Q1 2024 Wolfspeed Inc Earnings Call

Okay.

Hello, everyone and welcome to the World speeds third quarter fiscal 2020 full conference call. My name is not yet and I will be coordinating the call today.

If you would like to ask a question. Please press star followed by one on your telephone keypad.

Now how do you get your highest tonic on bulk Vice President external affairs to begin tied up. Please go ahead.

Thank you operator, and good afternoon, everyone welcome to <unk> first quarter fiscal 2024 conference call.

Today, we'll speed CEO, Gregg Lowe and will speed CFO Neill Reynolds will report on the results for the first quarter fiscal year 2024.

Please note that we will be presenting non-GAAP financial results during today's call.

We believe provides useful information to our investors non.

non-GAAP results are not in accordance with GAAP and may not be comparable to non-GAAP information provided by other companies.

non-GAAP information should be considered a supplement to another substitute for financial statements prepared in accordance with GAAP.

A reconciliation to the most directly comparable GAAP measures in our press release and posted in the Investor Relations section of our website along with a historical summary of other key metrics.

Today's discussion includes forward looking statements about our business outlook and we may make other forward looking statements during the call.

Such forward looking statements are subject to numerous risks and uncertainties. Our press release today and the SEC filings noted in the release mentioned important factors that could cause actual results to differ materially.

Lastly, I would also like to note that during the quarter, we announced our intent to sell our RF business to make up the results of our business will not be classified as discontinuing operation and all discussions today will be on a continuing operations basis. During the Q&A. We would ask that you limit yourself to one question. So that we can accommodate as many.

Questions as possible during today's call. If you have any additional questions. Please feel free to contact us after the call and now I'd like to turn the call over to Greg.

Thanks, Tyler and good afternoon, everyone. It is an exciting time at will speed with the pending sale of the RF business. We are now the worlds only pure play vertically integrated Silicon carbide company.

We are uniquely positioned to drive the industry transition from silicon to silicon carbide from both our materials and a device perspective.

As we continue to scale our operations, we have overcome our fair share of challenges along the way and I remain very confident around our long term trajectory for three reasons.

First we demonstrated the capability to consistently produce high quality high yielding 200 millimeter wafers and building 10.

Ahead of the needs of the Mohawk Valley Fab.

Operator: Hello everyone, I'm Agnes Wolfspeed's first quarter physical 2024 conference call. My name is Nadia and I'll be coordinating the call today. If you would like to ask a question, please press star, fill it by 1 on the telephone keypad.

Second.

We've assembled a team comprised of internal silicon carbide experts, including one of our co founders.

And external advisors from our tool manufacturers to ensure that we will achieve 20% utilization at Mohawk Valley in the June quarter of 2024, and we've seen notable progress this quarter.

Tyler Gronbach: I will now hand over to your host, Tyler Gronbach, Vice President, external affairs to begin. Tyler, please go ahead. Thank you operator and good afternoon everyone. Welcome to Wolfspeed's first quarter physical 2024 conference call. Today, Wolfspeed CEO, Gregg Lowe, and Wolfspeed CFO, Neill Reynolds will report on the results for the first quarter of fiscal year 2024. Please note that we will be presenting non-gap financial results during today's call, which we believe provides useful information to our investors.

And finally customers continued to partner with what speed.

We secured our third highest quarterly total AR device design ends at $2 2 billion.

And we converted more than a $1 billion.

Nine wins this past quarter as well.

In addition, we've also posted record revenue for our 150 millimeter substrates in the first quarter.

Which is an indication that demand remains robust for our high quality substrates.

Tyler Gronbach: Non-gap results are not in accordance with gap and may not be comparable to non-gap information provided by other companies. Non-gap information should be considered a supplement to and not a substitute for financial statements prepared in accordance with gap. A reconciliation to the most directly comparable gap measures is in our press release and posted in the investor relations section of our website, along with a historical summary of other key metrics.

Our first quarter results demonstrate the initial returns on our capacity expansion investments that will pave the way for the rest of the fiscal year and beyond.

Revenue non-GAAP gross margin and non-GAAP EPS all came in at the high end of our guidance range, turning to Mohawk Valley, where we continue to ramp production there.

This quarter, we generated $4 million in revenue from the fab, which compares to $1 million that was delivered in the previous quarter.

Tyler Gronbach: Today's discussion includes forward-looking statements about our business outlook and we may make other forward-looking statements during the call. Such forward-looking statements are subject to numerous risks and uncertainties. Our press release today and the SEC filing noted in the release mentioned important factors that could cause actual results to differ materially.

In the coming quarter, we expect to more than double the output from the fab as we continued to ramp device production.

Because of the complex nature of Silicon carbide technology.

We ramped the fab further we're collaborating even more closely with our tool vendors to ensure maximum uptime the best yield in the most efficient use of all of our tools.

Tyler Gronbach: Lastly, I would also like to note that during the quarter we announced our intent to sell our RF business to make up. The results of our RF business will now be classified as discontinuing operations and all discussions today will be on a continuing operations basis. During the Q&A we would ask that you limit yourself to one question so that we cannot accommodate as many questions as possible during today's call.

We've worked closely with them to develop optimal operating protocols and as a result, we're seeing good improvement in the fab.

I was just up in the Fad last week meeting with the leadership team walking the floor to talk with our technicians and seeing the progress firsthand that we're making in some of our bottleneck areas.

Gregg Lowe: If you have any additional questions please feel free to contact us after the call and now I'd like to turn the call over to Greg. Thanks Tyler and good afternoon everyone. It is an exciting time at will speed.

We have now doubled the number of products qualified in the last 90 days.

All of those MOSFET to achieve qualification on the first pass through the fab.

As a strong indication of the <unk>.

Gregg Lowe: With the pending sale of the RF business, we are now the world's only pure play vertically integrated silicon carbide company. We are uniquely positioned to drive the industry transition from silicon to silicon carbide from both in materials and a device perspective.

Underlying capability of the fab.

Finally, those products, we have already qualified have sufficient demand to more than satisfy our short term 20% utilization target.

I am, especially proud of this incredible effort by our team.

Gregg Lowe: As we continue to scale our operations, we have overcome our fair share of challenges along the way and I remain very confident around our long term trajectory for three reasons. First, we demonstrated the capability to consistently produce enough high quality high yielding 200 millimeter wafers and building 10 ahead of the needs of the Mohawk Valley tab. Second, we've assembled a team comprised of internal silicon carbide experts, including one of our co-founders.

It speaks to the advanced Silicon carbide technical device capability, we have assembled and the focused a detailed execution of our engineering and quality teams to ensure that we are more than ready to produce high quality automotive devices at 200 millimeter.

Something nobody else in the World is currently doing.

As I mentioned, we are ahead of plan and a ramp of building 10 crystal growth for 200 millimeter substrates.

By the end of this quarter.

Gregg Lowe: And external advisors from our tool manufacturers to ensure that we will achieve 20% utilization at Mohawk Valley in the June quarter of 2024 and we've seen notable progress this quarter, and finally, customers continued to partner with Wolfspeed as we secured our third highest quarterly total of device design ends at 2.2 billion and we converted more than a billion dollars of design wins this past quarter as well.

Producing enough material to support 15% utilization at Mohawk Valley.

Putting us nicely on track for our goal of 20% utilization by June of 2024.

Turning to the JP construct construction continues and design schedule.

We expect to be producing material in the first half of fiscal 2025.

And we've already hired and began training more than 100 people that will work at that facility.

On the demand side as I said, we recorded $2 $2 billion of design and the third largest amount of any quarter in our history.

It had a record design wins of $1 4 billion.

Illustrating our customers' willingness to move into volume production and projects that we've won over the past few years.

Gregg Lowe: Our first quarter results demonstrate the initial returns on our capacity expansion investments that will pave the way for the rest of the fiscal year and beyond. Revenue, non-gap gross margin and non-gap EPS all came in at the high end of our guidance range, turning the Mohawk Valley where we continue to ramp production. This quarter, we generated $4 million in revenue from the fab, which compares to $1 million that was delivered in the previous quarter.

Our design win record for the first quarter represents more than 230 projects.

Many of which are converting sooner than our original expectations.

Most of these projects are the automotive end market and we are steadily ramping our designers to design win with.

With major Oems and tier ones.

We remain confident that the demand from automotive customers will remain strong while we are seeing some softness in the industrial and energy space, primarily in China and Asia.

Gregg Lowe: In the coming quarter, we expect to more than double the outputs from the fab as we continue to ramp device production. Because of the complex nature of silicon carbide technology, as we ramp the fab further, we're collaborating even more closely with our tool vendors to ensure maximum uptime, the best yields and the most efficient use of all of our tools. We've worked closely with them to develop optimal operating protocols, and as a result, we're seeing good improvement in the fab.

Additionally, we had a record quarter for 150 millimeter wafer revenue a strong signal that the demand for materials remains solid.

<unk> is the first mover into 200 millimeter wafer volume production.

Which will be the silicon carbide industries, most advanced technology.

As a result, we are well positioned to be the only company producing 200 millimeter at scale for the next few years.

Gregg Lowe: I was just up in the fab last week, meeting with the leadership team, walking the floor to talk with our technicians and seeing the progress firsthand that we're making in some of our bottleneck areas. We've now doubled the number of products qualified in the last 90 days, and all of those MOSFETs achieve qualifications on the first pass through the fab, which is a strong indication of the underlying capability of the fab.

And believe this competitive advantage will further extend our leadership position well into the future.

We'll see.

