What changed in this filing

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Item 1. Financial Statements

2024-05-02 compared with 2024-02-01 · 142 added, 125 removed, 736 unchanged (27% of the section changed)

Financial Statements (Unaudited)

Consolidated Balance Sheets as of December 31, 2023 and June 25, 2023

Consolidated Statements of Operations for the three and six months ended December 31, 2023 and December 25, 2022

Consolidated Statements of Comprehensive Loss for the three and six months ended December 31, 2023 and December 25, 2022

Consolidated Statements of Shareholders' Equity for the six months ended December 31, 2023 and December 25, 2022

Consolidated Statements of Cash Flows for the six months ended December 31, 2023 and December 25, 2022

Consolidated Balance Sheets as of March 31, 2024 and June 25, 2023

Consolidated Statements of Operations for the three and nine months ended March 31, 202 4 and March 2 6 , 202 3

Consolidated Statements of Comprehensive Loss for the three and nine months ended March 31, 202 4 and March 2 6 , 202 3

Consolidated Statements of Shareholders' Equity for the nine months ended March 31, 202 4 and March 2 6 , 202 3

Consolidated Statements of Cash Flows for the nine months ended March 31, 202 4 and March 2 6 , 202 3

Notes to Unaudited Consolidated Financial Statements

2 unchanged sentences

in millions of U.S.

Dollars, except share data in thousands December 31, 2023 June 25, 2023

Dollars, except share data in thousands March 31, 2024 June 25, 2023

Current assets:

38 unchanged sentences

Preferred stock, par value $ 0.01 ;

3,000 shares authorized at December 31, 2023 and June 25, 2023;

3,000 shares authorized at March 31, 2024 and June 25, 2023;

none issued and outstanding

Common stock, par value $ 0.00125 ;

400,000 shares authorized at December 31, 2023 and 200,000 shares authorized at June 25, 2023;

125,785 and 124,794 shares issued and outstanding at December 31, 2023 and June 25, 2023, respectively

400,000 shares authorized at March 31, 2024 and 200,000 shares authorized at June 25, 2023;

125,833 and 124,794 shares issued and outstanding at March 31, 2024 and June 25, 2023, respectively

Additional paid-in-capital 3,788.6 3,711.0

6 unchanged sentences

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

Three months ended Six months ended

Three months ended Nine months ended

in millions of U.S.

Dollars, except share data December 31, 2023 December 25, 2022 December 31, 2023 December 25, 2022

Dollars, except share data March 31, 2024 March 26, 2023 March 31, 2024 March 26, 2023

Revenue, net $ 200.7 $ 192.6 $ 606.5 $ 555.8

22 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 31, 2023 December 25, 2022 December 31, 2023 December 25, 2022

Dollars) March 31, 2024 March 26, 2023 March 31, 2024 March 26, 2023

Net loss ($ 148.9 ) ($ 99.5 ) ($ 689.3 ) ($ 216.6 )

Other comprehensive income (loss):

Net unrealized gain (loss) on available-for-sale securities 11.0 3.7 12.9 ( 3.3 )

Other comprehensive (loss) income:

Net unrealized (loss) gain on available-for-sale securities ( 0.5 ) 5.5 12.4 2.2

Comprehensive loss ( 149.4 ) ( 94.0 ) ( 676.9 ) ( 214.4 )

18 unchanged sentences

Balance at December 31, 2023 125,785 $ 0.2 $ 3,766.8 ($ 2,604.6 ) ($ 12.2 ) $ 1,150.2

Net loss — — — ( 148.9 ) — ( 148.9 )

Unrealized loss on available-for-sale securities — — — — ( 0.5 ) ( 0.5 )

Tax withholding on vested equity awards — — ( 0.7 ) — — ( 0.7 )

Stock-based compensation 48 — 22.5 — — 22.5

Balance at March 31, 2024 125,833 $ 0.2 $ 3,788.6 ($ 2,753.5 ) ($ 12.7 ) $ 1,022.6

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

19 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

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

1 unchanged sentence

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six months ended

Nine months ended

(in millions of U.S.

Dollars) December 31, 2023 December 25, 2022

Dollars) March 31, 2024 March 26, 2023

Operating activities:

8 unchanged sentences

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

Amortization of (premium) discount on investments, net ( 13.8 ) 2.2

Amortization of premium on investments, net ( 21.4 ) ( 1.3 )

Deferred income taxes 0.1 0.5

57 unchanged sentences

Unless otherwise noted, discussion within these notes to the consolidated financial statements relates to the Company's continuing operations.

