Wolfspeed(US:WOLF)2021-04-29 01:59Financial Data and Key Metrics Changes - Revenues for Q3 2021 were $137 million, exceeding the high end of guidance, representing an 8% sequential increase and a 21% year-over-year increase [10] - Non-GAAP net loss was $24.7 million or $0.22 per diluted share, with non-GAAP earnings excluding $41.8 million of various expenses [11] - Non-GAAP gross margin for Q3 was 35.0%, slightly down from 35.4% in the previous quarter due to higher factory costs [14] - Cash generated from operations was negative $27 million, with capital expenditures of $138 million, resulting in negative free cash flow of $165 million [15] Performance by Business Line - Power segment showed solid performance driven by momentum across various sectors, with a notable year-over-year revenue increase of over 50% [12] - RF segment experienced improving trends due to increased 5G activity, with a growing backlog as 5G rolls out globally [12] - Materials segment saw a modest uptick in order flow, consistent with expectations for the latter half of fiscal 2021 [13] Market Data and Key Metrics Changes - Strong adoption of silicon carbide in automotive and industrial sectors, with increasing demand as industries transition from silicon-based to silicon carbide-based high-power electronics [9] - The company is well-positioned to capitalize on long-term growth opportunities in the semiconductor market, particularly in electric vehicles and communications infrastructure [8] Company Strategy and Industry Competition - The company aims to become a pure-play semiconductor powerhouse following the divestiture of its LED business [7] - Investments are being made to expand capacity, particularly with the launch of the Mohawk Valley Fab at 200 millimeters, expected to support increased adoption across various sectors [17][37] - The competitive landscape is evolving, with increasing interest from OEMs in silicon carbide technology, particularly in the context of electric vehicles [66][94] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term prospects, citing strong demand in core markets and a robust device opportunity pipeline exceeding $10 billion [26] - The company anticipates continued momentum in Power and RF device product lines, with Q4 revenue expected to be between $142 million and $148 million [20] - Management acknowledged challenges related to factory transitions and productivity but remains optimistic about future margin improvements as capacity ramps up [90] Other Important Information - The company completed an equity offering with gross proceeds of approximately $500 million to bolster liquidity for growth initiatives [16] - Fiscal 2021 is expected to be a peak investment year with capital expenditures projected at approximately $550 million [17] Q&A Session Summary Question: Changes in discussions regarding silicon carbide vs. silicon IGBT - Management noted that discussions have shifted from cost comparisons to system-level benefits of silicon carbide, with OEMs increasingly favoring silicon carbide for their platforms [45][46] Question: Margin expectations and adjustments - Management indicated that margins are expected to decline in the short term due to product mix and capacity ramp-up challenges, but they anticipate a return to mid-30s margins in the second half of the year [52][90] Question: Impact of macro base stations on GaN RF device business - Management stated that their engagement in the base station area in China is limited, and they are seeing wins outside of China despite the shift to macro base stations [73][75] Question: Supply chain issues affecting customer purchasing - Management does not foresee direct impacts on purchasing due to supply chain issues, as their focus is on preproduction vehicles and future growth [77][80] Question: Details on new GaN on silicon carbide products - Management confirmed that they are sampling new products and expect them to be margin accretive, with significant interest in RF products [82][84] Question: Competitive landscape and market opportunities - Management acknowledged the growing interest in silicon carbide and the potential for new competitors, but emphasized their leadership position and ongoing investments to maintain competitiveness [94][98]