WOLFSPEED, INC. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations Information set forth in this Quarterly Report on Form 10-Q contains various “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). All information contained in this report relative to future markets for our products, trends in and anticipated levels of revenue, gross margins and expenses, and ability to access funding as well as other statements containing words such as “believe,” “project,” “may,” “will,” “anticipate,” “target,” “plan,” “estimate,” “expect” and “intend” and other similar expressions constitute forward-looking statements. These forward-looking statements are subject to business, economic and other risks and uncertainties, both known and unknown, and actual results may differ materially from those contained in the forward-looking statements. Any forward-looking statements we make are as of the date made, and except as required under the U.S. federal securities laws and the rules and regulations of the Securities and Exchange Commission (the SEC), we have no duty to update them if our views later change. These forward-looking statements should not be relied upon as representing our views as of any date subsequent to the date of this Quarterly Report. Examples of risks and uncertainties that could cause actual results to differ materially from historical performance and any forward-looking statements include, but are not limited to, those described in “Risk Factors” in Part II, Item 1A of this Quarterly Report. Executive Summary The following discussion is designed to provide a better understanding of our unaudited consolidated financial statements, including a brief discussion of our business and products, key factors that impacted our performance and a summary of our operating results. The following discussion should be read in conjunction with the unaudited consolidated financial statements and the notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q, and the audited consolidated financial statements and notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the fiscal year ended June 30, 2024 (the 2024 Form 10-K). Historical results and percentage relationships among any amounts in the financial statements are not necessarily indicative of trends in operating results for any future periods. Unless otherwise noted, the following information and discussion relates to our continuing operations. Overview Wolfspeed, Inc. (Wolfspeed, we, our, or us) is an innovator of wide bandgap semiconductors, focused on silicon carbide materials and devices for power applications. Our product families include power devices and silicon carbide and gallium nitride (GaN) materials. Our products are targeted for various applications such as electric vehicles, fast charging and renewable energy and storage. Our materials products and power devices are used in electric vehicles, motor drives, power supplies, solar and transportation applications. Our materials products are also used in military communications, radar, satellite and telecommunication applications. During and prior to fiscal 2024, we designed, manufactured and sold radio-frequency (RF) devices. As discussed more fully above in Note 2, “Discontinued Operations,” to our unaudited consolidated financial statements in Part I, Item 1 of this Quarterly Report, we completed the sale of certain assets comprising our former RF product line (the RF Business Divestiture) in the second quarter of fiscal 2024. The RF Business Divestiture represented a strategic shift that had a major effect on our operations and financial results. As a result, we have classified the results and cash flows of the RF product line as discontinued operations in our consolidated statements of operations and consolidated statements of cash flows for fiscal 2024. Unless otherwise noted, discussion within this Quarterly Report to the consolidated financial statements relates to our continuing operations. 28 Table of Contents Industry Dynamics and Trends There are a number of industry factors that affect our business which include, among others: • Overall Demand for Products and Applications Using Our Wolfspeed Materials and Devices . Our potential for growth depends significantly on the continued adoption of silicon carbide materials, device products in the power markets and our ability to win new designs for these applications. Demand also fluctuates based on various domestic and global economic and market cycles, continuously evolving industry supply chains, trade and tariff terms, and inflationary impacts, as well as evolving competitive dynamics in each of our respective markets. These uncertainties make demand difficult to forecast for us and our customers. Recently, we and other semiconductor