Wolfspeed, Inc. (WOLF) Earnings Call Transcript & Summary

Great. Good afternoon. I'm Darren Jackson, Cree's Chairman of the Board. We appreciate your attendance today and welcome you to the 2020 Annual Meeting. We're excited to be holding our first hybrid annual meeting. This means that the meeting is being held both at Cree's headquarters and also virtually via the web portal. In light of public health concerns regarding COVID-19 pandemic, we decided it was prudent to conduct this year's annual meeting in the hybrid format, with most shareholders attending in a virtual format. While this allows for a higher level of safety for those present in room at Cree, compliance with North Carolina laws also allows us to be more inclusive -- be more inclusive and hopefully, reach greater number of shareholders. Before we begin, I'd like to introduce our Board members. Standing for election this year, they are present virtually today include: Glenda Dorchak, Director of Viavi Solutions, ANSYS and GlobalFoundries; John Hodge, founding partner of Rubicon Technology Partners; Clyde Hosein, CFO of Automation Anywhere; Duy-Loan, President of DLE Management Consulting; Gregg Lowe, our President and CEO; John Replogle, the founding partner of One Better Ventures; Tom Werner, CEO of SunPower Corporation; and Anne Whitaker, CEO of Aerami Therapeutics, Inc. I'd like to also introduce Neill Reynolds, our CFO; Brad Kohn, our General Counsel and Corporate Secretary. I will now turn the meeting over to our Corporate Secretary to conduct the official business of the meeting. Brad?

Thank you, Darren. The meeting will now please come to order. Please note that this meeting is being recorded. However, no one attending via the web portal or telephone is permitted to use any audio recording device. I'd like to point out that validated shareholders participating virtually may submit questions at any time during the meeting in the space provided in the web portal. [Operator Instructions] Though we may not be able to answer every question, we will do our best to provide a response to as many as possible today and in the coming days in our earnings call or on our corporate website after the meeting. I note that I have received the notice of meeting mailed to shareholders and an affidavit sufficient to evidence that the meeting was duly called in accordance with the company's bylaws. At the inspector of elections table here in the room is a list of the shareholders of record on the record date for the meeting, which was August 28, 2020. The list will remain open for inspection during the meeting by any record shareholder or the shareholder's representative. This list is also available for inspection during this meeting by any record shareholder on the website used to access this meeting. [ Mike Beelen ], the company's corporate controller, has been appointed inspector of elections for this meeting. If there was anyone holding proxies that have not yet been submitted or intends to vote their shares in person, please report to the inspector at this time. To establish that we have a quorum to conduct business, the holders of a majority of the shares outstanding on the record date must be present today or in person by proxy. The inspector has delivered to me his report in which he has determined based on account of the proxies previously submitted that the holders of shares representing a majority of the shares outstanding on the record date are, in fact, present today in person or by proxy. Based on this inspector report, I find that a quorum is present for all purposes, and this meeting has been called to consider the following business: the election of nine directors, the approval of the Cree 2020 employee stock purchase plan, the ratification of the appointment of PricewaterhouseCoopers LLP as the independent auditors for our current fiscal year, and an advisory vote to approve executive compensation, all as was described in the notice of annual meeting and proxy statement previously made available to shareholders. I note that Garret Tripp of PricewaterhouseCoopers, the company's independent auditors, is present today to respond to appropriate questions and is welcome to make a statement if he wishes. The company's bylaws require that shareholders give a prior notice of any nomination or proposal the shareholder may wish to present. There are no shareholder nominations or proposals today, and therefore, only the 4 items described in the notice of annual meeting may be considered. It is now 12:05, and I declare the polls open. If you are a shareholder entitled to vote and have not yet voted, or if you want to change your previously cast vote, you may do so by ballot here in the room or by voting online if you are attending virtually. If you wish to vote by ballot and have not already delivered your ballot to the inspector of elections, please do so at this time. If you're attending online, you have the ability to vote by clicking the voting button on the web portal and following the instructions there. You do not, I repeat, you do not need to vote by ballot or online if you have previously voted using the proxy card, audience instructions accompanying the proxy statement. While the votes are being collected and tabulated, our CEO, Gregg Lowe, would like to take a few minutes to give you a brief update on Cree.