Undisputed leader in Silicon Carbide will continue to play an industry critical role in the coming years as a supplier of merchant materials to leading power device makers.

Demand for our materials remains strong and we have extended some of our agreements with existing wafer customers.

Gregg Lowe: Finally, those products we have already qualified have sufficient demand to more than satisfy our short-term 20% utilization target. I am especially proud of this incredible effort by our team. It speaks to the advanced silicon carbide technical device capability we have assembled and the focused and detailed execution of our engineering and quality teams to ensure that we are more than ready to produce high quality, and we have a lot of automotive devices at 200 millimeters.

Added new agreements like the one with Renesas.

That being said.

We're not content with being the leading material supplier to the market. We also expect to be one of the top silicon carbide device suppliers in the years to come.

In 2018, the Silicon carbide device market was estimated to be about $400 million.

Five years later.

The market size is pegged at $6 billion and the projected Tam for the end of the decade is north of $20 billion and continues to grow.

Gregg Lowe: Something nobody else in the world is currently doing. As I mentioned, we are head up by end in our ramp of building 10 crystal growths for 200 millimeters substrates. By the end of this quarter, we will be producing enough material to support 15% utilization at Mulhock Valley, putting us nicely on track for our goal of 20% utilization by June of 2024.

This is part of the reason, we announced and are now in the process of completing the sale of our RF business to make time.

Which we expect to close by the end of the calendar year.

We've always said that the growth of <unk> will come from our leadership in silicon carbide and power devices.

Gregg Lowe: Turning to the JP, construction continues and design schedule. We expect to be producing material in the first half of fiscal 2025, and we have already hired and began training more than 100 people that will work at that facility. On the demand side, as I said, we recorded $2.2 billion of design, and the third largest amount of any quarter in our history. It had a record design wins of $1.4 billion, illustrating our customers willingness to move into volume production on projects that we won over the past few years.

This marks a definitive milestone and allocating all of our investments.

<unk> development and technology.

These business areas.

There is a long road ahead of us here.

Which is why we invested the time and capital to develop the world's only purpose built silicon carbide device fab.

We're keenly focused on execution and firmly believe we're doing this right.

Doing this at scale at 200 millimeter from the outset, well result in gaining and sustaining significant market share in the coming decades.

Gregg Lowe: Our design win record for the first quarter represents more than 230 projects, many of which are converting sooner than our original expectations. Most of these projects serve the automotive end market. And we are steadily ramping our design ends to design win with major OEMs and tier ones.

It is rewarding to see the pieces of our long term strategy become reality, albeit on a longer timeline than we originally anticipated.

The remainder of this fiscal year.

And particularly the second half will prove the conviction that we've always had in our strategy and our products.

And in our team.

Gregg Lowe: We remain confident that the demand from automotive customers will remain strong while we are seeing some softness in the industrial and energy space primarily in China and Asia. Additionally, we had a record quarter for 150 millimeter wafer revenue, a strong signal that the demand for materials remains solid.

It is extremely exciting to see what's on the horizon.

I'll now turn it over to Neil who will provide an overview of our financial results and outlook Neil.

Thanks, Greg and good afternoon, everyone. During the first quarter, we achieved revenue gross margin and EPS results all at the high end of our guidance range.

Gregg Lowe: Wolfspeed is the first mover to 200 millimeter wafer volume production, which will be the silicon carbide industry's most advanced technology. As a result, we are well positioned to be the only company producing 200 millimeter at scale for the next few years and believe this competitive advantage will further extend our leadership position well into the future.

In addition, we expect continued revenue growth and gross margin expansion as we transition into <unk> 'twenty four.

The outperformance in our financial results was underpinned by $4 million of revenue from Mohawk Valley during the quarter.

Up from $1 million in the prior quarter.

Expect to grow that to between $10 million to $15 million of revenue as we transition into <unk> 24.

Gregg Lowe: Wolfspeed as the undisputed leader in silicon carbide will continue to play an industry critical role in the coming years as a supplier of merchant materials to leading power device makers. Demands for our materials remain strong and we have extended some of our agreements with existing wafer customers and added new agreements like the one with Renasis.

While we expect some variability in the production ramp at Mohawk Valley, we remain on pace for a larger step up in revenue as we transition into <unk> 24.

Let me review the financial results in more detail.

I'll start by providing an overview of the first quarter revenue.

Revenue from continuing operations for the quarter was $197 million compared to our updated guidance range of 185 million to $205 million and growth of four 2% year over year.

Gregg Lowe: That being said, we're not content with being the leading material supplier to the market. We also expect to be one of the top silicon carbide device suppliers in the years to come. In 2018, the silicon carbide device market was estimated to be about $400 million. Five years later, the market size is pegged at $6 billion and the projected tam for the end of the decade is north of $20 billion and continues to grow.

Power device revenue was impacted by slower industrial and energy demand, primarily in China, and the broader Asia market, partially offset by the revenue ramp and Mohawk Valley.

<unk> 150 millimeter substrate revenue achieved a record quarter above our expectations driven by continued strong demand and record manufacturing performance.

Durum materials operations team.

Gregg Lowe: This is part of the reason we announced and are now in the process of completing the sale of our RF business to make on, which we expect to close by the end of the calendar year. We've always said that the growth of Wolfspeed will come from our leadership in silicon carbide and power devices.

As Greg mentioned earlier, our historical design and portfolio supported the first quarter revenue growth.

And we secured $2 2 billion of new design wins for power devices are design and design win conversion rate is ahead of our original expectations.

Gregg Lowe: And this marks a definitive milestone in allocating all of our investments, research and development and technology into these business areas.

And based on the design ends we've already secured the next few years of expected revenue covered by our existing book of business.

non-GAAP gross margin from continuing operations in the first quarter was 15, 6% under.

Gregg Lowe: There is a long road ahead of us here, which is why we invested the time and capital to develop the world's only purpose built silicon carbide device fab. We're keenly focused on execution and firmly believe we're doing this right. Doing this at scale at 200 millimeter from the outset will result in gaining and sustaining significant market share in the coming decades.

Underutilization cost for the quarter were $34 4 million, representing 17, 4% or 1740 basis points of gross margin.

Gregg Lowe: It is rewarding to see the pieces of our long-term strategy become reality, albeit on a longer timeline than we originally anticipated.

Outperformance was driven largely by improved materials manufacturing performance, resulting in better than expected 150 millimeter materials costs and yields.

In addition, we saw lower than expected underutilization cost as we ramp Mohawk Valley.

Gregg Lowe: The remainder of this fiscal year, and particularly the second half, will prove the conviction that we've always had in our strategy, in our products, and in our team.

We generated adjusted loss per share of 53 from continuing operations in the fiscal first quarter compared to a loss of 36 last quarter and a loss of 24 in the same period last year.

Adjusted loss per share was a significantly lower loss and the high end of our guidance range as higher revenue higher gross margin and lower operating expenses all fell through to the bottom line.

Gregg Lowe: It is extremely exciting to see what's on that horizon.

Neill Reynolds: I'll now turn it over to Neill, who will provide an overview of our financial results, and outlook. Neill. Thanks, Greg, and good afternoon everyone. During the first quarter, we achieved revenue, gross margin, and ETS results, all at the high end of our guidance range. In addition, we expect continued revenue growth and gross margin expansion, as we transition into 2K24. The outperformance in our financial results was underpinned by $4 million of revenue from Mohawk Valley during the quarter, up from $1 million in the prior quarter.

Before moving to the outlook I'll touch on our balance sheet. We ended the quarter with over $3 3 billion of cash and liquidity on hand to support our ramp and growth plans.

DSO was 55 days, while inventory days on hand was 162 days.

Free cash flow during the quarter was negative $517 million comprised of $113 million of operating cash flow and $404 million of capital expenditures.

Regarding our financing initiatives, we are pursuing funding from the chipset and should have more clarity on this by early next calendar year.

Neill Reynolds: And we expect to grow that to between 10 to 15 million of revenue, as we transition into 2K24. While we expect some variability in the production ramp at Mohawk Valley, we remain on pace for the larger step up in revenue, as we transition into 3K24.

We are constantly evaluating ways to optimize our balance sheet and capital structure, and we will continue to be opportunistic and flexible in our capital strategy.

And the last year, we have raised approximately $5 billion of low dilution capital across a number of vectors, including customers governments private financing and capital markets.

Neill Reynolds: With that, let me review the financial results in more detail. I'll start by providing an overview of the first quarter. Revenue from continuing operations for the quarter was $197 million, compared to our updated guidance range of $185 million to $205 million, and growth of 4.2% year over year. Power device revenue was impacted by slower industrial and energy demand, primarily in China and the broader Asia market, partially offset by the revenue ramp in Mohawk Valley.

In conjunction with federal funding, we are in good position to execute our capacity expansion plans, but we will remain nimble to optimize our capital structure for the long term.

Turning to the second quarter outlook, we are targeting revenue from continuing operations in the range of 192 million to $222 million driven largely by the incremental revenue contribution you expect from Mohawk Valley in this quarter.

Neill Reynolds: Materials 150 millimeter substrate revenue achieved a record quarter, above our expectations, driven by continued strong demand and record manufacturing performance by our Durham Materials Operations team. As Greg mentioned earlier, our historical design and portfolio supported the first quarter revenue growth, and we secured 2.2 billion of new designs for power devices. Our design end to design when conversion rate is ahead of our original expectations. And based on the design ends, we've already secured we have the next few years of expected revenue covers by our existing book of business.

We now anticipate roughly 10 million to $15 million of revenue to come from Mohawk Valley in Q2.

