Wolfspeed, Inc.

We expect to ramp down final production and farmers branch by the end of this calendar year. Regarding SARLAN, 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 SARLAN 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 bend 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 and 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. For 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 the quality of the material we're seeing being produced at that facility. Instruction 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 a 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.

Thank you, Greg, and good afternoon, everyone. Following up on Greg's comments, I will hit on three important areas of focus during the call today. First, I will focus on our liquidity and capital structure. With the announcement of the CHIPS PMT and upon completion of that agreement, we will have access to an incremental $2.5 billion of future funding in addition to the approximately $1.7 billion of cash that we ended the quarter with. In combination, this totals greater than $4 billion of capital that we target keeping our cash levels greater than $1 billion for the next several years. Secondly, I will outline in more detail our power device transition to 200 millimeter, resulting in restructuring actions that will simplify our operating model, lower our non-GAAP EBITDA break even to below a $1 billion annual revenue run rate and clearing our path to profitability. Lastly, I will focus on our quarterly results and outlook, incorporating the benefits of our 200 millimeter transition, operational simplification, and restructuring actions. Starting with liquidity and funding, the $2.5 billion CHIPS PMT funding package previously mentioned has three components. $750 million of direct funding from the CHIPS Act, $750 million of debt financing, and $1 billion of 48E refundable tax credits under the CHIPS Act. Regarding the $750 million in direct funding from the CHIPS Act, we expect to receive this funding in multiple disbursements over the next several years, mainly tied to operational milestones at the JP and Mohawk Valley. The first disbursement, which we expect to receive in mid-calendar year 2025, will be roughly 20 to 25% of the total grant size, and will require us to meet the following conditions, executing a definitive direct funding award agreement with the CHIPS office, hitting certain operational milestones, and meeting other financial milestones related to our liquidity, including raising additional capital and refinancing our outstanding 2026 convertible notes prior to their maturity date. Regarding the $750 million in debt financing and customer financing, we have already executed the agreement for the Apollo-led debt financing over three tranches, the first of which was $250 million that we received in October. You'll be required to draw additional debt tranches related to this agreement of $250 million each in conjunction with drawing down on the first two disbursements of the CHIPS grant. We have also finalized an agreement to defer a total of $120 million in cash interest payments due prior to June 30th, 2025, from an unsecured customer refundable deposit agreement. As it relates to meeting the CHIPS award financial milestones, as previously mentioned, we will be required to raise up to $300 million of additional capital from non-debt sources, including equity. To achieve the first disbursement of the CHIPS grant, we are targeting to raise a portion of this amount in equity capital in the near future. As for our convertible notes, the CHIPS PMT provides some optionality for how we can address the maturities. We will closely monitor and assess market conditions prior to taking any action related to our convertible notes. And we will consider all options available to us at that time to determine what is in the best interest of long-term shareholder value. Right now, in order to achieve the first CHIPS disbursement, our focus will be on refinancing or restructuring the outstanding 2026 convertible notes. Regarding the estimated $1 billion of Section 48D cash tax refund, a few weeks ago, the U.S. Treasury Department released final 48D regulations and our capacity expansion investments are fully eligible for this program. Accordingly, we have now increased our accruals to approximately $725 million in 48D tax credits as of the end of the first quarter. We expect to see additional accruals in calendar 2025, and as we complete the JP facility and tool spend, more of these accruals will be added to the balance sheet. We expect to realize the first tranche of cash tax refunds in calendar 2025 and subsequent refunds in 2026 and beyond. In summary, this $2.5 billion funding package, in conjunction with the required capital raises and debt refinancing, will significantly enhance our financial position and support our U.S. capacity expansion plans. This is simply the first step, however, in our journey to improve our balance sheet and accelerate our path to profitability. While we expect to have access to new capital, we will continue to remain relentlessly focused on liquidity and driving operational improvements. Given the higher yields and efficiency of our 200-millimeter production in both substrate and BAV stages, in conjunction with a weaker short-term market outlook, we will lower our capital expenditures in fiscal year 2025 to $1.1 to $1.3 billion. This is a reduction of $100 million versus our prior guidance. This will allow us to largely complete our facility buildout at the JP and Mohawk Valley, while being more proven with tool expenditures in order to match supply output with market demand. However, with the facilities largely complete, we will be poised to respond with tool installations to expand capacity and serve our customers when demand reaccelerates.

