Wolfspeed (WOLF) 1 May 242024 Q3 Earnings call transcript

Hello all and welcome to Wolfspeed's Third Quarter Fiscal 2024 Conference Call. My name is Lydia, and I will be your operator today. [Operator Instructions] I'll now hand you over to Tyler Gronbach, Vice President, External Affairs, to begin. Please go ahead.

Thank you, operator, and good afternoon, everyone. Quarter Conference Third Wolfspeed's to Fiscal Call. XXXX Welcome and Neill for Reynolds, Wolfspeed third CEO, report CFO, Lowe; Gregg XXXX. year results Today, will Wolfspeed on of fiscal quarter the the

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

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

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

Last be continuing basis. on today discussions operation note, a all that will

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

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

call the turn Gregg. to to like over I'd now And

our customers integrated pure-play from deliver is helping Thanks, market carbide Wolfspeed to Tyler, only transition next-generation the the XXX% vertically returns on pursuing industry outsized to to products traditional silicon silicon and of good everyone. for and team's capitalize afternoon, investors. company. energy-efficient world's silicon our carbide, focus is

allow manufacturing scale automation that an us velocity. efforts key gains the industry ecosystem and as tools with first-of-a-kind unmatched of electrification to have segments our We will

backdrop, a spend a as to I'd minutes covering points. four like that few With

disconnect the not and built business. the for the strategic the with business fairly of the to First, company, Directors potential or alternatives and enhance Board are routinely team is valuing the consistent have on consider we we value of believe and this The market management the technology shareholders. focused

by at we Second, and commitments is of driving better on the every for XXXX for performance our operational core XXXX fiscal and decision delivering value near-term make. financial shareholders

at We on in as are Valley, increasing and laser-focused are solid the a utilization talk progress Mohawk minutes, about I'll there. making we few

bringing focused are are We The that likewise online, on on progress we also making where JP project. solid

Third, our additional commitments. significantly on any track we to not us and to of any sure our by operational project, are on time, on for grants receiving to to of customers move or making launch who for focus Valley CapEx road this reduce meet At our investors, existing greenfield further also project, counting before time there our Mohawk expect we which progress from new on not government. projects our but scheduled until sufficient demonstrate are the fiscal U.S. JP we map efforts good is and provides for all to The are only ahead funding XXXX,

capital. map considering And built the disadvantageous a us and clear, operational development structure allocating currently our market. silicon and let performance leadership does this capital and our the we Finally, carbide have time, at road lock valuation disconnect into position me dilutive effectively raising are deliberately would that contemplate especially in current between be capital not current the we

our closely and funding U.S.-based the to entities we with commerce support and As other secure stated are previously, government act projects. chips to working related department

discipline our positive energy industrial near-term focus and those the out operational on laid of the performance the demand. and despite which over Wolfspeed's points, the results believe move we Having specifics quarter, headwinds let's past the to of in demonstrates

$XX delivering quarter, progress more Valley fab. revenue Mohawk million of from at customers strong third the in doubling to made product We and than this our

are to are extremely per Mohawk April, sense in our year. based on you ability Valley track week, wafer June by than more of confident start making a in starts of June to already And to at target utilization this utilization of wafer making on achieve give we as We XX% on the XXXX. XX% achieve our progress of we're us

made is progress optimizing improve. in We've integration flow to and operating great factory the tool continuing

in and Valley milestones Our the in die in than its being another put focus progress year cost out which strong we've better year. are each we of proud Durham, to hit for is its of I'm ability a on ago. produced the Mohawk of our Valley dies made of ramp equivalent the the past sign team Mohawk the place

world, From is out are carbide which silicon driven high perspective, by producing of facility, XX. yielding substrates wafers largest we a the in Durham our consistently of XXX-millimeter high-quality the materials and producer Building

masted XX% to to in yield We at and substrates carbide wafers, XXX-millimeter Valley. fab our the We of confident least our factory able wafer New are are that the ramp support are continuing starts will in automotive-grade Mohawk to Building a high build inventory on now support already at XX silicon for York. be

annual continue construction of Our JP, leadership billion-plus expand game-changing position with in The a the revenue significantly will XXX-millimeter support target. Mohawk to our materials and facility capacity $X will materials Valley's grow that

The and topping and employees celebrate Wolfspeed. construction U.S. the ], another supporter was vocal hosting the at for state officials, community Tom attendance the In have and honor of ardent we a Tilles partners that out ceremony JP. at Senator Recently, advocate day to [ local of

