Gregg Lowe

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 expensive, 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 in the next-generation power semiconductor applications is a key reason why we were awarded $750 million in proposed direct funding under the CHIPS & 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 and 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 US 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 IPOs 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 EVs adoption and the continued weakness in industrial and energy, the steps we are taking will rightsize 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 time frame. 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 Zeta and they understand that we would need to see a clear acceleration of our customer demand and additional capacity requirements before we would reconsider construction at the site.
While we are indefinitely suspending our activities in Saarland at this time, should we determine to build a fab in the future, the in-store site remains our preferred site in Europe. Third, we have implemented a workforce reduction in our administrative and other business functions. This reduction, along with the factory closures, will impact approximately 20% of our total employee base. This reduction will better align our business with current market conditions and customer demand.
These facility and head count restructuring initiatives are targeted to generate annual cash savings of approximately $200 million, significantly improving our projected cash flow from operations over time. These actions will foster a stronger, more agile company, ready to seize the opportunities ahead. Many of these reductions have already occurred, and we expect to complete the majority of the actions by the end of the year. And lastly, we are further reducing our fiscal 2025 CapEx guidance range by an additional $100 million to a new range of $1.1 billion to $1.3 billion, excluding federal incentives.
This reduction will align the pace of our CapEx spend with the broader shift in EV and I&E market demand that we are currently observing. Now let's look at how well positioned the company is to capitalize on the structural and long-term growing demand for silicon carbide, and we'll begin with EVs. As we stated in the past, we are in the very early stage of the most significant and disruptive transition in the auto industry. While this creates a potential for significant growth and opportunity in the long term, it will also result in a dynamic environment in the near term.
As with any disruptive technology, we are seeing EV customers revise their launch time lines as the market works through this transition period. This push out in anticipated EV demand does not reflect diminished confidence in the long-term demand for the adoption of EVs. As China, the world's largest market, aggressively moves forward with the electrification of the automobile, the rest of the world will need to follow and compete, particularly in the context of the stringent emission standards that will be taking effect in coming years. Although demand is expected to ramp more slowly than we originally anticipated, we are continuing to win our share in the EVs marketplace.
In fiscal Q1, we recorded $1.3 billion of design wins, our third highest on record and $1.5 billion of design-ins, approximately 70% of which were for EV platforms. EV revenue grew 2.5 times year-over-year, and we expect our EV revenue to continue to grow throughout calendar 2025 as the total number of car models using Wolfspeed silicon carbide devices in the powertrain increased by 4 times from 2023 to 2024 and is expected to grow by another approximately 75% in 2025. For the industrial and energy sectors, we are seeing continued softness, primarily due to broader macroeconomic pressures, including higher interest rates and the rising cost of capital, which have delayed investment cycles and contributed to a slower recovery for this sector. These conditions also resulted in shorter lead times and limited visibility throughout the broader supply chain.
While the industrial and energy end markets have remained challenged with orders remaining weak, we are seeing an increase in end customer demand as inventory levels in the market are starting to decline. As such, we expect the market will begin to recover in the first half of calendar 2025, and as we see broader market conditions further stabilize and move forward to a recovery, we'll be prepared to support the increased demand. Now, let's take a minute to cover the great progress we've made in building out our 200-millimeter footprint. For the first time, the revenue from our 200-millimeter fab at Mohawk Valley exceeded the revenue from our legacy Durham fab in Q1.
While this revenue was lower than originally anticipated due to market demand and customer pushouts, we continue to see great performance out of the fab with yield and cycle times ahead of plan, and anticipate future improvements as we ramp the fab. In addition, at the JP, we have crystal growers up and running and have been achieving our expected targets with the quality of the material we're seeing being produced at that facility. Construction at the site continues, and we expect to receive a certificate of occupancy in the first half of calendar 2025. Crystal growth and substrate processing out of Building 10 in Durham continues to generate solid output and yields.
This level of productivity will allow for a more measured ramp and, therefore, a more measured level of spend at the JP. Now to quickly summarize before passing over to Neill. We are solidifying our capital structure to complete and position our 200-millimeter footprint to generate annual targeted revenues of approximately $3 billion and optimizing our strategic options. At the same time, we are simplifying our business to be a 200-millimeter leader with a lower cost structure and capital requirements to accelerate our path to profitability.
And the company is well positioned to capitalize on the structural and long-term growing demand for silicon carbide power devices and materials. And with that, I'll turn it over to Neill to discuss our financials and our guidance.

Neill Reynolds

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 PMC 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 power device transition to 200-millimeter, resulting in restructuring actions that will simplify our operating model, lower our non-GAAP EBITDA breakeven 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 200-millimeter 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 brand 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 dates.
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 have also finalized an agreement to defer a total of $120 million in cash interest payments due prior to June 30, 2025, from an unsecured customer refundable deposit agreements.
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 nondebt 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 US Treasury Department released final 48D deregulations and our capacity expansion investments are fully eligible for this program. Accordingly, we have now increased our accrual 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 US 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 fast stages, in conjunction with a weaker short-term market outlook, we will lower our capital expenditures in fiscal year 2025 to $1.1 billion 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 reaccelerates.
Now that we have made the decision to move our power device business fully to 200-millimeter, this will allow us to restructure our company to significantly simplify our operating model, lower our non-GAAP EBITDA breakeven 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 million 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 that Gregg mentioned. First, as a result of our successful transition to 200-millimeter, we are in the process of closing our Durham 150-millimeter device fab. This decision underscores our confidence in 200-millimeter technology and a 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-millimeter Epitaxy facility by the end of this calendar year, with some additional closure we're 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 nonfactory workforce. And this, along with the factory closures, will impact approximately 20% 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 plan, we will be divesting noncore 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 materials operations in North Carolina in both Durham and the JP and Siler City as well as power device fabrication at Mohawk Valley in Marcel, New York. In total, these actions will generate significant annualized cash savings and cash generation capability once complete, lowering our non-GAAP EBITDA breakeven point to less than $1 billion on an annualized revenue run rate, accelerating our path to profitability.
The $2.5 billion of incremental funding for 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 of 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 remains 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 yields 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 million to $200 million, reflecting the current macro environment and our demand visibility related to EVs. We continue to have ongoing customer demand discussions that we expect to provide more clarity for calendar 2025 as we complete the quarter.
The rights revenue at Mohawk Valley is targeted to be between $50 million to $70 million for Q2. Given the near-term variation and 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-GAAP 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-GAAP operating expenses of $110 million, down another $10 million quarter-over-quarter and down $20 million or approximately 15% from fiscal 4Q '24 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-GAAP EBITDA profitability in the second half of fiscal 2025 and operating cash flow breakeven 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.

