WOLF - NYSE

Good afternoon. Thank you for attending the Wolfspeed, Inc. Q1 Fiscal Year '25 Earnings Call. My name is Matt, and I'll be your moderator for today's call. All lines will be muted during the presentation portion of the call for an opportunity for questions and answers at the end. [Operator Instructions]. I'm now like to pass the conference over to our host, Tyler Gronbach, Vice President of External Affairs for Wolfspeed. Tyler, please go ahead.

Thank you, operator, and good afternoon, everyone. Welcome to Wolfspeed's first quarter fiscal 2025 conference call. Today, Wolfspeed CEO, Gregg Lowe; and Wolfspeed CFO, Neill Reynolds will report on the results of the first quarter of fiscal year 2025. Please note that we will be presenting non-GAAP financial results during today's call, which we believe provides 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 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. Lastly, please note that all numbers presented today will be on a continuing operations basis. During the Q&A session, we would ask that you limit yourself to one question so that we can accommodate as many questions as possible during today's call. If you have any additional questions, please feel free to contact us after the call. And now, I'd like to turn the call over to Gregg.

Good afternoon, everyone, and thank you for joining us today. Wolfspeed is at a critical inflection point in our strategic direction and priorities as an organization. My comments will be focused on this inflection point and the key priorities for the business, and those include solidifying our capital structure to complete and position our Mohawk Valley device and North Carolina materials facilities to generate an annual targeted revenue of approximately $3 billion while optimizing our strategic options. Simplify our business to be the 200-millimeter silicon carbide leader by lowering our cost structure and capital requirements to accelerate the path to profitability immediately. And capitalize on the structural and long-term growth demand in the silicon carbide transition in the global shift to EVs as well as the industrial and energy markets. We are focused on our 200-millimeter strategy to differentiate and extend our leadership position against the competitive landscape as a scaled operator with the most advanced and highest quality products in the marketplace. We will continue to improve our financial performance and grow revenue by aligning our robust backlog of $11 billion of design wins with industry cycles and targeted cash savings activities that significantly lower our breakeven point and accelerate our path to generate positive cash flows from operations. While EVs have been the biggest driver of silicon carbide adoption thus far, the potential use cases for our technology are expansive, and we believe they will only continue to grow as more and more industries need to solve for the same power loss, system size and system cost challenges as the automakers. The importance of silicon carbide to the next generation power semiconductor applications is a key reason why we were awarded $750 million and proposed direct funding under the CHIPS and Science Act, a key component to solidifying our capital structure. We also secured $750 million in additional committed debt funding from an investor group that included Apollo, The Baupost Group, Fidelity Management & Research Company and the Capital Group. Coupled with an estimated $1 billion of Section 48D cash tax refunds that we expect under the CHIPS and Science Act, we now have access to up to $2.5 billion of incremental funding to support our U.S. capacity plan. This funding is an important milestone in Wolfspeed's long-term growth strategy, and it speaks to the quality of our products and the role we play in the broader semiconductor industry. With this funding secured, I'll now address how we're simplifying our business and focusing on our 200-millimeter device platform, lowering our cost structure and capital requirements to accelerate the path to profitability. Wolfspeed is the first silicon carbide company in the industry to transition its entire device business to 200-millimeter. This strategic move is driven by superior yields, improved die cost, and overall enhanced economics that we're seeing in our 200-millimeter platform. This will allow us to utilize our capacity more efficiently due to more automated manufacturing at our 200-millimeter Mohawk Valley Fab versus our very manual 150-millimeter Durham Fab. This will enable us to eliminate redundancies, significantly improving gross margins. The transition to a fully 200-millimeter device platform also provides opportunities to streamline our organization and lower our operating expenses. Considering the slower growth of EV adoption and the continued weakness in industrial and energy, the steps we are taking will right-size the business and generate additional cash savings. These steps include, first, we have begun to execute our plan to close our 150-millimeter device fab on the Durham campus. This closure will be a phased process over the next nine to 12 months, and we are currently working with customers to finalize the transition timeframe. Second, we are optimizing our capacity footprint by closing our epitaxy facility in Farmers Branch, Texas, and indefinitely suspending our construction plans for the next device fab in Saarland, Germany. We expect to ramp down final production in Farmers Branch by the end of this calendar year. Regarding Saarland, we have spoken with government officials and

