Mohawk Valley Fab Revenue more than Doubled
Sequentially; On Track for 20% Utilization in Fourth Quarter of
Fiscal 2024
$2.8 Billion of Design-Ins, Second Highest
Quarter on Record
Wolfspeed, Inc. (NYSE: WOLF) today announced its results for the
third quarter of fiscal 2024.
Quarterly Financial Highlights (Continuing operations only.
All comparisons are to the third quarter of fiscal 2023)
- Consolidated revenue of approximately $201 million, compared to
approximately $193 million
- Mohawk Valley Fab contributed approximately $28 million in
revenue, over a 2x increase from the prior quarter
- Materials revenue of approximately $99 million - second highest
quarter on record
- Power device design-ins of $2.8 billion
- Quarterly design-wins of $0.9 billion - 70% related to EV
applications
- GAAP gross margin of 11%, compared to 31%
- Non-GAAP gross margin of 15%, compared to 34%
- GAAP and non-GAAP gross margins for the third quarter of fiscal
2024 include the impact of $30 million of underutilization costs,
representing approximately 1,500 basis points of gross margin. See
"Start-up and Underutilization Costs" below for additional
information.
"We are pleased with the significant operational milestones
achieved in the quarter for Wolfspeed as we continue to be the
world’s first fully, vertically integrated 200-millimeter silicon
carbide player at scale,” said Wolfspeed CEO, Gregg Lowe. "We are
making progress on our Mohawk Valley ramp, more than doubling
revenue sequentially in the quarter and reaching more than 16%
wafer start utilization in April, giving us confidence in our
ability to achieve our 20% utilization target in June 2024.
Construction continues at the JP, our 200mm materials factory in
North Carolina. During the quarter, we started installing furnaces
and connected the facility to the power grid, and we recently
hosted our topping out ceremony. As we’ve said before, Mohawk
Valley will be the flywheel of growth for Wolfspeed, and the JP
will be instrumental in supplying it with high-quality materials.
We are encouraged by the operational progress these facilities have
made and how it will support our long-term growth trajectory."
Lowe continued, "While there have been headlines around general
demand weakness in EVs, we still have more demand than we can
supply for the foreseeable future. Our second highest quarter of
design-ins to date and more than $5 billion of design-wins so far
this fiscal year, tell a compelling story. While the industrial and
energy end markets pose short-term headwinds to our results, we
firmly believe in the strength of our long-term prospects as the
electrification of all things continues across a broad set of
applications."
Business Outlook:
For its fourth quarter of fiscal 2024, Wolfspeed targets revenue
from continuing operations in a range of $185 million to $215
million. GAAP net loss from continuing operations is targeted at
$166 million to $189 million, or $1.32 to $1.50 per diluted share.
Non-GAAP net loss from continuing operations is targeted to be in a
range of $91 million to $109 million, or $0.72 to $0.86 per diluted
share. Targeted non-GAAP net loss from continuing operations
excludes $75 million to $80 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. The GAAP and non-GAAP targets
from continuing operations do not include any estimated change in
the fair value of the shares of common stock of MACOM Technology
Solutions Holdings, Inc. (MACOM) that we acquired in connection
with the sale to MACOM of our RF product line (RF Business
Divestiture).
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 $14.4 million of factory start-up costs and
$30.4 million of underutilization costs in the third quarter of
fiscal 2024. No underutilization costs were incurred in the third
quarter of fiscal 2023.
For the fourth quarter of fiscal 2024, operating expenses are
expected to include approximately $20 million of factory start-up
costs primarily in connection with materials expansion efforts.
Cost of revenue, net, is expected to include approximately $29
million of underutilization costs primarily in connection with the
Mohawk Valley Fab.
Quarterly Conference Call:
Wolfspeed will host a conference call at 5:00 p.m. Eastern time
today to review the highlights of its third quarter results and its
fiscal fourth quarter 2024 business outlook, including significant
factors and assumptions underlying the targets noted above.
