Wolfspeed, Inc. (NYSE: WOLF), formerly known as Cree, Inc.,
today announced revenue of $188.0 million for its third quarter of
fiscal 2022, ended March 27, 2022. This represents a 37% increase
compared to revenue from continuing operations of $137.3 million
reported for the third quarter of fiscal 2021, and a 9% increase
compared to the second quarter of fiscal 2022. GAAP net loss from
continuing operations was $66.5 million for the third quarter of
fiscal 2022 and the third quarter of fiscal 2021. GAAP net loss per
diluted share from continuing operations was $0.54 and $0.59 for
the third quarter of fiscal 2022 and the third quarter of fiscal
2021, respectively. On a non-GAAP basis, net loss from continuing
operations for the third quarter of fiscal 2022 was $14.3 million,
or $0.12 per diluted share, compared to non-GAAP net loss from
continuing operations for the third quarter of fiscal 2021 of $24.7
million, or $0.22 per diluted share.
"The opening of our new Mohawk Valley 200mm Silicon Carbide
semiconductor wafer fab was a tremendous undertaking that required
the best from our talented team across nearly every function," said
Wolfspeed Chief Executive Officer, Gregg Lowe. "Additionally, our
financial results for the quarter continue to demonstrate progress
towards our corporate objectives and the further adoption of
Silicon Carbide across a wide range of applications."
Business Outlook:
For its fourth quarter of fiscal 2022, Wolfspeed targets revenue
in a range of $200 million to $215 million. GAAP net loss is
targeted at $78 million to $85 million, or $0.63 to $0.69 per
diluted share. Non-GAAP net loss is targeted to be in a range of $9
million to $16 million, or $0.07 to $0.13 per diluted share.
Targeted non-GAAP net loss excludes $69 million of estimated
expenses, net of tax, related to stock-based compensation expense,
amortization or impairment of acquisition-related intangibles,
factory optimization restructuring and start-up costs, accretion on
convertible notes, net of capitalized interest, severance and other
restructuring costs, and project, transformation, transaction and
transition costs.
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 the
fiscal fourth quarter 2022 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 and gallium nitride (GaN) technologies.
We provide industry-leading solutions for efficient energy
consumption and a sustainable future. Wolfspeed’s product families
include Silicon Carbide and GaN materials, power-switching devices
and RF devices targeted for various applications such as electric
vehicles, fast charging, 5G, renewable energy and storage, and
aerospace and defense. 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.
Change in Estimate:
As a result of the divestiture of the LED Products business and
the Company's continued investment in 200mm technology, the Company
evaluated the useful lives applied to certain machinery and
equipment assets by considering industry standards and reviewing
the assets' historical and estimated future use. In the first
quarter of fiscal 2022, the Company increased the expected useful
lives of these assets by two to five years to more closely reflect
the estimated economic lives of those assets. This change in
estimate was applied prospectively effective for the first quarter
of fiscal 2022 and resulted in a decrease in depreciation expense
of $8.3 million and $25.2 million for the three and nine months
ended March 27, 2022, respectively. Approximately $10.4 million of
the decrease in depreciation expense for the nine months ended
March 27, 2022 resulted in a net reduction of inventory as of March
27, 2022 and will impact cost of revenue, net in future periods as
the inventory is relieved. The remaining $14.8 million of the
decrease in depreciation expense resulted in the following for the
three and nine months ended March 27, 2022: (1) an improvement in
gross profit of $7.3 million and $12.2 million, respectively; (2)
an improvement in both loss before income taxes and net loss of
$8.2 million and $14.8 million, respectively; and (3) an
improvement in basic and diluted loss per share of $0.07 and $0.12
per share, respectively.