Thank you, Gregg, and good afternoon, everyone. Following up on Gregg's comments, I will hit on three important areas of focus during the call today. First, I will focus on our liquidity and capital structure. With the announcement of the CHIPS PMT and upon completion of that agreement, we will have access to an incremental $2.5 billion of future funding in addition to the approximately $1.7 billion of cash that we ended the quarter with. In combination, this total is greater than $4 billion of capital that we target keeping our cash levels greater than $1 billion for the next several years. Secondly, I will outline in more detail our powered device transition to 200mm resulting in restructuring actions that will simplify our operating model, lower our non-GAAP EBITDA break-even to below a $1 billion annual revenue run rate, and clearing our path to profitability. Lastly, I will focus on our quarterly results and outlook incorporating the benefits of our 200mm transition, operational simplification, and restructuring actions. Starting with liquidity and funding, the $2.5 billion CHIPS PMT funding package previously mentioned has three components, $750 million of direct funding from the CHIPS Act, $750 million of debt financing, and $1 billion of 48D refundable tax credits under the CHIPS Act. Regarding the $750 million in direct funding from the CHIPS Act, we expect to receive this funding in multiple disbursements over the next several years, mainly tied to operational milestones at the JP and Mohawk Valley. The first disbursement, which we expect to receive in mid-calendar year 2025, will be roughly 20% to 25% of the total grant size and will require us to meet the following conditions. Executing a definitive direct funding award agreement with the CHIPS Office, hitting certain operational milestones, and meeting other financial milestones related to our liquidity, including raising additional capital and refinancing our outstanding 2026 convertible notes prior to their maturity date. Regarding the $750 million in debt financing and customer financing, we have already executed the agreement for the Apollo-led debt financing over three tranches, the first of which was $250 million that we received in October. We will be required to draw additional debt tranches related to this agreement of $250 million each in conjunction with drawing down on the first two disbursements of the CHIPS grant. We’ve also finalized an agreement to defer a total of $120 million in cash interest payments due prior to June 30th, 2025, from an unsecured customer refundable deposit agreement. As it relates to meeting the CHIPS award financial milestones, as previously mentioned, we will be required to raise up to $300 million of additional capital from non-debt sources, including equity. To achieve the first disbursement of the CHIPS grant, we are targeting to raise a portion of this amount in equity capital in the near future. As for our convertible notes, the CHIPS PMT provides some optionality for how we can address the maturities. We will closely monitor and assess market conditions prior to taking any action related to our convertible notes, and we will consider all options available to us at that time to determine what is in the best interest of long-term shareholder value. Right now, in order to achieve the first CHIPS disbursement, our focus will be on refinancing or restructuring the outstanding 2026 convertible notes. Regarding the estimated $1 billion of Section 48D cash tax refunds, a few weeks ago, the U.S. Treasury Department released final 48D regulations, and our capacity expansion investments are fully eligible for this program. Accordingly, we have now increased our accruals to approximately $725 million in 48D tax credits as of the end of the first quarter. We expect to see additional accruals in calendar 2025, and as we complete the JP facility and tool spend, more of these accruals will be added to the balance sheet. We expect to realize the first tranche of cash tax refunds in calendar 2025 and subsequent refunds in 2026 and beyond. In summary, this $2.5 billion funding package, in conjunction with the required capital raises and debt refinancing, will significantly enhance our financial position and support our U.S. capacity expansion plans. This is simply the first step, however, in our journey to improve our balance sheet and accelerate our path to profitability. While we expect to have access to new capital, we will continue to remain relentlessly focused on liquidity and driving operational improvements. Given the higher yields and efficiency of our 200-millimeter production in both substrate and fab stages, in conjunction with a weaker short-term market outlook, we will lower our capital expenditures in fiscal year 2025 to $1.1 to $1.3 billion. This is a reduction of $100 million versus our prior guidance. This will allow us to largely complete our facility build-out at the JP and Mohawk Valley while being more prudent with tool expenditures in order to match supply output with market demand. However, with the facilities largely complete, we will be poised to respond with tool installations to expand capacity and serve our customers when demand re-accelerates. Now that we have made the decision to move our power device business fully to 200 millimetres, this will allow us to restructure our company to significantly simplify our operating model, lower our non-GAAP EBITDA break-even point, and exit assets we will no longer require for production. As Gregg discussed, we have a variety of operational and headcount restructuring initiatives that are already underway to reduce our overall cost basis and streamline operations. These actions, upon completion, are targeted to generate annual cash savings of approximately $200 million. This restructuring will be cash neutral in fiscal year 2025 and start generating a large portion of the $200 million of annual cash savings during fiscal year 2026. As part of this program, we expect to recognize total restructuring charges of approximately $400 to $450 million over the next several quarters, including $87 million in charges recorded in Q1. We have provided a Non-GAAP adjustment and a description of these charges in our earnings release today. These restructuring charges include severance costs, asset impairments, asset disposition costs, and other related expenses of which $170 million to $185 million will be in cash charges. As I mentioned before, these restructuring charges are targeted to be cash neutral during fiscal year 2025. To expand a bit on the restructuring initiatives Gregg mentioned, first, as a result of our successful transition to 200 millimetres, we are in the process of closing our Durham 150 millimetres device fab. This decision underscores our confidence in 200-millimetre technology and its superior yield, better die costs, and overall improved economics. It will be a phased closure, which we expect to