Wolfspeed (WOLF) Q1 2027 Earnings Call Transcript

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DATE

Wednesday, Nov. 4, 2026

CALL PARTICIPANTS

• Chief Executive Officer - Robert Feurle
• Chief Financial Officer - Gregor van Issum
• Vice President Investor Relations - Dan Whalen

TAKEAWAYS

• Consolidated Revenue -- $155 million, representing a result above the midpoint of the company's guidance range.
• Power Revenue -- $117 million, growing 10% sequentially due to demand in the Industrial and Energy end markets.
• Materials Revenue -- $38 million, reflecting the company's ongoing supply of silicon carbide materials to a broad range of customers.
• Non-GAAP Gross Margin -- (13)%, representing a 710 basis point sequential improvement driven by higher utilization and operational improvement initiatives.
• GAAP Gross Margin -- (22)%, reflecting costs associated with underutilization and facility transitions.
• Non-GAAP EBITDA -- ($55) million, improving 12% sequentially as the company optimized its cost structure.
• GAAP Net Loss -- $144 million, compared to a loss of $644 million in the prior year period.
• Operating Cash Flow -- ($84) million, which includes $32 million in interest payments made during the quarter.
• Working Capital -- $60 million contribution to cash, primarily driven by continued inventory reduction efforts.
• Total Liquidity -- $1 billion in cash, cash equivalents, and short-term investments as of Sept. 27, 2026.
• Capital Expenditures -- $11 million in gross spending, focused on maintaining existing manufacturing capabilities.
• Workforce Reduction -- 6% of the total employee base, a measure completed during the quarter to streamline operations.
• AI Data Center Revenue -- more than a twofold increase year over year on a trailing 12-month basis, establishing it as the company's fastest-growing end market.
• Loan Commitment -- $1.5 billion through a conditional 30-year agreement with the U.S. Department of War to support the domestic wide bandgap supply chain.
• Annual Interest Savings -- $50 million, expected upon the closing of Tranche A of the loan to refinance first lien senior secured notes due in 2030.
• Annual Cash Interest Savings -- $100 million, projected because the first five years of interest on the new loan will be paid in kind.
• Q2 Revenue Guidance -- $155 million to $175 million, reflecting anticipated growth in core end markets.
• Q2 Non-GAAP Operating Expenses -- $65 million to $69 million, representing a modest sequential increase to support AI data center growth.
• Break-even Revenue Target -- less than $200 million per quarter, a target management expects to reach through improved product mix and utilization.
• Mohawk Valley Utilization -- 25% to 30%, identified as the utilization level required to achieve break-even gross margins.
• Free Cash Flow -- ($97) million, reflecting ongoing investments in the business and operational requirements.

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RISKS

• Van Issum stated, "Underutilization remains the primary driver of our gross margin profile," noting that factory utilization is the most critical lever for near-term margin expansion.
• Feurle noted that in the automotive sector, the company must manage strides within a "long lead time, high-volume market" as automakers scale next-generation electric vehicle platforms.

SUMMARY

Wolfspeed, Inc. (NYSE:WOLF) reported first-quarter results that met or exceeded the company's guidance ranges and announced a multi-billion dollar conditional financing agreement with the U.S. government. Management stated that the company is focused on four strategic objectives: advancing technology leadership, diversifying its revenue base, driving operational excellence, and maintaining financial discipline. The company indicated that its AI data center business is currently its highest-growth end market, with demand increasing for high-voltage direct current architectures. Management reported that fiscal 2027 is expected to be a turning point for the company as it transitions toward improved utilization and profitability.

• Management announced a conditional 30-year, $1.5 billion loan commitment from the U.S. Department of War to advance the domestic supply chain for wide bandgap semiconductors.
• The company is expanding its technological reach into the Gallium Nitride market, targeting applications in humanoid robotics and data center voltage step-down functions.
• Wolfspeed extended and expanded its long-term silicon carbide wafer supply agreement with Infineon to include 200-millimeter wafers.
• CEO Feurle stated, "Our work on optical-grade TSiC is exactly the type of materials innovation that underscores the versatility of silicon carbide," referring to the new technology's potential in augmented reality and quantum computing.
• The company completed a 6% workforce reduction to further streamline its organization and align costs with current market conditions.
• Management signed a majority share long-term supply agreement with BorgWarner to support their next-generation 800-volt silicon carbide inverter platform.
• Manufacturing equipment at the Mohawk Valley facility is described as highly fungible, allowing the company to pivot capacity between silicon carbide and gallium nitride production as needed.