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 and our ability to achieve our targets for the fourth
quarter of fiscal 2022 and beyond. Actual results could differ
materially due to a number of factors, including but not limited
to, risks relating to the ongoing COVID-19 pandemic, including the
risk of new and different government restrictions and regulations
that limit our ability to do business, the risk of infection in our
workforce and subsequent impact on our ability to conduct business,
the risk that our supply chain, including our contract
manufacturers, or customer demand may be negatively impacted, the
risk posed by vaccine resistance and the emergence of
fast-spreading variants, the risk that the COVID-19 pandemic will
lead to a global recession and the potential for costs associated
with our operations during the fiscal 2022 fourth quarter and
future quarters to be greater than we anticipate as a result of all
of these factors; the risk that we may not obtain sufficient orders
to achieve our targeted revenues; price competition in key markets;
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; risks associated with
our factory optimization plan and construction of a new device
fabrication facility, including design and construction delays and
cost overruns, 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 or our channel partners are not able to develop and
expand customer bases and accurately anticipate demand from end
customers, which can result in increased inventory and reduced
orders as we experience wide fluctuations in supply and demand; 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; risks related to
international sales and purchases; ongoing uncertainty in global
economic and geopolitical conditions, including the ongoing
military conflict between Russia and Ukraine, infrastructure
development or customer demand that could negatively affect product
demand, collectability of receivables and other related matters as
consumers and businesses may defer purchases or payments, or
default on payments; 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 that has the ability to supply a
sufficient quantity of raw materials, subsystems and finished
products with the required specifications and quality; 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; issues, delays or complications in
completing required transition activities to allow the Company's
now divested LED Products business to operate under the SMART
Global Holdings, Inc. (SGH) portfolio of businesses after the
closing, including incurring unanticipated costs to complete such
activities; risks associated with strategic transactions, including
the possibility that we may not realize the full purchase price
contemplated in connection with the sale of our former LED Products
or Lighting Products business units; 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
27, 2021, 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 27, 2022
March 28, 2021
March 27, 2022
March 28, 2021
Revenue, net
$188.0
$137.3
$517.7
$379.8
Cost of revenue, net
124.0
93.3
347.3
259.0
Gross profit
64.0
44.0
170.4
120.8
Gross margin percentage
34
%
32
%
33
%
32
%
Operating expenses:
Research and development
48.1
46.0
148.2
132.7
Sales, general and administrative
51.5
44.2
148.5
135.0
Amortization or impairment of
acquisition-related intangibles
3.4
3.7
10.6
10.9
(Gain) loss on disposal or impairment of
other assets
(0.6
)
0.1
(0.3
)
0.8
Other operating expense
23.9
11.4
52.3
22.6
Total operating expense
126.3
105.4
359.3
302.0
Operating loss
(62.3
)
(61.4
)
(188.9
)
(181.2
)
Operating loss percentage
(33
) %
(45
) %
(36
) %
(48
) %
Non-operating expense, net
3.8
8.1
35.7
18.9
Loss before income taxes
(66.1
)
(69.5
)
(224.6
)
(200.1
)
Income tax expense (benefit)
0.4
(3.0
)
8.7
(4.0
)
Net loss from continuing
operations
(66.5
)
(66.5
)
(233.3
)
(196.1
)
Net loss from discontinued operations
—
(41.6
)
—
(178.8
)
Net loss
(66.5
)
(108.1
)
(233.3
)
(374.9
)
Net income from discontinued operations
attributable to noncontrolling interest
—
0.8
—
1.4
Net loss attributable to controlling
interest
($66.5
)
($108.9
)
($233.3
)
($376.3
)
Basic and diluted loss per
share
Continuing operations
($0.54
)
($0.59
)
($1.96
)
($1.75
)
Net loss attributable to controlling
interest
($0.54
)
($0.96
)
($1.96
)
($3.35
)
Weighted average shares - basic and
diluted (in thousands)
123,597
112,891
118,917
112,330
WOLFSPEED, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(unaudited)
(in millions of U.S. Dollars)
March 27, 2022
June 27, 2021
Assets
