What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-05-09 compared with 2025-01-30 · 114 added, 107 removed, 178 unchanged (55% of the section changed)

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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.

As discussed more fully 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.

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We continue to experience increased mid- and long-term demand for our power products designed for electrical vehicle applications, though at a slower pace than initially expected.

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.

We believe that this 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.

• Intense and Constantly Evolving Competitive Environment.

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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.

We continue to monitor the recent changes in global trade policy, including tariffs and related trade actions announced by the U.S., China and other countries.

The degree to which such tariffs and other related actions impact our business, financial condition and results of operations will depend on future developments, which are uncertain.

Changes in trade policy, such as the imposition or expansion 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.

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To enforce or protect intellectual property rights, litigation or threatened litigation is common.

Overview of the six months ended December 29, 2024

The following is a summary of our continuing operations financial results as of and for the six months ended December 29, 2024 compared to the six months ended December 31, 2023, unless otherwise stated.

• Our year-over-year revenue decreased ($30.6) million to $375.2 million.

Overview of the nine months ended March 30, 2025

The following is a summary of our continuing operations financial results as of and for the nine months ended March 30, 2025 compared to the nine months ended March 31, 2024, unless otherwise stated.

• Our year-over-year revenue decreased ($45.9) million to $560.6 million, primarily driven by weaker demand for applications serving the industrial and energy end markets, partially offset by continued growth from our automotive products.

• Gross margin decreased to (17.1)% from 12.4%.

Gross profit decreased to ($73.4) million from $52.5 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 $55.3 million compared to $70.0 million.

Gross margin includes 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.

• Operating loss was $747.6 million compared to $299.4 million.

• Diluted loss per share was $6.88 compared to $3.18.

• Combined cash, cash equivalents and short-term investments was $1,404.8 million at December 29, 2024 and $2,174.6 million at June 30, 2024.

• Long-term debt, net was $6,423.8 million at December 29, 2024 and $6,161.1 million at June 30, 2024.

• Combined cash, cash equivalents and short-term investments was $1,329.6 million at March 30, 2025 and $2,174.6 million at June 30, 2024.

• Long-term debt, net was $6,511.8 million at March 30, 2025 and $6,161.1 million at June 30, 2024.

• Cash used in operating activities was $469.2 million compared to $431.8 million.

• Purchases of property and equipment, net were $796.8 million (net of $42.0 million in reimbursements) compared to $972.8 million (net of $79.4 million in reimbursements).

• Design-ins were $3.0 billion compared to $4.3 billion.

• Design-wins were $2.1 billion compared to $4.4 billion.

• Purchases of property and equipment, net were $820.9 million (net of $238.6 million in reimbursements) compared to $1,451.3 million (net of $178.4 million in reimbursements), primarily due to a planned decrease in capital expenditures and our initial receipt of Section 48D Advanced Manufacturing Investment Credits (AMIC) refundable tax credits, both related to our expansion initiatives.

• Design-wins and design-ins decreased for the nine months ended March 30, 2025 compared to the same period ended March 31, 2024.

Design-wins for the third quarter of fiscal 2025 were the second highest in company history, as customers begin to ramp previously reported design-ins, although at a lower ramp rate than initially expected

Business Outlook

We believe we are uniquely positioned as an innovator in the global semiconductor industry.

We are committed to a plan 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, and an expansion of our materials factory in Durham, North Carolina and the construction of a new materials manufacturing facility in Siler City, North Carolina.

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.

We are currently focused on three key priorities designed to put us on a path toward long-term growth and profitability:

• improving the financial performance of the company

• taking aggressive steps to strengthen our balance sheet

• deploying cost-efficient capital to support our growth plan

We believe these efforts will support our goals of delivering long-term growth and profitability, while enabling us to continue to invest in our business to further develop the technologies and accelerate the growth opportunities of silicon carbide materials and silicon carbide power devices and modules.