The conference call will be available to the public through a
live audio web broadcast via the Internet. For webcast details,
visit Wolfspeed's website at investor.wolfspeed.com/events.cfm.
Supplemental financial information, including the non-GAAP
reconciliation attached to this press release, is available on
Wolfspeed's website at investor.wolfspeed.com/results.cfm.
About Wolfspeed, Inc.
Wolfspeed (NYSE: WOLF) leads the market in the worldwide
adoption of silicon carbide technologies. We provide
industry-leading solutions for efficient energy consumption and a
sustainable future. Wolfspeed’s product families include silicon
carbide material and power devices targeted for various
applications such as electric vehicles, fast charging, and
renewable energy and storage. We unleash the power of possibilities
through hard work, collaboration and a passion for innovation.
Learn more at www.wolfspeed.com.
Non-GAAP Financial Measures:
This press release highlights the Company's financial results on
both a GAAP and a non-GAAP basis. The GAAP results include certain
costs, charges and expenses that are excluded from non-GAAP
results. By publishing the non-GAAP measures, management intends to
provide investors with additional information to further analyze
the Company's performance, core results and underlying trends.
Wolfspeed's management evaluates results and makes operating
decisions using both GAAP and non-GAAP measures included in this
press release. Non-GAAP results are not prepared in accordance with
GAAP, and non-GAAP information should be considered a supplement
to, and not a substitute for, financial statements prepared in
accordance with GAAP. Investors and potential investors are
encouraged to review the reconciliation of non-GAAP financial
measures to their most directly comparable GAAP measures attached
to this press release.
Beginning with the fourth quarter of fiscal 2023, the Company no
longer excludes start-up expenses from its non-GAAP measures and
does not exclude underutilization from its non-GAAP measures. Prior
period non-GAAP measures have been updated in this press release to
reflect the current presentation of the Company's non-GAAP
measures. As a result of this change, previously published non-GAAP
financial measures for the Company for prior periods which exclude
start-up expenses are not directly comparable to the non-GAAP
measures included herein.
Forward Looking Statements:
The schedules attached to this release are an integral part of
the release. This press release contains forward-looking statements
involving risks and uncertainties, both known and unknown, that may
cause Wolfspeed’s actual results to differ materially from those
indicated in the forward-looking statements. Forward-looking
statements by their nature address matters that are, to different
degrees, uncertain, such as statements about our plans to grow the
business, our ability to achieve our targets for the fourth quarter
of fiscal 2024 and periods beyond, our ability to meet targeted
utilization rates at the Mohawk Valley Fab, and our market growth.
Actual results could differ materially due to a number of factors
including but not limited to, ongoing uncertainty in global
economic and geopolitical conditions, such as the ongoing military
conflict between Russia and Ukraine and the ongoing conflicts in
the Middle East, changes in progress on infrastructure development
or changes in customer or industrial demand that could negatively
affect product demand, including as a result of an economic
slowdown or recession, collectability of receivables and other
related matters if consumers and businesses defer purchases or
payments, or default on payments; risks associated with our
expansion plans, including design and construction delays, cost
overruns, the timing and amount of government incentives actually
received, issues in installing and qualifying new equipment and
ramping production, poor production process yields and quality
control, and potential increases to our restructuring costs; the
risk that we do not meet our production commitments to those
customers who provide us with capacity reservation deposits or
