SkyWater Technology Reports Third Quarter 2023 Results

Q3 2023 Results:

  • Revenue: Revenue of $71.6 million increased 37% year-over-year. ATS revenue of $57.1 million increased 62% year-over-year. ATS revenue contained $3.2 million of tool revenue in the third quarter of 2023 and $0.2 million in the third quarter of 2022. Wafer Services revenue of $14.5 million decreased (16)% compared to the third quarter of 2022.
  • Gross Profit: GAAP gross profit was $14.1 million, or 19.8% of revenue, compared to gross profit of $8.3 million, or 15.8% of revenue, in the third quarter of 2022. Non-GAAP gross profit was $14.6 million, or 20.4% of revenue, compared to non-GAAP gross profit of $8.8 million, or 16.9% of revenue, in the third quarter of 2022.
  • Operating Expenses: GAAP operating expenses were $18.3 million, compared to $13.4 million in the third quarter of 2022, and included $3.5 million of project-based management consulting transformation fees related to long-term improvement in automation and operational efficiency that were not a component of operating expenses in the third quarter of 2022.
  • Net Loss: GAAP net loss to shareholders of $7.6 million, or $(0.16) per share, compared to a net loss to shareholders of $6.9 million, or $(0.17) per share, in the third quarter of 2022. Non-GAAP net loss to shareholders of $2.2 million, or $(0.05) per share, compared to a non-GAAP net loss to shareholders of $5.1 million, or $(0.13) per share, in the third quarter of 2022.
  • Adjusted EBITDA: Adjusted EBITDA was $8.3 million, or 11.6% of revenue, compared to $3.8 million, or 7.3% of revenue, in the third quarter of 2022.

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 Wednesday, November 8, 2023, at 3:30 p.m. CT to discuss its third 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, read-out ICs, 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 third quarter of 2023 are preliminary, unaudited and subject to the finalization of the Company’s third 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; 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)

 

 

October 1, 2023

 

January 1, 2023

 

(in thousands, except share data)

Assets

 

 

 

Current assets

 

 

 

Cash and cash equivalents

$

17,346

 

 

$

30,025

 

Accounts receivable (net of allowance for credit losses of $4,699 and $1,638, respectively)

 

43,492

 

 

 

28,045

 

Contract assets (net of allowance for credit losses of $227 and $0, respectively)

 

37,733

 

 

 

34,625

 

Inventory

 

16,648

 

 

 

13,397

 

Prepaid expenses and other current assets

 

8,654

 

 

 

10,290

 

Income tax receivable

 

122

 

 

 

169

 

Total current assets

 

123,995

 

 

 

116,551

 

Property and equipment, net

 

165,818

 

 

 

179,915

 

Intangible assets, net

 

4,843

 

 

 

5,608

 

Other assets

 

5,053

 

 

 

3,690

 

Total assets

$

299,709

 

 

$

305,764

 

Liabilities and shareholders' equity

 

 

 

Current liabilities

 

 

 

Current portion of long-term debt

$

4,241

 

 

$

1,855

 

Accounts payable

 

14,378

 

 

 

21,102

 

Accrued expenses

 

39,381

 

 

 

25,212

 

Short-term financing, net of unamortized debt issuance costs

 

45,253

 

 

 

55,817

 

Contract liabilities

 

24,674

 

 

 

28,186

 

Total current liabilities

 

127,927

 

 

 

132,172

 

Long-term liabilities

 

 

 

Long-term debt, less current portion and net of unamortized debt issuance costs

 

37,729

 

 

 

35,181

 

Long-term incentive plan

 

 

 

 

1,643

 

Long-term contract liabilities

 

55,636

 

 

 

67,967

 

Deferred income tax liability, net

 

1,121

 

 

 

1,239

 

Other long-term liabilities

 

9,466

 

 

 

13,585

 

Total long-term liabilities

 

103,952

 

 

 

119,615

 

Total liabilities

 

231,879

 

 

 

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; 47,006,694 and 43,704,876 shares issued and outstanding)

 

470

 

 

 

437

 

Additional paid-in capital

 

177,286

 

 

 

147,304

 

Accumulated deficit

 

(114,878

)

 

 

(94,072

)

Total shareholders' equity, SkyWater Technology, Inc.

 

62,878

 

 

 

53,669

 

Noncontrolling interests

 

4,952

 

 

 

308

 

Total shareholders' equity

 

67,830

 

 

 

53,977

 

Total liabilities and shareholders' equity

$

299,709

 

 

$

305,764

 

SKYWATER TECHNOLOGY, INC.