North President our in enjoyed in the Governor the their continued and build Hocol have We ecosystem from we and Senator carbide Commerce as visits Biden, since levels support Governor support here we and last in expansion We appreciate York partnership from Cooper plans largest carbide significant Schumer, the United X Secretary silicon of our with silicon Ramundo, government world's States. years. expansion in for Carolina, all New announced

will JP carbide XXX-millimeter silicon The instrumental Valley in be Mohawk our to fab. high-quality supplying materials

possible growth of diligence expansion connected Whiting [ our furnaces contractor, and major grid, crystal the started by facility accomplishments the power installing global our the we general team quarter, the ]. to During made Turner and two

our we from Building the applying learned ramp have great facility many teams the Our of Durham XX. [indiscernible] partnership Materials lessons in by

up initial June, meet quarter, ahead, Looking to which of expect to qualifying in we to the has September and gold our us to year. targets. start progressed leading begin powering production by will allow by this initial furnaces in end Construction incredibly the we well, confident these are furnaces calendar end ability the of

continue substrates we market, of as announced we extensions As supply that be we a the the January. by quarter, mentioned silicon broader to two in last key to supplier carbide evidenced

as high-quality continue of the market, important the underscore and substrates our XXX-millimeter come. Our in provider customers LTAs will the our we the importance to to be role an to leading to years of partner

the Valley, close of indicator silicon wafers our believe to but sources agreements currently We in an needs market customers carbide for around stands. On remain potential XXX-millimeter, supplying these internal of our are alternative contact on Mohawk we're where discuss focused agreements. with XXX-millimeter

said it say and is technology taken it complex in rushed We've silicon incredibly we'll industry. that the experience this XX-plus or leadership be again, and before years lightly. cannot an from know of carbide our We

is the our Mohawk progressing allow highest substrate of quality fab, ramp devices out high-quality the Valley well. where produce us MOSFET Our to

$XX of minutes. at of this As guidance quarter, more strong in I million. few forecast to double will on mentioned, a of facility. expect ahead Mohawk general, and Valley specific our you million growth revenues generated Neill midpoint Mohawk total in we continue Valley than last trajectory more $XX our give But of the quarter's

this As XX% achieve I Valley utilization is Mohawk quarter. said earlier, anticipated to

three qualification Valley Mohawk continue to die and five progress product completing including make also in transfers, with We more MOSFET. discrete product the two MOSFET quarter,

While original to coming, and market end buildups markets. expectations, market almost primarily due weaker which services inventory channels in the across Mohawk remains entirely many our EV customers, and energy currently challenged remains market predominantly than Valley, the or is Asian I&E industrial

Valley I&E We Durham both EV. are capacity Mohawk by responding towards in shifting and

from I&E to Our ability shift flexibility business our the EV that us. our to model speaks provides to production

start short-term recovery but us on However, I&E gross a for this will some market will at the end could period. mix the see in as it of during change and a headwind XXXX, this have for margins, fiscal point position we well shift demand product

our see of have I&E, a we adopted devices. carbide continue to Unlike ramp silicon that EVs

time substantially continue adjusting production near-term see a EV we to and their OEMs this supply in we constrained remain for disruptive industry, devices. and While our plans, modifying is carbide silicon

current can nimble we well much supply, supply and to be demand for As our above to customers these near-term our accommodate of shift remains other changes.

this design-in EV is our quarter. performance design Underscoring win demand strong this and continued

represents we've to design-in converts win awarded once business been As initial reminder, production. ramping begin which into a we a a design

achieved of over we applications, marking on record about quarter, design-ins EV was of of for totaling XX% design-ins, billion total second billion $X highest fiscal our for which XXXX. and $X.X This approximately

wins for design foreseeable of million $XXX which to the wins These X approximately had we the that X announce the mature to typically quarter. proud ample over provides We're third revenue visibility next in years, future. design

of more Our across backlog wins to than design now X XX more next over OEMs XXX years. the than car X support models

the we market, in on materials and conviction untapped and we silicon As unprecedented serve a expansion our highest-quality execute greenfield to plans continue largely carbide to our devices our maintain strategy.

current the longevity design and Valley, the forward of gives trajectories particularly future XXXX of through continuing the and year, in look strong to and fiscal notwithstanding market, and at the EV of our carbide, in us this gyrations design momentum, confidence Our win beyond. the we silicon Mohawk close

to Neill our Now to like pass I'd over quarterly discuss the call to guidance.

Thanks, Gregg.

