Solidifying Capital Structure, Simplifying
Business to Accelerate Profitability and Continuing to Build Core
Sales Demand
Executed Access to Incremental $2.5 Billion in
Liquidity via CHIPS, Lenders, Tax Credits
Streamlining Business to 200mm Pure Play
Yielding $200 Million in Cash Savings
Wolfspeed, Inc. (NYSE: WOLF) today announced its results for the
first quarter of fiscal 2025.
Quarterly Financial Highlights (Continuing operations only.
All comparisons are to the first quarter of fiscal 2024.)
- Consolidated revenue of approximately $195 million, as compared
to approximately $197 million
- Mohawk Valley Fab contributed approximately $49 million in
revenue
- Power device design-ins of $1.5 billion
- Power device design-wins of $1.3 billion
- GAAP gross margin of approximately (19)%, compared to
approximately 13%
- GAAP gross margin includes the impacts of underutilization
costs primarily in connection with the start of production at the
Mohawk Valley Fab. Underutilization was $26.4 million as compared
to $34.4 million. See "Start-up and Underutilization Costs" below
for additional information.
- Non-GAAP gross margin of 3%, compared to 16%
- Ended Q1 with ~$1.7 billion in cash and investments; does not
include initial draw down of $250 million from lender group
“This quarter we took action to solidify the capital structure,
simplifying our business to accelerate structural profitability and
support the build out of our state-of-the-art silicon carbide
facilities. We will have a 200mm silicon carbide footprint at
Mohawk Valley and North Carolina materials factories that we target
to generate approximately $3 billion in revenue annually,” said
Wolfspeed CEO, Gregg Lowe. “Last month, we reached a significant
milestone by signing a non-binding preliminary memorandum of terms
(PMT) for up to $750 million in proposed direct funding under the
CHIPS and Science Act and an additional $750 million from our
lending group, demonstrating substantial progress towards our
funding goals. With this announcement, we now have access to up to
$2.5 billion of incremental funding to support our U.S. capacity
expansion plans.”
Lowe continued, "To drive operational improvements, we are
taking action to enhance efficiency, align our business with
current market conditions and become the first silicon carbide
company to transition to pure-play 200-millimeter. The transition
to a fully 200-millimeter platform allows us to take further
initiatives to streamline our cost structure, including closing our
manual Durham 150-millimeter Fab, other manufacturing footprint
rationalization, and reducing our workforce. Combined, we expect
these initiatives will yield approximately $200 million in annual
cash savings. In parallel, we remain focused on optimizing our
capital structure, further reducing our fiscal 2025 CapEx guidance
by $100 million to align the pace of our spend with the broader
shift in EV market demand.”
“We delivered 2.5 times year-over-year growth in our automotive
business in the first quarter, and we expect our EV revenue to
continue to grow throughout calendar 2025, as the total number of
car models using a Wolfspeed silicon carbide solution in the power
train increased by 4x from 2023 to 2024 and is expected to grow by
another approximately 75% year over year in 2025. We also remain
confident in the long-term fundamentals of our industrial and
energy business. Importantly, we believe the secular trends and
long-term growth drivers for our core end markets remain intact,
and we expect the actions we are taking today will allow us to
become a more efficient and agile organization positioned to
capture the long-term growth opportunities ahead,” concluded
Lowe.
Business Outlook:
For its second quarter of fiscal 2025, Wolfspeed targets revenue
from continuing operations in a range of $160 million to $200
million. GAAP net loss is targeted at $401 million to $362 million,
or $3.14 to $2.84 per diluted share. Non-GAAP net loss is targeted
to be in a range of $145 million to $114 million, or $1.14 to $0.89
per diluted share. Targeted non-GAAP net loss excludes $256 million
to $248 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 restructuring and
other facility closure costs. The GAAP and non-GAAP targets 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).
Restructuring and Facility Closure:
During the first quarter of fiscal 2025, Wolfspeed initiated a
facility closure and consolidation plan to optimize its cost
structure and accelerate its transition from 150mm to 200mm silicon
carbide devices. The costs incurred as a result of this
restructuring plan include severance and employee benefit costs,
voluntary termination benefits and other facility closure-related
costs. Wolfspeed incurred $87.1 million of restructuring-related
costs in the first quarter of fiscal 2025, of which $34.3 million
were recognized in cost of revenue, net and $52.8 million were
expensed as operating expense in the statement of operations.
For the second quarter of fiscal 2025, the Company expects to
incur $174 million of restructuring-related costs, of which $34
million will be recognized in cost of revenue, net and the
remaining $140 million will be recognized as operating expense.
Start-up and Underutilization Costs:
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 are instead 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 in fiscal 2024 and going forward
are primarily reflected in cost of revenue, net.
