Wolfspeed Reports Financial Results for the Second Quarter of Fiscal Year 2024
Mohawk Valley Fab Revenue Tripled Sequentially; On Track for 20% Utilization in Fourth Quarter of Fiscal 2024
Year-over-year Revenue Growth of 20 Percent; Record Quarterly Design-Wins Totaling
Quarterly Financial Highlights (Continuing operations only. All comparisons are to the second quarter of fiscal 2023)
-
Consolidated revenue of
$208.4 million , compared to$173.8 million -
Mohawk Valley Fab contributed
$12 million in revenue, a 3x increase from the prior quarter
-
Mohawk Valley Fab contributed
-
Power device design-ins of
$2.1 billion -
Quarterly record design-wins of
$2.9 billion - over 75% related to automotive applications - GAAP gross margin of 13.3%, compared to 32.6%
-
Non-GAAP gross margin of 16.4%, compared to 35.8%
-
GAAP and non-GAAP gross margins for the second quarter of fiscal 2024 include the impact of
$35.6 million of underutilization costs, representing approximately 1,700 basis points of gross margin. See "Start-up and Underutilization Costs" below for additional information
-
GAAP and non-GAAP gross margins for the second quarter of fiscal 2024 include the impact of
-
Completed sale of our RF Business to MACOM Technology Solutions Holdings, Inc. (MACOM) for
$75 million in cash and 711,528 shares of MACOM common stock (the RF Business Divestiture)
"We’re proud of our results this quarter, which reflect robust execution of our strategy and fortify our vision for the future of
Lowe continued, “Our steadfast commitment to our long-term goals is bolstered by the conversion of our design-ins into significant design-wins. This solidifies our confidence in the electrification trend, which increasingly depends on the widespread adoption of silicon carbide technology. We are pioneers in this transformative era, steering towards a more electrified and efficient future."
Business Outlook:
For its third quarter of fiscal 2024,
Start-up and Underutilization Costs:
As part of expanding its production footprint to support expected growth,
When a new facility begins revenue generating production, the operating costs of that facility that were previously expensed as start-up costs will instead be primarily reflected as part of the cost of production within the cost of revenue, net line item in our statement of operations. For example, the Mohawk Valley Fab began revenue generating production at the end of fiscal 2023 and the costs of operating this facility going forward will be primarily reflected in cost of revenue, net in future periods.
During the period when production begins, but before the facility is at its expected utilization level,
For the third quarter of fiscal 2024, operating expenses are expected to include approximately
Quarterly Conference Call:
The conference call will be available to the public through a live audio web broadcast via the Internet. For webcast details, visit
Supplemental financial information, including the non-GAAP reconciliation attached to this press release, is available on
About
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.
Beginning with the fourth quarter of fiscal 2023, the Company no longer excludes start-up expenses from its non-GAAP measures and does not exclude underutilization from its non-GAAP measures. Prior period non-GAAP measures have been updated in this press release to reflect the current presentation of the Company's non-GAAP measures. As a result of this change, previously published non-GAAP financial measures for the Company for prior periods which exclude start-up expenses are not directly comparable to the non-GAAP measures included herein.
Forward Looking Statements:
The schedules attached to this release are an integral part of the release. This press release contains forward-looking statements involving risks and uncertainties, both known and unknown, that may cause Wolfspeed’s actual results to differ materially from those indicated in the forward-looking statements. Forward-looking statements by their nature address matters that are, to different degrees, uncertain, such as statements about our plans to grow the business, our ability to achieve our targets for the third quarter of fiscal 2024 and periods beyond, our ability to meet targeted utilization rates at the Mohawk Valley Fab, and our market growth. Actual results could differ materially due to a number of factors, including but not limited to, ongoing uncertainty in global economic and geopolitical conditions, such as the ongoing military conflict between
