Wolfspeed, Inc. Q2 FY2025 earnings call

Key Priorities

• Dramatically improve financial performance and accelerate path to positive free cash flow.
• Strengthen balance sheet and raise cost-effective capital.

Facility Actions

• Closing Durham 150-millimeter device and epi facilities by end of calendar year. Maintaining CapEx at midpoint of ~$1.2 billion for fiscal 2025, with further CapEx commitments near zero.

Cost Reductions

• Started additional cost reductions in Q3 focusing on operational efficiencies, lower manufacturing costs, and stricter cash management.

Balance Sheet Work

• Scrutinizing investments to lower cost structure, working with Apollo and Renesas, addressing convertible notes, and finalizing CHIPS Act funding agreements.

End Markets

• EV revenue growing but at slower pace; I&E showing green shoots in AI, data centers, energy; channel inventory reduced.

Product Innovation

• Introduced Gen 4 MOSFET platform using 200-millimeter wafers.

Power Devices: Recognized revenue of $91 million, down 6% sequentially; EV revenue grew 92% year-over-year. Materials: Recognized revenue of $90 million, down 8% sequentially; revenue contribution from Mohawk Valley was $52 million, up quarter-over-quarter, expected to be between $55 million to $75 million in Q3. Revenue contribution from Mohawk Valley was $52 million, up quarter-over-quarter, and expected to reach between $55 million to $75 million in the third quarter.

Q3 2025 Guidance

• Revenue: Between $170 million and $200 million.
• Non-GAAP Gross Margin: Minus 3% to 7%.
• Non-GAAP OpEx: $104 million to $99 million.
• Non-GAAP EPS Loss: $0.88 to $0.76.

Fiscal 2025 CapEx

• Midpoint of ~$1.2 billion, with CapEx commitments near zero.

• Demand Uncertainty: EV demand growth slower than expected; I&E market visibility limited.
• Competitive Landscape: China semiconductor policies and competition in 200-millimeter SiC wafer capacity.
• Balance Sheet Challenges: Work on balance sheet initiatives subject to confidential agreements, not addressable in Q&A.

Q: Brian Lee on demand environment, especially EV and I&E demand.

A: Tom Werner discussed EV growth slowing but some models increasing, I&E showing green shoots with lower channel inventory. Neill Reynolds added on EV revenue growth year-over-year and diversity in customer base.

Q: Jed Dorsheimer on CHIPS Act transition and liquidity.

A: Tom Werner mentioned constructive engagement with CHIPS program office, Neill Reynolds talked about liquidity sources and ongoing discussions on 200-millimeter supply agreements.

Q: George Gianarikas on revenue breakeven and revenue targets.

A: Tom Werner and Neill Reynolds discussed cost reduction programs, operational initiatives, and revenue growth expectations.

Q: Samik Chatterjee on revenue transition from Durham and CHIPS milestones.

A: Neill Reynolds talked about revenue mix transition and CHIPS Act operational milestones expected in early 2025.

Q: Jack Egan on wafer thickness and revenue mix.

A: Tom Werner mentioned development of 350-micron wafers, Neill Reynolds discussed revenue mix shift from I&E to EV.

Q: Craig Irwin on competitive dynamics and supplier stickiness.

A: Tom Werner and Neill Reynolds explained material quality impact on device performance, long-term agreements, and customer stickiness.

Q: Harsh Kumar on breakeven, CapEx, and underutilization charges.

A: Neill Reynolds clarified breakeven includes full P&L, CapEx expected to fall close to zero next year excluding maintenance, and underutilization charges depend on revenue and utilization.