similar payments; the risk that we may experience production
difficulties that preclude us from shipping sufficient quantities
to meet customer orders or that result in higher production costs,
lower yields and lower margins; our ability to lower costs; the
risk that our results will suffer if we are unable to balance
fluctuations in customer demand and capacity, including bringing on
additional capacity on a timely basis to meet customer demand; the
risk that longer manufacturing lead times may cause customers to
fulfill their orders with a competitor's products instead; product
mix; risks associated with the ramp-up of production of our new
products, and our entry into new business channels different from
those in which we have historically operated; our ability to
convert customer design-ins to design-wins and sales of significant
volume, and, if customer design-in activity does result in such
sales, when such sales will ultimately occur and what the amount of
such sales will be; the risk that the markets for our products will
not develop as we expect, including the adoption of our products by
electrical vehicle manufacturers and the overall adoption of
electrical vehicles; the risk that the economic and political
uncertainty caused by the tariffs imposed by the United States on
Chinese goods, and corresponding Chinese tariffs and currency
devaluation in response, may negatively impact demand for our
products; the risk that we or our channel partners are not able to
develop and expand customer bases and accurately anticipate demand
from end customers, including production and product mix, which can
result in increased inventory and reduced orders as we experience
wide fluctuations in supply and demand; risks related to
international sales and purchases; risks resulting from the
concentration of our business among few customers, including the
risk that customers may reduce or cancel orders or fail to honor
purchase commitments; the risk that our investments may experience
periods of significant market value and interest rate volatility
causing us to recognize fair value losses on our investment; the
risk posed by managing an increasingly complex supply chain
(including managing the impacts of ongoing supply constraints in
the semiconductor industry and meeting purchase commitments under
take-or-pay arrangements with certain suppliers) that has the
ability to supply a sufficient quantity of raw materials,
subsystems and finished products with the required specifications
and quality; risks relating to outbreaks of infectious diseases or
similar public health events, including the risk of disruptions to
our operations, supply chain, including our contract manufacturers,
or customer demand; the risk we may be required to record a
significant charge to earnings if our remaining goodwill or
amortizable assets become impaired; risks relating to confidential
information theft or misuse, including through cyber-attacks or
cyber intrusion; our ability to complete development and
commercialization of products under development; the rapid
development of new technology and competing products that may
impair demand or render our products obsolete; the potential lack
of customer acceptance for our products; risks associated with
ongoing litigation; the risk that customers do not maintain their
favorable perception of our brand and products, resulting in lower
demand for our products; the risk that our products fail to perform
or fail to meet customer requirements or expectations, resulting in
significant additional costs; risks associated with strategic
transactions; and other factors discussed in our filings with the
Securities and Exchange Commission (SEC), including our report on
Form 10-K for the fiscal year ended June 25, 2023, and subsequent
reports filed with the SEC. These forward-looking statements
represent Wolfspeed's judgment as of the date of this release.
Except as required under the U.S. federal securities laws and the
rules and regulations of the SEC, Wolfspeed disclaims any intent or
obligation to update any forward-looking statements after the date
of this release, whether as a result of new information, future