Before our and into to I longer-term financials and detailed up I following with up it would our Gregg's current comments, like performance frame the aligns go on how outlook.

second continue and ever. products facilities device Wolfspeed Customers and We across company's EV used products our and both visited long-term tested remains compared to to achieved them and state-of-the-art of billion the strong. new applications. quarter demand our who highest choose and their rival supplier as another First, industrial design-ins, have $X.X energy key manufacturing our

Infineon Rome have in Wolfspeed of [ multiyear key supply wafer to [ for agreement. ] such In as recent back and XXX-millimeter come expansion months, materials, customers ]

the CRD of capacity the the included serving addition, reservation deposit, XX-year what history year, supply landscape, after for a largest believe that billion substrates $X In XXX-millimeter a semiconductors. is including Renesas selected materials agreement, we last in Wolfspeed

Durham those in which operating during achieved Since the a has execution XXXX. then, we months. of we Valley. of XX% delivered ago, Mohawk schedule have our culminate our ramp last June One in revised will improved in campus one XX XXX-millimeter significantly milestones, production announced utilization Secondly, every for out wafer year

We have time in operation, performance quarter, past frame, million materials our above had quarter highest $XX second generating this also our including our or revenue best-in-class at ever. guidance that from

XXX-millimeter. at XXX-millimeter a QX Let the now produced Mohawk was to our lower Durham our through ramp. Die is me product $XX.X costs underutilization, from at fab than substrate Valley, burden out walk that few XXX-millimeter of same in our of which fab Mohawk Valley of even full facts including related million the

We reduction cost expect continue fab. ramp as we to the this accelerate to

device transition improve both Mohawk the has cost driven times, The performance breakthroughs been as that we by are into to current Valley quarter. we unit in cycle and yields see continuing

very have packaging to to continues continues no our strong of qualification perform substantial MOSFETs operation well, at levels Mohawk success and and Next, very has utilization. performed well testing higher Valley, in issues with back-end and

are technology Please fab mind, these keep very a new results at on a time. seeing this substrate, in diameter, a material first in for new the tools new with

was addition, In on devices and our years on completed for in X allow executing our remain the to transformed materials. of business as year, power our the this divestiture capacity last both business RF we and that ramps focused the third has us will achieved last carve-out sale

well. very executing is team Our

we Next, greater partners, And for facilities we future. sharply the and and focused a to expect with our finance $X maintain strategy. capital on current foreseeable position remain our than billion financing optimizing funding cash allocation

told March over fiscal of our we $X on From of and wanted a low governments. later, we plan. In on private we final between to billion dilution from allowed the November a with billion cash the have executed balance cash XXXX, next $X.X years. financing funding to now Eight on you public $X had perspective, quarter liquidity billion $X markets, the combination customers liquidity. sheet. ending Renesas of XXXX and of few raise we and delivered Including markets, months to $X.X billion of with deposit, our over billion approximately us and This end customer draw billion anticipate $X.X we

guidance in year, CapEx, $X $X.X offset in by at of of billion $XXX CapEx, communicated spend peak XXXX. we expect gross includes we with fiscal our to year. Looking last the incentives approximately million government approximately This XXXX, consistent billion fiscal

and is Mohawk XXXX, in we CapEx greenfield primarily a in on million, JP focused CapEx fiscal gross include a facility. CapEx expect approximately billion any billion of gross Valley The $XXX of to about In to substantial resulting This $X.X not million $X.X reduction and CapEx. $XXX does new for

facilities expansion objectives in until greenfield plans U.S., and We from liquidity begin flow meets achieved government are requirements our our cash financing the another not funding and our we have minimum will facility clearly place. in

to further lower The fiscal within of XXXX CapEx potentially $X.X include would this subsidies number received also does potential fiscal billion and XXXX. that incentives, be grants government billion $X.X not and CapEx

chips remains key the our have constructive, continue to the a the in with focus. office, with We very our interactions work and with chips to completing forward work future. near To look date, been we and this program office them

and maintain we to the of Fab. the may construction these and balance company as the proceed enhance important under more for otherwise, some tools Valley approved it financing and are current then financing position when financing timing facilities with us This would include on will payments front. allow City cash the be our add incentive Siler on Depending to in Mohawk sheet interim funded, very flexibility or that the

structure. as earlier, that clear, do disadvantageous lock into dilutive not be or Gregg anticipate capital a us interim stated we be should it, decide execute To to to we financing,

of phase able end much our of outlook. tools as we CapEx by point, to our to largely majority of invest flexible calendar XXXX, closing At facility our spend. that the modulate initial In the to expect JP be demand addition, more variable, we out be facility be will the fixed and how we match will in capacity The complete vast

exiting targeting fiscal From that. XXXX and performance EBITDA to positive are we business shortly cash standpoint, after operating year achieve breakeven flow a

to and operating options Given that plan and liquidity minimum of will continue to a disposal, our future, outlook the EBITDA expansion we than to maintain balance greater that and our we billion $X transition at number the cash U.S. as facility expect evaluate we cash and for flow. need complete positive foreseeable

remain $X U.S. long-range current expansions our margins. can the XX% targets. financial believe capacity generate confident we than in EBITDA ahead, revenue We Looking greater annual approximately billion with in

underlying and integrated are purpose-built our the capacity will demonstrate for Valley greenfield generate we economics revenue and that As so strong profitability. seeing Mohawk far XX Building approach to expansion vertically

of the with billion Durham The be of more than Mohawk to $X combination device will produce to currently in in million our device able JP, In device $XXX revenue, installed Valley capacity addition app.

