Wolfspeed, Inc. Q3 FY2024 earnings call

Management Statement and Operational Highlights:

• Wolfspeed is the world's only pure play vertically integrated silicon carbide company, focusing on the transition from silicon to silicon carbide.
• Mohawk Valley progress: Doubled revenue to $28M in Q3, on track to achieve 20% wafer start utilization by June 2024; die costs better than equivalent dies from Durham.
• Materials: Largest producer of silicon carbide substrates, with Durham facility consistently producing high-quality 200mm wafers. The JP facility: Topped out construction, crystal growth furnaces installed, expected initial boule production by end of 2024.
• Design-ins/design-wins: ~$2.8B design-ins in Q3 (80% for EV applications), ~$870M design-wins, supporting over 125 car models across 30 OEMs over 3-5 years.
• Capacity shift: Moving capacity from industrial/energy to EV due to market challenges, impacting short-term gross margins but positioning for I&E recovery.

Segment Performance:

• Materials: Generated $99 million in Q3, the second highest quarter ever, driven by better-than-expected yields and output on 150 millimeter wafers.
• Power Devices: Mohawk Valley contributed $28 million in Q3, more than doubling the previous quarter's revenue. Total power revenue was $102 million. EV device revenue increased ~48% year-over-year, offset by weakness in industrial and energy markets, particularly in Asia. Revenue from the firm was $201 million for the quarter, a 4% sequential decline but 4% year-over-year increase.

Guidance:

• Q3 2024: Revenue $201M, down 4% QoQ, up 4% YoY. Materials revenue $99M, power revenue $102M.
• Q4 2024 guidance: Revenue $185M-$215M; materials ~$90M-$95M, Mohawk Valley $40M-$50M, Durham power devices $55M-$70M.
• Non-GAAP gross margin 8%-16%, non-GAAP net loss $91M-$109M.
• CapEx: $2B in 2024 (peak), ~$1.4B-$1.6B in 2025 (excluding new greenfield projects); targeting positive EBITDA by FY2025 and operating cash flow breakeven shortly after.

Risks:

• Short-term headwinds from slower industrial and energy markets, particularly in Asia.
• Concerns about Chinese competition in silicon carbide materials and devices; however, renewed supply agreements and strong design-ins suggest continued demand for Wolfspeed's products.

Question and Answer: Q: Concerns about Chinese competition in materials and devices.

A: Gregg Lowe stated Chinese are behind in high-quality automotive-grade substrates and devices; renewed supply agreements with long-term customers indicate continued demand for Wolfspeed's products.

Q: Market share trends and Durham device revenue outlook.

A: Strong design-ins and EV growth; Durham device revenue impacted by I&E weakness, expected to trough and recover later.

Q: Design-in to design-win conversion.

A: Design-ins and design-wins not synchronized; design-ins in Q3 $2.8B, design-wins $870M, with long-term visibility.

Q: Unit economics and CapEx.

A: Transition from I&E to EV impacts short-term margins; CapEx focus on The JP and Mohawk Valley, peaking in 2024, then declining in 2025.

Q: Voltage trends in EV power trains and materials ramp.

A: Trend towards 800V and higher; materials ramp tied to EV demand, with long-term agreements supporting revenue.