Wolfspeed, Inc.

Good afternoon. Thank you for attending the Wolfspeed Inc. Q1 fiscal year 25 earnings call. My name is Matt and I will be your moderator for today's call. All lines be muted during the presentation portion of the call for an opportunity for questions and answers at the end. If you'd like to ask a question, please press star one on your telephone key that I'm out to pass the conference over to our host, Tyler Grombach, vice president of external affairs for Wolfspeed. Tyler, please go ahead.

Thank you, operator. And good afternoon, everyone. Welcome to Wolf Speed's first quarter fiscal 2025 conference call. Today, Wolf Speed CEO Greg Lowe and Wolf Speed CFO Neil Reynolds will report on the results of the first quarter of fiscal year 2025. 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 as 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. Lastly, please note that all numbers presented today will be on a continuing operations 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.

Good afternoon, everyone, and thank you for joining us today. World Speed is at a critical inflection point in our strategic direction and priorities as an organization. My comments will be focused on this inflection point and the key priorities for the business, and those include solidifying our capital structure to complete and position our Mohawk Valley device and North Carolina materials facilities to generate an annual targeted revenue of approximately $3 billion while optimizing our strategic options. Simplify our business to be the 200 millimeter silicon carbide leader by lowering our cost structure and capital requirements to accelerate the path to profitability immediately. And capitalize on the structural and long-term growth demand in the silicon carbide transition in the global shift to EVs as well as the industrial and energy markets. We are focused on our 200 millimeter strategy to differentiate and extend our leadership position against the competitive landscape. as a scaled operator with the most advanced and highest quality products in the marketplace. We will continue to improve our financial performance and grow revenue by aligning our robust backlog of $11 billion of design wins with industry cycles and targeted cash savings activities that significantly lower our break-even point and accelerate our path to generate positive cash flows from operations. While EVs have been the biggest driver of silicon carbide adoption thus far, the potential use cases for our technology are expansive, and we believe they will only continue to grow as more and more industries need to solve for the same power loss, system size, and system cost challenges as the automakers. The importance of silicon carbides in the next generation power semiconductor applications is a key reason why we are awarded $750 million in proposed direct funding under the CHIPS and Science Act. a key component to solidifying our capital structure. We also secured $750 million in additional committed debt funding from an investor group that included Apollo, the Baupos Group, Fidelity Management and Research Company, and the Capital Group. Coupled with an estimated $1 billion of Section 48D cash tax refunds that we expect under the CHIPS and Science Act, We now have access to up to $2.5 billion of incremental funding to support our U.S. capacity plan. This funding is an important milestone in Wolfspeed's long-term growth strategy, and it speaks to the quality of our products and the role we play in the broader semiconductor industry. With this funding secured, I'll now address how we're simplifying our business and focusing on our 200-millimeter device platform. lowering our cost structure and capital requirements to accelerate the path to profitability. Wolfspeed is the first silicon carbide company in the industry to transition its entire device business to 200 millimeter. This strategic move is driven by superior yields, improved DIPOS, and overall enhanced economics that we're seeing in our 200 millimeter platform. This will allow us to utilize our capacity more efficiently due to more automated manufacturing at our 200 millimeter Mohawk Valley fab versus our very manual 150 millimeter Durham fab. This will enable us to eliminate redundancies, significantly improving gross margins. The transition to a fully 200 millimeter device platform also provides opportunities to streamline our organization and lower our operating expenses. Considering the slower growth of ED adoption and the continued weakness in industrial and energy, the steps we are taking will right-size the business and generate additional cash savings. These steps include, first, we have begun to execute our plan to close our 150-millimeter device fab on the Durham campus. This closure will be a phased process over the next 9 to 12 months, and we are currently working with customers to finalize the transition timeframe. Second, we are optimizing our capacity footprint by closing our epitaxy facility in Farmers Branch, Texas, and indefinitely suspending our construction plans for the next device fab in Saarland, Germany. We expect to ramp down final production in Farmers Branch by the end of this calendar year. Regarding Saarland, we have spoken with government officials and Zeta, and they understand that we would need to see a clear acceleration of our customer demand and