WOLFSPEED, INC.WOLF
WOLFSPEED, INC. Segments Disclosure
Reportable SegmentsReportable segments are components of the Company that the Chief Operating Decision Maker (CODM) regularly reviews when allocating resources and assessing performance. The Company’s CODM reviews segment performance and allocates resources based upon segment revenue and segment gross profit. The Company's identified CODM is the Chief Executive Officer.
The Company’s operating and reportable segments are:
•Wolfspeed
•LED Products
The Wolfspeed segment includes silicon carbide materials, power devices and RF devices, and the LED Products segment includes LED chips and LED components.
Financial Results by Reportable Segment
The table below reflects the results of the Company’s reportable segments as reviewed by the CODM for fiscal 2020, 2019 and 2018. The Company used the same accounting policies to derive the segment results reported below as those used in the Company’s consolidated financial statements.
The Company’s CODM does not review inter-segment transactions when evaluating segment performance and allocating resources to each segment, and inter-segment transactions are not included in the segment revenue presented in the table below. As such, total segment revenue in the table below is equal to the Company’s consolidated revenue.
The Company’s CODM reviews gross profit as the lowest and only level of segment profit. As such, all items below gross profit in the consolidated statements of operations must be included to reconcile the consolidated gross profit presented in the table below to the Company’s consolidated loss before income taxes.
In order to determine gross profit for each reportable segment, the Company allocates direct costs and indirect costs to each segment’s cost of revenue. The Company allocates indirect costs, such as employee benefits for manufacturing employees, shared facilities services, information technology, purchasing, and customer service, when the costs are identifiable and beneficial to the reportable segment. The Company allocates these indirect costs based on a reasonable measure of utilization that considers the specific facts and circumstances of the costs being allocated.
Unallocated costs in the table below consisted primarily of manufacturing employees’ stock-based compensation, expenses for quarterly or annual incentive plans, and matching contributions under the Company’s 401(k) plan. These costs were not allocated to the reportable segments' gross profit because the Company’s CODM does not review them regularly when evaluating segment performance and allocating resources.
For fiscal 2020, unallocated costs include incremental costs relating to operating our manufacturing operations during the COVID-19 pandemic. The majority of these incremental costs comprise additional labor costs paid to our manufacturing employees, increased cleaning costs, cleaning supplies and protective equipment, and the costs of implementing preventative safety measures, including increased wellness checks.
The cost of goods sold (COGS) acquisition related costs adjustment includes inventory fair value amortization of the fair value increase to inventory recognized at the date of acquisition, and other RF Power acquisition costs, impacting cost of revenue for fiscal 2018. These costs were not allocated to the reportable segments’ gross profit for fiscal 2018 because they represent an adjustment which does not provide comparability to the corresponding prior period and therefore were not reviewed by the Company's CODM when evaluating segment performance and allocating resources.
Revenue, gross profit and gross margin for each of the Company's segments were as follows:
| Revenue | Gross Profit and Gross Margin | ||||||||||||||||||||||||||||||||||
| Year Ended | Year Ended | ||||||||||||||||||||||||||||||||||
| (in millions of U.S. Dollars) | June 28, 2020 | June 30, 2019 | June 24, 2018 | June 28, 2020 | June 30, 2019 | June 24, 2018 | |||||||||||||||||||||||||||||
| Wolfspeed | $470.7 | $538.2 | $328.6 | $184.6 | $258.7 | $158.5 | |||||||||||||||||||||||||||||
| Wolfspeed gross margin | 39 | % | 48 | % | 48 | % | |||||||||||||||||||||||||||||
| LED Products | 433.2 | 541.8 | 596.3 | 91.1 | 150.0 | 157.9 | |||||||||||||||||||||||||||||
| LED Products gross margin | 21 | % | 28 | % | 26 | % | |||||||||||||||||||||||||||||
| Total segment reporting | $903.9 | $1,080.0 | $924.9 | 275.7 | 408.7 | 316.4 | |||||||||||||||||||||||||||||
Unallocated costs (1) | (27.4) | (17.7) | (9.0) | ||||||||||||||||||||||||||||||||
| COGS acquisition related costs | — | — | (5.4) | ||||||||||||||||||||||||||||||||
| Consolidated gross profit | $248.3 | $391.0 | $302.0 | ||||||||||||||||||||||||||||||||
| Consolidated gross margin | 27 | % | 36 | % | 33 | % | |||||||||||||||||||||||||||||
(1) Unallocated costs for the fiscal year ended June 28, 2020 include $8.5 million in incremental manufacturing costs relating to COVID-19.
