Annual Revenue Growth of 42 Percent; Record
Quarter of Design-Ins Totaling $2.6 Billion
Wolfspeed, Inc. (NYSE: WOLF) today announced its results for the
fourth quarter and full year of fiscal 2022.
Quarterly Financial Highlights (all comparisons are to the
prior year period, unless otherwise noted. Figures are continuing
operations only)
- Revenue of $228.5 million, compared to $145.8 million
- GAAP gross margin of 34.5%, compared to 30.0%
- Non-GAAP gross margin of 36.5%, compared to 32.2%
- GAAP net loss of $61.8 million, or $0.50 per diluted share,
compared to $145.2 million, or $1.26 per diluted share
- Non-GAAP net loss of $2.9 million, or $0.02 per diluted share,
compared to $26.9 million, or $0.23 per diluted share
- Quarterly design-ins of $2.6 billion
Full Fiscal Year Financial Highlights
- Revenue of $746.2 million, compared to $525.6 million
- GAAP gross margin of 33.4%, compared to 31.3%
- Non-GAAP gross margin of 35.6%, compared to 34.2%
- GAAP net loss from continuing operations of $295.1 million, or
$2.46 per diluted share, compared to $341.3 million, or $3.04 per
diluted share
- Non-GAAP net loss from continuing operations of $59.6 million,
or $0.50 per diluted share, compared to $104.7 million, or $0.93
per diluted share
- Full year design-ins of $6.4 billion
"We delivered an extremely strong quarter to close out the
fiscal year and I am very proud of the progress the Wolfspeed team
has made in delivering on our goals. We announced a number of
exciting customer wins, opened the world's first fully automated
200mm Silicon Carbide fab at Mohawk Valley, and made significant
strides in growing our top-line, while also improving
profitability," said Wolfspeed Chief Executive Officer, Gregg Lowe.
"Looking forward, we remain very encouraged about the industry's
prospects for future growth and the activity we are seeing across
our end-markets. We had a phenomenal record of $2.6 billion of
design-ins in the fourth quarter. This achievement, coupled with
the previous two quarters of $1.6 billion each, provides further
evidence of the upward pressure we are seeing on our 2026 revenue
outlook, which we now believe is between 30 to 40 percent higher
than the $2.1 billion we forecasted at the end of last year."
Business Outlook:
For its first quarter of fiscal 2023, Wolfspeed targets revenue
in a range of $232.5 million to $247.5 million. GAAP net loss is
targeted at $14 million to $21 million, or $0.11 to $0.17 per
diluted share. Non-GAAP net loss is targeted to be in a range of $3
million to $10 million, or $0.02 to $0.08 per diluted share.
Targeted non-GAAP net loss excludes $11 million of estimated
expenses, net of tax, related to stock-based compensation expense,
amortization or impairment of acquisition-related intangibles,
factory start-up costs, gain on arbitration proceedings,
amortization of debt issuance costs and project, transformation and
transaction costs.
Quarterly Conference Call:
Wolfspeed will host a conference call at 5:00 p.m. Eastern time
today to review the highlights of its fourth quarter results and
the fiscal first quarter 2023 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 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 its LED Products business in
fiscal 2021 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 $8.1 million and $33.3 million for the
three and twelve months ended months ended June 26, 2022,
respectively. Approximately $10.4 million of the decrease in
depreciation expense for the twelve months ended June 26, 2022
resulted in a net reduction of inventory as of June 26, 2022 and
the remaining decrease in depreciation expense resulted in the
following for the three and twelve months ended months ended June
26, 2022: (1) an improvement in gross profit of $7.4 million and
$19.6 million, respectively; (2) an improvement in both loss before
income taxes and net loss of $8.1 million and $22.9 million,
respectively; and (3) an improvement in basic and diluted loss per
share of $0.07 and $0.19 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 first
quarter of fiscal 2023 and periods beyond. Actual results could