companies have been experiencing softening demand for power products in industrial and energy applications. We continue to experience increased mid- and long-term demand for our power products designed for electrical vehicle applications, and we are working closely with our customer base to best match our supply to their near-term demand. We believe the increased demand for our power products reflects the value that the industry places on a transition to silicon carbide materials and devices while also evidencing the growing global focus on adopting higher efficiency energy solutions, including electric vehicle and related technologies. We believe these trends could have a significant positive impact on revenues in future periods as we increase capacity to meet this increased demand. • Supply Constraints. The semiconductor industry has experienced supply constraints for certain items, although constraints appear to be alleviating in recent months. We have successfully managed through challenges relating to obtaining certain necessary production and processing equipment thus far, and we have continued to see supply availabilities and lead times stabilize across many direct materials. In addition, although we have not experienced significant impacts to date, the ongoing military conflict between Russia and Ukraine and the ongoing conflicts in the Middle East may further exacerbate global supply constraints. • Intense and Constantly Evolving Competitive Environment. Competition in the industries we serve is intense. Many companies have made significant investments in product development, production equipment and production facilities. To remain competitive, market participants must continuously increase product performance, reduce costs and develop improved ways to serve their customers. In addition, market participants often undertake pricing strategies to gain or protect market share, increase the utilization of their production capacity and open new applications in the power markets we serve. To address these competitive pressures, we have invested in new production facilities, as well as research and development activities to support new product development, lower product costs and increase levels of product performance to differentiate our products in the market. In addition, we invest in systems, people and new processes to improve our ability to deliver a better overall experience for our customers. • Governmental Trade and Regulatory Conditions . Our potential for growth, as with most multi-national companies, depends on a balanced and stable trade, political, geopolitical, economic and regulatory environment in the countries where we do business. Changes in trade policy, such as the imposition or extension of tariffs or export bans to specific customers or countries, could reduce or limit demand for, or increase the cost of production of, our products in certain markets. • Technological Innovation and Advancement. Innovations and advancements in materials and power technologies continue to expand the potential commercial application for our products. However, new technologies or standards could emerge or improvements could be made in existing technologies that could reduce or limit the demand for our products in certain markets. • Intellectual Property Issues. Market participants rely on patented and non-patented proprietary information associated with product development, manufacturing capabilities and other core competencies of their business. Protection of intellectual property is critical. Therefore, steps such as additional patent applications, confidentiality and non-disclosure agreements, as well as other security measures are generally taken. To enforce or protect intellectual property rights, litigation or threatened litigation is common. Overview of the three months ended September 29, 2024 The following is a summary of our continuing operations financial results as of and for the three months ended September 29, 2024 compared to the three months ended September 24, 2023, unless otherwise stated. • Our year-over-year revenue decreased ($2.7) million to $194.7 million. • Gross margin decreased to (18.6)% from 12.5%. Gross profit decreased to ($36.2) million from $24.7 million. Gross margin and gross profit include the impacts of underutilization costs primarily in connection with the start of production at the Mohawk Valley Fab and restructuring and closure-related costs associated with the Durham fab. Underutilization was $26.4 million compared to $34.4 million. • Operating loss was $230.1 million compared to $94.9 million. 