INDUSTRY GLOSSARY

• GaN: Gallium Nitride, a wide bandgap semiconductor material used for lower-voltage power and radiofrequency applications.
• HVDC: High-Voltage Direct Current, a power electronics system used for efficient long-distance power transmission and data center power architectures.
• MOSFET: Metal-Oxide-Semiconductor Field-Effect Transistor, a type of transistor used for switching or amplifying electronic signals in power applications.
• PIK: Payment-in-Kind, a type of interest payment that is paid by increasing the principal amount of the debt rather than in cash.
• SiC: Silicon Carbide, a wide bandgap semiconductor material that offers higher efficiency and power density than traditional silicon.
• TSiC: Transparent Silicon Carbide, a proprietary material technology developed for optical applications such as augmented reality glasses.
• Wide Bandgap: A category of semiconductor materials that can operate at much higher voltages, temperatures, and frequencies than conventional silicon.

Full Conference Call Transcript

Operator: Hello, everyone. Thank you for joining us, and welcome to the Wolfspeed Inc. Q1 Fiscal Year 2027 Earnings Call. On the call today from the Wolfspeed team is Chief Executive Officer Robert Feurle, Chief Financial Officer Gregor van Issum, and Dan Whalen, Vice President Investor Relations. After today's prepared remarks, we will host a question-and-answer session. I will now hand the conference over to Dan Whalen. Dan, please go ahead.

Dan Whalen: Thank you, operator, and good afternoon, everyone. Welcome to Wolfspeed's Q1 Fiscal 2027 Conference Call. We encourage you to reference the slides that were published on our IR website today. Please note that we will be presenting non-GAAP financial results during today's call, which we believe provide 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 the 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. With that, I'll turn the call over to Robert.

Robert Feurle: Thank you, and good afternoon, everyone. We appreciate you joining us today. We continue to build momentum. With each passing quarter, my conviction, our strategy, and team grow stronger. Q1 revenue of $155 million marks another quarter of delivering on the commitments we have made, in this case, above the midpoint of our guidance range. Our progress is anchored on our four strategic objectives: advancing technology leadership, diversifying our revenue and customer base, driving operational excellence, and maintaining financial discipline. Together with our strengthened leadership team, these are translating into financial traction. Let me start with financial discipline. In October, we announced a conditional 30-year, $1.5 billion loan commitment from the U.S.

Department of War to advance the domestic wide bandgap supply chain. Upon closing, this would mark another significant milestone in optimizing our capital structure and financial foundation. Gregor will elaborate on this later, but at a high level, Tranche A would refinance our outstanding higher-cost first lien senior secured notes due in 2030, significantly reducing our cost of capital, increasing cash flow generation, and extending the maturity of the refinanced debt to 2056.

The tranches beyond Tranche A would give us the flexibility to fund a multi-year strategic investment program on a project basis, including scaling our established silicon carbide platform, establishing and expanding domestic GaN power device capabilities, advancing GaN on SiC RF material technology, and developing domestic radiation-hardening capabilities. To be clear, this is not a program to build additional sites or square footage. It is about capitalizing on our existing capabilities, IP, tooling, and customer relationships we already have, which is fully aligned with the strategic objective we have discussed for several quarters.

Importantly, our manufacturing capacity is highly fungible and synergistic between SiC and GaN, and outside of targeted tooling investments, we can pivot existing capacity as appropriate and as needed. Put simply, this would broaden our portfolio to span both SiC and GaN, two complementary power technologies that address different points on the voltage spectrum. SiC anchors the high-voltage, high-power applications where we lead today, while GaN extends our reach into lower-voltage designs. Together, they give us two engines to drive high utilization across our sites and ultimately fuel both revenue growth and gross margin expansion.

