What changed in this filing

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Item 1. Financial Statements

2023-04-27 compared with 2023-01-26 · 151 added, 144 removed, 702 unchanged (30% of the section changed)

Financial Statements (Unaudited)

Consolidated Balance Sheets as of December 25, 2022 and June 26, 2022

Consolidated Statements of Operations for the three and six months ended December 25, 2022 and December 26, 2021

Consolidated Statements of Comprehensive Loss for the three and six months ended December 25, 2022 and December 26, 2021

Consolidated Statements of Shareholders' Equity for the six months ended December 25, 2022 and December 26, 2021

Consolidated Statements of Cash Flows for the six months ended December 25, 2022 and December 26, 2021

Consolidated Balance Sheets as of March 26, 2023 and June 26, 2022

Consolidated Statements of Operations for the three and nine months ended March 26, 2023 and March 27, 2022

Consolidated Statements of Comprehensive Loss for the three and nine months ended March 26, 2023 and March 27, 2022

Consolidated Statements of Shareholders' Equity for the nine months ended March 26, 2023 and March 27, 2022

Consolidated Statements of Cash Flows for the nine months ended March 26, 2023 and March 27, 2022

Notes to Unaudited Consolidated Financial Statements

2 unchanged sentences

in millions of U.S.

Dollars, except share data in thousands December 25, 2022 June 26, 2022

Dollars, except share data in thousands March 26, 2023 June 26, 2022

Current assets:

33 unchanged sentences

Preferred stock, par value $ 0.01 ;

3,000 shares authorized at December 25, 2022 and June 26, 2022;

3,000 shares authorized at March 26, 2023 and June 26, 2022;

none issued and outstanding

Common stock, par value $ 0.00125 ;

200,000 shares authorized at December 25, 2022 and June 26, 2022;

124,413 and 123,795 shares issued and outstanding at December 25, 2022 and June 26, 2022, respectively

200,000 shares authorized at March 26, 2023 and June 26, 2022;

124,437 and 123,795 shares issued and outstanding at March 26, 2023 and June 26, 2022, respectively

Additional paid-in-capital 3,680.6 4,228.4

6 unchanged sentences

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

Three months ended Six months ended

December 25, 2022 December 26, 2021 December 25, 2022 December 26, 2021

Three months ended Nine months ended

March 26, 2023 March 27, 2022 March 26, 2023 March 27, 2022

in millions of U.S.

7 unchanged sentences

Amortization or impairment of acquisition-related intangibles 2.6 3.4 8.3 10.6

Loss on disposal or impairment of other assets 0.1 0.5 0.2 0.3

Loss (gain) on disposal or impairment of other assets 1.7 ( 0.6 ) 1.9 ( 0.3 )

Other operating expense 49.1 23.9 134.1 52.3

9 unchanged sentences

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

Three months ended Six months ended

Three months ended Nine months ended

(in millions of U.S.

Dollars) December 25, 2022 December 26, 2021 December 25, 2022 December 26, 2021

Dollars) March 26, 2023 March 27, 2022 March 26, 2023 March 27, 2022

Net loss ($ 99.5 ) ($ 66.5 ) ($ 216.6 ) ($ 233.3 )

25 unchanged sentences

Balance at December 25, 2022 124,413 $ 0.2 $ 3,660.0 ($ 1,851.4 ) ($ 28.6 ) $ 1,780.2

Net loss — — — ( 99.5 ) — ( 99.5 )

Unrealized gain on available-for-sale securities — — — — 5.5 5.5

Comprehensive loss ( 94.0 )

Tax withholding on vested equity awards — — ( 0.4 ) — — ( 0.4 )

Stock-based compensation — — 20.8 — — 20.8

Exercise of stock options and issuance of shares 24 — 0.2 — — 0.2

Balance at March 26, 2023 124,437 $ 0.2 $ 3,680.6 ($ 1,950.9 ) ($ 23.1 ) $ 1,706.8

The accompanying notes are an integral part of the consolidated financial statements

20 unchanged sentences

Balance at December 26, 2021 123,570 $ 0.2 $ 4,110.3 ($ 1,729.9 ) ($ 1.7 ) $ 2,378.9

Net loss — — — ( 66.5 ) — ( 66.5 )

Unrealized loss on available-for-sale securities — — — — ( 16.3 ) ( 16.3 )

Comprehensive loss ( 82.8 )

Tax withholding on vested equity awards — — ( 0.8 ) — — ( 0.8 )

Stock-based compensation — — 15.4 — — 15.4

Exercise of stock options and issuance of shares 29 — 0.3 — — 0.3

Issuance of convertible notes due February 15, 2028 — — 187.6 — — 187.6

Capped call transactions related to the issuance of convertible notes due February 15, 2028 — — ( 108.2 ) — — ( 108.2 )

Balance at March 27, 2022 123,599 $ 0.2 $ 4,204.6 ($ 1,796.4 ) ($ 18.0 ) $ 2,390.4

The accompanying notes are an integral part of the consolidated financial statements

1 unchanged sentence

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six months ended

Nine months ended

(in millions of U.S.