Assets by Reportable Segment
Inventories are the only assets reviewed by the Company’s CODM when evaluating segment performance and allocating resources to the segments. The CODM reviews all of the Company's assets other than inventories on a consolidated basis. The following table sets forth the Company’s inventories by reportable segment for the fiscal years ended June 28, 2020 and June 30, 2019.
Unallocated inventories in the table below were not allocated to the reportable segments because the Company’s CODM does not review them when evaluating performance and allocating resources to each segment. Unallocated inventories consisted primarily of manufacturing employees’ stock-based compensation, quarterly or annual incentive compensation, and matching contributions under the Company’s 401(k) plan.
Inventories for each of the Company's segments were as follows:
| (in millions of U.S. Dollars) | June 28, 2020 | June 30, 2019 | |||||||||
| Wolfspeed | $97.3 | $81.6 | |||||||||
| LED Products | 76.2 | 99.2 | |||||||||
| Total segment inventories | 173.5 | 180.8 | |||||||||
| Unallocated inventories | 5.6 | 6.6 | |||||||||
| Consolidated inventories | $179.1 | $187.4 | |||||||||
Geographic Information
The Company conducts business in several geographic areas. Revenue is attributed to a particular geographic region based on the shipping address for the products. Disaggregated revenue from external customers by geographic area is as follows:
| For the Years Ended | |||||||||||||||||||||||||||||||||||
| June 28, 2020 | June 30, 2019 | June 24, 2018 | |||||||||||||||||||||||||||||||||
| (in millions of U.S. Dollars) | Revenue | % of Revenue | Revenue | % of Revenue | Revenue | % of Revenue | |||||||||||||||||||||||||||||
| United States | $ | 212.1 | 23 | % | $ | 261.4 | 24 | % | $ | 220.2 | 24 | % | |||||||||||||||||||||||
| China | 260.4 | 29 | % | 367.2 | 34 | % | 390.5 | 42 | % | ||||||||||||||||||||||||||
| Europe | 243.7 | 27 | % | 255.0 | 24 | % | 167.4 | 18 | % | ||||||||||||||||||||||||||
| Other | 187.7 | 21 | % | 196.4 | 18 | % | 146.8 | 16 | % | ||||||||||||||||||||||||||
| Total | $ | 903.9 | $ | 1,080.0 | $ | 924.9 | |||||||||||||||||||||||||||||
The Company’s tangible long-lived assets by country is as follows:
| (in millions of U.S. Dollars) | June 28, 2020 | June 30, 2019 | |||||||||
| United States | $773.1 | $558.6 | |||||||||
| China | 53.3 | 61.8 | |||||||||
| Other | 4.7 | 4.8 | |||||||||
| Total | $831.1 | $625.2 | |||||||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2020 | Aug 19, 2020 | Showing above |
| 2019 | Aug 21, 2019 | |
| 2018 | Aug 20, 2018 | |
| 2017 | Aug 23, 2017 | |
| 2016 | Aug 25, 2016 | |
About Segments Disclosures
Segment disclosures break a company into its reportable operating units, revealing revenue, profit, and asset allocation that consolidated financial statements obscure. Under ASC 280, segments must match how the chief operating decision maker views the business, providing a window into internal management structure and resource allocation priorities.
Key signals: compare segment margins to identify which units drive profitability and which destroy value. Watch for changes in the number of reportable segments — segment aggregation or disaggregation often coincides with strategic shifts or attempts to obscure declining performance. Intersegment elimination patterns reveal internal pricing practices. The reconciliation between segment totals and consolidated figures exposes corporate overhead allocation and unallocated items. Geographic revenue concentration highlights regulatory and currency exposure. Compare segment-level capital expenditure against segment revenue to assess where management is investing for future growth versus harvesting existing assets.