differ materially due to a number of factors, including but not
limited to, 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
related to international sales and purchases; 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 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 contribute to a global recession and the potential
for costs associated with our operations during the fiscal 2023
first quarter and future quarters to be greater than we anticipate
as a result of all of these factors; 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 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 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 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; 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; 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 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
Fiscal years ended
(in millions of U.S. Dollars, except per
share data)
June 26, 2022
June 27, 2021
June 26, 2022
June 27, 2021
Revenue, net
$228.5
$145.8
$746.2
$525.6
Cost of revenue, net
149.6
102.0
496.9
361.0
Gross profit
78.9
43.8
249.3
164.6
Gross margin percentage
35
%
30
%
33
%
31
%
Operating expenses:
Research and development
48.2
45.1
196.4
177.8
Sales, general and administrative
55.0
46.6
203.5
181.6
Amortization or impairment of
acquisition-related intangibles
3.0
3.6
13.6
14.5
Abandonment of long-lived assets
—
73.9
—
73.9
Loss (gain) on disposal or impairment of
other assets
—
0.8
(0.3
)
1.6
Other operating expense
31.6
6.5
83.9
29.1
Total operating expense
137.8
176.5
497.1
478.5
Operating loss
(58.9
)
(132.7
)
(247.8
)
(313.9
)
Operating loss percentage
(26
)%
(91
)%
(33
)%
(60
)%
Non-operating expense, net
2.6
7.4
38.3
26.3
Loss before income taxes
(61.5
)
(140.1
)
(286.1
)
(340.2
)
Income tax expense
0.3
5.1
9.0
1.1
Net loss from continuing
operations
(61.8
)
(145.2
)
(295.1
)
(341.3
)
Net income (loss) from discontinued
operations
94.2
(2.4
)
94.2
(181.2
)
Net income (loss)
32.4
(147.6
)
(200.9
)
(522.5
)
Net income from discontinued operations
attributable to noncontrolling interest
—
—
—
1.4
Net income (loss) attributable to
controlling interest
$32.4
($147.6
)
($200.9
)
($523.9
)
Basic and diluted loss per
share
Continuing operations
($0.50
)
($1.26
)
($2.46
)
($3.04
)
Net income (loss) attributable to
controlling interest
$0.26
($1.28
)
($1.67
)
($4.66
)
Weighted average shares - basic and
diluted (in thousands)
123,746
115,616
120,120
112,346
WOLFSPEED, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(unaudited)
(in millions of U.S. Dollars)
June 26, 2022
June 27, 2021
Assets
Current assets:
Cash, cash equivalents, and short-term
investments
$1,198.8
$1,154.6
Accounts receivable, net
150.2
95.9
Inventories
227.0
166.6
Income taxes receivable
1.3
6.4
Prepaid expenses
32.1
25.7
Other current assets
151.4
27.9
Current assets held for sale
1.6
1.6
Total current assets
1,762.4
1,478.7
Property and equipment, net
1,481.1
1,292.3
Goodwill
359.2
359.2
Intangible assets, net
125.4
140.5
Long-term receivables
104.7
138.4
Deferred tax assets
1.0
1.0
Other assets
83.7
35.5
Long-term assets of discontinued
operations
—
1.2
Total assets
$3,917.5
$3,446.8
Liabilities and Shareholders'
Equity
Current liabilities:
Accounts payable and accrued expenses
$307.7
$381.1
Accrued contract liabilities
37.0
22.9
Income taxes payable
11.6
0.4
Finance lease liabilities
0.5
5.2
Other current liabilities
31.7
38.6
Current liabilities of discontinued
operations
—
0.6
Total current liabilities
388.5
448.8
Long-term liabilities:
Convertible notes, net
1,021.6
823.9
Deferred tax liabilities
3.2
2.5
Finance lease liabilities - long-term
9.6
10.0
Other long-term liabilities
55.3
44.5
Long-term liabilities of discontinued
operations
—
0.6
Total long-term liabilities
1,089.7
881.5
Shareholders’ equity:
Common stock
0.2
0.1
Additional paid-in-capital
4,228.4
3,676.8
Accumulated other comprehensive (loss)
income
(25.3
)
2.7
Accumulated deficit
(1,764.0
)
(1,563.1
)
Total shareholders’ equity
2,439.3
2,116.5
Total liabilities and shareholders’
equity
$3,917.5
$3,446.8
WOLFSPEED, INC.