Current assets:
Cash, cash equivalents, and short-term
investments
$1,286.1
$1,154.6
Accounts receivable, net
122.4
95.9
Inventories
219.4
166.6
Income taxes receivable
6.9
6.4
Prepaid expenses
32.3
25.7
Other current assets
169.3
27.9
Current assets held for sale
1.6
1.6
Total current assets
1,838.0
1,478.7
Property and equipment, net
1,390.0
1,292.3
Goodwill
359.2
359.2
Intangible assets, net
128.3
140.5
Long-term receivables
2.5
138.4
Deferred tax assets
0.9
1.0
Other assets
33.8
35.5
Long-term assets of discontinued
operations
—
1.2
Total assets
$3,752.7
$3,446.8
Liabilities and Shareholders'
Equity
Current liabilities:
Accounts payable and accrued expenses
$248.3
$381.1
Accrued contract liabilities
31.4
22.9
Income taxes payable
8.3
0.4
Finance lease liabilities
0.5
5.2
Other current liabilities
34.1
38.6
Current liabilities of discontinued
operations
—
0.6
Total current liabilities
322.6
448.8
Long-term liabilities:
Convertible notes, net
1,008.4
823.9
Deferred tax liabilities
3.1
2.5
Finance lease liabilities - long-term
9.7
10.0
Other long-term liabilities
18.5
44.5
Long-term liabilities of discontinued
operations
—
0.6
Total long-term liabilities
1,039.7
881.5
Shareholders’ equity:
Common stock
0.2
0.1
Additional paid-in-capital
4,204.6
3,676.8
Accumulated other comprehensive (loss)
income
(18.0
)
2.7
Accumulated deficit
(1,796.4
)
(1,563.1
)
Total shareholders’ equity
2,390.4
2,116.5
Total liabilities and shareholders’
equity
$3,752.7
$3,446.8
WOLFSPEED, INC.
CONSOLIDATED STATEMENTS OF
CASH FLOWS
(unaudited)
Nine months ended
(in millions of U.S. Dollars)
March 27, 2022
March 28, 2021
Operating activities:
Net loss
($233.3
)
($374.9
)
Net loss from discontinued operations
—
(178.8
)
Net loss from continuing operations
(233.3
)
(196.1
)
Adjustments to reconcile net loss from
continuing operations to cash used in operating activities:
Depreciation and amortization
97.9
88.6
Amortization of debt issuance costs and
discount, net of non-cash capitalized interest
12.9
26.1
Stock-based compensation
45.2
40.3
Loss on extinguishment of debt
24.8
—
Loss on disposal or impairment of
long-lived assets
1.0
3.7
Amortization of premium/discount on
investments
4.5
4.9
Realized gain on sale of investments
(0.3
)
(0.3
)
Gain on equity investment
—
(7.9
)
Foreign exchange gain on equity
investment
—
(3.4
)
Deferred income taxes
0.7
0.5
Changes in operating assets and
liabilities:
Accounts receivable, net
(26.5
)
(11.7
)
Inventories
(61.6
)
(25.4
)
Prepaid expenses and other assets
(3.3
)
(28.2
)
Accounts payable, trade
11.3
27.2
Accrued salaries and wages and other
liabilities
6.5
12.5
Accrued contract liabilities
(3.2
)
10.3
Net cash used in operating activities of
continuing operations
(123.4
)
(58.9
)
Net cash used in operating activities of
discontinued operations
—
(16.6
)
Cash used in operating
activities
(123.4
)
(75.5
)
Investing activities:
Purchases of property and equipment
(535.5
)
(394.0
)
Purchases of patent and licensing
rights
(4.2
)
(3.6
)
Proceeds from sale of property and
equipment, including insurance proceeds
2.7
0.2
Purchases of short-term investments
(408.2
)
(342.1
)
Proceeds from maturities of short-term
investments
135.5
335.6
Proceeds from sale of short-term
investments
223.2
28.1
Reimbursement of property and equipment
purchases from long-term incentive agreement
83.5
—
Proceeds from sale of business, net,
including receipt of note receivable
125.0
36.6
Net cash used in investing activities of
continuing operations
(378.0
)
(339.2
)
Net cash used in investing activities of
discontinued operations
—
(0.3
)
Cash used in investing
activities
(378.0
)
(339.5
)
Financing activities:
Proceeds from long-term debt
borrowings
20.0
30.0
Payments on long-term debt borrowings,
including finance lease obligations
(20.4
)
(30.3
)
Proceeds from issuance of common stock
11.7
530.1
Tax withholding on vested equity
awards
(26.1
)
(31.7
)
Proceeds from convertible notes
750.0
—
Payments of debt issuance costs
(17.7
)
—
Cash paid for capped call transactions
(108.2
)
—
Commitment fee on long-term incentive
agreement
(1.0
)
(0.5
)
Cash provided by financing
activities
608.3
497.6
Effects of foreign exchange changes on
cash and cash equivalents
—
0.2
Net change in cash and cash
equivalents
106.9
82.8
Cash and cash equivalents, beginning of
period
379.0
448.8
Cash and cash equivalents, end of
period
$485.9
$531.6
Wolfspeed, Inc. 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 from continuing operations, non-GAAP diluted (loss) earnings
per share from continuing operations and free cash flow.
