SkyWater Technology Reports Second Quarter 2023 Results

Q2 2023 Results:

Revenue: Revenue of $69.8 million increased 47% year-over-year. Advanced Technology Services revenue of $53.0 million increased 78% year-over-year driven primarily by continued momentum with key customers in the Aerospace & Defense sector, as well as a $3.6 million revenue pull-in following the restructuring of an ATS program with a commercial customer. Advanced Technology Services revenue contained $0.9 million of tool revenue in the second quarter of 2023 and $0.3 million in the second quarter of 2022. Wafer Services revenue of $16.8 million decreased (4)% compared to the second quarter of 2022.
Gross Profit: GAAP gross profit was $16.7 million, or 23.9% of revenue, compared to gross profit of $2.1 million, or 4.4% of revenue, in the second quarter of 2022. Non-GAAP gross profit was $17.0 million, or 24.7% of revenue, compared to non-GAAP gross profit of $2.6 million, or 5.6% of revenue, in the second quarter of 2022. With no associated costs related to the $3.6 million revenue pull-in referenced above, the restructuring of this commercial customer contract benefited Q2’23 gross margin by approximately 400 bp.
Operating Expenses: GAAP operating expenses were $20.2 million, compared to $13.2 million in the second quarter of 2022, and included $3.8 million of project-based consulting fees that were not a component of operating expenses in the second quarter of 2022. These project-based consulting fees included $2.5 million of management consulting transformation fees related to long-term improvement in automation and operational efficiency and $1.3 million of specialist fees related to the CHIPS Act application process. GAAP operating expenses also included $1.4 million of additional bad debt accrual that was not a component of operating expenses in the second quarter of 2022.
Net Loss: GAAP net loss to shareholders of $8.6 million, or $(0.19) per share, compared to a net loss to shareholders of $13.0 million, or $(0.32) per share, in the second quarter of 2022. Non-GAAP net loss to shareholders of $6.4 million, or $(0.14) per share, compared to a non-GAAP net loss to shareholders of $10.8 million, or $(0.27) per share, in the second quarter of 2022.
Adjusted EBITDA: Adjusted EBITDA was $6.5 million, or 9.3% of revenue, compared to $(1.6) million, or (3.4)% of revenue, in the second quarter of 2022. The benefit of the $3.6 million revenue pull-in was more than offset by the additional $5.2 million of operating expenses referenced above, which resulted in a net negative impact on EBITDA margin of approximately 200 bp.

A reconciliation between historical GAAP and non-GAAP information is contained in the tables below in the section titled, “Non-GAAP Financial Measures.”

Investor Webcast

SkyWater will host a conference call on Monday, August 7, 2023, at 3:30 p.m. CT to discuss its second quarter 2023 financial results. A live webcast of the call will be available online at IR.SkyWaterTechnology.com.

About SkyWater Technology

SkyWater (NASDAQ: SKYT) is a U.S.-based semiconductor manufacturer and a DMEA-accredited Category 1A Trusted Foundry. SkyWater’s Technology as a Service model streamlines the path to production for customers with development services, volume production and heterogeneous integration solutions in its world-class U.S. facilities. This pioneering model enables innovators to co-create the next wave of technology with diverse categories including mixed-signal CMOS, ROICs, rad-hard ICs, power management, MEMS, superconducting ICs, photonics, carbon nanotubes and interposers. SkyWater serves growing markets including aerospace & defense, automotive, biomedical, cloud & computing, consumer, industrial and IoT. For more information, visit: www.skywatertechnology.com.

Cautionary Statement Regarding Preliminary Results

The Company’s results for the fiscal quarter ended July 2, 2023 are preliminary, unaudited and subject to the finalization of the Company’s second quarter review and full-year audit and should not be viewed as a substitute for full financial statements prepared in accordance with GAAP. The Company cautions that actual results may differ materially from those described in this press release.