CONSOLIDATED STATEMENTS OF
CASH FLOWS
(unaudited)
Fiscal years ended
(in millions of U.S. Dollars)
June 26, 2022
June 27, 2021
Operating activities:
Net loss
($200.9
)
($522.5
)
Net income (loss) from discontinued
operations
94.2
(181.2
)
Net loss from continuing operations
(295.1
)
(341.3
)
Adjustments to reconcile net loss from
continuing operations to cash used in operating activities:
Depreciation and amortization
129.8
120.9
Amortization of debt issuance costs and
discount, net of non-cash capitalized interest
20.1
32.8
Loss on extinguishment of debt
24.8
—
Stock-based compensation
60.9
53.2
Abandonment of long-lived assets
—
73.9
Loss on disposal or impairment of
long-lived assets
1.0
5.0
Amortization of premium/discount on
investments
6.1
6.9
Realized gain on sale of investments
(0.3
)
(0.4
)
Gain on equity investment
—
(8.3
)
Foreign exchange gain on equity
investment
—
(2.2
)
Deferred income taxes
0.7
0.9
Changes in operating assets and
liabilities:
Accounts receivable, net
(54.3
)
(23.5
)
Inventories
(68.8
)
(44.6
)
Prepaid expenses and other assets
(0.4
)
(20.0
)
Accounts payable, trade
29.2
21.7
Accrued salaries and wages and other
liabilities
(10.5
)
15.3
Accrued contract liabilities
2.6
(2.8
)
Net cash used in operating activities of
continuing operations
(154.2
)
(112.5
)
Net cash used in operating activities of
discontinued operations
—
(13.0
)
Cash used in operating
activities
(154.2
)
(125.5
)
Investing activities:
Purchases of property and equipment
(644.9
)
(570.5
)
Purchases of patent and licensing
rights
(5.7
)
(5.9
)
Proceeds from sale of property and
equipment, including insurance proceeds
3.1
2.3
Purchases of short-term investments
(475.0
)
(475.0
)
Proceeds from maturities of short-term
investments
242.3
428.3
Proceeds from sale of short-term
investments
225.2
51.7
Reimbursement of property and equipment
purchases from long-term incentive agreement
139.0
10.7
Proceeds from sale of business, net,
including receipt of note receivable
125.0
43.7
Proceeds from sale of long-term
investment
—
66.4
Net cash used in investing activities of
continuing operations
(391.0
)
(448.3
)
Net cash used in investing activities of
discontinued operations
—
(0.3
)
Cash used in investing
activities
(391.0
)
(448.6
)
Financing activities:
Proceeds from long-term debt
borrowings
20.0
30.0
Payments on long-term debt borrowings,
including finance lease obligations
(20.5
)
(30.4
)
Proceeds from issuance of common stock
22.4
539.7
Tax withholding on vested equity
awards
(29.1
)
(36.2
)
Proceeds from convertible notes
750.0
—
Payments of debt issuance costs
(17.7
)
—
Cash paid for capped call transactions
(108.2
)
—
Incentive-related escrow refunds
—
1.5
Commitment fees on long-term incentive
agreement
(1.0
)
(0.5
)
Cash provided by financing
activities
615.9
504.1
Effects of foreign exchange changes on
cash and cash equivalents
(0.2
)
0.2
Net change in cash and cash
equivalents
70.5
(69.8
)
Cash and cash equivalents, beginning of
period
379.0
448.8
Cash and cash equivalents, end of
period
$449.5
$379.0
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 incurred 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 start-up costs. The Company has incurred and will incur
start-up costs relating to the Company's new device fabrication
facility in Marcy, New York. Additionally, as part of the factory
optimization plan, the Company incurred start-up costs relating to
the Company's materials factory expansion in Durham, North
Carolina. Wolfspeed does not believe these costs are reflective of
ongoing operating results. In fiscal 2023, the Company expects
approximately $100 million of additional start-up and
underutilization costs primarily related to ramping of production
at the Marcy, New York facility.
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
its 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 receivables. 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 two unsecured promissory notes issued to the Company by
SGH in the amounts of $125 million (the Purchase Price Note) and
$101.8 million (the Earnout Note, and collectively, the LED Notes).
The Company received an early payment on the Purchase Price Note in
the third quarter of fiscal 2022. Interest income on the LED Notes
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 August 2022, Wolfspeed received a $49.0 million payment for
an arbitration award, net of estimated attorneys' fees and other
costs, in relation to a former customer failing to fulfill
contractual obligations to purchase a certain amount of product
over a period of time. The corresponding gain from arbitration
proceedings is excluded from targeted non-GAAP net loss for the
first quarter of fiscal 2023.
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
Fiscal years ended
June 26, 2022
June 27, 2021
June 26, 2022
June 27, 2021
GAAP gross profit
$78.9
$43.8
$249.3
$164.6
GAAP gross margin percentage