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 believe are reflective of ongoing
operating results.
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 arise from Wolfspeed's prior acquisitions
and have no direct correlation to the ongoing operating results of
Wolfspeed's business.
Factory optimization restructuring. In May 2019, the Company
started a significant, multi-year factory optimization plan to be
anchored by a state-of-the-art, automated 200mm Silicon Carbide
device fabrication facility. In September 2019, the Company
announced the intent to build the new fabrication facility in
Marcy, New York to complement the factory expansion underway at its
U.S. campus headquarters in Durham, North Carolina. As part of the
plan, the Company will incur restructuring costs associated with
the movement of equipment as well as disposals on certain
long-lived assets. Because these charges relate to assets which had
been retired prior to the end of their estimated useful lives,
Wolfspeed does not believe these costs are reflective of ongoing
operating results. Similarly, Wolfspeed does not consider the
realized net losses on sale of assets relating to the restructuring
to be reflective of ongoing operating results.
Severance and other restructuring. These costs relate to the
Company's realignment of certain resources as part of the Company's
transition to a more focused semiconductor company. Wolfspeed does
not believe these costs are reflective of ongoing operating
results.
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.
Factory optimization start-up costs. As part of the factory
optimization plan, the Company has incurred and will incur start-up
costs. Wolfspeed does not believe these costs are reflective of
ongoing operating results. In fiscal 2022, these costs will include
an estimated $75.0 million of start-up and pre-production related
costs associated with the Company ramping production at its new
device fabrication facility in Marcy, New York.
Non-restructuring related executive severance. 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.
Transition service agreement costs. As a result of the sale of
the Lighting Products business unit, the Company provided certain
information technology services under a transition services
agreement which will not be reimbursed. Wolfspeed excludes the
costs of these services because Wolfspeed believes they are not
reflective of the ongoing operating results of Wolfspeed's
business.
Net changes in fair value of investment in ENNOSTAR. Prior to
the Company liquidating its interests in ENNOSTAR in fiscal 2021,
the Company's common stock ownership investment in ENNOSTAR, Inc.
was accounted for utilizing the fair value option. As such, changes
in fair value were recognized in income, including fluctuations due
to the exchange rate between the New Taiwan Dollar and the United
States Dollar. Wolfspeed excluded the impact of these gains or
losses from its non-GAAP measures because they were non-cash
impacts. Additionally, Wolfspeed excluded the impact of dividends
received, if any, on its ENNOSTAR investment as Wolfspeed does not
believe it was reflective of its ongoing operating results.
Interest income on transaction-related note receivable. In
connection with the completed sale of the LED Products business
unit to SGH and its wholly owned acquisition subsidiary CreeLED,
Inc. (CreeLED and collectively with SGH, SMART), the Company
received an unsecured promissory note issued to the Company by SGH
in the amount of $125 million (the Purchase Price Note). Interest
income on the Purchase Price Note is excluded because Wolfspeed
believes it is not reflective of the ongoing operating results of
Wolfspeed's business.
Loss on debt extinguishment related to the conversion of 2023
Notes. In the second quarter of fiscal 2022, all outstanding 0.875%
convertible senior notes due 2023 (2023 Notes) and issued in August
2018 were surrendered for conversion, resulting in the settlement
of the 2023 Notes in approximately 7.1 million shares of the
Company's common stock. This conversion resulted in a loss on
extinguishment of convertible notes. Wolfspeed excludes this item
because Wolfspeed believes it is not reflective of the ongoing
operating results of Wolfspeed's business.