The Company’s continuing operations consist of power devices, which are used in electric vehicles, motor drives, power supplies, solar and transportation applications, and silicon carbide and GaN materials, which are targeted for customers who use them to manufacture products for RF, power and other applications.

The Company’s continuing operations consist of power devices, which are used in electric vehicles, motor drives, power supplies, solar and transportation applications, and silicon carbide and gallium nitride (GaN) materials, which are targeted for customers who use them to manufacture products for RF, power and other applications.

The majority of the Company's products are manufactured at production facilities located in North Carolina, New York and Arkansas.

5 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 31, 2023, 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 31, 2024, 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 25, 2023 (fiscal 2023).

The results of operations for the three and six months ended December 31, 2023 are not necessarily indicative of the operating results that may be attained for the entire fiscal year ending June 30, 2024 (fiscal 2024).

The results of operations for the three and nine months ended March 31, 2024 are not necessarily indicative of the operating results that may be attained for the entire fiscal year ending June 30, 2024 (fiscal 2024).

Recently Adopted Accounting Pronouncements

16 unchanged sentences

(MACOM) pursuant to the terms of the previously reported Asset Purchase Agreement (the RF Purchase Agreement).

Pursuant to the RF Purchase Agreement, the Company received approximately $ 75 million in cash, subject to a customary purchase price adjustment, and 711,528 shares of MACOM common stock (the MACOM Shares), which shares had a market value of approximately $ 60.8 million based on the closing price for MACOM’s common stock on December 1, 2023, the last trading day prior to the closing of the transaction (the RF Closing), as reported on the Nasdaq Global Select Market (the RF Business Divestiture).

Pursuant to the RF Purchase Agreement, the Company received approximately $ 75 million in cash and 711,528 shares of MACOM common stock (the MACOM Shares), which shares had a market value of approximately $ 60.8 million based on the closing price for MACOM’s common stock on December 1, 2023, the last trading day prior to the closing of the transaction (the RF Closing), as reported on the Nasdaq Global Select Market (the RF Business Divestiture).

In connection with the RF Business Divestiture, MACOM will assume control of Wolfspeed’s 100mm gallium nitride wafer fabrication facility in Research Triangle Park, North Carolina (the RTP Fab) approximately two years following the RF Closing (the RTP Fab Transfer).

4 unchanged sentences

In connection with the RTP Fab Transfer, the Company and MACOM will enter into a Lease Agreement (the RTP Fab Lease Agreement), which allows MACOM to lease the premises of the RTP Fab for a period of 15 years after the RTP Fab Transfer Date.

Because the RF Business Divestiture represented a strategic shift that will have a major effect on the Company’s operations and financial results, the Company has classified the results of the RF Business as discontinued operations in the Company’s consolidated statements of operations for all periods presented.

Because the RF Business Divestiture represented a strategic shift that had and will continue to have a major effect on the Company’s operations and financial results, the Company has classified the results of the RF Business as discontinued operations in the Company’s consolidated statements of operations for all periods presented.

The Company ceased recording depreciation and amortization of long-lived assets that conveyed in the RF Purchase Agreement upon classification as discontinued operations in August 2023.

2 unchanged sentences

The following table presents the financial results of the RF Business as loss from discontinued operations, net of income taxes in the Company's consolidated statements of operations:

Three months ended Six months ended

Three months ended Nine months ended

(in millions of U.S.

Dollars) December 31, 2023 December 25, 2022 December 31, 2023 December 25, 2022

Dollars) March 26, 2023 March 31, 2024 March 26, 2023

Revenue, net $ 36.1 $ 59.6 $ 130.3

Cost of revenue, net 27.8 68.7 99.6

Gross (loss) profit ( 4.0 ) 10.2 ( 9.1 ) 22.4

Gross profit (loss) 8.3 ( 9.1 ) 30.7

Operating expenses:

4 unchanged sentences

Other operating expense 3.0 24.3 8.5

Operating loss ( 27.9 ) ( 18.3 ) ( 79.6 ) ( 30.5 )

Non-operating expense — 0.2 — —

Loss before income taxes and loss on sale ( 16.2 ) ( 79.6 ) ( 46.7 )

(Gain) loss on sale ( 16.0 ) — 204.0 —

Loss on sale — 204.0 —

Loss before income taxes ( 16.2 ) ( 283.6 ) ( 46.7 )

1 unchanged sentence

Net loss ($ 16.4 ) ($ 290.6 ) ($ 47.3 )

In the first quarter of fiscal 2024, the Company recorded an impairment to assets held for sale associated with the pending RF Business Divestiture of $ 144.6 million and an excess loss liability on assets held for sale of $ 75.4 million.