Now

that we have made the decision to move our power device business fully to 200-millimeter, this will allow us to restructure our company to significantly simplify our operating model, lower our non-GAAP EBITDAB right-even point, and exit assets we will no longer require for production. As Greg discussed, we have a variety of operational and headcount restructuring initiatives that are already underway to reduce our overall cost basis and streamline operations. These actions upon completion are targeted to generate annual cash savings of approximately $200 million. This restructuring will be cash neutral in fiscal year 2025 and start generating a large portion of the $200 million of annual cash savings during fiscal year 2026. As part of this program, we expect to recognize total restructuring charges of approximately 400 to 450 million over the next several quarters, including $87 million in charges recorded in Q1. We have provided a non-GAAP adjustment and a description of these charges in our earnings released today. These restructuring charges include severance costs, asset impairment, asset disposition costs, and other related expenses of which $170 million to $185 million will be in cash charges. As I mentioned before, these restructuring charges are targeted to be cash neutral during fiscal year 2025. To expand a bit on the restructuring initiatives Greg mentioned, first, as a result of our successful transition to 200 millimeter, we are in the process of closing our Durham 150 millimeter device FAB. This decision underscores our confidence in 200 millimeter technology and its superior yield, better die cost, and overall improved economics. It will be a phased closure, which we expect to complete by the second half of calendar 2025. We expect revenue contribution from the Durham FAB to continue for the next four quarters, with the expectation of a gradual phasing out and transfer of revenue to Mohawk Valley over time. Second, we are in the process of closing our farmers branch 150 millimeter epitaxy facility by the end of this calendar year, with some additional closure work continuing into mid-calendar 2025. We expect most of the workforce reductions associated with this facility closure will occur by the end of this calendar year. As such, we expect to realize initial cash savings in the second half of fiscal 2025, with full cash savings being achieved by early fiscal year 2026. Finally, we are implementing a reduction to our overall non-factory workforce, and this, along with the factory closures, will impact approximately 20% of our total employee base. The majority of these workforce reductions will be completed by the end of this calendar year. We expect to see lower operating expenses and immediate savings in the current quarter and beyond. In addition, as part of our restructuring and simplification plans, we will be divesting non-core assets that we target to generate more than $150 million of cash proceeds in calendar 2025. That would be incremental to the savings goals mentioned earlier. This will allow us to simplify our manufacturing and administrative footprint and focus on delivering our leading silicon carbide technologies to our customers. Post these efforts, our primary manufacturing facilities will consist of materials operations in North Carolina, in both Durham and the J.P. and Tyler City, as well as powered device fabrication at Mohawk Valley and Marcy, New York. In total, these actions will generate significant annualized cash savings and cash generation capability once complete, lowering our non-GAAP EBITDA break-even point to less than $1 billion on an annualized revenue run rate, accelerating our path to profitability. The $2.5 billion of incremental funding through the CHIPS PMT and the actions we have taken to reduce our operating costs puts us on a stronger financial foundation. This clarity on our financial trajectory underscores our commitment to delivering value to our shareholders and solidifies our confidence in the steps we are taking. Now, moving on to our quarterly results. We generated $195 million of revenue for the quarter, slightly below the midpoint of our guidance and down 3% sequentially. We recognize power revenue of $97 million down quarter over quarter, driven largely by lower demand in the industrial and energy sectors. Revenue contribution from Mohawk Valley was $49 million, up more than 20% quarter over quarter, but at the lower end of our range due to lower customer demand within the quarter. We also note that this is the first quarter that Mohawk Valley contributed more power device revenue than the Durham FAB and with higher yields and consistent operating execution, remain poised to deliver higher levels of revenue in future periods. We had materials revenue of $98 million, up slightly from our prior quarter and above our expectations, driven by