events, developments, changes in assumptions or otherwise.
Wolfspeed® is a registered trademark of Wolfspeed, Inc.
WOLFSPEED, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(unaudited)
Three months ended
Nine months ended
(in millions of U.S. Dollars, except per
share data)
March 31, 2024
March 26, 2023
March 31, 2024
March 26, 2023
Revenue, net
$
200.7
$
192.6
$
606.5
$
555.8
Cost of revenue, net
178.2
132.8
531.5
371.6
Gross profit
22.5
59.8
75.0
184.2
Gross margin percentage
11
%
31
%
12
%
33
%
Operating expenses:
Research and development
52.5
42.4
141.9
122.1
Sales, general and administrative
55.8
55.1
184.8
155.5
Factory start-up costs
14.4
44.6
33.3
120.6
Amortization of acquisition-related
intangibles
0.3
0.2
0.9
1.3
Loss on disposal or impairment of other
assets
0.6
1.7
1.0
1.9
Other operating expense
5.3
1.5
12.5
5.0
Total operating expense
128.9
145.5
374.4
406.4
Operating loss
(106.4
)
(85.7
)
(299.4
)
(222.2
)
Operating loss percentage
(53
)%
(44
)%
(49
)%
(40
)%
Non-operating expense (income), net
42.4
(2.9
)
98.7
(53.4
)
Loss before income taxes
(148.8
)
(82.8
)
(398.1
)
(168.8
)
Income tax expense
0.1
0.3
0.6
0.5
Net loss from continuing
operations
(148.9
)
(83.1
)
(398.7
)
(169.3
)
Net loss from discontinued operations
—
(16.4
)
(290.6
)
(47.3
)
Net loss
$
(148.9
)
$
(99.5
)
$
(689.3
)
$
(216.6
)
Basic and diluted loss per
share
Continuing operations
($
1.18
)
($
0.67
)
($
3.18
)
($
1.36
)
Net loss
($
1.18
)
($
0.80
)
($
5.49
)
($
1.74
)
Weighted average shares - basic and
diluted (in thousands)
125,830
124,439
125,514
124,273
WOLFSPEED, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(unaudited)
(in millions of U.S. Dollars)
March 31, 2024
June 25, 2023
Assets
Current assets:
Cash, cash equivalents, and short-term
investments
$
2,550.9
$
2,954.9
Accounts receivable, net
124.3
154.8
Inventories
421.2
284.9
Income taxes receivable
0.8
0.8
Prepaid expenses
71.1
36.8
Other current assets
162.7
131.5
Current assets held for sale from
discontinued operations
—
42.8
Total current assets
3,331.0
3,606.5
Property and equipment, net
3,221.9
2,165.5
Goodwill
359.2
359.2
Intangible assets, net
23.7
23.9
Long-term receivables
2.8
2.6
Other long-term investments
68.1
—
Deferred tax assets
1.2
1.2
Other assets
688.3
303.3
Long-term assets held for sale from
discontinued operations
—
124.5
Total assets
$
7,696.2
$
6,586.7
Liabilities and Shareholders'
Equity
Current liabilities:
Accounts payable and accrued expenses
$
556.0
$
534.5
Accrued contract liabilities
55.8
39.0
Income taxes payable
10.0
9.6
Finance lease liabilities
0.5
0.5
Other current liabilities
104.7
35.7
Current liabilities held for sale from
discontinued operations
—
8.6
Total current liabilities
727.0
627.9
Long-term liabilities:
Long-term debt
2,631.7
1,149.5
Convertible notes, net
3,032.6
3,025.6
Deferred tax liabilities
10.8
3.9
Finance lease liabilities - long-term
9.1
9.2
Other long-term liabilities
262.4
143.4
Long-term liabilities held for sale from
discontinued operations
—
5.3
Total long-term liabilities
5,946.6
4,336.9
Shareholders’ equity:
Common stock
0.2
0.2
Additional paid-in-capital
3,788.6
3,711.0
Accumulated other comprehensive loss
(12.7
)
(25.1
)
Accumulated deficit
(2,753.5
)
(2,064.2
)
Total shareholders’ equity
1,022.6
1,621.9
Total liabilities and shareholders’
equity
$
7,696.2
$
6,586.7
WOLFSPEED, INC.
CONSOLIDATED STATEMENTS OF
CASH FLOWS
(unaudited)
Nine months ended
(in millions of U.S. Dollars)
March 31, 2024
March 26, 2023
Operating activities:
Net loss
($
689.3
)
($
216.6
)
Net loss from discontinued operations
(290.6
)
(47.3
)
Net loss from continuing operations
(398.7
)
(169.3
)
Adjustments to reconcile net loss to cash
used in operating activities of continuing operations:
Depreciation and amortization
135.7
104.5
Amortization of debt issuance costs and
discount, net of non-cash capitalized interest
21.7
5.2
Stock-based compensation
63.9
56.3
Gain on equity investment
(7.3
)
—
Loss on disposal or impairment of
long-lived assets, including loss on disposal portion of factory
start-up costs
1.0
3.7
Amortization of premium on investments,
net
(21.4
)
(1.3
)
Deferred income taxes
0.1
0.5
Changes in operating assets and
