SkyWater Technology Reports Second Quarter 2022 Results

Non-GAAP Financial Measures

We provide supplemental non-GAAP financial information that our management utilizes to evaluate our ongoing financial performance and provide additional insight to investors as supplemental information to our U.S. GAAP results. We provide non-GAAP gross profit, non-GAAP gross margin, non-GAAP net loss to shareholders, and non-GAAP net loss per share. We provide these non-GAAP financial measures because we believe this non-GAAP presentation provides a baseline for analyzing trends in our business and to exclude certain items that may not be indicative of our core operating results. The non-GAAP financial measures disclosed in this earnings press release should not be viewed as an alternative to, or more meaningful than, the reported results prepared in accordance with GAAP. In addition, because our non-GAAP measures are not determined in accordance with U.S. GAAP, these measures are susceptible to differing calculations, and not all comparable or peer companies may calculate their non-GAAP measures in the same manner. As a result, the non-GAAP financial measures presented in this earnings press release may not be directly comparable to similarly titled measures presented by other companies.

We also provide adjusted EBITDA and adjusted EBITDA margin as supplemental non-GAAP measurements. We define adjusted EBITDA as net income (loss) before interest expense, income tax provision (benefit), depreciation and amortization, equity-based compensation and certain other items that we do not view as indicative of our ongoing performance, including fair value changes in contingent considerations, management fees, inventory write-down, corporate conversion and IPO related costs, Paycheck Protection Program loan forgiveness, SkyWater Florida start-up costs, net income attributable to non-controlling interests, and management transition expense. We believe adjusted EBITDA is a useful performance measure because it allows for an effective evaluation of our operating performance when compared to our peers, without regard to our financing methods or capital structure. We exclude the items listed above from net income or loss in arriving at adjusted EBITDA because these amounts can vary substantially within our industry depending upon accounting methods and book values of assets, capital structures and the method by which the assets were acquired. Adjusted EBITDA should not be considered as an alternative to, or more meaningful than, net income determined in accordance with U.S. GAAP. Certain items excluded from adjusted EBITDA are significant components in understanding and assessing a company’s financial performance, such as a company’s cost of capital and tax structure, as well as the historic costs of depreciable assets, none of which are reflected in adjusted EBITDA. Our presentation of adjusted EBITDA should not be construed as an indication that our results will be unaffected by the items excluded from adjusted EBITDA. In future fiscal periods, we may exclude such items and may incur income and expenses similar to these excluded items. Accordingly, the exclusion of these items and other similar items in our non-GAAP presentation should not be interpreted as implying that these items are non-recurring, infrequent or unusual, unless otherwise expressly indicated.

The following tables present a reconciliation of the most directly comparable financial measures, calculated and presented in accordance with U.S. GAAP, to our non-GAAP financial measures.

SKYWATER TECHNOLOGY, INC.

Reconciliation of GAAP to Non-GAAP Financial Measures

(Unaudited)

 

 

Three Months Ended

 

July 3, 2022

 

July 4, 2021

 

April 3, 2022

 

(in thousands)

GAAP revenue

$

47,407

 

 

$

41,189

 

 

$

48,121

 

Tool revenue (1)

 

(313

)

 

 

(2,346

)

 

 

(984

)

Non-GAAP revenue

$

47,094

 

 

$

38,843

 

 

$

47,137

 

 

 

 

 

 

 

GAAP cost of revenue

$

45,327

 

 

$

39,377

 

 

$

49,061

 

Equity-based compensation (2)

 

(546

)

 

 

(827

)

 

 

(1,125

)

SkyWater Florida start-up costs (3)

 

(113

)

 

 

(318

)

 

 

(341

)

Cost of tool revenue (1)

 

(200

)

 

 

(1,223

)

 

 

(984

)

Non-GAAP cost of revenue

$

44,468

 

 

$

37,009

 

 

$

46,611

 

 

 

 

 

 

 

GAAP gross profit

$

2,080

 

 

$

1,812

 

 

$

(940

)

GAAP gross margin

 

4.4

%

 

 

4.4

%

 

 

(2.0

)%

Equity-based compensation (2)

 

546

 

 

 

827

 

 

 

1,125

 