continued strong operating performance by our materials operations team. Non-GAAP gross margin for the first quarter was 3.4%, down quarter over quarter, but above the midpoint of our August guidance. This included $26 million or approximately 1,300 basis points of underutilization cost, primarily related to Mohawk Valley. Margins were also impacted by lower revenue, driven by industrial and energy mix, and lower product margins from our Durham FAB, but offset by improved yields and operating performance at Mohawk Valley. Operating expenses were $120 million in the quarter, well below our guidance, and down 10 million quarter over quarter, as we continue to manage costs in conjunction with our overall simplification initiatives and restructuring efforts. Adjusted EPS was ahead of the midpoint of the August guidance, as we saw the benefits of the higher gross margin percent and lower OPEX offset the impact of lower revenue mentioned earlier. Turning to the balance sheet, we ended the quarter with a strong cash position, with total cash and cash equivalents of approximately 1.7 billion. This amount does not include the additional $250 million of term loan financing received in October. Free cash flow during the quarter was negative 528 million, comprised of negative 132 million of operating cash flow, and 396 million of capital expenditures. Importantly, with the CHIPS PMT and funding package, as well as the restructuring actions that we're taking, we target maintaining a minimum cash balance greater than $1 billion moving forward. Finally, turning to our Q2 2025 guidance. We target Q2 2025 revenue to be between $160 billion to $200 billion, reflecting the current macro environment and our demand visibility related to EVs. We continue to have ongoing customer demand discussion that we expect to provide more clarity for calendar 2025 as we complete the quarter. The rights revenue at Mohawk Valley is targeted to be between 50 million to 70 million for Q2. Given the near-term variation in the demand outlook and our continued discussions with customers, for the second quarter of fiscal 2025, we are providing a wider guidance range. We expect to complete a planned shutdown to conduct maintenance at both our Durham and Mohawk Valley campuses in Q2. For the Mohawk Valley FAB, we will be completing system tie-ins to increase our utility capacity, which will enable us to reach full FAB output. For the Durham campus, we will be performing standard preventative maintenance on key portions of our electrical infrastructure in order to increase reliability. The impact of these shutdowns has been contemplated in our guidance range. We target Q2 2025 non-GAAP gross margin to be between minus negative 6% to positive 6%. At the midpoint of this range includes approximately 35 million or 1,900 basis points of underutilization costs of $9 million quarter over quarter, primarily related to Mohawk Valley, as we will reduce utilization this quarter to target an inventory burn, as well as complete the scheduled maintenance shutdowns I just mentioned. We target Q2 2025 non-GAAP operating expenses of 110 million, down another 10 million quarter over quarter, and down 20 million or approximately 15% from fiscal 4Q24 to reflect the impact of restructuring actions and cash savings efforts. We are continuing to invest in our business while at the same time structurally simplifying the company to be lower cost and creating a clear path to profitability. We now expect non-GAAP EBITDA profitability in the second half of fiscal 2025 and operating cash flow break even during fiscal year 2026. As market conditions continue to improve, Wolf Speed will be ready. We will be more nimble and agile to respond to customer needs. Thank you, and I'll now turn it back over to Greg for closing comments.

Thanks, Neil. As we close out the first quarter, I want to reiterate the significant progress we've made to achieve the targets that we've communicated and put Wolf Speed on a path for long-term success. As I said at the start of today's call, Wolf Speed is at a critical inflection point in our strategic direction and priorities as an organization. And we are focused on solidifying our capital structure to complete and position our 200 millimeter footprint to generate an annual targeted revenue of approximately $3 billion while optimizing our strategic options. We are simplifying our business to be the 200 millimeter leader with a lower cost structure and capital requirements to accelerate our path to profitability. And we're positioning the company to capitalize on the structural and long-term growing demand for silicon carbide power devices and material. We look forward to providing additional updates on our progress in the coming months. And as always, we would like to thank everyone for your continued support. And now I'll turn it over to the operator for Q&A.

