Good afternoon. Thank you for standing by, and welcome to the Wolfspeed, Inc. Second Quarter Fiscal Year 2026 Earnings Call. At this time, all participants are in a listen-only mode. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by one on your telephone keypad. If you would like to withdraw your question, please press star followed by the number two. We ask that you limit your questions to one question and one follow-up. Thank you. Please note today's call is being recorded. And I would now like to pass the conference over to your first speaker today, Tyler Gronbach, Vice President of Investor Relations. Please go ahead.

Thank you, Operator. Good afternoon, everyone. Welcome to Wolfspeed's Second Quarter Fiscal 2026 Conference Call. Today, Wolfspeed's Chief Executive Officer, Robert Feurle, and Chief Financial Officer, Gregg Lowe, will report on the results for 2026. We would also encourage you to reference the slides that were published on the IR website today as we will be referring to them during the call 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. Reconciliation to the most directly comparable GAAP measures is in our press release and posted to 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. Now I'll turn the call over to Robert.

Thank you, Tyler. Good afternoon, everyone. We appreciate you joining us on today's call. As you can see on slide three, we've continued to build solid momentum across the business since reporting our fiscal first quarter results. From achieving 50% quarter-over-quarter growth in AI data center revenue to producing a 300-millimeter silicon carbide wafer, securing key customer wins, and most recently, completing CFIUS clearance, we've been moving the business forward on multiple fronts. Under our refreshed leadership team, Wolfspeed has sharpened its operational discipline and strategic focus to ensure consistent execution. Since I've joined the company, we've brought top-tier talent from across the semiconductor industry, people who recognize our unique position in the silicon carbide market, in helping us scale execution to better serve our customers and meet future market demand. As we outlined on our last call and cover on slide four, we're concentrating in a few key areas: strict financial discipline, advancing our technology leadership, and driving operational excellence. A central theme across these priorities is diversifying our revenue base, particularly in industrial and energy, including applications tied to AI-related power demand and grid modernization. By continuing to support our broad base of automotive and other device and material customers, during Q2, we continue to fortify our sales, marketing, and product teams, adding experienced leaders with deep semiconductor knowledge and strong customer relationships. These hires are already helping us extend our reach into emerging power device opportunities. More on this later. And foremost, we are making solid progress in applying strict financial discipline across the organization. Following our financial restructuring, Wolfspeed has a stronger capital structure, net debt of approximately $600 million, annual cash interest expense lowered by approximately 60%, and strong liquidity, which includes approximately $700 million in 48D cash tax refunds we recently secured. Our cash…

Thank you, Robert, and good afternoon, everyone. I'll begin with a brief overview of our second quarter performance. Then I'll walk through the key financial impacts from our restructuring and the adoption of fresh start accounting, and finally, I will share our outlook for the fiscal third quarter. Starting with an update on some highlights of our second quarter, which we've illustrated on slide 12 of our presentation, are as follows. We continue to make progress implementing strict financial discipline, focusing on the aspects of the business within our control. The closure of the Durham 150-millimeter device fab one month ahead of schedule is a good example of that. We upsized and collected the $700 million cash tax refund in Q2. We also improved $89 million in working capital management, excluding the headwind of final payments linked to our restructuring, and further reduced both operating expenses and CapEx investments. Now I'll review our quarterly financial results and speak to some of these updates in more detail, which you can see on slide 13 of our presentation. We generated $168 million of total revenue, in line with the midpoint of the guidance range we provided last quarter. Power revenue was $118 million, of which Mohawk Valley contributed approximately $75 million. This includes some of the last time buy shipments from the Durham Campus ahead of the closing I referenced earlier. As Robert mentioned, the revenue tracking is a mix between a weaker automotive market and fast-growing mid to high voltage revenue. This is linked to the good traction in AI and data center space. Materials revenue was $50 million, driven largely by a tightening demand environment and increased competition in the market. Non-GAAP gross margin for the second quarter was negative 34%, which included several adverse effects. First of all, a…

Thank you, Gregg. Across the business, our team is working tirelessly to drive progress against our strategic priorities and to mobilize our scale and technology advantages. All of these efforts are intended to strengthen our ability to capture the next wave of growth in silicon carbide. While the near-term demand picture remains dynamic, two trends remain clear. First, electrification is happening across new markets every day. Second, voltages will continue to increase, necessitating more power density and increased energy efficiency. We are building a stronger, more resilient Wolfspeed. With an improved financial foundation, experienced leadership team, and our vertically integrated platform, we are strategically positioned to drive long-term growth and value as we define the future of silicon carbide technology. Operator, we are now ready to take questions.