In addition, we are focused on continuous improvement in the number of usable items in a production cycle (yield) as our manufacturing technologies become more complex.

We have significantly improved yields and expect to continue to improve yields as we transition additional device production to the Mohawk Valley Fab, where we have consistently realized quarterly yield improvements during fiscal 2025.

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.

We have made targeted adjustments to the 2025 Restructuring Plan as we identify additional opportunities to optimize our cost structure while continuing to support future growth and meet long-term demand.

Refer to Note 13, "Restructuring," 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.

For fiscal 2025, we have targeted approximately $1.1 billion to $1.3 billion of net capital investment.

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-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.

We incurred approximately $0.8 billion of net capital investment for the nine months ended March 30, 2025 and expect to incur an additional $0.2 billion of net capital investment during the fourth quarter of fiscal 2025.

Our net capital investment during fiscal 2025 includes approximately $0.2 billion of incentives received for eligible expenditures, primarily under the AMIC refundable tax credits, as further discussed in Note 1, "Basis of Presentation".

Our major expansion projects at the Mohawk Valley Fab and Siler City, NC facility are approaching substantial completion.

Consequently, we expect gross capital investment to decrease significantly, to approximately $0.2 billion in fiscal 2026.

We also expect to receive an additional $0.6 billion of incentives primarily related to the AMIC refundable tax credits, during fiscal 2026.

Fiscal Quarters

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Results of Operations

Selected consolidated statements of operations data for the three and six months ended December 29, 2024 and December 31, 2023 were as follows:

Three months ended Six months ended

December 29, 2024 December 31, 2023 December 29, 2024 December 31, 2023

Selected consolidated statements of operations data for the three and nine months ended March 30, 2025 and March 31, 2024 were as follows:

Three months ended Nine months ended

March 30, 2025 March 31, 2024 March 30, 2025 March 31, 2024

(in millions of U.S.

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Loss before income taxes (285.4) (153.9) % (148.8) (74.1) % (939.5) (167.6) % (398.1) (65.6) %

Income tax (benefit) expense (0.1) (0.1) % 0.3 0.1 % 0.3 0.1 % 0.5 0.1 %

Income tax expense 0.1 0.1 % 0.1 — % 0.4 0.1 % 0.6 0.1 %

Net loss from continuing operations (285.5) (154.0) % (148.9) (74.2) % (939.9) (167.7) % (398.7) (65.7) %

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Discontinued operations — — — (2.32)

Three months ended Six months ended

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(in millions of U.S.

Dollars) December 29, 2024 December 31, 2023 Change December 29, 2024 December 31, 2023 Change

Dollars) March 30, 2025 March 31, 2024 Change March 30, 2025 March 31, 2024 Change

Power Products $107.5 $102.1 $5.4 5 % $295.4 $311.0 ($15.6) (5) %

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Revenue $185.4 $200.7 ($15.3) (8) % $560.6 $606.5 ($45.9) (8) %

Revenue for the three and six months ended December 29, 2024 as compared to the three and six months ended December 31, 2023 for our power product line decreased due to the softening of demand in industrial and energy applications.

This decrease has been partially offset by growth in demand for automotive applications, though we are beginning to experience slower growth for automotive applications than we previously expected.

The decrease in our materials products revenue for all periods is primarily driven by weakening demand across end markets.

Net sales for the three and nine months ended March 30, 2025 were down 8% compared to the same periods in 2024.

• Net sales of our Power Product offerings were primarily impacted by ongoing weakness in the industrial and energy end market.

This decrease has been primarily offset by growth in demand for automotive applications, though we are continuing to experience slower growth for automotive applications than we previously expected.

• Net sales of our Materials Product offerings were primarily impacted by weaker end market demand that has resulted in some of our customers adjusting the timing and size of their orders.

Gross Profit and Gross Margin

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(in millions of U.S.