complete by the second half of calendar 2025. We expect revenue contribution from the Durham Fab to continue for the next four quarters with the expectation of a gradual phasing out and transfer of revenue to Mohawk Valley over time. Second, we are in the process of closing our Farmers Branch 150-millimetre epitaxy facility by the end of this calendar year, with some additional closure work continuing into mid-calendar 2025. We expect most of the workforce reductions associated with this facility closure will occur by the end of this calendar year. As such, we expect to realize initial cash savings in the second half of fiscal 2025, with full cash savings being achieved by early fiscal year 2026. Finally, we are implementing a reduction to our overall non-factory workforce, and this, along with the factory closures, will impact approximately 20 percent of our total employee base. The majority of these workforce reductions will be completed by the end of this calendar year. We expect to see lower operating expenses and immediate savings in the current quarter and beyond. In addition, as part of our restructuring and simplification plans, we will be divesting non-core assets that we target to generate more than $150 million of cash proceeds in calendar 2025. That would be incremental to the savings goals mentioned earlier. This will allow us to simplify our manufacturing and administrative footprint and focus on delivering our leading silicon carbide technologies to our customers. Post these efforts, our primary manufacturing facilities will consist of material operations in North Carolina, in both Durham and the JP and Siler cities, as well as power device fabrication at Mohawk Valley and Marcy, New York. In total, these actions will generate significant annualized cash savings and cash generation capability once complete, lowering our non-GAAP EBITDA break-even point to less than $1 billion on an annualized revenue run rate, accelerating our path to profitability. The $2.5 billion of incremental funding to the CHIPS PMT and the actions we have taken to reduce our operating costs puts us on a stronger financial foundation. This clarity on our financial trajectory underscores our commitment to delivering value to our shareholders and solidifies our confidence in the steps we are taking. Now, moving on to our quarterly results. We generated $195 million in revenue for the quarter, slightly below the midpoint of our guidance and down 3% sequentially. We recognized power revenue of $97 million, down quarter over quarter, driven largely by lower demand in the industrial and energy sectors. Revenue contribution from Mohawk Valley was $49 million, up more than 20% quarter over quarter, but at the lower end of our range due to lower customer demand within the quarter. We also note that this is the first quarter that Mohawk Valley contributed more power device revenue than the Durham Fab, and with higher yields and consistent operating execution, remained poised to deliver higher levels of revenue in future periods. We had materials revenue of $98 million, up slightly from our prior quarter and above our expectations, driven by continued strong operating performance by our materials operations team. Non-GAAP gross margin for the first quarter was 3.4%, down quarter over quarter, but above the midpoint of our August guidance. This included 26 million or approximately 1,300 basis points of underutilization costs, primarily related to Mohawk Valley. Margins were also impacted by lower revenue driven by industrial and energy mix, and lower product margins from our Durham Fab, but offset by improved yield and operating performance at Mohawk Valley. Operating expenses were $120 million in the quarter, well below our guidance, and down $10 million quarter over quarter, as we continue to manage costs in conjunction with our overall simplification initiatives and restructuring efforts. Adjusted EPS was ahead of the midpoint of the August guidance, as we saw the benefits of the higher gross margin percent and lower OpEx offset the impact of lower revenue mentioned earlier. Turning to the balance sheet, we ended the quarter with a strong cash position, with total cash and cash equivalents of approximately $1.7 billion. This amount does not include the additional $250 million of term loan financing received in October. Free cash flow during the quarter was negative $528 million, comprised of negative $132 million of operating cash flow and $396 million of capital expenditures. Importantly, with the CHIPS PMT and funding package, as well as the restructuring actions that we're taking, we target maintaining a minimum cash balance greater than $1 billion moving forward. Finally, turning to our Q2 2025 guidance, we target Q2 2025 revenue to be between $160 billion to $200 million, reflecting the current macro environment and our demand visibility related to EVs. We continue to have ongoing customer demand discussion that we expect to provide more clarity for calendar 2025 as we complete the quarter. Device revenue at Mohawk Valley is targeted to be between $50 million to $70 million for Q2. Given the near-term variation in the demand outlook and our continued discussions with customers for the second quarter of fiscal 2025, we are providing a wider guidance range. We expect to complete a planned shutdown to conduct maintenance at both our Durham and Mohawk Valley campuses in Q2. For the Mohawk Valley Fab, we will be completing system tie-ins to increase our utility capacity, which will enable us to reach full fab output. For the Durham campus, we will be performing standard preventative maintenance on key portions of our electrical infrastructure in order to increase reliability. The impact of these shutdowns has been contemplated in our guidance range. We target Q2 2025 non-gap gross margin to be between minus negative 6% to positive 6%. At the midpoint of this range includes approximately 35 million or 1,900 basis points of underutilization costs of $9 million quarter over quarter, primarily related to Mohawk Valley, as we will reduce utilization this quarter to target an inventory burn, as well as complete the scheduled maintenance shutdowns I just mentioned. We target Q2 2025 non-gap operating expenses of 110 million, down another 10 million quarter over quarter, and down 20 million or approximately 15% from fiscal 4Q24 to reflect the impact of restructuring actions and cash savings efforts. We are continuing to invest in our business while at the same time structurally simplifying the company to be lower cost and creating a clear path to profitability. We now expect non-gap EBITDA profitability in the second half of fiscal 2025 and operating cash flow break even during fiscal year 2026. As market conditions continue to improve, Wolfspeed will be ready. We will be more nimble and agile to respond to customer needs. Thank you. And I'll now turn it back over to Gregg for closing comments.