additional capacity requirements before we would reconsider construction at the site. While we are indefinitely suspending our activities in Saarland at this time, should we determine to build a FAB in the future, the end store site remains our preferred site in Europe. Third, we have implemented a workforce reduction in our administrative and other business functions. This reduction, along with the factory closures, will impact approximately 20% of our total employee base. This reduction will better align our business with current market conditions and customer demand. These facility and headcount restructuring initiatives are targeted to generate annual cash savings of approximately $200 million, significantly improving our projected cash flow from operations over time. These actions will foster a stronger, more agile company ready to seize the opportunities ahead. Many of these reductions have already occurred, and we expect to complete the majority of the actions by the end of the year. And lastly, we are further reducing our fiscal 2025 CapEx guidance range by an additional $100 million to a new range of $1.1 billion to $1.3 billion, excluding federal incentives. This reduction will align the pace of our CapEx spend with the broader shift in EV and I&E market demand that we are currently observing. Now let's look at how well positioned the company is to capitalize on the structural and long-term growing demand for silicon carbide, and we'll begin with EVs. As we stated in the past, we are in the very early stage of the most significant and disruptive transition in the auto industry. While this creates a potential for significant growth and opportunity in the long term, It will also result in a dynamic environment in the near term. As with any disruptive technology, we are seeing EV customers revise their launch timelines as the market works through this transition period. This push out in an anticipated EV demand does not reflect diminished confidence in the long-term demand for the adoption of EVs. As China, the world's largest market, aggressively moves forward with the electrification of the automobile, The rest of the world will need to follow and compete, particularly in the context of the stringent emission standards that will be taking effect in coming years. Although demand is expected to ramp more slowly than we originally anticipated, we are continuing to win our share in the EV marketplace. In fiscal Q1, we recorded $1.3 billion of design wins, our third highest on records, and $1.5 billion of design ins. approximately 70% of which were for EV platforms. EV revenue grew 2.5 times year over year, and we expect our EV revenue to continue to grow throughout calendar 2025 as the total number of car models using Will Speed silicon carbide devices in the powertrain increased by 4x from 2023 to 2024 and is expected to grow by another approximately 75% in 2025. For the industrial and energy sectors, we are seeing continued softness primarily due to broader macroeconomic pressures, including higher interest rates and the rising cost of capital, which have delayed investment cycles and contributed to a slower recovery for this sector. These conditions also resulted in shorter lead times and limited visibility throughout the broader supply chain. While the industrial and energy end markets have remained challenged, with orders remaining weak, we are seeing an increase in end customer demand as inventory levels in the market are starting to decline. As such, we expect the market will begin to recover in the first half of calendar 2025. And as we see broader market conditions further stabilize and move forward to recovery, we'll be prepared to support the increased demand. Now let's take a minute to cover the great progress we've made in building out our 200 millimeter footprint. the first time the revenue from our 200 millimeter fab at mohawk valley exceeded the revenue from our legacy durham fab in q1 while this revenue was lower than originally anticipated due to market demand and customer pushouts we continue to see great performance out of the fab with yield and cycle times ahead of plan and anticipate future improvements as we ramp the fab in addition at the jp We have crystal growers up and running and have been achieving our expected targets with quality of the material we're seeing being produced at that facility. Construction at the site continues and we expect to receive a certificate of occupancy in the first half of calendar 2025. Crystal growth and substrate processing out of building 10 in Durham continues to generate solid output and yields. This level of productivity will allow for a more measured ramp and therefore more measured level of spend at the JP. Now to quickly summarize before passing over to Neil. We are solidifying our capital structure to complete and position our 200 millimeter footprint to generate annual targeted revenues of approximately $3 billion and optimizing our strategic options. At the same time, we are simplifying our business to be a 200-millimeter leader with a lower cost structure and capital requirements to accelerate our path to profitability. And the company is well-positioned to capitalize on the structural and long-term growing demand for silicon carbide power devices and materials. And with that, I'll turn it over to Neil to discuss our financials and our guidance.