Dollars) December 25, 2022 December 26, 2021

Dollars) March 26, 2023 March 27, 2022

Operating activities:

6 unchanged sentences

Loss on disposal or impairment of long-lived assets, including loss on disposal portion of factory optimization and start-up costs 3.7 1.0

Amortization of premium/discount on investments 2.2 3.2

Amortization of (premium) discount on investments, net ( 1.3 ) 4.5

Realized gain on sale of investments — ( 0.3 )

27 unchanged sentences

Commitment fees on long-term incentive agreement ( 1.0 ) ( 1.0 )

Cash provided by (used in) financing activities 1,437.3 ( 15.0 )

Cash provided by financing activities 1,437.0 608.3

Effects of foreign exchange changes on cash and cash equivalents — —

15 unchanged sentences

Commitments and Contingencies

Restructuring

Note 1 – Basis of Presentation and New Accounting Standards

12 unchanged sentences

The consolidated financial statements presented herein have been prepared by the Company and have not been audited.

In the opinion of management, all normal and recurring adjustments necessary to fairly state the consolidated financial position, results of operations, comprehensive loss, shareholders' equity and cash flows at December 25, 2022, and for all periods presented, have been made.

In the opinion of management, all normal and recurring adjustments necessary to fairly state the consolidated financial position, results of operations, comprehensive loss, shareholders' equity and cash flows at March 26, 2023, and for all periods presented, have been made.

All material intercompany accounts and transactions have been eliminated.

7 unchanged sentences

These financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 26, 2022 (fiscal 2022) (the 2022 Form 10-K).

The results of operations for the three and six months ended December 25, 2022 are not necessarily indicative of the operating results that may be attained for the entire fiscal year ending June 25, 2023 (fiscal 2023).

The results of operations for the three and nine months ended March 26, 2023 are not necessarily indicative of the operating results that may be attained for the entire fiscal year ending June 25, 2023 (fiscal 2023).

Recently Adopted Accounting Pronouncements

37 unchanged sentences

The principal amount of $ 101.8 million was paid in full and the Company agreed to forgo payment by CreeLED of the outstanding accrued interest as of the payment date.

For the three and six months ended December 25, 2022, the Company recognized $ 0.9 million and $ 1.8 million in administrative fees related to the LED RELA, respectively, of which $ 0.3 million is included in accounts receivable, net in the consolidated balance sheet as of December 25, 2022.

For the three and six months ended December 26, 2021, the Company recognized $ 0.9 million and $ 1.8 million in administrative fees related to the LED RELA, respectively.

For the three and nine months ended March 26, 2023, the Company recognized $ 0.6 million and $ 2.4 million in administrative fees related to the LED RELA, respectively, none of which is included in accounts receivable, net in the consolidated balance sheet as of March 26, 2023.

For the three and nine months ended March 27, 2022, the Company recognized $ 0.9 million and $ 2.7 million in administrative fees related to the LED RELA, respectively.

Fees related to the LED RELA were recorded as lease income, see Note 4, "Leases."

For the three and six months ended December 25, 2022, the Company recognized $ 1.8 million and $ 3.7 million in administrative fees related to the LED TSA, respectively, of which $ 0.6 million is included in accounts receivable, net in the consolidated balance sheet as of December 25, 2022.

For the three and six months ended December 26, 2021, the Company recognized $ 2.4 million and $ 5.3 million in administrative fees related to the LED TSA, respectively.

For the three and nine months ended March 26, 2023, the Company recognized $ 1.5 million and $ 5.2 million in administrative fees related to the LED TSA, respectively, of which $ 0.5 million is included in accounts receivable, net in the consolidated balance sheet as of March 26, 2023.

For the three and nine months ended March 27, 2022, the Company recognized $ 2.1 million and $ 7.4 million in administrative fees related to the LED TSA, respectively.

Fees related to the LED TSA were recorded as a reduction in expense within the line item in the consolidated statements of operations in which costs were incurred.

At the inception of the Wafer Supply Agreement, the Company recorded a supply agreement liability of $ 31.0 million, none of which was outstanding as of December 25, 2022.

For the three and six months ended December 25, 2022, the Company recognized a net loss of $ 2.6 million and $ 2.5 million, respectively, in non-operating income, net related to the Wafer Supply Agreement, of which a receivable of $ 1.6 million is included in other assets in the consolidated balance sheet as of December 25, 2022.

For the three and six months ended December 26, 2021, the Company recognized a net loss of $ 0.1 million and $ 0.9 million, respectively, in non-operating income, net related to the Wafer Supply Agreement.

At the inception of the Wafer Supply Agreement, the Company recorded a supply agreement liability of $ 31.0 million, none of which was outstanding as of March 26, 2023.

For the three and nine months ended March 26, 2023, the Company recognized a net loss of $ 4.8 million and $ 7.3 million, respectively, in non-operating income, net related to the Wafer Supply Agreement, of which a receivable of $ 2.0 million is included in other assets in the consolidated balance sheet as of March 26, 2023.

For the three and nine months ended March 27, 2022, the Company recognized a net loss of $ 0.5 million and $ 1.4 million, respectively, in non-operating income, net related to the Wafer Supply Agreement.

Note 3 – Revenue Recognition

6 unchanged sentences

Contract liabilities primarily include various rights of return and customer deposits, as well as a reserve on the Company's "ship and debit" program.

Contract liabilities were $ 45.6 million as of December 25, 2022 and $ 47.8 million as of June 26, 2022.

The decrease was primarily due to decreases in ship and debit reserves and product exchange reserves.

Contract liabilities were $ 72.3 million as of March 26, 2023 and $ 47.8 million as of June 26, 2022.

The increase was primarily due to increased customer reserve deposits and ship and debit reserves.

Contract liabilities are recorded within accrued contract liabilities and other long-term liabilities on the consolidated balance sheets.