Thank you. We will now begin the Q&A session. If you'd like to remove your question, press star followed by 2. Again, to ask a question, press star 1. And as a reminder, if you are using a speakerphone, please remember to pick up your handset before asking a question. And during the Q&A session, we ask that you please limit your questions to one question and one follow-up. The first question comes from the line of Brian Lee with Goldman Sachs. You may proceed.

Hey, guys. Good afternoon. Thanks for the updates here. Appreciate the slide deck as well. A lot of new information. So maybe the first question, just thinking about the strategy, you mentioned the diversification away from EVs, you know, key segments like AI, grid modernization, AI data centers. Maybe just walk through a little bit of how that's gonna work and then what it requires for you to change how you go to market and maybe the timeline involved. Then I had a follow-up.

Yeah. Thanks, Brian. At the end of the day, look, what we're doing is we're pretty much looking to pivot away from being a one-trick pony focused on EVs. This means here, when I started, I kind of turned the organization, the go-to-market organization, to be application-oriented, yeah, and from coming from a product or a setup, which means they really need to know automotive, industrial energy, and aerospace as the defense and pretty much take these application requirements into what does it take to build these products. And I think what you can see here with our progress quarter over quarter in AI data centers, that revenue growth here is really starting to pay off. In addition to that, it's also to get the right sales organization and the right channel strategy in place. Right? So this means a clear tiering of what are the key accounts in this respect application segment. But, also, especially, IE segments, these are it's a large number of customers. So really getting a channel strategy around distribution and specifically for the US, a rep structure in place. This is all in progress as we brought in some really good new talent from the outside from other big semiconductor companies.

Great. That's helpful color. And then maybe just a follow-up on the financials and the balance sheet. You know, a lot's changed, and maybe more is gonna change. But could you guys remind us, is there any expected interest rate step-up on the first lien this year or next year? And then I think up, you know, until recently, the 2031 converts were sort of in the money, but are you contemplating doing any sort of additional financing strategic maneuvers, with respect to the, you know, the first lien and the convert, just given, you know, the equity and where it's been trading? Thank you.

Gregor, maybe, Albert, I can take that one. Yeah. Yeah. So you're right. So we took, obviously, first big steps with emerging from Chapter 11 and restructuring the balance sheet in that process. And then we focused very much on collecting the cash from 48D and using it first pay down of the L1s, but that's just the first step. Then we are very much aware of the situation and opportunity potential in the convert area, which we're deeply looking into at the moment alongside other options that we have. So as I mentioned in the script earlier, we realize there's more work to be done. And over the next period, we will be very actively looking at that. Very concretely, the interest rate will step up around the middle of calendar year 2026. And at that moment, also, some of the make-whole premium stepped down. So in our view, that is definitely a very high cost of capital there and something to be looked at. For the rest, we continue to focus a lot on the strict financial discipline. So you've seen we focus a lot on getting more cash out to working capital. I hope to make some further improvements there as well. And we believe that with the long maturity and the strong cash balance, we do have the time to look into this refinancing topic in a good way.

Appreciate the color. Thank you.

The next question comes from the line of Christopher Rolland with Susquehanna. Christopher, your line is now open.

Excellent. Thanks, guys. Appreciate the question. So I also wanted to dig in in some of these other opportunities, particularly AI data center from a power perspective, it's pretty interesting right now. If you guys can talk about kind of what your AI data center revenue consists of today that was up 50% quarter over quarter. And then going forward, kind of your top sockets. Is it gonna be SSTs or in the power supply or we're hearing even potentially for substrates? Would love to know about your competitive position there and how big this thing could be for you guys eventually.