material substrate have to $XXX In the potential grow to JP addition, greater The we with than online, business the million.

are markets. industrial margins energy gross being and revenue slower short-term Lastly, impacted by and

to our the this and capacity of next gross few available for EV product outcome term, that to short to where demand. outstrip In more are EV pivoting the margin will continues products, we quarters. growth muted demand serve our available be revenue The capacity low

I&E, EBITDA our earlier, impact As longer-term our it importantly, to potential recovery plans it most for Gregg us and in revenue any does not targets. positions achieve mentioned

already we our normal. and to before produced will are the be half inventory much But And to match match inventory second We in least calendar we this for it as pipeline. that ship at had work of find that elsewhere we to said levels best product the the return quarter, continuing to last believe at the year of we see now. slated

to to performance. like now would quarterly shift I our

a reported before discuss on QX will results RF all As divested a of results. today operations our reminder, our impact basis business performance, and we in exclude continuing the be

X% of energy Asia. our revenue were weakness decline an million results of $XX particularly million by a generated Valley, offset the driven for $XXX million. increase These year-over-year. Mohawk of X% and from persistent sequentially, industrial markets, of $XXX of revenue power generated across and the quarter, We by in contribution revenue We largely

as our year-over-year. increased see EV EV continue to We XX% from device revenue customers, approximately growth

million, yields revenue quarter was of by highest strong $XX This performance mentioned on XXX-millimeter our second earlier, output I we better-than-expected ever. and materials As driven posted wafers.

Non-GAAP was in gross margin XX%. the third quarter

driven I the mentioned by at and costs Valley yields as previously, unit lower we Mohawk improve, ramp cycle As to times increasing fab. continued

revenue an and the will demand impact as see shifts on in However, short away we from I&E, gross margin. term,

We as much or production production products to not the this be EV term, near a anticipate however, over until in the generate will underlying margin possible XXXX. revenue as the part we change results. and the to capacity the We to see year shift start gross same portfolio equivalent product capacity substantial case half I&E This our first be important view of the markets longer in a not, investment recovery our that I&E products in calendar and of will term. does will

Our adjusted EPS of above just negative $X.XX the of our midpoint guidance. was

of materials our also the the start-up of addition The above, in mentioned factory impact and JP to million Our costs construction expansion included to EPS, underutilization related the efforts. $XX.X of costs

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

on quarter Moving XXXX. in of fiscal guidance the fourth our to

of $XXX fourth more expect consistent expectations million million on $XX our be to We bit revenue outlook. continuing approximately a from our million. for $XX we give with operations breakdown quarter, to $XXX a revenue To specific materials the million, expect prior of to

power contribute to down at down up in devices as in to $XX of I EV, of from more our from $XX in to Durham I&E million and guidance the prior million, $XX mix in a our to earlier. revenue than XX% the million product to approximately in mentioned quarter the revenue our is period. significant Mohawk Valley quarter, embedded midpoint, Fab year shift prior million $XXX $XX Also from to contribution million be from Durham,

and a by towards Mohawk had XX% we Valley at fiscal Mohawk strong year-end. have a we clear Valley, earlier, trajectory utilization the mentioned Gregg As in quarter

contribution quarter time June a the production does that we to stated revenue However, previously, run through due XX% entail our full in needed to not as cycle. the

gross X% midpoint, $XX includes expect underutilization. XX%. XX%, or non-GAAP the of to million X,XXX of this We margins a At points of midpoint with basis

non-GAAP operating to of $XXX related The expenses expect costs JP. million, million of $XX startup We approximately of inclusive

The increases, lines hit As a P&L. reminder, incrementally less we costs, our utilization starts as incrementally see as JP more underutilization, but to come different Mohawk Fab start-up which Valley to start online, of will

fourth million. Net result, expenses non-GAAP $XX expect for between and be And roughly nonoperating we a million the as million net loss will $XXX quarter. $XX

to back solutions leading like to it velocity. Before believe to our I and carbide of Operating remains silicon demand provider be improving. gaining is comments, that I'd We market for closing highlight plan on turn the Gregg again long-term robust. a to this is because track execution

Our by a capacity maintain to balance U.S. more now production EV to device expect generate company we supported expansion and greater a sheet remains financial of $X financing I&E and cash returns, position can than multifaceted The recovery. positions future for pivoting strong, plan, billion. the strong

you. to Gregg, hand back over I'll it

Thanks, Neill.