SkyWater Technology Forward-Looking Statements

This press release contains “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements that are based on the Company’s current expectations or forecasts of future events, rather than past, events and outcomes, and such statements are not guarantees of future performance. Forward-looking statements include all statements other than statements of historical fact contained in this presentation, including information or predictions concerning the Company’s future business, results of operations, financial performance, plans and objectives, competitive position, market trends, and potential growth and market opportunities. In some cases, you can identify forward-looking statements by words such as “intends,” “estimates,” “predicts,” “potential,” “continues,” “anticipates,” “plans,” “expects,” “believes,” “should,” “could,” “may,” “will,” “targets,” “projects,” “seeks” or the negative of these terms or other comparable terminology.

Forward-looking statements are subject to risks, uncertainties and assumptions, which may cause the Company’s actual results, performance or achievements to be materially different from those expressed or implied by such forward-looking statements. Key factors that could cause the Company’s actual results to be different than expected or anticipated include, but are not limited to: our goals and strategies; our future business development, financial condition and results of operations; our ability to continue operating our sole semiconductor foundry at full capacity; our ability to appropriately respond to changing technologies on a timely and cost-effective basis; our customer relationships and our ability to retain and expand our customer relationships; our ability to accurately predict our future revenues for the purpose of appropriately budgeting and adjusting our expenses; our expectations regarding dependence on our largest customers; our ability to diversify our customer base and develop relationships in new markets; the performance and reliability of our third-party suppliers and manufacturers; our ability to procure tools, materials, and chemicals amid industry-wide supply chain shortages; our ability to control costs, including our operating and capital expenses; the size and growth potential of the markets for our solutions, and our ability to serve and expand our presence in those markets; the level of demand in our customers’ end markets; our ability to attract, train and retain key qualified personnel in a competitive labor market; adverse litigation judgments, settlements or other litigation-related costs; changes in trade policies, including the imposition of tariffs; our ability to raise additional capital or financing; our ability to accurately forecast demand; the level and timing of U.S. government program funding; our ability to maintain compliance with certain U.S. government contracting requirements; regulatory developments in the United States and foreign countries; our ability to protect our intellectual property rights; our ability to meet our long-term growth targets; and other factors discussed in the “Risk Factors” section of the annual report on Form 10-K the Company filed with the SEC on March 15, 2023 and in other documents that the Company files with the SEC, which are available at http://www.sec.gov. The Company assumes no obligation to update any forward-looking statements, which speak only as of the date of this press release.

SKYWATER TECHNOLOGY, INC. Consolidated Balance Sheets (Unaudited)

	July 2, 2023			January 1, 2023
	(in thousands, except share data)
Assets
Current assets:
Cash and cash equivalents	$	16,178		$	30,025
Accounts receivable, net		77,085			62,670
Inventories		16,024			13,397
Prepaid expenses and other current assets		9,069			10,290
Income tax receivable		107			169
Total current assets		118,463			116,551
Property and equipment, net		169,540			179,915
Intangible assets, net		5,216			5,608
Other assets		5,517			3,690
Total assets	$	298,736		$	305,764
Liabilities and shareholders' equity
Current liabilities:
Current portion of long-term debt	$	1,964		$	1,855
Accounts payable		14,182			21,102
Accrued expenses		32,112			25,212
Short-term financing, net of unamortized debt issuance costs		54,233			55,817
Deferred revenue - current		27,943			28,186
Total current liabilities		130,434			132,172
Long-term liabilities:
Long-term debt, less current portion and net of unamortized debt issuance costs		34,778			35,181
Long-term incentive plan		—			1,643
Deferred revenue - long-term		59,839			67,967
Deferred income tax liability, net		1,202			1,239
Other long-term liabilities		9,601			13,585
Total long-term liabilities		105,420			119,615
Total liabilities		235,854			251,787
Shareholders’ equity:
Preferred stock, $0.01 par value per share (80,000,000 shares authorized, zero shares issued and outstanding)		—			—
Common stock, $0.01 par value per share (200,000,000 shares authorized; 45,399,761 and 43,704,876 shares issued and outstanding)		454			437
Additional paid-in capital		166,179			147,304
Accumulated deficit		(107,310	)		(94,072	)
Total shareholders’ equity, SkyWater Technology, Inc.		59,323			53,669
Noncontrolling interests		3,559			308
Total shareholders’ equity		62,882			53,977
Total liabilities and shareholders’ equity	$	298,736		$	305,764