During the first six months of fiscal 2024, the Company recorded a total loss on sale of $ 204.0 million, which was net against the impairments and excess loss liability on assets held for sale in the first quarter of fiscal 2024 and resulted in a gain on sale for the three months ended December 31, 2023.

This gain primarily consisted of an increase in fair value of the MACOM Shares between the date of the RF Purchase Agreement and the RF Closing.

Total cost of selling the RF Business was $ 25.4 million, which was recognized throughout fiscal 2023 and 2024.

At the inception of the RF Master Supply Agreement, the Company recorded a supply agreement liability of $ 95.0 million, of which $ 92.9 million was outstanding as of December 31, 2023.

In the first quarter of fiscal 2024, the Company recorded an impairment to assets held for sale associated with the RF Business Divestiture of $ 144.6 million and an excess loss liability on assets held for sale of $ 75.4 million.

During the first nine months of fiscal 2024, the Company recorded a total loss on sale of $ 204.0 million, which was net against the impairments and excess loss liability on assets held for sale in the first quarter of fiscal 2024.

The total cost of selling the RF Business was $ 25.4 million, of which $ 12.2 million was recognized in fiscal 2024.

At the inception of the RF Master Supply Agreement, the Company recorded a supply agreement liability of $ 95.0 million, of which $ 79.2 million was outstanding as of March 31, 2024.

The supply agreement liability is recognized in other current liabilities and other long-term liabilities on the consolidated balance sheets.

A receivable of $ 1.0 million in connection with the RF Master Supply Agreement is included in other current assets in the consolidated balance sheet as of December 31, 2023.

A receivable of $ 6.1 million in connection with the RF Master Supply Agreement is included in other current assets in the consolidated balance sheet as of March 31, 2024.

Additionally, the Company recorded a supply agreement liability of $ 58.0 million for the Long-Term Epi Supply Agreement and a liability of $ 38.0 million for the future transfer of assets in connection with the RTP Fab Transfer.

13 unchanged sentences

Accrued contract liabilities 4.0

Finance lease liabilities 0.1

Other current liabilities 2.2

6 unchanged sentences

In connection with the closing of the LED Business Divestiture, the Company and CreeLED also entered into certain ancillary and related agreements, including (i) an Intellectual Property Assignment and License Agreement, which assigned to CreeLED certain intellectual property owned by the Company and its affiliates and licensed to CreeLED certain additional intellectual property owned by the Company, (ii) a Transition Services Agreement (the LED TSA), (iii) a Wafer Supply and Fabrication Services Agreement (the Wafer Supply Agreement), pursuant to which the Company will supply CreeLED with certain silicon carbide materials and fabrication services for up to four years , and (iv) a Real Estate License Agreement (the LED RELA), which allowed CreeLED to use certain premises owned by the Company to conduct the LED Business for a period of up to 24 months after closing.

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.

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.

Fees related to the LED RELA were recorded as lease income, see Note 4, "Leases." The LED RELA concluded in the third quarter of fiscal 2023.

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.

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.

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.

The LED TSA concluded in the fourth quarter of fiscal 2023.

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 31, 2023.

For the three and six months ended December 31, 2023, the Company recognized a net loss of $ 6.6 million and $ 13.5 million, respectively in non-operating expense (income), net related to the Wafer Supply Agreement, of which a receivable of $ 0.9 million is included in other current assets in the consolidated balance sheet as of December 31, 2023.

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.

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 31, 2024.

For the three and nine months ended March 31, 2024, the Company recognized a net loss of $ 6.9 million and $ 20.4 million, respectively, in non-operating expense (income), net related to the Wafer Supply Agreement, of which a receivable of $ 2.0 million is included in other current assets in the consolidated balance sheet as of March 31, 2024.

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 expense (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 $ 84.8 million as of December 31, 2023 and $ 69.8 million as of June 25, 2023.

Contract liabilities were $ 81.6 million as of March 31, 2024 and $ 69.8 million as of June 25, 2023.

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

4 unchanged sentences

Revenue from these two product lines is as follows:

Three months ended Six months ended

Three months ended Nine months ended

(in millions of U.S.

Dollars) December 31, 2023 December 25, 2022 December 31, 2023 December 25, 2022

Dollars) March 31, 2024 March 26, 2023 March 31, 2024 March 26, 2023

Power Products $ 102.1 $ 101.6 $ 311.0 $ 302.1

5 unchanged sentences

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

Three months ended Six months ended

December 31, 2023 December 25, 2022 December 31, 2023 December 25, 2022

Three months ended Nine months ended

March 31, 2024 March 26, 2023 March 31, 2024 March 26, 2023

(in millions of U.S.