Yeah. Thanks, Chris. I mean, really, very, very good questions. Let me kind of take them one step at a time. I think so what's happening in the AI data center space, especially on the indirect side, is that today, you're round about the 100 kilowatt-ish per rack, yeah? Kind of moving in two years or so to, like, 600 kilowatt per rack into, like, a mega rack, like, the 2029, 2030 timeframe. This means you have to go figure out how do you power these racks, and how do you get the energy from the energy generation to that rack? And I think this is where exactly Wolfspeed can play to the full advantages coming from the energy generation, which is pretty much really going into the in from the kilowatts as stepping that voltage down. And then as more and more renewables come into the mix, you need also a lot of energy storage systems in between to kind of buffer glitches and these types of things. So that's kind of the next portion that we are focused on. Then, of course, you need to get this energy into the data center with, you know, with transformers. Right? And there is a transition happening from traditional transformers to solid-state transformers. Also, silicon carbide is the perfect solution, I would say. That transition is starting to happen here. So we're really playing in terms of energy generation, energy storage system, solid-state transformers, but then also you look into in the data center, there is the UPS. So the uninterruptible power supply is a big, big application. And then, again, 40% of the energy in the data center is the cooling devices. Another way to say, hey, can you have built these systems more effectively? You see, this is not…

Excellent. Sounds very exciting. My second question is around just kind of stability moving forward and then, you know, eventually growth. And I think you guys talked about the fiscal first half customer purchases from term transition. Obviously, it sounds like a pull-in of orders. Where are we in digesting those orders and alleviating that overhang? And when do you think you have confidence in the bottom and then building growth on top of that bottom again? How should we think about these different dynamics?

Yeah. I think, look, there are various topics playing into this. The one is what's clearly the kind of the transition from 150-millimeter devices to 200-millimeter devices. In such a fab transition, you always have customer purchasing more for end-of-life in the parts. Right? I think that end-of-life is done. Right? The 150-millimeter factory is shut down. We took the cost out of the company, also the running cost out of the company. And I believe here with that step, also, we are really the first company in the Western world who's completely only manufacturing the 200-millimeter devices. And then, of course, it comes to this question of demand. Right? And I think we talked about this also in the earnings call. It's a very dynamic environment, especially around the EV side here. And it's really hard to predict in terms of visibility of kind of how that will develop. In the long run, I think, look, the electrification of the drivetrain is continuing. Right? I mean, if you see, I just recently saw a market research forecast. Right? Slightly over 90 million cars getting sold, around about 20% of these cars being, you know, EVs. Yeah? And that portion of EVs is just gonna grow, right, towards the end of the decade. I saw some forecasting around about 50% of the cars being sold at the end of the decade are EVs. Right? And then in these EVs, you have kind of two dominant voltages for the batteries. The one is an 800-volt platform. The other one is a 400-volt platform. And for the 800-volt platform, I mean, the primary solution is to do the traction inverter with silicon carbide. So I think the overall trend long-term of adopting silicon carbide using this in EVs, and also, again, we talked about the AI. There's an opportunity. It's real. Right? Can I tell you exactly kind of short-term what will happen? No. All the macroeconomic factors are playing into this.

Excellent. Thank you for that color. Appreciate it.

The next question comes from the line of Jed Dorsheimer with William Blair.

Hey. Thanks. Thanks for taking my questions, guys. I guess the first one for you, Gregg. Just a follow-up to Brian's previous question. It would seem like, you know, dealing with the L1s in some capacity might be the lowest hanging fruit. So I'm just curious, have you kind of looked at what the potential savings and interest could be? I'm just wondering in terms of, you know, as you explore different options, are you talking about sort of a $50 million to $100 million annual savings? Are you talking $150 million? Like, what is the scope of that? And then I have a follow-up.

