TechDogs-"Wolfspeed Reports Financial Results For The Fourth Quarter And Full Fiscal Year 2023"

Manufacturing Technology

Wolfspeed Reports Financial Results For The Fourth Quarter And Full Fiscal Year 2023

By Business Wire

Business Wire
Overall Rating

Annual Revenue Growth of 24 Percent; Full Fiscal Year Design-Ins Totaling $8.3 Billion

DURHAM, N.C.--(BUSINESS WIRE)--Wolfspeed, Inc. (NYSE: WOLF) today announced its results for the fourth quarter of fiscal 2023 and the full 2023 fiscal year.

Quarterly Financial Highlights (all comparisons are to the fourth quarter of fiscal 2022)

  • Revenue of $235.8 million, compared to $228.5 million
  • GAAP gross margin of 27.4%, compared to 34.5%
  • Non-GAAP gross margin of 29.0%, compared to 36.5%
  • GAAP net loss from continuing operations of $113.3 million, or $0.91 per diluted share, compared to $61.8 million, or $0.50 per diluted share
  • Non-GAAP net loss from continuing operations of $52.8 million, or $0.42 per diluted share, compared to $26.0 million*, or $0.21* per diluted share
  • Quarterly design-ins of $1.6 billion

Full Fiscal Year Financial Highlights (all comparisons are to fiscal 2022)

  • Revenue of $921.9 million, compared to $746.2 million
  • GAAP gross margin of 30.3%, compared to 33.4%
  • Non-GAAP gross margin of 32.6%, compared to 35.6%
  • GAAP net loss from continuing operations of $329.9 million, or $2.65 per diluted share, compared to $295.1 million, or $2.46 per diluted share
  • Non-GAAP net loss from continuing operations of $180.7 million, or $1.45 per diluted share, compared to $115.4 million*, or $0.96* per diluted share
  • Year-to-date design-ins of $8.3 billion

*See 'Non-GAAP Financial Measures' below for information about changes to the Company's presentation of non-GAAP financial measures for present and future periods.

"We are very pleased with our progress in fiscal 2023 as we secured $5 billion of funding to support our continued capacity expansion plans, initiated construction on our 200mm materials factory in North Carolina, and generated initial revenue from the Mohawk Valley 200mm device fab," said Wolfspeed CEO, Gregg Lowe. "With approximately $8.3 billion of customer design-ins secured in the last 12 months, customers are continuing to select Wolfspeed for their future silicon carbide device needs, so we must remain keenly focused on scaling our materials and device capacity in fiscal 2024."

Business Outlook:

For its first quarter of fiscal 2024, Wolfspeed targets revenue in a range of $220 million to $240 million. GAAP net loss is targeted at $145 million to $169 million, or $1.16 to $1.35 per diluted share. Non-GAAP net loss is targeted to be in a range of $75 million to $94 million, or $0.60 to $0.75 per diluted share. Targeted non-GAAP net loss excludes $70 million to $75 million of estimated expenses, net of tax, related to stock-based compensation expense, amortization or impairment of acquisition-related intangibles, amortization of debt issuance costs, net of capitalized interest, project, transformation and transaction costs and loss on Wafer Supply Agreement. Targets in this paragraph, other than revenue, reflect the presentation changes described below.

Start-up and Underutilization Costs:

As part of expanding our production footprint to support expected growth, we are incurring significant factory start-up costs relating to facilities that we are 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 our statement of operations.

When a new facility begins revenue generating production, the operating costs of that facility that were previously expensed as start-up costs will instead be primarily reflected as part of the cost of production within the cost of revenue, net line item in our statement of operations. For example, our new silicon carbide device fabrication facility in Marcy, New York 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, we expect 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. We expect that these costs will be substantial as we ramp up the facility to the expected utilization level.

We incurred $39.5 million and $160.2 million of factory start-up costs for the fourth quarter and full fiscal year 2023, respectively, which accounted for a significant portion of our operating expenses. For the first quarter of fiscal 2024, we target our operating expenses to include approximately $8 million of factory start-up costs primarily in connection with our materials expansion efforts and our cost of revenue, net, to include approximately $37 million of underutilization costs primarily in connection with our new silicon carbide device fabrication facility in Marcy, New York.

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 its fiscal first quarter 2024 business outlook, including significant factors and assumptions underlying the targets noted above.

The conference call will be available to the public through a live audio web broadcast via the Internet. For webcast details, visit Wolfspeed's website at investor.wolfspeed.com/events.cfm.

Supplemental financial information, including the non-GAAP reconciliation attached to this press release, is available on Wolfspeed's website at investor.wolfspeed.com/results.cfm.

About Wolfspeed, Inc.

Wolfspeed (NYSE: WOLF) leads the market in the worldwide adoption of silicon carbide 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.