To elaborate, we believe GaN is the next power technology of the future beyond silicon, with major growth drivers emerging in data center power devices and humanoids. Given our physical assets, our existing GaN IP position, and operational synergies in manufacturing, we believe we have earned the right to compete in this market. Regarding our AI data center or superintelligence opportunity, our dedicated data center team is becoming more deeply integrated into our go-to-market efforts and is leveraging longstanding customer relationships in Silicon Valley to drive medium- and long-term sustainable growth. They are already engaging directly with hyperscaler customers on product innovation.

We continue to view AI data centers as our highest growth end market, consistent with last quarter revenue more than doubled year over year on a trailing 12-month basis, and our order book is accelerating, reinforcing its position as our fastest-growing market. Of course, our top AI data center OEMs relationships are building, and the trajectory keeps moving higher as these programs mature. We are also gaining share in HVDC, high-voltage direct current, adoption as the architecture of the industry is moving towards a disaggregated power architecture, so high power density can be driven from a smaller footprint.

The architecture is evolving from a single rack carrying both GPU and power to a dedicated two-rack design, one rack for compute and a dedicated sidecar power rack alongside it. Our technology is at the core of enabling high power density with high efficiency. This opens up more space for power content and plays directly to our strength, as our components convert incoming power, enable backup power through conversion, protect against faults, and step voltage down to what the AI data center servers require. In mid-September, Megmeet, an emerging customer in the AI data center market, presents us with their highest honor, the Strategic Partner Award. This underscores the strength of the partnership we are building.

We see significant growth potential here and actively providing technical, commercial, and supply support to ensure a smooth ramp. In automotive, we continue to make strides in this long lead time, high-volume market. As automakers scale next-generation EV platforms, silicon carbide is increasingly essential to the efficiency, power density, and performance these architectures demand. Further separating SiC from silicon, which is directly aligned with advancing our technology leadership and doubling down on core markets. Notably, we recently signed a majority share long-term supply agreement supporting BorgWarner's next-generation 800-volt silicon carbide inverter platform.

This deepens a longstanding collaboration while providing BorgWarner reliable long-term supply of high-performance SiC for next-generation EVs, which is directly aligned with advancing our technology leadership and doubling down on core markets. In aerospace and defense, we continue to leverage our established leadership in high-voltage SiC, which is anchored by the industry's first commercially available 10kV MOSFET into a new class of ultra-high voltage, high-current bipolar device architecture. Our industry-leading materials expertise and advanced device capabilities to develop power semiconductors operating at unprecedented voltage and current levels continues to position us well to support the increasingly demanding power conversion applications. In materials, we continue to serve a broad range of power and RF customers.

As you may have seen, we recently announced the expansion and extension of our long-term SiC wafer supply agreement with Infineon. The expanded agreement adds 200-millimeter wafers to the existing 150-millimeter supply, building on a relationship spanning multiple decades. It also further cements our position as a leading western materials manufacturer and highlights the value customers place on multiple suppliers across reliable geopolitical regions. We also recently announced the commercial introduction of our proprietary transparent silicon carbide technology, further expanding growth potential of silicon carbide. This proprietary TSiC technology, coupled with our extensive IP portfolio, will enable breakthroughs across augmented reality, quantum computing, and other emerging markets, a true testament to silicon carbide's versatility and transformative potential.

I want to take a moment to further elaborate on where this technology can go beyond our core markets. For years, the industry vision of truly immersive, all-day augmented reality glasses has collided with the hard limits of optical materials. You simply could not deliver a wide field of view, high image quality, and lightweight, variable form factor all at the same time. We believe silicon carbide changes that equation. Its exceptionally high refractive index allows a single layer waveguide to do the work that once required stacked optics, a kind of step change that can move AR from a novelty into everyday eyewear.

Our work on optical-grade TSiC is exactly the type of materials innovation that underscores the versatility of silicon carbide and the long-term optionality of our platforms and is a powerful example of how the materials leadership that defines our power business can open entirely new markets over time. With that, I will turn it over to Gregor.

Gregor van Issum: Thank you, Robert, and good afternoon, everyone. As you heard, we are making strong progress on multiple fronts, and we remain in the early stages of translating that into revenue growth and margin expansion. As noted, we generated $155 million in total revenue for the quarter, slightly above the midpoint of our guidance. Materials revenue was approximately $38 million. Power revenue was approximately $117 million, up 10% sequentially, driven largely by growth in the I&E end market, which includes our data center business. We believe fiscal 2027 will be a turning point and the start to more meaningful longer-term growth in both revenue and profitability.