Yeah. I think it depends a little bit on how we would execute some portion of the refinancing of the L1. As said, there are several options, and it depends a bit on what is available given the specifics and nature of just emerging from Chapter 11. So we are very actively looking at that. You know our cost of capital is right now very high, and there will be a further step-up. So that is something that we are looking for to address head-on. I think the exact amount of interest reduction really depends on the instrument we will use and the size of the first step we can make. And I think it's a bit premature to indicate exactly how big that would be, but I'm looking for making, let's say, a material first step there, but it's probably not gonna be in a one-go transaction.

If that helps. Thank you.

It does. Yeah. I mean, I think you addressed sort of, you know, scope. I guess the second question would be for you, Robert. With respect to Siler City and, you know, just the I know you can't guide or, you know, it's premature to frame around the 300-millimeter for virtual lens opportunities. But that would seemingly be the fastest way to fill that fab. I'm just wondering, is there any framework to think about how to timing of utilization should the AR/VR type opportunity ramp? How should we be thinking about that?

Look. I mean, at the end of the day, we're always adjusting, you know, kind of the production to the demand. Right? And we're gonna be scaling this up as demand, you know, picks up. And at the end of the day, this is really dependent on customer adoption of the technology. Right? Yeah. And then, of course, we are ready to scale. I mean, the good thing is here with Wolfspeed here, we got really the facilities. We got the CapEx, which was spent here pretty much in both the device step-up in Mohawk Valley and, as you said, on the materials side here, we got, you know, capacity in Durham, but also in Siler City. Yeah. The factories are built. Right? So this means, yeah, at the end of the day, it is really now looking to how do we get customers, how do we get pretty much new applications, yeah, to drive that growth. This is something we completely have in our end? No. Because we need to make the customer need to make an architectural choice. Right? Then, of course, we need to go we get this qualified and ramped. And this is why I think, you know, diversifying here the customer base, the go-to-market, and also how we think about understanding the end application is such an important piece of getting Wolfspeed here into the right position.

Great. Thanks, guys.

The next question comes from the line of Samik Chatterjee with JPMorgan. You may proceed.

Hi. Good afternoon, and thanks for the question. This is Joe Cardoso on for Samik. Maybe for my first, I just wanted to follow-up on the EV comments you made, but maybe less on the market itself and just more curious we should think about Wolfspeed's positioning in the market today. Particularly following a somewhat turbulent twelve months or so, like, how but also kind of on the heels of the recent announcements like the one you mentioned with Toyota. Just curious what you're seeing across customer conversations and dialogues and any incremental color you can provide on that front. And then I have a follow-up.

Sure. I mean, so look. Again, we've been announced the partnership with Toyota, right, which pretty much showing we're diversifying here also globally. And, clearly, Toyota is a, you know, very well-known brand for quality. So I think, you know, this is also a testament to the great cooperation between the two companies. Yeah. And then, of course, we're really here looking into, yeah, diversifying here globally, but also in terms of within the EV makers. As I said, right, I mean, with the emergence of these 800-volt battery platforms, it's really the perfect fit for, yeah, the silicon carbide in the traction inverter. And this is what we're really, really focused on. A lot of them are valuing our vertical integration. Right? I mean, if you saw also what happened recently around, you know, where else, obviously, still kind of what happened last year also around Gallium. Yeah. And pretty much all of a sudden, certain countries restricted these materials from being exported. Right? A lot of customers are building okay Wolfspeed. You have manufacturing capabilities. You have the capacity. And you have this right here in the United States. Right? I mean, if you see kind of our footprint, it's pretty much first of all, very lean. Yeah? But it's also something which we have under our control. That is pretty much between North Carolina, Mohawk Valley, and our device and module site in Arkansas. Right? I mean, we can really move very fast. We have this all under one roof. So this is really something where a lot of customers like it. And we have, again, here a lot of, you know, sampling ongoing with various key customers here for programs.

That concludes today's Q&A. I would now like to pass the call back for any closing remarks.

Thanks, everybody, for joining us on the call today here. Thank you.

Thank you for your participation, and enjoy the rest of your day.