For the three and six months ended December 25, 2022, the Company did not recognize revenue that was included in contract liabilities as of June 26, 2022.

For the three and nine months ended March 26, 2023, the Company did not recognize revenue that was included in contract liabilities as of June 26, 2022.

The Company conducts business in several geographic areas.

1 unchanged sentence

Disaggregated revenue from external customers by geographic area is as follows:

Three months ended Six months ended

December 25, 2022 December 26, 2021 December 25, 2022 December 26, 2021

Three months ended Nine months ended

March 26, 2023 March 27, 2022 March 26, 2023 March 27, 2022

(in millions of U.S.

2 unchanged sentences

China 63.7 27.9 % 50.4 26.8 % 181.7 26.5 % 143.0 27.6 %

United States 53.3 24.7 % 32.7 18.9 % 103.7 22.7 % 58.7 17.8 %

Asia Pacific (excluding China) 51.1 22.3 % 30.7 16.3 % 145.0 21.1 % 88.6 17.1 %

United States 39.8 17.4 % 42.4 22.6 % 143.5 20.9 % 101.1 19.5 %

Other 0.9 0.4 % 1.3 0.7 % 3.4 0.5 % 2.0 0.4 %

9 unchanged sentences

Operating Leases:

December 25, 2022 June 26, 2022

March 26, 2023 June 26, 2022

Right-of-use asset (1)

5 unchanged sentences

Finance lease assets (4)

$ 10.0 $ 10.3

Current portion of finance lease liabilities 0.5 0.5

6 unchanged sentences

Statement of Operations

Operating lease expense was $ 2.5 million and $ 4.7 million for the three and six months ended December 25, 2022, respectively, and $ 3.3 million and $ 4.8 million for the three and six months ended December 26, 2021, respectively.

Short-term lease expense, variable lease expense and sublease income were immaterial for the three and six months ended December 25, 2022 and December 26, 2021.

Finance lease amortization was $ 0.2 million and $ 0.4 million and interest expense was less than $ 0.1 million and $ 0.1 million for the three and six months ended December 25, 2022, respectively.

Finance lease amortization was $ 0.3 million and $ 0.7 million and interest expense was $ 0.1 million and $ 0.2 million for the three and six months ended December 26, 2021, respectively.

Operating lease expense was $ 2.7 million and $ 7.4 million for the three and nine months ended March 26, 2023, respectively, and $ 1.8 million and $ 6.6 million for the three and nine months ended March 27, 2022, respectively.

Short-term lease expense, variable lease expense and sublease income were immaterial for the three and nine months ended March 26, 2023 and March 27, 2022.

Finance lease amortization was $ 0.2 million and $ 0.6 million and interest expense was $ 0.1 million and $ 0.2 million for the three and nine months ended March 26, 2023, respectively.

Finance lease amortization was $ 0.2 million and $ 0.9 million and interest expense was less than $ 0.1 million and $ 0.2 million for the three and nine months ended March 27, 2022, respectively.

Cash flow information consisted of the following (1) :

Six months ended

Nine months ended

(in millions of U.S.

Dollars) December 25, 2022 December 26, 2021

Dollars) March 26, 2023 March 27, 2022

Cash (used in) provided by operating activities:

6 unchanged sentences

Lease Liability Maturities

Maturities of operating and finance lease liabilities as of December 25, 2022 were as follows (in millions of U.S.

Maturities of operating and finance lease liabilities as of March 26, 2023 were as follows (in millions of U.S.

Fiscal Year Ending Operating Leases Finance Leases Total

16 unchanged sentences

(2) Weighted average discount rate of finance leases excluding the 49-year ground lease is 3.55 %.

As mentioned in Note 2, "Discontinued Operations", on March 1, 2021 and in connection with the sale of its LED Business, the Company entered into the LED RELA pursuant to which the Company leases to CreeLED approximately 58,000 square feet of the Company’s property and certain facilities in Durham, North Carolina for a total of $ 3.6 million per year.

The lease term is 24 months and expires on February 26, 2023.

Subject to certain provisions in the LED RELA, CreeLED may terminate its rights or a portion of its rights under the agreement at any time with sixty days written notice.

A notice of thirty days is permitted under certain circumstances as defined in the agreement.

The agreement does not contain any renewal provisions.

The Company recognized lease income of $ 0.9 million and $ 1.8 million for the three and six months ended December 25, 2022, respectively.

The Company recognized lease income of $ 0.9 million and $ 1.8 million for the three and six months ended December 26, 2021, respectively.

The Company did not recognize any variable lease income for the three and six months ended December 25, 2022 and December 26, 2021.

Future minimum rental income relating to the LED RELA is $ 0.6 million for the remainder of fiscal 2023.

As mentioned in Note 2, "Discontinued Operations", on March 1, 2021 and in connection with the sale of its LED Business, the Company entered into the LED RELA pursuant to which the Company leased to CreeLED approximately 58,000 square feet of the Company’s property and certain facilities in Durham, North Carolina for a total of $ 3.6 million per year.

The lease term was 24 months and expired on February 26, 2023.

The Company recognized lease income of $ 0.6 million and $ 2.4 million for the three and nine months ended March 26, 2023, respectively.

The Company recognized lease income of $ 0.9 million and $ 2.7 million for the three and nine months ended March 27, 2022, respectively.

The Company did not recognize any variable lease income for the three and nine months ended March 26, 2023 and March 27, 2022.