Good morning, and thank you for joining us today. Fiscal 2020 was an important year for us as we made significant progress on becoming a global semiconductor powerhouse, while at the same time, addressing the unexpected challenges associated with the pandemic and ongoing geopolitical concerns. Our facilities have remained open throughout the pandemic. And we have implemented a stringent set of protocols to keep our people safe while at work. I'd like to take a moment to thank all of our employees around the world. I'm extremely proud of their dedication to keeping our businesses running and serving our customers during this difficult time. All of their hard work during this pandemic has helped us transform the company in 2020. Our innovative solutions are driving changes across the semiconductor market, enabling greater efficiency and performance, smaller systems and lower costs. We are helping customers to electrify the automotive drivetrain and deliver longer-range, faster-charging electric vehicles, extend wireless infrastructure to unlock the potential of smart cities and enable new systems to broaden the adoption of alternative energy. Helping our customers do more with less is at the core of what we do. In support of this effort, we forged a partnership with the state of New York to break ground on the world's largest silicon carbide device manufacturing facility, our Mohawk Valley Fab This state is helping us defray about half of the build and has been a fantastic partner. We've made solid progress on the construction and expect the facility to be operational in 2022. Aside from the new construction, we're also expanding our materials factory here in Durham as part of an overall plan to increase capacity and establish a silicon carbide corridor here on the East Coast. Our capacity expansion plans are a key differentiator when we meet with customers, which, coupled with our superior technology and silicon carbide's demonstrated advantages, is encouraging our customers to accelerate their adoption of silicon carbide. The momentum has resulted in an opportunity device pipeline that is above $10 billion. We are well positioned to win opportunities as our diversified and growing product portfolio remain a key competitive advantage in the marketplace. We released more than 60 new Wolfspeed products during fiscal 2020. Finally, last week, we accomplished a critical milestone in our transformational journey with the proposed divestiture of our Cree LED business to SMART Global holdings for up to $300 million. This agreement establishes Cree as a pure-play global semiconductor powerhouse with a strong financial profile and positions us well to continue to lead the industry transition from silicon to silicon carbide. This transaction sharpens our focus exclusively on our innovative Wolfspeed business and will allow us to deliver long-term value to our shareholders. In addition to the operational expansion and commercial endeavors, we are also making investments in our people and the community. We're creating opportunities for our employees through an internal mobility practice that combines ongoing workforce development, leadership training, education assistance and career path planning. We also continue to make progress fostering a culture of diversity, equity and inclusion, encompassing all employees' differences and identities. It is important that we build an environment where inclusivity is real and active rather than theoretical and static. To lead this effort, we appointed our first director for diversity, equity and inclusion, Tamara Pearce. Lastly, we are committed to serving the communities where we operate through our community engagement program. Our focus on closing the opportunity gap through STEM programs from early intervention through the college level is underpinned by ensuring our neighbors have enough food to eat and a safe place to sleep. This enables students to focus on the important work of achieving their full potential. Our efforts through the direct contribution and employee volunteerism build important relationships with our community, including those historically underserved with the same spirit of passion and innovation that drives our business. This year, we announced a significant partnership with SUNY Poly in New York, donating $3.5 million to establish the Cree Wolfspeed scholarship program. And the Dr. John Edmond and the Dr. John Palmour Endowed Faculty Chairs for the continued expansion of STEM opportunities. The scholarship support will help ensure students who come from historically underserved or marginalized communities have greater access to educational opportunities. We have also partnered this year with North Carolina A&T University here in North Carolina, donating $4 million to establish the Cree Wolfspeed Endowed Scholars program. N.C.A&T is the nation's #1 ranked historically black university, producing more engineers than any other historically black college or university. This marks the single largest donation in their history and is designed to encourage and support students who choose to study in the college of engineering or the college of science and technology. Through the scholarship, students will have an opportunity for a paid and summer internship at Cree Wolfspeed as well as full-time employment with the company after graduation. As we look ahead to fiscal '21, we are firmly committed to our long-term strategy. While we expect to continue to address the challenges related to the pandemic in the near term, we are encouraged by the growing demand we're seeing and expect more opportunities to materialize in our business throughout fiscal '21. We have a strong balance sheet and financial position that will help fund our operations and future growth. I'm very confident in our path forward and believe the underlying trends we are seeing underscore the opportunity we have ahead of us. Thank you, again, for joining us today, and thank you for your continued support of the company. I'll now turn it back over to Brad.

Thank you, Gregg. Seeing no questions in the web portal, I'll return to the business of the meeting. It appears that all shareholders who wish to vote have done so. It is 12:13 p.m., and I therefore declare the voting closed. The inspector has delivered his preliminary report with the results of the voting prior to today's meeting to me. Inspector's report shows that all the proposals received the votes required for approval and that the advisory vote on executive compensation was favorable. We will file the final report of the inspector of elections with the records of this meeting. We expect to report the results of the voting on a Form 8-K to be filed with the SEC within 4 business days of this meeting. That concludes the business to be conducted, and the meeting is adjourned. Thank you, again, for joining us today.

This now concludes the meeting. Thank you for joining, and have a pleasant day.