With increase in Mohawk Valley revenue will be partially offset by continued softer demand.

The industrial and energy products, primarily in China, and broader Asia markets. However, we will look to repurpose the supply and demand remains strong.

We're also expecting non-GAAP gross margin in the range of 12% to 20% with a midpoint of 16% at.

At the midpoint. This includes approximately $35 million or negative 1700 basis points of Underutilization costs as we ramp up revenue at the Mohawk Valley Fab.

Neill Reynolds: 9 gap gross margin from continuing operations in the first quarter was 15.6% under utilization costs for the quarter was 34.4 million representing 17.4% for 1,740 basis points of gross margin. Outperformance was driven largely by improved materials manufacturing performance resulting in better than expected 150 millimeter materials cost and yields. In addition, we saw lower than expected under utilization costs as we ramped Mohawk Valley. We generated adjusted loss per share of 53 cents from continuing operations in the fiscal first quarter compared to a loss of 36 cents last quarter and a loss of 24 cents in the same period last year. Adjusted loss per share was a significantly lower loss in the high end of our guidance range as higher revenue higher gross margin and lower operating expenses all fell through to the bottom line.

We're also targeting non-GAAP operating expenses of approximately $109 million for the second quarter of fiscal year, 2024, which is inclusive of $11 million of startup costs, primarily related to the JP materials facility and Siler City North Carolina.

We expect Q2 net non operating expense of approximately $27 million.

As I have mentioned previously expect nonoperating expense to increase as the year progresses as we earn less interest income on our short term investments in connection with our continued investment in our facilities expansions.

We expect Q2, non-GAAP net loss to be between $88 million and $71 million.

Our Q2 targets are based on several factors that could affect them significantly including supply chain dynamics overall demand product mix factory productivity and the competitive environment.

Neill Reynolds: Before moving to the outlook, I'll touch on our balance sheet. We ended the quarter with over 3.3 billion of cash and liquidity on hand to support our ramp and growth plans. DSO was 55 days, while inventory days on hand was 162 days. Free cash flow during the quarter was negative 517 million, comprised of 113 million of operating cash flow and 404 million of capital expenditures. Regarding our financing initiatives, we are pursuing funding from the Chips Act and should have more clarity on this by early next calendar year.

As Greg mentioned earlier, we're moving ever closer to the significant uptick in our ramp of the Mohawk Valley Fab and we expect a larger ramp in the back half of the fiscal year.

We're still extremely confident in our ability to achieve 20% utilization in the fab by June.

As we indicated on our last call it will be a lag between 20% utilization and 100 million quarterly revenue due to the time between fab starts and shipments to our customers.

Lastly, during the quarter, we announced the intent to sell our RF business to May come.

We had been pursuing for quite some time.

Neill Reynolds: We are constantly evaluating ways to optimize our balance sheet and capital structure and will continue to be opportunistic and flexible in our capital strategy. In the last year, we have raised approximately $5 billion of low dilution capital across a number of vectors, including customers, governments, private financing and capital markets. In conjunction with federal funding, we are in good position to execute our capacity expansion plans, but we will remain nimble to optimize our capital structure for the long term.

When the sale is finalized we will have completed the path towards portfolio optimization that we've been on since 2018.

Dominantly a lighting company.

We are happy to say that will speed is now the only pure play silicon carbide business in the marketplace and we can focus all our collective efforts on the silicon carbide materials and power device businesses.

With that I'll pass it back to Greg.

As we close out the first quarter.

I want to reiterate that fiscal 2024 is a pivotal year for world speed.

Neill Reynolds: Turning to the second quarter outlook, we are targeting revenue from continuing operations in the range of $192 million to $222 million, driven largely by the incremental revenue contribution we expect from Mohawk Valley in this quarter. We now anticipate roughly $10 million to $15 million of revenue to come from Mohawk Valley in Q2. This increase in Mohawk Valley revenue will be partially offset by continued softer demand for the industrial and energy products, primarily in the China and broader Asia markets.

We remain confident in our long term vision and are seeing promising results.

I gave some color earlier in design and I think it's worth repeating that we had a record design wins.

For this past quarter as customers ramp their programs.

Demand has certainly attracted new entrants and from our viewpoint and checks in the market. There is not a single player who can match, our quality and our scale at 150 millimeter.

And as I said earlier.

Neill Reynolds: However, we will look to repurpose the supply to where end demand remains strong. We are also expecting 9 gap growth margin in the range of 12% to 20% to the midpoint of 16%. At the midpoint, this includes approximately 35 million or negative 1,700 basis points of underutilization costs as we ramp up revenue at the Mohawk Valley tab. We are also targeting non-gap operating expenses of approximately $109 million for the second quarter of fiscal year 2024, which is inclusive of 11 million of startup costs, primarily related to the JP materials facility in Tyler City, North Carolina.

No one is close to our position of 200 millimeter.

This gap will only widen as we bring the J P online in the first half of fiscal 2025.

Secondly, while there have been several new entrants to the materials market Chinese and others.

<unk> ramp required to create high quality materials.

It's still in front of them.

Has taken US 35 years to master this technology.

Which we know firsthand can be incredibly difficult to work with let alone scale.

<unk> at the highest quality possible.

Well I've always said, we are taking our competitors at their word regarding their stated capability to produce silicon carbide materials internally.

Neill Reynolds: We expect Q2 net non operating expense of approximately $27 million. As I have mentioned previously, we expect non-operating expense to increase as the unit progresses, as we earn less interest income on our short-term investments and connection with our continued investment and our facilities expansions. We expect Q2 non-gap net loss to be between $88 million and $71 million. Our Q2 targets are based on several factors that could affect them significantly, including supply chain dynamics, overall demand, product mix, factory productivity and the competitive environment.

It is highly unlikely that every competitor will be successful.

And this will create an opportunity for those with additional materials capacity.

To secure long term agreements with device producers.

Or capture an even larger share of the device market.

And we are well positioned to do both.

Demand remains strong across the business outside of the industrial and energy markets, particularly in China and Asia.

Overall.

What we have said time and time again about the transition to the use of silicon carbide rings true.

Neill Reynolds: As Greg mentioned earlier, we are moving ever closer to the significant uptick in our ramp of the Mohawk Valley tab. We expect a larger ramp in the back half of the fiscal year. We are still extremely confident in our ability to achieve 20% utilization in the fab by June. As we indicated on our last call, it will be a lag between 20% utilization and 100 million of quarterly revenue due to the time between fab starts and shipments to our customers.

The EV transition remains the largest change in the history of the automobile.

And with that comes winners and losers and potentially a bumpy path.

However, there is no reverting to the internal combustion engine.

That is the way of the past Phil.

Silicon carbide has shown that evs can be pushed further with extended range faster charge times and competitive prices.

Neill Reynolds: Partners. Lastly, during the quarter, we announced the intent to sell our RF business to Maytime. A path we had been pursuing for quite some time. From the sale of finalize, we will have completed the path towards portfolio optimization that we have been on since 2018. We are predominantly a lighting company. We are happy to say that Wolfspeed is now the only pure play silicon carbide business in the marketplace.

Despite the current softness in China and Asia.

<unk> remains high for our products and customers' needs are higher than our current output levels.

And this is why we are keenly focused on ramping Mohawk valley, 20% utilization.

Neill Reynolds: And we can focus all our collective efforts on the silicon carbide materials and power device businesses.

To close we are excited about this year.

Fiscal 2023 was not without its challenges.

Those challenges come with being the first pursue next generation 200 millimeter technology and Silicon carbide.

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

However, the opportunity to be the leader of this transformative technology keeps us moving forward as quickly and have purposely as possible to execute and generate value for our stakeholders. Thank.

Gregg Lowe: As we close out the first quarter, I want to reiterate that fiscal 2024 is a pivotal year for Wolfspeed. Remain confident in our long-term vision and our seeing promising results. While I gave some color earlier on design ends, I think it's worth repeating that we had a record design wins for this past quarter as customers ramped their programs. Demand has certainly attracted new entrants, and from our viewpoint and checks in the market, there is not a single player who can match our quality and our scale at 150 millimeter.

Thank you operator, and we're now ready for Q&A.

Thank you if you would like to ask a question. Please press star followed by one on understood. Thank you Pat.

Choose to retract your question. Please press star followed by T.

When the Pan to ask a question. Please ensure you're finding some niche lately.

We ask you please limit yourself to one question per person.

Our first question.

Gregg Lowe: And as I said earlier, no one is close to our position of 200 millimeter. This gap will only widen as we bring the JP online in the first half of fiscal 2025. Secondly, while there have been several new entrants to the materials market Chinese and others, the significant ramp required to create high quality materials is still in front of them. It's taken us 35 years to master this technology, which we know firsthand can be incredibly difficult to work with, let alone scale and produce at the highest quality possible.

<unk> of Jpmorgan. Please go ahead your line is open.

Hey, Thanks, guys. This is actually Joe Cardoso on for Sonic Yeah. So for my one question it sounds like qualifications in the building 10 ramp are tracking well. So as we think about what is keeping you on the sidelines relative to Mohawk, reaching 20% utilization earlier than the June quarter itself can you just.

Walk us through what the key drivers are at this point in the ramp just curious to hear your thoughts on that front. Thanks for the question guys.

Yes. Thank you for thanks for the question first off you're right building tenants in great shape, right now will be producing material.

Gregg Lowe: While I've always said we are taking our competitors at their word regarding their stated capability to produce silicon carbide materials internally, it is highly unlikely that every competitor will be successful. And this will create an opportunity for those with additional materials capacity to secure long-term agreements with device producers or capture an even larger share of the device market. And we are well positioned to do both. Demand remains strong across the business outside of the industrial and energy markets, particularly in China and Asia. Overall, what we have said time and time again about the transition to the use of silicon carbide rings true.