Note 5 – Financial Statement Details

2 unchanged sentences

(in millions of U.S.

Dollars) December 25, 2022 June 26, 2022

Dollars) March 26, 2023 June 26, 2022

Billed trade receivables $ 161.0 $ 148.0

5 unchanged sentences

(in millions of U.S.

Dollars) December 25, 2022

Dollars) March 26, 2023

Balance at beginning of period $ 1.2

4 unchanged sentences

(in millions of U.S.

Dollars) December 25, 2022 June 26, 2022

Dollars) March 26, 2023 June 26, 2022

Raw material $ 87.3 $ 60.2

5 unchanged sentences

(in millions of U.S.

Dollars) December 25, 2022 June 26, 2022

Dollars) March 26, 2023 June 26, 2022

Reimbursement receivable on long-term incentive agreement $ 86.9 $ 132.5

Accrued interest receivable 12.0 5.9

Receivable on Wafer Supply Agreement 1.6 2.7

Inventory related to Wafer Supply Agreement 4.0 3.9

VAT receivables 3.3 0.2

Receivable on Wafer Supply Agreement 2.0 2.7

Other receivables 1.6 2.2

Deferred product costs 0.4 2.5

4 unchanged sentences

(in millions of U.S.

Dollars) December 25, 2022 June 26, 2022

Dollars) March 26, 2023 June 26, 2022

Accounts payable, trade $ 45.3 $ 57.8

5 unchanged sentences

Other operating expense consisted of the following:

Three months ended Six months ended

Three months ended Nine months ended

(in millions of U.S.

Dollars) December 25, 2022 December 26, 2021 December 25, 2022 December 26, 2021

Dollars) March 26, 2023 March 27, 2022 March 26, 2023 March 27, 2022

Factory start-up costs 44.7 21.4 120.7 41.0

Project, transformation and transaction costs 3.9 1.2 11.4 5.3

Restructuring costs 0.2 2.1 0.2 4.7

Non-restructuring related executive severance 0.3 — 1.3 —

Factory optimization restructuring (1)

Severance costs 0.5 0.5 2.0 0.5

Other operating expense $ 49.1 $ 23.9 $ 134.1 $ 52.3

(1) Factory optimization restructuring costs relate to the Company's multi-year factory optimization restructuring plan, which was implemented in connection with the Company's expansion activities between fiscal 2019 and fiscal 2022.

As part of the factory optimization restructuring plan, the Company incurred restructuring charges associated with the movement of equipment as well as disposals on certain long-lived assets.

The factory optimization restructuring plan concluded in fiscal 2022.

Accumulated Other Comprehensive Loss, net of taxes

Accumulated other comprehensive loss, net of taxes, consisted of $ 28.6 million and $ 25.3 million of net unrealized losses on available-for-sale securities as of December 25, 2022 and June 26, 2022, respectively.

Accumulated other comprehensive loss, net of taxes, consisted of $ 23.1 million and $ 25.3 million of net unrealized losses on available-for-sale securities as of March 26, 2023 and June 26, 2022, respectively.

Amounts for both periods include a $ 2.4 million loss related to tax on unrealized loss on available-for-sale securities.

Reclassifications Out of Accumulated Other Comprehensive Loss

Reclassifications out of accumulated other comprehensive loss was a loss of less than $ 0.1 million for both the three and six months ended December 25, 2022 and a $ 0.1 million and $ 0.3 million gain for the three and six months ended December 26, 2021, respectively.

Reclassifications out of accumulated other comprehensive loss was a loss of less than $ 0.1 million for both the three and nine months ended March 26, 2023 and a less than $ 0.1 million gain and a $ 0.3 million gain for the three and nine months ended March 27, 2022, respectively.

Amounts were reclassified to non-operating (income) expense, net on the consolidated statements of operations.

1 unchanged sentence

The following table summarizes the components of non-operating (income) expense, net:

Three months ended Six months ended

Three months ended Nine months ended

(in millions of U.S.

Dollars) December 25, 2022 December 26, 2021 December 25, 2022 December 26, 2021

Dollars) March 26, 2023 March 27, 2022 March 26, 2023 March 27, 2022

Interest income ( 22.2 ) ( 2.8 ) ( 38.1 ) ( 7.8 )

Interest expense, net of capitalized interest 14.1 5.1 26.7 17.1

Gain on arbitration proceedings (1)

1 unchanged sentence

Loss on debt extinguishment (2)

— 24.8 — 24.8

Interest income ( 11.6 ) ( 2.4 ) ( 15.9 ) ( 5.0 )

Interest expense, net of capitalized interest 7.8 5.3 12.6 12.0

Loss on Wafer Supply Agreement 4.8 0.5 7.3 1.4

Loss on early payment of transaction-related note receivable (3)

Gain on sale of investments, net — — — ( 0.3 )

5 unchanged sentences

(2) As discussed further in Note 9, "Long-term Debt," in the second quarter of fiscal 2022, all outstanding 2023 Notes (as defined below) were surrendered for conversion, resulting in the settlement of all outstanding 2023 Notes in shares, with fractional shares paid in cash.

(3) As discussed further in Note 2, "Discontinued Operations," in the third quarter of fiscal 2022, the Company recognized a loss of $ 1.2 million related to the early payment of the Purchase Price Note.

Statements of Cash Flows - non-cash activities

Six months ended

Nine months ended

(in millions of U.S.