Gregg Lowe

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 has had 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.

Question and Answer Session

Operator

(Operator Instructions) Brian Lee, Goldman Sachs.

Brian Lee

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 chipset 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 I had a follow-up.

Gregg Lowe

Thanks, Brian. So again, obviously, we've been in communication with the CHIPS office on a pretty constant basis, both toward the election and today. The localization or the repatriation of the semiconductor supply chain becoming less reliant on foreign supply is a national and economic security issue for the US, it's a bipartisan priority; and the CHIPS Act has got strong bipartisan support. Silicon carbide is especially important that it's becoming really a predominant power technology for high-power applications that includes the 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 in silicon carbide is a US homegrown technology and 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 this CHIPS grants is an investment in keeping the leadership versus trying to get it back or repatriate. And I think the election result doesn't change any of that. There's a very strong bipartisan support for this activity.

Brian Lee

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.

Gregg Lowe

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

Operator

Samik Chatterjee, JPMorgan.

Joseph Cardoso

This is Joe Cardoso on for Samik. I 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 through the next year. 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.

Gregg Lowe

Yes, thanks. So I'll kick it off and then maybe Neill can give a little bit more color. Obviously, anytime you transition from one fab to another, the customers have an input 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 as well, is producing better results and out of the tab in North Carolina and also have a higher quality since there will be less manual interventions in that fab. 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 enough amount of revenue is planning to transfer to Mohawk Valley. I would note that all of our powertrain customers that we're shipping to, to today currently have already been qualified and the best that is shipping already out of Mohawk Valley. So that transition was well underway.

Neill Reynolds

Yes. And just from a revenue perspective coming out of Durham, right now, we are starting to ramp down our automotive products at Durham. That's already well underway. I think from an industrial energy perspective, as Gregg mentioned, we qualified in both auto and nonauto 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 year, the fiscal year, we really just think about it from a market perspective, we'll lower revenue, particularly in the Durham fab in this quarter.
We'll burn off some inventory. We'll see how that rebound 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're going to see a lot more revenue at Mohawk Valley coming forward as Durham starts to come down during the next nine to 12 months.

Operator

Colin Rusch, Oppenheimer.

Colin Rusch

Can you talk a little bit about the competitive environment with your customers on the material 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?

Gregg Lowe

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, 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 in the early phases 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 material operation is in really good shape. So those discussions are going on right now, and we'll kick out today as those come to fruition.

Operator

Jed Dorsheimer, William Blair.

Jonathan Dorsheimer

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.

Neill Reynolds

Yes. So it's coming down, obviously, for $50 million, $70 million. We're roughly at $60 million or so at the midpoint. I think if you look at power devices, we're going to see that break that down quarter-over-quarter, primarily related to industrial energy burn off in terms of building inventory burn off in 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 kind of $90 million to $95 million range kind of at the midpoint is what we're thinking right now, Jed. So we can see some reduction in Durham, burn off some of that inventory, probably coming down lower but more EV strength.

Jonathan Dorsheimer

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

Neill Reynolds

Yes. So as it relates to 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 of those requirements that relates to the PMT. And obviously, that will allow us to drive very significant liquidity into the business. As I said also, it requires two things.
It requires us to raise up to $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. If you ask about the convertibles and again, to receive the first tranche, we need to refinance a portion of the 2026 converts to go do that, and we have 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 obviously where the share price is and make a decision depending on how that looks out here in time.

Operator

George Gianarikas, Canaccord Genuity.

George Gianarikas

On the recent call, you did around the CHIPS Act, 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 occur?

Gregg Lowe

Yes. The near 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.

Neill Reynolds

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 -- as I mentioned earlier on equity 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 raise and the refinancing, the direct disbursements related to the debt financing will drive a significant amount of capital in. So I think on all fronts, I think we've got a very solid plan here.

Operator

Joshua Buchalter, TD Cowen.

Joshua Buchalter

This is Lanny on for Joshua. I have two questions for you. My first one, it sounds like you're guiding your materials business down high single digits quarter-over-quarter based on the devices 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.

Neill Reynolds

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, strength from an EV perspective as we head into the December quarter. As it relates to materials, I think it's similar kind of somewhat end market weakness is what we're seeing. We continue to work with customers as we always have. It's the timing of shipments and inventory that we're managing related to those end markets. We've got very big contracts and very good relationships with those customers. So really just a matter of kind of working through end market demand materials front as well.

Joshua Buchalter

Yes, that makes sense. And then just housekeeping question for Neill regarding some of the recent capital raises that you've done with, 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?

Neill Reynolds

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

Operator

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.

Gregg Lowe

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

Operator

That concludes the conference call. Thank you for your participation. You may now disconnect your lines.