In this quarter that we'll be able to support 50% utilization and obviously, we have two quarters.

After that to get to 20% utilization.

I'll hop Valley, So that's been really great shape.

We've quantified a bunch of different mindsets already and that all of those months followed by first passing so and we've actually two modules as well that have come through on 200 millimeter, which I think is a really good sign for the quality of our back end operation.

The fab itself is the world's first 200 millimeter fab and as such a lot of the machines that are in fab are seeing.

Volume ramp of 200 millimeter silicon carbide for the first time and.

So we're working very closely with our tool vendor to ensure we have better uptime machine.

Gregg Lowe: The EV transition remains the largest change in the history of the automobile. It comes winners and losers and potentially a bumpy path. However, there's no reverting to the internal combustion engine. That is the way the past. Silicon carbide has shown that EVs can be pushed further with extended range, faster charge times and competitive prices. Despite the current softness in China and Asia, demand remains high for our products and customers needs are higher than our current output levels. We are keenly focused on ramping Mohawk Valley to 20% utilization.

Particular machine is seeing.

Hi, downtime more than.

We would then it should.

The team that is completely focused on resolving that as I mentioned I was in the fat last week I met with the engineers from our team as well as the engineer from the vendors team. They are also truly confident that this is a normal process going through as you ramp and we will resolve this.

Track, 20% utilization in the June quarter.

Thank you and our next question does your harsh came out of Piper Sandler. Please go ahead. Your line is open.

Gregg Lowe: Declose. We're excited about this year, fiscal 2023 was not without its challenges, but those challenges come with being the first pursue next generation 200 millimeter technology in silicon carbide. However, the opportunity to be the leader of this transformative technology keeps us moving forward as quickly and purposely as possible to execute and generate value for our stakeholders.

Sure.

Yes, Hey.

Guys I had a quick timing question, so mark quality did $4 million of revenues in the March quarter.

Implies that given the timing the lead time difference conversion packaging et cetera that means a bond quality of wafer runs in the March slash April timeframe at about that $4 million.

Operator: Thank you operator and we're now ready for Q&A. Thank you. If you would like to ask a question, please press star, fill it by one on your telephone keypad. If you choose to retract your question, please press star, fill it by two. Whether parent asked your question, please ensure your phone is unmuted locally. We ask you please limit yourself to one question per person.

So my question really is could you give us a glimpse into what Mark Valley wafer runs are looking like on a dollar basis today.

And that would be that would be the color that I am looking forward.

Hey, Thanks for the question. This is Neil So first of all let me just when you start thinking about utilization of the fab that relates to wafer starts that's really what we're talking about utilization.

Joseph Cardoso: Our first question, go to Samik Chatterjee of JP Morgan, Samik please go ahead your line is open.

That was really a function more of wafer starts so when we talked about that into 15% out of build.

Gregg Lowe: Hey, thanks guys, this is actually Joe Cardoso on for Samik. Yeah, so for my one question, you know, it sounds like qualifications in the building 10 ramp are tracking well. So as we think about what is keeping you on the sidelines relative to Mohawk reaching 20% utilization earlier than the June quarter itself. Can you just walk us through what the key drivers are at this point in the ramp just curious to hear your thoughts on that front.

And this quarter I think we're running papers out of North Carolina.

200 millimeter substrates out of North Carolina that could potentially support that that 15% by the end of this year.

Look out to the end of the year there were still on target to hit the 20% utilization. So what that means is we're seeing solid performance from a substrate perspective backhaul after that what that means.

Gregg Lowe: Thanks for the question guys. Yeah, thank you for thanks for the question. You know, first off, you're right, building 10 is in the right shape right now. We'll be producing material in this quarter that will be able to support 15% utilization. And obviously we have two quarters after that to get to 20% utilization in in Mohawk Valley. So that's in really great shape. We qualify a bunch of different MOSFETs already in that all of those MOSFETs are followed by that first pass and we've actually qualified two modules as well that have come through on 200 millimeter, which I think is a really good sign for the quality of our back end operation.

Again it starts utilization so what that means is you have to put the wafers that you got to run those through the fab.

Second time, you've got to send it to the back end to be either sold devices.

Packaged parts that they had brought the packages and the cycle time on.

On that as well so once we get to the 20% utilization.

Flag is important for those cycle times that you see.

Revenue that corresponds to that so in this case once we get to 20% and that June timeframe, we would anticipate that being from a revenue trend learning from a revenue perspective about $100 million.

As we get to December quarter next year.

Just maybe add one comment to it as material goes through these these tools in the factory.

Gregg Lowe: The fab itself is the world's first 200 millimeter fab and as such a lot of the machines that are in the fab are seeing volume ramp at 200 millimeter solid carbide for the first time. And so we're working very closely with our tools under to ensure we have better up time with the machine, one particular machine is seeing. Down time more than than we would then it should we have a team that is completely focused on resolving that.

We're seeing great results that they go through the tool what we're seeing though is the Dow.

One time or the maintenance required.

It's higher than it should be right now and again I was in the past last week.

Engineers.

Tool side as well as our side and there is a very.

We have good line of sight for what we need to do to.

To get the tool uptime.

Where it needs to be.

And as soon as that happens our ability to transition from relatively low utilization to towards 20%.

Gregg Lowe: As I mentioned I was in the fab last week I met with the engineers from our team as well as the engineer from the vendors team. They are all supremely confident that this is a normal process but going through as you ramp and we will resolve this and the outcome track to 20% utilization in the June quarter.

<unk>.

Should be a very very good snap.

So you should expect that.

As I mentioned.

Last week will be in about two more times than in November including on Thanksgiving day to continue that focus Mohawk valley ramp 20% utilization.

Harsh Kumar: Thank you and on that question does your harsh cream out of the sandler harsh please go ahead line is open. Yeah, hey guys had a quick timing question so Mark Valley did $4 million of revenues in the March quarter. Then implies that given the timing the lead time difference conversion packaging, etc. That means a block Valley wafer runs in the March slash April timeframe about that $4 million.

Thank you and our next question guys, Hey, George <unk> of Canaccord Genuity George. Please go ahead. Your line is open.

Okay.

Good afternoon, and thank you for taking my question I just wanted to get your thoughts on.

Some of the turbulence to say the least and recent discussions around EV plans at some of the big three European Oems and what are your thoughts there and I know you talked about your backlog being so robust that it didn't kind of math.

Neill Reynolds: So my question really is could you give us a glimpse into what more quality wafer runs are looking like on a dollar basis today. And that would be that would be the color that I'm looking for. Hey, Harsh, thanks for the question. This is Neil. So, first of all, let me just start thinking about utilization of a bad and how that relates to razor starts. That's really what we're talking about. So, utilization in the bad is really a function form of, you know, razor started.

For the next couple of few quarters, but what are you seeing in your own business that may or may not reflect what we're hearing in the marketplace. Thank you.

Neill Reynolds: So, when you talk about getting to, you know, 15% out of build and tend to score, that means you're running razor paper out of North Carolina. So, in fact, 200 million years substrate out of North Carolina, that could potentially support the bad at 15% utilization, even by the end of this year. As you look out to the end of the year, we're still on target to get the 20% utilization. So, what that means is we're seeing, you know, solid performance from a substrate perspective to be that goal.

Well, obviously, we would like our Mohawk Valley Fab.

Faster and so what our customers and as such I have been on pretty much weekly calls with Ceos and executives from major Oems and tier ones and basically they are consistent message back to me we need more immediate it soon.

So the demand that we're seeing both near term and long term is very very solid I'll remind.

So many of the cars that are that are being sold today.

<unk> targets that are being sold today were designed 567 years ago.

Neill Reynolds: After that, what that means is, it's, again, it starts utilization. So, what that means is you have to put the wafers in the fad, you've got to run those through the fad, you've got that cycle time, you've got to send it to the back end and be either sold as devices or as package parts that they have sold the packages. So, they're very cycle times on that as well. So, once we get to the 20% utilization, we'll be a bit of lag.

With with Silicon based.

MOSFET for ITT.

And what's really the carmike.

Three important things.

One is it extends the range of the car.

This allows the car to be charged faster from a and then three.

Neill Reynolds: It's important for those cycle times. So, you see, you know, the revenue that corresponds to that. So, in this case, once we get the 20%, in that June time brand, we anticipate that being from a revenue, from a revenue perspective to about $100 million revenue out of the end of December for the next year.

At the at the vehicle level user.

Using silicon carbide allows the vehicle to be less expensive because there are lot.

Actually if you do so much battery life.

<unk> cooling and different things in fact, there was a report a few years ago.

Gregg Lowe: That would just maybe add one comment to it. You know, as material goes through these tools and the factor greatly, we're seeing great results as they go through the tool. What we're seeing, though, is at the downtime where the maintenance required is higher than it should be right now. And again, I was in the fad last week. I met with the engineers. I'm both a toolside, as well as our side. And there's a very good line of sight for what we need to do to get the tool uptime where it needs to be.

For every incremental dollar of silica.

Spend on Silicon carbide over Silicon you get three five to $7 back so basically silicon carbide is enabling longer range.

It's enabling faster charging.

Enabling lower systems cost.

Gregg Lowe: And as soon as that happens, our ability to transition from relatively low utilization to towards this 20% should be a very good snap as we as we fixed that. As I mentioned, I was in the fad last week. I will be in the fad two more times than in November, including on Thanksgiving Day, to continue the focus of Mohawk Valley brand to 20% utilization.

