Wolfspeed, Inc.

Hello, everyone. Thank you for attending today's Wolf Speed Incorporated Q2 fiscal year 2025 earnings call. My name is Sierra and I will be your moderator for today. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you would like to ask a question, press star one on your telephone keypad. I would now like to pass the conference over to our host, Tyler Grombach, VP External Affairs.

Thank you, operator and good afternoon. Everyone welcome to will speed 2nd quarter fiscal 2025 conference call. Today will speed the executive chairman Tom Werner and we'll speed CFO. Neil Reynolds. We'll report on the results for the 2nd quarter fiscal year 2025. also in attendance is Jay Cameron, our head of power devices and Rick, our head of sales and product marketing. 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 our 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 and one follow-up so that we can accommodate as many questions as possible during today's call. Also, any discussions surrounding our work to strengthen our balance sheet, at least initially, will take place pursuant to confidential non-disclosure agreements. And therefore, we will not be addressing any specific questions on balance sheet initiatives involving Renesas, our convertible notes, or Apollo during the Q&A session. 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 Tom.

Good afternoon, and thank you for joining me today. By way of introduction, I have been a member of the Wolf Speed Board for 19 years. have served as chairman of the board before assuming my current role. Throughout my years with the company, I've had the opportunity to support the business in its transition into an established leader in silicon carbide and have developed a solid understanding of the business, the technology, employees, and the market. Since stepping into the role as executive chairman in November, I've dedicated my efforts to examining every aspect of the company with a fresh perspective, aggressively executing against our plan to achieve our financial and operational targets and ensuring we are intensely focused and accountable to improve financial performance. I have visited both Mohawk ValleyFab and the Cyber City locations multiple times. I'm impressed with the advanced capabilities of both facilities and with the Wolfspeed teams that run them. This work is reaching the first phase of completion, and it is now time to leverage the advantage of these facilities. With that said, it is critically important that we continue to execute on the plan that was outlined on the last earnings call in early November to accelerate our profitability and optimize our capital structure. This will allow us to leverage the best-in-class assets and capabilities we have already built and capitalize on the long-term opportunities that lie ahead. I, the board, and the management team have aligned on an operating plan driven by the key priorities that will be our focus over the coming months. We believe focusing on these priorities in the immediate term will put Wolfspeed on a path toward long-term growth and profitability. We must dramatically improve the financial performance of the company and accelerate our path to generate positive free cash flow. Second, we will continue to take aggressive steps to strengthen our balance sheet. And third, we will continue our efforts to raise cost effective capital required to support our long term growth plan. Work on these initiatives is well underway. And I'd like to share some of the progress we've made thus far. By focusing on our purpose-built 200-millimeter greenfield facilities, this is an opportunity to simplify our operating footprint and focus on best-in-class execution to improve our financial performance. We are continuing with the closure of our Durham 150-millimeter device facility and the closure of our 150-millimeter Epi Farmer's Branch facility. We expect all these actions to be completed by the end of this calendar year, supporting our plans to lower our breakeven point and accelerating our path to profitability. In addition, we are maintaining our outlook for reduced capex levels for fiscal 2025 at a midpoint of approximately $1.2 billion. This level of capex allows us to continue to grow the top line while maintaining the capability to ramp supply rapidly should a sharp turn in demand materialize, while we also minimize cash use for the remainder of fiscal 2025 to achieve our previously stated profitability goals. We expect further CapEx commitments to be closed to zero. I credit the team with having the foresight to build these greenfield facilities in a modular manner, thereby allowing us to easily flex capex spend up and down with market dynamics. However, we reiterate that for now, we have adequate supply to service current demand from our customers. We have also started work on additional cost reductions that will further reduce our break-even point. We expect to start implementing these during fiscal Q3. We will focus on operational efficiencies Lower manufacturing costs and stricter cash management. This will result in the restructuring of several supply contracts, securing additional savings going forward. Regarding our second initiative, our work to strengthen the balance sheet continues. We're scrutinizing every investment across the company to lower our cost structure and capital requirements, helping to accelerate our path to profitability. We are working closely with Apollo to look at ways to improve our overall capital structure and renaissance to account for the current market dynamics. In addition, we've also begun the work to address our convertible modes. We will be working with the financial advisors to advance these efforts in the very near term. Our plan is to complete this work as quickly as possible. Turning to the U.S. government support, We're working to finalize both direct funding agreement announced last October and the disbursement of certain CHIPS Act-related cash tax refunds. We're optimistic about achieving a definitive agreement, particularly after completing our $200 million ATM earlier this month, an important milestone in the CHIPS funding process. We maintain frequent, constructive dialogue with the CHIPS program office