Dollars) December 29, 2024 December 31, 2023 Change December 29, 2024 December 31, 2023 Change

Dollars) March 30, 2025 March 31, 2024 Change March 30, 2025 March 31, 2024 Change

Gross (loss) profit

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Gross margin (12.1) % 11.2 % (17.1) % 12.4 %

Gross profit and gross margin were impacted by a less favorable product mix resulting from the softening of demand for our products.

Production capacity in the Durham fab shifted from industrial and energy products to automotive products, which have a higher production cost in that fab.

Gross profit for the three and six months ended December 29, 2024 includes:

The primary drivers of the decrease in gross profit and gross margin for the three and nine months ended March 30, 2025 compared to the same periods in 2024 included:

• $16.8 million and $82.5 million, respectively, of costs in connection with the 2025 Restructuring Plan as discussed in Note 13, "Restructuring," to our unaudited consolidated financial statements in Part I, Item 1 of this Quarterly Report.

• $28.9 million and $55.3 million, respectively, of underutilization costs in connection with the start of production at our Mohawk Valley Fab.

Underutilization costs were $35.6 million and $70.0 million for the three and six months ended December 31, 2023, respectively.

• Unfavorable changes in product mix driven by (1) a decrease in the percent of total net sales attributable to our higher-margin Materials Products offerings and (2) an increase in the percent of Power Product net sales attributable to lower margin automotive applications, due to ongoing weakness in the industrial & energy end market.

Production capacity in the Durham fab has shifted from industrial and energy products to automotive products, which have a higher production cost in that fab.

The gross margin impact of the above items was partially offset by slightly lower underutilization costs due to the timing of the Mohawk Valley Fab ramp.

We incurred $26.3 million and $81.6 million for the three and nine months ended March 30, 2025, respectively, of underutilization costs in connection with the start of production at our Mohawk Valley Fab.

Underutilization costs were $30.4 million and $100.4 million for the three and nine months ended March 31, 2024, respectively.

Research and Development

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(in millions of U.S.

Dollars) December 29, 2024 December 31, 2023 Change December 29, 2024 December 31, 2023 Change

Dollars) March 30, 2025 March 31, 2024 Change March 30, 2025 March 31, 2024 Change

Research and development $42.2 $52.5 ($10.3) (20) % $137.5 $141.9 ($4.4) (3) %

Percent of revenue 23 % 26 % 25 % 23 %

The increase in research and development expenses for the six months ended December 29, 2024 as compared to the six months ended December 31, 2023 was primarily due to increases in product material costs, partially offset by a decrease in salary and benefits costs related to the reduction in headcount.

The decrease in research and development expenses for the three months ended December 29, 2024 as compared to the three months ended December 31, 2023 was immaterial.

The decrease in research and development expenses for the three and nine months ended March 30, 2025 as compared to the three and nine months ended March 31, 2024 was primarily due to a decrease in salary and benefits costs related to lower headcount and lower material costs from a planned decrease in research and development wafer starts associated with product transfers and technology qualifications related to the Mohawk Valley Fab ramp.

Sales, General and Administrative

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(in millions of U.S.

Dollars) December 29, 2024 December 31, 2023 Change December 29, 2024 December 31, 2023 Change

Dollars) March 30, 2025 March 31, 2024 Change March 30, 2025 March 31, 2024 Change

Sales, general and administrative $41.1 $55.8 ($14.7) (26) % $154.4 $184.8 ($30.4) (16) %

Percent of revenue 22 % 28 % 28 % 30 %

The decrease in sales, general and administrative expenses for the three and six months ended December 29, 2024 as compared to the three and six months ended December 31, 2023 was primarily driven by a decrease in salary and benefits costs of approximately $11.0 million and $13.6 million, respectively, due to reduced headcount and a decrease in travel and professional services of $3 million as compared to the six months ended December 31, 2023, resulting from cost optimization.

The decrease in sales, general and administrative expenses for the three and nine months ended March 30, 2025 as compared to the three and nine months ended March 31, 2024 was primarily driven by a reduction in salaries related to planned decreases in headcount and variable compensation costs of approximately $9.9 million and $24.0 million, respectively.