If you would like to ask a question, please press star followed by 1 on your telephone keypad. If for any reason you'd like to remove that question, please press star followed by 2. Again, to ask a question, press star 1. As a reminder, if you're using a speakerphone, please remember to pick up your handset before asking your question. We will pause here briefly as questions are registered. The first question is from the line of Brian Lee with Goldman Sachs. Your line is now open.

Hey, guys. Good afternoon. Thanks for taking the questions. I know you kind of walked through some of this, but maybe just wanted to ask point blank. I know, you know, the dust hasn't even settled on the election results and sort of this potential red sweep, but can you speak to what that means for the Chipsack broadly and then your status with the PMT and just maybe walk us through the next steps here as you think about the implications of last night and then add a follow-up?

Thanks. Thanks, Brian. So, again, obviously we've been in communication with the Chips office on a pretty constant basis both before the election and even today. You know, the localization or the repatriation of the semiconductor supply chain becomes less reliant on foreign supply. It's a national and economic security issue for the US. It's a bipartisan priority and the Chips Act was passed with strong bipartisan support. You know, silicon carbide is especially important as it's becoming really the predominant power technology for high power applications. That includes grid. That includes AI data centers, numerous other industrial applications, and of course, you know, electric vehicles, as we've been saying. Now, the thing that's different is silicon carbide is a US homegrown technology and the US currently has the leadership in this. We've been very much engaged with the Chips program office on this particular point. So, this Chips grant is an investment in keeping the leadership versus trying to get it back or repatriate. And I think the election results doesn't change any of that. There's a very strong bipartisan support for this activity.

Okay, awesome. Appreciate those thoughts. And then just second question related to, you know, some of your customer, one of your customer comments on a recent call. I think Renasas was talking about maybe pulling back on wafer commitments with you. I don't know if that is true or maybe you can provide some details, maybe speak to the latest status there as well with Renasas. And, you know, whether that's specific to 200 millimeter or 150 or both, and then if there are any implications for their deposit with you. Thanks, guys.

Yeah, thanks for that, Brian. You know, Renasas is a great partner. We have a very, very strong relationship with them across multiple levels, including the CEO levels. You know, they are new to the silicon carbide business, so it would be very normal that they're mad with Heaven Flow as they established a foothold in the business. We continue to work with them on their supply chain plans, and that's for both 150 and 200 millimeter substrates in F.

Thank you for your question. Next question is from the line of SOMIC chatter, GU with JP Morgan, your line is now open.

Hey, thanks for the question. This is Joe Cardoso on for SOMIC. Was wondering if you could provide a bit more color on how you guys are envisioning the magnitude and timing relative to the revenue ramp down of the Durham device fab and the impact to your top line through the next year or so, and as you talk to customers around transitioning the capacity that you're currently running out of Durham to Mohawk, what's your sense on the appetite to transition this capacity versus perhaps customers potentially being more reluctant to do so? Basically, just curious if there's any concerns around not being able to capture all of that as you try to transition it from Durham to Mohawk. Thanks for the question.

Yes, I'll kick it off and then maybe Neil will get a little bit more color. You know, obviously, any time you transition from one fab to another, you know, the customers have an input, you know, into that, we're engaged with them. I think the thing that's very different in this particular situation is that we're moving from a very manual, optimized fab to a new, highly automated fab that we believe is going to produce, you know, is producing better results out of the fab in North Carolina and also with higher quality since there'll be less manual interventions than that. We're already engaged with customers on that. We've got a pretty solid plan. I think we're transitioning the vast majority of the revenue up to the factory. There will be some parts that don't transfer, but the vast amount of revenue is planning to transfer to Mohawk Valley. I would note that all of our powertrain customers that we're shipping to today currently have already been qualified and the vast majority of that is shipping already out of Mohawk Valley. So that transition was well underway.