Dollars) December 25, 2022 December 26, 2021

Dollars) March 26, 2023 March 27, 2022

Lease asset and liability additions $ 26.7 $ 6.3

5 unchanged sentences

(1) As discussed further in Note 9, "Long-term Debt," in the second quarter of fiscal 2022, all outstanding 2023 Notes were surrendered for conversion, resulting in the settlement of all outstanding 2023 Notes in shares, with fractional shares paid in cash.

Accrued property and equipment as of December 25, 2022 and December 26, 2021 was $ 156.8 million and $ 135.7 million, respectively.

Accrued property and equipment as of March 26, 2023 and March 27, 2022 was $ 306.0 million and $ 88.3 million, respectively.

Note 6 – Investments

Short-term investments consisted of the following (in millions of U.S.

December 25, 2022

March 26, 2023

Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Credit Loss Allowance Estimated Fair Value

3 unchanged sentences

Municipal bonds 191.3 0.1 ( 3.8 ) — 187.6

agency securities 76.9 0.1 ( 0.1 ) — 76.9

Variable rate demand notes 55.6 — — — 55.6

Commercial paper 34.7 — — — 34.7

agency securities 20.2 — ( 0.1 ) — 20.1

Total short-term investments $ 1,473.8 $ 0.7 ($ 21.4 ) $ — $ 1,453.1

8 unchanged sentences

All short-term investments are classified as available-for-sale.

The Company did not have any long-term investments as of December 25, 2022 and June 26, 2022.

The Company did not have any long-term investments as of March 26, 2023 and June 26, 2022.

The following tables present the gross unrealized losses and estimated fair value of the Company’s short-term investments, aggregated by investment type and the length of time that individual securities have been in a continuous unrealized loss position (in millions of U.S.

December 25, 2022

March 26, 2023

Less than 12 Months Greater than 12 Months Total

15 unchanged sentences

Number of securities with an unrealized loss 346 5 351

Additionally, the Company held cash equivalent securities in unrealized loss positions as of December 25, 2022 and June 26, 2022.

As of December 25, 2022, the Company held ten cash equivalent securities in unrealized loss positions with an aggregate fair value of $ 104.7 million and an aggregate unrealized loss of less than $ 0.1 million.

Additionally, the Company held cash equivalent securities in unrealized loss positions as of March 26, 2023 and June 26, 2022.

As of March 26, 2023, the Company held one cash equivalent security in an unrealized loss position with a fair value of $ 14.8 million and an unrealized loss of less than $ 0.1 million.

As of June 26, 2022, the Company held six cash equivalent securities in unrealized loss positions with an aggregate fair value of $ 69.0 million and an aggregate unrealized loss of less than $ 0.1 million.

All cash equivalents in unrealized loss positions as of December 25, 2022 and June 26, 2022 have been in unrealized loss positions for less than 12 months.

All cash equivalents in unrealized loss positions as of March 26, 2023 and June 26, 2022 have been in unrealized loss positions for less than 12 months.

The Company does not include accrued interest in estimated fair values of short-term investments and does not record an allowance for credit losses on receivables related to accrued interest.

Accrued interest receivable was $ 11.2 million and $ 5.9 million as of December 25, 2022 and June 26, 2022, respectively, and is recorded in other current assets on the consolidated balance sheets.

Accrued interest receivable was $ 12.0 million and $ 5.9 million as of March 26, 2023 and June 26, 2022, respectively, and is recorded in other current assets on the consolidated balance sheets.

When necessary, write-offs of noncollectable interest income are recorded as a reversal to interest income.

There were no write-offs of noncollectable interest income during the three and six months ended December 25, 2022 and December 26, 2021.

There were no write-offs of noncollectable interest income during the three and nine months ended March 26, 2023 and March 27, 2022.

The Company utilizes specific identification in computing realized gains and losses on the sale of investments.

2 unchanged sentences

The Company evaluates its investments for expected credit losses.

The Company believes it is able to and intends to hold each of the investments held with an unrealized loss as of December 25, 2022 until the investments fully recover in market value.

No allowance for credit losses was recorded as of December 25, 2022.

The contractual maturities of short-term investments as of December 25, 2022 were as follows:

The Company believes it is able to and intends to hold each of the investments held with an unrealized loss as of March 26, 2023 until the investments fully recover in market value.

No allowance for credit losses was recorded as of March 26, 2023.

The contractual maturities of short-term investments as of March 26, 2023 were as follows:

(in millions of U.S.

4 unchanged sentences

Municipal bonds 88.9 96.3 — 2.4 187.6

agency securities 56.9 20.0 — — 76.9

Variable rate demand notes — — 14.7 40.9 55.6

Commercial paper 34.7 — — — 34.7

agency securities 15.1 5.0 — — 20.1

Total short-term investments $ 989.6 $ 405.5 $ 14.7 $ 43.3 $ 1,453.1

10 unchanged sentences

The financial assets for which the Company performs recurring fair value remeasurements are cash equivalents and short-term investments.

As of December 25, 2022 and June 26, 2022, financial assets utilizing Level 1 inputs included U.S.

As of March 26, 2023 and June 26, 2022, financial assets utilizing Level 1 inputs included U.S.

treasury securities and money market funds.

3 unchanged sentences

These sources determine prices utilizing market income models which factor in, where applicable, transactions of similar assets in active markets, transactions of identical assets in infrequent markets, interest rates, bond or credit default swap spreads and volatility.

