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01/11 16:17
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The financial performance shows a decline in revenue and gross margin, with significant free cash flow negativity and restructuring charges. Despite optimistic guidance and potential growth in EV revenue, there are concerns about underutilization costs, competitive pressures, and unclear management responses. The ATM equity offering and restructuring efforts might not offset negative sentiment due to revenue misses and operational inefficiencies. Given the market cap, the stock is likely to react negatively, with a potential decline of 2% to 8% over the next two weeks.
Revenue $181,000,000, down 7% sequentially; driven by ongoing weakness in industrial and energy end markets, but EV revenue grew 92% year over year.
Power Device Revenue $91,000,000, down 6% sequentially; primarily due to weakness in industrial and energy end markets.
Materials Revenue $90,000,000, down 8% sequentially; driven by customers adjusting inventories to account for current demand outlook.
Non GAAP Gross Margin 1.8%, down 160 basis points quarter over quarter; impacted by $29,000,000 of underutilization costs and lower factory production rates.
Operating Expenses $108,000,000, down $11,000,000 quarter over quarter; part of restructuring and simplification efforts.
Adjusted EPS Negative $0.95, better than the midpoint of guidance; included an increase of 1,600,000 shares on a weighted average shares outstanding basis.
Cash and Liquidity Approximately $1,400,000,000 at the end of the quarter; included $91,000,000 from the $200,000,000 ATM equity offering completed in January.
Free Cash Flow Negative $598,000,000; comprised of negative $195,000,000 of operating cash flow and $403,000,000 of capital expenditures.
Capital Expenditures (CapEx) $403,000,000; primarily for facilities investments into the JP Materials facility.
Restructuring Charges Expected to be in the range of $400,000,000 to $450,000,000 in fiscal 2025; included $188,000,000 in charges recorded in fiscal Q2.
48D Tax Credits $865,000,000 accrued as of fiscal 2Q; expect to request significantly more cash tax refunds in calendar 2025.
Annual Cash Savings from Restructuring Expected to contribute to $200,000,000 of annual cash savings.
Liquidity from 48D Cash Tax Refunds and Non-Core Asset Sales Approximately $325,000,000 of liquidity expected.
Revenue Breakeven Point Under $1,000,000,000 on an annualized revenue basis.
New Product Introduction: Wolfspeed introduced the new Gen 4 MOSFET, a highly flexible platform that supports long-term roadmaps for high-performance application optimized products.
Market Expansion: Revenue from Mohawk Valley was $52,000,000, expected to grow in Q3 with a continued ramp of previously announced design wins.
Market Positioning: Wolfspeed is the only volume producer of 200 millimeter wafers, shipping thousands weekly, providing a competitive advantage.
Operational Efficiencies: Wolfspeed is closing the Durham 150 millimeter device facility and the 150 millimeter Epi Farmers Branch facility to simplify operations and lower breakeven points.
Cost Management: The company is implementing additional cost reductions to lower manufacturing costs and improve cash management.
Strategic Shift: Wolfspeed is focused on improving financial performance, strengthening the balance sheet, and raising cost-effective capital to support long-term growth.
Competitive Pressures: Wolfspeed acknowledges challenges in demand, particularly in the EV market, which is growing slower than expected. The company is aware of increasing competition, especially from China regarding 200 millimeter silicon carbide wafer production.
Regulatory Issues: Wolfspeed is actively engaged with the U.S. Government regarding the CHIPS Act funding, which is crucial for liquidity. They are working to meet operational milestones to secure funding.
Supply Chain Challenges: The company is restructuring its operations, including the closure of certain facilities, to optimize its supply chain and reduce costs. They are also addressing underutilization costs and startup expenses.
Economic Factors: Broader macroeconomic pressures are impacting demand in industrial and energy markets, with visibility remaining limited. The company is cautious about revenue forecasts despite some positive indicators in AI and data centers.
Financial Performance Risks: Wolfspeed is focused on improving financial performance and cash flow, with a target breakeven point under $1 billion in revenue. They are also scrutinizing investments to strengthen their balance sheet.
Operational Efficiency: The company is implementing cost reduction measures and restructuring efforts to improve operational efficiency and reduce cash burn.
Financial Performance Improvement: Wolfspeed aims to dramatically improve financial performance and accelerate the path to positive free cash flow.