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) |
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Three months ended |
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Six months ended |
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(in millions of |
|
|
|
|
|
|
|
||||
Revenue, net |
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue, net |
180.6 |
|
|
117.1 |
|
|
353.3 |
|
|
238.8 |
|
Gross profit |
27.8 |
|
|
56.7 |
|
|
52.5 |
|
|
124.4 |
|
Gross margin percentage |
13 |
% |
|
33 |
% |
|
13 |
% |
|
34 |
% |
|
|
|
|
|
|
|
|
||||
Operating expenses: |
|
|
|
|
|
|
|
||||
Research and development |
45.3 |
|
|
39.4 |
|
|
89.4 |
|
|
79.7 |
|
Sales, general and administrative |
64.9 |
|
|
50.4 |
|
|
129.0 |
|
|
100.4 |
|
Factory start-up costs |
10.5 |
|
|
37.6 |
|
|
18.9 |
|
|
76.0 |
|
Amortization of acquisition-related intangibles |
0.3 |
|
|
0.6 |
|
|
0.6 |
|
|
1.1 |
|
Loss on disposal or impairment of other assets |
0.3 |
|
|
0.1 |
|
|
0.4 |
|
|
0.2 |
|
Other operating expense |
4.6 |
|
|
1.6 |
|
|
7.2 |
|
|
3.5 |
|
Total operating expense |
125.9 |
|
|
129.7 |
|
|
245.5 |
|
|
260.9 |
|
Operating loss |
(98.1 |
) |
|
(73.0 |
) |
|
(193.0 |
) |
|
(136.5 |
) |
Operating loss percentage |
(47 |
)% |
|
(42 |
)% |
|
(48 |
)% |
|
(38 |
)% |
|
|
|
|
|
|
|
|
||||
Non-operating expense (income), net |
27.8 |
|
|
(1.0 |
) |
|
56.3 |
|
|
(50.5 |
) |
Loss before income taxes |
(125.9 |
) |
|
(72.0 |
) |
|
(249.3 |
) |
|
(86.0 |
) |
Income tax expense |
0.3 |
|
|
0.1 |
|
|
0.5 |
|
|
0.2 |
|
Net loss from continuing operations |
(126.2 |
) |
|
(72.1 |
) |
|
(249.8 |
) |
|
(86.2 |
) |
Net loss from discontinued operations |
(18.5 |
) |
|
(18.8 |
) |
|
(290.6 |
) |
|
(30.9 |
) |
Net loss |
(144.7 |
) |
|
(90.9 |
) |
|
(540.4 |
) |
|
(117.1 |
) |
|
|
|
|
|
|
|
|
||||
Basic and diluted loss per share |
|
|
|
|
|
|
|
||||
Continuing operations |
( |
) |
|
( |
) |
|
( |
) |
|
( |
) |
Net loss |
( |
) |
|
( |
) |
|
( |
) |
|
( |
) |
|
|
|
|
|
|
|
|
||||
Weighted average shares - basic and diluted (in thousands) |
125,602 |
|
|
124,344 |
|
|
125,363 |
|
|
124,190 |
|
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) |
|||||
(in millions of |
|
|
|
||
Assets |
|
|
|
||
Current assets: |
|
|
|
||
Cash, cash equivalents, and short-term investments |
|
|
|
|
|
Accounts receivable, net |
132.6 |
|
|
154.8 |
|
Inventories |
370.2 |
|
|
284.9 |
|
Income taxes receivable |
0.6 |
|
|
0.8 |
|
Prepaid expenses |
78.1 |
|
|
36.8 |
|
Other current assets |
228.9 |
|
|
131.5 |
|
Current assets held for sale from discontinued operations |
— |
|
|
42.8 |
|
Total current assets |
3,446.1 |
|
|
3,606.5 |
|
Property and equipment, net |
2,850.1 |
|
|
2,165.5 |
|
|
359.2 |
|
|
359.2 |
|
Intangible assets, net |
23.9 |
|
|
23.9 |
|
Long-term receivables |
2.5 |
|
|
2.6 |
|
Other long-term investments |
66.1 |
|
|
— |
|
Deferred tax assets |
1.2 |
|
|
1.2 |
|
Other assets |
541.1 |
|
|
303.3 |
|
Long-term assets held for sale from discontinued operations |
— |
|
|
124.5 |
|
Total assets |
|
|
|
|
|
|
|
|
|
||
Liabilities and Shareholders' Equity |
|
|
|
||
Current liabilities: |
|
|
|
||
Accounts payable and accrued expenses |
|
|
|
|
|
Accrued contract liabilities |
51.1 |
|
|
39.0 |
|
Income taxes payable |
10.0 |
|
|
9.6 |
|
Finance lease liabilities |
0.4 |
|
|
0.4 |
|
Other current liabilities |
85.7 |
|
|
35.7 |
|
Current liabilities held for sale from discontinued operations |
— |
|
|
8.6 |
|
Total current liabilities |
671.2 |
|
|
627.8 |
|
|
|
|
|
||
Long-term liabilities: |
|
|
|
||
Long-term debt |
2,137.3 |
|
|
1,149.5 |
|
Convertible notes, net |
3,030.3 |
|
|
3,025.6 |
|
Deferred tax liabilities |
10.8 |
|
|
3.9 |
|
Finance lease liabilities - long-term |
9.0 |
|
|
9.2 |
|
Other long-term liabilities |
281.4 |
|
|
143.5 |
|
Long-term liabilities held for sale from discontinued operations |
— |
|
|
5.3 |
|
Total long-term liabilities |
5,468.8 |
|
|
4,337.0 |
|
|
|
|
|
||
Shareholders’ equity: |
|
|
|
||
Common stock |
0.2 |
|
|
0.2 |
|
Additional paid-in-capital |
3,766.8 |
|
|
3,711.0 |