Thanks, Neill. As we close out the first quarter, I want to reiterate the significant progress we've made to achieve the targets that we communicated and put Wolfspeed on a path for long-term success. As I said at the start of today's call, Wolfspeed is at a critical inflection point in our strategic direction and priorities as an organization, and we are focused on solidifying our capital structure to complete and position our 200-millimeter footprint to generate an annual targeted revenue of approximately $3 billion while optimizing our strategic options. We are simplifying our business to be the 200-millimeter leader with a lower cost structure and capital requirements to accelerate our path to profitability, and we're positioning the company to capitalize on the structural and long-term growing demand for silicon carbide power devices and material. We look forward to providing additional updates on our progress in the coming months, and as always, we would like to thank everyone for your continued support. And now I'll turn it over to the operator for Q&A.

[Operator Instructions]. The first question is from the line of Brian Lee with Goldman Sachs. Your line is now open.

Hi, guys. Good afternoon. Thanks for taking the questions. I know you kind of walked through some of this, but maybe just wanted to ask point blank. I know the dust hasn't even settled on the election results and sort of this potential red sweep, but can you speak to what that means for the CHIPS Act broadly and then your status with the PMT and just maybe walk us through the next steps here as you think about the implications of last night and then add a follow-up.

Thanks, Brian. So, again, obviously, we've been in communication with the CHIPS office on a pretty constant basis both before the election and even today. The localization or the repatriation of the semiconductor supply chain becomes less reliant on foreign supply. It's a national and economic security issue for the U.S. It's a bipartisan priority and the CHIPS Act was passed with strong bipartisan support. Silicon carbide is especially important as it's becoming really the predominant power technology for high power applications. That includes grid, that includes AI data centers, numerous other industrial applications, and, of course, electric vehicles, as we've been saying. Now, the thing that's different is silicon carbide is a U.S. homegrown technology and the U.S. currently has the leadership in this, and we've been very much engaged with the CHIPS program office on this particular point. So, CHIPS grant is an investment in keeping the leadership versus trying to get it back or repatriate. And I think the election results doesn't change any of that. There's a very strong bipartisan support for this activity.

Okay. Awesome. Appreciate those thoughts. And then just second question related to some of your customer, one of your customer comments on a recent call. I think Renesas was talking about maybe pulling back on wafer commitments with you. I don't know if that is true or maybe you can provide some details, maybe speak to the latest status there as well with Renesas and whether that's specific to 200 millimeter or 150 or both, and then if there are any implications for their deposit with you. Thanks, guys.