Beginning with the fourth quarter of fiscal 2023, the Company no longer excludes start-up expenses from its non-GAAP measures and will not exclude underutilization from its future 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 and our ability to achieve our targets for the first quarter of fiscal 2024 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 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 as consumers and businesses may defer purchases or payments, or default on payments; risks associated with our expansion plans, including design and construction delays and cost overruns, timing and amount of government incentives actually received, issues in installing and qualifying new equipment and ramping production, poor production process yields and quality control, and potential increases to our restructuring costs; the risk that we do not meet our production commitments to those customers who provide us with capacity reservation deposits or similar payments; the risk that we may experience production difficulties that preclude us from shipping sufficient quantities to meet customer orders or that result in higher production costs, lower yields and lower margins; our ability to lower costs; the risk that our results will suffer if we are unable to balance fluctuations in customer demand and capacity, including bringing on additional capacity on a timely basis to meet customer demand; the risk that longer manufacturing lead times may cause customers to fulfill their orders with a competitor's products instead; product mix; risks associated with the ramp-up of production of our new products, and our entry into new business channels different from those in which we have historically operated; our ability to convert customer design-ins to 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 economic and political uncertainty caused by the tariffs imposed by the United States on Chinese goods, and corresponding Chinese tariffs and currency devaluation in response, may negatively impact demand for our products; the risk that we or our channel partners are not able to develop and expand customer bases and accurately anticipate demand from end customers, which can result in increased inventory and reduced orders as we experience wide fluctuations in supply and demand; risks related to international sales and purchases; risks resulting from the concentration of our business among few customers, including the risk that customers may reduce or cancel orders or fail to honor purchase commitments; the risk that our investments may experience periods of significant market value and interest rate volatility causing us to recognize fair value losses on our investment; the risk posed by managing an increasingly complex supply chain (including managing the impacts of ongoing supply constraints in the semiconductor industry and meeting purchase commitments under take-or-pay arrangements with certain suppliers) that has the ability to supply a sufficient quantity of raw materials, subsystems and finished products with the required specifications and quality; risks relating to the ongoing COVID-19 pandemic, including the risk of disruptions to our operations, supply chain, including our contract manufacturers, or customer demand; the risk we may be required to record a significant charge to earnings if our remaining goodwill or amortizable assets become impaired; risks relating to confidential information theft or misuse, including through cyber-attacks or cyber intrusion; our ability to complete development and commercialization of products under development; the rapid development of new technology and competing products that may impair demand or render our products obsolete; the potential lack of customer acceptance for our products; risks associated with ongoing litigation; the risk that customers do not maintain their favorable perception of our brand and products, resulting in lower demand for our products; the risk that our products fail to perform or fail to meet customer requirements or expectations, resulting in significant additional costs; risks associated with strategic transactions; and other factors discussed in our filings with the Securities and Exchange Commission (SEC), including our report on Form 10-K for the fiscal year ended June 26, 2022, 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 25, 2023

June 26, 2022

June 25, 2023

June 26, 2022

Revenue, net

$235.8

$228.5

$921.9

$746.2

Cost of revenue, net

171.2

149.6

642.4

496.9

Gross profit

64.6

78.9

279.5

249.3

Gross margin percentage

27

%

35

%

30

%

33

%

Operating expenses:

Research and development

57.1

48.2

225.4

196.4

Sales, general and administrative

64.1

55.0

235.3

203.5

Factory start-up costs

39.5

29.0

160.2

70.0

Amortization or impairment of acquisition-related intangibles

2.6

3.0

10.9

13.6

Loss (gain) on disposal or impairment of other assets

0.1

2.0

(0.3

)

Other operating expense

12.9

2.6

26.3

13.9

Total operating expense

176.3

137.8

660.1

497.1

Operating loss

(111.7

)

(58.9

)

(380.6

)

(247.8

)

Operating loss percentage

(47

)%

(26

)%

(41

)%

(33

)%

Non-operating expense (income), net

1.3

2.6

(52.1

)

38.3

Loss before income taxes

(113.0

)

(61.5

)

(328.5

)

(286.1

)

Income tax expense

0.3

0.3

1.4

9.0

Net loss from continuing operations

(113.3

)

(61.8

)

(329.9

)

(295.1

)

Net income from discontinued operations

94.2

94.2

Net (loss) income

(113.3

)

32.4

(329.9

)

(200.9

)

Basic and diluted (loss) income per share

Continuing operations

($0.91

)

($0.50

)

($2.65

)

($2.46

)

Net (loss) income

($0.91

)

$0.26

($2.65

)

($1.67

)

Weighted average shares - basic and diluted (in thousands)

124,679

123,746

124,374

120,120

WOLFSPEED, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)

(in millions of U.S. Dollars)

June 25, 2023

June 26, 2022

Assets

Current assets:

Cash, cash equivalents, and short-term investments

$2,954.9

$1,198.8

Accounts receivable, net

154.8

150.2

Inventories

327.5

227.0

Income taxes receivable

0.8

1.3

Prepaid expenses

36.8

32.1

Other current assets

150.9

151.4

Current assets held for sale

1.6

Total current assets

3,625.7

1,762.4

Property and equipment, net

2,204.0

1,481.1

Goodwill

359.2

359.2

Intangible assets, net

115.9

125.4

Long-term receivables

2.6

104.7

Deferred tax assets

1.2

1.0

Other assets

312.1

83.7

Total assets

$6,620.7

$3,917.5

Liabilities and Shareholders' Equity

Current liabilities:

Accounts payable and accrued expenses

$570.9

$307.7

Accrued contract liabilities

43.0

37.0

Income taxes payable

9.6

11.6

Finance lease liabilities

0.5

0.5

Other current liabilities

37.9

31.7

Total current liabilities

661.9

388.5

Long-term liabilities:

Long-term debt

1,149.5

Convertible notes, net

3,025.6

1,021.6

Deferred tax liabilities

3.9

3.2

Finance lease liabilities - long-term

9.2

9.6

Other long-term liabilities

148.7

55.3

Total long-term liabilities

4,336.9

1,089.7

Shareholders’ equity:

Common stock

0.2

0.2

Additional paid-in-capital

3,711.0

4,228.4

Accumulated other comprehensive loss

(25.1

)

(25.3

)

Accumulated deficit

(2,064.2

)

(1,764.0

)

Total shareholders’ equity

1,621.9

2,439.3

Total liabilities and shareholders’ equity

$6,620.7

$3,917.5

WOLFSPEED, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

Fiscal years ended

(in millions of U.S. Dollars)

June 25, 2023

June 26, 2022

Operating activities:

Net loss

($329.9

)

($200.9

)

Net income (loss) from discontinued operations

94.2

Net loss from continuing operations

(329.9

)

(295.1

)

Adjustments to reconcile net loss to cash used in operating activities:

Depreciation and amortization

164.0

129.8

Amortization of debt issuance costs and discount, net of non-cash capitalized interest

7.5

20.1

Loss on extinguishment of debt

24.8

Stock-based compensation

81.9

60.9

Loss on disposal or impairment of long-lived assets, including loss on disposal portion of factory optimization and start-up costs

3.8

1.0

Amortization of (premium) discount on investments, net

(4.7

)

6.1

Realized gain on sale of investments

(0.3

)

Deferred income taxes

0.5

0.7

Changes in operating assets and liabilities:

Accounts receivable, net

(4.6

)

(54.3

)

Inventories

(97.5

)

(68.8

)

Prepaid expenses and other assets

(18.5

)

(0.4

)

Accounts payable, trade

30.0

29.2

Accrued salaries and wages and other liabilities

(1.1

)

(10.5

)

Accrued contract liabilities

26.0

2.6

Cash used in operating activities

(142.6

)

(154.2

)

Investing activities:

Purchases of property and equipment

(955.8

)

(644.9

)

Purchases of patent and licensing rights

(6.5

)

(5.7

)

Proceeds from sale of property and equipment, including insurance proceeds

1.7

3.1

Purchases of short-term investments

(1,191.0

)

(475.0

)

Proceeds from maturities of short-term investments

637.2

242.3

Proceeds from sale of short-term investments

110.1

225.2

Reimbursement of property and equipment purchases from long-term incentive agreement

155.5

139.0

Proceeds from sale of business resulting from the receipt of transaction related note receivable

101.8

125.0

Cash used in investing activities

(1,147.0

)

(391.0

)

Financing activities:

Proceeds from long-term debt borrowings

1,200.0

20.0

Proceeds from convertible notes

1,750.0

750.0

Payments of debt issuance costs

(82.1

)

(17.7

)

Cash paid for capped call transactions

(273.9

)

(108.2

)

Proceeds from issuance of common stock

23.8

22.4

Tax withholding on vested equity awards

(19.2

)

(29.1

)

Payments on long-term debt borrowings, including finance lease obligations

(0.5

)

(20.5

)

Commitment fees on long-term incentive agreement

(1.0

)

(1.0

)

Cash provided by financing activities

2,597.1

615.9

Effects of foreign exchange changes on cash and cash equivalents

(0.2

)

Net change in cash and cash equivalents

1,307.5

70.5

Cash and cash equivalents, beginning of period

449.5

379.0

Cash and cash equivalents, end of period

$1,757.0

$449.5

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, non-GAAP diluted (loss) earnings per share 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 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.

Factory optimization restructuring costs. The Company has incurred restructuring costs in connection with various operating plans, including a multi-year factory optimization plan anchored by a state-of-the-art, automated 200mm silicon carbide device fabrication facility in Marcy, New York to complement a factory expansion at its U.S. campus headquarters in Durham, North Carolina. 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.

Contacts

Tyler Gronbach
Wolfspeed, Inc.
Vice President of External Affairs
Phone: 919-407-4820
investorrelations@wolfspeed.com

Read full story here

First published on Thu, Aug 17, 2023

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