Balance Sheet Strengthening: The company is taking aggressive steps to strengthen its balance sheet and scrutinizing every investment to lower costs.
Capital Structure Optimization: Wolfspeed is focused on raising cost-effective capital to support long-term growth.
Facility Closures: Closure of the Durham 150mm device facility and the Farmers Branch 150mm Epi facility is expected to be completed by the end of the calendar year.
CapEx Reduction: CapEx for fiscal 2025 is projected at approximately $1.2 billion, with expectations for further CapEx commitments to be close to zero.
Cost Reduction Initiatives: The company is implementing additional cost reductions to lower the breakeven point, focusing on operational efficiencies and stricter cash management.
Government Support: Wolfspeed is finalizing funding agreements related to the CHIPS Act and expects to receive the first tranche of funding in mid-calendar year 2025.
Liquidity Access: Wolfspeed has access to a total funding package of $2.5 billion, including government support and private financing.
Q3 2025 Revenue Guidance: Wolfspeed expects Q3 2025 revenue to be between $170 million and $200 million.
Q3 2025 Gross Margin Guidance: Non-GAAP gross margin for Q3 2025 is expected to be between -3% and 7%.
Q3 2025 Operating Expenses Guidance: Non-GAAP operating expenses for Q3 2025 are expected to be between $99 million and $104 million.
Q3 2025 EPS Guidance: Non-GAAP EPS loss for Q3 2025 is expected to be between $0.76 and $0.88.
Long-term Revenue Breakeven: Wolfspeed aims to reduce its non-GAAP EBITDA breakeven point to under $1 billion on an annualized revenue basis.
ATM Equity Offering: Wolfspeed completed a $200,000,000 ATM equity offering earlier this month, which is part of their strategy to raise non-debt capital.
Funding Package: Wolfspeed has access to a total of $2,500,000,000 funding package, which includes $750,000,000 grant, $750,000,000 of additional private secured term loan financing, and approximately $1,000,000,000 in 48D tax credits.
Restructuring Charges: Restructuring charges related to simplification and restructuring efforts are expected to be in the range of $400,000,000 to $450,000,000 in fiscal 2025.
Cash Savings: Wolfspeed expects to contribute to $200,000,000 of annual cash savings as well as driving approximately $150,000,000 of liquidity in conjunction with non-core asset sales.
Liquidity Visibility: Wolfspeed has clear visibility to approximately $325,000,000 of liquidity from 48D cash tax refunds and non-core asset sales.
The earnings call highlights several negative factors: a decline in revenue expectations, operating losses with negative gross margins, and challenges from Chapter 11 bankruptcy. Despite some operational improvements, the lack of profitability guidance and ongoing soft market demand contribute to a negative outlook. The market cap suggests a moderate reaction, leading to an expected stock price movement of -2% to -8% over the next two weeks.
The earnings call presents mixed signals. Positive aspects include improved revenue and materials revenue, leadership changes, and cost-saving measures. However, the negative EPS, restructuring charges, and competitive pressures weigh down sentiment. The guidance for Q3 2025 indicates potential challenges with expected losses. The company's market cap suggests a moderate reaction. Overall, while there's potential for improvement, uncertainties and risks related to economic factors and leadership transitions balance the outlook, resulting in a neutral sentiment.
The financial performance shows a decline in revenue and gross margin, with significant free cash flow negativity and restructuring charges. Despite optimistic guidance and potential growth in EV revenue, there are concerns about underutilization costs, competitive pressures, and unclear management responses. The ATM equity offering and restructuring efforts might not offset negative sentiment due to revenue misses and operational inefficiencies. Given the market cap, the stock is likely to react negatively, with a potential decline of 2% to 8% over the next two weeks.
The earnings call summary presents a mixed picture: while there are positive signs such as strong design wins and growth in EV revenue, there are also concerns like reduced revenue guidance, workforce reduction, and restructuring costs. The Q&A section did not provide clear answers, particularly regarding CHIPS Act milestones and Renesas' commitments, adding uncertainty. The market cap of $2.9 billion suggests moderate sensitivity to these factors. Overall, the lack of a clear shareholder return plan and uncertain guidance balance out the positives, leading to a neutral stock price prediction over the next two weeks.
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