Adjusted non-GAAP gross margin was negative 12.8%, a 710 basis point sequential improvement on a slightly higher revenue base, reflecting the benefits of our operational improvement initiatives. This margin improvement was primarily driven by higher utilization as we largely completed our inventory reduction, with a secondary benefit from a more favorable product mix in power. Underutilization remains the primary driver of our gross margin profile, and improving factory utilization is one of the most important near-term levers to drive margin expansion. Non-GAAP operating expenses were $64 million versus $62 million in the prior quarter, as we position the company for growth. Adjusted non-GAAP EBITDA was negative $55 million, an $8 million or 12% improvement sequentially.

Gross capital expenditures were approximately $11 million. Turning into cash flow, which remains a top priority, our operating cash flow was negative $84 million, including $32 million of interest paid during the quarter. Changes in working capital contributed approximately $60 million to cash in the quarter, partially from further inventory reduction. Over the past five quarters, working capital improvements have contributed approximately $235 million to cash. At this point, we believe we have largely completed the working capital optimization initiatives we launched shortly after I joined Wolfspeed. Before turning to the outlook, I will elaborate on Robert's comments regarding the conditional 30-year $1.5 billion loan commitment from the US Department of War.

This is an important milestone that will provide long-term capital to support our strategy while strengthening our capital structure, and one we believe is reflective of the importance of Wolfspeed's silicon carbide to the U.S. national and economic security. The initial $600 million tranche, Tranche A, is expected to refinance the remaining balance of our high-cost first lien senior secured notes due in 2030. This builds on the reduction we completed in March, which lowered our first lien debt from $1.1 billion to approximately $630 million, and would complete our planned refinancing of these notes.

The refinancing is expected to deliver more than $50 million in annual interest savings, and given the first five years of interest payments will be paid in kind, annual cash interest savings are expected to be approximately $100 million. Ultimately, we see this as a start of a meaningful financing partnership. This is a conditional milestone-based commitment that supports our existing strategy, improves our capital structure, and funds the next phase of growth as we position the company to become the partner of choice in critical end markets, benefiting customers, shareholders, and national security. The additional tranches are intended to support the strategic objectives Robert previously outlined.

For more details, please see the presentation posted to the events and presentation section of our website. Turning to our outlook, we continue to see growth and are targeting Q2 fiscal 2027 revenue in the range of $155 million-$175 million. We expect non-GAAP gross margin to improve sequentially and approach break-even for the Q2. Operating expenses are expected to be in the range of $65 million-$69 million, a modest sequential increase driven primarily by the investments to support anticipated AI data center growth. I will also note that this quarter, we completed a previously planned workforce reduction of approximately 6%, further streamlining our organization.

Before turning the call back to Robert, I will echo his growing conviction in our strategy and long-term outlook. With that, I will turn the call back over to Robert for his closing remarks.

Robert Feurle: Thank you, Gregor. Before we open the call up for questions, let me reinforce my enthusiasm and conviction for what lies ahead. Our leadership additions are becoming more integrated across every level. We continue to deepen customer partnerships across the widening scope of the market. We are taking every necessary step to return Wolfspeed to a path of long-term growth and success, and that is the source of our increased conviction in Wolfspeed's future. With that, operator, we are ready to take questions.

Operator: We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Joshua Buchalter with TD Cowen. Joshua, your line is now open. Please go ahead.

Sam: Hi. Good evening, gentlemen. This is Sam on for Josh. Congrats on the quarter of results. I was just curious if you could remind us the milestones for the $1.5 billion commitment that you are getting from the government. What hurdles do you still have to clear, and roughly what timing should we think about in terms of the refinancing occurring this year? And then secondarily, how has that dynamic shaped your relationship with your customers, either ongoing or new ones, perhaps using your BorgWarner deal as an example of how that has given potential customers more confidence in your ability as a long-term supplier? Thank you.

Gregor van Issum: Yeah. Thanks. Let me take it, This is Gregor. Let me take the first question on the OSC loan. Obviously, a lot of work has been done by the government already before we went into the announcement that led to a very detailed LOI. However, during this period, the government is further completing its detailed due diligence. That is all well on track, and we expect that this takes another couple of weeks to be able to do that, as well as in parallel finalizing the credit agreement as such. Around the actual drawing of the tranches, there are several financial commitments, limited equity raise, and some other de-risking measures that we have to take on the balance sheet.