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 continue to be
substantial as Wolfspeed ramps up the facility to the expected or
normal utilization level.
Wolfspeed incurred $19.7 million of factory start-up costs and
$26.4 million of underutilization costs in the first quarter of
fiscal 2025. Wolfspeed incurred $8.4 million of factory start-up
costs and $34.4 million of underutilization costs in the first
quarter of fiscal 2024.
For the second quarter of fiscal 2025, operating expenses are
expected to include approximately $23 million of factory start-up
costs primarily in connection with materials expansion efforts.
Cost of revenue, net, is expected to include approximately $35
million of underutilization costs 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 first quarter results and its
fiscal second quarter 2025 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 that power the world’s
most disruptive innovations. As the pioneers of silicon carbide,
and creators of the most advanced semiconductor technology on
earth, we are committed to powering a better world for everyone.
Through silicon carbide material, Power Modules, Discrete Power
Devices and Power Die Products targeted for various applications,
we will bring you The Power to Make It Real.TM 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.
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 second quarter
of fiscal 2025 and periods beyond, our ability to meet targeted
utilization rates and accelerate the shift of our device
fabrication to the Mohawk Valley Fab, our revenue and market
growth, and our ability to reduce costs, optimize our capital
structure and access funding. 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, including, among
other things, any direct grants and tax credits under the CHIPS
Act, issues in installing and qualifying new equipment and ramping
production, poor production process yields and quality control, and
potential increases to our restructuring costs; our ability to
obtain additional funding, including, among other things, from
government funding, public or private equity offerings, or debt
financings, on favorable terms and on a timely basis, if at all;
our ability to take certain actions with respect to our capital and
debt structure, including issuing the full amount of senior notes
under our agreements with our lenders and restructuring or
refinancing our convertible notes; 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 electric vehicle
manufacturers and the overall adoption of electric 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 continue to 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 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; the risk that we are not able to successfully execute
or achieve the potential benefits of our efforts to enhance our
value; 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 30, 2024, 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 United States 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
(in millions of U.S. Dollars, except per
share data)
September 29, 2024
September 24, 2023
Revenue, net
$194.7
$197.4
Cost of revenue, net
230.9
172.7
Gross profit
(36.2
)
24.7
Gross margin percentage
(19
)%
13
%
Operating expenses:
Research and development
50.9
44.1
Sales, general and administrative
62.2
64.1
Factory start-up costs
19.7
8.4
Amortization of acquisition-related
intangibles
0.3
0.3
Loss on disposal or impairment of other
assets
0.6
0.1
Other operating expense
60.2
2.6
Total operating expense
193.9
119.6
Operating loss
(230.1
)
(94.9
)
Operating loss percentage
(118
)%
(48
)%
Non-operating expense, net
51.7
28.5
Loss before income taxes
(281.8
)
(123.4
)
Income tax expense
0.4
0.2
Net loss from continuing
operations
(282.2
)
(123.6
)
Net loss from discontinued operations
—
(272.1
)
Net loss
($282.2
)
($395.7
)
Basic and diluted loss per
share
Continuing operations
($2.23
)
($0.99
)
Net loss
($2.23
)
($3.16
)
Weighted average shares - basic and
diluted (in thousands)
126,733
125,105
WOLFSPEED, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(unaudited)
(in millions of U.S. Dollars)
September 29, 2024
June 30, 2024
Assets
Current assets:
Cash, cash equivalents, and short-term
investments
$1,687.6
$2,174.6
Accounts receivable, net
145.4
147.4
Inventories
467.9
440.7
Income taxes receivable
0.3
0.5
Prepaid expenses
58.3
56.6
Other current assets
98.9
179.8
Total current assets
2,458.4
2,999.6
Property and equipment, net
3,959.3
3,652.3
Goodwill
359.2
359.2
Intangible assets, net
23.7
23.9
Long-term receivables
2.2
2.3
Other long-term investments
79.3
79.3
Deferred tax assets
1.1
1.1
Investment tax credit receivable
723.5
641.8
Other assets
251.1
225.1
Total assets
$7,857.8
$7,984.6
Liabilities and Shareholders'
Equity
Current liabilities:
Accounts payable and accrued expenses
$600.4
$523.6
Contract liabilities and
distributor-related reserves
62.9
62.3
Income taxes payable
1.3
1.0
Finance lease liabilities
0.5
0.5
Other current liabilities
117.8
77.9
Total current liabilities
782.9
665.3
Long-term liabilities:
Long-term debt
3,132.6
3,126.2
Convertible notes, net
3,037.3
3,034.9
Deferred tax liabilities
10.8
10.8
Finance lease liabilities - long-term
8.8
8.9
Other long-term liabilities
256.5
256.4
Total long-term liabilities
6,446.0
6,437.2
Shareholders’ equity:
Common stock
0.2
0.2
Additional paid-in-capital
3,843.6
3,821.9
Accumulated other comprehensive loss
(4.3
)
(11.6
)
Accumulated deficit
(3,210.6
)
(2,928.4
)
Total shareholders’ equity
628.9
882.1
Total liabilities and shareholders’
equity
$7,857.8
$7,984.6
WOLFSPEED, INC.