29 Table of Contents • Diluted loss per share was $2.23 compared to $0.99. • Combined cash, cash equivalents and short-term investments was $1,687.6 million at September 29, 2024 and $2,174.6 million at June 30, 2024. • Long-term debt, net was $6,169.9 million at September 29, 2024 and $6,161.1 million at June 30, 2024. • Cash used in operating activities was $132.0 million compared to $112.7 million. • Purchases of property and equipment, net were $395.0 million (net of $42.0 million in reimbursements) compared to $402.4 million (net of $39.6 million in reimbursements). • Design-ins were $1.5 billion compared to $2.2 billion. • Design-wins were $1.3 billion compared to $1.5 billion. Business Outlook We believe we are uniquely positioned as an innovator in the global semiconductor industry. The strength of our balance sheet provides us the ability to invest in our business and increase production capacity, as indicated by the Mohawk Valley Fab, where we started revenue production in late fiscal 2023. In addition, an expansion of our materials factory in Durham, North Carolina and the construction of a new materials manufacturing facility in Siler City, North Carolina are expected to increase our production capacity. We are primarily focused on investing in our business to expand the scale of production, further develop the technologies, and accelerate the growth opportunities of silicon carbide materials, silicon carbide power devices and modules. We are prioritizing the identification of opportunities to reduce operating costs and to optimize our capital structure in support of these investments in our business. We believe these efforts will support our goals of delivering higher revenue and shareholder returns over time. In addition, we are focused on improving the number of usable items in a production cycle (yield) as our manufacturing technologies become more complex. Despite increased complexities in our manufacturing processes, we have improved yields significantly and expect that we will continue to improve yield levels to support our future growth, particularly as we transition more device production to the Mohawk Valley Fab. During the first quarter of fiscal 2025, we initiated a headcount reduction and facility consolidation plan (the 2025 Restructuring Plan) intended to further optimize our cost structure as we accelerate our transition from 150mm to 200mm silicon carbide devices. Refer to Note 13, "Restructuring," and Note 14, "Subsequent Events" to our unaudited consolidated financial statements in Part I, Item 1 of this Quarterly Report for additional discussion of the financial impact of these activities. We believe we have the ability to navigate the current environment while maintaining our capital expenditure plans to support future growth to meet long-term demand, although demand in the mid-term appears to be ahead of the industry's supply capabilities. For fiscal 2025, we have targeted approximately $1.1 billion to $1.3 billion of net capital investment. Design-ins Design-ins are customer commitments to purchase our products and are one of the factors we use to forecast long-term demand and future revenue. To meet the qualification of a design-in, the customer provides us with documentation (e.g., a letter of intent, statement of work or developmental contract) that can include details such as the expected delivery timeline, estimated price, necessary capacity and required support. A design-in, even with a formal commitment, does not always convert to future revenue (a "design-win") for a variety of reasons, including, but not limited to, the customer delaying or abandoning the project, capacity constraints, timeline challenges, and/or technology changes. Therefore, management uses the design-in amount as a guide to forecast future demand but it should not be taken as an absolute indicator of future revenue. Design-wins Design-ins are considered design-wins when a customer issues a purchase order for at least 20% of the expected first year revenue. Design-wins reflect each project's entire commitment at the time this criterion is satisfied and should not be taken as an absolute indicator of future revenue. Depending on timing, certain projects may be reflected within a single period's design-in and design-win figures. 