Wolfspeed Provides Update on Steps to Strengthen Capital Structure

Rhea-AI Summary

Wolfspeed (NYSE: WOLF) has received $192.1 million in cash tax refunds from the advanced manufacturing tax credit under Section 48D, including $186.5 million for fiscal 2023 and 2024 taxes plus interest. This is part of approximately $1 billion in total expected Section 48D refunds, with over $600 million anticipated in fiscal 2026.

The company reaffirmed its Q3 FY2025 guidance, projecting revenue of $170-200 million, with a non-GAAP gross margin of -3% to 7% and a GAAP net loss of $(295)-$(270) million. Wolfspeed expects its cash balance to reach approximately $1.3 billion by the end of Q3 FY2025.

The company also confirmed its previous guidance including reduced capital expenditures for FY2026-2027, targeting EBITDA break-even at $800 million annual revenue, and projecting positive levered free cash flow in FY2027. Wolfspeed continues discussions with lenders, including Apollo and Renesas, while maintaining dialogue with the U.S. Department of Commerce regarding federal funding.

Positive

• Received $192.1 million in Section 48D tax refunds
• Expected to receive over $600 million additional tax refunds in FY2026
• Projected cash balance of $1.3 billion by end of Q3 FY2025
• Significant reduction in planned capital expenditures for FY2026-27
• Targeting $200 million unlevered operating cash flow in FY2026

Negative

• Projected Q3 FY2025 non-GAAP gross margin of -3% to 7%
• Expected Q3 FY2025 GAAP net loss of $270-295 million
• Continuing discussions with lenders suggesting potential financing concerns
• North Carolina Fab closure as part of restructuring actions

Insights

Financial Analyst

Wolfspeed's receipt of $192.1 million in Section 48D tax credits represents a significant liquidity injection for a company with a $1 billion market cap. This cash infusion, combined with their projection of an additional $600+ million in fiscal 2026 tax refunds, substantially strengthens their near-term financial position.

The projected $1.3 billion quarter-end cash balance provides crucial operational runway while the company navigates toward profitability. However, the reaffirmed guidance reveals persistent challenges: expected negative non-GAAP gross margins (between -3% and +7%) and substantial quarterly losses ($138-119 million non-GAAP).

Notably, the company is actively discussing its capital structure with lenders including Apollo and Renesas, suggesting potential debt restructuring of their convertible notes. This, combined with the article's title focus on "strengthening capital structure," indicates management is prioritizing balance sheet reinforcement.

The dramatic reduction in planned capital expenditures ($150-200 million for FY2026 dropping to $30-50 million for FY2027) signals a shift from aggressive expansion to financial sustainability. Their projection of reaching breakeven at $800 million annual revenue provides a clear operational target, though this represents a substantial increase from current revenue levels.

While the tax credit windfall doesn't address fundamental operational challenges, it buys Wolfspeed valuable time to execute their operational simplification strategy and work toward positive free cash flow targeted for FY2027.

Announces Receipt of $192 million in Section 48D Cash Tax Refunds from IRS

Reaffirms Fiscal Third Quarter 2025 Guidance and Current Cash Balance

Continues Active Discussions with Lenders, Including Apollo & Renesas

Remains in Dialogue with U.S. Department of Commerce

DURHAM, N.C.--(BUSINESS WIRE)-- Wolfspeed, Inc. (NYSE: WOLF) today announced that the Company has received $192.1 million in cash tax refunds from the advanced manufacturing tax credit under Section 48D. Funds include $186.5 million owed to the Company for both fiscal 2023 and fiscal 2024 taxes, as well as accrued interest. This announcement reflects a portion of the approximately $1 billion total Section 48D cash tax refunds that the Company expects to receive. As of the end of the second quarter of fiscal 2025, the Company had accrued a total of $865 million in Section 48D tax credits. The Company expects receipt of more than $600 million in cash tax refunds in fiscal year 2026. Wolfspeed intends to use the tax credit proceeds to strengthen its capital structure and for general corporate purposes. The Company expects that its cash balance at the end of its fiscal third quarter of 2025 will be approximately $1.3 billion, inclusive of these recently received 48D cash tax credits.