Outside services spending also decreased by $2.8 million and $6.5 million for the three and nine months ended March 30, 2025, respectively, as compared to the same periods in fiscal 2024 as a result of our recent efforts to optimize our cost structure.

Factory Start-up Costs

Three months ended Six months ended

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(in millions of U.S.

Dollars) December 29, 2024 December 31, 2023 Change December 29, 2024 December 31, 2023 Change

Dollars) March 30, 2025 March 31, 2024 Change March 30, 2025 March 31, 2024 Change

Factory start-up costs $23.5 $14.4 $9.1 63 % $66.0 $33.3 $32.7 98 %

Start-up costs increased for the three and six months ended December 29, 2024 as compared to the three and six months ended December 31, 2023 due to increased costs incurred in connection with the construction of our materials manufacturing facility in Siler City, North Carolina.

Start-up costs increased for the three and nine months ended March 30, 2025 as compared to the three and nine months ended March 31, 2024 due to increased costs incurred in connection with the construction of our materials manufacturing facility in Siler City, North Carolina.

These costs are expected to be minimal once the facility begins to ramp production.

Loss on Disposal or Impairment of Long-Lived Assets

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(in millions of U.S.

Dollars) December 29, 2024 December 31, 2023 Change December 29, 2024 December 31, 2023 Change

Dollars) March 30, 2025 March 31, 2024 Change March 30, 2025 March 31, 2024 Change

Loss on disposal or impairment of long-lived assets $31.1 $0.6 $30.5 5,083% $157.5 $1.0 $156.5 15,650%

Loss on disposal or impairment of long-lived 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.

Loss on disposal or impairment of long-lived assets for the three and six months ended December 29, 2024 consist of impairments of abandoned assets totaling $124.5 million related to the 2025 Restructuring Plan as discussed in Note 13, "Restructuring," to our unaudited consolidated financial statements in Part I, Item 1 of this Quarterly Report.

Loss on disposal or impairment of long-lived assets primarily includes the write-offs of fixed assets, as well as the write-offs of impaired or abandoned patents, partially offset by proceeds from asset sales.

Loss on disposal or impairment of long-lived assets for the three and nine months ended March 30, 2025 consist of impairments of abandoned facility-related assets totaling $155.2 million related to the 2025 Restructuring Plan as discussed in Note 13, "Restructuring," to our unaudited consolidated financial statements in Part I, Item 1 of this Quarterly Report.

Other Operating Expense

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(in millions of U.S.

Dollars) December 29, 2024 December 31, 2023 Change December 29, 2024 December 31, 2023 Change

Restructuring costs and other exit costs $ 32.2 $ — $ 32.2 100 % $ 85.0 $ — $ 85.0 100 %

Dollars) March 30, 2025 March 31, 2024 Change March 30, 2025 March 31, 2024 Change

Legal settlements 17.0 — 17.0 100 % 17.0 — 17.0 100 %

Restructuring and other exit costs 10.0 $ — $ 10.0 100 % 95.0 $ — 95.0 100 %

Project, transformation and transaction costs 6.8 $ 5.3 $ 1.5 28 % 20.6 $ 12.5 8.1 65 %

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Other operating expense $ 33.8 $ 5.3 $ 28.5 538 % $ 135.4 $ 12.5 $ 122.9 983 %

Restructuring and other closure-related costs for the three and six months ended December 29, 2024 consist of:

• $15.0 million and $51.5 million, respectively, of employee severance and benefit costs;

• $5.7 million and $12.8 million, respectively, of non-cash asset-related charges from accelerated depreciation;

• $11.5 million and $20.7 million of other closure-related costs related to the 2025 Restructuring Plan as discussed in Note 13, "Restructuring," to our unaudited consolidated financial statements in Part I, Item 1 of this Quarterly Report.