liabilities:
Accounts receivable, net
30.5
(13.8
)
Inventories
(132.9
)
(54.4
)
Prepaid expenses and other assets
(83.6
)
(13.2
)
Accounts payable
(48.2
)
1.8
Accrued salaries and wages and other
liabilities
(4.3
)
(7.0
)
Accrued contract liabilities
11.7
23.5
Net cash used in operating activities of
continuing operations
(431.8
)
(63.5
)
Net cash used in operating activities of
discontinued operations
(54.3
)
(27.2
)
Cash used in operating
activities
(486.1
)
(90.7
)
Investing activities:
Purchases of property and equipment
(1,629.7
)
(524.9
)
Purchases of patent and licensing
rights
(4.3
)
(3.6
)
Proceeds from sale of property and
equipment
0.4
1.7
Purchases of short-term investments
(1,488.6
)
(1,020.5
)
Proceeds from maturities of short-term
investments
1,244.1
238.4
Proceeds from sale of short-term
investments
52.7
81.8
Reimbursement of property and equipment
purchases from long-term incentive agreement
178.4
131.0
Proceeds from sale of business
75.6
101.8
Net cash used in investing activities of
continuing operations
(1,571.4
)
(994.3
)
Net cash used in investing activities of
discontinued operations
(3.1
)
(6.4
)
Cash used in investing
activities
(1,574.5
)
(1,000.7
)
Financing activities:
Proceeds from long-term debt
borrowings
1,500.0
—
Proceeds from convertible notes
—
1,750.0
Payments of debt issuance costs
(46.0
)
(31.4
)
Cash paid for capped call transactions
—
(273.9
)
Proceeds from issuance of common stock
10.9
11.4
Tax withholding on vested equity
awards
(17.5
)
(17.7
)
Payments on long-term debt borrowings,
including finance lease obligations
(0.3
)
(0.4
)
Commitment fees on long-term incentive
agreement
(1.0
)
(1.0
)
Cash provided by financing
activities
1,446.1
1,437.0
Effects of foreign exchange changes on
cash and cash equivalents
(0.1
)
—
Net change in cash and cash
equivalents
(614.6
)
345.6
Cash and cash equivalents, beginning of
period
1,757.0
449.5
Cash and cash equivalents, end of
period
$
1,142.4
$
795.1
Product Line Revenue
Three months ended
Nine months ended
(in millions of U.S. Dollars)
March 31, 2024
March 26, 2023
March 31, 2024
March 26, 2023
Power Products
$
102.1
$
101.6
$
311.0
$
302.1
Materials Products
98.6
91.0
295.5
253.7
Total
$
200.7
$
192.6
$
606.5
$
555.8
Non-GAAP Measures of Financial Performance
To supplement the Company's consolidated financial statements
presented in accordance with generally accepted accounting
principles, or GAAP, Wolfspeed uses non-GAAP measures of certain
components of financial performance. These non-GAAP measures
include non-GAAP gross margin, non-GAAP operating (loss) income,
non-GAAP non-operating income (expense), net, non-GAAP net (loss)
income, non-GAAP diluted (loss) earnings per share, EBITDA,
adjusted EBITDA and free cash flow. These measures are presented
for continuing operations only.
Reconciliation to the nearest GAAP measure of all historical
non-GAAP measures included in this press release can be found in
the tables included with this press release.
Non-GAAP measures presented in this press release are not in
accordance with or an alternative to measures prepared in
accordance with GAAP and may be different from non-GAAP measures
used by other companies. In addition, these non-GAAP measures are
not based on any comprehensive set of accounting rules or
principles. Non-GAAP measures have limitations in that they do not
reflect all of the amounts associated with Wolfspeed's results of
operations as determined in accordance with GAAP. These non-GAAP
measures should only be used to evaluate Wolfspeed's results of
operations in conjunction with the corresponding GAAP measures.
Wolfspeed believes that these non-GAAP measures, when shown in
conjunction with the corresponding GAAP measures, enhance
investors' and management's overall understanding of the Company's
current financial performance and the Company's prospects for the
future, including cash flows available to pursue opportunities to
enhance shareholder value. In addition, because Wolfspeed has
historically reported certain non-GAAP results to investors, the
Company believes the inclusion of non-GAAP measures provides
consistency in the Company's financial reporting.