Kind of a trifecta for EV, so any of the noise that you see.

Operator: Thank you, and on the next question.

Hey.

<unk> has no impact on our demand both near term and long term.

And by the way it is.

Yes, Oems and.

And tier ones.

The U S.

In China.

And in Europe.

Thank you and the next question is cheap Brian Lee of Goldman Sachs. Brian. Please go ahead. Your line is open.

Thank you Hey, guys. Good afternoon, thanks for taking the question.

I guess, you mentioned I think Neil during your prepared remarks that.

Implying a stronger step up and Mohawk and <unk>.

Does that imply that the tool downtime issue that.

George Gianarikas: Go to George Giannarrachis of Tannichord Genuity. George, please go ahead, your line is open. Good afternoon, and thank you for taking my question.

Sure.

You guys have been referencing here is sort of done by that point and then if I just look at the numbers to midpoint for Mohawk is up <unk> <unk> sequentially in revenue terms. So is <unk> expected to be up at that level or above or are you talking more in absolute dollars. When you were talking about this bigger step out thanks guys.

Gregg Lowe: I just wanted to get your thoughts on some of the turbulence to say the least in recent discussions around EV plans at some of the big three, European OEMs. What are your thoughts there? And I know you talked about your backlog being so robust that it didn't kind of matter for the next couple of few quarters, but what are you seeing in your own business that may or may not reflect what we're hearing in the marketplace?

Well I think thanks, Brian for the question. So I think as Greg mentioned there. Its obviously a lot of attention now that we're seeing from evolving our substrates.

Supporting the fab fab ramp in a very.

Gregg Lowe: Thank you. Well, you know, obviously we would like our Mohawk Valley brand to be remanded faster and so would our customers. And as such, I've been on pretty much weekly calls with CEOs and executives from major OEMs and tier ones, and basically their consistent message back to many because we need more and needed some. So, you know, the demand that we're seeing both near-term and long-term is very, very solid. I'll remind folks that many of the cars that are being sold today were designed 5, 6, 7 years ago and are with silicon-based MOSFETs or IGBT.

At this point so a lot of the attention is on the fab itself.

We're working very closely with that team.

External vendor teams and whatnot to try and solve what we think are very solvable challenge isn't a bat right now to try to get more throughput.

System uptime and cycle times to start getting material out, but that's our anticipation.

I'll take in revenues, you kind of get to the back back half of the year.

You could take a step back and look at the pieces, maybe unpack those a bit longer than we think about revenue.

Guidance was about 100 million a quarter out of <unk> $995 million, sorry, 100 million a quarter out of term for power devices 995.

Cereal capacity that we've got so the step.

Up in the back half would be from.

Revenue from all of our valid.

Gregg Lowe: And then what silicon carbide does is three important things. One, is it extends the range of the car. Two, is a lot of the car to be charged faster. And then three, at the vehicle level, using silicon carbide allows the vehicle to be less expensive because there are lots of, you know, you use less battery, less cooling and different things. In fact, it was a report a few years ago that said for every economical dollar of silicon, I should spend on silicon carbide over silicon, you get three and a half to seven dollars back.

The $15 million this quarter, you could see us doubling that again next quarter as well.

Q3, so it really will just depend on.

How things play out from a time.

Perspective, and a throughput perspective in the past, but we feel like we've got good confidence right now based on the way.

Teams are working through that.

Sure.

Thank you. Our next question guys, Hey, Joshua <unk> of Cowen. Please go ahead. Your line is open.

Hey, guys. Thanks for taking my question.

That's on the progress I wanted to ask about the timeline of the JP actually so you mentioned it on schedule ramping in the fiscal first half of 2025, what should we how should we expect the cadence of that ramp to look compared to building 10, and the reason I ask is it sounds like there is roughly a two quarter lag between when you get utilization in building.

Gregg Lowe: So basically, silicon carbide is enabling longer range. It's enabling fast charging, and it's enabling lower systems cost, and that's kind of a trifect for EVs. So any of the noise that you see today, it certainly has no impact on our demand for your term in law term. And by the way, that's OEMs and secure ones in the U.S., China, and in Europe.

And when you generate revenue and is that sort of indicative of what we should expect at.

At the J P. When that starts up and any initial indications of how much that could contribute in fiscal 2025. Thank you.

Well I would say, let me maybe kick it off.

Brian Lee: Thank you, and the next question goes to Brian Lee of Goldman Sachs. Brian, please go ahead, line is open. Thank you. Hey, guys, good afternoon. Thanks for taking the question.

Little bit of color to.

J P.

It's a substantially larger facilities that building and as such as we as we turn it on it will it will turn on pretty decent capability kind of right from the start.

Neill Reynolds: I guess you mentioned, I think, the other end of your prepared remarks that, you know, kind of implying a stronger step up in mohawk in 3Q. Does that imply that the tool downtime issue that you guys have been referencing here is sort of done by that point, and then, you know, if I just look at the numbers, 2Q midpoint, 4 mohawk is up like 3X sequentially in revenue terms. So is 3Q expected to be up at that level or above? Are you talking more in absolute dollars when you're talking about this bigger step up? Thanks, guys.

It's on schedule at this point.

Obviously, we want to keep it on schedule. So that's all looking pretty good but basically I would anticipate that.

But as we ramp up the JV.

Okay.

<unk>.

The amount of capability that will be coming online will actually be quite substantial.

Right.

Yes, so on the timing it was it's been a back half of calendar next year.

For in terms of Crystal ball about the JP.

Good shape right now the timeline on our expansions are on track with the timeline and budget perspective. So we feel good about correct. There. However, I would also add to that we're looking for ways to expand our current capacity.

Neill Reynolds: Well, I think, thanks, Brian, for the question. So I think it's right mentioned, you're obviously a lot of attention now that we're seeing the torrented moment or such trees, you know, supporting the fab ramp in a very way at this point. So a lot of the attention is on the fab itself, but we're working very closely with the fab team, the external vendor teams and whatnot to try and solve. But we think our very solvable challenges in the fab right now to try to get more truth with the system, you know, for the other times, and the cycle times and chart getting the cheerlems at that.

<unk> percent, just a bumper that over that timeframe.

Divested in some satellite sites to help with backend wayfaring operations net of tax of operations alphabet.

In addition, there is kind of the opportunity I think in time, some really good performance out of our operations manufacturing team, so yield opportunity operations productivity improvements and throughput capabilities that could bring us job at.

Neill Reynolds: So our justification is that we see an oxygen revenues you try to get to the back, you know, back half of the year. If you take a step back and look at the pieces, maybe the impact goes a bit, you know, moment when we think about revenue. We've got about 100,000,000, a quarter out of Durham, 90, 95 million, so I'm 100,000,000, a quarter out of Durham for power devices, 90 or 95 million material capacity that we got.

That 20% or so capability at the Durham. So we're working through all of those things now putting in extra capacity wherever we can while looking for innovation.

They should other opportunities from a productivity perspective to bring more capacity online. So we're trying to pick.

Neill Reynolds: So the step up in the back half would be from, you know, from 70 for a long amount of value. We have 10 to 15 million this quarter, you could see us, you know, doubling that, you know, again, vegetables as well. So it's going to be interesting to see three. So it only will just the past, you know, how things play out from a uptime perspective and truth of perspective in the past. But we feel like we've got good confidence right now based on the way in the kinds of working through the fab, you know, through pretty well.

From a number of angles that will give you update on that as we make more progress as we go into the <unk>.

Sure. So just to reiterate J P is currently on schedule, we are working with our existing.

Facilities.

Europe.

To increase productivity to give us more than 20% utilization.

The Mohawk Valley Fab and were also utilizing.

Satellite sites for backend operations to <unk>.

Support that J P. As well so we're trying to create a little bit of a belt and suspenders on.

Joshua Buchalter: Thank you on that question, let's do Joshua, the culture of current Joshua, please go ahead, line is open. Hey guys, thanks for taking my question. I think that's on the progress. I wanted to ask about the timeline of the JP, actually, so you mentioned it's on schedule, ramping in the fiscal first half of 2025. What should we, how should we expect the cadence of that ramp to look compared to building 10 and the reason I ask is, it sounds like there's roughly a two quarter lag between when you get utilization in building 10 to when you generate revenue. And is that sort of indicative of what we should expect at at the JP when that starts up in any initial indications of how much that could contribute in fiscal 2025. Thank you.

JP.

Thank you and our next question go to Jed <unk> of William Blair. Please go ahead. Your line is open.

Hi, Thanks for taking my question I guess, two part or really two questions I'll break the rules.

I guess the.

First is your it sounds like things are going better at Mohawk Valley in your Underutilization cost of $37 million.

We're actually better than what you.

What you guided for 34 million better than what you guided in terms of 37%. So I was wondering if you could maybe just.

Gregg Lowe: Well, I would say, let me maybe kick it off and, you know, let me add a little bit of color to it. The J.P, is a substantially larger facility than that building tent. And, you know, as such, as we, as we turn it on, it'll turn on pretty decent capability kind of right from the start. It's on schedule at this point. And, you know, obviously, we want to keep it on schedule, so that's all looking pretty good.

Talk about the revenue implications in terms of is it a direct one for one or is there a lagging effect in terms of.

As Mohawk scales, and then I have a follow up too.

Maybe I'll kick it off and then Nielsen.

Talk a little bit about that.

Yes.

Without a doubt.