30 Table of Contents Fiscal Quarters Our fiscal quarters end on the last Sunday of the month in September, December, March and June. Each fiscal quarter is generally 13 weeks as part of a 52-week fiscal year. Occasionally, we have a 53-week fiscal year, and in those instances, one quarter within the fiscal year is comprised of 14 weeks instead of 13 weeks. Fiscal 2025 is a 52-week fiscal year. Fiscal 2024 was a 53-week fiscal year, and the second quarter of fiscal 2024 was a 14-week fiscal quarter. Results of Operations Selected consolidated statements of operations data for the three months ended September 29, 2024 and September 24, 2023 were as follows: Three months ended September 29, 2024 September 24, 2023 (in millions of U.S. Dollars, except share data) Amount % of Revenue Amount % of Revenue Revenue, net $194.7 100.0 % $197.4 100.0 % Cost of revenue, net 230.9 118.6 % 172.7 87.5 % Gross profit (36.2) (18.6) % 24.7 12.5 % Research and development 50.9 26.1 % 44.1 22.3 % Sales, general and administrative 62.2 31.9 % 64.1 32.5 % Factory start-up costs 19.7 10.1 % 8.4 4.3 % Amortization of acquisition-related intangibles 0.3 0.2 % 0.3 0.2 % Loss on disposal or impairment of other assets 0.6 0.3 % 0.1 0.1 % Other operating expense 60.2 30.9 % 2.6 1.3 % Operating loss (230.1) (118.2) % (94.9) (48.1) % Non-operating expense, net 51.7 26.6 % 28.5 14.4 % Loss before income taxes (281.8) (144.7) % (123.4) (62.5) % Income tax expense 0.4 0.2 % 0.2 0.1 % Net loss from continuing operations (282.2) (144.9) % (123.6) (62.6) % Net loss from discontinued operations — — % (272.1) (137.8) % Net loss ($282.2) (144.9) % ($395.7) (200.5) % Basic and diluted loss per share Continuing operations ($2.23) ($0.99) Discontinued operations — (2.17) Revenue Three months ended (in millions of U.S. Dollars) September 29, 2024 September 24, 2023 Change Power Products $97.1 $101.2 ($4.1) (4) % Materials Products $97.6 $96.2 $1.4 1 % Revenue $194.7 $197.4 ($2.7) (1) % Revenue for the three months ended September 29, 2024 as compared to the three months ended September 24, 2023 decreased due to the softening of demand in industrial and energy applications, which has been largely fulfilled from our North Carolina fab. This decrease has been partially offset by growth in demand for automotive applications. 31 Table of Contents Gross Profit and Gross Margin Three months ended (in millions of U.S. Dollars) September 29, 2024 September 24, 2023 Change Gross profit ($36.2) $24.7 ($60.9) (247) % Gross margin (18.6) % 12.5 % Gross profit and gross margin were impacted by a less favorable product mix resulting from the softening of demand in industrial and energy applications. Production capacity in the North Carolina fab shifted from industrial and energy products to automotive products, which have a higher production cost in that fab. Gross profit for the three months ended September 29, 2024 includes restructuring costs of $11.7 million of non-cash asset-related charges from accelerated depreciation and $22.6 million of other exit costs for our restructuring plan adopted in the first quarter of fiscal 2025 as discussed in Note 13, "Restructuring," to our unaudited consolidated financial statements in Part I, Item 1 of this Quarterly Report. Gross profit and gross margin for both periods include underutilization costs incurred within cost of revenue in connection with the start of production at our Mohawk Valley Fab. Underutilization costs for the three months ended September 29, 2024 were $26.4 million as compared to $34.4 million for the three months ended September 24, 2023. Research and Development Three months ended (in millions of U.S. Dollars) September 29, 2024 September 24, 2023 Change Research and development $50.9 $44.1 $6.8 15 % Percent of revenue 26 % 22 % The increase in Research and development expenses for the three months ended September 29, 2024 as compared to the three months ended September 24, 2023 was primarily due to increases in product material costs. Sales, General and Administrative Three months ended (in millions of U.S. Dollars) September 29, 2024 September 24, 2023 Change Sales, general and administrative $62.2 $64.1 ($1.9) (3) % Percent of revenue 32 % 32 % The decrease in Sales, general and administrative expenses for the three months ended September 29, 2024 as compared to the three months ended September 24, 2023 was primarily driven by a decrease in people costs. Factory Start-up Costs Three months ended (in millions of U.S. Dollars) September 29, 2024 September 24, 2023 Change Factory start-up costs $19.7 $8.4 $11.3 135 % Start-up costs increased for the three months ended September 29, 2024 as compared to the three months ended September 24, 2023 due to increased costs incurred in connection with the construction of our materials manufacturing facility in Siler City, North Carolina. 