DURHAM, N.C. — Wolfspeed, Inc. (NYSE: WOLF) today announced its results for the second quarter of fiscal 2024.
Quarterly Financial Highlights (Continuing operations only. All comparisons are to the second quarter of fiscal 2023)
- Consolidated revenue of $208.4 million, compared to $173.8 million
- Mohawk Valley Fab contributed $12 million in revenue, a 3x increase from the prior quarter
- Power device design-ins of $2.1 billion
- Quarterly record design-wins of $2.9 billion – over 75% related to automotive applications
- GAAP gross margin of 13.3%, compared to 32.6%
- Non-GAAP gross margin of 16.4%, compared to 35.8%
- GAAP and non-GAAP gross margins for the second quarter of fiscal 2024 include the impact of $35.6 million of underutilization costs, representing approximately 1,700 basis points of gross margin. See “Start-up and Underutilization Costs” below for additional information
- Completed sale of our RF Business to MACOM Technology Solutions Holdings, Inc. (MACOM) for $75 million in cash and 711,528 shares of MACOM common stock (the RF Business Divestiture)
“We’re proud of our results this quarter, which reflect robust execution of our strategy and fortify our vision for the future of Wolfspeed and silicon carbide,” said Wolfspeed CEO, Gregg Lowe. “We have made considerable progress at our Mohawk Valley facility, tripling revenue sequentially. Our successful scale-up of 200mm wafer production and continued qualification of high-quality EV products on 200mm substrates are critical steps in meeting the continued customer demand. This is demonstrated by a record $2.9 billion of design-wins, predominantly in the EV sector across multiple OEMs.”
Lowe continued, “Our steadfast commitment to our long-term goals is bolstered by the conversion of our design-ins into significant design-wins. This solidifies our confidence in the electrification trend, which increasingly depends on the widespread adoption of silicon carbide technology. We are pioneers in this transformative era, steering towards a more electrified and efficient future.”
Business Outlook:
For its third quarter of fiscal 2024, Wolfspeed targets revenue from continuing operations in a range of $185 million to $215 million. GAAP net loss from continuing operations is targeted at $134 million to $155 million, or $1.07 to $1.23 per diluted share. Non-GAAP net loss from continuing operations is targeted to be in the range of $71 million to $87 million, or $0.57 to $0.69 per diluted share. Targeted non-GAAP net loss from continuing operations excludes $63 million to $68 million of estimated expenses, net of tax, primarily related to stock-based compensation expense, amortization of discount and debt issuance costs, net of capitalized interest, project, transformation, and transaction costs and loss on Wafer Supply Agreement. The GAAP and non-GAAP targets from continuing operations do not include any estimated change in the fair value of the shares of MACOM common stock that we acquired in connection with the RF Business Divestiture.
Start-up and Underutilization Costs:
As part of expanding its production footprint to support expected growth, Wolfspeed is incurring significant factory start-up costs relating to facilities the Company is constructing or expanding that have not yet started revenue-generating production. These factory start-up costs have been and will be expensed as operating expenses in the statement of operations.
When a new facility begins revenue-generating production, the operating costs of that facility that were previously expensed as start-up costs will instead be primarily reflected as part of the cost of production within the cost of revenue, net line item in our statement of operations. For example, the Mohawk Valley Fab began revenue-generating production at the end of fiscal 2023 and the costs of operating this facility going forward will be primarily reflected in cost of revenue, net in future periods.
During the period when production begins, but before the facility is at its expected utilization level, Wolfspeed expects some of the costs to operate the facility will not be absorbed into the cost of inventory. The costs incurred to operate the facility in excess of the costs absorbed into inventory are referred to as underutilization costs and are expensed as incurred to cost of revenue, net. These costs are expected to be substantial as Wolfspeed ramps up the facility to the expected utilization level.
Wolfspeed incurred $10.5 million of factory start-up costs and $35.6 million of underutilization costs in the second quarter of fiscal 2024. No underutilization costs were incurred in the second quarter of fiscal 2023.
For the third quarter of fiscal 2024, operating expenses are expected to include approximately $13 million of factory start-up costs primarily in connection with materials expansion efforts. Cost of revenue, net, is expected to include approximately $36 million of underutilization costs primarily in connection with the Mohawk Valley Fab.
Quarterly Conference Call:
Wolfspeed will host a conference call at 5:00 p.m. Eastern time today to review the highlights of its second quarter results and its fiscal third-quarter 2024 business outlook, including significant factors and assumptions underlying the targets noted above.
The conference call will be available to the public through a live audio web broadcast via the Internet. For webcast details, visit Wolfspeed’s website at investor.wolfspeed.com/events.cfm.
Supplemental financial information, including the non-GAAP reconciliation attached to this press release, is available on Wolfspeed’s website at investor.wolfspeed.com/results.cfm.
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