The increase in Other Operating Expenses during the three and nine months ended March 30, 2025 compared to the three and nine months ended March 31, 2024 was primarily driven by costs related to the 2025 Restructuring Plan.

Additionally, during the third quarter of fiscal 2025, we agreed to settle several ongoing legal matters and recognized the associated financial statement impact of those settlements in Other Operating Expense.

Refer to Note 13, "Restructuring," in Part I, Item 1 of this Quarterly Report for more information on Restructuring and Other Exit Costs.

Refer to Note 5, "Commitments and Contingencies," in Part I, Item 1 of this Quarterly Report for more information on our accounting for contingent losses.

Non-Operating Expense, net

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(in millions of U.S.

Dollars) December 29, 2024 December 31, 2023 Change December 29, 2024 December 31, 2023 Change

Dollars) March 30, 2025 March 31, 2024 Change March 30, 2025 March 31, 2024 Change

Interest income ($19.4) ($30.1) $10.7 (36) % ($58.6) ($108.9) $50.3 (46) %

Interest expense, net of capitalized interest 85.4 59.5 25.9 44 % 230.4 185.5 44.9 24 %

Loss on customs matter

— 7.7 (7.7) (100) % — 7.7 (7.7) (100) %

Loss on Wafer Supply Agreement — 6.9 (6.9) (100) % 9.2 20.4 (11.2) (55) %

Unrealized gain on equity investment (15.7) (5.4) (10.3) 191 % (15.7) (5.4) (10.3) 191 %

Unrealized loss (gain) on equity investment 24.9 (1.9) 26.8 (1,411) % 9.2 (7.3) 16.5 (226) %

Other expense, net — 0.3 (0.3) (100) % 1.7 1.3 0.4 31 %

2 unchanged sentences

Interest income.

The decrease in interest income for the three and six months ended December 29, 2024 as compared to the three and six months ended December 31, 2023 was primarily due to lower short-term investment balances.

The decrease in interest income for the three and nine months ended March 30, 2025 as compared to the three and nine months ended March 31, 2024 was primarily due to lower short-term investment balances and a lower interest rate environment.

Interest expense, net of capitalized interest .

The increase in interest expense for the three and six months ended December 29, 2024 as compared to the three and six months ended December 31, 2023 was primarily due to higher average debt outstanding offset, in part, by increased interest capitalization in the three and six months ended December 29, 2024.

The increase in interest expense for the three and nine months ended March 30, 2025 as compared to the three and nine months ended March 31, 2024 was primarily due to higher average debt outstanding and a higher average borrowing rate, offset, in part, by increased interest capitalization in the three and nine months ended March 30, 2025.

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

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(in millions of U.S.

Dollars) December 29, 2024 December 31, 2023 Change December 29, 2024 December 31, 2023 Change

Income tax (benefit) expense ($0.1) $0.3 ($0.4) (133) % $0.3 $0.5 ($0.2) (40) %

Dollars) March 30, 2025 March 31, 2024 Change March 30, 2025 March 31, 2024 Change

Income tax expense $0.1 $0.1 $— — % $0.4 $0.6 ($0.2) (33) %

Effective tax rate — % — % — % — %

The change in our effective tax rate for the three and six months ended December 29, 2024 compared to the three and six months ended December 31, 2023 was immaterial.

The change in our effective tax rate for the three and nine months ended March 30, 2025 compared to the three and nine months ended March 31, 2024 was immaterial.

In general, the variation between our effective income tax rate and the current U.S.

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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.

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, we expect to need additional funding to fully complete all of our intended capacity expansions.

We expect to need additional funding to fully complete all of our intended capacity expansions.

Further, we may need to reduce capital expenditures and/or take other steps to preserve working capital in the future in order to ensure that we can meet our needs and obligations and maintain compliance with our debt covenants.

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 (the 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.

Our principal sources of liquidity are cash on hand and marketable securities.

In the second quarter of fiscal 2025, we filed a shelf registration statement on Form S-3 to register for possible future sale shares of our common stock.

