DURHAM, N.C. — Wolfspeed, Inc. announced its results for the first quarter of fiscal 2024.
Quarterly Financial Highlights (Continuing operations only. All comparisons are to the first quarter of fiscal 2023) • Consolidated revenue of $197.4 million, compared to $189.4 million ◦ Mohawk Valley Fab contributed $4.0 million in revenue • Device design-ins of $2.2 billion and quarterly record of over $1 billion in device design-wins • GAAP gross margin of 12.5%, compared to 35.7% • Non-GAAP gross margin of 15.6%, compared to 38.8% ◦ GAAP and non-GAAP gross margins for the first quarter of fiscal 2024 include the impact of $34.4 million of underutilization costs, representing approximately 1,740 basis points of gross margin. See “Start-up and Underutilization Costs” below for additional information.
“We kicked off our fiscal year with a strong quarter in both execution and market share. Not only have we continued to win in the marketplace, as evidenced by our third highest quarter of design-ins and a record quarter of design-wins, we have clear focus on the ramp of our Mohawk Valley Fab,” said Wolfspeed CEO, Gregg Lowe. “At Mohawk Valley, we have an outstanding operations team in place, Building 10 on our Durham campus is producing enough 200mm wafers ahead of the needs of Mohawk Valley, and we already have enough qualified product to satisfy our 20 percent utilization goals.”
Lowe continued, “We remain steadfast in our long-term vision for the future of this industry. The market opportunity for silicon carbide stands at $6 billion today, up from $400 million just five years ago. This further validates our strategy to invest now to capitalize on the immense opportunities at-hand, and the significant opportunity in the future. We have amassed significant materials expertise over the decades, which combined with the capacity of our new materials factory in Siler City, will increase our wafer production by 10x when fully operational, and creates significant competitive advantages over our peers and new entrants. We will be better positioned to support our customers’ needs going forward and cater to a whole host of new applications for silicon carbide technology. As the only pure-play silicon carbide company in the market today, we believe that we are best positioned to capitalize on a decades long tailwind that represents a $20 billion addressable market by 2030.”
As previously announced, on August 22, 2023, Wolfspeed entered into a definitive agreement to sell its RF product line to MACOM Technology Solutions Holdings, Inc. (MACOM) for approximately $75 million in cash, subject to a customary purchase price adjustment, and 711,528 shares of MACOM common stock, valued at $50 million based on the 30 trading day trailing average closing price for MACOM’s common stock through August 21, 2023. Wolfspeed expects to close the transaction by the end of calendar 2023.
Business Outlook:
For its second quarter of fiscal 2024, Wolfspeed targets revenue from continuing operations in a range of $192 million to $222 million. GAAP net loss from continuing operations is targeted at $131 million to $153 million, or $1.04 to $1.22 per diluted share. Non-GAAP net loss from continuing operations is targeted to be in a range of $71 million to $88 million, or $0.56 to 1 $0.70 per diluted share. Targeted non-GAAP net loss from continuing operations excludes $60 million to $65 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.
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 $8.4 million of factory start-up costs and $34.4 million of underutilization costs in the first quarter of fiscal 2024. No underutilization costs were incurred in the first quarter of fiscal 2023.
For the second quarter of fiscal 2024, operating expenses are expected to include approximately $11 million of factory start-up costs primarily in connection with materials expansion efforts. Cost of revenue, net, is expected to include approximately $35 million of underutilization costs primarily in connection with the Mohawk Valley Fab.
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