Consolidated Statements of Operations

(Unaudited)

 

 

Three-Month Period Ended

 

Nine-Month Period Ended

 

October 1, 2023

 

July 2, 2023

 

October 2, 2022

 

October 1, 2023

 

October 2, 2022

 

(in thousands, except share data)

Revenue

$

71,624

 

 

$

69,811

 

 

$

52,326

 

 

$

207,529

 

 

$

147,854

 

Cost of revenue

 

57,477

 

 

 

53,144

 

 

 

44,049

 

 

 

160,247

 

 

 

138,437

 

Gross profit

 

14,147

 

 

 

16,667

 

 

 

8,277

 

 

 

47,282

 

 

 

9,417

 

Research and development expense

 

2,233

 

 

 

2,396

 

 

 

2,580

 

 

 

7,296

 

 

 

7,223

 

Selling, general, and administrative expense

 

16,105

 

 

 

17,820

 

 

 

10,778

 

 

 

48,821

 

 

 

33,263

 

Operating loss

 

(4,191

)

 

 

(3,549

)

 

 

(5,081

)

 

 

(8,835

)

 

 

(31,069

)

Interest expense

 

(2,507

)

 

 

(2,950

)

 

 

(1,331

)

 

 

(7,928

)

 

 

(3,400

)

Loss before income taxes

 

(6,698

)

 

 

(6,499

)

 

 

(6,412

)

 

 

(16,763

)

 

 

(34,469

)

Income tax (benefit) expense

 

(96

)

 

 

25

 

 

 

87

 

 

 

(71

)

 

 

(44

)

Net loss

 

(6,602

)

 

 

(6,524

)

 

 

(6,499

)

 

 

(16,692

)

 

 

(34,425

)

Less: net income attributable to noncontrolling interests

 

966

 

 

 

2,066

 

 

 

440

 

 

 

3,739

 

 

 

2,125

 

Net loss attributable to SkyWater Technology, Inc.

$

(7,568

)

 

$

(8,590

)

 

$

(6,939

)

 

$

(20,431

)

 

$

(36,550

)

Net loss per share attributable to common shareholders, basic and diluted

$

(0.16

)

 

$

(0.19

)

 

$

(0.17

)

 

$

(0.45

)

 

$

(0.91

)

Weighted average shares used in computing net loss per common share, basic and diluted

 

46,445,309

 

 

 

44,743,269

 

 

 

40,669,322

 

 

 

45,001,998

 

 

 

40,245,736

 

SKYWATER TECHNOLOGY, INC.

Consolidated Statements of Cash Flows

(Unaudited)

 

 

Nine-Month Period Ended

 

October 1, 2023

 

October 2, 2022

 

(in thousands)

Cash flows from operating activities

 

 

 

Net loss

$

(16,692

)

 

$

(34,425

)

Adjustments to reconcile net loss to net cash flows used in operating activities

 

 

 

Depreciation and amortization

 

21,651

 

 

 

20,740

 

Amortization of debt issuance costs included in interest expense

 

1,349

 

 

 

521

 

Long-term incentive and equity-based compensation

 

5,673

 

 

 

7,033

 

Cash paid for contingent consideration in excess of initial valuation

 

 

 

 

(816

)

Deferred income taxes

 

(118

)

 

 

(30

)

Cash paid for operating leases

 

(37

)

 

 

 

Cash paid for interest on finance leases

 

(649

)

 

 

 

Provision for credit losses

 

4,133

 

 

 

 

Changes in operating assets and liabilities

 

 

 

Accounts receivable and contract assets

 

(23,063

)

 

 

773

 

Inventory

 

(3,251

)

 

 

(4,686

)

Prepaid expenses and other assets

 

270

 

 

 

(1,212

)

Accounts payable and accrued expenses

 

4,868

 

 

 

16,705

 

Contract liabilities, current and long-term

 

(15,843

)

 

 

(10,612

)

Income tax receivable and payable

 

47

 

 

 

1

 

Net cash used in operating activities

 

(21,662

)

 

 

(6,008

)

Cash flows from investing activities

 

 

 

Purchase of software and licenses

 

(612

)

 

 

(400

)

Purchases of property and equipment

 

(3,864

)

 

 

(11,325

)

Net cash used in investing activities

 

(4,476

)

 

 

(11,725

)

Cash flows from financing activities

 

 

 

Draws on revolving line of credit

 

182,763

 

 

 

 

Paydowns of revolving line of credit

 

(194,396

)

 

 

 

Net proceeds on Revolver

 

 

 

 

14,522

 

Proceeds from tool financings

 

6,492

 

 

 

 

Repayment of VIE financing

 

(1,839

)

 

 

(765

)

Cash paid for principal on finance leases

 

(818

)

 

 

(1,158

)

Proceeds from the issuance of common stock pursuant to the employee stock purchase plan

 

2,305

 

 

 

1,800

 

Proceeds from the issuance of common stock, net of commissions

 

20,397

 

 

 

2,186

 

Cash paid on license technology obligations

 

(2,350

)

 

 

(1,150

)

Net contributions (distributions) from (to) noncontrolling interest

 

905

 

 

 

(1,297

)

Net cash provided by financing activities

 

13,459

 

 

 

14,138

 

Net uses of cash and cash equivalents

 

(12,679

)

 

 

(3,595

)

Cash and cash equivalents - beginning of period

 

30,025

 

 

 

12,917

 

Cash and cash equivalents - end of period

$

17,346

 

 

$

9,322

 


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