Yes, thanks for that, Brian. You know, Renesas is a great partner. We have a very, very strong relationship with them across multiple levels, including the CDO levels. You know, they are new to the silicon carbide business, so it would be very normal that demand would ebb and flow as they establish a foothold in business. We continue to work with them on their supply chain plans, and that's for both 150 and 200 millimeter substrates.

Thank you for your question. Next question is from the line of Samik Chatterjee with JPMorgan. Your line is now open.

Hi. Thanks for the question. This is Joe Cardoso on for Samik. Was wondering if you could provide a bit more color on how you guys are envisioning the magnitude and timing relative to the revenue ramp down of the Durham device fab and the impact to your top line for the next year or so. And as you talk to customers around transitioning the capacity that you're currently running out of Durham to Mohawk, what's your sense on the appetite to transition this capacity versus perhaps customers potentially being more reluctant to do so? Basically, just curious if there's any concerns around not being able to capture all of that as you try to transition it from Durham to Mohawk. Thanks for the question.

Yes, thanks. I'll kick it off and then maybe you'll get a little bit more color. Obviously, any time you transition from one fab to another, you know, the customers have an input, you know, into that. We're engaged with them. I think the thing that's very different in this particular situation is that we're moving from a very manual optimized fab to a new, highly automated fab that we believe is going to produce, you know, well, is producing better results out of the fab in North Carolina and also will have higher quality since there'll be less manual interventions in that. We're already engaged with customers on that. We've got a pretty solid plan. I think we're transitioning the vast majority of the revenue up to the factory. There will be some parts that don't transfer, but the vast amount of revenue is planning to transfer to Mohawk Valley. I would note that all of our powertrain customers that we're shipping to today currently have already been qualified, and the vast majority of that shipping already out of Mohawk Valley. So, that transition was well underway.

Yes and that's just from a revenue perspective coming out of Durham. You know, right now, we are starting to ramp down our automotive products in Durham. That's already well, you know, underway. I think from an industrial energy perspective, as Gregg mentioned, we've qualified, I think, both auto and non-auto parts a very significant amount already at Mohawk Valley. So, we'll just transition those parts up there. So, as we move into the second half of the fiscal year, we really just think about it from a market perspective. We'll lower revenue, particularly in the Durham Fab this quarter, of our burnoffs and inventory. We'll see how that rebounds in the second half of the year, just driving more towards Mohawk Valley. So, we'll see Mohawk Valley revenue continue to increase, and Durham, kind of come down over the following quarters. At least that's kind of our forecast for today. What we can tell is some customers may make some end-of-life or later purchases in the fab. We don't have that baked in yet, but we'll wait to see how those kind of play out. Our expectation is we'll just see a lot more revenue out of Mohawk Valley coming forward as Durham starts to come down during the next 12 months.

Thank you for your question. The next question is from the line of Colin Rusch with Oppenheimer. Your line is now open.

Thanks so much, guys. Can you talk a little bit about the competitive environment with your customers on the materials side around moving to 200 millimeters on those wafers and how much of the wafer and materials business is going to migrate into the larger diameter here over the next 12 months?

Yes. So, we are obviously moving our own business to 200 millimeter and many of our materials customers are interested as well in moving to 200 millimeter over time. We have engaged with many of them in initial discussions about supply agreements on 200 millimeter. I think the – in fact, we had several of them visiting the JP to kind of check out what we're doing there. I would say they were pretty impressed with the scale of the operation there. We're at the early phase of discussions on this, but I would say the interest is pretty solid and the capability that we're demonstrating or the confidence that we're demonstrating by shutting down our 150 millimeter device fab gives them the confidence that our 200 millimeter materials operation is in really good shape. So, those discussions are going on right now, and we'll keep you up to date as those come to fruition.

Thank you for your question. Next question is from the line of Jed Dorsheimer with William Blair. Your line is now open.

Hi. Thanks. I guess two questions. So, first one, maybe, Neill, just going back to the previous question, I'm not sure if you – or, I didn't hear it, but if Mohawk Valley is doing 50 to 70, did you mention what Durham would be in the devices for the quarter out of that 150 to 200 guide, and then I have a follow-up?

Yes. So, if it's coming down, obviously, for 50 to 70, we're roughly at 60 million or so at the midpoint. I think if you look at power devices, we're going to see them, bring that down quarter-over-quarter, primarily related to industrial energy, burn off in terms of building, inventory burn off at the channel. We will see significant EV growth continue here into the quarter at the midpoint. We are widening the ranges because we're having some customer discussions right now. We do see some incremental EV demand. So, we'll see Durham come down further and we'll probably see power devices in that 90 to 95 million range kind of at the midpoint is what we're thinking right now, Jed. So, we'll continue to see some reduction in Durham, burn off some of that inventory. Pioneer coming down lower, but more EV strength.