|
Accumulated other comprehensive loss |
(12.2 |
) |
|
(25.1 |
) |
Accumulated deficit |
(2,604.6 |
) |
|
(2,064.2 |
) |
Total shareholders’ equity |
1,150.2 |
|
|
1,621.9 |
|
Total liabilities and shareholders’ equity |
|
|
|
|
|
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) |
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|
Six months ended |
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(in millions of |
|
|
|
||
Operating activities: |
|
|
|
||
Net loss |
( |
) |
|
( |
) |
Net loss from discontinued operations |
(290.6 |
) |
|
(30.9 |
) |
Net loss from continuing operations |
(249.8 |
) |
|
(86.2 |
) |
Adjustments to reconcile net loss to cash used in operating activities of continuing operations: |
|
|
|
||
Depreciation and amortization |
88.7 |
|
|
68.0 |
|
Amortization of debt issuance costs and discount, net of non-cash capitalized interest |
14.7 |
|
|
2.9 |
|
Stock-based compensation |
42.1 |
|
|
38.9 |
|
Gain on equity investment |
(5.4 |
) |
|
— |
|
Loss on disposal or impairment of long-lived assets, including loss on disposal portion of factory start-up costs |
0.4 |
|
|
2.0 |
|
Amortization of (premium) discount on investments, net |
(13.8 |
) |
|
2.2 |
|
Deferred income taxes |
0.1 |
|
|
0.3 |
|
Changes in operating assets and liabilities: |
|
|
|
||
Accounts receivable, net |
22.2 |
|
|
(19.1 |
) |
Inventories |
(82.6 |
) |
|
(41.5 |
) |
Prepaid expenses and other assets |
(74.4 |
) |
|
(3.6 |
) |
Accounts payable |
(58.0 |
) |
|
1.6 |
|
Accrued salaries and wages and other liabilities |
5.2 |
|
|
(32.7 |
) |
Accrued contract liabilities |
15.0 |
|
|
(2.7 |
) |
Net cash used in operating activities of continuing operations |
(295.6 |
) |
|
(69.9 |
) |
Net cash used in operating activities of discontinued operations |
(54.3 |
) |
|
(9.8 |
) |
Cash used in operating activities |
(349.9 |
) |
|
(79.7 |
) |
Investing activities: |
|
|
|
||
Purchases of property and equipment |
(1,052.2 |
) |
|
(234.1 |
) |
Purchases of patent and licensing rights |
(3.2 |
) |
|
(2.3 |
) |
Proceeds from sale of property and equipment |
0.4 |
|
|
1.7 |
|
Purchases of short-term investments |
(1,307.2 |
) |
|
(814.1 |
) |
Proceeds from maturities of short-term investments |
734.7 |
|
|
115.5 |
|
Proceeds from sale of short-term investments |
25.8 |
|
|
43.1 |
|
Reimbursement of property and equipment purchases from long-term incentive agreement |
79.4 |
|
|
70.7 |
|
Proceeds from sale of business |
75.6 |
|
|
101.8 |
|
Net cash used in investing activities of continuing operations |
(1,446.7 |
) |
|
(717.7 |
) |
Net cash used in investing activities of discontinued operations |
(3.1 |
) |
|
(4.3 |
) |
Cash used in investing activities |
(1,449.8 |
) |
|
(722.0 |
) |
Financing activities: |
|
|
|
||
Proceeds from long-term debt borrowings |
1,000.0 |
|
|
— |
|
Proceeds from convertible notes |
— |
|
|
1,750.0 |
|
Payments of debt issuance costs |
(46.0 |
) |
|
(31.4 |
) |
Cash paid for capped call transactions |
— |
|
|
(273.9 |
) |
Proceeds from issuance of common stock |
10.9 |
|
|
11.2 |
|
Tax withholding on vested equity awards |
(16.7 |
) |
|
(17.3 |
) |
Payments on long-term debt borrowings, including finance lease obligations |
(0.2 |
) |
|
(0.3 |
) |
Commitment fees on long-term incentive agreement |
(1.0 |
) |
|
(1.0 |
) |
Cash provided by financing activities |
947.0 |
|
|
1,437.3 |
|
Effects of foreign exchange changes on cash and cash equivalents |
0.1 |
|
|
— |
|
Net change in cash and cash equivalents |
(852.6 |
) |
|
635.6 |
|
Cash and cash equivalents, beginning of period |
1,757.0 |
|
|
449.5 |
|
Cash and cash equivalents, end of period |
|
|
|
|
|
Product Line Revenue |
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|
Three months ended |
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(in millions of |
|
|
|
|
|
|
|
Power Products |
|
|
|
|
|
|
|
Materials Products |
100.7 |
|
77.8 |
|
196.9 |
|
162.7 |
Total |
|
|
|
|
|
|
|
Non-GAAP Measures of Financial Performance
To supplement the Company's consolidated financial statements presented in accordance with generally accepted accounting principles, or GAAP,
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
For its internal budgeting process, and as discussed further below,
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.
