Wolfspeed, Inc.

conference call. My name is Lydia and I'll be your operator today. If you'd like to ask a question during the Q&A, you can do so by pressing star followed by one on your telephone keypad. I'll now hand you over to Tal Grombach, Vice President, External Affairs, to begin. Please go ahead.

Thank you, operator, and good afternoon, everyone. Welcome to Wolfspeed's third quarter fiscal 2024 conference call. Today, Wolfspeed CEO Greg Lowe and Wolfspeed CFO Neil Reynolds will report on the results for the third quarter of fiscal year 2024. Please note that we will be presenting non-GAAP financial results during today's call, which we believe provides useful information to our investors. Non-GAAP results are not in accordance with GAAP and may not be comparable to non-GAAP information provided by other companies. Non-GAAP information should be considered a supplement to and not a substitute for financial statements prepared in accordance with GAAP. A reconciliation to the most directly comparable GAAP measures is in our press release and posted in the investor relations section of our website, along with a historical summary of other key metrics. Today's discussion includes forward-looking statements about our business outlook, and we may make other forward-looking statements during the call. Such forward-looking statements are subject to numerous risks and uncertainties. Our press release today and the SEC filings noted in the release mention important factors that could cause actual results to differ materially. Last note, that all discussions today will be on a continuing operation basis. During the Q&A session, we would ask that you limit yourself to one question so that we can accommodate as many questions as possible during today's call. If you have any additional questions, please feel free to contact us after the call. And now I'd like to turn the call over to Greg.