32 Table of Contents Loss on Disposal or Impairment of Other Assets Three months ended (in millions of U.S. Dollars) September 29, 2024 September 24, 2023 Change Loss on disposal or impairment of other assets $0.6 $0.1 $0.5 500 % Loss on disposal or impairment of other assets primarily relate to write-offs of fixed assets, as well as the write-offs of impaired or abandoned patents, partially offset by proceeds from asset sales. Other Operating Expense Three months ended (in millions of U.S. Dollars) September 29, 2024 September 24, 2023 Change Restructuring costs and other exit costs $ 52.8 $ — $ 52.8 100 % Project, transformation and transaction costs $ 6.0 $ 2.6 $ 3.4 131 % Other 1.4 — 1.4 100 % Other operating expense $60.2 $2.6 $57.6 2,215 % Restructuring and other closure-related costs for the three months ended September 29, 2024 consist of: • $36.5 million of employee severance and benefit costs; • $7.1 million of non-cash asset-related charges from accelerated depreciation; and • $9.2 million of other closure-related costs related to our restructuring plan adopted in the first quarter of fiscal 2025 as discussed in Note 13, "Restructuring," to our unaudited consolidated financial statements in Part I, Item 1 of this Quarterly Report. Non-Operating Expense, net Three months ended (in millions of U.S. Dollars) September 29, 2024 September 24, 2023 Change Interest income ($22.2) ($40.6) $18.4 45 % Interest expense, net of capitalized interest 64.5 61.7 2.8 5 % Other expense, net 9.4 7.4 2.0 27 % Non-operating expense, net $51.7 $28.5 $23.2 (81) % Interest income. The decrease in interest income for the three months ended September 29, 2024 as compared to the three months ended September 24, 2023 was primarily due to lower short-term investment balances. Interest expense, net of capitalized interest . The increase in interest expense for the three months ended September 29, 2024 as compared to the three months ended September 24, 2023 was primarily due to higher average debt outstanding offset, in part, by increased interest capitalization in the three months ended September 29, 2024. Refer to Note 9 "Long-term Debt," to our unaudited consolidated financial statements in Part I, Item 1 of this Quarterly Report for the summary of outstanding debt. Income Tax Expense Three months ended (in millions of U.S. Dollars) September 29, 2024 September 24, 2023 Change Income tax expense $0.4 $0.2 $0.2 100 % Effective tax rate — % — % The change in our effective tax rate for the three months ended September 29, 2024 compared to the three months ended September 24, 2023 was immaterial. 33 Table of Contents In general, the variation between our effective income tax rate and the current U.S. statutory rate of 21.0% is primarily due to: (i) changes in our valuation allowances against deferred tax assets, (ii) income derived from international locations with differing tax rates than the U.S., and (iii) tax credits generated. 34 Table of Contents Liquidity and Capital Resources Overview We require cash to fund our operating expenses, debt service costs, working capital requirements and capital expenditures, including the purchase of goods and services in the ordinary course of business such as raw materials, supplies and capital equipment, as well as outlays for research and development, strategic acquisitions and investments. Our principal sources of liquidity are cash on hand and marketable securities. Based on past performance and current expectations, we believe our current working capital will be adequate to meet our cash needs for at least the next 12 months. With the strength of our working capital position, we believe that we have the ability to continue to invest in the completion of our near-term expansion of our production capacity, further develop our product portfolio and, when necessary or appropriate, make selective acquisitions or other strategic investments to strengthen our product portfolio or secure key intellectual properties. However, even with the strength of our working capital position, we expect to need additional funding to fully complete all of our intended capacity expansions. We obtained additional funding of $250.0 million in October 2024 through the issuance of additional senior secured notes due 2030 (the 2030 Senior Notes) and have the ability to issue an additional $500.0 million of additional tranches under the Amended and Restated Indenture governing the 2030 Senior Notes (the 2030 Senior Notes Indenture), subject to certain conditions. In accordance with the terms of the non-binding preliminary memorandum of terms (PMT) with the United States Department of Commerce that require us to restructure or refinance our outstanding 1.75% convertible senior notes due May 1, 2026 (2026 Notes), we are actively evaluating our options, including the refinancing of the 2026 Notes through the near-term issuance of equity-linked securities and/or other financing options, subject to market conditions and other considerations. Sources of Liquidity The following table sets forth our cash, cash equivalents and short-term investments: (in millions of U.S. Dollars) September 29, 2024 June 30, 2024 Change Cash and cash equivalents $726.1 $1,045.9 ($319.8) Short-term investments 961.5 1,128.7 (167.2) Total cash, cash equivalents and short-term