SkyWater Florida start-up costs (3)

 

113

 

 

 

318

 

 

 

341

 

Tool revenue (1)

 

(313

)

 

 

(2,346

)

 

 

(984

)

Cost of tool revenue (1)

 

200

 

 

 

1,223

 

 

 

984

 

Non-GAAP gross profit

$

2,626

 

 

$

1,834

 

 

$

526

 

Non-GAAP gross margin

 

5.6

%

 

 

4.7

%

 

 

1.1

%

 

 

 

 

 

 

GAAP research and development

$

2,361

 

 

$

3,339

 

 

$

2,282

 

Equity-based compensation (2)

 

(128

)

 

 

(1,487

)

 

 

(225

)

Non-GAAP research and development

$

2,233

 

 

$

1,852

 

 

$

2,057

 

 

 

 

 

 

 

GAAP selling, general and administrative expenses

$

10,795

 

 

$

15,415

 

 

$

11,690

 

SkyWater Florida start-up costs (3)

 

(45

)

 

 

(186

)

 

 

(61

)

Management transition expense (4)

 

 

 

 

(435

)

 

 

 

Equity-based compensation (2)

 

(1,444

)

 

 

(4,454

)

 

 

(1,866

)

Management fees (6)

 

 

 

 

(56

)

 

 

 

Non-GAAP selling, general and administrative expenses

$

9,306

 

 

$

10,284

 

 

$

9,763

 

 

Three Months Ended

 

July 3, 2022

 

July 4, 2021

 

April 3, 2022

 

(in thousands)

GAAP net loss to SkyWater Technology, Inc.

$

(13,005

)

 

$

(6,979

)

 

$

(16,606

)

Paycheck Protection Program loan forgiveness

 

 

 

 

(6,453

)

 

 

 

Corporate conversion and initial public offering related costs (5)

 

 

 

 

1,521

 

 

 

 

SkyWater Florida start-up costs (3)

 

158

 

 

 

504

 

 

 

402

 

Management transition expense (4)

 

 

 

 

435

 

 

 

 

Fair value changes in contingent consideration (5)

 

 

 

 

(942

)

 

 

 

Equity-based compensation (2)

 

2,118

 

 

 

6,768

 

 

 

3,216

 

Management fees (6)

 

 

 

 

56

 

 

 

 

Non-GAAP net loss to shareholders

$

(10,729

)

 

$

(5,090

)

 

$

(12,988

)

 

 

 

 

 

 

Equity-based compensation allocation in the consolidated statements of operations:

 

 

 

 

 

Cost of revenue

$

546

 

 

$

827

 

 

$

1,125

 

Research and development

 

128

 

 

 

1,487

 

 

 

225

 

Selling, general and administrative expenses

 

1,444

 

 

 

4,454

 

 

 

1,866

 

 

$

2,118

 

 

$

6,768

 

 

$

3,216

 

 

 

 

 

 

 

SkyWater Florida start-up costs allocation in the consolidated statements of operations:

 

 

 

 

 

Cost of revenue

$

113

 

 

$

318

 

 

$

341

 

Selling, general and administrative expenses

 

45

 

 

 

186

 

 

 

61

 

 

$

158

 

 

$

504

 

 

$

402

 

 

Three Months Ended
July 3, 2022

 

GAAP

 

Non-GAAP

Computation of net loss per common share, basic and diluted:

(in thousands, except per share data)

Numerator:

 

 

 

Net loss attributable to SkyWater Technology, Inc.

$

(13,005

)

 

$

(10,729

)

Denominator:

 

 

 

Weighted-average common shares outstanding, basic and diluted

 

40,203

 

 

 

40,203

 

Net loss per common share, basic and diluted

$

(0.32

)

 

$

(0.27

)

 

 

 

 

 

Three Months Ended
July 4, 2021

 

GAAP

 

Non-GAAP

Computation of net loss per common share, basic and diluted:

(in thousands, except per share data)

Numerator:

 

 

 

Net loss attributable to SkyWater Technology, Inc.

