're the fab. wafers, then the all into of process, production crystals. the We are production that feeding wafering ramping ramping a

the utilized kind million of that And pretty is basically think. fact we can is I that coming of revenue XX% good online. So from go year $X to actually in worth of all a

Joshua Buchalter

of it XXX-millimeter guess some output run want And and constrained follow to forward. from to out remain and smoothly $XXX guess volatility we the carbide the of how give comments. to -- given can I site. at details million that in sort expected range? pretty guess be then volatile also previous I you. you have Thank silicon more I the I here it. up going million should given smooth revenue just device I moves I'm on And intra-quarter just to utilization that is, at Got of coming by of expect capacity generate it Any full on or $XXX would surprised Durham stay

Neill Reynolds

Yes. I wouldn't call it volatile.

the plus older line I of quarters think previously. is Durham X%, had we probably that think, what or I fab. reasonable. now. million an think with mixes pretty We've It's as perspective think, be minus, got that's And we what couple -- pretty site different through for clearly it's $XXX I of last projected or running said, device in from will I kind right a factory X% power the

just Valley. see I Mohawk you're and from about as lag, about going level perspective, a a the business trajectory power meaningful forecasting and device from generating to good you And come going forward. So that think that think revenue then would revenue I above think for

Joshua Buchalter

guys. color. Thanks, the Appreciate

Operator

is Prisco question Matthew with next from Our Evercore.

now Your is line open.

Matthew Prisco

that level? you Siler Mohawk the Valley? How rate you utilization XX%, When XX% for Valley, hit thinking kick are past Thanks XX%, off up that City rate you guys. will look ramp we as at as you with hit Mohawk that taking starting do turn Hey, the cadence? to question. To XX% utilization expect just to quickly on how ramp, of right,

Gregg Lowe

in are right in City, Siler the JP going right vertical now it's construction on now. We

going yes, we with is coming in year, out -- June would the the facility. would kind coming Valley. lines nicely XXX-millimeter out expectation of the pretty So crystals next Mohawk that that Valley and the would of that up, from up June that that And Mohawk the increase -- of time is quarter shell begin we quarter, of at producing begin we want

we've wafers are on getting crystal here two Carolina footprint. North get current going other of out in where One more is our kind come got run. will we locally on flavors. more Additionally, R&D, have capacity per projects that in working that of And projects those

second higher sites expansion. throughput of of one facility. to existing help couple bit a expansion describing and another And cushion obviously, JP. going is that with is area the nearby of So into on for us little way are of And us Dallas ramp the the giving a that in the

getting So more existing bit our and little facilities. of a out our local capability

Matthew Prisco

obviously, maybe about time? completely new that at be because guess, some will just applying ramp, Durham. [directly] new little delays that it's process, confidence (ph) on to Is on I taking you City learning out Interesting. Siler the and a as able here ramp And What it then going a fab, gives it's you that think a new?

Gregg Lowe

for there's we sure. schedule I So tracking right lot work are talked just on of that be to that But a the about. now to done

are increase and that have in capacity demonstrated create we machines our We can XXX-millimeter producing and crystal high growth them quality.

be So JP we've think here. in Siler is already the sit demonstrated team so new ramp in camp a which Building so-called that that City our using we facility. same here city not to away, the I could out we'll The XX that facility, -- far

it learned it done will doing we've again, from. think I once, something I be, would already we've So say, and

Matthew Prisco

that have material still at share are more eyes? the on provided from quickly to just right recently you think given with of last Are used your how then kind Analyst revenue your that of ballpark perspective? side, targets changed things material seen the those front and now for your thinking And you. few about Got having the Day? Or in about a competitor deal delays Renesas changes you've And you internally, announcement.

Gregg Lowe

Well, the wouldn't -- first we be no, off, thing target. one changing the

but would I agreement carbide, high. big silicon materials, our And would in remarks, the very of up my right And said then in part supply obviously very, we've signed -- now devices between now I as plan. is prepared say, and for both a say, I now, So with is Renesas. that very demand and

Matthew Prisco

guys. Perfect. Thanks,

Gregg Lowe

you. Thank

Operator

is Natalia from with next Our question Winkler Jefferies.

now Your line open. is

Natalia Winkler

kind us I for should Thanks that the potential about think headwind And depreciation entire What's JP-related we for CapEx? any follow how from ramp? up ramp. the ramp? how questions. Could the the of timeline you JP City my is large on the guys please taking wanted remind to Siler

Neill Reynolds

Yes.

So from of vast perspective, about say, $X that the this CapEx JP. build-out an let's year, investment is we've the talked to majority at related of billion

tools we're Mohawk some have into putting also Valley. We

semiconductor materials some putting expansion have equipment back-end We and in.

of in to we XXXX, So which I think be to that indicates done should that vast XXXX, the ramping facility. that would majority here into start get able be then

'XX. moving that sales saw sales we in to part But capacity transition to our to and million] you As $X think (ph) that we should then year about costs, some the in talked in in this about by to see of bring factory you [$XX if that Mohawk of or what should of be increases just just to transition costs about as you of of start-up additional the Valley the fixed cost and will million kind similar related forward that on XXXX. double to fiscal quarter, QX we levels, cost production end

Natalia Winkler

my seeing for of expectations you're ask the maybe you. your follow-up, and few to Understood. then color quarters? wanted business. I And Could you the next some what sort Thank on for there what guys RF are provide

Neill Reynolds

Yes.

the our flattish somewhat kind of pickup So back expectations. the from of environment of fiscal half the weak half maybe in the We a modest with for with the overall kind RF year. line see I perspective, year in has think first of been that year

Natalia Winkler

Understood. Thank you.

Operator

like over to to Mr. Lowe final thoughts. some turn call now I'd back the for

Gregg Lowe

up. before final wrap of thoughts we couple a Just

a billion were Valley, in the grow well. And our to the for underway demand producing that and design-ins will that factory, beginning increase pave at high-quality Durham XXX-millimeter is that yielding substrate are campus and as open XXXX. at of for unprecedented is materials JP, scale. $X.X is Construction are levels. that demonstrated way in We by we which new revenue Mohawk awarded XXX-millimeter supply continues [indiscernible] business, the substantial to generating fiscal the

we growth positioned secured support well funding ensure opportunity. nine multi-decade the of we $X Finally, billion to to in are this months last

next quarter. We continued with and speaking your you to look support, appreciate forward

Operator

That your you the Thank for participation. conference call. concludes

disconnect You may your now lines.

Wolfspeed (WOLF) 16 Aug 232023 Q4 Earnings call transcript