We wanted to be ramping Mohawk valley faster than we currently are and our customers wanted that as well so we're not satisfied with the situation.

Gregg Lowe: But basically, I would anticipate that as we ramp up the J.P, is the amount of capability that will be coming online will actually be quite substantial. Yeah, so on the time he was at the back of the calendar next year, 24 in terms of personal growth out of the J.P., which I think is a good shape. But right now, the timeline on our expansions are all on track from the timeline and budget perspective.

Intensely trying to work it so forth I think we've made a lot of really good progress on it.

It obviously building 10 has been very very successful and we are also extremely confident that we'll be able to get these tools with operating the way that they are supposed to.

And we will be able to ramp that up to 20% utilization in the June quarter, Yeah, and then just from a numbers perspective, yes, we did see some benefit on the margin just because of the lower utilization level. Although I did mentioned, we're going to be.

Gregg Lowe: So we feel great about right there. However, I also add to that, you know, we're looking for ways to, you know, expand our forecast out beyond 20% just above prevent it over that time frame. We've invested in some satellite sites to help us back and we bring operations back to the operations to help with that. In addition, there's been a lot of opportunity, I think, in time. It's a really good performance out of our operations manufacturing team.

But we are pursuing from the substrate performance on 200 millimeter, yes, we're going to move as quickly as we can create more capacity online.

It even faster than we thought initially within the battery materials satellite side as I mentioned earlier, so you could see that underutilization number tick up throughout the year.

You're starting to see it come down back in fiscal 2025, and that was really related to adding more capacity given that we're seeing.

Gregg Lowe: So the deal of opportunity operations productivity improvements and true quick capabilities that could bring us down that that 20% or so capability at a during. So we're going through all those things now, you know, putting in extra capacity where we can. Living for, you know, deal about the base and other other opportunities, some of the productivity perspective to bring more capacity online that year. So we're trying to take on, you know, from a number of angles and we'll give you an update on that as we make more progress in the next year.

Obviously, the performance perspective, just to give us as many opportunities to do so.

<unk> our customers as we look out in time as Greg said very heavy demand, particularly on the automotive side right now.

Discussions with customers. So we're looking for where all the ways we can to.

Satisfy.

Their demand.

Absolutely.

Gregg Lowe: So just to reiterate, JP is currently on schedule. We're working with our existing facilities and Durham to increase productivity to give us more than 20% utilization. So the Mohawk Valley fab and we're also utilizing satellite sites for backend operations to support the JP as well. So we're trying to create a little bit of belt and suspenders on JP.

Yes.

Operator: Thank you on our next question.

Great and then just as my follow up if I look at the.

Last quarter, you saw a bump up in the inventory.

And raw materials.

The greatest increase quarter over quarter.

This quarter you saw us slight increase I think a $13 million in inventory I don't know the composition because the Q hasnt been filed.

I'm assuming that most of that is work in process could you just give us some color on that and where I'm going with this is just trying to back into the buildup of inventory from a wafer perspective. Thanks.

Jed Dorsheimer: Go to Jed Dorsheimer of William Blair. Jed please go ahead. Your line is open. Hi, thanks for taking my question. I guess two part or really two questions. I'll break the rules. Yes. I guess first is, you know, your sounds like things are going better at Mohawk Valley and your underutilization costs of 37 million are actually better than what you. What you got it for or 34 million better than what you got it in terms of 37.

Well, let me, yes, thanks, Kevin let me give kind of a high level on that Neil can work through the details on this.

We began working with our raw material suppliers.

2019.

I'm getting ready for what is this big and transformative ramped in silicon carbide, we knew that we were going to need to have them investing in their capacity to support this ramp and obviously I think we've done a really good job of doing that so some of this is just about getting material in place and capacity in place so that we're in.

Neill Reynolds: So is wonder if you can maybe just talk about the revenue implications in terms of is it a direct one for one or is there a lagging effect in terms of it is Mohawk scales and then I have a follow up. Maybe I'm going to check it out in the open time. I'm going to talk a little bit about that. You know, it's without a doubt, we wanted to be ramping all our valley faster than we currently are, and our customers wanted that as well.

I hope not.

Kind of upstream if you will yes, and then from a number standpoint.

I don't think Theres any big pickup in finished goods, primarily related to Ross raw materials and with some raw about ensuring we have enough raw material and capacities to support the substrate ramp as Greg indicated. In addition, we're supplying a lot of wafers out of the <unk> building <unk> from a 200 millimeter substrate capacity in central is up to us.

Neill Reynolds: So we're not satisfied with the situation. We're intensely trying to work at Toport. I think we've made a lot of really good progress. Obviously, Building 10 has been very, very successful. We are also supremely competent that we'll be able to get these tools operating the way that they are supposed to, and we'll be able to ramp that fast to 20% utilization in the June 4th. Yeah, and then just from a numbers perspective, Jed, yes, we did see some benefit on the margin just because of the low utilization level.

The Mohawk Valley, that's another kind of tick up in.

Inventory as well.

Finished goods perspective, I'm comfortable much growth there, we're still we're still continuing to ship to customers.

Within that loan side at this point.

Thank you and our next question. This is Colin Rusch of Oppenheimer. Please go ahead. Your line is open.

Thanks, so much.

Central for folks end up exiting the market.

Neill Reynolds: Although I did mention, you know, we're going to be, you know, base of over-perceived from the substrate performance on 200 Nm. You know, we're going to know who will be quickly as we can create a bit more capacity online. So maybe even faster than we thought initially, we'll be able to do that. And then at the Material Stabilite site, I mentioned it earlier. So you could see that under utilization number kick up throughout the year.

Can you talk a little bit about how to serve the customers are at this point around assessing that risk and how impactful that is in terms of your design wins.

Thank you.

Our cash is to repeat that it was really hard to hear you.

Neill Reynolds: You start to see it come down back in fiscal 2045. And that's just really related to you, you know, adding more capacity to the amount we're seeing from the substrate performance perspective to give us as many, you know, opportunities to, you know, supply our customers, you look out in time. You sure I said, you know, very heavy demand, particularly on the automotive side right now, very advanced discussions with customers. So we're looking for all the ways we can to satisfy their demand with the, you know, more capacity as we look out in time there.

Okay no problem.

You talked about some folks exiting the market.

Selling in the market and then I'm curious about.

Your customers ability to assess the risk of folks not being able to deliver on some of their commitments.

And I'm wondering how impactful that is around your design in design win performance.

Yeah, well I would say that.

We are clearly the leader in Silicon carbide technology.

Hi, substrates to nearly all of the.

<unk> device, some folks out there and obviously see those.

So having that.

Neill Reynolds: Great. And then just as my follow up, if I look at the last quarter, you saw a bump up in the inventory. And raw materials saws, I think the greatest increase quarter over quarter. This quarter, you saw a slight increase, I think a 13 million in inventory. I don't know the composition because the queue hasn't been filed. I'm assuming that most of that is work in process. Could you just give us some color on that and where I'm going with this is just trying to back into the build up of inventory from away for perspective.

Having that strength really underpins their belief in our ability to ramp this technology.

Like I said I've been.

On weekly calls with executives Ceos from our team.

Tier one partners, our OEM customers et cetera, and they're consistent messages, they need more and they needed faster and.

And.

And then they see that.

We're ramping Mohawk valley they'd like us to ramp Mohawk Valley faster.

But the one thing I see is that we have something called Mohawk Valley, we have the world's largest 200 millimeter wafer fab.

Neill Reynolds: Thanks. Well, let me, yeah, thanks, Chad. And let me give us kind of a high level on that. That needle can work through the details on this. You know, we began working with our raw material suppliers in May of 2019, I'm getting ready for what is this big and transformative ramp in silicon carbide. We knew that we were going to need to have them investing in their capacity to support this ramp.

But you've seen that we've been able to solve.

Crystal growth challenge for 200 millimeter and gift building 10.

Operating.

Probably not probably that is the hardest thing to do and getting a silicon carbide MOSFET is getting the wafer and the substrate right.

So I think it's a matter of time for.

For us demonstrating the 20% utilization out of all of our value I think we're pretty close on that as Neil said the building 10 as seating Mohawk Valley now obviously at a higher rate than we're utilizing Animaux hop Valley, we've got plenty of inventory staged.

Neill Reynolds: And obviously, I think we've done a really good job of doing that. So, some of this is all just about getting material in place and capacity in place so that we're not all next, you know, kind of upstream, if you will. Yeah, and then from a number of standpoint, and Jed, that's right. I don't think there's any basic up and finish good time area related to raw raw materials and whip. So raw about ensuring we have enough raw material with capacity to support the substrate ramp is very indicated.

As we as we've now kind of at these last couple of.

The bottlenecks.

I think we're going to see a pretty nice pickup in Mohawk Valley.

And then finally I think it's worth mentioning that.

Neill Reynolds: In addition, we're supplying a lot of wafers out of the mall hall valley. That's the other kind of pickup in inventory as well. From a good perspective, I'm going to see a bunch of raw material. We're still retaining the customers. We're doing a lot more service to be able to do. Thank you.

You have mentioned again.

The fact that we've had first pass qualification on a March thats coming out of it.

Operator: Thank you on the next question.

New wafer fab, a new wafer diameter and so forth.

Jim.

Really points to the fundamental capability of this fab.

It is not normal that you would have a 100% first pass success rate.

All the MOSFET switch products, including a couple of modules and I think that really again.

Colin Rusch: Go to Colin Rusch of Openheimer. Colin, please go ahead. Your line is open. Thanks so much. God, you mentioned the central for folks to end up at good end of the market. Can you talk a little bit about how discerning the customers are at this point around assessing that risk and how impactful that is in terms of your design wins and design. Colin, can I ask you to repeat that? It was really hard to hear you.