The Company did not have any financial assets requiring the use of Level 3 inputs as of December 25, 2022 and June 26, 2022.

The Company did not have any financial assets requiring the use of Level 3 inputs as of March 26, 2023 and June 26, 2022.

The following table sets forth financial instruments carried at fair value within the U.S.

GAAP hierarchy:

December 25, 2022 June 26, 2022

March 26, 2023 June 26, 2022

(in millions of U.S.

1 unchanged sentence

Cash equivalents:

treasury securities $ 307.0 $ — $ 307.0 $ 69.0 $ — $ 69.0

Money market funds $ 208.3 $ — $ 208.3 $ 115.9 $ — $ 115.9

treasury securities 144.6 — 144.6 69.0 — 69.0

Commercial paper — 12.4 12.4 — 59.4 59.4

Certificates of deposit — 38.8 38.8 — — —

Corporate bonds — 8.4 8.4 — — —

Municipal bonds — 1.0 1.0 — — —

Total cash equivalents 352.9 12.4 365.3 184.9 59.4 244.3

4 unchanged sentences

Municipal bonds — 187.6 187.6 — 162.2 162.2

agency securities — 76.9 76.9 — 3.9 3.9

Variable rate demand notes — 55.6 55.6 — 69.4 69.4

Commercial paper — 34.7 34.7 — — —

agency securities — 20.1 20.1 — 3.9 3.9

Total short-term investments 298.6 1,154.5 1,453.1 65.8 683.5 749.3

1 unchanged sentence

Note 8 – Goodwill and Intangible Assets

There were no changes to goodwill during the six months ended December 25, 2022.

There were no changes to goodwill during the nine months ended March 26, 2023.

Intangible Assets, net

The following table presents the components of intangible assets, net:

December 25, 2022 June 26, 2022

March 26, 2023 June 26, 2022

(in millions of U.S.

6 unchanged sentences

Total intangible assets $ 240.4 ($ 122.4 ) $ 118.0 $ 242.5 ($ 117.1 ) $ 125.4

Total amortization of acquisition-related intangibles assets was $ 2.8 million and $ 5.7 million for the three and six months ended December 25, 2022, respectively, and $ 3.6 million and $ 7.2 million for the three and six months ended December 26, 2021, respectively.

Total amortization of patents and licensing rights was $ 1.3 million and $ 2.5 million for the three and six months ended December 25, 2022, respectively, and $ 1.5 million and $ 2.8 million for the three and six months ended December 26, 2021, respectively.

Total amortization of acquisition-related intangibles assets was $ 2.6 million and $ 8.3 million for the three and nine months ended March 26, 2023, respectively, and $ 3.4 million and $ 10.6 million for the three and nine months ended March 27, 2022, respectively.

Total amortization of patents and licensing rights was $ 1.2 million and $ 3.7 million for the three and nine months ended March 26, 2023, respectively, and $ 1.3 million and $ 4.1 million for the three and nine months ended March 27, 2022, respectively.

Total future amortization expense of intangible assets is estimated to be as follows:

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Revolving Line of Credit

As of December 25, 2022, the Company had a $ 125.0 million secured revolving line of credit (the Credit Agreement) under which the Company can borrow, repay and reborrow loans from time to time prior to its scheduled maturity date of January 9, 2026.

As of March 26, 2023, the Company had a $ 125.0 million secured revolving line of credit (the Credit Agreement) under which the Company can borrow, repay and reborrow loans from time to time prior to its scheduled maturity date of January 9, 2026.

The Credit Agreement requires the Company to maintain a ratio of certain cash equivalents and marketable securities to outstanding loans and letter of credit obligations greater than 1.25 :1, with no other financial covenants.

The Company classifies balances outstanding under the Credit Agreement as long-term debt in the consolidated balance sheets.

As of December 25, 2022, the Company had no outstanding borrowings under the Credit Agreement, $ 125.0 million in available commitments under the Credit Agreement and $ 125.0 million available for borrowing.

For the three and six months ended December 25, 2022, the average interest rate was 0.00 % due to no borrowings.

As of December 25, 2022, the unused line fee on available borrowings is 25 basis points.

As of March 26, 2023, the Company had no outstanding borrowings under the Credit Agreement, $ 125.0 million in available commitments under the Credit Agreement and $ 125.0 million available for borrowing.

For the three and nine months ended March 26, 2023, the average interest rate was 0.00 % due to no borrowings.

As of March 26, 2023, the unused line fee on available borrowings is 25 basis points.

2023 Convertible Notes

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Holders may convert their 2029 Notes at their option at any time prior to the close of business on the business day immediately preceding June 1, 2029 only under the following circumstances:

(1) during any calendar quarter commencing after the calendar quarter ending March 31, 2023 (and only during such calendar quarter), if the last reported sale price of the common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130 % of the conversion price on each applicable trading day;

(1) during any calendar quarter commencing after the calendar quarter ended March 31, 2023 (and only during such calendar quarter), if the last reported sale price of the common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130 % of the conversion price on each applicable trading day;

(2) during the five business day period after any ten consecutive trading day period in which the trading price per $1.0 thousand principal amount of 2029 Notes for each trading day of the measurement period was less than 98 % of the product of the last reported sale price of its common stock and the conversion rate on each such trading day;

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(in millions of U.S.

Dollars) December 25, 2022 June 26, 2022

Dollars) March 26, 2023 June 26, 2022

Principal $ 3,075.0 $ 1,325.0

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(in millions of U.S.