Accretion on convertible notes, net of capitalized interest. The
issuance of the Company's convertible senior notes in August 2018,
April 2020 and February 2022 results in interest accretion on the
convertible notes' issue costs and discount. Wolfspeed considers
these items as either limited in term or having no impact on the
Company's cash flows, and therefore has excluded such items to
facilitate a review of current operating performance and
comparisons to the Company's past operating performance.
Loss on early payment of transaction-related note receivable. In
the third quarter of fiscal 2022, the Company received an early
payment for the Purchase Price Note. The principal amount of $125.0
million was prepaid in full, along with outstanding accrued
interest as of the payment date (the Early Payment). In conjunction
with the Early Payment, the Company transferred naming rights and
trademarks related to Cree, Inc. and the CREE brand to SMART (the
Trademark Transfer). Because the Early Payment did not include
additional consideration in exchange for the Trademark Transfer,
the Company allocated consideration from the principal amount to
the value of the trademarks transferred to SMART. The portion of
the Early Payment not allocated to the Trademark Transfer was
$123.2 million. At the time of payment, the Company had a note
receivable balance of $124.4 million, resulting in a loss of $1.2
million. This loss is excluded because Wolfspeed believes it is not
reflective of the ongoing operating results of Wolfspeed's
business.
Loss on Wafer Supply Agreement. In connection with the completed
sale of the LED Products business unit to SMART, the Company
entered into a Wafer Supply and Fabrication Services Agreement (the
Wafer Supply Agreement), pursuant to which the Company supplies
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.
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 from continuing
operations 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
(in millions of U.S. Dollars,
except per share amounts and percentages)
(unaudited)
Non-GAAP Gross Margin
Three months ended
Nine months ended
March 27, 2022
March 28, 2021
March 27, 2022
March 28, 2021
GAAP gross profit
$64.0
$44.0
$170.4
$120.8
GAAP gross margin percentage
34
%
32
%
33
%
32
%
Adjustments:
Stock-based compensation expense
4.2
4.1
11.5
11.2
Factory optimization restructuring
—
—
—
1.0
Non-GAAP gross profit
$68.2
$48.1
$181.9
$133.0
Non-GAAP gross margin percentage
36
%
35
%
35
%
35
%
Non-GAAP Operating Loss
Three months ended
Nine months ended
March 27, 2022
March 28, 2021
March 27, 2022
March 28, 2021
GAAP operating loss
($62.3
)
($61.4
)
($188.9
)
($181.2
)
GAAP operating loss percentage
(33
) %
(45
) %
(36
) %
(48
) %
Adjustments:
Stock-based compensation expense:
Cost of revenue, net
4.2
4.1
11.5
11.2
Research and development
2.3
2.1
7.3
6.7
Sales, general and administrative
8.7
6.7
26.4
22.4
Total stock-based compensation expense
15.2
12.9
45.2
40.3
Amortization or impairment of
acquisition-related intangibles
3.4
3.7
10.6
10.9
Factory optimization restructuring
0.8
3.8
5.5
7.7
Severance and other restructuring
0.5
0.6
0.5
3.4
Project, transformation and transaction
costs
0.6
3.7
6.9
6.7
Factory optimization start-up costs
21.4
1.8
41.0
6.0
Non-restructuring related executive
severance
—
2.8
—
2.8
Transition service agreement costs
—
0.1
—
5.0
Total adjustments to GAAP operating
loss
41.9
29.4
109.7
82.8
Non-GAAP operating loss
($20.4
)
($32.0
)
($79.2
)
($98.4
)
Non-GAAP operating loss percentage
(11
) %
(23
) %
(15
) %
(26
) %