In the state that fundamental capability.

Thank you. Our next question Vivek Arya of Bank of America. Please go ahead. Your line is open.

Yes.

Thanks for taking my question, Greg I, just wanted to get your perspective on the next one to two years.

A lot of concern about.

More capacity coming online I understand maybe it's not exactly the same quality.

Colin Rusch: Okay, no problem. You talked about some folks exiting the market or failing in the market. And I'm curious about your customer's ability to assess the risk of folks not being able to deliver on some other commitments. You know, I'm wondering how impactful that is around your design and design win performance. Yeah, well, I would say that, you know, we are clearly the leader in solar and carbide technology supply substrates to really all the device folks out there and obviously feed those to ourselves.

Or is that maybe it might not even have the same cost structure, but the fact of the matter is that is a significant amount of 150 or 200 millimeter.

Capacity.

So how do you look at that are you assuming that the market is under supplied for the next one or two years.

So.

What are your assumptions about industry capacity for the next one to two years.

I think from my viewpoint.

There is going to be a supply demand mismatch there will be more demand and that there will be supply certainly over the next couple of years and probably longer than that.

Colin Rusch: So having that, having that strength really underpins, you know, their belief in our ability to wrap this technology. Like I said, I'm a weekly calls with executives and CEOs from tier one partners are OEM customers, etc. And their consistent messages, they need more and they need it faster. And, and we're, you know, and then they see that, you know, we're ramping Mohawk Valley, they like us to ramp Mohawk Valley faster. But the one thing they see is that we have something called Mohawk Valley.

Repeat something that I said in our prepared remarks this quarter is past quarter.

We recorded a record materials revenue.

So there's a lot of noise about different folks coming online, but the <unk>.

Demand for our materials was very very strong.

We're obviously in constant communication with our materials customers. Many of them are looking for extensions and expansions.

Things like that and then obviously we just.

<unk> the largest capacity reservation market.

Colin Rusch: We have the world's largest 200 millimeter way for fat. They've seen that we've been able to solve the crystal growth, you know, a challenge for 200 millimeter and get building 10 operating. That's probably, that's not probably that is the hardest thing to do. And getting a solid carbide must that is getting the wafer and the substrate, you know, right.

<unk> semiconductor with our deal with Renaissance.

The feedback we're getting from both China is doing a lot of investment.

And silicon carbide, if theyre doing that silicon as well.

Feedback. We're also getting is that theyre not automotive ready F 150, let alone 200, so I really don't anticipate.

Gregg Lowe: So I think it's a matter of time for for us demonstrating, you know, 20% utilization out of all our Valley. I think we'll put it close on that. As Neil said, the building 10 is feeding Mohawk Valley. Now obviously at a higher rate than we're utilizing out of Mohawk Valley. We've got plenty of inventory stage up there. So as we as we knock out these last couple of the bottlenecks, you know, I think we're going to see a pretty nice check up in Mohawk Valley.

A.

Demand being below supply for any anytime in the future next couple of years for sure and probably the next half a decade.

Thank you. Our next question go to Christopher Rolland of Zircon Aha Christopher. Please go ahead. Your line is open.

Thanks for the question.

Gregg Lowe: And then finally, I think it's worth mentioning for, you know, mentioning again, the fact that we've had first pass qualification on these mosquets coming in a new way for fat, a new way for diameter, you know, and so forth, really points to the fundamental capability of this fat. It is not normal that you would have 100% first pass success rate on, you know, all the mosquets which qualify, including a couple of modules. And I think that really, again, I think the fundamental capability.

I guess.

A competitor talked about.

A fairly large downtick in sick for them.

I guess my question for you is.

And you may have just addressed it Greg but.

Is your.

Is your backlog.

Covering all through 2024 and into 2005.

Do you have any problems.

With customers that are looking for push outs et cetera, and would those push outs. If you experienced them would they be fungible or transferable to someone else.

Gregg Lowe: Thank you, our next question, which is Vivek Arya of Bank of America, Vivek, please go ahead and run this open. Thanks for taking my question. Gregg, I just wanted to get your perspective on the next one to two years. There is just a lot of concern about more capacity coming online. I understand maybe it's not exactly the same quality as yours and maybe it might not even have the same cost structure, but the factor of the matter is there is a significant amount of whether it's 150 or 200 millimeter capacity.

Yes, let me let me.

I didn't answer on that and I'll kick it over to Neil for a little bit more detail.

The only area of softness that we see as the industrial and energy basically primarily China and Asia.

Everything else is pretty strong in fact.

One thing I wanted to just kind of give some of the numbers. So when you look at the revenue outlook.

Second half of the year from an auto perspective, as Greg said very very heavy demand and I think that's across the U S. That's in Europe. That's in Asia. So, we're saying there hasnt demand there and that's really a function of how fast we can ramp a lockout brand capacity, we are seeing some softness in industrial and energy.

Gregg Lowe: So how do you look at that? Are you assuming that the market stays under supplied for the next one or two years? Is it just rightly supplied? What are your assumptions about industry capacity for the next one to two years? I think from my viewpoint, you know, there is going to be a supply demand mismatch. There will be more demand and there will be supply certainly over the next couple of years and probably a lot longer than that.

Areas, particularly in China as inkjet right now China represents about 20% of our total revenue again, primarily in industrial and energy space.

But in conversations with customer that's really just kind of.

Tori timing, we're still seeing growth there still very heavy demand from automotive customers.

Gregg Lowe: I would repeat something that I said and I prepared remarks. This quarter, his mass quarter re-recorded a record materials revenue. So there's a lot of noise about different folks coming online, but the demand for our materials is very, very strong. And we're obviously constantly communicating with our materials customers. Any of them are looking for extensions and expansions and things like that. And then obviously we just recorded the largest capacity reservation. In the ministry of semiconductors with our deal with Renasis.

As well so we're really just working through the revenue sorry, the inventory timing if you look out into the industrial side and the third piece of that is a material side as Greg mentioned, we're still seeing very strong demand for 150 millimeter wafers as well so.

We are seeing.

Having been in automotive devices demand, having 150 millimeter substrates little bit of softness in industrial energy.

But we're just looking to match up supply and demand there right. Now so there are pockets, where we can take that supply match it up to where the demand is still remained strong in industrial energy and Thats really what were looking at right now in terms of the outlook.

Gregg Lowe: The feedback we're getting from the boats is that China is giving a lot of investing in silicon carpide. They're doing that in silicon as well. But feedback we're also getting is that they're not a lot more ready at 150 let alone 200. So I really don't anticipate.

Thank you. The next question goes to Natalia linked cloud of Jefferies. Natalia. Please go ahead. Your line is open.

Right.

Hi, Thank you.

Vivek Arya: You know, a demand being below supply for any any time in the future really next couple of years for sure and probably the next half of the decade. Thank you.

I wanted to ask about the new design wins.

This quarter that you guys have seen could you possibly.

I think right, where we are at the most of them are what we think about maybe kind of increase in industrial activity or automotive and just.

Christopher Rolland: Our next question, do she Christopher Rowland of the corner, huh? Christopher, please go ahead. Your line is open. Thanks for the question. I guess today a competitor talked about a fairly large down tick and sick for them. I guess my question for you is and you may have just addressed it Greg, but is your is your backlog covering all through 2024 and into 25? Do you have any problems with customers that are looking for push outs, et cetera? And would those push outs, if you experienced them, would they be fungible or transferable to someone else?

Any additional color would be really helpful.

Okay. So just from a clarification perspective.

We.

We call it design ins and that's when a customer awards us the business.

Then, we say design win and Thats, when a customer transitions into production.

Specifically they have to give us purchase orders for 20% of the first year as anticipated.

Volume that they've declared during the design and so we had $1 billion worth of design wins, which means customers were transitioning from.

They awarded US the program two they are beginning to ramp into production, that's an incredible number by the way.

And it's happening faster than we anticipated.

Believes that was 230 different projects.

Of those were automotive projects others sprinkled around.

Neill Reynolds: Yeah, let me let me start with the answer on that and I'll kick over a meal for a little bit more detail. The only area of softness that we see is industrial and energy basic and primarily that's China and Asia. Everything else is pretty strong. In fact, well, you want to just kind of give some of the numbers. Yeah, so look at the revenue outlook. It's only a second half of the year.

Industrial.

<unk>, but I would say the majority of those were quite bullish.

Thank you. The next question Matthew Prisco of Evercore. Matthew. Please go ahead. Your line is open.

Thanks for taking the question guys.

How should we be thinking about the gross margin path from here, particularly given the commentary on underutilization potentially ticking higher as low to mid 20% still the right range exiting the year and kind of what would be the primary risk drivers that figure at this point either upside or downside.

Neill Reynolds: In fact, from an auto perspective, a great set, you know, very, very happy demand. I think that's across US, that's in Europe, that's in Asia. So we're saying, you know, I have a demand there. That's really a bunch of how fast is in, you know, ramp a lot of balance ramp capacity. We are seeing some softness and industrial energy areas, particularly in China and Asia. Right now, China represents about 20% of our total revenue.

Thanks, Matt Let me just unpack the growth market a little bit.

Look here. So obviously in <unk>, we had a good quarter from a gross margin perspective.

Neill Reynolds: Again, primarily industrial and energy space, but in conversations with customers, where that's really just kind of an inventory timing, we're still seeing growth there. I feel very heavy demand from automotive customers from China as well. So really just working through the revenue, sorry, the inventory timing to look out into the industrial site. And a third piece of data on material side is right mentioned for still seeing very strong demand for 150 moment away for us as well.