CONSOLIDATED STATEMENTS OF
CASH FLOWS
(unaudited)
Three months ended
(in millions of U.S. Dollars)
September 29, 2024
September 24, 2023
Operating activities:
Net loss
($282.2
)
($395.7
)
Net loss from discontinued operations
—
(272.1
)
Net loss from continuing operations
(282.2
)
(123.6
)
Adjustments to reconcile net loss to cash
used in operating activities of continuing operations:
Depreciation and amortization
71.1
40.1
Amortization of debt issuance costs and
discount, net of non-cash capitalized interest
6.7
7.2
Stock-based compensation
23.7
19.7
Loss on disposal or impairment of
long-lived assets
0.6
—
Amortization of premium on investments,
net
(3.8
)
(5.3
)
Realized gain on sale of investments
0.1
—
Deferred income taxes
—
0.3
Changes in operating assets and
liabilities:
Accounts receivable, net
2.0
0.6
Inventories
(25.6
)
(50.0
)
Prepaid expenses and other assets
(10.5
)
(34.7
)
Accounts payable
20.2
(18.1
)
Accrued salaries and wages and other
liabilities
65.1
45.3
Contract liabilities and
distributor-related reserves
0.6
5.8
Net cash used in operating activities of
continuing operations
(132.0
)
(112.7
)
Net cash used in operating activities of
discontinued operations
—
(34.7
)
Cash used in operating
activities
(132.0
)
(147.4
)
Investing activities:
Purchases of property and equipment
(437.0
)
(442.0
)
Purchases of patent and licensing
rights
(1.2
)
(1.3
)
Purchases of short-term investments
(56.1
)
(775.3
)
Proceeds from maturities of short-term
investments
256.2
370.0
Proceeds from sale of short-term
investments
3.1
24.8
Reimbursement of property and equipment
purchases from long-term incentive agreement
42.0
39.6
Net cash used in investing activities of
continuing operations
(193.0
)
(784.2
)
Net cash used in investing activities of
discontinued operations
—
(1.7
)
Cash used in investing
activities
(193.0
)
(785.9
)
Financing activities:
Proceeds from long-term debt
borrowings
—
1,000.0
Payments of debt issuance costs
—
(46.0
)
Proceeds from issuance of common stock
—
0.5
Tax withholding on vested equity
awards
(3.6
)
(15.0
)
Payments on long-term debt borrowings,
including finance lease obligations
(0.1
)
(0.1
)
Incentive-related escrow refunds
10.0
—
Commitment fees on long-term incentive
agreement
(1.5
)
(1.0
)
Cash provided by financing
activities
4.8
938.4
Effects of foreign exchange changes on
cash and cash equivalents
0.4
(0.1
)
Net change in cash and cash
equivalents
(319.8
)
5.0
Cash and cash equivalents, beginning of
period
1,045.9
1,757.0
Cash and cash equivalents, end of
period
$726.1
$1,762.0
Product Line Revenue
Three months ended
(in millions of U.S. Dollars)
September 29, 2024
September 24, 2023
Power Products
$97.1
$101.2
Materials Products
97.6
96.2
Total
$194.7
$197.4
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.
Restructuring and facility closure costs. During the first
quarter of fiscal 2025, the Company began to incur costs to
optimize its operating model and accelerate our transition to 200mm
silicon carbide offerings through facility closures and headcount
reduction initiatives. Wolfspeed does not include these expenses
when evaluating core operating activities for strategic decision
making, forecasting future results and evaluating current
performance, as these activities may be non-recurring, unusual,
infrequent or directly related to an event that is distinct and
non-reflective of the Company's ongoing business operations.
Restructuring and facility closure costs primarily consist of
severance, asset-related charges and other closure-related costs
related to facilities in the process of closing or already closed.
Other closure-related costs primarily consist of contract
termination costs, manufacturing transition charges and certain
inventory abandonments that are directly attributable to a facility
closure. Contract termination costs relate to penalties incurred to
terminate vendor arrangements that are directly attributable to a
facility closure. Manufacturing transition charges include
non-productive manufacturing expenses incurred during the period
from when shutdown activities commence to when a facility is
closed. Inventory abandonments relate to identification and
disposal of inventory that will not be utilized after a product
line is transferred to a new manufacturing location. Loss on
disposition of assets results from abandonment of non-productive
assets in accordance with a restructuring plan.