at seeing are As course, never said silicon is exactly business, in to time today. embark conviction more That plan, will continue there be our to on pioneer like strategy. Progress maintain expansion and of we valleys, we our execution. be numbers in sometimes different progress done. a XXX-millimeter that of there peaks we areas same line, carbide straight the said, demonstrate But and work we've our the and on capacity is

in seeing our team well many declines that substantial year-over-year proud and analog environment to of has revenue. peers are in our an continued I'm execute sequential where

market-leading outperformance and to position strong design-ins, by Wolfspeed's continued silicon reaffirms which the our corroborated demand as carbide Forward-looking indicators products. for our point strong

and our for Mohawk of by company silicon ramps carbide will pure-play position progress JP only enhancing as that be scale. ahead The underway. of world's will our integrated is us the at Valley lead and fully vertically XXX-millimeter flywheel growth ramp continued Valley of Mohawk further the competition, the Wolfspeed,

EV of is our a From of unwavering noise. combustion despite most change automobile. demand well from a standpoint, But the EVs transition transition short-term The the the as history macro is as new to entrants. the the disruptive and to bumpy the internal will EV long-term view be engine in traditional the And internal it for turbulent will transition combustion continue. from OEMs

the the models, in they to to are that in showrooms, apparent become more visited it are car the that need China OEMs this recently in is well the our this the to transition Nowhere player a my very is is new the using some I try China. the customers me this vehicles and of observation traditional personal many using as as than clear Based Chinese quality of of and navigate. approaches to threat EV new dominant legitimate innovative with market. on their OEMs

decreases when standard to for profound and consumption to savings time carbide cars system It EVs. the silicon increases and has size, charge energy sector EV drive The models range Using compared system the is efficient. now reduce overall recognized traditional impact the have new silicon coming silicon. reduce helps an EV carbide It more the making in the energy for can market. a

recognize the many few grid, for world This the trend secured the electrifies the greater energy need on we last power other of reflected are in the industries As is design-ins existing years. to well. as starting in efficiency have

charging, EV servers, in market, short-term including equipment, energy future the vast wireless AI despite storage, and the heavy-duty mining cryptocurrency potential. a I&E holds applications, correction mining, the For

further and set the by We potential segments billion We continues even industrial more undeterred years. applications ramping than coming applications, than see the as for as the currently of next things of across and all industrial the energy broad are from a opportunities short-term X,XXX have several such, demand. in more in of representing design-ins $X.X electrification fluctuations

is for as capacity ramp to we reasons. possible continue our that believe understand the future. we pieces stock has following true does moving are the that. company, many reflect value the current and story not fund our of our working And hard We I believe and price change to very this I our

and start the And on we First, wafers. track June. by wafer producing XXX-millimeter XX% XX high devices is high-quality producing goal is of hit to Mohawk are volume Building utilization Valley automotive-grade

a produced grade XXX-millimeter carbide being our out for we very cost die wafers. MOSFET are Our Mohawk substrates high Durham, automotive on equivalent of out Valley silicon and the at yield of are than dies better

past same complete the business. allow almost will funding investment carbide the are expect capacity we world's peak the tax XXX-millimeter capital of that period we and time, construction the footprint. At silicon to secure the largest for government incentives Next, us to

continue focus outsized our keen capital going structure investors. to returns on We optimize a forward for our delivering with

since Finally, joined ago. X our been strong company is ever the value years I proposition as as it's

We in are substrates. first XXX-millimeter to from company those and world carbide the the produce wafers silicon devices

We billion have design-ins, to we largest silicon the carbide more supplier the $XX and are market. than of materials world's of

revolution the and And Leading carbide Wolfspeed, is formidable intent. at a task. silicon we tackle focus it with

good are communicated. your achieving executing, you to We well Wolfspeed. on previously making the progress way that and targets continued our we've for of Thank are support

Operator, for ready we're Q&A. up now to open

[Operator Gianarikas Genuity. from question of Canaccord comes first Instructions] George Our

level significant P&L And ramping device concerned one. Just we higher over they How marketplace their the about us yet? as that sort capacity. how a you comfortable Can seen put of devices? a perspective, Chinese, get can impact any you and to help context? Have the particularly appear and there materials next impact a are the both years? concern about won't material significant aggressively from be in into There's you their about be that few

couple side Yes. I of on [ new things. is would the [ I'll all substrate say Thanks, start George. A the place. The the ] over design -- ] off -- of

is they're further to that And automotive-grade terms And much at a some high-quality, from probably progress. substrates. making seems the far they're behind off. word be of high They're say I making that investing. would XXX-millimeter in hear XXX -- definitely then You perspective,

and I a judge a not totally it's out going high-quality, to I a because be to the high-volume good us would as of conviction supply ago, mentioned for visit hard was China, there's did I that of weeks substrates It's pretty strong. couple of there. lot speculation say