Yeah, and that's just from a revenue perspective coming out of Durham. You know, right now, we are starting to ramp down our automotive products in Durham that's already well underway. I think from an industrial energy perspective, as Greg mentioned, we've qualified both auto and non-auto parts, a very significant amount already at Mohawk Valley. So we'll just transition those parts up there. So as we move into the second half of the year, the fiscal year, we really just think about it from a market perspective. We'll lower revenue, particularly in the Durham fab, in this quarter, we'll burn off some inventory. We'll see how that rebounds in the second half of the year, just driving more towards Mohawk Valley. So we'll see Mohawk Valley revenue continue to increase. And Durham, you know, kind of come down over the following quarters. At least that's kind of our forecast for today. What we can tell is, you know, some customers may make some, you know, end of life or later purchases in the fab. We don't have that baked in yet, but we'll wait to see how those kind of play out. Our expectation is we'll just see a lot more revenue at Mohawk Valley coming forward as Durham starts to come down during the next year, nine to 12 months.

Thank you for your question. Next question is from the line of Colin Rush with Oppenheimer. He'll have it open.

Thanks so much, guys. You know, can you talk a little bit about the competitive environment with your customers on the materials side around moving to 200 millimeters on those wafers and how much of the wafer and materials business is going to migrate into the larger diameter here over the next 12 months?

Yeah, so we are obviously moving our own business to 200 millimeter, and many of our materials customers are interested as well in moving to 200 millimeter over time. We have engaged with many of them in initial discussions about supply agreements on 200 millimeter. I think the week in fact we had several of them visiting the JP to kind of check out what we're doing there. I would say they were pretty impressed with the scale of the operation there. You know, we're at the early phase of discussions on this, but I would say the interest is pretty solid and, you know, the capability that we're demonstrating or the confidence that we're demonstrating by shutting down our 150 millimeter device fab gives them the confidence that our 200 millimeter materials operation is in really good shape. So those discussions are going on right now, and we'll keep you up to date as those come to fruition.

Thank you for your question. Next question is from the line of Jed Dorsheimer with William Blair. Your line is now open.

Hi, thanks. I guess two questions. So first one, maybe Neil, just going back to the previous question, I'm not sure if you, or I didn't hear it, but if Mohawk Valley is doing 50 to 70, did you mention what Durham would be in the devices for the quarter out of that 160 to 200 guide? And then I have a follow up.

Yeah, so if it's coming down, obviously, for 50 to 70, we're roughly at, you know, 60 million or so at midpoint. I think it's going to get powered devices. We're going to see that, you know, bring that down, or primarily related to the industrial energy, you know, burn off in terms of building, you know, inventory burn off at the channel. We will see significant EV growth continue here into the quarter at the midpoint. We are widening the ranges because we're having some customer discussions right now. We do see some, you know, incremental EV demand. So we'll see Durham come down further, and we'll probably see, you know, powered devices in that kind of 90 to 95 lane range kind of at the midpoint, is what we're thinking right now, Jed. So, you know, can you see some, you know, reduction in Durham, burn off some of that, you know, inventory, high income down lower, but, you know, more EV strength.

Got it. And then just as a follow-up, regarding the 26 converts and the raise of the 300 million, is that to retire those, or is your plan to restructure those converts?