Thanks, Tyler, and good afternoon, everyone. Wolfspeed is the world's only pure play vertically integrated silicon carbide company. 100% of our team's focus is to capitalize on the industry transition from traditional silicon to next generation silicon carbide. helping customers deliver energy efficient products to market and pursuing outsized returns for our investors. We have an unmatched manufacturing ecosystem with first of a kind tools and automation that will allow us to scale our efforts as the electrification of key industry segments gains velocity. With that as a backdrop, I'd like to spend a few minutes covering four points. First, we believe the market is not fairly valuing the company consistent with the technologies and the business we have built or the strategic potential of the business. The management team and the board of directors are focused on this disconnect and routinely consider alternatives to enhance value for shareholders. Second, driving better financial performance and value for shareholders by delivering on our near-term operational commitments for fiscal 2024 and 2025 is at the core of every decision we make. We are laser focused on increasing the utilization at Mohawk Valley, and as I'll talk about in a few minutes, we are making solid progress there. We are also focused on bringing the JP online, where we are likewise making solid progress on that project. Third, Our operational roadmap provides sufficient time to focus all of our efforts on making sure Mohawk Valley and the JP are on track before we move on to new projects, which is not only good for investors, but for our customers who are also counting on us to meet our commitments. At this time, there are not any additional greenfield projects scheduled to launch until we demonstrate further progress on our existing projects. and we expect to significantly reduce capex for fiscal 2025 ahead of receiving any grants or funding from the U.S. government. Finally, we are deliberately and effectively allocating capital. And let me be clear, our current operational performance and development roadmap does not currently contemplate raising dilutive capital that would lock us into a disadvantageous capital structure at this time, especially considering the disconnect between our current valuation and the leadership position we have built in the silicon carbide market. As stated previously, we are working closely with the Commerce Department and other government entities to secure CHIPS Act and related funding to support our U.S.-based projects. Having laid out those points, let's move on to the specifics of Woolspeed's performance over the past quarter. which we believe demonstrates the positive results of our operational focus and discipline, despite the near-term headwinds in the industrial and energy demand. We made strong progress at Mohawk Valley in the third quarter, more than doubling our revenue and delivering $28 million of product to customers from this fab. We are on track to achieve 20% wafer start utilization in Mohawk Valley by June of this year. And to give you a sense of the progress we're making, as of April, We are already at more than 16% utilization based on wafer starts per week, making us extremely competent on our ability to achieve our target in June of 2024. We've made great progress on optimizing factory tool integration, and the operating flow is continuing to improve. Our die costs out of Mohawk Valley are better than the equivalent dies being produced in Durham, which is another sign of the progress we've made in the past year. proud of our team for its strong focus on the Mohawk Valley ramp and its ability to hit each of the milestones we put in place a year ago. From a materials perspective, we are the largest producer of silicon carbide substrates in the world, driven by our Durham facility, which is consistently producing high-quality and high-yielding 200-millimeter wafers out of Building 10. We are continuing to build inventory to support the ramp of the FAB in New York. We already are at a high yield for automotive-grade MOSFET substrates on our 200-millimeter silicon carbide wafers and are now confident that our Building 10 factory will be able to support at least 25% wafer starts in Mohawk Valley. Our leadership position in 200-millimeter materials will continue to expand with the construction of the JP. a game-changing facility that will significantly grow our materials capacity and support Mohawk Valley's annual $2 billion-plus revenue target. Recently, we had the honor of hosting state and local officials, community partners, and employees at a ceremony to celebrate the topping out of the construction at the JP. In attendance that day was U.S. Senator Tom Tillis, another ardent supporter and vocal advocate for Wolfspeed. We have enjoyed significant support for our silicon carbide expansion from all levels of government since we announced our expansion plans in New York and in North Carolina, with visits from President Biden, Senator Schumer, Commerce Secretary Raimondo, Governor Cooper, and Governor Hochul in the last two years. We appreciate their continued partnership and support as we build the world's largest silicon carbide ecosystem. here in the United States. The JP will be instrumental in supplying high-quality 200-millimeter silicon carbide materials to our Mohawk Valley fab. During the quarter, we started installing crystal growth furnaces and connected the facility to the power grid, two major accomplishments made possible by the diligence of our global expansion team and our general contractor, Whiting-Turner. Our teams have struck great partnership by applying the many lessons we learned from the ramp of our Durham materials facility in Building 10. Looking ahead, we expect to begin powering up initial furnaces by the end of June, which will allow us to start qualifying furnaces in the September quarter, leading to initial bull production by the end of this calendar year. Construction has progressed incredibly well, and we are confident in our ability to meet these targets. As we mentioned last quarter, we continue to be a key supplier of silicon carbide substrates to the broader market as evidenced by the two supply extensions that we announced in January. Our LTAs underscore the importance of our role as the leading provider of high quality 150 millimeter substrates to the market. And we will continue to be an important partner to our customers in the years to come. We believe these agreements are an indicator of where the market for alternative sources of silicon carbide wafers currently stands. On 200 millimeter, we're focused on our internal needs around supplying Mohawk Valley, but remain in close contact with our customers to discuss potential 200 millimeter agreements. We've said it before and we'll say it again, silicon carbide is an incredibly complex technology that cannot be rushed or taken lightly. We know this from our 35 plus years of experience and leadership in the industry. Our high quality substrates allow us to produce the highest quality MOSFET devices out of our Mohawk Valley fab, where the ramp is progressing well. As I mentioned, Mohawk Valley generated $28 million of revenues this quarter, ahead of midpoint of our forecast, and more than double last quarter's total of $12 million. Neil will give you more specific guidance on Mohawk Valley in a few minutes, but in general, We expect to continue our strong growth trajectory at the facility. As I said earlier, Mohawk Valley is anticipated to achieve 20% utilization this quarter. We also continue to make progress with Mohawk Valley product qualifications in the quarter, completing five more product transfers, including two MOSFET dye and three discrete MOSFETs. While Mohawk Valley, which currently services almost entirely EV customers, is humming, The I&E market, or industrial energy market, remains challenged and remains weaker than our original expectations, primarily due to inventory buildups across many end market channels, predominantly in the Asian markets. We are responding by shifting I&E capacity, both in Durham and Mohawk Valley, towards EV. Our ability to shift our production from I&E to EV speaks to the flexibility that our business model provides us. However, this end market shift and change in product mix will have a short-term headwind on gross margins, but it will position us well for fiscal 2025, as we could see the start of a recovery for the I&E demand at some point during this period. Unlike I&E, we continue to see a ramp of EVs that have adopted our silicon carbide devices. While this is a disruptive time in industry and we continue to see OEMs adjusting and modifying their near-term EV production plans, we remain substantially supply constrained for our silicon carbide devices. As demand remains well above our current supply, we can be nimble and shift much of our supply to other customers to accommodate for these near-term changes. Underscoring this continued EV demand is our strong design end and design win performance this quarter. As a reminder, a design end represents business we've been awarded, which converts to a design win once we begin ramping into initial production. This quarter, we achieved approximately $2.8 billion of design ends, about 80% of which was for EV applications. marking our second highest total on record, totaling over $7 billion of design ends for fiscal 2024. We're proud to announce that we had approximately $870 million of design wins in the third quarter. These design wins typically mature over the next five to seven years, which provides ample revenue visibility for the foreseeable future. Our backlog of design wins now support more than 125 car models across more than 30 OEMs over the next three to five years. As we continue to execute on our unprecedented greenfield expansion plans and serve the highest quality silk carbide materials and devices to a largely untapped market, we maintain our conviction in our strategy. Our strong design-in and design-win trajectories this year notwithstanding the current gyrations of the EV market. It gives us confidence in the future and the longevity of silicon carbide, and we look forward to continuing our momentum, particularly at Mohawk Valley through the close of fiscal 2024 and beyond. Now, I'd like to pass the call over to Neil to discuss our quarterly guidance.