I the that long-term extension. substrates guess at customers we've or best were wafers two XXX-millimeter. a a for Those renewed can and fact two two supply say half is with extended our of I agreements And just supply decade

to points well. fact the that that not line along that some guess I maybe So there's conviction as

of a to understand worried seems subsidiaries. a to the go that. some obviously of lot both it We there's I'm there's not there. quality not we're with quantity catch to trying investment about the for back say automotive-grade still the on going ways perspective, and up Chinese like that But from

From they're as a device than further perspective, I that off well. think

Our Sachs. from question Brian comes Lee of Goldman next

among a us a guess on of like I movement maybe side. Gregg, device It a follow-up seems share as on some George's seeing you're there give your trends? the some hearing market address to from meet impact any the you're supply as and what of you if unable Are sense has commentary in in that, market. peers seeing market More you're to could device Maybe just share needs? of can bit question. seeing you shorter-term customers? been focused you what

to fully now pick kind so, And seeing the thorn for outlook if device Durham the is of time we outlook of -- headwinds that's a little that of your revenue. market? believe a then sort troughing you here? has side this do for of that continue then some Durham separately And on the see been Could end still from I&E? to And up? frame for for levered what's back in on of several your bit mean, much I the past quarters. here How

Thanks design-in highest second the Neill billion, in maybe take I'll history the first is our for XX% [ our second can We one. Brian. posted for tackle the ] of EVs. one, $X.X of question, which just

think a of sign I progress. continued pretty obviously that's good So

or going for the will doubled year-on-year at since midpoint on our the guidance up, automotive our and business, midpoint the think, EV the have XX% of our to of business we're also EV of At EVs, this for order year. beginning the guidance I be of

XXX%. grown it's So

So I think it's year. XXX% unaware the of growing through anybody that's

our second about And the there's the share. on quite spread losing how you So highest top of commentary having put I then it a don't history, see doesn't design-in circle. that in

And an that's exactly I&E I Brian, Durham perspective, Yes. think fab from right. and perspective secondly,

have seen weakness We further there. some

going million primarily down down, should the $X revenue of next at level. ] it, Durham, talked I&E, that from for [ we of to which call is million quarters about I couple think $X you see that

really of just to would the feel normal like margin does type kind a isn't mix thing I not that just say. It There's consider trade-off. bottom, of a here

If also automotive data, and we steps shift you talking from doing, about auto, to perspective. what go-through we're I&E [indiscernible] the in an the complex about from think factory more die we're bigger

trade-off that really So from is not X of perspective. kind ] to [ that X

[ this continues fab supply to $XX swap market going our that to be million applications. EV have we're for range. $XX the we So [indiscernible] our and end where of Durham But will and demand hang push and about will leverage to be out the volume on customers EVs through ] capacity more demand, million

of I&E of couple coming back we'll next year, frame, anticipate that June starts back start to quarters, in then that to as next keep we ready respond. most likely out to the come March, time December to And that For as quarter. ready

Samik comes question JPMorgan. next Chatterjee of Our from

it This some wins? and Maybe over how is relatively quick relative around of and the this on despite conversion design-ins Samik. response past down for talking with the Gregg. particularly terms moderation just investors line just the tracking in to the be wins design-in Cardoso you're design-in this maybe time in -- the is there you wins. a Joe follow-up the from seeing for the with spend your Can design you Can just rate trends win, recent the should in quarters, Like quarter particularly here as to relates design to step X trends? interpreting about

wins the synchronized. and that I We about you design tell conversion. would thing one the is necessarily good design-ins feel aren't very And

bit that clearly. explain me little Let more a

that the then XX% X design they into years production. year's volume. And first some we say the of before we get application, convert let's XX% companies a win when on on ED orders depending in go purchase into you Depending -- company, the for then

years it design-in into from take So win. X design could go to

the of EV giving nimble manufacturers, design-in. X go they start-ups, Other in production for would some years the instance, after more

into so design it two, number quarter our the for necessarily I synchronized So isn't the pleased between wouldn't We're with very as quarter our design read number win it. the both well. for and and

from William question next Dorsheimer of Blair. Our comes Jed

getting I which margin which million, $XX Valley would help is a will with am the -- then a circle to one your gross guess Durham X, Durham be a I I margin. look be my XX% be at million just Can use where that be is which the materials Or and million, negative guess would there? even million midpoint, help $XX me get economics. here. me would of square business dollars? you of doing at I'm If if I on on $XX so plus a the what I kind only I can $XX might imply math couple first questions unit XX% contributor to XXX, a wrong? $XX that $XX the the profit million, to on if gross look Mohawk business, underutilization, and of you Is million, wrong XX%

that. Yes. kind breaking Jed, that I think you're little of way down the than more nuanced it's a this

about before, bit a the a from when As becomes you to challenging move more I die manufacturing standpoint. automotive talked bigger this transition

we're products manufacturing kind itself So of going automotive to will transition to a right products sort to now that through go I&E out.

couple think as the through I we work quarters. of next

Valley, obviously, performance. think about Mohawk of And that product profitability, the that seeing if same out clearly translates better [indiscernible], over customer would clearly, But that the running seeing Valley. Mohawk you cost transition to are better we same same into transition are we

Okay.