10 unchanged sentences

Note 4 – Leases

The Company primarily leases manufacturing and office spaces.

The Company also has a number of bulk gas leases.

The Company primarily leases manufacturing and office spaces and bulk gas equipment.

Lease agreements frequently include renewal provisions and require the Company to pay real estate taxes, insurance and maintenance costs.

2 unchanged sentences

Balance Sheet

Lease assets and liabilities and the corresponding balance sheet classifications are as follows (in millions of U.S.

Lease assets and liabilities are as follows (in millions of U.S.

Operating Leases:

December 31, 2023 June 25, 2023

March 31, 2024 June 25, 2023

Right-of-use asset (1)

13 unchanged sentences

Statement of Operations

Operating lease expense was $ 3.9 million and $ 7.2 million for the three and six months ended December 31, 2023, respectively, and $ 2.0 million and $ 3.8 million for the three and six months ended December 25, 2022, respectively.

Finance lease amortization was $ 0.2 million and $ 0.4 million for the three and six months ended December 31, 2023, respectively, and $ 0.2 million and $ 0.4 million for the three and six months ended December 25, 2022, respectively.

Operating lease expense was $ 3.3 million and $ 10.5 million for the three and nine months ended March 31, 2024, respectively, and $ 2.3 million and $ 6.1 million for the three and nine months ended March 26, 2023, respectively.

Finance lease amortization was $ 0.2 million and $ 0.6 million for the three and nine months ended March 31, 2024, respectively, and $ 0.2 million and $ 0.6 million for the three and nine months ended March 26, 2023, respectively.

Interest expense for all periods presented was immaterial.

Cash flow information consisted of the following (1) :

Six months ended

Nine months ended

(in millions of U.S.

Dollars) December 31, 2023 December 25, 2022

Dollars) March 31, 2024 March 26, 2023

Cash (used in) provided by operating activities from continuing operations:

6 unchanged sentences

Lease Liability Maturities

Maturities of operating and finance lease liabilities as of December 31, 2023 were as follows (in millions of U.S.

Maturities of operating and finance lease liabilities as of March 31, 2024 were as follows (in millions of U.S.

Fiscal Year Ending Operating Leases Finance Leases Total

22 unchanged sentences

In addition, the Company leases space to a third party at one of its owned facilities.

The Company recognized lease income of $ 0.2 million and $ 0.4 million for the three and six months ended December 31, 2023, respectively.

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 $ 0.3 million and $ 0.7 million for the three and nine months ended March 31, 2024, respectively.

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

Note 5 – Financial Statement Details

2 unchanged sentences

(in millions of U.S.

Dollars) December 31, 2023 June 25, 2023

Dollars) March 31, 2024 June 25, 2023

Billed trade receivables $ 121.7 $ 152.1

8 unchanged sentences

(in millions of U.S.

Dollars) December 31, 2023 June 25, 2023

Dollars) March 31, 2024 June 25, 2023

Raw material $ 122.4 $ 90.7

8 unchanged sentences

(in millions of U.S.

Dollars) December 31, 2023 June 25, 2023

Dollars) March 31, 2024 June 25, 2023

Reimbursement receivable on long-term incentive agreement $ 75.7 $ 91.3

7 unchanged sentences

(in millions of U.S.

Dollars) December 31, 2023 June 25, 2023

Dollars) March 31, 2024 June 25, 2023

Investment tax credit receivable (1)

$ 515.4 $ 167.4

Right-of-use assets 94.3 98.0

3 unchanged sentences

Other assets $ 688.3 $ 303.3

(1) The Company expects to receive refundable federal investment tax credits through the U.S.

CHIPS and Science Act of 2022 (CHIPS) in connection with ongoing expansion projects.

The Company has reduced property and equipment by $ 515.4 million and $ 167.4 million as of March 31, 2024 and June 25, 2023, respectively.

The receivable recorded is an estimate based on the Company's interpretation of the Section 48D Advanced Manufacturing Investment Credit.

The final guidance from the Internal Revenue Service and Department of Treasury may update the definition of qualifying capital expenditures to either exclude certain qualified property included in the estimate or include additional such property not currently reflected in the estimate.

The Company may record a change in estimate in the period when final guidance is issued.

The impact to cost of revenue from the investment tax credit as a result of a change in estimate is expected to have an immaterial impact to depreciation expense.

Accounts Payable and Accrued Expenses

1 unchanged sentence

(in millions of U.S.