SKYWATER TECHNOLOGY, INC. Consolidated Statements of Operations (Unaudited)

	Three Months Ended									Six Months Ended
	July 2, 2023			April 2, 2023			July 3, 2022			July 2, 2023			July 3, 2022
	(in thousands, except share data)
Revenue	$	69,811		$	66,094		$	47,407		$	135,905		$	95,528
Cost of revenue		53,144			49,626			45,327			102,770			94,388
Gross profit		16,667			16,468			2,080			33,135			1,140
Research and development		2,396			2,668			2,361			5,063			4,643
Selling, general and administrative expense		17,820			14,895			10,795			32,716			22,485
Operating income (loss)		(3,549	)		(1,095	)		(11,076	)		(4,644	)		(25,988	)
Interest expense		(2,950	)		(2,471	)		(1,040	)		(5,421	)		(2,069	)
Income (loss) before income taxes		(6,499	)		(3,566	)		(12,116	)		(10,065	)		(28,057	)
Income tax expense (benefit)		25			—			63			25			(131	)
Net income (loss)		(6,524	)		(3,566	)		(12,179	)		(10,090	)		(27,926	)
Less: net income attributable to noncontrolling interests		2,066			707			826			2,773			1,685
Net income (loss) attributable to SkyWater Technology, Inc.	$	(8,590	)	$	(4,273	)	$	(13,005	)	$	(12,863	)	$	(29,611	)
Net income (loss) per share attributable to common shareholders, basic and diluted:	$	(0.19	)	$	(0.10	)	$	(0.32	)	$	(0.29	)	$	(0.74	)
Weighted average shares used in computing net income (loss) per common share, basic and diluted:		44,743,269			43,817,417			40,203,050			44,280,343			40,031,615

SKYWATER TECHNOLOGY, INC. Consolidated Statements of Cash Flows (Unaudited)

	Six Months Ended
	July 2, 2023			July 3, 2022

	(in thousands)
Cash flows from operating activities:
Net income (loss)	$	(10,090	)	$	(27,926	)
Adjustments to reconcile net income (loss) to net cash flows used in operating activities:
Depreciation and amortization		14,559			13,657
Amortization of debt issuance costs included in interest expense		876			348
Long-term incentive and stock-based compensation		3,820			5,334
Cash paid for contingent consideration in excess of initial valuation		—			(375	)
Deferred income taxes		(37	)		(137	)
Cash paid for operating leases		(12	)		—
Cash paid for finance leases		(415	)		—
Provision for credit losses		3,602			—
Changes in operating assets and liabilities:
Accounts receivable		(17,425	)		(1,024	)
Inventories		(2,627	)		(3,865	)
Prepaid expenses and other assets		(496	)		(751	)
Accounts payable and accrued expenses		(1,344	)		6,047
Deferred revenue		(8,371	)		(5,170	)
Income tax receivable and payable		62			—
Net cash used in operating activities		(17,898	)		(13,862	)
Cash flows from investing activities:
Purchase of software and licenses		(612	)		(400	)
Purchases of property and equipment		(2,718	)		(5,463	)
Net cash used in investing activities		(3,330	)		(5,863	)
Cash flows from financing activities:
Draws on revolving line of credit		121,350			—
Paydowns of revolving line of credit		(123,810	)		—
Net proceeds on Revolver		—			18,946
Net proceeds from tool financing		496			—
Repayment of VIE financing		(791	)		(509	)
Cash paid for finance leases		(456	)		(416	)
Proceeds from the issuance of common stock pursuant to the employee stock purchase plan		1,276			1,128
Proceeds from the issuance of common stock, net of commissions		12,144			—
Cash paid on license technology obligations		(2,350	)		(500	)
Net contributions (distributions) from (to) noncontrolling interest		(478	)		(867	)
Net cash provided by financing activities		7,381			17,782
Net uses of cash and cash equivalents		(13,847	)		(1,943	)
Cash and cash equivalents - beginning of period		30,025			12,917
Cash and cash equivalents - end of period	$	16,178		$	10,974

« Previous Page 1 | 2 | 3 | 4 | 5 Next Page »