Item 1A. RISK FACTORS

In addition to the other information set forth in this Quarterly Report on Form 10-Q, including the additional risk factors set forth below in this Item 1A, carefully consider the risk factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended June 30, 2023, any of which could materially affect our business, financial condition or future results. Those risk factors are not the only risks facing the Company. Additional risks and uncertainties not currently known or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

Risks Relating to the Announced Transactions Involving Our Silicon Carbide Business

We are subject to a number of risks associated with the possibility that the equity investments contemplated by the respective investment agreements entered into with Denso Corporation and Mitsubishi Electric Corporation and certain related supply arrangements are not consummated, and these risks could adversely impact our operations and our liquidity position.

On October 10, 2023, Silicon Carbide LLC (“Silicon Carbide”), a wholly owned subsidiary of the Company, entered into (i) an investment agreement (the “Denso Investment Agreement”) with Denso Corporation (“Denso”) pursuant to which, subject to the terms and conditions set forth therein, Silicon Carbide has agreed to issue and sell to Denso 16,666,667 Class A Common Units of Silicon Carbide (“Common Units”) for an aggregate purchase price of $500,000,000, and (ii) an investment agreement (together with the Denso Investment Agreement, the “Investment Agreements”) with Mitsubishi Electric Corporation (“MELCO”) pursuant to which, subject to the terms and conditions set forth therein, Silicon Carbide has agreed to issue and sell to MELCO 16,666,667 Common Units for an aggregate purchase price of $500,000,000 (the issuance and sale of the Common Units to Denso and MELCO, collectively the “Equity Investments”). Following the consummation of the Equity Investments, it is expected that the Company will own approximately 75% of Silicon Carbide’s outstanding Common Units, Denso will own approximately 12.5% of the outstanding Common Units and MELCO will own approximately 12.5% of the outstanding Common Units. In connection with the entrance into the Investment Agreements, Silicon Carbide also has agreed to enter into certain supply arrangements with each of MELCO and Denso pursuant to which Silicon Carbide will supply 150 mm and 200 mm silicon carbide substrates (collectively, the “Supply Arrangements”).

We cannot provide any assurance that the transactions contemplated by the Investment Agreement will be consummated on our anticipated timing or at all. In the event that the transactions contemplated by the Investment Agreements are not consummated, we would be subject to a number of risks, including risks associated with:

• not receiving the anticipated benefits of either the $1.0 billion of additional liquidity that we would receive from the aggregate purchase price under the Investment Agreements or the Supply Arrangements;

• disruption to and uncertainty in our silicon carbide business and our relationships with our customers during the pendency of the Equity Investments, including any attempts by our customers to terminate or renegotiate their relationships with us or decisions by our customers to defer or delay purchases from us;

• having operated our silicon carbide business in accordance with the covenants set forth in the Investment Agreements during the pendency of the Equity Investments;

• having incurred significant transaction costs in connection with the transactions contemplated by the Investment Agreements, for which we are responsible regardless of whether the transactions are consummated;

• potential difficulties in hiring, retaining and motivating key personnel during the pendency of the Equity Investments or as a result of uncertainties generated by the transaction process or any developments or actions relating to it; and

• the diversion of our management’s attention away from the operation of the Company’s other businesses during the pendency of the Equity Investments.

Our failure to consummate the Equity Investments and the Supply Arrangements could adversely impact our operations, including the operations of our silicon carbide business, and our liquidity position and could limit our ability to pursue additional strategic transactions in the future.

We also are subject to a number of risks in the event that the transactions contemplated by the Investment Agreements are consummated, and these risks could adversely impact our operations, financial condition and business.

If the transactions contemplated by the Investment Agreements are consummated as expected on the terms set forth in the Investment Agreements, we also would be subject to a number of risks. For example, we would be subject to risks associated with:

• the separation of our silicon carbide business in accordance with the terms of the Investment Agreements;

• unfavorable reaction to the Equity Investments and the Supply Arrangements by our customers, competitors, suppliers and employees;

• the commitments that Silicon Carbide would make under the Supply Arrangements, including the terms of the Supply Arrangements in comparison to the terms that are available under other commercial opportunities that Silicon Carbide may have in the future; and

• the consequences of any disruptions to our silicon carbide business during the pendency of the transactions contemplated by the Investment Agreements, including as a result of factors discussed above under “We are subject to a number of risks associated with the possibility that the equity investments contemplated by the respective investment agreements entered into with Denso Corporation and Mitsubishi Electric Corporation and certain related supply arrangements are not consummated, and these risks could adversely impact our operations and our liquidity position.”

These risks may cause us to be unable to realize the anticipated benefits of the Equity Investments and the Supply Arrangements even if those transactions are consummated on our expected timing. Our failure to realize the anticipated benefits of the Equity Investments and the Supply Arrangements could adversely impact our operations and the operations of Silicon Carbide, as well as our liquidity position, and could limit our ability and the ability of Silicon Carbide to pursue additional strategic transactions in the future.