Dollars) December 31, 2023 June 25, 2023

Dollars) March 31, 2024 June 25, 2023

Accounts payable, trade $ 52.4 $ 44.9

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 31, 2023 December 25, 2022 December 31, 2023 December 25, 2022

Dollars) March 31, 2024 March 26, 2023 March 31, 2024 March 26, 2023

Project, transformation and transaction costs 5.3 0.9 $ 12.5 $ 2.9

3 unchanged sentences

Accumulated Other Comprehensive Loss, net of taxes

Accumulated other comprehensive loss, net of taxes, consisted of $ 12.2 million and $ 25.1 million of net unrealized losses on available-for-sale securities as of December 31, 2023 and June 25, 2023, respectively.

Accumulated other comprehensive loss, net of taxes, consisted of $ 12.7 million and $ 25.1 million of net unrealized losses on available-for-sale securities as of March 31, 2024 and June 25, 2023, respectively.

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

3 unchanged sentences

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

Three months ended Six months ended

Three months ended Nine months ended

(in millions of U.S.

Dollars) December 31, 2023 December 25, 2022 December 31, 2023 December 25, 2022

Dollars) March 31, 2024 March 26, 2023 March 31, 2024 March 26, 2023

Interest income ( 30.1 ) ( 22.2 ) ( 108.9 ) ( 38.1 )

Interest expense, net of capitalized interest 59.5 14.1 185.5 26.7

Gain on arbitration proceedings (1)

Loss/(gain) on legal proceedings (1)(2)

7.7 — 7.7 ( 50.3 )

3 unchanged sentences

Non-operating expense (income), net $ 42.4 ($ 2.9 ) $ 98.7 ($ 53.4 )

(1) In the first quarter of fiscal 2023, the Company received an arbitration award in relation to a former customer failing to fulfill contractual obligations to purchase a certain amount of product over a period of time.

In the second quarter of fiscal 2023, a final payment, net of legal fees, was received.

(1) In the third quarter of fiscal 2024, the Company accrued a liability for payment of customs duties totaling approximately $ 7.7 million for alleged undervalued duties related to transactions by the Company's former Lighting Products business unit from 2012 to 2017.

(2) In fiscal 2023, the Company received an arbitration award in relation to a former customer failing to fulfill contractual obligations to purchase a certain amount of product over a period of time.

The arbitration award is recognized as non-operating income, net of legal fees incurred.

Statements of Cash Flows - non-cash activities

Six months ended

Nine months ended

(in millions of U.S.

Dollars) December 31, 2023 December 25, 2022

Dollars) March 31, 2024 March 26, 2023

Decrease in property, plant and equipment from investment tax credit receivables $ 348.0 $ 106.0

2 unchanged sentences

Receivables in connection with short-term investment maturities 15.0 —

Decrease in property, plant and equipment from insurance receivable 2.2 —

Lease asset and liability additions 1.8 26.7

Lease asset and liability modifications, net 0.9 0.2

Lease terminations ( 1.4 ) —

Accrued property and equipment as of December 31, 2023 and December 25, 2022 was $ 368.0 million and $ 156.8 million, respectively.

Accrued property and equipment as of March 31, 2024 and March 26, 2023 was $ 407.2 million and $ 306.0 million, respectively.

Note 6 – Investments

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

December 31, 2023

March 31, 2024

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

19 unchanged sentences

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 31, 2023

March 31, 2024

Less than 12 Months Greater than 12 Months Total

19 unchanged sentences

All cash equivalents in unrealized loss positions as of June 25, 2023 had been in unrealized loss positions for less than 12 months.

The Company did not hold cash equivalent securities in an unrealized loss position as of December 31, 2023.

The Company did not hold cash equivalent securities in an unrealized loss position as of March 31, 2024.

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 $ 14.2 million and $ 10.1 million as of December 31, 2023 and June 25, 2023, respectively, and is recorded in other current assets on the consolidated balance sheets.

Accrued interest receivable was $ 12.7 million and $ 10.1 million as of March 31, 2024 and June 25, 2023, 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 31, 2023 and December 25, 2022.

There were no write-offs of noncollectable interest income during the three and nine months ended March 31, 2024 and March 26, 2023.

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 31, 2023 until the investments fully recover in market value.

No allowance for credit losses was recorded as of December 31, 2023.

The contractual maturities of short-term investments as of December 31, 2023 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 31, 2024 until the investments fully recover in market value.

No allowance for credit losses was recorded as of March 31, 2024.

The contractual maturities of short-term investments as of March 31, 2024 were as follows:

(in millions of U.S.

18 unchanged sentences

• Level 3 - Valuations based on inputs that are unobservable and significant to the overall fair value measurement.

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

As of December 31, 2023 and June 25, 2023, financial assets utilizing Level 1 inputs included U.S.

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

As of March 31, 2024 and June 25, 2023, financial assets utilizing Level 1 inputs included U.S.

treasury securities, money market fund and U.S.