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The ATM Program concluded on January 14, 2025, and we completed the sale of approximately 27.8 million additional shares of common stock for total gross proceeds of approximately $200.0 million and net proceeds of approximately $195.2 million, after $4 million in commissions to the Managers and $0.8 million in other offering costs.

As discussed in Note 9 "Long-term Debt," to our unaudited consolidated financial statements in Part I, Item 1 of this Quarterly Report, we also obtained additional funding of $250.0 million through the issuance of additional 2030 Senior Notes, and expect to pursue additional funding through debt refinancing (which may involve refinancing, modifying or retiring some of our existing debt), equity offerings or other non-debt capital sources.

In the third quarter of fiscal 2025, we received an initial federal cash tax refund of $186.5 million for the AMIC claimed under Section 48D of the Internal Revenue Code, related to capital projects included in fiscal 2023 and fiscal 2024 tax returns.

As described above and in Note 1, “Basis of Presentation and New Accounting Standards – Liquidity,” to our unaudited consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q, we have a significant amount of outstanding indebtedness and have engaged external advisors to assist with the evaluation of a number of strategic alternatives, including a potential out-of-court or in-court capital restructuring.

These alternatives include, but are not limited to, restructuring, refinancing or amending our existing debt, seeking new financing or pursuing asset sales to bolster liquidity.

No definitive terms have been agreed upon to date and there can be no assurance that we will reach an agreement or successfully complete a transaction in a timely manner or at all.

Any restructuring or other transaction is expected to be costly, would likely be substantially dilutive to our existing shareholders, and would likely limit our ability to utilize our net operating loss carry forwards (and/or other nonrefundable tax attributes).

Our ability to generate and monetize certain refundable tax credits, such as the AMIC, is not anticipated to be limited as a result of any potential strategic alternatives being pursued.

While we consider these strategic alternatives, we retain sufficient liquidity in the near term, with approximately $1,329.6 million of unrestricted cash and cash equivalents and short-term investments on its unaudited consolidated balance sheet as of March 30, 2025, compared to scheduled debt repayments and debt service costs of $575 million and $322 million, respectively, over the next 12 months.

We also plan to submit for approximately $600 million in cash tax refunds related to the amounts eligible for reimbursement under the AMIC over the next 12 months.

We expect that our current operating forecast over the next 12 months will allow us to maintain operations and meet our obligations to customers, vendors and employees in the ordinary course of business.

However, due to our ongoing consideration of an in-court restructuring that would result in an event of default during the implementation of that potential solution, management has concluded that there is substantial doubt about our ability to continue as a going concern as of the issuance date of the unaudited consolidated financial statements included in this Quarterly Report on Form 10-Q, in accordance with the requirements of ASC 205-40, “Presentation of Financial Statements – Going Concern.”

Sources of Liquidity

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(in millions of U.S.

Dollars) December 29, 2024 June 30, 2024 Change

Dollars) March 30, 2025 June 30, 2024 Change

Cash and cash equivalents $730.2 $1,045.9 ($315.7)

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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.

As of December 29, 2024, we had unrealized losses on our short-term investments of $4.2 million.

All of our short-term investments had investment grade ratings, and any such investments that were in an unrealized loss position at December 29, 2024 were in such position due to interest rate changes, sector credit rating changes or company-specific rating changes.

We are required to maintain a minimum amount of at least $630.0 million in unrestricted cash and permitted investments 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.

All of our short-term investments had investment grade ratings, and any such investments that were in an unrealized loss position at March 30, 2025 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 December 29, 2024 until the investments fully recover in market value.

No allowance for credit losses was recorded as of December 29, 2024.

We believe we are able and intend to hold each of the investments held with an unrealized loss as of March 30, 2025 until the investments fully recover in market value.

No allowance for credit losses was recorded as of March 30, 2025.

We also continue to actively pursue opportunities for federal funding, including but not limited to awards that may be made available through the CHIPS Act or other programs, including the recently established US Investment Accelerator Office ("federal funding opportunities").