For its internal budgeting process, and as discussed further
below, Wolfspeed's management uses financial statements that do not
include the items listed below and the income tax effects
associated with the foregoing. Wolfspeed's management also uses
non-GAAP measures, in addition to the corresponding GAAP measures,
in reviewing the Company's financial results.
Wolfspeed excludes the following items from one or more of its
non-GAAP measures when applicable:
Stock-based compensation expense. This expense consists of
expenses for stock options, restricted stock, performance stock
awards and employee stock purchases through its Employee Stock
Purchase Program. Wolfspeed excludes stock-based compensation
expenses from its non-GAAP measures because they are non-cash
expenses that Wolfspeed does not use to evaluate core operating
performance.
Amortization or impairment of acquisition-related intangibles.
Wolfspeed incurs amortization or impairment of acquisition-related
intangibles in connection with acquisitions. Wolfspeed excludes
these items because they are non-cash expenses that Wolfspeed does
not use to evaluate core operating performance.
Project, transformation and transaction costs. The Company has
incurred professional services fees and other costs associated with
completed and potential acquisitions and divestitures, as well as
internal transformation programs focused on optimizing the
Company's administrative processes. Wolfspeed excludes these items
because Wolfspeed believes they are not reflective of the ongoing
operating results of Wolfspeed's business.
Severance costs. The Company has incurred costs in conjunction
with the termination of key executive personnel. Wolfspeed excludes
these items because Wolfspeed believes they have no direct
correlation to the ongoing operating results of Wolfspeed's
business.
Loss (gain) on legal proceedings. In the third quarter of fiscal
2024, Wolfspeed accrued a liability for payment of customs duties
totaling approximately $7.7 million for alleged undervalued duties
related to transactions by the Company's former Lighting Products
business unit from 2012 to 2017. In fiscal 2023, Wolfspeed received
an arbitration award in relation to a former customer failing to
fulfill contractual obligations to purchase a certain amount of
product over a period of time. Wolfspeed excludes these items
because Wolfspeed believes they are not reflective of the ongoing
operating results of Wolfspeed's business.
Amortization of discount and debt issuance costs, net of
capitalized interest. The issuance of the Company's convertible
senior notes in April 2020, February 2022 and November 2022, the
sale of the Company's 2030 senior secured notes in June 2023, and
the receipt of deposits in connection with an unsecured customer
refundable deposit agreement in July 2023 results in amortization
of discount and debt issuance costs. Wolfspeed excludes
amortization of discount and debt issuance costs from its non-GAAP
measures because they are non-cash expenses that Wolfspeed does not
use to evaluate core operating performance.
Loss (gain) on Wafer Supply Agreement. In connection with the
completed sale of the LED Products business unit to SMART Global
Holdings, Inc., and its wholly owned subsidiary, the Company
entered into a Wafer Supply and Fabrication Services Agreement (the
Wafer Supply Agreement), pursuant to which the Company supplies
CreeLED, Inc. (CreeLED) with certain silicon carbide materials and
fabrication services for up to four years. Wolfspeed excludes the
financial impact of this agreement because Wolfspeed believes it is
not reflective of the ongoing operating results of Wolfspeed's
business.
Gain (loss) on equity investment. The Company received shares of
MACOM common stock in connection with the RF Business Divestiture.
These shares are accounted for utilizing the fair value option and
changes in the fair value of the shares are recognized in income.
Wolfspeed excludes the impact of these gains or losses from its
non-GAAP measures because Wolfspeed believes it is not reflective
of the ongoing operating results of Wolfspeed's business.
Income tax adjustment. This amount reconciles GAAP tax (benefit)
expense to a calculated non-GAAP tax (benefit) expense utilizing a
non-GAAP tax rate. The non-GAAP tax rate estimates an appropriate
tax rate if the listed non-GAAP items were excluded. This
reconciling item adjusts non-GAAP net (loss) income to the amount
it would be if the calculated non-GAAP tax rate was applied to
non-GAAP (loss) income before income taxes.