investments $1,687.6 $2,174.6 ($487.0) The significant components of our working capital are liquid assets such as cash and cash equivalents, short-term investments, accounts receivable and inventories, partially reduced by accounts payable and accrued expenses. In the first quarter of fiscal 2024, we entered into the Unsecured Customer Refundable Deposit Agreement (the CRD Agreement) with Renesas Electronics America Inc. (Renesas America), pursuant to which Renesas America agreed to provide us up to $2 billion in unsecured deposits, subject to certain conditions. We received an initial deposit of $1 billion in the first quarter of fiscal 2024, a second deposit of $500 million in the third quarter of fiscal 2024 and the third and final deposit in the fourth quarter of fiscal 2024. As discussed in Note 14, "Subsequent Events" to our unaudited consolidated financial statements in Part I, Item 1 of this Quarterly Report, we entered into an amendment to the CRD Agreement in October 2024 to permit us to pay the accrued interest on the outstanding loans payable on the last business day of each of December 2024 and June 2025 by adding those amounts to the outstanding principal amount of the loans rather than in cash, reducing our expected cash interest payments in fiscal 2025 by $120.0 million. As also discussed in Note 14, "Subsequent Events", to our unaudited consolidated financial statements in Part I, Item 1 of this Quarterly Report, in the second quarter of fiscal 2025, we issued an additional $250.0 million aggregate principal amount of 2030 Senior Notes. The 2030 Senior Notes Indenture permits us to issue additional tranches up to $500.0 million subject to certain conditions. We are required to maintain a minimum amount of at least $630.0 million in unrestricted cash and cash equivalents as of the last day of any calendar month through March 31, 2025 and at least $750.0 million beginning on April 1, 2025, which amount will be reduced over time upon the fulfillment of certain conditions In the second quarter of fiscal 2024, we completed the sale of the RF Business and received approximately $75 million in cash. In the third quarter of fiscal 2024, we received a $57.5 million Land Acquisition Business Investment Grant from the North Carolina Department of Commerce. 35 Table of Contents As of September 29, 2024, we had unrealized losses on our short-term investments of $4.4 million. All of our short-term investments had investment grade ratings, and any such investments that were in an unrealized loss position at September 29, 2024 were in such position due to interest rate changes, sector credit rating changes or company-specific rating changes. We evaluate our short-term investments for expected credit losses. We believe we are able and intend to hold each of the investments held with an unrealized loss as of September 29, 2024 until the investments fully recover in market value. No allowance for credit losses was recorded as of September 29, 2024. From time to time, we evaluate strategic opportunities, including potential acquisitions, joint ventures, divestitures, spin-offs or investments in complementary businesses, and we have continued to make such evaluations. We may also access capital markets through the issuance of debt or equity, which we may use in connection with the acquisition of complementary businesses or other significant assets or for other strategic opportunities, debt restructuring or general corporate purposes. Expected Uses of Liquidity We opened the Mohawk Valley Fab in the fourth quarter of fiscal 2022 to expand capacity for production of our silicon carbide devices and started revenue generating production at the facility in the fourth quarter of fiscal 2023. We expect to invest approximately $2.0 billion in total construction, equipment and other related costs for the new facility, of which approximately $500 million is expected to be reimbursed over time by the State of New York Urban Development Corporation (doing business as Empire State Development) under a Grant Disbursement Agreement (the GDA). As of September 29, 2024, we have spent approximately $1.2 billion and received $467.2 million in reimbursements. We started construction on a new materials manufacturing facility in Siler City, North Carolina in September 2022. We expect to invest approximately $2.3 billion in total construction, equipment and other related costs for the facility through fiscal 2025. As of September 29, 2024, we have spent approximately $1.6 billion. For fiscal 2025, we target approximately $1.1 billion to $1.3 billion of capital investment, which is primarily related to capacity and infrastructure projects to support longer-term growth and strategic priorities. This target is highly dependent on the