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 31, 2023 and June 25, 2023.

The Company did not have any financial assets requiring the use of Level 3 inputs as of March 31, 2024 and June 25, 2023.

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

GAAP hierarchy:

December 31, 2023 June 25, 2023

March 31, 2024 June 25, 2023

(in millions of U.S.

2 unchanged sentences

Money market funds $ 342.4 $ — $ 342.4 $ 230.4 $ — $ 230.4

Corporate bonds — 4.0 4.0 — — —

treasury securities 104.6 — 104.6 20.7 — 20.7

14 unchanged sentences

Other long-term investments consists of the MACOM Shares which the Company received as partial consideration 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 non-operating expense (income), net.

These shares are remeasured to fair value each period with changes in the fair value of the shares recognized in non-operating expense (income), net.

Note 8 – Goodwill and Intangible Assets

There were no changes to goodwill during the six months ended December 31, 2023.

There were no changes to goodwill during the nine months ended March 31, 2024.

Intangible Assets, net

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

December 31, 2023 June 25, 2023

March 31, 2024 June 25, 2023

(in millions of U.S.

5 unchanged sentences

(1) Relates to developed technology

Total amortization of acquisition-related intangibles assets was $ 0.3 million and $ 0.6 million for the three and six months ended December 31, 2023, respectively, and $ 0.6 million and $ 1.1 million for the three and six months ended December 25, 2022, respectively.

Total amortization of patents and licensing rights was $ 1.3 million and $ 2.3 million for the three and six months ended December 31, 2023, respectively, and $ 1.1 million and $ 2.1 million for the three and six months ended December 25, 2022, respectively.

Total amortization of acquisition-related intangibles assets was $ 0.3 million and $ 0.9 million for the three and nine months ended March 31, 2024, respectively, and $ 0.2 million and $ 1.3 million for the three and nine months ended March 26, 2023, respectively.

Total amortization of patents and licensing rights was $ 1.0 million and $ 3.3 million for the three and nine months ended March 31, 2024, respectively, and $ 1.1 million and $ 3.2 million for the three and nine months ended March 26, 2023, respectively.

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

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(in millions of U.S.

Dollars) December 31, 2023 June 25, 2023

Dollars) March 31, 2024 June 25, 2023

Principal $ 3,075.0 $ 3,075.0

1 unchanged sentence

Net carrying amount $ 3,032.6 $ 3,025.6

The last reported sale price of the Company's common stock was not greater than or equal to 130 % of the applicable conversion price for any of the Outstanding Convertible Notes for at least 20 trading days in the 30 consecutive trading days ended on December 31, 2023.

As a result, none of the Outstanding Convertible Notes are convertible at the option of the holders through March 31, 2024.

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Upon the Company achieving 30 % utilization at its silicon carbide device fabrication facility in Marcy, New York and generating at least $ 240.0 million of revenue from the Company's Power product line, that are manufactured or produced on wafers that are fabricated at the Marcy, New York facility (the MVF Products), in each case over a six-month period, the level of the Liquidity Covenant shall be permanently reduced to $ 325.0 million.

Upon the Company’s achieving 50 % utilization at its Marcy, New York facility and generating at least $ 450.0 million of revenue from MVF Products, in each case over a six-month period, the Liquidity Covenant will be permanently reduced to zero .

As of December 31, 2023, the Company was in compliance with all covenants relating to the 2030 Senior Notes.

Upon the Company achieving 50 % utilization at its Marcy, New York facility and generating at least $ 450.0 million of revenue from MVF Products, in each case over a six-month period, the Liquidity Covenant will be permanently reduced to zero .

As of March 31, 2024, the Company was in compliance with all covenants relating to the 2030 Senior Notes.

The 2030 Senior Notes are superior in right of payment to the Company's unsecured indebtedness to the extent of the collateral securing the 2030 Senior Notes.

6 unchanged sentences

In July 2023, the Company entered into an Unsecured Customer Refundable Deposit Agreement (the CRD Agreement) with a customer, pursuant to which the customer will provide the Company up to $ 2 billion in unsecured deposits.

Under the CRD Agreement, the Company received an initial deposit of $ 1 billion with additional deposits of up to an additional $ 1 billion at the Company's request, subject to certain conditions during the 2024 calendar year.

Under the CRD Agreement, the Company received an initial deposit of $ 1 billion with the option to receive additional deposits up to an additional $ 1 billion at the Company's request, subject to certain conditions during the 2024 calendar year.

On February 27, 2024, the Company received an additional deposit of $ 500 million (the second draw).

