Wolfspeed, Inc. 2026 Q4 Earnings Call

Dan, please go ahead. Thank you, operator, and good afternoon, everyone.

Welcome to Wolfspeed's fourth quarter fiscal 2026 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 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. With that, I will turn the call over to Robert.

Thank you, and good afternoon, everyone. We appreciate you joining us today. This quarter marks another step in building momentum since we substantially refreshed our leadership team and capital structure. The fourth quarter revenue result of $150 million represents another quarter of delivering results at the midpoint of the guidance range and further demonstrates we are delivering on our commitments. Reflecting on this past fiscal year, we have proactively taken aggressive actions, including recapitalizing the company to strengthen the balance sheet and bolstering our leadership team and our sales organization with seasoned industry veterans. We've also adjusted our go-to-market sales strategy and positioned the company to refocus on our technology leadership and a customer-centric approach. We have accomplished a lot as we continue to deliver on our commitments.

We remain early in our transformation, and as each month and quarter passes, we continue to gain further confidence in our path to profitability as we execute our strategic priorities and navigate broader industry dynamics. As I said on my very first earnings call leading the Wolfspeed team, we have enormous potential underpinned by strong foundational elements. Since then, we have been proactive building upon these strengths by attracting and incorporating industry veterans with extensive customer relationships to leverage, optimize, and capitalize on our physical, operational, and intellectual assets. Most recently, as announced late July, Andy Mattes was appointed to our board of directors. As the former CEO of Coherent and Diebold Nixdorf, with more than 40 years of leadership in semiconductor and advanced technology industries, he brings a strong record of strategic leadership, operational excellence, and industry relationships to further bolster and accelerate our path to profitability.

Also, in early June, we announced the launch of a dedicated data center solutions team to capitalize on the further growth in our fastest-growing end market. To lead this effort, we appointed two industry veterans in the San Francisco Bay Area, the epicenter of tech innovation, who have extensive experience in high voltage power architecture for AI and data center applications. Our investment and focus on AI data center applications is gaining momentum, reflected in both revenue growth and expanding customer traction. In fiscal 2026, revenue in this business more than doubled versus fiscal 2025, including increasing approximately 20% from the fiscal third quarter to the fourth quarter. We continue to see encouraging progress as new design wins ramp at leading power supply companies, including Lite-On, Macре, and others, to support multiple hyperscaler customers. These wins span both established and emerging HVDC AI architectures.

Transition to 800-volt architectures is increasing silicon carbide content across the data center power ecosystem. As these next-generation power architectures become a critical enabler of AI infrastructure, hyperscaler customers are placing greater emphasis on system efficiency, quality, and supply assurance. Beyond AC-DC power supplies, we are seeing opportunities emerge across battery backup units, super capacitors, eFuses, and high voltage DC to DC conversion. We are also pursuing opportunities on the secondary side of high voltage DC to DC conversion systems, which could further expand our addressable market over time. While the market remains in its early stages, we believe our technology leadership and available manufacturing capacity position us well to participate in this long-term growth opportunity. With industry-leading SiC technology and differentiated vertically integrated 200-millimeter manufacturing capability, we are well positioned to support this transition as AI data center adoption continues to scale.

These are all clear examples demonstrating the team is executing and delivering on the key strategic priorities we committed to. I will also comment on a few updates regarding our commitments to technology leadership, another key strategic priority. This past June, we announced two significant achievements at PCIM, a leading power technology conference in Europe. Gen 5 MOSFET technology and 10kV MOSFET commercial readiness. At PCIM, we announced our fifth generation silicon carbide MOSFET technology, making another significant milestone in our innovation roadmap. Gen 5 MOSFET deliver the best specific on state resistance in the industry while maintaining the excellent switching behavior introduced in our Gen 4 MOSFET. This combination represents a substantial performance leap in efficiency over competitive solutions, giving our customers the option to maintain efficiency and reduce the overall size of their systems, or maintain system size and achieve greater power density.