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.

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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 December 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 December 29, 2024, we have spent approximately $1.9 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.

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.

The initial phase of our major expansion projects at the Mohawk Valley Fab and Siler City, NC facility are approaching substantial completion.

Consequently, we expect gross capital investment to decrease significantly, to approximately $0.2 billion in fiscal 2026.

We also expect to receive an additional $0.6 billion of incentives primarily related to the AMIC refundable tax credits, during fiscal 2026.

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 $212.6 million of purchases over the next four years and a commitment to provide quarterly capacity reservation deposits with a remaining total of $11.1 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 9 "Long-term Debt," 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).

We have take-or-pay supplier agreements that require a minimum of $209.9 million of purchases over the next five years and a commitment to provide quarterly capacity reservation deposits with a remaining total of $7.1 million, as outlined further in Note 5, "Commitments and Contingencies," to our unaudited financial statements in Part I, Item 1 of this Quarterly Report.

As mentioned above, considering the significant amount of our outstanding indebtedness, we have engaged advisors to assist with the evaluation of a number of potential out-of-court and in-court strategic alternatives, including, but not limited to, restructuring, refinancing or amending our existing debt, seeking new financing or pursuing asset sales to bolster liquidity.

In summary, our cash flows were as follows:

Six months ended

Nine months ended

in millions of U.S.

December 29, 2024 December 31, 2023 Change

March 30, 2025 March 31, 2024 Change

Net cash used in operating activities of continuing operations ($469.2) ($431.8) ($37.4) (9) %

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Cash Flows from Operating Activities

Net cash used in operating activities of continuing operations increased primarily due to an increased net loss, offset in part by increased working capital resulting from lower inventory growth and timing of payables.

Net cash used in operating activities of continuing operations increased due to higher interest payments on our long-term debt and payments under the 2025 Restructuring Plan, offset in part by reductions in personnel costs and other variable spend due to our 2025 Restructuring Plan and related cost optimization efforts.

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.

Our investing activities of continuing operations primarily relate to short-term investment transactions, purchases of property and equipment, and property and equipment related reimbursements under various federal, state, and local incentive programs.

Cash used in investing activities of continuing operations decreased primarily due to decreases in net purchases of short-term investments of $761.1 million and in net property and equipment purchases of $630.4 million.

The decrease in net property and equipment purchases was driven by lower capital expenditures associated with our ongoing expansion projects and the receipt of cash tax refunds as discussed in Note 1 - "Basis of Presentation and New Accounting Standards," in our unaudited financial statements in Part I, Item 1 of this Quarterly Report.

Cash Flows from Financing Activities

For the six months ended December 29, 2024, cash provided by financing activities primarily consisted of proceeds of $240 million from the issuance of additional 2030 Senior Notes, net proceeds of $100 million from issuances of common stock and a $10.0 million refund of escrow deposit, partially offset by $26.1 million of debt issuance costs and $3.7 million in tax withholdings on vested equity awards.

For the nine months ended March 30, 2025, cash provided by financing activities primarily consisted of proceeds of $240 million from the issuance of additional 2030 Senior Notes, net proceeds of $203.9 million from issuances of common stock primarily related to our ATM Program and a $10.0 million refund of escrow deposit, partially offset by $40.2 million of debt issuance costs and $3.9 million in tax withholdings on vested equity awards.

For the nine months ended March 31, 2024, we had proceeds of $1.5 billion primarily related to borrowings under our CRD Agreement during fiscal 2024 and $10.9 million from the issuance of common stock.

These proceeds were partially offset by payments of $46 million for debt issuance costs and $17.5 million in tax withholdings on vested equity awards.

Off-Balance Sheet Arrangements

As of December 29, 2024, we did not have any off-balance sheet arrangements.

As of March 30, 2025, 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.

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What changed 10-Q

Item 2. Management’s Discussion and Analysis