I So then, it's non-optimized be guess, the... would

in is couple issue. kind doesn't quarters think think think longer it I I the a of how just view the term, look of Durham on think really over longer things term. I over really our change -- I This

period. this we'll They'll And a respond back, quickly. factory be be very customers. able we're for strong the the I&E to products when the we time, ability to Over and margin. to to of shift business XX-XX to that about to EV in to I&E try ready gross drive kind have while the and be up then Think mix heavy over prediction suboptimizing XX% serve

we the the is from silver demand. -- there end is I perspective that that the lining So business to transition have and see we move [indiscernible] where think ability the market

And very footprint, not respond we'll think over as long well. will the come think think just that longer if you are in run. applications, growing, I as back markets over we've you the time, ready the at lot over to But leverage designs that customers and a to short clearly look of a be about and term, lot the for able the but where of got I&E for I term, significantly across it Durham

expect positive us again, over I unit for even to in very, Mohawk we just just accelerate economics at right time. think, But are that very Valley cost now, stages, early

of comes question next Buchalter from Our Cowen. Joshua TD

on around a Siler the hoping there for in maybe like right CapEx. more but you tone to think you -- Or EV the into little confidence in of driving I now? change what's some sort more supply was bit constraints It the stock is in the expansion be was doesn't outlook? given could mentioned this in primarily a expand the and change long-term facility. in latter, would it to Is sort a better hear of reaction what on seem perpetual the you demand, input change helpful

Neill little let give bit Yes, an I of introduction here. cover after this I'll a

add to we're we're think right focused today what to very, trying I clear to clarification on do now. and be is what very

couple ramp heard Valley. JP The and included are laser up and Mohawk of you've getting constructed. we of say, me That last the the For Building focused quarters, XX on getting included running

projects three those now. laser-focused So are we're right on what

Mohawk all of our XX% in Mohawk and that being XX% milestones We're of utilization on talked hit infrastructure to great has JP confident Valley, XX success. campus in to schedule. XX we've quarter. ability very Valley out has The able Durham furnaces be our Building in We'll the about. the well, been Building utilization And a as this hit are installed. is service

minutes we right we're about those from where high XX, campus And is XX JP in qualifying We'll mentioned, at have super the now. connected that grid. we and to away the site later this energized As furnitures because being year. start is confidence The

you courts facility, a be same JP. things And team brought up It and the team Building manufacturing I'll same was and The all will was silicon [indiscernible] XX, basketball That like XXX-millimeter carbide. bringing ] now that a court up [ not on remind of that. humming which it's

that. we're very in So confident

on we we of until that trying off know of taking that clarification not our is get is. that that the can to we what focus demonstrate we're focus we're facilities. our And that's What success those give can out get we until --

no substantially, saying, And I would we [ kind period. talked high million, including then there's CapEx see been perspective, to of time. ] a I could CapEx thought change XXXX before bringing $XXX be We're than some quite always frame. for what that $XX peak going think in from any at think, CapEx down million down come our we've to about potential We XXXX, in pretty government incentives come that really

for from complete facilities that largely be reason The JP perspective. a will the is And

year, majority been in XXXX. spend our calendar the of the finish we As that's CapEx

both Mohawk As start you very it that 'XX, tools get match modulate in market we'll out demand. and into continue to and [indiscernible]. with Valley, of this be calendar calendar to much our selling year just of tool JP and looking a would CapEx We're that

that's right now. really focused where we're So

it plan what that's another in laid very As we'll see performance the would clearly what we that, in good in prepared can the that talked next. that out about, we wait flow to said And really we Gregg and and performance having focus we to support the addition relates company facility remarks, after I until that operating on. that's cash do

Colin from comes Oppenheimer. Rusch of question next Our

higher activity city voltage activity ground cost or XXX towards design and of makers, seeing retrace we're volt? the kind a you Are Given any of can of to with sort you're EV seeing perspective back about around voltages powertrain middle Are you XXX reduction volt a seeing migration activity on even a seeing a or than XXX? some what talk you the the that from lot designs?