Non-GAAP Non-Operating Income
(Expense), net
Three months ended
Nine months ended
March 27, 2022
March 28, 2021
March 27, 2022
March 28, 2021
GAAP non-operating expense, net
($3.8
)
($8.1
)
($35.7
)
($18.9
)
Adjustments:
Net changes in the fair value of ENNOSTAR
investment
—
(1.1
)
—
(11.3
)
Interest income on transaction-related
note receivable
(0.5
)
—
(2.7
)
—
Loss on debt extinguishment related the
conversion of 2023 Notes
—
—
24.8
—
Accretion on convertible notes, net of
capitalized interest
3.9
8.0
12.9
26.1
Loss on early payment of
transaction-related note receivable
1.2
—
1.2
—
Loss on Wafer Supply Agreement
0.5
0.1
1.4
0.1
Non-GAAP non-operating income (expense),
net
$1.3
($1.1
)
$1.9
($4.0
)
Non-GAAP Net Loss
Three months ended
Nine months ended
March 27, 2022
March 28, 2021
March 27, 2022
March 28, 2021
GAAP net loss from continuing
operations
($66.5
)
($66.5
)
($233.3
)
($196.1
)
Adjustments:
Stock-based compensation expense
15.2
12.9
45.2
40.3
Amortization or impairment of
acquisition-related intangibles
3.4
3.7
10.6
10.9
Factory optimization restructuring
0.8
3.8
5.5
7.7
Severance and other restructuring
0.5
0.6
0.5
3.4
Project, transformation and transaction
costs
0.6
3.7
6.9
6.7
Factory optimization start-up costs
21.4
1.8
41.0
6.0
Non-restructuring related executive
severance
—
2.8
—
2.8
Transition service agreement costs
—
0.1
—
5.0
Net changes in the fair value of ENNOSTAR
investment
—
(1.1
)
—
(11.3
)
Interest income on transaction-related
note receivable
(0.5
)
—
(2.7
)
—
Loss on debt extinguishment related the
conversion of 2023 Notes
—
—
24.8
—
Accretion on convertible notes, net of
capitalized interest
3.9
8.0
12.9
26.1
Loss on early payment of
transaction-related note receivable
1.2
—
1.2
—
Loss on Wafer Supply Agreement
0.5
0.1
1.4
0.1
Total adjustments to GAAP net loss from
continuing operations before provision for income taxes
47.0
36.4
147.3
97.7
Income tax adjustment - benefit
(expense)
5.2
5.4
29.3
20.6
Non-GAAP net loss from continuing
operations
($14.3
)
($24.7
)
($56.7
)
($77.8
)
Non-GAAP diluted loss per share from
continuing operations
($0.12
)
($0.22
)
($0.48
)
($0.69
)
Non-GAAP weighted average shares (in
thousands)
123,597
112,891
118,917
112,330
Free Cash Flow
Three months ended
Nine months ended
March 27, 2022
March 28, 2021
March 27, 2022
March 28, 2021
Net cash used in operating activities from
continuing operations
($28.4
)
($26.8
)
($123.4
)
($58.9
)
Less: PP&E spending, net of
reimbursements from long-term incentive agreement
(101.2
)
(136.5
)
(452.0
)
(394.0
)
Less: Patents spending
(1.6
)
(1.7
)
(4.2
)
(3.6
)
Total free cash flow
($131.2
)
($165.0
)
($579.6
)
($456.5
)
WOLFSPEED, INC.
Business Outlook Unaudited GAAP to Non-GAAP
Reconciliation
Three Months Ended
(in millions of U.S. Dollars)
June 26, 2022
GAAP net loss outlook range
($85) to ($78)
Adjustments:
Stock-based compensation expense
16
Amortization or impairment of
acquisition-related intangibles
3
Factory optimization restructuring and
start-up costs
34
Accretion on convertible notes, net of
capitalized interest
9
Severance and other restructuring
1
Project, transformation, transaction and
transition costs
2
Total adjustments to GAAP net loss before
provision for income taxes
65
Income tax adjustment
4
Non-GAAP net loss outlook range
($16) to ($9)
Category: Investors
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220504006014/en/
Tyler Gronbach Wolfspeed, Inc. Vice President, Investor
Relations Phone: 919-407-4820 investorrelations@wolfspeed.com
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