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 and in the second half of
fiscal 2024 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. 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.
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
September 29, 2024
September 24, 2023
GAAP gross profit
($36.2
)
$24.7
GAAP gross margin percentage
(19
)%
13
%
Adjustments:
Stock-based compensation expense
8.5
6.0
Restructuring and facility closure
costs
34.3
—
Non-GAAP gross profit
$6.6
$30.7
Non-GAAP gross margin percentage
3
%
16
%
Non-GAAP Operating Loss
Three months ended
September 29, 2024
September 24, 2023
GAAP operating loss
($230.1
)
($94.9
)
GAAP operating loss percentage
(118
)%
(48
)%
Adjustments:
Stock-based compensation expense:
Cost of revenue, net
8.5
6.0
Research and development
3.2
2.7
Sales, general and administrative
12.0
11.0
Total stock-based compensation expense
23.7
19.7
Amortization of acquisition-related
intangibles
0.3
0.3
Project, transformation and transaction
costs
6.0
2.6
Restructuring and facility closure
costs:
Cost of revenue, net
34.3
—
Other operating expense
52.8
—
Total restructuring and other costs
87.1
—
Total adjustments to GAAP operating
loss
117.1
22.6
Non-GAAP operating loss
($113.0
)
($72.3
)
Non-GAAP operating loss percentage
(58
)%
(37
)%
Non-GAAP Non-Operating (Expense)
Income, net
Three months ended
September 29, 2024
September 24, 2023
GAAP non-operating expense, net
($51.7
)
($28.5
)
Adjustments:
Amortization of discount and debt issuance
costs, net of capitalized interest
6.7
7.2
Loss on Wafer Supply Agreement
9.2
6.9
Non-GAAP non-operating expense, net
($35.8
)
($14.4
)
Non-GAAP Net Loss
Three months ended
September 29, 2024
September 24, 2023
GAAP net loss
($282.2
)
($123.6
)
Adjustments:
Stock-based compensation expense
23.7
19.7
Amortization of acquisition-related
intangibles
0.3
0.3
Project, transformation and transaction
costs
6.0
2.6
Restructuring and facility closure
costs
87.1
—
Amortization of discount and debt issuance
costs, net of capitalized interest
6.7
7.2
Loss on Wafer Supply Agreement
9.2
6.9
Total adjustments to GAAP net loss before
provision for income taxes
133.0
36.7
Income tax adjustment - benefit
33.4
20.3
Non-GAAP net loss
($115.8
)
($66.6
)
Non-GAAP diluted loss per share
($0.91
)
($0.53
)
Non-GAAP weighted average shares (in
thousands)
126,733
125,105
Adjusted EBITDA
Three months ended
September 29, 2024
September 24, 2023
GAAP net loss
($282.2
)
($123.6
)
Reconciling items to EBITDA (Non-GAAP)
Income tax expense
0.4
0.2
Interest expense
42.3
21.1
Depreciation and amortization
71.1
40.1
EBITDA (Non-GAAP)
(168.4
)
(62.2
)
Reconciling items to adjusted EBITDA
(Non-GAAP)
Stock based compensation
23.7
19.7
Project, transformation and transaction
costs
6.0
2.6
Restructuring and facility closure
costs(1)
68.3
—
Loss on Wafer Supply Agreement
9.2
6.9
Adjusted EBITDA (Non-GAAP)
($61.2
)
($33.0
)
(1)Excludes restructuring-related
accelerated depreciation included in "Depreciation and
amortization"
Free Cash Flow
Three months ended
September 29, 2024
September 24, 2023
Net cash used in operating activities
($132.0
)
($112.7
)
Less: PP&E spending, net of
reimbursements from long-term incentive agreement
(395.0
)
(402.4
)
Less: Patents spending
(1.2
)
(1.3
)
Total free cash flow
($528.2
)
($516.4
)
WOLFSPEED, INC.
Business Outlook Unaudited
GAAP to Non-GAAP Reconciliation
Three Months Ended
(in millions of U.S. Dollars)
December 29, 2024
GAAP net loss from continuing
operations outlook range
($401) to ($362)
Adjustments:
Stock-based compensation expense
24
Restructuring and facility closure
costs
174
Amortization of discount and debt issuance
costs, net of capitalized interest
12
Project, transformation and transaction
costs
5
Total adjustments to GAAP net loss before
provision for income taxes
215
Income tax adjustment
41 to 33
Non-GAAP net loss from continuing
operations outlook range
($145) to ($114)
`
View source
version on businesswire.com: https://www.businesswire.com/news/home/20241106197166/en/
Tyler Gronbach Wolfspeed, Inc. Vice President of External
Affairs Phone: 919-407-4820 investorrelations@wolfspeed.com
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