narrowing the remaining milestones to reach a final arrangement. We believe that the recent OMB memos issued this week do not impact our anticipated timeline to receive the first tranche of CHIPS Act funding in mid-calendar year 2025. We are actively monitoring the situation as it evolves. As part of our tighter cash management, we plan to have close to zero capital commitments until we have a direct funding agreement signed with the CHIPS program office. With existing committed capital, we will still complete construction at the JP and have the wafer capacity to support the continued ramp at Mohawk Valley. Our congressional champions remain unwavering in their support of Wolf Speed, and we're equally encouraged by the Trump administration's America first agenda and its emphasis on strengthening us supply chains, especially for silicon carbide technologies will speed has long championed a domestic manufacturing renaissance in semiconductors. Particularly in North Carolina and New York, and we look forward to continuing alignment on the shared objectives, putting it all together. When you combine U.S. government support with the additional committed funding from our investor group led by Apollo, Wolfspeed has access to a total of $2.5 billion funding package. At the same time, while we execute on these priorities, we continue to believe we are strategically undervalued, and the Board continues to examine ways to ensure that we're generating the most value for shareholders. That said, at this point, management's core focus is on executing against the priorities I've just outlined to improve our financial performance, strengthen the balance sheet, and raise additional capital. Before I turn the call over to Neil, I would like to touch on our end markets and the competitive landscape. We acknowledge that over the past few quarters, both we and the entire market have faced challenges in demand. This quarter, Revenue from Mohawk Valley was $52 million, which we expect will grow again in the third quarter with a continued ramp of our previously announced design wins. Similarly, we are making strong progress at the JP and we remain on track to receive a certificate of occupancy in the first half of this year. We are extremely pleased with the yields of our 200 millimeter wafers and the performance of our devices from these wafers. This is a key competitive advantage as we are the first to begin commercial production on 200-millimeter substrates. As these new facilities mature and we see less impact from startup and underutilization costs on our financials, unit economics will improve significantly. For our key end markets, although broader macroeconomic pressures and a slower-than-expected EV ramp have challenged I&E and auto demand in recent quarters, we continue to aggressively perceive stronger markets, including renewables and AI data centers. Our previous design wins are ramping, and as such, our power revenue will continue to grow over the balance of the year, largely driven by our EV customers, where companies like GM are investing in their EV programs to support the long-term transition taking place in automotive. Demand in industrial and energy applications is showing some green shoots, but visibility remains limited. While we're not out of the woods yet, we remain encouraged with what we are seeing so far. Our channel inventory has dropped significantly over the last few quarters, and we have even more competence given the long-term demand drivers behind AI and data centers, where billions are being invested in renewable energy. which will continue to see demand as the need for electricity generation storage increases rapidly. Silicon carbide is homegrown, American innovation at its core, pioneered by Wolfspeed scientists nearly 40 years ago in Raleigh, North Carolina. Although the EV market propelled silicon carbide from a niche technology into a multibillion-dollar industry, we believe we're still in the early stages of realizing its full potential. Many of the world's most advanced technologies in markets ranging from consumer products to aerospace and defense to e-mobility increasingly require silicon carbide for high-voltage solutions due to its ability to operate at higher voltages with higher efficiency and with higher power density and with greater ruggedness in extreme environments. In these critical applications, reliability is paramount. The risk of failure is simply too great to depend on lower-grade materials, and this is why customers rate performance and quality at the top of their list when selecting a silicon carbide device partner. And we are continuing to deliver more innovative device solutions to customers. Last week, we introduced our new GEM4 MOSFET, a highly flexible platform that supports long-term roadmaps for high performance, application optimized products. This new platform allows design engineers to create more efficient, longer lasting systems that perform well in tough operating environments at a better overall system cost. Our Gen4 platform will be delivered via our highly efficient 200 millimeter wafers, which will enable us to deliver products on a scale not seen in this industry before. Turning to the broader competitive landscape, we continue to track key industry developments, including the US Trade Representative's recent 301 investigation into China's semiconductors policies. We recognize that these issues remain front and center for our investors and stakeholders, and by participating in this process, we anticipate government actions will help level the playing field for American companies making significant investments in advanced technologies. Silicon carbide is critical to our national security. Warp Speed has been at the forefront of advanced silicon carbide programs for U.S. security. We welcome the U.S. government's efforts to safeguard American interests as these measures are vital to preserving our competitive edge in semiconductors. Silicon carbide is homegrown American IP that fuels economic growth and creates well-paying jobs. We stand ready to engage and assist the U.S. government as it advances their investigation. Now I'd like to turn the call over to Neil to discuss our quarterly financials and guidance in more detail.