No, we're a return there is to back certainly shape -- XXX. not

an X,XXX folks voltage have the at better [indiscernible] volt get realized it, requires so That higher that think higher I and voltage, call forth you on efficiency, charging much even the EVs. XXX, at even better an MOSFET.

on they're from not but not beyond the backwards. to XXX that. really the back is XXX So expert would say I switching XXX volt, no next to what's I'm retrenching going

And kind Okay. That's processes. cost then rebalancing into side a opportunity a fundamental about a chain the reduction from chain little side, on there's inputs obviously, supply various of lot supply the manufacturing helpful. been talk perspective? the for bit on Can around you of

that. ] kind on [ really of of [ automotive are in Substantially bit I so new think the wafers quality that diameter category, of a ramping that all Neill give and with of Yes. I fab We're and can already a wafer in that seeing that And me ]. wafer out we pools in of let excellent more the grade percentage get forth. maybe phase and of terms the would in the early are we're -- XXX-millimeter hit we're little color. progress a them pleased so

fab We'll We're getting wafer yield obviously and the pool. working look we'll on getting cuts continue better per forth. in at so more

below think cost think that fact So cost in the innings lot there's a I in I compared Mohawk already we're despite Valley on the the to we're of -- XXX-millimeter. of reductions die Durham, early

Well, Yes. let And just agree. me that. think fully add to I on and I

we're further. I the that yield we're opportunity on I the times of really cost only down and we at think site very early and think the fab returns even seeing reinforce that have early the stages drive

think I here. we're the But also that there's a structural component building of business

cash at time. about EBITDA XX% at you margins over or look look you If target

depreciation to JP That of The our of early Once next we at we'll represents bring XX%, today, towards million that these year, will If you $XXX XX% look stages business about year. even building the XX% our in this revenue. do upwards about of push business. online

that a -- XX% part, cash. is of a very XX% substantial from cost means to today just like So our not

a a opportunity very, cash see time over you margin we a So nice out and very the fall-through perspective as perspective build from business.

of flow. cycle business to scale improve the and we going is as yields a lot facilities, generate this cash So and these build times for

customers, cycle just it's business but that just continuing a on will lot flow. supply of base think and structurally, to our I our generates the translate into to I that times think yield execute cash

Charter Our Equity from Jack next of Research. question Egan comes today

earlier clarification a quick had just of I comments. your Gregg, So you on for one

think guess, point materials you we generally devices devices. and probably further generally as than an materials. But understand to it, view, I that I Chinese a, R&D a develop of mentioned So from science are and harder are a lot ramp off than

even So material to behind I mean, in if they're ramp than why side? the further devices would relatively China easier be

Yes.

just trying is crystal This I the got a the that into effort of lot out there question, develop I to carbide customers China. the silicon Jack. is for thanks growth a of from input So know capabilities. going

thing. behind likely on XXX. this progress what hear at pretty is the hard that I it's they're And mentioned, get to far As they're -- [indiscernible] through there's all making noise XXX. we

a and feels it from So on this is that device not MOSFET carbide I point. super perspective, like there's be then a honest, less And think do also thing as to there's to well. at silicon -- easy focus

Jed follow-up a of is question from next Dorsheimer The William Blair.

Thanks. on strong you demand, seems to I in comments which just dig EV. for wanted Gregg, your into,

with that much. so Just down materials business, business coming in the

of $XX your I kind materials up ramping other basis, on guide wafers if I sell Why Because opens customers. continent quarterly the come million about per quarter. down aren't assume that? to it's So XXX-millimeter a take that, that to would to

Sorry, Jed.

the we end of -- customers. about terms now, EV market demand how of in terms right the in So that, for think automotive

amount of about in of our terms still So the there's a supply. that landscape. of talked Gregg lot outstrips changes The OEM demand

important as So us take those it's we to really for much continue to customers. capacity serve can as

business. to we'll materials meantime, continue our the drive In

terms agreements a underpin in that long kind revenue out ] for we've think the of $XX that laid of million per that there our you million time. As to think, to a quarter, [ got today. continue market, long-term lot I we'll how $XX And know, it's I of service

very service that we're we understand... this customers our it's I at to time. important going continue to think And automotive to continue

of Neill, where coming million the to clearly, I but on materials it's supplying internally. increase XXX-millimeter be the out maybe able question wafers side, in you a million devices Why didn't wouldn't ask $XX see the Durham the $XX business? you're

Yes.

think be could your So maybe question. I I take that. understood crack a don't I'll at that

our supply. have Obviously, couple current automotive a than that of we So higher demand is things.

So very transitioning important a I&E to capability we're focused is that customer automotive item that from satisfaction on.

the module products. industrial the substantially, exact for products they sold are industrial packaged devices in automotive of than get And opposite most larger The are the form. And automotive. or

For automotive of in die the product we sell form. most is substantially, that

millimeters for we're I'll potential it, adding silicon amount value, So we're the call revenue carbide incremental of, not [indiscernible]. adding same

part that an the fab from So it's you Is in when trade-off not move a industrial clear, Jed? part to one-to-one itself. an automotive

have in We questions no the further queue.

for Gregg closing to comments. over back call the Lowe turn I'll So any

in Well, end this look thanks, at next Thank quarter. us, forward we catching everybody, with of to participating the and up for call you.

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

lines. may your now disconnect You