Amortization or impairment of acquisition-related intangibles.
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.
Severance costs. The Company has incurred costs in conjunction with the termination of key executive personnel.
Gain on arbitration proceedings. In the first quarter of fiscal 2023,
Amortization of discount and debt issuance costs, net of capitalized interest. The issuance of the Company's convertible senior notes in
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
Gain (loss) on equity investment. The Company received shares of MACOM common stock in connection with the RF Business Divestiture. These shares are accounted for utilizing the fair value option and changes in the fair value of the shares are recognized in income.
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.
In addition to the non-GAAP measures discussed above,
Reconciliation of GAAP to Non-GAAP Measures - Continuing Operations Only
(in millions of (unaudited) |
|||||||||||
Non-GAAP Gross Margin |
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Three months ended |
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Six months ended |
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GAAP gross profit |
|
|
|
|
|
|
|
|
|
|
|
GAAP gross margin percentage |
13 |
% |
|
33 |
% |
|
13 |
% |
|
34 |
% |
Adjustments: |
|
|
|
|
|
|
|
||||
Stock-based compensation expense |
6.4 |
|
|
5.5 |
|
|
12.4 |
|
|
11.3 |
|
Non-GAAP gross profit |
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP gross margin percentage |
16 |
% |
|
36 |
% |
|
16 |
% |
|
37 |
% |
Non-GAAP Operating Loss |
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Three months ended |
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Six months ended |
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|
||||
GAAP operating loss |
( |
) |
|
( |
) |
|
( |
) |
|
( |
) |
GAAP operating loss percentage |
(47 |
)% |
|
(42 |
)% |
|
(48 |
)% |
|
(38 |
)% |
Adjustments: |
|
|
|
|
|
|
|
||||
Stock-based compensation expense: |
|
|
|
|
|
|
|
||||
Cost of revenue, net |
6.4 |
|
|
5.5 |
|
|
12.4 |
|
|
11.3 |
|
Research and development |
3.4 |
|
|
4.1 |
|
|
6.1 |
|
|
6.5 |
|
Sales, general and administrative |
12.6 |
|
|
9.5 |
|
|
23.6 |
|
|
21.1 |
|
Total stock-based compensation expense |
22.4 |
|
|
19.1 |
|
|
42.1 |
|
|
38.9 |
|
Amortization of acquisition-related intangibles |
0.3 |
|
|
0.6 |
|
|
0.6 |
|
|
1.1 |
|
Project, transformation and transaction costs |
4.6 |
|
|
1.1 |
|
|
7.2 |
|
|
2.0 |
|
Executive severance costs |
— |
|
|
0.3 |
|
|
— |
|
|
1.3 |
|
Restructuring costs |
— |
|
|
0.2 |
|
|
— |
|
|
0.2 |
|
Total adjustments to GAAP operating loss |
27.3 |
|
|
21.3 |
|
|
49.9 |
|
|
43.5 |
|
Non-GAAP operating loss |
( |
) |
|
( |
) |
|
( |
) |
|
( |
) |
Non-GAAP operating loss percentage |
(34 |
)% |
|
(30 |
)% |
|
(35 |
)% |
|
(26 |
)% |
Non-GAAP Non-Operating (Expense) Income, net |
|||||||||||
|
Three months ended |
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Six months ended |
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|