Dollars) December 25, 2022 (1)

Dollars) March 26, 2023 (1)

June 26, 2022

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The interest expense, net recognized related to the Outstanding Notes is as follows:

Three months ended Six months ended

Three months ended Nine months ended

(in millions of U.S.

Dollars) December 25, 2022 December 26, 2021 December 25, 2022 December 26, 2021

Dollars) March 26, 2023 March 27, 2022 March 26, 2023 March 27, 2022

Interest expense, net of capitalized interest $ 11.0 $ 0.2 $ 19.7 $ 2.1

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Total interest expense, net $ 13.3 $ 4.1 $ 24.9 $ 15.0

The Company did not capitalize interest expense for the three and six months ended December 25, 2022.

For the three and six months ended December 26, 2021, the Company capitalized $ 2.6 million and $ 4.9 million of interest expense, respectively, and $ 5.8 million and $ 11.2 million of amortization of discount and issuance costs, respectively, in connection with the building of a new Silicon Carbide device fabrication facility in New York.

The last reported sale price of the Company's common stock was greater than or equal to 130 % of the applicable conversion price for the 2026 Notes for at least 20 trading days in the 30 consecutive trading days ended on December 31, 2022.

As a result, the 2026 Notes are convertible at the option of the holders through March 31, 2023.

As of December 25, 2022, the if-converted value of the 2026 Notes exceeded their respective principal amounts by $ 303.3 million.

The estimated fair value of the Outstanding Notes is $ 3.3 billion as of December 25, 2022, as determined by a Level 2 valuation.

The Company capitalizes interest in connection with ongoing capacity expansions.

For both the three and nine months ended March 26, 2023, the Company capitalized $ 0.2 million of interest expense and less than $ 0.1 million of amortization of issuance costs.

For the three and nine months ended March 27, 2022, the Company capitalized $ 2.4 million and $ 7.3 million of interest expense, respectively, and $ 5.9 million and $ 17.1 million of amortization of discount and issuance costs, respectively.

As a result, the 2026 Notes are convertible at the option of the holders through June 30, 2023.

As of March 26, 2023, the if-converted value of the 2026 Notes exceeded their respective principal amounts by $ 169.9 million.

The estimated fair value of the Outstanding Notes is $ 3.0 billion as of March 26, 2023, as determined by a Level 2 valuation.

Note 10 – Loss Per Share

The details of the computation of basic and diluted loss per share are as follows:

Three months ended Six months ended

Three months ended Nine months ended

(in millions of U.S.

Dollars, except share data) December 25, 2022 December 26, 2021 December 25, 2022 December 26, 2021

Dollars, except share data) March 26, 2023 March 27, 2022 March 26, 2023 March 27, 2022

Net loss ($ 99.5 ) ($ 66.5 ) ($ 216.6 ) ($ 233.3 )

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Diluted net loss per share is the same as basic net loss per share for the periods presented due to potentially dilutive items being anti-dilutive given the Company's net loss.

For the three and six months ended December 25, 2022, 2.8 million and 2.8 million, respectively, of weighted average shares were excluded from the calculation of diluted loss per share because their effect would be anti-dilutive.

For the three and six months ended December 26, 2021, 3.1 million and 3.3 million, respectively, of weighted average shares were excluded from the calculation of diluted loss per share because their effect would be anti-dilutive.

For both the three and nine months ended March 26, 2023, 2.9 million of weighted average shares were excluded from the calculation of diluted loss per share because their effect would be anti-dilutive.

For the three and nine months ended March 27, 2022, 2.3 million and 2.4 million, respectively, of weighted average shares were excluded from the calculation of diluted loss per share because their effect would be anti-dilutive.

In addition, future earnings per share of the Company are also subject to dilution from conversion of the 2026 Notes, 2028 Notes and 2029 Notes under certain conditions as described in Note 9, “Long-term Debt.”

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Overview of Employee Stock-Based Compensation Plans

The Company currently has one equity-based compensation plan, the 2013 Long-Term Incentive Compensation Plan (2013 LTIP), from which stock-based compensation awards can be granted to employees and directors.

The 2013 LTIP provides for awards in the form of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units and other awards.

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The ESPP limits employee contributions to 15 % of each employee’s compensation (as defined in the plan) and allows employees to purchase shares at a 15 % discount to the fair market value of common stock on the purchase date two times per year.

The ESPP provides for a twelve-month participation period, divided into two equal six-month purchase

periods, and also provides for a look-back feature.

The ESPP provides for a twelve-month participation period, divided into two equal six-month purchase periods, and also provides for a look-back feature.

At the end of each six-month period in April and October, participants purchase the Company’s common stock through the ESPP at a 15 % discount to the fair market value of the common stock on the first day of the twelve-month participation period or the purchase date, whichever is lower.

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Stock Option Awards

A summary of stock option awards outstanding as of December 25, 2022 and changes during the six months then ended is as follows:

A summary of stock option awards outstanding as of March 26, 2023 and changes during the nine months then ended is as follows:

(shares in thousands) Number of Shares Weighted Average Exercise Price

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Forfeited or expired ( 2 ) $ 27.09

Outstanding at December 25, 2022 40 $ 24.86

Outstanding at March 26, 2023 31 $ 24.52

Restricted Stock Units

A summary of nonvested restricted stock unit awards (RSUs) outstanding as of December 25, 2022 and changes during the six months then ended is as follows:

A summary of nonvested restricted stock unit awards (RSUs) outstanding as of March 26, 2023 and changes during the nine months then ended is as follows:

(unit awards in thousands) Number of RSUs Weighted Average Grant-Date Fair Value

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Forfeited ( 209 ) $ 77.72

Nonvested at December 25, 2022 2,334 $ 84.25

Nonvested at March 26, 2023 2,411 $ 84.57

Stock-Based Compensation Valuation and Expense

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Total stock-based compensation expense was classified in the consolidated statements of operations as follows:

Three months ended Six months ended

Three months ended Nine months ended

(in millions of U.S.