Wolfspeed may incur some of these same expenses, including
income taxes associated with these expenses, in future periods.
In addition to the non-GAAP measures discussed above, Wolfspeed
also uses free cash flow as a measure of operating performance and
liquidity. Free cash flow represents operating cash flows from
continuing operations, less net purchases of property and equipment
and patent and licensing rights. Wolfspeed considers free cash flow
to be an operating performance and a liquidity measure that
provides useful information to management and investors about the
amount of cash generated by the business after the purchases of
property and equipment, a portion of which can then be used to,
among other things, invest in Wolfspeed's business, make strategic
acquisitions and strengthen the balance sheet. A limitation of the
utility of free cash flow as a measure of operating performance and
liquidity is that it does not represent the residual cash flow
available to the company for discretionary expenditures, as it
excludes certain mandatory expenditures such as debt service.
WOLFSPEED, INC.
Reconciliation of GAAP to
Non-GAAP Measures - Continuing Operations Only
(in millions of U.S. Dollars,
except per share amounts and percentages)
(unaudited)
Non-GAAP Gross Margin
Three months ended
Nine months ended
March 31, 2024
March 26, 2023
March 31, 2024
March 26, 2023
GAAP gross profit
$
22.5
$
59.8
$
75.0
$
184.2
GAAP gross margin percentage
11
%
31
%
12
%
33
%
Adjustments:
Stock-based compensation expense
7.6
5.5
20.0
16.8
Non-GAAP gross profit
$
30.1
$
65.3
$
95.0
$
201.0
Non-GAAP gross margin percentage
15
%
34
%
16
%
36
%
Non-GAAP Operating Loss
Three months ended
Nine months ended
March 31, 2024
March 26, 2023
March 31, 2024
March 26, 2023
GAAP operating loss
($
106.4
)
($
85.7
)
($
299.4
)
($
222.2
)
GAAP operating loss percentage
(53
)%
(44
)%
(49
)%
(40
)%
Adjustments:
Stock-based compensation expense:
Cost of revenue, net
7.6
5.5
20.0
16.8
Research and development
3.0
2.3
9.1
8.8
Sales, general and administrative
11.2
9.6
34.8
30.7
Total stock-based compensation expense
21.8
17.4
63.9
56.3
Amortization of acquisition-related
intangibles
0.3
0.2
0.9
1.3
Project, transformation and transaction
costs
5.3
0.9
12.5
2.9
Executive severance costs
—
0.6
—
1.9
Restructuring costs
—
—
—
0.2
Total adjustments to GAAP operating
loss
27.4
19.1
77.3
62.6
Non-GAAP operating loss
($
79.0
)
($
66.6
)
($
222.1
)
($
159.6
)
Non-GAAP operating loss percentage
(39
)%
(35
)%
(37
)%
(29
)%
Non-GAAP Non-Operating (Expense)
Income, net
Three months ended
Nine months ended
March 31, 2024
March 26, 2023
March 31, 2024
March 26, 2023
GAAP non-operating (expense) income,
net
($
42.4
)
$
2.9
($
98.7
)
$
53.4
Adjustments:
Loss (gain) on legal proceedings
7.7
—
7.7
(50.3
)
Gain on equity investment
(1.9
)
—
(7.3
)
—
Amortization of discount and debt issuance
costs, net of capitalized interest
7.0
2.3
21.6
5.2
Loss on Wafer Supply Agreement
6.9
4.8
20.4
7.3
Non-GAAP non-operating (expense) income,
net
($
22.7
)
$
10.0
($
56.3
)
$
15.6
Non-GAAP Net Loss
Three months ended
Nine months ended
March 31, 2024