$

(6,979

)

 

$

(5,090

)

Denominator:

 

 

 

Weighted-average Class B preferred units outstanding, basic and diluted

 

34,708

 

 

 

34,708

 

Net loss per Class B preferred unit, basic and diluted

$

(0.20

)

 

$

(0.15

)

 

 

 

 

 

Three Months Ended
April 3, 2022

 

GAAP

 

Non-GAAP

Computation of net loss per common share, basic and diluted:

(in thousands, except per share data)

Numerator:

 

 

 

Net loss attributable to SkyWater Technology, Inc.

$

(16,606

)

 

$

(12,988

)

Denominator:

 

 

 

Weighted-average common shares outstanding, basic and diluted

 

39,862

 

 

 

39,862

 

Net loss per common share, basic and diluted

$

(0.42

)

 

$

(0.33

)

 

Three Months Ended

 

Six Months Ended

 

July 3, 2022

 

July 4, 2021

 

April 3,
2022

 

July 3, 2022

 

July 4, 2021

 

(in thousands)

Net loss to shareholders

$

(13,005

)

 

$

(6,979

)

 

$

(16,606

)

 

$

(29,611

)

 

$

(9,790

)

Interest expense

 

1,040

 

 

 

912

 

 

 

1,029

 

 

 

2,069

 

 

 

1,970

 

Income tax expense (benefit)

 

63

 

 

 

(4,237

)

 

 

(194

)

 

 

(131

)

 

 

(4,662

)

Depreciation and amortization

 

7,198

 

 

 

6,854

 

 

 

6,458

 

 

 

13,657

 

 

 

13,336

 

EBITDA

 

(4,704

)

 

 

(3,450

)

 

 

(9,313

)

 

 

(14,016

)

 

 

854

 

Paycheck Protection Program loan forgiveness

 

 

 

 

(6,453

)

 

 

 

 

 

 

 

 

(6,453

)

Corporate conversion and initial public offering related costs

 

 

 

 

1,521

 

 

 

 

 

 

 

 

 

1,521

 

SkyWater Florida start-up costs (3)

 

158

 

 

 

504

 

 

 

402

 

 

 

560

 

 

 

504

 

Management transition expense (4)

 

 

 

 

435

 

 

 

 

 

 

 

 

 

435

 

Fair value changes in contingent consideration (5)

 

 

 

 

(942

)

 

 

 

 

 

 

 

 

(886

)

Equity-based compensation (2)

 

2,118

 

 

 

6,768

 

 

 

3,216

 

 

 

5,334

 

 

 

7,003

 

Management fees (6)

 

 

 

 

56

 

 

 

 

 

 

 

 

 

332

 

Net income attributable to non-controlling interests (7)

 

826

 

 

 

757

 

 

 

859

 

 

 

1,685

 

 

 

1,515

 

Adjusted EBITDA

$

(1,602

)

 

$

(804

)

 

$

(4,836

)

 

$

(6,437

)

 

$

4,825

 

__________________
(1)

Tool revenue and cost of tool revenue represent the revenue and external costs related to the services we provide to qualify customer funded tool technologies as our customers invest in our capabilities to expand our technology platforms.

(2)

Represents non-cash equity-based compensation expense.

(3)

Represents start-up costs associated with our 200 mm heterogeneous integration facility in Kissimmee, Florida, which includes legal fees, recruiting expenses, retention awards and facility start-up expenses. These expenses are not indicative of our ongoing costs and will be discontinued following the start-up of SkyWater Florida.

(4)

Represents expenses directly associated with the corporate conversion and IPO, such as professional, consulting, legal and accounting services. This also includes bonus awards granted to employees upon the completion of the IPO. These expenses are not indicative of our ongoing costs and were discontinued following the completion of our initial public offering.

(5)

Represents non-cash valuation adjustment of contingent consideration to fair market value during the period.

(6)

Represents a related party transaction with Oxbow Industries, our principal stockholder. As these fees are not part of the core business, did not continue after our IPO and are excluded from management’s assessment of the business, we believe it is useful to investors to view our results excluding these fees.

(7)

Represents net income attributable to our VIE, which was formed for the purpose of purchasing our land, building with the proceeds of a bank loan. Since depreciation and interest expense are excluded from net loss in our adjusted EBITDA financial measure, we also exclude the net income attributable to the VIE.


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