|
|
|
|
|
|
||||
GAAP non-operating (expense) income, net |
( |
) |
|
|
|
|
( |
) |
|
|
|
Adjustments: |
|
|
|
|
|
|
|
||||
Gain on arbitration proceedings |
— |
|
|
(0.9 |
) |
|
— |
|
|
(50.3 |
) |
Gain on equity investment |
(5.4 |
) |
|
— |
|
|
(5.4 |
) |
|
— |
|
Amortization of discount and debt issuance costs, net of capitalized interest |
7.4 |
|
|
1.6 |
|
|
14.6 |
|
|
2.9 |
|
Loss on Wafer Supply Agreement |
6.6 |
|
|
2.6 |
|
|
13.5 |
|
|
2.5 |
|
Non-GAAP non-operating (expense) income, net |
( |
) |
|
|
|
|
( |
) |
|
|
|
Non-GAAP Net Loss |
|||||||||||
|
Three months ended |
|
Six months ended |
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|
|
|
|
|
|
|
|
||||
GAAP net loss |
( |
) |
|
( |
) |
|
( |
) |
|
( |
) |
Adjustments: |
|
|
|
|
|
|
|
||||
Stock-based compensation expense |
22.4 |
|
|
19.1 |
|
|
42.1 |
|
|
38.9 |
|
Amortization of acquisition-related intangibles |
0.3 |
|
|
0.6 |
|
|
0.6 |
|
|
1.1 |
|
Project, transformation and transaction costs |
4.6 |
|
|
1.1 |
|
|
7.2 |
|
|
2.0 |
|
Executive severance costs |
— |
|
|
0.3 |
|
|
— |
|
|
1.3 |
|
Restructuring costs |
— |
|
|
0.2 |
|
|
— |
|
|
0.2 |
|
Gain on arbitration proceedings |
— |
|
|
(0.9 |
) |
|
— |
|
|
(50.3 |
) |
Gain on equity investment |
(5.4 |
) |
|
— |
|
|
(5.4 |
) |
|
— |
|
Amortization of discount and debt issuance costs, net of capitalized interest |
7.4 |
|
|
1.6 |
|
|
14.6 |
|
|
2.9 |
|
Loss on Wafer Supply Agreement |
6.6 |
|
|
2.6 |
|
|
13.5 |
|
|
2.5 |
|
Total adjustments to GAAP net loss before provision for income taxes |
35.9 |
|
|
24.6 |
|
|
72.6 |
|
|
(1.4 |
) |
Income tax adjustment - benefit (expense) |
20.7 |
|
|
11.6 |
|
|
41.0 |
|
|
21.6 |
|
Non-GAAP net loss |
( |
) |
|
( |
) |
|
( |
) |
|
( |
) |
|
|
|
|
|
|
|
|
||||
Non-GAAP diluted loss per share |
( |
) |
|
( |
) |
|
( |
) |
|
( |
) |
Non-GAAP weighted average shares (in thousands) |
125,602 |
|
|
124,344 |
|
|
125,363 |
|
|
124,190 |
|
Free Cash Flow |
|||||||||||
|
Three months ended |
|
Six months ended |
||||||||
|
|
|
|
|
|
|
|
||||
Net cash used in operating activities |
( |
) |
|
( |
) |
|
( |
) |
|
( |
) |
Less: PP&E spending, net of reimbursements from long-term incentive agreement |
(570.4 |
) |
|
(102.4 |
) |
|
(972.8 |
) |
|
(163.4 |
) |
Less: Patents spending |
(1.9 |
) |
|
(1.2 |
) |
|
(3.2 |
) |
|
(2.3 |
) |
Total free cash flow |
( |
) |
|
( |
) |
|
( |
) |
|
( |
) |
Business Outlook Unaudited GAAP to Non-GAAP Reconciliation |
||
|
|
Three Months Ended |
(in millions of |
|
|
GAAP net loss from continuing operations outlook range |
|
( |
Adjustments: |
|
|
Stock-based compensation expense |
|
22 |
Amortization of discount and debt issuance costs, net of capitalized interest |
|
7 |
Project, transformation and transaction costs |
|
7 |
Loss on Wafer Supply Agreement |
|
6 |
Total adjustments to GAAP net loss before provision for income taxes |
|
42 |
Income tax adjustment |
|
26 to 21 |
Non-GAAP net loss from continuing operations outlook range |
|
( |
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