Gen 5 enables more compact traction inverters, extended EV driving range, right-sized battery systems, and improved EV charging infrastructure, directly addressing the cost and efficiency pressures faced by automotive OEMs. Beyond automotive, Gen 5 also addresses several industrial power supply applications demanding leading-edge performance, including AI data center power supplies, solid-state transformers, and renewable energy conversion. Importantly, Gen 5 was developed and is running in our highly automated 200 millimeter facility in Mohawk Valley in upstate N.Y. This provides our automotive and industrial customers with a rapid, low-risk path from design into volume production. While we are diversifying our revenue and customer base beyond our historical core concentration, as discussed above, we are also continuing to develop and improve our automotive customer relationships. To this point, our previously announced partnership with Toyota for onboard charging systems reflect the continued importance of silicon carbide in next-generation EV platforms.

More recently, we were awarded first-time business from a European tier 1 supplier supporting the onboard charger for a large German OEM. To touch on the aerospace and defense market briefly, our 10 kilovolt silicon carbide MOSFET was acknowledged at the PCIM as the top innovation at the conference. We also recently announced a memorandum of understanding with GE Aerospace to accelerate the adoption of high voltage silicon carbide across the industrial, aerospace, and defense market. This technical partnership includes the supply of the industry's first commercially available 10 kilovolt SiC MOSFET from Wolfspeed, and will ensure co-development of standard high voltage power module formats. This domestic partnership strengthens our supply chain resilience and aligns with U.S. government priorities around critical technologies for AI, energy, defense, and national security. Now, materials business, we continue to serve a broad range of power and RF-based customers, including our 150 millimeter LTA customers.

We are also working closely with them on their 200 millimeter transition by providing state-of-the-art samples and technical support. Our increased focus, customer-centric approach, and operational discipline continue to be the backbone of these relationships. Regarding our 200 millimeter substrates, we continue to explore new opportunities and make steady progress. Since our last update, we began shipping the first engineering samples to multiple customers for their internal evaluation. We continue to view this as a longer-term growth opportunity. Prior to turning it over to Gregor, I will close by saying thank you to the entire Wolfspeed team for their continued commitment, execution, and drive. Our strategic alignment is significantly improved, with new leadership, a new sales strategy, and a stronger capital structure, better positioning us to capitalize on long-term industry trends. This will continue to strengthen our earnings potential and we believe will ultimately deliver significant value creation for shareholders.

Thank you, Robert, and good afternoon, everyone. In addition to the key strategic priorities reviewed by Robert, we have also made great strides with our operational excellence initiatives, which will continue to increase our earnings potential and differentiate us in the marketplace as partner of choice. I will turn to our fourth quarter results, which generated $150 million in total revenue for the quarter, in line with the midpoint of our guidance. Materials revenue was approximately $43 million. Power revenue was approximately $106 million, which represents 6% sequential growth as the quarter benefit from strength in AI data centers, which increased approximately 20% from Q3 to Q4, and more than doubled from fiscal 2025 to fiscal 2026, which helped to compensate for the softer results in automotive. Next, our adjusted non-GAAP gross margin for the quarter was -19.9%, reflecting a 70 basis point sequential improvement.

This was driven primarily by product mix, including higher I&E sales in Power and higher RF sales in Materials. Underutilization continues to be the primary driver of our gross margin profile, and improving factory utilization remains one of the most important levers to drive margin expansion. As I mentioned during the third quarter earnings call, we continue to focus on producing the same revenue with less capacity consumed. These continued efforts position us to keep expanding our earnings potential per dollar of invested capital, even if it makes the reported underutilization appear larger. Non-GAAP operating expenses totaled $62 million in the quarter versus $61 million in the prior quarter, largely due to continued investment in R&D and marketing-related expenses. Adjusted non-GAAP EBITDA for the quarter was negative $62 million, comparable to a prior quarter.