At the high end of the guidance range that just really driven by strong performance from our materials operations team.

Very very good cost performance.

Neill Reynolds: So, you know, we're seeing, you know, I think demand heavy and automotive devices, demand heavy 150 millimeter substrates, a little bit of softness and industrial energy perspective, but we're just looking to match up supply and demand there right now. So there are pockets where we can take that supply and match it up to where the demand is still remains strong industrial energy. And that's really what we're looking at right now in terms of the outlook.

Performance, both on the 150 millimeter and 200 Bellatrix subsidiary.

So that was solid and if you go back to <unk> 24, we've reported.

Gross margin of approximately 29%.

And when we divested of RF.

We picked up about 200 basis points of improvement excluding Europe business. So the baseline back in <unk> was about 31% and we just.

About 200 basis points of improvement in gross margin quarter over quarter. When you exclude that underutilization. So I'd say overall good.

The quarter from a gross margin perspective.

And with that a little bit of a lower impact from under utilization, although as I said earlier, you might see that tick up a bit more towards the end of year.

As we bring on more capacity so with that as we look out beyond that we will see an uptick in gross margin as you kind of get into QQ.

Natalia Winkler: Thank you, the next question goes to Natalia Winkler of Jeffree's Natalia. Please go ahead, your line is open. Hi, thank you. I wanted to ask about the new design wins this quarter that you guys have seen. Could you possibly kind of help us figure out where the most of them are? Is there a way to think about maybe kind of increase in industrial activity or what if and just for any additional color would be really helpful.

<unk> solid performance offset a little bit by some of the auto mix that we'll see come into the business.

Continue to support that demand, we're talking about under utilization being $35 million at the midpoint might tick up again to get out the end of the year, but as we get out towards the end of the year at 20% or so gross margin target for getting here still makes sense I think you put that in there it's really going to be a bump the carpet volume that can drive through model are valid.

We said many times already.

Gregg Lowe: Okay, so just from a clarification perspective, we we we call on design ends and that's when a customer awards us the business and then we say design win and that's when a customer transitions into production. Specifically, they have to give us purchase orders for 20% of the first years and participate in volume that they declare during the design in place. So we had a billion dollars worth of design wins, which means customers were transitioning from the award of this to program to their beginning to ramp into production.

While our value I think from a market perspective, that's the case.

Yes, good targets and fabrics.

If you look at the back half.

Thank you. The next question go to Edward Snyder with Charter equity Research. Please go ahead. Your line is open.

Thanks, a lot maybe first a housekeeping just check Neil.

The quarter, if you back out obviously, you've gotten pro forma out the RF business and give you a underutilization charges I'm getting around 32% gross margin. If you get all that out of it and then it looks like.

Gregg Lowe: That's an incredible number, by the way, and it's happening faster than we anticipated. I believe that was 230 different projects. Many of those were automotive projects and the others sprinkle around industrial opportunities, but I would say the major worries, though, we're quite bullish.

The RF business last quarter.

I'm, sorry last year, because you pro forma that was running around 24% gross margin just wanted to check on that and then I had a question about the materials.

Yes.

Yes.

For Q4, we recorded 29% gross margin the RF business was about a 200 basis point drag. So you can think about the XR reps that remain about 31%.

Matthew Prisco: Thank you, the next question goes to Matthew Prisco of Everpool. Matthew, please go ahead, your line is open. Thanks for taking the question, guys. How should we be thinking about the growth margin past of years, particularly given the commentary on under utilization, potentially sticking higher? Is low to mid 20% still the right range exiting the year and what would be the primary risk privacy figures at this point either upside or downside? Thanks.

200 basis points pick up there.

With excluding asset utilization, we saw about 200 basis points pick up <unk> went to <unk>. So.

415, 6%.

With that 17, 4% of optimization.

And accordingly.

As you move into Q3 now.

Little bit of an uptick in utilization does relate to some of that capacity.

Okay.

Neill Reynolds: Let me just maybe I should have had the first market a little bit here. So obviously in one few, we had a good quarter from the first market perspective, you know, at the high end of the guidance range. This is really driven by, you know, strong performance from the material operation team. It just was very, very good cost. He'll help the performance both on that 150 millimeter and 200 millimeter substrate. So that was, you know, solid.

Great and then.

Kind of a detailed survey we did of all the new competitors in China and talking to folks on the ground there. It seemed in the feedback we got from the <unk> conference in Italy.

The feedback seems to be pretty consistent on a die basis will speed is still the preferred vendor even some of your competitors tools too.

And module.

<unk>.

There's work that needs to be done because you've kind of early and modules to begin with but the vast majority of everything you're going to be shipping.

Neill Reynolds: And if you go back to 4 to 24, you know, we reported, you know, growth margin of approximately 29%. And when we get best of RF, we picked up about 200 basis points of improvement, excluding your evidence. So the baseline back and forth, he was about 31%. And we just saw about, you know, 200 basis points of improvement in growth margin, quarter to quarter when you exclude that under utilization. So as they overall, you know, good quarter from a growth margin perspective.

Provided by Wolfe Mohawk Valley is going to be done anywhere right and so as that ramps up.

Some of these deals Greg just looking for European some of these deals where some of your vendors are cutting deals to get any kind of die. They can get now because of the demand far exceeds supply could revert back to hire them once they see the mohawks up it has the capacity to supply it is isn't that a fair assessment.

Neill Reynolds: And with that, a little bit of the lower impact from under utilization, although they said earlier, you might see that take out a bit more toward the end of the year as we bring on more capacity. So with that, if you look out beyond that, we will see enough taking growth margin and you kind of get into QQ. We'll see continued some of the performance, you know, offset a little bit by some of the auto mix that we'll see come into the business.

I think the.

Mohawk Valley will largely be a die story.

But near term, we want some good module business as well, but.

Many of our customers are basically building their own.

Burgers in our own module, so certainly it's going to be a ramp mostly on the dark side of things I would say for the near term.

Neill Reynolds: As you continue to support that demand, we talked about under utilization being 35 million at the midpoint, like take up again as you get out the end of the year. But as we get out for the end of the year, you know, 20% or so, you know, you know, first margin target for the end of the year still makes sense. I think you can put that in there. It's really going to be a month of comment falling and we can drive through all our value.

Great. Thanks.

Thank you Ed Thank you.

That's all the questions that we have time for today I'll now hand, the call back over to Greg Lang for any closing comments.

Just two thoughts before we.

Neill Reynolds: We said many times on road. I think the more value, I think of a market perspective that's the case as well. So I still think that's a, you know, good chart to think about it. You know, make the doc happen.

Before we end the call one demand remains very strong for silicon carbide and two <unk>.

I am personally laser focused on the Mohawk valley ramped to 20% utilization in the June quarter.

Neill Reynolds: Thank you. The next question goes to Edward Snyder of Charter Equity Research. Edward Feastle, Hedge Line is open. Thanks a lot. I'm maybe first out of house keeping, just to check, Neill. The quarter of your back out, obviously you've got a performer out the RF business and giving our new legislation charges. I'm getting around 30% gross margin if you get all that out of it and looks like the RF business last quarter, I'm sorry, last year because you performed, that was running around 24% gross margin.

Thanks, a lot for joining us today and look forward to updating you in our next quarter results.

Thank you. This now concludes today's call. Thank you all for joining you may now disconnect your lines.

Yeah.

[music].

Neill Reynolds: I just want to check on that and then I have a question about the materials. Yeah, so in 1424, we recorded 29% gross margin. The RF business was about 200 basis point drags. You can think about the XRF number being about 31%. That's about 200 basis point to pick out there. The exclusive individualization saw about 200 basis point to pick out 4% to rent a one-tier. So, you know, you reported 15.6% with that 17.4% of one-tierization and the quarter. As you move into, you know, keep doing that. We'll see you build a little bit of an uptick and kind of individualization. That's related to the next task.

Edward Snyder: Great. And then in kind of the detailed survey we did of all the new competitors in China and talking to folks on the ground there. It seemed, and feedback we got from the conference and Italy. The feedback seems to be pretty consistent that on a die basis, Wolf Speed is still the preferred vendor. Even some of your competitors saw that too. And module, you need, there's worse than it needs to be done because you're kind of early in modules to begin with.

Edward Snyder: But the vast majority of everything you're going to be shipping, by the way, Wolf's by Mohawk Valley is going to be dying anywhere, right? And so, as that ramps up, some of these deals, I'd like to just look for your opinions. Some of these deals where some of your vendors are cutting deals to get any kind of die they can get now because the demand is far exceeds fly. Could revert back to higher demand once they see that Mohawk's up and has the capacity to supply it.

Edward Snyder: Isn't that a fair assessment? I think the ramp of Mohawk Valley will largely be a die story for the near term. We want some good you know, module business as well, but many of our customers are basically building their own, in burgers in our own modules. So certainly it's going to be a ramp mostly on the side. Thank you.

Operator: That's all the questions that we have time for today.

Gregg Lowe: I'll now hand back the call, hand the call back over to Greg, low C of any closing comments. Just two thoughts before we, before we end the call. One, demand remains very strong for silicon carbide. And two, I am personally laser focused on the Mohawk Valley ramp to 20% utilization in the June quarter.

Operator: Thanks a lot for joining us today and look forward to updating you in our next quarter's results. Thank you.

Operator: This now concludes today's call. Thanks for joining. You may now disconnect your line. Thank you.