timing and overall progress on the construction of the manufacturing facility in Siler City, North Carolina and the completion of the expansion of our Mohawk Valley Fab, as well as on the receipt of direct funding awards from the United States Department of Commerce and additional funding. Compared to fiscal 2024, our capital investment related to these new facilities during the next 12 months will be significantly less and will continue to decrease substantially as we complete the majority of construction related to this phase of our expansion efforts. As such, our ability to modulate capital investment up or down in response to expected production capacity demand requirements will continue to increase. We have take-or-pay supplier agreements that require a minimum of $221.2 million of purchases over the next four years and a commitment to provide quarterly capacity reservation deposits with a remaining total of $15.1 million, as outlined further in Note 5, "Commitments and Contingencies," to our unaudited financial statements in Part I, Item 1 of this Quarterly Report. Given our current cash position, we believe we will be able to fund daily operating expenses, debt service, working capital and capital requirements for at least the next 12 months, but we expect to need additional funding to complete our previously announced expansion initiatives. As discussed in Note 14 "Subsequent Events," to our unaudited consolidated financial statements in Part I, Item 1 of this Quarterly Report, we have obtained additional funding of $250.0 million through the issuance of additional 2030 Senior Notes, and expect to pursue additional funding through the United States CHIPS and Science Act of 2022 (the CHIPS Act) in accordance with the terms of a definitive direct funding award agreement with the United States Department of Commerce as contemplated by the PMT, equity offerings or other non-debt capital sources, and debt financings (which may involve refinancing, modifying or retiring some of our existing debt). In addition, we may also apply for and potentially sell tax credits as part of the IRA to further fund our expansion initiatives. 36 Table of Contents Cash Flows In summary, our cash flows were as follows: Three months ended in millions of U.S. Dollars September 29, 2024 September 24, 2023 Change Net cash used in operating activities of continuing operations ($132.0) ($112.7) ($19.3) (17) % Net cash used in investing activities of continuing operations (193.0) (784.2) 591.2 75 % Net cash provided by financing activities of continuing operations 4.8 938.4 (933.6) (99) % Effects of foreign exchange changes on cash and cash equivalents 0.4 (0.1) 0.5 500 % Cash used in discontinued operations $— ($36.4) 36.4 100 % Net change in cash and cash equivalents ($319.8) $5.0 ($324.8) (6,496) % Cash Flows from Operating Activities Net cash used in operating activities of continuing operations decreased primarily due to increased working capital resulting from lower inventory growth and timing of payables. Cash Flows from Investing Activities Our investing activities of continuing operations primarily relate to short-term investment transactions, purchases of property and equipment, and property and equipment related reimbursements. Cash used in investing activities of continuing operations decreased primarily due to decreases in net purchases of short term investments of $583.7 million and in net property and equipment purchases of $7.4 million. Cash Flows from Financing Activities For the three months ended September 29, 2024, cash provided by financing activities primarily consisted of a $10.0 million refund of escrow deposit, partially offset by $3.6 million in tax withholdings on vested equity awards. Off-Balance Sheet Arrangements As of September 29, 2024, we did not have any off-balance sheet arrangements. We do not use off-balance sheet arrangements with unconsolidated entities or related parties, nor do we use any other forms of off-balance sheet arrangements. Accordingly, our liquidity and capital resources are not subject to off-balance sheet risks from unconsolidated entities. Critical Accounting Policies and Estimates For information on critical accounting policies and estimates, see the “Critical Accounting Policies and Estimates” section of “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the 2024 Form 10-K. Recent Accounting Pronouncements For a description of recent accounting pronouncements pending adoption, including the expected dates of adoption and the estimated effects, if any, on our consolidated financial statements, see Note 1, “Basis of Presentation and New Accounting Standards,” to our unaudited consolidated financial statements in Part I, Item 1 of this Quarterly Report. 37 Table of Contents