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

Good afternoon. I'm Darren Jackson, Wolfspeed's Chairman of the Board. We appreciate your attendance today and welcome you to this 2021 Annual Shareholder Meeting. We're conducting our second hybrid annual meeting. This means the meeting is being held both at Wolfspeed's headquarters and virtually via the web portal. We decided it was prudent to conduct this year's annual meeting in this hybrid format in light of the COVID-19 public health challenges. It allows for a higher level of safety for those present in the room at Wolfspeed and compliance with North Carolina law. Practically, it allows us to be more inclusive and hopefully, reach a greater number of our shareholders. Before we begin, I'd like to introduce our Board members standing for election this year that are present virtually today. You can find their backgrounds in the proxy. Glenda Dorchak; John Hodge; Clyde Hosein; Duy-Loan Le; Gregg Lowe, our President and CEO; John Replogle; Marvin Riley; and Tom Werner. I'd like to also introduce Neill Reynolds, our CFO; and Brad Kohn, our General Counsel and Corporate Secretary. I will now turn the meeting over to our Corporate Secretary for the conduct of the official business of the meeting. Brad?

Thank you, Chairman Jackson. The meeting will now please come to order. Please note that this meeting is being recorded. However, no one attending the meeting via the web portal or via telephone is permitted to use any audio recording device. [Operator Instructions] Questions will be answered following remarks from our Chief Executive Officer, Mr. Lowe. And 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. I note that I 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 inspection 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 27, 2021. 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 the meeting. Chuck Burnside, the company's Vice President of Accounting and Tax, has been appointed Inspector of Elections for this meeting. If there is anyone holding proxies that have not yet been submitted or who 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 in person or by proxy. The inspector has delivered to me his report in which he has determined, based on a count of the proxies previously submitted, that the holders of shares representing a majority of the shares outstanding on the record date are present today in person or by proxy. So based on the inspector's report, I find that a quorum is present for all purposes and that this meeting has been called, therefore, to consider the following items of business: the election of 9 directors; secondly, the approval of an amendment to our bylaws to increase the authorized number of directors to a minimum of 5 and a maximum of 10; thirdly, the ratification of the appointment of PricewaterhouseCoopers LLP as independent auditors for the current fiscal year; and fourth, an advisory vote to approve executive compensation, all as 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 virtually to respond to appropriate questions and is welcome to make a statement if he so wishes. The company's bylaws require that shareholders give prior notice of any nomination or proposal the shareholder may wish to present. There are no shareholder nominations or proposals, and therefore, only the 4 items described in the Notice of Annual Meeting may be considered today. Does any shareholder wish to discuss the matters to be voted on? 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 do 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 are 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 or the 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 Wolfspeed. Gregg?

Thanks, Brad, and good morning. And thank you for joining us today. And while we continue to confront the challenges associated with the global pandemic, I'm extremely proud of what our team has accomplished in fiscal 2021. I want to take a moment to thank our employees around the world for their dedication and commitment, and thank you for your support, which is instrumental to our success. As you may have seen, on October 4, we officially changed our name to Wolfspeed and began trading under a new ticker, WOLF, on the New York Stock Exchange. These changes mark the culmination of a 4-year journey to build a global semiconductor powerhouse that is leading the industry transition from silicon to silicon carbide. They also set the stage for significant growth we are anticipating by aligning our brand with the value that we deliver to our customers. As we continue to navigate the effects of the pandemic and the ongoing global economic challenges, we remain very confident in the long-term opportunity ahead of us, we are -- we see accelerating demand for silicon carbide based, high-power electronics across a range of industries, most notably an even steeper demand in automotive. During the past year, we achieved several key milestones and made really good progress in key areas, progressing from moving dirt to installing equipment in the clean room of the world's largest and the world's only 200-millimeter silicon carbide fab in Upstate New York, which is a critical element in supporting our long-term strategy, given the steepening demand curve for silicon carbide we are seeing in 2024 and beyond. The facility remains on track to begin processing 200-millimeter wafers in the first half of calendar '22. At the same time, we continued the expansion of our crystal growth and wafer production capacity here in our North Carolina campus, furthering our efforts to establish a silicon carbide corridor on the East Coast. We continue to convert device pipeline opportunities at record levels, as evidenced by the more than 1,100 customer projects designed in at this year alone. In fiscal 2021, we secured approximately $2.9 billion of design in commitments, which include a major strategic sourcing agreement with General Motors for silicon carbide devices to power their electric vehicle platforms. Across the globe, we continue to see momentum and action from both private and public entities regarding energy efficiency, with everything from cars to gaming systems, all of which are major catalysts in the transition from silicon to silicon carbide and will only increase demand for our products. Revenue in our Wolfspeed business in fiscal 2021 increased 12% compared to fiscal 2020 due to the growth of our device business. We continue to win new business, and our balance sheet remains healthy to support growing opportunities. Demand in the core automotive and RF markets continue to be strong, and we are encouraged by growing interest across a variety of industries and energy customers. Our device opportunity pipeline is now above $15 billion, and the team is continuing to uncover new opportunities at a very rapid pace. To support our expected growth across all functions, we continued vital progress in talent development, from attracting and retaining seasoned semiconductor leaders across the industry to nurturing a steady pipeline of young professionals through our intern program and partnerships with local universities. Our employees remain our biggest differentiator and taking care of them will continue to serve our guiding principle. We used their feedback to establish new forms of communication and deliver positive change in our work environment, the introduction of our Work Where It Works program provides our employees flexibility about where and when they work. Additionally, as the pandemic continues to impact the communities where we work and live, we have found creative and impactful ways to help those with the greatest need, including our Matching Gifts program, supporting hunger and housing relief and educating and early intervention programs through science, technology, engineering and math programs. Suggested by our employees and in line with our company values, these programs aim to close the opportunity gap in our communities through advancement of diversity, equity, inclusion and social justice initiatives. It is clear our employees are our greatest thought leaders, and we remain committed to creating and sustaining a culture, where all employees are engaged and empowered to contribute to their full potential. Looking ahead, we are at the beginning of a multi-decade secular shift to silicon carbide with the demand curve that we believe is steeper than originally expected. The next-generation in power semiconductors will be driven by silicon carbide technology, with superior performance that unleashes new possibilities with electric vehicles, 5G, industrial and energy applications and beyond. As we look forward to the future as Wolfspeed, we believe we are well positioned to unlock unprecedented levels of growth through our leading technology, secure financial foundation and seasoned leadership, along with continued support from our employees, partners, customers, investors and stakeholders. Thank you for your continued interest and support. We invite you to join us at our November 17 Investor Day webcast from the New York Stock Exchange to learn more about our long-term plans. We look forward to remaining -- reimagining a more sustainable world and doing that together. And I'll now turn it back over to Brad.

Thank you, Gregg. Tyler, are there any questions in the web portal?

No, there are none.

Are there any questions in the room? Yes, ma'am?

[ Did the Cree shares transferred 1:1 to Wolfspeed's share ]?

Yes. The Cree share was transferred 1:1.

Seeing no other questions in the room, we'll return to the business of the meeting. It appears that all shareholders who wish to vote have done so. It is 12:13 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, and the 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, and 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 officially adjourned. Thank you for joining us today.

Thank you.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.