That is something we are looking at and discussing together with the U.S. government. But all in all, we look to be well on track to be able to finish this ideally before end of the year.

Robert Feurle: Let me just, Robert here, let me briefly comment on your question on the customer side. I mean, I would say this has been received very, very positively across the globe. Pretty much I talked to a lot of customers both in, you know, United States, Europe, but also Asia Pacific, and I think the feedback has been very well received, and they really support that strategy.

Speaker 4: Excellent. Thank you for the color there. My follow-up, your gross margin guidance is approaching breakeven, as you said. Could you give us some guideposts to think about what breakeven looks like in terms of Mohawk Valley utilization or what kind of revenue levels we are talking about here, just so we can kind of range bound when we might be breaking even on the gross margin line? Thank you.

Gregor van Issum: Yeah, let me comment on that. Last call, I mentioned that you should think about the company as being around $200 million a quarter to be break-even. Given the improvements we are making and the favorable end market mix, we think that break-even point is a little bit lower than the $200 million. We will have to see exactly how that plays out, but we think that we are really well on track. Utilization of Mohawk Valley, to be able to achieve that, I would say wall-to-wall would be around 25%-30%. On the equipment utilization, we believe we are well on track to be able to do that.

That is a bit more difficult to comment on because the question is how do you measure that, and also micro nodes. But I would say we are well within capabilities, Mohawk Valley, to be able to achieve that.

Speaker 4: Thanks so much.

Operator: Your next question comes from the line of Christopher Rolland with Susquehanna. Christopher, your line is now open. Please go ahead.

Christopher Rolland: Hey, guys. Thank you for the question. Some of our data around the silicon carbide market has actually shown an increase in lead times as well as an increase in pricing. I guess my question for you guys is, do you think the market has kind of bottomed here in terms of both pricing, it seemed like it was a race to the bottom for a while there, but also this overcapacity situation? If you could address maybe both the materials market and the device market and your perspective would be greatly appreciated.

Robert Feurle: Sure. This is Robert here. Let me answer that question. What we see clearly is that the build-out of the power infrastructure for AI data centers has created a very large additional consumer socket or end application for silicon carbide. I think this really helped here to make sure that the capacity which was built over the last years here is getting more and more absorbed in two large end markets. One is automotive. This is a very important market, and especially with the high gas prices out here, high energy prices, a lot of new EVs are getting bought.

The other one is, again, the AI data center build-out, especially now with the 800-volt systems getting deployed, will drive additional demand for silicon carbide. I think this is something which a lot of people didn't have on their radar screen, let's say, two years ago, right? I think this will help you to get the market into a better supply-demand balance.

Christopher Rolland: Thanks, Robert. Yeah, sorry. Go ahead.

Robert Feurle: Sorry. On the material side, what we clearly see is here also the RF business is something which is very interesting, and we see a lot of announcements around satellite communication and these type of applications. Of course, us being here positioned in the U.S. with our unique capabilities is putting us in a pretty good situation for the materials business.

Christopher Rolland: Excellent. For my second question, your entry into the GaN market seems really interesting. When might you have products coming? What end markets, products, or applications are you targeting for GaN as well?

Robert Feurle: Let me start with the market. What we clearly see is that kind of two markets driving the demand for GaN, for the low-voltage GaN. One is the robotics, specifically the humanoid robotics. The other one is, of course, the voltage step-down for the data centers, covering the voltage range below what silicon carbide can do. I think if you look at Wolfspeed from a capability perspective, we have core assets in Mohawk Valley, and the tools are pretty fungible. Of course, there's some additional tools needed here to go around the dedicated GaN line, but a lot of tools are fungible between Si and GaN.

We have a very broad IP portfolio on GaN as well, and that's why we believe it's a good way for us to expand pretty much the TAM of Wolfspeed as a general direction to say, look, in addition to silicon carbide, we are also going to enter that market.

Christopher Rolland: Excellent. Thank you.

Operator: As a reminder, if you would like to ask a question, please press star one to raise your hand. There are no further questions at this time. This concludes today's call. Thank you for attending. You may now disconnect.

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