Unless previously terminated in accordance with its terms, the CRD Agreement will mature on July 5, 2033, and the amount of the deposits, together with accrued and unpaid interest, will be required to be repaid to the customer at such time.

The deposits under the CRD Agreement will bear interest, payable on a semi-annual basis, at a base rate of 6 % per annum, with the potential for an increased variable rate of either 10 % or 15 % in connection with any inability of the Company to satisfy supply targets under a ten-year wafer supply agreement with the same customer.

The deposits under the CRD Agreement bear interest, payable on a semi-annual basis, at a base rate of 6 % per annum, with the potential for an increased variable rate of either 10 % or 15 % in connection with any inability of the Company to satisfy supply targets under a ten-year wafer supply agreement with the same customer.

The Company may voluntarily prepay the deposits, in whole or in part, at any time at a price equal to 106 % of the principal amount of the deposits prepaid.

Upon the occurrence of a change of control, the customer may require the Company to prepay the deposits in whole at a variable prepayment price depending on the day of prepayment.

Debt issuance costs for the CRD Agreement related to both the initial deposit received and the potential additional deposits.

A portion of the debt issuance costs were accounted for on a pro rata basis as a reduction of the principal balance for the initial deposit and will be amortized over the term of the deposit at an effective interest rate of 6.3 %.

The remaining debt issuance costs of approximately $ 22.8 million were recorded as a prepaid expense and will be recorded as a reduction of the principal balance, on a pro rata basis, if additional deposits are drawn under the CRD Agreement.

Debt issuance costs for the CRD Agreement related to the full deposit capacity under the agreement.

A portion of the debt issuance costs were accounted for on a pro rata basis as a reduction of the principal balance for the initial deposit and the second draw, and will be amortized over the term of the deposit at an effective interest rate of 6.3 %.

During the third quarter of fiscal 2024, the debt issuance costs allocated to the second draw were $ 11.4 million and these costs were reclassified from prepaid expense and recorded as a reduction of principal related to the additional deposit received.

The remaining debt issuance costs of approximately $ 11.4 million are recorded as a prepaid expense and will be recorded as a reduction of the principal balance, on a pro rata basis, if additional deposits are drawn under the CRD Agreement.

The CRD Agreement contains certain customary affirmative covenants, negative covenants and events of default.

As of March 31, 2024, the Company was in compliance with all covenants related to this agreement.

The net carrying amount of the liability component of the 2030 Senior Notes and the deposits under the CRD Agreement is as follows:

(in millions of U.S.

Dollars) December 31, 2023 June 25, 2023

Dollars) March 31, 2024 June 25, 2023

Principal $ 2,750.0 $ 1,250.0

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The interest expense, net recognized related to the Corporate Debt Holdings and the deposits under the CRD Agreement is as follows:

Three months ended Six months ended

Three months ended Nine months ended

(in millions of U.S.

Dollars) December 31, 2023 December 25, 2022 December 31, 2023 December 25, 2022

Dollars) March 31, 2024 March 26, 2023 March 31, 2024 March 26, 2023

Interest expense, net of capitalized interest $ 51.7 $ 11.0 $ 161.4 $ 19.7

2 unchanged sentences

The Company capitalizes interest in connection with ongoing capacity expansions.

For the three and six months ended December 31, 2023, the Company capitalized $ 5.2 million and $ 7.5 million of interest expense, respectively, and $ 0.7 million and $ 1.0 million of amortization of issuance costs, respectively.

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

For the three and nine months ended March 31, 2024, the Company capitalized $ 8.6 million and $ 16.1 million of interest expense, respectively, and $ 1.1 million and $ 2.1 million of amortization of issuance costs, respectively.

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.

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 31, 2023 December 25, 2022 December 31, 2023 December 25, 2022

Dollars, except share data) March 31, 2024 March 26, 2023 March 31, 2024 March 26, 2023

Net loss from continuing operations ($ 148.9 ) ($ 83.1 ) ($ 398.7 ) ($ 169.3 )

5 unchanged sentences

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 31, 2023, 3.9 million and 3.8 million of weighted average shares, respectively, 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 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 nine months ended March 31, 2024, 4.0 million and 3.9 million of weighted average shares, respectively, 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.

Future earnings per share of the Company are also subject to dilution from conversion of its Outstanding Convertible Notes under certain conditions as described in Note 9, “Long-term Debt.”