Reaffirming Guidance:

The Company is reaffirming its business outlook for the third quarter of fiscal 2025 as follows:

• Revenue from continuing operations of $170 million to $200 million
• Non-GAAP gross margin of (3)% to 7%
• Non-GAAP operating expenses of $99 million to $104 million
• GAAP net loss of $(295) million to $(270) million, or $(1.89) to $(1.73) per diluted share
• Non-GAAP net loss of $(138) million to $(119) million, or $(0.88) to $(0.76) per diluted share

In addition, the Company is also reaffirming the guidance that it issued in its Form 8-K filed on March 7, 2025:

• Fiscal 2026 capital expenditures of approximately $150 million to $200 million
• Fiscal 2027 capital expenditures of approximately $30 million to $50 million
• Adjusted EBITDA break-even point of $800 million of annual revenue upon completion of the operational simplifications, additional restructuring actions, including the closure of North Carolina Fab, and other cost reduction initiatives
• $200 million of unlevered operating cash flow in fiscal 2026 based on targeted fiscal 2026 revenue growth
• Positive levered free cash flow in fiscal 2027 following completion of refinancing transactions

Wolfspeed continues to explore alternatives with regard to its convertible notes, in partnership with its advisors, and remains in a dialogue with lenders, including Apollo and Renesas. The Company also maintains constructive dialogue with the White House, its legislators, and the U.S. Department of Commerce to secure federal funding and on ways Wolfspeed can support the Trump Administration’s efforts to reinforce U.S. industrial leadership in semiconductors, secure domestic supply chains, and reshore the manufacturing of critical mineral derivatives, including semiconductor wafers.

About Wolfspeed, Inc.

Wolfspeed (NYSE: WOLF) leads the market in the worldwide adoption of silicon carbide technologies that power the world’s most disruptive innovations. As the pioneers of silicon carbide, and creators of the most advanced semiconductor technology on earth, we are committed to powering a better world for everyone. Through silicon carbide material, Power Modules, Discrete Power Devices and Power Die Products targeted for various applications, we will bring you The Power to Make It Real.^TM Learn more at www.wolfspeed.com.

Non-GAAP Financial Measures:

This press release provides certain guidance on Wolfspeed’s financial results on both a GAAP and a non-GAAP basis. The GAAP results include certain costs, charges and expenses that are excluded from non-GAAP results. Investors and potential investors are encouraged to review the reconciliation of non-GAAP financial measures to their most directly comparable GAAP measures attached to the press release dated January 29, 2025 and available on Wolfspeed's website at https://investor.wolfspeed.com/events-and-presentations/default.aspx.

Forward Looking Statements:

This press release contains forward-looking statements involving risks and uncertainties, both known and unknown, that may cause Wolfspeed’s actual results to differ materially from those indicated in the forward-looking statements. Forward-looking statements by their nature address matters that are, to different degrees, uncertain, such as statements about its strategic plans and priorities, its ability to achieve its targets for the third quarter of fiscal 2025 and periods beyond, its financial and operational performance and its ability to reduce costs, optimize its capital structure, access funding and achieve profitability. Actual results could differ materially due to a number of factors, including but not limited to, ongoing uncertainty in global economic and geopolitical conditions, such as the ongoing military conflict between Russia and Ukraine and the ongoing conflicts in the Middle East, changes in progress on infrastructure development or changes in customer or industrial demand that could negatively affect product demand, including as a result of an economic slowdown or recession, collectability of receivables and other related matters if consumers and businesses defer purchases or payments, or default on payments; risks associated with its expansion plans, including design and construction delays, cost overruns, the timing and amount of government incentives actually received, including, among other things, any direct grants and tax credits, issues in installing and qualifying new equipment and ramping production, poor production process yields and quality control, and potential increases to its restructuring costs; Wolfspeed’s ability to obtain additional funding, including, among other things, from government funding, public or private equity offerings, or debt financings, on favorable terms and on a timely basis, if at all; its ability to take certain actions with respect to its capital and debt structure, including issuing the full amount of senior notes under its agreements with its lenders and restructuring or refinancing its convertible notes; the risk that Wolfspeed does not meet its production commitments to those customers who provide it with capacity reservation deposits or similar payments; the risk that Wolfspeed may experience production difficulties that preclude it from shipping sufficient quantities to meet customer orders or that result in higher production costs, lower yields and lower margins; its ability to lower costs; the risk that Wolfspeed’s results will suffer if it is unable to balance fluctuations in customer demand and capacity, including bringing on additional capacity on a timely basis to meet customer demand or scaling back its manufacturing expenses or overhead costs quickly enough to correspond to lower than expected demand; the risk that longer manufacturing lead times may cause customers to fulfill their orders with a competitor's products instead; product mix; risks associated with the ramp-up of production of Wolfspeed’s new products, and its entry into new business channels different from those in which Wolfspeed has historically operated; the ability to convert customer design-ins to design-wins and sales of significant volume, and, if customer design-in activity does result in such sales, when such sales will ultimately occur and what the amount of such sales will be; the risk that the markets for Wolfspeed’s products will not develop as it expects, including the adoption of its products by electric vehicle manufacturers and the overall adoption of electric vehicles; the risk that the economic and political uncertainty caused by the tariffs imposed by the United States on Chinese goods, and corresponding Chinese tariffs and currency devaluation in response, may continue to negatively impact demand for its products; the risk that Wolfspeed or its channel partners are not able to develop and expand customer bases and accurately anticipate demand from end customers, including production and product mix, which can result in increased inventory and reduced orders as Wolfspeed experiences wide fluctuations in supply and demand; risks related to international sales and purchases; risks resulting from the concentration of its business among few customers, including the risk that customers may reduce or cancel orders or fail to honor purchase commitments; the risk that Wolfspeed’s investments may experience periods of significant market value and interest rate volatility causing it to recognize fair value losses on its investment; the risk posed by managing an increasingly complex supply chain (including managing the impacts of supply constraints in the semiconductor industry and meeting purchase commitments under take-or-pay arrangements with certain suppliers) that has the ability to supply a sufficient quantity of raw materials, subsystems and finished products with the required specifications and quality; risks relating to outbreaks of infectious diseases or similar public health events, including the risk of disruptions to Wolfspeed’s operations, supply chain, including its contract manufacturers, or customer demand; the risk Wolfspeed may be required to record a significant charge to earnings if its remaining goodwill or amortizable assets become impaired; risks relating to confidential information theft or misuse, including through cyber-attacks or cyber intrusion; Wolfspeed’s ability to complete development and commercialization of products under development; the rapid development of new technology and competing products that may impair demand or render its products obsolete; the potential lack of customer acceptance for its products; risks associated with ongoing litigation; the risk that customers do not maintain their favorable perception of Wolfspeed’s brand and products, resulting in lower demand for its products; the risk that its products fail to perform or fail to meet customer requirements or expectations, resulting in significant additional costs; risks associated with strategic transactions; the risk that Wolfspeed is not able to successfully execute or achieve the potential benefits of its efforts to enhance its value; and other factors discussed in Wolfspeed’s filings with the Securities and Exchange Commission (SEC), including its report on Form 10-K for the fiscal year ended June 30, 2024, and subsequent reports filed with the SEC. These forward-looking statements represent Wolfspeed's judgment as of the date of this release. Except as required under the United States federal securities laws and the rules and regulations of the SEC, Wolfspeed disclaims any intent or obligation to update any forward-looking statements after the date of this release, whether as a result of new information, future events, developments, changes in assumptions or otherwise.

View source version on businesswire.com: https://www.businesswire.com/news/home/20250328806681/en/

Tyler Gronbach

Wolfspeed, Inc.

Vice President of External Affairs

Phone: 919-407-4820

investorrelations@wolfspeed.com

Media Relations:

Bridget Johnson

Head of Corporate Marketing and Communications

Phone: 919-407-6651

media@wolfspeed.com

Source: Wolfspeed, Inc.

FAQ

How much did Wolfspeed (WOLF) receive in Section 48D tax refunds and what is the total expected amount?

Wolfspeed received $192.1 million in Section 48D tax refunds, part of approximately $1 billion total expected refunds, with over $600 million anticipated in fiscal 2026.

What is Wolfspeed's (WOLF) projected revenue guidance for Q3 FY2025?

Wolfspeed projects revenue from continuing operations of $170 million to $200 million for Q3 FY2025.

When does Wolfspeed (WOLF) expect to achieve positive levered free cash flow?

Wolfspeed expects to achieve positive levered free cash flow in fiscal 2027 following completion of refinancing transactions.

What is Wolfspeed's (WOLF) expected cash balance for Q3 FY2025?

Wolfspeed expects its cash balance to be approximately $1.3 billion at the end of Q3 FY2025, including the recently received 48D tax credits.

What are Wolfspeed's (WOLF) capital expenditure projections for FY2026 and FY2027?

Wolfspeed projects capital expenditures of $150-200 million for FY2026 and $30-50 million for FY2027.