Got it. And then, just as a follow-up, regarding the 26 converts and the raise of the 300 million, is that to retire those or is your plan to restructure that those converts?

Yes. So, as it relates to the - how we're thinking about executing the plans related to the PMT. As we said on the call, we're just going to look at market conditions. We're clearly going to do what we think is in the best interest of long-term shareholder value requirements as it relates to the PMT. And obviously, that'll allow us to drive very significant liquidity into the business. As I said also it requires two things. It requires us to raise up the $300 million of equity to receive the full grant. However, it's only a portion of that to get to the first tranche. So, that's number one. We asked about the convertibles and again to receive the first tranche, we need to refinance a portion of the 2026 converts to do that. I think I said that on the call. So, we'll look at a number of options to go do that, look at the market conditions, look at where the obviously where the share price is and make a decision depending on how that looks out here in time.

Thank you for your question. Next question is from the line of George Gianarikas with Canaccord Genuity. Your line is now open.

Hi, good afternoon. Thank you for taking my questions. On the recent call you did around the CHIPS Act Fund, you had mentioned some operational milestones that you had to meet in order to qualify for subsequent tranches. Can you just give us a little bit of color on what those milestones are and your confidence in achieving them given the situation that your fundamentals occurred in? Thank you.

Yes the new term, the first tranche, and Neill will go through a little bit of detail in terms of what that first tranche means. We've got pretty good, I would say we've got very solid line of sight to hitting the milestones that are going in for the first milestone that we need to hit.

Yes. So I think from an operational perspective, we're in good shape. And as it relates to that first tranche, in addition to the items I mentioned earlier on the equity and the convertibles, essentially what you're talking about is 20% to 25% of that first tranche coming in. That would also include the next tranche of the debt financing for another $250 million. So I think between the capital raises, the refinancing, the direct disbursements related to CHIPS and the debt financing will drive significant amount of capital. So I think on all fronts I think we've got a very solid plan here.

Thank you for your question. Next question is from the line of Joshua Buchalter with TD Cowen. Your line is now open.

Hi, everyone. This is Lannie [ph] on for Josh. Thank you for taking my questions. I have two questions for you. My first one, it sounds like you're guiding your materials business down a single digit quarter-over-quarter based on the device's guidance of low 90s. Can you talk about the puts and takes there, any timing issues as far as recognition goes or perhaps demand from your customers who are also probably likely seeing similar weaknesses in industrial and energy revenue and I have a follow-up.

Yes, so I think in terms of – I talked a little bit about devices coming down, particularly related to industrial energy, although we are still continuing to see at the midpoint the strength from an EV perspective as you head into the December quarter. As it relates to materials, I think it's similar, kind of similar end market weakness is what we're seeing. We continue to work with customers as we always have, as the timing of shipments and inventory that they're managing related to those end markets. We've got very good contracts and very good relationships with those customers. So, really, it's just a matter of kind of working through end market demand on the materials front as well.

Yes, that makes sense. And then, just a housekeeping question for Neill regarding some of the recent capital raises that you've done with Apollo and the consortium. Could you walk us through how you see interest expense evolving over the next year or so, kind of given the change in terms and thank you for the question?

Yes, sure. So, I think -- so, I'll focus on the cash interest. So, if you look at current year versus prior year, we'll actually see the cash interest come down year-over-year. As you look into 2025, fiscal '25 versus '24, the reason for that is also we've restructured the CRD to push out some of the interest costs on that, which will help some of the interest costs come down year-over-year. So, it will also help provide some improvement in terms of our operating cash burns, I think, about the second half of the year. So, operating cash burn will likely come down, both based on the restructuring actions we talked about on the call, but also related to the lower cash interest. That will start to come back up as we get into 2026. Our anticipation is when you think of the structural demands, when you are over time we anticipate coming, along with the restructuring actions, the savings that we're seeing the $200 million in cash savings, we'll start to see a big chunk of those as you move into fiscal year 2026. Yes, we should be in good shape to get coverage on that.

Thank you for your question. There are no additional questions waiting at this time, so I'll pass the conference back to Gregg Lowe, CEO, for any closing remarks.

Thank you everyone for taking the time to be with us today, and we look forward to catching up with you next quarter.