10 unchanged sentences

Restricted Stock Units

A summary of nonvested restricted stock unit awards (RSUs) outstanding as of December 31, 2023 and changes during the six months then ended is as follows:

A summary of nonvested restricted stock unit awards (RSUs) outstanding as of March 31, 2024 and changes during the nine months then ended is as follows:

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

3 unchanged sentences

Forfeited ( 371 ) $ 77.25

Nonvested at December 31, 2023 3,021 $ 74.56

Nonvested at March 31, 2024 3,115 $ 72.29

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 31, 2023 December 25, 2022 December 31, 2023 December 25, 2022

Dollars) March 31, 2024 March 26, 2023 March 31, 2024 March 26, 2023

Cost of revenue, net $ 7.6 $ 5.5 $ 20.0 $ 16.8

9 unchanged sentences

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 31, 2023, the Company has concluded that it is necessary to recognize a full valuation allowance against its U.S.

As of March 31, 2024, the Company has concluded that it is necessary to recognize a full valuation allowance against its U.S.

deferred tax assets.

3 unchanged sentences

As of June 25, 2023, the Company's liability for unrecognized tax benefits was $ 9.8 million.

During the six months ended December 31, 2023, the Company recognized a $ 1.3 million decrease to the liability for unrecognized tax benefits due to statute expiration and a $ 0.4 million increase to the liability for unrecognized tax benefits due to an increase in generated research and development credits.

As a result, the total liability for unrecognized tax benefits as of December 31, 2023 was $ 8.9 million.

During the nine months ended March 31, 2024, the Company recognized a $ 1.3 million decrease to the liability for unrecognized tax benefits due to statute expiration and a $ 0.5 million increase to the liability for unrecognized tax benefits due to an increase in generated research and development credits.

As a result, the total liability for unrecognized tax benefits as of March 31, 2024 was $ 9.0 million.

If any portion of this $ 9.0 million is recognized, the Company will then include that portion in the computation of its effective tax rate.

19 unchanged sentences

Patent & Trademark Office.

The litigation with Purdue is in the middle of fact discovery, and the trial date has not yet been finalized but is expected to take place in 2025.

The Company expects discovery in this matter to conclude in August 2024, with a trial date most likely in 2025.

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

5 unchanged sentences

Additionally, the Company has agreed, under a separate agreement (the SUNY Agreement), to sponsor the creation of two endowed faculty chairs and fund a scholarship program at SUNY Polytechnic Institute.

As of December 31, 2023, 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 31, 2023, the Company has reduced property and equipment, net by a total of $ 500.0 million as a result of GDA reimbursements, of which $ 384.0 million has been received in cash and an additional $ 116.0 million in receivables are recorded in other current assets and in other assets in the consolidated balance sheet.

As of March 31, 2024, 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 March 31, 2024, the Company has reduced property and equipment, net by a total of $ 500.0 million as a result of GDA reimbursements, of which $ 425.4 million has been received in cash and an additional $ 74.6 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.

2 unchanged sentences

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 life of the contract.

During the three and six months ended December 31, 2023, the Company purchased $ 6.3 million and $ 12.6 million of product under this agreement, respectively.

As of December 31, 2023, minimum future product purchases have been satisfied for fiscal 2024, and minimum future product purchases for fiscal years 2025, 2026, 2027 and 2028 are $ 26.8 million, $ 36.0 million, $ 50.1 million and $ 73.7 million, respectively.

During the three and nine months ended March 31, 2024, the Company purchased $ 3.4 million and $ 16.0 million of product under this agreement, respectively.

As of March 31, 2024, minimum future product purchases have been satisfied for fiscal 2024, and minimum future product purchases for fiscal years 2025, 2026, 2027 and 2028 are $ 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.

As of December 31, 2023, the Company has paid $ 26.2 million in connection with the agreement, which is recognized in prepaid expenses and other long-term assets on the consolidated balance sheet.

In the second quarter of fiscal 2024, the Company entered into an agreement with a supplier which requires a minimum commitment of product purchases on a take-or-pay basis of $ 86.4 million over the life of the contract.

In the second quarter of fiscal 2024, the Company purchased $ 4.8 million of product under this agreement, which satisfied the minimum future product purchases for the period.

As of March 31, 2024, the Company has paid $ 31.9 million in connection with the agreement, which is recognized in prepaid expenses and other long-term assets on the consolidated balance sheet.

In the second quarter of fiscal 2024, the Company entered into an agreement with another supplier which requires a minimum commitment of product purchases on a take-or-pay basis of $ 86.4 million over the life of the contract.

During the three and nine months ended March 31, 2024, the Company purchased $ 7.2 million and $ 12.0 million of product under this agreement, respectively, which satisfied the minimum future product purchases for the period.

Minimum future product purchase for the remainder of fiscal 2024 and fiscal years 2025, 2026 and 2027 are $ 7.2 million, $ 28.8 million, $ 28.8 million and $ 9.6 million, respectively.

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