Yeah, so as it relates to the, you know, to how we're thinking about executing the plans related to the PMT, you know, as we said on the call, we're just going to look at market conditions. We're clearly going to do what we think is in the best interest of long-term shareholder value to meet those requirements that relate to the PMT. And obviously, that will allow us to drive, you know, very significant liquidity into the business. As I said also, it requires two things. It requires us to raise up the 300 million dollars of equity to receive the full grant. However, it's only a portion of that to get to the first trumps, so that's number one. You asked about the convertibles, and again, to receive the first trumps, we need to refinance a portion of the 2026 converts to go do that. I think I said that on the call. So, we'll look at a number of options to go do that, look at the market conditions, look at where the, you know, obviously where the share price is, and, you know, make a decision depending on, you know, how that looks out here in time.

Thank you for your question. Next question is from the line of George Gianarikis with Canacora Genuity. Your line is now open.

Hi, good afternoon. Thank you for taking my questions. On the recent call you did around the Chipsight Fund, you had mentioned some operational milestones that you had to meet in order to qualify for subsequent tranches. Can you just give us a little bit of color around what those milestones are in your confidence in achieving them given the situation that your fundamentals occurred in? Thank you.

Yeah, the new term, the first tranche, and Neil will go through a little bit of detail in terms of what that first tranche, you know, means. We've got pretty good, I would say we've got very solid line of sight to hitting the milestones that are going in for the first

milestone that we need to hit. Yeah, so I think from an operational perspective, you know, we're in good shape. And as it relates to that first tranche, in addition to the, as I mentioned earlier, equity and convertibles, essentially what you're talking about is 20 to 25% of that first tranche coming in. That would also include the next tranche of the debt financing for another $250 million. So I think between the capital raises, the refinancing, the direct disbursements related to chips and the debt financing will drive, you know, a significant amount of capital into the business. So I think on all fronts, you know, we've got a very solid plan here.

Thank you for your question. Next question is from the line of Joshua Bacalter with TD County. Your line is now open.

Hi, everyone. This is Lanny Ahn for Josh. Thank you for taking my questions. I have two questions for you. My first one, it sounds like you're guiding your materials business down a single digit quarter of a quarter based on the device's guidance of low 90s. Can you talk about the puts and takes there, any timing issues as far as recognition goes, or perhaps demand from your customers who are also probably likely seeing similar weaknesses in industrial and energy revenue? And I have a follow up.

Yeah, so I think in terms of I talked a little bit about, you know, devices, you know, coming down, particularly related to industrial energy, you know, although we are still continuing to see at the midpoint, you know, strength from an EV perspective as you head into the December quarter, you know, as it relates to materials, I think it's similar, kind of similar end market weakness is what we're seeing. We continue to work with customers as we always have, as the timing of shipments and inventory that they're managing related to this end market. We've got very good contracts and very good relationships with those customers. So really just a matter of kind of working through end market demand on the materials front as well.

Yes, that makes sense. And then just a housekeeping question for Neil regarding some of the recent capital raises that you've done with Apollo and the consortium. Could you walk us through how you see interest expense evolving over the next year? So kind of given the change in terms and thank you for the question.

Yeah, sure. So I think so I'll focus on the cash interest. So if you look at, you know, current year versus prior year, we'll actually see the cash interest come down, you know, year over year as you look into 2025, fiscal 25 versus 24. The reason for that is also we restructure the CRD to push out some of the interest cost on that, which will help some of the interest costs come down year over year. So it will also help provide some improvement in terms of our operating cash burns, you think about the second half of the year. So operating cash for it will likely come down based on restructuring actions we talked about on the call, but also related to the lower cash interest. That will start to come back up as we get into, you know, 2026. Our anticipation is when you think at the structural demands over time, we anticipate coming along with the restructuring actions, the savings that we're seeing, the $200 million in cash savings, we'll start to see a big chunk of those as you move into fiscal year 2026. Yeah, we should be in good shape to get covered on that.

Thank you for your question. There are no additional questions waiting at this time, so I'll pass the conference back to Greg Lowe, CEO, for any closing remarks.

Thank you everyone for taking the time to be with us today and we look forward to catching up with you next quarter.

That concludes the conference call. Thank you for your participation. You may now disconnect your lines.