March 26, 2023
March 31, 2024
March 26, 2023
GAAP net loss
($
148.9
)
($
83.1
)
($
398.7
)
($
169.3
)
Adjustments:
Stock-based compensation expense
21.8
17.4
63.9
56.3
Amortization of acquisition-related
intangibles
0.3
0.2
0.9
1.3
Project, transformation and transaction
costs
5.3
0.9
12.5
2.9
Executive severance costs
—
0.6
—
1.9
Restructuring costs
—
—
—
0.2
Loss (gain) on legal proceedings
7.7
—
7.7
(50.3
)
Gain on equity investment
(1.9
)
—
(7.3
)
—
Amortization of discount and debt issuance
costs, net of capitalized interest
7.0
2.3
21.6
5.2
Loss on Wafer Supply Agreement
6.9
4.8
20.4
7.3
Total adjustments to GAAP net loss before
provision for income taxes
47.1
26.2
119.7
24.8
Income tax adjustment - benefit
(expense)
24.1
14.3
65.1
35.9
Non-GAAP net loss
($
77.7
)
($
42.6
)
($
213.9
)
($
108.6
)
Non-GAAP diluted loss per share
($
0.62
)
($
0.34
)
($
1.70
)
($
0.87
)
Non-GAAP weighted average shares (in
thousands)
125,830
124,439
125,514
124,273
Adjusted EBITDA
Three months ended
Nine months ended
March 31, 2024
March 26, 2023
March 31, 2024
March 26, 2023
GAAP net loss
($
148.9
)
($
83.1
)
($
398.7
)
($
169.3
)
Reconciling items to EBITDA (Non-GAAP)
Income tax expense
0.1
0.3
0.6
0.5
Interest expense (income)
29.4
(8.1
)
76.6
(11.4
)
Depreciation
45.7
35.2
131.5
100.0
Amortization
1.3
1.3
4.2
4.5
EBITDA (Non-GAAP)
(72.4
)
(54.4
)
(185.8
)
(75.7
)
Reconciling items to adjusted EBITDA
(Non-GAAP)
Stock based compensation
21.8
17.4
63.9
56.3
Amortization of acquisition-related
intangibles
0.3
0.2
0.9
1.3
Project, transformation and transaction
costs
5.3
0.9
12.5
2.9
Executive severance costs
—
0.6
—
1.9
Restructuring costs
—
—
—
0.2
Loss (gain) on legal proceedings
7.7
—
7.7
(50.3
)
Gain on equity investment
(1.9
)
—
—
—
(7.3
)
—
Loss on Wafer Supply Agreement
6.9
4.8
20.4
7.3
Adjusted EBITDA (Non-GAAP)
($
32.3
)
($
30.5
)
($
87.7
)
($
56.1
)
Free Cash Flow
Three months ended
Nine months ended
March 31, 2024
March 26, 2023
March 31, 2024
March 26, 2023
Net cash used in operating activities
($
136.2
)
$
6.4
($
431.8
)
($
63.5
)
Less: PP&E spending, net of
reimbursements from long-term incentive agreement
(478.5
)
(230.5
)
(1,451.3
)
(393.9
)
Less: Patents spending
(1.1
)
(1.3
)
(4.3
)
(3.6
)
Total free cash flow
($
615.8
)
($
225.4
)
($
1,887.4
)
($
461.0
)
WOLFSPEED, INC.
Business Outlook Unaudited
GAAP to Non-GAAP Reconciliation
Three Months Ended
(in millions of U.S. Dollars)
June 30, 2024
GAAP net loss from continuing
operations outlook range
($189) to ($166)
Adjustments:
Stock-based compensation expense
23
Amortization of discount and debt issuance
costs, net of capitalized interest
11
Project, transformation and transaction
costs
7
Loss on Wafer Supply Agreement
7
Total adjustments to GAAP net loss before
provision for income taxes
48
Income tax adjustment
32 to 27
Non-GAAP net loss from continuing
operations outlook range
($109) to ($91)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240501806752/en/
Tyler Gronbach Wolfspeed, Inc. Vice President of External
Affairs Phone: 919-407-4820 investorrelations@wolfspeed.com
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