35
%
30
%
33
%
31
%
Adjustments:
Stock-based compensation expense
4.5
3.2
16.0
14.4
Factory optimization restructuring
—
—
—
1.0
Non-GAAP gross profit
$83.4
$47.0
$265.3
$180.0
Non-GAAP gross margin percentage
36
%
32
%
36
%
34
%
Non-GAAP Operating Loss
Three months ended
Fiscal years ended
June 26, 2022
June 27, 2021
June 26, 2022
June 27, 2021
GAAP operating loss
($58.9
)
($132.7
)
($247.8
)
($313.9
)
GAAP operating loss percentage
(26
)%
(91
)%
(33
)%
(60
)%
Adjustments:
Stock-based compensation expense:
Cost of revenue, net
4.5
3.2
16.0
14.4
Research and development
2.6
2.0
9.9
8.7
Sales, general and administrative
8.6
7.7
35.0
30.1
Total stock-based compensation expense
15.7
12.9
60.9
53.2
Amortization or impairment of
acquisition-related intangibles
3.0
3.6
13.6
14.5
Abandonment of long-lived assets
—
73.9
—
73.9
Factory optimization restructuring
0.6
0.9
6.1
8.6
Severance and other restructuring
0.7
—
1.2
3.4
Project, transformation and transaction
costs
1.3
4.0
8.2
10.7
Factory start-up costs
29.0
2.0
70.0
8.0
Non-restructuring related executive
severance
—
—
—
2.8
Transition service agreement costs
—
—
—
5.0
Total adjustments to GAAP operating
loss
50.3
97.3
160.0
180.1
Non-GAAP operating loss
($8.6
)
($35.4
)
($87.8
)
($133.8
)
Non-GAAP operating loss percentage
(4
)%
(24
)%
(12
)%
(25
)%
Non-GAAP Non-Operating Income
(Expense), net
Three months ended
Fiscal years ended
June 26, 2022
June 27, 2021
June 26, 2022
June 27, 2021
GAAP non-operating expense, net
($2.6
)
($7.4
)
($38.3
)
($26.3
)
Adjustments:
Net changes in the fair value of ENNOSTAR
investment
—
0.8
—
(10.5
)
Interest income on transaction-related
note receivables
(1.0
)
(1.4
)
(3.7
)
(1.4
)
Loss on debt extinguishment related the
conversion of 2023 Notes
—
—
24.8
—
Accretion on convertible notes, net of
capitalized interest
7.2
6.7
20.1
32.8
Loss on early payment of
transaction-related note receivable
—
—
1.2
—
Loss on Wafer Supply Agreement
(0.6
)
0.7
0.8
0.8
Non-GAAP non-operating income (expense),
net
$3.0
($0.6
)
$4.9
($4.6
)
Non-GAAP Net Loss
Three months ended
Fiscal years ended
June 26, 2022
June 27, 2021
June 26, 2022
June 27, 2021
GAAP net loss from continuing
operations
($61.8
)
($145.2
)
($295.1
)
($341.3
)
Adjustments:
Stock-based compensation expense
15.7
12.9
60.9
53.2
Amortization or impairment of
acquisition-related intangibles
3.0
3.6
13.6
14.5
Abandonment of long-lived assets
—
73.9
—
73.9
Factory optimization restructuring
0.6
0.9
6.1
8.6
Severance and other restructuring
0.7
—
1.2
3.4
Project, transformation and transaction
costs
1.3
4.0
8.2
10.7
Factory start-up costs
29.0
2.0
70.0
8.0
Non-restructuring related executive
severance
—
—
—
2.8
Transition service agreement costs
—
—
—
5.0
Net changes in the fair value of ENNOSTAR
investment
—
0.8
—
(10.5
)
Interest income on transaction-related
note receivables
(1.0
)
(1.4
)
(3.7
)
(1.4
)
Loss on debt extinguishment related the
conversion of 2023 Notes
—
—
24.8
—
Accretion on convertible notes, net of
capitalized interest
7.2
6.7
20.1
32.8
Loss on early payment of
transaction-related note receivable
—
—
1.2
—
Loss on Wafer Supply Agreement
(0.6
)
0.7
0.8
0.8
Total adjustments to GAAP net loss from
continuing operations before provision for income taxes
55.9
104.1
203.2
201.8
Income tax adjustment - benefit
(expense)
3.0
14.2
32.3
34.8
Non-GAAP net loss from continuing
operations
($2.9
)
($26.9
)
($59.6
)
($104.7
)
Non-GAAP diluted loss per share from
continuing operations
($0.02
)
($0.23
)
($0.50
)
($0.93
)
Non-GAAP weighted average shares (in
thousands)
123,746
115,616
120,120
112,346
Free Cash Flow
Three months ended
Fiscal years ended
June 26, 2022
June 27, 2021
June 26, 2022
June 27, 2021
Net cash used in operating activities from
continuing operations
($30.8
)
($53.6
)
($154.2
)
($112.5
)
Less: PP&E spending, net of
reimbursements from long-term incentive agreement
(53.9
)
(165.8
)
(505.9
)
(559.8
)
Less: Patents spending
(1.5
)
(2.3
)
(5.7
)
(5.9
)
Total free cash flow
($86.2
)
($221.7
)
($665.8
)
($678.2
)
WOLFSPEED, INC.
Business Outlook Unaudited
GAAP to Non-GAAP Reconciliation
Three Months Ended
(in millions of U.S. Dollars)
September 25, 2022
GAAP net loss outlook range
($21) to ($14)
Adjustments:
Stock-based compensation expense
19
Amortization or impairment of
acquisition-related intangibles
3
Factory start-up costs
35
Gain on arbitration proceedings
(49)
Amortization of debt issuance costs, net
of capitalized interest
1
Project, transformation and transaction
costs
1
Total adjustments to GAAP net loss before
provision for income taxes
10
Income tax adjustment
1
Non-GAAP net loss outlook range
($10) to ($3)
Category: Investors
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220817005618/en/
Tyler Gronbach Wolfspeed, Inc. Vice President, Investor
Relations Phone: 919-407-4820 investorrelations@wolfspeed.com
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