Wolfspeed, Inc. Q1 FY2025 earnings call

• Solidifying capital structure to complete and position the 200mm footprint to generate annual targeted revenues of approximately $3 billion and optimize strategic options.
• Simplifying the business to be a 200mm leader with a lower cost structure and capital requirements by transitioning the entire device business to 200mm, closing the Durham 150mm device fab, Farmers Branch epitaxy facility, and indefinitely suspending Saarland fab construction, and implementing a workforce reduction, targeting annual cash savings of approximately $200 million.
• 200mm fab at Mohawk Valley had revenue exceeding legacy Durham Fab in Q1, with yield and cycle times ahead of plan. Crystal growers at JP are up and running achieving expected targets, and construction at JP continues with expected certificate of occupancy in H1 2025. Durham's crystal growth and substrate processing continues to generate solid output.

For the first quarter, Wolfspeed generated $195 million in revenue. Power revenue was $97 million, down quarter over quarter due to lower demand in the industrial and energy sectors. Materials revenue was $98 million, slightly up from the prior quarter. The revenue from the 200mm fab at Mohawk Valley exceeded the revenue from the legacy Durham Fab in Q1, though this revenue was lower than originally anticipated due to market demand and customer push-outs. Power device revenue from Mohawk Valley was $49 million, up more than 20% quarter over quarter but at the lower end of the range due to lower customer demand within the quarter.

• Lowered fiscal 2025 CapEx guidance range to $1.1 billion to $1.3 billion, excluding federal incentives.
• Q2 2025 revenue guidance: $160 million to $200 million. Device revenue at Mohawk Valley: $50 million to $70 million.
• Non-GAAP gross margin guidance: -6% to 6%. Non-GAAP operating expenses: $110 million.
• Target non-GAAP EBITDA profitability in the second half of fiscal 2025 and operating cash flow break-even during fiscal year 2026.

• Market demand variability and customer push-outs affecting revenue projections.
• Macro-economic pressures in the industrial and energy sectors leading to weakness in demand.
• Dependence on successful execution of restructuring and CapEx reduction plans to achieve profitability and cash flow targets.

Q: How does the election results impact the CHIPS Act and Wolfspeed's status with the PMT?

A: The localization of the semiconductor supply chain is a bipartisan priority. Silicon carbide is a U.S. homegrown technology with strong bipartisan support for the CHIPS Act. The election results don't change the strong bipartisan support for the activity related to keeping U.S. leadership in silicon carbide technology.

Q: Can you provide more color on the revenue ramp down of the Durham device fab and impact on top line?

A: Moving from Durham to Mohawk Valley 200mm fab is well underway. Revenue from Durham will come down as Mohawk Valley's revenue increases. Automotive products are already ramping down in Durham, and most powertrain customers are already qualified and shipping from Mohawk Valley. We'll see a transition of most revenue to Mohawk Valley with some parts not transferring, but the vast majority is planned to transfer.

Q: What's the status on materials business migration to 200mm?

A: Many materials customers are interested in moving to 200mm. We're in initial discussions with them about supply agreements. Customers have visited the JP facility and are impressed, with interest in 200mm materials supply agreements ongoing.

Q: How does the raise of $300 million relate to the 26 convertibles?

A: To receive the first tranche of the CHIPS grant, we need to raise $300 million of additional capital (including equity) and refinance the 2026 convertibles. We'll look at market conditions and options to determine the best approach for long-term shareholder value, including refinancing or restructuring the convertibles to qualify for the grant tranche.