Dollars) December 25, 2022 December 26, 2021 December 25, 2022 December 26, 2021

Dollars) March 26, 2023 March 27, 2022 March 26, 2023 March 27, 2022

Cost of revenue, net $ 5.8 $ 4.2 $ 17.7 $ 11.5

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The Company assesses all available positive and negative evidence to estimate if sufficient future taxable income will be generated to utilize the existing deferred tax assets by jurisdiction.

As of December 25, 2022, the Company has concluded that it is necessary to recognize a full valuation allowance against its U.S.

As of March 26, 2023, the Company has concluded that it is necessary to recognize a full valuation allowance against its U.S.

deferred tax assets.

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As of June 26, 2022, the Company's liability for unrecognized tax benefits was $ 7.2 million.

During the six months ended December 25, 2022, the Company did not record any material movement in its unrecognized tax benefits.

As a result, the total liability for unrecognized tax benefits as of December 25, 2022 was $ 7.2 million.

During the nine months ended March 26, 2023, the Company recognized a $ 0.2 million decrease to the liability for unrecognized tax benefits due to statute expiration.

As a result, the total liability for unrecognized tax benefits as of March 26, 2023 was $ 7.0 million.

If any portion of this $ 7.0 million is recognized, the Company will then include that portion in the computation of its effective tax rate.

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Patent & Trademark Office.

The litigation with Purdue is in the early stages of fact discovery, and trial is currently scheduled to begin in August 2024.

Due to the early stage of the case, the Company is unable to estimate the possible range of loss, if any, at this time.

The litigation with Purdue is in the middle of fact discovery, and trial is currently scheduled to begin in August 2024.

Due to the stage of the case, the Company is unable to estimate the possible range of loss, if any, at this time.

Grant Disbursement Agreement (GDA) with the State of New York

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The annual cost of satisfying the objectives of the GDA and the SUNY Agreement, excluding the direct and indirect costs associated with employment, varies from $ 2.7 million to $ 5.2 million per year through fiscal 2031.

As of December 25, 2022, the Company has reduced property and equipment, net by a total of $ 334.9 million as a result of GDA reimbursements, of which $ 220.4 million has been received in cash and an additional $ 114.5 million in receivables are recorded in other current assets and in other assets in the consolidated balance sheet.

As of March 26, 2023, the Company has reduced property and equipment, net by a total of $ 370.3 million as a result of GDA reimbursements, of which $ 280.7 million has been received in cash and an additional $ 89.6 million in receivables are recorded in other current assets and in other assets in the consolidated balance sheet.

The Company started receiving cash reimbursements in the fourth quarter of fiscal 2021.

Note 14 - Restructuring

The Company has approved various operational plans that include restructuring costs.

All restructuring costs are recorded in other operating expense on the consolidated statement of operations.

Corporate Restructuring

In January 2022, the Company commenced a plan to open a global IT shared services hub in Belfast, Northern Ireland in partnership with the Northern Ireland government.

The Company recorded $ 0.2 million of severance-related costs relating to this plan for both the three and six months ended December 25, 2022 and has accrued $ 0.8 million as of December 25, 2022.

Factory Optimization Restructuring

In May 2019, the Company started a significant, multi-year factory optimization plan anchored by a state-of-the-art, automated 200mm capable Silicon Carbide and GaN fabrication facility in Marcy, New York to complement an expansion of the Company's Silicon Carbide materials production at its U.S.

campus headquarters in Durham, North Carolina.

As part of the plan, the Company incurred restructuring charges associated with the movement of equipment as well as disposals on certain long-lived assets.

The factory optimization restructuring plan concluded in fiscal 2022.

For the three and six months ended December 26, 2021, the Company expensed and paid $ 1.8 million and $ 3.4 million, respectively, of restructuring charges associated with the movement of equipment related to the factory optimization plan.

Additionally, the Company expensed and paid $ 0.3 million and $ 1.3 million of restructuring charges associated with disposals of certain long-lived assets for the three and six months ended December 26, 2021, respectively.

Supply Commitments

In the third quarter of fiscal 2023, the Company entered into an agreement with a supplier which requires a minimum commitment of product purchases on a take-or-pay basis of $ 200.0 million over the next five years .

During the three and nine months ended March 26, 2023, the Company purchased $ 3.5 million of product under this agreement.

As of March 26, 2023, minimum future product purchases for fiscal years 2024, 2025, 2026, 2027 and 2028 are $ 9.9 million, $ 26.8 million, $ 36.0 million, $ 50.1 million and $ 73.7 million, respectively.

In addition, the Company will pay quarterly capacity reservation deposits through the second quarter of fiscal 2026.

The capacity reservation deposits will total $ 60.0 million and are refundable through credits on future product purchases.

The Company paid $ 5.5 million in the third quarter of fiscal 2023 in connection with the agreement, which is recognized in prepaid expenses on the consolidated balance sheet.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements